Internal Revenue News Release IR-2000-45, June 29, 2000.


[Code Sec. 6331 ]

Levy and distraint: Continuous levy: Property subject to: Federal Payment Levy Program.--The IRS has announced that, pursuant to the new Federal Payment Levy Program (FPLP), individuals and businesses with delinquent tax liabilities may be subject to a continuous 15% levy against funds owed them by the federal government beginning in July 2000. The FPLP will be used in conjunction with the existing levy program. .

Beginning in July 2000, certain individuals and businesses with unpaid tax bills from whom the IRS has been unable to collect may be subject to a continuous 15 percent levy on money due them from the federal government.

A new program, the Federal Payment Levy Program (FPLP), is the result of a provision of the Taxpayer Relief Act of 1997. The law was passed by Congress on July 31, 1997, and signed by President Clinton on Aug. 5, 1997. Through the program, the Internal Revenue Service can collect overdue taxes through a continuous levy on certain federal payments. This program will be used in conjunction with the existing levy program.

In its initial phase, the program will reduce federal retirement benefits paid to individuals through the Office of Personnel Management and federal payments to vendors doing business with the government. Later, the program will expand to include federal employee salaries, some Social Security benefits and other federal payments. Under prior law, the IRS was able to levy on Social Security payments but was unable to levy on other types of federal payments or could only levy on amounts that exceeded a certain exemption level.

Federal payments to a delinquent taxpayer will not be included in this program in certain circumstances, for example, when a taxpayer is in bankruptcy, in a hardship situation or has applied for relief as an innocent or injured spouse. The levy program will not apply to certain types of federal insurance payments, including Black Lung benefits or SSI payments.

A taxpayer whose federal payments are subject to levy under this program may contact IRS to resolve the issue by paying the tax bill, entering into an installment agreement or proposing an offer in compromise.

The determination of whether to make a continuous levy under the program will be made on a case-by-case basis.

As part of this program, a file of delinquent taxpayer accounts will be transmitted to the Financial Management Service ( FMS ), a bureau of the U.S. Treasury, to be matched against pending federal payments. When a match is found, IRS will send the taxpayer a final notice of levy with appeal rights if one has not already been issued. If the taxpayer does not respond, the IRS will transmit the levy electronically to FMS . From that point on, FMS will reduce any federal payments subject to the levy by 15 percent.

When fully implemented, the program is projected to bring in an additional $478 million in revenues annually.

In an attempt to raise public awareness, the IRS is releasing information on the levy program to associations, organizations, unions and federal

Revenue News Release IR-2001-78,   September 7, 2001 .


[Code Sec. 6331 ]

Internal Revenue Service: Federal Payment Levy Program: Continuous levy: Federal employees.--The IRS is encouraging federal employees to immediately resolve any long-term unpaid federal tax bills to avoid having their federal salaries levied. The Service is implementing the next phase of its Federal Payment Levy Program this fall to include the salaries of 8,855 federal employees with unpaid federal tax debts. The program affects those paid through the National Finance Center , making their federal salaries subject to a 15% continuous levy. The General Accounting Office estimates this phase of the program could generate $32.8 million annually. .

The Internal Revenue Service is encouraging federal employees to resolve any long-term unpaid federal tax bills now to avoid having their federal salaries levied.

The IRS is implementing the next phase of its Federal Payment Levy Program this fall to include the salaries of 8,855 federal employees with unpaid federal tax debts. The program affects those paid through the National Finance Center , making their federal salaries subject to a 15 percent continuous levy. The General Accounting Office estimates this phase of the program could generate $32.8 million annually.

To prevent having their salaries reduced federal employees should contact the IRS at 1-800-829-7650 . Those who have already arranged to pay their tax debts through installment agreements or other IRS programs do not need to contact the IRS .

Congress approved the Taxpayer Relief Act of 1997, authorizing continuous levies on certain federal payments going to individuals and businesses, including federal employees.

The IRS applies the Federal Payment Levy Program after attempts to resolve delinquent tax accounts have failed. Salaries of those in bankruptcy, suffering hardship situations or who have applied for relief as an innocent or injured spouse will not be included in this program.

Before levies are placed, delinquent taxpayers receive a final notice with details about their tax bill, an explanation of their appeal rights, and a telephone number for inquiries and assistance. The IRS will not issue a levy if payment arrangements are made within 30 days after a final notice is sent.

If there is no response, the IRS transmits the levy electronically to the Financial Management Service, a bureau of the Treasury Department. From that point, until the debt is paid or other satisfactory arrangements are made, FMS reduces the federal employee's salary subject to the levy by 15 percent and sends it to the IRS . The balance of the salary is sent to the employee.

Cumulative Bulletin Notice 98-62, , 1998-2 CB 760

[Code Sec. 6331 ]

Liens and levies: Levy and distraint: Continuous levies, use of: Procedures: Notice.--The IRS has issued a notice clarifying that it will not begin the use of continuous levies, as provided for by new Code Sec. 6331(h) , added by the Taxpayer Relief Act of 1997 (P.L. 105-34), until such time as procedures for the new form of levy have been issued. The new provision permits the IRS to issue a continuous levy of up to 15% of any "specified payment due to or received by a taxpayer," as defined therein, and is effective for levies issued after Aug. 5, 1997. The new procedures, when issued, will require that any levy intended to be issued under Code Sec. 6331(h) must be clearly identified on the face of the levy as such. Any levy that is not clearly identified will be treated as an ordinary levy under Code Secs. 6331(a) or (e) . .

This Notice provides information about Internal Revenue Service procedures under section 6331(h) of the Internal Revenue Code of 1986.

The Taxpayer Relief Act of 1997 added section 6331(h) to the Code in order to provide for a continuous levy of up to 15 percent of any "specified payment due to or received by a taxpayer." I.R.C. §6331(h)(1) . Section 6331(h)(2) defines a specified payment as: any Federal payment other than a payment for which eligibility is based on income or assets (or both) of a payee; unemployment compensation; workmen's compensation; wages, salary, or other income to the extent they do not exceed minimum exemptions for an I.R.S. levy; supplemental security income for the aged, blind, and disabled under Social Security; state or local public welfare programs based on needs or income; and any annuity or pension under the Railroad Retirement Act or benefit under the Railroad Unemployment Insurance Act.

The Service has received questions as to whether levies are currently being served under section 6331(h) . Section 6331(h) is effective for levies issued after August 5, 1997. Section 6010(f) of the Internal Revenue Service Restructuring and Reform Act of 1998 clarifies that the new continuous levy is an option for collection that is exercised at the Service's discretion. As of this date, the Service has no procedures for serving levies under section 6331(h) , and no such levies have been issued. Procedures will be announced before any levies are issued under section 6331(h) .

Because section 6331(h) does not identify a format for serving a continuous levy, there may be confusion as to whether the levy is a continuous levy under section 6331(h) or an ordinary form of levy under sections 6331(a) or 6331(e) . When the continuous levy procedures are issued, they will require that any levy intended to be issued under section 6331(h) must be clearly identified, on the face of the levy, as a levy made pursuant to section 6331(h) . Any levy that is not clearly identified, on the face of the levy, as a section 6331(h) levy will be treated as an ordinary levy under sections 6331(a) or 6331(e) .

The principal author of this notice is Walter Ryan of the Office of Assistant Chief Counsel (General Litigation). For further information regarding this notice contact Mr. Ryan at 202-622-3610 (not a toll-free call).

