Unsigned and Electronically Signed Refund Claims

0 Flares Filament.io 0 Flares ×

Last year I blogged on the case of Gregory v. United States, 149 Fed. Cl. 719 (2020), in which the Court of Federal Claims denied a refund claim because the taxpayers did not sign the amended return.  It turns out the Gregory case is part of a larger group of cases involving the same or similar issues.  The tax clinic at Harvard filed an amicus brief in the Federal Circuit regarding one of the cases in the group, Brown, on behalf of the Center for Taxpayer Rights.  The Court of Federal Claims has recently addressed another case in the group and one that has a slightly different fact pattern.

In Mills v. United States, No. 1:20-cv-00417 (Fed. Cl. 2021), the CFC issued another opinion in the long line of cases caused by accountant and lawyer John Anthony Castro, who is doing contingency fee refund suits involving IRC 911 exclusions for numerous people overseas. The first case decided by the Court of Federal Claims was last year and Gregory was among the first wave.


In the earlier cases, the problem was that the Forms 1040X were substantively reviewed by the IRS and denied on their merits.  Only when the cases got to the CFC did the DOJ object that Castro signed the Forms 1040X, though his POA did not authorize him to sign for the taxpayers.  In these earlier cases, the taxpayers, relying on a Supreme Court opinion from the 1940s, Angelus Milling Co. v. Commissioner, 325 U.S. 293 (1945), argued that the IRS waived the signature defect by disallowing the claims on the merits rather than based on the lack of signature. 

In all of the cases decided so far, the Court of Federal Claims has held that the signature requirement is jurisdictional and not subject to waiver.  The judges dismissed all such suits without deciding whether a waiver might have occurred if the requirement were not jurisdictional.  An appeal to the Fed. Cir. has been taken only in one such suit, Brown, where the Center for Taxpayer Rights, as amicus, has argued that the whole requirement to file a refund claim is no longer jurisdictional under recent Supreme Court case law, so the signature requirement is also one that can be waived or forfeited by IRS inaction.

The Center cited, among other things, an opinion of the Fed. Cir. from 2020 named Walby, a case Carl Smith blogged here.  In Walby v. United States, 957 F.3d 1295 (Fed. Cir. 2020), a pro se tax protester case, a panel of the Federal Circuit joined a panel of the Seventh Circuit in Gillepsie v. United States, 670 F. Appx. 393 (7th Cir. 2016), in questioning, in dicta, their Circuits’ precedents holding that the administrative tax refund claim filing requirement at section 7422(a) is a jurisdictional requirement to the bringing of a refund suit, as probably no longer good law under recent Supreme Court case law

Mills differs from the prior cases in that, after the first set of Forms 1040X were signed by Castro, the IRS denied them on the grounds that Castro improperly signed them — i.e., not on the merits.  So, there could be no argument in Mills (unlike in the prior cases) that the IRS waived the signature requirement.  Castro responded by getting the CFC to dismiss without prejudice a prior suit Mills had brought and tried again. 

Mills filed new Forms 1040X on which to bring suit.  Mills was in Afghanistan, however, where he could not print out the Forms 1040X and sign them.  So, he affixed his digital signature to the new Forms 1040X.  This was done before the IRS authorized using digital signatures on Forms 1040X.  Waiting more than 6 months after the second amended returns were filed, Mills brought suit for refund.  The opinion just issued (which had initially been issued 2 weeks ago as a sealed opinion, but is no longer sealed) again holds that the claim filing requirement is jurisdictional — citing prior Fed. Cir. case law, but not mentioning Walby.  The court goes on to hold that Forms 1040X at the time these were filed could not be electronically signed.  Thus, the court dismisses this second Mills suit for lack of jurisdiction. All may not be lost for Mills, however, who can now, if he so chooses, go back and perfect his Forms 1040X for the third time, this time complying with IRS procedures for electronic signatures.

It is Carl’s view that Mills would not make a good test case for asking the Fed. Cir. to overrule its prior precedent on whether claim filing is jurisdictional to a refund suit because there is no possible way for Mills to argue for waiver on these facts (and, indeed, no waiver argument was ever made by Mills in this case).  Although the Court of Federal Claims in Mills may have been wrong to call the requirement jurisdictional, in any appeal, the Fed. Cir. would likely duck the jurisdictional question as not necessary to decide the case — just as it did in Walby.  In Brown, deciding whether or not the filing requirement is jurisdictional cannot be avoided, since the taxpayer has an argument for waiver that has not yet been considered by the CFC.

Fellow blogger, Jack Townsend, wrote to Les and I with the following comment:

In the conclusion, the court says:

“This result here is admittedly harsh. Mr. Mills was working overseas under difficult circumstances and made demonstrable efforts to sign the returns as best he could. The IRS could have accepted his digital initials as an appropriate signature but chose not to do so. If it is to process millions of tax-forms each year, the IRS may insist on strict compliance with its procedural requirements. The plaintiff’s second amended returns did not comply with IRS requirements and were therefore not duly filed. Under these facts, the Court lacks jurisdiction over the plaintiff’s refund suit and must dismiss the complaint.” (emphasis added by Jack)

In the bold-face, the court says IRS had authority/discretion to accept the returns but chose not to do so.  Could that decision be reviewed under the APA arbitrary and capricious standard or some review of discretionary decisions?

