No. 05-1962
________________________________________________________________________________
In the United States Circuit Court of Appeals
For the Fourth Circuit
Richmond, Virginia
________________________________________________________________________________
John C. Calhoun
Appellant
Vs.
United States of America and
Mark W. Everson, Commissioner of Internal Revenue
Appellee
________________________________________________________________________________
On appeal from the Judgment of the U.S. District Court for the District of South Carolina
________________________________________________________________________________
Memorandum in Support of Informal Brief of October 18, 2005
________________________________________________________________________________
John Calhoun, pro se
P.O. Box 25
Greenville, SC 29616
Table of Contents
Statement Regarding Oral Argument………..………………………………………………… 2
Statement of Corporate Affiliations.……………………………….………………………….. 2
Statement of the Issues………………………………………………………………………… 2
Statement of the Case………………………………………………………………………….. 3
Statement of the Facts ……………. …………………………………………………………... 4
Argument: …………………...……….……………………………………………………….... 8
Issue I: Application of New Law: Schulz II…………………………………………… 9
Issue II(a): CDPH Requirements……………………………………………………... 12
Issue II(b): Meaning of a “Hearing” in Law ………………………………...………. 17
Issue II(c): Appellant’s Actions and Appellee’s Failures and Peccadilloes…………. 20
Issue III: IRS Sent the Notice of Deficiency to a Known Bad Address…………..…. 21
Issue IV(a): Appellant Requests to Appellee Ignored or Refused ………..…………. 27
Issue IV(b): Miscellaneous Matters Requiring a Judicial Remedy ….………………. 28
Issue V: Subject Matter Jurisdiction in District Court re Underlying Tax Liability…. 36
Conclusion…………………………………………………………………………………… 36
Certificate of Service………………………………………………………………………… 38
Statement Regarding Oral Argument
Due to the important, unusual, and first impression nature of this case and the issues, this Appeals Court’s understanding of the issues and facts would be assisted by oral argument. Defendant pro se is a renown lecturer holding a doctoral degree and thus would be able to properly present an oral presentation. The main issue in this case is spreading the umbrella of the Due Process Clause.
Statement of Corporate Affiliations
Appellant does hereby certify that neither party is a publicly held corporation. No business or corporation has an interest in this case or the outcome of this appeal.
Statement of the Issues
1. Requiring judicial review of IRS actions (as elevated in the Second Circuit’s Schulz II decision)
2. Denying a face-to-face hearing of Appellant in violation of the intention of Congress, even though Appellant followed the correct procedure in requesting one
3. Sending a Notice of Deficiency to Appellant at a known bad address and then proceeding against Appellant more than a decade later
4. Using the law illicitly to punish Appellant because of his strongly free market views and publications
5. Subject matter jurisdiction in District Court re underlying tax liability
United States Circuit Court of Appeals
For the Fourth Circuit
Richmond, Virginia
John C. Calhoun }
Appellant-Plaintiff } No. 05-1962
Vs. } Memorandum in Support of Informal Brief
}
United States of America and }
Mark W. Everson, Commissioner }
of Internal Revenue }
Appellee-Defendants }
On appeal from the Judgment of the U.S. District Court for the District of South Carolina
Appellant-Plaintiff John C. Calhoun hereby files this Memorandum to Support his Informal Brief which was filed in this case on October 18, 2005.
Statement of the Case
In response to Appellant’s request for a Collections Due Process Hearing (hereinafter: “CDPH” or “CDP hearing”), the IRS issued its Notices of Determination (attached as Exhibits A1 and A2) on July 8, 2004. The first one was related to form 1040 for years 1991 and 1992 and the IRS said that any appeal was to be directed to U.S. Tax Court. The second one, with language essentially identical to the first one (and related to the same period), was related to form 6702 and any appeal was to be directed to U.S. District Court. Appellant took both issues to U.S. District court in one case from which they are currently being appealed to this Appeals Court.
On May 26, 2002 Calhoun requested the CDP hearing guaranteed to him in 26 USC 6320(b) & 6330(b) both of which sections being captioned: “Right to fair hearing”. (See Calhoun’s request, attached as Exhibit B.) This hearing was never granted. On July 23, 2004, Calhoun sued in U.S. District Court (South Carolina), case no. 6:04CV2455-26BI (Judge Henry Floyd). The case was dismissed on June 29, 2005, approving Magistrate Judge Bruce Hendricks’s recommendations given on January 7, 2005 and June 22, 2005. Calhoun’s Motion for Reconsideration and to Alter Judgment was filed on August 5, 2005, and subsequently denied on August 19, 2005, from which this appeal springs.
Statement of the Facts
1. In 1998, the Congress passed a new law which granted taxpayers embroiled in the IRS collections process the statutory right to a Collection Due Process Hearing. Once the Request Form was timely submitted, all of the IRS collection efforts were put on hold. Also, the taxpayer was entitled to a hearing for certain purposes. This case involves new law (Schulz II), failure to schedule an in-person hearing, IRS procedural peccadilloes, lies about Appellant, and illicit abuse of power, etc. The determinations of the IRS were issued unlawfully, as the following will show.
2. An IRS agent in Columbia, SC scheduled a “correspondence hearing” in Columbia, SC on June 9, 2004 (see Exhibit D). The “hearing” concerned whether or not the United States could legally seize Calhoun’s property pursuant to Internal Revenue Code Section 6331 even though no court order, writ of garnishment or writ of attachment had ever been issued by any court of law with respect to any of Calhoun’s property. The hearing would also be used as a means to discuss any proposed payment schedule or collection alternatives.
a) Calhoun requested that the hearing be changed to a face-to-face hearing in Greenville, South Carolina. The IRS holds CDP hearings at that location frequently. IRC 6330 provides that the CDP hearing must be convenient to the taxpayer. As the IRS’s Office of Chief Counsel’s Notice of May 29, 2003 (CC-2003-016), updating the Collections Due Process Handbook, provides: “If a taxpayer requests a face-to-face meeting, the regulations provide that he or she should be offered one at the appeals office closest to his or her residence” (page 11).
b) Calhoun had previously requested a face-to-face hearing in San Luis Obispo, CA (where his family lives) in letters dated December 11, 2003 and December 22, 2003 (attached as Exhibits E and C). But this request was likewise ignored.
c) IRS agent in Columbia, SC lied and falsely claimed (in sworn statement government exhibit 6) that Calhoun made statements to her at the “correspondence hearing”. Calhoun made no statements at all or even exchanged letters during this time but instead requested a face-to-face hearing, which is his right, and which the IRS has repeatedly denied to him.
d) The IRS and Department of Justice have cited Treasury Regulation in defense of its use of a correspondence hearing instead of a face-to-face hearing. However, the Treasury Regulations are not law. The Collection Due Process Hearing is not similar to the Collections Appeal Program that the IRS used to have earlier. The former is an act of Congress while the latter was a mere internal procedure.
Congress did not intend that the Treasury Department should be able to trample on the rights of citizens by modifying the law to suit its needs best. The IRS is correct in bringing up that there were Constitutional, statutory and judicial arguments made by Calhoun over a decade ago. Calhoun raised those issues with the IRS on many occasions and never received anything but temporizing and obfuscating letters from them. Calhoun has not thus far used such issues as arguments in this case.
3. In letters of December 11, 2003 and December 22, 2003 (attached as Exhibits E and C), Calhoun sent to the settlement officer a letter stating that he intended to make a tape recording of the meeting pursuant to IRC section 7521 and Publication 17, as well as have a witnesses present.
a) Calhoun was also denied his right under the law to make an audio recording of the meeting by virtue of the fact that a face-to-face hearing was summarily denied by the agent. IRC section 7521 states in relevant part, “Any officer or employee of the Internal Revenue Service in connection with any in-person interview with any taxpayer relating to the determination or collection of any tax shall, upon advance request (see Exhibits C and E) of such taxpayer, allow the taxpayer to make an audio recording of such interview” (Morrill vs. Jones, 106 U.S. 466).
b) In Keene v. Commissioner, 121 T.C. No. 2, July 8, 2003, the U.S. Tax Court said, “Accordingly, we hold that, pursuant to section 7521(a)(1), Calhoun is entitled to audio record his IRC 6330 hearing with the Appeals Office.” Calhoun’s CDP hearing was not held—in violation of law—and the subsequent determination from the “correspondence hearing” should thus be set-aside on this basis alone.
