Ashley C. Scott v. United States of America, Treasury Department, Internal Revenue Service, et al

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 23-12244
Non-Argument Calendar
____________________
ASHLEY C. SCOTT,
Plaintiff-Counter Defendant-Appellant,
versus
UNITED STATES OF AMERICA, TREASURY DEPARTMENT,
INTERNAL REVENUE SERVICE,
Defendant-Counter Claimant-Third Party Plaintiff-Appellee,
MICHAEL A JENKINS,
Defendant,
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2 Opinion of the Court 23-12244
TYRENE SCOTT,
Defendant-Third Party Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 3:12-cv-00494-BJD-MCR
____________________
Before R OSENBAUM , BRASHER , and ABUDU, Circuit Judges.
PER CURIAM:
This is the fourth appeal in a tax case that has lasted more
than a decade. In 2021, after multiple retrials, a federal jury deter-
mined that Ashley Scott was a “responsible person” who was indi-
vidually liable for unpaid payroll taxes of her father’s company for
two tax quarters. See 26 U.S.C. § 6672. The district court entered
judgment for the government in the amount of $166,641.74, plus
interest, and we affirmed on appeal, bringing an end to the under-
lying tax dispute. See Scott v. United States, No. 21-13098, 2022 WL
16547995 (11th Cir. Oct. 31, 2022).
Now, Scott seeks to recover reasonable litigation costs as a
“prevailing party” under the qualified-offer rule. See 26 U.S.C.
§ 7430(c)(4)(E). She contends that, because she offered the govern-
ment $250 for each of the original thirteen tax quarters at issue, she
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23-12244 Opinion of the Court 3
is entitled to recover her post-offer litigation costs for the eleven
tax quarters for which the government recovered nothing. The
district court found that Scott was not a prevailing party under the
qualified-offer rule because the tax liability reflected in the judg-
ment ($166,641.74) well exceeded the tax liability proposed in her
qualified offer ($3,250). After careful review, we affirm.
I.
Scott worked as a corporate secretary for her father’s com-
pany, Scott Air, during times when the company failed to pay pay-
roll taxes. In 2010, the IRS assessed a penalty against Scott in the
amount of $680,472.28, which reflected the company’s unpaid pay-
roll taxes for thirteen quarters between 2004 and 2007. The IRS
invoked 26 U.S.C. § 6672, under which a person responsible for
paying a company’s payroll taxes can be held personally liable for
willfully failing to pay such taxes.
Scott responded to the assessment by mailing the govern-
ment a check for $300, covering the amount owed by one em-
ployee for one quarter, and requesting that the government abate
the remainder of the assessment against her. When the govern-
ment failed to respond, she sued for a refund of the $300 and a dec-
laration that she was not liable for the company’s unpaid payroll
taxes. The government initiated a counterclaim against Scott for
the full amount of the assessment.
After extensive proceedings not directly relevant to this case,
a federal jury determined that Scott was a “responsible person”
who was liable for unpaid payroll taxes for two of the original
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4 Opinion of the Court 23-12244
thirteen quarters: the third quarter of 2005 and the fourth quarter
of 2006.1 The district court entered judgment for the government
in the amount of $166,641.74, plus interest, and then denied Scott’s
motion for judgment as a matter of law or a new trial. We af-
firmed. Scott, 2022 WL 16547995, at *5.
II.
Meanwhile, in May 2021, Scott filed a motion for attorney’s
fees under 26 U.S.C. § 7430. As relevant here, Scott claimed that
she was a “prevailing party” under § 7430 because she had submit-
ted a “qualified offer” of $3,250 (or $250 per quarter) for all thirteen
1 This case has a long history. In 2016, we reversed the district court’s ruling
at summary judgment that Scott was a “responsible person” as to all thirteen
tax quarters, finding that genuine issues of material fact existed on that issue.
Scott v. United States, 825 F.3d 1275, 1282 (11th Cir. 2016). But we affirmed
findings that Scott acted “willfully”—an essential element to recovery under
§ 6672—as to ten of the thirteen quarters. Id. Thus, ten quarters remained on
which the government could prevail at trial by showing that Scott was a re-
sponsible person. On remand, after trial in February 2017, a jury found that
Scott was a responsible person for three quarters, but not for the other seven
quarters. Scott appealed a second time, and we vacated and remanded for a
new trial, concluding that the district court committed plain error in instruct-
ing the jury. Scott v. United States, 776 F. App’x 612, 615 (11th Cir. 2019). An-
other jury trial was held in April 2021 on the remaining three quarters, and the
jury found that Scott was a responsible person for Scott Air for the third quar-
ter of 2005 and the fourth quarter of 2006, but not for the second quarter of
2007. Scott appealed a third time, but we affirmed. Scott v. United States, No.
21-13098, 2022 WL 16547995 (11th Cir. Oct. 31, 2022).
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23-12244 Opinion of the Court 5
tax quarters originally at issue. Because the government recovered
less than $250 for eleven of the thirteen quarters, her argument
went, she was the prevailing party as to those quarters. The gov-
ernment responded that Scott was not a prevailing party under §
7430’s qualified-offer rule because she had made one offer of
$3,250—not thirteen separate offers. And that offer was less than
the judgment of $166,641.74.
