I. Procedural History

STOTLER, Judge:

On January 19, 2000 , plaintiff TTK Management filed a corrected Complaint for Lien or Levy Action under 26 U.S.C. §6330(d). In its Complaint, plaintiff appeals the December 8, 1999 Notice of Determination of the Internal Revenue Service ("IRS") Appeals Office to undertake a levy action against plaintiff's hair salon at 22461 Antonio Parkway A-155 in Rancho Santa Margarita, California .

On September 25, 2000 , defendant United States of America filed a motion for summary judgment that the Appeals Officer did not abuse his discretion by making the determination set forth in the Notice of Determination. Plaintiff filed its opposition to defendant's motion on October 24, 2000 . Defendant filed its reply on November 6, 2000 . Hearing on the matter was set on the Court's November 13, 2000 hearing calendar. On November 6, 2000 , plaintiff filed the declaration of A. Lavar Taylor in support of its opposition to the motion. On November 7, 2000 , defendant filed a motion to strike the Taylor declaration as untimely filed.

The Court took defendant's motion for summary judgment and motion to strike under submission, and removed the hearing on both motions from the Court's November 13, 2000 .

II. Rulings

1. Jurisdiction

Pursuant to 26 U.S.C. §6330(d)(1), the Court may review a timely-filed appeal of an IRS Notice of Determination. On appeal to this Court, plaintiff may raise only those issues raised with the Appeals Office at the Collection Due Process Hearing. See Temporary Treasury Regulation §301.6320-1T, Q & A F5. The parties do not dispute that during the appeals hearing, plaintiff asked Appeals Officer Robert Bottoms to consider an installment plan or offer-in-compromise as an alternative to a levy action for collection of plaintiff's past-due taxes. This Court, therefore, has jurisdiction to review the Appeals Office's rejection of these alternatives.

2. Standard of Review

Plaintiff urges the Court to apply a de novo standard of review on the ground that the circumstances of plaintiff have changed since the Appeals Office issued the Notice of Determination, i.e, plaintiff has been in compliance with its employment tax obligations for the three consecutive quarters following the Notice of Determination. Opp'n at 17:23-18:3.

Although section 6330(d) does not specify the standard of review a district court should apply to an appeal of a Notice of Determination, the legislative history unequivocally indicates that Congress intended the Court to review the Notice of Determination for abuse of discretion where, as here, the amount of the tax liability was not in dispute at the hearing. See H. Conf. Rept. 105-599, at 266 (1998) ("Where the validity of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officers for abuse of discretion."); see also Goza v. Commissioner of Internal Revenue [CCH Dec. 53,803], 114 T.C. 176, 179-80 (2000); and Sego v. Commissioner [CCH Dec. 53,938], 114 T.C. No. 603 (2000). The Court will not substitute such a clear congressional statement of legislative intent for a de novo standard of review unsupported by any legislative history or statutory language.

The Court reviews the decision of the Appeals Office in the Notice of Determination for abuse of discretion. An abuse of discretion is "a plain error, discretion exercised to an end not justified by the evidence, a judgment that is clearly against the logic and effect of the facts as are found." Wing v. Asarco, Inc., 114 F.3d 986 (9th Cir. 1997).

3. No Abuse of Discretion

Plaintiff contends that Appeals Officer Bottoms abused his discretion by not considering an installment plan or offer-in-compromise as an alternative to a levy action against the Antonio Parkway hair salon.

The Court finds that the Appeals Officer did, in fact, consider plaintiff's proposal that the IRS select an installment plan or offer-in-compromise to collect plaintiff's overdue taxes. Bottoms and plaintiff's counsel discussed these two alternatives in telephone conversations prior to the August 2, 1999 meeting, conversations that both parties concede were part of the "hearing" by the Appeals Office. Opp'n at 5:3-9, 15:19-23; Linas Udrys Decl. at ¶14; Robert Bottoms Decl. at ¶11:11-4. Bottoms and plaintiff's counsel also discussed the installment plan and offer-in-compromise options at the August 2, 1999 hearing. Opp'n 16:1-12; Udrys Decl. at ¶16:8-20; Bottoms' Decl at ¶11:14-7. By informing plaintiff in these conversations that the proposed alternatives were not appropriate and by explaining his rationale for not selecting those alternatives, Bottoms clearly considered and rejected the installment plan and offer-in-compromise, despite Bottoms' choice of words in his declaration and misunderstanding of "hearing" to mean only the August 2, 1999 in-person meeting.

Furthermore, the decision to reject the installment plan and offer-in-compromise alternatives was not an abuse of discretion. At the time of the appeals hearing, plaintiff had a long history of non-compliance with payroll tax laws, had failed to pay payroll taxes for every quarter since its inception in May 1997, and was not in compliance for the then-current quarter. Bottoms' Decl. at ¶4(d)-(e). The Court finds that Bottoms did not abuse his discretion to reject the proposed collection alternatives for past liabilities when the plaintiff was not meeting its current payroll tax obligations.

In addition, plaintiff contends that Bottoms abused his discretion by not giving plaintiff one full financial quarter after the August 2, 1999 meeting to show compliance. Opp'n at 21:12-5. The parties do not dispute that during and after the August 2, 1999 in-person meeting, Bottoms stated that he might approve an installment agreement if plaintiff could show one quarter of compliance. Udrys Decl. ¶16:10-20, ¶17:22-8. To show compliance, a taxpayer must be making timely payroll deposits for the current quarter. Mot. at 4 n.1. The parties also do not dispute that Bottoms advised plaintiff at the August 2, 1999 meeting and in telephone conversations with plaintiff's counsel thereafter that the Notice of Determination would be issued "shortly." Udrys Decl. ¶17. Plaintiff contends that Bottoms should have waited at least 180 days after the August 2, 1999 meeting for plaintiff to show compliance.

The Court finds that Appeals Officer was not required to wait, nor did he agree to wait, one full quarter to show compliance. The August 2, 1999 hearing occurred during the third financial quarter ending September 30, 1999 . Plaintiff did not show compliance for that quarter despite having nearly two months after the August 2 meeting to comply and receiving Bottoms' warning that the Notice would be issued "shortly." The Notice of Determination was not issued until December 8, 2000 . Therefore, the Appeals Office waited four months, or over half of the third quarter and most of the fourth, for plaintiff to show compliance.

Furthermore, plaintiff's hiring of a service to pay plaintiff's payroll taxes automatically to the IRS when due did not require the Appeals Office to continue to wait for timely payments, particularly given plaintiff's long-standing record of delinquency. Plaintiff has presented no evidence that plaintiff informed the Appeals Office that plaintiff had hired this payroll service to ensure future compliance, although the Notice of Determination was not mailed for at least a month after plaintiff hired the payroll service. In short, the Court finds that the Appeals Office did not abuse its discretion by giving plaintiff no more than part of one and most of another financial quarter to show compliance.

Finally, plaintiff urges the Court to order the IRS Appeals Office to reconsider its Notice of Determination given plaintiff's compliance for three quarters since the Notice of Determination was issued. Opp'n at 23:18-25. The IRS Office of Appeals retains jurisdiction over its Notice of Determination pursuant to 26 U.S.C. §6330(d)(2). However, absent any indication in the Internal Revenue Code or its legislative history that a district court can or should order the IRS to reconsider a Notice of Determination in light of "changed circumstances," this Court will not order the IRS Appeals Office to exercise its jurisdiction.

4. Taylor Declaration

Plaintiff's opposition papers to defendant's motion for summary judgment were due on October 24, 2000 , pursuant to Local Rule 7.6. Plaintiff did not file the declaration of A. Lavar Taylor until November 6, 2000 . Plaintiff has filed no response to defendant's motion to strike, or otherwise offered any explanation for the late filing. The Court grants defendant's request to strike the Taylor declaration as untimely.

III. Conclusion

For the foregoing reasons, the Court finds that plaintiff has raised no triable issue of fact indicating that the Appeals Officer abused his discretion by making the determination set forth in the Notice of Determination. The Court, therefore, grants defendant's motion for summary judgment and enters judgment for defendant.

The Court has this date signed and filed the proposed Judgment lodged by defendant on September 25, 2000 . Defendant's proposed Statement of Uncontroverted Facts and Conclusions of Law lodged on September 25, 2000 , has been modified by strike-outs and interlineations in accordance with the foregoing ruling, and, as modified, is adopted by the Court.

The Clerk shall serve this minute order on counsel for all parties in this action and provide an advance copy by telecopier.

[2002-1 USTC ¶50,309] Charles M.F. Van Gaasbeck, Plaintiff v. United States of America , Defendant

U.S. District Court, Dist. Nev., CV-S-01-1004-KJD (PAL), 2/15/2002

[Code Sec. 6330 ]

Jurisdiction: Hearing before levy: Requests for hearing: Timeliness.--The district court lacked to jurisdiction to review the refusal of the IRS to grant an individual a Collection Due Process (CDP) hearing with respect to a proposed levy because he failed to timely request such a hearing. His request for a hearing was made almost 60 days late.

[Code Sec. 6330 ]

Jurisdiction: Hearing before levy: Equivalent hearing.--An individual could not appeal to the district court an adverse decision in an equivalent hearing that was afforded him. No right to appeal exists with such a hearing.

ORDER

DAWSON, District Judge:

This matter is before the Court on Defendant's Motion to Dismiss (#4). The Court has also considered Plaintiff's Objection (#6) and the Declaration of Traci L. Patterson (#5).

FACTUAL HISTORY

On July 6, 2000 , the Internal Revenue Service (IRS) mailed Plaintiff a Notice of Intent to Levy and Right to Hearing regarding a 1996 federal income tax liability. Plaintiff received that notice on July 8, 2000 . On October 10, 2000 , the IRS received Plaintiff's "Request for Collection Due Process Hearing" mailed on October 5, 2000 . Although Plaintiff's request for hearing was untimely, he was given an "equivalent hearing" at the IRS Las Vegas Appeal Office on May 10, 2001 . The IRS issued its decision letter on July 24, 2001 , denying relief and finding that Plaintiff did not file suit in tax court. On August 24, 2001 , Plaintiff filed the instant action requesting the Court to invalidate the IRS decision letter. Defendant subsequently filed this motion to dismiss alleging lack of subject matter jurisdiction.

ANALYSIS

Plaintiff received the Notice of Intent to Levy on July 8, 2000 . On October 5, 2000 , Plaintiff requested a Collection Due Process hearing. 26 U.S.C. §6330(a)(2) and (a)(3)(B) requires that the taxpayer make such request within 30 days of receipt of the notice of right to hearing. Plaintiff does not dispute that he received the notice on July 8, 2000 or that he did not mail his request for hearing until October 5, 2000 . He does make several arguments going to the merits of the case. For example, he points out that the notice was not sent by the "Secretary" but by Scott Kilpatrick, Chief, Automated Collection Branch. Plaintiff contends that Scott Kilpatrick does not have the required delegation of authority from the Secretary of the Treasury.

This Court cannot consider the merits of Plaintiff's appeal for the reasons that follow. First, the U.S. District Court lacks jurisdiction over Plaintiff's claims because his request for hearing was made almost 60 days late. Second, there is no right to judicial review of decisions made by an appeals officer at an equivalent hearing. See Moorhous v. Commissioner [CCH Dec. 54,316], 116 T.C. 263 (2001), Kennedy v. Commissioner [CCH Dec. 54,315], 116 T.C. 255 (2001). Finally, even ignoring the untimeliness of Plaintiff's claim and the fact that there is no appeal from an equivalent hearing, any jurisdiction over this matter would be in the tax court. Although Plaintiff alleges that a tax court is not a court of law and is barred from ruling on matters of law, he provides no authority for those statements. To the contrary of Plaintiff's argument, 26 U.S.C. §6330(d)(1) provides that the right to judicial review is in the tax court, unless that court does not have jurisdiction.

Federal Courts are courts of limited jurisdiction. They can only adjudicate those cases which the Constitution and Congress authorize them to adjudicate. See Kokkonen v. Guardian Life Ins. Co., 511 U.S 375 (1994). It is well established that the tax court is a court of limited jurisdiction and that it may exercise jurisdiction to the extent authorized by Congress. See 26 U.S.C. §7442; Commissioner v. McCoy [87-2 USTC ¶13,736], 484 U.S. 3, 7 (1987). Pursuant to 26 U.S.C. §6213(a), the tax court has jurisdiction to redetermine deficiencies assessed by the Commissioner. Pursuant to 28 U.S.C. §1340, a federal district court has jurisdiction over taxpayer actions for a refund of taxes paid in full, but not for assessed but unpaid taxes. See Flora v. United States [60-1 USTC ¶9347], 362 U.S. 145 (1960); Geurkink Farms, Inc. v. United States [71-2 USTC ¶9692], 452 F2d 643, (7th Cir. 1971). A taxpayer may challenge a tax liability before paying the deficiency by filing a timely petition with the tax court. See Scar v. Commissioner [87-1 USTC ¶9277], 814 F.2d 1363, 1366 (9th Cir. 1987). A tax court is a court of law notwithstanding Plaintiffs' unsupported statement to the contrary. See Freytag v. Commissioner [91-2 USTC ¶50,321], 501 U.S. 868 (1991). The burden of establishing jurisdiction over civil actions rests upon the party asserting it. Kokkonen, 377.

CONCLUSION

Here, Plaintiff failed to file a timely petition. His request deals with taxes and penalties assessed but not paid. The Court cannot consider his challenges to the authority of the individual issuing the notice of intent to levy, the early termination of the equivalent hearing, denial of representation at the equivalent hearing, or whether there is an underlying income tax liability, because this Court does not have jurisdiction. The Court cannot address the merits of any dispute unless it is first established that there is subject-matter jurisdiction. Plaintiff has failed to meet his burden to establish that the Court has subject-matter jurisdiction.

The District Court lacking jurisdiction, Defendant's Motion to Dismiss (#4) is granted and Plaintiff's Complaint is dismissed with prejudice.

[2002-1 USTC ¶50,365] Chun Hwan Lee, Plaintiff v. Internal Revenue Service, Defendant

U.S. District Court, Mid. Dist. Tenn., Nashville Div., 3-00-741, 2/20/2002, 2002 U.S. Dist. LEXIS 4823.

[Code Secs. 6330 and 7402 ]

District court: Jurisdiction: Summary judgment: Liens and levies: Collection Due Process: Issues raised at hearing: Abuse of discretion.--The IRS was entitled to summary judgment against a pro se individual in connection with a levy on his bank account for unpaid employment and unemployment taxes. The taxpayer was barred from challenging his liability for such taxes in the district court because he failed to raise either issue at his Collection Due Process hearing. Moreover, there was no showing of abuse of discretion by the IRS Appeals officer in the collection of the taxes at issue.