[2002-1 USTC ¶50,347] United States of America , Plaintiff v. James I. Hall, Defendant

U.S. District Court, So. Dist. Ind., Evansville Div., EV 99-0147-C-Y/H, 2/12/2002

[Code Secs. 61 and 6211 ]

Computation of deficiency: Proof of arbitrariness: Gross income: Evidence.--The government was entitled to partial summary judgment with respect to a nonfiling individual's delinquent tax liabilities. The tax assessments against him were deemed presumptively correct, and the taxpayer failed to carry his burden that they were arbitrary or erroneous merely because they were based on "hearsay" of IRS special agent reports. His argument that there was no substantive evidence that he received unreported income was rejected in light of an IRS special agent's report disclosing a foundation for the assessments, including payroll records and documentation of unemployment compensation.
[Code Sec. 6331 ]

Tax levies: Continuous levy: Application of proceeds.--The proceeds of a continuous levy on a nonfiling individual's pension were properly credited to his account. The government's statement of material facts, which was deemed undisputed, stated that all appropriate credits had been applied.

[Code Secs. 6502 and 6503 ]

Suits by the United States : Statute of limitations: Suspension of running of period of limitations: Bankruptcy: Tax protestors: Individuals subject to tax.--A nonfiling individual was not entitled to summary judgment in connection with the government's suit to recover his unpaid income taxes for four tax years. The government filed its suit within the ten-year statutory period of Code Sec. 6502(a) . The limitations period commenced when the IRS assessed the tax and was suspended from the date of the taxpayer's Chapter 7 bankruptcy filing until six months after his bankruptcy discharge. The suspension period was added to the ten-year limitations period, within which the government filed suit to recover the unpaid taxes. The taxpayer's contention that he was not a taxpayer was meritless.

[Code Sec. 6871 ]

Bankruptcy discharge: Burden of proof: Failure to file returns.--An individual failed to support his contention that his delinquent taxes were discharged in his Chapter 7 bankruptcy case. He bore the burden of proving that his liability was discharged, but merely argued that the burden of proving that his debts were nondischargeable was on the government. Regardless, he failed to file tax returns for all tax years at issue and, thus, the exception to discharge of §523(a) of the Bankruptcy Code applied.

Jeffrey L. Hunter, United States Attorney's Office, Indianapolis, Ind. 46204, Douglas W. Snoeyenbos, Department of Justice, Washington, D.C. 20530, for plaintiff.

ENTRY ON UNITED STATES'S MOTION FOR PARTIAL SUMMARY JUDGMENT and DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

I. Introduction

YOUNG, Judge:

The United States of America (" United States ") filed this action against James I. Hall ("Hall"), seeking the unpaid balances of federal income tax assessments against him for the years 1981 through 1985, plus interest and any statutory additions. By motion, the United States seeks determination as a matter of law that Hall is liable for the unpaid balances for the years 1981 through 1984. ¹ In addition to filing his response to the United States's motion, Hall filed his own motion for summary judgment ("cross-motion for summary judgment"), arguing that the United States is statutorily barred from filing its Complaint against him and that the United States fails to state a claim. After reviewing the motions, the parties' arguments, and the facts and law of this matter, the court finds that Hall's cross-motion for summary judgment shall be denied and the United States 's motion for partial summary judgment shall be granted.

II. Jurisdiction

This court exercises jurisdiction over this matter pursuant to 28 U.S.C. §1340 and 1345 and 26 U.S.C. §7402.

III . Undisputed Material Facts

1. The United States filed the instant Complaint against Hall on September 24, 1999. (Plaintiff's Fact No. 1).

2. The calendar year 1981 was assessed on December 13, 1988. (Plaintiff's Fact No. 2).

3. The calendar year 1982 was assessed on December 13, 1988. (Plaintiff's Fact No. 3).

4. The calendar year 1983 was assessed on December 13, 1988. (Plaintiff's Fact No. 4).

5. The calendar year 1984 was assessed on June 26, 1989. (Plaintiff's Fact No. 5).

6. Delegates of the Secretary of the Treasury made assessments of income tax against Hall as demonstrated by the following chart.

Assessment Date                                            Tax Year  Amount

December 13, 1988 ........................................   1981   $7,732.14

December 13, 1983 ........................................   1982   $6,902.00

December 13, 1988 ........................................   1983   $8,257.99

June 26, 1989 ............................................   1984   $5,428.00

( United States Fact No. 2).

7. The assessments against Hall were based on amounts of income that the Internal Revenue Service (" IRS ") determined that he received during the years at issue. Hall received income from various employers, from the Indiana Department of Employment Security, and as interest income from Tell City National Bank.

8. At the time the assessments were made, the IRS had information indicating that Hall had an adjusted gross income of at least $33,370.85 for the year 1981, $31,335.18 for the year 1982, $38,591.84 for the year 1983, and $23,834.20 for the year 1984. ( United States Fact No. 2) (citing United States Ex. 1, Declaration of Douglas W. Snoeyenbos, at 9).

9. Interest pursuant to 26 U.S.C. §6601, and other statutory additions, have accrued on the unpaid balance assessment of income tax, so that as of March 15, 2001 , Hall owed the sum of $113,022.11 with respect to them. ( United States Fact No. 4) (citing Declaration of Cindy A. Ragains, at ¶3).

10. On February 5, 1993, Hall filed a Chapter 7 bankruptcy proceeding with the United States Bankruptcy Court for this district, which was assigned cause number 93-70115- BHL -7. ( United States Additional Fact No. 1).

11. On May 20, 1993, the United States Bankruptcy Court entered an order of discharge in Hall's bankruptcy case. ( United States Additional Fact No. 2).

IV. Discussion

A. Summary Judgment Standard

Pursuant to Trial Rule 56(c), a party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." FED . R. CIV . P. 56(c). The record and all reasonable inferences therefrom must be viewed in the light most favorable to the nonmoving party. National Soffit & Escutcheons, Inc. v. Superior Sys. Inc., 98 F.3d 262, 264 (7th Cir. 1996).

The moving party bears the burden of demonstrating the absence of a triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden may be met by demonstrating "that there is an absence of evidence to support the non-moving party's case." Id. at 325. If the moving party meets its burden, the adverse party "may not rest upon the mere allegations or denials of the adverse party's pleading," but must present specific facts to show that there is a genuine issue of material fact. FED . R. CIV P. 56(e); see also National Soffit, 98 F.3d at 265 (citing Hughes v. Joliet Correctional Ctr., 931 F.2d 425, 428 (7th Cir. 1991)).

Although the United States filed its motion for summary judgment prior to Hall filing his cross-motion for summary judgment, the court will examine Hall's cross-motion for summary judgment first.

B. Hall's Cross-Motion for Summary Judgment

Hall moves for summary judgment on two bases: (1) that the United States is statutorily barred from seeking judgment for an assessment for calendar years 1981, 1982, 1983, and 1984 because the time period set forth by 26 U.S.C. §6502(a) lapsed and (2) the Complaint fails to state a claim as it fails to allege what statute makes Hall liable for payment of the assessment. The court notes that Hall did not file a reply brief to the United States 's response to Hall's cross-motion for summary judgment.

1. Statuary Period of 26 U.S.C. §6502(a)

The Internal Revenue Code ("IRC") provides that collection of a tax by levy or proceeding in court must commence within ten years after the assessment of the tax. 26 U.S.C. §6502(a). This period of limitations, however, may be suspended "for the period the assets of the taxpayer are in control or custody of the court in any proceeding before any court of the United States . . . and for 6 months thereafter." 26 U.S.C. §6503(b).

The court has taken judicial notice of the fact that Hall filed a Chapter 7 bankruptcy proceeding in this district on February 5, 1993 . The proceeding was closed, and Hall's debts discharged, on March 20, 1993 . Therefore, pursuant to section 6503(b) of the Internal Revenue Code, the statute of limitations was suspended from the date of the filing, February 5, 1993 , to six months after the May 20, 1993 discharge, or November 20, 1993 . Thus, the period for filing an action against Hall was suspended 288 days, and this 288 day period must be added to the ten-year limitation set forth in section 6502(a).

