United States of America v. Bigley et al

Filing 188

ORDER denying 175 Motion to Dismiss for Lack of Jurisdiction. See document for details. Signed by Judge H Russel Holland on 11/21/2016. (ATD)

WO

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

UNITED STATES OF AMERICA,

)
)
Plaintiff,
)
)
vs.
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)
MICHAEL A. BIGLEY, et al.,
)
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Defendants.
)
_______________________________________)

No. 2:14-cv-0729-HRH

ORDER
Motion to Dismiss
Pursuant to Rules 12(b)(1) and 12(h)(3), Federal Rules of Civil Procedure, defendant
Michael Bigley again moves to dismiss plaintiff’s complaint on the ground that this court
lacks subject matter jurisdiction.1 This motion is opposed.2 Oral argument has not been
requested and is not deemed necessary.
“A motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) or
12(h)(3) challenges the [c]ourt’s subject matter jurisdiction.” Coble v. DeRosia, 823 F.
Supp. 2d 1048, 1050 (E.D. Cal. 2011). This court has previously held that it has subject

1

Docket No. 175.

2

Docket No. 182.
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matter jurisdiction of plaintiff’s complaint pursuant to 28 U.S.C. §§ 1340 and 1345 and 26
U.S.C. §§ 7402 and 7403. Nothing has happened in this case to change that holding. The
court continues to have subject matter jurisdiction of plaintiff’s complaint pursuant to 28
U.S.C. §§ 1340 and 1345 and 26 U.S.C. §§ 7402 and 7403.
In the instant motion, Mr. Bigley argues that he is not a taxpayer and thus plaintiff’s
claims, which are based on a presumption that he is a taxpayer, must fail.3 This is an
argument more properly raised in a Rule 12(b)(6) motion for failure to state a claim. “To
survive a Rule 12(b)(6) motion to dismiss, a ‘plaintiff must allege enough facts to state a
claim to relief that is plausible on its face.’” Turner v. City and County of San Francisco,
788 F.3d 1206, 1210 (9th Cir. 2015) (quoting Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580,
588 (9th Cir. 2008)).
Plaintiff has asserted four claims for relief in its complaint: 1) a claim to reduce
federal tax assessments to judgment, 2) a claim seeking a determination that the Kelsos and
ISA Ministries were the nominees or alter egos of the Bigleys, 3) a fraudulent transfer claim
against the Bigleys, and 4) a claim seeking to foreclose the federal tax liens encumbering the
real property at issue.

3

To the extent that Mr. Bigley has advanced any other arguments in the instant motion
to dismiss and his reply to plaintiff’s opposition, these arguments are frivolous and the court
declines to address them in detail. See Crain v. C.I.R., 737 F.2d 1417, 1417 (5th Cir. 1984)
(finding “no need to refute” frivolous “arguments with somber reasoning and copious citation
of precedent” because “to do so might suggest that these arguments have some colorable
merit”).
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Congress has authorized the IRS to collect outstanding tax
liabilities. Pursuant to 26 U.S.C. § 7402(a), the United States
can bring an action to obtain a judgment in order to enforce the
internal revenue laws. Pursuant to 26 U.S.C. § 7403(a), where
the taxpayer refuses or neglects to pay his federal taxes, the
United States can bring a civil action in federal court to enforce
a tax lien or to subject a taxpayer’s property to payment of such
federal taxes. Section 7403(b) requires the United States to
name as defendants all persons who have an interest in, or a lien
upon, the property at issue. Section 7403(c) provides that, after
all parties have been notified of the action, the court shall
determine the merits of all claims to and liens upon the property.
Where the United States establishes its interest in the property,
the court can direct a sale of the property[.]
United States v. Suganuma, 546 F. Supp. 2d 996, 1000 (D. Hawai’i 2008).
Plaintiff has alleged that taxes and penalties of $214,912.78 have been assessed
against Mr. Bigley.4 Plaintiff alleges that it has given Mr. Bigley timely notice of these
assessments and has made a demand for payment, but that Mr. Bigley “has neglected,
refused, or failed to make payment of the assessed amount....”5 Plaintiff further alleges that
Mr. Bigley “petitioned the United States Tax Court to contest the merits of the notice of
deficiency by the IRS for the 2004 tax year. The Tax Court issued a decision in favor of the
IRS, sustaining the deficiency determinations for the 2004 tax year[.]”6 These allegations

4

Complaint to Reduce Federal Tax Assessments to Judgment and Foreclose Federal
Tax Liens at 6-7, ¶ 22, Docket No. 1.
5

Id. at 8, ¶¶ 23-24.

6

Id. at ¶ 25.
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are sufficient to make plaintiff’s claims against Mr. Bigley plausible on their face, unless, as
Mr. Bigley now argues, he is not a “taxpayer.”
Mr. Bigley argues that he is not a “taxpayer” as that term is defined in 26 U.S.C. §
7701(a)(14). Section 7701(a)(14) defines “taxpayer” to mean “any person subject to any
internal revenue tax.” Mr. Bigley argues that he does not meet this definition because he
cannot be subject to an internal revenue tax on the income which is the basis for plaintiff’s
tax assessment. Mr. Bigley contends that
[t]he “internal revenue tax” is limited to that of a tax levied or
imposed upon an object of interstate commerce that is a proper
subject of the Congressional power to tax under U.S. Const. Art.
I, § 8 to the exclusion of any other tax levied or imposed upon
activity or object under that same power....[7]
Mr. Bigley argues that his income was not an object of interstate commerce because it was
earned only in Arizona and not while he was engaged in interstate commerce. According to
Mr. Bigley, if his income was not an object of interstate commerce, then an internal revenue
tax could not be levied or imposed upon it, and if no internal revenue tax could be levied or
imposed upon his income, then he could not be a taxpayer for purposes of Title 26.
The meaning of “internal revenue tax” is not limited in the manner that Mr. Bigley
suggests. “‘The authority conferred upon Congress by § 8 of article 1 to lay and collect
taxes, duties, imposts and excises is exhaustive and embraces every conceivable power of
taxation’” including the authority “‘... to lay and collect income taxes.’” Parker v. C.I.R., 724

7

Memorandum of Law Internal Revenue Tax and “Taxpayer” at 1, Docket No. 175.
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F.2d 469, 471 (5th Cir. 1984) (quoting Brushaber v. Union Pacific Ry. Co., 240 U.S. 1, 12-13
(1916)). “The Sixteenth Amendment provides[,]” in pertinent part that “[t]he Congress shall
have power to lay and collect taxes on incomes, from whatever source derived[.]” Murphy
v. United States, 992 F.2d 929, 930 (9th Cir. 1993). The Sixteenth Amendment “is a broad
grant of power to tax income from whatever source it is derived, including income derived
from wholly intrastate actions or property.” Secora v. United States, Case No. 4:CV96–3356,
1997 WL 460162, at *6 (D. Neb. April 18, 1997) (emphasis added). That Mr. Bigley’s
income may have been earned solely within Arizona does not mean that any tax imposed on
that income is not an “internal revenue tax.” As a person who has received income, Mr.
Bigley is a person “subject to any internal revenue tax.” 26 U.S.C. § 7701(a)(14). Mr.
Bigley is a “taxpayer” for purposes of Title 26, and, as set out above, plaintiff’s claims
against Mr. Bigley are not implausible.
Mr. Bigley’s motion to dismiss8 is denied.
DATED at Anchorage, Alaska, this 21st day of November, 2016.
/s/ H. Russel Holland
United States District Judge

8

Docket No. 175.
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