Opinion
CIVIL ACTION 03-0936
February 11, 2004
MEMORANDUM
Presently before this Court is a Motion for Summary Judgment filed by Defendant Internal Review Service ("Defendant") against pro se Plaintiff William B. Miller ("Plaintiff). For the reasons detailed below, the Court will grant Defendant's motion.
I. Factual Background
On October 26, 2000, Defendant sent Plaintiff a letter and Form 2751 detailing a $475,774.66 penalty being assessed against him arising out of his role as Secretary of Centennial Printing Corporation ("Centennial") and Chief Financial Officer of The Eastwind Group, Inc., the parent company of Centennial (Gov't. Ex. 6, 6.1). On November 1, 2000, Defendant sent Plaintiff a letter and Form 2751 detailing a $44,230.61 penalty being assessed to him as it relates to the Lavelle Company ("Lavelle") (Gov't Ex. 5, 5.1). Both of these liabilities were for trust fund recovery penalties related to unpaid unemployment taxes of the respective companies from March 31, 1999 to June 30, 1999. Both letters detailed the procedure Plaintiff should follow if he wished to appeal these penalties. In Plaintiff's case, the proper appeal would have been to file a written protest to the office of the Regional Director of Appeals for Defendant. (Gov't Ex. 5, 6). Plaintiff filed no such written appeal. Plaintiff alleges that he never received either of these letters. (Compl. ¶ 6).
Plaintiff's role in Lavelle is not detailed by either party. Plaintiff does not mention the penalty related to Lavelle in his Complaint, and states in his Response to the Motion for Summary Judgment that this penalty is not the subject of this suit. (Resp. ¶ 5). Defendant, however, mentions this penalty and includes it in the exhibits to the Motion for Summary Judgment. In addition, both the Lavelle and Centennial penalties are the subject of the collection action being challenged (Gov't Ex. 1). Accordingly, the Lavelle penalty will not be addressed as it relates to Plaintiff's challenges to the underlying tax liability, but will be addressed as it relates to the collection action claims.
On August 21, 2001, Defendant sent Plaintiff a Letter 3172, giving him notice of a lien that was to be placed on him and detailing how to request a collection due process hearing under 26 U.S.C. § 6320 (Gov't Ex. 1). Plaintiff acknowledges receiving this letter. (Compl. ¶ 8). On September 7, 2001, Plaintiff sent a letter to Revenue Agent Kerry Martin in Jenkintown, PA detailing his situation with regard to the liability. (Compl. ¶ 8). Plaintiff also met with Agent Martin at Defendant's Office in Jenkintown, PA. (Compl. ¶ 9). On September 20, 2001, Plaintiff filed a Form 12153, requesting a collection due process hearing, with an attachment detailing that he was appealing the lien and challenging the underlying liability. (Gov't Ex. 2, 2.1).
On January 15, 2002, IRS Appeals Officer Jay Helm, Jr. in Houston, Texas called Plaintiff and had a phone conversation with him regarding Plaintiff's liability, and suggested to Plaintiff that he make an offer of compromise for some partial amount of the tax liability. (Compl. ¶ 9, Anderson Decl. ¶ 7-9).
On January 7, 2003, Appeals Officer Kenneth Anderson held a collection due process hearing with Plaintiff via telephone. (Anderson Declaration ¶ 12, Compl. ¶ 10). Anderson had no prior involvement in Plaintiff's case. Anderson reviewed Plaintiff's file and determined that all administrative and procedural requirements had been met. (Anderson Decl. ¶ 13). Anderson claims he informed Plaintiff during the telephone hearing that he would be issuing a determination letter. (Anderson Decl. ¶ 12). Plaintiff denies that he was told that a determination letter would be issued (Compl. ¶ 11, Resp. ¶ 8). During this telephone hearing, Plaintiff expressed that he did not owe these penalties and Anderson responded by informing him that he had a chance to challenge this tax liability after he received the letters in October and November of 2000, and that because he did not challenge the liability at that time, he could not do so now. (Anderson Decl. ¶ 14, Resp. ¶ 9). Defendant alleges that Plaintiff also requested an installment agreement and Anderson informed him that he could not enter into an installment agreement because he had not filed his 2001 tax return. (Anderson Decl. ¶ 12). Plaintiff alleges that this exchange never took place. (Resp. ¶ 8). Plaintiff informed Anderson that the reason he had not filed his 2001 return was because the tax refund sent to Plaintiff and his wife as part of the Economic Growth and Tax Reconciliation Act of 2001 had been seized and he did not want to risk having other joint property seized. (Compl. ¶ 13, Anderson Decl. ¶ 12)
On January 16, 2003, a Notice of Determination Concerning Collection was issued and sent to Plaintiff, stating that no installment agreement was available because Plaintiff failed to file his 2001 tax return, that Plaintiff could not at this time challenge his tax liability, and that there were no collection alternatives other than a lien because Plaintiff had not attempted to pay any of his liability. (Gov't Ex. 4)
Plaintiff filed a Complaint in this Court on February 19, 2003, and an amended Complaint on June 5, 2003. Defendant filed a motion for summary judgment on October 16, 2003 and briefing was completed on December 18, 2003.
