Supreme Court’s Likely Review Of Rulings Equitably Tolling FTCA Claims May Impact Tax Refund Suits

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Today we welcome back guest blogger Carl Smith who discusses two 9th Circuit cases involving different time periods for filing administrative claims or district court suits under the Federal Tort Claims Act (FTCA). The cases consider whether the filing limits are jurisdictional or are subject to equitable tolling. Over the past few years, this is an area of the law that has had major developments. Carl identifies how these cases may influence tax procedure, which is peppered with time limits for filing claims or suits. Les

Almost every Term now, the Supreme Court issues an opinion dealing with the doctrines of “jurisdiction” and equitable tolling.  Last Term’s opinion was Sebelius v. Auburn Regional Medical Center, 133 S. Ct. 817 (2013), where the Court found that a time period in which to bring a Medicare reimbursement administrative proceeding was not “jurisdictional”.  Jurisdictional time periods may never be tolled for equitable reasons. In Auburn, the Supreme Court then went on to decide that the presumption in favor of equitable tolling of non-jurisdictional federal time periods established in Irwin v. Dept. of Veterans Affairs, 498 U.S. 89 (1990), was rebutted for this particular Medicare time period.  If there is a trend in the Court’s case law these days, it is that, other than under stare decisis to prior Court opinions, almost no time periods are being found jurisdictional, and, contrary to Auburn, most are being found subject to equitable tolling.  This should be of great interest to tax practitioners, since there are many time periods in the IRC, and case law from the Tax Court and appeals courts preceding the recent Supreme Court trend has almost exclusively held that IRC time periods are jurisdictional or, if not, are still not subject to equitable tolling.  The IRC case law should now be up for reconsideration.

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In two cases case that are expected to be heard next Term, the Solicitor General (seeking to resolve splits among the Circuits) just asked the Supreme Court to grant certiorari to the 9th Circuit on the issue of whether two different time periods for filing administrative claims or district court suits under the Federal Tort Claims Act (FTCA) are jurisdictional or are subject to equitable tolling.  Because of the substantial similarity between the procedures for bringing district court FTCA and tax refund suits, the Court’s ruling in these two cases could have a great impact on whether, in the future, the IRC section 6532(a) time period in which to file a tax refund lawsuit is held to be subject to equitable tolling.

Indeed, one of the 9th Circuit opinions expected to be reviewed is already having an impact on the briefing in the pending 9th Circuit case of Volpicelli v. U.S., on which I have blogged beforeVolpicelli presents the issue of whether the 9-month time period at IRC section 6532(c) to file a wrongful levy suit is jurisdictional or subject to equitable tolling — an issue on which the Circuits are also currently split.  In a motion filed last week seeking more time to file its Volpicelli brief, the DOJ stated:  “This Court recently issued an opinion on equitable tolling that significantly affects the analysis of this issue.  See Kwai Fun Wong v. Beebe, 732 F.3d 1030 (9th Cir. 2013) (en banc), petition for cert. filed 82 U.S.L.W. 3541 (Mar 07, 2014).  In light of the above, drafting a brief that adequately reflects recent law and furnishes the maximum assistance to the Court is a challenging and time-consuming endeavor.”  In a warning that may indicate the DOJ’s possible interest in taking the Volpicelli case higher if the 9th Circuit rules against it, the DOJ also stated in that motion:  “This issue [i.e., whether IRC section 6532(c)’s time period may be equitably tolled] is of particular administrative importance to the United States.”

But, let’s turn back to tax refund lawsuits.  First, let’s compare the procedures for bringing an FTCA suit and a tax refund lawsuit to see how similar they are:

Both the FTCA and the IRC provide for the predicate filing of administrative claims.  28 U.S.C. section 2675(a) provides, in part, that “[a]n action shall not be instituted upon a[n FTCA] claim against the United States . . . unless the claimant shall have first presented the claim to the appropriate Federal agency and his claim shall have been finally denied by the agency.”  IRC section 7422(a) provides, in part:  “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 filed with the Secretary.”

Both the FTCA and the IRC provide for time limits in which to file the administrative claim.  28 U.S.C. section 2401(b) states, in part, that “a tort claim against the United States shall be forever barred unless it is presented in writing to the appropriate Federal agency within two years after such claim accrues”.  IRC section 6511(a) provides that a refund claim is timely only if filed within 3 years of the filing of the tax return or 2 years of payment of the tax, whichever is later.

28 U.S.C. section 1346 provides the district courts with jurisdiction to hear both tax refund suits (at subsection (a)(1)) and FTCA suits (at subsection (b)(1)).

Both the FTCA and the IRC provide that such district court suits cannot be brought in the first 6 month if the agency has not ruled in that period, but can be brought after the agency denies the claim  28 U.S.C. section 2675(a) provides, in part:  “An action shall not be instituted upon a claim against the United States for money damages for injury or loss of property or personal injury or death caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, unless the . . . [administrative] claim shall have been finally denied by the agency in writing and sent by certified or registered mail. The failure of an agency to make final disposition of a claim within six months after it is filed shall, at the option of the claimant any time thereafter, be deemed a final denial of the claim for purposes of this section.”  IRC section 6532(a)(1) provides, in part:  “No suit or proceeding under section 7422(a) for the recovery of any internal revenue tax . . . shall be begun before the expiration of 6 months from the date of filing the claim required under such section unless the Secretary renders a decision thereon within that time.”

