Wright v. Commissioner of Internal Revenue, No. 07-1462 (2d Cir. 2009)

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07-1462-ag Wright v. Commissioner of Internal Revenue 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2008 (Argued: December 2, 2008 Decided: July 7, 2009) Docket No. 07-1462-ag - - - - - - - - - - - - - - - - - - - -x Raymond Wright, Plaintiff-Appellant, - v.Commissioner of Internal Revenue, Defendant-Appellee. - - - - - - - - - - - - - - - - - - - -x Before: JACOBS, Chief Judge, McLaughlin and B.D. Parker, Circuit Judges. Raymond Wright appeals from a judgment of the United 30 States Tax Court insofar as the Tax Court dismissed, on 31 jurisdictional and mootness grounds, Wright s suit 32 challenging a tax collection action arising from his failure 33 to file tax returns in 1987 and 1989. 34 the Tax Court erred in declining to exercise jurisdiction 35 over his request for an abatement of interest and a refund Wright argues that 1 of any resulting overpayment. 2 Court had jurisdiction to determine whether the pro se 3 plaintiff was entitled to an abatement of interest and to a 4 refund resulting from any consequent overpayment. 5 and remanded. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 We conclude that the Tax Vacated RAYMOND WRIGHT, pro se, New York, N.Y. Sara An Ketchum, Esq., on submission, Joan I. Oppenheimer, Esq., United States Department of Justice, Tax Division, on the brief, for Richard T. Morrison, Acting Assistant Attorney General for the United States, for Appellee. DENNIS JACOBS, Chief Judge: This is the third appeal to consider the baffling 21 ramifications of Raymond Wright s failure to file tax 22 returns in 1987 and 1989. 23 (2d Cir. 2004); Wright v. Comm r, 173 F.3d 848 (2d Cir. 24 1999) (Table). 25 this litigation, has been trying to balance the books on his 26 tax obligations, without much help from the Internal Revenue 27 Service ( IRS ). 28 (Vasquez, J.) entered a judgment treating as moot Wright s 29 challenge to the assessment of his 1987 taxes, enjoining the See Wright v. Comm r, 381 F.3d 41 Wright, who has appeared pro se throughout Most recently, the United States Tax Court 2 1 IRS from collecting Wright s 1989 taxes, but declining for 2 lack of jurisdiction to determine whether Wright has 3 overpaid his 1989 taxes. 4 various payments he has made (including payments on the 1987 5 taxes) constitute overpayment for which he seeks a refund. 6 For the following reasons, we vacate the judgment of the Tax 7 Court insofar as it treated as moot Wright s challenge to 8 the assessment of his 1987 taxes and declined to exercise 9 jurisdiction over Wright s abatement and overpayment claims, 10 On appeal, Wright argues that the and we remand for yet further proceedings. 11 BACKGROUND 12 13 The facts are set out at length in our 2004 opinion. 14 The (highly compressed) facts bearing on this current appeal 15 are as follows. 16 Wright did not file returns for the years 1987 and 17 1989. The IRS began sending him delinquency notices as 18 early as 1989. 19 substitute returns on his behalf for 1987 and 1989, and it 20 did so in October 1993. 21 Wright and charged him with deficiencies of $3,777.00 (plus 22 interest and late penalties) for 1987 and $6,500.00 (plus In 1992, Wright asked the IRS to file In November 1993 the IRS audited 3 1 interest and late penalties) for 1989. In May 1994, Wright 2 filed a tax return for the year 1993 and requested a refund. 3 When the IRS reminded Wright that he still owed taxes for 4 1987 and 1989, Wright directed the IRS by letter to apply 5 his refund of $1,046.90 (representing an overpayment of 6 $971.78 and interest of $75.12) to the deficiencies found 7 for 1987 and 1989. 8 Instead, the IRS withheld his refund without applying it to 9 the 1987 and 1989 deficiencies (which continued to accrue The IRS did not accede to that request. 10 penalties and interest on the books of the IRS), and without 11 advising Wright what it was doing. 12 On June 21, 1994, Wright paid the IRS $6,681.22, which 13 was applied pro rata to Wright s outstanding tax liabilities 14 for 1987 and 1989. 15 676 (2002). 