Whittington v. UNITED STATES

Filing 17

ORDER by Judge Benjamin H. Settle granting 14 Motion for Summary Judgment.(TG; cc mailed to plaintiffs)

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1 2 3 4 5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 6 7 SCOTT and SHERI WHITTINGTON, 8 9 10 Plaintiffs, v. UNITED STATES OF AMERICA, 11 CASE NO. C14-5117 BHS ORDER GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT Defendant. 12 13 This matter comes before the Court on Defendant United States of America’s 14 (“Government”) motion for summary judgment (Dkt. 14). The Court has considered the 15 pleadings and the remainder of the file and hereby grants the motion for the reasons 16 stated herein. 17 18 I. PROCEDURAL BACKGROUND On February 7, 2014, Plaintiffs Scott Whittington (“Scott”) and Sheri Whittington 19 (“Sheri”) filed virtually identical suits against the Government under 26 U.S.C. § 7431. 20 C14-5117, Dkt. 1; C14-5118, Dkt. 1. Scott and Sheri allege that the IRS wrongfully 21 disclosed their respective tax return information in violation of 26 U.S.C. § 6103(a). 22 C14-5117, Dkt. 1; C14-5118, Dkt. 1. ORDER - 1 1 On May 21, 2014, the Court consolidated the two suits. Dkt. 11. 2 On July 15, 2014, the Government moved for summary judgment. Dkt. 14. Scott 3 and Sheri did not respond. 4 5 II. FACTUAL BACKGROUND Scott and Sheri are married and reside in Washington, a community property state. 6 Dkt. 15, Declaration of Patrick E. McGuire (“McGuire Dec.”) at 2. 7 Between 2006 and 2009, Scott did not file individual income tax returns. Id. 8 Unlike her husband, Sheri filed income tax returns between 2006 and 2009. Id. at 3. 9 Sheri reported the income she earned, but did not report her one-half share of Scott’s 10 income. Id. 11 In January 2010, the IRS audited Scott’s income tax liabilities for the 2006 12 through 2009 tax years. Id. at 3. The IRS determined that Scott was liable for the 13 income tax on his unreported income, as well as his one-half share of Sheri’s income. Id. 14 Based on these determinations, the IRS sent a deficiency notice to Scott on October 23, 15 2012. Dkt. 16, Declaration of Michael Hatzimichalis (“Hatzimichalis Dec.”), Ex. 1. The 16 notice disclosed Sheri’s one-half share of marital income. Id. 17 The IRS also audited Sheri’s income tax liabilities for the 2006 through 2009 tax 18 years. McGuire Dec. at 3. The IRS determined that Sheri was liable for the income tax 19 on her one-half share of Scott’s income. Hatzimichalis Dec., Ex. 2. Based on these 20 determinations, the IRS sent a deficiency notice to Sheri on October 23, 2012. Id. The 21 notice disclosed the IRS’s determinations regarding Scott’s one-half share of marital 22 income. Id. ORDER - 2 1 On January 23, 2013, Scott and Sheri filed petitions to redetermine their proposed 2 tax deficiencies with the U.S. Tax Court. Scott A. Whittington v. Comm’r, No. 0020603 13; Sheri L. Whittington v. Comm’r, No. 002061-13. On December 4, 2013, the IRS sent 4 Sheri trial exhibits. See Hatzimichalis Dec., Ex. 6. The trial exhibits included bank 5 records and evidence of Scott’s income. Id. On December 5, 2013, the IRS sent Scott 6 trial exhibits. See Hatzimichalis Dec., Ex. 10. The exhibits included bank records and 7 evidence of Sheri’s income, including her tax returns. Id. 8 III. DISCUSSION 9 A. 10 Summary Judgment Standard Summary judgment is proper only if the pleadings, the discovery and disclosure 11 materials on file, and any affidavits show that there is no genuine issue as to any material 12 fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). 13 The moving party is entitled to judgment as a matter of law when the nonmoving party 14 fails to make a sufficient showing on an essential element of a claim in the case on which 15 the nonmoving party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 16 323 (1986). There is no genuine issue of fact for trial where the record, taken as a whole, 17 could not lead a rational trier of fact to find for the nonmoving party. Matsushita Elec. 18 Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (nonmoving party must 19 present specific, significant probative evidence, not simply “some metaphysical doubt”). 20 See also Fed. R. Civ. P. 56(e). Conversely, a genuine dispute over a material fact exists 21 if there is sufficient evidence supporting the claimed factual dispute, requiring a judge or 22 jury to resolve the differing versions of the truth. Anderson v. Liberty Lobby, Inc., 477 ORDER - 3 1 U.S. 242, 253 (1986); T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 2 626, 630 (9th Cir. 1987). 