A magistrate judge recommended denying Scott’s motion,
reasoning that the statute called for a comparison between the total
offer ($3,250) and the total recovery ($166,641.74), and that Scott’s
piecemeal, quarter-by-quarter approach “defies logic.” Scott filed
objections, but the district court overruled them, agreeing with the
magistrate judge that Scott was not entitled to attorney’s fees un-
der a “plain reading” of § 7430. Scott timely appeals.
III.
We review the denial of a motion for litigation costs under
26 U.S.C. § 7430 for an abuse of discretion. Cooper v. United States,
60 F.3d 1529, 1531 (11th Cir. 1995). The district court’s “interpre-
tation of a statutory section of the Internal Revenue Code is a ques-
tion of law that is reviewed de novo.” Fla. Country Clubs, Inc. v.
Comm’r of Internal Revenue, 404 F.3d 1291, 1293 (11th Cir. 2005).
Section 7430 authorizes an award of “reasonable litigation
costs,” including attorney’s fees, to private parties who prevail in a
court proceeding, brought by or against the United States, concern-
ing federal taxes. 26 U.S.C. § 7430(a). “Congress enacted § 7430 to
deter abusive actions or overreaching by the IRS and to enable
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6 Opinion of the Court 23-12244
taxpayers to vindicate their rights regardless of their economic cir-
cumstances.” Cooper, 60 F.3d at 1530 (cleaned up).
To recover under § 7430, the taxpayer must prove that she
is a “prevailing party,” among other requirements. Id. at 1530–31.
The general rule is that a taxpayer is the prevailing party if she
meets two requirements: (1) she has “substantially prevailed” with
respect to either the amount in controversy or the most significant
issue or set of issues, 26 U.S.C. § 7430(c)(4)(A)(i); and (2) the gov-
ernment’s position was not “substantially justified,” id.
§ 7430(c)(4)(B)(i).
Besides the general rule, a special rule permits a taxpayer to
be treated as a prevailing party in cases when the judgment is less
than the taxpayer’s unaccepted offer to settle the tax liability. See
26 U.S.C. § 7430(c)(4)(E). The rule states that the taxpayer
shall be treated as the prevailing party if the liability
of the taxpayer pursuant to the judgment in the pro-
ceeding (determined without regard to interest) is
equal to or less than the liability of the taxpayer which
would have been so determined if the United States
had accepted a qualified offer of the party under sub-
section (g).
Id. § 7430(c)(4)(E)(i). The determination is “made by reference to
the last qualified offer made with respect to the tax liability at issue
in the proceeding.” Id. § 7430(c)(4)(E)(iii)(I).
So, under the qualified-offer special rule, we must compare
two things: (1) the “liability of the taxpayer pursuant to the
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23-12244 Opinion of the Court 7
judgment in the proceeding”; and (2) the liability proposed in the
taxpayer’s “last qualified offer made with respect to the tax liability
at issue.” If the judgment’s liability is “equal to or less than” the
offer’s liability, the taxpayer “shall be treated as the prevailing
party.” 26 U.S.C. § 7430(c)(4)(E)(i). Treasury Regulations define
the relevant “judgment” as “the cumulative determinations of the
court concerning the adjustments at issue and litigated to a deter-
mination in the court proceeding.” Treas. Reg. § 301.7430-7(a).
Section 7430(g) defines a “qualified offer” to mean a written
offer which, among other requirements, “specifies the offered
amount of the taxpayer’s liability (determined without regard to
interest).” 26 U.S.C. § 7430(g)(1)(B). According to Treasury Regu-
lations, a qualified offer must specify an amount “with respect to
all of the adjustments at issue in the administrative or court proceed-
ing at the time the offer is made.” Treas. Reg. § 301.7430-7(c)(3)
(emphasis added). It must be an offer that, if accepted, “fully re-
solve[s] the taxpayer’s liability . . . for the type or types of tax and
the taxable year or years at issue in the proceeding.” Id.
Where “multiple tax years” are at issue, a taxpayer may
make a qualified offer “for less than all of the tax years involved” if
adjustments in different tax years arise from “separate and distinct
issues.” Id. But the offer still “must resolve all of the issues for the
tax years covered by the offer and also must cover all tax years in
the proceeding affected by those issues.” Id.
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8 Opinion of the Court 23-12244
IV.
Scott maintains that she made thirteen distinct qualified of-
fers to settle each of the tax quarters at issue, rather than one single
offer to settle her total liability. That claim, however, is contrary
to the terms of her offer and to the requirements for a qualified
offer.
As the district court observed, the evidence shows that Scott
made one offer, rather than thirteen separate offers, in her letter to
the government dated October 17, 2012. The letter stated that it
constituted a singular “qualified offer” under § 7430(g), in that
“[i]t”—meaning, the offer—met each of the statutory require-
ments. The letter proposed that, “as her qualified offer,” Scott
would be liable for $250 for each of the thirteen quarters at issue,
which were listed out separately in a chart, for a total of $3,250. An
email from Scott’s attorney to the government dated October 18,
2012, likewise described the letter as a singular “Qualified Offer.”
