Norma Williams, Plaintiff-appellant, v. United States of America, Defendant-appellee, 704 F.2d 1222 (11th Cir. 1983)

Norma Williams brought this action in the District Court for the Southern District of Florida under I.R.C. Sec. 7429(b) (1).¹  The district court entered a final judgment of dismissal for lack of venue because Norma Williams, the appellant, is an alien. Williams argues that such a holding unconstitutionally infringes upon her fifth amendment rights and the rights of all alien taxpayers. We remand to the district court.

Norma Williams, a citizen of the United Kingdom, has a visa which allows her to visit and stay in the United States. During the past year, Williams spent eight months in Boca Raton, Florida, her principal place of residence; she spent the remaining time on trips abroad. Although Williams' husband had extensive business dealings in this country, they did not file federal income tax returns for the years 1978, 1979, or 1980. Williams' two children are enrolled in a Boca Raton elementary school.

On May 18, 1981, the Internal Revenue Service (IRS), made a jeopardy assessment under section 6861 of the Internal Revenue Code against Williams as a transferee of her husband.²  Accordingly, notice was immediately mailed demanding prompt payment. At the time of the assessment, Williams was advertising her house for sale. After receiving notice of assessment, Williams filed a timely request for an administrative review of the assessment pursuant to section 7429(a) (2). The IRS, after conducting a review, notified Williams that it would uphold its assessment.

On July 30, 1981, Norma Williams filed this action in the District Court for the Southern District of Florida pursuant to I.R.C. Sec. 7429(b) (1). On August 21, 1981, the court held a hearing on Williams's motion to abate the assessment and on the government's motion to dismiss for improper venue. The court held that pursuant to section 7429(e) of the Internal Revenue Code and 28 U.S.C. § 1402(a) (1), Williams failed to establish venue in the Southern District of Florida. The district court made no finding as to whether Williams is a resident or non-resident alien. The court entered judgment dismissing the case for lack of venue. Williams appealed.

We have before this court a case vastly different from the case before the district court. The government, by supplemental brief, has changed its position from the position it asserted in the district court and at oral argument before this court. The government originally argued that no alien taxpayer, resident or non-resident, could avail himself of I.R.C. Sec. 7429. Upon "more mature reflection" the government reconsidered its position in similar cases (Botero v. United States, and Fernandez v. United States, 704 F.2d 592), and now concedes that a resident alien may attack a jeopardy assessment without any venue bar.

The principal issue now before us is whether a non-resident alien taxpayer has the right to contest jeopardy assessments under I.R.C. Sec. 7429. The resolution of this issue is of prime importance because of the impact a district court's decision has on the merits of a jeopardy assessment. See section 7429(f), Internal Revenue Code (1954), see also Vicknair v. United States, 617 F.2d 1129 (5th Cir. 1980) (district court's decision on the merits of a jeopardy assessment is not reviewable by the circuit courts under section 7429(f)).

Section 7429(e) I.R.C. provides that an action filed pursuant to section 7429(b) may "be commenced only in the judicial district described in section 1402(a) (1) ... of Title 28 U.S.C." Section 1402(a) (1) provides that a civil action may be prosecuted against the United States under section 1346(a), 28 U.S.C., only "in the judicial district where plaintiff resides." Since a non-resident alien is not a resident in any judicial district, the government argues that he cannot meet the venue requirements of section 1402(a) (1).PURPOSE OF SECTION 7429

