Opinion ID: 72468
Heading Depth: 3
Heading Rank: 3

Heading: Stanley or VPCT as the member of Mission

Text: Mission argues that it could not honor a levy against Stanley, since only his wholly-owned corporation, VPCT, was a member of Mission. Mission maintains that the district court impermissibly “pierced” VPCT to reach Stanley. Mission implies that the IRS ought to have levied against VPCT instead of against Mission. However, the evidence shows that none of the disputed funds ever went to VPCT. Indeed, each check from Mission was made payable to Stanley and was deposited into his personal bank account. In any case, the levy applied to all of Stanley’s rights to property in Mission’s possession. As sole owner of VPCT, Stanley had rights in the funds disbursed by Mission. 8 Case: 09-60402 Document: 00511062860 Page: 9 Date Filed: 03/25/2010 No. 09-60402 D. Stanley’s exemptions from levy under 26 U.S.C. § 6334 Following the district court’s summary judgment, Mission asserted that the amounts owed to the IRS ought to be reduced by two specific exemptions to which Stanley is entitled. Mission filed a motion to clarify the portion of the district court’s opinion determining that it was liable for the entire amount distributed to Stanley during the operation of the levy. To the extent that Mission sought a reduction in its liability, the district court denied the motion. The first exemption Mission claimed was for Stanley’s $5,000 monthly child support obligation. See 26 U.S.C. § 6334(a)(8). A child support order issued by a court of competent jurisdiction may be exempt from levy under Section 6334(a)(8). The implementing regulation for that Section specifically mandated that a taxpayer claiming such exemption establish the amount that satisfies the child support decree. 26 C.F.R. § 301.6334-1(a)(8). The IRS is not required to release the levy until the taxpayer proves that the funds will actually be used to pay that obligation. Id. Stanley did not provide any such documentation until June of 2007. At the time Mission failed to honor the levy, it had no reason to withhold this amount. Accordingly, Stanley’s tardy compliance with the regulation may not be used to reduce Mission’s liability to the IRS retroactively. The second exemption Mission seeks is a $1,012.50 personal exemption. See 26 U.S.C. 6334(a)(9), (d). Like the child support provision, the taxpayer is required to produce certain documentation to establish his entitlement to this exemption. 26 C.F.R. § 301.6334-3(c). The applicable Treasury Regulation requires a “written and properly verified statement” to validate the proper amount of the exemption. Id. The consequences of failing to provide the proper documentation, though, are different for the personal exemption. This regulation also provides a “fallback” provision for a taxpayer who fails to comply with the documentation 9 Case: 09-60402 Document: 00511062860 Page: 10 Date Filed: 03/25/2010 No. 09-60402 requirement. In the absence of proper documentation, this exemption will be calculated as if the taxpayer is a married individual filing separately with only one personal exemption. 26 U.S.C. § 6334(d). Although Stanley did not file his exemption statement until June of 2007, he is nevertheless entitled to the fallback exemption. The IRS contends that another factor complicates the validity of Stanley’s personal exemption. The regulations provide that where a taxpayer has a source of income separate from the source levied which produces income equal to or greater than the amount of exemption to which he is entitled, the exemption will not apply. 26 C.F.R. § 301.6334-2(c). The IRS asserts that Stanley never demonstrated that he had no other source of income, thus he is not entitled to the exemption. We disagree with the IRS. The applicable regulation expressly places the onus on the IRS to notify the entity on whom the levy was served if the taxpayer has another source of income. Id. We have previously recognized and upheld the IRS’s duty to provide notice as a prerequisite to claiming that a taxpayer is not entitled to this exemption. Melton, 114 F.3d at 560. Accordingly, the district court erred in disallowing Stanley’s personal exemption. Mission is entitled to assert this exemption to reduce its liability to the IRS. We REVERSE and REMAND to the district court for recalculation of Mission’s liability. In all other respects, we AFFIRM.3 3 Mission made a cursory request that this Court review the assessment of prejudgment and postjudgment interest on the amounts owing to the IRS. Mission did not raise this argument before the district court, and did not sufficiently brief it here. The argument is thereby waived. Sw. Bell Tel., L.P. v. City of Houston, 529 F.3d 257, 263 (5th Cir. 2008). 10