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Timestamp: 2017-05-25 07:31:15
Document Index: 737229748

Matched Legal Cases: ['§ 6851', '§ 6851', '§ 6851', '§ 6861', '§ 6851', '§ 6211', '§ 6851', '§ 7421', '§ 6861', '§ 6851', '§ 6861', '§ 6211', '§ 6851', '§ 6851', '§ 6851', '§ 6861', '§ 6861', '§ 6211', '§ 6211', '§ 6851', '§ 6851', '§ 6861', '§ 6851', '§ 6861', '§ 6861', '§ 6331', '§ 6851', '§ 7421', '§ 7421', '§ 2201', '§ 6851', '§ 443', '§ 443', '§ 6331', '§ 7421', '§ 6861', '§ 6861', '§ 6851', '§ 6851', '§ 6861', '§ 6861', '§ 6851', '§ 6211', '§ 6861', '§ 6861', '§ 6861', '§ 6213', '§ 6863', '§ 6863', '§ 6861', '§ 6851', '§ 6211', '§ 6861', '§ 6861', '§ 6851', '§ 6861', '§ 6861', '§ 6851', '§ 1346', '§ 6532', '§ 6861', '§ 6211', '§ 6211', '§ 301', '§ 301', '§ 6851', '§ 443', '§ 6851', '§ 6851', '§ 6851', '§ 443', '§ 7701', '§ 6211', '§ 6851', '§ 6871', '§ 6861', '§ 6851', '§ 6861', '§ 250', '§ 6851', '§ 3182', '§ 6861', '§ 250', '§ 250', '§ 6851', '§ 6861', '§ 7421', '§ 6851', '§ 6851', '§ 6851', '§ 6861', '§ 6201', '§ 6201', '§ 6861', '§ 6211', '§ 6201', '§ 6211', '§ 301', '§ 301', '§ 443', '§ 6861', '§ 6331', '§ 6851', '§ 49', '§ 6851', '§ 6851', '§ 441', '§ 6211', '§ 6861', '§ 6861', '§ 6861', '§ 250', '§ 6861', '§ 6861', '§ 6863', '§ 6861', '§ 7421', '§ 6213', '§ 6861', '§ 6861', '§ 6861', '§ 6861', '§ 6213', '§ 6213', '§ 6863', '§ 6861', '§ 6213', '§ 6851', '§ 6211', '§ 6211', '§ 6851', '§ 601', '§ 601', '§ 1', '§ 1', '§ 6201', '§ 6201', '§ 6203', '§ 6321', '§ 6331', '§ 6861', '§ 6861', '§ 6851', '§ 10', '§ 3224', '§ 7421', '§ 7426', '§ 7426', '§ 7421', '§ 6861', '§ 6851', '§ 250', '§ 250', '§ 6851', '§ 3182', '§ 3226', '§ 1346', '§ 250', '§ 3182', '§ 900', '§ 900', '§ 282', '§ 273', '§ 6211', '§ 301', '§ 301', '§ 274', '§ 504', '§ 6851', '§ 1', '§ 1', '§ 6863', '§ 6861', '§ 6851', '§ 6851', '§ 6861', '§ 6201', '§ 6851', '§ 6861', '§ 6861', '§ 6851', '§ 6851', '§ 7806', '§ 7806', '§ 6851', '§ 6201', '§ 6861', '§ 6861', '§ 6851', '§ 6851', '§ 6211', '§ 6212', '§ 301', '§ 301', '§ 532', '§ 6532', '§ 1346', '§ 6851', '§ 6851', '§ 6851', '§ 250', '§ 6851', '§ 6861']

Laing Vs United States - Citation 104075 - Court Judgment | LegalCrystal
Save as PDF Add a Tag Add a Note Semantics Visualize Laing Vs. United States - Court Judgment	LegalCrystal Citationlegalcrystal.com/104075CourtUS Supreme CourtDecided OnJan-13-1976Case Number423 U.S. 161AppellantLaingRespondentUnited StatesExcerpt:
laing v. united states - 423 u.s. 161 (1976)
these cases involve two income tax payers whose taxable years were terminated by the internal revenue service (irs) prior to their normal expiration dates pursuant to the jeopardy termination provisions of § 6851(a)(1) of the internal revenue code of 1954 (code), which allow the irs immediately to terminate a taxpayer's taxable period when it finds that the taxpayer intends to commit any act..... Judgment:
These cases involve two income tax payers whose taxable years were terminated by the Internal Revenue Service (IRS) prior to their normal expiration dates pursuant to the jeopardy termination provisions of § 6851(a)(1) of the Internal Revenue Code of 1954 (Code), which allow the IRS immediately to terminate a taxpayer's taxable period when it finds that the taxpayer intends to commit any act tending to prejudice or render ineffectual the collection of his income tax for the current or. preceding taxable year. Under § 6851, the tax is due immediately upon termination, and, upon such termination, the taxpayer's taxable year comes to a close. In each case, after the taxpayer failed to file a return or pay the tax assessed as demanded, the IRS levied upon and seized property of the taxpayer without having sent a notice of deficiency to the taxpayer, a jurisdictional prerequisite to a taxpayer's suit in the Tax Court for redetermination of his tax liability, and without having followed the other procedures mandated by § 6861
of the Code for the assessment and collection of a deficiency whose collection is in jeopardy. The Government contends that such procedures are inapplicable to a tax liability arising after a § 6851 termination because such liability is not a "deficiency" within the meaning of § 6211(a) of the Code, where the term is defined as the amount of the tax imposed less any amount that may have been reported by the taxpayer on his return. In No. 73-1808 the District Court held that a deficiency notice is not required when a taxable period is terminated pursuant to § 6851(a)(1), and dismissed the taxpayer's suit for injunctive and declaratory relief on the ground,
that it was prohibited by the Anti-Injunction Act, § 7421(a) of the Code, and the Court of Appeals affirmed. In No. 74-75, the District Court granted the taxpayer injunctive relief, holding that the Anti-Injunction Act was inapplicable because of the IRS's failure to follow the procedures
of § 6861
Based on the plain language of the statutory provisions at issue, their place in the legislative scheme, and their legislative history, the tax owing, but not reported, at the time of a § 6851 termination is a deficiency whose assessment and collection is subject to the procedures of § 6861
and hence, because the District Director in each case failed to comply with these requirements, the taxpayers' suits were not barred by the Anti-Injunction Act. Pp.
423 U. S. 169
(a) Under the statutory definition of § 6211(a), the tax owing and unreported after a jeopardy termination, which in these cases, as in most § 6851 terminations, is the full tax due, is clearly a deficiency, there being nothing in the definition to suggest that a deficiency can arise only at the conclusion of a 12-month taxable year and it being sufficient that the taxable period in question has come to an end and the tax in question is due and unreported. Pp.
423 U. S. 173
(b) To deny a taxpayer subjected to a jeopardy termination the opportunity to litigate his tax liability in the Tax Court, as would be the case under the Government's view that the unreported tax due after a jeopardy termination is not a deficiency and that, hence, a deficiency notice is not required, would be out of keeping with the thrust of the Code, which generally allows income tax payers access to that court. Pp.
