Hanna v. Internal Revenue Services (IRS)

• Court: District Court, S.D. California
• Decided: May 13, 2025
• Docket: 3:24-cv-00515
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 RIMON HANNA, Case No.: 3:24-cv-00515-RBM-KSC 10 Plaintiff, ORDER:

11 v. (1) GRANTING PLAINTIFF’S 12 INTERNAL REVENUE SERVICE (IRS), REQUEST FOR EXTENSION TO and DOES 1 through 10, inclusive, FILE PLAINTIFF’S FIRST 13 AMENDED COMPLAINT [Doc. 5] Defendants. 14 (2) DISMISSING THE FIRST 15 AMENDED COMPLAINT [Doc. 6] 16 17 18 Pending before the Court is Plaintiff Rimon Hanna’s (“Plaintiff”) Request for 19 Extension to File Plaintiff’s First Amended Complaint (“Motion”). (Doc. 5.) On January 20 9, 2025, without waiting for the Court’s approval, Plaintiff filed a First Amended 21 Complaint (“FAC”). (See Doc. 6.) For the reasons discussed below, Plaintiff’s Motion 22 (Doc. 5) is GRANTED and the FAC (Doc. 6) is DISMISSED. 23 I. BACKGROUND 24 A. Procedural Background 25 On March 18, 2024, Plaintiff initiated this action against the Internal Revenue 26 Service (“IRS”) and Does 1 through 10 by filing a complaint (“Complaint”). (Doc. 1.) 27 Along with his Complaint, Plaintiff filed a Motion for Leave to Proceed in Forma Pauperis 28 (“IFP Motion”) pursuant to 28 U.S.C. § 1915. (Doc. 2.) 1 On September 20, 2024, the Court granted Plaintiff’s IFP Motion but dismissed the 2 Complaint without prejudice for failure to state a claim pursuant to 28 U.S.C. § 1915(e)(2) 3 (“Dismissal Order”). (Doc. 3.) Given Plaintiff’s pro se status, the Court granted Plaintiff 4 an opportunity to file an amended complaint on or before October 11, 2024. (Id. at 7.1) 5 On December 18, 2024, more than two months after the Court-ordered deadline, 6 Plaintiff filed the instant Motion requesting the Court’s approval to file his amended 7 Complaint on or before January 10, 2025. (Doc. 5 at 1.) On January 9, 2025, Plaintiff filed 8 the FAC without the Court’s approval. (Doc. 6). 9 B. Factual Background2 10 In the FAC, Plaintiff asserts a single cause of action under Internal Revenue Code 11 (“IRC”) § 7433, which “authorizes the filing of a damages action against the government 12 in federal district court when, in connection with the collection of a tax, any officer or 13 employee of the IRS recklessly, intentionally, or negligently disregards any provision of 14 the [IRC] or the related Treasury Regulations.” (FAC at 2.) Plaintiff claims that the IRS 15 violated 26 U.S.C. §§ 161, 162, “26 USC Part VI,” and the “Taxpayer Bill of Rights.” (Id. 16 at 1–3.) Plaintiff seeks the “release” of $815.29 for tax year 2016, $1,069.00 for tax year 17 2017, $2,557.00 for tax year 2018, and for this Court to “[r]everse any penalties and interest 18 [that have] been charged” against him. (Id. at 4–5, Damages and Relief Requested.) 19 Plaintiff filed “with the IRS his 1040X for the tax year[s] of 2016, 2017[,] and 2018 20 which were mailed on April 17, [2020], and received by the IRS on April 20, [2020].”3 21 22 1 The Court cites the paragraph numbers of the Complaint and the CM/ECF electronic 23 pagination for other citations unless otherwise noted.

24 2 The Court’s summary of Plaintiff’s FAC in this section does not reflect the factual or legal 25 opinions of the Court.

