This file is comprised of case cites imported from cases previously downloaded
from law publishing Internet services. Case cite information appears prior to
text inserts. The cites have not been edited or otherwise changed. All comments
other than case text appears in brackets [note]. The following categories are
listed:
Requirement of Assessment
Notice & Demand for Payment
Deficiency Proceedings
Overpayment of Tax
Jurisdiction For Suit (Standing)
Payment Prior to Assessment is Deposit
Regulations Binding on Government as Well as People
Executive Officer Immunity; Immunity in General
Administrative Due Process
Burden of Proof
______________________________
United States v. Miller 318 F.2d 637 (1963)
We think it clear that the term 'assessment' referred to in this section of
the Internal Revenue Code of 1954 has [*639] a technical meaning
spelled out in the Code and that meaning is binding on this court. n2
The district court properly considered the copy of the official Certificate of
Assessments and Payments submitted by the Government in ruling on the motion
for summary judgment. 28 U.S.C. § 1733(b); and Rule
44(a), Fed.R.Civ.P. That document shows that assessment entries were made
on March 8, and April 13, 1956, in the manner prescribed by the statute and the
applicable regulation. Since the [**5] present suit was filed by
the Government on March 2, 1962, it was not barred by the applicable statute of
limitations.
Bothke v. Fluor Engineers and Constructors, Inc. 713 F.2d 1405 (1983)
For a levy to be statutorily authorized in the circumstances here, two
conditions must be fulfilled. First, a 10-day notice of intent to levy must
have issued. See 26 U.S.C. § 6331(a). Terry ascertained that this
had been done. Second, the taxpayer must be liable for the tax. Id. Tax
liability is a condition precedent to the demand. Merely demanding payment,
even repeatedly, does not cause liability.
For the condition precedent of liability to be met, there must be a lawful
assessment, either a voluntary one by the taxpayer or one procedurally proper
by the IRS. Because this country's income tax system is based on voluntary
self-assessment, rather than distraint, Flora v. United States [**25] ,
362 U.S. 145, 176, 4 L. Ed. 2d 623, 80 S. Ct. 630 (1960), the Service may
assess the tax only in certain circumstances and in conformity with proper
procedures.
In re Western Trading Company 340 F.Supp. 1130 )1972
We, nevertheless, conclude that the law applicable to ordinary bankruptcy is
inapplicable to this Chapter XI proceeding. The salutary purposes of
Section 397 are two-fold. It not only recognizes the need of taxing
authorities for additional time to determine and assess taxes which may be
asserted [**8] late as a priority claim under Section 64 of the Act, but
it also fixes a time limit qualification upon the type of claims which will be
accorded such preferred treatment. While the bankruptcy court may be
required to reconsider its order of confirmation or to modify the plan of
arrangement or dismiss the proceeding on account of the impact of such a late
filed claim (see In re Gates, supra, 256 F. Supp. at page 4), it need do so
only if the delayed claim is for a tax "found to be owing" within one
year of the filing of the petition. "Found to be owing," as
used in this section, means "assessed." The Internal Revenue Code
provides for a specific procedure for assessment (26 U.S.C. ß
6203). An assessment is an administrative determination of tax liability. Kurio
v. United States, 281 F. Supp. 252 (S.D.Tex.1968); United States v. Miller, 318
F.2d 637 (7th Cir. 1963). And until the assessment has been made, the tax has
not been found to be owing.
We note that the Advisory Committee on Bankruptcy Rules appointed by the
[*1134] Chief Justice of the United States under the program of the
Judicial Conference of the United States is in accord with this
interpretation. In the [**9] Preliminary Draft of Proposed
Bankruptcy Rules and Official Forms under Chapter XIII of the Bankruptcy Act,
September, 1971, the Committee of bankruptcy experts has proposed Rule 13-405,
as follows:
"Upon application accompanied by a proof of claim the court may allow the
following claims to participate in distributions under the plan:
"(a) Claims for taxes owing to the United States, or to any state, or any
subdivision thereof, at the time of the filing of a petition under Rule 13-103
or 13-104 which had not been assessed prior to the date of confirmation of the
plan, but which are assessed within one year after the date of the filing of
the petition.
"(b) Claims for taxes owing to the United States, or to any state, or any
subdivision thereof, after the filing of a petition under Rule 13-103 or 13-104
and which are assessed while the case is pending * * *."
In this instance, we consider Section 397 of the Bankruptcy Act to be
"an overriding statement of federal policy" (Randall, supra, at p.
515, 91 S. Ct. at p. 993) to the effect that a tax liability to participate in
a plan of arrangement must have been assessed before confirmation of the plan
or within one year after the filing of the petition, or must have become owing
on account of the operations of the trustee, receiver or debtor in possession
(In re Gates, supra).
The instant claim for estimated 1969 corporate income tax deficiencies does not
qualify under any category. It has never been assessed, it has never
"been found to be owing." It is, thus, barred from participating in
the plan of arrangement as a priority claim. It is, nevertheless, not
discharged (Section 78a (1) of the Act, 11 U.S.C. ß 35). Its
collectibility as a non-priority claim may be left for future determination.
Radinsky v. United States 622 F.Supp. 412 (D.C.Colo. 1985)
28 U.S.C. ß 1346(a)(1) confers jurisdiction upon this court and waives the sovereign immunity of the United States regarding claims for sums wrongfully collected under the internal revenue laws. In a suit under this section, a plaintiff "may challenge the constitutionality, legality or fairness of any tax statute or amount assessed or collected." White v. C.I.R., 537 F.Supp 679 (D.Colo. 1982). In the two briefs filed in this action, the IRS has not explained where it finds statutory authority to employ its tax collection procedures to collect from the plaintiffs a sum of money that has never been assessed as a tax. Since the IRS had no authority to adjust the plaintiffs' account or employ deficiency procedures in these circumstances, it is self-evident that the collection of the sum in this manner was wrongful.
The United States misperceives the issue in this matter as whether the
plaintiffs were initially entitled to the money. The dispositive issue is
instead whether the IRS has followed the law in collecting the money it
mistakenly sent to the plaintiffs. While this court is aware that the
plaintiffs may receive a windfall, the IRS can only recover the sum pursuant to
powers granted by Congress … The short answer to the defense is that the
Radinskys are entitled to the money unless the IRS brings a civil action within
two years. 26 U.S.C. 6532(b).
Brafman v. United States 384 F.2d 863 (1967)
… July 23, 1956, a purported assessment was levied against the Estate of Abraham Lazarowitz for the unpaid taxes, the penalty, and interest to the date of assessment. August 28, 1956, the Commissioner notified the Estate of the assessment made demand for payment. The Estate is without assets with which to pay any debts or obligations.
We [**5] do not reach the complex and tantalizing issue of a
trust-fund theory of transferee liability for the transfer of a contingent
insurance interest. The threshold issue of the validity of the assessment
is crucial. We reverse on the ground that a valid assessment against the
transferor's estate was not made, because of an assessment officer's
failure [*865] to sign the certificate of assessment. The
Government's claim against the transferee is proscribed by the statute of
limitations governing this action.
* * *
For a tax to be collected upon any deficiency, an assessment must be made
against the taxpayer within three years after his return is filed. Int.
Rev. Code of 1939, § 874 (§ 6501 of the 1954 Code).
