UNITED STATES OF AMERICA (2010)

UNITED STATES OF AMERICA

THE DEPARTMENT OF THE TREASURY

DIRECTOR,

OFFICE OF PROFESSIONAL

RESPONSIBILITY

Complainant,

v.

(b)(3)/26 USC 6103

Respondent.

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Complaint No. 2010-07

DECISION AND ORDER ON COMPLAINANT’S MOTION

FOR SUMMARY JUDGMENT

I.

Background

On April 8, 2010, Complainant Karen L. Hawkins, in her official capacity as Director

of the Office of Professional Responsibility (“OPR”), United States Department of the

Treasury, Internal Revenue Service (“IRS”), initiated this proceeding by issuing a Complaint

against Respondent (b)(3)/26 USC 6103 pursuant to 31 U.S.C. § 330 and Section 10.60 of the

regulations codified at 31 C.F.R. Part 10 (“Rules”) governing the practice of attorneys,

certified public accountants, enrolled agents and other practitioners before the IRS. 1

The Complainant alleges that Respondent is an Enrolled Agent engaged in practice

before the IRS (as defined by 31 C.F.R. § 10.2(a)(4)). The Complainant alleges six counts of

(b)(3)/26 USC 6103

violation against Respondent: two counts for

and four counts of (b)(3)/26 USC 6103

(b)(3)/26 USC 6103

. The Complaint alleges

(b)(3)/26

USC

6103

further that

in accordance with law

1

All citations to the regulations codified at 31 C.F.R. Part 10 (§§ 10.0-10.93), Practice Before the

Internal Revenue Service, can also be found in corresponding sections of Treasury Department Circular No. 230,

entitled “Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents,

Enrolled Actuaries, Enrolled Retirement Plan Agents, and Appraisers before the Internal Revenue Service” (Rev.

4-2008), issued pursuant to the provisions of 31 U.S.C. § 330.

constitutes disreputable conduct, as defined by 31 C.F.R. § 10.51. 2 As a sanction, the

Complaint seeks to have Respondent disbarred from practice before the IRS pursuant to 31

C.F.R. §§ 10.51 and 10.70, with reinstatement thereafter being at the sole discretion of OPR.

The Complaint further specifies that, at a minimum, reinstatement should not be granted unless

(b)(3)/26 USC 6103

Respondent

.

On June 1, 2010, Respondent (appearing pro se) filed an Answer requesting that she

not be disbarred. 3 Respondent’s Answer did not deny the allegations in the Complaint that she

(b)(3)/26 USC 6103

A prehearing Order was issued thereafter, requiring each party to submit a

Prehearing Memorandum by a certain date. In accordance with the Prehearing Order,

Complainant filed a Prehearing memorandum on June 30, 2010, but Respondent failed to file

her Prehearing Memorandum. She also did not respond to this Tribunal’s Order To Show

Cause regarding this failure and why a default judgment should be entered against her.

On July 19, 2010, Complainant filed a Motion for Summary Judgment (“Motion” or

“Mot.”). On July 22, 2010, the undersigned issued an Order staying the scheduled hearing, so

as to allow time for Respondent to respond to Complainant’s Motion for Summary Judgment

and for a ruling thereon. According to the Prehearing Order, Respondent’s response to

Complainant’s Motion for Summary Judgment was due fifteen days after service of the

Motion, which would be July 29, 2010. See, 31 C.F.R. § 10.68(a)(2)(“. . . the non-moving

party must file a written response within 30 days unless otherwise ordered by the

Administrative Law Judge.”). To date, Respondent has not submitted a response to the Motion

For Summary Judgment. 4

II.

Standards for Summary Adjudication

__ (b)((3)/26 USC 6103

__

__

2

The pertinent paragraph of 31 C.F.R. was previously codified as (b)(3)/26 , which is cited in

USC

6103

USC

Counts 1 through 4. The pertinent paragraph is currently codified as (b)(3)/26

, which is cited in

6103

Counts 5 and 6.

