Holdner v. Commissioner of Internal Revenue

Filing 22

ORDER: Granting Defendant's Motion 15 to Dismiss Case for Lack of Jurisdiction and for Failure to State a Claim. Signed on 11/23/2016 by Judge Anna J. Brown. (br4)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

WILLIAM F. HOLDNER D/B/A
HOLDNER FARMS,

3:16-CV-00475-BR
OPINION AND ORDER

Plaintiff,
v.
COMMISSIONER OF INTERNAL
REVENUE,
Defendant.

WILLIAM F. HOLDNER
975 S.E. Sandy Blvd
Portland, OR 97214
[phone]
Plaintiff, Pro Se
BILLY J. WILLIAMS
United States Attorney
1000 S.W. Third Avenue
Suite 600
Portland, OR 97204
[phone]

1 - OPINION AND ORDER

CAROLINE D. CIRAOLO
Principal Deputy Assistant Attorney General
DYLAN C. CERLING
Assistant Attorney General
United States Department of Justice
P.O. Box 683
Washington, DC 20044
[phone]
Attorneys for Defendant
BROWN, Judge.
This matter comes before the Court on Defendant’s Motion
(#15) to Dismiss for Lack of Subject-Matter Jurisdiction, Failure
to State a Claim for Relief, and Res Judicata.

For the reasons

that follow, the Court GRANTS Defendant’s Motion and DISMISSES
this matter with prejudice.

BACKGROUND
The following facts are taken from Plaintiff’s Complaint and
the parties’ materials related to Defendant’s Motion to Dismiss.
During the relevant period Plaintiff William Holdner and his
son Randal Holdner (collectively referred to as the Holdners) ran
Holdner Farms, a cattle business.

The Holdners each “effectively

reported one-half of Holdner Farms' gross income for 2004, 2005,
and 2006 on Schedules F, Profit or Loss From Farming and
Schedules D, Capital Gains and Losses, of their respective
Federal income tax returns for those years.”
Cerling, Ex. 4 at 2.
2 - OPINION AND ORDER

Decl. of Dylan

The Holdners, however, did not split the

expenses of Holdner Farms equally on their tax returns.
Plaintiff “deducted most of Holdner Farms’ expenses.”

Id. at 3.

The Holdners also did not file federal partnership returns.
At some point the Internal Revenue Service (IRS) issued
Notices of Deficiency to each of the Holdners in which it
determined:

(1) Holdner Farms was a partnership (or a joint

venture taxed as a partnership) for federal income-tax purposes
in 2004-2006, (2) the Holdners were equal partners in the
partnership, and (3) Plaintiff was liable for an accuracy-related
penalty for 2004-2006 pursuant to 26 U.S.C. § 6662.

The Holdners

petitioned the United States Tax Court to review the IRS’s
determinations.
On August 4, 2010, the Tax Court issued a Memorandum
Findings of Fact and Opinion in which it found “the allocation of
expenses made by [Plaintiff] had no apparent rational basis and
appeared completely arbitrary.”

Cerling Decl., Ex. 4 at 15.

The

Tax Court held Holdner Farms was a partnership rather than a
joint venture of two individual proprietorships or at least had
to be treated as such for federal tax purposes.

Id. at 29–31.

Accordingly, the Tax Court held the Holdners had to allocate
income and expenses equally and that the IRS had properly
assessed an accuracy-related penalty for Plaintiff because he had
incorrectly included expenses on his tax return that should have
been included on Randal Holdner’s tax return.

3 - OPINION AND ORDER

Id. at 32-37, 40.

On September 7, 2010, Plaintiff filed a motion with the Tax
Court seeking reconsideration of its opinion.

On October 22,

2010, the Tax Court denied Plaintiff’s motion for
reconsideration.

Plaintiff appealed.

On October 12, 2012, the

Ninth Circuit affirmed the Tax Court’s decisions.
At some point Plaintiff brought another action in Tax Court
addressing the same tax years at issue in his 2010 proceeding and
asserting the same arguments against his deficiency and penalty
assessments that he had asserted in his 2010 proceeding.

The

parties cross-moved for summary judgment.
On November 13, 2013, the Tax Court granted the
Commissioner’s motion for summary judgment and denied Plaintiff’s
motion for summary judgment noting Plaintiff “is barred by the
doctrine of res judicata from attempting to challenge his
liabilities a second time in this proceeding.”

