Galluzzo v. Commissioner of Internal Revenue

Citation:
Galluzzo v. Commissioner of Internal Revenue, No. 13-3555 (3d Cir. April 24, 2014)
Tag(s):
Ruling:
The United States Tax Court did not have jurisdiction over former debtors' tax redetermination action because the Commissioner of Internal Revenue did not mail a notice of deficiency to the debtors in accordance with section 6212 of the Internal Revenue Code.
Procedural context:
The United States Tax Court dismissed former debtors' tax redetermination action because the Tax Court lacked subject matter determination. The Commissioner of Internal Revenue timely appealed.
Facts:
The Internal Revenue Service (“IRS”) determined that Mr. and Mrs. Galluzzo were liable for a tax deficiency for each of 1999, 2000, and 2001. According to a U.S. Postal Service Form 3877, the IRS sent separate notices of deficiency by certified mail to the Galluzzos at their home in Saddle Brook, New Jersey on June 2, 2005. The Galluzzos did not make payment and on November 7, 2005, the IRS made its assessment of liability for each tax year, and filed notices of a federal tax lien on the Galluzzos’ property with the Clerks of Ocean County and Bergen County, NJ. On June 15, 2006, Mr. Galluzzo filed for Chapter 11 bankruptcy. The IRS filed proofs of claim, listing a secured claim for unpaid taxes, penalties, and interest for the 1999-2001 tax years. Mr. Galluzzo did not object to the proofs of claim and included the IRS’s secured claim in his plan of reorganization, which was approved by the Bankruptcy Court in March 2008. The confirmation order stated that the IRS’s secured claim would be treated in the manner set forth in a consent order providing that the IRS’s secured claim would be reduced by $200,000 and that the IRS would “retain its lien for any remaining balance” on the Galluzzos’ New Jersey properties. The confirmation order added a directive to Galluzzo to pay the federal tax lien within six years of the date of assessment, i.e., by November 2011. Seven months before that deadline, the Galluzzos filed a complaint in the U.S. District Court for the District of New Jersey contesting their tax liabilities based on the IRS’s failure to mail notices of deficiency. The District Court concluded that the Galluzzos could not pursue relief in the District Court until they had paid the challenged tax assessments and filed a claim for a refund or credit. The District Court noted that, as an alternative, the Galluzzos could file a petition in the Tax Court, which had authority to determine, as part of its own jurisdictional analysis, whether valid notices were issued. On May 21, 2012, the Galluzzos commenced an action in the Tax Court seeking redetermination of their deficiency assessments. The Tax Court agreed that the Commissioner had failed to satisfy his burden of proving he had prepared and sent notices of deficiency to the Galluzzos by certified or registered mail in accordance with I.R.C. § 6212(a)-(b)(1). The Tax Court noted that under I.R.C. § 6213(a), the IRS cannot assess a tax deficiency until a notice of deficiency has been validly issued and mailed. Proof of proper mailing was a prerequisite for the Tax Court's assertion of subject matter jurisdiction. The Tax Court, therefore, dismissed the action for lack of jurisdiction.
Judge(s):
Hardiman, Sloviter, and Barry, Circuit Judges

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