Opinion
Case No. 1:02CV0540.
July 23, 2002
MEMORANDUM ORDER
On March 21, 2002, pro se Plaintiff Ronald Herip filed this action against the United States of America ("the Government"). Mr. Herip sought to set aside a Notice of Determination issued by an Internal Revenue Service (IRS) Appeals Officer on February 27, 2002. Mr. Herip asserted he was entitled to relief pursuant to 26 U.S.C. § 6330 because the Appeals Officer failed to conduct the collection due process hearing in accordance with the law.
Upon initial review, the Court advised Herip that his complaint may be subject to dismissal for failure to state a claim upon which relief may be granted. On April 12, 2002, the Court ordered Plaintiff to file an amended complaint setting forth a valid claim within 15 days. The Court indicated that there were no facts alleged in the original complaint which could be construed to state a valid federal claim for relief See Goza v. Commissioner of Internal Revenue, 114 T.C. 176, 183 (T.C. 2000).
Plaintiff subsequently filed a timely "Amended Addition to Original Complaint" on April 26, 2002. The document includes five paragraphs outlining Herip's basis for filing a complaint in this Court pursuant 26 U.S.C. § 6330, as follows:
a. The Tax Court has no jurisdiction to review these issues.
b. The lawless seizure of property which the IRS seeks is not supported by any testimony or documented evidence.
c. Defendants did not conduct the CDP hearing in accordance with the law.
d. Defendant employees who issued the determinations had no basis in law or fact to issue such adverse determinations.
e. Defendant violated Plaintiff's rights and injured him by compelling him to expend time, money and energy to litigate these fraudulent determinations to prevent illegal seizure of his property pursuant to code 6331.
(Am. Compl. at 1). Contrary to the Court's order, Plaintiff filed an amended pleading which essentially summarizes the same issues raised in his original complaint.
On May 30, 2002, the Government filed a motion for summary judgment, asserting that (1) the Court lacks jurisdiction over Plaintiff's federal income tax liability for tax year 1996; (2) the Court lacks jurisdiction over Plaintiff's damages claims; and (3) the IRS Appeals Office did not abuse its discretion in making the determination made at Plaintiff's Collection Due Process ("CDP") hearing. Plaintiff has opposed that motion, asserting that material disputes of fact exist that preclude judgment in favor of the Government and that, at a minimum, the Court should afford him discovery before entry of any judgment.
For the reasons stated below, the Court finds that further proceedings are unnecessary in this case and GRANTS Defendant's motion for summary judgment.
I. Background
For purposes of this motion, the following material facts are not in dispute. On June 28, 2001, Herip filed a Request for a CDP Hearing, Form 12153 in response to a Notice of Intent to Levy/Seizure previously issued by the IRS. Plaintiff contested the IRS's Notice with respect to income tax due for 1996 and civil penalties imposed pursuant to 26 U.S.C. § 6702 for tax years 1984 through 1999. He asserted that "the IRS made a procedural error in the assessments, such as no assessments were made. I did not have the opportunity to dispute the assessed liability." (Pl.'s Ex. C).
On October 12, 2001, Plaintiff's CDP hearing was held before an IRS Appeals Officer. Plaintiff complains that the appeals officer failed to provide any of the "verification" he previously requested. From this he concludes that the IRS violated 26 U.S.C. § 6330(c)(1) and 6330 (c)(3)(A). He alleges that no document was provided by the Appeals Officer that verified that the "requirements of any applicable law or administrative procedure have been met" as required by Treasury Regulation 301.6320-IT(e).
Plaintiff requested the following information regarding the IRS employees who imposed the "frivolous penalty": (1) names; (2) federal identification numbers; (3) delegation orders from the Secretary authorizing them to impose the penalty; (4) official job descriptions; (5) the Treasury Department regulation that allows them to impose a "frivolous penalty"; and (6) the Treasury Department regulation requiring Plaintiff to pay a penalty.
The relevant subsections provide:
(1) Requirement of investigation. — The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.26 U.S.C. § 6330(c)(1).
