Taylor v. US Government et al

Filing 17

OPINION and ORDER Granting Defendants' 10 Motion to Dismiss. Signed by District Judge Stephen J. Murphy, III. (DPar)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
BETTY JUNE TAYLOR,
Case No. 2:18-cv-11185
Plaintiff,
HONORABLE STEPHEN J. MURPHY, III
v.
U.S. GOVERNMENT and
INTERNAL REVENUE SERVICE,1
Defendants.
/
OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS [10]
On April 13, 2018, pro se Plaintiff Betty June Taylor filed her complaint based on
"the Internal Revenue Service's failure to issue a refund" to her. ECF 1, PgID 1. Plaintiff
filed an application to proceed in forma pauperis, which the Court granted. ECF 6. On
August 3, 2018, Defendants filed a motion to dismiss. Plaintiff subsequently responded,
ECF 12, and filed a motion to strike, ECF 11. The Court has reviewed the briefs and finds
that a hearing is unnecessary. For the reasons below, the Court will grant Defendants'
motion on jurisdictional grounds and thus will not address Plaintiff's motion to strike.
BACKGROUND
On April 30, 2016, Plaintiff mailed her IRS 1040 tax return for 2015. ECF 1, PgID
1, 4. Plaintiff indicated that she earned $18,383.00 in wages, salaries, or tips. ECF 10-3,
PgID 85. She earned $2,240 in wages, tips, and other compensation, ECF 10-5, and
received $15,783 in pension benefits, ECF 10-6. She further indicated that $41,629.00 in

1

Plaintiff contends that the Internal Revenue Service ("IRS") is not an agency of the
United States and that the Department of Justice ("DOJ") cannot serve as counsel for the
IRS. See ECF 12, PgID 110. The IRS, however, is a bureau of the Department of Treasury
and is properly represented by the DOJ.
1

federal tax was withheld from her income. ECF 10-3, PgID 86. That amount actually
corresponds to the price listed for a 2015 Dodge Journey that Plaintiff sold to LLAP Auto
Lease, Ltd. ECF 10-7, PgID 93. Finally, Plaintiff claimed a $3,317.00 earned income
credit. ECF 10-3, PgID 86.2 Plaintiff indicated that her total payments were $44,946.00
and that she was entitled to a complete refund of that amount. Id. (comparing lines 74
and 75). In December 2016, to "protect [Plaintiff] from identity theft," the IRS sought to
verify Plaintiff's identity. ECF 1, PgID 6.
On April 19, 2017, Plaintiff filed an amended return. Id. at 1. Plaintiff avers that the
amended return was for "the amount of $104,304.00." Id.3 Plaintiff's amended tax return
dated April 15, 2017, however, seeks a refund of $44,946.00. ECF 10-4, PgID 87.
On July 20, 2017, Plaintiff received an adjusted refund letter that calculated her
refund at $40,821.75. ECF 1, PgID 11, 13 (listing total payments as $41,629.75 and total
tax of $808.00—a difference of $40,821.75). On July 21, 2017, Plaintiff received another
letter from the IRS explaining that she had filed "a claim of refundable credits" to which
she was not entitled, that the IRS considered the tax return frivolous, and that the filing
could result in a $5,000 penalty unless she withdrew the frivolous return. Id. at 16–17.

2

Plaintiff's claimed earned income tax credit exceeded the amount of her earned income.
Compare 26 U.S.C. § 32(c)(2)(A) (defining earned income as "wages, salaries, tips, and
other employee compensation, but only if such amounts are includible in gross income
for the taxable year") with 26 U.S.C. § 32(c)(2)(B)(ii) (stating that "no amount received as
a pension or annuity shall be taken into account" as earned income).
3

Plaintiff did not attach her original or amended tax returns to either her complaint or her
response to Defendants' motion to dismiss. Defendants did attach the original tax return,
ECF 10-3, and the amended tax return, ECF 10-4, to their motion to dismiss. Neither tax
return presents any basis for a refund exceeding $100,000.
2

