Vir v. United States , 117 A.F.T.R.2d (RIA) 768 ( 2016 )

In the United States Court of Federal Claims
No. 15-73T
Filed: February 22, 2016
* * * * * * * * * * * * * * * * * * *
*
JAY R. VIR, *
Plaintiff, *
Tax; Motion to Dismiss; RCFC
*
12(b)(1); 26 U.S.C. § 6672; Trust Fund
v. *
Recovery Penalty; Full Payment Rule;
*
UNITED STATES, Divisible Taxes.
*
*
Defendant.
*
* * * * * * * * * * * * * * * * * * *
Joyce Rebhun, Beverly Hills, CA for the plaintiff.
Matthew D. Lucey, Court of Federal Claims Section, Tax Division, United States
Department of Justice, Washington, D.C. for the defendant. With him were Caroline D.
Ciraolo, Acting Assistant Attorney General, David I. Pincus, Chief, Court of Federal
Claims Section, and G. Robson Steward, Assistant Chief, Court of Federal Claims
Section, Tax Division, United States Department of Justice, Washington, D.C.
OPINION
HORN, J.
FINDINGS OF FACTS
This is a tax refund case involving the trust fund recovery penalty assessed under
26 U.S.C. § 6672 (2012).1 Plaintiff Jay R. Vir was formerly an officer of his employer
1 The relevant portion of 26 U.S.C. § 6672 states:
Any person required to collect, truthfully account for, and pay over any tax
imposed by this title who willfully fails to collect such tax, or truthfully
account for and pay over such tax, or willfully attempts in any manner to
evade or defeat any such tax or the payment thereof, shall, in addition to
other penalties provided by law, be liable to a penalty equal to the total
amount of the tax evaded, or not collected, or not accounted for and paid
over.
26 U.S.C. § 6672(a).
NGTV.2 While plaintiff was an officer, NGTV did not pay its employment taxes for the
quarters ending December 31, 2008, March 31, 2009, June 30, 2009, and September 30,
2009. Based on the failure to pay these taxes, on April 19, 2012, the Internal Revenue
Service (IRS) assessed trust fund recovery penalties in the amount of $130,437.41
against plaintiff personally, pursuant to 26 U.S.C. § 6672. Plaintiff alleges that, on or about
May 7, 2012, plaintiff paid the IRS $400.00, which he alleges in his complaint, without
further elaboration or naming the employee, “represents employment and withholding
taxes for one employee for each of the four quarters.” Plaintiff also alleges that, on May
7, 2012, he filed four claims, one for each of the periods at issue, seeking a refund and
an abatement of the entire amount of the employment taxes assessed by the IRS. Plaintiff
has included, as exhibits to his complaint, what he alleges are the claims he submitted to
the IRS using IRS Form 843. The “Explanation” portion of each of plaintiff’s Forms 843
states, in language which is identical except for the date given:
Taxpayer was erroneously assessed the Trust Fund Recovery Penalty (fka
100% penalty) for the period the period [sic] ended [sic]: 12/31/08 [or
03/30/09 [sic] or 6/30/09 or 9/30/09]. Taxpayer was not responsible for
collecting accounting and paying over employment taxes. Mr. Vir is making
a nominal payment on the withheld tax for one employee for one quarter of
liability and requests an abatement for reasons explained in attached
memorandum/affidavit.
Notably, the Forms 843 nowhere provide the name of the employee whose withheld tax
the “nominal payment” that was being made allegedly represented. Four identical
“Memorand[a] of Law” are attached to the four Forms 843, which plaintiff included with
his complaint.3 In the memoranda, plaintiff’s attorney describes how NGTV suffered a
number of financial setbacks in 2009 which prevented NGTV and plaintiff from paying
NGTV’s employment taxes to the IRS. The memoranda then argue that 26 U.S.C. § 6672
is inapplicable to plaintiff.
The IRS notified plaintiff that his claims had been denied in a letter dated August
29, 2012 and that his appeal had been denied in a letter dated June 6, 2013. In the June
6, 2013 letter, the IRS explained its reasons for denying plaintiff’s appeal as follows:
You did not provide any new evidence with your claim for refund. You did
not provide any new evidence during the face-to-face hearing on April 30,
2013. During the conference you indicated that you can provide evidence
2 In the opposition to defendant’s motion to dismiss, plaintiff states that NGTV, which is
not further defined in the pleadings, is a California corporation. The court notes that this
information is not alleged in plaintiff’s complaint or included in any of the exhibits to the
complaint. The Forms 843 attached to the complaint do, however, list NGTV as having a
Beverly Hills, California mailing address.
3 Although plaintiff alleges that he filed his four Forms 843 with the IRS on May 7, 2012,
the four “Memorand[a] of Law” are dated May 8, 2012. Plaintiff provides no explanation
for this discrepancy.