4. Calhoun has collection alternatives. He has a wife and six minor children to support. Calhoun owns no real estate and has no savings. At a bona fide hearing, Calhoun would have had a right to set forth collection alternatives. However, the settlement officer would not hear it, and thus violated Calhoun’s rights. Therefore the IRS should be required to facilitate a full and complete CDPH.
a) The government has claimed that Calhoun did not propose a viable collection alternative proposal or submit a “Collection Information Statement”. But by saying so, the IRS is making up requirements that were not mandated by Congress, forcing Calhoun to appeal to the judiciary. The fact is that Calhoun did request collection alternatives on the application for his CDPH and in his other related correspondence. The term “collection alternatives” was used several times.
b) IRC 6330 does not say that tax returns for all years have to be filed in order to get a CDPH. The simple fact is that Calhoun was not required to file tax returns for the years mentioned by the IRS appeals office, most of which coincided with many years when Calhoun was a full time student or living overseas. Furthermore, there are no pre-conditions other than requesting the CDPH within the specified time period, which Calhoun did. Thus, the IRS is simply disobeying the law.
5. In IRC 6330, Congress said that Calhoun is entitled to a CDP hearing, but he did not get one. Instead, the IRS illicitly scheduled a “correspondence hearing”. Congress meant the CDPH would be a face-to-face meeting. Hence, the IRS is viciously denying Calhoun’s rights. Because only a “correspondence hearing” was allegedly held (on June 9, 2004 in Columbia, SC), Calhoun was obviously not present—even though he had made a timely request for postponement and change of venue as noted in paragraphs 2(a) and 2(b) above. There is no transcript of the hearing for that day, even though the events of that hearing are hotly contested.
6. Calhoun seeks to secure judgment in his favor against IRS, or to at least remand to the District Court for a new trial and decision, granting Calhoun his CDP hearing. Calhoun is being pummeled by vicious behavior and recalcitrance of IRS and Department of Justice, coupled with the failure of the District Court to hear Calhoun’s issues, and thus seeks relief in this Appeals Court. Unless explicitly admitted, Calhoun denies all allegations of the IRS against him.
The main issues before this Appeals Court are:
§ The judicial review issue elevated in the Second Circuit’s Schulz II decision (IRS v. Schulz, 413 F.3d 297, 95 A.F.T.R.2d 2005-3007, 2005 WL 152090 (June 29, 2005). The IRS is the last major bureaucracy in the federal government that heretofore does not have its efforts against citizens subject to judicial review. Schulz II changed that fact. The IRS is now trying to squirm away from Schulz II, although they did write a masterful brief about the Schulz I decision in U.S. District Court—wrongly ascribing the ruling in that case to Schulz II.
§ The IRS has denied Calhoun a face-to-face hearing in violation of the intention of Congress in 26 U.S.C. 6330, even though Calhoun followed the correct procedure in requesting one. Calhoun has had no opportunity to raise issues discounting his alleged tax liability and the IRS is stonewalling by trying to make the liability stick without a CDPH. Thus, the IRS is abusing its power in the same way that Congress tried to prevent by IRC 6330 and the Taxpayer’s Bill of Rights II legislation (IRS Restructuring and Reform Act of 1998 [RRA 98] § 3707).
§ The IRS allegedly sent a Notice of Deficiency to Calhoun at a known bad address, and then has proceeded against Calhoun more than a decade later. This action violates Calhoun’s rights. IRS steadfastly has refused to meet with Calhoun and hear why Calhoun believes that he has no tax liability.
§ The IRS is attempting to use the law to punish Calhoun because of his strongly free market views and publications. Calhoun did his doctoral study under noted conservative economist Walter Williams (and generally shares his views), and writes a weekly column, books, articles, besides his daily radio show that extol the virtues of free markets and pro-life libertarian ideas. Calhoun does not spare any inefficient or corrupt bureaus, including the IRS. Because IRS hates Calhoun’s views, they have been assailing him by use of abusive language, fraudulent claims, and economic harassment.
Argument
7. Legal scholars have been critical of the CDPH process as carried out by the IRS. An appeals officer who is uninvolved in the case is supposed to oversee the process to insure that IRC procedures related to the case have been followed. The purpose of the Internal Revenue Service Restructuring and Reform Act of 1998 (Pub. L. No. 105-206, § 3401(b), 112 Stat. 685) was to establish formal procedures designed to ensure due process where the IRS seeks to collect taxes by levy (see H.R. Conf. Rep. No. 105-599 at 263 [1998]). Prior to that legislation, in the Hearings before the Senate Committee on Finance (1997), 105th Cong., 1st Sess. 1-357, legislators expressed “extreme dissatisfaction with the functioning of the IRS” including “inflammatory testimony detailing alleged abuses of the IRS and its practices”. The CDPH statute was intended to rectify IRS abuses.
a) However, many legal scholars and politicians have been concerned that IRS abuses have been, and continue to be, prominent features of the landscape of American tax policy. Leslie Book’s 2000 article, “The New Collection Due Process Taxpayer Rights” (86 Tax Notes 1127, 1132) describes the CDPH process as a “maze”. Senator William Roth, Jr. (R-DE) called the IRC “a mine field for most Americans, and even too complex to be efficiently and consistently administered by the Internal Revenue Service” (cited in Bryan T. Camp [2004], “Tax Administration as Inquisitorial Process and the Partial Paradigm Shift in the IRS Restructuring and Reform Act of 1998”, 56 Fl. L. Rev. 1, 84). Further scholarly criticism of the CDPH process is found in Diane L. Fahey (2003), “The Tax Court’s Jurisdiction Over Due Process Collection Appeals: Is it Constitutional?” (55 Baylor L. Rev. 453), and Leslie Book (2004), The Collection Due Process Rights: A Misstep or a Step in the Right Direction? (41 Houston L. Rev. 1145).
b) Moreover, in another scholarly article, Danshera Cords has argued that the intent of Congress in the Internal Revenue Service Restructuring and Reform Act related to CDPH procedure has not been carried out—especially since the IRS has chosen to hold “equivalent hearings” instead of in-person hearings—creating pejorative circumstances for taxpayers that constitute a “slippery slope” that leads to “undercutting congressional intent”. Thus, some scholars have called the CDPH statute merely “symbolic legislation” on account of the non-meaningful way in which it is carried out by the IRS, Danshera Cords (2004), 29 Vt. L. Rev. 51, 104-108 and fn 3, 40, 97, 275-277; also see Pamela H. Kesner (2001), “Determining the meaning of a Meaningful Collection Due Process Hearing: Katz v. Commissioner” (54 Tax Law. 823). In a related article, Cords comments that while the delays caused by CDP hearings and judicial challenges have been significant, “the CDP provisions have been identified as among the most important provisions of RRA 1998” (Danshera Cords [2005], “Collection Due Process: The Scope and Nature of Judicial Review”, 73 U. Cin. L. Rev. 1021, 1022). The decisions of virtually every other federal bureau that directly impact American citizens are subject to judicial review. Why shouldn’t the IRS’s summonses, levies, etc. likewise be subject to judicial review?
Issue I: Application of New Law: Schulz II
8. Calhoun points out the important new Schulz v. IRS decision (a.k.a. Schulz II) by the Second Circuit Court of Appeals (413 F.3d 297, 95 A.F.T.R.2d 2005-3007, 2005 WL 152090, June 29, 2005).
a) In Schulz II, the Appellate Court held:
The rule of due process upon which we relied in Schulz I, and upon which we rely now, can be stated thus: any legislative scheme that denies subjects an opportunity to seek judicial review of administrative orders except by refusing to comply, and so put themselves in immediate jeopardy of possible penalties “so heavy as to prohibit resort to that remedy,” Oklahoma Operating Co. v. Love, 252 U.S. 331, 333 (1920), runs afoul of the due process requirements of the Fifth and Fourteenth Amendments. This is so even if “in the proceedings for contempt the validity of the original order may be assailed.” Id. 1 at 335; see also Reisman, 375, 2 U.S. at 446; Ex parte Young, 209 U.S. 123, 147-48 (1908). [Bold emphasis added]
In saying “any legislative scheme” and specifying “administrative orders”, the Court broadened its ruling to include not only IRS summonses but also all other IRS administrative edicts.
b) On account of Schulz II, the IRS must comply with the judicial decisions set forth for other institutions that attempt to collect debts. The debtor is entitled to an independent judge to scrutinize the enforcement activities of all collection agencies. Accordingly, Calhoun has requested independent review of the administrative action taken against him by the IRS. On July 18, 2005, Calhoun wrote to the IRS requesting a judicial hearing and the appropriate and necessary forms for Calhoun to comply with the mandate of the 2nd Circuit in Schulz II. The IRS denied his request on October 6, 2005.
c) Calhoun seeks judicial review of the IRS tax assessment under the due process clause of the United States Constitution. No government agency can take any action against any citizen absent judicial intervention. Government agents are not allowed into people’s homes or people’s pocketbooks without review by the independent judiciary.
I. The seizure actions of virtually all other federal agencies are subject to judicial review. A hearing must be held prior to the agency seizing a man’s property. In Fuentes v. Shevin, 407 U.S. 67, 80, 96-97 (1972), the U.S. Supreme Court recognized “the right to a prior opportunity to be heard before chattels are taken from their possessor.”
