Equitable tolling does not apply to refund limitation statutes

The Tax Court held that Sec. 6511(b)(2) and Sec. 6512(b)(3) are not subject to equitable tolling, so a taxpayer was not entitled to refunds of overpayments of income tax for his 2014 and 2015 tax years.

Background

In November 2019, the IRS mailed Paul Applegarth a notice of deficiency in which it determined income tax deficiencies of $4,465 for tax year 2014 and $66,935 for tax year 2015. For 2015, the deficiency notice also determined a Sec. 6651(a)(1) penalty of $8,535, a Sec. 6651(a)(2) penalty of $8,156, and a Sec. 6654 penalty of $1,206.

Applegarth timely filed two petitions in Tax Court in response to the deficiency notice, one challenging the IRS’s determinations in it for 2014 and the other challenging the IRS’s determinations in it for 2015. The Tax Court consolidated the cases.

In June 2023, Applegarth and the IRS stipulated that Applegarth had an income tax deficiency of $4,465 and an overpayment of $78,472 for his 2014 tax year and an income tax deficiency of $25,576 and an overpayment of $9,603 for his 2015 tax year. They also stipulated that Applegarth was not liable for penalties under Sec. 6651(a)(1), 6651(a)(2), or 6654 for the 2015 tax year.

The IRS, however, argued that refunds of Applegarth’s tax overpayments for both 2014 and 2015 were barred by the limitation periods in Sec. 6511(b)(2) and Sec. 6512(b)(3). Sec. 6511(b)(2) generally limits the amount of a refund to the amount paid within a three–year lookback period before the filing of a refund claim, and Sec. 6512(b)(3) generally limits the refund of an overpayment of tax determined by the Tax Court to the portion of the tax paid within one of three time periods. Relevant to Applegarth’s case was the period in Sec. 6512(b)(3)(A), which limits the refund to the portion of the tax that the Tax Court determines was paid after the mailing of the notice of deficiency.

Applegarth did not dispute the IRS’s arguments except that he asserted that the limitation periods in Sec. 6511(b)(2) and Sec. 6512(b)(3) were equitably tolled. Under the doctrine of equitable tolling, in certain circumstances, such as a case of IRS misconduct, a statutory limitation period is tolled (suspended) if not doing so would be inequitable. Applegarth conceded that if equitable tolling did not apply to Sec. 6511(b)(2) and Sec. 6512(b)(3), he was not entitled to refunds of his overpayments for 2014 or 2015.

The Tax Court’s decision

The Tax Court, relying on the Supreme Court’s decision in Brockamp, 519 U.S. 347 (1997), held that Sec. 6511(b)(2) and Sec. 6512(b)(3) are not subject to equitable tolling. Therefore, Applegarth was not entitled to refunds of his tax overpayments for his 2014 and 2015 tax years.

In his opening brief, Applegarth acknowledged that the Supreme Court’s decision in Brockamp was precedent on the question of whether the time frames for filing a refund claim under Secs. 6511 and 6512 were subject to equitable tolling and that the Court’s reasoning in the case was inconsistent with his position that the provisions were subject to equitable tolling. However, he argued that if the Supreme Court were to revisit the issue, it might reverse Brockamp.

The Tax Court, agreeing with Applegarth’s first point, found that Brockamp is inconsistent with the proposition that Sec. 6511(b)(2) and Sec. 6512(b)(3) are subject to equitable tolling. In Brockamp, the taxpayers filed claims for refund more than three years after the filing of their returns and, absent equitable tolling, were not entitled to a refund of their overpayment under Sec. 6511(a). The Supreme Court held that the three–year requirement of Sec. 6511(a) was not subject to equitable tolling, reasoning that although “[o]rdinarily limitations statutes use fairly simple language, which one can often plausibly read as containing an implied ‘equitable tolling’ exception,” Sec. 6511 “sets forth its limitations in a highly detailed technical manner, that, linguistically speaking, cannot easily be read as containing implicit exceptions” (Brockamp, 519 U.S. at 350).

Looking at the language of Sec. 6511(b)(2) and Sec. 6512(b)(3), the Tax Court found that both provisions are written in a “highly detailed technical manner.” This led the Tax Court to conclude that, under the Supreme Court’s reasoning in Brockamp, neither provision was subject to equitable tolling. Thus, as Applegarth had conceded, he was not entitled to a refund of his tax overpayments for 2014 and 2015.

The Tax Court further stated, “The force of Brockamp’s reasoning has not been diminished by subsequent developments in the law,” discussing two developments that supported this conclusion.

First, the Tax Court pointed to the addition in 1998 (shortly after the Brockamp decision) of Sec. 6511(h), which suspends the periods set forth in Sec. 6511 for the time that a taxpayer is unable to manage financial affairs by reason of a permanent physical or mental impairment. According to the court, the enactment of the narrow Sec. 6511(h) exception for physical and mental impairment suggested that Congress did not intend there to be a broader equitable–tolling exception to the limitation period in Sec. 6511(b)(2) (or the other periods in Sec. 6511), further justifying the Supreme Court’s reading of Sec. 6511 in Brockamp.

Second, the Tax Court addressed the Supreme Court’s decision in Boechler, P.C., 142 S. Ct. 1493 (2022), in which the Court held that equitable tolling applies to the 30–day period for a person to appeal a Collection Due Process determination under Sec. 6330(d)(1). The Court distinguished this holding from its holding in Brockamp that equitable tolling did not apply to Sec. 6511(a) because Sec. 6330(d)(1) does not have the “detailed” and “technical” language of Sec. 6511(a). Thus, the Tax Court found that Boechler did not undermine the Court’s reasoning in Brockamp regarding time periods imposed by “detailed” and “technical” statutes.

Reflections

If it had held Sec. 6511(b)(2) and Sec. 6512(b)(3) were subject to equitable tolling, the Tax Court would still have been required to determine whether the facts supported its application in Applegarth’s case. Because the court held that equitable tolling did not apply to Sec. 6511(b)(2) and Sec. 6512(b)(3), it stated that it had not made any findings regarding the factual allegations that Applegarth argued would support equitable tolling. As an example of Applegarth’s factual allegations, the Tax Court noted that he had asserted that the IRS’s delay or mishandling of its audit of his 2013 tax year prevented him from timely filing his 2014 and 2015 returns.

Applegarth, T.C. Memo. 2024–107