May v. C.I.R.

• Decision Date: 25 January 1985
• Docket Number: No. 84-1583,84-1583
• Citation: 752 F.2d 1301
• Parties: -747, 85-1 USTC P 9156 Richard D. MAY, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1301

752 F.2d 1301

55 A.F.T.R.2d 85-747, 85-1 USTC P 9156

Richard D. MAY, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.

No. 84-1583.

United States Court of Appeals Eighth Circuit.

Submitted July 2, 1984.

Decided Jan. 25, 1985.

Richard D. May, pro se.

Glenn L. Archer, Jr. & Michael L. Paup, Justice Dept., Washington, D.C., for appellee.

Before HEANEY, BRIGHT and ROSS, Circuit Judges.

BRIGHT, Circuit Judge.

Appellant Richard May appeals from the Tax Court's dismissal of his petition contesting the Commissioner's deficiency determination in his federal income taxes for failure to state a claim and its decision, sua sponte, to impose $5,000 damages against him pursuant to section 6673 of the Internal Revenue Code. We affirm.

I. BACKGROUND.

On February 24, 1983, May received from the Commissioner of Internal Revenue a notice of deficiency in federal income taxes for the years 1978 through 1981. On May 19, 1983, six days before the expiration of the statutory ninety-day period provided taxpayers to file a petition in the Tax Court challenging the Commissioner's determination, the Tax Court received a letter from May requesting that he be sent the "necessary materials" to petition the court and an extension of time in which to file a petition. The court treated that letter as a petition for purposes of the ninety-day period and ordered May to file an amended petition by July 25. On July 22, May filed an amended petition contesting the deficiency determination in which he asserted, inter alia, that he is not subject to federal income tax because the Internal Revenue Code contains no definition of "income" that his income for these years was derived solely from wages which is neither "gain" nor "profit" subject to the federal income tax; that the filing of a tax return is voluntary and he did not "volunteer to self-assess himself" for the years in question; and that the Commissioner violated the Privacy Act of 1974, 5 U.S.C. Sec. 552a (1982), an act of fraud which vitiates his obligation to comply with any act.

On September 9, the Commissioner filed a motion to dismiss the petition for failure to state a claim. The Tax Court granted May until October 13 to file a response to that motion. On October 13, the court received another letter from May requesting an extension of time in which to file his response. The court granted him an extension until November 8. May never filed a response.

The Tax Court, noting that May's petition was comprised of various tax protestations which have been repeatedly and soundly rejected, concluded that the petition was frivolous and had been instituted primarily to delay the payment of taxes. Accordingly, on February 7, 1984, it entered an order granting the Commissioner's motion to dismiss and affirming the determination of deficiencies and additions to tax owed by May for the four years in question. In addition, the court, sua sponte, ordered May to pay $5,000 damages to the United States pursuant to 26 U.S.C. Sec. 6673 (1982). ¹

May brings this appeal pro se. He contends that he filed his petition in the Tax Court to obtain a clarification of the alleged deficiency. He asserts that the Tax Court erred in dismissing his petition before holding a hearing in which the burden of proof was on the Commissioner to establish his tax liability. He also argues that the Tax Court abused its discretion by imposing section 6673 damages against him for asserting a constitutional right.

This court, sua sponte, requested the government to prepare a letter brief addressing the question of whether the Tax Court may assess the maximum damages under 26 U.S.C. Sec. 6673 (1982) without providing notice or the opportunity for a hearing and without a showing that the taxpayer's conduct was willful. On August 9, the government filed a brief supporting the Tax Court's assessment against May of the maximum damages allowable under section 6673. On August 15, 1984, we asked the clerk's office to notify May and inform him that he was entitled to retain counsel and that he would be allowed twenty-five days in which to file a response to the government's brief. That period has long since expired and we have received no response from May.

II. DISCUSSION.

A. Dismissal of petition for failure to state a claim.

The first issue we address is whether the Tax Court properly dismissed May's complaint for failure to state a claim. It is axiomatic that a court should not dismiss a complaint for failure to state a claim "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957) (footnote omitted); Price v. Moody, 677 F.2d 676, 677 (8th Cir.1982). In reviewing the dismissal of a petition for failure to state a claim, we must, of course, assume the plaintiff's allegations to be true. Id.