423 U. S. 176
(c) The jeopardy assessment and jeopardy termination provisions have long been treated in a closely parallel fashion, and there is nothing in the early codification of such provisions to suggest the contrary. Pp.
423 U. S. 177
MARSHALL, J., delivered the opinion of the Court, in which BRENNAN, STEWART, WHITE, and POWELL, JJ., joined. BRENNAN, J., filed a concurring opinion,
423 U. S. 185
. BLACKMUN, J., filed a dissenting opinion, in which BURGER, C.J., and REHNQUIST, J., joined,
423 U. S. 188
These companion cases involve two taxpayers whose taxable years were terminated by the Internal Revenue Service (IRS) prior to their normal expiration date pursuant to the jeopardy termination provisions of § 6851(a)(1) of the Internal Revenue Code of 1954 (Code), 26 U.S.C. § 6851(a)(1). [
] Section 6851(a)(1) allows the IRS immediately to terminate a taxpayer's taxable period when it finds that the taxpayer intends to do any act tending to prejudice or render ineffectual the collection of his income tax for the current or preceding taxable
We must decide whether the IRS, when assessing and collecting the unreported tax due after the termination of a taxpayer's taxable period, must follow the procedures mandated by § 6861
of the Code, 26 U.S.C. § 6861
for the assessment and collection of a deficiency whose collection is in jeopardy. [
] The answer, as we shall see, depends on whether the unreported tax due upon such a termination is a "deficiency" as defined in § 6211(a) of the Code, 26 U.S.C. § 6211(a) (1970 ed. and Supp. IV). The Government argues that the tax liability that arises after a § 6851 termination cannot be a "deficiency," and that the procedures for the assessment and collection of deficiencies in jeopardy are therefore inapplicable. We reject this argument. We agree with the taxpayers that any tax owing, but unreported, after a § 6851 termination is a deficiency, and that the assessment of that deficiency is subject to the provisions of § 6861
We reverse in No. 73-1808 and affirm in No. 74-75.
A. No. 73-1808,
Laing v. United States.
Petitioner James Burnett McKay Laing is a citizen of New Zealand.
He entered the United States from Canada on a temporary visitor's visa on May 31, 1972. On the following June 24, Mr. Laing and two companions sought to enter Canada from Vermont, but were refused entry by Canadian officials. As they turned back, they were detained by United States customs authorities at Derby, Vt. Upon a search of the vehicle in which the three were traveling, the customs officers discovered in the engine compartment a suitcase containing more than $300,000 in United States currency. The IRS District Director found that petitioner Laing and his companions were in the process of placing assets beyond the reach of the Government by removing them from the United States, thereby tending to prejudice or render ineffectual the collection of their income tax. [
] He declared the taxable periods of petitioner and his companions immediately terminated under § 6851(a). An assessment of $310,000 against each was orally asserted for the period from January 1 through June 24, 1972. The assessment against Mr. Laing was subsequently abated to the amount of $195,985.55 when a formal letter notice of termination and demand for payment and the filing of a return were sent. Mr. Laing received no deficiency notice under § 6861(b) and no specific information about how the amount of the tax was determined. [
in the vehicle. A portion thereof was applied to the tax assessed against Mr. Laing. [
On July 15, petitioner filed suit against the United States, the Commissioner of Internal Revenue, the District Director, and the Chief of the Collection Division, District of Vermont, in the United States District Court for the District of Vermont. He asserted the absence of a notice of deficiency, which he claimed was required under § 6861(b), and he challenged as violative of due process both the provisions of the levy and distraint statute, § 6331(a), and the actions of the IRS in seizing and retaining the currency "without any finding of a substantial or probable nexus between that money and taxable income." App. in No. 73-1808, p. 20. [
The District Court, relying on its controlling court's decision in
Irving v. Gray,
479 F.2d 20 (CA2 1973), held that a notice of deficiency is not required when a taxable period is terminated pursuant to § 6851(a)(1), and dismissed the suit as prohibited by the Federal Anti-Injunction Act, § 7421(a) of the Code, 26 U.S.C. § 7421(a), and as within the plain wording of the exception to the Declaratory Judgment Act, 28 U.S.C. § 2201, for a controversy with respect to federal taxes. 364 F.Supp. 469 (1973).
Adhering to its earlier ruling in
the Second Circuit affirmed per curiam. 496 F.2d 853 (1974). It expressly declined to follow the Sixth Circuit's decision in
Rambo v. United States,
492 F.2d 1060 (1974). [
] These rulings of the Second Circuit, and one of the
31 A.F.T.R.2d 73-800 (1971), appeared to be in conflict with holdings by other Courts of Appeals,
Rambo v. United States, supra; Hall v. United States,
493 F.2d 1211 (CA6 1974); and
Clark v. Campbell,
501 F.2d 108 (CA5 1974), [
] Suggesting that the conflict was irreconcilable and noting that some 70 pending cases in the federal courts depended on its resolution, the Solicitor General did not oppose Mr. Laing's petition for certiorari. We granted certiorari to resolve the conflict. [
] 419 U.S. 824 (1974).
B. No. 74-75,
Respondent Elizabeth Jane Hall is a resident of Shelbyville, Ky. After the arrest of her husband in Texas on drug-related charges, Kentucky state troopers obtained a warrant and searched respondent's home on January 31, 1973. They found controlled substances there. The next day, the Acting District Director notified respondent Hall by letter that he found her "involved in illicit drug activities, thereby tending to prejudice or render ineffectual collection of income tax for the period 1-1-73 thru 1-30-73." App. in No. 74-75, p. 11. Citing § 6851, the Acting Director declared respondent's taxable period for the first 30 days of 1973 "immediately terminated" and her income tax for that period "immediately due and payable."
He further informed respondent that a tax in the amount of $52,680.25 for the period "will be immediately assessed" and that "[d]emand for immediate payment of the full amount of this tax is hereby made."
A return for the terminated period, pursuant to § 443(a)(3) of the Code, 26 U.S.C. § 443(a)(3),
Respondent was unable to pay the tax so assessed. Therefore, the IRS, acting pursuant to § 6331, levied upon and seized respondent's 1970 Volkswagen and offered it for sale. [
Respondent Hall instituted suit on February 13 in the United States District Court for the Western District of Kentucky, seeking injunctive relief and compensatory and punitive damages. The court issued an order temporarily restraining the IRS from selling the automobile and from seizing any more of respondent's property. Thereafter, relying upon
Schreck v. United States,
301 F.Supp. 1265 (Md.1969), the court held that the Federal Anti-Injunction Act, § 7421(a), was inapplicable because of the IRS's failure to follow the procedures of § 6861
The court ordered the return of respondent's automobile upon her posting a bond in the amount of its fair market value. [
] It issued a preliminary injunction restraining the defendants (the United States, the Acting District Director, the Group Supervisor of Internal Revenue, and a lieutenant of the Kentucky State Police)
On appeal, the United States Court of Appeals for the Sixth Circuit affirmed per curiam, 493 F.2d 1211 (1974), relying upon its opinion and decision in
Rambo v. United States, supra,
decided one month earlier. In
the court had held that the failure of the IRS to issue a deficiency notice for a terminated taxable period, and the consequent unavailability of a remedy in the United States Tax Court, entitled the taxpayer to injunctive relief. Because of the conflict, indicated above, we also granted certiorari in Mrs. Hall's case. 419 U.S. 824 (1974).
