Annotations- Social Security
Social Security Benefits- Levy
Property Exempt from
Levy: Social Security Benefits
USTC ¶50,254] George C. Leining, Plaintiff v.
United States of America
District Court, Dist. Conn., Civ. 3:96cv00992 (AVC),
Sec. 6334 ]
Social security benefits: Garnishment by IRS: Exemption from levy.--The
IRS could garnish an individual's social security benefits until his
outstanding tax liabilities were paid in full. Thus, the individual's
action for reimbursement of the social security benefits and for a
judgment declaring that his future social security benefits were exempt
from IRS collection was dismissed. Although Section 407(a) of the Social
Security Act generally exempts social security benefits from levy, it is
superseded by Code Sec. 6334 , which
provides that such benefits are not exempt from levy.
Sec. 7402 ]
Social security benefits: Wrongful taking by IRS: Damages: Federal
Tort Claims Act.--An individual's action for damages arising from
the IRS's garnishment of his social security benefits to satisfy his
outstanding tax liabilities without due process of law was dismissed.
The IRS, under the Federal Tort Claims Act, did not waive its sovereign
immunity for claims arising in respect of the assessment or collection
of any tax.
C. Leining, 280 Hicks Ave., Meriden, Conn. 06450, pro se. David
X. Sullivan, New Haven, Conn. 06508, Philip J. Berkowitz, Department of
Justice, Washington, D.C. 20530, for defendant.
ON DEFENDANT'S MOTION TO DISMISS
is an action for reimbursement and for damages brought pursuant to the
Social Security Act, 42 U.S.C. §407(a). The complaint seeks
reimbursement of certain social security benefits garnished by the
Internal Revenue Service ("IRS"), a judgment declaring the
plaintiff's future social security benefits exempt from IRS collection,
and "an award of money under 28 U.S.C. 1346(a)(2), an amount to be
set by a trial jury, in order to give notice to [the defendant] that the
courts will not tolerate this sort of abuse."
defendant now moves to dismiss the complaint pursuant to Federal Rule of
Civil Procedure 12(b)6 on the grounds that the complaint does not state
a claim upon which relief can be granted. The issues presented are: 1)
whether the IRS can levy upon the plaintiff's social security benefits
until the plaintiff's outstanding federal income taxes, and assessed
penalties, are paid; and 2) whether the doctrine of sovereign immunity
bars the complaint insofar as it states an action for a tortious,
unconstitutional taking of property by a federal revenue agent. For the
reasons hereinafter set forth, the court grants the defendant's motion
of June 1995, the plaintiff, George Leining, owed the IRS income taxes
and civil penalties, assessed pursuant to Internal Revenue Code §6672,
in excess of $100,000. On
June 21, 1995
, an IRS officer, Linda Rheault, sent a notice of levy to the social
security administration, garnishing the plaintiff's entire social
security benefit for the month of September 1995. Thereafter, the IRS
has taken, each month, approximately one half of the plaintiff's social
motion to dismiss pursuant to Fed. R. Civ. P 12(b)6 involves a
determination as to whether the plaintiff has stated a claim upon which
relief may be granted. Fischman v. Blue Cross Blue Shield, 755 F.
Supp. 528 (D.
1990). The motion must be decided solely on the facts alleged. Goldman
v. Beldon, 754 F.2d 1059, 1065 (2d Cir. 1985). In deciding a motion
to dismiss, a court must assume all factual allegations in the complaint
to be true and must draw reasonable references in favor of the
non-moving party. Scheurer v. Rhodes, 416
232, 236 (1974). Such motion should be granted only where no set of
facts consistent with the allegations could be proven which would
entitle the plaintiff to relief. Conely v. Gibson, 355
41, 45 (1957). The issue is not whether the plaintiff will prevail, but
whether he would have the opportunity to prove his claims.
defendant first moves to dismiss the complaint on the grounds that the
complaint does not state a claim upon which relief can be granted.
Specifically, the defendant argues that IRS Code §6334(a) authorizes
the defendant to garnish the plaintiff's monthly social security
benefits until the defendant has paid his outstanding income taxes and
the assessed penalties. The plaintiff responds that 42 U.S.C. §407(a)
bars the defendant from imposing a levy upon the plaintiff's social
court agrees with the defendant. 42 U.S.C. §407(a) provides,
right of any person to any future payment under this subchapter [Federal
old-Age, Survivors, And Disability Insurance Benefits] shall not be
transferable or assignable, at law or in equity, and none of the monies
paid or payable or rights existing under this subchapter shall be
subject to execution, levy, attachment, garnishment, or other legal
process, or to the operation of any bankruptcy or insolvency law.
