Sixth Circuit Affirms Judgment for Taxes, Lien Foreclosure

UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
MICHAEL D. MASON,
Defendant-Appellant.

NOT RECOMMENDED FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE

Before: SUHRHEINRICH, GIBBONS, and KETHLEDGE, Circuit Judges.

ORDER

Michael D. Mason, a Tennessee resident proceeding pro se, appeals the district court judgment that reduced to judgment the federal taxes, interest, and penalties Mason owed and that ordered the sale of his real property to satisfy federal tax liens. This case has been referred to a panel of the court that, upon examination, unanimously agrees that oral argument is not needed. See Fed. R. App. P. 34(a).

The United States sued Mason for unpaid tax liabilities, alleging that he owed the government $930,041 because he failed to timely file income tax returns and pay taxes for tax years 2000 to 2004. It sought a judgment that it had valid federal tax liens on Mason's real property, an order foreclosing its liens, and the sale of the real property. Mason moved to dismiss, arguing that the IRS had not filed a notice of deficiency in his taxpayer records and that the district court therefore lacked jurisdiction. The district court denied Mason's motion because it concluded that the government was not required to file a notice of deficiency before bringing suit and that it had jurisdiction under 26 U.S.C. § 7402. The government moved for summary judgment. It submitted tax records, documents from Mason's conviction for attempting to evade or defeat federal income taxes, and documents related to Mason's purported transfers of his real property. The district court granted summary judgment to the government and ordered the sale of Mason's real property. It held that the government had shown Mason's tax liability, Mason had not presented evidence establishing a genuine issue of material fact, and Mason owed the government $930,041. The district court also held that the government had shown that it held valid liens against Mason's real property and was entitled to the proceeds of the property's sale.

On appeal, Mason argues that: (1) the government filed its notice of tax lien prematurely or not in accordance with IRS procedures because of a lack of jurisdiction; and (2) the IRS cannot lawfully diminish, take, or destroy property without establishing proper jurisdiction.

We review a district court's grant of summary judgment de novo, viewing the facts in the light most favorable to the non-moving party. Flagg v. City of Detroit, 715 F.3d 165, 178 (6th Cir. 2013). Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party bears the initial burden of establishing an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met its burden of production, the nonmoving party cannot rest on its pleadings but must present significant probative evidence in support of the complaint to defeat the motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).

The government may collect federal income tax by filing a civil action in a district court within ten years after the assessment of the tax. See 26 U.S.C. § 6502(a); United States v. Estate of Chicorel, 907 F.3d 896, 898 (6th Cir. 2018). An assessment is the IRS's determination that a taxpayer owes unpaid taxes and is presumed to be correct. United States v. Fior D'Italia, Inc., 536 U.S. 238, 242 (2002). The taxpayer has the burden of proving that the assessment is incorrect. Indmar Prods. Co. v. Comm'r, 444 F.3d 771, 776 (6th Cir. 2006). If the taxpayer fails to present sufficient evidence that the assessment is incorrect, the government is entitled to summary judgment. See United States v. Hillman, 60 F. App'x 563, 563-64 (6th Cir. 2003).

A federal tax lien attaches to property owned by a delinquent taxpayer. 26 U.S.C. § 6321; United States v. Rodgers, 461 U.S. 677, 681–82 (1983). The lien arises when the assessment is made and continues until the liability is satisfied or becomes unenforceable. 26 U.S.C. § 6322; Spotts v. United States, 429 F.3d 248, 251 (6th Cir. 2005). The United States may bring an action in district court for the judicial sale of the taxpayer's property. 26 U.S.C. § 7403; United States v. Winsper, 680 F.3d 482, 488 (6th Cir. 2012). The district court determines the merits of all claims and liens upon the property and may decree the sale of the property and the distribution of the proceeds if the government's claim is established. 26 U.S.C. § 7403(c). The proceeds are distributed according to the interests of the parties. Id.; United States v. Barr, 617 F.3d 370, 373 (6th Cir. 2010).

The government argued that Mason was liable for unpaid tax liabilities for failing to file tax returns and pay taxes for 2000 to 2004, that he was liable for fraudulent failure-to-file penalties, and that the district court should order the foreclosure of Mason's real property. It submitted Certificates of Assessments and Payments showing that it had assessed Mason's liabilities and sent him notices of the assessments and demands for payment. It also provided account transcripts showing the accrued interest, penalties, and unpaid taxes. The government used Mason's tax returns to calculate the assessments. Although Mason did not timely file tax returns for 2000 to 2004, he filed returns for those years in 2006. The IRS calculated that Mason's tax liabilities for 2000 to 2004 totaled $930,041.

