Cooper v. United States

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]n tbt Wnittb $tatt5 QCourt of ebtral QClaims jf
No. 15-213T
(Filed: September 9, 2015) FILED
(Reissued: October 14, 2015)*
OCT 1 4 2015
***********************~************* U.S. COURT OF
ALAN DAYID COOPER, * FEDERAL CLAIMS
*
Plaintiff, *
* Motion to Dismiss; Jurisdiction; Pro Se
v. * Plaintiff; Tax Refund; Waltner; Tax Levy;
* Civil Penalties
THE UNITED STATES, *
*
Defendant. *
*************************************
Alan David Cooper, Eau Claire, WI, prose.
Karen Servidea, United States Department of Justice, Washington, DC, for respondent.
OPINION AND ORDER
SWEENEY, Judge
Plaintiff Alan David Cooper, proceeding pro se, filed a complaint and an application to
proceed in forma pauperis on March 3, 2015. In his complaint, plaintiff alleges that he is entitled
to a refund of all of the federal income taxes that he paid from 1964 to 2013. He further
contends that the Internal Revenue Service ("IRS") has been unlawfully levying his Social
Security payments since 2011, and that IRS agents have been engaged in an ongoing conspiracy
against him.
Before defendant had an opportunity to respond to plaintiffs allegations, plaintiff filed a
combined motion for judgment on the pleadings and motion for partial summary judgment, as
well as a motion to suspend the levy on his Social Security payments. Defendant subsequently
moved to dismiss plaintiffs complaint. For the reasons set forth below, the court grants
plaintiffs application to proceed in forma pauperis and grants defendant's motion to dismiss.
Plaintiffs motions for judgment on the pleadings, partial summary judgment, and suspension of
the levy are, therefore, moot.
* Pursuant to the court's October 14, 2015 Order, this decision replaces the court's
September 9, 2015 Opinion and Order.
I. BACKGROUND
Plaintiffs tax refund claim and related allegations are premised on his belief that because
he was a private citizen who worked for private companies from 1964 to 2013, he was never paid
"wages" as that term is defined in the Internal Revenue Code ("IRC"). 1 Therefore, plaintiff
contends, he did not owe any federal income taxes and should not have been subject to federal
income tax withholding during those years.
Acting on his beliefs, beginning in May 2010, plaintiff repeatedly filed amended federal
income tax returns for tax years 1989, 1998, and 2002 to 2013. Indeed, plaintiff has submitted at
least thirty-eight amended returns to the IRS since May 2010. Plaintiff attached to his complaint
the amended returns that he sent to the IRS on June 28, 2013, and May 2, 2014, on which he
reported the following information: 2
Tax Original Corrected Corrected Corrected Refund
Year(s) Adjusted Adjusted Tax Payments Due
Gross Gross Liability
Income Income
1964-2013 n/a $0 $0 $271,366 $271,366
1998 $7254 $0 $0 $1461 $1461
1999 $0 $0 $0 $0 $0
2000 $0 $0 $0 $0 $0
2001 $13,343 $0 $0 $462 $462
2002 $9006 $0 $0 $338 $338
2003 $0 $0 $0 $0 $0
2004 n/a $0 $0 $0 $0
2005 $18,917 $0 $0 $1814 $1814
2006 $32,184 $0 $0 $2837 $2837
1
The court derives the facts in this section from plaintiffs complaint, the exhibits
attached to plaintiffs complaint, and the exhibits attached to defendant's motion to dismiss and
reply in support of that motion.
2
Except for the amended return that he submitted for the 1964 to 2013 tax years
collectively, plaintiff only provided the court with the first page of the amended returns.
