United States of America v. Austin et al
Filing
65
PROPOSED FINDINGS AND RECOMMENDED DISPOSITION by Magistrate Judge Steven C. Yarbrough regarding 46 Plaintiff's Motion for Partial Summary Judgment Against Mark Austin. Objections to R&R due by 8/23/2018. Add 3 days to the dead line if service is by mailing it to the person's last known address (or means described in Fed. R. Civ. P. 5(b)(2)(D) and (F)); if service is by electronic means, no additional days are added. (Fed. R. Civ. P. 6(d); Fed. R. Crim. P. 45(c).) (hm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
UNITED STATES OF AMERICA,
Plaintiff,
v.
Civ. No. 15-1072 MV/SCY
MARK AUSTIN, and
CATHERINE AUSTIN,
Defendants.
PROPOSED FINDINGS AND RECOMMENDED DISPOSITION
Defendant Mark Austin failed to file income tax returns for multiple years, leading the
Internal Revenue Service (IRS) to assess substantial tax liabilities. The United States filed this
action to reduce to judgment the federal tax assessments against Mr. Austin plus civil penalty
assessments against Mr. Austin and his wife, Catherine Austin, and to foreclose on real property
Mr. and Mrs. Austin own in San Juan County, New Mexico.
On December 27, 2017, the United States moved for partial1 summary judgment against
Mr. Austin. Doc. 46. Mr. Austin filed a response on February 9, 2018 (Doc. 57), and the United
States replied on February 12, 2018 (Doc. 58). On March 27, 2018, United States District Judge
Martha Vazquez referred the motion to the undersigned for entry of proposed findings and a
recommended disposition. Doc. 64. As set forth more fully below, I recommend the Court
GRANT the United States’ motion for partial summary judgment against Mr. Austin as to tax
years 1999-2002, 2004-2005, 2009-2010 and DENY the motion as to tax year 2008.
1
Although the United States filed this action against both Mr. and Mrs. Austin, this motion seeks “only summary
judgment with respect to the approximately $1.8 million in Form 1040 income tax liabilities (tax, penalties and
interest) owed by Mr. Austin.” Doc. 46 at 1.
1
I.
Factual Background
The following facts are undisputed. On August 30, 2000, Mr. and Mrs. Austin purchased
real property by warranty deed in San Juan County, New Mexico. Doc. 47-14. The warranty
deed indicates that Mr. and Mrs. Austin purchased the property “as husband and wife.” Id. The
property (hereinafter “Anasazi Trail Property”) has the following legal description:
The Southwest Quarter of the Southeast Quarter of the Southeast Quarter of the
Northeast Quarter (SW1/4SE1/4SE1/4NE1/4) of Section Twenty-Six (26) in
Township Thirty (30) North of Range Thirteen (13) West, N.M.P.M., San Juan
County, New Mexico.
Id. According to county tax records, Mr. and Mrs. Austin still own the Anasazi Trail Property.
Doc. 47-15. Mr. and Mrs. Austin do not reside at or have a homestead interest in the Anasazi
Trail Property. Doc. 29 (Answer) at ¶ 24.
Mr. Austin failed to file federal income tax returns for nine years: specifically, tax years
1999, 2000, 2001, 2002, 2004, 2005, 2008, 2009, and 2010. Doc. 47-1 (Certifications of Lack of
Record for Form 1040).2 Pursuant to its authority under 26 U.S.C. § 6020(b), the IRS prepared
substitute returns. See Doc. 47-2 (Form 4340 Certification of Assessments, Payments, and other
Specified Matters); Doc. 47-3 (Declaration of Ignacio Perez de la Cruz). The IRS issued
Statutory Notices of Deficiency, which the United States has produced for all tax years at issue
except tax year 2008. See Docs. 47-4 to 47-11 (Letters number 3219(SC/CG) and Forms 5564
“Notice of Deficiency-Waiver”).
The IRS assessed that, as of November 6, 2017, Mr. Austin owed a total of $1,861,642.62
in unpaid federal income taxes and statutory additions (penalties and interest). See Doc. 47-12
2
The United States submitted redacted certifications of lack of record for all tax years at issue, except 2000. See
Doc. 47-1. The remaining evidence the United States submitted for tax year 2000 (the Form 4340 certificate, notice
of deficiency, and tax transcript), however, establish that Mr. Austin did not file an income tax return in tax year
2000. Furthermore, Mr. Austin does not dispute that he failed to file income tax returns for the tax years at issue
here, including 2000.
