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DePolo v. Ciraolo-Klepper

United States District Court, District of Columbia

July 14, 2016

LOUIS RONALD DEPOLO, Plaintiff,
v.
CAROLINE CIRAOLO-KLEPPER, Personally, et al., Defendants.

          OPINION

          ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE

         Louis Ronald DePolo complains that the Internal Revenue Service (IRS) labels him an income tax non-filer, creates automated substitutes for his missing tax returns, and uses the substitutes in subsequent tax collection and enforcement proceedings against him. Mr. DePolo seeks to enjoin IRS from engaging in what he calls a criminal conspiracy and record-falsification scheme on the basis that it violates his rights under the Constitution. Mr. DePolo, proceeding pro se, sues Caroline Ciraolo-Klepper, Acting Assistant Attorney General of the Tax Division at the Department of Justice, in her personal and official capacities, as well as the Commissioner of Internal Revenue and Attorney General of the United States in their official capacities. See Compl. [Dkt. 1]. Defendants move to dismiss the Complaint. See Mot. to Dismiss [Dkt. 2] (Mot.). Mr. DePolo filed a timely opposition to the motion, see Opp'n [Dkt. 7], to which Defendants replied, see Reply [Dkt. 8]. For the reasons that follow, the Court will grant the motion to dismiss.

         I. FACTS

         IRS opens an Individual Master File (IMF) for income tax non-filers by creating an entry in its computer system indicating that the individual paid zero tax. This is exactly what the law provides. See 26 U.S.C. § 6020(b)(1) (providing in relevant part that "if any person fails to make any return required by any internal revenue law or regulation made thereunder . . . the Secretary [of Treasury] shall make such return"); see also 26 C.F.R. § 301.6211-1 ("If no return is made . . . for the purpose of the definition ‘the amount shown as the tax by the taxpayer upon his return' shall be considered as zero."). IRS then estimates the individual's tax deficiency and any "additions to tax" (i.e., penalties and interest). "If a taxpayer fails to file a return, the IRS may create a substitute tax form under 26 U.S.C. § 6020(b) and file a notice of deficiency for the total amount it calculates as due." Byers v. C.I.R., 740 F.3d 668, 671 (D.C. Cir. 2014), cert. denied, 135 S.Ct. 232, reh'g denied, 135 S.Ct. 887 (2014). This calculation is recorded on Form 4549 titled, "Income Tax Examination Changes, " and Form 866 titled, "Explanation of Items."

         These forms are appended to Form 13496, titled "IRC § 6020(b) Certification, " that contains the IRS assessment of the taxes and other charges due. See 26 C.F.R. § 301.6020-1. This packet of records is known as a Substitute for Return (SFR). Finally, IRS produces a certified transcript of the IMF (or Form 4340) that the Department of Justice uses in tax collection and enforcement proceedings against the non-filer. See Mot. at 3 (citing Compl. ¶¶ 20-53). The use of certified transcripts to collect unpaid taxes also is authorized by law. See 26 U.S.C. § 6020(b)(2) ("Any return so made and subscribed by the Secretary [of Treasury] shall be prima facie good and sufficient for all legal purposes."); see also 26 C.F.R. § 301.6020-1(b)(3).

         As far as can be discerned from his Complaint and Opposition, Mr. DePolo believes this process violates his constitutional rights and multiple criminal statutes. He claims that IRS falsely labels him an income tax non-filer, estimates his annual tax liability each year, and then certifies the amount of taxes to be collected from him. Mr. DePolo accuses Defendants of engaging in a "criminal enterprise" to falsify records concerning him, which are then used "to damage [him] by stealing his property." Compl. ¶¶ 1-5, 17. The underlying basis for his beliefs lies in his assertion that he possesses a constitutional right under the Fifth Amendment to refuse to file an income tax return.

         Mr. DePolo alleges that he "will never voluntarily confess liability by swearing out 1040 evidence which can be used against him." Id. ¶ 5; see also Opp'n at 9. As a result, IRS points out that Mr. DePolo is a "tax defier" -- namely, someone who does not file annual income tax returns. Mot. at 1. Mr. DePolo contends that "because IRS must falsify its records to create the appearance of a collectible deficiency, Plaintiff has no liability to pay that tax and owes nothing to the Treasury." Opp'n at 9.

         Specifically, Mr. DePolo asserts two claims against Defendants: (1) a violation of the Administrative Procedure Act (APA), 5 U.S.C. § 702 (Count 1); and (2) a violation of Mr. DePolo's procedural and due process rights under the Fifth Amendment of the U.S. Constitution (Count 2). See Compl. ¶¶ 54-60. Although these are the only two counts included in the Complaint, Mr. DePolo also mentions in passing that Defendants' conduct violates his right against self-incrimination under the Fifth Amendment, as well as his rights under the Fourth and Thirteenth Amendments. See Id. ¶¶ 1, 5.[1] Mr. DePolo asks the Court to enjoin IRS from fabricating records and engaging in this alleged falsification scheme against him, thereby avoiding future income tax assessments based on this process. He also wants an injunction to prevent the Attorney General and the Department of Justice from participating in this putative scheme and using forms provided by IRS to collect any tax deficiency.

         Defendants move to dismiss for lack of jurisdiction, including lack of standing, under Federal Rule of Civil Procedure 12(b)(1). In the alternative, Defendants move to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6) because Mr. DePolo failed to state a claim upon which relief can be granted. The case will be dismissed for lack of jurisdiction.

         II. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 12(b)(1), a defendant may move to dismiss a complaint, or any portion thereof, for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). No action of the parties can confer subject matter jurisdiction on a federal court because subject matter jurisdiction is both a statutory requirement and an Article III requirement. Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C. Cir. 2003). The party claiming subject matter jurisdiction bears the burden of demonstrating that such jurisdiction exists. Khadr v. United States, 529 F.3d 1112, 1115 (D.C. Cir. 2008); see Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (noting that federal courts are courts of limited jurisdiction and "[i]t is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction") (internal citations omitted).

         When reviewing a motion to dismiss for lack of jurisdiction under Rule 12(b)(1), a court should "assume the truth of all material factual allegations in the complaint and ‘construe the complaint liberally, granting the plaintiff the benefit of all inferences that can be derived from the facts alleged.'" Am. Nat'l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (quoting Thomas v. Principi, 394 F.3d 970, 972 (D.C. Cir. 2005)). Nevertheless, "the court need not accept factual inferences drawn by plaintiffs if those inferences are not supported by facts alleged in the complaint, nor must the Court accept plaintiff's legal conclusions." Speelman v. United States, 461 F.Supp.2d 71, 73 (D.D.C. 2006). A court may consider materials outside the pleadings to determine its jurisdiction. Settles v. U.S. Parole Comm'n, 429 F.3d 1098, 1107 (D.C. Cir. 2005); Coal. for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003). A court has "broad discretion to consider relevant and competent evidence" to resolve factual issues raised by a Rule 12(b)(1) motion. Finca Santa Elena, Inc. v. U.S. Army Corps of Engineers, 873 F.Supp.2d 363, 368 (D.D.C. 2012) (citation omitted).

         Jurisdiction over a complaint also requires that the plaintiff in a lawsuit have standing to pursue his claim. Flast v. Cohen, 392 U.S. 83, 95 (1968). Standing requires a plaintiff to show that "(1) [he] has suffered an ‘injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., 528 U.S. 167, 180-81 (2000) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561 (1992)).

         III. ...


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