UNPUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 17-1642
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
WILLIAM J. GILLIAM,
Defendant - Appellant.
Appeal from the United States District Court for the District of South Carolina, at Charleston. Margaret B. Seymour, Senior District Judge. (2:15-cv-04064-MBS)
Argued: May 9, 2018 Decided: June 25, 2018
Before KING, DIAZ, and FLOYD, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Wyatt B. Durrette, Jr., DURRETTE, ARKEMA & GILL, PC, Richmond, Virginia, for Appellant. Julie Ciamporcero Avetta, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Tobias G. Ward, Jr., TOBIAS G. WARD, JR. LAW FIRM, Columbia, South Carolina, for Appellant. David A. Hubbert, Acting Assistant Attorney General, Joan I. Oppenheimer, Tax Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Beth Drake, Interim United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Columbia, South Carolina, for Appellee. Unpublished opinions are not binding precedent in this circuit.
2 PER CURIAM:
The Internal Revenue Service (IRS) assessed federal income tax liability against
Appellant William J. Gilliam for the 1993 and 1995 tax years. In 2015, the government
sought to collect on Gilliam’s outstanding tax liability. In response, Gilliam asserted that
the ten-year limitations period for the assessment of taxes had expired. The government
argued that the limitations period was suspended between December 2007 and September
2010 such that the limitations period had not expired before the time it moved to collect.
The district court agreed, held that the government’s collection action was timely, and
granted summary judgment for the government.
Gilliam now appeals, arguing that the district court erred in concluding that the
government brought its action within the limitations period. We hold that the district
court correctly determined that the limitations period had been suspended during the
operative time period. Accordingly, we affirm the district court’s grant of summary
judgment in the government’s favor.
I.
We begin with a brief overview of the relevant statutory and regulatory
framework. When a taxpayer owes the government taxes, the IRS makes an assessment
which constitutes “the official recording of liability that triggers levy and collection
efforts.” Hibbs v. Winn, 542 U.S. 88, 101 (2004); see also 26 U.S.C. § 6203. After
making an assessment, the IRS may either place a lien on the taxpayer’s property or levy
3 the property to satisfy the debt. 1 Typically, the IRS has ten years after making an
assessment to collect through levy or judicial proceeding. 26 U.S.C. § 6502(a)(1).
The statute of limitations for collection is suspended: (1) when “the Secretary is
prohibited from making the assessment or from collecting by levy or a proceeding in
court,” 26 U.S.C. § 6503(a)(1); (2) if the government gives notice of intent to levy and
the taxpayer requests a hearing to challenge the levy actions, 26 U.S.C. § 6330(e)(1); 2 or
(3) if the government institutes a lien and the taxpayer requests a hearing to challenge the
lien, 26 U.S.C. § 6320(c).
The pertinent IRS regulations further explain that once a taxpayer requests a
hearing to challenge a levy or lien, the taxpayer must be afforded one of two types of
hearings. The first, a collection due process (CDP) hearing, is available only if the
taxpayer’s request for a hearing is timely. 26 C.F.R. § 301.6320–1(b)(1). If the request
is untimely, the taxpayer receives an equivalent hearing rather than a CDP hearing. Id.
§ 301.6320–1(c)(2). The Internal Revenue Code does not distinguish between CDP and
1 A lien is a “legal right or interest that a creditor has in another’s property, lasting usu[ally] until a debt or duty that it secures is satisfied.” Lien, Black’s Law Dictionary (10th ed. 2014). A tax lien is a “lien on property, and all rights to property, imposed by the federal government for unpaid federal taxes.” Id. “A levy is a legal seizure of [an individual’s] property to satisfy a tax debt.” IRS, What is a Levy?, https://www.irs.gov/businesses/small-businesses-self-employed/what-is-a-levy (saved as ECF opinion attachment). 2 Subsection 6330(e)(1) states that “if a hearing is requested . . . , the levy actions which are the subject of the requested hearing and the running of any period of limitations under section 6502 . . . shall be suspended for the period during which such hearing, and appeals therein, are pending.”
4 equivalent hearings; the two-track hearing system originates entirely in the regulations.
