Perez v. Internal Revenue Service ( 2023 )

1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 * * * 4 JOSEPH PEREZ, Case No. 2:23-cv-00215-CDS-EJY 5 Plaintiff, Order and REPORT AND RECOMMENDATION 6 v. ECF No. 1 7 INTERNAL REVENUE SERVICE, et al., 8 Defendants. 9 10 Pending before the Court is Plaintiff’s in forma pauperis application and Civil Rights 11 Complaint alleging the Internal Revenue Service (the “IRS”) and six individual agents (the 12 “Individual Agents”) violated his Eighth and Fourteenth Amendment rights. ECF No. 1, 1-1. 13 Plaintiff’s application to proceed in forma pauperis is complete and granted below. 14 I. SCREENING THE COMPLAINT 15 Upon granting a request to proceed in forma pauperis, a court must screen the complaint 16 under 28 U.S.C. § 1915(e)(2). In its review, the court must identify any cognizable claims and 17 dismiss any claims that are frivolous, malicious, fail to state a claim upon which relief may be 18 granted or seek monetary relief from a defendant who is immune from such relief. See 28 U.S.C. § 19 1915A(b)(1), (2). However, pro se pleadings must be liberally construed. Balistreri v. Pacifica 20 Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). 21 In addition to the screening requirements under § 1915A, under the Prison Litigation Reform 22 Act, a federal court must dismiss a prisoner’s claim if the action “is frivolous or malicious, fails to 23 state a claim on which relief may be granted, or seeks monetary relief against a defendant who is 24 immune from such relief.” 28 U.S.C. § 1915(e)(2). The standard for dismissing a complaint for 25 failure to state a claim upon which relief can be granted is established by Federal Rule of Civil 26 Procedure 12(b)(6). The court applies the same standard under § 1915 when reviewing the adequacy 27 of a complaint or an amended complaint. When a court dismisses a complaint under § 1915(e), the 1 it is clear from the face of the complaint that the deficiencies cannot be cured by amendment. Cato 2 v. United States, 70 F.3d 1103, 1106 (9th Cir. 1995). 3 Review under Rule 12(b)(6) is essentially a ruling on a question of law. Chappel v. Lab. 4 Corp. of America, 232 F.3d 719, 723 (9th Cir. 2000). In making this determination, the court treats 5 all material factual allegations as true and construes these facts in the light most favorable to the 6 non-moving party. Warshaw v. Xoma Corp., 74 F.3d 955, 957 (9th Cir. 1996). While the standard 7 under Rule 12(b)(6) does not require detailed factual allegations, a plaintiff must plead more than 8 mere labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A formulaic 9 recitation of the elements of a cause of action is insufficient. Id. 10 Finally, all or part of a complaint filed by a prisoner may be dismissed sua sponte if the 11 prisoner’s claims lack an arguable basis either in law or in fact. This includes claims based on legal 12 conclusions that are untenable as well as claims based on fanciful factual allegations (e.g., fantastic 13 or delusional scenarios). Neitzke v. Williams, 490 U.S. 319, 327-28 (1989); see also McKeever v. 14 Block, 932 F.2d 795, 798 (9th Cir. 1991). 15 II. DISCUSSION 16 A. Background Facts. 17 Plaintiff brings claims against the IRS and Individual Agents Linda Aponte, Marjorie 18 Gallagher, Pamela Weems-Baker, Deidre Moran, Sterling Hickerson, Jr., Melissa Franklin, and 19 Unknown Agents. ECF No. 1-1 at 3-4. Plaintiff contends the IRS improperly deposited his three 20 Economic Impact Payments (the “stimulus checks”), totaling $3,200, into another person’s bank 21 account. Id. at 3. Plaintiff says the Individual Agents knew Plaintiff had not received his stimulus 22 checks because he sent communications to the IRS alerting the agency to this problem. Id. at 5. 23 Attached to Plaintiff’s Complaint are responses to Plaintiff’s communications in which the IRS 24 stated it needed additional time to respond to Plaintiff’s concerns. Id. at 21, 23-25. Plaintiff claims 25 he is receiving “atypical” treatment because he is an inmate. Id. at 5. 