2
that you were not responsible for non payment of taxes – a written order
assigning receivership rights to a third party and proof that you were
instructed by that party not to pay the payroll taxes. You were given 10 days
to provide that information, however as of today, May 23, 2013, I have not
received that evidence.
The June 6, 2013 letter to plaintiff from the IRS also states that the “Claim Amount(s)”
involved in plaintiff’s appeal was $129,308.41. (emphasis in original). No explanation is
provided in plaintiff’s complaint, the June 6, 2013 letter, or any of the other documents
attached to plaintiff’s complaint as to why this amount is less than the $130,437.41 the
IRS originally assessed against plaintiff on April 9, 2012.
In the three page complaint filed in this court, plaintiff alleges that he “is not a
person responsible for collecting, according [sic] for, and paying over employment and
withholding taxes” and that the trust fund recovery penalty was assessed against him by
the IRS “erroneously and illegally.” Plaintiff requests a judgment against the United States
“in the amount of $129,308.41 (the amount of the trust fund penalty assessed against his
account pursuant to Internal Revenue Code Section 6672) and the refund of $400.00 in
employment taxes paid on Forms 843 or such larger amount as is legally refundable,
plus interest and costs.” (emphasis in original). Defendant filed an answer along with a
counterclaim. In its counterclaim, defendant alleges that plaintiff was required to collect,
truthfully account for, and pay over employment taxes for NGTV for the tax periods ending
December 31, 2008, March 31, 2009, June 30, 2009, and September 30, 2009, but
willfully failed to do so. Defendant alleges that, on April 9, 2012, plaintiff was assessed
trust fund recovery penalties pursuant to 26 U.S.C. § 6672 in the total amount of
$130,437.41 and requests judgment in this amount and assessed interest minus the
payments that defendant has already made.4
After a status conference with the attorneys for both plaintiff and defendant, the
court issued an order setting a briefing schedule and ordering plaintiff and plaintiff’s
attorney to “provide defendant and the court with a copy of the pay stubs relating to the
employee identified as the individual for whom tax was paid in order to allow plaintiff to
potentially satisfy the jurisdictional requirements for filing suit in this court.” No such pay
stubs were provided to the court nor was an explanation for failing to do so provided by
plaintiff or his attorney. Defendant ultimately filed a motion to dismiss plaintiff’s complaint
under Rule 12(b)(1) (2015) of the Court of Federal Claims (RCFC) for lack of subject
matter jurisdiction. Plaintiff filed an opposition to defendant’s motion to dismiss and an
answer to defendant’s counterclaim, and defendant filed a reply to plaintiff’s opposition.
4 The court notes that although defendant is seeking a judgment of $130,437.41, the
amount the IRS assessed against plaintiff on April 9, 2012, plaintiff is seeking a judgment
of $129,308.41, the amount that the June 6, 2013 letter from the IRS describes as being
involved in plaintiff’s claims submitted to the IRS. As noted above, none of the filings
presently before the court explain the discrepancy between these two amounts.
3
DISCUSSION
It is well established that “‘subject-matter jurisdiction, because it involves a court’s
power to hear a case, can never be forfeited or waived.’” Arbaugh v. Y & H Corp., 546
U.S. 500, 514 (2006) (quoting United States v. Cotton, 535 U.S. 625, 630 (2002)).
“[F]ederal courts have an independent obligation to ensure that they do not exceed the
scope of their jurisdiction, and therefore they must raise and decide jurisdictional
questions that the parties either overlook or elect not to press.” Henderson ex rel.
Henderson v. Shinseki, 131 S. Ct. 1197, 1202 (2011); see also Gonzalez v. Thaler, 132
S. Ct. 641, 648 (2012) (“When a requirement goes to subject-matter jurisdiction, courts
are obligated to consider sua sponte issues that the parties have disclaimed or have not
presented.”); Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010) (“Courts have an independent
obligation to determine whether subject-matter jurisdiction exists, even when no party
challenges it.” (citing Arbaugh v. Y & H Corp., 546 U.S. at 514)); Special Devices, Inc. v.
