David D. Smith v. Commissioner

                UNITED STATES TAX COURT



             DAVID D. SMITH, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket Nos. 11109-04L, 11110-04L.    Filed February 8, 2005.



     On Aug. 26, 2003, R issued to P separate Final
Notices of Intent to Levy and Notice of Your Right to a
Hearing with regard to his unpaid Federal income taxes
for the taxable years 1985 to 1995 and for the taxable
years 1996 to 1999. P submitted to respondent timely
requests for a hearing under sec. 6330, I.R.C.

     On Mar. 3, 2004, P filed a bankruptcy petition
under ch. 7 of the Bankruptcy Code.

     On May 25, 2004, while P’s bankruptcy case
remained open, R issued to P separate Notices of
Determination Concerning Collection Actions for the
taxable years 1985 to 1995 and the taxable years 1996
to 1999. On June 28, 2004, P filed with the Court
petitions for lien or levy action challenging R’s
notices. R filed motions to dismiss for lack of
jurisdiction on the ground the petitions were filed in
                               - 2 -

     violation of the automatic stay imposed under 

(a)(8) (2000). P filed objections to R’s
     motions.

          Held: The notices of determination underlying the
     petitions were issued to petitioner in violation of the
     automatic stay imposed under 

(a)(1)
     (2000), and, therefore, the Court lacks jurisdiction.
     Held, further, R’s motions to dismiss for lack of
     jurisdiction shall be denied, and these cases shall be
     dismissed for lack of jurisdiction on the Court’s own
     motions.



     Robert Alan Jones, for petitioner.

     Alan J. Tomsic, for respondent.



                              OPINION


     GERBER, Chief Judge:   These collection review cases are

before the Court on respondent’s motions to dismiss for lack of

jurisdiction.   Respondent contends that the Court lacks

jurisdiction on the ground the petitions for lien or levy action

were filed in violation of the automatic stay imposed under 

(a)(8) (2000) (the automatic stay).1     As

discussed in detail below, we conclude that we lack jurisdiction

in these cases on the alternative ground that the notices of

determination underlying the petitions were issued to petitioner




     1
      Unless otherwise indicated, section references are to
sections of the Internal Revenue Code, as amended, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

in violation of the automatic stay imposed under 

(a)(1) (2000).

                              Background2

     On August 26, 2003, respondent issued to petitioner separate

Final Notices of Intent to Levy and Notice of Your Right to a

Hearing with regard to his unpaid Federal income taxes for the

taxable years 1985 to 1995 and for the taxable years 1996 to

1999.    Petitioner submitted to respondent timely requests for a

hearing under section 6330.

     On March 3, 2004, petitioner filed a bankruptcy petition

under chapter 7 of the Bankruptcy Code with the U.S. Bankruptcy

Court for the District of Nevada.

     By letter dated April 12, 2004, Christopher Gellner (Mr.

Gellner), petitioner’s bankruptcy attorney, informed Appeals

Officer Anthony Aguiar that petitioner had filed the above-

referenced bankruptcy petition and that petitioner was not in

need of, and desired to withdraw, his request for a section 6330

hearing.    On April 14, 2004, Appeals Officer Aguiar sent to Mr.

Gellner a Form 12256 (Withdrawal of Request for Collection Due

Process Hearing).

     However, by letter dated May 5, 2004, Robert Alan Jones (Mr.

Jones), petitioner’s tax attorney, informed Appeals Officer



     2
      The record establishes and/or the parties do not dispute
the following background facts.
                                 - 4 -

Aguiar (1) That Mr. Gellner did not have the authority to

represent petitioner with regard to tax matters; (2) that Mr.

Jones was appointed as petitioner’s attorney-in-fact for the

years in issue; and (3) that, although petitioner did not want to

withdraw his rights to a section 6330 hearing, the bankruptcy

automatic stay barred further administrative proceedings at that

time.

     On May 25, 2004, respondent’s Office of Appeals issued to

petitioner separate Notices of Determination Concerning

Collection Actions for the taxable years 1985 to 1995 and for the

taxable years 1996 to 1999.     The notices stated that respondent

determined that it was appropriate to proceed with the proposed

levies.     On June 28, 2004, petitioner filed with the Court

petitions for lien or levy action challenging respondent’s

notices.3    At the time the petitions were filed, petitioner

resided in Las Vegas, Nevada.

