Opinion
CV-N-02-0046-LRH (RAM)
April 2, 2003
ORDER
Presently before the Court is the United States' Motion for Summary Judgment (#12), filed on October 2, 2002, and the Plaintiffs' amended complaint, filed on December 20, 2002, which was actually received concurrently with Plaintiffs' Verified Response to the Motion for Summary Judgment (#16). For the following reasons, Defendant's Motion for Summary Judgment is granted.
Entities such as the IRS, are not suable, as they are not real parties in interest. See Blackmar v. Guerre, 342 U.S. 512, 514 (1952). The United States will be substituted for the IRS.
I. Background
On January 23, 2002, Plaintiffs' Gene and Ciao Newman ("Plaintiffs") filed a complaint (the submission is actually styled as a motion) to set aside an allegedly "invalid" collection due process determination for frivolous return penalties issued pursuant to 26 U.S.C. § 6330. The proposed collection activity results from Plaintiffs' federal income tax returns filed for the 1996 and 1999 income tax years. The returns had zeroes on all the lines of the return which reflected income or tax due to the government (Mot. Summ. J., exibits A and B). However, W-2 forms attached to the 1999 return indicate that Plaintiffs did in fact receive income. ( Id.). Consequently, the Internal Revenue Service ("IRS") assessed a $500.00 frivolous return penalty against Plaintiffs for 1996 and 1999 and provided them with notices of their right to a Collection Due Process ("CDP") hearing. (Mot. Summ. J., Exhibit C).
On November 29, 2001, a CDP hearing was held regarding the frivolous return penalties. It also appears that Plaintiffs' underlying tax liability was also properly at issue in the hearing. (Mot. Summ. J., Exhibit D). On December 27, 2001, the IRS sent each Plaintiff, by certified mail, a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330. ( Id.). The Notices informed Plaintiffs that the proposed levy to collect the amounts due would not be restricted. ( Id.). The Notices also informed the Plaintiffs' of their right to appeal for redetermination to the United States District Court. ( Id.).
II. Analysis
Summary judgment is appropriate only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 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." Fed.R.Civ.P. 56(c). In assessing a motion for summary judgment, the evidence, together with all inferences that can reasonably be drawn therefrom must be read in the light most favorable to the party opposing the motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1154 (9th Cir. 2001).
The initial burden rests on the moving party to point out the absence of any genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On those issues for which it bears the burden of proof, the moving party must make a showing that is "`sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party.'" Calderone v. United States, 799 F.2d 254, 259 (6th Cir. 1986). See Idema v. Dreamworks, Inc., 162 F. Supp.2d 1162, 1141 (C.D.Cal. 2001). For those issues where the moving party will not have the burden of proof at trial, the movant must point out to the court "that there is an absence of evidence to support the nonmoving party's case." Catrett, 477 U.S. at 325.
In responding to a summary judgment motion, the non-moving party may not rest upon the pleadings but must go beyond the pleadings and "present affirmative evidence in order to defeat a properly supported motion for summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). The nonmoving party "must set forth specific facts showing there is a genuine issue for trial." Fed.R.Civ.P. 56(e). A dispute is genuine if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id. at 249. The mere existence of a scintilla of evidence in support of the plaintiffs position will be insufficient to establish a genuine dispute; there must be evidence on which the jury could reasonably find for the plaintiff See id. at 252.
Section 6330(d) does not specify the standard of review a district court should apply to an appeal of a Notice of Determination. However, the legislative history indicates that the Court should conduct a de novo review only "where the validity of the tax liability was properly at issue at the administrative hearing." H. Conf. Rept. 105-599, 105 th Cong.2d Sess. 266 (1998). Where the amount of the underlying tax liability is not properly part of the appeal, the Court reviews a Notice of Determination for abuse of discretion. In the present case, when the underlying action rests on a plaintiffs "underlying income tax liability, judicial review over a determination made in a Collection Due Process hearing lies in the United States Tax Court, not the district court" Bartschi v. Tracy, 88 A.F.T.R.2d 2001-6223, 2001 WL 1338795, *3 (9. Ariz. Sept. 5, 2001). See also Dimartino v. United States, 87 A.F.T.R.2d 2001-1002, 2001 WL 260042, *2 (D. Nev. Jan. 29, 2001). Where the taxpayer had the opportunity to dispute the liability, and the assessment was upheld, the taxpayer must follow the claim for refund provisions set forth in 26 U.S.C. § 6532(a) and 7422 in order to proceed in the United States District Court.