In this matter, the federal assessments against Hall were made on December 13, 1988 , and June 26, 1989 . Taking the earlier assessment of December 13, 1988 , and adding 288 days means that the United States had until September 27, 1999 to initiate its action against Hall. Since this matter was filed prior to that date, on September 24, 1999 , the United States filed its action timely. Accordingly, Hall's cross-motion for summary judgment based upon the United States 's failure to file the instant Complaint within the statutory time period is denied.

2. Failure to State a Claim

Hall also argues that the Complaint does not specify the statute that makes him liable for the payment of the assessments; specifically, Hall states that the Complaint does not allege any reason why he is a "taxpayer" under the relevant IRS provisions.

The term "taxpayer" is defined under the IRC as "person subject to any internal revenue tax." 26 U.S.C. §7701(a)(14); see also 26 U.S.C. §1313(b) ("Notwithstanding section 7701(a)(14), the term 'taxpayer' means any person subject to a tax under the applicable revenue law.").

Hall alleges that the two definitions set forth at 26 U.S.C. §7701(a)(14) and 26 U.S.C. §1313(b) negate one another, and that the IRC is "loaded with terms of art." (Defendant's Brief in Support of Motion for Summary Judgment, at 3-4). After reviewing Hall's argument, the court finds that it lacks merit and notes that courts have consistently rejected claims where a defendant asserts that he is not a taxpayer. See, e.g., United States v. Studley [86-1 USTC ¶9390], 783 F.2d 934, 937 n.3 (9th Cir. 1986) ("We note that this argument [argument that defendant is an individual but not a taxpayer] has been consistently and thoroughly rejected by every branch of the government for decades. Indeed advancement of such utterly meritless arguments is now the basis for serious sanctions imposed on civil litigants who raise them."); Lonsdale v. United States [90-2 USTC ¶50,581], 919 F.2d 1440, 1448 (10th Cir. 1990) (finding that the argument that "individuals . . . are not 'persons' subject to taxation under the Internal Revenue Code" is "completely lacking in legal merit and patently frivolous."). ² Accordingly, Hall's cross-motion for summary judgment based upon the United States 's failure to state a claim is denied.

C. United States 's Motion for Partial Summary Judgment

The court now addresses the United States 's motion for partial summary judgment. The United States seeks a determination as a matter of law that Hall is liable for the unpaid balance of assessments of income tax for the years 1981 through 1984, plus interest and other statutory additions; however, it does not seek judgment as a matter of law for the year 1985 at this time because it is still gathering evidence in support of its claim for that year.

In support of its motion, the United States points to the fact that assessments are deemed presumptively correct, unless arbitrary or erroneous, and that Hall will not be able to show by a preponderance of the evidence that he does not owe the assessments made against him. Hall, however, responds that the assessments should not be afforded the presumption of correctness because the United States seeks judgment on the absence of any admissible evidence, and there is no substantive evidence that the taxpayer received unreported income. (Defendant's Response, at 3-5) (citing three 9th Circuit opinions: United States v. Stonehill [83-1 USTC ¶9285], 702 F.2d 1288, 1293 (9th Cir. 1983); Rapp v. C.I.R. [85-2 USTC ¶9750], 774 F.2d 932, 935 (9th Cir. 1985); Weimerskirch v. C.I.R. [79-1 USTC ¶9359], 596 F.2d 358, 360-61 (9th Cir. 1979)). ³ In addition, Hall argues that his tax debts were discharged in his bankruptcy proceeding.

1. Whether the Assessment is Afforded a Presumption of Correctness

IRS assessments are presumed to be correct and the burden then shifts to the taxpayer to show by a preponderance of the evidence that the determination is incorrect. See, e.g., Estate of Starkey v. United States [2000-2 USTC ¶60,381], 223 F.3d 694, 698 (7th Cir. 2000) (citing United States v. Janis [76-2 USTC ¶16,229], 428 U.S. 433, 440 (1976)).

"In certain quite limited circumstances, however, courts recognize that an assessment should not be accorded even a rebuttable presumption of correctness. For example, when the assessment is shown to be 'without rational foundation' or 'arbitrary and erroneous,' the presumption should not be recognized. . . As long as the procedures used and the evidence relied upon by the government to determine the assessment had a rational foundation, the inquiry focuses on the merits of the tax liability, not on IRS procedures." ZuHone v. C.I.R. [89-2 USTC ¶9512], 893 F.2d 1317, 1325 (7th Cir. 1989) (citations omitted).

"All that is required to support the presumption [of correctness] is that the Commissioner's determination have some minimal factual predicate." Pittman v. C.I.R. [96-2 USTC ¶50,658], 100 F.3d 1308, 1317 (7th Cir. 1996). The presumption of correctness attaches to the Commissioner's determination virtually regardless of the information, procedures or policies used because the presumption recognizes the structural inequality of information in the possession of the Commissioner relative to the taxpayer. ZuHone [89-2 USTC ¶9512], 883 F.2d at 1325-26.

Contrary to Hall's assertions, the court finds that the Commissioner's assessment bears a rational foundation and is not arbitrary or erroneous. Hall's argument that the assessment is arbitrary rests on his presumption that the report prepared by IRS Special Agent Marilyn A. Evers ("Agent Evers"), ⁴ which was relied upon by the Commissioner, is hearsay and, therefore, inadmissible. The court points out, however, that "[t]he Commissioner's determination may often rest upon hearsay or other inadmissible evidence, and we know of no rule of law calling for a review of the materials that were before the Commissioner in order to ascertain whether he relied upon improper evidence.' " ZuHone [89-2 USTC ¶9512], 883 F.2d at 1325 (quoting Jackson [ CCH Dec. 36,460], 73 T.C., at 400); see also Portillo v. C.I.R. [91-2 USTC ¶50,304], 932 F.2d 1128, 1133 (5th Cir. 1991) ("The presumption of correctness generally prohibits a court from looking behind the Commissioner's determination even though it may be based on hearsay or other evidence inadmissible at trial.") (citations omitted); Anastasato v. C.I.R. [86-2 USTC ¶9529], 794 F.2d 884, 886-87 (3rd Cir. 1986) ("A court usually will not look behind the Commissioner's determination, even though it may be based on hearsay or other evidence inadmissible at trial") (citing Dellacroce v. Commissioner [ CCH Dec. 41,440], 83 T.C. 269, 280 (1984)). Thus, the Commissioner's assessment is not deemed arbitrary simply because it relied on hearsay such as IRS Special Agent reports.

In addition, Hall argues that the assessment is arbitrary because there is no substantive evidence that he received unreported income. The court disagrees with this argument. In her report, Special Agent Evers details Hall's income-generating activity for the relevant time period and demonstrates that the IRS had a factual predicate for each dollar of unreported income on which the assessments were based. Specifically, Special Agent Evers obtained Hall's payroll records from his employers for the 1981-1984 time period as well as documentation of Hall's unemployment compensation from 1982 and 1983.

Hall has failed to demonstrate that the assessment was arbitrary and excessive or without factual foundation to remove the presumption of correctness from the Commissioner's assessment. Thus, the assessment is deemed presumptively correct. The burden thus shifts to Hall to submit evidence showing that he did not have the income on which the assessments were based. Hall, however, simply argued there was no foundation for the United States 's assessments and he did not submit any evidence contradicting the United States 's allegation that Hall received income during the relevant time period.

2. Whether Tax Debts Were Discharged in Bankruptcy Proceeding

Hall further claims that even if he is liable for taxes during 1981 through 1984, that liability was discharged during his Chapter 7 bankruptcy proceeding.

A claim that a debt was discharged in bankruptcy is an affirmative defense that must be proven by the party asserting it. FED . R. CIV . P. 8(c). Thus, Hall bears the burden of showing his liability was discharged. Hall has not met this burden as he simply argued that the burden of proving his debts are non-dischargeable is on the United States . However, as pointed out by the United States , pursuant to the Bankruptcy Code section 523, a debtor is not discharged from a debt for a tax with respect to which a return, if required, was not filed. 11 U.S.C. §523(a)(1)(B)(ii).