3

As noted in this Tribunal’s June 1, 2010, Notice of Receipt of Ex Parte Communication,

Respondent’s Answer appeared in the form of regular correspondence and lacked a certificate of

service. Complainant’s Motion for Summary Judgment refers to this correspondence from Respondent,

dated May 19, 2010, as Respondent’s “Answer.”

4

The Prehearing Order (p.3) directs that, prior to filing any motion, the moving party shall

contact the other party and the motion shall state the position of the other party regarding the relief

sought in the motion. The Prehearing Order states that “No motion shall be considered without such a

statement.” Complainant’s Motion for Summary Judgment does not contain such a statement.

However, Complainant’s June 21, 2010 Settlement Status Report states that Respondent did not

respond to Complainant’s proposed settlement agreement and did not respond to three voice mail

messages left May 17, May 24 and June 11, 2010. Similarly, Respondent has not responded to two

voice mail messages left by the undersigned’s staff.

2

The Rules provide that “[e]ither party may move for a summary adjudication upon all

or any part of the legal issues in controversy,” and that if the non-moving party files no

response to a motion, “the non-moving party is deemed to oppose the motion” and therefore

the Motion must be determined on its merits. 31 C.F.R. §§ 10.68(a)(2), 10.68(b). The Rules

provide further that “[a] decision shall thereafter be rendered if the pleadings, depositions,

admissions, and any other admissible evidence show that there is no genuine issue of material

fact and that a decision may be rendered as a matter of law.” 31 C.F.R. § 10.76(a)(2).

A motion for summary adjudication is analogous to a motion for summary judgment

under Rule 56 of the Federal Rules of Civil procedure (“FRCP”). Therefore, federal court

rulings on motions under Rule 56 of the FRCP provide guidance for ruling on a motion for

summary adjudication in an administrative proceeding. See Puerto Rico Sewer and Aqueduct

Authority v. EPA, 35 F.3d 600, 607 (1st Cir. 1994) (holding that Rule 56 of the FRCP “is the

prototype for administrative summary judgment procedures, and the jurisprudence that has

grown up around Rule 56 is, therefore, the most fertile source of information about

administrative summary judgment.”), cert. denied, 513 U.S. 1148 (1995).

The party moving for summary judgment bears the initial burden of showing the

absence of any genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986). Once the moving party has met its initial burden, the non-moving party “may not rely

merely on allegations or denials” in its pleadings but “must set out specific facts showing a

genuine issue for trial.” FRCP 56(e)(2). If the non-moving party “does not so respond,

summary judgment should, if appropriate, be entered against that party.” Id.

In evaluating a motion for summary judgment, the tribunal must view the record in a

light most favorable to non-moving party, indulging all reasonable inferences in that party’s

favor. Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990). The record to be considered

by the tribunal includes any material that would be admissible or usable at trial. Horta v.

Sullivan, 4 F.3d 2, 8 (1st Cir. 1993), citing 10A Charles A. Wright, Arthur R. Miller, and Mary

Kay Kane, Federal Practice and Procedure § 2721, at 40 (2d ed. 1983). However, the burden

of coming forward with evidence in support of their respective positions remains squarely

upon the litigants. See Northwestern Nat’l Ins. Co. v. Baltes, 15 F.3d 660, 662-63 (7th Cir.

1994) (“[J]udges are not archaeologists. They need not excavate masses of papers in search of

revealing tidbits – not only because the rules of procedure place the burden on the litigants, but

also because their time is scarce.”).

III.

Complaint’s Motion

Complainant states that “[s]ummary judgment is appropriate in this manner, as the

(b)(3)/26 USC 6103

undisputed facts of the case show that Respondent

Disbarment is the appropriate sanction for such disreputable conduct.” Mot. at 3.

3

Complainant notes that Respondent does not deny any of the allegations on the Complaint that

(b)(3)/26 USC 6103

she

. Mot. At 2-3. Attached to the Motion are

(b)(3)/26 USC 6103

. Mot., Attachments 1-7.

(b)(3)/26

USC

6103

They show that Respondent

. Id.

