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Aircraft Management Company Entitled to Partial Refund

MAR. 21, 2017

NetJets Large Aircraft Inc. et al. v. U.S.

DATED MAR. 21, 2017
DOCUMENT ATTRIBUTES

NetJets Large Aircraft Inc. et al. v. U.S.

 

UNITED STATES DISTRICT COURT

 

SOUTHERN DISTRICT OF OHIO

 

EASTERN DIVISION

 

 

CHIEF JUDGE EDMUND A. SARGUS, JR.

 

Magistrate Judge Terence P. Kemp

 

 

OPINION AND ORDER

 

 

This matter is before the Court on the parties' motions to alter or amend judgment [ECF Nos. 180, 182] and Plaintiffs' Motion for Leave to File a Surreply [ECF No. 189]. For the following reasons, Plaintiffs' Motion for Leave [ECF No. 189] is GRANTED, and the parties' motions to alter or amend judgment [ECF Nos. 180, 182] are each GRANTED IN PART and DENIED IN PART.

 

I.

 

 

In its January 26, 2015 Opinion and Order on the parties' cross-motions for summary judgment, the Court determined that the Government could not collect the 26 U.S.C. § 4261 air transportation excise tax related to fuel variable surcharges and management fees imposed against Plaintiffs NetJets Aviation, Inc., NeJets Large Aircraft, Inc., and NetJets International, Inc. (collectively, "NetJets") (Jan. 26, 2015 Op. & Order at 2 [ECF No. 136].) The Court later held that the Government could not collect the § 4261 taxes imposed against Plaintiff Executive Jet Management ("EJM") either. (Nov. 12, 2015 Op. & Order at 2 [ECF No. 178].) After granting EJM's motion for summary judgment, the Court entered final judgment and dismissed this case. (J. in a Civil Case at 1 [ECF No. 179].) The judgment entry did not outline any specific award or tax refund amounts. (Id.)

The parties have each subsequently filed a motion to alter or amend judgment. (See Pls.' Mot. to Alter J. at 1 [ECF No. 180]; Govt's Mot. to Alter J. at 1 [ECF No. 182].) Over the course of their briefing, the parties have conceded or agreed on all but one issue: the refund of overpayments retained by the IRS. (See Pls.' Reply at 2 [ECF No. 188].)

Some background information is in order. On January 29, 2010, the IRS retroactively imposed assessments of the § 4261 air transportation excise tax against the monthly management fees and fuel variable surcharges that fractional aircraft owners paid to NetJets during prior tax periods. (Pls.' Mot. to Alter J. at 3.) That same day, the IRS also assessed the air transportation excise tax against the monthly management fees and pass-through costs that whole aircraft owners paid to EJM. (Id.) The assessments encompassed the following periods:

           Entity                                 Period

 

 ______________________________________________________________________

 

 

 NetJets Aviation, Inc.               January 1, 2005 - June 30, 2009

 

 NetJets Large Aircraft, Inc.         October 1, 2003 - June 30, 2009

 

 NetJets International, Inc.          April 1, 2005 - June 30, 2009

 

 Executive Jet Management, Inc.       April 1, 2005 - June 30, 2009

 

 

(Id.)

Before they could file their refund claims with the IRS, Plaintiffs first had to pay a divisible portion of the § 4261 assessments. (Pls.' Mot. to Alter J. at 3.) Normally, a taxpayer must pay the entire amount of an assessment before it can file suit challenging the assessment. See Leeke v. United States, 737 F. Supp. 1013, 1015 (S.D. Ohio 1990). An exception exists, however, for a divisible tax, which is a tax "that represents an aggregate of taxes due on multiple transactions." Rocovich v. United States, 933 F.2d 991, 995 (Fed. Cir. 1991). When challenging a divisible tax, such as an excise tax, a taxpayer need only pay the amount of tax due on an individual transaction for each tax quarter at issue to gain standing to challenge the entirety of the assessment. See Univ. of Chi. v. United States, 547 F.3d 773, 785 (7th Cir. 2008). Plaintiffs, thus, made divisible payments for the periods at issue and then, between October 15, 2008 and June 2, 2011, filed their refund claims. (Pls.' Mot. to Alter J. at 3; see generally Refund Claims [ECF Nos. 1-5, 1-6, 1-7, 1-8].) The IRS denied those claims, so Plaintiffs filed their action in this Court seeking, among other things, refunds of the amounts paid on the IRS's retroactive assessments and abatement of the unpaid portions of the assessments. (Pls.' Mot. to Alter J. at 3.)

