Lawson v. U.S. Internal Revenue Servs.

• Decision Date: 08 July 2016
• Docket Number: C.A. No. 15-499ML
• Parties: JAMES T. LAWSON, and DONNA S. LAWSON, Plaintiffs, v. UNITED STATES INTERNAL REVENUE SERVICES, Defendant.
• Court: U.S. District Court — District of Rhode Island

JAMES T. LAWSON, and DONNA S. LAWSON, Plaintiffs, v. UNITED STATES INTERNAL REVENUE SERVICES, Defendant.

C.A. No. 15-499ML

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

July 8, 2016

REPORT AND RECOMMENDATION

Patricia A. Sullivan, United States Magistrate Judge

Plaintiffs James T. Lawson and Donna S. Lawson (the "Lawsons"), acting pro se,¹ have sued the Internal Revenue Service (IRS), challenging tax collection efforts that they perceive either as contrary to the binding settlement of their tax court case in 2015 or violative of the statute of limitations. Eschewing other avenues of relief, the Lawsons brought their claim directly to this Court. In so doing, they ask this Court to ignore clear congressional policy that federal district courts should not intervene preemptively in the tax collection process. United States v. Thomas, 577 F. Supp. 2d 469, 479 (D. Me. 2008). The IRS responded with the pending motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1), arguing that this Court lacks subject matter jurisdiction to grant the relief the Lawsons seek. ECF No. 3. It has been referred to me for report and recommendation. 28 U.S.C. § 636(b)(1)(B).

Suits against the United States² are barred by sovereign immunity except where Congress has expressly created a waiver; when it comes to the collection of federal tax revenues, Congress has given the IRS a monopoly and created a narrow but clear set of moves for taxpayers seeking to challenge its tax collection activities. These time-tested principles do not permit taxpayers to side-step administrative remedies and bring their claim against the IRS directly in district court. Based on the bedrock doctrine that the sovereign is immune from suit except to the extent that immunity is waived, I recommend that the IRS's motion to dismiss be granted. My reasoning follows.

I. FACTUAL³ AND PROCEDURAL BACKGROUND

The Lawsons' tale of tax woe began, like so many, with a federal tax audit, which led to a notice of deficiency in March 2012 for over $650,000 in unpaid taxes for tax years 2007, 2008, and 2009, inclusive of penalties and additions. ECF No. 4 at 3; ECF No. 4-1 at 7. In June 2012, the Lawsons properly challenged the deficiencies by initiating a proceeding in United States Tax Court ("Tax Court"). ECF No. 1 at 2. After a long delay, apparently caused by one or more bankruptcy proceedings involving Mr. Lawson,⁴ the Tax Court case ended with a stipulation that lowered the Lawsons' federal income tax assessment by hundreds of thousands of dollars for the three years under review. ECF No. 4 at 3; ECF No. 4-1 at 2-3; ECF No. 6 at 2. On January 28,2015, the Tax Court entered an Order and Decision that memorialized this stipulation (the "Tax Court Ruling"),⁵ which provides that the Lawsons owe $49,313 for tax year 2007 and $800 for tax year 2009, and that "there is an overpayment in tax due to [the Lawsons] . . . in the amount of $36,062" for tax year 2008. See ECF No. 4 at 3.

After that (from the Lawsons' perspective), things went awry.

On October 19, 2015, the IRS sent a tax refund letter to the Lawsons for tax year 2008 ("Refund Letter"). Inconsistently with the Tax Court Ruling on tax year 2008, it stated that they overpaid by only $29,564, instead of the $36,062 set forth in the Tax Court Ruling.⁶ ECF No. 4-1 at 4. It also deducted "unpaid balance[s]" to "an amount owed" for four other tax years, including 1998 and 2006,⁷ neither of which had been in issue in the Tax Court case, as well as $226.03 (instead of $49,313) for tax year 2007 and $800 for tax year 2009. ECF No. 4-1 at 4. As the Lawsons argue in this Court, they do not understand any of these deductions except for the $800 unpaid tax for tax year 2009, which is consistent with the Tax Court Ruling.

After getting the Refund Letter, the Lawsons contacted the IRS several times to express their displeasure. On October 23, 2015, they sent the IRS a "Request for Appeals Review;" on October 25, 2015, they mailed an "Application for Fast Track Settlement"; and on October 19, 2015, and again on November 23, 2015, they sent certified notices that requested backup information on why the IRS deducted these amounts from their 2008 refund in light of the Tax Court Ruling. See ECF No. 1 at 2; ECF No. 4 at 4; ECF No. 8-2 at 1-2 (certified mail receiptsdated October 24 and November 7, 2015). Then, on November 30, 2015, they gave up on further pursuit of any administrative remedies⁸ and filed their complaint in this Court.

The Lawsons' extremely confusing filings (including their complaint and the various supplementations) essentially contend that the Refund Letter, coupled with other tax collection actions taken by the IRS, amount to "Criminal and deceptive" actions, based on "strange accounting methods" for which they now seek relief in this Court. ECF No. 4 at 6. The title of the complaint is an "Action to Compel [IRS] Under 6-5.410 - Tax Refund Suits/Petitions for Readjustment."⁹ It contains four requests for relief:

• For tax year 1998, it contends that the amount deducted from the refund due is barred by the statute of limitations. ECF No. 1 at 3; ECF No. 8 at 2.