Nothing in the letter indicated that there were thirteen separate of-
fers for thirteen quarters, or that the government could accept of-
fers for some quarters and reject offers for other quarters.
Moreover, interpretating the letter as a single offer is the
only construction consistent with § 7430 and governing regula-
tions. Scott acknowledges the regulations, but she claims that they
“actually support [her] position, not the [g]overnment’s.” Not so.
If viewed in piecemeal fashion, none of the purported thirteen of-
fers of $250 would count as a qualified offer under the regulations.
Each offer was for an amount with respect to fewer than “all of the
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23-12244 Opinion of the Court 9
adjustments at issue” in the court proceeding. And had an individ-
ual offer been accepted, it would not have “fully resolve[d] the tax-
payer’s liability . . . for the type or types of tax and the taxable year
or years at issue in the proceeding.” Treas. Reg. § 301.7430-7(c)(3).
Nor could the piecemeal offers be meaningfully compared to the
“judgment,” 26 U.S.C. § 7530(c)(4)(E)(i), which refers to “the cumu-
lative determinations of the court concerning the adjustments at is-
sue,” Treas. Reg. § 301.7430-7(a) (emphasis added).
Scott relies on a provision in the regulations concerning
cases that involve multiple tax years to argue that she could have
made qualified offers for each of the thirteen quarters at issue. But
we cannot simply substitute the word “quarter” for “year” in the
regulations, as Scott suggests. See Landau v. RoundPoint Mortg. Serv.
Corp., 925 F.3d 1365, 1369 (11th Cir. 2019) (“When we construe reg-
ulations, we begin with the language of the regulation, just as we
do for statutes.”); Harris v. Garner, 216 F.3d 970, 976 (11th Cir. 2000)
(“[T]he role of the judicial branch is to apply statutory language,
not to rewrite it.”). And the regulations clearly state that a partial
qualified offer still “must resolve all of the issues for the tax years
covered by the offer.” Treas. Reg. § 301.7430-7(c)(3). An offer cov-
ering a particular quarter of a tax year simply does not meet that
requirement.
In contrast, Scott’s October 2012 letter, viewed as a single
offer, counts as a qualified offer because it specified an amount
($3,250) for “all of the adjustments at issue,” the acceptance of
which would have “fully resolved [Scott’s] liability” for the
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10 Opinion of the Court 23-12244
penalties at issue in the proceeding. Treas. Reg. § 301.7430-7(c)(3).
And we can readily compare it to the judgment in the proceeding,
which awarded the government a total of $166,641.74, represent-
ing “the cumulative determinations of the court concerning the ad-
justments at issue and litigated to a determination in the court pro-
ceeding.” Treas. Reg. § 301.7430-7(a). Because the liability under
the judgment was not “equal to or less than” the liability under the
qualified offer, it follows that Scott cannot be treated as a prevailing
party under the qualified-offer rule. See 26 U.S.C. § 7430(c)(4)(E)(i).
Finally, in the course of her briefing on the qualified-offer
rule, Scott makes several references to the general prevailing-party
rules, contending that she substantially prevailed and that the gov-
ernment’s position was not substantially justified. The qualified-
offer rule, however, operates on its own terms. See 26 U.S.C.
§ 7430(c)(4)(E)(iv) (stating that the qualified-offer rule “shall not ap-
ply to a party which is a prevailing party” under the general rule).
So those usual requirements are not relevant to the inquiry.
Nor has Scott shown that she qualifies as a prevailing party
under the general rule. See 26 U.S.C. § 7430(c)(4)(A)(i). Even as-
suming she substantially prevailed, the magistrate judge found that
the government’s position that Scott was a responsible person lia-
ble for § 6672 penalties was substantially justified. That finding pre-
vents Scott from being treated as a prevailing party. See 26 U.S.C.
§ 7430(c)(4)(B)(i) (“A party shall not be treated as the prevailing
party . . . if the United States establishes that the position of the
United States in the proceeding was substantially justified.”). Scott
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did not address that finding in her objections, so the district court
considered the issue abandoned and adopted the magistrate judge’s
report. And Scott has not adequately briefed the issue on appeal.2
See Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 681 (11th Cir.
2014) (“A party fails to adequately ‘brief’ a claim when he does not
plainly and prominently raise it, for instance by devoting a discrete
section of his argument to those claims.”) (quotation marks omit-
ted).
V.
In sum, the district court did not abuse its discretion in deny-
ing Scott’s motion for reasonable litigation costs as a prevailing
party. See 26 U.S.C. § 7430(c)(4)(E)(i).
AFFIRMED.
2 The fact that the government lost at trial on eleven of the thirteen tax quar-
ters is certainly relevant, but Scott cites no authority for her assertion that the
government is “precluded from asserting it was substantially justified” as to
those quarters. And Scott fails to engage with any of the magistrate judge’s
reasons for concluding that the government’s position, notwithstanding the
jury findings, was substantially justified.
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