On June 9, 2004, the Government filed this cause of action to reduce to judgment the federal tax liabilities of defendant Charles Chrein, totaling $556,914.81 as of January 14, 2005 (with interest still accruing since then), for the following 11 years: 1981, 1982, 1989, 1991, 1993, 1995, 1996, 1997, 1998, 1999, and 2002 (the “Relevant Tax Years”). 1 In addition, the original Complaint sought to foreclose on certain tax liens levied on real and personal property owned by Chrein, but on August 4, 2004, the Government filed an Amended Complaint that now seeks to foreclose only on the tax liens levied on certain of Chreiris personal property, specifically, his interests in four co-op apartments located at 220 East 57th Street, New York, NY, on which Chrein also possesses proprietary leases.
On August 6, 2004, the Court bifurcated these two claims, placing the foreclosure claims on the Suspense Calendar pending the resolution of the claim to reduce Chrein’s liabilities to judgment. On August 20, 2004, Chrein (then represented by counsel, but now proceeding pro se) filed his Answer, which included eleven counterclaims. See Answer & Counterclaims. Specifically, Chrein seeks (1) abatement of taxes, interest, and penaltiés (Counterclaims 1-3); (2) damages for alleged failure by the IRS to release federal tax liens for Tax Years 1981 and 1982 (Counterclaims 4-5); (3) damages for negligent collection of taxes from a receiver and trustee (Counterclaims 6-7); (4) a determination that the Government should bear the burden of proof in this action pursuant to 26 U.S.C. § 7491 (Counterclaim 8); (5) production of certain documents pursuant to the Freedom of.Information Act, 5 U.S.C. § 552 (“FOIA”) (Counterclaim 9); (6) the sale of certain apartments pendente lite (Counterclaim 10); and (7) production of certain documents pursuant to 26 U.S.C. § 7602(c)(2) (Counterclaim 11).
On January 14, 2005, the Government moved for summary judgment on its claim to reduce Chreiris liabilities to judgment and for summary judgment on, and/or dismissal, of Counterclaims 1 through 9 and 11. (Counterclaim 10 relates to the same apartments involved with the Government’s foreclosure claim and therefore will only be considered during the second phase of these bifurcated proceedings.) For the following reasons, the Government’s motion is granted in its entirety.
The Claim to Reduce Chrein’s Liabilities to Judgment: Timeliness. As to the Government’s claim to reduce Chreiris tax liabilities to judgment, Chrein conceded in open court that the dates of assessment, the amounts of deficiency assessment, and the assessed balances for the Relevant Tax Years are correct. See transcript, March 25, 2005. They are summarized as follows:
Tax Year Date of Assessment Amount of Deficiency Assessment Assessed Balance
1981 Mar. 1 ,1993 $25,639.00 $115,987.91
1982 Feb. 7,1994 $ 614.00 $ 22,627.20
1989 Mar. 21 , 1994 $ 6,488.00 $ 9,835.85
1991 Mar. 21 , 1994 $41,650.00 $ 68,317.98
1993 Feb. 5,1996 $46,440.00 $ 64,206.72
1995 Feb. 9,1998 $36,968.00 $ 13,231.52
1996 Feb. 16,1998 $13,719.00 $ 4,451.73
1997 Nov. 23,1998 $ 5,248.00 $ 738.55
1998 Dec. 13,1999 $65,635.36 $ 32,035.52
1999 Sept. 18, 2000 $ 5,706.00 $ 169.86
2002 Nov. 17,2003 $12,248.00 $ 12,351.10
See
Corrected Declaration of Arnold Rif-kin, March 21, 2005 (“Corrected Rifkin Decl.”) ¶ 13; Certificates of Assessments, Payments, and Other Specified Matters
The claim here to reduce Chrein’s liabilities to judgment is what the relevant statutes and regulations refer to as a “collection action.” As a general matter, the IRS is required to bring any collection action against a delinquent taxpayer within ten years after the assessment of the tax. See 26 U.S.C. § 6502. However, the statute of limitations on collection actions is suspended while “the assets of the taxpayer are in the control or custody of the court in any proceeding before any court of the United States or of any State or of the District of Columbia, and for 6 months thereafter.” 26 U.S.C. § 6503(b). The regulations makes clear that § 6503(b) applies when “all or substantially all of the assets of a taxpayer áre in the control or custody of the court in any proceeding before any court.” 26 C.F.R. § 301.6503(b)-!. Where a receiver is appointed by a federal or state court, “the assets of the taxpayer are in- general under the control of the court in which such proceeding is pending.” 26 C.F.R. § 301.6331-1.
