Paul Retfalvi v. United States

PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 18-2158 PAUL M. RETFALVI, Plaintiff - Appellant, v. UNITED STATES OF AMERICA, Defendant - Appellee. Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. James C. Dever III, District Judge. (5:17-cv-00468-D) Argued: May 8, 2019 Decided: July 16, 2019 Before NIEMEYER and HARRIS, Circuit Judges, and Ellen L. HOLLANDER, United States District Judge for the District of Maryland, sitting by designation. Affirmed by published opinion. Judge Hollander wrote the opinion, in which Judges Niemeyer and Harris joined. ARGUED: Robert H. Merritt, Jr., BAILEY & DIXON, LLP, Raleigh, North Carolina, for Appellant. Anthony T. Sheehan, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Richard E. Zuckerman, Principal Deputy Assistant Attorney General, Teresa E. McLaughlin, Tax Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Robert J. Higdon, Jr., United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Raleigh, North Carolina, for Appellee. HOLLANDER, District Judge: This appeal resolves a challenge to the constitutionality of a treaty authorizing the United States to collect unpaid income taxes on behalf of Canada. The issue arises in the context of a tax refund action filed by appellant Paul M. Retfalvi, M.D., the taxpayer. He filed suit against the United States, seeking a refund of approximately $125,000 in taxes collected from him by the Internal Revenue Service (“IRS”), pursuant to the treaty, for income taxes that he owed to Canada for 2006. Dr. Retfalvi advances several grounds in support of his challenge to the constitutionality of the treaty. According to Dr. Retfalvi, the treaty constitutes a “bill for raising revenue” that did not originate in the House of Representatives, in violation of the Origination Clause, Article 1, § 7, cl. 1. In addition, he argues that the treaty violates the Taxing Clause, Article I, § 8, cl. 1, which, in his view, confers on Congress the exclusive right to enact taxing legislation. Further, Dr. Retfalvi contends that the treaty is not self- executing and is therefore unenforceable, because it has not been validated by the requisite implementing legislation. Dr. Retfalvi also challenges the IRS’s legal authority to collect a foreign assessment on behalf of Canada. The District Court for the Eastern District of North Carolina rejected these contentions. We affirm. 2 I. A. In 1980, the United States and Canada executed the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital, U.S.-Can., Sept. 26, 1980, 1986-2 C.B. 258 (the “Treaty”). It was ratified by the U.S. Senate in 1984. Article 26 XXVIA (“Article 26A”) was added to the Treaty by Article 15 of Protocol 3 and entered into force after the Senate ratified Protocol 3 in 1995. S. Treaty Doc. No. 104-4, 1984 WL 261890. Under Article 26A, the United States and Canada agreed to assist each other with the collection of unpaid taxes. Article 26A, ¶¶ 1, 9. To apply for collection assistance, the applicant State ...

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