Opinion
Case No. C-2-00-1222.
January 29, 2002
Rudy A. Bisciotti, Mazanec Raskin Ryder Co LPA, Columbus, OH Attorney For Bonfante, John R.
Stephen Sherman, US Dept of Justice, Tax Division, Washington, DC, Attorney For USA.
ORDER
Plaintiff John R. Bonfante brings this action against defendant United States of America alleging that he was improperly assessed taxes and tax penalties. This matter is before the Court on defendant's June 26, 2001 motion for partial dismissal and for judgment affirming the administrative decision of the appeals officer of the Internal Revenue Service (IRS) (doc. 10). Defendant has moved for partial dismissal of plaintiff John Bonfante's complaint, arguing that this Court lacks subject matter jurisdiction to hear the action because the complaint sets forth claims which are not within the United States' limited waiver of sovereign immunity provided in 28 U.S.C. § 2410. As to the remainder of the complaint, defendant seeks judgment affirming the IRS's administrative determinations.
For the reasons that follow, defendant's motion for partial dismissal is GRANTED and the administrative decision of the IRS appeals officer is AFFIRMED.
I. Facts
A. Procedural History
Bonfante commenced this action on October 18, 2000 (doc. 1). Defendant filed the present motion for partial dismissal and for judgment affirming the administrative decision of the IRS appeals officer on June 26, 2001 (doc. 10). Bonfante filed a memorandum in opposition to the defendant's motion on August 21, 2001 (doc. 17). Plaintiff then filed an addendum to his memorandum in Opposition on August 24, 2001 (doc. 18). The Court, in its October 25, 2001 preliminary pretrial order (doc. 20), provided both parties an opportunity to file supplemental briefs regarding the applicability of the recent decision of Geller v. United States, 88 A.F.T.R.2d 6494, 2001 WL 1346669 (S.D. Ohio Sept. 25, 2001), to the instant case. Neither party has filed a supplemental brief regarding this decision.
B. Cause of Action
Bonfante brings this action against the defendant to set aside all federal trust fund taxes, penalties, and related tax liens that have been assessed and collected to date from Bonfante. See 26 U.S.C. § 2410, 6203, 6330, and 28 U.S.C. § 1331. Bonfante alleges that the IRS violated its public taxing authority by improperly attempting to assess against him and to collect a one hundred percent (100%) penalty for trust fund taxes allegedly owed by Royal Food Products Corporation, Inc. and International Multi-Vest, Inc. Specifically, Bonfante alleges that defendant: 1) failed to issue and/or provide Bonfante with a "Form 4340 Certificate of Assessments and Payments"; 2) failed to provide him with a hearing after January 22, 1999 as required by 26 U.S.C. § 6330; and 3) breached a 1999 express agreement to provide Bonfante with a hearing as to his underlying tax and tax penalty liabilities.
II. Motion to Dismiss
When considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b) (6), a court must construe the complaint in the light most favorable to the plaintiff and accept all well-pleaded material allegations in the complaint as true. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 515 (1972); Roth Steel Prods. v. Sharon Steel Corp., 705 F.2d 134, 155 (6th Cir. 1982); Smart v. Ellis Trucking Co., 580 F.2d 215, 218 n. 3 (6th Cir. 1978); Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir. 1976). Although the court must apply a liberal construction of the complaint in favor of the party opposing the motion to dismiss, see Kugler v. Helfant, 421 U.S. 117, 125-26 n. 5 (1975); Smart, 580 F.2d at 218 n. 3; Davis H. Elliot Co. v. Caribbean Utilities Co., 513 F.2d 1176, 1182 (6th Cir. 1975), a court will not accept conclusions of law or unwarranted inferences of fact cast in the form of factual allegations. See Blackburn v. Fisk Univ., 443 F.2d 121, 124 (6th Cir. 1971); Sexton v. Barry, 233 F.2d 220, 223 (6th Cir. 1956). In reading a complaint, however, a court will indulge all reasonable inferences that might be drawn from the pleading. See Fitzke v. Shappell, 468 F.2d 1072, 1076 n. 6 (6th Cir. 1972).
