                  T.C. Memo. 2008-39



                UNITED STATES TAX COURT



            RODOLFO LIZCANO, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 211-03.               Filed February 26, 2008.



     R determined a deficiency in income tax for P’s
1999 tax year based primarily on the disallowance of
claimed business expenses. R mailed to P a notice of
deficiency that incorrectly provided the last day P
could petition the Tax Court. P claims that the notice
of deficiency is invalid and alleges that the
examination and audit were illegal and retaliatory.

     Held: The notice of deficiency is valid because P
received the notice timely and petitioned the Tax Court
timely.

     Held, further, the examination and audit of P’s
1999 Federal income tax return were in accordance with
applicable law.

     Held, further, R’s deficiency determination is
sustained.
                                - 2 -

     Rodolfo Lizcano, pro se.

     Roberta Shumway and Kelli H. Todd, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     WHERRY, Judge:   This case is before the Court on

respondent’s motion for summary judgment.   The issues are:

     (1) Whether the notice of deficiency is invalid because the

date it specified as the last day on which petitioner could

petition this Court was in error;

     (2) whether the notice of deficiency is invalid because

petitioner was improperly selected for examination and audit in

retaliation for Equal Employment Opportunity Commission (EEOC)

complaints and whistle blower reports he made while he was an

employee of the Internal Revenue Service (IRS).

     Unless otherwise indicated all section references are to the

Internal Revenue Code of 1986, as amended for the year in issue,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

                         FINDINGS OF FACT

     Petitioner was employed by the IRS for approximately 20

years.   Petitioner claims that during his employment he was

subjected to harassment and discrimination by his superiors and

colleagues and witnessed his superiors and colleagues engaging in

illegal activities.   Petitioner claims to have filed a complaint
                                - 3 -

with the EEOC in 1988 or 1989 on account of religious harassment

and discrimination by IRS managers.     He also claims to have made

whistle blower disclosures in 1996 regarding improprieties,

including “fraud, waste, mismanagement and abuse by IRS managers

and employees in Austin, TX”.    Additionally, he asserts that he

reported an IRS employee to IRS Inspection for interfering with

an audit he was conducting in 1997.

     On October 6, 1999, petitioner filed a formal equal

employment opportunity (EEO) complaint, case No. TD-00-2004,

alleging that his employer, the IRS, denied him the right to

reasonable accommodation in violation of the Rehabilitation Act

of 1973.    The Department of the Treasury, after its

investigation, ruled against petitioner.1    Petitioner appealed,

and the EEOC issued a decision, appeal No. 01A12073, on July 11,

2002, affirming the adverse decision of the Department of the

Treasury.

     On November 1, 2001, petitioner filed a formal EEO

complaint, case No. TD-02-2036, for retaliation, discrimination,

and harassment.    Additionally, on November 29, 2001, petitioner

filed another formal EEO complaint, case No. TD-02-2066, alleging

“illegal browsing of petitioner’s 2000 tax account information,



     1
      Federal employees who believe that they have been
discriminated against by a Federal agency have a right to file an
EEO complaint with that agency. The employee may then appeal the
agency’s decision to the EEOC.
                               - 4 -

the illegal initiation of an audit on petitioner’s 2000 tax

return, and the illegal denial of petitioner’s right to

reasonable accommodation”.   These cases were both decided against

petitioner by the Department of the Treasury.

     Petitioner appealed both of these cases, and the EEOC issued

a final decision, appeal No. 01A33800, on July 15, 2004.    The

EEOC affirmed the initial adverse rulings as to both of

petitioner’s complaints, concluding that petitioner was not

subjected to a hostile work environment or denied reasonable

accommodation for his disability, and that the allegation of

discrimination due to the selection of petitioner’s 2000 tax

return for audit was rejected appropriately.

     The notice of deficiency was mailed to petitioner on

October 3, 2002.   The notice determined an income tax deficiency

of $3,959, based primarily on the disallowance of amounts

petitioner claimed as business expense deductions, for

petitioner’s 1999 taxable year.   The notice of deficiency, in

error, listed January 2, 2002, as the last day to file a petition

with this Court.   On October 31, 2002, respondent mailed to

petitioner a letter acknowledging the error and informing

petitioner that the last day to file a petition with this Court

was in fact January 2, 2003.   Petitioner denies receipt of this

letter.
                               - 5 -

     Petitioner, who at that time resided in McAllen, Texas,

filed timely a petition with this Court postmarked January 2,

2003.2   On February 20, 2003, respondent filed a motion to

dismiss for failure to state a claim upon which relief can be

granted.   In response, the Court issued an order instructing

petitioner to file an amended petition, and informing both

parties that a hearing would be held on respondent’s motion.

