On March 18, 2021, Judge John D. Bates filed his Order to Dismiss [33] this case and his Memorandum and Opinion [34] in support of that Order.
In his Memorandum, he writes:
“Read properly, McNeil’s pared-down request for relief is fairly straightforward. He is bringing an action authorized under 26 U.S.C. § 7345(e)(1) that asks the Court “to determine whether [his] certification was erroneous” and he seeks the relief authorized under 26 U.S.C. § 7345(e)(2), an order directing the IRS “to notify the Secretary of State” to that effect. The jurisdictional question—which was the subject of extensive briefing in the motion to dismiss—is simple now that McNeil has limited the scope of his requested relief. His suit is authorized by, and the remaining injunctive relief he seeks could be granted under, § 7345(e). It would seem that the Government agrees with this analysis, as its reply brief only raises jurisdictional concerns in reference to the possibility that McNeil is seeking to “challenge the underlying assessments” of his tax debts by the Government. United States’ Reply in Supp. of its Mot. to Dismiss (“Reply”) [ECF No. 31] at 2–3. Hence, the only question at this time is not jurisdiction, but instead whether McNeil has alleged sufficient facts to state a claim that could result in the Court ordering the Secretary of the Treasury to inform the Secretary of State that the certification of his debt was erroneous under 26 U.S.C. § 7345(e)(2).”
“In his opposition, McNeil gives two reasons why he is entitled to the limited relief he still seeks. First, he argues that he was never notified that the IRS had certified to State that he had a seriously delinquent tax debt. Opp’n at 2. McNeil attached to his amended complaint copies of two different IRS Notices that should have informed him of the IRS’s certification of his debt. Am. Compl., Ex. A at 4–9, 12–17. He obtained these through the FOIA request he submitted to the IRS, but he claims he never received copies from the IRS when he should have because the IRS sent them to a Tucson, Arizona address where he has never lived. Am. Compl. at 11–12; Opp’n at 2. The Court takes this fact as true for purposes of this motion. See Iqbal, 556 U.S. at 678.”
He further states:
“Even if McNeil is able to prove that he never received these Notices, though, it would not mean that the IRS’s certification was erroneous. As the Government observes, § 7345 does not say that a flawed or failed notice renders a certification erroneous. Reply at 3–4. Subsections (a) and (b) describe when the Secretary of the Treasury must transmit certification to the Secretary of State and identify which debts qualify as “seriously delinquent tax debt.” 26 U.S.C. § 7345(a)–(b). Neither subsection says that proper notice is an element of or a prerequisite to a proper certification by the IRS of a seriously delinquent tax debt. In fact, subsection (d) says that notice to the taxpayer should be “contemporaneous[]” with certification to State, so it logically cannot be a prerequisite to that certification. 26 U.S.C. § 7345(d). Further, because subsection (e) includes no statute of limitations, there is no reason why improper notice under subsection (d) would prejudice a taxpayer who, like McNeil, does not learn about the certification of his debt in a sufficiently timely manner. See id. § 7345(e). The text of the statute suggests that the purpose of the notice requirement is to inform the debtor “in simple and nontechnical terms of the right to bring a civil action under subsection (e).”5 Id. Therefore, McNeil’s argument concerning the notice requirement fails because even if notice was not effected here, it would not mean that the IRS’s certification of his debt to the State Department was erroneous.”
“McNeil’s second argument is that the Notices sent to Arizona falsely suggest that “either a Form 1040 or 1040A had been filed for” each year from 2003 to 2006 and from 2008 to 2012 even though, according to McNeil, “no Form 1040 or 1040A exists in IRS’[s] records” for those years. Opp’n at 2. McNeil’s argument then seems to be that the IRS’s certification of his debt was erroneous because in identifying his “seriously delinquent tax debt,” the IRS pointed to flawed or fraudulent records. Even assuming the IRS did rely on faulty records, McNeil would need a different mechanism to contest that. Indeed, his argument sounds more like a challenge to the underlying tax assessments against him or to the way the IRS assesses the taxes owed by non-filers. The argument therefore goes beyond the scope of the challenge that § 7345(e) allows. Paragraph (e)(1) only allows a court “to determine whether the certification was erroneous or whether the Commissioner [of the IRS] has failed to reverse [a] certification.” 26 U.S.C. § 7345(e)(1) (emphasis added). It does not allow an action to determine the validity of an underlying tax debt.”
“McNeil’s theory would transform the limited waiver of the government’s sovereign immunity under § 7345(e) into a mechanism for challenging any number of aspects of an underlying seriously delinquent tax debt or IRS monitoring and recordkeeping procedures. If Congress intended that a case under § 7345(e) would be such a powerful tool for scrutinizing the IRS, surely it would have provided for more extensive remedies than just the correction of the erroneous certification.”
“…. the limited scope of relief available under § 7345 indicates that Congress intended for courts to scrutinize only a narrow set of grounds on which a certification might be erroneous. Section 7345 defines “seriously delinquent tax debt” as “an unpaid, legally enforceable Federal tax liability of an individual” that has been “assessed,” is “greater than $50,000” and is subject to a notice of lien or a levy. 26 U.S.C. § 7345(b)(1). The provision’s focus on these characteristics—nonpayment, enforceability, assessment, an amount over $50,000, and the appropriate lien or levy—suggests that they are the proper focus of the Court’s determination under § 7345(e). McNeil has not raised arguments that go to any of these, but has instead argued that the IRS’s procedures for calculating his underlying debt are unlawful.”
“To be sure, the phrase “Federal tax liability” is also part of the definition of “seriously delinquent tax debt,” but treating tax liability as an element of a proper (i.e., non-erroneous) certification and allowing the accuracy of a federal tax liability to be challenged under § 7345(e) leads to counterintuitive if not absurd results. McNeil suggests that the Court should treat the reference to “Federal tax liability” as transforming § 7345 into a vehicle by which a litigant can challenge any aspect of an underlying “seriously delinquent tax debt” or of an IRS procedure that led to that debt’s assessment. This is at odds with both the very limited relief available under § 7345(e)(2) and with the types of tax-collection challenges that can generally be brought in federal court. Indeed, Congress has tightly limited the availability of injunctive relief when it comes to tax assessment and collection through the Anti-Injunction Act, which deprives the federal courts of jurisdiction over any “suit for the purpose of restraining the assessment or collection of any tax,” subject to limited statutory exemptions, none of which would be relevant here. 26 U.S.C. § 7421(a).”
“The Court finds no support in § 7345 or anywhere else in the tax code for the notion that Congress wanted § 7345(e) to become a vehicle for challenging IRS procedures and tax assessments that cannot otherwise be challenged. Because the Court finds that Congress did not intend for McNeil’s argument about the Forms 1040 and 1040A to be the basis for a claim under § 7345(e), and because he cannot argue that the IRS’s certification was erroneous based on a flawed notice, he has failed to state a claim upon which the Court could grant him relief under § 7345(e)(2).”
I encourage each of you to read the complete Memorandum to see for yourself the twisted logic he used to arrive at his conclusion.
RAM NOTE: On April 15, 2021, I will file a Rule 59 Motion to Alter or Amend Judgment and post it in my next blog. Personally, I expect Judge Bates to deny that motion. So, I will immediately file a Notice of Appeal.
Stay tuned.