                                                                   NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT
                                 ____________

                                       No. 14-3446
                                      ____________

                      LOUIS D. RUSCITTO; CAROL RUSCITTO,
                                                  Appellants
                                      v.

                            UNITED STATES OF AMERICA
                                   ____________

                     On Appeal from the United States District Court
                        for the Western District of Pennsylvania
                                (D.C. No. 2-11-cv-00824)
                      District Judge: Honorable Joy Flowers Conti
                                     ____________

                       Submitted Under Third Circuit LAR 34.1(a)
                                  November 17, 2015

           Before: AMBRO, HARDIMAN, and SLOVITER, Circuit Judges.

                               (Filed: November 23, 2015)

                                      ____________

                                        OPINION*
                                      ____________




       *
        This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does
not constitute binding precedent.
HARDIMAN, Circuit Judge.

       Louis and Carol Ruscitto appeal the District Court’s summary judgment in favor

of the Government, denying their claims for abatement and recovery of civil tax penalties

assessed against Mr. Ruscitto. The Ruscittos also challenge the District Court’s dismissal

of Mrs. Ruscitto’s claims alleging that the Government improperly used her portion of

the couple’s 2003 tax refund to satisfy Mr. Ruscitto’s tax penalties. We will affirm.

                                               I

        In early 2005, A&L, Inc., a construction company owned by Louis Ruscitto,

became financially distressed and entered into a surety agreement with Safeco Insurance

Company. Under the terms of their agreement, Safeco acquired control of A&L’s cash

flow from the company’s bonded projects, which amounted to approximately 75 percent

of its total revenue. The surety’s restrictions strained A&L’s ability to satisfy its legal

obligation to remit employment withholding taxes (also known as “trust fund taxes”) to

the Internal Revenue Service (IRS). Ultimately, A&L failed to remit trust fund taxes for

three taxable quarters in 2005 and 2006, and as a result, the IRS assessed $389,986.44 in

civil tax penalties under 26 U.S.C. § 6672 against Louis personally.

       In 2009, Louis and Carol filed a joint amendment to their 2003 individual tax

return. Their Form 1040X claimed a tax refund of $434,293 due to a net operating loss

(NOL) carryback from tax year 2005 in the amount of $2,480,647. The Ruscittos did not

receive the full amount of their claimed refund, however, because the IRS offset their


                                               2
claim to satisfy Louis’s penalties—satisfying his trust fund tax liability—and refunded

only the remaining amount ($89,226.51).

       After unsuccessfully pursuing administrative remedies with the IRS, the Ruscittos

filed suit in the District Court seeking a refund of the offset amount and denying Louis’s

culpability under 26 U.S.C. § 6672. In an amended complaint Carol asserted that she was

entitled to at least a portion of the offset amount as an “innocent” or “injured” spouse.

After a number of procedural twists, the District Court dismissed Carol’s claims and

ordered summary judgment in favor of the Government as to Louis’s tax liability. The

Court also held that Carol was not entitled to any portion of the 2003 refund as a matter

of law because the Ruscittos had “not met their burden of showing . . . that Carol Ruscitto

in any way contributed to the overpaid tax.” App. 64, 70.1

                                              II

       The Ruscittos first challenge the District Court’s dismissal of Carol’s injured

spouse claim on jurisdictional grounds and its summary judgment that she was not

entitled to a tax refund as a matter of law. Jurisdiction over a taxpayer suit seeking

“recovery of any internal revenue tax . . . or of any penalty claimed to have been

       1
          The District Court had jurisdiction of Louis’s claims under 26 U.S.C. §§ 6532
and 7422 and 28 U.S.C. § 1346. The parties contest jurisdiction over Carol’s claims
because these statutes make a timely filed administrative claim jurisdictional and Carol
did not present her administrative claim until after the Ruscittos filed their complaint. We
have appellate jurisdiction under 28 U.S.C. § 1291. Our review of both the District
Court’s dismissal order and its summary judgment is plenary, and we apply the same
standard that the District Court did when deciding the respective motions. See, e.g., Byers
v. Intuit, Inc., 600 F.3d 286, 291 (3d Cir. 2010).

                                              3
collected without authority” requires the taxpayer to present a timely claim to the IRS.

See 26 U.S.C. § 7422(a); United States v. Dalm, 494 U.S. 596, 601–02 (1990); Koss v.

United States, 69 F.3d 705, 707–08 (3d Cir. 1995).

