No. 94-1785 In The Supreme Court of The United States OCTOBER TERM, 1995 COMMISSIONER OF INTERNAL REVENUE, PETITIONER v. ROBERT F. LUNDY ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT BRIEF FOR THE PETITIONER DREW S. DAYS, III Solicitor General LORETTA C. ARGRETT Assistant Attorney General LAWRENCE G. WALLACE Deputy Solicitor General KENT L. JONES Assistant to the Solicitor General RICHARD FARBER REGINA S. MORIARTY Attorneys Department of Justice Washington, D.C. 20530 (202)514-2217 ---------------------------------------- Page Break ---------------------------------------- QUESTION PRESENTED Whether 26 U.S.C. 6512 (b) (3) (B) bars a taxpayer from obtaining a refund of an overpayment of in- come taxes in a Tax Court case when he (i) failed to file a return for more than two years after the return was due and the taxes in issue were paid and (ii) then filed his return only after the Commissioner issued the notice of deficiency that led to the Tax Court litigation. (I) ---------------------------------------- Page Break ---------------------------------------- TABLE OF CONTENTS Page Opinions below . . . . 1 Jurisdiction . . . . 1 Statutory provisions involved . . . . 1 Statement . . . . 3 Summary of argument . . . . 10 Argument: Section 6512 (b) (3) (B) of the Internal Revenue Code bars a taxpayer from obtaining a refund of an overpayment of income taxes in a tax court case when the taxpayer (i) failed to file a return for more than two years after the return was due and the taxes in issue were paid and (ii) then filed his return only after the Commissioner issued the notice of deficiency that led to the tax court liti- gation . . . . 13 1. The governing statutory provisions . . . . 13 2. Application of the statutory provisions to this case . . . . 17 3. Limited waivers of sovereign immunity are to be strictly applied in accordance with their terms . . . . 20 4. The court of appeals disregarded the plain lan- guage of the statute . . . . 22 Conclusion . . . . 34 TABLE OF AUTHORITIES Cases: Allen V. Commissioner, 23 F.2d 406 (6th Cir. 1994) , aff'g 99 T.C. 475 (1992) . . . . . 7, 14, 20, 22 Anderson V. Commissioner, 74 A.F.T.R.2d Par.94- 6222, 36 F.3d 1091 (4th Cir. 1994) . . . . 19, 22 Badaracco V. Commissioner, 464 U.S. 386 {1984 ) . . . . 25, 33 Berry V. Commissioner, 97 T. C. 339 (1991) . . . . 27-28 (III) ---------------------------------------- Page Break ---------------------------------------- Iv Cases-Continued: Page Block V. North Dakota, 461 U.S. 273 (1983) . . . . 21 Commissioner v. Gooch Milling & Elevator Co., 320 U.S. 418 (1943) . . . . 13, 16 Commissioner v. McCoy, 484 U.S. 3 (19/37) . . . . 13 Davison V. Commissioner, 9 F.3d 1538 (2d Cir. 1993) , aff'g 64 T.C.M. (CCH) 1517 (1992) . . . . 7, 22 Galuska V. Commissioner, 5 F.3d 195 (7th Cir. 1993) . . . . 7, 14, 17, 19, 20, 22, 23 Hall V. Commissioner, 58 T.C.M. (CCH) 879 (1989) . . . . 28 Hosking V. Commissioner, 62 T.C. 635 (1974) . . . . 28 Jones V. .Liberty Glass Co., 332 U.S. 524 (1947) . . . . 16 Kartrude v. Commissioner, 925 F.2d 1379 (11th Cir. 1991) . . . . 19-20 Kavanagh v. Noble, 332 U.S. 535 (1947) . . . . 21 Lehman V. Nakshian, 453 U.S. 546 (1981) . . . . 21 Lewyt Corp. V. Commissioner, 349 U.S. 237 (1955) . . . . 33 Mamsell V. Mansell, 490 U.S. 581 (1989) . . . . 26 Miller V. United States, 949 F.2d 708 (4th Cir. 1991) . . . . 6 Miller V. United States, 38 F.3d 473 (9th Cir. 1994) . . . . 7, 8, 12, 29-30 Oropallo V. United States, 994 F.2d 25 (1st Cir. 1993),cert. denied, 114 S. Ct. 705 (1994) . . . . 30 Richards v. Commissioner: 65 T.C.M. (CCH) 2137 (1993), aff'd, 37 F.3d 587 (l0th Cir. 1994) . . . . 23 37 F.3d 587 (l0th Cir. 1994) . . . . 7, 14, 18, 20, 26, 28, 32 Rossman V. Commissioner, 46 F.3d 1144 (9th Cir. 1995), aff'g 66 T.C.M. (CCH) 336 (1993), peti- tion for cert. pending, No. 94-1747 . . . . 7, 29 Soriano V. United States, 352 U.S. 270 (1957 ). . . . 21 TVA V. Hill, 437 U.S. 153 (1978) . . . . 33 United States V. Alabama, 313 U.S. 274 (1941) . . . . 21 United States V. Calamero, 354 U.S. 351 (1957 ). . . . 33 United States V. Dalm, 494 U.S. 596 (1990) . . . . 21 United States V. Kubric, 444 U.S. 111 (1979) . . . . 21 United States v. Mottaz, 476 U.S. 834 (1986) . . . . 21 ---------------------------------------- Page Break ---------------------------------------- v Cases-Continued: Page United States v. Nordic Village, Inc., 503 U.S. 30 (1992) . . . . 20 United States v. Olympic Radio & Television, Inc., 349 U.S. 232 (1955) . . . . 33 United States V. Ron Pair Enterprises, Inc., 489 U.S. 235 (1989) . . . . 29 United States V. Williams, 115 S. Ct. 1611 (1995) . . . . 20 West Virginia Univ. Hosps., Inc. V. Casey, 499 U.S. 83 (1991) . . . . 26, 32 White V. Commissioner, 72 T.C. 1126 (1979) . . . . 28 Statutes: Internal Revenue Code (26 U.S.C.): 6013 (b) (2) . . . . 32 6211 (a) (1) . . . . 15 6212 (a) . . . . 15 6213(a) . . . . 15 6501(a) . . . . 33 6503(a) . . . . 32 6503(a) (1) . . . . 15 6511(a) (1958) . . . . 31 6511 (a) (Supp. II 1954) . . . . 31 6511 . . . . 16 6511(a) . . . . .passim 6511 (b) . . . . 31 6511 (b) (1) . . . . 14 6511 (b) (2) . . . . 4, 10, 14, 16, 22, 23 6511 (b) (2) (A) . . . . 2, 11, 14, 18, 28, 33 6511(b) (2) (B) . . . . 2, 5, 11, 14, 17, 18, 19, 22, 33 6511 (c) (1988 & Supp.V 1993) . . . . 16 6511 (d) {1988& Supp. v 1.993) . . . . 16 6512 (Supp. II 1954) . . . . 16 6512 . . . . 16, 24 6512(b) (1) . . . . . 2, 10, 15 6512(b) (2) . . . . 16, 28 6512 (b} (3) . . . . 3, 15, 16, 17, 31 6512 (b) (3) (A) . . . . 16 6512(b) (3) (A) - (C) . . . . 16 6512(b) (3) (B) . . . . .passim 6512(b) (3) (C) . . . . 16 ---------------------------------------- Page Break ---------------------------------------- VI Statutes-Continued: Page 6513 . . . . 3 6513(b) (1) . . . . 3, 20, 3 6513 (b) (2) . . . . 33 28 U.S.C. 2402 . . . . 32 Revenue Act of 1928, ch. 852, 322,45 Stat. 861 . . . . 15 Revenue Act of 1934, ch. 277,322 (b) (1),48 Stat. 750 . . . . 30-31 Revenue Act of 1936, ch. 690, 322,49 Stat. 1731. . . . 15 Revenue Act of 1942, ch. 619, 169, 56 Stat. 876 . . . . 15, 24-25,26 Miscellaneous H.R. Rep. No. 775, 85th Cong., 1st Sess. (1957) . . . . 31 H.R. Rep. No. 1337, 83d Cong., 2d Sess. (1954) . . . . 24 P. Junghans & J. Becker, Federal Tax Litigation (3d ed. 1992) . . . . 32 Rev. Rul. 76-511,1976-2 C.B. 423 . . . . 6 S. Rep. No. 558, 73d Cong., 2d Sess. (1934) . . . . 31 S. Rep. No. 1622, 83d Cong., 2d Sess. (1954) . . . . 24 S. Rep. No. 1983, 85th Cong., 2d Sess. (1958) . . . . 31 ---------------------------------------- Page Break ---------------------------------------- In the Supreme Court of the United States OCTOBER TERM, 1995 No. 94-1785 COMMISSIONER OF INTERNAL REVENUE, PETITIONER v. ROBERT F. LUNDY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF- APPEALS FOR THE FOURTH CIRCUIT BRIEF FOR THE PETITIONER OPINIONS BELOW The opinion of the court of appeals (Pet. App. la-29a) is reported at 45 F.3d 856. The opinion of the Tax Court (Pet. App. 30a-52a) is reported at 65 T.C.M. (CCH) 3011. JURISDICTION The judgment of the court of appeals was entered on January 30, 1995. The petition for a writ of certiorari was filed on April 28, 1995, and was granted on May 30, 1995 (115 S. Ct.. 2244). The jurisdiction of this Court rests upon 28 U. S. C. 1254(1). STATUTORY PROVISIONS INVOLVED 1. Section 6511 (26 U.S.C.) provides, in relevant part: (1) ---------------------------------------- Page Break ---------------------------------------- 2 (a) Claim for credit or refund of an over- payment of any tax imposed by this title in re- spect 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, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid. * * * * * * * * (b) (2) (A) If the claim was fled by the tax- payer during the 3-year period prescribed in sub- section (a), the amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately preceding the fil- ing of the claim, equal to 3 years plus the pe- riod of any extension of time for filing the return. * * * * * (b) (2) (B) If the claim was not filed within such 3-year period, the amount of the credit or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim. * * * * * 2. Section 6512 (26 U. S. C.) provides, in relevant part: (b) (1) Except as provided by paragraph (3) and by section 7463, if the Tax Court finds that there is no deficiency and further finds that the taxpayer has made an overpayment of income tax for the same taxable year, * * * the Tax Court shall have jurisdiction to determine the amount of such overpayment, and such amount shall, when the decision of the Tax Court has ---------------------------------------- Page Break ---------------------------------------- 3 become final, be credited or refunded to the tax- payer. (b) (3) No such credit or refund shall be al- lowed or made of any portion of the tax unless the Tax Court determines as part of its decision that such portion was paid- * * * * * (B) within the period which would be applica- ble under section 6511(b) (2), (c), or (d), if on the date of the mailing of the notice of defi- ciency a claim had been filed (whether or not filed) stating the grounds upon which the Tax Court finds that there is an overpayment * * *. 3. Section 6513 (26 U.S.C.) provides, in relevant part: (b) (1) Any tax actually deducted and with- held at the source during any calendar year under chapter 24 shall, in respect of the recipient of the income, be deemed to have been paid by him on the 15th day of the fourth month follow- ing the close of his taxable year with respect to which such tax is allowable as a credit under sec- tion 31. STATEMENT 1. Although federal income taxes were withheld from respondent's wages during 1987, he failed to file an income tax return for that year when it was due, on April 15, 1988 More than two years later, on September 26, 1990, in the absence of any return from respondent, the Commissioner of Internal Reve- nue mailed respondent a notice of deficiency of $13,806 in his income taxes for 1987. Three months later, on December 22, 1990, respondent mailed a joint income tax return for 1987 with his wife. That untimely return asserted a $3,537 overpayment of ---------------------------------------- Page Break ---------------------------------------- 4 their joint income tax liability for 1987 (Pet. App. 2a). 2. a. On December 28, 1990, respondent sought a redetermination in the Tax Court of the deficiency asserted by the Commissioner in his 1987 income taxes. Respondent also sought a further determina- tion that he had overpaid his 1987 taxes by $3,537. Upon review of the information contained in respon- dent's untimely return, the Commissioner filed an amended answer that acknowledged that a deficiency did not exist in respondent's 1987 taxes and that respondent had, in fact, made an overpayment of $3,537 in the taxes that he owed for that year (Pet. App. 2a). Following these stipulations, the only issue remain- ing in the Tax Court was whether respondent was entitled to a refund of the overpayment. The Com- missioner contended that a refund of the overpay- ment was barred by the provisions of Sections 6511 and 6512 of the Internal Revenue Code, 26 U.S.C. 6511,6512 (Pet. App. 3a). b. The Tax Court agreed with the Commissioner that Sections 6511 and 6512 bar any recovery of respondent's refund claim (Pet. App. 30a-52a). The court noted that Section 6512 (b) (3) (B) limits the amount of any overpayment that may be refunded in a Tax Court case to the amount that would have been refundable under Section 6511 (b) (2) if a claim for refund had been filed "on the date of the mailing of the notice of deficiency" (Pet. App. 37a-38a, quot- ing 26 U.S.C. 6512(b) (3) (B) ). The court stated that Section 6512 (b) (3) (B) "directs us to focus on the situation as it would have been on a specified date-the date of the mailing of the notice of deficiency. Thus, this provision requires us to `take a snapshot' of the situation" as of the date of the mail- ing of the notice of deficiency (Pet. App. 38a). Be- ---------------------------------------- Page Break ---------------------------------------- 5 cause, as of the date the notice of deficiency was mailed, respondent had not filed a return for his 1987 taxes, the amount of the overpayment of tax that was refundable to him was limited to the amount of tax he had paid within the two-year period im- mediately preceding the date that the notice of defi- ciency was mailed (id. at 39a, citing 26 U.S.C. 6511 (b) (2) (B)). Since respondent had not paid any of the taxes involved in this case during the two-year period preceding the mailing of the notice of defi- ciency, the court concluded that Section 6512 (b) (3) (B) bars any refund of respondent's overpayment (Pet. App. 39 ) . The Tax Court rejected (Pet. App. 51a) respon- dent's contention that the government should be estopped from applying the two-year limitation of Section 6512(b) (3) (B) : 1 ___________________(footnotes) 1 The Tax Court made the following findings concerning the late filing of respondent's 1987 tax return (Pet. App. 32a- 33a): [The taxpayer] timely requested an automatic extension of