17‐3900
Borenstein v. Comm’r of Internal Revenue
United States Court of Appeals
for the Second Circuit
AUGUST TERM 2018
No. 17‐3900
ROBERTA BORENSTEIN,
Petitioner‐Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent‐Appellee.
ARGUED: NOVEMBER 13, 2018
DECIDED: APRIL 2, 2019
Before: JACOBS, POOLER, WESLEY, Circuit Judges.
Roberta Borenstein appeals from a judgment of the United States Tax Court
denying her petition seeking a refund of her overpayment of 2012 income taxes.
The Commissioner of Internal Revenue and Borenstein do not dispute that she
overpaid, or the amount of her overpayment; however, the Commissioner
argues‐‐and the Tax Court agreed‐‐that the Tax Court lacks jurisdiction to order a
refund or credit of the overpayment.
1
On appeal, Borenstein argues that the Tax Court’s interpretation of 26
U.S.C. § 6512(b)(3), which limits its jurisdiction to order refunds or credits of
overpayments, is unreasonable and inconsistent with congressional intent.
Reversed and remanded.
____________________
KENDALL C. JONES, Eversheds Sutherland (US) LLP,
Washington, D.C., for Petitioner‐Appellant.
IVAN C. DALE, Tax Division (Richard E. Zuckerman,
Principal Deputy Assistant Attorney General; Joan I.
Oppenheimer, Tax Division, on the brief), United States
Department of Justice, Washington, D.C., for
Respondent‐Appellee.
T. KEITH FOGG (Simona Altshuler, on the brief),
Federal Tax Clinic at the Legal Services Center of
Harvard Law School, Jamaica Plain, MA; W. EDWARD
AFIELD, Philip C. Cook Low‐Income Taxpayer Clinic,
Atlanta, GA; for Amici Curiae Federal Tax Clinic at the
Legal Services Center of Harvard Law School, Philip C.
Cook Low‐Income Taxpayer Clinic, in support of
Petitioner‐Appellant.
DENNIS JACOBS, Circuit Judge:
Roberta Borenstein appeals from a judgment of the United States Tax Court
(Lauber, J.) denying her petition seeking refund of her overpayment of 2012
income tax. The Commissioner of Internal Revenue (“the Commissioner”) and
Borenstein do not dispute that she overpaid, or the amount of her overpayment;
however, the Commissioner argues‐‐and the Tax Court agreed‐‐that the Tax
Court lacks jurisdiction to order a refund or credit of the overpayment. As the
Tax Court observed, and so far as we can ascertain, this case presents an issue of
first impression in any court.
2
On appeal, Borenstein argues that the Tax Court’s interpretation of 26
U.S.C. § 6512(b)(3), which limits its jurisdiction to order refunds or credits of
overpayments, is unreasonable and inconsistent with congressional intent, and
that its judgment must therefore be reversed.
The question of Tax Court jurisdiction is one of statutory interpretation.
The Tax Court has jurisdiction under 26 U.S.C. § 6512(b) to order refunds or
credits for overpayments in years past, but its jurisdiction is circumscribed. As
relevant to this case, “look‐back periods” limit how far into the past the Tax Court
may reach to remedy overpayments by refund or credit.
A taxpayer who files a tax return, and within three years after that filing is
mailed a notice of deficiency from the Commissioner, is entitled to a look‐back
period of at least three years. However, prior to Congress’s amendment of the
governing statute, a taxpayer who had not filed a return before the mailing of a
notice of deficiency‐‐like Borenstein‐‐was entitled only to a default two‐year
look‐back period. Accordingly, Congress, seeking to extend the look‐back
period available to such non‐filing taxpayers, provided that if a notice of
deficiency is mailed “during the third year after the due date (with extensions) for
filing the return,” and if no return was filed before the notice of deficiency was
mailed, the applicable look‐back period is three years. This is called the “flush
language” of 26 U.S.C. § 6512(b)(3).
Borenstein paid (in fact, overpaid) her 2012 taxes on the due date of her
2012 return and received a six‐month extension for the filing of her return, but
failed to file her return for that year by the time that the Commissioner mailed a
notice of deficiency‐‐26 months after the due date. If, as the Tax Court ruled (and
the Commissioner argues), “(with extensions)” has the effect of delaying by six
months the beginning of the “third year after the due date,” then Borenstein’s
notice of deficiency was mailed prior to the commencement of the third year.
That would leave the Tax Court with jurisdiction to look back only two years
from the notice of deficiency, and unable to reach Borenstein’s overpayment 26
months earlier.
3
Borenstein argues that “(with extensions)” has the effect of extending by six
months the “third year after the due date,” and therefore that the notice of
deficiency, mailed 26 months after the due date, was mailed during the third year.
