The Court is of the opinion that plaintiffs' contention
concerning the constitutionality of 26 U.S.C. § 6672 cannot be of
sufficient substance if the allegations of the amended complaint
are sufficient per se to warrant relief from defendant's actions
taken under the purported authority of that section. Otherwise
stated, it is this Court's opinion that if plaintiffs have a
right to relief from alleged unauthorized administrative
activity, it is unnecessary to determine the constitutional
question and no three-judge court need be convened.
The parties have filed extensive memoranda in support of their
respective positions on the motion to dismiss. They have
stipulated that the Court shall decide the motion on the briefs
and have waived oral argument. The Court will not, therefore,
examine questions not raised or argued by the parties, and will
consider that such points must be resolved as the parties have
assumed them to be. Further, the Court should note that counsel
for the defendant has represented in open court that the status
quo would be maintained and that no further action would be taken
to enforce collection of the alleged assessments by the defendant
until further order of this Court. Plaintiffs, too, through
plaintiff Bessie A. Mrizek, in open court have represented that
plaintiffs would maintain the status quo and take no action to
dispose of any of their assets until further order of this Court.
Defendant does not contend that plaintiffs have no standing to
complain of defendant's seizure of the assets of the R.J. Mrizek
Co., Inc., and the Court, therefore, concludes for purposes of
this case that they have.
It requires no profound comparison of the allegations of the
amended complaint with the purported enabling statutes to
demonstrate that plaintiffs sufficiently allege unauthorized
action by the defendant.
(a) Section 6331(a) requires a notice and demand before the
Secretary of the Treasury or his delegate may collect a tax, from
any person liable to pay it, by way of levy upon property and
rights thereto. Plaintiffs aver that there has been no such
notice and demand. Assuming this averment to be true, the Court
cannot approve a plain disregard of congressional mandate. Still
assuming the averment to be true, the Court can conceive of no
theory which would warrant the defendant's failure to comply with
this statutory requirement. A notice of seizure, prepared five
days after the levy as alleged by plaintiffs, does not satisfy
(b) A levy is authorized only when a taxpayer "neglects or
refuses" (after 10-day notice and demand), or upon "failure or
refusal" (after jeopardy finding, notice and demand), to pay any
tax for which he is liable. The amended complaint sufficiently
alleges that the R.J. Mrizek Co., Inc. has never neglected,
failed or refused to pay any tax liability, both because it was
making payments pursuant to an agreement with defendant until
defendant by his own actions cut off the means of payment, and
because no neglect, failure or refusal to pay within the meaning
of Section 6331 can occur prior to notice and demand.
(c) Plaintiffs' allegation that defendant's levy on the
property of the R.J. Mrizek Co., Inc. has deprived them of their
property, is unchallenged in defendant's motion to dismiss and
supporting briefs. The Court holds that if plaintiffs are being
thus deprived of their property by administrative action
purporting to conform, but failing to conform, to the
requirements of Section 6331, the plaintiffs have sufficiently
alleged deprivation of property without due process of law in
violation of the Fifth Amendment.
Plaintiffs do not allege that they are not required by law "to
account for, and pay over any tax imposed by this title" and the
Court assumes that they are so required.
(a) Section 6671(a) reads:
"(a) Penalty assessed as tax. — The penalties and
liabilities provided by this subchapter shall be paid
upon notice and demand by the Secretary or his
delegate, and shall be assessed and collected in the
same manner as taxes. Except as otherwise provided,
any reference in this title to `tax' imposed by this
title shall be deemed also to refer to the penalties
and liabilities provided by this subchapter."
The amended complaint avers that the "notice and demand"
specified in Section 6671(a) has never been given or made upon
them. A notice of proposed assessment of the penalty prescribed
by Section 6672 does not dispense with the necessity for the
notice and demand prescribed by Section 6671(a) and referred to
as forthcoming in the notice of proposed assessment. Assuming the
averment to be true, the Court is obliged to conclude that this
requirement of the statute has been disregarded by the defendant.
(b) According to the plaintiffs, the agreement described in the
amended complaint has been breached, if breached at all, by the
defendant's alleged actions. But even if the agreement and the
plaintiffs' actions pursuant to it are as alleged, this Court
could not conclude, as plaintiffs urge, that plaintiffs did not
"willfully [fail] to collect such tax, or truthfully account for
and pay over such tax, or willfully [attempt] in any manner to
evade or defeat any such tax or the payment thereof." Their good
faith in the performance of the agreement does not wipe the slate
clean of their actions prior to the agreement. Plaintiffs have
not alleged that those prior actions were not willful, and
therefore the Court will not sustain their allegation that
defendant could not impose the sanction of Section 6672 penalties
for lack of willfulness.
(c) According to the amended complaint, the tax which
plaintiffs were required to pay over to defendant amounts to
$32,474.48, while the assessment against each is $52,206.68.
Although the pleading does not explain an apparent discrepancy
between (i) plaintiffs' allegation of the amount of tax due and
(ii) the statement in the exhibits (the itemization page of each
of Exhibits B and C to the complaint) that "the following
penalties, equal to the amount of taxes required to be withheld
and not paid over to the District Director of Internal Revenue"
"Total $52,206.68," the Court will disregard the discrepancy and
read the complaint in the light most favorable to plaintiffs.
Thus, if, as alleged, the assessed penalty is $19,732.20 more
than authorized by Section 6672, the Court would have to hold the
(d) Section 6321 reads as follows:
"If any person liable to pay any tax neglects or
refuses to pay the same after demand, the amount
(including any interest, additional amount, addition
to tax, or assessable penalty, together with any
costs that may accrue in addition thereto) shall be a
lien in favor of the United States upon all property
and rights to property, whether real or personal,
belonging to such person."
Plaintiffs, having alleged that no demand was ever made upon
them for the penalty which has apparently been assessed in
accordance with Regulation § 301.6203-1
in Section 6321 has not attached to their property.
(e) Plaintiffs claim that the purported assessments are
speculative because they are assessed cumulatively against them
severally rather than in the alternative. Assuming that the
amount of each assessment is correct, the Court does not agree
that Section 6672 permits but one, and no more than one, penalty
assessment equal to the amount of the tax. The section permits
assessment of the penalty against "any person" who does the
illegal act. The Court does not now decide whether, in reliance
on Section 6672, the Government can collect more than 100% of a
tax. Plaintiffs' said claim is, therefore, insufficient in law.
Plaintiffs complain that the "Notice of deficiency" required by
Section 6212 was not sent them. Paragraph (a) of that Section
"(a) In general. — If the Secretary or his delegate
determines that there is a deficiency in respect of
any tax imposed by subtitles A or B, he is authorized
to send notice of such deficiency to the taxpayer by
Withholding taxes are imposed by Subtitle C of the Internal
Revenue Code. Since no notice of deficiency was required to be
sent the plaintiffs by Section 6212(a), plaintiffs cannot
complain of its omission.