Court Opinion

ID: 9915936
Source: CourtListenerOpinion
Date Created: 2024-01-09 01:00:43.976424+00
Date Added: 2024-06-11T13:21:59.833605
License: Public Domain

Case: 23-10551         Document: 00517025494             Page: 1      Date Filed: 01/08/2024

              United States Court of Appeals
                   for the Fifth Circuit
                                      ____________                                    United States Court of Appeals
                                                                                               Fifth Circuit

                                       No. 23-10551
                                                                                             FILED
                                                                                       January 8, 2024
                                     Summary Calendar
                                     ____________                                       Lyle W. Cayce
                                                                                             Clerk
   Dennis J. Chaisson; Lisa M. Bulthaup, Husband and Wife, each
   Individually and the Marital Community Comprised Thereof,

                                                                   Plaintiffs—Appellants,

                                             versus

   United States of America,

                                                Defendant—Appellee.
                      ______________________________

                      Appeal from the United States District Court
                          for the Northern District of Texas
                                USDC No. 3:22-CV-540
                      ______________________________

   Before Davis, Wilson, and Ramirez, Circuit Judges.
   Per Curiam: *
          Plaintiffs-Appellants, Dennis J. Chaisson and Lisa M. Bulthaup,
   appeal the district court’s dismissal of their complaint for lack of subject-
   matter jurisdiction and the court’s subsequent denial of their motion for
   reconsideration. We AFFIRM.

          _____________________
          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 23-10551       Document: 00517025494          Page: 2    Date Filed: 01/08/2024

                                     No. 23-10551

                                          I.
          Plaintiffs filed their 2018 tax return over six months after the April 15,
   2019 deadline. After processing Plaintiffs’ 2018 return, the Internal Revenue
   Service (“IRS”) assessed Plaintiffs $777,393 in income tax, as well as the
   following penalties: $149,366.70 for failing to file a timely tax return,
   $7,415.56 for late payment of the tax, and $13,365.74 for failing to pay their
   estimated taxes. The IRS also assessed $10,272.90 in interest on Plaintiffs’
   late payment of the tax.
          Plaintiffs allege that they filed an IRS Form 843, “Claim for Refund
   and Request for Abatement,” seeking “a refund of the IRS penalty.”
   Plaintiffs further allege that in response to their refund claim, the IRS sent
   them a letter dated February 27, 2020, indicating that they would not grant
   the refund request. On March 16, 2020, Plaintiffs’ counsel sent a letter to
   the IRS, to which Plaintiffs contend the IRS never replied. After more than
   six months had passed without a response from the IRS, Plaintiffs filed the
   present suit seeking the “recovery of taxes, penalties, and interest assessed
   by the IRS.”
          The United States moved to dismiss Plaintiffs’ complaint for lack of
   subject-matter jurisdiction on the ground of sovereign immunity because
   Plaintiffs had not fully paid their IRS-assessed liability before filing suit. As
   evidence of the lack of payment, the United States attached to its motion the
   following: (1) Plaintiffs’ “Internal Revenue Form 1040 Account Transcript”
   (“Account Transcript”) for the tax year ending in 2018; and (2) the
   declaration of Stephanie J. Rakoski, an attorney in the IRS’s Office of Chief
   Counsel, to authenticate the Account Transcript and to provide a foundation
   for its admissibility.
          The district court granted the United States’ motion to dismiss after
   reviewing the Account Transcript and finding that it showed Plaintiffs owed

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                                           No. 23-10551

   the IRS approximately $75,000 for the tax year ending on December 31, 2018.
   Plaintiffs timely moved to alter or amend the district court’s judgment under
   Federal Rules of Civil Procedure 59(e) and 60(b)(6). The district court
   denied Plaintiffs’ motion. Plaintiffs timely appealed the district court’s
   12(b)(1) dismissal and the denial of their motion to alter or amend the
   judgment.
                                                II.
                                                A.
           Plaintiffs first challenge the 12(b)(1) dismissal of their complaint for
   lack of subject-matter jurisdiction. “We review questions of subject matter
   jurisdiction, including sovereign immunity determinations, de novo.” 1 “The
   United States, as sovereign, is immune from suit save as it consents to be
   sued, and the terms of its consent to be sued in any court define that court’s
   jurisdiction to entertain the suit.” 2 A “guiding principle is that waivers of
   sovereign immunity should be narrowly construed in favor of the United
   States.” 3
           Federal district courts have jurisdiction over “[a]ny civil action
   against the United States for the recovery of any internal-revenue tax alleged
   to have been erroneously or illegally assessed or collected, or any penalty
   claimed to have been collected without authority or any sum alleged to have
   been excessive or in any manner wrongfully collected under the internal-

           _____________________
           1
            Daniel v. Univ. of Tex. Sw. Med. Ctr., 960 F.3d 253, 256 (5th Cir. 2020) (citing
   Machete Prods., L.L.C. v. Page, 809 F.3d 281, 287 (5th Cir. 2015)).
           2
              United States v. Mitchell, 445 U.S. 535, 538 (1980) (cleaned up) (quoting United
   States v. Sherwood, 312 U.S. 584, 586 (1941)).
           3
             In re Supreme Beef Processors, Inc., 468 F.3d 248, 253 (5th Cir. 2006) (citing United
   States v. Nordic Vill. Inc., 503 U.S. 30, 34–35 (1992)).