The mailing of a ninety-day letter of deficiency or the filing of any court
action will suspend the running of the statute of limitations, and the time
will not begin to run again until sixty days from the entry of final judgment
of that court or until ninety days following the mailing of the letter of
deficiency if no proceedings are begun. See Int. Rev. Code of 1954,
§ 6213. In the case of a transferee, a separate section
provides that the assessment must be filed [**6] against the transferee
within one year after the expiration of the period of limitation for assessment
against the original transferor. Int. Rev. Code of 1939, § 900(b)(1)
(§ 6901(c)(1) of the 1954 Code)
If the estate is not assessed within the statutory period there can be no
transferee liability. United States v. Updike, 1930, 281 U.S. 489, 50 S.
Ct. 367, 74 L. Ed. 984. For the Government to collect any tax from the
transferee, Mrs. Brafman, a valid assessment must have been made against the
estate of the transferor, Abraham Lazarowitz, by September 28, 1957.
There is no disagreement that if the assessment against the estate was made on
July 23, 1956, as the Government argues and the documents apparently indicate,
the assessment of the transferor was timely. Mrs. Brafman contends,
however, that no valid assessment was made on July 23, 1956, because the
assessment certificate was not signed.
Section 6203 of the Internal Revenue Code of 1954 specifies that an assessment
n4 shall be made by recording the liability of the taxpayer in the office of
the Secretary or his delegate in accordance with rules or regulations
prescribed by the Secretary or his delegate.
The Treasury [**7] Regulations set forth the procedures governing the
assessment process as follows:
The District Director shall appoint one or more assessment officers, and the
assessment shall be made by an assessment officer signing the summary record of
assessment. The summary record, through supporting records, shall provide
identification of the taxpayer, the character of the liability assessed, the
taxable period if applicable, and the amount of the assessment. The
amount of the assessment shall in the case of tax shown on a return by the
taxpayer, be the amount so shown, and in all other cases the amount of the
assessment shall be the amount shown on the supporting list or record.
The date of the assessment is the date the summary record is signed by an
assessment officer. * * * Treas. Reg. § 301.6203-1
(1955)(emphasis added.)
The assessment certificate involved in this case, a photostated copy of which
is in the record, is not signed by an assessment officer or by any other
official. The certificate refers to July 23, 1956, but shows that it was
"prepared" August 1, 1956. Apparently this is the
[*866] date on which the assessment was to be formally certified, as it
appears twice in the certification portion of the form. Since the
certificate lacks the requisite signature, it cannot constitute a valid
assessment.
We are not moved by the Government's argument that the assessment was valid and
effective on July 23rd because it is certified for authenticity under the seal
of the United States Treasury. There is no question as to the
authenticity of the document or its admissibility into evidence. n5 But
authenticity of the certificate cannot be equated with validity of the
assessment on the alleged date: a seal establishes the former, a signature of
the assessment officer -- as required by the Treasury Regulations --
establishes the latter.
We find section 301.6203-1 of the Treasury Regulations reasonably adapted to
carry out the intent of Congress as reflected in § 6203 of the Code.
n6 We therefore adhere to our pronouncement in United States v. Fisher, 5 Cir.
1965, 353 F.2d 396, 398-399, that:
In the absence of any better test, we give effect to the generally recognized rule that Regulations issued by the Secretary of the Treasury, pursuant to statutory authority, and when necessary to make a statute effective, although not a statute, may have the force of law. Fawcus Machine Co. v. United States, 282 U.S. 375, 51 S. Ct. 144, 75 L. Ed. 397; Commissioner of Internal Revenue v. South Texas Lumber Co., 333 U.S. 496, 501, 68 S. Ct. 695, 92 L. Ed. 831.
The Treasury Regulations are binding on the Government as well as on the
taxpayer: "Tax officials and taxpayers alike are under the law, not above
it." Pacific National Bank of Seattle v. Commissioner, 9 Cir. 1937, 91
F.2d 103, 105. n7 Even the instructions on the reverse side of the assessment
certificate, Form 23C, specify that the original form "is to be
transmitted to the District Director for signature, after which it will be
returned to the Accounting [**10] Branch for permanent filing. * *
*"
Case after case has quoted Treasury Regulation § 301.6203-1
and cited it approvingly, and the treatises on taxation take its literal
application for granted. n8 In United States v. Miller, 7 Cir. 1963, 318 F.2d
637, the administrator of an estate executed an estate tax Waiver of
Restrictions on Assessment, which was accepted by the Commissioner on February
16, 1956. The Commissioner made assessments by certificate on March 8 and
April 13, 1956. Suit for collection was not brought until March 2,
1962. An intervenor argued on appeal that acceptance of the waiver
amounted to assessment which commenced the running of the statute of
limitations. The Court rejected this [**11] argument, saying that
"assessment", as referred to in § 6502 of the Code,
"has a technical meaning spelled out in the Code and that
[*867] meaning is binding on this court." n9 The Court
continued:
The district court properly considered the copy of the official Certificate of
Assessments and Payments submitted by the Government in ruling on the motion
for summary judgment. * * That document shows that assessment entries
were made on March 8, and April 13, 1956, in the manner prescribed by the
statute and the applicable regulation. Since the present suit was filed
by the Government on March 2, 1962, it was not barred by the applicable statute
of limitations. 318 F.2d at 639, (emphasis added).
The taxpayer in Filippini v. United States, N.D. Cal. 1961, 200 F. Supp. 286,
argued that the assessment was not effective until notice was sent to him, and
notice was not sent until three days after the running of the statute of
limitations. The Court found that the assessment was "made and
complete" when the procedure outlined in the Code and Regulations --
including the signing of the summary record by the assessment officer -- was
followed. In accord with Filippini and Miller are Graper v. United
States, E.D. Wis. 1962, 206 F. Supp. 173; In re Milwaukee Crate & Lumber
Co., E.D. Wis. 1961, 206 F. Supp. 115. See also Commissioner of Internal
Revenue v. Welch, 5 Cir. 1965, 345 F.2d 939, 948 n. 33.
When § 6203 of the Internal Revenue Code of 1954 was before
Congress, the detailed discussions of the proposed section in both the House
and Senate was substantially the same:
This section is a substantial clarification of existing law. It provides
that the assessments shall be made by recording the liability of the taxpayer
in accordance with rules or regulations of the Secretary. This will
permit recording of liability, and hence assessment, through machine operations
[**13] or through any other modern procedure. The Secretary is
directed to furnish to the taxpayer, upon request, a copy of the record of the
assessment of that taxpayer's liability. n10
It appears to us that the requirement of the applicable Treasury Regulation --
that an assessment officer sign the assessment certificate -- is consistent
with the literally mechanical procedures for recording of liability. The
recordation is to be accomplished through "machine operations", but
the actual and final assessment step, that step which establishes a prima facie
case of taxpayer liability, n11 can be taken only with the approval of a
responsible officer of the Internal Revenue Service. The Government may
want to postpone assessment in certain cases because of the limitations on
collection and lien perfection that begin to run at the time of
assessment. [**14] This might be accomplished, after the computers
have run their course, only by the assessment officer refusing to sign the
already prepared certificate. n12 What is important in any case is that
assessment is not automatic upon recordation; it requires the action of an
assessment officer. That action, as defined explicitly in the Treasury
Regulations, is the signing of the certificate.
