United States District Court, N.D. Texas, Dallas Division
GEORG F.W. SCHAEFFLER and BERNADETTE SCHAEFFLER, Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
MEMORANDUM OPINION AND ORDER
BARBARA M. G. LYNN CHIEF JUDGE
the Court is the Motion to Dismiss of the Defendant United
States [ECF No. 28]. For the reasons stated below, the Motion
December 30, 2015, Plaintiffs Georg F.W. Schaeffler and
Bernadette Schaeffler filed this action for the refund of
federal income taxes paid by Plaintiffs for the taxable year
ending December 31, 2002, and for related statutory interest
for an alleged overpayment. Compl. ¶ 1. [ECF No. 1].
Plaintiffs were previously married, and filed a joint income
tax return for the 2002 tax year on or about October 15,
2003. Id. ¶ 5, 10. On April 10, 2013,
Plaintiffs filed a claim with the IRS for the 2002 tax year,
requesting a refund of $5, 170, 760. Id. ¶ 12.
Broadly speaking, Plaintiffs allege they are entitled to a
refund on account of a redetermination by German authorities
of Georg Schaeffler's German tax liability, which
Plaintiffs claim results in additional foreign tax credits
available for use on Plaintiffs' 2002 federal income tax
return and for carry forward of additional minimum tax
credits. Id. ¶ 11.
August 5, 2016, the parties filed their Joint Report
Regarding Contents of Scheduling Order, in which the
Defendant asserted that the Court lacks subject matter
jurisdiction because Plaintiffs filed their claim for refund
outside the applicable statute of limitations. ECF No. 22 at
3-4. On August 15, 2016, the Court directed the parties to
address the threshold issue of subject matter jurisdiction
[ECF No. 23], and on September 9, 2016, Defendant filed its
Motion to Dismiss pursuant to Federal Rule of Civil Procedure
SUBJECT MATTER JURISDICTION
filed under Rule 12(b)(1) of the Federal Rules of Civil
Procedure challenge the subject matter jurisdiction of the
district court to hear a case. Fed.R.Civ.P. 12(b)(1). Federal
subject matter jurisdiction is limited; federal courts may
entertain only those cases involving a question of federal
law or those where parties are of diverse citizenship.
See 28 U.S.C. §§ 1331, 1332. They
“must presume that a suit lies outside this limited
jurisdiction, and the burden of establishing federal
jurisdiction rests on the party seeking the federal
forum.” Howery v. Allstate Ins. Co., 243 F.3d
912, 916 (5th Cir. 2001). Federal courts have original
jurisdiction over claims when a complaint states claims
arising under federal law. Id. § 1331; Ky.
Fried Chicken Corp. v. Diversified Packaging Corp., 549
F.2d 368, 392 (5th Cir. 1977).
subject matter jurisdiction may be found based on any one of
three considerations: (1) the complaint alone; (2) the
complaint supplemented by undisputed facts evidenced in the
record; or (3) the complaint supplemented by undisputed
facts, plus the court's resolution of disputed facts.
Barrera-Montenegro v. United States, 74 F.3d 657,
659 (5th Cir. 1996). A motion to dismiss based on the
complaint alone presents a “facial attack” that
requires the court to decide whether the allegations in the
complaint, presumed to be true, sufficiently state a basis
for subject matter jurisdiction. See Paterson v.
Weinberger, 644 F.2d 521, 523 (5th Cir. 1998);
Rodriguez v. Tex. Comm'n on the Arts, 992
F.Supp. 876, 878 (N.D. Tex. 1998) (citation omitted). Facial
attacks are usually made early in the proceedings.
Paterson, 644 F.2d at 523. However, if the Defendant
supports the motion with evidence, then the attack is
“factual, ” and “no presumptive
truthfulness attaches to plaintiff's allegations, and the
existence of disputed material facts will not preclude the
trial court from evaluating for itself the merits of
jurisdictional claims.” Williamson v. Tucker,
645 F.2d 404, 413 (5th Cir. 1981) (en banc). A factual attack
may occur at any stage of the proceedings. Menchaca v.
Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.
1980). Regardless of the nature of the attack, the party
asserting federal jurisdiction continually carries the burden
of proof to show it exists. Ramming v. United
States, 281 F.3d 158, 161 (5th Cir. 2001).
TAXPAYER REFUND CLAIMS
doctrine of sovereign immunity bars suit against the United
States unless it has expressly consented to be sued.
United States v. Mitchell, 445 U.S. 535, 538 (1980).
