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Walcott v. United States

United States District Court, D. Colorado

July 7, 2017

JANET L. WALCOTT, Plaintiff,
v.
UNITED STATES OF AMERICA, Defendant.

          OPINION AND ORDER SUSTAINING OBJECTIONS IN PART AND GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

          MARCIA S. KRIEGER CHIEF UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court pursuant to Ms. Walcott's Objections (# 51) to the Magistrate Judge's Recommendation (# 47) that the Government's Motion to Dismiss (# 38) be granted, and the Government's response (# 52).

         FACTS

         According to the Amended Complaint (# 5), Ms. Walcott receives monthly pension payments from her former employer. Beginning in 2013, the Internal Revenue Service (“IRS”) issued a levy[1] against those pension payments, directing that 100% of each monthly payment be paid over to the IRS instead of Ms. Walcott. Ms. Walcott contends that the IRS never issued any Notice of Deficiency that would support such collection efforts, never gave her notice and an opportunity to be heard on the levy, nor complied with statutory prerequisites to the issuance of a levy.

         Her pro se[2] Amended Complaint contains three claims: (i) a request for an injunction halting the current levy and “barring defendant from any further levy activity for its unstated claims, ” pursuant to 26 U.S.C. § 6213(a), plus an apparent claim for a refund of the levied monies under the same provision; (ii) a claim for damages pursuant to 26 U.S.C. § 7433, in that the IRS negligently disregarded the provisions of the Internal Revenue Code in issuing the levy; and (iii) a request for return of the full amount -- $ 95, 000 - collected pursuant to the levy because such funds are “surplus proceeds” as defined by 26 U.S.C. § 6342.

         The Government moved to dismiss (# 38) Ms. Walcott's claims pursuant to Fed.R.Civ.P. 12(b)(1). It argued that: (i) as to her request for an injunction, the request was moot because the IRS had released all of its levies against her pension payments, she did not show that the claim fell within a recognized exception to the Anti-Injunction act, 26 U.S.C. § 7421(a), and she was precluded from challenging at least one of the levies in question due to res judicata effects from a prior challenge she brought; (ii) as to her claim for a refund of “surplus proceeds” the IRS collected, she has not shown a waiver of the Government's sovereign immunity for such a claim, nor shown that she exhausted her administrative remedies by filing a claim with the appropriate IRS District Director; and (iii) as to her claim for negligence, she failed to adequately exhaust her administrative remedies.

         The Court referred the Government's motion to the Magistrate Judge for a Recommendation. On March 31, 2017, the Magistrate Judge recommended (# 47) that the Government's motion be granted. Specifically, the Magistrate Judge found: (i) her request for injunctive relief was rendered moot when the IRS released the levy in March 2016; (ii) Ms. Walcott's argument that the request was not moot because the IRS released the levy voluntarily and could thus resume it at any time was without merit, insofar as the IRS represented by affidavit that there are no collection hearings pending for any levies against Ms. Walcott; (iii) to the extent her request for injunctive relief also includes a request for a refund under 26 U.S.C. § 6213(a), she failed to avail herself of the two alternatives for challenging a tax deficiency - either paying the tax, seeking a refund from the IRS, and litigating the denial of that refund, or by filing a timely petition in Tax Court; (iv) as to her second and third claims, she failed to exhaust her administrative remedies by first filing a request with the Administrative Director for the region in which she resides, 26 C.F.R. § 301.7433-1(e)(1) and 26 C.F.R. § 301-6342-1(b); and (v) Ms. Walcott's argument that she filed her request with the IRS at its address in Washington D.C. because the IRS had not published its Denver, Colorado address in the Federal Register was without merit because she had actual notice of the Denver address pursuant to IRS publication 4235.

         Ms. Walcott timely filed Objections (# 51) to the Recommendation. She contends: (i) the IRS' affidavit as to the absence of any existing collection hearings is not enough to render her request for an injunction moot because there is no necessary connection between such hearings and the IRS resuming the levy and because the IRS clearly released the levy only as a direct response to the pendency of her lawsuit; (ii) the Magistrate Judge erred in considering her request for a refund under 26 U.S.C. § 7422, instead of considering it under 26 U.S.C. § 6213(a), rendering the latter statute meaningless; (iii) the Magistrate Judge erred in excusing the IRS' failure to publish the address of its Denver location in the Federal Register as required by 5 U.S.C. § 552, and erred in finding that the IRS' publication of the address in a general pamphlet was sufficient to confer actual notice of the address upon her when “direct notice” to her of the address is required.

         ANALYSIS

         The Court reviews the objected-to portions of a Recommendation de novo. Fed.R.Civ.P. 72(b).

         A. Mootness

         Ms. Walcott's primary objection to the Magistrate Judge's finding that the matter was moot is that the IRS could resume the levy at any time. As the Magistrate Judge noted, the Government, as the party asserting mootness, carries a “formidable” burden (also described as “heavy” and “stringent”) “of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” Brown v. Buhman, 822 F.3d 1151, 1166-67 (10thCir. 2016). However, Brown recognizes that “the burden is not insurmountable, especially in the context of government enforcement, ” and that cases in which the Government's voluntary cessation of a challenged practice has been found to not moot the case have been cases involving “clear showings of reluctant submission by governmental actors and a desire to return to the old ways.” Id. at 1167. Thus, in the context of government enforcement efforts, the 10th Circuit generally finds that “absent evidence that the voluntary cessation is a sham, ” the government need not show that it is “physical[ly] or logical[ly] impossibl[e] that the challenged policy will be reenacted”; it need only show that the cessation of the challenged practice is “genuine.” Id.

         Here, the Government submitted the affidavit of Roseanne Miller, an IRS Revenue Officer. Ms. Miller notes that Ms. Walcott continues to have tax deficiencies (or, did as of 2013), but states that “there is no collection due-process hearing pending for the levy at issue in this lawsuit or for any other collection action by the IRS at this time.” That assertion requires some parsing. The reference to a “collection due-process hearing” refers to the hearing contemplated by 26 U.S.C. § 6330(a)(1). See Keller Tank Services II, Inc. v. Commissioner of Internal Revenue, 854 F.3d 1178, 1188 (10th Cir. 2017). That statute provides that “[n]o levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of their right to a hearing under this section before such levy is made.” The hearing is an “opportunity [for the taxpayer] to contest the lien or levy before the IRS proceeded with collection.” Keller, id. However, a hearing only occurs if the taxpayer makes a timely request for one. 26 U.S.C. § 6330(b)(1). The ability of the taxpayer to request a hearing is triggered by the IRS giving notice of the intended levy, and the request must be made within the 30-day period before the levy takes effect. 26 U.S.C. § 6330(a)(3)(B). If no hearing is timely requested, the IRS may proceed on the levy.

         Ms. Miller states that no such hearing is “pending for the levy at issue in this lawsuit” - that is, the levy against Ms. Walcott's pension. That assertion is largely self-evident: the levy in question was imposed in October 2014, and Ms. Miller's affidavit was signed in March 2016. By operation of § 6330(a)(3)(B), Ms. Walcott's ability to request a hearing with regard to that levy expired by October 2014, when the levy took effect. Thus, the fact that no hearing is pending for that levy does little to guard against the concern Ms. Walcott has that the IRS will simply reinstate the October 2014 levy (or impose a new levy, again without notifying Ms. Walcott as required by § 6330). The second portion of Ms. Miller's statement seems to piggyback on the first: there “is no collection due-process hearing pending . . . for any other collection action by the IRS at this time.” Once again, the statement's focus on the pendency of a “hearing” tends to obscure, rather than clarify, Ms. Miller's ...


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