Opinion
Case No. 01-CV-2058
August 12, 2002
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS COUNT I
This matter comes before the Court on Defendant United States of America's ("Defendant") Motion to Dismiss Count 1. For the reasons set forth below, Defendant's motion is GRANTED.
I. BACKGROUND PROCEDURE
Plaintiff Dennis E. Walker ("Plaintiff") and Defendant stipulate to the facts as set forth in Defendant's Memorandum of Points and Authorities in Support of United States' Motion to Dismiss. (Plaintiff's Memorandum of Point and Authorities in Opposition to Motion to Dismiss at 3 ("Opposition") (Docket No. 8)). Since the facts germane to this motion are undisputed, the Court adopts the following as findings of fact:
1. SBN, LLC, a telemarketing firm, was formed in 1996 and operated until filing for protection under the bankruptcy laws of the United States in January of 1998. (Complaint, ¶ 5-11).
2. SBN, LLC, failed to withhold and pay over to the United States income tax withholding and the employees' share of Medicare and FICA for the tax periods ending September 30, 1996, December 31, 1996, March 31, 1997, and September 30, 1997 (the "trust fund taxes at issue"). (Complaint, ¶ 13).
3. The Internal Revenue Service ("IRS") determined that Plaintiff was a responsible person who willfully failed to pay over to the United States the trust fund taxes at issue. On or about April 28, 1998, the IRS mailed to Plaintiff a Notice of Proposed Assessment pursuant to 26 U.S.C. § 6672, proposing to assess a Trust Fund Recovery Penalty against Plaintiff to recover the trust fund taxes at issue. (Complaint, ¶ 14, Exhibit "A").
4. On April 28, 1998, the IRS mailed to Plaintiff, and Plaintiff received, a letter notifying him of the proposed assessment and collection, and notifying Plaintiff of his right to an administrative appeal and hearing to dispute the proposed assessment. (Complaint, ¶ 15, Exhibit "B").
5. Plaintiff did not file a protest and request for a hearing with the IRS Appeals Office. (Complaint, ¶ 15).
6. The Trust Fund Recovery Penalty relating to the tax liability at issue was assessed against Plaintiff on September 28, 1998. (Complaint, Exhibit "C").
7. 26 U.S.C. § 6330, granting new procedural rights to taxpayers subject to IRS collection, became effective for collection actions initiated after January 19, 1999. (Internal Revenue Service Restructuring and Reform Act of 1998, § 3401 (Pub.L. 105-206; 112 Stat. 685)).
8. On November 28, 2000, the IRS sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing to Plaintiff, informing him of his right to a collection due process hearing. (Declaration of G. Patrick Jennings ("Jennings Decl."), Exhibit "A" (Docket No. 8)).
9. On December 14, 2000, Plainliff sent a timely request for a collection due process hearing. The only issue raised in the request was Plaintiff's contention that he is not liable for the Trust Fund Recovery Penalty. (Jennings Decl., Exhibit "B").
10. On or about April 15, 2001, Plaintiff's personal income tax refund in the amount of $33,716 was applied to the Trust Fund Recovery Penalty assessment pursuant to 26 U.S.C. § 6402(a). (Complaint, ¶ 24).
11. On July 16, 2001, Plaintiff appeared by counsel William P. Shannahan at the collection due process hearing before IRS Settlement Officer Cynthia Chadwell. (Complaint, ¶ 20). Officer Chadwell informed Mr. Shannahan that Plaintiff would not be allowed to dispute the existence or amount of the underlying tax liability because Plaintiff had previously been given such an opportunity. (Id.)
12. On October 12, 2001, the IRS issued its Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330, sustaining the proposed levy action. (Complaint, Exhibit "F").
13. On November 8, 2001, Plaintiff timely filed this Complaint seeking an order determining (1) that Plaintiff was denied due process rights, (2) that Plaintiff is not liable for a Trust Fund Recovery Penalty under 26 U.S.C. § 6672, and (3) that Plaintiff is entitled to a tax refund of monies applied to the Trust Fund Recovery Penalty.
II. DISCUSSION
A. Legal Standard 26 U.S.C. § 6330 ("Section 6330") states that the IRS may not levy any property of any person unless such person has been notified in writing of their right to a hearing before such levy is made. It also provides that at the hearing, the person may raise "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 or did not otherwise have an opportunity to dispute such tax liability." 26 U.S.C. § 6330(c)(2)(B).
B. Analysis
Since the facts relevant to this motion are not in dispute, the narrow issue before this Court involves the applicability of Section 6330. Defendant contends that all requirements for Section 6330 were met by the IRS, and therefore Plaintiff should be precluded from challenging his tax liability. Conversely, Plaintiff argues that his "opportunity" to dispute tax liability was provided on April 28, 1998, and that Section 6330 did not take effect until January 19, 1999. Thus, Plaintiff concludes, "prior opportunities . . . should not be bootstrapped to comply with the statute that wasn't even in existence when the alleged opportunity occurred." (Opposition at 9). Nevertheless, existing case law demonstrates that application of Section 6330 is applicable in the instant case.
