BLACKSTONE v. U.S

RICHARD W. STORY, United States District Judge

Plaintiff brings this action seeking to overturn two determinations by the Internal Revenue Service ("IRS"). Now before the Court for consideration is Defendant's Motion to Dismiss [5-1] and alternative Motion for Summary Judgment [5-2]. After reviewing the record and considering the arguments of the parties, the Court enters the following Order.

As is required on a motion to dismiss, the facts stated herein are taken from the Complaint and the exhibits attached thereto. In relation to collection actions by the IRS, Plaintiff requested two collection due process hearings pursuant to 26 U.S.C. § 6320 (b) 6330(b). On December 7, 2001, Plaintiff requested a hearing to challenge a frivolous return penalty imposed with respect to his 1997 federal income tax return. The collection due process hearing was held on February 19, 2002, and a determination letter was issued on July 30, 2002. On April 6, 2002, Plaintiff requested a hearing related to his 1998 federal income tax liability. On July 26, 2002, the IRS sent a determination letter related to Plaintiff's 1998 tax return.

In both collection actions, Plaintiff challenged IRS employees' compliance with applicable law and administrative procedures in collecting taxes and imposing a $500 penalty for the filing of a frivolous tax return. Plaintiff alleges that IRS employees did not conduct the hearing at issue in accordance with the law. Plaintiff asserts that he sent a timely request for a collection due process hearing, seeking to challenge both the underlying tax liability and the appropriateness of the collection action on the basis that he never received a valid deficiency notice or notice and demand for payment in connection with the taxes allegedly due. Plaintiff also wished to question the IRS employees' authority to impose the frivolous penalty. Plaintiff asks the Court to declare that the determinations issued on July 26 30, 2002 were invalid, to order the government to reimburse Plaintiff's costs, and to award punitive damages.

Defendant moves to dismiss this action for failure to state a claim upon which relief can be granted. Federal Rule of Civil Procedure 12(b)(6) empowers the Court to grant a defendant's motion to dismiss when a complaint fails to state a claim upon which relief can be granted. In considering whether to grant or deny such a motion, the Court may only look to the pleadings. Fed.R.Civ.P. 12(b). The pleadings are, in addition, construed broadly so that all facts pleaded therein are accepted as true and all inferences are viewed in a light most favorable to the nonmoving party. Cooper v. Pate, 378 U.S. 546, 546, 84 S.Ct. 1733, 1734, 12 L.Ed.2d 1030 (1964). Thus, a motion to dismiss should be granted when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

A civil penalty can be imposed for the filing of a frivolous tax return. 26 U.S.C. § 6702. A return is considered frivolous if it does not contain information on which the correctness of the return may be judged or if it contains information indicating that it is substantially incorrect. 26 U.S.C. § 6702 (a)(1).

A frivolous penalty was assessed for Plaintiff's 1997 return on July 16, 2001, and a notice of civil penalty assessment was mailed to Plaintiff on that date. (Compl., Ex. A2.) Plaintiff requested a due process hearing on that penalty on December 7, 2001, and the hearing was conducted on February 19, 2002. On July 30, 2002, a determination letter was issued, and that determination sustained the collection action. Plaintiff contends that Defendant did not follow proper procedures because he never received a notice and demand for payment or valid deficiency notice. The record shows that proper notice was mailed to Plaintiff, at the same address Plaintiff lists on the Complaint, on July 16, 2001, and, because the assessment was for a § 6702 penalty, no deficiency proceedings were required. 26 U.S.C. § 6703 (b). Since the authority to assess a penalty for a frivolous return is provided by statute, Plaintiff's argument that IRS employees lacked the authority to impose such a penalty is without merit. Since the penalty was rightfully assessed and the procedural requirements were followed, Plaintiff's challenges to the penalty assessment related to his 1997 tax return are unfounded.

On July 23, 2001, the IRS sent a notice of federal tax lien and notice of right to a hearing to Plaintiff with regard to his 1998 tax liability. Plaintiff did not request a due process hearing until April 6, 2002. By that time, it was too late to request the hearing. 26 U.S.C. § 6330. Nonetheless, the IRS reviewed the collection action and issued a determination on July 26, 2002, indicating that all procedural requirements had been met and that the assessment was proper. Although Plaintiff failed to request the hearing in a timely manner, the IRS shows that proper procedures were followed, and Plaintiff's challenge to the collection action related to his 1998 tax return is invalid.

Since Plaintiff's Complaint fails to state a claim upon which relief can be granted, Defendant's Motion to Dismiss [5-1] is hereby GRANTED and Defendant's Motion for Summary Judgment [5-2] is hereby DENIED AS MOOT.