Opinion
Case No. CV-S-02-0353-KJD-(LRL)
March 12, 2003
ORDER
This matter comes before the Court on Defendant's Motion to Dismiss or, in the Alternative, For Summary Judgment (#2). Plaintiff filed a response in opposition (#7).
I. Factual and Procedural History
In her complaint, Plaintiff alleges that the Internal Revenue Service ("IRS") improperly determined that collection actions against her should not be restricted. Plaintiff now seeks to set aside the IRS's determination. The collection activity at issue stems from a frivolous return penalty the IRS assessed against Plaintiff for the return she filed for the 1999 tax year. Plaintiff filed Form 1040, U.S. Individual income Tax Returns for the 1999 tax year. The return had zeroes on all lines which reflected amounts of income earned or taxes due. Plaintiff also requested a refund of all taxes either withheld or paid for this tax year. Plaintiff attached W-2 forms to the return which indicated she had earned wages for the 1999 tax year. Finally, attached to the return was a three-page document which set forth arguments as to why Plaintiff did not believe that she owed federal income taxes. The IRS assessed a $500 civil penalty against Plaintiff under 26 U.S.C. § 6702 for filing the above described tax return. Section 6702 assesses a civil penalty of $500 if an individual "files what purports to be a return" but which contains "information that on its face indicates that the self-assessment is substantially incorrect" and is due to "a position which is frivolous." Plaintiff's self-assessment of her 1999 income tax liability was substantially incorrect in that she entered zeros for all income and tax information. According to the attached statement, Plaintiff's self-assessment was based on her position that there is no statutory income tax liability that applies to her and that wages do not constitute income. Courts have found this position to be frivolous and patently without merit. See Sisemore v. United States, 797 F.2d 268, 270 (6th Cir 1986); see also Newman v. Comm'r, 83 T.C.M. (CCH) 1757 (2002) (quotingCrain v. Comm'r, 737 F.2d 1417, 1417 (5th Cir. 1984) ("We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.")). Because Plaintiff's self-assessment was on its face substantially incorrect and was based on a frivolous position, there is no doubt as to the validity of the penalty.
On August 19, 2001, the IRS sent Plaintiff a "Final Notice-Notice of Intent to Levy and Notice of Your Rights to a Hearing." This letter notified Plaintiff of her right to appeal the IRS's levy within 30 days by requesting a Collection Due Process Hearing ("CDP Hearing"). Plaintiff filed Form 12153 "Request for a Collection Due Process Hearing" which the IRS received on August 23, 2001. Plaintiff's CDP Hearing was held on February 4, 2002, in Las Vegas, Nevada before appeals officer Thomas Lee Tracy. Ms. Canillo attended the hearing. On February 14, 2002, the IRS Appeals Office sent Ms. Carrillo a "Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330." The letter informed Plaintiff that the proposed collection action should be allowed to proceed unrestricted. The letter also informed Plaintiff of her right to dispute the determination by filing a complaint in Federal District Court within 30 days. Plaintiff filed a timely complaint with this Court. Defendant has now filed a motion for summary judgment.
II. Standard of Review
A dismissal for failure to state a claim pursuant to Rule 12(b)(6) is a ruling on a question of law. See Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994). In reviewing a Rule 12(b)(6) motion, the Court "must construe the complaint in the light most favorable to the plaintiff and must accept all well-pleaded factual allegations as true."Swarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). Moreover, because Plaintiff in this action is proceeding pro se, the Court must liberally construe all arguments set forth in her complaint. See Boag v. MacDougall, 454 U.S. 364, 365 (1982). Review is limited to the contents of the complaint. See Sprewell v. Golden State Warriors, 231 R3d 520, 527 (9th Cir. 2000). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of her claims that would entitle her to relief.See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Sprewell, 231 F.3d at 528. If matters outside the pleadings are considered, the court should treat the motion as one for summary judgment. See Fed.R.Civ.P. 12(c).
Summary judgment may be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is endued to a judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of showing the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. The burden then shifts to the nonmoving party to set forth specific facts demonstrating a genuine factual issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Fed.R.Civ.P. 56(e). The evidence, as well as all justifiable inferences drawn from it, must be viewed in the light most favorable to the nonmoving party.See Matsushita, 475 U.S. at 587. Summary judgment shall be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." See Celotex, 477 U.S. at 322.
III. Analysis
From what can be gleaned from it, Plaintiff's complaint contains a barrage of meritless arguments which she insists this Court must address. The only genuine issue before this Court is whether the IRS Appeals Office met all requirements of applicable laws and administrative procedures when making its determination that the collection action against Plaintiff should continue unrestricted. This issue will be addressed first, followed by a discussion of Plaintiff's purely meritless arguments.
A. Collection Procedure
Procedures for administrative collection actions are found in 26 U.S.C. § 6330 which requires that: (1) the IRS give 30 days' written notice of the taxpayer's right to a CDP Hearing before making a levy; (2) a hearing be conducted by an officer or employee who has no prior involvement with the subject tax liability; (3) the Appeals Office obtain verification from the IRS that the requirements of any applicable law or administrative procedure have been met; (4) the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy at the time of the CDP Hearing, including appropriate spousal defenses, challenges to the collection actions and offer of collection alternatives; (5) the taxpayer may challenge the existence of the underlying tax liability under some circumstances; and (6) the final determination by the Appeals Officer shall take into consideration (a) the verification that applicable law and administrative procedures have been met, (b) the issues raised by the taxpayer, and (c) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.
