Summary
In Gregory v. United States, 2003 WL 701218 (N.D. Ga. Jan. 15, 2003), the taxpayer challenged a Notice of Determination involving frivolous return penalties on the grounds that the appeal officer did not produce and present various documents during the CDP hearing and did not consider the arguments she made during the hearing.
Summary of this case from Sergio v. U.S.Opinion
Civil Action No. 1:02-CV-899-CC
January 15, 2003
ORDER
Pending before the court is Defendant United States of America ("Defendant") Motion to Dismiss [Doc. No. 5-1] or, In the Alternative, Motion for Summary Judgment [Doc. No. 5-2].
FACTUAL BACKGROUND
The Internal Revenue Service ("IRS") assessed frivolous return penalties against Plaintiff Carolyn Gregory ("Plaintiff") related to her 1998 and 1999 federal income tax returns. Plaintiff received notices of intent to levy for frivolous return penalties imposed by the IRS with respect to her 1998 and 1999 federal income tax returns. Each notice was in the amount of $500. Pursuant to 26 U.S.C. § 6330, Plaintiff requested and received a Collection Due Process hearing related to these penalties.
The Collection Due Process hearing was conducted on February 19, 2002. On March 9, 2002. Plaintiff received a detailed determination sustaining the IRS collection action. Specifically, the letter stated that Plaintiff, during the Appeals consideration of her case did not:
"Raise any collection alternatives or other relevant issues. Your arguments regarding the liability were of a nature that cannot be considered by Appeals. Appeals is not allowed to consider arguments based on moral, religious, political, constitutional, conscientious or similar grounds. C.F.R. § 601.106(b). Appeals has obtained verification from the Secretary that the requirements of any applicable law or administrative procedure have been met, considered any relevant issues relating to the unpaid tax/penalty raised at the hearing, and taken into consideration whether the proposed collection action balances the need for the efficient collection of taxes/penalties with the legitimate concern of the person that any collection action be no more intrusive than necessary. You were provided copies of the Form 4340, Certificate of Assessment and Payments and Other Specified Matters, for your account. The Courts have held that Form 4340 is presumptive proof of a valid assessment. Therefore, the determination in this case is the proposed levy action is sustained.
[See Complaint, Exhibit A].
On April 5, 2002, Plaintiff filed a "Complaint for Damages and Request that This Court Set Aside an Invalid Collection Due Process `Determination' Lawlessly Issued Pursuant to 26 U.S.C. § 6330" seeking judicial review of a Determination by the Internal Revenue Service Office of Appeals. Plaintiff asserts she is entitled to relief because the appeals officer did not produce and present various documents during the Collection Due Process hearing, and did not consider the arguments she made during the hearing.
DISCUSSION
In the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub.L. 105-206, sec. 3401, 112 Stat. 685, 746, Congress enacted new sections 6320 (pertaining to liens) and 6330 (pertaining to levies) to provide due process protections for taxpayers in tax collection matters. Section 6330 generally provides that the Commissioner cannot proceed with the collection of taxes by way of a levy on a taxpayer's property until the taxpayer has been given notice of and the opportunity for an administrative review of the matter (in the form of an Appeals Office due process hearing) and, if dissatisfied, with judicial review of the administrative determination. Section 6330(c) pertains to matters considered at such a hearing and provides in pertinent part:
(c) Matters considered at hearing. In the case of any hearing conducted under this section —
(1) Requirement of investigation. The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.
Section 6330(c)(2)(A) provides that the person may raise any relevant issue to the unpaid tax or the unpaid levy, including appropriate spousal defenses, challenges to the appropriateness of collection actions, and "offer of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer in compromise." Section 6330(c)(2)(B) provides that "[t]he person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability."
Defendant moves to dismiss the Complaint for failure to state a claim which relief can be granted pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure. Alternatively, Defendant moves the court for summary judgment pursuant to Rule 56, Federal Rules of Civil Procedure.
The Complaint first alleges that the appeals officer "[d]id not produce and present to Plaintiff the `verification from the Secretary' as required by Section 6330(c)" and that the appeals officer "[d]id not `Prior to issuance of the `determination' at issue, send Plaintiff the `verification from the IRS office collecting the tax that the requirement of any applicable have been met,' as `required' by Treasury Regulation 301.6330-1(e).