In these cases, the taxpayers seek the protection of certain procedural safeguards that the Government claims were not intended to apply to jeopardy terminations. Specifically, the taxpayers argue that the procedures mandated by § 6861
for assessing and collecting deficiencies whose collection is in jeopardy also govern assessments of taxes owing, but not reported, after the termination of a taxpayer's taxable period under § 6851. Resolution of this claim requires analysis of the interplay between these two basic jeopardy provisions -- § 6851, the jeopardy termination provision, and § 6861, the jeopardy assessment provision.
The initial workings of the jeopardy termination provision, which essentially permits the shortening of a taxable year, are not in dispute. When the District Director determines that the conditions of 6851(a) are met -- generally, that the taxpayer is preparing to do something that will endanger the collection of his taxes [
] -- the District Director may declare the taxpayer's
The disagreement between the taxpayers and the Government focuses on the applicability of the jeopardy assessment procedures of § 6861
to the assessment [
] and collection of taxes that become due upon a § 6851 termination. Section 6861(a) provides for the immediate assessment of a deficiency, as defined in § 6211(a), whenever the assessment or collection of the deficiency would be "jeopardized by delay." By allowing an immediate assessment, § 6861(a) provides an exception to the general rule barring an assessment until the taxpayer has been sent a notice of deficiency and has been afforded an opportunity to seek resolution of his tax liability in the Tax Court. [
] Certain procedural safeguards are provided, however, to the taxpayer whose deficiency is assessed
immediately under § 6861(a). Within 60 days after the jeopardy assessment, the District Director must send the taxpayer a notice of deficiency, § 6861(b), which enables the taxpayer to file a petition with the Tax Court for a redetermination of the deficiency, 26 U.S.C. § 6213(a) (1970 ed., Supp. IV). The taxpayer can stay the collection of the amount assessed by posting an equivalent bond, § 6863(a). Any property seized for the collection of the tax cannot be sod until a notice of deficiency is issued and the taxpayer is afforded an opportunity to file a petition in the Tax Court. If the taxpayer does seek a redetermination of the deficiency in the Tax Court, the prohibition against sale extends until the Tax Court decision becomes final. § 6863(b)(3)(A). [
The taxpayers view the provisions of § 6861
as complementary to those of § 6851. They contend that, to the extent the tax owing upon a jeopardy termination has not been reported, it is a "deficiency" as that term is defined in § 6211(a) and used in § 6861(a), and that the deficiency, being of necessity one whose assessment or collection is in jeopardy, [
] must be assessed and collected in accordance with the procedures of § 6861
taxes are due and payable, while Section 6861 advances the time for collection of taxes which are already overdue [
already owing for a prior, normally expiring taxable year]."
Brief for United States 10. The validity of this distinction rests on the Government's claim that a deficiency can arise only with respect to a nonterminated taxable year, so that no deficiency can be created by a § 6851 termination. If there is no deficiency to assess, of course, the provisions of § 6861
Thus, under the Government's reading of the Code, the procedures for assessment and collection of a tax owing, but not reported, after the termination of a taxable period are not governed by § 6861
] The Government argues that, with the single exception of the bond provision of § 6851(e), the taxpayer's only remedy upon a jeopardy termination is to pay the tax, file for a refund, and, if the refund is refused, bring suit in the district
court or the Court of Claims.
28 U.S.C. § 1346(a)(1). Since the IRS has up to six months to act on a request for a refund, the taxpayer, under the Government's theory, may have to wait up to half a year before gaining access to any judicial forum.
26 U.S.C. §§ 6532(a), 7422(a) (1970 ed. and Supp. IV).
The Government does not seriously challenge the taxpayers' conclusion that, if the termination of their taxable periods created a deficiency whose assessment or collection was in jeopardy, the assessments and collections in these cases should have been pursuant to the procedures of § 6861
The question, then, is whether the tax owing, but not reported, upon a jeopardy termination is a deficiency within the meaning of § 6211(a).
In essence, a deficiency as defined in the Code is the amount of tax imposed less any amount that may have been reported by the taxpayer on his return. [
] § 6211(a).
Where there has been no tax return filed, the deficiency is the amount of tax due. Treas.Reg. § 301.6211-1(a), 26 CFR § 301.6211-1(a)(1975). As we have seen, upon terminating a taxpayer's taxable year under § 6851, the District Director makes a demand for the payment of the unpaid tax for the terminated period and for the preceding taxable year. The taxpayer is then required to file a return for the truncated taxable year. § 443(a)(3). The amount due, of course, must be determined according to ordinary tax principles, as applied to the abbreviated reporting period. The amount properly assessed upon a § 6851 termination is thus the amount of tax imposed under the Code for the preceding year and the terminated short year, less any amount that may already have been paid. To the extent this sum has not been reported by the taxpayer on a return, it fits precisely the statutory definition of a deficiency. [
that a deficiency does not arise until the tax is actually due and the taxable year is complete. The fact is, however, that, under § 6851 the tax is due immediately upon termination. Moreover, upon a § 6851 termination, the taxpayer's taxable year has come to a close.
See Sanzogmo v. Commissioner,
60 T.C. 321, 325 (1973). [
] Section 441(b)(3) defines as a "taxable year" the terminated taxable period on which a return is due under § 443(a)(3).
§ 7701(a) (23). Under the statutory definition of § 6211(a), the tax owing and unreported after a Jeopardy termination, which, in these cases and in most § 6851 terminations, is the full tax due, is clearly a deficiency. We see nothing in the definition to suggest that a deficiency can arise only at the conclusion of a 12-month taxable year; it is sufficient that the taxable period in question has come to an end and the tax in question is due and unreported. [
Besides conflicting with the plain language of the Code provisions directly before us, the Government's position in these cases would, for no discernible purpose, isolate the taxpayer subjected to a jeopardy termination from most other income taxpayers. If the unreported tax due after a jeopardy termination is not a deficiency, the IRS need not issue the taxpayer a deficiency notice and accord him access to the Tax Court for a redetermination of his tax. Denial of an opportunity to litigate in the Tax Court is out of keeping with the thrust of the Code, which generally allows income tax payers access to that court. Where exceptions are intended, the Code is explicit on the matter.
