Opinion
No: CV-S-01-0934-RLH (LRL)
July 17, 2002
ORDER
Before the Court is Defendant's Motion to Dismiss (#4), filed December 5, 2001. The Court has also considered Plaintiff's Opposition (#11), filed January 18, 2002, and Defendant's Reply (#13), filed February 7, 2002.
BACKGROUND
In August 1999, Plaintiff Stephen M. Robison filed a Form W-4, Employee's Withholding Certificate, with his employer in which he claimed he was "exempt" from the withholding of federal income tax. On September 16, 1999, the Defendant IRS sent a letter to Plaintiff which informed him that the exempt status claimed on his Form W-4 filed for 1999 was disallowed. The letter also informed Plaintiff that pursuant to 26 U.S.C. § 6682 the civil penalty for false information with regard to withholding would be assessed for 1999 unless, within 15 days, he could provide a reasonable basis for the statement reflected in the Form W-4. The letter also informed Plaintiff of his right to appeal the IRS's determination within 30 days from the date of the letter. Plaintiff responded in a timely manner acknowledging receipt of the IRS's September 16 letter and objected to payment of the penalty without giving a reasonable basis for the statements regarding the false information made on Plaintiff's Form W-4 for 1999.
On February 14, 2000, an assessment in the amount of $500.00 was made against Plaintiff pursuant to 26 U.S.C. § 6682. On the same day the assessment was sent, a notice of the assessment of the penalty and demand for payment was also sent to Plaintiff. Additional notices of the assessment of the penalty and demand for payment were sent on March 20, 2000 and April 24, 2000.
On August 31, 2000, a Final Notice — Notice of Intent to Levy and Notice of Your Right To a Hearing was sent to Plaintiff. The notice informed Plaintiff of IRS's intent to levy to collect the outstanding civil penalty assessed against him pursuant to 26 U.S.C. § 6682 for the 1999 tax year. The notice also informed Plaintiff of his right to request a Collection Due Process ("CDP") Hearing with the IRS. A CDP Hearing was held on May 11, 2001.
On July 11, 2001, a Notice of Determination Concerning Collection Action Under Section 6320 and/or 6330 was sent by certified mail to Plaintiff. The Notice of Determination informed Plaintiff of the matters considered at the appeals hearing and the conclusion that it would be appropriate for the Government to pursue levy action. In addition, the Notice of Determination informed Plaintiff of his right to dispute the IRS's determination in court by filing a petition with the United States District Court for a redetermination within 30 days from the date of the notice. On August 10, 2001, Plaintiff filed a complaint with this Court. In addition to damages, Plaintiff asks that this Court set aside the CDP determination as invalid. Defendant requests this Court to dismiss the complaint for failure to state a claim for which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6) or in the alternative, to enter summary judgment pursuant to Fed.R.Civ.P. 56 in favor of the United States.
DISCUSSION
[I] Motion to Dismiss Standard Under Rule 12(b)(6)
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a court may dismiss a complaint for "failure to state a claim upon which relief can be granted." "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief" Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Yamaguchi v. U.S. Dep't of the Air Force, 109 F.3d 1475, 1481 (9th Cir. 1997). All factual allegations set forth in the complaint "are taken as true and construed in the light most favorable to [p]laintiffs." Epstein v. Washington Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1999). Dismissal is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proven consistent with the allegations." Hishon v. King Spalding, 467 U.S. 69, 73 (1984); see also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988).
II. Collection of Fines by the IRS
Under 26 U.S.C. § 6682, a civil penalty of $500 may be imposed if any individual makes a statement with respect to withholding that results in a decrease in the amounts deducted and withheld and there is no reasonable basis for the statement at the time it is made.
Here, Plaintiff filed an exempt Form W-4 for the 1999 tax year claiming that he owed no income tax. The IRS found that Plaintiff was subject to pay income tax for 1999 and subsequently assessed a $500 civil penalty pursuant to 26 U.S.C. § 6682.
Title 26 U.S.C. § 6330 (a) provides that before proceeding with the collection by way of levy, the IRS must provide the taxpayer notice of the right to a hearing on the matter. 26 U.S.C. § 6303(a) states that notice shall be left at the taxpayer's dwelling or usual place of business or be sent by mail to the taxpayer's last known address. The taxpayer has a right, within 30 days of the Section 6330 notice, to request a hearing with the IRS Office of Appeals. Id. § 6330(a)(3)(B). At the hearing, the taxpayer may raise any issue relevant to the unpaid tax and the proposed levy, including challenges to the propriety of the levy and offers of collection alternatives. Id. § 6330(c)(2).
The impartial IRS Appeals Officer who conducts the hearing must then formulate his or her determination based on: (1) the verification that the requirements of any applicable law or administrative procedure have been met; (2) the issues raised by the taxpayer; and (3) the proper balance between the need for efficient tax collection and the legitimate concern that any collection action be no more intrusive than necessary. See id. § 6330(c)(3). At the hearing, the taxpayer may address any of the statutorily-specified issues allowed at a collection due process hearing, including spousal defenses, the appropriateness of an intended collection action, and possible alternative means of collection. See 26 U.S.C. § 6330(c); see also Sego v. Comm'r of Internal Revenue, 114 T.C. 604, 609 (2000). Following the hearing, the Appeals Officer sends a Notice of Determination to the taxpayer that summarizes the matters raised during the hearing and responds to any offers or objections made by the taxpayer. If the taxpayer is dissatisfied with the administrative determination, he may seek judicial review in the United States Tax Court within 30 days of receiving the Notice or, if the Tax Court does not have jurisdiction over the underlying tax liability, the appropriate United States District Court. Id. § 6330(d)(1). Review is limited to matters actually raised at the administrative hearing. Temp. Treas. Reg. § 301.6330-1T(f)(2001).
