[00:00:00] Speaker 01:
The first case is Doherty Electric versus the United States, 2024, 1458, and 1838.

[00:00:09] Speaker 01:
Mr. Hughes.

[00:00:17] Speaker 02:
Mr. Chief Judge, Your Honors, Matthew Hughes on behalf of taxpayer appellant Doherty Electric, Inc.

[00:00:23] Speaker 02:
I've asked that two minutes be reserved for rebuttal.

[00:00:26] Speaker 02:
Taxpayer in this case gave the IRS all the information that it had, supplemented when it learned more, and at the IRS's request filled out all the necessary paperwork.

[00:00:37] Speaker 02:
The IRS considered our claims on the merits and rejected them.

[00:00:40] Speaker 01:
Well, they didn't even provide the period, the tax period.

[00:00:46] Speaker 01:
I mean, that's pretty basic.

[00:00:48] Speaker 02:
Your Honor, the IRS's own response shows that the tax period wasn't necessary for the IRS's analysis, at least of the client versus commissioner argument.

[00:00:59] Speaker 02:
They just rejected that argument and said, as a legal matter, we can impose interest and penalties on a criminal restitution order.

[00:01:08] Speaker 03:
Can I ask, I thought your position was,

[00:01:11] Speaker 03:
It seemed to me that there was something to be said for it.

[00:01:16] Speaker 03:
That the IRS of course knew what the nine quarters were.

[00:01:20] Speaker 03:
You gave the exact dollar amount to the penny of what you had paid for in 2015.

[00:01:29] Speaker 03:
I guess there's a little bit of a dispute.

[00:01:32] Speaker 03:
I don't quite understand.

[00:01:33] Speaker 03:
But the governance position is that when you made that payment in 2015, it was accompanied by a tiny little form.

[00:01:42] Speaker 03:
I forget what page it is in the appendix.

[00:01:47] Speaker 03:
That had each of the nine quarters for the dollar amounts.

[00:01:50] Speaker 03:
The penalties and the owed amounts were listed on there.

[00:01:59] Speaker 03:
The interest is a statutory matter, perfectly calculable.

[00:02:05] Speaker 03:
I thought your position was that the one thing the IRS cannot possibly say is that it didn't know what the years and amounts were for.

[00:02:14] Speaker 02:
That's correct.

[00:02:14] Speaker 03:
There's another bucket of uncertainty about what the grounds for

[00:02:21] Speaker 03:
for your asking the refund is.

[00:02:24] Speaker 02:
Did I misunderstand that?

[00:02:26] Speaker 02:
No, you're absolutely right.

[00:02:27] Speaker 02:
You're absolutely right about that.

[00:02:29] Speaker 02:
As far as the schedule of payment application, we have at the very end, near the very end of the appendix pages 312 and 313, we have a declaration that's been put in the record from our CPA saying that document was created in 2018.

[00:02:48] Speaker 02:
after he got the restitution schedule from the IRS.

[00:02:52] Speaker 03:
So I guess I didn't really understand that and also didn't understand why what you just said helps you as opposed to hurts you.

[00:03:02] Speaker 02:
So he didn't have that information at the time?

[00:03:05] Speaker 03:
The government says in its motion to dismiss that it received

[00:03:10] Speaker 03:
the instructions with dollar amounts associated with nine quarters.

[00:03:15] Speaker 03:
That's very helpful to you, is it not?

[00:03:17] Speaker 03:
I think I may be confused about this.

[00:03:19] Speaker 03:
So I don't understand what this affidavit is doing.

[00:03:22] Speaker 02:
I think what you're confused about is that they claim they received that payment schedule with the 2015 payment and not with our refund claim.

[00:03:33] Speaker 02:
Now, if they received it with the 2015 payment, that does really help our case.

[00:03:38] Speaker 02:
So now you're saying they didn't.

[00:03:40] Speaker 02:
And we don't think they actually did.

[00:03:42] Speaker 03:
Getting back to Judge Lurie's point, how is it that the IRS should have known what the 1.53 million, et cetera, was for?

[00:03:56] Speaker 02:
Well, just to point out first, we had no way of knowing that.

