Opinion
Case No.: CV-S-01-1232-RLH (RJJ)
August 15, 2002
ORDER (Motion to Dismiss — #3)
Before the Court is Defendant's Motion to Dismiss (#3), filed May 8, 2002. The Court has also considered Plaintiff's Opposition (#5), filed May 17, 2002.
BACKGROUND
For the calendar year 1997 Plaintiff's attached a statement to their return indicating that they were not required to file a federal income tax return, that they had "zero" income and that there was no U.S. Code section which made them "liable" for any income tax. The Defendant Internal Revenue Service ("IRS") assessed a penalty for filing a frivolous return.
On December 26, 2000, the IRS sent Plaintiffs, via certified mail, a notice informing them of their intent to levy to collect the outstanding income tax and civil penalties assessed against them for their 1997 tax year pursuant to 26 U.S.C. § 6330. The collection activity with respect to the civil penalty assessments resulted from the federal income tax returns filed by Plaintiffs for their 1997 tax year.
Included with the notice of intent to levy was information notifying Plaintiffs of their right to request a Collection Due Process ("CDP") hearing pursuant to 26 U.S.C. § 6330(a). On July 30, 2001, a CDP hearing was held. At the hearing, the appeals officer relied on IRS computer-generated documents that detailed the activity of the assessments made against Plaintiffs for the 1997 tax year.
On September 21, 2001, pursuant to 26 U.S.C. § 6330, Defendant then sent Plaintiffs a Notice of Determination concerning collection actions for the amount of unpaid income tax and civil penalties owed. In this Notice, Defendant informed Plaintiffs of their right to judicial review of the determination in the appropriate United States Tax Court. On October 19, 2001, Plaintiffs filed a complaint asking that this Court set aside the CDP determination as invalid. Defendant requests this Court to dismiss the complaint for lack of subject matter jurisdiction.
DISCUSSION
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a court may dismiss a complaint for "failure to state a claim upon which relief can be granted." "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond 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); see also Yamaguchi v. U.S. Dept of the Air Force, 109 F.3d 1475, 1481 (9th Cir. 1997). All factual allegations set forth in the complaint "are taken as true and construed in the light most favorable to [p]laintiffs." Epstein v. Washington Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1999). Dismissal is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proven consistent with the allegations." Hishon v. King Spalding, 467 U.S. 69, 73 (1984); see also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988).
Under Fed.R.Civ.P. 12(b)(3), lack of subject matter jurisdiction, unlike many other objections to jurisdiction of a particular court, cannot be waived and can be raised at any time by a party to an action or by the court sua sponte. Csibi v. Fustos, 670 F.2d 134 (9th Cir. 1982).
In general, the United States is immune from suit under the doctrine of sovereign immunity unless it explicitly waives such immunity. United States v. Mitchell, 445 U.S. 535, 538 (1980). The plaintiff has the burden of establishing that the government has waived sovereign immunity and to identify the specific statutory provision containing the waiver. See Baker v. United States, 817 F.2d 560, 562 (9th Cir. 1987). The waiver must be express and will not be implied. Lane v. Pena, 518 U.S. 187, 192 (1996). The scope of a waiver of sovereign immunity is to be strictly construed in favor of the sovereign. Dep't of the Army v. Blue Vox, Inc., 525 U.S. 255, 261 (1999).
Title 26 U.S.C. § 6330(d) provides a limited waiver of sovereign immunity to taxpayers who disagree with the outcome of a CDP hearing. Pursuant to 26 U.S.C. § 6330(d)(1)(A), a person may, within 30 days of receiving a Notice of Determination, appeal such determination in a United States Tax Court, provided that the Tax Court has jurisdiction with respect to such matter. If the Tax Court does not have jurisdiction of the underlying tax liability, the appeal shall be made to a district court of the United States. 26 U.S.C. § 6330(d)(1)(B). If a court determines that the appeal was to an incorrect court, a person shall have 30 days after the court so determines, to file an appeal with the correct court. Id.
In their Opposition, Plaintiffs contest the jurisdiction of the Tax Court, stating that the Tax Court is barred from ruling on matters of law. The Supreme Court has held, however, that the Tax Court, which is an Article I court, is a "Court of Law" under the Appointments Clause. Freytag v. Comm'r, 501 U.S. 868, 888, 891 (1991); see also Crawford v. C.I.R., 266 F.3d 1120, 1121 (9th Cir. 2001) ("The Tax Court is an Article I court created by Congress with limited jurisdiction to rule on deficiencies assessed by the government on taxpayers.").
Under 26 U.S.C. § 7442, the U.S. Tax Court has jurisdiction over matters of federal income tax. Treas. Reg. § 301.6330-IT(f)(2), Q-F3/A-F3 states that the Tax Court has jurisdiction over matters related to income tax, including levies imposed for the purpose of collecting taxes. See Krugman v. Comm'r, 112 T.C. 230, n. 6 (1999) (noting that with respect to an underlying income tax liability, "the Tax Court has jurisdiction to review determinations under § 6330 relating to proposed levies").
Here, Defendant IRS sought to impose a levy on Plaintiffs for failing to pay income tax and the corresponding penalties. Although a court of limited jurisdiction, the Tax Court has primary jurisdiction over income tax disputes. Because the underlying issue set forth in the Notice of Determination involves income tax liability and related penalties, this Court lacks subject matter jurisdiction. Plaintiffs' failure to petition the proper court for review of the IRS's administrative determination is not fatal to their claim, since Section 6330(d) permits refiling in the correct court within 30 days after this Court's determination.
CONCLUSION
Accordingly, and for good cause appearing,
IT IS HEREBY ORDERED that Defendant's Motion to Dismiss (#3) is GRANTED.