United States District Court, W.D. Washington, Seattle
ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT AND GRANTING UNITED STATES OF AMERICA'S MOTION
FOR SUMMARY JUDGMENT.
S. Lasnik United States District Judge.
matter comes before the Court on the parties' respective
motions for summary judgment. Dkt. ## 30, 31. This case
arises from a dispute over whether plaintiff Jeffrey Alan
Rische overpaid his federal income tax for the years 2013 and
2014. While the facts are undisputed, the parties disagree
over the application of certain tax code provisions. Having
reviewed the parties' memoranda, declarations, and
exhibits, and the remainder of the record, the Court grants
the government's motion and denies plaintiff's motion
for the reasons that follow.
and 2014, plaintiff worked for Lightspeed Design, Inc.
(“Lightspeed”) as Vice President of Sales and
Marketing. Dkt. # 30-1 at 7, 19. In 2013, Lightspeed paid
plaintiff $74, 627. Dkt. # 30-1 at 9, 19-20; Dkt. # 30-2 at
5. That year, Lightspeed withheld $10, 076 in federal income
tax on plaintiff's behalf, along with $4, 626 in social
security tax and $1, 082 in Medicare tax. Dkt. # 30-2 at 5.
In 2014, Lightspeed paid plaintiff $113, 712. Dkt. # 30-1 at
119, 21; Dkt. # 30-2 at 8. That year, Lightspeed withheld
$23, 764 in federal income tax on plaintiff's behalf,
along with $7, 050 in social security tax and $1, 648 in
Medicare tax. Dkt. # 30-2 at 8. In 2013 and 2014, Lightspeed
reported the above amounts on a Form W-2 Wage and Tax
Statement, and those amounts are now reflected in IRS
records. Dkt. # 30-2 at 5, 8.
plaintiff's 2013 and 2014 tax returns, however, rather
than declaring the annual inco listed above as taxable
income, plaintiff reported an income of $0. Dkt. # 30-1 at
33, 36. Base on this figure, in both 2013 and 2014, plaintiff
claimed that his tax liability was $0. Dkt. # 30-at 33, 36.
Because Lightspeed had withheld a certain amount of federal
income tax, social security tax, and Medicare tax, plaintiff
claimed that he had overpaid in both 2013 and 2014 a thus was
entitled to a tax refund (of $15, 785 in 2013 and $32, 463 in
2014). Dkt. # 30-1 at 33, 36. It is uncontested that the
government neither refunded the claimed overpayments to
plaint nor contested the returns by sending a notice of
deficiency or executing a 26 U.S.C. § 6020(b) return.
Dkt. # 17 at 6-7.
March 2016, plaintiff filed this suit against the federal
government,  seeking a refund of these alleged
overpayments. Dkt. # 1. Both parties have now moved for
summary judgmen Dkt. ## 31, 32. The government argues that,
given the payments reported by Lightspeed in 20 and 2014,
plaintiff's net tax liability for those years exceeded
the total amount withheld, and accordingly that plaintiff did
not overpay his income tax. Plaintiff argues that under the
definitions of the terms “wages, ” “trade
or business, ” and “employee” in 26 U.S.C.
§§ 3121, 3401, and 7701, his payments in 2013 and
2014 were not taxable income because they came from a private
company in non-cash form. The government disagrees.
Summary Judgment Standard
judgment is appropriate when there is no genuine dispute as
to any material fact which would preclude the entry of
judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving
party bears the initial burden of identifying those portions
of the pleadings, depositions, answers to interrogatories,
admissions, and affidavits, if any, that demonstrate the
absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the
moving party has satisfied its burden, it is entitled to
summary judgment if the nonmoving party fails to designate
specific facts showing that there is a genuine issue of
material fact for trial. Id. at 324. “The mere
existence of a scintilla of evidence in support of the
non-moving party's position is not sufficient, ”
and factual disputes whose resolution would not affect the
outcome of the suit are irrelevant to the consideration of a
motion for summary judgment. Arpin v. Santa Clara Valley
Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). The Court will view the evidence in the light most
favorable to the nonmoving party and draw all reasonable
inferences in that party's favor. Mueller v.
