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11453135.1

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CHAKA FATTAH, JR., : CIVIL ACTION : Plaintiff : : v. : No. 14-1092-TJS : UNITED STATES OF AMERICA, et al., : : Defendants. : DEFENDANTS’ BRIEF IN SUPPORT OF ITS MOTION TO DISMISS CLAIMS UNDER

PRIVACY ACT AND 26 U.S.C. §§ 7431, 7433, AND FOR SUMMARY JUDGMENT AS TO REMAINING CLAIM FOR REFUND OF PENALTIES

Plaintiff’s amended complaint grasps at various legal theories, but they all fall short of

what is required to bring a claim in federal court. Plaintiff alleges that, on February 29, 2012,

two IRS special agents interviewed him in his unit in a high-rise apartment building in Center

City Philadelphia. He alleges the agents also served him with a subpoena. Later that day, he

alleges various news outlets carried news reports – and photographs – about a “raid” by federal

agents, including the FBI and the IRS. Almost exactly two years later, Plaintiff filed a complaint

against the IRS. He claimed the IRS owed him a refund of tax penalties, and he also sought

almost $1 million in damages for the IRS’s visit on February 29, 2012 – namely, arriving too

early in the morning, and not contacting Plaintiff’s lawyer before arriving. (Docs. 1-2, 1-3.)

Plaintiff amended his complaint to add a brand new claim against the United States,

alleging that he believed the media received his tax return information before and after the

February 29 interview in his apartment. (Doc. 11.) That new claim was leveled not only against

the IRS, but also against new defendants, the FBI and Department of Justice, because he believed

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they may the source of the media reports and advance notice.1 Plaintiff’s claims are

insufficiently supported by factual allegations, and they do not fall within specific, limited

waivers of sovereign immunity. Therefore, the Court lacks subject matter jurisdiction, or in the

alternative, Plaintiff has failed to state a claim upon which relief may be granted.2

LEGAL STANDARDS

“Jurisdiction over any suit against the Government requires a clear statement from the

United States waiving sovereign immunity, together with a claim falling within the terms of the

waiver.” United States v. White Mountain Apache Tribe, 537 U.S. 465, 472 (2003). The waiver

must be unequivocally expressed in statutory text and it cannot be implied or inferred. United

States v. Nordic Village, Inc., 503 U.S. 30, 33-34 (1992); Irwin v. Dep’t of Veterans Affairs, 498

U.S. 89, 95 (1990); Clinton County Comm’rs v. E.P.A., 116 F.3d 1018, 1021 (3d Cir. 1997). Any

ambiguity must be construed strictly in favor of immunity. Nordic Village, 503 U.S. at 34. If

the plaintiff cannot carry his burden to show a claim falls within a waiver of immunity, the claim

must be dismissed. Fed. R. Civ. P. 12(b)(1).

In this case, Plaintiff’s complaint is insufficient to establish jurisdiction, which would

trigger a “facial attack” under Fed. R. Civ. P. 12(b)(1). CNA v. United States, 535 F.3d 132, 139

(3d Cir. 2008) (describing “facial” versus “factual” attack). But the United States’ present

motion is also a “factual attack” on jurisdiction: the question is whether the Court actually has

jurisdiction, i.e., “the actual failure of a plaintiff’s claim to comport factually with the

1 Plaintiff’s pleadings also mention the Privacy Act, 5 U.S.C. § 552a

2 Plaintiff seeks a trial by jury, but a jury is not available in connection most or all of his claims. To the extent that any of his claims survive dismissal, the United States will then move the Court to strike the jury demand if warranted.

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jurisdictional prerequisites.” CNA, 535 F.3d at 139. When considering a factual attack, “[n]o

presumptive truthfulness attaches to plaintiff’s allegations,” and the plaintiff bears the burden of

establishing that jurisdiction does, in fact, exist. Mortensen v. First Fed. Savings & Loan Ass’n.,

549 F.2d 884, 891 (3d Cir. 1977). The Court, therefore, may consider evidence outside the

pleadings “to satisfy itself as to the existence of its power to hear the case.” Id.

Even if the Court determined that it had subject matter jurisdiction, Plaintiff has failed to

allege sufficient – or the necessary – facts to state a plausible claim upon which relief may be

granted. As such, his claims are insufficiently pleaded under the Federal Rules of Civil

Procedure. The party seeking relief must put forth “a short and plain statement of the claim

showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive a motion to

dismiss such as this, a complaint must contain more than a “formulaic recitation of the elements

of a cause of action,” “labels[,] and conclusions.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,

555 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), quoting Twombly, 550 U.S. at 570 (after

stripping away “[t]hreadbare recitals of the elements of a cause of action, supported by mere

conclusory statements,” there must remain “sufficient factual matter, accepted as true, to ‘state a

claim to relief that is plausible on its face.’”); Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir.