While this case was pending, the IRS seized Plaintiffs' overpayments from later tax periods -- from July 31, 2011 and May 4, 2012 -- and applied those overpayments toward the assessments, from the periods listed above, at issue in Plaintiffs' suit. (Pls.' Mot. to Alter J. at 3.) The IRS retained $896,115 in overpayments, as detailed below:

                                                  Date the IRS Gave

 

                                    Overpayment   Notice It Had Applied

 

          Entity                    Amount        the Overpayment

 

 ______________________________________________________________________

 

 

 NetJets Aviation, Inc.               $451,861        Aug. 22, 2011

 

                                        $1,466        Feb. 27, 2012

 

                                       $67,493        June 4, 2012

 

                                        $8,537        June 4, 2012

 

 

 NetJets International, Inc.          $359,483        Dec. 12, 2011

 

 

 Executive Jet Management, Inc.         $5,108        Dec. 5, 2011

 

                                          $641        June 4, 2012

 

                                        $1,526        Aug. 27, 2012

 

 

(Pls.' Resp. at 4 [ECF No. 186].) Whether these retained overpayments should be awarded to Plaintiffs as part of the final judgment in this action is now before the Court.

 

II.

 

 

Plaintiffs have moved to alter or amend judgment under Federal Rule of Civil Procedure 59(e) and, alternatively, under Rule 60(a). (Pls.' Mot. to Alter J. at 1 [ECF No. 180].) The Government brings its Motion solely under Rule 59(e). (Govt's Mot. to Alter J. at 1 [ECF No. 182].)

Under Rule 60(a), "[t]he court may correct a clerical mistake or a mistake arising from an oversight or omission whenever one is found in a judgment. . . . The court may do so on motion or on its own, with or without notice." Fed. R. Civ. P. 60(a). The rule authorizes courts "to correct errors that are mechanical in nature that arise from oversight or omission." In re Walter, 282 F.3d 434, 440 (6th Cir. 2002). Rule 60(a) "does not, however, authorize the court to revisit its legal analysis or otherwise correct an 'error[ ] of substantive judgment.'" Id. (quoting Olle v. Henry & Wright Corp., 910 F.2d 357, 364 (6th Cir. 1990)). Clerical mistakes, which are properly corrected under Rule 60(a), "'consist of blunders in execution.'" Id. (quoting Blanton v. Anzalone, 813 F.2d 1547, 1577 n.2 (9th Cir. 1987)) (internal quotation marks omitted). Non-clerical mistakes, by contrast, '"consist[ ] of instances where the court changes its mind, either because it made a legal or factual mistake . . . or because on second thought, it has decided to exercise its discretion in a manner different from the way it was exercised in the original determination.'" Id. (quoting Blanton, 813 F.2d at 1577 n.2).

Rule 59(e) affords the Court broader bases for altering or amending judgment. "A court may grant a Rule 59(e) motion to alter or amend if there is: (1) a clear error of law; (2) newly discovered evidence; (3) an intervening change in controlling law; or (4) a need to prevent manifest injustice." Intera Corp. v. Henderson, 428 F.3d 605, 620 (6th Cir. 2005). Under Rule 59(e), a party may move to alter or amend judgment within 28 days after the entry of the judgment. The decision to grant relief under Rule 59(e) is left to the district court's informed discretion. Huff v. Metro. Life Ins. Co., 675 F.2d 119, 122 (6th Cir. 1982); CitiMortgage, Inc. v. Nyamusevya, No. 2:13-cv-680, 2015 WL 1000444, at *3 (S.D. Ohio Mar. 5, 2015).

Given that the Court did not specifically address the retained overpayments in its prior opinions, and that a failure to include the retained overpayments in the final judgment in this matter could represent a clear error in the law or constitute a manifest injustice, the parties' motions to alter or amend judgment are more appropriately reviewed under Rule 59(e) than Rule 60(a).

