The opinion of the court was delivered by: LEVY
REPORT AND RECOMMENDATION
LEVY, United States Magistrate Judge:
By order dated March 14, 1996, the Honorable Carol Bagley Amon, United States District Judge, referred the above-captioned matter to me for a report and recommendation on defendant's motion to dismiss plaintiffs' complaint. For the reasons set forth below, I respectfully recommend that defendant's motion be granted.
Plaintiff Sheldon Stern was an insurance agent for the Allstate Insurance Company ("Allstate") for the tax years 1990, 1991 and 1992. He and his wife, Sara Stern, commenced this action on February 23, 1994; they seek a tax refund totaling $ 51,447 in conjunction with amended tax returns for those three tax years.
Before filing the instant action, plaintiffs filed an administrative claim with the Internal Revenue Service ("I.R.S."), contending that Allstate mistakenly had classified plaintiff Sheldon Stern as an employee instead of granting him independent contractor status. Plaintiffs' petition to the I.R.S. for a redetermination of Sheldon Stern's employment status with Allstate relied exclusively on the United States Tax Court's decision in Butts v. Commissioner of Internal Revenue, T.C. Memo 1993-478, 66 T.C.M. (CCH) 1041, 1993 WL 410704 (1993), aff'd, 49 F.3d 713 (11th Cir. 1995).
In Butts, an Allstate representative received a judicial redetermination of his employment status as that of an independent contractor, and not an employee. As a result, the plaintiff in Butts was permitted to deduct office expenses as Schedule C business expenses.
The I.R.S. disallowed plaintiffs' claim, citing the uncertainty of I.R.S. policy regarding the Butts decision:
The official word from the National Office is that the decision in the case of Butts v. Commissioner of the Internal Revenue Service is not binding nationwide. The case is currently in appeals, therefore your claim cannot be accepted until this issue is resolved.
After receiving the I.R.S. District Director's letter disallowing their claim, plaintiffs brought their original complaint in this action, which repeated the facts and theory of their administrative action and sought the same amount in tax refunds, i.e., a total of $ 51,447. Shortly thereafter, the United States informed plaintiffs of the potential consequences on their tax liability were they to obtain a ruling that Sheldon Stern was not an employee of Allstate, but instead was an independent contractor. Specifically, the United States explained that, as an independent contractor, Mr. Stern would be required to report the payments made by Allstate on his behalf to FICA, social security, a company pension fund, health insurance, and so forth, as additional taxable income. Furthermore, the tax-exempt status of a substantial IRA rollover undertaken by Mr. Stern during this period would be reevaluated and would potentially accrue additional tax liability. While plaintiffs would receive more favorable tax treatment in terms of exempting certain business expenses, the government explained that the net result of a judicial redetermination concerning Mr. Stern's employment status would likely be an increased tax liability instead of plaintiffs' hoped-for refund.
In light of that information, plaintiffs amended their complaint. In their amended complaint, the subject of the current motion to dismiss, plaintiffs withdraw their claim that Sheldon Stern was not an employee of Allstate. Plaintiffs now allege that Mr. Stern was, for purposes of calculating income taxes, both an employee of Allstate and an independent contractor. They calculate that sixty percent of Mr. Stern's total book income reported can be attributed to his position as an Allstate employee and that the remaining forty percent of Mr. Stern's gross income should be deemed independent contractor income. Thus, according to plaintiffs, the income gained through FICA, social security and other contributions occurred within the employer-employee relationship between Allstate and Mr. Stern.
The government moves to dismiss plaintiffs' complaint on jurisdictional grounds. It argues that the issue plaintiffs raise in this action "fatally varies" from that raised in plaintiffs' administrative claim.
It is well-settled that the United States, as sovereign, may not be sued without its consent. United States v. Dalm, 494 U.S. 596, 608, 108 L. Ed. 2d 548, 110 S. Ct. 1361 (1990); United States v. Testan, 424 U.S. 392, 399, 47 L. Ed. 2d 114, 96 S. Ct. 948 (1976); United States v. Sherwood, 312 U.S. 584, 586, 85 L. Ed. 1058, 61 S. Ct. 767 (1941). Moreover, a waiver of sovereign immunity may not be implied, but must be expressed unequivocally. Lehman v. Nakshian, 453 U.S. 156, 161, 69 L. Ed. 2d 548, 101 S. Ct. 2698 (1981). Thus, no suit may be maintained against the United States unless the complaint complies exactly with the terms of the statute pursuant to which the government has consented to be sued. Lehman, 453 U.S. at 160; Sherwood, 312 U.S. at 590.
Actions against the United States for tax refunds may only be brought under a narrowly construed set of guidelines set forth in the Internal Revenue Code. See 28 U.S.C. § 1346(a)
and 26 U.S.C. § 7422(a).
In the present matter, the relevant rule is 26 C.F.R. § 301.6402-2(b) (Treas. Reg. 1992), which requires all refund claims to "set forth in detail each ground upon which a credit or refund is claimed and facts sufficient to apprise the Commissioner of the exact basis thereof." 26 C.F.R. § 301.6402-2(b). See also United States v. Felt & Tarrant Mfg. Co., 283 U.S. 269, 272, 75 L. Ed. 1025, 51 S. Ct. 376 (1931); United States v. Forma, 42 F.3d 759, 767 n. 13 (2d Cir. 1994); Barenfeld v. United States, 194 Ct. Cl. 903, 442 F.2d 371, 373-74 (Ct. Cl. 1971). The Commissioner of Internal Revenue is entitled to insist upon full compliance with this regulation, which affords the I.R.S. an opportunity to examine the facts and legal arguments that are central to a plaintiff's claim before coming to federal court. Angelus Milling Co. v. ...