Meuli v. Internal Revenue Service, Commissioner of
Filing
43
MEMORANDUM AND ORDER granting 30 government's Motion to Dismiss for Failure to State a Claim; granting 30 government's Motion to Dismiss for Lack of Jurisdiction; granting 30 government's Motion for Partial Summary Judgment; denying 34 plaintiff's Motion for Order; and denying 28 plaintiff's Motion for Default Judgment. Signed by District Judge J. Thomas Marten on 12/9/2013. Mailed to pro se party Gene E. Meuli by regular mail. (mss)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
GENE E. MEULI,
Plaintiff,
v.
Case No. 13-cv-1114-JTM-KGG
COMMISSIONER OF IRS,
UNITED STATES OF AMERICA,
Defendant.
MEMORANDUM AND ORDER
The court has before it defendant United States of America’s combined Motion
to Dismiss Counts 1–6 and 8–24, and for Summary Judgment on Count 7 (Dkt. 30). The
court also has before it plaintiff Meuli’s Motion for Default Judgment (Dkt. 28) and
Motion to Award Actual Damages and Court Costs (Dkt. 34). After reviewing the
parties’ briefs and the evidence submitted with them, the court grants the defendant’s
motion and denies the plaintiff’s motions for the following reasons.
I. Uncontroverted Facts
Plaintiff Gene E. Meuli is a citizen of Salina, Kansas. Meuli did not file a timely
tax return for tax year 2002. On August, 28, 2006, the IRS asserted a total of $27,640.21 in
tax, interest, and penalties against him. In 2008, Meuli sent the IRS a signed and dated
Form 1040 income tax return for the 2002 tax year. The return reported an overpayment
of $2,134. Thus, Meuli sought to recover the surplus amount in taxes that he claimed
was withheld from his income during the 2002 tax year.
Meuli included an “Affidavit” with the Form 1040 he submitted to the IRS. In it,
Meuli declared that his income was not taxable because: (1) he is a citizen of the State of
Kansas, but has never been a citizen or resident of any federal district, or any federal
state, enclave, or territory; (2) he is a private-sector individual; (3) he has never been an
“employee,” as defined in 26 U.S.C. § 3401(c), who earned “wages,” as defined in 26
U.S.C. § 3401(a), that were paid to him by an “employer,” as defined in 26 U.S.C.
§ 3401(d); (4) he has never been engaged in a “trade or business,” as defined in U.S.C.
§ 7701(a)(26); (5) he has never been a government agent, officer, or contractor, nor
received any government privilege; (6) he has no federally connected earnings,
privileges, or authority; and (7) any taxes on his earnings would have to be classified as
a direct tax, prohibited under the U.S. Constitution.
On March 1, 2010, the IRS assessed a $5,000 penalty against Meuli, citing his
Form 1040 tax return as “frivolous.” He paid the penalty in full within a month.
Subsequently, Meuli filed suit in the U.S. District Court for the District of Kansas,
asking the court for relief under 26 U.S.C. § 7433. Meuli v. United States, No. 11-1044RDR, 2011 WL 2650355, at *1 (D. Kan. July 6, 2011). The court dismissed the action,
finding the United States did not waive sovereign immunity because Meuli had not
filed a Claim for Refund with the IRS. Id. at *2–5.
After the court dismissed his claim, Meuli filed a Form 843 Claim for Refund
with the IRS claiming, among other things, that wages are not taxable under Art. 1,
Section 9, Clause 4 of the federal Constitution. On December, 12, 2011, the IRS assessed
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another $5,000 frivolous filing penalty against Meuli, citing the frivolous claims set forth
in his Form 843 Claim for Refund. Meuli has not fully paid this penalty.
Meuli filed this action pro se, improperly naming the Commissioner of the
Internal Revenue Service as the defendant. The court allowed Meuli to amend the
complaint to name the United States as the proper defendant. This case is before the
court upon the government’s combined motion to dismiss and motion for summary
judgment.
II. Motion to Dismiss and for Summary Judgment
A. Legal Standard
The government moves the court to dismiss Meuli’s claims pursuant to Fed. R.
Civ. P. 12(b)(1) and Fed. R. Civ. P. 12(b)(6). Regarding motions alleging a lack of
jurisdiction under Rule 12(b)(1), it is well-settled that the plaintiff bears the burden of
showing that jurisdiction is proper and must demonstrate that the case should not be
dismissed. United States ex rel. Stone v. Rockwell Int'l Corp., 282 F.3d 787, 797 (10th Cir.
2002). Plaintiff must sustain the burden of alleging facts which show jurisdiction and
supporting those facts with competent proof. Id. at 797–98. “Mere conclusory
allegations of jurisdiction are not enough.“ Id. at 798 (quoting United States ex rel. Hafter
v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1160 (10th Cir. 1999)).
To survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), a
complaint must present factual allegations, assumed to be true, that “raise a right to
relief above the speculative level” and must contain “enough facts to state a claim to
relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570
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(2007). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). “Allegations of
conclusions or opinions are not sufficient when no facts are alleged by way of the
statement of the claim.” Bryan v. Stillwater Board of Realtors, 578 F.2d 1319, 1321 (10th Cir.
1977).
The government also seeks summary judgment on Meuli’s claims that relate to
the 2010 penalty. Summary judgment is appropriate when there is no genuine dispute
as to any material fact and the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56. The burden of showing an absence of a genuine dispute of material
fact falls upon the moving party. Adler v Wal-Mart Store, Inc., 144 F.3d 664, 670 (10th Cir.
1998). However, when the moving party does not bear the ultimate burden of
persuasion at trial, it may satisfy its burden at the summary judgment stage by pointing
out to the court that there is an absence of evidence to support the nonmoving party’s
case. Celotex Corp. v Catrett, 477 U.S. 317, 322–23 (1986). The nonmoving party must then
go beyond the pleadings to set forth specific facts showing that there is a genuine issue
for trial sufficient to support a verdict for the nonmovant. Anderson v Liberty Lobby, Inc.,
477 U.S. 242, 248–49 (1986). In ruling on a motion for summary judgment, the court does
not weigh the evidence, but determines whether the evidence presents a sufficient
disagreement to require submission to a jury, or whether it is so one-sided that one
party must prevail as a matter of law. Sierra Club v. El Paso Gold Mines, Inc., 421 F.3d
1133, 1150 (10th Cir. 2005). In making this determination, the court must construe all the
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facts in the record and reasonable inferences that can be drawn from those facts in a
light most favorable to the nonmoving party. Worrell v. Henry, 219 F.3d 1197, 1204 (10th
Cir. 2000).
In its analysis, the court must bear in mind that Meuli is a pro se litigant. A pro
se litigant’s pleadings “are to be construed liberally and held to a less stringent standard
than formal pleadings drafted by lawyers.” Hall v. Bellmon, 935 F.2d 1106, 1110 (10th
Cir. 1991). If the plaintiff’s pleadings can be reasonably read to state a valid claim on
which they could prevail, the court should do so despite a failure to cite proper legal
authority or follow normal pleading requirements. Id. But, the court may not provide
additional factual allegations “to round out a plaintiff’s complaint or construct a legal
theory on a plaintiff’s behalf.” Whitney v. New Mexico, 113 F.3d 1170, 1173–74 (10th Cir.
1997).
B. Analysis
The court notes that Meuli is challenging the two penalties assessed against him
in 2010 and 2011. However, the counts listed in Meuli’s complaint do not clearly state
which penalty they are challenging. The government moves to dismiss the claims to the
extent they refer to the 2011 penalty, and it seeks summary judgment to the extent the
claims refer to the 2010 penalty. Ultimately, this distinction is inconsequential because
all of Meuli’s claims are frivolous, regardless of the penalty they challenge and
regardless of whether the court analyzes them under a motion to dismiss or summary
judgment standard.
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For a tax return to be frivolous under 28 U.S.C. § 6702, the return must be facially
incorrect or its correctness must be unascertainable, and it must be based on a position
which the Secretary has identified as frivolous under I.R.C. § 6702(c) or reflect a desire
to delay or impede the administration of Federal tax laws. Schlabach v. United States, 101
Fed. Cl. 678, 683 (2011). Section 6702(c) states that the IRS “shall prescribe (and
periodically revise) a list of positions” that are frivolous. The most recent list released
by the IRS, Notice 2007-30, lists the following actions as frivolous: (1) arguing that a
taxpayer’s income is excluded from taxation when the taxpayer rejects or renounces
United States citizenship because the taxpayer is the citizen exclusively of a State; (2)
arguing that one does not have to pay taxes because he is not an employee of the
“Federal government” or a “business;” (3) arguing that a tax on earnings is a violation
of the United States Constitution; and (4) altering a return or attaching documents to it.1
Courts have also determined a number of actions to be “frivolous.” A party
advances a frivolous action when they indicate that they had no income from wages on
a return despite third-party documents indicating they did receive wages. See Kelly v.
United States, 789 F.2d 94, 97 (1st Cir. 1986); see also Turner v. United States, 372 F. Supp.
2d 1053, 1060 (S.D. Ohio 2005); Holker v. United States, 737 F.2d 751, 753 (8th Cir. 1984).
Reporting a reduction in income from a significant amount to zero is frivolous. See Herip
v. United States, 106 Fed. Appx. 995, 999 (6th Cir. 2004). A party claiming they had no
income because they are not engaged in corporate activity is frivolous. See Cipolla v.
I.R.S., 2003 WL 22952617, at *4 (E.D.N.Y. Nov. 5, 2003). Arguing that income tax is not
1IRS
Notice 2007–30, available at http://www.irs.gov/pub/irs-drop/n-07-30.pdf.
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applicable to private men is frivolous. See United States v. Howard, 2008 WL 4471333, at
*11 (D. Ariz. June 25, 2008).