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                                            No. 23-10551

   revenue laws.” 4 However, “[d]espite its spacious terms, § 1346(a)(1) must
   be read in conformity with other statutory provisions which qualify a
   taxpayer’s right to bring a refund suit upon compliance with certain
   conditions.” 5 As relevant here, one of those conditions is the full-payment
   rule, which “requires full payment of the assessment before an income tax
   refund suit can be maintained in a Federal District Court.” 6 Put differently,
   a taxpayer must “pay first and litigate later.” 7
           As explained by the district court, a motion to dismiss for lack of
   subject-matter jurisdiction may be either “facial” or “factual.” 8 A motion
   to dismiss is “factual” if “the defendant submits affidavits, testimony, or
   other evidentiary materials.” 9 Here, the United States brought a factual
   attack on Plaintiffs’ complaint by introducing the Account Transcript. In
   order to defeat this factual attack, Plaintiffs “must prove the existence of
   subject-matter jurisdiction by a preponderance of the evidence and is obliged
   to submit facts through some evidentiary method to sustain his burden of
   proof.” 10

           _____________________
           4
               28 U.S.C. § 1346(a)(1).
           5
               United States v. Dalm, 494 U.S. 596, 601–03 (1990) (citing 26 U.S.C. §§ 7422(a),
   6511(a)).
           6
            Flora v. United States, 362 U.S. 145, 177 (1960); see also Shanbaum v. United States,
   32 F.3d 180, 182 (5th Cir. 1994) (per curiam) (“Section 1346 operates in conjunction with
   26 U.S.C. § 7422 to provide a waiver of sovereign immunity in tax refund suits only when
   the taxpayer has fully paid the tax and filed an administrative claim for a refund.”).
           7
               Flora, 362 U.S. at 164.
           8
               Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. 1981).
           9
               Id.
           10
             Superior MRI Servs., Inc. v. All. Healthcare Servs., Inc., 778 F.3d 502, 504 (5th Cir.
   2015) (internal quotation marks and citations omitted).

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                                         No. 23-10551

          As an initial matter, Plaintiffs assert that the district court had subject-
   matter jurisdiction under 26 U.S.C. § 6532(a)(1) regardless of whether they
   complied with the full-payment rule.             Section 6532(a)(1) states that a
   taxpayer may not bring a refund suit under § 7422(a) until either “the
   expiration of 6 months from the date of filing the claim” or the IRS “renders
   a decision thereon within that time.” 11 But the fact that Plaintiffs brought
   this suit within the limitations period set forth in § 6532(a)(1) does not
   eliminate the need to comply with § 7422(a)’s prerequisites to suit, including
   the full-payment rule. Thus, the question is whether Plaintiffs have satisfied
   this jurisdictional prerequisite.
          Plaintiffs next take issue with the district court’s reliance on the
   Account Transcript as evidence that they had not fully paid their 2018 tax
   liabilities before filing suit. Specifically, Plaintiffs assert that the Account
   Transcript is inadmissible hearsay evidence that the district court improperly
   considered on a motion to dismiss. Both of these contentions fail. As noted
   above, in considering a motion to dismiss based on a factual challenge to
   subject-matter jurisdiction, the court is free to consider matters outside of
   the pleadings, such as affidavits and testimony. Additionally, under our
   abuse of discretion standard of review for evidentiary rulings, 12 we find no
   abuse of discretion in the district court’s admission of the Account

          _____________________
          11
               26 U.S.C. § 6532(a)(1).
          12
               Hicks-Fields v. Harris Cnty., 860 F.3d 803, 807–08 (5th Cir. 2017) (citation
   omitted).

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                                             No. 23-10551

   Transcript under the business-records 13 and public-records exceptions 14 to
   the hearsay rule.
           In the alternative, Plaintiffs contend that the Account Transcript “can
   be construed” to show they satisfied the full-payment rule for the assessment
   they seek to recover. Plaintiffs point to the fact that as of the date of the
   missed filing deadline, April 15, 2019, they had a “credit” in their account.
   But Plaintiffs’ account credit as of April 15, 2019, is irrelevant because
   subject-matter jurisdiction is determined at the time the complaint is filed,
   which in this case was on March 7, 2022. 15 And, at the time Plaintiffs filed
   their complaint, the district court determined that the Account Transcript
   showed they owed approximately $75,000 for the 2018 tax year.
           Although Plaintiffs “do not concede the accuracy” of the Account
   Transcript, they contend for the first time in their reply brief that even if they
   did owe $75,000 at the time suit was filed, that amount was “entirely
   comprised of penalties, and not principal taxes owed.” Relying on Shore v.

