Court Opinion

ID: 9364406
Source: CourtListenerOpinion
Date Created: 2023-01-19 16:01:40.23409+00
Date Added: 2024-06-11T17:15:37.682765
License: Public Domain

Appellate Case: 21-9006    Document: 010110799884       Date Filed: 01/19/2023    Page: 1
                                                                                 FILED
                                                                     United States Court of Appeals
                      UNITED STATES COURT OF APPEALS                         Tenth Circuit

                              FOR THE TENTH CIRCUIT                        January 19, 2023
                          _________________________________
                                                                        Christopher M. Wolpert
                                                                            Clerk of Court
  JOHN THOMAS MINEMYER,

        Petitioner - Appellant/Cross-
        Appellee,

  v.                                                  Nos. 21-9006 & 21-9007
                                                        (CIR No. 22182-10)
  COMMISSIONER OF INTERNAL                            (United States Tax Court)
  REVENUE,

        Respondent - Appellee/Cross-
        Appellant.
                       _________________________________

                              ORDER AND JUDGMENT*
                          _________________________________

 Before TYMKOVICH, PHILLIPS, and EID, Circuit Judges.
                  _________________________________

       John Thomas Minemyer, proceeding pro se, appeals from a decision of the

 United States Tax Court holding him liable for income tax deficiencies for tax years

 2000 and 2001, and for a civil fraud penalty for tax year 2000. The Commissioner of

 Internal Revenue (IRS) cross-appeals the tax court’s determination that

 Mr. Minemyer was not liable for a civil fraud penalty for tax year 2001 because the

       *
         After examining the briefs and appellate record, this panel has determined
 unanimously that oral argument would not materially assist in the determination of
 this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
 ordered submitted without oral argument. This order and judgment is not binding
 precedent, except under the doctrines of law of the case, res judicata, and collateral
 estoppel. It may be cited, however, for its persuasive value consistent with
 Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
Appellate Case: 21-9006    Document: 010110799884        Date Filed: 01/19/2023     Page: 2

 IRS failed to obtain written supervisory approval for the penalty as required by

 26 U.S.C. § 6751(b)(1). In particular, the tax court held that § 6751(b)(1) requires

 such approval before any proposed civil fraud penalty is communicated to the

 taxpayer.

       Exercising jurisdiction under 26 U.S.C. § 7482(a)(1), we affirm the tax court’s

 decision holding Mr. Minemyer liable for the income tax deficiencies for 2000 and

 2001, and for a civil fraud penalty for 2000. We reverse the tax court’s holding that

 the IRS did not satisfy the approval requirement with respect to the 2001 civil fraud

 penalty, and hold that the IRS satisfies § 6751(b)(1) so long as written supervisory

 approval is obtained no later than the date the IRS issues the notice of deficiency

 formally asserting a penalty. Accordingly, we remand for the tax court to decide on

 the evidence whether Mr. Minemyer is liable for the civil fraud penalty for 2001.

                                     I. Background

       In 2008 Mr. Minemyer was indicted on two counts of tax evasion for the years

 2000 and 2001. He pled guilty to the 2000 count and in exchange the government

 dismissed the 2001 count. Two years later the IRS sent Mr. Minemyer a notice of

 deficiency asserting income tax deficiencies and civil fraud penalties for 2000 and

 2001. Mr. Minemyer petitioned the tax court to dispute the asserted deficiencies and

 penalties. The tax court granted summary judgment in favor of the IRS on the

 deficiencies for both years and the fraud penalty for 2000. After a trial, the tax court

 held the IRS had not met its burden of production for the 2001 fraud penalty.

 Mr. Minemyer’s appeal and the IRS’s cross-appeal followed.

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       A. The Plea Agreement and Sentence

       In connection with his guilty plea, Mr. Minemyer entered a plea agreement.

 Mr. Minemyer agreed “to pay restitution to the [IRS] in the amount of all taxes,

 interest, and penalties due and owing from the tax years 2000 and 2001.” R. vol. 2.2

 at 93. The plea agreement stated that “the Court shall enter a restitution order for the

 full amount of the IRS’s loss,” which the plea agreement calculated to be

 $200,918.22. Id. at 99. The concluding paragraph of the plea agreement contained

 an integration clause stating, inter alia, that “neither the [government] nor the

 defendant have relied, or are relying, on any terms, promises, conditions or

 assurances not expressly stated in this agreement.” Id. at 101.

