                3Jn tbe Wniteb ~tates ~ourt of jfeberal ~laims
                                          No. 15-1266T                              FILED
                                     (Filed: February 6, 2017)                    FEB - 6 2017
                                                                                 U.S. COURT OF
 ********************************** )                                           FEDERAL CLAIMS
                                               )
 GEORGE J. FOXX,                               )     Tax refund suit; preparer penalty; l.R.C. §
                                               )     6694(b)
                        Plaintiff,             )
                                               )
           v.                                  )
                                               )
 UNITED STATES,                                )
                                               )
                        Defendant.             )
                                               )
 **********************************

       George J. Foxx, pro se, Tampa, Florida.

       Brian J. Sullivan, Trial Attorney, Tax Division, United States Department of Justice,
Washington, D.C., for defendant. With him on the briefs were Caroline D. Ciraolo, Principal
Deputy Assistant Attorney General, Tax Division, David I. Pincus, Chief, Court of Federal
Claims Section, and G. Robson Stewart, Assistant Chief, Court of Federal Claims Section, Tax
Division, United States Department of Justice, Washington, D.C.

                                     OPINION AND ORDER

LETTOW, Judge.

        Plaintiff, Dr. George J. Foxx, brings this action to recover a $2,500 tax preparer penalty
he paid to the Internal Revenue Service ("IRS") in 2012. Dr. Foxx was originally assessed a
$5,000 penalty after preparing a 2007 tax return for Shakeena Bryant that rep01ted false business
income. The IRS reduced the penalty to $2,500 after Dr. Foxx filed a pre-assessment appeal.
Dr. Foxx now claims that he is entitled to a full refund because he relied upon the statements of
Ms. Bryant regarding a business, performed due diligence, and acted in good faith in preparing
Ms. Bryant's 2007 tax return. He also seeks sanctions against the government due to a discovery
request made by the government to a third party during the course of this case.

        Pending before the court are Dr. Foxx's motion for summary judgment or, alternatively,
for sanctions, see Pl.'s Mot. for Directed Verdict, in the Alternative, Sanctions Based o[n] Rule
37 ("Pl. 's Mot."), ECF No. 11 , 1 and the government's cross-motion for summary judgment,

       1
        Dr. Foxx styled his submission as a motion for a directed verdict, but that motion is
inappropriate under the Rules of the Court of Federal Claims ("RCFC") because this comt sits


                                                                 7014 1200 ODDO 9093 6545
Def.'s Opp'n to Pl.'s Mot. for a "Directed Verdict" and Cross-Mot. for Summary Judgment
("Def. 's Cross-Mot."), ECF No. 12. For the reasons stated, Dr. Foxx's motion is denied and the
government's cross-motion is granted.

                                        BACKGROUND

        The events underlying this dispute began in February 2008, when Shakeena Bryant,
accompanied by her then-friend Herman James, approached Dr. Foxx for assistance in preparing
Ms. Bryant's 2007 tax return. Def. 's Cross-Mot. Ex. 5 (Deel. of Shakeena Bryant ("Bryant
Deel.")), 3; see also Def.'s Cross-Mot. Ex. 4 (Dep. of Herman James ("James Dep.")) at 14:2-
11 (Sept. 21, 2016). Dr. Foxx held himself out as the "Tax Doctor," as indicated by his tax-
preparer invoice to Ms. Bryant. See Def.'s Cross-Mot. Ex. 9. He claims to have more than 37
years of tax preparation experience, allegedly having prepared over 7,000 tax returns between
2004 and 2014. Comp!. at 5. Ms. Bryant and Dr. Foxx had not met previously. Hr'g Tr. 6:16-
19 (Jan. 13, 2017). 2 Ms. Bryant brought her W-2, which indicated that she had received a total
of $15. 51 in 2007 from a brief employment at Busch Gardens, and information regarding her
children. Bryant Deel. , 3. She did not bring any documents indicating additional income. Id.;
James Dep. at 24:20-24. According to Ms. Bryant and Mr. James, Dr. Foxx told Ms. Bryant that
she could nonetheless receive a tax refund if she reported additional income from a business.
Bryant Deel., 4; James Dep. at 17:9-22. 3 Ms. Bryant applied for and received a business license
for auto detailing, and returned to Dr. Foxx's office that same day with the license. Bryant Deel.
,, 4-5; James Dep. at 15: 16-24, 31 :3 to 32:6. Dr. Foxx then prepared Ms. Bryant's tax return
and reported $18,288 in business income from Ms. Bryant's purported auto-detailing business.
See Def. 's Cross-Mot. Ex. 1, Ex. 9. As a result, Ms. Bryant qualified for earned income tax
credits and received a refund of $2,577 from the IRS. Def. 's Cross-Mot. Ex. 1, Ex. 6. Ms.
Bryant paid Dr. Foxx $169 as a tax preparation fee. Def. 's Cross-Mot. Ex. 9.

