In the case of Bowman v. Iddon, No. 15-7118 (D.C. Cir. 2017), Mr. Bowman seeks to recover damages based on a wrongful suspension from practice in a situation in which he never had authority to engage in that practice before the suspension. The D.C. Circuit decided that appellant was not entitled to damages for reasons that made good sense to me. The case leaves you scratching your head at how it could come to exist. The post will discuss Bivens actions against government employees, something I have posted on before, and the suspension from practice mechanism of the Office of Professional Responsibility (OPR). Read this post for amusement and not enlightenment.read more...
The underlying suit seeks damages from five IRS employees who allegedly barred Mr. Bowman from representing taxpayers before the IRS without due process of law. That premise for the suit and a several page opinion enticed me to read further. The problem with Mr. Bowman’s theory of the case stems from the fact that before he was allegedly suspended from practice without due process he did not have the authority to engage in practice before the IRS anyway because he had never become an attorney, CPA or enrolled agent. He was a return preparer.
It is easy to poke holes in Mr. Bowman’s theory of the case but it makes you wonder why the IRS, or at least 5 employees alleged to have taken this action, suspended him from a practice in which he was not authorized to engage. It seems that while Mr. Bowman was working as a return preparer in 2005, he pled guilty to mail fraud, wire fraud and money laundering. He received a sentence of 57 months and began to serve in August 2005. I did not go and look for details of his criminal activity beyond those described in the opinion but his return prep business must have been an interesting one.
Shortly after Mr. Bowman went to the big house, Revenue Agent Iddon sent OPR a report of Mr. Bowman’s misconduct. The form she used required her to check a box indicting that he was an attorney, CPA, enrolled agent or enrolled actuary. She checked the box for enrolled agent citing personal knowledge as her basis for knowing this and attaching articles about his prosecution. Unfortunately, or maybe fortunately for those of us who like to believe the 4th Estate is mostly trustworthy, the articles did not state that he was an enrolled agent and she never searched the IRS records to confirm his status.
After receipt of this report, OPR began disciplinary proceedings against Mr. Bowman to suspend him from practicing as an enrolled agent. Apparently, part of the investigation did not involve double checking to make sure he was an enrolled agent. Additionally, although it was clear from the newspaper articles attached to the initiating document that he now resided at the big house, apparently no one looked to correct his address from the business address he used as a return preparer. This caused the correspondence about the proposed disciplinary action to go unanswered since it did not make its way to Mr. Bowman.
Because he did not answer the charges against him, OPR issued a decision by default suspending him from practicing as an enrolled agent and OPR published this decision in the quarterly bulletin identifying practitioners with disciplinary problems. One of the defendants, an OPR manager, also emailed the announcement to 20 people asking them to further disseminate the information.
When Mr. Bowman left prison in 2011, he did what every prisoner does (?), he sent a FOIA request to the IRS and through that request learned for the first time that he was suspended from practice as an enrolled agent. This is where the facts get a little crazy, because those of you who are tax history buffs will remember that shortly before Mr. Bowman’s release, the IRS had promulgated the rule extended Circular 230 to tax preparers. So, now the mistaken suspension may have actually become a suspension that mattered to Mr. Bowman vis a vis his livelihood as a tax preparer. So, in November of 2012, he filed a petition for reinstatement with OPR.
Fast forward a couple of years and the D.C. Circuit strikes down the rule extending Circular 230 coverage over return preparers. After that decision, the IRS writes to Mr. Bowman recognizing that he was never an enrolled agent and informing him that he may not practice as an enrolled agent. It also restored his “ability to engage in limited practice before the IRS, as defined in section 10.7 of Circular 230, by removing [his] name from the list of individuals currently barred from practice before the IRS.” Just when it seemed normalcy might return to the practice world, Mr. Bowman decided to further complicate matters by suing the IRS officials he identified as causing his wrongful suspension. The mechanism he chose for bringing the suit was a Bivens action.
He argued that the named IRS employees violated the 5th Amendment by “harming his reputation and business without due process.” The defendants moved to dismiss the complaint and the District Court granted the motion concluding that the remedial scheme under Circular 230 precluded any Bivens remedy even though some mistakes occurred here. Mr. Bowman brought the matter pro se. On Appeal the court appointed an amicus to assist it in understanding the issues.
The D.C. Circuit decided that it did not need to reach the issue of whether a Bivens action could succeed under these circumstances because the complaint failed to state a claim on which relief could be granted. It stated that accepting all of the factual statements as true he must lose because “he identifies no constitutionally protected interest lost through Defendants’ actions.” Since he was never an enrolled agent the misguided actions of the IRS employees suspending him from a status he never held had no impact on his property rights.
Amicus brought up that although misguided in suspending him as an enrolled agent, the actions had an impact on him for the period of time the IRS sought to regulate mere preparers. The Court pointed out that although this was possible, it was not what he alleged in his complaint. Two judges wrote separately to explain that if he had alleged “that Defendants barred him from preparing taxes, I would have concluded that he was entitled to pursue his claim against Defendants.” The concurring opinion concluded by saying that “had Bowman alleged that Defendants disciplined him without authority and barred him from preparing taxes, I would have concluded that Circular 230’s remedial scheme presents no bar to a Bivens claim in the narrow and unique circumstances of this case.” So, it looks like the IRS employees dodged a bullet because Mr. Bowman did not plead correctly.
We do not often focus on pleadings but they do matter as this case points out. I see it often in Tax Court cases because we regularly come into cases after the taxpayer has filed a pro se petition. Taxpayers will fail to contest penalties or other matters in the notice of deficiency. If we are actually going to take the case to trial, we must seek permission from the court and file amended pleadings alleging all of the matters in the notice of deficiency with which the taxpayer has a dispute.
Mr. Bowman’s case is unusual. I suspect it has led to some procedural changes in OPR regarding double checks concerning the status of alleged wrongdoers and addresses of wrongdoers brought to its attention who are incarcerated. If it has not brought about those changes, perhaps we will see a successful Bivens suit at some point in the future.