Opinion
Case No. CV-S-01-1190-KJD-(PAL)
August 6, 2002
ORDER
This matter comes before the Court on Defendant's Motion for Summary Judgment (#3). Plaintiff filed a response in opposition (#10).
I. Factual and Procedural History
In his complaint, Plaintiff alleges that the IRS improperly determined that collection actions against him should not be restricted. Plaintiff now seeks to set aside the IRS's determination. The collection activity at issue stems from a frivolous return penalty the IRS assessed against Plaintiff for a return he filed for the 1998 tax year. In February of 2000, Plaintiff filed Form 1040, U.S. Individual Income Tax Return for the 1998 tax year. This return had zeroes on all lines which reflected amounts of income earned or taxes due. Attached to the return was a two page document which set forth arguments as to why Plaintiff did not believe that he owed federal income taxes for 1998. The IRS assessed a $500 civil penalty against Plaintiff under 26 U.S.C. § 6702 for filing the above described tax return. Section 6702 assesses a $500 civil penalty if an individual "files what purports to be a return" but which contains "information that on its face indicates that the self-assessment is substantially incorrect" and is due to "a position which is frivolous." Plaintiffs self assessment of his 1998 income tax liability was substantially incorrect in that he entered zeros for all income and tax information. According to the attached statement, Plaintiffs self-assessment was based on the position that there is no statutory income tax liability that applies to him and that his wages do not constitute income. Courts have found both of these positions to be frivolous and patently without merit. See Sisemore v. United States, 797 F.2d 268, 270 (6th Cir 1986); Olson v.United States, 760 F.2d 1003, 1005 (9th Cir. 1985). Because Plaintiffs self-assessment was on its face substantially incorrect and was based on frivolous positions, there is no doubt as to the validity of the penalty.
On November 30, 2000, the IRS sent Plaintiff a "Final Notice-Notice of Intent to Levy and Notice of Your Rights to a Hearing." This letter notified Plaintiff of his right to appeal the IRS's levy within 30 days by requesting a Collection Due Process Hearing ("CDP Hearing"). Plaintiff filed Form 12153 "Request for a Collection Due Process Hearing" which the IRS received on December 21, 2000. Plaintiffs CDP Hearing was held on August 21, 2001 in Las Vegas, Nevada before Appeals Team Manager Tom Aneau. Plaintiff attended the hearing with Cynthia Neun, his "taxpayer representative." On Sept 20, 2001, the IRS Appeals Office sent, by certified mail, a "Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330." The letter informed Plaintiff that the proposed collection action should be allowed to proceed. The letter also informed Plaintiff of his right to dispute the determination by filing a complaint in Federal District Court within 30 days. Plaintiff filed a timely complaint with this Court. Defendant has now filed a motion for summary judgment.
II. Standard of Review
Summary judgment may be granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56(c); see also Celotex v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the initial burden of showing the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. The burden then shifts to the nonmoving party to set forth specific facts demonstrating a genuine factual issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Co., 475 U.S. 574, 587 (1986); Fed.R.Civ.P. 56(e). The evidence, as well as all justifiable inferences drawn from it, must be viewed in the light most favorable to the nonmoving party. See Matsushita, 475 U.S. at 587. Summary judgment shall be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." See Celotex, 477 U.S. at 322.
III. Analysis
From what can be gleaned from it, Plaintiff's complaint contains a barrage of meritless arguments which he insists this Court must address. The only genuine issue before this Court is whether the IRS Appeals Office met all requirements of applicable law and administrative procedures when making its determination that the collection action against Plaintiff should continue unrestricted. This issue will be addressed first, followed by a discussion of Plaintiffs purely meritless arguments.
A. Collection Procedure
Procedures for administrative collection actions are found in 26 U.S.C. § 6330 which requires that: (1) the IRS give 30 days' written notice of the taxpayer's right to a CDP Hearing before making a levy; (2) a hearing be conducted by an officer or employee who has no prior involvement with the subject tax liability; (3) the Appeals Office obtain verification from the IRS that the requirements of any applicable law or administrative procedure have been met; (4) the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy at the time of the CDP Hearing, including appropriate spousal defenses, challenges to the collection actions and offer of collection alternatives; (5) the taxpayer may challenge the existence of the underlying tax liability under some circumstances; and (6) the final determination by the Appeals Officer shall take into consideration (a) the verification that applicable law and administrative procedures have been met, (b) the issues raised by the taxpayer, and (c) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.
A review of Plaintiff's complaint illustrates that all of the above requirements have been met: (1) Plaintiff received a timely notice of levy and then requested a CDP hearing; (2) Plaintiff attended his CDP Hearing on August 21, 2001 with Tom Aneau, the appeals team manager who had no prior involvement with the subject tax liability; (3) the Appeals Office obtained Form 4340 from the IRS which serves as verification that the requirements of any applicable laws or administrative procedures were met; (4) the only relevant issue raised by the Plaintiff at the appeals hearing was his claim that he did not receive a statutory notice and demand for payment (he raised no appropriate defenses pertaining to the proposed collection action and offered no collection alternatives); (5) At the hearing, Plaintiff challenged the liability for the penalty and whether the return he filed was frivolous, arguments determined to be frivolous by the appeals officer; and (6) in the final determination, the appeals officer stated that he took into consideration all required statutory elements.
