Summary
explaining that section 6672 authorizes the I.R.S. to assess a penalty against a responsible person who willfully fails to pay over withholding taxes and that its purpose is to protect the government against losses
Summary of this case from Simpson v. California Nonprofit Inc.Opinion
Case No: 01-7507-CIV-GOLD-SIMONTON.
February 12, 2002
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
THIS CAUSE is before the court upon the United States of America's motion to dismiss (DE #7). The plaintiff, E. Steven Wald ("Wald"), filed a three-count complaint against the United States alleging as follows: count I, judicial review of I.R.S. notice of determination, pursuant to 26 U.S.C. § 6330 (d)(1); count II, action for redetermination of I.R.S. notice to levy, pursuant to 26 U.S.C. § 6672 (c)(2); and count III, request for abatement of tax levy. The United States seeks to dismiss Wald's complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Upon a review of the parties' arguments, the applicable case law, and the pleadings, the court has determined that the United States's motion shall be granted.
In his original complaint, Wald sought relief in count II pursuant to 26 U.S.C. § 6672 (b)(2), but, in response to the I.R.S.'s motion, Wald indicated that count II should be amended to seek relief under 26 U.S.C. § 6672 (c)(2).
Statement of Facts
The following facts are derived from Wald's complaint and the exhibits attached to the complaint.
Wald, a taxpayer and resident of Palm Beach County, Florida, is the former president and C.E.O. of Metacor, Inc. ("Metacor") and other corporations. According to Wald, Metacor paid approximately $50,000.00 into Metacor's Employer Tax Trust Fund throughout the last fiscal quarter of 1991. These payments were intended to cover employment taxes for the Employment Tax Trust Fund. Compl. at ¶¶ 4, 6. Although Metacor's comptroller informed an I.R.S. field agent that these payments were earmarked for the Employer Tax Trust Fund, an I.R.S. hearing officer concluded that the funds were not properly designated to go into the Trust Fund. Compl. at ¶ 7. As a result, the I.R.S. determined that Metacor was responsible for approximately $24,000.00 in taxes.
At some time in the late 1990s, Metacor and some of Wald's other corporations filed for bankruptcy. The I.R.S. filed claims in the other bankruptcies for $4,039.55. Although the I.R.S. was informed of Metacor's bankruptcy and was provided copies of bankruptcy records, it did not file a claim in conjunction with Metacor's bankruptcy. Compl. at ¶ 11, 12. As a result, the debts of Metacor's unsecured creditors were paid, but the I.R.S. never received any proceeds from Metacor's bankruptcy proceedings.
Following administrative proceedings and a hearing with the I.R.S. Office of Appeals, the I.R.S. determined that Wald was responsible for the alleged nonpayment of Metacor's employment taxes. The I.R.S. Office of Appeals sustained the I.R.S.'s Notice of Intent to Levy a civil penalty assessment in the amount of $42,011.71.
Analysis
In its motion to dismiss, the United States has identified three grounds for dismissal of Wald's complaint: (1) count I of Wald's complaint, which is pursuant to 26 U.S.C. § 6330, fails to state a claim upon which relief can be granted; (2) the court lacks jurisdiction to redetermine Wald's tax liability; and (3) Wald's request for equitable relief violates the Anti-Injunction Act, 26 U.S.C. § 7421. Each of these points is addressed below.
In its reply to Wald's response, the United States apparently abandons its jurisdiction argument. Instead, it contends that count II of the complaint should be dismissed for failure to state a claim.