       The district court sentenced Mr. Minemyer to one year in prison and three

 years of supervised release. It also ordered restitution in the amount of $200,918.22,

 which Mr. Minemyer paid at the time of his sentencing.

       B. The Deficiency Notice and Fraud Penalties

       In March 2010 a revenue agent visited Mr. Minemyer in prison and obtained

 his signature on a form proposing certain tax deficiencies and civil fraud penalties for

 2000 and 2001. Those proposed penalties and deficiencies had not been approved by

 the agent’s supervisor. Mr. Minemyer’s signature evidenced his consent to the

 proposed amounts, but he later withdrew his consent. The IRS therefore disregarded

 the form and in May 2010 sent Mr. Minemyer a letter, which the IRS calls a Letter

 950 or a 30-day letter, proposing the same deficiencies and civil fraud penalties.

 That letter was approved by the revenue agent’s immediate supervisor.

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       On August 19, 2010, the IRS sent Mr. Minemyer a deficiency notice

 determining a tax deficiency of $140,561 for 2000 and $56,944 for 2001.1 R. vol. 2.1

 at 51. It also determined civil penalties under 26 U.S.C. § 6663 in the amounts of

 $105,420.75 for 2000 and $42,708 for 2001. Id.

       C. The Tax Court’s Decision

       Mr. Minemyer petitioned the tax court to dispute the deficiency notice. He

 argued he did not owe the deficiencies because they were already part of the

 restitution he had paid. He further argued he was not liable for the fraud penalties

 because a guilty plea does not prove fraud and because the plea agreement precluded

 any additional penalties.

       The tax court rejected Mr. Minemyer’s arguments in granting summary

 judgment to the government, holding that the plea agreement and conviction did not

 preclude the IRS from pursuing civil tax proceedings. The tax court therefore upheld

 the tax deficiencies for 2000 and 2001. The tax court further held that

 Mr. Minemyer’s conviction for tax evasion on the 2000 count collaterally estopped

 him from challenging a civil fraud penalty for the same year. Mr. Minemyer appeals

 from the tax court’s summary judgment order.

       The civil fraud penalty for 2001 went to trial, after which the tax court held

 that the IRS had not met its burden of production. The tax court interpreted

       1
        The Commissioner assures us that the figures differ between the restitution
 amount in the plea agreement and the deficiency notice “because of computational
 adjustments irrelevant to this appeal.” Principal and Resp. Br. at 14 n.2.
 Mr. Minemyer does not dispute this characterization.
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 26 U.S.C. § 6751(b)(1) to require written supervisory approval of an initial

 determination of civil fraud penalties before that determination is formally

 communicated to the taxpayer. The court therefore held that because the March 2010

 proposed deficiencies and penalties had been communicated to Mr. Minemyer

 without first being approved by a supervisor, the IRS had not complied with

 § 6751(b)(1). The IRS cross-appeals the tax court’s interpretation of § 6751(b)(1).

                                      II. Discussion

       A. Standard of Review

       “We review tax court decisions in the same manner and to the same extent as

 decisions of the district courts in civil actions tried without a jury.” Keller Tank

 Servs. II, Inc. v. Comm’r, 854 F.3d 1178, 1195 (10th Cir. 2017) (internal quotation

 marks omitted). “Thus, like our review of a district court’s grant of summary

 judgment, we review the Tax Court’s grant of summary judgment de novo.” Id. We

 review the tax court’s interpretation of the plea agreement for clear error. See United

 States v. Rockwell Int’l Corp., 124 F.3d 1194, 1199 (10th Cir. 1997). Finally, we

 review de novo the tax court’s conclusions of law, including its statutory

 interpretations. Roth v. Comm’r, 922 F.3d 1126, 1131 (10th Cir. 2019).

       B. Mr. Minemyer’s Appeal

       Mr. Minemyer challenges the tax court’s summary judgment determination

 that he is liable for income tax deficiencies for tax years 2000 and 2001, and for a

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 civil fraud penalty for tax year 2000.2 He contends that his plea agreement and the

 district court’s restitution order precluded the IRS from pursuing civil tax

 proceedings. We reject his arguments.

