United States of America v. Nelson et al
MEMORANDUM OPINION AND ORDER denying 7 Motion to Dismiss. Signed by U.S. District Judge Lawrence L. Piersol on 8/8/17. (DJP)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
UNITED STATES OF AMERICA,
JEFFREY A. NELSON,Individually and as *
Trustee ofthe J.A. Nelson Irrevocable
Trust; BEVERLY A. NELSON; and
The MINNEHAHA COUNTY
The United States of America commenced this action to reduce to judgment unpaid federal
income tax assessments made against Jeffrey A. Nelson, to obtain ajudicial determination that the
"J.A. Nelson Irrevocable Trust" is a nominee and/or alter ego ofJeffrey A. Nelson, and to foreclose
the resulting tax liens. Beverly Nelson, the Minnehaha Cormty Treasurer's Office, and Jeffrey
Nelson as Trustee of the J.A. Nelson Irrevocahle Trust are named only in Count II, the count to
enforce the tax liens, because they may claim an interest in the real property. Jeffrey Nelson and
Beverly Nelson move to dismiss the Complaint. The United States resists the motion. For the
following reasons, the motion to dismiss will he denied.
The facts, according to the Complaint, are as follows:
Jeffrey and Beverly Nelson, husband and wife,reside in Dell Rapids, South Dakota. Jeffrey
Nelson acquired the property described in the complaint on September 22, 1978 and has
continuously used it as his personal residence. On or about October 25, 1978, Jeffrey Nelson
transferred the property by quitclaim deed to the J.A. Nelson Irrevocahle Trust for no consideration.
Jeffrey Nelson has personally paid the Minnehaha County Treasurer real property taxes assessed on
Jeffrey Nelson did not file federal income tax returns for the tax years 2004 through 20IT,
inclusive. Nelson was given timelynotice ofthe assessments against him each ofthose years.Nelson
owes $152,350.27 in taxes and statutory additions. Notices of federal tax liens were filed against
both Jeffrey A. Nelson and the J.A. Nelson Irrevocable Trust. As of November 30, 2016, Jeffrey
Nelson owes $152,350.27 in taxes and statutory additions.
In support of their motion to dismiss the complaint, the Nelsons argue the Court does not
have subject matter jurisdiction over the claims against them, personal jurisdiction over them is
lacking, venue is improper, and Plaintiff has failed a state a valid claim.(Docs. 7 and 11.)
A. Subject Matter Jurisdiction
This Court has subject matter jurisdiction over the claims in this case pursuant to 26 U.S.C.
§ 7402 and 28 U.S.C.§§ 1340 and 1345.Under section 7402,federal district courts havejurisdiction
"to render such judgments and decrees as may be necessary or appropriate for the enforcement of
the internal revenue laws."26 U.S.C. § 7402(a). Section 1340 grants originaljurisdiction to district
courts "of any civil action arising under any Act of Congress providing for internal revenue." 28
U.S.C. § 1340. Finally, section 1345 provides, in pertinent part: "the district courts shall have
original jurisdiction of all civil actions, suits or proceedings commenced by the United States." 28
U.S.C. § 1345. This Court has subject matter jurisdiction over this action brought by the United
States as Plaintiff, seeking to enforce a lien arising from an assessment offederal income tax. See,
e.g., United States v. Harvey,2013 WL 5604307, at *2(D.S.D. Oct. 11, 2013)(concluding subject
matter jurisdiction existed under 28 U.S.C. §§ 1340 and 1345 and 26 U.S.C. § 7402 over ease
seeking adjudication offederal tax lien). Accordingly, the Nelsons are not entitled to dismissal of
this action for lack of subject matterjurisdiction.
B. Personal Jurisdiction
Jurisdiction exists when a defendant is domiciled in the forum state. See Goodyear Dunlop
Tires Operations, S.A. v. Brown, 564 U.S. 915, 924 (2011)(noting that "[f]or an individual, the
paradigm forum for the exercise ofgeneral jurisdiction is the individual's domicile"). The Nelsons
admit they are residents of the State of South Dakota and that the property is located in South
Dakota.(Doc. 7, pp. 2 and 8.) The Nelson's mailing address is the same as the property location in
Dell Rapids,(docs. 11 and 11-1), and they were served with the summons and complaint at the
property in Dell Rapids, South Dakota.(Doc. 6.) Thus,the Nelsons are not entitled to dismissal of
this case for lack ofpersonal jurisdiction.
Venue is proper because the Nelsons reside in this district. See 28 U.S.C. § 1391(b)(1).
Additionally, a substantial part ofthe events or omissions giving rise to the claim occurred in this
district, and the property that is the subject of the action is located in this district. See 2% U.S.C.
§ 1391(b)(2); see also United States v. Craig, 1995 WL 55166, *1 (8th Cir. Feb. 13, 1995)
(detemiined venue was proper because the defendant liyed in North Dakota where the property
subject to the federal tax liens was located). The complaint in this case is not subject to dismissal
based on improper venue.
