Diamond v. United States , 603 F. App'x 947 ( 2015 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
NORMAN DOUGLAS DIAMOND,
Plaintiff-Appellant
ZAIDA GOLENA DEL ROSARIO,
Plaintiff
v.
UNITED STATES,
Defendant-Appellee
______________________
2014-5088
______________________
Appeal from the United States Court of Federal
Claims in No. 13-cv-0292-SGB, Judge Susan G. Braden.
______________________
Decided: February 10, 2015
______________________
NORMAN DOUGLAS DIAMOND, Tokyo, Japan, pro se.
JANET A. BRADLEY, Tax Division, United States De-
partment of Justice, Washington, DC, for defendant-
appellee. Also represented by MICHAEL J. HAUNGS,
TAMARA W. ASHFORD.
______________________
2 DIAMOND v. US
Before PROST, Chief Judge, MOORE, and O’MALLEY,
Circuit Judges.
PER CURIAM.
Norman Douglas Diamond and his wife, Zaida Golena
Del Rosario, (collectively, “Appellants”), acting pro se,
appeal a decision of the United States Court of Federal
Claims dismissing their claim for abatement of a 2008
Internal Revenue Service (“IRS”) fee for lack of subject
matter jurisdiction, and granting the government’s mo-
tion for summary judgment that they were not entitled to
a tax refund for 2006-2011 tax years. See Diamond v.
United States, 115 Fed. Cl. 516 (2014) (“Claims Decision”).
Because the Court of Federal Claims did not err in its
decision, we affirm.
BACKGROUND
Norman Diamond and his wife have been in a pro-
tracted dispute with the IRS since the early 1990s, when
the IRS sent documents to the Appellants’ residence in
Japan with Mr. Diamond’s Social Security number on the
outside of the envelopes. Following this incident, both
Mr. Diamond and his wife applied for new Social Security
numbers and individual taxpayer identification numbers
(“ITINs”). The two have not been issued new Social
Security numbers, but received ITINs finally in 2011.
In the interim, Appellants have had several other is-
sues with the IRS regarding their tax returns. For exam-
ple, the IRS fined Appellants several times for filing
frivolous tax returns under 26 U.S.C. § 6702, including a
$5,000 fee for filing a frivolous income tax return in 2008.
Appellants challenged this assessment in 2011, but the
IRS denied the request to abate the fee because Appel-
lants had failed to timely challenge it. Appellants then
protested this penalty by filing a petition in the United
States Tax Court (“Tax Court”), but the Tax Court dis-
missed their petition for lack of subject matter jurisdiction
DIAMOND v. US 3
in 2012. Because they contest the propriety of these fines
and have yet to pay the penalties in full, Appellants
continue to have outstanding tax liabilities.
Despite these troubles, for the 2006-2011 tax years,
Appellants actually overpaid a total of $881.93 in federal
taxes: $116.95 for 2006; $131.49 for 2007; $192.31 for
2008; $274.44 for 2009; $157.50 for 2010; and $36.24 for
2011. See Claims Decision, 115 Fed. Cl. at 522 n.10.
Rather than issue a refund, however, the IRS applied
these overpayments to Appellants’ outstanding liabilities.
In light of the Tax Court’s decision to dismiss their
2008 abatement claim and the IRS’s decision not to issue
a refund for their overpayments, Appellants filed a com-
plaint in the Court of Federal Claims, seeking an abate-
ment of the penalty assessed for the frivolous 2008 tax
return and a refund for their 2006-2011 tax years.
Appellants contended that they were entitled to $881.93
in refunds for the 2006-2011 tax years and also argued
that the government had incorrectly determined that the
2008 tax return was frivolous and requested an abate-
ment of the $5,000 penalty. The government filed a
motion to dismiss, arguing that the Court of Federal
Claims lacked jurisdiction over the 2008 abatement claim
and that Appellants were not entitled to a refund because
the overpayments had been properly applied to other
outstanding IRS debts.
Upon review of the motions, the Court of Federal
Claims found in favor of the government on both issues.