           _____________________
           13
             See Fed. R. Evid. 803(6). The declaration attached to the Account Transcript
   provided that Plaintiffs’ Account Transcript was made by a person with knowledge of the
   events, was kept in the ordinary course of business, and that it was regular practice of the
   IRS to keep such records. Accordingly, the declaration laid a proper foundation for the
   admission of the Account Transcript. See United States v. Hayes, 861 F.2d 1225, 1228 (10th
   Cir. 1988) (holding that tax records were admissible under Rule 803(6) based on
   representations by an IRS employee that the records were “kept in the ordinary course of
   business and that it was the regular practice of the I.R.S. to keep such records”).
           14
              See Fed. R. Evid. 803(8); see also United States v. Lockett, 601 F. App’x 325,
   327 (5th Cir. 2015) (per curiam) (unpublished) (holding that certified account transcripts
   from the IRS satisfied the public-records exception to hearsay). Unpublished opinions
   issued in or after 1996 are “not controlling precedent” except in limited circumstances, but
   they “may be persuasive authority.” Ballard v. Burton, 444 F.3d 391, 401 n.7 (5th Cir.
   2006).
           15
                Carney v. Resol. Tr. Corp., 19 F.3d 950, 954 (5th Cir. 1994) (citations omitted).

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                                             No. 23-10551

   United States, 16 Plaintiffs thus contend that they have satisfied the full-
   payment rule because it only requires the payment of the underlying tax and
   not the penalties or interest. However, “this court will not consider issues
   raised for the first time in a reply brief.” 17
           In short, although Plaintiffs assert that they complied with the full-
   payment rule, they have failed to proffer any evidence of additional payments
   not listed on the Account Transcript or otherwise rebut the accuracy of the
   Account Transcript. And, as acknowledged by the district court, “plaintiffs
   would be the only persons to have evidence of whether they made more
   payments on their account than shown on the IRS transcript.” Given that
   there is no indication in the record that Plaintiffs have complied with the full-
   payment prerequisite, the district court correctly dismissed the case for lack
   of subject-matter jurisdiction.
                                                  B.
           Plaintiffs additionally challenge the district court’s denial of their
   motion to alter or amend the judgment. 18 We review the denial of a Rule

           _____________________
           16
               9 F.3d 1524, 1527 (Fed. Cir. 1993) (concluding that the district court had subject-
   matter jurisdiction under the Flora full-payment rule because although the plaintiffs had
   not paid the interest and penalty portions of the assessment, they had fully paid their tax
   liability and the “the issues of interest and penalties were not before the court”).
           17
                Wright v. Excel Paralubes, 807 F.3d 730, 736 (5th Cir. 2015) (citation omitted).
           18
              A motion for reconsideration “may be considered either a Rule 59(e) motion to
   alter or amend judgment or a Rule 60(b) motion for relief from judgment.” Shepherd v.
   Int’l Paper Co., 372 F.3d 326, 328 n.1 (5th Cir. 2004) (citation omitted). If the motion “is
   filed within ten days of the judgment or order of which the party complains, it is considered
   a Rule 59(e) motion; otherwise, it is treated as a Rule 60(b) motion.” Id. (citation omitted).
   Here, Plaintiffs filed their motion within ten days of the district court’s judgment.
   Accordingly, we treat it as a Rule 59(e) motion.

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                                            No. 23-10551

   59(e) motion for abuse of discretion. 19
          The district court denied the motion to alter or amend its judgment
   because Plaintiffs had failed to establish any of the three grounds for granting
   such a motion, including: “(1) an intervening change in controlling law;
   (2) the availability of new evidence not previously available; or (3) the need
   to correct a clear error of law or prevent manifest injustice.” 20 On appeal,
   Plaintiffs argue the court erred in denying the motion because “it
   misconstrued the information stated on the IRS Account Transcript” which
   resulted in a manifest injustice. However, for the reasons stated above, we
   find no error in the district court’s reliance or interpretation of the Account
   Transcript, and therefore conclude the district court did not abuse its
   discretion in denying relief to Plaintiffs under Rule 59(e).
                                                III.
          For the reasons above, the district court’s judgment is AFFIRMED.

          _____________________
          19
               Simon v. United States, 891 F.2d 1154, 1159 (5th Cir. 1990) (citation omitted).
          20
               In re Benjamin Moore & Co., 318 F.3d 626, 629 (5th Cir. 2002).

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