Minemyer v. CIR ( 2023 )

Appellate Case: 21-9006 Document: 010110799884 Date Filed: 01/19/2023 Page: 1
FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT January 19, 2023
_________________________________
Christopher M. Wolpert
Clerk of Court
JOHN THOMAS MINEMYER,
Petitioner - Appellant/Cross-
Appellee,
v. Nos. 21-9006 & 21-9007
(CIR No. 22182-10)
COMMISSIONER OF INTERNAL (United States Tax Court)
REVENUE,
Respondent - Appellee/Cross-
Appellant.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before TYMKOVICH, PHILLIPS, and EID, Circuit Judges.
_________________________________
John Thomas Minemyer, proceeding pro se, appeals from a decision of the
United States Tax Court holding him liable for income tax deficiencies for tax years
2000 and 2001, and for a civil fraud penalty for tax year 2000. The Commissioner of
Internal Revenue (IRS) cross-appeals the tax court’s determination that
Mr. Minemyer was not liable for a civil fraud penalty for tax year 2001 because the
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
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IRS failed to obtain written supervisory approval for the penalty as required by
26 U.S.C. § 6751(b)(1). In particular, the tax court held that § 6751(b)(1) requires
such approval before any proposed civil fraud penalty is communicated to the
taxpayer.
Exercising jurisdiction under 26 U.S.C. § 7482(a)(1), we affirm the tax court’s
decision holding Mr. Minemyer liable for the income tax deficiencies for 2000 and
2001, and for a civil fraud penalty for 2000. We reverse the tax court’s holding that
the IRS did not satisfy the approval requirement with respect to the 2001 civil fraud
penalty, and hold that the IRS satisfies § 6751(b)(1) so long as written supervisory
approval is obtained no later than the date the IRS issues the notice of deficiency
formally asserting a penalty. Accordingly, we remand for the tax court to decide on
the evidence whether Mr. Minemyer is liable for the civil fraud penalty for 2001.
I. Background
In 2008 Mr. Minemyer was indicted on two counts of tax evasion for the years
2000 and 2001. He pled guilty to the 2000 count and in exchange the government
dismissed the 2001 count. Two years later the IRS sent Mr. Minemyer a notice of
deficiency asserting income tax deficiencies and civil fraud penalties for 2000 and
2001. Mr. Minemyer petitioned the tax court to dispute the asserted deficiencies and
penalties. The tax court granted summary judgment in favor of the IRS on the
deficiencies for both years and the fraud penalty for 2000. After a trial, the tax court
held the IRS had not met its burden of production for the 2001 fraud penalty.
Mr. Minemyer’s appeal and the IRS’s cross-appeal followed.
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A. The Plea Agreement and Sentence
In connection with his guilty plea, Mr. Minemyer entered a plea agreement.
Mr. Minemyer agreed “to pay restitution to the [IRS] in the amount of all taxes,
interest, and penalties due and owing from the tax years 2000 and 2001.” R. vol. 2.2
at 93. The plea agreement stated that “the Court shall enter a restitution order for the
full amount of the IRS’s loss,” which the plea agreement calculated to be
$200,918.22. Id. at 99. The concluding paragraph of the plea agreement contained
an integration clause stating, inter alia, that “neither the [government] nor the
defendant have relied, or are relying, on any terms, promises, conditions or
assurances not expressly stated in this agreement.” Id. at 101.
The district court sentenced Mr. Minemyer to one year in prison and three
years of supervised release. It also ordered restitution in the amount of $200,918.22,
which Mr. Minemyer paid at the time of his sentencing.
B. The Deficiency Notice and Fraud Penalties
In March 2010 a revenue agent visited Mr. Minemyer in prison and obtained
his signature on a form proposing certain tax deficiencies and civil fraud penalties for
2000 and 2001. Those proposed penalties and deficiencies had not been approved by
the agent’s supervisor. Mr. Minemyer’s signature evidenced his consent to the
proposed amounts, but he later withdrew his consent. The IRS therefore disregarded
the form and in May 2010 sent Mr. Minemyer a letter, which the IRS calls a Letter
950 or a 30-day letter, proposing the same deficiencies and civil fraud penalties.
