[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
June 7, 2004
No. 03-13868 THOMAS K. KAHN
________________________ CLERK
D.C. Docket No. 02-00010-CV-GET-1
WILLIAMS-RUSSELL & JOHNSON, INC.,
Plaintiff-Appellant,
versus
UNITED STATES OF AMERICA,
Defendant-Appellee.
_______________________
Appeal from the United States District Court
for the Northern District of Georgia
_______________________
(June 7, 2004)
Before EDMONDSON, Chief Judge, HULL, Circuit Judge, and EDENFIELD*,
District Judge.
EDENFIELD, District Judge:
*
Honorable B. Avant Edenfield, United States District Judge for the Southern District of Georgia,
sitting by designation.
I. Introduction
Appellant Williams-Russell & Johnson, Inc. (“WRJ”), brought this action to
recover from the Internal Revenue Service (“IRS”) an “overpayment” tax refund that
WRJ claims it is due under 26 U.S.C. § 7422. The district court dismissed the
case for lack of subject-matter jurisdiction, finding that there was no overpayment and
in any event the claim was time-barred. WRJ appeals.
In that the tax code can be difficult to follow, we first pause to explain the
general framework that applies to this situation. Companies like WRJ must pay
employment taxes over time. The IRS is supposed to keep track of these payments
and periodically make “assessments” which determine and inform taxpayers what
they actually owe (ideally for both sides, this amount reflects what the taxpayer has
paid, or thinks he should have paid).
But, the IRS makes mistakes, and so it does not always get around to timely
assessing liability. The question for us, then, is what effect such a mistake (a late
assessment) has on a taxpayer’s liabilities and rights.
II. Background
During 1993-1995 WRJ filed monthly, rather than the usual quarterly,
employment tax returns. Similarly, it deposited its employment taxes on a monthly
basis. This required the IRS to, on a quarterly basis, consolidate the returns and make
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proper assessment of WRJ’s tax liability. But the IRS failed to discharge those
duties.
In fact, it did not assess liability for those years until 6/99. It concedes, then,
that those 1993-1995 assessments were made beyond 26 U.S.C. § 6501's three-year
statute of limitations period for collection and assessment.1 So, the IRS admits, it
cannot collect any additional employment taxes from WRJ even though WRJ had, in
fact, underpaid its taxes for the subject years. See Ewing v. United States, 914 F.2d
499, 503-04 (4th Cir. 1990).
Not content with its good fortune, however, WRJ wants more. Reasoning that
it would have gotten away without paying anything had it simply not paid its taxes
(because the IRS failed to timely make assessments for 1993-1995), it argues that late
assessment also “entitles” it to recover those taxes it had already paid and otherwise
owed during those years. In fact, it labels them “overpayments” within the meaning
of 26 U.S.C. § 6402(a). In support, WRJ cites 26 U.S.C. § 6401(a), which provides
that
“overpayment” includes that part of the amount of the
payment of any internal revenue tax which is assessed or
1
26 U.S.C. § 6513(c)(1) provides that any return filed before 4/15 shall be considered as filed on
4/15. Accordingly, the last of WRJ’s returns was “filed” on 4/15/96. Under § 6501, then, the IRS
had until 4/15/99 to assess taxes for 1995, and one and two years earlier, respectively for 1994 and
1993.
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collected after the expiration of the period of limitation
properly applicable thereto.
Accordingly, WRJ applied for a refund -- first on 1/27/00 and then again on
5/30/00. But, the IRS denied those claims on statute of limitations grounds -- that
since WRJ paid those taxes from 1994-1996, see infra note 2, it simply waited too
long to try and get them back even if it is otherwise entitled to them because of the
late assessment. In so doing, the IRS relied on 26 U.S.C. § 6511, under which claims
for credit or refund of an overpayment of any tax ... in
respect of which tax the taxpayer is required to file a return
shall be filed by the taxpayer 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.
WRJ’s year 2000 refund applications, then, placed it beyond the 2-3 year limit
for recovering any 1993-95 “overpayments.”
Unsatisfied, WRJ brought this refund action, arguing that, in light of §
6401(a)’s definition of “overpayment,” § 6511's statute of limitation did not bar its
recovery because the IRS did not assess its 1993-1995 employment taxes until 6/99.
In other words, no “overpayment” occurred until the IRS made its assessment in
1999, so it would be unfair to apply the 2-3 year limitations statute. Therefore, WRJ
argues, the court should deem § 6511's statute of limitations tolled until 1999, thus
making its 2000 refund claim timely.
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III. Analysis
We review de novo subject-matter jurisdiction dismissals such as that which
occurred here. Broward Gardens Tenants Assoc. v. United States Env’t Protection
Agency, 311 F.3d 1066, 1072 (11th Cir. 2002); Ochran v. United States, 273 F.3d
1315, 1317 (11th Cir. 2001).
