Opinion
CV-S-02-0175-RLH (RJJ),
August 15, 2002
ORDER Motion for Summary Judgment (#5)
Before the Court is Defendant United States' Motion for Summary Judgment (#5, filed March 19, 2002). Plaintiffs' Objection (#10) was filed May 7, 2002. However, there is no evidence that it was ever served on the defendant, which may explain why there is no reply filed thereto.
Plaintiffs did file a purported Affidavit of Service in connection with their Application for Default Judgment (#12, which the Court has denied in a separate order) in which it is claimed that an "AFFIDAVIT OF Service of the Plaintiffs' Objection to Defendant's Motion to Dismiss or Summary Judgment is attached hereto as Exhibit `A'." However, there was no "Exhibit A" attached as promised and there is no affidavit of service attached to the Plaintiffs' Objection.
The Court has reviewed the motion for summary judgment and the objection and finds merit in the former and none in the latter and thus will rule without waiting for service of the objection and a reply.
BACKGROUND
The complaint herein was filed February 6, 2002, and seeks damages and a request to set aside an allegedly "invalid" collection due process determination for a frivolous return penalty issued pursuant to 26 U.S.C. § 6630. The penalty in question was the result of plaintiffs' federal income tax return filed for the 1998 income tax year. The return had only zeroes on all the lines reflecting no income or tax due the government. The plaintiffs believe they do not owe federal income taxes.
On August 28, 2001, a collection due process hearing was held at plaintiffs' request, regarding the frivolous return penalty. At the hearing, the IRS appeals officer determined that all administrative procedures had been followed. Plaintiffs claim the appeals officer had not complied with the law and had failed to show them a statute or regulation making them liable for the penalty or a tax.
On January 8, 2002, the IRS sent plaintiffs, by certified mail, a Notice of Determination Concerning Collection Actions(s) Under Section 6320 and/or 6330 ("Notice of Determination"), informing plaintiffs that the proposed levy to collect the frivolous return penalty would not be restricted, stating reasons. The attachment to the Notice explained that the appeals officer determined that the IRS had complied with all applicable laws, regulations and administrative procedures.
DISCUSSION AND DECISION
Pursuant to Fed.R.Civ.P. 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
The moving party for summary judgment has the initial burden of showing the absence of a genuine issue of material fact. Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). Once the movant's burden is met by presenting evidence which, if uncontroverted, would entitle the movant to a directed verdict at trial, the burden then shifts to the respondent to set forth specific facts demonstrating that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). If the factual context makes the respondent's claim implausible, that party must come forward with more persuasive evidence that would otherwise be necessary to show that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-324 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); California Arch. Bldg. Prod. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir. 1987), cert. denied, 484 U.S. 1006 (1988).
If the party seeking summary judgment meets its burden, then summary judgment will be granted unless there is significant probative evidence tending to support the opponent's legal theory. First National Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 290 (1968); Commodity Futures Trading Commission v. Savage, 611 F.2d 270, 282 (9th Cir. 1979). Parties seeking to defeat summary judgment cannot stand on their pleadings once the movant has submitted affidavits or other similar materials. Affidavits that do not affirmatively demonstrate personal knowledge are insufficient. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 1978), cert. denied, 440 U.S. 981 (1979). Likewise, "legal memoranda and oral argument are not evidence and they cannot by themselves create a factual dispute sufficient to defeat a summary judgment motion where no dispute otherwise exists." British Airways Bd., 585 F.2d at 952.
A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of the truth. See S.E.C. v. Seaboard Corp., 677 F.2d 1289, 1293 (9th Cir. 1982); S.E.C. v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982).
All facts and inferences drawn must be viewed in the light most favorable to the responding party when determining whether a genuine issue of material fact exists for summary judgment purposes. Poller v. CBS, Inc., 368 U.S. 464, 473 (1962). After drawing inferences favorable to the respondent, summary judgment will be granted only if all reasonable inferences defeat the respondent's claims. S.E.C. v. Seaboard Corp., 677 F.2d 1297, 1298 (9th Cir. 1982).