time to file his tax return for 1987; the filing period was extended to August 15, 1988. From 1988 through 1990, [the taxpayer] had health problems, was hospital- ized after a car accident, dealt with various family prob- lems, and was involved in a divorce. On June 4,1990, [the government] sent a letter to [the taxpayer] stating that if the [government] did not hear from [the taxpayer] within 30 days: then [the government] would prepare a substitute return for 1987 for [the taxpayer]. In re- sponse, on July 3, 1990, [the taxpayer] wrote to [the government] stating that he had not yet filed his 1987 income tax return, but that he would "file within the three year period to claim [his] refund". From June 1988 until September 1990, [the government] contacted [the taxpayer] twice about his 1987 Federal income tax ---------------------------------------- Page Break ---------------------------------------- 6 [Respondent] contends that he was misled by [the government] because he relied on * * * representations that a taxpayer has 3 years from the time the tax was paid to file a return or claim for credit or refund. [Respondent] does not claim that any specific type of estoppel should be applied to [the government]. How- ever, his contentions are similar to the equitable estoppel argument which was rejected in Dillard v. Commissioner, T.C. Memo. 1992-126, and we also reject it in the instant case. * * * [Respond- ent] testified that [the government's] employees urged him to file his 1987 tax return as soon as possible. As noted in Rev. Rul. 57-354, [1957-2 C.B. 913], which [respondent] relies on for his administrative practice argument, for at least a generation [the government] has warned that if a taxpayer files a claim for credit or refund before filing a tax return for that period, then the taxpayer may lose an opportunity to get the credit or refund. Noting that the limitation on refunds of overpay- ments in Tax Court that this case involves "is spe- cifically provided by statute," the court concluded that " [t]here is no basis for an estoppel against [the Commissioner] in the instant case. See Miller v. United States 949 F.2d 708, 712-713 (4th Cir. 1991) ." Pet. App. 51a. ___________________(footnotes) return. Each time [the government] asked [the tax- payer] to file his tax return "as soon as possible.". On them occasions, [the government] did not tell [the tax- payer] that he did not have to file his 1987 tax return for 3 years. ---------------------------------------- Page Break ---------------------------------------- 7 The court stated that "the statute is intricate and precise" in denying a refund in the context of this case (Pet. App. 51a). The court concluded that, even if the statute may appear harsh to a person such as respondent who failed to file his return in a timely manner, the statute must be applied "as the Congress enacted it" (id. at 51a-52a). 3. The court of appeals reversed (Pet. App. la- 29a ). In doing so, the court rejected the decisions of several other circuits that had upheld the Tax Court's analysis of these statutory provisions (id. at 21a-22a. citing, e.g., Richards v. Commissioner, 37 F.3d 587 ( 10th Cir. 1994), petition for cert. pending, No. 94- 1537 ) . 2 The court of appeals held in the present case (Pet. App. 12a) that, notwithstanding the plain lan- guage of the statute, Section 6512(b) (3) (B) does not require the Tax Court to test the taxpayer's claim for refund as if it were filed on the date that the notice of deficiency was issued. In reaching that con- clusion, the court of appeals relied on what it re- garded as evidence in "the legislative history of ___________________(footnotes) 2 See, e.g,, Davison v, Commissioner, 9 F.3d 1538 (2d Cir. 1993) (Table) (unpub. ), aff'g 64 T.C.M. (CCH) 1517 ( 1992); Allen v, Commissioner, 23 F.3d 406 (6th Cir. 1994 ) (Table) (unpub.), aff'g 99 T.C. 475 (1992); Galuska v. Commis- sioner, 5 F.3d 195 (7th Cir. 1993). The court of appeals also expressly disagreed (Pet. App. 22a , 25a-28a ) with the Ninth Circuit's analysis of Section 6511 in Miller V. United States, 38 F.3d 473 ( 1994). The analysis if the Ninth Circuit in Miller led directly to that court's decision in Rossman v. Commissioner, 46 F.3d 1144 (1995) (Table) (unpub.), aff'g 66 T.C.M. ( CCH) 336 (1993), petition for cert. pending, No. 94-1747, which held that Section 6512 (b) (3) (B) barred a refund of the overpayment made by the taxpayer in that case. The decision in Rossman, also directly conflicts with the deci- sion of the court of appeals in the present case. ---------------------------------------- Page Break ---------------------------------------- 8 6512 [that] indicates that Congress intended a tax- payer who filed a claim for refund within three years of filing a tax return to have a three-year refund period that runs from the date of the mailing of the notice of deficiency" (Pet. App. 17a). Based on this reading of the legislative history, the court stated (ibid.) : We interpret 6512(b)(3) (B) to provide for a three-year refund period where the taxpayer files a claim for refund in Tax Court within three years of filing his tax return and to com- mence the refund period from the date of the mailing of the notice of deficiency. The court of appeals also sought to rely on what it perceived to be the potential anomaly that respond- ent "would have received his refund if he had filed his claim for refund in a United States district court or the United States Claims Court" (Pet. App. 10a). In making this assertion, the court assumed that a return filed by a taxpayer more than two years after the return was due would permit a subsequent re- fund claim to invoke the three-year refund period of Section 6511 (b) (2) (A). The court recognized (Pet. App. 27a) that its assumption that the same tax- payer would fare differently in a refund suit in the Court of Federal Claims or in federal district court than in the Tax Court had been squarely rejected by the Ninth Circuit in Miller v. United States, 38 F.3d 473, 475-476 (1994). In Miller, the court ruled that, when a return is not filed within "two years after payment," the taxpayer's claim-whether brought in the Court of Federal Claims, federal district court or in the Tax Court-is barred by Section 6511(a). 38 F.3d at 476. The court explained in Miller that an ---------------------------------------- Page Break ---------------------------------------- 9 untimely return filed more than two years after the date of payment "cannot resurrect the three-year period" (id. at 475) : If the clock were to run only from the filing of the return, no claim would ever be barred as long as the return was not filed. * * * The point at which one must determine whether a return has or has not been filed, for purposes of [Section 6511 (a) ], must be two years after payment. Otherwise, no claim could ever finally be barred by the two-year-after-payment clause because the taxpayer could at any time file a return and have three more years to assert the claim. In the present case, however, the court of appeals expressly disagreed with the reasoning of Miller. The court concluded instead that, "under 6511(a), [a taxpayer] has three years from the date of the filing of even a delinquent tax return to tile a claim for refund" (Pet. App. 27a). The court did not attempt to explain what, if any, role it would attribute to the two-year limit on refunds under Section 6511(a) that was central to the court's decision in Miller. The court of appeals summarized its holding in the present case as follows (Pet. App. 12a) : We hold that the Tax Court when applying the limitation provision of 6511 (b) (2) in light of 6512 (b ) (3) (B), should substitute the date of the mailing of the notice of deficiency for the date on which the taxpayer filed the claim for refund, but only for the purpose of determining the benchmark date for measuring the limitation period and not for the purpose of determining whether the two-yeas or three-year limitation period applies. In other words, we interpret 6512(b) (3) (B) as merely shifting back the ---------------------------------------- Page Break ---------------------------------------- 10 benchmark date of the refund period from the date on which the taxpayer filed the claim for refund to the date on which the IRS mailed the notice of deficiency; 6512(b) (3) (B) does not change the length of the refund period from what would have been applied under 6511 (b)(2). Because the entire amount of the overpayment in- volved in this case had been made within three years of the mailing date of the notice of deficiency, the court concluded that respondent was entitled to a refund of the overpayment under Section 6512 (b) (3) (B) (Pet. App. 13a), SUMMARY OF ARGUMENT 1. When a taxpayer petitions the Tax Court for review of a deficiency asserted by the Commissioner, Section 6512 (b) (1) of the Internal Revenue Code authorizes the Tax Court not only to review the claimed deficiency but also to determine the amount of any overpayment that the taxpayer may have made. 26 U.S.C. 6512 (b) (1). Section 6512(b) (3) {B), however, limits the amount of any refund of an overpayment determined by the Tax Court to the amount that would have been refundable under Sec- tion 6511(b) (2) if a claim for refund had been filed by the taxpayer "on the date of the mailing of the notice of deficiency" (26 U.S.C. 6512(b) (3) (B)). Section 6511 (b) (2)-which Section 6512 (b) (3) (B) incorporates by reference-limits the amount of any refund to the amount of the disputed taxes that the taxpayer paid (i) within the two-year period prior to the date of the refund claim if, at the time of the refund claim, "no return was filed by the tax- payer" (26 U.S.C. 6511(a), incorporated by refer- ---------------------------------------- Page Break ---------------------------------------- 11 ence in 26 U.S.C. 6511(b)(2) (B)) or (ii) within the three-year period prior to the date of the refund claim if the refund claim was made "within 3 years from the time the return was filed" (26 U.S.C. 6511 (a), incorporated by reference in 26 U.S.C. 6511(b) (2) (A) ). Section 6512(b) (3) (B) incorpo- rates these refund limitations into Tax Court over- payment determinations and specifies that they are to be applied by assuming that a claim for refund was tiled by the taxpayer "on the date of the mailing of the notice of deficiency" (26 U.S.C. 6512 (b)(3) (B)). In the present case, respondent had failed to file any return for 1987 by the time the notice of defi- ciency was mailed by the Commissioner in 1990. Accordingly, on the date that the notice of deficiency was issued and the statutorily imputed refund claim arose under Section 6512(b)(3)(B), "no return was filed by the taxpayer" (26 U.S.C. 6511(a)). As the result, the refund that respondent may obtain for his overpayment of tax for 1987 is limited to the amount of tax that he paid during the two-year period im- mediately preceding the imputed refund claim. 26 U.S.C. 6511( b)(2) (B). Because no portion of the tax at issue in this case was paid within the two- year period preceding the mailing of the notice of deficiency, respondent was barred by the statutory text from obtaining any refund of his overpayment, as the Tax Court correctly held. 2. The court of appeals expressly disregarded the plain language of Section 6512(b)(3)(B) in order to achieve a result that the court conclucled was sup- ported by its legislative history. In the court's view, the history of the statute supports the proposition that Congress intended a taxpayer who challenges a ---------------------------------------- Page Break ---------------------------------------- 12 tax in Tax Court to be able to obtain a refund for the amount of any overpayment made within three years of the date that the notice of deficiency was mailed. The extraordinarily sparse history cited by the court of appeals falls far short of supporting the court's speculations concerning legislative intent and, in any event, does not provide a basis for flouting the direct command of the plain language of Section 6512 (b) (3) (B). By disregarding the text of the statute, the court of appeals reached a conclusion that conflicts with a prior decision of that court and also with decisions of the Second, Sixth, Seventh, Ninth and Tenth Circuits. 