Johnson v. Comm'r of Internal Revenue

Decision Date30 November 2001
Docket NumberNo. 12616–00L.,12616–00L.
PartiesDavid J. and Jo Dena JOHNSON, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

Taxpayers petitioned for review of IRS' determination to proceed with collection of frivolous return penalty for three taxable years in which taxpayers maintained their wages were not taxable income. IRS moved to dismiss for lack of jurisdiction. The Tax Court, Colvin, J., held that: (1) Tax Court lacked subject matter jurisdiction to review IRS' lien and levy determination to proceed with collection of frivolous return penalty, and (2) Tax Court would not rule of sufficiency of pre-levy hearing where it lacked subject matter jurisdiction, abrogating Meyer v. Comm., 115 T.C. 417.

Motion granted.

Vasquez, J., filed consenting opinion in which, Laro, J., joined.

Beghe, J., filed dissenting opinion, in which Halpern, J., joined. David J. and Jo Dena Johnson, pro se.

Horace Crump, for respondent.

OPINION

COLVIN, J.

Ps filed returns for 1994, 1995, and 1996, in which they reported their wages as income. Ps later filed amended returns for those years in which they reported no income and contended that wages are not taxable. R assessed the frivolous return penalty imposed by sec. 6702, I.R.C., for those years. After offering Ps an opportunity to attend a prelevy hearing, R issued a notice of determination under secs. 6320 and/or 6330, I.R.C.

Ps contend that R's determination is invalid because R failed to comply with the hearing requirement provided by sec. 6330(b)(1), I.R .C. R contends that we lack jurisdiction under sec. 6330(d)(1)(A), I.R.C., to review the determination because it relates to the frivolous return penalty.

Held: We lack jurisdiction to review R's lien and levy determination to proceed with collection of the frivolous return penalty. Van Es v. Commissioner, 115 T.C. 324, 328–329, 2000 WL 1520321 (2000).

Held, further, in a case in which we lack jurisdiction to review a lien and levy determination, we will no longer decide whether the hearing requirement was met. We will no longer follow Meyer v. Commissioner, 115 T.C. 417, 2000 WL 1672623 (2000), to the extent it holds to the contrary.

On November 2, 2000, respondent sent petitioners a Notice of Determination Concerning Collection Action(s) Under Sections 6320 and/or 6330 1 (the lien or levy determination), in which respondent determined to proceed with collection from petitioners of the frivolous return penalty for 1994, 1995, and 1996. In this opinion we decide:

1. Whether we have jurisdiction under section 6330(d)(1)(A) to review respondent's determination under sections 6320 and/or 6330 to proceed with a collection action following respondent's assessment of the frivolous return penalty under section 6702 for 1994, 1995, and 1996. We hold that we do not. Van Es v. Commissioner, 115 T.C. 324, 328–329, 2000 WL 1520321 (2000). Thus, we will dismiss this case for lack of jurisdiction.

2. Whether we will decide if the hearing requirement under section 6330(b) has been met. We hold that we will not. We will no longer follow Meyer v. Commissioner, 115 T.C. 417, 2000 WL 1672623 (2000), to the extent that it holds to the contrary.

References to petitioner are to David J. Johnson.

Background

Petitioners lived in Milton, Florida, when they filed the petition in this case.

A. Petitioners' Tax Returns

Petitioners filed returns for 1994, 1995, and 1996, in which they reported their wages as income. They later filed amended returns for those years in which they did not report any income, and contended that wages and salary reported as income on their original returns are not taxable. In attachments to each of those amended returns, petitioners stated:

1. No section in the Internal Revenue Code makes petitioners liable for the income taxes at issue.

2. Income is not defined in the Internal Revenue Code.

3. The Supreme Court defines income as corporate profit.

4. Wages are not corporate profit; thus, petitioners have no income.

5. Section 61 is invalid because it defines “gross income” by using the word “income”.

6. Section 6702(b) states that the penalty imposed by subsection (a) shall be in addition to some other penalty being imposed, thus it cannot be imposed alone.