A. The Parties' Arguments

The Government insists that the retained overpayments should not be included in the final judgment. (Govt's Mot. to Alter J. at 3 [ECF No. 182].) The Government's initial argument for excluding these overpayments from the final judgment focuses on the scope of Plaintiffs' request for relief. In its Motion to Alter or Amend Judgment, the Government noted that the recovery of the retained overpayments was not sought in the Complaint, nor was the recovery sought in any filing in this case prior to the Court's entry of final judgment. (Id.)

Plaintiffs responded to the Government by quoting Federal Rule of Civil Procedure 54(c): "'Every . . . final judgment [other than a default judgment] should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.'" (Pls.' Resp. at 1 [ECF No. 186] (quoting Fed. R. Civ. P. 54(c)).) Although Plaintiffs may not have specifically requested the refund of the retained overpayments, the letter and spirit of Rule 54(c) mandates that those overpayments be refunded through the final judgment, Plaintiffs argue. (Id. at 1-2, 5-7.)

In its reply brief, the Government raises a new argument: Rule 54(c) cannot trump sovereign immunity limitations; and here, the United States has not waived its sovereign immunity with respect to Plaintiffs' recovery of the retained overpayments. (Govt's Reply at 1, 4 [ECF No 187].) The Government's argument begins with the proposition that the United States has, under 28 U.S.C. § 1346(a) and 26 U.S.C. § 7422(a), waived its sovereign immunity with respect to tax refund suits. (Id. at 2.) Section 1346(a) vests district courts with "original jurisdiction, concurrent with the United States Court of Federal Claims" over "[a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected." 28 U.S.C. § 1346(a). And § 7422(a) provides that a tax refund suit may not be maintained in any court until a claim for refund or credit has been filed with the IRS. 26 U.S.C. § 7422(a). This is a narrow waiver of sovereign immunity. (See Govt's Reply at 1-3.) A refund suit is barred by sovereign immunity, the Government argues, if the taxpayer fails to comply with the tax refund procedures set forth in the Internal Revenue Code ("IRC"). (See id.)

The Government contends that Plaintiffs failed to comply with an IRC provision -- 26 U.S.C. § 6511 -- and, thus, cannot collect the retained overpayments as part of the final judgment in this matter. (Govt's Reply at 3.) Subsection (a) of § 6511 establishes time limits on filing refund claims:

 

(a) Period of limitation on tiling claim

Claim for credit or refund of an overpayment 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 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.

 

26 U.S.C. § 6511(a). And subsection (b) establishes limits on the amount that a taxpayer can recover:

 

(b) Limitation on allowance of credits and refunds

 

(1) Filing of claim within prescribed period

No credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in subsection (a) for the filing of a claim for credit or refund, unless a claim for credit or refund is filed by the taxpayer within such period.

(2) Limit on amount of credit or refund

 

(A) Limit where claim filed within 3-year period

If the claim was filed by the taxpayer during the 3-year period prescribed in subsection (a), the amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the return. . . .

(B) Limit where claim not filed within 3-year period

If the claim was not filed within such 3-year period, the amount of the credit or refund shall not exceed the portions of the tax paid during the 2 years immediately preceding the filing of the claim.

(C) Limit if no claim filed

If no claim was filed, the credit or refund shall not exceed the amount which would be allowable under subparagraph (A) or (B), as the case may be, if claim was filed on the date the credit or refund is allowed.

Id. § 6511(b).

