Opinion
Case No. CV-S-02-0239-KJD-(RJJ)
January 31, 2003
ORDER
This matter comes before the Court on Defendant's Motion To Dismiss or, in the Alternative For Summary Judgment (#9). Plaintiff filed a response in opposition (#13).
I. Factual and Procedural History
In his complaint, Plaintiff alleges that the IRS improperly determined that collection actions against him should not be restricted. Plaintiff now seeks to set aside the IRS's determination. The collection activity at issue stems from frivolous return penalties the IRS assessed against Plaintiff for returns he filed for the 1993, 1994, 1995, 1996 and 1997 tax years. Plaintiff filed Form 1040x, U.S. Individual Income Tax Returns for the 1993 and 1994 tax years, and Form 1040 for the 1995, 1996 and 1997 tax years. The returns had zeroes on all lines which reflected amounts of income earned or taxes due. Plaintiff also requested a refund of all taxes either withheld or paid for those tax years. Plaintiff attached W-2 forms to the returns which indicated Plaintiff had earned wages. Finally, attached to the returns was a two page document which set forth arguments as to why Plaintiff did not believe that he owed federal income taxes. The IRS assessed a $500 civil penalty against Plaintiff under 26 IJ.S.C. § 6702 for each filing of the above described tax returns. Section 6702 assesses a civil penally of $500 if an individual "files what purports to be a return" but which contains "information that on its face indicates that the self-assessment is substantially incorrect" and is due to "a position which is frivolous." Plaintiff's self assessment of his income tax liability Was substantially incorrect in that he entered zeros for all income and tax information. According to the attached statement, Plaintiff's self-assessment was based on his position that there is no statutory income tax liability that applies to him and that wages do not constitute income. Courts have found this position to be frivolous and patently without merit. See Sisemore v. United States, 797 F.2d 268, 270 (6th Cir 1986); Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985). Because Plaintiff's self-assessment was on its face substantially incorrect and was based on a frivolous position, there is no doubt as to the validity of the penalty.
On January 30, 2001, the IRS sent Plaintiff a "Final Notice — Notice of Intent to Levy and Notice of Your Rights to a Hearing." This letter notified Plaintiff of his fight to appeal the IRS's levy within 30 days by requesting a Collection Due Process Hearing ("CDP hearing"). Plaintiff filed Form 12153 "Request for a Collection Due Process Hearing" which the IRS received on February 23, 2001. Plaintiff's CDP Hearing was held on January 10, 2002 in Las Vegas, Nevada before an appeals officer, Julie Peterson. Mr. Wahl attended the hearing. On January 24, 2002, the IRS Appeals Office sent Mr. Wahl, by certified mail, a "Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330." The letter informed Plaintiff that the proposed collection action should be allowed to proceed unrestricted. The letters also informed Plaintiff of his right to dispute the determination by filing a complaint in Federal District Court within 30 days. Plaintiff filed a timely complaint with this Court. Defendant has now filed a motion for summary judgment.
II. Standard of Review
A dismissal for failure to state a claim pursuant to Rule 12(b)(6) is a ruling on a question of law. See Clegg v, Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994). In reviewing a Rule 12(b)(6) motion, the Court "must construe the complaint in the light most favorable to the plaintiff and must accept all well-pleaded factual allegations as true."Swarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). Moreover, because Plaintiff in this action is proceeding pro se, the Court must liberally construe all arguments set forth in his complaint. See Boag v. MacDougal, 454 U.S. 364, 365 (1982). Review is limited to the contents of the complaint. See Sprewell v. Golden State Warriors, 231 F.3d 520, 527 (9th Cir. 2000). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims that would entitle him to relief.See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Sprewell, 231 F.3d at 528. If matters outside the pleadings are considered, the court should treat the motion as one for summary judgment. See Fed.R.Civ.P. 12(c).