26 Plaintiff alleges the above facts demonstrate the Individual Agents violated his (1) Eighth 27 Amendment rights through deliberate indifference, atypical treatment, negligence, and cruel and 1 of IRS policies. Id. at 5-6. Plaintiff seeks compensatory and punitive damages of $3,200 from each 2 Defendant, along with interest that has accrued over the past two years. Id. at 8. 3 B. Plaintiff’s Constitutional Claims Fail. 4 1. Plaintiff’s claims against the IRS and Individual Defendants in their official capacities are barred as a matter of law. 5 6 Plaintiff’s claims against the IRS and Individual Agents in their official capacities fail 7 because these claims are barred by sovereign immunity. More specifically, Plaintiff seeks monetary 8 relief effectively from the United States as he sued the IRS, a federal agency, for money damages 9 based solely on Defendants’ performing their official duties. When it is clear “that any relief granted 10 would expend itself on the public treasury or interfere with the public administration of the tax 11 system … the action is really against the United States.”1 “[A] suit against IRS employees in their 12 official capacity is essentially a suit against the United States … As such, absent express statutory 13 consent to sue, dismissal is required.”) (internal citations omitted).2 For this reason, Plaintiff’s 14 claims against the IRS and the Individual Agents in their official capacities are barred as a matter of 15 law and the Court recommends all such claims be dismissed with prejudice. 16 2. Plaintiff’s Individual Capacity Claims. 17 To the extent Plaintiff asserts claims against the Individual Agents in their individual 18 capacities, these claims also fail. While individual capacity claims are not barred by sovereign 19 immunity,3 Plaintiff’s deliberate indifference and cruel and unusual punishment claims arise under 20 the Eighth Amendment, which applies only to punishments imposed after “a formal adjudication of 21 guilt in accordance with due process of law.”4 The Eighth Amendment requires prison officials to 22 “ensure that inmates receive adequate food, clothing, shelter, and medical care, and must take 23 24 1 Richcreek v. Grecu, 612 F.Supp. 111, 115 (S.D. Ind. 1985). 25 2 Chapin v. United States Internal Revenue Service, 276 Fed.Appx. 638 (9th Cir. 2008), citing Gilbert v. DaGrossa, 756 F.2d 1455, 1457-58 (9th Cir.1985); Cameron v. I.R.S., 593 F.Supp. 1540 (N.D. Ind. 1984); Ross v. United 26 States, 574 F.Supp. 536 (S.D.N.Y. 1983); Lawrence v. Acree, 79 F.R.D. 669 (D.D.C. 1978). 3 Dawn v. Richmond, 861 F.2d 268, 1988 WL 117424 (Table), at *3 (9th Cir. 1988); United States v. Yakima 27 Tribal Ct., 806 F.2d 853, 859 (9th Cir. 1986). 1 reasonable measures to guarantee the safety of the inmates.”5 Here, Plaintiff is not incarcerated and 2 claims only that he was deprived of property (stimulus checks) by the Individual Agents. None of 3 these individuals are prison officials and there are no allegations regarding punishment Plaintiff 4 supposedly suffered as a result of not receiving his checks from the IRS. In sum, Plaintiff’s Eighth 5 Amendment claims against the Individual Agents fail as a matter of law and should be dismissed 6 with prejudice. 7 Plaintiff next alleges the Individual Agents were negligent, there were excessive delays, and 8 violations of IRS policy resulting in violation of the Due Process Clause of Fourteenth Amendment. 