United States District Court, E.D. Pennsylvania
MARK S. ROSEMAN, Plaintiff,
UNITED STATES OF AMERICA, Defendant.
Gerald Austin McHugh United States District Court Judge.
For the last several years, Plaintiff Mark S. Roseman has been contesting the Internal Revenue Service’s assessment of penalties for the nonpayment of certain taxes in 2003 and 2004. Seeking to eliminate or reduce the assessed penalties, Plaintiff brought suit in the Court of Federal Claims in 2009. The Court of Federal Claims action settled with an agreement the IRS would eliminate the penalties for 2003 only. Plaintiff then sought to further reduce his liability by sending the IRS an Offer in Compromise, proposing to pay $1000 to settle the 2004 liability. The IRS rejected the offer. Plaintiff appealed the rejection, and the IRS rejected the appeal on October 15, 2014. Complaint at 1–2.
II. The Present Action
Plaintiff filed this action pro se on October 29, 2014. His Complaint alleges the Internal Revenue Service improperly assessed penalties on unpaid taxes and has improperly failed to correct the errors. The Complaint lists six Counts. First, Plaintiff alleges “the United States Government would be unjustly enriched” if it were permitted to collect the penalty assessed. Complaint at 3. Count Two asserts “Incompetence of Internal Revenue Service Officials.” Complaint at 4. The third count accuses the IRS of failing to carry out its mission statement. Id. The fourth count alleges a violation of “The Taxpayer Bill of Rights.” Id. Specifically, Plaintiff claims the IRS failed to “consider facts and circumstances that might affect [his] underlying liabilities.” Id. at 5. The fifth claim asserts the IRS failed to “follow its own Internal Revenue Manual” in the procedures it filed to handle Plaintiff’s offer of compromise to the IRS. Id. Finally, Count Six alleges Defendant violated the Freedom of Information Act by failing to provide Plaintiff with his IRS case file upon his request. Plaintiff seeks, as a remedy, compensatory and punitive damages as well as an injunction preventing the collection of the challenged taxes.
The Counts in Plaintiff’s Complaint do not identify the statutory authority for bringing Plaintiff’s claims. Defendant, in its Motion to Dismiss, characterizes the first five claims as all arising under 26 U.S.C. § 7433, and asks this Court to dismiss these claims for several reasons. First, Defendant argues that these claims are all barred because Plaintiff has failed to exhaust his administrative remedies. Defendant next argues that Plaintiff’s request for an injunction is barred by the Anti-Injunction Act, 26 U.S.C. § 7421(a). Third, Defendant asserts that pursuant to the Administrative Procedure Act this Court may not compel the IRS to accept Plaintiff’s Offer in Compromise.
Defendant finally argues that Plaintiff’s sixth and last claim, which arises under the Freedom of Information Act, must be dismissed because Plaintiff has failed to exhaust required administrative remedies.
Defendants seek dismissal of the Complaint under both Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). When evaluating a motion to dismiss based on Rule 12(b)(1), one that challenges the facial sufficiency of the complaint (as opposed to the factual accuracy of the basis for subject matter jurisdiction), the “court may rule on the motion by accepting [the plaintiff’s] allegations as true” and then evaluating whether the plaintiff has alleged facts supporting jurisdiction. McCann v. Newman Irrevocable Trust, 458 F.3d 281, 290 (3d Cir. 2006). When evaluating a motion brought under Rule 12(b)(6), the Court “must accept all of the complaint’s well-pleaded facts as true, ” and then go on to “determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.’ ” Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir. 2009) (citations omitted). The differences between 12(b)(6) motions and 12(b)(1) motions are subtle and sometimes glossed over, but can be important. See Arbaugh v. Y & H Corp., 546 U.S. 500, 500–02 (2006).
In this case there is some uncertainty about which standard applies to particular aspects of Defendant’s arguments. Specifically, the law may be unsettled as to whether the exhaustion of administrative remedies is a jurisdictional or substantive requirement for a Section 7433 claim. Defendant’s Memorandum in Support of Motion to Dismiss 8 n.3; Bullock v. I.R.S., 602 Fed. App’x. 58, 60 n.3 (3d Cir. 2015) (noting that a recent Supreme Court decision may have superseded the Third Circuit’s rule that administrative exhaustion is a jurisdictional requirement). However, here, as in Bullock, the distinction does not affect the outcome of this Motion because Defendant has only challenged the legal sufficiency of the facts alleged in the Complaint.
1. Exhaustion of Administrative Remedies
Plaintiff does not reject Defendant’s characterization that his requests for damages in Counts One through Five of the Complaint are brought under 26 U.S.C. § 7433. This statute allows taxpayers to bring actions for damages if “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.” 26 U.S.C. § 7433(a). The statute provides that except for certain actions related to liens, the statute is the exclusive remedy for negligent or intentionally wrongful collection actions. Id. Section 7433 requires claimants to exhaust administrative remedies before they can bring a claim for damages in court. 26 U.S.C. § 7433(d)(1).
Plaintiff argues he complied with this requirement by filing an Offer in Compromise and Forms 1040X, an Amended Tax Return. I do not find that these forms comply with the IRS’s rules for administrative claims. IRS regulations provide precise requirements for making administrative claims that would satisfy 26 U.S.C. § 7433. 26 C.F.R. § 301.7433-1(e); Venen v. United States, 38 F.3d 100, 103 (3d Cir. 1994) (discussing administrative exhaustion requirements under Section 7433). The regulation requires claimants to send their claim in writing to a particular office within the IRS and to include in the claim certain information, such as a “description of injuries” and a “dollar amount of the claim.” 26 C.F.R. § 301.7433-1(e). Plaintiff has not alleged facts showing his Offer in Compromise and Amended Tax Return satisfy those requirements.
In addition, even if Plaintiff had exhausted his remedies, Section 7433 appears to limit monetary remedies to “actual, direct economic damages.” 26 U.S.C. § 7433(b). Counts One through Four of the Complaint request punitive damages, which do not appear to be available under the statute. Count Five refers to compensatory damages, but the Complaint does not allege facts showing a plausible basis ...