     On August 19, 2004, respondent filed motions to dismiss for

lack of jurisdiction on the ground the petitions were filed in

violation of the automatic stay.     On September 16, 2004,

petitioner filed objections to respondent’s motions.     Petitioner

maintains that the Court should (1) conclude that petitioner




     3
      The petitions arrived at the Court in an envelope bearing a
timely U.S. Postal Service postmark dated June 24, 2004. See
sec. 7502(a).
                                 - 5 -

properly invoked the Court’s jurisdiction, and (2) stay any

further proceedings pending the final disposition of petitioner’s

bankruptcy case.     Petitioner did not aver that the bankruptcy

court had granted relief from the automatic stay, or that the

automatic stay otherwise was no longer in effect, on the date the

petitions were filed.

                              Discussion

     It is well settled that the Court’s jurisdiction in a

collection review case under section 6330 depends upon the

issuance of a valid notice of determination and the filing of a

timely petition for review.     See Sarrell v. Commissioner, 

 (2001); Moorhous v. Commissioner, 

(2001); see also Rule 330(b).

     In a recent case, Prevo v. Commissioner, 

(2004), we granted the Commissioner’s motion to dismiss for lack

of jurisdiction in a collection review case on the ground the

petition for lien or levy action was filed with the Court in

violation of the automatic stay imposed under 

(a)(8) (2000).4    In Prevo v. Commissioner, supra, the sequence

of relevant events unfolded as follows:    (1) The Commissioner

issued to the taxpayer a notice of determination concerning




     4
      

(a)(8) (2000) expressly bars “the
commencement or continuation of a proceeding before the United
States Tax Court concerning the debtor.”
                                - 6 -

collection actions; (2) the taxpayer filed a bankruptcy petition;

and (3) the taxpayer filed with the Court a petition for lien or

levy action.    In granting the Commissioner’s motion to dismiss

for lack of jurisdiction, we noted that the taxpayer had fallen

victim to a trap for the unwary in that the automatic stay that

arose by operation of law upon the filing of her bankruptcy

petition barred her from subsequently filing a petition with the

Court.    Moreover, in the absence of a tolling provision in the

collection review provisions similar to that contained in section

6213(f),5 the taxpayer lost the opportunity to contest the

Commissioner’s notice of determination in this Court.

     The facts in the present cases are materially different from

those in Prevo v. Commissioner, supra.    As previously described,

these cases developed as follows:    (1) Petitioner filed a

bankruptcy petition; (2) the Commissioner issued to petitioner

notices of determination concerning collection actions; and (3)

petitioner filed with the Court petitions for lien or levy

action.



     5
      Although 

(a)(8) (2000) bars the
commencement or continuation of a proceeding before the Tax
Court, by reason of sec. 6213(f) the period for filing a petition
for redetermination of a deficiency with the Tax Court under sec.
6213(a) is suspended for the period during which the taxpayer is
prohibited by reason of the automatic stay from filing a petition
in this Court and for 60 days thereafter. See Olson v.
Commissioner, 

 (1986), and cases cited
therein.
                               - 7 -

     Like the taxpayer in Prevo v. 

petitioner filed his petitions for lien or levy action with the

Court after filing his bankruptcy petition and while the

automatic stay imposed under 

(a)(8) (2000)

remained in effect.   The fact that respondent issued the notices

of determination in question after petitioner filed his

bankruptcy petition presents a ground for dismissal that was not

available in Prevo v. 

   Specifically, the

question arises whether respondent was barred by the automatic

stay from issuing the notices of determination to petitioner in

the first instance.   If so, it would follow that these cases

should be dismissed on the ground that the notices of

determination were void or invalid.

     The Court can, sua sponte, question its jurisdiction at any

time.   Raymond v. Commissioner, 

 (2002); Neely

v. Commissioner, 

 (2000); Romann v.

Commissioner, 

 (1998).   Where the application of

the automatic stay may act as an impediment to the Court’s

jurisdiction in a collection review proceeding, it is incumbent

on the Court to determine the proper ground for dismissal.    Cf.,

e.g., Pietanza v. Commissioner, 

 (1989)

(holding that, where appropriate, the Court will dismiss on the

ground that the Commissioner failed to issue a valid notice of

deficiency rather than for lack of a timely filed petition),
                               - 8 -

affd. without published opinion 

 (3d Cir. 1991).

The Pietanza principle is particularly compelling in the present

cases inasmuch as the Court is confronted with two alternative

grounds for dismissal, one of which will have the effect of

denying petitioner the opportunity to obtain judicial review of

respondent’s notices of determination in this Court.     See Prevo

v. Commissioner, supra.

