Revis v. United States

558 F. Supp. 1071, 51 A.F.T.R.2d (RIA) 1020, 1983 U.S. Dist. LEXIS 19149
CourtDistrict Court, D. Rhode Island
DecidedFebruary 18, 1983
DocketCiv. A. 83-106 S
StatusPublished
Cited by15 cases

This text of 558 F. Supp. 1071 (Revis v. United States) is published on Counsel Stack Legal Research, covering District Court, D. Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Revis v. United States, 558 F. Supp. 1071, 51 A.F.T.R.2d (RIA) 1020, 1983 U.S. Dist. LEXIS 19149 (D.R.I. 1983).

Opinion

OPINION

SELYA, District Judge.

This is a civil action for judicial review of jeopardy assessments imposed by the Internal Revenue Service (“Service”) anent federal income taxes allegedly owed by the taxpayer-plaintiff for calendar years 1979 and 1980. Jurisdiction of the Court has been invoked pursuant to 26 U.S.C. § 7429.

It appears that on January 13, 1983, the Service made certain assessments for the years in question against the plaintiff; 1 that said assessments, together with a demand for immediate payment, were served on the following day; that on January 19, 1983, a formal notice of assessment, accompanied by advices as to the taxpayer’s rights of appeal, was served; that plaintiff promptly filed his protest and a request for expedited administrative review; that such review was had; and that the Service on February 4, 1983, through a duly-designated appeals officer, refused to modify or abate the assessments. The instant action was filed in this Court on February 8,1983.

These jeopardy assessments were made by the District Director of the Internal Revenue Service pursuant to 26 U.S.C. § 6861, which states in pertinent part:

If the Secretary or his delegate believes that the assessment or collection of a deficiency, as defined in § 6211, will be jeopardized by delay, he shall, notwithstanding the provisions of § 6213(a), immediately assess such deficiency (together with all interest, additional amounts, and additions to the tax provided by law), and notice and demand shall be made by the Secretary or his delegate for the payment thereof.

26 U.S.C. § 6861(a).

The jeopardy assessment is a singular weapon in the Service’s armamentarium. In the ordinary course of events, there is generally a time-consuming ritual which is enacted from the initial notice of a putative tax deficiency to the point of compulsory payment, a ritual which wends at a relatively leisurely pace through a labyrinth of administrative avenues and which finds its ultimate way to the Tax Court and to yet loftier judicial reaches (should appeals be pursued) — all without the taxpayer’s silver actually crossing the Service’s palm. When the Service, however, properly resorts to the heavy artillery of § 6861 (the firing pin of which is a determination that collection of the tax may be in jeopardy), it is empowered in effect to truncate the ritual, forego its customary procedures, and assess and collect the claimed deficiency straightaway.

Prior to the enactment of the Tax Reform Act of 1976, no immediate judicial review of jeopardy assessments was available to taxpayers. See Davis v. United States, 511 F.Supp. 193, 196 (D.Kan.1981). See also 4 U.S.Cong. & Adm.News 1976, 2897, 3789, at p. 390. 26 U.S.C. § 7429, enacted as a part of the Tax Reform Act of 1976, 2 did confer upon taxpayers some defensive armor, in making provision for both administrative and judicial review of jeopardy assessments. These provisions may be succinctly summarized as follows:

1. Within five days after the jeopardy assessment is made, the Service must furnish the taxpayer with a written statement of the information relied upon in formulating the assessment;

2. Within thirty days thereafter, the taxpayer may request administrative review;

*1074 3. Upon such request, the Service must expeditiously determine if the action was reasonable and the amount of the assessment was appropriate.

If such administrative review is unavailing, the taxpayer may bring suit under 26 U.S.C. § 7429. The district court’s function is limited to a determination as to whether the imposition of the assessment is reasonable under the circumstances; and if so, whether the amount so assessed is appropriate under the circumstances. As to the first of these inquiries, the burden of proof rests with the Service; as to the latter, the burden of proof rests with the taxpayer. Davis v. United States, 511 F.Supp. at 197; Loretto v. United States, 440 F.Supp. 1168, 1171 (E.D.Pa.1977). While the standard to be applied in measuring the Service’s actions is something more than the mere avoidance of arbitrary or capricious conduct, it is, conversely, something less than a substantial-evidence-on-the-record test. Id. at 1172. The determination of the district court in the premises is final, and no further appeal lies. See 26 U.S.C. § 7429(f).

In ascertaining the “reasonableness” of the Service’s conduct, the Congress has given scant guidance to the district courts. Other than the “jeopardized by delay” criterion embodied in 29 U.S.C. § 6861(a), quoted supra, the statute is, as to this point, most notable for its silence. The Service, in its Manual, 3 hypothesizes that the existence of any of three conditions will soundly bottom a jeopardy assessment, to wit:

1. If the taxpayer has left American shores, or appears to be designing so to depart with unseemly haste; or
2. If the taxpayer has placed, or appears to be designing quickly to place, his assets beyond the reach of the government by transfers abroad or to third parties, or by dissipation; or by concealment; or
3. If the taxpayer’s fiscal solvency appears to be imperiled.

The legislative history of § 7429 indicates congressional approval of the standards set forth in the Manual. See Senate Finance Committee, S.Rep. No. 94-938 (part II), 94th Cong., 2d Sess., 360 n. 1 (1976). Even accepting these conditions, if extant, as sufficient in law to trigger jeopardy assessments, it is well settled that this Court’s review is not in any way, shape or form restricted thereto. Fidelity Equipment Leasing Corp. v. United States, 462 F.Supp. 845, 849 (N.D.Ga.1978).

The judicial review envisaged by Congress in enacting 26 U.S.C. § 7429 is limited not only in its scope, but also in its effect. The Senate Finance Committee, in explaining the intended effect of a district court’s determination under § 7429, made this clear (S.Rep. No. 94-938, supra, at 365, U.S. Code Cong. & Admin.News 1976, p. 3795):

A determination made under new § 7429 will have no effect upon the determination of the correct tax liability in a subsequent proceeding.

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Bluebook (online)
558 F. Supp. 1071, 51 A.F.T.R.2d (RIA) 1020, 1983 U.S. Dist. LEXIS 19149, Counsel Stack Legal Research, https://law.counselstack.com/opinion/revis-v-united-states-rid-1983.