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Cummings v. United States

United States District Court, S.D. Indiana, New Albany Division

March 29, 2017




         This matter is before the Court on a Motion for Judgment on the Pleadings filed pursuant to Federal Rule of Civil Procedure 12(c) by Defendant United States of America (“the Government”). (Filing No. 40.) Plaintiff Steven J. Cummings (“Cummings”) accrued approximately $125, 000.00 in unpaid tax liabilities. The Government ultimately issued several levies on Cummings' wages and Thrift Savings Plan (“TSP”), through which it collected funds owed. Cummings alleges that those levies were issued in violation of a statute prohibiting the collection of funds via levy while the taxpayer has an Installment Agreement Request (“IAR”) or Offer in Compromise (“OIC”) pending with the Internal Revenue Service (“IRS”). Cummings sues for damages, and the Government has filed the instant 12(c) motion, arguing that Cummings did not have an IAR or OIC pending with the IRS at the time that his funds were levied. For the reasons discussed below, the Court GRANTS in part and DENIES in part the Government's motion.

         I. BACKGROUND

         The following facts are not necessarily objectively true; but, as required when reviewing a motion for judgment on the pleadings, the Court accepts as true all factual allegations in the Amended Complaint and draws all inferences in favor of Cummings. See Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008).

         Cummings accumulated a variety of tax liabilities and civil penalties amounting to approximately $125, 000.00 related to payroll taxes in both his individual and business capacities. (Filing No. 22 at 2.) IRS revenue officer Michael Ripley (“Ripley”) was assigned to Cummings' case and began his analysis of Cummings' accrued liabilities in June 2012. (Filing No. 41 at 5.) Prior to June 2012, the IRS had been collecting 15% of Cummings' wages from his employer, the Defense Finance and Accounting Service (“DFAS”) under the Federal Payment Levy Program. (Filing No. 41 at 5.) On July 30, 2012, Ripley issued a Notice of Wage Levy to DFAS, but DFAS did not comply with the Levy. (Filing No. 41 at 5.) Ripley issued a second Notice on January 18, 2013, and DFAS did not comply with this Levy either. (Filing No. 41 at 5.) As a result, the IRS did not receive any payments after May 10, 2013. (Filing No. 41 at 8.)

         Cummings received a summons to appear at Ripley's Bloomington, Indiana office on February 26, 2013. (Filing No. 22 at 2.) Cummings and his attorney waited for several hours, but Ripley did not appear for the appointment. (Filing No. 22 at 2-3.) On March 23, 2013, Cummings sent by Certified U.S. Mail an Installment Agreement Request to Ripley at his Bloomington office. (Filing No. 22 at 3.) Cummings made his request on IRS form 433-D, and he attached a completed financial information statement on IRS Form 433-A. (Filing No. 22 at 3.) The package's tracking information indicated that the request was delivered to the Ripley's office on March 25, 2013. (Filing No. 22 at 3.)[1]

         On May 6 and July 16, 2013, Cummings' counsel faxed correspondence to Ripley inquiring about the status of Cummings' IAR. (Filing No. 22 at 3.) Neither Cummings nor his counsel received any response. (Filing No. 22 at 3.) On August 29, 2013, Cummings' counsel left a voicemail message for Ripley inquiring about the status of Cummings' request, and again, he did not receive a response. (Filing No. 22 at 3-4.)

         On September 3, 2013, Ripley discovered that no wage levy payments had been received on Cummings' liability since May. (Filing No. 41 at 8.) On that same day, Ripley contacted DFAS to inquire as to why it had not complied with the levies, and DFAS responded that it had overlooked them. (Filing No. 41 at 8.) Ripley sent another Notice of Levy in early September 2013. (Filing No. 41 at 8.) On or about October 31, 2013, DFAS sent Cummings a letter indicating that the employer had received a Levy Notice from the IRS. (Filing No. 22 at 4.) Cummings received the letter on or around November 4, 2013, and this was his first notice that a wage levy had been issued. (Filing No. 22 at 4.) At the time that Cummings received the Notice, he had not been informed that his IAR had been rejected. (Filing No. 22 at 4.) DFAS began withholdings from Cummings' paycheck on December 6, 2013. (Filing No. 41 at 8.) That levy continued until it was released on June 17, 2015. (Filing No. 22 at 5.)

         On November 6, 2013, Cummings' counsel requested assistance from the IRS Taxpayer Assistance Service, and on December 10, 2013, the Taxpayer Assistance Service submitted another IAR on Cummings' behalf to Ripley. (Filing No. 22 at 4.) On December 10, 2013, Ripley informed Cummings' counsel that he recommended the rejection of Cummings' IAR on the basis that Cummings could afford a higher payment. (Filing No. 22 at 4.) On February 26, 2014, Cummings' counsel appealed the installment agreement rejection through the Collective Appeals Program and requested a return of the wages that had been levied from Cummings. (Filing No. 22 at 5.) On March 7, 2014, the IRS issued a determination letter sustaining the installment agreement rejection. (Filing No. 22 at 5.)