B. The Lien and Levy Proceeding

Petitioners received a “Final Notice—Notice of Intent to Levy & Your Notice of a Right to a Hearing” and filed a Request for a Collection Due Process Hearing (Form 12153), dated June 19, 2000. In their request for a hearing, petitioners asked that the Appeals officer have at the hearing: (1) The name of respondent's employee who imposed the frivolous return penalty and his or her Federal ID number; (2) the delegation of authority from the Secretary authorizing persons to impose the frivolous return penalty; (3) official job descriptions of respondent's employees who imposed the frivolous return penalty; (4) copies of the regulations that allow Internal Revenue Service (IRS) employees to impose the frivolous return penalty; and (5) copies of the Code section that makes petitioners liable for income tax.

By letter dated July 7, 2000, respondent's Appeals officer, Gayla L. Owens (Owens), told petitioners that their case had been assigned to her. She asked them whether they wanted a face-to-face conference in Mobile, Alabama, which is respondent's Appeals Office closest to their residence, or whether they preferred to handle the matter by telephone or correspondence.

By letter dated July 19, 2000, petitioner asked that the hearing not be scheduled before September 15, 2000, in part because he said he was obtaining documents under the Freedom of Information Act that he said he might need in the hearing. Petitioner also asked for copies of the Code section and implementing legislative regulations that establish his liability.

By letter dated July 26, 2000, Owens scheduled a hearing for September 15, 2000, and again asked petitioner whether he preferred a face-to-face conference or to handle it by telephone. By letter dated August 18, 2000, petitioner told Owens that he would not attend a hearing for which he was not allowed to prepare, and that Owens had not responded to points he raised in earlier letters to her. In that same letter, petitioner stated, among other things, his views that: (1) The frivolous return penalties are illegal; (2) respondent's employees are subject to punishment under section 7214(a) for violating the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. 105–206, 112 Stat. 685; (3) the IRS is required to sue him for payment of the penalty; and (4) the IRS was harassing him. Petitioner also asked for a statement acknowledging that he did not question the constitutionality of the income tax when he filed his amended returns for the years in issue. He wrote in part:

Therefore, I am requesting that you comply with IRS Code Section 6065 and send me a statement which “is verified by a written declaration that is made under the penalties of perjury”. Your statement should include the following:

Acknowledgment that you have the following documents in your possession so that I can review them at the hearing:

a. Verification from the Secretary of the Treasury that the requirements of any applicable law or administrative procedure have been met. 6330(c)(1), 6703(a)

b. The Treasury Regulation which allows IRS employees to impose the “frivolous” penalty, and the Treasury Regulation which requires me to pay it. 6703(a)

c. The specific code section that makes me liable for the tax. 6330(c)(2)(B) (I am questioning the underlying liability.)

* * *

By letter dated September 6, 2000, Owens told petitioners that their claim that wages are not taxable income has been rejected by courts and is frivolous, and, thus, a return based on that theory is subject to the frivolous return penalty. Owens also told petitioners she would consider other items such as arranging for the payment of the penalty and asked petitioners to provide those items to her by September 21, 2000.

By letter dated September 22, 2000, petitioner said, among other things, that section 6330(c)(3) requires verification from the Secretary that requirements of applicable law and procedure have been met, and that he would not attend a hearing unless (1) Owens told petitioner in writing before the hearing, under penalty of perjury, that Owens had all of the documents petitioner had requested, and (2) Owens arranged for the attendance at the hearing by the person who declared petitioners' Forms 1040X, Amended U.S. Individual Income Tax Return, to be frivolous and by the person who made the decision to levy petitioners' property without a court order.

C. Respondent's Notice of Determination

On November 2, 2000, respondent sent petitioners a notice of determination concerning collection actions in which respondent determined to proceed with collection from petitioners of the frivolous return penalty for 1994, 1995, and 1996, and told petitioners that they have 30 days to file a complaint in the appropriate U.S. District Court for a redetermination. The notice of determination appeared valid on its face. Petitioners timely filed in this Court an appeal of respondent's determination. On January 2, 2001, petitioners filed with the Court an amended petition for lien or levy action under section 6320(c) or section 6330(d).

Discussion
A. Whether the Tax Court Has Jurisdiction To Review Respondent's Determination Under Sections 6320 and 6330

We have previously held that we lack jurisdiction under section 6330(d)(1)(A) to review the Commissioner's determination to collect by levy the frivolous return penalty under section 6702. Van Es v. Commissioner, 115 T.C. at 328–329. That case controls this issue, and thus we will dismiss this case for lack of jurisdiction.

B. Whether We Will Decide If Respondent Failed To Hold a Hearing as Required by Section 6330(b) in a Case in Which We Lack Jurisdiction To Review the...

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