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2007 $32,280 $0 $0 $3051 $3051
2008 $36,753 $0 $0 $3678 $3678
2009 $21,210 $0 $0 $3611 $3611
2010 n/a $0 $0 $0 $0
2011 $4390 $0 $0 $1129 $1129
2012 $13,861 $0 $0 $7350 $7350
2013 $14,169 $0 $0 $9538 $9538
Along with each of these amended returns, plaintiff submitted a Form 4852, "Substitute for Form
W-2, Wage and Tax Statement," reflecting receipt of zero income from the named employer. On
each Form 4852, he indicated that he did not attempt to obtain a corrected Form W-2 from the
employer, and on all but one Form 4852 he typed the following statement:
This Form 4582 is submitted to rebut, and correct information on, a
document known to have been submitted to IRS by the party above as "Payer",
erroneously alleging that I received payments from them in the course of a trade or
business or other taxable activity. The payments made to me by this payer did not
result from any taxable activity, "excise type or otherwise" and do not constitute
any taxable income under relevant law.
I mistakenly included their incorrect W-2 with my ... original 1040 and/or
previous 1040-X return(s), resulting in an incorrect amount of taxable income
declared, [and or causing a penalty provision in error] and this is the reason I am
now filing an Amended return 1040X ... to correct the record.
The IRS apparently treated all of plaintiffs amended returns as frivolous, and assessed a civil
penalty, usually $5000, for each one plaintiff submitted. By May 2015, plaintiff owed the IRS
$131,864.92 in civil penalties and interest, with balances due for the following tax years: 1989,
2005, and 2007 to 2013. 3
Due to plaintiffs failure to pay the assessed civil penalties, the IRS began to levy
plaintiffs Social Security payments in 2011. In the most recent tax year, 2014, plaintiff was
entitled to $21,586 in Social Security benefits. Of that amount, the IRS received $19,963.80 and
the balance was used to pay plaintiffs Medicare premiums.
3
Plaintiff also incurred civil penalties for the 1998, 2002, 2003, 2004, and 2006 tax
years. However, these debts were subsequently discharged in bankruptcy.
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In his complaint, plaintiff alleges that the IRS and the Social Security Administration
have conspired to deprive him of his property. He further claims that the IRS unlawfully levied
his Social Security payments over thirty-four months from 2011to2015. He seeks treble
damages for the purportedly unlawful levy under the Administrative Procedure Act and $100,000
for each individual deduction from his Social Security payments under the IRC. Moreover,
plaintiff requests $1,000,000 in damages for an alleged ongoing conspiracy against him by
unnamed IRS agents. Finally, plaintiff requests the return of $307,376.26 that he has paid in
federal income taxes and civil penalties.
Plaintiff moves for judgment on the pleadings and for partial summary judgment, and
also seeks the suspension of the IRS levy. Defendant opposes plaintiffs motions and seeks the
dismissal of plaintiffs complaint pursuant to Rule 12(b) of the Rules of the United States Court
of Federal Claims ("RCFC"). All of the motions have been fully briefed and the court deems
oral argument unnecessary.
II. DEFENDANT'S MOTION TO DISMISS
Because defendant challenges the court's jurisdiction to entertain plaintiffs complaint,
the court first addresses defendant's motion to dismiss. 4
A. Standard of Review
Defendant moves to dismiss plaintiffs complaint for lack of jurisdiction pursuant to
RCFC 12(b)(1 ). When considering whether to dismiss a complaint for lack of jurisdiction, a
court assumes that the allegations in the complaint are true and construes those allegations in the
plaintiffs favor. Henke v. United States, 60 F.3d 795 , 797 (Fed. Cir. 1995). Plaintiffs
proceeding prose are not excused from meeting basic jurisdictional requirements, id. at 799,
even though the court holds their complaints to "less stringent standards than formal pleadings
drafted by lawyers," Haines v. Kerner, 404 U.S. 519, 520-21 (1972). In other words, a plaintiff
proceeding pro se is not excused from his burden of proving, by a preponderance of the evidence,
that the court possesses jurisdiction. See McNutt v. Gen. Motors Acceptance Corp., 298 U.S.
178, 189 (1936); Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988).
If the court finds that it lacks subject matter jurisdiction over a claim, RCFC 12(h)(3) requires the
court to dismiss that claim.
