United States v. Sullivan
| Decision Date | 27 February 2013 |
| Docket Number | Civil Action No. 2:12-CV-72 |
| Court | U.S. District Court — District of Vermont |
| Parties | United States of America, Plaintiff, v. Jane C. Sullivan, Defendant. |
(Doc. 9)
The Plaintiff United States of America ("the government") commenced this action against Defendant Jane C. Sullivan, a resident of Stamford, Vermont, pursuant to § 7401 of the Internal Revenue Code, 26 U.S.C. § 7401, to reduce to a money judgment five years' worth of unpaid federal income taxes, penalties, and interest. (Doc. 1.) Presently before the Court is the government's Motion for Summary Judgment (Doc. 9), to which Sullivan has not filed a response. A hearing on the Motion, at which both parties appeared, was held on February 20, 2013.
For the reasons that follow, the Court hereby GRANTS the government's Motion.
This case arises from the alleged underpayment by Sullivan of her personal income taxes for the years 1996 to 1999, and 2010. Because Sullivan failed to respond to the government's Motion for Summary Judgment after receiving the notice due pro se litigants(Doc. 9-1), the facts in the government's record are deemed undisputed (except insofar as Sullivan's Answer expresses disagreement).
According to a declaration from Rai Shepardson, a Technical Services Advisor for the Internal Revenue Service ("IRS"), as well as official IRS records,1 the following assessments were made by a delegate of the Secretary of the Treasury of the United States on the following dates:
Taxable Year 1996:
Taxable Year 1997:
Taxable Year 1998:
Taxable Year 1999:
Taxable Year 2010:
Accordingly, the assessments for the combined tax years equals $237,086.36. In her Answer, Sullivan stated that she "strenuously disagree[s]" that she owes anything and sought relief "due to extenuating and mitigating circumstances." (Doc. 4.) During the hearing on the instant Motion, however, Sullivan repeatedly stated that she did not dispute the amounts of these assessments and agreed that they have not been paid.2
Incorporating statutory additions and interest, the total amount owed as of September 21, 2012, according to Shepardson's declaration, is $417,757.97. (Doc. 9-2 at 2.)
Between 2000 and 2011, the government issued notices of the assessments described above, and made numerous demands for payment, to Sullivan. (Doc. 9-2 at 2; Doc. 9-3 at 4; Doc. 9-4 at 8-9; Doc. 9-5 at 7-8; Doc. 9-6 at 6-7; Doc. 9-7 at 3.) Payment was not forthcoming, and has not been made to this day. (Doc. 9-2 at 2.)
To resolve the dispute, Sullivan submitted two offers in compromise to the IRS. The first offer was processed on February 28, 2002 and rejected on November 3, 2003. (Doc. 9-2 at 3; Doc. 9-3 at 3.) The second offer was processed on August 3, 2006 and rejected on January 7, 2008. (Doc. 9-2 at 3; Doc. 9-3 at 3-4.)
On April 11, 2012, the government initiated this suit to reduce Sullivan's unpaid taxes and associated penalties to a money judgment. (Doc. 1.) Sullivan filed her Answer on June 15, 2012. (Doc. 4.) Both parties consented to direct assignment to the undersigned Magistrate Judge. (Doc. 2; Doc. 3.) After discovery commenced (Doc. 8), the government filed the instant Motion for Summary Judgment (Doc. 9).
It is apodictic that the government may commence an action in federal district court to collect unpaid federal taxes. See 26 U.S.C. §§ 7401, 7402(a); 28 U.S.C. § 1340; see also United States v. Alfano, 34 F. Supp. 2d 827, 836 (E.D.N.Y. 1999); Beeler v. United States, 894 F. Supp. 761, 771-72 (S.D.N.Y. 1995) (). The government may seek to recover not only delinquent tax obligations, but also statutory interest and penalties when the taxes are not timely paid.
