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Tanne v. Commissioner of Internal Revenue Service

United States District Court, D. Utah Central Division

November 7, 2017


         District Judge Robert J. Shelby Magistrate Judge Evelyn J. Furse


          EVELYN J. FURSE United States Magistrate Judge.

         Pro se Plaintiffs James Tanne and Megan Tanne move the Court[1] for “leave to supplement their pleadings with a Supplemental Claim for 2012 Offsets for 2005.” (Am. Request for Leave to Submit Suppl. Claim (“Mot.”) 1, ECF No. 63.) Specifically, Mr. and Ms. Tanne's supplemental claim contests the penalty amount and interest the IRS applied in 2013 and 2014 from a 2012 overpayment to tax owed by Mr. and Ms. Tanne from their 2005 tax return. (Suppl. Claim for 2012 offsets for 2005 (“Suppl. Claim”), ¶¶ 4-5, 12, ECF No. 63-1.) The undersigned RECOMMENDS the District Court deny Mr. and Ms. Tanne's Motion because it lacks jurisdiction over the supplemental claim, and alternatively res judicata bars the supplemental claim.

         On April 20, 2015, Mr. and Ms. Tanne filed a Complaint against the Commissioner of Internal Revenue Service seeking refunds for the 2004 and 2005 tax years. (ECF No. 3.) On July 12, 2016, the Tannes filed a Request for Leave to Submit Supplemental Claim. (ECF No. 47.) After dismissal of their Complaint, (ECF No. 55), and denial of their initial request for failure to meet local rules, (ECF No. 61), Mr. and Ms. Tanne filed a Motion for Leave to File a Supplemental Claim. (Am. Request for Leave to Submit Suppl. Claim (“Mot.”), ECF No. 63.)

         I. DISCUSSION

         Under Federal Rule of Civil Procedure (“Rule”) 15(a)(2), a court shall freely grant leave to amend when justice requires. Fed.R.Civ.P. 15(a)(2). Courts “generally refuse leave to amend only on ‘a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment.'” Duncan v. Manager, 397 F.3d 1300, 1315 (10th Cir. 2005) (quoting Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993)). ”A proposed amendment is futile if the complaint, as amended, would be subject to dismissal.” Watson ex rel. Watson v. Beckel, 242 F.3d 1237, 1239-40 (10th Cir. 2001).

         Mr. and Ms. Tanne argue this Court should grant their Motion because “[t]he cause of action arose after Petitioners filed the initial claim, ” and “the new supplemental claim stands on its own, demanding repayment of separate funds which were garnished from overpaid taxes in the 2012 tax year for offsets in the 2005 tax year.” (Mot. 1-2, ECF No. 63.) The United States argues the Court should deny Mr. and Ms. Tanne's Motion because the supplemental claim “is futile and would be subject to dismissal for failure to state a claim under Fed.R.Civ.P. 12(b)(6) and for lack of subject matter under Fed.R.Civ.P. 12(b)(1).” (United States' Mem. in Opp'n to Pls.' Am. Request for Leave to Suppl. Proceedings, (“Opp'n”), 2, ECF No. 64.)

         Specifically, the United States contends the Court should deny the supplemental claim because (1) the claim is time barred under 26 U.S.C. § 6511, (2) the attempt to have 2004 funds applied to 2005 is time barred, and (3) the Court lacks subject matter jurisdiction over the claim under 26 U.S.C. § 6512. (Id. at 7-9.) The Court considers the subject matter jurisdiction argument first, as it must. See Sinochem Int'l Co. v. Malay Int'l Shipping Corp., 549 U.S. 422, 430-31 (2007).

         1. The Court Lacks Jurisdiction Over Mr. and Ms. Tanne's Proposed Supplemental Claim.

         The United States argues this Court should deny Mr. and Ms. Tanne's Supplemental Claim as futile because the Court lacks subject matter jurisdiction. Specifically, the United States argues “this Court lacks jurisdiction over the proposed supplemental claim for 2005 pursuant to 26 U.S.C. § 6512(a) because the Plaintiffs already challenged the 2005 tax year deficiency before the Tax Court.” (Opp'n 9, ECF No. 64.)

         26 U.S.C. § 6512(a) provides that “if the taxpayer files a petition with the Tax Court . . . no credit or refund of income tax for the same taxable year . . . in respect of which the secretary has determined the deficiency shall be allowed or made and no suit by the taxpayer for the recovery of any part of the tax shall be instituted in any court.” 26 U.S.C. § 6512(a).

Section 6512(a) is an exception to the general rule that the United States may not be sued in its own courts. The exception provided by section 6512(a) is a limited one and generally prohibits a taxpayer from instituting an action against the government once he has petitioned to the Tax Court. . . . [S]ection 6512(c) serves to “deprive the district court of jurisdiction” once the Tax Court has been petitioned. . . . The jurisdictional bar of section 6512(a) operates to prohibit any action for taxes for that taxable year.

Solitron Devices, Inc. v. United States, 862 F.2d 846, 848 (11th Cir. 1989) (citing United States v. Alabama, 313 U.S. 274 (1941), Holzer v. United States, 250 F.Supp. 875, 877 (E.D. Wisc.), aff'd, 367 F.2d 822 (7th Cir. 1966); quoting 1st Nat'l Bank of Chicago v. United States, 792 F.2d 954, 956 (9th Cir.1986)). Courts consider penalties and interest as part of the “tax” contemplated by § 6512. See, e.g., Cheesecake Factory Inc. v. United States, 111 Fed.Cl. 686, 696 (Fed. Cl. 2013).

         Mr. and Ms. Tanne contend that “Defendant's assertions of 26 U.S.C. § 6512 relative to tax year 2005 are not relevant because the Supplemental Claim does not attach to the $1, 080 assessment of the 2005 tax against taxpayers' income - there is no dispute over this amount, nor was there ever.” (Reply 10, ECF No. 65.) Mr. and Ms. Tanne dispute only the amount of the penalty and interest assessed on the $1, 080.00 deficiency. Specifically, Mr. and Ms. Tanne claim that “there should be no interest accrued nor penalties assessed” because they overpaid their 2004 taxes, and therefore ...

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