Dacanay v. Government of Guam

• Court: District Court, D. Guam
• Decided: September 9, 2005
• Docket: 1:05-cv-00017
• Status: Unknown

Opinion

BAe i bia) DISTRICT COURT OF GUAM 3 SEP _ 9 20089P 4 MARY L.M. MORAN CLERK OF COURT DISTRICT COURT OF GUAM TERRITORY OF GUAM 8 HENRY S. DACANAY and 9 | LAURA LYNN DACANAY, Civil Case No. 05-00017 10 Plaintiffs, 11 VS. ORDER RE MOTION TO DISMISS 12 | GOVERNMENT OF GUAM, 13 Defendant. 14 15 The matter is before the Court on Defendant Government of Guam’s (“Guam”) 16 |] Motion to Dismiss for Lack of Subject Matter Jurisdiction and Failure to State a Claim 17 || pursuant to Rules 12(b}{1) and (6) of the Federal Rules of Civil Procedure. Defendant 18 |] contends the Court lacks subject matter jurisdiction over the instant matter because 19 }| Plaintiffs Henry and Laura Dacanay (“Plaintiffs”) failed to name any officer or employee 20 || of the United States or any agency as a party to this matter under 28 U.S.C § 1361.’ 21 2) 0 0Cti“‘é‘;aS;w;*‘ ' Title 28 of the United States Code § 1361 provides that “district courts shall 23 || have original jurisdiction of any action in the nature of mandamus to compel an officer 24 || OF employee of the United States or any agency thereof to perform a duty owed to the plaintiff.” 25 Defendant notes that the sole defendant in this action is the Government of Guam, which is neither an officer or employee or agency of the United States. 26 Plaintiffs concede the issue as shown by their silence with respect to this 27 || argument. Opp’n at 4. 3 Accordingly, the Court finds that § 1361 cannot serve as a jurisdictional basis 28 || for the instant action.

1 || Defendant also argues that it has sovereign immunity with respect to the injunctive and 2 || declaratory judgment claims in this action.?, Defendant also alleges that the Declaratory 3 || Judgment Act, 28 U.S.C. § 2201,° does not apply to the Guam Territorial Income Tax 4 || (“GTIT”) nor does it apply to federal tax. Therefore, the Court does not have jurisdiction 5 || over Plaintiffs’ second cause of action which seeks declaratory relief. Def.’s Mot. at 7-8; 6 {| ——_———————wei 7 ? Defendant concedes that an action to recover a refund of tax under the Guam Territorial Income Tax ("“GTIT”) is authorized by the Organic Act of Guam, 48 U.S.C. § 8 1421i(h)(2) and 26 U.S.C. § 7422(a) as mirrored for the Guam Territorial Income Tax g | CGTIT”) by 48 U.S.C. § 1421i(d)(1) and (e). However, Defendant posits that sovereign immunity applies with respect to the equitable claims. Defendant argues 10 || that “[a] money judgment, not injunctive or declaratory relief, is the remedy provided by the Internal Revenue Code.” Reply at 2 (citing Crain v. Government of Guam, 195 F.2d 414, 417 (9th Cir. 1952)). 12 In Crain, the Ninth Circuit affirmed the lower court's dismissal of an action for declaratory relief brought against defendant based on sovereign immunity, holding 13 | that the government had not waived its immunity from suits seeking declaratory relief. 14 However, thereafter, the Ninth Circuit has observed that: 15 So far as the language of section 1421i{h) is concerned, subsection (2) .. . is 16 simply a waiver of the government of Guam's immunity from suit which the Congress thought was made necessary by this court's decision in Crain v. 17 Government of Guam. 18 || See Forbes v. Maddox, 339 F.2d 387, 388 (9th Cir. 1964) (citing S.Rep. No. 2176, 19 || U-S.Code & Admin. News (85th Cong.2d Sess. (1958)) 3647, 3653). Accordingly, sovereign immunity generally does not bar Plaintiffs’ claim for declaratory relief. 20 || Accord, Simpao et al. v. Government of Guam, CV 04-00049, Order dated March 17, 2005 at 6-7 (finding subject matter jurisdiction over plaintiffs’ claims for declaratory relief). 22 3 The Declaratory Judgment Act provides in relevant part: 23 4 [ijn a case of actual controversy within its jurisdiction, except with respect to Federal taxes other than actions brought under section 7428 of the Internal 25 Revenue Code of 1986 [26 USCS § 7428]... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other 26 legal relations of any interested party seeking such declaration, whether or not 7 further relief is or could be sought. 28 28 U.S.C. § 2201.

