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United States v. Steele

United States District Court, E.D. Kentucky, Central Division, Frankfort

March 13, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
JOHN K. STEELE, et al, Defendants.

          MEMORANDUM OPINION & ORDER

          GREGORY F. VAN TATENHOVE, UNITED STATES DISTRICT JUDGE

         The United States filed the above-styled action at the request of the Internal Revenue Service, in an attempt to collect over two million dollars in federal income tax liabilities allegedly owed by Defendant John K. Steele. The United States also seeks to enforce certain federal tax liens against a tract of real property located in Bagdad, Kentucky. Defendant Steele, proceeding pro se, has moved to dismiss the complaint filed against him, arguing this Court lacks jurisdiction and suggesting he is exempt from the provisions of the Internal Revenue Code. For the reasons that follow, Steele's motion to dismiss will be DENIED.

         I

         In December 2016, the United States filed suit against John K. Steele, Kimberly A. Flake, Dutton & Salyers, PLLC, the Kentucky Department of Revenue, and Shelbyville Energy Cooperative. [R. 1.] The United States' action seeks to "collect certain unpaid federal income tax liabilities of the defendant, John K. Steele, and to enforce certain federal tax liens against certain real property located in Bagdad, Kentucky." [Id. at 1.] The complaint seeks to reduce Mr. Steele's alleged $2, 861, 096.54 in tax liabilities to judgment and to foreclose certain federal tax liens. [Id. at 3, 5.]

         Defendant John Steele has filed apro se motion entitled "Motion to Dismiss/Quash Indictment No Jurisdiction or Standing." [R. 12.] Mr. Steele has also attached a memorandum in support of his motion. [R. 12-1.] The motion is now fully briefed and ripe for the Court's review. [See R. 21; R. 28.]

         II

         Defendant Steele moves to dismiss the United States' complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). [R. 12-1 at 1-2.] He also maintains the United States cannot bring this action because it failed to exhaust its administrative remedies, and he suggests he is entitled to a "non-taxpayer legal status" which exempts him from the requirements of the Internal Revenue Code. [Id. at 3; R. 28 at 3 (arguing the United States provides no evidence that he is a taxpayer as defined in 26 U.S.C. § 7701).] The Court addresses each of these arguments in turn.

         A

         First, since the Court has jurisdiction over this action, Steele's Rule 12(b)(1) motion to dismiss for lack of subject-matter jurisdiction fails. Federal courts are, indeed, courts of limited jurisdiction. See, e.g., Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). But pursuant to 28 U.S.C. § 1331, federal district courts enjoy subject-matter jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." And Congress has further clarified that federal district courts have original subject-matter jurisdiction over "any civil action arising under any Act of Congress providing for internal revenue." 28 U.S.C. § 1340. See also 26 U.S.C. § 7402 (giving United States district courts jurisdiction to "render such judgments and decrees as may be necessary or appropriate for the enforcement of the internal revenue laws"). The United States' action is plainly brought to enforce various provisions of the Internal Revenue Code and, thus, falls within the scope of these statutes. [See R. 1.]

         In fact, 26 U.S.C. § 7403 explicitly provides for the present type of action to be filed in a court such as this one:

In any case where there has been a refusal or neglect to pay any tax, or to discharge any liability in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary, may direct a civil action to be filed in a district court of the United States to enforce the lien of the United States under this title with respect to such tax or liability or to subject any property, or whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax or liability.

26 U.S.C. § 7403(a). The complaint indicates the United States filed this action at the request of the Chief Counsel of the Internal Revenue Service, a delegate of the Secretary of the Treasury, and also at the direction of a delegate of the Attorney General. [R. 1 at 1.] On the whole, it is clear that the Court has subject-matter jurisdiction over the Plaintiffs complaint, and Steele's motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1) should be denied.

         B

         Steele also moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), for the United States' alleged failure to state a claim. This motion is also properly denied, because the United States appropriately pled a cause of action. Rule 12(b)(6) allows a Defendant to seek dismissal of a complaint which fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Federal Rule of Civil Procedure 8 requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). However, as is now well known, "a complaint must contain sufficient factual matter, accepted as true, to 'state a ...


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