OEA, Inc., 269 F.3d 1340, 1342 (Fed. Cir. 2001) (“[A] court has a duty to inquire into its
jurisdiction to hear and decide a case.” (citing Johannsen v. Pay Less Drug Stores N.W.,
Inc., 918 F.2d 160, 161 (Fed. Cir. 1990))); View Eng’g, Inc. v. Robotic Vision Sys., Inc.,
115 F.3d 962, 963 (Fed. Cir. 1997) (“[C]ourts must always look to their jurisdiction,
whether the parties raise the issue or not.”). “Objections to a tribunal’s jurisdiction can be
raised at any time, even by a party that once conceded the tribunal’s subject-matter
jurisdiction over the controversy.” Sebelius v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824
(2013); see also Arbaugh v. Y & H Corp., 546 U.S. at 506 (“The objection that a federal
court lacks subject-matter jurisdiction . . . may be raised by a party, or by a court on its
own initiative, at any stage in the litigation, even after trial and the entry of judgment.”);
Cent. Pines Land Co., L.L.C. v. United States, 697 F.3d 1360, 1364 n.1 (Fed. Cir. 2012)
(“An objection to a court’s subject matter jurisdiction can be raised by any party or the
court at any stage of litigation, including after trial and the entry of judgment.” (citing
Arbaugh v. Y & H Corp., 546 U.S. at 506–07)); Rick’s Mushroom Serv., Inc. v. United
States, 521 F.3d 1338, 1346 (Fed. Cir. 2008) (“[A]ny party may challenge, or the court
may raise sua sponte, subject matter jurisdiction at any time.” (citing Arbaugh v. Y & H
Corp., 546 U.S. at 506; Folden v. United States, 379 F.3d 1344, 1354 (Fed. Cir.), reh’g
and reh’g en banc denied (Fed. Cir. 2004), cert. denied, 545 U.S. 1127 (2005); and
Fanning, Phillips & Molnar v. West, 160 F.3d 717, 720 (Fed. Cir. 1998))); Pikulin v. United
States, 97 Fed. Cl. 71, 76, appeal dismissed, 425 F. App’x 902 (Fed. Cir. 2011).
A plaintiff need only state in the complaint “a short and plain statement of the
grounds for the court’s jurisdiction,” and “a short and plain statement of the claim showing
that the pleader is entitled to relief.” RCFC 8(a)(1), (2) (2015); Fed. R. Civ. P. 8(a)(1), (2)
(2016); see also Ashcroft v. Iqbal, 556 U.S. 662, 677–78 (2009) (citing Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555–57, 570 (2007)). “Determination of jurisdiction starts with
the complaint, which must be well-pleaded in that it must state the necessary elements
of the plaintiff’s claim, independent of any defense that may be interposed.” Holley v.
United States, 124 F.3d 1462, 1465 (Fed. Cir.) (citing Franchise Tax Bd. v. Constr.
Laborers Vacation Trust, 463 U.S. 1 (1983)), reh’g denied (Fed. Cir. 1997); see also
Klamath Tribe Claims Comm. v. United States, 97 Fed. Cl. 203, 208 (2011); Gonzalez-
McCaulley Inv. Grp., Inc. v. United States, 93 Fed. Cl. 710, 713 (2010). “Conclusory
allegations of law and unwarranted inferences of fact do not suffice to support a claim.”
4
Bradley v. Chiron Corp., 136 F.3d 1317, 1322 (Fed. Cir. 1998); see also McZeal v. Sprint
Nextel Corp., 501 F.3d 1354, 1363 n.9 (Fed. Cir. 2007) (Dyk, J., concurring in part,
dissenting in part) (quoting C. Wright and A. Miller, Federal Practice and Procedure §
1286 (3d ed. 2004)). “A plaintiff’s factual allegations must ‘raise a right to relief above the
speculative level’ and cross ‘the line from conceivable to plausible.’” Three S Consulting
v. United States, 104 Fed. Cl. 510, 523 (2012) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. at 555), aff’d, 562 F. App’x 964 (Fed. Cir.), reh’g denied (Fed. Cir. 2014). As stated
in Ashcroft v. Iqbal, “[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic
recitation of the elements of a cause of action will not do.’ 550 U.S. at 555. Nor does a
complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’”
Ashcroft v. Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 555).
When deciding a case based on a lack of subject matter jurisdiction or for failure
to state a claim, this court must assume that all undisputed facts alleged in the complaint
are true and must draw all reasonable inferences in the non-movant’s favor. See Erickson
v. Pardus, 551 U.S. 89, 94 (2007) (“In addition, when ruling on a defendant’s motion to
dismiss, a judge must accept as true all of the factual allegations contained in the
complaint.” (citing Bell Atl. Corp. v. Twombly, 550 U.S. at 555–56 (citing Swierkiewicz v.
Sorema N. A., 534 U.S. 506, 508 n.1 (2002)))); Scheuer v. Rhodes, 416 U.S. 232, 236
(1974) (“Moreover, it is well established that, in passing on a motion to dismiss, whether
on the ground of lack of jurisdiction over the subject matter or for failure to state a cause
of action, the allegations of the complaint should be construed favorably to the pleader.”),
abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982), recognized by
Davis v. Scherer, 468 U.S. 183, 190 (1984), reh’g denied, 468 U.S. 1226 (1984); United
Pac. Ins. Co. v. United States, 464 F.3d 1325, 1327–28 (Fed. Cir. 2006); Samish Indian
Nation v. United States, 419 F.3d 1355, 1364 (Fed. Cir. 2005); Boise Cascade Corp. v.