1 || Reply at 3-4.4 Further, Defendant contends that the Court lacks subject matter jurisdiction 2 || because Plaintiffs have not exhausted their administrative remedies required under 26 3 || U.S.C. § 7422(a) and that Plaintiffs’ claims are barred by the applicable statute of 4 || limitations.® In addition, Defendant moves to dismiss for failure to state a claim pursuant 5 |} to Rule 12(b)(6) of the Federal Rules of Civil Procedure. 6 A hearing was held on September 2, 2005. Having thoroughly considered all the 7 || relevant pleadings and documents filed by counsel for both parties, the Complaint is 8 || dismissed without prejudice to filing the same after the appropriate administrative 9 || remedies have been exhausted. In the alternative, the Complaint is dismissed with leave 10 || to amend to allege compliance with the claims requirements, exception thereto, or that 11 | the filing of a claim would be futile. The Court also grants Plaintiffs leave to amend 12 || Complaint to allege sufficient facts showing that the action is not barred by the statutes 13 | of limitations. Should Plaintiffs choose to amend the complaint, the Amended Complaint 14 | must be filed within thirty (30) days from the date of this Order. Defendant has twenty 15 16 * Almost the same issue was discussed and ruled upon in this Court, The 17 || Honorable Ronald S.W. Lew, presiding, in a case involving Defendant captioned, Simpao et al. v. Government of Guam, CV 04-00049, Order dated March 17, 2005 at 18 | 43-45. In Simpao, Defendant Guam claimed that GTIT is a federal tax to which the 19 || Declaratory Judgment Act does not apply. Judge Lew agreed with plaintiffs’ position that the GTIT is not a federal tax, and therefore, the Declaratory Judgment Act per se 20 || does not bar declaratory relief. Id. at 14-15. The Court finds Judge Lew’s reasoning 1 to be persuasive and does not re-visit this issue. 2 ° Title 48 of the United States Code § 7422(a) states that “[n]o suit or proceeding shall be maintained in any court for the recovery of any internal revenue 23 |! tax alleged to have been erroneously or illegally assessed or collected . . . until a claim 24 for refund or credit has been duly filed with the Secretary.” (Emphasis added). 25 ® Title 26 of the United States Code § 6511 provides that a “claim or refund of an overpayment of any tax imposed by this title in respect of which tax the taxpayer is 26 |! required to file a return shall be filed by the taxpayer within 3 years from the time the 97 || return was filed or 2 years from the time the tax was paid, whichever of such periods expires later or if no return was filed by the taxpayer, within 2 years from the time the 28 || fax was paid.” (Emphasis added).