2007) (courts are not required to accept as true “unsupported conclusions and unwarranted

inferences” or “legal conclusions”). The “[f]actual allegations must be enough to raise a right to

relief above the speculative level.” Twombly, 550 U.S. at 555. This standard “demands more

than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. As set forth below for

each of Plaintiff’s claims, the amended complaint does not meet this standard, and therefore, the

claims should be dismissed.

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DISCUSSION

I. Plaintiff’s Claim for Damages Based on the Manner of the IRS Visit on

February 29, 2012, Relates to an Alleged Criminal Investigation and, Therefore, Does Not Fall Within the Waiver of Sovereign Immunity in 26 U.S.C. §§ 6304 and 7433.

Plaintiff seeks damages under 26 U.S.C. § 7433 for two actions by IRS special agents:

visiting his residence too early in the morning and not giving advance notice to his attorney.

(Doc. 11 ¶¶ 10-14.) Plaintiff claims those two actions or omissions violated the Fair Tax

Collection Practices Act, 26 U.S.C. § 6304(a), and that he is entitled to damages caused by those

violations. (Id. ¶ 13.)3 Plaintiff is incorrect, and his claim fails to fall within the applicable

waivers of sovereign immunity.

Section 6304 places limits on communication with a taxpayer, but it only applies “in

connection with the collection of any unpaid tax.” See 26 U.S.C. § 6304(a), (b).4 Claims of

violations of section 6304 can only be raised to the extent allowed by 26 U.S.C. § 7433, which,

in turn, only waives sovereign immunity for suits for civil damages for “collection actions.” See

26 U.S.C. § 6304(c); 26 U.S.C. § 7433 (“If, in connection with any collection of Federal

3 Plaintiff seeks nearly $1 million in overall actual damages, but it is not clear – because Plaintiff does not allege – how much of that amount is attributable to violations of section 6304, as opposed to one of his other claims. (See id. at pages 47, 49.)

4 Plaintiff apparently also seeks relief under section 6304(b) for alleged harassment, oppression, and abuse by the IRS special agents due to “contacting members of the media prior to, and after the visit to Plaintiff’s residence.” (Doc. 11 ¶ 32.) That is woefully insufficient to state a claim under section 6304(b), and moreover, because he claims the contacts with the media amount to tax return information, section 7431 is the exclusive remedy, if any exists. Gardner v. United States, 213 F.3d 735, 741-742 (D.C. Cir. 2000).

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tax…”).5 But Plaintiff’s complaint only alleges violations in connection with an apparent

criminal investigation. (Doc. 11 ¶¶ 10, 88 (identifying IRS employees as “special agents” or

“criminal investigators”); id. ¶¶ (citing Internal Revenue Manual sections relating to criminal

investigations (“CI”).) Criminal investigations seek to determine whether any criminal violation

of the internal revenue laws has occurred; on the other hand, “collection” activities by the IRS

seek to recover assets and procure payments of unpaid tax liabilities. See Buaiz v. United States,

471 F. Supp. 2d 129, 135-137 (D.D.C. 2007)(dismissing claims relating to special agent’s

investigation); Springer v. United States, No. 08-cv-4, 2009 WL 981856, at *1 (N.D. Okla. Apr.

10, 2009)(dismissing section 7433 claims against special agents conducting investigation); cf.

Hart v. United States, Civil No. 96-5639, 1997 WL 732466, at *1-2 (E.D. Pa. Nov. 21,

1997)(recognizing limited scope of “collection”). The distinction is intentional and is codified

by Congress’ separate treatment of “collection” in Chapter 64 of the Internal Revenue Code, 26

U.S.C. §§ 6301-6344, and “crimes” in Chapter 75, 26 U.S.C. §§ 7201-7344. Therefore, the plain

language of sections 6304 and 7433 offer no relief for Plaintiff’s claim of wrongdoing in the

context of a criminal investigation.

Plaintiff alleges that IRS special agents handed him a subpoena on February 29, 2012,

and he implies that the subpoena was a “collection action.” (Doc. 11 ¶ 12.) As set forth in the

Declaration of Dennis Bohn submitted herewith (“Bohn Decl.”), if there were collection actions,

the IRS’s records would contain various related entries and notations. (Bohn Decl. ¶¶ 6, 8.)

5 Although Plaintiff cites to the IRS’s alleged failure to comply with provisions of the Internal Revenue Manual, courts consistently hold that such a failure is not actionable. E.g., In re Pransky, 318 F.3d 536, 544 n.7 (3d Cir. 2003) (“Procedures in the Internal Revenue Manual are intended to aid in the internal administration of the IRS; they do not confer rights on taxpayers.”), quoting Carlson v. United States, 126 F.3d 915, 922 (7th Cir. 1997).