United States, 296 F.3d 1339, 1343 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir.
2002), cert. denied, 538 U.S. 906 (2003). If a defendant or the court challenges jurisdiction
or plaintiff’s claim for relief, however, the plaintiff cannot rely merely on allegations in the
complaint, but must instead bring forth relevant, competent proof to establish jurisdiction.
McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189 (1936); see also Land
v. Dollar, 330 U.S. 731, 735 n. 4 (1947); Reynolds v. Army & Air Force Exch. Serv., 846
F.2d 746, 747 (Fed. Cir. 1988); Catellus Dev. Corp. v. United States, 31 Fed. Cl. 399,
404–05 (1994).
The Tucker Act grants jurisdiction to this court as follows:
The United States Court of Federal Claims shall have jurisdiction to render
judgment upon any claim against the United States founded either upon the
Constitution, or any Act of Congress or any regulation of an executive
department, or upon any express or implied contract with the United States,
or for liquidated or unliquidated damages in cases not sounding in tort.
28 U.S.C. § 1491(a)(1) (2012). As interpreted by the United States Supreme Court, the
Tucker Act waives sovereign immunity to allow jurisdiction over claims against the United
States (1) founded on an express or implied contract with the United States, (2) seeking
a refund from a prior payment made to the government, or (3) based on federal
5
constitutional, statutory, or regulatory law mandating compensation by the federal
government for damages sustained. See United States v. Navajo Nation, 556 U.S. 287,
289–90 (2009); United States v. Mitchell, 463 U.S. 206, 216 (1983); see also Greenlee
Cnty., Ariz. v. United States, 487 F.3d 871, 875 (Fed. Cir.), reh’g and reh’g en banc denied
(Fed. Cir. 2007), cert. denied, 552 U.S. 1142 (2008); Palmer v. United States, 168 F.3d
1310, 1314 (Fed. Cir. 1999).
“Not every claim invoking the Constitution, a federal statute, or a regulation is
cognizable under the Tucker Act. The claim must be one for money damages against the
United States . . . .” United States v. Mitchell, 463 U.S. at 216; see also United States v.
White Mountain Apache Tribe, 537 U.S. 465, 472 (2003); Smith v. United States, 709
F.3d 1114, 1116 (Fed. Cir.), cert. denied, 134 S. Ct. 259 (2013); RadioShack Corp. v.
United States, 566 F.3d 1358, 1360 (Fed. Cir. 2009); Rick’s Mushroom Serv., Inc. v.
United States, 521 F.3d at 1343 (“[P]laintiff must . . . identify a substantive source of law
that creates the right to recovery of money damages against the United States.”). In
Ontario Power Generation, Inc. v. United States, the United States Court of Appeals for
the Federal Circuit identified three types of monetary claims for which jurisdiction is
lodged in the United States Court of Federal Claims. The court wrote:
The underlying monetary claims are of three types. . . . First, claims alleging
the existence of a contract between the plaintiff and the government fall
within the Tucker Act’s waiver. . . . Second, the Tucker Act’s waiver
encompasses claims where “the plaintiff has paid money over to the
Government, directly or in effect, and seeks return of all or part of that sum.”
Eastport S.S. [Corp. v. United States, 178 Ct. Cl. 599, 605–06,] 372 F.2d
[1002,] 1007-08 [(1967)] (describing illegal exaction claims as claims “in
which ‘the Government has the citizen’s money in its pocket’” (quoting
Clapp v. United States, 127 Ct. Cl. 505, 117 F. Supp. 576, 580 (1954)) . . . .
Third, the Court of Federal Claims has jurisdiction over those claims where
“money has not been paid but the plaintiff asserts that he is nevertheless
entitled to a payment from the treasury.” Eastport S.S., 372 F.2d at 1007.
Claims in this third category, where no payment has been made to the
government, either directly or in effect, require that the “particular provision
of law relied upon grants the claimant, expressly or by implication, a right to
be paid a certain sum.” Id.; see also [United States v. ]Testan, 424 U.S.
[392,] 401-02 [1976] (“Where the United States is the defendant and the
plaintiff is not suing for money improperly exacted or retained, the basis of
the federal claim-whether it be the Constitution, a statute, or a regulation-
does not create a cause of action for money damages unless, as the Court
of Claims has stated, that basis ‘in itself . . . can fairly be interpreted as
mandating compensation by the Federal Government for the damage
sustained.’” (quoting Eastport S.S., 372 F.2d at 1009)). This category is
commonly referred to as claims brought under a “money-mandating”
statute.