       As an initial matter, Mr. Minemyer appears to argue that his criminal

 conviction and payment of restitution extinguishes the IRS’s right to pursue income

 tax deficiencies and fraud penalties in this case. He is incorrect. First, “any amounts

 paid to the IRS as restitution must be deducted from any civil judgment IRS obtains

 to collect the same tax deficiency.” United States v. Tucker, 217 F.3d 960, 962

 (8th Cir. 2000). Second, it is well settled that a conviction for tax evasion does not

 preclude a later civil proceeding for the remedial purpose of determining, assessing,

 and collecting tax deficiencies from the same taxpayer for the same years. See

 Helvering v. Mitchell, 303 U.S. 391, 399 (1938); Creel v. Comm’r, 419 F.3d 1135,

 1140 (11th Cir. 2005); United States v. Helmsley, 941 F.2d 71, 102 (2d Cir. 1991).

 Third, “the government does not surrender its right to seek civil fraud penalties by

 undertaking a criminal tax prosecution.”3 Morse v. Comm’r, 419 F.3d 829, 834

       2
          We liberally construe Mr. Minemyer’s pro se filings, but we do not assume
 the role of advocate. See Yang v. Archuleta, 525 F.3d 925, 927 n.1 (10th Cir. 2008).
       3
          Mr. Minemyer cites Creel v. Commissioner in arguing that his restitution
 payments extinguished his civil tax liabilities. Creel recognized the “general rule
 [that] the government can recover criminal penalties from an individual in a criminal
 prosecution and can recover additional civil penalties in a civil proceeding.”
 419 F.3d at 1140. But it held that under “the unique facts and the nuances” of the
 case, the restitution amount ordered by the district court specifically included the
 civil penalties. Id. By contrast, here the district court ordered restitution of $200,918
 without incorporating or otherwise mentioning additional, undetermined civil
 penalties.
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 (8th Cir. 2005). Thus, we reject Mr. Minemyer’s contention that either his criminal

 conviction or payment of restitution precluded further civil tax proceedings.

       Mr. Minemyer also contends that his plea agreement forecloses any civil

 liabilities exceeding his restitution payments, because his understanding of the plea

 agreement was that the district court would order restitution in the full amount of the

 government’s losses. “A court applies a two-step process in interpreting the terms of

 a plea bargain: first, the court examines the nature of the government’s promise;

 second, the court investigates this promise based upon the defendant’s reasonable

 understanding at the time the guilty plea was entered.” Rockwell, 124 F.3d at 1199.

 There are two problems with Mr. Minemyer’s contention. First, the plea agreement

 contains an integration clause, which bars Mr. Minemyer from offering extrinsic

 evidence to prove his understanding. See id. (“the second-step reasonableness

 inquiry is severely limited” by the presence of an integration clause in a plea

 agreement). Second, the plea agreement contains no language prohibiting the IRS

 from assessing civil fraud penalties. The only promises made by the government

 were that it would file no other federal criminal charges based on matters then known

 to it and that Mr. Minemyer would receive a one-level reduction in his offense level

 for purposes of calculating his sentence.

       Mr. Minemyer also focuses on paragraph 3 of the plea agreement, which

 states: “The defendant agrees to pay restitution to the [IRS] . . . in the amount of all

 taxes, interest, and penalties due and owing from the tax years 2000 and 2001.”

 R. vol. 2.2 at 93. From this, he argues that the district court’s subsequent restitution

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 order necessarily included “all” penalties owed and that therefore the IRS was

 precluded from pursuing additional civil fraud penalties. But the plea agreement

 simply recited what Mr. Minemyer agreed to; it did not obligate the district court to

 order any specific amount of restitution. See, e.g., Morse, 419 F.3d at 834 (“[T]he

 district judge enjoys considerable discretion as to whether [to] order restitution, and

 if so, as to the amount.” (brackets and internal quotation marks omitted)). In

 addition, plea agreements must be considered as a whole, United States v. Jordan,

 853 F.3d 1334, 1341 (10th Cir. 2017), and other provisions of the plea agreement

 demonstrate that the restitution order did not include penalties. For example,

 paragraph 19.J of the plea agreement states that “the Court shall enter a restitution

 order for the full amount of the IRS’s loss,” R. vol. 2.2 at 99. Elsewhere the plea

 agreement states that the IRS’s loss was $200,918—the amount comprising

 Mr. Minemyer’s under-reported tax liability for 2000 and 2001—and the district

 court ordered restitution in that amount. In short, Mr. Minemyer’s reliance upon

 paragraph 3 of the plea agreement is misplaced.

