EC TERM OF YEARS TRUST v. UNITED STATES
The Internal Revenue Service (IRS) contended that Elmer and Dorothy Cullers had established a trust for the purpose of evading taxes. The IRS filed tax liens against the trust, freezing the trustees' assets until the outstanding taxes were paid. The trustees disagreed with the IRS, but opened a bank account to settle the tax dispute. A month later, the IRS collected the outstanding taxes from the bank account. EC Term of Years Trust sued the IRS pursuant to 26 U.S.C. 7426, which entitles trustees to challenge wrongful IRS collections, and 28 U.S.C. 1346(a)(1), which entitles taxpayers to recover erroneously collected taxes. A district court decided that only 26 U.S.C. 7426 allowed third-party tax recoveries, so the court lacked jurisdiction under 28 U.S.C. 1346(a)(1), the general provision for tax recovery. The court dismissed the 26 U.S.C. 7426 claim because the nine-month filing time limit had expired. EC Trust claimed in a second suit that the Supreme Court's opinion in United States v. Williams meant that the possibility of a suit under 26 U.S.C. 7426 did not preclude suits under 28 U.S.C. 1346(a)(1). The District Court rejected the argument, and the U.S. Court of Appeals for the Fifth Circuit affirmed.
Can a party challenge, under 28 U.S.C. 1346(a)(1), an Internal Revenue Service tax levy on its property intended to collect taxes owed by another party, even if the party could have sued under 26 U.S.C. 7426 but failed to file the suit before the time limit expired?
Legal provision: Internal Revenue Code
No. In a unanimous decision written by Justice David Souter, the Court ruled that "Resisting the force of the better-fitted statute [28 U.S.C. 7426] requires a good countervailing reason, and none appears here." The Court held that Section 7426 is the exclusive legal vehicle for challenging a wrongful tax levy, so after having missed the deadline EC Term of Years Trust could not bring its suit as a tax refund claim under 1346(a)(1). The Court acknowledged that in United States v. Williams it had allowed liens to be challenged under 28 U.S.C. 1346(a)(1), but the Court held that the principle in Williams was limited to cases in which there is no other remedy available. The Justices ruled that it would not make sense to allow claims under 28 U.S.C. 1346(a)(1), which has a 9-month limitations period, to be duplicated under 26 U.S.C. 7426, which has a time limit of four years.
Argument of Francis S. Ainsa Jr
Chief Justice Roberts: We'll hear argument first this morning in case 05-1541, EC Term of Years Trust vs. United States.
Mr. Ainsa: Mr. Chief Justice and may it please the Court:
The Defendant, in unequivocal language of section 1346, waives sovereign immunity and permits a refund suit by a third party such as Petitioner.
That conclusion that I've stated to the Court was supported by the holding in United States versus Williams.
That case, as the Court well knows, dealt with a situation in which the Government sought to recover money through a tax lien as opposed to a tax levy, which is the situation in this case.
However, there is no substantive difference between the--
Justice Ginsburg: And why did the court point out twice in Williams that section 7426 was not available?
Mr. Ainsa: --Justice Ginsburg, section 7426 was not available in the case of Mrs. Williams, but--
Justice Ginsburg: Because there was no levy.
It was only a lien.
Mr. Ainsa: --It was a lien case, and of course, 7426 involves a levy.
But nonetheless, the holding that I have read in that case very definitively deals with the breadth of section 1346.
And the breadth of section 1346, according to the holding and United States vs. Williams, is certainly broad enough to encompass a third party like Petitioner.
I do not view the fact that 7426 was not available to be a controlling issue because the question was whether or not 1346 would permit a third party to bring a refund action.
And that was the holding of the court as I read that opinion.
Justice Ginsburg: But when Congress provides a special remedy for a particular class of persons, that special remedy usually excludes a more general provision.
Mr. Ainsa: Justice Ginsburg, in the case of 7426, Congress never made that remedy expressly exclusive.
The language is completely missing from that statute.
And the argument was raised in United States vs. Williams that if section 1346 was made available to third parties, like Mrs. Williams, it would render meaningless the short statute of limitations.
1346 offers only post deprivation relief.
section 7426 offers both pre and post deprivation relief.
So the two statutes can live in harmony and can be harmonized and should not be held to have preempt... one over the other when there is no express declaration from Congress making that the case.
Justice Kennedy: The Government does cite the principle that when there's a specific statutory scheme that controls over a more general one.
It doesn't cite a tax case for that, at least as I recall.
Has that principle ever been applied in the tax code, do you know?
Mr. Ainsa: Justice Kennedy, I don't believe that's been applied in the tax code, but I can answer your question, I think, by saying this.
Congress on many instances has made provisions of the United States Internal Revenue Code exclusive.