The Government focuses its argument on subsection (b)(2)(B). That subsection's 2-year lookback period purportedly applies because the retained overpayments "were applied to periods for which a return was filed more than three years prior to [the 2011 and 2012] overpayment applications]." (Govt's Reply at 3 n.1.) To obtain a refund of the retained overpayments under subsection (b)(2)(B), Plaintiffs would have needed to file a refund claim within two years after the retained overpayments were applied (i.e., paid) toward the January 2005 through June 2009 assessments. 26 U.S.C. § 6511(b)(2)(B); see 26 U.S.C. § 7422(d) ("The credit of an overpayment of any tax in satisfaction of any tax liability shall . . . be deemed to be a payment in respect of such tax liability at the time such credit is allowed."). The retained overpayments were applied toward the earlier assessments between August 22, 2011, and August 27, 2012. (See Govt's Reply at 3.) Plaintiffs' refund claims, however, appear to have been filed between October 15, 2008 and June 2, 2011. (See generally Refund Claims [ECF Nos. 1-5, 1-6, 1-7, 1-8].) That is, according to the Government, the refund claims were filed too early and, thus, the claims were not made during the 2 years immediately following the application of the overpayments, as required under § 6511(b)(2)(B). (See Govt's Reply at 3.) Plaintiffs should have filed new refund claims subsequent to the overpayment applications, the Government argues. (Id.)

In a proposed Surreply, Plaintiffs contend that the Court should eschew a literal interpretation of § 6511(b)(2) in favor of an interpretation that considers the statute's legislative history and, ostensibly, comports more faithfully with Congressional intent. (Pls.' Surreply at 5-6 [ECF No. 189].) Under the suggested interpretation, § 6511(b)(2) would not prohibit Plaintiffs' recovery of the retained overpayments. (See id.)1

B. Plaintiffs' Motion for Leave

The Court begins by granting Plaintiffs' Motion for Leave [ECF No. 189] to file their Surreply. Under the Court's Local Civil Rules, no party may file memoranda beyond a reply brief "except upon leave of court for good cause shown." S.D. Ohio Civ. R. 7.2(a)(2). Good cause exists here: Plaintiffs seek leave to file a surreply so that they can respond to an argument raised by the Government for the first time in its reply brief. See Burlington Ins. Co. v. PMI Am., Inc., 862 F. Supp. 2d 719, 726 (S.D. Ohio 2012) (granting a defendant leave to file a surreply where the plaintiff made new arguments in its reply brief).

C. Motions to Alter or Amend Judgment

Moving to the substance of the parties' arguments, the Court concludes that, with one potential exception, the retained overpayments are not properly awarded to Plaintiffs as part of the final judgment in this action.

 

1. Whether 26 U.S.C. § 6511(b)(2) Applies to the Retained Overpayments

 

In their Surreply, Plaintiffs encourage the Court to look behind the language of § 6511(b)(2) -- to the legislative history of that statute's predecessor, (Pls.' Surreply at 7 [ECF No. 189].) The legislative history purportedly demonstrates that the predecessor to § 6511(b)(2) was enacted as an accompaniment to the full payment rule. (Id.) The predecessor statute "prevented] taxpayers from manipulating the full payment rule, and thereby bringing stale refund claims, by making piecemeal payments of a tax assessment over a long period of time and then filing a claim for refund of the entire amount once the assessment was paid in full." (Id.) Section 6511(b)(2), Plaintiffs argue, was not intended to apply to situations, like the one here, where "the IRS retains overpayments and applies them against a divisible-tax assessment after a claim has already been filed." (Id. at 8.) As Plaintiffs explain, "[w]hen Congress enacted the predecessor to section 6511(b)(2) in 1924, the divisible tax exception to the full payment rule did not exist." (Id. at 7.) Back then, a taxpayer would not have found itself in the situation now confronting Plaintiffs. (Id. at 7-8.) The IRS would not have applied overpayments to a tax liability after the taxpayer had filed a refund claim because, under the full payment rule, a taxpayer could not have brought a refund suit in district court without first paying the tax assessment in full. (See id.) Only decades later, in 1960, did the Supreme Court recognize an exception to the full payment rule for divisible taxes. (Id. at 4 (citing Flora v. United States, 362 U.S. 145, 171 n.37 (1960)).)

'"In all cases of statutory construction, the starting point is the language employed by Congress.' Where 'the statute's language is plain, the sole function of the courts is to enforce it according to its terms.'" Vergos v. Gregg's Enters., Inc., 159 F.3d 989, 990 (6th Cir. 1998) (citations and quotation marks omitted) (quoting Appleton v. First Nat'l Bank of Ohio, 62 F.3d 791, 801 (6th Cir. 1995); United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989)). Courts will look beyond a statute's language when the text is ambiguous or when a literal interpretation would lead to internal inconsistencies, an absurd result, or an interpretation inconsistent with the intent of Congress. Id.