1 || (20) days thereafter to respond. 1. BACKGROUND 3 On June 8, 2005, Plaintiffs filed this proposed class action against the Govemment 4 || of Guam for: (1) failure to send a valid Notice of Deficiency as required under 26 U.S.C. 5 | §§ 6212 and 6213(a); (2) failure to send a valid Notice of Lien as required under 26 6 || U.S.C. § 6320; and (3) failure to comply with the requirements for Final Notice / Notice 7 || of Intent to Levy under 26 U.S.C. § 6330. Compl. | 2. These aforementioned statutes 8 || went into effect on July 22, 1998. 9 Plaintiffs allege that they “have paid income taxes” to the Government of Guam 10 || pursuant to a Final Notice/Notice of Intent to Levy sent to them by the Government, and 11 || a tax tien which was filed by the Government of Guam without a Notice of Lien. /d. 71. 12 A. Notice of Deficiency 13 In 1998, Congress amended the Internal Revenue Code to include 26 U.S.C. § 14 || 6212(a) which provides: 15 lf the Secretary determines that there is a deficiency in respect of any tax imposed by subtitle A or B [26 USCS §§ 1 et seq. or 2001 et seq.] or chapter 41, 42, 43 or 16 44 26 USCS §§ 4911 et seq., 4940 et seq., 4971 et seq., 4981 et □□□□ he is authorized to send notice of such deficiency to the taxpayer by certified mail or 17 registered mail. Such notice shall include a notice to the axpayer of the □□□□□□□□□□ right to contact a local office of the taxpayer advocate and the location and phone 18 number of the appropriate office. 19 30 26 U.S.C. § 6212. (Emphasis added). In addition, 26 U.S.C. § 6213(a) provides: Except as otherwise provided in section 6851, 6852, or 6861 [26 USCS § 6857, 22 6852, or 6861] no assessment of a deficiency in respect of any tax imposed by subtitle A or B ge USCS §§ 1 et seq. or 2001 et seq.], chapter 41, 42, 43, or 44 23 [26 USCS §§ 4911 et seq., 4940 et seq., 4971 et seq., or 4981 et seq.] and no evy or proceeding in court for its collection shall be made, begun, or prosecuted 24 until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period, as the case may be... 25 26 || 26 U.S.C. § 6213. (Emphasis added). 27 The Organic Act of Guam expressly provides that, “where not manifestly 28 || inapplicable,” the income tax laws in force in Guam include “all provisions of subtitle F”

1 | of the Internal Revenue Code. 48 U.S.C. § 1421i(d)(1). Sections 6212(a) and 6213(a) 2 || are included within subtitle F of the internal Revenue Code, and thus, in force in Guam. 3 Plaintiffs allege that they “never received a Notice of Deficiency from the 4 || Government of Guam,” and all further attempts to collect the taxes paid by Plaintiffs were 5 || thus improper under the notice of deficiency provisions. Compl. J] 12.’ 6 B. Notice of Lien 7 Section 6320(a){1) to the Intemal Revenue Code provides, in relevant part: 8 The eccrelary shall notify in writing the person described in section 6321 £8 USCS § 6321] of the filing of a notice of lien under section 6323 [26 USCS § 9 6323]. 10 || 26 U.S.C. § 6320. (Emphasis added). Section 6320(a}(3) further provides: 11 phe notice required under paragraph (1) shall include in simple and nontechnical erms-— 12 iB the amount of unpaid tax; □ B} the right of the person to request a hearing during the 30-day period beginning 13 on the day after the 5-day period described in paragraph (2); (C) the administrative appeals available to the taxpayer with respect to such tien 14 and the procedures relating to such appeals; and (D) the provisions of this title and procedures relating to the release of liens on 15 property. 16 . . . . 26 U.S.C. § 6320(a\(3). Section 6320(a)(3) is also included within subtitle F of the 17 Internal Revenue Code, and thus, in force in Guam. 18 Plaintiffs allege that on or about June 28, 2000, the Government of Guam filed a 19 20 7 Plaintiffs indicate that here, Plaintiffs seek to extend Marangi v. Gov't of 21 | Guam, 319 F. Supp. 2d 1179, 1185 (D. Guam 2004); Opp'n at 1. Marangi held that a 22 || Notice of Deficiency that did not contain the statutorily required notice to the taxpayer of the tax payer's right to contact a local office of the taxpayer advocate and the 23 || location and phone number of the appropriate office was void, and that taxes collected 4 pursuant to the inadequate Notice of Deficiency were improperly collected and had to be refunded. 25 Guam did not appeal the judgment in Marangi. Therefore, Plaintiffs argue that Defendant is estopped from contending that the Notice of Deficiency it issued 26 | subsequent to July 22, 1998 without the notice required by § 6212(a) were valid and 7 || that the taxes paid pursuant to the notice was properly collected. See Compl. {| 17. The issues of exhaustion of remedies and statute of limitations, however, were 28 || not before the court in Marangi.