I. Standard for Motion to Dismiss
To warrant dismissal of a complaint under Rule 12(b)(6) of the Federal Rules of Civil procedure, it must be "clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Blackston v. Alabama, 30 F.3d 117, 120 (11th Cir. 1994) (quoting Hishon v. King Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232 (1984)). Determining the propriety of granting a motion to dismiss requires courts to accept all the factual allegations in the complaint as true and to evaluate all inferences derived from those facts in the light most favorable to the plaintiff. See Hunnings v. Texaco, Inc., 29 F.3d 1480, 1483 (11th Cir. 1994). The threshold of sufficiency that a complaint must meet to survive a motion to dismiss is exceedingly low. See Ancata v. Prison Health Svcs., Inc., 769 F.2d 700, 703 (11th Cir. 1985) (citation omitted); Jackam v. Hospital Corp. of America Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir. 1983). "[U]nless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief," the complaint should not be dismissed on grounds that it fails to state a claim upon which relief can be granted. M/V Sea Lion V v. Reyes, 23 F.3d 345, 347 (11th Cir. 1994) (citation omitted). Nevertheless, to survive a motion to dismiss, a plaintiff must do more than merely "label" his claims. Blumel v. Mylander, 919 F. Supp. 423, 425 (M.D. Fla. 1996). Moreover, when on the basis of a dispositive issue of law no construction of the factual allegations will support the cause of action, dismissal of the complaint is appropriate. Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993).
II. Failure to State a Claim in Count I
In count I of his complaint, Wald requests "judicial review and redetermination" of the I.R.S.'s determination of his tax liability in the amount of $42,011.71. Specifically, Wald claims that the I.R.S.'s appeals officer's determination was not supported by competent evidence, failed to consider the determination by the I.R.S. field officer that Metacor payments had been earmarked for the tax funds, and denied Wald access to any of the relevant evidence that contributed to his final decision.
Wald brings count I of his complaint pursuant to 26 U.S.C. § 6330 (d)(1). Section 6330 provides a taxpayer for notice and an opportunity for a hearing before a levy by the I.R.S. Office of Appeals. 26 U.S.C. § 6330 (a)-(b). The appeals officer's determination is subject to judicial review by the Tax Court or a district court, if the Tax Court does not have jurisdiction. 26 U.S.C. § 6330 (d). During the hearing before the appeals officer, a taxpayer may raise the following issues:
(A) In general. —
(i) appropriate spousal defenses;
(ii) challenges to the appropriateness of collection actions; and
(iii) offers of collection alternatives. . . .
(B) Underlying liability. — The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.26 U.S.C. § 6330 (c)(2).
Count I of Wald's complaint fails to state a claim upon which relief can be granted because it does not properly raise any of the issues listed in § 6330(c)(2). It is undisputed that Wald does not raise any spousal defenses or collection alternatives. Instead, what is at issue is whether Wald has stated a cognizable challenge to the appropriateness of the collection action or his underlying liability. By questioning the sufficiency of the evidence and the Appeals Officers' alleged failure to consider the field officer's determination that a tax payment had been made, Wald has raised the issue of his underlying tax liability. According to 26 U.S.C. § 6330 (c)(2)(B), the taxpayer can challenge the existence or amount of the underlying tax liability only if he or she "did not receive any statutory notice of deficiency for such tax liability" or "did not otherwise have an opportunity to dispute such tax liability". The complaint is devoid of any allegation that Wald did not receive notice of his tax liability or that he did not have an opportunity to dispute his liability. In fact, the Notice of Determination Wald attaches to his complaint prevent such a finding. See Compl, Ex. 3. Because it appears that Wald received notices of his deficiency and had an opportunity to challenge the I.R.S.'s determinations, he cannot challenge his underlying liability pursuant to 26 U.S.C. § 6330 (d)(1). See Fossen v. Comm. of Int. Rev., 4 Fed. Appx. 526 (9th Cir. 2001) (holding that plaintiff could not raise challenge to underlying tax liability under 26 U.S.C. § 6330 (c)(2)(B) because he had received statutory notices of tax deficiency).
To the extent that Wald seeks to challenge the appropriateness of the collection action by arguing that the evidence was incompetent or that he lacked access to relevant evidence, judicial review of those questions is precluded because Wald did not raise those issues before the appeals officer. The Notice of Determination by the Office of Appeals, which Wald attaches to his complaint, indicates that he challenged only the existence and the amount of the underlying tax liability, not the appropriateness of the collection action or any other issues. See Compl, Ex. 3 at 4-5. The complaint does not contradict this exhibit. Because Wald cannot raise issues in this court that he did not raise below, the allegations regarding the competence or access to evidence must be dismissed.