42 U.S.C. §407(b) provides that §407(a) may be modified by other
provisions of law, so long as the modification is by "express
reference to this section." IRS Code §6334(c) provides an
express reference to §407(a), in that,
any other law of the United States (including §207 1 of the
Social Security Act), no property or rights to property shall be exempt
from levy other than the property specifically made exempt by subsection
§6334(c) . Accordingly, social security benefits are subject
to levy by the IRS. See also United States v. Cleveland [94-2
USTC ¶50,421 ], 1994 WL 411376 (N.D. Ill. 1994). The court,
therefore, concludes that the defendant may garnish the plaintiff's
monthly social security benefits until the plaintiff's outstanding
federal income taxes, and assessed penalties, are paid.
Tax Collection and The Federal Tort Claims Act
complaint alleges that, "the defendant's agent [took the]
plaintiff's social security benefit ... without due process of law, and
in violation of law ... [and accordingly, the plaintiff is entitled to]
an award of money under 28 U.S.C. §1346(a)(1) 2 , in an
amount to be set by a trial jury, in order to give notice to [the
defendant] that the courts will not tolerate this sort of abuse."
The defendant responds that, to the extent that the above allegation
seeks damages for a tortious, unconstitutional taking of property by a
federal revenue agent, the action is barred by the doctrine of sovereign
immunity and specifically, the tax collection exception to the Federal
Tort Claims Act.
court concludes that the complaint can be read to seek damages for an
alleged tortious, unconstitutional taking of property by a federal
revenue agent. It is well settled, though, that the defendant cannot be
sued absent a specific statutory waiver of sovereign immunity. Dalehite
15, 30 (1953). The defendant, under the Federal Tort Claims Act and 28
U.S.C. §1346(b), specifically has not waived its sovereign immunity for
claims arising "in respect of the assessment of collection of any
tax ..." 28 U.S.C. 2680(c) (the tax collection exception). See Akers
v. United States [82-1 USTC ¶9234], 539 F. Supp. 831 (D. Conn.
1982) citing Dupont Forgan Inc. v. AT&T Co., 428 D. Supp.
1297, aff'd 578 F.2d 1367 (2d Cir. 1978) cert. denied, 439
U.S. 970 (1978). Accordingly, the court grants the defendant's motion to
the foregoing reasons, the defendant's motion to dismiss (document no.
10) is granted.
Section 207 of the Social Security Act has been codified and re-numbered
as 42 U.S.C. §407.
28 U.S.C. §1346(a)(1) provides, The district courts shall have original
jurisdiction, concurrent with the United States Court of Federal Claims,
of: (1) Any civil action against the United States for the recovery of
any internal-revenue tax alleged to have been erroneously or illegally
assessed or collected, or any penalty claimed to have been collected
without authority or any sum alleged to have been excessive or in any
manner wrongfully collected under the internal-revenue laws;
USTC ¶50,128] Godfrey Lehman, Plaintiff v. Internal Revenue Service,
District Court, No. Dist. Calif., C 96-2381 FMS,
Secs. 6331 , 6334
and 7421 ]
Jurisdiction: District Court: IRS levy: Social security benefits:
Anti-Injunction Act: Likelihood of prevailing: Irreparable injury.--A
tax protestor's suit seeking to enjoin the IRS from levying his social
security benefits or, in the alternative, to limit the amount of the
levy was barred by the Anti-Injunction Act; thus, the court lacked
jurisdiction. The IRS was likely to prevail against the taxpayer's
efforts to enjoin the levy because the taxpayer owed back taxes, the
levy did not require judicial approval before it became effective, and
levies are not limited to government employees. Also, it was not
necessary to reduce the amount of the levy because the taxpayer had
other sources of income. The taxpayer did not suffer irreparable injury
because he presented insufficient evidence to show financial hardship
and he had a remedy at law in that he could pay the assessed taxes and
then sue for a refund.
Lehman, 333 Kearny St., San Francisco, Calif. 94108-3219, pro se.
