Unreported / Non-Citable
Background
The United States sued Robert Steven Powell in 2018 to reduce to judgment federal income-tax assessments for 1999 through 2002 and civil penalties associated with the 1999 tax period. The civil case was stayed while a related criminal tax-evasion prosecution proceeded; after Powell’s conviction, the stay was lifted in 2023.
The parties filed cross-motions for partial summary judgment. The government argued that Powell’s Collection Due Process hearing request and ensuing appeals suspended the ten-year collection limitations period and sought judgment on three civil penalties—$25,000, $8,000, and $5,000—plus interest. Powell argued that the suit was untimely and disputed the validity or satisfaction of the penalties.
The Court’s Holding
In a report and recommendation, Magistrate Judge Elizabeth S. Chestney recommended granting the government’s motion and denying Powell’s motion. She concluded that 26 U.S.C. § 6330(e)(2), which can permit levy activity during an appeal, did not terminate the separate suspension of the collection limitations period. The Tax Court’s order allowing a levy therefore did not restart the limitations clock.
The magistrate judge further concluded that the limitations period remained suspended through Powell’s Sixth Circuit proceedings and the expiration of his time to seek Supreme Court review. With that tolling, the government had until at least April 3, 2020, to sue concerning the 1999 taxes and until June 26, 2020, for the 2000 through 2002 taxes, making the June 20, 2018 action timely.
The report also recommended reducing the 1999 civil penalties and accrued interest to judgment. IRS records presumptively established the assessments, including notice concerning the $5,000 frivolous-submission penalty, and Powell did not produce contrary evidence showing invalidity or payment. His reliance on proceeds from a foreclosure sale did not create a fact dispute because the IRS could apply those involuntary proceeds among the liabilities covered by the levy.
Key Takeaways
- An order permitting a tax levy during an appeal does not, by itself, end the statutory suspension of the limitations period for bringing a collection action.
- The magistrate judge treated “appeals therein” under 26 U.S.C. § 6330(e)(1) as including appellate review of the Collection Due Process proceeding through the time for seeking Supreme Court review.
- IRS assessment records remained presumptively valid because Powell offered no contrary evidence establishing defective notice or satisfaction of the civil penalties.
Why It Matters
The recommendation distinguishes the government’s authority to resume levy activity from the running of the deadline for filing a judicial collection action. If adopted, that interpretation will allow the government’s claims to proceed despite their having been filed nearly fourteen years after the original tax assessments.
The decision is a report and recommendation, not a final judgment. The parties may file specific objections, after which the district judge will review the challenged portions de novo.