T.C. Memo. 2002-291
UNITED STATES TAX COURT
JOSEPH T. TORNICHIO, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13629-01L. Filed November 26, 2002.
Joseph T. Tornichio, pro se.
Katherine Lee Kosar, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
THORNTON, Judge: Pursuant to section 6330(d), petitioner
seeks review of respondent’s determination to proceed with
collection of his 1995 through 1997 tax liabilities.1
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended.
- 2 -
FINDINGS OF FACT
The parties have stipulated some of the facts, which we
incorporate herein by this reference. When petitioner filed his
petition, he resided in Akron, Ohio.
A. Petitioner’s Forms 1040
On or about April 12, 1996, February 22, 1997, and April 13,
1998, petitioner submitted to respondent Forms 1040, U.S.
Individual Income Tax Return, for taxable years 1995, 1996, and
1997, respectively. On each Form 1040, petitioner listed his
occupation as salesman.
To the extent he made any entries in the income portions of
these Forms 1040, petitioner entered zeros; in particular, he
entered zeros on line 7 for wages, salaries, tips, etc.; on line
22 for total income; and on line 31 for adjusted gross income.
Petitioner left blank line 38, taxable income, and entered zeros
for total taxes due. For each year, petitioner claimed refunds
equal to the amount of Federal income tax that he reported
withheld from wages--$1,675 for 1995, $559.82 for 1996, and
$232.12 for 1997.
Petitioner attached to these several Forms 1040
substantially identical two-page statements alleging, among other
things, that the Internal Revenue Code does not establish an
income tax liability or require income taxes to be paid “on the
basis of a return”; that requirements to file tax returns violate
- 3 -
his Fifth Amendment rights; and that his wages do not constitute
“income” within the meaning of the Internal Revenue Code, on the
basis of his interpretation of the “Corporation Excise Tax Act
(of 1909)” and on a theory that only corporate-derived income
constitutes taxable income.
B. Notices of Deficiency and Petitioner’s Responses
On October 10, 1997, and February 6, 1998, respondent
(acting through Jimmy L. Smith, Director of the Internal Revenue
Service (IRS) Service Center in Cincinnati, Ohio) issued
petitioner notices of deficiency for 1995 and 1996, respectively;
and on May 28, 1999, respondent (acting through R. Wayne Hicks,
Director of the IRS Service Center in Cincinnati, Ohio) issued
petitioner a notice of deficiency for 1997. In these notices,
respondent determined deficiencies in, and additions to,
petitioner’s Federal income taxes as follows:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654(a)
1995 $8,826 $1,788.00 $324.00
1996 11,990 2,857.55 605.09
1997 20,465 5,058.25 1,081.10
The deficiencies were based on respondent’s determination
that petitioner failed to report wage income as reported to
respondent by Nationwide Communications, Inc., on Forms W-2, Wage
and Tax Statement.
- 4 -
Although the notices of deficiency explained petitioner’s
right to petition the Tax Court to contest the deficiency
determinations, petitioner chose not to do so. Rather, in
various letters to respondent in 1997 through 1999, petitioner
acknowledged receipt of the notices of deficiency and disputed
respondent’s authority to issue them.
C. Respondent’s Final Notice and Petitioner’s Response
After sending petitioner a number of notices of intent to
levy, on October 17, 2000, respondent sent petitioner a Final
Notice of Intent to Levy and Notice of Your Right to a Hearing in
respect of the assessments of petitioner’s deficiencies and
additions to tax, plus interest, for tax years 1995, 1996, and
1997. By letter dated November 3, 2000, petitioner requested an
administrative hearing.
D. The Appeals Office Hearing
On November 1, 2001, petitioner attended an administrative
hearing in Akron, Ohio, before respondent’s Appeals officer.
According to a purported transcript of the hearing attached to
petitioner’s petition, petitioner declined to discuss meaningful
collection alternatives at the hearing.2 Rather, petitioner
2
Petitioner’s purported transcript of the Appeals Office
hearing reveals that the only “collection alternative” he was
willing to discuss was patently spurious:
Now, I’m proposing an alternative for payment and that
is let the record show that I’m providing the Internal
(continued...)
- 5 -
attempted to challenge his underlying tax liability and demanded
proof of his tax assessments, copies of Form 4340 (Certificate of
Assessments, Payments, and Other Specified Matters), copies of
his tax returns for the years at issue, and verification that all
applicable laws and administrative procedures had been followed
in the assessment and collection process.
E. Respondent’s Notice of Determination
On November 1, 2001, respondent sent petitioner a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330. In the notice of determination, the Appeals Office
concluded that the proposed collection action should be
sustained.
F. The Petition
On December 4, 2001, petitioner filed his petition with this
Court seeking review of respondent’s notice of determination.
