Patriot Tax International, LLC v. Diaz

Full title: PATRIOT TAX INTERNATIONAL, LLC, PLAINTIFFS, v. RALPH DIAZ, ET AL.…

Court: United States District Court, E.D. Kentucky, Central Division, Lexington

CIVIL ACTION NO. 07-262-JBC.

Date published: Jul 3, 2008

Fact:

  • The plaintiff brought suit against the defendants under the False Claims Act (FCA) for preparing fraudulent tax returns.
  • The complaint alleged that the defendants prepared tax returns for immigrants with children living outside the United States, claiming the Child Tax Credit and Additional Child Tax Credit without verifying if the children qualified under the tax law.
  • The Department of Justice declined to intervene in the action, and the complaint became unsealed.
  • The defendants moved to dismiss the complaint.
  • The plaintiff argued that the Tax Bar did not apply because it sought damages based on statutory penalties and forfeiture of fees, not collection of income taxes.
  • The court held a hearing on the motion to dismiss.

Issue:

Whether the Tax Bar under the False Claims Act applies to the plaintiff’s case, barring the court from having subject matter jurisdiction.

Decision:

  • The court granted the defendants’ motion to dismiss, finding that it lacked subject matter jurisdiction under the False Claims Act’s Tax Bar to reach the merits of the plaintiff’s case.
  • The court determined that the plain language of the Tax Bar, which excludes claims made under the Internal Revenue Code of 1986 from the scope of the False Claims Act, barred the present action.
  • The court rejected the plaintiff’s argument that seeking damages based on statutory penalties and forfeiture of fees exempted the case from the Tax Bar.
  • The court’s decision was based on the interpretation of statutory language and previous case law, including United States ex rel. Lissack v. Sakura Global Capital Markets, Inc., which found that claims involving violations of the Tax Code fell within the scope of the Tax Bar.
  • Therefore, the court granted the defendants’ motion to dismiss the complaint.

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