The Court of Federal Claims held that married taxpayers failed to duly file refund claims; the IRS could not waive the statutory taxpayer signature requirement; and, therefore, the court lacked jurisdiction over the taxpayers' complaint.
Facts: George P. Brown and Ruth Hunt-Brown filed joint federal income tax returns for 2015 and 2017. The Browns signed both original returns electronically. In October 2018, the IRS received the Browns' amended tax returns for 2015 and 2017, both claiming a refund. Neither amended return contained the Browns' signatures. Both were signed by their tax preparer but without an accompanying Form 2848, Power of Attorney and Declaration of Representative.
In November 2018, the IRS notified the Browns that it could not consider the 2015 refund claim due to incomplete supporting documentation. The preparer faxed to the IRS a Form 2848 purporting to represent George Brown for tax years 2014 through 2018. However, George Brown did not sign it.
In January 2019, the IRS received a second amended tax return for 2015, claiming the same refund amount. Again, the return did not contain the Browns' signatures but was signed by the preparer without a Form 2848. In April 2019, the IRS issued a letter to the Browns proposing to disallow the 2015 and 2017 refunds.
After requesting a review by the IRS Office of Appeals, the Browns filed a complaint with the Court of Federal Claims, asserting a tax refund claim for 2015 and 2017 based on the foreign earned income exclusion under Sec. 911(a). The Browns sought to recover federal income tax and interest paid during their employment in Australia.
Issues: The government moved to dismiss the Browns' complaint, arguing the court lacked subject matter jurisdiction because the Browns failed to verify, under penalties of perjury, the refund claims and failed to properly authorize a representative to sign the returns on their behalf. In their response, the Browns conceded they failed to comply with the taxpayer signature requirement but asserted the IRS waived the taxpayer signature requirement by fully investigating the merits of their claims. In its reply, the government argued the doctrine of waiver is inapplicable to the signature requirement.
The court analyzed whether the Browns' refund claims were "duly filed" with the IRS and whether the taxpayer signature requirement is statutory and therefore could not be waived by the IRS.
For the court to have jurisdiction over a tax refund claim, the claim must be duly filed in accordance with Treasury regulations (Sec. 7422(a)). To be duly filed, a claim must contain a statement of the grounds upon which a refund is claimed, as well as sufficient background facts, made under the penalties of perjury (Regs. Sec. 301.6402-2(b)(1)). This signature requirement may be excepted when a legal representative certifies the claim and attaches a valid power of attorney (Regs. Sec. 301.6402-2(e)).
As to the doctrine of waiver, the IRS may waive compliance with its regulatory requirements by: (1) investigating the merits of a refund claim; (2) taking action upon the refund claim; and (3) unmistakably making a determination to dispense with the formal regulatory requirements. The Supreme Court has held the doctrine of waiver applies only to regulatory requirements and not to statutory requirements (Angelus Milling Co., 325 U.S. 293 (1945)).
Sec. 6061 states that "any return ... shall be signed in accordance with forms or regulations prescribed by the Secretary." Sec. 6065 states that "any return ... shall contain or be verified by a written declaration that it is made under the penalties of perjury." The taxpayers maintained that the taxpayer signature requirement is a regulatory requirement that can be waived because Secs. 6061 and 6065 do not mandate the signature of the taxpayer. Accordingly, they argued that the requirement that the taxpayer personally sign his or her returns, and if they are signed by an agent, that a power of attorney must accompany the return, is created by Regs. Secs. 301.6402-2(b)(1) and (e), and therefore can be waived.
The IRS countered that Secs. 6061 and 6065 create a default rule that refund claims must be signed by the taxpayer under the penalties of perjury and that the default rule can only be relaxed by regulation, as it is in Regs. Sec. 301.6402-2(e), which allows a refund claim to be signed on a taxpayer's behalf by the taxpayer's agent if it is accompanied by a valid power of attorney.
Holding: The court granted the government's motion to dismiss the Browns' complaint. The court found the Browns failed to sign the amended returns for 2015 and 2017, as required by Regs. Sec. 301.6402-2(b)(1), and the signature requirements were statutory and thus could not be waived, citing Turks Head Club v. Broderick, 166 F.2d 877 (1st Cir. 1948); Oplin, 270 F.3d 1297 (10th Cir. 2001); and two of its own recent opinions, Dixon, 147 Fed. Cl. 469 (2020), and Gregory, 149 Fed. Cl. 719 (2020).
Because the court found the Browns' amended returns were not duly filed under Sec. 7422(a), the court held it lacked jurisdiction over the Browns' complaint. As a result, the court granted the government's motion and dismissed the Browns' complaint for lack of subject matter jurisdiction.
- Brown, No. 19-848 (Fed. Cl. 12/15/20)
— By Matthew T. Schippers, CPA, J.D., LL.M., Triplett Woolf Garretson LLC, Wichita, Kan.
