In Re: Roger Pransky ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
1-29-2003
In Re: Roger Pransky
Precedential or Non-Precedential: Precedential
Docket 01-2132
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PRECEDENTIAL
Filed January 29, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-2132
IN RE:
ROGER PRANSKY,
Debtor
INTERNAL REVENUE SERVICE
v.
ROGER PRANSKY,
Appellant
Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil Action No. 00-cv-02066)
District Judge: Honorable Garrett E. Brown, Jr.
Argued September 24, 2002
Before: BARRY, AMBRO and COWEN, Circuit Judges
(Opinion filed: January 29, 2003)
Michael I. Saltzman, Esquire
(Argued)
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attorney for Appellant
Eileen J. O’Connor
Assistant Attorney General
Gilbert S. Rothenberg, Esquire
(Argued)
Annette M. Wietecha, Esquire
Andrea R. Tebbets, Esquire
Department of Justice, Tax Division
Post Office Box 502
Washington, D.C. 20044
Attorneys for Appellee
OPINION OF THE COURT
AMBRO, Circuit Judge:
Roger Pransky appeals the District Court’s determination
that he failed to initiate in a timely manner this adversary
proceeding against the Internal Revenue Service, as
required to invoke the Bankruptcy Court’s jurisdiction
pursuant to 26 U.S.C. S 6532(a)(1). Section 6532 sets a
two-year statute of limitations to file suit in court when the
IRS disallows a taxpayer’s request for a tax refund. Because
Pransky did not bring suit within S 6532’s two-year window
of opportunity following the IRS’s disallowance of his refund
requests for tax years 1984 and 1985, the District Court
correctly held that the Bankruptcy Court did not have
jurisdiction over Pransky’s adversary proceeding as it
pertains to those tax years. We therefore affirm the decision
of the District Court in this regard and remand to permit
the Bankruptcy Court to rule on the IRS’s proof of claim,
over which the Bankruptcy Court can properly exercise
jurisdiction.
FACTUAL BACKGROUND
For tax years 1984 through 1987, Pransky did not file tax
returns by the applicable due dates because he was under
a criminal investigation at that time and feared that by
providing certain information on the tax returns he might
waive his Fifth Amendment right not to incriminate himself.
His counsel advised him instead to remit money to the IRS
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in an amount that would exceed any tax liability he might
have. Following this advice, Pransky remitted sums of
money for each of the taxable years in question, 1984
through 1987, with letters directing that the money was to
be applied to any income tax liability that he might have for
those years.
In 1991 Pransky finally filed tax returns for tax years
1984, 1985, and 1986, and in 1992 he filed his 1987
return. He elected on his 1984 through 1986 tax returns to
apply overpayments from those years as credits to the taxes
he owed for each succeeding year. The IRS interpreted the
elections to credit the overpayments as requests for
refunds, and there is no dispute over this characterization.
We will refer to the requests for credits made on Pransky’s
1984 and 1985 tax return forms as the "first requests."1
In 1992 the IRS disallowed the first requests as untimely
under 26 U.S.C. S 6511(b)(2)(A), which, generally speaking,
permits refunds of tax payments only if they were paid
within the three-year period preceding the request. Pransky
had remitted in 1986 and 1987 the money expected to
cover his 1984 and 1985 taxes, respectively. These
remittances were therefore made more than three years
before 1991, when Pransky filed the pertinent returns.
The IRS did not send a notice of disallowance of
Pransky’s request to carry forward any overpayment from
his 1986 taxes. As a result of the disallowances for the
1984 and 1985 tax years, however, Pransky had
deficiencies in his 1986 and 1987 taxes. In 1992, after
Pransky received the disallowance notices for the 1984 and
1985 requested refunds, he again asked the IRS to credit
the 1984 and 1985 overpayments to the 1986 and 1987 tax
deficiencies ("second requests"). Pransky had made the first
requests only by filling in a line on his tax forms that
indicated that he elected to credit to subsequent years the
amount of money he claimed in overpayments. The second
requests included factual background and legal argument
in support of the requested credits, contending whyS 6511
did not preclude them.
