Opinion
CASE NO. 1:03CV1634
February 27, 2004
MEMORANDUM OF OPINION AND ORDER
This matter is before the Court upon the respondent, United States of America's motion (ECF 6) to dismiss the petitioners', Melvin and Delight Wilson's petition to quash an IRS summons issued to the Defense Finance Accounting Service, 1240 East Ninth Street, Cleveland, Ohio 44199. (ECF 1). Petitioners have also filed a motion to quash administrative summons (ECF 8) similar to their petition. The Court's discussion pertains to both. Further the Court has reviewed the petitioners' response in opposition to the respondent's motion to dismiss. (ECF 7). For the reasons that follow, the respondent's motion to dismiss will be granted, the petition to quash the IRS summons will be dismissed and the motion to quash the IRS summons will be denied.
The United States is immune from suit unless it consents to be sued and the terms of its consent to be sued in any court determines the court's jurisdiction to entertain the suit. United States v. Sherwood, 312 U.S. 584 (1941); United States v. Testan, 424 U.S. 392, 399 (1976); Upton v. I.R.S., 104 F.3d 543, 545 (2d Cir. 1997).
The IRS has been granted the authority to issue an IRS administrative summons for the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or collecting any such liability. 26 U.S.C. § 7602(a). In order to accomplish this purpose, the IRS may summon the person liable for the tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for the tax or required to perform the act, or any person the Secretary may deem proper, to appear before the Secretary and produce such documents as may be relevant or material to such inquiry. 26 U.S.C. § 7602(a)(2). In order to succeed in quashing an IRS administrative summons, the taxpayer must show that the summons was issued for an improper purpose, such as to harass the taxpayer, or for any purpose reflecting on the good faith of a particular investigation. United States v. Powell, 379 U.S. 48, 58 (1964), 26 U.S.C. § 7609(b) applies to third party summonses. Under this section, a taxpayer may bring an action in federal court to quash an IRS summons issued to a third party record keeper as defined in 26 U.S.C. § 7603(b)(2)(A). A third party record keeper is defined as
any mutual savings bank, cooperative bank, domestic building and loan association, or other savings institution chartered and supervised as a savings and loan or similar association under Federal or State law, any bank (as defined in section 581), or any credit union (within the meaning of section 501(c)(14)(A).Connell v. United States, 1998 WL 1033081 (N.D. Ohio Dec. 7, 1998). The Defense Finance Accounting Service is a third party record keeper.
In a proceeding brought by a taxpayer under § 7609, the Secretary may seek to compel compliance with a summons pursuant to 26 U.S.C. § 7609(b)(2)(A) or may move to dismiss the petition to quash and rely on third party compliance of the summons. Hogan v. United States, 873 F. Supp. 80, 81 (S.D. Ohio 1994).
The United States chose not to seek direct enforcement of the summons. Therefore, it does not have to follow the procedures set forth in United States v. Powell, 379 U.S. at 57-58 (1964), for enforcing a summons that requires establishing a prima facie case of good faith by showing that certain conditions exist for the issuance of a summons. Oldham v. United States, 2002 WL 507544 at *4 (D. Or. Apr. 1, 2002); Gingrich v. United States, 1987 WL 16946 at *2 (C.D. Ill. May 18, 1987). The burden shifts to the petitioner to raise a sufficient legal challenge to the summons. In such case, the standard for a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the Fed.R.Civ.P. is applicable. Id. Faber v. United States, 69 F. Supp.2d 965, 971 (W.D. Mich. 1999).
A complaint should not be dismissed unless it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle him to relief. Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988).
The petitioners argue that: 1) they are beyond federal jurisdiction; 2) Respondent's summons is unenforceable because it was not issued in the District of Columbia; 3) Respondent's summons does not comply with the Administrative Procedures Act ("APA"); 4) the summons power under 26 U.S.C. § 7602 applies exclusively to the Bureau of Alcohol, Tobacco and Firearms; and 5) the summons power articulated in the Internal Revenue Code acts as an unlawful bill of attainder which violates due process.
First, the petitioners state that they are not United States citizens and are not subject to federal jurisdiction. They claim that they are citizens only of the State of Washington. A federal employee who was within the jurisdiction of the sovereign State of Washington issued the summons to an "American citizen" while residing in Washington and thus alleges petitioners, the summons is a nullity and without the full force and effect of law.
The Sixth Circuit has determined, although in a criminal case, that the same jurisdictional argument made by petitioners in the present case is completely without merit and patently frivolous. United States v. Mundt, 29 F.3d 233, 237 (6th Cir. 1994). The Fourteenth Amendment to the United States Constitution provides: "All persons born or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States and the State wherein they reside." To believe that federal laws do not apply to citizens of the various states and only to those living in the District of Columbia, the territories, or federal enclaves is ludicrous.