Congress knows how to write those provisions into the tax code when it wants to do so.
In this case, it was not done.
And I would also like to point out that after the decision in United States vs. Williams, Congress amended 7426 to add a special provision.
And in that special provision, it was made exclusive.
And I use that to exemplify the fact that Congress can, when it wants to, make a tax provision exclusive.
Justice Scalia: In the law, we don't... we certainly don't want to deprive any statutory provision of its whole purpose and effect.
And as I understand the purpose of this especially short statute of limitations, it is to enable the Government to dispose of the property that it has seized, and to be able to give clear title to it without somebody coming back, you know, many years later and saying this property should not have been taken.
How is that purpose served if indeed you can proceed under the provision that has a longer statute?
Mr. Ainsa: Justice Scalia, 7426 has four different components.
Two of the components are clearly pre-deprivation type remedies.
They are the ability of a taxpayer or third party to seek an injunction to prohibit the Government from either selling property or conducting a levy.
Those are clearly pre-deprivation.
The other two are primarily post deprivation remedies.
And so the object that the Government was trying to achieve can be achieved through looking at it from a pre-deprivation/post-deprivation analysis.
I don't believe that the Government's underlying purpose is in any way diminished when the two statutes can live in harmony.
And without having an exclusivity provision expressly stated in 7426, and given the fact that 1346 on its face plainly waives sovereign immunity for third parties to bring refund suits, the two statutes must be construed--
Justice Stevens: But isn't there this difference between the two.
One of them... you're not challenging the amount of the tax in this case, are you?
Mr. Ainsa: --Your Honor, I'm sorry.
I didn't understand your question.
Justice Stevens: You're not challenging the amount of the assessed tax, are you?
You're just... whether they can collect it from this particular person?
Mr. Ainsa: Petitioner is not challenging the underlying assessment against the taxpayer.
Justice Stevens: And isn't that the basic difference between the two statutes, that one of them deals with a fight about how much money the taxpayer owes, and the other one deals with the method of collection.
Mr. Ainsa: 7426 clearly prevents a person from contesting the underlying assessment, whereas in 1346, that is possible.
But in this case, 1346 is broad enough because it uses the term collected.
And just like in Williams, we are not seeking to contest the underlying assessment.
Justice Stevens: But it does seem to me if you think of the two statutes as performing rather separate functions, one primarily focused at the method of collection, the other the amount of tax, makes quite good sense to have different statute of limitations for the two, because there is an interest in the prompt resolution of the former issue that doesn't apply to the latter.
Mr. Ainsa: Justice Stevens, there is certainly... Government has demonstrated by... or Congress has demonstrated by passing 7426, that there is an interest in a shorter statute of limitations in certain cases.
However, I return to my original argument that if 1346 is broad enough to encompass third party refund suits, and if Congress has not made 7426 exclusive, the two statutes should be allowed to coexist.
This Court has held on other occasions that it will not preempt statutes without a very clear expression from Congress.
And Congress, once again, knew how to do it after the Williams case.
Justice Kennedy: Well, I suppose... tell me if I'm wrong, or the Government can tell me if I'm wrong... but there is this difference also that in a refund suit, you have to pay the money.
The Government has the money before you can bring the refund suit.
Am I right about that?
Mr. Ainsa: That is correct.
Justice Kennedy: Incidentally, I'm just curious, if the underlying assessment... if you wished to have challenged the underlying assessment, it's for a million dollars, can you pay $100,000 and then bring the refund suit in order to test the validity of the tax, or do you have to pay the whole amount?
Mr. Ainsa: The whole amount.
Chief Justice Roberts: What about the underlying principle that waivers of sovereign immunity are strictly construed.
And when you have a waiver on the broader statute, but shouldn't you read them together with the specific to suggest that they weren't waiving sovereign immunity when a more specific statute governed, except to the extent of the provisions in that more specific statute.
Mr. Ainsa: Mr. Chief Justice, when I read the opinion in United States vs. Williams, the Nordic case was brought up by the dissent in that case, that there must be an absolutely unequivocal waiver of sovereign immunity in order to allow a particular suit against the United States.
The holding in United States versus Williams was that 1346 was sufficiently broad.
And given that holding, and given the fact that the Government was asserting that Mrs. Williams had other remedies in the form of a quiet title action, a refund action--
Justice Ginsburg: The court took care to point out why those were not realistic remedies.
But here there is a prompt and efficient remedy.
Mr. Ainsa: --Justice Ginsburg, there is another remedy, which is certainly governed by a much shorter statute of limitations.
But in my view, the equities or the facts of the case should not drive the construction of the statute, any more than it did in United States versus Williams.
And if 1346 is broad enough to encompass a third party case in the instance of a lien, it is broad enough to encompass it in the case of a levy.
