United States District Court, D. Colorado
ESTATE OF DANIEL B. CULVER, and ANB BANK, Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant.
ORDER
RAYMOND P. MOORE UNITED STATES DISTRICT JUDGE
This
matter is before the Court on Defendant's motion to
dismiss or transfer this case for lack of subject matter
jurisdiction. (ECF No. 22.) The motion has been fully
briefed. (ECF Nos. 25, 26, 27.) For the reasons below, the
Court is transferring the case to the United States Court of
Federal Claims.
I.
LEGAL STANDARD
Federal
courts must have a statutory basis to exercise jurisdiction.
Montoya v. Chao, 296 F.3d 952, 955. “The
burden of establishing a federal court's subject matter
jurisdiction rests upon the party asserting
jurisdiction.” Safe Streets Alliance v.
Hickenlooper, 859 F.3d 865, 878 (10th Cir. 2017)
(quotations omitted). When a defendant asserts a facial
attack on the complaint's allegations regarding subject
matter jurisdiction, the Court accepts those allegations as
true. See Smith v. United States, 561 F.3d 1090,
1097 (10th Cir. 2009).
II.
BACKGROUND
Plaintiffs
bring this lawsuit against the government, seeking to recover
interest based on overpayment of taxes. But as a threshold
matter, the Court must determine if it has subject matter
jurisdiction. Plaintiffs contend that jurisdiction for claims
of overpayment interest exists under 28 U.S.C. §
1346(a)(1). Defendant disagrees. The United States Court of
Appeals for the Tenth Circuit has not addressed this issue,
and the Second and Sixth Circuits have reached opposite
conclusions.
III.
DISCUSSION
Section
1346(a)(1) provides that federal district courts and the
Court of Federal Claims shall have concurrent jurisdiction
over
[a]ny civil action against the United States for the recovery
of [1] any inter n al -r ev enue tax alleged t o have been
erron eousl y o r ille gall y as ses s ed or collected, [2]
any penalty claimed to have been collected without authority,
or [3] any sum alleged to have been excessive or in any
manner wrongfully collected under the internal-revenue tax
laws.
There
is no dispute that overpayment interest is not a tax or
penalty under the first two categories; the issue presented
is whether overpayment interest qualifies under the third
category.
In
E.W. Scripps Co. v. United States, 420 F.3d 589, 597
(6th Cir. 2005), the Sixth Circuit concluded that overpayment
interest is an “excessive sum” included within
the third category.[1] In reaching its decision, the Sixth
Circuit accepted at face value a statement from Flora v.
United States, 362 U.S. 145, 149 (1960), that a
“sum” under the third category could include
interest. There, the Supreme Court reasoned that “any
sum” must mean “amounts which are neither taxes
nor penalties, ” stating that “[o]ne example of
such a ‘sum' is interest.” Id. But
the Flora court was not addressing a claim for
overpayment interest, nor did it acknowledge that different
types of interest are treated differently under tax law.
See Alexander Proudfoot Co. v. United States, 454
F.2d 1379, 1385 (Ct. Cl. 1972) (“Congress has
distinguished markedly between a refund of that kind of
interest paid by a taxpayer and statutory interest payable by
the Government on an overpayment . . . .”). Noting that
taxpayers have a statutory right to compensation “for
the lost time-value of their when they make overpayments of
tax, ” the Sixth Circuit concluded that “[i]f the
Government does not compensate the taxpayer for the
time-value of the tax overpayment, the Government has
retained more money than it is due, i.e., an ‘excessive
sum.'” E.W. Scripps, 420 F.3d at 597
(citing 26 U.S.C. § 6611).
In
Pfizer Inc. v. United States, No. 17-2307-cv, 2019
WL 4398425, at * (2d Cir. Sept. 16, 2019), the Second Circuit
disagreed with the Sixth Circuit's analysis, ruling that
the district court had erroneously relied on E.W.
Scripps in determining that it had jurisdiction. First,
the Second Circuit concluded that Flora is
inapplicable in the context of considering overpayment
interest because the interest at issue in that case was
deficiency interest. Id. at *3. Noting that
deficiency interest (which is treated as part of the
underlying tax) and overpayment interest (which is simply a
general debt of the government) are treated differently under
tax law, the Second Circuit concluded that
“Flora's passing statement” about
interest did not require putting all interest, including
overpayment interest, into the third category of §
1346(a)(1). Id.
The
Second Circuit then focused on the text of § 1346(a)(1)
and concluded that the third category, like the first two,
must refer to “an amount previously paid to the IRA by
the taxpayer.” Id. at *4. Because
“overpayment interest is not a sum that, at some point
in the past, was either excessive or wrongfully collected,
” the court concluded that “[t]o find that
overpayment interest qualifies as the type of ‘sum'
encompassed by § 1346(a)(1) strains the plain text of
the statute beyond what it can bear.” Id. at
*4. Instead, the Second Circuit held, “overpayment
interest is a straightforward claim against the federal
government and is therefore covered by the Tucker Act, which
vests exclusive jurisdiction in the United States Court of
Federal Claims to hear any non-tort claim against the United
States founded upon any Act of Congress.” Id.
at *5 (quotation omitted); see also 28 U.S.C. §
1491(a)(1).
The
Court finds Second Circuit's analysis to be more
thorough, reasoned, and persuasive than the Sixth
Circuit's on this issue. The Sixth Circuit's analysis
relies on a strained reading of § 1346(a)(1) and an
overbroad reading of a dictum in Flora to permit a
taxpayer to recover a sum that it never paid to the
government. The Second Circuit's approach is rooted in
the text of the statute and appropriate considerations
regarding the broader context of ...