Petitioners argue that the summons is a nullity because it was not issued in the District of Columbia but originated from a federal official located in the State of Washington. Federal officials are located just about everywhere in this country and have the authority to enforce the federal laws in the various states. In In re Becraft, 885 F.2d 547, 548 n. 2 (9th Cir. 1989), the court stated as to the plaintiff's position that the Tenth Amendment does not authorize a direct non-apportioned income tax on resdient United States citizens and thus such citizens are not subject to federal income tax laws: "We hardly need comment on the patent absurdity and frivolity of such a proposition. For over 75 years, the Supreme Court and the lower federal courts have both implicitly and explicitly recognized the Sixteenth Amendment's authorization of a non-apportioned direct income tax on United States citizens residing in the United States and thus the validity of the federal income tax laws as applied to such citizens. See, e.g., Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 12-19 (1916); United States v. Ward, 833 F.2d 1538 (11th Cir. 1987); Lovell v. United States, 755 F.2d 517, 519 (7th Cir. 1984); Parker v. C.I.R., 724 F.2d 469, 471 (5th Cir. 1984); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981)." The Secretary of the Treasury or his delegate has the authority to issue an administrative summons for the purpose of ascertaining the correctness of any return or determining the liability of a citizen. 26 U.S.C. § 7602. United States v. Maczka, 957 F. Supp. 988, 990 (W.D. Mich. 1996), citing Van Manen v. United States, 1994 WL 151352 at *2 (6th Cir. Apr. 27, 1994). The official issuing the summons may be located outside the District of Columbia.
Petitioners assert that the summons does not comply with the Administrative Procedures Act because Treasury Form 2039 lacks a control number and was not published in the Federal Register. In response to respondent's argument on this issue, petitioners stated that the respondent's comment that the "summonses issued on Form 2039 are valid" may be a true statement in a federal jurisdiction but not as it relates to petitioners. As the above discussion points out, petitioners' statement is without merit.
A Form 2039 does not need an OMB number to be valid. Faber v. United States, 69 F. Supp.2d at 969. There is no provision in the APA, 5 U.S.C. § 552, that requires official treasury forms to be published in the Federal Registry. Petitioners cited United States v. Reinis, 794 F.2d 506 (9th Cir. 1986), that involved the requirement of reports for currency transactions over $10,000.00. The form was not effective as a regulation because it was never promulgated pursuant to the rule making requirements of the APA. It had nothing to do with any requirement to publish the form as to an individual in the Federal Register.
Next, the petitioners contend that the summons power applies exclusively to the Bureau of Alcohol, Tobacco, and Firearms. They agree that this argument has been rejected by the courts but claim that it is not a deterrent for them because respondent must comply with regulations not statutes. Respondent has cited no regulations in support of its argument so allegedly has no authority to enforce an administrative summons. This Court will follow the decisions of the other courts in this matter. In Hogan v. United States, 873 F. Supp. at 81, the plaintiff presented a similar argument. The court determined that the ATF regulations are not the exclusive source of the government's authority to issue a summons under § 7602. The Internal Revenue Code has the force of law. Feck v. Sprigg, 2001 WL 897725 at *3 (S.D. Ohio June 11, 2001); Wagenknecht v. United States, 2001 WL 350222 at *4 (N.D. Ohio Feb. 26, 2001), aff., 2001 WL 1355615 (6th Cir. Oct. 26, 2001), cert. denied, 536 U.S. 941 (2002).
Finally, petitioners assert that the summons power articulated in the Internal Revenue Code acts as an unlawful bill of attainder which violates due process. When a summons is issued to a third party record keeper under 26 U.S.C. § 7609, the taxpayer is notified. The notice informs the taxpayer of his or her rights, including the right to file a petition in federal court to quash the summons. A taxpayer has no liberty or property interest protectable by due process prior to the enforcement of the summons. Petitioners are proceeding in accordance with the Internal Revenue Code and have correctly followed the procedure for objecting to an IRS summons.
The petitioners have raised claims that do not constitute legally sufficient challenges to the summons and have not specifically challenged the good faith of the IRS in issuing it. Dismissal for failure to a state a claim is appropriate. Faber v. United States, 69 F. Supp.2d at 971. Petitioners state that they "are pro se in the matter at hand because no attorney would argue these issues, no matter how righteous they may be because the attorney is typically threatened with sanctions." This case is definitely frivolous, containing common tax protesters' arguments. The fact that it was filed pro se does not give it merit.
Accordingly, for the foregoing reasons, the petitioners' petition to quash administrative summons is dismissed and the motion to quash administrative summons is denied. (ECF 1, 8). The respondent's motion to dismiss for failure to state a claim upon which relief can be granted is granted. Fed.R.Civ.P. 12(b)(6). ECF 6).
IT IS SO ORDERED.