Cerling Decl.,

Ex. 7 at 5.
Plaintiff appealed the Tax Court’s November 2013 decision.
On November 18, 2015, the Ninth Circuit affirmed the decision and
noted the Tax Court had properly concluded Plaintiff “was
precluded from challenging the validity of the underlying tax
assessments, as the matter had been resolved in prior
litigation.”

Cerling Decl., Ex. 8 at 3.

The Ninth Circuit also

noted it did “not consider [Plaintiff’s] contentions concerning
the propriety of the judgment entered in his [2010] tax case,

4 - OPINION AND ORDER

which were addressed in a prior appeal.”

Id.

On March 18, 2016, Plaintiff filed a Complaint in this Court
pursuant to 42 U.S.C. § 1983 in which he alleges “the collection
of assessments1 for the years 2004, 2005, and 2006 are invalid
under the Internal Revenue Code”; the original Notice of
Deficiency was defective; and “the IRS audit was not conducted in
accordance with statutory and administrative procedures and
therefore the assessments are invalid in violation of due
process.”

Compl. at 2.

On September 21, 2016, Defendant filed a Motion to Dismiss
for Lack of Subject-Matter Jurisdiction, Failure to State a Claim
for Relief, and Res Judicata.

The Court took Defendant’s Motion

under advisement on October 20, 2016.

STANDARDS
I.

Dismissal for Lack of Jurisdiction Pursuant to Rule 12(b)(1)
Plaintiff “bears the burden of establishing subject matter

jurisdiction by a preponderance of the evidence.”

United States

ex rel. Mateski v. Raytheon Co., 816 F.3d 565, 569 (9th Cir.
2016)(quotation omitted).

See also Ass'n of Am. Med. Coll. v.

United States, 217 F.3d 770 (9th Cir. 2000).
When deciding a motion to dismiss for lack of subject-matter
1

The record does not reflect Plaintiff has paid the
deficiencies or penalties assessed against him or that he has
filed a refund claim related to tax years 2004-2006.
5 - OPINION AND ORDER

jurisdiction under Rule 12(b)(1), the court may consider
affidavits and other evidence supporting or attacking the
complaint's jurisdictional allegations.
F.3d 1108, 1114 n.1 (9th Cir. 2013).

Rivas v. Napolitano, 714

The court may permit

discovery to determine whether it has jurisdiction.

Laub v.

United States Dep't of Interior, 342 F.3d 1080, 1093 (9th Cir.
2003).

When a defendant's motion to dismiss for lack of

jurisdiction "is based on written materials rather than an
evidentiary hearing, the plaintiff need only make a prima facie
showing of jurisdictional facts to withstand the motion to
dismiss."

Mavrix Photo, Inc. v. Brand Tech., Inc., 647 F.3d

1218, 1223 (9th Cir. 2011)(citation omitted).
II.

Dismissal for Failure to State a Claim Pursuant to Rule
12(b)(6)
To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as
true, to “state a claim to relief that is
plausible on its face.” [Bell Atlantic v.
Twombly, 550 U.S. 554,] 570, 127 S. Ct. 1955. 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. Id. at 556.
. . . The plausibility standard is not akin to a
“probability requirement,” but it asks for more
than a sheer possibility that a defendant has
acted unlawfully. Ibid. Where a complaint pleads
facts that are “merely consistent with” a
defendant's liability, it “stops short of the line
between possibility and plausibility of
‘entitlement to relief.’” Id. at 557, 127 S. Ct.
1955 (brackets omitted).

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
6 - OPINION AND ORDER

See also Bell

Atlantic, 550 U.S. at 555-56.

The court must accept as true the

allegations in the complaint and construe them in favor of the
plaintiff.

Din v. Kerry, 718 F.3d 856, 859 (9th Cir. 2013).

The pleading standard under Federal Rule of Civil Procedure
8 “does not require ‘detailed factual allegations,’ but it
demands more than an unadorned, the-defendant-unlawfully-harmedme accusation.”
U.S. at 555).

Iqbal, 556 U.S. at 678 (quoting Twombly, 550
See also Fed. R. Civ. P. 8(a)(2).

“A pleading

that offers ‘labels and conclusions’ or ‘a formulaic recitation
of the elements of a cause of action will not do.’”
Twombly, 550 U.S. at 555).

Id. (citing

A complaint also does not suffice if

it tenders “naked assertion[s]” devoid of “further factual
enhancement.”

Id. at 557.

"In ruling on a 12(b)(6) motion, a court may generally
consider only allegations contained in the pleadings, exhibits
attached to the complaint, and matters properly subject to
judicial notice."

Akhtar v. Mesa, 698 F.3d 1202, 1212 (9th Cir.

2012)(citation omitted).