(3) Basis for the determination. — The determination by an appeals officer under this subsection shall take into consideration —
(A) the verification presented under paragraph (1);
26 U.S.C. § 6330(c)(3)(A).
Herip further maintains that, because section 6211 does not provide for a "deficiency" if no return is filed or if no "tax due" is shown by the taxpayer on his return, the IRS could not legally issue a deficiency because he never indicated taxes were due on his tax return for the years at issue. He also disputes the legitimacy of the deficiency notices sent to him because they were signed by a Director of a Service Center, and not personally by the Secretary, as Plaintiff asserts is required by law. Plaintiff asserts that because "there is no regulation that implements Code Section 6702, there is no regulation that Plaintiff can comply with . . ." (Orig. Compl. at 6-7) and, therefore, he is not required to pay any frivolous tax penalties. Herip explained that during the CDP heating he "put both his checkbook and IR Code book on the table in front of the Appeals Officers and repeatedly offered to pay all of the taxes and penalties at issue right then and there, if [sic] Appeals Officers would provide him with the regulation that implements the frivolous penalty code section and requires him to pay the penalty." (Orig. Compl. at 6).
The term "deficiency" is defined, in relevant part, under Title 26 Section 6211 as:
(1) the sum of
(A) the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the tax payer thereon. . . .
On February 27, 2002, IRS Appeals Team Manager Joseph W. Weiss issued two Notices of Determination. The notices addressed Plaintiff's "1040 tax" for 1996 and "civil penalty taxes" pursuant to Internal Revenue Code (IRC) section 6702 for 1984-96. As an attachment to the Notice, Mr. Weiss provided an outline of the following issues discussed during the hearing: Summary and Recommendation, Brief Background, Discussion and Analysis, Verification of Legal and Procedural Requirements, Issues Raised by the Taxpayer, and Balancing Efficient Collection and Intrusiveness. In summarizing the issues Plaintiff raised during the CDP hearing, the Appeals Officer noted that Herip failed to show that any procedural error was made in the assessment.
With regard to the civil penalties at issue, Mr. Weiss noted that Herip was assessed civil penalties under IRC Section 6702 because he filed frivolous income tax returns from 1984 through 1996. The IRS issued a final notice of intent to levy to Herip by certified mail on June 16, 2001. Plaintiffs' Request for Collection Due Process Hearing was received by the IRS on July 3, 2001. In addressing Plaintiff's income tax return for 1996, the Officer noted that the IRS sent Mr. Herip a notice on October 29, 1998 proposing changes to his income tax. Mr. Herip responded to the notice by filing an amended return, Form 1040X, showing "no income" and claiming a refund of the income tax paid. The return was determined to be a frivolous return and Plaintiff was assessed a civil penalty under IRC § 6702, after being given an opportunity to correct the amended return. A statutory notice of deficiency was sent on March 17, 1999 by certified mail to Herip's last known address. On June 16, 2001 a final notice of intent to levy was sent to Plaintiff by certified mail to which he responded by requesting a CDP hearing.
Under the Determination heading, Issues Raised by the Taxpayer, the Appeals Officer explained the following to Herip: "You did not present any relevant issues at the hearing. You asked for a copy of the `statutory notice of deficiency' and `notice and demand'. The Internal Revenue Service does not maintain copies of `notice and demand'. However, subsequent to the hearing, you were sent a literal transcript of your account. A copy of the `statutory notice of deficiency' was also mailed to you with an explanation of the adjustments made to your return." (Ex. A at 4). He determined further that "[s]ince you did not show you did not receive the `statutory notice of deficiency' mailed to you by certified mail on March 17, 1999, you cannot raise the issue of the underlying liability at the Collection Due Process Hearing." Id. In each Determination, Mr. Weiss concluded "that no relief is to be granted and that the proposed levy action is sustained. The Internal Revenue Service has complied with code and procedural requirements in collecting the tax." (Ex. B at 2).
Herip challenges both Determinations because he believes the IRS's failure to provide information he considers critical to a valid CDP hearing renders the hearing illegitimate. Based on his conclusions, Herip requests that the Court invalidate the IRS Determination, order the government to reimburse him for the cost of bringing this action and award him "punitive damages as equity relief dictates."