Thomas F. Carlucci, 450 Golden Gate Ave., San Francisco, Calif. 94102,
July 1996, plaintiff, a long-time tax protester, filed a pro se
complaint, in forma pauperis, seeking to enjoin the Internal
Revenue Service from levying his social security benefits. Plaintiff
asserts that he owes no tax debt, and that even if he did, the
government should collect no more than twenty-five percent of his social
security checks because of the hardship he would face if more were
collected. He also challenges the authority of the government to garnish
his social security based on 26 U.S.C. §6331, asserting that the
provision applies only to government employees.
government claims that plaintiff presently owes over $100,000, for
failure to timely pay his taxes between 1982 and 1993. As part of its
effort to collect this tax liability, the IRS began levying plaintiff's
social security benefits in October 1995, collecting approximately $1500
per month. In March 1996, the IRS mistakenly released the levy; the
agency later corrected this error and continues to levy plaintiff's
social security benefits. The government argues that the Court lacks
subject matter jurisdiction over the case.
has failed to oppose the government's motion to dismiss. On
October 2, 1996
, the Court ordered plaintiff to show cause why the Court should not
consider the matter submitted and decide the motion on the papers filed
by defendant to date. Plaintiff responded that he had not opposed
defendant's motion because he refused to accept the Court's substitution
of the IRS as a defendant in the case. The Court finds this explanation
inadequate; the question of substitution was settled in July 1996.
Because plaintiff is pro se, however, the Court will consider the
arguments against dismissal presented in his response to the order to
motion brought under Federal Rule of Civil Procedure 12(b)(1) seeks
dismissal of the plaintiff's complaint for lack of subject matter
jurisdiction. "Unlike a Rule 12(b)(6) motion, a Rule 12(b)(1)
motion can attack the substance of a complaint's jurisdictional
allegations despite their formal sufficiency, and in so doing rely on
affidavits or any other evidence properly before the court." St.
Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989), cert.
denied, 493 U.S. 993 (1989). Because federal courts are
presumptively without jurisdiction in civil matters, the burden of
proving the Court's authority to consider a case rests on the party
asserting jurisdiction. Kokkonen v. Guardian Life Ins. Co. of
1673, 1675 (1994).
person may bring a lawsuit against the
unless the government has expressly consented by statute to be sued. United
States v. Dalm [90-1 USTC ¶50,154; 90-1 USTC ¶60,012], 494 U.S.
596, 608 (1990). If the government has consented to be sued, a plaintiff
must comply exactly with the terms of the statute giving such consent.
v. Sherwood, 312
584, 590 (1941). If the
has not waived its sovereign immunity, courts lack the jurisdiction to
entertain lawsuits against the government. Gilbert v. DaGrossa
[85-2 USTC ¶9665], 756 F.2d 1455, 1458 (9th Cir. 1985).
Anti-Injunction Act, 26 U.S.C. §7421, prohibits suits that seek to
prevent the assessment or collection of taxes. A judicial exception to
the Act, however, permits a taxpayer to sue the
for injunctive relief if she can demonstrate that (1) the government
cannot prevail on the merits, and (2) the taxpayer will suffer
irreparable injury if injunctive relief is not granted. Enochs v.
Williams Packing & Navigation Co., Inc. [62-2 USTC ¶9545], 370
U.S. 1, 6-8 (1962); Hughes v. United States [92-1 USTC ¶50,086],
953 F.2d 531, 535 (9th Cir. 1992).
claim that he owes no tax debt does not meet these requirements.
According to Internal Revenue Service ("IRS") records,
plaintiff still owes the government over $100,000. (Declaration of John
Borchelt ("Borchelt Decl.") Exhibit C.) The government is
therefore likely to prevail against plaintiff's effort to enjoin any
government collection of his social security benefits.
to plaintiff's assertions, the levy does not require judicial approval
before it becomes effective. See United States v. Phillips [2
USTC ¶743], 283 U.S. 589, 593-594 (1931) (IRS authorized to use summary
collection procedures such as a levy); Towne Antique Ford Foundation
v. Internal Revenue Service [93-2 USTC ¶50,430], 999 F.2d 1387,
1394 (9th Cir. 1993) (pre-levy hearing not required). The levies are not
limited to government employees, either. See Sims v. United States
[59-1 USTC ¶9338], 359 U.S. 108, 112-13 (1959); Arford v. United
States [92-1 USTC ¶50,229], 934 F.2d 229, 234 (9th Cir. 1991) (§6331
applies to private sector employees as well as government workers).
is correct that the Internal Revenue Code exempts from levy an amount of
money sufficient to support a taxpayer and her family. 26 U.S.C. §§6331(a),
6334(d). The IRS appropriately determined that a reduction in the amount
of the levy was unnecessary in plaintiff's case, however, because it
determined that he has other sources of income. (Borchelt Decl. ¶7.)
