Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_07-cv-00620/USCOURTS-azd-4_07-cv-00620-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7403 Suit to Enforce Federal Tax Lien

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America, 

Plaintiff, 

vs.

Randal W. Howard; Arizona Department

of Revenue, 

Defendants. 

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No. CV 07-620-TUC-DCB (HCE)

REPORT & RECOMMENDATION

Pending before the Court are Defendant Randal Howard’s: (1) December 26, 2007

Motion to Dismiss (Doc. No. 10); (2) January 8, 2008 Motion to Dismiss (Doc. No. 12); (3)

January 28, 2008 “Third Motion to Dismiss” (Doc. No. 15); and (4) February 25, 2008

Motion to Dismiss (Doc. No. 20) For the following reasons, the Magistrate Judge

recommends that the District Court deny Defendant Howard’s motions to dismiss.

I. FACTUAL & PROCEDURAL BACKGROUND

On November 26, 2007, the Government filed the instant Complaint to Reduce

Federal Tax Assessments to Judgment and to Foreclose Federal Tax Liens on Real Property

(Doc. No. 1). Named as Defendants are: Randal Howard and the Arizona Department of

Case 4:07-cv-00620-DCB Document 27 Filed 06/26/08 Page 1 of 20
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1

“Defendant Arizona Department of Revenue...is made a party to this action because

it may claim some right, title, or interest in the real property that is the subject of this action.”

(Complaint, p. 2) 

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Revenue.1

 The Complaint seeks to reduce to judgment against Defendant Howard alleged

outstanding federal income tax liabilities and civil penalties for the years: 1983, 1984, 1987,

1988, 1989 1990, 1991, 1992, 1996, 1997, 1998, 1999, 2000, 2001, 2002, and 2003. The

Government also seeks to foreclose federal tax liens on real property currently titled in

Defendant Howard’s name. 

Defendant Howard, acting pro se, has filed four separate motions to dismiss as

discussed below.

II. THE PENDING MOTIONS TO DISMISS

A. Timeliness

The Government argues that of the four pending motions to dismiss, only Defendant

Howard’s December 26, 2007 Motion to Dismiss is timely. The Government points out that

the other three motions were filed more than twenty days after the December 5, 2007 service

of the summons and complaint herein. (See Response to Third Motion, p. 2 nn. 1-2;

Response to Fourth Motion, p. 2( (Doc. Nos. 16, 21)

A motion asserting Rule 12(b) defenses “must be made before pleading if a responsive

pleading is allowed.” Fed.R.Civ.P. 12(b). The record is clear that Defendant Howard has

not filed an answer. The Ninth Circuit allows a motion under Rule 12(b) any time before the

responsive pleading is filed. See Aetna Life Ins. Co. v. Alla Medical Servs. Inc., 855 F.2d

1470, 1474 (9th Cir. 1988); Bechtel v. Liberty Nat’l Bank, 534 F.2d 1335, 1340-1341 (9th Cir.

1976). Additionally, with regard to Defendant Howard’s January 8, 2008 Motion to Dismiss

challenging the Court’s jurisdiction, “it has long been well-established that the court’s lack

of subject matter jurisdiction may be asserted at any time by any interested party...” Charles

Alan Wright & Arthur R. Miller, 5B Federal Practice and Procedure, § 1350. See also

United States v. Bennett, 147 F.3d 912, 914 (9th Cir. 1998); Emrich v. Touche Ross & Co.,

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846 F.2d 1190, 1194 n.2 (9th Cir. 1988). Consequently, all of Defendant Howard’s motions

are timely. 

On March 31, 2008, Defendant Howard filed a “Rebuttal to Prosecutions’ Response.”

(Doc. No. 23) The Government Responded to Defendant Howard’s fourth, and final, Motion

to Dismiss on February 28, 2008. (Doc. No. 21) Defendant Howard had five days after

service of the responsive memorandum to file a reply memorandum. L.R.Civ. 7.2(d), Rules

of Practice of the U.S. District Court for the District of Arizona. Defendant Howard’s March

31, 2008 “Rebuttal...” is untimely and will not be considered. See Ghazali v. Moran, 46

F.3d 52 (9th Cir. 1995) ("pro se litigants are bound by the rules of procedure"); King v.

Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987)("[p]ro se litigants must follow the same rules of

procedure that govern other litigants").

B. Defendant Howard’s December 26, 2007 Motion to Dismiss (Doc. No. 10)

In his December 26, 2007 Motion to Dismiss, Defendant Howard seeks dismissal of

this action because the statute of limitations bars recovery and the homestead exemption

prevents foreclosure on his property.

1. Standard

In assessing the complaint on a motion to dismiss, all allegations of fact are taken as

true. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). However, conclusory allegations

and unreasonable inferences are insufficient to defeat a motion to dismiss. Id. To survive

dismissal, the plaintiff must allege “enough facts to state a claim to relief that is plausible on

its face.” Bell Atl. Corp. v. Twombly, __ U.S. __, 127 S.Ct. 1955, 1987 (2007). That is, when

all the allegations are taken as true and construed in the light most favorable to the plaintiff,

the factual allegations pled “‘must be enough to raise a right to relief above the speculative

level.’” Williams v. Gerber Products Co., 523 F.3d 934, 938 (9th Cir. 2008) (quoting Bell

Atl. Corp., __ U.S. __, 127 S.Ct. at 1965). “Once a claim has been stated adequately, it may

be supported by a showing consistent with the allegations in the complaint.” Bell Atl. Corp.,

__ U.S. __, 127 S.Ct. at 1968.

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Certificates of Assessments are a certification of what the Internal Revenue Service

records show about the assessment against, and payments made, by a taxpayer of a particular

tax. Certificates of Assessments are public records and qualify as self-authenticating when

filed under seal. Hughes v. United States, 953 F.2d 531, 535 (9th Cir. 1992). In the absence

of contrary evidence, Certificates of Assessment are prima facie evidence of the facts

contained therein. Hughes, 953 F.2d at 541.

