Holderbaum v. United States

• Decision Date: 12 March 1984
• Docket Number: Civ. A. No. 83-F-1444.
• Citation: 589 F. Supp. 107
• Parties: William HOLDERBAUM, Petitioner, v. UNITED STATES of America; Douglas S. Weikle, Special Agent Internal Revenue Service; Donald T. Regan, Secretary of the Treasury, United States of America; and Rosco L. Egger, Jr., Commissioner of Internal Revenue Service, United States of America, Respondents.
• Court: U.S. District Court — District of Colorado

589 F. Supp. 107

William HOLDERBAUM, Petitioner, v. UNITED STATES of America; Douglas S. Weikle, Special Agent Internal Revenue Service; Donald T. Regan, Secretary of the Treasury, United States of America; and Rosco L. Egger, Jr., Commissioner of Internal Revenue Service, United States of America, Respondents.

Civ. A. No. 83-F-1444.

United States District Court, D. Colorado.

March 12, 1984.

William Holderbaum, pro se.

Robert N. Miller, U.S. Atty., D. Colorado, Denver, Colo., John D. Steffan, Tax Division, Department of Justice, Washington, D.C., for respondents.

ORDER

SHERMAN G. FINESILVER, Chief Judge.

PETITIONER William Holderbaum is a member of the National Commodity And Barter Association ("NCBA"), an alleged "unincorporated, voluntary, political association of individuals, whose members promote individual civil liberties, and extensive tax and monetary reforms." Mr. Holderbaum is currently the subject of an investigation by the Internal Revenue Service ("IRS") regarding his federal tax liabilities for the years 1980 and 1981. As a result of this investigation, a summons has been issued to the Mesa Federal Savings & Loan Association, where the Petitioner maintains bank accounts. The Petitioner brought this action seeking a declaratory judgment that the Tax Equity And Fiscal Responsibility Act of 1982 ("TEFRA") and/or Section 331 of TEFRA, is unconstitutional. Based on this claim, Plaintiff seeks to enjoin the return of all revenues collected pursuant to TEFRA. In addition, Petitioner has requested the Court to quash the third-party recordkeeper summons that has been issued to Mesa Federal Savings & Loan Association. Petitioner maintains that the summons is invalid for three reasons: (1) the Petitioner is the subject of a Justice Department referral; (2) the summons was issued in bad faith; and (3) the summons violates Petitioner's rights under the First Amendment to the United States Constitution.

This matter is before the Court on the following motions, filed by Respondent on October 3, 1983: (1) Respondent's Motion To Dismiss Petition For Declaratory And Injunctive Relief; (2) Respondent's Motion To Strike Improper Parties; and (3) Respondent's Motion To Deny Petition To Quash; For Summary Enforcement Of Summons; And For Attorneys' Fees, Expenses And Costs.

The parties have submitted extensive briefs, affidavits and exhibits in support of their respective positions on Respondent's motions. Upon a careful consideration of the briefs, affidavits, exhibits, and all other materials before the Court, the Court finds as follows: (1) Respondent's Motion To Dismiss Petition For Declaratory And Injunctive Relief should be GRANTED; (2) Respondent's Motion To Strike Improper Parties should be GRANTED; (3) Respondent's Motion To Deny Petition To Quash and Motion For Summary Enforcement Of Summons should be GRANTED; (4) Respondent's Motion For Attorneys' Fees should be DENIED; and (5) Respondent's Motion For Costs should be GRANTED.

I. MOTION TO DISMISS PETITION FOR DECLARATORY AND INJUNCTIVE RELIEF

As noted above, Petitioner moves this Court to declare that Section 331 of TEFRA, and TEFRA in its entirety, are unconstitutional. In its Motion To Dismiss Petition For Declaratory And Injunctive Relief, Respondent maintains that this Court has no jurisdiction to make a declaratory judgment regarding TEFRA. In support of this claim, Respondent cites the Declaratory Judgment Act, 28 U.S.C. § 2201, which states in pertinent part:

In a case of actual controversy within its jurisdiction except with respect to Federal taxes, other than actions brought under section 7428 of the Internal Revenue Code of 1954 or a proceeding under section 505 or 1146 of title 11, 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, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such. (Emphasis added.)

The Court is of the view that the language of the statute is clear. Federal courts are prohibited from declaring the rights of parties regarding the collection of federal income taxes under TEFRA. See John A. Voss and Sharon Voss v. United States, 573 F.Supp. 957 (D.Colo.1983) (an opinion by Judge Kane), appeal docketed, No. 83-2433 (10th Cir. November 30, 1983), and cases cited therein. There are only two exceptions to the general rule barring declaratory relief in cases involving federal taxes: (1) where the government could under no circumstances ultimately prevail and the prerequisites for equity jurisdiction are met; and (2) where an aggrieved party has no access at all to judicial review. John A. Voss and Sharon Voss v. United States, supra. In the instant case, the Court finds that Petitioner's claim fits into neither of these two exceptions. Accordingly, Respondent's Motion To Dismiss Petition For Declaratory Relief should be GRANTED.