Auker, 576 F.3d 979, 991 (9th Cir. 2009).
Tax Refund Claim
question presented in a tax refund suit is “whether the
taxpayer has overpaid his tax.” Lewis v.
Reynolds, 284 U.S. 281, 283 (1932); see also Sokolow
v. United States, 169 F.3d 663, 665 (9th Cir. 1999).
“[T]he taxpayer bears the burden of proving the amount
he is entitled to recover.” United States v.
Janis, 428 U.S. 433, 440 (1976) (citing Lewis,
284 U.S. at 283). The Supreme Court defines
“overpayment” as “any payment in excess of
that which is properly due.” Jones v. Liberty Glass
Co., 332 U.S. 524, 531 (1947). Even where the government
can no longer assess an individual's income tax for the
years in question due to procedural bars (such as the statute
of limitations, or the government's failure to issue a
notice of deficiency or a 26 U.S.C. § 6020(b) return),
the individual's tax liability must nonetheless be
calculated to determine whether there was, in fact, an
overpayment. See Lewis, 284 U.S. at 283 (recognizing
that the government may “retain payments already
received when they do not exceed the amount which might
have been properly assessed and demanded”
(emphasis added)). Thus, the Court must determine
plaintiff's income tax liability for 2013 and 2014.
parties agree that Lightspeed paid plaintiff $74, 627 in 2013
and $113, 712 in 2014. Dkt. # 30-1 at 9, 19-20; Dkt. # 30-2
at 5; Dkt. # 30-1 at 10, 19, 21; Dkt. # 30-2 at 8; Dkt. # 35
at 20. Based on these sums, the government calculates that in
2013 plaintiff had an income tax liability of $12, 085, and
that in 2014 plaintiff had an income tax liability of $22,
173.11. Dkt. # 30 at 13; Dkt. # 30-3, ¶¶ 4-7. Based
on the IRS records documenting Lightspeed's federal
income tax withholding on plaintiff's behalf ($10, 076 in
2013, Dkt. # 30-2 at 5, and $23, 764 in 2014, Dkt. # 30-2 at
8), the government further calculates that plaintiff
underpaid by $2, 009 in 2013 and overpaid by $1, 591 in 2014,
for a net underpayment of $418. Dkt. # 30 at 18; 26 U.S.C.
§ 6402(a) (providing that overpayments may be credited
against any liability on the part of the
does not dispute the figures underlying the government's
calculations, or the validity of the calculations themselves.
Rather, plaintiff contends that the government cannot now
dispute plaintiff's asserted overpayments after failing
to contest them through statutory remedies upon receiving
plaintiff's returns in 2013 and 2014. But here, where the
government is defending against a refund claim rather than
affirmatively seeking an assessment, the government's
failure to contest plaintiff's returns does not prevent
the Court from evaluating plaintiff's overall federal tax
liability for the years in question to determine whether
plaintiff overpaid. See Lewis, 284 U.S. at 283
(holding that the government may “retain payments
already received when they do not exceed the amount which
might have been properly assessed and
demanded” (emphasis added)). The government's
failure to rebut plaintiff's refund claims in his Forms
4852 does not mean that the factual and legal assertions in
those forms become binding. Neither does that failure estop
the government from contesting those assertions now.
merits of his overpayment claim, plaintiff argues that his
payments from Lightspeed were not taxable income based on his
reading of various definitions in the Internal Revenue Code.
Specifically, plaintiff argues that his payments from
Lightspeed were not compensation for employment in
“trade or business” as that term is defined in 26
U.S.C. § 7701(a)(26). That subsection provides that
“[t]he term ‘trade or business' includes the
performance of the functions of a public office, ” and
plaintiff argues that this definition limits the meaning of
“trade or business” to functions performed by a
“public office” - that is, a government agency.
Plaintiff also argues that the definition of
“employee” in 26 U.S.C. § 3401(c) - which