Michael E. Nestor v. CommissionerMichael E. Nestor v. Commissioner
Respondent (R) issued notices of deficiency to petitioner (P) for tax years 1990 through 1997 (1990-97). P received the notices of deficiency for tax years 1992-97 but did not file a petition for redetermination with the Court. R issued to P a notice of intent to levy with respect to P’s taxes due for tax years 1990-97. P requested and R held a hearing pursuant to
Held, further, R’s determination to proceed with collection with respect to P’s tax years 1992-97 was not an abuse of discretion.
Michael E. Nestor, pro se.
David C. Holtz, for respondent.
COLVIN, Judge: On April 7, 2000, respondent sent petitioner a Notice of Determination Concerning Collection Action(s) Under Sections 6320 and/or 6330 (the lien or levy determination), in which respondent determined to proceed with collection of deficiencies in petitioner’s income tax, additions to tax, interest, and the frivolous return penalty1 for 1990 through 1997 (1990-97).
In this opinion, we decide:
(1) Whether petitioner may contest his underlying tax liability for tax years 1992-97. We hold that he may not.
(2) Whether respondent’s determination to proceed with collection with respect to petitioner’s tax years 1992-97 was an abuse of discretion. We hold that it was not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner resided in California when he filed the petition in this case.
A. Petitioner’s Tax Returns and the Notices of Deficiency
Petitioner filed purported Federal income tax returns for 1990-96 in May 1997, and he timely filed a purported 1997 return on April 15, 1998.2 On each return, he reported that he had no wages, other income, or tax liability. After petitioner filed those tax returns and before October 1999 (when respondent issued the notice of intent to levy discussed at paragraph B, below), respondent assessed the frivolous return penalty under
Respondent issued notices of deficiency to petitioner for each of his 1990-97 tax years determining deficiencies and additions to tax as follows:
| Year | Deficiency | Additions to Tax Sec. 6651(a) | Sec. 6654 |
| 1990 | $2,006 | $493.00 | $129.46 |
| 1991 | 1,834 | 455.75 | 104.73 |
| 1992 | 2,201 | 550.25 | -0- |
| 1993 | 2,021 | 493.75 | -0- |
| 1994 | 1,954 | 254.02 | -0- |
| 1995 | 2,899 | 202.93 | -0- |
| 1996 | 2,951 | 29.49 | 156.93 |
| 1997 | 2,996 | 89.88 | -0- |
Petitioner received the notices of deficiency for 1992-97, but he did not file a petition for redetermination of the deficiencies for 1992-97.
B. The Lien and Levy Proceeding
On October 21, 1999, respondent issued to petitioner a Notice of Intent to Levy and Notice of Your Right to a Hearing relating to petitioner’s 1990-97 tax years. On November 17, 1999, petitioner filed a Request for a Collection Due Process Hearing, Form 12153, for tax years 1990-983 in which he contended: (1) There was “no valid, underlying assessment” of taxes; (2) he did not receive the “statutory ‘notice and demand’” for payment of the taxes at issue; (3) he did not receive a valid notice of deficiency; and (4) he had no underlying tax liability.
In his request for a hearing, petitioner asked that the Appeals officer have at the hearing: (1) Verification that “the
C. The Section 6330 Hearing and Respondent’s Notice of Determination
On December 28, 1999, respondent’s Appeals Office conducted a hearing in petitioner’s case for tax years 1990-97. Petitioner attended the hearing. He was not given an opportunity to challenge his underlying tax liability for 1990-97 at the hearing. At the hearing, he asked the Appeals officer to provide verification that the requirements of any applicable law or administrative procedures had been met, to give him copies of a notice and demand for payment, and to show him “anything that indicated [he] owed income tax” or that he was required to pay Federal income tax. The Appeals officer did not comply with petitioner’s requests and told petitioner that the hearing was limited to alternatives to collection. At the hearing, petitioner did not challenge the appropriateness of the intended
On April 7, 2000, respondent sent petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (the determination letter), in which respondent stated that all applicable laws and administrative procedures had been met and that collection from petitioner of his tax liability for 1990-97 would proceed. On May 8, 2000, petitioner filed a petition for lien or levy action under
OPINION
A. Whether Petitioner May Contest His Underlying Tax Liabilities for 1992-97
Petitioner contends that he was improperly precluded at the section 6330 hearing from challenging his underlying tax liability for tax years 1992-97. He bases this on the claim that the notices of deficiency he received were not valid because they were not prepared or issued by the Secretary and because the Director of the Service Center who prepared and issued them did not give petitioner a copy of the order delegating authority from the Secretary to her.
Petitioner’s contention lacks merit. The Secretary or his delegate may issue notices of deficiency.