Les responded “I would think that an APA claim under 706(2)(A) could have been brought as part of the refund suit. Having failed to raise it the taxpayer is out of luck as the APA would not confer independent jurisdiction.”

Unintentionally, a whole group of taxpayers has been keeping lawyers interested in procedural issues occupied.  It’s possible that the Brown case could create some new precedent in the Federal Circuit that could have an impact on other circuits.  The digital signature problem faced by Mr. Mills is in some ways similar to the mailing problem faced by Guralnik and Organic Cannabis.  In both situations, the rules changed shortly after their failure to follow the old rules.  The old rules were changed because they no longer fit the circumstances but the last taxpayers to incorrectly attempt action under the old rules are paying the price.


  1. Carl Smith says

    I won’t answer Jack’s question about the APA (I don’t know the answer, though am skeptical), but I will highlight the sentence from the Mills opinion that Jack highlighted, which reads: “The IRS could have accepted his digital initials as an appropriate signature but chose not to do so.”

    The court says this after having found the signature requirement jurisdictional. Clearly, the court doesn’t understand what it means for a requirement to be jurisdictional to a refund suit. If a requirement is jurisdictional, the IRS could not have accepted an improper signature because that would constitute a waiver of the signature defect, and parties cannot waive jurisdictional defects. Indeed, courts must enforce jurisdictional defects, even if parties won’t. The holdings in Mills and the other cases that the signature and verification under penalties of perjury requirements are jurisdictional means that, in all future refund suits in any court and on any ground (not just section 911), the court should initially ask the plaintiff to plead and prove that the signature on the refund claim was either an original of the taxpayer, one by a person authorized by a POA, or one that complied with the IRS new procedures on electronic signatures.

    The only way to try to make sense of the judge’s sentence from Mills is to say that the IRS could have accepted the claim if it had first authorized, by reg. or procedure, electronic initialing of the claim. But, of course, the IRS hadn’t at the time of the refund claim at issue in Mills.

    The fact that the IRS itself has the regulatory authority under section 6061 and 6065 to create rules for signing and verifying claims under penalties of perjury suggests that the signing and verification requirements are not jurisdictional — even if the filing of a claim still is. Parties are not supposed to have the ability to alter jurisdictional time period. In Sebelius v. Auburn Regional Med. Center, 568 U.S. 145 (2013), where the Supreme Court held that a filing deadline is not jurisdictional, but is still not subject to equitable tolling, the Court noted that there was a reg. allowing a good cause extension. The Court pointed out that, if the filing deadline in the statute were jurisdictional, that reg. would be invalid because a party cannot alter a jurisdictional deadline. By holding the deadline not jurisdictional, the Court indirectly upheld the validity of the reg. (which, of course, mitigated for many other plaintiffs — though not the one before the court — the harshness of the ruling that no equitable tolling of the deadline was permitted for people who also missed the reg. extended deadline).

  2. Buck Meister says

    Just doing a web search of Castro & Co., found one in Virginia claiming to be a CPA firm that does audits for the government, basically a contractor for the IRS. So, if they are supposed to be representing taxpayers either they are breaching their duty of loyalty to one or the other. It is written: one cannot serve two opposing masters. The bigger question of a lawyer working on a contingency for refunds is duty. A taxpayer due refunds is victimized by IRS (a fiduciary to taxpayers) and attorney, taking a fee that either he knows will not be reimbursed by IRS or just doesn’t care. In both cases, the taxpayer loses. How is this fair within the meaning of the Taxpayers Bill of Rights?

    • Another question that jumped out at me: given that Circular 230 prohibits the practitioner from endorsing into the attorney’s account a check that the government issues to a client, does taking IRS cases on contingency generally make business sense? You’d have to chase the client for your fee.

  3. Bob Kamman says

    Carl Smith didn’t need to go beyond “Clearly, the court doesn’t understand.”

    Those interested in Judge Hertling’s credentials before his appointment to the federal judiciary in 2019 can find them here:


Comment Policy: While we all have years of experience as practitioners and attorneys, and while Keith and Les have taught for many years, we think our work is better when we generate input from others. That is one of the reasons we solicit guest posts (and also because of the time it takes to write what we think are high quality posts). Involvement from others makes our site better. That is why we have kept our site open to comments.

If you want to make a public comment, you must identify yourself (using your first and last name) and register by including your email. If you do not, we will remove your comment. In a comment, if you disagree with or intend to criticize someone (such as the poster, another commenter, a party or counsel in a case), you must do so in a respectful manner. We reserve the right to delete comments. If your comment is obnoxious, mean-spirited or violates our sense of decency we will remove the comment. While you have the right to say what you want, you do not have the right to say what you want on our blog.

Speak Your Mind