Opinion
CV 00-1461-KI
September 13, 2001
Steven M. Cyr, Legal Representation, LLC, 4850 S.W. Scholls Ferry Road, Suite 305, Portland, Oregon 97225, Attorney for Plaintiff.
Michael W. Mosman, United States Attorney, 1000 S.W. Third Avenue, Portland, Oregon 97204-2902, Jennifer Whang, Trial Attorney, Tax Division, U.S. Department of Justice, P.O. Box 683, Ben Franklin Station, Washington, D.C. 20044-0683, Attorneys for Defendant.
OPINION AND ORDER
The matter before the court is defendant's motion (doc. 3) to dismiss plaintiff's complaint.
BACKGROUND
On October 27, 2000, plaintiff filed his complaint in this case, and on May 15, 2001, defendant filed the subject motion to dismiss.
Plaintiff's complaint does not cite any jurisdictional statutes. Therefore, defendant determined that the complaint should be separated into three distinct claims for relief and its motion to dismiss is directed at the three claims: (1) wrongful levy; (2) claim for tax refund; and (3) determination of tax liability.
This action arises out of plaintiff's 1985 Form 1040 filed with the Internal Revenue Service (IRS) with a total tax due of $21,501, which was later amended by Form 1040X showing a total tax due of $20,406. Whang Declar., Exh. 4. On April 22, 1996, after notices about outstanding tax liabilities, the IRS issued a levy upon plaintiff's retirement account, held by Pioneer Trust Company, which satisfied plaintiff's 1985 tax liability to the IRS. Whang Declar., Exh. 1.
In his response to the motion to dismiss, plaintiff asserts that he is not making a wrongful levy claim; he argues the claims he asserts are for a tax refund and for a declaration of tax liability that is necessary to resolve the issues associated with his argument that the tax obligation that resulted in the levy against his retirement account was not his.
MOTION TO DISMISS
Defendant moves for an order under Fed.R.Civ.P. 12(b)(1) dismissing plaintiff's complaint for lack of subject matter jurisdiction. Defendant argues that: (1) plaintiff's wrongful levy claim should be dismissed because he is not the proper party to bring the claim and the statute of limitations has run; (2) plaintiff's refund claim should be dismissed because the statute of limitations has run; and (3) plaintiff's determination of tax liability claim should be dismissed because declaratory judgments are not generally permitted for federal tax controversies.
A. Motion to Dismiss Standards.
In ruling on a challenge to subject matter jurisdiction, the court is free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary. Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983). In such cases, no presumption of truthfulness attaches to plaintiff's allegations. Id. Unlike a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), a court may consider extrinsic evidence regarding a motion to dismiss for lack of subject matter jurisdiction without converting the motion into one for summary judgment. Trentacosta v. Frontier Pacific Aircraft Industries, Inc., 813 F.2d 1553, 1558 (9th Cir. 1987). Courts may consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading." Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998), cert. denied, 525 U.S. 1001 (1998) (citations omitted).
B. Arguments.
Defendant moves for dismissal of plaintiff's complaint as to three claims for relief: (1) wrongful levy; (2) claim for tax refund; and (3) determination of tax liability.
1. Wrongful Levy.
Plaintiff is the taxpayer in this case. Defendant argues that a wrongful levy action cannot be maintained by a taxpayer because the statute allows only a third party claim; that is, the statute allows only a party other than the delinquent taxpayer to challenge the IRS levy. IRC § 7426(a)(1). Therefore, defendant argues that plaintiff's wrongful levy claim must be dismissed.
Defendant also argues that, even assuming plaintiff is a proper party to bring a wrongful levy action, this claim must be dismissed because an administrative action in circumstances such as this must be initiated within nine months of the challenged levy. IRC § 6532(c)(1). If an administrative request for the return of property is filed within the 9-month period, the suit is timely if commenced within 12 months after the filing of the request. IRC § 6532(c)(2). Thus, a wrongful levy action must be filed no later than 21 months after the date of the levy. In this case, the levy occurred on April 22, 1996, but plaintiff's complaint was not filed until October 27, 2000, which is more than four years after the alleged wrongful levy. Therefore, defendant argues the claim also is time-barred.
As mentioned above, plaintiff's response to the motion to dismiss indicates that "plaintiff is not contending wrongful levy." Pl. Memo., p. 3. Rather, plaintiff characterizes his claim as relating to his allegations that the funds taken from Pioneer Trust Company were taken to satisfy the tax obligation of an estate for which plaintiff was executor, not for his personal tax obligation. Therefore, plaintiff argues, this action is not for wrongful levy, but rather for return of funds that were never due from him in the first place. Id.
Since plaintiff disavows making any wrongful levy claim, defendant's motion as it relates to a wrongful levy claim is denied as moot.
2. Claim for Tax Refund.
(a) Defendant's Arguments.
A limited waiver of sovereign immunity exists pursuant to 28 U.S.C. § 1346(a)(1) for suits in the United States District Courts for recovery of IRS taxes alleged to have been erroneously or illegally assessed or collected. The prerequisites for such a claim are: (a) full payment of the assessed amount; (b) timely filing of an administrative claim for refund; and (c) timely filing of the refund suit (which must be filed by the later of the expiration of six months from the date the claim was filed, or two years after the date the IRS mailed a notice of claim disallowance). IRC §§ 6511, 6402, 7422. Therefore, a refund suit that is filed more than two years after the date of notice of claim disallowance must be dismissed for lack of jurisdiction.
