MICHAEL NEARY AS EXECUTOR OF ESTATE OF MERILEE FENTON v. UNITED STATES OF AMERICA (2026)

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

I. INTRODUCTION

Plaintiff Michael Neary, in his representative capacity for the Estate of Merilee Fenton, brings an action against Defendant United States of America seeking a refund of $41,764.53 that Merilee Fenton paid to the IRS. The Government moves to dismiss Neary's complaint for lack of subject matter jurisdiction under Federal Rules of Civil Procedure 12(b)(1). For the reasons set forth below, the Court grants the Government's motion.

II. BACKGROUND

The Court accepts the following facts as true for the purpose of analyzing Defendants' motion to dismiss. See Brown v. Medtronic, Inc., 628 F.3d 451, 459 (8th Cir. 2010); see also Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990) (affording the same procedural protections to a non-moving party in review of a Rule 12(b)(1) facial attack and a motion brought under Rule 12(b)(6)).

Merilee Fenton filed joint federal income tax returns with her then-husband from 2011 until 2015. Compl., ECF No. 1 ¶ 4. As a result of alleged underpayment of taxes, the IRS placed a lien on property owned jointly in equal one-half interest by Merilee Fenton and her ex-husband. Id. ¶¶ 6, 9. Merilee Fenton sought, and was granted, partial innocent spouse relief on January 31, 2022, for those years which reduced her tax liability. Id. ¶ 7–8. Months later, on September 7, 2022, Merilee Fenton and her ex-husband sold the property. Id. ¶ 9. The IRS required sale proceeds of $97,471 to be paid and applied to the outstanding assessed tax liability from the 2011 to 2015 taxes. Id. ¶ 10. The amount was paid. Id. ¶ 11.

Merilee Fenton died on October 29, 2022, and an estate was opened in Polk County, Iowa on July 11, 2023. Id. ¶ 12. Michael Neary was appointed executor of the estate. Id. Merilee Fenton's estate filed a claim with the IRS seeking a refund of Merilee Fenton's sale proceeds on January 31, 2024. Id. ¶ 13. The IRS denied the claim. Id. ¶ 14.

Neary filed suit in this Court seeking a refund in the amount of $41,764.53. Id. at 3. The Government now moves to dismiss for lack of jurisdiction. Def.'s Mot. Dismiss, ECF No. 16; Def.'s Br. Supp. Mot. Dismiss, ECF No. 17. Neary responded, and the Government replied. Pl.'s Resp. Def.'s Mot. Dismiss, ECF No. 22; Def.'s Reply Supp. Mot. Dismiss, ECF No. 23.

Additional facts are set forth below as necessary.

III. LEGAL STANDARD

A party may bring a Rule 12(b)(1) motion as either a “factual attack” or a “facial attack,” and the difference between the two affects a court's standard of review. Stalley v. Catholic Health Initiatives, 509 F.3d 517, 520–21 (8th Cir. 2007) (citing Osborn, 918 F.2d at 729 n.6). A factual attack challenges the existence of subject matter jurisdiction, despite the jurisdictional allegations of the pleadings. Branson Label, Inc. v. City of Branson, 793 F.3d 910, 914–15 (8th Cir. 2015). In analyzing a factual attack, a court may go beyond the pleadings and consider extrinsic evidence to determine whether it has subject matter jurisdiction. Osborn, 918 F.2d at 729 n.6. Here, the Government brings its Rule 12(b)(1) motion as a factual attack and the Court applies the factual attack standard. ECF No. 17 at 1 n.1.

“When the moving party makes a factual attack on the court's subject-matter jurisdiction, as the United States does here, the district court may look outside the pleadings and weigh evidence.” Two Eagle v. United States, 57 F.4th 616, 620 (8th Cir. 2023). “The plaintiff bears the burden to establish subject-matter jurisdiction.” Id. In asserting a factual attack, “the complaint is formally sufficient but the contention is that there is in fact no subject matter jurisdiction.” Apex Digit., Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009) (emphasis, internal quotation marks, and citation omitted).

