Keado v. U.S.

• Decision Date: 01 September 1988
• Docket Number: Nos. 86-1312,87-1725 and 87-4752,s. 86-1312
• Citation: 853 F.2d 1209
• Parties: -5666, 88-2 USTC P 9489 Conrad KEADO, et al., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee. Conrad L. KEADO and Linda W. Keado, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1209

853 F.2d 1209

62 A.F.T.R.2d 88-5666, 88-2 USTC P 9489

Conrad KEADO, et al., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

Conrad L. KEADO and Linda W. Keado, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.

Nos. 86-1312, 87-1725 and 87-4752.

United States Court of Appeals Fifth Circuit.

Sept. 1, 1988.

Ronald M. Mankoff, G. Tomas Rhodus, Ronald A. Stein, Brice & Mankoff, Dallas, Tex., for Conrad L. Keado and Linda W. Keado.

Martha B. Brissette, Tax Div., U.S. Dept. of Justice, Washington, D.C., Marvin Collins, U.S. Atty., Dallas, Tex., David English Carmack, Tax Div., U.S. Dept. of Justice, Washington, D.C., for U.S.

Martha B. Brissette, David English Carmack, Tax Div., U.S. Dept. of Justice, Washington, D.C., for C.I.R.

Appeals from the United States District Court for the Northern District of Texas.

Appeal from the Decision of the United States Tax Court.

Before GOLDBERG, GARWOOD and JOLLY, Circuit Judges.

GOLDBERG, Circuit Judge:

The plaintiffs appeal from a federal district court decision denying their request for an injunction barring collection of deficiencies asserted by the Internal Revenue Service. They also appeal from a Tax Court decision dismissing their petition on the ground that it was not timely filed. Finding both decisions correct, we affirm.

I. BACKGROUND

The Internal Revenue Service ("IRS") audited the 1980 and 1981 tax returns filed by Conrad L. Keado and his wife, Linda W. Keado (the "Taxpayers"), and determined deficiencies ¹ in their reported tax liabilities.

The Internal Revenue Code (the "Code") ² generally requires the IRS to mail a notice of deficiency to a taxpayer's last known address at least ninety days before assessing ³ a tax deficiency. The IRS contends that it sent the Taxpayers a notice of their 1980 and 1981 deficiencies by certified mail on August 10, 1984. For summary judgment purposes, the Government concedes that the Post Office never delivered the August 10, 1984 notice of deficiency to the Taxpayers.

On December 31, 1984, the IRS assessed the 1980 and 1981 deficiencies of $50,069.38 and $22,919.97 respectively. ⁴ Several days later, the Taxpayers received notice of these assessments. Over the next nine months, the Taxpayers repeatedly wrote to various offices of the IRS complaining that the IRS had not mailed a notice of deficiency before making these assessments. ⁵

The IRS planned to file notice of the tax liens resulting from the 1980 and 1981 assessments on October 4, 1985. ⁶ On that day, however, the Taxpayers filed suit in federal district court seeking an injunction barring collection of the 1980 and 1981 deficiencies. The Taxpayers contended that the IRS could not properly file notice of the tax liens or otherwise try to collect the taxes because it had not mailed a notice of deficiency before making the December 31, 1984 assessment.

On October 5, 1985, the day after the Taxpayers filed their suit, the parties attended a conference with a district court judge. At this conference the Government agreed to forbear further collection activity until an investigation of the facts was completed.

Both parties moved for summary judgment. On March 12, 1986, the district court issued its memorandum opinion and order. The district court noted that the Taxpayers' request for an injunction barring collection of the 1980 deficiency was moot because the government had subsequently issued a second deficiency notice for 1980. ⁷ The district court then concluded that the summary judgment evidence was sufficient to establish as a matter of law that the IRS mailed the August 10, 1984 deficiency notice. As a result the district court refused to issue the injunction sought by the Taxpayers and dismissed the case.

II. 1981 DEFICIENCY

With regard to the 1981 deficiency, the sole issue on appeal is whether the district court erred in concluding that the IRS mailed the August 10, 1984 deficiency notice. The district court properly granted summary judgment if the Government showed that there was "no genuine issue as to any material fact" and that it was "entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In reviewing the district court's decision we apply the same general standard. Gatx Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 714 (5th Cir.1985); McCrae v. Hankins, 720 F.2d 863, 865 (5th Cir.1983). We view the record and inferences from the facts in the light most favorable to the Taxpayers, the nonmoving party. Gatx Aircraft, 768 F.2d at 714.

A. Statutory Requirements for Assessment

The Code sets forth specific procedures that the IRS must follow to assess and collect an income tax deficiency.