That would mean that the Tax Court has jurisdiction to look back three years,
which would reach the due date and allow Borenstein to recover her
overpayment.
We agree with Borenstein, reverse the judgment of the Tax Court, and
remand for the entry of judgment for Borenstein. The question of statutory
interpretation is considerably easier than the scheme in which it is embedded, but
needs to be considered in its (dizzying) context.
BACKGROUND
Borenstein’s 2012 federal income tax return was due on April 15, 2013. By
that date, she had made income tax payments for 2012 totaling $112,000.
On April 15, Borenstein was granted a six‐month extension for the filing of
her return, until October 15, 2013. Borenstein failed to file her return by that
date, or after, and on June 19, 2015, the Commissioner sent her a notice of
deficiency stating that she owed $1,666,463 in 2012 income taxes and $572,756.90
in penalties. On August 29, 2015, Borenstein filed her (late) 2012 return reporting
an income tax liability of $79,559, which the parties have stipulated is the correct
amount.1 The return also reported an overpayment of $38,447. Borenstein and
the Commissioner have since stipulated that the correct amount of overpayment
is $32,441 (the difference between Borenstein’s $112,000 in payments and $79,559
in liability).
Borenstein filed a petition in Tax Court on September 16, 2015, seeking a
redetermination of the amount of her 2012 tax deficiency and a refund of her
1 The Commissioner identified approximately $4.3 million in sales of stocks and
bonds in 2012, and the notice of deficiency reflected an assumption that the full
sales proceeds represented a profit for Borenstein. Her late return showed that
she in fact took a loss on the asset sales, greatly reducing her 2012 tax liability.
4
overpayment. The case was submitted for decision without trial pursuant to
Rule 122 of the Tax Court Rules of Practice and Procedure; and because the
parties stipulated to the numbers, the sole question before the Tax Court was
whether it had jurisdiction to order a refund of the overpayment.
The Tax Court ruled that it lacked jurisdiction. The court determined that
under 26 U.S.C. § 6512(b)(3), Borenstein was only entitled to a two‐year look‐back
period for any refund and, since the overpayment occurred more than two years
prior to the mailing of the notice of deficiency, the court lacked jurisdiction to
order a refund.
On appeal, Borenstein argues that the Tax Court adopted an interpretation
of 26 U.S.C. § 6512(b)(3) that is inconsistent with its plain language and
congressional intent.
DISCUSSION
“[T]he Tax Court is a court of limited jurisdiction that possesses only those
powers expressly conferred upon it by Congress; it may exercise jurisdiction only
pursuant to specific legislative enactments.” Maier v. Comm’r of Internal
Revenue, 360 F.3d 361, 363 (2d Cir. 2004). “The Tax Court’s interpretation of
federal statutes, including statutes delimiting the scope of its own jurisdiction, [is]
reviewed de novo.” Wright v. Comm’r of Internal Revenue, 571 F.3d 215, 219
(2d Cir. 2009) (quoting Maier, 360 F.3d at 363).
A. Statutory Framework
The Tax Court’s jurisdiction to order refunds and credits for past
overpayments is limited by “look‐back periods,” such that “a taxpayer who seeks
a refund in the Tax Court” must “show that the tax to be refunded was paid
during the applicable look‐back period.” Comm’r of Internal Revenue v. Lundy,
516 U.S. 235, 241 (1996). Without the modification effected by the flush
language, the Tax Court had (and has) jurisdiction to order a refund or credit of
(1) overpayments made during the two years immediately preceding the mailing
of a notice of deficiency (i.e., a two‐year look‐back period); and (2) overpayments
5
made during the three years immediately preceding the mailing of a notice of
deficiency “plus the period of any extension of time for filing the return” if a
return was filed and a notice of deficiency was mailed within three years after
such filing. 26 U.S.C. § 6512(b)(3)(B) (incorporating by reference 26 U.S.C.
§ 6511(b)(2)). Additionally‐‐as applicable to this case‐‐the flush language
provides the Tax Court with jurisdiction to order a refund or credit of
overpayments made during the three years immediately preceding the mailing of
the notice of deficiency (i.e., a three‐year look‐back period) if the taxpayer failed
to file a return before the mailing of the notice of deficiency and “the date of the
mailing of the notice of deficiency is during the third year after the due date (with
extensions) for filing the return of tax.” 26 U.S.C. § 6512(b)(3) (flush language).