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2. Statute of Limitations

 The statute of limitations defense may be raised by a motion for dismissal pursuant

to Rule 12(b)(6), Federal Rules of Civil Procedure, “[i]f the running of the statute is apparent

on the face of the complaint.” Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir.

1980) (applying standard for motions to dismiss under Rule 12(b)(6) to motion to dismiss

based on expiration of the statute of limitations). 

The Complaint sets out the dates when the assessments at issue were made. In

responding to Defendant Howard’s statute of limitations defense, the Government attached

to its Response (Doc. No. 13) several exhibits including a declaration, Certificates of

Assessments and Payments (hereinafter “Certificates of Assessments”)2

 which were signed

under seal (Ex. A-S), court docket pages reflecting the dates of Defendant Howard’s three

bankruptcy proceedings (Ex. T-V), a “Case Activity Record Print” reflecting that Defendant

Howard requested a Collection Due Process (hereinafter “CDP”) Hearing on May 22, 2001

(Ex. W), and the January 31, 2002 Notice of Determination regarding Defendant Howard’s

appeal from the CDP Hearing (Id.) On May 15, 2008, the Court informed the parties that:

(1) the Government’s exhibits would be considered in resolving Defendant Howard’s Motion

to Dismiss (Doc. No. 10) pertaining to the statute of limitations defense; and (2) pursuant

to Rule 12(d) of the Federal Rules of Civil Procedure, Defendant Howard’s Motion to

Dismiss (Doc. No. 10) would be treated as a motion for summary judgment with regard to

the statute of limitations issue. (Doc. No. 24) The parties were given additional time to file

supplemental briefs. (Id.) The Court also directed the Government to address two questions

raised from the previous filings. (Id.) On May 20, 2008, the Government filed its

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Supplemental Brief and exhibits. (Doc. No. 25) Defendant Howard did not file additional

argument or evidence.

“A motion for summary judgment will be granted if the moving party has

demonstrated the absence of any issue of material fact and the right to judgment as a matter

of law.” Jablon, 614 F.2d at 682 (citations omitted).

a. Pertinent Statutory Provisions

(1.) Assessment

Assessment is the first step in the collection process. Michael Saltzman, IRS Practice

& Procedure, ¶14.05[1]. An assessment is the official act of recording a taxypayer’s liability

on a summary list. Id.

The general rule is that an assessment must be made within three years after the tax

“return was filed (whether or not such return was filed on or after the date prescribed)....”

26 U.S.C. § 6501(a). However, this general rule is subject to certain exceptions including

the taxpayer’s failure to file a return where, in such case, “the tax may be assessed, or a

proceeding in court for the collection of such tax may be begun without assessment, at any

time.” 26 U.S.C. § 6501(c)(3) (emphasis added). See also Edwards v. Comm’r , 680 F.2d

1268, 1269 n. 1 (9th Cir. 1982) (“Clearly no statute of limitations applies...for those years in

which [the taxpayer] filed no returns at all.”)

Additionally, prior to 1994, the three-year statute of limitations for tax assessments

under section 6501(a) was tolled during the pendency of taxpayer’s bankruptcy proceeding

where the claim arose before the commencement of the bankruptcy proceeding. 11 U.S.C.

§ 362(a)(6), subsequently amended by Bankruptcy Reform Act of 1994, H.R. 5116, 103d

Cong. §§ 116, 702 (1994 amendment removing such provision). Thus, in cases where the

taxpayer filed a bankruptcy petition prior to October 22, 1994, the IRS was precluded from

making assessments for claims predating the bankruptcy filing until the bankruptcy court

dismissed the petition. Id.; See also Schwartz v. United States, 954 F.2d 569, 571 (9th Cir.

1992) (IRS tax assessment made during pending bankruptcy proceeding “violated the

Bankruptcy Code’s automatic stay provision.”)

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(2.) Collection

A levy must be made or a collection proceeding in court must commence “within 10

years after the assessment of the tax.” 26 U.S.C. § 6502(a). However, the statute of

limitations pertaining to collection proceeding is tolled during the period when a taxpayer’s

bankruptcy case is pending, plus an additional six months thereafter. 26 U.S.C. § 6503(h)(2);

11 U.S.C. § 362(a). Additionally, the statute of limitations for collection proceedings is

tolled for the period during which a taxpayer’s CDP hearing, or appeal thereof in Tax Court,

is pending and “[i]n no event shall any such period expire before the 90th day after the day

on which there is a final determination in such hearing.” 26 U.S.C. § 6330(e)(1). 

b. Defendant’s Howard’s Bankruptcy Proceedings and CDP Hearing

The record reflects that Defendant Howard has been involved in three separate

bankruptcy proceedings. He filed his first petition under Chapter 13 on June 14, 1991 and

the bankruptcy court entered a dismissal on July 24,1996. (Response, Ex. T) (Doc. No. 13)

Defendant Howard filed his second petition, this time under Chapter 7, on December 6, 1996.

