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D & M Painting Corp. v. United States

March 31, 2009

D & M PAINTING CORPORATION, MIKE MAKRIPODIS, KATHY MAKRIPODIS, PLAINTIFFS,
v.
UNITED STATES OF AMERICA, DEFENDANT.



The opinion of the court was delivered by: Arthur J. Schwab United States District Judge

MEMORANDUM OPINION

ELECTRONICALLY FILED

Introduction.

Plaintiffs D & M Painting Corporation and Mike and Kathy Makripodis filed a Complaint seeking a writ of mandamus against the United States of America to stay the collection of substantial penalties ($600,000) assessed by the IRS against plaintiffs pursuant to 26 U.S.C. § 6707A, for failing to report a "listed transaction" concerning certain life insurance policies issued under the D & M Painting Corporation Pension Plan. Plaintiffs assert that the IRS is currently auditing the 2004 and 2005 individual and corporate tax returns, that the audit will show that the penalties assessed pursuant to section 6707A are not warranted because the policies in question do not qualify as "listed transactions," that collection of the penalties prior to completion of that audit will force D & M Painting out of business, and that plaintiffs have no adequate administrative or legal remedies to challenge the assessment.

Before the Court is the United States' Motion to Dismiss Plaintiffs' Complaint Pursuant to Rule 12(b)(1) (doc. no. 8), for lack of subject matter jurisdiction. Defendant asserts that it has sovereign immunity which has not been waived in this case, that the Anti-Injunction Act, 26 U.S.C. § 7421(a), prohibits this suit against the IRS, and that in any event the averments of plaintiffs' complaint do not set forth the requisite elements for this Court to issue a writ of mandamus. After careful consideration of the complaint, defendant's motion to dismiss and brief in support, plaintiffs' brief in opposition and defendant's reply thereto, the Court agrees with the United States that this suit is prohibited by the Anti-Injunction Act.

Rule 12(b)(1) Standard.

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) challenges the lack of subject matter jurisdiction over a plaintiff's claims, the court's "very power to hear the case." See Fed. R. Civ. P. 12(b)(1); Judkins v. HT Window Fashions Corp., 514 F.Supp.2d 753, 759 (W.D.Pa. 2007) (quoting Mortenson v. First Federal Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)). As the party asserting jurisdiction, the plaintiff "bears the burden of showing that its claims are properly before the district court." Development Fin. Corp. v. Alpha Housing & Health Care, 54 F.3d 156, 158 (3d Cir.1995). In reviewing a motion to dismiss pursuant to Rule 12(b)(1), the Court must distinguish between facial attacks and factual attacks. Petruska v. Gannon Univ., 462 F.3d 294, 302 (3d Cir. 2006).

A facial attack challenges the sufficiency of the pleadings, and the court must accept the plaintiff's allegations as true. Id. When a defendant attacks a complaint on its face, he "[asserts] that considering the allegations of the complaint as true, and drawing all reasonable inferences in favor of [plaintiff], the allegations of the complaint are insufficient to establish a federal cause of action." Mullen v. Thompson, 155 F.Supp.2d 448, 451 (W.D.Pa. 2001). Dismissal is proper under Rule 12(b)(1) only when "the claim clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or . . . is wholly insubstantial and frivolous." Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991) (quoting Bell v. Hood, 327 U.S. 678, 682 (1946)).

When a defendant launches a factual attack on subject matter jurisdiction, "no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Petruska, 462 F.3d at 302 (quoting Mortenson, 549 F.2d at 891). In a factual attack, the court must weigh the evidence relating to jurisdiction, with discretion to allow affidavits, documents, and even limited evidentiary hearings. United States ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 514 (3d Cir. 2007). Defendant asserts that its attack is a factual one, and as the plaintiffs have filed affidavits in support of their jurisdictional claim, the Court will proceed accordingly.

The Anti-Injunction Act.

The Anti-Injunction Act provides as follows:

Prohibition of suits to restrain assessment or collection (a) Tax.-- Except as provided in [certain specifically enumerated sections, including 6330(e)(1)] no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.

26 U.S.C. § 7421(a).

The Act applies to collection of penalties. Iraci v. Scanlon, 219 F.Supp. 796 (E.D.N.Y. 1963); Rosner v. McGinnes, 167 F.Supp. 44 (E.D.Pa. 1958). The Court agrees with the United States that plaintiffs are indeed seeking to restrain the collection of an assessment pending completion of their 2004 and 2005 tax return audits, and that the Act presumptively prohibits such suit except as provided in the Act or in the narrow judicial exceptions set forth in ...


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