Due to the unique nature of the jurisdictional question, if the Court's inquiry extends beyond the pleadings, “the court may receive evidence via ‘any rational mode of inquiry.’ ” Buckler v. United States, 919 F.3d 1038, 1044 (8th Cir. 2019) (quoting Osborn, 918 F.2d at 730). “Once the evidence is submitted, the district court must decide the jurisdictional issue, not simply rule that there is or is not enough evidence to have a trial on the issue.” Osborn, 918 F.2d at 730. “The only exception is in instances when the jurisdictional issue is ‘so bound up with the merits that a full trial on the merits may be necessary to resolve the issue.’ ” Id.

IV. DISCUSSION

The Government moves to dismiss Neary's complaint for lack of subject matter jurisdiction. ECF No. 16. The Government argues Neary ¹ is a third party seeking a refund for taxes paid on someone else's behalf. ECF No. 17 at 1–2. The Government asserts as a third party, Merilee Fenton was required to comply with the procedures set forth in 26 U.S.C. § 6325(b)(4) in order for the waiver of sovereign immunity in § 7426(a)(4) to apply. Id. at 2. Neary resists, arguing the Court has jurisdiction because Merilee Fenton was a taxpayer, not a third party, and therefore he may bring suit pursuant to 28 U.S.C. § 1346(a)(1). ECF No. 22-1 at 6–8.

The Court first addresses the different statutory requirements applicable to third parties and taxpayers, then addresses Merilee Fenton's status following the grant of innocent spousal relief, and lastly addresses whether, based on Merilee Fenton's status, Neary has demonstrated sovereign immunity has been waived such that this Court retains subject matter jurisdiction.

A. Sovereign Immunity & Third-Party Requirements

“It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction.” United States v. Mitchell, 463 U.S. 206, 212 (1983). “[T]he terms of [the Government's] consent to be sued in any court define that court's jurisdiction to entertain the suit.” United States v. Dalm, 494 U.S. 596, 608 (1990) (internal quotation marks and citation omitted). The Supreme Court “ha[s] said on many occasions that a waiver of sovereign immunity must be ‘unequivocally expressed’ in statutory text.” FAA v. Cooper, 566 U.S. 284, 290 (2012) (citation omitted). “Any ambiguities in the statutory language are to be construed in favor of immunity.” Id.

28 U.S.C § 1346(a)(1) provides a general grant of jurisdiction for tax cases brought by a taxpayer, stating “district courts shall have original jurisdiction” over “[a]ny civil action against the United States for the recovery of any internal-revenue tax.” 28 U.S.C § 1346(a)(1). Previous Supreme Court precedent extended this right to individuals bringing suit seeking recovery for taxes paid which were assessed against a third party—not the individual bringing suit. United States v. Williams, 514 U.S. 527 (1995). The Williams court held that the plaintiff was a “taxpayer” under the law because she was subject to the tax, even though she was not the one against whom the tax was assessed. Id. at 535–36. The Court's analysis focused on the reality that if taxpayers in Williams's position could not bring suit under § 1346, they would be left without a remedy. Id. at 536. The Supreme Court has since acknowledged the narrow holding in Williams was based “on the specific understanding that no other remedy, not even a timely claim under § 7426(a)(1), was open to the plaintiff in that case.” EC Term of Years Tr. v. United States, 550 U.S. 429, 435 (2007).

Congress amended the tax code in 1998 to provide such a remedy when individuals seek relief from taxes assessed against third parties. Internal Revenue Service Restructuring & Reform Act of 1998, Pub. L. 105–206, July 22, 1998, 112 Stat. 685. The purpose of adding subsection (b)(4) to § 6325 and subsection (a)(4) to § 7426 was to remedy the deficiency identified by the Court in Williams and provide a statutory scheme for individuals seeking relief from tax liability assessed against third parties. See S. Rep. No. 105–174, at 44–55 (1998). Section 6325(b)(3) requires the Government to “issue a certificate of discharge” if the property subject to a lien is sold and, pursuant to an agreement with the IRS, the proceeds are held by the IRS in the same manner as the lien. 26 U.S.C § 6325(b)(3). Section 6325(b)(4) requires the Government to “issue a certificate of discharge” upon deposit or bond sufficient to protect the Government's interest. 26 U.S.C § 6325(b)(4). Sections 7426(a)(3) and 7426(a)(4) provide a judicial remedy for violations of §§ 6325(b)(3) or 6325(b)(4)—granting a district court jurisdiction in such cases. 26 U.S.C §§ 7426(a)(3)–(4). Courts have generally recognized this remedial scheme satisfied the Williams Court's concern with the pre-amendment statute and have found Williams is no longer applicable. See, e.g., Munaco v. United States, 522 F.3d 651, 654 (6th Cir. 2008); Four Rivers Invs., Inc. v. United States, 77 Fed. Cl. 592, 603 (Fed. Cl. 2007).