The appellees do not suggest that these [contractual] provisions waived the appellants’ right to a full post-seizure hearing to determine whether those events had, in fact, occurred and to consider any other available defenses. By the same token, the language of the purported waiver provisions did not waive the appellants’ constitutional right to a pre-seizure hearing of some kind...We hold that the Florida and Pennsylvania prejudgment replevin provisions work a deprivation of property without due process of law insofar as they deny the right to a prior opportunity to be heard before chattels are taken from their possessor...Since the essential reason for the requirement of a prior hearing is to prevent unfair and mistaken deprivations of property, however, it is axiomatic that the hearing must provide a real test. “[D]ue process is afforded only by the kinds of `notice’ and `hearing’ that are aimed at establishing the validity, or at least the probable validity, of the underlying claim against the alleged debtor before he can be deprived of his property....” Sniadach v. Family Finance Corp., supra, at 343 (Harlan, J., concurring). See Bell v. Burson, supra, at 540; Goldberg v. Kelly, supra, at 267.
II. In Sniadach v. Family Fin. Corp. of Bay View, 395 U.S. 337, 342 (1969), the U.S. Supreme Court addressed “the issue of whether a post-seizure hearing is meaningful in terms of due process and deciding that a pre-deprivation notice and opportunity to be heard is necessary absent an important governmental or public interest to the contrary [—i.e., under special circumstances]”:
Recent investigations of the problem have disclosed the grave injustices made possible by prejudgment garnishment whereby the sole opportunity to be heard comes after the taking [as noted by Congressman Sullivan, Chairman of the House Subcommittee on Consumer Affairs who held extensive hearings on this and related problems]...Thus, the U.S. Supreme Court ruled that where the taking of one’s property is so obvious[, egregious, and sinister in effect], it needs no extended argument to conclude that absent notice and a prior hearing (cf. Coe v. Armour Fertilizer Works, 237 U.S. 413, 423) this prejudgment garnishment procedure violates the fundamental principles of due process [Sniadach, supra].
III. Until Schulz II, the IRS has been able to conduct seizures without judicial review. The recent ruling changed how the IRS must comply with judicial review, including how it conducts CDH hearings. Now the IRS too is finally constrained by the “fundamental principles of due process” ad its seizure attempts are subject to review by the independent judiciary in order to protect the rights of citizens.
IV. The Due Process Clause of the Constitution forbids arbitrary deprivations of liberty, and the U.S. Supreme Court has been careful to protect citizens from abuse by government agencies. “Where a person’s good name, reputation, honor, or integrity is at stake because of what the government is doing to him” (Wisconsin v. Constantineau, 400 U.S. 433 [1971]), the minimal requirements of the Clause must be satisfied. “[F]airness can rarely be obtained by secret, one-sided determination of facts decisive of rights....” (Joint Anti-Fascist Committee v. McGrath, 341 U.S. 123, 170). “Secrecy is not congenial to truth-seeking and self-righteousness gives too slender an assurance of rightness. No better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss notice of the case against him and opportunity to meet it” (Goss vs. Lopez, 419 U.S. 565, 580 [1975]) “Whether any procedural protections are due depends on the extent to which an individual will be ‘condemned to suffer grievous loss.’” (Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 168 [1951]; cf. Morrissey v. Brewer, 408 U.S. 471, 481 [1972]. “[T]he Fourth Amendment “balance between individual and public interests always has been thought to define the ‘process that is due’ for seizures of person or property” (Albright v. Oliver, 510 U.S. 266 [1994]).
V. Calhoun therefore requests independent judicial review of IRS’s enforcement actions. The courts have a long string of cases requiring a judicial intervention under the due process clause prior to state action being taken against a citizen. On July 18, 2005, Calhoun sent a letter to the Commissioner of Internal Revenue requesting an independent judicial review and the appropriate forms to request it. The IRS refused to grant judicial review or the requested forms on October 6, 2005. Therefore, this Court should schedule a hearing to review or scrutinize the intended IRS police state activities.
Issue II(a): CDPH Requirements
9. The establishment of the CDPH was enacted by Congress as a result of disclosures emanating from the Senate Finance Committee’s 1997 investigation of the Internal Revenue Service. That investigation revealed widespread, lawless IRS seizures of property, and extensive violations by the IRS of taxpayers’ rights.
a) Section 6330(a)(1) provides, in pertinent part, that “No levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of their right to a hearing under this section before such levy is made.”
b) Section 6330(c)(1) provides “The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.”
c) Section 6330(c)(2) provides that “The person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy…”
d) Section 6330(c)(2)(B) provides that “The person may also raise at the hearing challenges to the existence…of the underlying liability” if the person “did not receive any statutory notice of deficiency for such tax liability…”
e) Section 6330(c)(3) specifically states (in pertinent part) that the “determination by an appeals officer under this subsection shall take into consideration―(A) the verification presented under paragraph (1).”
f) Insofar as the regulations are concerned, Calhoun contends that the IRS is far too generous in granting itself wide authority to alter the statute passed by Congress or to create new law through regulations. The regulations are supposed to clarify or amplify the statute (or fill in the gaps) rather than replace or counter it. It is simply not fair for the IRS to bring up secret regulations that no one knows about and then to attempt to hold people accountable to those clandestine rules.
g) Congress set forth three preconditions for Calhoun’s CDPH:
· Calhoun must make a request
· Calhoun must make a request in a timely manner, and
· Calhoun must state the purpose of the hearing which includes collection alternatives, procedure irregularities, spousal relief, and tax liability in some cases
If Congress wanted to set forth other preconditions that the IRS claims must be met, then why did they not so indicate in the statute? Calhoun complied with each of the three items set forth by Congress. The IRS has additional preconditions for a CDPH, viz. that a taxpayer is not to raise political, constitutional and religious concerns. Calhoun complied with these preconditions too. So why is Calhoun being harassed by the IRS and denied his right under the statute of a face-to-face hearing?
h) Furthermore, Congress did not specify that tax returns for subsequent years be filed as a precondition for a CDPH. If Calhoun had no underlying tax liability from 1993 through 2003 (as a full time student, living outside of the United States, or living upon the charity of others), and the government has not contested otherwise, then why would Calhoun file income tax returns for those years? The IRS knew that Calhoun was a student for many years and had four to six small dependent children during the period, often subsisting on gifts from others. He also had the expense of dealing with a nutty and mendacious wife. There was no reason why Calhoun would have filed income tax returns during those years (or would the IRS have preferred that Calhoun file “zero returns” for those years?), and Congress has not demanded that he do so in order to qualify for a CDPH.
i) The IRS illegally and wrongfully withheld a CDPH from Calhoun and the IRS violated Calhoun’s statutory rights and administrative due process right to appear at a CDPH. Calhoun disagrees with all of the Notice of Determination, and never received a Notice of Deficiency (90 day letter) until some twelve years after the tax period in question. (As detailed below, the IRS mailed the alleged original Notice of Deficiency to a known bad address.)
The law says that Calhoun is entitled to a face-to-face hearing if the request is made within the time period and if there are procedural irregularities or questions about the underlying tax liability. Calhoun’s request met these requirements. For whatever reason, the Magistrate Judge in the District Court case cited the regulations as authoritative in saying that a face-to-face meeting could be replaced by a correspondence hearing. But these regulations are not the law. Congress did not establish them.
j) The Magistrate Judge in the District Court continually brought up things that Calhoun said or did twelve to fifteen years ago as relevant to the current request for a CDPH. Why did he not also bring up other old facts such as Calhoun getting his mouth washed out with soap thirty-five years ago for using foul language at school? Perhaps he should also look for other things that were done by Calhoun in the 1970s and 1980s that have nothing to do with the matter at hand? The Magistrate Judge in the District Court brought up irrelevant past statements by Calhoun but has no proof that Calhoun was not in full compliance with the law.
k) The Magistrate Judge in the District Court claimed that Calhoun “failed to provide a viable collection alternative”. But why should Calhoun have done so, since he did not have a face-to-face hearing? He was prepared to do so at the CDP hearing. The purpose of the CDPH is to discuss collection alternatives. Congress did not say that he must do so beforehand. The CDPH notice does not say that Calhoun had to do so. How was Calhoun supposed to know such a requirement existed? If Calhoun had had the CDPH, he would have done all that the statute requires. Was the Magistrate Judge trying to overturn Congress with his insistence upon inapplicable regulations? The regulations he cites are just the opinions of the IRS on what Congress said, not the law.
l) Even the IRS regulations favored by the Magistrate Judge in the District Court clearly provided that a face-to-face hearing is required when there are relevant issues. And there are relevant issues—such as not receiving the mandatory Notice of Deficiency (a standard argument accepted by the IRS) and Calhoun’s personal circumstances during the period in question. The Magistrate Judge in the District Court simply had no basis to conclude that Calhoun would raise only frivolous issues if a face-to-face hearing were granted. How could the Magistrate Judge in the District Court know that Calhoun’s position on certain taxation issues has not changed since 1991-1992? Indeed, Calhoun had evidence and witnesses to present during the CDP hearing that would have bolstered his case. Yet by the Magistrate Judge’s recommendation such evidence and testimony could not be heard.
m) The Magistrate Judge in the District Court case cited several cases in support of his position, but none of these cases was pertinent to Calhoun’s case. In Tinnerman v. IRS, WL 1332314 2005 (M.D. Fla., May 10, 2005), a taxpayer was not offered a CDPH because he did not request it. Alternatively, Calhoun did request a CDPH in a timely manner. In Quigley v. U.S., 358 F.Supp.2d 427 (E.D. Penn. 2004), a taxpayer was offered an in-person hearing and did not take it. Calhoun was never offered an in-person CDPH.
