Opinion
CIVIL 3:21-CV-1283
07-12-2022
UNITED STATES OF AMERICA, Plaintiff, v. JOHN MICHAEL KISTLER, JR., Defendant.
Mariani Judge
REPORT AND RECOMMENDATION
Martin C. Carlson United States Magistrate Judge
I. Factual Background and Procedural History
It has been said that “[t]axes are what we pay for civilized society.” Compania Gen. de Tabacos de Filipinas v. Collector of Internal Revenue, 275 U.S. 87, 100, 48 S.Ct. 100, 105, 72 L.Ed. 177 (1927)(Holmes, J., dissenting). Yet, for as long as there have been taxes, there have been those who seek to avoid this cost of civilized society. The means by which individuals attempt to avoid this legal duty have been many and varied, but for some the illusory appeal of various tax protester rationales has presented a legal siren song, luring litigants to a tragic end. As one court has aptly observed on this score:
Like moths to a flame, some people find themselves irresistibly drawn to the tax protestor movement's illusory claim that there is no legal requirement to pay federal income tax. And, like the moths, these people sometimes get burned.United States v. Sloan, 939 F.2d 499, 499-500 (7th Cir. 1991).
So it is here.
This is an action brought by the United States which seeks to reduce various federal income tax assessments to judgment. (Doc. 1). The defendant, John Kistler, is proceeding pro se in this action. This case was referred to the undersigned on June 21, 2022.
The government's civil complaint, and its pending motion for summary judgment, present a simple, straightforward factual narrative. According to the United States, between 2008 and 2012, the Internal Revenue Service made a series of tax assessments against the defendant John Kistler. (Doc. 1, ¶ 7). The IRS provided Kistler with timely notice and demands for payment of these assessments, but he has failed to pay the amounts due and owing on the passements. (Id., ¶¶ 9-10). Accordingly, the IRS requests that its unpaid tax assessments be reduced to judgment. (Id.)
In stark contrast to the United States' linear narrative, Mr. Kistler, as the pro se architect of his own defense, has followed a more eccentric, elliptical, erratic, and enigmatic course in resisting this effort to reduce his tax assessments to judgment. Kistler's idiosyncratic approach to his litigation was evident from the outset in the manner in which Kistler refers to himself throughout his pleadings. Kistler consistently signs his pleadings “without prejudice” under the Uniform Commercial Code, embracing the U.C.C. in some talismanic fashion as a shield against tax liability, and identifies himself as “John Michael, Jr., of the family Kistler.”
On their merits, Kistler's filings consist of a curious confection of claims and concepts. At the outset, it appears that Kistler is resisting this lawsuit by suggesting that taxes are voluntary; that the IRS and federal government are artificial persons or foreign entities; and that the Eleventh Amendment to the United States Constitution forbids federal income taxation. In addition, Kistler appears to lodge some largely undefined hearsay objection to the IRS's tax assessments. (Doc. 66). However, notably lacking from Kistler's pleadings is any competent evidence challenging the accuracy of those assessments.
In addition, Kistler has filed a series of third-party complaints against various banks, employers, and individuals. (Docs. 25-32). While Kistler's reliance upon unintelligible tax protestor rhetoric leaves the meaning of these third-party complaints quite obscure, it appears that Kistler may be asserting that the third party defendants' compliance with IRS tax levies made them members of some broad, amorphous conspiracy against the plaintiff.
With the issues in this case framed in this fashion by the parties' pleadings, this case comes before us for consideration of a battery of pretrial motions. These motions include a motion for summary judgment filed by the United States, (Doc. 52); a motion filed by Kistler to “remand” this case to a court which has never entertained this lawsuit, the U.S. Tax Court, (Doc. 68); a separate motion by Kistler styled as a motion for conditional acceptance of an Offer in Compromise, (Doc. 74); and motions to dismiss Kistler's third party complaints filed by the various third-party defendants. (Docs. 50, 53, 54, and 55).