The petition includes allegations that: (1) The Appeals officer
failed to properly verify that the requirements of any applicable
law or administrative procedure were met as required under
section 6330(c)(1); (2) petitioner did not receive the requisite
statutory notice and demand for payment or valid notice of
deficiency; and (3) petitioner was denied the opportunity to
2
(...continued)
Revenue Code with that section marked liability for
tax. If you could show me the statute that requires me
to pay the tax, I am prepared to make arrangements to
pay that which you say that I owe.
- 6 -
raise “relevant issues”. In support of this last-mentioned
allegation, the petition cross-references portions of
petitioner’s purported transcript of the Appeals Office hearing
in which petitioner sought unsuccessfully to engage the Appeals
officer in a colloquy as to whether the Internal Revenue Code
establishes any liability to pay income taxes.
After the hearing but before trial, respondent provided
petitioner with computer transcripts of his account for the 3 tax
years at issue and a copy of Monaghan v. Commissioner, T.C. Memo.
2002-16, in which this Court imposed penalties under section
6673(a)(1) for the taxpayer’s taking frivolous positions.
G. Petitioner’s Refund Actions
Pursuant to section 6702, respondent assessed a $500
frivolous return penalty against petitioner for each of the years
at issue, as well as for other years. After respondent had
collected these penalties for 1994 and 1995, petitioner filed an
action in U.S. District Court for the Northern District of Ohio
seeking a refund of these amounts. In this action, petitioner
relied “essentially on the same arguments he asserted in the
attachments to his tax returns.” Tornichio v. United States, 81
AFTR 2d 98-1377, at 98-1379, 98-1 USTC par. 50,299, at 83,681
(N.D. Ohio 1998).3 The District Court dismissed petitioner’s
3
In a separate action, petitioner sought to have the U.S.
District Court for the Northern District of Ohio review the
(continued...)
- 7 -
arguments as “frivolous”, observing, among other things, that
section 1 of the Internal Revenue Code imposes tax liability on
taxpayers and that “income” encompasses wages.4 Id. The
District Court imposed sanctions on petitioner pursuant to rule
11 of the Federal Rules of Civil Procedure.
Describing petitioner as “an Ohio tax protestor”, the U.S.
Court of Appeals for the Sixth Circuit affirmed the District
Court’s judgment and concluded that “assertion of Tornichio’s
arguments in this appeal also warrants a Fed. R. App. P. [Federal
Rules of Appellate Procedure] 38 award” of $1,000 in favor of the
United States. Tornichio v. United States, 83 AFTR 2d 99-1531,
at 99-1531 to 99-1532 (6th Cir. 1999).
In a separate action in the District Court, petitioner
sought refund of income taxes withheld from his wages for 1994
3
(...continued)
legitimacy of an Appeals Office hearing involving respondent’s
attempted collection of frivolous return penalties assessed
against petitioner for 1996, 1997, and 1998. The District Court
dismissed the action for lack of jurisdiction. Tornichio v.
United States, 89 AFTR 2d 2002-1506, 2002-1 USTC par. 50,411
(N.D. Ohio 2002).
4
The District Court explained:
Plaintiff argues the Code does not impose a tax
“liability”. The plain language of the Code belies
this, stating the tax is “imposed”. See 26 U.S.C. § 1.
He attempts to distinguish between “imposing” a tax and
creating a “liability” for tax. The Court fails to see
a difference. Individuals have an affirmative duty to
pay taxes. * * * [Tornichio v. United States, 81 AFTR
2d 98-1377, at 98-1379, 98-1 USTC par. 50,299, at
83,681 (N.D. Ohio 1998).]
- 8 -
through 1996, arguing that the term “income” in section 61
encompasses only corporate income. Affirming an unpublished
District Court order dismissing the action, the Court of Appeals
stated that petitioner’s legal assertions were “patently
spurious”. Tornichio v. United States, 83 AFTR 2d 99-1516, at
99-1517, 99-1 USTC par. 50,394, at 87,962 (6th Cir. 1999). The
Court of Appeals assessed $1,000 in damages in favor of the
United States pursuant to rule 38 of the Federal Rules of
Appellate Procedure.
OPINION
A. Statutory Framework
If any person neglects or refuses to make payment of any
Federal tax liability within 10 days of notice and demand, the
Secretary is authorized to collect the tax by levy on the
person’s property. Sec. 6331(a). At least 30 days before taking
such action, however, the Secretary generally must provide the
person with a final notice of intent to levy that describes,
among other things, the administrative appeals available to the
person. Sec. 6331(d). Upon request, the person is entitled to
an administrative hearing before the Appeals Office of the IRS.
Sec. 6330(b)(1). If dissatisfied with the Appeals Office
determination, the person may seek judicial review in the Tax
Court or a District Court, as appropriate. Sec. 6330(d).
