Foutz v. US, Civ. No. 93-C-1011W.

• Decision Date: 13 June 1994
• Docket Number: Civ. No. 93-C-1011W.
• Citation: 860 F. Supp. 788
• Parties: Liane B. FOUTZ, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of Utah

860 F. Supp. 788

Liane B. FOUTZ, Plaintiff, v. UNITED STATES of America, Defendant.

Civ. No. 93-C-1011W.

United States District Court, for D. Utah, Central Division.

June 13, 1994.

Barrie G. McKay, McKay, Burton & Thurman, Salt Lake City, UT, for plaintiff.

Kirk C. Lusty, Sp. Asst. U.S. Atty., Dept. of Justice, Tax Div., Washington, DC, for defendant.

ORDER GRANTING AND DENYING MOTIONS FOR SUMMARY JUDGMENT

WINDER, Chief Judge.

This matter is before the court on a motion for summary judgment filed by Plaintiff Liane B. Foutz ("Foutz") and a cross-motion for summary judgment filed by Defendant United States of America ("United States"). A hearing on both motions was held on June 1, 1994. At the hearing, Barrie G. McKay represented Foutz and Kirk C. Lusty represented the United States. Before the hearing, the court considered carefully the memoranda and other materials submitted by the parties relating to their cross-motions. The court had also read certain of the authorities cited by the parties. Following oral argument, and after taking the motions under advisement, the court has further considered the law and facts related to each motion. Also, the attorney for the United States has brought to the attention of the court an unpublished memorandum decision and order entered by the Honorable Dee Benson of this court on March 21, 1994 in United States v. Simons, et al., Civil No. 92-C-1071B. Having now fully considered the issues in this case, and good cause appearing, the court enters the following memorandum decision and order.

I. BACKGROUND

On October 6, 1983, the Internal Revenue Service ("IRS") assessed Plaintiff Liane Foutz and her now-deceased husband, Hal B. Foutz, with certain income taxes for the prior tax years 1966 through 1968.¹ The assessment was made pursuant to a determination of the United States Tax Court entered on May 23, 1983 that the Foutz's had understated their gross income in excess of twenty-five percent in each of the aforementioned tax years in question.² Additional statutory interest continued to accrue on these amounts until the Foutz's paid the amount due to the IRS in full on February 7, 1992.³

Because of the October 6, 1983 assessment by the IRS against the Foutzes, the statute of limitation began to run on that day. Specifically, the relevant congressional statute of limitation in place at the time of the assessment provided that the IRS had to collect the assessed taxes by levy or court action within six years of the date of the assessment against the Foutzes or forever be barred. See 26 U.S.C. § 6502(a)(1) (1987) (preamendment version). Alternatively, the statute also provided that the IRS and the putative taxpayers could consensually waive the six-year limitation period mentioned above so long as the agreement was in writing and entered into prior to the expiration of the express six-year term established by section 6502(a)(1) of the statute. Id. § 6502(a)(2).⁴

Accordingly, because the IRS' assessment of the Foutzes for the tax years 1966 through 1968 occurred on October 6, 1983, the statutory six-year limitation period imposed by section 6502(a)(1) would have expired by its own terms on October 6, 1989. This did not occur however. Instead, on September 25, 1989, the Foutzes executed and signed an IRS Form 900, extending the statutory period for collecting the 1966, 1967, and 1968 taxes from October 6, 1989 until December 31, 1990 (the "Consensual Deadline"). Thus, pursuant to section 6502(a)(2), the IRS then had up to and including December 31, 1990 in which to collect the taxes assessed against the Foutzes.

Subsequently, on November 5, 1990,⁵ Congress enacted the Omnibus Budget Reconciliation Act of 1990 ("1990 Act"). See Pub.L. No. 101-508, 104 Stat. 1388, 1388-458 (1990). Section 11317 of the 1990 Act amended the six-year statute of limitation for collection of assessed taxes under section 6502(a) of the Internal Revenue Code and replaced it with a ten-year limitation period instead. Section 11317(a) provides:

(a) IN GENERAL. — Subsection (a) of Section 6502 (relating to collection after assessment) is amended —

(1) by striking "6 years" in paragraph (1) and inserting "10 years," and

(2) by striking "6-year period" each place it appears in paragraph (2) and inserting "10-year period."

