United States of America v. Lund et al

Filing 52

ORDER: denying Motions to Take Judicial Notice 40 , 41 , 42 and 43 ; granting Motion to Set Aside Default 39 ; granting Motion for Relief From Requirements to Confer 26 .FINDINGS & RECOMMENDATION: Motion to Dismiss for Lack of Jurisdiction 34 should be denied. Objections to the Findings and Recommendation are due by 9/17/2012. Signed on 8/31/2012 by Magistrate Judge Thomas M. Coffin. (plb)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
EUGENE DIVISION
UNITED STATES OF AMERICA

6:12-CV-62-TC
Plaintiff,

v.

FINDINGS and RECOMMENDATION
and ORDER

ROBERT A. LUND and COLLEEN L. LUND,

Defendants.

COFFIN, Magistrate Judge:
This is an action brought by the United States to reduce tax assessments to judgment.
There are several motions presently before the court.
A. Defendants' Motion to Dismiss

Prose defendants Robett and Colleen Lund have filed a motion (#34) to dismiss. Defendants
argue that the United States failed to make timely assessments of penalties and interest and failed
to file this action within the statute of limitations.

Page 1 - FINDINGS and RECOMMENDATION and ORDER

Defendants' arguments fail. First, the assessment statute of limitations set out in 26 U.S.C.
§6501 (1) (a) does not apply to failure to file penalties and interest, both of which accumulate beyond
the three year period set by §6501(a). Second, the collection statute oflimitations in 26 U.S.C. §
6502 was suspended by the Lunds' request for a collection due process hearing, and this action was
filed within the extended deadline.
1. The assessments of interest and failure to pay penalty were timely because the three year statute
oflimitations does not apply
Defendants argue that cetiain assessments fail after the running of the three year statute of
limitations. However, the assessments defendants challenge are not assessments of tax; they are
assessments of failure to file penalties, interest and fees. That is an impmiant difference because
the three year statute oflimitations does not apply to those types of assessments.
First, it is clear the three year statute of limitations does not apply to interest. 26 U.S.C.
§660 1(g).

Second, the three year statute oflimitations also does not apply to the penalty for failing

to pay taxes due. It is true that § 650l(a) provides that "the amount of any tax imposed by this title
shall be assessed within 3 years after the return was filed (whether or not such return was filed on
or after the date prescribed)." And 26 U.S.C. §6665(b) provides that "[e]xcept as otherwise
provided in this title ... reference in this title to 'tax' imposed by this title shall be deemed also to
refer to the additions to the tax, additional amounts, and penalties provided by this chapter."
Conceivably §6665(b) could apply §650l(a)'s three year statute of limitations to penalties. But as
set fmih below, if §6665 were read to require all penalties to be assessed within three years of the
date that the return was filed, it would vitiate a pmiion of the language in the penalty statute itself,
26 U.S. C. §6651 (a)(3). This court should and hereby does avoid that result.

Page 2- FINDINGS and RECOMMENDATION and ORDER

See,~,

Am. Vantage

Cos. V. Table Mountain Rancheria, 292 F.3d 1091, 1098 (9'h Cir. 2002)(noting that statutes should
not be construed to create surplusage).
Under §6651(a)(3) and § 6303(a), the penalty cannot begin to accrue until the Internal Revenue
Service has determined that there is an additional amount of tax due that was not shown on the
retum, has assessed the tax, and has demanded payment of the additional tax. That cannot happen
until the retum is filed. The penalty then continues to increase each month for 4 years and two
months. If the penalty were required to be assessed within three years of the return being filed, it
would never be able to accrue to the full amount provided in the statute. Consequently, every court
to consider the issue has held that § 665l(a)(3) creates an exception to the three year statute of
limitations.

See,~.

United States v.

