The Due Process Clause of the Constitution mandates that the IRS strictly comply with the statutory process established by Congress before it is authorized to make any collection efforts against a taxpayer. Where the requirements of law have not been followed, the defects taint the collection process and render the IRS actions invalid.

In this case, the tax liens were illegal based on lack of due process because the government did not follow the procedures of notice and demand. Defendant stated in its Counterclaim that notice and demand were given to Plaintiffs. Defendant never submitted copies of what exactly was given and on what date(s). Plaintiffs were not aware of the illegal liens on their property until November 30, 2004 when they were supposed to close on the sale of their home.

Once again, to confirm Plaintiffs’ story, Plaintiffs’ lawyer asked: “Is it correct that you never received notice and demand about the liens?” Plaintiff Sherrie Long answered: “Yes that is correct.  We never received anything in the mail, left at our home or anything signed by a judge to take our property. I found out at the lawyers office.”

In Gandy, the Court wrote: Whether or not the government's position was substantially justified is determined from a reasonable person standard. More specifically, the government's position is “justified to a degree that would satisfy a reasonable person.” Nalle v. Comm'r, 55 F.3d 189, 191 (5th Cir.1995). “To meet this standard, the government's position must have a reasonable basis in law and fact.” Wilkerson, supra, 67 F.3d at 119 citing Bouterie v. Comm'r, 36 F.3d 1361, 1367 (5th Cir.1994); Hanson v. Comm'r, 975 F.2d 1150, 1153 (5th Cir.1992). “In essence, the inquiry focuses on the reasonableness of the government's position prior to the onset of litigation.” Wilkerson, supra, 67 F.3d at 119.  Gandy Nursery, Inc. v. U.S., not Reported in F.Supp.2d, 2004 WL 838070 (E. D. Tex., 2004).

In this case, it is not reasonable that the government has made no determination on Plaintiffs’ many administrative claims prior to this lawsuit.

It is not reasonable that Defendant placed liens based on assessment made without notice and demand.

It is not reasonable that Defendant fails to release the liens based on illegal assessment.

It is not reasonable that Defendant failed to notify Plaintiffs “not more than 5 business days after the day of the filing of the notice of lien.” 26 USC 6320(a)(2).

It is not reasonable that Defendant failed to provide for an administrative hearing and administrative appeal.

It is not reasonable for Defendant not to withdraw the notices of liens filed “not in accordance with administrative procedures of the Secretary.”  26 USC 6323(j)(1)(A).

 It is not reasonable for Defendant not to issue a certificate of release of lien that is illegal and thus legally unenforceable. 26 USC 6325(a)(1).

It is not reasonable to presume that Plaintiffs’ inability to close on the sale of their home, in addition to other incurred expenses resulting from the liens, is not damages.

It is not reasonable to presume that Plaintiffs were not caused real and substantive injury due to Defendant’s actions.

It would not be reasonable for Defendant to commit all these reckless, intentional, or negligent acts without the Court finding defendant liable to Plaintiffs for damages.

It would not be reasonable for the Court to dismiss this case knowing that Defendant had committed all these reckless, intentional, or negligent acts.

Plaintiffs did suffer direct, economic damages from Defendant’s failure to provide them notice. The fact that they could not sell their property was directly attributable to Defendant’s liens.

Plaintiffs submitted jurisdictionally mandated administrative claims required by 26 USC 7432(d)(1) which requires plaintiffs to exhaust the administrative remedies available to such plaintiffs with the IRS. Plaintiffs had also filed Administrative Claims for relief from wrongful collection actions pursuant to 26 USC § 7433(e). In its Answer of August 25, 2008, Defendant admitted (in paragraphs 37 and 42) that Plaintiffs have exhausted their administrative remedies.

In their pleading of August 26, 2008 (Plaintiffs’ response to Defendant’s memorandum in support of the motion to dismiss), Plaintiffs outlined how their challenge of Defendant’s actions was within the statute of limitations.

Defendant did not prove that they followed proper procedural measures in enforcing the liens. Instead of resolving the matter with least expense for all parties, Defendant filed a motion to dismiss as if Plaintiffs have no rights at all with them – incurring more anguish and expense on Plaintiffs, and more expense to the government.

In addition, Defendant filed a counterclaim against Plaintiffs making allegations of “frivolous return penalties” without providing documentations on either the Code’s definition of frivolous or how such description is applicable to Plaintiffs returns. A similar counterclaim, with almost word for word similarities in certain parts, was also filed in another case represented by Plaintiffs’ attorney (1:08-cv-00914-PLF). Whether these counterclaims are legitimated or intended to harass Plaintiffs’ attorney from filing similar lawsuits in the future against IRS unauthorized collection measures would be for the Court to judge.

The U.S. Congress has passed many private attorney general statutes, which relate to a private party who brings a lawsuit that is considered to be in the public interest, i.e. benefiting the general public and not just the plaintiff. The private attorney general is entitled to recover attorney's fees if he or she prevails. The purpose of this principle is to provide extra incentive to private citizens to pursue suits that may be of benefit to society at large.

For this Court to award maximum damages would rightfully compensate Plaintiffs for their economic and other losses or damages due to IRS actions.  It would give bureaucracies, such as the IRS, incentives to be more watchful so that they do not pursue unauthorized collection measures. It would also encourage citizens to file complaints in courts when their rights have been trespassed upon.

 Section 7433(b) was amended on July 30, 1996 to increase the maximum recoverable damages from $ 100,000 to $ 1,000,000. Gandy Nursery, Inc. v. United States, 318 F.3d 631, 638 (5th Cir.2003).

Due to the reasons listed above, Plaintiffs seek the maximum damages of $1,000,000 along with other relief the court deems appropriate including attorney fees and costs. Plaintiffs are entitled to damages under IRC § 7432 and to the statutory maximum in damages under IRC § 7433.