Opinion
03-CV-791S.
March 30, 2005
DECISION AND ORDER
1. In this case, pro se Plaintiff Eugene Sidney seeks to recover taxes erroneously assessed and collected from him by the Internal Revenue Service ("I.R.S."). Plaintiff brings this action pursuant to 26 U.S.C. § 7422. Currently before this Court is Defendant's Motion to Dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.
2. The following facts, which are alleged in the Complaint, are assumed true for the purpose of the instant motion. In July of 1995, the I.R.S. made the following tax assessments against Plaintiff with respect to the 1992 income tax period: a deficiency in the amount of $2,164, interest in the amount of $519.02, and a late filing penalty in the amount of $425.25. (Compl., ¶¶ 7-9). Plaintiff paid the tax and interest on August 13, 2001. (Compl., ¶ 10). Plaintiff thereafter made a claim for the taxes, interest and withholding credits on September 25, 2001. (Compl. ¶ 11). By certified letter dated November 2, 2001, the I.R.S. acknowledged that it received Plaintiff's claim for the $463.00 withholding credit for the 1992 income tax period. (Compl., Ex. D). However, the I.R.S. disallowed Plaintiff's claim because it was filed late. (Compl., ¶ 12, Ex. D). Specifically, the I.R.S. explained that it considers a claim late "if it was filed three years after the return was due or if it was filed more than two years after the tax was paid." (Compl., Ex. D).
On December 3, 2001, Plaintiff "filed and mailed" an appeal to Jean E. Valenti, the Field Director of Compliance Services at the I.R.S. (Compl., ¶ 13). On February 11, 2002, Plaintiff made another claim to the I.R.S. for a refund. (Compl., ¶ 14). In response, the I.R.S. sent Plaintiff a second notice of disallowance dated March 25, 2002, which stated "the withholding that you are claiming was applied to partially pay your income tax." (Compl., ¶ 15, Ex. E). Further, the letter stated "[i]f you want to appeal our decision to disallow your claim, you must provide a brief written statement of the issues you don't agree with." (Compl., Ex. E). Plaintiff filed a "written protest," but the I.R.S. denied his appeal by letter dated September 11, 2002. (Compl., ¶ 16; Defendant's Memorandum of Law, Ex. B) ("Def.'s Mem. of Law"). The I.R.S. further explained:
The $463.00 withheld tax is associated with the tax liability set forth in the July 19, 1995 statutory notice of deficiency. Subsequently, it was determined that you were not liable for the taxes shown in the notice. To restate this latter determination, you were not responsible to report the Form W-2 income that generated the tax liability; this income is not attributable to you. It follows that the withheld tax shown on that particular Form W-2 is likewise not attributable to you. Accordingly, you are not entitled to receive a refund of this $463.00 withheld tax, as it was withheld from taxable income/earnings determined to not be attributable to you.
(Def.'s Mem. of Law, Ex. B, p. 1). Further, the letter stated that "[y]our appeal of the November 2, 2001 and March 25, 2002 statutory notices of claim disallowance did not extend the two-year period during which you may file a lawsuit with the United States District Court having jurisdiction. . . . If you wish to pursue such an action, contact [the] court for guidance and file a lawsuit no later than November 2, 2003." (Def.'s Mem. of Law, Ex. B, p. 2).
According to his official tax record for the 1992 tax period, Plaintiff never filed a return for the 1992 income tax period. (Def.'s Mem. of Law, ¶ 1 Ex. A, Form 4340, Certificate of Assessments, Payments and Other Specified Matters). Accordingly, the I.R.S. prepared a "substitute for return" for Plaintiff for the relevant income tax period. (Def.'s Mem. of Law, ¶ 2 Ex. A). Based on this "substitute for return," the I.R.S. erroneously taxed and credited Plaintiff on income that was not attributable to him. (Def.'s Mem. of Law, ¶¶ 3-5). Plaintiff's official tax record indicates that the I.R.S. abated the late filing penalty on December 25, 1995, reversed the withholding credit of $463.00 on April 15, 1993, and abated the previously assessed tax and interest in its entirety on October 8, 2001. (Def.'s Mem. of Law, ¶¶ 6-7 Ex. A). Moreover, the tax record reflects that no payments or credits have ever been applied to that account, other than the withholding credit that was reversed on April 15, 1993. (Def.'s Mem. of Law, ¶ 7, Ex. A).
3. Plaintiff commenced this action on October 24, 2003, by filing a Complaint in the United States District Court for the Western District of New York. On May 17, 2004, Defendant filed a Motion to Dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure. For the following reasons, Defendant's Motion is denied.
In support of its motion, Defendant filed a memorandum of law, a declaration, various exhibits, and a reply memorandum of law. Plaintiff filed a memorandum of law, an affirmation, and various exhibits in opposition.
4. Under Rule 12(b)(1), a defendant can move the court to dismiss the case for lack of subject matter jurisdiction. FED. R. CIV. P. 12(b)(1). When considering a motion to dismiss for lack of subject matter jurisdiction, a court must accept all factual allegations in the complaint as true and draw all inferences from those allegations in plaintiff's favor. Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997). The court may not dismiss a complaint unless "it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief." Id. Where the existence of subject matter jurisdiction turns on a factual issue, however, the court is permitted to look beyond the complaint itself and may consider evidence outside the pleadings.See United States v. Vazquez, 145 F.3d 74, 80 (2d Cir. 1998);Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997). Ultimately, the burden of proving jurisdiction is on the party asserting it. See Malik v. Meissner, 82 F.3d 560, 562 (2d Cir. 1996).
