Gonzales v. United States
| Decision Date | 30 April 2014 |
| Docket Number | No. 12-66T,12-66T |
| Parties | TOM GONZALES, as Personal Representative for the Estate of Thomas J. Gonzales, II; Thomas J. Gonzales, II, Administrative Trust, Plaintiff, v. THE UNITED STATES, Defendant. |
| Court | U.S. Claims Court |
Cross-Motions for Summary
Judgment, RCFC 56; Luxury
Demonstrator Exemption Under
I.R.C. § 4002(b)(1); Gas
Guzzler Tax; I.R.C. § 4064;
Abatement of Penalties and
Interest
Frances D. Sheehy, Coconut Creek, FL, for plaintiff.
Shelley dA. Leonard, with whom were Kathryn Keneally, Assistant Attorney General, and David I. Pincus, Chief, Court of Federal Claims Section, United States Department of Justice, Tax Division, Washington, DC, for defendant.
Plaintiff brought suit in this court challenging the luxury tax and gas guzzler tax assessments imposed on an imported McLaren F-1 (the car, the vehicle, the McLaren), a high-performance, luxury vehicle. Plaintiff seeks to recover the tax paid,1 asserting that the imported McLaren was exempt from the assessed taxes. See Complaint (Compl.),ECF No. 1, filed Feb. 1, 2012. Defendant (the government) filed its answer and counterclaim on June 15, 2012, Def.'s Ans. and Countercl., ECF No. 13, seeking an additional $20,000 in luxury tax based on the purchase price of $1.5 million for the McLaren rather than the initially assessed price, $1 million. Id. ¶¶ 51, 57.
The parties conducted discovery in late 2012 and early 2013. Cross-motions for summary judgment were filed thereafter. Before the court are Plaintiff's Motion for Summary Judgment (Pl.'s Mot.) and Plaintiff's Proposed Findings of Uncontroverted Facts, ECF No. 26, attached to which is an Appendix (Pl.'s App.), ECF Nos. 26-1 to -3, filed October 28, 2013; Defendant's Cross-Motion for Summary Judgment and Response to Plaintiff's Motion (Def.'s Mot.), ECF No. 34, attached to which is an Appendix (Def.'s App.), ECF No. 34-1, and Defendant's Response to Plaintiff's Proposed Findings of Uncontroverted Facts, ECF No. 34-2, filed December 20, 2013; Plaintiff's Response and Reply (Pl.'s Resp.), ECF No. 37, filed January 20, 2014; and Defendant's Reply (Def.'s Reply), ECF No. 38, filed January 27, 2014.2
Oral argument was deemed unnecessary. The matter is now ripe for decision. For the reasons described below, the court DENIES plaintiff's motion for summary judgment and GRANTS defendant's cross-motion.
In May 2000, Thomas J. Gonzales (Mr. Gonzales) purchased and imported a 1998 McLaren F-1 from a German seller through a stateside car dealer located in Missouri. Compl. ¶ 8. A serious car collector, Mr. Gonzales desired to add the McLaren to his collection. Def.'s App. 12 at 25:15-20.
The car required modifications to the engine and other components to meet certain environmental standards prescribed by the Environmental Protection Agency (EPA). Def.'s Mot. 4. To allow the adjustments to be made, the car was held in a secure area by Customs for over a year. See Def.'s App. 42, 49-51. The car had shipped to the United States with an odometer reading of 9905 miles. Compl. ¶ 10. After its testing, modification, and delivery to Mr. Gonzales, the odometer read 10,041 miles. Id.
Mr. Gonzales applied for, and received, an exemption from the Department of Transportation's (DOT) car safety requirements. This exemption, known as a "show or display" exemption, can be obtained for cars with historical or technological significance. Compl. ¶ 9. The McLaren F-1 is one of the cars that the DOT has pre-approved as eligible for such exemption. Def.'s App. 42 ¶ 9; Dep't of Transp., Vehicles Determined Eligible for Importation for Show or Display, www.nhtsa.gov/cars/rules/import/sdlist040109.pdf.4
In the DOT files are several applications for a show or display exemption that Mr. Gonzales submitted for the McLaren. Def.'s App. 61-72. As indicated in the applications, he intended to engage the car in "on-road use." Def.'s App. 68, 72. A car that is eligible for a show or display exemption can be driven a maximum of 2500 miles per year. 49 C.F.R. § 591.6(f)(2). Correspondence from an Allstate insurance agent to Mr. Gonzales confirmed that the car was insured to permit "2500 miles [of driving] per year." Def.'s App. 65. DOT granted Mr. Gonzales's application for the show or display exemption on July 31, 2001. Def.'s App. 60.
Upon certification that the McLaren had been adapted to meet EPA emissions standards and that the DOT exemption had been granted, the car was released from Customs in August 2001 for transport within the United States. Def.'s App. 49-51. A truck transported the car to California for garage storage at one of Mr. Gonzales's homes. The car remained garaged there for the remainder of the time Mr. Gonzales owned it. See Def.'s App. 30 at 96:17-97:2.
