Opinion
Civil No. C88-340Z.
July 15, 1988
ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
This is an action by plaintiff David L. Smith against defendants Internal Revenue Service ("IRS"), certain IRS employees and the United States seeking a temporary restraining order, a preliminary injunction, and compensatory and punitive damages against the defendants for their activities in collection of taxes owed by plaintiff for the tax years 1978 through 1982. Defendants have moved to dismiss or in the alternative for summary judgment.
The government argues that this action is barred by the doctrine of sovereign immunity, the Anti-Injunction Act, 26 U.S.C. § 7421, and the Declaratory Judgment Act, 28 U.S.C. § 2201. Smith correctly responds that his complaint is not barred because he is challenging the IRS' compliance with required assessment procedures rather than the assessment itself. A taxpayer may challenge the IRS' compliance with assessment procedures in district court. See, e.g., Aqua Bar Lounge, Inc. v. United States Department of Treasury, 539 F.2d 935, 939-40 (3d. Cir. 1976); United States v. Coson, 286 F.2d 453 (9th Cir. 1961). To the extent his complaint alleges procedural violations committed by the IRS in assessing his tax deficiency, Smith may bring this action against the government in this court.
Smith does not respond to or dispute the government's contentions that his due process claims under counts 1 and 6 should be dismissed because the failure of the IRS to hold an administrative hearing does not constitute a Fifth Amendment due process violation. The Supreme Court has stated:
Where . . . adequate opportunity is afforded for a later judicial determination of the legal rights, summary proceedings to secure prompt performance of pecuniary obligations to the government have been consistently sustained.Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, 595, 75 L.Ed. 1289 (1931); see also Western Reserve Oil Gas Co. v. New, 765 F.2d 1428 (9th Cir. 1985), cert. denied 474 U.S. 1056 (1986). In this case Smith is entitled to a future judicial determination of his legal rights, so the refusal by the IRS to conduct an administrative hearing on Smith's obligation to pay taxes did not deny him due process.
The Notice of Deficiency from the IRS, dated April 26, 1986, provided that if Smith wished "to contest this deficiency in court before making any payment, [he had] 90 days from the mailing date of th[e] letter . . . to file a petition with the United States Tax Court for a redetermination of the deficiency." Smith chose not to exercise this opportunity. He cannot now complain that he is without legal remedy because he is unable to pay the claimed deficiency. Cf. Jensen v. I.R.S., 835 F.2d 196, 198 (9th Cir. 1987) ("[T]he alleged failure by the IRS to give Jensen notice of the deficiency deprived him of his opportunity to challenge the claimed deficiency in the tax court without having to pay the tax.").
In Counts 1 and 4 Smith claims he is not a taxpayer and has no tax liability. Title 26, U.S.C. section 1 provides that a tax is imposed on the income of every individual. All individuals must pay federal income tax on their wages. Lovell v. United States, 755 F.2d 517 (7th Cir. 1984). Unless Smith establishes that he is not a citizen of the United States, the IRS possesses the authority to attempt to determine his federal income tax liability. United States v. Slater, 545 F. Supp. 179, 182 (D. Del. 1982), aff'd without opinion, 709 F.2d 1496 (3d. Cir. 1983). Smith has not provided any evidence that he is not a United States citizen. Consequently his claim that he is not a taxpayer is without merit.
Smith's remaining claims are that the IRS tax assessment is invalid because the IRS failed to (1) file a substitute tax return for him as allegedly required by title 26, U.S.C. sections 6020(b)(1) and 6201(a)(1); and (2) provide him the requisite notice of assessments and demand for payment. Assuming for the purposes of this motion that the IRS did not prepare a substitute tax return upon Smith's failure to submit his own return, this claim will be dismissed because the IRS is simply not required to prepare such a return. In United States v. Verkuilen, 690 F.2d 648 (7th Cir. 1982), the court rejected the contention that section 6020(b)(1) required the IRS to prepare a substitute return prior to assessing a deficiency. Rather, the court citedHartman v. Commissioner of Internal Revenue, 65 T.C. 542 (1975), for the rule that the section does not make it mandatory that the Secretary of the Treasury file a tax return before issuing a statutory notice of deficiency. 690 F.2d at 657. The assessment of Smith's tax deficiency was not invalid merely because the IRS did not prepare a tax return for Smith.
