United States District Court, W.D. Kentucky, Louisville Division
WILLIAM R. SAWYERS PLAINTIFF
UNITED STATES OF AMERICA DEFENDANTS
MEMORANDUM OPINION AND ORDER
N. Stivers, Judge.
matter comes before the Court on Plaintiff's Motion for
Judgment (DN 8) and Defendant's Motion to Dismiss (DN
11). The matter is ripe for adjudication. For the reasons
detailed below, Plaintiff's Motion for Judgment is
DENIED and Defendant's Motion to Dismiss
Sawyers (“Sawyers”) filed his pro se
Complaint in this Court against Ms. Fentress (incorrectly
identified in the complaint as “Ms. Festurs”) and
Ms. Ruckers alleging that the Internal Revenue Service
(“IRS”) violated his rights by denying his
request to enroll in the Fresh Start Program, an IRS tax
repayment program. (Compl. ¶ 1, DN 1). Sawyers submitted
several offers in compromise to the IRS in the past five
years. (Pl.'s Mot. for J. Ex. 1, 2, DN 8-1). His most
recent offer in compromise was rejected due to an error in
the IRS records that reflected a previous offer in compromise
as still pending. (Compl. ¶ 4).
December 10, 2015, Sawyers filed this action alleging that
IRS employees intentionally misrepresented that his previous
offer in compromise was still pending in order to reject his
offer in compromise and therefore deny his participation in
the Fresh Start Initiative. (Compl. ¶ 4). In the
Complaint, he seeks relief in the form of an order compelling
the IRS to accept his offer in compromise, release of the
federal tax liens filed against him, a recovery of his
administrative costs, and to have his credit rating restored.
(Compl. ¶ 5).
21, 2016, Sawyers moved for judgment reiterating the claims
in the Complaint.(Pl.'s Mot. for J. DN 8). On August 15,
2016, the United States then moved to dismiss the action on
the basis of insufficient service of process, lack of
personal jurisdiction, failure to state a claim upon which
relief can be granted, and lack of subject matter
jurisdiction. (Def.'s Mot. to Dismiss, DN 11).
Subject Matter Jurisdiction
first and fundamental question presented by every case
brought to the federal courts is whether it has jurisdiction
to hear a case . . . .” Douglas v. E.G. Baldwin
& Assocs., 150 F.3d 604, 607 (6th Cir.1998),
abrogation on other grounds recognized by Heartwood, Inc.
v. Agpaoa, 628 F.3d 261, 266 (6th Cir. 2010) (citations
omitted). “A motion to dismiss on the basis that
plaintiff's claim is barred by sovereign immunity is a
motion to dismiss for lack of subject matter
jurisdiction.” Pyramid Mining, Inc. v. The Hoke
Co., No. CIV.A.95-CV-0010-M, 1997 WL 1037975, at *1
(W.D. Ky. Oct. 6, 1997). The party asserting jurisdiction has
the burden of proof in a motion to dismiss for lack of
subject matter jurisdiction. Id. (citing RMI
Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125,
1134 (6th Cir. 1996)).
case, the Court lacks subject matter jurisdiction because
there has been no waiver of sovereign immunity by the United
States. See Pyramid Mining, Inc., 1997 WL 1037975,
at *1 (“[I]t is well-established that the United States
may not be sued absent an effective waiver of its sovereign
immunity. The consent of the United States can only derive
from an Act of Congress which explicitly waives
immunity.” (citing United States v. Testan,
424 U.S. 392, 399 (1976))). The only possible basis in this
action of a waiver of sovereign immunity alleged in the
Complaint is 26 U.S.C. § 7433, which provides limited
waiver of sovereign immunity for suits by taxpayers, for
damages, against the United States in circumstances where,
“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(a) (emphasis added).