        In 2009, the IRS audited Ms. Bryant's tax return. Def. Cross-Mot. Ex. 6; Bryant Deel.,
7. In the course of that audit, Ms. Bryant stated that she had never owned an auto-detailing
business. Bryant Deel.,, 6-7. She told the IRS that her 2007 tax return was incorrect, while
also stating that she reported her false business income under the instructions of Dr. Foxx.
Def.'s Cross-Mot. Ex. 7; Bryant Deel., 7. The IRS then contacted Dr. Foxx, who responded in
March 2009 that he reasonably relied upon the statements of Ms. Bryant and exercised "due
diligence" in preparing her return. See Def.'s Cross-Mot. Ex. 9. Dr. Foxx also provided Ms.
Bryant's auto-detailing business license and two pages of handwritten notes, written by Dr.



without juries. The court will thus consider Dr. Foxx's submission to be a motion for summary
judgment pursuant to RCFC 56.
       2
        The date will be omitted from further citations to the transcript of the hearing held on the
pending motions.

       3
        Business income would enable Ms. Bryant to qualify for earned income tax credits under
26 U.S.C. ("I.R.C.") § 32, which allows low-income individuals with children to receive a
refundable tax credit. See Def. 's Cross-Mot. at 3 n.4.
                                                 2
Foxx, relating to that business. See Def. 's Cross-Mot. Ex. 9, Ex. 15 (Dep. of George J. Foxx
("Foxx Dep."), at 220:13 to 221:15 (Sept. 22, 2016)).

        In May 2009, the IRS imposed a $5,000 tax return preparer penalty on Dr. Foxx pursuant
to 1.R.C. § 6694(b) for his "[w]illful or reckless conduct" in preparing Ms. Bryant's inaccurate
2007 tax return. Def 's Cross-Mot. at 5, Ex. 3. Dr. Foxx filed a pre-assessment appeal in which
he stated that he relied upon the "verbal statements" of Ms. Bryant regarding her business
income. Def.'s Cross-Mot. Ex. 11, at 1-2. On February 28, 2012, the IRS reduced Dr. Foxx's
penalty to $2,500. Id. at 1, 4. Dr. Foxx paid the $2,500 penalty in April 2012. Def.'s Cross-
Mot. at 5. He subsequently filed a claim for a refund of that penalty through submission of a
Form 843 on May 28, 2013, Def.'s Cross-Mot. Ex. 12, but the IRS denied that claim on
September 28, 2015, Def.'s Cross-Mot. Ex. 13. Dr. Foxx then filed suit in this court on October
27, 2015, seeking to recover the $2,500 penalty he paid to the IRS. See generally Comp!. Dr.
Foxx alleges "he followed the rules of due diligence and acted in good faith" and therefore "the
penalty should not have been imposed." Comp!. at 2.

         On April 19, 2016, the court issued a scheduling order, ECF No. 9, setting the close of
fact discovery for October 20, 2016, and requesting that the parties file a joint status report on
November 1, 2016. During fact discovery and after completion of Dr. Foxx's deposition, the
government sent a subpoena to Nova Southeastern University to verify Dr. Foxx's claim that he
had received a doctorate from that university. See Pl.'s Mot. at l; Hr'g Tr. at 5:23 to 6:1. Dr.
Foxx contends that the government, through this subpoena, "sought irrelevant evidence,"
requested the "disclosure of privileged or other protected information," and hindered Dr. Foxx's
ability to be hired by Nova Southeastern University in the future. Pl. 's Mot. at 2. He further
asse1ts that "the subpoena served no purpose but to hmt [p)laintiff." Id. at 4. However, Dr. Foxx
did not file a motion to quash the subpoena or a motion for a protective order. The government
responds that it reasonably sought "independent information about the legitimacy of plaintiffs
claimed credentials and his credibility" and that such information is relevant and discoverable
under RCFC 26. Def. 's Resp. to Pl.'s Mot. for Sanctions ("Def.'s Opp'n to Mot. for Sanctions")
at 2-3, ECF No. 13.