Plaintiffs recognize that the Court will typically look to the plain language of a statute to determine Congressional intent. They argue, however, mat as applied here, the plain language of § 6511(b)(2)(i) fails to effectuate Congress's intent (i.e., preventing the litigation of stale claims brought under the full payment rule), (ii) leads to an absurd result (i.e., that Plaintiffs would be required to file new refund claims regarding tax assessments that the Court has already found to be unlawful), and (iii) contradicts the IRS's own policy statement. {See Pls.' Surreply at 6-12.) They argue that the Court should look instead to the legislative history, outlined above, in holding that § 6511(b)(2)'s restrictions on refund amounts do not apply to the retained overpayments.

Contrary to Plaintiffs' assertions, Congress's intent is not so easily divined from legislative history. Take, for example, the 1924 Senate Report quoted by Plaintiffs:

 

In order that a late payment of a small portion of the tax due may not extend the time for filing of a claim for refund of the entire tax, a limitation has been inserted by the committee restricting the amount of a credit or refund to the portion of the tax paid during the four years immediately preceding the filing of the claim.

 

(Pls.' Surreply at 7 (emphasis deleted) (quoting S. Rep. No. 398, 68th Cong., 1st Sess. 33 (1924)).) This ninety-three-year-old passage may help to explain why Congress enacted § 6511(b)(2)'s predecessor. But the passage does little to explain why Congress has, in the intervening decades, continuously updated § 6511(b)(2) yet retained that subsection's refund limits even after the Supreme Court, in 1960, recognized the divisible tax exception to the full payment rule. As Plaintiffs recognize, the divisible tax exception is not new. If it was Congress's intent that § 6511(b)(2) not apply to claims regarding divisible taxes, Congress could have communicated that intent through the language of the statute sometime within the last fifty-seven years.

The current language of § 6511 offers a clearer picture of Congressional intent than a 1924 Senate Report on a predecessor statute does. Subsection (a) begins with an inclusive statement of § 6511's coverage: the statute applies (i) to a "[c]laim for credit or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is required to file a return" and (ii) to a "[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." 26 U.S.C. § 6511(a) (emphasis added). The broad language continues in subsection (b), where taxpayers are informed that "[n]o credit or refund shall be allowed or made after the expiration of the period of limitation prescribed in subsection (a) for the filing of a claim for credit or refund, unless a claim for credit or refund is filed by the taxpayer within such period." Id. § 6511(b)(1) (emphasis added). The statute, moreover, contains no discernable exceptions. Subsection (b)(2)(B), for example, plainly states that "[if] the claim was not filed within [the 3-year period prescribed in subsection (a)], 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." Id. § 6511(b)(2)(B); see United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1, 7-8 (2008) (discussing the "'unusually emphatic form'" of § 6511's timing requirements for refund claims and communicating the Court's inability to "imagine what language could more clearly state that taxpayers seeking refunds of unlawfully assessed taxes must comply with the Code's refund scheme before bringing suit, including the requirement to file a timely administrative claim" (quoting United States v. Brockamp, 519 U.S. 347, 350 (1997))); Brockamp, 519 U.S. at 350-51 (Section 6511 "sets forth its limitations in a highly detailed technical manner, mat, linguistically speaking, cannot easily be read as containing implicit exceptions. Moreover, § 6511 reiterates its limitations several times in several different ways[ ]" -- in subsections (a) and (b).). Congress may have intended that § 6511(b)(2)'s predecessor statute simply accompany the full payment rule. But the absence of an express exception for divisible taxes in the current statute, coupled with the current statute's broad language, suggests that Congress envisions a more expansive role for § 6511. Cf. United States v. Williams, 514 U.S. 527, 534 n.7 (1995) (indicating that § 6511(a) acts as a statute of limitations barring tardy refund claims). Based on a natural reading of § 6511's plain language, the Court concludes that Congress intended § 6511(b)(2) to limit refund claims irrespective of whether the claims relate to a divisible tax. See 26 U.S.C. § 6511.

