Thursday, September 20, 2012

Erroneous Refund Suit is Timely Filed (9/20/12)

In United States v. Davenport, 2012 U.S. Dist. LEXIS 131468 (ND TX 2012), here, the Court held in an erroneous refund suit that the Government's suit had been timely filed.  The erroneous refund suit is brought under Section 7405, here.  The statutes of limitations for such suits is in section 6532, here, which provides:
(b) Suits by United States for recovery of erroneous refunds 
Recovery of an erroneous refund by suit under section 7405 shall be allowed only if such suit is begun within 2 years after the making of such refund, except that such suit may be brought at any time within 5 years from the making of the refund if it appears that any part of the refund was induced by fraud or misrepresentation of a material fact.
Here's the Court's entire discussion on the timeliness of the Government's erroneous refund suit (footnotes omitted):
The parties acknowledge that the earliest possible date that the statute of limitations could have commenced to run is December 28, 2007, the date that the IRS prepared and mailed David and Myra Davenport's refund check for the 2003 tax year. The Davenports contend that the Government's claim accrued on December 28, 2007, and it was therefore required to file suit by December 27, 2009. The court disagrees, as this argument, if not frivolous, is certainly specious.
Rule 6(a) of the Federal Rules of Civil Procedure applies in "computing any time period specified in these rules, in any local rule or court order, or in any statute that does not specify a method of computing time." See Fed. R. Civ. P. 6(a). Section 6532(b) does not specify a method of computing time. For periods stated in days or a longer period of time, every day is counted, including intermediate weekends and holidays and the last day of the period; however, the day of the event that triggers the period is excluded. Fed. R. Civ. P. 6(a)(1)(A), (B). Assuming for purposes of this analysis that December 28, 2007, is the date that the Government's claim accrued, the count begins on December 29, 2007, not December 28, 2007, because Rule 6(a) plainly states that the first day, namely the date that triggers the event, is excluded. Id. Accordingly, the last day that the Government could have timely filed this action was December 28, 2009. As the Government filed this action on December 28, 2009, it was filed within two years after the making of the refund and is therefore timely. 
Moreover, even if the court were to accept David and Myra Davenport's argument that the two years ended on December 27, 2009, the argument fails as a matter of law. Rule 6(a)(1)(C) provides that if the last day of the period for counting time falls on a "Saturday, Sunday, or legal holiday, the period continues to run until the next day that is not a Saturday, Sunday, or legal holiday."  Fed. R. Civ. P. 6(a)(1)(C). As December 27, 2009, fell on a Sunday, which cannot be disputed,  the next countable day was Monday, December 28, 2009, and the Government therefore timely filed its claim regarding David and Myra Davenport's 2003 refund. Having determined that the Government's claim was filed within the limitations period, the court need not address the parties' contentions regarding the meaning of "making" a refund. Thus, the only remaining issue is whether the Davenports were entitled to the qualified research credits claimed for expenses incurred in conjunction with the Mueller OneWorld Project in the 2002 and 2003 tax years.
Pretty straightforward application of the law, including the Rules.

I have to admit that I did not know that there was a material difference between the adjectives frivolous and specious.  The Court declared the taxpayer's position "if not frivolous, [] certainly specious."  So I looked them up in Merriam Webster online dictionary, here.

Frivolous means "of little weight or importance" and "having no sound basis (as in fact or law)."

Specious means "having a deceptive attraction or allure" and "having a false look or truth or genuineness."

I am not sure I understand the particular nuance the judge was making and wonder if only one of the adjectives would have sufficed.  Perhaps readers will enlighten in the comments.

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