CHURCH OF SCIENTOLOGY OF COLORADO, Plaintiff,
UNITED STATES of America, Defendant.
Civ. A. No. 79-C-1515.
United States District Court, D. Colorado.
Oct. 24, 1980.
Suit was brought for refund of FICA taxes on ground that plaintiff was an
organization exempt from taxation. On the court's own motion, the District
Court, Carrigan, J., held that: (1) complaint in action seeking refund of FICA
taxes, which alleged at best only partial payment of deficiency assessed,
revealed on its face a fatal jurisdictional defect, and (2) payment of the
amount assessed in full some 22 months later failed to confer jurisdiction
since district court lacked jurisdiction when the case was filed.
 FEDERAL COURTS
Federal district court has obligation to inquire on its own motion whether
subject matter jurisdiction exists if it appears from complaint that
jurisdiction is lacking.
 INTERNAL REVENUE
Jurisdiction of district court to hear tax refund suit must be alleged in
complaint, and complaint must state that plaintiff paid the tax it wants
refunded and filed a claim for refund prior to instituting suit. 28
U.S.C.A. s 1346(a)(1).
 INTERNAL REVENUE
General rule is that taxpayer must pay full amount of income tax deficiency
assessed before he may challenge assessment in suit for refund;
exceptions are that partial payment may suffice if the assessment is for unpaid
excise taxes and that partial payment may support suit by a "responsible
person" who has been assessed with 100% penalty for failure to withhold and pay
over employment taxes. 28 U.S.C.A. s 1346(a)(1); 26 U.S.C.A. s 6672.
 INTERNAL REVENUE
Complaint in action seeking refund of FICA taxes, which alleged at best only
partial payment of deficiency assessed, revealed on its face a fatal
jurisdictional defect. 28 U.S.C.A. ss 1346, 1346(a)(1).
 FEDERAL COURTS
Parties may not by stipulation confer subject matter jurisdiction on a federal
 FEDERAL CIVIL PROCEDURE
Defective jurisdictional allegation may be amended, but amendment is proper
only as to matters of "form" in stating jurisdictional allegations, not of
"substance" in creating these facts to confer jurisdiction nunc pro tunc.
28 U.S.C.A. s 1653.
 INTERNAL REVENUE
Where district court lacked jurisdiction of FICA tax refund suit when case was
filed because there had been, at best, a partial payment of the deficiency
assessed, full payment some 22 months after the suit was filed failed to confer
jurisdiction. 28 U.S.C.A. ss 1346, 1346(a)(1).
*1086 Sander N. Karp, Karp, Goldstein & Stern, Denver, Colo., for
Angelo I. Castelli, Atty., Tax Div., Dept. of Justice, Washington, D. C., for
MEMORANDUM OPINION AND ORDER
CARRIGAN, District Judge.
 THIS MATTER is before the Court on its own motion.[FN1] Plaintiff Church
of Scientology of Colorado ("Scientology") brought this suit for refund
claiming that it had been improperly assessed for failure to withhold and pay
FICA taxes for the second quarter of 1974. See 26 U.S.C. s 3101, et seq.
Scientology claims that it has no obligation to collect and pay over FICA taxes
since it is an organization exempt from taxation under 26 U.S.C. s
FN1. The Court has the obligation to inquire on its own motion whether
subject matter jurisdiction exists if it appears from the complaint that
jurisdiction is lacking. This is so even if neither party questions subject
matter jurisdiction. Clark v. Paul Gray, Inc., 306 U.S. 583, 588, 59
S.Ct. 744, 748, 83 L.Ed. 1001 (1939); McNutt v. General Motors
Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 789, 80 L.Ed. 1135
(1936); Basso v. Utah Power and Light Co., 495 F.2d 906, 909 (10th Cir.
On January 20, 1975, the government levied upon Scientology's bank account,
and seized $906.56 in partial satisfaction of the amount the IRS claims
Scientology owes the United States. That $906.56 is the object of the instant
suit for refund. The remaining FICA tax liability of $2,544.55, plus accrued
interest and penalties, was not paid by Scientology until September 12, 1980,
[FN2] more than 22 months after this suit was filed. Moreover, the latter
amount was not paid until after a suggestion that this Court had no
jurisdiction because of its nonpayment.
FN2. This was the date argument was heard on the question of jurisdiction.
Payment was made a few minutes before the hearing started.
In preparing to hear Scientology's motion for summary judgment, the
government's cross-motion for summary judgment, and the government's motion to
compel discovery, the Court reviewed the pleadings filed to date in this case.
