Opinion
CV-N-99-478-ECR(PHA)
February 12, 2001
C. Nicholas Pereos, Reno, NV, Pro Se, PLAINTIFF.
Virginia Cronon Lowe, U.S. Justice Department, Tax Division, Washington, DC, Shirley Smith, U.S. Attorney, Reno, NV, Attorneys for U.S. Internal Revenue Service, United States of America, DEFENDANT.
ORDER
Plaintiff has brought this action seeking a refund. The claim is based on an alleged wrongful levy by the IRS without proper notice. Plaintiff seeks an award in the amount of $8,896.23 seized from his bank account by virtue of the levy, together with bank fees, costs, interest, and attorney's fees. Plaintiff also seeks a declaratory judgment declaring that the IRS must comply with 26 U.S.C. §§ 6321, 6322, and 6631, as they relate to plaintiff and any other persons similarly situated.
In his response to defendant's now pending motion for summary judgment, plaintiff adds the claim that the additional assessment by the IRS on his 1994 taxes was improper; that he did not and does not owe the $8,861.23 (which includes taxes, as well as penalties and late interest) assessed for 1994; and that IRS has failed to provide an explanation for the additional assessment. Plaintiff has not sought to amend his complaint to add this additional claim as a basis for refund, and such additional claim may not be introduced into the proceedings in an opposition to a motion for summary judgment.
Furthermore, we note that the correspondence accompanying the claim for refund filed with the IRS and the amended tax return were (like the complaint) based upon the claimed wrongful levy because a lack of notice rather than a challenge to the assessment of additional taxes for 1994 made by the IRS. It does not appear that any amendment of the complaint on these facts could cure the failure to allege the ground that the subject taxes were not owed where the claim for refund filed with the IRS was based on wrongful levy without proper notice. We lack jurisdiction of an action to recover taxes except upon grounds reasonably encompassed in the, claim for refund as originally filed with the IRS.
We therefore proceed to consider defendant's summary judgment motion on the basis of the claim in the complaint as filed.
Plaintiff alleges he did not receive the required notice of levy before his bank account at U.S. Bank was levied upon by the IRS. Plaintiff claims in his complaint that "Defendant caused to issue an IRS tax levy against Plaintiff's account at U.S. Bank . . . without any prior notification to Plaintiff in violation of 26 U.S.C. § 6321, 26 U.S.C. § 6322;" and "Defendant cause (sic) to attach and take possession of the sum of $8,896.23 from U.S Bank . . . by reason of the levy . . . without prior notification by Defendant as required by 26 U.S.C. § 6331."
Plaintiff's affidavit filed in opposition to the motion for summary judgment states that, prior to the filing of the instant motion, he "had no information that Defendant sent any notices to affiant. Affiant at no time received any notice from the Defendant in September of 1997, October of 1997, November of 1997, December of 1997, January of 1998, or any other time as to any claims by the Defendant concerning monies Defendant alleges to be due it for the 1994 tax year."
The undisputed evidence submitted by defendant in support of the motion shows that notices were sent to plaintiff, as follows:
9/29/1997 Notice of Balance Due 11/03/1997 Third Delinquency Notice 12/08/1997 Fourth Delinquency Notice
Defendant contends that the Fourth Delinquency Notice sent to plaintiff was a notice of intent to levy. However, the Certificate of Assessments and Payments in evidence does not reflect this; it is identified only as the "Fourth Delinquence Notice." There is no evidence in the record that a notice of levy was sent to plaintiff 30 days before the date of the levy as required by 26 U.S.C. § 6331(d)(2). Furthermore, the record does not show the manner in which the notice was "sent" to plaintiff as required by that section of the statute, i.e., (A) given in person, (B) left at the dwelling or usual place of business of such person, or (C) sent by certified or registered mail to such person's last known address.
There may be additional evidence, regulations or cases which would support the proposition that the Fourth Delinquency Notice by its terms would necessarily include a notice of intention to make levy and that it would be sent by certified or registered mail to plaintiff's last known address. However, no such additional evidence has been presented in connection with the motion and no party has called the court's attention to regulations or cases which would show that the reference to the Fourth Delinquency Notice would incorporate those requirements.
By itself, if the notice of levy was provided to the plaintiff in the form and manner required by the statute, plaintiff's claim that he never "received" notice of the intention to levy would not make the levy wrongful. It is generally only necessary that the IRS send the notice not that plaintiff receive it. See Williams v. Commissioner, 935 F.2d 1066, 1067 (9th Cir. 1991); In Re Camacho, Bkrtycy. D.Alaska 1995; 184 B.R. 807, affirmed in part, reversed in part on other grounds, 190 B.R. 895, reconsideration denied 195 B.R. 114, appeal dismissed 131 F.3d 1289; Cf.Erhard v. Commissioner, 87 F.3d 273 (9th Cir. 1996). If the evidence were sufficient to show that the notice of levy was properly and timely mailed, the IRS might prevail in consideration of plaintiffs conclusory statement that he never received notice of the levy.