In this case, the IRS discovered Meuli’s failure to file a proper tax return for 2002.
Meuli attempted to rectify his failure by filing a Form 1040, including with it an
affidavit. As an initial matter, Meuli’s affidavit suggesting he could reduce or eliminate
his tax liability was, itself, frivolous.2 The affidavit also set forth numerous frivolous
claims, as defined by the IRS and courts, including: (1) correcting his wages from
$10,402 to $0; (2) claiming he is a citizen of Kansas, and not a citizen of any federal
district; (3) claiming he is exempt from taxes as a private-sector individual; (4) claiming
he has never been an employee that earned wages from an employer; (5) claiming he
has never been engaged in a trade or business; (6) claiming he has never been a
government agent, officer, or contractor; (7) claiming he has no federally connected
earnings, privileges, or authority; and (8) arguing that any taxes on his earnings violate
the United States Constitution.
Additionally, all of the claims in Meuli’s complaint have been rejected as
patently incorrect or frivolous by federal courts or the federal government, most of
them overlapping with the assertions in his affidavit to the IRS. See Lonsdale v. United
States, 919 F.2d 1440, 1447–48 (10th Cir. 1990) (holding that the Tenth Circuit has “made
itself clear on these and similar issues numerous times” and the taxpayers “cannot by
any stretch of the imagination assert that their arguments regarding the taxability of
2See
IRS Notice 2007–30(17) available at http://www.irs.gov/pub/irs-drop/n-07-30.pdf (listing as a
defined frivolous position a taxpayer’s claim that they “may reduce or eliminate their Federal tax liability
by altering a tax return, including striking out the penalty-of-perjury declaration, or attaching documents
to the return, such as a disclaimer of liability, or similar arguments . . . .”)
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wages have any support in this circuit”); see also Perkins v. C.I.R., 262 Fed. App’x 119
(11th Cir. 2008) (imposing sanctions for the frivolous argument the Secretary must
personally notify a taxpayer that he is required to keep records, make statements, or file
returns); Lee v. C.I.R., 463 Fed. App’x 236 (5th Cir. 2012) (finding frivolous the
arguments that the taxpayer was not a person subject to tax penalty or levy, and that
she was not involved in a trade or business). Where a plaintiff claims “a hodgepodge of
unsupported assertions, irrelevant platitudes, and legalistic gibberish,” there is “no
need to refute [these] arguments with somber reasoning and copious citation to
precedent.” Crain v. Comm’r, 737 F.2d 1417 (5th Cir. 1984) (dismissing the frivolous
claims).
Accordingly, the civil penalty assessed by the IRS against Meuli in 2010 and 2011
were proper, and Meuli’s challenges to the penalties are frivolous. The court grants the
relief sought by the government, dismissing Meuli’s claims that refer to the 2011
penalty and granting the government summary judgment on his claims that refer to the
2010 penalty.3
III. Meuli’s Motion for Default Judgment
On September 23, 2013, Meuli filed a Motion for Default Judgment citing the
government’s failure to answer his Verified Complaint—filed on March 22, 2013—
within the time required. See Dkt. 28. The motion lacks foundation.
3The
court notes that Meuli was allowed to file an amended complaint. In his amended complaint, Meuli
has added several statutes, apparently under the belief that they support a finding of jurisdiction. The
court finds these amendments are immaterial to its analysis, as they do not cure Meuli’s frivolous claims.
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The “United States, [or] a United States agency . . . must serve an answer to a
complaint, counterclaim, or crossclaim within 60 days after service on the United States
attorney.” FED. R. CIV. P. 12(a)(2). This court’s order granting the Motion to Amend
Plaintiff’s Complaint was filed on August 12, 2013, giving the government until October
11, 2013 to respond. Meuli filed his Motion for Default Judgment well before the
government’s time to respond had run. The government filed its motion to dismiss
before October 11, so it is not in default. See Rule 12(a)(4) (establishing that a Rule 12
motion tolls the time for the defendant to filed its response to the complaint).
Accordingly, the court denies Meuli’s motion for default judgment.
IV. Meuli’s Motion to Award Actual Damages and Court Costs
On September 27, 2013, Meuli filed a Motion to Award Plaintiff Actual Damages
and Court Costs and Such Other and Further Relief as the Court may Deem Just and for
the Plaintiff’s IMF Record to be Accurately Amended (Dkt. 34). As a result of the court’s
ruling on the government’s motion, Meuli’s motion is moot. The court denies the
motion.
IT IS THEREFORE ORDERED this 9th day of December, 2013, that the
government’s Motion to Dismiss and for Summary Judgment (Dkt. 30) is granted.
Plaintiff Gene E. Meuli’s Motion for Default Judgment (Dkt. 28) and Motion for Actual
Damages, Court Costs, and Further Relief (Dkt. 34) are denied.
s/J. Thomas Marten
J. THOMAS MARTEN, JUDGE
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