     Petitioner filed a motion for extension of the time to file

his amended petition, which the Court granted.   Petitioner filed

an amended petition on March 13, 2003, and filed a second amended

petition on March 24, 2003.   All three of petitioner’s petitions

were devoid of any arguments regarding the dollar amount of the

deficiency.3   They focused solely on petitioner’s contentions


     2
      Respondent mailed the notice of deficiency to petitioner on
Oct. 3, 2002. The 90th day thereafter was Wednesday, Jan. 1,
2003, which was a legal holiday in the District of Columbia. See
sec. 6213(a); Rule 25(b). “When the last day prescribed under
authority of the internal revenue laws for performing any act
falls on * * * a legal holiday, the performance of such act shall
be considered timely if it is performed on the next succeeding
day which is not a * * * legal holiday.” Sec. 7503.

     If a postage prepaid properly addressed petition is received
by the Court after the expiration of the 90-day period, it is
nevertheless deemed to be timely if the date of the U.S. Postal
Service postmark stamped on the envelope in which the petition
was mailed is within the time prescribed for filing.
Sec. 7502(a); sec. 301.7502-1, Proced. & Admin. Regs. Petitioner
mailed his petition via the U.S. Postal Service, and it bears a
postmark of Jan. 2, 2003. Accordingly, the petition is deemed
timely filed. See sec. 7502(a).
     3
      Petitioner did not assign error to respondent’s deficiency
                                                   (continued...)
                               - 6 -

that the statutory notice of deficiency was invalid because of

its faulty designation of January 2, 2002, as the last date for

filing the petition and that respondent illegally conducted a

retaliatory audit of his 1999 Federal income tax return on

account of his EEOC complaints and whistle blowing.

     A hearing on respondent’s motion to dismiss was held on

March 24, 2003, in San Antonio, Texas.   At that time the Court

denied respondent’s motion.   Thereafter, respondent filed an

answer to the second amended petition.

     On June 13, 2003, petitioner filed an original complaint in

District Court in the McAllen Division of the Southern District

of Texas.   Petitioner’s original complaint asserted various

constitutional and statutory actions based upon his former

employment with the IRS and named the United States of America,

the United States Department of the Treasury, the IRS, and 17

individuals with whom he had worked or who had been involved with

the audit of his 1999 Federal income tax return as defendants.

Petitioner sought a trial by jury and damages for alleged

violations of his civil rights.   See Bivens v. Six Unknown Named

Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971).


     3
      (...continued)
determination in his petition, amended petition, or second
amended petition. Each issue not addressed by a clear and
concise assignment of error in the petition is deemed to be
conceded. Rule 34(b)(4). Accordingly, petitioner is deemed to
have conceded the correctness of respondent’s deficiency
determination.
                               - 7 -

Petitioner’s original complaint, on September 12, 2003, was sua

sponte ordered transferred to the Austin Division of the Western

District of Texas (District Court), where it was filed on

September 23, 2003.   Lizcano v. United States, No. A-03-CA-661-SS

(D. Tex. Dec. 14, 2004).

     On December 4, 2003, respondent filed a motion for

continuance of the then-scheduled Tax Court trial because “The

common issue before this Court and the District Court will

necessitate that the same evidence be introduced in each case.”

The Tax Court ordered petitioner to file a response.   On

December 24, 2003, petitioner filed a response indicating no

objection to respondent’s motion.   On December 30, 2003, the Tax

Court granted respondent’s motion for continuance.

     On December 23, 2003, the District Court defendants filed

motions to dismiss, and on March 8, 2004, that court dismissed

all causes of action against the individual defendants and

granted petitioner leave to file an amended complaint with

respect to his Bivens, and section 7431 or Privacy Act, claims.4



     4
      The District Court concluded that the suit against the
individually named defendants “in their official capacities” was
precluded by sovereign immunity, and that there was “no private
cause of action against an employee under the Family Medical
Leave Act” or “Whistleblower Act as applicable to federal
employees”. No claims were alleged by petitioner under the
Federal Tort Claims Act and the District Court found that “his
attempted Bivens pleadings * * * [were] also defective” because
they did not contain a “specific allegation of any constitutional
right violation”.
                              - 8 -

Petitioner, on April 22, 2004, filed his Bivens action amended

complaint, in which he named as defendants nine individuals with

whom he had worked or who had been involved with the audit of his

1999 Federal income tax return.5   The amended complaint alleged

violations of sections 6103 and 7605 and his civil rights.