There is no functional substantive difference between money taken from a... from a third party via a lien or via a levy.
Justice Kennedy: Well, your argument is probably based on the statute.
I just question one phrase you mentioned, which was that Williams was not driven by the equities.
It seems to me it was wholly driven by the equities.
Mr. Ainsa: Justice Kennedy, as I read the holding in United States vs. Williams, the Court found that there was an unequivocal waiver of sovereign immunity in section 1346.
And observed afterwards that a person like Mrs. Williams did not have a meaningful remedy.
I did not read that to be... that the construction of the statute was driven by the equities.
It was an observation after the fact.
Justice Ginsburg: It was a determination that the word taxpayer encompassed someone who had, in fact, paid the tax.
Here you don't even have that, because the tax wasn't paid directly by the EC Trust.
The trust deposited the money in the bank, and then the Government levied on it, as distinguished from Williams, where Mrs. Williams, in fact, wrote a check to the Internal Revenue Service covering her husband's tax liability.
Mr. Ainsa: Justice Ginsburg, I believe that both Mrs. Williams and the trust are in the same position.
Both of them paid the tax.
Both were third parties.
Neither was a taxpayer.
In the case of Williams, the taxpayer was her husband.
In the case of the trust--
Justice Ginsburg: Well, the whole case was about whether she indeed qualified as a taxpayer, having voluntarily paid the tax.
Mr. Ainsa: --In this case, the levy was an involuntary act on the part of the Government to take the money from EC Trust, from the deposit that was put up.
Justice Ginsburg: Yes.
It was an involuntary act, whereas in Williams, she stepped forward and paid the tax and claimed on that basis that she was the taxpayer.
Mr. Ainsa: Justice Ginsburg, the situation in Williams, however, involved the tax lien.
Mrs. Williams would not have paid the tax had the Government not asserted the tax lien and forced her to pay the tax out of the proceeds of the house when it was sold.
It was no more voluntary than a levy in the sense that I'm talking about.
Justice Breyer: Why isn't the obvious difference... I may have missed this... but you say, in the case, a taxpayer owed some money and the Government via a lien took property from a different person who then had to pay the tax who then had to get rid of the lien and wanted it back.
And in this case they did exactly the same thing but they did it via a levy.
So you say if the first could sue so could the second.
But the difference, the obvious difference, which maybe you have explained and I missed, is that in the second case, namely this case, there is a specific statute that says you have to do it with a levy in nine months, and in the other case there wasn't such a statute.
Why isn't that the obvious difference?
Mr. Ainsa: Justice Breyer, the answer is because 1346 also permits a third party to bring a refund action.
It is not restricted even though there is a specific statute dealing with levies, 1346 was held to be broad enough to... to encompass the refund action.
Justice Breyer: Encompasses a lien for a refund action in the case where you took the property via a lien.
And you'd say... they say, I guess, but it doesn't encompass it when you take it via a levy.
Because of the specific, the same thing I just said.
Now I want to be sure I have your whole answer to that.
Mr. Ainsa: My answer to that is there is no substantive distinction between a levy and a lien.
And that while Williams dealt with a lien, and I fully understand that, the taking by the Government was just as involuntary under the levy as it is with a lien.
And once section 1346 is deemed to be broad enough or held to be broad enough to encompass a refund action, it should encompass an action by the levy.
Essentially I'm arguing that the two statutes can coexist together and should coexist together in the absence of a clear declaration from Congress that 7426 is exclusive.
I can support my argument by the fact that after Williams, Congress did make, did amend 7426 and did make a specific new remedy and they're exclusive.
Congress could have done that at the time 7426 was originally enacted in 1966 but did not do so.
Justice Breyer: If your interpretation is correct then are there many such cases where the Government takes property via a levy and the person who wants to sue would get worried about nine months, because obviously he would think I can sue under a... kind of thing.
It's two years.
So are there still some where he would have to worry about nine months?
Mr. Ainsa: No.
Justice Breyer: In other words, are... in your interpretation, does the nine-month statute become meaningless?
Mr. Ainsa: It, it does not become meaningless because 7426 offers certain remedies that are clearly post deprivation such as filing for an injunction to stop the levy, filing for an injunction to stop a foreclosure.
Those are still viable under 7426 and would fall within the nine-month period but essentially Congress has permitted two different complementary actions to seek a refund.
Justice Ginsburg: But you just... you just pointed to situations where one to expect action to be taken promptly.
You don't want to wait to, to get an injunction against a levy because the Government might be there and levy on the property and then you're out of luck.
Where the incompatibility exists is post deprivation, when the nine-month, the interest in having these claims resolved properly is totally defeated if you can get the longer statute of limitations under the general refund statute.