Compare 26 U.S.C. § 6330(e), with 26 C.F.R. § 301.6320–1(b)(1), (c)(2)(v) (“A taxpayer
is entitled to one CDP hearing with respect to the first filing of a [Notice for Tax
Lien] . . . if the taxpayer timely requests such a hearing. . . . If the request for CDP hearing
is untimely, . . . the taxpayer will be notified of the untimeliness of the request and offered
an equivalent hearing.” (emphasis added)). Taxpayers are afforded the same procedures
during CDP and equivalent hearings, with two exceptions. See 26 C.F.R. § 301.6320–
1(i)(1) (stating that equivalent hearings “generally will follow . . . procedures for a CDP
hearing.”). First, a decision letter issued at the conclusion of an equivalent hearing
cannot be appealed, whereas a notice of determination issued following a CDP hearing is
appealable. See id. § 301.6320–1(i)(1), (2). Second, the limitations period is not
suspended during the pendency of an equivalent hearing, whereas a CDP hearing request
suspends the limitations period. See id.
II.
Having outlined the relevant statutory and regulatory structure, we now turn to
Gilliam’s claims. In 1995, the IRS selected Gilliam’s 1993 tax return for examination,
and it assessed approximately $1.5 million in additional income tax against Gilliam. In
1997, the IRS assessed another approximately $800,000 in income tax liability, including
interest and penalties, against Gilliam for the 1995 tax year. In 2007, the IRS added
approximately $1.1 million in interest and penalties to the 1995 assessment. As of
5 September 2016, Gilliam’s liability for unpaid taxes, penalties, and interest for 1993
totaled just over $5 million and his liability for 1995 totaled approximately $2.6 million.
On November 27, 2007, the government filed a notice of federal tax lien for
Gilliam’s unpaid 1993 and 1995 income tax liabilities pursuant to 26 U.S.C. § 6320 in
California, where Gilliam resided. The government also informed Gilliam that he had a
right to a hearing under 26 U.S.C. § 6329 and that the deadline to request that hearing
was January 4, 2008. Gilliam submitted a request for review of a levy, pursuant to 26
U.S.C. § 6330, which the IRS received on December 18, 2007. Because there was no
levy pending against Gilliam at that time, the IRS disregarded his request. Gilliam sent a
second hearing request, using IRS Form 12153, properly challenging the lien. The IRS
received his second request on January 30, 2008, and deemed it untimely, but granted
Gilliam an “equivalent hearing” pursuant to 26 C.F.R. § 301.6320–1.
In December 2008, the IRS Appeals Office sustained the notice of federal tax lien
against Gilliam. Gilliam sought Tax Court review of the IRS Appeals Office’s
determination, pursuant to 26 U.S.C. §§ 6320(c) and 6330(d)(1). The government moved
to dismiss for lack of jurisdiction on the grounds that Gilliam’s hearing request had been
untimely and that the equivalent hearing he had received could not be appealed. See 26
C.F.R. § 301.6320–1(i)(1), (2)
While the Tax Court considered this motion, on March 24, 2009, a bankruptcy
court ruled on the IRS’s attempt to collect part of Gilliam’s unpaid income tax liability
from a bankruptcy trust associated with Marine Energy Systems Corporation (MESC), a
South Carolina corporation of which Gilliam had served as president, chief executive,
6 and majority shareholder until it entered into bankruptcy in 1996. Gilliam was to receive
funds from the bankruptcy trustee pursuant to a settlement agreement associated with the
bankruptcy. In May 2007, the IRS tried to collect Gilliam’s unpaid income tax liability
by serving a notice of levy on the trustee. The South Carolina Department of Revenue
filed a competing claim, and an adversary proceeding was held to resolve the dispute.
The proceeding concluded in 2009 and the bankruptcy court ordered the trustee to
distribute all funds that would be payable to Gilliam to the IRS. In total, the government
collected $614,000 from the trustee on Gilliam’s 1993 and 1995 assessed taxes.
On September 15, 2010, the Tax Court denied the government’s motion to dismiss
Gilliam’s appeal regarding the lien action. It reasoned that despite its references to 26
U.S.C. § 6330, Gilliam’s December 2007 hearing request had been an attempt to request
review of the lien action against him. It further reasoned that despite the incomplete
nature of this initial hearing request, Gilliam’s January 2008 request clarified his intent.