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Bohn reviewed Plaintiff’s accounts for 2005 – 2010, the years Plaintiff alleges were at issue in

the “collection” visit on February 29, 2012. (Id. ¶ 5.) There is no record of the assignment of a

Revenue Officer to issue a collection summons with the purpose of collecting unpaid taxes, nor

is there a record of any collection summons actually issued. (Id. ¶¶ 5-8.)

II. Plaintiff Fails to Plead any Necessary Elements to State a Claim Under the Privacy Act.

Plaintiff mentions the Privacy Act in his amended complaint, but he does not plead any of

the necessary elements for a Privacy Act claim. Generally, the Privacy Act only allows two

types of civil actions: a claim for seeking access to or amendment of plaintiff’s own records

retained by an agency, or a claim alleging improper disclosure of records in violation of the

Privacy Act. E.g., 5 U.S.C. § 552a(g)(1); Blazy v. Tenet, 979 F. Supp. 10, 16 (D.D.C. 1997)

(general description of Privacy Act remedies). At best, Plaintiff attempts to allege the latter –

that unidentified persons associated with an unspecified federal agency must have improperly

disclosed his name and address to the media. (Doc. 11 ¶¶ 1, 75, 91 (adding the “time of their

arrival”).) That is the full extent of his Privacy Act claim, and that is insufficient to state a

Privacy Act claim.

Plaintiff does not identify what provision of the Privacy Act waives sovereign immunity

for the claim in this case. In fact, Plaintiff never even cites to any Privacy Act provision.

Because his passing references relate to the disclosure of his name and address, the only possible

provision would be the catch-all provision in 5 U.S.C. § 552a(g)(1)(D), as the other civil

remedies relate to access to, amendment of, or preservation of an agency’s records. See 5 U.S.C.

§ 552a(g)(1)(A)-(C). Section 552a(g)(1)(D), however, only allows a claim based on a showing

that (1) the disclosed information was a “record” contained within the agency’s “system of

records” (as those terms are defined by the Privacy Act); (2) the agency’s disclosure violated a

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provision of the Privacy Act; (3) the agency’s disclosure was intentional and willful; (4) the

violation caused an adverse effect; and (5) the plaintiff suffered actual damages. See 5 U.S.C. §

552a(g)(1)(D); 5 U.S.C. § 552a(g)(4) (to recover damages, a plaintiff must show that the agency

acted in a manner that was intentional or willful); Quinn v. Stone, 978 F.2d 126, 131 n.6 (3d Cir.

1992); Doe v. DOJ, 660 F. Supp. 2d 31, 44-45 (D.D.C. 2009); Thompson v. Dept. of State, 400

F. Supp. 2d 1, 8 (D.D.C. 2005).

Beyond mentioning “the Privacy Act,” Plaintiff has not made the necessary showing for a

claim under the Privacy Act. He hasn’t identified what “record” from which “system of records”

of which agency was disclosed in violation of the Privacy Act. He has offered no factual

allegations to show that an alleged disclosure of Privacy Act information was intentional or

willful. (E.g., Doc. 11 ¶ 74 (offering only a conclusory statement that “Defendants acted

willfully, recklessly, intentionally or with gross negligence…”).) Plaintiff cannot even allege

which agency – let alone which person(s) – disclosed the information, and, thus, he cannot plead

any facts regarding the person’s mental state. Instead, he undoubtedly will want to conduct a

fishing expedition across multiple federal agencies to try to find the facts he needs to meet even a

plausibility standard, including if someone at one of the named agencies disclosed something

protected by the Privacy Act. That is prohibited by the pleading standards applicable to civil

litigation and sovereign immunity, which requires a claim to fall within a waiver.

Nor does Plaintiff even identify what provision of the Privacy Act was violated, as

required for a claim under section 552a(g)(1)(D). Plaintiff appears to quote a part of 5 U.S.C. §

552a(e)(10) as the provision violated by an unidentified person in an unidentified agency. (Doc.

11 ¶ 90.) But that subsection – which relates to agency procedural safeguards – is insufficient as

a matter of law and unsupported by any factual allegations in the present complaint. As a matter

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of law, the “extensive” regulations implemented by the Department of Justice (also applicable to

the FBI) to safeguard information are sufficient for purposes of subsection (e)(10) of the Privacy

Act. E.g., Doe, 660 F. Supp. 2d at 43 (dismissing claim under Fed. R. Civ. P. 12(b)(6)); see also

28 C.F.R. §§ 16.40-16.55. Defendant IRS has similar “extensive regulations” to safeguard

information covered by the Privacy Act. E.g., 31 C.F.R. §§ 1.20-1.36. Plaintiff has not

identified any rule or safeguard that should have been in place to prevent the alleged violation,

and that is fatal to any claim he intends to raise in connection with subsection (e)(10). See Doe,

660 F. Supp. 2d at 43.

This Court has held conclusory allegations that confidential information was wrongfully

disclosed are not sufficient to state a claim of a violation of subsection (e)(10). See Fleury v.