26 3 While Plaintiff alleges that he mailed his tax returns to the IRS on April 17, 2021, the 27 attached exhibits show that he mailed them on April 17, 2020. (See FAC, Ex. A at 7; id., Ex. D at 15, 17; id. Ex. J at 42.) It appears to the Court, based on its review of the FAC 28 1 (Id. ¶ 6.) He “amended his returns to reflect his self-employment as an UBER driver, to 2 include [an] increase of earning[s,] and to claim self-employment expenses.” (Id. ¶ 7.) 3 The “IRS processed Plaintiff’s 1040X for the tax year of 2016 and issued [a] refund 4 of $815.29.” (Id. ¶ 8) The IRS also “processed Plaintiff’s 1040X for the tax year of 2018 5 and issued [a] refund of $2557.00.” (Id.) Finally, the IRS “processed Plaintiff’s 1040X 6 for the tax year of 2017, and should have issued [a] refund of $1069.00.” (Id.) Instead, 7 the IRS withheld “Plaintiff’s refund for 2016[,] 2017, and 2018 and applied all of the 8 refunds to [a] (new) calculated balance by the IRS, resulting [in] an outstanding balance of 9 $2,234.04 for 2017, due to IRS disallowing Plaintiff’s genuine deduction . . . .” (Id. ¶ 9.) 10 “Plaintiff was forced to issue a payment to the IRS in the amount of $1539.00 to keep his 11 account in good standing with the IRS and to avoid collection.” (Id. ¶ 10.) 12 Plaintiff spoke with a manager at his local IRS office who “revie[we]d the file [] and 13 determined[:] (a) 2017 amended return was filed timely [and] (b) all of the expenses and 14 credits should have been allowed.” (Id. ¶ 12.) The manager “contacted the supervisor of 15 the IRS office in Fresno where the decision was made, Plaintiff was promised a correction 16 to be made within couple of weeks, but until the day of filing this complaint, there is no 17 correction was ever made.” (Id.) On June 29, 2022, Plaintiff sent the IRS a letter titled 18 “Appeal Request–Notice to Sue,” where he stated his reasons for appealing the IRS’ 19 decision on his amended return for the 2017 tax year. (Id. ¶ 13; see id., Ex. J at 42.) The 20 IRS rejected Plaintiff’s appeal on November 22, 2022. (Id. ¶ 13; see id., Ex. J at 42.) 21 II. DISCUSSION 22 A. Request for Extension of Time 23 Federal Rule of Civil Procedure 6(b) allows a court to extend, for good cause, a 24 deadline after its expiration “if the party failed to act because of excusable neglect.” Fed. 25 R. Civ. P. 6(b)(1)(B). “This rule, like all the Federal Rules of Civil Procedure, ‘[is] to be 26 liberally construed to effectuate the general purpose of seeing that cases are tried on the 27 merits.’” Ahanchian v. Xenon Pictures, Inc., 624 F.3d 1253, 1258–59 (9th Cir. 2010) 28 (citations omitted). “[T]he determination of whether neglect is excusable is an equitable 1 one that depends on at least four factors,” including, but not limited to, “(1) the danger of 2 prejudice to the opposing party; (2) the length of the delay and its potential impact on the 3 proceedings; (3) the reason for the delay; and (4) whether the movant acted in good faith.” 4 Bateman v. U.S. Postal Serv., 231 F.3d 1220, 1223–24 (9th Cir. 2000) (citing Pioneer Inv. 5 Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395 (1993)) (“Pioneer factors”). 6 The same factors apply in assessing “excusable neglect” under Rules 60(b) and 6(b). See 7 Pioneer, 507 U.S. at 392–93. 8 Plaintiff filed the instant Motion on December 18, 2024—three months after the 9 October 11, 2024 deadline to file his amended complaint. (Doc. 3 at 7). (See Doc. 5.) In 10 his Motion, Plaintiff explains that he did not receive the Court’s order due to possible mail 11 loss, leading him to miss the deadline to amend his Complaint. (Doc. 5 ¶ 4.) He alleges 12 that he moved to a new address on November 4, 2024 and had access to his address on 13 record until the end of November 2024. (Id. ¶ 3.) Although the Court issued its Dismissal 14 Order almost two months prior to Plaintiff’s change of address, Plaintiff claims that the 15 mailbox at his previous address was “unsecured and [he] notice[d] loss of some of [his] 16 mail.” (Id. ¶ 4.) Plaintiff was informed of the Court’s ruling on December 17, 2024, upon 17 filing a Notice of Change of Address with the Court (see Doc. 4) and proceeded to file the 18 instant Motion the next day. (Doc. 5 at ¶ 5.) 