9 ECF No. 1-1 at 6. Plaintiff further alleges he was treated unfairly by the Individual Agents based 10 on his status as an incarcerated person. Id. at 4. These claims fail under the Fourteenth Amendment 11 because this Amendment does not apply to the federal government or its officers.6 12 If the Court construes Plaintiff’s claims under the Fifth Amendment, Plaintiff must meet the 13 requirements of Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388 14 (1971). When no statutory redress exists, Bivens provides plaintiffs with a potential implied cause 15 of action against federal officials acting in their individual capacities who violated a plaintiff’s 16 constitutional rights.7 However, no remedy under Bivens is available “if there is an alternative 17 remedial structure present in a certain case” because a legislatively created remedy moots the 18 necessity for the judicial branch to provide “a new and freestanding remedy in damages.”8 Here, as 19 discussed infra, 26 U.S.C. § 7422 provides remedial structure for Plaintiff to obtain relief under the 20 circumstances alleged in his Complaint; thus, Plaintiff cannot proceed under the Fifth Amendment. 21 Because Plaintiff’s claims against the Individual Agents under the Fourteenth and Fifth 22 Amendments fail as a matter of law, the Court recommends these claims be dismissed with prejudice. 23 24 5 Farmer v. Brennan, 511 U.S. 825, 832 (1994) (internal quotations and citations omitted); Rhodes v. Chapman, 452 U.S. 337, 346 (1981) (“[T]he Eighth Amendment prohibits punishments which ... involve the unnecessary and 25 wanton infliction of pain, ... are grossly disproportionate to the severity of the crime,” or are otherwise “totally without penological justification.”) (citations and internal quotations omitted). 26 6 D.C. v. Carter, 409 U.S. 418, 423-24 (1973); Dry v. United States, 235 F.3d 1249, 1255 (10th Cir. 2000) (“Both … [§ 1983 and the Fourteenth Amendment] are applicable only to actions by state and local entities, not by the federal 27 government.”). 1 C. The Court Recommends Dismissing Plaintiff’s 26 U.S.C. § 7422(a) Claim Against the United States Without Prejudice. 2 3 Plaintiff’s Complaint does not expressly assert a cause of action under 26 U.S.C. § 7422; 4 however, when liberally construed, the remedy Plaintiff seeks is recovery of tax refunds under the 5 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which implicates a cause 6 of action under 26 U.S.C. § 7422.9 7 Through the CARES Act, Congress provided emergency financial assistance during the early 8 days of the COVID-19 pandemic through the distribution of “Economic Impact Payments.”10 The 9 CARES Act allowed for advance refunds on 2020 tax filings in the form of credits commonly 10 referred to as “stimulus checks.”11 “[E]ach individual who was an eligible individual for such 11 individual’s first taxable year beginning in 2019 shall be treated as having made a payment against 12 the tax imposed ... for such taxable year in an amount equal to the advance refund amount for such 13 taxable year.”12 The advance refund amount is “the amount that would have been allowed as a credit 14 under this section for such taxable year if this section ... had applied to such taxable year.”13 15 Incarcerated individuals are eligible for the refund provided by the CARES Act.14 16 Here, while Plaintiff is prohibited from seeking relief against individual IRS agents for the 17 recovery of duly owed tax refunds,15 Congress has waived the United States’ sovereign immunity 18 with respect to civil actions seeking refunds or credits on overpaid taxes.16 To pursue such a claim, 19 a plaintiff must first file his claim under 26 U.S.C. § 7422(a). This statute states: “No suit or 20 proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to 21 have been erroneously or illegally assessed or collected ... until a claim for refund or credit has been 22 duly filed with the Secretary, according to the provisions of law in that regard, and the regulations 23 9 Ross v. Bolin, Case No. 1:21-cv-01753-JLT-SAB, 2022 WL 992967, at *3 (E.D. Cal. Apr. 1, 2022). 24 10 26 U.S.C. § 6428(a); Edmisten v. Internal Revenue Service, Case No. 3:21-cv-00232-MMD-WGC, 2021 WL 5177460, at *3 (D. Nev. Aug. 19, 2021). 25 11 26 U.S.C. § 6428(f)(1). 