In Tilley v. U.S., 270 F.Supp.2d 731 (M.D. N.C. 2003), the Court ruled that a taxpayer was not entitled to a CDPH because he was merely raising frivolous issues. Calhoun has not raised frivolous issues. Indeed, in his request for a face-to-face CDPH, Calhoun clearly stated benign reasons regarding his student status and family circumstances, and has also raised the crucial fact that he had never received a Notice of Deficiency (since it was knowingly sent to a bad address). In Lunsford v. Commissioner, 117 T.C. 159, the U.S. Tax Court primarily held that they had no authority to deal with frivolous penalties and so the case should have been dismissed and sent to U.S. Tax Court. Lunsford has little bearing on Calhoun’s frivolous penalty case which is in U.S. District Court already to consider frivolous penalties and other matters.
n) Appellant recognizes that the aforementioned cases are useful in adjudicating cases similar to this one. However, the pertinent issues in Calhoun’s case are different than these ones because Calhoun did follow the correct procedures to get an in-person (or face-to-face) hearing. Indeed, the IRS correspondence with Calhoun presented in the U.S. District Court case shows that the IRS knew that it had an obligation under the law to provide Calhoun with an in-person hearing at the appeals office nearest his home. That is what the IRS stated in its inter-agency notes when Calhoun’s case was transferred from Oregon to South Carolina. Then, after realizing the trouble the IRS would be in without proof of delivering a notice of Deficiency and the IRS’s acknowledgement that the Notice was sent to a known bad address, they have been taking great pains to avoid a tape recorded hearing at an Appeals Office.
o) One of the purposes of a CDPH is to force the IRS to prove that Calhoun received a Notice of Deficiency. But IRS cannot do this but is seeking to circumvent the law and justice in Calhoun’s case. Likewise, the Magistrate Judge in the U.S. District Court became complicit in this wrongdoing by ignoring that no Notice of Deficiency was ever received by Calhoun in 1994. The IRS has tried a sneaky trick and the Magistrate Judge fell for it! Hopefully this Appeals Court will not.
Issue II(b): Meaning of a “Hearing” in Law
10. According to Black’s Law Dictionary, “hearing” means a “Proceeding of relative formality, generally public, with definite issues of fact or of law to be tried, in which parties proceeded against have a right to be heard, and is much the same as a trial and may terminate a final order.” Standard English dictionaries provide: “an opportunity to state your case and be heard…[by means of] the act of hearing attentively”; “To listen to in an official, professional, or formal capacity”; “An opportunity to be heard”; “A preliminary examination of an accused person”; “A session, as of an investigatory committee or a grand jury, at which testimony is taken from witnesses”; “a proceeding of relative formality at which evidence and arguments may be presented on the matter at issue to be decided by a person or body having decision-making authority”.
a) One dictionary annotation provides: “The purpose of a hearing is to provide the opportunity for each side of a dispute, and esp. a person who may be deprived of his or her rights, to present its position. A hearing, along with notice, is a fundamental part of procedural due process. Hearings are also held, as for example by a legislature or an administrative agency, for the purpose of gathering information and hearing the testimony of witnesses.” A fair hearing is “a hearing that is conducted impartially and in accordance with due process and for which the Respondent has reasonable opportunity to prepare, the assistance of counsel, the right to present evidence, the opportunity to cross-examine adverse witnesses, and often the right to a jury.”
b) Corpus Juris Secundum says that a hearing “contemplates an opportunity to be heard”, as one examines, explains, or refutes any evidence presented, and requires the privilege to be present and “the right to present one’s contentions and to support the same by proof and argument.” “It must be fair in all respects and not be a mere form to precede a predetermined result.” There is to be “a listening to facts and evidence for the sake of adjudication.”
Even the IRS has recognized that hearings are face-to-face in discussing whether to reimburse the expenses of those traveling to personally present evidence before its examiners, see To the Commissioner, Internal Revenue Service (1966), 1966 WL 1798 (Comp. Gen.), 45 Comp. Gen. 654.
c) A hearing has to occur at an IRS appeals office closest to taxpayer’s residence unless it is not staffed with “appropriate personnel”. IRC 6320 “does not specify at what location the appeals hearing needs to take place or whether it can occur during telephone.” Being “almost an hour away” is not an “undue burden” when not substantiated as such. A telephone hearing was the only acceptable substitute mentioned, Katz v. Commissioner of Internal Revenue (2000), 115 T.C. 329, 335, 336. A correspondence hearing is not contemplated in the law.
d) The idea of having an audible, face-to-face hearing is well-established in case law and the precedents regarding what constitutes a hearing have been continued and cited for decades. One of the essential characteristics about a “hearing” is the right to be heard, Wisconsin Telephone Co. v. Public Service Commission (1939), 287 N.W. 122, 133, 135, 138, 143; 232 Wis. 274. A hearing is a formal procedure where evidence may be adduced by both parties and where all have a right to be heard, In re Securities and Exchange Commission (1936), C.C.A.N.Y. 84 F.2d. 316, 318. Both parties must be able to adduce proof and argue inferences from evidence (1966), D.B. Clayton and Associates v. McNaughton (1966), 182 So.2d 890, 891, 892, and this must be done in person or by counsel, Fiorella v. State (1960), 121 So.2d 875, 878; 40 Ala.App. 587. In a hearing, the officer who makes determinations must consider and appraise the evidence presented, Joyce v. Bruckman (1939), 15 N.Y.S.2d 679, 681; 257 App.Div. 795.
e) An “opportunity to be heard” or hearing contemplates a listening to the facts and evidence for the sake of adjudication, Amerada Petroleum Corp. v. Hester (1940), 109 P.2d 820, 821; 188 Okl. 394. A hearing embodies the right to be heard on the controverted facts and on the law, Carpenters’ District Council, Detroit, Wayne, and Oakland Counties and Vicinity, of the United Brotherhood of Carpenters and Joiners of America, AFL-CIO v. Cicci (1958), C.A.Mich, 261 F.2d 5, 8. Furthermore, there is no hearing when the affected party does not know what evidence is offered and considered, and has no opportunity to test, explain, or refute it, and any subsequent finding without evidence is “arbitrary and baseless” (1948), Hyman v. Muller, 62 A.2d 221, 223; 1 N.J. 124 and, similarly, Moran v. School Committee of Littleton (1945), 59 N.E.2d 279, 281; 317 Mass. 591. The IRS is viciously denying Calhoun his right to a genuine hearing.
11. Hence, these legal proceedings revolve around Calhoun’s proposed remedy of forcing the IRS to grant Calhoun a face-to-face CDP hearing. Calhoun was denied this hearing, even though he properly requested collection alternatives within the thirty (30) day period specified by Congress.
a) In the U.S. District Court case, the Department of Justice argued that the Treasury Department can modify what Congress has said, and now the issue is before this Appeals Court to decide what the law means. Congress has not placed preconditions for exercising one’s right to a CDPH. The IRS has unilaterally held that Calhoun is out of compliance but Congress has not said so.
b) The IRS is always trying to put itself above the law, and this case provides an example of their abuse. Calhoun should not have to jump through the IRS’s hoops. Their barriers are unlawful and self-serving, going beyond what Congress has enacted.
c) Furthermore, what would the IRS have Calhoun to do? Does it really want the inefficiencies of Calhoun filing form 1040 “zero” tax returns for years in which he had no tax liability from 1993 to 2003, especially given the fact that Calhoun was either a full time graduate student (with no significant earnings) or lived in South America for eight (8) of those years! If anything, Calhoun would have been due the Earned Income Credit and other welfare state benefits given that he had between four and six children plus a dependent wife during that period. But everyone knows that the IRS is not happy with so-called “zero” returns so why would they want them from Calhoun? The hypothetical exercise noted here is simply an analytical heuristic used to make a point. Calhoun contends, of course, that he has had no tax liability to report on a Form 1040.
d) The IRS has attempted to deny Calhoun his right to a face-to-face CDPH by stating that Calhoun used, in IRS’s erroneous judgment, “frivolous” arguments about tax liability well over ten years ago. Yet the IRS did not so respond to Calhoun’s queries at that time. And what would such issues have to do with Calhoun exercising his right to have a face-to-face CDPH twelve years later? Calhoun asks this Appeals Court for relief from the IRS apparently thinking that there is no time limit on how far it can pursue political matters against Calhoun.
e) How can it be possible for a taxpayer to have witnesses present at his CDP hearing by means of a correspondence hearing? In order for witnesses to be present, there must be a face-to-face hearing. The elected representatives of the people intended a face-to-face hearing in writing the CDPH legislation because they did not exclude the presence of witnesses. Likewise, the courts have permitted tape recording of such hearings which require a face-to-face meeting.
