Court Opinion

ID: 9386554
Source: CourtListenerOpinion
Date Created: 2023-04-12 20:01:39.224278+00
Date Added: 2024-06-11T17:18:07.286363
License: Public Domain

In the United States Court of Federal Claims
                                NOT FOR PUBLICATION

                                          No. 22-899T
                                     (Filed: April 6, 2023)

                                                )
    STACEY L. KING,                             )
                                                )
                Plaintiff,                      )
                                                )
        v.                                      )
                                                )
    UNITED STATES,                              )
                                                )
                Defendant.                      )
                                                )

Stacey L. King, Las Vegas, NV, pro se.

Anthony M. Cognasi, Trial Attorney, Court of Federal Claims Section, Tax Division,
U.S. Department of Justice, Washington, DC, for defendant.

                                 ORDER OF DISMISSAL 1

       Plaintiff pro se Stacey L. King filed this federal income tax-related matter–
pled as a breach of contract case–against the United States on August 10, 2022.
See ECF No. 1. The genesis of this matter relates to plaintiff’s 2014 Form 1040,
U.S. Individual Income Tax Return, filed on April 15, 2015. In processing plaintiff’s
2014 federal income tax return, the United States Department of the Treasury,
Internal Revenue Service (IRS), assessed an amount due of $3,100 plus $1.27 in
interest. See ECF No. 8-1 at 4. 2 No payment was remitted with plaintiff’s 2014
federal income tax return. See id. Thereafter, between April 2017 and April 2019,
the IRS offset the arrearage with plaintiff’s reported overpayments for tax years
2016 through 2018 in the aggregate amount of $3,113.42, plus $401 in installments

1This case was transferred to the undersigned for adjudication on March 28, 2023, pursuant to
Rule 40.1(b) of the Rules of the United States Court of Federal Claims (RCFC). See ECF Nos. 12–13.

2In ruling upon a motion to dismiss for lack of subject matter jurisdiction under RCFC 12(b)(1),
the Court may consider matters outside the complaint. See Alisud-Gesac Handling-Servisair 2 Scarl
v. United States, 161 Fed. Cl. 655, 662 (2022) (citing Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d
1573, 1584 (Fed. Cir. 1993)), appeal docketed, No. 23-1087 (Fed. Cir. filed Oct. 27, 2022).
reportedly made by plaintiff. 3 Id. at 4–5. On May 15, 2019, the IRS assessed
plaintiff a failure to pay tax penalty in the amount of $413.15 for tax year 2019.
See id. at 5. At this point, according to the Court’s calculation, the parties were
all square.

       On November 25, 2019, plaintiff filed suit in the United States District Court
for the District of Nevada challenging his tax year 2014 assessment and seeking a
refund of the IRS offsets for tax years 2016 to 2018. See ECF No. 8-1 at 10–15.
The parties resolved the matter in May 2020, executed a settlement agreement,
and subsequently filed a notice of voluntary dismissal. See ECF No. 8-1 at 17–19,
21–22, 24. Pursuant to the settlement agreement dated May 1, 2020, plaintiff was
credited with an overpayment of his 2014 federal income taxes in the amount of
$3,739.42 plus statutory interest. See ECF No. 11-1 at 1; see also ECF No. 8-1 at 6–
7. According to the complaint filed in this case, “[i]n October of 2020, Defendant
delivered a check to Plaintiff for said tax overpayment . . . .” See ECF No. 1 at 2.
This payment presumably concluded the tax year 2014 federal income tax dispute.

       Nevertheless, on August 10, 2022, plaintiff commenced this action alleging
the IRS failed to process and refund plaintiff’s reported federal income tax
overpayments for tax years 2020 and 2021. Plaintiff alleges the IRS mistakenly
withheld these refunds to satisfy the same 2014 arrearages the parties resolved
through their May 1, 2020 settlement agreement, thereby breaching the agreement.
See id. at 2–3. Plaintiff seeks monetary damages in the amount of $11,000, plus
interest, reimbursement of unspecified costs and fees, and a court order directing
the government’s compliance with the terms of the May 1, 2020 settlement
agreement. Id. at 3.

