Opinion
Case No. 99-19155/JHW
October 16, 2002
LETTER OPINION
Dear Ms. Damminger and Mr. Paxman,
This matter concerns the debtor's quest to declare her debt to the Internal Revenue Service ("IRS") discharged, and to recover her 2001 income tax refund.
By way of background, on May 3, 2002, debtor Patricia Damminger, a/k/a Patricia Stankiewicz, contacted this court by letter to reopen her no-asset Chapter 7 case to recover her 2001 income tax refund, to declare her previous debt to the IRS discharged, and to prevent the IRS from further levying upon her future tax refunds. By letter dated May 30, 2002, I granted the debtor's request to reopen her case, and I waived the reopening fee. Due to the informal manner of the debtor's request, I directed the debtor to file a more formal pleading seeking relief, with the required notice to the IRS. The debtor responded with a second letter, dated July 3, 2002, seeking declaratory relief, with expanded notice to the IRS.
The underlying dispute in this matter begins with Ms. Damminger's 1995 tax return, which she filed on March 11, 1996, and from which she received a refund of $691.00. At some point, the exact date of which is unclear, Ms. Damminger's 1995 tax return was reviewed by the IRS, and an additional tax liability was discovered. Ms. Damminger was sent a notice of tax deficiency in the amount of $332.00, which she challenged before the United States Tax Court. When she failed to amend her petition and failed to pay a filing fee, as directed by the Tax Court, her tax appeal was dismissed on February 25, 1999. On August 9, 1999, the IRS assessed the additional tax of $332.00, plus interest of $107.41, against Ms. Damminger with respect to her 1995 taxes.
Two months later, on October 12, 1999, the debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code, with the assistance of Camden Regional Legal Services. The debtor listed, as an unsecured nonpriority claim, the debt owed to the IRS in the amount of $439.41 for her 1995 income tax obligation. Notice of the debtor's filing was provided to the IRS by electronic transmission. Creditors were informed that this was a no-asset Chapter 7 case and that proofs of claim were not to be filed unless the creditors were directed to do so. The IRS did not file a proof of claim. The debtor received her discharge on January 25, 2000 and her case was closed on February 4, 2000.
On August 27, 2001, the debtor was sent a CP 504 notice letter, indicating that her current outstanding balance to the IRS for the 1995 tax year was $555.22. On March 4, 2002, the IRS sent notice to the debtor that her 2001 tax refund was being applied to the amount the IRS indicated as due for the 1995 tax year. Following her receipt of this notice, the debtor indicates that she tried to contact the IRS on several occasions to prevent the loss of her 2001 tax refund, but to no avail. On May 3, 2002, the debtor contacted this court, insisting that this debt was discharged through her bankruptcy, since it was for a tax claim that was over 3 years old, and asking that the IRS be enjoined from applying her 2001 tax refund to her 1995 tax debt.
The debtor filed a subsequent letter complaining that the IRS has also retained her 2001 Homestead Rebate.
In response, the IRS claimed that the debtor's 1995 tax liability was excepted from discharge, pursuant to 11 U.S.C. § 523 (a)(1)(A) and 507(a)(8)(A)(ii), having been assessed only 65 days prior to her Chapter 7 bankruptcy filing, and that her motion was barred by the Anti-Injunction Act and the Declaratory Judgment Act.
Oral argument on this matter was heard in court on August 5, 2002. The debtor insisted at that time that she did not owe this tax debt in the first instance, because she was disabled and had additional rights. She also challenged the IRS's representations regarding her appeal, and insisted that she has been appealing this matter for 3 years before the United States Tax Court. She explained that she had asked the Tax Court to waive her filing fees, but that she never heard back from the court. In this regard, the court order and court docket for the United States Tax Court are accepted as a reflection that the debtor's appeal to the Tax Court was dismissed.
I reserved final decision on this matter because it was unclear from the evidence proffered by the IRS whether or not an assessment was made on August 9, 1999. The Form 4340 produced by the IRS included a line entry for August 9, 1999 that read "Agreed Audit Deficiency Prior to 30 or 60 Day Letter" and recited an amount of $332.00 under the column labeled "Assessment, Other Debits (Reversal)". The "literal transcript" provided by the IRS explained this entry as an "Additional Tax Assessed by Examination". Counsel was unable to give a definitive answer regarding the entry. I directed the IRS to provide a further certification explaining whether or not an assessment was made on August 9, 1999.
The "Certificate of Assessments and Payments", also referred to as a Form 4340, is "admissible as self-authenticating under Fed.R.Evid. 902(1) when accompanied by a Form 2866 certification that is under seal and bears the appropriate signature." Knight v. United States, No. 94-15738, 77 F.3d 489, 1996 WL 48380, *2 (9th Cir. Feb. 6, 1996). See also U.S. v. Burdine, 205 F. Supp.2d 1175, 1178 (W.D.Wash. 2002); U.S. v. Gabel, 2002 WL 1396782, *2 (N.D.Cal. Mar. 26, 2002). These forms are routinely used to prove that a tax assessment was in fact made, and they "carry a presumption of correctness." Burdine, 205 F. Supp.2d at 1178.
In response, the IRS has provided a certification from Robert A. Baxer, Esq., an attorney with the Office of the Chief Counsel for the IRS. Mr. Baxer certifies that the "transcript of account [Form 4340] indicates that on August 9, 1999, the Internal Revenue Service made an additional assessment of tax in the amount of $332.00 for the 1995 taxable year of Patricia Damminger. The assessment related to Ms. Damminger's individual income tax return and therefore was a tax on or measured by income."
In light of this clarification, I must agree with the position of the IRS, and conclude on this record that the claim of the IRS for the debtor's 1995 taxes was not discharged during the debtor's Chapter 7 case. As indicated on the debtor's notice of discharge, the debtor was released from all dischargeable debts, meaning that she was no longer personally liable for any of the debts discharged under 11 U.S.C. § 727. However, section 523(a)(1) provides that a Chapter 7 discharge under section 727 "does not discharge an individual debtor from any debt — for a tax . . . of the kind and for the periods specified in section 507(a)(2) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed." Section 507(a)(8) includes taxes "assessed within 240 days" before the date of the petition. In this case, the IRS made its assessment approximately 65 days prior to the debtor's filing. Therefore, the debtor's tax liability must be categorized as a Section 507(a)(8) assessment, which is not dischargeable under 11 U.S.C. § 523 (a)(1)(A).
Having concluded that the debtor's quest for relief must be denied, I need not reach the other questions raised by the IRS by way of defense to the debtor's motion.
Counsel for the IRS shall submit an order in conformance with this letter opinion.
Very truly yours,
JUDITH H. WIZMUR