Mr. Ainsa: Justice Ginsburg, if I understand your question you're really talking about the underlying policy of a short statute of limitations driving certain types of--
Justice Ginsburg: That's why the code has that nine-month period instead of the two-year or in fact four-years because you have to go to the administrative process first.
The whole purpose of the nine-months is to get people to act quickly.
Mr. Ainsa: --But I can say to you that with some degree, I think, of sound legal argument, that once 1346 was found to have unequivocally waived sovereign immunity for third party refund actions in the context of a lien it should also follow that it waived sovereign immunity for levies because there is no fundamental legal difference between the manner in which the money is extracted from the third party.
There is no, the core logic of the decision in United States vs. Williams is that money was involuntarily taken from Mrs.... from Mrs. Williams.
Justice Stevens: It doesn't seem to me that the fact that there is a waiver of sovereign immunity with regard to levies answers the statute of limitations question.
Sure, there is a waive of sovereign immunity, but the question is how long does the... how promptly do you have to act?
Mr. Ainsa: Justice Stevens, the... the issue of the statute of limitations I believe is dependent upon whether or not 1346 provides for remaining a viable method of seeking a refund.
And my position is that if 1346 does provide that in the context of a levy, then you have in effect two statutory schemes which coexist; one is 7426 and one is 10... uh, 1346.
It is true that they overlap in the sense that there is a refund provision that could be sought under either one of them, but 7426 is distinctly different in that it offers pre-deprivation relief that is not offered under 1326.
Justice Kennedy: Getting back to my earlier question, if there is a million-dollar tax liability, and there is a levy on the bank account for $100,000, do you have to pay the extra 900,000 before can you bring--
the refund suit?
Mr. Ainsa: Yes, Your Honor.
Justice Kennedy: So that's, that's also a difference.
Mr. Ainsa: Yes.
In this case, it wasn't a million dollars, it was $3 million and the entire amount was paid in order to bring the refund suit.
Justice Scalia: What if the amount wasn't paid and what if your client just sat back and the, the assets, or let's say some real estate were, were seized by the Government.
Would the 1346 action still lie?
Or is it only for return of money that, that's been paid to satisfy the tax?
Mr. Ainsa: 1346 in my view would not apply to that situation, in that if property was seized and used to, under a tax lien, if that was seized and the Government proceeded to sell, then the third party, Petitioner, would have to file for an injunction to stop the foreclosure sale under 7426.
Justice Scalia: And that's the, it seems to me the principal problem that the Government was facing and justified the short statute, wasn't it?
That is the need to get, to be able to convey clear title to this property that it has seized.
But once... once the money is put up, and what the Government has taken is in effect payment of the tax, maybe there is no harm in proceeding under 1346.
Mr. Ainsa: Justice Scalia--
Justice Scalia: I'm helping you.
Mr. Ainsa: --There is no harm in proceeding under 1346 once the money is paid because you're dealing with a simple refund action.
You're not dealing with trying to stop a foreclosure suit or stop a levy.
You're dealing with a simple foreclosure action.
Chief Justice Roberts: Well, but there may be situations where the Government, having levied, doesn't feel the need to pursued other remedies available to it.
And if you then allow a challenge to the levy to come in later the person they would have proceeded against if they didn't have the levy may have left the country, may have dissipated the funds that they would otherwise go after.
They need to know early on that they are barking up the wrong tree if they have levied on the wrong property, and that's why you have a short statute to clear that up as soon as possible.
Mr. Ainsa: Mr. Chief Justice, there is rationale for having a short statute, but once again I point out that you have two statutory schemes which appear to be able to be harmonized and coexist together.
1346 constitutes or at least the language is clear and unequivocal in its waiver of sovereign immunity for a third party who desires to collect a tax that's been taken from that third party.
And with that construction, it seems to me that only Congress can... can deal with the question that you've just raised, if Congress wants to make it.
Justice Breyer: The... the, the statute that you point to talks about taking a civil action against the United States.
When there has been a wrongful levy, is that right?
Mr. Ainsa: 7426.
Justice Breyer: It doesn't say an injunctive action.
So I would reading it think it encompasses both actions for injunctions, which are rare, probably, and what I think is not rare at all, an action for damages or money back.
Now your reading of the statute takes that whole ordinary case, where people are just suing to get back some money, and it says our nine-month statute of limitations here is meaningless.
All it applies to are injunctive actions which I bet are far and few between.
You can tell me I'm wrong on that.
Mr. Ainsa: Okay.
Justice Breyer: I won't say you've made it meaningless but you have eviscerated it.
Is that fair?
Mr. Ainsa: Justice Breyer, it is fair.
And it's fair for this reason, that in the Williams case the very--
Justice Breyer: I mean, is my characterization fair?
You want to say no to that.