[Code Sec. 6330 ]

District court: Jurisdiction: Liens and levies: Collection Due Process: Judicial review: Excise taxes.--A pro se individual waived his right to appeal the IRS's assessment of excise taxes in the district court. Although statutory notices are not authorized for excise tax liabilities, he received notice of proposed tax assessments for excise taxes and appealed his liability to the IRS Appeals office. However, he failed to contest the IRS Appeals officer's determination sustaining the proposed assessments.

[Code Secs. 6330 and 6871 ]

District court: Liens and levies: Excise taxes: Bankruptcy: Automatic stay: Discharge.--A pro se individual who failed to contest an IRS Appeals officer's determination sustaining proposed excise tax assessments in federal district court waived his right to appeal the IRS's assessment of excise taxes in the district court. Even if the taxpayer was not prohibited from challenging the underlying excise tax liability, he did not receive a discharge from his Chapter 7 bankruptcy case, which was closed prior to the filing of the notice of federal tax lien; thus, the automatic stay was not violated.

Chun Hwan Lee, Hendersonville, Tenn., pro se. Rachel L. Waterhouse, Office of the United States Attorney, Nashville, Tenn., D. Brian Simpson, Department of Justice, Washington, D.C. 20530, for defendant.

MEMORANDUM

ECHOLS, District Judge:

Presently pending before the Court is Defendant's Motion for Summary Judgment (Docket Entry No. 10), to which Plaintiff has responded in opposition. For the reasons explained herein, Defendant's Motion shall be GRANTED. Accordingly, this case shall be DISMISSED.

I.

Plaintiff instituted this pro se action on August 4, 2000 , seeking judicial review of the Internal Revenue Service's (IRS) administrative determination that the Federal Tax collection actions taken to collect Plaintiff's unpaid Federal Excise, Employment and Unemployment Taxes were appropriate pursuant to 26 U.S.C. §6320. Plaintiff also contends that he does not owe the alleged taxes and the underlying tax assessments were fraudulent. Defendant moves for judgment as a matter of law, asserting that Defendant did not abuse its discretion in determining that certain collection activity against Plaintiff was appropriate pursuant to 26 U.S.C. §§6320 and 6330. Defendant further maintains that the prior procedures followed by the IRS in determining Plaintiff's tax liability were proper and Plaintiff's records do not refute the prior finding of tax liability against Plaintiff.

II.

In ruling on a motion for summary judgment, this Court must construe the evidence produced in the light most favorable to the non-moving party, drawing all justifiable inferences in his or her favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 91 L.Ed.2d 202, 106 S.Ct. 2505 (1986). A party may obtain summary judgment if the evidentiary material on file shows "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). The moving party bears the burden of satisfying the court that the standards of Rule 56 have been met. See Martin v. Kelley, 803 F.2d 236, 239 n.4 (6th Cir. 1986). The ultimate question to be addressed is whether there exists any genuine issue of material fact which is disputed. See Anderson, 477 U.S. at 248. If so, summary judgment dismissal is appropriate.

To defeat a properly supported motion for summary judgment, an adverse party "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." Fed. R. Civ. P. 56(e). The non-moving party's burden of providing specific facts demonstrating that there remains a genuine issue for trial is triggered once the moving party "show[s] B that is, point[s] out to the district court B that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 91 L.Ed.2d 265, 106 S.Ct. 2548 (1986).

III.

Viewed in the light most favorable to Plaintiff, as the Court must at this stage of the proceedings, the relevant facts and circumstances are as follows: On July 19, 1999 , Defendant filed a Notice of Federal Tax Lien against Plaintiff with the Register of Deeds, Davidson County, Nashville, Tennessee. The Federal Tax Lien filed by the Defendant included excise fuel taxes (owed for various quarters ranging from 1985 through 1991) that had been assessed in March 1998 and various employment and unemployment taxes owed for 1992 and 1993. On August 25, 1999 , Plaintiff requested a collection due process hearing ("hearing") pursuant to 26 U.S.C. §6330, as to the appropriateness of service of a Notice of Levy. Plaintiff's request was construed to be for a hearing pursuant to 26 U.S.C. §6320, relating to a filed Notice of Federal Tax Lien. Appeals Officer John N. Brandon, Jr., who had no prior involvement with Plaintiff or the outstanding tax liabilities that were the subject of the Notice of Federal Tax Lien, was assigned to conduct Plaintiff's collection due process hearing.

Plaintiff's collection due process hearing was conducted telephonically on June 20, 2000 . At this hearing, Plaintiff raised the following issues: (1) Plaintiff did not agree with the Notice of Levy/Seizure; (2) Plaintiff asserted that he had located and provided Defendant with four invoices indicating that he had paid Federal Diesel Tax in addition to other taxes to JMS Marketing Company, Inc., and to other companies that he had done business with, thus proving his payment of the excise taxes; (3) most of the claims for unpaid excise taxes were assessed after the Plaintiff filed a petition in bankruptcy. No other issues were raised during Plaintiff's June 20, 2000 , hearing, including the employment and unemployment tax liability or the lien against his bank account.

After reviewing the Plaintiff's administrative record, Appeals Officer Brandon concluded that all applicable legal and procedural requirements had been met pursuant to 26 U.S.C. §§6320(c) and 6330(c)(1). The opinion of Brandon informed Plaintiff that 26 U.S.C. §§6320 and 6330 prohibited him from challenging the underlying excise tax liability in a due process hearing because Plaintiff had received notice of the proposed excise tax assessments in 1993 and, at that time, he appealed the assessments to the IRS Appeals Office. In 1993, the IRS Appeals Office sustained the proposed assessments, with modest adjustments. Plaintiff did not exercise his right to challenge the 1993 decision sustaining the proposed assessments in a United States District Court. ¹

Brandon also held that even if Plaintiff was not prohibited from challenging the underlying excise tax liability, the documents he submitted to the IRS did not refute the excise tax assessments because none of the invoices provided by Plaintiff were for periods in which taxes have been assessed. Brandon further found that although Plaintiff filed a petition for relief under Chapter 11 in Bankruptcy Court in California , which was subsequently converted to a case under Chapter 7, Plaintiff did not receive a discharge. Plaintiff's bankruptcy case was closed prior to March 1998. Brandon determined that the Notice of Federal Tax lien filed July 19, 1999 , did not violate the automatic stay provisions of 11 U.S.C. §362(a) and that Plaintiff did not raise any issues that justified the withdrawal or release of the Notice of Federal Tax Lien. Appeals Officer Brandon determined that the IRS's filing of the tax lien was an appropriate collection action. Brandon determined that the Notice of Federal Tax Lien filed by the IRS balances the need for the efficient collection of federal taxes with Plaintiff's concern that the IRS's collection actions be no more intrusive than necessary. On July 7, 2000 , a Notice of Determination Concerning Collection Action(s) under 26 U.S.C. §6320 and/or §6330 was issued by the IRS. On August 4, 2000 , Plaintiff filed a timely complaint in this Court.

IV.

Defendant contends that there are no genuine issues of material fact in this case, and, therefore, its Motion for Summary Judgment should be granted. Defendant asserts that Plaintiff is barred from litigating whether he is liable for employment and unemployment taxes and that the IRS "liened" his bank account because he failed to raise either issue at his collection due process hearing. Defendant claims that although notice of deficiencies are not authorized for excise tax liabilities, Plaintiff received notice of the excise tax assessments and actually availed himself of the opportunity to dispute the excise tax liability to the Appeals Office; therefore, the underlying excise tax liability cannot be raised in the hearing or in the district court proceeding. Defendant also claims that Plaintiff has conceded the issues that may be raised under section 6330(c)(2)(A), since he did not raise those issues in the Complaint or at the hearing. Plaintiff questions (1) his liability for unemployment and employment tax deficiencies, and (2) his liability for various excise taxes deficiencies.

1. Employment and Unemployment Taxes

The Court agrees with Defendant that Plaintiff is barred from litigating whether he is liable for employment and unemployment taxes and that the IRS "liened" his bank account because he failed to raise either issue at his collection due process hearing. Treasury Regulation 26 CFR §301.6320-1T(f)(2), provides that when seeking judicial review of a Notice of Determination, a taxpayer can only ask the court to consider issues raised at the taxpayer's collection due process hearing. Plaintiff failed to raise issues relating to employment and unemployment tax liabilities, as well as the alleged lien of his bank account, resulting in Appeals Officer Brandon not addressing them in his Notice of Determination. Therefore, the Court can not address Plaintiff's challenges to the employment and unemployment taxes which underlie the Notice of Federal Tax Lien. This regulation also bars Plaintiff's contention that an IRS officer informed him that his case was on hold and therefore he did not pursue any remedies available to him. This contention was not brought up at the collection due process hearing nor in his Complaint and therefore is not properly before this Court.

2. Excise Taxes

Title 26 U.S.C. §6321 imposes a lien on all property and property rights of a taxpayer where a demand for the payment of taxes has been made and the taxpayer fails to pay those taxes. A lien is imposed when an assessment of taxes is made. 26 U.S.C. §6322. Title 26 U.S.C. §6323(a) requires the Secretary to file notice of a lien if it is to be valid against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor.

Title 26 U.S.C. §6320 was added to the Code in 1998, along with its sister provision, section 6330. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. 105-206, sec. 3401, 112 Stat. 746. Title 26 U.S.C. §6320(a) requires the Secretary to send a written notice to the taxpayer of the filing of a notice of lien and of his right to a hearing. Title 26 U.S.C. §6320(b) affords the taxpayer the right to a fair hearing before an impartial appeals officer. Title 26 U.S.C. §6320(c) incorporates the provisions under section 6330(c), (d), and (e). Title 26 U.S.C. §6330(c)(1) requires the appeals officer to verify that the requirements of any applicable law or administrative procedure have been met. Title 26 U.S.C. §6330(c)(2)(A) specifies issues that the taxpayer may raise at the appeals hearing.

The taxpayer is allowed to raise any relevant issue relating to the unpaid tax to the IRS appeals officer, including spousal defenses, challenges to the appropriateness of collection action, and alternatives to collection. 26 U.S.C. §6330(c)(2)(A). The taxpayer, however, cannot raise issues challenging the underlying tax liability if the taxpayer previously received a statutory notice of deficiency for such tax liability or the taxpayer otherwise had an earlier opportunity to dispute the tax liability. 26 U.S.C. §6330(c)(2)(B). Title 26 U.S.C. §6330(d)(1) allows the taxpayer to appeal a determination by the appeals officer to the tax court or a district court.

Statutory notices are not authorized for excise tax liabilities. But, Treasury Regulations grant a taxpayer the right to dispute a tax liability before or after a tax assessment, including holding a conference with an IRS appeals officer. In this case, Plaintiff did dispute the excise tax assessments when he had received notice of the proposed tax assessments in 1993 and appealed the assessments to the IRS appeals office at that time. In 1993, the IRS Appeals Office sustained the proposed excise tax assessments, with modest adjustments. However, Plaintiff did not exercise his right to challenge the Appeals Office's decision sustaining the proposed assessments in a United States District Court. Therefore, Plaintiff waived his rights to appeal the IRS's assessment of excise tax liabilities.

Although 26 U.S.C. §6330 does not prescribe the standard of review that the court is to apply in reviewing the appeals officer's administrative determinations, the subject is addressed in detail in MRCA Information Services v. U.S. [2000-2 USTC ¶50,683], 145 F.Supp.2d 194 (citing the legislative history of the provision, H. Conf. Rept. 105-599, at 266 (D. CONN. 1998); Sego v. CIR [CCH Dec. 53,938], 114 T.C. 604, 2000 WL 889754, 114 T.C. No. 37 (2000); Goza v. CIR [CCH Dec. 53,803], 114 T.C. 176, 114 T.C. No. 12 (2000)). The court held that:

Where the validity of the tax liability was properly at issue in the hearing, and where the determination with regard to the tax liability is part of the appeal, no levy may take place during the pendency of the appeal. The amount of the tax liability will in such cases be reviewed by the appropriate court on a de novo basis. Where the validity of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officer for abuse of discretion.

This Court agrees that where the validity of the underlying tax liability is properly at issue, the Court should review the matter on a de novo basis. However, where the validity of the underlying tax liability is not properly at issue, the Court will review the appeals officer's administrative determination for abuse of discretion.

The major grounds raised by Plaintiff in his appeal to this Court concern the underlying tax liabilities. In that regard, Plaintiff contends that the underlying determinations are fraudulent and that Defendant had no authority to make the assessments. These grounds, however, are insufficient to challenge Defendant's intent to levy and the filing of notices of lien. Title 26 U.S.C. §6330(c)(2)(B) provides that the taxpayer cannot raise issues challenging the underlying tax liability if the taxpayer previously received a statutory notice of deficiency for such tax liability or the taxpayer otherwise had an earlier opportunity to dispute the tax liability. In this case, Plaintiff is prohibited from questioning the underlying deficiencies because in 1993 he received notice of the excise tax assessment and actually availed himself of the opportunity to dispute the tax liability for the applicable taxable years.

V.

As shown above, the validity of the underlying tax liability is not properly at issue before the Court. The only issue before the Court is whether there was an abuse of discretion by Brandon . Upon review of the Administrative Record, the Court finds that all the procedures were adhered to and there was no abuse of discretion. The Complaint does not assert (nor is there any basis in the Administrative Record for the Court to conclude) that Brandon abused his discretion with respect to any actions taken to collect the subject excise, employment, and unemployment taxes. See 26 U.S.C. §6330(c)(2)(A).

Based on the foregoing reasons, the Court finds that since there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law, Defendant's Motion for Summary Judgment (Docket Entry No. 10) shall be GRANTED.

An appropriate Order shall be entered.

ORDER

Presently pending before the Court is Defendant's Motion for Summary Judgment (Docket Entry No. 10), to which Plaintiff has responded in opposition. For the reasons explained in the Memorandum entered contemporaneously herewith, Defendant's Motion is hereby GRANTED. Accordingly, this case is hereby DISMISSED.

It is so ORDERED.

¹ In his Response to Defendant's Motion for Summary Judgment, Plaintiff contends that in 1993 he contacted the IRS several times to question the process of his case, and when he was informed by a California IRS officer that due to his bankruptcy proceedings the case was on hold, he did not pursue any further activities at that time. (Docket Entry No. 15 at 2.) However, this contention was not brought up at his collection due process hearing or in his Complaint.

