Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_05-cv-00394/USCOURTS-azd-4_05-cv-00394-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7426 IRS: Wrongful Levy for Taxes

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1 Defendant notes in its Motion to Dismiss that the numerous

exhibits attached to the Complaint were not attached to the copy

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

MICHAEL C. CALHOUN,

Plaintiff, 

vs.

UNITED STATES OF AMERICA, 

Defendant. 

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No. CV 05-0394-TUC-CKJ (BPV)

REPORT AND RECOMMENDATION

Currently pending before this Court is a Motion to Dismiss (Document # 3), filed

by Defendant on July 28, 2005, along with a memorandum of points and authorities,

and a Declaration of John B. Snyder III ("Declaration"). On August 23, 2005, Plaintiff

filed a response. For reasons which follow, the Magistrate Judge recommends that the

District Court, after its independent review GRANT Defendants' Motion to Dismiss. 

Procedural Background

On June 17, 2005, Plaintiff filed a Complaint in the United States District Court

invoking the jurisdiction of the Court "pursuant to 26 U.S.C. 6330(d)(1)(B) to set aside

the 'Determination' at issue, and award Plaintiff costs and damages pursuant to 26

U.S.C. 7433." (Complaint, p. 1.) 

Plaintiff contends that the determination was issued in violation of law.

(Complaint, p. 2) The rest of the Complaint sets forth, in paragraphs numbered 1

through 40, Plaintiff's arguments, factual summaries, and references to attached

transcripts and exhibits1

 in support of the primary allegation of his Complaint. 

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of the Complaint served on the United States. 

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The facts which give rise to the Complaint are essentially uncontested. Plaintiff

received two letters, dated January 28, 2004, from a Thomas D. Mathews, Compliance

Center, Ogden Service Center. (Complaint, Ex. B) The letters state that "This letter is

your NOTICE OF DEFICIENCY, as required by law." (Id.) Plaintiff concedes that he

received these letters, however, Plaintiff contests certain procedural irregularities,

including the sufficiency of these letters to serve as Notices of Deficiency for the tax

years 2000 and 2001 for numerous reasons. (See Complaint and attached transcript.)

The letters instructed Plaintiff, if he wished to contest the determination, to petition the

United States Tax Court within 90 days of the date of the letter. (Complaint, Ex. B &

C.) 

In response to the January 28, 2004 letter, Plaintiff sent letters to Secretary of

Treasury, John W. Snow, Commissioner of the Internal Revenue Service ("IRS") Mark

W. Everson, Thomas D. Mathews, Compliance Center, and requested that Mr. Mathews

forward a copy of the letter to a Mr. Parizek. (Complaint, ¶ 2, Ex. D, E.) 

Plaintiff received no direct response from the above letters, but did receive a

notice entitled "Final Notice of Intent to Levy and Notice of Your Right to a Hearing,"

dated October 29, 2004, which instructed Plaintiff to "Call Immediately to Prevent

Property Loss." (Complaint, Ex. F.) 

Plaintiff filed a timely request for a collection due process hearing, and a face-toface hearing was scheduled for May 10, 2005. (Complaint, Ex. G, H; Declaration, Ex.

A.) 

The hearing was conducted and Plaintiff raised many issues, again, dealing

primarily with alleged procedural irregularities, including statutory sufficiency of the

Notice and Demand for payment, the verification of the notice and demand at the

hearing, the lack of delegation of authority of the Secretary to agents whose signatures

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appeared on various notices received by Plaintiff, and the sufficiency of the collection

due process hearing itself. (Complaint, Ex. I) 

On May 19, 2005, the IRS sent Plaintiff a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330. (Declaration, Ex. A) The Notice

of Determination informed Plaintiff that it was the determination of Appeals to fully

sustain the Compliance Function, that the Plaintiff presented only frivolous arguments

and did not provide the necessary documentation for consideration to be given to a less

intrusive collection alternative. (Id.) The Notice of Determination also informed

Plaintiff that to dispute the determination he must file a petition with the United States

Tax Court for a redetermination within 30 days from the date of the letter. (Id.) 

This Complaint followed. 

Discussion

Defendant's Position

Defendant moves to dismiss for lack of subject matter jurisdiction. Defendant

argues that to the extent that Plaintiff is seeking judicial review of the IRS's

determination under 26 U.S.C. § 6330, jurisdiction lies with the United States Tax

Court. To the extent that Plaintiff is seeking an award of costs or damages under 26

U.S.C. § 7433, this Court is deprived of jurisdiction unless Plaintiff has exhausted

administrative remedies mandated under that section. Finally, to the extent Plaintiff is

seeking punitive damages against the United States, sovereign immunity prevents

Plaintiff from doing so.

Plaintiff's Position

Plaintiff responds by clarifying that he is not seeking judicial review of a 26

U.S.C. § 6330 hearing, but is bringing a civil action as provided for by 26 U.S.C. §

7433, and intends to prove that the Defendant recklessly or intentionally disregarded

the provisions of 26 U.S.C. § 6330 such that no § 6330 hearing even took place. 