The government's assessments of Mason's liabilities included penalties for fraudulent failure to file tax returns on time. See 26 U.S.C. § 6651(f). The IRS imposed a seventy-five percent penalty for each year he failed to file his returns. It argued that Mason's liability for the fraud penalty was established by his guilty plea to attempting to evade or defeat his federal income taxes. Mason was indicted for trying to conceal his income by filing a false withholding certificate or W-4 form with his employer for the years 2000 to 2004 and owed $229,064. He pleaded guilty to one count for the year 2003 and agreed to the tax loss in the indictment. The government argued that Mason's guilty plea conclusively established fraud with respect to 2003 and that he had admitted fraudulent intent with respect to the remaining years by agreeing with the government's proffer. The proffer recited that the United States would have established that Mason failed to file tax returns when due, failed to pay his tax liabilities, filed false W-4 forms claiming he was exempt from withholding, used nominee entities and individuals, engaged in cash transactions to conceal the disposition of his income, and had legal documents prepared purporting to show that he had mortgaged his residence to a sham entity. Mason agreed that the government's statements were true.

The IRS also documented its right to foreclose on Mason's residence. It argued that federal tax liens attached to his property on the dates of the assessments for tax years 2000 to 2004 under 26 U.S.C. §§ 6321 and 6322. Mason and his wife purchased 2807 Eagle Brier Cove, Cordova, Tennessee, in 1987. Mason's wife died in 2006, leaving him the sole owner. The IRS assessed Mason's tax liabilities in 2009. From 2010 to 2014, Mason undertook a series of transactions purporting to transfer the residence out of his name. The last transfer was a gift of deed to Regan D. Reedy in his capacity for the Cherokee Country Government, Cherokee Nation of Indians by Treaty law. The government named Reedy and Capital One Bank as defendants in the action. Neither asserted any legal interest in the property and the court clerk entered a default judgment against them. The IRS then asked the district court for an order authorizing the sale of Mason's property with the proceeds to pay his federal tax liens.

In response to the government's motion, Mason argued that the IRS used the wrong regulations to make erroneous assessments, did not submit a signed Form 23 C Assessment Certificate or Notice of Deficiency, tricked him into signing tax returns for 2000 to 2004, and lacked authority and jurisdiction over his criminal case and the civil action. He sought summary judgment in his favor, return of his property, and expungement of the assessments and liens against him and his property.

The district court held that the government had shown Mason's tax liability, that it held valid liens against Mason's real property, and that it was entitled to the proceeds of the property's sale. The district court found that the government had established Mason's tax liabilities by filing copies of assessments against him and that Mason did not present any evidence to create an issue of fact. It further found that the government showed that Mason was subject to penalties under § 6651(f) for fraudulently failing to file returns. The district court held that Mason's plea agreement and conviction collaterally estopped him from contesting that he committed fraud with respect to tax year 2003 and showed his fraudulent intent for the other tax years. It next found that the government held valid liens against Mason's real property. The district court concluded that Mason was the sole owner of the property when the IRS assessed his tax liabilities and the liens arose and that the liens were not affected by Mason's purported transfers. It held that the United States was entitled to the proceeds of the sale of the property because of its tax and criminal restitution liens and because no other parties asserted a claim.

Upon review, we affirm the district court's judgment. The district court properly presumed that the government's assessments were correct and Mason did not submit evidence to prove that they were not. The government was entitled to summary judgment as a matter of law as to Mason's liability for the tax assessments. See Fior D'Italia, Inc., 536 U.S. at 242; Indmar Prods. Co., 444 F.3d at 776; Hillman, 60 F. App'x at 563-64. Mason was the sole owner of the real property when the government acquired its liens based upon its assessments. See 26 U.S.C. §§ 6321, 6322; Rodgers, 461 U.S. at 681–82; Spotts, 429 F.3d at 251. The government was authorized to seek the judicial sale of Mason's property. See 26 U.S.C. § 7403; Winsper, 680 F.3d at 488. The district court properly ordered that the proceeds of the sale of the property should go to the government because no one else asserted a claim. See 26 U.S.C. § 7403(c); Barr, 617 F.3d at 373.

Mason's arguments on appeal are without merit. The IRS did not have to issue a notice of deficiency to Mason because it based its assessments of his liabilities on the tax returns he filed in 2006. See 26 U.S.C. §§ 6201(a), 6212(a). The government was authorized to sue Mason to reduce to judgment the federal taxes, interest, and penalties Mason owed, and the district court properly ordered the sale of his property. See 26 U.S.C. § 7403. Mason does not dispute the district court's factual findings or explain how those facts show that the district court erred.

For the foregoing reasons, we AFFIRM the district court's judgment.

ENTERED BY ORDER OF THE COURT

Deborah S. Hunt, Clerk