The government is therefore likely to prevail against plaintiff's effort
to obtain a reduction in the levy on his social security benefits.
if plaintiff were able to show that the government could not prevail on
the merits, he cannot meet the second prong of the Anti-Injunction Act
test--irreparable injury. Plaintiff's evidence that he owes debts to
several companies is not sufficient evidence to support a finding of
financial hardship. The Court so advised plaintiff in July 1996, when it
denied his motion for a preliminary injunction. Moreover, because
plaintiff has a remedy at law, he cannot show irreparable injury;
plaintiff may pay the assessed taxes and then sue for a refund under 28
U.S.C. §1346(a), after fulfilling certain administrative prerequisites.
plaintiff cannot overcome the requirements of the Anti-Injunction Act,
's sovereign immunity prevents this Court from taking jurisdiction over
his claim. Plaintiff's case therefore must be dismissed.
the foregoing reasons, the Court GRANTS defendant's motion to dismiss.
Based on the history of this case, the Court finds that any amendment
would be futile; therefore, plaintiff's case is dismissed WITH
the reasons stated in the accompanying order, this action is DISMISSED.
The Clerk of the Court shall close the file.
USTC ¶50,441] Arlie Chester Addington and Rena Sue Addington,
Plaintiffs v. United States of America, U.S. Treasury Department,
Internal Revenue Service and James Payton, individually, Defendants
District Court, So. Dist. W.Va., Charleston Div., Civ. 2:98-0376,
, 75 FSupp 2 d 520
Secs. 6331 and 6334
Liens and levies: Authority of IRS: Social security benefits.--Married
taxpayers failed to substantiate their claim that an IRS levy against
the husband's social security benefits violated any statute; the IRS is
specifically authorized to seize social security benefits to collect
Sec. 6871 ]
Bankruptcy: Discharge of tax debt: Failure to prove.--Married
taxpayers offered no evidence that tax liabilities with respect to two
tax years were discharged in bankruptcy. The discharge order did not
specifically discharge the liabilities, and there was no evidence that
the IRS intentionally violated any code section in sending balance due
Sec. 7122 ]
Offers-in-compromise: Discretion of IRS to reject.--The IRS was
entitled to reject married taxpayers' offer in compromise of their tax
liability since it has discretion as to whether to accept such an offer.
Secs. 7422 and 7433
Suits by taxpayers: Wrongful collection: Failure to state claim for:
Challenge to assessments: Refund claims: Failure to pay tax: Failure to
file administrative claim.--Married taxpayers failed to state a
claim for wrongful collection of tax in connection with the IRS's
rejection of their offer in compromise and its levy on the husband's
social security benefits. Although Code
Sec. 7433 provides a limited waiver of sovereign immunity
with respect to wrongful collection, the taxpayers essentially alleged
wrongful assessment; thus, they were not entitled to circumvent the Code Sec. 7422 procedure of
paying the assessment and bringing a timely administrative refund claim
with the IRS prior to challenging their assessment.
MEMORANDUM OPINION AND ORDER
before the Court is the motion for summary judgment filed by Defendant
United States of
. For the reasons set forth below, the defendant's motion for summary
judgment is GRANTED.
Arlie Chester and Rena Sue Addington, filed this action against the
United States of America, the Department of Treasury, the Internal
Revenue Service and Revenue Officer James Payton pursuant to 26 U.S.C.