U.S.P.S., No. 00-5550-JCW, 2001 WL 964147, at *1-2 (E.D. Pa. Aug. 21, 2001). In Fleury, the

Plaintiff at least identified agency regulations, the actual record disclosed, and the persons

involved. Id. In this case, however, Plaintiff only alleges that the media reported that federal

agents were at his residence. He implies that must be a violation of some part of the Privacy Act,

but that supposition is not enough, and his equivocations are particularly telling. He avers that

the IRS disclosed unspecified tax return information and then adds “it is also possible” that FBI

or DOJ employees gave information to the media or “may also have confirmed” information

provided by the IRS. (Doc. 11 ¶ 56.) Those speculative, conclusory statements are not sufficient

to constitute a well-pleaded claim under the Privacy Act.

Essentially, Plaintiff’s Privacy Act claim is a feeble attempt to ride the coattails of his

assertion that the IRS disclosed his tax return information, which can only be remedied by a

valid claim under 26 U.S.C. § 7431, not the Privacy Act. See Gardner v. United States, 213 F.3d

at 741-742 (affirming dismissal of Privacy Act claim under Fed. R. Civ. P. 12(b)(6) where

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claims were based on disclosure of tax information; Internal Revenue Code’s confidentiality

provisions are the exclusive remedy for disclosures of tax return information). Plaintiff blurs the

line between the necessary elements of the section 7431 and Privacy Act claims. When the dust

settles, his allegations do not meet the requirements for a claim under the Privacy Act.

III. Plaintiff’s Claim for Damages Under 26 U.S.C. § 7431 Relating to Alleged Unauthorized Disclosures of Tax Return Information Should Be Dismissed as Time-Barred and for Failure to Plead an Allowable Claim for Relief.

Plaintiff’s amended complaint contains a claim for damages resulting from an alleged

unauthorized disclosure of his tax return information. This claim should be dismissed because it

is time-barred. In addition, Plaintiff fails to identify the information that was disclosed, Plaintiff

fails to allege facts to show that any disclosure was unauthorized, and Plaintiff’s own

contradictions and concessions refute any implication that he has a plausible claim.

A. Plaintiff’s Section 7431 Claim Is Barred Because He Filed It More Than Two Years After the Alleged Disclosure.

Section 7431(d) explicitly bars claims against the United States unless they are raised

within two years after the discovery of the alleged disclosure. E.g., Dean v. United States, Civil

No. 09-3095 (MLC), 2009 WL 4911939, at *2 (D.N.J. Dec. 11, 2009)(“Courts have held that

this period of limitations is jurisdictional…”), citing Aloe Vera of America, Inc. v. United States,

580 F.3d 867, 872 (9th Cir. 2009); Gandy v. United States, 234 F.3d 281, 283 (5th Cir. 2000). In

this case, Plaintiff alleges an unauthorized disclosure occurred on or before February 29, 2012.

He filed an application for in forma pauperis status on February 21, 2014, with a copy of a

complaint attached. (See Docs, 1, 1-2, 1-3.) On March 19, 2014, the Court granted his

application to proceed in forma pauperis, and the Clerk docketed the complaint on that same

date. (See Doc. 5.) Plaintiff’s initial complaint did not contain any claim under section 7431.

(Id.) His original complaint only sought the refund of tax penalties and damages under section

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7433 and the Privacy Act. (Id.) Plaintiff did not seek relief under section 7431 until March 25,

2014, when he filed an amended complaint to add that new claim, new factual allegations, and

new defendants. (Doc. 11.) The section 7431 claim, therefore, is untimely because it was filed

more than two years after the disclosure to which it relates.

The United States submits that the amended complaint does not “relate back” under Fed.

R. Civ. P. 15(c) for purposes of the section 7431 claim. In the Third Circuit, courts require a

“common core of operative facts” in the initial and amended complaints. Anderson v. Bondex

Int’l., Inc., - - - Fed. App’x. - - -, 2014 WL 44015, at *2 (3d Cir. Jan. 7, 2014). Plaintiff’s initial

pleading must “give a defendant fair notice of what the plaintiff’s amended claim is and the

grounds upon which it rests.” Id. at *4 (internal quotations omitted). Plaintiff’s addition of his

section 7431 claim fails both requirements, and thus, it does not relate back and is untimely

under section 7431(d).

First, the initial and amended complaints do not share a common core of operative facts

as to the section 7431 claim. The initial complaint alleged that IRS agents came to his residence

too early in the morning and without contacting his attorneys. (Doc. 5-1 ¶¶ 7-20.) Those

allegations of disruption and deprivation of rights under section 6304 formed the core of his

initial complaint, and he alleged that he suffered emotional distress and “was unable to continue

work under a contract,” he “was unable to complete some course work and attend classes for

which he was billed,” and he “sought and received physical therapy.” (Id. ¶¶ 32-34.) He also

allegedly lost business opportunities, bonuses, and was inconvenienced. (Id. ¶¶ 35-36.) All of

these allegations were explicitly linked to the IRS “actions in violation of 26 U.S.C. § 7433” and

“actions in connection with the collection of a tax,” which can only relate to the early arrival and

failure to contact Plaintiff’s attorneys. (See id. ¶¶ 32-36.)