_________________________________________________________________
1. As we explain below, Pransky’s request to carry forward his 1986
overpayment is not relevant to this case.
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The IRS did not send notices of disallowance for the
second requests. Instead, it applied $294,613 in
overpayments from Pransky’s 1991 through 1996 taxes to
pay his 1986 and 1987 tax deficiencies as calculated
without the 1984 and 1985 credits. Nonetheless, according
to the IRS’s calculations Pransky still owed money on his
1987 taxes.
PROCEDURAL HISTORY
In January 1997, Pransky filed a Chapter 11 bankruptcy
petition. The next month, the IRS brought a proof of claim
for Pransky’s 1987 taxes in the amount of $131,237.02.
Pransky in April 1998 began an adversary proceeding
against the IRS, seeking a determination of his tax liability
for tax years 1984 through 1987. The Bankruptcy Court
entered summary judgment in favor of Pransky, holding
that he had paid his 1984 and 1985 taxes within the three-
year period preceding his requests for refund for those
years and therefore that S 6511 did not bar his recovery.2
The Bankruptcy Court did not address whether S 6532’s
two-year statute of limitations affected its jurisdiction to
consider Pransky’s 1984 and 1985 taxes.
The District Court did address this issue. It concluded
that the Bankruptcy Court lacked jurisdiction over
Pransky’s 1984 and 1985 taxes because he had not, as
required by S 6532, filed suit within two years from the date
the IRS sent notices of disallowance for his refund requests
for those years. The District Court also affirmed the
Bankruptcy Court’s holding that S 6511 did not preclude
Pransky from obtaining refunds from the payments he
made toward his 1986 and 1987 taxes because he had paid
_________________________________________________________________
2. The Bankruptcy Court reasoned that under Rosenman v. United
States, 323 U.S. 658 (1945), and its progeny, the remittances Pransky
made prior to the three-year period preceding his requests for refunds
were deposits of money, not tax payments, and that Pransky paid his
taxes for 1984 and 1985 when he filed his tax returns for those years
simultaneously with his requests for refunds from those taxes. Because
S 6511 precludes refunds of taxes "paid" (but not money only
"deposited") more than three years prior to the request for refund, the
Court concluded that the statute did not bar Pransky’s recovery.
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those taxes within the three years preceding his requests
for refunds. As the IRS points out, however, there was no
reason for the District Court to reach this issue because,
without the 1984 and 1985 credits, there were no
overpayments from 1986 or 1987 to refund.3
The District Court remanded for the Bankruptcy Court to
decide the IRS’s proof of claim for Pransky’s 1987 taxes. He
timely appealed to this Court.
APPELLATE JURISDICTION
The IRS argues that we do not have jurisdiction over this
case because the District Court’s remand to the
Bankruptcy Court does not constitute a final decision or
order. The IRS is correct that we may review the District
Court’s decision only if it is "final," 28 U.S.C. S 158(d), but
we conclude that it is such an order.
A district court order that affirms or reverses a final
bankruptcy court decision in its entirety will generally
qualify as a final order. Official Comm. of Unsecured
Creditors of Life Serv. Sys., Inc. v. Westmoreland County
MH/MR., 183 F.3d 273, 276 (3d Cir. 1999). When a district
court remands a case to bankruptcy court, however,"the
finality of the order is less clear." Id. at 277. Nonetheless,
a remand that requires the bankruptcy court to perform
only "ministerial" tasks does not detract from the finality of
an otherwise appealable order. Id. ("If the bankruptcy
court’s actions will be ‘purely ministerial in character,’ such
as computing prejudgment interest according to an
undisputed rate and time period, then the remanded
proceedings are unlikely to engender further appeals and
the order is final.") (quoting In re Lopez , 116 F.3d 1191,
1192 (7th Cir. 1997)).