The Collection Due Process Hearing
In 1998, Congress enacted 26 U.S.C. § 6630 as part of the IRS Restructuring and Reform Act of 1998, Pub.L. No. 105-206. The statute provides that, prior to the issuance of an administrative tax levy, the IRS must give the taxpayer notice of an opportunity for a Collection Due Process hearing before the IRS Office of Appeals. 26 U.S.C. § 6330(a), (b). Pursuant to 26 U.S.C. § 6330(a)(2) and (a)(3)(B), a taxpayer must request a Collection Due Process hearing within 30 days of the date notice is given regarding his right to that hearing.
Section 6330(c)(2)(A) prescribes the matters that may properly be raised by a taxpayer at a Collection Due Process hearing. These matters include spousal defenses, the appropriateness of the Commissioner's intended collection action, and possible alternative means of collection. See Goza v. Commissioner, 114 T.C. 176, 180 (2000). A taxpayer may also raise arguments concerning the existence or amount of the underlying tax liability if he did not have a prior opportunity to contest the liability. 26 U.S.C. § 6330(c)(2)(B).
After the collection due process hearing, the taxpayer may appeal the IRS's determination to an appropriate court. See 26 U.S.C. § 6330(d). When, as in this case, the validity of the tax liability was properly at issue in the appeals hearing, the amount of the tax liability will be reviewed de novo by the reviewing court.
Plaintiffs' Arguments Regarding the Hearing are Frivolous
Plaintiffs received notice of the IRS' proposed levy relative to the frivolous return penalty, along with notice of the right to a Collection Due Process Hearing, and made written demand for the hearing. At the hearing plaintiffs alleged frivolous claims (which they continue to assert in their complaint) including a claim that the appeals officer cannot rely on IRS records (including Forms 4340-Certificates of Assessments and Payments), certificates, computerized transcripts, etc., in determining whether appropriate administrative procedures have been met.
Courts have repeatedly recognized that Forms 4340 constitute presumptive proof of a valid assessment. Huff v. United States, 10 F.3d 1440, 1445 (9th Cir. 1993); Hefi v. United States, 8 F.3d 1169, 1172 (7th Cir. 1993); Farr v. United States, 990 F.2d 451, 454 (9th Cir. 1993). in this case the appeals officer determined that the assessment had been properly made and that the appropriate administrative procedures had been met. The appeals officer is entitled to rely on the Internal Revenue Service computer transcripts and Forms 4340 in making that decision.
Further, under 26 U.S.C. § 6702, a frivolous return penalty is appropriate whenever two conditions are met. First, a taxpayer must file what purports to be a return but which either does not contain information on which the substantial correctness of the taxpayer's self-assessment may be judged or contains information that on its face indicates that the self-assessment is substantially incorrect. Second, the filing must be due to a frivolous position or a desire to delay or impede the administration of federal income tax laws.
Plaintiffs' claims and arguments made in this case have been considered by other courts and have been universally deemed to be frivolous. In Sisemore v. United States, 979 F.2d 268 (6th Cir. 1986), the Sixth Circuit upheld penalties in a case similar to this one. The Sisemore plaintiffs amended a joint tax return to deny their wages and salary were taxable "income." The court concluded that the amended return on its faced indicated the self-assessment was substantially incorrect and that the taxpayer's position that wages are not taxable income was frivolous. The Ninth Circuit has also repeatedly rejected the "wages are not income" argument as frivolous. See, e.g., Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985). Here, as plaintiffs' federal income tax return, its attachments, and their complaint demonstrate, they are making the same frivolous argument that their wages are not income.
Finally, plaintiffs' claim for punitive damages has no statutory basis and the defendant's sovereign immunity precludes the claim.
After review of the IRS' administrative determination to proceed with a levy to effect the collection of taxes due from plaintiffs, the Court finds the determination and actions of the IRS to be within its proper authority and within the due process requirements of the Constitution.
IT IS THEREFORE ORDERED that the Internal Revenue Services's administrative determination at issue here is approved and sustained.
IT IS FURTHER ORDERED that Defendant United States' Motion for Summary Judgment (#5) is GRANTED.