Ontario Power Generation, Inc. v. United States, 369 F.3d 1298, 1301 (Fed. Cir. 2004);
see also Twp. of Saddle Brook v. United States, 104 Fed. Cl. 101, 106 (2012).
6
Regarding a tax refund suit, “[n]o suit or proceeding shall be maintained in any
court for the recovery of any internal revenue tax . . . until a claim for refund or credit has
been duly filed with the Secretary [of the Treasury].” 26 U.S.C. § 7422 (2012). In United
States v. Clintwood Elkhorn Mining Co., the United States Supreme Court indicated that:
A taxpayer seeking a refund of taxes erroneously or unlawfully assessed or
collected may bring an action against the Government either in United
States district court or in the United States Court of Federal Claims. The
Internal Revenue Code specifies that before doing so, the taxpayer must
comply with the tax refund scheme established in the Code. That scheme
provides that a claim for a refund must be filed with the Internal Revenue
Service (IRS) before suit can be brought, and establishes strict timeframes
for filing such a claim.
United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1, 4 (2008) (citing 28 U.S.C.
§ 1346(a)(1))5 and EC Term of Years Trust v. United States, 550 U.S. 429, 431, & n.2
(2007)).
According to the United States Court of Appeals for the Federal Circuit, “in the
context of tax refund suits, the [United States Supreme] Court has held that the Court of
Federal Claims’ Tucker Act jurisdiction is limited by the Internal Revenue Code, including
26 U.S.C. § 7422(a).”6 RadioShack Corp. v. United States, 566 F.3d at 1360 (citing United
5 The statute at 28 U.S.C. § 1346 (2012) provides that:
(a) The district courts shall have original jurisdiction, concurrent with the
United States Court of Federal Claims, of:
(1) Any civil action against the United States for the recovery of
any internal-revenue tax alleged to have been erroneously or
illegally assessed or collected, or any penalty claimed to have
been collected without authority or any sum alleged to have been
excessive or in any manner wrongfully collected under the
internal-revenue laws[.]
28 U.S.C. § 1346(a)(1).
6 The statute at 26 U.S.C. § 7422 (2012) provides that:
(a) No suit prior to filing claim for refund
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
7
States v. Clintwood Elkhorn Mining Co., 553 U.S. at 4 and United States v. A.S. Kreider
Co., 313 U.S. 443, 447–48 (1941)); see also United States v. Dalm, 494 U.S. 596, 609–
10, reh’g denied, 495 U.S. 941 (1990); Strategic Hous. Fin. Corp. v. United States, 608
F.3d 1317, 1324 (Fed. Cir.), reh’g and reh’g en banc denied (Fed. Cir. 2010), cert. denied,
131 S. Ct. 1513 (2011). Stated another way, “[i]n the context of tax refund suits, the United
States sovereign immunity is construed narrowly and jurisdiction of the Court of Federal
Claims is limited by the Internal Revenue Code, including 26 U.S.C. § 7422.” Waltner v.
United States, 679 F.3d 1329, 1332 (Fed. Cir.), cert. denied, 133 S. Ct. 319, reh’g denied,
133 S. Ct. 688 (2012); see id. at 1332 (“Thus, whether sovereign immunity has been
waived and the Court of Federal Claims has jurisdiction over these refund claims depends
on whether the taxpayers’ submissions to the IRS constitute a claim for refund.”).
The statute at 26 U.S.C. § 7422(a) functions as a waiver of the government’s
sovereign immunity in tax refund suits. See Chicago Milwaukee Corp. v. United States,
40 F.3d 373, 374 (Fed. Cir. 1994); see also Ishler v. United States, 115 Fed. Cl. 530,
534–35 (2014); Tieman v. United States, 113 Fed. Cl. 528, 531 (2013). “[S]ection 7422(a)
creates a jurisdictional prerequisite to filing a refund suit.” Gluck v. United States, 84 Fed.
Cl. 609, 613 (2008) (citing Chicago Milwaukee Corp. v. United States, 40 F.3d at 374
(citing Burlington N., Inc. v. United States, 231 Ct. Cl. 222, 684 F.2d 866, 868 (1982))).
Generally, “payment of the assessed taxes in full is a prerequisite to bringing a
refund claim.” Ledford v. United States, 297 F.3d 1378, 1382 (Fed. Cir. 2002) (citing Flora
v. United States, 362 U.S. 145, 177, reh’g denied, 362 U.S. 972 (1960); Rocovich v.
United States, 933 F.2d 991, 993–94 (Fed. Cir. 1991)); see also Shore v. United States,
9 F.3d 1524, 1527 (Fed. Cir. 1993) (“The Flora [v. United States, 362 U.S. 145] full
payment rule requires that taxpayers prepay the tax principal before the Court of Federal
Claims will have subject matter jurisdiction over their tax refund action under § 1491.”).
