Opinion
EP-03-C M)003-PRM
August 12, 2003
MEMORANDUM OPINION AND ORDER
On this day, the Court considered Defendant's "Motion to Dismiss or for Summary Judgement," filed in the above-captioned cause on June 16, 2003. After due consideration, the Court is of the opinion that Defendant's Motion for Summary Judgment should be granted for the reasons below.
I. BACKGROUND
Plaintiff filed the instant Complaint based on the Internal Revenue Service's ("IRS") responsive actions to Plaintiffs 2000 tax return. On this return, Plaintiff reported total income of $0 resulting in a total tax liability for the year 2000 of $0. Plaintiff filed his 2000 return along with five additional documents: a W-2 form from the PaceSetter Corporation showing $300.00 in wages; a 1099-R form from the PaceSetter Corporation showing $5,158.50 in nonemployee compensation; a 1099-R form from K Designers showing $31,084.74 in nonemployee compensation; a 1099-R form from the State of California, Franchise Tax Board, showing $22.27 in interest; and a personal statement asserting Plaintiffs reasons for not recognizing income. The following represents a summarization of the claims made by Plaintiff in his statement: he had zero income according to the Supreme Court's definition of income; his claim for a refund cannot be considered "frivolous," but based on a Supreme Court decision in Merchants' Loan Trust Co. v. Smietanka, 255 U.S. 509 (1921); since no assessment of Plaintiff's 2000 income taxes was made, the IRS had no legal basis to hold Plaintiffs money; pursuant to § 31(a)(1), Plaintiff was entitled to have the full amount of his wage tax refunded; if the IRS disagreed, it should conduct a field audit to discuss the differences; a demand to be notified if the IRS determined that changes to the return were warranted so that he may inspect the text of any written determination and any background documents relating to such determination; and finally, if any IRS employee "disregard[ed] the statutes, court decisions, Privacy Act provisions, and other references contained in this document, they will be in criminal violations of these statutes" and will be held accountable. Plaintiff Brief Ex.
The issue currently before the Court is distinguishable from Merchants' Loan Trust Co. The underlying income at issue in this case is actual compensation and wages, whereas, the income at issue in Merchants' Loan Trust Co. is income from the sale of property. Merchants' Loan Trust Co. has no bearing on the case at hand.
The IRS notified Plaintiff, via written letter dated August 23, 2001, that his 2000 return contained frivolous information, that his claims had no legal basis, and that the IRS would not respond to future correspondences concerning these issues. The letter also stated that federal courts, including the Supreme Court, have considered and rejected such claims as being without merit. The notice gave Plaintiff thirty days to correct his position and informed him of the potential penalties, i.e., a possible $500 fine. Plaintiff did not respond to the IRS's notice.
On December 31, 2001, IRS issued a Notice of Penalty Charge assessing a penalty of $500. The Notice specifically stated that "[w]e charged you a penalty of $500 for filing a tax return that contained frivolous arguments to reduce taxes or delay collection of taxes. The deduction you claimed doesn't have legal basis, so it represents a frivolous position." The letter notified Plaintiff that if he wanted the IRS to remove or reduce the penalty, he must pay the entire penalty and file a claim for a refund by January 30, 2002. No payment of the penalty was received.
Subsequently, on May 8, 2002, the IRS issued a Notice of Intent to Levy and Notice of Your Right to a Hearing. This letter informed Plaintiff of his right to "pay, make alternative arrangements to pay, or request Appeals consideration within 30 days from the date of [the] letter." Id. Plaintiff timely requested a hearing. An IRS Settlement Officer, was assigned to conduct Plaintiffs Collection Due Process hearing. The hearing was scheduled for November 5, 2002. Plaintiff failed to appear at that hearing. The IRS offered Plaintiff a second opportunity for a hearing if Plaintiff contacted the IRS by November 27, 2002. Plaintiff did not write or call to reschedule the hearing. Consequently, on December 13, 2002, the IRS sent Plaintiff the Settlement Officer's Notice of Determination Concerning Collection Action. The Notice reported that Plaintiff showed no indication of cooperating in either determining the correct amount of tax or paying it and offered no collection alternatives. To date, Plaintiff has not paid the frivolous return penalty.
