An 'Outside Limit' for Refund Suits: The Case Against the Tax Exception to the Six-Year Bar on Claims Against the Government

Abstract

Longstanding judicial precedent and the official position of the IRS agree that federal tax refund suits are limited only by the two-year statute of limitations of § 6532(a)(1) of the Internal Revenue Code, which is triggered only when the IRS mails the claimant a notice of disallowance. This Article contends that tax refund litigation is also governed by the six-year limitation of 28 U.S.C. § 2401(a) on “every civil action commenced against the United States,” which is triggered upon the accrual of a claim. The Supreme Court alluded to this duallimitation scheme in 2008 in United States v. Clintwood Elkhorn Mining Co., stating in dicta that the six-year bar places an “outside limit” on the tax-specific limitation.

Applying the six-year bar as a backstop to tax refund suits would enforce its plain meaning, would accord with multiple canons of statutory construction, would promote timely resolution of tax refund claims, and would bring tax refund litigation into line with the rest of federal claims jurisprudence, thereby eliminating one manifestation of the tax exceptionalism that the Supreme Court criticized last term in Mayo Foundation for Medical Education & Research v. United States.

Even while abandoning its tax-exceptional doctrine, the IRS may be able to soften the blow to potential claimants’ reliance interests by systematically granting extensions of the limitation period pursuant to § 6532(a)(2). This would buy time for attentive taxpayers to file suit while putting future claimants on notice that they must pursue their claims in court within six years of accrual.

Keywords: tax refund jurisdiction, refund claim, tax exceptionalism, statute of limitations, informal claim doctrine, canons of statutory construction, plain meaning, expressio unius, implied repeal, in pari materia, Tucker Act, Court of Federal Claims, Clintwood Elkhorn, Detroit Trust, Mayo Foundation