A court, however, "may consider a

writing referenced in a complaint but not explicitly incorporated
therein if the complaint relies on the document and its
authenticity is unquestioned."

Swartz v. KPMG LLP, 476 F.3d 756,

763 (9th Cir. 2007)(citation omitted).

7 - OPINION AND ORDER

DISCUSSION
Defendant moves to dismiss Plaintiff’s Complaint on the
grounds that this Court lacks subject-matter jurisdiction, this
matter is barred by res judicata, and Plaintiff fails to state a
claim.
I.

Substitution of United States for Commissioner.
The Supreme Court and Ninth Circuit have made clear that a

claim against an officer or agent of the United States concerning
actions taken in his official capacity must be construed as an
action against the United States.
609 (1963).

See Dugan v. Rank, 372 U.S.

See also Gilbert v. DaGrossa, 756 F.2d 1455, 1458

(9th Cir. 1985)(“[A] suit against IRS employees in their official
capacity is essentially a suit against the United States.”); Lai
v. Ipson, 474 F. App’x 595, 596 (9th Cir. 2012)(same).
Accordingly, the Court substitutes the United States as
Defendant in this matter.
II.

This Court lacks subject-matter jurisdiction.
In his Complaint Plaintiff “prays the collection of the

assessments and penalties are reversed.”

Compl. at 8.

28 U.S.C. § 1346(a)(1) provides district courts have
“original jurisdiction, concurrent with the United States Court
of Federal Claims” over civil actions against the United States
“for the recovery of any internal-revenue tax alleged to have
been erroneously or illegally assessed or collected, or any
8 - OPINION AND ORDER

penalty claimed to have been collected without authority or any
sum alleged to have been excessive or in any manner wrongfully
collected under the internal-revenue laws.”
noted:

The Supreme Court

“Despite its spacious terms, § 1346(a)(1) must be read in

conformity with other statutory provisions which qualify a
taxpayer's right to bring a refund suit upon compliance with
certain conditions.”
(1990).

United States v. Dalm, 494 U.S. 596, 601

Specifically, 26 U.S.C. § 7422(a)
limits a taxpayer’s right to bring a refund suit
by providing that “[n]o suit or proceeding shall
be maintained . . . for the recovery of any
internal revenue tax alleged to have been
erroneously or illegally assessed or collected, or
of any penalty claimed to have been collected
without authority, or of any sum alleged to have
been excessive or in any manner wrongfully
collected, until a claim for refund or credit has
been duly filed with the Secretary.”

Id. (quoting § 7422(a)).

See also Byrne v. United States, 127

Fed. Cl. 284, 290 (2016)(“To file a federal tax refund suit . . .
a plaintiff first must file a claim for refund with the IRS,
within the time period proscribed by 26 U.S.C. § 6511(a).”).
In addition, the Supreme Court has held a taxpayer must
fully pay a tax assessment before he may bring a refund action
pursuant to § 1346.
(1960).

Flora v. United States, 362 U.S. 145, 177

See also Intersport Fashions West, Inc. v. United

States, 84 Fed. Cl. 454, 456 (2008)(“[T]he Supreme Court has
limited the jurisdiction of this court (and the district courts)
in tax refund suits to those claims in which the taxpayer has
9 - OPINION AND ORDER

paid fully all tax assessed for the tax year at issue prior to
the initiation of the claim.”); Byrne v. United States, 127 Fed.
Cl. 284, 290 (2016)(“[B]efore filing suit, a taxpayer must pay
the full amount of the tax alleged to be due.”).
Finally, 26 U.S.C. § 6512 provides “no suit by the taxpayer
for the recovery of any part of the tax shall be instituted in
any court” when “the Secretary has mailed to the taxpayer a
notice of deficiency . . . and . . . the taxpayer files a
petition with the Tax Court . . . [and] the Secretary has
determined the deficiency shall be allowed or made.”
Accordingly, § 6512 “precludes a district court from
redetermining tax liability once the Tax Court has done so.”
George v. United States, No. C07-01369 MJJ, 2007 WL 2318922, at
*2 (N.D. Cal. Aug. 13, 2007)(citing First Nat’l Bank of Chicago
v. United States, 792 F.2d 954, 956 (9th Cir. 1986).

The Ninth

Circuit has held § 6512 has a “broad general application [such]
that if the taxpayer files a petition with the tax court, the
mere filing of the petition operates to deprive the district
court of jurisdiction to entertain a subsequent suit for refund.”
First Nat'l Bank of Chicago, 792 F.2d at 956.

