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Adolphson v. Commissioner of Internal Revenue

United States Court of Appeals, Seventh Circuit

November 18, 2016

Kerry Adolphson, Petitioner-Appellant,
v.
Commissioner of Internal Revenue, Respondent-Appellee.

          Argued April 27, 2016

         Petition for Review of an Order of the United States Tax Court. No. 21816-14L - Lewis R. Carluzzo, Special Trial Judge.

          Before Flaum, Manion, and Williams, Circuit Judges.

          Williams, Circuit Judge.

         This is a difficult tax case made more so by the refusal of the Commissioner of Internal Revenue to engage the taxpayer's arguments or the tax court's decision. Kerry Adolphson, who has failed to file a tax return since at least 2002, challenges levies used by the IRS to collect his unpaid taxes. The tax court dismissed his petition for lack of subject-matter jurisdiction because Adolphson had not challenged the levies administratively, see 26 U.S.C. § 6330(d), and, therefore, lacked the requisite notice of determination from the IRS Office of Appeals.

         Adolphson contends that because the IRS prevented him from obtaining a notice of determination by failing to properly notify him of its intent to levy, the tax court should have declared the levies invalid. To support his argument, Adolphson relies on a line of cases where the tax court accepted this argument and invalidated levies despite the fact that absent a notice of determination, the tax court lacks the statutory authority to hear a taxpayer's claim. While we agree with Adolphson that his case is indistinguishable from this line of tax court precedent, we affirm the judgment dismissing Adolphson's petition because we find that those decisions are unsound and reflect an improper extension of the tax court's jurisdiction.

         I. BACKGROUND

         The IRS's authority to levy a taxpayer's property is governed by 26 U.S.C. § 6330, which states 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." Id. § 6330(a)(1). This "Final Notice of Intent to Levy" may be given in person, left at the taxpayer's home or place of business, or sent by certified mail to the person's last known address. Id. § 6330(a)(2). After issuance, the taxpayer has 30 days to request a "collection due process hearing" ("CDP hearing") with the Office of Appeals, at which the person may challenge both the levy activities and the underlying tax debt, if there has not previously been an opportunity to do so. Id. § 6330(b), (c). After the hearing, the Office of Appeals issues a notice of its determination, which authorizes a dissatisfied taxpayer to petition the tax court for review within 30 days. Id. § 6330(d). We have held that the tax court lacks subject-matter jurisdiction to review IRS collection activities unless the aggrieved taxpayer has obtained a notice of determination. See Gray v. Comm'r, 723 F.3d 790, 792-93 (7th Cir. 2013); Cleveland v. Comm'r, 600 F.3d 739, 741 (7th Cir. 2010).

         In 2014, the IRS set out to collect $244, 464 in unpaid taxes and penalties assessed against Adolphson for tax years 2002 and 2006 through 2010. According to Adolphson, he was unaware of the IRS's collection efforts until May 2014, when the agency levied on his funds held by third parties. Rather than challenge the levies directly with the IRS, Adolphson filed a pro se petition in September 2014, asking the tax court to enjoin collection efforts by the IRS and refund amounts already collected through the levies. Adolphson argued that the levies are invalid because the IRS had not mailed him a Final Notice of Intent to Levy as required, and so he was deprived of the right to challenge the liability in a CDP hearing before the IRS Office of Appeals. He relied on several tax court decisions, including Buffano v. Commissioner, 93 T.C.M. (CCH) 901 (2007), in which the tax court asserted that it lacked subject-matter jurisdiction without a notice of determination, yet nevertheless invalidated levies after finding that the taxpayer was prevented from requesting a CDP hearing by the IRS's failure to mail a Final Notice of Intent to Levy to the proper address.

         The Commissioner initially responded by asserting that the statutorily required notices had been "mailed" but said that further investigation was needed to ascertain where those notices were sent. The Commissioner never provided an answer to that question, however, and instead moved to dismiss Adolphson's petition. The Commissioner argued that the tax court lacked subject-matter jurisdiction under 26 U.S.C. § 6330(d), because Adolphson had not requested a CDP hearing. Absent a CDP hearing, Adolphson could not have received a notice of determination from the IRS Office of Appeals. The Commissioner maintained that without a notice of determination, the tax court had no power to review the levies or to determine whether the IRS had issued them properly. In his motion, the Commissioner did not acknowledge Buffano or the other decisions in which the tax court had invalidated levies-notwithstanding the absence of a notice of determination-based on the same argument Adolphson advanced.

         Despite contending that the tax court lacked jurisdiction, however, the Commissioner responded to Adolphson's challenge on the merits. The Commissioner noted that Final Notices of Intent had been issued on March 11, 2010 and January 16, 2014. While IRS records indicated that Adolphson's address had been updated in 2006, and then again in 2014, the Commissioner was unable to say "with certainty" whether the Final Notices of Intent were sent to the proper addresses. Although the Commissioner conceded that the Notices of Intent to Levy were invalid if mailed to the improper address, which would mean that the levies must be reversed, the Commissioner once more reiterated that absent a CDP letter, the Court lacked jurisdiction over the collection matter pursuant to Section 6330(d)(1).

         The only supporting documents that the Commissioner provided were unauthenticated copies of Adolphson's transcripts of account for the years at issue and an unauthenticated computer printout listing dates on which his address of record had been changed in the IRS system. These exhibits corroborate the Commissioner's account of when the Final Notices of Intent to Levy were issued but, as acknowledged by the Commissioner, the documents do not show where any of the notices were mailed. Indeed, these computerized records are not even adequate to establish a use of the mail, since they only state that the Final Notices of Intent to Levy were "issued" (one in 2010, pertaining to tax year 2002, and a second in 2014, for tax years 2006 through 2010). A post office box in Iowa is given as Adolphson's address on each transcript of account (all of which were generated by the IRS from its database after Adolphson had petitioned the tax court in September 2014). The 2002 transcript also shows that the Final Notice of Intent to Levy for that year, issued in 2010, was returned as "undeliverable."

         While Adolphson conceded that he lacked a notice of determination, he urged the tax court to apply Buffano and invalidate the levies because the IRS had prevented him from requesting a CDP hearing by failing to send him a Final Notice of Intent to Levy for any of the relevant tax years. He further argued that although the Commissioner's exhibits listed an Iowa address, his "address for the last 5 years has and always has been" in Illinois.

         At that point the Commissioner conceded that the IRS could not establish through its records where the agency had sent either of the Final Notices of Intent to Levy. The Commissioner speculated, though, that the Iowa address on the transcripts of account is "the most likely address to which these notices were sent." As before, the Commissioner did not acknowledge-much less try to distinguish-the tax court decisions relied upon by Adolphson, instead faulting him for the agency's floundering while continuing to insist that the tax court lacked subject-matter jurisdiction to invalidate the levies. Nor did the Commissioner submit additional evidence, instead relying upon the assertion that IRS "records reflect that Notice was mailed/' which misrepresents the ...


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