1 || tax lien against Plaintiffs, but “never sent Plaintiffs the statutorily required Notice of Lien.” 2 | Compl. | 22. Because the lien was allegedly filed without the requisite notice, Plaintiffs 3 || claim that the lien was void, and the Government of Guam’s attempts to collect on the 4 || lien, consequently, were improper. /d. 23. 5 C. Final Notice / Notice of Intent to Levy 6 Section 6330(a) of the Internal Revenue Code provides, in relevant part: 7 No levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of thelr right to a hearing under this 8 section before such levy is made. 0 26 U.S.C. § 6330(a). Section 6330(a)(3) delineates the information required to be in the 1 Notice of Levy: 11 The notice required under paragraph (1) shall include in simple and nontechnical 12 terms-- A) the amount of unpaid tax; 13 B} the night of the person to request a hearing during the 30-day period under paragraph (2); and 14 (C) the proposed action by the Secretary and the rights of the person with respect to such action, including a brief statement which sets forth-- 15 |} the provisions of this title relating to levy and sale of property; ii) the procedures applicable to the levy and sale of property under this title; 16 iil) the administrative appeals available to the taxpayer with respect to such levy and sale and the procedures relating to such appeals; 17 iv) the alternatives available to taxpayers which could prevent levy on property including installment agreements under section 6159) (6 USCS § 6159]; and 18 v) the provisions of this title and procedures relating to redemption of property and release of liens on property. 20 | 26 U.S.C. § 6330(a)(3). Section 6330(a)(3) is included within subtitle F of the Internal 21 || Revenue Code, and therefore, is also applicable to Guam. Compl. { 27. 22 Plaintiffs aver that on or about October 2, 2000, and again on or about March 6, 23 || 2003, the Government of Guam sent Plaintiffs a Final Notice / Notice of Intent to Levy. 24 || The Final Notice / Notice of Intent to Levy allegedly did not contain a notice that complied 25 | with the requirements of § 6330(a)(3). Jd. 26 | D. Plaintiffs’ Prayer for Relief 27 Based on the allegations in the Complaint, Plaintiffs seek a refund of those 28 || improperly paid taxes pursuant to the void Notices of Deficiency, liens, Notices of Lien

1 || and/or Final Notices/Notices of Intent to Levy (Claim 1). Compl. (| 41-42. 2 In the alternative, Plaintiffs seek a declaratory judgment that the Defendant failed 3 □ to comply with the notice requirements of §§ 6212(a), 6213(a), 6320 and/or 6330 and that 4 | the taxes were therefore improperly collected (Claim 2). 5 Plaintiffs also seek an injunction requiring the Government of Guam to: (1) notify 6 || all taxpayers who paid taxes pursuant to the void notices that the aforementioned notices 7 || were void and that the taxes paid pursuant to them were improperly collected; (2) provide 8 || each of these taxpayers with the appropriate form for claiming a refund of these taxes; 9 |} and (3) refund the improperly collected taxes once the claims forms are properly 10 || submitted (Claim 3).® Ul. LEGAL STANDARD 12 It is a fundamental legal principle that federal courts are courts of limited 13 || jurisdiction. "A federal court is presumed to lack jurisdiction in a particular case unless 14 |] the contrary affirmatively appears." Stock West, Inc. v. Confederated Tribes, 873 F.2d 15 } 1221, 1225 (9th Cir. 1989) (citation omitted). Lack of subject matter jurisdiction may be 16 }| raised by any party at any time, and it is never waived: "whenever it appears by 17 || suggestion of the parties or otherwise that the court lacks jurisdiction of the subject 18 || matter, the court shall dismiss the action." Fed. R. Civ. P. 12(h)(3); Hernandez v. 19 || McClanahan, 996 F. Supp. 975, 977 (N. D. Cal. 1998). 20 Rule 12(b)(6) must be read in conjunction with Rule 8(a) which requires “a short 21 || and plain statement of the claim showing that the pleader is entitled to relief.” 54 Charles 22 |} —____ 23 * The Court notes what the Complaint failed to aver. The Complaint was devoid of any allegation as to when the subject taxes were actually paid. Plaintiffs allege that they received Final Notices / Notices of Intent to Levy on or about October 25 || 2, 2000, and again on or about March 6, 2003. Plaintiffs may have had until about October 2002 and March 2005 to seek a refund pursuant to 26 U.S.C. § 6511, supra, 26 | note 6. However, the Complaint failed to allege that they sought a refund of the taxes 27 || paid within the limitations period. \n their amended complaint, Plaintiffs must allege that they sought a refund, or the reasons why they are excused from compliance with 28 || § 6511.

