Hope Hospice, Inc. v. United States
| Docket Number | 2:22-cv-01365-SGC |
| Decision Date | 01 December 2023 |
| Parties | HOPE HOSPICE, INC., Plaintiff, v. UNITED STATES OF AMERICA, Defendant. |
| Court | U.S. District Court — Northern District of Alabama |
This is a tax refund suit brought by Hope Hospice, Inc. It is before the court on a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure by the United States of America (the “Government”). (Doc. 23).[2]The motion is due to be granted for the reasons stated below.
Hope Hospice initiated this action by filing a complaint on October 25, 2022. (Doc. 1). The Government filed a motion to dismiss the complaint for lack of subject matter jurisdiction, in response to which Hope Hospice filed an amended complaint.
(Docs. 13, 19). The Government then filed a motion to dismiss the amended complaint for lack of subject matter jurisdiction. (Doc. 23). The motion has been fully briefed. (Docs. 26, 28). The parties requested that discovery not commence until the court ruled on the Government's motion to dismiss. (Doc. 15 at 3). The court therefore entered a stay following a scheduling conference with the parties. (Doc. 30).
The Government contends the allegations contained in the amended complaint are not sufficient to establish subject matter jurisdiction. This is known as a “facial attack” on subject matter jurisdiction. See Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir. 1990) (distinguishing between a “facial attack” on subject matter jurisdiction and a “factual attack” on subject matter jurisdiction). In the case of a facial attack on subject matter jurisdiction, a court accepts the factual allegations contained in the operative pleading as true. Stalley ex rel. U.S. v. Orlando Reg'l Healthcare Sys., Inc., 524 F.3d 1229, 1233 (11th Cir. 2008).[3]But it is not required to accept conclusory allegations as true. Lawrence v. United States, 597 Fed.Appx. 599, 602 (11th Cir. 2015).
Hope Hospice is a provider of hospice services. (Doc. 19 at ¶ 5). It did not timely report or pay its annual taxes due under the Federal Unemployment Tax Act (“FUTA”) for 2016, 2017, or 2018. (Doc. 19 at ¶ 8). The Internal Revenue Service (“IRS”) constructed FUTA returns for those years reflecting taxes owed in an amount exceeding the amount actually owed. (Doc. 19 at ¶¶ 9-10). The IRS has remedied those errors and refunded the excess FUTA taxes paid by Hope Hospice. (Doc. 19 at p. 2 n.2). But examination of Hope Hospice's FUTA tax liability prompted the IRS to examine Hope Hospice's tax liability under the Federal Insurance Contributions Act (“FICA”), and that led to a dispute that remains unresolved and forms the basis of the present action. (Doc. 19 at ¶ 11).
Hope Hospice did report and pay its FICA taxes for each quarter of 2016, 2017, 2018, and 2019 timely. (Doc. 19 at ¶ 12). It did not report or pay FICA taxes for any quarter of 2020 because it did not have any employees during those quarters. (Doc. 19 at ¶ 12). The IRS, however, asserted Hope Hospice did not report or pay FICA taxes for certain quarters of 2016, 2017, 2018, 2019, and 2020 and constructed its own FICA returns for those quarters, reflecting taxes owed in an amount exceeding the amount reflected on Hope Hospice's returns, together with penalties and interest. (Doc. 19 at ¶¶ 13-15).[4]
On August 16, 2021, the IRS sent Hope Hospice a notice of its intent to impose a tax levy in a specific amount to satisfy the tax liability reflected on the constructed FUTA returns for 2016, 2017, and 2018 and the constructed FICA returns for the first quarter of 2017 and the second quarter of 2019. (Doc. 19 at ¶ 17). But the IRS ultimately garnished Hope Hospice's Medicare reimbursements in an amount exceeding the amount stated in the notice. (Doc. 19 at ¶ 18).
The IRS began issuing refunds to Hope Hospice on February 15, 2022. (Doc. 19 at ¶ 26). Of the total amount refunded, $119,720.58 is attributable to the constructed FICA returns. (Doc. 19 at ¶ 27). But Hope Hospice claims it is still owed refunds totaling $359,870.39 in relation to the erroneous assessment of its FICA tax liability. (Doc. 19 at ¶ 28).
Hope Hospice tried to resolve its dispute with the IRS before coming to the court. It communicated, or attempted to communicate, with IRS agents but “encountered nothing but obstacles and delay.” (Doc. 19 at ¶¶ 19-21). It contacted, or attempted to contact, local and regional IRS offices and public IRS hotlines. (Doc. 19 at ¶ 22). “Several individuals who responded were sympathetic, but none were able to help.” (Doc. 19 at ¶ 22). Hope Hospice does not allege the substance of those communications. It does, however, identify and attach to its amended complaint certain letters and forms submitted to the IRS in relation to its predicament.
