Manchanda v. Internal Revenue Service

Background

Rahul Manchanda brought a damages action against the Internal Revenue Service, the United States, and other defendants. He alleged that the Internal Revenue Service took unauthorized collection actions concerning his tax debts, including filing tax liens, making collection calls, and sending collection notices. He also alleged that he submitted offers to settle his tax debts and two administrative claims concerning allegedly abusive collection activity.

The amended complaint asserted claims under 26 U.S.C. § 7433 for unauthorized tax collection, the Federal Tort Claims Act for intentional and negligent infliction of emotional distress, and 26 U.S.C. § 7431 for unauthorized inspection or disclosure of tax information.

Court’s Analysis

The court dismissed the Federal Tort Claims Act claims for lack of subject-matter jurisdiction. The Federal Tort Claims Act generally waives the United States’ immunity from certain tort lawsuits, but an exception applies to claims arising from the assessment or collection of taxes. The court interpreted that exception broadly and held that the alleged calls, harassment, notices, and other conduct arose from tax collection, even if the conduct was allegedly abusive. The court therefore held that the United States had not consented to those claims.

The court also dismissed the § 7433 claim because Manchanda had not exhausted the required administrative remedies. Before filing a § 7433 lawsuit, a taxpayer must submit a qualifying administrative claim to the Internal Revenue Service. The court held that the two Standard Forms 95 identified by Manchanda did not satisfy the regulation’s requirements. In particular, the amended complaint did not plausibly allege that the forms included the required taxpayer identification number, detailed grounds and supporting documentation, or a description of the injuries and supporting evidence. The court also noted that the materials discussed Federal Tort Claims Act claims rather than claims under § 7433.

For the § 7431 claim, the court held that Manchanda had tied the alleged unauthorized disclosures to tax collection. The court stated that § 7433 provides the exclusive remedy for unauthorized-disclosure claims arising from tax collection, and that the amended complaint identified no basis for the disclosure claim apart from tax collection. The court did not decide whether § 7433’s exclusivity rule would apply to disclosures unrelated to tax collection.

Disposition

The court dismissed all of Manchanda’s claims for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). Judge Andrew L. Carter, Jr. granted the defendants’ motion to dismiss, stated that it did not need to reach the defendants’ other arguments, directed the Clerk to terminate the motion, and ordered the case closed. The opinion does not state that the dismissal was with or without prejudice.