Drefchinski v. Regan

Citation589 F. Supp. 1516
Decision Date25 June 1984
Docket NumberCiv. A. No. 83-2277.
PartiesAlice DREFCHINSKI v. Donald T. REGAN, et al.
CourtU.S. District Court — Western District of Louisiana

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

William P. Quigley, Quigley & Scheckman, New Orleans, La., for plaintiff.

Steven Shapiro, Chief, Civil Trial Section, Southern Region, U.S. Dept. of Justice, Tax Div., Washington, D.C., for defendants.

RULING

SHAW, District Judge.

This matter comes before the Court on the motion of the defendants, Donald T. Regan and Roscoe L. Egger, Jr. to dismiss the plaintiff's claim, or, in the alternative, for judgment on the pleadings. The plaintiff, Alice Drefchinski, brings this action to challenge the imposition of a $500.00 civil penalty assessed against her by the Internal Revenue Service (IRS) for claiming a "war tax deduction" on her 1982 federal income tax return. The Court will treat the defendant's motion as one for judgment on the pleadings. As such, the motion should be granted only if there is no issue of material fact and if the pleadings show that the defendant is entitled to prevail as a matter of law. For purposes of this motion, all well-pleaded factual allegations in the plaintiff's complaint will be assumed to be true. E.g., Beal v. Missouri Pac. R.R. Corp., 312 U.S. 45, 61 S.Ct. 418, 85 L.Ed. 577 (1941); Greenburg v. General Mills Fun Group, Inc., 478 F.2d 254, 256 (5th Cir.1973).1

Background Facts

The Court must regard the following factual assertions as proven in considering the defendant's motion.

On April 15, 1983, Alice Drefchinski filed an income tax return for the 1982 tax year, using Form 1040 with Schedule A attached for itemized deductions. On line 26 of Schedule A, Drefchinski listed a deduction of $5,082.00 for "War Tax." Drefchinski had determined that this amount equalled the proportion of her income tax monies applied to military spending by the national government. She also attached a letter to her income tax return. This letter called attention to her claimed war tax deduction and requested that this portion of her taxes be applied to various humanitarian causes rather than to military spending. The text of the letter is attached as an appendix to this opinion.

The plaintiff took this action because of her sincerely held religious beliefs as a Roman Catholic. She wanted to fully disclose and explain her beliefs to the IRS, and further wanted to protest compelled payment of taxes for military spending despite her religious beliefs. Drefchinski did not claim the war tax deduction with a desire to impede or delay the administration of the federal income tax laws.

By claiming the war tax deduction, Drefchinski made an incorrect self-assessment of her tax liability for 1982. The war tax deduction increased her total excess itemized deductions by $5,082.00 and decreased her taxable income by the same amount. Accordingly, after taking a $50.00 partial credit for political contributions, she assessed a tax liability of only $988.00. Under the 1982 Tax Tables, her after-credit tax liability would have been $2,067.00 without the war tax deduction. Drefchinski's self-assessment led her to claim a refund due her of $1,799.00, whereas she would have been entitled to a refund of only $720.00 without the war tax deduction. The IRS disallowed the war tax deduction, recalculated the taxes due, and refunded Drefchinski's federal income tax withholding only to the extent that they were due under the recalculation.

On July 21, 1983, the plaintiff received IRS Form 6335 which notified her that the IRS had assessed a $500.00 penalty against her under section 6702 of the Internal Revenue Code, 26 U.S.C. § 6702, for filing a frivolous income tax return. On August 12, 1983, Drefchinski paid fifteen per cent of the penalty, seventy-five dollars, and filed a request for a refund of this money and abatement of the remainder of the penalty and interest. On September 8, 1983, the plaintiff received notice that the IRS had denied her request.

No regulations or guidelines have been published in the Federal Register for implementation of section 6702. For purposes of this motion, the Court must accept as true the allegation that the IRS was following unpublished agency guidelines in applying the section 6702 penalty to the plaintiff.2

Issues

Drefchinski claims that section 6702 does not apply to the return that she filed and that the penalty was assessed and collected in violation of the Administrative Procedure Act, 5 U.S.C. §§ 552 and 706(2)(D). In the alternative, if the statute has been properly applied to her, she urges that section 6702 violates her first amendment rights of freedom of expression, freedom of religion, and freedom to petition the government for a redress of grievances, that section 6702 violates her fifth amendment right to due process because the statute is unconstitutionally vague and because it denies her equal protection of the laws. The defendants of course contend that these claims are without merit. The defendants also claim that they are not proper parties defendant in this action.