     On December 14, 2004, the District Court issued an order and

a judgment dismissing petitioner’s case.   It concluded that, for

summary judgment purposes, while petitioner had sufficiently

alleged violations of his constitutional rights by defendants in



     5
      Petitioner’s amended complaint did not list the United
States, the Department of the Treasury, or the IRS as a
defendant. In n.1 in the Appendix To Individual Defendant’s
Dispositive Motion, filed with the District Court, the nine named
individual defendants argued that

     by operation of Lizcano’s amended complaint, the
     Treasury Department has been dismissed from this
     action. 6 CHARLES ALAN WRIGHT, ARTHUR R. MILLER, MARY
     K. KANE, FEDERAL PRACTICE AND PROCEDURE § 1476 (2d ed.
     1990) (reasoning that an amended pleading supersedes
     the original, i.e., the original is of no legal
     effect); King v. Dogan, 31 F.3d 344, 346 (5th Cir.
     1994) (same); see also Campbell v. Hoffman, 151 F.R.D.
     682, 684 (D. Kan. 1993) (holding that the plaintiff’s
     amended complaint effected the dismissal of one of the
     defendants from the lawsuit); 8 MOORE’S FEDERAL
     PRACTICE ¶ 41.21[2] (3d ed. 2002) (reasoning that an
     amended complaint is the appropriate mechanism for
     eliminating an issue, or one or more but less than all
     of several claims).

     This Court notes that the District Court’s order dismissing
petitioner’s case, as well as its judgment, both discussed infra,
included the United States, the Department of the Treasury, and
the IRS as defendants in the caption.
                               - 9 -

initiating the audit, he had failed to prove those charges.

Further, the defendants had with “competent summary judgment

evidence” established that “none of them were responsible for the

initiation of his federal income tax examination” and that his

return was selected for audit by computer and not as a

retaliatory action.   The order states:   “Plaintiff’s own evidence

supports Defendants’ claims of non-involvement in the selection

of his audit.”   The District Court completely dismissed

petitioner’s suit, including the Bivens claim.    The District

Court’s judgment stated:   “IT IS ORDERED, ADJUDGED, and DECREED

that Plaintiff Rodolfo Lizcano TAKE NOTHING against Defendants

the United States of America, the Internal Revenue Service, the

Department of the Treasury”, and the named individual defendants.

     On February 7, 2005, respondent filed with this Court a

motion for continuance of trial to provide time for petitioner to

appeal the District Court case.   This Court granted respondent’s

motion.   On August 11, 2005, respondent filed a motion for

summary judgment.   The Tax Court, by order dated August 22, 2005,

ordered petitioner to file any response on or before

September 30, 2005.   To date, the Tax Court has not received a

response.

     The Tax Court, by order dated November 25, 2005, informed

both parties that a hearing on respondent’s motion for summary

judgment was scheduled for a time and date certain of
                                - 10 -

January 10, 2006, at 9 a.m. in San Antonio, Texas, in a

designated courtroom in order to precede the scheduled trial of

the case that week.   Petitioner failed to make an appearance at

the hearing.

                                OPINION

I.   Jurisdiction

     There are two prerequisites to this Court’s jurisdiction to

redetermine a deficiency:   (1) The issuance of a valid notice of

deficiency by the Commissioner, and (2) the timely filing of a

petition with the Court by the taxpayer.   See Rule 13(a), (c);

Rochelle v. Commissioner, 116 T.C. 356, 358 (2001) (and cases

cited thereat), affd. 293 F.3d 740 (5th Cir. 2002).

     Validity of Notice of Deficiency

     Petitioner contends that the notice of deficiency is invalid

because it lists incorrectly the last date on which petitioner

could file a timely petition with this Court.   Petitioner relies

on section 6213(a) and the Internal Revenue Service Restructuring

and Reform Act of 1998 (RRA),    Pub. L. 105-206, sec. 3463(a), 112

Stat. 767, for his argument that the notice of deficiency is

invalid.

     Pursuant to section 6213(a), a taxpayer has 90 days (or 150

days if the notice is addressed to a person outside the United

States) from the date that the notice of deficiency is mailed to
                               - 11 -

file a petition with this Court for a redetermination of the

contested deficiency.   RRA section 3463(a) provides as follows:

     (a) In General.--The Secretary of the Treasury or the
     Secretary’s delegate shall include on each notice of
     deficiency under section 6212 of the Internal Revenue
     Code of 1986 the date determined by such Secretary (or
     delegate) as the last day on which the taxpayer may
     file a petition with the Tax Court.

     (b) Later Filing Deadlines Specified on Notice of
     Deficiency To Be Binding.--Subsection (a) of section
     6213 (relating to restrictions applicable to
     deficiencies; petition to Tax Court) is amended by
     adding at the end the following new sentence: “Any
     petition filed with the Tax Court on or before the last
     date specified for filing such petition by the
     Secretary in the notice of deficiency shall be treated
     as timely filed”.

