Hoglund v. Kautter

Craig Hoglund and Christine Hoglund, Plaintiffs, v. Commissioner of Internal Revenue, David J. Kautter, Internal Revenue Service,its officers, employees, and corps including Dana (Hill) Fairchild, in her official capacity,and Doreen Peterson, her official capacity, et al., Defendants.

Case No. 1:18-cv-189

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NORTH DAKOTA

May 28, 2020

REPORT AND RECOMMENDATION

Before the court is defendants' motion to dismiss for insufficient service, lack of jurisdiction and failure to state a claim for which relief may be granted. Also before the court are plaintiffs' motions for summary judgment, injunctive relief, and leave to file an amended complaint. Judge Hovland has referred these motions to the undersigned for preliminary consideration. For the reasons set forth below, the undersigned recommends dismissal of this action without prejudice on account of insufficient service and deem the remainder of the motions moot.

I. BACKGROUND

A. General Background

Unless otherwise indicated, the following facts are cobbled together from plaintiffs' complaint along with an affidavit and IRS records filed by defendants in support of their motion to dismiss. The United States contends the latter are relevant to resolve the question of whether the court has jurisdiction. Plaintiffs filed their 2006 and 2007 federal income tax returns on October 15, 2007, and October 15, 2008, respectively. (Doc. Nos. 1 at p. 4; 18-1 at p. 2; 18-2 at p. 2). On May 11, 2009, the IRS assessed plaintiffs' additional tax liabilities for tax year 2006. (Doc. Nos. 18; 18-1 at pp. 2).

Plaintiffs filed amended or "completed" federal income tax returns for tax years 2006 and 2007 on October 15, 2007, and March 24, 2010. (Doc. Nos. 1, p. 4; 18-1, p. 3). On April 12, 2010, the IRS assessed plaintiffs additional tax liabilities for tax year 2007. (Doc. Nos. 18; 18-2 at p. 2).

Plaintiffs submitted to an examination by an IRS examiner on January 29, 2011. (Doc. No. 1, p. 4). They filed notice of their dispute with the examiner's report for tax year 2006 upon its issuance on May 2, 2011, and requested an appeal hearing. (Id.). On August 2, 2011, they received a second examiner's report that they also disputed. (Id. at pp. 4-5).

On or about August 14, 2012, the IRS filed notices of federal tax liens against plaintiffs. (Id. at p. 5; Doc. No. 18-1 at p. 3; 18-2 at p. 3). Plaintiffs claim they made payments under the belief that the liens would be removed. (Id,; Doc. Nos. 18-1 at pp. 4-5). The liens were not removed as plaintiffs had expected. (Doc. No. 1 at p. 4). Meanwhile, plaintiffs' requests for hearings on the examiner's reports and/or appeal hearings were denied. (Id. at pp. 5-6).

Plaintiffs' other efforts to have the IRS extinguish or remove the liens were unsuccessful. (Id. at pp. 5-6, 8). They filed an administrative claim against the IRS by way of letter dated March 17, 2017, which later was denied. (Id. at p. 8).

Plaintiffs also petitioned the United States Tax Court for relief with respect to the 2006 and 2007 tax years. (Id. at p. 6). On May 14, 2018, the tax court dismissed their case for lack of jurisdiction on grounds that it had not been timely filed. In the memorandum order granting the Commissioner's motion to dismiss, the court noted that "petitioners are not without recourse to challenge their liability; they may pay their outstanding liability and file a claim for refund."Hoglund v. Commissioner, Doc. No. 18823-16 L, United States Tax Court, Order dated May 14, 2018.

As for the IRS' continued collection efforts, notices of intended levy were issued for the 2006 and 2007 tax years on March 13, 2017. Also, a notice of federal tax liens covering the two tax years was filed on June 15, 2018, and a lien-filing collection due process notice was issued on June 19, 2018. (Doc. No. 18-2).

Plaintiffs assert they are entitled to tax refunds for tax years 2006 and 2007. (Id.). The IRS, however, maintain that plaintiffs have outstanding liabilities as of the date of the filing of plaintiffs' complaint of $869.01 for tax year 2006 and $42,172.44 for tax year 2007—at least as of the time of the filing of the complaint. (Doc. Nos. 18; 18-1 at p. 10; 18-2 at p. 7).

B. Procedural History

Plaintiffs initiated the above-entitled action pro se on September 17, 2018. (Doc. No. 1). They appear, as best the undersigned can discern, to be taking issue with additional income tax, interest, and penalties assessed against them by the Internal Revenue Service ("IRS") for tax years 2006 and 2007.¹ They cite 26 U.S.C. §§ 6325, 7422, 7432, and 7433, 26 C.F. R § 301.7433-1, and various sections of the Internal Revenue Manual as the basis for this court's exercise of jurisdiction. In their Complaint, under heading "Claims," they incorporate by reference the administrative record.

