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Building Blocks For A Writ Of Mandamus To Compel The Processing Of Filed Returns

 

What follows below are core building blocks that will be assembled into a writ of mandamus to compel agency processing of properly-filed tax returns.  I am hoping that all CtC warriors will study this assemblage in order to get a sense of the instrument that will be produced, and then contribute research time toward fortifying this material with additional statutory authority if available, and relevant "case law".  It's past time to get rolling on this front, and those needing to deploy these instruments (prior to being consolidated into a class) should start out armed for bear.  Thus this really needs to be a group effort.

 

PLEASE DO NOT SUBMIT ANYTHING WHICH DOES NOT DIRECTLY RELATE TO ONE OF THE BUILDING BLOCKS BELOW!

 

Every relevant contribution will be appreciated, but irrelevancies will not be.  This is not the time for theorizing about why the agency is seeking to evade the law, or even about what the agency might propose as its legal justification for its bad behavior.  Those issues, and others like them, are not important.

 

All that matters here is that the law (and the principles of due process) provide for the introduction of one's testimony and that it be accorded standing.  That an agency refusal to process any mechanically intact filing is a violation of the relevant statutes (and fundamental due process).  That it is outside an agency's latitude to challenge the content of a return--particularly concerning transactions to which the agency is not a party.  That the law provides that a court, upon proper application, must compel a recalcitrant agency to abide by the law.

 

Let's go to work.

 


 

Revenue Act of 1862 § 93

 

And be it further enacted,…that any party, in his or her own behalf,…shall be permitted to declare, under oath or affirmation, the form and manner of which shall be prescribed by the Commissioner of Internal Revenue,... ...the amount of his or her annual income,… liable to be assessed,… and the same so declared shall be received as the sum upon which duties are to be assessed and collected.

 

***

 

Senator Clark: "Of course, you withhold not only from taxpayers but nontaxpayers."

Mr. Hardy: "Yes."

...

Senator Danaher: "I have only one other thought on that point. In the event of withholding from the owner of stock and no taxes due ultimately, where does he get his refund?"

Mr. Friedman: "You're thinking of a corporation or an individual?"

Senator Danaher: "I am talking about an individual."

Mr. Friedman: "An individual will file an income tax return, and that income tax return will constitute an automatic claim for refund."

(From a hearing before a subcommittee of the committee on finance, United States Senate, during the 77th Congress, Second Session on withholding provisions of the 1942 Revenue Act on August 21 and 22, 1942.  Missouri Democratic Senator Bennett Clark, Connecticut Republican Senator John A. Danaher and testifying witnesses Charles O. Hardy of the Brookings Institution and Milton Friedman of the Treasury Department Division of Tax Research.)

 

***

 

“Even if you do not otherwise have to file a return, you should file one to get a refund of any Federal income tax withheld.”

From the instructions for the 2002 Form 1040

 

***

 

26 USC § 6402. - Authority to make credits or refunds

(a) General rule

In the case of any overpayment, the Secretary, within the applicable period of limitations, may credit the amount of such overpayment, including any interest allowed thereon, against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall, subject to subsections (c), (d), and (e) [deductions for past due obligations to federal or state agencies -PH] refund any balance to such person.

 

***

 

26 USC § 7422 Civil actions for refund

(a) No suit prior to filing claim for refund

No suit or proceeding shall be maintained in any court 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, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.

 

***

 

26 CFR § 301.6402-3  Special rules applicable to income tax.

(a) In the case of a claim for credit or refund filed after June 30, 1976--

(1) In general, in the case of an overpayment of income taxes, a claim for credit or refund of such overpayment shall be made on the appropriate income tax return.

...

(5) A properly executed individual, fiduciary, or corporation original income tax return or an amended return (on 1040X or 1120X if applicable) shall constitute a claim for refund or credit within the meaning of section 6402 and section 6511 for the amount of the overpayment disclosed by such return (or amended return).

 

***

 

 

26 USC § 6401- Amounts treated as overpayments

(b) Excessive credits

(1) In general

If the amount allowable as credits under subpart C of part IV of subchapter A of chapter 1 (relating to refundable credits) exceeds the tax imposed by subtitle A (reduced by the credits allowable under subparts A, B, D, and G of such part IV), the amount of such excess shall be considered an overpayment.

(c) Rule where no tax liability

An amount paid as tax shall not be considered not to constitute an overpayment solely by reason of the fact that there was no tax liability in respect of which such amount was paid.

