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United States v. Peery

United States District Court, E.D. California

July 10, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
NEWMAN S. PEERY, JR., [1]Defendant.

          FINDINGS AND RECOMMENDATIONS

          ALLISON CLAIRE UNITED STATES MAGISTRATE JUDGE.

         Defendant is proceeding in this matter pro se, and pre-trial proceedings are accordingly referred to the undersigned pursuant to Local Rule 302(c)(21). Pending before the court is defendant's renewed motion to dismiss, ECF No. 86, which has been fully briefed, ECF Nos. 87, 92.[2] The motion was originally scheduled for hearing on July 10, 2019, but upon review of the record, the court found the motion appropriate for submission without oral argument.[3] ECF No. 90. Based upon review of the record and the parties' briefing, the court recommends that defendant's motion to dismiss be DENIED.

         I. BACKGROUND

         The United States of America (“United States”) commenced this action against defendant Newman S. Peery, Jr. (“Peery”) on April 30, 2018. ECF No. 1. On June 22, 2018, the United States filed a first amended complaint (“Complaint”), which is the operative complaint in this action.[4] ECF No. 6.

         The Complaint seeks to reduce to judgment federal tax assessments against Peery, pursuant to 26 U.S.C. (Internal Revenue Code) § 7402. Id. at 2. Defendant has been assessed for individual federal income taxes, penalties, interest, and other statutory additions for the taxable years 2009 and 2010. Id. at 2-3. Plaintiff contends that Peery has “neglected, refused or failed to pay the assessments against him[.]” Id. at 3. Plaintiff seeks to reduce to judgment federal tax assessments against Peery in the amount of $259, 032.55 “inclusive of statutory interest and other statutory additions as provided by law, less any payments or credits received.”[5] Id. at 3-4.

         In October 2018, Peery moved to dismiss based, in part, on lack of subject matter jurisdiction. ECF No. 47. The undersigned found that jurisdiction was proper pursuant to 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. (Internal Revenue Code) § 7402, and recommended denying the motion. ECF No. 54 at 3, 6. The district judge adopted these findings and recommendations in January 2019. ECF No. 60. Peery has since filed numerous affidavits, exhibits, and briefs without any accompanying motions. ECF Nos. 72-79. On June 5, 2019, Peery filed the instant renewed motion to dismiss. ECF No. 86.

         II. MOTION TO DIMISS

         Defendant now seeks to dismiss the complaint, purportedly “due to lack of personum and subject matter jurisdiction, ” citing Fed.R.Civ.P. 12(b)(1) and 12(b)(2). ECF No. 86 at 1-6. Despite this characterization, examination of defendant's arguments leads the court to construe the motion as seeking dismissal for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). Defendant's arguments do not challenge the court's power-either to hear the case, as with a Rule 12(b)(1) motion, or to render an enforceable judgment against him, as with a Rule 12(b)(2) motion-but, rather, plaintiff's ability to enforce internal revenue laws against him through this action. See ECF No. 86 at 20 (“The United States and the Internal Revenue Service lacks personum jurisdiction in this Case . . . .”). Moreover, this court has already determined that subject matter jurisdiction is proper in this case under 28 U.S.C. §§ 1340, 1345 and 26 U.S.C. § 7402. ECF No. 54 at 3. Regardless of the type of motion to dismiss, all of defendant's arguments are meritless; most are frivolous. The court will briefly address each in turn.

         A. Legal Standard

         The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir.1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, a defendant's Rule 12(b)(6) motion challenges the court's ability to grant any relief on the plaintiff's claims, even if the plaintiff's allegations are true.

         In determining whether a complaint states a claim on which relief may be granted, the court accepts as true the allegations in the complaint and construes the allegations in the light most favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1989). The court may consider facts established by exhibits attached to the complaint. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987). The court may also consider facts which may be judicially noticed, Mullis v. United States Bankruptcy Ct., 828 F.2d 1385, 1388 (9th Cir. 1987), and matters of public record, including pleadings, orders, and other papers filed with the court, Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir. 1986). The court need not accept legal conclusions “cast in the form of factual allegations.” Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

         B. Analysis

         First, defendant argues that, as a resident of New Mexico,[6] he is a “Private Citizen Nonresident Alien . . . who resides outside of the foreign jurisdiction to which the Internal Revenue Code (IRC) operates, which is the District of Columbia and federal territories.” ECF No. 86 at 15. Section 1 of the Internal Revenue Code (“IRC”) imposes a tax liability on the taxable income of every individual, see Grimes v. Commissioner, 806 F.2d 1451, 1453 (9th Cir. 1986), and is not limited to the District of Columbia and federal territories, see In re Becraft, 885 F.2d 547, 548 (9th Cir. 1989) (confirming the constitutional authority for imposing federal income tax “on United States citizens residing in the United States and . . . the validity of the federal income tax laws as applied to such citizens”). Defendant's first argument is patently frivolous. See Robinson v. United States, 224 Fed.Appx. 700, 701 (9th Cir. 2007) (rejecting as frivolous argument that individual was not a citizen of the United States but of “the Hawaii-republic”, and therefore not subject to tax); United States v. Molen, No. 2:10-CV-02591 MCE, 2012 WL 2886669, at *4 (E.D. Cal. July 13, 2012) (rejecting as frivolous argument that defendants were not subject to federal tax laws because they were not citizens of Washington, D.C., or other federal territories).

         Next, defendant puts forth three arguments related to his lack of taxable “wages” and “income”: (1) that, as a nonresident alien, he cannot have wages or income; (2) because he did not hold public office in the United States, he could not have wages, citing 26 U.S.C. § 3401; and (3) because he did not have wages or income related to a variety of categories listed in 26 C.F.R. 1.861-8(f)(1)(vi), he had no taxable income. ECF No. 86 at 16-19. The first argument fails for the reasons just discussed. Second, while 26 U.S.C. § 3401(c) specifies that, for taxation purposes, “the term ‘employee' includes an officer, employee, or elected official of the United States [among others], ” it does not thereby exclude others from the IRC's application. Third, 26 C.F.R. 1.861-8(f) is part of the United States Treasury regulations concerning whether an item of a taxpayer's gross income has its source within or outside the United States. The fact that defendant received no income that fell within the categories listed in that regulation has ...


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