Beltran v. Cohen

• Decision Date: 11 March 1969
• Docket Number: No. 49250.,49250.
• Citation: 303 F. Supp. 889
• Court: U.S. District Court — Northern District of California
• Parties: Elisa V. BELTRAN et al., Plaintiffs, v. Sheldon COHEN, Commissioner of Internal Revenue Service et al., Defendants.

303 F. Supp. 889

Elisa V. BELTRAN et al., Plaintiffs, v. Sheldon COHEN, Commissioner of Internal Revenue Service et al., Defendants.

No. 49250.

United States District Court N. D. California.

March 11, 1969.

COPYRIGHT MATERIAL OMITTED

Robert L. Gnaizda, Martin R. Glick and Allan I. Blau, Salinas, Cal., for plaintiffs.

Richard L. Carico, Asst. U. S. Atty., San Francisco, Cal., for defendants.

MEMORANDUM OF DECISION

SWEIGERT, District Judge.

This is a civil action for declaratory and injunctive relief brought by plaintiff, an agricultural field worker, on behalf of herself and the class she purports to represent, against the Commissioner of the Internal Revenue Service, the Secretary of the United States Treasury Department, and certain Internal Revenue Service officers, to restrain defendants from levying on her wages to collect federal income taxes due from her, upon the ground that the levies, and the statute authorizing them, deprive her of property without due process of law and compel involuntary servitude in violation of the Fifth and Thirteenth Amendments.

The gist of the complaint is that the levies were made under a statute which makes no provision for exempting from levy any portion of the taxpayer's wages or salary.

The case is now before the court on plaintiff's application for convening of a three judge court under Title 28 U.S. C. § 2282, and defendants' motion to dismiss on the ground of failure to state a claim upon which relief can be granted.

The record consists of the complaint, as amended, defendants' affidavit of Revenue Officer Green (with exhibits), answers to certain interrogatories propounded by plaintiff concerning the tax collection policies and practices of the Internal Revenue Service, and a declaration of Judy Iman, payroll clerk of plaintiff's employer.

Since matters outside the pleading are presented and not excluded by the court, and since it appears that all parties have had reasonable opportunity to present pertinent material, the motion to dismiss will be treated as one for summary judgment and disposed of as provided in Rule 56, Federal Rules of Civil Procedure. Rule 12(b), F.R.Civ.P.

The record shows, in substance and effect, that on June 2, 1967, income taxes and interest in the total amount of $402.80 were assessed against plaintiff and her husband on the basis of a joint income tax return which they filed without payment for the calendar year 1966.

On January 22, 1968, the delinquent account was referred for field collection and, after a series of efforts to effect collection (as related in the affidavit of Revenue Officer Green on file herein), Notices of Levy upon plaintiff's wages were mailed to her employer — one on March 12, 1968, and a second on April 5, 1968. These two levies yielded $40.10 and $84.67, respectively.

When the Revenue Officer discovered that plaintiff had on November 30, 1966, financed the purchase of a 1966 Buick for $2,957.40, payable at $93.35 per month, he mailed a third Notice of Levy to plaintiff's employer on May 8, 1968.

On May 10, 1968, the Revenue Officer received a letter from plaintiff indicating that plaintiff had become separated from her husband and that the levy of May 8th would cause undue hardship to plaintiff and her family. The Revenue Officer determined that the levy should be released, and with the concurrence of his Group Supervisor and Area Collection Manager, he released the levy.

On May 14, 1968, subsequent to the release, this suit was commenced and a temporary restraining order was issued.

The power of Congress to lay and collect taxes derives from Article I, Section 8 of the Constitution. The power to lay and collect taxes on income derives from the Sixteenth Amendment.

Congress has provided that a lien arises in favor of the United States upon all property belonging to any person liable to pay any tax who neglects or refuses to pay it after demand. Title 26 U.S.C. § 6321. The lien arises at the time the tax is assessed and continues until the tax is satisfied or becomes unenforceable by reason of lapse of time. Title 26 U.S.C. § 6322.

Further, Congress has authorized the Secretary of the Treasury to take administrative action to collect unpaid taxes by means of a levy on any property subject to the tax lien, and to make levies as often as may be necessary until the tax and expenses of levy are fully paid. Title 26 U.S.C. § 6331.

Congress has exempted certain property from the levy power granted to the Secretary. Title 26 U.S.C. § 6334(a) excepts such items as wearing apparel, school books, fuel, provisions, furniture and personal effects of the taxpayer's household, books or tools necessary for the taxpayer's trade or business, unemployment benefits, certain annuity and pension payments and workmen's compensation payments.

Salaries and wages, however, are not included in these exemptions. Section 6334(c) specifically provides that "no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a)." Salaries and wages are, therefore, subject to levy under this section. See, Sims v. United States, 359 U.S. 108, 110-111, 79 S.Ct. 641, 3 L.Ed.2d 667 (1959).

Although the law clearly authorizes levy upon salary or wages, the Commissioner of Internal Revenue has adopted certain procedures designed to avoid undue hardship to a delinquent taxpayer. See, Commissioner's Answers to Interrogatories.

For example, the Internal Revenue Manual requires not one but three notices before levy action is taken. Furthermore, if the taxpayer demonstrates hardship, a deferred payment plan may be arranged or collection suspended, as was done in the present case.

It is true that the federal law does not exempt any part of the wage or salary of the taxpayer from the levy. It may be that Congress should and will eventually exempt some part of the salary or wage. However, Congress has not manifested up to this time any such intention. On the contrary, Section 303 of the recently enacted Consumer Credit Protection Act, Public Law 90-321, 82 Stat. 146, Title 15 U.S.C. § 1673, restricting the amount of a worker's earnings which may be subject to garnishment, contains the express exception that such restriction does not apply to "any debt due for any State or Federal tax."

Plaintiff contends that the statutory authorization for levy upon wages or salary, without exemption of any portion thereof, amounts to a denial of due process and in effect subjects the taxpayer to involuntary servitude.

It is well settled that provisions for the summary, administrative collection of taxes are not violative of due process. See, Murray's Lessee v. Hoboken, Land & Improvement Co., 59 U.S. 272, 15 L.Ed. 372 (1855); Mason v. Rollins, 16 Fed.Cas. p. 1061, No. 9,252 (N.D.Ill.1869); Springer v. United States, 102 U.S. 586, 26 L.Ed. 253 (1880); Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289 (1931); and Communist Party U.S.A. v. Moysey, 141 F.Supp. 332, 339 (S.D.N.Y.1956). See also, De Mille v. A.F.R.A., 31 Cal.2d 139, 187 P.2d 769, 175 A.L.R. 382 (1947), cert. denied 333 U.S. 876, 68 S.Ct. 906, 92 L.Ed. 1152 (1948).

We cannot say that the Congressional provision for summary levy on wages and salaries is a denial of due process merely because it does not provide for exemption of some part of the wage or salary of the tax debtor.

Although at first reading such a statute might seem harsh, it must be borne in mind that a duly assessed tax, especially a tax self-assessed by the taxpayer on his income tax return, implies that the taxpayer had property, money income in this case, out of which the tax could have been paid if the taxable portion of that income had been reserved from spending for other purposes. Thus, any harshness in a salary or wage levy without exemption is more apparent than real. The hardship stems more from the conduct of the taxpayer than from the nature of the statute.

Congress has the power to consider the national interest in effective tax collection from all tax debtors against the...