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FARENGA v. U.S.

March 29, 2004.

MICHAEL A. FARENGA, Plaintiff,
v.
U.S., Defendant.



The opinion of the court was delivered by: NORMAN MORDUE, District Judge

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

  On September 27, 2001, plaintiff pro se Michael A. Farenga filed a complaint seeking to set aside a "Notice of Determination Concerning Collection Action(s) Under Section 6330"*fn1 in which the Internal Revenue Service concluded a levy was an appropriate action to collect two, five hundred dollar civil penalties that were assessed against plaintiff, pursuant to 26 U.S.C. § 6702, for filing a both a frivolous income tax return and a Form 843*fn2 claim for refund of credits pursuant to 26 U.S.C. § 31(a)(1). Presently before the Court is the government's "Motion to Affirm Determination of the Internal Revenue Service."*fn3

  III. BACKGROUND

  According to the complaint and its exhibits: plaintiff, an Alltel of New York employee, filed a federal income tax return for the year 1999 and claimed zero income and zero taxes due. Plaintiff also claimed that $1,311.21 had been withheld as income tax and requested that amount be refunded to him. Plaintiff also filed a "843 claim form" claiming a "statutory refund of credits pursuant to IRS code Section 31 A-1."*fn4 See Transcript of CDP Hearing, Complaint, Ex.D. Finding the income tax return and claim form frivolous, the Internal Revenue Service fined plaintiff $500 for each filing. The IRS sent plaintiff a Notice of Intent to Levy and Notice of Your Right to a Hearing. See Complaint, Ex.C. Plaintiff timely requested a Collection Due Process Hearing (CDP) and stated that he would challenge the existence of his underlying tax liability. See Complaint, Ex.B. Along with his request for a hearing, plaintiff attached a list of items the IRS was to "have at the hearing", including the name(s), "Federal ID number", and job description of the IRS employee(s) who imposed the frivolous penalty; "[t]he delegation of authority from the Secretary authorizing such persons to impose a `frivolous' penalty"; the "Treasury regulation that allows IRS employees to impose the `frivolous' penalty, and the regulation that required me to pay it"; the frivolous penalty determination document; and the "specific Code section that makes me `liable' for the income tax at issue". Plaintiff specified that he "will need to see all of the above documents at the IRC 6320 `Due Process Hearing' before I am persuaded that I am legally obligated to pay the (2) $500, frivolous penalties at issue."

  By letter dated July 16, 2001, the IRS informed plaintiff that a hearing had been scheduled. In the letter, Michael Smith, Appeals Settlement Officer, stated that:
IRC section 6012(a) requires the filing of an income tax return by every individual having taxable year gross income exceeding the exemption amount. IRC section 61 defines gross income. The return that you filed showing that you had no income, when you plainly had wages from Alltel, is frivolous on its face. This return resulted in a civil penalty imposed by authority of IRC 6702. While due process permits you the opportunity to object to the underlying assessment, your issue that you are not liable to pay income tax and therefore you are not liable for this civil penalty is unlikely to prevail.
Mr. Smith further informed plaintiff:
Your request for the names, job descriptions and delegation authority of the individual involved in imposing the penalty under IRC section 6702 is not relevant to this proceeding. Appeals is not required to produce this documentation before making a determination in your case. Courts have consistently held that a written transcript of your account is presumptive evidence of the validity of the assessment i.e. that the Service complied with the requirements of the law in making the assessment.
Complaint, Ex.F.

  On July 31, 2001, Appeals Officer Michael Smith presided over plaintiff's CDP hearing. See Transcript of CDP Hearing, Complaint, Ex.D. At the hearing, plaintiff: (1) argued that the Appeals Officer was required to provide verification from the Secretary that the requirements of any applicable law and administrative procedure have been met; (2) requested the "assessment of [his] account"; (3) requested the identity of the employee who determined the frivolous penalties were appropriate and his or her job description showing that he or she was authorized to assess a penalty; (4) requested that the Appeals Officer show him the regulation authorizing the frivolous penalty; (5) argued that because wages are not income, his income tax return was not frivolous; and (6) requested that the Appeals Officer show him the law establishing his liability for income taxes. Plaintiff stated that he would pay the amount due in full if the Appeals Officer could point to the law establishing his liability for income taxes. The Appeals Officer listened to plaintiff's arguments, refused to answer some of plaintiff's requests, informed plaintiff that he would issue a determination, and terminated the hearing.