• For tax year 2006, it demands "[v]erification of the amount of 2006 taxes in the amount of $1,662.21 and source of same for the amount as the [Lawsons] were never apprised of the source of this [assessment]." ECF No. 1 at 4.

• For tax year 2007, it contends that any assessment beyond the amount provided for by the Tax Court Ruling is barred. ECF No. 1 at 3, 4.

• For tax year 2009, it demands that the Court order the IRS to process the Lawsons' tax return as implicitly required by the Tax Court Ruling, which they claim would result in an additional refund. ECF No. 1 at 3; ECF No. 8 at 2.

In their supplemental filings, the Lawsons add a new accusation based on a post-filing (February 8, 2016) Notice of Intent to Levy for tax year 2007. ECF No. 4-1 at 6. The Notice says the Lawsons owe $68,642.65 "due immediately," plus a $1,218.71 failure to pay penalty. ECF No. 4-1 at 6. Because these figures differ both from the $49,313 deficiency for tax year 2007 in the Tax Court Ruling and from the "unpaid balance" of $226.03 for tax year 2007 in the Refund Letter, and is eerily (according to the Lawsons) similar to the deficiency assessed in the IRS's original audit for tax year 2007 ($58,190), they have added it to their claim.¹⁰ ECF No. 4 at 3, 6.

II. STANDARD OF REVIEW

"It is beyond cavil that, as the sovereign, the United States is immune from suit without its consent." Muirhead v. Mecham, 427 F.3d 14, 17 (1st Cir. 2005). Such consent must be expressed in "[a] waiver of sovereign immunity," which cannot be implied but "must be unequivocally expressed." United States v. Mitchell, 445 U.S. 535, 538 (1980) (citing United States v. King, 395 U.S. 1, 4 (1969)). Because the IRS is an agency of the United States, it is also well-settled that the IRS is immune from suit except where Congress, by specific statute, has waived the sovereign immunity of the United States. United States v. Williams, 514 U.S. 527, 531 (1995); Gorod v. I.R.S., No. 75-4190-F, 1976 WL 1146, at *1 (D. Mass. Sept. 21, 1976). When the United States has not waived sovereign immunity, a suit against the IRS should be dismissed for lack of subject matter jurisdiction. Sanchez v. United States, 740 F.3d 47, 50 (1st Cir. 2014) ("Federal courts lack jurisdiction over claims against the United States unless the government has waived its sovereign immunity."); see Menge v. N. Am. Specialty Ins. Co., 905F. Supp. 2d 414, 416-17 (D.R.I. 2012) (agency of federal government, "[a]bsent a waiver," is shielded by sovereign immunity from suit).

Procedurally, a motion to dismiss based on the sovereign immunity of the named defendant is an attack on the court's subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). The rule requires the court to "accept as true all well-pleaded factual averments in the plaintiff's complaint and indulge all reasonable inferences therefrom in his favor." Katz v. Pershing, LLC, 672 F.3d 64, 70 (1st Cir. 2012) (internal quotations omitted). The plaintiff has the burden to plead facts to demonstrate subject matter jurisdiction; the plausibility standard under Fed. R. Civ. P. 12(b)(6) applies to jurisdictional determinations at the pleadings stage. See Hochendoner v. Genzyme Corp., No. 15-1446, 2016 WL 2962148, at *4 (1st Cir. May 23, 2016). A court may also consider exhibits and other documents outside the pleadings on a Fed. R. Civ. P. 12(b)(1) motion. Gonzalez v. United States, 284 F.3d 281, 288 (1st Cir. 2002). The attachment of exhibits does not convert a Fed. R. Civ. P. 12(b)(1) motion into a Fed. R. Civ. P. 56 motion, unless the jurisdictional question is intertwined with the merits. Gonzalez, 284 F.3d at 287-88 (1st Cir. 2002); see Odyssey Marine Expl., Inc. v. Unidentified Shipwrecked Vessel, 657 F.3d 1159, 1169-70 (11th Cir. 2011). In considering a motion to dismiss a claim against an agency of the United States based on sovereign immunity, the court's task is to seek evidence that the federal defendant expressly waived sovereign immunity or consented in any way to be sued in the case. Menge, 905 F. Supp. 2d at 416-17. If there is no waiver, the complaint must be dismissed.

III. ANALYSIS

A. Refund Claims Barred by Sovereign Immunity

Brought in reliance on 28 U.S.C. § 1346(a),¹¹ three of the Lawsons' four requests for relief affect tax years 1998, 2007 and 2009. Read with all reasonable inferences in the Lawsons' favor and mindful of their pro se status, these claims amount to a challenge to the IRS's determination of amounts owed and a demand that the IRS issue tax refunds to bring their tax liability for those years into conformity with the Lawsons' interpretation of what the Tax Court Ruling is or should be. See ECF No. 1 at 3, 4. Similarly, the Lawsons' supplemental filings, which contest the Notice of Intent to Levy for tax year 2007 and seek to relitigate the...