On January 3, 2003, Plaintiff filed the instant Complaint with this Court. Plaintiff claims that title 26 U.S.C. § 6702 is unconstitutional and that the imposition of the $500 penalty is improper.
II. SUMMARY JUDGMENT STANDARD
Summary judgment should be granted only where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED, R. Civ. P. 56(c). The party that moves for summary judgment bears an initial burden of identifying those portions of the pleadings and discovery on file, together with any affidavit, which it believes demonstrate the absence of a genuine issue of material fact. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "If the moving party fails to meet this burden, the motion must be denied, regardless of the nonmovant's response." Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). If the movant does meet this burden, however, the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial. See, e.g., Celotex, 477 U.S. at 324, "If the non-movant fails to meet this burden, then summary judgment is appropriate." Tubacex, 45 F.3d at 954.
When making a determination under Rule 56, factual questions and inferences are viewed in a light most favorable to the nonmovant-Plaintiff in this case. Lemelle v. Universal Mfg. Corp., 18 F.3d 1268, 1272 (5th Cir. 1994). The party opposing a motion supported by evidence cannot discharge his burden by alleging mere legal conclusions. Anderson v. Liberty Lobby, 477 U.S. 242, 248-49 (1986). Instead, the party must present affirmative evidence in order to defeat a properly supported motion for summary judgment. Id.
III. DISCUSSION
For the reasons stated below, Defendant has satisfied its burden of demonstrating to the Court that there is an absence of a genuine issue of material fact in the current case. Once that burden is satisfied, Plaintiff then has the burden to show that there is a genuine issue of material fact necessary for trial. Plaintiff has not come forward with any genuine issues of material fact that would necessitate a trial on the merits. Therefore, the Court will dispose of this case based upon relevant law.
A. Statutory Scheme
Title 26, United States Code, Section 633 l(a) provides, in relevant part: "[i]f any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax . . . by levy upon all property and rights to property . . . belonging to such person. . . ." 26 U.S.C. § 6331(a) (2002). The IRS must provide taxpayers with notice of an intent to levy and the availability of administrative appeals. 26 U.S.C. § 6331(d) (2002). A levy "may not be made on any property or right to property of any person unless the Secretary [of the Treasury] has notified such person in writing of their right to a hearing . . . before such levy is made." 26 U.S.C. § 6330(a) (2002). The hearing referred to in § 6330(a) is called a Collection Due Process ("CDP") Hearing.
At the CDP Hearing, an IRS Appeals Officer must verify that any and all requirements of the applicable law or the administrative procedures have been met. 26 U.S.C. § 6330(c)(1) (2002). The taxpayer may raise "any relevant issue relating to the unpaid tax or the proposed levy, including[:] (i) appropriate spousal defenses; (ii) challenges to the appropriateness of the collection actions; and (iii) offers of collection alternatives. . . ." 26 U.S.C. § 6330(c)(2)(A) (2002). In addition, the taxpayer "may also raise. . . . challenges to the existence or the amount of the underlying tax liability for any 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) (2002). If the taxpayer does not agree with the Appeals Officer's written determination, the taxpayer can appeal the determination to the Tax Court or to a United States District Court (if the Tax Court does not have jurisdiction over the underlying tax liability). 26 U.S.C. § 6330(d)(1) (2002).
The Tax Court has jurisdiction to redetermine the amount of some tax deficiencies. 26 U.S.C. § 6214(a) (2002). Deficiency procedures do not apply to frivolous filing penalties. 26 U.S.C. § 6703(b) (2002). Therefore, since Plaintiff is appealing a determination involving a frivolous filing penalty, Plaintiff was required to bring his appeal before this Court.
