Welch v. U.S.
| Decision Date | 04 January 1985 |
| Docket Number | No. 84-1131,84-1131 |
| Citation | 750 F.2d 1101 |
| Parties | , 55 A.F.T.R.2d 85-560, 85-1 USTC P 9122 Sharon D. WELCH, et al., Plaintiffs, Appellants, v. UNITED STATES of America, Defendant, Appellee. |
| Court | U.S. Court of Appeals — First Circuit |
David L. Kelston, Boston, Mass., with whom Nancy Gertner, Silverglate, Gertner, Baker & Fine, and John Reinstein, Civil Liberties Union of Massachusetts, Boston, Mass., were on brief, for appellants.
Elaine F. Ferris, Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., with whom William F. Weld, U.S. Atty., Boston, Mass., Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, Chief, Appellate Sec., and Gary R. Allen, Atty., Tax Div., U.S. Dept. of Justice, Washington, D.C., were on brief, for appellee.
Before CAMPBELL, Chief Judge, BOWNES, Circuit Judge, and PEREZ-GIMENEZ, * District Judge.
This is an appeal from an order of the United States District Court for the District of Massachusetts, dismissing with prejudice plaintiffs' tax refund suit because the complaint failed to state a claim upon which relief could be granted. The appeal presents questions about the constitutionality of a new tax statute, 26 U.S.C. Sec. 6702, 1 and about the legality of the procedures employed by the IRS in assessing and imposing the penalty provided therein. For the reasons stated herein, we affirm the order of the district court.
The relevant facts may be summarized as follows. Plaintiff taxpayers (Sharon S. Welch, Larry Goldsmith and Christopher J. Lenney) each filed a 1982 federal income tax return (Form 1040) on which the amount of his or her reported total tax liability was reduced by a credit claimed on line 48, 2 which represented an estimate of the proportion of taxes to be expended by the United States Government for military purposes. Taxpayer Welch claimed a "war tax credit" in the amount of $1250 on line 48 of her return and attached a letter to the return stating that because of her opposition to war and her religious faith she could not help finance the production and deployment of nuclear and conventional weapons. Welch thus claimed the war tax credit of $1250, "a figure that represents the 52% of our taxes that goes to the military," stating that she would donate her refund to a non-profit charitable organization. Taxpayer Goldsmith claimed a credit of $251.32 on line 48 of his return for alleged "government war crimes." Attached to Goldsmith's return was a letter stating that "[a]s an act of protest against U.S. Militarism, I am deducting the 61 percent 'war tax' from my 1982 federal income tax," and requesting that the balance of his income tax be put to peaceful uses. Taxpayer Lenney claimed a "war tax credit" of $490.50 on line 48 of his return, stating that the same was Lenney also attached a letter to his return explaining that the credit claimed on line 48 represented his opposition to the expenditure of tax dollars on nuclear weapons. Since in each case the return reported withholding in an amount that exceeded the total tax liability reported on line 59 of Form 1040, each of the taxpayers claimed a refund on line 69 of his or her return. Welch claimed a refund in the amount of $1795.12, Goldsmith claimed a refund in the amount of $360.06, and Lenney claimed a refund in the amount of $493.46. 3
In August 1983, the Internal Revenue Service ("IRS") assessed a $500 penalty against each of the taxpayers pursuant to Section 6702 of the Internal Revenue Code of 1954 ("IRC"), 26 U.S.C. Sec. 6702, for filing "frivolous" income tax returns. Each of the taxpayers thereafter paid 15 percent of the penalty ($75) and filed a request for a refund of this money and abatement of the remainder of the penalty with the IRS pursuant to 26 U.S.C. Sec. 6703(c)(1). 4 When the IRS denied the taxpayers' claims, they brought this suit for refund in the district court pursuant to 26 U.S.C. Sec. 6703(c)(2) to challenge the imposition of the $500 civil penalty assessed against them by the IRS. 5 Taxpayers claimed in the complaint that Section 6702 does not apply to the returns that they filed and that the penalty was assessed and collected in violation of the Administrative Procedure Act, 5 U.S.C. Secs. 552 and 706(2)(D) "in that it is based on agency guidelines that have not been published in the Federal Register." In the alternative, if the statute had been properly applied to them, taxpayers urged that Section 6702 violates their First Amendment rights of freedom of expression, freedom of religion, freedom to petition the government for redress of grievances, and freedom of conscience; and that Section 6702 violates their Fifth Amendment right to due process, because the statute is unconstitutionally vague and arbitrary, and to equal protection of the laws, because it subjects them to a penalty not imposed on other similarly situated individuals.
The Government moved the district court to dismiss the complaint with prejudice on the ground that the complaint failed to state a claim upon which relief could be granted. F.R.Civ.P. 12(b)(6). 6 The district court granted the Government's motion to dismiss sustaining the constitutionality of the penalty provision and holding that the statutory conditions for imposition of the penalty were satisfied. Specifically, the district court held (1) that Section 6702 applies to the returns filed by the taxpayers herein; (2) that the statute did not penalize them for the expression of political, moral or religious beliefs, but for filing legally incorrect returns which showed reduced taxes due because of the taxpayers' claims of unallowable credits; (3) that the statute is neither vague nor overbroad; (4) that the assessment of a Section 6702 penalty does not implicate any due process or equal protection rights; and (5) that the assessment of the penalty against the taxpayers herein was not based on secret agency guidelines. The district court thus concluded that the assessment of the penalty against the taxpayers was based on a statute enacted by Congress which is rationally related to a legitimate governmental interest, namely, to deter the filing of legally incorrect tax returns, and dismissed taxpayers' suit. This appeal followed.