It is undisputed that Hall did not file federal income tax returns for the periods at issue, 1981 through 1984. Thus, the exception to discharge is invoked and Hall's argument that his income tax liability was discharged fails.

3. Whether Levy Proceeds Have Been Credited

Hall states that the United States has not credited any of the proceeds from a continuous levy against his Boilermaker-Blacksmith National Pension Trust. Hall indicates that he was notified by a facsimile letter from Pension Manager Mary Pierce, dated July 2, 2001 , that Hall's $11,349,45 of pension payments were mailed directly to the IRS . The United States argues that the letter is inadmissible as hearsay. In addition, the United States argues that neither Hall nor the letter suggests the dates on which the pension payments were sent to the IRS and for what tax years. If the pension payments were sent to the IRS prior to March 27, 2002 , the date Cindy Ragains made her computations, then the United States asserts that the payment was considered in the computations.

The court notes that this letter, which is attached to Hall's response brief, has not been authenticated. However, if it is verified that Hall's pension payments were mailed to the IRS on his behalf, then Hall should be credited the amount. Since the United States 's Statement of Material Facts has been deemed undisputed and since it states that all appropriate credits have been applied, the court shall presume that Hall was properly credited.

4. Summary

Based on the reasoning set forth in Section C.1., the court determined that the assessments made against Hall are presumptively correct. Hall, however, did not present any evidence rebutting the allegation that he received income during the relevant time period. The court, therefore, finds there is no genuine issue of material fact in this matter, and grants the United States 's motion for summary judgment.

V. Conclusion

For the reasons set forth above, the court finds that the United States's motion for partial summary judgment as to tax years 1981-1984 shall be granted and Hall's cross-motion for summary judgment shall be denied.

It is so ordered.

¹ The United States does not seek judgment at this time for the year 1985 because it is still gathering evidence to support its claim for that year.

² The court notes that when citing to these cases in its brief, the United States stated that it was not seeking an award of sanctions at this time; however, it intends to seek sanctions if Hall raises the argument again in the future. ( United States 's Response in Opposition to Defendant's Motion for Summary Judgment, at 3).

³ To survive summary judgment, a nonmovant must set forth "specific facts showing that there is a genuine issue for trial." FED . R. CIV . P. 56(f). The court notes that Hall failed to file a response to the United States 's statement of facts nor did he file a statement of additional facts, setting forth in any genuine issues of material fact, pursuant to Local Rule 56.1. L.R. S.D. IND . 56.1(f). Thus, the United States 's statement of facts is deemed admitted. See, e.g., Corder v. Lucent Techs., Inc., 162 F.3d 924, 927 (7th Cir. 1998); Flaherty v. Gas Research Inst., 31 F.3d 451, 453 (7th Cir. 1994)

⁴ Contrary to Hall's arguments, this report has been properly authenticated per Rule 901 of the Federal Rules of Evidence.

2000-1 USTC ¶50,289] United States of America , Plaintiff v. John W. Marsh, Sean Marsh & Heather Marsh, as Trustees of the Marsh Trust, and Bank of Hawaii , Defendants

U.S. District Court, Dist. Hawaii , Civ. 99-00355 SOM, 3/2/2000, 89 FSupp2d 1171.

[Code Sec. 7433 ]

IRS levy: Civil damages: Unauthorized collection: Retirement payments: Time for filing suit: Two-year limitations period.--A sole proprietor's claim for damages against the IRS based on allegations that the notice of levy on his retirement payments was invalid because it was not properly countersigned and that the IRS should have filed a notice of levy for each semi-monthly retirement payment was barred by the two-year limitations period. The taxpayer knew of the actions giving rise to these claims more than two years before asserting his counterclaim.

[Code Sec. 7433 ]

Civil damages: Time for filing suit: Two-year limitations period: Administrative remedies, exhaustion of.--The two-year limitations period for commencing damage claims against the IRS was not tolled pending exhaustion of a sole proprietor's administrative remedies. The taxpayer was not required to exhaust his administrative remedies before filing an action for damages; however, he chose to pursue administrative remedies rather than file suit in federal court. Since he could have filed suit as soon as his cause of action accrued, the statute of limitations applicable to his Code Sec. 7433 claims was not tolled. Moreover, the two-year limitations period was not equitably tolled since the taxpayer did not show that an inequitable event prevented his timely action.

[Code Secs. 6331 , 6334 and 7433 ]

IRS levy: Civil damages: Unauthorized collection: Retirement payments: Continuous levy: Exemption amounts.--A sole proprietor's contention that he did not receive the proper exemption amount of his retirement payments because the IRS was only allowed to levy 15% of each semi-monthly payment was rejected. The taxpayer erroneously construed Code Sec. 6331(h) as eliminating the right of the IRS to levy amounts exceeding the minimum exemption on wages, salary, and other income and limiting any continuous levy to 15% of the exempt amount. Instead, Code Sec. 6331(h) expanded the IRS 's ability to levy against funds previously exempt from levy under Code Sec. 6334 .

ORDER GRANTING SUMMARY JUDGMENT ON THE COUNTERCLAIM

MOLLWAY, District Judge:

Plaintiff United States of America (" United States ") has filed this action to collect unpaid federal employment and unemployment taxes owed by Defendant John W. Marsh ("Marsh"). Marsh has filed a Counterclaim against the United States for unauthorized collection practices pursuant to 26 U.S.C. §7433.

The United States has moved for summary judgment on the Counterclaim. Because all of the allegations contained in the Counterclaim are either time-barred or not cognizable, the court grants the United States ' motion.

BACKGROUND

Between 1985 and 1989, Marsh operated a sole proprietorship called S & H Masonry. During that time, Marsh paid wages to various S & H Masonry employees but failed to pay federal employment and unemployment taxes. Marsh admits that the assessments against him for the unpaid taxes are correct. See Stipulation Regarding Amount of Assessments at Issue and to Continue Hearing on United States ' Motion to Dismiss Counterclaim of John W. Marsh; Order filed on December 3, 1999.

To collect the unpaid taxes Marsh owed, the Internal Revenue Service (" IRS ") served a Notice of Levy dated November 18, 1996 , ("November 18, 1996 levy") on the Employees' Retirement System of the State of Hawaii ("Retirement System"). See Declaration of Rebecca McKenzie-Young ("McKenzie-Young Dec.") ¶3, attached to Plaintiff's Motion to Dismiss; Exhibit 1, attached to Plaintiff's Motion to Dismiss. Marsh, a retired police officer, was receiving retirement payments ¹ from the Retirement System. The November 18, 1996 levy was on Form 668-A(c) and indicated that Marsh owed the IRS $510,219.96.

On December 2, 1996 , Marsh's counsel wrote a letter to Revenue Officer Rebecca McKenzie-Young asking that the November 18, 1996 levy on the Retirement System be released because the IRS "is only entitled to any amounts pursuant to levy on a pension plan where the taxpayer has an unconditional right to demand payment from the plan." See Exhibit 4, attached to Plaintiff's Motion to Dismiss. Marsh's counsel argued that, because Marsh was only entitled to receive payments in the future, the retirement payments could not be levied. Id. Marsh's counsel further asked the IRS to honor his power of attorney and communicate only through him. Id.

On December 9, 1996 , the IRS responded to Marsh's counsel's December 2, 1996 letter, explaining that the IRS had not realized that the power of attorney was relevant because the power of attorney form executed by Marsh's counsel had not included Marsh's employer identification number. See Exhibit B, attached to Defendants' Opposition to Plaintiff's Motion to Dismiss. The IRS said that it would research Marsh's "right to demand payment from his pension plan." Id.