(Response, Ex. U) The second matter was discharged on April 7, 1997. (Id.) Thus, with

regard to the limitations period for assessments, the Government correctly asserts that the

automatic stay provision of the bankruptcy statute in effect when Defendant Howard filed

his first bankruptcy petition in April 1991 precluded the IRS from making assessments until

the bankruptcy court dismissed that petition on July 24, 1996. (Response, p. 3 (citing

Bankruptcy Reform Act of 1994, H.R. 5116, 103d Cong. §§ 116, 702)). Additionally, with

regard to collection efforts, the statute of limitations was tolled pursuant to section

6503(h)(2) from June 14, 1991 (when Defendant Howard first initiated bankruptcy

proceedings) until October 4, 1997 (six months after the conclusion of the second bankruptcy

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3

Before the section 6503(h)(2) tolling period attributable to the first petition

concluded, Defendant Howard filed his second petition. Thus the tolling period for both

petitions is combined.

4

There are two methods by which the limitations period can be computed: the “actual

days” method, and the “month-days” method. See United States v. Tyrrell, 329 F.2d 341 (7th

Cir. 1964) (approving district court’s use of the “actual days” method instead of “monthdays” method employed by the IRS); see also Michael Saltzman, IRS Practice & Procedure,

§5.07[1]. In calculating the tolling periods herein, the Court has employed the “actual days

method.” Under this method, for example, six months is calculated as 180 days thus

resulting in the conclusion that the tolling period attributable to Defendant Howard’s first and

second bankruptcy proceedings ended on October 4, 1997. Under the Government’s monthdays method, the tolling period ended on October 7, 1997. Regardless of this difference, the

choice of method herein is unimportant because the Government’s action is timely when

measured by either method. (See Government’s Response, pp. 2-11 (calculating dates under

IRS method) & discussion infra (calculating dates under the actual days method). 

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proceeding3

): a total of 2,305 days.4 Defendant Howard’s third bankruptcy petition, filed

on April 16, 1999, was dismissed on April 27, 1999. (Response, Ex. V) Therefore, pursuant

to section 6503(h)(2), the statute of limitations for collections was also tolled from April 16,

1999 (when Defendant Howard initiated the third bankruptcy proceeding) until October 24,

1999 (six months after the conclusion of the third bankruptcy proceeding): a total of 192

days. 

Additionally, on May 22, 2001, Defendant Howard requested a CDP Hearing for tax

years 1984, 1985, and 1986. (Response, Ex. W) The IRS issued a final CDP determination

on January 31, 2002. Thus, under section 6330(e)(1), the statute of limitations pertaining to

collection was tolled from May 22, 2001 until May 1, 2002 (ninety days after issuance of the

January 31, 2002 final determination letter): a total of 345 days. 

c. Specific Claims

The Complaint alleges amounts assessed by a delegate of the Secretary of Treasury,

the dates such amounts were assessed, and the unpaid balance as of October 23, 2007

regarding Defendant Howard’s income tax for the following years: 1983, 1984, 1987, 1988,

1989, 1990, 1991, 1996, 1997, 1998, 1999, 2000, 2001, 2002, and 2003. (Complaint, pp. 3-

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5

According to Defendant Howard, the IRS “claimed that [he] filed a return for...1983

but...” that he failed to sign it. (Motion, p. 2) He argues that the Government’s failure to send

the tax return to him for signature is bad faith. Defendant Howard cites no authority to

support his position. The Government states that Plaintiff did not file a tax return for 1983.

(Response, p.5) Generally, “[t]he U.S. Tax Courts have consistently held that an unsigned

tax return is no return at all, because an unsigned tax return would be insufficient to support

a perjury charge based on a false return...Similarly, the U.S. Court of Appeals have held that

an unsigned tax return does not start the statute of limitations period, within which the IRS

must assess tax liability.” In re Lee, 186 B.R. 539 (S.D. Fla. 1995) (citations omitted). See

also Lucas v. Pilliod Lumber Co., 281 U.S. 245, 249 (1930) (noting that the statute of

limitations runs against the United States “only when they assent and upon the conditions

prescribed” and holding that the filing of an unverified return did not trigger the

commencement of the statute of limitations); Kalb v. United States, 505 F.2d 506 (2d Cir.

1974) (“Generally an unsigned return does not start the statute of limitations running.”); Doll

v. Commissioner, 358 F.2d 713 (3d Cir. 1996) (statute of limitations did not bar assessment

of tax deficiency where taxpayers failed to sign the return); Commissioner v. Krug, 78 F.2d

57 (9th Cir. 1935) (filing of unverified return “did not start the running of the statute of

limitations” period for assessment). 