When determining the sufficiency of a complaint in the face of a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), a court will apply the principle that "a complaint should not be dismissed for failure to state a claim unless it appears beyond a 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 McClain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232 (1980); Windsor v. The Tennessean, 719 F.2d 155, 158 (6th Cir. 1983); Neil v. Bergland, 646 F.2d 1178, 1184 (6th Cir. 1981); Parker v. Turner, 626 F.2d 1, 7 (6th Cir. 1980). Because the motion under Fed.R.Civ.P. 12(b)(6) is directed solely to the complaint itself, see Roth Steel Prods., 705 F.2d at 155; Sims v. Mercy Hosp. of Monroe, 451 F.2d 171, 173 (6th Cir. 1983), the court must focus on whether the claimant is entitled to offer evidence to support the claims, rather than whether the plaintiff will ultimately prevail. See Scheuer, 416 U.S. at 236; McDaniel v. Thodes, 512 F. Supp. 117, 120 (S.D. Ohio 1981). A federal court cannot consider extrinsic evidence in determining whether a complaint states a claim upon which relief can be granted. See Roth Steel Prods., 705 F.2d at 155; Sims, 451 F.2d at 173.
A complaint need not set down in detail all the particularities of a plaintiff's claim against a defendant. See United States v. School Dist. of Ferndale, 577 F.2d 1339, 1345 (6th Cir. 1978); Westlake v. Lucas, 537 F.2d at 858; Dunn v. Tennessee, 697 F.2d 121, 125 (6th Cir. 1983). Fed.R.Civ.P. 8(a)(2) simply requires a "short and plain statement of the claim showing that the pleader is entitled to relief." The function of the complaint is to afford the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests. See Dunn, 697 F.2d at 125; Westlake, 537 F.2d at 858.
The court will grant a defendant's motion for dismissal under Fed.R.Civ.P. 12(b)(6) if the complaint is without any merit because of an absence of law to support a claim of the type made, or of facts sufficient to make a valid claim, or if on the face of the complaint there is an insurmountable bar to relief indicating that the plaintiff does not have a claim. See generally Rauch v. Day Night Mfg. Corp., 576 F.2d 697 (6th Cir. 1978); Ott v. Midland-Ross Corp., 523 F.2d 1367; Brennan v. Rhodes, 423 F.2d 706 (6th Cir. 1970). It is not necessary that a plaintiff set forth in a complaint the legal theory on which plaintiff relies if the complaint sets forth sufficient factual allegations to state a claim showing that plaintiff is entitled to any relief which can be granted. See Rohler v. TRW, Inc., 576 F.2d 1260, 1264 (7th Cir. 1978); Bramlet v. Wilson, 495 F.2d 714, 716 (8th Cir. 1974); New Amsterdam Casualty Co. v. Waller, 323 F.2d 20, 24-25 (4th Cir. 1963).
III. Applicable Law
A. 28 U.S.C. § 2410 28 U.S.C. § 2410 provides, inter alia, that the United States may be named a party in any civil action or suit in any district court having jurisdiction of the subject matter: 1) to quiet title to; 2) to foreclose a mortgage or other lien upon; 3) to partition; 4) to condemn, or; 5) of interpleader or in the nature of interpleader with respect to, real or personal property on which the United States has or claims a mortgage or other lien. 28 U.S.C. § 2410 (a).
B. 26 U.S.C. § 6203 26 U.S.C. § 6203 provides, inter alia, that the IRS, upon request, shall furnish the taxpayer a copy of the "record of the assessment." The "record of assessment" includes the pertinent parts of the assessment which set forth: 1) the name of the taxpayer; 2) the date of assessment; 3) the character of the liability assessed; 4) the taxable period, if applicable; and 5) the amounts assessed. 26 C.F.R. § 301.6203-1.
C. 26 U.S.C. § 6331 26 U.S.C. § 6331 provides, inter alia, that if any person liable to pay any tax neglects or refuses to pay such tax within 10 days after notice and demand, the IRS is authorized to collect such tax by levy upon all property and rights to property belonging to the taxpayer. Before proceeding with any collection by way of levy, however, the IRS must provide the taxpayer notice of the right to an administrative appeal. 26 U.S.C. § 6631 (d).
D. 26 U.S.C. § 6630
After notice under the provisions of 26 U.S.C. § 6631 (d), the taxpayer has a right, within 30 days, to request a hearing before the IRS Office of Appeals. 26 U.S.C. § 6330 (a)(3)(B). At the hearing, the taxpayer may raise any issue relevant to the unpaid tax and proposed levy, including challenges to the propriety of the levy and offers of collection alternatives. 26 U.S.C. § 6330 (c)(2). The impartial IRS appeals officer conducting the hearing must then formulate a determination based on: 1) the verification that the requirements of any applicable law or administrative procedures 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. 26 U.S.C. § 6330 (c)(3).
Following the hearing, the appeals officer sends a Notice of Determination to the taxpayer summarizing the matters raised during the hearing and responding to any offers or objections made by the taxpayer. 26 C.F.R. § 301.6330-1T(e)(3)QA-E7. If the taxpayer is dissatisfied with the administrative determination, he may seek judicial review within 30 days of the Notice of Determination being issued either in the Tax Court or, if the Tax Court does not have jurisdiction over the underlying tax liability, the appropriate United States District Court. 26 U.S.C. § 6330 (d)(1). Review must be limited to matters actually raised at the administrative hearing. 26 C.F.R. § 301.6330-1T(f) (2)QA-F5.
