Allen C. Sande v. United States

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
APRIL 21, 2009
No. 08-13989
THOMAS K. KAHN
Non-Argument Calendar
CLERK
________________________
D. C. Docket No. 07-01878-CV-ORL-31GJK
ALLEN C. SANDE,
LISA A. SANDE,
Plaintiffs-Appellants,
versus
UNITED STATES OF AMERICA,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
_________________________
(April 21, 2009)
Before BLACK, BARKETT and HULL, Circuit Judges.
PER CURIAM:
Plaintiffs Allen C. and Lisa A. Sande are taxpayers suing the United States,
pursuant to 26 U.S.C. § 7433, in connection with the filing of a Notice of Federal
Tax Lien. Section 7433 authorizes a damages action if an Internal Revenue
Service (“IRS”) officer or employee intentionally, recklessly or negligently
disregards the Internal Revenue Code (“IRC”) or IRS regulations “in connection
with any collection of Federal tax.” 26 U.S.C. § 7433(a). The district court
granted the United States’ motion to dismiss Plaintiffs’ amended complaint for
failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). After
review, we affirm.1
I. BACKGROUND
On December 20, 2004, after conducting an audit, the IRS assessed
additional income tax in the amount of $22,019.00 against Plaintiffs for the 1997
tax year. The IRS also imposed a fraud penalty of $16,514.25. On November 30,
2005,2 the IRS filed a Notice of Federal Tax Lien against Plaintiffs in conjunction
1
We review de novo a district court’s dismissal of a complaint pursuant to Rule 12(b)(6).
United Techs. Corp. v. Mazer, 556 F.3d 1260, 1269 (11th Cir. 2009). In so doing, we accept the
factual allegations in the complaint as true and construe them in a light most favorable to the
non-moving party. Id. Dismissal is appropriate only if the plaintiff’s factual allegations “‘raise a
right to relief above the speculative level.’” Id. at 1270 (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, ___, 127 S. Ct. 1955, 1965 (2007)).
2
Although Plaintiffs’ amended complaint alleges that the Notice of Filing Tax Lien was
filed on November 18, 2005, the copy of the Notice attached to the amended complaint is
stamped filed on November 30, 2005.
2
with the 1997 tax-year assessment and penalty in the Volusia County Clerk’s
Office.3
On November 12, 2007, Plaintiffs filed an administrative claim for damages
under § 7433 with the IRS challenging its filing of the Notice of Federal Tax Lien
as to the 1997 tax-year assessment. Plaintiffs claimed that the filing of the Notice
caused Mr. Sande’s drywall company $1,800,000.00 in lost income and sought
$1,000,000.00 in damages. The basis for the Plaintiffs’ § 7433 administrative
claim was that the Notice of Federal Tax Lien was wrongfully filed because the
underlying assessment was made more than three years after the filing of their
December 30, 2000 amended return for tax year 1997. The IRS denied Plaintiffs’
administrative claim.
Plaintiffs filed this action in district court asserting a § 7433 claim. After
Plaintiffs’ original complaint was dismissed without prejudice for failure to state a
claim, Plaintiffs filed an amended complaint repleading their § 7433 claim.
According to the amended complaint:
Because there was no tax liability of the Plaintiffs in this matter and
because officer(s) and/or employee(s) of the IRS recklessly or
intentionally, or by reason of negligence disregarded IRC §6321 [by
reason of no tax liability of the Plaintiffs] by filing an unlawful
3
The Notice of Federal Tax Lien also listed assessments for tax years 1998, 1999 and
2000 totaling $156,432.89; $99,966.44 and $181,505.61, respectively.
3
Notice of Federal Tax Lien against the Plaintiffs, the Plaintiffs have a
cause of action for damages against the Defendant as set forth further
in this action.
Pls.’ Compl. ¶ 4 (emphasis added, brackets in original). The amended complaint
explained that the assessment for the 1997 tax year was not “lawfully collectable
from Plaintiffs” because it was “completed in excess of the three (3) year statute of
limitation period for the assessment” as provided in 26 U.S.C. § 6501. Id. ¶¶ 18-
21. Thus, “any collection activity by the IRS” was also “time-barred.” Id. ¶ 19.
Plaintiffs’ amended complaint did not state any other ground on which the Notice
was unlawful.
The district court granted the United States’ Rule 12(b)(6) motion and
dismissed the amended complaint for failure to state a claim. The district court
concluded that Plaintiffs’ amended complaint was “seeking to challenge the
assessment of their taxes, not the collection, as the only impropriety alleged is that
the Defendant is seeking to collect a tax debt that they do not owe.” Because
§ 7433 provides a remedy only for improper collection activities, the district court
dismissed the amended complaint with prejudice. Plaintiffs appealed.
II. DISCUSSION
As noted above, § 7433 authorizes a damages claim where an IRS officer or
employee intentionally, recklessly or negligently disregards the IRC or IRS
4
regulations “in connection with any collection of Federal tax.”4 26 U.S.C. §
7433(a) (emphasis added). The parties agree that § 7433 provides a remedy only
for improper collection activities, not for an improper assessment of taxes. Thus,
courts have not permitted a taxpayer’s § 7433 damages action when the gravamen
of the claim is that the IRS improperly assessed tax liability. See, e.g., Miller v.
United States, 66 F.3d 220, 222-23 (9th Cir. 1995); Shaw v. United States, 20 F.3d
182, 184 (5th Cir. 1994); Gonsalves v. IRS, 975 F.2d 13, 16 (1st Cir. 1992).5 The
only question presented in this appeal is whether the allegedly wrongful filing of
the Notice of Federal Tax Lien was a collection activity cognizable under § 7433.
