Milazzo v. United States

• Decision Date: 16 January 1984
• Docket Number: 83-1936-T,83-1980-T and 83-2016-T.,Civ. No. 83-1901-T
• Citation: 578 F. Supp. 248
• Court: U.S. District Court — Southern District of California
• Parties: Peter S. and Susan A. MILAZZO, Plaintiffs, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants. Stanley H. and Elizabeth S. CASE, Plaintiffs, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants. John F. DZIUBALA, Plaintiff, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants. James M., Jr. and Shelley BOYCE, Plaintiffs, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants.

578 F. Supp. 248

Peter S. and Susan A. MILAZZO, Plaintiffs, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants.

Stanley H. and Elizabeth S. CASE, Plaintiffs, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants.

John F. DZIUBALA, Plaintiff, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants.

James M., Jr. and Shelley BOYCE, Plaintiffs, v. UNITED STATES of America and Commissioner of Internal Revenue, Defendants.

Civ. Nos. 83-1901-T, 83-1936-T, 83-1980-T and 83-2016-T.

United States District Court, S.D. California.

January 16, 1984.

Peter and Susan Milazzo, plaintiffs pro se.

Stanley and Elizabeth Case, plaintiffs pro se.

Peter K. Nunez, U.S. Atty., Kathryn A. Snyder, Asst. U.S. Atty., San Diego, Cal., Nancy G. Morgan, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendants.

John F. Dziubala, plaintiff pro se.

James M. Jr. and Shelley Boyce, plaintiffs pro se.

ORDER

TURRENTINE, Chief Judge.

The plaintiffs in these actions filed what purport to be their income tax returns for 1982, refusing to furnish any financial data on the forms on the basis of their constitutional rights against self-incrimination. The Internal Revenue Service ("IRS") determined in each case that the purported tax return could not be processed and that it constituted a "frivolous" return within the meaning of § 6702 of the Internal Revenue Code ("Code") of 1954 (26 U.S.C.), which was added to the Code by § 326(a) of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. Law No. 97-248. The $500 civil penalty provided for in § 6702 was duly assessed. Plaintiffs complied with § 6703 of the Code by paying 15% ($75) of that fine and are therefore entitled to challenge the assessment of the penalty in an original action in this court. Jurisdiction is proper under 28 U.S.C. § 1346(a)(1). The plaintiffs all filed complaints alleging several constitutional objections to the imposition of the fines and the government now moves for summary judgment in each case.

These four cases have been consolidated for hearing and for disposition in this order due to their essential identity. The only means of distinguishing among the actions is to examine the plaintiffs' names in the captions. The four complaints are, paragraph for paragraph, identical, as are the four ex parte motions for continuance. The papers which the plaintiffs individually filed with the IRS at the time they mailed in their tax forms also appear to have been photocopied or transcribed from a common source. Judicial economy is thus served by considering these cases together.

I. SECTION 6702 PROPERLY WAS APPLIED TO PLAINTIFFS' TAX RETURNS.

The plaintiffs argue that the penalty contained in § 6702 does not apply to "returns which do not report a self-assessment" of tax. On the contrary, plaintiffs' conduct is the raison d'etre of § 6702. Section 6702(a)(1)(A) specifically provides that the $500 penalty shall be assessed:

If any individual files what purports to be a return of tax imposed by subtitle A but which does not contain information on which the substantial correctness of the self-assessment may be judged.

Indeed, the four returns involved in these cases fit quite comfortably into one of the four examples provided in the legislative history: a return which contains insufficient information by which to calculate the tax, or contains inconsistent information, or otherwise reveals a frivolous position or a desire to impede the tax laws. S.Rep. No. 494, 97th Cong., 2d Sess., 277-78 (1982), U.S.Code Cong. & Admin.News, p. 781. The four returns involved here contain the plaintiffs' names and addresses, but are almost wholly devoid of financial information. The entries on most lines of the standard forms 1040 read "object." Two of the returns even more obviously reveal an intent to impede the revenue process: plaintiffs Case and Milazzo refused to even provide their social security numbers. Curiously, these plaintiffs were good enough to note that they received no farm income in 1982.

This law was clearly passed to deal with tax protesters, and no application could be more appropriate than the four in issue here.

II. PLAINTIFFS' ASSERTIONS OF THE FIFTH AMENDMENT PRIVILEGE ARE SPURIOUS.

Plaintiffs' tax returns also fit within another of the examples enumerated in the Senate Report on § 6702:

returns in which many or all of the line items are not filled in, except for spurious constitutional objections.