3. The court of appeals found additional support for its decision in the potential anomaly that respond- ent may not have been barred from recovery if he had elected to bring suit for a refund in federal dis- trict court instead of challenging the tax in the Tax Court. But Congress has provided numerous distinc- tions between district court actions and Tax Court proceedings. Even if the court of appeals were cor- rect in assuming that respondent would have fared better had he elected to proceed in district court, that would not provide a valid basis for ignoring the plain language of Section 6512(b) (3)(B). Moreover, as the Ninth Circuit explained in Miller v. United States, supra, the text of the statute supports a con- clusion that the presumed anomaly may not exist- that a taxpayer such as respondent who fails to file a return for more than two years after it is due may also be ineligible to receive a refund of his overpay- ment in a suit brought in district court. ---------------------------------------- Page Break ---------------------------------------- 13 ARGUMENT SECTION 6512(b) (3) (B) OF THE INTERNAL REVE- NUE CODE BARS A TAXPAYER FROM OBTAINING A REFUND OF AN OVERPAYMENT' OF INCOME TAXES IN A TAX COURT CASE WHEN THE TAX- PAYER (i) FAILED TO FILE A RETURN FOR MORE THAN TWO YEARS AFTER THE RETURN WAS DUE AND THE TAXES IN ISSUE WERE PAID AND (ii) THEN FILED HIS RETURN ONLY AFTER THE COM- MISSIONER ISSUED THE NOTICE OF DEFICIENCY THAT LED TO THE TAX COURT LITIGATION The Tax Court is a court of limited jurisdiction. (Commissioner v. MCCOY, 484 U.S. 3, 7 (1987) ; Com- missioner V. Gooch Milling & Elevator Co., 320 U.S. 418, 420 (1943). This case concerns the limits on the jurisdiction of the Tax Court to award refunds for overpayments of tax. 1. The Governing Statutory Provisions The statutory limits on refunds in Tax Court pro- ceedings (in Section 6512 of the Internal Revenue Code) are derived from, but not identical to, the limits that apply to refund suits in federal district courts (in Section 6511 of the Code ). A description of the latter provisions is necessary for an explana- tion of the former. a. In separate, intertwined subsections of Section 6511, Congress has provided both a statute of limita- tions for claims for refund and a limit on the amount of a refund that may be recovered under timely filed claims. Section 6511 (a) specifies that any claim for refund must be submitted to the Commissioner (26 U.S.C. 6511 (a)) within 3 years from the time the return was filed or 2 years from the time the tax was paid, which- ---------------------------------------- Page Break ---------------------------------------- 14 ever 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. If a refund claim is submitted out of time under this provision, it must be disallowed. 26 U.S.C. 6511(b) (1). If a refund claim has been submitted within the time permitted by Section 6511 (a), Section 6511 (b) (2) then provides limits on the amount of any refund that may be allowed. The subparagraphs of Section 6511 (b) (2) are sometimes referred to as the `look-back" rules. See, e.g., Allen v. Commissioner, 99 T.C. 475, 477 (1992), aff'd, 23 F.3d 406 (6th Cir. 1994) (Table) (unpub. ). They limit the amount of any refund of an overpayment of tax to the amount of the taxes that the taxpayer paid (i) within the three-year period prior to the date of the refund claim if the refund claim was made "within 3 years from the time the return was filed" (26 U. S. C. 6511(a), incorporated by reference in 26 U.S.C. 6511 (b) (2) (A) ) ; or (ii) within the two-year period prior to the date of the refund claim if, (I) at the time of the refund claim, "no return was filed by the taxpayer" or (II) the refund claim was filed more than three years after the return but within two years "from the time the tax was paid" (26 U.S.C. 6511(a), incorporated by ref- erence in 26 U.S.C. 6511 (b) (2) (B)). See Richards v. Commissioner, 37 F.3d 587, 589 ( l0th Cir. 1994); Galuska v. Commissioner, 5 F.3d 195, 196 (7th Cir. 1993). b. The provisions of Section 6511 are not, by their terms, directly applicable to Tax Court proceedings. ---------------------------------------- Page Break ---------------------------------------- 15 Indeed, the jurisdiction of the Tax Court may not be invoked solely for the purpose of obtaining a refund. Instead, the basic jurisdiction of the Tax Court is to review deficiencies in tax that the Commissioner has asserted. 3 26 U.S.C. 6213(a). In proceedings com- menced by a taxpayer to review an asserted defi- ciency, however, the Tax Court has been given juris- diction not only to redetermine the amount of the deficiency but also to determine the amount of any overpayment that the taxpayer may have made. 26 U.S.C. 6512(b)(1). An overpayment determined by the Tax Court in such a proceeding is to be credited or refunded to the taxpayer subject to the express limitations of Section 6512(b) (3) of the Code. See 26 U.S.C. 6512(b) (1). 4 ___________________(footnotes) 3 A "deficiency" in tax is ordinarily the amount by which the tax determined to be due by the Commissioner exceeds the amount reported by the taxpayer on the return. 26 U.S.C, 6211 (a) (1). When the Commissioner determines a "defi- ciency" because the taxpayer has filed no return or has under- reported the taxes due on his return, the Commissioner may not proceed to assessment and and collection of the outstanding tax until notice of the deficiency is issued to the taxpayer. 26 U.S.C. 6212 (a). If, within 90 days after issuance of the notice of deficiency} the taxpayer files a petition for review of the deficiency in Tax Court, the Commissioner may not proceed to assessment and collection until the judgment of the Tax Court becomes final. 26 U.S.C. 6213(a). During the period of the Tax Court litigation (and for 60 days there- after), the three-year statute of limitations on assessment (that commences upon the filing of the return) is tolled. See 26 U.S.C. 6501, 6503 (a) (1 ). 4 Beginning in 1928, Congress enacted a series of provisions that conferred jurisdiction on the Tax Court to determine the amount of overpayments. See, e.g., Revenue Act of 1928, ch. 852, 322 45 Stat. 861; Revenue .Act of 1936, ch. 690, 322, 49 Stat. 1731: Revenue Act of 1942, ch. 619, 169, 56 Stat. ---------------------------------------- Page Break ---------------------------------------- 16 Section 6512 (b) (3) (B) limits the amount of any refund of an overpayment determined in a Tax Court case to the amount that would have been refundable under Section 6511(b) (2) if a claim for refund had been filed by the taxpayer "on the date of the mailing of the notice of deficiency" (26 U.S.C. 6512(b) (3) (B) )5 Thus, under Section 6512(b) (3) (13), the re- fund limitations of Section 6511(b) (2) are incorpo- ___________________(footnotes) 876; 26 U.S.C. 6511, 6512 (Supp. II 1954). See also Jones v. Liberty Glass Co., 332 U.S. 524, 527-531 (1947). Even though these provisions authorized the Tax Court to deter- mine an overpayment the court was not initially given "power to order a refund or credit should it find that there has been an overpayment" (Commissioner V. Gooch MiIling & Elevator Co., 320 U.S. at 420). Under Section 6512(b) (2) of the Code, however, the Tax Court is now authorized "to order the refund of such overpayment and interest" if, after the decision of the Tax Court becomes final, the Secretary fails to refund the overpayment. 26 U.S.C. 6512(b) (2). 5 Paragraph (3) of Section 6512(b) has three subpara- graphs. Section 6512(b) (3) (B) is the one applicable to this case; Section 6512 (b) (3) (A) does not apply because no pay- ments were made by respondent after the notice of deficiency was mailed; Section 6512 (b) (3) (C) does not apply because no claim for refund was filed by respondent before the notice of deficiency was mailed. See 26 U.S.C. 6512 (b) (3) (A)- (C). Section 6512 (b) (3) (B) incorporates by reference three limitations provisions. See 26 U.S.C. 6512 (b) (3) (B). only one of those provisions (Section 6511 (b) (2)) is applicable to the present case. Sections 6511 (c) and (d), which are also incorporated by reference in Section 6512(b) (3) (B), are inapplicable because Section 6511 (c) applies only when the time for assessing a tax has been extended by agreement and Section 6511 (d) applies only to specified types of claims- such as bad debts, worthless securities, net operating losses, and certain credit carrybacks that the present case does not involve. See 26 U.S.C. 6511 (c) and (d) (1988 & Supp. V 1993). ---------------------------------------- Page Break ---------------------------------------- 17 rated into Tax Court overpayment determinations and are to be applied by assuming that a claim for refund was filed by the taxpayer "on the date of the mailing of the notice of deficiency" (26 U.S.C, 6512 (b) (3) (B) ). See Galuska v. Commissioner, 5 F.3d at 196; Pet. App. 38a. 2. Application of the Statutory Provisions to This Case In the present case, when the notice of deficiency was issued by the Commissioner in September 1990, respondent had not filed any return for his 1987 tax year (Pet. App. 33a). 6 Thus, on the date that the notice of deficiency was issued and the statutorily imputed refund claim arose under Section 651.2 (b) (3) (B), "no return was filed by the taxpayer" (26 U.S.C. 6511(a)). The refund that respondent may obtain for his overpayment of tax for 1987 is there- fore limited to the amount of tax that he paid during the two-year period immediately preceding the filing of the claim for refund. 26 U. S. C. 6511 (b) (2) (B), incorporated by reference in 26 U.S.C. 6512(b) (3) (B). The Seventh Circuit explained the operation of these statutory provisions in Galuska v. Commis- sioner, 5 F.3d at 196: ___________________(footnotes) 6 Three months after the notice of deficiency was issued, respondent filed au untimely return for his 1987 tax year and sought review of the deficiency in the Tax Court in December 1990. The belated return provided a sufficient basis for the determination of respondent's correct liability and the exist- ence of an overpayment was then conceded by the Commis- sioner in the Tax Court case (Pet. App. 33a). Because the existence of an overpayment was conceded, the amount of the refund to which respondent is entitled turns solely on the correct application of the refund limitations contained in Section 6512 (b) (3). ---------------------------------------- Page Break ---------------------------------------- 18 Here, by virtue of Section 6512(b) (3) (B), Galuska is deemed to have filed his claim for re- fund on April 12, 1990, which was the date the notice of deficiency was mailed to him. At that time he had filed no tax return for 1986. Con- sequently, his deemed claim for refund was not filed within the 3-year period prescribed by Sec- tion 6511 (a) because it states that if no return is filed, the 2-year period prescribed therein is applicable. Therefore the look-back period is the 2-year period prescribed by Section 6511(b) (2) (B). Galuska paid no portion of the tax within that period so that Section 6512(b) (3) (B) precludes any refund of his overpay- ment, as the Tax Court held. At least twelve other Tax Court cases are in accord, and we dis- covered no case that is contra. The Tenth Circuit reached the same conclusion in Richards v. Commissioner, 37 F.3d at 589: It is undisputed that in tax court, Ms. Rich- ards' claim was deemed filed on the elate she received her notice of deficiency, October 22, 1990, although her return was filed on January 23, 1991. As a result, her claim was not filed "within 3 years from the time the return was filed." 26 U.S.C.A. 6511 (a) (emphasis added). The ordinary understanding of the words "from the time" implies that the taxpayer must file the return prior to filing the claim m order to ben- efit from the three-year refund period. Ms. Rich- ards' return, however, was filed on January 23, 1991, after the date her claim was deemed filed in tax court. Therefore, she cannot avail her- self of the three-year refund period under 6511 (b) (2) (A), and she is necessarily limited to the two-year refund period under 6511(b) (2) (B). ---------------------------------------- Page Break ---------------------------------------- 19 See also Anderson v. Commissioner, 74 A.F.T.R.2d Par. 94-6222, 94-6223 ( 4th Cir. 1994) ("`Where, as here, the taxpayer did not file a return within three years preceding the claim for a refund of tax, section 6511 (b) (2) (B) provides that the applicable limit, on the amount of credit or refund is the 'portion of the tax paid during the 2 years immediately preceding the filing of the claim ' ");7Kartrude v. Commissioner, ___________________(footnotes) 7 The court of appeals attempted to reconcile its decision in this case with the prior decision of the same circuit in Anderson v. Commissioner, supra (Pet. App. 28a-29a). In Anderson, the Fourth Circuit (in an unpublished but detailed opinion) followed the statutory analysis of the Seventh Cir- cuit in Galuska, v. Commissioner, supra, in holding that tax- payers who had not filed a return before the notice of defi- ciency was issued were barred by Section 6512 (b) (3) (B) from obtaining a refund in Tax Court of any portion of their overpayment paid more than two years before the notice of deficiency was issued. The Fourth Circuit panel in the present case purported to distinguish Anderson on the ground that, the taxpayers in Anderson did not file their tax returns until after they had filed their Tax Court petition while respondent in the present case mailed his tax return a few days before he filed his Tax Court petition (Pet. App. 28a-29a). The court of appeals did not explain how the factual distinction it de- scribes which is unrelated to any of the operative statutory terms-would make a difference in applying Section 6512 (b) (3) (B). The critical fact in applying Section 6512(b) (3) (B) in both the present case and Anderson is that, as of the date that the notice of deficiency was mailed to the taxpayer, "no return was filed by the taxpayer" (26 U.S.C. 6511 (a), incor- porated by reference in 26 U.S.C. 6511 (b) (2) (B), incor- porated by reference in 26 U.S.C. 6512 (b) (3) (B)). As the result, "the amount of the credit or refund shall not exceed the portion of the tax paid during the 2 years immediately preceding the filing of the claim" (26 U.S.C. 6511 (b) (2) (B), which date is imputed by statute (in Tax Court cases) to be ---------------------------------------- Page Break ---------------------------------------- 20 925 F.2d 1379, 1385 (llth Cir. 1991); Allen v. Commissioner, 99 T.C. at 479. The taxes that were withheld from the income earned by respondent during 1987 are deemed by statute to have been paid on April 15, 1988, the date when his tax return for that year was due. See 26 U.S.C. 6513(b) (1). None of the taxes at issue in this ease were paid by respondent within the two- year period that preceded the issuance of the notice of deficiency on September 26, 1990 (the date of the statutorily imputed refund claim under Section 6512 (b) (3) (B) ). Because no portion of the tax at issue in this ease was paid within the two-year period preceding the mailing of the notice of deficiency, respondent was barred from obtaining any refund of his overpayment, as the Tax Court correctly held (Pet. App. 39a). Accord, e.g., Galuska v. Commis- sioner, 5 F.3d at 196 & n.2 (citing eases); Richards v. Commissioner, 37 F.3d at 589. 