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The initial complaint did not contain any factual allegations or other mention whatsoever

about “tax return information” or breach of confidentiality. (See Doc. 5-1.) The initial

complaint did contain a single, stand-alone paragraph that alleged media reports appeared

regarding the agents’ visits, alleged that Plaintiff did not tell the media, and speculated that

Defendants’ must have given the press “advance notice.” (Id. ¶ 23.) In paragraph 29, Plaintiff

linked the media presence and reports to harassment and abuse in violation of section 6304(b),

but Plaintiff made no factual allegations or other reference to disclosure of “tax return

information.” (Id. ¶ 29.) Nor does the initial complaint – unlike the amended complaint –

contain any allegations about what was contained in the “advance notice” to the media.

Certainly there is no factual allegation that “tax return information” was disclosed without

authorization, and Plaintiff gives no indication that the content of the notice was the source of his

harm. (Id. ¶¶ 23, 29.) Finally, Plaintiff alleges that his claim was presented to the IRS in an

administrative request for relief. (Id. ¶ 30.) That claim – attached as Exhibit 4 to the amended

complaint – was limited to the event of the IRS agents’ visit and resulting damages, not the

wrongful disclosure of specific tax return information. (Doc. 11-4.) The limited references to

“advance notice” to the media was tangential to the “common core” of Plaintiff’s initial

complaint, and moreover, there were no allegations at all relating to confidential tax return

information.6

6 The amended complaint not only added an entirely new legal claim, Plaintiff also, coincidentally, added non-IRS defendants and new allegations about a leak to the media. (See Doc. 11.) There are no new allegations against the IRS under section 7433 – this is an entirely new cause of action against an expanded pool of defendants. The new allegations relate to the alleged disclosure and the new parties, including allegations that employees of the added parties may have been the source for the media reports. (Doc. 11 ¶ 56.) Under these circumstances, the section 7431 claim does not relate back to the initial filing date.

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Second, for similar reasons, the initial complaint did not give fair notice to the IRS about

the subsequently added section 7431 claim. As stated previously, there was no reference to any

of the key concepts underlying section 6103 or section 7431 – “tax return information,”

confidentiality, unauthorized disclosure. (See Doc. 5-1.) Instead, the essence of the initial

complaint was an action seeking damages for the special agents’ visit in violation of the timing

and notice requirements in section 6304. (Id.) These allegations relate to a wrongful collection

activity, not improper disclosure of specific confidential information.

B. Plaintiff Fails To State a Claim that Falls Within the Narrow Waiver of Sovereign Immunity, Because He Does Not Allege that His Tax Return Information Was Disclosed to the Media Without Authorization.

It appears, but it is far from clear, that Plaintiff now asserts two instances of unauthorized

disclosure of tax information, both of which are insufficiently stated.7 First, he alleges that the

presence of the media at his apartment building indicates that a wrongful disclosure of tax

information occurred. (E.g., Doc. 11 ¶ 2.) But Plaintiff admits that there were other federal

agencies present at the building at the same time, and he offers no factual allegations to show

that the media was present because of a disclosure of his tax return information as opposed to

some other information, such as may be related to a non-tax investigation. Without factual

allegations that tax return information was disclosed, he has failed to state a claim under section

7431. Instead, he relies on the following logical fallacy: the media was present at the Residences

7 Plaintiff also seeks damages for the alleged disclosure of another entity’s tax return information, but he cannot bring that claim. (Doc. 11 ¶ 96 (alleged disclosure of the amount of contract between two businesses).) Section 7431 only allows claims for the unauthorized disclosure of a taxpayer’s own return information. 26 U.S.C. § 7431(a)(1) (“…such taxpayer may bring a civil action…”); Norman E. Duquette, Inc. v. Comm’r., 110 F. Supp. 2d 16, 23 (D.D.C. 2000) (collecting cases).

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at the Ritz-Carlton, the IRS was one of several agencies with agents at that building on the

morning of February 29, 2012; therefore, the IRS must have disclosed the existence of a tax

investigation to the media. (E.g., Doc. 11 ¶¶ 2, 56.) This self-contradictory argument fails the

plausibility standard required to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6). This

claim fails against the IRS and, for the same reasons, it fails against the FBI and DOJ.