(The “subpart C of part IV of subchapter A of chapter 1”, to which 6401(b)(1) refers, is:

26 USC § 31 -Tax withheld on wages

(a) Wage withholding for income tax purposes

(1) In general

The amount withheld as tax under chapter 24 shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle.)

***

 

"A fundamental requirement of due process is "the opportunity to be heard." Grannis v. Ordean, 234 U.S. 385, 394. It is an opportunity which must be granted at a meaningful time and in a meaningful manner."  Armstrong v. Manzo, 380 U.S. 545 (1965)

 

***

 

28 USC § 1361. Action to compel an officer of the United States to perform his duty

 

The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.

 

***

 

5 USC § 702 Right of review

 

A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof. An action in a court of the United States seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party. The United States may be named as a defendant in any such action, and a judgment or decree may be entered against the United States: Provided, That any mandatory or injunctive decree shall specify the Federal officer or officers (by name or by title), and their successors in office, personally responsible for compliance. Nothing herein

(1) affects other limitations on judicial review or the power or duty of the court to dismiss any action or deny relief on any other appropriate legal or equitable ground; or

(2) confers authority to grant relief if any other statute that grants consent to suit expressly or impliedly forbids the relief which is sought.

***

 

5 USC § 701 Application; Definitions

(a) This chapter applies, according to the provisions thereof, except to the extent that—

(1) statutes preclude judicial review; or
(2) agency action is committed to agency discretion by law.

(b) For the purpose of this chapter—

 

(1) “agency” means each authority of the Government of the United States, whether or not it is within or subject to review by another agency, but does not include—

(A) the Congress;

(B) the courts of the United States;

(C) the governments of the territories or possessions of the United States;

(D) the government of the District of Columbia;

(E) agencies composed of representatives of the parties or of representatives of organizations of the parties to the disputes determined by them;

(F) courts martial and military commissions;

(G) military authority exercised in the field in time of war or in occupied territory; or

(H) functions conferred by sections 1738, 1739, 1743, and 1744 of title 12; chapter 2 of title 41; subchapter II of chapter 471 of title 49; or sections 1884, 1891–1902, and former section 1641 (b)(2), of title 50, appendix; and

(2) “person”, “rule”, “order”, “license”, “sanction”, “relief”, and “agency action” have the meanings given them by section 551 of this title.

***

 

5 USC § 551 Definitions

 

For the purpose of this subchapter—

...

(2) “person” includes an individual, partnership, corporation, association, or public or private organization other than an agency;

...

(4) “rule” means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval or prescription for the future of rates, wages, corporate or financial structures or reorganizations thereof, prices, facilities, appliances, services or allowances therefor or of valuations, costs, or accounting, or practices bearing on any of the foregoing;

...

(6) “order” means the whole or a part of a final disposition, whether affirmative, negative, injunctive, or declaratory in form, of an agency in a matter other than rule making but including licensing;

...

(10) “sanction” includes the whole or a part of an agency—

(A) prohibition, requirement, limitation, or other condition affecting the freedom of a person;

(B) withholding of relief;

(C) imposition of penalty or fine;

(D) destruction, taking, seizure, or withholding of property;

(E) assessment of damages, reimbursement, restitution, compensation, costs, charges, or fees;

(F) requirement, revocation, or suspension of a license; or

(G) taking other compulsory or restrictive action;

(11) “relief” includes the whole or a part of an agency—

(A) grant of money, assistance, license, authority, exemption, exception, privilege, or remedy;

(B) recognition of a claim, right, immunity, privilege, exemption, or exception; or

(C) taking of other action on the application or petition of, and beneficial to, a person;

...

(13) “agency action” includes the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act; and

...

***

 

5 USC § 703 Form and venue of proceeding

 

The form of proceeding for judicial review is the special statutory review proceeding relevant to the subject matter in a court specified by statute or, in the absence or inadequacy thereof, any applicable form of legal action, including actions for declaratory judgments or writs of prohibitory or mandatory injunction or habeas corpus, in a court of competent jurisdiction. If no special statutory review proceeding is applicable, the action for judicial review may be brought against the United States, the agency by its official title, or the appropriate officer. Except to the extent that prior, adequate, and exclusive opportunity for judicial review is provided by law, agency action is subject to judicial review in civil or criminal proceedings for judicial enforcement.

 

***

 

5 USC § 704 Actions reviewable

 

Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review. A preliminary, procedural, or intermediate agency action or ruling not directly reviewable is subject to review on the review of the final agency action. Except as otherwise expressly required by statute, agency action otherwise final is final for the purposes of this section whether or not there has been presented or determined an application for a declaratory order, for any form of reconsideration, or, unless the agency otherwise requires by rule and provides that the action meanwhile is inoperative, for an appeal to superior agency authority.

