Opinion
Case No.: CV-S-02-0108-RLH (LRL)
September 6, 2002
ORDER (Motion for Summary Judgment-#3)
Before the Court is Defendant Commissioner's Motion for Summary Judgment (#3), filed May 23, 2002. The Court has also considered Plaintiffs Objection (#6) filed June 20, 2002 and Plaintiffs Complaint (#1) filed January 24, 2002.
BACKGROUND
Plaintiff asks this court to grant three requests: 1) To "declare invalid" a collection due process determination made by the IRS against him; 2) To order reimbursement by Defendant of Plaintiffs costs associated with bringing this action; and 3) To award punitive damages based on Defendant's conduct.
In 1999, Plaintiff filed Form 1040, U.S. Individual Income Tax Return, for the 1998 tax year. Plaintiff also filed amended tax returns for 1989 and 1990. Although the included Form W2 showed income received by the Plaintiff, the 1998 Return contained zeroes on all lines reflecting income earned or taxes due and had attached to it a two page, typewritten statement outlining reasons for his belief that he had no income to report and did not, therefor, owe federal income tax. According to Defendant's motion, and not refuted by Plaintiff, copies of Plaintiffs amended 1989 and 1990 returns are unavailable but were similarly filed with zeroes written on all appropriate lines.
On July 20, 1998, under 26 U.S.C. § 6702, the IRS assessed two $500 civil penalties on Plaintiff for filing the amended returns and, on March 26, 2001, assessed another $500 civil penalty for filing the 1998 tax return. After applying the balance of Plaintiff's overpaid taxes, the amount of assessed civil penalties totaled $1,083.99. Section 6702 assesses a $500 civil penalty 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."
The IRS posted a Notice of Federal Tax Lien for unpaid civil penalties pursuant to Internal Revenue Code §§ 6321, 6322, and 6323 on May 15, 2001 and informed Plaintiff of the lien by certified mail in a letter dated May 22, 2001. Plaintiff then requested from defendant a collection due process hearing regarding the frivolous return penalties and collection alternatives which was held on October 9, 2001, a transcript of which is attached to Plaintiffs Complaint (#1).
Finally, on December 27, 2001, the IRS sent Plaintiff a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (Notice of Determination) informing Plaintiff that the proposed levy to collect the frivolous return penalty would not be restricted. Attached to the Notice of Determination was Attachment 3194 explaining that the decision was based on the determination that the IRS fully complied with all applicable laws, regulations, and administrative procedures. The Notice of Determination also informed Plaintiff that any dispute of the determination could be made within 30 days in the appropriate United States District Court. Plaintiff timely filed with this Court and Defendant now moves for summary judgment.
DISCUSSION
I. Summary Judgment Standard
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper only "where the record before the court on the motion reveals the absence of any material issue of fact and [where] the moving party is entitled to judgment as a matter of law." Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982) (quoting Portland Retail Druggists Ass'n v. Kaiser Found. Health Plan, 662 F.2d 641, 645 (9th Cir. 1981)), cert. denied, 460 U.S. 1085 (1983). "A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the parties' differing version of the truth." Sec. Exch. Comm'n v. Seaboard Corp., 677 F.2d 1289, 1293 (9th Cir. 1982) (citation omitted).
The party moving for summary judgment has the burden of showing the absence of a genuine issue of material fact, and the court must view all facts and draw all inferences in the light most favorable to the responding party. See Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). See also Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982), cert. denied, 460 U.S. 1085 (1983). Once this burden has been met, "[t]he opposing party must then present specific facts demonstrating that there is a factual dispute about a material issue." Zoslaw, 693 F.2d at 883 (citation and internal quotes omitted).
II. Analysis
Plaintiff first asks that the collection due process determination made against him by the IRS be declared invalid. Since the Tax Court does not have jurisdiction to consider frivolous return penalties, See Van Es v. Commissioner, 115 T.C. 324 (2000), the matter is appropriately before this court. 26 U.S.C. § 6320(c), 6330(d)(1)(B).
26 U.S.C. § 6702 assigns liability in the amount of five hundred dollars ($500) to a person filing a frivolous tax return. The Secretary of the Treasury or his delegate, such as the IRS, assesses this penalty in the same manner as a tax, and any reference to a "tax" in Title 26 also includes this penalty. 26 U.S.C. § 6671. Section 6201 of the Code authorizes the Secretary to make any necessary tax assessments. In the case of a frivolous return penalty, the deficiency procedures of Title 26, Chapter 63, subchapter B, do not apply. 26 U.S.C. § 6703(b). The failure to pay the penalty results in a lien on the person's property. 26 U.S.C. § 6321. To ensure the validity of the lien, the Secretary files the lien with, in this case, the Clark County Recorder, 26 U.S.C. § 6323(f)(1)(A), and sends a notice of filing of the lien to the person, 26 U.S.C. § 6320(a). The Secretary must also inform the person of his right to a hearing at the same time. 26 U.S.C. § 6320(a)(3)(B). For the purposes of this Order, the procedures of the collection due process hearing, 26 U.S.C. § 6330(c), apply to the lien hearing, 26 U.S.C. § 6320(c). If the person requests a hearing, the hearing officer must "obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met." 26 U.S.C. § 6330(c)(1). At the hearing, the person may also raise any relevant issue, including spousal defenses, the appropriateness of the collection action, and any collection alternatives. 26 U.S.C. § 6330(c)(2)(A). The 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." 26 U.S.C. § 6330(c)(2)(B).