19 Applying the Pioneer factors, the Court finds that Plaintiff’s failure to comply with 20 the Dismissal Order and timely amend his complaint constituted excusable neglect meriting 21 relief. There is no indication that Plaintiff’s request for an extension of time in which to 22 amend his Complaint was done willfully or in bad faith. While delay may be prejudicial 23 to a defendant, the delay in this case is not great. Ahanchian, 624 F.3d at 1260 (“Critically, 24 the record is devoid of any indication either that [Plaintiff] acted in bad faith or that an 25 extension of time would prejudice defendants.”). 26 Given Plaintiff’s pro se status, and good cause appearing, Plaintiff’s Motion is 27 GRANTED. The FAC, filed on January 9, 2025 (Doc. 6), is therefore deemed timely filed. 28 Plaintiff is cautioned that the Court will not entertain any further untimely filings and will 1 strike or otherwise reject any future filings that fail to comply with the Local Rules, this 2 Court’s Civil Chamber Rules,5 and the Federal Rules.6 3 B. Screening under 28 U.S.C. § 1915(e) 4 A complaint filed by any person proceeding IFP pursuant to 28 U.S.C. § 1915(a) is 5 subject to mandatory, sua sponte review and dismissal by the Court if the action: “(i) is 6 frivolous or malicious; (ii) fails to state a claim on which relief may be granted; or (iii) 7 seeks monetary relief against a defendant who is immune from such relief.” 28 U.S.C. 8 § 1915(e)(2)(B); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (“1915(e) not 9 only permits but requires a district court to dismiss an [IFP] complaint that fails to state a 10 claim.”). “[T]he sua sponte screening and dismissal procedure is cumulative of, not a 11 substitute for, any subsequent Rule 12(b)(6) motion that the defendant may choose to 12 bring.” Teahan v. Wilhelm, 481 F. Supp. 2d 1115, 1119 (S.D. Cal. 2007). 13 In addition, “[f]ederal courts have an independent obligation to ensure that they do 14 not exceed the scope of their jurisdiction, and therefore they must raise and decide 15 jurisdictional questions that the parties either overlook or elect not to press.” Henderson 16 ex rel. Henderson v. Shinseki, 562 U.S. 428, 434 (2011); see also Fed. R. Civ. P. 12(h)(3) 17 (“If the court determines at any time that it lacks subject-matter jurisdiction, the court must 18 dismiss the action.”). Courts address the issue of subject matter jurisdiction first, as “[t]he 19 requirement that jurisdiction be established as a threshold matter ‘spring[s] from the nature 20 21 22 4 The United States District Court for the Southern District of California’s Civil Local 23 Rules are available at https://www.casd.uscourts.gov/_assets/pdf/rules/2025.01.02%20Local%20Rules.pdf. 24

25 5 This Court’s Civil Chamber Rules are available at https://www.casd.uscourts.gov/judges/montenegro/docs/Montenegro%20Civil%20Cham 26 ber%20Rules.pdf. 27 6 The Federal Rules of Civil Procedure are available at 28 1 and limits of the judicial power of the United States’ and is ‘inflexible and without 2 exception.’” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95 (1998) (quoting 3 Mansfield, C. & L.M. Ry. Co. v. Swan, 111 U.S. 379, 382 (1884)). 4 1. Subject Matter Jurisdiction 5 “Federal courts are courts of limited jurisdiction” and “possess only that power 6 authorized by Constitution and statute . . . .” Kokkonen v. Guardian Life Ins. Co. of Am., 7 511 U.S. 375, 377 (1994). As a sovereign, the federal government “is immune from suit 8 unless it has expressly waived such immunity and consented to be sued.” Dunn & Black, 9 P.S. v. United States, 492 F.3d 1084, 1087–88 (9th Cir. 2007) (quoting Gilbert v. 10 DaGrossa, 756 F.2d 1455, 1458 (9th Cir.1985)). In the absence of a waiver, federal courts 11 lack subject matter jurisdiction over suits against the federal government and the action 12 must be dismissed. See Dunn & Black, 492 F.3d at 1088. 