B. Plaintiff's Arguments
1. Inadequacy of Notice
Plaintiff repeatedly argues that letters and notices sent to him by the IRS are invalid because there is no evidence of any delegated authority from the Secretary of Treasury to the various IRS employees. Relevant statutes and regulations demonstrate, however, that the Secretary does have the power to collect taxes, and that such power can be delegated to local IRS agents. 26 U.S.C. § 6301 provides that "[t]he Secretary shall collect the taxes imposed by the internal revenue laws." The actual task of collecting the taxes, however, has been delegated to local IRS directors. See 26 C.F.R. § 301.6301-1 ("The taxes imposed by the internal revenue laws shall be collected by district directors of internal revenue."). The delegation of authority down the chain of command, from the Secretary, to the Commissioner of Internal Revenue, to local IRS employees constitutes a valid delegation by the Secretary to the Commissioner, and a re-delegation by the Commissioner to the delegated officers and employees. See 26 U.S.C. § 7701(a)(11)(A), (12)(A)(i); 26 C.F.R. § 301.7701-9; Hughes v. United States, 953 F.2d 531, 536 (9th Cir. 1991).
2. Adequacy of Supporting Documentation
Plaintiff contends the IRS has never produced a document supporting imposition of the penalties at issue. He does not believe that a computer transcript is adequate to verify an assessment. At his CDP Hearing, the Appeals Officer provided Plaintiff with Form 4340, "Certificate of Assessments and Payments" for the penalty assessment. The Ninth Circuit has held that a Form 4340 is sufficient evidence to support a grant of summary judgment on a claim that the IRS failed to issue notice of assessment and demand for payment. See Huff v. United States, 10 F.3d 1440, 1446-1447 (9th Cir. 1993); Hughes, 953 F.2d at 535. Official certificates, such as Form 4340, can constitute proof of the fact that the assessments actually were made. See Hughes, 953 F.2d at 535.
3. Statutory Notice and Demand for Payment
Plaintiff claims he never received the required Statutory Notice and Demand for payment with regard to the penalties at issue. Plaintiff received notice of the assessment and an opportunity to appeal that assessment. In his affidavit presented to Appeals Team Manage Aneau at the CDP Hearing, Plaintiff contends that he should have received a Form 17A, rather than the notice he received. Form 17A relates to assessment of unpaid income tax no a frivolous return penalty, which is the subject tax liability in this case. In addition, Notice and demand is not required to be sent on any particular form so long as the requisite information is included. See id. at 536. The Notice of Intent to Levy, which Plaintiff received and which he includes in his complaint as exhibit B-4, satisfies the requirements to serve as Statutory Notice and Demand. See id.
4. Regulation Requiring Plaintiff to Pay Penalty
Plaintiff contends that no Treasury Department regulation requires that he pay the penalties at issue and Defendant has not produced any such regulation. 26 U.S.C. § 6702(a), however, provides the statutory authority for assessing the penalty and does not by its terms require any implementing regulations. See Hoffman v. United States, No. C02-5023RJB, 2002 WL 1299991, at *5 (W.D. Wash. May 3, 2002).
5. Underlying Liability for Income Tax
Plaintiff contends that no statute establishes an underlying liability for the income tax to which the penalties relate, and the IRS has not identified any such statute. Plaintiffs liability for tax deficiencies (what he owed in taxes for the year 1998) is not at issue in this case, although he consistently tried to make it so at the CDP Hearing and in the instant complaint. Plaintiffs remedy with regard to the liability for tax deficiencies does not lie in this Court. This Court does not have jurisdiction to consider Plaintiff's income tax deficiencies. See 26 U.S.C. § 6213(a); Moore v. Commissioner, 114 T.C. 171, 175 (2000).
6. Denial of representation
Plaintiff contends that the appeal team manager prevented Cynthia Neun from representing him at the appeals hearing. Plaintiff contends that this violates 5 U.S.C. § 500(d). Section 500 governs who may practice before a federal agency. This section specifically allows licensed attorneys as well as certified public accountants to represent a person before the Internal Revenue Service. See 5 U.S.C. § 500(b), (c). Plaintiff contends that § 500(d)(1) allows any individual to represent another before a federal agency. Plaintiff is clearly mistaken. Section 500(d) states:
(d) This Section does not —
(1) grant or deny to an individual who is not qualified as provided by subsection (b) or (c) of this section the right to appear for or represent a person before an agency or in an agency proceeding;
Contrary to Plaintiff's position, § 500(d)(1) does not allow him to have anyone be his representative in an agency matter. Rather this section is neutral on representation not specifically provided in subsections (b) or (c). Plaintiff's claim that the appeal officer violated 5 U.S.C. § 500(d)(1) is meritless.
III. Conclusion.
Plaintiffs 1998 Form 1040 was clearly frivolous and the civil penalty was validly assessed. More importantly, for purposes of this action, the Defendant properly followed the requirements of all applicable laws and administrative procedures when assessing the civil penalty and then determining the collection action should continue unrestricted. Additionally, the arguments that the Court could glean from Plaintiff's disjunctive complaint and opposition to Defendant's motion are purely meritless. Finally, because Plaintiff's complaint lacks any merit, had the Defendant moved for Rule 11 sanctions this Court would have freely granted such motion.
Accordingly, IT IS HEREBY ORDERED that Defendant's Motion for Summary Judgment (#3) is GRANTED. IT IS FURTHER ORDERED that Plaintiff's Complaint (#1) is DISMISSED.