The District Court here affirmed in part and reversed in
part the Bankruptcy Court’s entry of summary judgment
_________________________________________________________________
3. Presumably the District Court addressed the effect of S 6511 on
Pransky’s 1986 and 1987 taxes but not his 1984 and 1985 taxes
because the Court recognized that its holding as toS 6532 meant that
Pransky could not obtain refunds for 1984 and 1985 regardless of the
outcome of a S 6511 analysis.
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and remanded for "re-determination of the debtor’s tax
liability consistent with this Opinion." Because the District
Court held that the Bankruptcy Court did not have
jurisdiction over Pransky’s 1984 and 1985 taxes (and
rejected Pransky’s recoupment and setoff arguments
discussed below), the redetermination of Pransky’s tax
liability is, according to the District Court’s decision, to
take place without applying any credits from those years to
Pransky’s 1987 taxes.
Pransky’s complaint raises only the issue whether he
could carry forward his 1984 and 1985 tax overpayments,4
and he asserts in his brief to our Court that the"parties
raised all of their arguments concerning each side’s
potential liability in their motions for summary judgment."
We therefore have no reason to believe that the
redetermination on remand of Pransky’s tax liability would
involve anything other than mathematical calculations of
the IRS’s proof of claim. Such mathematical calculations
are precisely the type of ministerial tasks that do not
interfere with the finality of the district court’s decision as
required for appellate jurisdiction pursuant toS 158(d). See
Official Comm. of Unsecured Creditors of Life Serv. Sys.,
Inc., 183 F.3d at 277.
Even if a remand involves more than ministerial
concerns, as we suppose is possible here, the decision of a
district court may be sufficiently final to confer appellate
jurisdiction if it "conclusively determined the question
presented by th[e] appeal," F/S Airlease II, Inc. v. Simon,
844 F.2d 99, 105 (3d Cir. 1988) (citation omitted), and
consequently presents the appellate court with a discrete
question to review. Cf. In re Market Square Inn, Inc., 978
F.2d 116, 117 (3d Cir. 1992) (finding jurisdiction to review
the question whether a lease was properly terminated,
when the question whether it could be assumed would have
to be addressed on remand); Wheeling-Pittsburgh Steel Corp.
v. McCune, 836 F.2d 153, 158 (3d Cir. 1987) (exercising
appellate jurisdiction although the District Court decided
_________________________________________________________________
4. As do his 11 U.S.C. S 505(a) 120-day letters to the IRS (which a
taxpayer must send to the IRS 120 days before filing suit in court in
order to notify the IRS of the basis of suit).
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only the "core" issue whether a company is a railroad). To
determine whether we should exercise jurisdiction despite
the possibility of a remand for more than ministerial
functions, we consider four factors: (1) the effect of the
disputed issue on the assets of the bankruptcy estate; (2)
the necessity for additional fact-finding on remand; (3) the
preclusive effect of this Court’s decision on the merits of
subsequent litigation; and (4) judicial economy. Buncher v.
Official Comm. of Unsecured Creditors of GenFarm Ltd.
P’ship IV, 229 F.3d 245, 250 (3d Cir. 2002); Wheeling-
Pittsburgh Steel Corp., 836 F.2d at 158.
None of these four factors counsels against the
assumption of appellate jurisdiction in this case. The
District Court "conclusively determined" the question
presented on appeal: whether Pransky may apply to his
1987 taxes his 1984 and 1985 tax overpayments. The
exercise of jurisdiction over this appeal will preclusively
decide this discrete question that will have a significant
effect on the assets of the bankruptcy estate. The IRS
repeats the same two arguments in its discussion of each
of the four factors. Rather than set forth a lengthy analysis
as to each factor, we shall address the IRS’s two main
contentions.