§7433 for wrongful collection of taxes. Defendants IRS, Revenue Office
Payton and the Department of the Treasury were dismissed as parties in
July, 1998. In their complaint, plaintiffs claim that an officer or
employee of the Internal Revenue Service intentionally or recklessly
violated Internal Revenue Code provisions and policies in collecting
taxes allegedly owed by the plaintiffs. Specifically, plaintiffs allege:
that the IRS violated Code Section 7122 and "internal policy"
in "refusing to consider" or "summarily rejecting"
their offer in compromise. (compl., Introduction and ¶33.);
that after they were unable to successfully compromise their tax
liabilities, the IRS improperly levied on Mr. Addington's social
security benefits. (Compl., ¶29.); and,
that the IRS wrongfully sent them collection notices for the 1984 and
1985 income tax liabilities which had been discharged in bankruptcy. (Compl.,
¶¶41 and 42.).
seek an abatement and refund of tax, compensatory and punitive damages,
attorney's fees and costs.
deny plaintiffs' allegations and contend that plaintiffs owe federal
income taxes for several tax years.
IRS assessed $145,886.06 in federal income taxes, penalties and interest
for tax year 1986 against Plaintiff Arlie Addington on
May 1, 1989
. This assessment was issued as a result of an embezzlement scheme for
which Mr. Addington plead guilty to conspiracy charges. In 1994, Revenue
Officer James Payton was assigned to collect the alleged delinquent
taxes from plaintiffs for tax years, 1986, 1990, 1993 and 1994.
April 18, 1995
, plaintiffs filed a voluntary Chapter 7 bankruptcy petition in this
district's bankruptcy court. In July 1995, the bankruptcy court issued
the discharge order in the Addington's bankruptcy case. The bankruptcy
case was closed in June 1996.
July 1996, plaintiffs provided Revenue Officer Payton with a collection
information statement. Plaintiffs incorrectly believed this form to be
an offer in compromise. After reviewing this form, Payton prepared an
installment agreement and sent it to plaintiffs' attorney, Earnest
late 1996, Payton began levying on Mr. Addington's social security
benefits in order to collect a portion of the taxes owed. In June 1997,
plaintiffs did submit an offer in compromise after which the IRS
returned it to plaintiffs with a request to provide additional
October 1997, the IRS sent balance due notices to Rena Sue Addington for
tax years 1984 and 1985.
contend in their complaint that they owe federal taxes for 1990 through
and including 1994, but deny any liability for 1986. Plaintiffs claim
that any alleged tax liability for 1984, 1985, and 1986 was discharged
at the end of the bankruptcy case.
filed this action on
May 4, 1998
, alleging reckless conduct by the IRS in wrongful collection of federal
income taxes. Defendants denied the allegations in their answer.
to a scheduling order adopted by the Court, the defendant filed a
summary judgment motion. All briefs now being submitted, this matter is
ripe for decision.
Standard of Review
obtain summary judgment, the moving party must show that there is no
genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).
In considering a motion for summary judgment, the Court will not
"weigh the evidence and determine the truth of the matter." Anderson
v. Liberty Lobby, Inc., 477
242, 249 (1986). Instead, the Court will draw any permissible inference
from the underlying facts in the light most favorable to the nonmoving
party. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp.,
574, 587-88 (1986).
the Court will view all underlying facts and inferences in the light
most favorable to the nonmoving party, the nonmoving party nonetheless
must offer some "concrete evidence from which a reasonable juror
could return a verdict in his [or her] favor." Anderson, 477
at 256. Summary judgment is appropriate when the nonmoving party has the
burden of proof on an essential element of his or her case and does not
make, after adequate time for discovery, a showing sufficient to
establish that element. Celotex Corp. v. Catrett, 477
317, 322-23 (1986). The nonmoving party must satisfy this burden of
proof by offering more than a mere "scintilla of evidence" in
support of his or her position. Anderson, 477
support of its motion for summary judgment, defendant asserts that
plaintiffs cannot litigate the correctness of their tax liability under
the guise of a damage claim pursuant to 26 U.S.C. §7433 but must follow
the specific statutory provisions for contesting one's tax liability.
Defendants further assert that no IRS officer intentionally or
recklessly violated any code provision during dealing with plaintiffs.
opposition to the motion, plaintiffs contend genuine issues of fact
exist, prohibiting entry of summary judgment for defendants.
this case, plaintiffs seem to suggest that the IRS's collection activity
by its rejection of an offer to compromise and serving a levy on
plaintiff Arlie Addington's social security benefits gives rise to a
cause of action pursuant to 26 U.S.C. §7433 because the IRS was
attempting to collect a liability for tax year 1986 which plaintiff's
did not owe.
