Opinion
Case No. CV-S-02-1307-KJD (LRL)
May 2, 2003
ORDER
Presently the Court has before it Defendant's Motion To Dismiss, or In The Alternative, For Summary Judgment (#2). Plaintiff filed a response in opposition (#3). Additionally, Plaintiff filed Objections To Defendant's Motion To Dismiss For Failure To State A Claim And Motion That This Court Impose Rule 11 Sanctions On Jennifer A. Giaimo, Attorney For Defendant, For Filing Pleadings That She Knows Contain False And Fraudulent Claims And Statements (#4, 5) as well as Answer To Defendant's Objection That This Court Rule The CDP "Determination" At Issue Invalid, By Holding That This Court Is Without Jurisdiction To Hear The Matter (#6).
1. Background.
In his complaint, Plaintiff alleges that the Internal Revenue Service ("IRS") improperly determined that collection actions against him should continue unrestricted. The collection activities at issue are income tax liabilities and frivolous return penalties the IRS assessed against Plaintiff for the 1996, 1997, 1998, and 1999 tax years. For each tax year in question, Plaintiff filed a Form 1040, U.S. Individual Income Tax Return with zeroes on all lines which reflected amounts of income earned or taxes due. Plaintiff also requested a refund of all taxes either withheld or paid for this tax year. However, attached to the return was a W-2 Form indicating that Plaintiff received taxable wages as well as a form document setting forth arguments as to why Plaintiff does not owe federal income taxes. According to the attached form document, Plaintiff has no income tax liability because there is no statutory income tax liability that applies to him and wages do not constitute income. Courts, however, have found this position to be patently without merit.See Sisemore v. United States, 797 F.2d 268, 270 (6th Cir. 1986); Newman v. Comm'r, 83 T.C.M. (CCH) 1757 (2002).
Plaintiff alleges to have requested a Collection Due Process Hearing ("CDP Hearing") on April 14, 2002. On August 20, 2002, the IRS held the requested CDP Hearing, which Plaintiff attended. Plaintiff admits that, at the hearing, the appeals officer provided the Plaintiff with Forms 4340, Certificates of Assessments and Payments, with regard to the income and civil penalty assessments at issue. Subsequently, on September 5, 2002, the IRS Appeals Office sent a "Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330" informing Plaintiff that the proposed collection action should proceed unrestricted. Plaintiff timely filed the instant complaint seeking to set aside the IRS's determination. Defendant has now filed a motion to dismiss or for summary judgment.
II. Analysis.
From what the Court can glean from them, Plaintiff's complaint as well as his various other filings contain a barrage of meritless arguments which Plaintiff insists this Court must address. Essentially, Plaintiff is challenging the income tax liabilities and frivolous return penalties the IRS assessed against him for the 1996-1999 tax years. This Court has jurisdiction over the Plaintiff's complaint under the IRS Restructuring and Reform Act of 1998. This Act allows an individual to appeal to the federal district court an adverse IRS ruling arising from a CDP hearing if the United States Tax Court does not have jurisdiction over the underlying tax liability. See 26 U.S.C. § 6330 (d)(1)(B). The Court will address the income tax liabilities and frivolous return penalties separately.
A. Income Tax Liabilities.
Defendant seeks to dismiss those aspects of Plaintiff's complaint that address the income tax liabilities the IRS assessed against Plaintiff for the tax years of 1996-1999. Defendant seeks dismissal pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. The Court finds that this aspect of Defendant's motion has merit. When the IRS's proposed levy involves an underlying income tax liability, judicial review over any determination made in a CDP hearing lies exclusively with the United States Tax Court, not the district court. See 26 U.S.C. § 6213 (a);Danner v. United States, 208 F. Supp.2d 1166, 1170 (E.D. Wash. 2002);Foster v. United States, No. CV-S-01-1003-RLH (LRL), 2002 WL 1396772, *1 (D. Nev. May 10, 2002). Because the Tax Court has jurisdiction, this Court lacks jurisdiction under § 6330(d)(1)(B).
To the extent Plaintiff's complaint seeks a refund of the taxes paid in each of the tax years in question, such relief supports the finding that the Tax Court has jurisdiction. A taxpayer may file a suit in district court to recover any internal revenue tax alleged to have been excessive or in any manner wrongfully collected under internal revenue laws. See 28 U.S.C. § 1346 (a)(1). Before a plaintiff may file in federal district court, he must satisfy the jurisdictional prerequisites of making a full payment of the tax deficiency and exhausting his administrative remedies by filing a refund claim with the IRS. See Thomas v. United States, 755 F.2d 728, 729 (9th Cir. 1985) (stating that ordinarily, there is no jurisdiction in the district courts over suits for the refund of amounts paid until the taxpayer had paid the full amount of the contested assessment, and has filed a claim for refund which the IRS has either rejected or not acted upon in six months). A taxpayer may, however, challenge a tax liability before paying the deficiency by filing a timely petition with the Tax Court. See Scar. Comm'r, 814 F.2d 1363, 1366 (9th Cir. 1987). When subject matter jurisdiction is challenged under Rule 12(b)(1), as the Defendant does, the plaintiff bears the burden of proving jurisdiction in order to survive the motion. See Tosco Corp. v. Communities for a Better Env't, 236 F.3d 495, 499 (9th Cir. 2001). Here, Plaintiff has failed to meet his burden. Plaintiff never addressed whether jurisdiction is proper in this Court as to his income tax liabilities. Rather, Plaintiff essentially repeats the same arguments made in relation to the frivolous return penalty. IRS records indicate that Plaintiff has not made a full payment of the amount he owes for the years in question. Plaintiff does not assert that he has made full payment, only that he does not owe any taxes. Moreover, Plaintiff never asserted to have filed an administrative claim with the IRS seeking a refund. Absent full payment and exhaustion of his administrative remedies, Plaintiff's remedy, to the extent he is seeking a refund, lies in Tax Court.
