David D. Smith v. Commissioner

124 T.C. No. 3UNITED STATES TAX COURT
DAVID D. SMITH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 11109-04L, 11110-04L. Filed February 8, 2005.
On Aug. 26, 2003, R issued to P separate Final
Notices of Intent to Levy and Notice of Your Right to a
Hearing with regard to his unpaid Federal income taxes
for the taxable years 1985 to 1995 and for the taxable
years 1996 to 1999. P submitted to respondent timely
requests for a hearing under sec. 6330, I.R.C.
On Mar. 3, 2004, P filed a bankruptcy petition
under ch. 7 of the Bankruptcy Code.
On May 25, 2004, while P’s bankruptcy case
remained open, R issued to P separate Notices of
Determination Concerning Collection Actions for the
taxable years 1985 to 1995 and the taxable years 1996
to 1999. On June 28, 2004, P filed with the Court
petitions for lien or levy action challenging R’s
notices. R filed motions to dismiss for lack of
jurisdiction on the ground the petitions were filed in
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violation of the automatic stay imposed under 11 U.S.C.
sec. 362(a)(8) (2000). P filed objections to R’s
motions.
Held: The notices of determination underlying the
petitions were issued to petitioner in violation of the
automatic stay imposed under 11 U.S.C. sec. 362(a)(1)
(2000), and, therefore, the Court lacks jurisdiction.
Held, further, R’s motions to dismiss for lack of
jurisdiction shall be denied, and these cases shall be
dismissed for lack of jurisdiction on the Court’s own
motions.
Robert Alan Jones, for petitioner.
Alan J. Tomsic, for respondent.
OPINION
GERBER, Chief Judge: These collection review cases are
before the Court on respondent’s motions to dismiss for lack of
jurisdiction. Respondent contends that the Court lacks
jurisdiction on the ground the petitions for lien or levy action
were filed in violation of the automatic stay imposed under 11
U.S.C. section 362(a)(8) (2000) (the automatic stay).1 As
discussed in detail below, we conclude that we lack jurisdiction
in these cases on the alternative ground that the notices of
determination underlying the petitions were issued to petitioner
1
Unless otherwise indicated, section references are to
sections of the Internal Revenue Code, as amended, and Rule
references are to the Tax Court Rules of Practice and Procedure.
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in violation of the automatic stay imposed under 11 U.S.C.
section 362(a)(1) (2000).
Background2
On August 26, 2003, respondent issued to petitioner separate
Final Notices of Intent to Levy and Notice of Your Right to a
Hearing with regard to his unpaid Federal income taxes for the
taxable years 1985 to 1995 and for the taxable years 1996 to
1999. Petitioner submitted to respondent timely requests for a
hearing under section 6330.
On March 3, 2004, petitioner filed a bankruptcy petition
under chapter 7 of the Bankruptcy Code with the U.S. Bankruptcy
Court for the District of Nevada.
By letter dated April 12, 2004, Christopher Gellner (Mr.
Gellner), petitioner’s bankruptcy attorney, informed Appeals
Officer Anthony Aguiar that petitioner had filed the above-
referenced bankruptcy petition and that petitioner was not in
need of, and desired to withdraw, his request for a section 6330
hearing. On April 14, 2004, Appeals Officer Aguiar sent to Mr.
Gellner a Form 12256 (Withdrawal of Request for Collection Due
Process Hearing).
However, by letter dated May 5, 2004, Robert Alan Jones (Mr.
Jones), petitioner’s tax attorney, informed Appeals Officer
2
The record establishes and/or the parties do not dispute
the following background facts.
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Aguiar (1) That Mr. Gellner did not have the authority to
represent petitioner with regard to tax matters; (2) that Mr.
Jones was appointed as petitioner’s attorney-in-fact for the
years in issue; and (3) that, although petitioner did not want to
withdraw his rights to a section 6330 hearing, the bankruptcy
automatic stay barred further administrative proceedings at that
time.
On May 25, 2004, respondent’s Office of Appeals issued to
petitioner separate Notices of Determination Concerning
Collection Actions for the taxable years 1985 to 1995 and for the
taxable years 1996 to 1999. The notices stated that respondent
determined that it was appropriate to proceed with the proposed
levies. On June 28, 2004, petitioner filed with the Court
petitions for lien or levy action challenging respondent’s
notices.3 At the time the petitions were filed, petitioner
resided in Las Vegas, Nevada.