Although the act of filing a Notice of Federal Tax Lien is in connection
with tax collection, the error Plaintiffs asserted in their amended complaint was
not a procedural one. That is, Plaintiffs did not allege that the IRS failed to follow
4
Section 7433(a) states:
If, in connection with any collection of Federal tax with respect to a taxpayer, any
officer or employee of the Internal Revenue Service recklessly or intentionally, or
by reason of negligence disregards any provision of this title, or any regulation
promulgated under this title, such taxpayer may bring a civil action for damages
against the United States in a district court of the United States.
26 U.S.C. § 7433(a).
5
An assessment is made by the recording of a taxpayer’s liability in the office of the
Secretary of the IRS. See 26 U.S.C. § 6203; Hibbs v. Winn, 542 U.S. 88, 101, 124 S. Ct. 2276,
2285-86 (2004) (defining “assessment” as “the official recording of liability that triggers levy and
collection efforts”). An assessment by necessity precedes any collection activity. See 26 U.S.C.
§ 6303(a) (providing that notice and demand for payment, which begins the IRS’s collection
process, occurs after an assessment is made).
5
the proper procedures in either the IRC or IRS regulations for filing a lien notice.
See, e.g., 26 U.S.C. § 6323 (outlining procedural requirements for the filing of
certain notices of liens); 26 C.F.R. § 301.6323(a)-1 to (j)-1 (same).6 Rather,
Plaintiffs contended that the Notice of Federal Tax Lien was “unlawful” because
the underlying tax assessment was barred by the three-year statute of limitations in
26 U.S.C. § 6501(a).7 Therefore, the essence of Plaintiffs’ claim is that no taxes
were owed and not that the procedures used to collect the unpaid taxes were
improper.
Plaintiffs cite 26 U.S.C. § 6321, which is found in the collection portion of
the IRC and provides:
If any person liable to pay any tax neglects or refuses to pay the same
after demand, the amount (including any interest, additional amount,
addition to tax, or assessable penalty, together with any costs that
may accrue in addition thereto) shall be a lien in favor of the United
States upon all property and rights to property, whether real or
personal, belonging to such person.
6
Notably, the IRC and IRS regulations provide for an administrative appeal of an
erroneous filing of a notice of federal tax lien and judicial review of the agency’s determination.
See 26 U.S.C. §§ 6326(a), 6330(d); 26 C.F.R. § 301.6326-1. It does not appear from the record
that Plaintiffs availed themselves of this avenue for review. Instead, Plaintiffs filed an
administrative claim pursuant to 26 C.F.R. § 301.7433-1, the regulation regarding unauthorized
collection actions.
7
The United States argues that § 6501(a)’s three-year limitations period did not apply in
Plaintiffs’ assessment because it arose out of taxpayer fraud. See 26 U.S.C. § 6501(c)(1)
(providing that tax may be assessed “at any time” in a case of a fraudulent tax return). Because
the validity of the underlying assessment is not at issue in a § 7433 proceeding, we need not
address this issue.
6
26 U.S.C. § 6321. Plaintiffs argue that by filing the Notice of Federal Tax Lien
when Plaintiffs were not in fact “liable to pay any tax,” IRS officials disregarded
§ 6321. However, § 6321 creates a statutory lien that arises automatically once an
assessment is made and the IRS gives notice and demands payment. See 26
U.S.C. §§ 6303(a), 6322 (providing that the lien imposed by § 6321 arises “at the
time the assessment is made,” after which the IRS gives notice of the amount due
and demands payment).8 It does not govern the conduct of any IRS official or
employee in filing a notice of the tax lien or in attempting to collect the taxes
owed and, thus, cannot be the basis for a § 7433 claim. To hold otherwise would
eviscerate the distinction between claims for wrongful assessment and claims for
wrongful collection. When a taxpayer fails to pay a tax assessment after the IRS
gives notice and makes a demand, the mere filing of a Notice of Federal Tax Lien
in a manner that conforms to the procedures outlined in the code and regulations is
not actionable under § 7433.
For the first time on appeal, Plaintiffs offer two alternative grounds for why
the Notice of Federal Tax Lien was wrongfully filed: (1) the Notice was premature
under 26 U.S.C. § 6323(j) because Plaintiffs had submitted several amended tax
8
Plaintiffs do not argue that the IRS failed to comply with the notice and demand
requirements of § 6303(a), and exhibits attached to the amended complaint indicate that the IRS
gave Plaintiffs notice before filing the Notice of Federal Tax Lien.
7
returns that resulted in a credit that could have been used to satisfy the tax
liability; and (2) the Notice should not have been filed while Plaintiffs’ application
to the Office of the Taxpayer Advocate, pursuant to 26 U.S.C. § 7811, for a
taxpayer assistance order was pending. Because Plaintiffs did not raise these
claims before the IRS, they failed to exhaust their administrative remedies with
respect to them. See 26 U.S.C. § 7433(d) (imposing a mandatory exhaustion
requirement); 26 C.F.R. § 301.7433-1(d).9 Additionally, we do not address
arguments that were not raised in the district court. See McGinnis v. Ingram
Equip. Co., Inc., 918 F.2d 1491, 1495 (11th Cir. 1990). Accordingly, we do not
address Plaintiffs’ alternative arguments.
For all the foregoing reasons, the district court properly concluded that
Plaintiffs’ amended complaint failed to state a claim under § 7433. Thus, the
district court did not err in granting the United States’ Rule 12(b)(6) motion to
dismiss.
AFFIRMED.
9
We reject Plaintiffs contention that these alternative arguments fall within their
allegation that the Notice of Filing Tax Lien was “time-barred.” In both the IRS administrative
appeal and the district court proceedings, Plaintiffs’ only time-bar argument was in relation to the
three-year statute of limitations found in 26 U.S.C. § 6501.
8