(b)(3)/26 USC 6103

Complainant asserts that

. Citing United States v. Pomponio, 429 U.S. 10, 12 (1996) and Cheek v. United

States, 498 U.S. 192, 201 (1991), Complainant notes that the United States Supreme Court has

articulated a definition of “willful” in the context of criminal violations of the Revenue Code

as a “voluntary, intentional violation of a known legal duty.” Complainant reasons that “[a]s

(b)(3)/26 USC 6103

Respondent’s conduct

,a

(b)(3)/26

USC 6103

determination of the appropriate

is unnecessary.” Mot. At 5.

Complainant states further that “as an Enrolled Agent, Respondent was aware of (b)(3)/26

USC

(b)(3)/26 USC 6103

. Respondent does not allege that she was unaware

of

6103

(b)(3)/26 USC 6103

(b)(3)/26 USC 6103

. . . . There is also no dispute that Respondent

. . .” Id.

Respondent’s May 19, 2010, Answer (at p.2) states, “ (b)(3)/26 USC 6103 , I could

not function!” Respondent alleges her inability to function was based on her emotional and

physical collapse as a result of her husband suddenly abandoning their 27 year marriage in or

about the year 2000. Answer at 1.

Complainant argues that “Respondent’s claim that any violations (b)(3)/26 USC 6103 due

to her inability to ‘function’ is without merit.” Mot. At 5. First, Complainant asserts that

Respondent has proffered no evidence to support her assertion that, during the time period in

issue, she was physically or emotionally incapable (b)(3)/26 USC 6103 . Id. At 6.

“Respondent’s assertion that her 2000 divorce left her unable to function for more than seven

years is simply not credible. This is especially true because Respondent actually (b)(3)/26

USC

6103

(b)(3)/26 USC 6103

.” Id.,

Mot.

Attachment 3.

Secondly, Complainant argues that “even assuming all of Respondent’s contentions

regarding her physical and/or emotional state during the period in question to be true, such

(b)(3)/26 USC 6103

facts would not justify a finding that

.” Id. In extreme

(b)(3)/26 USC 6103

circumstances, some courts have found “reasonable cause” to justify

. However, Complainant contends that Respondent’s Answer includes

indications that she does not meet the requisite standard of complete incapacity. Complainant

also points to Respondent’s statements indicating that “serving as a tax practitioner provided a

substantial portion of her livelihood.” Mot. At 7. Complainant argues that Respondent’s

4

(b)(3)/26 USC 6103

ability both to prepare client’s tax returns and

was not incapacitated to a degree sufficient to justify or excuse

IV.

Discussion

A.

Applicable Legal Standards

prove that Respondent

(b)(3)/

.

26 USC 6103

Section 330(b) of Title 31 of the United States Code provides that:

After notice and opportunity for a proceeding, the Secretary may suspend or disbar

from practice before the Department, or censure, a representative who - (1) is incompetent [or]

(2) is disreputable . . . .

31 U.S.C. § 330(b)

The Rules set forth the duties and restrictions relating to practice before the IRS, the

sanctions for violations of the regulations and basis therefore, and the procedures applicable to

disciplinary proceedings for violations. Section 10.50 of the Rules provides in relevant part

that:

The Secretary of the Treasury, or delegate, after notice and an opportunity for a

proceeding, may censure, suspend, or disbar any practitioner from practice before

the Internal Revenue Service if the practitioner is shown to be incompetent or

disreputable (within the meaning of § 10.51) . . . .

31 C.F.R. § 10.50(a). Section 10.51(a), in turn, provides in pertinent part that –

Incompetence and disreputable conduct for which a practitioner may be sanctioned

under § 10.50 includes, but is not limited to –

****

(6) Willfully failing to make a Federal tax return in violation of the Federal

tax laws . . .

****

5

(b)(3)/26 USC 6103

31 C.F.R. §§ 10.51(a)(6).

Owrutsky v. Brady, No. 89-2402, 1991 U.S. App. LEXIS 2613 (4 h

Cir. 1991).

5

Previously codified, with slightly different language, as § 10.51(f). See note 2, supra.

5

B.

Willfulness

(b)(3)/26 USC 6103

Respondent has not denied any of the allegations regarding

, with one exception. Respondent’s Answer asserts that (b)(3)/26

USCand

6103

(b)(3)/26 USC 6103

but rather she could not function due to her emotional

physical

collapse as a result of her husband suddenly abandoning their 27 year marriage.