§ 6871(b). Denying a Tax Court forum to a particular class of taxpayers is sufficiently anomalous that an intention to do so should not be imputed to Congress when the statute does not expressly so provide. This is particularly so in view of the Government's concession that the jeopardy assessment procedures of § 6861
are sufficient to protect its interests, and that providing taxpayers with the
limited protections of those procedures would not impair the collection of the revenues. [
While the plain language of the provisions at issue here and their place in the legislative scheme suggest that the unreported tax due upon a § 6851 termination is a deficiency, and that the deficiency, its collection being in jeopardy, must be assessed and collected according to the procedures of § 6861
the Government attempts to undercut this conclusion by pointing to the legislative history of the several provisions at issue in this case. We are unpersuaded. The jeopardy assessment and jeopardy termination provisions have long been treated in a closely parallel fashion, and nothing that the Government points to in the early codifications suggests the contrary.
As the Government points out, the Revenue Act of 1918 (1918 Act) contained a termination provision, § 250(g), 40 Stat. 1084, that was very similar to the present § 6851. Under the 1918 statute, all assessments were made under the authority of Rev.Stat. § 3182, [
] and the taxpayer could attack an assessment only by paying the amount claimed and bringing suit for a refund in district court. Since there was no way for the taxpayer to contest assessments prior to payment, the Government had no need for any expedited jeopardy assessment procedure
such as is now authorized in § 6861. [
] When a termination was made under § 250(g), the tax assessment and collection thus proceeded exactly as in any other case -- the taxpayer had to pay first and litigate later.
The Government, however, relies heavily on the 1921 Act, claiming that "[t]he key to an understanding of the term
deficiency' lies" therein. Brief for United States 42. It relies on a reference to the term "deficiency" in § 250(b), which set out the procedure for handling underpayments after returns had been filed:
To understand the use of the word "deficiency" in the 1921 Act, it is necessary to begin with the 1918 Act, where the term first appeared. In the 1918 statute, the term was not formally defined, but appeared in various provisions dealing with underpayments and overpayments of tax, referring to the difference between the amount due and the amount already paid. "Deficiency" was used synonymously with the word "understatement," and it is clear from the context that neither word was being used as a term of art. In the 1921 Act, the 1918 language was left largely unchanged, except that, after the reference to the difference between the amount paid and the amount due, Congress added the parenthetical expression "(hereinafter called
deficiency')," and, from that point on, replaced all references to "understatement" with the word "deficiency." From the context, it is evident that the "hereinafter" parenthetical term was not intended as a restrictive definition of deficiency, but merely as an indication that, throughout the subsection, the word would be used as shorthand for the difference between the amount paid and the amount that should have been paid. [
] We thus find nothing in the informal use of the term "deficiency" in the 1921 Act to limit our construction
Based on the plain language of the statutory provisions, their place in the legislative scheme, and the legislative history, we agree with the taxpayers' reading of the pertinent sections of the Code. [
] Under that reading, the
tax owing, but not reported, at the time of a § 6851 termination is a deficiency whose assessment and collection are subject to the procedures of § 6861
Section 6861(b) requires a notice of deficiency to be mailed to a taxpayer within 60 days after the jeopardy assessment. Section 6863 bars the offering for sale of property seized until the taxpayer has had an opportunity to litigate in the Tax Court. Because the District Director failed to comply with these requirements in these cases, the taxpayers' suits were not barred by the Anti-Injunction Act, [
] § 7421(a) of the Code. The judgment of the
* Together with No. 74-75,
United States et al. v. Hall,
A deficiency notice is of import primarily because it is a jurisdictional prerequisite to a taxpayer's suit in the Tax Court for redetermination of his tax liability.
423 U. S. 171
is before us as No. 73-2005,
cert. pending.
Cert. pending sub nom. United States v. Clark,
No. 74-722.
The developing conflict among the federal courts was recognized in
Willits v. Richardson,
497 F.2d 240, 246 n. 4 (CA5 1974), and
62 T.C. 1, 2 (1974).
Counsel for respondent Hall asserted that the IRS also "seized $57 from her bank account," and that it would, or did, seize her paycheck. Tr. of Oral Arg. 46. Counsel also stated that $77 was later refunded to Mrs. Hall.
at 57. We are not advised how the latter amount was computed.
The precise findings required are: (1) that the taxpayer designs quickly to depart from the United States or to remove his property therefrom; or (2) that he intends to conceal himself or his property therein; or (3) that he is about to do any other act tending to prejudice or render wholly or partly ineffectual proceedings to collect income tax for the current or preceding year. § 6851(a).
In the past, the Government has argued that § 6851 contained its own assessment authority,
see Schreck v. United States,
301 F.Supp. 1265 (Md.1969), but it has since abandoned that position,
see Lisner v. McCanless,
356 F.Supp. 398, 401 (Ariz.1973), and it does not press the point here.
This follows because the findings necessary to terminate a taxable year under § 6851 will always justify a finding that the assessment of the taxes owed will be "jeopardized by delay."
S. 161fn2|>2,
The Government further argues that the power to assess jeopardy terminations is derived solely from the general assessment section. While the taxpayers argue that the power to assess jeopardy terminations comes from the jeopardy assessment provision, § 6861, rather than the general assessment provision, § 6201, we need not resolve that question here. Even if the Government is correct that the assessment power comes from § 6201, the procedural rules of § 6861
govern, on their face, when the assessment is of a deficiency whose collection is in jeopardy.
Likewise, the procedural rules of §§ 6211-6216 govern assessments empowered by § 6201 when the assessment is of a deficiency whose collection is not in jeopardy.
26 U.S.C. § 6211(a) (1970 ed. and Supp. IV).
Treas.Reg. § 301.6211-1(a), 26 CFR § 301.6211-1(a) (1975). Thus, a deficiency does not include all taxes owed by a taxpayer, but only those that are both owed and not reported.
To the extent the tax owing upon a jeopardy termination has been reported by the taxpayer -- either because it was reported for the preceding year or because the taxpayer immediately filed a § 443 return -- no deficiency is created, even if the taxes reported have not yet been paid.
Of course, the procedures for assessing deficiencies whose collection is in jeopardy, § 6861
would not apply to such monies. The taxpayer has conceded owing the taxes he has reported, and those taxes, if unpaid, may be directly obtained by levy without according any prepayment access to the Tax Court. The levy provision, § 6331, contains provisions for the expedited collection of taxes owing in jeopardy situations.
The broad dictum to the contrary in the Board of Tax Appeals' 1938 opinion in
Ludwig Littauer & Co. v. Commissioner,
37 B.T.A. 840, 842, upon which the Government in part relies, was apparently rejected by the Tax Court in the
opinion. The majority recognized in
that "[i]t is possible that our holding is in some conflict with the rationale of our opinion in
Ludwig Littauer & Co.,
" 60 T.C. at 325 n. 2, and Judge Simpson wrote separately to suggest that the earlier precedent should have been given its formal burial then and there. In a subsequent § 6851 case,
62 T.C. 1 (1974), the Tax Court avoided the broad rationale of
and instead held simply that a termination letter was not a deficiency notice, and that, without a deficiency notice, a taxpayer cannot litigate his claim in the Tax Court.