Summary judgment may be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with 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. See Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of showing the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. The burden then shifts to the nonmoving party to set forth specific facts demonstrating a genuine factual issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Fed.R.Civ.P. 56(e). The evidence, as well as all justifiable inferences drawn from it, must be viewed in the light most favorable to the nonmoving party.See Matsushita, 475 U.S. at 587. Summary judgment shall be entered "against a party who 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." See Celotex, 477 U.S. at 322.
III. Analysis
Plaintiff's complaint contains a barrage of meritless arguments which he insists this Court must address. The only two genuine issue before this Court is first, whether this Court Las jurisdiction and 2) whether the IRS Appeals Office met all requirements of applicable laws and administrative procedures when making its determination that the collection action against Plaintiff should continue unrestricted. This jurisdictional issue will be addressed first, followed by a discussion of Plaintiffs purely meritless arguments.
A. Subject-matter Jurisdiction
Defendant has brought a motion to dismiss for lack of subject matter jurisdiction. Defendant argues that the United States has not waived its sovereign immunity, that the Tax Court properly has the power of judicial review, and that § 26 U.S.C. § 6330 (d) establishes only a limited waiver of sovereign immunity. In response, Plaintiffs claim that the United States Tax Court does not have jurisdiction to hear his claim, that notice from the Secretary or his delegate of their right to a CDP hearing is a jurisdictional prerequisite for the CDP hearing. and that various legal issues bar the United States Tax Court from having jurisdiction.
Of primary importance in the present case is whether or not this Court has jurisdiction to hear Plaintiff's claims. The section of the United States Code at issue, § 26 U.S.C. § 6330, specifies that "[n]o levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of their right to a hearing under this section before such levy is made." 26 U.S.C. § 6330 (1). The statute also provides for judicial review:
(1) Judicial review of determination. — The person may, within 30 days of a determination under this section, appeal such determination —
(A) To the Tax Court (and the Tax Court shall have jurisdiction with respect to 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). Thus, the Tax Court has the power to hear appeals from determinations pursuant to 26 U.S.C. § 6330, 26 U.S.C. § 6330 (1)(A). Only if the Tax Court does not have jurisdiction over the "underlying tax liability" does a United States District have jurisdiction. § 26 U.S.C. § 6330 (1)(B). See also True v. Comm'r of the Internal Revenue Serv., 108 F. Supp.2d 1361 (M.D.Fla. 2000) ("A claimant is required to bring a § 6330 appeal in the Tax Court, so long as the Tax Court has jurisdiction of the underlying tax lability."). If the Tax Court has jurisdiction over the present claim, then, this Court cannot hear Plaintiff's case.
The Tax Court is an Article I court and has limited jurisdiction to "rule on deficiencies assessed by the government on taxpayers." Crawford v. Comm'r of Internal Revenue, 266 F.3d 1120, 1122 (9th Cir. 2001). See also § 26 U.S.C. § 7441; Freytag v. Comm'r of Internal Revenue, 501 U.S. 868, 891 (1991) ("The Tax Court's function and role in the federal judicial scheme closely resemble those of the federal district courts, which indisputably are `Courts of Law.' Furthermore, the Tax Court exercises its judicial power in much the same way as the federal district courts exercise theirs."). Despite the fact that the Tax Court's jurisdiction is ostensibly limited to hearing disputes about the government's assessment of deficiencies, however, the Tax Court also has the jurisdiction to hear constitutional claims. Rager v. Comrn'r of Internal Revenue, 775 F.2d 1081, 1083 (9th Cir. 1985) ("[W]e have often upheld Tax Court decisions which were based on a constitutional inquiry."). See also Crawford, 266 F.3d at 1123 ("We have previously held that Tax Courts, which are Article I courts, have jurisdiction to consider constitutional questions in the context of deciding deficiencies."). Even drawing all inferences in favor of Plaintiff, as this Court must, this Court finds that the Tax Court has jurisdiction to hear Plaintiff's claims. The Plaintiff's claim involves a dispute ever a proposed levy by the Internal Revenue Service in response to an alleged income tax liability. This is precisely the kind of claim over which the Tax Court has jurisdiction. See Kurgman v. Comm'r of Internal Revenue, 12[112] T.C. 230, 236 n. 6 (1999) ("[T]he Tax Court has jurisdiction to review determinations under § 6330 relating to proposed levies."). Further, the fact that Plaintiff has alleged constitutional violations in the present case does not preclude the Tax Court from hearing all of his claims. See Rager, 775 F.2d at 1083; Crawford, 266 F.3d at 1123. Because the Tax Court has jurisdiction over Plaintiff's claims, this Court cannot hear those claims. § 26 U.S.C. § 6330 (1)(B). Defendant's motion to dismiss is granted. To the extent that any of Plaintiff's claims cannot be dismissed for lack of subject-matter jurisdiction, they will be dismissed for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).