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4) The Complaint also alleges the same information with regard to civil penalties imposed

pursuant to 26 U.S.C. § 6673 in 1990, 1991, 1992. (Id.)

d. Timeliness of Assessments

(1.) Assessments for Income Tax Years 1983, 1984, and 1996

through 2003

Regarding tax years 1983,5 1984, and 1996 through 2003, the record reflects that

assessments were made in one or more of the following years: 1990, 1991, 2002, 2004,

2005, 2006 and 2007. (Response, pp.7-8 & Ex. A-B, L-S) The Government asserts that

Defendant Howard did not file income tax returns for the years 1983, 1984, and 1996 through

2003. (Response, p.5) Where no return is filed, “the tax may be assessed...at any time.” 26

U.S.C. § 6501(c)(3). Therefore, the Government is correct that the assessment for tax years

1983, 1984, and 1996 through 2003 are timely because the statute of limitations does not

apply. (Response, p. 5 (citing 26 U.S.C. 6501(c)(3); Edwards, 680 F.2d at 1269 n.1)).

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(2.) Assessments for Income Tax Years 1987 through 1991

Regarding tax years 1987 through 1991, the record reflects that assessments were

made in one or more of the following years: 1992, 1997, 1998, 1999, and 2005. (Response,

p.7 & Ex. C,D,F,G, I) 

Assessments for tax year 1989 were entered on August 10, 1992 while the automatic

bankruptcy stay was in effect. (See Response, Ex. F) The record also reflects that the

assessments were subsequently abated. (Id.) Reassessment occurred on December 8, 1997,

after the stay was no longer in effect. The Court does not consider the 1992 assessment

herein in light of the abatement of same. Instead, the Court considers the assessment for tax

year 1987 as made on December 8, 1997. 

In mid-march 1994, Defendant Howard filed amended income tax returns for the years

1987 through 1991. (Response, p. 5 & Ex. C,D,F,G, I) Ordinarily, the IRS would have had

three years from the date Defendant Howard filed the amended returns to make liability

assessments. (Id. at p.5 (citing 26 U.S.C. § 6501(a)) However, Defendant Howard’s first

bankruptcy proceeding, filed in 1991, was still pending when he filed the amended returns

in 1994. Therefore, the automatic stay precluded the IRS from making the assessments while

the bankruptcy proceeding was pending. See 11 U.S.C. § 362(a) (1991) subsequently

amended by Bankruptcy Reform Act of 1994, H.R. 5116, 103d Cong. §§ 116, 702.

Consequently, the three-year limitations period under section 6501(a) did not begin to run

until the July 24, 1996 conclusion of the first bankruptcy proceeding and the IRS had until

July 24, 1999 to make the assessments at issue. Because the assessments made in 1997,

1998, and January 1, 1999 were made prior to July 24, 1999, those assessments are not timebarred. 

Further, with regard to tax year 1987, the IRS assessed $16.00 in fees on October 3,

2005. (Response, Ex. C) Collection fees serve to reimburse the Government for its collection

efforts. See e.g. United States v. Powell, 2001 WL 283808 at *9 (D.Ariz. Feb. 20, 2001).

The Government persuasively argues that because the collection fees herein “were assessed

during the period for collection and are not taxes, they are not subject to the assessment

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Only the earliest assessment date for each tax year is discussed because “[o]nce it is

shown that the statute of limitations has not run on the earliest date, all assessments made

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statute of limitations which applies only to ‘tax[es] imposed...’” under Title 26.

(Supplemental Brief, p. 4 (quoting 26 U.S.C. §6501)) The Government’s argument is well

taken. The assessment of the collection fee is not barred by section 6501(a).

(3.) Assessment for Civil Penalties

On May 6, 1996, the IRS assessed civil penalties pursuant to 26 U.S.C. § 6673 for

tax years 1988, 1990, 1991, and 1992. (Response, Ex. E,H,J,K) The Court requested that the

Government address whether the automatic stay in effect during Defendant Howard’s first

bankruptcy proceeding, (i.e., from June 14, 1991 through July 24, 1996) precluded the May

6, 1996 assessments. (May 15, 2008 Order) (Doc. No. 24) The Government points out that

the penalties were abated the same day they were made (i.e. on May 6, 1996) in light of the

automatic stay. (Supplemental Brief, p. 5 & Ex. A-D) (Doc. No. 25) After the stay was no

longer in effect, the IRS made the civil penalty assessments again on May 18, 1998. (Id.)

“[T]he balance due presented in charts in...” the Government’s briefs and Complaint

“consists of interest accruals beginning on May 18, 1998, not May 6, 1996.” (Id. at p. 5)

Consequently, the amount specified in the Complaint for civil penalties is “collectable and

owing to the IRS.” (Id. at p. 6)

e. Timeliness of Collection

(1.) Collection for Income Tax Year 1983

Defendant Howard argues that the Government has already collected for 1983

liabilities. 

The Government concedes that by way of levy, the IRS fully collected on the income

tax liabilities that were assessed on or before July 4, 2004. (Response, p. 8, Ex. A)

Subsequent to the IRS’ levy, the IRS assessed an additional $10,000 penalty on October 6,

2005 and $16.00 in fees on March 26, 2007. (Id.) Therefore, the earliest relevant assessment

date for 1983 income tax liabilities is October 6, 2005.6

 Pursuant to the 10 year statute of

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thereafter are necessarily timely as well.” (Response, p.8 n.4)

7

Ten years from July 13, 1998 is Sunday, July 13, 2008. Rule 6(a) of the Federal

Rules of Civil Procedure provides that “in computing any time period specified

in...any...statute...[i]nclude the last day of the period unless it is a Saturday, Sunday, [or] legal

holiday....When the last day is excluded, the period runs until the end of the next day that is

not a Saturday, Sunday, [or] legal holiday...” Fed.R.Civ.P. 6(a)(3). Because July 13, 2008

falls on a Sunday, the statute of limitations will not expire until Monday, July 14, 2008. Id.;

Hart v. United States, 817 F.2d 78, 80 (9th Cir. 1987) (Rule 6(a) applies to statute of

limitations calculation).

