IRS Request for Stay Pending Appeal in Case of EIP for Incarcerated Individuals

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We recently wrote about the significant victory for incarcerated individuals.  The victory opens the door for these individuals to receive the EIP reversing the position the IRS took in an FAQ it first published in May which FAQ reversed the initial position of the IRS regarding the payment of EIP to incarcerated individuals.

Earlier this week the government filed an emergency motion seeking a stay of the district court’s order pending appeal arguing that if a stay was not granted by 1:00 today the IRS would have to take action and warning that the action would be irreversible because it would be unable to recover the payments made to incarcerated individuals.  The government does not focus on the basis for its position that the incarcerated individuals are not entitled to EIP but relies on procedural arguments for its position that it should not be ordered to make payments. 

Counsel for the incarcerated individuals filed a responsive brief yesterday in this super expedited case.  Perhaps by early afternoon, the 9th Circuit will have ruled regarding this unusual request.

Update: The government has filed its reply to plaintiffs’ opposition to the stay.

Comments

  1. Robert Kantowitz says

    The two filings spar over whether the government does or does not have a remedy to recover refunds erroneously issued. Focusing on one category outside the prisoner context, note that the amount and phase-out are supposed to be determined based on 2019 tax liability but if the taxpayer had not yet filed for 2019 when the payment was to be made in 2020, the calculation would be based on the 2018 amount. There are taxpayers who qualified based on 2018 and therefore got payments but who would not have qualified for the same amount (or at all) based on 2019 (call the difference the “excess”). It appears (see https://www.kiplinger.com/article/taxes/t056-c032-s014-filing-taxes-early-cost-me-my-stimulus-check.html and https://www.irs.gov/newsroom/economic-impact-payment-information-center-topic-j-reconciling-on-your-2020-tax-return) that the excess would not have to be paid back because there is no law that can require it to be paid pack or to be treated as an additional tax due. Is that correct? If so, does that add any weight to the IRS’s argument in the prisoners’ case that the possibility or likelihood of erroneous refunds irreparably harms the government?

  2. Before: W. FLETCHER, BERZON, and BYBEE, Circuit Judges.
    Filed October 23, 2020.

    The emergency motion for a stay pending appeal (Docket Entry No. 5) is denied. See Nken v. Holder, 556 U.S. 418, 426 (2009).

    In the emergency motion, appellants do not argue that their policy precluding incarcerated persons from receiving advance payments under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), Pub. L. 116–136, is valid under the statute.. They raise only procedural arguments: that appellees’ claims are barred by 26 U.S.C. § 7422(a), and that appellees have no cause of action under the Administrative Procedure Act, 5 U.S.C. § 702 (the “APA”).

    We conclude that appellants have not demonstrated a sufficient likelihood of success on appeal to warrant a stay. Appellants have not demonstrated that the district court erred in concluding that appellees’ claims fall outside § 7422(a). We note that appellants’ policy of considering incarcerated individuals ineligible for CARES Act advance payments precluded class members from following the prescribed claims filing procedures used by other individuals. Appellants also have not demonstrated that the district court erred in concluding that appellees could proceed under the APA. Appellees challenge an agency policy, leaving determination of whether any individual incarcerated individual is to receive advance CARES Act payments to the agency’s decision, applying the generally applicable standards and procedures.

    DENIED.

    [Judge Bybee was appointed by President George W. Bush. Judges Fletcher and Berzon were appointed by President Bill Clinton.]

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