IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-31037
PALA, INC. EMPLOYEES PROFIT SHARING PLAN AND TRUST AGREEMENT,
Plaintiff-Appellant,
versus
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
for the Middle District of Louisiana
November 29, 2000
Before JOLLY, HIGGINBOTHAM, and EMILIO M. GARZA, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
This case requires us to examine the nuances of the "informal
claim" doctrine. Plaintiff-Appellant filed suit, requesting a tax
refund from the Internal Revenue Service. Although it never made a
formal refund claim to the IRS, Plaintiff-Appellant asserts that it
filed a timely "informal claim." The district court dismissed for
lack of subject matter jurisdiction, concluding that no timely
claim was filed. Upon denial of its motion for reconsideration,
Plaintiff-Appellant asks this Court to overturn the district
court's judgment of dismissal. We decline this invitation.
I
In 1975 PALA, Inc. established an Employees Profit Sharing
Plan and Trust, for which PALA served as trustee. The IRS sent PALA
favorable determination letters, which stated that the Plan was
qualified as a tax-exempt profit sharing plan. In 1983 PALA decided
to terminate the Plan and received a favorable termination letter
from the IRS. All of the Plan's assets were distributed except
those belonging to Jose Ricardo Tarajano, PALA's president. His
assets consisted of PALA stock. Tarajano sought to place the stock
in an IRA account but could not find a willing financial
institution. PALA lacked sufficient funds to redeem Tarajano's
stock and his assets remained in the Plan. Applying Revenue Ruling
89-87,1 the IRS consequently determined that the Plan had not been
terminated. On May 18, 1992, PALA redeemed Tarajano's stock and
distributed the balance to him.
On June 1, 1992, PALA filed an additional request for an IRS
determination that the Plan was terminated. The IRS responded on
April 3, 1993, by sending a proposed adverse determination letter
1
1989-2 C.B. 81. In its ruling, rendered on July 3, 1989, the
IRS stated that a plan would not be considered terminated if assets
remained in the plan's trust. It also noted that, if a plan's
assets were not distributed as soon as administratively feasible,
the plan would have to continue to meet the qualifications of
I.R.C. § 401(a) to retain its qualified status. See id.
2
to PALA. In its letter, the IRS indicated that, for the plan year
ending May 31, 1988, and all years thereafter, the Plan was not
qualified as a tax exempt plan under I.R.C. § 401. The IRS asserted
that the Plan continued in existence and that no new employees had
been admitted to participate.2 The IRS concluded that the Plan was
not terminated and that it was therefore not tax exempt for the
years 1988 through 1991.
PALA filed Form 1041 fiduciary income tax returns for the
1988-1991 period and attached a request for waiver of penalties
because the disqualification was retroactive.3 PALA appealed the
IRS's proposed disqualification of the Plan's tax exempt status. In
a letter to the IRS dated May 4, 1993, PALA argued that the IRS
could not retroactively disqualify the Plan more than three years
from the timely filing of a Form 5500 with attached Schedule P.4
PALA argued that, because the proposed adverse determination letter
was dated April 8, 1993, the IRS could not retroactively disqualify
the Plan for any plan year prior to the plan year beginning June 1,
1989. Moreover, PALA also argued in its letter that the proposed
disqualification was erroneous for all years. In the wake of this
2
The IRS apparently based its decision on, inter alia, the
requirements articulated in 26 U.S.C.A. § 401(a)(26), 410(b)(1)
(1998 & Supp. 2000).
3
PALA paid the taxes on April 14, 1993.
4
PALA timely filed an informational return, Form 5500-EZ
(Annual Return of One Participant (Owners and their Spouses)
Pension Benefit Plan), as well as a Schedule P (Annual Return of
Fiduciary of Employee Benefit Trust).
3
letter and discussions at an appellate conference, the IRS refunded
the tax paid for the plan years ending May 31, 1988 and 1989.
On November 19, 1996, the IRS issued its final determination
letter, concluding that the Plan was disqualified because it failed
to meet the requirements of I.R.C. § 401 for the plan years
beginning after May 31, 1990, and for all subsequent years. PALA
then sought a refund of taxes paid for 1990 and 1991. It sent a
letter to the IRS on January 23, 1997, entitled, "Second Request
for Refund," in which it "reiterate[d] its prior request for refund
for all taxes, interest and penalties paid for the years ending May
31, 1988; May 31, 1989; May 31, 1990; and May 31, 1991, plus
interest thereon." On March 18, 1997, PALA sent a "Follow Up
Letter" making the same request. The IRS granted a partial refund
on April 28, 1997, refunding only the 1990 tax.