III. Failure to State a Claim in Count II
In count II of his complaint, as amended in his response to the United States's motion, Wald requests relief under 26 U.S.C. § 6672 (c)(2). At the outset, the court notes that Wald cannot seek relief under this provision because it is not intended to create a cause of action for taxpayers. Section 6672 authorizes the I.R.S. to assess a penalty against a responsible person who willfully fails to pay over withholding taxes. 26 U.S.C. § 6672 (a). Its purpose is to protect the government against losses, not to afford relief to taxpayers against whom penalties have been assessed. See Ross v. United States, 949 F. Supp. 536 (N.D. Oh. 1996) (discussing purpose of statute).
The provision under which Wald seeks relief reads as follows:
Suit must be brought to determine liability for penalty. — If, within 30 days after the day on which is claim for refund with respect to any penalty under subsection (a) is denied, the person described in paragraph (1) fails to begin a proceeding in the appropriate United States district court (or in the Court of Claims) for the determination of his liability for such penalty, effective on the day following the close of the 30-day period referred to in this paragraph.26 U.S.C. § 6672 (c)(2). Nothing in this provision suggests that it was intended to create a cause of action for taxpayers. Additionally, § 6672(c)(1), to which § 6672(c)(2) refers, applies only to taxpayers who have filed bonds with respect to liability for tax penalties. Wald's complaint does not allege that he has filed such a bond. For these reasons, 26 U.S.C. § 6672 (c)(2) is further inapplicable to this case. Cf. Glass v. Int. Rev. Svc., 21 Fed. Appx. 870, 871 (10th Cir. 2001) ("District courts have no jurisdiction over civil claims challenging taxes unless litigants first pay the assessed tax and then raise these claims in a refund suit."). As such, count II of Wald's complaint must be dismissed.
IV. Anti-Injunction Act Bars Count III
In count III of his complaint, Wald requests an equitable determination that the penalty assessed against him should be abated. In effect, he requests that the court enjoin the tax assessment. The United States moves to dismiss this count under 26 U.S.C. § 7421, which prohibits suits to restrain tax assessments or collections. In pertinent part, this provision states, "Except as provided in sections 6-15(e), 6212(a) and (c), 6213(a), 6225(b), 6246(b), 6330(e)(1), 6331(i), 6672(c), 6694 (c), 7426(a) and (b)(1), 7429(b), and 7436, no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed." 26 U.S.C. § 7421 (a).
It is clear that, in count III of his complaint, Wald requests that the I.R.S.'s collection be restrained, yet none of the exceptions listed in this provision apply to this case. Wald erroneously claims that his action falls under sections 6330(e)(1) and 6672(c), which are among the exceptions listed in 26 U.S.C. § 7421 (a). As discussed in the preceding subsection, § 6672(c) is inapplicable because it deals with situations where a bond has been filed, and none has been filed in this case. Moreover, this provision does not create a cause of action for a taxpayer such as Wald. Section 6330(e)(i) is related to the suspension of collection actions while a collection due process request is still pending. In this case, the complaint alleges that the collection due process determination has been completed. Therefore, § 6330(e)(i) cannot apply. Because none of the exceptions listed in 26 U.S.C. § 7421 (a) are satisfied, Wald's "equitable action for abatement" cannot be entertained, and count III must be dismissed.
In Enochs v. Williams Packing Navigation Co., 370 U.S. 1, 82 S.Ct. 1125 (1962), the Supreme Court recognized a judicial exception to § 7421, which also is inapplicable here. The Court concluded that the Anti-Injunction Act bars a suit to enjoin a tax penalty (1) unless under no circumstances can the United States prevail and (2) if equity jurisdiction otherwise exists. Id. at 370 U.S. at 7; see also Commissioner v. Shapiro, 424 U.S. 614, 627, 96 S.Ct. 1062 (1976). The burden is on the plaintiff to show that his case falls within this exception, but Wald has not attempted to make such a showing in this case.
It is therefore:
ORDERED AND ADJUDGED THAT:
1. The United States's motion to dismiss (DE #7) shall be GRANTED.
2. The Clerk of the Court shall CLOSE this case.
3. All pending motions are DENIED AS MOOT.
DONE AND ORDERED.