12 Id. 26 13 26 § 6428(f)(2). 14 Scholl v. Mnuchin, 494 F.Supp.3d 661, 689 (N.D. Cal. 2020). 27 15 26 U.S.C. § 7422(f)(1); Zinda v. Johnson, 463 F.Supp.2d 45, 48 (D.D.C. 2006) (“suits for tax refunds or 1 of the Secretary established in pursuance thereof.”17 Specifically, and as applied here, a taxpayer 2 must file a claim for a refund which the IRS must either reject or not act upon within six months of 3 filing.18 4 Treasury Regulations state a refund claim “must set forth in detail each ground upon which 5 a credit or refund is claimed and facts sufficient to apprise the Commissioner of the exact basis 6 thereof … [and] [t]he statement of the grounds and facts must be verified by a written declaration 7 that it is made under the penalties of perjury … [or it] will not be considered for any purpose as a 8 claim for refund or credit.”19 In addition, certain refund claims must be made on the form identified 9 by the IRS.20 The IRS website requires a Taxpayer Statement Regarding Refund (Form 3911) must 10 be completed “to trace the nonreceipt or loss of the already issued refund check.”21 Form 3911 11 instructs a taxpayer to complete a “separate Form 3911 for each refund for which … [Plaintiff is] 12 requesting information.”22 “If the refund claim does not meet the requirements of the Code and the 13 regulations, the suit must be dismissed … because filing pursuant to the rules is a jurisdictional 14 prerequisite.”23 15 16 17 Id.; see also United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1, 4 (2008) (prior to filing a suit in federal court, a taxpayer must first comply with the tax refund scheme established in § 7422 by filing an administrative claim 17 with the IRS). 18 26 U.S.C. § 6532(a); Thomas v. United States, 755 F.2d 728, 729 (9th Cir. 1985); Bolin, 2022 WL 992967, at 18 *3 (“[I]t appears the remedy Plaintiff seeks is recovery of certain tax refunds in the form of Economic Impact Payments under the CARES Act, which would implicate a cause of action pursuant to 26 U.S.C. § 7422.”). Further, the consensus 19 among courts having addressed complaints of missing or erroneously administered COVID stimulus checks is to apply § 7422 tax refund procedures to such claims. Davis v. Internal Revenue Service, Civil Action No. 21-CV-4728, 2022 20 WL 612718, at **4-5 (E.D. Pa. Mar. 1, 2022); McElrath v. Internal Revenue Service, C/A No. 6:23-272-BHH-KDW, 2023 WL 2226833, at *2 (D.S.C. Feb. 9, 2023); Taylor v. Internal Revenue Service, Civil No. 1:22-cv-00027-HSO- 21 BWR, 2022 WL 4545121, at *3 (S.D. Miss. Sept. 28, 2022); Epps v. United States, Case No. 1:22-cv-609, 2022 WL 17250296, at *2 (S.D. Ohio Nov. 28, 2022); Kline v. Rettig, Case No. 3:21cv1002-LC-HTC, 2022 WL 4001142, at *3- 22 4 (N.D. Fla. June 29, 2022). 19 26 C.F.R. § 301.6402-2(b). 23 20 26 C.F.R. § 301.6402-2(c); see also 26 C.F.R. § 301.6402-2(a)(2) (“[I]f a taxpayer is required to file a claim for credit or refund using a particular form, then the claim, together with appropriate supporting evidence, shall be filed 24 in a manner consistent with such form, form instructions, publications, or other guidance found on the IRS.gov Web site.”). 25 21 IRS, https://www.irs.gov/forms-pubs/about-form-3911-taxpayer-statement-regarding-refund (last visited Mar. 27, 2023). 26 22 IRS, https://www.irs.gov/pub/irs-pdf/f3911.pdf (last visited Mar. 27, 2023). 23 Boyd v. United States, 762 F.2d 1369, 1371 (9th Cir. 1985) (internal citations omitted); see also Sierra v. 27 Internal Revenue Service, Case No. 1:22-cv-01226-SAB, 2022 WL 17904544, at *3 (E.D. Cal. Dec. 23, 2022) (holding 1 Plaintiff contends he submitted certificates of identity, letters, affidavits, declarations, and a 2 Form 3911 to the IRS in an attempt to collect his stimulus checks.24 However, Plaintiff does not 3 allege any facts or attach any documents showing a completed Form 3911. Plaintiff also does not 4 indicate whether he verified by written declaration that his administrative claim was submitted under 5 penalty of perjury. Plaintiff does not attach any documents to support his assertion that he submitted 6 a compliant claim, or identify what evidence, if any, he submitted to the IRS along with his claim. 