         On November 2, 2016, Dr. Foxx filed a motion for summary judgment or, alternatively,
for sanctions pursuant to RCFC 37. See Pl.'s Mot. On November 21, 2016, the government
filed a cross-motion for summary judgment pursuant to RCFC 56, Def. 's Cross-Mot., and
opposed Dr. Foxx's motion for sanctions, Def.'s Opp'n to Mot. for Sanctions. The competing
motions have been briefed and were addressed at a hearing on January 13, 2017.

                                       JURISDICTION

       As plaintiff, Dr. Foxx has the burden of establishing jurisdiction. See Reynolds v. Army
& Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988). Under the Tucker Act, the court
has jurisdiction "to render judgment upon any claim against the United States founded either
upon the Constitution, or any Act of Congress or any regulation of an executive department, or
upon any express or implied contract with the United States, or for liquidated or unliquidated
damages in cases not sounding in to1t." 28 U.S.C. § 149l(a)(l). The Tucker Act waives
sovereign immunity, thus allowing a plaintiff to sue the United States for money damages,


                                                3
United States v. Mitchell, 463 U.S. 206, 212 (1983), including refunds of taxes paid, Diversified
Grp. Inc. v. United States, 841F.3d975, 981 (Fed. Cir. 2016) (citing 28 U.S.C. § 1491; Shore v.
United States, 9 F.3d 1524, 1525 (Fed. Cir. 1993); Rocovich v. United States, 933 F.2d 991, 993
(Fed. Cir. 1991)).

         Before filing suit for a refund, the taxpayer must generally pay the full amount of the
taxes due, see Flora v. United States, 357 U.S. 63, 72-73 (1958), ajf'd on reh 'g, 362 U.S. 145
(1960), subject to an exception when divisible taxes are at issue, see Byrne v. United States, 127
Fed. Cl. 284, 290 (2016); Beardv. United States, 99 Fed. Cl. 147, 149 (2011) (quoting I.R.C. §
6331 (i), which forbids "proceeding[s] in court for the collection of any unpaid [divisible] tax ..
. during the pendency of any proceeding ... for the recovery of any portion of such divisible tax
which was paid by such person"). The taxpayer must also comply with the requirements of
l.R.C. § 6511 (a), which requires a taxpayer to file a claim for refund with the IRS "within 3
years from the time the return was filed or 2 years from the time the tax was paid, whichever of
such periods expires the later." The court does not have jurisdiction over a suit unless a claim
for refund has been properly filed with the IRS. See I.R.C. § 7422(a). If the IRS denies the
claim for refund, the taxpayer must then file suit in this court within two years of the IRS's
notice of disallowance of the refund. See I.R.C. § 6532(a)(l).

        Here, the court has jurisdiction over Dr. Foxx's refund claim. Dr. Foxx paid the assessed
$2,500 tax penalty in full in April 2012. Def.'s Cross-Mot. Ex. 12. He then filed a claim for
refund with the IRS in May 2013, id., which was within two years of paying the penalty. After
receiving the notice ofdisallowance of his claim in September 2015, Def.'s Cross-Mot. Ex. 13,
Dr. Foxx complied with I.R.C. § 6532(a)(l) by filing suit in this court approximately one month
later. The court thus has jurisdiction.

                                ST AND ARDS FOR DECISION

        Under RCFC 56(a), a grant of summary judgment is proper when the pleadings,
affidavits, and evidentiary materials of the case demonstrate that "there is no genuine dispute as
to any material fact and the movant is entitled to judgment as a matter of law." See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247-49 (1986). A genuine dispute exists when the issue "may
reasonably be resolved in favor of either party," id. at 250, and a fact is considered material when
it "might affect the outcome of the suit under the governing law," id. at 248. The moving party
has the burden of establishing that no genuine issue of material fact exists. Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986). Therefore, the court is to draw all factual inferences "in
the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 587-88 (1986) (quoting United States v. Diebold, Inc., 369
U.S. 654, 655 (1962)). Summary judgment will be appropriate if"the record taken as a whole
could not lead a rational trier of fact to find for the non-moving party." Id. at 587.

                                           ANALYSIS

                                A. Dr. Foxx 's Tax Refund Claim




                                                 4
         The IRS invoked l.R.C. § 6694(b) to impose a tax-return-preparer penalty on Dr. Foxx.
Def.'s Cross-Mot. Ex. 3. Subsection 6694(b) provides in relevant part that a penalty will be
assessed on any tax return preparer who prepares a tax return "with respect to which any part of
an understatement of liability is due to ... a willful attempt in any manner to understate the
liability for tax on the return or claim, or ... a reckless or intentional disregard of rules or
regulations." l.R.C. § 6694(b )(1 ), (2). The term "understatement of liability" is defined as "any
understatement of the net amount payable with respect to any tax imposed by this title or any
overstatement of the net amount creditable or refundable with respect to any such tax." Id. §
6694(e). The government thus correctly notes that the validity of the penalty in this case
depends on whether (1) Dr. Foxx prepared Ms. Bryant's 2007 tax return, (2) Ms. Bryant's return
contained an understatement of liability, and (3) such understatement was due to Dr. Foxx's
willful action or his reckless or intentional disregard of rules or regulations. Def. 's Cross-Mot. at
7.