In this Report and Recommendation, we turn to the government's summary judgment motion, (Doc. 52), and Kistler's apparent efforts to stave off that motion through a “remand” or offer in compromise. (Docs. 68, 74). Upon consideration, for the reasons set forth below, it is recommended that the motion for summary judgment be granted, and the motions to remand and for an offer in compromise be denied.
We will issue a separate Report and Recommendation to address the pending motions to dismiss Kistler's third-party complaints.
II. Discussion
A. Motion for Summary Judgment - Standard of Review
The United States has moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, which provides that the court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Through summary adjudication, a court is empowered to dispose of those claims that do not present a “genuine dispute as to any material fact,” Fed.R.Civ.P. 56(a), and for which a trial would be “an empty and unnecessary formality.” Univac Dental Co. v. Dentsply Int'l, Inc., 702 F.Supp.2d 465, 468 (M.D. Pa. 2010). The substantive law identifies which facts are material, and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is genuine only if there is a sufficient evidentiary basis that would allow a reasonable fact finder to return a verdict for the non-moving party. Id., at 248-49.
The moving party has the initial burden of identifying evidence that it believes shows an absence of a genuine issue of material fact. Conoshenti v. Pub. Serv. Elec. & Gas Co., 364 F.3d 135, 145-46 (3d Cir. 2004). Once the moving party has shown that there is an absence of evidence to support the non-moving party's claims, “the non-moving party must rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument.” Berckeley Inv. Group. Ltd. v. Colkitt, 455 F.3d 195, 201 (3d Cir. 2006), accord Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). If the non-moving party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden at trial,” summary judgment is appropriate. Celotex, 477 U.S. at 322. Summary judgment is also appropriate if the non-moving party provides merely colorable, conclusory, or speculative evidence. Anderson, 477 U.S. at 249. There must be more than a scintilla of evidence supporting the non-moving party and more than some metaphysical doubt as to the material facts. Id., at 252; see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). In making this determination, the Court must “consider all evidence in the light most favorable to the party opposing the motion.” A.W. v. Jersey City Pub. Schs., 486 F.3d 791, 794 (3d Cir. 2007).
Moreover, a party who seeks to resist a summary judgment motion by citing to disputed material issues of fact must show by competent evidence that such factual disputes exist. Further, “only evidence which is admissible at trial may be considered in ruling on a motion for summary judgment.” Countryside Oil Co., Inc. v. Travelers Ins. Co., 928 F.Supp. 474, 482 (D.N.J. 1995). Similarly, it is well-settled that: “[o]ne cannot create an issue of fact merely by . . . denying averments . . . without producing any supporting evidence of the denials.” Thimons v. PNC Bank, NA, 254 Fed.Appx. 896, 899 (3d Cir. 2007) (citation omitted). Thus, “[w]hen a motion for summary judgment is made and supported . . ., an adverse party may not rest upon mere allegations or denial.” Fireman's Ins. Co. of Newark New Jersey v. DuFresne, 676 F.2d 965, 968 (3d Cir. 1982); see Sunshine Books, Ltd. v. Temple University, 697 F.2d 90, 96 (3d Cir. 1982). “[A] mere denial is insufficient to raise a disputed issue of fact, and an unsubstantiated doubt as to the veracity of the opposing affidavit is also not sufficient.” Lockhart v. Hoenstine, 411 F.2d 455, 458 (3d Cir. 1969). Furthermore, “a party resisting a [Rule 56] motion cannot expect to rely merely upon bare assertions, conclusory allegations or suspicions.” Gans v. Mundy, 762 F.2d 338, 341 (3d Cir. 1985) (citing Ness v. Marshall, 660 F.2d 517, 519 (3d Cir. 1981)).