3 The determination of the existence of a material fact is often a close question. The 4 Court must consider the substantive evidentiary burden that the nonmoving party must 5 meet at trial—e.g., a preponderance of the evidence in most civil cases. Anderson, 477 6 U.S. at 254; T.W. Elec. Serv., Inc., 809 F.2d at 630. The Court must resolve any factual 7 issues of controversy in favor of the nonmoving party only when the facts specifically 8 attested by that party contradict facts specifically attested by the moving party. The 9 nonmoving party may not merely state that it will discredit the moving party’s evidence 10 at trial, in the hopes that evidence can be developed at trial to support the claim. T.W. 11 Elec. Serv., Inc., 809 F.2d at 630 (relying on Anderson, 477 U.S. at 255). Conclusory, 12 nonspecific statements in affidavits are not sufficient, and missing facts will not be 13 presumed. Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 888-89 (1990). 14 B. Government’s Motion for Summary Judgment 15 Scott and Sheri allege that the IRS wrongfully disclosed their respective tax return 16 information in violation of 26 U.S.C. § 6103(a). C14-5117, Dkt. 1; C14-5118, Dkt. 1. 17 The Government moves for summary judgment, arguing that all disclosures were 18 authorized by 26 U.S.C. § 6103(h)(4). Dkt. 14 at 6. 19 Section 6103(a) prohibits the disclosure of confidential tax returns and return 20 information unless a statutory exception applies. 26 U.S.C. § 6103(a); Aloe Vera of Am., 21 Inc. v. United States, 699 F.3d 1153, 1156 (9th Cir. 2012). “Return information” is 22 broadly defined and includes “a taxpayer’s identity, [and] the nature, source, or amount ORDER - 4 1 of his income.” 26 U.S.C. § 6103(b)(2)(A). 2 Section 6103(h)(4) sets forth various exceptions to the general rule prohibiting 3 disclosure of tax return information. Section 6013(h)(4) provides, in part: 4 5 6 7 A return or return information may be disclosed in a Federal or State judicial or administrative proceeding pertaining to tax administration . . . (B) if the treatment of an item reflected on such return is directly related to the resolution of an issue in the proceeding; [or] (C) if such return or return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer which directly affects the resolution of an issue in the proceeding . . . . 8 Id. § 6103(h)(4)(B), (C). 9 In this case, the Government’s disclosures were proper under 26 U.S.C. 10 § 6103(h)(4)(B). The Government disclosed Scott and Sheri’s respective tax return 11 information during income tax audits and U.S. Tax Court proceedings. Income tax audits 12 are considered administrative proceedings. See Abelein v. United States, 323 F.3d 1210, 13 1214–15 (9th Cir. 2003); Delpit v. Comm’r, 18 F.3d 768, 770 (9th Cir. 1994). U.S. Tax 14 Court proceedings are judicial proceedings. See 26 U.S.C. §§ 7441, 7442. 15 Additionally, the Government’s disclosures directly relate to the resolution of tax 16 liability issues in the audits and tax court litigation. As Washington residents, Scott and 17 Sheri were required to report their one-half share of marital community income on their 18 individual income tax returns. See RCW 26.16.030; see also Comm’r v. Dunkin, 500 19 F.3d 1065, 1069–70 (9th Cir. 2007). Scott and Sheri, however, failed to report their one20 half shares of community income. The IRS audited Scott and Sheri to determine the 21 correct amount of their taxable income. Scott’s return information directly relates to 22 ORDER - 5 1 Sheri’s taxable income. Conversely, Sheri’s return information directly relates to Scott’s 2 taxable income. Section 6103(h)(4)(B) therefore authorized the Government’s 3 disclosures. 4 The Government’s disclosures were also proper under 26 U.S.C. § 6103(h)(4)(C). 5 As discussed above, the Government disclosed Scott and Sheri’s tax return information in 6 administrative and judicial proceedings. Moreover, the disclosed information relates to a 7 transactional relationship between Scott and Sheri that directly affects the audits and tax 8 court litigation. Given the community property nature of their income, a transactional 9 relationship existed between Scott and Shari. This relationship directly affects the 10 amount of Scott and Sheri’s taxable income—an issue in both the audits and the tax court 11 litigation. Accordingly, section 6103(h)(4)(C) also authorized the Government’s 12 disclosures. 13 14 IV. ORDER Therefore, it is hereby ORDERED that the Government’s motion for summary 15 judgment (Dkt. 14) is GRANTED. The clerk is directed to close the case. 16 Dated this 22nd day of September, 2014. A 17 18 BENJAMIN H. SETTLE United States District Judge 19 20 21 22 ORDER - 6

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