Plaintiff mailed her guardianship papers and her granddaughter's social security card to
the IRS to confirm her entitlement to the credit. Id. at 2.
Then, in August 2017, the IRS mailed Plaintiff another letter seeking to verify her
identity. Id. at 21. In October 2017, the IRS sent Plaintiff a revised refund letter that
reflected an "increase in credit" of $3,317.00, which entitled her to a refund of $44,946.75.
Id. at 28. On November 30, 2017, Plaintiff filed a claim for a refund. See id. at 30;4 ECF
10-2, PgID 84.5 In December 2017, the IRS mailed multiple letters to Plaintiff regarding
the status of her inquiry into her refund. ECF 1, PgID 36–37. Finally, in January 2018, the
IRS mailed Plaintiff another letter acknowledging receipt of another inquiry. Id. at 35.
Plaintiff alleges that she "tendered payment to the IRS in the amount of $5,000 on
February 5, 2018" to pay the penalty assessment. ECF 10-2, PgID 84.
Plaintiff's complaint sought refunds of $104,304.00 for her amended 1040 tax
return ("Return Refund") and for the penalty payment of $5,030.77 ("Penalty Refund"). Id.
STANDARD OF REVIEW
Rule 12(b)(1) provides for the dismissal of an action for lack of subject matter
jurisdiction. Fed. R. Civ. P. 12(b)(1). A 12(b)(1) motion "can challenge the sufficiency of
the pleading itself (facial attack) or the factual existence of subject matter jurisdiction
(factual attack)." Cartwright v. Garner, 751 F.3d 752, 759 (6th Cir. 2014) (citing United
States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994)). When considering a factual attack
pursuant to Rule 12(b)(1), federal courts have "broad discretion with respect to what

4

Plaintiff neither signed nor dated the claim for refund.

5

Plaintiff's complaint is missing a page, but the missing page is included as an exhibit to
Defendants' motion to dismiss. Compare ECF 1, PgID 1–2 with ECF 10-2. When
reviewing a 12(b)(1) motion, the Court can review evidence outside the pleadings.
3

evidence to consider," which may include "evidence outside the pleadings[.]" Id.
Moreover, courts have "the power to weigh the evidence and determine the effect of that
evidence on the court's authority to hear the case." Id. at 759–60; see Global Tech., Inc.
v. Yubei (XinXiang) Power Steering Sys. Co., 807 F.3d 806, 810 (6th Cir. 2015). A court
is "empowered to resolve factual disputes" at the 12(b)(1) stage. Rogers v. Stratton
Indus., Inc., 798 F.2d 913, 915 (6th Cir. 1986). Finally, the plaintiff bears the burden of
establishing that subject-matter jurisdiction exists. Cartwright, 751 F.3d at 760 (citing
DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004)).
DISCUSSION
I.

Motion to Dismiss
Defendants presents three theories for dismissing Plaintiff's claim to the Return

Refund: (1) under 28 U.S.C. § 1915(e)(2)(B)(i) because Plaintiff's claim is frivolous; (2)
under Rule 12(b)(6) because the claim fails to state a claim for relief; and (3) under Rule
12(b)(1) because the Court lacks subject matter jurisdiction. Moreover, Defendants
contend that the Court lacks subject-matter jurisdiction over Plaintiff's Penalty Refund
claim. The Court will address the jurisdictional issue.
Federal courts are "courts of limited jurisdiction." Gunn v. Minton, 568 U.S. 251,
256 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
(1994)). Ordinarily, sovereign immunity precludes suit against the United States. F.D.I.C.
v. Meyer, 510 U.S. 471, 475 (1994) ("Absent a waiver, sovereign immunity shields the
Federal Government and its agencies from suit."). If the United States has not waived
sovereign immunity for a particular claim, courts must dismiss the case on jurisdictional
grounds. Reetz v. United States, 224 F.3d 794, 795 (6th Cir. 2000).