“[S]ection 7433's limited waiver of sovereign
immunity must be read narrowly.” Portsmouth
Ambulance, Inc. v. United States, 943 F.Supp.2d 806, 813
(S.D. Ohio 2013) (alteration in original) (citation omitted).
claim falls outside Section 7433's waiver of sovereign
immunity because his claim does not implicate the
statute's prohibition against collection activity that
disregards provisions of, or regulations under, the Internal
Revenue Code. See Spahr v. United States, 501
F.Supp.2d 92, 96 (D.D.C. 2007) (dismissing pro se
taxpayer's claims against IRS because the complained of
actions did not involve collection activity and therefore
fell outside of Section 7433's limited waiver of
sovereign immunity). Sawyers argues that an intentional error
in the IRS records showing that a previous offer in
compromise had yet to be processed “prevent[ed]
[Sawyers] latest [offer in compromise] from being
processed.” (Compl. ¶ 2). Sawyers asserts
“[f]urther, the findings show and prove dishonesty by
the IRS, and that IRS procedures were not at all followed
regarding my settlement attempts [with the OIC].”
(Pl.'s Mot. for J. 1). Essentially, in his Complaint and
motion, Sawyer is alleging that the IRS did not follow proper
procedures when denying his offer in compromise.
decisions and actions pertaining to offers in compromise are
not considered to be collection activity under Section 7433.
See Addington v. United States, 75 F.Supp.2d 520,
524 (S.D. W.Va. 1999) (“Since compromising tax
liabilities is purely discretionary, even if the IRS had
summarily rejected plaintiffs' offer, it would not give
rise to a claim for intentional or reckless violation of the
Code.”). See also Id. (“Section 7122
clearly states that the Secretary may compromise any civil or
criminal tax case prior to referral to the Department of
Justice. The decision to accept or reject a compromise offer
is discretionary and cannot be compelled by any
action.” (citation omitted)); United States v.
Ullman, No. CIV.A. 01-0272, 2002 WL 987998, at *6 (E.D.
Pa. May 8, 2002) (“Compromising tax liabilities is a
purely discretionary activity and will not give rise to a
claim for intentional, reckless or negligent violation of the
Internal Revenue Code.” (citing Addington, 75
F.Supp.2d at 524)). Sawyers' allegations against the IRS
do not pertain to collection activity and do not fall under
the scope of Section 7433; thus, there is no waiver of
Sawyers complains that he was prevented from participating in
the Fresh Start Tax Program by the IRS' actions denying
his offer in compromise. (Compl. ¶ 1). The Fresh Start
Initiative is an IRS program which allows tax payers to
benefit from installment agreements, relaxed rules regarding
offers in compromise, and forbearance or withdrawal of
federal tax liens. See I.R.S. News Release
IR-2012-31 (Mar. 7, 2012). Decisions to allow taxpayers to
participate in the Fresh Start Program by accepting their
offers in compromise are completely discretionary and is not
guaranteed by statute or regulation so that Sawyers cannot
prove that an “officer or employee of the Internal
Revenue Service recklessly or intentionally . . . disregards
any provision of this title . . . .” 26 U.S.C. §
7433(a). “A successful claim under § 7433 can only
occur, therefore, when Title 26, or a regulation promulgated
thereunder, is violated.” Sachs v. U.S. ex rel.
I.R.S., 59 F.App'x 116, 118 (6th Cir. 2003). The
decision to allow participation in the program is
discretionary and the denial of the offer in compromise would
not be a violation giving rise to a claim under Section
7433's protections. Accordingly, Sawyers' claims must
be dismissed under Federal Rule of Civil Procedure 12(b)(1)
for lack of jurisdiction.
should be noted that the United States argues in its motion
that this Court lacks subject matter jurisdiction over this
matter because Sawyers failed to administratively exhaust his
remedies before filing this lawsuit. In asserting this
position, the United States ignores the Sixth Circuit holding
in Hoogerheide v. I.R.S., 637 F.3d 634 (6th Cir.
2011), in which that court “rejected the argument that
the failure to exhaust administrative remedies is a
jurisdictional defect.” Hunter v. United
States, No. 3:12-CV-144, 2012 WL 6002821, at *4 (W.D.
Ky. Nov. 30, 2012) (citing Hoogerheide, 637 F.3d at
636-39). In Hoogerheide, the Sixth Circuit noted
that an exhaustion requirement is typically an affirmative
defense, rather than a jurisdictional defect.
Hoogerheide, 637 F.3d at 638 (citing Jones v.
Bock, 549 U.S. 199 (2007). The Sixth Circuit found that
dismissal of the Section 7433 claim for failure to exhaust
administrative remedies was warranted, however, because
relevant letters demonstrating the plaintiff's failure to
comply with the exhaustion ...