[00:03:58] Speaker 02:
Our CPA tried to calculate it, but the IRS should have known it because in our original letter on December 7th of 2017, we pointed back to the restitution order, the criminal case.

[00:04:11] Speaker 02:
And if the IRS had done its basic due diligence in checking those files, it would have found the restitution order

[00:04:17] Speaker 02:
that has all of that information laid out, tax period and amount, tax period and amount, tax period and amount.

[00:04:23] Speaker 00:
That's true in virtually all cases, right?

[00:04:25] Speaker 00:
I mean, the IRS has the information, but that doesn't alleviate your obligation to file a duly filed claim, articulating what the details are.

[00:04:36] Speaker 00:
That could be the excuse for the IRS.

[00:04:38] Speaker 00:
I don't have to say anything because the IRS has all this paper.

[00:04:41] Speaker 02:
And the Supreme Court has said that's not appropriate, but the only question here is, was it enough information for the IRS to be adequately apprised to the basis of the claim?

[00:04:52] Speaker 02:
And just going back to what I originally said to Judge Laurie, the IRS denied the penalty portion of the claim solely on legal grounds.

[00:05:00] Speaker 02:
They never had to check the year.

[00:05:02] Speaker 02:
They issued that decision when they didn't, supposedly didn't know the year.

[00:05:06] Speaker 00:
I need some clarification here because throughout the filings, I understand you to have raised two specific but different theories, right?

[00:05:15] Speaker 00:
Yes, Your Honor.

[00:05:16] Speaker 00:
One was the Klein theory that was based on interest on restitution.

[00:05:20] Speaker 00:
And the other was the failure to get supervisory approval for the fraud.

[00:05:24] Speaker 00:
Yes, Your Honor.

[00:05:25] Speaker 00:
Are you still maintaining the Klein theory here?

[00:05:27] Speaker 00:
Because it seems like most of your arguments had to do with the supervisory authority issue.

[00:05:33] Speaker 02:
We maintain both.

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And we think that any consideration of those claims on the substance of those claims would be appropriate on remand.

[00:05:43] Speaker 02:
But we do believe that both were adequately preserved in terms of- But there's a difference, right?

[00:05:48] Speaker 00:
There is a difference.

[00:05:48] Speaker 00:
I mean, in your original submission on December 7th, at least you articulated, you referenced the Klein theory.

[00:05:54] Speaker 00:
No reference other than your one sentence that says, and anything else that we might come up with.

[00:06:00] Speaker 00:
I assume you put your supervisory approval into that bucket, right?

[00:06:04] Speaker 00:
So there's a distinction.

[00:06:05] Speaker 00:
One could view the record as a different

[00:06:09] Speaker 00:
different issues arising with respect to the different claims, correct?

[00:06:13] Speaker 02:
That's absolutely right, Your Honor, but we would argue under the Western Company of America case from 2006, I believe.

[00:06:23] Speaker 02:
In that case, this court said that when the information

[00:06:29] Speaker 02:
When you have an informal claim, like we continue to have here, and during the course of your investigation and examination with the IRS, information solely within the possession of the IRS comes to light that reveals an additional basis for asking for a refund, you can add that to your informal claim.

[00:06:46] Speaker 01:
Let's sit down to basics.

[00:06:47] Speaker 01:
The claims court dismissed the case for lack of jurisdiction.

[00:06:52] Speaker 01:
You argue there was jurisdiction.

[00:06:56] Speaker 01:
But even if the fact isn't at issue, the adequacy of the claim is, right?

[00:07:06] Speaker 02:
That's what they contain, Your Honor.

[00:07:09] Speaker 01:
The district court didn't talk about adequacy, did it?

[00:07:13] Speaker 02:
Your Honor, just to back up and make sure I'm being absolutely clear about this, Your Honor's right.

[00:07:19] Speaker 02:
This court has consistently said that even though the fact of filing requirement is subject matter jurisdictional,

[00:07:26] Speaker 02:
And even though this court in a recent unpublished decision held that the timeliness requirement under 6511 is subject matter jurisdictional, that doesn't matter here because the only issue was the adequacy of our filing, not whether or not we made one, not whether or not it was a request for a refund, and not whether or not it was on time.

