Bowman v. Iddon, 15-7118

• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)
• Writing for the Court: Tatel, Circuit Judge
• Citation: 848 F.3d 1034
• Parties: John J. BOWMAN, Jr., Appellant v. Kimberly IDDON, et al., Appellees
• Docket Number: No. 15-7118,15-7118
• Decision Date: 21 February 2017

848 F.3d 1034

John J. BOWMAN, Jr., Appellant
v.
Kimberly IDDON, et al., Appellees

No. 15-7118

United States Court of Appeals, District of Columbia Circuit.

Argued November 8, 2016
Decided February 21, 2017

Jennifer J. Clark, Washington, DC, appointed by the court, argued the cause as amicus curiae in support of appellant. With her on the briefs was Jeffrey T. Green, Washington, DC.

John J. Bowman Jr., pro se, was on the brief for appellant.

Jonathan S. Cohen, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Gilbert S. Rothenberg and Gretchen M. Wolfinger, Attorneys.

Before: Tatel and Wilkins, Circuit Judges, and Ginsburg, Senior Circuit Judge.

Concurring opinion filed by Circuit Judge Tatel, with whom Senior Circuit Judge Ginsburg joins.

Tatel, Circuit Judge:

Appellant John Bowman alleges that five Internal Revenue Service (IRS) employees barred him from representing taxpayers before the Service without due process in violation of the Fifth Amendment. He seeks damages under Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics , 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). The district court dismissed the case, concluding that the Internal Revenue Code's remedial scheme for tax practitioners foreclosed a Bivens action. Without reaching that issue, we affirm on the alternative ground that Bowman has failed to state a claim under Federal Rule of Civil Procedure 12(b)(6) because his complaint contains no allegation that Defendants deprived him of a constitutionally protected interest.

I.

The Internal Revenue Service recognizes four primary groups of individuals who prepare tax returns: certified public accountants (CPAs), lawyers, enrolled agents, and unenrolled preparers ("tax preparers"). See 31 C.F.R. § 10.8(a) ; American Institute of Certified Public Accountants v. IRS , 804 F.3d 1193, 1194–95 (D.C. Cir. 2015). CPAs, lawyers, and enrolled agents must be licensed, while tax preparers are "subject to less stringent regulation." American Institute , 804 F.3d at 1195. This case concerns a tax preparer.

As of 2005, IRS regulations permitted the first three of these groups—all but tax preparers—to "practice before the IRS." See 31 C.F.R. §§ 10.2(d)–(e), 10.3(a)–(c) (2005). The regulation then governing practice before the IRS, Circular 230, defined these groups as "practitioners" and permitted them to act in "all matters connected with a presentation to the [IRS] or any of its officers or employees relating to a taxpayer's rights, privileges, or liabilities," including through "filing documents," "corresponding ... with the IRS," and "representing a client at conferences." Id. §§ 10.2(d)–(e), 10.3. Tax preparers, by contrast, could obtain only "limited practice" authorization, which allowed them to represent taxpayers before certain line officers of the IRS, excluding "appeals officers, revenue officers, Counsel or similar officers or employees." Id. § 10.7(c)(1)(viii).

In 2011, "after an IRS review found problems in the tax-preparation industry," the Service issued a new rule governing tax preparers. Loving v. IRS , 742 F.3d 1013, 1015 (D.C. Cir. 2013) (citing

848 F.3d 1037

Regulations Governing Practice Before the Internal Revenue Service, 76 Fed. Reg. 32,286 (June 3, 2011) ). That rule created a new category of "registered tax preparers," who counted as "practitioners" obligated to "register with the IRS by paying a fee and passing a qualifying exam." Id. ; see 31 C.F.R. §§ 10.2(a)(5), 10.3(f), 10.4(c), 10.5(b) (2011). Under the rule, and except as otherwise prescribed, only attorneys, CPAs, enrolled agents, and registered tax preparers could "for compensation prepare[ ] or assist[ ] with the preparation of all or substantially all of a tax return or claim for refund." 76 Fed. Reg. at 32,291 ; see 31 C.F.R. § 10.8(a) (2011) ; see also 26 C.F.R. § 301.7701-15 (2009) ("A tax return preparer is any person who prepares for compensation, or who employs one or more persons to prepare for compensation, all or a substantial portion of any return of tax or any claim to refund of tax under the Internal Revenue Code."). This court invalidated these regulations in Loving v. IRS , holding that tax-return preparers fall outside the IRS's statutory authority to regulate " ‘the practice of representatives of persons before the Department of the Treasury.’ " 742 F.3d at 1015 (quoting 31 U.S.C. § 330(a)(1) ).

