ROYAL DENIM FOR IMPORT AND EXPORT, INC. and Fred Reda, Plaintiffs, v. UNITED STATES OF AMERICA, Defendant., United States District Court, S.D. New York., 371 F.Supp.2d 569, No. 04 Civ. 6706(LLS)., May 26, 2005
ROYAL DENIM FOR IMPORT AND EXPORT, INC. and Fred Reda, Plaintiffs, v. UNITED STATES OF AMERICA, Defendant.
United States District Court, S.D. New York.
371 F.Supp.2d 569
No. 04 Civ. 6706(LLS).
May 26, 2005.
Barry Leibowicz, Great Neck, NY for Plaintiffs.
Pierre G. Armand, U.S. Atty., Southern District of New York, New York City, for Defendant.
OPINION and ORDER
STANTON, District Judge.
Defendant's motion to dismiss for lack of subject matter jurisdiction is granted for the reasons that follow.
On February 1, 2002, the Internal Reve╜nue Service issued a jeopardy assessment pursuant to 26 U.S.C. ╖ 6861 against plaintiff, Royal Denim for Import and Ex╜port, Inc., because of Royal Denim's fail╜ure to file a tax return for the tax year 1999. The IRS then issued levy notices and collected the following amounts from Royal Denim's bank accounts: (1) $31,890.87 on March 15, 2002; (2) $52,653.20 on March 26, 2002; and (3) $7,008.45 on March 26, 2002. On April 2, 2002, the IRS sent a notice of deficiency to Royal Denim. Marvald Reply Decl. Ex╜hibit A. Royal Denim still owes the IRS $1,606,100.31 under the jeopardy assess╜ment.
Royal Denim and its President sue to recover the levied amounts from the IRS, plus attorney's fees and costs, claiming that the tax, penalty and interest were "erroneously and illegally assessed against and collected from plaintiffs." Complaint ╤1. Defendant moves to dismiss, arguing that the Court lacks subject matter juris╜diction over the action. 1
1. ═ Defendant withdrew its additional argument based on alleged failure to file a timely administrative claim for refund.
"Absent a waiver of sovereign immunity, the Federal Government is im╜mune from suit." Loeffler v. Frank, 486 U.S. 549, 554, 108 S.Ct. 1965, 1969, 100 L.Ed.2d 549 (1988). If the United States waives its immunity, "the terms of its con╜sent to be sued in any court define that court's jurisdiction to entertain the suit." United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 770, 85 L.Ed. 1058 (1941). Any consent given, "since it is a relinquishment of a sovereign immunity, must be strictly interpreted." Sherwood, 312 U.S. at 590, 61 S.Ct. at 771.
28 U.S.C. ╖ 1346(a)(1) waives the United States' sovereign immunity in spe╜cific tax cases and provides that:
(a) The district courts shall have origi╜nal jurisdiction, concurrent with the United States Court of Federal Claims, of:
(1) Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been errone╜ously or illegally assessed or collected, or any 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.
In Flora v. United States, the Supreme Court delineated the District Courts' juris╜diction pursuant to that section. The Court held that the provision, "correctly construed, requires full payment of the assessment before an income tax refund suit can be maintained in a Federal Dis╜trict Court." 362 U.S. 145, 177, 80 S.Ct. 630, 647, 4 L.Ed.2d 623 (1960). Against the argument that the full payment rule might impose a hardship on some taxpay╜ers, the Court cited the Government's "substantial interest in protecting the pub╜lic purse, an interest which would be sub╜stantially impaired if a taxpayer could sue in a District Court without paying his tax in full." Id., 362 U.S. at 175, 80 S.Ct. at 646. See also Magnone v. United States, 902 F.2d 192, 193 (2d Cir.1990)("First, the full payment rule requires as a prerequi╜site for federal court jurisdiction over a tax refund suit, that the taxpayer make full payment of the assessment, including pen╜alties and interest."), cert. denied, 498 U.S. 853, 111 S.Ct. 147, 112 L.Ed.2d 113 (1990).
Plaintiffs still owe the IRS $1,606,100.31 under the jeopardy assessment and there╜fore have not satisfied the full payment rule. Since they have not met a jurisdic╜tional condition precedent to maintaining a tax refund claim in a District Court, this Court lacks jurisdiction over the case.
Plaintiffs argue that this Court has subject matter jurisdiction because they were not sent a notice of deficiency within 60 days as required by 26 U.S.C. ╖ 6861(b), 2 thus invalidating the assess╜ment. The argument fails, under the text of the statute.
2. ═ 26 U.S.C. ╖ 6861(b) states: "Deficiency Let╜ters. If the jeopardy assessment is made be╜fore any notice in respect of the tax to which the jeopardy assessment relates has been mailed under section 6212(a), then the Secre╜tary shall mail a notice under such subsection within 60 days after the making of the assess╜ment."
The jeopardy assessment was issued on February 1, 2002. The documentary proof establishes, and plaintiffs cannot disprove, that on April 2, 2002 (60 days later), defen╜dant mailed the notice of deficiency by certified mail to plaintiffs at their last known corporate addresses in New York and California (Marvald Reply Decl. ╤4 and Exhibit A), thus complying with the 60 day requirement.
Even if plaintiff did not receive the no╜tices of deficiency, the government thus satisfied the requirement of 26 U.S.C. ╖ 6861(b) that it "mail a notice" within 60 days of making the assessment. The stat╜ute does not require receipt of the notice by the taxpayer. Cf. Follum v. Commis╜sioner, 128 F.3d 118 (2d Cir.1997).
The defendant's motion to dismiss is granted. The Clerk shall dismiss the com╜plaint, with costs to defendant according to law.