As previously discussed, the income tax liability the IRS has assessed for the tax years in question needs to be addressed in Tax Court. Accordingly, this Court lacks jurisdiction over this aspect of Plaintiff's complaint. To the extent Defendant's motion seeks dismissal of these aspects of Plaintiff's complaint pursuant to Rule 12(b)(1), the Court will grant the motion.
B. Frivolous Return Penalty.
Plaintiff also attacks the CDP determination as it related to the frivolous return penalty assessments. Defendant now moves to dismiss or alternatively for summary judgment as to this aspect of the Plaintiff's complaint. In reviewing a Rule 12(b)(6) motion, the Court "must construe the complaint in the light most favorable to the plaintiff and must accept all well-pleaded factual allegations as true." Swarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). Review is limited to the contents of the complaint. See Sprewell v. Golden Estate Warriors, 231 F.3d 520, 527 (9th Cir. 2000). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims that would entitle him to relief. See id. at 528. If matters outside the pleadings are considered, the court should treat the motion as one for summary judgment. See Fed.R.Civ.P. 12(c).
Summary judgment may be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56(c), Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The evidence, as well as all justifiable inferences drawn from it, must be viewed in the light most favorable to the nonmoving party.See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Summary judgment shall be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." See Celotex, 477 U.S. at 322.
In both his complaint and other pleadings, Plaintiff raised almost verbatim the same meritless arguments that other individuals have previously raised before this Court in challenging the CDP determination as it relates to the frivolous return penalty. For example, these arguments typically include: (1) the IRS's failure to produce evidence of any delegated authority from the Secretary of Treasury to the various IRS employees invalidates the letters and notices these employees sent; (2) the IRS never produced a document supporting imposition of the penalties at issue; (3) no Treasury Department regulation requires that an individual pay the penalties at issue; (4) no statute establishes an underlying liability for the income tax to which the penalties relate; (5) Plaintiff never received the required statutory Notice and Demand for payment with regard to the penalties at issue; and (6) the IRS failed to produce the verification from the Secretary of Treasury that the requirement of any applicable law or administrative procedure have been met in accordance with 26 U.S.C. § 6330. For the reasons stated in the Orders dismissing these other cases, Plaintiff's arguments, as they relate to the CDP determination of the frivolous return penalties, are patently meritless. See Carrillo v. United States, No. CV-S-02-0353-KJD (LRL), Order (#14) dated March 12, 2003, at 5-7; Wahl v. United States, No. CV-S-02-0239-KJD (RJJ), Order (#14) dated Jan. 31, 2003, at 7-9;Carini v. United States, No. CV-S-02-0169-KJD (RJJ), Order (#11) dated Dec. 2, 2002. at 5-7; Caldwell v. United States, CV-S-02-0045-KJD (PAL), Order (#16) dated Feb. 5, 2003, at 5-7; Ordunez v. United States, No. CV-S-02-0033-KJD (LRL), Order (#23) dated Feb. 3, 2003, at 4-7; Samlaska v. United States, No. CV-S-01-1237-KJD (PAL), Order (#17) dated July 31, 2002, at 6-8; Waller v. United States, No. CV-S-01-1190-KJD (PAL), Order (#11) dated Aug. 6, 2002, at 4-7; Blanchard v. United States, No. CV-S-01-1083-KJD (RJJ), Order (#16) dated July 31, 2002, at 5-7; Haas v. United States, No. CV-S-01-0905-KJD (RJJ), Order (#11) dated July 24, 2002, at 5-7.
III. Conclusion.
The Court lacks jurisdiction to address Plaintiff's complaint as it relates to the income tax liabilities assessed by the IRS. Additionally, the Plaintiff's arguments raised against the CDP determination regarding the assessment of the frivolous return penalties are purely meritless, such that had the Defendant moved for Rule 11 sanctions this Court would have freely granted them.
Plaintiff has moved for sanctions against Defendant's counsel (#5). As discussed in this Order, it is he, not Defendant's counsel, that has presented arguments that are subject to Rule 11 sanctions.
Accordingly, IT IS HEREBY ORDERED that Motion To Dismiss, or In The Alternative, For Summary Judgment (#2) is GRANTED.
IT IS FURTHER ORDERED that Plaintiff's Motion That This Court Impose Rule 11 Sanctions On Jennifer A. Giaimo, Attorney For Defendant, For Filing Pleadings That She Knows Contain False And Fraudulent Claims And Statements (#5) is DENIED.