Bowers v. United States of America et al

Filing 25

ORDER Entered by Chief Judge James E. Shadid on 5/22/12. For the reasons set forth above, the Motion to Dismiss 14 is GRANTED and the alternativerequest for summary judgment is MOOT. This matter is DISMISSED for failure to state a claim upon which relief could be granted. All deadlines or hearings are VACATED and any other pending motions are now MOOT. This matter is now TERMINATED. (cc:pla)(SW, ilcd)

E-FILED

Tuesday, 22 May, 2012 03:01:55 PM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS

GARY D. BOWERS,
Plaintiff,
v.
UNITED STATES OF AMERICA and
COMMISSIONER OF INTERNAL
REVENUE,
Defendants.

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Case No. 11-1224

ORDER
This matter is now before the Court on Defendant’s Motion to Dismiss or Alternatively for
Summary Judgment. For the reasons set forth below, the Motion to Dismiss [14] is GRANTED.
BACKGROUND
Plaintiff, Gary Bowers, is a resident of Pekin, Illinois. He has received monthly social
security benefits for a number of years and continues to receive these benefits. In June 2010, the
Internal Revenue Service placed a levy against Bowers’ social security benefits to collect overdue
tax debt, requiring the Social Security Administration to remit $1,107.80 of each of the checks since
June 2010 to the IRS and leaving a $779.17 monthly benefit for Bowers. He contends that this levy
exceeds the 15% maximum allowed under IRS regulations and that all efforts to remedy the situation
through the administrative process have failed.
Defendants have now moved to dismiss the Complaint. The matter is fully briefed, and this
Order follows.

DEFENDANTS MOTION TO DISMISS
I.

Legal Standard

Courts have traditionally held that a complaint should not be dismissed unless it appears from
the pleadings that the plaintiff could prove no set of facts in support of his claim which would entitle
him to relief. See Conley v. Gibson, 355 U.S. 41 (1957); Gould v. Artisoft, Inc., 1 F.3d 544, 548 (7th
Cir. 1993). Rather, a complaint should be construed broadly and liberally in conformity with the
mandate in Federal Rule of Civil Procedure 8(f). More recently, the Supreme Court has phrased this
standard as requiring a showing sufficient “to raise a right to relief beyond a speculative level.” Bell
Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007). Furthermore, the claim for relief must be
“plausible on its face.” Id.; Ashcroft v. Iqbal, 129 S.Ct. 1937, 1953 (2009).
For purposes of a motion to dismiss, the complaint is construed in the light most favorable
to the plaintiff; its well-pleaded factual allegations are taken as true, and all reasonably-drawn
inferences are drawn in favor of the plaintiff. See Albright v. Oliver, 510 U.S. 266, 268 (1994);
Hishon v. King & Spalding, 467 U.S. 69 (1984); Lanigan v. Village of East Hazel Crest, 110 F.3d
467 (7th Cir. 1997); M.C.M. Partners, Inc. V. Andrews-Bartlett & Assoc., Inc., 62 F.3d 967, 969 (7th
Cir. 1995); Early v. Bankers Life & Cas. Co., 959 F.2d 75 (7th Cir. 1992).
II.

Analysis

The Complaint cites 26 U.S.C. § 7442 as the basis for jurisdiction. Section 7442 provides
in its entirety:
The Tax Court and its divisions shall have such jurisdiction as is
conferred on them by this title, by chapters 1, 2, 3, and 4 of the
Internal Revenue Code of 1939, by title II and title III of the Revenue
Act of 1926 (44 Stat 10-87), or by laws enacted subsequent to
February 26, 1926.
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This section plainly does not vest Plaintiff with jurisdiction to sue the IRS in federal district court.
However, the Court notes that 26 U.S.C. § 7433 does authorize a private right of action to collect
civil damages in federal district court and also contains a waiver of sovereign immunity for such a
suit.
A levy is an administrative order from the IRS seizing property belonging to a taxpayer in
payment of an outstanding tax liability. I.R.C. § 6331(a). Individual income, including social
security benefits, is partially exempt from levy under I.R.C. § 6334 in an amount equal to the sum
of the taxpayer’s standard deduction and personal exemptions. 42 U.S.C. § 407; I.R.C. §§
6334(a)(9), (c), and (d). For 2009 and 2010, this exempt amount was $779.17 per month.
An IRS levy is generally a one-time occurrence rather than a continuing event, seizing
property in existence at the time the levy is served. I.R.C. §§ 6331 (a) and (b). However, a one-time
levy may seize a future stream of payments if the taxpayer’s right to the payments is fixed and
determinable without any requirement for the provision of future services. Treas. Reg. § 301.633-1;
Rev. Rul. 55-210. Alternatively, where these requirements may not be satisfied, a levy on salary or
wages payable to or received by a taxpayer can also be continuous from the date the levy is first
made until the levy is released pursuant to I.R.C. § 6331(e). Further provisions establish that this
type of continuing levy on specified payments (which can also include the social security payments
at issue here) is subject to a 15% cap. I.R.C. §§ 6331(h)(1) and (2). It is this 15% cap that Plaintiff
claims has been violated in this case.
Plaintiff does not challenge the procedures used to institute the levy, but only the amount
levied from his social security benefits. Essentially, his position boils down to the argument that any
levy against income, such as social security payments, must be made pursuant to I.R.C. § 6331(h)
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and is therefore subject to the 15% cap. This argument lacks any basis in fact or law, as “the
permissive language of the statute gives the Secretary discretion to approve [continuous] levies under
Section 6331(h) rather than under Section 6331(a), but Section 6331(h) does not require the
Secretary to attach a continuous levy [under Section 6331(h)] even where the type of property might
be eligible for one.” Hines v. United States, 658 F.Supp.2d 139, 146-47 (D.D.C. 2009). In other
words, where a levy could be issued under both sections, the statute does not compel that the levy
be issued under one section or the other.
Here, Plaintiff’s social security payments represent a present, vested right to receive such
benefits in fixed monthly payments for the rest of his life. “The amount of benefits are calculable
– they are based on earnings averaged over plaintiff’s lifetime and determinable based upon a
complex formula.” Id., citing 42 U.S.C. §§ 402 et seq. Receipt of benefits is not contingent on the
performance of any additional services, and the tax lien and levy could therefore attach to the entire
stream of payments as a one-time levy pursuant to §§ 6331(a)-(b). The assertion that this was a onetime levy is further supported by the fact that the levy was initiated by a paper Form 668-W rather
than the electronic processes under the Federal Payment Levy Program, as would be the proper
mechanism for a continuous levy. As a one-time levy, the 15% cap on continuing levies under §
6331(h) is simply inapplicable. See United States v. Marsh, 89 F.Supp.2d 1171, 1178-79 (D.Hawaii
2000). Plaintiff has therefore failed to establish a claim for relief that is plausible on its face, and
the Complaint must be dismissed.
CONCLUSION
For the reasons set forth above, the Motion to Dismiss [14] is GRANTED and the alternative
request for summary judgment is MOOT. This matter is DISMISSED for failure to state a claim
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upon which relief could be granted. All deadlines or hearings are VACATED and any other pending
motions are now MOOT. This matter is now TERMINATED.
ENTERED this 22nd day of May, 2012.
s/ James E. Shadid
James E. Shadid
Chief United States District Judge

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