2
(Declaration of Sandra Davaz); Doc. 47-13 (IRS Account Transcripts). The IRS has filed notices
of a federal tax lien with the San Juan County Clerk in connection with Mr. Austin’s delinquent
Form 1040 tax liabilities for the tax years at issue. Doc. 47-16. The following chart shows the
IRS’ assessment of Mr. Austin’s Form 1040 liability for each year and the date it filed the
notices of its federal tax liens.
Tax Year
Assessment Date3
1999
October 2, 2006
Amount due as of
November 6, 20174
$369,579.98
Notice of Federal
Tax Lien filed5
February 2, 2012
2000
May 1, 2006
$279,176.96
February 2, 2012
2001
May 8, 2006
$159,684.73
February 2, 2012
2002
May 8, 2006
$363,060.29
February 2, 2012
2004
June 4, 2007
$172,295.45
February 2, 2012
2005
February 25, 2008
$186,277.67
February 2, 2012
2008
March 19, 2012
$118,053.40
October 11, 2012
2009
February 11, 2013
$158,065.74
March 8, 2013
2010
September 1, 2014
$55,448.40
September 26, 2014
TOTAL:
$1,861,642.62
On November 24, 2015, the United States filed this lawsuit pursuant to 26 U.S.C. § 7401 seeking
1) to reduce to judgment the federal tax assessments against Mr. and Mrs. Austin, 2) to foreclose
federal tax liens on property Mr. and Mrs. Austin own in San Juan County, including the Anasazi
Trail Property, 3) obtain a sale of the property, 4) obtain a judgment for any amount remaining
unpaid after the distribution and application of the property sale proceeds, and 5) award a 10%
3
See Doc. 47-2 (Assessment dates from each Form 4340).
These amounts are taken from the Account Transcripts. See Doc. 47-13. For each tax year, the amount listed
corresponds to the assessed account balance as set forth in each Form 4340 plus accrued interest and penalties. Id.
5
Doc. 47-16 (Notices of Federal Tax Lien).
4
3
surcharge if the United States must use the remedies under Subchapter B or C of the Federal
Collections Procedure Act. See Doc. 1.
In addition to Mr. and Mrs. Austin, the United States named Ocwen Loan Servicing LLC,
Indymac F.S.B., OneWest Bank, and Discover Bank as defendants because they may claim an
interest in the property at issue in this lawsuit. Id. On March 16, 2016, the Court entered default
judgment against Discover Bank, IndyMac F.S.B., and OneWest Bank. Doc. 27. Thereafter, the
parties agreed to dismiss Ocwen Loan Servicing, LLC with prejudice under Fed. R. Civ. P.
41(a)(1)(ii) (Doc. 56), leaving Mr. and Mrs. Austin as the only two remaining defendants in this
action. As noted earlier, the United States is now seeking summary judgment solely as to Mr.
Austin. See Doc. 46, at n.1 (“Granting of this motion for partial summary judgment allowing
foreclosure of a property valued at under $50,000 would make the judgments for the $5,000
penalties (including the one against Mrs. Austin) largely irrelevant.”).
II.
Legal Standards
Summary judgment is appropriate if the United States shows “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(a). Once the United States meets its initial burden of demonstrating the absence of a genuine
issue of material fact, the burden shifts to Mr. Austin to set forth specific facts showing that there
is a genuine issue for trial. See Schneider v. City of Grand Junction Police Dep’t, 717 F.3d 760,
767 (10th Cir. 2013). The Court views the facts in the light most favorable to Mr. Austin as the
non-moving party and draws all reasonable inferences in his favor. See Tabor v. Hilti, Inc., 703
F.3d 1206, 1215 (10th Cir. 2013). The Court also construes Mr. Austin’s pro se pleadings
liberally. See Childs v. Miller, 713 F.3d 1262, 1264 (10th Cir. 2013). Nonetheless, pro se parties
must follow the same rules of procedure as other litigants. Kay v. Bemis, 500 F.3d 1214, 1218
4
(10th Cir. 2007). The Court will not supply additional factual allegations or construct a legal
theory on Mr. Austin’s behalf. See Smith v. United States, 561 F.3d 1090, 1096 (10th Cir. 2009).
III.
Analysis
In its summary judgment motion, the United States asks the Court to: (1) enter judgment
against Mr. Austin in the amount of $1,861,642.62 for delinquent Form 1040 tax liabilities plus
interest and any other statutory additions provided by law from November 6, 2017; (2) find that
the United States’ federal tax liens attach to the Anasazi Trail Property; and (3) allow the United
States to foreclose its tax liens against the property. See Doc. 47 at 8-9.
