Opinion
CIVIL ACTION NO. 1:03-CV-0475-GET
October 3, 2003
ORDER
The above-styled matter is presently before the court on:
(1) defendant's motion to dismiss counts I and III of the complaint [docket no. 7-1], or alternatively
(2) defendants motion for summary judgment on counts I and III of the complaint [docket no. 7-2].
Background
On February 20, 2003, pursuant to 26 U.S.C. § 6330(d)(1), plaintiff filed the instant action for judicial review of the Internal Revenue Service ("IRS")'s determination to collect a tax penalty for unpaid employment taxes by levy on plaintiff's property. Count. I of plaintiff's complaint asserts that the IRS incorrectly determined and assessed the tax penalty against plaintiff. Count II alleges that the amount of the tax penalty is incorrect. Count III of the complaint alleges that the IRS did not provide plaintiff with due process at a collections due process hearing. On May 30, 2003, defendant moved to dismiss counts I and III, or alternatively for summary judgment.
Motion to Dismiss
Defendant has filed a motion to dismiss counts I and III of the complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). "If on a motion . . . to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented and not excluded by the court, the motion shall be treated as one for summary judgment." Fed.R.Civ.P. 12(b).
In support of its motion, defendant presented, and the court considered, two declarations from IRS employees as well as copies of the claims register and docket sheet from In re Melvin D. Johnson and Sandra J. Johnson, No. N95-12178-WHD (Bankr. N.D. Ga.). Therefore, the court will consider defendant's motion as one for summary judgment. Accordingly, defendant's motion to dismiss counts I and III [docket no. 7-1] is DENIED.
Motion for Summary Judgment
Defendant has also moved for summary judgment as to counts I and III of plaintiff's complaint. On June 2, 2003, the Clerk of Court sent plaintiff notice of defendant's motion for summary judgment. Plaintiff filed a response on July 1, 2003.
Standard
Courts should grant summary judgment when "there is no genuine issue as to any material fact . . . and the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c), The moving party must "always bear the initial responsibility of informing the district court of the basis of its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). That burden is "discharged by `showing' — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party's case." Id. at 325; see also U.S. v. Four Parcels of Real Property, 941 F.2d 1428, 1437 (11th Cir. 1991).
Once the movant has met this burden, the opposing party must then present evidence establishing that there is a genuine issue of material fact. Celotex, 477 U.S. at 325. The nonmoving party must go beyond the pleadings and submit evidence such as affidavits, depositions and admissions that are sufficient to demonstrate that if allowed to proceed to trial, a jury might return a verdict in his favor.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). If he does so, there is a genuine issue of fact that requires a trial. In making a determination of whether there is a material issue of fact, the evidence of the non-movant is to be believed and all justifiable inferences are to be drawn in his favor. Id. at 255; Rollins v. TechSouth, Inc., 833 F.2d 1525, 1529 (11th Cir. 1987). However, an issue is not genuine if it is unsupported by evidence or if it is created by evidence that is "merely colorable" or is "not significantly probative." Anderson, 477 U.S. at 249-50. Similarly, a fact is not material unless it is identified by the controlling substantive law as an essential element of the nonmoving party's case. Id. at 248. Thus, to create a genuine issue of material fact for trial, the party opposing the summary judgment must come forward with specific evidence of every element essential to his case with respect to which (1) he has the burden of proof, and (2) the summary judgment movant has made a plausible showing of the absence of evidence of the necessary element. Celotex, 477 U.S. at 323.
Facts
In light of the foregoing standard, the court finds the following facts for the purpose of resolving defendant's motion for summary judgment only. PCT Services, Inc. failed to pay fully income and social security taxes for its employees for all of 1993, 1994, and the first calendar quarter of 1995. Plaintiff was the employee who collected, accounted for, and paid taxes on behalf of PCT Services, Inc. Pursuant to 26 U.S.C. § 6672, the IBS assessed a penalty against plaintiff in the amount of $1,504,201.31. Plaintiff signed the IRS's form 2751 acknowledging the assessment.