This Court is mindful that because plaintiff is proceeding pro se, his submissions should be held "to less stringent standards than formal pleadings drafted by lawyers." Hughes v. Rowe, 449 U.S. 5, 9, 101 S. Ct. 173, 176, 66 L. Ed. 2d 163 (1980) (per curiam) (quoting Haines v. Kerner, 404 U.S. 519, 520, 92 S. Ct. 594, 595, 30 L. Ed. 2d 652 (1972)). District courts are obligated to "read the pleadings of a pro se plaintiff liberally and interpret them to raise the strongest arguments that they suggest." McPherson v. Coombe, 174 F.3d 276, 280 (2d Cir. 1999) (quoting Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir. 1994)). Nevertheless, a plaintiff's pro se status "does not exempt [him or her] from compliance with relevant rules of procedural and substantive law." Traguth v. Zuck, 710 F.2d 90, 95 (2d Cir. 1983) (internal quotations and citations omitted).
5. Under settled principles of sovereign immunity, the United States is immune from suit unless it consents to be sued. United States v. Dalm, 494 U.S. 596, 608, 110 S. Ct. 1361, 1368, 108 L. Ed. 2d 548 (1990). The United States has specifically consented to suits for the recovery of erroneously paid taxes. See Miller v. United States, 500 F.2d 1007, 1008 (2d Cir. 1974). "However, a taxpayer may only invoke the waiver of sovereign immunity for a refund of purportedly overpaid taxes by complying with the requirements set forth in 26 U.S.C. § 7422 regarding the filing of a claim."Bastable v. I.R.S., No. 04-CV00415(ADS)(JO), 2004 WL 3170534, *1-2 (E.D.N.Y. Dec. 27, 2004) (internal citations omitted). Specifically, Section 7422(a) of the Internal Revenue Code ("Code") provides that "[n]o suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, . . . until a claim for refund or credit has been duly filed with the Secretary." 26 U.S.C. § 7422(a).
Moreover, to satisfy the jurisdictional prerequisite to bringing an action in district court, the claim upon which the action is based must have been filed with the I.R.S. in a timely manner. C.I.R. v. Lundy, 516 U.S. 235, 240, 116 S. Ct. 647, 651, 133 L. Ed. 2d 611 (1996). To be timely, a "[c]laim for credit or refund of an overpayment of any tax . . . shall be filed by the taxpayer within 3 years from the time the return was filed or 2 years from the time the tax was paid, . . . or if no return was filed by the taxpayer, within 2 years from the time the tax was paid." 26 U.S.C. § 6511. A taxpayer's failure to comply with a prerequisite to commencing suit in a federal court is a jurisdictional defect that cannot be waived. See e.g., Hynard v. I.R.S., 881 F. Supp. 92, 94 (E.D.N.Y. 1994).
Defendant argues that Plaintiff's claim to the I.R.S. was untimely because: (1) Plaintiff did not file an income tax return for 1992; (2) he was thus required to file his administrative claim for a refund within two years from the time the tax was paid as required by 26 U.S.C. § 6511; (3) the only tax payment ever applied to Plaintiff's account for that taxable year was the withholding credit applied on April 15, 1993; and (4) Plaintiff failed to file his claim with the I.R.S. within two years of that date, i.e., by April 15, 1995. However, construing the complaint liberally, this Court declines to dismiss Plaintiff's case based on the untimeliness of his claim to the I.R.S.
As previously noted herein, Plaintiff seeks recovery of taxes erroneously assessed and collected from him pursuant to 26 U.S.C. § 7422. Plaintiff alleges that he paid the wrongly assessed tax and interest on August 13, 2001, and made a claim for a refund of the deficiency, interest and withholding credits on September 25, 2001. (Compl., ¶¶ 10-11). Accepting all of the allegations in the Complaint as true, this Court finds that Plaintiff filed his claim for a refund within 2 years from the time the tax was paid as required by 26 U.S.C. § 6511. Further, according to the Complaint, Plaintiff received a notice of disallowance for the withholding credit by certified letter mailed on November 2, 2001. (Compl., ¶ 12, Ex. D). Section 6532 of the Code provides that "[n]o suit or proceeding under section 7422(a) for the recovery of any internal revenue tax, penalty, or other sum, shall be begun . . . after the expiration of 2 years from the date of mailing by certified mail or registered mail by the Secretary to the taxpayer of a notice of the disallowance of the part of the claim to which the suit or proceeding relates." 26 U.S.C. § 6532. Plaintiff filed the instant suit on October 24, 2003, within two years of the November 2, 2001 certified letter disallowing his claim. It bears noting that the I.R.S. advised Plaintiff in its letter of September 11, 2002, that his deadline for filing a lawsuit was November 2, 2003. (Def.'s Mem. of Law, Ex. B, p. 2).
This Court acknowledges that the November 2, 2001 notice of disallowance relates only to the withholding credit. However, Plaintiff alleges that he made a claim to the I.R.S. "requesting payment of the deficiency, taxes, and interest, and of all allowable credits of $463.00." (Compl., ¶ 11). Whether the I.R.S. ever issued a notice of disallowance with respect to a tax deficiency and interest is a factual question not appropriately resolved on a motion to dismiss.
6. Reading Plaintiff's Complaint liberally and drawing all inferences in his favor, this Court finds that he has alleged sufficient facts to survive Defendant's Motion to Dismiss for lack of subject matter jurisdiction.
IT HEREBY IS ORDERED that Defendant's Motion to Dismiss (Docket No. 6) is DENIED.
SO ORDERED.