In support of its summary judgment motion, the United States has submitted three
categories of documents concerning Mr. Austin’s unpaid Form 1040 income tax liabilities.6 First,
for all tax years at issue, the United States has submitted certified copes of IRS Form 4340,
“Certification of Assessments, Payments, and other Specified Matters,” which disclose the fact,
date, and assessed amount of Mr. Austin’s unpaid taxes, penalties, and interest. See Doc. 47-2.
Second, for all tax years at issue, the United States has submitted transcript reports the IRS
prepared to show interest accruals through November 6, 2017. See Doc. 47-13. Third, for all tax
years at issue except 2008, the United States has submitted copies of redacted Letters number
3219(SC/CG) and Forms 5564 statutory “Notice of Deficiency-Waiver”. See Docs. 47-4 to 4711. Although the United States acknowledges it has not produced a notice of deficiency for tax
year 2008, it does not otherwise explain in its briefing what, if any, consequences flow from its
failure to produce this notice. Doc. 47 at 2, 4; see Guthrie v. Sawyer, 970 F.2d 733, 735 (10th
Cir. 1992) (explaining procedural requirements for notice of deficiency in the tax collection
process). As the Court understands it, in this case, the IRS was required to send a deficiency
6
The summary judgment record also includes the declarations of counsel for the United States and IRS personnel.
See Docs. 47-3 and 47-12.
5
notice to Mr. Austin for all tax years at issue, including tax year 2008, before it could proceed to
assess liability for unpaid taxes. See Cropper v. Comm’r of Internal Revenue, 826 F.3d 1280,
1285 (10th Cir. 2016) (“The IRS must send a deficiency notice to the taxpayer’s ‘last known
address by certified mail or registered mail before it assesses liability for unpaid taxes.” (citing
26 U.S.C. § 6212(a), (b)(1)). Although the United States may have been able to point to other
evidence in the summary judgment record, such as the Form 4340 for tax year 2008, to
demonstrate that the 2008 deficiency notice was mailed to Mr. Austin, it did not do so. See, e.g.,
Cropper, 826 F.3d at 1287 (pointing to entries in Forms 4340 as further evidence establishing
that the IRS properly mailed deficiency notices to taxpayer); Long v. United States, 972 F.3d
1174, 1181 (10th Cir. 1992) (noting in a parenthetical that the certificate of assessments and
payments provide sufficient proof of adequacy and propriety of notices and assessments absent
evidence to the contrary); United States v. Goodman, 2012 WL 3155824, at *4 (D.Colo. 2012)
(unpublished) (“The ‘notice’ entries on the Forms 4340 demonstrate that adequate notice and
demand was made and carry a presumption of correctness.”); Leathers v. Leathers, 2013 WL
1873275, at *7 (D. Kan. 2013) (unpublished) (noting that “the Form 4340 entries showing that
statutory notices were sent are sufficient, absent any contrary evidence, to meet the
Government’s burden to show that notices were in fact sent by certified or registered mail.”).
Because the United States carries the burden of proof and has not demonstrated that the IRS
properly mailed the 2008 deficiency notice, I propose finding that the United States has not
established a valid tax assessment for tax year 2008. See Cropper, 826 F.3d at 1285 (“If the IRS
fails to prove that it properly mailed a deficiency notice, any tax assessment based on that notice
is invalid.”). On this basis, I recommend denying the United States’ motion with regard to tax
year 2008.
6
I now turn to consider the United States’ arguments in favor of summary judgment as to
the remaining tax years at issue (1999-2002, 2004-2005, and 2009-2010).
1. Tax Assessments
To prevail on its claim to reduce the federal tax assessments to judgment, the United
States must first establish a prima facie case by showing “a timely assessment of the tax due,
supported by a minimal evidentiary foundation, at which point a presumption of correctness
arises.” United States v. McMullin, 948 F.2d 1188, 1192 (10th Cir.1991) (internal citations
omitted). The opposing party, Mr. Austin in this case, must then produce substantial evidence to
overcome the presumption. Id.