13 “[W]aivers often take the form of statutory consent to a cause of action against the 14 United States.” Tait v. Internal Revenue Serv., No. 16-CV-01270-JSC, 2016 WL 3683008, 15 at *3 (N.D. Cal. July 12, 2016) (citation omitted). “To confer subject matter jurisdiction 16 in an action against a sovereign, in addition to a waiver of sovereign immunity, there must 17 be statutory authority vesting a district court with subject matter jurisdiction.” Alvarado v. 18 Table Mountain Rancheria, 509 F.3d 1008, 1016 (9th Cir. 2007). “[T]he statute in question 19 must be strictly construed in favor of the sovereign and may not be enlarged beyond the 20 waiver its language expressly requires.” Miller v. United States, 66 F.3d 220, 222–23 (9th 21 Cir.1995). As the party asserting federal subject matter jurisdiction, Plaintiff bears the 22 burden of establishing its existence. Kokkonen, 511 U.S. at 377. 23 Plaintiff asserts a single cause of action for civil damages pursuant to 26 U.S.C. 24 § 7433 based on alleged violations of two IRC provisions.7 As relevant here, the Taxpayer 25

26 27 7 Plaintiff also asserts violations of “26 USC Part VI” and the “Taxpayer[’s] Bill of Rights” as bases for his § 7433 claim. (FAC at 2.) However, Part VI refers to numerous provisions, 28 1 Bill of Rights, 26 U.S.C. § 7433, contains a limited waiver of the federal government’s 2 sovereign immunity. The Taxpayer Bill of Rights allows a taxpayer to sue the federal 3 government in district court for damages “if, in connection with any collection of Federal 4 tax, any [IRS] officer or employee” negligently, recklessly, or intentionally disregards any 5 IRC provision or regulation. 26 U.S.C. § 7433(a). However, § 7433’s waiver to the federal 6 government’s sovereign immunity is strictly limited to claims arising from conduct in 7 connection with the collection of federal taxes. See Allied/Royal Parking L.P. v. United 8 States, 166 F.3d 1000, 1003 (9th Cir. 1999) (“[S]ection 7433’s limited waiver to the 9 government’s sovereign immunity must be read narrowly.”). A taxpayer cannot seek 10 damages under § 7433 for the assessment or determination of tax liability, even if 11 improper, because it “is not an act of collection and therefore not actionable . . . .” Tekle 12 v. United States, No. CV 01-11096 RSWL EX, 2002 WL 1988178, at *5 (C.D. Cal. Apr. 13 30, 2002), aff’d, 58 F. App’x 768 (9th Cir. 2003) (citing Miller, 66 F.3d at 222). 14 Here, Plaintiff’s allegations describe improper assessment and determination of tax, 15 rather than improper collection activities. In the FAC, Plaintiff alleges that the IRS 16 calculated an outstanding balance of $2,234.04 for the 2017 tax year because it “disallowed 17 [his] genuine deduction.” (FAC ¶¶ 8–9; see also FAC, Ex. J at 42 (“The IRS wrongfully 18 calculated my 2017 return and left me with Liability of $2,234.04 . . . .”) (emphasis 19 added).) Plaintiff then alleges that the IRS withheld his previously issued refunds from 20 2016 through 2018 and applied them to this “newly calculated” balance. (Id. ¶ 9.) 21 While Plaintiff alleges that such conduct violated Sections 161 and 162 of the IRC, 22 these provisions do not implicate collection procedures. See Tekle, 2002 WL 1988178, at 23 *5 (“Collection actions include notice and demand for payment and filing of notice of tax 24 lien.”) (citing Miller, 66 F.3d at 222). Sections 161 and 162 merely define itemized tax 25 deductions used to reduce the calculation of an individual’s taxable income on which tax 26

