Opinion
NO. 6:95cv837
May 31, 2001
AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW
The above styled case was tried for four days during the week of September 26, 2000, in Tyler, Texas, before the undersigned Magistrate Judge. The jury heard the evidence and found for the Plaintiff on the ten issues submitted. of the ten issues submitted to the jury for deliberation, only two issues relating to Plaintiffs' claim for refund were binding on the Court. Under Rule 39(c) of the Federal Rules of Civil Procedure, the remaining eight issues were tried with an advisory jury and are not binding upon the Court. The Government subsequently submitted a Motion to Alter or Amend this Court's Findings of Fact and Conclusions of Law to which the Plaintiffs responded. After due consideration, the Court makes the following Amended Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
1. At Special Interrogatory 1, the jury found from a preponderance of the evidence that the failure to file or pay employment taxes by Plaintiff Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., was due to the embezzlement of funds by an employee of Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc.
2. On or about April 1993, Dennis C. Gandy ("Gandy") discovered his Chief Financial Officer, Ms. Mildred Ann Dozier, had been embezzling funds which were to be paid to the government for employment taxes.
3. After discovering the embezzlement of funds by Ms. Dozier, Plaintiffs met with Tyler Revenue Officer, Jo Kirkham, and petitioned for a reasonable cause hearing on the penalties, pending Plaintiffs' payment of the underlying taxes, and requested involuntary collection proceedings be withheld until after the reasonable cause hearings.
4. Ann Dozier plead guilty to a grand jury indictment for the embezzlement of more than $100,000.00.
5. When Plaintiffs attempted to take the deposition of Ms. Dozier, Ms. Dozier asserted her Fifth Amendment Right and Privilege against self incrimination.
6. Tyler Revenue Officer Kirkham began civil collection actions for the IRS by preparing prompt assessments, the first step in a civil collection proceeding, before the criminal investigation of Mr. Gandy had been closed or completed.
7. Civil collection actions which are taken against a taxpayer while that taxpayer remains under criminal investigation is a procedure not employed by the IRS.
8. Tyler Revenue Officer Kirkham assessed taxes and penalties against Gandy on the same day the file was formally received from a Tyler IRS Special Agent. Officer Kirkham levied because Plaintiffs only had a filing extension, not a payment extension.
9. Tyler Revenue Officer Kirham found reasonable cause existed as to some of the quarters for which Plaintiffs had failed to file employment taxes. Officer Kirkham assured Plaintiffs the IRS would not levy on Plaintiffs' accounts until after the IRS office in Dallas had determined if reasonable cause existed as to all quarters.
10. On or about November 1, 1989, during an IRS Criminal Investigation of Gandy and his nursery operations, the Government seized Plaintiff's financial records and other business documents for the 1989 year.
11. In order to retrieve Plaintiff's financial records and other business documents for the 1989 year, the Plaintiff was required to and did obtain a Court Order for return of such property on June 18, 1993.
12. At Special Interrogatory 2, the jury found from a preponderance of the evidence Plaintiff Gandy Marketing and Trucking, Inc., was entitled to a refund from the IRS in the amount of $11,154.00.
13. At Special Interrogatory 3, the jury found from a preponderance of the evidence Gandy Nursery, Inc., was entitled to a refund due to the Government's wrongful erroneous application of money, causing fuel tax penalties of $11,156.79 and $26.74.
14. The Government concedes that Gandy Nursery Inc. is entitled to and should receive a refund for the amount of $11,156.79.
15. On or about April 25, 1994, at the request of Plaintiff's CPA, the IRS corrected a taxpayer error and applied $34,625.71 from a tax payment of $76,814.21 for Gandy Nursery, Inc., under the correct taxpayer identification number.
16. On or about May 4, 1994, Plaintiff's CPA again requested for the entire amount to be applied as directed, however, on or about August 15, 1994, the IRS instead assessed penalties and interest against the $42,189.50 remaining unpaid under the correct taxpayer identification number.
17. On or about September 5, 1994, the IRS applied the tax payment as directed but failed to remove the assessed penalties and interest and applied a fuel tax refund towards the erroneous penalty.
