Parrish v. Daly

• Decision Date: 16 October 1972
• Docket Number: No. IP 72-C-307.,IP 72-C-307.
• Citation: 350 F. Supp. 735
• Parties: James B. PARRISH v. James L. DALY, District Director, Internal Revenue Service.
• Court: U.S. District Court — Southern District of Indiana

350 F. Supp. 735

James B. PARRISH v. James L. DALY, District Director, Internal Revenue Service.

No. IP 72-C-307.

United States District Court, S. D. Indiana, Indianapolis Division.

October 16, 1972.

F. Pen Cosby, Indianapolis, Ind., for plaintiff.

Stanley B. Miller, U. S. Dist. Atty., by Richard L. Darst, Asst. U. S. Atty., for defendant.

ENTRY

NOLAND, District Judge.

The plaintiff in this case has asked for a permanent injunction restraining the defendant from seizing money or personal property of the plaintiff pursuant to a Notice of Termination of Taxable Period given by defendant to plaintiff under § 6851 of the Internal Revenue Code. Defendant has filed a Motion to Dismiss on the grounds that the Court lacks jurisdiction to enjoin the collection of federal taxes. Although this motion is characterized as a motion to dismiss for lack of subject matter jurisdiction it is really based on an assertion that the plaintiff has failed to state a claim on which relief can be granted. Therefore, it is a motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Suits to enjoin the collection and assessment of taxes are barred by statute. Section 7421 of the Internal Revenue Code states that "no suit for the purpose of restraining the assessment or collection of any tax may be maintained in any court by any person . . ." except as provided in § 6213(a). The present action on its face is one to enjoin the present and prospective collection of federal taxes, and is thus within the general bar of the statute. The plaintiff apparently attempts to bring himself within the exception provided under § 6213(a).

In the cases of Miller v. Standard Nut Margarine Co., 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422 (1932) and Enochs v. Williams Packing and Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962) the Supreme Court has established an extremely limited judicial exception to the general bar of § 7421. The Court ruled that § 7421 is inapplicable "if it is clear that under no circumstances could the Government ultimately prevail" and if the traditional requisites for equitable relief are otherwise present. Williams Packing, 370 U.S. at 7, 82 S.Ct. at 1129.

The only case in which the Supreme Court has permitted an injunction to stand in spite of § 7421 is Miller v. Standard Nut Margarine, supra, which involved the unusual circumstance that the product manufactured by the plaintiff had previously been ruled to be exempt from the excise tax that was subsequently sought to be collected. In order for the plaintiff to bring his case within the Standard Nut Margarine rule, he must show that he has previously been adjudicated free of those income taxes now assessed against him, and thus that the Government under no circumstances can ultimately prevail. As long as there has been no prior adjudication of the liabilities of the plaintiff for 1972, the rule of Standard Nut Margarine does not permit an injunction against collection.

In the instant case the District Director, acting pursuant to the authority contained in § 6851 determined that there was a threat that the taxpayer would act to conceal or to remove his property, which would render virtually uncollectible the present tax liabilities; therefore, in accordance with § 6851 he terminated the 1972 taxable year of the plaintiff herein, and declared that the liability for the terminated period was immediately due and payable. An immediate assessment was made against the taxpayer under the authority contained in § 6201.

Section 6211 of the Internal Revenue Code defines "deficiency" as the amount by which the tax imposed by statute exceeds the amount of tax shown on the taxpayer's return; § 6213 requires that a notice of deficiency be sent to the taxpayer prior only to the assessment of a deficiency. The amount of tax determined for a taxable period that has been terminated in accordance with § 6851 is not a deficiency; it is only a provisional statement of the amount that must be presently paid as a protection against the impossibility of collection at some future date. On this point the Seventh Circuit stated in the case of Williamson v. United States, No. 17,992 (7th Cir. 1971):

"We believe, however, that the deficiency notice requirement cannot be read into Section 6851 because the assessment made under that section is not a deficiency as defined in Section 6211. That section defines a deficiency as the amount by which the 'tax imposed' exceeds the amount shown on the tax return. The assessment in this case was not an imposed tax, but merely an amount which the I.R.S. believed justified the termination of the taxable year. Since no return had been filed at the date of the

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