Both the FTCA and the IRC provide similar outside time limits on bringing the suit after the claim is denied (6 months for the FTCA and 2 years for the IRC).  28 U.S.C. section 2401(b) provides in part, “[A] tort claim against the United States shall be forever barred unless . . . action is begun within six months after the date of mailing, by certified or registered mail, of notice of final denial of the claim by the agency to which it was presented.”  IRC section 6532(a)(1) prohibits a tax refund suit “after the expiration of 2 years from the date of mailing by certified mail or registered mail by the Secretary to the taxpayer of a notice of the disallowance of the part of the claim to which the suit or proceeding relates.”

In Kwai Fun Wong, an FTCA claimant brought a premature suit (i.e., before 6 months had run and before the agency ruled).  The district court judge intended to rule that she could amend the pleadings to continue the suit after 6 months had elapsed.  Unfortunately, his ruling was now going to be issued more than 6 months after the agency denied the claim, so the district court held that there was no longer jurisdiction to bring the suit.  The claimant appealed, arguing that, under these circumstances, the 6-months-after-denial period should be equitably tolled, and the 9th Circuit agreed.  The 9th Circuit held that the 6-month period was not jurisdictional, since time limits rarely are held jurisdictional these days (except in cases of stare decisis to older Supreme Court opinions addressing the specific time period, which did not apply here).  Buttressing its ruling was the fact that the 6-month period was found in 28 U.S.C. section 2401(b), not the jurisdictional grant at 28 U.S.C. section 1346(b)(1) — a factor noted by the Supreme Court in a number of its opinions.  If this similar logic were followed for the IRC section 6532(c)(1)’s 2-year time period to bring a tax refund suit after a claim is denied, then that provision would not be held jurisdictional, either, since the Supreme Court has never ruled on that time period, and the jurisdictional grant for a tax refund suit is also located elsewhere at 26 U.S.C. section 1346(a)(1).

Later in 2013, a panel of the 9th Circuit, citing Kwai Fun Wong, also held that the 2-year period in which to file an administrative claim under the FTCA was not jurisdictional and was subject to equitable tolling.  June v. U.S., 2013 U.S. App. LEXIS 25657 (9th Cir. 
2013).

On March 7, 2014, the Solicitor General asked the Supreme Court to grant cert. in both the Kwai Fun Wong and June cases to clear up confusing and contradictory authority on jurisdiction and equitable tolling of the FTCA periods in the lower courts (links to cert petitions).  The Supreme Court docket numbers are 13-1074 and 13-1075, respectively.  The claimants have not yet filed their responses to the Solicitor General’s petitions, and the Supreme Court has not yet granted the petitions, but it seems likely that both of these cases will be heard by the Court in its October 2014 Term.

If the Court rules in Kwai Fun Wong that equitable tolling is allowed of the 6-month period to file an FTCA lawsuit, then it would seem very hard for one to make a case that the 2-year period in which to file a tax refund lawsuit after claim denial is not subject to equitable tolling.  However, all recent appeals court cases have so far held that the 2-year period in IRC section 6532(a)(1) is jurisdictional.  See, e.g., Marcinkowsky v. U.S., 206 F.3d 1419, 1422 (Fed. Cir. 2000). Serous doubt would be cast on those lower court opinions.

If the Supreme Court rules that the 2-year period under the FTCA to file an administrative claim is subject to equitable tolling, though, that ruling won’t affect tax refund lawsuits.  In U.S. v. Brockamp, 519 U.S. 347 (1997), the Supreme Court held that the similar tax refund administrative claim filing period at IRC section 6511(a) is not subject to equitable tolling, in part because of the numerous exceptions to that period already in the statute and the administrative nightmare that would ensue in the IRS having to review then 90 million refund claims annually, many of which would present equitable tolling inquiries.  Brockamp, though dealt with a much more complicated statute than the 2-year-to-file period in IRC section 6532(a)(1), which contains no exceptions to the period, and under which only about 1,000 refund lawsuits are currently brought each year, so there would be little administrative nightmare if equitable tolling inquiries were required. Brockamp, also, notably, did not discuss whether section 6511 was jurisdictional.  It just held that the Irwin presumption in favor of tolling non-jurisdictional time periods, if it applied, was overcome for section 6511.

Although tax practitioners rarely like to follow cases in other areas of the law — tending towards what has been called “tax myopia” — the Kwai Fun Wong and June cases bear watching.  Go get your glasses fixed.

About Carlton Smith

Carlton M. Smith worked (as an associate and partner) at Roberts & Holland LLP in Manhattan from 1983-1999. From 2003 to 2013, he was the Director of the Cardozo School of Law tax clinic. In his retirement, he volunteers with the tax clinic at Harvard, where he was Acting Director from January to June 2019.

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