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McConnell v. United States

United States District Court, S.D. New York

January 13, 2017

VINCENT M. McCONNELL, Plaintiff,
v.
UNITED STATES OF AMERICA, by U.S. INTERNAL REVENUE SERVICE, U.S. SOCIAL SECURITY SERVICE, U.S. OFFICE OF PERSONNEL MANAGEMENT, Defendants. UNITED STATES OF AMERICA Plaintiff,
v.
VINCENT M. McCONNELL, Defendant.

          OPINION AND ORDER

          VALERIE CAPRONI United States District Judge.

         This case arises from the IRS's assessment of taxes against McConnell for the years 1989, 1990, and 1991 (collectively, the “At-Issue Years”). In McConnell v. United States, No. 14-CV-5355 (hereafter, “McConnell I”), McConnell seeks a refund of retirement-income benefits that were withheld to pay taxes due for the At-Issue Years. In United States v. McConnell, No. 15-CV-10164 (hereafter, “McConnell II”), the Government seeks collection of McConnell's outstanding tax liability for the At-Issue Years. McConnell moves for summary judgment in McConnell I and McConnell II, claiming that the statute of limitations for the IRS to collect taxes due from those years has expired; the Government cross-moves for summary judgment in both cases, claiming that the limitations period has not expired. For the following reasons, all of the motions for summary judgment are DENIED.

         BACKGROUND

         According to the Government, McConnell owes approximately $123, 600 in unpaid federal taxes for the At-Issue Years.[1] Government 56.1 ¶¶ 2, 5, 8; Ward Decl. ¶¶ 10, 12, 14.[2] In March 1994, McConnell and the IRS executed a Form 900 Tax Collection Waiver (the “Form 900 Waiver”), which extended the “statutory period” for the IRS's collection of taxes (“Extension Date”) until December 31, 2015. Cowart Decl., Ex. 1; McConnell 56.1 Response ¶ 12. The Form 900 Waiver states that McConnell and the IRS agree that the taxes outstanding for the At-Issue Years, plus interest and penalties, may be collected from McConell by levy or a court proceeding begun on or before the Extension Date. Cowart Decl., Ex. 1. The Form 900 Waiver further states that the time for the IRS's collection of taxes will be extended past the Extension Date if the taxpayer makes an “offer in compromise” on or before the Extension Date.[3] Cowart Decl., Ex. 1.

         The IRS assessed taxes against McConnell for the 1989, 1990, and 1991 years in May 1990, November 1991, and November 1992, respectively. Government 56.1 Response ¶ 3; McConnell Aff. ¶ 6. In December 2002, because McConnell still owed taxes for the At-Issue Years, the IRS levied McConnell's federal retirement-income benefits to pay McConnell's outstanding tax liabilities for the At-Issue Years. Government 56.1 Response ¶ 1; McConnell Aff. ¶ 6, Ex. C; Compl. at 10. To date, a portion of McConnell's retirement-income benefits, which include social security and military benefits, continues to be withheld from him and collected by the IRS. McConnell Aff. ¶ 9.

         Claiming that the statute of limitations for the IRS's collection of taxes had expired, McConnell filed claims with the IRS for refund of the withheld retirement-income benefits. Compl. at 11-14; McConnell Aff. ¶ 7, McConnell Aff. ¶¶ 10-11, Ex. A. The IRS denied McConnell's claim, concluding that the Form 900 Waiver was valid and that the statute of limitations had not expired. Compl. at 15; McConnell Aff., Ex. E; see also McConnell Aff., Ex. F. After the IRS denied McConnell's refund claim, McConnell filed a lawsuit on July 16, 2014, seeking a full refund of all amounts collected by the IRS after the expiration of the statute of limitations.[4] McConnell I. On December 30, 2015, the Government filed a lawsuit against McConnell to collect the federal taxes owed for the At-Issue Tax Years. McConnell II. The parties' cross-motions for summary judgment, filed in both cases, are now pending before this Court. McConnell I (Dkts. 34, 40); McConnell II (Dkts. 18, 25).[5]

         DISCUSSION

         The crux of the issue in both cases is whether the statute of limitations expired, thereby barring the IRS's collection of taxes from McConnell, or whether McConnell waived the statute of limitation in connection with an “installment agreement.”[6] McConnell moves for summary judgment on the grounds that he is entitled to a refund because the limitations period for the IRS's collection of taxes for the At-Issue Years expired. The Government cross-moves for summary judgment, arguing that McConnell extended the limitations period and that the IRS's collection of taxes was, therefore, not time-barred.

         Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (internal quotation marks omitted)). Courts “construe the facts in the light most favorable to the non-moving party and resolve all ambiguities and draw all reasonable inferences against the movant.” Delaney v. Bank of Am. Corp., 766 F.3d 163, 167 (2d Cir. 2014) (per curiam) (quoting Aulicino v. N.Y.C. Dep't of Homeless Servs., 580 F.3d 73, 79-80 (2d Cir. 2009) (alteration omitted)).

         The non-moving party, however, “must do more than simply show that there is some metaphysical doubt as to the material facts” and “may not rely on conclusory allegations or unsubstantiated speculation.” Jeffreys v. City of New York, 426 F.3d 549, 554 (2d Cir. 2005) (citations and internal quotation marks omitted). Rather, the nonmoving party must come forward with “specific facts showing that there is a genuine issue for trial.” Sista v. CDC IXIS N. Am., Inc., 445 F.3d 161, 169 (2d Cir. 2006) (citation omitted). “[I]f the evidence is such that a reasonable jury could return a verdict for the nonmoving party, ” a motion for summary judgment must be denied. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         The statute of limitations for the Government to collect unpaid tax is ten years from the date of the tax assessment. 26 U.S.C. § 6502(a)(1). This limitations period may be extended by written agreement. See 26 U.S.C. § 6502(a)(2). The parties agree that for the Government's attempt to collect taxes for the At-Issue Years to be timely, McConnell must have executed the Form 900 Waiver in connection with an installment agreement. See Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, § 3461, 112 Stat. 685 (1998).

         Although there is no dispute that McConnell executed the Form 900 Waiver, McConnell 56.1 Response ¶ 12, Cowart Decl. Ex. 1, there is a dispute over whether an installment agreement ever was executed.[7] The Government relies on the entry of a “code 60” in McConnell's IRS account as circumstantial evidence that McConnell executed an installment agreement in connection with the Form 900 Waiver.[8] According to an IRS employee, a “code 60” in the TMF system means that “an Installment Agreement [was] entered into by the IRS . . . and the taxpayer.” Ward Decl. ¶¶ 23, 28. The IRS employee stated that in her 31 years of IRS employment, she was “aware of no instance in which [an IRS] officer executed a Form 900 Waiver and then an installment agreement within a few weeks later unless the waiver agreement was a condition to [an IRS] officer agreeing to an installment agreement” because “[w]ithout an installment agreement, extending the collection statute of limitations for twenty-one years (as was done [in the Form 900 Waiver]) would make little sense.” Ward Decl. ¶¶ 30, 31. The IRS employee concluded that the entry of a “code 60” several weeks after the Form 900 Waiver was executed means that McConnell executed an installment agreement in connection with the Form 900 Waiver. Ward Supp. Decl. ¶ 5.

         McConnell, on the other hand, submitted an affirmation in which he stated that he “neither requested . . . nor signed” an installment agreement in connection with the Form 900 Waiver. McConnell Reply Aff. ¶ 5. According to McConnell, the Form 900 Waiver was executed not in connection with an installment agreement but in connection with an offer in compromise that the IRS later rejected. McConnell Reply Aff. ¶ 9. McConnell explained that he never executed an installment agreement because the additional monthly interest and penalties that he would have incurred through such an agreement “would have posed an insurmountable financial difficulty.” McConnell Reply Aff. ¶¶ 6-7. McConnell does not offer any evidence other than his own affirmations in support of his position that he never executed an installment agreement.

         The fact that the IRS no longer has a physical copy of the installment agreement is not fatal to its case if it has “reliable secondary evidence” that proves the agreement existed. See Malkin v. United States, 243 F.3d 120, 122 (2d Cir. 2001). The Malkin court concluded that a district court did not clearly err in finding after a bench trial that secondary evidence consisting of IRS records and testimony regarding standard IRS procedures was sufficient to prove that the taxpayer signed the relevant IRS form. Id. at 124. Even though the taxpayer disputed that he had signed the form, the Malkin court declined to second-guess the trial court's assessment of the credibility of the evidence presented. Id. at 123-24 (“It is within the province of the trier of fact to decide whose testimony should be credited, and we are not allowed to ...


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