18. Testimony revealed that taxpayer error such as payment of taxes owed under an incorrect taxpayer identification number is a type of error routinely corrected without imposing penalties.
19. At Special Interrogatory 4 the jury found by a preponderance of the evidence that Gandy is not responsible for a fraud penalty for the tax years ended December 31, 1990 and 1991.
20. The Plaintiff Dennis C. Gandy admitted to cheating on his taxes and committing fraud in the years 1985 through 1989.
21. Fraud is an intentional act.
22. Dennis C. Gandy filed his 1990 and 1991 income tax returns after the 1989 search warrant was issued and carried forward Net Operating Losses ("NOL") from the previous years on the 1990 and 1991 income tax returns.
23. The present suit was filed before the Tax Court's decision was entered.
24. But for the fraudulent under-reporting of income for the years 1985 through 1989, the NOL claimed in 1990 and 1991 by Dennis C. Gandy would not have been generated.
25. Title 26, United States Code, section 6663 imposes a penalty if any part of any underpayment of taxes required to be shown on a return is due to fraud.
26. The Fifth Circuit has upheld the Tax Court's determination that Dennis C. Gandy under-reported his income by substantial amounts and upheld fraud penalties imposed by the Internal Revenue Service for this under-reported income.
27. The under-reporting of income by Dennis C. Gandy created NOL's which could be carried over into subsequent tax years, including the tax years of 1990 and 1991, was determined to be fraudulent and in violation of various tax laws.
28. At Special Interrogatory 5, the jury found by a preponderance of the evidence Gandy is entitled to a refund of $105.63 because of the wrongful and erroneous taking of Gandy's 1991 income tax overpayment and further applying that overpayment to penalties for the first quarter of 1991.
29. A sum of $255,000.00 was needed to zero out the refund claimed by Plaintiffs.
30. In an attempt to narrow the issues for trial, Plaintiffs voluntarily disclosed the 1990 and 1991 income tax returns to the Government's witness, Tyler Revenue Agent Jeff Caid, who examined Plaintiffs' income tax records.
31. Mr. Caid estimated the Plaintiffs failed to report a substantial amount of their daily cash sales by examining Plaintiffs' invoices. Mr. Caid stated that only 36 of 1500 invoices were available for inspection and had failed to report approximately $2000.00 of daily cash sales from 1990 to 1991, totaling approximately $450,000.00 in unreported cash income.
32. Mr. Caid stated his estimate was not supportable by any evidence beyond his examination of Mr. Gandy' s records and his own speculation as to what amount of walk in business the Plaintiffs maintained.
33. At Special Interrogatory 6, the jury found by a preponderance of the evidence that Gandy is entitled to a refund because the IRS wrongfully and erroneously withheld a refund relating to his 1991 income tax return.
34. As a farmer, Dennis C. Gandy is not required to utilize the accrual method of accounting, but rather may use the cash method under 26 U.S.C. § 447, 448(b)(1).
35. Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., recorded receipts under the accrual method rather than the cash method until Plaintiffs' accountant Mr. Tanner corrected the mistake and utilized the cash method, which resulted in an overstatement of income on Dennis C. Gandy's income tax return in the amount of $550,223.00.
36. The overstatement of income by Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., on the 1991 tax return resulted in an overpayment of taxes to the IRS.
37. The Government concedes that Dennis C. Gandy is entitled to a credit or refund and should receive a credit or refund for the amount of $105.63.
38. Evidence at trial reveals Dennis C. Gandy has an outstanding tax liability in the amount of $2,000,000.00, which the IRS has the right to offset with a credit owed the taxpayer.
39. At Special Interrogatory 7, the jury found by a preponderance of the evidence that an IRS employee had negligently failed to release a tax lien filed in 1993 against Dennis C. Gandy, Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc.
40. Plaintiffs' business activities as they were conducted for the purposes of running a nursery were done so under a cooperate identity.
41. The tax liens filed in 1993 against Dennis C. Gandy were levied without due process as required by the and in violation of IRS operating policy requiring IRS officers to deal honestly with taxpayers.
42. Tyler Revenue Officer Kirkham levied on Plaintiffs' bank accounts despite having provided Plaintiffs with the assurance she would not do so until the IRS office in Dallas could determine if reasonable cause existed as to the disputed tax periods.