 

***

 

5 USC § 705 Relief pending review

 

When an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review. On such conditions as may be required and to the extent necessary to prevent irreparable injury, the reviewing court, including the court to which a case may be taken on appeal from or on application for certiorari or other writ to a reviewing court, may issue all necessary and appropriate process to postpone the effective date of an agency action or to preserve status or rights pending conclusion of the review proceedings.

 

***

 

5 USC § 706 Scope of review

 

To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—

(1) compel agency action unlawfully withheld or unreasonably delayed; and

(2) hold unlawful and set aside agency action, findings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(D) without observance of procedure required by law;

(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or

(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.

 


 

Warrior Thomas Wilson has noted and forwarded the following very useful passage from a recent case in the DC district court which involved an uneducated effort to recover withheld or paid-in property, and to enjoin the government from engaging in a variety of collections-related activities, despite the plaintiffs having never actually submitted any cognizable claim for their property nor any rebuttal to the information returns upon which the offending collections activities were based (the plaintiffs are "non-filers", and thus have never actually claimed the return of their withheld or paid-in property in a legally-meaningful way nor disposed of the allegations of engaging in taxable activity upon which the government's collections efforts are based):

Jimmie D. Ross v. United States, DC District Court # CV06-0963

Even if the request for mandamus relief were not barred by the Anti-Injunction Act, the Court would dismiss the mandamus claim for failure to state a claim upon which relief can be granted. Mandamus relief is available only if "(1) the plaintiff has a clear right to relief; (2) the defendant has a clear duty to act; and (3) there is no other adequate remedy available to plaintiff." Fornaro v. James, 416 F.3d 63, 69 (D.C. Cir. 2005) (quoting Power v. Barnhart, 292 F.3d 781, 84 (D.C. Cir. 2002)); accord In re Medicare Reimbursement Litig., 414 F.3d 7, 10 (D.C. Cir. 2005); Ganem v. Heckler, 746 F.2d 844, 852 (D.C. Cir. 1984). "[I]f there is no clear and compelling duty under the statute as interpreted, the district court must dismiss the action." In re Cheney, 406 F.3d 723, 729 (D.C. Cir. 2005) (en banc). Even if a plaintiff satisfies all three elements, whether the extraordinary remedy of mandamus should issue remains discretionary. Id. Here, plaintiffs have failed to allege a clear and compelling duty to act; the laundry list of statutes and regulations in the amended complaint fails to indicate the specific duty plaintiffs believe the United States should be ordered to implement; plaintiffs have failed to demonstrate a clear right to the relief sought; and they have adequate remedies available through a refund action under 26 U.S.C. § 7422 and an action for damages under 26 U.S.C. § 7433.

As the government can be counted on to reflexively mischaracterize and outright lie about the facts in any action, each of the legitimate defects in the case quoted above can be expected to be alleged in our action.  Further, this language alerts us to anticipate the absurd contention that a writ is discretionary-- as though a failure of an executive agency to do as commanded by statute must simply be accepted.

 

Regarding the court's reference to the Anti-Injunction Act:

 

Why The "Anti-Injunction" Act Is Irrelevant To CtC-Educated Filers

 

At 26 USC 7421(a), Congress has provided that,

...[N]o 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.

This language has been used many times over the years to thwart lawsuits and other legal actions launched or argued by litigants in connection with various IRS activities.  In most cases, the application of the act has been proper.  Fears (or hopes) that the act could be used to hinder refund claims or lawsuits brought by the CtC-educated are misplaced, however.

 

The reason this is so is that, just as it plainly says, the "Anti-Injunction" Act only applies to IRS actions to collect or assess taxes, not merely IRS efforts to collect, seize, extort or retain money.  That is, the provisions of the act only come into play when a volume of "income" (and a consequent and corresponding liability) has been formally and legally defined, and only to the extent that the relevant tax agency activities concern themselves with assessing and collecting a tax thereon.  Agency activity to collect (or retain) anything other than in connection with a formally and legally defined liability is mere piracy, and is not protected by the act in any fashion whatever.

 

Whether an amount deposited and claimed for refund can be characterized as a tax, and/or whether any tax is due for collection, is dependent on the existence of a defined liability.  That liability cannot exceed the amount resulting from the proper application of the rate of tax to the amount of income declared on the relevant filer’s return, which "shall be received as the amount upon which the tax is to be assessed and collected" (Revenue Act of 1862, Section 93; 26 USC 6201; 26 CFR 301.6203-1).  Any amount deposited which exceeds the liability thus determined is not, and never was, an amount of tax.