On appeal, the taxpayers claim that the district court erred in dismissing three of their claims, to wit: (1) that Section 6702 violates their First Amendment rights to freedom of speech, free exercise of religion and the right to petition the government for the redress of grievances; (2) that the application of the statute to their returns violates the Freedom of Information Act; and (3) that the statute is unconstitutionally vague. Before we address taxpayers' contentions, we believe that we should address the question whether Section 6702 was properly applied to taxpayers' returns. Although taxpayers did not include this as one of the questions presented for review, we agree with the Government that the taxpayers appear, at various points in their brief, to have renewed their contention below that their returns do not fall within the scope of Section 6702.
Section 6702 of the Internal Revenue Code of 1954, applicable with respect to returns filed after September 3, 1982, was enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"), Pub.L. No. 97-248, 96 Stat. 324, in order to improve compliance with the federal tax laws. See, S.Rep. No. 494, 97th Cong., 2d Sess. 74, 277, reprinted in 1982 U.S.Code Cong. & Ad.News 781, 1023-25. The provision was enacted in response to the "rapid growth in deliberate defiance of the tax laws by tax protestors." As the Senate Finance Committee explained:
[t]he committee is concerned with the rapid growth in deliberate defiance of the tax laws by tax protestors. The Internal Revenue Service had 13,600 illegal protest returns under examination as of June 30, 1981. Many of these protestors are induced to file protest returns through the criminal conduct of others. These advisors frequently emphasize the lack of any penalty when sufficient tax has been withheld from wages and encourage others to play the "audit lottery." The committee believes that an immediately assessable penalty on the filing of protest returns will help deter the filing of such returns, and will demonstrate the determination of the Congress to maintain the integrity of the income tax system.
S.Rep. No. 494, supra, at 277, reprinted in 1982 U.S.Code Cong. & Ad.News at 1023-24. The congressional draftsmen of Section 6702 noted that, under existing law, a taxpayer who files a protest return was potentially subject to other civil penalties, such as the penalty for failure to file under IRC Section 6651(a), the 5 percent negligence penalty under IRC Section 6653(a) and the penalty for fraud under IRC Section 6653(b). However, the draftsmen concluded that limitations in the amounts of such penalties, as well as the delays in their imposition, had rendered those penalties ineffective as deterrents to the filing of tax protest returns.
Thus, to protect the "integrity of the income tax system" Congress added Section 6702 to the Internal Revenue Code, which provides for the immediate assessment of a civil penalty of $500 against taxpayers filing tax protest documents. The Section 6702 penalty can be imposed upon any taxpayer who (1) files a purported return that fails to contain information from which the correctness of the reported tax liability can be determined or that clearly indicates that the tax liability shown is substantially incorrect, Section 6702(a)(1), and (2) does so in furtherance of a frivolous position or a prima facie intent to delay or impede the administration of the federal income tax laws. Section 6702(a)(2). According to...
To continue reading
Request your trial
-
Fuller v. United States
...whether a self-assessment was necessary was not discussed because a self-assessment in fact had been made. See Welch v. United States, 750 F.2d 1101, 1103 (1st Cir.1985); Kahn v. United States, 753 F.2d 1208, 1211 (3d Cir.1985); Franklet v. United States, 578 F.Supp. 1552, 1554 (N.D.Cal.198......
-
Adams v. C.I.R.
...curiam); Jenney v. United States, 755 F.2d 1384 (9th Cir.1985); Wall v. United States, 756 F.2d 52 (8th Cir.1985); Welch v. United States, 750 F.2d 1101 (1st Cir.1985); Ballinger v. Commissioner, 728 F.2d 1287 (10th Cir.1984); cf. United States v. Malinowski, 472 F.2d 850 (3d Cir.1973) (Fir......
-
Blackwelder v. Safnauer
...they are actually engaged. Id. at 495, 102 S.Ct. at 1191-92; Parker v. Levy, 417 U.S. at 757, 94 S.Ct. at 2562; Welch v. United States, 750 F.2d 1101, 1111 (1st Cir.1985). In the case at bar, a successful facial challenge cannot be made under this standard of review, because however uncerta......
-
Kahn v. U.S.
...is assured her right to protest, but she cannot protest in the fashion she attempted on her income tax form. See Welch, et al. v. United States, 750 F.2d 1101 (1st Cir. 1985). So long as Emily Kahn provided the correct figures on her 1040A form, section 6702 would not have prohibited her pr......
-
CHAPTER 18 PANELAUDIT ISSUES
...Inc. v. United States, 841 F.2d at 1108; D&W Food Centers, Inc. v. Block, 786 F.2d 751, 757-58 (6th Cir. 1986). Welch v. United States, 750 F.2d 1101, 1111 (1st Cir. 1985). [Page 9] OTHER PUBLICATIONS CITED IN MMS PAPERS Sections 5-6 of the model form of a commutization agreement, BLM Manua......
-
MINERALS MANAGEMENT SERVICE REGULATORY UPDATE
...See, e.g., Capriano v. National Transportation Safety Board, 843 F.2d 56, 57-58 (1st Cir. 1988). [24] See, e.g., Welch v. United States, 750 F.2d 1101, 1111 (1st Cir. 1985). [25] See, e.g., NI Indus., Inc. v. United States, 841 F.2d at 1108; D&W Food Centers, Inc. v. Block, 786 F.2d 751, 75......