43. The IRS levied $44,703.00 from the bank accounts of Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc. which was applied to penalties assessed for the nonpayment of employment taxes.
44. Plaintiffs voluntarily paid the unemployment taxes due plus $599.00 on penalties assessed for the nonpayment of employment taxes.
45. Plaintiffs filed administrative claims with the IRS to obtain the release of liens which fairly advised the Commissioner of the nature of the taxpayers' claims and the liens against them and were substantively complete so as to meet the requirements of 26 U.S.C. § 7422(a), 7432 and Treasury Regulations §§ 301.6402-2, 301.7432-1(e) and (f).
46. The underlying taxes and penalties in regard to the 1993 tax liens had been paid by the Plaintiffs and the penalties associated with such taxes had been abated.
47. A partial release of any part of the tax liens which are the subject of this case has not been issued by the IRS although the Plaintiff Gandy Marketing and Trucking, Inc. and Dennis C. Gandy have properly requested a partial release be entered.
48. Issuance of a tax lien by the IRS had a detrimental effect upon the Plaintiffs' businesses, preventing Plaintiffs from selling or purchasing assets.
49. Dennis C. Gandy, Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., did not have use of his operating capital because of the 1993 lien on Plaintiffs' bank accounts.
50. Inventory purchases could not be made due to the credit damage as well as the lack of operating capital available to Dennis C. Gandy, Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., causing Plaintiffs to lose revenue and profits exceeding $400,000.00.
51. Property to be used for the expansion of the Plaintiffs' business could not purchased due to the erroneously imposed liens on Plaintiffs' bank accounts.
52. Beyond the actions of Carol Szenkel of the Internal Revenue Service ("IRS") Austin Service Center in abating and refunding monies to Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., the IRS office in Dallas has yet to make a determination as to whether Plaintiffs' did in fact have reasonable cause.
53. Certain penalties that had been abated by the Austin IRS Service Center were again reassessed against the Plaintiffs without notice or demand as required under 26 U.S.C. § 6201, 6212, 6303.
54. IRS Officer Carol Szenkel examined 24 claims for refund filed by Plaintiffs and independently determined reasonable cause existed for Plaintiffs' failure to pay the employment taxes owed and abated the penalties assessed for the failure to pay the employment taxes in late 1993.
55. The IRS office in Tyler later reassessed penalties against the Plaintiffs and placed the penalties and interest back on the transcripts without providing proper notice and demand.
56. After eighteen months had elapsed from the closing of the criminal investigation of Dennis C. Gandy, Special Agent McPherson directed Carol Szenkel in the Austin Service Center to cease any and all issuing of refunds to the Plaintiffs.
57. No release of the individual quarters or liens on Gandy Marketing and Trucking, Inc., was issued despite the Austin IRS Service Center's finding that reasonable cause existed on the non-payment of taxes.
58. Six refund checks have not been issued to Plaintiffs which are part of the taxes subject to review and determination by the IRS as to Plaintiffs' claims of reasonable cause.
59. After Plaintiff's CPA, Mr. Morgan, was designated an expert in the above styled cause of action, the Tyler IRS Office asserted a tax return preparer penalty against Mr. Morgan, which was then withdrawn when Mr. Morgan appealed to IRS officers in the Dallas office.
60. Plaintiffs filed the necessary Administrative Claims for Relief from Wrongful Collection Actions on December 12, 1996, asking the Government to cease the wrongful collection activities.
61. The claims submitted by Plaintiffs contained information required under Treasury Regulation section 301.7432-1. The information included name, current address, current home and work telephone number, taxpayer identification number, notice of the tax lien, the grounds for the claim, identification of the injury suffered, dollar amounts of the claims and the signature of the taxpayer or duly authorized representative.
62. The trial testimony of Debra Alcorte was not found to be credible testimony, either by the jury or by the Court, as to the sufficiency of the administrative claims for damages filed by Plaintiffs as required under section 7432 of the United States Code.
63. At Special Interrogatory 9, the jury found from a preponderance of the evidence that an officer or employee of the IRS conducted an unauthorized collection activity in regards to Gandy Marketing and Trucking, Inc., awarding Gandy Marketing and Trucking, Inc., $630,559.37 in damages.