B. Jurisdiction
Whether the court has jurisdiction to decide the merits of a case is a threshold matter. See
Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998). "Without jurisdiction the
4
Defendant also challenges plaintiffs ability to state a claim upon which relief could be
granted pursuant to RCFC 12(b)(6). Because the court disposes of plaintiffs complaint on
jurisdictional grounds under RCFC 12(b)(l), the court need not reach this challenge.
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court cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it
ceases to exist, the only function remaining to the court is that of announcing the fact and
dismissing the cause." Ex parte Mccardle, 74 U.S. (7 Wall.) 506, 514 (1868). The parties or the
court on its own initiative may challenge the existence of subject matter jurisdiction at any time.
Arbaugh v. Y & H Corp., 546 U.S. 500, 506 (2006).
The ability of the United States Court of Federal Claims ("Court of Federal Claims") to
entertain suits against the United States is limited. "The United States, as sovereign, is immune
from suit save as it consents to be sued." United States v. Sherwood, 312 U.S. 584, 586 (1941).
The waiver of immunity "cannot be implied but must be unequivocally expressed." United
States v. King, 395 U.S. 1, 4 (1969). The Tucker Act, the principal statute governing the
jurisdiction of this court, waives sovereign immunity for claims against the United States, not
sounding in tort, that are founded upon the United States Constitution, a federal statute or
regulation, or an express or implied contract with the United States. 28 U.S.C. § 149l(a)(l)
(2012). However, the Tucker Act is merely a jurisdictional statute and "does not create any
substantive right enforceable against the United States for money damages." United States v.
Testan, 424 U.S. 392, 398 (1976). Instead, the substantive right must appear in another source of
law, such as a "money-mandating constitutional provision, statute or regulation that has been
violated, or an express or implied contract with the United States." Loveladies Harbor, Inc. v.
United States, 27 F.3d 1545, 1554 (Fed. Cir. 1994) (en bane).
C. The United States Is the Only Proper Defendant
The court first addresses plaintiffs claims against the unnamed IRS agents. It is well
settled that the United States is the only proper defendant in the Court of Federal Claims. See 28
U.S.C. § 149l(a)(l) (providing that the Court of Federal Claims has jurisdiction over claims
against the United States); RCFC 1O(a) (requiring that the United States be designated as the
defendant in the Court of Federal Claims); Stephenson v. United States, 58 Fed. Cl. 186, 190
(2003) ("[T]he only proper defendant for any matter before this court is the United States, not its
officers, nor any other individual."). This court does not possess jurisdiction to hear claims
against individual federal government officials. See Brown v. United States, 105 F.3d 621, 624
(Fed. Cir. 1997) ("The Tucker Act grants the Court of Federal Claims jurisdiction over suits
against the United States, not against individual federal officials."). Moreover, a claim that IRS
employees engaged in the unauthorized collection of taxes pursuant to IRC § 7433 must be
brought in a federal district court, and the Court of Federal Claims is not a district court. See
Ledford v. United States, 297 F.3d 1378, 1382 (Fed. Cir. 2002) (per curiam); Alford v. United
States, 3 Cl. Ct. 229, 230 (1983). Accordingly, the court dismisses plaintiffs claims against the
unnamed IRS agents for lack of jurisdiction.
D. The Court Lacks Jurisdiction to Entertain Plaintiff's Tax Refund Claim
Plaintiffs tax refund claim is also not properly before the court. Congress has explicitly
waived sovereign immunity for tax refund suits. 26 U.S.C. § 7422 (2012); 28 U.S.C.
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§ 1346(a)(l); Chi. Milwaukee Corp. v. United States, 40 F.3d 373, 374 (Fed. Cir. 1994).
However, the jurisdiction of the Court of Federal Claims to entertain tax refund suits is limited to
those situations where the taxpayer has complied with the provisions of the IRC. See 26 U.S.C.
§ 7422(a); United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1, 4 (2008); Chi.