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Plaintiff further contends that he has exhausted his administrative remedies

through the issuance of above mentioned letters to the Commissioner of the IRS and the

Secretary of the Treasury, and that the collection due process hearing was Plaintiff's

final administrative remedy. 

Analysis

It is the Magistrate Judge's Finding and Recommendation that the Plaintiff has

waived, pursuant to Paragraph 2 of his Response, any judicial review of the

Determination by this Court, either of the underlying liability or of any procedural

irregularities, asserted in his claim. 

Jurisdiction under 26 U.S.C. § 6330

In the alternative, however, this Court will address this Court's jurisdiction over

Plaintiff's request to set aside the Determination at issue pursuant to 26 U.S.C. §

6330(d)(1)(B). 

The United States, as a sovereign, is immune from suit unless it has consented to be

sued. United States v. Dalm, 494 U.S. 596, 608 (1990). A waiver of sovereign immunity must

be explicit and is strictly construed in favor of the United States. Id. The party suing the

United States bears the burden of demonstrating a waiver of immunity. Anderson v. Zenali,

163 F.3d 605 (9th Cir.1998) (quoting Cominotto v. United States, 802 F.2d 1127, 1129 (9th Cir.

1986)). 

To the extent that Plaintiff is attempting to obtain judicial review of the

Determination pursuant to 26 U.S.C. § 6330, jurisdiction is vested in the court that has

jurisdiction of the underlying tax liability. 26 U.S.C. § 6330(d)(1). Exhibits B and C

of Plaintiff's Complaint indicate that the underlying tax liability at issue is an income

tax liability. Plaintiff himself makes arguments in his Complaint based on his assertion

that the underlying tax liability is an income tax liability. (See Complaint, ¶ 39.f.3.)

Furthermore, Plaintiff does not dispute Defendant's characterization in the Motion to

Dismiss of the underlying liability as an income tax liability. 

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Pursuant to Treasury Regulation, if the tax liabilities at issue are income tax

liabilities, the United States Tax Court has exclusive jurisdiction. See Treas.Reg. §

301.6330-1T(f)(2), Q-F3/A-F3. There is no distinction present in the statute between

cases of procedural versus substantive content and Plaintiff has not produced any

relevant law which would suggest that a procedural claim should be treated differently

for purposes of judicial review. Judicial review of the Determination in this case

properly lies with the United States Tax Court. 

Jurisdiction under 26 U.S.C. § 7433

Plaintiff also asserts jurisdiction under 26 U.S.C. § 7433. Section 7433 provides

for a civil cause of action for damages, against the United States in a district court, if,

in connection with any collection of Federal tax with respect to a taxpayer, any officer

of employee of the Internal Revenue Service recklessly or intentionally, or by reason

of negligence disregards any provision of the tax code or any regulation promulgated

thereunder. See 26 U.S.C. § 7433(a). 

Damages may not be awarded, however, in an action brought pursuant to § 7433,

unless the court first determines that the plaintiff has exhausted the administrative

remedies available to a plaintiff within the Internal Revenue Service. See 26 U.S.C. §

7433(d)(1). See also Conforte v. United States, 979 F.2d 1375,1377 (9th Cir. 1992).

 The exhaustion requirements under § 7433 are governed by 26 C.F.R. § 301.7433-1.

Among these requirements are that an administrative claim is sent to the Area Director,

Attn: Compliance Technical Support Manager of the area in which the taxpayer

currently resides. 26 C.F.R. § 301.7433-1(e). There is no indication that Plaintiff has

complied with these filing guidelines. Plaintiffs only allegation that he has exhausted

administrative remedies falls short of complying with the appropriate guidelines.

Plaintiff therefore cannot establish jurisdiction under § 7433. All claims pursuant to

this section are properly dismissed. 

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Other Punitive Damages

As noted above, it is the Plaintiff's burden to demonstrate a waiver of sovereign

immunity establishing jurisdiction over all claims. Plaintiff has not met that burden

inasmuch as his Complaint requests relief in the form of punitive damages.

Recommendation

In light of the foregoing, this Court recommends that the District Judge, after its

independent review, GRANT Defendant's Motion to Dismiss for Lack of Subject

Matter Jurisdiction. (Document #3)

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

objections within 10 days of being served with a copy of this Report and

Recommendation. If objections are not timely filed, they may be deemed waived. If

objections are filed, the parties should use the following case number: CIV 05-0394-

TUC-CKJ.

PLAINTIFF IS FURTHER NOTIFIED THAT IF HE FILES OBJECTIONS TO

THIS RECOMMENDATION HE SHALL SERVE ON DEFENDANT, AT THE

SAME TIME AS THE OBJECTIONS, A COPY OF ALL EXHIBITS AND

TRANSCRIPTS THAT WERE ORIGINALLY FILED IN THE COURT ALONG

WITH THE COMPLAINT IN THIS MATTER. 

DATED this 3rd day of February, 2006.

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