Taxation — Withholding – Responsible Party – Counterclaims & Defenses

United States v. Appelbaum (Lawyers Weekly No. 14-04-0933, 15 pp.) (Richard Voorhees, J.) 5:12-cv-00186; W.D.N.C.

Holding: In this action to collect withholding taxes from a corporation’s responsible party, defendant counterclaims that the Internal Revenue Service damaged him by failing to proceed with its claim against the payroll taxes surety. Even if defendant’s counterclaim is brought under 26 U.S.C. § 7433 (authorizing a private action if an IRS employee disregards relevant statutes while collecting taxes), and even though § 7433(d)’s administrative exhaustion requirement is not jurisdictional, defendant’s failure to exhaust his administrative remedies causes his counterclaim to fail to state a claim upon which relief may be granted. Finally, the decision defendant complains of was made in 2004, and § 7433 claims are subject to a two-year statute of limitations.

Defendant’s counterclaims are dismissed. Plaintiff’s motion to strike certain defenses is granted in part and denied in part.

If defendant’s first counterclaim is considered as a laches claim, it is dismissed because the Federal Tort Claims Act specifically retains sovereign immunity for “any claim arising in respect to the assessment or collection of any tax.” 28 U.S.C. § 2680(c).

In his second counterclaim, defendant seeks the refund of the part of his Social Security benefits that has been diverted to the IRS since September 2012. Defendant’s failure to exhaust his administrative remedies for this claim is a jurisdictional defect.

Defendant’s first two defenses are stricken because the doctrine of laches does not preclude the United States from collecting from a responsible party.

Insofar as defendant’s fourth defense raises the 10-year limitations period of 26 U.S.C. § 6502, the defense is not stricken. However, the court strikes any allegations that attempt to raise a statute of limitations defense with regard to federal tax liens. The United States is seeking to reduce assessments to judgment; therefore, defenses related to tax liens are irrelevant to this action.

Construing defendant’s seventh defense liberally, it gives the United States fair notice that defendant is raising the issue of whether the assessment was properly made; accordingly, the court denies plaintiff’s motion to strike the seventh defense.

Motions granted in part and denied in part.