Mr. Ainsa: --In the Williams case, the very same argument was raised, that 7426 would be rendered meaningless if, and other, the quiet title action and other actions would be rendered meanings less if 1346 was construed to allow Mrs. Williams to have a third party action.
Justice Breyer: Why would it have?
Because there I think we are talking about liens and it doesn't cover liens, the specifics statute.
Mr. Ainsa: The Government contended that Mrs. Williams had remedies available to her, certainly not a levy, because there was no levy, but the Government was contending she could have sought relief under the Quiet Title Act.
She could have sought relief by posting--
Justice Ginsburg: And the Government... and the opinion points out that if she had gone the quiet title route she would have lost the advantageous... she would have had to make.
She could never complete a quiet title suit within the time that she needed to execute this sale.
Mr. Ainsa: --Justice Ginsburg, I, I know you've found that in the opinion.
But at the same time I'm pointing out that the Government was contending that the Quiet Title Act was available to Mrs. Williams, and also that she could have simply put the money up.
And... put the money up, and the land would have been released and there was an argument over whether the secretary would have discretion to turn her down.
But the point is there were other remedies out there, and they were not deemed--
Justice Ginsburg: And the, and the opinion suggests... not merely suggests, determines... that those other remedies, unlike 7426 in cases where it applies, were ineffective.
The Government raised other remedies and the Court said they were ineffective.
Mr. Ainsa: --The other remedies I understand were determined to be not meaningful in the opinion of the Court.
But I'm pointing out that argument was raised and rejected.
And it was rejected because, because 1346 as I understand it has a life of its own, so to speak, and it was construed to be an unequivocal waiver of sovereign immunity.
And I return to my original buoyant that if that is the case then the two statutes most coexist together.
Mr. Chief Justice, if there are no further questions I would like to reserve the remainder of my time for rebuttal.
Argument of Deanne E. Maynard
Chief Justice Roberts: Thank you, Counsel.
Ms Maynard: Mr. Chief Justice, and may it please the Court.
When Congress creates a specific remedy for a specific situation that remedy forecloses resort to a more general remedy when that general remedy would frustrate the purposes of the specific remedy.
Justice Kennedy: Do you have a citation for that as would apply to the Internal Revenue code?
Ms Maynard: Yes, Your Honor.
The A.S. Kreider decision that we discuss in our brief is about was whether or not the sorter statute of limitations, ironically, in the case for refund suit, applied, rather than the broad general Tucker Act statute of limitations.
And this Court held that the specific controlled over the general because Congress was entitled to provide more specifically in a particular situation when the need called for it.
Justice Scalia: Was, was the more specific statute there enacted after the more general statute?
Ms Maynard: Both of those statutes, it's been a long time, Your Honor.
I'm not, I'm not totally--
Justice Scalia: The reason I ask is we... we do have a principle which I think is a sound one, that repeals by implication are not fatal.
And what you're saying is that the enactment of the more narrow statute impliedly repeals the cause of action that existed under 1346.
Do you know if any of your cases that you cite, even those outside of the Internal Revenue field, involve more specific statutes enacted after the general statute that they supposedly limit?
Ms Maynard: --I'm not sure if they answer that precise question, but--
Justice Scalia: Well, I guess--
Ms Maynard: --the implied repeal analysis is not the proper analysis to apply here, because the proper principle is that the specific remedy forecloses resort to the more general remedy, when two things are true.
Justice Scalia: --Well, that's certainly true when the two are enacted at the same time, obviously.
Or even when the, when the general is enacted after the more specific one and does not thereby limit the more specific one.
Ms Maynard: In... in this Court's case, if I can answer your, the principle of your question, Your Honor, which is that the replied repeal doctrine is not the proper analysis here because the specific controls the general.
Justice Alito: If 7426 had not been enacted, wouldn't this case have fallen within 1346 as interpreted by Williams.
Ms Maynard: Well, we would certainly have a more difficult argument here if that were the case, Your Honor.
But Williams' specific withholding was... didn't answer the question at issue here, because it only held that a person who had been subjected to a lien, involuntarily paid it under duress, could be a taxpayer within the meaning of 1346.
But it didn't answer the question here, which is whether or not when Congress has provided specifically for parties in Petitioner's situation and created a remedial scheme that would be wholly frustrated--
Justice Alito: What could you point to in the language of 1346 that would take this case outside of 1346 as interpreted in Williams?
Ms Maynard: --That would be a difficult argument to make, that it doesn't fall within the erroneously or illegally collected tax.
But that was the same case in A.S. Kreider.
That was the same language in A.S. Kreider, the erroneously collected tax.
Yet the Court held that the more specific refund statute of limitations there applied.