As a result, the Tax Court determined that Gilliam’s request for a hearing had been
timely, citing 26 C.F.R. § 301.6320–1(c)(2)(v) for the proposition that an imperfect
written request for a CDP hearing is “timely if the request is perfected within a
reasonable period of time[.]” J.A. 87. The Tax Court adjudicated the merits of Gilliam’s
appeal, and in 2012 entered summary judgment in favor of the government, holding that
the lien against Gilliam was proper and that the government could proceed with the
collection action for the 1993 and 1995 tax years. Gilliam appealed the Tax Court’s
7 determination to the Ninth Circuit. The Ninth Circuit dismissed his appeal on March 13,
2013, for failure to prosecute. 3
On September 30, 2015, the government filed an action in the United States
District Court for the District of South Carolina, seeking to bring Gilliam’s unpaid
income tax liabilities for 1993 and 1995 to judgment. Gilliam opposed the collection,
claiming that the action was untimely because the ten-year statute of limitations had run.
The government argued that the limitations period had been suspended for a period of
years due to Gilliam’s timely request for a lien hearing in 2007, among other things. The
new limitations deadlines, it asserted, were November 2015 and June 2016 for the 1993
and 1995 tax years, respectively. Gilliam responded that between December 2007, the
date of his request for a CDP hearing, and September 2010, the date that the Tax Court
ruled his CDP request timely, the statute of limitations was not suspended. As a result,
he claimed the limitations period for both tax years expired in 2013 and that the
government’s collection action was therefore untimely. Specifically, he argued that the
limitations period is only suspended when the government is prohibited from collecting,
and that the government’s collection of $614,000 from the MESC trustee during the
1,003-day period between December 2007 and September 2010 demonstrated that the
government had the ability to collect such that the statute of limitations was not
3 A case is dismissed for failure to prosecute when “the plaintiff has failed to pursue the case diligently toward completion.” Dismissal, Black's Law Dictionary (10th ed. 2014).
8 suspended. 4 He also claimed that the limitations period was not suspended because he
actually received an equivalent hearing, which does not suspend the limitations period,
rather than a CDP hearing, which would have suspended the limitations period.
The district court disagreed. The court rejected Gilliam’s argument that the
government’s collection of funds after his hearing request nullified the suspension of the
limitations period and held that 26 U.S.C. § 7433, which provides that a taxpayer may
bring a civil action if the IRS disregards the tax code, was Gilliam’s only avenue for
remedying any potential injury stemming from that collection. The court also determined
that because Gilliam received the benefit of an appeal to the Tax Court despite receiving
an equivalent hearing, which typically cannot be appealed, Gilliam was foreclosed by
judicial estoppel from asserting a statute of limitations defense against the government.
It reasoned that the remedy Gilliam sought was fundamentally unfair, as it would allow
him the advantage of an appeal to the Tax Court as well as the running of the statute of
limitations.
Gilliam timely appealed to this Court, arguing the district court erred in granting
the government’s summary judgment motion. For the reasons that follow, we affirm.
III.
4 Gilliam does not dispute that the limitations period was tolled for the 910 days between the Tax Court’s jurisdictional ruling and the dismissal of his appeal by the Ninth Circuit on March 13, 2013.
9 This Court reviews questions of statutory interpretation de novo. Raplee v. United
States, 842 F.3d 328, 331 (4th Cir. 2016). It likewise reviews the district court’s grant of
summary judgment de novo. Cox v. SNAP, Inc., 859 F.3d 304, 307 (4th Cir. 2017).
The issue before us is whether the ten-year statute of limitations period was
suspended between December 2007, when Gilliam mistakenly requested a CDP hearing
for review of a nonexistent levy, and September 2010, when the Tax Court determined
his initial request was intended to request review of the lien and was therefore timely. If
the limitations period was suspended, the government’s collection action was timely. If
not, the government cannot collect.
A.
Gilliam first argues that together §§ 6503 and 6330, as incorporated by § 6320,
suspend the limitations period only when the government is prohibited from collecting.
Thus, because the government collected $614,000 from the MESC trustee while
Gilliam’s lien appeal was pending, he asserts that the limitations period cannot have been
suspended between 2007 and 2010.
