Opinion
Civil Action No. 3:03-CV-1265-N.
July 2, 2004
ORDER
Before the Court are Defendant Boeing-Irving Co. ("Boeing")'s Motion for Summary Judgment, filed January 20, 2004, and Plaintiff Shedrick Magee ("Magee")'s Cross-Motion for Summary Judgment, filed March 15, 2004. Boeing argues that Magee's claim for wrongful withholding of federal income tax is statutorily barred and based on an incorrect reading of applicable law. Because Magee raises no genuine issues of material fact to suggest that a suit against an employer for wrongful withholding of taxes is permitted by the Internal Revenue Code, Boeing's motion is granted and Magee's motion is denied.
Shedrick Magee is a United States citizen employed as an electronic technician at Boeing. On or about December 4, 2001, Magee sent a letter to Boeing's payroll department stating that he was providing a "statement of citizenship" in lieu of a W-4 form. Attached to the letter was a signed declaration claiming that Magee is a "citizen of the United States" and a demand that Boeing cease withholding any money, including federal taxes, from Magee's wages. Magee argues that, having provided such "statement of citizenship" he is not subject to federal withholding taxes under language formerly contained within the Internal Revenue Code, 26 C.F.R. § 1.1441-5(a). Boeing referred the matter to in-house counsel Mark W. Reardon ("Reardon"), who explained to Magee that the Internal Revenue Code section in question applied only to foreign persons. In addition, Reardon contacted the Internal Revenue Service, which subsequently instructed Boeing to disregard Magee's demand and to withhold taxes from his wages as if he was a single person claiming zero exemptions.
After a series of increasingly contentious letters from Magee led to no policy change by Boeing, Magee claimed on February 12, 2003 that he was also exempt from withholding taxes because he did not expect to have federal income tax liability. When contacted, the IRS again instructed Boeing to withhold taxes as if Magee was a single person claiming zero exemptions. Magee filed the instant suit in a Dallas County, Texas small claims court on April 24, 2003, seeking $1,585.65 plus court costs, and Boeing removed the case to this Court on June 5, 2003.
This case is another of the unfortunately long list of cases brought by "tax protestors." E.g., Edgar v. Inland Steel Co., 744 F.2d 1276, 1278 (7th Cir. 1984) (affirming dismissal of action by plaintiff against employer for failure to honor exemption claims, and describing such action as "yet another disturbing example of a patently frivolous appeal filed by abusers of the tax system merely to delay and harass the collection of public revenues."); McKeown v. Ott, No. H-84-169, 1985 WL 11176, at *1 (N.D. Ind. Oct. 30, 1985) (rejecting tax protestor's claims of exemption from withholding taxes and invalidity of Title 26 of the United States Code as "discredited" and "clearly and repeatedly rejected by this and every other court to review them."). Indeed, Magee is not alone in his attempt to evade withholding taxes by relying on a "statement of citizenship." Alaska Computer Brokers v. Morton, No. A95-106-CV, 1995 WL 653260, at *1 (D. Alaska Sept. 6, 1995); Betz v. United States, 40 Fed. Cl. 286, 294 (Ct. Fed. Cl. 1998).
Here, Magee claims that a now-superseded code provision applicable to foreign persons exempts him from tax liability and that Boeing has damaged him through their continued practice of withholding money from his wages. Magee argues in the alternative that the Internal Revenue Code lacks legal authority. Section 1-1441-5(a), upon which Magee relies, formerly stated that "an individual's written statement that he or she is a citizen of the United States may be relied upon by the payer of the income as proof that such individual is a citizen or resident of the United States." 26 C.F.R. § 1.1441-5(a). However, the Internal Revenue Code defines a foreign person, exempt from withholding, as an alien individual — one who is "not a citizen or a national of the United States." 26 C.F.R. § 1.1441-5(c)(3). By its very definition, the section relied upon by Magee applies to "nonresident aliens," not a "citizen of the United States" like Magee.
Magee's claim that the Internal Revenue Code does not apply because it was not enacted into positive law has been uniformly rejected by federal courts. See Ryan v. Bilby, 764 F.2d 1325, 1328 (9th Cir. 1985) ("Congress's failure to enact a title [of the United States Code] into positive law has only evidentiary significance and does not render the underlying enactment invalid or unenforceable."); United States v. Zuger, 602 F. Supp. 889, 891-92 (D. Conn. 1984) (holding that "the failure of Congress to enact a title as such and in such form into positive law . . . in no way impugns the validity, effect, enforceability or constitutionality of the laws as contained and set forth in the title."); Young v. IRS, 596 F. Supp. 141, 149 (N.D. Ind. 1984) ("even if Title 26 was not itself enacted into positive law, that does not mean that the laws under that title are null and void.").
Regardless whether Magee's fanciful reading of the Internal Revenue Code is correct, no remedy is available from this Court. Magee seeks only return of the money he deems wrongly withheld and to require Boeing to cease withholding from his paycheck. Section 3403 of the Internal Revenue Code states, "the employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any person for the amount of any such payment." 26 U.S.C. § 3403. Federal courts have uniformly held that Section 3403 precludes employer liability for withholding taxes from an employee's paycheck. E.g., Lonsdale v. Smelser, 553 F. Supp. 259, 260 (N.D. Tex. 1982) (granting defendant's motion for summary judgment because Section 3403 precludes suit against employer for failure to honor taxpayer's claimed exemption from withholding taxes); Edgar, 744 F.2d at 1278 ("Employees have no cause of action against employers to recover wages withheld and paid over to the government in satisfaction of federal income tax liability."); Lepucki v. Van Wormer, 587 F. Supp. 1390, 1393 (N.D. Ind. 1984) (granting defendant's motion to dismiss wrongful withholding claim, because "employers may not be sued for complying with the requirements of 26 U.S.C. § 3403.").
While Boeing may be penalized by the IRS for failure to turn over amounts withheld from Magee's paycheck, Magee's suit against Boeing is statutorily barred. Lepucki, 587 F. Supp. at 1393. Indeed, "an employer cannot be liable for failing to honor an employee's W-4 form when it has been directed to do so [to so ignore] by the Internal Revenue Service." Purk v. United States, 747 F. Supp. 1243, 1250 (S.D. Ohio 1989) (quoting Benz v. United Parcel Service, 815 F.2d 75 (6th Cir. 1987)). Magee's remedy, were his reading of the Internal Revenue Code correct, would lie solely in a claim for a tax refund on his federal income tax return. See, e.g., Maxfield v. United States Postal Serv., 752 F.2d 433, 434 (9th Cir. 1984); 26 U.S.C. § 6402. Magee's suit is thus barred by Section 3403. Accordingly, Boeing's motion for summary judgment is granted and Magee's motion for summary judgment is denied.