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Horne v. Internal Revenue Service

United States District Court, D. Nevada

October 27, 2014

WILLIAM F. HORNE, Plaintiff,


MIRANDA M. DU, District Judge.


Before the Court is Defendant the United States of America's Motion to Dismiss for Lack of Subject Matter Jurisdiction. (Dkt. no. 10.) Plaintiff has also filed a motion to remand and a motion to stay collection. (Dkt. nos. 17, 20.) For the reasons discussed below, the Motion to Dismiss is granted. The remaining motions are denied as moot.


The following facts are taken from Plaintiff's Complaint. Plaintiff, who is proceeding pro se, alleges that the Internal Revenue Service ("IRS") imposed a punishment that was "labeled a penalty charge" on him under 26 U.S.C. § 6700 for promoting an abusive tax shelter. (Dkt. no. 1-1 ¶ 3.) Plaintiff received a Form 886-A notifying him of a penalty of $21, 000 for Plaintiff's alleged preparation of twenty-one (21) corporation soles for the year 2007. ( Id. ¶¶ 13, 18.) He further alleges that the IRS filed a tax lien in Carson City based on its penalty assessment. ( Id. ¶ 8.) According to Plaintiff, the penalty charge is a "punishment for allegedly performing the criminal acts of promoting abusive tax shelters." ( Id. ¶ 19.) Plaintiff does not allege that he has paid the penalty assessed or that he has challenged the assessment.

Plaintiff filed this action with the First Judicial District Court of the State of Nevada in and for Carson City. The Complaint asserts a claim for denial of "due process by imposing criminal punishment without due process of law" and a claim for "filing a fraudulent IRS tax lien." ( Id. at 4-6.) Defendant removed and moved to dismiss the Complaint under Rule 12(b)(1). (Dkt. no. 10.) Plaintiff filed an opposition and Defendant filed a reply. (Dkt. nos. 14, 15.) Plaintiff then filed a rebuttal to Defendant's reply. (Dkt. no. 16.) Plaintiff's rebuttal is improper and violates Local Rule 7-2, which permits the filing of a motion, response, and reply. The Court will not consider Plaintiff's rebuttal and orders that it be stricken.


Defendant argues that the Court lacks jurisdiction over Plaintiff's first claim because Plaintiff fails to allege jurisdictional prerequisites for challenging a tax assessment, such that Defendant's sovereign immunity bars jurisdiction. As to Plaintiff's second claim, Defendant argues that the Tax Anti-Injunction Act ("the Act"), 26 U.S.C. § 7421(a), forecloses his claim. Plaintiff counters that Defendant's arguments do not apply for two reasons. First, by removing the case, Defendant confers jurisdiction. (Dkt. no. 14 at 3-4.) Second, Plaintiff contends that he is not challenging the IRS's authority to assess or collect taxes because his claims involve the IRS's authority to impose a criminal penalty without due process. In particular, Plaintiff argues that he is alleged to have committed a tax crime because the penalty assessed under § 6700 is criminal, and his right to due process entitles him to have a jury to decide his guilt or innocence. (Dkt. no. 14 at 5-6.) The Court will address Plaintiff's second argument first.

Sovereign immunity is a threshold issue that goes to the court's subject matter jurisdiction. Cassirer v. Kingdom of Spain, 616 F.3d 1019, 1026 (9th Cir. 2010). When a party makes a factual attack on the district court's subject matter jurisdiction under Rule 12(b)(1), the court "need not presume the truthfulness of the plaintiffs' allegations." White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000) (citation omitted). The party asserting jurisdiction bears the burden of establishing subject matter jurisdiction on a Rule 12(b)(1) motion to dismiss. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Pro se pleadings, however, must be liberally construed. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

The Court finds that because the Complaint alleges claims against the IRS, an agency of the United States, it is a suit against the United States. "[T]he United States is a sovereign, and, as such, is immune from suit unless it has expressly waived such immunity and consented to be sued." Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985) (citations omitted); see United States v. Shaw, 309 U.S. 495, 500-01 (1940). Moreover, "[s]uch waiver cannot be implied, but must be unequivocally expressed." Gilbert, 756 F.2d at 1458 ( citing United States v. King, 395 U.S. 1, 4 (1969)).

In the context of tax litigation, two statutes - 28 U.S.C. § 1346(a) and 26 U.S.C. § 7422(a) - "operate as a waiver of the government's sovereign immunity and as a grant of jurisdiction." Henkell v. United States, No. S-96-2228 MLS GGH, No. S-97-0017 LS GGH, 1998 WL 41565 at *3 (E.D. Cal. Jan. 9, 1998). Section 1346(a) gives federal district court original jurisdiction over "[a]ny civil action against the United States for... any penalty claimed to have been collected without authority." 28 U.S.C. § 1346(a). Section 7422(a) establishes jurisdictional prerequisites before a taxpayer like Plaintiff may pursue legal action:

No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.

26 U.S.C. § 7422(a). Limitation periods for filing such an action appear in 26 U.S.C. § 6532.[1]

Here, Plaintiff's claims challenge the IRS's assessment of a penalty, and its filing of a tax lien based on that penalty assessment, under 26 U.S.C. § 6700.[2] Even accepting Plaintiff's contention that he does not challenge the IRS's authority to assess taxes, but only its authority to assess the penalty, the Court finds that Plaintiff's claims fall within the ambit of § 7422(a). Section 7422(a) expressly covers any action for recovery of "any penalty claimed to have been collected without authority." Plaintiff does not allege that he has satisfied the requirements of § 7422(a), nor does he dispute that these prerequisites have not been met. Plaintiff has also failed to comply with 26 U.S.C. § 6703, which permits plaintiffs to challenge a tax penalty under § 6700, but only if a ...

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