IRS Must Answer for Levy on Nevada 10-Year-Old

(CN) - After taking $13,000 from a 10-year-old boy, the Internal Revenue Service cannot claim that he waited too long to sue, the 9th Circuit ruled Friday.

Logan Volpicelli says he was 10 when the IRS confiscated $13,000 from him through a levy and applied it to his dead father's tax liability. The IRS thought the money belonged to his father, Volpicelli says, and he didn't learn of the wrongful levy until after he turned 18.

By the time he filed the 2010 federal complaint against the IRS in Nevada, more than eight years had elapsed since the levy.

Federal law allows only nine months to challenge an IRS levy.

"The government, as might be expected, moved to dismiss Volpicelli's action as untimely," the 9th Circuit's Friday summary of the proceedings states. "Volpicelli conceded his failure to meet the statutory filing deadline but argued that the deadline should be equitably tolled until he reached the age of majority."

Though Volpicelli said that the statute of limitations, codified at Section 653 2(c) of Title 26, should not have applied until after his 18th birthday, the trial court disagreed and granted the IRS' motion to dismiss.

"The only issue on appeal is whether the district court correctly held that § 6532(c) is not subject to equitable tolling," Judge Paul Watford wrote for the three-person appellate panel. "As it happens, we decided that very issue almost two decades ago."

Watford noted that the circuit precedent from 1995 came five years after the Supreme Court's ruling in Irwin v. Department of Veterans Affairs rejected the "then prevailing rule" under which lawsuits against the government were not subject to equitable tolling.

Since that time, however, recent U.S. Supreme Court decisions "placed new limits on the circumstances" in which equitable tolling applies, the San Francisco-based panel found.

The IRS argued equitable tolling does not apply to deadlines that are jurisdictional, an issue that it said controls Volpicelli's case.

Alternatively, the agency said equitable tolling would apply only if Velopicelli's claim were "analogous to a claim that could be asserted against a private party," according to the ruling.

Watford noted that the panel "carefully" reviewed the three Supreme Court decisions that the IRS cited, but "we don't see anything in them that would allow us to overrule our prior decisions."

The Supreme Court's recent decisions "require a clear statement from Congress before a procedural rule will be treated as jurisdictional," according to the ruling.

Finding that the statute of limitations is subject to equitable tolling, the panel said Velopicelli's claim that the IRS wrongfully took money from him "is akin to the traditional common law torts of conversion and trespass to chattels, claims that have long been asserted against private parties."

"We reaffirm our prior holding that the limitations period set by 26 U.S.C. § 6532(c) is not jurisdictional and may be equitably tolled," Watford wrote.

The case returns to U.S. District Judge Robert Jones in Nevada on remand.

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