Finally, it is emphatically not the province of the court to weigh evidence or assess credibility when passing upon a motion for summary judgment. Rather, in adjudicating the motion, the court must view the evidence presented in the light most favorable to the opposing party, Anderson, 477 U.S. at 255, and draw all reasonable inferences in the light most favorable to the non-moving party. Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir. 1992). Where the non-moving party's evidence contradicts the movant's, then the non-movant's must be taken as true. Id. Additionally, the court is not to decide whether the evidence unquestionably favors one side or the other, or to make credibility determinations, but instead must decide whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented. Anderson, 477 U.S. at 252; see also Big Apple BMW, 974 F.2d at 1363. In reaching this determination, the Third Circuit has instructed that:
To raise a genuine issue of material fact . . . the opponent need not match, item for item, each piece of evidence proffered by the movant. In practical terms, if the opponent has exceeded the “mere scintilla” threshold and has offered a genuine issue of material fact, then the court cannot credit the movant's version of events against the opponent, even if the quantity of the movant's evidence far outweighs that of its
opponent. It thus remains the province of the fact finder to ascertain the believability and weight of the evidence.Id. In contrast, “[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (internal quotation marks omitted); NAACP v. North Hudson Reg'l Fire & Rescue, 665 F.3d 464, 476 (3d Cir. 2011).
B. The United States' Motion for Summary Judgment Should Be Granted.
In this case, the United States seeks a summary judgment reducing its longstanding tax assessments to a judgment. Such lawsuits are commonplace and are governed by familiar legal standards. At the outset:
A federal tax deficiency assessment is the “ascertainment of the amount due [in delinquent taxes] and the formal entry of that amount on the books of the Secretary.” United States v. Dixieline Fin., Inc., 594 F.2d 1311, 1312 (9th Cir.1979). In the case of a tax deficiency, “[i]f the taxpayer does not file a petition with the Tax Court within ... [ninety days from the date of the issuance of the Notice of Deficiency], the deficiency ... shall be assessed, and shall be paid upon notice and demand from the Secretary.” 26 U.S.C. § 6213(c). Once an assessment has been made, the Government is entitled to pursue certain remedies, similar to those of a judgment creditor, in seeking satisfaction of the tax deficiency owed. See Bull v. United States, 295 U.S. 247, 260, 55 S.Ct. 695, 699, 79 L.Ed. 1421 (1935) (holding that “[t]he assessment is given the force of a judgment, and if the amount assessed is not paid when due, administrative officials may seize the debtor's property to satisfy the debt”).United States v. Klimek, 952 F.Supp. 1100, 1109 (E.D. Pa. 1997). Moreover, once a tax assessment is made:
[F]ederal income tax assessments, including civil penalties (i.e., for negligence) and interest, “are generally presumed valid and establish a prima facie case of liability against a taxpayer.” Freck v. Internal Revenue Serv., 37 F.3d 986, 992 n. 8 (3d Cir.1994); see also Becker v. Internal Revenue Serv., 804 F.Supp. 658, 668 (D.N.J.1992) (IRS's determination of civil penalty presumptively correct). The burden is on the taxpayer to overcome this presumption by persuading the finder of fact, by a preponderance of the evidence, that the income tax assessments are erroneous. See Sullivan v. United States, 618 F.2d 1001, 1008 (3d Cir.1980).Id. at 1110-11. Thus, “[i]n tax law, an assessment is entitled to a legal presumption of correctness,” and “[t]he burden of producing evidence to rebut the presumption of correctness is then on the taxpayer.” United States v. Green, No. CIV.A. 01-CV-3849, 2002 WL 31513379, at *4 (E.D. Pa. Oct. 22, 2002), affd, 80 Fed.Appx. 289 (3d Cir. 2003).
A delinquent taxpayer cannot carry this burden of proof by “relying upon well-worn but fruitless arguments often advanced by the tax protestors who have mentored them.” United States v. Bogart, No. 4:12-CV-347, 2015 WL 1883210, at *12 (M.D. Pa. Feb. 11, 2015), report and recommendation adopted, No. 4:12-CV-00347, 2015 WL 1883255 (M.D. Pa. Mar. 27, 2015), affd, 715 Fed.Appx. 161 (3d Cir. 2017). Instead, it is incumbent upon the tax payer to “present[] evidence demonstrating that the assessments are erroneous.” Id. If the taxpayer fails to present competent proof challenging the accuracy of the assessment, the United States is entitled to summary judgment in its favor. Id.