     (c) Effective Date.--Subsection (a) and the amendment
     made by subsection (b) shall apply to notices mailed
     after December 31, 1998.

     Section 6212(a) provides that if the Commissioner determines

a deficiency in income tax, “he is authorized to send notice of

such deficiency to the taxpayer by certified mail or registered

mail.”    “The purpose of this provision is to provide the taxpayer

with actual notice of the deficiency in a timely manner, so that

the taxpayer will have an opportunity to seek a redetermination

of such deficiency in the prepayment forum offered by this

Court.”   Rochelle v. Commissioner, supra at 359-360; see Smith v.

Commissioner, 114 T.C. 489, 490-491 (2000), affd. 275 F.3d 912

(10th Cir. 2001); McKay v. Commissioner, 89 T.C. 1063, 1067

(1987), affd. 886 F.2d 1237 (9th Cir. 1989).   Accordingly, this

Court has held that where the Commissioner fails to provide the
                                - 12 -

petition date on the notice of deficiency but the taxpayer

nonetheless receives the notice and files a timely petition, the

notice is valid.     Smith v. Commissioner, supra at 492.

      Petitioner received the notice of deficiency and filed a

timely petition with this Court.    Although the notice of

deficiency stated incorrectly the last date on which petitioner

could petition this Court, it clearly and conspicuously stated

that a petition must be filed with this Court within 90 days of

the date the notice of deficiency was mailed.    Furthermore,

respondent mailed a letter to petitioner on October 31, 2002,

acknowledging the error in the notice of deficiency and informing

petitioner that he had until January 2, 2003, to file a petition

with this Court.    Accordingly, the statutory goal of providing

the taxpayer with actual notice of the deficiency determination

in a timely manner was satisfied.    The Court concludes that the

notice of deficiency is valid and this Court has jurisdiction.

II.   Availability of a Bivens Remedy

      “Bivens provides that federal courts have the inherent

authority to award damages against federal officials to

compensate plaintiffs for violations of their constitutional

rights.   * * *    However, Bivens remedies are not available to

compensate plaintiffs for all constitutional torts committed by

federal officials.”     W. Ctr. for Journalism v. Cederquist, 235

F.3d 1153, 1156 (9th Cir. 2000).    There are three recognized
                                - 13 -

circumstances in which a Bivens remedy is unavailable:

(1) “Congress has provided what it considers adequate remedial

mechanisms for constitutional violations that may occur” in the

course of administering a Federal program,6 (2) there are

“special factors counselling hesitation in the absence of

affirmative action by Congress”7 that indicate that congressional

inaction has not been inadvertent, and (3) Congress has

specifically foreclosed such relief (and courts cannot judicially

create a remedy).8     Id. at 1156 n.3.

     The third circumstance is applicable to the instant case as

the Anti-Injunction Act, section 7421(a), prohibits suits to

restrain the assessment or collection of taxes.9      The first

circumstance is also pertinent as Congress has given taxpayers

the right to sue for a refund.     Sec. 7422.    Additionally,


     6
      Schweiker v. Chilicky, 487 U.S. 412, 423 (1988); see the
Court of Appeals for the Fifth Circuit’s decision in Baddour,
Inc. v. United States, 802 F.2d 801, 807-808 (5th Cir. 1986), the
court to which an appeal in this case would normally lie absent a
stipulation to an appeal elsewhere; see also Natl. Commodity and
Barter Ass’n v. Archer, 31 F.3d 1521, 1532 (10th Cir. 1994);
Wages v. IRS, 915 F.2d 1230, 1235 (9th Cir. 1990); Cameron v.
IRS, 773 F.2d 126, 129 (7th Cir. 1985).
     7
      Carlson v. Green, 446 U.S. 14, 18 (1980); see Chappell v.
Wallace, 462 U.S. 296 (1983).
     8
         See Carlson v. Green, supra at 18-19.
     9
      Sec. 6330(e)(1) overrides the Anti-Injunction Act and
permits proceedings in the proper court, including this Court, to
enjoin the beginning of a levy during the period the levy action
is suspended. See Boyd v. Commissioner, 124 T.C. 296, 299
(2005).
                              - 14 -

Congress has given taxpayers the right to bring a civil action

for damages and has established criminal sanctions for Federal

officers or employees who infringe upon a taxpayer’s rights.      See

sections 6103, 7213, 7213A, and 7431, discussed infra.

