Mann v. U.S.

• Decision Date: 18 February 2000
• Docket Number: No. 98-2201,98-2201
• Citation: 204 F.3d 1012
• Parties: (10th Cir. 2000) SCOTT D. MANN and CONSTANCE L. MANN, Plaintiffs-Appellants, v. UNITED STATES OF AMERICA, Defendant-Appellee
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1012

204 F.3d 1012 (10th Cir. 2000)

SCOTT D. MANN and CONSTANCE L. MANN, Plaintiffs-Appellants, v. UNITED STATES OF AMERICA, Defendant-Appellee.

No. 98-2201

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

February 18, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO. D.C. No. CIV-97-0882-MV/LCS

Michael M. Noyes for Plaintiffs-Appellants.

Jonathan S. Cohen (Ann B. Durney and John A. Dudeck, Jr., Attorneys, on the briefs), Tax Division, Department of Justice, Washington, D.C., for Defendant-Appellee.

Before MURPHY and HOLLOWAY, Circuit Judges, and COOK, District Judge.^*

COOK, District Judge.

Plaintiffs-Appellants Scott Mann and Constance Mann bring this appeal from a final order and judgment of the United States District Court for the District of New Mexico, granting in part defendant-appellee's motion for summary judgment. We have jurisdiction by virtue of 28 U.S.C. § 1291, and we affirm.

Background

In December 1995, appellants filed their joint federal tax return for the 1994 tax year. On their return, appellants stated that they had received $133,381.00 in "non-taxable compensation." Appellants reported an adjusted gross income and taxable income in the amount of zero dollars. Appellants further reported federal income tax withheld in the amount of $6,780.00, and they sought a refund in that amount.

In February 1996, the Internal Revenue Service ("IRS") sent a letter to appellants explaining that certain changes had been made to their return and that taxes were due. The letter indicated that appellants' corrected, adjusted gross income totaled $133,381.00, and that their corrected taxable income totaled $122,131.00. The letter further indicated that appellants' 1994 tax liability totaled $30,165.10, and that appellants had underpaid their tax liability by $23,385.10. In addition to the underpayment, the IRS also demanded the payment of a penalty in the amount of $5,846.28 and interest in the amount of $2,386.41. Thus, the IRS initially demanded that appellants pay $31,617.79.

In March 1996, appellants responded in writing¹ to the IRS's letter. Appellants set forth various arguments in support of their opinion that no taxes were due, and they requested a refund of the taxes withheld. The IRS did not send a notice of deficiency to appellants or otherwise respond to appellants' letter, but, in late March 1996, the IRS sent appellants a notice of intent to levy. In that notice, the IRS demanded payment of $32,007.96, which included additional penalties and interest.

The IRS initially assigned the matter to its Automated Collection System Branch in May 1996 and later to Revenue Officer Joan Adams in November 1996. From May 1996 through April 1997, the IRS issued several notices of levy to various banks and businesses, which, the IRS believed, had engaged in business with Scott Mann. The IRS also filed a notice of federal tax lien with the Dona Ana County Recorder, and it sent a final demand notice to Medicine Mound Enterprises, which was believed to be Mr. Mann's employer at that time.² Each notice contained one or more of the following items: appellants' names, their address, one or both of appellants' social security numbers, type of tax, tax period, unpaid balance, statutory additions, and amount due.

In February 1997, Ms. Adams issued two administrative summonses to Mr. Mann, requesting his testimony and records for the 1994 and 1995 calender years. Mr. Mann was instructed to appear at Ms. Adams' office on March 6, 1997. Mr. Mann failed to appear, and he further failed to contact Ms. Adams prior to the scheduled meeting. Ms. Adams thus referred the matter to IRS District Counsel on March 6, 1997, to seek judicial enforcement of the summonses.

In April 1997, the IRS District Counsel sent appellants a letter threatening judicial enforcement of the summonses if Mr. Mann did not comply. In May 1997, Mr. Mann contacted Ms. Adams and arranged a meeting with her. Mr. Mann appeared at the meeting with two other individuals. When one of the individuals did not provide his name when initially asked, Ms. Adams terminated the meeting.

On July 1, 1997, appellants filed this action in the United States District Court for the District of New Mexico. Appellants sought injunctive relief against the IRS under 26 U.S.C. § 6213(a) and damages for wrongful disclosure of tax return information under 26 U.S.C. §7431. Appellants based their complaint on the undisputed fact that the IRS never sent a deficiency notice to them, and they alleged that, because of this failure and because the IRS engaged in collection activity at a time when it was prohibited from doing so, the disclosure of their tax return information in the lien and levy notices was wrongful. Appellants later filed an amended complaint seeking witness and mileage fees and costs for attending the May 1997 meeting with Ms. Adams.