Here, the United States has provided competent proof of its tax assessments against Kistler by submitting a declaration from IRS Revenue Officer Bruce Clark and accompanying exhibits documenting and confirming these tax assessments. (Docs. 52-2, 52-3). Notably, Kistler has not challenged the accuracy of these assessment calculations in any way. Thus, the unrebutted tax assessments are cloaked in a legal presumption of correctness.
Instead, Kistler forays down several feckless legal paths in an effort to avoid having these longstanding tax assessments reduced to judgment. First, Kistler advances several well-worn but fruitless tax protester arguments, challenging the ability of the United States to assess taxes and arguing that the Eleventh Amendment shields him from federal tax liability. These type of tax protester arguments are entirely unavailing, and have been repeatedly rejected in the past by courts. Bogart, 2015 WL 1883210, at *12. Instead, it is clear that “26 U.S.C. § 1(a) imposes an income tax upon the income of ‘every' United States citizen and that, pursuant to § 1(a), 26 C.F.R. § 1.1-1(b) provides that ‘all citizens of the United States ... are liable to the income taxes imposed by the Code ...'.” United States v. Lesonik, No. CA 12-65, 2012 WL 4611950, at *1 (W.D. Pa. Oct. 2, 2012).
Simply stated, Kistler's arguments in opposition to this summary judgment motion are merely the latest of:
[C]ountless other “frivolous tax-protester arguments,” [that] ha[ve] been “uniformly and conclusively rejected by every court that has examined the issue,” typically without further discussion. Belmont v. Commissioner of Internal Revenue, 2007 WL 686388, *1 (U.S.Tax Ct.2007) (rejecting petitioner's tax-protester arguments as “frivolous and without merit”); Jibilian v. United States, 2005 WL 1491908, * (Fed.Cl.2005) (characterizing the argument that “there is no law that makes [plaintiff] liable for income tax” as “without merit and frivolous”); see also, e.g., Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir.1984) (“We perceive no need to refute these [tax-protester] arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.”); Upton v. I.R.S., 104 F.3d 543, 545 n. 1 (2nd Cir.1997) (stating that the plaintiff's “tax protestor arguments” were “barely worth a footnote”); United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir.1993) (characterizing such arguments as “shop worn” and without merit); Robnett v. United States, 165 B.R. 272, 274 (9th Cir.1994) (noting that tax protest issues are “completely without merit” and serve no purpose “except to clog the court's dockets, waste judicial time and cause protracted delays in worthy litigation.”); United States v. Jagim, 978 F.2d 1032, 1036 (8th Cir.1992) (stating that constitutional tax protest issues are “completely without merit, patently frivolous and will be rejected without expending any more of this Court's resources on their discussion.”); United States v. Drefke, 707 F.2d 978, 981 (8th Cir.1983) (contention that individuals have no duty to pay income taxes is “totally without arguable merit”); Maxwell v. I.R.S. 2009 WL 920533, *2 (M.D.Tenn.2009) (argument that “no law exists which imposes an income tax” has been “routinely rejected”); Bonnaccorso v. Comm'r of Internal Revenue, 2005 WL 3241913, * *1-2 (U.S.Tax Ct.2005) (argument that petitioner had found “no code section that made [him] liable for any income tax” had been “consistently rejected and characterized as frivolous in innumerable cases” and required no discussion).Lesonik, 2012 WL 4611950, at *1.
In particular, Kistler's efforts to use the Eleventh Amendment as a constitutional shield protecting him from federal tax liability is unavailing. This argument fails for at least two reasons. First, it misconstrues the scope of the Eleventh Amendment, which simply addressed the question of whether the various states were subject to suit in federal courts. See Seminole Tribe of Fla. v. Fla., 517 U.S. 44, 54, 116 S.Ct. 1114, 1122, 134 L.Ed.2d 252 (1996). Moreover, and more fundamentally, Kistler's focus upon the Eleventh Amendment as a prohibition on federal taxation ignores the plain language of the Sixteenth Amendment to the United States Constitution which expressly authorizes such taxation and unequivocally states that: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” U.S. Const. amend. XVI.