We recognize that in sustaining Mrs. Brafman's contention regarding lack of
proper assessment within the limitations period we are disposing of this case
on what could be termed a "technical defense". As the district
court said in [*868] United States v. Lehigh, W.D. Ark. 1961, 201
F. Supp. 224, 234, this [**15] is both true and immaterial:
Any procedural defense is in a sense "technical." The procedures set
forth in the Internal Revenue Code were prescribed for the protection of both
Government and taxpayer. Neglect to comply with those procedures may
entail consequences which the neglecting party must be prepared to face,
whether such party be the taxpayer or the Government.
Certainly the courts have not hesitated to enforce strictly the Code
requirement that a taxpayer's returns must be signed to be effective.
Thus, unsigned returns, even with remittances, have been viewed as nullities
from the standpoint of imposition of penalties n13 and of commencement of the
running of the statute of limitations. n14 It has availed the taxpayer little
that his failure to sign was inadvertent. n15
Finally, where state taxation is involved compliance with a statutory provision
requiring an assessment list to be signed by the assessors is usually
considered essential to the validity of further proceedings. 84 C.J.S. Taxation
§ 473 (1954).
* * *
Since the assessment certificate in this case was not signed by the proper
official, as prescribed by the applicable Treasury Regulation, within the
statutory period after the filing of the estate tax return, this suit for
collection of any deficiency is barred by the statute of limitations. The
judgment of the district court is therefore reversed and the cause remanded for
dismissal.
Girard Trust Bank v. United States 643 F.2d 725 (1981)
Section 6401 does not define an "overpayment," but does provide that the term "includes" certain enumerated items which will be treated as or "considered" overpayments. An "overpayment" is not necessarily a form of "payment." It can be the "amount" by which an "amount allowable as credits" exceeds "the tax imposed." n6 Use of the term "the tax imposed" rather than "the liability for tax," disposes of any argument that an overpayment, for purposes of section 6611, necessarily occurs with respect to an interim liability. In fact, under the provisions of section 6401(c), an amount paid as tax may constitute an "overpayment" even though there was no tax "liability" in respect of which such amount was paid. On the other hand, one may not unilaterally establish an "overpayment" by the "deposit" of money with the district director in "payment" of an amount designated as a "tax." n7 "Liability" and amounts "due" normally depend upon "assessment," and the latter is entirely a Government, not a taxpayer, function. n8 Thus an actual "liability" can eventually constitute an "overpayment" for the reason that the "tax imposed" by law, which [*370] is to say the correct amount [***9] of the "entire tax liability" as finally determined, is less than the total of the amounts paid by or credited to the taxpayer, as tax. This is not to say that the "overpayment" does not occur until the final determination of the tax; it merely means that there cannot be an ascertainment that there has been an overpayment of tax until the "tax imposed" has been ascertained.
n8 I.R.C. § 6201(a). The oft-repeated description of the
American system of taxation as a system of "self-assessment" is a
rhetorical taradiddle. For example, the Internal Revenue Service does not
recognize officially an "'amended return', so-called." Treas. Reg.
§ 301.6211-1(a) (1980). Assessment of United States taxes has,
since time immemorial, been made by the Government's recording the liability of
the taxpayer. I.R.C. § 6203. Originally this was done by
a Government employee by hand, by inscribing the amount of the liability next
to the name of or in the account of the taxpayer. The entry may now be an
entirely mechanical process, but there are some old-timers who believe that
deep in the bowels of the giant computer at the service center there still sits
a little old man in green eyeshade, meticulously enrolling on parchment the
figures banged out by the machine.
_________________________________
United States v. Coson 286 F.2d 453
This brings us to the merits of the case. The court's opinion, which the Judge treated as his findings, found there had been no notice or demand respecting these taxes given to Coson, individually, prior to commencement of his action. He also found: 'Between March and August of 1955, plaintiff invested $ 31,000 in a newly organized Las Vegas, Nevada, hotel and gambling establishment known as the 'Moulin Rouge,' and obtained a 1.70 per cent interest therein. He reasonably and in good faith thought he was investing as a limited partner in a limited partnership. The Moulin Rouge was note, however, [**14] a limited partnership. Upon first ascertaining this, plaintiff promptly mailed notices of renunciation.' n10 (169 F.Supp. 672)
All of this is significant in view of the fact that on December 27, 1956, when this suit was started, no notice or demand concerning these taxes had been given to or served upon Coson. This procedural prerequisite to the securing of a Government lien for such taxes is made plain by the statute. See Detroit Bank v. United States, 317 U.S. 329, 335, 63 S.Ct. 297, 87 L.Ed. 304. § 6321 of Title 26 U.S.C. recites that the amount of taxes shall be a lien upon the property of a person liable to pay the tax who 'neglects or refuses to pay the same after demand.' n15 The procedure for making such demand is set forth in § 6303(a) of the same title as follows: 'Where it is not otherwise provided by this title, the Secretary or his delegate shall, as soon as practicable, and within 60 days, after [**23] the making of an assessment of a tax pursuant to § 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof. * * *'
It will be noted that our decision here is based upon our holding that the
Government's lien was irregular, insufficient and valueless from a procedural
standpoint for failure to serve the statutory notice and demand in connection
therewith and for failure to comply with required procedures.
In developing that conclusion many circumstances tend to show that not only
were these required procedures not complied with but [**25] that Coson
was not a taxpayer and not liable for the tax to begin with. Whether that
non-liability could also constitute the basis for a suit of this kind, or for
relief under § 2410(a) of Title 28, we need not here decide.
The recent case of Pipola v. Chicco, 2 Cir., 274 F.2d 909, 914, appears to give
a negative answer to that question. But that case agrees with what we
hold here, that in an action of the kind here involved plaintiff may attack the
Government lien for taxes as irregular or valueless 'from a procedural
standpoint', and may raise the question whether the Government 'complied with
required procedures * * * or whether by error the assessment was made against a
taxpayer other than the one intended.' n16
Bothke v. Fluor Engineers and Constructors, Inc. 713 F.2d 1405 (1983)
For a levy to be statutorily authorized in the circumstances here, two
conditions must be fulfilled. First, a 10-day notice of intent to levy must
have issued. See 26 U.S.C. § 6331(a). Terry ascertained that this
had been done. Second, the taxpayer must be liable for the tax. Id. Tax
liability is a condition precedent to the demand. Merely demanding payment,
even repeatedly, does not cause liability.
___________________________
Bothke v. Fluor Engineers and Constructors, Inc. 713 F.2d 1405 (1983)
Bothke believes that the IRS had to follow the deficiency proceedings of 26
U.S.C. § § 6212, 6213(a), under which he was entitled to a
preassessment notice of deficiency which gave him 90 days to petition the Tax
Court. Terry argues that the IRS was proceeding properly under an
exception to the statutory requirement, whereby no deficiency notice is
necessary if the amount assessed is the result of a mathematical or clerical
error on the face of the return. Id. § 6213(b)(1), (g)(2).
Even under this exception, the regular deficiency-proceeding safeguards are
mandatorily triggered if the taxpayer requests an abatement within 60 days. Id.
§ 6213(b)(2). Bothke responded to the IRS's Correction to Arithmetic
well within that time.