Here, while the IRS made assessments for Tax Years 1981, 1982, 1989 and 1991 on March 1, 1993, February 7, 1994, March 21, 1994, and March'21, 1994, respectively, ie., more than ten years before the filing of the instant action, see Corrected Rifkin Decl. ¶ 13; Certificates of Assessment, attached as Exhibits A-D to Rifkin Decl.; the ten-year collection limitations period was suspended during a period of' time when substantially all of Chrein’s assets were under the control of the New York Supreme Court, by operation of the appointment of Chrein’s then-wife, Carol Horn Chrein (“Horn”), as receiver of both the marital assets and Chrein’s personal assets. See Interim Order' Preliminary to Judgment dated September 26, 1994, Chrein v. Chrein, No. 82049/86, New York Supreme Court, New York County (“Interim Order of the New York Supreme Court”), attached as Exhibit L to Declaration of Danna Drori, January 14, 2005 (“Drori Decl.”) 2 Chrein has produced no admissible evidence demonstrating that other substantial assets existed that were not under the New York Supreme Court’s control. 3
The Claim to Reduce Chrein’s Liabilities to Judgment: Interest and Penalty Computations. As noted, Chrein has conceded that the Government’s calculations of the principal amounts due, ie., the amounts of the deficiency assessments, are accurate. See transcript, March 25, 2005; Def. 56.1 ¶ 2. Now that timeliness has been established, the only remaining issue on the Government’s claim to reduce Chrein’s liability to judgment is whether the Government has properly calculated the amounts of interest and penalties owing. As of January 14, 2005, the Government calculates Chrein’s total tax liabilities for the Relevant Years as $556,914.81. See PI. 56.1 ¶ 8; Corrected Rifkin Decl. ¶ 18. Put more specifically;
Tax Year Total Balance Owed (as of Jan. 14, 2005)
1981 $137,755.21
1982 51,350.89
1989 20,729.02
1991 $106,325.19
1993 $130,669.53
1995 $ 24,799.48
1996 13,877.22
1997 3.15
1998 54,482.43
1999 580.63
2002 $ 14,462.06
See Corrected Rifkin Decl. ¶ 18.
It is well established that the IRS’s tax calculations (including calculations of interest and penalties) are presumptively valid and create a
prima facie
case of liability, such that the Government is “entitled to have the assessment reduced to judgment unless the taxpayer overcomes the presumption by the IRS that the assessment is correct.”
Chariot Plastics, Inc. v. United States,
In the case at bar, Chrein has not overcome the presumption, that the IRS’s assessments of interest and penalties are correct. Chrein argues that the relevant CSEDs expired prior to the commencement of this collection action.
See
Def.
Accordingly, the Court hereby grants the Government’s motion for summary judgment reducing to judgment Chrein’s tax liabilities totaling $556,914.81 as of January 14, 2005, plus whatever interest has accrued since then.
Counterclaims 1-3.
Turning to the counterclaims, Chrein bases jurisdiction for his first three counterclaims— which assert claims for abatement of tax (Counterclaim 1), penalty (Counterclaim 2), and interest (Counterclaim 3)—on 28 U.S.C. § 1346(a)(1). However, it is well-settled that § 1346(a)(1) “require[s] full payment of an assessed tax
before
a taxpayer can invoke the jurisdiction of the district court for the refund of any portion of such tax,”
United States v. Forma,
Counterclaims 4 and 5.
Chrein next asserts that he is entitled to damages, pursuant to 26 U.S.C. § 6325, for the IRS’s failure to release his federal tax liens for tax liabilities relating to Tax Years 1981 (Counterclaim 4) and 1982 (Counterclaim 5). However, while Chrein did initially receive two Certificates of Release of Federal Tax Lien Forms (Forms 668(Z)) dated September 14, 2004, that are relevant to those Tax Years, he subsequently received two Revocations of Certificate of Tax Liens (Forms 12474) that made the initial releases a nullity.
Compare
Forms 668(Z),
with
Forms 12474, attached as Exhibit 14 to Chrein Aff.; see
also In re Becker,
Counterclaims 6 and
7. Chrein also asserts two counterclaims, pursuant to 26 U.S.C. § 6901, alleging that the IRS was negligent in failing to collect some of his taxes from Ms. Horn while she was the receiver (Counterclaim 6) and trustee (Counterclaim 7) of his personal and the marital assets. But this was not a case where Chrein’s assets w¡ere being permanently transferred to a third party or where he was being rendered completely insolvent. Rather than undertaking the added complexities and burdens of proceeding against Horn, whose receivership could end at any time, the IRS reasonably chose to proceed further against Chrein, the taxpayer-transferor. This was well within the IRS’s prerogative.
See Kreps v. Comm’r,
Counterclaim 8.