Plaintiffs' second argument -- that interpreting § 6511(b)(2) by looking at the statute's plain language produces an absurd result -- also lacks merit. Plaintiffs point to the apparent absurdity of filing a new refund claim when the Court has already determined that the underlying tax assessment cannot be collected. The application of § 6511(b)(2) in this case is, admittedly, tedious. But it is hardly absurd. Where the IRS retains overpayments and applies them toward a divisible tax liability for which a claim has already been filed, the taxpayer, to comply with § 6511(b)(2), must take a simple action: file a new refund claim. And contrary to Plaintiffs' assertion, a refund claim is not only a "challenge [to] the lawfulness of an underlying tax assessment." (Pls.' Surreply at 10 [ECF No. 189].) More mundanely, and as relevant here, a refund claim is a formal request to the IRS for the return of a taxpayer's money. See 26 C.F.R. 301.6402-2. Filing a refund claim does not become a superfluous task simply because the lawfulness of the underlying assessment has already been determined.

In their final argument, Plaintiffs assert that a plain-language interpretation of § 6511(b)(2) conflicts with the IRS's own published policy, namely § 1.2.14.1.4 of the Internal Revenue Manual ("IRM"). That section addresses the retention of overpayments with respect to divisible tax assessments:

 

When a refund suit is pending on a divisible assessment, the Service will exercise forbearance with respect to collection provided that the interests of the government are adequately protected and the revenue is not in jeopardy. However, any refunds due the taxpayer may be credited to the unpaid portion of the liability pending the outcome of the suit.

 

(Pls.' Surreply at 11 (emphasis deleted) (quoting Internal Revenue Manual § 1.2.14.1.4, Policy Statement 5-16 (Mar. 1, 1984)).) According to Plaintiffs, § 1.2.14.1.4 mandates that the IRS "retain overpayments as credits against a divisible tax assessment only so long as the suit is pending." (Id.) Once a court finds the assessment to be unlawful, § 1.2.14.1.4 purportedly requires that the IRS return the overpayments to the taxpayer. (Id.)

Despite Plaintiffs' insistence, there is no conflict here. Section 1.2.14.1.4 does not affirmatively direct the IRS to refund retained overpayments. The section offers an implied mandate. The section's indirect language suggests that it was not intended to serve as the IRS's sole guidance on the issue of refunding overpayments applied toward divisible tax assessments. In fact, the section offers no guidance on the conditions and timing for issuing a refund. Nor does the section say anything about a taxpayer's obligation to file a claim for a refund. The implied refund mandate found in § 1.2.14.1.4 is, consequently, easily reconciled with § 6511(b)(2). To comply with both provisions, the IRS could refund retained overpayments when the taxpayer has filed a claim within the time limits specified in § 6511.

 

2. Application of 26 U.S.C. § 6511(b)(2) to the Retained Overpayments

 

Section 6511(b)(2) applies here by its plain language. And it limits the Court's jurisdiction to award retained overpayments to Plaintiffs as part of the final judgment in this action. See 26 U.S.C. § 7422(a) ("No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax . . . until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof." (emphasis added)); Leeke, 737 F. Supp. at 1016 ("[J]urisdiction under § 1346(a)(1) is limited by 26 U.S.C. § 7422(a), which prohibits any suit for refund of taxes prior to filing a claim for refund."); Greene-Thapedi v. United States, 549 F.3d 530, 532 (7th Cir. 2008) ("Under section 7422(a) of the Internal Revenue Code, a district court lacks jurisdiction over a refund claim that has not first been filed with the IRS."); cf. United States v. Dalm, 494 U.S. 596, 602 ("Dalm did not file her claim for refund of the gift tax until November 1984, long after the limitations period expired. Under the plain language of §§ 6511(a) and 7422(a), the District Court was barred from entertaining her suit for a refund of the tax."). The Court may only direct the refund of a retained overpayment if Plaintiffs filed a claim for the refund of that retained overpayment within the relevant time limit set forth in § 6511.

