Class Action Lawsuit Contends Incarcerated Individuals Are Entitled to CARES Act Stimulus Payments [UPDATE]

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A proposed class action lawsuit argues the specific language of the CARES Act does not exempt incarcerated individuals from receiving federal Economic Impact Payments from the IRS. 

Filed in Illinois federal court, the 32-page lawsuit alleges the defendants—The United States Department of the Treasury, U.S. Treasury Secretary Steven Mnuchin, the Internal Revenue Service, Commissioner of Internal Revenue Charles Rettig and the United States of America—have “usurped Congress’s lawmaking power” by unilaterally refusing to issue relief payments to incarcerated individuals despite a “clear mandate to do so.”

The suit relays Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 in an effort to combat the economic downturn caused by the COVID-19 pandemic. To quickly kickstart the economy, Congress created a 2020 tax credit to be disbursed as a direct payment of $1,200 to “eligible individuals” making $75,000 per year or less, per the case.

Speaking to the unprecedentedly broad scale of the CARES Act, the lawsuit says only four categories of people were initially excluded by Congress from receiving stimulus payments: those without a social security number, non-resident aliens, dependents claimed on the tax return of another taxpayer and estates or trusts. The plaintiffs, two individuals incarcerated in Illinois, stress in the complaint that the CARES Act is “clear and unambiguous” with regard to who is and is not eligible for a payment. 

Shortly after the IRS began sending out stimulus payments on April 10, however, the Treasury Department’s Inspector General for Tax Administration expressed concern to the agency that incarcerated individuals may receive CARES Act money, the complaint says. In response, the IRS at first affirmed that those who are incarcerated fit within the CARES Act definition of “eligible individuals” and are thus entitled to stimulus payments, the suit shares.

Within weeks, however, the IRS reversed course and decided against sending Economic Impact Payments to incarcerated individuals “despite the statutory language” of the CARES Act, the lawsuit says. Per the case, the IRS went so far as to seek help from prisons, jails and other correctional facilities to “intercept checks that it had already sent out." 

As the plaintiffs tell it, the defendants’ about-face with regard to stimulus payments for jailed/incarcerated individuals has sweeping ramifications among many who’ve suffered the most due to the COVID-19 pandemic. From the complaint: 

“The effects of Defendants’ conduct are severe and ongoing. With the CARES Act, Congress used a broad brush to address an unparalleled economic crisis by disbursing funds immediately to protect vulnerable populations. Families with an incarcerated parent are among the most vulnerable and, in this respect, Defendants’ decision to disobey the Congressional command is most cruel. Incarcerated people and their families are primarily low-income and come disproportionately from minority communities that have endured long histories of discrimination at the hands of the government authority. These communities are among the hardest hit by the economic slowdown caused by COVID-19. Economic Impact Payments have the potential to assist with their serious needs. Indeed, more than 50% of incarcerated persons have at least one minor child and many of these remain under child support obligations should they receive funds while incarcerated. Spending by prisoners, pre-trial detainees, and their families furthers Congress’s goal of protecting the needy in this crisis while also stimulating economic activity and supporting businesses and workers.”

The case adds that many who are incarcerated are unable to earn income while housed in a prison or jail, and pay “exorbitant sums” to communicate with loved ones. According to the lawsuit, the costs of communicating with an incarcerated individual fall predominantly on their family on the outside. 

“Communication with family members is, sadly, the only contact with the world outside of the cell for many Class Members,” the lawsuit reads. “Defendants cannot and should not narrow the scope of the CARES Act so casually.” 

The case looks to represent a proposed class consisting of everyone in the United States categorized as an “eligible individual” to receive an Economic Impact Payment but did not receive one due to incarceration or because they met the criteria described in Section 202(x)(1)(A)(i)-(v) of the Social Security Act. 

ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.

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