Manjaro v. Comm'r ( 2010 )

T.C. Memo. 2010-25
UNITED STATES TAX COURT
KLE MANJARO, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 26386-08L. Filed February 16, 2010.
Kle Manjaro, pro se.
Alicia E. Elliott, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: This case was commenced in response to a
notice of determination concerning collection action sent to
petitioner with respect to a levy to collect unpaid taxes for
2000, 2001, 2002, 2003, 2005, and 2006. Petitioner has failed to
raise any bona fide issue about his underlying liabilities or to
identify any abuse of discretion by the Appeals Office.
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Therefore, the issue for decision is whether a penalty should be
imposed under section 6673 on the grounds that petitioner’s
arguments are frivolous and that the proceeding was commenced and
maintained primarily for delay. All section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Arizona at the time that he filed his
petition.
Petitioner filed Federal income tax returns for 2000, 2001,
2002, 2003, 2005, and 2006, reporting taxable income and balances
owing after withholding credits that were insufficient to pay the
reported income taxes. The reported amounts were duly assessed,
along with interest and penalties. Petitioner failed to file a
Federal income tax return for 2007 or 2008.
On February 21, 2008, the Internal Revenue Service sent
petitioner Letter 1058, Final Notice of Intent to Levy and Notice
of Your Right to a Hearing. Petitioner requested a hearing under
section 6330, asserting that he disagreed with the amount of tax
due. On July 1, 2008, the Appeals Office sent a letter to
petitioner scheduling a hearing and requesting that petitioner
provide documentation, including a completed Form 433-A,
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Collection Information Statement for Wage Earners and Self-
Employed Individuals, a signed Federal income tax return for
2007, and a completed Form W-4, Employee’s Withholding Allowance
Certificate.
Petitioner did not provide the requested documents, he did
not identify any specific disagreement with the underlying
liabilities, and he did not offer any collection alternatives.
He did not accept an offer of a face-to-face hearing. He
indicated that he was unemployed and suggested financial
hardship. After a telephone hearing, the Appeals settlement
officer reviewed transcripts of petitioner’s account and verified
that legal and procedural requirements had been met. The Appeals
Office, therefore, determined that the proposed levy was
appropriate.
In the petition filed October 29, 2008, petitioner indicated
his belief that he did not owe the assessed amounts and that he
desired to file amended returns “based on IRS Code”. The
petition also claimed financial hardship.
By notice served July 1, 2009, the case was set for trial on
December 7, 2009. Attached to the notice was the Court’s
standing pretrial order. Petitioner did not file the pretrial
memorandum specified by the standing pretrial order, but he did
enter into a stipulation as required by that order and Rule 91.
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OPINION
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, the Secretary is authorized 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, including notice of the administrative
appeals available to the taxpayer, before proceeding with
collection by levy on the taxpayer’s property.
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 a section 6330 hearing) and, if dissatisfied,
with judicial review of the administrative determination.
Section 6330(c)(2) specifies the issues that the taxpayer may
raise at the hearing. The taxpayer is allowed to raise “any
relevant issue relating to the unpaid tax or the proposed levy”
including spousal defenses, challenges to the appropriateness of
collection actions, and alternatives to collection. Sec.
6330(c)(2)(A). Section 6330(c)(3) provides that the
determination of the settlement officer shall take into
consideration the verification under section 6330(c)(1), the
issues raised by the taxpayer, and whether the proposed
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collection action balances the need for the efficient collection
of taxes with the legitimate concern of the taxpayer that any
collection action be no more intrusive than necessary.
Petitioner filed this action under section 6330(d), seeking
judicial review of the notice of determination. When the case
was called from the calendar for trial, petitioner sought a
continuance, which was denied. He began his testimony by reading
a statement as follows: “I do not believe that I owe taxes on my
wages because Article I, Section 9, Clause 4 of the U.S.
Constitution, which has never been repealed, prevents direct
taxes without apportionment on natural persons born within the 50
states.” The Court interrupted petitioner’s prepared statement
to admonish him that he was risking a penalty under section 6673
because he was making frivolous arguments. The argument that
wages are exempt from taxation has been described as “beyond
frivolous” and “frivolous squared”. See, e.g., United States v.
Cooper, 170 F.3d 691, 691 (7th Cir. 1999). Over 20 years ago the
Court of Appeals for the Ninth Circuit, to which our decision in
this case is appealable, observed that “We hardly need comment on
the patent absurdity and frivolity of such a proposition [that
direct nonapportioned income taxes are unconstitutional].”
United States v. Nelson (In re Becraft), 885 F.2d 547, 548 (9th
Cir. 1989).
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Petitioner then attempted to raise procedural questions and
statutory arguments--a common dilatory tactic employed by tax
defiers. See, e.g., Huntress v. Commissioner, T.C. Memo. 2009-
161, regarding the “laundry list” of objections frequently
invoked in section 6330 cases. Petitioner, however, had
stipulated that “the settlement officer verified that all legal
and administrative procedures were followed.” At no time did
petitioner raise any bona fide issues specified in section
6330(c)(2)(A).
So far as the record reflects, petitioner filed valid
returns for the years subject to the collection action in
question. The assessments were based on the returns that he
filed. He became noncompliant with the filing requirements when
he failed to file a Federal income tax return for 2007, and he
also failed to file a return for 2008. His failure to file those
returns or to provide the financial information requested by the
Appeals officer precluded consideration of collection
alternatives. See, e.g., Huntress v. Commissioner, supra. As a
result, he has forgone the opportunity to present arguments based
on his alleged financial hardship.
The record does not clearly reflect when petitioner decided
to pursue frivolous arguments, but he did so at trial after his
request for a continuance was denied. At that time the case had
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been pending for over a year, and it had been set for trial for
over 5 months. No further delays were justified.
Section 6673(a)(1) provides:
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, or
(C) the taxpayer unreasonably failed to
pursue available administrative remedies,
the Tax Court, in its decision, may require
the taxpayer to pay to the United States a
penalty not in excess of $25,000.
We have decided not to impose a penalty in this case, but
petitioner is warned that a penalty may be imposed if he pursues
a similar course in the future. See Pierson v. Commissioner, 115
T.C. 576, 581 (2000). In view of the foregoing,
Decision will be entered
for respondent.