Per Tax Court Rule 210(b)(12) and Michael Thomas Garrett-Tex Court Bar No. GM0632, attorney representing the Commissioner in Docket No: 17639-17L before the United States Tax Court, the Administrative Record in possession of the Internal Revenue Service and the Commissioner of the Internal Revenue will contain all the Plaintiffs facts, financials disputes, and claims including all names, dates and specifics . . .

(Doc. No. 1). They go on to describe their interactions with the IRS in regards to their dispute over the assessment of liabilities for tax years 2006 and 2007. In so doing, they accuse various IRS employees with obstruction and flouting with IRS rules, regulations, and procedures. In their prayer for relief, they request tax refunds and compensatory damages for the alleged wrongful actions of defendants as outlined in their March 17, 2017, administrative claim letter, which they also incorporate by reference.

On December 17, 2018, defendants filed a motion to dismiss, a brief in support of the motion, the declaration of IRS Advisory Revenue Officer Sheryl McCanlies, a copy plaintiffs' administrative claim letter dated March 17, 2017, and copies of IRS Form 4340 for tax years 2006 and 2007. (Doc. Nos. 16-18). Reading the administrative claim letter in conjunction with plaintiffs' complaint, defendants identify three claims: (1) an attack on the merits of the tax assessments and an associated refund demand for a refund under 26 U.S.C. § 7422; (2) damages for failure to release a lien under 26 U.S.C. § 7432; and (3) damages for unlawful collection activities under 26 U.S.C. § 7433. Defendants go on to assert that this court lacks subject matter jurisdiction because the United States has not waived its sovereign immunity, that plaintiffs' complaint otherwise fails to state any cognizable claims, and that plaintiffs have not properly served the United States.

On January 14, 2019, plaintiffs filed a combined response to defendants' motion to dismiss and motion for summary judgment. (Doc. Nos. 19 and 20). Notably, they do not take issue with how defendants have construed their claims or categories of relief or otherwise take the position have asserted additional claims that defendants missed. Rather, they challenge the grounds for dismissal advanced by defendants. In so doing, they characterize defendants' assertion that they "did not pay the 'illegally calculated assessments' nor request refunds" as a "bold faced lie" because" IRS records do show that [plaintiffs] paid [the IRS's] illegal assessment in dispute." (Doc. No. 19 at pp. 12-13).

On January 16, 2019, defendants filed an unopposed motion to stay this action, citing the lapse of appropriations and the resulting government shutdown. (Doc. No. 21). The court granted defendants' motion the following day. (Doc. No. 22).

On January 28 2019, defendants filed a motion to lift the stay as the Congress had appropriated funds for the Department of Justice. (Doc. No. 23).

On January 31, 2019, plaintiffs filed a combined motion for injunctive relief and response to defendants' January 16, 2019, unopposed motion to stay this action. (Doc. No. 24). That same day the court issued an order granting the defendants' motion to lift the stay and establishing a briefing schedule for the pending motions. (Doc. No. 27).

On February 14, 2019, defendants filed a response to plaintiffs' motion for injunctive relief and a reply in support of their motion to dismiss. (Doc. Nos. 28 and 29). On February 21, 2019, they filed a response to plaintiffs' motion for summary judgment. (Doc. No. 31).

On March 27, 2019, plaintiffs filed a motion seeking leave to file an amended complaint. (Doc. No. 31). That same day defendants filed a response in opposition to plaintiffs' motion for leave to amend the complaint (Doc. No. 33).

On June 19, 2019, plaintiffs filed proof of service on IRS Commissioner David J. Kaulter, IRS Revenue Officer Dana Fairchild (Hill), Doreen Peterson, and Christopher Myers, former U.S. Attorney for the District of North Dakota. (Doc. No. 34).

On September 16, 2019, the court received an eight-page letter from plaintiffs. In the letter plaintiffs advise, among other things, that the some of their accounts have been partiallyabated/credited but they are still waiting for the IRS to "zero out" all of the assessments, lift all of the liens against them, and refund them $69,792 for tax year 2006 and $18,640 for tax year 2007.

II. DISCUSSION

A. This action involves only the 2006 and 2007 tax years and is a suit against the United States and its agency the Internal Revenue Service

It appears plaintiffs have disputes with the IRS involving a number of tax years. However, the complaint in this action, fairly construed, involves only the 2006 and 2007 tax years.

A suit against the IRS is treated as one against the United States. Jones v. I.R.S., 216 F. Supp. 2d 955, 958 (D. Neb. 2002), aff'd, 60 F. App'x 642 (8th Cir. 2003) (internal quotation marks omitted); see also Carelli v. IRS, 668 F.2d 902, 904 (6th Cir.1982). A suit against IRS employees in their official capacities is likewise treated as one against the United...