3. Limited Waivers of Sovereign Immunity Are to Be Strictly Applied in Accordance With Their Terms Section 6512(b) confers a limited jurisdiction on the Tax Court to award refunds and represents a limited waiver of the sovereign immunity of the United States. Statutes waiving the immunity of the United States are to be interpreted narrowly in accordance with their terms and any ambiguity is to be resolved "in favor of immunity." United States v. Williams, 115 S. Ct. 1611, 1616 (1995), citing United States v. Nordic Village, Inc., 503 U.S. 30, 33 (1992). 8 It is exclusively the province of Congress ___________________(footnotes) "the date of the mailing of the notice of deficiency" (26 U.S.C. 6512(b) (3) (B) ). 8 The United States is immune from suit without its con- sent. The terms of its consent define the jurisdiction and ---------------------------------------- Page Break ---------------------------------------- 21 to decide when, and under what conditions, the sover- eign immunity of the United States is to be waived, and " 'this Court has long decided that limitations and conditions upon which the Government consents to be sued must be strictly observed and exceptions thereto are not to be implied.' " Lehman v. Nakshian, 453 U.S. 156, 161 (1981 ), quoting Soriano v. United States, 352 U.S. 270,276 (1957). Obviously, statutes that limit waivers of sovereign immunity may operate to deny a litigant the right to present an otherwise valid claim for recovery against the government. Recognizing that it is the "very purpose" of such statutes to "make it impossible to enforce what were otherwise perfectly valid claims" (United States v, Kubric, 444 U.S. 111, 125 (1979) ), the Court has admonished that statutory limitations on recoveries against the government "must be strictly adhered to by the judiciary (Kavanagh v. Noble, 332 U.S. 535,539 (1947) ). Prior to the decision of the court of appeals in the present case, the courts had consistently followed this Court's admonition and "strictly adhered" to the plain language of Section 6512(b) (3) (B). These courts uniformly concluded that if "no return was filed by the taxpayer" (26 U.S.C. 6511(a) ) before the notice of deficiency was issued by the Commissioner, the taxpayer may recover in a Tax Court case only that ___________________(footnotes) authority of the courts. United States V. Dalm, 494 U.S. 596, 608 (1990 ) ; United States v. Alabama, 313 U.S. 2749 282 (1941). Statutes limiting suits against the United States "constitute [] a condition on the waiver of sovereign im- munity" and "define the extent of the court's jurisdiction" over such an action. United States v. Mottaz, 476 U.S. 834, 841 (1986). See also Block v. North Dakota, 461 U.S. 273, 287 (1983). ---------------------------------------- Page Break ---------------------------------------- 22 portion of the overpayment that he paid within the two-year period preceding the notice (26 U.S.C. 6512 (b) (3) (B), incorporating 26 U.S.C. 6511 (b) (2) (B) ). See Galuska v. Commissioner, 5 F.3d at 196 & n.2; Richards v. Commissioner, 37 F.3d at 589 & n.6. See also Allen v. Commissioner, 23 F.3d 406 (6th Cir. 1994) (Table) (unpub.); Davison v. Com- missioner, 9 F.3d 1538 (2d Cir. 1993) (Table) (un- pub.), aff'g 64 T.C.M. (CCH) 1517 (1992); Ander- son v. Commissioner, 36 F.3d 1091 (4th Cir. 1994) (Table) (unpub.), reported at 74 A.F.T.R.2d Par. 94- 6222, aff'g 66 T.C.M. (CCH) 4 ( 1993). 4. The Court of Appeals Disregarded the Plain Language of the Statute The court of appeals expressly rejected the con- sistent reasoning of these other courts. The court held instead that (Pet. App. 12a) (emphasis added) the Tax Court, when applying the limitation pro- vision of 6511 (b) (2) in light of 6512(b) (3) (B), should substitute the date of the fil- ing of the notice of deficiency for the date on which the taxpayer filed the claim for refund, but only for the purpose of determining the benchmark date for measuring the limitation pe- riod and not for the purpose of determining whether the two-year or three-year limitation period applies. The court identified no textual basis in the statute for this holding. Instead, the court described four objec- tions that it had with the reasoning of the courts that had reached a contrary interpretation. a. The court of appeals first took issue with the Tax Court's use of the phrase " `deemed' claim for refund" (Pet. App. 9a) to describe the statutorily ---------------------------------------- Page Break ---------------------------------------- 23 imputed refund claim that arises "on the date of the mailing of the notice of deficiency'> (26 U.S.C. 6512 (b) (3) (B) ). The Tax Court, and other courts as well, referred to the imputed refund claim under Section 6512 (b) (3) (B) as a deemed" refund claim in applying the limits set forth in Section 6511 (b) (2). See, e.g., Richards v. Commissioner, 37 F.3d at 589; Pet. App. 40a. The court of appeals objected to this terminology, noting that Section 6512 (b) (3) (B) does not actually use the word "deemed" (Pet. App. 9a). The objection expressed by the court of' appeals to use of the term "deemed" to refer to the statutorily imputed refund claim under Section 6512 (b) (3) (B) is wholly semantical. As the Tax Court explained in its opinion in this case, "section 6512(b) (3) (B) directs us to make a determination assuming that a claim for credit or refund was filed on * * * the date the notice of deficiency was mailed" (Pet. App. 39a) (emphasis added). Nothing in the analysis applied by the Tax Court (or any other court) turns on the court's use of the term "deemed" as a short-hand reference to the statutorily imputed refund claim under Section 6512 (b) (3) (B). In criticizing the use of that terminology in this case, the court of appeals gave no explanation of what relevance, if any, it thought its objection would have to the correct interpretation of the statute. See Pet. App. 9a-10a. In fact, it has none. See, e.g., Galuska v. Commissioner , 5 F.3d at 196 ("Galuska agrees that under Section 6512 (b) (3) (B) he is deemed to have filed a claim for refund of the alleged overpayment * * * when the Commissioner mailed him the notice of deficiency"); Richards v. Commis- sioner, 65 T.C.M. (CCH) 2137, 2138 (1993) (Section 6512 (b) (3) (B) "tests the applicable limitations pe- ---------------------------------------- Page Break ---------------------------------------- 24 riod of section 6511 against a hypothetical claim for refund filed on the date the notice of deficiency was mailed"), aff'd, 37 F.3d 587 (l00th Cir. 1994), peti- tion for cert. pending, No. 94-1537. b. Instead of squarely confronting the words of the statute, the court of appeals relied on what it perceived to be evidence in "the legislative history of 6512 [that] indicates that Congress intended a tax- payer who filed a claim for refund within three years of filing a tax return to have a three-year refund period that runs from the date of the mailing of the notice of deficiency" (Pet. App. 17a). The extraordi- narily sparse history cited by the court of appeals falls far short of supporting the court's speculations concerning legislative intent and, in any event, does not provide a basis for flouting the direct command of the plain language of Section 6512(b) (3) (B). The sole statement of legislative history on which the court of appeals relied (Pet. App. 17a) is a single sentence contained in the voluminous House and Sen- ate reports that were issued in connection with the enactment of the InternaI Revenue Code of 1954. These reports simply state that Section 6512, as en- acted at that time, contains "no material changes from existing law" (H.R. Rep. No. 1337, 83d Cong., 2d Sess. A415 (1954); S. Rep. No. 1622, 83d Cong., 2d Sess. 586 (1954)). The court of appeals recognized that "the language of 6512 differed from the language in" the prior version of this statute, which was Section 322(d) of the 1942 Code (Pet. App. 16a). That Section had provided (Revenue Act of 1942, ch. 619, 169 (b), 56 Stat. 877- 878)-: No such credit or refund shall be made of any portion of the tax unless the Board [of Tax ---------------------------------------- Page Break ---------------------------------------- 25 Appeals] determines as part of its decision (1) that such portion was paid (A) within two years before the filing of the claim, the mailing of the notice of deficiency, or the execution of an agree- ment by both the Commissioner and the taxpayer * * * whichever is earliest, or (B) within three years before the filing of the claim, the mailing of the notice of deficiency, or the execution of the agreement, whichever is earliest, if the claim was filed, the notice of deficiency mailed, or the agreement executed within three years from the time the return was filed by the taxpayer. Without undertaking a close analysis of the language of the 1942 provision, the court asserted that respond- ent would have prevailed under that statute. `The court stated that "[t] he three-year refund period [under the 1942 Act] would have run from the date of the mailing of the notice of deficiency because it was earlier than the date of the filing of the claim for refund.)' (Pet. App. 16a). The court then rea- soned that., because "no material change" was made in enacting the different language of the 1954 Code, the same result must have been "intended" by Con- gress under Section 6512 (b) (3) (B) (Pet. App. 17a). The reasoning of the court of appeals is faulty for several reasons. In the first place the court erred in attempting to interpret the language of Section 6512 (b) (3) (B) by ignoring the language of that Astute and interpreting instead the markedly different lan- guage of a discarded provision of an outdated Code. This case concerns the language of Section 6512 (b) (3) (B ), not of some other pro-vision of law, Cf. Badaracco v. Commissioner, 464 U.S. 386, 398 (1984) (" [t] he cases before us * * * concern the construct- ion of existing statutes"). ---------------------------------------- Page Break ---------------------------------------- 26 The court compounded its error by adopting an interpretation of the 1942 provision that was mani- festly incorrect.. The plain language of Section 322(d) of the 1942 Act provides that the three-year refund period was available in Tax Court (then the Board of Tax Appeals) only when the "earliest" of the refund claim, the notice of deficiency or an extension agreement occurred "within three years from the time the return was filed by the taxpayer" (Revenue Act of 1942, ch. 619, 169(b), 56 Stat. 878). Ac- cordingly, under both Section 6512(b) (3) (B) of the current Code and Section 322 (d) of the 1942 Act, the three-year refund period is unavailable to the taxpayer who fails to file a return before the notice of deficiency is issued: "The ordinary understanding of the words `from the time' implies that the tax- payer must file the return prior to filing the claim in order to benefit from the three-year refund period." Richards v. Commissioner, 37 F.3d at 589. See pages 18-19, supra. The cursory statement, in the 1954 committee re- ports-that the enactment of Section 6512 did not make any "material changes" in existing law-thus provides no support for the conclusion reached by the court of appeals in this case. The plain meaning of statutory text should not be disregarded in the absence of "clear evidence that reading the language literally would thwart the obvious purposes of the Act." Mansell v. Mansell, 490 U.S. 581, 592 (1989); accord West Virginia Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 98-99 (1991 ). Nothing in the history relied on by the court of appeals suggests that the literal appli- cation of the language of Section 6512 (b) (3) (B) would defeat the obvious purpose of the statute. c. The court of appeals recognized that the inter- pretation of Section 6512(b) (3) (B) applied by the ---------------------------------------- Page Break ---------------------------------------- 27 Tax Court in this case has a lengthy pedigree (Pet. App. 20a & n.11, citing a total of 25 consistent Tax Court decisions). The court of appeals suggested, however, that the administrative practice has not been consistent with that interpretation. Without offering any plausible foundation for its view,9 the court asserted (id. at 21a) : [T]he IRS, until 1992, had always treated 6512 (b) (3) (B) as providing a three-year refund pe- riod where the taxpayer filed a tax return and a claim for refund after the IRS mailed the notice of deficiency. Only recently has the IRS interpreted 6512(b) (3) (B) to provide only a two-year refund period in a situation like Lundy's. The court erred in its description of the applicable administrative practice. For at least twenty years, the Internal Revenue Service-1ike the Tax Court and five of the courts of appeals has consistently inter- preted Section 6512(b) (3) (B) to limit Tax Court refunds in cases of this type to the amount of taxes paid within the two-year period preceding the notice of deficiency. See, e.g., Berry v, Commissioner, 97 ___________________(footnotes) 9 The only support that the court offered for its assertion that the IRS had only recently adopted the Tax Court's interpretation of Section 6512(b) (3) (B) was its statement that "[t]he IRS seemed ready to pay Lundy his refund prior to March 17, 1992, `when the Commissioner moved to amend its answer and argued for the first time that the Tax Court did not have the authority to grant Lundy his refund" (Pet. App. 21a). Without offering any other basis for its under- standing of administrative practice, the court offered the fol- lowing speculation: "We suspect that the IRS's interpretation of 6512 (b) (3) (B) originated sometime in 1991 or 1992" (Pet. App. 21a). ---------------------------------------- Page Break ---------------------------------------- 28 T.C. 339, 344-345 (1991); Hall v. Commissioner, 58 T.C.M. (CCH) 879, 880 (1989); White v. Commis- sioner, 72 T. C. 1126, 1131 (1979) ("It is respond- ent's position * * * that any overpayment which may be determined * * * cannot be refunded or credited to petitioner due to restrictions contained in sections 6511 and 6512"); Hosking v. Commissioner, 62 T.C. 635, 642 (1974) ("Respondent contends that the rec- ord does not permit the finding necessary under sec- tion 6512 (b) (2) `to entitle petitioner to a refund."). That consistent administrative practice supports the interpretation of Section 6512(b) (3) (B) applied by the Tax Court in this case. d. In concluding that respondent should be al- lowed to recover a refund of any overpayment made within the three-year period preceeding the issuance of the notice of deficiency, the court of appeals also relied on what it perceived to be the potential anom- aly that "Lundy would have received his refund if he had filed his claim for refund in a United States district court or the United States Claims Court" (Pet. App. 10a). In making this assertion, the court assumed that a return filed by a taxpayer more than two years after the return was due would permit a subsequent refund claim to invoke the three-year re- fund period of Section 6511(b) (2) [A). That as- sumed result, of course, has no direct relevance to the proper interpretation of the plain language of Sec- tion 6512(b) (3) (B).10 ___________________(footnotes) 10 Whether Lundy would have received his refund if the "circumstances had been different" (Pet. App. 11a) is irrele vant to interpreting the statute as it applies to the facts of this case. See Richards V. Commissioner, 37 F.3d at 591. Where the statute's language is plain, the "sole function of ---------------------------------------- Page Break ---------------------------------------- 29 Moreover, the court's assumption that the same taxpayer would fare differently in a refund suit in federal district court or the Court of Federal Claims than in the Tax Court has been squarely rejected by the Ninth Circuit in Miller v. United States, 38 F.3d 473 (1994). In Miller, the court held that, when a return is not filed within "two years after the pay- ment of taxes," the taxpayer's claim for refund- whether brought in the Court of Federal Claims, federal district court or in the Tax Court-is barred by Section 6511(a).11 See 38 F.3d at 476; see also Rossman, v. Commissioner, 46 F.3d 1144 (9th Cir. 1995 ) (Table) (unpub. ), petition for cert. pending, No. 94-1747. The court noted in Miller that 26 U.S.C. 6511(a) specifies that, to be timely, a refund claim must be filed (38 F.3d at 475) : 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 two years from the time the tax was paid. ___________________(footnotes) the courts is to enforce it according to its terms." United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241 (1989). 11 Revenue Ruling 76-511, 1976-2 C.B. 428, assumes that, if (i) a return is filed more than two but, less than three years after it is due and (ii) a refund claim is filed contemporane- ously or subsequently, "the refund would [be] allowable since the overpayment would have been made within the 3-year period immediately preceding the filing of the claim." Id. at 429. That Ruling is inconsistent with the court of appeals' conclusion in .Miller. See 38 F.3d at 475. For the reasons discussed in the text, however, the question whether Miller or Revenue Ruling 76-511 correctly interprets Section 6511 (a) is not presented in this case and need not be resolved by the Court. See pages 31-33, infra. ---------------------------------------- Page Break ---------------------------------------- The court concluded that an untimely return filed more than "2 years from the time the tax was paid" (26 U.S.C. 6511(a)) "cannot resurrect the three- year period" (38 F.3d at 475): If the clock were to run only from the filing of the return, no claim would ever be barred as long as the return was not filed. * * * The point at which one must determine whether a return has or has not been filed, for purposes of [Section 6511(a) ], must be two years after pay- ment. Otherwise, no claim could ever finally be barred by the two-year-after-payment clause be- cause the taxpayer could at any time file a re- turn and have three more years to assert the claim. See also Oropallo v. United States, 994 F.2d 25, 30 (lst Cir. 1993) ("We have assumed [for the sake of argument] that a return can be filed at any time after its due date and still be a return for purposes of filing a claim within that three-year period. Under that interpretation, the limitations period in section 6511 (a) is totally illusory."), cert. denied, 114 S. Ct. 705 (1994) .12 ___________________(footnotes) 12 The precise role intended for the last clause of Section 6511 (a) has never been clearly stated by Congress. The phrasing of that Section first appeared in approximately its current form as Section 322(b) (1) of the Revenue Act of 1934, ch. 277, 48 Stat. 750. That Section provided (ibid.): Unless a claim for credit or refund is filed by the tax- payer within three years from the time the return was filed by the taxpayer or within two years from the time the tax was paid, no credit or refund shall be allowed or made after the expiration of whichever of such periods expires the later. If no return is filed by the taxpayer, then no credit or refund shall be allowed or made after ---------------------------------------- Page Break ---------------------------------------- 31 Even if-notwithstanding the reasoning of Miller and Oropallo the language of Section 6512(b) (3) produces a difference in the treatment of taxpayers who seek of a refund of their overpayment in the Tax Court and those who seek their refund in a district court or the Court of Federal Claims, it is not the function of this Court "to treat alike subjects that different congresses have chosen to treat differently." ___________________(footnotes) two years from the time the tax was paid, unless before the expiration of such period a claim therefor is filed by the taxpayer. The history of the 1934 Act indicates that this Section sought to ensure that the taxpayer had no longer a period to seek a refund than was available for assessment. See S. Rep. No. 558, 73d Cong., 2d Sess. 44 {1934). That history does not indicate whether an untimely return would extend the time for filing a refund claim in situations where the tax had been paid more than two years previously. The language of this provision was revised in 1954 and was revised again into its current form in 1958. The 1959 revision specified that the claim for refund could be filed within three years of when "the return was filed" (26 U.S.C. 6511(a) (1958)), as contrasted with the 1954 provisions under which the claim was required to be filed within three years "from the time the return was required to be filed (determined without regard to my extension)" (26 U.S.C. 6511(a) (Supp. II 1954)). As a concurrent change in the language of Section 6511 (b) reflects, the purpose of the 1958 revision to Section 6511 (a) was to allow the time for the filing of the refund claim to be expanded to include "the period of any extension for filing the retrim to which the claim relates" (H.R. Rep. No. 775, 85th Cong., 1st Sess. 102 (1957)). Accord S. Rep. No. 1983, 85th Cong., 2d Sess. 233-234 (1958). The histories of the 1954 and 1958 revisions do not discuss or explain the separate role intended for the last clause of Section 6511(a), which since 1934 has provided only a two-year period file a claim for refund "if no return was filed" (26U.S.C.6511 (a)). ---------------------------------------- Page Break ---------------------------------------- 32 West Virginia Univ. Hosps., Inc. v. Casey, 499 U.S. at 101. See Richards v. Commissioner, 37 F.3d at 591. There are numerous, significant differences be- tween litigation in the Tax Court and in a district court. For example, (i) jury trials are allowed in a district court refund suit (28 U.S.C. 2402), but not in Tax Court suits ( Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986)); (ii) in the Tax Court, but generally not in district court, the Com- missioner may assert a deficiency greater than that determined in the notice of deficiency (26 U.S.C. 6.214 (a); see Ferrill v. Commissioner, 684 F.2d 261, 265 (3d Cir. 1982)) ; 13 and (iii) the Tax Court, unlike the district courts, "is a court of limited jurisdiction and lacks general equitable powers" (Commissioner V. McCoy, 484 U.S. at 7).14 The potential disparity in treatment of Tax Court and district court refund litigation, on which the court of appeals relied in this case, provides no basis for dis- ___________________(footnotes) 13 Because the limitations period on assessment is suspended during the pendency of a Tax Court proceeding (26 U.S.C. 6503 (a) ), any increased deficiency asserted by the Commis- sioner would not be barred by the statute of limitations. A refund suit, however, does not suspend the period of limita- tions on assessment and, therefore, the government generally would be barred by the statute of limitations from asserting new deficiencies in tax against the taxpayer in such a suit. See P. Junghans & J. Becker, Federal Tax Litigation Par.3.06, at 3-16 (2d ed. 1992]-. 14 Additional distinctions exist. For example, the right of a husband and wife who have filed separate returns for a particular year thereafter to elect to file a joint return for that year is terminated if either files a petition in Tax Court but not if either files a refund suit in district court. See 26 U.S.C. 6013 (b) (2). ---------------------------------------- Page Break ---------------------------------------- 33 regarding the direct command of the specific lan- guage that Congress has employed. It should not be forgotten that the solution to respondent's predicament was within his own grasp. Only taxpayers who file tax returns more than two yearn after they are due are affected by the decision in this case.15 A legislative determination that re- funds should be restricted for such severely delin- quent filers is not unduly harsh.16 ___________________(footnotes) 15 If the notice of deficiency were issued in the first two years following the date on which the return was due, the taxpayer's payments during the tax year would be within the two-year refund period (under 26 U.S.C. 6511 (b) (2) (B)) even if a return had not been filed. This is because withhold- ing taxes and estimated tax payments made during the tax year are presumed to have been made on the date that the return was due. See 26 U.S.C. 6513 (b) (1) and (2). If the taxpayer filed a timely return before the notice of deficiency, and the notice of deficiency were filed within three years from the filing of the return, the taxpayer would be entitled to recover overpayments made within the three-year period preceding the issuance of the notice under Section 6512 (b) (3) (B). See 26 U.S.C. 6511 (a), incorporated in 26 U.S.C. 6511 (b) (2) (A), incorporated in 26 U.S.C. 6512 (b) (3) (B). Taxpayers who file timely returns are thus protected because the notice of deficiency generally must be issued in time to permit assessment to occur "within 3 years after the return was filed" (26 U.S. C. 6501 (a) ). See note 3, supra. 16 Moreover, this Court has repeatedly held that courts are not authorized to rewrite a statute merely because they regard its effects as harsh or its operation to be "susceptible of improvement" (Badarraco v. Commissioner, 464 U.S. 386, 398 (1984)). See e.g., TVA v. Hill, 437 U.S. 153, 194-195 (1978); Lewyt Corp. v. Commissioner, 349 U.S. 237, 240 (1955); United States v. Olympic Radio & Television, Inc., 349 U.S. 232, 236 (1955). "Neither [this Court] nor the Commissioner may rewrite the statute simply because we may ---------------------------------------- Page Break ---------------------------------------- 34 CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. DREW S. DAYS, III Solicitor General LORETTA C. ARGRETT Assistant Attorney General LAWRENCE G. WALLACE Deputy Solicitor General KENT L. JONES Assistant to the Solicitor General RICHARD FARBER REGINA S. MORIARTY Attorneys JULY 1995 ___________________(footnotes) feel that the scheme it creates could be improved upon." United States v. Calamaro, 354 U.S. 351, 357 (1957). * U.S. GOVERNMENT PRINTING OFFICE; 1995 387147 20094 ---------------------------------------- Page Break ---------------------------------------- IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1995 No. 94-1785 COMMISSIONER OF INTERNAL REVENUE, PETITIONER v. ROBERT F. LUNDY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT REPLY BRIEF FOR THE PETITIONER DREW S. DAYS, III Solicitor General Department of Justice Washington, D.C. 20530 (202) 514-2217 ---------------------------------------- Page Break ---------------------------------------- TABLE OF AUTHORITIES Cases: Page Allen v. Commissioner, 99 T.C. 475 (1992 ), affd, 23 F.3d 406 (6th Cir. 1994) . . . . 6 American Radiator & Standard Sanitary Corp. V. United States, 318 F.2d 915 (Ct. Cl. 1963). . . . 14 Anderson V. Commissioner, 74 A.F.T.R.2d Par.94- 6222 (4th Cir. 1994) . . . . 6,14, 16 Arch Engineering Co. V. United States, 783 F.2d 190 (Fed. Cir. 1986) . . . . 14 Arizona Elec. Power Co-op, Inc. v. United States, 816 F.2d 1366 (9th Cir. 1987) . . . . 16 Commissioner v. MCCoy, 484 U.S. 3 (1987 ) . . . . 4 Estate of Hale v. United States, 876 F.2d 1258 (6th Cir.1989) . . . . 14 Furst V. United States, 678 F.2d 147 (Ct. Cl. 1982) . . . . 14 Galuska V. Commissioner, 5 F.3d 195 (7th Cir. 1993) . . . . 2,6,14,16, 18 Kartrude V. Commissioner, 925 F.2d 1379 (11th Cir. 1991) . . . . 2, 6 Kavanagh v. Noble,332 U.S. 535 (1947) . . . . 4 Miller V. United States, 38 F.3d 473 (9th Cir. 1994) . . . . 5 National Muffler Dealers Ass'n V. United States, 440 U.S. 742 (1979) . . . . 11-12 New Jersey v. Anderson, 203 U.S. 483 (1906 ) . . . . . 19 Oropallo v. United States, 994 F.2d 25 (1st Cir. 1993), cert. denied, 114 S. Ct. 705 (1994 ) . . . . 5 Richards v. Commissioner : 65 T.C.M (CCH) 2137 (1993), aff'd, 37 F.3d 587 (1Oth Cir. 1994), petition for cert. pend- ing, No. 94-1537 . . . . 9 37 F.3d 587 (10th Cir.1994), petition for cert. pending, No. 94-1537 . . . . 2, 6 Russello v. United States, 464 U.S.16 (1983 ) . . . . 16 United States v. Calamaro, 354 U.S. 351 {1957). . . . 19 United States v. Cartwright ,411 U.S. 546 (1973 ). . . . 12 (I) ---------------------------------------- Page Break ---------------------------------------- II Cases Continued: Page United States V. Wong Kim Bo, 472 F.2d 720 (5th Cir. 1972) . . . . 16 White V. Commissioner, 72 T.C. 1126 (1979 ) . . . . 17 Statutes and regulations: Internal Revenue Code (26 U.S.C.): 6012 . . . . 15 6213(a) . . . . 18 6501(a) . . . . 15 6511 . . . . 3, 8, 9, 10, 11, 15 6511 (a) . . . .2, 5, 6, 7, 8, 9, 10, 11, 15 6511 (b) (2) . . . . .1, 4, 5, 13, 16 6511 (b) (2) (A) . . . . 2, 3 6511 (b) (2) (B) . . . . 2, 6, 8, 9 6512 . . . . 3, 4, 8, 10 6512(b) (1) . . . . 1 6512(b) (3) . . . . 3 6512(b) (3) (B) . . . . passim 6512(b) (3) (C) . . . . 4, 7 6651 . . . . 15 6651 (a) . . . . 7 7422 . . . . 15 Treas. Reg. (26 C.F.R.): 301.6402-3(a) (1) . . . . 14 301.6511(a) -l . . . . 11 Miscellaneous: M. Saltzman, IRS Practice and Procedure (2d ed. 1991) . . . . 14-15 S. Rep. No. 2273, 87th Cong., 2d Sess. (1962) . . . . 7 T.D. 6172, 1956-1 C.B. 565 . . . . 11 ---------------------------------------- Page Break ---------------------------------------- IN THE SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1995 No. 94-1785 COMMISSIONER OF INTERNAL REVENUE, PETITIONER v. ROBERT F. LUNDY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT REPLY BRIEF FOR THE PETITIONER When a taxpayer petitions the Tax Court for re- view of a deficiency asserted by the Commissioner, Section 6512 (b) (1) of the Internal Revenue Code authorizes the Tax Court not only to review the claimed deficiency but also to determine the amount of any overpayment that the taxpayer may have made. 26 U.S.C. 6512(b) (1). Section 6512(b) (3) (B), how- ever, limits the amount of any refund of an overpay- ment to the amount that would have been refundable under Section 6511 (b) (2) if a claim for refund had been filed by the taxpayer "on the date of the mailing of the notice of deficiency" (26 U.S.C. 6512 (b) (3) (B)). Section 6511(b)(2)-which Section 6512 (b) (3) (B) incorporates by reference-limits the amount of any refund to the amount of the disputed taxes that the taxpayer paid (i) within the two-year (1) ---------------------------------------- Page Break ---------------------------------------- 2 period prior to the date of the refund claim if, at the time of the refund claim, "no return was filed by the taxpayer" (26 U.S.C. 6511(a), incorporated by ref- erence in 26 U.S.C. 6511(b) (2) (B) ) or (ii) within the three-year period prior to the date of the refund claim if the refund claim was made "within 3 years from the time the return was filed" (26 U.S.C. 6511 (a), incorporated by reference in 26 U.S.C. 6511(b) (2) (A) ). In the present, case, respondent had failed to file any return for 1987 by the time the notice of defi- ciency was mailed by the Commissioner in 1990. Accordingly, on the date that the notice of deficiency was issued and the statutorily imputed refund claim arose under Section 6512 (b) (3) (B), "no return was filed by the taxpayer" (26 U.S.C. 6511 (a)). As the result, the refund that respondent may obtain is lim- ited to the amount of tax that he paid during the two-year period immediately preceding the imputed refund claim. 26 U.S.C. 6511(b) (2) (B). Because no portion of the tax in issue was paid within the two- year period preceding the mailing of the notice of deficiency, respondent was barred from obtaining any refund of his overpayment. See, e.g., Richards v. Commissioner, 37 F.3d 587, 589 (l0th Cir. 1994), pe- tition for cert. pending, No. 94-1537; Galuska v. Commissioner, 5 F.3d 195, 196 (7th Cir. 1993); Kartrude v. Commissioner, 925 F.2d 1379, 1385 (11th Cir. 1991) ; cases cited Pet. Br. 22. For the reasons set forth in detail in our opening brief, the contrary conclusion of the court of appeals in this case disregards the text of the statute and mis- interprets its history. Indeed, neither respondent nor the amicus curiae directly attempts to defend the reasoning of the court of appeals. Instead, they offer ---------------------------------------- Page Break ---------------------------------------- 3 a variety of alternative rationales, none of which withstands scrutiny. 1. The two principal arguments advanced by re- spondent were not addressed by the court of appeals. a. Respondent offers, as his first alternative argu- ment (see Resp. Br. 16 n.6 ), the suggestion that Sec- tion 6512 does not control the determination of the limitations on his refund in Tax Court. He notes that, after the notice of deficiency was issued in Sep- tember 1990, he filed a belated return with a refund claim in December 1990. He further notes ( Resp. Br. 14-15 ) that the belated return was filed within three years of its lawful due date ( April 1988) and asserts that the associated refund claim would there- fore trigger the three-year refund period that he claims would be applicable in federal district court under Section 6511(b) (2) (A). The question whether, on these facts, respondent could have brought a refund suit in federal district court is obviously not presented in this case. That question, on which courts have reached different con- cousins, involves different statutory language than the question presented in this case. See Pet. Br. 29- 30. The present case arose in Tax Court, not in district court. For Tax Court cases, Congress ash- ironed statutory language in Section 6512 that incor- porates some of the provisions of Section 6511 but tailors them to the specifics of Tax Court litigation. The events that bear on the determination of the refund period in Tax Court cases are specifically set forth in Section 6512 (b) (3). Under that Section, the refund period is to be determined as if a refund claim had been filed "on the date of the mailing of the notice of deficiency" (26 U.S.C. 6512(b)(3)(B)) unless a refund claim had actually been filed "before ---------------------------------------- Page Break ---------------------------------------- 4 the date of the mailing of the notice of deficiency" (26 U. S. Cl. 6512(b) (3) (C) {emphasis added)). The statute does not provide, as respondent suggests, any additional jurisdiction in Tax Court for refund claims made "after" the notice of deficiency is issued. Respondent's contention that a subsequent refund claim expands the refund period in Tax Court pro- ceedings thus simply ignores, and departs from, the plain text of the applicable statute. The Tax Court is a court of limited jurisdiction (commissioner v. McCoy, 484 U.S. 3, 7 (1987) and the limitations that Congress has imposed on that court's jurisdiction to award recoveries against the government "must be strictly adhered to by the judiciary" ( Kavanagh V. Noble, 332 U.S. 535,539 (1947) ). b. Turning to the text of the applicable statute, respondent asserts that if Section 6512 were amended only slightly it could be read to permit his recovery in this suit. Disregarding the actual text of the statute, respondent asserts ( Resp. Br. 16-21) that the statute does not-as its language states-direct the Tax Court to assume that "on the elate of the mailing of the notice of deficiency a [refund] claim had been filed" by the taxpayer (26 U.S.C. 6512 (b) (3) (B) j and to then determine, based on that assumption, the amount of the taxpayer's overpay- ment that would be refundable under Section 6511 (b) (2), Instead, respondent claims that Section 6512 (b) (3) (B) should be read to direct the Tax Court to make a determination as to whether the tax- payer "could have filed a claim for refund" cm the elate the notice of. deficiency was mailed (Resp. Br. 17). If the taxpayer "could have filed" a timely re- fund claim on that date, respondent contends, then the taxpayer should be allowed to recover the amount ---------------------------------------- Page Break ---------------------------------------- 5 of any tax overpayment that was paid within the three-year period immediately preceding the issuance of the notice of deficiency ( Resp. Br. 16 & n.6).1 Respondent's "could have filed" construction of Section 651 2(b) ( 3 ) ( B ) suffers from the obvious flaw that it deviates from the actual language of that pro- vision. Section 6512 (b) (3) (B) states that no refund shall be allowed for any overpayment of tax except to the extent that the Tax Court determines that it was paid (26 U.S.C. 6512 (b) (3) (B) (emphasis added )): within the period which would be applicable under section 6511 (b) (2) * * *, if on the date of the mailing of the notice of deficiency a claim had been filed (whether or not filed) * * *. As the courts of appeals and the Tax Court had con- sistently held prior to the decision in this case, the language of Section 6512 (b] (3) (B) directs the Tax Court to treat the taxpayer as if he had filed a claim for refund on the date the notice of deficiency was mailed and then to apply the limitations provisions of Section 6511 (b) ( 2 ) to that imputed claim for refund. ___________________(footnotes) 1 That contention is undergirded by the assertion that a re- turn and refund claim tiled more than two years after the tax is paid would be effective to invoke the three-year limitations period in a district court refund suit under Section 6511 (a). That assertion was squarely rejected by the Ninth Circuit in Miller V. United States, 38 F,3d 473, 476 (1994). See also Oropallo V. United States, 994 F.2d 25, 30 (1st Cir. 1993) ("We have assumed [for the sake of argument] that a return can be filed at any time after its due date and still be a return for purposes of filing a claim within that three-year period. Under that interpretation, the limitations period in section 6511 (a) is totally illusory."], cert. denied, 114 S. Ct. 705 ('1994). See Pet. Br. 29-30 & nn.11, 12. ---------------------------------------- Page Break ---------------------------------------- 6 Because "no return was filed by the taxpayer" (26 U.S.C. 6511(a)) before. the notice of deficiency was issued by the Commissioner, respondent may recover only that portion of the overpayment that he paid within the two-year period preceding the notice (26 U.S.C. 6512(b) (3) (B), incorporating 26 U.S.C. 6511 (b) (2) (B) ). See, e.g., Richards v. Commis- sioner, 37 F.3d at 589; Galuska v. Commissioner, 5 F.3d at 196. Respondent's proposed reconstruction of Section 6512 (b) (3) (B) has no connection to the actual lan- guage of that provision. The principal substantive difference between the text of the statute and re- spondent's proposed revision is that, under respond- ent's view, the requirement that taxpayers submit in- come tax returns would become irrelevant. Under the statute, a refund claim is not effective to invoke the three-year limitations period unless it is filed with or following a return. Richards v. Commissioner, 37 F.3d at 589. A refund claim that is filed before the return is filed is not filed "within 3 years from the time the return was filed." 