[2002-1 USTC ¶50,436] Dennis J. Danner and Pamela O. Danner, Plaintiffs v. United States of America , Defendant

U.S. District Court, East. Dist. Wash., CS-01-0143-JLQ, 4/24/2002 , 208 F. Supp. 2d 116

[Code Secs. 6330 and 6702 ]

District court: Jurisdiction: Collection Due Process hearing: Frivolous return penalty.--A federal district court had jurisdiction to review matters associated with taxpayers' liability for frivolous return penalties that related back to deficiencies arising when the taxpayers filed a return comprised substantially of zeros, except for the "tax withheld" and "refund owed" entries. The transcript of the Collection Due Process hearing revealed that the hearing officer was not predisposed against the taxpayers and had, in fact, granted them great latitude in the pursuit of their hearing. Additionally, the IRS failure to produce documents the taxpayers requested was not improper since they were not entitled to the production of the documents. The federal district court did not have jurisdiction over an appeal of the taxpayers' underlying income tax liability since that is exclusively the Tax Court's jurisdiction but the taxpayers had failed to timely file a petition for a redetermination of the deficiencies.
ORDER GRANTING SUMMARY JUDGMENT FOR DEFENDANT UNITED STATES OF AMERICA

QUACKENBUSH, Senior District Judge:

Before the court is the United States ' Motion to Dismiss or, in the Alternative, for Summary Judgment (C.R. 30), which was heard without oral argument on April 23, 2002 . Plaintiffs Dennis J. Danner and Pamela O. Danner are proceeding pro se. Defendant United States of America is represented by Frederick S. Wermuth, United States Department of Justice, Tax Division.

For the following reasons, the Defendant's Motion is GRANTED.

Background and Procedural History

This case involves a $500 tax penalty which the Internal Revenue Service (IRS) imposed on Plaintiffs pursuant to 26 U.S.C. §6702 because Plaintiffs allegedly filed a frivolous income-tax return. The United States seeks to levy upon the Plaintiffs' property to collect the tax penalty pursuant to 26 U.S.C. §6331. The Plaintiffs have petitioned this court to declare the basis for the levy action invalid. The procedural history of this matter may be summarized as follows.

On June 23, 1998 , Dennis and Pamela Danner filed their 1997 Form 1040 joint federal income tax return with zeros entered on nearly every line of the return, including Line 38, which indicated zero taxable income. The only exceptions were Lines 54 and 60-62, which showed that $1,058 in federal income tax had been withheld and that the Danners were claiming a refund of $1,058. ( United States ' Statement of Material Facts (C.R. 33), Exhibit A (Declaration of Frederick S. Wermuth) at Exhibit 1). In contrast, the government's computerized records of the Danners' Forms W-2 and 1099 revealed that the Danners' 1997 income was at least $24,259. (C.R. 33 at 2).

Accompanying the Danners' 1040 Form, and submitted as part their return, was a two-page statement averring, inter alia, that "no section of the Internal Revenue Code: 1) [e]stablishes an income tax 'liability' as, for example, Code Sections 4401, 5005, and 5703 do with respect to wagering, alcohol, and tobacco taxes; [or] 2) [p]rovides that income taxes have to be paid on the basis of a return--as, for example, Code Sections 4374, 4401(c), 5061(a), and 5703(b) do with respect to other taxes." (Declaration of Frederick S. Wermuth at Exhibit 1). The remainder of the statement set forth a dozen additional arguments as to why the Danners believed that they were not liable for any income tax.

On August 6, 1998 , the IRS sent the Danners a letter notifying them that their 1997 1040 Form was a frivolous return and offering them 30 days to correct the return to avoid a penalty. ( Id. , Exhibit 3 at 1). The Danners did not correct their return.

Consequently, on November 12, 1999 , the IRS issued the Danners a Statutory Notice of Deficiency recalculating their 1997 tax liability as $1,414. The calculation was based on unreported wages of $22,321, interest income of $58, and unemployment compensation of $1,880. ( United States ' Statement of Material Facts (C.R. 33), Exhibit C (Declaration of Debra Brush), Exhibit 1 at 3). The government asserts that "it is certain that [the Danners] received the Statutory Notice because on January 5, 2000 they wrote a letter to the Internal Revenue Service, attention Deborah Decker, Customer Service Center, Ogden, Utah, titled 'In Re: Your Deficiency Notice Dated November 12, 1999 .' " Id. The Danners did not file a petition with the United States Tax Court for a redetermination of the deficiency under 26 U.S.C. §6213.

On February 21, 2000 , the IRS sent notice to the Plaintiffs that they were being charged a $500 penalty under 26 U.S.C. §6702 for filing a frivolous 1997 income-tax return. ( United States ' Statement of Material Facts (C.R. 33), Exhibit B (Certificate of Official Record) at 8). The record also indicates that the government assessed the Danners' recalculated 1997 income tax on May 8, 2000 . (C.R. 33, Exhibit C (Declaration of Debra Brush), Exhibit 1 at 3).

Subsequently, the IRS sent the Danners a letter captioned "Final Notice--Notice Of Intent To Levy And Notice of Your Right To A Hearing" on August 30, 2000 . (Declaration of Frederick S. Wermuth, Exhibit 4). The letter recited that the government was giving notice of its intent to levy upon Plaintiffs' property under 26 U.S.C. §6331 in order to collect the frivolous return penalty. The letter also informed the Danners of their right to request a Collections Due Process (CDP) hearing pursuant to 26 U.S.C. §6330. The Notice Of Intent To Levy And Notice of Right To A Hearing form contained a footer with the words "Letter 1058 (DO) (Rev. 1-1999)." Id.

The Danners admit that they received the notice, but deny that "IRS Form 1058" is the correct Statutory Notice and Demand required to be provided under §6331 of the Internal Revenue Code. (C.R. 21 at 5). Instead, the Danners claim that "IRS Form 17" is the proper Statutory Notice and Demand required to be provided under 26 U.S.C. §6331. Id. In support of this claim, the Danners cite a Treasury Department document dated June 12, 19 14, T.D. (Treasury Decision) 1995. (Memorandum in Opposition to the United States ' Motion to Dismiss or, in the Alternative, for Summary Judgment (C.R. 36), Plaintiff Exhibit 2 at 1). The Danners assert that T.D. 1995 established Form 17 as the required Statutory Notice and Demand to be provided under 26 U.S.C. §6331, and that T.D. 1995 has never been revoked. (C.R. 36 at 11). The Danners have submitted Affidavits stating that they have not received "a statutory Form 17A, Notice and Demand for Payment." (C.R. 36, Plaintiff Exhibit 2 at 3A-3B). Nevertheless, on September 9, 2000 , the Danners timely requested a CDP hearing pursuant to 26 U.S.C. §6330, along with a request for production of a number of documents. (C.R. 21 at 2).

The IRS acknowledged the request for hearing in a letter dated September 20, 2000 , and attempted to schedule a telephonic conference for October 11, 2000 . (Declaration of Debra Brush, Exhibit 1 at 4). The Danners rejected the proposed hearing in a letter dated October 4, 2000 , in which they expressed outrage at the suggestion that a mere "telephone conference" would suffice; instead, the Plaintiffs demanded a face-to-face appeals conference. They also demanded a minimum of 60 days notice and ruled out holding the hearing during the period from December 1, 2000 to January 15, 2001 . The IRS then offered to schedule the hearing in its Spokane Office on March 21, 2001 or April 5, 2001 . Neither date was acceptable to the Danners. Id. at 4-5. Concluding that the Plaintiffs' primary purpose was to delay, on April 20, 2001 , the IRS issued a determination letter, without having held a prior CDP hearing, Id. at 5.

The Plaintiffs then commenced the action herein on May 8, 2001 . (C.R. 1). In their complaint, the Danners petitioned this court to declare the determination of April 20, 2001 invalid and to order the IRS to conduct a Collections Due Process hearing pursuant to 76 U.S.C. §6330. Id. at 4. The Danners also alleged that the government had improperly attempted to limit the scope of the CDP hearing so as to exclude argument regarding the Danners' underlying tax liability. Id. at 2. In addition, the Danners asked this court to order the IRS to produce documents establishing a chain of delegated authority from the Secretary of the Treasury to the IRS Appeals Officer assigned to their case. Id. at 4. However, before this court ruled on the merits herein, the parties entered into a stipulated agreement vacating the April 20, 2001 determination and remanding the case to the IRS Appeals Office for a CDP hearing on the collection issue. (Declaration of Debra Brush, Exhibit 1 at 5).

Appeals Officer Debra Brush conducted the Collections Due Process hearing in Spokane on October 24, 2001 . In addition to the Plaintiffs, also present at the hearing were Charles Danner and Richard Bristol. At the outset, Plaintiffs asserted that Richard Bristol, to whom Plaintiffs had given their Power of Attorney, was Mr. Danner's brother. (C.R. 36, Written Transcript of Collection Due Process Hearing Conducted October 24, 2001 (Plaintiff Exhibit 3) at 7). Plaintiffs thereby asserted that it was their right under 5 U.S.C. §500(d) to have Mr. Bristol represent them before the IRS as their attorney-in-fact. Id. at 3-4. The record indicates that Mr. Bristol was essentially permitted to represent the Plaintiffs throughout the proceedings. Id.

At the CDP hearing, the Plaintiffs offered a number of arguments as to why the frivolous return penalty should not be collected. Some of the Plaintiffs' arguments attacked the government's alleged failure to follow the procedural requirements of 26 U.S.C. §6330, such as the statutory notice requirement. Others attacked the authority of the IRS to assess a frivolous return penalty under 26 U.S.C. §6702. Still other arguments sought to attack the validity of Plaintiffs' underlying 1997 income-tax liability. Id.

It is apparent from the transcript of the hearing that the Appeals Officer found these arguments irrelevant and frivolous. At one point in the hearing, Mr. Bristol asked the Appeals Officer if a recommendation that the IRS proceed with the collection was a possible outcome. Id. at 14. The Appeals Officer replied, "It's a definite outcome . . . unless I hear some arguments on why the frivolous return penalty [inaudible]." However, the Danners continued to press their attacks on the validity of their underlying income-tax liability. Id.

At the end of the hearing, Plaintiffs purported to offer the government a collection alternative--immediate payment of the frivolous return penalty--if the Appeals Officer pointed to language in the United States Code which subjected them, in their view, to federal income-tax liability. Id. at 32-33. In response, the Appeals Officer stated that the only underlying tax liability at issue in the hearing was for the frivolous return penalty, the authority for which was set forth in 26 U.S.C. §6702. Id. at 32-33. That response was unacceptable to Plaintiffs, and the CDP hearing was subsequently concluded. The IRS issued a letter of determination recommending appropriate enforced collection action on Dec. 17, 2001 . (Declaration of Debra Brush, Exhibit 1 at 4).

Plaintiffs moved to reopen this action and amend their complaint on January 22, 2002 . The United States did not oppose the motion. Accordingly, Plaintiffs' Amended Complaint alleged, inter alia, that Plaintiffs did not receive a fair Collections Due Process hearing; that notice of the CDP hearing was defective; that the IRS Appeals Officer was biased; that the procedure used to impose the frivolous return penalty was defective; that Defendant failed to comply with their requests for the production of documents; that the Appeals Officer ignored their offer of a viable collection alternative; and that the $500 frivolous return penalty was erroneously predicated on the government's recalculation of their underlying 1997 income-tax liability. (C.R. 29 at 2-8).

The court now turns to consideration of the merits of the United States ' Motion.

Analysis

This court has jurisdiction of the Plaintiffs' Amended Complaint under the IRS Restructuring and Reform Act of 1998, which allows an appeal to federal district court from an adverse IRS ruling arising from a Collections Due Process hearing, if the United States Tax Court does not have jurisdiction of the underlying tax liability. 26 U.S.C. §6330(d)(1)(B). Under the Internal Revenue Code, a tax penalty is itself considered to be a tax. 26 U.S.C. §6671. Consequently, two distinct "underlying tax liabilities" are implicated herein: (1) the Danners' 1997 income-tax liability; and (2) the Danners' alleged liability for filing a frivolous 1997 tax return.

In general, the United States Tax Court has exclusive jurisdiction to determine the correctness of deficiency assessments made by the Commissioner of Internal Revenue, and may raise or lower an assessment or determine that there was no deficiency. Peerless Woolen Mills v. Rose [1 USTC ¶334], 28 F.2d 661, 662 (5th Cir. 1928) (referring to powers of the Tax Court's predecessor body, the Board of Tax Appeals); Brampton Woolen Co. v. Field [1932 CCH ¶9108], 56 F.2d 23, 26-27 (1st Cir. 1932) (holding that the jurisdiction of the Board of Tax Appeals is exclusive, and that District Courts are without jurisdiction of suit after appeal to the Board from a determination of additional deficiency tax).

In the case sub judice, the IRS issued a Statutory Notice of Deficiency recalculating the Danners' 1997 income-tax liability as $1,414. Consequently, the United States Tax Court, rather than this court, had exclusive jurisdiction of any appeal of underlying tax liability of type (1), the Danners' 1997 income-tax liability. The Danners were advised of their right under 26 U.S.C. §6213 to petition the Tax Court for a redetermination of the income-tax deficiency, but they failed to do so. Thus, this court lacks subject matter jurisdiction as to matters related to the Danners' underlying income-tax liability.

Although the jurisdiction of the Tax Court extends to civil penalties that can be assessed and paid after the government gives notice of a deficiency to the taxpayer, its jurisdiction does not apply to those penalties which the government can assess without notice of a deficiency. Runtch v. Commissioner [CCH Dec. 30,939(M)], 30 TCM 856 (1971). Deficiency procedures do not apply to the assessment or collection of frivolous tax return penalties. 26 U.S.C. §6703. Where the Tax Court lacks jurisdiction, the federal district court is empowered to review a determination arising from a Collections Due Process hearing. 26 U.S.C. §6330(d)(1)(B). Accordingly, this court has jurisdiction to review matters related to underlying tax liability of type (2), the Danners' alleged liability for filing a frivolous tax return.

Section 6330(d) does not prescribe the standard of review the court should apply in reviewing administrative CDP determinations, but the standard of review is set forth in the legislative history of the provision. Sego v. Commissioner [CCH Dec. 53,938], 114 T.C. 604, 609 (2000). Where the validity of the underlying tax liability was properly at issue in the hearing, the standard of review is de novo. However, where the validity of the underlying tax liability was not properly at issue, the court will review the administrative determination for abuse of discretion. Sego [CCH Dec. 53,938], 114 T.C. at 610 (citing House Conference Report on the IRS Restructuring and Reform Bill of 1998).

