Coplin v. U.S.
| Decision Date | 17 December 1991 |
| Docket Number | No. 91-1338,91-1338 |
| Parties | NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit. Duane COPLIN and Patricia Coplin, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Before BOGGS and ALAN E. NORRIS, Circuit Judges, and BERTELSMAN, Chief District Judge. *
Taxpayers Duane Coplin and Patricia Coplin sued to have certain government tax liens on their property declared invalid pursuant to 28 U.S.C. § 2410. They also sought money damages against the United States and Patricia Wilker for alleged wrongful disclosures of income tax information, pursuant to 26 U.S.C. § 7213 and § 7431. After a bench trial, the district court ruled in favor of the United States. We affirm.
Duane Coplin ("taxpayer") 1 had been in the business of preparing income tax returns as an accountant for over twenty years and is the sole source of support for himself and his wife, Patricia Coplin. Taxpayer currently makes a living by preparing federal income tax returns on behalf of Coplin & Associates. Coplin & Associates, a corporation operated by taxpayer's son, is the successor to Coplin & Baughman, Inc. and Coplin Business Services, Inc. ("CBS"), a defunct corporation that was owned and controlled by taxpayers. Taxpayer testified that he worked as an accountant for Coplin & Associates as a self-employed consultant, not as an employee. Taxpayers have not filed an income tax return since 1981.
At the time taxpayers filed this lawsuit, the Internal Revenue Service ("IRS") had made nine different assessment against one or both of the taxpayers. When the IRS made assessments against the taxpayers, it would mail to the taxpayers at their last known address notices of those assessments and demands of payment. On January 13, 1983; December 28, 1987; April 17, 1989; and September 29, 1989, the IRS filed nine notices of liens against all of the taxpayers' property. These notices listed the taxpayers' name, address, social security number and amount then due for each assessment. Three of the liens were against both taxpayers for unpaid assessments on their joint income tax returns in 1978, 1979, and 1981. Two liens were against taxpayer with respect to assessments made in March 1984 and September 1987 pursuant to 26 U.S.C. § 6672(a), as a "person responsible" for taxes withheld from the wages of the employees of CBS. The IRS also claimed four liens against the taxpayer for return preparer penalties for two assessments made against Coplin in 1983 and two in 1985, pursuant to 26 U.S.C. § 6694.
The IRS had attempted to collect taxes owed by taxpayers for several years, beginning in 1980. These efforts all failed. In September 1987, Internal Revenue Officer Patricia Wilker was assigned to collect the taxpayers' unpaid taxes. Familiar with the IRS's past efforts with the taxpayers, Wilker tried many different methods including directly asking taxpayers to pay up. The taxpayers refused to provide any information from which Wilker could locate assets or sources of income from which she could collect unpaid taxes. After being unable to locate any property registered in taxpayers' name that had not already been foreclosed upon by a bank and after the taxpayers' continued refusal to cooperate, Wilker filed tax levies pursuant to 26 U.S.C. § 6331.
Upon receiving a final notice of intention to levy, the taxpayers responded by letter that they were not liable to the United States for any taxes. In a subsequent interview between Wilker and Coplin to determine if Coplin was liable as a "responsible person" for taxes withheld from employees of CBS, Coplin first denied he was employed, but then stated that he was self-employed, though he refused to identify his clients for whom he prepared tax returns.
Wilker then asked the Examination Division of the IRS to provide her with a list of persons whose income tax returns were prepared by Coplin, or by CBS before it liquidated in 1987. Wilker served Notices of Levy upon the 374 persons on the list on January 27, 1989 to collect the individual liabilities of the taxpayer and again on February 10, 1989, to collect the joint liabilities of both taxpayers.
On March 22, 1989, taxpayers filed a quiet title action, alleging that the United States had filed a lien against unspecified property and that the lien was invalid because no lawful and proper assessment had been made as required by 26 U.S.C. § 6203. Taxpayers also alleged unlawful disclosure of their income tax returns, in violation of 26 U.S.C. § 6103, and sought to invalidate the lien and collect money damages pursuant to 26 U.S.C. § 7431.
The district court entered judgment for the United States, holding that the IRS levy notices and demands for payments were properly mailed to taxpayers' last known address and that, therefore, the government liens were valid. The court also held that the disclosures of the taxpayers' income tax returns were made in an attempt to collect taxes owed by the taxpayers and were therefore authorized pursuant to 26 U.S.C. § 6103(k)(6).