II. Legal Standard
Summary judgment is appropriate "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." FED. R. CIV. P. 56(c). An issue is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is "material" if it might affect the outcome of the case under governing law. Id.
A party seeking summary judgment always bears the initial responsibility for informing the district court of the basis for its motion and identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the non-moving party bears the burden of proof on a particular issue at trial, the moving party's initial burden can be met simply by "pointing out to the district court that there is an absence of evidence to support the non-moving party's case." Id. at 325. After the moving party has met its initial burden, "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." FED. R. CIV. P. 56(e). Summary judgment is appropriate if the non-moving party fails to rebut by making a factual 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. Under Rule 56, the Court must view the evidence presented on the motion in the light most favorable to the opposing party. Anderson, 477 U.S. at 255. III. Discussion
Although Plaintiff's Complaint does not explicitly state any claims for relief, as he is a pro se Plaintiff, this Court will construe his pleadings liberally. From the statements in his Complaint, it appears that Plaintiff is raising three claims. The first is that he received improper notice of his tax liability because he did not receive either Form 2751 informing him of his liability. (Compl. ¶ 6). The second is that he is challenging his collection determination that resulted in a lien. (Compl. ¶ 11, 17). And the third is that he is challenging his wife's liability, as their joint tax refund was seized by Defendant. (Compl. ¶ 14, 20).
A. Improper Notice of Liability
Plaintiff, in his Complaint, argues that he did not receive notice of his tax liability in October and November of 2000 and, thus, could not have challenged his liability according to the appropriate procedures. A preliminary question regarding this inquiry is whether this Court even has jurisdiction over Plaintiff's challenge to his underlying tax liability.
Taxpayers who are challenging tax determinations have two avenues of relief, after exhausting administrative procedures. The first is to challenge the liability in the U.S. Tax Court upon receipt of a notice of liability. This is the appeal that Plaintiff failed to make. The second means of relief is to pay some or all of the liability and then sue for a refund in either the Court of Federal Claims or a U.S. District Court. See Bowser v. Comm'r of IRS, 1977 U.S. App. LEXIS 12984 (3d Cir. June 10, 1977) (delineating the two means of review of a determination of tax liability). Because of these two distinct avenues of relief, courts have found that taxpayers cannot challenge tax liabilities that they have not yet paid in a U.S. District Court. See Randle v. IRS, 2003 U.S. Dist. LEXIS 14983 (E.D. Pa. July 21, 2003) (holding that the Tax Court has jurisdiction over challenges to unpaid liabilities), Hart v. IRS, 2001 U.S. Dist. LEXIS 3288 (E.D. Pa. February 9, 2001) (same). This position is based, in part, on the concept of distinct jurisdictions of the Tax Court and District Courts.
As Plaintiff has not yet paid any of his liability, this mechanism is not currently available to him. Regardless of the outcome of the case currently pending before this Court, however, Plaintiff could still pay a portion of his liability and sue for a refund. 26 U.S.C. § 6511, 6532, 7422.
In addition, the Anti-Injunction Act, 26 U.S.C. § 7421, prohibits U.S. District Courts from enjoining the Internal Revenue Service from collecting a tax liability. See Sager v. IRS, 2002 U.S. Dist. LEXIS 21511, at *8-9 (W.D. Pa. October 10, 2002) (citing Flynn v. U.S., 786 F.2d 586, 588 (3d Cir. 1986)) (holding that the Anti-Injunction Act bars district courts from restraining the collection of taxes and that a suit for refund is the appropriate method for disputing liabilities in a district court). Thus, when taxpayers such as Plaintiff challenge an unpaid tax liability in a U.S. District Court, they are essentially asking a court to enjoin the IRS collecting their taxes, and the court is barred from providing such relief. As this Court, then, does not have jurisdiction to consider Plaintiff's challenge to his tax liability, it will not do so.
