115 T.C. No. 39
UNITED STATES TAX COURT
TERRY HIRAM PIERSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8650-00L. Filed December 14, 2000.
R issued a notice of deficiency to P for the
taxable year 1988, but P did not file a petition for
redetermination with the Court. R subsequently issued
a notice of intent to levy. P requested and received
an administrative review of the proposed collection
action. R issued a notice of determination to P
stating that all applicable laws and administrative
procedures had been met and that collection would
proceed; R further advised P that a challenge to the
underlying liability would not be considered because P
had received a notice of deficiency. P filed an
imperfect petition with the Court for review of
respondent’s determination to proceed with collection.
However, the petition did not contain any specific
allegations. R moved to dismiss for failure to state a
claim. The Court then directed P to file a proper
amended petition, but P failed to do so. Rather, P
filed a statement asserting that he is not liable for
the underlying liability based on frivolous and
groundless arguments.
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Held, P’s petition for review of R’s
administrative determination to proceed with collection
fails to state a claim upon which relief can be
granted. See Goza v. Commissioner, 114 T.C. 176
(2000). Held, further, the Court may in a Lien and
Levy Action, either upon the Commissioner’s motion or
sua sponte, require a taxpayer to pay to the United
States a penalty not in excess of $25,000 whenever it
appears that such action has been instituted or
maintained by a taxpayer primarily for delay or that
the taxpayer’s position in such action is frivolous or
groundless. See sec. 6673(a)(1), I.R.C.
Terry Hiram Pierson, pro se.
Kerry Bryan and John A. Weeda, for respondent.
OPINION
WELLS, Chief Judge: This case was assigned to Special Trial
Judge Robert N. Armen, Jr., pursuant to the provisions of section
7443A(b)(5) and Rules 180, 181, and 183.1 The Court agrees with
and adopts the Opinion of the Special Trial Judge, which is set
forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
ARMEN, Special Trial Judge: This matter is before the Court
on respondent’s Motion To Dismiss For Failure To State A Claim
Upon Which Relief Can Be Granted. As discussed in detail below,
we shall grant respondent’s motion.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
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Background
On October 6, 1995, respondent issued a notice of deficiency
to petitioner determining a deficiency of $5,944 in his Federal
income tax for 1988, as well as an addition to tax pursuant to
section 6651(a)(1) in the amount of $736 and an addition to tax
pursuant to section 6654(a) in the amount of $166. Petitioner
did not file a petition with the Court contesting the notice of
deficiency within the 90-day period prescribed in section
6213(a).
The notice of deficiency for 1988 was mailed to petitioner
at 7690 Knox Court, Westminster, Colorado 80030, the same address
that petitioner used in filing the petition herein. Petitioner
does not allege that he did not receive the notice of deficiency,
and respondent has no record that the notice was returned by the
U.S. Postal Service to respondent as undelivered.
On January 24, 2000, respondent mailed a final notice of
intent to levy to petitioner. See sec. 6331. The notice stated
that petitioner owed tax and additional amounts totaling
$8,309.06 for the taxable year 1988 and that respondent was
preparing to collect this amount. The notice also stated that
petitioner would be given 30 days to request an Appeals Office
hearing.
Petitioner requested a hearing with respondent's Appeals
Office. On July 12, 2000, the Appeals Office issued a Notice of
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Determination Concerning Collection Actions to petitioner stating
in pertinent part as follows:
Your request for a hearing with Appeals was made under
IRC §6330 to prevent appropriate collection action.
You state in your request that you did not have income
for 1988 that is subject to tax. Tax was assessed for
the year 1988 under IRC §6020(b) because you failed to
voluntarily file an income tax return. You were
provided an opportunity to dispute the assessment but
you defaulted on the statutory notice of deficiency of
October 6, 1995.
