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United States v. Gilliam

United States District Court, D. South Carolina, Charleston Division

June 20, 2016

United States of America, Plaintiff,
v.
William J. Gilliam, Defendant.

          OPINION AND ORDER

          MARGARET B. SEYMOUR, Senior District Judge.

         On September 30, 2015, Plaintiff United States of America ("the government") brought this action against Defendant William J. Gilliam ("Defendant") to reduce to judgment unpaid individual income tax liabilities for Tax Year 1993 and Tax Year 1995. The government contends that, as of September 20, 2015, Defendant owes $4, 941, 583.85 in tax, penalties, and interest for Tax Year 1993, and $2, 534, 573.11 in tax, penalties, and interest for Tax Year 1995.

         This matter is before the court on Defendant's motion to compel, which motion was filed on March 17, 2016. Defendant contends that the ten-year limitations period has expired with respect to his tax liabilities for Tax Year 1993 and Tax Year 1995, and he seeks discovery to support his defense. On April 4, 2016, the government filed a motion for order limiting the extent of discovery and response in opposition to Defendant's motion to compel. Defendant filed a response in opposition to the government's motion on April 21, 2016. The court held a hearing on May 16, 2016. For the reasons set forth hereinbelow, Defendant's motion to compel is denied. The government's motion to limit discovery is granted.

         I. FACTS

         The underlying facts are voluminous. Briefly, in 1995 the Internal Revenue Service (IRS) assessed income taxes against Defendant in the amount of $1, 488.165.00 for Tax Year 1993. Defendant filed for relief in the United States Bankruptcy Court for the District of South Carolina on July 8, 1996. In 1997, Defendant reported a tax liability of $619, 913.00 for Tax Year 1995. The IRS subsequently assessed penalties and interests in the amount of $1, 208, 759.20. Defendant's bankruptcy case was discharged on May 4, 1999, without full payment to the IRS.

         On July 31, 2000, Defendant filed for relief in the United States Bankruptcy Court for the Northern District of California. That case was dismissed on October 24, 2000. On April 19, 2004, Defendant again filed for protection in the United States Bankruptcy Court for the Northern District of California. That case was dismissed on June 10, 2004.

         Defendant submitted a letter to the IRS on December 17, 2007, challenging the IRS's intent to levy and seeking a collection due process (CDP) hearing pursuant to 26 U.S.C. § 6330 (providing for notice and opportunity for hearing before levy). On January 30, 2008, Defendant submitted to the IRS a Form 12153 in which he challenged the IRS's intent to levy and sought a hearing as to certain IRS liens pursuant to 26 U.S.C. § 6320 (providing for notice and opportunity for hearing upon filing notice of lien). The IRS denied the CDP hearing request as untimely, but granted Defendant an equivalent hearing. See 26 C.F.R. § 301.6330-1(i). A hearing was held on April 10, 2008.

         On December 2, 2008, the IRS issued a decision letter in which it determined that (1) the December 17, 2007, request related to levy issues was untimely, because the IRS notice of intent to levy had been issued four years earlier; (2) the January 30, 2008, request related to both levy and lien issues; however, because the levy claims were untimely, the equivalent hearing addressed only the lien issues; and (3) the recordation of the notice of federal tax lien should be sustained. The IRS informed Defendant that its decision letter was not appealable. See 26 C.F.R. § 301.6330-1(f) (providing for judicial review of notices of determination); 26 C.F.R. § 301.6330-1(i) (stating that a decision letter, and not a notice of determination, will be issued subsequent to an equivalent hearing).

         On December 31, 2008, despite the IRS's notice to him that its decision letter was not appealable, Defendant sought review from the Tax Court. The Tax Court found that, contrary to the IRS's categorization of Defendant's December 17, 2007, request for review, the December 17, 2007, letter was "an incomplete but processable request for a CDP hearing" that was perfected on January 30, 2008. The Tax Court observed:

Because we conclude that [Defendant] timely requested a CDP hearing, it follows that the letter respondent issued following the so-called equivalency hearing was a notice of determination within the meaning of sections 6320 and 6330.

         Accordingly, on September 15, 2010, the Tax Court determined that it had jurisdiction to review the IRS decision. See ECF No. 1-1.

         By order issued June 12, 2012, the Tax Court affirmed the IRS's findings as to Defendant's challenge of the filing of notices of federal tax lien against him. ECF No. 1-2. Defendant appealed the Tax Court's decision to the Ninth Circuit Court of Appeals, which dismissed the appeal on March 13, 2013, for failure to prosecute.

         II. DISCUSSION

         The government assessed Defendant's income tax deficiencies for Tax Year 1993 on November 16, 1995, and for Tax Year 1995 on September 8, 1997. Title 26, United States Code, Section 6501 provides that "[w]here the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun... within 10 years after the assessment of the tax[.]" Under 26 U.S.C. § 6503(h), the running of the limitations period is suspended during a bankruptcy proceeding "for the period during which [the government] is prohibited by reason of such case from... collecting and... 6 months thereafter." Further, if a CDP hearing is requested pursuant to 26. U.S.C. § 6320, the statute of limitations is suspended "for the period ...


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