Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-00877/USCOURTS-azd-2_05-cv-00877-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7402 IRS: Petition to Enforce IRS Summons

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America, 

Plaintiff/Counterdefendant, 

vs.

Beverly J. Hill and Darrell J. Hill,

individually and doing business as

Superior Claims Management, 

Defendant s/Counterclaimants.

Beverly J. Hill and Darrell J. Hill,

individually and doing business as

Superior Claims Management,

Third Party Plaintiffs,

vs.

Patricia Blancarte, et al.,

Third Party Defendants.

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No. CV-05-877-PHX-DGC

ORDER

Pending before the Court are the United States’ motion for summary judgment and

motion to dismiss counterclaims and Third Party Defendants’ motion to dismiss third party

complaint. Also pending are motions for preliminary injunction and to strike jury demand

filed by the United St ates and numerous motions filed by pro se litigants Beverly and

Darrell Hill. For the reasons set forth below, the Court will grant the disp osit ive motions

in favor of the United States and Third Party Defendants and deny the other motions

Case 2:05-cv-00877-DGC Document 190 Filed 12/23/05 Page 1 of 15
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as moot.

Background

Plaintiff Unit ed States commenced this action on March 23, 2005 by filing a

complaint against Defendants Beverly and Darrell Hill. Doc. #1. Plaintiff alleges t hat

Defendants, operating under the business name Superior Claims Management, prepare and

file frivolous federal income t ax returns or claims for refund for other individuals. Doc. #1

¶ 6. In Counts I, II, and III of the complaint, Plaintiff seeks an injunction permanently

enjoining Defendants from acting as federal income tax return preparers under Internal

Revenue Code (“IRC”) §§ 7407, 7408, and 7402(a), respectively. Id. ¶¶ 19-38. Plaintiff also

seeks an order requiring Defendants to (1) remove advert ising for fraudulent tax services

from their internet website, (2) post a copy of the requested permanent injunction on their

website, and (3) provide Plaintiff with the identities of the individuals for whom Defendants

have filed tax returns or claims for refund and notify these individuals of the Court’s ruling

in this matter. Id. at 8-10. 

Defendants answered the complaint and filed a counterclaim against Plaintiff and

a third party complaint against numerous Int ernal Revenue Service (“IRS”) employees.

Docs. ##14, 18-19. Defendants seek damages for alleged violat ions of IRC §§ 7433 and

7214. Id. ¶¶ 57-62. 

Discussion

I. Plaintiff’s Motion for Summary Judgment.

A. Summary Judgment Standard.

Summary judgment is appropriat e if the evidence, viewed in the light most favorable

to the nonmoving party, “show[s] that there is no genuine issue as to any material fact and

that the moving part y is ent it led to judgment as a matter of law.” Fed. R. Civ. P. 56(c).

Substantive law determines which facts are material and “[o]nly disp utes over facts that

might affect t he out come of the suit . . . will properly preclude the entry of summary

judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Similarly, to preclude

summary judgment the dispute must be genuine, that is, the evidence must be “such that

Case 2:05-cv-00877-DGC Document 190 Filed 12/23/05 Page 2 of 15
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1

Subtitle A of the IRC is entitled “Income Taxes” and encompasses IRC § 1, the

sect ion that imposes a tax on individuals based on their taxable income. IRC Subt. A, Part

I, § 1.

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a reasonable jury could return a verdict for the nonmoving party.” Id., 477 U.S. at 248.

A principal purpose of summary judgment is “to isolate and dispose of factually

unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). 

B. Analysis.

1. Count I: Injunction Under IRC § 7407.

In Count I of t he complaint, Plaintiff seeks an injunction under IRC § 7407

permanently enjoining Defendants from acting as federal income tax return preparers.

Doc. #1 ¶¶ 19-24. Section 7407 authorizes the Court to issue injunctive relief if it makes

certain findings. IRC § 7407(b); see United States v. Estate Pres. Servs., 202 F.3d 1093, 1098

(9th Cir. 2000) (stating that the traditional requirements for equitable relief need not be

satisfied where the IRC expressly authorizes the issuance of an injunction). If the Court

finds that Defendants have acted as income tax return preparers and have violated either

IRC § 6694, which prohibits preparers from understating a taxpayer’s liability due to an

unrealistic position, or IRC § 6695, which requires prep arers t o sign returns and furnish

identifying numbers, the Court may enjoin Defendants from engaging in such conduct.