Counterclaim 8, made pursuant to 26 U.S.C. § 7491, seeks to remove the presumption of validity that
Counterclaim 9. On March 20, 2003, Chrein made a FOIA request to the IRS for certain files relating to his tax liabilities. See Declaration of Nathan Rosen, December 6, 2004, ¶ 2. Specifically, according to Chrein, he asked for:
All notes, letters, memorandum, contact history sheets, audit reports, correspondence, IRS forms, liens and levies or other documents prepared by or received by the IRS which refer or relate to the assessment and/or collection of my federal income taxes; (2) All transcripts of account, record of assessments and abatements and ’ other documents reflecting all account activity and/or collection of my federal income taxes; and (3) All documents, correspondence, transcripts of account and other information that relate, indirectly, to the assessment and/or collection of my federal income taxes, such as TEFRA related adjustments, etc. together with all underlying documents and other information in connection therewith.
Def. Mem. at 25. On June 30, 2003, the IRS informed Chrein that it had located 915 pages of responsive' material, of which it would release '753 pages in full and 97 pages in part, while withholding 65 pages in full. See id. Chrein appealed and, as a result, obtained much of what had been previously withheld, but still leaving 10 pages withheld in full and 81 pages withheld in part. Chrein Aff. at 21.
By Countez-claim 9, Chrein seeks to have this Court review and reverse the IRS’s withholding of these remaining materials, on the ground that the withheld materials are likely to be relevant and material to the issues in this case. Chrein Aff. at 10, ¶ 3. But what Chrein is entitled to in this respect is governed, not by FOIA, but by the Federal Rules of Civil Procedure, under which Chrein has already received all the discovery he is entitled to in this case. Put another way, a FOIA request cannot be used as simply a way to get around the discovery rules, and limitations, of a civil action.
See NLRB v. Sears, Roebuck & Co.,
Counterclaim 11. Chrein’s final counterclaim, really another disguised discovery request, vaguely contends that the Government has failed to turn over all that it is required to turn over under 26 U.S.C. § 7602(c)(2), which provides that “[t]he Secretary shall periodically provide to a taxpayer a record of persons contacted during such period by the Secretary with respect to the determination or collection of the tax liability of such taxpayer.” But a careful review of that Government’s submissions demonstrates that the Government has, in fact, fully complied with § 7602. See Pl. Mem. at 28; Plaintiffs Responses and Objections to Defendant Charles L. Chrein’s First Set of Interrogatories and First Request for Production of Documents at 15, attached as Exhibit P to Drori Deck Accordingly, Counterclaims 11 is hereby dismissed.
For the foregoing reasons, the Clerk is directed to enter partial judgment dismissing all of defendants’ counterclaims except Counterclaim 10, and to enter partial judgment in favor of the United States and against Charles Chrein in the sum of
SO ORDERED.
Notes
. Under 26 U.S.C. § 7402(a), once a taxpayer has been assessed liability by the Internal Revenue Service ("IRS”), the Government may proceed in district court to reduce the assessments to judgment.
. In relevant part, the Order reads: "it was necessary for [the Court] to appoint a receiver of defendant's income and assets to preserve the estate and attempt to locate millions of dollars of secreted assets.” Interim Order of the New York Supreme Court at 1 (Bates Stamp No. U.S. 877) (emphasis in original). Horn was appointed receiver on June 23, 1994. See Order dated June 23, 1994, Chrein v. Chrein, 82049/86, New York Supreme Court, New York County, attached as Exhibit K to Drori. Decl. Horn remained receiver until her resignation on April 5, 1995. See Endorsed Affidavit of Carol Horn Chrein dated April 5, 1995, Chrein v. Chrein, 82049/86, New York Supreme Court, New York County ("Endorsed Order dated April 5, 1995”), attached as Exhibit M to Drori Decl.
. Chrein argues,
inter alia,
that "the best evidence of assets not in control or custody of any court was the apartment [No.] 3 IB, located at 1725 York Avenue, in Manhattan.” Def. Mem. at 12. This argument is unavailing, as the New York Supreme Court made clear that it granted Horn "exclusive use and occupancy” of that apartment. Interim Order of the New York Supreme Court at 2 (Bates No. U.S. 878). If that were not enough, Chrein relied on a poverty defense — in which he ef
. The Court notes that Chrein’s suggestion that § 6503(b) extends the statute of limitations by only 454 days, see Computation of "CSED” Dates for Tax Period — Years 1981, 1982, 1989, and 1991, attached to Letter of Charles L. Chrein, March 28, 2005 ("Chrein Computation”), is unpersuasive, given that Horn was undisputably the receiver until April 5, 1995, see Endorsed Order dated April 5, 1995.