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Ulloa v. United States

September 9, 2008


The opinion of the court was delivered by: Norman A. Mordue, Chief U.S. District Judge



Plaintiff pro se Richard Ulloa brings this action seeking an order: declaring invalid a determination the Internal Revenue Service ("IRS") issued, which sustained the assessment and collection of a $500 penalty for filing a frivolous income tax return for the 2003 tax year; directing the government to pay plaintiff for the costs he incurred in this action; awarding plaintiff punitive damages; and directing the government to "[r]eturn all monies in overpayments". Dkt. No. 1. Plaintiff moves to compel the United States of America to refund withholdings from the 2006 tax year. Dkt. No. 15. The government opposes this motion, Dkt. No. 17, and moves for summary judgment affirming the determination and dismissing the complaint pursuant to Rule 56 of the Federal Rules of Criminal Procedure. Dkt. No. 18. Plaintiff opposes summary judgment.


In a 1040 United States Individual Income Tax Return dated December 31, 2004, plaintiff entered zeros throughout his tax return, claiming that he received income during 2003, reported that he had $12,482.07 in withholdings, and requested a refund in that amount. Gov't Ex.1.

Plaintiff attached a three page "statement" to his Form 1040 notifying the IRS that he was filing his tax return "out of fear" and that he "received no income in the 'constitutional sense'". Id. According to certified records from the IRS, in 2003, plaintiff earned $104,424 in wages, collected $2,538 in rent, and received $10,704 in other income. Gov't Ex. 2. On August 22, 2005, the IRS assessed plaintiff with a $500 penalty pursuant to 26 U.S.C. § 6702,*fn1 for filing a frivolous income tax return. In an effort to collect the penalty, the IRS sent plaintiff a final notice of intent to levy dated November 28, 2005, and notified plaintiff of his right to a hearing. Gov't Ex. 4.

Plaintiff timely requested a collection due process ("CDP") hearing.*fn2 Gov't Ex.6.

Thomas Conley, an IRS "Settlement/Appeals Officer", offered plaintiff a telephone conference scheduled on February 22, 2006, regarding the penalty. Id. According to Conley, plaintiff objected to a telephone conference, contending that his constitutional rights were being violated because the IRS was not giving him a face to face conference. Id. As reflected in Conley's notes, on February 22, 2006, plaintiff participated in a CDP hearing via telephone conference:

Held telephone conference with TP. SO, Michael Smith, present on conference call. Mr. Ulloa indicated he was recording the conversation and also had a court reporter taking notes. He was informed that neither tape recordings or stenographic recording were allowed in Appeals telephone conferences. He stated he had advised the SO previously of his intention to record and had not been advised in correspondence that it would not be allowed. TP requested a copy of the 1040 document that verified the assessment. Informed TP SO will send his correspondence with Certificate of Assessment as verification of the assessment. TP continue to argue that he has to be provided with a copy of the 1040 return. He was advised that the courts have accepted the 4340 as presumtive [sic] evidence of a valid assessment. TP wanted to discuss sections of the IRC. Informed TP that SO would not argue his challenges to the IRC. Informed him that he has the opportunity make a payment proposal in lieu of the levy. Mr. Ulloa only indicated that he would write a check to FP when he received the verification he requested which he will fwd to the Secretary for signature. Mr. Ulloa indicated that he would be summons the SO and petition the court on Appeals determination. He advised that he has the tape recording and the court steno's recording. Advised him again that he was advised that neither recording was allowed in a telephone confernece [sic]. He stated he didn't care what the SO said. Discontinued conference. Prepared correspondence presenting TP 14 days to provide any additional information he would like Appeals to consider. Enclosed the Certificate of Assessment.

Gov't Ex. 6.

After the hearing, plaintiff submitted further correspondence requesting Form 4340, advising that he would report the settlement officer to the FBI for participating in fraud, arguing liability for income tax, raising constitutional challenges, and requesting documents. Id. The IRS issued a Notice of Determination dated March 28, 2006, finding that the Compliance Division could proceed with the propose levy action because plaintiff had not offered a valid proposal of an alternative to collection. Gov't Ex. 7.


A. Motion for Summary Judgment

The United States moves for summary judgment affirming the March 28, 2006, Notice of Determination. Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c). Substantive law determines which facts are material; that is, which facts might affect the outcome of the suit under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 258 (1986). Irrelevant or unnecessary facts do not preclude summary judgment, even when they are in dispute. See id. The moving party bears the initial burden of establishing that there is no genuine issue of material fact to be decided. See Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986). With respect to any issue on which the moving party does not bear the burden of proof, it may meet its burden on summary judgment by showing that there is an absence of evidence to support the nonmoving party's case. See id. at 325. Once the movant meets this initial burden, the nonmoving party must demonstrate that there is a genuine unresolved issue for trial. See Fed. R. Civ. P. 56(e). A trial court must resolve all ambiguities and draw all inferences in favor of that party against whom summary judgment is sought, see Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989); Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985).

In the complaint, plaintiff challenges the imposition of the $500 penalty and contends that the appeals officer did not: (1) conduct a face-to-face CPD hearing; (2) produce and present to plaintiff the verification required; (3) produce any document signed by an IRS employee supporting the imposition of the "frivolous penalty" at issue; (4) produce any delegation of authority from the Secretary that authorized any IRS employee to impose the "frivolous penalty" at issue; (5) identify a Treasury Department regulation authorizing IRS employees to impose, or requiring plaintiff to pay, the "frivolous penalty" at issue; (6) produce any statute establishing the existence of the underlying liability of the tax for which the "frivolous penalty" was imposed; (7) produce documentary evidence that the Secretary authorized this collection action and that the Attorney General, or his delegate, directed that this collection action be commenced: (8) produce an "Assessment" for taxes plaintiff owes; or (9) produce the law requiring plaintiff to pay income taxes. Additionally, plaintiff seeks a refund of withholdings in connection with the 2003 tax year and an award of punitive damages. The government seeks summary judgment dismissing plaintiff's challenge to the imposition of a $500 penalty for filing a frivolous tax return and the proposed levy.

The Court reviews the validity of the tax liability*fn3 at issue de novo. MRCA Info. Serv. v. United States, 145 F.Supp.2d 194 (D.Conn. 2000). "Where the validity of the tax liability was properly at issue in the hearing, and where the determination with regard to the tax liability is part of the appeal .... [t]he amount of tax liability will be reviewed by the appropriate court on a de novo basis." Id. at 199 (quoting the conference report accompanying the IRS Restructuring and Reform Act of 1998, H. Rep. No. 105-599 at 266 (1998)). Where, however, "the validity of the tax liability is not properly part of the appeal, . . . the appeals officer's determination as to the appropriateness of the collection activity will be reviewed using an abuse of discretion standard." Id. "To the extent that, liberally construed, plaintiff argues he is not liable for the penalty because of alleged procedural and evidentiary defects, the Court should apply a de novo standard of review." Cipolla v. Internal Revenue Serv., No. CV-02-2063, 2003 WL 22952617 (E.D.N.Y. ...

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