Leiter v. U.S., Civil Action No. 03-2149-GTV (D. Kan. 1/22/2004), Civil Action No. 03-2149-GTV.

Decision Date22 January 2004
Docket NumberCivil Action No. 03-2149-GTV.
PartiesJOHN A. P. LEITER Plaintiff, v. UNITED STATES OF AMERICA, Defendant
CourtUnited States District Courts. 10th Circuit. United States District Courts. 10th Circuit. District of Kansas
MEMORANDUM AND ORDER

G. THOMAS VANBEBBER, Senior District Judge.

This tax case arises from an assessment of trust fund recovery penalties pursuant to 26 § U.S.C. § 6672 against Plaintiff John A. P. Leiter. Plaintiff filed this action against the United States ("Defendant") to appeal the Internal Revenue Service's ("IRS") Notice of Determination concerning Plaintiff's tax liability. This action is now before the court on Defendant's motion for summary judgment (Doc. 6). For the reasons stated below, Defendant's motion is granted.

I. BACKGROUND

As a result of the failure of Oxygen Technologies Corporation ("OTC") to pay its employment taxes for the periods ending on September 30, 1994, the IRS determined that Plaintiff, former treasurer of OTC, was a responsible person liable for trust fund recovery penalties ("TFRP") under 26 U.S.C. § 6672.1

Prior to this assessment, Plaintiff filed a written protest and received a hearing with IRS Appeals regarding his proposed assessment. The IRS Appeals Office sustained the proposed assessment against Plaintiff and assessed the TFRP on December 28, 1998. On March 3, 1999 Plaintiff again contested the assessment by filing a Form 843, Claim for Refund. IRS Special Procedures reviewed the assessment and again denied Plaintiff's claim. On March 18, 2002 the IRS issued a Notice of Intent to Levy. In response, Plaintiff filed a request for a Collection Due Process ("CDP") Hearing on April 1, 2002 to challenge the proposed levy. Plaintiff's request stated that "Amount charged as tax is incorrect. Statutory addition amount is incorrect. Amount owed is disputed by taxpayer."

A hearing was held on December 3, 2002 before Officer Keith Cummings of the IRS Appeals Office. Officer Cummings issued a Notice of Determination on February 21, 2003, upholding the proposed levy. The Notice of Determination states Mark J. Eichholz, Plaintiff's counsel, raised the following issues on behalf of Plaintiff:

Mr. Leiter was not responsible for paying the trust fund taxes of Oxygen Technologies Corporation and should not have been assessed a penalty.

Could some of the interest charges be abated on the account due to the long appeals process the taxpayer has endured while disputing the penalty assessment?

Officer Cummings first concluded that Plaintiff's underlying liability would not be considered at the CDP hearing pursuant to 26 U.S.C. § 6330(c)(2)(B), which states that a taxpayer's underlying liability can be raised "only if he did not receive a statutory notice of deficiency regarding the liability, or did not otherwise have a previous opportunity to dispute the liability." 26 U.S.C. § 6330(c)(2)(B). Officer Cummings determined that Plaintiff had already received a hearing with IRS Appeals and a review by IRS Special Procedures concerning the proposed assessment. Second, Officer Cummings concluded that Plaintiff did not provide "reasonable grounds for the abatement of interest." Officer Cummings noted that Plaintiff could have stopped the interest from accruing by paying the TFRP. Additionally, Officer Cummings observed that before the assessment of the penalty and continuing with the IRS's notice and demand for payment after the assessment of the penalty, Plaintiff "was repeatedly warned that interest charges [would] accrue on the penalty as long as it remains unpaid." Finally, in response to Plaintiff's claim that the IRS charged an incorrect amount of tax, Officer Cummings determined "that the assessed and accrued amounts are correct."

Plaintiff now seeks judicial review of this Notice of Determination after timely filing his complaint on March 19, 2003.

II. STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Lack of a genuine issue of material fact means that the evidence is such that no reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52.

The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. This burden may be met by showing that there is a lack of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has properly supported its motion for summary judgment, the burden shifts to the nonmoving party to show that there is a genuine issue of material fact left for trial. Anderson, 477 U.S. at 256. "[A] party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Id. Therefore, the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Id. The court must consider the record in the light most favorable to the nonmoving party. Bee v. Greaves, 744 F.2d 1387, 1396 (10th Cir. 1984).

