Opinion
5854-21P
05-22-2023
KEITH M. PHILLIPS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER OF DISMISSAL
Travis A. Greaves Judge
Pending before the Court is respondent's Motion to Dismiss for Failure to State a Claim upon which Relief can be Granted, filed September 2, 2021. Therein, respondent requests that this case be dismissed on the ground that petitioner's assignment of error is a challenge to his underlying liability, which this Court lacks jurisdiction to determine in an action brought under section 7345.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Background
While incarcerated, petitioner was injured during a recreation day, and in 2014, received a personal injury settlement based on this injury. Petitioner failed to timely file an income tax return for tax year 2014. On September 3, 2018, respondent prepared a substitute for return for 2014 pursuant to section 6020(b), which included petitioner's personal injury settlement as income.
On September 11, 2018, respondent issued a notice of deficiency for tax year 2014. Petitioner did not protest the notice of deficiency within 90 days, and respondent assessed the deficiency along with penalties on February 25, 2019. After receiving no payment, respondent issued a notice of federal tax lien for tax year 2014 on January 23, 2020. Petitioner did not request a collection due process hearing and failed to pay the liability.
Respondent certified petitioner as an individual owing seriously delinquent tax debt to the State Department and issued petitioner CP508C, Notice of Certification of Your Seriously Delinquent Federal Tax Debt to the State Department, dated May 3, 2021 (Notice of Certification). The Notice of Certification stated that petitioner's tax debts totaled $97,337. In response, petitioner filed a petition with this Court on May 3, 2021. In his petition, petitioner checked the boxes indicating he sought review of a notice of deficiency and the Notice of Certification. In his explanation of the basis for his petition, petitioner alleged that the personal injury settlement he received in 2014 was not taxable income.
All dollar amounts are rounded to the nearest dollar.
On April 13, 2023, this Court ordered all claims relating to the notice of deficiency severed from claims relating to the Notice of Certification. Claims relating to the notice of deficiency will not be addressed in this Order.
On September 2, 2021, respondent filed a Motion to Dismiss for Failure to State a Claim upon which Relief can be Granted under section 7345. On September 7, 2021, we ordered petitioner to respond to the Motion to Dismiss by September 27, 2021. After an extension of time, petitioner filed an objection to the Motion to Dismiss, in which he continued to assert that the sole assignment of error was the determination that the personal injury settlement was taxable income. We ordered respondent to file a response to petitioner's objection by November 16, 2021. After an extension, respondent filed a response, asserting the same argument that petitioner failed to state a claim upon which relief can be granted.
Discussion
When reviewing a motion to dismiss for failure to state a claim upon which relief can be granted, we assume that all allegations stated in the petition are true and then determine whether the claim asserted fails as a matter of law. See Cohen v. Commissioner, 139 T.C. 299, 302 (2012). We construe all pleadings to do substantial justice. See id.; Rule 31(d). For purposes of this motion, we assume any allegations relating to our jurisdiction under section 7345 are true to determine whether petitioner has stated a claim upon which relief can be granted under this section.
Section 7345(a) provides that, if the IRS certifies that a taxpayer has "a seriously delinquent tax debt," that certification shall be transmitted "to the Secretary of State for action with respect to denial, revocation, or limitation of [the taxpayer's] passport." The IRS is responsible for notifying the taxpayer contemporaneously with the making of such certification. § 7345(d). A "seriously delinquent tax debt" is a Federal tax liability that has been assessed, exceeds $50,000 (adjusted for inflation), is unpaid and legally enforceable, and with respect to which a lien notice has been filed or a levy made. § 7345(b)(1), (f). The adjusted threshold amount for 2021, the year of petitioner's certification, was $54,000. See Rev. Proc. 2020-45, § 3.59, 2020-46 I.R.B. 1016, 1027.
Section 7345(e)(1) permits a taxpayer who has been certified as having a seriously delinquent tax debt to petition this Court to determine "whether the certification was erroneous or whether the [IRS] has failed to reverse the certification." If we find that a certification was erroneous, we "may order the Secretary to notify the Secretary of State that such certification was erroneous." § 7345(e)(2). As we recently readopted in Adams v. Commissioner, No. 1527-21P, 160 T.C., slip op. 13-15 (Jan. 24, 2023), we are not empowered to review or redetermine a taxpayer's underlying liability in a section 7345(e)(1) proceeding. See also Ruesch v. Commissioner, 25 F.4th 67, 70 (2d Cir. 2022), aff'g in part, vacating and remanding in part 154 T.C. 289 (2020).
Respondent contends that petitioner's allegations in his petition relate only to the validity and amount of his underlying tax liabilities. Respondent also alleges that petitioner made no allegation of any error in the certification process. Accordingly, respondent contends that insofar as petitioner seeks review of his underlying liabilities he failed to state a claim upon which relief can be granted. Moreover, respondent contends that because petitioner has failed to allege any error in the verification process, we should conclude that his certification was not erroneous.
Petitioner's allegations that his settlement award was not taxable in his petition relate only to the validity and amount of his underlying tax liability. Even accepting petitioner's allegations as true, they do not relate to any question within our jurisdiction under section 7345(e)(1). Because petitioner has not alleged any error in the certification, he has failed to raise any issue for which we can grant him relief in this proceeding. See Adams, 160 T.C., slip op. at 13-15. Accordingly, we will grant respondent's motion.
Upon due consideration and for cause, it is
ORDERED that respondent's Motion to Dismiss for Failure to State a Claim upon which Relief can be Granted, filed September 2, 2021, is granted and this case is dismissed for failure to state a claim upon which relief can be granted.