At some point, Marsh's counsel also complained to the IRS that the November 18, 1996 levy was invalid because it was not properly signed by a manager. See Exhibit H, attached to Defendants' Opposition to Plaintiff's Motion to Dismiss.

The IRS served its Final Demand for payment on the Retirement System on January 6, 1997 . See McKenzie-Young Dec. ¶4; Exhibit 2, attached to Plaintiff's Motion to Dismiss. On January 15, 1997 , the Retirement System honored the November 18, 1996 levy and remitted $1,188.83 to the IRS . See McKenzie-Young Dec. ¶5; Exhibit 3, attached to Plaintiff's Motion to Dismiss.

The IRS served another Notice of Levy dated January 17, 1997 on the Retirement System ("January 17, 1997 levy"). The January 17, 1997 levy was also on Form 668-A(c) but stated a different amount--$496,309.31--owed by Marsh. This levy was signed by an IRS manager. See Exhibit D, attached to Defendants' Opposition to Plaintiff's Motion to Dismiss.

The IRS also served a Notice of Levy dated September 19, 1997 ("September 19, 1997 levy"). This levy, however, was on Form 668-W(c). ² See Exhibit G, attached to Defendants' Opposition to Plaintiff's Motion to Dismiss.

Between January 15, 1997 and October 15, 1997 , the IRS levied $22,572 of Marsh's retirement payments, which was all but $19 of the amount Marsh was entitled to receive. See Exhibit H at 4, attached to Defendants' Opposition to Plaintiff's Motion to Dismiss.

"Without notice or explanation, on October 31, 1997 , the IRS reduced the levied amount to $963." Id. The balance of $299.58 was remitted to Marsh.

On May 17, 1999 , the United States filed this action. It amended the Complaint on May 24, 1999 . The United States seeks to reduce to judgment unpaid federal employment and unemployment taxes assessed against Marsh and to set aside allegedly fraudulent transfers of two parcels of real property from Marsh to the Marsh Trust.

On July 22, 1999 , Marsh filed a Counterclaim against the United States for damages for unauthorized collection practices under 26 U.S.C. §7433. Marsh claims that the IRS acted improperly in attempting to collect the taxes it claims Marsh owes. Marsh seeks the return of all monies levied, $1,000,000 in damages, and attorney's fees and costs.

The United States has moved to dismiss the Counterclaim on statute of limitations grounds under Fed.R.Civ.P. 12(b)(1), which concerns lack of subject matter jurisdiction. ³ The United States relies on the wrong court rule. "[F]ederal statutory time limitations on suits against the government are not jurisdictional in nature." Irwin v. Department of Veterans Affairs, 498 U.S. 89 (1990), reh'q denied, 498 U.S. 1075 (1991). See also Capital Tracing, Inc. v. U.S. [95-2 USTC ¶50,473], 63 F.3d 859, 861 n.3 (9th Cir. 1995). Accordingly, the United States' motion is one under Rule 12(b)(6), not under Rule 12(b)(1). Because the United States, however, has submitted evidence beyond the pleadings, the court treats this motion as one for summary judgment. See Keams v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th Cir. 1997) (if matters outside the pleadings are considered, a motion to dismiss under Rule 12(b)(6) is treated as one for summary judgment); Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996). ⁴

STANDARD

Summary judgment shall be granted when

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). One of the principal purposes of summary judgment is to identify and dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).

Summary judgment must be granted against a party who fails to demonstrate facts to establish what will be an essential element at trial. Id. at 322. The burden initially lies with the moving party to identify for the court "the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp., 477 U.S. at 323). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (footnote omitted). The nonmoving party may not rely on the mere allegations in the pleadings and instead must set forth "specific facts showing that there is a genuine issue for trial." Id. At least some " 'significant probative evidence tending to support the complaint' " must be produced. Summers v. A. Teichert & Son, Inc., 127 F.3d 1150, 1152 (9th Cir. 1997) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). "[I]f the factual context makes the non-moving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial." California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (citing Matsushita Elec. Indus. Co., Ltd., 475 U.S. at 587), cert. denied, 484 U.S. 1006 (1988).

However, when "direct evidence" produced by the moving party conflicts with "direct evidence" produced by the party opposing summary judgment, "the judge must assume the truth of the evidence set forth by the nonmoving party with respect to that fact." T.W. Elec. Serv., 809 F.2d at 631. All evidence and inferences must be construed in the light most favorable to the nonmoving party. Id. Inferences may be drawn from underlying facts not in dispute, as well as from disputed facts that the judge is required to resolve in favor of the nonmoving party. Id.

DISCUSSION

I. The Statute of Limitations Bars Two Claims In The Counterclaim.

In his Counterclaim, Marsh has sued the United States for monetary damages arising from the IRS 's collection of taxes it claims Marsh owes. The United States, however, "is immune from suit save as it consents to be sued." United States v. Mitchell, 445 U.S. 535, 538 (1980) (quoting United States v. Sherwood, 312 U.S. 584, 586 (1941)), reh'g denied, 446 U.S. 992 (1980) The party bringing suit against the United States bears the burden of proving that sovereign immunity has been waived. See Cato v. United States, 70 F.3d 1103, 1107 (9th Cir. 1995); Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983), cert. denied, 466 U.S. 958 (1984).

The United States has consented to be sued for damages when an IRS employee intentionally or recklessly disregards any provision of the Internal Revenue Code, or any regulation promulgated under the Internal Revenue Code in connection with the collection of federal tax. See 26 U.S.C. §7433 (1997). ⁵

"[W]hen consent to sue the United States is granted, such as by way of §7433, the precise terms, conditions, and qualifications of such consent must be scrupulously followed." Caparaso v. Commissioner of Internal Revenue, 907 F.Supp. 1235, 1239 (N.D. Ind. 1995) (citing Long Island Radio Company v. NLRB, 841 F.2d 474, 477 (2d Cir. 1988)).

An action to enforce liability under section 7433 "may be brought only within two years after the date the right of action accrues." 26 U.S.C. §7433(d)(3) (1997). A cause of action accrues "when the taxpayer has had a reasonable opportunity to discover all essential elements of a possible cause of action." 26 C.F.R. §301.7433-1(g)(2).

Marsh claims that section 7433 was violated because: (1) the November 18, 1996 levy "was not properly countersigned"; (2) a Notice of Levy was not served for each semi-monthly retirement payment; and (3) the September 19, 1997 exempt amount was incorrect. ⁶ The first two of these claims are time-barred. Marsh filed his Counterclaim on July 22, 1999 . Thus, the section 7433 claim based on any of these allegations must have accrued on or before July 22, 1997 .

A. Marsh's Allegation That The First Levy Was Not Properly Signed Is Time-Barred.

Marsh alleges that the November 18, 1996 levy "was not properly countersigned by the IRS District Authorized Person." Counterclaim ¶7. According to Marsh's attorney, on December 2, 1996 , he wrote to McKenzie-Young to request that she release the levy. Marsh's attorney says that Group Manager Rebecca Nadler responded to his concerns, "agree[ing] that the 11/8/96 levy was not properly issued as it was not signed as required." See Exhibit H at 3, attached to Defendants' Opposition to United States' Motion to Dismiss. "The IRS subsequently acknowledged that the [l]evy was erroneous and a mistake and reissued a signed [l]evy in February 1997." Counterclaim ¶7. Because Marsh knew of any section 7433 claim based on this allegation as early as December 2, 1996 , the claim is time-barred. ⁷

B. Marsh's Allegation That a Notice of Levy Should Have Been Filed For Each Semi-Monthly Payment Is Time-Barred.

Marsh claims that section 7433 was violated because the IRS failed to file a separate Notice of Levy for each semi-monthly retirement payment made to Marsh by the Retirement System. According to Marsh, the November 18, 1996 and January 17, 1997 levies were "snapshot" levies that entitled the IRS to only the particular semi-monthly payments owed to Marsh at the times of the two levies. The Retirement System made multiple remittances to the IRS under these levies.

