Pragovich v. United States ( 2009 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
GEORGE K. PRAGOVICH, et al., :
:
Plaintiffs, :
:
v. : Civil Action No. 07-2079 (JR)
:
UNITED STATES OF AMERICA, :
:
Defendant. :
MEMORANDUM
Pro se plaintiffs George and Claudia Pragovich sue the
United States Government seeking money damages for asserted
violations of the Internal Revenue Code.1 The case is similar to
an earlier one brought by the same plaintiffs (and dismissed).
Pragovich v. United States, 2007 WL 521890 (D.D.C. 2007). It is
genetically indistinguishable from a gaggle of other tax protest
suits that have been filed in this court, and it is almost
identical to one dismissed by Judge Huvelle in Wesselman v.
United States, 501 F. Supp. 2d 98 (D.D.C. 2007). Because this
court has no jurisdiction over many of the plaintiffs’ claims,
and because the plaintiffs have failed to exhaust their
administrative remedies as to the rest, the government’s motion
to dismiss will be granted.
1
A conspicuous footnote to the complaint disavows any claim
for declaratory or injunctive relief, or for a tax refund --
remedies that are unavailable to these plaintiffs anyway.
Analysis
This court does not have jurisdiction to hear claims
for money damages under the Administrative Procedure Act. 5
U.S.C. § 702. There is no waiver of sovereign immunity for a
damages claim in the Federal Records Act or the National Archives
Act. See, Ross v. United States, 460 F. Supp. 2d 139, 148-50
(D.D.C. 2006). No Bivens remedy is available to the plaintiffs
because the internal Revenue Code contains a comprehensive
remedial scheme. Marsoun v. U.S., 591 F. Supp. 2d 41, 47-48
(D.D.C. 2008) (citing, Wilson v. Libby, 535 F.3d 697, 705 (D.C.
Cir. 2008)). The only waiver of sovereign immunity applicable to
the plaintiff’s claims is found in 26 U.S.C. § 7433, which is
limited to actions seeking damages “in connection with any
collection of Federal tax with respect to a taxpayer.” All of
the plaintiffs counts that deal with issues other than the
collection of taxes -- counts 1-19, 27-29, and 33 -- must
therefore be dismissed for lack of jurisdiction. Fed. R. Civ.
Pro. § 12(b)(1); accord, Wesselman, 501 F. Supp. 2d at 100-101.
Section 7433(d)(1) states that a “judgment for damages
shall not be awarded . . . unless the court determines that the
plaintiff has exhausted the administrative remedies available to
such plaintiff within the Internal Revenue Service.” The
exhaustion procedures are set out in 26 C.F.R. § 301.7433-1. The
defendants urge me to reverse the position I took in Gross v.
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United States, 2006 U.S. Dist. LEXIS 68965 at *1 fn. 1 (D.D.C.
2006), that this exhaustion requirement is non-jurisdictional,
arguing that, in relevant part, the Supreme Court’s recent
decision in John R. Sand & Gravel Co. v. United States, ---U.S.
----, 128 S.Ct. 750 (2008), has undermined my reliance on Arbaugh
v. Y&H Corp., 546 U.S. 500 (2006), and Avocados Plus v. Veneman,
361 U.S. App. D.C. 519, 370 F.3d 1243, 1247-48 (D.C. Cir. 2004).
I decline to do so for substantially the same reasons articulated
by Judge Bates in the Marsoun case, i.e., that John R. Sand &
Gravel provides little support for the defendant’s position.
Marsoun, 591 F. Supp. 2d at 44-45.
In any event, the plaintiffs do not assert that they
have exhausted their administrative remedies. Instead, they
argue that § 301.7433-1 is a nonbinding “interpretive” rule that
courts should ignore or invalidate. Their assumption,
apparently, is that regulations issued under 26 U.S.C.
§ 7805(a)’s general grant of authority after notice and comment,
which have been called “interpretive,” are like the non-binding
interpretations issued by some administrative agencies to clarify
existing duties, but which are not the product of notice and
comment rulemaking and do not have the force of law. This
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assumption is mistaken. Regulations issued under § 7805 after
notice and comment do have the force of law.2
Because it is “quite clear” from the “statutory and
historical context” of § 7433(d)(1) “that Congress has implicitly
authorized the IRS to prescribe the details of administrative
exhaustion,” Evans v. U.S., 433 F. Supp. 2d 17, 22 (D.D.C.
2006), and thus that the “IRS ha[d] authority under 26 U.S.C.
§ 7805(a), and § 7433 itself, to promulgate the exhaustion
regulation,” Marsoun, 591 F. Supp. 2d at 46; because the
regulation is reasonable; and because the plaintiffs have given
me no reason to do otherwise; I will follow the lead of several
of my learned colleagues and find that the regulation is
deserving of deference and valid. See, e.g., Evans, 433 F. Supp.
2d at 22; O'Connor v. U.S., 2007 WL 274755 (D.D.C. 2007);
2
The fact that regulations are issued under § 7805 are
“interpretive” raises the question of whether their validity will
be reviewed using the analysis prescribed by National Muffler
Dealers Ass'n, Inc., v. U.S., 440 U.S. 472 (1979), and its more
recent derivatives, or under Chevron USA, Inc. v. Natural
Resources Defense Council, 467 U.S. 837 (1984). See, Swallows
Holding, Ltd. V. C.I.R., 515 F.3d 167, 168 (3rd Cir. 2008). The
D.C. Circuit appears to have resolved the matter by applying
Chevron. See, Tax Analysts v. IRS, 350 F.3d 100, 103 (D.C. Cir.
2003); New Millennium Trading, L.L.C. v. C.I.R., 131 T.C. No. 18,
2008 WL 5330940 (U.S. Tax Ct. 2008) (“The U.S. Court of Appeals
for the District of Columbia Circuit has held that regulations
issued under the general authority of the IRS to promulgate
necessary rules are entitled to Chevron deference.”) (citing Tax
Analysts).
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Anderson v. U.S., 2007 WL 2059737 (D.D.C. 2007); Rippl v. U.S.,
2006 WL 2024966 (D.D.C. 2006).3
The plaintiffs’ argument that the regulation is not
binding because it was not properly promulgated also fails:
notice was published in the Federal Register. Civil Cause of
Action for Unauthorized Collection Actions, 56 Fed. Reg. 28842(June 25, 1991). The regulation’s validity would not be
compromised, in any event, by technical Treasury Directives.
See, 1 C.F.R. § 5.1. The plaintiffs have made no showing of
exhaustion, and so their claims in counts 20-26 and 30-32 must be
dismissed for failure to state a claim upon which relief can be
granted. Fed. R. Civ. Pro. § 12(b)(6).
* * *
An appropriate order accompanies this memorandum.
JAMES ROBERTSON
United States District Judge
3
Even under National Muffler I “must still treat the
regulation with deference,” Boeing Co. v. U.S., 537 U.S. 437(2003) (citing, Cottage Savings Assn. v. Commissioner, 499 U.S.
554, 560-561 (1991)), and “defer to the Commissioner's
regulations as long as they implement the congressional mandate
in some reasonable manner,” United States v. Cleveland Indians
Baseball Co., 532 U.S. 200, 219 (2001), because “Congress has
delegated to the [Secretary of the Treasury and his delegate,
the] Commissioner [of Internal Revenue], not to the courts, the
task of prescribing all needful rules and regulations for the
enforcement of the Internal Revenue Code,” Nat'l Muffler Dealers
Ass'n v. United States, 440 U.S. 472, 4777 (1979) (quoting United
States v. Correll, 389 U.S. 299, 307 (1967)). The regulation
here is reasonable.
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