Fristoe v. Anata Management LLC

          ORDER AND FINDINGS AND RECOMMENDATIONS

          GREGORY G. HOLLOWS UNITED STATES MAGISTRATE JUDGE

         Plaintiff is proceeding in this action pro se and has paid the filing fee. Presently pending before the court are various motions, including plaintiff’s “motion for summary judgment, ” filed January 15, 2016, Anata Management Solutions’ (“Anata”) motion to dismiss, filed January 20, 2016, the United States’ motion to dismiss, filed March 24, 2016, and plaintiff’s motion to prevent the U.S. Attorney from representing the Internal Revenue Service (“IRS”) and to require this entity to secure its own counsel, filed April 8, 2016. Having reviewed all filings in support and in opposition to these motions, the undersigned now issues the following order and findings and recommendations.^[1]

         BACKGROUND

         Plaintiff is a taxpayer whose work for her former employer, Anata, based in Utah, was performed in Eureka California for the years 2010 through 2012.^[2] The complaint alleges that Anata intentionally, recklessly and fraudulently issued W-2 tax forms which calculated plaintiff’s daily per diem allowance for 2010 and 2012 as gross wages which were taxable. (For whatever reason, plaintiff does not claim any refund is due for tax year 2011). Plaintiff asserts that her per diem should not be taxable, and that she is owed a tax refund from the IRS based on Anata’s misreporting. Plaintiff has attached affidavits and amended tax forms. (ECF No. 1 at 10-23.) She seeks damages from Anata for the hardship and distress caused her by the IRS’ attempts to collect taxes on her allegedly non-taxable daily per diem, and she seeks a tax refund from the IRS for tax years 2010^[3] and 2012, as well as punitive damages.

         DISCUSSION

         I. Legal Standards

         A. Rule 12(b)(1) - Subject Matter Jurisdiction

         On a Rule12(b)(1) motion to dismiss for lack of subject matter jurisdiction, plaintiff bears the burden of proof that jurisdiction exists. See, e.g., Sopcak v. Northern Mountain Helicopter Serv., 52 F.3d 817, 818 (9th Cir.1995); Thornhill Pub. Co. v. General Tel. & Electronics Corp., 594 F.2d 730, 733 (9th Cir. 1979). Different standards apply to a 12(b)(1) motion, depending on the manner in which it is made. See, e.g., Crisp v. U.S., 966 F.Supp. 970, 971-72 (E.D. Cal. 1997).

         First, if the motion attacks the complaint on its face, often referred to as a “facial attack, ” the court considers the complaint’s allegations to be true, and plaintiff enjoys “safeguards akin to those applied when a Rule 12(b)(6) motion is made.” Doe v. Schachter, 804 F.Supp. 53, 56 (N.D. Cal. 1992). Presuming its factual allegations to be true, the complaint must demonstrate that the court has either diversity jurisdiction or federal question jurisdiction. For diversity jurisdiction pursuant to 28 U.S.C. § 1332, plaintiff and defendant must be residents of different states. For federal question jurisdiction pursuant to 28 U.S.C. § 1331, the complaint must either (1) arise under a federal law or the United States Constitution, (2) allege a “case or controversy” within the meaning of Article III, § 2, or (3) be authorized by a jurisdiction statute. Baker v. Carr, 369 U.S. 186, 198, 82 S.Ct. 691, 699-700 (1962).

         Second, if the motion makes a “factual attack” on subject matter jurisdiction, often referred to as a “speaking motion, ” the court does not presume the factual allegations of the complaint to be true. Thornhill, 594 F.2d at 733. In a factual attack, defendant challenges the truth of the jurisdictional facts underlying the complaint. “Faced with a factual attack on subject matter jurisdiction, the trial court may proceed as it never could under Rule 12(b)(6). . . . No presumptive truthfulness attaches to plaintiff’s allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Id. (quotations and citation omitted). The court may hear evidence such as declarations or testimony to resolve factual disputes. Id.; McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988).^[4]

         B. Rule 12(b)(6) - Failure to State a Claim

         A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the pleadings set forth in the complaint. Vega v. JPMorgan Chase Bank, N.A., 654 F.Supp.2d 1104, 1109 (E.D. Cal. 2009). Under the “notice pleading” standard of the Federal Rules of Civil Procedure, a plaintiff’s complaint must provide, in part, a “short and plain statement” of plaintiff’s claims showing entitlement to relief. Fed.R.Civ.P. 8(a)(2); see also Paulsen v. CNF, Inc., 559 F.3d 1061, 1071 (9th Cir. 2009). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         In considering a motion to dismiss for failure to state a claim, the court accepts all of the facts alleged in the complaint as true and construes them in the light most favorable to the plaintiff. Corrie v. Caterpillar, Inc., 503 F.3d 974, 977 (9th Cir. 2007). The court is “not, however, required to accept as true conclusory allegations that are contradicted by documents referred to in the complaint, and [the court does] not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations.” Paulsen, 559 F.3d at 1071. The court must construe a pro se pleading liberally to determine if it states a claim and, prior to dismissal, tell a plaintiff of deficiencies in his complaint and give plaintiff an opportunity to cure them if it appears at all possible that the plaintiff can correct the defect. See Lopez v. Smith, 203 F.3d 1122, 1130-31 (9th Cir. 2000) (en banc); accord Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990) (stating that “pro se pleadings are liberally construed, particularly where civil rights claims are involved”); see also Hebbe v. Pliler, 627 F.3d 338, 342 & n.7 (9th Cir. 2010) (stating that courts continue to construe pro se filings liberally even when evaluating them under the standard announced in Iqbal).

