More on US v. Clintwood Elkhorn

On February 13, Akin Gump filed this Respondent’s brief in US v. Clintwood Elkhorn.  Steven C. Wu, an associate in the firm’s DC office who worked extensively on the case, wrote the following summary of the case and the arguments in the merits brief.

The issue in the case is whether a constitutional challenge to a coal export tax may be brought under the Tucker Act or, instead, must be brought under the more limited procedures available for tax refund claims.

The Export Clause of the U.S. Constitution, art. I, § 9, cl. 5, states: “No Tax or Duty shall be laid on Articles exported from any State.”  Notwithstanding the clarity of this command, Congress in 1978 levied an excise tax on coal production and sales and expressly directed that the tax would apply to sales of coal for export.  In 1998, several coal companies successfully challenged the constitutionality of this export tax in federal district court.  The IRS ultimately acquiesced in the decision.

The constitutionality of the coal export tax is no longer an issue.  Instead, the current dispute concerns the proper procedural vehicle for bringing claims to recover damages for previously collected taxes.  Two different sets of statutes could apply.  The Tucker Act, 28 U.S.C. § 1491(a), waives the United States’ sovereign immunity for (among other things) claims founded upon the Constitution.  However, not every constitutional provision provides a cause of action under the Tucker Act — only “money-mandating” provisions do.  That is, a constitutional provision must either expressly or implicitly promise money damages for its violation in order for it to provide a cause of action against the United States under the Tucker Act.  For such causes of action, the statute of limitations is six years.

By contrast, ordinary suits for tax refunds — that is, suits to recover previously paid taxes that were “erroneously or illegally assessed or collected,” 26 U.S.C. § 7422(a) — are governed by an entirely separate statutory scheme.  Under that scheme, no suit can be brought in any court until an administrative refund claim has first been filed with the IRS.  Only if that claim has been denied, or if the IRS does not act upon it within six months, can a civil action be brought in federal court.  Moreover, unlike the six-year statute of limitations for Tucker Act claims, an administrative claim for a tax refund must be filed within three years after a return was filed or two years after the tax in question was paid, whichever is later.  26 U.S.C. § 6511(a), (b)(1).

Clintwood Elkhorn, the petitioner in this case, brought this lawsuit to challenge its payment of the coal export tax for the six years preceding the filing of the lawsuit.  For the three tax years immediately before the lawsuit, Clintwood had also filed administrative refund claims within the tax statutes’ limitations period; the United States does not contest Clintwood’s entitlement to recover those taxes.

However, for the three years prior to that, Clintwood did not file an administrative refund claim, which would have been untimely in any event.  Instead, Clintwood invoked the Tucker Act’s six-year limitations period and claimed an entitlement to damages equivalent to the unconstitutional export taxes that it had paid for those years.  The United States argued that Clintwood could not recover damages for those years because it had not filed — and could not file — a timely administrative refund claim first.  Disagreeing with the United States, the Federal Circuit held that, for the three years outside the limitations period of the administrative tax refund scheme, Clintwood was entitled to damages plus interest because it had brought a constitutional cause of action under the Export Clause and the Tucker Act, not a tax refund claim under the Internal Revenue Code.

Our brief argues that the Federal Circuit’s decision was correct and should be affirmed.  We first argue that, under the straightforward test for determining causes of action that may be brought under the Tucker Act, the Export Clause is “money-mandating.”  In recent opinions, the Supreme Court has emphasized the Clause’s uniquely “simple, direct, unqualified prohibition” on congressional taxing power.  The stark terms of this prohibition necessarily entail money damages for its violation because the only way to enforce a complete exclusion of funds from revenue is to take the full and equivalent value of those funds back out of the revenue if they have been unconstitutionally collected.

Our brief further argues that the Tucker Act remedy takes precedence over the administrative tax refund scheme.  This is not a situation where two statutes expressly govern the same area and the more specific statute must be applied.  Instead, here, the two statutory schemes cover different domains, as is clear from both their text and their avowed purpose.  The Tucker Act by its own terms applies to constitutional claims against the United States.  By contrast, the administrative tax refund scheme is a congressionally designed, time-delayed, pro-government, and revenue-protective set of procedures intended to facilitate the uniform implementation of the Internal Revenue Code.  Because (we argue) Clintwood’s claim seek to vindicate a constitutional right, and not to resolve a technical tax question, the Tucker Act provides an appropriate remedy.

Oral argument in this case will be held on March 24.