Section 7429 was introduced into the Internal Revenue Code of 1954 under the Tax Reform Act of 1976. See Pub. L. No. 94-455, 90 Stat. 1520 Sec. 1204(a) (1976). Basically, I.R.C. Sec. 7429 provides for an "expedited" means of judicial review of jeopardy assessments made by the IRS. S.Rep. No. 938, (Part I), 94th Cong.2d Sess. 364 (1976), reprinted in 1976 U.S.Code Cong. & Ad.News (90 Stat.) 2897, 3439. Congress introduced I.R.C. Sec. 7429 because of the lack of effective judicial remedies available to a taxpayer under the prior law. See Joint Committee on Taxation, 94th Cong., 2d Sess. General Explanation of the Tax Reform Act of 1976. See also Laing v. United States, 423 U.S. 161, 96 S. Ct. 473, 46 L. Ed. 2d 416 (1976) (when taxpayer has been subjected to termination assessment, the service is required to send taxpayer a notice of deficiency within sixty days after assessment); Commissioner of Internal Revenue v. Shapiro, 424 U.S. 614, 630 n. 12, 96 S. Ct. 1062, 1072 n. 12, 47 L. Ed. 2d 278 (1976) (taxpayer may be constitutionally entitled to a more rapid judicial or administrative review of the service's basis for a seizure of assets pursuant to a jeopardy assessment than is provided by his right to petition the tax court under the normal tax procedures). Under the prior law, when the IRS made a jeopardy assessment, the only judicial remedies available to the taxpayer were the same as those available for a normal assessment. These remedies included either petitioning the tax court for redetermination or filing a refund suit in the United States district court or the old Court of Claims after six months. As a practical matter, however, these remedies were of no consequence since the jeopardy assessed the taxpayer was not subject to the same protections afforded the ordinary taxpayer.³  See Joint Committee of Taxation, 94th Cong., 2d Sess., General Explanation of the Tax Reform Act of 1976. Congress, realizing the seriousness of the problem, decided that a taxpayer should be able to obtain an "expedited" judicial review of the propriety of a jeopardy assessment. Moreover, Congress indicated that this expedited judicial review should be available without subjecting the assets levied upon to sale prior to or during the pendency of judicial review. See H.R.Rep. No. 658, 94th Cong., 1st Sess. 301-303 (1975), reprinted in 1976 U.S.Code Cong. & Ad.News 2897, 3197-99; S.Rep. No. 938 (Part I), 94th Cong., 2d Sess. 361-64 (1976), reprinted in 1976 U.S.Code Cong. & Ad. of I.R.C. Sec. 7429 (indicates that its purpose is to provide a means whereby a taxpayer can contest the propriety of a jeopardy assessment without fear of losing the assets levied upon). S.Rep. No. 938 (Part I), 94th Cong., 2d Sess. 364 (1976), reprinted in 1976 U.S.Code Cong. & Ad.News (90 stat.) 3439.

I.R.C. Sec. 7429(b) (1) provides that jurisdiction for such judicial review rests in the United States district court. See Loretto v. United States, 440 F. Supp. 1168, 1170 (E.D. Pa. 1977). The statute further provides that venue for such actions is to be determined under 28 U.S.C.A. Sec. 1402(a) (1) or (2). Section 7429(e), Internal Revenue Code (1954). It is from this provision that our dispute originates.

SECTION 1402(a) (1)

Title 28 U.S.C.A. Sec. 1402(a) (1) provides that: "Any civil action against the United States under subsection (a) of section 1346 of this Title may be prosecuted only: (1) except as provided in paragraph (2), in the judicial district where the plaintiff resides ...." An alien, for purposes of establishing venue, is presumed by law not to reside in any judicial district of the United States regardless of where the alien actually lives. Galveston, Harrisburg & San Antonio Railway Co. v. Gonzales, 151 U.S. 496, 506-07, 14 S. Ct. 401, 404-05, 38 L. Ed. 248 (1894). Moreover, the First Circuit and the Southern District of New York have both held that section 1402(a) (1) venue is improper in a tax refund suit instituted by a non-resident alien in the United States district court. Malajaeian v. United States, 504 F.2d 842 (1st Cir. 1974); Shaw v. United States, 422 F. Supp. 339 (S.D.N.Y. 1976), see also Prudencio v. Hanselmann, 178 F. Supp. 887 (Minn.1959) (resident alien was precluded from bringing a diversity action in his home state because, as an alien, he was not a resident of any district in the United States). The government, on the basis of the venue statute and these cases, urges us to hold that a non-resident alien cannot establish venue in any district in order to contest a jeopardy assessment. In viewing this matter, however, we are cognizant of the fact that these cases were decided before I.R.C. Sec. 7429 was enacted. Additionally, they presented a totally different problem from the one we now face. Notwithstanding these points, even more important are the possible constitutional implications caused by the conflict between section 1402(a) (1) and the objective of I.R.C. Sec. 7429.