PALA filed suit for a refund of $64,004 for the year ending
May 31, 1991. The district court dismissed for lack of subject
matter jurisdiction, asserting that PALA did not file a timely
administrative claim for refund of the 1991 tax. The court denied
PALA's motion for new trial, which the court treated as a motion
for reconsideration. PALA appeals the dismissal of its claim.5
II
5
PALA also asks this Court to supplement the record on
appeal. Our disposition of this case renders it unnecessary for us
to decide these motions.
4
In adopting 28 U.S.C. § 1346(a)(1), Congress waived sovereign
immunity for purposes of civil actions against the United States
"for the recovery of any internal-revenue tax alleged to have been
erroneously or illegally assessed or collected."6 Congress
conditioned this waiver on the filing of refund claims within the
appropriate statute of limitations.7 According to the Internal
Revenue Code, a claim for a tax refund must be presented "within
3 years from the time the return was filed or 2 years from the time
the tax was paid, whichever of such periods expires the later, or
if no return was filed by the taxpayer, within 2 years from the
time the tax was paid."8 In this case, the three-year period of
limitations began to run as of December 31, 1992, the due date for
PALA's Form 5500 with attached Schedule P for fiscal year ending
May 31, 1992. Because PALA's return is deemed filed on December 31,
1992, PALA had until December 31, 1995, to file a timely
6
28 U.S.C.A. § 1346(a) (Supp. 2000).
7
See United States v. Mottaz, 476 U.S. 834, 841 (1986) ("When
the United States consents to be sued, the terms of its waiver of
sovereign immunity define the extent of the court's
jurisdiction.").
8
26 U.S.C.A. § 6511(a) (Supp. 2000). Reading this provision
together with 26 U.S.C. § 7422(a) and 28 U.S.C.A. § 1346(a)(1), the
Supreme Court has concluded that, "unless a claim for refund of a
tax has been filed within the time limits imposed by § 6511(a), a
suit for refund, regardless of whether the tax is alleged to have
been 'erroneously,' 'illegally,' or 'wrongfully collected,' §§
1346(a)(1), 7422(a), may not be maintained in any court." United
States v. Dalm, 494 U.S. 596, 602 (1990).
5
administrative claim for refund.9 The Code requires that a claim
for refund be made on an amended version of the otherwise
appropriate return—in this case, Form 1041.10 The timely filing of
such a claim is a jurisdictional prerequisite to a refund suit.11
PALA argues that, although it never filed a 1041 refund claim
within the limitations period, it presented a timely "informal
claim." While its theoretical underpinnings remain shrouded in some
obscurity,12 the informal claim doctrine has received the
endorsement of the Supreme Court.13 According to this doctrine, an
informal claim is sufficient if it is filed within the statutory
period, puts the IRS on notice that the taxpayer believes an
erroneous tax has been assessed, and describes the tax and year
9
See 26 U.S.C.A. § 6511(a), § 6513(a) (Supp. 2000). PALA
filed the form early, on August 25, 1992. However, the due date
for the form is the relevant date for section 6511 purposes. See 26
U.S.C. § 6513(a). Because PALA paid the tax on April 14, 1993, the
two-year period would expire on April 14, 1995. Thus, the filing
due date for PALA's Form 5500 with attached Schedule P actually
triggers the statute of limitations, as the limitations period
would expire approximately six months later than if the period were
calculated from the payment of the tax. See 26 U.S.C. § 6511(a).
10
See 26 C.F.R. § 301.6402-3(a)(4) (2000); see also 26 C.F.R.
§ 301.6402-2(b)(1) (2000).
11
See Dalm, 494 U.S. at 601-02, 609-10; Gustin v. United
States, 876 F.2d 485, 488 (5th Cir. 1989).
12
For an excellent discussion of the theoretical difficulties
associated with the informal claim doctrine, see BCS Fin. Corp. v.
United States, 118 F.3d 522, 524-27 (7th Cir. 1997) (Posner,
C.J.).
13
See United States v. Kales, 314 U.S. 186, 194 (1941).