B. Application
Borenstein’s 2012 taxes (withheld or paid in installments over 2012) were
deemed to have been paid on April 15, 2013 (the due date for her 2012 tax return)
pursuant to 26 U.S.C. § 6513. The Commissioner mailed the notice of deficiency
on June 19, 2015. Accordingly, if June 19, 2015 “is during the third year after the
due date (with extensions) for filing the return,” Borenstein is entitled to a
three‐year look‐back period, and the Tax Court has jurisdiction to order a refund
of the overpayment that occurred approximately 26 months prior to the notice of
deficiency. 26 U.S.C. § 6512(b)(3) (flush language). If June 19, 2015 is not
“during the third year after the due date (with extensions) for filing the return,”
Borenstein is entitled to only a two‐year look‐back period, and the Tax Court
would be without jurisdiction to remedy her overpayment. 26 U.S.C.
§ 6512(b)(3)(B) (incorporating by reference 26 U.S.C. § 6511(b)(2)(B)).
Borenstein argued to the Tax Court that “third year after the due date (with
extensions)” refers in this case to the third year after the return due date, plus a
six‐month extension period‐‐i.e., April 16, 2015, to October 15, 2016. The
Commissioner argued that the statutory language instead refers in this case to the
third year after the conclusion of the six‐month extension period‐‐i.e., October 16,
2015, to October 15, 2016.
6
As the Tax Court noted, “the statutory provisions we are construing are
extremely technical and complex.” Borenstein v. Comm’r of Internal Revenue,
149 T.C. 263, 279 (2017). Nevertheless, the Tax Court determined that the
meaning of the flush language of 26 U.S.C. § 6512(b)(3) is unambiguous, relying
heavily on the canon of statutory construction known as the “rule of the last
antecedent” to find that “(with extensions)” modifies only “due date.”
However, that canon “is not an absolute and can assuredly be overcome by other
indicia of meaning.” Barnhart v. Thomas, 540 U.S. 20, 26 (2003). Here, it does
not yield a clear answer.
The rule of the last antecedent “provides that ‘a limiting clause or phrase
. . . should ordinarily be read as modifying only the noun or phrase that it
immediately follows.’” Lloyd v. J.P. Morgan Chase & Co., 791 F.3d 265, 271 (2d
Cir. 2015) (ellipsis in original) (emphasis added) (quoting Barnhart, 540 U.S. at
26). While the Tax Court determined that “(with extensions)” modifies the noun
“due date,” it is at least as plausible that “(with extensions)” modifies the phrase
“third year after the due date,” thereby extending the third year. Accordingly,
because the flush language of 26 U.S.C. § 6512(b)(3) supports more than one
interpretation, we “consult legislative history and other tools of statutory
construction to discern Congress’s meaning.” Chai v. Comm’r of Internal
Revenue, 851 F.3d 190, 219 (2d Cir. 2017) (quoting United States v. Gayle, 342 F.3d
89, 93 (2d Cir. 2003)).
Congress added the flush language of 26 U.S.C. § 6512(b)(3) in response to
the outcome of the Supreme Court’s decision in Lundy. That case considered
whether the Tax Court had jurisdiction to order a refund of taxes paid more than
two years prior to the mailing of a notice of deficiency, where the taxpayer failed
to file a return by the date the notice of deficiency was mailed. The Court ruled
that non‐filers were limited to a two‐year look‐back period:
The operative question is whether a claim filed “on the date of the
mailing of the notice of deficiency” would be filed “within 3 years
from the time the return was filed.” See § 6512(b)(3)(B)
(incorporating §§ 6511(b)(2) and 6511(a)). In the case of a taxpayer
who does not file a return before the notice of deficiency is mailed,
7
the claim described in § 6512(b)(3)(B) could not be filed “within 3
years from the time the return was filed.” No return having been
filed, there is no date from which to measure the 3‐year filing period
described in § 6511(a). Consequently, the claim contemplated in
§ 6512(b)(3)(B) would not be filed within the 3‐year window
described in § 6511(a), and the 3‐year look‐back period set out in
§ 6511(b)(2)(A) would not apply. The applicable look‐back period is
instead the default 2‐year period described in § 6511(b)(2)(B), which
is measured from the date of the mailing of the notice of deficiency,
see § 6512(b)(3)(B). The taxpayer is entitled to a refund of any taxes
paid within two years prior to the date of the mailing of the notice of
deficiency.
Lundy, 516 U.S. at 243. The taxpayer sought a refund of his overpayment of 1987
taxes, deemed paid on April 15, 1988, but since the notice of deficiency was not
mailed until September 26, 1990 (at which time he had still not filed his return),
the overpayment occurred outside of the applicable two‐year look‐back period,
and the Tax Court lacked jurisdiction to order a refund of the overpayment. Id.
at 237‐38, 253.
