The opinion of the court was delivered by: WILLIAM H. WALLS
This matter is before the Court on the motion of defendant, CPC International Inc. (CPC), to dismiss this complaint for lack of subject matter jurisdiction and for failure to state a claim.
The United States is suing to recover an erroneous refund pursuant to 26 U.S.C. § 7405. In 1990, the Internal Revenue Service (IRS) examined CPC's federal Form 1120 income tax returns for tax years 1978 through 1983. On October 30, 1990, the IRS issued a refund check to CPC in the amount of $ 3,713,283.84 of which $ 297,495.71 was refunded erroneously. The Government maintains that the $ 297,495.71 represented an overpayment by the IRS of allowable interest for tax year ending 1983.
On July 10, 1992, the IRS issued a refund check to CPC in the amount of $ 5,014,947.03 for tax year ending 1983 as a result of an additional carryback to CPC's 1983 year from tax years 1985 and 1986. The government failed to retain or setoff the $ 297,495.71 against the $ 5,014,947.03 refund. CPC has refused to return the $ 297,495.71, despite being advised that the IRS overpaid interest for tax year 1983.
On July 8, 1994, the Government filed a complaint against CPC to recover the $ 297,495.71 with interest and attorney fees.
CPC argues that the Court lacks subject matter jurisdiction and that plaintiff fails to state a claim because such is time barred. CPC contends that the two (2) year period for bringing such an erroneous refund suit commenced October 30, 1990.
The Government counters that it had a right to retain and deduct the $ 297,495.71 against the refund made to CPC on July 10, 1992. The Government's failure to setoff that stated amount against the July 1992 refund caused the July 1992 refund to be erroneous to the extent of $ 297,495.71. The statute of limitations, the Government asserts, therefore began to run in July 1992, not October 1990, making the July 8, 1994 filing of the complaint timely.
RULE 12(b)(6) DISMISSAL ON STATUTE OF LIMITATIONS GROUNDS
A complaint may be dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure when an affirmative defense appears on its face. See Ala, Inc. v. CCAIR, Inc, 29 F.3d 855, 859 (3d Cir. 1994) (citing Continental Collieries, Inc. v. Shober, 130 F.2d 631, 635 (3d Cir. 1942)). Under Rule 8(c) of the Federal Rules of Civil Procedure, the statute of limitations is an affirmative defense "and the burden of establishing its applicability to a particular claim rests with the defendant." See Bradford-White Corp. v. Ernst & Whinney, 872 F.2d 1153, 1161 (3d Cir. 1989), cert. denied sub nom. Ernst & Whinney v. Bradford-White Corp., 493 U.S. 993, 107 L. Ed. 2d 539, 110 S. Ct. 542 (1989) (quoting Van Buskirk v. Carey Canadian Mines, Ltd., 760 F.2d 481, 487 (3d Cir. 1985)).
In the present case, there is a two year statute of limitations for the government to exercise its right to sue for the recovery of an erroneous refund. 26 U.S.C.A. § 6532(b).
Recovery of an erroneous refund by suit under section 7405 shall be allowed only if such suit is begun within 2 years after the making of such refund, except that such suit may be brought at any time within 5 years from the making of the refund if it appears that any part of ...