Sandoval Lua v. United States
2016 U.S. App. LEXIS 22247
| Fed. Cir. | 2016Background
- In 2006 the IRS audited the Sandovals' 2004 return and expanded to 2003 and 2005; the Sandovals signed Form 4549 (waiving notice of deficiency) and Form 872 (extending the 2003 assessment period).
- After audit reconsideration the IRS assessed deficiencies for 2003 ($60,274) and 2004 ($87,566). The parties negotiated and the Sandovals submitted amended returns and remittances in June 2008, with a cover letter directing the IRS to apply payments to the 2003–2004 liabilities and to apply any overpayments to other years.
- The IRS granted abatements and applied overpayment credits such that the 2003–2004 liabilities were satisfied; the Sandovals later filed additional amended returns (2010) seeking refunds of roughly $101,000, which the IRS denied.
- The Sandovals sued in the Court of Federal Claims; that court granted summary judgment to the Government. This appeal followed.
- The Sandovals’ principal theories were (1) they withdrew their waiver of notice of deficiency (Form 4549) and so assessment without a deficiency notice was invalid; (2) the 2008 remittances were untimely under the statute of limitations; (3) the 2008 remittances were refundable deposits rather than tax payments; and (4) two additional theories (satellite reimbursements not constituting income; duress in signing Form 4549) were raised later.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of assessments absent notice of deficiency | Sandoval: they impliedly/constructively withdrew the Form 4549 waiver via audit-reconsideration communications, so assessments required notice | Govt: Sandovals never withdrew the waiver; Form 4549 remained effective and assessments were lawful | Waiver was not withdrawn; no evidence of withdrawal; assessments valid |
| Timeliness of 2004 assessment under statute of limitations | Sandoval: June 2008 remittance was outside the 3-year assessment period and entitles them to refund | Govt: Omissions exceeded 25% of gross income, extending limitations to 6 years so 2008 payments were timely | Six-year statute applied; 2008 payments were timely |
| Characterization of 2008 remittances (deposit vs. payment) | Sandoval: remittances were deposits (New York Life circumstances) and/or Government estopped from treating them as payments | Govt: Post-2004 statutory regime (I.R.C. §6603/Rev. Proc. 2005-18) controls; remittances lacked written designation as deposits, so treated as payments | Remittances were tax payments, not deposits; no equitable estoppel shown |
| New theories raised in suit (income treatment, duress) | Sandoval: satellite reimbursements not income; Form 4549 signed under duress | Govt: Those grounds were not in timely refund claim and thus cannot be litigated now | Arguments waived under the substantial-variance rule (statutory/regulatory exhaustion requirement) |
Key Cases Cited
- Perez v. United States, 312 F.3d 191 (5th Cir. 2002) (Form 4549 is a proper waiver of deficiency-notice requirements)
- New York Life Ins. Co. v. United States, 118 F.3d 1553 (Fed. Cir. 1997) (circumstances test for treating remittances as deposits under pre-2004 law)
- Amergen Energy Co. v. United States, 779 F.3d 1368 (Fed. Cir. 2015) (standard of review for Claims Court summary-judgment decisions)
- SunTiger, Inc. v. Sci. Research Funding Grp., 189 F.3d 1327 (Fed. Cir. 1999) (summary-judgment evidence view and inferences for non-movant)
- Zacharin v. United States, 213 F.3d 1366 (Fed. Cir. 2000) (equitable estoppel against the government requires affirmative misconduct)
- Cencast Servs., L.P. v. United States, 729 F.3d 1352 (Fed. Cir. 2013) (substantial-variance rule for refund-claim exhaustion)