III. Anti-Injunction Act

     In Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974), the

court stated the purpose of the Anti-Injunction Act as follows:

     The Anti-Injunction Act apparently has no recorded
     legislative history, but its language could scarcely be
     more explicit - ‘no suit for the purpose of restraining
     the assessment or collection of any tax shall be
     maintained in any court * * *’[.] The Court has
     interpreted the principal purpose of this language to
     be the protection of the Government’s need to assess
     and collect taxes as expeditiously as possible with a
     minimum of preenforcement judicial interference, ‘and
     to require that the legal right to the disputed sums be
     determined in a suit for refund.’” [Citations
     omitted.]

     It is evident that the primary purpose of petitioner’s case

is to prevent the assessment and collection of taxes for his 1999

taxable year.   Congress has given taxpayers “the right to sue the

government for a refund if forced to overpay taxes, and it would

make the collection of taxes chaotic if a taxpayer could bypass

the remedies provided by Congress simply by bringing a damage

action against Treasury employees.”    Cameron v. IRS, 773 F.2d

126, 129 (7th Cir. 1985).   “There are sound reasons not to

subject the taxing system to an extra-statutory measure of

damages without express Congressional authority.”    Baddour, Inc.
                               - 15 -

v. United States, supra at 809.    The Anti-Injunction Act

expressly bars petitioner’s action.10

     Furthermore, the Courts of Appeals for the First, Second,

Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, and Tenth

Circuits are all in agreement that “Bivens relief is not

available for alleged constitutional violations by IRS officials

involved in the process of assessing and collecting taxes”.

Adams v. Johnson, 355 F.3d 1179, 1184 (9th Cir. 2004); see Hudson

Valley Black Press v. IRS, 409 F.3d 106, 113 (2d Cir. 2005);

Judicial Watch, Inc. v. Rossotti, 317 F.3d 401, 413 (4th Cir.

2003); Shreiber v. Mastrogiovanni, 214 F.3d 148, 155 (3d Cir.

2000); Dahn v. United States, 127 F.3d 1249, 1254 (10th Cir.

1997); Fishburn v. Brown, 125 F.3d 979, 982-983 (6th Cir. 1997);

Vennes v. An Unknown Number of Unidentified Agents of the United

States, 26 F.3d 1448, 1453-1454 (8th Cir. 1994); McMillen v.

United States Department of Treasury, 960 F.2d 187, 190 (1st Cir.

1991); Baddour, Inc. v. United States, supra at 807-809; Cameron

v. IRS, supra at 129.    This Court will not judicially create a

remedy for petitioner.




     10
      None of the exceptions to the Anti-Injunction Act is
applicable to the instant case. Sec. 7421(a) provides: “Except
as provided in sections 6015(e), 6212(a) and (c), 6213(a),
6225(b), 6246(b), 6330(e)(1), 6331(i), 6672(c), 6694(c), 7426(a)
and (b)(1), 7429(b), and 7436, no suit for the purpose of
restraining the assessment or collection of any tax shall be
maintained in any court by any person”.
                               - 16 -

IV.   Respondent’s Motion for Summary Judgment

      A. General Rules

      Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).    A party is allowed to

move “for a summary adjudication in the moving party’s favor upon

all or any part of the legal issues in controversy.”

Rule 121(a).   A decision on the motion shall be “rendered if the

pleadings, answers to interrogatories, depositions, admissions,

and any other acceptable materials, together with the affidavits,

if any, show that there is no genuine issue as to any material

fact and that a decision may be rendered as a matter of law.”

Rule 121(b).

      The moving party bears the burden of proving that no genuine

issue of material fact exists and that he or she is entitled to

judgment as a matter of law.   Sundstrand Corp. v. Commissioner,

98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994).

Facts and inferences drawn from the record are viewed in the

light most favorable to the nonmoving party.     Id.   Where the

moving party properly makes and supports a motion for summary

judgment, “an adverse party may not rest upon the mere

allegations or denials of such party’s pleading,” but must, by

affidavits or otherwise, set forth “specific facts showing that

there is a genuine issue for trial.”    Rule 121(d).
                                - 17 -

     B. Unlawful Audit

     Petitioner relies on sections 6103 and 7213 for his claim

that the audit and examination of his 1999 Federal income tax

return was improper.     Section 6103 protects the privacy of

taxpayers and restricts Government officers and employees from

disclosing confidential return information.     In support of the

restrictions imposed by section 6103, sections 7213 and 7213A

make unlawful the unauthorized disclosure of return information

and the unauthorized inspection of returns or return information,

respectively.

