M.O.R.E. LLC v. United States provides the view of a federal tax case with an interesting, nonchalant application of equitable tolling. I will address the equitable tolling issue first and then briefly mention the statute of limitation where the court applies a general federal statute of limitations to a tax case. All in all, this case seems the perfect example of a court ignoring any application of tax exceptionalism and is worth reading simply for that point.
We write too much perhaps about equitable tolling and how it might apply in tax cases. I will not even link to all of the posts we have done on equitable tolling but feel free to hit the search key on the blog site if you want to read about the many things we have written on this subject. With that in mind, it was somewhat shocking to read a tax case where the court just rolled into the application of equitable tolling as though it was the most natural thing to consider. The court displayed no angst or concerns about application of the doctrine but simply applied it. Although it determined that the statute of limitations was not equitable tolled in this case, I mention the discussion simply to make the point that at least one judge has no concerns about the application of equitable tolling in tax cases. The straightforwardness of the application, as well as the denial, demonstrates that this concept need not create great pain in its application and that applying the concept may not alter the outcome of many cases.
The court gets to this issue by questioning the IRS motion to dismiss for lack of subject matter jurisdiction under Federal Rules of Civil Procedure 12(b)(1). It finds that “Federal statutory time limitations on suits against the government, however, are not jurisdictional in nature” citing Irwin v. Department of Veterans Affairs. It then says that the issue of whether the claim is barred by the statute of limitations does not raise the kind of jurisdictional question governed by Rule 12(b)(1) but rather a motion for failure to state a claim governed by 12(b)(6).
After setting the case up properly, the Court looks at the facts of the case to determine if they support equitable tolling and finds that they do not. The Court also examined equitable estoppel, a similar but distinct equitable principle that could also impact the tolling of the statute of limitations in certain circumstances. It concludes dismissal is appropriate because plaintiffs failed to allege a plausible claim for either equitable remedy to hold open the statute.
Then the Court looked at the claim itself and the statute of limitations for bringing a quite title action. The Court found that the statute of limitations for a quiet title action is governed by the general six year statute of limitations for bringing a civil action against the United States under 28 USC 2401(a). The six year period began to run when the IRS assessed the taxes. Since this was far more than six years before plaintiffs brought the action and since nothing held open the statute, the Court granted judgment on the pleadings.