IRC §§ 7407(b). If the Court further finds that Defendants have continually or repeatedly

engaged in such conduct and that an injunction prohibiting such conduct would not be

sufficient to prevent Defendants’ interference with the proper administration of the IRC,

the Court may enjoin Defendants from acting as income tax return preparers. Id.

a. Have Defendants Acted as Income Tax Return Preparers?

The IRC defines “income tax return preparer” as “any person who prepares for

compensation . . . any return of tax imposed by subtitle A or any claim for refund of tax

imposed by subt it le A.” IRC § 7701(a)(36)(A); see Treas. Reg. § 301.7701-15(a) (same).1

An exception to this definition provides that “[a] person shall not be an ‘income tax return

preparer’ merely because such person . . . prepares as a fiduciary a return or claim for

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refund for any person.” IRC § 7701(a)(36)(B)(iii); see Treas. Reg. § 301.7701-15(d)(3). 

Defendants do not dispute that they have sought income tax refunds for other

individuals in numerous filings with the IRS. Docs ##18-19 ¶¶ 6-8, 40-41 ¶¶ 14(a)-(d), 16.

Nor do Defendants disp ut e t hat they charged these individuals 25% of any refunds

received. Docs. ##4 ¶ 14, 14 Ex. K1. Defendants nonetheless contend that they are not

income tax return preparers because they were act ing as “fiduciaries” when they submitted

the filings to the IRS. Doc. #151 ¶ 5.

“A fiduciary is a person who holds something in trust for another.” Ip v. United

States, 205 F.3d 1168, 1176 (9t h Cir. 2000). The IRC provides the following examples of a

fiduciary: “guardian, trustee, executor, administrator, receiver, [or] conservator.” Id.

at 1173 (quoting IRC § 7701(a)(6)). The treasury regulations provide this definition:

Fiduciary is a term that applies to persons who occupy positions of peculiar

confidence toward others, such as trustees, executors, and administrators.

A fiduciary is a person who holds in trust an estate to which anot her has a

beneficial interest, or receives and controls income of anot her, as in the case

of receivers. A committee or guardian of t he property of an incompetent

person is a fiduciary.

Id. (quoting Treas. Reg. § 301.7701-6(b)(1) (1996)).

Defendants do not contend that they are trustees, executors, or administrators with

respect to the individuals for whom they have provided tax services. Rather, Defendants

contend that they are fiduciaries because their filings with the IRS included IRS Form 56,

titled “Notice Concerning Fiduciary Relationship.” Doc. #151 ¶ 5. As the Court has

previously held, however, Form 56 merely gives notice of a pre-existing fiduciary

relationship and cannot, by itself, create the relationship. See United States v. Volling,

No. MC-04-94-PHX-DGC (Dec. 8, 2004 Order) (granting the United States’ motion to

enforce IRS summons against respondent Roxann Volling and precluding Darrell Hill from

appearing before the IRS on respondent’s behalf because there was no evidence of a

fiduciary relationship between them) (citing Gouv eia v. Comm’r, T.C. Memo 2004-256

(2004)). Defendants have presented no evidence of any fiduciary relationship between

them and the individuals for whom they have provided tax services. The Court thus

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concludes that Defendant s have acted as income tax return preparers within the meaning

of the IRC. See IRC § 7701(a)(36)(A); Ip, 205 F.3d at 1176-77 (finding no fiduciary

relationship where the petitioner acted merely as a “liaison” or “communicator”); see also

United States v. Savoie, 594 F. Supp. 678, 684 (W.D. La. 1984) (holding that the defendant

was a paid preparer within the meaning of IRC based on uncontroverted evidence that he

prepared three returns for a client for a twenty-five or thirty dollar fee). 

b. Have Defendants Violated IRC § 6694 or § 6695?

An income tax return preparer violates IRC § 6694 if (1) t he preparer files a

return or claim for refund that contains an understatement of liability due to a position for

which there was not a realistic possibility of being sustained on the merits, (2) the preparer

knew or should have known of such position, and (3) the position was frivolous. IRC §

6694(a)(1)-(3). An income tax return preparer violates IRC § 6695 if the preparer fails to sign

a return or furnish an identifying number as required by federal regulations. IRC § 6695(b)-

(c); see Treas. Reg. § 1.6695-1(b).

