George v. United States

Background

Richard George filed his 2018 federal tax return in October 2019. The return stated that he owed $127,333, an amount calculated by his tax preparer and based primarily on gains from the sale of real property. George paid the taxes and later requested a refund from the Internal Revenue Service. He did not claim that the tax amount resulted from a clerical or mathematical mistake. Instead, he based his refund request on constitutional arguments concerning the taxation of the property-sale gains.

The Internal Revenue Service denied the refund request as frivolous on or about January 14, 2021. George then sued the United States for a refund and sought orders declaring or preventing certain government actions. He argued that the Sixteenth Amendment was unconstitutional because it violated the Fourteenth Amendment’s Privileges and Immunities Clause, was improperly enacted, and permitted an unapportioned direct tax in violation of Article I. He also alleged violations of the First and Fourteenth Amendments.

Refund Claim

The United States moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally recognized claim supported by sufficient facts. The court held that George had not pleaded a valid legal theory for recovering the taxes.

The court rejected George’s challenges to the Sixteenth Amendment, relying on decisions that had upheld the amendment and rejected arguments against its authorization of income taxes that need not be apportioned among the states. The court also held that the Fourteenth Amendment does not apply to claims against the federal government. To the extent George’s arguments could be understood as a due-process challenge under the Fifth Amendment, the court held that the refund procedure provided by 26 U.S.C. § 7422 satisfied due process.

The court separately held that George had not alleged facts or provided documents establishing that his taxes were overpaid. In a tax-refund case, the taxpayer bears the burden of establishing the refund claim. The court therefore granted the United States’ motion to dismiss George’s refund claims.

Injunctive and Declaratory Claims

George also sought to prevent the United States from assessing penalties under 26 U.S.C. § 6702 for filing frivolous tax submissions. He argued that the possibility of those penalties violated his First Amendment right to petition the government.

The court held that the Anti-Injunction Act, 26 U.S.C. § 7421(a), and the Declaratory Judgment Act, 28 U.S.C. § 2201(a), deprived it of subject-matter jurisdiction over those claims. The Anti-Injunction Act generally bars lawsuits seeking to restrain the assessment or collection of taxes. The court held that the § 6702 penalties are treated as taxes for this purpose. It also held that the Declaratory Judgment Act likewise barred the claims because the suit was not permitted under the Anti-Injunction Act.

The court found no applicable exception. It explained that, if George were assessed the penalties, paid them, and submitted a refund request to the Internal Revenue Service, he could pursue a refund suit under 26 U.S.C. § 7422. The court therefore held that the Anti-Injunction Act and Declaratory Judgment Act barred the injunctive and declaratory claims.

Disposition

The court granted the United States’ motion to dismiss. It dismissed George’s refund claim with prejudice because amendment would be futile, and it declined to grant leave to amend the injunctive and declaratory claims. The clerk was directed to close the file.