Congress subsequently passed the Taxpayer Relief Act of 1997, amending
26 U.S.C. § 6512(b)(3) to add the flush language providing a three‐year look‐back
period in certain situations in which a taxpayer failed to file a return prior to
receiving a notice of deficiency. The conference committee report for the
amendment discusses the flush language as a corrective to Lundy:
The Supreme Court held that the taxpayer could not recover
overpayments . . . because no return was filed and the 2‐year “look
back” rule applied. Since overwithheld amounts are deemed paid
as of the date the taxpayer’s return was first due (i.e., more than 2
years before the notice of deficiency was issued), such overpayments
could not be recovered. By contrast, if the same taxpayer had filed a
return on the date the notice of deficiency was issued, and then
claimed a refund, the 3‐year “look back” rule would apply, and the
taxpayer could have obtained a refund of the overwithheld amounts.
8
H.R. Rep. No. 105‐220, at 701 (1997) (Conf. Rep.). To eliminate such differential
treatment of filing and non‐filing taxpayers who are otherwise identically
situated, the amendment “permits taxpayers who initially fail to file a return, but
who receive a notice of deficiency . . . during the third year after the return due
date, to obtain a refund of excessive amounts paid within the 3‐year period prior
to the date of the deficiency notice.” Id. It thus appears that the amendment to
26 U.S.C. § 6512(b)(3) was intended to expand the jurisdiction of the Tax Court to
order refunds for taxpayers who failed to file a return prior to the mailing of a
notice of deficiency, and thereby eliminate an unwarranted differential in
treatment.
The Tax Court’s interpretation of 26 U.S.C. § 6512(b)(3) results in
differential treatment of taxpayers that the statute’s flush language was intended
to eliminate: it would have had jurisdiction to grant Borenstein a refund if she had
not been granted an extension for the filing of her return, but lacks jurisdiction
because she obtained an extension that was not used. And if the Commissioner
had mailed the notice of deficiency six months earlier, or six months later, the Tax
Court would have unquestioned jurisdiction to grant Borenstein a refund under
two‐year and three‐year look‐back periods, respectively. The Tax Court’s
interpretation disclaims jurisdiction to order a refund simply because the
Commissioner chose to mail the notice of deficiency during a (supposed) gap in
the Tax Court’s jurisdiction in the second half of the second year after
Borenstein’s extension period. But “there is no need to read [the flush language
of § 6512(b)(3)]‐‐a provision designed to benefit the taxpayer who receives an
unexpected deficiency notice‐‐as giving the [Commissioner] an arbitrary right to
shorten the taxpayer’s period for claiming a refund if that taxpayer has not yet
filed a return,” thereby “convert[ing] an intended benefit into a handicap.” See
Lundy, 516 U.S. at 253 (Stevens, J., dissenting). Instead, because “we must (as
usual) interpret the relevant words not in a vacuum, but with reference to the
statutory context, ‘structure, history, and purpose,’” Abramski v. United States,
573 U.S. 169, 179 (2014) (quoting Maracich v. Spears, 570 U.S. 48, 76 (2013)), we
conclude that “(with extensions)” modifies “third year after the due date,” such
that the flush language of 26 U.S.C. § 6512(b)(3) provides a three‐year look‐back
9
period when a notice of deficiency is mailed during the third year after the return
due date plus the period of any extensions.
Our conclusion is supported by “the longstanding canon of construction
that where ‘the words [of a tax statute] are doubtful, the doubt must be resolved
against the government and in favor of the taxpayer,’” a principle of which “we
are particularly mindful.” Exxon Mobil Corp. & Affiliated Cos. v. Comm’r of
Internal Revenue, 689 F.3d 191, 199‐200 (2d Cir. 2012) (quoting United States v.
Merriam, 263 U.S. 179, 188 (1923)). As Borenstein notes, the Tax Court’s
interpretation creates a six‐month “black hole” into which her refund disappears,
a result that unreasonably harms the taxpayer and is not required by the statutory
language.
Moreover, the interpretation we adopt is consistent with the language of 26
U.S.C. § 6511(b)(2)(A), which provides for a look‐back period “equal to 3 years
plus the period of any extension of time for filing the return.” 26 U.S.C. § 6511(b)(2)(A)
(emphasis added). In view of our obligation to resolve doubtful language in tax
statutes against the government and in favor of the taxpayer, we conclude that
“(with extensions)” has the same effect as does the similar language that existed
in § 6511(b)(2)(A) at the time of § 6512(b)(3)’s amendment‐‐that is, the language
expands the Tax Court’s jurisdiction to order refunds and credits.2
CONCLUSION
For the foregoing reasons, we hereby REVERSE the judgment of the Tax
Court, and REMAND for the entry of judgment for Borenstein.
2 As the Commissioner observes, the analogy between 26 U.S.C. § 6511(b)(2)(A)
and § 6512(b)(3) is imperfect. But no analogy is perfect.
10