       Mr. Minemyer’s remaining arguments include: (1) the Tax Court was biased

 against him; (2) various Justice Department and IRS manuals mandate that plea

 agreements include a stipulation that the defendant must agree to civil liabilities

 exceeding restitution; and (3) the government committed fraud by not disclosing to

 him that his guilty plea could result in the assessment of civil fraud penalties. We

 reject each of these arguments and affirm the tax court’s decision holding him liable

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 for income tax deficiencies for tax years 2000 and 2001, and for civil fraud penalties

 for tax year 2000.4

       C. The IRS’s Cross-Appeal

       Concerning the imposition of civil tax penalties, 26 U.S.C. § 6751(b)(1)

 imposes an approval requirement:

       No penalty . . . shall be assessed unless the initial determination of such
       assessment is personally approved (in writing) by [an] immediate
       supervisor of the individual making such determination . . . .

 As we explained in Roth v. Commissioner, 922 F.3d 1126 (10th Cir. 2019), an

 “assessment” as used in this statute “is the formal recording and establishment of a

 taxpayer’s liability, fixing the amount owed by the taxpayer.” Id. at 1131 (internal

 quotation marks omitted). “In essence, [an assessment] is the last of a number of

 steps required before the IRS can collect” on a liability. Chai v. Comm’r, 851 F.3d

 190, 218 (2d Cir. 2017); accord Roth, 922 F.3d at 1131 (same). “Before a liability

 related to a deficiency or penalty may be assessed, the Commissioner must determine

 whether one exists in the first place.” Roth, 922 F.3d at 1131 (internal quotation

 marks omitted). Once the Commissioner makes that determination—often, as in this

 case, in the form of proposed deficiencies and penalties sent to the taxpayer—a

       4
         The IRS argues that with respect to the civil fraud penalties for the year
 2000, Mr. Minemyer waived the argument that the IRS failed to comply with
 26 U.S.C. § 6751(b)(1). We need not address that argument in light of our resolution
 of the IRS’s cross-appeal, in which we hold that with respect to the year 2001, the
 IRS did not fail to comply with the requirements of § 6751(b)(1). The same
 reasoning would apply to the 2000 civil fraud penalties.

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  notice of deficiency may then be sent to the taxpayer. Id. If the taxpayer does not

  file a tax court petition challenging the notice within 90 days, “the deficiency . . .

  shall be assessed.” 26 U.S.C § 6213(c). If the taxpayer does file a tax court petition,

  the IRS may not make an assessment until the tax court’s decision is final. § 6213(a).

        With this background, we turn to the issue presented in the IRS’s cross-appeal.

  The United States Tax Court has interpreted § 6751(b)(1) to require supervisory

  approval before the IRS communicates an “initial determination of such assessment”

  to a taxpayer. See Frost v. Comm’r, 154 T.C. 23, 32 (2020). In this case, a revenue

  agent gave Mr. Minemyer a form proposing civil penalties. That form had not been

  approved by the agent’s supervisor prior to its being handed to Mr. Minemyer.

  Because the form was never introduced into evidence, the tax court held that it could

  not assess whether the form was an “initial determination” within the meaning of

  § 6751(b)(1) and therefore the IRS had not carried its burden of showing it complied

  with the statute’s requirements.

        The IRS argues that the tax court imposed a requirement that appears nowhere

  in the text of the statute. That position is supported by two recent circuit court

  decisions, from the Ninth and Eleventh Circuits, which have examined the plain

  language of § 6751(b)(1) and concluded that it is not ambiguous and does not require

  supervisory approval before an initial determination of an assessment is

  communicated to the taxpayer. Kroner v. Comm’r, 48 F.4th 1272, 1276-81 (11th Cir.