Plaintiff argues that t he undisputed evidence shows that Defendants have

continually and rep eatedly engaged in conduct that violates both § 6694 and § 6695. Doc.

#128 at 6-8. In sup p ort of its argument, Plaintiff has presented evidence of the following:

Defendants have registered “Superior Claims Management” as a trade name with

t he Arizona Secretary of State. Doc. #4 ¶ 4. Defendants also have registered t he relat ed

website, “www.getmytaxesback.com,” with a registrar of internet domain names. Id. ¶ 5.

Defendants offer on this website to recover previously paid taxes for other individuals,

stating “We put Your Past Taxes in Your Bank!!!” Id. ¶ 8. Defendant s further state that

“[w]age earnings are not ‘taxable p rofit ’” and that most people have erroneously been

overpaying taxes their entire lives. Id. ¶ 11.

Between April 2003 and November 2004, Defendants filed with the IRS at least 252

income tax returns or claims that seek refunds due t o t he p osit ion that the taxpayers’ wages

are not taxable income under the IRC. Docs. ##6 ¶¶ 5-7 & Exs. A-D, 121 ¶ 6, 127 ¶¶ 26-73.

Defendants neither identified themselves as tax ret urn p rep arers nor listed identifying

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numbers on the filings. Doc. #6 ¶ 8. Defendants attached to each filing a five-page

supplement that cites various court cases and provides: “The Supreme Court of the United

States had already established that my labor for my wages was/ and is not taxable income.

Please reimburse my money without delay!” Doc. #6 ¶ 7, Exs. A-D.

The IRS devoted approximately four hours of employ ee t ime to the review of each

filing. Doc. #121 ¶¶ 15-16. The IRS ultimately rejected the filings and responded to most

of them by notifying the taxpayers that the position taken was frivolous and could result

in the imp osit ion of frivolous return penalties. Docs. ##6 ¶ 9, 121 ¶ 9. Many of these

notices resulted in further filings and correspondence from Defendants. Doc. #121 ¶ 9.

In early 2004, the IRS issued Revenue Ruling 2004-29, which addresses the type of

filings submitted by Defendants. Docs. ##5 121 ¶ 11. The ruling states in part:

This revenue ruling emphasizes to taxpayers, and to promoters and return

preparers who assist taxpayers with this scheme, t hat there is no “claim of

right” doctrine that permits an individual t o t ake the position that either the

individual or the individual’s income is not subject to federal income tax.

This argument has no merit and is frivolous.

Id. On February 11, 2004, the IRS sent each Defendant a letter notify ing t hem t hat the IRS

had begun an investigation to determine whether they should be enjoined and/or penalized

for their return preparation activities. Docs. ##6 ¶ 10, 127 ¶ 77. Despite this notification,

Defendants continued to file returns or claims for refund through November 2004. Doc.

#121 ¶ 6.

Defendant s assert in their three-page response that Plaintiff’s “allegations are

substantially unjustified.” Doc. #151 ¶ 1. As Plaintiff points out in its reply, however,

Defendants present no evidence showing that there is a genuine issue for trial. Doc. #155

at 1. Defendants merely st at e that the Court should deny Plaintiff’s motion because it

“perpetrates the denial of the Constitutional Rights, Guarantees and Protections of the

Constitution of the State of Arizona and t he Constitution of the United States.” Doc. #151

at 3. Such conclusory statements are insufficient to survive summary judgment . See Fed.

R. Civ. P. 56(e); LRCiv 56.1(a); Celotex, 477 U.S. at 323-24. 

The Court concludes that there is no genuine issue as to whether Defendants have

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repeatedly violated IRC §§ 6694 and 6695. Defendants have submitted numerous filings

with the IRS seeking the return of taxes based on the frivolous position that wages are not

taxable income under the IRC. Docs. ##6 ¶¶ 5-7 & Exs. A-D, 121 ¶ 6, 127 ¶¶ 26-73; see IRC

§ 61 (stating that “gross income means all income from whatever source derived, including

. . . [c]ompensation for services”); United States v. Buras, 633 F.2d 1356, 1361 (9th Cir.