This court need not decide whether the IRS should have filed a separate "snapshot" levy addressing each semi-monthly payment. Even if the court were to assume the correctness of Marsh's argument, his section 7433 claim would still be time-barred. The Retirement System made its first payment to the IRS on January 15, 1997 . Thereafter, the Retirement System remitted $1188 to the IRS twice a month. At the same time, the Retirement System sent Marsh the remaining one dollar that had not been levied by the IRS . From this repeated semi-monthly payment of only one dollar directly to him, Marsh knew well before July 1997 that the Retirement System was continually remitting $1188 semimonthly to the IRS . Accordingly, Marsh's allegation that the IRS should have filed a Notice of Levy for each semi-monthly retirement payment is time-barred.

C. The Limitations Period Was Not Tolled While Marsh Was Pursuing Nonmandatory Administrative Remedies.

Marsh claims that summary judgment should not be granted on the Counterclaim because the limitations period was tolled while he was pursuing his administrative remedies.

A plaintiff is not required to exhaust administrative remedies before filing a section 7433 action. See 26 U.S.C. §7433(d)(1) (1997). Instead, "[t]he amount of damages awarded . . . may be reduced if the court determines that the plaintiff has not exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service." Id.

When a complainant is not required to exhaust his administrative remedies before bringing suit, the Supreme Court has held that the statute of limitations is not tolled, even if the complainant chooses to seek optional administrative remedies. See Delaware State College v. Ricks, 449 U.S. 250, 261 (1980) (holding a 42 U.S.C. §1981 claim untimely as "the pendency of a grievance, or some other method of collateral review of an employment decision, does not toll the running of the limitations periods"); Johnson v. Railway Exp. Agency, Inc., 421 U.S. 454, 460-61 (1975) (refusing to toll §1981 statute of limitations even though a Title VII complaint was pending in the administrative agency); see also Andrews v. Consolidated Rail Corp., 831 F.2d 678, 684 (7th Cir. 1967) (pursuit of nonmandatory administrative remedy under Rehabilitation Act did not toll the statute of limitations); Smith v. McClammy, 740 F.2d 925, 927 (11th Cir.) ("[s]ince exhaustion of administrative remedies is not a prerequisite to filing suit, the statute would not be tolled pending pursuit of administrative remedies but would begin to run on the date the cause of action accrued"), reh'g denied, 748 F.2d 690 (11th Cir. 1984).

Thus, the statute of limitations applicable to a section 7433 action is not tolled pending exhaustion of administrative remedies, but runs from the time the cause of action accrued. Marsh chose to pursue administrative remedies rather than immediately sue in federal court. Although administrative remedies were an option, they were not a prerequisite to filing suit. Because Marsh could have sued immediately rather than awaiting the result from the administrative agency, Marsh's section 7433 claim was not tolled. ⁸

D. The Limitations Period Was Not Equitably Tolled.

Nor is the statute of limitations on his section 7433 claim equitably tolled. The doctrine of equitable tolling of a statute of limitations may be applied in suits against the federal government. Irwin v. Department of Veteran Affairs, 498 U.S. 89, 95-96 (1990). However, "tolling is an extraordinary remedy which should be extended only sparingly." Justice v. United States, 6 F.3d 1474, 1479 (11th Cir. 1993) (citing Irwin, 498 U.S. at 96).

Courts should toll a statute of limitations only when there is an inequitable event that prevents timely action. Id. The Supreme Court has recognized equitable tolling only "where the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period, or where the complainant has been induced or tricked by his adversary's misconduct into allowing the filing deadline to pass." Irwin, 498 U.S. at 96 (footnotes omitted). ⁹

Neither of these two circumstances applies here. Marsh did not file a defective pleading during the statutory period, and there is no evidence that Marsh was induced or tricked by the United States into allowing the filing deadline to pass.

Marsh argues that equitable tolling is warranted because the IRS initially told Marsh that the first and second levies were proper but turned around and served the third levy, which included an exempted amount. According to Marsh, McKenzie-Young told Marsh's attorney in February 1997 that the continuous levy form (668-W) would be issued. Two weeks later, IRS District Counsel Henry O'Neill told Marsh's counsel that the first two levies were proper. Seven months later, the IRS issued the Form 668-W (third levy). See Defendants' Supplemental Memo. at 105.

Marsh does not indicate how this conduct misled him. Marsh instead appears to argue that this conduct was general evidence of the IRS 's misconduct. Without evidence that Marsh was induced or tricked by the United States into allowing the filing deadline to pass, there is no basis for equitable tolling.

The court has found time-barred two of Marsh's allegations, that is, the allegation that the November 18, 1996 levy "was not properly countersigned" and the allegation that a Notice of Levy should have been served for each semi-monthly retirement payment. There is no equitable basis for tolling the limitation period on either of those allegations.

There is no evidence that the IRS induced or tricked Marsh into allowing the filing deadline to pass on the claim that the November 18, 1996 levy was not countersigned. In fact, the IRS addressed this allegation two months later by serving a properly countersigned levy on January 17, 1997 .

There is also no evidence that the IRS induced or tricked Marsh into allowing the filing deadline to pass on the claim that a Notice of Levy should have been served for each semi-monthly payment. The IRS delay in serving the September 9, 1997 levy was irrelevant to Marsh's claim that a Notice of Levy should have been filed for every semi-monthly payment, as the delay was in serving a continuous levy, not in serving a one-time levy. Taking all of the allegations as true and in the light most favorable to Marsh, no possible construction of the facts exists that would support equitable tolling.

II. Summary Judgment is Granted on Marsh's Allegation That The Exempt Amount Was Incorrect.

Marsh's third section 7433 claim is that, even if the IRS acted correctly in issuing what it deemed to be a "continuous levy," the IRS was only allowed to levy 15 percent of each semimonthly payment under 26 U.S.C. §6331(h). The court disagrees.

Section 6331(h) was enacted in 1997 and only applies to levies issued after August 5, 1997 . Taxpayer Relief Act of 1997, Pub. L. No. 105-34, §1024(b), 111 Stat. 788, 923-24 (1997). Thus, the only levy to which Marsh's 15 percent argument applies is the third levy, issued on September 19, 1997 .

The effect of section 6331(h) was to subject to continuous levy funds that previously, under section 6334, had been exempt from levy. Section 6331(h) states:

The effect of a levy on specified payments to or received by a taxpayer shall be continuous from the date such levy is first made until such levy is released. Notwithstanding section 6334, such continuous levy shall attach to up to 15 percent of any specified payment due to the taxpayer.

26 U.S.C. §6331(h)(1) (1998).

A "specified payment" is (1) "any Federal payment other than a payment for which eligibility is based on the income or assets (or both) of a payee," (2) "any payment described in paragraphs (4), (7), (9), or (11) of section 6334(a)," and (3) "any annuity or pension payment under the Railroad Retirement Act or benefit under the Railroad Unemployment Insurance Act." Id. §6331(h)(2). Payments described in section 6334(a) are for unemployment benefits (section 6334(a)(4)), workmen's compensation (section 6334(a)(7)), the "[m]inimum exemption for wages, salary, and other income" (section 6334(a)(9)), and certain public assistance (section 6334(a)(11)).

The only category Marsh's state retirement payments could possibly fall within is section 6334(a)(9). Section 6334(a)(9) exempts from levy a certain portion of wages, salary, and other income. Before section 6331(h) took effect, unemployment benefits, workmen's compensation, and certain public assistance payments were also exempt from levy. Section 6331(h) changed the law to permit continuous levies on such payments and to allow a continuous levy on up to 15 percent of the minimum exemption for wages, salary, and other income.