Justice Alito: But if this case would have fallen within 1346 as interpreted by Williams until... then you must be arguing that 1346 was in part impliedly repealed when 7426 was enacted.
Ms Maynard: One can look at it that way, Your Honor.
But I think if one looks at it that way then I think this Court's cases in Brown and Block are how you apply the implied repeal analysis when a specific statute would be wholly fully frustrated by application of a more general statute.
And that's particularly true where it's uncertain at the time Congress enacted the specific statute.
Justice Kennedy: I don't, I don't see how you can say there's frustration.
Perhaps I'm missing something.
It seems to me that for years the Revenue Code has had two basic schemes.
One is you can contest the liability before you pay the money.
The other is you pay the money and sue for refund.
And one requires you go to the Tax Court and the other district court and so forth.
So these are two different schemes and here you have to... we are advised that even if there was a levy for $100,000 you, couldn't contest it unless you paid the extra 900.
So those are two very different schemes.
Am I wrong about that?
Ms Maynard: Well, they are two very different schemes, Your Honor, and one is for the situation that Petitioner faces, which is a third party whose property is levied upon to collect the taxes of another, and it has its own venue provisions, its own jurisdictional provisions, its own short statute of limitations.
Justice Kennedy: Of course, because the Government doesn't have the money.
But in the refund suit the Government has the money.
Ms Maynard: --No, no, Your Honor.
In a levy suit the Government often does have the property.
Justice Kennedy: Often does, but not necessarily, and doesn't have to have all the amount.
Ms Maynard: Not... I think, Your Honor, the Flora requirement, which is a judicially interpretation on the refund statute which requires you, a taxpayer to pay all of its tax liability for a given year before it can bring a refund statute challenge, actually supports our argument here because it shows how complicated it would be to apply that scheme when you're talking about a party who doesn't owe the tax.
We haven't... the Government has not assessed the tax against the trust here.
It believes the trust is a nominee or alter ego of the taxpayer and the... the wrongful levy statute has a short statute of limitations for the precise reason that if we seize the property of the trust the Government needs to know promptly if the trust claims it's not the taxpayer's property because the Government, as the Chief Justice indicated, will cease going after the taxpayer if it believes it has already collected the tax from someone else that it believes to be holding the money for the taxpayer, which is different and crucially different than in a refund suit, as Justice Stevens alluded to, because in a refund suit where the taxpayer brings the challenge and has paid the tax, at the end of that suit either the Government has to pay the money back to the taxpayer in a refund or the Government gets to keep the tax and that's the end of the matter.
In a third party challenge, whether the third party brings it pre-deprivation or post-deprivation, the Government's interest is knowing whether or not the third party has taxpayer property or not.
Because if it turns out that it's not the taxpayer's property the Government needs to pursue the taxpayer.
And Congress accounted for that not only in 7426 by the short statute of limitations, but also for the expression suspension of the Government's period of time that it can pursue the taxpayer.
The, the section 7426 expressly suspends the time period during the running of a third party challenge whether that's pre or post deprivation.
In addition, the... if I can go back to Justice Scalia, I would like to impress upon you why we don't believe the implied repeal doctrine is applicable here, and not only is it because the specific controls the general when it would be wholly frustrated as it would be here by both the statute of limitations provision and its express suspension, but also because the availability of the general remedy was uncertain at the time that Congress passed... and for the purposes of the implied repeal doctrine that's the proper analysis: What did the 1966 Congress think it needed to say in order to make this the exclusive remedy?
The state of the law at the time--
Justice Scalia: --Pre-Williams you're talking about?
Ms Maynard: --Yes, in 1966, Your Honor.
The state of the law at the time when the Congress was deciding how to write this provision, there was certainly no authoritative pronouncement that, that the, that third parties could bring a suit, and indeed the law that--
Justice Alito: Why does that make your argument stronger?
If Congress didn't think that 1346 applied, then surely it didn't intend to repeal it.
Ms Maynard: --Well, the cases say it matters what the Congress saw at the time it passed the statute in Brown and Block.
But the reason it does matter as a logical matter is that the state of the law was such that third parties couldn't bring a refund suit under 1346.
The actions that had been allowed, Your Honor, were against the IRS officials and those were expressly replaced by the statute.
Congress expressly replaced them in section 7426(d) and (e), which is on 12a of our, of our petition.
So that shows that Congress did intend to make this the exclusive remedy.
The other reason why I think you can--
Justice Scalia: Did you make that argument, did the Government make that argument, in Williams?
Ms Maynard: --Did we make the argument in Williams?
Justice Scalia: Yes, that... that Congress had enacted another statute which presumes that there is no cause of action under 1346?
Ms Maynard: Well, the Government conceded in Williams that 7426 was not available to Ms. Williams there because she had only been subjected to a lien, not a levy.