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limitations for commencement of collection proceedings under section 6502(a), the

Government has until October 6, 2015 to file such action. Thus, the Government’s action

filed on November 26, 2007 is timely with regard to tax year 1983.

(2.) Collection for Income Tax Year 1984

The earliest assessment date for 1984 income tax liabilities is May 10, 1990.

(Response, Ex. B) Ordinarily, the Government had 10 years, i.e. until May 10, 2000, to

commence a collection action. See 26 U.S.C. § 6502(a). However, the statute of limitations

was tolled for a total of 2,842 days (2,497 days due to Defendant Howard’s bankruptcy

proceedings and 345 days due to the CDP proceeding). Therefore, the statute of limitations

expired on February 20, 2008. The Government’s action filed on November 26, 2007 is

timely with regard to tax year 1984.

(3.) Collection for Income Tax Years 1987 and 1988

The earliest assessment date for 1987 and 1988 income tax liabilities is July 13, 1998.

(Response, Ex. C, D) Without tolling, the Government had 10 years, i.e. until July 14, 20087

to commence a collection action. See 26 U.S.C. § 6502(a); Fed.R.Civ.P. (6)(a)(3). Thus,

even without consideration of the tolling provisions, this action is timely. Moreover,

Defendant Howard’s 1999 bankruptcy proceeding tolled the statute of limitations for 192

days until January 21, 2009. The Government’s action filed on November 26, 2007 is timely

with regard to tax years 1987 and 1988.

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If the August 10, 1992 assessment date is used, then without tolling, the Government

had until August 12, 2002 to commence collection proceedings. See 26 U.S.C. § 6502(a);

Fed.R.Civ.P. 6(a)(3). The statute of limitations was tolled for 2,074 days (due to Defendant

Howard’s combined bankruptcy proceedings). Therefore, the statute of limitations expired

on April 16, 2008. If the December 8, 1997 assessment date is used, then without tolling, the

Government had until December 10, 2007 to commence collection proceedings. See 26

U.S.C. § 6502(a); Fed.R.Civ.P. 6(a)(3). With 192 days tolling (due to Defendant Howard’s

third bankruptcy proceeding), the Government had until June 19, 2008 to commence

collection proceedings. Consequently, the Government’s action filed on November 26, 2007

is timely with regard to tax year 1989.

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(4.) Collection for Income Tax Year 1989

According to the Government, the earliest assessment date for 1989 tax liabilities is

August 10, 1992. (Response, p.9) However, as discussed supra, at p.9, the 1992 assessment

was abated and reassessed on December 8, 1997. (Response, Ex. F) Nonetheless, the

Government’s action filed on November 26, 2007 is timely with regard to either assessment

date.8

(5.) Collection for Income Tax Years 1990 and 1991

The earliest assessment date for 1990 and 1991 income tax liabilities is June 16, 1997.

(Response, Ex. G, I) Without tolling, the Government had until June 18, 2007 to commence

collection proceedings. See 26 U.S.C. § 6502(a); Fed.R.Civ.P. 6(a)(3). The Government

applies a portion of the six-month tolling provision under section 6503(h)(2) attributable to

Defendant Howard’s first two bankruptcy proceedings. (See Response, p. 9) Although the

tolling period was not over, the automatic stay was not in effect on the June 16, 1997

assessment date. Therefore, the IRS was not prevented from “making the assessment or

from collecting” on that date due to the automatic stay. 26 U.S.C. § 6503(h)(2). Hence, it

is questionable whether section the 6503(h)(2) tolling provision attributable to the first and

second bankruptcy proceedings applies in this particular instance. Section 6503(h)(2) does

apply to toll the limitations period 192 days for Defendant Howard’s third bankruptcy

proceeding, thus, resulting in a December 27, 2007 statute of limitations date. See 26 U.S.C.

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9

Using the Government’s calculation, the expiration date is April 16, 2008. The

Government indicated May 15, 2008 for tax year 1990 and April 16, 2009 for tax year 1991.

(Response, pp.7, 9) This discrepancy is of no moment given that under the corrected date,

April 16, 2008, the Government’s action filed on November 26, 2007 is timely with regard

to tax years 1990 and 1991.

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§ 6503(h)(2). Consequently, under either the Government’s calculation9

 or the Court’s, the

Government’s action filed on November 26, 2007 is timely with regard to tax years 1990 and

1991.

(6.) Collection for Income Tax Year 1996

The earliest assessment date for 1996 income tax liabilities is September 2, 2002.

(Response, Ex. L) The statute of limitations will expire on September 2, 2012. See 26

U.S.C. § 6502(a). The Government’s action filed on November 26, 2007 is timely with

regard to tax year 1996.

(7.) Collection for Income Tax Years 1997 through 1999

The earliest assessment date for tax years 1997, 1998 and 1999 is May 10, 2004.

(Response, Ex. M, N, O) The statute of limitations will expire on May 12, 2014. See 26

U.S.C. § 6502(a); Fed.R.Civ.P. 6(a)(3). The Government’s action filed on November 26,

2007 is timely with regard to tax years 1997 through 1999.