6
with sufficient particularity to allow the IRS to undertake an
investigation.14 Although an informal claim may include oral
communications, it must have a written component.15 There are no
"hard and fast rules" for determining the sufficiency of an
informal claim, and each case must be decided on its own facts
"'with a view towards determining whether under those facts the
Commissioner knew, or should have known, that a claim was being
made.'"16 However, it is not enough that the IRS merely "has
information somewhere in its possession from which it might deduce
that the taxpayer is entitled to a refund."17
PALA points to five potential sources of an informal claim:
(1) PALA's May 4, 1993 letter; (2) the IRS's November 8, 1993,
letter to PALA; (3) the IRS's November 19, 1996 letter; (4) the
IRS's April 28, 1997 letter; and (5) unspecified oral
communications between PALA and IRS agents. None of the
14
See Kales, 314 U.S. at 194-95; Gustin, 876 F.2d at 488;
Bauer v. United States, 594 F.2d 44, 46 (5th Cir. 1979); American
Radiator & Standard Sanitary Corp. v. United States, 318 F.2d 915,
920 (Ct. Cl. 1963); Michael I. Saltzmann, IRS Practice & Procedure
¶ 11.08[2] (2000).
15
See Gustin, 876 F.2d at 488. As the Court of Claims has
stated, the informal claim must provide "clear and explicit"
notice. Missouri Pacific R.R. Co. v. United States, 558 F.2d 596,
598 (Ct. Cl. 1977); see Bauer, 594 F.2d at 46.
16
See Gustin, 876 F.2d at 488-89, quoting Newton v. United
States, 163 F. Supp. 614, 619 (Ct. Cl. 1958).
17
Gustin, 876 F.2d at 489; see American Radiator, 318 F.2d at
920.
7
communications from the IRS to PALA indicate even indirectly that
the IRS was aware of a claim for the 1991 tax that was filed within
the statutory period.18 The portion of PALA's May 4, 1993 letter
that addresses the limited retroactive application of the proposed
ruling only extended to the years up to and including 1990. As that
portion of the letter did not specifically address the 1991 tax
period, it did not provide the IRS with notice sufficient to
constitute an informal claim for that period.19
The second portion of the May 4, 1993, letter initially
provided the IRS with the requisite notice. That section of the
letter contained an objection to the basis for the proposed adverse
determination itself. The letter requested that "the entire adverse
determination be withdrawn," thereby objecting to the tax levied on
all of the years targeted by the proposed adverse determination -
including 1991. Indeed, the IRS's proposed adverse determination
letter, which was dated April 8, 1993, attempted to disqualify the
Plan for all plan years "ending May 31, 1988 and subsequent years"
(emphasis added).20 The fact that PALA’s letter does not
18
The factual irrelevance of the IRS letters is apparent
despite the procedural posture of the case. We review the dismissal
of a complaint applying a de novo standard, accepting all well-
pleaded facts and drawing all reasonable inferences in favor of the
non-movant, PALA. See Price v. Pinnacle Brands, Inc., 138 F.3d 602,
605 (5th Cir. 1998).
19
See Rosengarten v. United States, 181 F. Supp. 275, 278-79
(Ct. Cl. 1960).
20
The May 4, 1993, letter from PALA specifically refers to the
scope of the proposed adverse determination, noting that it applies
8
specifically mention the year 1991 is irrelevant; the IRS had ample
notice that the entire determination—and thus every year covered by
the determination—was the subject of a claim for refund.21 As this
Court has noted, "the writing should not be given a crabbed or
literal reading, ignoring all the surrounding circumstances which
give it body and content."22 Cases applying this doctrine have found
informal claims in similar and arguably less compelling
circumstances.23 The May 4, 1993, letter is therefore consonant with
to "plan years beginning after May 31, 1987."
21
In American Radiator & Standard Sanitary Corp. v. United
States, 318 F.2d 915, 921 (Ct. Cl. 1963), the court stated that an
informal claim is present even where it is "partially informative"
and fails "to match particular amounts to particular years." Id. An
informal claim is therefore valid even though it is "'too general'
or suffering from a 'lack of specificity.'" Id., quoting United
States v. Kales, 314 U.S. 186, 194 (1941).
22
Gustin v. United States, 876 F.2d 485, 489 (5th Cir. 1989),
quoting American Radiator, 318 F.2d at 920.
23
See, e.g., Penn Mut. Indemn. Co. v. Comm'r, 277 F.2d 16, 18-
19 (3d Cir. 1960) (holding that a letter attached to a return
protesting the constitutionality of an imposed tax was an informal
claim); Newton v. United States, 163 F. Supp. 614, 619-20 (Ct. Cl.
1958) (finding that a written protest prior to or accompanying
payment of a tax constituted an informal claim); Cumberland
Portland Cement Co. v. United States, 104 F. Supp. 1010, 1013-14
(Ct. Cl. 1952) (finding an informal claim in a letter attached to
a waiver of restrictions on an assessment); Night Hawk Leasing Co.
v. United States, 18 F. Supp. 938 (Ct. Cl. 1937) (finding an
informal claim in a notation on the back of a check issued to pay
tax). But see Rosengarten, 181 F. Supp. at 278-79 (finding no
informal claim where claim filed for another year or different
period).