A hearing with Appeals to discuss alternative
collection resolutions was held with you on June 12,
2000. IRC §6330(c)(2)(B) precludes you from raising
the 1988 liability as an issue. You responded by
stating that you had no income that is subject to tax
for 1988 and requested a Determination Letter be issued
so that you may pursue your case through the Tax Court.
On August 10, 2000, petitioner submitted to the Court a
document that the Court filed as an imperfect petition for review
of respondent's determination to proceed with collection.2 The
petition does not contain any specific allegations.
In response to the petition, respondent filed a Motion To
Dismiss For Failure To State A Claim Upon Which Relief Can Be
Granted. Respondent asserts that, because petitioner received a
notice of deficiency for the year in issue (and therefore was
presented with an earlier opportunity to contest his tax
liability in this Court), petitioner is precluded by statute from
contesting his tax liability in this proceeding. By Order dated
2
At the time that the petition was filed, petitioner
resided in Westminster, Colo.
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October 4, 2000, petitioner was directed to file a proper amended
petition. Petitioner failed to file a proper amended petition.
This matter was called for hearing at the Court's motions
session held in Washington, D.C., on November 8, 2000. Counsel
for respondent appeared at the hearing and offered argument and
evidence in support of respondent's motion to dismiss. No
appearance was made by or on behalf of petitioner at the hearing.
Rather, petitioner responded to the notice of hearing by filing a
Rule 50(c) statement in which he asserted that he is not liable
for the underlying taxes based on frivolous and groundless
arguments, including the following:
According to 6331(a) and the fact I am not an elected
official, or an employee of the United States of
America or one of its possessions, and not receiving an
income from the government, (upon whom a levy or notice
of levy could be served) the “Notice of intent to levy”
should not be allowed to be used on the citizens and
general public.
The word income is not defined in the I.R.C., * * *
but, can only be a derivative of corporate activity.
[I]ncome taxes applied on individuals is [sic] illegal.
[T]axes are filed voluntarily and * * * Assessment of
taxes on individuals is also voluntary and self
assessment [sic].
Discussion
Section 6331(a) provides that if any person liable to pay
any tax neglects or refuses to pay such tax within 10 days after
notice and demand for payment, then the Secretary is authorized
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to collect such tax by levy upon property belonging to the
taxpayer. Section 6331(d) provides that the Secretary is obliged
to provide the taxpayer with notice before proceeding with
collection by levy on the taxpayer's property, including notice
of the administrative appeals available to the taxpayer.
In the Internal Revenue Service Restructuring and Reform Act
of 1998 (RRA 1998), Pub. L. 105-206, sec. 3401, 112 Stat. 685,
746, Congress enacted new sections 6320 (pertaining to liens) and
6330 (pertaining to levies) to provide due process protections
for taxpayers in tax collection matters. Section 6330 generally
provides that the Commissioner cannot proceed with the collection
of taxes by way of a levy on a taxpayer's property until the
taxpayer has been given notice of and the opportunity for an
administrative review of the matter (in the form of an Appeals
Office hearing), and if dissatisfied, with judicial review of the
administrative determination in either the Tax Court or Federal
District Court.
In Goza v. Commissioner, 114 T.C. 176 (2000), we explained
that section 6330(c) provides for an Appeals Office hearing to
address collection issues such as spousal defenses, the
appropriateness of the Commissioner's intended collection action,
and possible alternative means of collection. Under section
6330(c)(2)(B), neither the existence nor the amount of the
underlying tax liability can be contested at an Appeals Office
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hearing unless the taxpayer did not receive a notice of
deficiency for the taxes in question or did not otherwise have an
earlier opportunity to dispute such tax liability. The taxpayer
in Goza had received a notice of deficiency, yet failed to file a
petition for redetermination with the Court. When the taxpayer
subsequently attempted to use the Court's collection review
procedure as a forum to assert frivolous and groundless
constitutional arguments against the Federal income tax, the
Court dismissed the petition for failure to state a claim upon
which relief can be granted.
