Dudley's Commercial and Ind. Coating v. U.S.I.R.S., 3:02-0106.
| Decision Date | 17 March 2003 |
| Docket Number | No. 3:02-0106.,3:02-0106. |
| Citation | 292 F.Supp.2d 976 |
| Parties | DUDLEY'S COMMERCIAL AND INDUSTRIAL COATING, INC., Plaintiff v. UNITED STATES INTERNAL REVENUE SERVICE, Commissioner of Revenue, Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
Mark Harrington Westlake, Westlake & Marsden, Nashville, TN, for plaintiff.
Richard Fox Clippard, Office of the United States Attorney, Nashville, TN, Jason S. Zarin, Department of Justice, Washington, DC, for defendant.
Plaintiff, Dudley's Commercial and Industrial Coating, Inc. ("Dudley's"), filed this action pursuant to the tax collection due process provisions of 26 U.S.C. § 6330 against the Defendant. United States Internal Revenue Service ("IRS"). The gravamen of Plaintiff's claim is that Defendant abused its discretion in determining that Plaintiff's proposed installment agreement should be rejected in favor of a levy against Plaintiff's assets.
Before the Court is Defendants's motion for summary judgment (Docket No. 14) and Plaintiff's motion for summary judgement (Docket Entry No. 18) for which oral argument was held March 14, 2003 (Docket No. 22).
As stated in oral argument and on brief, Defendant contends in sum, that all procedural requirements of 26 U.S.C. § 6330 were satisfied and that the IRS appeals officer did not abuse its discretion by rejecting Plaintiff's proposed installment agreement on grounds that: (1) Plaintiff had a long history of non-compliance with federal tax laws; (2) Plaintiff did not have the financial ability to pay current operating expenses and current taxes; (3) the proposed installment agreement would not fully pay the taxes before the Collection Statute Expiration Date ("CSED") with a five-year extension; and (4) Plaintiff had a documented history of not keeping its commitments to resolve tax problems.
Plaintiff responds, in sum, that the appeals officer's refusal to accept an installment payment agreement in lieu of the proposed levy action was an abuse of discretion on grounds that: (1) the appeals officer incorrectly concluded that the proposed installment agreement would not pay in full the outstanding tax liability within the applicable collection statute of limitations; (2) the proposed monthly payment represented a reasonable collection alternative and that its rejection was an abuse of discretion; (3) the appeal's officer incorrectly concluded that Plaintiff was unable to pay its current operating expenses and current taxes; (4) the appeals officer abused its discretion by rejecting the proposed installment agreement on the basis of Plaintiff's prior non-compliance; and (5) the IRS standard permitting the rejection of a proposed installment agreement for any reason, renders a district court's review under 26 U.S.C. § 6330(d) and empty appeal.
For the reasons set forth below, the Court concludes that Defendant's motion for summary judgement (Docket Entry No. 14) should be granted and Plaintiff's motion for summary judgement (Docket Entry No. 18) should be denied.
Plaintiff, Dudley's provides commercial painting services. Prior to April 2001, a substantial portion of Dudley's business included stripping and re-coating municipal water tanks and other large facilities. (Docket Entry No. 1, Complaint ¶ 5). During that time, employees of Dudley's failed to apply coatings on several large tank facilities properly and Dudley's was compelled to re-strip and re-coat the tanks at its sole cost, resulting in substantial financial losses and the inability to pay expenses that included payroll tax obligations. (Docket Entry No. 1, Complaint ¶ 6).
Plaintiff asserts that in order to recover from these financial losses, Dudley's restructured and eliminated the municipal water and large tank facilities portion of its business. (Docket Entry No. 1, Complaint ¶ 7). After restructuring, Dudley's asserts that it used contract revenue to pay delinquent payroll tax obligations at the expense of current payroll tax deposits. (Docket Entry No. 1, Complaint ¶ 8). Dudley's further asserts that IRS collection personnel failed to advise Dudley's that all current payroll deposits should be paid before devoting current revenue to the payment of accrued tax obligations. Id. Upon learning this information from counsel, Dudley's began to pay current tax obligations in April of 2001 and paid all obligations for the second, third and fourth quarters of 2001 and the first quarter of 2002. (Docket Entry No. 1, Complaint ¶ 9).