The general rule of law is that, to be excused from (b)(3)/26 USC 6103 , a person’s

incapacity must be virtually complete, such that they are unable to conduct any work. Roberts

Metal Fabrication v. United States, 147 B.R. 965, 968 (1992) (to find “reasonable cause” for

failure to file, illness must be present at time return is customarily prepared and render

taxpayer physically or mentally incapable of preparing a return or conducting business

activity); Meyer v. Comm’r, 85 T.C.M. (CCH) 760 (2003) taxpayer had severe health

problems and nervous breakdown, took leave of absence from job); Shaffer v. Comm’r, 68

T.C.M. (CCH) 1455 (1994) (taxpayer placed on disability retirement); Dir., Office of Prof’l

(b)(3)/26

Responsibility v. USC 6103 , Complaint No. 2009-26 (Decision on Appeal, May 28, 2010)(where

respondent prepared returns for other taxpayers, medical conditions (b)(3)/26 USC 6103

).

As pointed out in Complainant’s Motion, Respondent’s Answer contains certain

USC

statements indicating that her conduct was (b)(3)/26

and her incapacity was not complete.

6103

First, as Complainant notes, Respondent’s Answer indicates that she was able to do work for

her clients. Respondent’s Answer states “I could only do bare minimum, that meant my

clients came 1st and I was last!” Answer at 1. Attachment 9 to Complainant’s Motion (a FAX

from Respondent to IRS) includes a statement from Respondent indicating that, if she loses her

Enrolled Agent license, “I will not be able to support myself.” Respondent’s Answer (p.1)

contains a similar statement: “This is my only form for making a living, to support

(b)(3)/26 USC 6103

myself . . . “ Second, Respondent’s

(b)(3)/26 USC 6103

. Owrutsky v. Brady, No. 89-2402, 1991 U.S. App. LEXIS

2613 (4 Cir. 1991), citing United States v. Pomponio, 429 U.S. 10, 12 (1976).

C.

Respondent’s Failure to Respond to Motion

Respondent failed to respond to the Prehearing Order and to the Motion for Summary

Judgment, and failed to provide this Tribunal with any evidence, or any indication of the

evidence she can present at hearing, to support her assertions in her Answer. As noted above,

according to Rule 56(e)(2) of the Federal Rules of Civil Procedure:

6

When a motion for summary judgment is properly made and supported, an opposing

party may not rely merely on allegations or denials in its own pleading; rather, its

response must – by affidavits or as otherwise provided in this rule – set out specific

facts showing a genuine issue for trial. If the opposing party does not so respond,

summary judgment should, if appropriate, be entered against that party.

Accordingly, summary judgment may be granted in favor of Complainant if the undisputed

material facts, as supported by the “pleadings, . . . admissions, and any other admissible

evidence,” demonstrate Complainant’s entitlement to judgment as a matter of law. 31 C.F.R.

§ 10.76(a)(2); Champion v. Artuz, 76 F.3d 482, 486 (2nd Cir, 1996). Based on Respondent’s

(b)(3)/26 USC 6103

failure to set out specific facts supporting her assertion that

,

summary judgment against her is appropriate.

D.

Statute of Limitations

Complainant’s Motion (n.2) notes, and makes several arguments against, the potential

application of a five year statute of limitations under 28 U.S.C. § 2462 to Counts 1 and 2.

Although Respondent has not raised this issue, there is case law supporting the proposition that

courts should raise sua sponte certain jurisdictional statutes of limitation. John R. Sand &

Gravel Co. v. United States, 552 U.S. 130 (2008). However, it is unnecessary for this Tribunal

to address that issue, since Counts 3 through 6 are unaffected by this potential issue and suffice

to support the sanction imposed herein.

E.

Sanction

A sanction is to be determined by examining the nature of the violations in relation to

the purposes of the regulations along with all relevant circumstances, and giving appropriate

weight to the recommendation of the administrative officials charged with the responsibility of

achieving the statutory and regulatory purposes.