Enter appellant John Bowman. While working as a tax preparer in June 2005, he pleaded guilty to mail fraud, wire fraud, and money laundering, and was sentenced to fifty-seven months' incarceration. He began serving his sentence in August 2005.

Three months later, while Bowman was still in prison, Defendant Kimberly Iddon, an IRS Revenue Agent, submitted a report of Bowman's suspected misconduct to the IRS Office of Professional Responsibility (OPR). The form on which Iddon submitted the report required her to identify whether Bowman was an attorney, CPA, enrolled agent, or enrolled actuary. Though Bowman had never been an enrolled agent, Iddon erroneously identified him as one, citing "personal knowledge" and attaching newspaper articles on Bowman's prosecution. Bowman Mot. for Summ. J. at 21. None of those articles, however, identify Bowman as an enrolled agent, and Iddon never searched the IRS's records to confirm Bowman's status.

A few weeks later, Iddon faxed Bowman's IRS Centralized Authorization File to an OPR paralegal. Although the space on the form for "Enrollment Number" is empty, someone handwrote the words "Enrolled Agent" at the bottom of the page. Bowman Mot. for Summ. J. at 35. An IRS official who has since searched the agency's records reports that she "did not find any record indicating that [Bowman] was authorized to practice before the IRS as an enrolled agent." Rogers Decl. at 1.

OPR nonetheless initiated disciplinary proceedings to suspend Bowman from doing what, as a tax preparer, he had no authority to do: practice before the IRS. Due to a second mistake by the IRS, Bowman received neither the complaint that initiated those proceedings nor an opportunity to correct the agency's obvious error. Specifically, the Service mailed a copy of the complaint to his business address, even though the IRS knew Bowman was incarcerated and had forfeited his business property to the government as restitution. Unsurprisingly, the letter was returned undelivered.

A month later, OPR issued a "decision by default" suspending Bowman. Decision—Complaint No. XP-2006-067 at 1. That decision reads:

Effective this date, you are suspended from eligibility to practice before the Internal Revenue Service. Your suspension prohibits you from engaging in practice before the Internal Revenue Service as that term is defined in section 10.2(d) of Circular 230.

848 F.3d 1038

Repeating its earlier mistake, OPR sent the letter to Bowman's former business address even though, as the IRS well knew, Bowman remained incarcerated and the previous letter had been returned undelivered.

The IRS then announced Bowman's suspension in its quarterly bulletin, as well as on a website listing disciplinary actions for "Attorneys, Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries." See Internal Revenue Bulletin, 2006-18 I.R.B. 855, 869 (May 1, 2006). Defendant Karen Copeland, an OPR manager, emailed more than twenty people informing them that Bowman "ha [d] been suspended from practice before the [IRS]" and "should not be recognized as a taxpayer's representative." Bowman Mot. for Summ. J. at 49–50. She provided the information for "dissemination throughout your organization as you deem appropriate." Id. at 49.

Having left prison, and having received no correspondence from the IRS, Bowman learned of OPR's disciplinary decision through a Freedom of Information Act request in September 2011. By this time, the IRS had promulgated the 2011 rule extending Circular 230 to tax preparers. So on November 30, 2012, Bowman filed a petition for reinstatement with OPR pursuant to Circular 230.

Two years later, after this court's Loving decision invalidated the 2011 rule, the IRS responded to Bowman's petition. Now recognizing that Bowman was not and had never been an enrolled agent, OPR sent him a letter dated November 3, 2014, informing him that "[a]ccording to the [IRS's] Enrolled Agent database, you are not an Enrolled Agent." Bowman Mot. for Summ. J. at 75. OPR went on to warn Bowman that "unless you currently possess a license under section 10.3 of Circular 230, you may not engage in full practice before the Internal Revenue Service...." Id. But OPR concluded by restoring Bowman's "ability to engage in limited practice before the IRS, as defined in section 10.7 of Circular 230, by removing [his] name from the list of individuals currently barred from practice before the IRS." Id.

In January 2014, Bowman, proceeding pro se, sued Iddon, Copeland, and three other IRS officials. He raised a single Bivens claim—that Defendants violated the Fifth Amendment by harming his reputation and business without due process—and sought compensatory damages, punitive damages, and costs. Defendants moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and (6) on a variety of grounds,...