Lawsuit challenges stimulus fund denial for kin of undocumented

A U.S. citizen sued the federal government in the Central District of California for withholding her coronavirus stimulus check because her spouse is in the country without legal permission.

The Coronavirus Aid Relief and Economic Security Act (CARES) became law March 27 to provide emergency assistance for people impacted by the pandemic-related economic shutdowns. It prohibits checks for those who made more than a certain amount of money, didn't file a tax return in 2018 or 2019, dependents older than 16, those without a valid Social Security number and nonresident aliens. Exceptions exist for those who served in the U.S. military.

The proposed class action, filed by plaintiff Jane Doe, claims she and her children, who are also U.S. citizens, were excluded from the $2 trillion financial relief,"because she files her taxes jointly with her spouse, who does not have a Social Security number." Doe v. Trump et al., 8:20-CV-00858 (C.D. Cal., filed May 6, 2020).

The action follows a similar case filed last week in Maryland on behalf of naturalized children in mixed-status families who were also denied stimulus checks. R.V. et al. v. Steve Mnuchin, USA, 8:20-CV-0048 (Maryland, filed May 5, 2020).

The CARES Act policy punishes mixed-status households and denies many citizens benefits they deserve, the complaint states.

"We hope the courts will strike down the provision discriminating against our clients as unconstitutional," said plaintiffs' attorney Lana B. Nassar of Blaise and Nitschke PC in Chicago. "It's ironic they're punishing a U.S. citizen for something her spouse did, which was the right thing to do -- to comply with the law and file taxes."

"It's true. The stimulus package says if one spouse isn't a citizen, the entire family can't get money," said Scott J. Street, partner at Musick, Peeler & Garrett LLP who is not involved in the case. However, similar issues arose when lawmakers passed an economic stimulus package following the 2008 financial crisis that gave tax rebates to most people, but excluded citizens whose partners didn't have a Social Security number, Street said.

"Similar language was used then, and it was backed by Obama," he said. "The government could probably use that to their defense."

Nassar and Vivian Khalaf of Khalaf & Abuzir of Chicago teamed up weeks ago after they said they received hundreds of phone calls from peoples who found out they were ineligible for the stimulus money.

Nassar argues the government hasn't provided any justification that meets the heightened scrutiny to hold its positions to deprive her clients of money.

Scott agreed courts will have to apply a higher degree of scrutiny to evaluate whether the stimulus legislation substantively furthered the governments' interests. But, he said, the government could argue it is allowed to regulate or draw distinctions when it comes to restricting certain benefits based on citizenship status.

If it negatively impacts citizen children, "that's when you see problems," said Street. The Maryland case likely has more merits to succeed as courts historically tend to be more skeptical over issues that burden citizen children, as they can't control who their parents are, he said. Street also questioned whether the language exempting military members in a way intentionally targeted people who entered the U.S. without lawful authorization.

Khalaf said the case goes to the heart of the issue that has been a longtime battle between the Internal Revenue Service and Department of Homeland Security "because one hand doesn't know what the other hand is doing."

She predicted other consequences could follow, especially for couples that file jointly, or some with mixed-status that file jointly to pursue citizenship status. Permanent residency applicants typically must submit other documents to prove their marriage is real, which includes co-mingling of assets like a joint tax filing, she said.

"I'd guess 95% of couples applying for lawful status filed joint taxes," Khalaf said. "To now say somehow that's not the right thing to do and withhold your stimulus money impedes the entire process and curtails the ability for people to get citizenship status lawfully."