[00:07:46] Speaker 00:
But how would the analysis have differed?

[00:07:48] Speaker 00:
I mean, if we were reviewing it under failure to state a claim.

[00:07:51] Speaker 02:
It would be a different standard.

[00:07:53] Speaker 02:
It wouldn't be the 12b1 standard.

[00:07:55] Speaker 02:
It would be a 12b6 standard.

[00:07:57] Speaker 02:
And we would have the opportunity to ask for permission to amend.

[00:08:01] Speaker 02:
That alone is a basis for reversal, because the court decided this under the 12b1 standard and not the 12b6 standard or a motion for judgment on the pleading standard or another appropriate standard.

[00:08:13] Speaker 02:
But if that were to happen on remand,

[00:08:16] Speaker 03:
On the amendment, what might you want to say in an amended complaint?

[00:08:23] Speaker 02:
Because that issue wasn't presented to the court below.

[00:08:25] Speaker 03:
There's no record on it.

[00:08:26] Speaker 03:
But if you're saying that this makes a difference, you need to be able to say, here's what we should think it makes a difference.

[00:08:32] Speaker 02:
We don't think it would make a difference.

[00:08:33] Speaker 02:
We think we adequately pledged claims under 12b6.

[00:08:36] Speaker 00:
OK, so there's no practical difference.

[00:08:38] Speaker 00:
I mean, there's no equitable tolling that's been shown here or argued.

[00:08:42] Speaker 00:
There's no waiver argument by the government.

[00:08:45] Speaker 00:
The government presented all these issues below.

[00:08:47] Speaker 00:
So it's a practical matter.

[00:08:48] Speaker 00:
I'm not seeing the distinction between deciding this issue is jurisdictional or is failure a state of claim.

[00:08:55] Speaker 00:
What's the difference?

[00:08:56] Speaker 00:
Your answer was we wanted to amend it, or we could have amended it.

[00:09:00] Speaker 00:
I don't understand.

[00:09:04] Speaker 02:
The 12b6 issues that the government has argued have gone to whether or not we actually stated a claim under the client versus commissioner argument and the supervisory approval issue.

[00:09:15] Speaker 02:
Those claims were never considered by the court below.

[00:09:17] Speaker 02:
We think that if the government were to go back and ask for a motion to dismiss based on the substantial variance doctrine,

[00:09:28] Speaker 02:
You know, we think that would be most appropriate at a motion for summary judgment as that I believe is an affirmative defense.

[00:09:34] Speaker 02:
I don't think that the Court of Federal Claims could dismiss it on a 12b6.

[00:09:38] Speaker 02:
Even if they could, then we would go back and allege everything that's on the record that we put on the record, all the evidence that we put on the record,

[00:09:45] Speaker 02:
that the IRS had enough information, et cetera, et cetera.

[00:09:49] Speaker 02:
So the arguments would really, they would be the same in terms of our informal claim doctrine argument and our germaneous argument.

[00:10:00] Speaker 03:
Can I ask you a very specific question?

[00:10:02] Speaker 03:
So in the summer of 2018, you filed, I think you filed on August, in August 2018, but they're signed 20 July, the 843 forms.

[00:10:16] Speaker 03:
Yes, Your Honor.

[00:10:19] Speaker 03:
I'll ask the government too, but I want to ask you.

[00:10:23] Speaker 03:
Has the government said that those forms as submitted were, in fact, complete in order to be duly filed, timing aside?

[00:10:36] Speaker 02:
I'm not aware of any part of the record where they come in and say that, but they did consider those claims on the merits after receiving those forms in the accompanying documentation.

[00:10:46] Speaker 03:
The reason I ask is this.

[00:10:49] Speaker 03:
Line seven of those forms, which is the line that says give us grounds Doesn't say Klein doesn't say Approval by supervisor.