The IRS failed to construe his protest as a request for abatement because he
did not cite this statute. But the notice to Bothke did not suggest that the
IRS expected a statutory reference before it would conclude that the taxpayer's
procedural rights under the statute had been triggered. [**26]
Rather, it indicated that Bothke could challenge the correction merely by
"let[ting] us know if you believe that the balance due is incorrect."
More importantly, the statute does not require that the taxpayer put a legal
classification on his protest. The Service, however, with its expertise, is
obliged to know its own governing statutes and to apply them realistically.
Bothke's strongly worded protest should reasonably have been construed as a
request for abatement. It seems the IRS proceeded illegally even under its
interpretation of the proper procedure to use for his tax return. n4
______________________________________
Girard Trust Bank v. United States 643 F.2d 725 (1981)
The date of overpayment, from which date the statutory interest runs, is
determined in accordance with Treas. Reg. § 301.6611-1(b)
(1980). In the instant case, when the tax reported on the estate
tax [**728] return n9 was satisfied, there was an overpayment
because that "payment" exceeded the "correct liability," or
"entire tax liability," which means the "tax imposed,"
i.e., the tax as finally determined to have been imposed by the statute.
In Girard I we held that the overpayment was measured by the value, not the
face, of the bonds tendered in payment. In so holding, the special
considerations surrounding this special form of satisfaction of tax liability
were recognized by us as applicable until final determination of the tax
imposed.
________________________________________
Jurisdiction For Suit (Standing)
Radinsky v. United States 622 F.Supp. 412 (D.C.Colo. 1985)
28 U.S.C. ß 1346(a)(1) confers jurisdiction upon this court and
waives the sovereign immunity of the United States regarding claims for sums
wrongfully collected under the internal revenue laws. In a suit under this
section, a plaintiff "may challenge the constitutionality, legality or
fairness of any tax statute or amount assessed or collected." White v.
C.I.R., 537 F.Supp 679 (D.Colo. 1982). In the two briefs filed in this action,
the IRS has not explained where it finds statutory authority to employ its tax
collection procedures to collect from the plaintiffs a sum of money that has
never been assessed as a tax. Since the IRS had no authority to adjust the
plaintiffs' account or employ deficiency procedures in these circumstances, it
is self-evident that the collection of the sum in this manner was wrongful.
The IRS insists that only "taxpayers" have recourse against the
United States under 28 U.S.C. ß 1346(a)(1), and that the plaintiffs
are not "taxpayers" because no tax has been assessed. "The
United States agrees that taxpayers do have recourse against the United States
under 28 U.S.C. ß 1346(a)(1). But in this case, the plaintiffs are
not taxpayers." [**3] (Defendant's motion for summary judgment
at 2).
The government is wrong on both counts. First, the statute provides federal
district court jurisdiction for a civil action to recover any tax, penalty, or
sum alleged to have been wrongfully collected under the internal revenue laws.
There is no requirement that the plaintiffs be taxpayers challenging some
assessment. The government's interpretation of the statute would make
"sum" superfluous. In the course of holding that ß
1346(a)(1) requires full payment of an assessment before an income tax refund
suit can be maintained in federal district court, the Supreme Court has
noted:
. . . We believe that the statute more readily lends itself to the disjunctive
reading which is suggested by the connective "or." That is, "any
sum," instead of being related to "any internal-revenue tax" and
"any penalty," may refer to amounts which are neither taxes nor
penalties. Under this interpretation, the function of the phrase is to permit
suit for recovery of items which might not be designated as either
"taxes" or "penalties" by Congress or the Courts.
Flora v. United States, 362 U.S. 145, 149, 4 L. Ed. 2d 623, 80 S. Ct. 630
(1960). [**4] Accepting the argument that the amount in question is not a
tax or penalty, this action is clearly maintainable to recover a
"sum." Therefore plaintiffs who are not "taxpayers" as
defined by the United States in this action, i.e. persons who are challenging
an assessment, can indeed use ß 1346(a)(1). The plaintiffs have
standing to bring this action since they were the target of the IRS's
collection efforts.
United States v. Coson 286 F.2d 453 (1961)
[Read this entire case for discussion of 28 U.S.C. §§ 1340 &
2410 suits. It is particularly important with respect to "quiet
title" actions.]
______________________________________________
Payment Prior to Assessment is Deposit
Estate of Goetz v. United States 286 F.Supp. 128 (1968)
It does not follow from the fact that the Service had the taxpayers' money
in hand prior to the running of the statute of limitations, that the money was
duly collected. In order for the tax liability to have been duly
collected, it must have been properly assessed and such was not the case here
in that the assessment was made at a time subsequent to the running of the
statute of limitations.
It is this reasoning which apparently impelled the defendant to admit that the
plaintiffs are entitled to recover the $1,736.20 interest payment in that said
payment was not in the hands of the Service [**10] prior to the running
of the statute (nor was it in their hands prior to its assessment).
We cannot accept the distinction that the defendant would have us draw, that
the mailing of plaintiffs' check in response to the statutory notice of
deficiency amounted to a payment and that, therefore, the tax in question was
duly collected. On the contrary, we believe that plaintiffs' check served
as a deposit to be utilized by the Government in the event a tax obligation
were subsequently defined and imposed.
We are persuaded in so holding by the reasoning of the court in Rosenman v.
U.S., 323 U.S. 658, 65 S. Ct. 536, 89 L. Ed. 535 (1945) which recognized that
payments prior to assessment are deposits and not payments of taxes duly
collected.
… . We believe that the holding of the court, that money paid to
the Internal Revenue Service prior to the imposition of a valid assessment is a
deposit rather than a payment, should have the same meaning regardless of
whether it is the Government who seeks to preclude suit by the taxpayer or
whether it is the taxpayer who seeks to recover a refund.
In U.S. v. Dubuque Packing Company, 233 F.2d 453 (8th Cir. 1956) the court
followed the Rosenman case, supra, and held that transfers of money in
anticipation of further assessments did not have the status of payments until
tax deficiencies were formally assessed by the commissioner…
IT IS THEREFORE, our conclusion that the statute of limitations had expired
at the time the assessment was made, and that the plaintiffs [**12] are
entitled to recover the amounts paid to the Internal Revenue Service prior
thereto, and that the Motion for Summary Judgment should be and is sustained.
United States v. Coson 286 F.2d 453 (1961)
[The following is Footnote 2 from the Coson case where the amended brief set out specific allegations]
n2. In his brief here, and pending the appeal, plaintiff asked leave to
amend his complaint by adding a paragraph reading as follows: 'That the said
claim of lien was arbitrarily and capriciously imposed by reason of the
following facts:
1. No assessment upon which said lien was based was ever made against
plaintiff;
2. No notice or demand for payment of taxes had been served upon plaintiff at
the time of the commencement of this action;
3. No notice of the assessment had ever been furnished to plaintiff, within
sixty days from the making of the assessment, or otherwise; and
4. Plaintiff was not a partner in the Moulin Rouge.
That the continued imposition of said lien upon plaintiff's real property will
ruin and destroy plaintiff's property rights for the reason that plaintiff
borrowed $ 133,500.00 from the California Bank which he used to purchase real
property for $ 108,000.00 and did then enter into a twenty-year lease to erect
a department store building on the said real property incurring and paying a
leasing commission of $ 20,000.00; that thereafter, to-wit, on November 15,
1955, the defendant did file a Claim of Lien upon the said real property and
plaintiff is by reason thereof unable to erect the department store pursuant to
the terms of said lease; that unless said lien is speedily removed plaintiff
will become liable to the lessee for non-performance of the terms of said lease
and may be required to file a petition in bankruptcy.' [**28]
_________________________________________
Regulations Binding on Government as Well as People
Brafman v. United States 384 F.2d 863 (1967)
We find section 301.6203-1 of the Treasury Regulations reasonably adapted to
carry out the intent of Congress as reflected in § 6203 of the Code.
n6 We therefore adhere to our pronouncement in United States v. Fisher, 5 Cir.