Therefore, if Merilee Fenton was a third party, and not a taxpayer, as to the amount Neary seeks in this action, the statutory requirements of §§ 6325 and 7426 must be followed. Section 1346(a)(1) does not provide a grant of jurisdiction. Id.

B. Merilee Fenton's Taxpayer Status

Neary argues “Merilee [Fenton] was a Taxpayer, and the IRS considered her a Taxpayer when the tax returns were filed, when the taxes were assessed, when the Notice of Tax Lien was filed, when (and after) she was granted partial innocent spouse relief, and until at least October 17, 2022 when the second Refund Notice was issued.” ECF No. 22-1 at 9. The Government argues “Merilee [Fenton] was not the taxpayer for the amount of funds Plaintiff seeks in this refund suit because Merilee [Fenton] did not owe that money by virtue of being granted partial innocent-spouse relief.” ECF No. 23 at 1.

There is no dispute that Merilee Fenton was originally a taxpayer as she filed joint returns and the tax liability was assessed against her and her then-husband jointly. The parties instead diverge on how the Court should view the subsequent innocent-spousal relief. Neary maintains such relief does not change Merilee Fenton's status because she remained liable for a small portion of the original assessed amount and so remains a taxpayer as to the amount sought here. The Government argues such subsequent relief changes Merilee Fenton's taxpayer status as to the assessment because the amount assessed against her changed.

The Court finds Merilee Fenton is not a taxpayer as to the amount sought by Neary in the present action. As a result of the spousal relief—granted months before the property sale and payment to remove the levy—she was not liable for the amount now sought by Neary. The grant of innocent-spouse status “acts as an exception to the Tax Code's general rule that married couples filing joint returns are jointly and severally liable for income tax liabilities.” Bachner v. Comm'r of Internal Revenue, 124 F.4th 1066, 1071 (7th Cir. 2025). When an individual is granted innocent-spouse status, they are “relieved of liability for tax, penalties, and interest” during the years relief is granted. Id. (internal citation omitted). Therefore, when Merilee Fenton sought and was granted innocent-spouse status, she ceased being subject to the joint and several liability incurred from the joint returns filed with her then-husband. Id. Instead, she attained taxpayer status only as to the $6,970 still owed following her innocent-spouse status. Any other tax liability was no longer assessed to her and any taxes paid above this amount would be paid on account of tax assessed to her ex-husband, not her.

As discussed above, Merilee Fenton was liable for $6,970—yet Neary seeks a refund for the excess paid above what she personally owed. The amount sought represents the difference between the tax liability assessed against Merilee Fenton, and her share of the property sale proceeds paid to the IRS in satisfaction of the loan. Merilee Fenton paid $48,735.53 to the IRS in order to remove a lien on the property. $6,970 of this payment was to satisfy tax she was assessed to owe, the remaining $41,764.53 of her share of the sale proceeds was paid in satisfaction of liability not assessed against her. As such, the refund sought in this action is for a payment made on behalf of liability assessed to her ex-husband. The procedural requirements of §§ 6325 and 7426 exist for exactly such situations.

Because Merilee Fenton paid tax in order to remove a lien which was assessed to secure the tax owed by her ex-husband, she was not a taxpayer as to the amount now sought in this action. Neary must show the requirements of §§ 6325 and 7426 have been met in order for this Court to have jurisdiction. Neary has failed to demonstrate the requirements of § 6325 have been met and as such, the Court lacks jurisdiction to hear this matter under § 7426.

V. CONCLUSION

The Court lacks subject matter jurisdiction over Neary's claim.

IT IS ORDERED that the Government's Motion to Dismiss for Lack of Subject Matter Jurisdiction, ECF No. 16, is GRANTED.

IT IS SO ORDERED.

Dated this 13th day of August, 2026.

FOOTNOTES

1.   The Court refers to Neary throughout in reference to his representative capacity for the Estate of Merilee Fenton.

REBECCA GOODGAME EBINGER UNITED STATES DISTRICT JUDGE