[00:11:03] Speaker 03:
In fact, it doesn't say any Ground at all and if the IRS accepted those forms as completed I'm having a little trouble seeing

[00:11:15] Speaker 03:
why the Pearl Harbor Day 2017 filing your letter, why it matters whether you said Klein, whether you said supervisor or anything like that.

[00:11:29] Speaker 02:
Well, certainly those forms did reference and attach both our Pearl Harbor Day 2017 letter and our modified protective claim in April of 2018.

[00:11:40] Speaker 02:
So it attached and referred to them.

[00:11:42] Speaker 02:
So all those grounds were presented with the form 843 implicitly.

[00:11:49] Speaker 02:
Yes.

[00:11:50] Speaker 02:
So and just to go back to this.

[00:11:54] Speaker 02:
This issue about whether or not our supervisory approval claim was adequately presented and whether or not our client versus commissioner argument was adequately presented as to the year of filing.

[00:12:04] Speaker 02:
First, this court has never held that the year of filing has to be expressly stated.

[00:12:11] Speaker 02:
And the tax quarters were, the IRS had notice of the tax quarters because all it had to do was exactly what it did.

[00:12:20] Speaker 02:
Go find the restitution order.

[00:12:22] Speaker 02:
look at how it allocated interest and penalties and do the math from there.

[00:12:28] Speaker 02:
In fact, that's exactly like Memphis Cotton, one of the seminal Supreme Court decisions.

[00:12:34] Speaker 02:
In Memphis Cotton, there was an informal claim.

[00:12:37] Speaker 02:
The Supreme Court held it was an informal claim.

[00:12:39] Speaker 02:
But to process that claim, the IRS asked for

[00:12:44] Speaker 02:
the taxpayers' books and conducted an audit of those books.

[00:12:48] Speaker 02:
So for the government to say that to satisfy the informal claim doctrine, we have to have given them copies of every document they would need to assess the claim is inaccurate.

[00:13:00] Speaker 00:
But you're kind of creating a straw man.

[00:13:03] Speaker 00:
What did you say in your submission of December 7th relating to the supervisory authority?

[00:13:09] Speaker 00:
I see a reference to the Klein theory, but nothing whatsoever.

[00:13:14] Speaker 00:
So there's nothing.

[00:13:14] Speaker 00:
So your argument that they needed us to sign every day to whatever, whether you're right or wrong on that, you still needed to say something.

[00:13:22] Speaker 00:
And where is the something you're relying on on December 7th for the supervisory?

[00:13:26] Speaker 02:
As to supervise the approval, nothing in the Pearl Harbor Day 2017 letter.

[00:13:33] Speaker 02:
Your Honors, I see that I'm into my rebuttal time.

[00:13:36] Speaker 02:
I'll just briefly note that

[00:13:39] Speaker 02:
You know, we've preserved certain arguments as to the subject matter jurisdiction argument that might have to be taken up by this court en banc, by the Supreme Court.

[00:13:47] Speaker 02:
Those are not at issue here as to the fact of filing or the timeliness of filing under 6511 or several of the equitable exceptions, waiver and general claim in equitable tolling.

[00:13:59] Speaker 02:
Thank you very much.

[00:14:01] Speaker 01:
We will give you your full two minutes for a bottle.

[00:14:04] Speaker 01:
Thank you.

[00:14:06] Speaker 01:
Ms.

[00:14:06] Speaker 01:
Wallace.

[00:14:14] Speaker 04:
Thank you, Your Honor.

[00:14:15] Speaker 04:
Good morning, may it please the court.

[00:14:17] Speaker 04:
I'm Rachel Wolitzer, representing the Appellee of the United States.

[00:14:21] Speaker 04:
The Supreme Court in Dalm held that the filing of a timely refund claim is a jurisdictional requirement for a refund suit.

[00:14:30] Speaker 03:
Why does that issue matter here?

[00:14:33] Speaker 03:
I know there's lots of ink that's been spilled, but I can't figure out why we need to resolve that.

[00:14:38] Speaker 03:
All of the computer vision exceptions apply, even if it's jurisdictional.

[00:14:44] Speaker 03:
I don't really see a meaningful argument for equitable tolling in a way that wouldn't be available for a jurisdictional point.