         In ruling on a motion to dismiss filed pursuant to Rule 12(b)(6), the court “may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice.” Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899 (9th Cir. 2007) (citation and quotation marks omitted). Although the court may not consider a memorandum in opposition to a defendant’s motion to dismiss to determine the propriety of a Rule 12(b)(6) motion, see Schneider v. Cal. Dep’t of Corrections, 151 F.3d 1194, 1197 n.1 (9th Cir. 1998), it may consider allegations raised in opposition papers in deciding whether to grant leave to amend, see, e.g., Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003).

         II. United States’ Motion to Dismiss

         The United States brings this motion for lack of subject matter jurisdiction and for failure to state a claim in regard to plaintiff’s third, fourth and fifth claims for relief wherein she seeks a tax refund for years 2010 and 2012, and punitive damages against the United States and the IRS.

         A. Subject Matter Jurisdiction

         As set forth in the standard above, if the court has no subject matter jurisdiction, it has no authority to hear the case. Here, there is no subject matter jurisdiction in regard to the United States and the IRS.

         A suit for refund of taxes may only be brought against the United States, 26 U.S.C. § 7422(f); Wiltgen v. United States, 813 F.Supp. 1387, 1395 (D.Iowa 1992); Brennan v. C.I.R., 581 F.Supp. 28, aff'd. 752 F.2d 187 (6th Cir.1984), and then only if the taxpayer has actually paid the disputed tax. Flora v. United States, 362 U.S. 145, 80 S.Ct. 630 (1960); Francis v. United States, 715 F.Supp. 973 (D .Nev.1988).

         The IRS is not a proper party to this action which must be brought against the United States. Furthermore, plaintiff has not alleged that she has paid all of the taxes for tax year 2012 which is one of the years in dispute. In fact, in seeking punitive damages, the complaint requests “the just amount of what Plaintiff would have to pay to the Defendants, and each of them, if Plaintiff refused to pay her taxes….” The United States has submitted evidence that in fact plaintiff has not paid her 2012 tax bill in full. As of January 1, 2016, an Account Transcript by the IRS indicates that she had a tax liability of $14, 112.57 plus interest and penalty for a total balance due of $17, 819.28. (ECF No. 20-2 at 1.) The United States’ Exhibit 1 may be considered with its motion to dismiss because the government is mounting a factual attack on jurisdiction. See McCarthy, 850 F.2d at 560. Plaintiff has failed to submit evidence in opposition to satisfy her burden to establish subject matter jurisdiction. See Savage v. Glendale Union High School, 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003). Therefore, any refund claim for the 2012 tax year is dismissed for lack of jurisdiction.

         Nor is there jurisdiction over the United States for damages or punitive damages pursuant to the doctrine of sovereign immunity.^[5][6] Plaintiff has failed to cite any statute or provision of the Internal Revenue Code in support of her claims against the United States; however, a limited exception to sovereign immunity is contained in the Omnibus Taxpayer's Bill of Rights, 26 U.S.C. § 7433, as amended by the Internal Revenue Service Restructuring & Reform Act of 1998, allowing taxpayers to recover civil damages from the United States for unauthorized collection activities, when IRS employees cause the damage through reckless, intentional, or, as recently amended (effective July 22, 1998), negligent disregard of the Internal Revenue Code or regulations. The Taxpayer's Bill of Rights is the exclusive remedy for alleged abuses involved in the collection of taxes (even to the exclusion of FTCA and Bivens claims). 26 U.S.C. § 7433(a). Section 7433 does not permit a suit for damages by a taxpayer for improper assessment of taxes. Shaw v. U.S., 20 F.3d 182, 184 (5th Cir.), cert. denied, 513 U.S. 1041 (1994). The Ninth Circuit is in accord. See Miller v. U.S., 66 F.3d 220, 223 (9th Cir.1995) (“we align ourselves with the Fifth Circuit”).

The legislative history of Section 7433 tells us that “an action under this provision may not be based on alleged ... disregard in connection with the determination of tax.” Conf.Rep. No. 1104, 100th Cong., 2d Sess., at 229, reprinted in 1988-3 Internal Revenue Cum.Bull. 473, 719. Taxpayers who wish to challenge the IRS' calculation of their tax liability must file either a petition for redetermination in the Tax Court, 26 U.S.C. §§ 6213, 6214, or a refund action in the district court. 26 U.S.C. § 7422. Section 7433 was not intended to supplement or supersede, or to allow taxpayers to circumvent, these procedures.

Gonsalves v. I.R.S., 975 F.2d 13, 16 (1st Cir. 1992).

         This case does not present a claim of abuse or unauthorized collection by an individual IRS employee. It presents only a grievance requesting a tax refund based on plaintiff’s misperception of the law concerning tax deductions for per diem allowance. Since plaintiff is challenging only the determination of the tax, the United States has not waived its sovereign immunity and such a claim is not actionable.

         B. Failure to State a Claim Against the United States

         Assuming for the sake of argument that the court had subject matter jurisdiction over any of plaintiff’s claims against the United States, plaintiff has failed to state a claim on the merits. This discussion is also warranted to address plaintiff’s claims against Anata.

         26 U.S.C. § 62(a)(2)(A) provides in part that adjusted gross income consists of gross income minus deductions consisting of expenses paid or incurred by the taxpayer for work ...