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Wright v. Commissioner of Internal Revenue

July 7, 2009



Raymond Wright appeals from a judgment of the United States Tax Court insofar as the Tax Court dismissed, on jurisdictional and mootness grounds, Wright's suit challenging a tax collection action arising from his failure to file tax returns in 1987 and 1989. Wright argues that the Tax Court erred in declining to exercise jurisdiction over his request for an abatement of interest and a refund of any resulting overpayment. We conclude that the Tax Court had jurisdiction to determine whether the pro se plaintiff was entitled to an abatement of interest and to a refund resulting from any consequent overpayment. Vacated and remanded.

The opinion of the court was delivered by: Dennis Jacobs, Chief Judge

Argued: December 2, 2008

Before: JACOBS, Chief Judge, McLaughlin and B.D. Parker, Circuit Judges.

This is the third appeal to consider the baffling ramifications of Raymond Wright's failure to file tax returns in 1987 and 1989. See Wright v. Comm'r, 381 F.3d 41 (2d Cir. 2004); Wright v. Comm'r, 173 F.3d 848 (2d Cir. 1999) (Table). Wright, who has appeared pro se throughout this litigation, has been trying to balance the books on his tax obligations, without much help from the Internal Revenue Service ("IRS"). Most recently, the United States Tax Court (Vasquez, J.) entered a judgment treating as moot Wright's challenge to the assessment of his 1987 taxes, enjoining the IRS from collecting Wright's 1989 taxes, but declining for lack of jurisdiction to determine whether Wright has overpaid his 1989 taxes. On appeal, Wright argues that the various payments he has made (including payments on the 1987 taxes) constitute overpayment for which he seeks a refund. For the following reasons, we vacate the judgment of the Tax Court insofar as it treated as moot Wright's challenge to the assessment of his 1987 taxes and declined to exercise jurisdiction over Wright's abatement and overpayment claims, and we remand for yet further proceedings.


The facts are set out at length in our 2004 opinion. The (highly compressed) facts bearing on this current appeal are as follows.

Wright did not file returns for the years 1987 and 1989. The IRS began sending him delinquency notices as early as 1989. In 1992, Wright asked the IRS to file "substitute returns" on his behalf for 1987 and 1989, and it did so in October 1993. In November 1993 the IRS audited Wright and charged him with deficiencies of $3,777.00 (plus interest and late penalties) for 1987 and $6,500.00 (plus interest and late penalties) for 1989. In May 1994, Wright filed a tax return for the year 1993 and requested a refund. When the IRS reminded Wright that he still owed taxes for 1987 and 1989, Wright directed the IRS by letter to apply his refund of $1,046.90 (representing an overpayment of $971.78 and interest of $75.12) to the deficiencies found for 1987 and 1989. The IRS did not accede to that request. Instead, the IRS withheld his refund without applying it to the 1987 and 1989 deficiencies (which continued to accrue penalties and interest on the books of the IRS), and without advising Wright what it was doing.

On June 21, 1994, Wright paid the IRS $6,681.22, which was applied pro rata to Wright's outstanding tax liabilities for 1987 and 1989. Wright v. Comm'r, 84 T.C.M. (CCH) 675, 676 (2002).

After receiving a notice of deficiency in May 1995, Wright initiated a series of proceedings in which he asserted a variety of procedural and constitutional claims. Wright v. Comm'r, 75 T.C.M. (CCH) 2536, 2536 (1998). All of Wright's claims were held to be without merit, and a panel of this Court affirmed in an unpublished order. Wright, 173 F.3d at *1.

By May 2000, the books of the IRS reflected a total unpaid balance for 1987 and 1989 so big and so long delinquent that the IRS sent Wright a Notice of Intent to Levy for unpaid taxes. Wright, 84 T.C.M. at 676. Wright sought a pre-levy hearing pursuant to 26 U.S.C. § 6330 based on a variety of alleged errors and abuses. He met with an appeals officer in December 2000, and his outstanding balance was reduced to correct the IRS's failure to give him withholding credits of $2,346.00 in 1987 and $287.00 in 1989. Id. at 676-77. In May, 2001, the IRS abated $3,260.71 in statutory interest that had allegedly accrued on the 1987 deficiency. Id. at 677.

In April 2001 the IRS informed Wright that it would proceed with a levy action against him. Wright appealed the levy action pro se in Tax Court, "petitioning for an abatement of interest on grounds of IRS error and delay." Wright's appeal expressed (understandable) confusion as to the amounts levied against him by the IRS for the years 1987 and 1989, and claimed that he was entitled to additional interest abatement by reason of cascading errors he alleged the IRS had made--including its handling of his 1993 refund and its alleged failure to credit his withholding credits from 1987 and 1989.

The Tax Court rejected all of Wright's arguments, finding that Wright's 1993 refund had in fact been mailed to him, and concluding therefore that Wright's "1993 refund could not be applied against his outstanding liabilities for 1987 and 1989" and did not entitle him to additional interest abatement. Wright, 84 T.C.M. at 679. The Tax Court also ruled that, because Wright failed to file returns or pay taxes in 1987 and 1989, he was precluded from any additional interest abatement other than that he had already received for his missing withholding credits. Id.

We vacated that ruling on appeal, seeing no evidence that the IRS had sent Wright his 1993 refund, and observing that Wright's tax liability for 1987 and 1989 may have been completely satisfied by the refund along with Wright's other payments and credits. Wright, 381 F.3d at 45-46. We remanded to the Tax Court to determine (i) whether Wright's 1993 tax refund was sent to him by the IRS in 1994, (ii) if not, whether Wright received timely notice from the IRS that his refund had not been applied to his 1987 and 1989 tax deficiencies, (iii) if not, whether his current tax liability should be consequently adjusted by, inter alia, an abatement of interest pursuant to 26 U.S.C. ยง 6404(e), and (iv) in any case, whether the current interest abatement that ...

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