(8.) Collection for Income Tax Years 2000 through 2003

The earliest date of assessment for tax years 2000 through 2003 occurred in 2006.

(Response, Ex. P, Q, R, S) The statute of limitations will expire in 2016. See 26 U.S.C. §

6502(a). The Government’s action filed on November 26, 2007 is timely with regard to tax

years 2000 through 2003.

(9.) Collection for Civil Penalties for 1988, 1990, 1991, and 1992

The Government initially calculated the statute of limitations for 1988, 1990, 1991

and 1992 using the earliest assessment date of May 6, 1996. (Response, pp. 10-11) However,

the Government has explained that the instant collection action is for penalties assessed on

May 18, 1998 given that the May 6, 1996 assessment was abated due to the automatic

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10If May 6, 1996 is used, the limitations period would have ordinarily expired on May

8, 2006. See 26 U.S.C. § 6502(a); Fed.R.Civ.P. 6(a)(3). The statute of limitations was tolled

until April 16, 2008--a total of 709 days (from May 6, 1996 until October 4, 1997 and April

16, 1999 through October 24, 1999 due to Defendant Howard’s bankruptcy proceedings)

The Government states that the limitations period would expire on April 13, 2009

(Response, p. 7) or March 13, 2009 (Response, p.11) However, when using the

Government’s stated figures to make the calculation, the result is March 14, 2008. Any

discrepancy is inconsequential given that the Government commenced the instant action in

November 2007. If the May 18, 1998 assessment date is used, allowing 192 days tolling for

the third bankruptcy proceeding, the statute of limitations would expire in November 2008.

In sum, the Government’s action filed on November 26, 2007 is timely for the civil penalties

for 1988, 1990, 1991, and 1992.

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bankruptcy stay then in effect. (Supplemental Brief, p. 5) The Government’s action filed on

November 26, 2007 is timely with regard to either assessment date.10

3. Homestead Exemption

Defendant Howard also argues that the homestead exemption shields his property

from foreclosure. It is well-settled that homestead exemptions under state law are ineffective

against federal tax liens. See United States v. Rodgers, 461 U.S. 677, 693-694 (1983) (the

Supremacy Clause prevents the use of a state-created interest to block a forced sale under 26

U.S.C. § 7403); United States v. Bess, 357 U.S. 51, 57 (1958), superseded on other grounds

by 26 U.S.C. § 6332(b), (“The provisions of the Internal Revenue Act creating liens upon

taxpayer’s property for unpaid taxes...do not specifically provide for recognition of such state

laws.”); see also William D. Elliott, Federal Tax Collections, Liens & Levies, ¶ 13.11[1]

(“any property exempt from execution under state, personal, or homestead exemption laws

is subject to levy for collection of federal taxes.”) Defendant Howard’s property is subject

to the instant action.

C. Defendant Howard’s January 8, 2008 Motion to Dismiss (Doc. No. 12)

The Government commenced this action “pursuant to 26 U.S.C. §§ 7401 and 7403 of

the Internal Revenue Code at the direction of the Attorney General of the United States and

at the request and with the authorization of the Chief Counsel of the Internal Revenue

Service, a delegate of the Secretary of the Treasury.” (Complaint, pp. 1-2) Defendant

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Howard argues that the Court lacks jurisdiction because “[t]here is no enabling [r]egulation

for section 7403 in 26 C.F.R...” and without such regulation the law is without effect.

(January 8, 2008 Motion, p. 1) He also argues that jurisdiction is lacking because the

Secretary of the Treasury has not delegated authority to “any IRS agent to commence” a civil

suit under section 7403. 

Section 7403(a) provides:

In any case where there has been a refusal or neglect to pay any tax, or to

discharge any liability in respect thereof, whether or not levy has been made,

the Attorney General or his delegate, at the request of the Secretary, may direct

a civil action to be filed in a district court of the United States to enforce the

lien of the United States under this title with respect to such tax or liability or

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 or liability. For

purposes of the preceding sentence, any acceleration of payment under section

6166(g) shall be treated as a neglect to pay tax.

26 U.S.C. § 7403(a). The statute also specifies the appropriate parties and vests the district

court with jurisdiction to adjudicate the matter and to a appoint a receiver. 26 U.S.C. §

7403(b)-(d). Defendant Howard stresses that the Code of Federal Regulations does not

mention a delegate of the Secretary. (January 8, 2008 Motion, p. 2) 

Congress has granted the Secretary of the Treasury broad authority to “prescribe all

needful rules and regulations for the enforcement of [the tax code], including all rules and

regulations as may be necessary by reason of any alteration of law in relation to internal

revenue.” 26 U.S.C. § 7805(a) (emphasis added). See also Granse v. United States, 892

F.Supp. 219, 224 (D.Minn. 1995) (citing Commissioner of Internal Revenue v. Engle, 464

U.S. 206, 226-27, 104 S.Ct. 597, 604, 78 L.Ed.2d 420 (1984)). However, “[s]ection 7805(a)

does not require the promulgation of regulations as a prerequisite to the enforcement of each

and every provision of the Code.” Granse, 892 F.Supp. at 224 (emphasis in original).