Id. § 11317(a). Moreover, Congress also provided guidance as to what assessments the new amendment applied to:

(c) EFFECTIVE DATE — The amendments made by this section shall apply to — (1) taxes assessed after the date of the enactment of this Act, and

(2) taxes assessed on or before such date if the period specified in section 6502 of the Internal Revenue Code of 1986 (determined without regard to the amendments made by subsection (a)) for collection of such taxes has not expired as of such date.

Id. § 11317(c). Thus, given the 1990 Act's amendment, the IRS now has up to ten years in which to collect taxes it has assessed against a putative taxpayer-provided the taxpayer falls within the effective date of the new statute. See 26 U.S.C.A. § 6502(a) (Supp.1994); In re Dakota Indus., Inc., 131 B.R. 437, 440-42 (Bankr.D.S.D.1991).⁶

The December 31, 1990 Consensual Deadline then came to pass without the IRS taking action to collect on Foutz's tax liability. Soon thereafter, however, the IRS issued a levy against Foutz for her 1966, 1967, and 1968 tax liability, and eventually collected a total of $58,303.93 in back taxes, penalties, and accrued interest. That levy occurred on November 7, 1991, or some eleven months after the Consensual Deadline had expired. Two weeks later, on November 21, 1991, Foutz filed an IRS Form 843, requesting the IRS to release the levy on the ground that the IRS had not sought to collect her tax liability prior to the December 31, 1990 deadline set by the parties. The IRS refused, however, and continued the collection process. Finally, on July 2, 1992 and after paying the taxes to the IRS, Foutz filed another IRS Form 843 — this time requesting a refund of the taxes on the same ground. The IRS again refused, and Foutz filed suit in this court seeking a refund of the $58,303.93 she previously had paid to the IRS, plus reimbursement for reasonable attorneys' fees under 26 U.S.C. § 7430.

The case at bar concerns the validity of the IRS's levy and collection of the $58,303.93 from Foutz after the December 31, 1990 Consensual Deadline had expired. Specifically, Foutz argues that the 1990 Act's amendment to the statute of limitation provision of 26 U.S.C. § 6502(a) (providing for a new ten-year statute of limitation in which to levy or sue) applies only if the amendment was enacted within the six-year window established by former section 6502(a)(1). Thus, Foutz argues that because this did not occur here and because the IRS began its collection process in this case after the expiration of the Consensual Deadline, the IRS should refund to Foutz the $58,303.93 that she previously paid the IRS.⁷

The United States, on the other hand, argues that the ten-year statute of limitation established by the 1990 Act's amendment to section 6502(a) clearly applies in this case because it was enacted before expiration of the party's Consensual Deadline of December 31, 1990.⁸ Thus, the United States argues that because the 1990 Act's amendment to section 6502(a) applies in this case, the IRS had ten years from the date of assessment in which to begin collection proceedings against Foutz. Because the IRS indeed began collection against Foutz within that ten-year window, the United States argues, Foutz's claim for a refund should be dismissed.⁹

II. STANDARD OF REVIEW

Summary judgment is proper "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 judgment as a matter of law." Fed.R.Civ.P. 56(c). In applying this standard, the court must construe all facts and reasonable inferences therefrom in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Wright v. Southwestern Bell Tel. Co., 925 F.2d 1288, 1292 (10th Cir.1991).

Once the moving party has carried its burden, Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by ... affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Gonzales v. Millers Casualty Ins. Co., 923 F.2d 1417, 1419 (10th Cir.1991).¹⁰ The non-moving party must "make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp., 477 U.S. at 322, 106 S.Ct. at 2552.

In considering whether there exist genuine issues of material fact, the court does not weigh the evidence but instead inquires whether a reasonable jury, faced with the evidence presented, could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986); Clifton v. Craig, 924 F.2d 182, 183 (10th Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 97, 116 L.Ed.2d 68 (1991).¹¹ Finally, all material facts asserted by the moving party shall be deemed admitted unless specifically controverted by the opposing party. D.Utah R. 202(b)(4).

III. DISCUSSION

In addressing the merits of this case, the court is guided by several rules of statutory construction applicable to tax statutes like the one at issue. First, because the Internal Revenue Code details a technical body of law, where "the statute's language is plain, `the sole function of the court is to enforce it by its terms.'" United States v. Ron Pair Enters., Inc. ...