9 J. Mertens, Law of Federal Income Taxation § 49.130 (J. Malone rev.1971); Odell, Assessments: What are they -- Ordinary? Immediate? Jeopardy?, 2 N.Y.U. 31st Inst. on Fed.Tax. 1495, 1520, 1522 (1973).
The Government argues that a deficiency cannot be created by a jeopardy termination, because a notice of deficiency for a terminated year would make no sense. This is so, it is argued, because the year is not really over, and may be reopened pursuant to § 6851(b). Brief for United States 24-25. The Government ignores the effect of a § 6851 termination: for the taxpayer, the "taxable year" is complete, and taxes are immediately owing for that short year. §§ 441(b)(3), 443(a)(3), 6851. The deficiency for that period can easily be computed under § 6211, and notice of that deficiency issued. If the short year is thereafter reopened and again terminated, a new notice of deficiency can, and, under our view of § 6861
must, be issued. § 6861(b).
The Government's argument, Brief for United States 25-26, that Tax Court jurisdiction in the case of a terminated year that is subject to reopening is inappropriate must likewise fail. We see no reason why the Tax Court, applying normal tax principles, should be less capable of determining the tax owing for the short year than the district court or Court of Claims, which, under the Government's theory, would make that determination.
§ 6861(c).
The Government repeatedly conceded at oral argument that adoption of the taxpayers' theory would result in no significant injury to the Government other than the loss of some of the cases now pending in the lower courts. Tr. of Oral Arg. 9-10, 18, 21, 23, 24, 28, 30. This concession completely rebuts the dissent's claim that our decision today deprives the IRS "of a device it obviously needs in combatting questionable tax practices. . . ."
423 U. S. 189
The jeopardy assessment procedure, as is indicated,
423 U. S. 170
, is an exception to the normal deficiency assessment mechanism, which allows a taxpayer the prepayment remedy of withholding the taxes claimed by the Government until after a final judicial determination of liability. Of course, under the 1918 Act, a taxpayer who sought to place in jeopardy collection of his taxes could be forestalled under the jeopardy termination provision of § 250(g), which enabled the IRS to declare immediately owing the tax for the present or previous taxable year. That the jeopardy assessment procedures, born of necessity to reconcile the prepayment remedy with the occasional need for expedited collections of taxes, did not exist to govern assessments after jeopardy terminations under the 1918 Act does not mean, of course, that the procedures, once formulated, were not intended to cover assessments of deficiencies created by jeopardy terminations as well as all other jeopardy assessments.
The Government suggests that the power to assess jeopardy terminations cannot derive from the jeopardy assessment section because the jeopardy termination provision existed in the 1918 Act before any provision was made for jeopardy assessments. Brief for United States 40-42. Since, in our view, the source of the power to assess jeopardy terminations is irrelevant in determining whether the procedures for jeopardy assessments apply to assessments after jeopardy terminations,
this argument is of no consequence.
As a final reason for adopting their construction of the Code, the taxpayers argue that the Government's reading would violate the Due Process Clause of the Fifth Amendment. The basis for this claim is that, under the assessment procedures of § 6861
the taxpayer is guaranteed access to the Tax Court within 60 days, while, under the procedures suggested by the Government, the taxpayer in a termination case could be denied access to a judicial forum for up to six months.
Cf. Phillips v. Commissioner,
(1931). Moreover, the taxpayers argue, under the procedures of § 6861
the property seized may not be sold until after a final determination by the Tax Court, § 6863, while, under the Government's theory, the property seized in a jeopardy termination may be immediately subject to sale. Because we agree with the taxpayers' construction of the Code, we need not decide whether the procedures available under the Government's theory would, in fact, violate the Constitution.
The taxpayers do not question here, and we do not consider, whether, even if the jeopardy assessment procedures of § 6861
are followed, due process demands that the taxpayer in a jeopardy assessment situation be afforded a prompt post-assessment hearing at which the Government must make some preliminary showing in support of the assessment.
419 U. S. 607
-611 (1974);
407 U. S. 72
The Anti-Injunction Act generally bars suits to enjoin the assessment or collection of taxes. But § 7421(a) is subject to several exceptions, one pertinent here: it does not forbid suits to enjoin the assessment of a deficiency, or a levy or proceeding in court for its collection, if the taxpayer has not been mailed a notice of deficiency and afforded an opportunity to secure a final Tax Court determination. § 6213(a). On the other hand, this exception to the Anti-Injunction Act does not apply to jeopardy assessments made "as . . . provided in" § 6861. Thus, jeopardy assessments ordinarily may not be enjoined. When, however, the IRS fails to follow the procedures of § 6861
as in these cases, it is not assessing "as . . . provided in" § 6861, and the § 6861 exception to § 6213(a) is inapplicable. In such cases, § 6213(a)'s exception to the Anti-Injunction Act becomes operative, and a suit to enjoin the collection of the jeopardy deficiency may be brought.
Respondent Hall in No. 775 likewise brought suit before the 60-day grace period had expired (although the 60-day period subsequently lapsed without the issuance of the required notice of deficiency). Mrs. Hall alleged, however, that the IRS was offering her automobile for sale before issuing her a notice of deficiency and affording her the opportunity to litigate in the Tax Court, an action that violated § 6863. Since the offering for sale was not in conformity with the jeopardy assessment procedures of § 6861
the Anti-Injunction Act bar was inapplicable, and the levy and subsequent sale could properly be enjoined under § 6213(a).
procedural due process secured by the Fifth Amendment. Decision of that question is therefore expressly reserved,
423 U. S. 184
n. 26. I write only to state my views of the considerations raised by the due process claim.
"that an individual be given an opportunity for a hearing
he is deprived of any significant property interest, except for extraordinary situations where some valid governmental interest is at stake that justifies postponing the hearing until after the event."
See, e.g., Bell v. Burson,
(1970). The precise timing and attributes of the due process requirement, however, depend upon accommodating the competing interests involved.
419 U. S. 579
(3) "the standards of a narrowly drawn statute" require that an official determine that the particular seizure is both necessary and justified.
See Fuentes v.Shevin,
(1972). Seizures pursuant to jeopardy assessments are clearly necessary to protect important governmental interests, and there is a "special need for very prompt action." But § 6851(a)(1), although requiring an official determination that the particular seizure is both necessary and justified, nevertheless falls short, in my view, of meeting due process requirements. This is because present law denies an affected taxpayer access to any forum for review of jeopardy assessments for up to 60 days.
the Court held that notice and hearing must follow a deprivation "as soon as practicable." 419 U.S. at
-583. The Louisiana statute upheld in
(1974), entitled debtors whose assets had been seized to a hearing immediately following seizure and to invalidation of the seizure unless the creditor could prove the basis for the seizure,
416 U. S. 606
. In contrast, a Georgia garnishment statute was invalidated for want of any opportunity "for an early hearing at which the creditor would be required to demonstrate at least probable cause for the garnishment."
