We have run a number of posts involving refund suits where (1) the taxpayer’s representative signed the predicate refund claim on the taxpayer’s signature line, and (2) the Form 2848 power of attorney did not expressly authorize the representative to sign returns. This is part I of a two-part post on two recent cases presenting this fact pattern, decided one day apart, Dixon v. United States, 2023 U.S. App. LEXIS 11422 (Fed. Cir., May 10, 2023) (Dixon 3), and Cooper v. United States, 2023 U.S. Claims LEXIS (Ct. Cl., May 9, 2023). The DOJ’s motion to dismiss was successful in Dixon and unsuccessful in Cooper. So, it may be worthwhile to explain how the courts reached different rulings on such similar fact patterns. Today’s post discusses Dixon and its predecessor cases generated by representative John Castro (the original signer in all the cases leading up to Dixon).
Background on Castro Cases
There is a tax attorney/CPA named John Castro, who represents a lot of United States citizens living abroad. Mr. Castro filed refund claims for them for various issues, frequently the foreign income exclusion of IRC § 911. Mr. Castro knew it was a big burden to send refund claims to his overseas clients to have the clients sign and return the claims. So, he obtained powers of attorney (Forms 2848) from them, and Mr. Castro signed the refund claims (Forms 1040X) on the line for the taxpayer’s signature (i.e., the line which contains the affirmation under penalties of perjury).
Line 3 of Form 2848 (rev. 1/2021) states: “I authorize my representative(s) to receive and inspect my confidential tax information and to perform acts I can perform with respect to the tax matters described below. For example, my representative(s) shall have the authority to sign any agreements, consents, or similar documents (see instructions for line 5a for authorizing a representative to sign a return).” Line 5a allows taxpayers to give the representative certain further powers, including, “Sign a return”. Unfortunately, Mr. Castro left that box on line 5a unchecked.
The IRS audited all the claims and rejected the claims on the merits. In response, Mr. Castro arranged for counsel he hired to file suits in the Court of Federal Claims (CFC) seeking refunds.
Mr. Castro’s signature is messy, and so it was not until the suits had commenced that the DOJ discovered that the purported taxpayer signatures on the Forms 1040X were those of Mr. Castro and not the taxpayers. Thereafter, the DOJ filed motions to dismiss for lack of jurisdiction under RCFC 12(b)(1). The taxpayers claimed the IRS had waived any defect in the form of the claims by rejecting the claims on the merits, citing Angelus Milling Co. v. Commissioner, 325 U.S. 293 (1945). In Angelus, the Supreme Court held that the IRS waives the regulatory specificity requirement of a refund claim when the IRS denies the claim on the merits. But, the Angelus Court stated that, by contrast, statutory refund claim requirements may never be waived.
Keith first did a post on one of the Castro-case opinions in which the CFC granted the IRS’ motion, Gregory v. United States, 149 Fed. Cl. 719 (2020). Gregory held jurisdictional to a refund suit compliance with the refund claim signature requirement of IRC § 6061 and the verification under penalties of perjury requirement of IRC § 6065. Jurisdictional requirements can never be waived. Since Castro did not have authority to sign Forms 1040X, the CFC dismissed Gregory’s suit for lack of jurisdiction.
Mr. Dixon and Mr. Brown had similar CFC cases dismissed for lack of jurisdiction. See Dixon v. United States, 147 Fed. Cl. 469 (2020) (Dixon 1); Brown v. United States, 151 Fed. Cl. 530 (2020). Mr. Dixon and Mr. Brown appealed the dismissals of their CFC cases to the Federal Circuit.
In Brown v. United States, 22 F.4th 1008 (Fed. Cir. 2022) (on which Keith blogged here), the Federal Circuit affirmed the CFC, but on different reasoning. Brown held that, under recent Supreme Court case law, certain requirements of a proper refund claim under IRC § 7422(a) are no longer jurisdictional to a refund suit, even though the predicate requirement to file a refund claim at all is still jurisdictional. Brown held that what it called the “duly filed” requirement of the statute (which the court said covered the IRC §§ 6061 and 6065 requirements) are not jurisdictional, but nevertheless are still statutory, so cannot be waived. Thus, Brown dismissed the suit for failure to state a claim under RCFC 12(b)(6), not for lack of jurisdiction under RCFC 12(b)(1). (Parenthetically, I question whether any requirement to file a refund claim is still jurisdictional, and I think the comment in Angelus that statutory requirements cannot be waived is also no longer good law and should not have been followed in Brown.)