     Section 7213 makes it unlawful for any officer or employee

of the United States, or any person described in section 6103(n)

(or an officer or employee of any such person), or any former

officer or employee, to willfully disclose, except as otherwise

authorized by law, any tax return or return information as

defined in section 6103(b).     The penalty for this felony is a

fine of not more than $5,000 or imprisonment for not more than 5

years, or both.   Additionally, section 7431 imposes civil damages

for the unauthorized inspection or disclosure of returns and

return information.11


     11
      A taxpayer may bring a civil action for damages in a U.S.
District Court. Sec. 7431(a)(1). The damages are the greater of
(1) $1,000 for each unauthorized inspection or disclosure of a
return or return information, or (2) the sum of the actual
damages sustained by the taxpayer as a result of such
unauthorized inspection or disclosure, plus, in the case of a
                                                   (continued...)
                             - 18 -

     Section 7213A, Unauthorized Inspection of Returns or Return

Information, was enacted in 1997 by the Taxpayer Browsing

Protection Act, Pub. L. 105-35, section 2(a), 111 Stat. 1104

(1997), to address unauthorized scanning of tax returns and

return information primarily by tax enforcement personnel.

Section 7213A provides:

     SEC. 7213A(a). Prohibitions.--

          (1) Federal employees and other persons.–-It shall
     be unlawful for--

               (A) any officer or employee of the United
          States, or

               (B) any person described in section 6103(n)
          or an officer or employee of any such person,

     willfully to inspect, except as authorized in this
     title, any return or return information.

For purposes of section 7213A, “inspect” means “any examination

of a return or return information.”    Secs. 7213A(c), 6103(b)(7).

Violation of section 7213A can result in a fine not exceeding

$1,000, or imprisonment not exceeding 1 year, or both, as well as

dismissal from Federal employment.    Sec. 7213A(b)(1) and (2).




     11
      (...continued)
willful inspection or disclosure, or an inspection or disclosure
that is the result of gross negligence, punitive damages. Sec.
7431(c)(1). In addition to the damages as determined by sec.
7431(c)(1), the taxpayer is entitled to the cost of the action.
Sec. 7431(c)(2). The taxpayer may also be able to recover
attorney’s fees. See secs. 7431(c)(3) and 7430.
                               - 19 -

     As a general rule, this Court will not look behind a notice

of deficiency.   It does not usually examine the evidence used or

the propriety of the Commissioner’s motives, policy, or

procedures in making audit determinations.   See Riland v.

Commissioner, 79 T.C. 185, 201 (1982); Greenberg’s Express, Inc.

v. Commissioner, 62 T.C. 324, 327-328 (1974); Human Engg.

Institute v. Commissioner, 61 T.C. 61, 66 (1973); Suarez v.

Commissioner, 58 T.C. 792, 814 (1972), overruled in part Guzzetta

v. Commissioner, 78 T.C. 173 (1982).    However, this Court has

recognized an exception to the rule when there is substantial

evidence of unconstitutional conduct on the Commissioner’s part

and the integrity of the judicial process would be impugned if

the Court permitted the Commissioner to benefit from his conduct.

Suarez v. Commissioner, supra; see Greenberg’s Express, Inc. v.

Commissioner, supra.    But even in these limited situations, this

Court has refused to hold the notice of deficiency null and void.

Human Engg. Institute v. Commissioner, supra; Suarez v.

Commissioner, supra; see Greenberg’s Express, Inc. v.

Commissioner, supra.

     C. Collateral Estoppel

     Respondent contends that collateral estoppel, also known as

issue preclusion, precludes petitioner from relitigating the

issue of whether his 1999 Federal income tax return was illegally

selected for audit.    Respondent notes that the District Court has
                              - 20 -

held that petitioner’s income tax return was selected for audit

by computer.

     Collateral estoppel exists for the “dual purpose of

protecting litigants from the burden of relitigating an identical

issue and of promoting judicial economy by preventing unnecessary

or redundant litigation.”   Meier v. Commissioner, 91 T.C. 273,

282 (1988); see also Montana v. United States, 440 U.S. 147, 153-

154 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326

(1979).   In general, the doctrine of collateral estoppel

forecloses relitigation of issues actually litigated and

necessarily decided in a prior suit.   Parklane Hosiery Co. v.

Shore, supra at 326 n.5; Meier v. Commissioner, supra at 282;

Peck v. Commissioner, 90 T.C. 162, 166 (1988), affd. 904 F.2d 525

(9th Cir. 1990).

     This Court, expanding upon three factors identified by the

Supreme Court in Montana v. United States, supra at 155, has set

forth five prerequisites necessary for the application in factual

contexts of collateral estoppel:

          (1) The issue in the second suit must be identical
     in all respects with the one decided in the first suit.
          (2) There must be a final judgment rendered by a
     court of competent jurisdiction.
     (3) Collateral estoppel may be invoked against parties and
their privies to the prior judgment.
          (4) The parties must actually have litigated the
     issues and the resolution of these issues must have
     been essential to the prior decision.
          (5) The controlling facts and applicable legal
     rules must remain unchanged from those in the prior
                                     - 21 -

       litigation. [Peck v. Commissioner, supra at 166-167
       (citations omitted).]

