Opinion
Case No. C02-5205RJB
July 22, 2002
ORDER GRANTING UNITED STATES' MOTION TO DISMISS OR, IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT, AND DISMISSING CASE
This matter comes before the court on the United States' Motion to Dismiss or, in the Alternative, for Summary Judgment. Dkt. 6. The court has considered the pleadings filed in support of and in opposition to the motion, and the remainder of the file herein.
PROCEDURAL HISTORY
On April 22, 2002, plaintiff filed a Petition for Review of Determination of Internal Revenue Service Office of Appeals and Denial of Due Process. Dkt. 1. The persons named as defendants are Russ Evans, Team Manager of the Appeals section of the Internal Revenue Service; and Tim Paul, Appeals Officer of the Appeals section of the Internal Revenue Service. Dkt. 1, at 2-3. In his complaint, plaintiff alleged that this court has federal question jurisdiction under 28 U.S.C. § 1331. He bases the federal question on 26 C.F.R. § 601.102, which provides that employment taxes are not within the jurisdiction of the U.S. Tax Court. Dkt. 1, at 2. In the complaint, plaintiff alleges that the I.R.S. issued a Notice of Determination without affording him the right to an in-person appeals conference; that he did not receive a statutory notice of deficiency; and that the tax assessments for the years 1996, 1997, and 1998 were not authorized by fact or law. Dkt. 1.
The United States has filed a Motion to Dismiss or, in the Alternative, for Summary Judgment (Dkt. 6), contending that the federal district court does not have jurisdiction over the claims raised in the complaint. The United States claims that (1) plaintiff's claims may be brought in the U.S. Court of Claims rather than the U.S. District Court because the determination at issue involves income taxes, not employment taxes; (2) the United States should be substituted for defendants Evans and Paul in this case, as the claims are against these defendants in their official capacities; (3) the United States is protected by sovereign immunity in this action because the underlying taxes are income taxes.
Plaintiff opposes the United States' motion, contending that (1) the district court should rule on this appeal because plaintiff was denied due process when he requested and was denied an in-person hearing; (2) the Tax Court does not have jurisdiction over this matter because the I.R.S. violated his constitutional rights by assessing tax liabilities that were not valid; (3) the defendants violated their duties when they failed to provide him a hearing; (4) the district court has jurisdiction because the appeals hearing was for a determination of employment taxes, not income taxes.
DISCUSSION
1. Jurisdiction of District Court 26 U.S.C. § 6330 provides the procedures for administrative collection actions. The law requires that (1) the IRS give 30 days' written notice of the taxpayer's right to a CDP hearing before making a levy; (2) a hearing be conducted by an officer or employee who has no prior involvement with the subject tax liability; (3) the Appeals Office obtain verification from the IRS that the requirements of any applicable law or administrative procedure have been met; (4) the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy at the CDP hearing, including challenges to the appropriateness of collection actions and offers of collection alternatives; (5) the taxpayer may challenge the existence or amount of the underlying tax liability under some circumstances; and (6) the final determination by the Appeals Officer shall take into consideration (a) the verification that applicable law and administrative procedures have been met, (b) the issues raised by the taxpayer, and (c) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary. See 26 U.S.C. § 6330 (a), (b)(1), (c), (c)(2)(B), and (c)(3)(C).
A taxpayer may appeal the determination of the Appeals Office to the Tax Court or to a federal district court, whichever has jurisdiction over the underlying tax liability. 26 U.S.C. § 6330(d). When the underlying taxes are income taxes, the Tax Court has exclusive jurisdiction. See 26 U.S.C. § 6213 (providing for filing petition in Tax Court for redetermination of deficiency in tax determined by Secretary pursuant to 26 U.S.C. § 6212); Treas. Reg. § 601.102(b)(1) (identifying income taxes as being within the jurisdiction of Tax Court); True v. Commissioner, 108 F. Supp.2d 1361, 1364 (M.D. Fla. 2000) (district court lacks subject matter jurisdiction over a Section 6330 case involving income tax as opposed to employment tax).
