Opinion
No. 2:99 CV 540
January 24, 2001
ORDER
Presently before the court is plaintiff United States of America's Motion to Dismiss, filed May 16, 2000. For the following reasons, the court RESERVES RULING on the motion until defendants have had an opportunity to respond to the following order to show cause.
On December 1, 1999, the government filed a complaint against defendants Hardy M. Willis, Jr. and Mary A. Willis ("the Willises") "to reduce to judgment the federal tax liabilities assessed pursuant to 26 U.S.C. § 6672" against the Willises. In its complaint, the government contends that as of November 15, 1999, the outstanding balance owed by Hardy M. Willis, Jr., including statutory additions and accrued interest, totaled $49,911,79, and that owed by Mary A. Willis totaled $52,740.85.
On March 9, 2000, the Willises notified the court that they would be proceeding in this matter pro se and filed a counterclaim against the government. In their counterclaim, the Willises argue that the above penalties were "incorrect and wrongly assessed;" that the government "did receive the Trust Fund Amounts in full" but chose to apply those amounts to interest; that "the information the Internal Revenue Department used to assess the penalty was given without getting our Taxpayer's Bill of Rights. Which in 1998 the author, U.S. Senator David Pryor promised that would `level the playing field;'" and that "[b]ecause of third party actions and lack of Due Process. The Internal Revenue Service grossly abused their powers." Due to their "great stress and financial difficulties," the Willises seek "$50,000.00 for reimbursement to attorneys, accountants, and other advise [sic]. Plus 10 years of harassment and stress. We also pray that the Internal Revenue Service be caused to wipe clean our credit records of their improper liens." In response, on May 16, 2000, the government filed the motion to dismiss presently before the court. On July 12, 2000, this court afforded the Willises up to and including Thursday, August 31, 2000, to respond to the motion. The Willises failed to respond.
In its motion to dismiss pursuant to FEDERAL RULE OF CIVIL PROCEDURE 12(b)(1), the government claims that sovereign immunity deprives this court of subject-matter jurisdiction It is fundamental that this court has no jurisdiction in a suit against the government "unless Congress has waived sovereign immunity with respect to the claim being asserted." Amwest Sur. Ins. Co. v. United States , 28 F.3d 690, 694 (7th Cir. 1994). Since jurisdiction turns upon the government's consent to be sued, sovereign immunity is properly raised in a RULE 12(b)(1) motion to dismiss. See, e.g., Gervasio v. United States, 627 F. Supp. 428, 430 (N.D. Ill. 1986).
As a preliminary matter, the government's first argument is for the dismissal of what it perceives to be the Willises' "Claim for Refund." The court will not address this argument because in their counterclaim, the Willises neither mention, nor request, nor "claim" a refund; rather, the Willises seek $50,000 in damages for the "great stress and financial difficulties" they have suffered as a result of the government's allegedly wrongly-assessed penalties. As to the Willises' claim for damages, the circumstances in which a taxpayer may bring a civil suit for damages against the government are circumscribed by the limited waivers of sovereign immunity contained within 26 U.S.C. § 7432 and 7433.
Title 26 U.S.C. § 7433 waives the sovereign immunity of the United States with regard to taxpayer civil damage suits if any officer or employee of the IRS recklessly, intentionally, or negligently disregards any provision of the Internal Revenue Code. Section 7433 reads, in relevant part:
If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.26 U.S.C. § 7433 (West 2000). In order to be able to sue the government under § 7433, the taxpayer must bring suit within two years after the date the right of action accrues and must exhaust all administrative remedies prior to bringing suit. See 26 U.S.C. § 7433(d). Failure to bring suit within two years and failure to exhaust the administrative remedies mandated by § 7433 deprives this court of subject-matter jurisdiction. See Vennen v. United States, 38 F.3d 100, 103 (3d Cir. 1994). Once a taxpayer has cleared these hurdles, he or she may sue the government for damages pursuant to § 7433 resulting only from an action "in connection with any collection of Federal tax." 26 U.S.C. § 7433(a).
Even if they had cleared the jurisdictional hurdles set forth in § 743 3(d), which is not at all clear, the Willises still would not be entitled to sue for damages under this section because for a plaintiff to sue under § 7433, the government's "reckless or intentional disregard" must be related to the collection of a federal tax assessed against the plaintiff. See, e.g., Sylvester v. United States, 978 F. Supp. 1186, 1189 (E.D. Wis. 1997). In other words, the Willises may sue under § 7433 only for harms they suffered "while the government was trying to collect the § 6672 assessment." Id . at 1190.