27 also notes that the Taxpayer’s Bill of Rights is the equivalent of 26 U.S.C. § 7433 and 28 1 liability is assessed. See 26 U.S.C. § 161 (“In computing taxable income under section 63, 2 there shall be allowed as deductions the items specified in [Part VI] . . . .”) (emphasis 3 added); 26 U.S.C. § 162 (allowing deductions for “all the ordinary and necessary expenses 4 paid or incurred during the taxable year in carrying on any trade or business.”). Indeed, 5 Plaintiff states that he “avoid[ed] collection” by issuing a payment to the IRS “to keep his 6 account in good standing.” (FAC ¶ 10 (emphasis added).) 7 Because Plaintiff challenges conduct in connection with the assessment of taxes, not 8 collection practices, “the United States has not waived its sovereign immunity and such a 9 claim is not actionable.” Miller, 66 F.3d at 22 (emphasis added); see, e.g., Whitton v. 10 United States, No. 3:14-CV-197-CAB-DHB, 2014 WL 5033056, at *2 n.3 (E.D. Cal. Sept. 11 9, 2014) (dismissing complaint for lack of subject matter jurisdiction where “the gravamen 12 [was] that the IRS assessed more taxes than [the plaintiff] actually owed and negligently 13 refused to reconsider its assessment based on [the plaintiff’s] amended return.”). Plaintiff 14 therefore fails to present any grounds for the Court’s jurisdiction over his § 7433 claim. 15 See Watson v. Chessman, 362 F. Supp. 2d 1190, 1194 (S.D. Cal. 2005) (“The court will 16 not . . . infer allegations supporting federal jurisdiction; [it] must always be affirmatively 17 alleged.”) (citations omitted). Accordingly, the FAC is DISMISSED for lack of subject 18 matter jurisdiction. See 28 U.S.C. § 1915(e)(2)(B)(ii) (“[T]he court shall dismiss the case 19 at any time if the court determines that . . . the action . . . seeks monetary relief against a 20 defendant who is immune from such relief.”). 21 2. Failure to State a Claim 22 Although Plaintiff has failed to demonstrate that this Court has subject matter 23 jurisdiction over his sole claim, the Court will additionally address the sufficiency of 24 Plaintiff’s FAC. This Court previously determined that Plaintiff failed to state a claim 25 under § 7433 when Plaintiff did not identify a specific code provision or regulation that the 26 IRS violated. (Doc. 3 at 6–7.) Plaintiff has attempted to cure this deficiency by alleging 27 that these same facts constitute a violation of IRC §§ 161, 162. Assuming the FAC seeks 28 relief for another alleged wrong, the Court finds it nonetheless must be dismissed for failure 1 to state a claim under § 7433. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (“A 2 document filed pro se is to be liberally construed, and a pro se complaint, however 3 inartfully pleaded, must be held to less stringent standards than formal pleadings drafted 4 by lawyers.”) (quoting Estelle v. Gamble, 429 U.S. 97, 106 (1976)) (cleaned up). 5 a. 26 U.S.C. § 7433 6 Under Federal Rule of Civil Procedure 8, a pleading must include “a short and plain 7 statement of the grounds for the court’s jurisdiction.” Fed. R. Civ. P. 8(a)(1). “[A] 8 complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief 9 that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell 10 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the 11 factual allegations permit “the court to draw the reasonable inference that the defendant is 12 liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. 13 “To state a claim under § 7433, a plaintiff must allege that the IRS violated an 14 Internal Revenue Code provision or a Treasury Regulations” in connection with any tax 15 collection. Scharringhausen v. United States, 686 F. Supp. 2d 1069, 1073 (S.D. Cal. 2009) 16 (citing Shwarz, 234 F.3d at 433–34). Assessment and collection are distinct claims. “[T]o 17 prove a claim for improper assessment, a taxpayer must demonstrate why no taxes are 18 owed, but to prove a claim for improper collection practices, the taxpayer must demonstrate 19 that the IRS did not follow the prescribed methods of acquiring assets.” Whitton, 2014 WL 20 5033056, at *2 (internal quotation marks omitted) (citing Shaw, 20 F.3d at 184). 