[00:14:57] Speaker 03:
So I'm not sure why.

[00:14:59] Speaker 03:
We need to decide anything about that.

[00:15:01] Speaker 04:
That's correct, Your Honor.

[00:15:02] Speaker 04:
It is an academic question whether the complaint is subject to dismissal on jurisdictional grounds or for failure to state a claim.

[00:15:11] Speaker 04:
So if the court would like me to just proceed into why the claims were inadequate and didn't satisfy any of the applicable doctrines, I can just do that.

[00:15:24] Speaker 04:
In this case, the taxpayer dollar electric

[00:15:28] Speaker 04:
seeks a refund of employment tax penalties and interest, assess against the company.

[00:15:35] Speaker 00:
after a civil audit.

[00:15:37] Speaker 00:
Can I ask you, when you're going through this, I'm really caught up in the fact that the two theories may be different, or at least should be treated differently under the variance factors.

[00:15:47] Speaker 00:
So can we talk about the Klein-based theory?

[00:15:50] Speaker 00:
Yes.

[00:15:50] Speaker 00:
Because it seems like the analysis is it wasn't specific enough to be an informal claim, but it was too specific to be a general claim.

[00:15:59] Speaker 00:
Exactly.

[00:16:00] Speaker 00:
I'm having a hard time reconciling those two.

[00:16:04] Speaker 04:
Right, Your Honor.

[00:16:06] Speaker 04:
If the taxpayer makes out a specific claim, then the taxpayer can, after the limitations period, but while the IRS still has jurisdiction over the claim, make a formal amendment raising a new legal theory that is germane to the original claim.

[00:16:25] Speaker 04:
So here, they made the specific claim, which was the Klein theory.

[00:16:29] Speaker 04:
And then later, they tried to amend it out of time.

[00:16:34] Speaker 04:
with a theory that isn't her main to that.

[00:16:38] Speaker 00:
You're talking about the supervisory authority.

[00:16:40] Speaker 04:
Exactly.

[00:16:40] Speaker 00:
No, I get that.

[00:16:41] Speaker 00:
I thought just looking at the Klein theory, though, doesn't it live under the general or under the specific?

[00:16:51] Speaker 00:
I mean, just leaving aside the other one, the difficulty I've had in this case is you kind of mush those two theories.

[00:16:58] Speaker 00:
And I think there's a basis for arguably separating the two.

[00:17:01] Speaker 00:
So just stick with the Klein theory.

[00:17:03] Speaker 00:
If you just have the Klein theory,

[00:17:04] Speaker 00:
Can it be not specific enough for the informal claim, but too specific for the general claim?

[00:17:10] Speaker 04:
Well, the client theory, Your Honor, simply doesn't apply here.

[00:17:15] Speaker 04:
Because a restitution-based assessment, which was referred to in that first claim letter, is a specific term of art.

[00:17:25] Speaker 04:
And it was authorized in 6201A4.

[00:17:30] Speaker 04:
And it applies, it means an assessment against the criminal defendant in the amount of the restitution judgment.

[00:17:39] Speaker 04:
So when Doherty Electric

[00:17:42] Speaker 04:
submitted this letter referring to a restitution-based assessment, there really was no such thing in the case at the time.

[00:17:52] Speaker 00:
And in fact, that's a merits argument.

[00:17:54] Speaker 00:
And I understand that you have plenty of merits arguments on the claim theory, and when nobody ever reached them under these circumstances.

[00:18:02] Speaker 00:
But that's a merits argument.

[00:18:04] Speaker 00:
That's not what's before us now, right?

[00:18:07] Speaker 04:
No, Your Honor, because it shows that the IRS did not have enough information based on that letter to know that Dougherty Electric was seeking a refund of penalties assessed, employment tax penalties assessed, after a civil audit for those specific periods.

[00:18:30] Speaker 04:
The IRS just received this check with no allocation

[00:18:35] Speaker 03:
And you now agree that contrary to your motion to dismiss, there was no instruction with the 2015 payment.

[00:18:46] Speaker 04:
Yes, Your Honor.

