Opinion
Case Number C-01-20798-JF, [Doc. Nos. 11, 16]
May 28, 2002
On March 14, 2002, the Court heard argument on Defendant's motion seeking dismissal or summary judgment as to a portion of Plaintiff's claims and remand as to the remainder of Plaintiff's claims. The Court also addressed Defendant's motion to strike Plaintiff's late-filed opposition and Plaintiff's request for recovery of costs. The Court will deny the motion to strike Plaintiff's late-filed opposition; deny Defendant's motion to dismiss or, in the alternative, for summary judgment; remand the matter for further proceedings; and denying Plaintiff's request for costs.
I. BACKGROUND
Plaintiff, proceeding pro se, appeals Defendant's determination that he owes three $500 frivolous return penalties and that such penalties may be collected by levy. The penalties relate to Plaintiff's federal income tax returns for the years 1996, 1997 and 1998. Those returns indicated that Plaintiff earned no taxable income despite the fact that the attached W-2 forms indicated that he earned significant wages during the years in question. The returns requested a refund of all wages withheld. The IRS assessed a $500 frivolous return penalty with respect to each return pursuant to 26 U.S.C. § 6702. That section provides in relevant part that:
(a) Civil penalty. — 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,
then such individual shall pay a penalty of $500.
On January 11, 2001, the IRS sent Plaintiff a Final Notice — Notice of Intent to Levy which requested frill payment of the assessed penalties and informed Plaintiff of his right to a Collection Due Process Hearing ("CDP Hearing") pursuant to 26 U.S.C. § 6330. Plaintiff timely requested a CDP Hearing, which was held on July 2, 2001 before an IRS Appeals Officer Following the hearing, the Appeals Officer issued a Notice of Determination stating that all legal and administrative requirements for the proposed levy had been met and that the proposed levy was not more intrusive than necessary. Plaintiff timely filed the instant pro se action appealing this determination.
II. DEFENDANT'S MOTION TO STRIKE PLAINTIFF'S LATE OPPOSITION
Defendant moves to strike Plaintiff's late-filed opposition, which was due by February 19, 2002 and was not filed until February 28, 2002. The Court in its discretion will deny the motion to strike and consider Plaintiff's opposition.
III. DISCUSSION
The requirements of a CDP Hearing are set forth in 26 U.S.C. § 6330. That section provides that "[t]he appeals officer shall at the hearing 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). It further provides that the taxpayer may raise at the hearing "any relevant issue relating to the unpaid tax or the proposed levy," including the appropriateness of the proposed collection action and offers of collection alternatives. 26 U.S.C. § 6330 (c)(2)(A). The taxpayer also may raise challenges to the existence or amount of the underlying tax liability if the taxpayer did not receive statutory notice of deficiency or did not otherwise have an opportunity to dispute such liability. 26 U.S.C. § 6330 (c)(2)(B). The Appeals Officer's determination must take into consideration the verification of the Secretary presented under § 6330(c)(1); any issues raised by the taxpayer under § 6330(c)(2); and whether any proposed collection action balances the need for the efficient collection of taxes against the taxpayer's legitimate concern that any collection action be no more intrusive than necessary.
Plaintiff challenges several aspects of the CDP Hearing, addressed in turn below.
Imposition of The Penalties
Plaintiff attempted to challenge whether the frivolous return penalties should have been imposed as permitted under § 6330(c)(2)(B). The Appeals Officer refused to address such challenge. Plaintiff asserts that such refusal was improper. Defendant concedes that the Appeals Officer should have addressed this issue and moves for remand so that the Appeals Officer may address the issue.
Verification
At the hearing, Plaintiff requested the verification from the Secretary that all legal requirements had been met in assessing the three $500 frivolous return penalties against him as required under § 6330(c)(1). The Appeals Officer offered Forms 4340, which were computer printouts indicating the various tax liabilities and penalties assessed against Plaintiff. Plaintiff asserts that these computer printouts were not signed by any individual and provided no indication of origin and therefore did not constitute appropriate verification of the Secretary as required under § 6330(c)(1). Defendant moves for dismissal or summary judgment as to this issue on the basis that the Forms 4340 constituted adequate verification.
The Court has been unable to discover any controlling authority on this issue. The Ninth Circuit has held in other contexts that "a Form 4340 is adequate to prove a valid assessment if it lists the `23C date,' indicating the date on which the actual assessment was made." Huff v. United States, 10 F.3d 1440, 1446 (9th Cir. 1993). In Huff the Court concluded that the IRS could not rely upon the proffered Form 4340 to prove validity of the disputed assessment, because the Form did not list any 23C dates. Defendant cites Huff for the proposition that the Forms 4340 satisfied the requirements of § 6330(c)(1) in the present case. However, the Huff Court's discussion did not § 6330(c)(1); accordingly, any application of Huff must be by analogy. Moreover, the Forms 4340 in the present case do not make explicit reference to any 23C dates. Defense counsel represented at the hearing that the 23C dates are present on the face of the Forms 4340, although they are not designated as such. Even applying Huff then, there is at least a serious question as to whether the Forms 4340 are adequate to demonstrate that the assessments against Plaintiff were valid.
Several tax court decisions have concluded that Forms 4340 are sufficient to verify valid tax assessments for purposes of § 6330(c)(1). See, e.g., Lunsford v. Commissioner of Internal Revenue, 117 T.C. 183, 187-88 (2001); Davis v. Commissioner of Internal Revenue, 115 T.C. 35, 40-41 (2000). These decisions are not binding upon this Court. In Lunsford, the tax court cited Huff for the proposition that, where the Form 4340 does not list a 23C date, further examination is required to determine whether an assessment was made. Lunsford, 117 T.C. at 187-88. The Lunsford court went on to state, however, that "where the taxpayer can point to no evidence of any irregularity in the assessment process, the presumption of a valid assessment remains intact." Id. at 188.
This Court declines to follow the Lunsford court's holding that a Form 4340 which does not list a 23C date nonetheless fulfills the verification requirement of § 6330(c)(1). Given the ambiguity as to whether the Forms 4340 at issue in this case list 23C dates, and the fact that the matter will be remanded on other grounds, the Court will deny Defendant's motion on this issue and remand for further proceedings.
Alternative To Levy
Finally, Plaintiff offered an alternative to the proposed levy, in that he offered to pay the frivolous return penalties if the Appeals Officer could point out any statutory authority for the assessment of the penalties against him. The Appeals Officer declined to do so and concluded that Plaintiff's conditional offer of payment did not provide a real alternative to the levy proposed by the IRS. Defendant moves for dismissal or summary judgment as to this issue. Given this Court's conclusions that the CDP Hearing was defective for the reasons noted above, consideration of the propriety of a levy as a means for collection would be premature. Accordingly, the Court will deny Defendant's motion on this issue.
Given the defective nature of the CDP Hearing provided to Plaintiff, this Court will remand the matter so that Plaintiff may be given a CDP Hearing which complies with statutory requirements. Plaintiff's request for costs will be denied.
IV. ORDER
It is hereby ordered:
(1) Defendant's motion to strike Plaintiff's late-filed opposition is DENIED;
(2) Defendant's motion to dismiss or, in the alternative, for summary judgment is DENIED;
(3) The matter is remanded for further proceedings consistent with this order; and
(4) Plaintiff's request for recovery of costs of suit is DENIED.