In Keene v. Commissioner, 121 T.C. 8, 14, 19 (U.S. Tax Ct., July 8, 2003), the U.S. Tax Court ruled that a taxpayer’s right to a tape recorded hearing cannot be denied: taxpayers are entitled, pursuant to IRC 7521(a)(1), to audio record IRC 6330 CDP hearings. In Keene, the taxpayer had refused to proceed with his CDPH after he was denied the opportunity to record it, and so the case was remanded to allow a recorded IRS Appeals office hearing.
Issue II(c): Appellant’s Actions and Appellee’s Failures and Peccadilloes
12. The IRS has a history of running roughshod over citizens’ procedural rights and Calhoun appeals to the judges under IRC 6330 for judicial review. In accordance with such provisions of Section 6330, Calhoun sent in a timely request for a CDP hearing as shown in Exhibits B, C, and E. Moreover, in a letter dated July 15, 2004 (attached as Exhibit F), Calhoun asked that the appeals officer provide the following information, which has yet to be answered:
a) The Delegation Orders from the Secretary delegating authority to persons who imposed the “frivolous penalty” and thus determining that Calhoun’s arguments are “frivolous.”
b) Calhoun also notified IRS that at the hearing he would challenge the “existence of the underlying liability” of the tax that generated the “frivolous penalty” as he was authorized to do by IRC Section 6330(c)(2)(B) since Calhoun did not receive any Deficiency Notice with respect to such a “tax liability”. The U.S. Tax Court has ruled in a criticizing manner that IRS procedural irregularities or erroneous statements in the IRS Notice of Determination render such notice invalid and void, along with any collection activity related to it (Montijo v. United States, 2002 U.S. Dist. LEXIS 9602; 2002-1 U.S. Tax Cas. [CCH] P50,321).
c) Calhoun also requested that the appeals officer produce documented proof that the Secretary authorized the instant collection action and that the Attorney General or his delegate “directed” that this collection action be commenced as they are required to do pursuant to IRC section 7401.
d) No provision in 26 U.S.C. 6330 provides that appeals officers can dictate conditions under which they will agree to conduct the CDP hearings required by law, or that allows them to dictate to taxpayers the issues they will consider at the hearings prior to the CDP hearings being held.
Issue III: IRS Sent the Notice of Deficiency to a Known Bad Address
13. In his letters of December 11, 2003, December 22, 2003, and May 26, 2004 (see Exhibits E, C, and B), Calhoun informed the appeals officer that he never received a valid Deficiency Notice. Moreover, since he never received a valid deficiency notice, Calhoun would be “challenging the existence of the underlying tax liability” as Calhoun is authorized to do in IRC section 6330(c)(2)(B). Calhoun further informed the appeals officer that he never received the statutory “Notice and Demand” for payment in connection with the alleged taxes due, as required by the statute.
a) The IRS willfully used a known bad address in order to make sure that Calhoun had no opportunity to contest the Notice of Deficiency’s false claims about his taxable income. Calhoun moved several times during 1993 and 1994, having addresses in several cities in Oregon (Grants Pass, Tangent and Alsea), as well as addresses near Centreville, Virginia and Harper’s Ferry, West Virginia. Calhoun was an impoverished graduate student during that time and his various familial, educational, and financial obligations created a need for his relocation on several occasions.
b) The IRS admits that it mailed a Notice of Deficiency to Calhoun’s known old business (not home) address in Rogue River, Oregon on March 31, 1994 (government exhibit 11 from the U.S. District Court case)—even though Calhoun had never lived at that address and had not used that address for well over a year! The IRS knew that Calhoun had moved since, as government exhibit 10 shows, around September 3, 1993 the IRS had a letter returned to them as undeliverable. Yet the IRS still sent the Notice of Deficiency letter seven months later to Calhoun’s previous office which would have been known to be bad address to any reasonable person.
In Gille v. United States (33 F.3d 46,47) the Tenth Circuit Court of Appeals held “case law has interpreted the term ‘last known address’ to mean that address to which the IRS reasonably believes the taxpayer wishes the notices sent”. Clearly, Calhoun did not “wish” that such an important Notice be sent to his previous address. And the Tenth Circuit has also held that “the taxpayer would be entitled to an injunction if the court were to find that the IRS did not send a Notice of Deficiency to the taxpayer’s ‘last known address’”, Cyclone Drilling, Inc. v. Kelley, 769 F.2d 662, 663 (1985).
Calhoun was a graduate student living in Virginia in March 1994. The IRS had Calhoun’s correct address in Virginia too since the Calhoun’s university’s administration at that time informed him that the IRS had tried to levy Calhoun’s meager graduate student stipend. Notwithstanding this fact, Calhoun had never seen this Notice of Deficiency before January 2005, and then only in the government’s exhibit for their proceeding in U.S. District Court.
c) Modern Americans move frequently—especially those doing graduate studies. The IRS knew that they had not sent correspondence to Calhoun’s known good address since the Post Office returned the Notices to them. IRS exhibits in the District Court case demonstrated that the IRS knew about many of Calhoun’s address changes. Yet they did not make a good faith effort to ensure that Calhoun received the IRS’s Notices.
d) IRC 6330 outlaws bad or incorrect IRS collection procedures. The IRS sent a Notice of Deficiency to a known bad address and thus did not fulfill its procedural obligations. Congress passed IRC 6330 to stop such IRS abuses. Moreover, by saying that they have proof of sending a Notice of Demand letter, but have conspicuously left out the proof for the Notice of Deficiency letter, the Department of Justice has made an implicit admission by omission. The missing proof of the latter was left out and provides an indirect admission from silence.
Similarly, the IRS’s Office of Chief Counsel’s Notice of May 29, 2003 (CC-2003-016), updating the Collections Due Process Handbook, provides: “Unless respondent can show by direct evidence that the taxpayer actually received the deficiency notice or refused its delivery…he will have to rely on the presumptions of official regularity and delivery to satisfy the requirements of section 6330(c)(2)(B)…respondent must show that the statutory notice of deficiency has been sent by certified mail to taxpayer’s last known address…Such proof should be accomplished by presenting a copy of the statutory notice and a certified copy of USPS Form 3877” (page 17). The IRS has no such proof. The abuse takes place once the IRS takes it upon themselves to send the notice to the “last known” address” even though they have good reason to believe that the victim no longer resides there. In Calhoun’s case, the IRS admits to having knocked on the door at the “last known address” and finding someone other than Calhoun living there. How then can the IRS justify sending the statutory Notice of Deficiency to that address? Having done so was pure moxie and abuse.
It is notable on page 19 of the same document, IRS Chief Counsel says: “We do not agree with, and will not follow, the decision in Kintzler v. United States, 2001-2 USTC ¶ 50,696 (D. Nev.)”. Thus, Appellee’s own words condemn the IRS. The IRS only obeys the law when it chooses to. At other times it behaves as if it were above the law. And so it has abused Calhoun.
e) The IRS appeals officers in Columbia, SC stated that Calhoun “failed to dispute” the assessments against him. But how could Calhoun dispute them? He was never advised that the (errant) assessments were made since the IRS willfully mailed the Notice of Deficiency to a known bad address. In government exhibit 6, she admits that the IRS knew that the “Notice of Deficiencies were returned to the IRS because Taxpayer had moved from his business”, but the IRS made no effort to verify that Calhoun’s address was correct prior to sending said Notice, and in fact knew that he had moved since he had been corresponding with them from a different address in Tangent, Oregon for over a year!
f) The U.S. Attorney’s interpretation of the law in IRC 6303 (in her Motion to Dismiss of January 18, 2004 in U.S. District Court for South Carolina) invited further IRS abuse. The pertinent part of that section states: “Such notice shall be left at the dwelling or usual place of business of such person, or shall be sent by mail to such person’s last known address.” Congress did not intend that this code section provide the IRS a means of sending important correspondence to a known bad address and then, when impaling its victim, to claim immunity or innocence under the provision. Since the IRS has been negligent in its dealings with Calhoun, and is intentionally malicious in its intent to punish Calhoun with the tax law, Calhoun requests that this Appeals Court not stand for the IRS’s chicanery or attempts to candy-coat its bad behavior, despite attempts by others (including the U.S. Attorney in the U.S. District Court case) to finagle the courts with eloquent rationalizations.