III. JURISDICTION

This court has jurisdiction pursuant to 26 U.S.C. § 6330(d)(1) of the Internal Revenue Code "to review a notice of determination relating to trust fund recovery penalties; however, judicial review is limited to those issues properly raised during the collection due process hearing." Konkel v. Comm'r, No. 6:99-cv-1026-Orl-31C, 2000 WL 1819417, at *3 (M.D. Fla. Nov. 6, 2000) (citation omitted).

IV. STANDARD OF REVIEW

"[W]here the validity of the underlying tax liability is properly at issue, the Court will review the matter on a de novo basis. However, where the validity of the underlying tax liability is not properly at issue, the Court will review the Commissioner's administrative determination for abuse of discretion." Sego v. Comm'r, 114 T.C. 604, 610 (2000). Pursuant to 26 U.S.C. § 6330(c)(2)(B), Officer Cummings found that Plaintiff could not contest his underlying liability for the TFRP because he had an earlier opportunity to dispute his tax liability. Accordingly, the court will review the IRS's decision for abuse of discretion.

V. DISCUSSION

Plaintiff claims that the IRS's TFRP assessment is erroneous in four respects: (1) the amount of tax owed is incorrect because Defendant has not accounted for or refused to apply several payments; (2) the amount of accrued interest should be abated because Defendant unreasonably delayed in acting on Plaintiff's claim; (3) Defendant failed to collect from other responsible persons; and (4) Plaintiff and Defendant's representatives entered into an agreement so that interest would not accrue during the pendency of this action. The court will address each argument in turn.

A. The Amount of Tax Owed is Incorrect

Plaintiff first claims that the Notice of Determination was in error because substantial payments were made on the TFRP account, but the IRS "failed and/or refused to account for" those payments. Plaintiff specifically disputes that certain payments made by another responsible person liable for the TFRP, Nelda Wing, were not properly credited towards Plaintiff's account.2

First, Plaintiff contends that the IRS failed to credit Plaintiff's account for a payment of $6,563.00 that Ms. Wing tendered on June 13, 2002. The Notice of Determination indicates that Plaintiff's representative at the CDP hearing, Mark Eichholz, maintained that payments had been made on the TFRP account that were not reflected by the IRS records. Officer Cummings provided Mr. Eichholz with a current transcript of Plaintiff's account during the CDP proceeding, and because Mr. Eichholz did not proffer any evidence explaining why the account records were incorrect, Officer Cummings asked Mr. Eichholz to send him copies of the cancelled checks. On December 16, 2002, Mr. Eichholz sent Officer Cummings a letter stating that Ms. Wing's payment of $6,563.00 should have been received by the IRS in June 2002. Mr. Eichholz sent Officer Cummings a copy of the cancelled check on December 30, 2002, asking Officer Cummings to advise him why the check had not been credited to Plaintiff's account.

The February 21, 2003 Notice of Determination explained why Ms. Wing's payments had not been applied to Plaintiff's TFRP account. Officer Cummings's research discovered that the $6,563.00 payment was a deposit made with Ms. Wing's offer in compromise. At the time of the CDP proceeding, the IRS had not accepted the offer in compromise. If the IRS decided to reject Ms. Wing's offer, the payment could be returned to her, and thus, the payment could not be posted to Ms. Wing's account, nor to Plaintiff's account. As a result, Officer Cummings stated in his Notice of Determination that "the assessed and accrued amounts are correct."

Defendant now asserts that Plaintiff's claim as to Ms. Wing's $6,530.00 payment is moot. In support of its motion, Defendant provided the declaration of Officer Cummings and a current transcript of Plaintiff's account. Officer Cummings states that the IRS accepted Ms. Wing's offer in compromise and the payment was posted to her account during the week of May 4, 2003. Furthermore, Officer Cummings states, and Plaintiff's account records reflect, that the IRS credited Ms. Wing's payment to Plaintiff's account on July 7, 2003. Accordingly, the court determines that Plaintiff's claim that Ms. Wing's $6,530.00 payment should be credited to his account is moot.

Second, Plaintiff asserts that the IRS failed to...

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