- 9 -
Generally, the proposed levy actions are suspended for the
pendency of the hearing and any judicial appeals therein. Sec.
6330(e)(1).
B. Petitioner’s Contentions
1. Underlying Tax Liability
Petitioner contends that he was improperly precluded at his
Appeals Office hearing from challenging his underlying tax
liability for the 3 tax years at issue. He bases this claim on
the Appeals officer’s refusal to engage in a colloquy with him
regarding his frivolous protestations about the existence of any
legal requirement to pay income taxes, and on his allegation that
the notices of deficiency for the years at issue were invalid
because they were not issued by the Secretary, and because he was
not given a copy of the order delegating authority from the
Secretary to the Director of the Service Center who issued them.
A taxpayer may contest the existence or amount of the
underlying tax liability at an Appeals Office hearing only if the
taxpayer did not receive any statutory notice of deficiency for
the tax liability or did not otherwise have an opportunity to
dispute the tax liability. Sec. 6330(c)(2)(B); see Sego v.
Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114
T.C. 176, 180-181 (2000). Petitioner received notices of
deficiency for the 3 tax years at issue. Petitioner did not
seek redetermination of the deficiencies in this Court. He did,
- 10 -
however, before the Appeals Office hearing, unsuccessfully seek a
refund of his 1995 and 1996 withheld income taxes in Federal
court. See Tornichio v. United States, 83 AFTR 2d 99-1516, 99-1
USTC par. 50,394 (6th Cir. 1999). Petitioner was not entitled to
raise challenges to his underlying tax liability at the Appeals
Office hearing.
Even if petitioner were permitted to challenge his
underlying tax liability, however, the arguments he has advanced
are without merit. In the previously cited refund actions
involving, in part, petitioner’s tax liabilities for 2 of the 3
years at issue here, the courts unequivocally rejected
petitioner’s “tax protest” arguments as “patently spurious”. Id.
at 99-1517, 99-1 USTC at 87,962; see Tornichio v. United States,
81 AFTR 2d 98-1377, 98-1 USTC par. 50,299 (N.D. Ohio 1998). The
same may be said of petitioner’s arguments regarding the validity
of the notices of deficiency.
The Secretary or his delegate may issue notices of
deficiency. Secs. 6212(a), 7701(a)(11)(B) and (12)(A)(i). The
Secretary’s authority to issue notices of deficiency has been
delegated to the Director of the Service Center who issued the
notices. See Nestor v. Commissioner, 118 T.C. 162, 165 (2002);
Stamos v. Commissioner, 95 T.C. 624, 630-631 (1990), affd.
without published opinion 956 F.2d 1168 (9th Cir. 1992); secs.
301.6212-1(a), 301.7701-9(b), Proced. & Admin. Regs.
- 11 -
2. Verification Requirements
Petitioner contends that the Appeals officer failed to
obtain verification from the Secretary that the requirements of
all applicable laws and administrative procedures had been met
under section 6330(c)(1). This contention is without merit.
Federal tax assessments are formally recorded on a record of
assessment. Sec. 6203. “The summary record, through supporting
records, shall provide identification of the taxpayer, the
character of the liability assessed, the taxable period, if
applicable, and the amount of the assessment.” Sec. 301.6203-1,
Proced. & Admin. Regs. Section 6330(c)(1) does not require the
Commissioner to rely on a particular document to satisfy the
verification requirement. Roberts v. Commissioner, 118 T.C. 365,
371 n.10 (2002); Kaeckell v. Commissioner, T.C. Memo. 2002-114;
Weishan v. Commissioner, T.C. Memo. 2002-88; Kuglin v.
Commissioner, T.C. Memo. 2002-51. Moreover, section 6330(c)(1)
does not require the Appeals officer to provide the taxpayer with
a copy of the verification at the hearing. Sec. 301.6330-
1(e)(1), Proced. & Admin. Regs.; see also Nestor v. Commissioner,
supra at 166.
According to petitioner’s purported transcript of the
Appeals Office hearing, the Appeals officer reviewed, among other
things, transcripts of petitioner’s account for the years at
issue in determining that the taxes were properly assessed. Some
- 12 -
5 months before trial, respondent sent petitioner “Plain English”
computer transcripts of his account. In addition, as part of the
pretrial stipulation process, respondent provided petitioner with
copies of so-called TXMODA transcripts of account.5 These various
transcripts of petitioner’s account, which are part of the record
in this case, contain all the information prescribed in section
301.6203-1, Proced. & Admin. Regs. See Schroeder v.
Commissioner, T.C. Memo. 2002-190; Kaeckell v. Commissioner,
supra; Weishan v. Commissioner, supra.6
Petitioner has shown no irregularity in the assessment
procedure that would raise a question about the validity of the
assessments or the information contained in the transcripts of
account. See Nestor v. Commissioner, supra at 167; Davis v.