The court stated

this is the rule even when the issues sought to be litigated in
the district court were not presented in the Tax Court.

Id. at

955 (“It is not the decision which the Tax Court makes but the
fact that the taxpayer has resorted to that court which ends his

10 - OPINION AND ORDER

opportunity to litigate in the District Court his tax liability
for the year in question.”).
Thus, in order for this Court to have jurisdiction over this
matter, Plaintiff must establish he has filed a claim for refund
with the IRS, he has paid the full amount of tax allegedly due,
and he has not filed a petition with the Tax Court.
Plaintiff did not allege in his Complaint or in his Response
to Defendant’s Motion to Dismiss that he has filed a refund claim
with the IRS.

In addition, the record filed by Defendant that

includes a report summarizing Plaintiff’s tax returns,
assessments, deficiencies, and payments does not reflect
Plaintiff has filed any refund claim.

Plaintiff, therefore, has

not established he filed a refund claim before he filed this
action.

In addition, it is undisputed that Plaintiff has not

fully paid his taxes and penalties for the period at issue.
Finally, the record reflects Plaintiff has twice challenged the
IRS’s Notices of Deficiency for tax years 2004-2006 in Tax Court.
Thus, Plaintiff has not established this Court has subject-matter
jurisdiction as to Plaintiff’s refund claim.
Accordingly, the Court grants Defendant’s Motion to Dismiss
Plaintiff Complaint for lack of subject-matter jurisdiction.
III. The Anti-Injunction Act bars Plaintiff’s claim to the extent
that he seeks declaratory or prospective relief.
Defendant asserts to the extent that Plaintiff seeks
declaratory or prospective relief, this Court lacks subject11 - OPINION AND ORDER

matter jurisdiction due to the Anti-Injunction Act, 26 U.S.C.
§ 7421.

Specifically, the Anti-Injunction Act states:

“[E]xcept

as provided in [sections of the Internal Revenue Code not
relevant here] no suit for the purpose of restraining the
assessment or collection of any tax shall be maintained in any
court by any person.”

26 U.S.C. § 7421(a).

The Supreme Court

has held the “principal purpose” of the Anti-Injunction Act is to
“protect[] . . . the Government's need to assess and collect
taxes as expeditiously as possible with a minimum of
preenforcement judicial interference, and to require that the
legal right to the disputed sums be determined in a suit for
refund.”

Bob Jones Univ. v. Simon, 416 U.S. 725, 736

(1974)(quotation omitted).

See also Hansen v. Dep’t of Treasury,

528 F.3d 597, 600 (9th Cir. 2007)(same).
The Ninth Circuit has held an action that does not fall
within an exception to the Anti-Injunction Act must be dismissed
for lack of subject-matter jurisdiction.

See Elias v. Connett,

908 F.2d 521, 526 (9th Cir. 1990)(concluding the district court
did not have subject-matter jurisdiction when the plaintiff did
not establish his action fell within any exception to the AntiInjunction Act).

See also Hansen, 528 F.3d at 601 (“[T]he

Anti–Injunction Act precludes federal jurisdiction over Hansen's
claim [seeking an exemption from self-employment social security
taxes] unless he is able to satisfy the judicially created

12 - OPINION AND ORDER

exception to the Act.”).
It is undisputed that none of the statutory exceptions to
the Anti-Injunction Act apply here.

The Supreme Court, however,

has also recognized a limited judicial exception when a taxpayer
establishes:

(1) “under no circumstances” could the United

States ultimately prevail on the merits and (2) the plaintiff
would suffer irreparable injury for which they do not have any
adequate remedy at law.

Enochs v. Williams Packing & Navigation

Co., 370 U.S. 1, 6–8 (1962).

See also United States v. Clintwood

Elkhorn Min. Co., 553 U.S. 1, 12-13 (2008)(same).

Plaintiff,

however, cannot satisfy either prong of the judicial exception.
Specifically, Plaintiff cannot establish the United States will
not prevail on the merits of this matter under any circumstances
because the IRS has already prevailed in Tax Court and in the
Ninth Circuit on the issues raised in Plaintiff’s claim.

In

addition, Plaintiff has not established his tax and penalty
assessments have placed him in danger of immediate, irreparable
injury for which he does not have any adequate remedy at law.
Plaintiff could pay the assessed taxes, file a proper refund
claim with the IRS, and file a refund action if the IRS denies
that claim.

See Hansen, 528 F.3d at 601 (finding the plaintiff

could not satisfy the judicial exception because “[t]his is not a
case in which an aggrieved party has no access at all to judicial
review. . . .