Dixon 2 and 3 Opinions
Mr. Dixon dropped his appeal of Dixon 1 when Mr. Castro got a bright idea: Mr. Castro had Mr. Dixon sign and file new Forms 1040X identical to the first set. This occurred after the IRS had denied the first set of Forms 1040X on the merits. The new claims were submitted to the IRS after the IRC § 6511 statute of limitations for refund claims had expired. The IRS denied the claims, and Mr. Dixon filed a new refund suit in the CFC. The DOJ moved to dismiss the case for lack of jurisdiction on the ground that the prior claims could not be treated as timely informal claims under the doctrine of United States v. Kales, 314 U.S. 186 (1941), arguing that informal claims need properly to be signed under penalties of perjury, as well. In Dixon v. United States, 158 Fed. Cl. 69 (2022) (Dixon 2) (on which I blogged here, the CFC dismissed the suit for lack of jurisdiction on the grounds sought by the DOJ.
In Dixon 3, the Federal Circuit recently affirmed the CFC’s dismissal of the case for lack of jurisdiction for late claim filing, but again on different grounds than those stated by the CFC. The Federal Circuit was concerned about the possible differences between the waiver doctrine cases (Angelus and its progeny, including Brown) and the informal claim doctrine cases (Kales and its progeny). The court was doubtful that to be a valid informal claim filed before the IRC § 6511 statute expired, all procedural requirements of claims must have been met, such as the signature and verification requirements. The court wrote:
The government’s argument, at least on its face, is in tension with decisions of both the Supreme Court and this court. See Kales, 314 U.S. at 194 (“This Court, applying the statute and regulations, has often held that a notice fairly advising the Commissioner of the nature of the taxpayer’s claim, which the Commissioner could reject because too general or because it does not comply with formal requirements of the statute and regulations, will nevertheless be treated as a claim where formal defects and lack of specificity have been remedied by amendment filed after the lapse of the statutory period.” (citations omitted)); Computervision, 445 F.3d at 1364 (“First, formal compliance with the statute and regulations is excused when the informal claim doctrine is applicable.”). And it is in tension with the above-described case law, see supra pp. 15-18, which has applied the informal-claim doctrine in the absence of writings, signatures, and verification under penalty of perjury.
Slip op. at 22-23.
All that is clear under Kales is that a perfected claim filed after the statute of limitations expires is deemed to be filed on the date the informal claim was filed.
The court pointed out the tension between the waiver and informal claim cases, but declined to resolve the issue of whether all informal claims must be signed by taxpayers under penalties of perjury. It left that question to another panel in a later case. “We flag these issues without prejudging the result of a full consideration of these and other issues in a case where deciding the question is necessary to the outcome.” Slip op. at 24.
The court could dodge the sticky issue because it found another ground for finding the refund suit to lack jurisdiction. Although the DOJ had not meaningfully presented the argument to the CFC, before the Fed. Cir. the DOJ argued that once an informal claim has been rejected on the merits, and the taxpayer brings suit on it, the ability of the IRS to rule on the claim lapses (authority passes to the DOJ), so the claim cannot be an informal claim for a later, perfected claim. The Federal Circuit agreed, writing:
On the merits, the Supreme Court in [United States v.] Memphis Cotton [Oil Co., 288 U.S. 62 (1933)], in articulating the informal-claim doctrine, stressed the importance of any amendment to a deficient refund claim being filed while the original claim remains before the IRS. 288 U.S. at 72. Only when the IRS “holds [a deficient claim] without action until the form has been corrected” is it true that “what is before [the IRS] is not a double claim, but a claim single and indivisible, the new indissolubly welded into the structure of the old.” Id. at 71. But “[w]hen correction is . . . postponed, there is no longer anything to amend, any more than in a lawsuit after the complaint has been dismissed.” Id. at 72. This court reiterated that principle in Computervision, where we noted that the IRS loses jurisdiction over—and a taxpayer loses the ability to amend—any refund claim that is allowed, disallowed, or the subject of a suit for refund. 445 F.3d at 1371-73.
Slip op. at 25-26.
When Dixon 2 came down, Keith was worried that the Federal Circuit might affirm the CFC on the ground that a valid informal claim must be signed by the taxpayer under penalties of perjury. That would seem to go against precedent of the Federal Circuit and many other courts. Accordingly, the Center for Taxpayer Rights (represented by Keith and Professor Andrew Weiner of Temple) filed an amicus brief pointing out that precedent. A copy of the amicus brief can be found here.