Milwaukee Corp., 40 F.3d at 374.
Under the IRC, a taxpayer may not file a tax refund suit "until a claim for refund or credit
has been duly filed with the [IRS], according to the provisions of law in that regard, and the
regulations of the Secretary [of the United States Department of the Treasury] established in
pursuance thereof." 26 U.S.C. § 7422(a). To be "duly filed":
The claim must set forth in detail each ground upon which a credit or refund is
claimed and facts sufficient to apprise the Commissioner of the exact basis
thereof. The statement of the grounds and facts must be verified by a written
declaration that it is made under the penalties of perjury. A claim which does not
comply with this paragraph will not be considered for any purpose as a claim for
refund or credit.
26 C.F.R. § 301.6402-2(b)(l) (2015). A claim for the refund of individual income taxes must be
made on a Form 1040X, "Amended U.S. Individual Income Tax Return," id. § 301.6402-3(a)(l)
to (2), that has been "properly executed," id. § 301.6402-3(a)(5). A claim for the refund of
penalties must be made on Form 843, "Claim for Refund and Request for Abatement." Id.
§ 301.6402-2(c ).
Plaintiff has not established that he has filed any valid claims for refund with the IRS. As
an initial matter, plaintiff did not note an overpayment of taxes on the amended returns attached
to his complaint for tax years 1999, 2000, 2003, 2004, and 2010. Consequently, those amended
returns did not include requests for a refund. Because such a request is a necessary element of a
claim for refund, these amended returns cannot constitute duly filed refund claims.
In addition, the amended returns and substitute W-2s that plaintiff attached to his
complaint for the remaining tax years are substantially similar to those described in Waltner v.
United States, 679 F.3d 1329 (Fed. Cir. 2012). The taxpayers in Waltner filed amended income
tax returns and substitute W-2s on which they reported zero income, directly contradicting the
information provided on their original income tax returns and the W-2s that their employers
provided to the IRS. Id. at 1330-31, 1334. Moreover, the taxpayers took no action to obtain
corrected W-2s that might corroborate their claims of zero income. Id. The United States Court
of Appeals for the Federal Circuit noted these facts and concluded that "the taxpayers' amended
returns ... do not implicate an 'honest and reasonable intent to supply information required by
the tax code' or rise to the level of specificity required by regulation." Id. at 1334 (quoting
United States v. Moore, 627 F.2d 830, 835 (7th Cir. 1980)). It therefore held that "[n]one of the
forms submitted by the taxpayers constitute[d] 'properly executed' returns that [could] serve as
claims for refund over which the Court of Federal Claims has jurisdiction." Id. (quoting 26
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C.F.R. § 301.6402-3(a)(5)). In this case, plaintiff submitted to the IRS amended income tax
returns reflecting zero adjusted gross income and zero tax liability, contradicting his earlier filed
returns. Plaintiff also submitted substitute W-2s reporting zero income and reflecting that he had
not attempted to obtain corrected W-2s from the original issuers. Accordingly, like the taxpayers
in Waltner, plaintiff has not filed valid claims for refund with the IRS for these tax years.
E. The Court Lacks Jurisdiction to Entertain Plaintiff's Challenges to the IRS's Levy
Plaintiffs only remaining claims are his challenges to the IRS' s levy of his Social
Security payments. Broadly construing the allegations in the complaint, plaintiff appears to be
advancing the following arguments with respect to the levy: (1) the IRS unlawfully imposed the
levy, (2) the IRS is unlawfully collecting his unpaid civil penalties from the Social Security
Administration pursuant to the levy, (3) the IRS should refund the funds it collected from the
Social Security Administration pursuant to the levy, (4) the IRS and the Social Security
Administration conspired to deprive him of his property, and (5) he is entitled to damages under
the Administrative Procedure Act and IRC § 7434. The court does not possess jurisdiction to
entertain any of these arguments.