Second, Plaintiff apparently seeks damages in connection with an IRS statement contained in

a Washington Times’ article about the events of February 29, 2012. (Doc. 11 ¶¶ 38-39, 89.) That

article reported IRS press officer Shauna Frye “said only that criminal investigators were at the

Residences at the Ritz-Carlton on Wednesday on official business.” (Doc. 11-3.) A generic

statement that is not associated with a particular taxpayer is not “tax return information” under

section 6103. See 26 U.S.C. § 6103(b)(2) (information that can “be associated with, or otherwise

identify, directly or indirectly, a particular taxpayer”). Frye stated that IRS criminal investigators

were at a high-rise apartment building. (Doc. 11-3.)8 That statement does not constitute

Plaintiff’s tax return information, and, therefore, he has no claim for damages under section 7431

for the unauthorized disclosure of return information.

Plaintiff acknowledges this shortcoming in his complaint. He states that the “disclosure that

criminal investigators, both IRS employees, were at the Residences at the Ritz-Carlton is

tantamount to disclosing the Plaintiff’s name and address under § 6103.” (Doc. 11 ¶ 89.) That is

meritless – disclosing that agents were at high rise apartment building is wholly different that

disclosing the name and address of a particular taxpayer – and concedes that the information

8 The Court can take judicial notice of the fact that the Residences’ website indicates there are “270 elegantly finished residences” in the building. See http://philadelphiaresidences.com/views/ (last visited May 19, 2014); see also Fed. R. Evid. 201.

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disclosed was not actually tax return information. But Plaintiff weakens his allegations even

further: “In the alternative, should some expert or legal analysis prove otherwise, the

communication between Shauna Frye definitely violates the spirit of the law regarding disclosure

of return information under §6103.” (Id.) Plaintiff’s pleadings invite the added problem that,

without identifying what was disclosed, Plaintiff cannot – and does not – allege facts to show the

disclosure was unauthorized, as required to have a claim under the narrow waiver of sovereign

immunity in section 7431.

IV. The Court Should Grant Summary Judgment on Plaintiff’s Claim for Refund of Unspecified Civil Penalties Because Plaintiff Is Not Entitled to the Refund.

If Plaintiff had fully pleaded his claim for refund, the United States could move to

dismiss that claim as well. But, due to the insufficient pleadings, the United States – and the

Court – must look outside the complaint. See Fed. R. Civ. P. 12(d). The result, however, is the

same: Plaintiff is not entitled to a refund of the penalties at issue in this complaint, the United

States is entitled to judgment as a matter of law, and the claim for refund of tax penalties should

be dismissed.

A. Statement of Undisputed Facts.

The United States submits that the following facts are material and undisputed for the

purposes of this motion:

1. On November 6, 2013, Plaintiff submitted a Form 843 – Claim for Refund and Request for Abatement – seeking a refund of tax penalties in connection with the 2010 tax year. (Ex. 101.)

2. The basis for Plaintiff’s claim for refund of late filing penalties was that he relied on his accountant to file a request for extension of the deadline to file his income tax return. (Exs. 101, 103.)

3. In his request for refund of 2010 penalties, Plaintiff did not offer any explanation or grounds for why he was not liable for a penalty for not timely paying his 2010 taxes. (Ex. 101.)

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4. On November 6, 2013, Plaintiff submitted a letter by a C.P.A. that asked the IRS to abate penalties for 2007, but did not identify which penalties. (Ex. 101.)

5. The basis for Plaintiff’s claim for refund of 2007 penalties was that Plaintiff was “under the impression that he did not have a liability in 2007. He was told he was getting a refund and would not be penalized for late filing if a refund is due.” (Ex. 101.)

6. On November 20, 2013, Plaintiff wrote to the IRS’s Taxpayer Advocate Service and requested that the “estimated tax penalty” for 2007 be removed due to “IRS error.” (Ex. 102.)

7. In his request for refund of 2007 and 2010 penalties, Plaintiff did not offer any support for an abatement based on inability to pay. (Exs. 101, 102.)

8. On April 13, 2011, Plaintiff’s accountant sent Plaintiff an email, stating that he would “prepare the extensions with the instructions and e-mail them to you.” (Ex. 103 at 2.)

9. On April 13, 2011, Plaintiff’s accountant sent Plaintiff an email, stating that filing a request for extension does not extend the due date for payment of taxes. (Ex. 103 at 2.)

10. Plaintiff’s 2007 tax return was filed with the IRS on July 17, 2012. (Bohn Decl. ¶ 14; Ex. 104.)

11. Plaintiff did not receive an extension of the deadline to file his 2007 income tax return. (Bohn Decl. ¶¶ 9-14.)

12. Plaintiff’s 2010 tax return was filed on September 27, 2011. (Bohn Decl. ¶ 20; Ex. 105; Ex. 101 at 2.)

13. Plaintiff did not receive an extension of the deadline to file his 2010 income tax return. (Bohn Decl. ¶¶ 15-20.)

The United States contends that, on the basis of Plaintiff’s amended complaint, plus these

undisputed facts, there is no genuine issue of material fact relating to Plaintiff’s claim for a

refund of 2007 and 2010 penalties. For the reasons stated hereafter, the Court should enter

summary judgment as to that claim.

