Celauro v. U.S., I.R.S.

• Decision Date: 13 May 2005
• Docket Number: No. 05-CV-02245-ADS-WDW.,05-CV-02245-ADS-WDW.
• Citation: 371 F.Supp.2d 219
• Parties: Sal CELAURO, Jr., Paul S. Astrup, Rosanne B. Astrup, Plaintiffs, v. UNITED STATES, INTERNAL REVENUE SERVICE, Lawrence Engle, Individually and in His Official Capacity, Smith's Aerospace, Inc., Teacher's Federal Credit Union DCS Transport & Logistics Solutions, Defendants.
• Court: U.S. District Court — Eastern District of New York

371 F.Supp.2d 219

Sal CELAURO, Jr., Paul S. Astrup, Rosanne B. Astrup, Plaintiffs, v.UNITED STATES, INTERNAL REVENUE SERVICE, Lawrence Engle, Individually and in His Official Capacity, Smith's Aerospace, Inc., Teacher's Federal Credit Union DCS Transport & Logistics Solutions, Defendants.

No. 05-CV-02245-ADS-WDW.

United States District Court, E.D. New York.

May 13, 2005.

Sal Celauro Jr., Massapequa, NY, pro sePlaintiff.

Paul S. Astrup, E. Quogue, NY, pro sePlaintiff.

Rosanne B. Astrup, E. Quogue, NY, pro sePlaintiff.

U.S. Department of Justice, by Karen Elizabeth Wozniak, Trial Attorney, Washington, DC, for the Defendant United States, Internal Revenue Service, and Revenue Officer Lawrence Engel.

Vincent Campasano, Esq., Deep Park, NY, for the Defendant Teacher's Federal Credit Union.

No Appearance DefendantsSmith's Aerospace, Inc., and DCS Transport & Logistics Solutions.

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

This is an action challenging the constitutionality and operation of the income tax system.The plaintiffsSal Celauro Jr.("Celauro"), Paul S. Astrup, and Rosanne B. Astrup("Paul and Rosanne Astrup")(collectively, the "Plaintiffs") are associated with a group known as "Wethe People Foundation for Constitutional Education, Inc.," that seeks to redress the Government's alleged violations of the Constitution's tax, war powers, money, debt limiting, and privacy clauses.

In this case, the Plaintiffs seek the following: (1) the return of $12,700.00 that the defendantSmith's Aerospace, Inc. garnished from Paul Astrup's wages and turned over to the IRS without a court order; (2) the return of $3,070.24 that the defendant Teacher's Federal Credit Union garnished from Paul and Rosanne Astrup's savings account and turned over to the IRS; and (3) the return of $7,942.69 that the defendant DCS Transport & Logistics Solutions ("DCS") garnished from Celauro's wages and turned over to the IRS.

The Plaintiffs also seek injunctive relief as follows: (1) an order permanently enjoining the IRS and defendant IRS Revenue Officer Lawrence Engel("Engel")(improperly referred to in the caption as "Engle") from abusing their authority by threatening private organizations with IRS civil enforcement actions; (2) an order permanently enjoining Smith's Aerospace, Inc.("Aerospace"), Teacher's Federal Credit Union ("TFCU"), and DCS (collectively the "private Defendants") from complying with any notice of levy that is not backed by an order from "a court of competent jurisdiction;" and (3) an order preliminarily enjoining the private Defendants from garnishing any money from the accounts or wages of the Plaintiffs and turning that money over to the IRS.This request for preliminary relief is the subject of this memorandum.

I.BACKGROUND

A.Facts as to the Plaintiff Paul and Rosanne Astrup

On October 8, 2004, IRS Revenue Officer Engel sent a "Notice of Levy on Wages, Salaries and other Income" for the years 1996 and 1997 in the amount of $1,669.15 to Paul Astrup's employer Aerospace with regard to his earnings.The Notice of Levy was signed by Astrup and returned to the IRS.During the next four pay periods Aerospace took $1,669.15 of earnings from Astrup's pay.On October 14, 2004, Astrup sent a "Petition for Redress" to the IRS that informed the IRS of his intention to take the dispute over his tax liability to the United States District Court.

On November 29, 2004, Engel sent a "Notice of Levy on Wages, Salaries and other Income" for the years 1998-2001 to Aerospace in the amount of $51,730.34.On November 30, 2004, Engel sent a "Notice of Levy" for the years 1998-2001 in the amount of $51,730.34 to the TFCU where Astrup had a bank account.The TFCU took $3,070.24 from Astrup's savings account ant turned it over to the IRS.

On December 9, 2004, Engel served Astrup with an Administrative Summons requiring him to appear on January 6, 2005, and to produce his private and personal books and records for the years 1998-2001.On January 6, 2005, Astrup met with Engel for about 15 minutes.In the meeting, Astrup "asked more questions regarding liability" and Engel "refused to answer the questions."