The Court will use the collective term "Secretary" to refer to the Secretary of the Treasury and any delegates. See 26 U.S.C. § 7701(a)(11)(B). The Secretary of the Treasury may delegate much of his authority and responsibilities to others by prescribing rules and 26 regulations, among other methods. 26 U.S.C. § 7805(a); see also 26 C.F.R. § 301.7701-9, 301.7701-10.
The "underlying tax liability" in this case is the frivolous return penalty. See 26 U.S.C. § 6671; see also 26 C.F.R. § 301.6321-1. Plaintiff properly challenged the validity of the frivolous return penalties at the collection due process hearing because the statutory deficiency procedures do not apply to frivolous return penalties, 26 U.S.C. § 6703(b), and thus Plaintiff had no prior opportunity to dispute the penalties. The validity of the income taxes that Plaintiff owes for 1989, 1990, and 1998 is not at issue in this action. On the other hand, the amended tax returns and tax return that Plaintiff filed for 1989, 1990, and 1998 are relevant because they determine whether assessment of the frivolous return penalty was proper.
Section 6330(d) is silent on the standard that the Court should use to review the determination of the collection hearing. However, the legislative history indicates that if the validity of the underlying tax liability was properly at issue, then review is de novo. H. Conf. Rep. 105-599 (1998); see also Dogwood Forest Rest Home, Inc. v. United States, 181 F. Supp.2d 554, 559 (M.D.N.C. 2001); MRCA Info. Servs. v. United States, 145 F. Supp.2d 194, 198-99 (D. Conn. 2000); Sego v. Commissioner, 114 T.C. 604, 610 (2000). The Court will use that standard of review.
There is no doubt as to the validity of the penalty. Plaintiff submitted Form 1040 for 1998 and apparently submitted Forms 1040X for 1989 and 1990 with zeros in the income section and Forms W-2 showing income considerably more than zero. Motion (#4), Exhibit A. He also attached an explanation of how no provisions of the Internal Revenue code make him liable for the income tax, how his wages are not income, and other matters. Wages are income, 26 U.S.C. § 61, upon which Plaintiff owes a tax, 26 U.S.C. § 1, and courts—including this one—have found arguments to the contrary to be tired and frivolous long before Plaintiff filed the tax returns at issue. See, e.g., Sisemore v. United States, 797 F.2d 268, 270 (6th Cir. 1986); Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir. 1986); Sullivan v. United States, 788 F.2d 813, 815 (1st Cir. 1986); Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985); In re Hopkins, 192 B.R. 760, 762-63 (D. Nev. 1995); and other cases too numerous to cite. On its face, Plaintiffs tax returns were substantially incorrect and frivolous, thus making Plaintiff liable for the frivolous return penalty. 26 U.S.C. § 6702. The assessments of the frivolous return penalties are valid.
No genuine issue of material fact exists over the verification of all legal and administrative requirements. Plaintiff states that the "Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC § 6320," Compl. (#1) Exhibit C-1, was sent by the Compliance Technical Support Manager, an official with the authority to send such a notice. See DO. No. 196, 1982-2 C.B. 748 (1982). The Secretary of the Treasury delegated to the local Internal Revenue Service office collecting the penalty the responsibility of providing the verification to the hearing officer. 26 C.F.R. § 301.6320-1(e)(1). The hearing officer properly relied on Fonns 4340, Defendant's Motion (#3) Exhibit B, for such verification. See Huff v. United States, 10 F.3d 1440, 1446-47 (9th Cir. 1993), cert. denied, 512 U.S. 1219 (1994); Hughes v. United States, 953 F.2d 531, 538-10 (9th Cir. 1992); see also Davis v. Commissioner, 115 T.C. 35, 41 (2000). The Forms 4340 show that the frivolous return penalty had been assessed, that notices had been mailed to Plaintiff, and that Plaintiff had requested a hearing. Because, as noted above, the tax returns are clearly frivolous, the hearing officer did not err in his verification that the requirements of any applicable law and administrative procedures had been met. Therefor, the collection due process determination is valid.
Plaintiffs repeated insistence that he see documents signed by the Secretary of the Treasury, or by a person with a delegation order signed by the Secretary of the Treasury, Compl. (#1), Exhibit B, at 4, is frivolous.
Without declaring defendant's collection due process determination invalid, the Court has no reason to reach Plaintiffs requests for costs or damages.
CONCLUSION
Accordingly, and for good cause appearing,
IT IS HEREBY ORDERED that Defendant's Motion for Summary Judgment (#3) is GRANTED.