Court of Federal Claims Rules for Mexican National in Refund Suit
The case of Maria Esther Montiel v. United States (“Monteil”) considers the question of how to determine the limitation period for filing a refund claim when a nonresident alien erroneously files an original tax return as a U.S. resident and later determines that she should have filed as a nonresident alien. As discussed below, the Court of Federal Claims concluded that there was a triable issue as to whether it had subject matter jurisdiction on the facts in Montiel.
Facts of the case
On March 16, 2008, Maria Esther Montiel (“Monteil”) filed a Form 1040 (United States Individual Income Tax Return) for the tax year 2007 with the IRS’s Fresno, CA Service Center and paid income tax as a U.S. resident. Montiel subsequently determined that she was a resident of Mexico (and a U.S. nonresident alien) during 2007 and should have filed a Form 1040NR. On June 10, 2011 Montiel filed a Form 1040X for 2007 and included a completed Form 1040NR and a copy of the Form 1040 filed in 2008. The Form 1040X reflected an overpayment of tax for 2007 and requested a refund.
The IRS denied Montiel’s request for refund stating that Montiel had failed to seek her refund within the three-year limitation period set forth in section 6513. According to the IRS, the limitation period had expired on April 15, 2011, approximately 3 months before Montiel filed her amended return.
Montiel then brought suit in the Court of Federal Claims seeking a refund for taxes overpaid for 2007 and 2008 (which had similar facts). The IRS responded by filing a motion to dismiss Montiel’s suit arguing that the Court of Federal Claims lacked subject matter jurisdiction.
Discussion of the law
In support of its motion to dismiss, the IRS made the following argument. The Tucker Act provides the Court of Federal Claims with jurisdiction to hear certain monetary claims against the United States; however, the Tucker Act itself does not create a substantive right to monetary relief. Plaintiffs must identify an independent statute providing such relief.
Section 7422(a) provides that “no suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax . . . until a claim for refund or credit has been duly filed with the Secretary.” Under section 6511(b)(1) no claim for refund may be made after the three-year limitation period specified in section 6511(a). According to the IRS, Montiel had no statutory right to relief, because, by filing a Form 1040 she had identified herself as a resident alien and therefore adopted an April 15 filing deadline. The court therefore lacked subject matter jurisdiction.
In finding for the taxpayer, the court stated “residency status directly affects the filing deadlines set by subsection 6511(a).” Nonresidents have until June 15 to file their Forms 1040NR. Section 6513(a) deems all timely returns as filed on their due dates, regardless of when they are actually submitted.
The court goes on to say “consequently, the effective filing dates of Ms. Montiel’s tax returns for 2007 and 2008 pose disputed issues of jurisdictional fact, as they ultimately determine whether or not Ms. Montiel complied with the statute of limitations imposed by subsection 6511(a).” The court goes on to conclude that “[b]ecause Ms. Montiel has set forth a plausible claim for refunds, provided evidence of her qualifications as a ‘nonresident alien,’ and shown her compliance with the filing requirements established for those with ‘nonresident’ status, she has presented triable issues concerning the court’s jurisdiction.” The court therefore ordered a trial to determine whether it had jurisdiction.
Nonresident aliens who erroneously file a U.S. tax return as a U.S. resident should file their Form 1040NR and companion refund claim prior to April 15 of the third year following the year in which they filed their original tax return. Should they failed to do so, Montiel demonstrates that they probably will have to pursue an expensive action in the courts in order to claim a refund with no guarantee of success.
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