B.Facts as to the Plaintiff Celauro

On November 13, 2003, Celauro was visited by Engel at DCS his place of business.Engel claimed that Celauro owed taxes.Celauro denied the claims and refused to answer questions.Celauro was served with a summons to appear at the IRS office in Garden City on December 1, 2003.On November 21, 2003, Celauro received a memo from his employer DCS regarding a letter that was sent to it by the IRS.The letter informed DCS that Celauro's Form W-4, Employee's Withholding Allowance Certification, did not conform with the requirements of the IRS Code.The letter directed DCS to withhold tax as if Celauro was a single taxpayer.DCS complied and started withholding taxes in accordance with the IRS letter.

On December 1, 2003, Celauro appeared at the IRS office and a hearing was conducted.At the hearing the IRS was represented by Engel and Revenue Officer Sara Ann Gagliardi.During the hearing, Celauro questioned whether he was required to turn over the information to the IRS.Engel responded that it was mandatory.At the end of the hearing, Celauro presented Engel with numerous documents such as "Statement of Facts and Beliefs about the Regarding the Individual Income Tax,""Produce the Law That Imposes a Tax on Me, My Property, of My Activities, or Leave Me Alone!," and "Questions Needing Answers" all pertaining to issues about the tax code.Celauro never received a response.

Between December 1, 2003 and February 4, 2004, Celauro sent numerous documents, requests for answers, and letters to Engel, all with no response.DCS continued withholding federal taxes from Celauro's wages.

On December 23, 2003, Engel filed a Form668(Y)(c) Notice of Federal Tax Lien in the amount of $22,285.96 against Celauro with the Clerk of Nassau County, New York.On January 26, 2004, Engel sent DCS a Notice of "Levy on Wages, Salary, and Other Income" in the amount of $23,143.31 with regard to Celauro's earnings.On February 6, 2004, Celauro received his paycheck with a garnishment amount in the sum of $1,596.84 deducted.On February 23, 2004, Celauro resigned from DCS.

On May 7, 2004, Engel handed Celauro a summons to appear at the IRS on May 25, 2004.The meeting was postponed to June 8, 2004.On June 8, 2004 a hearing was held at the IRS office.Engel was present for the IRS along with a Revenue Agent and an IRS attorney.During the hearing Celauro was served with IRS Letter 3221(DO), which informed Celauro that he owed the IRS the sum of $20,727.33 in unpaid taxes.

On November 13, 2004, Celauro received a Letter 950(DO) from the IRS Director for the North Atlantic Examination which proposed changes to his federal tax years 1998-2001.The letter offered Celauro with two options: (1) agree with the proposed changes and pay the amount; or (2) disagree with the amount and request a conference with the Appeals Office.On the same day, Celauro sent a letter to the IRS stating the he would not answer or respond to "fraudulent documents and that they were being returned."

This case was filed on May 9, 2005.

II.DISCUSSION

A.Preliminary Injunction Standard

To obtain a preliminary injunction, a plaintiff must show: (1) irreparable harm; and (2) either (a) likelihood of success on the merits, or (b) sufficiently serious questions going to the merits, and a balance of hardships tipping decidedly in the plaintiff's favor.SeeInternational Dairy Foods Ass'n, 92 F.3d at 70;Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc.,596 F.2d 70, 72(2d Cir.1979).

However, where, as in this case, a plaintiff seeks an injunction to "prevent government action taken pursuant to statutory authority, which is presumed to be in the public interest," the second "serious questions" prong is inapplicable and the plaintiff is required to demonstrate a likelihood of success on the merits.SeeMolloy v. Metropolitan Trans. Auth.,94 F.3d 808, 811(2d Cir.1996)(citingAble v. United States,44 F.3d 128, 130(2d Cir.1995)).

In addition, the courts are barred from entertaining suits that seek to restrain the assessment or collection of any tax. 26 U.S.C. § 7421.The Anti-Injunction Act withdraws jurisdiction from the state and federal courts in any suit seeking an injunction prohibiting the collection of federal taxes and requires that the legal right to a disputed sum be determined in a suit for refund.Id.;seeMullings v. Commissioner,78 A.F.T.R.2d(RIA) 6109, 96-2 U.S. Tax Cas. (CCH) P50531, 1996 WL 576999(E.D.N.Y.1996), aff'd,112 F.3d 504(2d Cir.1997).

The only exception to the general prohibition against injunctions of this type is if a taxpayer establishes that: "(1) under the most liberal view of the law and facts in favor of the government, the government cannot succeed on the merits of the tax claim, and (2) equitable jurisdiction exists because the taxpayer may suffer irreparable harm and does not have an adequate remedy at law."Id.(citingEnochs v. Williams Packing & Navigation Co.,370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292(1962)).

B.Collection of Tax by Levy and Distraint

The Internal Revenue Code provides two principal tools for the collection of delinquent taxes.The first is the lien-foreclosure suit.Under 26 U.S.C. § 7403(a), the IRS is authorized to institute a civil action in federal district court to enforce a lien "to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax."United States v. Nat'l Bank of Commerce,472 U.S. 713, 721, 105 S.Ct. 2919, 86 L.Ed.2d 565(1985).The second is the collection of the unpaid tax by administrative levy.The levy is a provisional remedy and generally "does not require any judicial intervention."United States v. Rodgers,461 U.S. 677, 682, 103 S.Ct. 2132, 2137, 76...