The IRS Form 4340 is “routinely used to prove that tax assessment has in fact been
made” and is “presumptive proof of a valid assessment.”7 Guthrie, 970 F.2d at 737 (internal
quotation marks omitted); see also Long, 972 F.3d at 1181 (“For purposes of granting summary
judgment, a Certificate of Assessments and Payments is sufficient evidence that an assessment
was made in the manner prescribed by [applicable regulations].”). “If a taxpayer does not present
evidence indicating to the contrary, a district court may properly rely on the forms to conclude
that valid assessments were made.” Guthrie, 970 F.3d at 737-38; see Long, 972 F.2d at 1181 n.9
(“[T]he taxpayer has the burden of going forward with evidence and the burden of persuasion to
overcome the presumption attaching to the Forms 4340.”). In this case, I recommend finding that
the certified copies of the IRS Forms 4340 in the summary judgment record are presumptive
proof that Mr. Austin was properly assessed income tax liabilities for tax years 1999-2002, 20042005, 2009-2010, and that they establish a prima facie case of liability. See Ford v. Pryor, 552
7
In addition, although Mr. Austin does not challenge their admissibility, IRS Forms 4340 are admissible under the
public-record hearsay exception under rule 803(8) of the Federal Rules of Evidence. James v. United States, 970
F.2d 750, 755 (10th Cir. 1992) (stating that “IRS Certificates of Assessments and Payments are admissible public
records sufficient to establish that notices and assessments were properly made”) (internal quotation marks and
citation omitted)).
7
F.3d 1174, 1178-79 (10th Cir. 2008) (“Courts, including this one, have held that a Summary
Record Assessment, provided on Form 4340, is presumptive proof of a valid assessment.”)
(internal citation omitted).
Mr. Austin has not presented any evidence to rebut the presumptive correctness of the
IRS Forms 4340 and account transcript reports the United States submitted. In fact, in his
response, Mr. Austin did not set forth any “specific facts showing there is a genuine issue for
trial” nor did he raise any arguments concerning the amount of his tax liability. See Celotex
Corp. v. Catrett, 477 U.S. 317, 324 (1986). Rather, Mr. Austin solely raised tax protestor/“nonfilers” arguments concerning whether he is liable at all and questioning this country’s tax system.
Mr. Austin claims that he “has no illusions about the probable outcome” of this case nor he does
believe he “would be successful in any legal or factual challenge” to the summary judgment
motion. Doc. 57 at 2-3. Mr. Austin further maintains that this Court has no jurisdiction over him
as he serves a “higher authority”, but in the interest of judicial economy, he offers to quit-claim
the Anasazi Trail Property “upon proof of claims” by the United States. Id. at 3. Towards that
end, he attaches affidavits asking the United States to provide proof of various tax law principles.
Id. at 6-27.
The Court has previously rejected Mr. Austin’s jurisdictional argument. See Mem. Op.
and Order, filed June 12, 2017 (Doc. 39). The tax-protestor type arguments raised in Mr.
Austin’s brief and accompanying affidavit have likewise been rejected by the Tenth Circuit as
“completely lacking in legal merit and patently frivolous.” See Scott v. Comm’r of Internal
Revenue, 696 F. App’x 928, 929 (10th Cir. 2017) (unpublished) (quoting Lonsdale v. United
States, 919 F.2d 1440, 1448 (10th Cir. 1990). I am not persuaded by Mr. Austin’s arguments and
recommend that the Court reject his arguments in light of the following authority:
8
As the cited cases, as well as many others, have made abundantly clear, the
following arguments . . . are completely lacking in legal merit and patently
frivolous: (1) individuals (“free born, white, preamble, sovereign, natural,
individual common law ‘de jure’ citizens of a state, etc.”) are not “persons”
subject to taxation under the Internal Revenue code; (2) the authority of the
United States is confined to the District of Columbia; (3) the income tax is a
direct tax which is invalid absent apportionment, and Pollock v. Farmers’ Loan &
Trust Co., 157 U.S. 429, . . . modified, 158 U.S. 601 . . . (1895), is authority for
that and other arguments against the government’s power to impose income taxes
on individuals; (4) the Sixteenth Amendment to the Constitution is either invalid
or applies only to corporations; (5) wages are not income; (6) the income tax is
voluntary; (7) no statutory authority exists for imposing an income tax on
individuals; (8) the term “income” as used in the tax statutes is unconstitutionally
vague and indefinite; (9) individuals are not required to file tax returns fully
reporting their income; and (10) the Anti–Injunction Act is invalid.
To this short list of rejected tax protester arguments we now add as equally
meritless the additional arguments made herein that (1) the Commissioner of
Internal Revenue and employees of the Internal Revenue Service have no power
or authority to administer the Internal Revenue laws, including power to issue
summons, liens and levies, because of invalid or nonexistent delegations of
authority, lack of publication of delegations of authority in the Federal Register,
violations of the Paperwork Reduction Act, and violations of the Administrative
Procedure Act, including the Freedom of Information Act; and (2) tax forms,
including 1040, 1040A, 1040EZ and other reporting forms, are invalid because
they have not been published in the Federal Register.
