Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_18-cv-06532/USCOURTS-cand-5_18-cv-06532-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:7402 Refund of Taxes

---

1

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

HOLLY A. ARMSTRONG,

Plaintiff,

v.

UNITED STATES OF AMERICA,

Defendant.

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL 

MOTION TO DISMISS WITH 

PREJUDICE

Re: Dkt. No. 23

Plaintiff Holly Armstrong, a certified public accountant, brings suit against the United 

States (“government”) challenging Internal Revenue Service (“IRS”) penalties assessed against 

her for aiding and abetting others to understate their tax liabilities. Plaintiff claims that the IRS 

penalty assessments are time barred by a statute of limitations. Before the Court is the 

government’s partial motion to dismiss one paragraph of Plaintiff’s complaint, a paragraph which 

alleges that the IRS penalty assessments are time barred by a statute of limitations. Having 

considered the filings of the parties, the relevant law, and the record in this case, the Court 

GRANTS with prejudice the government’s partial motion to dismiss.

I. BACKGROUND

A. Factual Background

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 1 of 11
2

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

Plaintiff is a certified public accountant. ECF No. 1 (“Compl.”) at ¶ 10. From 1999 to 

2003, Plaintiff’s clients participated in two of Plaintiff’s tax plans, one called the Income 

Stabilization Plan and the other named the Private Annuity Program. Id. at ¶¶ 10-11. Plaintiff 

alleges that the Income Stabilization Plan “involved the installment sale of compensation to be 

earned by the future performance of services.” ECF No. 1-7 at 4.1 Plaintiff also alleges that the 

Private Annuity Program “would enable . . . clients to dispose of negative basis property and 

spread their resultant tax liabilities over a number of years, rather than require them to pay the 

total tax in the year of disposition.” Id. at 6. Plaintiff was involved in the original design of both 

the Income Stabilization Plan and the Private Annuity Program, and advised clients on each plan. 

Id. at 4, 6; Compl. at ¶ 11. 

On October 7, 2013 and October 14, 2013, Plaintiff alleges that the IRS “imposed Internal 

Revenue Code . . . Section 6701 penalty tax assessments” against Plaintiff. Compl. at ¶ 5. In 

general terms, under 26 U.S.C. § 6701, 2the IRS may assess penalties against people who aid or 

assist in the understatement of the tax liability of others. Here, the IRS assessed a total of 

$337,000 in § 6701 penalties against Plaintiff for her clients’ understatement of taxes occurring 

between 1999 and 2003. Id. at ¶ 6. The assessed penalties are divisible into two groups, one group 

comprising those individuals and corporations participating in the Income Stabilization Plan, and 

the other group comprising those individuals and corporations participating in the Private Annuity 

Program. ECF No. 1-7 at 4.

Thus far, Plaintiff has paid to the IRS $11,500 in satisfaction of part of her § 6701 penalty. 

Compl. at ¶ 13. The IRS has also collected additional money from Plaintiff by way of levy, but 

Plaintiff is not certain of the amount that been collected. Id. at ¶ 14. 

B. Procedural History

On October 26, 2018, Plaintiff filed a complaint against the government. ECF No. 1. Per 

 

1

In citing to exhibits attached to Plaintiff’s complaint (ECF Nos. 1-1 through 1-12), the Court 

refers to the ECF-generated pagination of the documents because not all of the documents are 

consecutively paginated.

2 Title 26 of the United States Code is also known as the Internal Revenue Code, or “IRC.”

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 2 of 11
3

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

the complaint, Plaintiff brings suit to: recover the $11,500 she has already paid to the IRS plus 

interest and costs of suit; recover the amount the IRS collected by levy; and abate all penalties and 

interest assessments arising from the IRS’s October 7, 2013 and October 14, 2013 imposition of §

6701 penalties. Id. at ¶¶ A-C.

On March 14, 2019, the government filed its partial motion to dismiss. ECF No. 23 

(“Mot.”). On March 28, 2019, Plaintiff filed an opposition. ECF No. 28 (“Opp.”). On April 4,

2019, the government filed a reply. ECF No. 29 (“Reply”).

II. LEGAL STANDARD

A. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include “a 

short and plain statement of the claim showing that the pleader is entitled to relief.” A complaint 

that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil Procedure 

12(b)(6). The U.S. Supreme Court has held that Rule 8(a) requires a plaintiff to plead “enough 

facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. “A claim has 

facial plausibility when the plaintiff pleads factual content that allows the court to draw the 

reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at

678. “The plausibility standard is not akin to a probability requirement, but it asks for more than a 

sheer possibility that a defendant has acted unlawfully.” Id. (internal quotation marks omitted). 