Defendant contends that Section 6330 requires only that Plaintiff be afforded an opportunity to dispute liability, regardless of whether such opportunity occurred before or after January 19, 1999 (the effective date of Section 6330). Defendant cites three cases similar to the present case, in which the opportunity for the taxpayer to dispute liability occurred before the effective date of Section 6330. In Goza v. Commissioner, 114 T.C. 176 (2000), the taxpayer was provided with a notice of deficiency on February 9, 1998, and notice of intent to levy was mailed on February 17, 1999. The Tax Court, relying on 26 U.S.C. § 6330(c)(2)(B), concluded that the taxpayer did not avail himself of the opportunity to dispute the underlying taxes provided to him when he received the notice of deficiency, and was thus preduded from disputing the liability at the collection due process hearing before the Appeals Office. Goza, 114 T.C. at 183. Similar conclusions were reached inSego v. Commissioner, 114 T.C. No. 37 (2000), and Konkel v. Commissioner, 2000 WL 1819417 (M.D. Fla 2000) (taxpayer who receives notice of liability and right to hearing, but deliberately declines to avail himself of that right, is thereafter precluded from disputing the amount of tax liability at collections due process hearing).
Plaintiff attempts to distinguish the present case from the aforementioned cases by highlighting the frivolous conduct of the taxpayers in the other cases, and noting his good faith objections to the liability, and includes that Plaintiff is in compliance with the procedural requirements under Section 6330. Plaintiff asserts that "Konkel, Goza, and Sego all erroneously conclude that the issuance of a notice for the opportunity of a hearing issued before not only the effective date of the legislation but the enactment date of legislation can comply with requirements of legislation that didn't exist." (Opposition at 15).
However, Plaintiff's assertion regarding the "erroneous conclusions" in the Goza, Sego, and Konkel decisions is groundless. Aside from the cases cited by Defendant, the Tax Court has determined on numerous occasions that a notice of deficiency provided to a taxpayer prior to the effective date of Section 6330 satisfies the "opportunity to dispute" requirement under Section 6330(c)(2)(B). See, e.g., Behling v. Commissioner, 118 T.C. No. 36 (2002); Baxter v. Commissioner, T.C. Memo 2001-300 (2001);Pierson v. Commissioner, 115 T.C. No. 39 (2000); Howard v. Commissioner, T.C. Memo 2000-319 (2000).
Furthermore, Plaintiff's reliance on Parker v. Commissioner, 117 T.C. No. 6 (2001), is misplaced. In Parker v. Commissioner, the Tax Court found that the IRS was bound to the conditions set forth in Section 6630 where a Notice of Intent to Levy was mailed to a taxpayer by the IRS after its effective date. However, Parker is distinct from the above-cited cases because the taxpayer in Parker was not provided with a notice of deficiency. Instead, the IRS filed tax liens against the taxpayer's property prior to the effective date of Section 6330, and subsequently sent a Notice of Intent to Levy after the effective date. The IRS argued that their levy action commenced prior to the effective date through the filing of the liens against the taxpayers property, but the court in Parker clearly distinguished liens from levies, noting that two different statutes apply to challenges to liens and levies. Parker, 117 T.C. at *3. The court ruled that the levy action by the IRS initiated after the effective date of Section 6330 and was therefore subject to its conditions. The ruling in Parker is clearly distinguishable from the instant case, where there is no dispute that Plaintiff was provided an opportunity to dispute the underlying tax liability through a notice of deficiency.
Finally, Plaintiff claims that the legislative intent of Section 6330 was to provide "new taxpayer rights and new procedures" to the taxpayer, and therefore prior opportunities to dispute liability cannot be "bootstrapped" to comply with the statute. (Opposition at 9). Plaintiff cites Strickland v. Commissioner, T.C. Memo 2001-312 (2001), in which Judge Laro discussed the passage of Section 6330 and other statutes in response to "highly publicized criticisms of the agency's collection methods," which resulted in "new taxpayer rights" and "formal procedures where the IRS seeks to collect taxes by levy." Id. at *3.
Nevertheless, it is evident from the cases cited above that the taxpayer rights provided by Section 6330 ensure that a taxpayer is afforded an opportunity to dispute the underlying tax liability, regardless of whether that opportunity is given before or after the effective date of Section 6330. This position is solidified inStrickland, where after the discussion of the legislative intent of Section 6330, Judge Laro sustained the IRS's determination of levy, noting that "it is well settled in this court that the taxpayer cannot challenge the amount and/or existence of an underlying tax liability where the taxpayer receives a notice of deficiency." Id. Ironically, the taxpayer in Strickland received a notice of deficiency on September 26, 1998, nearly four months prior to the effective date of Section 6330.
Similar to the taxpayer in Strickland, Plaintiff in the instant case was afforded an opportunity to dispute the underlying tax liability through a notice of deficiency mailed to him on April 28, 1998, and Plaintiff deliberately declined to avail himself of that opportunity. Holding Plaintiff responsible for declining that opportunity fully comports with the legislative intent of Section 6330 articulated inStrickland, regardless of whether such opportunity was provided before or after the effective date of Section 6330.
III. CONCLUSION
For the aforementioned reasons, Defendant's Motion to Dismiss Count I is GRANTED.