Instead, section 7805(a): 

is a general grant of authority by Congress to the Commissioner to

promulgate-as necessary-“interpretive regulations” stating the agency's views

of what the existing Code provisions already require. E.I. duPont de Nemours

& Co. v. Commissioner of Internal Revenue, 41 F.3d 130, 135 & n. 20 (3[rd]

Cir.1994). ..The power of the Commissioner to promulgate regulations

pursuant to section 7805(a) 

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... “is not the power to make law,” but only the power “to carry

into effect” the will of Congress as expressed by the statute.

Manhattan General Equipment Co. v. Commissioner, 297 U.S.

129, 134... (1936). In cases where “the provisions of the [Code]

are unambiguous, and its directions specific, there is no power

to amend it by regulation.” Koshland v. Helvering, 298 U.S.

441, 447... (1936). 

Lovett's Estate v. United States, 621 F.2d 1130, 1135 (Ct.Cl.1980). Thus, if the

Congressional mandate of the Code provision is sufficiently clear, an

interpretative regulation is not necessary. Russell v. United States, 95-1

U.S.Tax Cas. (CCH) ¶ 50,029, at 87,122, 1994 WL 75063 (W.D.Mich. Nov.

23, 1994). 

Id. (holding that the plaintiff failed to show that the statute at issue was “so ambiguous or

unclear as to require the promulgation of an interpretative regulation.”). See also Watts v.

Internal Revenue Serv., 925 F.Supp. 271, 277(D.N.J. 1996) (“By ‘needful rules and

regulations,’ Congress did not intend to require the promulgation of unnecessary

regulations.”); Capra v. Smith, 1998 WL 723153 at *4 (D. Ariz. July 20, 1998) (The

provisions of section 7508(a) do “not mean that implementing regulations are required to

enforce every provision in the tax code.”); United States v. Stoecklin, 848 F.Supp 1521, 1525

(M.D. Fla. 1994) (“regulatory embellishment is unnecessary...” where the procedure is

clearly set forth in the statute). Section 7403(a) specifically authorizes “the Attorney General

or his delegate, at the request of the Secretary,...” to direct the filing of civil enforcement

actions in the district court. 26 U.S.C. § 7403(a). On this record, Defendant Howard has

failed to show that section 7403(a) is so ambiguous or unclear as to require the promulgation

of an interpretive regulation.

Defendant Howard also argues that the “appropriate” delegate of the Secretary is an

an ATF agent and that ATF agents are not authorized “to enforce any Subtitle A Internal

Revenue statutes, but [are] restricted to properly taxed commodities under his (her) authority,

subject to tax. Alcohol, Tobacco, and Firearms and their related products.” (January 8, 2008

Motion, p.2) 

Defendant Howard is mistaken. The Complaint alleges that this action was

commenced by the Attorney General, “at the request and with the authorization of the Chief

Counsel of the Internal Revenue Service, a delegate of the Secretary of the Treasury.”

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11On June 17, 2008 section 7701 was amended. Heroes Earnings Assistance and

Relief Tax Act of 2008, Pub.L.No. 110-245, 122 Stat. 1624 (2008). The amendments do not

affect the terms discussed herein.

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(Complaint, pp. 1-2) Congress has authorized the Secretary of the Treasury to request the

Attorney General, or his delegate, to file civil court actions for the collection of taxes and

enforcement of liens. 26 U.S.C. §§ 7401 (civil actions must be authorized by the Secretary

of the Treasury and commenced under the direction of the Attorney General or his delegate);

7403 (the Attorney General or his delegate, may file an action in district court at the request

of the Secretary). The Secretary, through Treasury Department Orders, has delegated

authority to the Commissioner of Internal Revenue to take various actions to administer and

enforce the Internal Revenue laws. See United States v. Saunders, 951 F.2d 1065, 1067-1068

(9th Cir. 1991); Lonsdale v. United States, 919 F.2d 1440, 1445-1446 & n.3 (10th Cir. 1999).

Thus, authority lies with the IRS, not the ATF, for this action. See e.g., Id.; Fairchild v. IRS,

450 F.Supp. 2d 654, 659 (M.D. La. 2006) (in light of delegation order, “the IRS, not the

ATF” had authority to file Notices of Federal Tax Liens). This action was validly

authorized and this Court has jurisdiction over this matter.

D. Defendant Howard’s January 28, 2008 Motion to Dismiss (Doc. No. 15)

Defendant Howard challenges the authority of the IRS to assess taxes and to prepare

substitute returns. He also challenges the existence of “‘Income Tax’” and its application to

himself as a “[p]rivate [m]an” who was “paid for work in the private sector.” (January 28,

2008 Motion, pp. 2-6) 

Under section 6201 of the Internal Revenue Code, “[t]he Secretary is authorized and

required to make the inquiries, determinations, and assessments of all taxes (including

interest, additional amounts, additions to the tax, and assessable penalties) imposed by this

title...” 26 U.S.C. § 6201(a). The term “Secretary” is defined in the Internal Revenue Code

to mean “the Secretary of the Treasury or his delegate.” 26 U.S.C. § 7701(a)(11)(B).11 “The

term ‘or his delegate’...when used with reference to the Secretary of the Treasury means any

officer, employee, or agency of the Treasury Department duly authorized by the Secretary

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of the Treasury directly, or indirectly by one or more redelegations of authority to perform

the function mentioned or described in the context...” 26 U.S.C. § 7701(a)(12)(A)(i). The

Ninth Circuit has recognized that the IRS has authority to assess taxes. See Law Offices of

Jonathan A. Stein v. Cadle Co., 250 F.3d 716, 720 (9th Cir. 2001) (citing 26 U.S.C. §§6201-

6204). 