After the penalty was assessed, plaintiff filed for bankruptcy. The IRS filed a "proof of claim," and plaintiff did not object or challenge the claim. The bankruptcy court confirmed plaintiff's plan of reorganization; however, plaintiff defaulted on his payments. Subsequently, the IRS proceeded to collect the full amount due of the assessment.
The IRS initiated collection of the penalty by levy. Pursuant to 26 U.S.C. § 6330 (a), the IRS sent plaintiff a "notice of intent to levy" that included information regarding plaintiff's rights to a "collection due process hearing." In his request for a hearing, plaintiff asserted that he had "the capability of performing under the [bankruptcy] Plan respectfully request that the Service allow Debtors to resume payments under the Plan." In addition, plaintiff stated that the IRS had not "correctly computed the amount owed under the terms of the proposed levy."
In a July 22, 2002 letter, an IRS hearing officer asked plaintiff to propose optional procedures to enable the IRS to collect plaintiff's tax penalty. Plaintiff did not respond to the letter and the hearing officer upheld the IRS's decision to collect; the penalty by levy.
Discussion
"If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice of demand, it shall be lawful for the [IRS] to collect such tax . . . by levy." 26 U.S.C. § 6331 (a). Before a levy can be assessed, the IRS must notify the taxpayer of his right to a hearing. See 26 U.S.C. § 6330 (a). At the hearing, the taxpayer may raise "any relevant issue relating to the unpaid tax or the proposed levy, including appropriate spousal defenses; challenges to the appropriateness of the collection actions; and offers of collection alternatives." 26 U.S.C. § 6330(c)(2).The taxpayer may challenge the "existence or amount of the underlying tax liability" only if the taxpayer "did not otherwise have an opportunity to dispute such tax liability." 26 U.S.C. § 6330 (c)(2) (B). "An issue may not be raised at the hearing if the issue was raised . . . in any other previous administrative or judicial proceeding; and the person seeking to raise the issue participated meaningfully in such hearing or proceeding." 26 U.S.C. § 6330(c)(4)(A)-(B).
Where "the amount of tax liability is part of the appeal," courts review the determination on a de nova basis. MRCA Info. Servs. v. United States, 145 F. Supp.2d 194, 199 (D. Conn. 2000) (emphasis in original). "Where the validity of the tax liability is not properly part of the appeal, . . . the appeals' officer's determination as to the appropriateness of the collection activity will be reviewed under an abuse of discretion standard of review." Id.
In the instant action, the IRS sent plaintiff a letter on June 1, 1995 that outlined the proposed penalty and appeals process. On July 3, 1995, plaintiff sent the IRS a signed statement where plaintiff agreed with the assessment and "waive [d] the privilege of filing a claim for abatement after assessment." Therefore, plaintiff relinquished the opportunity to challenge his responsibility for the assessment or the amount of the assessment. Accordingly, 26 U.S.C. § 6330 (c) bars plaintiff from challenging his tax liability at the collection due process hearing.See Maton v. Commissioner, 2003 WL 1860514 (N.D. Ill. 2003).
In addition, as part of plaintiff's bankruptcy proceeding, the IRS filed a proof of claim to which plaintiff never objected. A taxpayer cannot challenge the amount of his liability where he "had an opportunity, in [his] bankruptcy proceeding, to question the validity of the tax liability" because he "acknowledged the existence of [his] tax liability and the amount of the assessment by entering into a bankruptcy plan." Triad Microsystems, Inc. v. United States, 2002 WL 31777585, *3 (E.D. Va. 2002).
Finally, as to plaintiff's claim that the IRS did not; provide due process, the IRS appeals officer sent plaintiff a letter asking him to "please contact [the IRS] . . . so that we may discuss any collection alternatives you would like [the IRS] to consider.11 Plaintiff failed to respond. Therefore, the appeals officer did not abuse her discretion when upholding the agency's decision to collect plaintiff's tax penalty by levying on his property. Accordingly, defendant's motion for summary judgment as to counts I and III of the complaint [docket no. 7-2] is GRANTED.
Summary
(1) defendant's motion to dismiss counts I and III of the complaint [docket no. 7-1] is DENIED.
(2) defendant's motion for summary judgment on counts I and III of the complaint [docket no 7-2] is GRANTED.
SO ORDERED.