Opinion
No. 1:03-cv-190
February 24, 2004
MEMORANDUM
The plaintiff, Robert M. Wilson, trustee ("Wilson"), brings this action against the Internal Revenue Service ("IRS") seeking to challenge the IRS's value determination regarding the discharge of a federal tax lien. The IRS has moved to dismiss this action asserting that this Court lacks subject matter jurisdiction because the United States has not waived sovereign immunity for claims arising from liens discharged pursuant to 26 U.S.C. § 6325(b)(2)(A). [Court File No. 2]. The plaintiff contends that the IRS discharged the federal tax liens in question pursuant to 26 U.S.C. § 6325(b)(4), but asserts that this Court has jurisdiction regardless of which the portion of § 6325 was used to discharge the liens. [Court File Nos. 4, 5].
I. Standard of Review
Motions to dismiss for lack of subject matter jurisdiction under FED. R. Civ. P. 12(b)(1) generally come in two varieties. The first, "[a] facial attack on subject matter jurisdiction alleged . . . [in] the complaint merely questions the sufficiency of the pleading. In reviewing such a facial attack, a trial court takes the allegations in the complaint as true, which is . . . similar [to the] safeguard employed under 12(b)(6) motions to dismiss." Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). "On the other hand, when a court reviews a complaint under factual attack," as in this case, "no presumption [of] truthfulness applies to the factual allegations." Id. "When facts presented to the district court give rise to a factual controversy, the district court must therefore weigh the conflicting evidence to arrive at the factual predicate that subject matter jurisdiction does or does not exist." Id. Unlike a motion to dismiss pursuant to FED. R. Civ. P. 12(b)(6), the consideration of evidence outside the pleadings in the analysis of a motion under FED. R. Civ. P. 12(b)(1) will not convert that motion to a motion for summary judgment under FED. R. Civ. P. 56. Id.
II. Facts
The plaintiff, Wilson, acting on behalf of First Tennessee Bank National Association, brings this action in his role as trustee pursuant to a deed of trust entered on December 3, 1986. The deed of trust conveyed real property to secure the payment of a loan issued by the bank to William J. Brown and Peggy D. Brown. On August 28, 1997 and February 12, 2001, the IRS filed notices of tax liens for more than forty-thousand dollars on the property subject to the deed of trust. The Browns subsequently defaulted on the loan and, on April 1, 2002, the property was sold at a foreclosure sale to the highest bidders, Curtis C. Simmons and Sharon S. Simmons, for $55,000. At the time of the sale, the balance owed on the promissory note secured by the deed of trust was $54,941.68.
Both Wilson and the IRS agree that notice of the sale was provided to the IRS. They further agree that the notice was not provided twenty-five days before the sale. See 26 U.S.C. § 7425(b)(2)(C) and (c)(1). After the sale, Wilson applied to the IRS for a certificate of discharge of the federal tax lien and offered payment of $58.32, the amount in excess of the loan balance received from the sale. The IRS countered that its interest in the property was not limited to the amount received in excess of the loan because it was not provided with proper notice. Although the method of calculating the IRS's interest in the property was initially disputed, ultimately, through the Collection Appeals Program, the IRS determined that a certificate of discharge would be issued upon the payment of $8,658.32. Payment was made, a certificate of discharge was issued, and Wilsonnow seeks to have this Court review the determination of value reached by the IRS.
III. Analysis
In its motion to dismiss, the IRS asserts that Wilson received a discharge under 26 U.S.C. § 6325(b)(2)(A) and that sovereign immunity has not been waived for suits seeing a determination of value after discharge under § 6325(b)(2)(A). In response, Wilson asserts that the discharge was issued pursuant to 2 6 U.S.C. § 6325(b)(4). [Court File Nos. 5, 8]. In support of its position, the IRS points to 26 U.S.C. § 7426(a)(4), entitled "Substitution of Value," which states as follows:
If a certificate of discharge is issued to any person under section 6325(b)(4) with respect to any property, suchperson may, within 120 days after the day on which such certificate is issued, bring a civil action against the United States in a district court of the United States for a determination of whether the value of the interest of the United States (if any) in such property is less than the value determined by the Secretary. No other action may be brought by such person for such a determination.