On November 15, 2021, Hope Hospice's certified public accountant sent a letter to the IRS in response to notices indicating Hope Hospice had an outstanding balance in relation to its FICA taxes for the first quarter of 2017. The letter stated the plaintiff had reported and paid all FICA taxes owed for the quarter at issue and attached supporting evidence. (Doc. 19 at ¶ 23(a); Doc. 19-1).[5]
On December 14, 2021, Hope Hospice filed a Form 911 Request for Tax Advocate Service Assistance. The narrative portion of the request explained, “The IRS has attached a lien on Medicare payments normally received by the business.” It noted “[c]orrespondence has been sent to the IRS addressing the issue(s) with documentation to support the fact that the amounts being assessed are not correct.” It asked “that the lien be removed and that there be a review of all submitted documentation so as to resolve this matter.” (Doc. 19 at ¶ 23(b); Doc. 19-2).
On February 11, 2022, at the recommendation of the Tax Advocate Service, Hope Hospice filed FICA returns for the first quarters of 2019 and 2020, each of which reflected there was no balance due for the period. (Doc. 19 at ¶ 23(c); Doc. 19-3; Doc. 19-4). The IRS rejected those returns. It took the position Hope Hospice had to file amended FICA returns for these quarters because the returns constructed by the IRS were original returns. (Doc. 19 at ¶ 23(d)). Hope Hospice filed an amended FICA return, also known as a “Form 941-X,” for the first quarter of 2020 on August 17, 2022. The amended return reflected there was no balance due for the quarter because Hope Hospice's FICA tax liability for the period was $0. (Doc. 19 at ¶ 23(d); Doc. 19-5).[6]
Contemporaneously with submission of the Form 941-X, Hope Hospice's attorney sent a letter dated August 16, 2022, to the IRS, requesting a refund of excess FICA taxes assessed and paid for the first quarter of 2020. The August 17, 2022 Form 941-X was attached to the letter. (Doc. 19 at ¶ 23(e); Doc. 19-6). Hope Hospice initiated this action by filing a complaint on October 25, 2022. (Doc. 1). On March 6, 2023, Hope Hospice's attorney sent a second letter to the IRS, requesting a refund of excess FICA taxes assessed and paid for all quarters at issue. (Doc. 19 at ¶ 25; Doc. 19-7). March 6, 2023, also was the date on which the plaintiff filed an amended complaint in this action. (Doc. 19).
The United States is a sovereign entity that is immune from suit unless it consents to be sued. Christian Coal. of Fla Inc. v. United States, 662 F.3d 1182, 1188 (11th Cir. 2011). It has consented to be sued for the recovery of taxes “alleged to have been erroneously or illegally assessed or collected.” 28 U.S.C. § 1346. But this waiver of sovereign immunity is conditional. The conditions relevant here are two. First, a taxpayer must “duly file[]” an administrative claim for refund with the IRS before commencing an action in district court. 26 U.S.C. § 7422(a). And second, after “filing the claim required under [§ 7422(a)],” a taxpayer must allow six months to elapse before commencing an action in district court, unless the IRS renders a decision on the claim within that time. 26 U.S.C. § 6532(a)(1). The requirements of §§ 6532(a)(1) and 7422(a) are jurisdictional. Christian Coal. of Fla., 662 F.3d at 1188 (discussing several “jurisdictional statutes” relevant to a tax refund suit, including §§ 6532(a)(1) and 7422(a)); Wachovia Bank, N.A. v. United States, 455 F.3d 1261, 1264 (11th Cir. 2006) ().[7] For an administrative refund claim to be “duly filed,” it must comply with “the provisions of law in that regard” and regulations established by the Secretary of the Treasury. § 7422(a); Ginsburg v. United States, 17 F.4th 78, 84 (11th Cir. 2021). The applicable regulations require the claim to be “filed on the form prescribed by the IRS.” 26 C.F.R. § 31.6402(a)-2(a)(ii). The form prescribed by the IRS for filing a FICA refund claim is Form 941-X. Rev. Rul. 2009-39, 2009-52 I.R.B. 951 (2009); 15 MERTENS LAW OF FEDERAL INCOME TAXATION, § 58:26 (May 2023 update). A separate claim must be made for each taxable period. 26 C.F.R. § 301.6402-2(d). The claim must “designate the return period to which [it] relates” and “explain in detail the grounds and facts relied upon to support [it].” § 31.6402(a)-2(a)(ii). It must be “verified by a written declaration signed under penalty of perjury.” § 301.6402-2(b)(1). The verification may be made by the taxpayer or the taxpayer's attorney, but if by the latter, a power of attorney must be attached to the claim. § 301.6402-2(e); Gregory v. United States, 149 Fed.Cl. 719, 723 (2020); Special Touch Home Care Servs., Inc. v. United States, 2022 WL 673660, at *4-5 (E.D.N.Y. ...
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