Washington v. United States

Background

William Washington sued the United States for a refund of $29,876.12 that the Internal Revenue Service (IRS) levied from his wages or bank account and applied to income-tax liabilities for 2003, 2004, 2007, and 2008. He asserted claims for wrongful levy and failure to release the levy and unlawful tax collection. He also sought damages under 26 U.S.C. § 7433 and asked the court to stop installment payments and other collection activity, including activity involving tax years 2015 through 2019.

The United States moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction and under Rule 12(b)(6) for failure to state a claim. The court stated that the jurisdictional issues were dispositive and therefore focused on Rule 12(b)(1).

Court’s Analysis

Wrongful-levy claim

The court held that 26 U.S.C. § 7426(a)(1) provides the exclusive remedy for third-party wrongful-levy claims. Because Washington was the taxpayer whose taxes were being collected, rather than a third party claiming an interest in someone else’s property, he could not bring a claim under that statute. The court also found the claim untimely because the levies occurred in 2013 and Washington filed the action in 2020, more than the two-year period allowed by 26 U.S.C. § 6532(c)(1). The court concluded that it lacked subject-matter jurisdiction over the wrongful-levy claim.

Refund claim

The court concluded that Washington had not satisfied the jurisdictional prerequisites for a tax-refund suit under 26 U.S.C. § 7422. It found that Form 843 was not a proper form for claiming a refund of income taxes and that Washington had not shown he filed another document that could qualify as a proper administrative refund claim. The court also found that his letters did not adequately identify the relevant tax periods, the amount sought for each levy, or the basis for claiming the levies were erroneous. The court further stated that any informal claim would have applied only to amounts levied after April 12, 2013, and that Washington had not shown he later formalized the claim.

The court rejected Washington’s argument that the IRS’s failure to issue a notice denying his claim allowed the lawsuit to proceed. The court explained that a proper refund claim had to be submitted before the IRS could reject or otherwise act on it. Because Washington had not submitted a proper claim, the court held that he failed to satisfy § 7422 and that the court lacked subject-matter jurisdiction over the refund claims.

Damages claim

Washington sought damages under 26 U.S.C. § 7433, which permits damages when an IRS officer or employee recklessly, intentionally, or negligently disregards tax-law provisions or regulations during tax collection. The court explained that taxpayers must first exhaust specified administrative remedies. It found it unclear whether Washington’s May 26, 2018 letter fully complied with the regulatory requirements for an administrative damages claim. Even assuming that letter was valid and exhausted his administrative remedies, however, the court held that the damages claim was untimely. Washington knew about the levy no later than January 2013, but he did not make an administrative claim until 2018 and did not file this lawsuit until 2020. The court therefore dismissed the damages claim for lack of subject-matter jurisdiction.

Request to stop tax collection

To the extent Washington sought to prevent the IRS from collecting taxes for 2015 through 2019 or other tax years, the court held that the Anti-Injunction Act, 26 U.S.C. § 7421(a), barred the claims. That statute generally prevents courts from stopping the assessment or collection of taxes. The court found that Washington had not alleged an applicable exception and that the complaint did not indicate that the IRS acted without statutory authority. The court noted that refund and damages procedures could provide avenues for challenging collection activity, but it held that the requested injunction was outside the court’s jurisdiction.

Disposition

The court granted the government’s motion to dismiss for lack of subject-matter jurisdiction. It dismissed the case with prejudice because it found that allowing Washington to amend the complaint would be futile, and it ordered judgment entered accordingly. The court did not need to decide the government’s separate Rule 12(b)(6) argument that the complaint failed to state a claim.