A review of Plaintiff's complaint illustrates that all of the above requirements have been met: (1) Plaintiff received timely notice of levy and requested a CDP hearing; (2) Ms. Carrillo attended her CDP Hearing on February 4, 2002 with Appeals Officer Thomas Lee Tracy, who had no prior involvement with the subject tax liability; (3) the Appeals Office obtained Form 4340 from the IRS which serves as verification that the requirements of any applicable laws or administrative procedures were met; (4) Plaintiff raised no relevant issues or appropriate defenses pertaining to the proposed collection action and offered no collection alternatives; (5) at the hearing, Plaintiff challenged the liability for the penalty and whether the return filed was frivolous, arguments determined to be frivolous by the appeals officer and (6) in the final determination, the appeals officer stated that he took into consideration all required statutory elements.
The Plaintiff argues that she made a settlement offer by pulling out a checkbook and her copy of the IRS code, and offering to pay her penalty on the spot if the officers could show her which code section made her liable for the penalty. It is not the officer's duty to cite Plaintiff every section of law the income tax and enforcement provisions are based on. It is this kind of sophist argument made throughout Plaintiff's pleadings and motions that the Court rejects.
B. Plaintiff's Arguments
1. Inadequacy of Notice.
Plaintiff repeatedly argues that letters and notices the IRS sent as well as determinations and assesments made by the IRS are invalid because there is no evidence of any delegated authority from the Secretary of Treasury to the various IRS employees. Relevant statutes and regulations demonstrate, however, 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 the taxes, however, has been delegated to local IRS directors. See 26 C.F.R. § 301.6301-1 ("The taxes imposed by the internal revenue laws shall be collected by district directors of internal revenue."). 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 re-delegation by the Commissioner to the delegated officers and employees. See 26 U.S.C. § 7701 (a)(11)(A), (12)(A)(i); 26 C.F.R. § 301.7701-9; Hughes v. United States, 953 F.2d 531, 536 (9th Cir. 1992).
2. Statutory Notice and Demand for Payment.
Plaintiff also argues that she was never sent nor received the required Statutory Notice and Demand for payment with regard to the penalties at issue. It appears that Plaintiff wants the information contained in a specific document or form, though Plaintiff has not suggested what that would be. However, Plaintiff's belief is based on faulty logic and sources. Notice and demand is not required to be sent on any particular form so long as the requisite information is included. See Hoffman v. United States, 209 F. Supp.2d 1089, 1094 (W.D. Wash. 2002); Hughes, 953 F.2d at 536. Plaintiff received notice mailed August 19, 2001, of the assessment and the IRS's intent to levy in attempt to collect the assessment. Therefore, Plaintiff had more than adequate notice of the penalty.
3. Adequacy of Supporting Documentation.
Plaintiff contends the IRS has never produced a document supporting imposition of the penalties at issue. She does not believe that a computer transcript is adequate to verify an assessment was made or approved by the appropriate personnel. The Appeals Officer provided Ms. Carrillo with the Form 4340, "Certificate of Assessments and Payments" for the penalty assessment. The Ninth Circuit has held that a Form 4340 is sufficient evidence to support a grant of summary judgment on a claim that the IRS failed to issue notice of assessment and demand for payment. See Huff v. United States, 10 F.3d 1440, 1446-1447 (9th Cir. 1993); Hughes, 953 F.2d at 535. Official certificates, such as Form 4340, can constitute proof of the fact that the assessments actually were made. See id. Additionally, there is no requirement in § 6330 of the IRS code that the appeals officer at the hearing present verification to Plaintiff. The appeals officer is supposed to obtain the verification from the Secretary and shall consider that verification in making a determination. See 26 U.S.C. § 6330 (c)(3)(A).
4. Regulation Requiring Plaintiffs to Pay the Frivolous Return Penalty.
Plaintiff contends that no Treasury Department regulation requires that she pay the penalty at issue and Defendant has not produced any such regulation. 26 U.S.C. § 6702 (a), however, provides the statutory authority for assessing the penalty and does not require any implementing regulations. See Hoffman, 209 F. Supp.2d at 1094.
Again, the Court must note that Plaintiff's assertions and arguments are completely without merit, and Plaintiff cannot seriously assert to the Court that they are made in good faith. By Plaintiff's own admission, she has a copy of the Tax Code and has seriously studied it. In doing so, she must have read 26 U.S.C. § 6001 and 6011 that she relies upon for this argument. Neither section supports the argument Plaintiff is making. Those sections do require that people "comply" with regulations in filing returns. However, the sections do not require people to comply "exclusively" with regulations.
5. Underlying Liability for Income Tax.
Plaintiff contends that no statute establishes an underlying liability for the income tax to which the penalties relate, and the IRS has not identified any such statute. Plaintiffs liability for tax deficiencies is not at issue in this case, although she consistently tried to make it so at the CDP Hearing and in the instant complaint. Plaintiff's remedy with regard to the liability for tax deficiencies does not lie in this Court. No one disputes Plaintiff's right to challenge the underlying income tax liability. However, this Court does not have jurisdiction to consider Plaintiff's income tax deficiencies. See 26 U.S.C. § 62 13(a); Moore v. Commissioner, 114 T.C. 171, 175 (2000).
III. Conclusion.
Plaintiff's 1999 Form 1040 was clearly frivolous and the civil penalty was validly assessed. More importantly, for purposes of this action, the Defendant properly followed all requirements of applicable laws and administrative procedures when assessing the civil penalty and then determining the collection action should continue unrestricted. Moreover, the arguments that the Court could glean from Plaintiff's disjunctive complaint and opposition to Defendant's motion are purely meritless. Finally, because Plaintiff's complaint lacks any merit, had the Defendant moved for Rule 11 sanctions this Court would have freely granted such motion.
Accordingly, IT IS HEREBY ORDERED that Defendant's Motion For Summary Judgment (#2) is GRANTED.
IT IS FURTHER ORDERED that Plaintiffs' complaint is DISMISSED.