g) In the U.S. District Court case, the Magistrate Judge claimed “all procedural requirements were met” by the IRS. But this statement is false. Calhoun never received the Notice of Deficiency allegedly sent to him on March 31, 1994. As the evidence shows (backed up by government records), this Notice of Deficiency was purposely sent to three bad addresses. The IRS knew Calhoun had moved but issued a Notice of Deficiency and sent it to a known bad address in order to proceed against Calhoun under color of law.
h) The IRS states that it has proof of sending the Notice of Demand letter more recently but still has not provided proof of sending the required Notice of Deficiency twelve years ago. Calhoun did not sign any postal tracer that indicated his receipt of such Notice of Deficiency. For all anyone knows, the IRS had their Notice of Deficiency returned to them and then they just filed it as if it were received (even though it was not) anyway—just to be spiteful. It was known in Oregon that IRS Agent Pat Brown has a sufficiently malicious character to do so.
i) IRC 6330 outlaws bad or incorrect IRS collection procedures. The IRS sent a Notice of Deficiency to a known bad address and thus did not fulfill its procedural obligations. Congress passed IRC 6330 to stop such IRS abuses. Moreover, by saying that they have proof of sending a Notice of Demand letter, but have conspicuously left out the proof for the Notice of Deficiency letter, the Department of Justice has made an implicit admission by omission.
The 1998 Taxpayers “Bill of Rights II” (IRS Restructuring and Reform Act) was enacted as legislation of Congress to prevent administrative agencies like the IRS from abusing their authority. Calhoun’s tax liability is clearly in doubt yet no face-to-face hearing was granted to him. Calhoun never received any 90 day Notice of Deficiency letter from the IRS in 1992, 1993 or 1994. If the IRS did send one, they sent it to a known bad address (Calhoun had moved on several occasions during that period). The Bill of Rights II legislation was designed to prevent the IRS from doing such things. They knew Calhoun’s correct address by virtue of his multitudinous correspondence with the IRS during that period. Calhoun seeks relief from this Appeals Court by forcing the IRS to prove Calhoun’s tax liability, by forcing the IRS to prove that procedure for determining such alleged liability was followed correctly, and to give Calhoun his rightful face-to-face CDPH.
Congress enacted legislation in the Taxpayers Bill of Rights acts that require the IRS to send correspondence to a correct address. In violation of this rule, the IRS sent notices to a known bad address, as Calhoun explained at length in his Reply and Rebuttal to Motions of February 9, 2005 cited in the U.S. District Court. It is not simply a negative aspect of the IRS sending correspondence to Calhoun’s “last known address” that the law requires; the IRS also has a positive duty to send correspondence and notices to an identified good address (or to not send correspondence and notices to a known bad address), plus furnish proof at the CDPH.
Even if the IRS complied with the negative aspect of its duty, they did not comply with the positive aspect. While the IRS and some Congressmen like famed cheat Dan Rostenkowski opposed this legislation, it did pass into law—and the IRS (to its chagrin) must comply with it. Calhoun requests that the court admonish the IRS for treating the law with such indifference.
k) Calhoun’s tax liability is clearly in doubt and no face-to-face hearing was granted to him. The IRS knew Calhoun’s correct address by virtue of his multitudinous correspondence with them in 1992-1994. Calhoun seeks relief from this Appeals Court by forcing the IRS to prove Calhoun’s tax liability, by forcing the IRS to prove that procedure for determining such alleged liability was followed correctly, and to give Calhoun his rightful face-to-face CDPH.
l) In the final analysis, Calhoun disagrees with (and objected to) the recommendations of the Magistrate Judge in the U.S. District Court. He should not have been so imaginative in his analysis or trusting of an agency like the IRS that routinely lies. The IRS has to prove that Calhoun received the Notice of Deficiency in 1994 but cannot do so. They have no postal tracer bearing Calhoun’s signature to confirm receipt and the IRS never intended to do proper service anyway since they sent it to a known bad address. That reason alone should have given the Magistrate Judge in the District Court reason to doubt the IRS and Department of Justice’s position.
It is notable that the IRS has gone out of its way to prove that Calhoun received a copy of the Notice of Deficiency nine or ten years later, but has not done so for 1994—the only year which should be important to the Magistrate Judge in the District Court or to this Appeals Court. Clearly, the Magistrate Judge in the District Court received bad information from the agency, and Calhoun hopes that this Appeals Court will not be similarly deceived by the deceitful IRS.
Issue IV(a): Appellant Requests to Appellee Ignored or Refused
14. Calhoun had asked the appeals officer for the following information in his letter dated July 15, 2004 (Exhibit F):
a) The “verification from the Secretary that the requirement of any applicable law or administrative procedure have been met” as required by 6330(c)(1).
b) Since Calhoun believed that “no valid assessment” for the income taxes allegedly due (to support the threatened levy action) was ever made, Calhoun therefore wanted to see “a copy of the ‘Summary Record of Assessment’ (Form 23C) together with the ‘pertinent parts of the assessment etc. etc. etc….’ as provided for in Treas. Reg. 301.6203-1)” and a copy of the tax return from which the alleged assessment was made. Further inquiry in 2004 into IRS records under the Freedom of Information Act to the Atlanta disclosure office revealed that the IRS has no such tax returns.
c) Since all valid assessments must emanate from a filed return, proof that such a “filed return” exists is another “relevant” issue that Calhoun had a right to raise. Therefore, Calhoun requested that the appeals officer produce or identify the income tax return from which the alleged assessment for the income taxes at issue was made.
d) Calhoun asked for some documented proof that the statutory “Notice and Demand” for the payment of the income taxes allegedly due (as required by IRC sections 6303, 6321 and 6331) was received by him.
15. Calhoun has been exasperated by the refusal of IRS agents to answer written questions and concerns which they are legally obligated to answer. As a federal court ruled: “Silence can only be equated with fraud where there is a legal or moral duty to speak or where an inquiry left unanswered would be intentionally misleading...We cannot condone this shocking conduct by the IRS. Our revenue system is based upon the good faith of the taxpayers and the taxpayers should be able to expect the same from government in its enforcement and collection activities....This sort of deception will not be tolerated and if this is the ‘routine’ it should be corrected immediately” (U. S. v. Tweel, 550 F.2d 297, 299 (1977), citing U.S. v. Prudden, 424 F.2d 1021, 1032).
Issue IV(b): Miscellaneous Matters Requiring a Judicial Remedy
16. The Department of Justice has lied. Calhoun has never been a member of (or in any way involved with) “The Pilot Connection Society”, nor has he ever heard of such a group other than in IRS pleadings or letters. Government exhibit 16 does not show any connection between Calhoun and this society. Government exhibit 19 merely asserts this connection and that examination of Calhoun’s tax liability was therefore put into something known as the “Phoenix project”—whatever that was—but does not provide any proof of Calhoun’s alleged “connection”. Department of Justice is clearly fabricating spurious arguments in its case against Calhoun, and Calhoun requests that this Appeals Court force the IRS to disclose the nature of the “Phoenix project” and to stop these specious allegations against Calhoun.
a) In government exhibit 19 (Form 4318, page 2) IRS Agent Pat Brown calls Calhoun “an illegal tax protester.” His assertion is false; a mere fabrication. Calhoun has never been involved in any illegal or wrongful activity or association of any kind of “tax protest” scheme and denies being or having any nexus with an illegal or wrongful “tax protester” (as the term is used in IRS parlance and polemics, i.e., in the IRS’s view, one who breaks the law in some putative respect—the clear and only sense in which IRS uses such terms at all times—necessarily implying illegality with or without the adjective “illegal” on the IRS webpage).
b) On the contrary, Calhoun was endeavoring to comply with the law, and had undertaken regular correspondence with the IRS in order to make sure that his understanding of the law was correct. On the IRS Forms he filed, as well as many other confirmatory writings, Calhoun asked the IRS to respond within 30 days if they did not agree with his conclusions. Calhoun almost always sent 2nd and 3rd notices of the same correspondence. Yet the IRS did not respond (at least not with substantive answers) within 30, 60, or even 90 days. When Calhoun left Oregon for graduate school in Virginia, he had every reason to believe that the IRS agreed with his position after having sent such confirmatory writings.
c) Government exhibit 19 shows that IRS Agent Pat Brown falsely and maliciously asserted that Calhoun “has refused to cooperate” and “has actively attempted to thwart attempts to determine his substantially correct tax liability”. However, Calhoun wrote to the IRS on many occasions and will produce evidence of this correspondence and lack of substantial replies from the IRS during the trial phase. The IRS is lying. How can such refusals and thwarting be accurately said of one who is regularly corresponding with the IRS?