ALIEN TAXPAYER STATUS

The status of an alien taxpayer is divided into two classes: (1) non-resident alien, or (2) resident alien. See, Treas.Reg. Sec. 1.871-1 (1980). This status is important because its resolution determines how the alien will be taxed by the United States. A resident alien is taxed the same as a United States Citizen, a non-resident alien, conversely, is taxed according to three defined sub-classes. See, Treas.Reg. Sec. 1.871-1(a) (b). Determining which class an alien falls into requires an examination of the regulations and the circumstances.⁴  See Treas.Reg. Sec. 1.871-1; Rev.Rul. 70-461, CB 1970-2.

A non-resident alien is defined as an individual whose residence is not within the United States. Lemery v. Commissioner, 54 T.C. 480 (1970). A resident alien, by contrast, is an individual who is residing in the United States and is not a mere transient or sojourner. Treas.Reg. 1.871-2(b).

DISCUSSION

The government submits that the clear language of section 1402(a) (1) would mandate the exclusion of non-resident aliens for venue purposes under I.R.C. Sec. 7429(c). Additionally, the government submits there is a rational basis inherent in section 1402(a) (1) and section 7429(e) for distinguishing between non-resident and resident aliens. Williams, on the other hand, argues that to hold venue improper in all districts for non-resident taxpayers would violate the due process (equal protection) clause of the fifth amendment. Williams, thus, places in issue the constitutionality of section 1402(a) (1). After carefully considering both parties' arguments, we believe that it is settled that a court should scrutinize the constitutionality of a statute only as applied in the case before it. See Broadrick v. Oklahoma, 413 U.S. 601, 610-12, 93 S. Ct. 2908, 2914-2916, 37 L. Ed. 2d 830 (1973); United States v. Raines, 362 U.S. 17, 21, 80 S. Ct. 519, 522, 4 L. Ed. 2d 524 (1960). There is no doubt, as the government concedes, that resident alien taxpayers may avail themselves of the benefits of I.R.C. Sec. 7429 and the venue statute. Such a holding is clearly consistent with the purpose of I.R.C. Sec. 7429, and logically satisfies the requirements of Sec. 1402(a) (1). The question concerning non-resident alien taxpayers however, presents a more difficult problem. The most readily apparent problem concerns the extent of the deprivation of the constitutional rights of alien taxpayers, whose property has been seized by the government without the statutory benefits afforded all other taxpayers.⁵  The Supreme Court has repeatedly extended due process and equal protection to aliens without regard to resident or non-resident status. Plyer v. Doe, --- U.S. ----, 102 S. Ct. 2382, 72 L. Ed. 2d 786 (1982).

We hold, as the government concedes, that a resident alien taxpayer may establish venue under 28 U.S.C.A. Sec. 1402(a) (1) for purposes of contesting a jeopardy assessment. We are, however, unable to apply that holding in this case because the district court made no finding regarding the resident or non-resident status of Williams.⁶  Since the government has so radically changed its position from its assertions in the trial court, we will not attempt to find facts from this record. The trial court must perform that task. If the court finds that Williams is a resident alien taxpayer, and venue is proper in the Southern District of Florida, the case will proceed to the merits in the ordinary course of litigation. If the court finds that Williams is a non-resident alien taxpayer, it must consider the difficult constitutional question of whether the government may constitutionally raise improper venue to bar a non-resident alien taxpayer from use of the jeopardy assessment review procedures provided by section 7429 I.R.C. This difficult question is best left for determination if and when squarely presented.

Accordingly, this case is remanded for further proceedings.

REMANDED.