First, before beginning collection activity, the IRS must notify a taxpayer of the deficiency by mailing him a notice of deficiency by certified or registered mail. The Code provides that the notice "shall be sufficient" if it is sent to the taxpayer at his "last known address." ⁸ The Code does not require that the taxpayer receive the notice of deficiency. ⁹

Second, after mailing the notice of deficiency, the IRS must wait at least ninety days. During this ninety day waiting period the taxpayer may file a petition with the United States Tax Court. I.R.C. Sec. 6213(a). If the taxpayer fails to file a Tax Court petition during this ninety day period, the Tax Court lacks jurisdiction to consider the deficiency. ¹⁰

Third, if the taxpayer has not filed a Tax Court Petition, after waiting at least ninety days, the IRS may assess the deficiency.

Section 6213(a) specifically prohibits any assessment or collection attempts until ninety days after the mailing of the statutory notice of deficiency and during the time that a Tax Court case is pending. To enforce its prohibition, Sec. 6213(a) provides that any assessment during the prohibited times "may be enjoined by a proceeding in the proper court." Section 6213(a) is thus an exception to the general bar on suits to restrain assessment or collection of taxes. See I.R.C. Sec. 7421. If the IRS did not mail the August 10, 1984 deficiency notice as required by the Code, Sec. 6213(a) might permit a court to enjoin any attempts to collect the December 31, 1984 assessment.

B. Proof of Mailing

The relevant statutes simply require that the IRS mail a deficiency notice by certified or registered mail to a taxpayer's last known address. I.R.C. Sec. 6212(a); see supra note 8 and accompanying text. The IRS has, however, established detailed procedures for mailing deficiency notices. The Internal Revenue Manual provides:

(3) The record of certified mailing of notices of deficiency should be kept on P.S. Forms 3877 which are supplied in booklet form by the U.S. Postal Service. These books together with a series of certified numbers may be obtained from the local postmaster.... The following heading will be typed or imprinted by rubber stamp across the first line of each page of P.S. Form 3877:

"Notices of deficiency, for the years indicated, have been sent to the following taxpayers."

....

(6) The Service employee will then enter the certified number on the envelope, and list the same number together with the name and address of the addressee on P.S. Form 3877. The year(s) for which the notice is applicable ... will be entered in the remarks column opposite the taxpayer's name and address. The notices to be mailed together with P.S. Form(s) will then be presented to the post office. The postal employee first compares the certified mail numbers, and names and addresses, on the envelope with those on P.S. Form 3877 and counts the number of envelopes. He/she then indicates post office receipt of this mail by signing and inserting the post mark on P.S. Form 3877, and returns the forms to the Service employee. The Service employee should initial and date P.S. Form 3877 as part of the permanent record of mailing, in order that, if called as a witness, he/she could testify as to the exact date on which the letters were presented for mailing.... Under no circumstances will the receipted P.S. Forms 3877 pertaining to the mailing of notices of deficiency be commingled with any other mailing records.

Internal Revenue Manual--Audit Sec. 4462.2.

Complete compliance with these established procedures would provide sufficient proof of mailing. United States v. Zolla, 724 F.2d 808, 810 (9th Cir.), cert. denied, 469 U.S. 830, 105 S.Ct. 116, 83 L.Ed.2d 59 (1984) (Form 3877 is highly probative and is sufficient, in the absence of contrary evidence, to establish that the notice of deficiency was properly sent); United States v. Ahrens, 530 F.2d 781, 784-86 (8th Cir.1976); Cataldo v. Commissioner, 60 T.C. 522, 524 (1973), aff'd, 499 F.2d 550 (2d Cir.1974) (per curiam).

The IRS submitted three pieces of summary judgment evidence to prove that it mailed the August 10, 1984 notice of deficiency to the Taxpayers. First, the IRS submitted an affidavit by Mr. Donald A. Gloff of the IRS Quality Review Staff in Dallas. Mr. Gloff began:

I ... am in a position to verify the procedure for mailing of Statutory Notice[s] of Deficiency (90-day letter[s] and specifically the procedure used to mail the notice to Conrad and Linda Keado from Internal Revenue Service Quality Review Staff....

Mr. Gloff then explained the steps involved in the mailing, including signing the notice, date stamping all copies, completing Post Office Forms 3800 and 3877-A, and taking the Post Office Forms and the envelope containing the deficiency notice to the Post Office for stamping and mailing. Mr. Gloff also noted that "[t]he Firm Mailing Books maintained by QRS Section B, 90-Day section are used exclusively for the mailing of 90-day letters."

Second, the IRS submitted a copy of Post Office Form 3800, Receipt for Certified Mail. The bottom of Form 3800 is a numbered sticker for attachment to a certified letter. The top of Form 3800 is a numbered receipt for the person mailing the certified letter....