For purposes of ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual allegations in the

complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving 

party.” Manzarek, 519 F.3d at 1031 (9th Cir. 2008).

The Court, however, need not accept as true allegations contradicted by judicially 

noticeable facts, see Schwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and it “may look 

beyond the plaintiff’s complaint to matters of public record” without converting the Rule 12(b)(6) 

motion into a motion for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 

1995). Nor must the Court “assume the truth of legal conclusions merely because they are cast in 

the form of factual allegations.” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per 

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 3 of 11
4

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

curiam) (internal quotation marks omitted). Mere “conclusory allegations of law and unwarranted 

inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 

(9th Cir. 2004).

B. Leave to Amend

If the Court determines that a complaint should be dismissed, it must then decide whether

to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend 

“shall be freely given when justice so requires,” bearing in mind “the underlying purpose of Rule 

15 to facilitate decisions on the merits, rather than on the pleadings or technicalities.” Lopez v. 

Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (alterations and internal quotation marks 

omitted). When dismissing a complaint for failure to state a claim, “a district court should grant 

leave to amend even if no request to amend the pleading was made, unless it determines that the 

pleading could not possibly be cured by the allegation of other facts.” Id. at 1130 (internal 

quotation marks omitted). Accordingly, leave to amend generally shall be denied only if allowing 

amendment would unduly prejudice the opposing party, cause undue delay, or be futile, or if the 

moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ’g, 512 F.3d 522, 532 

(9th Cir. 2008).

III. DISCUSSION

The government moves to dismiss only one paragraph of Plaintiff’s complaint. Mot. at 2. 

Specifically, the government moves to dismiss paragraph 16, which states: “Assessment of all 

penalties for 1999, 2000, 2001, 2002, and 2003 as set forth in Exhibits A, B, C, D and E, 

respectively, is barred by the statute of limitations.” Compl. at ¶ 16. In particular, the government 

focuses on Plaintiff’s assertion that the IRS’s assessment of § 6701 penalties is subject to a fiveyear statute of limitations under 28 U.S.C. § 2462.

The government advances two arguments in support of its contention that assessment of 

the § 6701 penalties is not subject to the statute of limitations under § 2462. First, the government 

argues that § 6701 is part of a congressionally-crafted statutory framework that allows for 

unlimited time to assess § 6701 penalties and ten years to collect the penalties assessed. Second, 

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 4 of 11
5

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

the government contends that because Congress has not unequivocally imposed a statute of 

limitations on the assessment of § 6701 penalties, there is no statute of limitations on the 

assessment of § 6701 penalties. The Court addresses each argument in turn.

A. Whether the Statutory Framework of § 6701 Allows for an Unlimited Time to 

Assess § 6701 Penalties and 10 Years to Collect § 6701 Penalties

First, the Court discusses the statutory and regulatory framework for assessing § 6701 

penalties. Second, the Court turns to case law holding that the statute of limitations in § 2462 is 

inapplicable to the assessment of § 6701 penalties. Lastly, the Court discusses the rationale behind 

why § 2462 does not apply here.

1. Statutory Framework to Assessing § 6701 Penalties

Under 26 U.S.C. § 6701, a penalty may be imposed on a person “who aids or assists in, 

procedures, or advises with respect to, the preparation or presentation of any portion of a return, 

affidavit, claim, or other document” if that person “knows (or has reason to believe) that such 

portion will be used in connection with any material matter arising under the internal revenue 

laws, and . . . knows that such portion (if so used) would result in an understatement of the liability 

for tax of another person.” There is no statute that explicitly states that assessment of the § 6701

penalty is subject to a statute of limitations, a point Plaintiff concedes as well. See, e.g., Mullikin v. 

United States, 952 F.2d 920, 928 (6th Cir. 1991), cert. denied, 506 U.S. 827 (1992) (noting “the

absence of an express limitations period” for § 6701 penalties); Opp. at 7 (“[T]here is simply no 

provision in the Internal Revenue Code related to when § 6701 assessments may be made.”).

Once the § 6701 penalty has been assessed, 26 U.S.C. § 6671 states that the penalty can be 

“collected in the same manner as taxes” through administrative or judicial proceedings. The 

government admits that for IRS actions to collect on an already-assessed § 6701 penalty, the IRS 

is subject to a statute of limitations of 10 years. See 26 U.S.C. § 6502(a)(1). 