D. Failure to State a Claim
Seeking to dismiss Plaintiffs complaint for failure to state a claim,the Nelsons contend that
South Dakota is within the Constitutional Republic(the fifty states), not in the United States(which
includes only the District of Columbia and its territories), and thus they are "American Nationals,"
not subject to federal revenue laws.(Doe.7 at p. 7.) This argument has been decisively rejected by
the Eighth Circuit. See, e.g.. United States v. Gerads,999 F.2d 1255,1257(8th Cir. 1993)
reject appellants' contention that they are not citizens ofthe United States, but rather 'Free Citizens
ofthe Republic of Mirmesota' and, consequently, not subject to taxation"); United States v. Jagim,
978 F.2d 1032,1036(8th Cir. 1992)(characterizing taxpayer's claim he is not subject to federal tax
laws as citizen of"Republic ofIdaho" as "patently fiivolous" and rejecting the contention "without
expending anymore ofthis Court's resourees" on diseussion). See also United States v. Hilgeford,
1 F.3d 1340,1342(7th Cir. 1993)(deseribing taxpayer's elaim he is a eitizen ofthe "Indiana State
Republic" and not a eitizen ofthe United States as "ineorreet" and a"shop worn argument ofthe tax
The Tenth Circuit has held that
As the cited cases, as well as many others,have made abundantly clear,the following
arguments ... are completely lacking in legal merit and patently frivolous: (1)
individuals("free bom,white,preamble,sovereign,natural,individual common law
'de jure' citizens of a state, etc.") are not "persons" subject to taxation under the
Intemal Revenue code; (2) the authority of the'United States is confined to the
District of Columbia; (3) the income tax is a direct tax which is invalid absent
apportionment, duadPollockv. Farmers'Loan & Trust Co., 157 U.S. 429, 15 S.Ct.
673, 39 L.Ed. 759,
158 U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108 (1895), is
authority for that and other arguments against the government's power to impose
income taxes on individuals;(4) the Sixteenth Amendment to the Constitution is
either invalid or applies only to corporations; (5) wages are not income;(6) the
income tax is voluntary;(7)no statutory authority exists for imposing an income tax
on individuals;(8)the term "income" as used in the tax statutes is unconstitutionally
vague and indefinite;(9)individuals are notrequired to file tax retums fully reporting
their income; and (10)the Anti-Injunction Act is invalid.
To this short list ofrejected tax protester arguments we now add as equally meritless
the additional arguments made herein that(1)the Commissioner ofIntemal Revenue
and employees of the Intemal Revenue Service have no power or authority to
administer the Intemal Revenue laws, including power to issue summons,liens and
levies, because ofinvalid or nonexistent delegations ofauthority,lack ofpublication
of delegations of authority in the Federal Register, violations of the Paperwork
Reduction Act, and violations of the Administrative Procedure Act, including the
- Freedom ofInformation Act; and(2)tax forms,including 1040,1040A, 1040EZ and
other reporting forms,are invalid because they have notbeen published in the Federal
Lonsdale v. United States,919 F.2d 1440,1448(10th Cir. 1990). This Court agrees with the Tenth
Circuit in Lonsdale,and rejeets all other tax protester arguments raised by the Nelsons in the present
ease. Despite the Nelsons' belief to the contrary, they are required to pay income taxes, and their
arguments deserve no further consideration! See Grain v. Comm 'r ofInternal Revenue, 737 F.2d
1417, 1417 (5th Cir.1984)(per curiam)("We perceive no need to refute these arguments with
somber reasoning and copious citation of precedent; to do so might suggest that these arguments
have some colorable merit").
The Nelsons threaten to sue the Department of Justice, or the attorney for the Department of
Justice, ifthe Court denies the motion to dismiss this case.(Doc. 11 at p. 11.) There is no basis for
such a lawsuit because the Nelsons' tax protester arguments are frivolous. In Coleman v. Comm.'r
ofInternal Revenue, 791 F.2d 68 (7th Cir. 1986), the Seventh Circuit imposed sanctions in the
amount of $1,500 against tax protester plaintiffs who raised frivolous arguments. The Seventh
Circuit stated, in part:
Groundless litigation diverts the time and energies of judges from more serious
claims; it imposes needless costs on other litigants. Once the legal system has
resolved a claim,judges and lawyers must move on to other things. They cannot
endlessly rehear stale arguments.... An obtuse belief-even if sincerely held-is no
refuge, no warrant for imposing delay on the legal system and costs on one's
adversaries. The more costly obtuseness becomes, the less there will be.
Id. dXl2. For all of these reasons.
IT IS ORDERED that the Motion to Dismiss of Defendants Jeffrey A. Nelson and
Beverly A. Nelson, Doc. 7, is denied.
Dated this^ day of August, 2017.
BY THE COURT:
HJawrence L. Piersol
United States District Judge
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