64. Dennis C. Gandy, Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., would have been able to market and sell the majority if not all of the nursery inventory if he had been able to purchase such inventory.
65. Dennis C. Gandy, Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc., were unable to purchase 18,000 trees Plaintiffs had previously contracted to buy. Estimated profit on each tree is between eight and ten dollars.
66. The average growth of Plaintiffs' business was 17.8% per year, excepting the year of 1993, in which Plaintiff experienced a negative growth of 12.4%, causing lost profits of approximately $426,865.00.
67. The Government did not challenge Plaintiffs' testimony as to damages at trial.
68. The Government did not offer evidence concerning or pertaining to Plaintiffs' damages at trial.
69. The Internal Revenue Code of 1986, Title 26, United States Code, section 7433 was amended on July 30, 1996, raising the damages cap from $100,000.00 to $1 million.
70. The amendment to section 7433 applies to actions and officers or employees of the IRS after the date of enactment, July 30, 1996.
71. Actions which the evidence showed were unauthorized collection practices by the IRS, which include the (1) August 1993 bank levy and the (2) invalid assessment of taxes, penalties and interest, occurred before the amendment of section 7433.
72. The Government reserved the ability to raise subject matter jurisdiction defense to a possible 26 U.S.C. § 7433 claim by Plaintiffs for unauthorized collection actions in the joint pre-trial motion filed on January 9, 1998, which was signed by attorneys both for the plaintiffs and the Government.
73. The next time the Government raised the defense of limitations was at trial, over two years later, without notice to the Plaintiffs and after five years of litigation.
72. The Government failed to raise the affirmative defense of statute of limitations as to Plaintiffs' 26 U.S.C. § 7433 claim for unauthorized collection actions in its first or any subsequent responsive pleadings or motions until after trial.
73. Plaintiffs failed to file their suit for unauthorized collections under 26 U.S.C. § 7433 against the Government for the 1993 bank levy before the two year statute of limitations expired. Failure of the Plaintiffs to file suit within the two year statute of limitations deprives this Court of jurisdiction to consider Plaintiffs' claims.
74. Special Agent McPherson was not called to serve as a witness at trial.
CONCLUSIONS OF LAW
1. Plaintiffs have the right to a trial by jury on the issues concerning tax refunds.
2. Full payment of a tax is a jurisdictional prerequisite for bringing of a suit for refund.
3. Plaintiff's case is a refund case within the subject matter jurisdiction of this Court due to the payment of a divisible amount of the penalties and interest attributable to a single individual's withholding taxes owed, bestowing on the Plaintiff's the right to make a claim for refund and institute this suit for recovery in this Court, to determine whether or not the government had the right to make penalty assessments under the circumstances of this situation.
4. After 1992, all activities conducted by Dennis C. Gandy for the purposes of conducting the business of a nursery were done so as a cooperation under the names of Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc.
5. Plaintiffs Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc. had reasonable cause in regards to penalties for withholding taxes.
6. Embezzlement provides a basis for reasonable cause.
7. Austin IRS Officer Carol Szenkel found reasonable cause existed as to all time periods and issued refunds and abated the penalties for all periods.
8. A criminal investigator such as Agent McPherson does not have authority over a civil collections case.
9. The IRS reassessed the abated penalties against the Plaintiffs for failure to pay employment taxes without proper notice or demand, elements required for a valid assessment and collection of taxes to have taken place against a taxpayer.
10. No assessment of any tax or collection through levy or proceeding in court may begin until after the notice has been mailed and a ninety-day stay period during which the delinquent taxpayer may file a petition in Tax Court has expired.
11. Upon expiration of the ninety-day stay period, the IRS may assess the tax liability and within sixty days of making such assessment must provide notice of the assessment and demand payment from the liable taxpayer.
12. The IRS acted wrongfully and erroneously, as determined by the jury under 28 U.S.C. § 1346(a)(1) and 2402, in taking money of Gandy d/b/a Gandy Nursery and Gandy Marketing and Trucking, Inc., for penalties and interest.
