EC Term of Years Trust v. United States, 550 U.S. 429 (2007)

In EC Term of Years Trust v. United States, the underlying dispute arose when the Internal Revenue Service (IRS) levied property belonging to the EC Term of Years Trust to collect federal tax liabilities assessed against Elmer W. Cullers, Jr., and Dorothy Cullers. The IRS claimed that the Cullers had taken unwarranted income tax deductions in the 1980s, leading to the tax liabilities. The trust, established in 1991, contested the IRS's levy, arguing that the property seized did not belong to the Cullers and was wrongfully levied upon. The procedural history of the case began when the trust attempted to challenge the IRS's levy under 26 U.S.C. §7426(a)(1), which allows third parties to contest wrongful levies. However, the trust failed to file its challenge within the statutory nine-month deadline following the levy. Instead, the trust sought to pursue a tax refund action under 28 U.S.C. §1346(a)(1), which has a longer statute of limitations. The case ultimately reached the Supreme Court on a writ of certiorari after the Fifth Circuit Court of Appeals ruled against the trust's ability to challenge the levy through the refund action. The relevant background context includes the Federal Tax Lien Act of 1966, which established the framework for third-party challenges to IRS levies. The Act aimed to protect individuals or entities that might be wrongfully subjected to a levy on property not owned by the taxpayer. It imposed a strict nine-month deadline for filing such challenges to ensure prompt resolution and allow the IRS to continue pursuing the taxpayer's assets if necessary. The case highlights the tension between the trust's claim to the levied property and the IRS's authority to collect taxes owed by the Cullers.

Whether a trust that missed the statutory filing deadline to challenge an IRS levy under 26 U.S.C. §7426(a)(1) may still pursue a tax refund action under 28 U.S.C. §1346(a)(1).

The judgment is reversed.