498 F. App'x 623
7th Cir.2012Background
- Bowers receives Social Security retirement benefits and the IRS levied roughly two‑thirds of his monthly benefits in 2010 to recover about $100,000 in unpaid taxes.
- The IRS also collects over $40,000 annually from union pension funds, creating a substantial total levy against Bowers's income.
- Bowers contends that the levy violates 26 U.S.C. § 6331(h)(1), which caps continuing levies at 15% of certain payments.
- Bowers sued in district court seeking return of funds above 15% and an injunction/declaratory relief; the district court dismissed.
- The district court held that the 15% cap does not apply to one-time levies under § 6331(a) and that Bowers did not exhaust administrative remedies.
- On appeal, the court reviews de novo the district court’s ruling on the merits, exhaustion, and sovereign-immunity issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Exhaustion of administrative remedies for damages | Bowers exhausted remedies through the filing letter. | Letter was insufficient and sent to wrong offices; no proper § 301.7433-1 claim. | Exhaustion not satisfied; sovereign immunity bars damages claim. |
| Sovereign immunity waiver requirement | Waiver through exhaustion permits damages action. | Complete exhaustion required; claim failed to meet requirements. | Waiver not satisfied; sovereign immunity bars claim. |
| Applicability of the 15% cap to Social Security levies | Cap applies to his Social Security benefits. | Cap does not apply to a one-time levy under § 6331(a). | 15% cap does not limit this levy. |
| Equitable relief and Anti-Injunction Act | Equitable relief and declaratory judgment available. | Act bars suits to restrain tax collection or seek declaratory relief. | Anti-Injunction Act and Declaratory Judgment Act bars relief. |
Key Cases Cited
- McNeil v. United States, 508 U.S. 106 (Sup. Ct. 1993) (complete exhaustion is a condition of the waiver for damages actions)
- Hoogerheide v. I.R.S., 637 F.3d 634 (6th Cir. 2011) (administrative claim must be sent to proper address)
- Nick’s Cigarette City, Inc. v. United States, 531 F.3d 516 (7th Cir. 2008) (administrative claim must specify grounds for refund)
- Kikalos v. United States, 479 F.3d 522 (7th Cir. 2007) (administrative claim must detail grounds for refund)
- Oestreich v. United States, 286 F.3d 1026 (7th Cir. 2002) (claim must identify the violated law to support § 7433 claim)
- Collins v. United States, 564 F.3d 833 (7th Cir. 2009) (distinguishing sovereign immunity from jurisdiction)