7 Without evidence of Plaintiff’s prior filing of an administrative claim against the United States, the 8 Court cannot entertain Plaintiff’s requested relief as a plaintiff cannot recover damages in a lawsuit 9 for a tax refund when the facts were not previously stated in his administrative claim.25 10 While Plaintiff fails to allege sufficient facts or attach documents that evidence information 11 necessary to commence a refund process under the procedures he must follow in order to obtain 12 alleged unpaid CARES Act stimulus checks, Plaintiff may be able to amend his Complaint to allege 13 such facts or include documents that demonstrate such facts. Thus, the Court recommends dismissal 14 of this claim without prejudice and with leave to amend. 15 III. ORDER 16 IT IS HEREBY ORDERED that Plaintiff’s in forma pauperis application (ECF No. 1) is 17 GRANTED. 18 IV. RECOMMENDATION 19 IT IS HEREBY RECOMMENDED that Plaintiff’s claims under the Fifth, Eighth, and 20 Fourteenth Amendments asserted against the IRS be dismissed with prejudice as amendment is 21 futile. 22 IT IS FURTHER RECOMMENDED that Plaintiff’s claims under the Fifth, Eighth, and 23 Fourteenth Amendments asserted against the Individual Agents in their official and individual 24 capacities be dismissed with prejudice as amendment is futile. 25 24 ECF No. 1-1 at 4. 26 25 Dunn & Black, P.S. v. United States, 492 F.3d 1084, 1091 (9th Cir. 2007); Lewis v. Internal Revenue Service, Case No. 1:21-cv-1653 JLT EPG, 2022 WL 1449149, at **2-3 (E.D. Cal. May 9, 2022) (“Because the facts alleged are 27 insufficient to determine Plaintiff complied with the requirements of Sections 7422(a) and 6532(a), it appears the Court 1 IT IS FURTHER RECOMMENDED that Plaintiff's 26 U.S.C. § 7422 claim against the IF 2 || be dismissed without prejudice and with leave to amend. 3 IT IS FURTHER RECOMMENDED that Plaintiff's 26 U.S.C. § 7422 claim against tl 4 || Individual Agents be dismissed with prejudice as amendment is futile. 5 IT IS FURTHER RECOMMENDED that if Plaintiff chooses to do so, he be given o1 6 || opportunity to file an amended complaint, which he must file no later than May 1, 2023. TI 7 || amended complaint must be titled “FIRST AMENDED COMPLAINT” and must allege all facts at 8 || all claims Plaintiff seeks to assert. The Court cannot refer back to Plaintiff's original Complai 9 || when determining if the amended complaint states a claim. Plaintiff must be mindful to demonstra 10 || he has exhausted all administrative remedies in accordance with 26 U.S.C. § 7422. 11 IT IS FURTHER RECOMMENDED that Plaintiffs failure to timely comply with th 12 |} Recommendation may result in a further recommendation to dismiss this action in its entirety. 13 DATED this 29th day of March, 2023. 14 A 15 Cow) |. AroucWa lb 16 UNITEL Wg Tee or ATE JUDGE 17 NOTICE 18 Pursuant to Local Rule IB 3-2, any objection to this Finding and Recommendation must | 19 || in writing and filed with the Clerk of the Court within fourteen (14) days. The Supreme Court h 20 || held that the courts of appeal may determine that an appeal has been waived due to the failure to fi 21 || objections within the specified time. Thomas v. Arn, 474 U.S. 140, 142 (1985). This circuit has al 22 || held that (1) failure to file objections within the specified time and (2) failure to properly addre 23 || and brief the objectionable issues waives the right to appeal the District Court’s order and/or appe 24 || factual issues from the order of the District Court. Martinez v. Ylst, 951 F.2d 1153, 1157 (9th C 25 || 1991); Britt v. Simi Valley United Sch. Dist., 708 F.2d 452, 454 (9th Cir. 1983). 26 27 28