Federal Judge Orders IRS to Issues Withheld $1,200 Stimulus Checks to Persons in Carceral Settings

BREAKING: Earlier this week in the Northern District of California (NDCA),  a federal judge issued an injunction against the Trump Administration for withholding COVID relief funds from incarcerated people. The presiding judge, Phyllis J. Hamilton, ruled that the Treasury Department could no longer withhold CARES Act emergency relief “based solely on the basis that they are incarcerated.” Although both incarcerated and formerly incarcerated peoples were eligible to receive EIP (economic impact relief) under the CARES Act, the federal government still failed to provide them with this relief.

Earlier this year, the coronavirus pandemic took the nation by storm, causing significant economic turmoil for many citizens and their families. Congress passed the CARES Act in March of 2020 to help ease the impact of COVID-19 on affected Americans. The act effectively allocated over $2.2 trillion in stimulus funds and “establishes a tax credit for eligible individuals in the amount of $1,200 ($2,400 if filing a joint return), plus $500 multiplied by the number of qualifying children.” The act defines an eligible individual as anyone other than (1) any nonresident alien individual, (2) any individual who is allowed as a dependent deduction on another taxpayer’s return, and (3) an estate or trust.

The IRS became the main mode of distribution for monetary pandemic relief; however, a key group of citizens the IRS intentionally neglected to provide relief for was people in carceral settings. The IRS  posted a FAQ (frequently asked questions) page on their website pertaining to COVID relief in May 2020. The website listed a question and answer pair as follows, “Does someone who is incarcerated qualify for the Payment [i.e., an EIP]?” The IRS responded:

A15. No. A Payment made to someone who is incarcerated should be returned to the IRS by following the instructions about repayments. A person is incarcerated if he or she is described in one or more of clauses (i) through (v) of Section 202(x)(1)(A) of the Social Security Act (42 U.S.C. § 402 (x)(1)(A)(i) through (v)). For a Payment made with respect to a joint return where only one spouse is incarcerated, you only need to return the portion of the Payment made on account of the incarcerated spouse. This amount will be $1,200 unless adjusted gross income exceeded $150,000.

“According to IRS officials, IRS also worked with federal and state prison officials to assist in the return of payments made to incarcerated individuals.” (GAO report June 25, 2020.). However, this action was taken in direct contravention of the plain language of the legislation passed by Congress.

A Treasury Department inspector determined that as early as May the IRS deemed some 80,000 incarcerated persons as eligible for EIP, a cumulative amount exceeding $100 million. A team of lawyers in California filed a lawsuit (Scholl v. Mnuchin), and now the federal district judge has “ordered the government to make the payments to anyone who was denied them previously within 30 days of her order.”

“We have not received word of this yet,” says  Lisa Holder, a civil rights attorney who contributed to the litigation. “But they do have the option to appeal and to request that the court stay the injunction.  We anticipate the court will reject any of these delay tactics especially given that these uniquely vulnerable individuals and their families need the relief now during the crisis.” 

This bold early action by the Court not only bodes well for people living behind the walls in California, but for people in carceral settings across the country. This injunction essentially ensures that all eligible persons in carceral settings will receive critical monetary relief for themselves and their families. If you or your loved one has been directly impacted by this problem, you can read the FAQ posted by Lieff Cabraser and use the form at the bottom of their post to contact the Attorney’s with their firm who are working on this case (partners Kelly M. Dermody and Yaman Salahi and Associate Jallé Dafa).

Read the court order here.

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