Claims Decision, 115 Fed. Cl. at 526, 530. It first ex-
plained that it only has jurisdiction over tax refund cases
where a party pays the entire disputed assessment.
Because Appellants had failed to pay the entire penalty
before bringing suit, it could not exercise jurisdiction over
the 2008 abatement claim. Id. at 526. Regarding the
refund claim, because the parties heavily relied on mat-
ters outside the pleadings, the Court of Federal Claims
4 DIAMOND v. US
construed the government’s motion to dismiss as a motion
for summary judgment, and granted the motion, finding
that Appellants were not entitled to a refund. Id. at 522,
530. The court explained that because it was within the
IRS’s authority to apply overpayments to other outstand-
ing liabilities, the IRS’s decision to apply $881.93 to
Appellants’ unpaid penalties was permissible. According-
ly, the court concluded that Appellants were not entitled
to any relief and entered judgment in favor of the gov-
ernment.
Appellants timely appealed the Court of Federal
Claims’ decision to this court. We have jurisdiction pur-
suant to 28 U.S.C. § 1295(a)(3).
DISCUSSION
On appeal, Appellants seek clarification as to whether
any court has jurisdiction over their 2008 abatement
claim. Appellants also contest the Court of Federal
Claims’ decision to exercise jurisdiction over their 2006-
2011 refund claims, even though neither party questioned
the court’s ability to consider these claims below.
We review a Court of Federal Claims’ dismissal for
lack of jurisdiction de novo. Banks v. United States, 741
F.3d 1268, 1275 (Fed. Cir. 2014). We also review a grant
of summary judgment de novo. Century Exploration New
Orleans, LLC v. United States, 745 F.3d 1168, 1171 (Fed.
Cir. 2014). Summary judgment is appropriate when there
is no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986).
A. 2008 Abatement Claim
The Court of Federal Claims, concurrently with the
United States District Courts, has jurisdiction over tax
refund suits. See 28 U.S.C. §§ 1346(a)(1), 1491(a)(1). But
a prerequisite to bringing such a claim in the Court of
DIAMOND v. US 5
Federal Claims is full payment of the assessed taxes.
Flora v. United States, 362 U.S. 145, 177 (1960) (finding
that the proper construction of 28 U.S.C. §1346(a)(1)
“require[d] full payment of an assessment before an
income tax refund suit [could] be maintained”); Ledford v.
United States, 297 F.3d 1378, 1382 (Fed. Cir. 2002) (af-
firming a dismissal of a tax refund case because the
assessed tax had not been paid). This rule also applies
when a taxpayer is protesting a penalty imposed under 26
U.S.C. § 6702 by the IRS. 1 Accordingly, the Court of
Federal Claims lacks jurisdiction to consider a refund
claim for an assessment made pursuant to § 6702, if the
taxpayer does not pay the entire amount of the assess-
ment.
On appeal, Appellants question whether any court can
consider its 2008 abatement claim, given that both the
Court of Federal Claims and the Tax Court dismissed
claims relating to that question for lack of subject matter
jurisdiction. See Claims Decision, 115 Fed. Cl. at 522.
Typically, a taxpayer can challenge an assessment in
one of two ways. The first is to file a petition with the Tax
1 Unlike Section 6702 penalties, penalties assessed
under Section 6700 or 6701 do not require full payment.
Rather, a taxpayer can contest a penalty assessment
under these sections by paying only 15% of the fine. 26
U.S.C. § 6703(c) (requiring the taxpayer to pay at least
15% of any penalty imposed under sections 6700 or 6701,
and to file a claim seeking a refund of the amounts paid,
before filing a suit in district court); see Nielsen v. United
States, 976 F.2d 951, 954 n.7 (5th Cir. 1992) (“Section
6703 provides an exception to the general rule that the
entire amount of the assessment must be paid up front.
Under Section 6703 the taxpayer may contest § 6700 and
6701 penalties by paying only 15% of the assessment and
filing a refund suit in federal district court.”).