 

Once created, it is the filer’s return that establishes the amount of income received which can and is to be assessed; imposes the tax thereon (or consents to the Secretary doing so); and asserts the filer’s uncontestable claim to any consequent surplus of what had been previously paid-in against the possibility that the process might end in showing a tax due.  Once a return is filed, it is only if a filer has declared the receipt of sufficient income for a tax to be due that an appropriate portion of any amount paid in can then be characterized as “tax” (or any amount can be sought by collection or seizure).

 

Although observations by courts in this regard are superfluous at best-- as the language of the statutes is perfectly clear, and only a desire to evade the law would induce anyone to look further-- the simple realities about the law discussed above have been universally acknowledged by the federal courts at all levels and in all circuits:

“[Withheld or paid-in amounts] are, as it were, payments in escrow. They are set aside, as we have noted, in special suspense accounts established for depositing money received when no assessment is then outstanding against the taxpayer. The receipt by the Government of moneys under such an arrangement carries no more significance than would the giving of a surety bond. Money in these accounts is held not as taxes duly collected are held but as a deposit made in the nature of a cash bond for the payment of taxes thereafter found to be due.”  Rosenman v. United States, 323 US 658 (1945)

 

“It reasoned [in the District Court] that in the case of a proper tax return, the return itself defines the obligation, but where a taxpayer makes a transfer of money to the collector, the transfer itself does not define the tax obligation. Some further act is necessary. ... The Court found its course of reasoning and its conclusion supported by the decision of the Supreme Court in Rosenman v. United States. . . the reasoning compelled conclusion that the taxpayer's obligation became defined when the Commissioner made assessment. . . . It is the view of the Court that the transfers of money made by the taxpayer in the instant case did not have the status of 'payment' until the tax deficiencies were formally assessed by the Commissioner.”  United States v. Dubuque Packing Co., 233 F.2d 453 (8th Cir. 1956)

 

“We cannot accept the distinction that the Defendant-Appellant would have us draw, that the mailing of Plaintiff-Appellees' check in response to the statutory notice of deficiency amounted to a payment and that, therefore, the tax in question was duly collected.  On the contrary, we believe that Plaintiff-Appellees' check served as a deposit to be utilized by the Government in the event a tax obligation were subsequently defined and imposed.

 

We are persuaded in so holding by the reasoning of the court in Rosenman v. United States, 323 U.S. 658, 65 S.Ct. 536, 89 L.Ed. 535 (1945) which recognized that payments prior to assessment are deposits and not payments of taxes duly collected.”  Estate of M. Karl Goetz v. United States, 286 F. Supp. 128 (W.D.Mo. 1968)

 

“This much is clear: (1) a remittance is not per se 'payment' of the tax; (2) a remittance that does not satisfy an asserted tax liability should not be treated as the 'payment' of a tax; and (3) an essential factor in 'payment' before assessment is the satisfaction or discharge of what the taxpayer deems a liability.”  Ameel v. United States, 426 F.2d 1270 (6th Cir. 1970)

 

“[Rosenman Court Chief Justice Felix Frankfurter says] "the tax obligation did not become defined until April 1938," id. 323 U.S. at 662 (emphasis added); that is to say, not until the assessment was made. The key here is that something, other than the mere remittance of money, must happen to define the amount of the obligation. That could be an official assessment by the IRS, or a tax return or other official document signed by the taxpayer which acknowledges the amount of the obligation.”  Ewing v. United States, 711 F. Supp. 265 (W.D.N.C. 04/19/1989)

 

“...the Fifth and Eighth Circuits have held that Rosenman created a per se rule that whenever the taxpayer has somehow disputed liability for a deficiency, there can be no payment of taxes until there has been a formal assessment. United States v. Dubuque Packing Co., 233 F.2d 453 (8th Cir. 1956); Thomas v. Mercantile Nat'l Bank at Dallas, 204 F.2d 943 (5th Cir. 1953); Wiltgen v. United States, 813 F.Supp. 1387 (N.D.Iowa 1992); Estate of Goetz v. United States, 286 F.Supp. 128 (W.D.Mo. 1968); see also Ford v. United States, 618 F.2d 357, 359-61 (5th Cir. 1980) (questioning the wisdom of Mercantile Nat'l Bank but following it as circuit precedent); Schmidt v. Commissioner, 272 F.2d 423, 428 (9th Cir. 1959) (discussing Mercantile Nat'l Bank favorably). The Mercantile Nat'l Bank court in particular emphasized the illogic any other result would work by allowing the statute of limitations on refund claims to run against the taxpayer before the tax- payer knew what to claim. 204 F.2d at 944.