Marsh reads the words "notwithstanding section 6334" in section 6331(h) as eliminating the right of the IRS to levy amounts exceeding the "minimum exemption" referred to in section 6334(a)(9). According to Marsh, section 6331(h) now limits any continuous levy on wages, salary, and other income to 15 percent of the wages, salary, and other income. This reading makes a nullity of 26 U.S.C. 6334(d), which calculates the exempt amount listed in section 6334(a)(9). The court declines to read section 6331(h) as repealing provisions not expressly repealed. Instead, the court reads section 6331(h) as expanding the right of the IRS to levy amounts previously exempt from levy under section 6334. This reading gives effect to all of the statutory provisions in issue. See H.R. Rev. No. 148, at 1061 (1997), reprinted in 1997 WL 353016 ("The Committee believes that if wages are subject to levy, wage replacement payments should also be subject to levy. In addition, the Committee believes that it is inappropriate to exempt from levy one type of annuity or pension payment while most other types of these payments are subject to levy"). Thus, the court reads section 6331(h) as subjecting to levy the minimum exemption for wages, salary, and other income.

What this means is that, instead of being permitted to levy only the excess over the exempt amount, the IRS could levy that excess plus up to 15 percent of the exempt amount. When the September 19, 1997 levy was served, Marsh was entitled to $1262.58 from the Retirement System twice a month. Under section 6334(d), Marsh was allegedly ¹⁰ entitled to a minimum exemption of $258.33, which meant the IRS was entitled to $1004.25. ¹¹ Under section 6331(h), the IRS was, in addition, entitled to levy continuously 15 percent, or $38.75, of the $258.33 minimum exemption. In short, the IRS was entitled to collect $1043.00 ($1004.25 plus $38.75) twice a month. Marsh was then entitled to a semi-monthly payment of $219.58, or $258.33 minus $38.75. Marsh actually received $299.58 ¹² semi-monthly, which is more than he was entitled to receive under this scenario. Thus, Marsh was not deprived of the proper exemption amount, and the exemption cannot be the basis for a section 7433 claim.

CONCLUSION

Based on the foregoing, the court grants summary judgment on the Counterclaim. This order disposes of Plaintiff's Motion to Dismiss Counterclaim of John W. Marsh, which this order treats as a motion for summary judgment.

IT IS SO ORDERED.

¹ Marsh says that he elected to receive his accumulated contributions in a lump sum when he retired. In addition to the lump sum payment, Marsh was to receive a retirement allowance equal to the maximum retirement allowance reduced by the actuarial equivalent of the contributions. These payments will cease at Marsh's death. See Haw. Rev. Stat. §88-83.

² The court asked the parties to clarify the total amount due on the September 19, 1997 levy because the court's copy of the levy was illegible. Neither party was able to state the total amount due on that levy, but this fact is not essential for purposes of ruling on this motion.

³ [Marsh] The United States has also moved to dismiss some of the allegations in the Counterclaim for failure to state a claim upon which relief can be granted.

⁴ Local Rule 56.1 of the United States District Court for the District of Hawai'i requires that motions for summary judgment be accompanied by a "separate concise statement detailing each material fact as to which the moving party contends . . . [t]hat there are no genuine issues to be tried . . . [and] [w]hich are essential for the court's determination of the issue or issues presented on summary judgment." Marsh objected to the United States' failure to file a concise statement of material facts. In fairness to both parties, the court continued the hearing on the United States' motion and set a timetable for supplemental briefing that would comply with Local Rule 56.1.

⁵ Section 7433 provides:

If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.

Section 7433 was subsequently amended to impose liability for negligent conduct by an IRS employee. See 26 U.S.C. §7433 (1999). The amendment, however, only applies to actions taken after July 22, 1998 .

⁶ Marsh also alleges in his Counterclaim that IRS employee Rebecca McKenzie-Young disregarded a power of attorney and "yelled at Defendant Sean Marsh." At the hearing on this motion, Marsh's counsel stated that these allegations were not the basis for Marsh's section 7433 action. Instead, Marsh claims that these allegations are evidence of the IRS 's alleged animus against Marsh.

Even if those allegations were the basis for a section 7433 claim, they would be time-barred. Marsh knew by December 2, 1996 , that McKenzie-Young had allegedly "disregarded the power of attorney." See Exhibit 4, attached to Plaintiff's Motion to Dismiss ("Therefore, to follow up on my complaint about my [power of attorney] being circumvented, I am sending a copy of this letter to the PRO"]; Exhibit B, attached to Defendants' Opposition to United States' Motion to Dismiss. By November 8, 1996 , Marsh also knew that McKenzie-Young had allegedly "yelled at [him] . . . in a threatening, insulting and hostile manner" on November 8, 1996 . See Exhibit J, attached to Defendants' Separate and Concise Statement of Facts; Exhibit H, attached to Defendants' Opposition to United States' Motion to Dismiss (Marsh's attorney states, "On November 8, 1996 , I received a telephone call from [] Mr. Marsh telling me that RO McKenzie-Young had come to his home looking for him and harassed his son. . . . Apparently, she stood in a neighbor's driveway and yelled like 'a fishwife' at the son in a confrontational manner demanding that he answer her questions"). Having occurred before July 22, 1997 , both of these allegations would have also been time-barred.

⁷ Marsh's allegation that section 7433 was violated by the IRS 's failure to properly sign the November 18, 1996 levy also fails to state a claim upon which relief may be granted. "Section 7433 authorizes suits only where an IRS agent has violated the taxing statutes or regulations. Therefore, any 'rights' not created by statute or regulation, such as internal IRS policy in publications disseminated to taxpayers or state statutes not incorporated into the federal statute, cannot be relied upon under §7433." Amoco Prod. Co. v. Aspen Group [99-1 USTC ¶50,459], 59 F.Supp.2d 1112, 1122 (D. Colo. 1999). See, e.g., Gonsalves, 975 F.2d at 16 ("The government has not consented to suit for violations of rights created in [ IRS publications]"). The countersignature requirement is set forth in an IRS manual, not in the Code or any regulations promulgated pursuant to the Code. Accordingly, the countersignature allegation does not state a section 7433 claim and that is an additional ground for dismissal of that allegation.

⁸ Even if exhaustion was mandatory, Marsh's claims would still have been time-barred. Marsh attempted to exhaust his administrative remedies by writing a letter to the Taxpayer Advocate on February 17, 1999 . See Exhibit H, attached to Defendants' Opposition to Plaintiff's Motion to Dismiss (Marsh's attorney states, "This letter is Mr. Marsh's good faith attempt to exhaust all administrative remedies before filing suit in District Court"). As discussed above, Marsh's claims accrued on or before July 22, 1997 . Marsh's attempt to exhaust his administrative remedies in February 1999, almost two years after the claims accrued, is not a sufficient basis to save Marsh's claims.

⁹ The United States argues that equitable tolling does not apply to this action after United States v. Brockamp [97-1 USTC ¶50,216; 97-1 USTC ¶60,259], 519 U.S. 347 (1997). The court disagrees. Brockamp addressed a particular tax provision. There is no indication that the Supreme Court meant Brockamp to apply to all tax claims. The court in Brockamp held that Congress did not intend the equitable tolling doctrine to apply to the statute of limitations for filing tax refund claims. Id. at 354. The Court noted that, "[o]rdinarily limitations statutes use fairly simple language, which one can often plausibly read as containing an implied 'equitable tolling' exception." Id. at 350. In contrast, "[s]ection 6511 sets forth its time limitations in a highly detailed technical manner, reiterates them several times in different ways, imposes substantive limitations, and sets forth explicit exceptions to its basic time limits that do not include 'equitable tolling.' " Id. at 350-51. The statute of limitations at issue here for section 7433 claims is more akin to the ordinary limitations statute that merely sets forth when a cause of action will have run. Accordingly, Brockamp does not prohibit equitable tolling here.

