Ninth Circuit Denies Taxpayers a Refund for Failure to Satisfy § 6511 Timing Rules (8/15/24)

In Libitzky v. United States, 110 F.4th 1166 (9th Cir. 2024), CA9 here & GS here, the panel rejected the Libitzkys’ refund suit for failure to meet the refund suit limitations periods in § 6511, here. Many readers of this blog will likely already have some familiarity with the time limitations for refund suits and know that application of the time limitations can be complex. I cover the subject in the Federal Tax Procedure (2024 Practitioner Ed.), pp. 226-230 and Federal Tax Procedure (2024 Student Ed.), pp. 157-161, available free here. The only difference between the Practitioner Edition and the Student Edition is the former has footnotes and the latter does not. I have made significant revisions to these pages in my 2025 Working Draft (to be published in July or August 2025), particularly adding Example 8a inspired by Libitzky. The revisions as of the posting of this blog are in redline format here (Practitioner Edition). (Please note that a number of changes are nonsubstantive, such as changing April 15 of Year 02 to 4/15/02.

I have had considerable difficulty understanding the Libitzky opinion. The discussion I present here will likely reflect the difficulty. So, I have decided to first cover the applicable “law” as I understand it. I will then state key representative “facts” of Libitzky through Example 8a. That is the approach I take in the Book—to first present the law and then present various fact scenarios (Examples to discuss the complexities in the law). In presenting the law, I will copy and paste from the 2025 Practitioner Edition working draft retaining the redlines showing changes from the 2024 editions. I include only the portion related to Libitzky. I only include footnotes where they are needed for the discussion of Libitzky. (The numbering of the footnotes are not the same as in the Book.)

          There are two statutes of limitation on taxpayers claiming tax refunds.

          First, there is a statute of limitations for filing the claim for refund. A claim for refund must be filed within three years from the date the return was filed or two years from the date the tax was paid, whichever is later, and, if no return is filed, within two years from the date of payment. § 6511(a). This is sometimes called the refund claim limitation period. This statute of limitations has traditionally been read literally, requiring filing within the stated periods with no equitable relief; so read literally, the statute of limitations is said to be jurisdictional for the predicate condition in § 7422(a) to file a suit for refund. Also, if read literally, the statute means that a taxpayer can file a return claiming a refund 40 years late and qualify under this first rule. I hope readers will instinctively say something must be missing here, for statutes of limitations do not normally allow such lengthy lapses before the claim must be pursued. The answer to that concern is in the second rule, a limitation on the amount of tax that can be refunded. n1  

    n1 Omohundro v. United States, 300 F.3d 1065, 1068-1069 (9th Cir. 2002)); Weisbart v. Treasury, (2d Cir. 2000); and Rev. Rul. 76-511, 1976-2 C.B. 428. The 40 years late example is inspired by Oropallo v. United States, 994 F.2d 25, 30 (1st Cir. 1993) (noting that the limitation might be “illusory” for late filed returns because a taxpayer could “file a tax return 40 years late and still have 3 additional years in which to file a claim for refund;” the Second Circuit in Weisbart said that “Nevertheless” this construction makes sense, noting that the purpose of § 6511(a) “is not to bar stale refund claims, but to ensure that a taxpayer give the IRS notice of such claims before suing in federal court.”) But see Libitzky v. United States, 110 F.4th 1166, 1172 (9th Cir. 2024) (stating that “both the limitation period [in § 6511(a) and the look-back period in § 6511(b) (discussed immediately below the text above)] are shorter and less generous for taxpayers who do not timely file their tax returns.” (Bold-face supplied by JAT)). In other words, the Libitzky Court would not accept the conclusion that a refund claim return filed, say, 4 or 40 years after the return due date (meaning that the return is not timely filed) can avoid the two-year limitations period in § 6511(a). My concern with that notion is the limitations periods in § 6511(a) are whichever is later which, as I read the syntax of § 6511(a) would permit the return claiming a refund filed after the two year period to qualify under the first rule (3-years from the time the return was filed), thus mooting the applicability of the 2-year period in § 6511(a). For reasons that I note below, however, Libitzky may have been correct under § 6511(b) because of its distinction between a refund claim and a filed return. See below Example 8a on p. 233.

More Nuance On Loper Bright's Adoption of the Notion that Courts Say What the Law Is (8/6/24)

In the originally posted version of the Federal Tax Procedure Editions (Practitioner and Student), I explained Loper Bright’s rejection of Chevron deference to agency interpretations as follows:

The key notion behind this holding is that, in the words of Justice Marshall’s famous soundbite, “[i]t is emphatically the province and duty  of the judicial department to say what the law is.” Marbury v. Madison,  5 U.S. (1 Cranch) 137, 177 (1803). The balance of the reasoning for Loper Bright is just spinning that notion.

Upon reflection, the explanation was too cryptic for those not deep into the Loper Bright weeds and what came before it. I therefore have revised that paragraph to read as follows (offering here the footnotes in the Practitioner version and noting the changes in red):

          The key notion behind this holding is that, in the words of Justice Marshall’s famous soundbite, “[i]t is emphatically the province and duty of the judicial department to say what the law is.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803). The balance of the reasoning for Loper Bright is just spinning the notion n423a through APA § 706’s supposed command that courts “decide all relevant questions of law.” n423b
      n423a Professor Dorf says that, historically, the “say what the law is” notion in Marbury v. Madison accommodated judicial restraint –deference if you will. See Michael C. Dorf, How Emphatically is it the Province and Duty of the Judiciary to Say What the Law Is? (Dorf on Law 8/2/24), discussing “Thayerism” and judicial restraint to permit judicial intervention only in cases of clear violation of the text, an interpretive exercise compatible with deference, and concluding: 
  Yet neither Thayer nor those who followed in his footsteps thought his clear-incompatibility standard for invalidation of legislation violated Marbury. On the contrary, they understood it as what Marbury entailed. Thayerism thus validates the idea that the judicial province and duty to say what the law is can co-exist with a practice of deferring to non-judicial actors.
      n423b Striving to accommodate the above-quoted APA text to Marbury v. Madison’s “say what the law is” notion, the Supreme Court conveniently ignored the requirement in § 706(2)(A) that agency conclusions of law be set aside if “not in accordance with law.” As I develop in my article, The Tax Contribution to Deference and APA § 706, cited on p. 87 n. 422, the Court interpreted the “not in accordance with law” limitation on court review of Tax Court conclusions of law to require deference. Dobson v. Commissioner, 320 U.S. 489 (1943), reh. den. 321 U.S. 231 (1944). Indeed, the principal actors in the enactment of the APA just 3 years after Dobson would have known that the words “not in accordance with law” had been so interpreted to require deference. In this regard, Justice Robert Jackson’s opinion in Dobson interpreting those words echoes the Thayerism view that restraint (deference) not apply only for clear violations (Justice Jackson’s phrasing was “clear-cut violations”). In short, the Loper Bright Court strained to make the holding appear to be an APA holding on very weak grounds when, in fact, it was far more fundamentally about the majority’s view that courts alone say what the law is.

A pdf with the changes in the 2025 working draft is here (note that the footnotes in the pdf are numbered in order with the working draft).