d) In government exhibit 6, the IRS appeals officer flagrantly lies and falsely claims that Calhoun “conducts seminars around the country advancing arguments against taxes that Federal Courts have determined to be frivolous” and states that Calhoun “is a college professor who conducts seminars that advance frivolous argument [sic] against taxation.” These allegations are false. Neither she nor the IRS has any evidence to support these allegations and Calhoun avers that he has not conducted any such seminars. Calhoun was not a college professor when she made this claim, even though he does have recognized expertise in conventional public policy and free market economics topics. Appeals officer Mary Green is ignorant—and a malicious liar.
e) Calhoun asserts that such false accusations are typical of IRS bullying and demands that the IRS produce evidence of any membership in (or action with) the Pilot Connection Society or any tax protester activities. If the IRS is in fact engaged in a long-term program to chill pure First Amendment activity, this fact further belies its stated purposes of fair, honest tax collection, period—to the point that a formal investigation would be called for.
f) Absent evidence to prove Calhoun’s involvement in the Pilot Connection Society or a tax protest scheme or group, Calhoun hereby requests that this Appeals Court compel the IRS to remove all such assertion(s) and charge(s) from any and all of Calhoun’s record(s) and file(s) on file with any and all agencies and instrumentalities, including but not limited to the Internal Revenue Service.
g) In government exhibit 15, IRS Appeals Agents Cathy Lacienski and/or Jeanette Amaker state that it “clearly appears” that Calhoun is “tax challenged and won’t get a face or face [sic] anyway.” Calhoun considers this language to be offensive and requests that this Appeals Court require the IRS to issue a written apology for publishing such a judgment. Furthermore, Calhoun finds in this language more evidence of IRS abuse as they have evinced their intention to railroad Calhoun from the start, without allowing him the face-to-face hearing provided for him by Congress.
h) Calhoun also respectfully requests that the Court reprimand and admonish the IRS for using allegations known to be spurious or baseless. Calhoun further asks the Court to note that if such allegations are wrong then the court should likewise doubt the IRS’s other allegations against Calhoun.
17. What Calhoun knows about the law he learned through self-study, graduate studies, and through attending lectures on constitutional law. Calhoun has an impressive set of academic credentials and is able to do his own research. Calhoun does not follow a packaged plan for dealing with the IRS and gaining his understanding of the law. This fact should be apparent by reading this brief. Furthermore, Calhoun does not assist (and has never assisted) others in filing tax return pertinent documents with the IRS.
18. IRS has refused to hear or produce evidence that Calhoun has a tax liability and when confronted has made every effort to evade the process of law. For instance, Mary Green, IRS Appeals Officer in Columbia, SC, cannot possibly know the facts or testify to what happened in Oregon 12 to 14 years earlier. If this is how she operates, she must (as if to confirm the jaundiced public perception of things) be little more than a faceless bureaucrat processing paperwork in a rote manner without knowing any facts.
19. Likewise, in Calhoun’s recent case before the U.S. District Court, the IRS endeavored to avoid discovery by refusing to completely answer Calhoun’s interrogatories and requests for the production of documents. In their responses of January 31, 2005, they have used colorful language such as “vague”, “overly burdensome”, “unclear”, and “argumentative” to describe Calhoun’s clearly straightforward requests. The IRS should be reprimanded for this attempt to derail the process of law. The IRS has something to hide in this case and the IRS knows it.
20. The IRS has evidently extended the liens filed against Calhoun by two years and nine months based on a determination under IRC 6503(c). The pertinent part of that code section says: “Taxpayer outside United States[:] The running of the period of limitations on collection after assessment prescribed in section 6502 shall be suspended for the period during which the taxpayer is outside the United States if such period of absence is for a continuous period of at least 6 months.”
The IRS’s Office of Chief Counsel’s Notice of May 29, 2003 (CC-2003-016), updating the Collections Due Process Handbook, notes: “if the collection statute of assessment has expired, the lien must be released pursuant to [IRC] section 6325(a)(1) or the proposed levy abandoned” (page 39). The liens filed against Calhoun expired by statute on May 9, 2004, October 6, 2004, and October 12, 2004. The IRS has wrongly extended three of the liens for two years and nine months claiming that Calhoun resided outside of the country for that entire length of time while the assessment was still valid. However, this claim is false.
Calhoun was not entirely living out of the country for purposes of the code section in question, and was only outside of the United States for 265 days in the first period, 118 days the second period, and 400 days the last period. By this calculus, the most that the period could be extended is one year and nine (or ten) months, rather than the two years and nine months that the IRS used. The revised expiry dates would thus be in February 9, 2006, July 5, 2006, and July 12, 2006. Calhoun requests that the Court review the basis for the IRS’s extension of its liens against Calhoun (and the period of the statute of limitations to collect).
These liens are illegal and based on incorrect information and thus should be removed entirely. In the mean time, however, Calhoun asks that this Appeals Court eliminate or significantly reduce the allowable time for the extension based on IRC 6503(c). In attempting to exhaust his administrative remedies in this matter, Calhoun has written to the IRS offices in Greensboro, NC (September 15, 2005 plus related inquiries in 2004)) and Cincinnati, Ohio (September 22, 2005), as well as the Office of the National Taxpayer Advocate (September 19, 2005). However, the IRS has neither responded nor acted to rectify the problem, leaving only the judicial remedy open to Calhoun.
21. The IRS claims that Calhoun has no right to challenge the alleged tax liability. They are mistaken and are trying to use a sly means of not dealing with the issue. They are now trying to bring up Calhoun’s alleged political arguments in order to divert the focus away from the face-to-face CDPH matter.
Calhoun denies and rejects the blundering assertion and income figures of the IRS: “Plainly, Calhoun…was required to report his annual income (in excess of $100,000) on a U.S. Income Tax Return (Form 1040).” Calhoun denies the unsubstantiated and false claim of IRS Appeals Officers Mary Green and Pat Brown et al that he “had taxable income of $89,680” in 1991 and in 1992 “had taxable income of $176,601”. These figures are pure falsehood and ridiculous. The government’s exhibits show deposit receipts from different banks without taking into account the source of the deposits, which included new mortgage loans deposited into the account, gifts, and transfers from one account to another. The IRS has no proof of its claims—only the wishful thinking and/or malicious intent of the IRS appeals officer in Columbia, SC over a decade later.
22. The IRS has argued that the IRS denied Calhoun a face-to-face CDP hearing based on their belief that Calhoun held to “frivolous” arguments twelve or thirteen years ago.
a) Even if such were the case, why would it have any bearing on whether Calhoun should have a face-to-face hearing in 2005? Since Calhoun did not meet with the IRS for a hearing in 1993 or 1994, how is it that the IRS has determined that Calhoun’s arguments are frivolous?
b) The Treasury Regulations are not the law, even if they are often treated with similar force—and even if the IRS would like them to be the law. The IRC does not say that a face-to-face hearing may be disallowed by the caprice and whim of the IRS. It is precisely the proper function of this Appeals Court to handle disputes over what the law means and the intention of Congress rather than merely accept the fancies of the Treasury Department or the IRS.
23. The IRS has attempted to belittle their dishonesty in this case by saying that their allegations about Calhoun being involved in the Pilot Connection Society are effectively irrelevant. But this sentiment is not so. The IRS has tried to paint a picture of Calhoun as a “tax-protester” and therefore not entitled to a face-to-face hearing on account of his frivolous arguments. Therefore, the alleged Pilot Connection nexus is relevant to the case and the derogatory statements in the IRS file on Calhoun should be expunged.
Calhoun pointed out other lies of the IRS in his Reply and Rebuttal to Motions of February 9, 2005 in U.S. District Court, as well as the IRS’s belligerent and bald-faced lawbreaking by calling Calhoun a “tax-protester”. Yet there has been no remorse or retraction of the lies and characterizations of Calhoun. Thus, Calhoun again requests that this Appeals Court reprimand the IRS for these wrongful actions.
