Argument preview: United States v. Clintwood Elkhorn Mining Company
This case involves three companies' efforts to obtain a refund of taxes they paid on coal exports after it was determined that the export tax was unconstitutional. The question presented is whether the companies may file their refund claims directly in federal court under the Tucker Act or whether they must follow statutory procedures with the IRS that provide a more limited remedy.
Respondents Clintwood Elkhorn Mining Company, Gatliff Coal Company, and Premier Elkhorn Coal Company paid excise taxes on coal exports until 2000, when the IRS acquiesced to a federal court ruling declaring the excise tax to be unconstitutional under the Constitution's Export Clause, art. I, § 9, cl. 5. Barred by a three-year statute of limitations from seeking refunds for taxes paid before 1997, the companies applied to the IRS for a refund (with interest) of taxes paid from 1997-99. The companies also filed suit under the Tucker Act, claiming damages resulting from a violation of the Constitution. Because the Tucker Act has a six-year statute of limitations, the companies sought a refund (with interest) of taxes paid all the way back to 1994.
The Court of Federal Claims, relying on the Federal Circuit's 2000 decision in Cyprus Amax Coal Co. v. United States, held that a violation of the Export Clause did create a cause of action under the Tucker Act. The court agreed that the companies were owed refunds, but it refused to award interest because it construed the statute allowing interest for tax refunds, 28 U.S.C. § 2411, as applying only to claims brought under the standard administrative refund scheme. The Federal Circuit affirmed in part and reversed in part, reaffirming its view that jurisdiction is available under the Tucker Act for Export Clause violations and interpreting the interest-award statute as applying to any claim for a tax refund. The Supreme Court granted certiorari to review these issues on December 3, 2007.
The United States as petitioner argues that the tax code establishes specific procedures for obtaining a tax refund; when, as in this case, a taxpayer fails to follow those procedures, he may not bring claims such as these under the Tucker Act. The government contends that the standard administrative refund scheme is so comprehensive and detailed that it was intended to cover any claim for repayment of unlawful tax, regardless of whether it could be brought "independently" under the Tucker Act or some other statute. This detailed remedial scheme, the government argues, displaces any more general remedy that might be found elsewhere.
The government principally relies on § 7422 of the Internal Revenue Code, which states in pertinent part: "No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected . . . until a claim for refund or credit has been duly filed with the [IRS]." That filing requirement, in conjunction with specific statutes of limitation and time periods for resolving refund claims, demonstrates that Congress intended to create an exclusive set of procedures for tax refund claims. The government cites two cases from last Term, EC Term of Years Trust v. United States and Hinck v. United States for the proposition that, when a detailed remedial scheme provides specific relief for a plaintiff, the plaintiff cannot use the Tucker Act's more general provisions to obtain a more favorable outcome. The Tucker Act's six-year statute of limitations should therefore be viewed as merely an "outside limit," not an expansion of time to file a claim that would be time-barred if brought under another federal statute. In any event, the government asks the Court to resolve any ambiguity in its favor because waivers of sovereign immunity are to be construed strictly.
The government further argues that, in light of the statutory remedy in the Internal Revenue Code, there is no reason to imply a self-executing remedy under the Export Clause. The Court does not automatically imply freestanding damages remedies for every constitutional violation, particularly when other remedies are available and (unlike a Bivens action) no individual officer's conduct would be deterred by the remedy. Because Congress may legitimately impose a statute of limitations on constitutional claims, the administrative refund scheme is an adequate remedy for Export Clause violations, and no independent cause of action should be implied.
Finally, the government argues that the Federal Circuit erred by allowing interest to be awarded on taxes refunded through the Tucker Act because the interest provision is part of the administrative tax refund scheme. The government thus contends that there is no clear statement that Congress intended to waive sovereign immunity with respect to interest paid for damages sought under the Tucker Act.
Respondents contend in their brief that this case is not an ordinary challenge to the misuse of Congress's taxing power which can be remedied through the IRS's tax refund scheme. Rather, it is a challenge to the imposition of an unconstitutional tax, and the Tucker Act specifically provides a remedy for constitutional violations. Respondents argue that the Tucker Act provides a better remedy for Export Clause violations, and there is no evidence that Congress intended to subject claims under the Export Clause to the burdensome delays and restrictions in the normal administrative tax refund scheme.
Respondents argue that the Tucker Act provides remedies for "money-mandating" constitutional violations, and the Export Clause mandates monetary compensation for its violation. They describe the Export Clause as "a unique and uniquely comprehensive preclusion of congressional tax power," which by its historic design requires violations to be compensated. Respondents rely on United States v. U.S. Shoe Corp., a 1998 case in which the Court sustained jurisdiction in the Court of International Trade on the basis of an Export Clause claim, to show that the Export Clause gives rise to an action for relief. Respondents also compare the Export Clause to the Judicial Compensation and Takings Clauses, noting that they all protect purely pecuniary interests and can be remedied only through actions for damages. That independent cause of action cannot be eliminated by Congress.
Respondents further argue that the Tucker Act remedy has not been withdrawn by Congress. The administrative refund scheme does not displace the Tucker Act remedy, they contend, because it applies to "general" tax-refund claims and is not designed to handle the sui generis claim that taxes are facially unconstitutional under the Export Clause. Requiring respondents to adhere to the administrative refund scheme would allow Congress to impose significant restrictions on their rights to be free from unconstitutional taxes on exports. For example, the statutory remedy would only permit exporters to recover the amount of taxes unconstitutionally exacted; it would not allow claims for other damages resulting from imposition of an unconstitutional export tax. Moreover, the text of the normal statutory remedial scheme does not clearly apply to claims for refunds under the Export Clause.
Finally, respondents argue that the interest statute does properly apply to claims for refunds brought under the Tucker Act. The statute's language allowing interest on "any judgment of any court for any overpayment in respect of internal revenue tax" clearly applies to respondents' claim. Respondents argue that the interest provision is not an integral part of the statutory scheme such that it can only be applied to tax refund claims filed with the IRS. Rather, it makes sense to apply the interest statute to remedy the fundamental violation of the Export Clause that occurred here.
In its reply, the United States returns to the plain text of § 7422, arguing that a claim under the Export Clause for unconstitutionally exacted taxes is a claim that the tax was "erroneously or legally assessed" and therefore falls within the administrative tax refund scheme. The government points to the fact that the respondents filed claims with the IRS for the three years for which recovery was allowed and argues that their failure to file claims for the other years shows that they are trying to evade the statutory requirements. The government argues that those provisions apply equally to constitutional claims, and the Export Clause is no different.
Two amicus briefs were filed in the case in support of respondents. Alliance Coal, LLC, argues that the procedural requirements applicable to respondents' claims arise from the source of their right to recover, the Export Clause, rather than from the IRS tax refund scheme. Alliance argues that the Tucker Act has long provided jurisdiction for alternative rights to recover unconstitutional taxes, and Congress could not impliedly repeal that jurisdiction by creating an administrative refund scheme. The National Federation of Independent Business Legal Foundation also filed a brief arguing that the Export Clause is self-executing and that the IRS refund scheme is not intended to reach constitutional challenges to taxation.
The case is scheduled for argument on Monday, March 24, 2008. Assistant to the Solicitor General William M. Jay will be arguing for petitioner United States, and Patricia Millett of Akin Gump will be arguing for respondents.