1965, 353 F.2d 396, 398-399, that:
In the absence of any better test, we give effect to the generally recognized
rule that Regulations issued by the Secretary of the Treasury, pursuant to
statutory authority, and when necessary to make a statute effective, although
not a statute, may have the force of law. Fawcus Machine Co. v. United
States, 282 U.S. 375, 51 S. Ct. 144, 75 L. Ed. 397; Commissioner of Internal
Revenue v. South Texas Lumber Co., 333 U.S. 496, 501, 68 S. Ct. 695, 92 L. Ed.
831.
The Treasury Regulations are binding on the Government as well as on the
taxpayer: "Tax officials and taxpayers alike are under the law, not above
it." Pacific National Bank of Seattle v. Commissioner, 9 Cir. 1937, 91
F.2d 103, 105. n7 Even the instructions on the reverse side of the assessment
certificate, Form 23C, specify that the original form "is to be
transmitted to the District Director for signature, after which it will be
returned to the Accounting [**10] Branch for permanent filing. * *
*"
______________________________
Executive Officer Immunity; Immunity in General
Bothke v. Fluor Engineers and Constructors, Inc. 713 F.2d 1405 (1983)
I. Absolute Immunity
Executive officials have long enjoyed some form of immunity for acts performed
in the course of their official duties. The underlying rationales are (1) the
injustice of imposing personal liability on one whose public office obliges the
exercise of discretion and (2) the danger that potential liability will
compromise the forthright performance of official duties. See, e.g., Scheuer v.
Rhodes, 416 U.S. 232, 239-40, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974).
The rules governing official immunity are largely of judicial making and have
changed considerably over the years. Earlier cases wrestled with the issue with
varying results. See id. at 241. In some instances courts did not foreclose
recovery on immunity grounds, see, e.g., Bates v. Clark, 95 U.S. 204, 24 L. Ed.
471 (1877), and were reluctant to formulate a rule that would do so
irrespective of the circumstances, see O'Campo v. Hardisty [**9] , 262
F.2d 621, 625 (9th Cir. 1958).
Eventually, executive officials performing discretionary functions were
protected from damage suits by absolute official immunity, if they had acted
within the "outer perimeter" of their duties. E.g., Barr v. Matteo,
360 U.S. 564, 575, 3 L. Ed. 2d 1434, 79 S. Ct. 1335 (1959) (opinion of Harlan,
J.).
This general rule was applied to IRS agents. Sowders v. Damron, 457 F.2d
1182, 1184 (10th Cir. 1972); Bridges v. IRS, 433 F.2d 299, 300 (5th Cir. 1970);
David v. Cohen, 132 U.S. App. D.C. 333, 407 F.2d 1268, 1271-72 & n.2 (D.C.
Cir. 1969); Bershad v. Wood, 290 F.2d 714, 716, 719 (9th Cir. 1961).
A major change occurred when the Supreme Court concluded that absolute immunity
was inappropriate for state executive officials sued under 42 U.S.C.
§ 1983 for violating federal rights. Scheuer v. Rhodes, 416 U.S.
232, 238-49, 40 L. Ed. 2d 90, 94 S. Ct. 1683 (1974). The Court recognized that
Congress had not intended to abrogate entirely the immunity accorded some
officials by common law. Id. at 243. While judges and legislators acting within
their traditional roles continued to enjoy absolute immunity, id. at
243-44, state [**10] executive officials would have only qualified
immunity. Id. at 247-48.
The Court left the immunity question for federal officials to the courts of
appeals when it acknowledged a damages remedy against those persons in suits
for federal constitutional violations. Bivens v. Six Unknown Named Federal
Narcotics Agents, 403 U.S. 388, 390-98, 29 L. Ed. 2d 619, 91 S. Ct. 1999
(1971). This circuit reasoned that immunity accorded federal officials in
Bivens actions should be no greater than that accorded state officials under
section 1983 for identical violations. Mark v. Groff, 521 F.2d 1376, 1380 (9th
Cir. 1975).
Quoting Mark v. Groff, the Supreme Court agreed with this court and most
circuits, [*1410] which had reached similar conclusions. Butz v.
Economou, 438 U.S. 478, 486 & n.9, 498-500, 505-07, 57 L. Ed. 2d 895, 98 S.
Ct. 2894 (1978). A different holding would "stand the constitutional
scheme on its head." Id. at 504. Qualified immunity for federal executive
officials struck a balance between the interests underlying immunity and the
need for a remedy for constitutional violations. Id. at 497, 504-06.
Significantly for our purposes here, Mark [**11] v. Groff was
a suit against IRS officials, as were three of the other circuit cases cited
and followed in Butz. See Weir v. Muller, 527 F.2d 872, 874 & n.1
(5th Cir. 1976); n2 Black v. United States, 534 F.2d 524, 527 (2d Cir. 1976);
G.M. Leasing Corp. v. United States, 560 F.2d 1011, 1015 (10th Cir. 1977),
cert. denied, 435 U.S. 923, 55 L. Ed. 2d 516, 98 S. Ct. 1485 (1978).
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- -
n2 The Fifth Circuit's attempt to overrule this case insofar as it may have
implied a right of action under the due process clause of the Fifth Amendment
was reversed by the Supreme Court. Davis v. Passman, 571 F.2d 793, 801 (5th
Cir. 1978), reversed, 442 U.S. 228, 60 L. Ed. 2d 846, 99 S. Ct. 2264 (1979).
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - -
- -
The Supreme Court seemingly accepted no more than qualified immunity for IRS
officials in the remand that preceded the last-mentioned case. G.M.
Leasing Corp. v. United States, 429 U.S. 338, 360, 50 L. Ed. 2d 530, 97 S. Ct.
619 (1977). The Fourth Circuit also had selected the qualified immunity
standard for [**12] IRS officials. White v. Boyle, 538 F.2d 1077, 1080
(4th Cir. 1976).
After Butz, circuit cases have continued to apply the qualified immunity
standard to tax officials sued for constitutional torts. See Hall v. United
States, 704 F.2d 246, 249, 250 & n.2 (6th Cir. 1983) (levy without
statutory deficiency notice); Granger v. Marek, 583 F.2d 781, 784 (6th Cir.
1978).
Cases in this circuit also have applied that standard. Hutchinson v. United
States, 677 F.2d 1322, 1328 (9th Cir. 1982) (qualified immunity for activities
including levies); Miller v. DeLaune, 602 F.2d 198, 199 (9th Cir. 1979).