 

The Second, Third, Fourth, Sixth and Federal Circuits, on the other hand, have embraced a more open approach. Blatt v. United States, 34 F.3d 252 (4th Cir. 1994); Cohen v. United States, 995 F.2d 205 (Fed. Cir. 1993); Ewing v. United States, 914 F.2d 499 (4th Cir. 1990), cert. denied, 500 U.S. 905 (1991); Ameel v. United States, 426 F.2d 1270 (6th Cir. 1970); Fortugno v. Commissioner, 353 F.2d 429 (3d Cir. 1965), cert. dismissed, 385 U.S. 954 (1966); Charles Leich & Co. v. United States, 329 F.2d 649 (Ct.Cl. 1964); Hill v. United States, 263 F.2d 885 (3d Cir. 1959); Rose v. United States, 256 F.2d 223 (3d Cir. 1958); Lewyt Corp. v. Commissioner, 215 F.2d 518 (2d Cir. 1954), aff'd in part, rev'd in part on other grounds, 349 U.S. 237 (1955); Crosby v. United States, ___ F.Supp. ___, 75 A.F.T.R.2d 95-1718 (D.Vt. June 19, 1995). These courts have held that a remittance prior to a formal assessment may be a tax payment. Exactly when that happens depends on the circumstances of each case, the lack of an assessment being only one consideration among many. The cases suggest that a number of factors should play an important role besides the timing of the assessment, including the taxpayer's intent upon making the remittance, how the IRS treats the remittance upon receipt, and when the tax liability is defined. See Ewing, 914 F.2d at 503; Ameel, 426 F.2d at 1273.

 

We have not addressed the question raised by Rosenman and discussed in Rev. Proc. 84-58. Our decision in Plankinton v. United States, 267 F.2d 278 (7th Cir. 1959), cited Dubuque Packing and Mercantile Nat'l Bank favorably, but the government had conceded the issue in Plankinton and agreed that remittances made prior to the defining of a liability were not tax payments. Id. at 280.”

Moran v. United States, 63 F.3d 663, 666-667 (1995)

In the Moran case cited above, the 7th Circuit ruled that the amount paid in by the Morans-- who had filed returns declaring sufficient income for the paid-in amount to be equaled by their potential liability, but were merely arguing a timing issue-- DID constitute a payment of tax, BECAUSE THEY SAID THAT IS WHAT THEY MEANT IT TO BE: “...here, the taxpayers clearly expressed a desire to have their remittances treated as payments.”

 

At the same time, after its exhaustive review of existing case-law, the Court plainly observes that the courts at all levels are in universal agreement that even in the absence of a formal assessment, no amount paid-in or withheld can be considered a payment of tax except in accordance with a PREVIOUSLY “defined liability”, and not, in any case, when to take it so would be contrary to the express position of the filer.

 

(Good scholarship calls for noting the existence of several cases, such as Ehle v. United States, 720 F.2d 1096 (9th Cir. 1983), Baral v. United States, 528 U.S. 431 (2000) and others in which withheld or paid-in amounts ARE deemed to be “payments of tax”-- BUT ONLY FOR PURPOSES OF THE LOOKBACK-TIMING PROVISIONS OF 26 USC 6513 AND 6511.  As is noted in Baral:

" Internal Revenue Code §6511(b)(2)(A) imposes a ceiling on the amount of credit or refund to which a taxpayer is entitled as compensation for an overpayment of tax: "[T]he amount of the credit or refund shall not exceed the portion of the tax paid within the period, immediately preceding the filing of the claim, equal to 3 years plus the period of any extension of time for filing the return." 26 U. S. C. §6511(b)(2)(A). We are called upon in this case to decide when two types of remittance are "paid" for purposes of this section: a remittance by a taxpayer of estimated income tax, and a remittance by a taxpayer's employer of withholding tax."  (Emphasis added.)

and in Ehle:

“Under 26 U.S.C. § 6511(b)(2)(A), Ehle may obtain by refund only those taxes paid within the three previous years. Under 26 U.S.C. § 6513(b)(1), any amount withheld from wages is deemed paid on the April 15th following the close of the tax year. Because Ehle's refund claim was filed more than three years after the amounts withheld in 1969-71 were deemed paid, the claim is barred by section 6511(b)(2)(A).”  (Emphasis added.)

Such cases ARE NOT departures from Rosenman, and are clearly irrelevant to application of the "Anti-Injunction Act" as it relates to CtC-educated filings by which it is established that no liability exists.)