Bettis v. United States
17-766
| Fed. Cl. | Dec 12, 2017Background
- Plaintiff Kirell Francis Bettis (also known as Bettis-Taylor) sued seeking a $1,208,796,038 tax refund based on a claimed $5.162 billion "fiduciary fee" and massive OID income allegedly generated from an "Instrument" (a purported 1878 Floating Irrevocable Letter of Credit).
- Plaintiff filed various 2015 tax forms for the Trust (Forms 941, 945, and later Form 1041) reporting enormous income and tax liabilities but submitted no cash payments; he later mailed four Forms 1041-ES with "performance bonds" purportedly obligating billions from the Instrument as payment.
- The IRS abated certain assessments (Form 945 and the four Form 941 quarters) but denied plaintiff's Form 843 refund claim and assessed a frivolous-return penalty; plaintiff then filed suit in the Court of Federal Claims seeking refund relief.
- Defendant moved to dismiss under RCFC 12(b)(1), arguing the court lacks jurisdiction because plaintiff (or the Trust) did not fully pay the assessed taxes before suing, as required by the full-payment rule for refund suits.
- The court found plaintiff’s purported bonds derived from the Instrument had no market value and were legally insufficient as cash deposits under I.R.C. §6603 and governing revenue procedures.
- The court concluded the Instrument and related bonds were frivolous/delusional, plaintiff had not fully paid the taxes before filing suit, and thus the Court of Federal Claims lacked jurisdiction; it dismissed the complaint with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court has jurisdiction under the Tucker Act and tax-refund statutes (full-payment rule) | Bettis contends he paid liabilities by posting performance bonds tied to the Instrument and timely filed refund claim | U.S. argues no full payment was made; purported bonds are not acceptable cash deposits and have no market value | Dismissal for lack of subject-matter jurisdiction: plaintiff did not fully pay assessed taxes pre-suit |
| Whether the "performance bonds" constitute valid deposits/payments under I.R.C. §6603 and revenue procedures | Bettis asserts bonds/eligible obligations satisfy payment requirements | U.S. argues I.R.C. §6603 requires cash deposits (check/money order) and bonds submitted lack market value and do not meet rules | Bonds not treated as payments or valid deposits; insufficient to satisfy full-payment rule |
| Whether the Instrument and related claims are frivolous | Bettis relies on the Instrument’s alleged value to support payment/credit assertions | U.S. views the Instrument as without value and characterizes filings as frivolous | Court finds the Instrument and bonds frivolous/delusional; no merit to claimed obligation value |
| Pleading and refund-claim formalities (RCFC 9(m), timeliness) | Bettis largely complied with RCFC 9(m) and timely filed refund claim and suit | U.S. does not dispute formal filing/timeliness but contests substantive jurisdictional prerequisite (payment) | Court assumed timely filing but dismissed because full-payment prerequisite was not met |
Key Cases Cited
- Flora v. United States, 357 U.S. 63 (establishes full-payment rule as prerequisite for tax refund suits)
- Neitzke v. Williams, 490 U.S. 319 (frivolous or delusional factual allegations do not require evidentiary hearing)
- United States v. Testan, 424 U.S. 392 (Tucker Act is jurisdictional, not a substantive source of money-mandating rights)
- United States v. White Mountain Apache Tribe, 537 U.S. 465 (waiver of sovereign immunity must be unequivocal)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (jurisdictional requirements cannot be waived and must be addressed first)
- Erickson v. Pardus, 551 U.S. 89 (pro se pleadings are liberally construed but still must meet jurisdictional burdens)