Here, the government argues that because there is no statute of limitations period for the 

assessment of § 6701 penalties, the IRS timely assessed § 6701 penalties against Plaintiff for 

violating § 6701 between 1999 and 2003. Reply at 3. On the other hand, Plaintiff argues that 

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 5 of 11
6

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

although the assessment of § 6701 penalties does not have its own statute of limitations, there is a 

“catch-all” statute of limitations under 28 U.S.C. § 2462 that applies to the assessment of § 6701 

penalties. Opp. at 8. 28 U.S.C. § 2462 states:

Except as otherwise provided by Act of Congress, an action, suit, or 

proceeding for the enforcement of any civil fine, penalty, or 

forfeiture, pecuniary or otherwise, shall not be entertained unless 

commenced within five years from the date when the claim first 

accrued . . . .

However, the Court finds the government’s arguments more persuasive. Specifically, the Court 

finds, consistent with the body of case law on this issue, that the catch-all statute of limitations 

under 28 U.S.C. § 2462 does not apply to the assessment of § 6701 penalties.

2. Case Law Holding that § 2462 is Inapplicable to the Assessment of § 6701 

Penalties

Thus far, three United States Circuit Courts of Appeals—the District of Columbia, Sixth, 

and Eighth Circuits—have addressed the applicability of the catch-all statute of limitations under 

28 U.S.C. § 2462 to the assessment of § 6701 penalties, and all three Circuits have held that §

2462 does not apply to the assessment of § 6701 penalties. In the Sixth Circuit’s decision in

Mullikin, the court stated that “Congress did not intend that the statute of limitations contained in 

Section 2462 apply to the assessment of penalties pursuant to Section 6701.” 952 F.2d at 928. 

Similarly, the District of Columbia Circuit stated that “it was the intent of Congress in enacting 

Section 6701 that there be no statute of limitations governing the assessment of penalties.” Nat’l 

Mining Ass’n v. United States Dep’t of Interior, 177 F.3d 1, 8 (D.C. Cir. 1999). Moreover, the 

Eighth Circuit held that “the District Court erred in applying section 2462 to assessments made 

under . . . [section] 6701.” Lamb v. United States, 977 F.2d 1296, 1297 (8th Cir. 1992). Plaintiff 

fails to cite, and this Court has failed to find, any other United States Circuit Court of Appeals

opinion that has deviated from the above precedents by applying § 2462 to the assessment of §

6701 penalties.

Additionally, in In re Mitchell, the Ninth Circuit stated that “we agree with [Mullikin’s]” 

analysis of § 6701, including the part of Mullikin which held that the statute of limitations under §

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 6 of 11
7

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

2462 does not apply to § 6701. 977 F.2d 1318, 1321 (9th Cir. 1992). Moreover, district courts 

within the Ninth Circuit have uniformly rejected the notion that § 2462 applies to the assessment 

of § 6701 penalties. See Hargrove & Costanzo v. United States, 2008 WL 4133928, at *14 (E.D. 

Cal. Sept. 4, 2008) (“[T]he catch all provisions 28 U.S.C. § 2462 does not apply.”); Reiserer v. 

United States, 2005 WL 1667751, at *2 (W.D. Wash. July 15, 2005) (“[T]here is no statute of 

limitations governing the assessment of penalties.”). In fact, neither Plaintiff nor this Court has

found a single district court opinion applying § 2462’s statute of limitations to the assessment of §

6701 penalties. All district court opinions have been consistent with Mullikin, Nat’l Mining Ass’n, 

and Lamb. See, e.g., United States v. Ogbazion, 2013 WL 1721151, at *5 (S.D. Ohio Apr. 22, 

2013) (“[T]here is no statute of limitations under § 6701 . . . .”); Kraye v. United States, 1992 WL 

439753, at *2 (D.N.M. Nov. 4, 1992) (“[N]o statute of limitations period is applicable to § 6701 

penalties.”).

It is highly persuasive that the District of Columbia, Sixth, and Eighth Circuits have 

declined to apply § 2462’s statute of limitations to § 6701, that the Ninth Circuit agrees with the 

Sixth Circuit, and there is no contrary case law.

3. Rationale Behind why § 2462 is Inapplicable to the Assessment of § 6701 Penalties

In addition, the Court is persuaded by the government’s argument that § 2462’s statutory 

language states that the statute of limitations in § 2462 only applies to an “action, suit, or 

proceeding,” but the assessment of § 6701 penalties is not an action, suit, or proceeding. 

For instance, an “action” is defined as “the formal and ordinary means by which parties 

seek legal and/or equitable relief before a court of law through the filing of a formal complaint, 

triggering the full array of legal, procedural, and evidentiary rules governing the process by which 

a court adjudicates the merits of a dispute.” S.E.C. v. McCarthy, 322 F.3d 650, 657 (9th Cir. 