There is, however, an exception to this rule for divisible taxes, such as those levied under
26 U.S.C. § 6672. See 26 U.S.C. § 6331(i)(2)(B) (2012) (defining divisible taxes to include
“the penalty imposed by section 6672”). Under this exception, “a taxpayer assessed under
section 6672 need only pay the divisible amount of the penalty assessment attributable
to a single individual’s withholding before instituting a refund action.” Boynton v. United
States, 566 F.2d 50, 52 (9th Cir. 1977); see also Steele v. United States, 280 F.2d 89, 91
(8th Cir. 1960); Roseman v. United States, No. 09-539T, 2013 WL 151716, at *1 (Fed.
Cl. Jan. 3, 2013).7 The rationale for this exception is that “section 6672 assessments
represent a cumulation of separable assessments for each employee from whom taxes
that regard, and the regulations of the Secretary established in
pursuance thereof.
26 U.S.C. § 7422(a).
7 The genesis of the exception is dicta in Flora v. United States stating that “excise tax
assessments may be divisible into a tax on each transaction or event, so that the full-
payment rule would probably require no more than payment of a small amount.” Flora v.
United States, 362 U.S. at 175 n. 38; see also Steele v. United States, 280 F.2d at 90
(citing Flora v. United States, 362 U.S. at 171 n. 37, 175 n. 38).
8
were withheld.” Boynton v. United States, 566 F.2d at 52. Thus, in the past, courts have
permitted 26 U.S.C. § 6672 refund cases to proceed when the taxpayer has prepaid the
IRS an amount equal to one employee’s withholding for one quarter. Godfrey v. United
States, 748 F.2d 1568, 1573 (Fed. Cir. 1984) (noting that the United States Claims Court
had allowed the case to proceed after each plaintiff paid $150.00 to the IRS, “the amount
in excess of income and FICA taxes withheld from one employee”); Kennedy v. United
States, 95 Fed. Cl. 197, 200 (2010) (noting plaintiff had prepaid $476.15 to the IRS,
“representing the portion of the assessment relating to one employee for the fourth
quarter of 2000”); see also Roseman v. United States, 2013 WL 151716, at *1 (“Courts
have held that this [divisible tax] requirement is satisfied where a plaintiff pays the penalty
attributable to one employee’s wages for one quarter.”) (citing Ruth v. United States, 823
F.2d 1091, 1092 (7th Cir.1987); USLIFE Title Ins. Co. of Dall. v. Harbison, 784 F.2d 1238,
1243 n.6 (5th Cir.1986); Boynton v. United States, 566 F.2d at 52; Suhadolnik v. United
States, No. 10-3021, 2011 WL 2173683, at * 5 (C.D. Ill. June 2, 2011); Todd v. United
States, No. CV408-034, 2009 WL 3152863, at *3–4 (S.D. Ga. Sept. 29, 2009); Lighthall
v. Comm’r of Internal Revenue, No. 88-C-20344, 1990 WL 53127, at *2 (N.D. Ill. Apr. 12,
1990), aff'd, 948 F.2d 1292 (7th Cir. 1991)).
Defendant argues that the court lacks subject matter jurisdiction to hear plaintiff’s
case because plaintiff has not paid the required portion of the tax assessed. According to
defendant, “plaintiff has alleged no facts that suggest that $100 equals the withholding for
one employee” for one of the quarters at issue. Further, defendant argues:
Plaintiff has failed to produce any documents or substantiating evidence to
support the notion that $100 (or even $400) is sufficient to satisfy his
obligation to pay the requisite amount of tax that would satisfy the
jurisdictional requirements for a refund suit for even one quarter at issue in
this case.
According to defendant, plaintiff, therefore, has “failed to meet his burden because he has
not presented any evidence, let alone a preponderance of the evidence” to support his
position. (emphasis in original).
Plaintiff asserts that his burden of proving jurisdiction has been met. In particular,
plaintiff argues in his opposition to defendant’s motion to dismiss that he “has alleged
facts that suggest that $100 equals the withholding for one employee, Ms. Nicole Armijo
for each of the four quarters.” In support of this claim, plaintiff asserts in his opposition
that each of the Forms 843 he filed with the IRS for the four periods at issue “contains a
statement that plaintiff ‘is making a nominal payment on the withheld tax for one
employee, Ms. Nicole Armijo [Social Security numbers omitted] for each of the 4 quarters
of liability in the amount withheld from her paycheck for each of these four quarters.”
(missing quotation mark in original).
