Harris-Carter v. Carter et al

MOTION to dismiss for lack of jurisdiction and for failure to state a claim upon which relief can be granted

M.D. Fla.January 18, 2017

1 IN THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION MICHELE AUDREY HARRIS-CARTER, ) ) Plaintiff, ) ) v. ) ) GEORGE J. CARTER and ) INTERNAL REVENUE SERVICE, ) ) Defendants. ) ___________________________________ ) Case No.: 8:16-cv-3410-SDM- TGW MOTION TO DISMISS The United States of America, by and through undersigned counsel, moves this Court to dismiss Plaintiff’s Complaint (ECF No. 2) pursuant to Fed. R. Civ. P. 12(b)(1) and (6) for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. In her complaint, the plaintiff states that she seeks a declaratory judgment from the Court relieving her of all employment tax liabilities associated with People’s Appraisal Services. Ms. Harris-Carter indicates in the complaint that she owned and operated People’s Appraisal Services with her now deceased spouse, George J. Carter. In support of her request for to be relieved from employment tax liabilities stemming from that business, Ms. Harris-Carter seems to be claiming Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 1 of 13 PageID 21 2 she is an innocent spouse. Specifically, she claims that she could not prevent her husband from diverting the monies withheld from employees to his personal use, because Mr. Carter was verbally and physically abusive toward her due to drug and alcohol abuse. Ms. Harris-Carter previously filed a nearly-identical complaint in the Middle District of Florida (Case No. 8:15-cv-1362-T-33MAP) seeking the same relief. (Case No. 8:15-cv-1362-T-33MAP, ECF No. 1) That case was assigned to Judge Virginia M. Hernandez Covington, who dismissed the case for lack of jurisdiction and failure to state a claim, without prejudice, after Ms. Harris-Carter failed to respond to the United States’ motion. (Case No. 8:15-cv-1362-T- 33MAP, ECF No. 11) Plaintiff then refiled her complaint In the Circuit Court of the Thirteenth Judicial Circuit of the State of Florida in and for Hillsborough County. (ECF No. 2) and the United States filed a timely Notice of Removal with this Court. (ECF No. 1) As discussed in the incorporated memorandum of law, this Complaint, like the previous complaint filed by Ms. Harris-Carter should be dismissed because the Court lacks subject matter jurisdiction to grant the relief Plaintiff seeks because (1) it fails to establish a waiver of sovereign immunity for the causes of action it pleads; and (2) the Anti-Injunction Act 26 U.S.C. § 7421(a), and the Declaratory Judgment Act, 28 U.S.C. § 2201, expressly prohibit the relief she requests. Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 2 of 13 PageID 22 3 Plaintiff also fails to state a claim for innocent spouse relief, because such relief is limited to challenges to income tax deficiencies, not claims for employment taxes or trust fund recovery penalties. MEMORANDUM OF LAW The plaintiff, Ms. Harris-Carter owned and operated People’s Appraisal Services with George J. Carter. Ms. Harris-Carter’s complaint indicates that the business was in operation by 1991 and over time the growing business hired several employees. (ECF No. 2, at section IV. para. 1-2). Mrs. Harris-Carter contends that as Mr. Carter’s drug and alcohol problems escalated he became verbally and physically abusive to Mrs. Harris-Carter both at home and in the workplace. (ECF No. 2, at IV. para. 2) In her complaint Mrs. Harris-Carter describes the nature and extent of the abuse and of Mr. Carter’s substance abuse problems. (ECF No. 2, at IV. para.2-4). She alleges that Mr. Carter’s substance abuse problems led to his mismanagement of People’s Appraisal Service’s funds, a near constant depletion of the business bank accounts and a diversion of monies withheld from employees for Mr. Carter’s personal use. (ECF No. 1, at V. para. 5) Ms. Harris-Carter states that due to the abuse she suffered and her fear of Mr. Carter she was unable to prevent his mismanagement of the business and thus should not be held liable for any outstanding employment tax liabilities. (ECF No. 2, at V. para. 1). It appears that Ms. Harris-Carter seeks a judgment from this Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 3 of 13 PageID 23 4 Court enjoining the Internal Revenue Service from any collection activities related to employment tax liabilities related to People’s Appraisal Services on the basis of an innocent spouse claim. See 26 U.S.C. § 6015. I. The Court Lacks Subject Matter Jurisdiction. It is well settled that the United States, as sovereign, is immune from suit unless it has consented to be sued, see United States v. Dalm, 494 U.S. 596, 608 (1990); United States v. Sherwood, 312 U.S. 584, 586 (1941), and that the United States may define the terms and conditions upon which a litigant may proceed. See United States v. Testan, 424 U.S. 392, 399 (1976). It is also well settled that the burden to prove subject matter jurisdiction is on Plaintiff. See Eaton v. Dorchester Dev., Inc., 692 F.2d 727, 732 n. 9 (11th Cir. 1982). (burden to establish subject matter jurisdiction is on party seeking to invoke that jurisdiction). The Complaint should be dismissed because, quite simply, it fails to carry that burden. A defendant may challenge subject matter jurisdiction in one of two ways. Laurence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir. 1990). A "facial attack" on the