United States District Court, M.D. Tennessee, Nashville Division
KRISTIN INTRESS and PATRICK STEFFEN, individually and as husband and wife and as their marital community, Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
RICHARDSON UNITED STATES DISTRICT JUDGE.
the Court is Defendant the United States of America's
Motion to Dismiss (Doc. No. 11, “the Motion”)
Plaintiffs Kristin Intress and Patrick Steffen's
Complaint (Doc. No. 1). Plaintiffs responded in opposition
(Doc. No. 18), and Defendant has replied (Doc. No. 25). As
discussed below, the motion will be granted, and the
Complaint will be dismissed with prejudice.
Kristen Intress and Patrick Steffen, are a marital community
and taxpayers of Tennessee. They seek refund of a tax penalty
imposed as an addition to tax under Title 26 U.S.C.
§§6651, 6601 in the amount of $120, 607.27. (Doc.
No. 1 at 1 ¶4). The Internal Revenue Service (IRS)
imposed and collected the penalty subsequent to the late
filing of Plaintiffs' 2014 personal income tax return.
employ[ed] a professional tax preparer to file their Married
Filing Jointly United States Form 1040. (Id. at 2
¶11, 3 ¶13). Plaintiffs were out of the country at
or around the tax filing deadline for tax year 2014, and they
sought an extension of time to file via their tax preparer
and bookkeeper. (Id. at 3 ¶¶14-16). With
the data she possessed, on or about April 15, 2015 at 7:01
p.m. the tax preparer completed the prerequisite Form 4868
for filing and queued up the document through e-file
software. (Id. ¶17). The tax preparer failed to
hit “send” (mistakenly believing she had), and
the Form 4868 was not electronically received by the IRS on
the April 15, 2015 deadline. (Id. ¶18). The tax
preparer had never experienced this error before.
(Id. at 5 ¶29). The filing mistake went
undiscovered until October 2015. (Id. at 3
assessed a $120, 607.27 penalty based on the length of the
delinquency and negotiations with the tax preparer.
(Id. at 4 ¶20). Plaintiffs, after exhausting
all internal appeals, and while still maintaining the error
was through no fault of their own, paid the penalty on
November 1, 2016. (Id. ¶21-23). On March 31,
2017 Plaintiffs submitted to the IRS a Form 843 refund and
abatement request, which was subsequently denied.
(Id. ¶24-25). This suit followed.
contend that they meet the dual requirements for abatement of
a late filing penalty under 26 U.S.C. §6651:
“reasonable cause” and lack of “willful
neglect, ” see United States v. Boyle, 469
U.S. 241 (1985). Plaintiffs assert that their reliance on a
third-party tax preparer to timely file their tax return is
“reasonable cause” under 26 U.S.C. §6651.
(Doc. No. 1 at 4 (Count I)). Plaintiffs additionally argue
that the Supreme Court precedent holding otherwise is
inapplicable to the modern IRS e-filing system, as it was
decided in an era of exclusively paper tax filing. (Doc. No.
18 at 4); see also Boyle, 469 U.S. 241. Plaintiffs
further maintain that they are entitled to a
“first-time” abatement of the penalty, and that
the IRS abused its discretion in failing to grant one. (Doc.
No. 1 at 5 (Counts II & III)). Finally, Plaintiffs assert
that, based on Counts I-III and the Taking Clause of the
Fifth Amendment, the penalty as collected was an illegal
exaction of money by the IRS. (Id. at 6 (Count IV)).
purposes of a motion to dismiss, the Court must, as it has
above, take all of the factual allegations in the complaint
as true. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face. Id.
A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged. Id. Threadbare recitals of the elements of
a cause of action, supported by mere conclusory statements,
do not suffice. Id. When there are well-pleaded
factual allegations, a court should assume their veracity and
then determine whether they plausibly give rise to an
entitlement to relief. Id. at 679. A legal
conclusion, including one couched as a factual allegation,
need not be accepted as true on a motion to dismiss.