[00:18:47] Speaker 04:
That was an error in our briefing.

[00:18:53] Speaker 04:
So they had the check and then they got this letter and the letter didn't say,

[00:19:01] Speaker 04:
Oh, we're seeking a refund of employment taxes for this period, or for these periods, nine periods.

[00:19:09] Speaker 04:
And instead, it talked about this restitution-based assessment, which it didn't even exist.

[00:19:16] Speaker 03:
What was the IRS civil assessment, 2010 I think it was, that the 2015 payment said it was responding to?

[00:19:32] Speaker 04:
In 2010, after a civil audit, in March 2010, the IRS assessed the employment taxes and the civil fraud penalties and interest for the nine quarters.

[00:19:53] Speaker 03:
And for those nine quarters, and there was a penalty

[00:19:57] Speaker 03:
I'm sorry, there was a amount of employment tax not yet paid and a penalty column, right?

[00:20:04] Speaker 03:
Right.

[00:20:04] Speaker 04:
And interest.

[00:20:05] Speaker 03:
A little bit of interest.

[00:20:06] Speaker 03:
Assessed interest.

[00:20:07] Speaker 03:
Interest was going to continue to run by 2015.

[00:20:11] Speaker 03:
Correct.

[00:20:11] Speaker 03:
So the IRS, and I forget, did the December 2017 letter reference back to the, it did reference back to, refer back to the 2015 payment.

[00:20:26] Speaker 03:
Did the 2015 payment refer to the civil assessment from March of 2010?

[00:20:36] Speaker 04:
Well, as Mr. Hughes explained, the chart wasn't submitted until later.

[00:20:46] Speaker 04:
So presumably all that was.

[00:20:49] Speaker 03:
So there's a December 11, 2015 letter that says, attached as a check, right?

[00:20:59] Speaker 03:
Correct.

[00:21:00] Speaker 03:
OK.

[00:21:00] Speaker 03:
Did that refer to the 2010 civil assessment?

[00:21:14] Speaker 04:
I have to check, Your Honor, because there is a sealed appendix in this case.

[00:21:19] Speaker 04:
So I need to make sure that that was discussed by the court.

[00:21:25] Speaker 03:
I guess I'm trying to figure out what to make of, you make two different buckets of arguments for what was missing from the December 2017 letter.

[00:21:40] Speaker 03:
One is you didn't tell us the years and the amounts.

[00:21:43] Speaker 03:
The other is you didn't tell us enough about the reasons.

[00:21:46] Speaker 03:
Or you did one, but not the one eventually added.

[00:21:50] Speaker 03:
And I'm trying to focus on the first, the years and amounts.

[00:21:54] Speaker 03:
And it's the IRS made an assessment in 2010 based on nine quarters and penalties.

[00:22:09] Speaker 03:
It doesn't take more than arithmetic to calculate the interest because it's all statutory.

[00:22:17] Speaker 03:
to produce the exact number that was paid in 2015.

[00:22:22] Speaker 03:
And that exact number matched to the penalty, to the penny, what was requested as a refund in 2017.

[00:22:34] Speaker 03:
So it seems a little bit of a strain, I guess, to say the IRS was not apprised what this

[00:22:45] Speaker 04:
December 2017 refund request was for That's what I'm well because and in fact you can look at the denial letter by the IRS which basically says Well first there was a letter by the IRS saying well if this is all about the restitution judgment send us the restitution judgment, so they obviously Didn't really know what that was about and then

[00:23:11] Speaker 04:
The denial letter said the interest was proper in this restitution judgment.

[00:23:23] Speaker 04:
There was nothing wrong with the restitution order.

[00:23:26] Speaker 04:
The restitution judgment was perfectly legal.

[00:23:30] Speaker 04:
So you can see that the IRS was misled into focusing on this restitution-based assessment instead of the actual

[00:23:41] Speaker 04:
civil penalties against Doherty Electric, as opposed to the restitution-based assessment, which would have been against Mr. Doherty as the criminal defendant.

[00:23:55] Speaker 04:
So the first letter again is just

[00:23:59] Speaker 04:
It doesn't identify the tax periods which this court in Stevens held that a refund claim does have to do, even an informal one.