6 DIAMOND v. US
Court without paying the assessment, and the second is to
pay the assessment, request a refund from the IRS, and
then file a refund suit in the Court of Federal Claims or in
the district court. See 26 U.S.C. § 7422(a); Smith v.
United States, 495 F. App’x 44, 48 (Fed. Cir. 2012) (ex-
plaining how a taxpayer can dispute an income tax as-
sessment in the Tax Court or the Court of Federal
Claims).
In this case, Appellants first filed a petition in the Tax
Court regarding their 2008 fee, and then subsequently
filed a complaint in the Court of Federal Claims after the
Tax Court dismissed their petition. Appellants are cor-
rect that both courts dismissed their claim for lack of
subject matter jurisdiction, but neither court stated it
could never consider the claim. Rather, in both instances,
Appellants failed to comply with certain prerequisites to
the exercise of jurisdiction in those courts. The Tax Court
dismissed Appellants’ 2008 abatement claim because
Appellants failed to provide an IRS notice sufficient to
confer jurisdiction upon the court and the Court of Feder-
al Claims dismissed this same claim because Appellants
did not pay the disputed penalty in full. 2 See Diamond v.
Comm’r, No. 13878-12S (T.C. Aug. 28, 2012); Claims
Decision, 115 Fed. Cl. at 526.
In order to bring a claim in either venue, Appellants
had to comply with all governing prerequisites to doing
so. See Rochelle v. Comm’r, 116 T.C. 356, 358 (2001)
(“There are two prerequisites to this Court’s jurisdiction
to redetermine a deficiency: (1) The issuance of a valid
notice of deficiency by the Commissioner; and (2) the
timely filing of a petition with the Court by the taxpay-
er.”); Shore v. United States, 9 F.3d 1524, 1526 (Fed. Cir.
1993) (holding that a tax refund claim must be dismissed
2 The propriety of the dismissal by the Tax Court is
not before us.
DIAMOND v. US 7
if the “principal tax deficiency has not been paid in full”);
see also Brach v. United States, 443 F. App’x. 543, 545
(Fed. Cir. 2011) (explaining that full payment of an as-
sessment was a “jurisdictional prerequisite to suing for a
refund suit.”); Chi. Milwaukee Corp. v. United States, 40
F.3d 373, 374 (Fed. Cir. 1994) (finding that 26 U.S.C.
§ 7422(a) “imposes, as a jurisdictional prerequisite to a
refund suit, filing a refund claim with the IRS that com-
plies with IRS regulations”). In the case of the Court of
Federal Claims, this includes full payment of the chal-
lenged assessment.
In the present case, the Court of Federal Claims found
that there was no allegation and no proof that Appellants
had paid the entire 2008 penalty assessment. See Claims
Decision, 115 Fed. Cl. at 525–26. Because Appellants
failed to pay the full 2008 assessment, the Court of Fed-
eral Claims concluded it did not have jurisdiction to
consider this claim. See Schell v. United States, 589 F.3d
1378, 1381 (Fed. Cir. 2009) (“As the party seeking the
exercise of jurisdiction, the Taxpayers have the burden of
establishing that jurisdiction exists.”). As there was no
evidence that Appellants paid the entire fee, the Court of
Federal Claims correctly determined that it lacked juris-
diction to consider the Appellants’ 2008 abatement claim.
Accordingly, the Court of Federal Claims did not err when
it dismissed this portion of Appellants’ complaint for lack
of jurisdiction.
B. Tax Refund Claims for 2006-2011
For the first time on appeal Appellants question
whether the Court of Federal Claims had jurisdiction over
their refund claims for the 2006-2011 tax years. They
allege that this court’s decision in a case concerning
Appellants’ 2005 tax return, Diamond v. United States,
530 F. App’x 943 (2013), deprived the Court of Federal
Claims of jurisdiction over the Appellants’ 2006-2011 tax
returns. In the prior case, the Court of Federal Claims
8 DIAMOND v. US
determined that Appellants’ 2005 tax return did not
contain sufficient information, did not evince an honest
endeavor to satisfy the law, and therefore did not consti-
tute a proper claim for a refund. Because it only has
jurisdiction over a refund claim if “the taxpayers’ submis-
sions to the IRS constitute a claim for refund,” the Court
of Federal Claims dismissed Appellants’ refund claim for
the 2005 tax year. Diamond, 530 F. App’x at 944 (quoting
Waltner v. United States, 679 F.3d 1329, 1333 (Fed. Cir.