In 28 U.S.C. § 1346(a)(1), the United States has
consented to be sued for taxes improperly assessed or
collected, but only if the plaintiff complies with the
jurisdictional requirements set forth in 26 U.S.C. §
timely filing of a refund claim with the IRS is a
jurisdictional prerequisite to suit in a federal district
court. 26 U.S.C. § 7422(a) (“No suit or proceeding
shall be maintained in any court for the recovery of any
internal revenue tax . . . until a claim for refund or credit
has been duly filed with the Secretary . . . .”).
Section 6511 of the Internal Revenue Code (the “Tax
Code”) contains two separate provisions for determining
timeliness of a refund claim. Id. § 6511;
Comm'r v. Lundy, 516 U.S. 235, 239-40 (1996).
Under § 6511(a), a claim for a tax refund “shall
be filed by the taxpayer within 3 years from the time the
return was filed or 2 years from the time the tax was paid,
” whichever is later. Section 6511(b) defines two
“look-back” periods. First, if the claim is filed
“within 3 years from the time the return was filed,
” then the taxpayer is entitled to a refund of
“the portion of the tax paid within the 3 years
immediately preceding the filing of the claim.” 26
U.S.C. § 6511(b)(2)(A) (incorporating by reference
§ 6511(a)). Second, if the claim is not filed within
that 3-year period, then the taxpayer is entitled to a refund
of only that “portion of the tax paid during the 2
years immediately preceding the filing of the claim.”
Id. § 6511(b)(2)(B) (incorporating by reference
§ 6511(a)). Section 6511(3)(A) provides a special
10-year limitations period for refund claims relating to
foreign tax credits. Id. § 6511(3).
FOREIGN TAX CREDITS, ALTERNATIVE MINIMUM TAX, AND MINIMUM TAX
purpose of the Internal Revenue Code's foreign tax credit
provisions is to reduce international double taxation.
Compaq Comput. Corp. & Subsidiaries v.
Comm'r, 277 F.3d 778, 786 (5th Cir. 2001). Section
901 of the Tax Code generally provides a foreign tax credit
for the amount of creditable foreign taxes paid or accrued.
26 U.S.C. § 901.
minimum tax (AMT) is separate from, and in addition, to
regular income tax. 26 U.S.C. § 55(a); Merlo v.
Comm'r, 492 F.3d 618, 620 (5th Cir. 2007). The AMT
was enacted to “ensure that high-income taxpayers
cannot avoid significant tax liability through the use of
exclusions, deductions, and credits.” Merlo,
492 F.3d at 620. AMT is applied to an expanded income base
known as alternative minimum taxable income, which is
calculated by eliminating tax relief given to the taxpayer
under the regular income tax regime. § 55(b)(2);
Merlo, 492 F.3d at 620. If a taxpayer's
tentative minimum tax-calculated by imposing AMT rates on the
alternative minimum taxable income-is more than the regular
income tax, the taxpayer pays the difference as AMT. §
a taxpayer who pays AMT is entitled to use some or all of
that amount as a credit against regular income tax, referred
to as the “minimum tax credit.” § 53(a). The
minimum tax credit for a given taxable year is limited to the
excess of the taxpayer's regular tax liability, reduced
by the sum of certain allowed credits, over the
taxpayer's tentative minimum tax liability for that year.
§ 53(c). The minimum tax credit can be applied to reduce
regular income tax-and is considered used up, or
“absorbed”-to the extent that regular income tax
exceeds the tentative minimum tax for that year. Unabsorbed
minimum tax credits can be carried forward indefinitely to
future tax years; if a taxpayer does not use all of the
credit in one year, the credit may be aggregated with other
credits carried forward and used to reduce tax liabilities in
PLAINTIFFS' REFUND CLAIM
seek a refund of $5, 170, 760 for taxes paid for the 2002 tax
year. Compl. ¶ 17. Plaintiffs' amended tax returns
filed for the 2001 and 2002 tax years form the basis of their
refund claim. Id. ¶ 16.
PLAINTIFFS' THIRD AMENDED 2001 RETURN
filed their joint 2001 income tax return on Form 1040 on
October 15, 2002. Def. App. at 1 [ECF No. 28-1 at 1]. On or
about April 7, 2012, Plaintiffs filed their third amended
income tax return for the 2001 tax year. Id. at 2,
77; Compl. ¶ 16. Plaintiffs allege that based on the
figures in their original tax return filed for 2001, they
were not subject to AMT. Compl. ¶ 16. The revisions made
in the third 2001 amended return are summarized in the
following table. ...