We must first decide whether § 6401(a) operated to create an “overpayment”
of taxes. A literal reading of that statute supports WRJ’s claim that an “overpayment”
occurred. It provides that “‘overpayment’ includes that part of the amount of the
payment of any internal revenue tax which is assessed ... after the expiration of the
period of limitation,” 26 U.S.C. § 6401(a) (emphasis added), which in this case is §
6501. Again, the IRS did not assess WRJ’s 1993-1995 tax liability until 1999.
But WRJ paid the taxes it now seeks to recover as the liabilities accrued (on a
monthly basis from 1993-1995) well before the running of § 6501's limitation period.
So the question, then, is whether those payments, properly owed and paid within the
limitations period, somehow became “overpayments” merely because the IRS did not
get around to assessing liability for them until after the limitations period expired.
While this is a first impression question for our circuit, others have consistently
answered it in the negative. See Ewing, 914 F.2d at 500-04 (4th Cir. 1990); Moran
v. United States, 63 F.3d 663, 666 (7th Cir. 1995), overruled in part by Malachinski
5
v. Comm’r, 268 F.3d 497 (7th Cir. 2001); Crompton & Knowles Loom Works v.
White, 65 F.2d 132, 133-34 (1st Cir. 1933) (interpreting § 6401's predecessor statute).
We join those circuits by holding that, notwithstanding § 6401(a)’s language, an
untimely assessment of taxes otherwise properly owed and paid within the statutory
period for assessment and collection does not create an “overpayment” entitling the
“late-assessed” taxpayer to a refund.
Under the principles established in Lewis v. Reynolds, 284 U.S. 281, 282
(1932), “a taxpayer's claim for refund must be reduced by the amount of the correct
tax liability for the taxable year, regardless of the fact that the Commissioner can no
longer assess any deficiency for the taxable year.” Bachner v. Comm’r of Internal
Revenue, 109 T.C. 125, 130 (1997), aff’d, 172 F.3d 859 (3rd Cir. 1998) (Table)). To
accept WRJ’s proposition -- that it can recover undisputably owed taxes that have
already been rightly and timely paid -- would directly fly in the face of that tax
jurisprudence.
Put another way, WRJ “owed taxes, and the government’s failure to assess
them timely does not change that fact.” Moran, 63 F.3d at 666. We have been shown
no convincing legal reason why WRJ should be allowed to recover what it owed and
has already properly paid simply because the IRS was lax in it responsibilities.
Section 6501 simply strips “the United States ... [of] authority to collect [further] tax
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forcibly after the applicable period for assessment has expired.” Ewing, 914 F.2d at
503-04. It does not mean that a taxpayer can recover taxes already correctly owed
and paid.
Moreover, “an assessment is not a prerequisite to tax liability ... only a formal
determination that a taxpayer owes money.... It is more or less a bookkeeping
procedure .... but it is neither the beginning nor the end of tax liability.” Moran, 63
F.3d at 666 (internal citation omitted). That the assessment here was made late
therefore does not change the fact that the taxes were justly owed and paid, so it
would be nonsensical to allow a taxpayer to recover those taxes now.
Also, WRJ’s attempt to distinguish Lewis, Moran, and other authority is
unavailing. The technical factual distinctions pointed out by WRJ do not alter or
render inapplicable the legal propositions on which we rely here, for they are based
on policy considerations, not facts specific to those cases.
Finally, our conclusion that WRJ is not entitled to a refund by the operation of
§ 6401(a) obviates the need for us to rule on its argument that § 6511, the statute of
limitations for the bringing a refund claim, should be tolled until the IRS made its
assessment.2
2
We otherwise would find little merit to that argument. WRJ would have us equate the phrase
“from the time the tax as paid” in § 6511(a) to § 6401(a)’s time of assessment or collection. A
similar argument, however, was rejected in United States v. Dalm, 494 U.S. 596, 609 n. 7 (1990) (the
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IV. Conclusion
To summarize, if a taxpayer duly pays its taxes (even if in an amount latter
determined to be deficient) but is not timely assessed for the same, then the IRS is
barred from collecting any tax deficiencies. However, that same untimely assessment
does not also entitle the taxpayer to a refund, unless, of course, it actually paid more
than it owed (as indicated by the assessment) and timely files a refund claim.
Accordingly, the judgment of the district court is AFFIRMED.
limitations clock runs from when a tax payment is tendered, not when it is determined that the tax
is owed, i.e., assessed). Indeed,
[t]he most sensible interpretation of § 6511(a) is that a tax is paid when the taxpayer
tenders payment of the tax to the IRS, not when the taxpayer discovers that the
payment was erroneous. That a taxpayer does not learn until after the limitations
period has run that a tax was paid in error, and that he or she has a ground upon
which to claim a refund, does not operate to lift the statutory bar.
Id. at 609-10 n. 7.
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