Franklet v. United States

• Decision Date: 09 January 1984
• Docket Number: C-83-4004-WWS,C-83-3939-WWS,C-83-3958-WWS,No. C-83-3938-WWS,C-83-3957-WWS,C-83-4003-WWS,C-83-4218-WWS and C-83-4219-WWS.,C-83-3938-WWS
• Parties: Sharon FRANKLET, Plaintiff, v. UNITED STATES of America, Defendant. Dinah BACHRACH, Plaintiff, v. UNITED STATES of America, Defendant. John W. McCHESNEY-YOUNG and Ann L. McChesney-Young, Plaintiffs, v. UNITED STATES of America, Defendant. Kolya M. BRAUN, Plaintiff, v. UNITED STATES of America. Mary McKENNA, Plaintiff, v. UNITED STATES of America, Defendant. James T. AYERS, Plaintiff, v. UNITED STATES of America, Defendant. Judith L. KAPLAN, Plaintiff, v. UNITED STATES of America, Defendant. Timothy A. PEARCE, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Northern District of California

578 F. Supp. 1552

Sharon FRANKLET, Plaintiff, v. UNITED STATES of America, Defendant.

Dinah BACHRACH, Plaintiff, v. UNITED STATES of America, Defendant.

John W. McCHESNEY-YOUNG and Ann L. McChesney-Young, Plaintiffs, v. UNITED STATES of America, Defendant.

Kolya M. BRAUN, Plaintiff, v. UNITED STATES of America.

Mary McKENNA, Plaintiff, v. UNITED STATES of America, Defendant.

James T. AYERS, Plaintiff, v. UNITED STATES of America, Defendant.

Judith L. KAPLAN, Plaintiff, v. UNITED STATES of America, Defendant.

Timothy A. PEARCE, Plaintiff, v. UNITED STATES of America, Defendant.

Nos. C-83-3938-WWS, C-83-3939-WWS, C-83-3957-WWS, C-83-3958-WWS, C-83-4003-WWS, C-83-4004-WWS, C-83-4218-WWS and C-83-4219-WWS.

United States District Court, N.D. California.

January 9, 1984.

Ralph Johansen, San Francisco, Cal., for plaintiffs.

Michael D. Howard, Asst. U.S. Atty., San Francisco, Cal., for defendant.

MEMORANDUM OF OPINION AND ORDER

SCHWARZER, District Judge.

In these eight related actions, taxpayers have challenged penalties assessed against them by the Internal Revenue Service for filing "frivolous" 1982 income tax returns. Defendant has moved to dismiss the actions for failure to state a claim on which relief can be granted or alternatively for summary judgment. Plaintiffs have made cross-motions for summary judgment.

All the taxpayers oppose the use of their taxes to support or supply the military on ethical or religious grounds. The facts of the individual cases are established by the allegations of the complaints and counsel's oral stipulations at the hearing, are undisputed and are as follows:

In Franklet v. United States, No. C-83-3938-WWS, plaintiff claimed a "war tax credit" on line 42 of her 1982 Form 1040 tax return in the amount of $1876.

In Bachrach v. United States, No. C-83-3939-WWS, plaintiff claimed as a business expense deduction an "ethical redirection of military tax to social services" on line 30c of Schedule C to her 1982 Form 1040 tax return in the amount of $3354.

In McChesney-Young v. United States, No. C-83-3957-WWS, plaintiffs claimed a "war tax deduction" on line 26 of Schedule A to their 1982 joint Form 1040 tax return in the amount of $14,422.81. In Braun v. United States, No. C-83-3958-WWS, plaintiff claimed a "war tax credit" on line 48 of her 1982 Form 1040 tax return in the amount of $99.68.

In McKenna v. United States, No. C-83-4003-WWS, plaintiff alleges in her complaint that she "wrote a statement across the tax form generally protesting the uses to which a stated percentage of the tax paid was put, which corresponded to the amount used for military spending," but "made no other entry on her return than that required by the law and regulations, taking no `war tax deduction.'" At the hearing on these motions, however, counsel stipulated that, in addition to a notation of protest, plaintiff claimed a credit against tax pursuant to her protest at line 19b of her 1982 Form 1040A tax return in the amount of $184. She then entered two sets of figures at line 20 (total tax) and line 21 (refund claimed), one incorporating the credit, one not.

In Ayers v. United States, No. C-83-4004-WWS, plaintiff claimed a "war tax deduction" on line 26 of Schedule A to his 1982 Form 1040 tax return in the amount of $6074.27.

In Kaplan v. United States, No. C-83-4218-WWS, plaintiff claimed a credit against tax based on a payment "to Alternative Fund" on line 63 of her 1982 Form 1040 tax return in the amount of $835.

In Pearce v. United States, C-83-4219-WWS, plaintiff claimed a "Conscience War Tax Deduction" on line 26 of Schedule A to his 1982 Form 1040 tax return in the amount of $1848.42.

The IRS assessed each of the plaintiffs a $500 penalty pursuant to 26 U.S.C. § 6702.¹ As required by id. § 6703(c), each paid 15% of his or her penalty ($75), and demanded a refund and abatement from the IRS. The IRS denied each claim. Each plaintiff then filed an action in district court for a refund of that portion of the penalty already paid, and abatement of the remainder. Plaintiffs challenge the penalties on numerous statutory and constitutional grounds.