Apparently the only exception was a brief per curiam opinion in this circuit,
Stankevitz v. IRS, 640 F.2d 205 (9th Cir. 1981), n3 the case relied on by the
court below in holding Terry absolutely immune. Stankevitz accorded absolute
immunity to IRS officials who audited the plaintiff's tax return and assessed a
deficiency.
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- -
n3 One other Ninth Circuit case, in a footnote, cited Bershad v. Wood as an
example of a case granting absolute quasi-judicial immunity to some officials
other than judges. Pomerantz v. County of Los Angeles, 674 F.2d 1288, 1291 n.1
(9th Cir. 1982). The immunity in Bershad was not quasi-judicial, but the
then-existing absolute official immunity for executive officers. The Pomerantz
court did not discuss the intervening changes in the law wrought by Scheuer v.
Rhodes, Butz, Mark v. Groff, and related cases. We do not, however, criticize
the holding in Pomerantz that jury administrators rendering decisions as to
eligibility of prospective jurors were cloaked with quasi-judicial immunity.
A comparable oversight occurred with regard to the current scope of executive
immunity in general in a criminal case against an executive official adverting
to civil liability by way of analogy. See Clifton v. Cox, 549 F.2d 722, 726
(9th Cir. 1977) ("It is well-settled that a federal official cannot be
held personally liable in a civil suit for acts committed within the outer
perimeter of his line of duty").
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - -
- - [**13]
In so doing, the opinion followed another part of Butz, which stated that
executive officials have absolute immunity if, in an administrative proceeding,
they assume a role analogous to that of a judge or prosecutor in a traditional
trial setting. 438 U.S. at 508-17. Quoting Butz, Stankevitz accorded the IRS
defendants absolute immunity because they were " 'responsible for the
decision to initiate or continue a proceeding subject to agency adjudication.
'" 640 F.2d at 206 (quoting 438 U.S. at 516).
Taken out of context, this line quoted from Butz might easily be read to imply
a broader spectrum of immunity than the Supreme Court intended. In using the
term "proceeding subject to agency adjudication," Butz was not
referring broadly to an official's exercise of judgment in the course of agency
action directed at a private person. [*1411]
"Adjudication" was a technical term for a quasi-judicial, formal,
on-the-record proceeding under the Administrative Procedure Act. See 5 U.S.C.
§ § 554-557.
The quasi-judicial absolute immunity Butz accorded certain executive officials
was predicated on the close similarity of this formal agency adjudication to a
traditional [**14] courtroom trial. The Supreme Court recently
re-emphasized that absolute immunity for participants in judicial proceedings
"stem[s] 'from the characteristics of the judicial process.'" Briscoe
v. LaHue, 460 U.S. 325, 335, 103 S. Ct. 1108, 75 L. Ed. 2d 96, 51 U.S.L.W.
4247, 4249 (1983) (quoting Butz, 438 U.S. at 512). See also Sellars v.
Procunier, 641 F.2d 1295, 1298-1300 & nn.6-9 (9th Cir.), cert.
denied, 454 U.S. 1102, 102 S. Ct. 678, 70 L. Ed. 2d 644 (1981).
Formal administrative adjudication shares with judge-supervised trials two key
qualities that diminish the need for individual suits to correct constitutional
transgressions: (1) the impartiality of the decision maker and (2) the
reliability of the information forming the basis of the decision. See Butz, 438
U.S. at 512-13. Safeguards inherent in both forums foster these qualities.
The first quality is fostered in formal agency adjudication by the checks and
balances afforded when a different person assumes the roles comparable to those
of prosecutor and judge, with the adjudicator independent of agency control.
Hearing examiners are neither required to perform prosecutorial and
investigative functions [**15] inconsistent with their judicial role nor
to answer to those who do. Id. at 513-14. This unbiased adjudicator provides a
check on agency zeal. Id. at 515. One group of quasi-prosecutorial agency
officials immunized in Butz were those who brought a proceeding to seek
sanctions. Id. at 515. They did not impose the sanctions.
The second quality is fostered by having the transcript and exhibits of oral
and documentary evidence constitute the exclusive record on which the decision
must be based. The decision maker must explain the decision with findings and
conclusions. An adversarial procedure allows cross-examination of witnesses, a
challenge to the government's theories, and the sobering requirement of airing
these theories in a public forum. Id. at 512-13, 517.
The disinterested examiner may accept or reject the government's theories,
after hearing both sides and all relevant evidence. Id. at 517. The other
agency "prosecutorial" personnel granted absolute immunity in Butz
were those who present evidence in an agency hearing, the purpose being to
encourage the fullest possible presentation of evidence to the decision maker.
See id.
These two [**16] qualities are conspicuously absent from Terry's
activities, as they will typically be from an agency "proceeding" in
the broad sense that is not subject to the safeguards of formal adjudication.
First, Terry was not, nor was she restrained by, an adjudicator independent of
agency control and of a conflicting prosecutorial role. The role she played, if
analogized to a traditional trial, was an amalgam of the roles of prosecutor,
judge, jury, and marshal executing the judgment as well, as her duties included
agency investigation and enforcement, judgmental functions, assessment of
information, and execution of the levy. Second, the intra-agency file
forwarded to her as a basis for her decision bears little resemblance to the
complete and reliable record created and tested by the adversarial process in a
trial or formal agency hearing.
IRS defendants performing functions the Stankevitz defendants did may
legitimately be covered by the executive-branch analog to prosecutors'
quasi-judicial immunity as outlined in Butz, 438 U.S. at 515-17. Their actions
triggered the deficiency proceeding with its procedural safeguards, including
preseizure, preassessment notice and an opportunity [**17] for the
taxpayer to take his case to the impartial forum of the Tax Court.
[*1412] In contrast, Bothke's complaint is that statutorily
prescribed safeguards were circumvented in his case in disregard of his
vigorous protests at every stage. The IRS sent him no deficiency notice, a
jurisdictional prerequisite for a petition to the Tax Court, and provided no
impartial, formal agency hearing.
Stankevitz ruled that the proper forum for taxpayer complaints of unfair
treatment is in a subsequent enforcement proceeding by the agency. 640 F.2d at
206. This rule cannot apply when the agency has bypassed the
"proceeding" and gone precipitously to enforcement.
Qualified immunity for federal executive officials is the general rule and
absolute immunity the exceptional case, a proposition first voiced in Butz, 438
U.S. at 506-08, and recently reiterated in Harlow v. Fitzgerald, 457 U.S. 800,
102 S. Ct. 2727, 2736, 73 L. Ed. 2d 396 (1982). Were we to accord absolute
immunity to defendant Terry under the guise of applying Butz, its carefully
delineated exception would overwhelm the rule set forth in that case.
That IRS agents performing specific tasks had absolute immunity [**18] in
Stankevitz does not mean that all IRS agents are also absolutely immune
irrespective of what tasks they perform. There is no such blanket
immunity for an arm of government.
The immunity available depends not on an official's job title or agency, but on
the function that person was performing when taking the actions that provoked
the lawsuit. See, e.g., Richardson v. Koshiba, 693 F.2d 911, 913-14 (9th Cir.
1982) (even judicial personnel are not absolutely immune when performing
executive functions); Harlow, 102 S. Ct. at 2735. See also Scheuer v. Rhodes,
416 U.S. at 247.
As demonstrated, Terry does not qualify for the quasi-judicial absolute
immunity delineated in Butz. We must inquire if she was entitled to absolute
immunity on some other ground.
