Opinion
No. CV-04-242-HU.
September 22, 2004
Roger Updegrave, Portland, Oregon, Pro se.
Karin Immergut, United States Attorney, District of Oregon, Portland, Oregon, Richard A. Latterell, Tax Division, United States Department of Justice, Washington, D.C., Attorneys for defendant.
FINDINGS AND RECOMMENDATION
The matters before the court are 1) the United States' motion to dismiss for lack of personal jurisdiction or, in the alternative, to dismiss some of the claims for lack of subject matter jurisdiction (doc. # 3); 2) the United States' motion for extension of time for filing the joint alternate dispute resolution report and lodging the pretrial order (doc. #7); 3) the United States' motion for protective order barring plaintiff's first set of admissions (doc. #10) and the United States' motion for summary judgment on plaintiff's remaining claims (doc. # 15).
Plaintiff, appearing pro se, brings this action against the United States seeking damages and a determination that two tax collection due process determinations, issued on January 29, 2004, were invalid. The determinations upheld the Internal Revenue Service's proposed collection activity against plaintiff for the following liabilities: unpaid income taxes for years 1999 and 2000; frivolous return penalties for years 1998-2001, imposed pursuant to 26 U.S.C. § 6702; and a false information penalty for the year 2000 imposed pursuant to 26 U.S.C. § 6682. The complaint, seeking compensatory and punitive damages, was filed on February 19, 2004.
On June 18, 2004, the United States filed a motion to dismiss for failure to effect proper service or, in the alternative, to dismiss the claims based on plaintiff's income tax liabilities for lack of subject matter jurisdiction and to dismiss his claim for punitive damages. The United States contends that 1) plaintiff has failed to make proper service on the United States because he served his complaint on the Internal Revenue Service rather than upon the Attorney General of the United States or the United States Attorney for the District of Oregon; 2) exclusive jurisdiction over the claims based on a request for judicial review of an Internal Revenue Service appeals determination involving collection of an underlying income tax liability lies with the United States Tax Court; and 3) plaintiff's request for punitive damages is not authorized by statute and must therefore be stricken on the ground of sovereign immunity. On August 25, 2004, the United States filed a motion for a protective order barring plaintiff's first request for admissions, asserting that the requests were untimely, frivolous and irrelevant. On September 13, 2004, the United States filed a motion for summary judgment on plaintiff's remaining claims.
Discussion
1. The motion to dismiss
Plaintiff has titled his complaint, "Complaint for Damages and Request that this Court Set Aside an Invalid Collection Due Process 'Determination' Lawlessly Issued Pursuant to 26 U.S.C. 6330." The allegations of the complaint are that the due process hearing which followed the notice to plaintiff of intent to levy unpaid income taxes for the years 1999-2000 and civil penalties for the years 1998-2001, was not conducted in accordance with the provisions of 26 U.S.C. § 6330.
This court has no jurisdiction over plaintiff's claims based on the determination of income tax liability in the collection due process hearing. These claims are under the exclusive jurisdiction of the United States Tax Court. 26 U.S.C. § 6330(d)(1); 26 C.F.R. § 301.6330-1 Q-F3 ("Where should a taxpayer direct a request for judicial review of a Notice of Determination?"), A-F3 ("If the Tax Court would have jurisdiction over the type of tax specified in the C[ollection]D[ue]P]rocess] Notice (for example, income and estate taxes), then the taxpayer must seek judicial review by the Tax Court.") See also Danner v. United States, 208 F. Supp.2d 1166, 1170 (E.D. Wash. 2002) (in general, the United States Tax Court has exclusive jurisdiction to determine the correctness of deficiency assessments made by the Commissioner of Internal Revenue); Crawford v. Commissioner, 266 F.3d 1120, 1123 (9th Cir. 2001) (Tax Court has jurisdiction to consider constitutional issues asserted in context of deficiency challenges). Exclusive jurisdiction over plaintiff's claims based on his underlying income tax liabilities is in the United States Tax Court. Accordingly, I recommend that those claims be dismissed for lack of subject matter jurisdiction, without prejudice and with leave to refile them in the Tax Court.