It then became apparent from the pleadings that Scientology had brought this
suit without paying the full amount assessed against it. Accordingly, the Court
gave notice to counsel several hours before the hearing that they should
address the question of the Court's jurisdiction. After argument, the Court
invited counsel for both parties to submit supplemental *1087 briefs, and
counsel for Scientology filed an additional memorandum.
 Jurisdiction of district courts to hear refund suits derives from 28
U.S.C. s 1346(a)(1).[FN3] This jurisdiction must be alleged in the complaint.
The complaint must state that the plaintiff has paid the tax it wants refunded
and has filed a claim for refund prior to instituting suit. Freeman v.
United States, 46 AFTR 2d 80-5399, 5400 (E.D.Va.1980). Scientology alleged in
its complaint that it had filed a claim for refund. However, it also alleged
that the government had seized $906.56 by levy on its bank account, and that
the total assessment against it for the second and third quarters of 1974
amounted to $3,515.63. Scientology did not allege that it paid any part of the
balance remaining after the levy.
FN3. Title 28, U.S.C. s 1346 provides in part:
"(a) The district courts shall have original jurisdiction, concurrent with
the Court of Claims, of:
(1) Any civil action against the United States for the recovery of any
internal-revenue tax alleged to have been erroneously or illegally assessed
or collected, or any penalty claimed to have been collected without
authority or any sum alleged to have been excessive or in any manner
wrongfully collected under the internal-revenue laws...."
 The general rule is that a taxpayer must pay the full amount of an
income tax deficiency assessed by the IRS before he may challenge the
assessment in a suit for refund under Section 1346(a)(1). Flora v. United
States, 357 U.S. 63, 78 S.Ct. 1079, 2 L.Ed.2d 1165 (1958), aff'd on rehearing,
362 U.S. 145, 80 S.Ct. 630, 4 L.Ed.2d 623 (1960).
An exception to this general rule has been constructed from two footnotes to
the Supreme Court's second Flora opinion. See 362 U.S. at 171-75, 80 S.Ct.
at 644-46, notes 37 and 38. This exception provides that a taxpayer may pay
only the assessment for part of the tax if the tax is a "divisible" one.
Fidelity Bank, N.A. v. United States, 616 F.2d 1181, 1182 n.1 (10th Cir.
1980); Psaty v. United States, 442 F.2d 1154, 1159 (3d Cir. 1971); Steele
v. United States, 280 F.2d 89, 90 (8th Cir. 1960). However, the exception
applies in only two situations: (1) partial payment may suffice if the
assessment is for unpaid excise taxes,[FN4] or, (2) partial payment may support
suit by a "responsible person" who has been assessed with a 100% penalty
pursuant to 26 U.S.C. s 6672 for failure to withhold and pay over employment
taxes.[FN5] The instant refund suit involves neither exception. Scientology
complains that it was improperly assessed for failure to pay FICA taxes: no
excise taxes are involved. And, although FICA taxes are employment taxes for
which a "responsible person" may be assessed pursuant to Section 6672,
Marvel v. United States, 548 F.2d 295, 298 (10th Cir.), cert. denied, 431
U.S. 967, 97 S.Ct. 2924, 53 L.Ed.2d 1062 (1977), this case does not involve a
Section 6672 assessment.
FN4. See Higginbotham v. United States, 556 F.2d 1173 (4th Cir. 1977);
Lucia v. United States, 474 F.2d 565 (5th Cir. 1973) (en banc); Drake
v. United States, 355 F.Supp. 710 (E.D.Mo.1973); Pizzarello v. United
States, 285 F.Supp. 147 (S.D.N.Y.1968), rev'd on other grounds, 408 F.2d
579 (2d Cir.), cert. denied, 396 U.S. 986, 90 S.Ct. 481, 24 L.Ed.2d 450
(1969); Tysdale v. United States, 191 F.Supp. 442 (D.Minn.1961);
Dowie v. United States, 37 F.R.D. 229 (N.D.N.Y.1964).
FN5. Fidelity Bank, N. A. v. United States, 616 F.2d 1181 (10th Cir.
1980); Boynton v. United States, 566 F.2d 50 (9th Cir. 1977); Marvel
v. United States, 548 F.2d 295 (10th Cir.), cert. denied, 431 U.S. 967,
97 S.Ct. 2924, 53 L.Ed.2d 1062 (1977); Psaty v. United States, 442 F.2d
1154 (3d Cir. 1971); Steele v. United States, 280 F.2d 89 (8th Cir.
1960); Marquis v. United States, 348 F.Supp. 987 (C.D.Cal.1972);
Spivak v. United States, 254 F.Supp. 517 (S.D.N.Y.1966); Ruby v.