complaint, contends that the complaint has failed to allege facts upon which subject matter jurisdiction can be based, and "the facts alleged in the complaint are taken as true." Id. The second type of attack is a "factual attack" on the existence Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 4 of 13 PageID 24 5 of subject matter jurisdiction which looks beyond the pleadings. Id. The United States brings this motion as a facial attack to the Amended Complaint. The Complaint, no matter how liberally interpreted, an applicable waiver of sovereign immunity or subject matter jurisdiction. Ms. Harris-Carter’s request for a declaratory judgment from the Court determining that she is not liable for any employment tax liabilities related to People’s Appraisal Services cannot proceed as a tax refund suit because she fails to plead facts showing that she has exhausted all administrative remedies. Worse, it requests relief that - if granted - would enjoin the Internal Revenue Service from taking any collection action related to employment tax liabilities she contests. That declaratory and injunctive relief is barred by the Declaratory Judgment Act and Anti-Injunction Act. A. Plaintiff has failed to exhaust the required administrative remedies to maintain a tax refund suit. Liberally construing the Complaint, it appears that Ms. Harris-Carter’s case could be considered to be a refund suit under 26 U.S.C. § 7422. (ECF No. 2, Part IV, para 11). This Court has jurisdiction to hear suits for the refund of taxes, See 28 U.S.C. § 1346(a)(1), if the taxpayer complies with the waiver of sovereign immunity found in 26 U.S.C. § 7422. U.S. v. Clintwood Elkhorn Min. Co., 533 U.S. 1, 14 (2008); Wachovia Bank, N.A. v. U.S., 455 F.3d 1261, 1269 (11th Cir Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 5 of 13 PageID 25 6 2006). But that waiver of sovereign immunity is specifically limited by 26 U.S.C. § 7422, which requires that the taxpayer file a proper administrative claim with the Internal Revenue Service. This formality must be observed even if it is likely that the Internal Revenue Service will reject the claim. U.S. v Felt & Tarrrant Mfg. Co., 283 U.S. 269 (1931); Charter Co. v. U.S., 971 F.2d 1576 (11th Cir. 1992). Filing a proper administrative claim deprives the Court of subject matter jurisdiction. U.S. v. Dalm, 494 U.S. at 608; Mutual Assurance, Inc. v. U.S., 56 F.3d 1353 (11 Cir. 1995). Plaintiff alleges that she “has sought relief using IRS programs but has encountered various obstacles.” Ms. Harris-Carter does not state or allege in her complaint that she ever filed an administrative claim regarding 941 tax liabilities with the Internal Revenue Service. She fails to even state the tax years in which such liabilities arose. It is unclear what programs Ms. Harris-Carter is referring to in her pleading, and there is nothing in the facts to suggest that a proper administrative claim has ever been filed. Thus, this Court lacks subject matter jurisdiction over any refund suit by Plaintiff. Even if the plaintiff had filed a proper claim for refund, another prerequisite to a refund suit is that the challenged tax be paid in full. Flora v. United States, 362 U.S. 145, 150-151 (1960); See Curasi v. U.S. 907 F.Supp. 373, 374 (M.D. Fl. 1995). The Complaint fails to satisfy this prerequisite because it nowhere alleges Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 6 of 13 PageID 26 7 that Ms. Harris-Carter has fully paid a disputed employment tax liability or even that a federal employment tax liability exists. Even to the extent that this is a divisible tax, a taxpayer must pay the amount of tax paid for one employee for one period. Flora, 362 U.S. at 171-175, n. 37 & 38; Steele v. United States, 280 F.2d 89, 91 (8th Cir.1960). This taxpayer has not pleaded that she has met even this lesser burden. B. The relief Plaintiff seeks is barred by the Declaratory Judgment Act and Anti-Injunction Act. The remedy the Plaintiff seeks is a declaratory judgment under 28 U.S.C. § 2201 that she is not liable for employment tax liabilities related to Peoples Appraisal Services. But the Declaratory Judgment Act creates no substantive rights or duties and expressly excludes actions of this type. Section 2201(a) in relevant part provides: "In a case of actual controversy within its jurisdiction, except with respect to Federal taxes other than actions brought under Section 7428 of the Internal Revenue Code of 1986 [regarding exempt organizations], . . .any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration . . . ." The allegations of the complaint (ECF No. 2) make it clear that all such relief concerns federal taxes. Therefore, the Court lacks jurisdiction under 28 U.S.C. § 2201. See Flora v. United States, 362 U.S. at 164, 165. Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 7 of 13 PageID 27 8 Interpreting her request for relief slightly differently, Ms. Harris-Carter appears to be seeking to have the IRS enjoined from taking any further action to assess or collect her tax liabilities. Section 7421(a) of the I.R.C. provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person . . . ." The manifest purpose of section 7421(a) is "to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sum be determined in a suit for refund." Enochs v. Williams Packing Navigation Co., 370 U.S. 1 (1962); see also Meyer v. Everson, 2006 WL 2583699, at *4 (M.D. Fla. Sept. 7, 2006). Although there are limited statutory exceptions to the Act, none apply here. The limited judicial exception to the Anti-Injunction Act recognized by the Supreme Court in Williams Packing also does not apply under the facts as alleged in the Amended Complaint. Under Williams Packing, this Court could properly issue an injunction only if (1) it is clear that under no circumstances could the United States prevail, and (2) the taxpayer lacks an adequate remedy at law. See Williams Packing, 370 U.S. at 7. When applying this judicial exception, the court must view both the facts and the law in the light most favorable to the United States. See id.; Lange v. Phinney, 507 F.2d 1000, 1006 (5th Cir. 1975). Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 8 of 13 PageID 28 9 In this case, based on the allegations contained in the complaint, Plaintiff cannot show that the United States has no possibility of prevailing. In fact, quite the opposite appears to be true. She alleges no specific acts by the Internal Revenue Service that would constitute unlawful collection or assessment under 26 U.S.C. § 7433, and her other causes of action clearly fail for lack of subject matter jurisdiction as set forth above. Consequently, Plaintiff cannot meet the first prong of the Williams Packing exception and is not entitled to an injunction. Even if Plaintiff could demonstrate that the United States was unlikely to prevail in this action, the judicial exception to the Anti-Injunction Act would not apply because the Plaintiff has adequate remedies at law to redress her purported claims. As noted above, to the extent Ms. Harris-Carter is seeking a refund of federal tax which she does not owe, she has an adequate remedy at law. She may fully pay the tax liability, exhaust her administrative remedies, and then institute a refund suit. 26 U.S.C. § 7422. To the extent Plaintiff believes the IRS has engaged in erroneous collection activities that have caused her damage, she may file an appropriate claim under 26 U.S.C. § 7433 for redress. The existence of these remedies at law preclude Plaintiff from being able to satisfy the second prong of the Williams Packing exception and render her unable to obtain any injunction here. II. The Amended Complaint Fails to State a Claim. Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 9 of 13 PageID 29 10 Even if Plaintiff could demonstrate the presence of subject matter jurisdiction through an appropriate waiver of sovereign immunity, the Amended Complaint should be dismissed for failure to state a claim. See Fed. R. Civ. P. 8(a)(2), and 12(b)(6). Under the standards established by the Federal Rules of Civil Procedure, a court "must accept as true all factual allegations in the complaint." Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993). However, a motion to dismiss should be granted when the plaintiff has not proffered "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Federal Rule of Civil Procedure 8(a) "does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me- accusation." Id. "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679. Ms. Harris-Carter fails does not actually reference any statutes in her complaint, but her statement of facts, when interpreted broadly, indicates that Ms. Harris-Carter is arguing that she is not liable for employment tax liabilities on the basis of an innocent spouse claim under 26 U.S.C. § 6015. Under 26 U.S.C. § Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 10 of 13 PageID 30 11 6015 an individual who elected to file a joint income tax return with a spouse or former spouse can seek to be relieved of joint and several liability. Relief under 26 U.S.C. 6015 is not available for tax returns other than joint federal income tax returns as defined under 26 U.S.C. § 6013. 26 C.F.R. § 1.6015-1 (a). Here, Ms. Harris-Carter seems to be seeking relief from unspecified employment tax liabilities , rather than a federal income tax return that she filed with Mr. Carter. Thus, an innocent spouse claim is simply not applicable to her case. CONCLUSION Ms. Harris-Carter’s complaint fails to establish on its face that the Court has subject matter jurisdiction over her claims against the IRS. She also appears to base her claim for relief from unspecified employment tax liabilities on 26 U.S.C. § 6015, a provision dealing with federal income taxes rather than employment taxes. Therefore, it should be dismissed under Federal Rules of Civil Procedure 12(b)(1) and (6). Dated: January 18, 2017 Respectfully submitted, CAROLINE D. CIRAOLO Acting Assistant Attorney General Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 11 of 13 PageID 31 12 /s/ Archana Ravindranath ARCHANA RAVINDRANATH Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 14198 Washington, D.C. 20044 202-514-5885 (v) 202-514-4963 (f) Archana.Ravindranath@usdoj.gov Of Counsel: A. LEE BENTLEY, III United States Attorney Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 12 of 13 PageID 32 13 CERTIFICATE OF SERVICE I hereby certify that on this 18th day of January, 2017, I electronically filed the foregoing document with the Clerk of Court using the CM/ECF system, and mailed a copy of this document by first class mail to the following: Michelle Audrey Harris-Carter 13023 Terrace Springs Drive Temple Terrace, FL 33637 /s/ Archana Ravindranath ARCHANA RAVINDRANATH Trial Attorney United States Department of Justice, Tax Division Case 8:16-cv-03410-SDM-TGW Document 5 Filed 01/18/17 Page 13 of 13 PageID 33