First, the IRS points out that the District Court decided
the issue whether S 6511 precludes Pransky from obtaining
refunds on his 1986 and 1987 taxes even though the
Court’s earlier conclusion that the Bankruptcy Court did
not have jurisdiction under S 6532 to reevaluate Pransky’s
1984 and 1985 taxes made the S 6511 issue moot. The IRS
urges us to remand the case in order to permit the
Bankruptcy Court to clarify this point. Because we can just
as properly clarify this legal issue, we shall not on this
ground refuse to exercise our jurisdiction.
Second, the IRS expresses concern that on remand from
this appeal Pransky might argue that he can recoup the
1984 or 1985 overpayments or offset them against his 1987
taxes. Pransky points out, however, that the District Court
decided these questions, and we shall do so as well. Thus,
if Pransky does raise either issue on remand, the IRS need
only inform the Bankruptcy Court that this Court has
already entered a preclusive ruling. Again, the IRS’s
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concern does not amount to a reason for us to deny
jurisdiction over this appeal.
We therefore have jurisdiction pursuant to S 158(d) to
decide this appeal from the District Court’s final order.
Accordingly, we proceed to the merits of the case.
DISCUSSION
In this appeal we "stand in the shoes" of the District
Court and review the Bankruptcy Court’s decision. In re
Krystal Cadillac Oldsmobile GMC Truck, Inc., 142 F.3d 631,
635 (3d Cir. 1998). We review its findings of fact for clear
error and its legal conclusions de novo. Id.A. Section 6532(a)(1)’s two-year statute of limitations
The District Court held that the Bankruptcy Court did
not have jurisdiction to consider Pransky’s adversary
complaint as it pertains to his 1984 and 1985 taxes
because he did not file the complaint within S 6532(a)(1)’s
two-year statute of limitations, which began to run on the
date when the IRS sent notices of disallowance for
Pransky’s 1984 and 1985 tax refund requests. We agree.5
Section 6532 provides in relevant part that "[n]o suit . . .
shall be begun . . . after the expiration of 2 years from the
date of mailing . . . by the Secretary to the taxpayer of a
notice of the disallowance of the part of the claim to which
the suit or proceeding relates." 26 U.S.C. S 6532(a)(1).
Pransky does not contend that he timely filed suit pursuant
to S 6532 on the first requests for refund he made with the
IRS. Nor could he successfully do so, as the IRS sent in
1992 disallowances for the first requests and Pransky did
not bring the adversary proceeding until 1998, well beyond
the two-year limitations period. He argues instead that
S 6532’s statute of limitations does not bar his lawsuit
_________________________________________________________________
5. Because the IRS never sent a notice of disallowance for Pransky’s
1986 taxes, there is no dispute that the Bankruptcy Court can exercise
jurisdiction over the lawsuit as it pertains to those taxes. The
Bankruptcy Court’s consideration of Pransky’s 1986 taxes will do him no
good, however, unless he can carry forward his 1984 and 1985
overpayments because without such credits he has a deficiency on his
1986 taxes and therefore is left with nothing to credit to his 1987 taxes.
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because the lawsuit relates to the second rather than the
first requests he filed with the IRS. As he sees it, because
the IRS never sent notices of disallowance for the second
requests, no statute of limitations applies to a lawsuit
based on those requests. See Rev. Rul. 56-381, 1956-2 C.B.
953 (clarifying that if the IRS does not mail a notice of
disallowance, S 6532’s two-year statute of limitations to file
suit in court is never triggered).
The IRS responds that the second requests did nothing
more than ask for reconsideration of the first requests and,
as such, did not extend the limitations period begun when
the IRS denied the first requests. Cf. S 6532(a)(4) (providing
that reconsideration by the IRS of a claim it has previously
disallowed does not extend the limitations period). Put
another way, the IRS views the second requests as
presenting the same claims, subject to the same limitations
period, as the claims asserted in the first requests.
