Unpublished Disposition, 922 F.2d 844 (9th Cir. 1989)Annotate this Case
Bernard FLEHARTY, Plaintiff-Appellant,v.UNITED STATES of America, Defendant-Appellee.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Nov. 5, 1990.Decided Jan. 4, 1991.
Before TANG, O'SCANNLAIN and LEAVY, Circuit Judges.
Bernard Fleharty challenges the federal government's execution of liens upon his property to satisfy his alleged tax delinquency and associated penalties. The district court dismissed his complaint for lack of jurisdiction and, in the alternative, granted summary judgment for the defendant. It also awarded costs to the government. We affirm dismissal on jurisdictional grounds but vacate the award of costs.
* Pursuant to various audits, the Internal Revenue Service assessed income tax deficiencies, penalties, and interest against appellant Fleharty in the amount of $27,713.54. To satisfy these assessments, the government withheld Social Security funds otherwise payable to Fleharty and treated them as a set-off to the alleged tax liability. By October 1989, the government had fully satisfied its assessments.
In May 1989, Fleharty filed suit pro se in federal court. He contended that the government's execution upon his Social Security benefits was illegal because he had never received a proper assessment of the taxes allegedly owed. He further contended that he was "not [ ] liable for any United States Taxes." Complaint at p 17(a).1 In his prayer for relief, he requested:
(a) [t]hat th [e] court declare that the claims on the above described property2 are of no validity whatever [;]
(b) [t]hat th [e] court declare the seizure of Plaintiff's property to be null and void and in violation of law [;]
(c) [t]hat th [e] court order the Defendant and any agency or employee thereof to return all property heretofore seized pursuant to these void liens and levies and unassessed taxes, and to release all such liens and levies upon Plaintiff's property [; and]
(d) [t]hat th [e] court declare that the Plaintiff is the rightful owner of the described property and that the Defendant [ ] United States has no right, title or interest therein.
Id. at p 21.
Interpreting appellant's complaint as a request for declaratory relief, the district court dismissed the action for lack of jurisdiction. In the alternative, the court held that it would grant summary judgment for the defendant because "proper assessments were made [;] ... notices were mailed to the plaintiff's address [; and e]ven the plaintiff himself admitted that he received notices of unpaid taxes." Fleharty v. United States, No. 89-4059 at 3 (D. Idaho Nov. 3, 1989) (memorandum decision). After the district court denied his motion to set aside the judgment, appellant filed this timely appeal.
The presence or absence of subject-matter jurisdiction is a question of law reviewable de novo. Kruso v. Int'l Tel. and Tel., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 110 S. Ct. 3217 (1990). Upon our own independent review, we conclude that the district court properly dismissed appellant's complaint.
* To the extent that appellant seeks declaratory relief, the district court lacked jurisdiction. The Declaratory Judgment Act provides in relevant part that " [i]n a case of actual controversy within its jurisdiction, except with respect to Federal taxes ..., any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration." 28 U.S.C. § 2201(a) (1988) (emphasis added).3 The Act explicitly withholds jurisdiction from actions like the present suit in which the plaintiff seeks a declaration of his right not to pay a contested tax. Hutchinson v. United States, 677 F.2d 1322, 1326-27 (9th Cir. 1982).
Similarly, to the extent that appellant seeks injunctive relief, the district court also lacked jurisdiction. The Anti-Injunction Act provides in relevant part that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person." 26 U.S.C. § 7421(a) (1988). This proscription is subject to an exception for cases in which the government has proceeded to try to satisfy its claim without first providing the taxpayer with a notice of deficiency.4 See id.; 26 U.S.C. §§ 6212(a)-(c), 6213(a) (1988). Appellant, however, does not contend that the government has failed to provide him with notices of deficiency; indeed, he admits to having received such notices. His complaint is that the government has not provided him with notices of assessment. That complaint is not a recognized exception to the Anti-Injunction Act.
Moreover, jurisdiction for a suit that seeks to challenge an assessment before payment of that assessment is exclusive to the Tax Court. A taxpayer seeking prepayment review must file and appear before that court, and failure to do so can constitute waiver of the right to equitable relief. See Commissioner v. Shapiro, 424 U.S. 614, 634 n. 15 (1976).
Finally, to the extent that appellant seeks to recover monies already seized by the government to satisfy his alleged delinquency, the district court also lacked jurisdiction. The sole judicial avenue for recovery of taxes already paid is a taxpayer refund suit. Although the district courts have jurisdiction to entertain such suits under 28 U.S.C. § 1346(a) (1), they may do so only after the taxpayer has (a) fully paid the assessment, (b) filed an administrative claim, and (c) either received a denial of his claim or waited six months without an answer. See 26 U.S.C. §§ 7422(a), 6532 (1988).
No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.
26 U.S.C. § 7422(a). Appellant has not pursued an administrative claim and therefore has not met this exhaustion requirement.
The Declaratory Judgment Act, the Anti-Injunction Act, and the administrative exhaustion requirement are not meant to stymie taxpayer claims. As appellee points out, they are part of a comprehensive and interrelated system that Congress has established to ensure the uniform and fair treatment of taxpayers while preventing undue hindrances to the collection of revenue. Taxpayers must pursue their claims within the bounds of that system.
Because we hold that dismissal of this action was necessary on jurisdictional grounds, we need not address the district court's discussion of the merits.
As a final matter, we note that the district court awarded costs to the United States when it dismissed this action. Fleharty v. United States, No. 89-4059 at 1 (D. Idaho Nov. 3, 1989) (judgment). Although appellant has not explicitly challenged this award on appeal, one may reasonably question whether such an award is appropriate in light of 26 U.S.C. § 7430. Without ruling on the merits of this question, we note that the government has waived any rights that it may have had to such an award in open court.5 We therefore vacate the district court's award of costs against appellant as void by stipulation.
We affirm the district court's dismissal for lack of jurisdiction and vacate the award of costs.
AFFIRMED IN PART and REVERSED IN PART.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit R. 36-3
Fleharty's complaint challenged the government's assessments for tax years 1980-87. Complaint at paragraphs 9, 14. At the time he filed this suit, however, the government had only assessed deficiencies and penalties against him for tax years 1980, 1981, 1982, and 1986. The I.R.S. was still in the process of auditing him with respect to the other four years. Brief for Appellee at 2-4, 4 n. 3. We can only consider Fleharty's claims with respect to assessments at the time of suit
Fleharty challenged the government's seizure of "Social Security payments in the amount of $18,232.68." Complaint at p 9(a). For purposes of this appeal, we may assume without deciding that the government's higher figure is more accurate
The Act provides an exception for tax cases brought under section 7428 of the Internal Revenue Code of 1986. That provision specifically authorizes declaratory judgments in disputes over the tax status of organizations claiming to be tax-exempt under the charitable organizations provision, 26 U.S.C. § 501(c) (3). Section 7428 clearly has no bearing here
The Act also provides exceptions for suits seeking to enjoin jeopardy assessments under 26 U.S.C. § 7429(b) and for certain types of suits in which a party other than the taxpayer seeks the injunction. 26 U.S.C. §§ 6672(b) (suits by employers and others charged with failure to withhold and pay over the taxpayer's taxes), 6694(c) (suits by tax preparers being fined for filing improper returns), 7426(a)-(b) (suits by third parties claiming rights in the subject of a tax levy). These exceptions clearly have no bearing here
The government has also admitted that it did not seek an award of costs below, and it has not pursued this portion of the district court's judgment