United States District Court, N.D. California
December 30, 2005.
SHARON DE EDWARDS, M.D., Plaintiff,
INTERNAL REVENUE SERVICE, et al., Defendants.
The opinion of the court was delivered by: PHYLLIS HAMILTON, District Judge
ORDER GRANTING MOTION TO DISMISS
Before the court is the motion of defendants Internal Revenue
Service and United States of America to dismiss the complaint for
lack of subject matter jurisdiction and for failure to state a
claim. Having read the parties' papers and carefully considered
their arguments and the relevant legal authority, and good cause
appearing, the court hereby GRANTS the motion for the following
Plaintiff Sharon De Edwards is a physician in private practice.
She filed this action on November 29, 2004, against the Internal
Revenue Service ("IRS"), seeking declaratory and injunctive
relief, and also seeking damages. Plaintiff alleges that prior to
1997, she owed approximately $78,000 in federal taxes, penalties, and interest.
She claims that starting in 1997 the IRS began levying on her
bank accounts and on health plans that owed her money for
professional services, without providing her with a deficiency
notice prior to each assessment, in violation of
26 U.S.C. §§ 6212(a) and 6313(a).*fn1 She asserts that as of the time of
the filing of the complaint, the IRS had executed levies in the
amount of $196,029.80.
She alleges that the IRS has refused to stop the levies,
despite the fact that the amount collected now exceeds the amount
of her tax liability, and despite the fact that she has requested
on numerous occasions that the levies cease. She claims that the
IRS has also refused to provide her with an accounting of how the
money collected has been applied.
Defendants seek an order dismissing the complaint for lack of
subject matter jurisdiction.
A. Legal Standard
The term "subject-matter jurisdiction" refers to the court's
authority over the category of the claim in suit. Ruhrgas AG v.
Marathon Oil Co., 526 U.S. 574, 577 (1999). Subject matter
jurisdiction is fundamental and cannot be waived. Billingsly v.
C.I.R., 868 F.2d 1081, 1085 (9th Cir. 1989). It must be
established as a threshold matter, inflexibly and without
exception. Steel Co. v. Citizens for a Better Env't,
523 U.S. 83, 94-95 (1998). The burden of establishing federal jurisdiction
rests on the party seeking to invoke it. Kokkonen v. Guardian
Life Ins. Co. of America, 511 U.S. 375, 377 (1994).
Federal district courts are courts of limited jurisdiction. In
most cases, there must be both constitutional and statutory
authority for a federal court to act. Id. When suit is brought
against the United States, an additional threshold question
arises that is, whether the action is barred by sovereign
immunity. See F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994).
Without a waiver of that immunity, there can be no jurisdiction
over the claim in any court. Id. Moreover, when the United
States consents to be sued, the terms of its waiver of sovereign
immunity precisely define the extent of the court's jurisdiction. United
States v. Mottaz, 476 U.S. 834, 841 (1986).
B. Defendants' Motion
Defendants submit that plaintiff's intent, as reflected in the
complaint, is to seek damages from the IRS and from the United
States. They argue, however, that the IRS must be dismissed from
the case because it lacks the capacity to be sued.
Defendants also assert that the claims against the United
States should be dismissed because plaintiff fails to allege any
waiver of the United States' sovereign immunity, because
plaintiff failed to file an administrative claim for a refund
pursuant to the Internal Revenue Code, because the federal courts
lack jurisdiction over any suit seeking a declaratory judgment
with respect to federal taxes, and because plaintiff's suit does
not fall within the exceptions to the Anti-Injunction Act.
Plaintiff concedes that the court lacks subject matter
jurisdiction, and requests, in lieu of dismissal, that the court
transfer the action to the United States Tax Court, pursuant to
28 U.S.C. § 1631.
The government is correct in arguing that the IRS has no
capacity to be sued. See Blackmar v. Guerre, 342 U.S. 512,
514 (1952). Thus, the proper party in this litigation is the
United States. To be amenable to suit, the United States must
waive its sovereign immunity. Under 28 U.S.C. § 1346, district
courts have original jurisdiction, concurrent with the United
States Court of Federal Claims, of
any civil action against the United States for the
recovery of any internal-revenue tax alleged to have
been erroneously or illegally assessed or collected,
or any penalty claimed to have been collected, or any
sum alleged to have been excessive or in any manner
wrongfully collected under the internal-revenue laws.