II. Standard of Review
Federal Rule of Civil Procedure 56(c) governs summary judgment motions and provides:
The judgment sought shall be rendered forthwith 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. . . .
Rule 56(e) specifies the materials properly submitted in connection with a motion for summary judgment:
Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. . . . The court may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits. When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denial of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
However, the movant is not required to file affidavits or other similar materials negating a claim on which its opponent bears the burden of proof, so long as the movant relies upon the absence of the essential element in the pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v. Catrett, 477 U.S. 317 (1986).
In reviewing summary judgment motions, this Court must view the evidence in a light most favorable to the non-moving party to determine whether a genuine issue of material fact exists. Adickes v. S.H. Kress Co., 398 U.S. 144 (1970); White v. Turfway Park Racing Ass'n , Inc., 909 F.2d 941, 943-44 (6th Cir. 1990). A fact is "material" only if its resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Determination of whether a factual issue is "genuine" requires consideration of the applicable evidentiary standards. Thus, in most civil cases the Court must decide "whether reasonable jurors could find by a preponderance of the evidence that the [non-moving party] is entitled to a verdict." Id. at 252.
Summary judgment is appropriate whenever the non-moving party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322. Moreover, "the trial court no longer has a duty to search the entire record to establish that it is bereft of a genuine issue of material fact." Street v. J.C. Bradford Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989) (citing Frito-Lay, Inc. v. Willoughby, 863 F.2d 1029, 1034 (D.C. Cir. 1988)). The non-moving party is under an affirmative duty to point out specific facts in the record as it has been established which create a genuine issue of material fact. Fulson v. City of Columbus, 801 F. Supp. 1, 4 (S.D. Ohio 1992). The non-movant must show more than a scintilla of evidence to overcome summary judgment; it is not enough for the non-moving party to show that there is some metaphysical doubt as to material facts. Id.
Pro se pleadings, however, are to be liberally construed. Boag v. MacDougall, 454 U.S. 364, 365 (1982) (per curiam); Haines v. Kerner, 404 U.S. 519, 520 (1972).
III. Analysis
A. The Appeals Office Did Not Abuse Its Discretion When Issuing Its Determination
The Government argues that this Court must review the determination of the IRS Appeals Office under an abuse of discretion standard. The Government contends that Herip received a valid CDP hearing where he had the opportunity to raise any relevant issue relating to his tax liabilities or the proposed collection action. Instead, the Government contends, Herip persisted in raising meritless arguments. Thus, the Government argues that the Appeals Office did not abuse its discretion in issuing its determination.
Under the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub.L. 105-206, sec. 3401, 112 Stat. 685, 746, Congress enacted section 6330 (pertaining to levies) to provide due process protection for taxpayers in tax collection matters. This addresses instances where the Secretary is authorized to collect taxes by levy upon property belonging to a person who is liable to pay any tax, but the person neglects or refuses to pay such tax within 10 days after notice and demand for payment. 26 U.S.C. § 6331(a). Before proceeding with the collection by way of levy, however, the IRS must provide notice to the person of his or her right to a hearing on the matter. 26 U.S.C. § 6330 (a). The individual has a right, within 30 days of the section 6330 notice, to request a collection due process hearing with the IRS Office of Appeals. 26 U.S.C. § 6330(a)(3)(B). At the hearing, the taxpayer may raise any issue relevant to the unpaid tax and the proposed levy, including challenges to the propriety of the levy and may propose offers of collection alternatives. 26 U.S.C. § 6330(c)(2).
