Opinion
No. 2:06-CV-22-FL.
March 26, 2007
ORDER
This matter comes before the court on defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and (6) for lack of subject matter jurisdiction upon which the court can act and for failure to state a claim upon which relief can be granted (DE # 5). Additionally, defendants urge in the instant motion, where no relief is sought from defendant Charles Barrett personally he should be dismissed as a defendant. This matter also comes now before the court on plaintiff's motion for summary judgment (DE # 8). The issues raised are ripe for ruling. For the reasons stated below, defendants' motion is granted and plaintiff's motion is denied as moot.
BACKGROUND
Plaintiff carned $40,000 annually from 1998 through 2001. (Compl. Aff. ¶ 1, 2, 4.) After he did not pay income taxes for those years, the Internal Revenue Service (hereinafter "Service") issued a notice of levy, signed by defendant Charles Barrett (hereinafter "defendant Barrett") to plaintiff's employer Norfolk Southern Corporation. (Gov't Ex. 1.) Plaintiff seeks to enjoin the United States from levying his wages to collect his unpaid tax liabilities and seeks a return of amounts levied. The complaint names the Service and Barrett, an agent of the Service, as defendants, but does not seek any relief from Barrett. Plaintiff argues that his annual wages are not income, that he is not required to file federal income tax returns, and that the Service does not have jurisdiction over him or authority to determine his tax liabilities.
STANDARD OF REVIEW
The purpose of a motion to dismiss, under Fed.R.Civ.P. 12(b)(6), is to test the legal sufficiency of the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). The court may dismiss a complaint for failure to state a claim only if "it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). While the court must take the facts in the light most favorable to the plaintiff, the court "need not accept the legal conclusions drawn from the facts [or] . . . unwarranted inferences, unreasonable conclusions, or arguments." Eastern Shore Mkts., Inc. v. J.D. Assocs, Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000); see also Labram v. Havel, 43 F.3d 918, 921 (4th Cir. 1995) (stating that the court is not required to accept "conclusory allegations regarding the legal effect of the facts alleged"). In this way, a motion to dismiss "allows a court to eliminate actions that are fatally flawed in their legal premises." Parham v. Pepsico, Inc., 927 F. Supp. 177, 178 (E.D.N.C. 1995).
DISCUSSION
Upon a thorough review, the court finds, as defendants urge, that the complaint fails to state any claim upon which relief may be granted pursuant to Fed.R.Civ.P. 12(b)(6), and that it must be dismissed. Moreover, this court is without jurisdiction to grant the requested relief and for this reason, too, the complaint must be dismissed.
A. Wages Are Taxable Income
Plaintiff's main argument is that his annual wages from Norfolk Southern are not taxable income. He alleges that he is not "a person required to make returns of income" and that he "mak[es] a living by trading labor for compensation." (Compl. ¶ 3, Aff. ¶ 4.) Thus plaintiff is arguing that his wages are not income and he is not required to file income tax returns.
This argument has been raised before and considered by many federal courts and soundly rejected by each. In United States v. Connor, 898 F.2d 942, 943-44 (3d Cir.), cert. denied, 497 U.S. 1029 (1990) the court stated that "[e]very court which has ever considered the issue has unequivocally rejected the argument that wages are not income." The court went on to state [w]e will view arguments to the contrary as frivolous, which may subject the party asserting them to appropriate sanctions." Id. at 944; see also, United States v. Becker, 965 F.2d 383, 389 (7th Cir. 1992) (rejecting defendant's contention that wages are not income);United States v. Sloan, 939 F.2d 499, 500 (7th Cir. 1991) (rejecting defendant's argument that the revenue laws of the United States do not impose a tax on income and recognizing that the "Internal Revenue Code imposes a tax on all income."); Abrams v. Commissioner, 82 T.C. 403, 413 (1984) (rejecting the argument that wages are not income, sustaining the failure to file penalty, and awarding damages of $5,000 for pursuing a position that was "frivolous and groundless . . . and maintained primarily for delay.").
For federal income tax purposes, "gross income" means all income from whatever source derived and includes compensation for services. I.R.C. § 61. Any income, from whatever source, is presumed to be income under section 61, unless the taxpayer can establish that it is specifically exempted or excluded. In Reese v. United States, 24 F.3d 228, 231 (Fed. Cir. 1994), the court stated, "an abiding principle of federal tax law is that, absent an enumerated exception, gross income means all income from whatever source derived." Therefore, the court finds, as many courts have before it, that plaintiff's argument concerning his wages has no merit.
B. The United States Has Not Waived Immunity From Suit
Plaintiff also seeks a refund of amounts collected and an injunction prohibiting the United States from collecting his income tax liabilities. Under 28 U.S.C. § 1346(a)(1) and 26 U.S.C. § 7422, the federal district court has jurisdiction over suit for the recovery of an internal revenue tax alleged to have been erroneously or illegally assessed or collected only if the taxpayer has already fully paid the assessments. See Flora v. United States, 362 U.S. 145, 157, 177 (1960); Snyder v. United States, 539 F.2d 706 (4th Cir. 1976.) In the absence of full payment of the assessment and the timely filing of a valid administrative claim, the United States has not waived its immunity from a suit for a refund, and thus any suit for a refund must be dismissed. Plaintiff has not paid his assessments in full or filed a valid administrative claim and thus this court must dismiss this suit.
Furthermore, the Anti-Injunction Act, 26 U.S.C. § 7421(a), 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 the tax is assessed." The main purpose of the Anti-Injunction Act is to preserve the government's ability to assess and collect taxes expeditiously. See Bob Jones University v. Simon, 416 U.S. 725, 736 (1974); Judicial Watch, Inc. v. Rossotti, 317 F.3d 401, 404-05 (4th Cir. 2003). Because this is not a valid refund suit under 26 U.S.C. § 7422 and plaintiff is barred by the Anti-Injunction Act, 26 U.S.C. § 7421(a), this court lacks jurisdiction to grant the relief requested.
C. Defendant Barrett Is Improperly Named Defendant
The complaint seeks an order enjoining the United States from collecting plaintiff's income tax liabilities and a refund of amounts already collected, but seeks no relief from defendant Barrett. Under I.R.C. § 7422(f), such tax refund suits "may be maintained only against the United States and not against any officer or employee of the United States (or former officer or employee) or his personal representative." Therefore, all claims against defendant Barrett must be and are dismissed in their entirety.
CONCLUSION
For the foregoing reasons, the court GRANTS defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and (6) for lack of subject matter jurisdiction upon which the court could act and for failure to state a claim upon which relief can be granted (DE # 5). Accordingly, the court DENIES AS MOOT plaintiff's motion for summary judgment (DE # 8). Plaintiffs claims are DISMISSED WITH PREJUDICE in their entirety. The clerk of court is DIRECTED to close this case.
SO ORDERED.