Construing their counterclaim liberally in light of their pro se status, the Willises arguably allege only two negligent, reckless or intentional "acts." First, the heart of the Willises' counterclaim is their allegation that the government "incorrect[ly] and wrongly assessed" a penalty which "should never have been assessed." (Defs.' Countercl. ¶¶ 1, 2, 8.) Second, the Willises allege that the government has "grossly abused their powers" and "failed to follow the instructions of the United States Congress." (Defs.' Countercl. ¶¶ 7, 10.)
The Willises' first allegation is legally insufficient because it involves tax assessment, and the only harm actionable under § 7433 must relate to the collection, rather than the assessment, of a federal tax. By its plain language, § 7433 does not apply to even reckless or intentional errors in the assessment of a federal tax, as agreed by every court which has decided the issue. See Sylvester, 978 F. Supp. at 1189 (collecting cases). The Willises' second allegation is legally insufficient because it is entirely too vague to put the government on notice. See id . at 1190 (allegation that the "IRS recklessly or intentionally disregarded provisions of the Internal Revenue Code or regulations promulgated" thereunder legally insufficient to put government on notice because plaintiff failed to "identify what actions the IRS took or what regulations were violated. At least one or the other is necessary.").
Title 26 U.S.C. § 7432(b) waives sovereign immunity with regard to civil actions for damages where any officer or employee of the IRS knowingly or negligently fails to release a lien on the taxpayer's property. Section 7432 reads, in relevant part:
If any officer or employee of the Internal Revenue Service knowingly, or by reason of negligence, fails to release a lien under section 6325 on property of the taxpayer, such taxpayer may bring a civil action for damages against the United States in a district court of the United States.26 U.S.C. § 7432 (West 2000). In other words, pursuant to § 7432, a taxpayer is permitted to sue the government for damages if the government fails to release a lien where a tax liability has been satisfied or where the lien is legally unenforceable. As under § 7433, sovereign immunity under § 7432 is not waived unless the taxpayer brings suit within two years after the date the right of action accrues and exhausts all administrative remedies prior to bringing suit. See 26 U.S.C. § 7432(d).
Not only have the Willises failed to allege either that their tax liability has been satisfied or that the lien is legally unenforceable, but they are also not entitled to sue for damages pursuant to § 7432 because they have failed to demonstrate (1) that they filed suit within two years of the date the right of action accrued, or (2) that they appropriately exhausted all administrative remedies prior to bringing suit, both of which are prerequisites to this court's subject-matter jurisdiction over their counterclaim.
In Crampton v. United States , 163 F.R.D. 545 (N.D. Ind. 1995), this court found that
it is too much to expect of a pro se litigant that he or she will know that the failure to "present contradicting affidavits or materials . . . to cure a jurisdictional or party defect" will in all likelihood lead to dismissal of his or her action. Accordingly, this court concludes that pro se litigants must be given a notice, similar to that described in Faulkner, of the probable consequences of failure to respond to a RULE 12(b)(1) motion, when the motion uses affidavits or other evidence to attack the jurisdictional facts alleged in the complaint.Crampton, 163 F.R.D. at 547 (internal citations omitted) (Moody, J.). The court found that because "a RULE 12(b)(1) motion typically requires the nonmoving party to resolve, whether through affidavits or other relevant evidence, the factual dispute regarding the court's subject matter jurisdiction," id. at 546-47, the burden to provide notice to pro se litigants of their obligation to provide evidence that they have satisfied jurisdictional prerequisites to filing suit in future cases rested upon the party moving to dismiss.
In light of this court's ruling in Crampton and the Willises' pro se status, it is ORDERED THAT the government provide appropriate notice to the Willises, by February 9, 2001, of the consequences of their failure to respond to the government's motion to dismiss their counterclaim for lack of subject-matter jurisdiction. Thereafter, the Willises are ORDERED TO SHOW CAUSE, by March 2, 2001, why their claim should not be dismissed for lack of subject-matter jurisdiction; specifically, the Willises are ORDERED to provide competent proof that they have (1) filed suit within two years of the date the right of action accrued and (2) appropriately exhausted all administrative remedies prior to bringing suit. The court will deem any failure by the Willises to comply with this order by March 2, 2001 to be an admission by the Willises that they have failed to satisfy the jurisdictional requirements for filing a claim under 26 U.S.C. § 7432 and their counterclaim will be summarily dismissed.
SO ORDERED.