So the remedies the Government was pointing to in that case as exclusive of the 1346 remedy were the quiet title action and a discretionary--
Justice Scalia: Yes, but even if it wasn't available to her, the fact that there was another statute the whole premise for which is the unavailability of a remedy under 1346, it seems to me that would have, that would have strengthened the Government's case in Williams.
Ms Maynard: --Well, we did point to the statute, Your Honor, and suggest that the Congress had made it available.
I think the other reason why the implied repeal doctrine is not the right analysis here is that section 7426 did not withdraw any substantive rights.
This, the trust here is simply trying to take advantage of another remedial provision, 1346, and rename its cause of action.
They're bringing exactly the same... their complaint is substantively identical to the complaint they brought in their first action.
Justice Breyer: It looks like it's the same in the Kreider case.
I can't tell, I don't know.
But this case was a specific statute of limitations acted after the general refund statute, right?
Ms Maynard: That's right, Your Honor.
Justice Breyer: And in the prior case it seems to be a specific statute that was enacted in 1926.
I just got it out of the library.
They give it to us, you know, if you ask them.
Ms Maynard: Bless them, Your Honor.
Justice Breyer: And it was the 1926 code and it concerned 1926 income, so it must have been brought, the suit, fairly close to when that was enacted.
And the general provision was a general judicial code provision having to do with general statute of limitations and, no, it doesn't say.
It looks... I mean, it sounds as if that had been long in existence.
Ms Maynard: I believe it had been.
It was a Tucker Act provision.
That would be the answer to your question, Justice Scalia.
But in direct response to the question you started with, Justice Breyer, Congress... the general statute of limitations for refund actions did already exist.
In fact, the Government believes it's significant when Congress passed 7426, instead of referring to that specific provision, it placed in the same section of the code a shorter statute of limitations specifically for these actions.
It created a new subsection and said 7426 actions must be brought within 9 months.
Chief Justice Roberts: So why was it so hard for them to say that this is an exclusive remedy, as they have done in other situations?
Ms Maynard: As I indicated, Your Honor, at the time there was no authoritative pronouncement.
Chief Justice Roberts: That's even all the more reason for them to say.
If there's confusion about what remedies are available and they want it to be exclusive, it's easy enough to say that.
Ms Maynard: --Well, the remedies that have been allowed by the courts, Your Honor... and we believe, in the absence of any appropriate waiver... but the actions that have been allowed have been allowed against IRS officials, and Congress did expressly replace those, on 12a, in 7426(d):
"No action may be maintained against any officer or employee of the United States. "
Chief Justice Roberts: Well, again that suggests that they know how to spell out exclusivity when they have it in mind, and they didn't do it with respect to the availability of an action under 1346.
Ms Maynard: That's true, Your Honor.
But I think for purposes of trying to discern the intent of the 1966 Congress one has to look at the state of the law in 1966.
And there was no reason to believe and certainly no authoritative pronouncement at the time that 1346 covered this type of action, and I don't think--
Chief Justice Roberts: So the Williams decision came like a bolt out of the blue, then?
Ms Maynard: --Well, that's probably how the Government viewed it, Your Honor.
But certainly I don't think one should ascribe for purposes of implied repeal, in other words to assume a presumption, by making the Congress prescient of what this Court was going to decide in 1995.
And I certainly wouldn't concede, although the Petitioner would like to argue, that Williams' holding is as broad as it is.
Williams was about a very particular situation, a woman, as I said, who had a lien placed on her, and the Court didn't answer this question of whether someone who had, as Justice Ginsburg indicated, who had a levy placed on there, could be a taxpayer within the meaning of 1346 as this Court held in Williams.
Justice Kennedy, also on your question about the tax code, although we don't cite it in our brief, Estate of Ramani is another case in which this Court had in effect held that a specific provision in the tax code, in this very Tax Lien Act, took priority over a more general provision that had to do with the priority of the United States' claims.
And that's Estate of Ramani, 525 U.S. 517.
I believe if there are no further questions, the Government would ask the Court to find that 7426 is the... except I have one more thing to add.
Getting lots of help today from all quarters.
Chief Justice Roberts: Mr. Hungar has a further question.
Ms Maynard: I beg your pardon?
Chief Justice Roberts: Mr. Hungar has a further question.
Ms Maynard: He wants me to point out to the Court that, in addition to... it's always nice to have help.
In addition to the great American Federal Savings & Loan case, Justice Scalia, which indicated that the implied repeal analysis is not appropriate when you're talking about a subsequent simply remedial provision that doesn't withdraw substantive rights, the Court in a case authored I believe by Your Honor, Rancho Palos Verdes, in footnote 2 made that same point last term.
Justice Scalia: I forgot about that footnote.