        The first two elements of Subsection 6694(b) are undisputed in this case. Dr. Foxx
prepared Ms. Bryant's 2007 tax return, and that return contained an understatement ofliability
under the definition set fmth in Subsection 6694(e) because it overstated Ms. Bryant's tax refund
by falsely repmting business income. Regarding the third element, the government argues that
Dr. Foxx's "willfulness, or reckless or intentional disregard of a rule or regulation, caused the
improper refund." Def. 's Cross-Mot. at 8. In disputing his liability under this element of
Subsection 6694(b), Dr. Foxx contends that the IRS improperly imposed the penalty because he
acted diligently and in good faith while preparing Ms. Bryant's 2007 tax return. Comp!. at 2.

        Thus, the issue before the court is whether Ms. Bryant's inaccurate tax return was the
result of either Dr. Foxx's willful action or his intentional or reckless disregard for the
appropriate rules and regulations pertaining to tax return preparation. Both Ms. Bryant and Mr.
James stated that Ms. Bryant obtained a business license pursuant to Dr. Foxx's instruction.
Bryant Deel.,, 4-5; James Dep. at 15:11 to 17:22. According to Mr. James, Dr. Foxx explained
that such a license would allow him to obtain more money for Ms. Bryant, and Dr. Foxx, not Ms.
Bryant, created the false business income that appeared on Ms. Bryant's tax return. James Dep.
at 17:9-22, 19:3 to 21 :22. 4 Even ifthe court were to adopt Dr. Foxx's account of the event,
accepting that he possessed a good faith belief that Ms. Bryant had an auto-detailing business,
Dr. Foxx intentionally or recklessly disregarded tax preparer rules and regulations. Under the
applicable Treasury regulation in effect in 2008, Dr. Foxx was required to perfo1m due diligence
before filing Ms. Bryant's tax return for earned income tax credits. See 26 C.F.R. § 1.6695-2
(2008). This due diligence included an obligation to "make reasonable inquiries if the
information furnished to, or known by, [Dr. Foxx] appear[ed] to be incorrect, inconsistent, or
incomplete." Id. § 1.6695-2(b)(3) (2008). Dr. Foxx stated that he received training in preparing
tax returns and that he required substantiation of repmted business income from his clients.


       4
        In his correspondence with the IRS, Dr. Foxx submitted a statement allegedly made and
signed by Shakeena Bryant, stating that "Dr. Foxx is innocent" because "he only acted on the
information [Ms. Bryant] provided .... " Def.'s Cross-Mot. Ex. 10. However, this statement was
made after the IRS audit began, id., and Ms. Bryant does not recall making or signing it, Bryant
Deel., 9.


                                                  5
Def.'s Cross-Mot. Ex. 15 (Foxx Dep. at 106:3 to 109:8, 129:1-22). But in reporting more than
$18, 000 for Ms. Bryant's purported auto detailing business, Dr. Foxx did not examine any bank
statements, business expense receipts, or business ledgers. He instead relied upon Ms. Bryant's
business license, obtained the same day Dr. Foxx filed Ms. Bryant's return, and two pages of
notes written by Dr. Foxx that outlined expenses associated with the business. See Def. 's Cross-
Mot. Ex. 9. 5 Dr. Foxx argued before the IRS that his reliance on Ms. Bryant's alleged statements
regarding her business was reasonable because Ms. Bryant otherwise would have only earned
approximately $15 in 2007 based on the W-2 she provided to Dr. Foxx. Id. Such an argument is
misplaced; Ms. Bryant's financial situation did not relieve Dr. Foxx of his obligation to make
reasonable inquiries into any auto detailing business purportedly conducted by Ms. B1yant after
she did not provide adequate documentation. His failure to do so was an intentional or reckless
disregard of relevant Treasury Regulations. Dr. Foxx has not supported his motion for summary
judgment with undisputed material facts, nor has he raised a genuine dispute of material fact to
contravene the government's cross-motion. The IRS's tax preparer penalty was thus justified
under l.R.C. § 6694(b).

