Dixon v. Internal Revenue Service

          OPINION AND ORDER

          JOHN E. MARTIN MAGISTRATE JUDGE

         This matter is before the Court on United States of America's Motion to Dismiss [DE 12], filed by Defendant United States of America, improperly sued as Internal Revenue Service, on November 26, 2018, and Plaintiff's Motion for Leave to File an Amended Complaint to Join an Additional Party [DE 23], filed by Plaintiff Dixon, pro se, on March 25, 2019. Plaintiff Dixon seeks to amend his Complaint to add his wife as a plaintiff in this action. Defendant United States seeks to have the case dismissed.

         I. Background

         On July 26, 2018, Dixon filed a Complaint regarding his tax filing for the 2012 income tax year, alleging that the IRS improperly denied his timely first claim for refund. On November 26, 2018, the United States filed the instant Motion to Dismiss. Dixon filed a response on December 13, 2018, and on March 12, 2019, the United States filed a reply. On March 25, 2019, Dixon filed the instant Motion to Amend. The United States filed a response on April 4, 2019, and on April 19, 2019, Dixon filed a reply.

         II. Standard of Review

         Federal Rule of Civil Procedure 12(b)(1) requires a court to dismiss a cause of action when the court lacks subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). The “district court must accept as true all well-pleaded factual allegations, and draw reasonable inferences in favor of the plaintiff.” Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995). However, when subject matter jurisdiction is not apparent on the face of the complaint and is contested, the district court may “properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Evers v. Astrue, 536 F.3d 651, 656-57 (7th Cir. 2008). “In all cases, the party asserting federal jurisdiction has the burden of proof to show that jurisdiction is proper.” Travelers Prop. Cas. v. Good, 689 F.3d 714, 722 (7th Cir. 2012) (citing McNutt v. Gen. Motors Acceptance Corp., 289 U.S. 178, 198 (1936)).

         Federal Rule of Civil Procedure 15(a) provides that, when a party seeks leave to amend a pleading, the “court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). Thus, if the underlying facts or circumstances relied upon by a plaintiff are potentially a proper subject of relief, the party should be afforded an opportunity to test the claim on the merits. Foman v. Davis, 371 U.S. 178, 182 (1962). The decision whether to grant or deny a motion to amend lies within the sound discretion of the district court. Campbell v. Ingersoll Milling Mach. Co., 893 F.2d 925, 927 (7th Cir. 1990). However, leave to amend is “inappropriate where there is undue delay, bad faith, dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, or futility of the amendment.” Villa v. City of Chicago, 924 F.2d 629, 632 (7th Cir. 1991) (citing Foman, 371 U.S. at 183).

         When a plaintiff seeks to add a new plaintiff through an amended complaint, Federal Rule of Civil Procedure 20 is implicated. See Lee v. Cook Cnty. Ill., 635 F.3d 969, 971 (7th Cir. 2011). Rule 20 provides that plaintiffs may be joined to an action if “(A) they assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all plaintiffs will arise in the action.” Fed.R.Civ.P. 20(a)(1). “The standard for permissive joinder under Rule 20 is liberal, ” Eclipse Mfg. Co. v. M & M Rental Ctr., Inc., 521 F.Supp.2d 739, 744 (N.D. Ill. 2007), and “courts are inclined to find that claims arise out of the same transaction or occurrence when the likelihood of overlapping proof and duplication in testimony indicates that separate trials would result in delay, inconvenience, and added expense to the parties and to the court.” 7 Charles Alan Wright et al., Federal Practice and Procedure § 1653 (3d ed. 2001); see also Thompson v. Boggs, 33 F.3d 847, 858 (7th Cir. 1994).

         III. Analysis

         The Complaint, filed July 26, 2018, addresses federal income taxes for the tax year ending December 31, 2012. The parties agree that Dixon timely filed an administrative claim for a tax refund via Form 1040X on April 13, 2015. The IRS sent a Letter 105C to Dixon on January 21, 2016, stating that the claim of April 13, 2015, could not be allowed. Dixon filed another Form 1040X in June 2016, and received a Letter 105C dated August 3, 2016, disallowing that claim. During this time, Dixon was engaged in bankruptcy proceedings: he filed for bankruptcy on or about September 2, 2010, and he states that it was completed on July 22, 2016. In its Motion to Dismiss, the United States seeks to have Dixon's suit dismissed as barred by the applicable statute of limitations. Dixon filed a Motion to Amend, seeking to add his spouse as a party plaintiff.

         A. Motion to Dismiss

         The United States argues that Dixon's suit is untimely and must therefore be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1). Dixon argues that the statute of limitations was tolled when he filed for bankruptcy and that he relied on written guidance he received from the IRS, so the United States should be estopped from arguing a shorter statute of limitations should apply.

         Any suit “for the recovery of any internal revenue tax, penalty, or other sum” must be commenced before “the expiration of 2 years from the date of mailing by certified mail or registered mail by the Secretary to the taxpayer of a notice of the disallowance of the part of the claim to which the suit or proceeding relates.” 26 U.S.C. § 6532(a)(1). The United States argues that Dixon did not file his suit for refund until more than two years after the first administrative claim was denied, so the case must be dismissed for lack of subject matter jurisdiction.

         Dixon argues first that the statute of limitations was tolled when he filed for bankruptcy, so that the statue of limitations was tolled until January 22, 2017, six months after it was completed, citing to 26 U.S.C. § 6503(h). However, as the United States argues, that section of the code deals with assessment of taxes by the IRS, and “tolls the period of time in which the United States can collect a tax against a taxpayer/debtor, ” not the time for a suit brought against the United States. Merisel of Americas, Inc. v. United States, No. 97-0723T, 2000 WL 641604, at *6 (D.R.I. Feb. 22, 2000) (comparing 26 U.S.C. § 6503(h) with 26 U.S.C. § 6532(c)). Section 6532 provides the statute of limitations for lawsuits brought by taxpayers against the Government, and does not include a tolling provision for the plaintiff's bankruptcy. See 26 U.S.C. §6532(a). The disallowance letter ...