9
the policy objective underlying the statute of limitations—i.e., to
provide the government with "protection against stale demands."24
However, in a submission to the district court, PALA conceded
that, although it had initially disagreed with the grounds for the
disqualification, “the disqualification of the Plan in itself was
ultimately not opposed by PALA and is not a part of this
proceeding. The dispute concerning the refund turns on how far back
the Plan could be retroactively disqualified.”25 Consequently, PALA
admits to abandoning its informal claim for refund of the 1991 tax.
Nothing in the record indicates that PALA resurrected its claim
within the statutory time frame.26
Even if PALA had filed a timely informal claim, this claim was
not subsequently amended by a formal claim. Informal claims have
been likened to pleadings, for which technical deficiencies
generally can be corrected by amendment so as to relate back to the
24
United States v. Brockamp, 519 U.S. 347, 353 (1997)
(citations omitted).
25
See Appellant’s Memorandum in Opposition to Motion to
Dismiss, at 2 & n.2. Counsel for PALA also conceded at oral
argument that the May 4, 1993, letter was insufficient - in and of
itself - to effect an informal claim.
26
PALA's abandonment of this argument renders it unnecessary
for us to decide whether the oral communications between PALA and
the IRS prove the existence of an informal claim for the 1991 tax.
We note that PALA does not argue that it offered timely oral
requests for refund of the 1991 tax; it contends only that oral
discussions encompassed the applicability of the retroactivity
argument to the 1990 tax.
10
original date of filing suit.27 Similarly, courts will excuse
"harmless noncompliance" with the formalities prescribed for refund
claims.28 However, the doctrine is predicated on an expectation that
these formal deficiencies will at some point be corrected.29
Moreover, if the IRS rejects the informal claim after the statutory
period has expired, the claim can not be amended.30
PALA concedes that it did not file an amended 1041 return, as
required by Treasury Department regulations. Although it submitted
two letters to the IRS in 1997, which purported to be claims for
refund, PALA failed to comply with the basic requirement of filing
an amended 1041. In addition, the IRS arguably rejected PALA's
claim for a refund of the 1991 tax when it issued its final adverse
determination letter on November 19, 1996. The adverse
27
See Fed. R. Civ. P. 15(c); United States v. Memphis Cotton
Oil Co., 288 U.S. 62, 72-73 (1933) (Cardozo, J.). However, while
the Supreme Court has embraced the pleadings analogy, it has also
cautioned that this analogy "is not to be so slavishly followed as
to ignore the necessities and realities of administrative
procedure." United States v. Andrews, 302 U.S. 517, 524 (1938).
28
BCS Fin. Corp. v. United States, 118 F.3d 522, 524 (7th Cir.
1997) (Posner, C.J.).
29
See United States v. Kales, 314 U.S. 186, 194 (1941);
Memphis Cotton Oil Co., 288 U.S. at 72-73; BCS Fin. Corp., 118 F.3d
at 524; American Radiator, 318 F.2d at 921-22; Tobin v. Tomlinson,
310 F.2d 648, 652 (5th Cir. 1962); Night Hawk Leasing Co., 18 F.
Supp. at 941-42; Hollie v. Comm'r, 73 T.C. 1198, 1216 (1980); Boris
I. Bittker & Lawrence Lokken, Federal Taxation of Income, Estates
and Gifts ¶ 112.5.2 (2000).
30
See Tobin, 310 F.2d at 652; Hollie, 73 T.C. at 1216; Bittker
& Lokken, supra, at ¶ 112.5.2.
11
determination letter specifically rejected PALA's contention in its
May 4, 1993, letter that the disqualification was erroneous ab
initio. Consequently, no subsequent amendments could remedy the
formal inadequacies of PALA's claim. This leaves waiver, an
alternate strand of the informal claim doctrine.
III
The Supreme Court has long recognized the power of the IRS to
waive the formal requirements established by the Treasury
Department for refund claims.31 As the Court has noted, where the
Commissioner decides not to insist upon the formal requirements for
a refund, "it would be making an empty abstraction, and not a
practical safeguard, of a regulation to allow the Commissioner to
invoke technical objections after he has investigated the merits of
a claim and taken action upon it."32 However, "the courts should not
unduly help disobedient refund claimants to slip through . . . .
