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Ivy v. Commissioner of Internal Revenue Service

United States District Court, District of Columbia

July 18, 2016

REGINALD L. IVY, Plaintiff,
v.
COMMISSIONER OF THE INTERNAL REVENUE SERVICE, Defendant.[1]

          MEMORANDUM OPINION

          RUDOLPH CONTRERAS United States District Judge

         This matter is before the Court on the defendant’s Motion to Dismiss [ECF No. 7]. For the reasons discussed below, the motion will be granted.[2]

         I. BACKGROUND

         The plaintiff alleges that his “2011 tax return was fraudulently filed, ” Compl. at 1 (page numbers designated by ECF), and that the Internal Revenue Service (“IRS”) allowed the filer “to retain funds which would have been sent to [him] by means of [a] tax refund, ” id. at 2.[3] He characterizes this civil action as a challenge to “a wrongful offset” that did not comply with 26 U.S.C. § 6402 and 31 C.F.R. § 285.2. Compl. at 2. In addition, he deems “[t]he offset . . . in violation of Amendment 8; excessive fine; of the U.S. Constitution[.]” Id. (emphasis removed). The plaintiff demands a declaratory judgment and “relief under [26 U.S.C. § 7433, ]” specifically, “the return of the funds . . . wrongfully taken, damages and/or expenses because of the offset, and punitive relief.” Id.

         The offset to which the plaintiff refers pertains to then-outstanding student loan debt (“pre-consolidated debt”) owed the United States Department of Education and the Missouri Department of Higher Education. See Mem. in Support of United States’ Mot. to Dismiss [ECF No. 7-1] (“Def.’s Mem.”) at 2. IRS records show an overpayment to the plaintiff of $1, 822 for tax year 2011. Id. By letter dated September 26, 2012, the Department of the Treasury, Financial Management Service (“FMS”), notified the plaintiff that it had “applied this overpayment toward [his] outstanding student loan debt.” Id., Ex. B. At that time, the plaintiff’s pre-consolidated debt was in default status, see Compl. at 2, and the FMS advised the plaintiff that it “[could not] resolve issues regarding debts with other agencies, ” Def.’s Mem., Ex. B.

         Subsequently, in August 2013, the plaintiff’s pre-consolidated “student loan debt was marked as satisfied in full by the Missouri Department of Higher Education and consolidated into a new loan.” Def.’s Mem. at 2; see Compl. at 2 (“The previous account was a student loan which was in default (until August 2013) during the fraudulent return.”). The plaintiff’s income tax return for tax year 2011, which he filed in September 2013, “reported an overpayment of $634.” Def.’s Mem. at 2-3. “As a result, the Department of Treasury partially reversed its . . . setoff against [the plaintiff’s] original student loan so that only $ 634.00 was credited toward that pre-consolidated debt, ” id. at 3, that is, in January 2014 it “decreased the $1, 822.00 applied in September 2012 toward [the pre-consolidated] student loan by $1, 188.00, ” id. n.2; see id., Ex. C at 2 (noting “[r]eversal of refund applied to non-IRS debt”).

         II. DISCUSSION

         A. Dismissal Under Rule 12(b)(1)

         “Federal courts are courts of limited jurisdiction[ and] possess only that power authorized by Constitution and statute[.]” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). The presumption is “that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the [plaintiff].” Id. (citation omitted). Relevant to this case is the immunity of the United States from suit, and any waiver “cannot be implied but must be unequivocally expressed.” United States v. Mitchell, 445 U.S. 535, 538 (1980) (quoting United States v. King, 395 U.S. 1, 4 (1969)). The absence of a clear waiver of sovereign immunity deprives the courts of subject matter jurisdiction. See FDIC v. Meyer, 510 U.S. 471, 475 (1994).

         The IRS moves to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction on the ground that sovereign immunity bars the plaintiff’s claims. See Def.’s Mem. at 4. Here, the IRS argues, the plaintiff “fails to identify [a] waiver” of immunity. Id.

         Congress expressly authorizes the Department of the Treasury to apply an individual’s overpayment to outstanding debt incurred with another federal government agency:

Upon receiving notice from any Federal agency that a named person owes a past-due legally enforceable debt . . . to such agency, the Secretary [of the Department of the Treasury] shall -
(A) reduce the amount of any overpayment payable to such person by the amount of such debt;
(B) pay the amount by which such overpayment is reduced under subparagraph (A) ...

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