That letter was approved by the revenue agent’s immediate supervisor.
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On August 19, 2010, the IRS sent Mr. Minemyer a deficiency notice
determining a tax deficiency of $140,561 for 2000 and $56,944 for 2001.1 R. vol. 2.1
at 51. It also determined civil penalties under 26 U.S.C. § 6663 in the amounts of
$105,420.75 for 2000 and $42,708 for 2001. Id.C. The Tax Court’s Decision
Mr. Minemyer petitioned the tax court to dispute the deficiency notice. He
argued he did not owe the deficiencies because they were already part of the
restitution he had paid. He further argued he was not liable for the fraud penalties
because a guilty plea does not prove fraud and because the plea agreement precluded
any additional penalties.
The tax court rejected Mr. Minemyer’s arguments in granting summary
judgment to the government, holding that the plea agreement and conviction did not
preclude the IRS from pursuing civil tax proceedings. The tax court therefore upheld
the tax deficiencies for 2000 and 2001. The tax court further held that
Mr. Minemyer’s conviction for tax evasion on the 2000 count collaterally estopped
him from challenging a civil fraud penalty for the same year. Mr. Minemyer appeals
from the tax court’s summary judgment order.
The civil fraud penalty for 2001 went to trial, after which the tax court held
that the IRS had not met its burden of production. The tax court interpreted
1
The Commissioner assures us that the figures differ between the restitution
amount in the plea agreement and the deficiency notice “because of computational
adjustments irrelevant to this appeal.” Principal and Resp. Br. at 14 n.2.
Mr. Minemyer does not dispute this characterization.
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26 U.S.C. § 6751(b)(1) to require written supervisory approval of an initial
determination of civil fraud penalties before that determination is formally
communicated to the taxpayer. The court therefore held that because the March 2010
proposed deficiencies and penalties had been communicated to Mr. Minemyer
without first being approved by a supervisor, the IRS had not complied with
§ 6751(b)(1). The IRS cross-appeals the tax court’s interpretation of § 6751(b)(1).
II. Discussion
A. Standard of Review
“We review tax court decisions in the same manner and to the same extent as
decisions of the district courts in civil actions tried without a jury.” Keller Tank
Servs. II, Inc. v. Comm’r, 854 F.3d 1178, 1195 (10th Cir. 2017) (internal quotation
marks omitted). “Thus, like our review of a district court’s grant of summary
judgment, we review the Tax Court’s grant of summary judgment de novo.” Id. We
review the tax court’s interpretation of the plea agreement for clear error. See United
States v. Rockwell Int’l Corp., 124 F.3d 1194, 1199 (10th Cir. 1997). Finally, we
review de novo the tax court’s conclusions of law, including its statutory
interpretations. Roth v. Comm’r, 922 F.3d 1126, 1131 (10th Cir. 2019).
B. Mr. Minemyer’s Appeal
Mr. Minemyer challenges the tax court’s summary judgment determination
that he is liable for income tax deficiencies for tax years 2000 and 2001, and for a
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civil fraud penalty for tax year 2000.2 He contends that his plea agreement and the
district court’s restitution order precluded the IRS from pursuing civil tax
proceedings. We reject his arguments.
As an initial matter, Mr. Minemyer appears to argue that his criminal
conviction and payment of restitution extinguishes the IRS’s right to pursue income
tax deficiencies and fraud penalties in this case. He is incorrect. First, “any amounts
paid to the IRS as restitution must be deducted from any civil judgment IRS obtains
to collect the same tax deficiency.” United States v. Tucker, 217 F.3d 960, 962
(8th Cir. 2000). Second, it is well settled that a conviction for tax evasion does not
preclude a later civil proceeding for the remedial purpose of determining, assessing,
and collecting tax deficiencies from the same taxpayer for the same years. See
Helvering v. Mitchell, 303 U.S. 391, 399 (1938); Creel v. Comm’r, 419 F.3d 1135,
1140 (11th Cir. 2005); United States v. Helmsley, 941 F.2d 71, 102 (2d Cir. 1991).