B. Collection Procedure
Procedures for administrative collection actions are found in 26 U.S.C. § 6330 which requires that: (1) the IRS give 30 days' written notice of the taxpayer's right to a CDP hearing before making a levy; (2) a hearing be conducted by an officer or employee who has no prior involvement with the subject tax liability; (3) the Appeals Office obtain verification from the IRS that the requirements of any applicable law or administrative procedure have teen met; (4) the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy at the time of the CDP Hearing, including appropriate spousal defenses, challenges to the collection actions and offer of collection alternatives; (5) the taxpayer may challenge the existence of the underlying tax liability under some circumstances; and (6) the final determination by the Appeals Officer shall take into consideration (a) the verification that applicable law and administrative procedures have been met, (b) the issues raised by the taxpayer, and (c) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.
A review of Plaintiffs complaint illustrates that all of the above requirements have teen met: (1) Plaintiff received timely notice of levy and requested a CDP hearing; (2) Mr. Wahl attended his CDP Hearing on January 10, 2002 with Appeals Officer Peterson, who had no prior involvement with the subject tax liability; (3) the Appeals Office obtained Form 4340 from the IRS which serves as verification that the requirements of any applicable laws or adminisirative procedures were met; (4) Plaintiff raised no relevant issues or appropriate defenses pertaining to the proposed collection action and offered no collection alternatives; (5) at the hearing, Plaintiff challenged the liability for the penalty and whether the return filed was frivolous, arguments determined to be frivolous by the appeals officer and (6) in the final determination, the appeals officer stated that he took into consideration all required statutory elements.
The Plaintiff claims that he made a settlement offer by pulling out a checkbook and offering to pay his penalty on the spot if the officers could show him which code section made him liable for the penalty. It is not the officer's duty to cite Plaintiff every section of law the income tax and enforcement provisions are based on. It is this kind of argument made throughout Plaintiff's pleadings and motions that the Court rejects. Additionally, this kind of argument will subject Plaintiff to sanctions upon motion of Defendant.
C. Plaintiff's Arguments
1. Inadequacy of Notice
Plaintiff repeatedly argues that letters and notices the IRS sent as well as ceterminattons and assesments made by the IRS are invalid because there is no evidence of any delegated authority from the Secretary of Treasury to the various IRS employees. Relevant statutes and regulations demonstrate, however, that the Secretary does have the power to collect taxes, and that such power can be delegated to local IRS agents. 26 U.S.C. § 6301 provides that "[t]he Secretary shall collect the taxes imposed by the internal revenue laws." The actual task of collecting the taxes, however, has been delegated to local IRS directors. See 26 C.F.R. § 301.6301-1 ("The taxes imposed by the internal revenue laws shall be collected by district directors of internal revenue."). The delegation of authority down the chain of command, from the Secretary, to the Commissioner of Internal Revenue, to local IRS employees constitutes a valid delegation by the Secretary to the Commissioner, and a re-delegation by the Commissioner to the delegated officers and employees. See 26 U.S.C. § 7701 (a)(ll)(A), (12)(A)(i); 26 C.F.R. § 301.7701-9; Hughes v. United States, 953 F.2d 531, 536 (9th Cir. 1992).