Petitioner also moves the Court to issue an injunction requiring the return of all revenue collected under TEFRA, and restraining the collection of taxes under TEFRA. However, given the Court's ruling regarding Petitioner's claim for declaratory relief, the Court finds that Petitioner's claim for injunctive relief is also inappropriate. See Investment Annuity Inc. v. Blumenthal, 609 F.2d 1, 9 (D.C.Cir.1979), cert. denied, 446 U.S. 981, 100 S.Ct. 2961, 64 L.Ed.2d 837 (1980); John A. Voss and Sharon Voss v. United States, supra. Accordingly, Respondent's Motion To Dismiss Petition For Injunctive Relief should be GRANTED.

II. RESPONDENT'S MOTION TO STRIKE IMPROPER PARTIES

Respondent moves the Court to strike Respondents Douglas S. Weikle, Donald T. Regan and Roscoe L. Egger, Jr., from the Petition as improper parties to this action. Petitioner, in his response to Respondent's Motion To Strike, concedes that these individuals are not proper parties at this stage of the litigation. Accordingly, the Court finds that Respondent's Motion To Strike Improper Parties should be GRANTED.

III. MOTION TO DENY PETITION TO QUASH INTERNAL REVENUE SERVICE SUMMONS AND MOTION FOR SUMMARY ENFORCEMENT

As noted above, the Petitioner raises three objections to the IRS summons that has been issued in the instant case: (1) Petitioner is the subject of a "Justice Department referral"; (2) the IRS summons was issued in bad faith; and (3) the IRS summons infringes on Petitioner's rights under the First Amendment to the United States Constitution. The Court finds these allegations, individually and collectively, to be without merit.

A. JUSTICE DEPARTMENT REFERRAL

Petitioner maintains that the IRS lacked authority under 26 U.S.C. § 7602(c)(1) to issue the administrative summons in question because Petitioner is the subject of a "Justice Department referral."

No administrative summons may be issued by the IRS and the IRS may not begin any action to enforce any summons with respect to any person if a Justice Department referral is in effect with respect to such a person. 26 U.S.C. § 7602(c)(1). A Justice Department referral is in effect when:

(i) the Secretary has recommended to the Attorney General a grand jury investigation of, or criminal prosecution of, such person for any offense connected with the administration or enforcement of the internal revenue laws, or

(ii) any request is made ... for the disclosure of any return or return information ... relating to such person.

26 U.S.C. § 7602(c)(2)(A).

In support of his allegation regarding the existence of a Justice Department referral in the instant case, Petitioner cites a declaration of Gerald Mihlbachler, District Director of the IRS, taken in the case of John Grandbouche v. Pauline Adams, No. 80-C-1734, (D.Colo. Jan. 1, 1982). Mr. Mihlbachler stated in his declaration of February 12, 1981, that he "concurred in the recommendation for the Grand Jury investigation regarding members of a tax protest organization of which plaintiffs may be associated."

The investigation to which Mr. Mihlbachler refers was directed against John Grandbouche and other members of the NCBA. Petitioner offers no evidence, and fails to even suggest that he was a target of that particular investigation. Rather, petitioner apparently contends that he is the subject of a grand jury investigation because he is a member of the NCBA, which is allegedly the subject of a grand jury investigation.

Upon a review of the affidavits submitted by both parties, the Court finds that there is no Justice Department referral in effect with respect to the Petitioner. The affidavits submitted by the Respondent indicate that Petitioner is not the subject or the target of a grand jury investigation. In addition, the Respondent's affidavits indicate that no referral has been made to the Department of Justice relative to the prosecution of the Petitioner. Therefore, the authority of the IRS with respect to such an individual should not be curtailed merely because he is a member of an organization which may be a subject of a grand jury investigation.

B. GOOD FAITH

The Court also rejects Petitioner's contention that the IRS summons is not judicially enforceable because it was not issued in good faith.

In United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964), the Supreme Court established a four part test for determining whether a summons is issued in good faith. The four part test requires: (1) that the investigation be conducted pursuant to a legitimate purpose; (2) that the inquiry be relevant to that purpose; (3) that the information sought is not already within the commissioner's possession; and (4) that the administrative steps required by the United States Code have been followed. 379 U.S. at 57-58.

The requisite showing of good faith in this area is generally made by the affidavit of the agent who issued the summons and who is seeking enforcement....