24. IRS abuses continue to be widely discussed in the media. In the U.S. District Court case, the IRS’s uncooperative behavior concerning discovery exemplifies its abusive, harsh attitude. Moreover, another specific example is found in government exhibit 5, “Appeals Transmittal Memorandum and Case Memo” from IRS Appeals agent Mary Green (July 8, 2004, page 3). Green says that Calhoun “operates a website ‘Policy of Liberty’ that is prohibited by the service”.
a) Yet just how can the IRS prohibit an academic website? Does the IRS not have to respect the First Amendment rights of American citizens? Calhoun is not sure what the word “prohibited” means in Green’s assessment, but perhaps she is referring to Department of Justice injunctions under IRC 7600. If so, Calhoun has not received any injunction or correspondence regarding the Policy of Liberty website. Even if such correspondence were received, it would hardly be applicable as anyone visiting the site can plainly see.
b) Green is referring to Calhoun’s personal website http://www.policyofliberty.net which contains academic materials, viz. his books and articles, newspaper columns, as well as links to other websites and scholarly sources, famous quotations, photos, and family information. Hardly anything on this website has to do with the IRS directly. Does the IRS condemn Calhoun for being a civil libertarian? Once again, it is obvious that the IRS hates Calhoun’s free market stance and is trying to use the tax law to punish him. Calhoun seeks relief from IRS abuses from this Appeals Court.
c) The IRS failed to establish Calhoun’s underlying tax liability and has committed egregious procedural errors in violating Calhoun’s rights by failing to provide his CDPH. The U.S. Tax Court only has jurisdiction to review a CDPH if and when a taxpayer has been informed of his tax liability, Sapp v. Commissioner of Internal Revenue (2003), United States T.C. Memo 2003-207. Calhoun has not been so “informed” regarding his alleged tax liability, even though he has asked the IRS to provide this information on many occasions over the last 14 years. The IRS has to prove underlying tax liability when no form 1040 has been properly filed and there is a lack of evidence of income, Rivera v. Commissioner of Internal Revenue (2003), U.S. Tax Ct. 2003, 2003 WL 345341. Calhoun did not file a Form 1040 in 1991 and 1992. Normally, a taxpayer’s underlying tax liability can only be contested by petitioning U.S. Tax Court after receiving a Notice of Deficiency, Pahamotang v. Commissioner of Internal Revenue (2003), U.S. Tax Ct. 2003, 2003 WL 21385204. However, Calhoun never received such Notice of Deficiency, since the IRS purposely and knowingly sent it to an incorrect (old) address.
25. For the years in question related to the two adverse determinations, 1991 and 1992, Calhoun was the father of four small dependent children and a dependent wife who was a homemaker. Calhoun, who finished an M.A. degree in 1987 at the age of 24, had only a short time earlier begun his financial consulting practice (without completing the rest of his formal graduate education), and had very low net income. Calhoun had taught in community colleges for two years prior to starting his consulting practice with an entry-level salary.
26. The IRS claims that Calhoun owes over three hundred ten thousand dollars ($310,000) in taxes for the years 1991 and 1992. This figure is preposterous and a travesty. Calhoun had not had even close to that much income in his whole life up to that point, especially since he had been a full time student from 1969 to 1987, and afterwards only had entry-level employment in community colleges and financial consulting. Calhoun requests that the Court rectify this vast injustice.
27. Nevertheless, because of Dr. Calhoun’s strong position against socialism and IRS injustices, the IRS has vindictively retaliated against Calhoun by inventing a baseless, grossly fictitious tax liability for such an outrageous amount. In addition to his seminal papers at that time, Dr. Calhoun is the author of many books and papers including Building Regulation, Market Alternatives, and Allodial Policy (Avebury Press, 1997); A Primer on Modern Themes in Free Market Economics and Policy (Universal Publishers, 1999); Bible and Government: Public Policy from a Christian Perspective (Alertness Books, 2003); “Market Provision of Highways: Lessons from Costanera Norte” (Planning and Markets, vol. 2, no. 1, September 1999); “Fire Safety and Building Regulation in Eastern Santiago, Chile” (Planning and Markets, vol. 3, no. 1, September 2000); and “Abortion Policy and the Market” (Journal of Interdisciplinary Studies, vol. 15, September 2003). Dr. Calhoun is also a regular columnist in Greenville, South Carolina’s The Times Examiner (a conservative weekly newspaper), and host of radio talk shows in Greenville dealing with public policy themes.
a) Notwithstanding the IRS’s hatred of Dr. Calhoun’s views, the tax law is not intended to be used by the IRS to punish Calhoun for his strongly-held political views but rather for the IRS to collect the proper taxes. Yet the IRS has chosen to punish Dr. Calhoun as he has developed into a more outspoken advocate of free markets, a supporter of constitutionally limited government and low taxes, and a sophisticated public policy theorist. The timing of this IRS attack is revealing.
b) The IRS basically ignored Dr. Calhoun’s correspondence during the first half of the 1990s, and then curiously did not attempt to contact Calhoun whatsoever for nearly a decade (until the end of 2003), just when Dr. Calhoun’s academic work was maturing. Dr. Calhoun has now become a noted author and scholar with regard to free market economics and policy, as well as the relationship between economics and the legal system. Due to Dr. Calhoun’s expertise, he writes regular columns and has hosted radio talk shows. Even though Dr. Calhoun has responded to the recent IRS attacks, the IRS continues to run roughshod over Dr. Calhoun’s correspondence, ignoring his questions and appeals, and behaving in a malevolent manner.
Issue V: Subject Matter Jurisdiction in District Court re Underlying Tax Liability
28. In the District Court case, the U.S. Attorney argued, and the Magistrate Judge agreed, that the District Court lacked jurisdiction to hear the case that Calhoun presented, and that the case should be taken up in U.S. Tax Court. However, Calhoun believes that this understanding is mistaken. IRC 6330(d)(1) says:
(d) Proceeding after hearing (1) Judicial review of determination The person may, within 30 days of a determination under this section, appeal such determination - (A) to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter); or (B) if the Tax Court does not have jurisdiction of the underlying tax liability, to a district court of the United States. If a court determines that the appeal was to an incorrect court, a person shall have 30 days after the court determination to file such appeal with the correct court.
The U.S. District Court has jurisdiction when the underlying tax liability in and of itself is in question and when there have been procedural abuses.
Conclusion
The IRS is trying to thwart the will and intention of elected officials and the will of the people. The bureaucracy has usurped the statutory words of Congress (the expression of the will of the people) in denying Calhoun a CDPH. The IRS is willfully ignoring, denying, and thwarting the law, stonewalling and throwing up imaginary roadblocks to Dr. Calhoun’s judicial remedy. Therefore, Dr. Calhoun appeals to this Appeals Court for relief from these over-zealous bureaucrats by (a) order the reopening of a CDPH, and that the Judge would require the IRS reschedule an in-person hearing as the statute requires In IRC 6330, (b) compelling the IRS to provide proof of how they can pursue actions on old, doubtful liens that have expired under the statue of limitations and that have been unilaterally and wrongly extended (by falsely stating that Calhoun had remained outside of America for two years and nine months without returning during that period), and (c) admonishing the IRS agents for making their frivolous claims against Calhoun, expunging their records of such claims.
Furthermore, since Calhoun’s rights were violated, the Notice of Determination should be overturned and new CDP hearing should be scheduled. Consequently, Calhoun requests that this Honorable Court: (d) declare invalid the IRS determinations of July 8, 2004, since no valid hearing was ever held, (e) order the government to reimburse Calhoun for all of his costs in bringing this action and the actions in U.S. District Court and U.S. Tax Court, (f) reprimand IRS agents for their unwillingness to allow Calhoun to obtain the documents necessary to prepare for his CDP hearing, (g) compel the IRS to remove all assertions and charges that Calhoun has been involved with the Pilot Connection or the Phoenix Project from any and all of Calhoun’s record(s) and file(s) on file with any and all agencies and instrumentalities, including but not limited to the Internal Revenue Service, (h) require the IRS to issue a written apology for publishing its offensive language and judgment that Dr. Calhoun is “tax challenged” and the like, (i) reprimand and admonish the IRS for bringing up such spurious or baseless allegations in its court exhibits and previous motions in U.S. District Court, (j) eliminate or significantly reduce (by at least one year) the allowable time for the extension of liens filed against Calhoun’s based fraudulently on IRC 6503(c) related to an extended foreign stay without returning to the America, and (k) relieve Calhoun from the IRS’s tyranny and attempts to punish him with the law, thrust upon him on account of his interest in promoting the study of free market economics and law with respect to Christian principles, as well as his academic pursuits, weekly newspaper column, books, and radio broadcast—many of which occasionally decry IRS abuses.
Calhoun is a law-abiding citizen who has always endeavored to uphold the law and resents the IRS’s claims and insinuations that he is in any way a lawbreaker. The IRS Restructuring and Reform Act of 1998 (RRA 98) § 3707 and internal IRS guidelines prohibit the designation of taxpayers as “Illegal Tax Protesters” or any similar designations. Calhoun thus requests, finally, that (l) this Appeals Court reprimand the IRS and Department of Justice for their callous disregard of the law. The prohibition has been in effect seven years, and as of September 6, 2002—just three years ago—the IRS only then began to make mediocre progress in obeying it.
Certificate of Service: I do hereby certify that on this date I delivered properly a copy of this pleading to opposing counsel.
Executed on October 18, 2005
Respectfully submitted,
___________________
John C. Calhoun, Ph.D., pro se
P.O. Box 25
Greenville, SC 29616