4

Congress has waived sovereign immunity in tax-refund suits for "any civil action
against the United States for the recovery of any internal-revenue tax alleged to have
been erroneously or illegally assessed or collected, or any penalty claimed to have been
collected without authority[.]" 28 U.S.C. § 1346(a)(1).
Waiver of sovereign immunity is appropriate only if two jurisdictional prerequisites
exist. First, § 1346(a)(1) "requires full payment of the assessment before an income tax
refund suit can be maintained" in a federal district court. Flora v. United States, 362 U.S.
145, 177 (1960). Second, a taxpayer must have "duly filed" a "claim for refund or credit"
with the Secretary of the Treasury. 26 U.S.C. § 7422(a); see Stocker v. United States,
705 F.3d 225, 229 (6th Cir. 2013) (citing Thomas v. United States, 166 F.3d 825, 828–29
(6th Cir. 1999)).
A. Return Refund
Defendants assert that Plaintiff's Return Refund claim fails because she "never
made any payment to the IRS for the 2015 tax year" and failed to "provide[] any proof of
payment." ECF 10, PgID 75. As evidence of Plaintiff's failure to pay, Defendants present
the unsworn declaration of Bruce E. Clark, a Revenue Officer/Advisor in the IRS Civil
Enforcement Advice and Support Operations group. ECF 10-8.6 Mr. Clark stated that,
after reviewing Plaintiff's information on the IRS database, "the IRS has never received
any withheld tax payment" for Plaintiff's 2015 federal income tax account. Id. at 95.

6

Mr. Clark made his declaration under penalty of perjury pursuant to 28 U.S.C. § 1746.

5

Plaintiff responds with several arguments.7 First, she argues that the Court has
jurisdiction under 31 U.S.C. § 5118. ECF 12, PgID 107. Section 5118 concerns gold
clauses and suits involving currency litigation; the section does not provide a basis for the
Court to exercise jurisdiction in Plaintiff's tax-refund case.
Second, Plaintiff argues that "the IRS claims that [she] was a victim of" identity
theft and that "only through discovery" could the perpetrator be discovered. Id. Plaintiff
overstates the issue. First, the IRS sent Plaintiff two letters seeking to verify her identity
to protect her from identity theft. ECF 1, PgID 6–7, 21–22. Second, the IRS sent Plaintiff
a confirmation that it received her identity theft claim. Id. at 26. It appears, then, that
Plaintiff filed a claim of identity theft. Regardless, the identity theft issue does not help
establish the Court's jurisdiction.
Third, Plaintiff argues that Defendants failed to provide "any evidence from the
Internal Revenue Service . . . refuting [her] claim" or the determination made in the refund
letters. ECF 12, PgID 106–07. Here, Plaintiff misapprehends who carries the burden;
Plaintiff, not Defendants, must demonstrate subject-matter jurisdiction. See Cartwright,
751 F.3d at 760.
Finally, Plaintiff points to two refund letters she received from the IRS. See ECF 1,
PgID 11–14, 28. The letters indicated that Plaintiff may be entitled to refunds slightly more
than $40,000. Plaintiff avers that the Court would have to either "think[] that the Internal
Revenue Service is totally incompetent" or "would have to enforce [the IRS's]
determination" made in the refund letters. ECF 12, PgID 106.

7

Although Plaintiff presented only one issue regarding Defendants' 12(b)(1) argument,
see ECF 12, PgID 107–08, the factual issues presented throughout the response are
relevant to the Court's jurisdictional analysis.
6

But Plaintiff did not receive any communication from the IRS indicating an
entitlement to an amount near $104,304.00. Furthermore, in her amended tax return,
Plaintiff sought $41,629.00 in withheld tax and $3,317.00 in an earned income credit. See
ECF 10-4, PgID 87 (lines 12, 14, and 17). Plaintiff presented no evidence that she had
tax withheld in an amount of $104,304.00.
Because Plaintiff did not present facts that she paid $104,304.00, she fails the first
prerequisite of the United States' waiver of sovereign immunity in tax-refund suits. The
United States is therefore immune from suit for Plaintiff's Return Refund claim. As a result,
the Court lacks subject matter jurisdiction.
B. The $40,000 Refund Amounts
Even if the Court were to assume that Plaintiff presented sufficient facts that she
had tax withheld in the amount of either $40,821.75 or $44,946.75—and that the United
States' waiver of immunity applied to the claim—the Court still would be required to
dismiss Plaintiff's claim.
In cases involving in forma pauperis plaintiffs, courts "shall dismiss the case at any
time if the court determines that the action" is "frivolous." 28 U.S.C. 1915(e)(2)(B)(i). An
in forma pauperis complaint is frivolous when "it lacks an arguable basis either in law or
in fact," including when it contains "fanciful factual allegation[s]." Neitzke v. Williams, 490
U.S. 319, 325 (1989). Under § 1915, courts may "dismiss those claims whose factual
contentions are clearly baseless." Id. at 327.
Plaintiff's claim to the $40,000 refunds lacks an arguable basis in fact. Her original
and amended tax returns show an annual income of only $18,383. See ECF 10-3, PgID