7433 of Title 26 (U.S.C.) provides, in pertinent part, as follows:
In General--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.
U.S.C. §7433 was enacted as part of the Technical and Miscellaneous
Revenue Act of 1988, Pub. L. No. 100-647, Sec. 6241(a), 102 State. 3342
(hereinafter "TAMRA"). Section 7433 is effective for actions
taken by officers and employees of the Internal Revenue Service
November 10, 1998
, in connection with the collection of taxes. TAMRA at Sec. 6240(c).
7433 is a very limited waiver of the
' sovereign immunity. Like any other waiver of that sovereign immunity,
it " 'must be strictly observed, *** and construed in favor of the
sovereign.' " Gonsalves v. Internal Revenue Service [92-2
USTC ¶50,474], 975 F.2d 13, 15 (1st Cir. 1992). Indeed, "[c]ourts
may not 'enlarge . . . beyond what the language [of the statute creating
the waiver] requires.' "
at 16 (citing Eastern Transportation Co. v. United States, 272
U.S. 675 (1927)).
7433 provides a civil remedy for violations of the Internal Revenue Code
which occur in the course of collecting taxes. It is not a remedy for
taxpayers alleging impropriety or errors in the tax assessment
process. Miller v. United States [95-2 USTC ¶50,516], 66 F.3d
220, 222-223 (9th Cir. 1995) (Section 7433 does not extend to the
erroneous or improper assessment of taxes), cert. denied, 116
1317 (1996); Shaw v. United States [94-1 USTC ¶50,254], 20 F.3d
182, 184 (5th Cir.), cert denied, 115 S. Ct. 635 (1994). (based
on plain language of Section 7433, a taxpayer cannot maintain an action
under this statute for the improper assessment of taxes); see also
White v. Commissioner, 899 F. Supp. 767, 772 (D. Mass. 1995).
in order to demonstrate a claim under Section 7433(a), a taxpayer must
prove, by a preponderance of the evidence, that the IRS did not follow
the "prescribed methods of acquiring assets." See Shaw v.
United States [94-1 USTC ¶50,254], 20 F.3d at 184; see also
[95-2 USTC ¶50,516], 66 F.3d at 222. Stated another way, a Section
7433 plaintiff must demonstrate that some IRS official or employee
intentionally or recklessly violated a specific section of the Internal
Revenue Code or Treasury Regulations in collecting the taxes from the
taxpayer. See 26 U.S.C. §7433(a); White v. Commissioner,
899 F. Supp. at 772.
this case, plaintiffs suggest that the IRS's activity by its rejection
of an offer in compromise and securing a levy gives rise to a cause of
action pursuant to §7433 because the IRS was attempting to collect a
liability which plaintiffs claim Mr. Addington does not owe. The IRS
disputes Mr. Addington's claim that he owes no tax. In accordance with
the principles enunciated in Miller, Shaw and Gonsalves,
the court noted "[s]ection 7433 was not intended to supplement or
supersede, or to allow taxpayers to circumvent" the requirements of
26 U.S.C. §7422, or any other section of the Internal Revenue Code.
the Court is of the opinion that plaintiffs' claim that the IRS
wrongfully assessed 1986 taxes does not give rise to a valid Section
7433 claim for wrongful collection.
their complaint, plaintiffs' also allege that the IRS acted in direct
violation of IRS policy by unreasonably failing to submit their offer in
compromise or refusing to consider their offer in compromise.
only mechanism to compromise a tax before referral to the Department of
Justice is pursuant 26 U.S.C. §7122. Botany Worsted Mills v. U.S.
[1 USTC ¶348], 278 U.S. 282, 49 S. Ct. 129, 73 L. Ed. 379 (1929); Yarborough
v. U.S. [56-1 USTC ¶9295], 230 F.2d 56 (4th Cir. 1956).
7122 clearly states that the Secretary may compromise any civil
or criminal tax case prior to referral to the Department of Justice. The
decision to accept or reject a compromise offer is discretionary and
cannot be compelled by any action. Carroll v. Internal Revenue
Service [64-2 USTC ¶9687], 14 AFTR2d 5564 (E.D. N. Y. 1964).
complaint conveys the impression that plaintiffs submitted more than one
offer in compromise. Yet the record, through the declarations of Revenue
Office Payton, dictates only one was submitted to the IRS on July 1997.