On appeal, the government argues that the district court lacked jurisdiction to hear the taxpayers' quiet title action. The taxpayers, in Count One of their complaint, asserted a "quiet title" action under § 28 U.S.C. § 2410, challenging the validity of federal tax liens filed against them. Under § 2410, which provides a limited waiver of sovereign immunity, the United States may be named a party in a civil suit "to quiet title to ... real or personal property on which the United States has or claims a mortgage or other lien." 28 U.S.C. § 2410.
The United States argues that the complaint fails to identify any specific piece of property to which the tax liens were attached and as to which a quiet title action could lie, in violation of the requirements of 28 U.S.C. § 2410. The United States maintains that under § 2410, a quiet title action can not stand without a taxpayer claiming an interest in a special parcel of property and that § 2410 was not designed as a way for taxpayers to make procedural challenges to general tax liens.
However, as the taxpayers point out, the lien filed by the IRS provided that "there is a lien in favor of the United States on all property and rights to property belonging to this taxpayer ..." The United States is claiming a lien on everything the taxpayers own and the lien is thus defined in the sense that it applies to the taxpayers' personal and real property. In response, the taxpayers seek to quiet title to everything on which the United States claims a lien, which is everything the taxpayers own. It is somewhat disingenuous and illogical for the government to assert that it can to place a lien on everything the taxpayers own, even when the government is unclear what "everything" entails, while at the same time demanding that the taxpayers can bring a quiet title action only if their defense is more specific than the lien itself. The taxpayers met the "real or personal property" requirements of 28 U.S.C. § 2410 and the district court properly had jurisdiction to hear their quiet title action.
Section 6201 of the Internal Revenue Code authorizes the Secretary of the Treasury or his delegate to assess all taxes, including interest, additions to taxes and assessable penalties, imposed by the Internal Revenue Code. 26 U.S.C. §§ 6201, 6301. The Secretary is required to provide notice and make demand for the amount assessed. 26 U.S.C. § 6303. If payment is not made after notice and demand, a lien arises in favor of the United States "upon all property and rights to property, whether real or personal" belonging to the delinquent taxpayer. 26 U.S.C. § 6321. As stated above, § 2410 provides a limited waiver of sovereign immunity where the government has placed a lien on real or personal property. 28 U.S.C. § 2410(a). In that case, a taxpayer can bring an action to challenge the procedural regularity of the imposition of the tax lien. Pollack v. United States, 819 F.2d 144, 145 (6th Cir.1987).
"Assessment" is a prescribed procedure for officially recording the amount of a taxpayer's administratively determined tax liability. Rambo v. United States, 492 F.2d 1060, 1061 n. 1 (6th Cir.1974), citing Cohen v. Gross, 316 F.2d 521, 522 (3rd Cir.1963). The term "assessment" has a technical meaning spelled out in the Internal Revenue Code and that meaning is binding on the federal courts and the government as well. C & R Investments, Inc. v. United States, 267 F.Supp. 932, 937 (D.Kan.1967) (citing United States v. Miller, 318 F.2d 637, 638-39 (7th Cir.1963)), rev'd on other grounds, 404 F.2d 314 (10th Cir.1968). The meaning of the term contemplates the recordation by the Internal Revenue Service of the liability of a taxpayer or the determination of the amount due as tax. Ibid.
The taxpayers claim that the assessments of their tax liability were improperly made. In a quiet title action, the burden of proof rests with the plaintiff. Alexander Hamilton Life Ins. Co. v. Government of Virgin Islands, 757 F.2d 534, 541 (3rd Cir.1985). The government enjoys a presumption of administrative regularity with respect to the acts of its officials. Parkinson v. Commissioner, 647 F.2d 875, 876 (9th Cir.1981). In order for taxpayers to overcome this presumption, they must come forward with evidence tending to show that the IRS did not follow a mandated procedure. Then the burden then shifts to the government to prove that its assessment and collection procedures were properly followed. The taxpayers failed to meet their initial burden of proof.
The Internal Revenue Code provides the manner of making an assessment as follows:
Method of Assessment--the assessment shall be made by...
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...the burden then shifts to the government to prove that its assessment and collection procedures were properly followed.Coplin v. U.S., 952 F.2d 403 (6th Cir. 1991) (citation omitted). Plaintiffs have not introduced evidence that tends to show that the IRS did not follow the procedures requi......