2003). In addition, a “suit” is defined as “any proceeding by one person or persons against another 

or others in a court of justice.” TNT Marketing, Inc. v. Agresti, 796 F.2d 276, 278 (9th Cir. 1986). 

Moreover, a “proceeding” must “implicate some adversarial adjudication, be it administrative or 

judicial.” Capozzi v. United States, 980 F.2d 872, 874 (2d Cir. 1992). 

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 7 of 11
8

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

However, the IRS’s assessment of § 6701 penalties is not an action, suit, or proceeding. 

Assessments of § 6701 penalties are ex parte acts. An assessment occurs when an assessment 

officer signs a “summary record of assessment,” which “shall provide identification of the 

taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of 

the assessment.” 26 C.F.R. § 301.6203-1; see also Capozzi, 980 F.2d at 874 (“An assessment of a 

penalty (or tax), however, is an ex parte act. It is merely the determination of the amount of the 

penalty and the official recording of the liability.”).

There is no adversarial component—required of an action, suit, or proceeding—to 

assessing § 6701 penalties. Specifically, there is no formal complaint or the triggering of the “full 

array of legal, procedural, and evidentiary rules” as in an “action.” McCarthy, 322 F.3d at 657. 

There is no proceeding in a “court of justice” as in a “suit.” TNT Marketing, 796 F.2d at 278. 

There is no adversarial adjudication, as in a “proceeding.” Capozzi, 980 F.2d at 874. In fact, the 

person being penalized “is not even entitled to a pre-assessment hearing.” Id. (citing Western 

Reserve Oil & Gas Co. v. New, 765 F.2d 1428, 1434 (9th Cir. 1985), cert denied, 474 U.S. 1056 

(1986)).

However, Plaintiff argues that the facts of 3M Co.(Minnesota Mining & Mfg.) v. Browner

support Plaintiff’s argument that § 2462’s statute of limitations applies here. 17 F.3d 1453 (D.C. 

Cir. 1994); Opp. at 19. In Browner, the Environmental Protection Agency (“EPA”) filed an 

administrative complaint seeking civil penalties against 3M. Id. at 1455. An EPA administrative 

law judge rejected 3M’s argument that § 2462 applied to the administrative penalties the EPA 

sought to assess. Id. The administrative law judge then assessed penalties against 3M. Id. 3M 

appealed to the District of Columbia Circuit, which held that § 2462 applied to the actions of 

administrative agencies, and specifically, that the EPA’s proceedings to assess penalties against 

3M were “proceedings” under § 2462. Id. at 1457, 1459. 

However, Browner is distinguishable from the instant case. Indeed, the Browner court 

characterized the process of assessing EPA penalties as emulating “judicial proceedings” because 

“a complaint is brought, the defendant answers, motions and affidavits are filed, depositions are 

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 8 of 11
9

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

taken, other discovery pursued, a hearing is held, evidence is introduced, findings are rendered and 

an order assessing a civil penalty is issued.” Id. Here, the process of assessing § 6701 penalties 

involves none of the procedures the EPA implements in assessing EPA penalties. As 

aforementioned, assessing § 6701 penalties is ex parte. It does not involve an administrative law 

judge or any “proceeding” because there is no adversarial component to assessing § 6701 

penalties. No complaint is brought, motions or affidavits filed, depositions taken, discovery 

pursued, hearing held, evidence introduced, or order assessing civil penalties issued. Id. Thus, 

Browner is inapplicable to the instant case.

In sum, the statute of limitations under § 2462 does not apply here because the assessment 

of § 6701 penalties is ex parte and not an “action,” “suit,” or “proceeding” under § 2462.

B. Whether Congress has Clearly Imposed a Statute of Limitations for Assessment of

§ 6701 Penalties

Under United States Supreme Court precedents, it is “well settled that the United States is 

not subject to statutes of limitations in enforcing its rights unless Congress explicitly provides 

otherwise.” Agbanc, Ltd. v. United States, 707 F. Supp. 423, 426 (D. Ariz. Nov. 16, 1988) (citing 

United States v. Tri-No Enterps., Inc., 819 F.2d 154, 158 (7th Cir. 1987)); United States v. Podell, 

572 F.2d 31, 35 n.7 (2d Cir. 1978)); see also E.I. Du Pont De Nemours & Co. v. Davis, 264 U.S. 

456, 462 (1924) (“[T]he United States in its governmental capacity . . . is subject to no time

limitation, in the absence of congressional enactment clearly imposing it.”); United States v. 