The showing should be unmistakable that the Commissioner has in
fact seen fit to dispense with his formal requirements and to
examine the merits of the claim."33 Although the Commissioner need
31
See Angelus Milling Co. v. Comm'r, 325 U.S. 293, 297-99
(1945); Kales, 314 U.S. at 196-97; see also Gustin v. United
States, 876 F.2d 485, 489 (5th Cir. 1989).
32
Angelus Milling Co., 325 U.S. at 297.
33
Id. at 297.
12
not expressly state that he is waiving these requirements, the
implication of waiver should not be "tenuously argumentative."34
PALA argues that, because the IRS issued a refund for the 1990
tax—thereby waiving the requirement that PALA file a formal refund
claim for that year—PALA can not be held to the formal claim
requirements for the 1991 tax. PALA argues that the 1990 and 1991
taxes were paid at the same time and that assessment of tax for
both years was time-barred when the IRS issued its final decision
in 1996. While the reason behind the decision to refund the 1990
tax is unclear,35 the waiver of tax for one time period does not
compel waiver for a different time period, however analogous.36
Because PALA never made a timely claim for the 1991 tax, the IRS
can not be deemed to have waived the formal claim requirements for
that period.
PALA also argues that the IRS is estopped from refusing a
refund because it did not issue a final decision until 1996. Cases
applying the waiver doctrine in the refund context fail to clearly
34
Id. at 298. We note that the IRS can not waive the statutory
time limits for filing. However, the IRS can waive formal
requirements articulated in its own regulations. See Missouri
Pacific R.R. Co. v. United States, 558 F.2d 596, 599 (Ct. Cl.
1977).
35
The IRS claims on appeal that the 1990 refund was simply an
error committed by an IRS agent.
36
See Berman v. United States Treasury Dep't, 63 A.F.T.R.2d
89-538 (E.D.N.Y. 1988)("[A]pparent waiver of the statute of
limitations at the administrative level for the 1979 taxable year
does not constitute a waiver for subsequent taxable years.").
13
differentiate between actual and constructive waiver. Moreover,
this blurred waiver doctrine noticeably shades into estoppel.37
Indeed, cases applying the waiver doctrine have used it on occasion
“to prevent the IRS agents from lulling taxpayers into missing the
three-year deadline.”38
PALA attempts to align itself with such cases, arguing that,
by the time of the 1996 final determination letter, the IRS—under
PALA's retroactivity argument—could not collect taxes as far back
as 1991. PALA argues that, because the IRS delayed its final
decision for slightly more than three years, it prevented PALA from
asserting a refund claim for the 1991 tax within the statutory
period. PALA could not have known in 1993, when it paid the 1991
tax, that the IRS's then-unforeseeable delay would create grounds
for reimbursement. However, PALA could have filed a protective
claim for refund as early as 1994; this it failed to do.39 In fact,
37
See BCS Fin. Corp. v. United States, 118 F.3d 522, 526 (7th
Cir. 1997) (“Waiver . . . differs by only a hair’s breadth from
estoppel.”). We share the Seventh Circuit's concern that the
Supreme Court's decision in United States v. Brockamp, 519 U.S. 347
(1997), calls into question the continuing viability of the
waiver/estoppel strand of the informal claim doctrine. See id.
However, as the Supreme Court has not expressly overruled its cases
articulating the waiver doctrine, we refuse to infer such an
intention.
38
Id.; see United States v. Kales, 314 U.S. 186, 196-97
(1941); United States v. Memphis Cotton Oil Co., 288 U.S. 62, 70-71
(1933).
39
See BCS Fin. Corp., 118 F.3d at 526; United States v.
Commercial Nat'l Bank of Peoria, 874 F.2d 1165, 1170 (7th Cir.
1989); Swietlik v. United States, 779 F.2d 1306, 1307 (7th Cir.
14
PALA did not attempt to file even an informal refund claim for the
1991 tax until 1997. To the extent that PALA argues for an
equitable tolling of the statute of limitations, controlling
Supreme Court precedent refutes its position.40
As the district court was without subject matter jurisdiction,
we hereby AFFIRM its dismissal of PALA's claim.
AFFIRMED.
1985); Newton v. United States, 163 F. Supp. 614, 619-20 (Ct. Cl.
1958); Saltzmann, supra, at § 11.08[3].
40
See United States v. Brockamp, 519 U.S. 347 (1997) (holding
that courts can not equitably toll the statute of limitations for
refund claims under section 6511 of the Internal Revenue Code); see
also Missouri Pacific R.R. Co. v. United States, 558 F.2d 596, 599
(Ct. Cl. 1977) ("The requirements imposed by Treasury regulations
must be distinguished from those imposed by statute; the former
requirements may be waived while the latter may not.").
15