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6458
Angela Stark Brief for 9th circuit Re Penalty for Zero Return
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Angela Stark Brief for 9th circuit Re Penalty for Zero Return
No. 04-55017
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ANGELA STARK,
Plaintiff and Appellant
vs.
UNITED STATES OF AMERICA, INTERNAL REVENUE SERVICE
Defendants and Appellees
APPELLANTS' OPENING BRIEF
Appeal from the United States District Court for
The Central District of California
CV 03-1959-RSWL(CTx)
ANGELA STARK
In Pro Se
10864 Washington Boulevard
Culver City, CA 90232
(310) 390-6470
TABLE OF CONTENTS
JURISDICTIONAL STATEMENT...................................................... 1
STATEMENT OF ISSUES................................................................... 1
BRIEF STATEMENT OF THE CASE................................................. 3
STATEMENT OF FACTS.................................................................... 4
SUMMARY OF ARGUMENT............................................................. 6
ARGUMENT.......................................................................................... 8
I. The District Court Had Subject Matter Jurisdiction;
Ignored U.S. v. Long and Abused Its Discretion
In Ruling That The Court Did Not Have Subject
Matter Jurisdiction............................................................. 8
A. A Tax Return That Reports Zeros On Each
Line and Is Signed By The Taxpayer
Without Any Modifications, Additions, Or
Deletions To The Attestation Statement Is a
Return for Purposes of I.R.S. Code
§'s 6501 and 6511.................................................... 8
B. Standard of Review for Lack of Subject Matter
Jurisdiction is De Novo............................................ 9
i
C. Standard of Review for Exhaustion is Abuse of
Discretion.................................................................. 11
D. Subject Matter Jurisdiction is Intertwined
With The Merits....................................................... 11
CONCLUSION AND RELIEF REQUESTED.................................... 12
ii
TABLE OF AUTHORITIES
CASES
Association of Flight Attendants v. Horizon Air, Inc.
280 F3d 901, 904 (9th Cir. 2002)........................................................... 10
King County v. Rasmussen
299 F3d 1077, 1088 (9th Cir. 2002)....................................................... 9
Lovell v. Chandler
303 F3d 1039, 1052 (9th Cir. 2002)....................................................... 10
McGraw v. United States
281 F3d 997, 1001 (9th Cir. 2002), amended 298 F3d 754.................. 9
Pension Benefit Guar. Corp. V. Carter & Tillery Enterprises
133 F3d 1183, 1187 (9th Cir. 1998)....................................................... 11
Steen v. John Hancock Mutual Life Ins. Co.
106 F3d 904, 910 (9th Cir. 1997)........................................................... 12
United States v. Grabowski
727 F2d 681 (8th Cir. 1984)................................................................4, 7, 8
United States v. Hughes Aircraft Co.
162 F3d 1027, 1030 (9th Cir. 1988)..........................................................10
United States v. Kimball
925 F2d 356 (9th Cir. 1991)............................................................... 4, 7, 8
United States v. Long
618 F2d 74 (9th Cir. 1980) ............................................................4, 7, 8, 10
iii
Valdez v. Rosenbaum
302 F3d 1039, 1043 (9th Cir. 2002)......................................................... 10
Ventura Packers, Inc. v. F/V Jeanine Cathleen
305 F3d 913, 916 (9th Cir. 2002)............................................................. 10
STATUTES/CODES
Internal Revenue Code § 6501...........................................................6, 8, 9
Internal Revenue Code § 6511...........................................................6, 8, 9
Internal Revenue Code §7521(a)(1)....................................................... 3
26 U.S.C. 6702....................................................................................... 4
28 U.S.C. 1331........................................................................................ 1
iv
JURISDICTIONAL STATEMENT
The district court has jurisdiction pursuant to 28 U.S.C. § 1331 (federal question jurisdiction).
The district court granted Appellees Cross-Motion for Summary Judgment in part based upon a perceived lack of subject matter jurisdiction due to Appellants alleged failure to exhaust her administrative remedies. Based on the court's ruling, the court then dismissed the action on December 8, 2003.