Plaintiffs have not represented to the Court that they filed a timely refund claim with respect to any of the retained overpayments. The Government, however, hints that Plaintiffs did file a timely refund claim with respect to at least one of the retained overpayments -- an overpayment of $451,861 that the Government applied to NetJets Aviation, Lie's unpaid excise tax liability for the period ending March 31, 2005. (Govt's Reply at 4 n.2 [ECF No 187].) To the extent that Plaintiffs filed a timely refund claim for the $451,861 overpayment, the Court will, as part of the final judgment in this action, order that the Government refund that overpayment. See Fed. R. Civ. P. 54(c) ("Every . . . final judgment [other than a default judgment] should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.").

The Government also suggests that Plaintiffs may have submitted informal refund claims for the other retained overpayments. (Govt's Reply at 4 n.2.) There are three components to an informal refund claim:

 

First, "[o]nly when it is clear from such tacts and circumstances that the IRS was on actual or constructive notice that the taxpayer was asserting a right to a refund for a specific year will the court find that an effective informal claim was filed." Deluxe Check Printers, Inc. v. United States, 15 Cl.Ct. 175, 180 (1988), affd in part, rev'd in part on other grounds, 885 F.2d 848 (Fed.Cir.1989) (citing Furst, 230 Ct.Cl. at 381). Second, "the claim must describe the legal and factual basis for the refund." New England, 32 Fed.Cl. at 641. Finally, "an informal claim must have a written component]." Arch Eng'g Co. v. United States, 783 F.2d 190, 192 (Fed.Cir.1986).

 

Mobil Corp. v. United States, 67 Fed. Cl. 708, 716 (2005); see also Estate of Hale v. United States, 876 F.2d 1258, 1263 (6th Cir. 1989) (holding that a taxpayer submitted an informal claim where the taxpayer sufficiently advised the IRS that it intended to seek a refund, "gave written notice sufficient to alert the IRS to the circumstances upon which a claim for refund would be based," and provided accompanying documents to the IRS that adequately stated the legal basis of the claim). Whether a taxpayer has satisfied the requirements for submitting an informal claim is a determination "'made on a case-by-case basis and is based on the totality of the facts.'" Mobil Corp., 67 Fed. Cl. at 716 (quoting Donahue v. United States, 33 Fed. Cl. 600, 608 (1995)).

A taxpayer must do more, though, than file an informal claim before it can bring a refund suit in district court. Filing an informal claim "may prevent a plaintiff's claim from being rejected as time-barred." Pennoni v. United States, 86 Fed. Cl. 351, 363 (2009). A plaintiff's failure, however, "to subsequently perfect the [informal] claim by complying with the formal claim requirements will bar the court from exercising [subject matter] jurisdiction over the claim." Id.

The Court does not have an adequate factual record before it to determine whether Plaintiffs' submissions amount to informal claims. Moreover, even if the Court were to determine that Plaintiffs submitted informal claims, neither party represents that Plaintiffs perfected their ostensible informal claims with subsequent formal claims. The Court, consequently, will not order the refund of the other retained overpayments.

 

III.

 

 

For the reasons stated above, Plaintiffs' Motion for Leave [ECF No. 189] is GRANTED, and the parties' motions to alter or amend judgment [ECF Nos. 180, 182] are each GRANTED IN PART and DENIED IN PART. The Government's Motion is granted, and Plaintiffs' Motion is denied, to the extent the Court recognizes the applicability of 26 U.S.C. § 6511(b)(2) to the retained overpayments and has determined that all but one of the retained overpayments should not be included in the final judgment. The Government's Motion is denied, and Plaintiffs' Motion is granted, in that the Government is ordered to refund NetJets Aviation, Inc.'s $451,861 retained overpayment if Plaintiffs filed a timely refund claim for that overpayment.

IT IS SO ORDERED.

3-21-2017

 

DATE

 

 

EDMUND A. SARGUS, JR.

 

CHIEF UNITED STATES DISTRICT JUDGE

 

FOOTNOTE

 

 

1 Plaintiffs do not advance an argument on whether a 3-year or a 2-year lookback should be utilized in the event that § 6511(b)(2) applies to the retained overpayments. (See generally Pls.' Surreply.)

 

END OF FOOTNOTE
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