B. Standard of Review on Appeal
When the underlying tax liability is not in issue, the court reviews the decision of an appeals officer using an abuse of discretion standard of review. See generally H.R. CONF. REP. No. 105-599 (1998); Sego v. Comm V, 114 T.C. No. 37 (2000); Mesa Oil Inc. v. United States, No. 00-B-851, 2000 WL 1745280 (D. Colo. Nov. 21, 2000). As a result, the validity of the frivolous assessment against Plaintiff is reviewed de novo, while the determination that collection by levy was appropriate is reviewed under an abuse of discretion standard. Judicial review is limited to those issues properly raised during the Collection Due Process Hearing. Treas. Reg. § 301.6330-1(f), Q-F5 (2002).
C. Validity of Assessment
Title 26, United States Code, Section 6702 provides, in relevant part:
(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.
Title 26 U.S.C § 6702(a) (2002).
Under § 6703, the burden of proving that a taxpayer is liable for a frivolous filing penalty shall be on the Secretary of the Treasury (i.e., the United States). 26 U.S.C. § 6703(a) (2002).
Plaintiff argues that his wages are not taxable by the federal government. The Court finds that Plaintiffs arguments lack legal merit and are patently frivolous. An income tax is imposed on the income of every individual who is a citizen or resident of the United States. 26 U.S.C. § L The term "gross income" is defined as "all income from whatever source derived" including, but not limited to, compensation for services. 26 U.S.C. § 61. Here, while Plaintiffs W-2 form and 1099-R forms indicate taxable income of roughly $36,565.51 (for the 2000 tax year), Plaintiff did not include any of this income on his 2000 tax return.
The Fifth Circuit has considered and summarily dismissed numerous cases of individuals trying to shirk their duty to pay taxes. In Grain v. Commissioner, 737 F.2d 1415 (5th Cir. 1984), the Fifth Circuit went so far as to state that
[w]e perceive no need to refute [baseless] arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have colorable merit. . . . An appeal that lacks merit is not always-or often frivolous. However, we are not obliged to suffer in silence the filing of baseless, insupportable appeals presenting no colorable claims of error and designed only to delay, obstruct, or incapacitate the operations of the courts or any other governmental authority. . . . The government should not be put to the trouble of responding to such spurious arguments, nor this court to the trouble of `adjudicating' this meatless appeal.737 F.2d at 1417.
This case is no different. The arguments Plaintiff offers in support of his position, to the extent they are cognizable, are patently frivolous. Plaintiff articulates no worthy legal argument for his failure to recognize his income, except that his wages are not taxable by the federal government. Wherefore, the Court finds that Plaintiffs arguments against the validity of the assessment are without merit. Defendant has satisfied its burden of proof as to the Plaintiffs violation of § 6702. As a result, the assessment of the $500 frivolous filing penalty against Plaintiff with respect to the 2000 tax year was valid.
IV. CONCLUSION
After due consideration, the Court finds that Defendant has satisfied its burden of demonstrating to the Court that there is an absence of a genuine issue of material fact in the current case. Plaintiff has not come forward with any genuine issues of material fact that would necessitate a trial on the merits. The Court is of the opinion that Defendant's Motion for Summary Judgment should be granted.
Accordingly, IT IS HEREBY ORDERED that Defendant's "Motion to Dismiss or for Summary Judgement," filed in the above-captioned cause on June 16, 2003, is GRANTED.
FINAL JUDGMENT
On this day, the Court entered an Order granting summary judgment in favor of Defendant United States of America. The Court now enters Final Judgment pursuant to Federal Rule of Civil Procedure 58.
Accordingly, IT IS HEREBY ORDERED that Defendant's "Motion to Dismiss or for Summary Judgement" is GRANTED.
IT IS FURTHER ORDERED that Plaintiff Craig F. Reinhart's cause of action against Defendant is DISMISSED WITH PREJUDICE.
IT IS FINALLY ORDERED that all other pending motions, if any, are DENIED AS MOOT.