Gilliam’s emphasis on the intersection of §§ 6503 and 6330 is misplaced. The
collection of funds from the MESC trustee pursuant to a levy is unrelated to the question
of whether the limitations period was suspended while Gilliam’s lien hearing request and
appeal were pending because the collection from the MESC trustee was pursuant to a
§ 6330 levy action separate and apart from the § 6320 lien action at issue in this case.
10 Although lien and levy actions are similar, they are legally distinct. This
distinction is evidenced by the fact that liens and levies are controlled by separate
portions of the Tax Code and regulations. See 26 U.S.C. §§ 6320, 6330. In fact, the
language of § 6320 contemplates the possibility of the collection of a levy occurring
concurrent to a lien action. 26 U.S.C. § 6320(c) (incorporating § 6330(e) “[f]or purposes
of [§ 6320(e)]” i.e., solely for the purposes of lien actions); see also Treas. Reg.
§ 301.6320–1(g)(2), A3 (“Levy actions . . . are not the subject of a CDP hearing under
section 6320. The IRS may levy for tax periods and taxes covered by the CDP Notice
under section 6320 and for other taxes and periods if the CDP requirements under section
6330 for those taxes and periods have been satisfied.”). Accordingly, although 26 U.S.C.
§ 6503(g) suspends the limitations period when the government is prohibited from
collecting “by levy or a proceeding in court,” the government was not prohibited from
collecting by levy between 2007 and 2010. Thus, § 6503 does not require suspension of
the limitations period between 2007 and 2010. Indeed, § 6503 is wholly irrelevant to our
analysis of whether the limitations period was suspended during the operative time
period.
Instead, the relevant statutory provision is § 6320 and its incorporation of § 6330. 5
Section 6320 provides that a taxpayer has a “[r]ight to fair hearing” if “the person
5 Because the collection from MESC was pursuant to a separate levy action, we agree with the district court that if the collection was unlawful, Gilliam’s only remedy is damages under 26 U.S.C. § 7433. Id. (“If, in connection with any collection of Federal tax . . . any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of this title, . . . such (Continued) 11 requests a hearing in writing under subsection (a)(3)(B) and states the grounds for the
requested hearing,” and that the taxpayer is “entitled to only one hearing” per tax period
in front of an impartial officer. 26 U.S.C. § 6320(b). Section 6320 also incorporates the
portions of § 6330 dealing with suspension of the limitations period. Specifically, it
incorporates the language that “if a hearing is requested . . . the running of any period of
limitations . . . shall be suspended . . . .” 26 U.S.C. § 6330(e)(1). Section 6330 does not
specify the precise time at which the suspension of the limitations period begins
following a hearing request. Because the statute does not discuss the issue of timeliness
at all, the plain language of §§ 6320 and 6330 does not resolve the question of when the
suspension of the limitations period begins if, as in this case, a taxpayer makes a request
for a hearing which is initially considered untimely and later deemed timely.
However, the relevant regulations shed light on the issue at hand. The regulations
concerning § 6320 state that:
Q–G1. For what period of time will the periods of limitation under sections 6502, 6531, and 6532 remain suspended if the taxpayer timely requests a CDP hearing concerning [a lien]?
A–G1. The suspension period commences on the date the IRS receives the taxpayer’s written request for a CDP hearing. . . .
26 C.F.R. § 301.6320–1(g)(2) (emphasis added). Suspension is premised on the receipt
of a timely request for a hearing. If a request is timely, then suspension begins when the
taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.”).
12 request is received by the IRS. Here, the Tax Court determined that Gilliam’s request for
a CDP hearing was timely. As a result, the suspension period began on December 18,
2007, the date the IRS received Gilliam’s written request for a CDP hearing.
B.