This appeal is from the granting of the Appellees Cross-Motion for Summary Judgment alleging lack of subject matter jurisdiction for failure to exhaust administrative remedies.
STATEMENT OF ISSUES
1. Appellant properly filed her Federal Income Tax Form 1040's, for the calendar years 1999 and 2000. Appellant properly placed her name and address on the forms. She then reported zeros on each line, signed the forms without any modifications, additions, or deletions to the attestation statement. 1
Shouldn't a Form 1040 that reports zeros on each line and is signed by the taxpayer without any modifications, additions, or deletions to the attestation statement constitute a non-frivolous return for purposes of sections 6501 and 6511 of the Internal Revenue Code ?
2. Presuming that the Appellant's filings were "returns" pursuant to Internal Revenue Code sections 6501 and 6511, was it proper for the Internal Revenue Service to assess Appellant "frivolous penalties" for filing her returns ?
3. If the Internal Revenue Service's frivolous penalty assessment was improperly assessed against Appellant, wasn't it void ab initio ?
4. If the frivolous penalty assessment was void ab initio, wouldn't the granting of Appellees Motion for Summary Judgment for failure to exhaust administrative remedies constitute an abuse of discretion by the district court and thus prohibit the granting of a Motion for Summary Judgment for failure to exhaust administrative remedies ?
2
BRIEF STATEMENT OF THE CASE
Appellant filed suit in the United States Court, Central District of California to overturn two Internal Revenue Code assessments of $500.00 each for allegedly filing frivolous income tax returns for calendar years 1999 and 2000.
There were numerous irregularities in the Collection Due Process hearing, including but not limited to the Internal Revenue Service Agents refusing to allow Appellant to tape record the session or to allow her to bring a court reporter to the hearing, despite the taxpayer having a right to so do pursuant to Section 7521(a)(1) of the Internal Revenue Code.
Appellant contends that the zeros constituted information relating to the taxpayer's income from which the tax can be computed. The resulting assessments might not reflect the taxpayer's actual tax liability, but some computation was possible.
While the Internal Revenue Code contemplates that returns will sometimes be filed with intentional falsity, there is no dispute that such false returns are, in fact, returns. Thus, the difference between a lack of honest
3
intent to supply accurate financial information and the dishonest intent to supply false financial information is subtle at best.
The court construed the Complaint filed by Appellant as a challenge to the underlying merits of the frivolous return penalties of $500.00 each that the I.R.S. assessed against her, pursuant to 26 U.S.C. § 6702, regarding her Federal income tax returns for calendar years 1999 and 2000.
Appellant contended that the returns were not frivolous, based upon this court's ruling in United States v. Long 618 F2d 74 (9th Cir. 1980), as well as United States v. Kimball 925 F2d 356 (9th Cir. 1991), United States v. Grabowski 727 F2d 681 (8th Cir. 1984), and a Memorandum from the Department of the Treasury, Internal Revenue Service No. 200028033, Release Date: 7/14/2000; WTA-N-107529-00WLI#1 (Attached hereto as Exhibit "A") . Since the returns were not frivolous, the frivolous assessment fees were void ab initio.
STATEMENT OF FACTS
On or about August 13, 2001, Appellant filed her income tax return for
4
calendar year 1999. On August 19, Appellant filed her income return for calendar year 2000. Appellant, in reliance on case law from this court, as well as memorandum advice (Exhibit "A") from the Internal Revenue Service, filed zeroes on each line and signed the attestation without any modifications, additions, or deletions.
On or about October 24, 2001, Appellant received letter PRE-6640, a computer generated form letter stating in part that the I.R.S. could not accept the form 1040 filed by Appellant for calendar year 1999, and that they had "determined" that the return was a "frivolous return".
On October 24, 2001, Appellant replied, requesting information regarding her appeal rights and right to protest.
On or about November 8, 2001, Appellant received letter PRE-6640, a computer generated form letter stating in part that the I.R.S. could not accept the form 1040 filed by Appellant for calendar year 2000, and that they had "determined" that the return was a "frivolous return".