1980) (“Treas. Reg. § 1.61-2(a)(1) clearly includes wages within the definition of income.”);

United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981) (“Romero’s proclaimed belief

. . . that the wages he earned as a carpenter were not “income” is fatuous as well as

obviously incorrect. . . . Compensation for labor or services, paid in the form of wages or

salary, has been universally held by the courts of t his republic to be income, subject to

income tax laws currently applicable.”); Gattuso v. Pecorella, 733 F.2d 709, 710 (9th Cir.

1984) (“ T axp ayers’ claim that their wages are not income is frivolous.”) (citing Buras and

Romero). Defendants knew that t he IRS considered their position frivolous and that there

was no realistic possibility that it would be sust ained. Doc. #13 ¶¶ 3, 6, 10. Defendants

nonetheless continued to submit frivolous filings to t he IRS. Doc. #121 ¶ 6. The filings did

not include tax-preparer identification numbers as required by the regulations, and

Defendants have presented no evidence that their failure to provide identification numbers

was due to reasonable cause and not due to willful neglect. Doc. #6 ¶ 8; see IRC § 6695(c);

Savoie, 594 F. Supp. at 684 (“Savoie violated both sections 6694 and 6695. Savoie followed

his ‘Wages Not Income’ plan in each of the returns and amended ret urns t hat we have

uncontroverted evidence he prepared. . . . He affixed neit her his signature nor a taxpreparer identification number to any of the returns[.]”).

The Court further concludes that an injunction prohibiting only violat ions of IRC

§§ 6694 and 6695 would not be sufficient to prevent Defendants’ interference with the

proper administration of the IRC. Defendants continue to hold t he erroneous belief that

wages are not taxable income under the IRC and that Plaintiff is thus “imposing against

them unconstitutional taxat ion[.]” Doc #151 ¶ 1; see Docs. ##112 at 2, 152-53 (Defs.’

Affs.). In fact, in April 2005 – after Plaint iff filed this lawsuit – Defendant Darrell Hill filed

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It app ears that Defendant discovered this new practice from the book by Peter

Hendrickson, “Cracking the Code: The Fascinating Truth About Taxation in America.”

Docs. ##18-19 Exs. F. Defendants included the book with t heir answers and have avowed

their belief in the book’s interpretation of the IRC. Docs. ##12 ¶ 4, 13 ¶ 4, 18-19 Exs. E.

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forms with the IRS in an attempt to reduce to zero dollars the amount of wages previously

reported to the IRS by five of his former emp loy ers. Doc. #18 Ex. I (IRS Form 4852,

Substitute for W-2, Wage and Tax Statement).2 Such frivolous filings have impeded the

abilit y of the IRS to administer tax laws and has placed significant administrative and

financial burdens on the IRS. Doc. #121 ¶¶ 15-16.

The Court will grant Plaintiff’s motion for summary judgment with respect to Count I

and permanently enjoin Defendants from acting as federal income tax return prep arers.

See IRC § 7407(b)(2); Savoie, 594 F. Supp. at 685 (“[I]n light of Savoie’s unyielding

opposition to the current tax structure, we hardly need to explain that an injunction against

conduct listed in subsection (b)(1) would be insufficient to safeguard tax administration

from Savoie’s interference.”).

2. Count II: Injunction Under IRC § 7408.

 In Count II, Plaintiff seeks an injunction under IRC § 7408 permanent ly enjoining

Defendants from violating IRC § 6701, which imposes a penalty on any person who assists

in the preparation of a document that the person knows or has reason to believe will be

used in connection with any material mat t er arising under the IRC, and that the person

knows would result in the understatement of the tax liability of another person. IRC §

6701(a). Section 7408 authoriz es t he Court to issue an injunction if it finds that Defendants

have engaged in conduct subject to penalty under § 6701 and that “injunctive relief is

appropriate to prevent recurrence of such conduct[.]” IRC § 7408(b)-(c). Based on the

unrebutted evidence discussed above, the Court finds that Defendants have knowingly

and repeatedly violat ed § 6701 and that an injunction is necessary to prevent further

violations. See id.; United States v. Schiff, 379 F.3d 621, 625-26 (9th Cir. 2004) (affirming the

grant of injunctive relief under § 7408 because “[g]iven Schiff’s extensive history of tax

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avoidance and the fact that the defendants operate[d] a book store devoted to introducing

others to his tax avoidance schemes, there [was] a strong likelihood that the defendants

would violate § 6700 in the future.”). The Court will grant Plaintiff’s motion for summary

judgment with respect to Count II and permanently enjoin Defendants from engaging in

conduct t hat violates IRC § 6701. See id.; Estate Pres. Servs., 202 F.3d at 1098 (affirming

the grant of injunctive relief under § 7408); Savoie, 594 F. Supp. at 681-83 (granting

injunctive relief under § 7408).