Additionally, Plaintiff's argument regarding the consequences of his failure to receive notice of his tax liability is not supported by the cases. The IRS only has to show that it mailed notice to the taxpayer's last known address. Berger v. IRS, 404 F.2d 668, 673-4 (3d Cir. 1968). The IRS has made that showing in this case. See Gov't Ex. 5, 5.1, 6.1 (including proof of mailing).
B. Collection Determination
Plaintiff also challenges the collection determination by Defendant that Plaintiff is not eligible for an installment agreement, based on the fact that Plaintiff did not file his 2001 tax returns. The standard for this Court's review of an Internal Revenue Service collection due process hearing is the abuse of discretion standard pursuant to 26 U.S.C. § 6330. Christian v. Comm'r of IRS, 2003 U.S. Dist. LEXIS 11288 (E.D. Pa. June 5, 2003). In applying this standard the Court will "consider whether the decision was based on consideration of the relevant factors and whether there has been a clear error of judgment . . . Although this inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one." Id., quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971). This Court may not substitute its judgment for that of the IRS Appeals Officer provided his determination was not arbitrary and capricious. Id. A collection due process hearing requires that an appeals officer who has not been previously involved with a taxpayer's case review the taxpayer's file to determine whether all administrative and procedural requirements have been met. 16 U.S.C. § 6330(b)(3). In this case, Appeals Officer Anderson, who did not have any prior involvement with Plaintiff, reviewed Plaintiff's file and determined that all administrative and procedural requirements had been met. (Anderson Decl. ¶ 10, 13). There are no facts presented by Plaintiff suggesting that this is untrue, and there are no facts that evidence an abuse of discretion by Defendant. Accordingly, Plaintiff's challenge to the collection determination is without merit and there is no issue of material fact as to whether Defendant's decision represented an abuse of discretion.
The Court notes that there is some suggestion in the case law that does not bind this Court that a district court does not have jurisdiction over a challenge to the collection determination when the U.S. Tax Court has jurisdiction over a challenge to the underlying liability. See Sager v. IRS. 2002 U.S. Dist. LEXIS 21511, at *6-8 (W.D. Pa. October 10, 2002) (holding that the Tax Court, not the District Court has jurisdiction over a taxpayer's challenge to both a collection determination and the underlying liability). But see Bartolomeo v. IRS, 2003 U.S. Dist. LEXIS 19584, at *9-12 (W.D. Pa. September 30, 2003) (holding that a district court cannot review a challenge to underlying liability, but can review a challenge to a collection decision raised in the same suit). This Court will address the challenge to the collection determination.
C. Wife's Liability
Plaintiff also challenges the fact that the amount refunded jointly to Plaintiff and his wife was seized by Defendant, arguing that his wife does not share in his liability. Regardless of the merits of Plaintiff s claim, he does not have standing to bring this claim on his wife's behalf.
The Third Circuit applies a three part test to determine whether third party standing is appropriate. This test is prudential, rather than stemming from the "case or controvery" requirement, and reflects an interest in limiting access to the federal courts to those litigants best suited to assert a claim. See Pennsylvania Psychiatric Society v. Green Spring Health Services, Inc., 280 F.3d 278, 288-89 (3d. Cir 2002) (quoting Campbell v. Louisiana. 523 U.S. 392, 397, 140 L.Ed.2d 551, 118 S.Ct. 1419 (1998)). "To successfully assert third-party standing: (1) the plaintiff must suffer injury; (2) the plaintiff and the third party must have a `close relationship1; and (3) the third party must face some obstacles that prevent it from pursuing its own claims."Nasir v. Morgan, 2003 U.S. App. LEXIS 24013, at *26 (3d Cir. November 25, 2003).
In Plaintiff's case, there is no suggestion that Plaintiff's wife is prevented in any way from bringing suit to recover her share of the seized tax refund. See Williams v. U.S., 24 F.3d 1142 (9th Cir. 1994) (holding that widow who erroneously paid her husband's income taxes had standing to sue for refund); Knies v. Commissioner of IRS, 1992 U.S. App. LEXIS 331 (7th Cir. December 3, 1991) (holding that wife had standing to sue for refund of wrongful levy against joint property). Accordingly, this Court need not grapple with the other elements of third party standing at this stage. Plaintiff is without standing to bring a claim for refund of his wife's share of the seized tax refund, because his wife may do so herself.
III. Conclusion
For the reasons stated above, Plaintiff's claims challenging his tax liability and his wife's liability are improperly before this Court. In addition, Plaintiff's claim challenging his collection determination is without merit. Thus, Defendant has met its burden and the Motion for Summary Judgment will be granted.
An appropriate order follows.