On August 19, 2004, respondent filed motions to dismiss for
lack of jurisdiction on the ground the petitions were filed in
violation of the automatic stay. On September 16, 2004,
petitioner filed objections to respondent’s motions. Petitioner
maintains that the Court should (1) conclude that petitioner
3
The petitions arrived at the Court in an envelope bearing a
timely U.S. Postal Service postmark dated June 24, 2004. See
sec. 7502(a).
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properly invoked the Court’s jurisdiction, and (2) stay any
further proceedings pending the final disposition of petitioner’s
bankruptcy case. Petitioner did not aver that the bankruptcy
court had granted relief from the automatic stay, or that the
automatic stay otherwise was no longer in effect, on the date the
petitions were filed.
Discussion
It is well settled that the Court’s jurisdiction in a
collection review case under section 6330 depends upon the
issuance of a valid notice of determination and the filing of a
timely petition for review. See Sarrell v. Commissioner, 117
T.C. 122, 125 (2001); Moorhous v. Commissioner, 116 T.C. 263, 269
(2001); see also Rule 330(b).
In a recent case, Prevo v. Commissioner, 123 T.C. 326(2004), we granted the Commissioner’s motion to dismiss for lack
of jurisdiction in a collection review case on the ground the
petition for lien or levy action was filed with the Court in
violation of the automatic stay imposed under 11 U.S.C. section
362(a)(8) (2000).4 In Prevo v. Commissioner, supra, the sequence
of relevant events unfolded as follows: (1) The Commissioner
issued to the taxpayer a notice of determination concerning
4
11 U.S.C. sec. 362(a)(8) (2000) expressly bars “the
commencement or continuation of a proceeding before the United
States Tax Court concerning the debtor.”
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collection actions; (2) the taxpayer filed a bankruptcy petition;
and (3) the taxpayer filed with the Court a petition for lien or
levy action. In granting the Commissioner’s motion to dismiss
for lack of jurisdiction, we noted that the taxpayer had fallen
victim to a trap for the unwary in that the automatic stay that
arose by operation of law upon the filing of her bankruptcy
petition barred her from subsequently filing a petition with the
Court. Moreover, in the absence of a tolling provision in the
collection review provisions similar to that contained in section
6213(f),5 the taxpayer lost the opportunity to contest the
Commissioner’s notice of determination in this Court.
The facts in the present cases are materially different from
those in Prevo v. Commissioner, supra. As previously described,
these cases developed as follows: (1) Petitioner filed a
bankruptcy petition; (2) the Commissioner issued to petitioner
notices of determination concerning collection actions; and (3)
petitioner filed with the Court petitions for lien or levy
action.
5
Although 11 U.S.C. sec. 362(a)(8) (2000) bars the
commencement or continuation of a proceeding before the Tax
Court, by reason of sec. 6213(f) the period for filing a petition
for redetermination of a deficiency with the Tax Court under sec.
6213(a) is suspended for the period during which the taxpayer is
prohibited by reason of the automatic stay from filing a petition
in this Court and for 60 days thereafter. See Olson v.
Commissioner, 86 T.C. 1314, 1318-1319 (1986), and cases cited
therein.
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Like the taxpayer in Prevo v. Commissioner, supra,petitioner filed his petitions for lien or levy action with the
Court after filing his bankruptcy petition and while the
automatic stay imposed under 11 U.S.C. section 362(a)(8) (2000)
remained in effect. The fact that respondent issued the notices
of determination in question after petitioner filed his
bankruptcy petition presents a ground for dismissal that was not
available in Prevo v. Commissioner, supra. Specifically, the
question arises whether respondent was barred by the automatic
stay from issuing the notices of determination to petitioner in
the first instance. If so, it would follow that these cases
should be dismissed on the ground that the notices of
determination were void or invalid.
The Court can, sua sponte, question its jurisdiction at any
time. Raymond v. Commissioner, 119 T.C. 191, 193 (2002); Neely
v. Commissioner, 115 T.C. 287, 290 (2000); Romann v.
Commissioner, 111 T.C. 273, 280 (1998). Where the application of
the automatic stay may act as an impediment to the Court’s
jurisdiction in a collection review proceeding, it is incumbent
on the Court to determine the proper ground for dismissal. Cf.,
e.g., Pietanza v. Commissioner, 92 T.C. 729, 735-736 (1989)
(holding that, where appropriate, the Court will dismiss on the
ground that the Commissioner failed to issue a valid notice of
deficiency rather than for lack of a timely filed petition),
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affd. without published opinion 935 F.2d 1282 (3d Cir. 1991).