2009)). On appeal, this court affirmed, agreeing with the
Court of Federal Claims’ determination that Appellants’
2005 tax return was not a proper claim for a refund. Id.Here, Appellants allege that the same deficiencies
found in their 2005 tax return are present in the returns
at issue in this case. Therefore, Appellants contend that
the Court of Federal Claims could not have exercised
jurisdiction, because such returns were not valid claims
for refunds. At the Court of Federal Claims, Appellants
only contested the IRS’s decision to credit their overpay-
ments to other outstanding liabilities. As a general
principle, appellate courts do not consider issues that
were not clearly raised in the proceeding below. Hormel
v. Helvering, 312 U.S. 552, 556 (1941); see San Carlos
Apache Tribe v. United States, 639 F.3d 1346, 1355 (Fed.
Cir. 2011) (“Because the [litigant] did not raise this argu-
ment before the Court of Federal Claims, it is waived on
appeal.”). “Only rarely will an appellate court entertain”
a novel argument raised for the first time on appeal.
Karuck Tribe v. Ammon, 209 F.3d 1366, 1379 (Fed. Cir.
2000); see Singleton v. Wulff, 428 U.S. 106, 121 (1976)
(“The matter of what questions may be taken up and
resolved for the first time on appeal is one left primarily
to the discretion of the courts of appeals, to be exercised
on the facts of individuals case.”). Because Appellants
failed to raise this issue below, they have waived it.
Even if Appellants had made this argument to the
Court of Federal Claims, it is meritless. In the case
DIAMOND v. US 9
concerning their 2005 tax return, the IRS never accepted
a return from Appellants. See Diamond, 530 F. App’x at
944 (explaining that before Appellants filed suit against
the government in the Court of Federal Claims for a
refund, the IRS had asked Appellants twice to provide
additional information so that the IRS could process the
return, but Appellants had failed to do so). But, for the
years in dispute in this case, the IRS eventually did
accept all of Appellants’ tax returns, finding that any
deficiencies in the original returns had been corrected in
subsequent amended returns. Therefore, the concerns
raised in the prior case are not at issue here.
Regarding the legality of the IRS’s decision to apply
Appellants’ overpayments to their outstanding tax liabili-
ties for other years, the Court of Federal Claims correctly
concluded that the IRS has the authority to do so. See 26
U.S.C. § 6402(a) (“In the case of any overpayment, the
Secretary, within the applicable period of limitations, may
credit the amount of such overpayment, including any
interest allowed thereon, against any liability in respect
of an internal revenue tax on the part of the person who
made the overpayment . . . .”); General Elec. Co. v. United
States, 384 F.3d 1307, 1312 (Fed. Cir. 2004) (explaining
that the IRS has the ability to credit overpayments
“against the liability of the person who made the over-
payment”). Because this was the only issue disputed by
the parties below, the Court of Federal Claims properly
determined that Appellants had “received the benefit of
the refund they [sought]” and “[a]s such, the court can
afford them no further relief.” Claims Decision, 115 Fed.
Cl. at 528. As there were no other issues concerning the
Appellants’ refund claims, the Court of Federal Claims
did not err in granting summary judgment in favor of the
government.
10 DIAMOND v. US
CONCLUSION
Accordingly, we affirm the Court of Federal Claims’
decision dismissing Appellants’ 2008 abatement claim for
lack of jurisdiction, and granting the government’s motion
for summary judgment that Appellants were not entitled
to a refund for the tax years 2006-2011.
AFFIRMED