However, the defendant is not entitled to summary judgment on this record on the claim that proper notice of the levy was given and that the levy therefore was not wrongful.
As mentioned above, plaintiff has pursued this action as a claim for refund based on the claimed wrongful levy. We must for that reason now examine the issue of whether a taxpayer can obtain relief in an action for refund on account of a wrongful levy.
The subject matter jurisdiction of this court over an action for refund is found in 28 U.S.C. § 1346(a)(1), which provides that we have original jurisdiction (concurrent with the United States Claims Court) over any civil action against the United States for the recovery of any internal revenue tax alleged to have been illegally collected (or any penalty claimed to have been collected without authority) or in any manner wrongfully collected under the internal revenue laws. Generally, the United States has waived sovereign immunity as to such actions.
Under 26 U.S.C. § 7422(a), no such suit may be maintained until a claim for refund has been filed with the IRS. The filing of the amended tax return and claim for refund by plaintiff appear at this stage of the case to meet these requirements. Section 7422(a) suggests that there may be an entitlement to a "refund" for a wrongful levy.
All in all, based on the scope of this motion and the authority and evidence before the court, the complaint appears to state a cause of action under 28 U.S.C. § 1346(a)(1) and 26 U.S.C. § 7422(a), which is at this stage of the proceeding not subject to a dismissal or summary judgment. The claim appears to meet the letter of this law.
For the reasons stated above, plaintiff's claim cannot be based on a ground that the tax is not owed or that an overpayment has been made. The claim for refund filed with the IRS bars such an allegation. This action must be based on the claim that the funds seized from the bank account were wrongfully, erroneously, or illegally collected because notice of the levy was not given as required by the statute.
Many of the cases surveyed consider the requirement that the tax be paid in full before the refund action may be commenced. Here, interestingly enough, the tax has been paid in full by virtue of the levy, and so that requirement is met.
That the terms of the applicable statutes have been literally met does not necessarily end our analysis. We ask if this is a refund action as contemplated by the statutes. A review of the cases cited generally indicates these cases are brought because of levies for taxes that are not owed under the statute or where taxes have been overpaid. The prayer of the complaint goes beyond that. 28 U.S.C. § 1346(a)(1) provides for "recovery of any internal-revenue tax . . . alleged to have been . . . illegally . . . collected . . . [or penalty collected without authority] . . . or any sum . . . in any manner wrongfully collected . .". The complaint seeks (over and above the amounts levied for taxes, interest and penalties) bank fees, interest, attorney fees and costs. These additional items seek damages in addition to refund. These additional items aside, however, if notice of levy was not given, the amounts seized in the levy appear to have been erroneously, illegally, or wrongfully collected.
"Refunds" in this sense are usually defined as monies due to the taxpayer from the government because of overpayment of taxes. See Black's Law Dictionary Sixth Edition. The cases cited to us with respect to refunds generally speak in the same terms. Lewis v. Reynolds, 284 U.S. 281, 283 (1932) states that under the then extant revenue code "refunds" were limited to overpayments of taxes. However, the statutory sections referred to in the decision are those which provide for refunds where there has been an overpayment of taxes. Lewis v. Reynolds does not appear to stand for the proposition that a taxpayer may only collect a refund under the statute now in effect, where there has been an overpayment of taxes, as opposed to a refund of wrongfully collected taxes because of failure to give required notice of levy. We conclude on this record that the literal terms of the statute are met and that summary judgment on this basis is inappropriate at this time. WWSM Investors v. U.S., 64 F.3d 456 (9th Cir 1995) also suggests that a suit for refund on account of a wrongful levy may properly be brought under 28 U.S.C. § 1346(a)(1).
It is indicated by this record that there may be additional evidence or authority out there which is not being considered in connection with this order and which are beyond the scope of the pending motion. We will therefore allow a reasonably brief additional period of time for the parties to file further dispositive motions.
We also note that there is no claim that plaintiff seeks relief under 26 U.S.C. § 7433. The complaint makes no such claim, nor has such claim been made in the papers filed in connection with the motion. We therefore do not analyze § 7433, except note that it is, according to its provisions, the exclusive remedy for recovering damages on account of reckless, intentional disregard of the statute pertaining to collection of such taxes. The suit brought in this court is one for refund and not under section 7433.
Plaintiff's claim for declaratory judgment (paragraph IV of the complaint) is DISMISSED . The Declaratory Judgment Act bars declaratory judgments in federal tax controversies. Federal courts lack jurisdiction to enter declaratory judgments concerning federal taxes, unless the Government could not prevail under any circumstances. This is not the case here.
IT IS, THEREFORE, HEREBY ORDERED that the motion of defendant (#9) to dismiss or in the alternative for summary judgment is DENIED except as to the claim for declaratory judgment which is dismissed.
IT IS FURTHER ORDERED that the parties shall have 20 days from the date of entry of this order within which to file any further dispositive motions. This case has been pending for a considerable period of time and we do not, therefore, anticipate extending the period of time for filing further motions, absent some unusual or extraordinary circumstances.