Third, “the government does not surrender its right to seek civil fraud penalties by
undertaking a criminal tax prosecution.”3 Morse v. Comm’r, 419 F.3d 829, 834
2
We liberally construe Mr. Minemyer’s pro se filings, but we do not assume
the role of advocate. See Yang v. Archuleta, 525 F.3d 925, 927 n.1 (10th Cir. 2008).
3
Mr. Minemyer cites Creel v. Commissioner in arguing that his restitution
payments extinguished his civil tax liabilities. Creel recognized the “general rule
[that] the government can recover criminal penalties from an individual in a criminal
prosecution and can recover additional civil penalties in a civil proceeding.”
419 F.3d at 1140. But it held that under “the unique facts and the nuances” of the
case, the restitution amount ordered by the district court specifically included the
civil penalties. Id. By contrast, here the district court ordered restitution of $200,918
without incorporating or otherwise mentioning additional, undetermined civil
penalties.
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(8th Cir. 2005). Thus, we reject Mr. Minemyer’s contention that either his criminal
conviction or payment of restitution precluded further civil tax proceedings.
Mr. Minemyer also contends that his plea agreement forecloses any civil
liabilities exceeding his restitution payments, because his understanding of the plea
agreement was that the district court would order restitution in the full amount of the
government’s losses. “A court applies a two-step process in interpreting the terms of
a plea bargain: first, the court examines the nature of the government’s promise;
second, the court investigates this promise based upon the defendant’s reasonable
understanding at the time the guilty plea was entered.” Rockwell, 124 F.3d at 1199.
There are two problems with Mr. Minemyer’s contention. First, the plea agreement
contains an integration clause, which bars Mr. Minemyer from offering extrinsic
evidence to prove his understanding. See id. (“the second-step reasonableness
inquiry is severely limited” by the presence of an integration clause in a plea
agreement). Second, the plea agreement contains no language prohibiting the IRS
from assessing civil fraud penalties. The only promises made by the government
were that it would file no other federal criminal charges based on matters then known
to it and that Mr. Minemyer would receive a one-level reduction in his offense level
for purposes of calculating his sentence.
Mr. Minemyer also focuses on paragraph 3 of the plea agreement, which
states: “The defendant agrees to pay restitution to the [IRS] . . . in the amount of all
taxes, interest, and penalties due and owing from the tax years 2000 and 2001.”
R. vol. 2.2 at 93. From this, he argues that the district court’s subsequent restitution
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order necessarily included “all” penalties owed and that therefore the IRS was
precluded from pursuing additional civil fraud penalties. But the plea agreement
simply recited what Mr. Minemyer agreed to; it did not obligate the district court to
order any specific amount of restitution. See, e.g., Morse, 419 F.3d at 834 (“[T]he
district judge enjoys considerable discretion as to whether [to] order restitution, and
if so, as to the amount.” (brackets and internal quotation marks omitted)). In
addition, plea agreements must be considered as a whole, United States v. Jordan,
853 F.3d 1334, 1341 (10th Cir. 2017), and other provisions of the plea agreement
demonstrate that the restitution order did not include penalties. For example,
paragraph 19.J of the plea agreement states that “the Court shall enter a restitution
order for the full amount of the IRS’s loss,” R. vol. 2.2 at 99. Elsewhere the plea
agreement states that the IRS’s loss was $200,918—the amount comprising
Mr. Minemyer’s under-reported tax liability for 2000 and 2001—and the district
court ordered restitution in that amount. In short, Mr. Minemyer’s reliance upon
paragraph 3 of the plea agreement is misplaced.