(1975). Thus, the governing due process principle obliges the IRS to provide a prompt hearing at which the IRS must prove "at least probable cause" for its claim.
the basis for the assessment. In my view, such delay would be constitutionally permissible only if there were some overriding governmental interest at stake, and the IRS suggested none in either of these cases.
* But even if delay in judicial review on the merits were justifiable, due process would at least require some supporting rationale for denying taxpayers the opportunity for a prompt preliminary determination by an unbiased tribunal on the validity of the basis for the assessment. Again, none was offered in either of these cases.
* The dissenting opinion would require no justification for even a six-month delay, apparently on the view that tax seizures are somehow different from other deprivations for due process purposes. I am aware of no precedent drawing that distinction.
(1931), concerned a procedure that offered taxpayers an alternative of seeking a prompt determination before the Board of Tax Appeals, the predecessor to the Tax Court, before payment and without posting any bond.
283 U. S. 598
. The bond referred to in the dissenting opinion,
at 0210210-211, was required pending review in the court of appeals of the Board of Tax Appeals' decision.
most unfortunately, indulges in a faulty analysis of the Code's structure and misinterprets the historical development of the statutes. It is led astray, I fear, by the emotional appeal of the facts in Mrs. Hall's case, involving, as it does, her husband's arrest on drug-related charges [
] and the seizure by the Internal Revenue Service of Mrs. Hall's Volkswagen automobile. I have little doubt that, if Mr. Laing's case had come here alone and unfettered by the coincidental appearance of Mrs. Hall's case, the Court would have denied certiorari to Mr. Laing out of hand, or, if not, would readily have affirmed. But Mr. Laing's case did not arrive alone. Thus, the "equities" and the extremes of Mrs. Hall's case, with their sad overtones, tend to counterbalance, and now have overbalanced, the lack of "equity" in Mr. Laing's case. The result is that the Internal Revenue Service is deprived of a weapon it has long possessed under the Code, and of a device it obviously needs in combatting questionable tax practices and tax evasion by those who do not pay their rightful taxes and who thereby increase the burden of those who do.
The customary deficiency procedure.
-- This is prescribed by Subchapter B of Chapter 63 of the Code under the heading "Assessment." The term "deficiency" is defined in § 6211(a), 26 U.S.C. § 6211(a),
The "termination of the taxable period" statute.
-- This is the above-mentioned, and critical, § 6851, subsection (a)(1) of which is set forth in n. 1 of the Court's
423 U. S. 163
. The statute constitutes the entire Part I of Subchapter A (Jeopardy) of Chapter 70 of the Code.
Our income tax system is primarily a self-reporting and self-assessment one. It is "based upon voluntary assessment and payment, not upon distraint."
362 U. S. 145
362 U. S. 176
See Helvering v. Mitchell,
(1938); Treas.Reg. § 601.103(a), 26 CFR § 601.103(a) (1975). Congress, nonetheless, early recognized that there would be instances where the Service must take immediate affirmative action in order to safeguard the collection of a tax. [
] Section 6851(a)(1) fulfills this congressional concern and permits the District Director,
Treas.Reg. § 1.6851-1(a), 26 CFR § 1.6851-1(a) (1975), to terminate the taxable period if he finds that the taxpayer designs an act tending to prejudice or render ineffectual the collection of income tax for the current or the preceding tax year. [
] When this is done, notice of the termination must be given the taxpayer, together with a demand for immediate payment of the tax for the taxable period so terminated. The tax thereupon becomes immediately due and payable. [
Section 6851, standing alone, however, is not sufficient for a collection procedure, because it does not contain its own assessment authority. The statute provides simply for the termination of the taxable period prematurely, and the authority must be found elsewhere in the statutory scheme. [
That assessment authority is granted by § 6201(a) of the Code, 26 U.S.C. § 6201(a). [
] This empowers the Commissioner "to make . . . assessments of all taxes . . . imposed by this title." An assessment is made by recording the liability of the taxpayer in the Service's books of account. § 6203. If, after demand, the taxpayer fails to pay, the Commissioner may invoke § 6321, which provides that the amount shall be a lien in favor of the United States upon the property of the taxpayer. The Service has power, after 10 days' notice and demand in a nonjeopardy situation, to collect the tax by levy and distraint. § 6331 (1970 ed. and Supp. IV).
The jeopardy assessment statute.
-- This, so far as income, estate, and gift taxes are concerned, all of which require returns, is § 6861 of the Code, 26 U.S.C. § 6861. [
] It and the three succeeding sections constitute Part II (Jeopardy Assessments) of Subchapter A (Jeopardy) of Chapter 70 of the Code. Section 6861, like § 6851(a), is designed to achieve collection under exigent circumstances.
The Federal Anti-Injunction Act.
-- This statute,
The statute had its origin over a century ago in § 10 of the Revenue Act of Mar. 2, 1867, 14 Stat. 475. [
Rev.Stat. § 3224. It was enacted to prevent in the federal system the type of injunctive suits that had plagued tax collections by the States. The Court has recognized the congressional concern underlying the statute, namely, that, if courts were to exercise injunctive power with respect to the collection of taxes, the Government's very existence could be threatened.
See Cheatham v. United States,
-194 (1883);
-737 (1974). The statute has been uniformly applied to bar suits before collection except in certain specific and delimited circumstances.
The second exception is also spelled out in the prefatory words of § 7421(a): the Act does not apply to an injunctive suit within the contemplation of § 7426(a) and (b)(1), 26 U.S.C. §§ 7426(a) and (b)(1). These sections, however, concern a civil action instituted by a person other than the taxpayer, such as a person claiming a prior lien, and have no possible application here.
See Bob Jones University v. Simon,
-732, n. 6.
The third exception is of judicial origin. The Court, in
(1962), observed that,
This obviously is a very narrow exception, and is subject to a twofold test: a clear indication that the Government cannot prevail, and the presence of an equity consideration in the sense of threat of irreparable injury for which there is no adequate legal remedy. The Court recently reaffirmed the
416 U. S; 752 (1974). It noted that a somewhat different attitude had been evident in the 1930's.
See Miller v. Standard Nut Margarine Co.,
There is no question, of course, that the present suits instituted by petitioner Laing and respondent Hall are actions to restrain the collection or enforcement of tax within the meaning of § 7421(a). These parties, however, do not contend that the
exception is applicable to their respective cases. I necessarily agree that the exception affords Mr. Laing and
Mrs. Hall no avenue of relief, for there is no indication in the records that, on the merits, the Government under no circumstances could prevail. [
5. It would seem to follow, then, that §§ 6861 and 6851, although they are similar in character and although both are directed at emergency situations, are separate and distinct. Of the two, § 6851 is the more extreme and perilous, for its impact comes in midstream, that is, during the taxable year, rather than after its close and a return for it has been filed.
See Ludwig Littauer .& Co. v. Commissioner,
37 B.T.A. 840, 842 (1938) (reviewed by the Board).
The provision allowing premature termination of a taxable period where collection was feared jeopardized first appeared as § 250(g) of the Revenue Act of 1918, 40 Stat. 1084. [
] The language of § 250(g) obviously
comports substantially with the language of the current § 6851(a). An assessment for a terminated period was made under the general assessment authority provided by Rev.Stat. § 3182. Judicial review at that time could be obtained only after payment of the tax and by way of a refund suit in the United States district court or in the Court of Claims. Rev.Stat. § 3226.