3. Count III: Injunction Under IRC § 7402(a).

In Count III, Plaintiff seeks an injunct ion under IRC § 7402(a), which authorizes the

Court to issue “orders of injunction . . . and such other orders . . . as may be necessary or

app rop riat e for the enforcement of the internal revenue laws.” Plaintiff argues that

Defendants’ scheme of preparing and filing with the IRS “zero-income” tax documents

significant ly interferes with the enforcement of the internal revenue laws. Doc. #128 at 15.

Plaintiff further argues that Defendants’ fraudulent activities irreparably harm the federal

government by undermining public confidence in the fairness of the federal tax sy st em and

inciting violations of the internal revenue laws. Id. Plaintiff seeks an injunction requiring

Defendants to (1) remove advertising for fraudulent tax services from their website, (2) post

a copy of the Court’s order and permanent injunction on their website, and (3) p rovide

Plaintiff with the identities of the individuals for whom Defendants have filed tax

documents with the IRS since January 1, 2002, and notify these individuals of the Court’s

ruling in this matter. Id. at 15-16.

a. Removing False Advertising from the Website.

It is well settled that fraudulent commercial speech may be enjoined without

infringing the First Amendment right to free speech. See Schiff, 379 F.3d at 630; Estate

Pres. Servs., 202 F.3d at 1105; Savoie, 594 F. Supp. at 683 (stating that “commercial speech

that is misleading and concerns unlawful activity . . . has never been shielded by the First

Amendment”); see also Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455

U.S. 489, 496 (1982) (holding that the government may ban entirely any speech proposing

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an illegal t ransact ion). An advertisement is fraudulent when it misleads customers about

the benefit of the offered product or service. See Schiff, 379 F.3d at 630.

In this case, Defendants claim on their website to be able to “get your back taxes

reimbursed to you” based on the debunked theory that “[w]age earnings are not ‘taxable

profit.’” Doc. #4 Ex. A. Defendant s mislead potential customers by stating that their

“procedures are legitimately filed with the taxing ent it ies” and that they “engage the

agencies forthrightly.” Id. Defendants falsely promise that “at worst , all [t he taxing

entities] can say is ‘no’” and that such a response will cost the customer “nothing.” Id.

“Although these claims are far-fetched, they . . . mislead a customer into believing

that he or she could use [Defendants’ services] to legally stop p ay ing income taxes.”

Schiff, 379 F.3d at 630. The Court accordingly will order Defendant s t o remove from their

website all advertising for their fraudulent tax services. See id. (affirming an injunction that

prohibited the defendants from promoting or marketing the use of “zero income” tax returns

and false withholding forms); Savoie, 594 F. Supp. at 683 (enjoining t he defendant from

promoting fraudulent tax-avoidance schemes or advertising material to be used by

taxpayers t o avoid the payment of tax); United States v. Kaun, 633 F. Supp. 406, 409 (E.D.

Wis. 1986) (“Consistent wit h [the] broad, remedial purpose of § 7402(a), the federal courts

have routinely relied on its grant of injunctive authority to preclude individuals . . . from

disseminating their rather perverse notions about compliance with the Internal Revenue

laws or from promoting certain tax avoidance schemes.”) (citations omitted).

b. Postings on the Website.

The Ninth Circuit “ has held that mandated disclosure of factual, commercial

information does not offend the First Amendment.” Schiff, 379 F.3d at 631 (citing Envtl.

Def. Ctr., Inc. v. United States EPA, 344 F.3d 832, 849-51 (9th Cir. 2003)). Because

Defendants have been offering fraudulent tax services on their website that could expose

their customers to penalties under the IRC, the Court will order Defendants to post a copy

of this Order and the Court’s Permanent Injunction (which the Court will issue separately

from this Order) on their website, www.getmytaxesback.com. See id. (affirming order

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requiring posting of injunction on websites where tax evasion products were sold).

c. Customer Disclosure and Notification.

