Unpublished Disposition, 921 F.2d 279 (9th Cir. 1989)

MEMORANDUM^** 

Richard S. Despain appeals pro se the district court's order dismissing his action against the United States and the Commissioner of Internal Revenue (CIR) for lack of subject-matter jurisdiction pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, the Anti-Injunction Act, 26 U.S.C. § 7421, and 26 U.S.C. § 7422(a).¹  We have jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

* Dismissal

Despain submitted a Form W-4 Employee Withholding Allowance Certificate to his employer for tax year 1987 in which he claimed he was exempt from income tax withholding pursuant to 26 U.S.C. § 3402(n). Under section 3402(n), an employer will not withhold any tax if the employee certifies that (1) the employee incurred no federal income tax liability for the preceding tax year, and (2) anticipates incurring no federal income tax liability for the current tax year. See 26 U.S.C. § 3402(n). The CIR disallowed Despain's exception and advised him that he was ineligible under section 3402(n) because he had incurred an income tax liability in preceding tax year. The CIR also warned him that he could be subject to a civil penalty for filing a false statement under section 6682 and instructed him to file a new Form W-4 for 1987.

Instead of heeding this admonition, Despain submitted a Form W-4 for tax year 1988 again claiming he was entitled to exempt status. The CIR disallowed Despain's claimed exception and assessed a $500 penalty, under section 6682, against him for his 1987 and 1988 Form W-4 certificates.

On November 27, 1989, Despain filed this action in district court. Despain alleged that the CIR had incorrectly disallowed his Form W-4 certificates, in which he claimed he was exempt from federal income tax withholding, and improperly imposed civil penalties on him for filing false Form W-4 certificates pursuant to 26 U.S.C. § 6682. Despain sought to have the district court (1) enjoin the CIR from disregarding his Form W-4 certificates and denying him an exemption from the withholding of taxes, and (2) declare that Despain was exempt from the withholding of income taxes and not liable for the penalties assessed against him.

We review de novo the district court's grant of a motion to dismiss. See Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988); Hartford Accident & Indem. Co. v. Continental Nat'l American Ins. Cos., 861 F.2d 1184, 1185 (9th Cir. 1988).

The Anti-Injunction Act prohibits a taxpayer from bringing a "suit for the purpose of restraining the assessment or collection of any tax...." 26 U.S.C. § 7421(a). This section of the Anti-Injunction Act is strictly enforced. See Maxfield v. United States Postal Serv., 752 F.2d 433, 434 (9th Cir. 1984); see also Alexander v. "Americans United" Inc., 416 U.S. 752, 758 (1974); Bob Jones Univ. v. Simon, 416 U.S. 725, 736-37 (1974). Thus, ordinarily taxpayers are limited in district court "to suits for refund." United States v. Condo, 782 F.2d 1502, 1506 (9th Cir. 1986).

An exception to this bar is the two-prong test promulgated in Enochs v. Williams Packing & Navigation Co., Inc., 370 U.S. 1, 7 (1962). Under Enochs, injunctive relief is available only if the taxpayer can demonstrate that (1) under no circumstances could the government prevail, and (2) the taxpayer will be irreparably harmed if the injunction is not granted. Id.; see also Condo, 782 F.2d at 1506.

Despain argues that the Anti-Injunction Act does not apply to his action because the CIR cannot prevail in its claim for taxes against him. In support of this argument, Despain contends that he is not required to file federal income tax returns because he is "not a person liable for an income tax." This contention appears to be based on an erroneous belief that no one is statutorily required to file a federal income tax return, and that no one is liable for income taxes.

The CIR, however, is statutorily authorized to impose an income tax on individuals, such as Despain, who are United States citizens. See 26 U.S.C. § 1(c) (income tax on unmarried individuals); Treas.Reg. Sec. 1.1-1 (" [s]ection 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States"); Treas.Reg. Sec. 1.6012-1(a) (1) (i) ("an income tax return must be filed by every individual [with gross income above a certain minimum level who is a] citizen of the United States whether residing at home or abroad"); United States v. Nelson (In re Becraft), 885 F.2d 547, 548 (9th Cir. 1989) ("the Supreme Court and the lower federal courts have both implicitly and explicitly recognized the Sixteenth Amendment's authorization of ... [an] income tax on United States citizens residing in the United States and thus the validity of the federal income tax laws as applied to such citizens" (emphasis added, citations omitted)); see also Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988) (federal income tax system is not a voluntary system). Thus, Despain's contention--that there is no law which requires him to file a federal income tax return or pay income tax--not only fails to establish that under no circumstance could the CIR prevail in its claim, as is required by Enochs, but is wholly without merit.

Accordingly, we find that the district court correctly concluded that Despain's action does not fall within the Enochs exception to the Anti-Injunction Act and, to the extent it seeks injunctive relief, is barred by the Anti-Injunction Act.²  See, e.g., Bob Jones Univ., 416 U.S. at 738; Stonecipher v. Bray, 653 F.2d 398, 401 (9th Cir. 1981), cert. denied, 454 U.S. 1145 (1982).

Despain also sought declaratory relief from the district court. The Declaratory Judgment Act, however, contains an exception which bars declaratory relief with respect to federal taxes. See 28 U.S.C. § 2201(a); Hutchinson v. United States, 677 F.2d 1322, 1326-27 (9th Cir. 1982). Moreover, we have held that " [t]he federal tax exception to the Declaratory Judgment Act is 'at least as broad as the Anti-Injunction Act.' " California v. Regan, 641 F.2d 721, 723 (9th Cir. 1981) (quoting Bob Jones Univ., 416 U.S. at 733 n. 7).

Therefore, because Despain's action is barred by the Anti-Injunction Act, the district court correctly held that, to the extent the action also sought declaratory relief, it also was barred under the federal tax exception to the Declaratory Judgment Act. See, e.g., Hutchinson, 677 F.2d at 1326-27.

Despain contends that the district court erred in finding that it lacked jurisdiction to review the CIR's assessment of civil penalties against Despain. Despain, however, has not paid the penalty and did not file an administrative claim for a refund. Therefore, the district court properly held that it lacked jurisdiction over this portion of his action. See 26 U.S.C. § 7422(a); Flora v. United States, 362 U.S. 145, 177 (1960); Latch v. United States, 842 F.2d 1031, 1033 (9th Cir. 1988) (district court's jurisdiction is predicated on the taxpayer (1) paying the full amount contested and (2) filing an administrative refund claim).

Despain also contends that due process requires the CIR to grant him a formal administrative hearing. This contention lacks merit. See Stonecipher, 653 F.2d at 403. Despain's "due process rights are adequately protected by the statutory scheme which allows him to contest his tax liability in the Tax Court prior to paying the disputed tax or to sue for a refund in federal district court or in the Court of Claims." Id. (citing Phillips v. Commissioner, 283 U.S. 589, 595-97 (1931)).

II

Sanctions

The CIR requests sanctions against Despain for bringing this appeal. This court has discretion to impose damages against litigants, even pro se, as a sanction for bringing a frivolous appeal. Fed. R. App. P. 38; 28 U.S.C. § 1912; Wilcox, 848 F.2d at 1008-09 ($1,500 sanction imposed on pro se litigant for bringing a frivolous appeal). An appeal is frivolous if the results are obvious, or the arguments of error are wholly without merit. Wilcox, 848 F.2d at 1009 (citation omitted).

Despain's contention that the district court erred in finding that it lacked subject-matter jurisdiction over this action is wholly without merit. Accordingly, we impose sanctions of $1,500.

AFFIRMED.