                               B. Dr. Foxx 's Request for Sanctions

        RCFC 26(b )(I) generally permits the parties to request discovery "regarding any
nonprivileged matter that is relevant to any party's claim or defense and proportional to the
needs of the case." This rule is qualified by RCFC 26(b)(2)(C), which provides that discovery
can be limited when:

       (i) the discovery sought is unreasonably cumulative or duplicative, or can be
       obtained from some other source that is more convenient, Jess burdensome, or less
       expensive;

       (ii) the party seeking discovery has had ample opportunity to obtain the
       information by discovery in the action; or

       (iii) the proposed discovery is outside the scope permitted by RCFC 26(b)(l).

RCFC 26(g)(l )(B)(ii) also notes that a discovery request should not be made "for any improper
purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation."
If a party violates these discovery rules, the court has discretion whether to impose sanctions
pursuant to RCFC 37. See Hitkansut LLC v. United States, 127 Fed. Cl. 101, 106-07 (2016);
American Fed. Bank, FSB v. United States, 72 Fed. Cl. 586, 627 (2006) (citations omitted), ajf'd,
295 Fed. Appx. 368 (Fed. Cir. 2008).



       5Dr.  Foxx also submitted an envelope to the IRS that allegedly set out the expenses Ms.
Bryant incurred from her business. Def.'s Cross-Mot. Ex. 10. However, Ms. Bryant explained
that she never purchased the items listed on the envelope and that she only recorded the expenses
at Dr. Foxx's instruction after the IRS audit began. Bryant Deel.~ 8. Further, even if Dr. Foxx
was not aware that these expenses were falsified, such an envelope would not satisfy Dr. Foxx's
obligation to reasonably inquire into and substantiate Ms. Bryant's business.
                                                 6
        Here, the government's discovery request was permissible under RCFC 26 and sanctions
are not appropriate. Dr. Foxx informed the government that he had obtained a doctorate degree
from Nova Southeastern University. See Pl.'s Reply to Def.'s Resp. to Pl.'s Mot. for Sanctions
("Pl.'s Reply") at 1, ECF No. 15. The government then sought discovery from Nova
Southeastern University in September 2016, id at 1-2, to obtain "independent information about
the legitimacy of plaintiffs claimed credentials and his credibility," Def.'s Opp'n to Mot. for
Sanctions at 2. Dr. Foxx asserts that the government's request sought irrelevant evidence and
unnecessarily harmed him, see Pl. 's Mot. at 2, 4, but as a tax preparer who prepared an
inaccurate tax return, Dr. Foxx's education and background are relevant. Further, Dr. Foxx has
disagreed with Ms. Bryant and Mr. James regarding the events in 2008 that led to the filing of
the tax return at issue, and thus his credibility has been relevant in the case. As the government
notes, Dr. Foxx's veracity is especially significant because his qualifications have been
"questioned in the past" and he has "made extraordinary claims about other experiences." Def. 's
Opp'n to Mot. for Sanctions at 3. 6 The government's decision to verify Dr. Foxx's degree
independently, rather than merely to accept Dr. Foxx's statements, was therefore not for the
improper purpose of harassing or harming Dr. Foxx. 7 The government's request was relevant
and appropriate because it was reasonably calculated to assist the trier of fact in assessing Dr.
Foxx's education and credibility. Thus, sanctions are not warranted.

                                         CONCLUSION

       For the reasons stated, plaintiffs motion for summary judgment or, alternatively, for
sanctions is DENIED, and the government's cross-motion for summary judgment is GRANTED.
The clerk shall enter judgment in accord with this disposition.

       No costs.

       It is so ORDERED.


                                                     Charles F. Letlow
                                                     Judge




       6Notably,   Dr. Foxx is under investigation by the IRS for mishandling approximately 15
other tax returns. See Def. 's Opp'n to Mot. for Sanctions Ex. 7 (Foxx Dep. at 131 :4-15). He has
also been fired from previous jobs due to submitting improper documents, see id (Foxx Dep. at
27:2 to 34:14), and for unauthorized travel, see id. (Foxx Dep. at 37:25 to 41:12).

       7Additionally,   contrary to Dr. Foxx's assertion, his degree is nonprivileged information
that falls within the permissible scope of discovery set forth in RCFC 26.

         Dr. Foxx also argues that the government sought this information after the close of fact
discovery on October 20, 2016, see Pl.'s Reply at 2, but the government's subpoena was timely
filed, although the university's response was delayed, see id at 1-2.
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