S.Rep. No. 494, supra, at 277-78, U.S.Code Cong. & Admin.News, p. 1024. The single word "object" appears on most of the lines of plaintiffs' tax returns, and their accompanying letters and memoranda to the IRS make it clear that plaintiffs meant to assert their privilege against self-incrimination. In their complaints, they admit that their tax returns are lacking in required financial information and that their claims of privilege are the reason.

As all of the plaintiffs note in their papers, the credit for the privilege against self-incrimination contained in the Fifth Amendment to the Constitution belongs to James Madison, its author and advocate. However, I do not believe that the manner in which that privilege has been invoked in the instant cases is even remotely akin to what that most eminent of the Framers had in mind.

Fortunately, the court does not have to rely on its historical intuition in this matter, as there is ample case law. For more than fifty years it has been established that a taxpayer may not use the Fifth Amendment to refuse to provide any financial information on his or her federal income tax return. United States v. Sullivan, 274 U.S. 259, 263, 47 S.Ct. 607, 607, 71 L.Ed. 1037 (1927); United States v. Heise, 709 F.2d 449, 451 (6th Cir.1983); United States v. Neff, 615 F.2d 1235, 1239 (9th Cir.1980), cert. denied 447 U.S. 925, 100 S.Ct. 3018, 65 L.Ed.2d 1117 (1980). In fact, the courts have consistently held that when the data provided on a purported return are so incomplete that the tax liability cannot be computed, the filed document does not even constitute a tax return. Heise, supra, at 451; Edwards v. Commissioner, 680 F.2d 1268, 1269-70 (9th Cir.1982); United States v. Pilcher, 672 F.2d 875, 877 (11th Cir.1982), cert. denied 459 U.S. 973, 103 S.Ct. 306, 74 L.Ed.2d 286 (1982); Beatty v. Commissioner, 667 F.2d 501, 502 (5th Cir. 1982); United States v. Edelson, 604 F.2d 232, 234 (3d Cir.1979).

A citizen remains free to claim the Fifth Amendment privilege on a tax return, of course—but there are certain requirements that must be met. "The witness is not exonerated from answering merely because he declares that in so doing he would incriminate himself—his say-so does not of itself establish the hazard of incrimination." Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118 (1951); United States v. Neff, supra, at 1240. Nor, as plaintiffs seem to think, is the validity of a claim of privilege a question for a jury. When a person "takes the Fifth," "it is for the court to decide whether his silence is justified." Hoffman, supra, 341 U.S. at 486, 71 S.Ct. at 818.

In United States v. Neff, supra, the Ninth Circuit set out the applicable standards for invoking the Fifth Amendment in tax cases in an opinion by Judge Wallace. The defendant had appealed his conviction under Code § 7203 for willful failure to file a return. His returns, like those in the instant cases, contained no financial information and numerous entries of "object: self-incrimination." Judge Wallace wrote that in order to claim the privilege validly, a defendant must be faced with "substantial hazards of self incrimination" that are "real and appreciable" and not merely "imaginary and unsubstantial." Moreover, he must have "reasonable cause to apprehend such danger from a direct answer to the questions posed to him. The information that would be revealed by direct answer need not be such as would itself support a criminal conviction, however, but must simply furnish a link in the chain of evidence needed to prosecute the claimant for a federal crime." Neff, supra, at 1239 (citations omitted).

Here, as in Neff, nothing suggests that plaintiffs' responses to mundane tax questions would be the least bit incriminating. The income tax questions are "neutral on their face and directed to the public at large." Ibid. Nor does "the setting in which they were asked—a general inquiry about the taxpayer's financial and tax status, to be completed in the privacy of his own home—alter the non-incriminatory nature of those questions." Id. at 1240. In fact, the "peculiarities of the case," ibid., suggest that plaintiffs' refusal to complete their forms 1040 has nothing to do with the constitutional policies which animate the Fifth Amendment. This is a case of tax protesters who simply do not want to shoulder their share of the nation's tax burden.

The court is not presented here with individual citizens exercising their right against self-incrimination in good faith. These plaintiffs have marched virtually in lock-step. Every paper they have filed in these actions—be it the refund claim, the memorandum on the Fifth Amendment, the complaint or the motion for a continuance—seems to have been copied, line for line, from the same source. Perhaps the plaintiffs all subscribe to the same tax protester's newsletter. The typefaces vary, but the song remains the same—and the tune is one of broad objection to paying taxes along with the rest of us.

In such a case where the circumstances appear innocuous, an assertion of privilege must be overruled unless the party makes a "positive disclosure" indicating where the danger lurks. McCoy v. Commissioner, 696 F.2d 1234, 1236 (9th Cir. 1983); Neff, supra, at 1238; see also Hoffman v. United States, supra, 341 U.S. at 486, 71 S.Ct. at 818. Despite the plaintiffs' apparent familiarity with the nuances of Fifth Amendment law—each...