Simmons, Jannace & Stagg
EC Term Of Years Trust v. United States
In the case of EC Term of Years v. United States, the Internal Revenue Service was sued by EC Term of Years Trust under 26 U.S.C. § 7426. This statute is referred to as the "wrongful levy statute," as EC Term of Years Trust was looking to recover $3.3 million that the IRS had levied against the company. The money levied against the company was for back taxes, not for the company as a whole, but for two members of the trust. EC Term of Years of Trust argued that the full amount that was accumulated by the IRS was in excess of the taxes that were owed. One year after the taxes were collected, EC Term of Years of Trust filed the wrongful levy claim.
EC Term of Years of Trust's claim was dismissed by the district court. The court held that the claim was filed more than nine months after the statutory deadline had passed. After the denial by the district court, EC Term of Years Trust filed a refund complaint under 28 U.S.C. § 1346, which is the statute for tax refund. The refund claim was dismissed by the district court. The grounds that the court based their decision on was that EC Term of Years Trust initial wrongful levy claim was the companies "sole exclusive remedy."
The 5th Circuit Court of Appeals agreed with the district court's decision stating that if EC Term of Years Trust was wrongly charged, or if the company's property was wrongly confiscated, the only relief available to them is under the wrongful levy statute. The relief is also only available within the statute of limitation, which is nine months. Among the courts of appeals, there is disagreement on how to decide the problems that arise between the wrongful tax and tax refund statutes. The 9th Circuit allows levies against the IRS to be challenged through the channels of either a refund action or a wrongful levy action. However, the 5th and 10th Circuit Court place a limitation on the refund action as only the wrongful levy statute can be claimed.
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