B. Plaintiff’s Claim in This Case Is Untimely, and Therefore, It Is Barred.

Plaintiff’s refund claim in this civil action is outside the scope of the narrow waiver of

sovereign immunity for tax refund suits. “No suit or proceeding under section 7422(a) for the

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recovery of any internal revenue tax, penalty, or other sum, shall be begun before the expiration

of 6 months from the date of filing the claim required under such section unless the Secretary

renders a decision thereon within that time….” 26 U.S.C. § 6532(a)(1). Plaintiff filed his

purported claim for refund of penalties on or after November 6, 2013. (Ex. 101 (fax dated

November 6, 2013 containing Form 843 for 2010); Ex. 102 (fax dated November 20, 2013

containing a written request for abatement of 2007 penalty).) Plaintiff, however, commenced the

present civil action on February 21, 2013, which is less than six months after he filed his refund

claim with the IRS. (Doc. 1.) Therefore, the Court lacks subject matter jurisdiction to hear or

adjudicate the present claim for refund. E.g., Minuti v. I.R.S., 502 Fed. App’x. 161, 162-163 (3d

Cir. 2012), citing Becton Dickinson & Co. v. Wolkenhauer, 215 F.3d 340, 352 (3d Cir. 2000).

C. Plaintiff’s Arguments for Refund of Penalties Are Contrary to Law and Fact.

1. 2010 Penalties

Plaintiff filed a Form 843 – Claim for Refund and Request for Abatement – seeking a

refund of tax penalties in connection with the 2010 tax year. (Ex. 101 (Form 843 at page 4).)

Plaintiff also submitted a cover letter, and a letter signed by Thane C. Martin, C.P.A. (Id. at 2-3.)

Plaintiff argued he should be relieved from the late filing and late payment penalties under 26

U.S.C. §§ 6651(1), 6651(a)(2)(3), which require a showing that his failures were due to

“reasonable cause” and not due to “willful neglect.” (Id.) Plaintiff cannot satisfy even the first

element.9

9 In his amended complaint, Plaintiff also indicates he should receive a refund due to “undue financial harding [sic] . . . among others.” (Doc. 11 ¶ 24.) Martin’s letter made a similar passing reference. (Ex. 101 at 2 (listing “lack of funds” in bullet list, but providing no further information).) That is insufficient, and because he did not provide the IRS with an opportunity to review his claim on that ground at the administrative level, he cannot raise it here. Scott Paper (continued...)

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In his claim submitted to the IRS, Plaintiff claimed that “reasonable cause” exists because

he “relied on his previous accountant to file an extension to file his 2010 tax return as well as file

his tax return timely.” (Exs. 101, 103.) His claim is incorrect as a matter of law and fact. First,

it is the obligation of the taxpayer to timely file documents due to the IRS, including returns and

requests for extensions, and it is well-established that reliance on an accountant to perform a

ministerial task – such as filing a form – is not reasonable cause under section 6651. U.S. v.

Boyle, 469 U.S. 241, 251-252 (1985). That principle was recently re-affirmed by the Third

Circuit in addressing other factors related to reasonable cause. Estate of Thouron v. United

States, --- F.3d ---, 2014 WL 1887561, at *4 (3d Cir. May 13, 2014) (“…reliance on another to

perform the ministerial task of filing or paying cannot be reasonable cause for failure to file or

pay by the deadline.”).

Second, the documents Plaintiff submitted to the IRS demonstrate that his alleged

reliance was, at best, misplaced. Plaintiff’s accountant did not promise to file the extensions. In

an email dated April 13, 2011, Bedard told Plaintiff, “We will prepare the extensions with the

instructions and e-mail them to you.” (Ex. 103 at 2.)10 In seeking an abatement from the IRS,

Plaintiff misrepresented that email in claiming that it “clearly shows I was told an extension

(… continued)

Co. v. United States, 943 F. Supp. 489, 494 (E.D. Pa. 1996) (applying “variance doctrine,” which bars judicial consideration of a claim if the facts and arguments were not first presented in the claim to the IRS).

10 Bedard volunteered the option of seeking an extension after Plaintiff seemed unconcerned about missing the April 18, 2011 deadline for filing his return. (See Ex. 103 at 2 (“I don’t have any issue with Bedard holding the returns until the check arrives. I hope to have the check by the 18th…but if not…just hold the returns and you will receive the check by the end of the month at the latest.”).

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would be filed, prior to the filing date.” (Id. at 1.) That mistaken argument is the only argument

he made in support of an abatement of the late filing penalty for 2010. (See Ex. 101.)

Plaintiff also challenged the late payment penalty assessed for 2010. But Plaintiff offered

no explanation or grounds for why he was not liable for the penalty. (See Exs. 101, 103.)