The declarations of Mr. Payton also illustrate that plaintiffs provided
a financial/collection information statement to Officer Payton on July
1996 but no offer in compromise. At that time, Payton did determine the
offer was inappropriate, prepared a proposed installment agreement, and
sent it to plaintiffs' lawyer, Mr. Morton. At that time, plaintiffs
never did sign it nor did they submit an offer in compromise. Having
received nothing from plaintiffs in late 1996, the IRS then levied on
Mr. Addington's social security benefits. Not until June 1997 did
plaintiffs submit an offer in compromise to the IRS, Form 656.
July 30, 1997
, the form was returned to plaintiffs by the IRS and a request was made
for further information. The Court believes it is clear that the IRS did
not summarily reject this offer but did request resubmission of an offer
on forms sent to plaintiffs in that July 1997 letter. Since compromising
tax liabilities is purely discretionary, even if the IRS had summarily
rejected plaintiffs' offer, it would not give rise to a claim for
intentional or reckless violation of the Code.
further contend that the revenue officer intentionally or recklessly
violated some Code provision when he served a levy to collect Mr.
Addington's social security benefits. Plaintiffs do not allege
violations of specific Code sections but merely complain of IRS notices
of intent to levy for years 1990, 1992 and 1986.
Internal Revenue Code provides for two ways to enforce collection of
unpaid taxes. The first method permits the
to initiate a plenary judicial proceeding pursuant to Section 7403 of
the Code to foreclose a tax lien on property in which the taxpayer has a
right, title or interest. The second method under the Code for enforcing
collection of unpaid taxes is by seizure pursuant to levy under Section
6331. United States v. National Bank of Commerce [85-2 USTC ¶9482],
472 U.S. 713, at 720-21 (1985); accord Resolution Trust Corp. v. Gill
[92-1 USTC ¶50,199], 960 F.2d 336, 340 (3d Cir. 1991).
have failed to cite any specific Code provision or regulation which Mr.
Payton intentionally or recklessly violated in serving the levy to
collect taxes. In fact, the Internal Revenue Code specifically
authorizes a levy to collect taxes. 26 U.S.C. §6331(a). Upon review of
Mr. Payton's declarations, Mr. Payton's actions in seeking to collect
unpaid taxes were in observance of the Code, not a violation of it.
Indeed, it is the duty of the IRS to collect taxes and to investigate
possible defalcations of taxpayers in reporting and paying taxes. Chamberlain
v. Kurtz [79-1 USTC ¶9211], 589 F.2d 827, 835 (5th Cir. 1979).
Since Mr. Payton was simply collecting taxes pursuant to methods
prescribed by the Code, the Court believes that plaintiffs have no cause
of action pursuant to Section 7433 for the levy on Mr. Addington's
social security benefits.
plaintiffs admit that they owed income taxes for tax years 1990 and
1992. (Compl, ¶32.) Despite this admission, they surprisingly
complain that an IRS office sent them notices of intent to levy
concerning these years. (Compl. ¶45-46.) The IRS is clearly
authorized to issue notices of intent to levy pursuant to 26 U.S.C. §6331(a).
Plaintiffs have no wrongful collection cause of action for receiving
notices of intent to levy which, pursuant to I.R.C. §6331(a), they are
supposed to receive. The Court believes this allegation is without
finally allege that in October 1997, the IRS sent Mrs. Addington balance
due notices for 1984 and 1985 income tax liabilities. (Compl., ¶41.)
They claim that these tax liabilities were discharged in their
review of the extensive exhibits submitted by plaintiffs in opposition
to the summary judgment motion, plaintiffs have offered no evidence that
these liabilities were in fact discharged in their bankruptcy case. On
July 24, 1995
, the Bankruptcy Court issued a discharge order in the Addington's
bankruptcy case, and on
July 31, 1995
, it issued an amended discharge order. On
June 11, 1996
, the Bankruptcy Court issued a final decree in the Addington's
bankruptcy case and closed the case. However, the discharge order did
not specifically discharge the 1984 and 1985 tax liabilities. The
amended discharge order provides that the debtors are released from
"all dischargeable debts", including those "debts
dischargeable under 11 U.S.C. §523". (Clarke Decl., Def. Mtn.