28 U.S.C. § 1346(a)(1).
§ 250(g) of the 1921 Act, 42 Stat. 267, without any change material here and without reference to the newly established administrative appeal procedure.
S.Rep. No. 275, 67th Cong., 1st Sess., 20-21 (1921). And the assessment authority continued to be provided only by Rev.Stat. § 3182.
Congress soon recognized that taxpayers might not be convinced of the impartiality of an administrative appeal within the then Bureau of Internal Revenue. Accordingly, by § 900 of the Revenue Act of 1924, 43 Stat. 336, the Board of Tax Appeals was created as an independent agency in the Executive Branch. The taxpayer, prior to payment of his tax, could obtain a review in the Board whenever the Commissioner disagreed with the amount of tax reported.
H.R.Rep. No. 179, 68th Cong., 1st Sess., 7-8 (1924). The Board, however, was given only limited jurisdiction; it was confined to deficiencies in income, estate, and gift taxes, and to claims for abatement of deficiencies. Revenue Act of 1924, §§ 900(e), 274, 279, 308, 312, and 324, 43 Stat. 337, 297, 300, 308, 310, and 316. Review of the Commissioner's termination of a taxable period, however, was not cognizable before the Board. Under § 282 of the 1924 Act, 43 Stat. 302, the taxpayer whose taxable period was terminated could avoid immediate collection only by furnishing security that he would make a timely return and pay the tax when due.
The 1924 Act also introduced a more precise definition of the term "deficiency" to supplant the definition contained in the 1921 Act. [
] The new definition, contained in the 1924 Act's §§ 273(1) and (2), 43 Stat. 296, is virtually identical to the present definition in § 6211(a)
of the 1954 Code and in Treas.Reg. § 301.6211-1, 26 CFR § 301.6211-1 (1975). The committee reports described this new definition in terms that indicate that a deficiency could not be determined until the time for filing the return had arrived, that is, until a date after the close of the taxable year.
H.R.Rep. No. 179, 68th Cong., 1st Sess., 24 (1924); S.Rep. No. 398, 68th Cong., 1st Sess., 30 (1924). There was nothing indicating that the Congress intended that the definition of "deficiency" was to encompass the amount declared due and payable upon the termination of a taxable period. The exception for the situation where collection after the close of the taxable year and after the passing of the due date for the filing of the return would be jeopardized by delay, however, was carried forward to the Board review created by the 1924 Act, and the Commissioner could immediately assess and collect notwithstanding the taxpayer's ability to go to the Board. Revenue Act of 1924, §§ 274(d) and 279, 43 Stat. 297 and 300.
designations. Two minor changes were made in the statutes that are pertinent here, but neither altered the jurisdictional framework of the Tax Court, which, by § 504 of the Revenue Act of 1942, 56 Stat. 957, had supplanted the Board of Tax Appeals. The first was the amendment of the termination statute, § 6851, by the addition of its present subsection (b). This permitted the reopening of the terminated taxable period either by the Commissioner or by the taxpayer.
Treas.Reg. §§ 1.6851-1(b) and (c), 26 CFR §§ 1.6851-1(b) and (c) (1975); H.R.Rep. No. 1337, 83d Cong., 2 Sess., A421 (1954); S.Rep. No. 1622, 83d Cong., 2d Sess., 597 (1954). The second change was the addition of § 6863(b)(3) to authorize a stay of the sale of property seized after a jeopardy assessment under § 6861 pending decision by the Tax Court. No similar stay was made explicitly available with respect to the termination provisions of § 6851.
The first is the inescapable fact that the assessment authority for an amount made "immediately due and payable" under § 6851(a) is not § 6861, but is the general authority granted by § 6201. Indeed, during the time the Revenue Act of 1918 was in effect, that is, until the Revenue Act of 1921 was adopted, only § 6851's predecessor was in existence; the predecessor of § 6861 had not yet appeared. Thus, I disagree with the suggestions contained in
501 F.2d 108, 121 (CA5 1974), in
492 F.2d 1060, 1064 (CA6 1974), and in
301 F.Supp. 1265, 1273 (Md.1969), that the placement of § 6861 in the Code immediately following § 6851 served to establish a new procedure mandatory for a proceeding under § 6851. That approach is expressly
foreclosed, in any event, by § 7806(b) of the 1954 Code, 26 U.S.C. § 7806(b), providing that no inference shall be drawn by reason of the location or grouping of any particular section or portion of the tax title of the Code.
See United States v. Ryder,
Aberdeen Rockfish R. Co. v. SCRAP,
422 U. S. 309
n. 12 (1975). The Commissioner's power to terminate a taxable period under § 6851 and then to assess under § 6201 is not at all dependent upon § 6861, and there is no basis for the incorporation of the "notice of deficiency" requirement of § 6861(b) into § 6851.
Exactly the same analysis applies to the definition of "deficiency" under the 1954 Code. Prior to the end of the taxable year, neither the Commissioner nor the taxpayer is able to ascertain the tax imposed by the Code. A "deficiency" cannot be determined before the close of a taxable year. The requirement that a notice of deficiency be issued, therefore, does not apply to a § 6851(a) termination of a taxable period. [
that this result would produce "significant constitutional problems."
492 F.2d at 1064-1065.
See also Schreck v. United States,
301 F.Supp. at 1281. This constitutional reservation has been prompted by the concern that, if a notice of deficiency is not required for a terminated taxable period, the taxpayer does not have the benefit of immediate access to the Tax Court.
To be sure, as has been noted above, Tax Court jurisdiction to determine liability prior to payment is predicated upon the existence of a "deficiency," within the meaning of § 6211(a), and upon the Commissioner's formal issuance of a notice of deficiency pursuant to § 6212(a). As a result, notices of deficiency have been described as "
tickets to the tax court.'"
Corbett v. Frank,
293 F.2d 501, 502 (CA9 1961).
See Mason v. Commissioner,
210 F.2d 388 (CA5 1954). But this lack of access to the Tax Court by the taxpayer who finds himself in a terminated taxable period situation does not mean that he is without effective judicial remedy to challenge the Commissioner's action. Lack of access to the Tax Court does not equate with a denial of Fifth Amendment due process if due process is otherwise available. And it is at once apparent that the taxpayer has a variety of remedies to test the validity of the Commissioner's action:
First, a refund suit is possible. Once there is a seizure of any property of the taxpayer in satisfaction of the assessment for the terminated period, the taxpayer may file a claim for refund either by filing the formal claim (Form 843) or by making a short-period return and showing an amount due that is less than the amount seized.