  On August 29, 2001, the IRS issued a determination that plaintiff did not raise a valid issue concerning the use of a levy action to collect the frivolous tax return penalties. On September 27, 2001 plaintiff filed the instant complaint pursuant to 26 U.S.C. § 6330(d)(1)(A)*fn5 seeking damages and to "set aside an invalid collection due process `determination'". In the complaint, which is redundant and quite lengthy, the Court surmises that plaintiff alleges that he did not receive a proper CDP hearing and that the Appeals Officer's determination was defective because: (1) the penalties are not supported by any testimony or documentary evidence; (2) at the CDP hearing, the Appeals Officer did not produce the "verification from the Secretary" as required by § 6330(c) or send plaintiff the "verification from the IRS office collecting the tax that the requirements of any applicable [] have been met' as `required' by Treasury Regulation 301.6330-1(c)" prior to the issuance of the Notice of Determination; (3) the Appeals Officer did not produce the relevant regulations or statutes including a Treasury Department regulation authorizing IRS employees to impose a "frivolous penalty" or requiring plaintiff to pay such a penalty, a statute that established the existence of the underlying liability for the tax for which the frivolous penalty was imposed, and a provision of the Internal Revenue Code which establishes "income tax `liability'"; (4) the Appeals Officer did not produce proof that the Secretary authorized the instant collection action, proof that the "Attorney General or his delegate `directed' that this collection action be commenced", or a document signed by an IRS employee supporting the imposition of the "frivolous penalty"; and (5) the Appeals Officer refused to accept plaintiff's proposed collection alternative, i.e., that plaintiff would pay the amount at issue if the Appeals Officer could show him the regulation establishing his liability. Based on the above, plaintiff claims that no valid CDP hearing was held, and that the determination at issue "is a fraud and a mockery".

  Defendant moved to affirm the determination of the IRS on the basis that there was no abuse of discretion and that the Court lacks jurisdiction over plaintiff's claim for damages.*fn6 Defendant argues plaintiff failed to raise any relevant challenges to the tax penalties and did not challenge the underlying tax liability. III. JURISDICTION

  Pursuant to 26 U.S.C. § 6330(d)(1):
(d) Proceeding after hearing. —
(1) Judicial review of determination. — The person may, within 30 days of a determination under this section, appeal such determination —
(A) to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter); or
(B) if the Tax Court does not have jurisdiction of the underlying tax liability, to a district court of the United States.
The United States Tax Court has exclusive jurisdiction to review the Commissioner of Internal Revenue's deficiency assessments, but not to review penalties that can be assessed without a notice of deficiency. See Follum v. United States, 98 CV 0126, 1999 WL 250746 (W.D.N.Y. March 5, 1999); Danner v. United States, 208 F. Supp.2d 1166, 1171 (E.D.Wash. 2002). Deficiency procedures do not apply to the assessment of collection of frivolous tax return penalties. 26 U.S.C. § 6703. Thus, this Court has subject matter jurisdiction to review plaintiff's challenges to the two $500 penalties, but not to review plaintiff's income tax liability for the year 1999. Cipolla, 2003 WL 22952617 at *3.

  IV. DISCUSSION

  A. Standard

  In addressing a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the Court accepts as true all of the factual allegations in the complaint and draws inferences from those allegations in the light most favorable to the plaintiff. See Albright v. Oliver, 510 U.S. 266, 268 (1994); McEvoy v. Spencer, 124 F.3d 92, 95 (2d Cir. 1997). Dismissal is proper only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir. 1994). Plaintiff brings this action pro se, thus his submissions should be held "`to less ...


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