13. In order for a lien to be placed on a taxpayer, the IRS must first conduct a valid assessment.
14. In order for an assessment and collection of taxes by the IRS to be valid under law, the IRS must provide notice and demand as required under 26 U.S.C. § 6201, 6212 and 6303.
15. Treasury Regulations state that the Government shall release a tax lien or that portion of the tax lien which has been satisfied or becomes unenforceable when a taxpayer pays that portion of the tax lien or the lien becomes unenforceable.
16. After a taxpayer raises reasonable cause as grounds for the failure to file or pay taxes, the IRS is required under its own rules and procedures to withhold collection until the issue regarding reasonable cause is resolved.
17. Plaintiffs filed Form 843 administrative Claims for Refund and Requests for Abatement which fairly advised the Commissioner of the nature of the taxpayers' claims and were substantively complete so as to meet the requirements of 26 U.S.C. § 7422(a) and Treasury Regulation 301.6402-2.
18. Taxpayer error such as payment of taxes owed under an incorrect taxpayer identification number is a type of error routinely corrected by the IRS without imposing penalties.
19. The penalty provisions of the Internal Revenue Code provide incentive for and were written to ensure taxpayer compliance, not to provide punishment.
20. Plaintiffs attempted to comply with tax laws when filing under the wrong tax number and paying taxes under the incorrect taxpayer identification number.
21. Plaintiffs' error in filing its taxes under the wrong taxpayer identification number was an innocent error and constitutes reasonable cause.
22. The Government wrongfully and erroneously applied money paid by Plaintiffs', causing fuel tax penalties of $11,156.79 and $26.74, providing Plaintiffs' reasonable cause under 26 U.S.C. § 6651(a)(1).
23. Gandy Nursery, Inc., is entitled to a refund due to the Government's wrongful erroneous application of money, for the amount of $11,156.79. The Court finds and the Government concedes there is sufficient evidence to sustain the finding of the jury, and the refund award in the amount of $11,156.79 to Gandy Nursery, Inc. is sustained.
24. Dennis C. Gandy is entitled to a refund of $105.63 due to the wrongful and erroneous withholding of a refund resulting from an income tax overpayment which the Government had taken and applied to penalties for the first quarter of 1991. The Court finds and the Government has conceded that there is sufficient evidence to sustain the finding of the jury, and the refund award in the amount of $105.63 to Dennis C. Gandy is sustained subject to the Government's right to offset such amount against any of the Plaintiff's outstanding tax liabilities.
25. In the case of any overpayment, the Government may credit the amount of such overpayment, including any interest allowed thereon, against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall, subject to certain restrictions, refund any balance to such person.
26. The 1991 overpayment of $105.63 is subject to offset rather than refund against a tax liability owed by Dennis C. Gandy.
27. The Government failed to carry its burden of proof by clear and convincing evidence to the jury that Dennis C. Gandy is responsible for fraud penalties for tax years 1990 and 1991.
28. If the Net Operating Losses were not taken on Plaintiffs' 1990 and 1991 tax returns, the Net Operating Losses would not be assertable on a later filed tax return.
29. By under-reporting his income for the years 1985 through 1989, Dennis C. Gandy acted with the intent to defraud the government. Such fraudulent actions by the Plaintiff Gandy created NOL of large amounts, which were then carried over as NOL for the years 1990 and 1991.
30. The legal issues litigated in the tax court concerning Plaintiff Gandy's NOL for the years 1985 through 1989 were conclusively settled in a judgment by the Tax Court, a court of competent jurisdiction, and are issues that may not be re-litigated in any future action between the parties.
31. Issue preclusion is appropriate only if four conditions are met. First, the issue under consideration in a subsequent action must be identical to the issue litigated in a prior action. Second, the issue must have been fully and vigorously litigated in the prior action. Third, the issue must have been necessary to support the judgment in the prior case. Fourth, there must be no special circumstance that would render preclusion inappropriate or unfair.
32. The concept of collateral estoppel, or issue preclusion, holds any fact, question or matter in issue and directly adjudicated or necessarily involved in determination of an action before a court of competent jurisdiction in which judgment or decree is rendered on the merits, is conclusively settled by judgment therein and cannot be re-litigated in any future action between the parties or privies thereto, either in the same court or a court of concurrent jurisdiction, while judgment remains unreversed or unvacated by proper authority, regardless of whether a claim or cause of action, purpose or subject matter of the two suits is the same.