In this case, the Commissioner made a determination of various deficiencies in May's federal income taxes after he failed to file returns for the tax years 1978-81. Contrary to May's assertion in this appeal, the determinations made by the Commissioner in a notice of deficiency are presumed to be correct and the taxpayer bears the burden of demonstrating any error in the Commissioner's determination. ² Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 9, 78 L.Ed. 212 (1933); Bennett Paper Corp. & Subsidiaries v. Commissioner, 699 F.2d 450, 453 (8th Cir.1983); Abrams v. Commissioner, 82 T.C. 403, 405 (1984).

Upon review of May's amended petition, we find no allegations of fact which could give rise to a valid claim; rather, the complaint merely contains conclusory assertions attacking the constitutionality of the Internal Revenue Code and its applicability to the taxpayer. ³ Tax protest cases like this one raise no genuine controversy; the underlying legal issues have long been settled. See, e.g., Abrams, 82 T.C. at 406-07 (citing cases rejecting similar arguments). Because May's petition raised no justiciable claims, the Tax Court properly dismissed the petition for failure to state a claim.

B. Section 6673 damages.

The second issue we consider is whether the Tax Court erred in assessing damages, sua sponte, under section 6673 against a taxpayer proceeding pro se without first providing the taxpayer with notice or the opportunity for a hearing or without a showing of willfulness. In this case, the Tax Court, sua sponte, imposed damages of $5,000 against May pursuant to section 6673, stating--in language repeating the statutory language--its finding that May had filed a frivolous and groundless action primarily for delay. ⁴

The statutory language of section 6673 does not require that the Tax Court hold a hearing or give notice to the taxpayer as a prerequisite to assessing damages under that section and we have previously noted that the decision whether to impose damages under section 6673 rests within the discretion of the Tax Court. See Lukovsky v. Commissioner, 734 F.2d 1320, 1321 (8th Cir.1984). The problem with the Tax Court's imposition of section 6673 damages in this case is that the court did not indicate anywhere in its opinion the facts from which it concluded that May knew the petition was frivolous and that he had commenced this proceeding primarily to delay the payment of taxes to enable us to review whether it appropriately exercised its discretion in this case.

We are not unsympathetic to the Tax Court's position in these tax protest cases. An all too familiar pattern of claims challenging the Commissioner's deficiency determinations on various constitutional grounds has arisen over the past half dozen years. The Tax Court first noted this trend in Hatfield v. Commissioner, 68 T.C. 895, 899 (1977):

In recent times, this Court has been faced with numerous cases, such as this one, which have been commenced without any legal justification but solely for the purpose of protesting the Federal tax laws. This Court has before it a large number of cases which deserve careful consideration as speedily as possible, and cases of this sort needlessly disrupt our consideration of those genuine controversies. Moreover, by filing cases of this type, the protestors add to the caseload of the Court, which has reached a record size, and such cases increase the expenses of conducting this Court and the operations of the IRS, which expenses must eventually be borne by all of us.

Many citizens may dislike paying their fair share of taxes; everyone feels that he or she needs the money more than the Government. On the other hand, as Justice Oliver Wendell Holmes so eloquently stated: "Taxes are what we pay for civilized society." Compania de Tabacos [sic] v. Collector, 275 U.S. 87, 100 [48 S.Ct. 100, 105, 72 L.Ed. 177] (1927). The greatness of our nation is in no small part due to the willingness of our citizens to honestly and fairly participate in our tax collection system which depends upon self-assessment. Any citizen may resort to the courts whenever he or she in good faith and with a colorable claim desires to challenge the Commissioner's determination; but that does not mean that a citizen may resort to the courts merely to vent his or her anger and attempt symbolically to throw a wrench at the system. Access to the courts depends upon a real and actual wrong--not an imagined wrong--which is susceptible of judicial resolution. General grievances against the policies of the Government, or against the tax system as a whole, are not the types of controversies to be resolved in the courts; Congress is the appropriate body to which such matters should be referred.

Although the court did not impose damages in Hatfield, it warned that it would give "serious consideration" to imposing section 6673 damages in future cases, 68 T.C. at 900, and reiterated that warning in Crowder v. Commissioner, 37 T.C.M. (CCH) 1173, 1173-3 (1978). Nonetheless, the number of...