B. Whether Respondent’s Determination To Proceed With Collection as to Petitioner’s 1992-97 Tax Years Was an Abuse of Discretion
The Appeals officer verified that the Internal Revenue Service (IRS) had met the requirements of any applicable laws and administrative procedures. See
Section 6330(c)(1) does not require the Appeals officer to give the taxpayer a copy of the verification that the requirements of any applicable law or administrative procedure have been met. Section 301.6330-1(e)(1), Proced. & Admin. Regs., supra, requires that the Appeals officer obtain verification before issuing the determination, not that he or she provide it to the taxpayer. There is no requirement under internal revenue laws or regulations that the Appeals officer give the taxpayer a
The Appeals officer did not give petitioner a copy of the record of assessment at or before the hearing as petitioner had requested. Respondent gave petitioner copies of the Forms 4340 prior to the trial in this case. The Forms 4340 that respondent gave petitioner before trial showed that the amounts at issue were properly assessed, and petitioner did not show at trial any irregularity in the assessment procedure that would raise a question about the validity of the assessments. Requiring the Appeals officer to provide petitioner with a second copy of petitioner’s Forms 4340 at this time would delay disposition of this case. Petitioner was not prejudiced in any way by the fact that he first received copies of those records after the section 6330 hearing. Thus, whether or not the second sentence of
Petitioner contends that the notice of intent to levy improperly failed to identify the Code sections which establish his alleged tax liability. He contends that the assessment of tax was improper because he filed tax returns for 1990-97 which showed that he owed no income taxes for those years. He also
Petitioner’s contentions are frivolous. There is no requirement that the notice of intent to levy identify the Code sections which establish the taxpayer’s liability for tax, additions to tax, or penalties.
Accordingly,
An appropriate order
will be issued.
Reviewed by the Court.
WELLS, COHEN, GERBER, RUWE, WHALEN, HALPERN, and THORNTON, JJ., agree with this majority opinion.
MARVEL, J., concurs in result only.
Surely, we need not so hold in this case. Petitioner is not making that argument. At the Appeals hearing herein, the Appeals officer had a copy of the computerized transcript of account or Forms 4340 relating to petitioner, and nothing in the opinion suggests that the Appeals officer refused to provide petitioner with a copy of those specific documents.1
In light of comments made in Judge Foley’s dissenting opinion regarding the relationship of the verification requirements of
Under
Further consideration of other provisions of section 6330 buttresses this analysis. It is helpful to look closely at the specific language not only of
Accordingly, and particularly where taxpayers are making tax protester arguments, in collection hearings under
The referenced statutory language suggests strongly to me,
Petitioner herein is a flagrant tax protester. Petitioner did not file his 1990-96 income tax returns until 1997. On the late-filed tax returns petitioner reflected no financial information. Petitioner claimed his wages were not income. At the evidentiary hearing before the Court, petitioner asserted: “Since income taxes are based on self assessment, under Code
At the Appeals hearing and at the hearing before the Tax Court in this case, petitioner raised no relevant, legitimate, or good faith issue, and we have no business speculating as to whether petitioner may ever raise any such issue. The maxim, “Justice delayed is justice denied”, applies not only to cases eventually decided in favor of taxpayers but also to cases to be
Respectively, in my opinion, arguments made by taxpayers in administrative and court hearings under sections 6320 and 6330 that implicate only frivolous arguments and that implicate the postponement of the collection of taxes owed, should be dealt with by respondent’s Appeals Office and by this Court summarily and decisively.
I. Introduction
Petitioner requested and received a so-called collection due process hearing. At that hearing, the Appeals officer was required to obtain verification that the requirements of any applicable law or administrative procedure had been met.
The Appeals officer did not give petitioner a copy of the record of assessment at or before the hearing as
As will be shown, a person seeking judicial review of agency actions bears the burden of demonstrating prejudice from any error. Since petitioner did not show prejudice, the “rule of prejudicial error” is applicable, and petitioner is entitled to no relief.
II. Administrative Procedure Act
I have previously stated my belief that various provisions of the Administrative Procedure Act,
Among the applicable APA provisions is
Scope of review
To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and
(1) compel agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings, and conclusions found to be--
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
*
(D) without observance of procedure required by law;
In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error. [Emphasis added.]
The “rule of prejudicial error” (otherwise the doctrine of harmless error), as applied to an administrative action, provides that the reviewing court shall disregard procedural errors unless the complaining party was prejudiced thereby. As recently summarized by the Court of Appeals for the First Circuit:
The doctrine of harmless error is as much a part of judicial review of administrative action as of appellate review of trial court judgments. Indeed, the Administrative Procedure Act,
5 U.S.C. § 706 , says that in reviewing agency action, the court “shall” take due account of “the rule of prejudicial error,” i.e., whether the error caused actual prejudice. And while many of the decisions involve harmless substantive mistakes, no less an authority than Judge Friendly [in Kerner v. Celebrezze, 340 F.2d 736, 740 (2d Cir. 1965)] has applied the harmless error rule to procedural error, as has the circuit [Court of Appeals for the
The Court of Appeals added:
Obviously, a court must be cautious in assuming that the result would be the same if an error, procedural or substantive, had not occurred, and there may be some errors too fundamental to disregard. But even in criminal cases involving constitutional error, courts may ordinarily conclude that an admitted and fully preserved error was “harmless beyond a reasonable doubt.” Agency missteps too may be disregarded where it is clear that a remand “would accomplish nothing beyond further expense and delay.” [Id. at 61–62; emphasis added; citations omitted.]
