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United States v. Taylor

United States District Court, N.D. Alabama, Northwestern Division

May 17, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
NEIL TAYLOR, ET AL., Defendants.

          MEMORANDUM OPINION

          ABDUL K. KALLON UNITED STATES DISTRICT JUDGE

         The United States filed this lawsuit against Neil Taylor (individually and as the executor of the Estate of Haffred Neil Taylor), Lanette Taylor, Nancilu Underwood, C. Wilbur Underwood, and Laura Stewart to reduce to judgment the federal income and employment tax liabilities of Neil Taylor and to foreclose federal tax liens which have attached to two real properties in which Neil Taylor holds an interest. Doc. 1. The United States has reached stipulations regarding the property interests of Lanette Taylor, the Underwoods, and Stewart. Docs. 24, 28, 30. Presently before the court is the United States' motion for summary judgment against Neil Taylor. Doc. 34. As of the date of this order, Neil Taylor has not filed a response to the motion. For the reasons below, the motion is due to be granted.

         I. LEGAL STANDARD FOR SUMMARY JUDGMENT

         Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56. “Rule 56[] mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (alteration in original). The moving party bears the initial burden of proving the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the nonmoving party, who is required to “go beyond the pleadings” to establish that there is a “genuine issue for trial.” Id. at 324 (citation and internal quotation marks omitted). A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         II. FACTUAL BACKGROUND[1]

         Taylor is an attorney and owner of a law firm employing several employees in Russellville, Alabama. Docs. 34-1 at 6; 35 at 1, 4. For the taxable years 2007 through 2014, Taylor owes $216, 158.15, as of March 15, 2019, for unpaid income taxes, penalties, and interest. Docs. 34-1 at 2-6; 34-2; 35 at 1-6. In addition, for the years 2008 through 2016, Taylor owes $166, 041.57, as of March 15, 2019, for unpaid employment taxes, penalties, and interest. Doc. 34-1 at 8; 34-4; 34-5; 34-6; 34-7; 35 at 6-9. During this period, the Department of Treasury issued several Notices of Federal Tax Lien, which it recorded in the Office of the Judge of Probate of Franklin County, Alabama. The liens notified Taylor of his tax liabilities, the United States' demand for payment, and that “there is a lien in favor of the United States on all property and rights to property belong[ing] to [Taylor] for the amount of these taxes, ” plus penalties, interest, and costs. Docs. 34-9 and 34-10. The United States subsequently filed this suit to reduce to judgement Taylor's liability and to foreclose its liens on two parcels of real property in which Taylor has an interest. Doc. 1. See also 26 U.S.C. § 7401.

         III. ANALYSIS

         Pursuant to the Internal Revenue Code, “if any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.” 26 U.S.C. § 6321. In light of Taylor's failure to respond to the United States' motion, the court reviews whether the United States is entitled to reduce to judgement Taylor's tax liabilities and permit federal tax lien foreclosure against Taylor's property.

         A. Whether the United States May Reduce Taylor's Tax Assessments to Judgement

         “In reducing [a tax] assessment to judgment, the Government must first prove that the assessment was properly made.” United States v. Korman, 388 Fed.Appx. 914, 915 (11th Cir. 2010) (per curiam) (internal quotation marks omitted). “An ‘assessment' amounts to an IRS determination that a taxpayer owes the Federal Government a certain amount of unpaid taxes. It is well established in the tax law that an assessment is entitled to a legal presumption of correctness-a presumption that can help the Government prove its case against a taxpayer in court.” United States v. Fior D'Italia, Inc., 536 U.S. 238, 242 (2002). Without a “finding that the computational methods used and . . . the assessment was arbitrary and without foundation, ” the tax payer's “tax deficiency is presumptively correct.” Olster v. Comm'r of Internal Revenue Serv., 751 F.2d 1168, 1174 (11th Cir. 1985) (internal punctuation omitted). Although the IRS has an ongoing obligation to “make the inquiries, determinations, and assessments of all taxes . . . which have not been duly paid, ” 26 U.S.C. § 6201(a), the “taxpayer has the burden of proving that the [tax assessment] computational method used is arbitrary and without foundation.” Olster, 751 F.2d at 1174 (citing Mersel v. United States, 420 F.2d 517 (5th Cir. 1970)).

         The United States has satisfied its burden of providing evidence demonstrating all of the tax penalties and interest assessed against Taylor through the declaration of K. Cole, Forms 4340, [2] and the Notices of Federal Tax Liens that it filed against Taylor. See docs. 34-1, 34-2, 34-4, 34-5, 34-6, 34-7, 34-8, 34-9, 34-10, 37-1, 37-2; see also 26 U.S.C. § 7491(c) (stating that the United States initially has “the burden of production in any court proceeding with respect to the liability of any individual for any penalty, addition to tax, or additional amount imposed by [the tax code]”). The declaration establishes, in part, that as of March 15, 2019, Taylor owes $216, 158.15 for unpaid income taxes, penalties, and interest and $166, 041.57 for unpaid employment taxes, penalties, and interest. Doc. 34-1 at 2-6, 8. Cole based these amounts on certified copies of the Department of Treasury Account Transcript, i.e. Form 4340, of Taylor's employment and income tax returns, which show Taylor's “assessed penalties for failing to pre-pay taxes, filing delinquent tax returns, and making late payments, as well as the interest charged for late payments.” United States v. Trevitt, 196 F.Supp.3d 1366, 1379 (M.D. Ga. 2016). Based on these submissions, the United States “has clearly met its burden of production regarding the tax penalties and interest assessed for each year.” Trevitt, 196 F.Supp.3d at 1379.

         The burden therefore shifts to Taylor to prove the documents' inaccuracy, or “that the [tax assessment] computational method used is arbitrary and without foundation.” Olster, 751 F.2d at 1174. As stated previously, Taylor opted to ignore the United States' motion. Consequently, Taylor has failed to meet his burden, and the court accepts the United States' submissions as presumptive proof of Taylor's tax liability. See Korman, 388 Fed.Appx. at 915 (affirming “the presumption that the assessment was proper” because the tax payer failed to dispute the accuracy of the assessments, provided no evidence, and only offered “erroneous, unsupported, or irrelevant arguments”).

         B. Whether the United States May Foreclose its Tax Liens on Taylor's Properties

         Based on Taylor's tax liability assessments, the United States moves to foreclose its tax liens on two of Taylor's real properties-(1) 105A Jackson Avenue, Russellville, Alabama 35653 (“Office Property”) and (2) 959 Shady Grove Road, Phil Campbell, Alabama 35581 (“Shady Grove Property”). Doc. 35 at 16. “Whether the interests of [Taylor] in the propert[ies]” constitutes “‘property and rights to property' for the purposes of the federal tax lien statute, 26 U.S.C. § 6321, is ultimately a question of federal law.” United States v. Craft, 535 U.S. 274, 278 (2002). But, because the “federal tax lien statute itself creates no property rights but merely attaches consequences, federally defined, to rights created under state law, ” United States v. Bess,357 U.S. 51, 55 (1958), the “answer to this federal question, however, largely depends upon state law.” Craft, 535 U.S. at 278. Accordingly, the court applies Alabama law ...


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