Proper Parties Defendant

The plaintiff initiated this suit against Donald T. Regan, as Secretary of the Treasury, and Roscoe L. Egger, as Commissioner of the Internal Revenue Service. Under 26 U.S.C. § 6662(a)(2), a civil penalty under section 6702 is considered a "tax." A suit for refund of a tax or penalty may be maintained only against the United States and not against any officer or employee of the United States. Brennan v. Commissioner, 581 F.Supp. 28 (E.D.Mich.1984) (§ 6702 case); Tibbetts v. Secretary of the Treasury, 577 F.Supp. 911 (W.D.N.C.1984) (section 6702 case); Simpson v. United States, No. 83-1425 (S.D.Ind., Feb. 13, 1984) (section 6702 case); 26 U.S.C. § 7422(f)(1). This suit is plainly one for refund of a tax penalty. The fact that Drefchinski seeks declaratory relief in no way changes the character of this suit because the Declaratory Judgment Act, 28 U.S.C. § 2201 expressly excludes cases brought "with respect to Federal taxes." See, e.g., Horne v. United States, 519 F.2d 51 (5th Cir.1975). Accordingly, the named defendants are entitled to dismissal from this action as improper parties. The plaintiff has added the United States as a party and the Court will proceed to the merits with the United States as the sole defendant.

The Applicability of Section 6702

Section 6702(a) provides:

(a) Civil Penalty.—If—
(1) any individual files what purports to be a return of the tax imposed by subtitle A but which—
(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or
(B) contains information that on its face indicates that the self-assessment is substantially incorrect; and
(2) the conduct referred to in paragraph (1) is due to—
(A) a position which is frivolous, or
(B) a desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws
then such individual shall pay a penalty of $500.

Drefchinski's return easily satisfies the first leg of the section 6702 test. It is true that the return contained sufficient information for the IRS to judge the correctness of her self-assessment. The return provided sufficient information for the IRS to recalculate and assess the tax properly owed after it disallowed the war tax deduction. Yet the return also contained information that indicated that Drefchinski's self-assessment was substantially incorrect. By taking the war tax deduction, Drefchinski represented that she owed less than half of her actual tax liability and that she was entitled to a refund more than double that actually owed to her.

Drefchinski's conduct also satisfies the second leg of the section 6702 test. In this case, the plaintiff's allegation that she did not claim the deduction due to a desire to delay or impede the administration of the income tax laws is controlling. Such a desire does not appear on the return itself.3 Drefchinski's substantially incorrect self-assessment was due to a position which is frivolous within the meaning of section 6702(a)(2)(A), however. The Senate Report states that "the penalty could be imposed against any individual filing a `return' showing an incorrect tax due, or a reduced tax due, because of the individual's claim of a clearly unallowable deduction, such as ... a `war tax' deduction under which the taxpayer reduces his taxable income or shows a reduced tax due by that individual's estimate of the amount of his taxes going to the Defense Department budget...." S.Rep. No. 494, 97th Cong., 2d Sess. 278, reprinted in 1982 U.S.Code Cong. & Ad.News 781, 1024. Congress clearly intended that a return such as Drefchinski's would warrant imposition of the $500 fine for filing a frivolous return.

The plaintiff nonetheless contends that the statutory terms "self-assessment" and "frivolous" are ambiguous and do not clearly encompass her conduct. Specifically, the plaintiff urges that no Supreme Court decision categorically forecloses a deduction for war taxes and points to two pending cases in the Courts of Appeals involving war tax questions. The IRS cites several decisions which establish that a taxpayer may not reduce his tax liability by an amount believed to be spent on the military. E.g., Graves v. Commissioner, 579 F.2d 392 (6th Cir.1978), cert. denied, 440 U.S. 946, 99 S.Ct. 1423, 59 L.Ed.2d 634 (1979). Yet none of the cases cited by either the plaintiff or the Government are particularly relevant on this point. The legislative history conclusively establishes that Drefchinski's conduct falls squarely within the intended scope of the statute. Accord Franklet v. United States, 578 F.Supp. 1552, 1554-55 (N.D.Cal.1984) (a section 6702 "war tax" case); Simpson, (same); Welch v. United States, No. 83-3355 (D.Mass., Jan. 18, 1984) (same).

The plaintiff correctly contends that her opposition to the use of her...

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