1 || A. Wright & Arthur Miller, Federal Practice and Procedure §1356 (1990). A Rule 12(b)(6) 2 || dismissal is proper only where there is either a “lack of a cognizable legal theory” or “the 3 | absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica 4 || Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). The court must accept all material 5 || allegations in the complaint as true and construe them in the light most favorable to the 6 | plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986); see also, 7 || Russell v. Landrieu, 621 F.2d 1037, 1039 (9th Cir. 1980). 8 ff ill. DISCUSSION 9 A. Plaintiffs’ Failure to File a Refund Claim Warrants Dismissal of the Refund Cause of Action (“Claim 1") for Failure to Exhaust Administrative Remedies. 10 11 The Organic Act provides in relevant part as follows: 12 Suits for the recovery of any Guam Territorial income tax alleged to have been erroneously or illega y assessed or collected, or of any penalty claimed to have 13 been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, under the income-tax laws in force in Guam, 14 pursuant to subsection (a) of this section, may, regardless of the amount of claim, e maintained against the goverment of Guam subject to the same □□□□□□□□□ 15 requirements as are applicable to suits for the recovery of such amounts maintained against the United States in the United States district court with respect 16 to the United States income tax. 17 || 48 U.S.C. § 1421i{h)(2). (Emphasis added). 18 Section 7422(a) of the Internal Revenue Code states that: 19 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 20 collected, or of any penal y claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, 21 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 22 established in pursuance thereof. 23 34 26 U.S.C. § 7422. (Emphasis added). Section 7422, found in Subtitle F of the Internal

5 Revenue Code, applies to Guam pursuant to 48 U.S.C. § 1421i(d)(1), supra, which expressly provides that, “where not manifestly inapplicable,” the income tax laws in force

37 in Guam include “all provisions of subtitle F” of the Internal Revenue Code.

38 It is well-established that where the sovereign has waived its immunity, “no suit can

1 || be maintained unless it is in exact compliance with the terms of the statute under which 2 || the sovereign has consented to be sued.” Bruno v. United States, 547 F.2d 71, 73 (8th 3 || Cir. 1976). Section 7422(a) expressly prohibits suits against the United States for tax 4 || refunds unless "a claim for refund or credit has been duly filed with the S ecretary, 5 || according to the provisions of law in that regard, and the regulations of the Secretary 6 || established in pursuance thereof." 26 U.S.C. § 7422(a). Accordingly, the filing of a timely 7 || administrative claim for refund is a jurisdictional prerequisite to a tax refund suit and 8 j cannot be waived. See Quarty v. United States, 170 F.3d 961, 972 (9th Cir. 1999} 9 | (‘Compliance with these specificity requirements is a prerequisite to subject matter 10 || jurisdiction over a claim for a refund”); see also, Boyd v. United States, 762 F.2d 1369, 11 | 1371 (9th Cir. 1985) (“If the refund claim does not meet the requirements of the Code and 12 || the regulations, the suit must be dismissed because filing pursuant to the rules is a 13 || jurisdictional prerequisite”); see also, Essex v. Vinal, 499 F.2d 226, 231 (8th Cir. 1974), 14 || cert. denied, 419 U.S. 1107 (1975); Rosenbluth Trading, Inc. v. United States, 736 F.2d 15 || 43, 47 (2d Cir. 1984) ("The filing of a timely refund claim is a jurisdictional requirement, 16 || which cannot be waived."); United States v. Rochelle, 363 F.2d 225, 231 (5th Cir. 1966). 17 Exhaustion of administrative remedies under § 7422 applies to the refund of any 18 || internal revenue tax and constitutes a jurisdictional requirement. Further, § 6532(a)(1) 19 |] of the Internal Revenue Code provides a further exhaustion requirement: 20 No suit or proceeding under § 7422(a) for the recovery of any internal revenue tax, 21 d ate offing the ca required urider such section unless the Secretary renders 3 a decision thereon within that time...