Nashville, Chattanooga & St. Louis Ry. Co., 118 U.S. 120, 125 (1886) (“[T]he United States, 

asserting rights vested in them as a sovereign government, are not abound by any statute of 

limitations unless congress has clearly manifested its intention that they should be so bound.”);

United States v. Insley, 130 U.S. 263, 266 (1889) (same); Schaefer v. Town of Victor, 457 F.3d 

188, 206 n.23 (2d Cir. 2006) (same); United States v. Telluride Co., 146 F.3d 1241, 1244 (10th 

Cir. 1998) (“[A]n action on behalf of the United States in its governmental capacity . . . is subject 

to no time limitation, in the absence of congressional enactment clearly imposing it.”); United 

States v. Massachusetts Water Res. Auth., 256 F.3d 36, 40 n.3 (1st Cir. 2001) (“[A]n action on 

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 9 of 11
10

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

behalf of the United States in its governmental capacity . . . is subject to no time limitation, in the 

absence of congressional enactment clearly imposing it.”). 

Indeed, “[w]hen Congress does not clearly specify whether . . . any limitations period 

applies to a particular provision,” courts must presume that “no such limitation was intended.” 

Capozzi, 980 F.2d at 875. In fact, when a party contends that a statute of limitations bars an action 

by the United States, that statute of limitations “must receive a strict construction in favor of the 

Government.” Badaracco v. C.I.R., 464 U.S. 386, 391 (1984). 

Here, Congress has not expressly provided a statute of limitations that governs assessment 

of § 6701 penalties. As shown above, there are myriad United States Supreme Court and Circuit 

Court decisions which hold that if Congress has not clearly provided a statute of limitations for a 

statutory provision, no statute of limitations is applicable. See, e.g., Insley, 130 U.S. at 266 (“[T]he 

United States, asserting rights vested in them as a sovereign government, are not bound by any 

statute of limitations, unless congress has clearly manifested its intention that they should be so 

bound.”). These courts’ holdings apply here to prevent the application of the statute of limitations 

in § 2462 to the assessment of § 6701 penalties. 

Plaintiff cites a plethora of cases that, according to Plaintiff, stand for the proposition that 

statutes of limitations are important. Opp. at 10-11. See, e.g., Gabelli v. S.E.C., 568 U.S. 442, 448 

(2013) (“Statutes of limitation are intended to promote justice . . . .” (internal quotation marks 

omitted)). However, none of these cases overrule longstanding United States Supreme Court 

precedents that stress that the United States is not subject to a statute of limitations unless 

Congress clearly intended that the United States should be subject to a statute of limitations. 

Moreover, Plaintiff cites Bowers v. New York & Albany Lighterage Co. for the proposition 

that tax statutes should be interpreted in favor of the taxpayers. 273 U.S. 346, 350 (1927) (“The 

provision is part of a taxing statute; and such laws are to be interpreted liberally in favor of the 

taxpayers.”). However, the holding in Bowers is irrelevant to the instant case. Here, at issue is 

whether the statute of limitations in § 2462 applies to the assessment of § 6701 penalties. 

However, § 2462 is not a tax statute, and is not even found within the same Title of the United 

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 10 of 11
11

Case No. 18-CV-06532-LHK 

ORDER GRANTING PARTIAL MOTION TO DISMISS WITH PREJUDICE

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

States Code as the tax code. Thus, the Court’s determination of the applicability of § 2462 need 

not be in favor of taxpayers per Bowers because § 2462 is not a tax code provision.

In sum, pursuant to United States Supreme Court precedent, § 2462 does not apply to the 

assessment of § 6701 penalties because Congress did not clearly specify that the assessment of §

6701 penalties is subject to a statute of limitations.

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS the government’s motion to dismiss 

paragraph 16 of the complaint, which states that the IRS’s assessment of 26 U.S.C. § 6701 

penalties on Plaintiff is time barred by the statute of limitations in 28 U.S.C. § 2462. 

Amendment would be futile because the Court determined that, as a matter of law, 28 

U.S.C. § 2462 does not apply to assessment of 26 U.S.C. § 6701 penalties, so no amount of 

additional pleading would change the Court’s conclusion. Moreover, it would be unduly 

prejudicial to the government to require that the government continue litigating an issue that fails 

as a matter of law. Thus, leave to amend is DENIED. Leadsinger, 512 F.3d at 532.

IT IS SO ORDERED.

Dated: June 20, 2019

______________________________________

LUCY H. KOH

United States District Judge

Case 5:18-cv-06532-LHK Document 35 Filed 06/20/19 Page 11 of 11