9
Plaintiff next argues that Kaplan v. United States, 115 Fed. Cl. 491 (2014) is
“controlling.” According to plaintiff, Kaplan “affirms the Internal Revenue Service Rule[8]
of accepting a representative amount when the exact amount cannot be accurately
determined. Otherwise, the taxpayer will be deprived of a proper determination on the
merits regarding the appropriateness of the trust fund penalty assessment.” In an
apparent attempt to show the applicability of Kaplan, plaintiff states:
In the instant case, Plaintiff has made intense effort to obtain payroll
records; Plaintiff had been stripped of responsibility prior to the
accumulation of payroll tax liabilities for these quarters. Once NGTV filed
bankruptcy, all records were under the control of the Bankruptcy Trustee.
[In Kaplan v. United States,] Judge Wheeler concluded that the plaintiff’s
three $100 payments were “sufficient to establish subject matter
jurisdiction”.
Therefore, plaintiff argues, “the instant Complaint is more than sufficient to withstand
Defendant’s paint-by-the-numbers motion.”
The court finds that Mr. Vir, through his attorney, has failed to plead the necessary
cognizable facts or provide any evidence that the $400.00 he alleges was paid to the IRS
represents the taxes due for one employee for each, or even one, of the four quarters at
issue. Despite an order of this court explicitly requiring him and his attorney to provide
“pay stubs relating to the employee identified as the individual for whom tax was paid,”
plaintiff has, without explanation, or even an acknowledgement, failed to comply.9 Further,
despite plaintiff’s claim that he “has alleged facts that suggest that $100 equals the
withholding for one employee, Ms. Nicole Armijo for each of the four quarters,” there is
no mention whatsoever of Ms. Armijo in plaintiff’s complaint or any of the documents
attached to it. Plaintiff’s assertion that the Forms 843 attached to his complaint state that
a nominal payment was being made for Ms. Armijo is simply false. The Forms 843 make
no mention of Ms. Armijo, stating only that “Mr. Vir is making a nominal payment on the
withheld tax for one employee for one quarter of liability.” Thus, the only evidence
proffered by plaintiff to show he has meet his jurisdictional burden of proving that he has
paid to the IRS the “divisible amount of the penalty assessment attributable to a single
individual’s withholding,” Boynton v. United States, 566 F.2d at 52, is the general
allegation in his complaint, not tied to any individual employee, that the $400.00 he
allegedly paid the IRS “represents employment and withholding taxes for one employee
for each of the four quarters,” and the equally empty statements in the Forms 843
submitted with the complaint. Lacking specifics or any evidentiary support, these
statements amount to mere “[c]onclusory allegations of law and unwarranted inferences
of fact” that “do not suffice to support” plaintiff’s claim. Bradley v. Chiron Corp., 136 F.3d
8 Plaintiff does not specify which IRS Rule he is referring to, nor is one otherwise
referenced in his filed opposition to defendant’s motion to dismiss.
9The absence of any explanation or acknowledgment of this failure, including in plaintiff’s
opposition to defendant’s motion to dismiss, which was filed over one month after the pay
stubs were due, is inexplicable.
10
at 1322. Plaintiff, therefore, has failed to meet his burden of proving, by a preponderance
of the evidence, that jurisdiction exists to hear his claim.
Additionally, plaintiff is not helped by Kaplan v. United States. Contrary to plaintiff’s
assertion, Kaplan is not “controlling” on this court. The only precedents that are controlling
on this court are those of the United States Supreme Court, the United States Court of
Appeals for the Federal Circuit, and the United States Court of Claims, a predecessor
court to the United States Court of Federal Claims and the Court of Appeals for the
Federal Circuit. See Coltec Indus., Inc. v. United States, 454 F.3d 1340, 1353 (Fed. Cir.
2006). Prior Court of Federal Claims decisions such as Kaplan, “while persuasive, do not
set binding precedent for separate and distinct cases.” W. Coast Gen. Corp. v. Dalton, 39
F.3d 312, 315 (Fed. Cir. 1994) (citing Sun Eagle Corp. v. United States, 23 Cl. Ct. 465,
473 (1991)).
But even taken for its persuasive value, the Kaplan case does not support plaintiff’s
arguments. The Kaplan plaintiff made three payments of $100.00 to the IRS along with a
claim challenging the imposition of the trust fund recovery penalty against him. See
Kaplan v. United States, 115 Fed. Cl. at 492-93. After the government sought dismissal
for lack of subject matter jurisdiction on the grounds that plaintiff had “‘produced no
evidence’ showing the assessed tax for any employee in any of the relevant quarters,”
the plaintiff “responded by providing one week’s worth of payroll records and, by
extrapolation, arguing that this evidence was sufficient to meet his burden of establishing
subject matter jurisdiction by a preponderance of the evidence.” Id. at 493. The court
initially granted defendant’s motion to dismiss, finding that “one week’s worth of records
was an insufficient basis from which to extrapolate the data for a thirteen-week quarter.”
Id. The Kaplan plaintiff, however, subsequently filed a motion for reconsideration pursuant
to RCFC 59, arguing that reconsideration was necessary to prevent manifest injustice.