¹⁰ The United States claims that, even though the IRS gave Marsh the exemption, Marsh was not entitled to receive that exemption if he had other sources of income in excess of the exempt amount. The record shows that Marsh refused to provide evidence of his financial condition. Thus, Marsh has not met his burden of demonstrating his entitlement to the exemption. Marsh's failure to meet this burden provides yet another reason that Marsh cannot maintain his section 7433 claim with respect to the exemption.

¹¹ The exempt amount is the sum of the standard deduction and the aggregate amount of the deductions for personal exemptions allowed the taxpayer under 26 U.S.C. §151. When the income is received periodically, the total amount is divided by the appropriate number of annual payments. Id. §6334(d). Under §6634(d)(2), the amount is to be calculated by dividing the sum of the standard deduction for a married individual filing separately ($3,550) and the personal exemption amount ($2,650) by the number of payments (24). Under this formula, the semimonthly statutory exemption amount would be $258.33.

¹² In giving Marsh an exemption of $299.58, the IRS apparently added 15 percent of the minimum exemption to Marsh's minimum exemption, instead of subtracting 15 percent. This error is harmless for purposes of Marsh's Counterclaim, as Marsh received more than he was entitled to receive.

6331(h) CONTINUING LEVY ON CERTAIN PAYMENTS. --

6331(h)(1) IN GENERAL. --If the Secretary approves a levy under this subsection, the effect of such levy on specified payments to or received by a taxpayer shall be continuous from the date such levy is first made until such levy is released. Notwithstanding section 6334, such continuous levy shall attach to up to 15 percent of any specified payment due to the taxpayer.

6331(h)(2) SPECIFIED PAYMENT. --For the purposes of paragraph (1), the term "specified payment" means --

6331(h)(2)(A) any Federal payment other than a payment for which eligibility is based on the income or assets (or both) of a payee,

6331(h)(2)(B) any payment described in paragraph (4), (7), (9), or (11) of section 6334(a), and

6331(h)(2)(C) any annuity or pension payment under the Railroad Retirement Act or benefit under the Railroad Unemployment Insurance Act.

6331(h)(3) INCREASE IN LEVY FOR CERTAIN PAYMENTS. --Paragraph (1) shall be applied by substituting "100 percent" for "15 percent" in the case of any specified payment due to a vendor of goods or services sold or leased to the Federal Government.

6331(i) NO LEVY DURING PENDENCY OF PROCEEDINGS FOR REFUND OF DIVISIBLE TAX. --

6331(i)(1) IN GENERAL. --No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid divisible tax during the pendency of any proceeding brought by such person in a proper Federal trial court for the recovery of any portion of such divisible tax which was paid by such person if --

6331(i)(1)(A) the decision in such proceeding would be res judicata with respect to such unpaid tax; or

6331(i)(1)(B) such person would be collaterally estopped from contesting such unpaid tax by reason of such proceeding.

6331(i)(2) DIVISIBLE TAX. --For purposes of paragraph (1), the term "divisible tax" means --

6331(i)(2)(A) any tax imposed by subtitle C; and

6331(i)(2)(B) the penalty imposed by section 6672 with respect to any such tax.

6331(i)(3) EXCEPTIONS. --

6331(i)(3)(A) CERTAIN UNPAID TAXES. --This subsection shall not apply with respect to any unpaid tax if --

6331(i)(3)(A)(i) the taxpayer files a written notice with the Secretary which waives the restriction imposed by this subsection on levy with respect to such tax; or

6331(i)(3)(A)(ii) the Secretary finds that the collection of such tax is in jeopardy.

6331(i)(3)(B) CERTAIN LEVIES. --This subsection shall not apply to --

6331(i)(3)(B)(i) any levy to carry out an offset under section 6402; and

6331(i)(3)(B)(ii) any levy which was first made before the date that the applicable proceeding under this subsection commenced.

6331(i)(4) LIMITATION ON COLLECTION ACTIVITY; AUTHORITY TO ENJOIN COLLECTION. --

6331(i)(4)(A) LIMITATION ON COLLECTION. --No proceeding in court for the collection of any unpaid tax to which paragraph (1) applies shall be begun by the Secretary during the pendency of a proceeding under such paragraph. This subparagraph shall not apply to --

6331(i)(4)(A)(i) any counterclaim in a proceeding under such paragraph; or

6331(i)(4)(A)(ii) any proceeding relating to a proceeding under such paragraph.

6331(i)(4)(B) AUTHORITY TO ENJOIN. --Notwithstanding section 7421(a), a levy or collection proceeding prohibited by this subsection may be enjoined (during the period such prohibition is in force) by the court in which the proceeding under paragraph (1) is brought.

6331(i)(5) SUSPENSION OF STATUTE OF LIMITATIONS ON COLLECTION. --The period of limitations under section 6502 shall be suspended for the period during which the Secretary is prohibited under this subsection from making a levy.

6331(i)(6) PENDENCY OF PROCEEDING. --For purposes of this subsection, a proceeding is pending beginning on the date such proceeding commences and ending on the date that a final order or judgment from which an appeal may be taken is entered in such proceeding.

6331(j) NO LEVY BEFORE INVESTIGATION OF STATUS OF PROPERTY. --

6331(j)(1) IN GENERAL. --For purposes of applying the provisions of this subchapter, no levy may be made on any property or right to property which is to be sold under section 6335 until a thorough investigation of the status of such property has been completed.

6331(j)(2) ELEMENTS IN INVESTIGATION. --For purposes of paragraph (1), an investigation of the status of any property shall include --

6331(j)(2)(A) a verification of the taxpayer's liability;

6331(j)(2)(B) the completion of an analysis under subsection (f);

6331(j)(2)(C) the determination that the equity in such property is sufficient to yield net proceeds from the sale of such property to apply to such liability; and

6331(j)(2)(D) a thorough consideration of alternative collection methods.

6331(k) NO LEVY WHILE CERTAIN OFFERS PENDING OR INSTALLMENT AGREEMENT PENDING OR IN EFFECT. --

6331(k)(1) OFFER-IN-COMPROMISE PENDING. --No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid tax --

6331(k)(1)(A) during the period that an offer-in-compromise by such person under section 7122 of such unpaid tax is pending with the Secretary; and

6331(k)(1)(B) if such offer is rejected by the Secretary, during the 30 days thereafter (and, if an appeal of such rejection is filed within such 30 days, during the period that such appeal is pending).

For purposes of subparagraph (A), an offer is pending beginning on the date the Secretary accepts such offer for processing.

6331(k)(2) INSTALLMENT AGREEMENTS. --No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid tax --

6331(k)(2)(A) during the period that an offer by such person for an installment agreement under section 6159 for payment of such unpaid tax is pending with the Secretary;

6331(k)(2)(B) if such offer is rejected by the Secretary, during the 30 days thereafter (and, if an appeal of such rejection is filed within such 30 days, during the period that such appeal is pending);

6331(k)(2)(C) during the period that such an installment agreement for payment of such unpaid tax is in effect; and

6331(k)(2)(D) if such agreement is terminated by the Secretary, during the 30 days thereafter (and, if an appeal of such termination is filed within such 30 days, during the period that such appeal is pending).

6331(k)(3) CERTAIN RULES TO APPLY. --Rules similar to the rules of --

6331(k)(3)(A) paragraphs (3) and (4) of subsection (i), and

6331(k)(3)(B) except in the case of paragraph (2)(C), paragraph (5) of subsection (i),

shall apply for purposes of this subsection.

6331(l) CROSS REFERENCES. --

6331(l)(1) For provisions relating to jeopardy, see subchapter A of chapter 70.

6331(l)(2) For proceedings applicable to sale of seized property, see section 6335.

6331(l)(3) For release and notice of release of levy, see section 6343.