1. Imposition of the Levy
Plaintiff first contends that the IRS unlawfully imposed its levy. The IRS derives its
authority to levy property to recover unpaid taxes from IRC § 6331:
If any person liable to pay any tax neglects or refuses to pay the same within 10
days after notice and demand, it shall be lawful for the Secretary to collect such
tax (and such further sum as shall be sufficient to cover the expenses of the levy)
by levy upon all property and rights to property (except such property as is exempt
under section 6334) belonging to such person or on which there is a lien provided
in this chapter for the payment of such tax.
26 U.S.C. § 633l(a). The procedures to challenge a levy are set forth in IRC § 6330. First, a
taxpayer must request a hearing before the IRS Office of Appeals within thirty days of receiving
notice of the levy. Id. § 6330(a). Once the IRS Office of Appeals makes a determination, the
taxpayer has thirty days to appeal the determination to the United States Tax Court. Id.
§ 6330(d). The IRC does not authorize taxpayers to challenge the IRS's imposition of a levy in
the Court of Federal Claims. Accordingly, the court lacks jurisdiction to entertain such a
challenge.
2. Collection of the Civil Penalties Pursuant to the Levy
Plaintiff next challenges the IRS's collection of the civil penalties it imposed pursuant to
the levy. In other words, plaintiff is seeking to enjoin the IRS's collection activities. However,
the Anti-Injunction Act provides that except in limited circumstances not relevant here, "no suit
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for the purpose of restraining the assessment or collection of any tax shall be maintained in any
court by any person .... " Id.§ 7421(a); Stiles v. United States, 47 Fed. Cl. 1, 2 (2000) ("The
Anti-Injunction Act provides that once a tax has been assessed, a taxpayer is powerless to prevent
the [IRS] from collecting that tax."); cf. Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974)
(noting that the "principal purpose" of the Anti-Injunction Act is "the protection of the
Government's need to assess and collect taxes as expeditiously as possible with a minimum of
preenforcementjudicial interference, 'and to require that the legal right to the disputed sums be
determined in a suit for refund"' (quoting Enochs v. Williams Packing & Navigation Co., 370
U.S. 1, 6 (1962))). Consequently, the court lacks jurisdiction to award the equitable relief that
plaintiff requests. Accord Ledford, 297 F.3d at 1382 (explaining that "no statutory authority
exists that would grant the Court of Federal Claims the power to enjoin an IRS collection
proceeding," and noting that IRC § 7421, in most situations, "flatly prohibits" courts from
providing such relief); Schlabach v. United States, 97 Fed. Cl. 232, 234 (2011) ("This court's
equitable authority does not allow the court to enjoin the IRS from collection of penalties or
taxes even if the IRS' assessment and collection is tied directly to a claim for a refund that is
properly before the court."); Sanders v. United States, 34 Fed. Cl. 38, 48 (1995) ("Nowhere in the
text of26 U.S.C. § 7421 is there an unequivocal and express waiver of sovereign immunity.");
see also Bowen v. Massachusetts, 487 U.S. 879, 905 (1988) ("The Claims Court does not have
the general equitable powers of a district court to grant prospective relief. Indeed, we have stated
categorically that 'the Court of Claims has no power to grant equitable relief."' (quoting
Richardson v. Morris, 409 U.S. 464, 465 (1973) (per curiam))); Brown, 105 F.3d at 624 ("The
Tucker Act does not provide independent jurisdiction over ... claims for equitable relief.").
3. Refunding the Levied Funds
Third, plaintiff seeks a refund of all of the funds that the IRS obtained from the Social
Security Administration to satisfy plaintiffs unpaid civil penalties. However, a taxpayer seeking
a refund of civil penalties must submit a Form 843 to the IRS, 26 C.F.R. § 301.6402-2(c), and
plaintiff has not provided any evidence indicating that he has complied with that requirement.