IV. Motion for Partial Dismissal
A. Jurisdiction
Defendant moves for a partial dismissal, arguing: 1) that this Court lacks subject matter jurisdiction to hear the action because the complaint sets forth claims which are not within the United States' limited waiver of sovereign immunity as provided in 28 U.S.C. § 2410; and 2) that the complaint sets forth claims that do not state a legally valid cause of action.
Bonfante cites the provisions of 26 U.S.C. § 6203 as authority to bring this cause of action. Defendant argues that there is no statute which allows the United States to be sued for alleged violations of either 26 U.S.C. § 6203 or 6303, and that, therefore, this Court lacks subject matter jurisdiction because there has been no waiver of sovereign immunity for the Bonfante's claim. Fed.R.Civ.P. 12(b)(1).
Although 26 U.S.C. § 6203 is silent on the issue of sovereign immunity waiver, courts have generally exercised jurisdiction to interpret the statute's provisions. E.g., Gentry v. United States, 962 F.2d 555, 557-58 (6th Cir. 1992); United States v. Forrester, 87 A.F.T.R.2d 2001-1593, No. C-1-98-839, 2001 WL 429811 (S.D. Ohio Mar. 16, 2001). Defendant cites no contrary authority expressly holding that courts are without subject matter jurisdiction to hear challenges to records of assessment. Accordingly, this Court finds that it has subject matter jurisdiction to interpret the provisions of 26 U.S.C. § 6203.
B. Count I
In Count I of the complaint, Bonfante alleges that defendant did not provide him with the "Form 4340 Certificate of Assessment and Payments" pertaining to the underlying tax assessments and, therefore, violated 26 U.S.C. § 6203.
26 U.S.C. § 6203 provides, inter alia, that the IRS, upon request, shall furnish the taxpayer a copy of the "record of the assessment." The "record of assessment" includes the pertinent parts of the assessment which set forth: 1) the name of the taxpayer; 2) the date of assessment; 3) the character of the liability assessed; 4) the taxable period, if applicable; and 5) the amounts assessed. 26 C.F.R. § 301.6203-1.
The governing statute and regulation do not require that a taxpayer specifically be provided the "Form 4340 Certificate of Assessment and Payments." In Gentry, the Court addressed the issue of adequacy of tax records provided by the government to the plaintiff taxpayer. Gentry, 962 F.2d at 555. The court held that a "summary record of assessment" generated by computer and signed by an assessments officer (as long as it contained the five required elements listed in 26 C.F.R. § 301.6203-1) was adequate to establish a nexus between the taxpayer and the underlying assessments. Gentry, 962 F.2d at 558. The court further held that 26 C.F.R. § 301.6203-1 did not require the record to be of exacting specificity, as long as it was backed by supporting documents providing adequate notice to the taxpayer. Gentry, 962 F.2d at 557.
In the instant case, Exhibit C of the complaint indicates that: 1) Bonfante was sent letters in 1998 and 1999 regarding the assessment information found on the IRS Form 23-C and Form 4340; 2) he was provided transcripts of his account that showed all assessments; and 3) there was no apparent problem with the assessment process and the related forms. The IRS provided Bonfante with the information required by 26 C.F.R. § 301.6203-1 to be part of the record of assessment. Based on the record, this Court finds that the IRS complied with the governing statute and regulations in making the tax assessment against Bonfante.
Section 2410(a) of 28 U.S.C. provides that the United States may be named a party in any civil action or suit in any district court having jurisdiction of the subject matter: 1) to quiet title to; 2) to foreclose a mortgage or other lien upon; 3) to partition; 4) to condemn, or; 5) of interpleader or in the nature of interpleader with respect to, real or personal property on which the United States has or claims a mortgage or other lien. A lawsuit under the provisions of " 28 U.S.C. § 2410 is proper only to contest the procedural regularity of a lien; it may not be used to challenge the underlying tax liability." Pollack v. United States, 819 F.2d 144, 145 (6th Cir. 1987) (citing Laino v. United States, 633 F.2d 626, 633 n. 8 (2d Cir. 1980)) and Girvin v. United States, 84 A.F.T.R.2d (RIA) 6251, 1999 U.S. Dist. LEXIS 15331, at *1, 11-12 (S.D. Ohio, Sept. 9, 1999) (citing Pollack, 819 F.2d 144, 145 (6th Cir. 1987)). Bonfante does not set forth any procedural irregularities with the IRS's lien.