Plaintiff has presented unrebutted evidence that the IRS has been forced t o devote

significant resources to identifying and preventing lost revenue as a result of Defendants’

activit ies. Doc. #121 ¶¶ 6-16. Although the IRS attempts to identify all frivolous returns,

it has failed to identify many such ret urns before issuing refunds. Id. ¶ 14. In the 2003

p rocessing year alone, the IRS refunded approximately $200,000 based on returns t hat

assert t heories similar to those propounded by Defendants. Id. The IRS states that this

is a conservative total because it is still investigating whether other erroneous refunds

have been issued. Id.

The Court concludes that knowing the identit ies of Defendants’ customers will

assist the IRS in identifying frivolous returns and determining whether any erroneous

refunds have been issued. The Court will order Defendants to disclose to Plaintiff the

identities of any individuals for whom Defendants have filed tax documents with the IRS

since January 1, 2002, and notify such individuals of the disclosure.

II. Plaintiff’s and Third Party Defendants’ Motions to Dismiss.

In Counts I and II of t heir counterclaim/third party complaint, Defendants seek

damages for alleged violations of IRC §§ 7433 and 7214. Docs. ##18-19 ¶¶ 57-62.

Defendants allege that Plaint iff “has recklessly, intentionally and negligently . . .

disregarded provisions of Title 26 U.S.C., and regulations promulgated under the Title to

falsely accuse and prosecute [Defendant s] as ‘federal tax return preparers[.’]” Id. ¶ 40.

Defendants allege that Third Party Defendants have violated their oaths of office,

disregarded provisions of the IRC, and threat ened and implemented collection actions

without due process. Id. ¶¶ 44-51.

Plaint iff and Third Party Defendants move to dismiss the claims against them

pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction.

Docs. ##24, 104. T hey argue that jurisdiction is lacking because Defendants have failed

to show a waiver of sovereign immunity. Id.

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A. Rule 12(b)(1) Motion to Dismiss Standard.

 In resolving a motion to dismiss for lack of subject matter jurisdiction, the Court is

not limited to the allegations in the pleadings. See Roberts v . Corrothers, 812 F.2d 1173,

1177 (9th Cir. 1987). The Court is free to consider “evidence regarding jurisdiction and to

rule on t hat issue prior to trial, resolving factual disputes where necessary.” Augustine v.

United States, 704 F.2d 1074, 1077 (9th Cir. 1983). T he Court may review evidence and

resolve factual disputes “without converting the motion to dismiss to a motion for

summary judgment.” Id.

B. IRC § 7433.

Section 7433 permits a taxpayer to bring in federal district court a civil suit for

damages against the United States if, in connection with any collect ion of a federal tax, an

IRS officer or employee disregards a provision of the IRC. IRC § 7433(a). Before bringing

suit, however, the taxpayer must exhaust the administ rat ive remedies available to the

taxpayer within the IRS. IRC § 7433(d)(1); see Treas. Reg. § 301.7433-1(a)(2) (“An action

for damages filed in federal district court may not be maintained unless the taxp ay er has

filed an administrative claim pursuant to paragraph (e) of this section[.]”).

Plaintiff argues that it has not waived sovereign immunity with respect to

Defendants’ § 7433 claim because Defendants have not exhausted the administrative

remedies available to them under Treasury Regulation § 301.7433-1(e). Doc. #25 at 4-5.

Defendants do not dispute that they have failed to exhaust administrative remedies.

Rather, they allege that no administrative remedies are available to them due to Plaintiff’s

“systemic disregard” for the IRC and the regulations promulgated thereunder. Docs. ##18-

19 ¶ 52.

Plaintiff’s alleged disregard for the IRC does not excuse Defendants’ failure to

exhaust administrative remedies. See IRC § 7433(d)(1) (permit t ing a taxpayer to sue the

United States for disregarding the IRC only after the taxp ay er has exhausted administrative

remedies); Treas. Reg. § 301.7433-1(a)(2) (same). Defendants have thus failed to show that

Plaintiff has waived its sovereign immunity with respect to Defendants’ § 7433 claim. See

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To the extent T hird Party Defendants have been sued in their individual capacities,

an action for damages is still barred. See Wages v . IRS, 915 F.2d 1230, 1235 (9th Cir. 1990)

(holding that the remedies provided by Congress, particularly the right to sue the United

States for a refund of t axes improperly collected, foreclose a damages action against IRS

employees under Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388 (1971)).