The Pietanza principle is particularly compelling in the present
cases inasmuch as the Court is confronted with two alternative
grounds for dismissal, one of which will have the effect of
denying petitioner the opportunity to obtain judicial review of
respondent’s notices of determination in this Court. See Prevo
v. Commissioner, supra.
Before proceeding with our analysis, we first review the
pertinent portions of the automatic stay provisions set forth in
11 U.S.C. section 362 (2000) and the collection review procedures
established under sections 6320 and 6330.
The Automatic Stay
Title 11 of the United States Code provides uniform
procedures designed to promote the effective rehabilitation of
the bankrupt debtor and, when necessary, the equitable
distribution of his or her assets. See H. Rept. 95-595, at 340
(1977). One key to achieving these aims is the automatic stay,
which generally operates to temporarily bar actions against or
concerning the debtor or property of the debtor or the bankruptcy
estate. See Allison v. Commissioner, 97 T.C. 544, 545 (1991);
Halpern v. Commissioner, 96 T.C. 895, 897-898 (1991).
The automatic stay provisions are set forth in 11 U.S.C.
section 362(a) (2000), which provides in pertinent part:
(a) Except as provided in subsection (b) of this
section, a petition filed under section 301, 302, or
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303 of this title, * * * operates as a stay, applicable
to all entities, of--
(1) the commencement or continuation,
including the issuance or employment of
process, of a judicial, administrative, or
other action or proceeding against the debtor
that was or could have been commenced before
the commencement of the case under this
title, or to recover a claim against the
debtor that arose before the commencement of
the case under this title;
* * * * * * *
(3) any act to obtain possession of
property of the estate or of property from
the estate or to exercise control over
property of the estate;
(4) any act to create, perfect, or
enforce any lien against property of the
estate;
(5) any act to create, perfect, or
enforce against property of the debtor any
lien to the extent that such lien secures a
claim that arose before the commencement of
the case under this title;
(6) any act to collect, assess, or
recover a claim against the debtor that arose
before the commencement of the case under
this title; * * *
Title 11 U.S.C. section 362(b) (2000), which establishes
exceptions to the automatic stay described above, provides in
pertinent part:
(b) The filing of a petition under section 301,
302, or 303 of this title, * * * does not operate as a
stay--
* * * * * * *
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(9) under subsection (a), of--
(A) an audit by a governmental unit to
determine tax liability;
(B) the issuance to the debtor by a
governmental unit of a notice of tax
deficiency;
(C) a demand for tax returns; or
(D) the making of an assessment for any tax
and issuance of a notice and demand for
payment of such an assessment * * *.
The bankruptcy court may issue an order granting relief from
the automatic stay. 11 U.S.C. sec. 362(d) (2000). Absent such
an order, the automatic stay generally remains in effect until
the earliest of the closing of the case, dismissal of the case,
or the grant or denial of a discharge. 11 U.S.C. sec. 362(c)(2)
(2000); see Allison v. Commissioner, supra at 545; Smith v.
Commissioner, 96 T.C. 10, 14 (1991); Neilson v. Commissioner, 94
T.C. 1, 8 (1990).
Collection Review Procedures
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, then the Secretary is authorized
to collect such tax by levy upon the person’s property. Section
6331(d) provides that, at least 30 days prior to enforcing
collection by way of a levy on the person's property, the
Secretary shall provide the person with a final notice of intent
to levy, including notice of the administrative appeals available
to the person.
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Section 6330(a) provides in pertinent part that the
Secretary shall notify a person in writing of his or her right to
an Appeals Office hearing regarding a final notice of intent to
levy by mailing such notice by certified or registered mail to
such person at his or her last known address. Section 6330(a)(2)
provides that the prescribed notice shall be provided not less
than 30 days before the day of the first levy with respect to the
amount of the unpaid tax for the taxable period. Further,
section 6330(a)(3)(B) provides that the prescribed notice shall
explain that the person has the right to request an Appeals
Office hearing during that 30-day period.
Where the taxpayer has timely requested an Appeals Office
hearing and the Appeals Office has issued a notice of
determination to the taxpayer regarding a proposed levy action,
section 6330(d)(1) provides that the taxpayer will have 30 days
following the issuance of such notice to file a petition for
review with the Tax Court or Federal District Court, as may be
appropriate. See Offiler v. Commissioner, 114 T.C. 492, 498
(2000). Notably, there is no provision analogous to section
6213(f) in section 6330 that tolls the statutory period for
filing a timely petition for lien or levy action for the period
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during which the person is prohibited by reason of the automatic
stay from filing a petition.6
Analysis
The automatic stay under 11 U.S.C. section 362(a)(1) (2000)
bars “the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other
action or proceeding against the debtor that was or could have
been commenced before the commencement of the case under this
title”. In addition, 11 U.S.C. section 362(a)(6) bars any act to
collect, assess, or recover a claim against the debtor that arose
before the commencement of the bankruptcy case.