The party seeking judicial review of an agency action bears the burden of demonstrating prejudice from any error. DSE, Inc. v. United States, 169 F.3d 21, 31 (D.C. Cir. 1999) (“Under the APA, we will not set aside agency action unless the party asserting error can demonstrate prejudice from the error” (internal quotation marks and brackets omitted)).2
It is no bar to application of the doctrine of harmless error that the agency error complained of is the omission of a statutory prerequisite. See, e.g., Hydro Engg., Inc. v. United States
Intercargo Ins. Co. v. United States, 83 F.3d 391, 395 (Fed. Cir. 1996) (citing Brock v. Pierce County, 476 U.S. 253, 260 (1986), in which the Court said: “We would be most reluctant to conclude that every failure of an agency to observe a procedural requirement voids subsequent agency action, especially when important public rights are at stake.”).
III. Discussion
Section 6203 provides that, on request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of assessment. Section 6203 does not provide any remedy for the Secretary’s failure to comply. In United States v. James Daniel Good Real Prop., 510 U.S. 43, 63 (1993), in connection with agency disregard of statutorily imposed timing requirements, the Supreme Court stated: “We have held that if a statute does not specify a consequence for noncompliance with statutory timing provisions, the federal courts will not in the ordinary course impose their own coercive sanction.” The Court relied on United
In effect,
IV. Conclusion
If the Appeals officer committed error at all, it was harmless. Petitioner has failed to show that the Appeals officer’s determination would have differed in the slightest if petitioner had been provided the assessment record prior to or at the Appeals hearing. The majority is correct.
WHALEN and THORNTON, JJ., agree with this concurring opinion.
In any event, it should be standard procedure in collection cases for the Appeals officer, no later than the commencement of the hearing, to furnish the taxpayer a Form 4340 confirming the assessment. In so doing, the Appeals officer will provide the taxpayer minimum assurance that the amounts claimed by the Service in the lien or levy proceeding notice are due and owing. By furnishing the taxpayer a Form 4340 at or before the hearing, the Service will remove any excuse of the taxpayer for not coming to grips with the relevant issues described in
In the case at hand, the Appeals officer’s failure to furnish the taxpayer a Form 4340 at or before the hearing was
Because petitioner has already shown a penchant for causing delay and taking frivolous and groundless positions, this is not an appropriate case for imposing any sanction on respondent for delay in furnishing the Form 4340. However, a taxpayer who could show that he suffered genuine harm as a result of the Service’s delay in furnishing the Form 4340 should be entitled to a remedy. Cf. Shea v. Commissioner, 112 T.C. 183, 207-209 (1999). For example, a taxpayer who shows that respondent’s delay in furnishing Form 4340 caused the taxpayer to incur additional interest, and that no significant aspect of the delay can be attributed to the taxpayer, might be entitled to an abatement of interest under
I dissented in dismay in Johnson v. Commissioner, 117 T.C.
I renew my plea for congressional enactment of an explicit grant of jurisdiction to this Court to provide one-stop shopping in all cases under
I also write to clarify my understanding of the Court’s rejection of petitioner’s argument that the Appeals officer
The fact that Form 4340 is insufficient compliance with
During the hearing, the IRS is required to verify that all statutory, regulatory, and administrative requirements for the proposed collection action have been met. IRS verifications are expected to include (but not be limited to) showings that:
(1) the revenue officer recommending the collection action has verified the taxpayer’s liability;
(2) the estimated expenses of levy and sale will not exceed the value of the property to be seized;
(3) the revenue officer has determined that there is sufficient equity in the property to be seized to yield net proceeds from sale to apply to the unpaid tax liabilities; and
(4) with respect to the seizure of the assets of a going business, the revenue officer recommending the collection action has thoroughly considered the facts of the case, including the availability of alternative collection methods, before recommending the collection action. [S. Rept. 105-174, at 68 (1998), 1998-3 C.B. 537, 604.2]
Form 4340 simply does not meet each of these verification requirements. Form 4340 was sufficient both here and in Davis because the only irregularity alleged as to the verification requirement concerned the proper assessment.
VASQUEZ and GALE, JJ., agree with this concurring in result opinion.
Petitioner contends that respondent’s verification was incorrect because respondent did not, at the section 6330 hearing, provide him with proof of assessments. I agree. Despite respondent’s purported verification that all statutory or administrative procedures were met, respondent did not satisfy
Section 6203 provides that “The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by
Prior to the section 6330 hearing, respondent did not provide petitioner with Forms 4340. Moreover, at the hearing, respondent did not allow petitioner to discuss the assessments.
CHIECHI, J., agrees with this dissenting opinion.
Notes
SEC. 6203. METHOD OF ASSESSMENT.
The assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment. [Emphasis added.]
I note in passing, however, that Lunsford II appears to have been sapped of some of its vitality by the Treasury Department’s recent release of final regulations under