There is no genuine material issue of fact with respect to whether the IRS provided Smith the requisite notice informing him of the amount of tax due and demanding payment (count 5 of complaint). Such notice and demand must be provided within 60 days after making an assessment of a tax pursuant to section 6203. The notice must state the amount of the unpaid tax and demand payment thereof. 26 U.S.C. § 6303(a). Smith has denied that he received such notice and provided supporting evidence in the form of a Certificate of Assessments and Payments, Form 4340, from the IRS Service Center in Austin, Texas. Memorandum in Support of Plaintiff's Opposition to Motion to Dismiss or for Summary Judgment, Exhibit 1. The Certificate, which is a record of the transactions and correspondence involved in Smith's assessments, does not show that he received a "fourth notice" of his assessment.
26 U.S.C. § 6303(a) states:
Where it is not otherwise provided by this title, the Secretary or his delegate shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person's last known address.
The government, however, asserts that the notice was sent and argues that, even if not, the "first notice," sent on November 3, 1986, (Complaint, Exhibit E) satisfies the section 6303(a) notice and demand requirement. There is an issue of fact whether Smith was sent the "fourth notice." However, the Court agrees that the "first notice" complied with section 6303(a). Smith does not dispute his receipt of the "first notice." The notice timely informed Smith of the amount of his tax liability and requested payment, which is sufficient to comply with section 6303(a).
Smith responds with a technical argument that the notice was provided on a form designed to satisfy the notice requirement contained in section 6014, and hence the notice could not satisfy the section 6303(a) requirement. Section 6014 applies, however, only to taxpayers whose gross income is less than $10,000. 26 U.S.C. § 6014(a). Smith's gross income exceeded $10,000. Consequently, even assuming that the express purpose of the form on which the first notice was sent was to comply with the section 6014, the Court need not presume that the information contained thereupon was provided to comply with section 6014. The form on which a section 6303(a) notice and demand is provided is irrelevant as long as it adequately informed the taxpayer of his or her tax liability and requested payment. In this case the form clearly provided Smith the required information. The IRS complied with the notice and demand requirement of section 6303(a).
26 U.S.C. § 6014, titled "Income tax return — Tax not computed by taxpayer," states in part:
(a) Election by taxpayer. — An individual who does not itemize his deductions and . . . whose gross income is less than $10,000 . . . and whose gross income other than wages . . . does not exceed $100, shall at his election not be required to show on the return the tax imposed by section 1. . . . In such case the tax shall be computed by the Secretary who shall mail to the taxpayer a notice stating the amount determined as payable.
There is also no genuine issue of material fact with respect to whether the IRS provided 10-day notice of its intent to levy, pursuant to 26 U.S.C. § 6331(d). Such notice was provided on September 21, 1981. Complaint, Exhibit O. Smith responded to the notice by a letter, dated September 29, 1987, to the IRS, the Secretary of the Treasury, and the United States Attorney General. Complaint, Exhibit P. Smith's response precludes any factual dispute over whether Smith received the notice.
26 U.S.C. § 6331(d) provides in part:
(1) In general. — Levy may be made under subsection (a) upon the salary or wages or other property of any person with respect to any unpaid tax only after the Secretary has notified such person in writing of his intention to make such levy.
(2) 10-day requirement. — The notice required under paragraph (1) shall be —
(A) given in person,
(B) left at the dwelling or usual place of business of such person, or
(C) sent by certified or registered mail to such person's last known address, no less than 10 days before the day of the levy.
IT IS HEREBY ORDERED that plaintiff's complaint is dismissed with prejudice and without costs.
The Clerk of this Court is directed to send uncertified copies of this order to all counsel of record.