Ms Maynard: Mr. Hungar might have questioned your memory.
If there are no further questions, we would ask that the Court affirm.
Rebuttal of Francis S. Ainsa Jr
Chief Justice Roberts: Thank you, counsel.
Mr. Ainsa, you have 5 minutes remaining.
Mr. Ainsa: The Government argues that A.S. Kreider has relevance to this case and I will submit to the Court that it does not.
The analysis in A.S. Kreider about a more specific statute following a general statute controlling was based upon the peculiar syntax of the statute in question.
The analysis in A.S. Kreider was that the more general statute was phrased in the negative and that therefore all it did was set an outside time limit that Congress was free to shorten with a subsequent statute.
We do not have that situation in this case.
There was... there is no similar analysis that you can apply to 1346 and 7426.
Justice Kennedy: And both statutes in Kreider I take it applied to the refund suit?
Mr. Ainsa: Yes.
Justice Kennedy: So there were two statutes bearing on the same remedy.
Mr. Ainsa: Two statutes bearing on the same remedy.
And I submit that the A.S. Kreider analysis is not relevant here.
The Government ALSO relies on Brown versus the General Services Administration for the proposition that a very detailed, complete, balanced, structured statute will control over a more general statute, and the argument is of course that 7426 is that type of statute.
But the problem is in the Brown case we were dealing, the Court was dealing, with the Civil Rights Act and the Civil Rights Act was clearly the first piece of legislation that had been enacted by Congress to remedy Federal employment discrimination.
It was a brand new remedy.
In the case before the Court today, 7426 was a response to a particular issue that was raised in 1966 and that was that claimants who desired to seek redress from the Government when their property was taken were suing the director.
They were suing the tax collector.
This was just a statute to give them a remedy directly against the Government.
It wasn't creating a brand new situation.
It was clarifying that now you could sue the Government directly as opposed to the tax collector.
And in fact, the Federal Tax Lien Act prohibited suits against Government officials, as was previously the practice in the United States.
And so it's, this issue of implied repeal with the shorter statute I don't believe is apropos to the situation that confronts us here.
And I would like to also simply conclude my argument with regards to the Government's contention that the Government needs to know.
In this particular case the tax years in question were 1981 through 1984.
The Government did not assess the taxpayer until 1993 and 1994, 12 years after the first tax year.
The government did not levy until 1999, which was 18 years after the first tax year.
During this time the Government knew, very clearly knew, what the situation was in this case and for whatever reason did not take prompt action.
Therefore, on behalf of the Petitioner, I ask that you reverse and send this case back to the district court for proceedings under the refund statute.
Chief Justice Roberts: Thank you, Mr. Ainsa.
The case is submitted.
Argument of Speaker
Mr. Speaker: I have the announcement in two cases this morning the first is number 05-1541, EC Term of Years Trust versus United States.
Justice Souter has authored the opinion in this case, and he has asked me to announce it for him.
This case comes to us on a writ of certiorari to United States Court of Appeals for the Fifth Circuit.
The internal revenue service determined that Elmer and Dorothy Cullers claimed unwarranted income tax deductions in the 1980s but by the time the government tried to collect from the Cullers’ they have transferred some of their assets to petitioner EC Term of Years Trust.
The IRS levied on the Trust’s bank account and collected over $3 million.
Almost a year after that the Trust filed an action claiming that the IRS has wrongfully levied on it’s property to collect taxes owed by another.
Such wrongful levy actions are specifically authorized by statute, but they are subject to a nine month filing deadline because the Trust had missed that deadline the District Court dismissed it’s complain.
The Trust then re-filed its action as a claim for a tax refund which has a less demanding filing deadline, but the District Court dismissed it again reasoning that a wrongful levy claim was the Trust’s only recourse.
The Fifth Circuit affirmed and we granted certiorari to resolve a conflict with the Ninth Circuit.
In an opinion filed today with the Clerk of the Court, we affirm.
We have repeatedly held that when Congress creates a precisely drawn and detailed statute it preempts more general remedies.
Here Congress specifically tailored a remedy for third parties challenging a wrongful levy and provided a nine month statute of limitations.
That short period was no accident since the IRS must be promptly be told if it has seized property from the wrong party.
But this deadline could be easily awaited if as the Trust argues third parties could always reformulate their wrongful levy claim as one for a tax refund, resort to a tax refund claim is therefore preempted.
The trust also relies on United States against Williams, a case in which we held that a wrongful lien claim could be brought in the form of a tax refund action.
But we said in Williams that no remedy other than a tax refund was open to the plaintiff in that case.
Here on the other hand, the Trust challenges a levy not a lien and could have made a timely wrongful levy claim for the relief it now seeks.
Justice Souter’s opinion for the Court is unanimous.