On or about April 15, 2002, Appellant received a "Notice of Penalty Charge" letter from the I.R.S. On or about February 19, 2003, I.R.S. agent
5
Patrick Lin, denied Appellant's CDP (Collection Due Process) appeal via a "Notice of Determination".
Appellant did not pay the penalty nor did she file a claim for a refund on Form 843 by May 15, 2002. Appellant believes that the underlying "frivolous penalty" assessment is barred by the case law of this court as well as the I.R.S. Memorandum attached hereto as Exhibit "A".
SUMMARY OF ARGUMENT
Appellant should never have been assessed a frivolous penalty because the filing of a federal income tax return reporting zeros on each line should be treated as a return for purposes of Internal Revenue Code §'s 6501 and 6511.
Whether plaintiff has established probable success in this case is determined by answering the following questions:
(1) is the filing of a federal income tax return reporting zeros on each line a valid return for purposes of Internal Revenue Code §'s 6501 and 6511?
(2) if the filing of a federal income tax return reporting zeros on each
6
line is a valid return, can the I.R.S. nonetheless arbitrarily impose a frivolous penalty and require a taxpayer to pay any claimed assessment before filing a lawsuit against the I.R.S. to nullify the frivolous penalty assessment ?
Fortunately, this court has already dealt with these issues. See United States v. Long 618 F2d 74 (9th Cir. 1980), as well as United States v. Kimball 925 F2d 356 (9th Cir. 1991), and followed by the 8th circuit in United States v. Grabowski 727 F2d 681 (8th Cir. 1984).
If in fact, the returns are valid returns, then a frivolous penalty should never been assessed. The imposition of a frivolous penalty for filing a return with zeros on each line that was signed by the taxpayer without any modifications, additions, or deletions to the attestation statement was therefore a void act. A void act has no legal consequences.
Since the frivolous penalty assessment was void ab initio, the granting of Appellees Motion for Summary Judgment for failure to exhaust administrative remedies constituted an abuse of discretion by the district court and thus prohibited the granting of a Motion for Summary Judgment for failure to exhaust administrative remedies.
7
ARGUMENT
I. The District Court Had Subject Matter Jurisdiction; Ignored U.S. v. Long and Abused Its Discretion in Ruling That The Court Did Not Have Subject Matter Jurisdiction.
A. A return that reports zeros on each line and is signed by the taxpayer without any modifications, additions, or deletions to the attestation statement is a return for purposes of Internal Revenue Code §'s 6501 and 6511.
This court has held since 1980, that the filing of a return that reports zeros on each line and is signed by the taxpayer without any modifications, additions, or deletions to the attestation statement is a return for purposes of Internal Revenue Code §'s 6501 and 6511. See United States v. Long 618 F2d 74 (9th Cir. 1980), as well as United States v. Kimball 925 F2d 356 (9th Cir. 1991), and followed by the 8th circuit in United States v. Grabowski 727 F2d 681 (8th Cir. 1984). As this court stated:
"The zeros entered on Long's tax forms constitute ‘information
relating to the taxpayer's income from which the tax can be
computed.' The I.R.S. could calculate assessments from
Long's string of zeros, just as it could if Long had entered
other numbers."
8
In addition, a Memorandum from the Department of the Treasury, Internal Revenue Service No. 200028033, Release Date: 7/14/2000; WTA-N-107529-00WLI#1 (Attached hereto as Exhibit "A") demonstrates that the Assistant Chief Counsel, Deborah Butler has given advice that a zero return should be treated as a return for purposes of I.R.S. Code § 6501 and 6511.
It is axiomatic that if a return is valid for the purposes of I.R.S. code §'s 6501 and 6511, then no frivolous penalty can apply for submitting a zero return and the I.R.S. frivolous penalty assessment was void ab initio.
B. Standard of Review for Lack of Subject Matter Jurisdiction is De Novo
A district court order dismissing a complaint for lack of subject matter jurisdiction pursuant to FRCP 12(b)(1) is reviewed de novo. The appellate court must accept all un-controverted factual assertions regarding jurisdiction as true. McGraw v. United States 281 F3d 997, 1001 (9th Cir. 2002) amended 298 F3d 754; King County v. Rasmussen 299F3d 1077, 1088 (9th Cir. 2002).