33. The NOL claimed in 1990 and 1991 were generated by fraudulent under-reporting of income, and as such are part of the underpayment of tax and fraud from the years 1985 through 1989.
34. The four conditions of issue preclusion are met in the instant case. First, the issue of whether Dennis C. Gandy acted fraudulently in filing his tax returns for the years 1985 through 1989, which are the source for the claimed 1990 and 1991 NOL, is identical to whether these same funds were fraudulently filed as NOL in the years 1990 and 1991. Second, the issue has been fully and vigorously litigated in the prior action, having been appealed and affirmed by the Fifth Circuit. Third, the issue of Dennis C. Gandy's fraud in the filing and claiming these NOL was necessary to support the judgment in the prior case. Fourth, there are no special circumstances which could render preclusion inappropriate or unfair. Mr. Gandy cannot claim, having admitted his fraud in the years supplying the basis for the 1990 and 1991 NOL, that he did not have knowledge or notice that the funds comprising the 1990 and 1991 NOL were illegally and fraudulently created.
35. The Court does not find the evidence supports the jury's finding in Special Interrogatory 4 that Dennis C. Gandy is not responsible for a fraud penalty for the tax years December 31, 1990 and 1991. The Court finds there is insufficient evidence to sustain the finding of the jury and finds the Plaintiff Dennis C. Gandy is responsible for a fraud penalty for the tax years 1990 and 1991.
36. Title 26, United States Code, section 6325 provides that a certificate of release of any lien imposed with respect to any internal revenue tax not later than 30 days after the day on which it is found that the liability for the amount assessed, together with all interest, has been fully satisfied or has become legally unenforceable.
37. The unreported daily cash sales estimate of $2,000 by the Government was unreasonable and unrealistic in light of the Plaintiffs' gross sales revenue.
38. The Government's estimate of Plaintiffs' unreported gross cash sales did not zero out the refund claimed by Plaintiffs.
39. The penalties and interest assessed against the Plaintiffs were invalid due to the Government's failure to provide proper notice and demand before such taxes and penalties are assessed and/or collected.
40. A payment on a tax assessment, assuming the assessment and collection is one done with notice and demand, extinguishes the assessment to the extent of the payment, and an abatement generally will wipe out the assessment.
41. Plaintiffs submitted the jurisdictionally mandated administrative claims required by Title 26, United States Code, section 7432(d)(1) which requires plaintiffs to exhaust the administrative remedies available to such plaintiffs within the IRS. Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc. did submit administrative claims in writing to the district director seeking release of the federal tax liens filed.
42. Dennis C. Gandy d/b/a Dennis Gandy Nursery and Gandy Marketing and Trucking, Inc. submitted substantially correct administrative claims as required by Treasury Regulation section 301.7432-1(e) and (f).
43. The claims met Fifth Circuit requirements for informal claims and included information such that the IRS was provided with written notice that an administrative claim was being made.
44. If a taxpayer requests a certificate of release be issued with respect to one or more tax liabilities listed in the notice of Federal tax lien and such liability has been fully satisfied or has become legally unenforceable, the district director shall issue a certificate of release. For example, if a notice of Federal tax lien lists two separate liabilities and one of the liabilities is satisfied, the taxpayer may request the issuance of a certificate of release with respect to the satisfied tax liability and the district director shall issue a release.
45. Payment of a portion of a tax lien or the inability to enforce a portion of a tax lien requires, under Treasury Regulation 401.6325-1(e), that such portion of the tax lien becomes satisfied or unenforceable and shall be released.
46. Under the IRS's own rules and procedures, Civil collection activities may not be initiated against a taxpayer while that taxpayer remains under criminal investigation.
47. Our revenue system is based upon the good faith of the taxpayers and the taxpayers should be able to expect the same from the government in its enforcement and collection activities.
48. A taxpayer is prevented from purchasing and selling assets when a tax lien is placed upon that taxpayers property.
49. By assessing tax and penalties without proper notice and demand, the IRS conducted unauthorized collections against Gandy Marketing and Trucking, Inc.