16 Wright v. Comm r, 84 T.C.M. (CCH) 675, After receiving a notice of deficiency in May 1995, 17 Wright initiated a series of proceedings in which he 18 asserted a variety of procedural and constitutional claims. 19 Wright v. Comm r, 75 T.C.M. (CCH) 2536, 2536 (1998). 20 Wright s claims were held to be without merit, and a panel 21 of this Court affirmed in an unpublished order. 22 F.3d at *1. 4 All of Wright, 173 1 By May 2000, the books of the IRS reflected a total 2 unpaid balance for 1987 and 1989 so big and so long 3 delinquent that the IRS sent Wright a Notice of Intent to 4 Levy for unpaid taxes. 5 sought a pre-levy hearing pursuant to 26 U.S.C. § 6330 based 6 on a variety of alleged errors and abuses. 7 appeals officer in December 2000, and his outstanding 8 balance was reduced to correct the IRS s failure to give him 9 withholding credits of $2,346.00 in 1987 and $287.00 in Wright He met with an 10 1989. 11 $3,260.71 in statutory interest that had allegedly accrued 12 on the 1987 deficiency. 13 Id. at 676-77. Wright, 84 T.C.M. at 676. In May, 2001, the IRS abated Id. at 677. In April 2001 the IRS informed Wright that it would 14 proceed with a levy action against him. 15 levy action pro se in Tax Court, petitioning for an 16 abatement of interest on grounds of IRS error and delay. 17 Wright s appeal expressed (understandable) confusion as to 18 the amounts levied against him by the IRS for the years 1987 19 and 1989, and claimed that he was entitled to additional 20 interest abatement by reason of cascading errors he alleged 21 the IRS had made--including its handling of his 1993 refund 22 and its alleged failure to credit his withholding credits 5 Wright appealed the 1 2 from 1987 and 1989. The Tax Court rejected all of Wright s arguments, 3 finding that Wright s 1993 refund had in fact been mailed to 4 him, and concluding therefore that Wright s 1993 refund 5 could not be applied against his outstanding liabilities for 6 1987 and 1989 and did not entitle him to additional 7 interest abatement. 8 Court also ruled that, because Wright failed to file returns 9 or pay taxes in 1987 and 1989, he was precluded from any Wright, 84 T.C.M. at 679. The Tax 10 additional interest abatement other than that he had already 11 received for his missing withholding credits. 12 Id. We vacated that ruling on appeal, seeing no evidence 13 that the IRS had sent Wright his 1993 refund, and observing 14 that Wright s tax liability for 1987 and 1989 may have been 15 completely satisfied by the refund along with Wright s other 16 payments and credits. 17 remanded to the Tax Court to determine 18 19 20 21 22 23 24 25 26 27 Wright, 381 F.3d at 45-46. We (i) whether Wright s 1993 tax refund was sent to him by the IRS in 1994, (ii) if not, whether Wright received timely notice from the IRS that his refund had not been applied to his 1987 and 1989 tax deficiencies, (iii) if not, whether his current tax liability should be consequently adjusted by, inter alia, an abatement of interest pursuant to 26 U.S.C. § 6404(e), and (iv) in any case, whether the current interest abatement that Wright has already received was correct in light 6 1 2 3 4 5 6 of (a) the IRS s failure to give Wright appropriate withholding credits for 1987 and 1989, and (b) Wright s June 21, 1994 payment of $6,681.22. Id. at 46. 7 During the pendency of that appeal, Wright made a 8 payment of $15,550 to the IRS. On remand, the Tax Court 9 determined that the agency had applied $3,625 of the $15,000 10 payment to Wright s 1987 tax liability, thereby satisfying 11 the 1987 liability. 12 526 (2006). 13 Id. 14 applied the remaining $11,925 to Wright s 1989 tax 15 liability. 16 of $1,659.38 due in interest charges. 17 Wright v. Comm r, 92 T.C.M. (CCH) 525, The claims regarding 1987 were held to be moot. The Tax Court also determined that the agency had Id. According to the IRS, this left a balance Id. The Tax Court then proceeded to trial on the issues we 18 had identified. See id. at 527-28. 19 misstatements and errors made by [the IRS] through the 20 handling of [Wright s] 1987 and 1989" taxes, id. at 528, the 21 Tax Court found that (i) Wright s 1993 tax refund was not 22 sent to him by the IRS in 1994; (ii) the IRS failed to 23 notify Wright that his refund was never applied to his 1987 24 and 1989 tax deficiencies; (iii) Wright s tax liability 25 should be adjusted by an abatement of interest pursuant to 7 Citing numerous 1 Internal Revenue Code § 6404(e); and (iv) the interest 2 abatement that Wright had previously received was incorrect. 3 Id. at *6. 4 ruled that the IRS may not proceed with the collection 5 activities for 1989. 6 Tax Ct. Dec. 26, 2008) (Order and Decision); see Wright, 92 7 T.C.M. at 529. 8 jurisdiction to determine the proper abatement amount or to 9 order a refund for any resulting overpayment of Wright s 10 11 1989 taxes. On the basis of these findings, the Tax Court Wright v. Comm r, No. 6240-01L (U.S. However, the Tax Court ruled that it lacked Wright, 92 T.C.M. at 529. Wright timely appealed the Tax Court s decision. 12 DISCUSSION 13 14 We review the legal conclusions of the tax court de 15 novo and its factual findings under the clearly erroneous 16 standard. 17 application of a legal standard to a given factual pattern, 18 are [also] reviewed under the clearly erroneous standard. 19 Merrill Lynch & Co. v. Comm r, 386 F.3d 464, 469 (2d Cir. 20 2004) (internal quotation marks and citations omitted) 21 (citing Bausch & Lomb Inc. v. Comm r, 933 F.2d 1084, 1088 22 (2d Cir. 1991)). Mixed questions of law and fact, entailing the In reviewing a decision of the Tax Court, 8 1 we lack[] jurisdiction to decide an issue that was not the 2 subject of the Tax Court proceeding or to grant relief that 3 is beyond the powers of the Tax Court itself. 4 McCoy, 484 U.S. 3, 6 (1987). 5 Comm r v. This court construes appellate briefs submitted by pro 6 se litigants liberally and reads such submissions to raise 7 the strongest possible arguments they suggest. 8 McBride, 323 F.3d 191, 194 (2d Cir. 2003). 9 standard, we construe Wright s brief on appeal to make two 10 arguments: the Tax Court erred by [i] declining to exercise 11 jurisdiction to determine whether an overpayment exists or 12 to order a refund or credit with regard to either his 1987 13 or his 1989 tax liability, and [ii] denying his motion 14 seeking recusal of Judge Vasquez. Ortiz v. Under this 15 16 I 17 [T]he Tax Court is a court of limited jurisdiction 18 that possesses only those powers expressly conferred upon it 19 by Congress; it may exercise jurisdiction only pursuant to 20 specific legislative enactments. 21 361, 363 (2d Cir. 2004). 22 federal statutes, including statutes delimiting the scope of Maier v. Comm r, 360 F.3d The Tax Court s interpretation of 9 1 its own jurisdiction, [is] reviewed de novo. 2 Id. In this case, the Tax Court determined under Internal 3 Revenue Code ( I.R.C. ) § 6330 that Wright s $15,500 payment 4 fully satisfied his 1987 tax liability (including interest 5 and penalties) and satisfied all the tax due on his 1989 tax 6 liability (though not all of the outstanding interest). 7 Wright, 92 T.C.M. at 526. 8 whether, all things considered, Wright has paid more than 9 the sum of his properly-assessed taxes, penalties, and It has not been determined 10 interest. 11 jurisdiction to determine whether an overpayment exists or 12 to order a refund or credit for either tax year. 13 599. 14 But the Tax Court ruled that it lack[ed] Id. at The I.R.C. vests the Tax Court with jurisdiction to 15 determine whether the Secretary s failure to abate interest 16 . . . was an abuse of discretion, and [to] order an 17 abatement, if such action is brought within 180 days after 18 the date of the mailing of the Secretary s final 19 determination not to abate such interest. 20 § 6404(h)(1). 21 determine an overpayment and order a refund in the same 22 circumstances. I.R.C. The Code further empowers the Tax Court to I.R.C. § 6404(h)(2)(B) (incorporating I.R.C. 10 1 2 § 6512(b)). The Court declined to exercise that grant of 3 jurisdiction on the ground that Wright s action challenged a 4 Notice of Determination Concerning Collection Action(s) 5 Under Section 6320 and/or 6330, and was therefore brought 6 pursuant to § 6330 and not pursuant to § 6404. 