United States v. Howe
2:19-cv-00421
D. IdahoOct 5, 2023Background
- The United States sued Ebenezer K. Howe IV and PHI Development, LLC to reduce to judgment unpaid federal income tax assessments for tax years 2005, 2006, 2008–2013, to declare PHI a nominee/alter ego of Howe, to foreclose IRS tax liens on real property (2099 Katka Road, Bonners Ferry, ID), and to sell the property.
- Howe never filed federal returns for the listed years. The IRS, after audits and Notices of Deficiency, prepared substitute returns under 26 U.S.C. § 6020(b), assessed taxes, penalties, and interest, and recorded federal tax liens.
- PHI failed to appear and default was entered; the Court previously found PHI to be Howe’s nominee/alter ego.
- Howe, proceeding pro se, repeatedly argued (1) income tax is "voluntary," and (2) the IRS falsified records/computer entries (creating 1040A entries) to fabricate tax liabilities; he sought discovery into IRS source code and transaction codes.
- The magistrate judge found Howe’s "records-falsification/voluntary tax" affirmative defense frivolous as a matter of law, sustained authenticity of IRS records (Forms 4340, Notices of Deficiency), denied Howe’s discovery/evidentiary motions, and recommended summary judgment for the United States: $394,008.60 (as of March 9, 2023) plus statutory additions, liens attached to the Subject Property, foreclosure and sale, and a deficiency judgment for any unpaid balance.
Issues
| Issue | Plaintiff's Argument (United States) | Defendant's Argument (Howe) | Held |
|---|---|---|---|
| Whether Howe’s affirmative defense (tax is voluntary; IRS falsified records) defeats enforcement | Assessments are presumptively valid; §6020(b) authorizes substitute returns; Forms 4340 and certificates supply the minimal evidentiary foundation for summary judgment | Taxation and filing are voluntary; IRS used computer codes/forms to fabricate 1040A returns and falsify records | Denied. Defense is frivolous; §6020(b) and regulations authorize substitute returns; Howe produced no competent evidence to rebut presumption of correctness |
| Admissibility/authentication of Revenue Officer Marler’s declaration and attached IRS records | Marler authenticated IRS records under Fed. R. Evid. 901 and public‑records rules; his declaration was not expert testimony | Marler should be required to produce source code; his declaration is improper expert testimony and should be stricken | Denied. Marler’s declaration properly authenticates public IRS records; statements were lay/authentication not Rule 702 expert opinion |
| Request to reopen discovery and compel IRS to produce source code, IMF transaction codes, and depose Marler | Government provided relevant records and explained substitute‑return procedures; additional technical discovery is untimely and irrelevant to legal question | Discovery into transaction codes, source code, and forms 5345/5546 is case‑dispositive to show fabrication | Denied. Discovery deadline passed; the manner (codes/forms/software) by which the IRS implements §6020(b) is irrelevant to the legal validity of substitute returns |
| Whether the U.S. is entitled to summary judgment reducing assessments to judgment and foreclosing liens | Government introduced Forms 4340, transcripts, Notices of Deficiency and assessments showing unreported income and validly recorded liens; carried its initial burden | Howe disputes liability on statutory/constitutional grounds and alleges record falsification but offered no rebuttal evidence | Granted. Assessments presumptively correct; Howe failed to rebut. Judgment recommended for assessed amount plus interest/penalties; liens foreclosing on Subject Property and sale authorized |
Key Cases Cited
- Colton v. Gibbs, 902 F.2d 1462 (9th Cir. 1990) (rejecting voluntary‑tax argument)
- Roat v. Comm’r, 847 F.2d 1379 (9th Cir. 1988) (discussing §6020(b) authority to prepare returns for non‑filers)
- Rapp v. Comm’r, 774 F.2d 932 (9th Cir. 1985) (burden shifts after government makes prima facie showing of tax assessment)
- Byers v. Comm’r, 740 F.3d 668 (D.C. Cir. 2014) (statutory/regulatory framework for substitute returns under §6020(b))
- Hughes v. United States, 953 F.2d 531 (9th Cir. 1992) (Forms 4340 provide presumptive evidence of valid assessments)
- United States v. Stonehill, 702 F.2d 1288 (9th Cir. 1983) (government may carry initial burden by introducing its assessment and a minimal evidentiary foundation)
- United States v. Pomponio, 635 F.2d 293 (4th Cir. 1980) (certified certificates of assessment constitute prima facie proof of tax liability)
- Janis v. United States, 428 U.S. 433 (U.S. 1976) (certificates of assessment are presumptively correct)