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Stauffer v. Internal Revenue Service

United States Court of Appeals, First Circuit

September 16, 2019

HOFF STAUFFER, Administrator of the Estate of Carlton Stauffer, Plaintiff, Appellant,


          Thomas E. Crice, for appellant.

          Julie Ciamporcero Avetta, Attorney, Tax Division, Department of Justice, with whom Richard E. Zuckerman, Principal Deputy Assistant Attorney General, Travis A. Greaves, Deputy Assistant Attorney General, Andrew E. Lelling, United States Attorney, Gilbert S. Rothenberg, Attorney, and Joan I. Oppenheimer, Attorney, were on brief, for appellee.

          Before Howard, Chief Judge, Torruella and Selya, Circuit Judges.


         This case concerns Internal Revenue Code ("IRC") provisions governing the timeliness of a claim for refund of overpaid federal taxes and the renunciation of a durable power of attorney under Pennsylvania law. Hoff Stauffer ("Hoff") filed suit on behalf of his father's estate (the "Estate") against the Internal Revenue Service ("IRS"), alleging that the agency improperly denied his April 2013 claim for his father's 2006 tax refund as untimely, see I.R.C. § 6511(a) (2018) . The Estate averred that the applicable statute of limitations for the filing of a tax refund claim was tolled due to Hoff's father's financial disability, see id. § 6511(h) (1) . The district court dismissed the Estate's complaint, holding that the limitations period was not tolled because Hoff held a durable power of attorney authorizing him to act on his father's behalf in financial matters. See Stauffer v. Internal Revenue Serv., No. CV 15-10271-MLW, 2018 WL 5092885 (D. Mass. Sept. 29, 2018); see also § 6511(h)(2)(B). After careful review, we affirm.

         I. BACKGROUND

         In October 2005, Hoff and his father, Carlton Stauffer ("Carlton"), executed a written durable power of attorney (the "DPA")-[1] Hoff requested the DPA to better assist Carlton in the management of his finances because Carlton was both elderly and mentally ill. The DPA granted Hoff broad powers over Carlton's finances, including the authority to "prepare, execute and file in [Carlton's] behalf . . . any and all income tax declarations and returns . . . and to represent [Carlton] before the Internal Revenue Service . . . with respect to any claim or proceeding having to do with [his] tax liabilities."

         After the DPA came into effect, Hoff discovered that Carlton had lost track of millions of dollars in assets in the form of uncashed checks, matured bonds, and stocks. Hoff began recovering these assets and opened an investment account in Carlton's name at T. Rowe Price to deposit the recovered funds. In lieu of the existing DPA, T. Rowe Price required its own standardized, limited power of attorney form (the "TRP POA"), which Carlton executed on January 5, 2006. The TRP POA only authorized Hoff to conduct transactions within Carlton's T. Rowe Price account (e.g., to buy, sell and trade account assets, and to make withdrawals) .

         Despite Hoff's financial management efforts, the father-son relationship began to deteriorate in March 2006. During a face-to-face meeting (the "March 15 meeting"), Carlton and Hoff had an argument regarding Hoff's management of his father's financial affairs. Part of the tension resulted from Hoff's insistence that, as a condition of his continued assistance, Carlton stop permitting his girlfriend to overspend his money.[2] To control Carlton's girlfriend's excessive spending, Hoff suggested that Carlton limit her expenses to a monthly allowance. A falling out ensued.

         Hoff claims to have told Carlton at the March 15 meeting that he would no longer be exercising any rights granted to him under the DPA. Then, Carlton drafted three notices revoking the DPA. However, he never sent these notices, and Hoff never received them. Carlton and Hoff also stopped talking. Carlton would not pick up Hoff's calls or return his calls or messages. The fallout led Hoff to tell his sister (Carlton's daughter), Carlton's accountant, and Carlton's attorneys that he was no longer acting as his father's agent under the DPA.[3]

         The father and son, however, reconciled approximately four years later as reflected by a series of financial transactions. In May or June 2009, Carlton loaned Hoff $1.25M to purchase a home. With Carlton's permission, Hoff withdrew this amount from the T. Rowe Price account. Then, in 2012, Carlton asked Hoff for $100, 000, which Hoff withdrew from the same account at his father's request.

