United States v. Dalm, 494 U.S. 596 (1990)

United States v. Dalm

No. 88-1951

Argued January 10, 1990
Decided March 20, 1990
494 U.S. 596

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SIXTH CIRCUIT

Syllabus

In 1975, respondent Dalm was appointed administratrix of her deceased former employer’s estate. In 1976 and 1977, she received payments from the decedent’s brother, who wanted her to share in the estate because of her years of service to the decedent. In December, 1976, a federal gift tax return was filed, and the gift tax was paid, for that year’s payment to Dalm. The Internal Revenue Service (IRS) then assessed penalties and interest with respect to the 1976 transfer, which were paid in March, 1977. No gift tax return was filed for the 1977 payment. After auditing Dalm’s 1976 and 1977 income tax returns, the IRS asserted deficiencies upon determining that she should have reported the payments from the brother as income to her as administratrix. Arguing that the payments were gifts, she petitioned the Tax Court for a redetermination of the deficiencies, but made no claim for a credit or recoupment of the gift tax paid. The parties settled the case, agreeing to a stipulated decision that Dalm owed lesser income tax deficiencies than those asserted for both tax years. In November, 1984, she filed an administrative claim for refund of the gift tax, interest, and penalties paid with respect to the 1976 transfer, even though 26 U.S.C. § 6511(a) required that any refund claim be filed within three years of when the return was filed. When the IRS failed to act on the claim, she filed a District Court action for a refund of "overpaid gift tax," alleging that the court had jurisdiction under 28 U.S.C. § 1346(a)(1). The court dismissed the suit for lack of jurisdiction in light of § 6511(a), rejecting her contention that the suit was timely under the doctrine of equitable recoupment set forth in Bull v. United States, 295 U.S. 247. The Court of Appeals reversed, finding that her claim satisfied all of the doctrine’s requirements.

Held: The District Court lacked jurisdiction over Dalm’s refund suit. Pp. 601-611.

(a) Title 28 U.S.C. § 1346(a)(1)’s provision of broad district court jurisdiction over civil tax refund suits must be read in conformity with other statutory provisions conditioning the right to bring such a suit, including 26 U.S.C. § 7422(a), which requires the prior filing of an administrative refund claim, and § 6511(a), which provides the applicable statute of limitations for filing such a claim. Since Dalm failed to file her claim within the specified time limits, the District Court was barred from entertaining her suit. Pp. 601-602.

(b) The statute of limitations long since having run, the doctrine of equitable recoupment does not support Dalm’s suit. Bull must be distinguished on the ground that, there, equitable recoupment of estate tax was sought in an action for refund of income tax, over which the court had undisputed jurisdiction, and the only issue was whether the court, in the interests of equity, could adjust the income tax owed to take account of an estate tax paid in error but which the petitioner could not recover in a separate, time-barred refund action. Here, Dalm does not seek to invoke equitable recoupment in determining her income tax liability; she has already litigated that liability in the Tax Court without raising an equitable recoupment claim, and is foreclosed from litigating it now. She seeks to invoke equitable recoupment only in a separate action for refund of gift tax, an action for which there is no statutory authorization by reason of the statute of limitations bar. Bull and Stone v. White, 301 U.S. 532, stand only for the proposition that a party litigating a tax claim in a timely proceeding may, in that proceeding, seek recoupment of a related, and inconsistent, but now time-barred tax claim relating to the same transaction. They do not allow equitable recoupment to be the sole basis for jurisdiction. Pp. 602-608.

(c) Since Dalm failed to comply with the applicable statute of limitations, the Government is immune from suit under settled principles of sovereign immunity. See, e.g., United States v. Mottaz, 476 U.S. 834, 841. Because Dalm’s action does not come within any of the statutory exceptions to the limitations period prescribed by §§ 7422 and 6511(a), allowing her to maintain this suit would effectively override Congress’ judgment as to when equity requires an exception. Both the IRS and a court which has jurisdiction over a timely suit for refund may still consider an equitable recoupment claim for an earlier tax paid under an inconsistent theory on the same transaction. Pp. 608-610.

(d) The Court of Appeals’ reasoning that recoupment should be permitted in this case because it effected, with respect to a single transaction, the recovery of a tax based upon a theory inconsistent with the theory upon which a later tax was paid mistakes the threshold requirement for such a suit. Although this Court’s precedents allowing recoupment pertain to cases where a single transaction is subject to inconsistent taxation, the reason the statute of limitations is not a bar in those cases is that, unlike here, the court has uncontested jurisdiction to adjudicate one of the taxes in question and, therefore, the equitable power to examine and consider the entire transaction. See Rothensies v. Electric Storage Battery Co., 329 U.S. 296, 299. Pp. 610-611.

867 F.2d 305, reversed.

KENNEDY, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, BLACKMUN, O’CONNOR, and SCALIA, JJ., joined. STEVENS, J., filed a dissenting opinion, in which BRENNAN and MARSHALL, JJ., joined, post, p. 612.