~Krasnow,

548 F. Supp. 686 (S.D.N.Y. 1982); Bob Hasmic

Chevrolet, Inc. v. United States IRS, 849 F.Supp 500,515 (W.D. Tex. 1994); see also In re Gurley,
335 B.R. 389, 393 (Bankr. W.D. Tenn. 2005)(reaching same result with respect to §665l(a)(2)).
This court does the same.
Finally, for similar reasons, it is plain that the United States can continue to assess fees more than
three years after the retum was filed. See 26 U.S.C. §6331(a); 26 U.S. C. §6321. These statutes
contemplate that fees may accrue - and be collected- during the United States' attempts to collect
unpaid taxes. Accordingly, such fees are governed by the ten year collection statute of limitations
in 26 U.S.C. §6502, not the three year statute oflimitations for assessment of taxes in U.S. C. §6501.
2. The action was filed in a timely manner because the Lunds' request for a collection due process
hearing and Robert Lund's Bankruptcy petition tolled the statute of limitations
Defendants also contend that the United States failed to initiate this action within ten years of
the assessment dates. They conectly note that the earliest assessment alleged in the Complaint is

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July 9, 2001. Accordingly, the United States ordinarily would have been required to commence the
suit by July 9, 2011. See 26 U.S.C. §6502(a)(l). However, the Lunds requested a collection due
process hearing on or about July 8, 2002. The filing of the request for a hearing suspended the
statute of limitations. See 26 U.S.C. §6330(e)(1 ). The IRS denied the Lunds' request on January
7, 2003. The Lunds had 30 days after the determination to appeal to the United States Tax Comi,
see 26 U.S. C. §6330(d)(1), but did not do so. Accordingly, the IRS's detetmination became final,
and the statute oflimitations for collecting taxes began to run again, on February 7, 2003, the date
31 days after the final decision. See 26 C.F.R. § 301.6330-l(g)(l).

Therefore the statute of

limitations was suspended ti·om July 8, 2002, to February 6, 2003, a period of 214 days. As a
consequence of the suspension, the United States had until February 8, 2012 - the date 214 days
after July 9, 2001 -to commence a proceeding to collect the Lunds' taxes. This action was filed on
Janumy 12,2012. It is timely.
A second event also suspended the statute oflimitations with respect to Robert Lund (though not
with respect to Colleen Lund). Robert Lund filed a bankruptcy petition on April28, 2010. By filing
the petition, Robert Lund again suspended the statute of limitations for the collection of taxes. See
26 U.S.C. §6503(h). The bankruptcy was dismissed on June 8, 2010, but the suspension period
continued for another 6 months beyond that. §6503(h)(2). Accordingly, as to Robert Lund, the
statute of limitations was supended from April28, 2010, to December 8, 2010, an additional225
. days. Therefore, the United States had until the date 225 days after Februmy 8, 2012 - September
20, 2012- to file this action against Robert Lund. For this additional reason, the action was filed in
a timely manner against him.

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B. Motions to Set Aside Default
Prose defendant Colleen Lund's motion (#39) to set aside her default is specifically not opposed
by the United States as the United States is not prejudiced by it at this time. See Non Opposition
Memo (#48). As such, the motion to set aside default is allowed and the default(# 29) is vacated
. However, Colleen Lund shall file and Answer to the Complaint within 14 days, or the default will
be reinstated.

C. Motions for Judicial Notice
Prose defendants' motions (#40, #41, #42, #43) to take judicial notice oflaw are denied. None
of the motions actually seek judicial notice. Judicial notice is a method of establishing facts that are
not reasonably subject to dispute. See Fed. R. Evid. 201. The Lunds are making legal arguments.

D. Motion for Relief from Certain Conferences
The United States' Motion (#26) for relief from requirements to confer is allowed as prose
defendants only wish to confer by mail which defeats the purpose of confelTing, i.e., the speedy and
inexpensive resolution of litigation.

Page 5 -FINDINGS and RECOMMENDATION and ORDER

CONCLUSION
Defendant Robert and Colleen Lund's motion (#34) to dismiss should be denied.
The United States' Motion (#26) for relieffrom requirements to confer is allowed .
Defendant Robert and Colleen Lunds' motions (#40, #41, #42, #43) to take judicial notice of
law are denied.
Defendant Colleen Lund's motion (#39) to set aside her default is allowed and the default ( #29)
is vacated. Colleen Lund shall file and Answer to the Complaint within 14 days, or the default will
be reinstated.
DATED this

_1j_ day of August, 2012.

United States

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gistrate Judge