Mayer, 194 F.Supp. 594 (D.N.J.1961).
 Scientology brought this suit because the IRS disallowed its claim for
exempt status when processing Scientology's FICA tax return for the second
quarter of 1974. The IRS eventually assessed Scientology for a deficiency,
apparently under 26 CFR s 31.6205-1(a)(6), which was promulgated pursuant
to 26 U.S.C. s 6205(a)(1). There is no reason to extend the partial payment
rule to cover the facts in this case, *1088 since a Section 31.6205-
1(a)(6) assessment, unlike a Section 6672 assessment, is not a penalty
directed at third parties. A Section 31.6205-1(a)(6) assessment is more akin
to an assessment made pursuant to the Secretary's general assessment power.
See 26 U.S.C. s 6201. These "garden variety" assessments are those to which
the Flora full-payment rule applies. Therefore, the complaint in this action,
which alleges at best only a partial payment [FN6] of the deficiency assessed
against Scientology, reveals on its face a fatal jurisdictional defect.
FN6. Since the partial-payment exception to the Flora rule does not apply
in this case, it is unnecessary to discuss whether the levy made in this
case would suffice as partial payment. Cf. Kabbaby v. Richardson, 520
F.2d 334, 335 (5th Cir. 1975).
After being advised of the Court's concern regarding its jurisdiction,
Scientology wrote a check for the unpaid balance of the assessment and tendered
it to the government. The government accepted this check minutes before the
hearing on the jurisdiction issue. At that hearing, counsel for Scientology and
for the government orally stipulated that Scientology had paid the full
assessment. Both parties then urged that this payment, made twenty-two months
after this lawsuit was filed, is sufficient to confer jurisdiction on this
 It is fundamental that parties may not, by stipulation, confer
subject matter jurisdiction on a federal court. California v. LaRue, 409
U.S. 109, 112-13, n. 3, 93 S.Ct. 390, 394, 34 L.Ed.2d 342 (1972); United
States ex rel. Burnette v. Driving Hawk, 587 F.2d 23, 24 (8th Cir. 1978);
Potomac Passengers Association v. Chesapeake and Ohio Railway Company, 520
F.2d 91, 95 n. 22 (D.C.Cir.1975); Rincon Band of Mission Indians v. County
of San Diego, 495 F.2d 1, 8 (9th Cir. 1974). Of course, defective
jurisdictional allegations may be amended pursuant to 28 U.S.C. s 1653.
Schlesinger v. Councilman, 420 U.S. 738, 744 n. 9, 95 S.Ct. 1300, 1306, 43
L.Ed.2d 591 (1975). Amendment, however, is proper only as to matters of "form"
in stating jurisdictional allegations, not of "substance" in creating these
facts to confer jurisdiction nunc pro tunc. Cf. Brennan v. University of
Kansas, 451 F.2d 1287, 1289 (10th Cir. 1971).
 Even if the proposed stipulation is treated as a stipulated motion for
leave to amend the complaint, it fails to confer jurisdiction since this Court
lacked jurisdiction when the case was filed. Facts occurring after the
complaint is filed cannot confer jurisdiction on a federal court if sufficient
jurisdictional facts did not exist at the time the complaint was filed. See
Farmers' Alliance Mutual Ins. Co. v. Jones, 570 F.2d 1384, 1387 (10th Cir.
1978); Lyons v. Weltmer, 174 F.2d 473 (4th Cir. 1949); Seaboard Finance
Co. v. Davis, 276 F.Supp. 507, 509 (N.D.Ill.1967); Hagen v. Payne, 222
F.Supp. 548, 553 (W.D.Ark.1963); Wright, Miller and Cooper, Federal Practice
and Procedure Section 3608, vol. 13, pp. 661-62 (1975); Hart and Wechsler, The
Federal Courts and the Federal System 1063, 1102 (2d ed. 1973).
Most of the cases discussing this question involve diversity jurisdiction.
However, these cases require that the subject matter jurisdiction be
established as having existed at the time the suit is filed. This principle is
especially applicable in tax refund suits, since Congress has determined that
the taxpayer who elects to contest liability in the district court rather than
the tax court must pay the assessment before commencing suit for refund.
Flora v. United States, 357 U.S. 63, 69-70, 78 S.Ct. 1079, 1083, 2 L.Ed.2d
1165 (1958), aff'd on rehearing, 362 U.S. 145, 80 S.Ct. 630, 4 L.Ed.2d 623
(1960). Therefore, this action must be dismissed for lack of jurisdiction.
IT IS ORDERED that the plaintiff's action is dismissed for lack of subject