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Rockwell v. United States

United States District Court, D. Maryland

August 2, 2016

DAVID C. ROCKWELL, et al., Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant.

          David C. Rockwell, Plaintiff, represented by Gerald Warren Kelly, Jr., Kelly & Dorsey, P.C. & Daniel Scott Heller, Kelly Dorsey, P.C..

          Kathie M. Rockwell, Plaintiff, represented by Gerald Warren Kelly, Jr. & Daniel Scott Heller, Kelly Dorsey, P.C..

          United States of America, Defendant, represented by Stephen A. Josey, United States Department of Justice & Megan Eileen Hoffman Logsdon, U.S. Department of Justice.

          MEMORANDUM AND ORDER

          MARVIN J. GARBIS, District Judge.

         The Court has before it the United States' Motion to Dismiss and Motion for Summary Judgment [ECF No. 9] and the materials submitted relating thereto. The Court has held a hearing and had the benefit of the arguments of counsel.

         I. BACKGROUND

         In March 2009, Rumsey Road, LLC, a Maryland Limited Liability Company ("Rumsey Road"), executed a promissory note ("the Note") establishing a liability to Plaintiff David C. Rockwell in the principal amount of $450, 000.00, to be paid on the maturity date of March 1, 2016. Interest, at the rate of 6% per annum, was to be paid as follows:

• $27, 000.00 on execution of the note.
• $2, 250.00 on the first day of each month from April 2010 to March 2016.

         As of May 30, 2014, Plaintiffs, David and Kathie Rockwell, had the following unpaid principal balances[1] of assessments outstanding against them:

• § 6672 liabilities, 2008 and 4Q 2010 (Mr. Rockwell only) $317, 322.18.
• Form 1040, 2005 (Mr. Rockwell only) $150, 563.22.
• Form 1041, 2007, 2010, 2011 (Mr. & Mrs. Rockwell) $295, 254.82.

         On May 30, 2014, the I.R.S. served a Form 668-W(ICS) "Notice of Levy on Wages, Salary and Other Income" on Rumsey Road with regard to the Rockwell's tax liabilities. The form stated that the levy required Rumsey Road "to turn over to us: (1) this taxpayer's wages and salary that have been earned but not paid, as well as wages and salary earned in the future until this levy is released, and (2) this taxpayer's other income that you have now or for which you are obligated.[2] Mot. Ex. B, ECF No. 9-4 (emphasis added).

         In response, Rumsey Road paid the I.R.S. the $2, 250.00 of interest then owed and stated[3] that additional checks in that amount would be sent monthly.[4]

         On or about November 20, 2014, Plaintiffs filed an Offer in Compromise, Form 656, proposing to settle all their tax liabilities for a total payment of $150, 000.00 of which $6, 250.00 was paid with the offer and the balance of $143, 750.00 was to be paid from the principal of the Note[5] when paid. The I.R.S. returned the Offer in Compromise by letter of April 23, 2015, stating the following reasons for the return:

• The initial payment made was less than 20% of the offered amount.
• The offer was made in regard to two types of tax liabilities whereas separate offers were required for each type.
• The source of the offered payment was identified as the principal debt due on the Note, but that asset was already subject to an outstanding levy.

         Mot. Ex. C, ECF No. 9-5.

         Plaintiffs have filed the instant suit presenting claims in three Counts:

1. Violation of I.R.C.[6] § 7122 (Compromises)
2. Violation of I.R.C. § 6331 (Levies)
3. "Improper Treatment of Levy on Fund Restricted by Promissory ...

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