Plaintiffs raise the same issues before this Court that they raised at the November 29, 2001, hearing. For instance, Plaintiffs make conclusory allegations that the CDP hearing was not in accordance with the law. Such conclusory allegations need not be accepted in the absence of facts. In actual fact, Plaintiff did not appear to raise any of the statutory-specified issues that may be raised at a CDP hearing such as spousal defenses, the appropriateness of the intended collection action or the possibility of alternative means of collection. See 26 U.S.C. § 6330 (c). Instead, Plaintiffs argue that the appeals officer who conducted the hearing failed to provide them with various documents, including delegation orders for the IRS employees involved in assessments. However, "[s]ection 6330(c)(1) does not require the Appeals officer to give the taxpayer a copy of the verification that the requirements of any applicable law or administrative procedure have been met." Nestor v, Commissioner, 118 T.C. 162, 166 (2002).
Plaintiffs' argument that an appeals officer's reliance on IRS records, including Forms 4340 as verification that the appropriate administrative procedures have been met is also without merit. Courts have repeatedly recognized that use of such forms constitute presumptive proof of a valid assessment. Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993); Farr v. United States, 990 F.2d 451, 454 (9th Cir. 1993). According to the record in this case, the appeals officer determined that the assessment had been properly made and that the appropriate administrative procedures had been met. (Mot. Summ. J., Exhibits D and B). This evidence is not controverted by the Plaintiffs.
To the extent that Plaintiffs challenge the $500.00 frivolous return penalty imposed on them by the IRS, such a challenge is meritless. This Circuit has found that a person who fills out his return with zeros while attaching W-2's showing income has filed a frivolous return that is subject to a penalty. See Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985). Moreover, arguments similar to the ones employed by the Plaintiffs have been deemed frivolous on numerous occasions. See Sisernore v. United States, 979 F.2d 268 (6th Cir. 1986); Olsen, 760 F.2d at 1005; Light v. United States, 89 A.F.T.R.2d 2002-2970 (D. Nev.); Montijo v. United States, 90 A.F.T.R.2d 2002-5038 (D. Nev.). Accordingly, the frivolous return penalty was merited.
Assuming, arguendo, that the Court has subject matter jurisdiction over Plaintiffs' challenge to their underlying tax liability, the Court finds Plaintiffs' arguments entirely frivolous and without merit. In fact, the Supreme Court has held early and often that it is lawful to impose a tax on every person residing in the United States upon their entire net income arising from all sources. See S. Pacific Co. v. Lowe, 247 U.S. 330, 333-334 (1918). Plaintiffs' contentions are akin to the assertions of "those persons who are attempting to avoid their fair share of the costs of the government that organizes the society in which they live." United States v. Montgomery, 778 F.2d 222, 224 (5th Cir. 1985). Hence, this Court shall not further "address petitioner's assertions `with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.'" Williams v. Commissioner, 114 T.C. 136, 138 (2000) (quoting Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984). Based on the record, and in light of the abundance of authority regarding the taxability of Plaintiffs' income, the IRS's actions were warranted both in assessing the underlying tax liability and in assessing the frivolous return penalty against the Plaintiffs. There exist no outstanding issues of material fact, and the United States is entitled to judgment as a matter of law.
Finally, Plaintiffs have submitted an amended complaint after the filing of the United States' motion for summary judgment. In the amended complaint, Plaintiffs request a refund of all income taxes they have paid, an injunction preventing the IRS from collecting taxes against them, damages against the IRS, and a declaration as to whether they are "slaves of the governments." (Am. Compl., 7:18-10:5).
Leave to amend is denied as Plaintiffs have failed to request leave pursuant to Fed.R.Civ.P. 15(a). While Plaintiffs are pro se, they still must comply with procedural requirements. Ghazali v. Moran, 46 F.3d 52, 54 (9th Cir. 1995). Even if the Court were to allow amendment, like the initial complaint, the amended complaint contains only more frivolous arguments and suffers from the same defects. Specifically, the Plaintiffs' cannot request damages without first exhausting their administrative remedies. See 26 U.S.C. § 7433 (d)(1); Conforte v. United States, 979 F.2d 1375, 1377 (9th Cir. 1993). Plaintiffs do not allege that they have met this requirement. Plaintiffs' have also failed to fulfill the procedural requirements of a refund suit under 28 U.S.C. § 1346 (a)(1). Like their damages claim, they have not alleged that they paid the assessed liabilities in full or that they ever filed an administrative claim with the IRS. See 26 U.S.C. § 6511, 7422(a); Flora v. United States, 362 U.S. 145 (1960). Nor can the Court grant declaratory or injunctive relief as Plaintiffs request. See 28 U.S.C. § 2201; 26 U.S.C. § 7421 (a). Finally, imposition of income taxes does not violate the Thirteenth Amendment. See Kasey v. Commissioner, 457 F.2d 369, 370 (9th Cir. 1972).
IT IS THEREFORE ORDERED that the United States' Motion for Summary Judgment (#12) is GRANTED. Plaintiffs are not granted leave to amend their initial complaint and their amended complaint received concurrently with their opposition (#16) should not be filed.