Absolute immunity is accorded only to those public officials "whose
special functions or constitutional status requires complete protection from
suit." Harlow, 102 S. Ct. at 2732. These are members of the legislature
and judiciary performing their characteristic functions, and the President of
the United States. See id. at 2732-33.
For executive officials other than the President, the Supreme Court has
extended [**19] absolute immunity to those playing an integral part in
judge-supervised trials or in closely analogous proceedings. See id. at 2733
(citing Butz, 438 U.S. at 508-17); Briscoe v. LaHue, 51 U.S.L.W. at 4249-52. It
has denied absolute immunity to senior aides to the President, Harlow, 102 S.
Ct. at 2736, Cabinet members, see id. at 2734 (citing Butz, 438 U.S. at 506),
and state governors, see Harlow, 102 S. Ct. at 2733 (citing Scheuer v. Rhodes,
416 U.S. at 247-48).
Because Terry does not fit within the subcategory of executive officials held
absolutely immune in Butz, a new category of absolutely immune executive
officials would have to be created to exempt her unqualifiedly from liability.
New categories are recognized only in "exceptional situations where it is
demonstrated that absolute immunity is essential for the conduct of public
business." Butz, 438 U.S. at 507.
A defendant official bears the burden of proving that "public policy
requires an exemption of that scope," id. at 506, that "the
responsibilities of his office embraced a function so sensitive as to require a
total shield from liability." Harlow, 102 S. Ct. at 2735. A [**20]
court evaluates this possibility by assessing the importance of public policy
considerations through "reference to the common law, or more likely, our
constitutional heritage and structure." Id. at 2736 n.20.
Terry has made only a cursory argument that tax collectors are entitled to an
absolute immunity independent of the quasi-judicial immunity recognized in
Butz. She [*1413] contends that the duties of an IRS official
responsible for seizing property invite personal retaliation in the form of
vexatious damage suits and that absolute immunity is essential if these
officials are effectively to conduct the important public business of tax
collection.
Police officers, whose important duty to protect the public may involve
deprivations of liberty through arrests, are entitled only to qualified
immunity, Scheuer, 416 U.S. at 245, though their actions would seem equally
likely to invite retaliatory suits. Law enforcement personnel executing levies
were traditionally not protected by any immunity under the common law. IRS
agents are "relatively low-level executive officers" with a
correspondingly "narro[w] range of official discretion." Mark v.
Groff, 521 F.2d at [**21] 1380-81. Cf. G.M. Leasing, 560 F.2d at 1014
(levying is "ministerial" rather than "discretionary"
activity).
Other cases addressing IRS agents' damages liability for levy-related
activities have chosen the qualified immunity standard. Hall v. United States,
704 F.2d at 249-50 & n.2; Hutchinson v. United States, 677 F.2d at 1328;
G.M. Leasing Corp. v. United States, 560 F.2d at 1015.
We recognize the government's interest in collecting taxes. Congress's taxing
power is granted by the Constitution, U.S. Const. Art. I § 8, cl. 1;
Amend. XVI. The importance of tax collection is reflected in statutes which,
for example, prohibit its injunction. See 26 U.S.C. § 7421(a).
But the law reflects also a Congressional determination that the taxpayer
should be afforded certain procedural rights, which the IRS is bound to
respect. See, e.g., Laing v. United States, 423 U.S. 161, 46 L. Ed. 2d 416, 96
S. Ct. 473 (1976). In balancing these interests, Congress has determined that
violations of the procedural rights at issue here are exceptions to the
Anti-Injunction Act. See 26 U.S.C. § § 6213(a), (b)(2),
7421(a).
Private ownership of property and its enjoyment secure [**22] from
arbitrary governmental interference are cherished, fundamental concepts, see
U.S. Const. Amends. III, IV, V, X, XIV, and are two of the features
distinguishing this society from those with oppressive governments.
Unjustified governmental invasion of property rights by seizure can occasion
physical hardship, see Commissioner v. Shapiro, 424 U.S. 614, 629-30 &
n.11, 47 L. Ed. 2d 278, 96 S. Ct. 1062 (1976), but the affront to the citizen's
notions of the place of government in our society, when personally confronting
the misuse of its awesome power, may engender a turmoil that is more profound
than the physical effects of the deprivation. Cf. Bivens, 403 U.S. at
391-92, 394-96.
The Service, with its broad authority including that of levying property, has
power that is considerable, and in some ways unique, to disrupt taxpayers'
lives. The needs of the public fisc are vital, but their mere invocation cannot
override all rights of the public for whom it exists, without reference to the
propriety of that invocation.
With the IRS's broad power must come a concomitant responsibility to exercise
it within the confines of the law. The Court has emphasized that no official
[**23] is above the law, and that broad powers present broad
opportunities for abuse. Butz, 438 U.S. at 505-06. Cf. Mark v. Groff, 521 F.2d
at 1380 n.4.
We conclude that agents in Terry's position do not meet the Supreme Court's
test for creating new categories of absolutely immune executive officials.
II. Qualified Immunity
The decision below reflects a determination that Terry acted with subjective
good faith. However, when it was rendered, officials asserting the qualified
immunity defense had to demonstrate that they met an objective standard of good
faith as well. See, e.g., Wood v. Strickland, 420 U.S. 308, 321, 43 L. Ed. 2d
214, 95 S. Ct. 992 [*1414] (1975). Ignorance or disregard of
settled, undisputable law negates this defense even if subjective good faith
exists. Id.
The Supreme Court has since revised the summary judgment test for qualified
immunity, making objective good faith the only requirement. The district court
is to place its "reliance on the objective reasonableness of an official's
conduct." Harlow, 102 S. Ct. at 2739. "Government officials
performing discretionary functions generally are shielded from liability for
civil damages [**24] insofar as their conduct does not violate clearly
established statutory or constitutional rights of which a reasonable person
would have known." Id. at 2738 (emphasis supplied).
Bothke argues that Terry has not met this standard, because (1) the IRS
allegedly did not follow statutory procedures, and (2) he warned Terry twice
that she was proceeding illegally. Because of the lower court's disposition on
the immunity issue, it did not reach the question whether the IRS proceeded
correctly.
For a levy to be statutorily authorized in the circumstances here, two
conditions must be fulfilled. First, a 10-day notice of intent to levy must
have issued. See 26 U.S.C. § 6331(a). Terry ascertained that this
had been done. Second, the taxpayer must be liable for the tax. Id. Tax
liability is a condition precedent to the demand. Merely demanding payment,
even repeatedly, does not cause liability.
For the condition precedent of liability to be met, there must be a lawful
assessment, either a voluntary one by the taxpayer or one procedurally proper
by the IRS. Because this country's income tax system is based on voluntary
self-assessment, rather than distraint, Flora v. United States [**25] ,
362 U.S. 145, 176, 4 L. Ed. 2d 623, 80 S. Ct. 630 (1960), the Service may
assess the tax only in certain circumstances and in conformity with proper
procedures.
