02/21/2008
CONTACT: Melissa Sharp, 202-314-2068
Washington, D.C.--In March, the U.S. Supreme Court will consider a critical tax case that will determine how long taxpayers have to challenge the Internal Revenue Service for unconstitutional tax assessments made by the agency.
The case before the court is U.S. v. Clintwood Elkhorn Mining Co., and it aims to sort out a conflict between the statute of limitations under the Tucker Act and the tax code. The Tucker Act, which authorizes private parties to bring certain actions against the United States, has a six-year statute of limitations. The tax code has a three-year statue of limitations on actions brought against the IRS for refunds owed to taxpayers due to improper tax assessments. The IRS also requires that an administrative claim be filed within that three-year period. The Supreme Court is being asked to determine which statute of limitations should be used to determine when claims concerning a constitutional issue can be filed.
The National Federation of Independent Business Legal Foundation, the nation's leading small business advocate in the nation's courts, filed an amicus brief in this case urging the court to find that the statute of limitations in the Tucker Act should control in cases, like this one, where a tax is levied in violation of the Constitution.
"This case is significant for all taxpayers who have a claim against the federal government for the repayment of improper tax assessments," said Karen Harned executive director of NFIB's Legal Foundation. "If the Tucker Act's six-year limitation period applies to improper tax assessment claims, taxpayers will be allowed to obtain significantly greater recoveries than permitted under the current administrative claim process. Under the Tucker Act, Congress clearly intended to give taxpayers six years to sue the government for constitutional violations, such as an unconstitutional tax assessment. We urge the court to uphold Congress' intent and find in favor of all taxpayers."
In the case at hand, three coal companies paid taxes to the IRS for six years, from 1994 to 1999. The tax paid was found to be unconstitutional. The companies received refunds for 1997, 1998, and 1999 because they had filed an administrative claim within the three-year limitation the tax code requires. The IRS refused, however, to refund the companies for the three previous years because they had not filed an administrative claim within three years.
The plaintiffs brought a claim under the Tucker Act for refunds for 1994, 1995 and 1996. The two lower courts agreed that the Tucker Act allowed recovery and ordered the IRS to pay the companies the wrongfully assessed taxes for those years. The government has appealed this ruling to the U.S. Supreme Court.
Oral arguments are currently scheduled for Monday, March 24.