Lonsdale, 919 F.2d at 1448.
Although Mr. Ford objects to being called a tax protester, he is appropriately
designated a tax protester because he protests the legality of the income tax, and
his arguments stem from this position. For example, he argues that income taxes
do not apply to him, . . ., he is not required to file tax returns on Form 1040, . . .,
he is not required to comply with an IRS form that is obsolete and lacks an OMB
number, . . ., defendant Pryor issued administrative summonses without delegated
authority, . . ., and he is not subject to the income tax because he is a “non
resident alien to the political jurisdiction of the United States,” . . . . Such taxprotester arguments have long been held to be lacking in legal merit and frivolous.
Ford v. Pryor, 552 F.3d at 1177 n.2; see also id. at 1179 (holding that tax protester’s argument
that “Form 4340 is invalid because it reflects his social security number and shows his name in
all capital letters is wholly frivolous.”).
9
Based on the foregoing, I propose finding that the United States has met its prima facie
burden on summary judgment as to its first claim and that Mr. Austin has not shown any genuine
issue of material fact with respect to the assessments made against him. I therefore recommend
finding that the United States is entitled to judgment against Mr. Austin in the amount of
$1,743,589.22,8 as of November 6, 2017, for delinquent Form 1040 tax liabilities for tax years
1999-2002, 2004-2005, and 2009-2010.
2. Foreclosure
Under 26 U.S.C. § 6321, “if any person liable to pay any tax neglects or refuses to pay
the same after demand, the amount . . . 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.” The lien
arises at the time the assessment is made. 26 U.S.C. § 6322. Here, the United States has
established the tax liability underlying the lien for tax years 1999-2002, 2004-2005, and 20092010. Liens therefore arose against Mr. Austin’s property on the various dates the assessments
were made for these tax years: October 2, 2006; May 1, 2006; May 8, 2006; June 4, 2007;
February 25, 2008; February 11, 2013; and September 1, 2014.
The United States contends that Mr. Austin owns the Anasazi Trail Property. In support,
it attached warranty deeds filed in San Juan County on September 11, 2000, conveying the
property to Mr. Austin and his wife. Mr. Austin does not deny that he owns the property. The
evidence thus shows that Mr. Austin has a valid interest in the Anasazi Trail Property to which
the liens have attached. The liens were valid against purchasers, holders of security interests,
mechanic’s lienors, and judgment lien creditors under 26 U.S.C. § 6323(a) & (f) as of the date
the United States filed sufficient notice. The United States filed Notices of Federal Tax Lien with
8
This amount corresponds to the total amount of delinquent tax liability the United States sought in its motion
($1,861,642.62) minus the amount due for tax year 2008 ($118,053.40).
10
the County Clerk in San Juan County on February 2, 2012; March 8, 2013; and September 26,
2014.
Because Mr. Austin has not rebutted the United States’ evidence, I propose finding that
the United States is entitled to foreclose the federal tax liens against the Anasazi Trail Property to
satisfy Mr. Austin’s delinquent Form 1040 income tax liabilities for tax years 1999-2002, 20042005, and 2009-2010. I therefore recommend granting the United States’ motion for summary
judgment on its second claim and ordering foreclosure on Mr. Austin’s property in San Juan
County.
IV.
Conclusion
For the reasons stated above, I recommend that the Court grant the United States’ Motion
for Partial Summary Judgment against Mark Austin (Doc. 46). Accordingly, I recommend that:
1. the Court enter judgment in favor of the United States for $1,743,589.22, plus any
interest, penalties, and other statutory additions accruing from November 6, 2017
under applicable law; and
2. the United States may, in accordance with applicable law, proceed with foreclosure
proceedings on the Anasazi Trail Property in San Juan County, New Mexico.
___________________________________
UNITED STATES MAGISTRATE JUDGE
THE PARTIES ARE FURTHER NOTIFIED THAT WITHIN 14 DAYS OF SERVICE of
a copy of these Proposed Findings and Recommended Disposition they may file written
objections with the Clerk of the District Court pursuant to 28 U.S.C. § 636(b)(1). A party
must file any objections with the Clerk of the District Court within the fourteen-day period
if that party wants to have appellate review of the proposed findings and recommended
disposition. If no objections are filed, no appellate review will be allowed.
11
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