       On December 16, 2022, defendant filed a partial motion to dismiss plaintiff’s
complaint for lack of subject matter jurisdiction, characterizing the complaint as
asserting three claims: tax refund claims for tax years 2020 and 2021, and a breach
of contract claim premised thereupon. See ECF No. 8 at 1. Defendant argues the
Court does not have jurisdiction over either tax refund claim because plaintiff failed
to request a refund for tax year 2020 and filed his complaint before his cause of
action accrued for tax year 2021. 4 See ECF No. 8. Defendant further notes plaintiff
underpaid his federal income tax due for tax year 2020 and, as of October 13, 2022,

3A May 1, 2020 settlement agreement between the parties, discussed infra, suggests plaintiff made
payments in the aggregate amount of $626 during this timeframe. See ECF No. 11-1 at 1 (crediting
payments of $131 and $495 in addition to 3 federal tax refund offsets). The delta is attributable to
the inclusion of a $225 reversal in the calculation of plaintiff’s payments or credits. Compare id.
with ECF No. 8-1 at 4–5.

4As detailed below, defendant mistakenly cites IRS assessment dates as the dates plaintiff
reportedly filed his 2020 and 2021 federal income tax returns. Compare ECF No. 8 at 4 with
ECF No. 8-1 at 27, 32. The correct dates do not affect the Court’s analysis.

                                                  2
plaintiff’s arrearage totaled $2,120.64, including interest. See ECF No. 8 at 4;
ECF No. 8-1 at 27–29.

       The alleged breach of the settlement agreement by the government is
inextricably intertwined with the IRS’s processing of plaintiff’s federal income tax
returns for tax years 2020 and 2021. In other words, plaintiff’s breach of contract
claim turns on the government’s purported decisions to offset plaintiff’s reported
overpayments in tax years 2020 and 2021 to satisfy a tax arrearage settled in
May 2020. The Court, however, lacks jurisdiction to examine the IRS’s alleged
(mis)processing of plaintiff’s federal income tax returns for tax years 2020 and 2021.

        “To maintain a tax refund suit against the United States, taxpayers must
first file a refund claim with the [IRS].” Weston v. United States, No. 22-1179,
2022 WL 1097361, at *1 (Fed. Cir. Apr. 13, 2022) (per curiam) (citing 26 U.S.C.
§ 7422(a)). In turn, Title 26, United States Code, Section 6532(a)–titled “Suits by
taxpayers for refund”–provides in relevant part:

      No suit or proceeding under section 7422(a) for the recovery of any
      internal revenue tax, penalty, or other sum, shall be begun before the
      expiration of 6 months from the date of filing the claim required under
      such section unless the Secretary renders a decision thereon within
      that time . . . .

26 U.S.C. § 6532(a)(1). The filing of a refund claim begins the six-month clock
codified in § 6532(a). Unless the IRS issues a notice of decision during the
six-month period, the filer must await the end of the statutory period before
filing suit in this Court.

        Plaintiff filed his 2020 Form 1040, U.S. Individual Income Tax Return, on
April 25, 2021. See ECF No. 8-1 at 27. Rather than seek a refund due to a claimed
overpayment, plaintiff remitted a payment of $2,714 with his tax return. See id.
Since plaintiff did not request a refund in his 2020 Form 1040, the Court does not
have jurisdiction over his tax refund claim for that tax year. See Weston, 2022 WL
1097361, at *1 (citing 26 U.S.C. § 7422(a)). Additionally, according to IRS records,
plaintiff still owes $2,100 in back taxes, plus interest, for tax year 2020. See ECF
No. 8-1 at 27–29. As such, plaintiff must comply with the Full Payment Rule–
i.e., prepay his principal tax liability for tax year 2020–before seeking this Court’s
intervention. See Shore v. United States, 9 F.3d 1524, 1525–28 (Fed. Cir. 1993).
At bottom, regardless of whether the IRS properly assessed plaintiff’s arrearage,
plaintiff did not file the requisite administrative refund claim for tax year 2020
and failed to comply with the Full Payment Rule.

