Hallam v. Murphy, Civ. A. No. C83-1182A.

• Decision Date: 02 December 1983
• Docket Number: Civ. A. No. C83-1182A.
• Citation: 586 F. Supp. 1
• Parties: Philip G. HALLAM, Jr. and Judy P. Hallam v. Michael J. MURPHY, as the District Director of Internal Revenue.
• Court: U.S. District Court — Northern District of Georgia

586 F. Supp. 1

Philip G. HALLAM, Jr. and Judy P. Hallam v. Michael J. MURPHY, as the District Director of Internal Revenue.

Civ. A. No. C83-1182A.

United States District Court, N.D. Georgia, Atlanta Division.

December 2, 1983.

William A. McConnell, Jr., Norcross, Ga., for plaintiffs.

Sharon Stokes, Asst. U.S. Atty., Atlanta, Ga., Victoria Sherlock, Atty. Tax Div., Dept. of Justice, Washington, D.C., for defendant.

ORDER

TIDWELL, District Judge.

On June 6, 1983, plaintiffs filed the above-styled action seeking an injunction to permanently enjoin the defendant from collecting any alleged tax deficiencies of the plaintiff for the tax year 1977. The plaintiffs contended that the defendant had not given them the required notice, and therefore, the defendant could not legally seek to collect any alleged tax deficiencies. On August 10, 1983, the defendant abated the tax assessment complained of by the plaintiff. Presently before the court are the defendant's motion to dismiss this action, plaintiffs' motion to join an indispensable party and plaintiffs' motion for an award of costs and fees.

The plaintiffs seek to add the United States of America as a party defendant in this action, because the previously named defendant was acting in official capacity at all times, thereby requiring that the previously named defendant's employer be joined as a party defendant so that an award of costs and fees could be sought. The defendant and the prospective defendant have stated that they do not oppose plaintiffs' motion. Accordingly, the court hereby grants and sustains plaintiffs' motion to join an indispensable party.

In his motion to dismiss, the defendant contends that the plaintiffs' complaint is now moot because the tax assessment against the plaintiffs has been abated. However, in their complaint, the plaintiffs also sought costs and attorney's fees. Therefore, defendant's characterization that this action is now moot is not correct. Accordingly, defendant's motion to dismiss is hereby overruled and denied.

In their motion for an award of costs and fees, the plaintiffs contend that they are entitled to certain costs and fees pursuant to 26 U.S.C. § 7430. The defendants (since the United States did not oppose plaintiffs' motion to join, the attorney representing the original defendant, the District Director of the Internal Revenue Service, has briefed plaintiffs' motion as if the United States was already in fact a defendant) contend that the plaintiffs are not entitled to an award of costs and fees, because the plaintiffs did not exhaust all available administrative remedies, and because the position taken by the government in this matter was reasonable.

26 U.S.C. § 7430 provides, in pertinent part, the following:

(a) In general. — In the case of any civil proceeding which is —

(1) brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, and

(2) brought in a court of the United States (including the Tax Court), the prevailing party may be awarded a judgment for reasonable litigation costs incurred in such proceeding.

(b) Limitations. —

(1) Maximum dollar amount. — The amount of reasonable litigation costs which may be awarded under subsection (a) with respect to any prevailing party in any civil proceeding shall not exceed $25,000.

(2) Requirement that administrative remedies be exhausted. — A judgment for reasonable litigation costs shall not be awarded under subsection (a) unless the court determines that the prevailing party has exhausted the administrative remedies available to such party within the Internal Revenue Service.

. . . . .

(c)(2) Prevailing party. —

(A) In general. — The term "prevailing party" means any party to any proceeding described in subsection (a) (other than the United States or any creditor of the taxpayer involved) which —

(i) establishes that the position of the United States in the civil proceeding was unreasonable, and

(ii)(I) has substantially prevailed with respect to the amount in controversy, or

(II) has substantially prevailed with respect to the most significant issue or set of issues presented.

Although the defendants concede that the plaintiffs were prevailing parties, the defendants contend that the plaintiffs did not exhaust all available administrative remedies. In a letter dated February 10, 1983 (from the Internal Revenue Service to the plaintiffs' accountant), the defendants told the plaintiffs that if you "want your case to be given further consideration, you must pay the tax due and then file the enclosed Form 1040X to claim a refund." The plaintiffs argue that they did in fact exhaust all available administrative remedies, and that the paying of the alleged tax deficiencies and claim for a refund is not within the definition of "administrative remedies" as used in 26 U.S.C. § 7430.

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