for Summ. Judg., Ex. 3.)
these general principles of bankruptcy, in this case, Mrs. Addington's
1984 and 1985 income tax liabilities would have been considered
discharged debts in the bankruptcy proceeding, unless they were excepted
from discharge pursuant to 11 U.S.C. §523(a)(1)(A)--(C). Bankruptcy
Rule 7001 defines the scope of rules governing adversary proceedings in
bankruptcy cases and specifically provides that a complaint to determine
dischargeability (item (6) is an adversary proceeding. The Addingtons
did not file a complaint to determine dischargeability of their debts in
their Chapter 7 case. Accordingly, when the Addingtons received their
discharge, it was not clear whether their 1984 and 1985 tax liabilities
were, in fact, discharged. Even with questions arising over their
dischargeability, it is clear that the plaintiffs possess no evidence
that the IRS intentionally or recklessly violated some Code provision or
regulation in sending the balance due reminders.
Court notes that defendant's primary contention in its motion for
summary judgment centers around the fact that plaintiffs' complaint is
merely an action challenging the assessment of taxes. This Court agrees
with defendant's argument. The Court believes this plaintiffs' action is
merely a complaint challenging the assessment of taxes. Accordingly, in
order to challenge an assessment of taxes, jurisdictional prerequisite
must be met in order for this Court to exercise jurisdiction. The
taxpayer must first fully pay the tax assessment, including interest and
penalties, and then timely file a claim for refund with the IRS. See
26 U.S.C. §7422(a); Flora v. U.S. [58-2 USTC ¶9606], 357 U.S.
63, 68 (1958), aff'd on reh'g [60-1 USTC ¶9347], 362 U.S. 145
order to timely bring a suit for a tax refund under 28 U.S.C. §1345(a)(1)
and 26 U.S.C. §7422(a), the taxpayer must, in addition to complying
with the full payment rule set forth in Flora, supra, timely file
an administrative claim for refund with the IRS. United States v.
Dalm [90-1 USTC ¶50,154; 90-1 USTC ¶60,012], 494 U.S. 596, 601-602
(1990). In order to file a timely claim for refund of taxes paid or
collected, the taxpayer must file with the IRS a claim for refund within
three (3) years from the date the original tax return was filed, or
within two (2) years from the time the tax was paid, whichever period is
later. 26 U.S.C. §6511(a); United States v. Dalm [90-1 USTC ¶50,154;
90-1 USTC ¶60,012], 110 S. Ct. at 1368; accord Miller v.
[91-2 USTC ¶60,092], 949 F.2d 708, 711 (4th Cir. 1991); Yuen v.
United States [87-2 USTC ¶9483], 825. F.2d 244, 245 (9th Cir.
this case, plaintiffs claim that the IRS erroneously assessed an income
tax liability for tax year 1986 against Mr. Addington. (Compl., ¶7-18.)
Plaintiffs' request that the IRS's claim for these taxes "be
abated" and the money received pursuant to the IRS's levy on his
social security benefits be returned to him. (Compl., Prayer for
Relief.) However, plaintiffs have failed to allege that they (1)
fully paid the tax liabilities, including interest and penalties, as
required by Flora and its progeny, and (2) timely filed an
administrative claim for refund with the IRS. 26 U.S.C. §7422(a).
light of the above, plaintiffs' claims for tax abatement or the return
of money received pursuant to a tax levy must fail.
the Court is of the opinion that the claim of plaintiffs for damages for
intentional or reckless violations of the Code by the IRS collecting
taxes through balance due notices sent to Mrs. Addington does not amount
to a viable claim under §7433. Upon review of the record, the Court
finds that Mrs. Addington did not file tax returns for 1984 and 1985 and
that the IRS properly sent notices to her within the required statutory
period. 26 U.S.C. §6502(a).
there being no genuine issue of material fact and for the reasons set
forth hereinabove, the Court finds that the
is entitled to judgment as a matter of law with respect to plaintiffs'
claims as alleged in their complaint. The Court GRANTS the
defendant's motion for summary judgment and ORDERS that judgment
be entered in favor of the defendant and that plaintiffs' action be Dismissed
and Stricken from the docket of the Court.
Clerk is directed to mail copies of this Memorandum Opinion and
Order to counsel of record herein.