However, factual findings underlying the district court's jurisdictional decision are reviewed under the clearly erroneous standard.
9
See Association of Flight Attendants v. Horizon Air Indus. Inc., 280 F3d 901, 904 (9th Cir. 2002); United States v. Hughes Aircraft Co. 162 F3d 1027, 1030 (9th Cir. 1998). Here, the court failed to abide by the decision in United States v. Long 618 F2d 74 (9th Cir. 1980)
The determination of whether the district court was correct in dismissing plaintiff's complaint with prejudice for lack of subject matter jurisdiction is a conclusion of law, therefore this issue should be reviewed de novo.
Also, an order granting or denying a motion for summary judgment generally is reviewed de novo. See Lovell v. Chandler 303 F3d 1039, 1052 (9th Cir. 2002).
The reviewing court must determine whether, viewing the evidence in the light most favorable to the non moving party, there are any genuine issues of material fact and whether the court correctly applied the relevant substantive law. See Ventura Packers, Inc. v. F/V Jeanine Kathleen 305 F3d 913, 916 (9th Cir. 2002) and Valdez v. Rosenbaum 301 F3d 1039, 1043 (9th Cir. 2002). Clearly, there are material factual issues raised by Appellant as to
10
whether a zero return constitutes a return that is not subject to frivolous
penalties and whether the I.R.S. can arbitrarily impose frivolous assessments on valid returns.
C. Standard of Review for Exhaustion is Abuse of Discretion
Where exhaustion is required by regulation rather than by statute, application of the exhaustion doctrine rests within the district court's sound discretion and is reviewed for abuse of discretion. See Pension Benefit Guaranty Corp. v. Carter and Tillery Enterprises 133 F3d 1183, 1187 (9th Cir. 1998). Appellant claims that the mere filing of a zero return was not subject to a frivolous penalty, and the granting of Defendant/Appellee's Motion for Summary Judgment was an abuse of discretion because a zero return is a valid return not subject to frivolous penalties. Appellant should not have to "exhaust administrative remedies" when the initial assessment was void ab initio.
D. Subject Matter Jurisdiction is Intertwined with the Merits
Where jurisdiction is so intertwined with the merits that its resolution depends on resolution of the merits, the district court should employ the
11
standards applicable for a summary judgment motion. Under that standard. dismissal for lack of jurisdiction is appropriate only if there are no triable
issues of material fact.
The district court's determination will be reviewed under the same de novo standard applied to summary judgment motions. See Steen v. John Hancock Mutual Life Ins. Co. 106 F3d 904, 910 (9th Cir. 1997). Here there was a triable issue of material fact as to whether a zero return was a valid return such that a frivolous assessment by the I.R.S. would not apply.
CONCLUSION AND RELIEF REQUESTED
Appellant has demonstrated that the district court clearly erred when it found that it lacked subject matter jurisdiction over the plaintiff's complaint. The I.R.S.'s frivolous penalty assessment was void ab initio and should never have been assessed against Appellant. Thus, the district court abused its discretion in granting Defendants/Appellee's Motion for Summary Judgment
for Failure to Exhaust Administrative Remedies. Accordingly, Appellant respectfully requests that the granting of the motion for summary judgment be reversed.
12
March 30, 2004 Respectfully submitted,
ANGELA STARK
In Pro Se
13
CERTIFICATION OF COMPLIANCE PURSUANT TO
FED.R.APP.P.32(a)(7)(B)(C) and CIRCUIT RULE 32-1 FOR
COURT OF APPEAL CASE NUMBER 04-55017
(CV 03-1959-RSWL (Ctx))
Pursuant to Fed.R.App.32(a)(7)(C) and Circuit Rule 32-1 for case number 04-55017 (CV 03-1959-RSWL (Ctx)), I certify that the attached brief is proportionately spaced and has a typeface of 15-points and contains 2,440 words.
Dated: March 30, 2004 Respectfully submitted,
ANGELA STARK
In Pro Se