Mr. Minemyer’s remaining arguments include: (1) the Tax Court was biased
against him; (2) various Justice Department and IRS manuals mandate that plea
agreements include a stipulation that the defendant must agree to civil liabilities
exceeding restitution; and (3) the government committed fraud by not disclosing to
him that his guilty plea could result in the assessment of civil fraud penalties. We
reject each of these arguments and affirm the tax court’s decision holding him liable
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for income tax deficiencies for tax years 2000 and 2001, and for civil fraud penalties
for tax year 2000.4
C. The IRS’s Cross-Appeal
Concerning the imposition of civil tax penalties, 26 U.S.C. § 6751(b)(1)
imposes an approval requirement:
No penalty . . . shall be assessed unless the initial determination of such
assessment is personally approved (in writing) by [an] immediate
supervisor of the individual making such determination . . . .
As we explained in Roth v. Commissioner, 922 F.3d 1126 (10th Cir. 2019), an
“assessment” as used in this statute “is the formal recording and establishment of a
taxpayer’s liability, fixing the amount owed by the taxpayer.” Id. at 1131 (internal
quotation marks omitted). “In essence, [an assessment] is the last of a number of
steps required before the IRS can collect” on a liability. Chai v. Comm’r, 851 F.3d
190, 218 (2d Cir. 2017); accord Roth, 922 F.3d at 1131 (same). “Before a liability
related to a deficiency or penalty may be assessed, the Commissioner must determine
whether one exists in the first place.” Roth, 922 F.3d at 1131 (internal quotation
marks omitted). Once the Commissioner makes that determination—often, as in this
case, in the form of proposed deficiencies and penalties sent to the taxpayer—a
4
The IRS argues that with respect to the civil fraud penalties for the year
2000, Mr. Minemyer waived the argument that the IRS failed to comply with
26 U.S.C. § 6751(b)(1). We need not address that argument in light of our resolution
of the IRS’s cross-appeal, in which we hold that with respect to the year 2001, the
IRS did not fail to comply with the requirements of § 6751(b)(1). The same
reasoning would apply to the 2000 civil fraud penalties.
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notice of deficiency may then be sent to the taxpayer. Id. If the taxpayer does not
file a tax court petition challenging the notice within 90 days, “the deficiency . . .
shall be assessed.” 26 U.S.C § 6213(c). If the taxpayer does file a tax court petition,
the IRS may not make an assessment until the tax court’s decision is final. § 6213(a).
With this background, we turn to the issue presented in the IRS’s cross-appeal.
The United States Tax Court has interpreted § 6751(b)(1) to require supervisory
approval before the IRS communicates an “initial determination of such assessment”
to a taxpayer. See Frost v. Comm’r, 154 T.C. 23, 32 (2020). In this case, a revenue
agent gave Mr. Minemyer a form proposing civil penalties. That form had not been
approved by the agent’s supervisor prior to its being handed to Mr. Minemyer.
Because the form was never introduced into evidence, the tax court held that it could
not assess whether the form was an “initial determination” within the meaning of
§ 6751(b)(1) and therefore the IRS had not carried its burden of showing it complied
with the statute’s requirements.
The IRS argues that the tax court imposed a requirement that appears nowhere
in the text of the statute. That position is supported by two recent circuit court
decisions, from the Ninth and Eleventh Circuits, which have examined the plain
language of § 6751(b)(1) and concluded that it is not ambiguous and does not require
supervisory approval before an initial determination of an assessment is
communicated to the taxpayer. Kroner v. Comm’r, 48 F.4th 1272, 1276-81 (11th Cir.