     Before proceeding with our analysis, we first review the

pertinent portions of the automatic stay provisions set forth in

 (2000) and the collection review procedures

established under sections 6320 and 6330.

The Automatic Stay

     Title 11 of the United States Code provides uniform

procedures designed to promote the effective rehabilitation of

the bankrupt debtor and, when necessary, the equitable

distribution of his or her assets.     See H. Rept. 95-595, at 340

(1977).   One key to achieving these aims is the automatic stay,

which generally operates to temporarily bar actions against or

concerning the debtor or property of the debtor or the bankruptcy

estate.   See Allison v. Commissioner, 

 (1991);

Halpern v. Commissioner, 

 (1991).

     The automatic stay provisions are set forth in 

(a) (2000), which provides in pertinent part:

          (a) Except as provided in subsection (b) of this
     section, a petition filed under section 301, 302, or
                                 - 9 -

     303 of this title, … operates as a stay, applicable

     to all entities, of--

                 (1) the commencement or continuation,
          including the issuance or employment of
          process, of a judicial, administrative, or
          other action or proceeding against the debtor
          that was or could have been commenced before
          the commencement of the case under this
          title, or to recover a claim against the
          debtor that arose before the commencement of
          the case under this title;

              …   …

                 (3) any act to obtain possession of
          property of the estate or of property from
          the estate or to exercise control over
          property of the estate;

                  (4) any act to create, perfect, or
          enforce any lien against property of the
          estate;

                 (5) any act to create, perfect, or
          enforce against property of the debtor any
          lien to the extent that such lien secures a
          claim that arose before the commencement of
          the case under this title;

                 (6) any act to collect, assess, or
          recover a claim against the debtor that arose
          before the commencement of the case under
          this title; …

     Title 

(b) (2000), which establishes

exceptions to the automatic stay described above, provides in

pertinent part:

          (b) The filing of a petition under section 301,
     302, or 303 of this title, … does not operate as a
     stay--

              …   …
                               - 10 -

          (9) under subsection (a), of--

          (A) an audit by a governmental unit to
          determine tax liability;
          (B) the issuance to the debtor by a
          governmental unit of a notice of tax
          deficiency;
          (C) a demand for tax returns; or
          (D) the making of an assessment for any tax
          and issuance of a notice and demand for
          payment of such an assessment ….

     The bankruptcy court may issue an order granting relief from

the automatic stay.   

(d) (2000).   Absent such

an order, the automatic stay generally remains in effect until

the earliest of the closing of the case, dismissal of the case,

or the grant or denial of a discharge.   

(c)(2)

(2000); see Allison v. Commissioner, supra at 545; Smith v.

Commissioner, 

 (1991); Neilson v. Commissioner, 

 (1990).

Collection Review Procedures

     Section 6331(a) provides that if any person liable to pay

any tax neglects or refuses to pay such tax within 10 days after

notice and demand for payment, then the Secretary is authorized

to collect such tax by levy upon the person’s property.   Section

6331(d) provides that, at least 30 days prior to enforcing

collection by way of a levy on the person's property, the

Secretary shall provide the person with a final notice of intent

to levy, including notice of the administrative appeals available

to the person.
                              - 11 -

     Section 6330(a) provides in pertinent part that the

Secretary shall notify a person in writing of his or her right to

an Appeals Office hearing regarding a final notice of intent to

levy by mailing such notice by certified or registered mail to

such person at his or her last known address.   Section 6330(a)(2)

provides that the prescribed notice shall be provided not less

than 30 days before the day of the first levy with respect to the

amount of the unpaid tax for the taxable period.   Further,

section 6330(a)(3)(B) provides that the prescribed notice shall

explain that the person has the right to request an Appeals

Office hearing during that 30-day period.

     Where the taxpayer has timely requested an Appeals Office

hearing and the Appeals Office has issued a notice of

determination to the taxpayer regarding a proposed levy action,

section 6330(d)(1) provides that the taxpayer will have 30 days

following the issuance of such notice to file a petition for

review with the Tax Court or Federal District Court, as may be

appropriate.   See Offiler v. Commissioner, 

(2000).   Notably, there is no provision analogous to section

6213(f) in section 6330 that tolls the statutory period for

filing a timely petition for lien or levy action for the period
                                - 12 -

during which the person is prohibited by reason of the automatic

stay from filing a petition.6

Analysis

     The automatic stay under 

(a)(1) (2000)

bars “the commencement or continuation, including the issuance or

employment of process, of a judicial, administrative, or other

action or proceeding against the debtor that was or could have

been commenced before the commencement of the case under this

title”.    In addition, 

(a)(6) bars any act to

collect, assess, or recover a claim against the debtor that arose

before the commencement of the bankruptcy case.