Moreover, the email from his accountant plainly stated that, even if a request for extension for

filing was submitted to the IRS, that “does not extend the payment due date.” (Ex. 103 at 2.)

Therefore, Plaintiff had no reasonable cause to fail to pay his 2010 income tax on time, and he

has no grounds for relief from the late payment penalty.

2. 2007 Penalties

Plaintiff did not submit a refund claim (Form 843) in connection with the 2007 tax year,

as he acknowledges in his complaint. (Doc. 11 ¶ 24 (alleging he filed a Form 843 for 2010, but

that he filed a “written request” for 2007).) It appears that Plaintiff submitted a written request,

but it is still insufficient. The two-sentence request does not adequately state the grounds for the

request for abatement: it merely says the IRS should abate a penalty due to “IRS error.” (Ex.

102.) That statement is insufficient: it does not ask for a refund of the funds, it does not describe

what “error” occurred, and why Plaintiff contended it was erroneous. Cf., D’Amelio v. United

States, 679 F.2d 313, 315 (3d Cir. 1982)(describing “informal claim” doctrine, which allows

refund claims even if taxpayer does not use follow the proper form, but observing that a

“minimum amount of communication must take place”); Emax Fin. Group v. U.S.V.I., No. 2009-

086, 2012 WL 1190470, at *5-6 (D.V.I. Mar. 31, 2012), citing United States v. Kales, 314 U.S.

186, 194 (1941) (observing that the claim must “fairly advise the Commissioner of the nature of

the taxpayer’s claim”). Moreover, it is contradicted by Plaintiff’s other submissions to the IRS

that assert (without support) he should get a refund because Plaintiff “was under the impression

he did not have a liability in 2007,” and that “he would be getting a refund.” (Ex. 101 (letter

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from Martin).) Plaintiff’s administrative claim was not adequately stated, and the corresponding

claim in this case is premature and lacks any additional factual support. (Doc. 11 ¶ 24.)

V. Plaintiff’s Other Miscellaneous Claims For Relief Should Be Dismissed.

In his prayer for relief, Plaintiff seeks a Court order directing Defendants (a) to issue a

formal apology to Plaintiff, and (b) to refer employees for administrative discipline. (Doc. 11 at

50-51.) Plaintiff does not cite to any waiver of sovereign immunity for these claims, and no such

waiver exists.

VI. Defendants Federal Bureau of Investigation and Department of Justice Should Be Dismissed as Parties.

On March 25, 2014, Plaintiff amended his complaint to name the FBI and DOJ as

defendants, but he does not make any factual allegations against those agencies. The only

references to those agencies are legal conclusions (see Doc. 11 ¶¶ 54, 73, 92), or statements that

belie any plausible claim for relief (see Doc. 11 ¶¶ 56). Plaintiff’s claim under section 7433

cannot lie against the FBI or DOJ, as that statute is limited to collection actions by the IRS.11 See

26 U.S.C. § 7433 (limited to redress actions by “officer or employee of the Internal Revenue

Service”). Plaintiff’s claim for refund of unspecified tax penalties, discussed above, also cannot

be brought against the FBI or DOJ. Plaintiff’s Privacy Act claim is deficient as to all defendants,

and Plaintiff makes no factual allegations to support such a claim specifically against the FBI or

DOJ, as would be required to articulate a colorable claim under that statute. Finally, as the claim

for unauthorized disclosure of tax information, Plaintiff’s own complaint refutes any plausibility

11 Moreover, by its terms, section 7433 only waives sovereign immunity for actions brought against the United States. See 26 U.S.C. § 7433(a) (“against the United States”). The is true of an action under section 7431. See 26 U.S.C. § 7431(a) (“against the United States”).

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as to a claim against the FBI and DOJ. In addition to the jurisdictional and pleading flaws

discussed above, the only specific mention of the FBI and DOJ in connection with section 7431

is prefaced by Plaintiff’s statement that he believes it was not the FBI or DOJ that violated

section 6103. (Doc. 11 ¶ 56.) Accordingly, the Court should dismiss defendants FBI and DOJ.

CONCLUSION

Plaintiff tries several different ways to recover nearly a million dollars from the United

States, but all of his claims should be dismissed. His claims try to squeeze into narrow waivers

of sovereign immunity, but fail. Section 7433 only applies to collection activities; he has not

alleged any of the necessary elements of a Privacy Act claim; his refund claims are time-barred

and without merit; and his claim of unauthorized disclosure of tax return information is

insufficiently pled and ultimately implausible because of his own allegations against other

agencies and the exhibits he attached to his complaint. For these reasons, the Court should

dismiss all claims and all defendants.

DATE: May 19, 2014. Respectfully submitted, KATHRYN KENEALLY Assistant Attorney General /s/ Christopher D. Belen CHRISTOPHER D. BELEN Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 227 Washington, D.C. 20044 Telephone: (202) 307-2089 Christopher.D.Belen@usdoj.gov