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Holloman v . Watt, 708 F.2d 1399, 1402 (9th Cir. 1983) (reversing the award damages against

federal officials based on sovereign immunity and st ating: “A waiver of sovereign

immunity cannot be implied but must be unequivocally expressed. The party who sues the

United States bears the burden of pointing to such an unequivocal waiver of immunity.”)

(citations and alterations omitted). The Court will dismiss Defendants’ § 7433 claim against

Plaintiff for lack of subject matter jurisdiction. See Conforte v. United States, 979 F.2d 1375,

1377 (9th Cir. 1993) (“Conforte may not bring this action against t he Unit ed States under

. . . § 7433 without exhausting her administrative remedies. She has not done so. T he court

lacked jurisdiction to hear her.”) (citations omitted).

Defendants’ claim against Third Part y Defendants must be dismissed because

§ 7433 permits suits against only the United States, not IRS employees. IRC § 7433(a)

(“[A] taxpayer may bring a civil action for damages against the United States[.]”)

(emphasis added); see Treas. Reg. § 301.7433-1(a) (same); Gilbert v. DaGrossa, 756 F.2d

1455, 1458 (9th Cir. 1985) (“[A] suit against IRS employ ees in their official capacity is

essentially a suit against the United States. As such, absent express stat ut ory consent to

sue, dismissal is required.”) (citations omitted).3

C. IRC § 7214.

Section 7214 makes criminal certain acts by IRS employees and authorizes a court

to render judgment against a convicted “employee for the amount of damages sustained

in favor of the party injured[.]” IRC § 7214(a). Section 7214, however, provides no private

cause of action t o p art ies in a civil case. See United States v. Little, 753 F.2d 1420, 1437

(9th Cir. 1985) (holding that IRS agents did not violate § 7214 and stating that even if they

had, “the remedy lies not in freeing appellants, but in prosecuting the agents”) (emp hasis

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added). Moreover, Defendants have p resented no evidence that any Third Party

Defendant has been convicted under § 7214. The Court accordingly will dismiss

Defendants’ § 7214 claim for lack of subject matter jurisdiction.

IT IS ORDERED:

1. Plaintiff’s motion to dismiss counterclaims (Doc. #24) is granted.

2. Third Party Defendants’ motion to dismiss third party complaint (Doc. #104)

is granted.

3. Plaintiff’s motion for summary judgment (Doc. #126) is granted.

4. Defendants Beverly and Darrell Hill, individually and doing business as

Superior Claims Management or as any other entit y , are permanently enjoined from directly

or indirectly:

a. Acting as federal tax return p reparers or assisting in or directing the

preparation and/or filing of any federal tax return or claim for refund for any person or

entity other than themselves;

b. Appearing as represent at ives for any person or entity whose tax

liabilities are under examination or investigation by the IRS;

c. Preparing or assisting in the p rep aration of a document related to a

matter material to the internal revenue laws that includes a p osition that they know would

result in the understatement of tax liability; and 

d. Engaging in other conduct that they know will interfere with the

administration and/or enforcement of the internal revenue laws.

5. Defendants shall, within 15 days from the date of this Order, remove from

their website, www.getmytaxesback.com, all information advertising their services as

federal income t ax preparers, consultants, fiduciaries, or personal representatives and all

false or fraudulent statements regarding the meaning and application of the internal

revenue laws, including, but not limited to, any statements that wages or earnings are not

taxable income.

6. Defendants shall, wit hin 15 days from the date of this Order, post a

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complete copy of this Order and the Court’s separate Permanent Injunction on their

website, www.getmytaxesback.com.

7. Defendants shall, within 30 days from the date of this Order, disclose to

Plaintiff’s counsel a list that identifies by name, social security number, mailing address,

e-mail address, telephone number, and tax periods all persons for whom Defendants have

prepared federal income tax returns or claims for refund since January 1, 2002.

8. Defendants shall, wit hin 30 days from the date of this Order, notify in writing

and, if an e-mail address is known, by e-mail all persons described in paragraph 7 above

with respect to whom the Court has ordered Defendants to disclose identifying information

to Plaintiff’s counsel.

9. Defendants shall, within 30 days from the date of this Order, file with the

Court a notice certifying that they have complied fully with the requirements set forth in

paragraphs 5 through 8 above.

10. All other pending motions are denied as moot.

11. The Clerk shall terminate this action.

DATED this 22nd day of December, 2005.

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