C. Count III
Bonfante alleges that defendant breached a 1999 agreement to provide him with a hearing as to his underlying tax and tax penalty liabilities. According to Bonfante, a collection officer requested him to present deposition testimony to support his position that he was not liable for the underlying tax obligation. Bonfante argues that this request for additional evidence constituted an agreement to provide Bonfante with a new hearing.
Assuming a collection officer made such a request, the Court cannot construe that request to constitute a promise to provide Bonfante with a new hearing. And even if the officer did make a promise, Bonfante fails to cite any applicable law to support the contention that the promise created a right to another hearing. Further, Bonfante cites no authority allowing him to sue the government for an alleged failure to give him with a hearing in addition to the one already provided him.
V. Motion for Affirmation
A. Standard of Review
While 26 U.S.C. § 6330 (d) clearly provides for judicial review of the IRS's administrative determinations, the statute is silent with respect to the standard of review that the reviewing court must apply. The issue is discussed, however, in the conference report accompanying the IRS Restructuring Act. In cases where the validity of the underlying tax liability itself is properly at issue in the hearing, the administrative determination will be reviewed de novo. Where the validity of the underlying tax liability is not properly part of the appeal, the taxpayer may challenge the determination for abuse of discretion. H.R. Conf. Rep. No. 105-599, at 266 (1998); Goza v. Comm'r of Internal Revenue, 114 T.C. 176, 181-182 (2000) (concluding that a court must review the IRS officer's determinations using an abuse of discretion standard when the validity of the tax liability itself is not at issue); MIRCA Info. Services v. United States, 145 F. Supp.2d 194, 199 (D. Conn. 2000) (same); Geller v. United States, 88 A.F.T.R.2d 6494, 2001 WL 1346669, at *2 (S.D. Ohio Sept. 25, 2001) (same).
Although Bonfante alleges certain facts in his complaint challenging the validity of his underlying tax liability, that issue is not properly before this Court. Bonfante's underlying tax liability was not considered during the appeals officer's administrative determination that is the subject of this complaint. The underlying tax liability had been previously addressed at an appeals hearing conducted in 1993. The Court concludes that the complaint is based on a dispute regarding the IRS's proposed collection procedures and not on the underlying tax liability. The appropriate standard of review to resolve a collection dispute is abuse of discretion. Goza, 114 T.C. at 181-182. Under the abuse of discretion standard, a determination will be affirmed unless the Court determines with a "definite and firm conviction" that a clear error of judgment has been committed. Cincinnati Ins. Co. v. Byers, 151 F.3d 574, 578 (6th Cir. 1998).
B. Discussion
As discussed earlier, an IRS appeals officer must base his decision on three factors: 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 balance between the need for efficient tax collection and the legitimate concern of the person that any collection action be no more intrusive than necessary. 26 U.S.C. § 6330 (c)(3).
The Notice of Determination received by Bonfante indicates that the IRS complied with all applicable law and procedures. Specifically, the Notice of Determination reflects that the requirements regarding notice to the taxpayer, the taxpayer's opportunity to raise relevant objections at a hearing, and the absence of any prior involvement by the appeals officer were all considered and found in compliance with 26 U.S.C. § 6330. The Notice of Determination further reflects that the issues raised by Bonfante at his administrative hearing conducted in December, 1993 were duly considered. Bonfante does not dispute that he was afforded an opportunity to raise issues at the administrative hearing or that his claims at were fairly considered. The Notice of Determination also reflects that there were no apparent problems with the subsequent tax assessment process and the related Form 23-C and Form 4340. See Geller, 2001 WL 1346669 at *4.
Although a levy upon property may arguably be an intrusive collection tactic, the appeals officer considered the issues raised by Bonfante and balanced his interests and concerns against the need for efficient tax collection. The Notice of Determination states that the underlying tax liability was not reviewed because it was previously reviewed in the December 1993 administrative hearing. The Notice of Determination further states that Bonfante was afforded an opportunity to offer alternative collection methods on three separate occasions and failed to do so.
The Court finds that the appeals officer did not commit clear legal error. Because there is no evidence of error in judgment by the appeals officer, nor any specific allegation by Bonfante that would support a finding of abuse of discretion, the judgment of the appeals officer is AFFIRMED.
Bonfante can challenge the tax assessment made against him by complying with the procedures set forth in 26 U.S.C. § 7422 for bringing a refund action in the District Court. See United States v. Dalm, 494 U.S. 596 (1990).
VI. Conclusion
Accordingly, the defendant's partial motion for dismissal is GRANTED, and the administrative decision of the IRS appeals officer is AFFIRMED. This action is hereby DISMISSED.