The gravamen of the Plaintiffs' complaint is that they did not receive the fair hearing to which they were entitled under 26 U.S.C. §6330(b). The Danners' challenge rests in part on the claim that the Appeals Officer improperly attempted to limit the scope of the hearing to a discussion of "collection alternatives." The transcript of the hearing indicates that the Danners basically attempted to reargue their obligation to pay income taxes. The Danners contend that under §6330(c)(2)(B), they were entitled to be heard as to the validity of their underlying income-tax liability.

The Plaintiffs' argument is unsound. A taxpayer may raise a challenge to the existence of the underlying tax liability "if the person did not receive any statutory notice of deficiency for the tax liability or did not otherwise have an opportunity to dispute such tax liability." 26 U.S.C. §6330(c)(2)(B). However, the Danners did receive a notice of deficiency regarding their underlying income-tax liability. They also had an opportunity to dispute the income-tax deficiency before the Tax Court, but they did not do so. Thus, this court concludes as a matter of law that the Appeals Officer properly refused to hear arguments regarding the validity of Plaintiffs' underlying income-tax liability.

The Danners' related claim that the Appeals Officer was only willing to discuss collection alternatives for the frivolous return penalty is inaccurate. Early in the hearing, the Appeals Officer asked, "[W]hat would your position be on why your return shouldn't be considered a frivolous return and subject to that penalty?" (C.R. 36, Exhibit 3, at 7). Later, the Appeals Officer again asked, "What is your position regarding the $500 frivolous return penalty?" Still later, the Appeals Officer asked, "And so my question would be, . . . why do you not feel that . . . Mr. and Mrs. Danners' 1997 income tax return would be considered a frivolous return by the Internal Revenue Service?" Id. at 15. The transcript is simply devoid of any pertinent argument addressing the Plaintiffs' underlying liability for the frivolous return penalty.

An income tax return is frivolous if it contains information that on its face indicates that the self-assessment is substantially incorrect and is due to a position which is frivolous. 26 U.S.C. §6702(a). The Danners filed their 1997 Form 1040 joint federal income tax return with zeros on nearly every line of the return, including Line 38, which indicated zero taxable income. Lines 54 and 60-62 showed that $1,058 in federal income tax had been withheld and that the Danners were claiming a refund of $1,058. This information indicates that the Plaintiffs' self-assessment was substantially incorrect. In addition, the Danners' position has been based on frivolous arguments. Consequently, this court concludes as a matter of law that the Plaintiffs are liable for the $500 tax penalty pursuant to 26 U.S.C. §6702.

The Appeals Officer also inquired at the outset of the hearing whether the Danners wanted to discuss any collection alternatives, such as an installment agreement. (C.R. 36, Exhibit 3, at 8). The only response was an illusory offer in which Plaintiffs purported to offer immediate payment of the frivolous return penalty--if the Appeals Officer identified language in the United States Code which subjected them, in their view, to federal income-tax liability. Id. at 32-33. The Appeals Officer properly declined. This court therefore concludes that declining the Plaintiffs' illusory offer of a "collection alternative" was not an abuse of discretion.

The Plaintiffs claim that they did not receive a fair hearing because the Appeals Officer allegedly was biased. In support of this claim, the Plaintiffs allege that when asked if a recommendation that the IRS proceed with collection was a possible outcome, the Appeals Officer replied, "It's a definite outcome." Id. at 14. This quotation takes the Appeals Officer's words entirely out of context, because the Plaintiffs fail to supply the remainder of the statement "unless I hear some arguments on why the frivolous return penalty [inaudible]." Id. The record contains no evidence of bias on the part of the Appeals Officer.

The Plaintiffs claim that they did not receive a fair hearing because the United States failed to comply with their requests for the production of documents. Under the Administrative Procedure Act, however, "[p]rocess, requirement of a report, inspection, or other investigative act or demand may not be issued, made, or enforced except as authorized by law." 5 U.S.C. §555(c). Section 6330 does not provide authorization for production of documents or other investigative demands in connection with a Collections Due Process hearing. Hence, the Danners were not entitled to the production of documents from the IRS.

The Plaintiffs also claim that the Appeals Officer tried to disallow the participation of Richard Bristol in the CDP hearing. The transcript shows otherwise. The Appeals Officer allowed Mr. Bristol a great deal of latitude during the hearing to provide assistance to the Plaintiffs.

Finally, the Plaintiffs contend that the procedures used to impose the frivolous return penalty, such as the Statutory Notice and Demand issued to Plaintiffs, were defective. The Plaintiffs' contention is without merit.

In sum, the Plaintiffs have failed to raise a genuine issue of material fact and the United States is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The United States ' Motion for Summary Judgment (C.R. 30) is GRANTED.

Accordingly, IT IS HEREBY ORDERED that Plaintiffs' Amended Complaint is DISMISSED with prejudice.

IT IS SO ORDERED. The Clerk is hereby directed to enter this Order and furnish copies to Dennis J. Danner, Pamela O. Danner, and counsel for the Defendant. The Clerk shall thereafter enter judgment for the Defendant and close this file.

[2005-1 USTC ¶50,289] Leslie E. White, Plaintiff-Appellant v United States of America, Defendant-Respondent.

U.S. Court of Appeals, 6th Circuit; 03-6010, December 16, 2004 .

Affirming DC Tenn., 2003-1 USTC ¶50,259.

[ Code Sec. 6330]

District court jurisdiction: Collection Due Process hearing.

An individual's claims involving the appropriateness of a Collection Due Process (CDP) hearing were dismissed for lack of subject matter jurisdiction. Only the Tax Court has jurisdiction over claims regarding the procedural due process of a CDP hearing. .

[ Code Sec. 6673]

Sanctions and costs awarded: Appeals.

The government's motion for sanctions was granted where the individual's appeal was frivolous. Claims based on a taxpayer's assertion that wages are not income and not taxable by the IRS have been consistently rejected as frivolous and sanctionable.

[ Code Sec. 6702]

Penalties, civil: Frivolous returns.  

An individual's claim challenging the imposition of the penalty for filing a frivolous tax return was properly dismissed. The deficiencies in the tax return were based on the frivolous assertion that wages are not taxable income. .

Before: Guy and Cole, Circuit Judges, and Tarnow , District Judge. ^*

ORDER

Tarnow, District Judge: Leslie E. White appeals pro se from a district court judgment dismissing a civil action that he had filed challenging the procedures used to assess his income tax liability and the imposition of a frivolous return penalty. His appeal has been referred to a panel of this court pursuant to Rule 34(j)(1), Rules of the Sixth Circuit. Upon examination, the panel unanimously agrees that oral argument is not needed in this case. Fed. R. App. P. 34(a).

White primarily alleged: 1) that the Internal Revenue Service ("IRS") failed to conduct an appropriate collection due process hearing under 26 U.S.C. §§6320 and 6330; and 2) that the IRS improperly imposed a $500 penalty against him under 26 U.S.C. §6702, for filing a frivolous personal income tax return. The district court dismissed White's first claim for lack of jurisdiction on January 10, 2003. It awarded summary judgment to the government regarding his remaining claim on June 11, 2003, as that claim was based on the frivolous assertion that wages are not taxable income. The district court subsequently granted White's motion for reconsideration; however, it declined to reverse any of its prior rulings.

White alleges that the IRS violated its own procedures by failing to hold an appropriate hearing. The Sixth Circuit has held that "[t]he tax court has jurisdiction over income tax issues and liabilities ... [t]hus, if the §6330 proceeding involves income tax issues, the district court does not have jurisdiction to consider the case." Diefenbaugh v. White [ 2000-2 USTC ¶50,839], No. 00-3344, 2000 WL 1679510, at *1 (6th Cir. Nov.10, 2000); see also 26 U.S.C. §6330(d)(1). The tax court also has jurisdiction over claims involving the procedural due process of a collection due process hearing. See, e.g., Tornichio v. United States [ 2002-1 USTC ¶50,411], No. 5:02 CV 0351, 2002 WL 508325, at *3 (N. D. Ohio Mar. 18, 2002). Thus, the court properly dismissed the claim for lack of subject matter jurisdiction. See Fed. R. Civ. P. 12(b)(1).

White now argues that the IRS violated the Administrative Procedure Act by failing to provide him with the requested documents and information at his hearing. See generally 5 U.S.C. §706. This claim was not clearly raised in his complaint, and we will not reach it for the first time on appeal. See Barker v. Shalala, 40 F.3d 789, 793-94 (6th Cir. 1994).

In his second claim, White challenged the government's imposition of a $500 penalty under 26 U.S.C. §6702, for filing a frivolous tax return. The district court properly dismissed this claim because the deficiencies in White's income tax return were based on the frivolous assertion that wages are not taxable income. It is well-settled that wages are taxable income within the meaning of 26 U.S.C. §61(a). See Sisemore v. United States [ 86-2 USTC ¶9576], 797 F.2d 268, 271 (6th Cir. 1986); Perkins v. Comm'r [ 84-2 USTC ¶9898], 746 F.2d 1187, 1188 (6th Cir. 1984). Since the pro se appellant has vigorously indicated his sincere intent to follow the law, he should be advised that, where the Supreme Court is silent on a matter, the decisions of the lower courts have the weight of law in their respective jurisdictions. Thus, the district court properly awarded summary judgment to the government on White's challenge to the penalty because his underlying assertion lacked an arguable basis in law.

The government now moves for a lump sum sanction in the amount of $6,000, arguing that White's appeal is frivolous and that $6,900 approximates the amount of expenses that it has incurred in similar appeals. See generally Fed. R. App. P. 38; Schoffner v. Comm'r [ 87-1 USTC ¶9198], 812 F.2d 292, 293 (6th Cir. 1987). Claims based upon a taxpayer's assertion that wages are not income and not taxable by the IRS have been consistently rejected by courts as frivolous and sanctionable. See, e.g., Perkins [ 84-2 USTC ¶9898], 746 F.2d at 1188-89. However, a recent decision from our court has indicated that $4,000 is a reasonable penalty for persisting in this type of frivolous appeal. See, e.g., Sawukaytis v. Comm'r [ 2004-1 USTC ¶50,238], No. 02-2431, 2004 WL 1376612, at *5 (6th Cir. June 16, 2004).

Accordingly, the district court's judgment is affirmed and the government's motion for sanctions is granted in the amount of $4,000. Rule 34(j)(2)(C), Rules of the Sixth Circuit.

^* The Honorable Arthur J. Tarnow, United States District Judge for the Eastern District of Michigan, sitting by designation.

[2003-1 USTC ¶50,259] Leslie E. White, Plaintiff v. United States of America , Defendant.

U.S. District Court, Mid. Dist. Tenn., Nashville Div.; 3:02-0417, 250 FSupp2d 919, January 10, 2003 .

[ Code Sec. 6330]

District court jurisdiction: Collection Due Process hearing.

A federal district court lacked subject matter jurisdiction over an individual's challenge to a Collection Due Process (CDP) determination made regarding his tax liability. Pursuant to Code Sec. 6330(d)(1), jurisdiction over judicial review of income tax liability is conferred on the Tax Court. The taxpayer's argument that the conditions of Code Sec. 6330(d) were not satisfied because the IRS did not comply with the tax code and regulations before and at the CDP hearing was rejected. The statutory provision relates to the proceeding after hearing, and not to the CDP hearing itself or to any of the notices required prior to the hearing.

[ Code Secs. 6330 and 6702]

District court jurisdiction: Collection Due Process hearing: Penalties, civil: Frivolous returns. --

A federal district court had jurisdiction over an individual's challenge to the imposition of a frivolous return penalty that was upheld following a Collection Due Process hearing. In such cases, jurisdiction lies with the district court, rather than with the Tax Court.

ORDER

ECHOLS, District Judge: Before the Court are the following: (1) Defendant's Motion to Dismiss (Docket Entry No. 3), followed by (2) Defendant's Praecipe Withdrawing Defendant's Motion to Dismiss (Docket Entry No. 9); and (3) Defendants' Motion for Partial Dismissal (Docket Entry No. 11), to which Plaintiff responds in opposition. In its initial Motion to Dismiss (Docket Entry No. 3), Defendant sought dismissal of this action under Federal Rule of Civil Procedure 4(i)(1) for Plaintiff's failure to obtain summonses and serve the Complaint on the Internal Revenue Service ("IRS") and the Attorney General of the United States. Later, it was determined that Plaintiff had properly served all required parties, and Defendant filed the pending Praecipe to withdraw its prior Motion to Dismiss. Accordingly, Defendant's Motion to Dismiss (Docket Entry No. 3) is DEEMED WITHDRAWN.

For the reasons stated in the Memorandum contemporaneously entered herewith, Defendant's latest Motion for Partial Dismissal (Docket Entry No. 11) is GRANTED. Accordingly, Plaintiff's claims under 26 U.S.C. §6330 challenging the Collection Due Process Hearing by the I.R.S. and Plaintiff's 1997 income tax liability are hereby DISMISSED, and Plaintiff is granted thirty (30) days from the date of entry of this Order within which to appeal the IRS Appeals Office determination with the United States Tax Court pursuant to 26 U.S.C. §6330(d)(1)(B).

This case involves a discrepancy over a $500 assessment by the Internal Revenue Service. It is not the type of case that requires case management for a year or two. The case is hereby referred to the Magistrate Judge who is directed to conduct a "case management conference" to determine what discovery, if any, is required, set abbreviated deadlines for filing motions, and set a trial date to commence no later than July 22, 2003. The Magistrate Judge is directed to coordinate the setting of a trial date with Judge Echols' Courtroom Deputy.

It is so ORDERED.

MEMORANDUM

Before the Court are the following: (1) Defendant's Motion to Dismiss (Docket Entry No. 3), followed by (2) Defendant's Praecipe Withdrawing Defendant's Motion to Dismiss (Docket Entry No. 9); and (3) Defendants' Motion for Partial Dismissal (Docket Entry No. 11), to which Plaintiff responds in opposition. In its initial Motion to Dismiss (Docket Entry No. 3), Defendant sought dismissal of this action under Federal Rule of Civil Procedure 4(i)(1) for Plaintiff's failure to obtain summonses and serve the Complaint on the Internal Revenue Service ("IRS") and the Attorney General of the United States. Later, it was determined that Plaintiff had properly served all required parties, and Defendant filed the pending Praecipe to withdraw its prior Motion to Dismiss. Accordingly, Defendant's Motion to Dismiss (Docket Entry No. 3) shall be DEEMED WITHDRAWN. For the reasons explained below, Defendant's Motion for Partial Dismissal shall be GRANTED.

I.

Plaintiff, Leslie E. White, was informed by the IRS that he owes personal income taxes for the 1997 tax year. In addition, the IRS has assessed a "frivolous return penalty" against Plaintiff under 26 U.S.C. §6702. Plaintiff initiated this cause of action against the United States on April 25, 2002 under 26 U.S.C. §6330(d)(1) requesting that this Court set aside the collective due process hearing ("CDPH") determination and seeking declaratory relief, reimbursement for costs, and punitive damages. Plaintiff contends that the IRS did not conduct a CDPH in accordance with Sections 6320 and 6330, and Treasury Regulations 301.6320-IT and 301.6330-IT. Plaintiff also contends that the frivolous return penalty imposed by the IRS was unsupported by any evidence.

II.

It is well settled that a court's task in analyzing the sufficiency of a complaint for the purpose of a motion to dismiss is necessarily narrow and limited. The issue is not whether a claimant will ultimately prevail, but "whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that recovery is very remote and unlikely but this is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The standard in reviewing a motion to dismiss for lack of subject matter jurisdiction is identical to the standard in reviewing a motion to dismiss for failure to state a claim upon which relief may be granted. A court must review the complaint in the light most favorable to the non-moving party, construing all of the allegations in his or her favor. Id. A complaint should not be dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure "unless it appears beyond doubt that [the non-moving party] can prove no set of facts in support of [his or her] claim which would entitle [him or her] to relief." Id. (quoting Conley v. Gibson, 355 U.S. 41, 45 (1957)).

Pro se litigants' complaints are to be read particularly liberally, and are to be held to a less stringent standard than those drafted by attorneys. The complaints of pro se litigants should not be dismissed unless it is apparent beyond doubt that no set of facts can be proved in support of the claim entitling the litigant to relief. Haines v. Kerner, 404 U.S. 519, 520 (1972).

III.

Taking the allegations in Plaintiff's Complaint as true for purposes of Defendant's Motion for Partial Dismissal, the Court finds the following facts: Plaintiff was issued a Notice of Deficiency from the IRS on June 22, 1999, for the tax year ending December 31, 1997. Plaintiff was assessed a frivolous return penalty of $500 on September 13, 1999 for filing a frivolous income tax return in 1997, pursuant to 26 U.S.C. §6702. Plaintiff was issued a Final Notice of Intent to Levy from the IRS on June 23, 2001. Pursuant to 26 U.S.C. §6330(b), Plaintiff filed a request for a CDPH. Prior to the CDPH, Plaintiff informed Mr. Scott Biggs, the IRS Settlement Officer who was to be present at the CDPH, that he questioned the validity of the Notice of Deficiency. Plaintiff requested by letter that Mr. Biggs bring to the CDPH a copy of his 1997 tax return and the Summary Record of Assessment, and documented proof of the basis for the income tax deficiency and frivolous return penalty.

The CDPH took place on March 5, 2002. At the hearing, IRS Settlement Officer Biggs, did not provide any of the aforementioned documentation and proof requested by Plaintiff. Mr. Biggs also was unable to inform Plaintiff as to which specific officer or employee of the IRS imposed the $500 frivolous return penalty, and whether that person was authorized to impose such penalties. Plaintiff alleges that Mr. Biggs' failure to provide the requested documentation at the CDPH violated 26 C.F.R. 301.6320-1, and that as of the filing of his Complaint Plaintiff never received a valid Notice of Deficiency as required by 26 U.S.C. §6330(a). Following the CDPH, the IRS mailed Plaintiff a Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330 on March 28, 2002. The attachment to the Notice of Determination stated that the IRS deemed the levy action under Section 6330 appropriate. The letter stated that if Plaintiff wished to dispute the income tax liability determination in court, he should file a petition with the United States Tax Court within thirty days. Instead, Plaintiff filed a Complaint with this Court within the required time period.

IV.

Defendant United States now moves to dismiss the portion of Plaintiff's Complaint concerning the CDPH and Plaintiff's 1997 income tax liability under Section 6330 for lack of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1). Section 6330(d)(1) confers jurisdiction of judicial review of income tax liability on the Tax Court.

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 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.

If a court determines that the appeal was to an incorrect court, a person shall have 30 days after the court determination to file such appeal with the correct court.

26 U.S.C. §6330(d)(1).

The Sixth Circuit has held that "[t]he Tax Court has jurisdiction over income tax issues and liabilities ... [t]hus, if the §6330 proceeding involves income tax issues, the district court does not have jurisdiction to consider the case." Diefenbaugh v. White [ 2000-2 USTC ¶50,839], No. 00-3344, 2000 WL 1679510, at *1 (6th Cir. Nov. 10, 2000). Furthermore, a procedural due process claim is also properly brought in the Tax Court. Very few courts have expressly addressed this issue, but those that have hold that the Tax Court has jurisdiction over claims involving a CDPH, and district courts do not. In one case, Tornichio v. United States, the plaintiff sought to assert a claim against the IRS, asserting that his procedural due process rights were violated at his CDPH. Tornichio [ 2002-1 USTC ¶50,411], No. 5:02 CV 0351, 2002 WL 508325 (N.D. Ohio Mar. 18, 2002) The court held that "[d]istrict courts have no jurisdiction over civil claims challenging taxes unless litigants first pay the assessed tax and then raise these claims in a refund suit." Tornichio at *3 (citing 26 U.S.C. §7421(a)). Addressing the proper jurisdiction for review of a procedural due process violation at a CDPH, one court held that "the proper jurisdiction for judicial review of a Collection Due Process Hearing is the United States Tax Court." Johnson v. C.I.R. [ 2000-2 USTC ¶50,592], No. 99-6250-TC, 2000 WL 1041191 at *4 (D. Or. June 21, 2000).

Plaintiff asserts that the Tax Court does not have jurisdiction over his income tax liability claims and procedural due process claims arising from the CDPH, because Rule of Tax Court Procedure 330(b) states that "[t]he Court shall have jurisdiction of a lien or levy action under this Title when the conditions of Code Section 6320(c) or 6330(d), as applicable, have been satisfied." R. Tax Ct. P. 330(b). Plaintiff avers that the conditions of Code Section 6330(d) have not been satisfied, because the IRS did not comply with the Internal Revenue Code and Treasury Regulations before and at the CDPH. The Court finds, however, that Section 6330(d) relates to the "proceeding after hearing," not the CDPH itself or any of the notices required prior to the CDPH. Even when taking the allegations in Plaintiff's Complaint as true, the IRS's non-compliance does not vest jurisdiction over Plaintiff's tax liability and due process claims in this Court.

The Court notes, however, that it does have subject matter jurisdiction over Plaintiff's challenge to the $500 frivolous return penalty assessed under section 6702. This section imposes a penalty if a person files an income tax return that "does not contain information on which the substantial correctness of the self-assessment may be judged," or appears on its face to be "substantially incorrect," which is due to the taxpayer taking a position that is "frivolous" or "desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws." 26 U.S.C. §6702(a)(1), (2).

In a frivolous return penalty case, jurisdiction lies with the district court, rather than the tax court. "[U]nder section 6703 [the tax court] lack[s] jurisdiction to review assessments of section 6702 frivolous return penalties...." Van Es v. Commissioner [ CCH Dec. 54,080], 115 T.C. 324, 325 (2000). A person "must bring suit in district court to determine his liability for [a section 6702] penalty." 26 U.S.C. §6703(c)(2). See Colton v. Gibbs [ 90-1 USTC ¶50,262], 902 F.2d 1462 (9th Cir. 1990); Reinhardt v. I.R.S., 2002 WL 1095351 at *4 (E.D. Cal. May 24, 2002) ("[i]n the case of a frivolous return penalty under 26 U.S.C. §6702, the district court is the proper reviewing court."). Plaintiff has appropriately filed his Complaint in this Court with respect to his challenge to the frivolous return penalty under section 6702.

V.

Based on the foregoing reasons, the Court finds that it does not have subject matter jurisdiction over Plaintiff's income tax liability claims and procedural due process claims arising under 26 U.S.C. §6330. Because the tax court has jurisdiction over these claims, they are dismissed pursuant to 28 U.S.C. §1406. Plaintiff shall have thirty (30) days from the date of entry of this Memorandum and the accompanying Order to appeal the IRS Appeals Office determination with the Tax Court, pursuant to 26 U.S.C. §6330(d)(1)(B).

An appropriate Order shall be entered.

[2003-1 USTC ¶50,281] Paula Rae Smith, Plaintiff v. Charles O. Rossotte, Commissioner, Internal Revenue Service, Dennis L. Paiz, Chief Examination Branch, Deborah S. Decker, Director, Ogden Customer Service Center , Mr. Parezek, Susan Meredith, Automated Collection Service, Fresno , Greenpoint Financial, Does 1-999, Defendants.

U.S. District Court, Dist. Ore. ; Civ. 02-922-HU, 250 FSupp2d 1266, January 30, 2003 .

[ Code Sec. 7402]

District court jurisdiction: IRS employees: Official immunity: Service on United States .  

A federal district court lacked jurisdiction over a suit instituted by an individual who contested the validity of an IRS notice of levy, challenged the procedural validity of a tax lien, and sought to recover her garnished wages. To the extent that her claims for relief were brought against IRS employees acting in their official capacities, those claims were dismissed. Also, she failed to prove that she had properly effected service on the government.

[ Code Sec. 7402]

District court jurisdiction: Suits to quiet title: Wages as nontaxable receipts.

A federal district court lacked jurisdiction over a suit instituted by an individual who contested the validity of an IRS notice of levy, challenged the procedural validity of a tax lien, and sought to recover her garnished wages. Following the garnishment, the government had title to those funds, rather than a lien interest; thus, the taxpayer could not recover the wages through a quiet title action. Her argument that the earnings did not constitute taxable income represented an impermissible collateral attack on the merits of the tax assessment.

[ Code Secs. 6330 and 6331]

District court jurisdiction: Levy and distraint: Notice, sufficiency of: IRS employees: Official immunity: Service on United States . --

A federal district court lacked jurisdiction over a suit instituted by an individual who contested the validity of an IRS notice of levy, challenged the procedural validity of a tax lien, and sought to recover her garnished wages. Testimonial evidence and copies of certificates of assessment produced by the government established that notices of intent to levy and of the opportunity for a Collection Due Process hearing were sent by certified mail to the taxpayer's last known address. Because the documents were properly mailed, it was not necessary that the taxpayer receive or accept the notifications in order for them to be valid.

[ Code Sec. 7421]

District court jurisdiction: Injunctions: Exceptional circumstances: Anti-Injunction Act. --

A federal district court lacked jurisdiction over a suit instituted by an individual who contested the validity of an IRS notice of levy, challenged the procedural validity of a tax lien, and sought to recover her garnished wages. Absent a showing by the taxpayer that the government would be unable to prevail on the merits in the case and that she was threatened with irreparable harm and no adequate legal remedy was available, her suit was barred by the Anti-Injunction Act. In attempting to recover her garnished wages, she was seeking to restrain the collection of taxes.

Paula Rae Smith, pro se. Michael W. Mosman, United States Attorney, Jeremy N. Hendon, Department of Justice, for Rossotte, Paiz, Decker, Parezek and Meredith.

HAGGERTY, District Judge: This matter is before the court on defendants Rossotte, Paiz, Decker, Parezek, and Meredith's motion to dismiss (#3). For the following reasons, defendants' motion is granted.

BACKGROUND

Plaintiff filed a petition to quash notice of levy issued by the Internal Revenue Service ("IRS") on April 27, 2002 . Plaintiff challenges the procedural validity of a tax lien and seeks a release of the garnishment of her wages and a return of her property. Plaintiff alleges that defendants did not provide a ten day notice and demand, that plaintiff did not receive a copy of the Notice of Levy or a Certificate of Assessment form, and she did not receive a due process hearing. Plaintiff further alleges that her earnings are not taxable income and seems to contend that alcohol, tobacco, and firearms are the only taxable items.

Defendants Rossotte, Paiz, Decker, Parezek, and Meredith filed a motion to dismiss the complaint pursuant to Rule 12(b)(1), (b)(5), and (b)(6). Defendants contend that (1) the United States is the only proper defendant in this action; (2) plaintiff did not properly serve the United States; (3) this court lacks jurisdiction with respect to wages which the IRS has already levied upon and collected; (4) this court lacks jurisdiction with respect to plaintiff's contentions regarding issues other than the procedural validity of the levy; (5) this court lacks jurisdiction over plaintiff's procedural allegations; and (6) injunctive relief is barred in this case by the Injunctive Relief Act. Plaintiff filed no response to the motion to dismiss. Defendants' motion is now before the court.

STANDARDS

A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(1) addresses the court's subject matter jurisdiction. The party asserting jurisdiction bears the burden of proving that the court has subject matter jurisdiction over his claims. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).

A Rule 12(b)(1) motion may attack the substance of the complaint's jurisdictional allegations even though the allegations are formally sufficient. St. Clair v. City of Chico , 880 F.2d 199, 201 (9th Cir. 1989). The court may consider evidence outside the pleadings to resolve factual disputes. Id. ; see also Dreier v. United States , 106 F.3d 844, 847 (9th Cir. 1996) (a challenge to the court's subject matter jurisdiction under Rule 12(b)(1) may rely on affidavits or any other evidence properly before the court).

On a motion to dismiss pursuant to Rule 12(b)(6), the court must review the sufficiency of the complaint. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The court should construe the complaint most favorably to the pleader:

In evaluating the sufficiency of the complaint, we follow, of course, the accepted rule that the 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 claim which would entitle him to relief.

Conley v. Gibson, 355 U.S. 41, 45-46 (1957); American Family Ass'n, Inc. v. City & County of San Francisco, 277 F.3d 1114, 1120 (9th Cir. 2002). The allegations of material fact must be taken as true. Moyo v. Gomez, 40 F.3d 982, 984 (9th Cir. 1994).

DISCUSSION

I. Individual Defendants

Plaintiff brings this action against a number of IRS employees. However, the complaint makes no allegations against these defendants in their individual capacities. Rather, plaintiff's allegations are directed solely against these defendants in their official capacities and plaintiff seeks relief solely from the United States . Plaintiff may only seek relief for actions of these individuals taken in their official capacities from the United States , not from the individual defendants. See Dugan v. Rank, 372 U.S. 609 (1962); Hutchinson v. United States , 677 F.2d 1322, 1327 (9th Cir. 1982). Therefore, to the extent that plaintiff brings these claims against defendants Rossotte, Paiz, Decker, Parezek, and Meredith in their official capacities, plaintiff's claims are dismissed.

II. Improper Service

Defendants also contend that plaintiff has failed to properly serve the United States . Rule 4(i)(1) provides:

(i) Serving the United States , Its Agencies, Corporations, Officers, or Employees.

(1) Service upon the United States shall be effected

(A) by delivering a copy of the summons and of the complaint to the United States attorney for the district in which the action is brought or to an assistant United States attorney or clerical employee designated by the United States attorney in a writing filed with the clerk of the court or by sending a copy of the summons and of the complaint by registered or certified mail addressed to the civil process clerk at the office of the United States attorney and

(B) by also sending a copy of the summons and of the complaint by registered or certified mail to the Attorney General of the United States at Washington, District of Columbia, and

(C) in any action attacking the validity of an order of an officer or agency of the United States not made a party, by also sending a copy of the summons and of the complaint by registered or certified mail to the officer or agency.

Fed. R. Civ. P. 4(i)(1)(A) --(C). Rule 4(i)(2) provides that

(2)(A) Service on an agency or corporation of the United States, or an officer or employee of the United States sued only in an official capacity, is effected by serving the United States in the manner prescribed by Rule 4(i)(1) and by also sending a copy of the summons and complaint by registered or certified mail to the officer, employee, agency, or corporation.

Fed. R. Civ. P. 4(i)(2)(A).

Plaintiff's certificate of service does not demonstrate that she served the United States Attorney in this district as required by Rule 4(i)(1)(A). Furthermore, plaintiff's certificate of service states that she served United States Attorney General Ashcroft with a copy of the petition to quash, and the brief in support. Plaintiff fails to demonstrate that she served the United States Attorney General with a copy of the summons as required by Rule 4(i)(1)(B). Accordingly, plaintiff's complaint is dismissed for failure to properly serve the United States .

III. Section 2410

Plaintiff alleges that this court has jurisdiction over her petition pursuant to 28 U.S.C. §2410. Defendants contend that section 2410 applies only to a portion of plaintiff's claim and that the portions of her claim to which section 2410 does apply are barred by the Anti-Injunction Act.

Section 2410 provides in pertinent part:

(a) Under the conditions prescribed in this section and section 1444 of this title for the protection of the United States, the United States may be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter --(1) to quiet title to, ... real or personal property on which the United States has or claims a mortgage or other lien.

28 U.S.C. §2410(a)(1). The Ninth Circuit has stated:

Under 28 U.S.C. §2410, the United States may be joined as a party to a quiet title action affecting property upon which it claims a lien. A taxpayer may not use section 2410 to collaterally attack the merits of an assessment. Rather, the taxpayer may only contest the procedural validity of a tax lien.

Hughes v. United States [ 92-1 USTC ¶50,086], 953 F.2d 531, 538 (9th Cir. 1992) (quotation omitted).

A. Claims over which Section 2410 Does Not Confer Jurisdiction

Plaintiff seeks a return of all of her wages paid to the IRS in response to the Notice of Levy. However, the Ninth Circuit has made clear that section 2410 does not provide this court with jurisdiction over this portion of plaintiff's claim because the United States no longer has a lien interest in those wages, but instead has title to those wages. See Hughes [ 92-1 USTC ¶50,086], 953 F.2d at 538 ("an action [under 28 U.S.C. §2410] is jurisdictionally barred if, at the time it is commenced, the government claims a title interest rather than a lien interest.... Jurisdiction is also lacking on any claims relating to personal property, such as previously garnished wages, in which the government now claims a title interest."). Accordingly, defendants' motion to dismiss is granted with respect to this aspect of plaintiff's claim.

B. Non-procedural Challenges

Plaintiff seeks to challenge the validity of the assessment itself alleging that her earnings are not taxable income and that the IRS' assessment authority is limited to alcohol, tobacco, and firearms. However, as noted above, the Ninth Circuit in Hughes held that "A taxpayer may not use section 2410 to collaterally attack the merits of an assessment. Rather, the taxpayer may only contest the procedural validity of a tax lien." Hughes [ 92-1 USTC ¶50,086], 953 F.2d at 538. Plaintiff's allegations regarding her income as untaxable and contentions regarding the taxability of only alcohol, tobacco, and firearms constitute an effort to collaterally attack the merits of the assessment itself. Section 2410 does not confer jurisdiction on this court to address the merits of plaintiff's attack on the merits. ¹ Accordingly, defendants' motion to dismiss is granted with respect to this portion of plaintiff's claim.

C. Procedural Challenges

Plaintiff alleges that she did not receive the statutory notice and demand for payment ten days prior to the issuance of the Notice of Levy pursuant to 26 U.S.C. §6331(a), ² nor did she receive statutory notice of an opportunity for a Collection Due Process hearing pursuant to 26 U.S.C. §6330. ³ Although these are the types of procedural challenges properly brought pursuant to section 2410, plaintiff's arguments are unsuccessful.

The statue requires that to be effective, the IRS need only mail the notice and demand by certified or registered mail to the plaintiff's last known address. See 26 U.S.C. §6330(a)(2)(C); 26 U.S.C. §6331(d)(2)(C). The statute does not require that plaintiff receive or accept the registered or certified notifications. See 26 U.S.C. §6330(a)(2)(C); 26 U.S.C. §6331(d)(2)(C); Williams v. Internal Revenue Service [ 91-2 USTC ¶50,317], 935 F.2d 1066, 1067 (9th Cir. 1991) ("A notice of deficiency is valid if it is mailed to the taxpayer's last known address even if it is not received by the taxpayer.") (citation omitted); Camacho v. United States [ 95-1 USTC ¶50,315], 184 B.R. 807, 811 (D. Alaska 1995), reversed in part on other grounds [ 96-1 USTC ¶50,103], 190 B.R. 895 (1995) (concluding that notice sent by certified mail to plaintiffs' last known address was sufficient for notice under §6331(d)).

Defendants produced the affidavit of Kevin Coughlin in which he testifies that the notices of intent to levy and of an opportunity for a collection due process hearing were sent by certified mail on January 15, 2002, to plaintiff's last known address. ⁴ Coughlin Dec'l. ¶ ¶7, 11. Defendants further produced copies of certificates of assessment noting that they sent plaintiff the notices of intent to levy and of an opportunity for a collection due process hearing on January 15, 2002. Hendon Dec'l, Exh., A, p. 2; Exh. B, p. 2. This evidence is sufficient to demonstrate that the defendants met the requirements regarding notices of intent and of opportunity for a due process hearing by certified mail. Therefore, defendants' motion to dismiss is granted with respect to this aspect of plaintiff's claim.



IV. Anti-Injunction Act

Defendants contend that the portion of plaintiff's claim seeking to "release the garnishment of petitioners [sic] wages" is barred by the Anti-Injunction Act, 26 U.S.C. §7421(a) ⁵ which bars all suits "for the purpose of restraining the assessment of collection of any tax." Bright v. Bechtel Petroleum, Inc., 780 F.2d 766, 770 (9th Cir. 1986) (citation omitted). Defendants' argument is well taken.

In James v. United States [ 92-2 USTC ¶50,389], 970 F.2d 750 (10th Cir. 1992), the court held that it lacked subject matter jurisdiction over plaintiff's claim for injunctive relief from an IRS levy on plaintiff's wages due to the Anti-Injunction Act. Id. at 757. The court reasoned that plaintiff's request for relief from the levy was a suit for the purpose of restraining the assessment or collection of any tax, therefore the court did not have subject matter jurisdiction over his complaint. Id. Other courts have held similarly. See Bright, 780 F.2d at 770; Harrell v. United States [ 94-1 USTC ¶50,137], 13 F.3d 232 (7th Cir. 1993).

The Supreme Court has recognized a narrow exception to the Anti-Injunction Act when a taxpayer shows both that (1) "under no circumstance could the Government ultimately prevail" on the merits; and (2) "equity jurisdiction otherwise exists," i.e., the taxpayer is threatened with irreparable harm and there is no adequate legal remedy available. Enochs v. William Packing Navigation Co. [ 62-2 USTC ¶9545], 370 U.S. 1, 6-8 (1962). However, plaintiff has made no showing of either of the requirements of Enochs, nor does a review of the record suggest to the court either that under no circumstance can the Government prevail or that equity jurisdiction exists. Accordingly, this court lacks subject matter jurisdiction over the portion of plaintiff's petition seeking release of the garnishment of plaintiff's wages.

V. GreenPoint Financial

Plaintiff lists GreenPoint Financial in her case caption, however she fails to make any allegations or mention of GreenPoint Financial in the body of the petition. Furthermore, plaintiff has failed to properly serve GreenPoint Financial. Accordingly, plaintiff's claims against GreenPoint Financial are dismissed.

Plaintiff notes in her certificate of service that she mailed a copy of her petition and brief in support thereof to GreenPoint Financial. Rule 4(h) requires that in order to properly serve a corporation, plaintiff must "deliver a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process." Fed. R. Civ. P. 4(h)(1). There is no evidence before the court that plaintiff served GreenPoint Financial with a copy of the summons. Moreover, it does not appear that plaintiff served an officer, managing or general agent, or any other agent of GreenPoint Financial. Rather, plaintiff sent her petition to the corporation generally. This is not sufficient service under Rule 4(h).

Rule 4 also allows a plaintiff to serve a corporate defendant in any manner allowed under the law of the state in which the district court is located. Fed. R. Civ. P. 4(h)(1), (e)(1). However, plaintiff's service on GreenPoint Financial was not proper under Oregon law. Rule 7D(3)(b) provides that the primary service method for a corporation is by "personal service or office service upon a registered agent, officer, director, general partner, or managing agent of the corporation ... or by personal service upon any clerk on duty in the office of a registered agent." ORCP 7D(3)(b)(i). Although Rule 7D allows for substituted service if a registered agent, officer, director, general partner, or managing agent cannot be found where the action is filed, that substituted service must be made on a "registered agent, officer, director, general partner, or managing agent ... or by mailing a copy of the summons and complaint to the office of the registered agent." ORCP 7D(3)(b)(ii). There is no evidence before the court that plaintiff served a summons and complaint by mail or otherwise on any agent, officer, director, general partner, managing agent or registered agent of GreenPoint Financial. Therefore, plaintiff's complaint is dismiss with respect to GreenPoint Financial.

CONCLUSION

Defendants' motion to dismiss (#3) is GRANTED. Plaintiff's petition is also dismissed against defendant GreenPoint Financial without prejudice for failure to make any allegations against GreenPoint in the petition and for insufficient service. Plaintiff may file an amended petition curing the deficiencies with respect to GreenPoint Financial within thirty (30) days of the date of this order. Failure to file an amended petition will result in a dismissal of plaintiff's claims against GreenPoint Financial with prejudice.

IT IS SO ORDERED.

¹ I also note that plaintiff's arguments have been rejected by a number of courts. See Grimes v. Commissioner [ 87-1 USTC ¶9106], 806 F.2d 1451, 1453 (9th Cir. 1986); Gass v. United States Dep't of Treasury, 1999 WL 2508890, *14 (D. Colo. 1999).

² This section provides in pertinent part "If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax ... by levy upon all property and rights to property ... belonging to such person...." 26 U.S.C. §6331(a).

³ This section provides in pertinent part:

(a) Requirement of notice before levy. --

(1) In general. --No 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....

(2) Time and method for notice. --The notice required under paragraph (1) shall be --...

(C) sent by certified or registered mail, return receipt requested, to such person's last known address; not less than 30 days before the day of the first levy....

26 U.S.C. §6330(a)(1) and (2).

⁴ The court notes that the address to which defendant sent the notices is the address that plaintiff provided to the court upon the filing of this action.

⁵ This section provides in pertinent part "Except as provided in sections [n no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed." 26 U.S.C. §7421(a).

[2003-1 USTC ¶50,293] Michael F. Pelliccio v. United States of America , Commissioner of Internal Revenue.

U.S. District Court, Dist. Conn. ; 3:01CV601 (AHN), 253 FSupp2d 258, February 4, 2003 .

[ Code Secs. 6320, 6330 and 6672]

Collection Due Process hearing: District court jurisdiction: Penalties, civil: Trust fund recovery penalty. --

The government was entitled to summary judgment in connection with an individual's suit alleging that he was denied a fair Collection Due Process hearing in connection with the government's assessment of the trust fund recovery penalty against him for a corporation's unpaid withholding taxes. Notices of assessments and demands for payment sent to the individual clearly described the procedures that he had to follow in order to protest the IRS's collection action. The taxpayer failed to respond to these notices and, thus, failed to challenge the amount or the appropriateness of the liability itself. The taxpayer's challenge to a notice of intent to levy consisted of only the liability argument that he was not a "responsible person" with respect to the unpaid withholding taxes. The district court lacked jurisdiction to consider matters outside of compliance with procedures for IRS collection actions.

RULING ON MOTION TO AFFIRM DETERMINATION CONCERNING COLLECTION ACTION

NEVAS, District Judge: This is an action for judicial review of an administrative determination concerning collection action. The plaintiff, Michael F. Pelliccio ("Pelliccio"), seeks to have the assessments made against him by the Internal Revenue Service ("IRS") pursuant to Section 6672 reviewed and set aside. Pending before the court is the defendant's motion to affirm the determination of the IRS.

For the following reasons, the motion [doc. #12] is GRANTED.

FACTS

On November 13, 1995 , August 12, 1995 , and March 24, 1997 , the IRS made a tax assessment pursuant to §6672 against Pelliccio as a responsible person of State Welding and Fabricating, Inc., for willful failure to collect, truly account for and pay over income and FICA taxes that were withheld from employee wages for the tax periods ending December 31, 1993 , December 31, 1995 and September 30, 1996 , respectively.

Notices of these assessments and demand for payment was duly made on Pelliccio.

On January 28, 2000 , the IRS sent Pelliccio form letter 1058. The letter was captioned:

FINAL NOTICE

NOTICE OF INTENT TO LEVY AND NOTICE OF YOUR RIGHT TO A HEARING

PLEASE RESPOND IMMEDIATELY

The text of the letter stated:

Your Federal tax is still not paid.... This letter is your notice of our intent to levy under Internal Revenue Code (IRC) Section 6331 and your right to receive Appeals consideration under IRC Section 6330.

We may file a Notice of Federal Tax Lien at any time to protect the government's interest....

If you don't pay the amount you owe, make alternative arrangements to pay, or request Appeals consideration within 30 days from the date of this letter, we may take your property.... We've enclosed Publication 594 with more information, Publication 1660 explaining your right to appeal, and Form 12153 to request a Collection Due Process Hearing with Appeals.

Pelliccio timely requested a collection due process hearing. He claimed that he was not a responsible person liable for the tax because he had transferred ownership and was not involved in the business on a regular basis during the applicable periods. He also claimed that the IRS failed to comply with its obligations under §6320, because it sent a Final Notice after he requested a due process hearing on a prior identical Notice of Intent to Levy. He did not present any alternatives to the proposed collection action.

Upon receipt of this form, the IRS officer handling the collection due process hearing reviewed Pelliccio's administrative file. He noticed that Form Letter 1153 was sent to Pelliccio each time one of the assessments was made. That letter advised Pelliccio that if he did not agree with the assessment, or had any additional information to support his case, he should contact the IRS within 10 days. The letter also advised Pelliccio that he had the right to appeal within 60 days, and provided instructions explaining where and how to appeal and how to prepare a protest. It also stated "[i]f you ask for one, a hearing will be arranged."

Pelliccio did not avail himself of any of the alternatives set forth in any of the three 1153 letters that were sent to him. Accordingly, the IRS officer concluded that Pelliccio's failure to avail himself of the alternatives described in the letters precluded his right to challenge the merits of the assessments in a collection due process hearing under §6330.

On October 20, 2000, the IRS officer wrote to Pelliccio's attorney advising him that a collection due process hearing was scheduled for December 20, 2000. The letter also stated "[i]f you would like to propose alternatives to the proposed collection action please have [Pelliccio] complete and return the attached 433-A."

On December 18, 2000, two days before the scheduled hearing, Pelliccio's attorney phoned the IRS to advise them that they did not believe it was necessary to appear in person at the hearing and would send all information through the mail.

Pelliccio's attorney thereafter sent a letter containing Pelliccio's claim that he was not liable for the assessments because he transferred ownership and was no longer involved in the business after May, 1994, and was thus not a responsible person. The letter also stated that "[Pelliccio] has not to date had the opportunity to appeal or otherwise contest the merits of the assessment of the penalties either at appeals or in the Tax Court." The letter did not propose any alternatives to the proposed collection action.

In a letter dated January 3, 2001, the IRS officer responded to the claim that Pelliccio had not had an opportunity to contest the merits of the assessment. The letter stated

Our records indicated that the opportunity to appeal the assessments was presented via Letter 1153 prior to each assessment. As such, I may not consider the current liability challenge under IRC §6330. You maintain the right to pay a portion of the tax and to file a refund claim with the IRS and if necessary in District Court.

... The controlling issue under IRC §6330 is whether any liability arguments can be considered. Based on receipt of the Letter 1153's [sic] it would appear that the liability may not be challenged under IRC although remedy may still be available in a refund claim procedure at District Court.

Despite the inability to challenge the assessments I am able to consider any alternatives you wish to propose in order to avoid any further collection action. Please submit to me your payment proposal no later than January 24, 2001 . If I do not hear from you a Notice of Determination will be issued based on the available information.

In that same letter the IRS officer also responded to Pelliccio's substantive claim that he was not a responsible person or liable for the taxes. Specifically, the letter stated that Pelliccio's evidence was insufficient to support his claim because "the fact that the successive owner was to pay the taxes ... does not mitigate the responsibility of those assessed under IRC §6672 unless such payment is received." The letter also stated "[t]he documentation you presented is inconclusive and does not indicate to me that the assessments were inappropriate. The controlling issue under IRC §6330 is whether any liability arguments can be considered. Based on receipt of the Letter 1153's [sic] it would appear that the liability may not be challenged under IRC §6330...." Neither Pelliccio nor his attorney responded to that letter.

Thereafter, the IRS officer determined that all the legal and administrative requirements had been met, and all assets and income available for partial payment of the delinquent penalties had been identified, and concluded that Pelliccio had an ability to pay $100 per month. The IRS officer determined that the proposed collection action was appropriate and, upon considering Pelliccio's legitimate concerns of intrusiveness, determined that the need for efficient collection of the taxes outweighed them. Accordingly, on March 13, 2001 , a Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330, Letter 3194-c, was issued to Pelliccio. The IRS officer's conclusions were set forth in Attachment 3194 to the Notice of Determination.

On April 12, 2001 , Pelliccio filed the complaint in this action seeking judicial review of the determination concerning collection.

DISCUSSION

The government has moved to affirm the administrative determination concerning collection action. It contends that the court does not have jurisdiction under §6330 to review and set aside Pelliccio's liability for the tax assessments pursuant to §6672 because §6630 review is limited to claims properly raised in the collection due process hearing. See 26 C.F.R. §301.6330-1(f)(2), Q-F5 & A-F5. It maintains that the issue of Pelliccio's tax liability was not appropriate for consideration in the collection due process hearing because Pelliccio had a prior opportunity to dispute liability but failed to avail himself of that right. See 26 U.S.C. §6330(c)(2)(A); see also Konkel v. Commissioner [ 2001-2 USTC ¶50,520], No. 6:99CV1026-DRL-31C, 2000 WL 1819417, at *4 (M.D. Fla. Nov. 6, 2000).

In opposition, Pelliccio asserts that he did raise and challenge the issue of his responsible person status and liability for the assessments at a collection due process hearing and that his claims were addressed and decided by the IRS officer. In support of this claim, Pelliccio relies on the fact that in the January 3, 2001, letter and in Attachment 3194 to the Notice of Determination, the IRS officer discussed and rejected his challenges, even though he noted that he was without jurisdiction to do so. Pelliccio cites no authority for his contention that the "IRS cannot on one hand take the position it is without jurisdiction to consider liability, and on the other hand deny reviewability of the decision made by the appeal officer." Pelliccio also contends that the IRS officer's determination did not constitute meaningful review as required by statute and case law. There is no merit to Pelliccio's contentions.

A taxpayer is precluded from challenging the existence or amount of tax liability at a §6330 hearing if he received a statutory notice of deficiency or otherwise had an opportunity to dispute liability. See 26 U.S.C. §6330(c)(2)(A); see also Konkel, 2000 WL 1819417, at *3. An opportunity to dispute liability includes an opportunity for a conference with the IRS Office of Appeals either before or after the assessment of the liability. See 26 C.F.R. §301.6330-1(e)(3), Q-E2 and A-E2; Konkel [ 2001-2 USTC ¶50,520], 2000 WL 1819417, at *3. A taxpayer who receives notice of the liability and is offered an opportunity for a hearing, but does not avail himself of the opportunity cannot dispute the liability at a collection due process hearing. See Konkel [ 2001-2 USTC ¶50,520], 2000 WL 1819417, at *3; Sego v. Commissioner [ CCH Dec. 53,938], 114 T.C. 604, 610 (2000); Goza v. Commissioner [ CCH Dec. 53,803], 114 T.C. 176, 182-83 (2000).

In this case, Pelliccio received Letter 1153 prior to each assessment. The letter notified him of the assessment and informed him of his right to appeal and his right to a hearing. Pelliccio did not avail himself of his right to appeal or to a hearing. But, because he was afforded a prior opportunity to contest the merits of his liability, the challenge was not properly raised at the collection due process hearing.

Thus, because judicial review under §6330 is limited to issues properly raised during the collection due process hearing, this court does not have jurisdiction to review the merits of Pelliccio's tax liability. The fact that the IRS officer responded to Pelliccio's challenge to liability does not expand the court's statutory grant of jurisdiction to review only those issues that were properly raised at the hearing.

The court does, however, have jurisdiction pursuant to §6330(d)(1) to affirm the notice of determination concerning collection action. Because the underlying tax liability is not at issue, the court reviews the decision of the IRS officer for abuse of discretion. See Davis v. Commissioner [ CCH Dec. 53,969], 115 T.C. 4 [35] (2000); AJP Management v. United States [ 2001-1 USTC ¶50,184], No. SA CV 99-1541 AHS ANK, 2000 WL 33122693 (C.D. Cal. Nov. 27, 2000).

In formulating the determination, the statute requires the IRS officer to take into consideration (1) verification that the requirements of any applicable law or administrative procedure have been met, (2) issues raised by the taxpayer, and (3) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. See 26 U.S.C. 6330(c)(3).

The record in this case discloses that the IRS officer engaged in the required analysis prior to issuing the determination. He reviewed the administrative file and concluded that all requirements of applicable law and administrative procedure had been met with respect to the assessments and the proposed collection action. He considered all issues properly raised and pursued by Pelliccio. Moreover, despite advising Pelliccio numerous times that he would consider any proposed alternatives to collection, Pelliccio did not propose any alternatives. Finally, the IRS officer determined that Pelliccio's legitimate concerns of intrusiveness were outweighed by the need for efficient collection of taxes. Accordingly, the court finds no basis to conclude that the IRS abused its discretion in issuing the notice of determination.

CONCLUSION

For the foregoing reasons, the government's motion to affirm determination of collection action [doc. #12] is GRANTED. The Clerk shall enter judgment for the Commissioner and close this case.

SO ORDERED.

[2005-2 USTC ¶50,517] Jack Dowdy, Plaintiff v. United States of America , Defendant.

U.S. District Court, East. Dist. Texas , Sherman Div.; 4:04-CV-232, July 22, 2005 .

[ Code Secs. 6330 and 6672]

Trust fund penalties: Responsible person: Surety: Collection Due Process hearing. --

An individual was determined to be a responsible person with respect to unpaid employment taxes. The taxpayer, who was involved in the operation of two companies until the time a surety company assumed control, did not present any evidence contradicting that he was a responsible party for tax liability under Code Sec. 6672. Instead, the evidence reflected that the majority of the unpaid employment taxes accrued prior to the time the surety company assumed control. Furthermore, whether the surety was responsible for the unpaid employment taxes had no bearing on whether the taxpayer was a responsible person for purposes of tax liability.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

SCHELL, District Judge: Pending before the court is the Defendant's motion to dismiss or for summary judgment (docket entry #9). Having considered the Defendant's motion, the Plaintiff's response (docket entry #12) and the Defendant's reply thereto (docket entry #13), the court is of the opinion that the Defendant's motion for summary judgment should be granted.

BACKGROUND

The Plaintiff ("Dowdy") was involved in the operation of U.S. Stone, Inc., U.S. Rock, LLC and BCI Utility Construction, Inc. Def. Mtn. for Summary Judgment, p. 1. On November 2, 2001 , the Internal Revenue Service ("IRS") sent Letter 1153 to Dowdy, explaining to Dowdy that U.S. Rock, LLC owed unpaid employment taxes and that the IRS intended to assess a penalty against Dowdy for the same. Def. Mtn. for Summary Judgment, Exh. A, p. 1. On May 31, 2002 , the IRS sent Letter 1153 to Dowdy, explaining to Dowdy that U.S. Stone, Inc. owed unpaid employment taxes and that the IRS intended to assess a penalty against Dowdy for the same. Def. Mtn. for Summary Judgment, Exh. B, p. 1. On August 2, 2002 , the IRS sent Letter 1153 to Dowdy, explaining to Dowdy that BCI Utility Construction, Inc. owed unpaid employment taxes and that the IRS intended to assess a penalty against Dowdy for the same. Def. Mtn. for Summary Judgment, Exh. C, p. 1. In this letter, the IRS explained the penalty as follows:

Under the provisions of Internal Revenue Code section 6672, individuals who were required to collect, account for, and pay over these taxes for the business may be personally liable for a penalty if the business doesn't pay the taxes. These taxes, described in the enclosed Form 2751, consist of employment taxes you withheld (or should have withheld) from the employees' wages (and didn't pay) or excise taxes you collected (or should have collected) from patrons (and didn't pay), and are commonly referred to as "trust fund taxes."

The penalty we propose to assess against you is a personal liability called the Trust Fund Recovery Penalty. It is equal to the unpaid trust fund taxes which the business still owes the government.

The IRS assessed Dowdy with a trust fund penalty for the employment tax liabilities of U.S. Stone, Inc., U.S. Rock, LLC and BCI Utility Construction, Inc. as follows:

___________________________________________________________________           

_______________________________________________________________________

June 2000                           $372,232.52                        

_______________________________________________________________________

September 2000                      $315,650.11                        

_______________________________________________________________________

December 2000                       $284,885.38                        

_______________________________________________________________________

March 2001                          $153,727.28                        

_______________________________________________________________________

June 2001                           $105,924.05                        

_______________________________________________________________________

Def. Mtn. for Summary Judgment, Exh. D (Form 4340). However, Dowdy did not voluntarily pay the penalties. Accordingly, on April 30, 2003 , the IRS sent to Dowdy a "Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320." Def. Mtn. for Summary Judgment, Exh. E, p. 1. In the notice, Dowdy was advised that the IRS filed a Notice of Federal Tax Lien on April 25, 2003 because Dowdy owed the following:

___________________________________________________                     

_______________________________________________________________________

September 30, 2000
                  $320,375.11                        

_______________________________________________________________________

December 31, 2000
                   $284,885.38                        

_______________________________________________________________________

March 31, 2001
                      $153,727.28                        

_______________________________________________________________________

June 30, 2001
                       $105,924.05                        

_______________________________________________________________________

The notice further advised Dowdy that he had the right to request a hearing to appeal the collection action.

Dowdy asserted his right to appeal and requested a collection due process hearing with IRS Appeals. Def. Mtn. for Summary Judgment, p. 2. A collection due process hearing was conducted on October 30, 2003 . Id. On February 17, 2004 , the IRS issued its "Notice of Determination Concerning Collection Action(s) under Section 6320 and / or 6330." Pl. Compl., Exh. A. In the Notice of Determination, the IRS issued the following summary of determination:

Notice of Federal Tax Lien is sustained. No error was found on the part of the government. No relief was given to the taxpayer. It is our determination that the lien action by the Government is appropriate as it balances the Government's need to efficiently collect the unpaid tax liabilities with taxpayer concern that the collection action be no more intrusive than necessary.

Id. Additionally, the IRS issued the following summary and recommendation:

Given the facts and circumstances of the case, is the government's filing of the Notice of Federal Tax Lien for civil penalty tax quarters ending June 30, 2000 , September 30, 2000 , December 31, 2000 , March 31, 2001 and June 30, 2001 reasonable and efficient?

Yes.

Additionally, is there an alternative method of collection available to the taxpayer that would be less intrusive and still allow the government to collect the greater of the full amount owed or the taxpayer's reasonable collection potential?

No.

In my opinion, there is not an alternative to the lien action that would be less intrusive to the taxpayer and still allow the government to collect tax liabilities for civil penalty tax quarters ending June 30, 2000 , September 30, 2000 , December 31, 2000 , March 31, 2001 and June 30, 2001 . The Notice of Federal Tax Lien should be sustained. No agreement could be reached. Taxpayer is not in full compliance at this time.

DISCUSSION AND ANALYSIS

Legal and Procedural Requirements:

A review of the administrative file indicates that statutory and administrative requirements that needed to be met with respect to the filing of the Notice of Federal Tax Lien were in fact met in this case. Appeals found no error by the government. Taxpayers [sic] did not submit any factual evidence for consideration or raise any legal or procedural issues.

Prior to the consideration of the issues raised and the hearings conducted, the Settlement Officer had no prior involvement with respect to the subject liabilities.

Issues Raised by the Taxpayer:

The Primary issue in this case was the filing of the Notice of Federal Tax Lien. Per POA [power of attorney] his client did not receive adequate notice of the assessments against his client.

During a hearing held it was determined that the appropriate notices were issued prior to assessment and taxpayer chose not to appeal those notices. Per taxpayer / POA there was enough equity in assets to full [sic] pay the liability. However, it was discovered that a surety company took over the company and its assets in which no longer were a part of the company in which Mr. Dowdy owned. Once the Surety Company took over since there was no lien filed at that time the surety company was not liable for paying over any taxes owed prior to taking over Mr. Dowdy's business. This was finally understood by POA.

Since Mr. Dowdy is not in full compliance there was not much I could do for him at this time. POA understood this and agreed that the only recourse was to issue a determination letter.

The taxpayer raised no other issues. No question of spousal relief arose.

Balancing Efficient Tax Collection With Taxpayer's Concerns of Intrusiveness:

Taxpayer did not propose an acceptable alternative to the Notice of Federal Tax Lien. Alternative methods could not be reached at this time since taxpayer is not in full compliance. Accordingly, it is determined that the Notice of Federal Tax Lien is appropriate and the only acceptable alternative, that better balances the Government's need to efficiently collect the remaining balance due with the taxpayers' concerns of intrusiveness.

Pl. Compl., Exh. A.

Dowdy subsequently appealed the collection due process hearing determination to this court. On March 14, 2005 , the Defendant (the " United States ") filed its motion to dismiss or for summary judgment. The parties agree that the sole issue pending before the court is whether IRS Appeals abused its discretion when it sustained an IRS lien filed against the Plaintiff's assets.

LEGAL STANDARD

The purpose of summary judgment is to isolate and dispose of factually unsupported claims or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). 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." FED. R. CIV. P. 56(c). A dispute about a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all reasonable doubts in favor of the party opposing the motion for summary judgment. Casey Enterprises, Inc. v. American Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981) (citations omitted). The substantive law identifies which facts are material. See id. at 248.

The party moving for summary judgment has the burden to show that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. See id. at 247. If the movant bears the burden of proof on a claim or defense on which it is moving for summary judgment, it must come forward with evidence that establishes "beyond peradventure all of the essential elements of the claim or defense." Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). But if the nonmovant bears the burden of proof, the movant may discharge its burden by showing that there is an absence of evidence to support the nonmovant's case. Celotex, 477 U.S. at 323, 325; Byers v. Dallas Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the movant has carried its burden, the nonmovant "must set forth specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e). The nonmovant must adduce affirmative evidence. See Anderson, 477 U.S. at 257.

DISCUSSION AND ANALYSIS

1. LEGAL STANDARD FOR COLLECTION DUE PROCESS REVIEW

"Section 6321 of Title 26 of the United States Code provides that, '[i]f any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ... shall be a lien in favor of the United States.' Similarly, if a person neglects or refuses to pay such tax within ten days after notice and demand for payment, the Secretary may collect such tax by levy upon property belonging to the taxpayer."

Abu-Awad v. United States [ 2003-2 USTC ¶50,716], 294 F.Supp.2d 879, 885 (S.D. Tex. 2003), quoting Roberts v. Commissioner of Internal Revenue [ 2003-1 USTC ¶50,359], 329 F.3d 1224, 1227 (11th Cir. 2003) (citing 26 U.S.C. §6331). "In the Internal Revenue Service Restructuring and Reform Act of 1998, Congress enacted new sections 6320 (pertaining to liens) and 6330 (pertaining to levies) to provide due process protections for taxpayers involved in tax collection matters." Abu-Awad [ 2003-2 USTC ¶50,716], 294 F.Supp.2d at 885 (citations omitted). "Section 6330 generally provides that the IRS cannot proceed with the collection of taxes by way of a levy on a taxpayer's property until the taxpayer has been given notice of and the opportunity for an administrative review of the matter in the form of an Appeals Office due process hearing, and, if dissatisfied, with judicial review of the administrative decision. Id. (citations omitted). "Under §6330(a), a taxpayer receiving a Notice of Intent to Levy has thirty days in which to request an administrative [collection due process] hearing." Id. (citations omitted). "On January 18, 2002, regulations were enacted outlining the [collection due process] hearing process, which apply to all levy actions commencing on or after January 19, 1999." Id. (citation omitted).

"At the hearing, '[t]he appeals officer shall ... obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.'" Id. , citing 26 U.S.C. §6330(c)(1) (remaining citations omitted). "With regard to issues that may be raised at the [collection due process] hearing, the statute provides:

(2) Issues at hearing. --

(A) In general. --The person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy, including --

(i) appropriate spousal defenses;

(ii) challenges to the appropriateness of collection actions; and

(iii) offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise.

(B) Underlying liability. --The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability."

Id. at 885-86, quoting 26 U.S.C. §6330(c)(2).

"Hence, the validity of the underlying tax liability may be raised at the [collection due process] hearing only if the taxpayer 'did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.'" Id. at 886, quoting 26 U.S.C. §6330(c)(2)(B) (remaining citations omitted). "'A 'notice of deficiency' is only required in situations where there is a deficiency ( e.g. the amount of tax imposed by the IRS exceeds the amount of tax shown by the taxpayer on his return) and not in situations where, as here, a taxpayer fails to pay the amount of tax shown on the returns.'" Id. , quoting Jones v. Commissioner of Internal Revenue [ 2003-2 USTC ¶50,584], 338 F.3d 463, 466 (5th Cir. 2003); accord Perez v. United States [ 2002-2 USTC ¶50,795], 312 F.3d 191, 196-97 (5th Cir. 2002). "'An opportunity to dispute a liability includes a prior opportunity for a conference with Appeals that was offered either before or after the assessment of the liability.'" Id. , quoting 26 C.F.R. §301.6330-1(e)(A-E2).

"Pursuant to 26 U.S.C. §6330(c)(3), the determination by the Appeals Officer at the conclusion of the administrative review process must take into consideration the following factors:

'(A) the verification [that the requirements of any applicable law or administrative procedure 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.'"

Id. , quoting 26 U.S.C. §6330(c)(3) (remaining citations omitted). "When a [collection due process] hearing is requested, the proposed levy action is suspended while the hearing and any appeals are pending." Id. (citations omitted).

"The taxpayer may obtain judicial review of an adverse determination at the administrative level by appealing within thirty days of the decision to the Tax Court or to the district court (in the event the Tax Court does not have jurisdiction of the underlying tax liability.)" Id. , citing 26 U.S.C. §6330(d)(1) (remaining citations omitted). "Because the Tax Court does not have jurisdiction with respect to employment tax liability, the district court is the proper court in which to file a complaint contesting the assessment of employment taxes." Id. at 886-87 (citation omitted). "'[J]udicial review is limited to those issues properly raised during the collection due process hearing.'" Id. at 887 (citations omitted).

"Although §6330(d) provides for judicial review of the IRS's administrative determination, it is silent as to the standard of review a district court should apply when a taxpayer appeals a Notice of Determination by the IRS Appeals Office." Id. (citation omitted). "The legislative history indicates, however, that if the validity of the underlying tax liability was properly at issue at the administrative hearing, then the review is de novo." Id. (citations omitted). "When the validity of the underlying tax assessment was not properly at issue at the [collection due process] hearing, but another issue within the scope of the administrative appeal process was raised and determined, the administrative determination is reviewed for an abuse of discretion." Id. (citations omitted).

"The Fifth Circuit equates the phrase 'abuse of discretion' with 'arbitrary and capricious,' and states that an abuse necessarily occurs where an act can only be described as 'clearly improper.'" Siquieros v. United States [ 2005-1 USTC ¶50,244], 2004 WL 2011367, *4 (W.D. Tex. 2004) (citation omitted). "Under the abuse of discretion standard, a determination will be affirmed unless the court determines with a 'definite and firm conviction' that a clear error of judgment has been committed." Id. (citation omitted).

2. ANALYSIS

Here, both Dowdy and the United States agree that this court should apply an abuse of discretion standard. Such agreement indicates that the underlying tax liability was not in dispute at the collection due process hearing. See Siquieros [ 2005-1 USTC ¶50,244], 2004 WL 2011367 at *5.

In applying the abuse of discretion standard to collection due process determinations, the court considers the following factors:

(A) verification that the requirements of any applicable law or administrative procedures have been met;

(B) issues raised by the taxpayer; and

(C) whether any proposed collection 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."

See Abu-Awad, supra.; 26 U.S.C. §6330(c)(3).

Here, factors (A) and (C) are not in contention. Dowdy's sole argument focuses on an issue raised at the collection due process hearing. According to Dowdy, a surety company, Mid-Continent Casualty, assumed control over Dowdy's business during the first quarter of 2001. Pl. Resp. to Mtn. for Summary Judgment, Exh. A, p. 1, ¶2. Dowdy avers that he demanded that Mid-Continent Casualty pay the employment tax liabilities which were owed; however, Mid-Continent Casualty refused to do so. Pl. Resp. to Mtn. for Summary Judgment, Exh. A, p. 2, ¶¶8 & 11. Accordingly, Dowdy asserts that he is not liable for the taxes owed; rather, Dowdy argues that Mid-Continent Casualty is the responsible party. ¹

"Under federal law, employers are required to withhold from their employees' paychecks their shares of federal social security taxes and income taxes." Siquieros [ 2005-1 USTC ¶50,244], 2004 WL 2011367 at *6 (citations omitted). "The employer holds the withheld taxes 'in trust' for the United States and must pay them over to the government." Id. (citations omitted). "If the employer withholds the taxes but fails to remit them, the government must credit the employees for having paid the taxes and seek the unpaid funds from the employer." Id. (citation omitted). "Section 6672(a) imposes liability for the unremitted funds on any person who is required to collect, truthfully account for, and pay over the tax, who willfully fails to do so." Id. , citing 26 U.S.C. §6672(a).

"Any person facing liability under §6672 is generally referred to as a 'responsible person.'" Id. (citation omitted). "The Fifth Circuit has taken a broad view as to who qualifies as a responsible person under §6672." Id. (citations omitted). "Whether someone is a responsible person depends on the person's status, duty, and authority." Id. (citation omitted). "Section 6672 applies to any responsible person, not just the most responsible." Id. (citation omitted).

"Factors to consider as indicia of responsible person status include whether the person:

1. is an officer or member of the board of directors;

2. owns a substantial amount of stock in the company;

3. manages the day-to-day operations of the business;

4. has the authority to hire or fire employees;

5. makes decisions as to the disbursement of funds and payment of creditors; and

6. possesses the authority to sign company checks."

Id. at *7 (citation omitted). "No single factor is dispositive." Id. (citation omitted).

Dowdy argues that Mid-Continent Casualty is the responsible party under §6672. Dowdy further argues that once Mid-Continent Casualty assumed control of his company, Dowdy lost check-signing authority as well as control over who was to be paid. Pl. Resp. to Mtn. for Summary Judgment, Exh. A, p. 2, ¶12.

Dowdy, however, does not present any evidence contradicting that he too was a responsible party for tax liability under §6672. On the contrary, the evidence reflects that the majority of the unpaid employment taxes accrued prior to the time Mid-Continent Casualty assumed control over Dowdy's business. The issue before the court is not whether Mid-Continent Casualty is a responsible party; rather, the issue is whether Dowdy is a responsible party. Whether Mid-Continent Casualty is responsible for the unpaid employment taxes has no bearing on whether Dowdy is responsible as well. Dowdy's attempt to shift responsibility to Mid-Continent Casualty does not absolve Dowdy of his own responsibility for the unpaid employment taxes. Since Dowdy did not present any summary judgment evidence to the contrary, the court concludes that Dowdy is a responsible person for tax liability under §6672. See Siquieros [ 2005-1 USTC ¶50,244], 2004 WL 2011367 at *7. As such, the IRS Appeals did not abuse its discretion when it sustained an IRS lien filed against Dowdy's assets.

CONCLUSION

The court hereby GRANTS the Defendant's motion for summary judgment (docket entry #9).

FINAL JUDGMENT

This final judgment is entered pursuant to FED. R. CIV. P. 58 and the court's "Order Granting Defendant's Motion for Summary Judgment," signed on July 22, 2005 . In accordance with the rulings set forth in the above-referenced order, it is hereby

ORDERED that the Plaintiff shall take nothing in his suit against the United States . It is further

ORDERED that each party shall be responsible for its own costs of litigation, including attorney's fees. It is finally

ORDERED that any relief not specifically granted is denied.

¹ A challenge based on doubt as to liability is not synonymous with a challenge to the underlying liability. See Siquieros [ 2005-1 USTC ¶50,244], 2004 WL 2011367 at *6.

[2003-1 USTC ¶50,401] Odell Braggs d/b/a Braggs Upholstery, Plaintiff v. United States of America , Defendant.

U.S. District Court, West. Dist. Okla. ; CIV-02-0609-HE, March 17, 2003 .

[ Code Sec. 7402]

Proper party defendant: Suits against the IRS and individual IRS officers: Official capacity.

An individual was not entitled to name the IRS and an individual IRS officer as party defendants in his suit against the United States . The IRS is not an entity subject to suit, and a suit against an individual IRS officer acting within the scope of his employment is deemed a suit against the United States . As such, the United States was the only proper party in the taxpayer's action.

[ Code Secs. 6330 and 7402]

Jurisdiction: District court: Mandamus relief: Sovereign immunity.  

A federal district court lacked jurisdiction over an individual's suit requesting mandamus relief from a Collection Due Process determination. The United States had not waived its sovereign immunity with respect the taxpayer's mandamus claims. Moreover, the Mandamus Act did not operate to expand the scope of review under Code Sec. 6330(d).

ORDER