Id. at 678; Fritz v. Charter Township of
Comstock, 592 F.3d 718, 722 (6th Cir. 2010). Moreover,
factual allegations that are merely consistent with the
defendant's liability do not satisfy the claimant's
burden, as mere consistency does not establish plausibility
of entitlement to relief, even if it supports the possibility
of relief. Iqbal, 556 U.S. at 678.
determining whether a complaint is sufficient under the
standards of Iqbal and its predecessor and
complementary case, Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007), it may be appropriate to “begin
[the] analysis by identifying the allegations in the
complaint that are not entitled to the assumption of
truth.” Iqbal, 556 U.S. at 680. Identifying
and setting aside such allegations is crucial because they
simply do not count toward the plaintiff's goal of
showing plausibility of entitlement to relief. As suggested
above, such allegations include “bare assertions,
” formulaic recitation of the elements, and
“conclusory” or “bald” allegations.
Id. at 681. The question is whether the remaining
factual allegations plausibly suggest an entitlement to
relief. Id. If not, the pleading fails to meet the
standard of Rule 8 and thus must be dismissed pursuant to
Rule 12(b)(6). Id. at 683.
position is at odds with Boyle. There, the Supreme
Court ruled that a taxpayer's reliance on a professional
third party for tax filing is not reasonable cause for
abatement of late penalties should the third party fail to
file timely. See 469 U.S. at 252; see also
26 U.S.C. §6651. Reasonable cause is defined as being
“unable to file the return within the prescribed
time” notwithstanding the taxpayer's
“exercise of ordinary business care and
prudence.” Id. at 246 (quoting 26 CFR §
301.6651(c)(1) (1984)). The crux of the Boyle
opinion is that Congress assigned to the taxpayer
the duty to file timely taxes, and that reliance on an agent
to fulfill this duty is unjustified when the agent does
nothing the taxpayer could not do himself. See Id.
at 249, 252. The Court's intention was to create a rule
with “as ‘bright' a line as can be
drawn” to avoid “unnecessary ad hoc
determinations.” Id. at 249. Plaintiffs assert
that, with time, the “brightness” of the line
drawn in 1985 has faded, and that the Internet era introduces
considerations Boyle could not possibly have
contention that Boyle does not govern electronic tax
returns presents a novel legal question-one not
previously addressed squarely by the federal courts. See
Haynes v. United States, 760 Fed.Appx. 324, 326 (5th
Cir. 2019) (identifying e-filing question as unresolved
before declining to address it); Nat'l Taxpayer Advoc.,
Fiscal Year 2018 Ann. Rep. to Congress, Most Litigated Issues
at 514 (2019) (noting Haynes leaves open possibility
of e-filing exception to Boyle). While the Court
ultimately agrees with Defendant's position that
Boyle applies here, and thus prohibits a finding of
reasonable cause in this case, that conclusion is neither
axiomatic nor self-evident, and is worthy of analysis. The
remainder of Plaintiffs' claims are either contingent on
a finding of reasonable cause, or not entitled to judicial
relief, and accordingly fail.
REASONABLE CAUSE IN RELYING ON AN AGENT TO E-FILE
are correct in that IRS tax filing procedure has changed
significantly since Boyle was decided in 1985.
Chiefly, Plaintiffs draw attention to Revenue Procedure
2011-25, which mandates that “specified tax return
preparers, ” including any paid professional planning
to prepare more than 10 returns a year, must file returns
through e-file software. See Rev. Proc. 2011-25,
2011-17 I.R.B. 725 (2011); (Doc. No. 18 at 2). Plaintiffs argue
that, because filing taxes through a tax preparer now
necessarily involves use of specialized software that a
taxpayer cannot employ totally independently,  the task that
“required no special training or effort” in
Boyle, 469 U.S. at 252, has become one that