The IRS made several attempts to provide information to Dudley's and to encourage payment of Dudley's delinquent tax obligations. (Docket Entry No. 12. Administrative Record ("AR") at 91-112) (containing the IRS record of contacts, conversations and information given to Dudley's); see also infra p. 988-89. On August 7, 2001, the IRS sent Dudley's a notice of intent to levy, which proposed a levy to collect federal employment taxes (Form 941) for the fourth quarter of 2000 and the first quarter of 2001 and unemployment taxes (Form 940) for 1999 and 2000. (Docket Entry No. 1, Complaint ¶ 11 and Exhibit A; Docket Entry No. 12, AR at 21). The amount of the taxes at issue, including penalties and interest accrued as of that date, was $43,053. (Docket Entry No. 12, AR at 22).
On September 5, 2001, Dudley's filed a request for hearing under 26 U.S.C. § 6330. (Docket Entry No. 13, AR Supplement, Exhibit I at unnumbered page 4). Scott Biggs was the appeals officer assigned to conduct the hearing. Biggs had no prior involvement with the outstanding taxes that were the subject of the proposed levy and collection due process hearing. (Docket Entry No. 12, AR at 36). The IRS Operating Division provided the appeals officer with verification that all statutory, regulatory and administrative requirements were met before the notice of intent to levy was issued. (Docket Entry No. 12, AR at 38; Docket Entry No. 14, Biggs Declaration, Exhibit 1 at ¶ 7). The liability listed on the notice of intent to levy was properly assessed.2 Id.
Prior to the due process hearing, Dudley's proffered collection alternative was a suspension of all collection activity until Dudley's financial situation improved and in addition, Dudley's offered an installment agreement of $300 per month. The installment agreement was first offered to the revenue officer on June 29, 2001 (Docket Entry No. 13, AR Supplement at Exhibit H) and to the appeals office prior to the hearing on October 19, 2001 in the Form 12153 request for a collection due process hearing. (Docket Entry No. 13, AR Supplement, Exhibit I at unnumbered page 4). This form was submitted by certified mail on September 5, 2001 and stated:
We propose to pay installments of $300 each month which substantially exceeds our available cash flow ... We request that enforced collection action be suspended on the condition that we remain current on all accruing tax deposits, payment and filing obligations ... We are current on all payroll tax deposits for the second and third quarters of 2001.
After considering these collection alternatives, the taxpayer's financial status and its history of non-compliance, the appeals officer determined that the issuance of a notice of levy balanced the need for efficient tax collection action with the taxpayer's interest that the collection be no more intrusive than necessary. (Docket Entry No. 12, AR at 37-38). The appeals officer prepared the appeals case memorandum reflecting what occurred during the collection due process hearing on October 19, 2001, and his subsequent investigation of Dudley's financial status and history of non-compliance. Id. at 36-38. On December 31, 2001, the appeals office mailed Dudley's a "Notice of Determination Concerning Collection Action Under Section 6320 and/or 6330." based upon and incorporating the appeals officer's recommendation and evaluation of the appeal hearing. Id. at 34-38. This determination rejected Dudley's installment agreement and imposed a levy against Dudley's receivables. Id. Dudley's now appeals the levy to this district court pursuant to 26 U.S.C. § 6330.
"The very reason of the summary judgment procedure is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Advisory Committee Notes on Rule 56, Federal Civil Judicial Procedure and Rules (West Ed.1989). Moreover, "district courts are widely acknowledged to possess the power to enter summary judgment sua sponte, so long as the opposing party was on notice that she had to come forward with all of her evidence." Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Accord, Routman v. Automatic Data Processing, Inc., 873 F.2d 970, 971 (6th Cir.1989).
(1986), the United States Supreme Court explained the nature of a motion for summary judgment:
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be rendered forth with if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 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. By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. As to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.
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