Title 26 U.S.C. § 6330(d) does not specify the standard of review a district court should apply to an appeal of a Notice of Determination. However, the legislative history indicates that the court should conduct a de novo review only "where the validity of the tax liability was properly at issue at the administrative hearing." H. R. Conf. Rep. No. 105-599, at 266 (1998). Where the amount of the underlying tax liability is not properly part of the appeal, the court reviews a Notice of Determination for abuse of discretion. See Sego 114 T.C. at 609-10; Goza v. Comm'r of Internal Revenue, 114 T.C. 176, 179-80 (2000). An administrator abuses his or her discretion if he or she relies on clearly erroneous findings of fact in his or her determinations. Taft v. Equitable Life Assurance. Soc'y, 9F.3d 1469, 1473 (9th Cir. 1993).
Here, the issue before the Court is related to the collection action regarding the penalties incurred by Plaintiff for filing a false Form W-4 for the 1999 tax year. This Court is not reviewing the underlying income tax liability which, pursuant to 26 U.S.C. § 6330 (b)(1)(A), is reviewable only by the United States Tax Court. Therefore, this Court will apply an abuse of discretion standard in reviewing the Notice of Determination at issue.
In his opposition to the Motion to Dismiss, Plaintiff raises several issues regarding the authority of the IRS to assess and issue the determination that the collection action is based upon. Plaintiff questions the authority of the IRS Appeals Officer as well as his reliance on Form 4340 that was provided to Plaintiff during his Collection Due Process hearing that indicated an assessment was actually made and issued.
Here, the IRS hearing officer did not abuse his discretion when he determined that the requirements of applicable law had been met and that Plaintiff had been afforded statutorily| required administrative procedures. The hearings officer attempted to address the issues raised by Plaintiff; however, Plaintiff did not address any of the statutorily-specified issues that may be raised at a collection due process hearing, such as spousal defenses, the appropriateness of an intended collection action, and possible alternative means of collection. Instead Plaintiff attempted to revisit the issue of his underlying tax liability at the collection hearing at issue.
Further, Plaintiff's argument that there is no evidence of any delegated authority from the Secretary of Treasury cannot prevail. Relevant statues and regulations demonstrate that the Secretary does have the power to collect taxes, and that such power can be delegated to local IRS agents. 26 U.S.C. § 6301 provides that "[t]he Secretary shall collect the taxes imposed by the internal revenue laws." The actual task of collecting the taxes, however has been delegated to local IRS directors. See Hughes v. United States, 953 F.2d 531, 536 (9th Cir. 1992); 26 C.F.R. § 301.6301-1 ("[t]he taxes imposed by the internal revenue laws shall be collected by district directors of internal revenue"). District directors in turn are authorized to redelegate the levy power to lower level officials such as collection officers. See Hughes, at 536. The delegation of authority down the chain of command, from the Secretary, to the Commissioner of Internal Revenue, to local IRS employees constitutes a valid delegation by the Commissioner to the delegated officers and employees. See C.F.R. § 301.7701-9. Therefore, the agents involved in the instant case were acting within their authority when they made and sent a Notice of Determination regarding the collection action.
Appeals of the underlying claims are only appropriate at a collection due process hearing if the plaintiff did not receive notice of tax liability, Goza, 114 T.C. at 182, or "had no previous opportunity to contest the validity of those claims." Kintzler v. Internal Revenue Serv., 2001 WL 1137294, at *2 (D. Nev. 2001). The Hughes court and other circuit courts have held that Form 4340 Certificate of Assessments and Payments provided to the plaintiffs indicating that notice of assessment was made and demand for payment was issued on a certain date were sufficient to establish that assessments were actually made and issued. Hughes, at 535; see also US. v. Chila, 871 F.2d 1015 (11th Cir. 1989) (finding that Certificate of Assessments and Payments (4340) is presumptive proof of a valid assessment). In addition, the Ninth Circuit has held that an allegation of nonreceipt by a taxpayer will not defeat a motion for summary judgment supported by a Form 4340. Hansen v. United States, 7F.3d 137, 138 (9th Cir. 1993).
Although Plaintiff claimed that he did not receive the first notice requesting payment and demand of the civil penalty assessed, IRS records indicate that, in addition to the February 14, 2000 notice, subsequent notices were sent on March 20, 2000 and April 24, 2000. Plaintiff had ample opportunity to properly dispute the penalty assessment. The IRS Hearings Officer did not abuse his discretion by relying on Form 4340, which he provided to Plaintiff, that indicated that an assessment was made and issued to Plaintiff.
Plaintiff has not, and cannot, prove any set of facts in support of his claim which would entitle him to relief. Defendant's Motion to Dismiss will therefore be granted. See Goza, 114 T.C. at 183 (dismissing tax protester's appeal of IRS Notice of Determination for failure to state a claim).
CONCLUSION
Accordingly, and for good cause appearing, IT IS HEREBY ORDERED that Defendant's Motion to Dismiss (#4) is GRANTED.