      Next, plaintiff filed his 2021 Form 1040, U.S. Individual Income Tax Return,
on April 18, 2022. See ECF No. 8-1 at 32. The complaint in this case was filed

                                           3
just 3 months and 23 days later, on August 10, 2022. Compare id. with ECF 1.
According to government records, the IRS assessed plaintiff’s tax return on
September 12, 2022, and presumably issued a decision thereafter, calculating a
refund due of $6,895. See ECF No. 8-1 at 32–34. This Court lacks jurisdiction to
assess the propriety of the IRS’s actions regarding plaintiff’s 2021 federal income
tax return and administrative refund claim because plaintiff did not wait for either
the six-month statutory waiting period to expire or for the IRS to issue a decision on
his requested refund before filing his complaint. See Weston, 2022 WL 1097361, at
*1 (“[T]he failure to file a timely complaint under § 6532(a)(1) deprives the [Court
of Federal Claims] of subject matter jurisdiction.”) (citing cases); see Gaynor v.
United States, 150 Fed. Cl. 519, 537–38 (2020) (“[O]ur jurisdiction is assessed at the
time at which a complaint is filed – not subsequently, after a plaintiff already has
filed an action. Concluding otherwise would render the statutory waiting period a
dead letter.”); e.g., id. at 538 (dismissing tax refund claims for lack of jurisdiction
because the “requisite waiting period had not yet elapsed” when plaintiff filed the
initial complaint).

       Because the viability of plaintiff’s breach of contract claim turns exclusively
on the merits of his 2020 and 2021 tax refund claims over which the Court lacks
jurisdiction, the breach of contract claim cannot stand at this juncture. In other
words, when plaintiff filed this case, his breach of contract claim was not ripe
insofar as it relied on tax year 2020 due to his failure to seek a refund and to comply
with the Full Payment Rule. In turn, the claim’s reliance on tax year 2021 was
jurisdictionally premature because the complaint was filed before the six-month
statutory waiting period lapsed or the IRS decision. Accordingly, the Court lacks
subject matter jurisdiction over plaintiff’s breach of contract claim, as well as the
two underlying tax refund claims, and this case must therefore be dismissed. See
RCFC 12(h)(3) (“If the court determines at any time that it lacks subject-matter
jurisdiction, the court must dismiss the action.”); Folden v. United States, 379 F.3d
1344, 1354 (Fed. Cir. 2004) (“Subject-matter jurisdiction may be challenged at any
time by the parties or by the court sua sponte.”) (citing Fanning, Phillips & Molnar
v. West, 160 F.3d 717, 720 (Fed. Cir. 1998)).

       To be clear, according to government records, shortly after plaintiff filed the
complaint, the IRS assessed plaintiff’s administrative refund claim finding plaintiff
entitled to a refund for tax year 2021. Plaintiff may now refile suit insofar as he
relies upon the tax year 2021 assessment, potentially overcoming the jurisdictional
hurdles discussed supra. The same, however, does not hold true regarding
plaintiff’s tax year 2020 federal income tax return. As explained, for tax year 2020,
plaintiff reported an underpayment and remitted payment for his calculated
arrearage rather than request a refund. Additionally, IRS records indicate plaintiff
has not yet paid in full his tax year 2020 liability. To properly bring a claim based

                                           4
on the IRS’s assessment of his tax year 2020 liability, plaintiff must first cure the
continuing jurisdictional defects discussed herein. 5

        For these reasons,

    (1) Defendant’s Partial Motion to Dismiss plaintiff’s complaint for lack of subject
        matter jurisdiction (ECF No. 8) is GRANTED;

    (2) Plaintiff’s complaint (ECF No. 1) is DISMISSED without prejudice; and

    (3) The Clerk of Court is directed to ENTER Judgment DISMISSING this case
        without prejudice

        No costs.

        It is so ORDERED.

                                                                s/ Armando O. Bonilla
                                                                Armando O. Bonilla
                                                                Judge

5If the IRS uses a portion of plaintiff’s tax year 2021 calculated refund to offset his tax year 2020
arrearage, the Full Payment Rule will be satisfied. That said, plaintiff would still need to file an
administrative refund claim for tax year 2020 and await either a decision by the IRS or the
expiration of the six-month statutory waiting period.

                                                   5