At the conclusion of a CDP hearing, the Appeals Officer is tasked to formulate a determination based on: (1) the verification that the requirements of any applicable law or administrative procedure have been met; (2) the issues raised by the taxpayer; and (3) the proper balance between the need for efficient tax collection and the legitimate concern that any collection action be no more intrusive than necessary. 26 U.S.C. § 6330(c)(3). Following the hearing, the Appeals Officer sends a Notice of Determination to the complainant that summarizes the matters raised during the hearing and responds to any offers or objections made by the complainant. If the individual is dissatisfied with the administrative determination, he or she has 30 days within which to appeal to "the Tax Court (and the Tax Court shall have jurisdiction to hear such matter); or (B) if the Tax Court does not have jurisdiction of the underlying tax liability, to a district court of the United States." 26 U.S.C. § 6330(d)(1). Review is limited to matters actually raised at the administrative hearing. Temp. Treas. Reg. § 301.6330-IT(f) (2001).
Although section 6330 does not prescribe the standard of review that the district court is to apply in reviewing the Commissioner's administrative determinations, the legislative history indicates that the Court should conduct a de novo review only "where the validity of the tax liability was properly at issue at the administrative hearing." H. R. CONF. REP. No. 105-599, at 266 (1998). Where the amount of the underlying tax liability is not properly part of the appeal, the Court reviews a Notice of Determination for abuse of discretion. Sego v. Comm'r of Internal Revenue, 114 T.C. 604, 609-10 (T.C. 2000); Goza v. Comm'r of Internal Revenue, 114 T.C. 176, 179-80 (T.C. 2000). See also MRCA Information Services v. United States, 145 F. Supp.2d 194, 199 (D. Conn. 2000) (holding that district court applies an abuse of discretion standard when reviewing an IRS Settlement Officer's determination under 26 U.S.C. § 6330). The Sixth Circuit has held that an administrative agency abuses its discretion where there is no evidence to support its decision, or the agency misapplies the law. National Engineering Contracting Co. v. Occupational Safety Health Administration, 928 F.2d 762, 768 (6th Cir. 1991).
Section 6330(c) provides that an individual may raise any relevant issues relating to the unpaid taxes or a proposed levy during the course of a CDP hearing, including spousal defense to collection, challenges to the appropriateness of the Commissioner's intended collection action, and offers of alternative means of collection. 26 U.S.C. § 6330 (c)(2)(A). The statute does, however, bar a person from contesting the existence or amount of the underlying taxes unless that individual did not receive a notice of deficiency for the taxes in question or did not otherwise have an earlier opportunity to dispute such tax liability. 26 U.S.C. § 6330(c)(2)(B).
Plaintiff's threshold complaint is that the IRS cannot assess any penalties against him because the underlying income tax liability is questionable. The basis for this argument is his attack on the legitimacy of the Notice of Intent to Levy issued by the IRS. Herip first claims that he never received the deficiency notices, yet he asks the Court, in his opposition brief to take judicial notice that he received notice from the Chief of the Automated Collection Branch. (Plaint. Opp. Brief p. 3). While Plaintiff can plead in the alternative, this admission, coupled with the attached copies of the deficiency notices in the Government's motion for summary judgment (Govn. Exh. D I), clearly belie Herip's contention that he never received such notice. Herip also disputes the legitimacy of the deficiency notices sent to him because they were signed by the Director of a Service Center and the Chief of the Automated Collection Branch, not the Secretary "as required by law." He maintains that because "there is no regulation that implements Code Section 6702, there is no regulation that Plaintiff can comply with . . ." (Compl. at 6-7) and therefore he is not required to pay any frivolous tax penalties.
Herip is fundamentally challenging the merits of the IRS's determination in the Notice of Deficiency; he has not challenged the intended method of collection, offered an alternative means of collection, or raised spousal defenses to collection. His attempt to invalidate the notice based on the `questionable' authority of the Director is without merit. It is well established that the authority to determine and issue statutory notices of deficiency is vested by statute in the Secretary of the Treasury or his delegate. §§ 6212(a), 7701 (a)(11)(B), and 7701(a)(12)(A)(i) (emphasis added). Pursuant to 26 C.F.R. §§ 301.6212-1(a) and 301.7701-9(b), the Secretary has delegated to District Directors the authority to send deficiency notices. Hoffman v. United States, No. C02-5023RJB, 2002 WL 1299991, at *5 (W.D. Wash. May 3, 2002); (rejecting identical argument brought by plaintiff as frivolous and without merit); Kellogg v. Commissioner, 88 T.C. 167, 172 (T.C. 1987); Perlmutter v. Commissioner, 44 T.C. 382, 385 (T.C. 1965), affd. 373 F.2d 45 (10th Cir. 1967). Herip, therefore, cannot sustain a claim that he was entitled to challenge the existence of an underlying income tax liability during the CDP hearing on grounds that he never received statutory notice of the deficiency. Again, he concedes he received notice of the deficiency — his only complaint is a misguided one about the authority of the signatory on that notice.