See Rogan v. Mertens,
153 F.2d 937 (CA9 1946).
Treas.Reg. § 301.6402-3(a)(1), 26 CFR § 301.6402-3(a)(1) (1975). The Commissioner, of course, has
up to six months to process the claim. §§ 532(a) and 7422(a) of the Code, 26 U.S.C. §§ 6532(a) and 7422(a). Immediately upon denial of the claim, or upon the expiration of six months with no action by the Commissioner, [
] the taxpayer may commence suit for refund in the district court or in the Court of Claims.
28 U.S.C. § 1346(a)(1). The jurisdiction of these courts over a refund suit does not depend upon the existence of a formally asserted "deficiency," as does the jurisdiction of the Tax Court.
Second, the taxpayer subject to a § 6851 termination may await the end of his taxable year and then file a full-year return and claim an overpayment and refund and in due course seek relief in court.
See Irving v. Gray,
479 F.2d 20, 24 (CA2 1973).
U.S. 145 (1960), deserves comment. In that case, the Court held that a federal district court does not have jurisdiction of an action for refund of a part payment made by a taxpayer on an assessment. It ruled that the taxpayer must pay the full amount of the assessment before he may challenge its validity in the court action. Payment of the entire deficiency thus was made a prerequisite to the refund suit. The ruling, however, was tied directly to the jurisdiction of the Tax Court, where litigation prior to payment of the tax was the usual order of the day. 362 U.S. at
362 U. S. 158
-163. The holding thus kept clear and distinct the line between Tax Court jurisdiction and district court jurisdiction. The Court said specifically:
362 U. S. 175
. This passage demonstrates that the full payment rule applies only where a deficiency has been noticed, that is,
only where the taxpayer has access to the Tax Court for redetermination prior to payment. This is the thrust of the ruling in
which was concerned with the possibility, otherwise, of splitting actions between, and overlapping jurisdiction of, the Tax Court and the district court.
362 U. S. 163
362 U. S. 165
. Where, as here, in these terminated period situations, there is no deficiency, and no consequent right of access to the Tax Court, there is and can be no requirement of full payment in order to institute a refund suit. The taxpayer may sue for his refund even if he is unable to pay the full amount demanded upon the termination of his taxable period.
479 F.2d at 24-25, n. 6;
Lewis v. Sandler,
498 F.2d 395, 400 (CA4 1974).
I recognize that, on occasion, the refund procedure may cause some hardship for the terminated taxpayer whose entire assets may be seized and who may be required to wait as long as six months before filing his refund suit. Indeed, this hardship was one of the reasons for establishing the Board of Tax Appeals as a prepayment forum in the first place.
H.R.Rep. No. 179, 68th Cong., 1st Sess., 7 (1924); S.Rep. No. 398, 68th Cong., 1st Sess., 8 (1924). [
] It is obvious, of course, that, when one taxpayer
It has long been established, moreover, that there is no constitutional requirement for a prepayment forum to adjudicate a dispute over the collection of a tax.
-596 (1931). There, in an opinion by Mr. Justice Brandeis, the Court unanimously held that the taxing authorities may lawfully seize property for payment of taxes in summary proceedings prior to an adjudication of liability where "adequate opportunity is afforded for a later judicial determination of the legal rights."
-92, and n. 24 (1972).
the Court noted the availability of two alternative mechanisms for judicial review in that particular situation: a refund action, or immediate redetermination of liability by the Board of Tax Appeals. In response, however, to a complaint by the taxpayer there that, if the Board remedy were sought, collection would not be stayed unless a bond were filed, Mr. Justice Brandeis dismissed the contention with the observation:
-600. Thus, the Court made clear that a prepayment forum was not a requirement of due process. I see no reason whatsoever to depart from that rule in these cases, where the taxpayer may file an action for refund after, at most, six months from the seizure of his assets or other action taken by the IRS under § 6851.
The reference in the statute to the "preceding taxable year" enables the Commissioner to exercise the termination power after the close of the preceding year but prior to the filing of the return for that year.
See, e.g., Irving v. Gray,
479 F.2d 20, 25 (CA2 1973);
United States v. Johanesson,
62-1 U.S.T.C. 83197 (SD Fla.1961),
aff'd in part and remanded,
336 F.2d 809 (CA5 1964).
The Government, on at least one occasion in the past, has contended that § 6851 did contain its own assessment authority.
301 F.Supp. 1265, 1276 (Md.1969). In the present cases, however, the Government states that the statute does not go so far. Brief for United States 20.
I do not foreclose the possibility that, in some case the Service's action in terminating a taxable period would come within the
exception if the termination were so fictitious and without foundation that under no circumstances could the Government prevail on the merits. This view was taken by the Fifth Circuit in
497 F.2d 240 (1974).
Note, Use of I.R.C. Section 6851: Exaction in the Guise of a Tax?, 6 Loyola U.L.J. 139, 151-158 (1975).
The presence of § 250(g) so soon after the inception of the modern federal income tax in 1913,
the Sixteenth Amendment and the Tariff Act of Oct. 3, 1913, § II, 38 Stat. 166, discloses Congress' early and continuing concern with tax evasion.
The Tax Court itself consistently has denied jurisdiction on its part over a period terminated under § 6851(a), and has done so on the ground that the termination results in "but a provisional statement of the amount which must be presently paid as a protection against the impossibility of collection."
See Puritan Church -- The Church of America v. Commissioner,
10 T.C. M. 485, 494 (1951),
93 U.S.App.D.C. 129, 209 F.2d 306 (1953),
347 U.S. 975 (1954);
62 T.C. 1 (1974).
See also Page v. Commissioner,
297 F.2d 733 (CA8 1962).
The maximum six months' wait, in order to accommodate the administrative operation, surely is not
I have no hesitancy in recognizing that there is a possibility of abuse in the jeopardy assessment system.
Note, Narcotics Offenders and the Internal Revenue Code: Sheathing the Section 6851 Sword, 28 Vand.L.Rev. 363 (1975); Note, Jeopardy Terminations Under Section 6851: The Taxpayer's Rights and Remedies, 60 Iowa L.Rev. 644 (1975); Silver, Terminating the Taxpayer's Taxable Year: How IRS Uses it Against Narcotics Suspects, 40 J. of Tax. 110 (1974); Note, Jeopardy Assessment: The Sovereign's Stranglehold, 55 Geo.L.J. 701 (1967);
497 F.2d 240, 246 (CA5 1974). But this possibility is also present with respect to a jeopardy assessment under § 6861. And it is present, too, perhaps with even greater force, in those tax situations (excise, FICA, etc.) where jurisdiction of the Tax Court does not exist and the taxpayer has no ability to litigate prior to payment or seizure. These differing degrees of tax comfort, in my view, do not render the system, or parts of it, unconstitutional. Prior to 1924, as has been pointed out, there was no prepayment forum at all.
I do not condone abuse in tax collection. The records of these two cases do not convincingly demonstrate abuse, although Mrs. Hall's situation, as it developed after the initial critical moves by the Service, makes one wonder. I have no such concern whatsoever about Mr. Laing. In any event, abuse is subject to rectification otherwise, and the Congress and the courts surely will not be unsympathetic.