Plaintiff also argues that he was neither sent nor received the required Statutory Notice and Demand for payment with regard to the penalties at issue. Plaintiff wants the information contained in a specific document or form, though Plaintiff has not suggested what that would be. However, Plaintiffs belief is based on faulty logic and sources. Notice and demand is not required to be sent on any particular form so long as the requisite information is included. See Hoffman v. United States, 209 F. Supp.2d 1089, 1094 (W.D. Washington 2002); Hughes, 953 F.2d at 536. Plaintiff received notice mailed January 30, 2001 of the assessment and the IRS' intent to levy in attempt to collect the assessment. Plaintiff's complaint also discloses that statutory notices on intents to levy were sent on May 29 and October 2, 2000. Therefore, Plaintiff had more than adequate notice of the penalty.
2. Adequacy of Supporting Documentation
Plaintiff contends the IRS has never produced a document supporting imposition of the penalties at issue. He does not believe that a computer transcript is adequate to verify an assessment was made or approved by the appropriate personnel. At the CDP Hearing, the Appeals Officer verified that all appropriate administrative procedures had occurred through Form 4340, "Certificate of Assessments and Payments" for the penalty assessment. The Ninth Circuit has held that a Form 4340 is sufficient evidence to support a grant of summary judgment on a claim that the IRS failed to issue notice of assessment and demand for payment. See Huff v. United States, 10 F.3d 1440, 1446-1447 (9th Cir. 1993); Hughes, 953 F.2d at 535. Official certificates, such as Form 4340, can constitute proof of the fact that the assessments actually were made. See Id. Additionally, there is no requirement in § 6330 of the IRS code that the appeals officer at the hearing present verification to Plaintiff. The appeals officer is supposed to obtain the verification from the Secretary and shall consider that verification in making a determination. See 26 U.S.C. § 6330 (c)(3)(A).
3. Regulation Requiring Plaintiffs to Pay Penalty
Plaintiff contends that no Treasury Department regulation requires that he pay the penalties at issue and Defendant has not produced any such regulation. 26 U.S.C. § 6702 (a), However, provides the statutory authority for assessing the penalty and does not require any implementing regulations. See Hoffman, 209 F. Supp.2d at 1094.
Again, the Court must note that Plaintiff's assertions and arguments are completely without merit. By Plaintiff's own admission, he has a copy of the Tax Code. He must have read 26 U.S.C. § 6001 and 6011 that he relies upon for this argument. Neither section supports the argument Plaintiff is making. Those sections do require that people "comply" with regulations in filing returns. However, they do not require people to comply "only" with regulations.
4. Underlying Liability for Income Tax
Plaintiff contends that no statute establishes an underlying liability for the income tax to which the penalties relate, and the IRS has not identified any such statute. Plaintiff's liability for tax deficiencies is not at issue in this case, although he consistently tried to make it so at the CDP Hearing and in the instant complaint. Plaintiffs remedy with regard to the liability for tax deficiencies does not lie in this Court. This Court does not have jurisdiction to consider Plaintiffs income tax deficiencies. See 26 U.S.C. § 6213 (a); Moore v. Commissioner, 114 T.C. 171, 175 (2000).
III. Conclusion.
Plaintiff's 1999 Form 1040 was clearly frivolous and the civil penalty was validly assessed. More importantly, for purposes of this action, the Defendant properly followed all requirements of applicable laws and administrative procedures when assessing the civil penalty and then determining the collection action should continue unrestricted. Moreover, the arguments that the Court could glean from Plaintiff's complaint and opposition to Defendant's motion are purely meritless. Finally, because Plaintiffs complaint lacks any merit, had the Defendant moved for Rule 11 sanctions this Court would have freely granted such motion.
Accordingly, IT IS HEREBY ORDERED that Defendant's Motion For Summary Judgment (#9) is GRANTED.
IT IS FURTHER ORDERED that Plaintiff's complaint is DISMISSED.