         In late October 2012, Carlton passed away. Hoff was named the personal representative of the Estate the following month. As representative of the Estate, Hoff filed his father's tax returns for the tax years 2006 through 2012 in late April 2013. The 2006 return reported a tax overpayment of $137, 403, of which the Estate claimed a refund of $97, 364 and requested that $40, 000 of the remaining $40, 039 be applied to Carlton's 2007 tax liability. The IRS denied the claim for the 2006 tax refund as untimely pursuant to I.R.C. § 6511(a), which establishes the statutory timetable for filing tax refund claims. After an internal appeal, the IRS issued its final denial of the Estate's refund claim on January 7, 2015.

         On February 5, 2015, the Estate filed suit in the U.S. District Court for the District of Massachusetts against the IRS[4] seeking a refund of Carlton's 2006 tax overpayment. The Estate's complaint alleged that its refund claim (filed in 2013) was timely because Carlton's financial disability tolled the three-year statutory period to file the claim under I.R.C. § 6511(h)(1). On September 29, 2018, the district court dismissed the Estate's complaint, finding that: (1) Carlton had the capacity to execute the DPA; (2) Hoff was, as of 2005, authorized under the DPA to act on behalf of Carlton in financial matters for the purposes of I.R.C. § 6511(h) (2) (B); (3) Hoff did not renounce the DPA; and (4) Carlton did not effectively revoke the DPA. Stauffer, 2018 WL 5092885, at *6-11. Accordingly, the court held that the statutory period for the filing of Carlton's 2006 tax refund claim was never tolled under § 6511(h)(1) and thus had expired in October 2010, [5]which consequently deprived the court of subject matter jurisdiction over the Estate's suit. See Muskat v. United States, 554 F.3d 183, 194 (1st Cir. 2009) ("[A] district court has jurisdiction to adjudicate only those refund claims that have first been 'duly filed' with the Secretary of the Treasury." (citing 26 U.S.C. § 7422(a))). This appeal ensued thereafter.

         II. ANALYSIS

         The Estate's attack on the district court's decision is two-pronged: its first swing is directed at the court's factual finding that Hoff never renounced the DPA, while the second takes aim at the court's legal conclusion that the DPA qualified Hoff as a person authorized to act on behalf of Carlton in financial matters for the purposes of I.R.C. § 6511(h) (2) (B) . The Estate misses on both swings. We address the Estate's arguments in inverse order, directing our attention first to its challenge of the district court's interpretation of I.R.C. § 6511(h)(2)(B).

         A. Hoff's Qualification as a Person Authorized to Act on Behalf of Carlton in Financial Matters Pursuant to § 6511(h)(2)(B)

         We review the district court's interpretation of I.R.C. § 6511(h) (2) (B) -- the legal basis for the court's decision to dismiss the Estate's complaint for lack of subject matter jurisdiction -- de novo. Muskat, 554 F.3d at 194.

         The IRC states that "[n]o suit for a tax refund may be maintained in a United States district court 'until a claim for a refund . . . has been duly filed.' 26 U.S.C. § 7422(a). Thus, timely filing of a refund claim is a jurisdictional prerequisite to a tax refund suit." Me. Med. Ctr.v.United States, 675 F.3d 110, 114 (1st Cir. 2012) (citing Phila. Marine Trade Ass'nv. Comm'r, 523 F.3d 140, 146 (3d Cir. 2008)). The timeliness of a refund claim[6] is governed by I.R.C. § 6511(a), which provides that a "[c]laim for credit or refund of an overpayment of any tax imposed" must be filed "within 2 years from the time the tax was paid" when, as here, "no return was filed by the taxpayer." This two-year statute of limitations is commonly referred to as a "look-back period." Comm'r of Internal Revenuev.Lundy, 516 U.S. 235, 239 n.1, 240 (1996). ...

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