Miller v. US
Decision Date | 06 May 1991 |
Docket Number | No. C-90-3132 MHP.,C-90-3132 MHP. |
Citation | 763 F. Supp. 1534 |
Court | U.S. District Court — Northern District of California |
Parties | Albert J. MILLER, Plaintiff, v. UNITED STATES of America, Defendant. |
Theodore A. Kolb and Jon B. Sigerman, Sullivan, Roache & Johnson, San Francisco, Cal., for plaintiff.
William T. McGivern, Jr., U.S. Atty., and Jay R. Weill, Asst. U.S. Atty., Chief, Tax Div., San Francisco, Cal., for defendant.
Plaintiff Albert J. Miller ("Miller") brings this action against defendant United States of America ("Government") seeking: a) damages for failure to release a lien pursuant to 26 U.S.C. § 7432; b) reimbursement of attorneys' fees under 26 U.S.C. § 7430; and c) damages for unauthorized collection actions pursuant to 26 U.S.C. § 7433. The Government now moves for summary judgment on the section 7432 and 7433 claims. For the reasons discussed below, the Government's motion is DENIED.
This case concerns an Internal Revenue Service ("IRS") assessment and collection proceeding. Ordinarily, after the IRS has determined that a taxpayer has an income tax deficiency, the Commissioner must mail a Notice of Deficiency to the taxpayer before the deficiency is assessed or any collection action taken against the taxpayer.1 26 U.S.C. § 6212(a).2 The taxpayer has ninety days after the notice is mailed to file a petition in the United States Tax Court for a redetermination of the deficiency. Section 6213(a). Within this ninety-day period, the IRS is prohibited from assessing the proposed deficiency or taking any action to collect the tax. Id. Additionally, if the taxpayer chooses to file a petition with the United States Tax Court, the IRS is forbidden from assessing or collecting the deficiency at issue until the tax court's decision becomes final. Id.
Miller was audited by the IRS in the early and mid 1980's for certain limited partnerships he had formed. In 1987, the audit was concluded and the IRS (via the auditing agent, Jon A. Tamaki) recommended that approximately $16 million in federal withholding tax deficiencies and penalties be assessed against Miller. Tamaki Decl. ¶¶ 1-7.
Agent Tamaki's audit report, completed in August 1987, was then lost for two years. Upon its rediscovery in June or July 1989, the audit file was hastily sent to the IRS' Philadelphia Service Center for processing.3 Janich Decl. ¶ 2.
No ninety-day Notice of Deficiency was sent to Miller by either the San Francisco or San Jose IRS offices. Winnick Decl. ¶ 9. The Philadelphia Service Center assesses, but does not issue notices of deficiency. Id. at ¶ 7. Consequently, Miller was not sent any ninety-day Notice of Deficiency by the IRS prior to the first assessments being mailed. Id. at ¶ 9.
The first assessments were made on September 4, 1989, by the Philadelphia Service Center. See "Statements of Tax Due IRS" Forms, attached to First Amended Complaint as Exs. 7a-7e. On October 16, 1989, the Center mailed a second round of collection notices. See "Dear Taxpayer" Letters, attached to Complaint as Exs. 8a-8e.
Miller received both sets of documents near the end of October 1989 and promptly contacted his attorney, Edward Mevi. Miller Decl. ¶ 12. Mr. Mevi telephoned the Philadelphia Service Center one or more times in late October. Id. at ¶ 13. Although Mevi's conversations with the Philadelphia Service Center obviously concerned the assessment and collection notices that Miller had received, the substance of those conversations is unclear.
On April 26, 1990 Kenneth Whitmore, the IRS agent assigned to the collection of Miller's tax liabilities, accompanied by Agent Jules Tupaj, attempted to question Miller at his home. Whitmore Decl. ¶ 7. During this interview, Agent Tupaj allegedly informed Miller that he was there to "collect his unpaid tax liabilities," and Miller apparently responded that he preferred to deal with the IRS through his attorney. See Id.; Miller Decl. ¶¶ 17-21.
A notice of federal tax lien against Miller, manually prepared by Agent Tupaj at Agent Whitmore's request, was filed on May 1, 1990. On May 17, 1990, a duplicate and redundant notice of federal tax lien was filed "automatically" by the IRS computer. Whitmore Decl. ¶¶ 8, 13.