23 || 26 U.S.C. § 6532. Therefore, before commencing a suit for a refund, a taxpayer must file 24 || an administrative claim and then wait six months before filing suit, unless the claim is 25 || denied before the expiration of the six months. Until then, subject matter jurisdiction is 26 || lacking and the complaint must be dismissed. Boyd, 762 F.2d at 1371. 27 In the instant case, the Complaint does not allege that they filed claims for refund 28 || with the Director of Revenue and Taxation, the counterpart of the United States Secretary

1 || of Treasury referenced in 26 U.S.C. § 7422(a), supra; see also, 11 G.C.A. §§ 1102, 2 || 1104(a). Because Plaintiffs have not complied with the exhaustion of remedies 3 || requirements under §§ 7422(a) and 6532(a}(1), Claim 1 is dismissed for lack of subject 4 || matter jurisdiction. 5 Inresponse, Plaintiffs contend that the Government of Guam is equitably estopped 6 || from bringing a 28 U.S.C. § 7422 exhaustion of administrative remedies defense. Pls.’ 7 | Opp’n at 7-13. According to Plaintiffs, all the elements of equitable estoppel are met. /d. 8 | at 8-10. 9 The elements for equitable estoppel are: " Sonduct shall be acted or or must so act that the party asserting the estoppel has 11 a right to believe it is so intended; (3) the latter must be smmorant of the true facts: and (4) he must rely on the isenaee conduct to his injury. 12 13 || Watkins v. United States Army, 875 F.2d 699, 709 (Sth Cir. 1989). 14 Before the government will be estopped, however, two additional elements must 15 || be satisfied beyond those required for traditional estoppel. First, "[a] party seeking to 16 || raise estoppel against the government must establish ' affirmative misconduct g oing 17 || beyond mere negligence’; even then, ‘estoppel will only apply where the government's 18 || wrongful act will cause a serious injustice, and the public's interest will not suffer undue 19 || damage by imposition of the liability." /d. at 707. 20 1. Defendant's Knowledge of the Facts 21 Plaintiffs claim that this factor was met because Defendant had knowledge that the 22 || subject notices were statutorily required to be given to the taxpayers of Guam. Opp’n at 23 |] 9. 24 2. Intent 25 Plaintiffs claim that, in failing to inform its taxpayers of their rights given under the 26 || subject notices, Defendant intended the taxpayers to rely on its silence to mean that the 27 | subject rights under the Intemal Revenue Code were not applicable to them. /d. 28 fi 10

1 3. Plaintiffs’ Ignorance of the True Facts 2 Plaintiffs claim that this factor was met because they had no reason to believe that 3 || such rights existed in light of the Governmeni’s silence. /d. 4 4. Detrimental Reliance 5 Further, Plaintiffs contend that had they been given proper notices, they would 6 || have been informed of their rights to contact a local office of the taxpayer advocate if they 7 || had questions regarding their tax liabilities, as required by §§ 6212(a) and 6213(a). 8 Additionally, they would have been informed that they had the right to request 9 || hearings and to administratively appeal their liens, as required under the notice of lien 10 || provisions, 48 U.S.C. § 6320(a)(3). 1] Moreover, they would have been notified of their right to be informed of any 12 }| alternatives available which could have prevented levy on their property and been 13 || informed of how to release any liens on their property under 48 U.S.C. § 6330(a)(3). 14 The Defendant's failure to provide adequate notices, Plaintiffs contend, resulted 15 || in their reliance on the Government's silence to their detriment. Opp’n at 10. 16 5. Defendant's Affirmative Misconduct Going Beyond Mere Negligence 17 Plaintiffs posit that the Govermment had been more than negligent in its omissions, because they deprived Guam taxpayers of their rights under the GTIT, which they knew ? should have mirrored the Internal Revenue Code. /d. at 11. * 6. Serious Injustice and the Public's Interest Finally, Plaintiffs claim that Defendant’s wrongful act will cause a serious injustice, 33 and the public's interest will not suffer undue damage by imposition of the liability. As discussed previously, Plaintiffs allege that they were not told of their rights to approach the T axpayer Advocate’s Office a bout potential questions, their right to appeal with respect to liens or ievy and sale of property, and their right to be given alternatives to prevent levy on their property, including installment agreements. /d. at 11-12.

