Opinion
CIVIL ACTION NO. 01-0272.
January 29, 2002
MEMORANDUM AND ORDER
AND NOW, this 29th day of January, 2002 upon consideration of Defendant's Motion to Reconsider the Court's Order dated October 30, 2001, which granted summary judgment to Plaintiff and denied Defendant's counterclaims (Docket Nos. 15 and 17) the Order of October 30, 2001 is VACATED with respect to Defendant's counterclaim alleging unauthorized collection activities in violation of 26 U.S.C. § 7433, and said counterclaim is REINSTATED.
The Internal Revenue Service (the "IRS") terminated an installment agreement entered into between the parties after Defendant reduced his monthly payments to the IRS in response to his changed financial conditions, which included a substantial reduction in pension payments that Defendant was receiving from the Pension Benefit Guaranty Corporation ("PBGC"). Defendant claims that the terms of the installment agreement permitted him to reduce his monthly payments to the IRS and that the IRS' termination of the installment agreement constitutes unlawful collection activities in violation of 26 U.S.C. § 7433.
Section 7433 provides a cause of action for damages if any officer or employee of the IRS recklessly or intentionally, or negligently disregards any statute of the Internal Revenue Code or regulation promulgated thereunder. By terminating the installment agreement, Defendant contends that the IRS has disregarded a statute of the Internal Revenue Code or a regulation promulgated thereunder.
Specifically, Defendant claims that he was entitled to submit the reduced monthly payments to the IRS pursuant to an oral agreement entered into between himself and IRS Agent Eugene Clarke, an agreement entered into at the same time the parties signed the written installment agreement. According to Defendant, at the time that he was negotiating the installment agreement with the IRS, he made known to Agent Clarke that a reduction in his pension payments was imminent. Agent Clarke inquired, "When could the reduction occur?" The Defendant answered, "Within two years." Agent Clarke responded, "If that occurs, we will reduce your monthly payments by a like amount."
Relying on this alleged oral agreement, Defendant reduced his monthly installments to the IRS when the PBGC finally reduced his pension in March 2000. The IRS construed Defendant's conduct as a unilateral reduction in monthly installment payments without authorization from the IRS. Consequently, the IRS terminated the installment agreement. See 26 U.S.C. § 6159 (b)(4)(A) (authorizing termination of an installment agreement when a taxpayer fails to pay any installment at the time such installment payment is due).
If the oral terms, to which Defendant refers, became part of the installment agreement and entitled Defendant to reduce his monthly installment payments to the IRS once his pension payments were similarly reduced, it does not appear that the IRS had any authority to terminate Defendant's installment agreement. The Court assumes that without such authority, the IRS' act of unjustifiably terminating a valid installment agreement would be in disregard of a statute of the Internal Revenue Code or a regulation promulgated thereunder in connection with the collection of Federal tax in violation of 26 U.S.C. § 7433.
In its Order dated October 30, 2001, the Court dismissed Defendant's counterclaim as time barred. See 26 U.S.C.A. § 7433(d)(3) (1989 Supp. 2001) (providing for a two-year limitations period). However, as Defendant has clarified in the instant motion for reconsideration, although Defendant was aware at least seven years ago that the pension payments he was receiving from the PBGC would be reduced, the actual reduction in payments did not take place until March 2000, less than two years ago. Furthermore, for purposes of the counterclaim which the Court has reinstated, the offending conduct that Defendant complains of occurred in June 2000, when the IRS terminated the installment agreement, not in 1995 when the IRS declined to consider Defendant's impending reduction in pension payments in setting his monthly payment under the installment agreement.
At this stage, Defendant appears to have stated a cognizable claim pursuant to 26 U.S.C. § 7433 and such claim is not time barred as initially decided by the Court in its October 30, 2001 Order. Therefore, reinstatement of Defendant's counterclaim is warranted.
All discovery in this case is to be completed by March 31, 2002.
All case dispositive motions are due by April 12, 2002.
Trial is set for May 13, 2002.