On January 5, 1998, the government filed its motion for summary judgment. Appellants filed their response to the government's motion, and they also moved for summary judgment. On July 1, 1998, the trial court entered its order and judgment granting in part the government's motion and granting in part appellants' motion. Specifically, the trial court concluded that the disclosure of appellants' tax information by the IRS did not violate 26 U.S.C. § 6103, and that, therefore, appellants had no cause of action under 26 U.S.C. § 7431. However, the court enjoined the IRS from any further collection efforts until the IRS complied with the provisions of 26 U.S.C. §§ 6212 and 6213.³ The trial court further held the IRS liable to Mr. Mann for witness and mileage fees, but it ordered that such fees may be offset against appellants' outstanding tax liability.

The issues raised by appellants in this appeal are: (1) whether the lower court erred in concluding that the IRS did not violate 26 U.S.C. § 6103(k)(6) by disclosing tax return information in the lien and levy notices, at a time when the IRS was statutorily prohibited from engaging in collection activity, and (2) whether the lower court erred in permitting the IRS to offset appellants' witness and mileage fee award against their outstanding tax liability. The issues regarding the propriety of the injunction imposed against the IRS below and the trial court's determinations regarding the stay of collection activity and requirement for a notice of deficiency are not before this court.⁴

Discussion

We review de novo the district court's grant of summary judgment, applying the same standard used by the district court. McKnight v. Kimberly Clark Corp., 149 F.3d 1125, 1128 (10th Cir. 1998). "Summary judgment is appropriate if 'there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law.'" Williams v. Widnall, 79 F.3d 1003, 1005 (10th Cir. 1996) (quoting Fed. R. Civ. P. 56(c)). We examine the record to determine whether any genuine issue of material fact is in dispute, construing the factual record and reasonable inferences therefrom in the light most favorable to the non-moving party. Curtis v. Oklahoma City Public Schools Board of Education, 147 F.3d 1200, 1214 (10th Cir. 1998). If there is no dispute concerning a genuine issue of material fact, we determine whether the district court correctly applied the substantive law, Peck v. Horrocks Engineers, Inc., 106 F.3d 949, 951 (10th Cir. 1997), and we review de novo the district court's conclusions of law. Woodcock v. Chemical Bank, 45 F.3d 363, 367 (10th Cir. 1995).

Appellants alleged in their complaint that the IRS wrongfully disclosed tax return information when it issued notices of levy to banks and businesses which had conducted business with appellants, filed a notice of federal tax lien with the Dona Ana County Recorder, and issued a notice of final demand to Medicine Mound Enterprises. Appellants argued below that the disclosure was wrongful because the IRS did not follow the correct assessment and collection procedures, i.e., that the IRS did not issue the required deficiency notice to appellants and cease collection activity for the statutorily prescribed period of time prior to issuing the above notices to third parties. On appeal, appellants argue that this case involves a claim for damages for disclosures of tax information when the IRS was statutorily barred from engaging in collection activity. Appellants also argue that since the IRS had already determined the amount of tax that was due, it was not authorized to disclose return information under the Internal Revenue Code provision permitting disclosures for the purpose of obtaining information. That is, appellants argue that the lien and levy notices were not issued for the purpose of obtaining information and were therefore unauthorized.

The government argued below in its motion for summary judgment that two statutory provisions are relevant to the wrongful disclosure issue alleged in appellants' complaint. The government first cited 26 U.S.C. § 7431, which provides for civil damages for the unauthorized disclosure of returns and return information. The government next cited 26 U.S.C. § 6103(k)(6), which provides that certain disclosures of returns and return information are authorized. The government also cited 26 C.F.R. § 301.6103(k)(6)-1(b)(6), which is the regulation implementing § 6103(k)(6). The government argued that the disclosures in the lien and levy notices were authorized under § 6103(k)(6) and the regulations, and, therefore, appellants could not maintain a cause of action under § 7431 for wrongful disclosure. However, on appeal, the government states at page three of its supplemental brief that, "In briefest summary, it is our position that Section 7433 of the Internal Revenue Code provides the exclusive monetary damages remedy where allegedly unauthorized disclosures of federal tax return information are made in the course of collection activity, which...