Section 6532’s statute of limitations does operate to bar
a lawsuit brought pursuant to a second request for a tax
refund filed with the IRS if that request is substantially
identical to a claim presented in an earlier request that the
IRS disallowed more than two years before the taxpayer
filed suit in court. Stratmore v. United States , 463 F.2d
1195, 1197 n.1 (3d Cir. 1972) (rejecting the contention that
an "identical claim can be reasserted even though its
administrative disallowance has become final"); L&H Co. v.
United States, 963 F.2d 949, 951 (7th Cir. 1992) ("A
taxpayer cannot enlarge Section 6532’s two-year statute of
limitations by refiling what is essentially the same claim
that was rejected by the IRS."). If, however, the second
request relies on different factual or legal grounds from
those asserted in the first request, the second request (to
the extent that it differs from the first) will be considered a
different claim entitled to its own limitations period
beginning when the IRS sends a denial for that claim. Id.("A submission of a second claim may expand the
limitations period where the second claim alleges grounds
or theories for recovery which are different from those set
forth in the first claim."); Huettl v. United States, 675 F.2d
239, 242 (9th Cir. 1982) ("If the second claim is based on
different facts or legal theories from those contained in the
9
first, then the second claim may merit independent
treatment from the statute of limitations.").
So the question we must decide is whether Pransky’s first
and second requests qualify as different claims for
purposes of S 6532 because they relied on different factual
or legal grounds.6 Pransky’s second refund requests filed
with the IRS set out five pages of factual and legal
arguments not included in his first requests. Nonetheless,
Pransky did not rely on different facts or legal theories in
his second requests. The second but explained the factual
and legal bases for the refunds he claimed in both requests.
They added detail to the first requests, but the facts and
legal theories on which Pransky sought relief had not
changed. Thus, although the requests Pransky submitted
did not look identical, the second requests are best
characterized as motions for reconsideration of the first
requests, or as reiterations of the same claims. See L&H
Co., 963 F.2d at 951 ("[R]esubmission of an identical claim
with an attachment adding an additional piece of evidence
. . . does not constitute a new claim and does not warrant
suspension of the original limitations period."); 18th St.
Leader Stores, Inc. v. United States, 142 F.2d 113, 115-16
(7th Cir. 1944) (concluding that two claims were the same;
although the second included four additional affidavits, the
affidavits did not provide additional, useful information).
And, importantly, the IRS denied the first requests on the
same ground -- the S 6511 reasoning -- that Pransky
explicitly argued in his second requests. See Huettl, 675
F.2d at 242 (holding that two requests presented the same
_________________________________________________________________
6. The IRS asserts that because the first and second requests asked for
a refund of the same money (here, Pransky’s 1984 and 1985 tax
overpayments), they necessarily constituted the same claims, subject to
the same statute of limitations. This cannot be the case, however,
because (as we explained above) if two requests rely on different factual
or legal grounds those requests qualify as different claims. This rule
applies regardless whether the requests are for refunds of the same
money. Cf. Carlson Realty Co. v. United States (In re Carlson), 384 F.2d
434, 440 (Ct. Cl. 1967) ("The fact that both claims ask for the same
amount of refund does not make the two claims one and the same.").
Indeed, there would be no point to the "different facts or grounds" rule
were two claims necessarily the same if they requested refunds of the
same money.
10
claim and noting that "the IRS disallowed the first claim on
the ground taxpayers urge it to reconsider in the second
claim, that is, on the statute of limitations issue"); Union
Commerce Bank v. United States, 638 F.2d 962, 963 (6th
Cir. 1981) (reaching the same conclusion in part because
the IRS had "considered the merits of the claim").
Pransky’s adversary suit filed in 1998, to the extent it
seeks consideration of his 1984 and 1985 tax liability, is
therefore subject to S 6532’s two-year limitations period,
which began to run in 1992 when the IRS sent notices of
disallowance for his first requests for refund. 7 Accordingly,
it was not timely filed, and the District Court correctly held
that the Bankruptcy Court did not have jurisdiction over
Pransky’s 1984 and 1985 taxes.