In his complaint, plaintiff alleges he filed a claim for refund on December 11, 1997, and the IRS disallowed the claim on March 25, 1998. Defendant argues that plaintiff had two years from March 25, 1998 (i.e., March 25, 2000) to file his refund suit, but he filed his complaint on October 27, 2000, which falls outside of the two-year limitations period.
Defendant also argues that plaintiff attempts to get around the two-year limitation period by alleging that he filed a second claim for refund on September 15, 1998 and received a second disallowance on October 28, 1998. Thus, according to plaintiff, his complaint was timely because it was filed one day before expiration of the two-year limitation period that ran from October 28, 1998. Defendant argues that even if the court were to accept that what plaintiff characterizes as the second disallowance was, in fact, a formal disallowance of a formal claim, the start of the two-year limitation period would not have been delayed by the second disallowance.
Defendant argues that when there are two or more claims, the filing of the second refund claim on the same basis as the earlier denied claim does not extend the limitation period, citing Huettl v. United States, 675 F.2d 239, 241 (9th Cir. 1982). Further, the IRS' October 28, 1998 letter to plaintiff's attorney advised that the limitation period remained "two years from the mailing of Mr. Muehleck's letter to [sic] dated March 25, 1998." Whang Declar., Exh. 5. Therefore, defendant argues that to the extent plaintiff's complaint requests a refund related to the March 25, 1998 disallowance, it must be dismissed as time-barred.
Lastly, in his complaint, plaintiff refers to the "issue of a $5,500 refund check." Compl., p. 2, lines 1-2, Defendant argues that plaintiff appears to be claiming that a refund was sent by the IRS, but was "not signed by the taxpayer" (i.e., forged), which the IRS later "conceded." Compl., p. 2, lines 3-5. Defendant argues that plaintiff provides no proof of this refund and that his 1985 Form 1040 and Form 1040X show that no refund of this amount is due. Whang Declaration, Exh. 4. Further, the IRS' computerized records show nothing to support that a $5,500 refund was ever processed in regards to plaintiff's 1985 tax liability. Whang Declar., Exh. 5.
(b) Plaintiff's Arguments.
Plaintiff asserts that his claim for refund relates to a refund check that the IRS admitted was signed by someone other than plaintiff. Pl. Memo., p. 3. Further, according to plaintiff, the IRS levy was "apparently to satisfy the tax obligation of an estate that was being handled by the Plaintiff in California." Pl. Memo., p. 4. Once this was explained to the IRS, plaintiff asserts, it issued a refund check for a portion of the funds, but that check was never negotiated by plaintiff and is in the possession of the IRS. Plaintiff further contends that he is entitled to review the IRS' administrative file regarding the levy, the refund check, and other tax matters, but that the IRS has advised him that it has no file.
Plaintiff's only argument is that the claim for refund is timely because it was made within two years of an October 28, 1998 letter to plaintiff's attorney from the IRS (attached as Exhibit 5 to the Whang Declaration).
(c) Discussion.
The October 28th letter relied on by plaintiff clearly states that "you will have to file a suit within two years from the mailing of Mr. Muehleck's letter to [sic] dated March 25, 1998." Whang Declar., Exh. 5. Plaintiff cites no case law for his contention that this letter extended the two-year limitation period. In fact, plaintiff is not alleging that the two refund claims were based on different facts and issues. Rather, plaintiff states that the second claim was to submit "additional information to assist the IRS in understanding the transaction." Compl., p. 2, lines 21-22. When there are two or more claims, the filing of the second refund claim on the same basis as the earlier denied claim does not extend the limitation period. Huettl v. United States, 675 F.2d at 241. Therefore, I conclude that plaintiff's claim for refund is untimely.
Any factual issues regarding the existence of a $5,500 refund check are irrelevant to the issue of whether this court has subject matter jurisdiction. The issue of the alleged $5,500 refund check was part of plaintiff's first claim and its disallowance. See, Whang Declar., Exhs. 1, 2.
3. Determination of Tax Liability.
(a) Defendant's Arguments.
Defendant argues that other than a vague reference to the 1985 tax year when discussing the California estate, plaintiff does not specify which tax year's liability he is petitioning for the court to determine. Regardless, defendant argues that such a request is improper under the Declaratory Judgment Act, 28 U.S.C. § 2201(a).
Defendant argues that the Declaratory Judgment Act, subject to some exceptions not applicable here, prohibits federal courts from issuing judicial declarations with respect to federal taxes. Defendant argues that, when construing plaintiff's complaint as seeking declaratory relief, that relied must be denied, citing Christenson v. Brodrick, 169 F. Supp. 388, 389-90 (D.Kan. 1959). Thus, defendant argues there is no jurisdiction to give plaintiff the determinations he seeks and this claim should be dismissed.
(b) Plaintiff's Arguments.
Plaintiff's sole argument is that he seeks "not so much a determination of the liability owing, but a determination that the Internal Revenue Service collected the tax for 1985 twice or collected from the wrong taxpayer and issued a refund check which was negotiated by a third party and has failed to provide any discovery of the Internal Revenue Service's administrative file." Pl. Memo., p. 5.
(c) Discussion.
A claim for determination of tax liability is improper under the Declaratory Judgment Act. However, even if this court had jurisdiction to make the determinations that plaintiff requests, this claim would still have to be dismissed.
The determinations that plaintiff requests are, by his own admission, tied to his claim for refund which, as discussed above, I have determined must be dismissed. Therefore, defendant's motion to dismiss plaintiff's claim for tax liability determination is granted.
CONCLUSION
Defendant's motion to dismiss (doc. 3) with respect to the wrongful levy claim is DENIED as moot, and GRANTED with prejudice as to the tax refund and tax liability determination claims.
IT IS SO ORDERED.