     We evaluate the applicability of the automatic stay

provisions against the parties’ specific actions in these cases.

Although the record does not include transcripts of petitioner’s

account for the years in question, we assume that respondent

entered assessments against petitioner and issued to petitioner

notices and demand for payment of such assessments.    When no

payments were forthcoming, respondent issued to petitioner

Notices of Intent to Levy and Notice of Your Right to a Hearing

under section 6330.   Such notices prompted petitioner to submit

to respondent requests for a section 6330 hearing.    Several



     6
      Sec. 6330 is effective with respect to collection actions
initiated more than 180 days after July 22, 1998 (Jan. 19, 1999).
See Internal Revenue Service Restructuring and Reform Act of
1998, 

(d), 

.
                              - 13 -

months later, petitioner filed his bankruptcy petition.

Thereafter, respondent issued to petitioner the notices of

determination that led petitioner to attempt to invoke the

Court’s jurisdiction.

     Against this backdrop, we are satisfied that the issuance of

the final notices of intent to levy to petitioner constituted

administrative collection actions taken against petitioner

(before the commencement of the bankruptcy case) within the

meaning of 

(a)(1) (2000).    Consistent with

the foregoing, it follows that the issuance to petitioner of the

notices of determination constituted the continuation of

administrative collection actions against petitioner (after the

commencement of the bankruptcy case) within the meaning of 

(a)(1) (2000).    Our conclusion that the levy

notices and notices of determination constituted actions against

petitioner (as opposed to an action initiated by petitioner) is

bolstered by the nature and purpose of such notices.    We observe

that if petitioner had failed to request an administrative

hearing within 30 days of the issuance of the final notices of

intent to levy, he would have waived his right to administrative

and judicial review of the proposed collection actions under

section 6330, and respondent normally would have been free to

proceed with the proposed levies.    See Kennedy v. Commissioner,

 (2001).   Giving due regard to the public

policies underlying the automatic stay provisions, we conclude
                                - 14 -

that the issuance of the notices of determination to petitioner

violated the automatic stay.7

     Our holding on this point is consistent with both bankruptcy

caselaw and respondent’s administrative guidance.   See In re

Parker, 279 Bankr. 596, 602-603 (Bankr. S.D. Ala. 2002) (The IRS

conceded, and the bankruptcy court held, that the issuance of a

final notice of intent to levy under section 6330 violated the

automatic stay); In re Covington, 256 Bankr. 463, 465-466 (Bankr.

D.S.C. 2000) (The bankruptcy court held that the issuance of a

final notice of intent to levy under section 6330 violated the

automatic stay); see also Chief Counsel Advisory 2000-18-005 (May

5, 2000) (A Final Notice of Intent to Levy issued to a debtor who

had filed a bankruptcy petition violated the automatic stay and

was void).

     Collection activity undertaken in violation of the automatic

stay generally is considered void and without effect.   See 9B Am.

Jur. 2d, Bankruptcy, sec. 1756, at 387 (1999).   Accordingly, we

conclude that the notices of determination issued to petitioner


     7
      Despite the express exception permitting the Commissioner
to issue to a taxpayer a notice of deficiency under 

(b)(9)(B) (2000), there is no exception in 

(b) (2000) for the issuance of a notice of determination under
sec. 6330. In addition, a notice of determination issued
pursuant to sec. 6330 does not qualify as an audit, a request for
a tax return, or an assessment or notice and demand for payment
within the meaning of the applicable subparagraphs of 

(b)(9) (2000). See In re Covington, 256 Bankr. 463, 465-
466 (Bankr. D.S.C. 2000).
are void and of no effect.   Our ruling in Lundsford v.

Commissioner, 

 (2001) (notice of determination

issued without proper hearing held to be valid for purposes of

Tax Court jurisdiction) does not preclude that result, as it is

bankruptcy law, which is extrinsic to the procedures specified in

section 6330, that leads to our conclusion.    Given the invalidity

of the notices of determination, we shall dismiss these cases for

lack of jurisdiction on the Court’s own motion.

     To reflect the foregoing,


                                      Orders of dismissal shall be

                                 entered denying respondent’s

                                 motions to dismiss for lack of

                                 jurisdiction, and these cases shall

                                 be dismissed for lack of

                                 jurisdiction on the Court’s own

                                 motion.