On June 5, 1990, Mr. Brookes, Miller's new counsel, wrote to the IRS requesting a copy of the ninety-day Notice of Deficiency. See "Brookes Letter to IRS," attached to Complaint as Ex. 11. On July 10, 1990, the IRS Regional Counsel responded that it was attempting to locate a copy of the Notice of Deficiency. Winnick Decl. at Ex. C. On July 27, 1990, the Regional Counsel determined that no Notice of Deficiency had been sent by any IRS office and that a statutory Notice of Deficiency was required for the assessments to be legally valid. Id. at ¶ 9. The IRS released the notices of federal tax lien on July 27, 1990. Id. at ¶ 10.
On August 3, 1990, a request for abatement of the Miller tax assessments was transmitted to the Philadelphia Service Center. Id. at ¶ 11. The assessments were abated on August 29, 1990. See "Notice of Adjustment" Forms, attached to Complaint as Exs. 13a-13e.
Plaintiff filed the pending complaint in issue on October 31, 1990.
Under Federal Rule of Civil Procedure 56, summary judgment shall be granted "against a party who fails to 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 ... since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Celotex Corp. v. Catrett, 477 U.S. 317, 322-32, 106 S.Ct. 2548, 2552-57, 91 L.Ed.2d 265 (1986). See also T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987) ( ); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) ( ).
The court's function, however, is not to make credibility determinations. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510. The inferences to be drawn from the facts must be viewed in a light most favorable to the party opposing the motion. T.W. Elec. Serv., 809 F.2d at 631.
Plaintiff's first cause of action seeks civil damages for failure to release a lien pursuant to section 7432(a), part of the so-called "Taxpayer's Bill of Rights" enacted in the Technical and Miscellaneous Revenue Act of 1988, § 6240(c), Pub.L. No. 100-647, 102 Stat. 3746. This section provides, in pertinent part, that "if any officer or employee of the Internal Revenue Service knowingly, or by reason of negligence, fails to release a lien under section 6325 on property of the taxpayer, such taxpayer may bring a civil action for damages against the United States" in a federal district court. Section 7432(a).
A brief review of the relevant tax code provisions is warranted. Sections 6321-6323 provide for the creation, validity and priority of liens for taxes. Section 6325(a) provides the procedure the Secretary of the Treasury ("Secretary") shall follow for the release of a lien upon a finding that liability for the amount assessed has become legally unenforceable.
Section 6326 addresses the administrative appeal of liens and provides that any person may, after the filing of a notice of lien, appeal by alleging an error in the filing of the notice of such lien. If the Secretary determines that the filing of the notice was erroneous, then the Secretary shall expeditiously (preferably within 14 days), issue a certificate of release of lien, including a statement that such filing was erroneous.4 This section and section 7432 were added to the statute in 1988.
Section 7432 permits a civil suit against the United States if an IRS officer recklessly or negligently fails to release a lien under section 6325. Subparagraph (d)(1) contains an exhaustion requirement.5 Subparagraph (e) provides that the Secretary shall prescribe reasonable procedures for a taxpayer to notify the Secretary of the failure to release a lien under section 6325.
There are two distinct problem areas covered by these lien sections. The first, concerning removal of an erroneously filed notice of federal tax lien, need not be addressed in detail except to note that the Government confuses it with the second.6
The second problem, and the one around which this case revolves, arises when the actual assessment and demand which create a lien, not merely the notice of lien, are legally invalid. In Miller's case, by failing to send a ninety-day Notice of Deficiency, the IRS violated section 6212(a) and section 6213(a). Since notice is a condition precedent to any assessment and resulting lien, the lack of such notice renders the assessment and lien legally unenforceable.
In these situations the taxpayer is reliant on section 6325(a), and the parallel threat of a section 7432 action, to persuade the Secretary to release the unlawful lien imposed by the assessment and demand. There are, however, no established procedures outlining exactly how the taxpayer is to give notice to the Secretary of the lien's legal unenforceability under either section 7432 or section 6325, so as to comply with section 7432(d)(1) and 7432(e), of these provisions.7
The Government's motion first focuses on the notice of federal tax lien, which was filed on May 1, 1990, and released on July 27, 1990. The Government apparently believes that a tax lien does not arise until a notice of tax lien is filed. The Government also claims that taxpayers must provide written notice to the IRS of the failure to release a notice of tax lien before an action for damages under section 7432...
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