7

85, ECF 10-4, PgID 87.8 It is a fanciful factual allegation that the tax withheld from
Plaintiff's income could exceed her total annual income. Even if Plaintiff were able to
argue that the Court had jurisdiction to consider the claimed $40,000 refunds, the claim
is frivolous because the factual contentions are clearly baseless. The claim must be
dismissed.
C. Penalty Refund.
Defendants aver that Plaintiff's claim for the Penalty Refund similarly fails to show
that she made the payment or that she filed a claim for a refund. Mr. Clark declared that
the IRS has not received a payment for Plaintiff's penalty assessment. ECF 10-8, PgID
95.
Plaintiff responds with several arguments. First, she contends that the IRS "has
not submitted any proof that my collateral for the penalty assessed was not accepted"
and that she "ha[s] not received any correspondence contrary to that fact." ECF 12, PgID
109. Again, Plaintiff, not Defendants, bears the burden of shoing that the Court has
jurisdiction.
Second, Plaintiff cites Article 3 of the Uniform Commercial Code regarding the
tender of payment. Id. UCC 3-603 does not relate to whether the Court has jurisdiction to
decide the merits of the case.

8

Plaintiff also apparently submitted an OID-1099 Form claiming an original issue discount
of $41,629.75 in 2015 for a 2015 Dodge Journey. See ECF 10-7. Defendants contend
that Plaintiff engaged in "1099-OID fraud," which further demonstrates the frivolity of
Plaintiff's refund claims. See ECF 10, PgID 68–70. Because Plaintiff did not include the
amount as income in her annual tax returns, and makes no mention of the 1099-OID form,
the Court need not address the issue.
8

Third, Plaintiff suggests that she has no contract with the Department of Justice
and that the Internal Revenue Service is not an agency of the United States. Id. at 110.
Again, the argument fails to establish the Court's jurisdiction.
Fourth, Plaintiff cites 12 U.S.C. § 411 (authorizing federal reserve notes); 12
U.S.C. § 412 (establishing the process for federal reserve banks to apply for federal
reserve notes); 18 U.S.C. § 8 (defining "obligation or other security of the United States"
in the criminal code); and 12 U.S.C. § 95a(2), which is no longer valid. See ECF 12, PgID
110–11. None of the cited provisions provides a basis for the Court's jurisdiction.
Finally, Plaintiff offers only one piece of evidence that she submitted payment to
the IRS for the penalty assessment. See ECF 10-2, PgID 84 (referencing exhibit 13, which
appears to be a photocopy of a postage receipt); see also ECF 1, PgID 33. She submits
no other evidence that she made the payment. Moreover, she fails to submit any evidence
that she "duly filed" a "claim for refund" under 26 U.S.C. § 7422(a).
Plaintiff fails to show, therefore, that she satisfies the prerequisites for the United
States' waiver of sovereign immunity in tax-refund suits. Defendants are immune from
suit and the Court lacks subject matter jurisdiction over Plaintiff's Penalty Refund claim.
II.

Motion to Strike
Because the Court lacks jurisdiction over Plaintiff's claims, it cannot decide

Plaintiff's motion to strike. The Court will an additional clarification. Generally, tax returns
and return information remain confidential. 26 U.S.C. § 6103(a) (prohibiting certain
persons from disclosing "any return or return information"). An exception exists, however,
"if the taxpayer is a party to [a federal judicial] proceeding" pertaining to the taxpayer's

9

tax liability. Id. at § 6103(h)(4)(A). Here, Plaintiff's suit, in which she is a party, relates to
her tax refund. The disclosure, therefore, did not violate 26 U.S.C. § 6103.
ORDER
WHEREFORE, it is hereby ORDERED that Defendants' motion to dismiss [10] is
GRANTED.
SO ORDERED.

s/ Stephen J. Murphy, III
STEPHEN J. MURPHY, III
United States District Judge
Dated: September 10, 2018
I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on September 10, 2018, by electronic and/or ordinary mail.
s/ David Parker
Case Manager

10