As was the case in Goza v. Commissioner, supra, we are
satisfied that petitioner received a notice of deficiency, failed
to file a petition for redetermination with the Court, and has
attempted to contest his liability in this collection review
proceeding by raising frivolous and groundless arguments that he
is not liable for Federal income tax. Under the circumstances,
section 6330(c)(2)(B) clearly provides that petitioner was barred
from contesting the existence or amount of his tax liability
before the Appeals Office. Petitioner failed to raise a spousal
defense or challenge respondent's proposed levy by offering a
less intrusive means for collecting his tax liability in either
the Appeals Office hearing or in his petition for review filed
with the Court. See sec. 6330(c)(2)(A). These issues are now
deemed conceded. See Rule 331(b)(4). In the absence of a
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justiciable issue for review, we conclude that the petition fails
to state a claim for relief.3
As a final matter, we feel compelled to make mention of
section 6673(a)(1). That section provides in relevant part as
follows:
SEC. 6673. SANCTIONS AND COSTS AWARDED BY COURTS.
(a) Tax Court Proceedings.--
(1) Procedures Instituted Primarily for Delay,
Etc.--Whenever it appears to the Tax Court that--
(A) proceedings before it have been
instituted or maintained by the taxpayer primarily
for delay,
(B) the taxpayer’s position in such
proceeding is frivolous or groundless, * * *
the Tax Court, in its decision, may require the
taxpayer to pay to the United States a penalty not in
excess of $25,000.
See Wilkinson v. Commissioner, 71 T.C. 633 (1979), for a
discussion of the history of legislative efforts to discourage
frivolous appeals to this Court.
In the context of a deficiency action that we decided some
23 years ago, we stated as follows:
In recent times, this Court has been faced with
numerous cases, such as this one, which have been
commenced without any legal justification but solely
for the purpose of protesting the Federal tax laws.
3
The decision in this case will indicate that we sustain
respondent's administrative determination to proceed with
collection against petitioner. Our decision does not serve as a
review of respondent's determination as to petitioner's
underlying tax liability for 1988.
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This Court has before it a large number of cases which
deserve careful consideration as speedily as possible,
and cases of this sort needlessly disrupt our
consideration of those genuine controversies.
Moreover, by filing cases of this type, the protesters
add to the caseload of the Court * * * and such cases
increase the expenses of conducting this Court and the
operations of the IRS, which expenses must eventually
be borne by all of us.
Hatfield v. Commissioner, 68 T.C. 895, 899 (1977). Although we
did not require the taxpayer in that case to pay a penalty, we
stated that “if tax protestors continue to bring such frivolous
cases, serious consideration should be given to imposing such
damages.” Id. at 900.
We are convinced that petitioner instituted or maintained
the present case primarily, if not exclusively, as a protest
against the Federal income tax. Further, it is readily apparent
that petitioner’s position is frivolous and groundless. See,
e.g., Smith v. Commissioner, T.C. Memo. 2000-290. Thus, we would
be fully justified in requiring petitioner to pay a penalty
pursuant to section 6673. On the other hand, this Court’s
jurisdiction over lien and levy actions is barely 2 years old,
see RRA 1998 sec. 3401, and we have not previously required a
taxpayer who abused the protections afforded by sections 6320 and
6330 to pay a penalty pursuant to section 6673. Nor have we
previously provided unequivocal warning to such taxpayers that we
may require them to pay such a penalty. Accordingly, we have
decided not to require petitioner to pay a penalty in this case.
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However, we regard this case as fair warning to those taxpayers
who, in the future, institute or maintain a lien or levy action
primarily for delay or whose position in such a proceeding is
frivolous or groundless. See White v. Commissioner, 72 T.C.
1126, 1135-1136 (1979) (providing fair warning to taxpayers in
deficiency actions who bring frivolous case merely for purposes
of delay).
To reflect the foregoing,
An order of dismissal and
decision will be entered.