Additionally, section 6020(b) authorizes “the Secretary” to make substitute returns

where a “person fails to make any return required by any internal revenue law or

regulation...or makes, wilfully or otherwise, a false or fraudulent return...” 26 U.S.C. §

6020(b)(1). Further, where no return is filed, “the tax may be assessed, or a proceeding in

court for the collection of such tax may be begun without assessment, at any time.” 26

U.S.C. § 6501(c)(3). “Treasury regulations specifically allow the Secretary to delegate the

authority to prepare [substitute returns] to district directors or other IRS employees.” In re

Rosemiller, 188 B.R. 129, 136 (D.N.J. 1995) (citing 26 CFR 301.6020–1(b) and rejecting

argument that IRS employee did not have authority to prepare substitute return). See also

Hughes, 953 F.2d at 536 (The Secretary may delegate power to collect taxes “down the chain

of command...to the Commissioner of Internal Revenue, to local IRS employees...”) Thus,

despite Defendant Howard’s argument to the contrary, the IRS was authorized to prepare

substitute returns. 

As to Defendant Howard’s assertions that there is no income tax, that the income tax

is not applicable to private men, and that being paid for work in the private sector does not

constitute a revenue taxable activity, the Government persuasively argues that, “[t]here is

simply no support or authority for Howard’s arguments....” (Response to Third Motion, p.

4) (Doc. No. 16) See Lonsdale, 919 F.2d at 1448 (characterizing arguments that the income

tax is invalid and does not apply to individuals and wages as “completely lacking in legal

merit and patently frivolous...”). In the context of Defendant Howard’s arguments raised

herein, the Government’s position prevails. Id. (See also Response to Third Motion, p. 4

(citing Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431, (1955) (holding that

income is not limited to gains or profits); Reese v. United States, 24 F.3d 228, 231 (Fed.Cir.

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1994) (noting that 26 U.S.C. § 61 defines “gross income” as income from whatever source

derived)). 

Defendant Howard also states that “[t]here are: Direct Taxes, which must be

apportioned.” (January 28, 2008 Motion, p.2) The Government construes Defendant

Howard’s statement “as an assertion that the Sixteenth Amendment does not authorize a

direct non-apportioned income tax on resident United States citizens...” (Response to Third

Motion, p.4) The Ninth Circuit has noted the “patent absurdity and frivolity” of such an

argument. In re Becraft, 885 F.2d 547, 549 (9th Cir. 1989) (“For over 75 years, the Supreme

Court and the lower federal courts have both implicitly and explicitly recognized the

Sixteenth Amendment’s authorization of a non-apportioned direct income tax on United

States citizens residing in the United States and thus the validity of the federal income tax

laws as applied to such citizens.”) (citations omitted).

E. Defendant Howard’s February 25, 2008 Motion to Dismiss (Doc. No. 20)

Defendant Howard’s February 25, 2008 Motion to Dismiss consists of a litany of

reasons why he believes that “[t]he prosecution has brought a bogus filing to this Court...”

(February 25, 2008 Motion to Dismiss, p.1) As in his previous motions discussed above, he

challenges the existence of the income tax and its application to individuals, IRS authority

as exercised in this action, this Court’s jurisdiction, apportionment, in addition to other vague

assertions concerning the procedures employed by the IRS and lack of master files. The

Government asserts that Defendant Howard’s “arguments are frivolous, see Lonsdale..., [919

F.2d at 1449]...(characterizing arguments similar to those made by Howard as ‘completely

lacking in legal merit and patently frivolous’)...” (Response to Fourth Motion, p. 3) (Doc.

No. 21) The Court agrees.

III. CONCLUSION

The Government’s action is timely filed. This Court has jurisdiction over this action.

Defendant Howard’s arguments advanced in his four pending motions to dismiss are without

merit. Therefore, this action should not be dismissed.

IV. RECOMMENDATION

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For the foregoing reasons, the Magistrate Judge recommends that the District Court:

(1) deny Defendant Howard’s December 26, 2007 Motion to Dismiss, construed

as a motion for summary judgment as discussed above, (Doc. No. 10);

(2) deny Defendant Howard’s January 8, 2008 Motion to Dismiss (Doc. No. 12);

(3) deny Defendant Howard’s January 28, 2008 Motion to Dismiss (Doc. No. 15);

(4) deny Defendant Howard’s February 25, 2008 Motion to Dismiss (Doc. No.

20); and

(5) direct Defendant Howard to file an Answer to the Complaint within 20 days

after the Court’s Order.

Pursuant to 28 U.S.C. §636(b), any party may serve and file written objections within

ten days after being served with a copy of this Report and Recommendation. A party may

respond to another party's objections within ten days after being served with a copy thereof.

Fed.R.Civ.P. 72(b). 

If objections are not timely filed, then the parties' right to de novo review by the

District Court may be deemed waived. See United States v. Reyna-Tapia, 328 F.3d 1114,

1121 (9th Cir.) (en banc), cert. denied, 540 U.S. 900 (2003).

DATED this 25th day of June, 2008.

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