Commissioner, 115 T.C. 35, 41 (2000). Accordingly, we hold that
respondent satisfied the verification requirement of section
6330(c)(1).
5
A TXMODA transcript contains current account information
obtained from the Commissioner’s master file. “TXMODA” is the
command code that is entered into the Commissioner’s integrated
data retrieval system (IDRS) to obtain the transcript. IDRS is
essentially the interface between the Commissioner’s employees
and the Commissioner’s various computer systems. See Kaeckell v.
Commissioner, T.C. Memo. 2002-114, n.2.
6
The record does not reveal the particular type of
transcript relied upon by the Appeals officer, but we regard this
matter as irrelevant. See Keene v. Commissioner, T.C. Memo.
2002-277, n.10.
- 13 -
3. Notice and Demand
Petitioner contends that he did not receive a notice and
demand for payment for any of the 3 tax years at issue as
required by section 6303(a), which provides in pertinent part:
SEC. 6303(a). General Rule.-–Where it is not
otherwise provided by this title, the Secretary shall,
as soon as practicable, and within 60 days, after the
making of an assessment of a tax pursuant to section
6203, give notice to each person liable for the unpaid
tax, stating the amount and demanding payment thereof.
* * *
“The form on which a notice of assessment and demand for
payment is made is irrelevant as long as it provides the taxpayer
with all the information required under 26 U.S.C. § 6303(a).”
Elias v. Connett, 908 F.2d 521, 525 (9th Cir. 1990).
The TXMODA transcripts in the record show that for each year
at issue, respondent sent petitioner both an initial notice and
demand and, subsequently, a final notice and demand. In
addition, petitioner received numerous notices of intent to levy,
as well as notices of deficiency. These numerous notices
sufficed to meet the section 6303(a) requirements. See Hughes v.
United States, 953 F.2d 531, 536 (9th Cir. 1992); Standifird v.
Commissioner, T.C. Memo. 2002-245; Weishan v. Commissioner,
supra.
For the foregoing reasons, we sustain respondent’s
determination as to the proposed levy as a permissible exercise
of discretion.
- 14 -
C. Section 6673 Penalty
Section 6673(a)(1) authorizes the Tax Court to require a
taxpayer to pay to the United States a penalty not in excess of
$25,000 whenever it appears that proceedings have been instituted
or maintained by the taxpayer primarily for delay or that the
taxpayer’s position in such proceedings is frivolous or
groundless. The purpose of this penalty provision is to deter
and penalize frivolous claims and positions. Bagby v.
Commissioner, 102 T.C. 596, 614 (1994).
This Court has repeatedly indicated its willingness to
impose such penalties in collection review cases, see, e.g.,
Pierson v. Commissioner, 115 T.C. 576 (2000), and has in fact
imposed such penalties in numerous cases, see Keene v.
Commissioner, T.C. Memo. 2002-277 (imposing a $5,000 penalty),
and cases cited therein at n.14.
Petitioner is a frequent litigator of groundless protests to
the validity of the Internal Revenue Code. Federal courts have
unequivocally rejected his protester arguments and sanctioned him
for raising them. See, e.g., Tornichio v. United States, 83 AFTR
2d 99-1516, 99-1 USTC par. 50,394 (6th Cir. 1999); Tornichio v.
United States, 83 AFTR 2d 99-1531 (6th Cir. 1999); Tornichio v.
United States, 81 AFTR 2d 98-1377, 98-1 USTC par. 50,299 (N.D.
Ohio 1998).
- 15 -
Despite these judicial rebuffs and sanctions, petitioner has
instituted the instant action (involving in part the same tax
years that were at issue in the cases cited above), raising many
of these same types of frivolous arguments, as well as others.
We are convinced that he has instituted this action primarily for
delay; his positions in this proceeding are frivolous and
groundless.
Some 5 months before trial, respondent provided petitioner
with a copy of Monaghan v. Commissioner, T.C. Memo. 2002-16, in
which this Court imposed penalties under section 6673(a)(1).
Shortly before trial, this Court explicitly warned petitioner
that his continued reliance on frivolous arguments would expose
him to sanctions of up to $25,000 under section 6673. Petitioner
has been undeterred by these warnings and by the sanctions
previously imposed by the courts. Accordingly, in furtherance of
the purpose of section 6673(a) to deter such proceedings
instituted primarily for delay, we believe a more significant
sanction is appropriate here. Pursuant to section 6673, we
require petitioner to pay to the United States a penalty of
$12,500.
All other arguments raised by petitioner and not expressly
discussed herein are without merit. To reflect the foregoing,
Decision will be
entered for respondent.