We evaluate the applicability of the automatic stay
provisions against the parties’ specific actions in these cases.
Although the record does not include transcripts of petitioner’s
account for the years in question, we assume that respondent
entered assessments against petitioner and issued to petitioner
notices and demand for payment of such assessments. When no
payments were forthcoming, respondent issued to petitioner
Notices of Intent to Levy and Notice of Your Right to a Hearing
under section 6330. Such notices prompted petitioner to submit
to respondent requests for a section 6330 hearing. Several
6
Sec. 6330 is effective with respect to collection actions
initiated more than 180 days after July 22, 1998 (Jan. 19, 1999).
See Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3401(d), 112 Stat. 750.
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months later, petitioner filed his bankruptcy petition.
Thereafter, respondent issued to petitioner the notices of
determination that led petitioner to attempt to invoke the
Court’s jurisdiction.
Against this backdrop, we are satisfied that the issuance of
the final notices of intent to levy to petitioner constituted
administrative collection actions taken against petitioner
(before the commencement of the bankruptcy case) within the
meaning of 11 U.S.C. section 362(a)(1) (2000). Consistent with
the foregoing, it follows that the issuance to petitioner of the
notices of determination constituted the continuation of
administrative collection actions against petitioner (after the
commencement of the bankruptcy case) within the meaning of 11
U.S.C. section 362(a)(1) (2000). Our conclusion that the levy
notices and notices of determination constituted actions against
petitioner (as opposed to an action initiated by petitioner) is
bolstered by the nature and purpose of such notices. We observe
that if petitioner had failed to request an administrative
hearing within 30 days of the issuance of the final notices of
intent to levy, he would have waived his right to administrative
and judicial review of the proposed collection actions under
section 6330, and respondent normally would have been free to
proceed with the proposed levies. See Kennedy v. Commissioner,
116 T.C. 255, 262 (2001). Giving due regard to the public
policies underlying the automatic stay provisions, we conclude
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that the issuance of the notices of determination to petitioner
violated the automatic stay.7
Our holding on this point is consistent with both bankruptcy
caselaw and respondent’s administrative guidance. See In re
Parker, 279 Bankr. 596, 602-603 (Bankr. S.D. Ala. 2002) (The IRS
conceded, and the bankruptcy court held, that the issuance of a
final notice of intent to levy under section 6330 violated the
automatic stay); In re Covington, 256 Bankr. 463, 465-466 (Bankr.
D.S.C. 2000) (The bankruptcy court held that the issuance of a
final notice of intent to levy under section 6330 violated the
automatic stay); see also Chief Counsel Advisory 2000-18-005 (May
5, 2000) (A Final Notice of Intent to Levy issued to a debtor who
had filed a bankruptcy petition violated the automatic stay and
was void).
Collection activity undertaken in violation of the automatic
stay generally is considered void and without effect. See 9B Am.
Jur. 2d, Bankruptcy, sec. 1756, at 387 (1999). Accordingly, we
conclude that the notices of determination issued to petitioner
7
Despite the express exception permitting the Commissioner
to issue to a taxpayer a notice of deficiency under 11 U.S.C.
sec. 362(b)(9)(B) (2000), there is no exception in 11 U.S.C. sec.
362(b) (2000) for the issuance of a notice of determination under
sec. 6330. In addition, a notice of determination issued
pursuant to sec. 6330 does not qualify as an audit, a request for
a tax return, or an assessment or notice and demand for payment
within the meaning of the applicable subparagraphs of 11 U.S.C.
sec. 362(b)(9) (2000). See In re Covington, 256 Bankr. 463, 465-
466 (Bankr. D.S.C. 2000).
are void and of no effect. Our ruling in Lundsford v.
Commissioner, 117 T.C. 159, 165 (2001) (notice of determination
issued without proper hearing held to be valid for purposes of
Tax Court jurisdiction) does not preclude that result, as it is
bankruptcy law, which is extrinsic to the procedures specified in
section 6330, that leads to our conclusion. Given the invalidity
of the notices of determination, we shall dismiss these cases for
lack of jurisdiction on the Court’s own motion.
To reflect the foregoing,
Orders of dismissal shall be
entered denying respondent’s
motions to dismiss for lack of
jurisdiction, and these cases shall
be dismissed for lack of
jurisdiction on the Court’s own
motion.