Bothke believes that the IRS had to follow the deficiency proceedings of 26
U.S.C. § § 6212, 6213(a), under which he was entitled to a
preassessment notice of deficiency which gave him 90 days to petition the Tax
Court. Terry argues that the IRS was proceeding properly under an
exception to the statutory requirement, whereby no deficiency notice is
necessary if the amount assessed is the result of a mathematical or clerical
error on the face of the return. Id. § 6213(b)(1), (g)(2).
Even under this exception, the regular deficiency-proceeding safeguards are
mandatorily triggered if the taxpayer requests an abatement within 60 days. Id.
§ 6213(b)(2). Bothke responded to the IRS's Correction to Arithmetic
well within that time.
The IRS failed to construe his protest as a request for abatement because he
did not cite this statute. But the notice to Bothke did not suggest that the
IRS expected a statutory reference before it would conclude that the taxpayer's
procedural rights under the statute had been triggered. [**26]
Rather, it indicated that Bothke could challenge the correction merely by
"let[ting] us know if you believe that the balance due is incorrect."
More importantly, the statute does not require that the taxpayer put a legal
classification on his protest. The Service, however, with its expertise, is
obliged to know its own governing statutes and to apply them realistically.
Bothke's strongly worded protest should reasonably have been construed as a
request for abatement. It seems the IRS proceeded illegally even under its
interpretation of the proper procedure to use for his tax return. n4
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - -
- -
n4 Terry has in the alternative suggested briefly that the procedure used was
proper because no determination of a prior notice of deficiency is required
when the assessment is based on the return as filed. The authority offered is
Collins v. United States, 8001 U.S. Tax Cas. (CCH) 9130, 45 A.F.T.R. 2d 616
(E.D. Mo. Dec. 3, 1979). In that case, the taxpayers had self-assessed the
taxes but failed to pay them. Under the facts here, this argument is frivolous.
As the magistrate noted, when Terry's counsel suggested this below, "if
you read [Bothke's Form 1040] literally it indicates that the $1,100 should
come back to him. It doesn't indicate that he owes anything."
- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - -
- - [**27]
If Terry had this protest or was aware of its substance, it is questionable
whether she can meet the objective good [*1415] faith standard. n5
This information is not in the record on appeal. n6
- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - -
- -
n5 This is not to be read to imply that where the file passed to the field
officer masks, either carelessly or systematically, facts pertinent to the
legality of the levy, immunity will automatically result. If the field officer
has reasonable notice of possible irregularities that would make a levy
illegal, whether the notice comes by examination of the file or otherwise, the
matter must be resolved, if the exercise of discretion to levy is to have a
factual basis of adequate scope. This is especially true in a routine case
where no jeopardy assessment is involved and the circumstances are not exigent.
This follows from an application of good faith immunity standards to the fact
that field officer job duties include investigating an account before
determining that a levy is warranted.
We recognize that several agents may deal with a case before it reaches the
field officer and that any procedural error in these earlier stages are
committed by officials other than the one ultimately assigned the account for
investigation and levy.
Bothke's March 15 protest to the Correction to Arithmetic exemplifies the sort
of thing which, if known to the field officer, would provide reasonable notice
of preexisting procedural improprieties. It is the item which, after a review
of the record in this case, stands out as raising a genuine issue of Terry's
good faith under the objective standard. The district court's findings of
her subjective good faith survives the clearly erroneous test.
[**28]
n6 Terry did have the "Taxpayer Delinquent Account," but we cannot
decipher the abbreviations and transaction codes for the items in the printout.
The date of one item corresponds approximately with the date the IRS received
Bothke's March 15 protest.
Our consideration of this matter was hampered in other ways. The copy of
Terry's handwritten "TDA History Record" in the record on appeal is
so poorly reproduced as to be partially illegible. We are unable to decipher
the numerical codes Terry used. There appears to be an unexplained hiatus
on lines 9 and 13.
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- -
We remand for a determination whether Terry met the objective good faith
standard. The matter of Bothke's protest to the Correction to Arithmetic and
Terry's knowledge of it will be considered.
Bothke is clearly not without fault in the creation of this situation in view
of the manner in which he prepared his 1977 tax return. The Service, however,
has efficient methods for dealing with such returns. Our decision will not
hamper it from pursuing those proper methods in similar situations. Cf.
Fullerton Market Cold Storage Co. v. Cullerton [**29] , 582 F.2d 1071 at
1078 (7th Cir. 1978).
_______________________________
Bothke v. Fluor Engineers and Constructors, Inc. 713 F.2d 1405 (1983)
Formal administrative adjudication shares with judge-supervised trials two
key qualities that diminish the need for individual suits to correct
constitutional transgressions: (1) the impartiality of the decision maker and
(2) the reliability of the information forming the basis of the decision. See
Butz, 438 U.S. at 512-13. Safeguards inherent in both forums foster these
qualities.
The first quality is fostered in formal agency adjudication by the checks and
balances afforded when a different person assumes the roles comparable to those
of prosecutor and judge, with the adjudicator independent of agency control.
Hearing examiners are neither required to perform prosecutorial and
investigative functions [**15] inconsistent with their judicial role nor
to answer to those who do. Id. at 513-14. This unbiased adjudicator provides a
check on agency zeal. Id. at 515. One group of quasi-prosecutorial agency
officials immunized in Butz were those who brought a proceeding to seek
sanctions. Id. at 515. They did not impose the sanctions.
The second quality is fostered by having the transcript and exhibits of oral
and documentary evidence constitute the exclusive record on which the decision
must be based. The decision maker must explain the decision with findings and
conclusions. An adversarial procedure allows cross-examination of witnesses, a
challenge to the government's theories, and the sobering requirement of airing
these theories in a public forum. Id. at 512-13, 517.
The disinterested examiner may accept or reject the government's theories,
after hearing both sides and all relevant evidence. Id. at 517. The other
agency "prosecutorial" personnel granted absolute immunity in Butz
were those who present evidence in an agency hearing, the purpose being to
encourage the fullest possible presentation of evidence to the decision maker.
See id.
_____________________________
Bothke v. Fluor Engineers and Constructors, Inc. 713 F.2d 1405 (1983)
A defendant official bears the burden of proving that "public policy
requires an exemption of that scope," id. at 506, that "the
responsibilities of his office embraced a function so sensitive as to require a
total shield from liability." Harlow, 102 S. Ct. at 2735. A [**20]
court evaluates this possibility by assessing the importance of public policy
considerations through "reference to the common law, or more likely, our
constitutional heritage and structure." Id. at 2736 n.20.
The decision below reflects a determination that Terry acted with subjective
good faith. However, when it was rendered, officials asserting the qualified
immunity defense had to demonstrate that they met an objective standard of good
faith as well. See, e.g., Wood v. Strickland, 420 U.S. 308, 321, 43 L. Ed. 2d
214, 95 S. Ct. 992 [*1414] (1975). Ignorance or disregard of
settled, undisputable law negates this defense even if subjective good faith
exists. Id.
The Supreme Court has since revised the summary judgment test for qualified
immunity, making objective good faith the only requirement. The district court
is to place its "reliance on the objective reasonableness of an official's
conduct." Harlow, 102 S. Ct. at 2739. "Government officials
performing discretionary functions generally are shielded from liability for
civil damages [**24] insofar as their conduct does not violate clearly
established statutory or constitutional rights of which a reasonable person
would have known." Id. at 2738 (emphasis supplied).