I.R.C. Procedures Must Be Followed To Get Refund of Unconstitutional Taxes

The I.R.C. requires taxpayers that are seeking a refund of taxes that have been unlawfully assessed to file an administrative claim with the IRS before filing suit against the Government.  That claim has to be filed within three years of the filing of a tax return or two years of the tax’s payment, whichever is later.  But, the Tucker Act allows claims to be brought against the government within six years of the challenged conduct.  In this case, several small coal companies (who didn’t have in-house counsel) paid taxes on coal exports under of portion of the I.R.C. that was later ruled to be an unconstitutional violation of the Constitution’s Export Clause.  The dispute involved just over $1 million in coal export taxes paid in 1994-1996 by the coal companies.  They timely filed administrative claims and recovered refunds of their 1997-1999 taxes, but sought a refund of their 1994-1996 taxes in the U.S. Court of Federal Claims without following the I.R.C.’s refund procedures.  The Court allowed their claims and the Federal Circuit affirmed.  But, the U.S. Supreme Court has unanimously reversed.  They said that the plain language of I.R.C. §§7422(a) and 6511 requires a taxpayer this is seeking a refund for any tax to first file a timely administrative refund claim before suing in federal court.  Because the coal companies didn’t do that for the 1994-1996 taxes, they couldn’t sue in federal court.  

So, the Congress creates an illegal tax and establishes a procedure that must be followed for getting a refund of the illegally collected tax – the failure of which to follow allows the government to keep the illegally collected taxes.  In other words, a thief steals your property and because you didn’t follow the correct procedure to get your property back, the thief gets to keep it.   …What a country!  United States v. Clintwood Elkhorn Mining, Co., et al., No. 07-308, 2008 U.S. LEXIS 3472 (U.S. Apr. 15, 2008).