50. Plaintiffs were able to show actual damages exceeding $100,000.00
51. The Government's failure to release liens held on Plaintiff Gandy Marketing and Trucking, Inc. resulted in damages amounting to $16,800.00, due to the effect of the liens on the Plaintiffs' credit and the inability of Plaintiffs to purchase inventory for resale. The Court finds there is sufficient evidence to sustain the finding of the jury, and the damages award in the amount of $16,800.00 to Gandy Marketing and Trucking, Inc. is sustained.
52. Plaintiffs filed Administrative Claims for Relief from Wrongful Collection Actions pursuant to Title 26, United States Code, section 7433, which met the requirements of Regulation section 301.7433-(e).
53. The amendment to section 7433 raising the damages cap from $100,000.00 to $1 million applies to actions and officers or employees of the IRS after the date of enactment, July 30, 1996.
54. The actions complained of by the Plaintiffs as unauthorized collection practices occurred before the date of the cap amendment, thus requiring reduction of the jury's $630,559.37 verdict to the capped amount of $100,000.00.
55. Section 7433 violations may not be predicated, under Fifth Circuit law, upon the invalid assessments. Shaw v. United States, 20 F.3d 182, 184 (5th Cir. 1994).
56. Plaintiff Gandy Marketing and Trucking, Inc., is not entitled to damages in the amount of $100,000.00 for the unauthorized collection practices based upon invalid assessments of its officers or employees against Plaintiff Gandy Marketing and Trucking, Inc. The Court finds there is insufficient evidence to sustain the finding of the jury and the damages awarded by the jury, based upon invalid assessments in the amount of $630,559.37 to Gandy Marketing and Trucking, Inc., is overruled.
57. Under settled principles of sovereign immunity, the United States, as a sovereign, is immune from suit, unless it consents to be sued and the terms of such consent to be sued in any court have been met to grant a court jurisdiction to entertain the suit. A statute of limitations requiring that a suit against the Government be brought within a certain time period is one of those terms.
58. Generally, a party's failure to raise an affirmative defense in its first responsive pleading results in waiver. However, where the matter is raised by the trial court or the litigants that does not result in unfair surprise, technical failure to comply precisely with Rule 8(c) is not fatal, and in such a situation a court may hold that the defense is not waived.
59. A waiver of sovereign immunity containing a limitations period requires a plaintiff to timely file suit within that limitations period. Failure to sue the United States within the limitations period is not merely a waivable defense; it operates to deprive federal courts of jurisdiction.
60. The Government's failure to raise the affirmative defense of statute of limitations as to Plaintiffs' 26 U.S.C. § 7433 claim for unauthorized collection actions in its first or any subsequent responsive pleadings or motions until after trial did not operate as to waive sovereign immunity and thus the Court is without jurisdiction to consider Plaintiffs' claims. Accordingly, it is
ORDERED the United States Motion to Alter Judgement is granted in part and denied in part. (Doc.# 179, part 1), Further it is
ORDERED the United States Motion to Amend Findings of Fact is granted in part and denied in part. (Doc. # 179, part 2), Further it is
ORDERED the United States Motion for Judgment as a Matter of Law is denied. (Doc. # 179, part 3).
Further,
It is so ORDERED the judgment be entered against the Defendant, the UNITED STATES OF AMERICA, in favor of the Plaintiff, DENNIS C. GANDY as follows:
1. In the total amount of $105.63 refund pursuant to 26 U.S.C. § 7422 and 28 U.S.C. § 2402 and 1346(a)(1), from the IRS, as conceded by the Government, and subject to offset any outstanding tax liabilities;
and for the Plaintiff, GANDY NURSERY, INC., as follows:
1. In the total amount of $11,156.79 refund pursuant to 26 U.S.C. § 7422 and 28 U.S.C. § 2402 and 1346(a)(1), from the IRS, as conceded by the Government;
and for the Plaintiff, GANDY MARKETING AND TRUCKING, INC., as follows:
1. In the amount of $16,800.00 pursuant to 26 U.S.C. § 7432, from the IRS for failure to release liens against Plaintiff.
in the total amount of $27,956.79.