Sanchez v. Department of the Treasury IRS

Background

Alex Sanchez, identified as a state prisoner in Texas, brought this civil action without a lawyer against the Department of the Treasury IRS. The court had allowed him to proceed without paying the filing fee. Sanchez sought court intervention to obtain economic impact payments under the Coronavirus Aid, Relief, and Economic Security Act, commonly called the CARES Act. He stated that he had not received his payments.

Screening standard

Because Sanchez was a prisoner suing a governmental entity, the court was required to screen the complaint under 28 U.S.C. § 1915A. Screening is an initial review in which the court identifies claims that may proceed and dismisses claims that are frivolous, fail to state a legally sufficient claim, or seek money from a defendant protected from that type of relief. The court also applied the requirement that a complaint provide enough factual matter to make the requested relief plausible, rather than relying only on labels or conclusions.

Earlier class action

The court discussed the earlier related proceeding known as Scholl. In that case, the court certified a class that included qualifying United States citizens and lawful permanent residents who were or had been incarcerated and otherwise met the listed requirements. The court declared that 26 U.S.C. § 6428 did not allow the defendants to withhold advance refunds or credits from class members solely because they were or had been incarcerated. It also declared that the IRS policy treating people incarcerated at any time in 2020 as ineligible was arbitrary, capricious, and contrary to law, and entered a permanent injunction requiring reconsideration of payments denied solely for that reason.

The Scholl court expressly did not decide whether particular plaintiffs or class members were actually owed payments or how much they should receive. Individual eligibility determinations remained the IRS’s responsibility.

Court’s analysis

The court found that Sanchez was incarcerated and was part of the Scholl class. To the extent he claimed that his payments were denied because of his incarceration, the court held that he could not obtain separate individual injunctive or equitable relief duplicating the class action. The court stated that class members seeking further equitable or declaratory relief had to pursue it through the class action’s representatives and attorneys, including through contempt proceedings or intervention.

The court separately rejected Sanchez’s request to compel the IRS to provide payments under Scholl or the CARES Act. Scholl established only that incarceration alone could not justify denying a payment; it did not establish that Sanchez was individually owed one. In addition, the CARES Act provided that no refund or credit could be made or allowed after December 31, 2020. Because that deadline had passed, the court concluded that Sanchez could not obtain the requested relief.

Disposition

The court concluded that Sanchez failed to state a claim for relief. It dismissed the complaint without leave to amend because it found that no amendment could cure the identified problems. The conclusion states: “The action is DISMISSED with prejudice.” The clerk was directed to close the case. Judge Phyllis J. Hamilton signed the order.