7 T.C.M. at 526, 529 (citing Green-Thapedi v. Comm r, 126 T.C. 8 1 (2006)). 9 Wright, 92 This was error. Wright adequately raised the issue of abatement of 10 interest during the § 6330 hearing at the agency. See 11 Wright, 84 T.C.M. at 677. 12 issue at the agency, it follows that the subsequent Notice 13 of Determination--which did not grant Wright an abatement-- 14 was the Secretary s final determination not to abate . . . 15 interest under § 6404(h)(1). 16 the Notice of Determination to the Tax Court within the time 17 period required by § 6404(h)(1), the Tax Court had 18 jurisdiction to determine whether Wright was entitled to an 19 abatement, and if he was, whether he made an overpayment and 20 is entitled to a refund. 21 the broad parameters of our previous mandate, which directed 22 the Tax Court to determine whether Wright s current tax Since Wright properly raised the And because Wright appealed Such a determination was within 11 1 liability should . . . be adjusted by, inter alia, an 2 abatement of interest. 3 inter alia contemplated a final sorting out. 4 Wright, 381 F.3d at 46. The phrase Insofar as the Tax Court based its jurisdictional 5 decision on Wright s failure to style his petition an action 6 under § 6404, this too was error. 7 so construed as to do substantial justice. 8 31(d). 9 to follow the letter of [the] Court s Rules, it is within 10 the Court s discretion to construe pleadings (particularly 11 in the case of a petitioner filing a petition pro se) so as 12 to do substantial justice. 13 1990-82, 1990 WL 14571 n.6 (Tax Ct. Feb. 21, 1990). 14 that Wright s petition specifically sought to have the IRS 15 abate interest, failure to construe his pro se petition to 16 state a claim under § 6404 constituted an abuse of 17 discretion. 18 determine overpayment and to order a refund, its dismissal 19 of Wright s challenge to his 1987 taxes on mootness grounds 20 was also incorrect. 21 because the payment that mooted the IRS s claim for payment 22 did not moot Wright s claim of over-payment. All pleadings shall be Tax Court Rule While petitioners in [the Tax] Court are expected Swope v. Comm r, T.C. Memo. Given And because the Tax Court had jurisdiction to See Wright, 92 T.C.M. at 526. 12 That is 1 2 II Wright moved for the recusal of the Tax Court judge, 3 and the Tax Court denied the motion. 4 recusal was required under 28 U.S.C. § 455 because the judge 5 had denied various pre-trial motions, and because the same 6 judge was assigned to the case following remand. 7 Wright argues that There is some question as to whether the judges of the 8 Tax Court are subject to the mandatory recusal provisions in 9 28 U.S.C. § 455. See Nobles v. Comm r, 105 F.3d 436, 438 10 (9th Cir. 1997) ( [N]o authority exists in statute or rule 11 for ordering the recusal of a tax court judge in the first 12 place because Tax Court judges serve for only fifteen-year 13 terms and therefore are not judges for purposes of § 455). 14 At least as to district court judges, recusal motions are 15 committed to the court s sound discretion, and this Court 16 will reverse a decision denying such a motion only for abuse 17 of discretion. 18 495 (2d Cir. 2007). 19 constitute a valid basis for a bias or partiality motion. 20 Id. (internal quotation marks omitted). 21 long been regarded as normal and proper for a judge to sit 22 in the same case upon its remand. LoCascio v. United States, 473 F.3d 493, [J]udicial rulings alone almost never 13 Moreover, [i]t has Liteky v. United States, 1 510 U.S. 540, 551 (1994). There was therefore no abuse of 2 discretion in the Tax Court s denial of the recusal motion 3 (even assuming that Tax Court judges are subject to the 4 mandatory removal requirement of § 455). 5 6 7 CONCLUSION The judgment of the Tax Court is vacated insofar as it 8 [i] held that Wright s challenge to the assessment of his 9 1987 taxes was moot and [ii] declined to exercise 10 jurisdiction under I.R.C. § 6404(h), and this case is 11 remanded to the Tax Court to determine Wright s entitlement 12 to an abatement and any resulting overpayment and refund. 14

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