Fifth Circuit: 'taxpayer' means a person who pays tax.

• Author: Beavers, James A.

The Fifth Circuit, reversing a district court, held that, based on the plain language of Sec. 7811, the nine-month statute of limitation on fifing a suit for wrongful levy was tolled while the taxpayer had an application for a Taxpayer Assistance Order pending with the Taxpayer Advocate Service.

Background

Kathryn Rothkamm (Rothkamm) was married to Chester Rothkamm. Chester owed the IRS back taxes. Rothkamm had over $70,000 on account at IberiaBank. The IRS, apparently feeling it would be generous of Rothkamm to make good on Chester's tax debts, issued a levy to IberiaBank for the funds in Rothkamm's account. On April 18, 2012, Iberia gave the full amount in the account to the IRS.

Less than two weeks later, on April 30,2012, Rothkamm attempted to challenge the IRS's levy by fifing an application for a Taxpayer Assistance Order (TAO) with the Taxpayer Advocate Service (TAS). On Oct. 11,2012, having determined that it "was unable to provide any assistance to [Rothkamm]," the TAS "closed" her case.

Undaunted, on May 15,2013, Rothkamm filed with the IRS an administrative claim for wrongful levy pursuant to Sec. 6343(b). The IRS denied Rothkamm's claim on July 1, 2013. Consequently, on Sept. 6,2013, Rothkamm sued the IRS for wrongful levy in a federal district court, pursuant to Sec. 7426. The IRS moved to dismiss the case, claiming that the court did not have jurisdiction because the applicable nine-month statute of limitation for filing the suit under Sec. 6532 had passed when she filed her suit.

Rothkamm argued the statute of limitation had not run at that time because Sec. 7811(d) had tolled it during the time her application for a TAO had been pending. The IRS countered that Sec. 7811(d) did not toll the statute because it only applied to taxpayers and Rothkamm was not a taxpayer under any definition because she was not subject to a tax, and even if she were a taxpayer, she was not entitled to tolling because the suspensions of statute-of-limitation periods described in the statute are for IRS actions, not taxpayer actions.

The district court agreed with the IRS and dismissed Rothkamm's case with prejudice. Rothkamm appealed the decision to the Fifth Circuit.

The Fifth Circuit's Decision

The Fifth Circuit reversed the district court and held that Sec. 7811(d) tolled the statute of limitation during the pendency of Rothkamm's TAO application. The court concluded that the district court erred in determining the definition of "taxpayer" under...