Once the IRS makes an assessment against a taxpayer, and gives notice and demand for payment, the government obtains a lien in the amount of the deficiency against all property belonging to the taxpayer. Section 6321 of the Internal Revenue Code provides:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.
26 U.S.C. § 6321. The lien arises when the assessment is made, attaches automatically to every interest in property that the taxpayer had on the date of the assessment, and endures until the amount due is either satisfied or rendered unenforceable by lapse of time. 26 U.S.C. § 6322. As described by the Supreme Court of the United States, the scope of the lien is broad, reaching "every interest in property that a taxpayer might have." United States v. Nat'l Bank of Commerce, 472 U.S. 713, 720 (1985).
This lien, however, is not self-executing. "Nevertheless, the IRS is not without a sword to wield when a taxpayer fails to honor his or her income tax obligations." United States v. Moskowitz, Passman & Edelman, 603 F.3d 162, 165 (2d Cir. 2010). The Internal Revenue Code arms the government with two tools for collection. The first is the use of an administrative levy, which "is a provisional remedy and typically does not require any judicial intervention." Nat'l Bank of Commerce, 472 U.S. at 720 (internal quotation omitted); see 26 U.S.C. § 6331(a). Here, the government has opted to utilize the second enforcement mechanism—a lien-foreclosure suit, as contemplated by Section 7403(a) of the Internal Revenue Code. That section authorizes the institution of a civil action in federal district court to enforce a lien "to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax." 26 U.S.C. § 7403(a). In such proceedings, the court must "adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property." 26 U.S.C. § 7403(c).
In assessing the government's lien and the propriety of the lien-enforcement action, this Court recognizes that "an IRS notice of tax deficiency is presumed to be correct." United States v. Letscher, 83 F. Supp. 2d 367, 372 (S.D.N.Y. 1999) (citing Moretti v.Comm'r of Internal Revenue, 77 F.3d 637, 643 (2d Cir. 1996); see generally 14 Mertens Law of Fed. Income Tax'n § 50:51 (2013); United States v. Fior D'Italia, Inc., 536 U.S. 238, 242 (2002) (). The forms submitted to this Court, IRS Form 4340 Certificate of Assessments, Payments, and Other Specified Matters (Doc. 9-3; Doc. 9-4; Doc. 9-5; Doc. 9-6; Doc. 9-7), constitute "presumptive proof of a valid assessment." United States v. Lavi, No. 02-CV-6299, 2004 WL 2482323, at *3 (E.D.N.Y. Sept. 23, 2004) (quoting Geiselman v. United States, 961 F.2d 1, 6 (1st Cir. 1992)); see generally March v. I.R.S., 335 F.3d 1186 (10th Cir. 2003). "In general, courts will not look behind an assessment to evaluate the procedure and evidence used in making the assessment." Ruth v. United States, 823 F.2d 1091, 1094 (7th Cir. 1987). Not only are the assessments presumed valid, but "the IRS's tax calculations (including calculations of interest and penalties) are [also] presumptively valid and create a prima facie case of liability." United States v. Chrein, 368 F. Supp. 2d 278, 282 (S.D.N.Y. 2005).
As such, a taxpayer who wishes to challenge the validity of an assessment bears the burden of both production and persuasion to prove the claimed deficiency is incorrect by a preponderance of the evidence. See Moretti, 77 F.3d at 643; Schaffer v. Comm'r of Internal Revenue, 779 F.2d 849, 857-58 (2d Cir. 1985). "To defeat a motion for summary judgment, the taxpayer must not only show that the assessment is incorrect, but it must also prove the correct amount of the tax." Chariot Plastics, Inc. v. United States, 28 F. Supp. 2d 874, 882 (S.D.N.Y. 1998).
As a preliminary matter, this Court must assess the timeliness of the government's collection action.3 Section 6502(a)(1) of the Internal Revenue Code provides for a ten-year statute of limitations for collection of a tax that begins to run upon the date of the assessment of the tax:
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