Keechi v. United States

Citation: 604 F. Supp. 267Docket: Civ. A. 84-2085

Court: District Court, District of Columbia; February 11, 1985; Federal District Court

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Plaintiff Charles C. Keechi, representing the Wichita Indians, asserts that the Bureau of Indian Affairs holds tribal land in trust for him, following a treaty from 1891. The Bureau entered into an oil and gas lease in 1971, with royalties deposited into Keechi’s Individual Indian Money (IIM) Account. In early 1984, the IRS issued three Notices of Levy claiming Keechi owed $16,465.87 from tax assessments unrelated to the land lease income. On June 7, 1984, the IRS demanded the amount from the Bureau, which reported no funds in Keechi’s account. Keechi subsequently filed a complaint asserting that the Bureau actually held $283.03 and that the IRS was unlawfully attempting to levy this amount and future royalties. He seeks a declaratory judgment to affirm that income from the land is exempt from IRS claims and requests both preliminary and permanent injunctive relief to protect his account from future levies. The court issued a temporary restraining order preventing the IRS from enforcing the levy against any funds received after the levy date. Although this order has expired, the defendants agree to a preliminary injunction barring retention of funds received post-levy. Defendants seek to dismiss the case, arguing jurisdictional issues and citing 26 U.S.C. 7421, which prohibits actions to restrain federal tax collection, as well as 26 U.S.C. 7426(a)(1), which they claim does not permit Keechi to challenge the levy since he is the person liable for the tax.

Defendants claim that following a temporary restraining order, they disbursed all funds in the plaintiff's account and resumed normal payment practices, arguing this renders the case moot due to the absence of a live controversy. They assert that the plaintiff has a sufficient legal remedy for any wrongful collection through a civil suit for a refund under 26 U.S.C. § 7422. Additionally, defendants contend that the suit against individually named defendants should be dismissed as only the United States can be sued under 26 U.S.C. § 7426, and that venue is improper since actions under § 7426 must occur where the property was located at the time of levy, which is in Oklahoma.

In response, the plaintiff clarifies that the lawsuit is not aimed at halting tax collection but at clearing a cloud on his beneficial title to land and royalties under 25 U.S.C. § 345 and 28 U.S.C. § 1353, asserting the levies unlawfully restrict his benefits from the General Allotment Act and Wichita treaty. Plaintiff argues the issue is not moot as the threat of future levies remains, citing defendants' own claims that they may levy on his account again. The plaintiff contends that the Bureau of Indian Affairs, as trustee, must protect his interests from IRS actions, making him exempt from the jurisdictional bar of 26 U.S.C. § 7421, and argues that his claims are not tax liability matters that the Tax Court would handle.

The plaintiff emphasizes that the action seeks a declaratory judgment and injunction from a federal district court and that the individual defendants are properly named. He believes that his claims under 25 U.S.C. § 345 and 28 U.S.C. § 1353 can be prosecuted in this district under 28 U.S.C. § 1391(e). He clarifies that this lawsuit is to protect the income generated from a spendthrift trust and that the U.S. is obligated to convey the allotted land free from encumbrances, as established in case law. Expert opinion suggests that the exemption for tribal lands extends to income derived from them.

The Squire Court ruled that an Indian plaintiff was exempt from capital gains tax on timber sales from land held in trust by the U.S. This case involved the plaintiff challenging an IRS-assessed tax through a refund suit rather than seeking injunctive relief. It suggests that a civil action to recover illegally seized funds could suffice as a remedy, potentially limiting the broader protections intended by the General Allotment Act. This Act provides safeguards akin to those of a spendthrift trust, protecting the property from creditors until it is delivered to the beneficiary. The court emphasized that the U.S. government does not possess superior rights over creditors to attach or levy funds held in trust for Indian beneficiaries. Consequently, the defendants' reliance on the anti-injunction provision of the Internal Revenue Code was deemed incorrect, as the IRS was not assessing tax liability but attempting to collect a separate claim. The suit focuses on protecting the plaintiff's interests in trust-held property, not on tax claims, allowing for jurisdiction in federal court and the inclusion of individual federal officers as defendants. The court found the IRS's actions posed a continuous threat to encumber the beneficiary's income, thus keeping the dispute alive and justiciable. The accompanying order will deny the defendants' motion to dismiss, although the plaintiff has not addressed his right to sue for tax refunds under federal law.