2022); Laidlaw’s Harley Davidson Sales, Inc. v. Comm’r, 29 F.4th 1066, 1070-74
(9th Cir. 2022). The courts in Kroner and Laidlaw’s found nothing in the text of the
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statute to support the timing requirement imposed by the tax court here. See Kroner,
48 F.4th at 1278 (“nothing in the text . . . requires a supervisor to approve penalties at
any particular time”); Laidlaw’s, 29 F.4th at 1072-73 (“[t]he statute does not make
any reference to the communication of a proposed penalty to the taxpayer”). We
agree with these assessments of § 6751(b)(1) and hold that its plain language does
not require approval before proposed penalties are communicated to a taxpayer.5
That does not end our inquiry, however, for there remains the question whether
§ 6751(b)(1) imposes a timing requirement of any kind. The Second Circuit has
observed that “[i]f supervisory approval is to be required at all, it must be the case
that the approval is obtained when the supervisor has the discretion to give or
withhold it.” Chai, 851 F.3d at 220. The court reasoned that supervisory approval
would be meaningless if the statute were construed to allow such approval after the
supervisor lost the authority to prevent the penalty from being assessed. See id. at
220-21. The court further observed that the last moment that a supervisor still has
5
In Roth, we held that a phrase in § 6751(b)(1), “the initial determination of
such assessment,” is ambiguous. 922 F.3d at 1132. That holding has no bearing on
this case. We were required to interpret that phrase in Roth because the IRS had sent
the taxpayer multiple notices with penalties of different amounts. Id. at 1130, 1133.
We therefore had to determine which notice was the operative “initial
determination.” See id. at 1133. In other words, the case involved the what of the
statute, not the when. The meaning of the phrase “initial determination of such
assessment” is not implicated here, because although the IRS gave Mr. Minemyer
three notices of civil fraud penalties, he concedes the penalties were identical in each
instance. The question of which notice was the operative “initial determination” is
therefore not material. To the extent Roth declares the entirety of § 6751(b)(1)
ambiguous, we regard that declaration as dicta as to the specific issue presented here,
which is when written supervisory approval must be obtained.
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discretion to give or withhold approval is the IRS’s issuance of the notice of
deficiency, id. at 221, because after a notice of deficiency is issued the IRS loses the
discretion not to assess penalties. See 26 U.S.C. § 6213(c) (“the deficiency . . . shall
be assessed” if the deadline for seeking tax court review expires); § 6215(a) (if
taxpayer petitions the tax court, then the tax court determines the deficiency and
penalties, which “shall be assessed” once the tax court’s decision becomes final).
Accordingly, the Second Circuit held “that § 6751(b)(1) requires written approval of
the initial penalty determination no later than the date the IRS issues the notice of
deficiency . . . asserting such penalty.” Chai, 851 F.3d at 221.
We are persuaded by the Second Circuit’s reasoning and hold that with respect
to civil penalties, the requirements of § 6751(b)(1) are met so long as written
supervisory approval of an initial determination of an assessment is obtained on or
before the date the IRS issues a notice of deficiency.6 In this case, it is undisputed
that the proposed penalties received written supervisory approval three months before
the IRS issued the notice of deficiency to Mr. Minemyer. That is all that
§ 6751(b)(1) required. We therefore reverse the holding of the tax court denying a
6
The Ninth Circuit in Laidlaw’s agreed “that a supervisor cannot truly approve
of a penalty determination without also possessing discretion to withhold approval,”
and that “a supervisor [therefore] cannot always satisfy § 6751(b)(1) by waiting to
provide written approval until just before the moment of assessment.” 29 F.4th at
1071. Only the Eleventh Circuit maintains that § 6751(b) is satisfied “so long as a
supervisor approves a penalty before the assessment is made; there is no need to set
an earlier deadline.” Kroner, 48 F.4th at 1279.
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civil fraud penalty for 2001 and remand for the tax court to decide on the evidence
whether Mr. Minemyer is liable for the civil fraud penalty for 2001.
III. Conclusion
The tax court’s decision is affirmed as to the income tax deficiencies for 2000
and 2001 and the civil fraud penalty for 2000. The decision is reversed and
remanded as to Mr. Minemyer’s liability for the 2001 civil fraud penalty. We deny
Mr. Minemyer’s motion to supplement the record.
Entered for the Court
Timothy M. Tymkovich
Circuit Judge
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