See id. In this motion, the Kaplan plaintiff alleged not only that he was never “‘required to
collect, truthfully account for, and pay over employment taxes’” for his employer, but that
“even though he is listed as one of the company’s three managing members in its
certificate of formation,” he was “‘was unaware of this status and never agreed to assume
such responsibility.’’’ Id. Further, the court noted that plaintiff’s motion “relate[d] in detail
his diligent but futile efforts at obtaining these [payroll tax] records.” Id. at 494. The court
found that “assuming these representations are true” plaintiff was “caught in an
‘evidentiary Catch-22’”: “In order to prove the merits of his argument that he is not a
‘responsible person,’ he must first produce the evidence for which he is not responsible.”
Id. The court concluded that “[u]nder the circumstances of this case, the Court is not
inclined to prevent Mr. Kaplan from challenging that full assessment in this forum simply
because the representative amount he paid might not be representative enough.” Id.
Accordingly, the court granted the motion for reconsideration and accepted “the three
$100 payments as sufficient to establish subject matter jurisdiction.” Id. The Kaplan case
explicitly limited its holding to “the circumstances of this case.” Id. Those circumstances
included not only plaintiff’s allegation that he was not a responsible party, but also that he
was not even aware of his status as a managing member of the corporation at issue, that
he had made “diligent but futile efforts” to obtain the records necessary to determine the
amount of payroll taxes assessed for each employee, and that he had supplied some
relevant records to the court. See id.
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By contrast, in the present case, Mr. Vir concedes that he was an officer at NGTV
throughout the relevant periods. Additionally, although plaintiff asserts that he “has made
intense effort to obtain payroll records,” he provides no explanation of what these efforts
entailed, nor offers any citation to the record or additional evidence showing that such
efforts were made. Whereas the Kaplan plaintiff provided some, albeit incomplete,
evidence in the form of “one week’s worth of payroll records,” id. at 493, Mr. Vir and his
attorney have not provided any records whatsoever. Even more remarkable, Mr. Vir and
his attorney have failed to provide any evidence or explanation in the face of a court order
requiring them to do so. There is, thus, no evidence in the Vir record of the type of
circumstances upon which the Kaplan court based its decision in favor of the Kaplan
plaintiff. Kaplan, therefore, does not support Mr. Vir’s argument that jurisdiction exists in
this court to hear his claims. As plaintiff has not provided any evidence of the sufficiency
of the $400 to vest jurisdiction in this court, defendant’s motion to dismiss is granted.
Defendant also pleads a counterclaim against plaintiff. This court has jurisdiction
over counterclaims brought by the government under 28 U.S.C §§ 1503 and 2508 (2012).
“A prerequisite to this counterclaim jurisdiction is, however, the existence of a claim filed
against the United States within the jurisdiction of the Court of Federal Claims.” Talbot v.
United States, 40 Fed. Cl. 801, 805-06 (1998) (citing Triton Group, Ltd. v. United States,
10 Cl. Ct. 128, 134 (1986), aff'd, 818 F.2d 876 (Fed. Cir. 1987); Joseph Morton Co. v.
United States, 3 Cl. Ct. 780, 782 (1983)). “When a plaintiff's claim is rejected for lack of
jurisdiction, the defendant's counterclaim must be dismissed along with plaintiff's
complaint, without regard to the merits of the counterclaim.” Id. at 806 (citing Triton Group,
Ltd v. United States, 10 Cl. Ct. at 134; Joseph Morton Co. v. United States, 3 Cl. Ct. at
783); see also W. Mgmt., Inc. v. United States, 101 Fed. Cl. 105, 114 (2011) (dismissing
counterclaim due to lack of jurisdiction over claims in complaint) aff’d and remanded in
part, 498 F. App’x 10 (Fed. Cir. 2012); Medina Const., Ltd. v. United States, 43 Fed. Cl.
537, 560 (1999) (same). Because the court lacks jurisdiction to hear the claims in
plaintiff’s complaint, the court also lacks jurisdiction to hear defendant’s counterclaim, and
the counterclaim must be dismissed.
CONCLUSION
Plaintiff, therefore, has failed to plead cognizable facts or provide any evidence to
demonstrate that this court has jurisdiction to hear his claims. Defendant’s motion to
dismiss plaintiff’s claims pursuant to RCFC 12(b)(1) is GRANTED. Plaintiff’s complaint is
DISMISSED. Due to the dismissal of plaintiff’s complaint, the court lacks jurisdiction over
defendant’s counterclaim. Defendant’s counterclaim, therefore, also is DISMISSED. The
Clerk of Court shall enter JUDGMENT consistent with this opinion.
IT IS SO ORDERED.
s/Marian Blank Horn
MARIAN BLANK HORN
Judge
12