       The District Court dismissed Carol’s injured spouse claim because of her failure to

file a Form 8379 with the IRS specifying the basis of her right to relief within the three-

year time limit of 26 U.S.C. § 6511(a). Before the District Court, the Ruscittos argued (as

they do on appeal) that they actually had seven years under 26 U.S.C. § 6511(d) because

Carol’s claim arose from a net operating loss due to “bad debts and/or worthless

securities.” App. 40. They further argued that because Carol’s claim relied on the

existence of the joint refund claimed in their Form 1040X, the limitations period did not

begin to run until the filing of their return for tax year 2005, which gave rise to the NOL

carryback. The District Court considered these arguments but found them waived and

unsupported by the allegations in the Ruscittos’ amended complaint. Nor was the Court

persuaded on the merits because “[f]rom the face of the Injured Spouse allocation Form

8379,” the Ruscittos sought relief “only from 2003 tax year,” making Carol’s claim filed

in October 2012 untimely even under the seven-year limitations period. App. 40–41.

       Based on our review of the record, we perceive no error in the District Court’s

dismissal of Carol’s injured spouse claim. And even if Carol’s Form 8379 were

considered timely, the Government would still be entitled to summary judgment because

the couple failed to satisfy their burden of establishing Carol’s independent contribution

to any tax overpayment. “Under [26 U.S.C. § 6402(a)], a refund may only be obtained by
                                              4
the taxpayer who made the overpayment.” Delaune v. United States, 143 F.3d 995, 1006

(5th Cir. 1998). “Spouses who file a joint return have separate interests in any

overpayment, the interest of each depending on his or her relative contribution to the

overpaid tax.” United States v. Elam, 112 F.3d 1036, 1038 (9th Cir. 1997) (citing Gordon

v. United States, 757 F.2d 1157, 1160 (11th Cir. 1985); Rosen v. United States, 397 F.

Supp. 342, 343 (E.D. Pa. 1975); Rev. Rul. 74-611, 1974-2 C.B. 399). The sole evidence

Carol presented to the District Court as to her tax payments in 2003 was $87,303.62 in

cancelled commercial debts, which the Ruscittos characterize as taxable income. Taxable

income, however, is distinct from income used to pay taxes: the former creates tax

liability, while the latter dissolves it. As the Ruscittos identify no other evidence

establishing that Carol actually contributed to the couple’s 2003 overpayment,2 the

District Court did not err in entering summary judgment against her.

                                              III

       The Ruscittos also challenge the District Court’s summary judgment against Louis

concerning the trust fund tax penalties assessed against him under 26 U.S.C. § 6672. The

statute authorizes the IRS to assess penalties only against “responsible person[s]” who

“willfully” fail to remit trust fund taxes. See, e.g., Greenberg v. United States, 46 F.3d

239, 242–43 (3d Cir. 1994). Louis, who was A&L’s President and Chief Executive


       2
         The Ruscittos also assert that Carol had over $25,000 in 2003 earnings from her
business activities. As the Government observes, the documents cited by the Ruscittos
indicate that those earnings occurred in 2004.

                                               5
Officer, does not contest his status as a responsible person on appeal, but argues that he

was not willful because Safeco controlled all of A&L’s finances under the surety

agreement. He further argues that a genuine dispute as to whether A&L had adequate

unencumbered funds with which to satisfy its trust fund tax obligations precluded the

District Court from entering summary judgment.

       The District Court found that A&L and Safeco’s surety agreement did not

preclude Louis’s willfulness as a matter of law because “it is undisputed that payments

made by A&L were approved by Louis Ruscitto, that employee wages were ‘always

paid[,]’ and A&L paid other expenses and utilities that Safeco did not cover.” App. 60.

And Louis conceded that A&L used revenue from unbonded projects “not tied up by

Safeco” to keep its bonded projects running. App. 374. Finally, the Ruscittos do not

contest the District Court’s finding that Louis “knew that taxes were not being paid, or

recklessly disregarded the fact that they were not being paid.” App. 60.

       Willfulness under 26 U.S.C. § 6722 “means a voluntary, conscious[,] and

intentional decision to prefer other creditors over the Government.” Quattrone

Accountants, Inc. v. IRS, 895 F.2d 921, 927–28 (3d Cir. 1990). There is no genuine

dispute that A&L, with Louis’s knowledge and authorization, paid other creditors instead

of remitting its trust fund taxes to the IRS. Accordingly, the District Court’s summary

judgment was proper. We find the Ruscittos’ unencumbered funds argument

unpersuasive because taxpayers bear the burden of showing that “all potentially available

funds were encumbered.” Honey v. United States, 963 F.2d 1083, 1087 (8th Cir. 1992)
                                             6
(emphasis added). The record in this case negates the possibility that the Ruscittos could

satisfy this evidentiary burden.

                                      *      *      *

       For the reasons stated, we will affirm the District Court’s judgment.




                                             7
