On September 24, 2020, Judge Phyllis J. Hamilton of the U.S. District Court for the Northern District of California issued an Order certifying a nationwide class of people incarcerated in state and federal prisons, and granting the plaintiffs’ motion for preliminary injunction requiring the U.S. Department of Treasury, the U.S. Internal Revenue Service, and the United States of America (“Defendants”) to stop withholding CARES Act stimulus funds from plaintiffs or any class member on the sole basis of their incarcerated status.
The Judge’s preliminary injunction further ordered the defendants to reconsider their prior denial of advance refund payments to any person based on incarcerated status within 30 days, whether the denial was based on a 2018 or 2019 tax return, or on claims filed through the IRS’s online “Non-Filer” portal.
A Treasury Department Inspector General report confirms that, as of early May 2020, the IRS had determined that at least 80,000 incarcerated people were eligible for payments of over $100 million. The Judge’s order will thus result in desperately needed economic assistance of over $100 million to be delivered to members of the Class.
Other class members who did not file a 2018 or 2019 tax return are urged to file a claim with the IRS before October 15, 2020, in order to receive a payment. The Defendants are required to file a declaration within 45 days confirming that these steps have been implemented, and to provide the Court with “data regarding the number and amount of benefits that have been disbursed.”
“The country is suffering during this pandemic and economic crisis, and incarcerated people and the families they rely on for support are no exception,” said Kelly Dermody, a Partner at Lieff, Cabraser, Heimann & Bernstein, representing the Plaintiffs and Class. “Judge Hamilton’s order ensures that incarcerated people will receive the sorely needed economic assistance that Congress allocated.”
“The Treasury Department’s theft of the CARES Act supplements that Congress intended get to people in need right away is not only illegal, but cruel to the people and families most harmed by COVID-19 and over-incarceration — Black, Latinx and Native people and people with lower incomes,” said Mona Tawatao of the Equal Justice Society, an attorney for the plaintiffs. “The court’s order will bring them critical relief and some measure of justice.”
In the Order, Judge Hamilton recognized the strength of Plaintiffs’ claims, finding:
[P]laintiffs are likely to succeed on the merits of their APA contrary to law claim. The statute mandates distribution of the advance refund to eligible individuals. Incarcerated persons who otherwise qualify for an advance refund are not excluded as an ‘eligible individual.’ The IRS’s decision to exclude incarcerated persons from advance refund payments is likely contrary to law…. Plaintiffs have established they are likely to be irreparably injured without an injunction.
Background on the Case
Congress passed the CARES Act to provide sorely needed economic assistance during the economic crisis triggered by the COVID-19 pandemic. Under the Act, Congress allocated aid of up to $1,200 (plus $500 per qualifying child) to all American citizens and legal permanent residents below a certain income level who were not claimed as dependents. Incarcerated persons, and their families on the outside, are among the most economically disadvantaged people in the country. Indeed, according to one study, people who are incarcerated had a median income of only $19,185 before their incarceration, compared to $41,250 for non-incarcerated people. Low-income families are disproportionately more likely to have a relative behind bars.
The Treasury, however, has refused to issue stimulus payments authorized by Congress to eligible incarcerated persons, thereby further exacerbating the economic disadvantages they and their families suffer.
The lawsuit alleges that over 1.4 million incarcerated people have been affected by Defendants’ actions. Many rely on financial assistance from their friends or families on the outside, people who are already suffering in the current economic crisis. Hundreds of thousands of others will be re-entering society soon, and need help to get back on their feet at a time when the job market has collapsed. Incarcerated people also need to spend their own money—or that of friends and family who are already hard-pressed to make ends meet—to stay in touch with loved ones through expensive telephone and mail services, critical lifelines to support their rehabilitation. Further, many incarcerated people have outstanding child support and restitution obligations, and stimulus payments can be used to support children in need as well as crime victims.
The plaintiffs are Colin Scholl and Lisa Strawn, who have now been appointed as Class Representatives. The Lieff Cabraser legal team representing them and the proposed class are Kelly M. Dermody and Jalle H. Dafa, joined by Eva Jefferson Paterson, Mona Tawatao, Lisa Holder, and Christina Alvernaz of the Equal Justice Society. Kelly Dermody and Eva Paterson have been appointed Co-Lead Class Counsel.
The defendants are the Treasury Secretary Steven Mnuchin, the United States Commissioner of Internal Revenue Charles Rettig, the U.S. Department of the Treasury, the U.S. Internal Revenue Service, and the United States of America.
You can read a copy of Judge Hamilton’s full Order. If you or your loved one is an incarcerated person, please click here for a free legal consultation about your rights.
About Lieff Cabraser Heimann & Bernstein, LLP
Lieff Cabraser Heimann & Bernstein, LLP, is a 100-plus attorney AV-rated law firm founded in 1972 with offices in San Francisco, New York, Nashville, and Munich. Described by The American Lawyer as “one of the nation’s premier plaintiffs’ firms,” Lieff Cabraser has litigated some of the most important civil cases in the United States and assisted clients in recovering over $124 billion in verdicts and settlements. In March of 2020, Benchmark Litigation named Lieff Cabraser its “California Plaintiff Firm of the Year.” Lieff Cabraser is committed to access to justice for all.
About The Equal Justice Society
The Equal Justice Society is transforming the nation’s consciousness on race through law, social science, and the arts. Led by President Eva Paterson, its legal strategy aims to broaden conceptions of present-day discrimination to include unconscious and structural bias by using social science, structural analysis, and real-life experience. Currently, EJS targets its advocacy efforts on school discipline, special education, and the school-to-prison pipeline, race-conscious remedies, and inequities in the criminal justice system.
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