Having failed in his efforts to persuade us that the entire edifice of the federal tax system must collapse, Kistler presents a second, more prosaic, defense to this lawsuit, arguing that the IRS records which document his tax assessments constitute inadmissible hearsay. This evidentiary objection is without merit since it is well-settled that:
IRS computer records, including the IRS Form 4340 (Certificates of Assessments, Payments and Other Specified Matters), are not hearsay. Hughes v. United States, 953 F.2d 531, 539-40 (9th Cir.1992). IRS Form 4340 Certificates “are highly probative, and are
sufficient, in the absence of contrary evidence, to establish that the notices and assessments were properly made.” United States v. Zolla, 724 F.2d 808, 810 (9th Cir.1984). In addition, Certificates are admissible as an official record of a public agency. See United States v. Neff, 615 F.2d 1235, 1241 (9th Cir.1980).Doing v. Comm'r, 127 Fed.Appx. 971, 972 (9th Cir. 2005). Since these records fall within well-recognized exceptions to the hearsay rule, they are competent evidence which may be relied upon by this court. Kistler's evidentiary objections to the IRS's tax assessments therefore fail.
Finally, Kistler cannot avoid this outcome, which is otherwise mandated by law, through the expedient of belatedly seeking to have this case “remanded” to the U.S. Tax Court. To be sure, in some instances taxpayers have recourse to the Tax Court to challenge tax assessments. However, to avail himself of this right, Kistler had to act in a responsible and timely fashion. Specifically:
If a party does not make full payment of a particular tax assessment, he or she can only challenge the assessment in the Tax Court. To do so, however, the taxpayer must file her Tax Court petition within ninety days of the date IRS sent its statutory notice of deficiency. See 26 U.S.C.A. § 6213(a) (West Supp.1994).Freck v. I.R.S., 37 F.3d 986, 993 n. 13 (3d Cir. 1994).
Here, the United States alleges, without contradiction, that it timely notified Kistler of its tax assessments for 2008 through 2012. According to the IRS, that last tax assessment was made on September 15, 2014. (Doc. 52-2). Yet, there is no record that Kistler ever sought review of these assessments by the Tax Court within 90 days as he was required to do by law. Instead, Kistler allowed years to lapse before now belatedly seeking Tax Court review of these assessments through this tardy, and procedurally irregular, motion to remand. Simply put, as a result of Kistler's indolence, and failure to act, he has forfeited the opportunity to seek Tax Court review of these assessments at this late date. Therefore, this motion to remand should be denied.
Likewise, Kistler's latest filing, a curious document captioned conditional offer of compromise, (Doc. 74), does not serve to stave off the government's right to a summary judgment in this case. Fairly construed, Kistler's offer of compromise is a misnomer. It does not offer a compromise. Rather, it demands that the United States and the third-party defendants surrender to Kistler's own idiosyncratic views of the law. Those views are misguided and wrong, and Kistler has no legal right to compel the United States or these third-party defendants to accede to his eccentric notions. Therefore, this motion for conditional acceptance of an Offer in Compromise should be summarily denied.
We thus conclude as we began. For Kistler, as for all Americans, “[t]axes are what we pay for civilized society.” Compania Gen. de Tabacos de Filipinas, 275 U.S. at 100. (Holmes, J., dissenting). And, like a moth to a flame, Kistler's apparently irresistible attraction to the tax protester movement's illusory rhetoric now leaves the defendant burned. United States v. Sloan, 939 F.2d 499, 499-500 (7th Cir. 1991). Since the United States has demonstrated its right to a judgment in its favor as a matter of law, and none of these matters offered by Kistler in response defeat the government's entitlement to relief it is recommended that the motion for summary judgment be granted, and the motions to remand and for an offer in compromise be denied.
III. Recommendation
Accordingly, for the foregoing reasons, IT IS RECOMMENDED that the United States' motion for summary judgment (Doc. 52) be GRANTED and Defendant Kistler's motion to remand and motion for conditional acceptance of an Offer in Compromise, (Docs 68 and 74) be DENIED.
The parties are further placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions.