Commissioner v. Lundy

PETITIONER: Commissioner
RESPONDENT: Lundy
LOCATION: Denver Area Consortium

DOCKET NO.: 94-1785
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Fourth Circuit

CITATION: 516 US 235 (1996)
ARGUED: Nov 06, 1995
DECIDED: Jan 17, 1996

ADVOCATES:
Glenn P. Schwartz - Argued the cause for the respondent
Kent L. Jones - Department of Justice, argued the cause for the petitioner

Facts of the case

During 1987, Robert F. Lundy and his wife had $10,131 in federal income taxes withheld from their wages. This amount was substantially more than what the Lundys owed in taxes that year, but they did not file their 1987 tax return when it was due, nor did they file a return or claim a refund of the overpaid taxes in the following 2 1/2 years. In 1990, the Commissioner of Internal Revenue mailed Lundy a notice of deficiency for 1987. Subsequently, the Lundys filed their joint 1987 tax return, which claimed a refund of their overpaid taxes. Lundy also filed a petition in the Tax Court seeking a redetermination of the claimed deficiency and a refund. The Commissioner contended that the Tax Court lacked jurisdiction to award Lundy a refund, arguing that if a taxpayer does not file a tax return before the IRS mails the taxpayer a notice of deficiency, the Tax Court can only award the taxpayer a refund of taxes paid within two years prior to the date the notice of deficiency was mailed. The Tax Court agreed, finding also that 2-year "look-back" period applies. In reversing, the Court of Appeals found that the applicable look-back period in these circumstances is three years and that the Tax Court had jurisdiction to award a refund.

Question

Can the Tax Court award a refund of taxes paid more than two years prior to the date on which the Commissioner of Internal Revenue mailed the taxpayer a notice of deficiency, when, on the date the notice of deficiency was mailed, the taxpayer had not yet filed a return?

Media for Commissioner v. Lundy

Audio Transcription for Oral Argument - November 06, 1995 in Commissioner v. Lundy

William H. Rehnquist:

We'll hear argument now in Number 94-1785, Commissioner of Internal Revenue v. Robert F. Lundy.

Mr. Jones.

Kent L. Jones:

Mr. Chief Justice and may it please the Court--

The tax court is an Article I court of limited jurisdiction.

This case concerns the limitations on the jurisdiction of the tax court to award refunds.

When a taxpayer commences a suit in tax court to review an asserted deficiency, the court may then also determine whether an overpayment was made.

Section 6512(b)(3) of the Internal Revenue Code, however, provides three detailed jurisdictional limits on the amount of the refund that the court may award.

Under section 6512(b)(3)(A), the court may award amounts paid after the notice of deficiency is issued.

Under 6512(b)(3)(C), the court may award amounts for which a claim for refund was made before the notice of deficiency was issued, but when, as in this case, there was neither subsequent payment or a prior refund claim, section 6512(b)(3)(B), which this case concerns, limit the jurisdiction of the tax court to award amounts that would be refundable under 6511(b)(2) if on the date the notice of deficiency was issued a claim for refund had been filed.

In turn, 6511(b)(2) allows a refund of amounts paid within 3 years prior to the claim for refund only if the claim for refund was made within 3 years from the time of the taxpayer's return, but when--

Sandra Day O'Connor:

Mr. Jones, in subsection (B) that you're referring to it says that no credit or refund will be allowed unless it was paid within the period which would be applicable under 6511(b)(2)(C), or if on the date of the mailing of the notice of deficiency a claim had been filed, whether or not filed.

Now, that language is just incomprehensible.

What does that parenthetical mean?

Does it mean if it isn't filed we can deem it to have been filed?

Kent L. Jones:

--That's... what it means is that, whether or not a claim for refund had actually been filed, the court is to apply these statutes as if a claim for refund was filed on that date.

That was... no one has doubted, I think, that that is the meaning of that provision.

Sandra Day O'Connor:

And is that what should be done in this case?

Kent L. Jones:

Yes.

In this case, because the taxpayer had failed to file a return before the date of the notice of deficiency, 6512(b)(3)(B) operates, and what it operates to do is to require the court to apply 6511(b)(2) as if a claim for refund was filed on the date the notice of deficiency was issued.

David H. Souter:

Why does it say, whether or not, since subsection (C) covers the case in which it had been filed before that?

Kent L. Jones:

Yes, it... subsection (C) applies if a claim had been filed before that date.

Subsection (B) says you are to assume a claim is filed on that date, whether or not one had been filed.

David H. Souter:

Why didn't it just say that it wasn't, or if it wasn't?

Kent L. Jones:

I think one of the reasons it might put it that way is because if you read the rest of subsection (B) it goes on to say, a claim based upon whatever grounds the tax court determined an overpayment was made.

Now, what that refers to is a basic distinction between district court and tax court jurisdiction.

David H. Souter:

Oh, I see.

Kent L. Jones:

The district court only has jurisdiction to consider a judicial claim that is based upon precisely the administrative claim.

If there's any material variance between the district court claim and the administrative claim, the district court claim has no jurisdiction, but in the tax court there is no requirement of an administrative claim.

The court may award a refund based upon any ground for which it determines an overpayment.

David H. Souter:

Well, in that respect the taxpayer is better off to be in the tax court.