         At some point, Cummings (or the Taxpayer Assistance Service) drafted the OIC in which he offered to pay a $15, 000.00 lump-sum payment in full satisfaction of his roughly $125, 000.00 tax liability. (Filing No. 41 at 10.) On March 10, 2015, the Taxpayer Assistance Service issued a Taxpayer Assistance Order (“TAO”), which ordered the IRS to consider Cummings' OIC, which was attached to the TAO. (Filing No. 22 at 5.) The TAO also ordered the IRS to apply funds that had been “wrongfully” levied from Cummings' wages to the application fee and initial payment of the OIC. (Filing No. 22 at 5.)

         By letter dated April 9, 2015, the Deputy Commissioner for Services and Enforcement rescinded the TAO issued by Taxpayer Assistance Service. (Filing No. 26-7.) The letter explained that Cummings had failed to send his OIC to the Brookhaven Service Center, where it would be determined whether the offer qualified to be accepted for processing. (Filing No. 26-7 at 2.) It also stated that Cummings failed to include a check for the application fee and the statutorily required twenty percent down-payment when offering a lump sum OIC. (Filing No. 26-7 at 2.) For these reasons, “a processability determination has not been made.” (Filing No. 26-7 at 2.)

         On April 13, 2015, Ripley issued a Notice of Levy addressed to the administrator of Cummings' TSP account. (Filing No. 22 at 6; Filing No. 41 at 10.) On April 28, 2015, the IRS Centralized OIC Unit (“COIC”) informed Cummings that his OIC was being returned as non-processable, because Cummings did not submit the application fee and initial payment. (Filing No. 41 at 11.) On April 29, 2015, Cummings' counsel appealed the TSP levy, and the levy was sustained in full on May 13, 2015. (Filing No. 22 at 6.) Shortly after May 13, 2015, approximately $60, 000.00 was removed pursuant to the IRS levy from Cummings' TSP account. (Filing No. 22 at 6.) Cummings filed suit in this Court, alleging that the IRS levied his wages and TSP account in violation of 26 U.S.C. § 633(k). (Filing No. 1.) After filing an Answer to the Complaint, (Filing No. 26), the IRS moved to dismiss Cummings' claim pursuant to Fed.R.Civ.P. 12(c), (Filing No. 40). Cummings opposes that motion. (Filing No. 45.)


         Federal Rule of Civil Procedure 12(c) permits a party to move for judgment after the parties have filed a complaint and an answer. Rule 12(c) motions are analyzed under the same standard as a motion to dismiss under Rule 12(b)(6). Pisciotta v. Old Nat'l Bancorp., 499 F.3d 629, 633 (7th Cir. 2007); Frey v. Bank One, 91 F.3d 45, 46 (7th Cir. 1996). The complaint must allege facts that are “enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Although “detailed factual allegations” are not required, mere “labels, ” “conclusions, ” or “formulaic recitation[s] of the elements of a cause of action” are insufficient. Id. Stated differently, the complaint must include “enough facts to state a claim to relief that is plausible on its face.” Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (internal citation and quotation marks omitted). To be facially plausible, the complaint must allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).

         Like a Rule 12(b)(6) motion, the court will grant a Rule 12(c) motion only if “it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief.” N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998) (quoting Craigs, Inc. v. Gen. Elec. Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993)). The factual allegations in the complaint are viewed in a light most favorable to the non-moving party; however, the Court is “not obliged to ignore any facts set forth in the complaint that undermine the plaintiff's claim or to assign any weight to unsupported conclusions of law.” Id. (quoting R.J.R. Serv., Inc. v. Aetna Cas. & Sur. Co., 895 F.2d 279, 281 (7th Cir. 1989)). “As the title of the rule implies, Rule 12(c) permits a judgment based on the pleadings alone.... The pleadings include the complaint, the answer, and any written instruments attached as exhibits.” Id. (internal citations omitted).


         A. Legal Framework: Relevant Tax Code Provisions

         The Government may not be sued without its consent, and waivers to its sovereign immunity are both not implied and are construed narrowly against a plaintiff. Gessert v. United States, 703 F.3d 1028, 1033 (7th Cir. 2013) (citing Soriano v. United States, 352 U.S. 270, 276 (1957)). Section 7433 provides such a waiver. Id. That provision authorizes a taxpayer to seek damages through a civil action against the United States when “in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of this title, or any regulation promulgated under this title….” 26 U.S.C. § 7433.

         Tax Code provision 26 U.S.C. § 6331(a) authorizes the IRS to collect unpaid tax liabilities through the issuance of a levy:

upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person …. Levy may be made upon the accrued salary or wages of any officer, employee, or elected official, of the United States, the District of Columbia, or any agency or instrumentality of the United States or the District of Columbia, by serving a notice of levy on the employer (as defined in section 3401(d)) of such officer, employee, or elected official.

26 U.S.C. § 6331(a). Subsection (k) of that provision specifies that, however, under certain circumstances, a levy may not properly be issued. That subsection provides as follows:

(k) No levy while certain offers pending or installment agreement pending or in effect.
(1) Offer-in-compromise pending.--No levy may be made under subsection (a) on the property or rights to property of any person with ...

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