26 U.S.C. 6511(a) (emphasis added ). The ordinary understanding of the words "from the time" implies that the taxpayer must file the return prior to filing the claim in order to benefit from the three-year refund period. Richard-s v. Commissioner, 37 F.3d at 589. Accord, Galuska v. Commissioner, 5 F.3d at 196; Anderson v, Commissioner, 74 A. F. T.R.2d par 94-6222, 94-6223 (4th Cir. 1994); Kartrude v. Commssioner, 925 F.2d at 1385; Allen v. Commissioner, 99 T.C. 475, 479 (1992), aff'd, 23 F.3d 406 (6th Cir. 1994). ---------------------------------------- Page Break ---------------------------------------- 7 Under respondent's view, however, the requirement of Section 6511(a) that an income tax, return be filed before the refund claim is filed (to invoke the three- year period of limitations) would become irrelevant because respondent "could have filed" his return at any time, even several years after it was due. 2 By making it irrelevant whether or not a return ac- tually has been filed as of the date the notice of defi- ciency is issued, respondent's proposed reconstruction of the statute would result in a blanket allowance of a three-year period of limitations for refund claims in Tax Court.3 It is obvious, how-ever, that Congress did ___________________(footnotes) 2 See note 1, supra. Even though an additional tax obliga- tion may accrue from the failure to file a timely return (see 26 U.S.C. 6651(a) ), a belated income tax return may be tiled by any taxpayer at any time. In this case, respondent's return was due on April 15, 1988. The late filing of that return (in December 1990 ) could have exposed respondent to additional tax obligations; but the fact that the return was untimely does not mean that it could not be submitted late. " The various legislative reports that respondent cites in support of this proposition ( Resp. Br. 18-21) provide no basis for flouting the direct command of the plain language of Sec- tion 6512(b)(3)(!13). See Pet. Br. 23-26. In particular, the 1962 amendment that respondent cites added a provision to the statute that expressly authorizes refunds in Tax Court cases in which the taxpayer had filed a refund claim "before the date of the mailing of the notice of deficiency" (26 U.S.C. 6512(b) (3) (C) (emphasis added)). Respondent states that this amendment "is not pertinent to the issue here" (Resp. Br. 21) but asserts that its legislative history is. The Senate Report to the 1962 amendment states that the statute as amended permits refunds in Tax Court "where valid claims have been timely filed, as well as where these claims could have been filed on the date of the mailing of the notice of deficiency." S. "Rep. No. 2273, 87th Cong., 2d Sess. 15 (1962). Respondent asserts that this Report supports the ---------------------------------------- Page Break ---------------------------------------- 8 not intend to adopt an automatic three-year period of limitations for refund claims asserted in Tax Court proceedings. Instead, Congress specified that if "no return was filed" as of the date of the issuance of the notice of deficiency, only a two-year period of limita- tions applies. 26 U.S.C. 6511(a), incorporated by reference in 26 U.S.C. 6511(b) (2) (B), incorporated by reference in 26 U.S.C. 6512(b) (3) (B). By ignor- ing the language that Congress enacted, respondent's contention deprives the intricate distinctions that Congress drew in enacting Sections 6511 and 6512 of any meaning. 2. The central tenet of respondent's position is the theory that Congress intended a taxpayer in all cir- cumstances to be able to obtain a refund of any over- payment of tax made within the 3-year period im- mediately preceding the date of filing his claim for refund. That contention contradicts the actual terms of the limitations on refunds of tax overpayments im- posed by Congress in Sections 6511 and 6512 of the Code. a. Section 6511(a) provides that a claim for re- fund "of any tax imposed by this title 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 ___________________(footnotes) view that Section 6512 broadly permits a three-year refund period whenever a valid claim "could have been filed on the date of the mailing of the notice of deficiency." What re- spondent ignores in making that contention, however, is that a "valid claim" may give rise to only a two-year refund period, rather than a three-year refund period. Under Section 6511 (a), a valid claim gives rise to only a two-year refund period if, when the claim is filed, "no return was tiled" (ibid.), That is the situation that exists in this case. ---------------------------------------- Page Break ---------------------------------------- 9 the tax w-as 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." 26 U.S.C. 651.1(a) (emphasis added). When the tax- payer has not filed his return at the time that he files his refund claim, the refund claim is timely only if it is filed within two years of the date that the tax was paid. Ibid. Under the corresponding provisions of Section 6511 (b) (2) (B), which Section 6512(b) (3) (B) incorporates by reference, a taxpayer who files a claim for refund without filing a tax return is therefore limited to recovering only that portion of the tax overpayment that was paid within the two- year period preceding- the filing of the claim for refund, Since respondent had not filed his return as of the imputed filing date of his claim for refund under Section 6512 (b) (3) (B) (the date the notice of defi- ciency was mailed ) ,4 respondent was limited by Sec- tion 6511 (b) (2) ( B ) to recovering the portion of his ___________________(footnotes) 4 Respondent chides the Commissioner for using the phrase "imputed refund claim" to describe the operation of Section 6512 (b) (3) (B). Contrary to respondent's statement ( Resp. Br. 23-24), the Commissioner does not assert that a notice of deficiency is equivalent to a claim for refund. Instead, under the specific text of Section 6512 (b) (3) ( B), the mailing of the notice of deficiency simply establishes the date that the Tax Court is to assume as a matter of law that a refund claim was filed (even though one was not filed) for purposes of applying the limitations provisions of Section 6511. See, e.g., Richards V. Commissioner, 65 T.C.M. ((XXI") 2137, 2138 ( 1993) (Section 6512 (b) (3) (B) "tests the applicable limita- tions period of section 6511 against a hypothetical claim for refund filed on the date the notice of deficiency was mailed"), aff'd, 37 F.3d 587 (1Oth Cir. 1994), petition for cert. pend- ing, No. 94-1537, ---------------------------------------- Page Break ---------------------------------------- 10 overpayment that was paid within the two-year period preceding the date -of his imputed refund claim. Be- cause it is undisputed that no portion of respondent's tax overpayment was paid within the two-year period preceding the filing date of his imputed claim for refund (Pet. App. 2a), the Tax Court correctly held that it lacked jurisdiction to award a refund in this case. b. In an effort to avoid the mandate of Sections 6511 and 6512, respondent ( Resp. Br. 13-14) and the amicus curiae (Am. Br. 16-22) assert that the second clause of the first sentence of Section 6511(a) -which states that "if no return was filed by the taxpayer" the claim for refund must be filed "within 2 years from the time the tax was paid''-applies only to taxes for which no return is required to be filed. Under that theory, the two-year period under the statute would have no application to refund claims for income, estate, gift or other taxes for which a re- turn is required to be filed. That implausible assertion has no support in the case law. The short answer to respondent's argument is that Section 6511(a) states that if no return was filed by the taxpayer he must file his claim for refund within two years from the time the tax was paid. The statute does not state that if no return was re- quired to be filed by the taxpayer, then only a two-year filing period for the taxpayer's refund claim is al- lowed. Moreover, the clause "if no return was filed" is part of the first sentence of Section 6511(a), which, by its express terms, applies to any "[c] laim for credit or refund of an overpayment of any tax im- posed by this title in respect of which tax the tax- payer is required to file a return." 26 U. S. Cl. 6511(a). By contrast, the second sentence of Section 6511(a) ---------------------------------------- Page Break ---------------------------------------- 11 applies to any "[c] laim for credit or refund of an overpayment of any tax imposed by this title which is required to be paid by means of a stamp''-for which no return is required under the Code-and provides that such claims must be filed within three years from the time the tax was paid.. Ibid. The first sen- tence of Section 6511(a) `thus necessarily applies, as its language states, to any claim for refund of tax where a taxpayer "is required to file a return" but has failed to do so as of the time the claim for refund is filed. 26 U.S.C. 6 511 (a).5 Because `(no return was ___________________(footnotes) 5 This construction of Section 6511 is confirmed by Treasury Regulation 301.6511(a) -1, which was promulgated by the Secretary of the Treasury in 1956 (T.D. 6172, 1.956-1 C.B. 565, 567-568, 578). The regulation provides (26 C.F.R. 301.6511 (a) -1 (emphasis added) ): (a) In the case of any tax {other then a tax payable by stamp): (1) If a return is filed, a claim for credit or refund of an overpayment must be filed by the taxpayer within 3 years from the time the return Was filed or within 2 years from the time the tax was paid, whichever of such periods expires the later. (2) "If no return is filed, the claim for creditor refund of an overpayment must be filed by the taxpayer within 2 years from the time the tax was paid. l. (b] In the case of any tax payable by means of a stamp), a claim for credit or refund of an overpayment of such tax must be filed by the taxpayer within 3 years from the time the tax was paid. For provisions relating to redemption of unused stamps, see section 6805. This long-standing regulation is a reasonable interpretation of the statute that is consistent with Its terms. Under the regulation, respondent's assertion that the second clause of the first sentence of Section 6511 (a) applies only to taxes in respect of which a return was not required to be filed must be rejected. See National Muffler Dealers Ass'n V. United ---------------------------------------- Page Break ---------------------------------------- 12 filed by" respondent as of the time of the mailing of the notice of deficiency, he was barred by Section 6512 (b) (3) (B) from recovering any portion of his tax overpayment that was paid more than two years before that date. Galuska v. Commissioner, 5 F.3d at 196 & n.2. See also Miller v. United States, 38 F.3d at 475. 