       1. Identity of Issues

       The first of the five factors enumerated above focuses on

identity of the issues.       The Court must determine whether the

facts and issues upon which the earlier judgment was rendered are

applicable to the instant case.         See Gammill v. Commissioner, 62

T.C. 607, 616 (1974).       The question before the District Court in

the proceeding between petitioner and the nine named individuals

was:    (1) Whether the named individuals “either participated in

the decision to initiate audits of [his] tax returns or in the

actual audit process itself” in violation of sections 6103(a) and

7605(b),12 and (2) whether petitioner’s constitutional rights,

specifically his First Amendment right to free speech, his Fourth

Amendment liberty interests, his Fifth Amendment right to

procedural and substantive due process and equal protection, and

his right to be free of cruel and unusual punishment, were

violated.




       12
            Sec. 7605(b) provides:

            SEC. 7605(b). Restrictions on Examination of
       Taxpayer.–-No taxpayer shall be subjected to
       unnecessary examination or investigations, and only one
       inspection of a taxpayer’s books of account shall be
       made for each taxable year unless the taxpayer requests
       otherwise or unless the Secretary, after investigation,
       notifies the taxpayer in writing that an additional
       inspection is necessary.
                              - 22 -

     In probing the existence of the alleged violations, the

District Court made specific findings of fact and conclusions

with respect to the selection of petitioner’s 1999 Federal income

tax return for audit.   The District Court found that none of the

named individual defendants was responsible for the selection of

petitioner’s 1999 Federal income tax return for audit because his

tax return was selected by computer.   The District Court’s

findings addressed precisely the same issue that is now before

this Court:   the selection of petitioner’s 1999 Federal income

tax return for audit.   Accordingly, identity of issues poses no

barrier to the application of collateral estoppel.

     2. Final Judgment by Court of Competent Jurisdiction

     The second pertinent factor is phrased in terms of a final

judgment by a court of competent jurisdiction.   There is no

question that the District Court is a court of competent

jurisdiction and that it reached a final judgment in the subject

case.   This prerequisite also poses no barrier to the application

of collateral estoppel.

     3. Privity

     The third point typically considered by this Court in

assessing the propriety of collateral estoppel is that the

doctrine may be invoked against parties and their privies to the

prior judgment.   Peck v. Commissioner, supra at 166.

Historically, courts often went further than this formulation in
                              - 23 -

restricting the rule’s use.   As explained by the U.S. Supreme

Court in 1979:   “Until relatively recently, however, the scope of

collateral estoppel was limited by the doctrine of mutuality of

parties.   Under this mutuality doctrine, neither party could use

a prior judgment as an estoppel against the other unless both

parties were bound by the judgment.”   Parklane Hosiery Co. v.

Shore, supra at 326-327.   The Supreme Court has now abandoned the

requirement of mutuality and sanctioned both offensive and

defensive use of nonmutual collateral estoppel.    See, e.g.,

United States v. Mendoza, 464 U.S. 154, 158-159 (1984); Parklane

Hosiery Co. v. Shore, supra at 327-329, 331.

     Offensive use “occurs when the plaintiff seeks to foreclose

the defendant from litigating an issue the defendant has

previously litigated unsuccessfully in an action with another

party”, while use in the defensive sense “occurs when a defendant

seeks to prevent a plaintiff from asserting a claim the plaintiff

has previously litigated and lost against another defendant.”

Parklane Hosiery Co. v. Shore, supra at 326 n.4.    This Court

likewise no longer insists upon strict mutuality.13

     Respondent seeks to assert collateral estoppel against

petitioner, which is defensive collateral estoppel.    “Privity in


     13
      However, there is a caveat: where collateral estoppel
premised on a State proceeding is sought to be used offensively
in Federal Court, reference is made to the controlling State law
to determine the propriety of such offensive use. Bertoli v.
Commissioner, 103 T.C. 501, 508 (1994).
                               - 24 -

the sense of ‘identity of interests’ has been broadly construed

and applied. * * * Privity between the United States and the

Commissioner of Internal Revenue is also recognized by this

Court.”   Gammill v. Commissioner, supra at 614.   Similarly,

Government officials or employees who are sued in their official

capacities are generally considered to be in privity with the

Government or their governmental agencies.   Bloomquist v. Brady,

894 F. Supp. 108, 114 (W.D.N.Y. 1995) (Secretary of the Treasury

was in privity with the United States); see Gregory v. Chehi, 843

F.2d 111, 120 (3d Cir. 1988); Thurston v. United States, 810 F.2d

438, 444 (4th Cir. 1987); Town of Seabrook v. New Hampshire, 738

F.2d 10, 11 (1st Cir. 1984).