28 U.S.C. § 1346(a)(1). This provision waives the sovereign
immunity of the United States to permit suit for the recovery of
taxes which have been erroneously collected.
However, this provision is subject to additional jurisdictional
prerequisites. For example, "[n]o suit [for refund] . . . shall
be maintained in any court . . . until a claim for refund or
credit has been duly filed with the Secretary [of the Treasury],
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). Another
jurisdictional prerequisite is that the challenged tax assessment
must be paid in full. See 28 U.S.C. § 1346(a)(1); Flora v.
United States, 362 U.S. 145, 150-51 (1960) (assessment must be
paid in full before income tax refund suit can be maintained in
federal district court); see also PCCE, Inc. v. United
States, 159 F.3d 425, 428-29 (9th Cir. 1998) (district court
lacked jurisdiction over plaintiff's refund claim because
assessment was not paid in full).
Section 1346 must also be read in conjunction with
26 U.S.C. § 7421, known as the "Anti-Injunction Act," which provides that "no
suit for the purpose of restraining the assessment or collection
of any tax shall be maintained in any court by any person,
whether or not such person is the person against whom such tax
was assessed." 26 U.S.C. § 7421(a). In other words, an aggrieved
taxpayer must file a suit for a refund, rather than seek an
injunction. Enochs v. Williams Packing & Nav. Co., 370 U.S. 1,
Defendants assert, and plaintiff does not dispute, that she did
not file an administrative claim for a refund and did not pay the
disputed taxes and penalties in full before bringing suit. Absent
compliance with these two requirements before instituting suit,
this district court lacks subject-matter jurisdiction. Therefore,
this suit must be dismissed.
Plaintiff argues that defendants argue in their motion to
dismiss that "this matter properly belongs in Tax Court." The
court has reviewed defendants' papers carefully, and finds no
Plaintiff also claims that she has "presented evidence" of
"mis-allocation of corporate funds on the part of the defendant;"
of "duplicate separate filing of 1040 tax return by the defendant
allegedly on behalf of [p]laintiff, even though [p]laintiff had
already filed joint 1040 tax returns for the same year;" of
"filing inflated 941 tax returns allegedly on behalf or [sic] the
corporation;" and of "the defendant's failure to account for all
the funds it received by way of levies." None of this "evidence"
is before the court, as plaintiff filed a two-page "request to
transfer" with no supporting exhibits, declarations or other
"evidence." In any event, plaintiff does not explain how the
"evidence" would establish that a transfer of this case would be proper.
Plaintiff contends that the only considerations for the court
in ruling on a § 1631 motion to transfer are whether the action
was timely filed and whether a transfer would be in the interests
of justice. However, the Ninth Circuit has held that transfer is
appropriate under § 1631 if (1) the transferring court lacks
jurisdiction, (2) the transferee court could have exercised
jurisdiction at the time the action was filed, and (3) the
transfer is in the interest of justice. Arreola-Arreola v.
Ashcroft, 383 F.3d 956, 964 (9th Cir. 2004). Plaintiff has made
no showing that transfer is warranted under this standard.
As is true with all federal courts, the Tax Court is a court of
limited jurisdiction. Jurisdiction of the Tax Court is governed
by the Internal Revenue Code. 26 U.S.C. § 7442. The Tax Court's
jurisdiction is generally limited to redetermining deficiencies
in income taxes, estate and gift taxes, and certain specified
excise taxes that are subject to deficiency procedures. See
26 U.S.C. §§ 6212, 6213, 6214. Plaintiff did not file this action as
an appeal of the IRS' final notice and determination of a
deficiency. Instead, she alleged that the IRS executed the levies
without providing a deficiency notice, prior to each assessment,
claiming that this asserted failure to provide deficiency notices
violated §§ 6212(a) and 6213(a).*fn2 Moreover, plaintiff
filed this action in her individual capacity, while the relief
she seeks is directed toward the federal employment tax
liabilities of her corporation and her sole proprietorship.
The court finds that defendant's unopposed motion to dismiss
must be GRANTED. Plaintiff's request to transfer is DENIED, as
she has not met her burden of showing that the action could have
been brought in the Tax Court or that interests of justice will
be served by transferring the action. IT IS SO ORDERED.
© 1992-2006 VersusLaw Inc.