Lamentably, before Mr. Gonzales received delivery of the car, he was diagnosed with terminal gastric cancer. Def.'s App. 14 at 30:20-31: 17. In the fall of 2001, Mr. Gonzales transferred the newly delivered McLaren to his father to satisfy an outstanding debt for expenses related to a yacht the two owned. Def.'s App. 31 at 98:16-22, 99: 1-14, 100: 15-17; 38 at 128: 20-22. Mr. Gonzales died several months later, in December 2001. Def.'s App. 14 at 31:7-11. His father became the executor of his estate and the trustee of his administrative trust. Def.'s App. 32 at 102:8-21.
Plaintiff asserts that the McLaren has never been driven on public streets in the United States either during Mr. Gonzales's ownership of the car or after the transfer to Mr. Gonzales's father. Compl. ¶ 11. Mr. Gonzales's father sold the McLaren in March2011. Def.'s App. 83. The mileage on the car was "approximately 10,000 km" at the time of sale. Def.'s App. 105.5
In 2005—four years after Mr. Gonzales's death—the Internal Revenue Service (IRS) assessed against the administrative trust taxes related to the McLaren. Def.'s App. 107-08. For the tax period ending September 30, 2001, the Agency assessed, pursuant to I.R.C. § 4001, a luxury tax in the amount of $38,480, and the Agency assessed, pursuant to § 4064(a), a gas guzzler tax in the amount of $7,700.6 Compl. ¶ 12; Def.'s App. 107-08. On March 31, 2011, plaintiff paid, under protest, the total assessed tax in the amount of $46,180. Compl. ¶ 36; Def.'s App. 108; see also Compl. ¶¶ 12-35 (). In July 2011, plaintiff filed a Form 843 claim for refund of the assessed tax and for the abatement of interest and penalties. Compl. ¶ 37.
Plaintiff filed this suit on February 1, 2012, seeking a refund of $46,180 (the amount of the collected excise taxes) plus interest, attorneys' fees, and costs. See Compl. Plaintiff also seeks abatement of the assessed interest and penalties in the event that the court rules that the tax applies to plaintiff. Id. ¶ 45.
On June 15, 2012, defendant filed its answer and counterclaim, seeking an additional $20,000 in luxury tax. Def.'s Ans. & Countercl. ¶¶ 51, 57. The IRS assessed the additional $20,000 tax on June 25, 2012, because the purchase price of the McLaren was more than had been determined originally. Def.'s App. 108. Plaintiff does not dispute that the purchase price for the McLaren was $1.5 million, rather than the initially assessed $ 1 million. Nor does plaintiff dispute that if it is liable for the assessed tax, it owes the additional $20,000 of luxury tax. Pl.'s Mot. 2, n.2. Instead, plaintiff claims that it is exempted from such liability.
The parties have filed cross-motions for summary judgment pursuant to Rule 56 of the Rules of the United States Court of Federal Claims (RCFC). A party is entitled to summary judgment when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." RCFC 56(a). The movant has the burden of establishing "the absence of any genuine issue of material fact and entitlement to judgment as a matter of law." Crater Corp. v. Lucent Techs., Inc., 255 F.3d 1361,1366 (Fed. Cir. 2001). "The party opposing the motion must point to an evidentiary conflict created on the record; mere denials or conclusory statements are insufficient." SRI Int'l v. Matsushita Elec. Corp. of Am., 775 F.2d 1107, 1116 (Fed. Cir. 1985).
In considering a motion for summary judgment, the court draws all inferences in favor of the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Mann v. United States, 334 F.3d 1048, 1050 (Fed. Cir. 2003). When considering cross-motions for summary judgment, "the court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Mingus Constructors, Inc. v. United States, 812 F2d 1387, 1391 (Fed. Cir. 1987).
In a tax refund suit, plaintiff bears the burden of proving that the assessed tax was incorrect. Helvering v. Taylor, 293 U.S. 507, 515 (1935). Plaintiff also must establish the amount it is entitled to recover. United States v. Janis, 428 U.S. 433, 440 (1976).
Section § 4001 of the Internal Revenue Code (I.R.C.) imposes an excise tax "on the [first] retail sale of any [luxury] passenger vehicle." I.R.C. § 4001.7 Section 4002 of the I.R.C. explains that "[i]f any person uses a passenger vehicle (including any use after importation) before the [first] retail sale of such vehicle, then such person shall be liable for tax under this subchapter in the same manner as if such vehicle were sold at retail by him." I.R.C. § 4002(b)(1). Subsection 4002(b)(3) carves out an exemption from the tax on use of the vehicle described in section 4002(b)(1), and states, "[p]aragraph (1) shall not apply to any use of a passenger vehicle as a demonstrator." I.R.C. § 4002(b)(3). The term "demonstrator" is not defined in the statute, and the relevant proposed regulations have not been adopted by...
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