[00:24:09] Speaker 04:
It didn't identify the basis which it seeks to pursue in this case, which is 6751.

[00:24:20] Speaker 04:
And so therefore, the claim did not preserve.

[00:24:24] Speaker 03:
I'm sorry, you're more familiar with what substance a number like 6751 has.

[00:24:30] Speaker 03:
Is this the supervisory approval?

[00:24:32] Speaker 04:
Oh, the supervisory approval.

[00:24:33] Speaker 04:
I'm sorry, Your Honor.

[00:24:34] Speaker 04:
Yes, it didn't preserve that in the timely filed letter.

[00:24:40] Speaker 04:
So therefore, the only thing that it did mention in the complaint

[00:24:50] Speaker 04:
Um, it mentioned it in the complaint, but there was no timely letter raising that issue.

[00:24:58] Speaker 04:
So that issue was not preserved.

[00:25:00] Speaker 04:
And there's no, uh, and because combined with the years, not being on the claim and the basis that they now seek to pursue in their

[00:25:14] Speaker 04:
in their complaint.

[00:25:16] Speaker 04:
That's why the claim, the only timely claim, filed four days before the expiration of the statute of limitations was not a claim.

[00:25:25] Speaker 04:
It really wasn't even a claim.

[00:25:28] Speaker 03:
Mr. Hughes says that Daugherty Electric is pursuing its Klein theory.

[00:25:38] Speaker 04:
Yes, Your Honor.

[00:25:42] Speaker 04:
There really isn't a restitution-based assessment in this case.

[00:25:47] Speaker 04:
The restitution-based assessment would have been against Mr. Doherty.

[00:25:54] Speaker 04:
And the statute that authorizes those wasn't even passed and effective until after the judgment had already been entered.

[00:26:06] Speaker 04:
effective.

[00:26:07] Speaker 04:
So basically, their first letter was chasing a ghost.

[00:26:13] Speaker 03:
But those are merits arguments.

[00:26:14] Speaker 03:
And we don't have a ruling on them.

[00:26:18] Speaker 04:
Well, they just highlight the fact that the supervisor approval claim was not made in that first letter.

[00:26:31] Speaker 04:
So the IRS

[00:26:37] Speaker 04:
didn't have enough information to pass on the supervisor approval claim.

[00:26:46] Speaker 04:
It didn't even know that claim was being raised.

[00:26:50] Speaker 04:
So the IRS, none of the variance doctrines apply.

[00:26:57] Speaker 03:
Can I ask you, this is also, I guess, a little bit more on the merits maybe than we have.

[00:27:04] Speaker 03:
was if repayment of coughing up restitution, coughing up the amount of employment taxes that had not been paid but that should have been paid, how does Mr. Dougherty versus Dougherty Electric

[00:27:28] Speaker 03:
that distinction apply to that.

[00:27:32] Speaker 03:
If that money is given to the IRS, whether from a Doherty Electric account or a personal Doherty account, then there's only one such obligation that needs to be fulfilled, right?

[00:27:48] Speaker 03:
Correct.

[00:27:49] Speaker 04:
Right.

[00:27:49] Speaker 04:
They don't double count.

[00:27:51] Speaker 04:
So if it's sent in payment of the restitution, it can be applied to the civil assessment, though.

[00:28:00] Speaker 04:
So it has to be applied to the amount that was calculated.

[00:28:04] Speaker 04:
Because generally, the restitution judgment is not as exact as the amounts assessed in the civil assessments after the civil audit.

[00:28:16] Speaker 04:
which again, Doherty Electric participated in the audit.

[00:28:20] Speaker 04:
So they had all the information they needed to identify the tax periods and the basis for the claim.

[00:28:27] Speaker 04:
They didn't include that.

[00:28:29] Speaker 04:
And as to its being a merits question versus jurisdictional, even if it's a merits question, it would go to failure to state a claim.

[00:28:41] Speaker 04:
So therefore,

[00:28:43] Speaker 04:
the complaint would still be subject to dismissal for failure to state a claim because they didn't preserve their supervisory approval claim because they didn't include it in a timely letter.