To the extent Herip claims that a written delegation order is required, both 26 C.F.R. §§ 301.6212-1(a) and 301.7701-9(b) provide such written authority.
With regard to his claim that the Appeals Officer was obligated to respond to his prior requests for certain verifications at the CDP hearing, Plaintiff has failed to state a valid claim. The Settlement Officer owed the Plaintiff no duty to produce this information. Lindsey v. Commissioner of Internal Revenue, No. 9014-00L, T.C. Memo 2002-87, 2002 WL 487164 (T.C. Apr 2, 2002) (citing Nestor v. Commissioner, 118 T.C. 162, 166 (T.C. 2002) and holding that asserted error in IRS determination could not be based on petitioner's claim that the IRS appeals officer failed to furnish requested documentation prior to the CDP Hearing). Herip also argues that the appeals officer failed to provide documentation that supported the imposition of the penalties assessed against him, including the names of the individuals who determined that penalties were appropriate and whether such individuals were authorized to make these determinations. This argument is also without merit. Hoffman, 2002 WL 1299991, at *5 (rejecting identical argument as frivolous and without merit); Kelly v. United States, No. 4:01CV1803JCH, 2002 WL 1096809, at *8-9 (E.D. Mo. April 19, 2002) (rejecting identical argument as information sought was not required to be disclosed by the IRS in a CDP hearing and was irrelevant to plaintiff's underlying claims). The requests notwithstanding, Herip never draws a nexus between the information he requested and its relevance to the statutorily specified issues available for discussion during the CDP hearing.
The IRS hearing officer did not abuse his discretion when he determined that the requirements of applicable law had been met and that Herip had been afforded statutorily required administrative procedures. See 26 U.S.C. § 6330(c)(1). The hearing officer also attempted to address the issues raised by Plaintiff; however, Herip did not acknowledge any of the statutorily-specified issues that may be raised at a collection due process hearing, such as spousal defenses, the appropriateness of an intended collection action, and possible alternative means of collection. See 26 U.S.C. § 6330(c); see also Sego, 114 T.C. at 609. Instead, Plaintiff attempted to revisit the issue of his underlying tax liability at the collection hearing.
Based on the foregoing, Plaintiff has not, and cannot, prove any set of facts in support of his request to set aside the Notice of Determination that he is liable for frivolous tax penalties. Accordingly, the Government's motion for summary judgment on that ground is GRANTED and that portion of Plaintiff's appeal is DISMISSED. As the Court has concluded that Herip's underlying claim regarding the CDP hearing lacks merit, it need not reach the Government's second issue regarding the Court's jurisdiction over Herip's damages claims.
B. The Court Lacks Jurisdiction to Review Determinations of Herip's 1996 Tax Liability
The Government also argues that this Court lacks jurisdiction over any review of the IRS Appeals Office's determination relating to Herip's federal income tax liability for tax year 1996. The Government asserts that only a United States Tax Court, and not a District Court, has jurisdiction to hear these claims. Herip, in his opposition brief to the Government's motion for summary judgment, acknowledges that this Court would lack subject matter jurisdiction over such a claim and expressly disclaims intending to make such a claim. As such, that portion of Plaintiff's appeal is also DISMISSED.
IV. Conclusion
For the reasons stated above, the Court GRANTS Defendant's motion for summary judgment and DISMISSES this case.
The Court further certifies, pursuant to 28 U.S.C. § 1915(a)(3), that an appeal from this decision could not be taken in good faith.
IT IS SO ORDERED.