Section 6330(c)(1) only requires that the appeals officer "obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met." Section 301.6330-1(e) provides that the appeals officer is required to "obtain verification from the IRS office collecting the tax that the requirements of any applicable law or administrative procedures have been met." Nothing in either statute or regulation requires that the verification be sent to or provided to the taxpayer. See Nestor v. Commissioner, 2002 WL 236682 (U.S. Tax Ct. 2002). Therefore, the alleged failure to send to Plaintiff "verification from the IRS office collecting the tax" prior to the issuance of the "determination" is not a violation of the statute and cannot state a claim upon which relief can be granted.
The Complaint further alleges that the hearing pursuant to Section 6330 was unlawful because the appeals officer did not "produce any document signed by any Defendant employee that would have supported the imposition of the `frivolous penalty' at issue"; did not "produce any Delegation of Authority from the Secretary that authorized any Defendant employee to impose the `frivolous penalty' at issue"; did not "identify or produce a Treasury Department regulation that authorized any Defendant employee to impose the `frivolous penalty'"; and did not "produce any statute that established the `existence . . . of the underlying liability of the tax for which the `frivolous penalty' had been imposed."
Defendant moves to dismiss these allegations on the ground that there is no requirement in the law that the IRS produce any of these documents or information prior to the imposition of a levy or in connection with a Collection Due Process hearing.
The court agrees. Relevant statutes and regulations demonstrate . . . that the Secretary does have the power to collect taxes, and that such power can be delegated to local IRS agents. 26 U.S.C. § 6301 provides that "[t]he Secretary shall collect the taxes imposed by the internal revenue laws." The actual task of collecting taxes, however, has been delegated to local IRS directors. "The taxes imposed by the internal revenue laws shall be collected by district directors of internal revenue." 26 C.F.R. § 301.6301-1. District directors in turn are authorized to redelegate the levy power to lower level officials such as collection officers. See IRS Delegation Order 191. The delegation of authority down the chain of command, from the Secretary, to the Commissioner of Internal Revenue to local IRS employees constitutes a valid delegation by the Secretary to the Commissioner, and a redelegation by the Commissioner to the delegated officers and employees. See 26 C.F.R. § 301.7701-9.
With respect to the allegation that the Appeal Officer did not "produce any document signed by any Defendant employee that would have supported the imposition of the `frivolous penalty' at issue, 26 U.S.C. § 6702 provides for a $500 civil penalty for a frivolous income tax return if
(1) any individual files what purports to be a return of the tax imposed by subtitle A but which —
(A) does not contain information on which the substantial correctness of the self-assessment may be judged, or
(B) contains information that on its face indicates that the self-assessment is substantially incorrect; and
(2) the conduct referred to in paragraph (1) is due to —
(A) a position which is frivolous, or
(B) a desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws.
Here, the record before the court establishes that Plaintiff's 1998 and 1998 income tax returns contain zeroes except for her name, address, signature, occupation, amount withheld, and the alleged overpayment/refund due, and contains an attached letter. There is no question that the returns filed by Plaintiff are "purported returns" within the meaning of Section 6702. The returns do not, however, contain information on which the substantial correctness of the self-assessment may be judged, and the document attached to the Form 1040 shows that the information was omitted due to a position which is frivolous to delay or impede the administration of Federal income tax laws. See Bradley v. United States, 817 F.2d 1400, 1404 (9th Cir. 1987).
Lastly, the Complaint alleges that the Appeals Officer erred because the Appeals Officer
(g) refused to accept the `collection alternative' proposed by Plaintiff which was that she would immediately pay the `frivolous penalty' if the appeals officer would merely cite and produce the statute that established the `underlying liability' for the tax;
(h) to make it easy for the Appeals Officer to comply . . ., Plaintiff's placed an Internal Revenue Code on the table in front of the Appeals Officer;
(i) Despite having an Internal Revenue Code in front of him, the Appeals Officer refused to point out in the Code where an income tax `liability' was established by law.
[See Plaintiff's Complaint ¶¶ 17(g), (h) and (I)].
These allegations do not state a claim. The purpose of the provision for consideration of collection alternative described in Sections 6330(c)(2)(A) and 6330(c)(3)(C) clearly is intended to allow the taxpayer to propose a method of payment that will satisfy the underlying tax liability. Plaintiff's allegations propose a condition to payment of the underlying liability. Therefore, these allegations do not state a claim upon which relief can be granted.
CONCLUSION
Based on the foregoing, Defendant's Motion to Dismiss [Doc. No. 5-1] or, In the Alternative, Motion for Summary Judgment [Doc. No. 5-2] is hereby GRANTED.