3. a. The amicus curiae does not dispute that, under Section 6512 (b) (3) (B), the refund period in Tax Court cases is to be calculated as if respondent had filed a claim far refund "on the date of the mail- ing of the notice of deficiency" (26 U.S.C. 6512(b) (3) (B) ). The amicus maintains, however, that it should also be assumed that the taxpayer filed a tax return on that same date reporting an overpayment of the tax." The amicus asserts that, if both the re- turn and the refund claim were assumed to have been filed on the same date, the three-year period of limitations under Section 6511 (a) would then apply (Am. Br. 1-24). But see note 1, supra The contention that a hypothetical tax return should be assumed to have been filed on the date that the notice of deficiency was mailed is inconsistent with both the text and the logic of the statute. The statute directs the Tax Court to determine the amount of the overpayment that would be refundable under Section 6511 (b) (2) if it were assumed that the tax- payer had filed a "claim for refund" on the date the ___________________(footnotes) States, 440 U.S. 472, 476 (1979) (quoting United States v. Cartwright, 411 U.S. 546, 550 (1973)) (Treasury regulations, "if found to `implement the congressional mandate in some reasonable manner/ must be upheld"). 6 Respondent advances the same contention as an alternative to his principal assertions. See Resp. Br. 26-29. ------------------------------------------ Page Break ---------------------------------------- 13 Notice of deficiency was mailed. 26 U.S.C. 6512(b) (3) (B). The statute does not provide, as respondent and the amicus suggest, that the Tax Court is to de- termine the amount refundable under the applicable subparagraphs of Section 6511(b) (2) on the assump- tion that. the taxpayer filed both a return and a re- fund claim on the date of the mailing of the notice of deficiency. Respondent claims that, if a taxpayer were deemed under Section 6512 (b) (3) (B) to have filed his tax return on the date the notice of deficiency was mailed, as well as deemed to have filed his claim for refund on that date, the taxpayer would then be entitled under Section 6512(b) (3) (B) to obtain a refund of the amount of his overpayment that was paid within the three-year period immediately preceding the mail- ing date of the notice of deficiency. But see note 1, supra. If Congress had intended to adopt such a flat three-year rule, however, it would have specified in Section 6512 (b) (3) (B) that the Tax Court is au- thorized to determine an overpayment with respect to all amounts paid within the three-year period preced- ing the issuance of the notice of deficiency. Instead, by directing the Tax Court to determine the amount of the overpayment that would be refundable under the applicable subparagraph of Section 6511(b) (2) on the assumption that the taxpayer had filed a "claim for refund" on the date the notice of deficiency was mailed, Congress expressly incorporated the separate two-year and three-year limitations periods of Section 6511(b)(2). See c26 U.S.C. 6512(b)(3)(B). By adopting both limitations periods, Congress manifestly did not intend that all taxpayers invoking the Tax Court's jurisdiction would be entitled to the three- year period of limitations on overpayments. ---------------------------------------- Page Break ---------------------------------------- 14 The courts of appeals have recognized that the lan- guage of Section 6512(b) (3) (B) can not be con- strued in the manner urged by respondent and the amicus curiae. "When the Tax Court determines whether an overpayment is refundable under Section 6512 (b) (3) (B), the Internal Revenue Code does not empower the Tax Court to treat a taxpayer like Galuska who has not filed a return as of the date the deficiency notice was mailed as if he had filed a re- turn by that date." Galuska v. Commissioner, 5 F.3d at 197. See also Anderson v.. Commissioner, 74 A. F.T.R.2d at 94-6224 ("Although the Andersons are treated as if they had filed a claim on the date the deficiency notice was mailed, 26 U.S.C. Section 6512 (b) (3), they are not also treated as having filed a return on that date."). b. As the amicus curiae points out (Am. Br. 9), a claim for refund of income taxes is, "[i] n general," to be "made on the appropriate income tax return." 26 C.F.R. 301.6402-3(a)(1). It does not follow, how- ever, as amicus contends, that a claim for refund and a tax return are synonymous documents. It has "long been accepted" that a claim for refund need not be submitted on a return and that " (t)here are no rigid guidelines" governing the content of a claim for re- fund except that it "must have a written component and `should adequately apprise the Internal Revenue Service that a refund is sought and for certain years.'" Arch Engineering Co. v. United Slates, 783 F.2d 190, 192 (Fed. Cir. 1986), quoting American Radiator & Standard Sanitary Corp. v. United States, 318 F.2d 915, 920 (Ct. Cl. 1963). See also Estate of Hale v. United Stales, 876 F.2d 1258, 1261-1262 (6th Cir. 1989); Furst v. United States, 678 F.2d 147, 151 (Ct. Cl. 1982) ; M. Saltzman, IRS Practice ---------------------------------------- Page Break ---------------------------------------- 15 and Procedure par, 11.08[2,] 11-60 (2d ed. 1991). The following documents have been held sufficient to con- stitute a "claim for refund" under Section 6511(a) of the Code (id. at 1.1-62 (citing cases; footnotes omitted)): a notation on the back of a check paying the tax, a written protest prior to or accompanying a payment of a tax (even where contingent on the occurrence of a future event), a letter at- tached to a return protesting the constitutionality of an imposed tax, a letter attached to a waiver of restrictions on assessment, and a letter agree- ing to payment of tax in installments. The fact that a "claim for refund" is not the equiv- alent of, or a necessary component. of, a tax return is demonstrated by the text of the very statutes that this case involves. Section 6511(a) clearly establishes that Congress understands that claims for refund and tax returns are discrete, not interchangeable, documents. Section 6511 (a) provides that a "[c] lam for credit or refund of an overpayment?' is to be filed (26 U.S.C. 6511(a) (emphasis added)): within 3 years from the time the return was filed or 2 years from the time the tax was paid, which- ever "of such periods expires the later, or if no ___________________(footnotes) 7 Other provisions of the internal Revenue Code similarly reflect that tax returns are distinct from claims for refund and. Compare 26 U.S.C. 6012 (persons required to make returns of income), 26 U.S.C. 6651 (imposing an addition to tax for failure to file required returns), and 26 U.S.C. 6501 (a) (im- posing, in general, a three-year statute of limitations on assess- ment from the time the return Was filed), with 26 U.S.C. 6511 (imposing time limits for filing a claim for refund and limit- ing amount of refunds based on when the claim was filed) and 26 U.S.C. 7422 (precluding the filing of a suit for refund unless a timely claim for refund previously has been filed). ---------------------------------------- Page Break ---------------------------------------- 16 return was filed by the taxpayer, within 2 years from the time the tax was paid. The statutory limitations period for filing a claim for refund is thus specifically based on when, and whether, the separate event of the filing of the tax- payer's return occurred. As the Fourth and Seventh Circuits have held, when Congress directed the Tax Court in Section 6512(b) (3) (B) to determine the limitations period for refunds under the applicable provisions of Section 6511(b) (2) on the assumption that the taxpayer filed a "claim for refund" on the date the notice of. deficiency was mailed, it plainly did not intend the Tax Court to make the further assume- tion that the taxpayer filed his return at the same time. Galuska v. Commissioner, 5 F.3d at 197; Anderson v. Commissioner, 74 A. F. T.R.2d at 94-6224? 4. a. Respondent has filed numerous materials with this Court in the form of a lodging. None of these materials were submitted as evidentiary materials in the Tax Court and they do not form part of the formal record of this case. Some of the materials were appended to respondent's brief in the court of appeals; some of them post-date the briefing in the ___________________(footnotes) 8 " [W] here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Russello V. United States, 464 U.S. 16, 23 (1983), quoting United States V. Wong Kim Bo, 472 F.2d 720, (5th Cir. 1972). See also Arizona Elec. Power Co-op, Inc. V. United States, 816 F.2d 1366, 1375 (9th Cir. 1987) ("When Congress includes a specific term in one section of a statute but omits it in another section of the same Act it should not be implied where it is excluded."). ---------------------------------------- Page Break ---------------------------------------- 17 court of appeals and have simply been lodged by re- spondent with this Court in the first instance. The materials in the lodging purport to describe generic pronouncements of the Commissioner's con- cern that late-filed returns often preclude taxpayers from obtaining refunds to which they would otherwise be entitled. Those generic pronouncements obviously have no relevance to resolution of the legal question of the proper scope of the Tax Court's jurisdiction under the statutes that govern this case. b. Respondent Incorrectly asserts (Resp. Br. 32) that the long-standing interpretation of Section 6512 (b) (3) (B) that the Tax Court described in this case, and that numerous courts of appeals have adopted, reflects only a recent analysis that departs from ad- ministrative practice. In particular, respondent er- roneously claims that "the IRS changed its adminis- trative practice sometime around 1991" ( Resp. Br. 32). As we describe in our opening brief, for at least twenty years the Internal Revenue Service like the Tax Court and five of the courts of appeals-has con- sistently interpreted Section 6512 (b)(3)(B) to limit Tax Court, refunds in cases of this type to the amount of taxes paid within the two-year period preceding the notice of deficiency (Pet. Br.27-28, citing cases; see also Pet. Br. 27 n.9). For example, in White v. Commissioner, 72 T.C4 11.26, 1131 (1979), the Tax Court agreed with the Commissioner that the two- year period of limitations applies under Section 6512 (b) (3) (B) when the taxpayer had failed to file a valid return before the notice of deficiency was issued. The court of appeals acknowledged in this case that numerous Tax Court decisions reach the same com- clusion (Pet,. App. 20a & n. 11 ), and respondent fur- ---------------------------------------- Page Break ---------------------------------------- 18 ther acknowledges that this understanding of Section 6512 (b)(3)(B) had long been "suggested" in the case law ( Resp. Br.9). Nothing in the lodged materials supports a conclu- sion that any different administrative practice has existed. Moreover, this case involves the question of the proper scope of the statutory jurisdiction of the Tax Court to award refunds of overpayments. If any administrative practice were thought relevant to that determination, it would presumably be the practice of the Tax Court, not the practice of the Internal Reve- nue Service. And respondent correctly acknowledges (Resp. Br. 9) that the Tax Court has consistently held that recoveries of overpayments are not available in the context of this case. 5. In enacting generic statutes of limitations, Con- gress is responding principally to the facts that it anticipates will arise in typical cases, In the typical tax case, the taxpayer will file a timely return and the government will issue a notice of deficiency close to the end of the third year after the return was tiled. In that typical case, Section 6512(b) (3) (B) operates to permit the taxpayer to claim an overpay- ment and refund in his petition to the Tax Court even though the 90-day period for filing his petition under 26 U.S.C. 6213(a) would extend beyond the three-year period from the filing of his return. When the taxpayer has failed to file a timely re- turn, however, the Tax Court has no jurisdiction to award an overpayment made more than two years before the notice of deficiency is issued. See, e.g., Galuska v. Commissioner, 5 F.3d at 196. It is thus the failure of respondent to file a timely return, and not any administrative action or inaction of the Com- missioner, that resulted in the statutory bar against ---------------------------------------- Page Break ---------------------------------------- 19 respondent's refund claim in Tax Court under Sec- tion 6512 (b) (3) (B). Respondent disagrees that this legislative determination expresses good public policy (Resp, Br. 41-43). But the determination of good public policy is unquestionably reserved to the legisla- ture (New Jersey v. Anderson, 203 U.S. 483, 490 (1906) ) : [Considerations of this character, however, properly addressed to the legislative branch of the government, can have no place in influencing judicial determination It is the province Of the court to enforce, not to make the laws, and if the law works inequality the redress, if any, must be had from Congress. See also United States v. Calamaro, 354 U.S. 351, 357 (1957). CONCLUSION For the foregoing reasons and those stated in our opening brief, the judgment of the court of appeals should be reversed. Respectfully submitted. DREW S. DAYS, III Solicitor General SEPTEMBER 1995 * U.S. GOVERNMENT PRINTING OFFICE; 1995 387147 20114