[The plaintiff] may pay income taxes, or, in their

13 - OPINION AND ORDER

absence, an installment of FICA or FUTA taxes, exhaust the
Service's internal refund procedures, and then bring suit for a
refund.

These review procedures offer petitioner a full, albeit

delayed, opportunity to litigate [his claims].”).

Thus, the

Court concludes the Anti-Injunction Act applies to Plaintiff’s
claim and, therefore, this Court lacks subject-matter
jurisdiction as to Plaintiff’s claim to the extent that he seeks
declaratory or prospective relief.
IV.

Even if this Court has subject-matter jurisdiction,
Plaintiff’s claim is barred by res judicata.
Defendant asserts even if this Court has jurisdiction,

Plaintiff’s claim is barred by res judicata because Plaintiff
already has litigated his claims twice in the Tax Court.
Although Plaintiff asserts in his Response that res judicata
“may not be a bar to Federal Due Process Rights or a challenge of
a collection of tax in violation of the tax code,” the Ninth
Circuit has made clear that “[r]es judicata principles apply in
tax litigation.”

Russell v. Comm’r, 678 F.2d 782, 785 (9th Cir.

1982)(citing Comm’r v. Sunnen, 333 U.S. 591 (1948)).

See also

Singh v. United States, No. 2:13–cv–780–TLN–EFB PS, 2015 WL
1801347, at *2 (E.D. Cal. Mar. 31, 2015)(“Plaintiff essentially
seeks to relitigate the issues already resolved by the Tax Court,
which are the subject of appeals pending before the Ninth
Circuit. He is barred from doing so.

This Court lacks

jurisdiction to review the decision of the Tax Court. . . .
14 - OPINION AND ORDER

Furthermore, Plaintiff's claim is barred by the doctrine of res
judicata.”)(citing Russell, 678 F.2d at 785)).

In addition,

“[p]arties are bound by res judicata as to both matters decided
and matters which could have been raised once a court of
competent jurisdiction has entered a final judgment on the merits
of an action.”

Russell, 678 F.2d at 785)(citing Roberts v.

United States, 423 F. Supp. 1314, 1317 (C.D. Cal. 1976)(prior Tax
Court decision on the merits is absolute bar to all matters which
might have been decided)).

In fact, the Ninth Circuit

specifically held in Plaintiff’s appeal of his second action that
any challenge of his tax assessments was barred by res judicata:
The Tax Court properly sustained the collection
action because Holdner was precluded from
challenging the validity of the underlying tax
assessments, as the matter had been resolved in
prior litigation. See 26 U.S.C. §§ 6330(c)(2)(B),
6330(c)(4)(A)(i)(limiting issues a taxpayer may
challenge at a Collection Due Process hearing);
Comm'r v. Sunnen, 333 U.S. 591, 598–99
(1948)(discussing the application of res judicata
principles in tax litigation); Mpoyo v. Litton
Electro–Optical Sys., 430 F.3d 985, 988 (9th Cir.
2005)(summary judgment is a final judgment on the
merits for res judicata purposes); Baker v. IRS
(In re Baker), 74 F.3d 906, 910 (9th Cir.
1996)(res judicata precludes relitigation of
issues that were or could have been raised in the
prior action; “once a taxpayer's liability for a
particular year is litigated, ‘a judgment on the
merits is res judicata as to any subsequent
proceeding involving the same claim and the same
tax year.’” (citation omitted)).
Holdner v. C.I.R., 623 F. App’x 892, 893 (9th Cir. 2015).
Here Plaintiff seeks to challenge for a third time the
15 - OPINION AND ORDER

deficiency and penalty assessments for tax years 2004-2006.

The

issues Plaintiff raises in this action are one that he either
raised or could have raised in his previous two tax actions.

It

is undisputed that the Tax Court has twice sustained the IRS and
the Ninth Circuit has twice affirmed the Tax Court.

The Court,

therefore, concludes even if this Court has subject-matter
jurisdiction, Plaintiff’s claim is barred by res judicata.
Accordingly, the Court grants Defendant’s Motion to Dismiss
and dismisses this matter with prejudice.

CONCLUSION
For these reasons, the Court GRANTS Defendant’s Motion (#15)
to Dismiss for Lack of Subject-Matter Jurisdiction, Failure to
State a Claim for Relief, and Res Judicata and DISMISSES this
matter with prejudice.
IT IS SO ORDERED.
DATED this 23rd day of November, 2016.

s/ Anna J. Brown
ANNA J. BROWN
United States District Judge

16 - OPINION AND ORDER