38 As discussed above, § 7422(a) has been uniformly interpreted as establishing a 11

1 | jurisdictional requirement that cannot be waived. See Quarty, 170 F.3d at 972 2 | (Compliance with these specificity requirements is a prerequisite to subject matter 3 || jurisdiction over a claim for a refund”); see a/so, Boyd, 762 F.2d at 1371 (‘If the refund 4 || claim does not meet the requirements of the Code and the regulations, the suit must be 5 || dismissed because filing pursuant to the rules is a jurisdictional prerequisite”); see also, 6 | Essex, 499 F.2d at 231, cert. denied, 419 U.S. 1107 (1975); Rosenbluth Trading, 736 7 || F.2d at 47 ("The filing of a timely refund claim is a jurisdictional requirement, which cannot 8 || be waived.") 9 Here, Plaintiffs do not claim that a statutory exemption applies to the facts of this 10 || case. Further, Plaintiffs do not claim that exhausting administrative remedies would have 11 || been futile. More importantly, Plaintiffs do not explain why they failed exhaust their 12 || remedies. Rather, Plaintiffs ask the Court to dispense with the established statutory 13 || requirement. The Court cannot do so based on the allegations pled in the Complaint. 14 || Therefore, the Court lacks subject matter jurisdiction over Claim 1, because Plaintiffs 15 || have not alleged that they have exhausted their remedies by first seeking a seeking 16 || refund of taxes paid nor have they alleged an excuse for not filing a refund claim.® 17 Dismissal without leave to amend is improper unless it is clear that the complaint i8 | could not be saved by any amendment.” Polich v. Burlington Northern, Inc., 942 F.2d 19 ||; ——_@£————. 20 ? In the moving brief, Defendant posits that exhaustion is a requirement of subject matter jurisdiction, and it cannot be excused based upon futility. Mot. at 9. 21 Plaintiffs Opposition is silent as to this issue. See Opp'n at 7-13 (discussion re 22 || exhaustion of remedies). Because this issue was not presented before the Court, the Court need not 23 || speculate as to whether seeking administrative remedies would have been futile. Cf. 34 Simpao et al. v. Government of Guam, CV 04-00049, Order dated March 17, 2005 at 7-8 (rejecting Guam’s argument that plaintiffs’ claims are subject to dismissal for 25 || failure to exhaust administrative remedies where Guam affirmatively prevented Plaintiffs from filing ElC claims by blocking out the relevant sections of tax returns with 26 || the words ‘inapplicable to Guam,” thereby making [a]ny attempt to claim an EIC credit 97 || futile). 28 12

1 || 1457, 1472 (9th Cir. 1991). Under the Federai Rules of Civil Procedure 15(a), leave to 2 | amend “shall be freely given when justice so requires.” 3 The Court grants Plaintiffs leave to amend the Complaint by alleging facts 4 || demonstrating that they have exhausted their administrative remedies in compliance with 5 || the IRS code, they are statutorily exempted from complying with the applicable provisions 6 || of the IRS code, or they are excused from compliance due to the futility of pursuing 7 || administrative remedies. 9} B. Plaintiffs’ Failure to File a Refund Claim Also Requires Dismissal of the Prayer

" Claim 2 seeks a declaratory judgment that the Defendant failed to comply with the ‘2 requirements of §§ 6212(a), 6213(a), 6320 and/or 6330 and that the taxes were therefore improperly collected. Compl. □ 45. Claim 3 avers that the putative class, including Plaintiffs, are entitled to a refund 8 of those improperly paid taxes. /d. 48. In light of the allegedly void notices, Plaintiffs seek an injunction requiring the Government of Guam to (1) notify all taxpayers who paid " taxes pursuant to the void notices that the aforementioned notices were void and that the 8 taxes paid pursuant to them were improperly collected; (2) provide each of these taxpayers with the appropriate form for claiming a refund of these taxes; and (3) refund the improperly collected taxes once the claims forms are properly submitted. /d. 7 49. 2! Read together, Claims 2 and 3 attempt to circumvent the exhaustion of remedies requirement discussed above. As Defendant has correctly observed, Plaintiffs seek to use Claims 2 and 3 as predicates for obtaining refunds. However, it is well-established that the Intemal Revenue Code “provides the exclusive remedy in tax refund suits.” Brennan v. Southwest Airlines Co., 134 F.3d 1405, 1409 (Sth Cir. 1998). Further, even ° if equitable considerations were a factor in the determination of whether a taxpayer is entitled to a refund, Plaintiffs here have not shown irreparable harm inasmuch as there 13 □

