The court should dismiss John Galvin and Patrick Taylor's potential class action because they haven't shown any injury in not receiving the economic impact payments authorized in a stimulus law this year, according to the government's opposition brief Friday. Furthermore, Taylor has already received a coronavirus stimulus payment and shouldn't have standing to bring the suit, the government said.
The government brief said that the relief checks are actually advance refunds of a tax credit for the 2020 tax year, authorized by Section 6428 of the Internal Revenue Code.
"The statute explicitly recognizes that there are individuals who, although eligible for the credit on their 2020 tax returns, will not be issued an advance refund by Dec. 31, 2020, and will have to claim the credit on their 2020 tax returns," the government said.
The government asked that the court dismiss the group's claims that they were injured by not receiving the stimulus checks and reject their bid for a ruling that the incarcerated individuals meet the criteria for the payments and should receive them expeditiously.
Galvin and Taylor, who are both imprisoned in Illinois, filed the potential class action July 31, according to court documents. Attorneys for the men argued that the government violated the law passed by Congress to address the economic downturn caused by the novel coronavirus pandemic by preventing the distribution of $1,200 economic impact payments to incarcerated individuals who qualified.
The Coronavirus Aid, Relief and Economic Security Act includes no such language that would prevent the IRS from distributing stimulus payments to incarcerated individuals, according to the complaint. But the agency released informal guidance following its passage in March that requested any payments made to prisoners be returned, the complaint said.
The IRS guidance preventing the distribution of stimulus payments to incarcerated individuals violates the Administrative Procedure Act and fails to align with what lawmakers intended when they passed the CARES Act, Galvin and Taylor said.
But the government disagreed that the IRS' informal guidance violates the APA because it isn't considered a "final agency action" subject to the law, according to the brief.
The IRS FAQ on its website, which contains the information on denying advance coronavirus payments to incarcerated individuals, is more akin to a press release and "does not represent the consummation of the Department of the Treasury and the IRS' decision-making process," the government said.
Also, other remedies are available to those incarcerated individuals who want to argue they are entitled to the economic impact payment, such as filing a tax refund claim in the U.S. Tax Court, which should invalidate the group's APA claims, according to the brief.
Incarcerated individuals can claim the CARES Act economic impact payment on their 2020 tax returns but aren't eligible for the advance delivery of the payment, the government said. If the IRS were to improperly deny those individuals their payments at that time, then the group will have suffered an injury that could give the court jurisdiction, according to the brief.
The IRS also justified the decision to deny the advance distribution of payments to prisoners due to the high amount of fraudulent returns filed on behalf of incarcerated individuals, according to the brief.
Legal representatives for the government and for Galvan and Patrick didn't immediately respond to a request for comment.
Galvan and Patrick are represented by Jeannie Y. Evans, Steve W. Berman and Christopher R. Pitoun of Hagens Berman Sobol Shapiro LLP, Michael Kanovitz, Sarah Grady and Elliot Slosar of Loevy & Loevy and Patrick William Thomas of the Notre Dame Tax Clinic.
The government is represented by James M. Strandjord of the U.S. Department of Justice, Tax Division.
The case is John Galvan et al. v. Steven T. Munchin et al., case number 1:20-cv-04511, in the U.S. District Court for the Northern District of Illinois, Eastern Division.
--Editing by Neil Cohen.
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