I. Scope of the Statute

Plaintiffs initially assert that the penalty may not be assessed against them because their actions fall outside the scope of the statute. However, the statute's plain language, supported by clear legislative history, demonstrates that plaintiffs' actions are precisely those that Congress intended the statute to reach. Under § 6702, a penalty is assessable only if two criteria are met. First, the taxpayer's return must either "not contain information on which the substantial correctness of the self-assessment may be judged," § 6702(a)(1)(A); or "contain information that on its face indicates that the self-assessment is substantially incorrect," § 6702(a)(1)(B). Whatever other meaning may be attributed to the term "self-assessment", it clearly includes a taxpayer's representations on the return as to the tax due or refund claimed. The legislative history specifies 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...." S.Rep. No. 494, 97th Cong., 2d Sess. 278 (1982), reprinted in 1982 U.S. Code Cong. & Ad.News 781, 1024. See also section III A, infra. All the returns at issue here save plaintiff McKenna's unequivocally claim such an "incorrect tax due ... because of a clearly unallowable deduction." These returns thus plainly "contain information that on its face indicates that the self-assessment is substantially incorrect," and satisfy § 6702(a)(1)(B). Plaintiff McKenna's return provides two sets of figures for tax due, one reflecting an impermissible "war tax" reduction, and the other not. Because McKenna failed to specify which of the two figures on her return represented her self-assessment, her return "does not contain information on which the substantial correctness of the self-assessment may be judged," and thus satisfies § 6702(a)(1)(A).

Second, the penalty may be assessed against a taxpayer only if the conduct discussed above results from the taxpayer's taking a "position which is frivolous," § 6702(a)(2)(A); or the taxpayer's "desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws," § 6702(a)(2)(B). The incorrectness or incompleteness of the plaintiffs' returns results here from their adoption of positions that are "frivolous" within the statute's meaning. The legislative history states that:

the penalty could be imposed against any individual filing a `return' showing ... a reduced tax due, because of the individual's claim of 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 ....²

S.Rep., supra, at 278, reprinted in 1982 U.S.Code Cong. & Ad.News at 1024. Moreover, the long and unbroken line of authority establishing the impermissibility of these tax reductions dispels any doubt that plaintiffs' positions are "frivolous" within the meaning of the statute. See, e.g., Lull v. Commissioner, 602 F.2d 1166 (4th Cir. 1979), cert. denied, 444 U.S. 1014, 100 S.Ct. 664, 62 L.Ed.2d 643 (1980); First v. Commissioner, 547 F.2d 45 (7th Cir.1976) (per curiam); Autenrieth v. Cullen, 418 F.2d 586 (9th Cir.1969), cert. denied, 397 U.S. 1036, 90 S.Ct. 1353, 25 L.Ed.2d 647 (1970).³ See also section III A, infra.

These are not cases in which taxpayers rely on a colorable interpretation of the tax code or assert negligence in the preparation of their returns. Plaintiffs' positions fall squarely within § 6702(a)(2)(A), and the penalties were therefore properly assessed.

II. Substantive First Amendment Challenges

A. Right to Petition the Government for Redress of Grievances

Plaintiffs argue that the penalties assessed against them impermissibly restrict the right to petition the government for redress of grievances guaranteed to them by the First Amendment. The argument is without substance. Penalizing an individual who seeks to claim frivolous tax deductions in no way hinders that individual from complaining to any government official about the way those taxes are spent. See, e.g., Cupp v. Commissioner, 65 T.C. 68, 83-84 (1975), aff'd, 559 F.2d 1207 (3d Cir.1977).

B. Free Exercise of Religion

Plaintiffs also argue that the § 6702 penalty impermissibly burdens their First Amendment right to the free exercise of religion.⁴ This contention is meritless as well. The necessities of revenue collection under enactments of general applicability raise governmental interests sufficiently compelling to outweigh the free exercise rights of those who find the tax objectionable on bona fide religious grounds. As the Supreme Court recently stated: "The tax system could not function if denominations were allowed to challenge the tax system because tax payments were spent in a manner that violates their religious belief." United States v. Lee, 455 U.S. 252, 260, 102 S.Ct. 1051, 1056, 71 L.Ed.2d 127 (1982). See also Autenrieth, supra, 418 F.2d at 588-89; cf. Kalish v. United States, 411 F.2d 606 (9th Cir.) (per curiam), cert. denied, 396 U.S. 835, 90 S.Ct. 93, 24 L.Ed.2d 86 (1969). The penalty in question here applies to any taxpayer adopting any frivolous position for any reason. It does not penalize plaintiffs' exercise of conscience as such any more than the taxes they originally sought to avoid. "On matters religious, it is neutral." Autenrieth, supra, 418 F.2d at 588.

C. Freedom of Expression

Similar reasoning applies to any claim that § 6702 impermissibly abridges plaintiffs' First Amendment rights to freedom of expression. Even if plaintiffs' attempts to avoid or redirect their taxes were treated as expressive activity protected by the First Amendment, the authorities cited above establish...