Opinion
24147-16L
02-17-2023
JOSE M. GARCIA, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Patrick J. Urda Judge
In this collection due process (CDP) case petitioner, Jose M. Garcia, seeks review pursuant to sections 6320(c) and 6330(d)(1) of the determination by the Internal Revenue Service (IRS) to uphold a Notice of Intent to Levy and the filing of a Notice of Federal Tax Lien (NFTL). [Docs. 1, 23, 67.] Mr. Garcia challenges his underlying tax liability, which stems from the IRS's determination of penalties under section 6672(a) for certain periods during 2011-15. [Doc. 23, Ex. A.]
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C.,(I.R.C.) in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. "Doc." references are to the docket record in Docket No. 24147-16L, as numbered by the Clerk of this Court.
Pending before the Court are the Commissioner's motions to compel responses to interrogatories and production of documents. [Docs. 76, 77.] We will grant the former motion in full and the latter in part.
Background
The following facts are derived from the parties' pleadings, motion papers, and declarations and exhibits attached thereto. They are stated solely for the purpose of deciding the pending motions and not as findings of fact in this case.
Mr. Garcia was the chief executive officer and operations manager of a company called Cargo Express International, Inc. (Cargo Express) from October 1, 2011, through December 31, 2017. [Doc. 47, ¶¶ 4-5; Doc. 51.] He also was an owner of Cargo Express from at least January 2012 through December 31, 2017. [Doc. 47, ¶¶ 12-13; Doc. 51.]
Cargo Express failed to pay over payroll taxes during multiple quarters from 2012 through 2015, which ultimately led to the determination of section 6672 penalties against Mr. Garcia. [Doc. 23, Ex. A.] That section provides that "[a]ny person required to collect, truthfully account for, and pay over" payroll taxes, who willfully fails to do so, shall be liable for a penalty "equal to the total amount of the tax evaded . . . or not accounted for and paid over." I.R.C. § 6672(a).
After a remand to the IRS Office of Appeals and a lengthy period of discovery, the sole remaining issue is whether Mr. Garcia acted willfully in the nonpayment of the payroll taxes during the relevant periods. [Doc. 88.]
Discussion
I. Discovery Standard
Rule 70(b) permits discovery concerning "any matter not privileged and which is relevant to the subject matter involved in the pending case." The party objecting to discovery has the burden of establishing that the information sought is not relevant or otherwise not discoverable. See Rosenfeld v. Commissioner, 82 T.C. 105, 112 (1984); Rutter v. Commissioner, 81 T.C. 937, 948 (1983); Branerton Corp. v. Commissioner, 64 T.C. 191, 193 (1975).
II. Analysis
A. Motion To Compel Responses to Interrogatories
Rule 71(b) provides that answers to interrogatories "shall be made . . . as completely as the answering party's information shall permit" subject to the requirement that the answering party "make reasonable inquiry and ascertain readily obtainable information."
The Commissioner seeks to compel an answer to only one interrogatory. In that interrogatory, he requests a description of any attempts Mr. Garcia made to resolve Cargo Express's outstanding employment tax liabilities, including dates, individuals involved, and the nature of any action. [Doc. 77, Ex. I.] Mr. Garcia objects that this interrogatory is unduly burdensome, that he and Cargo Express previously provided the IRS information from which his answer can be gleaned, and that the interrogatory requires that he obtain information from Cargo Express, a third party. [Doc. 83 at 3-5.]
We will grant the motion to compel as to the interrogatory at issue. A contention interrogatory, as was propounded here, is well within the bounds of discovery, serving to clarify and narrow the issues in dispute. See, e.g., Zaentz v. Commissioner, 73 T.C. 469, 477-78 (1979); Rule 70(b). We see no particular burden in specifying Mr. Garcia's attempts to remedy Cargo Express's tax problems, which goes directly to willfulness and is within his own knowledge. Although a party at times may answer an interrogatory by producing documents, see Rule 71(e), the party is required to "specify" the responsive documents. Mr. Garcia's assertion that the answers to the interrogatory may be gleaned from documents previously provided at some point by Mr. Garcia or Cargo Express is plainly insufficient.
Mr. Garcia will have 14 days to answer this interrogatory.
B. Motion To Compel Production of Documents
The Commissioner also seeks to compel the production of three categories of documents: (1) documents relating to Mr. Garcia's attempts to resolve Cargo Express's payroll tax liabilities [Request 1]; (2) Cargo Express's bank statements for certain periods [Requests 3-7]; and (3) materials Mr. Garcia either used to respond to interrogatories or that he plans to use at trial [Requests 8-9]. [Doc. 76, Ex. I.] Mr. Garcia's objections track those that he made in response to the Commissioner's interrogatory i.e., the requests are overly burdensome, responsive information has previously been provided, and the requests seek information from Cargo Express, a third party. [Doc. 82 at 4-6.]
As an initial matter, Rule 72(a)(1) requires a person to produce items that "are in the possession, custody, or control of the party on whom the request is served." See also Marsh v. Commissioner, 62 T.C. 256, 258 (1974). By its terms, this rule is not limited to actual possession. Accepting Mr. Garcia's contention that many of the documents responsive to these requests are in the possession of Cargo Express, we believe that he has the ability to secure this material given his position as Cargo Express's owner and CEO. See, e.g., Lawrence v. Commissioner, T.C. Memo. 1983-497, 1983 WL 14477 ("[I]t does not matter in what capacity the party has possession, custody or control of the requested document."). We will therefore overrule this objection.
Mr. Garcia also objects [Doc. 82 at 13-14] that responding to the document request regarding his efforts to resolve Cargo Express's employment tax issues would be unduly burdensome and expensive, suggesting that the discovery might already reside in the IRS's own files. See Rule 70(c)(1). The mere possibility that the Commissioner might have a portion of the information sought does not relieve Mr. Garcia from the obligation to produce responsive documents in his possession.
Finally, Mr. Garcia contends that the Commissioner's request for all documents Mr. Garcia intends to rely upon at trial is premature. [Doc. 82 at 6.] We will deny the motion to compel as to this request without prejudice. The case has yet to be scheduled for trial, and we expect Mr. Garcia to comply with the request (or object) when trial is nearer.
Upon due consideration, it is
ORDERED that the Commissioner's motion to compel responses to interrogatories, [Doc. 77], filed on November 14, 2022, is granted and Mr. Garcia shall supplement his responses to Interrogatory 1 within 14 days of this Order. It is further
ORDERED that the Commissioner's motion to compel production of documents, [Doc. 76], filed on November 14, 2022, is granted in part in that Mr. Garcia shall respond to Requests 1 and 3-8 within 30 days of this Order. Should he fail to do so, Mr. Garcia will be prohibited at trial, without leave of this Court, from introducing into evidence any documents responsive to the Commissioner's requests that were not previously disclosed. The Commissioner's motion to compel production of documents is denied without prejudice in all other respects.