Furthermore, to maintain a tax refund suit in the Court of Federal Claims, a taxpayer must first
fully pay the taxes at issue. Flora v. United States, 362 U.S. 145, 177 (1960). Similarly, if a
taxpayer's liability consists only of unpaid civil penalties, then the taxpayer must fully pay the
civil penalties at issue before filing suit. Shore v. United States, 9 F.3d 1524, 1527-28 (Fed. Cir.
1993). Plaintiff has provided no evidence that he has paid any of the civil penalties for any tax
year in full. Accordingly, the court lacks jurisdiction to entertain plaintiffs request to recover the
funds that the IRS obtained by levy to collect the assessed civil penalties.
4. Conspiracy
Next, plaintiff contends that the IRS and the Social Security Administration conspired
against him to deprive him of his property. But because conspiracy claims sound in tort, the
Court of Federal Claims lacks jurisdiction to entertain them. Berdick v. United States, 612 F.2d
533, 536 (Ct. Cl. 1979) ("Clearly [conspiracy] claims sounds in tort, and we have no jurisdiction
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to hear such claims."); see also 28 U.S.C. § 1491(a)(l) (excluding claims sounding in tort from
the jurisdiction of the Court of Federal Claims).
5. Damages Under the Administrative Procedure Act and IRC § 7434
Finally, plaintiff alleges that he is entitled to treble damages under the Administrative
Procedure Act for the purported unlawful levy and $100,000 in damages for each deduction from
his Social Security payments pursuant to IRC § 7434. However, the Court of Federal Claims
lacks jurisdiction to grant relief pursuant to the Administrative Procedure Act. See Crocker v.
United States, 125 F.3d 1475, 1476 (Fed. Cir. 1997) (noting that the court "lacks the general
federal question jurisdiction of the district courts, which would allow it to review the agency's
actions and grant relief pursuant to the Administrative Procedure Act"); accord Century
Exploration New Orleans, LLC v. United States, 745 F.3d 1168, 1179-80 (Fed. Cir. 2014); Lion
Raisins, Inc. v. United States, 416 F.3d 1356, 1370 n.11 (Fed. Cir. 2005). And, this court lacks
jurisdiction to entertain suits under IRC § 7434 because that statute provides for taxpayer suits
against individuals who willfully file fraudulent tax returns, and not for taxpayer suits against the
United States. See 26 U.S.C. § 7434(a). As noted above, this court may only entertain suits
against the United States. See 28 U.S.C. § 1491(a)(l); RCFC lO(a); Stephenson, 58 Fed. Cl. at
190.
F. Conclusion
The court has concluded that it does not possess jurisdiction to entertain any of plaintiffs
claims. As a result, it cannot address plaintiffs motion for judgment on the pleadings, motion
for summary judgment, or motion to suspend the IRS levy.
III. APPLICATION TO PROCEED IN FORMA PAUPERIS
Plaintiff filed, concurrent with his complaint, an application to proceed in forma pauperis.
Pursuant to 28 U.S.C. § 1915, the Court of Federal Claims may waive filing fees and security
under certain circumstances. See 28 U.S.C. § 1915(a)(l); see also Hayes v. United States, 71
Fed. Cl. 366, 366-67 (2006) (concluding that 28 U.S.C. § 1915(a)(l) applies to both prisoners
and nonprisoners alike). Plaintiffs wishing to proceed in forma pauperis must submit an affidavit
that lists all of their assets, declares that they are unable to pay the fees or give the security, and
states the nature of the action and their belief that they are entitled to redress. 28 U.S.C.
§ 1915(a)(l). Here, plaintiff has satisfied all three requirements. Accordingly, the court grants
plaintiffs application and waives his filing fee.
IV. CONCLUSION
As explained above, the court GRANTS plaintiffs application to proceed in forma
pauperis, GRANTS defendant's motion to dismiss, and DISMISSES plaintiffs complaint for
lack of jurisdiction. Plaintiffs motions for judgment on the pleadings, partial summary
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judgment, and suspension of the levy are DENIED as MOOT. No costs. The clerk shall enter
judgment accordingly.
IT IS SO ORDERED.
Judge
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