Tax Court Rejects Attempt to Resurrect and Amend Brockamp Decision in Refund Case

(Parker Tax Publishing January 2025)

The Tax Court held that a taxpayer was not entitled to refunds of tax overpayments for his 2014 and 2015 tax returns because he did not timely file refund claims and thus such refunds were barred by Code Sec. 6511(b)(2) and Code Sec. 6512(b)(3). The court also rejected the taxpayer's attempt to revisit the Supreme Court's decision in U.S. v. Brockamp, 519 U.S. 347 (1997), in an attempt to apply equitable tolling to his case. Applegarth v. Comm'r, T.C. Memo. 2024-107.

Background

On November 21, 2019, the IRS mailed a Notice of Deficiency to Paul Applegarth, determining income tax deficiencies of $4,465 for tax year 2014 and $66,935 for tax year 2015. With respect to 2015, the IRS also determined a Code Sec. 6651(a)(1) addition to tax of $8,535, a Code Sec. 6651(a)(2) addition to tax of $8,156, and a Code Sec. 6654 addition to tax of $1,206. In March 2022, Applegarth sent an unsigned 2015 Form 1040 to IRS counsel.

Applegarth timely filed Tax Court petitions challenging the IRS's determinations. He did not dispute that refunds of the stipulated tax overpayments he made for his 2014 and 2015 tax years are barred by Code Sec. 6511(b)(2) and Code Sec. 6512(b)(3) if these statutory provisions are not subject to equitable tolling. However, he asserted that there was a good faith argument to be made that the Supreme Court would, and should, revisit U.S. v. Brockamp, 519 U.S. 347 (1997) and reverse its holding regarding equitable tolling in that case.

In Brockamp, the taxpayers filed refund claims more than three years after the filing of their returns and, thus, were not in compliance with Code Sec. 6511(a). The Supreme Court held that the Code Sec. 6511(a) three-year requirement for filing a refund claim was not subject to equitable tolling. The Supreme Court reasoned that, although "[o]rdinarily limitations statutes use fairly simple language, which one can often plausibly read as containing an implied 'equitable tolling' exception," Code Sec. 6511 "sets forth its limitations in a highly detailed technical manner, that, linguistically speaking, cannot easily be read as containing implicit exceptions."

Shortly after Brockamp was decided, Congress added Code Sec. 6511(h), which suspends the periods set forth in Code Sec. 6511 where a taxpayer is unable to manage financial affairs by reason of a permanent physical or mental impairment.

According to Applegarth, Brockamp should be overruled, or additional, nonstatutory exceptions to the refund filing dates should apply in exigent circumstances where the IRS, through its employees and agents, has behaved in such a way as to willfully interfere with a taxpayer's ability to meet the refund due date filing requirement. Further, Applegarth stated, the current makeup of the Supreme Court has evidenced a willingness to revisit prior precedent and, in particular circumstances, distinguish or reverse those old cases.

The IRS countered that the Tax Court is barred from awarding a refund for the 2014 and 2015 overpayments by Code Sec. 6511(b)(2) and Code Sec. 6512(b)(3) since no refund claims were timely filed by Applegarth for those years. Applegarth argued that the Form 1040 submitted to the IRS's counsel in March 2022 constituted both a filed return and a claim for refund.

Analysis

The Tax Court held that Applegarth was not entitled to a refund for either 2014 or 2015. With respect to the 2014 refund claim, the court concluded that claim was clearly barred by both Code Sec. 6511(b)(2) and Code Sec. 6512(b)(3), as Applegarth had admitted, and the court saw no reason to spend time addressing an issue not in dispute.

The court then turned to Applegarth's position on equitable tolling. The Brockamp decision, the court said, is inconsistent with the proposition that equitable tolling governs Code Sec. 6511(b)(2) and Code Sec. 6512(b)(3). Under the reasoning of Brockamp, the court noted, Code Sec. 6511(b)(2) is not subject to equitable tolling as it is written in a "highly detailed technical manner." Similarly, the court stated, Code Sec. 6512(b)(3) is also written in a "highly detailed" manner. Thus, under the reasoning of Brockamp, the court concluded that Code Sec. 6512(b)(3) is also not subject to equitable tolling.

The court then addressed the addition of Code Sec. 6511(h) shortly after the Brockamp decision and found that it did not help Applegarth because his allegations did not involve physical or mental impairment. Furthermore, the enactment of the narrow Code Sec. 6511(h) exception for physical and mental impairment suggested to the court that Congress did not intend for there to be a broader equitable tolling exception to the period in Code Sec. 6511(b)(2) (or the other periods in Code Sec. 6511).

With respect to Applegarth's 2015 refund request, the Tax Court held that, as with the 2014 overpayment, such refund was barred by both Code Sec. 6511(b)(2) and Code Sec. 6511(b)(3). The court also concluded that the Form 1040 filed by Applegarth did not constitute a filed return because (1) it was unsigned, and (2) it was submitted only to IRS counsel, not to the IRS.

For a discussion of the Brockamp decision and the rules regarding the statute of limitations for refunds or credits of tax overpayments, see Parker Tax ¶261,180.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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