B. Setoff or equitable recoupment
Pransky further contends that regardless of the strictures
imposed by S 6532, he may use his 1984 and 1985 tax
overpayments to offset his 1987 tax deficiencies or may
equitably recoup those tax overpayments by crediting them
to his later deficiencies. The Bankruptcy Court concluded
that Pransky could not proceed under a setoff theory, but
did not discuss the doctrine of equitable recoupment. The
District Court rejected both arguments, and we do as well.
1. Setoff. Although a bankruptcy court may generally
use tax overpayments to offset a deficiency in a proof of
claim filed by the IRS, it may do so only if each year at
issue falls within "the Internal Revenue Code’s time
_________________________________________________________________
7. The Internal Revenue Manual requires the IRS to send a letter to a
taxpayer whose request for reconsideration of a refund request is denied,
informing the taxpayer of the denial and that the statute of limitations
begun with the original disallowance remains unaffected by
reconsideration. The IRS did not send letters to Pransky so informing
him. He argues that this shows that his second requests state different
claims from his first. Whether this is so, it is not sufficient evidence to
alter the legal conclusion we have reached. Cf. Carlson v. United States,
126 F.3d 915, 922 (7th Cir. 1997) ("Procedures in the Internal Revenue
Manual are intended to aid in the internal administration of the IRS;
they do not confer rights on taxpayers."); Valen Mfg. Co. v. United States,
90 F.3d 1190, 1194 (6th Cir. 1996) (similar statement); Groder v. United
States, 816 F.2d 139, 142 (4th Cir. 1987) (same).
11
requirements for refund of overpaid tax because the
timeliness of a refund claim is jurisdictional." In re Custom
Distribution Servs., Inc., 224 F.3d 235, 244 (3d Cir. 2000).
Because, as we have just held, Pransky did not timely file
suit to recover his 1984 and 1985 tax overpayments, the
Bankruptcy Court does not have jurisdiction to offset those
overpayments against his 1987 tax deficiencies.
2. Equitable recoupment. "[A] claim of equitable
recoupment will lie only where the Government has taxed a
single transaction, item, or taxable event under two
inconsistent theories." United States v. Dalm , 494 U.S. 596,
605 n.5 (1990) (citing Rothensies v. Electric Storage Battery
Co., 329 U.S. 296, 299-300 (1946)). There is no
inconsistency between the IRS’s determination that Pransky
could not receive credits from the overpayments made on
his 1984 and 1985 taxes because he did not timely file
requests for those credits pursuant to S 6511 and its
separate determination that without such credits Pransky’s
payments on his 1987 taxes were deficient. See Diesel
Performance, Inc. v. Commissioner, 2001 WL 881741, at * 1
(9th Cir. Aug. 3, 2001) (unpublished). Without such an
inconsistency, the doctrine of equitable recoupment has no
role to play here.
CONCLUSION
Having concluded that we have jurisdiction to hear this
appeal because the District Court entered a final order, we
hold pursuant to S 6532(a)(1) that the Bankruptcy Court
did not have jurisdiction over Pransky’s adversary
proceeding as it pertains to his 1984 and 1985 taxes.
Because of this holding and because without carrying
forward Pransky’s overpayments from those tax years
Pransky had deficiencies on his 1986 and 1987 taxes, there
is no reason for us to consider in this case (nor was there
reason for the District Court or the Bankruptcy Court to
consider) the applicability of S 6511 to Pransky’s requests
with the IRS for refunds from his 1984 through 1987 taxes.
Finally, the doctrines of setoff and equitable recoupment do
not avoid S 6532’s statute of limitations bar in this case. We
therefore remand for the Bankruptcy Court to decide the
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IRS’s proof of claim without regard to the overpayments
Pransky made on his 1984 and 1985 taxes.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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