[00:28:59] Speaker 04:
And the restitution-based assessment doesn't apply because there was none in this case.

[00:29:07] Speaker 04:
that authorized those had not even been passed and was not effective for the restitution judgment in this case.

[00:29:16] Speaker 04:
So whether it's subject to dismissal for lack of jurisdiction or for failure to state a claim, the complaint must be dismissed.

[00:29:30] Speaker 01:
Thank you, counsel.

[00:29:32] Speaker 01:
Mr. Hughes, let's give you three minutes for a bottle.

[00:29:37] Speaker 02:
Thank you, your honor.

[00:29:43] Speaker 02:
Just a few quick points.

[00:29:45] Speaker 02:
Some of the factual issues just emphasize why deciding this case under the wrong standard matters.

[00:29:51] Speaker 02:
It's not subject matter jurisdictional.

[00:29:52] Speaker 02:
It should be decided by the court of federal claims in the first instance below under an appropriate standard, whether that be 12b6 or summary judgment or some other standard.

[00:30:03] Speaker 02:
Council reference Dahl versus Wilkins as saying that this is the 7422A and 6511A are subject matter jurisdictional.

[00:30:13] Speaker 02:
That's incorrect.

[00:30:15] Speaker 02:
As Brown and Dixon say, only the adequacy of a filing.

[00:30:19] Speaker 02:
Well, the adequacy of a filing, which is exactly what's at issue here.

[00:30:22] Speaker 03:
Can I ask you just to get back to what Ms.

[00:30:27] Speaker 03:
Wolitzer finished with?

[00:30:30] Speaker 03:
What would be the point of a remand on the question whether the Klein theory is wrong as a matter of law because it rests on a statute that didn't even exist at the time?

[00:30:46] Speaker 03:
That seems like a pure question of law.

[00:30:48] Speaker 02:
Well, it's not been decided, but more fundamentally, I think the government is confused as to exactly what our client versus commissioner argument was.

[00:30:56] Speaker 02:
What Klein didn't say, there's a new ground for refunds based on a statute.

[00:31:02] Speaker 02:
What it said is the statute doesn't change the background principle that you can't impose a civil penalty based on a number and a criminal restitution order.

[00:31:13] Speaker 02:
And that's what we allege in our complaint actually happened here.

[00:31:17] Speaker 02:
Number one, they're wrong.

[00:31:18] Speaker 02:
Number two, this court should remand for that to be decided in the first instance based on full briefing below.

[00:31:27] Speaker 02:
Judge Prost, as to the supervisory approval argument, I just want to emphasize again that we think Western Company of America controls.

[00:31:35] Speaker 02:
And that case says that when you raise grounds in an informal claim and then additional info only available to the IRS is disclosed during the dispute, that information can be the basis of an additional grounds for a refund.

[00:31:54] Speaker 02:
And that fits within the informal claim doctrine.

[00:31:58] Speaker 02:
Stevens does not say what the government says it says.

[00:32:02] Speaker 02:
It does not say that you have to specify a year.

[00:32:05] Speaker 02:
What Stevens says is that if you specify the wrong year and a completely different ground, you can't go back and later say, well, it was really a refund claim.

[00:32:14] Speaker 00:
On the two cases you've just mentioned, were those cited in your brief?

[00:32:18] Speaker 02:
Stevens is cited extensively in both briefs.

[00:32:21] Speaker 02:
I don't recall exactly.

[00:32:23] Speaker 02:
I believe Western America was, but I don't remember where.

[00:32:27] Speaker 02:
I can't cite you to a page.

[00:32:30] Speaker 02:
And I just want to emphasize this one last point.

[00:32:35] Speaker 02:
We gave the IRS everything we had.

[00:32:38] Speaker 02:
And to the extent the record discusses what we didn't have, you can look at pages 312 and 313 of the appendix.

[00:32:45] Speaker 02:
Thank you very much, Your Honors.

[00:32:47] Speaker 01:
Thank you to both counsels.

[00:32:48] Speaker 01:
The case is submitted.