Gilliam argues that the regulations do not resolve the issue in this case because his
request for a hearing was not initially considered timely. As a result, he contends that
allowing the regulations to control would be a retroactive conversion of his equivalent
proceeding into a CDP hearing and a retroactive suspension of the limitations period in
violation of §§ 6503 and 6330. Gilliam also claims that this retroactive suspension
amounts to an equitable remedy, which is inappropriate given the limited applicability of
equitable doctrines in the context of tax assessments. 6
6 In response, the government argues that it is not requesting a retroactive suspension of the limitations period because Gilliam actually received a CDP hearing. It claims that, when, in 2010, the Tax Court determined it had jurisdiction to hear Gilliam’s appeal, the Tax Court recategorized the decision letter issued by the Appeals Office as a notice of determination. The government argues that in so doing, the Tax Court implicitly concluded that the equivalent hearing Gilliam had received was actually a CDP hearing. Because we resolve this case based on the language of the statute and regulations, we see no need to address the validity of the government’s claim that Gilliam’s equivalent hearing was a CDP hearing all along. Similarly, although we agree with Gilliam that courts are generally reluctant to apply principles of equity in the context of tax assessments, see e.g., United States v. Brockamp, 519 U.S. 347, 348–49 (1997) (establishing that the three-year period during which a taxpayer must request a refund for overpayment of taxes was not subject to equitable tolling even when taxpayers suffered from mental disability throughout the statutory period), our determination that the limitations period was suspended between December 2007 and September 2010 is premised on the language of §§ 6320 and 6330 and the § 6320 regulations rather than equitable considerations.
13 Gilliam’s retroactivity argument ignores the substance and impact of the Tax
Court’s timeliness determination on the lien proceeding. In assessing whether it had
jurisdiction to hear Gilliam’s appeal following his equivalent hearing, the Tax Court did
not confine its analysis based on the name the government assigned to the hearing
Gilliam received. Had it done so, it would have been forced to rule that it lacked
jurisdiction to hear his appeal. Instead, the Tax Court looked past the label attached to
the procedure Gilliam received and asked whether Gilliam’s request for a hearing had
been timely. J.A. 85 (“The crucial question is not the label attached to the
Commissioner’s correspondence but whether the taxpayer timely requested a CDP
hearing . . . . [I]f petitioner’s CDP hearing request with respect to the [notice of filing tax
lien] was timely, . . . we have jurisdiction to review.” (citing § 6330(d)(1)). Determining
that the request was timely, the Tax Court concluded that it had jurisdiction to hear his
appeal. After receiving the benefit of that timeliness determination insofar as his right to
appeal was concerned, Gilliam cannot now ask this Court to conclude that his request
was untimely for purposes of the limitations period. This is especially true given that the
regulations distinguish between whether or not the limitations period is suspended based
solely on whether or not the taxpayer’s request for a hearing was timely. 26 C.F.R. §
301.6320–1(g)(2) (“[I]f the taxpayer timely requests a CDP hearing concerning [a
lien] . . . [t]he suspension period commences on the date the IRS receives the taxpayer’s
written request for a CDP hearing.”). The Tax Court determined that Gilliam’s hearing
request was timely. That timeliness determination applies both to the question of whether
14 the result of that hearing was appealable and to the question of whether the limitations
period was suspended.
Moreover, even assuming that allowing the regulations to control would be a
retroactive conversion of his equivalent proceeding into a CDP hearing and a retroactive
suspension of the limitations period, Gilliam’s contention that such a suspension would
violate §§ 6503 and 6330 is unfounded. Gilliam asks this Court to limit the government’s
power to collect in a manner that neither the statutes nor the regulations require. Section
6330, as incorporated by § 6320, is silent as to whether a hearing request must be timely.
See 26 U.S.C. § 6330(e)(1) (“[I]f a hearing is requested . . . the running of any period of
limitations under section 6502 . . . shall be suspended for the period during which such
hearing, and appeals therein, are pending.”). 7 The regulations raise the issue of
timeliness and use timeliness to distinguish between CDP and equivalent hearings
without reference to when a timeliness determination must be made. Accordingly, we
hold that the plain language of the regulations, which state that so long as a hearing
request is timely, “[t]he suspension period commences on the date the IRS receives the
taxpayer’s written request for a CDP hearing,” should control. 26 C.F.R. § 301.6320–
1(g)(2). It makes no difference that Gilliam’s hearing request was initially considered
untimely, it only matters that the final decision of the Tax Court was that his request was
7 As discussed above, 26 U.S.C. 6503(a)(1) is likewise inapplicable as there was no prohibition on making assessments or collecting levies in effect between December 2007 and September 2010.
15 timely. Thus, the limitations period was suspended between December 2007 and
September 2010 and the government’s collection action was timely.
IV.
For the foregoing reasons, the district court’s decision is
AFFIRMED.