     Respondent is permitted to use collateral estoppel in the

defensive sense because petitioner’s case in the District Court

was against respondent, at least initially, and named individual

employees of respondent.   The fact that petitioner did not

include respondent as a defendant in his District Court amended

complaint does not bar the application of collateral estoppel

because respondent has privity with its employees.   See supra

note 7.   Furthermore, the captions of the order and judgment of

the District Court include respondent, and the judgment

specifically provides:   “IT IS ORDERED, ADJUDGED, and DECREED

that Plaintiff Rodolfo Lizcano TAKE NOTHING against Defendants

the United States of America, the Internal Revenue Service, the
                                - 25 -

Department of the Treasury”.    There is an obvious “identity of

interests” where nine of respondent’s employees, as well as

respondent (at least initially), were defendants in petitioner’s

District Court case, and respondent is now the defendant in the

instant case.    Accordingly, privity poses no barrier to the

application of collateral estoppel.

     4. Issues Actually Litigated and Essential

     The fourth factor is that the issues in question have been

actually litigated and essential to the result in the prior

proceeding.     Peck v. Commissioner, supra at 167.    The District

Court stated:    “Lizcano has also alleged the sole motivation

underlying the audit of his tax returns was to retaliate against

his constitutionally protected right to complain of illegal and

discriminatory actions by other IRS employees.”       The District

Court concluded that while petitioner had sufficiently alleged

violations of his constitutional rights by defendants in

initiating the audit, he failed to prove that any of the named

defendants initiated or were involved in the selection of his tax

return for examination.    Instead, the District Court found that

the selection of his 1999 Federal income tax return for audit had

been done by computer.14    Petitioner again alleges that his 1999


     14
      There has been no allegation nor fact alleged that the
computer’s selection was done in other than a neutral way based
on the IRS’s standard matching and/or Discriminatory Income
Function (DIF) software used to score tax returns for their
                                                   (continued...)
                               - 26 -

Federal tax return was improperly selected for audit in

retaliation for his EEOC complaints and whistle blowing.       Thus,

petitioner seeks to relitigate the identical issue necessarily

decided in his District Court case.     This factor poses no

obstacle to the application of collateral estoppel.

     5. Change in Circumstances

     The fifth consideration for collateral estoppel is whether

there has been a change in the controlling facts or legal rules

since the earlier ruling.    Id.   The type of changes with which

this factor is concerned are factual changes stemming from

subsequent events and legal changes wrought by intervening

judicial decisions, statutory provisions, or regulatory

promulgations.   Sunnen v. Commissioner, 333 U.S. 591, 599-601

(1948).   Respondent seeks to apply collateral estoppel to the

same facts considered by the District Court.     Petitioner has not

brought to the Tax Court’s attention, nor is this Court aware of,

any relevant changes in the applicable law via judicial

decisions, statutory provisions, or regulatory promulgations that

have occurred since the District Court dismissed petitioner’s

case on December 14, 2004.   Accordingly, change in circumstances

also poses no bar to the application of collateral estoppel.


     14
      (...continued)
probability of error and applied even handedly to all individual
income tax returns. The DIF scoring system was developed by
using the results of random audits historically known as the
Taxpayer Compliance Movement Program or by its acronym TCMP.
                              - 27 -

     6. Conclusion

     The Court concludes that collateral estoppel bars petitioner

from relitigating the issue of whether his 1999 Federal income

tax return was improperly selected for audit in violation of

sections 6103 and 7605(b) and petitioner’s constitutional rights.

The District Court previously found that petitioner’s 1999

Federal income tax return was selected for audit by computer and

not in retaliation for his complaints against his coworkers or

his job performance.

     Petitioner also alleges that respondent violated section

7213, an issue which he did not raise in his District Court case.

However, pursuant to the judicial doctrine of collateral

estoppel, “the parties to the suit and their privies are

thereafter bound ‘not only as to every matter which was offered

and received to sustain or defeat the claim or demand, but as to

any other admissible matter which might have been offered for

that purpose.’”   Commissioner v. Sunnen, supra at 597 (quoting

Cromwell v. County of Sac, 94 U.S. 351, 352 (1877)).

Accordingly, the Court will grant respondent’s motion for summary

judgment.

     The Court has considered all of petitioner’s contentions,

arguments, requests, and statements.   To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.
                        - 28 -

To reflect the foregoing,


                                  An appropriate order and

                             decision will be entered for

                             respondent.