If the court in which the action is commenced determines that it was filed in the incorrect court, the plaintiff shall have thirty days after the court decision to file in the correct court. 26 U.S.C. § 6330(d)(1).
Although this court would have jurisdiction if the underlying taxes were employment taxes, as petitioner has alleged, the evidence shows that the underlying taxes owed by plaintiff for tax years 1996, 1997, and 1998 were income taxes. The Final Notice attached to the complaint describes the liabilities by the form number of income tax returns, 1040. Dkt. 1, Attachment. The Notice of Determination attached to the complaint also describes the liabilities as 1040 taxes. Dkt. 1, Attachment. The liabilities were based on income taxes assessed on February 5, 2001. Dkt. 7, at 3. The amounts of the assessments correspond to the amounts set forth as "Unpaid Amount[s] from Prior Notices" on the final page of the Final Notice. Dkt. 1, Attachment. Plaintiff's official records do not contain any employment tax liabilities. Dkt. 7, at 4. Petitioner's arguments in his opposition to this motion to the effect that the taxes at issue are employment taxes are frivolous and without merit.
Because the underlying taxes in this case are Form 1040 taxes, jurisdiction for an action for judicial review under 26 U.S.C. § 6330(d)(1) lies exclusively with the Tax Court. Accordingly, this case should be dismissed, and plaintiff should be afforded the opportunity to refile in Tax Court, provided that appeal is timely filed, that is, within thirty days after the date of this order. 26 U.S.C. § 6330(d)(1).
2. Sovereign Immunity
In light of the discussion above, the court need not reach the issue of Sovereign Immunity. However, the court will address this issue as an alternative basis for the decision on the United States' motion.
The United States argues that this action is barred by sovereign immunity. The United States first contends that this is an action against the United States because the remedy is sought against the individual defendants in their official capacities. Even if the United States were substituted as the sole defendant in this case, the United States argues that there has been no waiver of Sovereign Immunity.
A suit against an officer of the United States with respect to actions taken in his or her official capacity, where relief sought would expend itself against the federal fisc, is deemed to be against the United States. Gilbert v. DaGrossa, 756 F.2d 1455, 1458-59 (9th Cir. 1985); Ferrel v. Brown, 847 F. Supp. 1524, 1526 (W.D. Wash. 1993) aff'd, 40 F.3d 1049 (9th Cir. 1994). The actions alleged in the complaint are against defendants Evans and Paul in their official rather than personal capacities. Accordingly, this action may proceed, if at all, only against the United States.
As a sovereign, the United States may be sued only to the extent that it has consented to be sued. United States v. Sherwood, 321 U.S. 584, 586 (1941). A plaintiff who brings an action against the United States must find an express waiver of sovereign immunity that allows such an action. Lonsdale it United States, 919 F.2d 1440, 1444 (10th Cir. 1990). When there is no waiver of sovereign immunity, it is appropriate for the court to dismiss the action for lack of subject matter jurisdiction. Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985).
Plaintiff has alleged federal question jurisdiction under 28 U.S.C. § 1331. Section 1331 contains no wavier of sovereign immunity for an action against the United States in district court. North Side Lumber Co. v. Block, 753 F.2d 1482, 1484 (9th Cir. 1985). Moreover, 26 U.S.C. § 6330(d)(1) does not waive sovereign immunity for actions in district court if the underlying taxes are income taxes. As discussed above, the underlying taxes in this case are income taxes.
Because this is an action against the United States, and because there has been no waiver of sovereign immunity for a challenge of a determination of income tax liability in district court, this case should be dismissed. The United States has consented to an action in Tax Court under 26 U.S.C. § 6330.
Therefore, it is hereby
ORDERED that the United States' Motion to Dismiss or, in the Alternative, for Summary Judgment (Dkt. 6) is GRANTED. This action is DISMISSED without prejudice to plaintiff to file the action in U.S. Tax Court within thirty days of the date of this order.
The Clerk is directed to send uncertified copies of this Order to all counsel of record and to any party appearing pro se at said party's last known address.