  2022); Laidlaw’s Harley Davidson Sales, Inc. v. Comm’r, 29 F.4th 1066, 1070-74

  (9th Cir. 2022). The courts in Kroner and Laidlaw’s found nothing in the text of the

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  statute to support the timing requirement imposed by the tax court here. See Kroner,

  48 F.4th at 1278 (“nothing in the text . . . requires a supervisor to approve penalties at

  any particular time”); Laidlaw’s, 29 F.4th at 1072-73 (“[t]he statute does not make

  any reference to the communication of a proposed penalty to the taxpayer”). We

  agree with these assessments of § 6751(b)(1) and hold that its plain language does

  not require approval before proposed penalties are communicated to a taxpayer.5

        That does not end our inquiry, however, for there remains the question whether

  § 6751(b)(1) imposes a timing requirement of any kind. The Second Circuit has

  observed that “[i]f supervisory approval is to be required at all, it must be the case

  that the approval is obtained when the supervisor has the discretion to give or

  withhold it.” Chai, 851 F.3d at 220. The court reasoned that supervisory approval

  would be meaningless if the statute were construed to allow such approval after the

  supervisor lost the authority to prevent the penalty from being assessed. See id. at

  220-21. The court further observed that the last moment that a supervisor still has

        5
           In Roth, we held that a phrase in § 6751(b)(1), “the initial determination of
  such assessment,” is ambiguous. 922 F.3d at 1132. That holding has no bearing on
  this case. We were required to interpret that phrase in Roth because the IRS had sent
  the taxpayer multiple notices with penalties of different amounts. Id. at 1130, 1133.
  We therefore had to determine which notice was the operative “initial
  determination.” See id. at 1133. In other words, the case involved the what of the
  statute, not the when. The meaning of the phrase “initial determination of such
  assessment” is not implicated here, because although the IRS gave Mr. Minemyer
  three notices of civil fraud penalties, he concedes the penalties were identical in each
  instance. The question of which notice was the operative “initial determination” is
  therefore not material. To the extent Roth declares the entirety of § 6751(b)(1)
  ambiguous, we regard that declaration as dicta as to the specific issue presented here,
  which is when written supervisory approval must be obtained.

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  discretion to give or withhold approval is the IRS’s issuance of the notice of

  deficiency, id. at 221, because after a notice of deficiency is issued the IRS loses the

  discretion not to assess penalties. See 26 U.S.C. § 6213(c) (“the deficiency . . . shall

  be assessed” if the deadline for seeking tax court review expires); § 6215(a) (if

  taxpayer petitions the tax court, then the tax court determines the deficiency and

  penalties, which “shall be assessed” once the tax court’s decision becomes final).

  Accordingly, the Second Circuit held “that § 6751(b)(1) requires written approval of

  the initial penalty determination no later than the date the IRS issues the notice of

  deficiency . . . asserting such penalty.” Chai, 851 F.3d at 221.

        We are persuaded by the Second Circuit’s reasoning and hold that with respect

  to civil penalties, the requirements of § 6751(b)(1) are met so long as written

  supervisory approval of an initial determination of an assessment is obtained on or

  before the date the IRS issues a notice of deficiency.6 In this case, it is undisputed

  that the proposed penalties received written supervisory approval three months before

  the IRS issued the notice of deficiency to Mr. Minemyer. That is all that

  § 6751(b)(1) required. We therefore reverse the holding of the tax court denying a

        6
           The Ninth Circuit in Laidlaw’s agreed “that a supervisor cannot truly approve
  of a penalty determination without also possessing discretion to withhold approval,”
  and that “a supervisor [therefore] cannot always satisfy § 6751(b)(1) by waiting to
  provide written approval until just before the moment of assessment.” 29 F.4th at
  1071. Only the Eleventh Circuit maintains that § 6751(b) is satisfied “so long as a
  supervisor approves a penalty before the assessment is made; there is no need to set
  an earlier deadline.” Kroner, 48 F.4th at 1279.

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  civil fraud penalty for 2001 and remand for the tax court to decide on the evidence

  whether Mr. Minemyer is liable for the civil fraud penalty for 2001.

                                    III. Conclusion

        The tax court’s decision is affirmed as to the income tax deficiencies for 2000

  and 2001 and the civil fraud penalty for 2000. The decision is reversed and

  remanded as to Mr. Minemyer’s liability for the 2001 civil fraud penalty. We deny

  Mr. Minemyer’s motion to supplement the record.

                                             Entered for the Court

                                             Timothy M. Tymkovich
                                             Circuit Judge

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