1 |] is an adequate remedy at law in the form of a refund suit. 2 For all the foregoing reasons, the Court dismisses Claims 2 and 3 for want of 3 || subject matter jurisdiction and for Plaintiffs’ failure to state a claim. 4] C. Plaintitts Failed to Satisfy the Statute of Limitation Provisions of 26 U.S.C § 6 The Internal Revenue Code provides time limitations within which actions for 7 || refunds must be brought. 26 U.S.C. § 6511. “The limitations period is jurisdictional in 8 || nature and cannot be waived.” Gabelman v. Commissioner, 86 F.3d 609, 611 (6th Cir. 9 } 1996) (United States v. Daim, 494 U.S. 596, 602 (1990)). Title 26 of the United States 10 | Code § 6511 provides that a “claim or refund of an overpayment of any tax imposed by 11 | this title in respect of which tax the taxpayer is required io file a return shall be filed by the 12 || taxpayer within 3 years from the time the return was filed or 2 years from the time the tax 13 || was paid, whichever of such periods expires later or if no return was filed by the taxpayer, 14 || within 2 years from the time the tax was paid.” (Emphasis added). 15 Plaintiffs allege that they received Final Notices / Notices of Intent to Levy on or 16 || about October 2, 2000, and March 6, 2003. Compl. 28. The tax would have been paid 17 || on or about those dates or shortly thereafter. Although the Complaint alleges that 18 || Plaintiffs paid taxes pursuant to the defective notices, the complaint is devoid of any 19 || allegation as to when the taxes were paid. Further, Plaintiffs’ Complaint failed to allege 20 || that they sought a refund of the taxes paid within the limitations period. See Opp’n at 13. 21 In the Opposition, Plaintiffs cite 26 U.S.C. § 7433 which essentially states that the 22 || action must be brought within two years of the date when the cause of action accrues."° 23 24 © Title 26 of the United States Code 7433 provides: * If, in connection with any collection of Federal tax with respect to a taxpayer, 26 any officer or employee of the Internal Revenue Service recklessly or 27 intentionally, or by reason of negligence, disregards any provision of this title . . . such taxpayer may bring a civil action for damages against the United States 28 in a district court of the United States. Except as provided in section 7432 [26 USCS § 7432], such civil action shall be the exclusive remedy for recovering 14

1 || A cause of action "accrues when the taxpayer has had a reasonable opportunity tc 2 || discover all essential elements of a possible cause of action." 26 C.F.R. § 301.7433- 3 || 1(g){2). Plaintiffs faited to explain the circumstances surrounding the discovery of all 4 || essential elements of their claims to allow the Court to make an informed decision as to 5 || whether the claims are timely filed. Accordingly, the Court dismisses the Complaint for 6 || the additional ground that Plaintiffs failed to allege sufficient facts showing that the action 7 || is not barred by the statutes of limitations. IV. RULING 9 Based on the foregoing, the Complaint is dismissed without prejudice to filing the 10 || same after the appropriate administrative remedies have been exhausted. 11 in the alternative, the Complaint is dismissed with leave to amend to allege 12 || compliance with the claims requirements, exception thereto, or that the filing of a claim 13 |} would be futile. The Court also grants Plaintiffs leave to amend Complaint to allege 14 || sufficient facts showing that the action is not barred by the statutes of limitations. Should 15 || Plaintiffs choose to amend the complaint, the Amended Complaint must be filed within 16 || thirty (30} days from the date of this Order. Defendant has twenty (20) days thereafter 17 || to respond. 18 IT IS SO ORDERED. 19 20 Dated this qe day of September, 2005. Sa 22 pare raggh anes or — 33 United States District Judge 24 25 damages resulting from such actions. | 56 U.S.C. § 7433. 27 38 ” The Honorable Ss. James Otero, United States District Judge for the Central District of California, by designation. 15 □