Motion for a more definite statement denied

A federal district court held that the IRS failed to show that it was unable to respond to the taxpayers’ refund claim due to a lack of a “definite statement” within the complaint. According to the court, the taxpayers’ claim was not “unintelligible or unclear,” and the IRS could not present a compelling reason for requiring a more definite statement.

Facts: Charles and Denan Cox timely filed their 2015 Form 1040, U.S. Individual Income Tax Return, with the IRS in April 2016, paying $6,461 in taxes. In October 2017, the IRS audited the Coxes’ return, issuing a notice of tax examination changes report adjusting their 2015 tax liability to $25,114. The notice explained that the Coxes did not establish that certain expenses “were paid or incurred during the taxable year” or were “ordinary and necessary to [their] business and therefore disallowed.” Two months later, the IRS issued another notice increasing the amount due to $28,758 for failing to respond to the IRS’s request for supporting information.

The Coxes filed an appeal and reconsideration request with the IRS in December 2018 and April 2019, respectively. They submitted another audit reconsideration request on Feb. 6, 2020, attaching this time a Form 1040-X, Amended U.S. Individual Income Tax Return, for 2015 “for illustration and processing purposes.” The amended return separated the Coxes’ Schedule C, Profit or Loss From Business (Sole Proprietorship), into two businesses. Also, while their exam request was pending, the Coxes paid their tax debt in full in October 2020.

Several months later, the Coxes were told by an IRS agent that their request was closed in May 2021, but there were no notes or details describing why it had been closed. Another agent told them their request had been closed in April 2021 because “there were other issues raised in the [request] that fell outside the original audit issues,” and therefore the case was “routed back to Accounts Management for normal processing.”

After nearly two years, the Coxes learned that their case was closing in March 2023 “because of how long it ha[d] taken” and that the IRS would be issuing a letter denying their refund claim. All future attempts by the Coxes to work with the IRS were unsuccessful, even though they alleged filing a Form 907, Agreement to Extend Time to Bring Suit.

The Coxes, invoking Sec. 7422, brought a refund suit, alleging they paid $24,370 in federal income taxes even though their “unprocessed amended return show[ed] a corrected tax liability of $9,641.” The Coxes also claimed they submitted a timely “audit reconsideration/amended return,” but the IRS refused to process it as a valid refund claim. In response, the IRS moved for a “more definite statement” under Federal Rules of Civil Procedure (Fed. R. Civ. P.) Rule 12(e), claiming it could not respond to the Coxes’ complaint because it lacked relevant and necessary details.

Issues: Under Fed. R. Civ. P. 12(e), a party may move for a “more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response.” Rule 12(e) motions are generally disfavored by the courts and are properly granted only when a party is unable to determine the issues to which a response is required (Swig Holdings, LLC v. Sodalicious, Inc., No. 2:15-cv-307 (D. Utah 10/14/15)). The rule is intended to correct pleadings that are unintelligible and not merely to correct a pleading for a claimed lack of detail. The standard applied is whether the claims alleged are “sufficiently specific to enable a responsive pleading in the form of a denial or an admission” (Rudder Holding Co., LLC v. Christensen, No. 2:17-cv-00678 (D. Utah 3/27/21)). The court concluded that the Coxes satisfied this standard.

The IRS conceded that the Coxes asserted a refund claim for their 2015 taxes under Sec. 7422. Sec. 7422(a) allows a taxpayer to bring an action against the government to recover taxes that have been “erroneously or unlawfully assessed or collected.” The taxpayer first must file a refund claim with the IRS, as well as meet other timing requirements (Clintwood Elkhorn Mining Co., 553 U.S. 1, 4–5 (2008)).

The refund claim must detail “each ground upon which a credit or a refund is claimed,” in facts “sufficient to apprise the [IRS] of the exact basis thereof” (Regs. Sec. 301.6402-2(b)(1)). The notice, even for informal refund claims, must be in writing, describe the legal and factual basis for the refund, and provide “actual or constructive” notice that the taxpayer is seeking a refund for a particular tax year (Intermountain Electronics, Inc., No. 2:20-cv-00501 (D. Utah 7/16/21)). The taxpayer may not present any claims in a tax refund suit that are substantially different from the “legal theories and factual bases set forth in the tax refund claim presented to the IRS,” and the court may not consider any legal theories not expressly or implicitly contained within the refund claim (Green, 880 F.3d 519, 532 (10th Cir. 2018)). The taxpayer must have fully paid the assessed deficiencies before the suit commences (Oldland v. Kurtz, 528 F. Supp. 316, 322 (D. Colo. 1981), citing Flora, 362 U.S. 145 (1960)).

Instead of focusing on the timing and jurisdictional requirements of the Coxes’ refund claim, the IRS focused on the “final merits,” contending that the complaint included irrelevant facts and lacked allegations it needed to respond. The IRS argued that the basis for the refund claim was unclear since the complaint only detailed the Coxes’ communication with the IRS about their 2015 tax return. According to the IRS, the Coxes’ complaint did not describe the “nature and character of the alleged overpayment,” the “positions taken on [the Coxes’] amended return for 2015,” or “the basis for their purported entitlement to a tax refund in the amount claimed.” The IRS further argued that the complaint did not discuss the return itself or the changes sought in filing the amended return. Essential allegations of how the 2015 tax assessment was incorrect and the exact amount of the refund were also missing, which, the IRS claimed, were necessary to “adequately respond” to the Coxes’ complaint.

The court concluded that the IRS did not justify the need for a more definite statement. The court found that the Coxes provided a timeline and outline of the facts underlying their claim, showing the date they filed their 2015 return, how much was due and paid, when the IRS audit occurred and why, when they appealed and sought audit reconsideration, and when they paid their tax debt in full. Thus, the court determined that the Coxes’ refund claim was “not unintelligible or unclear” and that it included the essential points of how the 2015 tax assessment was incorrect and the refund amount.

Holding: The court held that the IRS failed to show that it was unable to respond to the taxpayers’ complaint and denied the IRS’s motion for a more definite statement.

• Cox, No. 2:25-cv-00274 (D. Utah 5/7/26)

— John McKinley, CPA, CGMA, J.D., LL.M., and Thomas Godwin, CPA, CGMA, Ph.D., are both professors of the practice in accounting and taxation in the SC Johnson College of Business at Cornell University in Ithaca, N.Y. To comment on this column, contact Paul Bonner, the JofA‘s tax editor.