The issue in a disbarment proceeding is essentially whether the practitioner in question

is fit to practice. Harary v. Blumenthal, 555 F. 2d 113, 116 (2d Cir. 1977). A certified public

accountant’s failure to file tax returns for three consecutive years has been held to constitute

grounds sufficient for disbarment. Poole v. United States, No. 84-0300, 1984 U.S. Dist.

LEXIS 15351 (D.D.C. June 29, 1984). The court in Poole stated, “willful failure to file tax

returns, in violation of Federal revenue laws, in [sic] dishonorable, unprofessional, and

adversely reflects on the petitioner’s fitness to practice. This is particularly true in a tax

system whose very effectiveness depends upon voluntary compliance.” 1984 U.S. Dist.

LEXIS 15351 at 8. In Owrutsky v. Brady, No. 89-2402, 1991 U.S. App. LEXIS 2613 (4th Cir.

1991), an attorney was disbarred for willful failure to file timely tax returns for six consecutive

years, albeit he had no tax liability for any of those years.

7

Practice before the IRS is a privilege, and one cannot partake of that privilege without

also taking on the responsibilities of complying with the regulations that govern such practice.

Disbarment and suspension are imposed in furtherance of the IRS’ regulatory duty to protect

the public interest and the Department by conducting business with responsible persons only.

(b)(3)/26 USC 6103

(b)(3)/26 USC 6103

as an enrolled agent before the IRS, reflected by

, shows a disregard for the standards established for the benefit of

the IRS and the public.

Complainant seeks an order disbarring Respondent and the record supports the finding

(b)(3)/26 USC 6103

that

as alleged in the

Complaint warrants disbarment. The sanction of disbarment is commensurate with the

seriousness of the disreputable conduct found herein, and allows the Director of the Office of

Professional Responsibility complete discretion to determine under what conditions

Respondent may be reinstated.

VI.

Conclusions

Complainant has carried its burden of demonstrating that no genuine issues of material

fact exist, and that Complainant is entitled to judgment as a matter of law, with regard to

(b)(3)/26 USC 6103

Respondent’s liability for engaging in disreputable conduct by

as alleged in the Complaint.

It is concluded that disbarment is an appropriate sanction to impose against Respondent

for violations found herein.

8

ORDER

It is hereby ORDERED that:

1.

Complainant’s Renewed Motion for Summary Judgment is GRANTED; and

2.

Respondent (b)(3)/26 USC 6103 , be DISBARRED from practice before the

Internal Revenue Service, with reinstatement to practice thereafter at the sole

discretion of the Director of the Office of Professional Responsibility.

________/s/_______________________

Susan L. Biro

Chief Administrative Law Judge

U.S. Environmental Protection Agency 6

Dated: August 17, 2010

Washington, D.C.

NOTICE OF APPEAL RIGHTS

Pursuant to 31 C.F.R. § 10.77, this Order may be appealed to the Secretary of the

Treasury within thirty (30) days from the date of service of this Decision on the parties.

The appeal must be filed in duplicate with the Director of the Office of Professional

Responsibility and shall include a brief that states the appellant’s exceptions to the

decision of the Administrative Law Judge and supporting reasons therfor.

6

The Administrative Law Judges of the United States Environmental Protection Agency are authorized

to hear cases pending before the United States Department of the Treasury, pursuant to an Interagency Agreement

dated October 1, 2008.

9

In the Matter of (b)(3)/26 USC 6103 , Respondent

Complaint No. 2010-07

CERTIFICATE OF SERVICE

I certify that a true copy of Decision And Order On Complainant’s Motion For

Summary Judgment, dated August 17, 2010, was sent this day in the following manner to the

addresses listed below:

____________/s/_______________

Maria Whiting-Beale

Staff Assistant

Dated: August 17, 2010

Copy by First Class Regular Mail to:

Erin J. Davidson, Attorney

Internal Revenue Service

Office of Chief Counsel

General Legal Services

[Redacted]

San Francisco, CA [Redacted]

Copy By First Class Regular Mail and Certified Mail

Return Receipt To:

(b)(3)/26 USC 6103

[Redacted]

(b)(3)/26 USC 6103

10