21 “Collection actions include notice and demand for payment and filing of notice of tax lien.” 22 Tekle, 2002 WL 1988178, at *5 (citing Miller, 66 F.3d at 222). 23 In this case, Plaintiff appears to allege that the IRS engaged in a collection activity 24 when it “withheld” taxes allegedly subject to refund. (FAC ¶ 9.) However, the FAC lacks 25 sufficient factual allegations from which the Court can infer any conduct by the IRS was 26 unauthorized or unlawful under IRC. On June 7, 2021, the IRS sent Plaintiff a second 27 28 1 notice of a balance due. (FAC, Ex. G at 36.) The notice states that the IRS had “recently 2 contacted [Plaintiff] about [his] past due 2017 taxes,” totaling $2,234.04, and warns 3 Plaintiff that he must pay this balance by June 17, 2021 “to stop further penalties and 4 interest.” (Id.) As such, this IRS notice plausibly supports a finding that he received 5 “notice and demand for payment” consistent with a collection action. See Tekle, 2002 WL 6 1988178, at *5. 7 Yet, Plaintiff does not allege a deficiency in the IRS’ collection procedure. Nor does 8 the FAC support a reasonable inference that the IRS failed to follow any prescribed 9 methods of acquiring assets under the IRC or that the IRS acted with intentional or reckless 10 disregard of such provisions. As discussed supra, Plaintiff only alleges a violation of the 11 IRC as to the assessment of his tax liability, not tax collection activities. Thus, even 12 liberally construing the FAC, the Court finds that Plaintiff fails to plausibly allege an 13 unauthorized collection action to state a § 7433 claim. See Miller, 66 F.3d at 223 (“[A] 14 taxpayer cannot seek damages under § 7433 for improper assessment of taxes.”) (quoting 15 Shaw v. United States, 20 F.3d 182, 184 (5th Cir. 1994)). 16 b. Improper Defendant 17 Additionally, § 7433 limits relief against the IRS in that a “taxpayer may bring a 18 civil action for damages against the United States in a district court of the United States.” 19 26 U.S.C. § 7433(a) (emphasis added). Since this action must be brought against the 20 United States, the IRS is not an “entit[y] subject to suit.” Krouse v. U.S. Gov’t Treasury 21 Dep’t IRS, 380 F. Supp. 219, 221 (C.D. Cal. 1974) (citing Blackmar v. Guerre, 342 U.S. 22 512, (1952)); see Tekle, 2002 WL 1988178, at *5. As the IRS is an improper defendant, it 23 is therefore DISMISSED from this action. If Plaintiff chooses to file an amended 24 complaint, he must name a proper defendant. 25 26

27 8 The Court notes that Plaintiff did not attach the first IRS notice of a balance as an exhibit 28 l Ht. CONCLUSION 2 Based on the foregoing considerations, Plaintiff's Motion (Doc. 5) is GRANTED 3 Plaintiff's FAC (Doc. 6) is DISMISSED pursuant to § 1915(e)(2) for lack of subject 4 || matter jurisdiction and for failure to state a claim. 5 While the Court has concerns regarding the viability of Plaintiff's § 7433 claim 6 ||based on the identified deficiencies, the Court grants Plaintiff a second opportunity to 7 ||amend his FAC in accordance with the above. See Weilburg v. Shapiro, 488 F.3d 1202, 8 (9th Cir. 2007) (“Dismissal of a pro se complaint without leave to amend is proper 9 || only if it is absolutely clear that the deficiencies of the complaint could not be cured by 10 |}amendment.”) (quoting Schucker v. Rockwood, 846 F.2d 1202, 1203-04 (9th Cir. 1988)). 11 || Any second amended complaint must be filed on or before June 13, 2025. Should Plaintiff 12 || fail to respond adequately by the deadline set forth in this Order, the Court will enter a final 13 order dismissing this action. See Lira v. Herrera, 427 F.3d 1164, 1169 (9th Cir. 2005) (“Tt 14 |/a plaintiff does not take advantage of the opportunity to fix his complaint, a district court 15 ||may convert the dismissal of the complaint into dismissal of the entire action.”’). 16 IT IS SO ORDERED. 17 || DATE: May 13, 2025 i Fett Boerminln, pitteagys 19 HON. RUTH BERMUDEZ'MONTENEGRO UNITED STATES DISTRICT JUDGE 20 21 22 23 24 25 26 27 28 11