The jurisdiction of the Tax Court does not apply to those penalties which the government can assess without notice of a deficiency. Danner, 208 F. Supp.2d at 1170-71. Such penalties include the frivolous return penalties and the false information penalty imposed on plaintiff in this case. See id. (deficiency procedures do not apply to the assessment or collection of frivolous tax return penalties imposed pursuant to 26 U.S.C. § 6702); 26 U.S.C. § 6703.
Where the Tax Court lacks jurisdiction, the federal district court is empowered to review a determination arising from a Collections Due Process hearing. 26 U.S.C. § 6330(e)(1)(B). This court, therefore, has jurisdiction to review matters related to plaintiff's alleged liability for filing a frivolous return and for providing false information with respect to a withholding penalty. However, the United States has moved to dismiss these claims for failure to effect proper service.
To effect service on the United States, a plaintiff must serve a copy of the summons and complaint upon the Attorney General of the United States and the local United States Attorney within 120 days after filing of the complaint. Fed.R.Civ.P. 4(i), (m).
In his response to the motion to dismiss, plaintiff has attached, as Exhibits B and C, documents entitled "Certification of Service," and signed by Charles Basham. The documents state that two copies of the complaint were served upon the United States by mailing them to the Internal Revenue Service Associate Area Counsel, Gus Solomon Courthouse, 620 S.W. Main Street, Suite 312, on March 22, 2004, and to Charles O. Rossotti, Commissioner of the Internal Revenue Service, 1111 Constitution Avenue N.W., Washington, D.C. 20224.
As Exhibit A to his response, plaintiff has attached a another document, also entitled "Certification of Service." The document states that two copies of the complaint "and a copy of this document" were served upon the United States by mailing them on July 12, 2004 to the Attorney General of the United States.
It is apparent that plaintiff initially attempted to serve the United States by serving the Internal Revenue Service, and after the government filed its motion to dismiss, attempted to serve the Attorney General of the United States (but not the United States Attorney for the District of Oregon) on July 12. However, none of these attempts constitutes effective service: the March attempts were directed at the wrong entities and the July attempt was untimely.
I recommend, therefore, that the remainder of plaintiff's claims, those based on the civil penalties assessed against him pursuant to 26 U.S.C. §§ 6702 and 6682, be dismissed without prejudice, because there has not been proper service upon the United States.
With respect to the request for punitive damages, the United States is correct that sovereign immunity bars the recovery of punitive damages against the United States or its agencies in the absence of a statutory provision providing otherwise. See, e.g.,Siddiqui v. United States, 359 F.3d 1200, 1204 (9th Cir. 2004) (award of damages against United States allowed pursuant only to an express waiver of the government's sovereign immunity, and any ambiguity is to be resolved in favor of the government); In re Sparkman, 703 F.2d 1097 (9th Cir. 1983) (sovereign, along with its agencies and instrumentalities, enjoys immunity from suit unless it waives that immunity, and retains its immunity from punitive damages unless Congress explicitly authorizes liability for such damages). Section 6330 contains no provision for the recovery of punitive damages against the United States. I therefore recommend that plaintiff's claim for punitive damages be dismissed with prejudice.
Conclusion
I recommend that the United States' motion to dismiss (doc. # 3) be GRANTED, as follows: 1) that plaintiff's claims based on his underlying income tax liabilities be dismissed for lack of subject matter jurisdiction; 2) that plaintiff's claim for punitive damages be dismissed with prejudice; and 3) that plaintiff's remaining claims, based on the civil penalties assessed against him pursuant to 26 U.S.C. §§ 6702 and 6682 be dismissed without prejudice for failure to effect timely service of the complaint.
I further recommend that, in view of the dismissal, with or without prejudice, of all of plaintiff's claims, the United States' motion for extension of deadlines (doc. # 7), the United States' motion for protective order (doc. # 10) and the United States' motion for summary judgment (doc. # 15) be DENIED AS MOOT.
Scheduling Order
The above Findings and Recommendation will be referred to a United States District Judge for review. Objections, if any, are due October 6, 2004. If no objections are filed, review of the Findings and Recommendation will go under advisement on that date. If objections are filed, a response to the objections is due October 20, 2004, and the review of the Findings and Recommendation will go under advisement on that date.