After reviewing the parties initial memoranda regarding the IRS's motion to dismiss [Court File Nos. 3, 5], this Court ordered the parties to submit additional briefs regarding the method by which the Court could determine which part of the statute was used to issue the discharge. Attached to its brief in response to the Court's order, the IRS provided a copy of the "Certificate of Discharge of Property from Federal Tax Lien" which repeatedly states that the lien was discharged pursuant to 26 U.S.C. § 6325(b)(2)(A). [Court File No. 7, declaration of Jennifer Best, exh. 1]. Thus, the sole remaining question is whether this Court has jurisdiction to review an IRS determination of value for a discharge issued pursuant to 26 U.S.C. § 6325(b)(2)(A).
Copies of the relevant tax liens and correspondence between the plaintiff and the IRS are attached to the plaintiff's complaint. [Court File No. 1]. The plaintiff argues that this correspondence demonstrates that it is unclear which portion of § 6325(b) was used to issue the discharge. [Court File No. 5, 8]. The plaintiff does not argue that there is a discrepancy between the correspondence leading up to the discharge, and the ultimate discharge, but instead only argues that the discharge was actually issued pursuant to § 6325(b)(4). [Court File No. 5, 8]. The copy of the "Certificate of Discharge of Property From Federal Tax Lien" provided by the IRS cites to § 6325(b)(2)(A) in the heading and twice in the text leaving no doubt regarding the intended statutory authority under which the discharge was issued. [Court File No. 7, declaration of Jennifer Best, exh. 1].
The entirety of Wilson's argument that it is within the jurisdiction of this Court to review a claim for determination of value following a discharge issued pursuant to 26 U.S.C. § 6325(b)(2)(A) is as follows:
[T]he position assumed by the Internal Revenue Service based on its regulations for calculation of it's [sic] interest is an impairment of the Contracts Clause, violates the Due Process Clause of the Fourteenth Amendment, constitutes an illegal exaction, and is an abrogation of state law. As such, this court has original jurisdiction pursuant to 28 U.S.C. § 1331.
[Court File No. 5 at 3]. However, this argument does not address the IRS's contention that subject matter jurisdiction is lacking because the United States has not waived sovereign immunity for claims arising from a value determination made pursuant to 26 U.S.C. § 6325(b)(2)(A). The IRS asserts that because § 7426(a)(4) waives sovereign immunity only for disputes arising from value determinations made pursuant to § 6325(b)(4), this Court lacks jurisdiction over Wilson's claims seeking a value determination following a discharge pursuant to § 6325(b)(2)(A).
Under the principles of sovereign immunity, the United States is immune from lawsuits except where it has acted to waive this immunity. See United States v. Dalm, 494 U.S. 596, 608 (1999). Such a waiver by the United States must be unequivocal and "the terms of its consent to be sued in any court determine that court's jurisdiction to entertain the suit." Id. (quoting United States v. Testan, 424 U.S. 392, 399 (1976) (quoting United States v. Sherwood, 312 U.S. 584, 586 (1941)). Further, "[i]t is the burden of the party who institutes a claim against the United States . . . to allege an act of Congress that authorizes the Court to entertain that specific claim." Ridenbaugh v. Long, 246 F. Supp.2d 849, 852 n. 1 (S.D. Ohio 2002) (citing Malone c. Bowdoin, 349 U.S. 643, 645, 648 (1962)). In this case, Wilson has only identified 26 U.S.C. § 7426(a)(4) as a source of waiver of sovereign immunity for his claims. On its face, 26 U.S.C. § 7426(a)(4) limits itself to permitting claims pursuant to § 6325(b)(4). As discussed above, the discharge in question occurred pursuant to § 6325(b)(2)(A). Wilson also asserts that this Court may maintain jurisdiction pursuant to 28 U.S.C. § 1331 should it find that the discharge occurred under § 6325(b)(2)(A), but this argument simply does not address the question of waiver of sovereign immunity. Having discovered no alternate source of waiver, this Court will dismiss the plaintiff's claims.
IV. Conclusion
For the reasons stated above, the IRS's motion to dismiss [Court File No. 2] will be GRANTED. Wilson's claims will be DISMISSED WITH PREJUDICE. A judgment will enter.
JUDGMENT
For the reasons stated in the accompanying memorandum, the motion to dismiss filed by the United States of America Internal Revenue Service [Court File No. 2] is GRANTED. Robert M. Wilson's claims are DISMISSED WITH PREJUDICE.
SO ORDERED.