USA v. Clark et al

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
United States of America
v. Case No. 1:22-cv-298-LM
Audris E. Clark and Dean M. Clark
d/b/a DMC Surveyors
REPORT AND RECOMMENDATION
The government filed suit against Audris E. Clark and Dean
M. Clark d/b/a DMC Surveyors, seeking to reduce unpaid federal
tax liabilities to judgment pursuant to 26 U.S.C. §§ 6651, 6654.
See Compl. (Doc. No. 1). The Clarks failed to respond to the
government’s complaint, and on October 24, 2022, the Clerk of
Court entered default against them. (Doc. No. 9). Before the
court for recommendation as to disposition is the government’s
motion for default judgment. (Doc. No. 10).1 For reasons
explained below, the court recommends that the government’s
motion be granted and that judgment be awarded in the following
amounts: $92,361.39 as to the Clarks for income tax liabilities;
1 The government moves for default judgment under Federal
Rule of Civil Procedure 55(b)(1), but as explained below, based
on the government’s initial submission, the entry of default
judgment was not a purely “ministerial task,” and therefore, the
court must analyze its motion under Federal Rule of Civil
Procedure 55(b)(2). See, e.g., United States v. Greer, No. 18-
02497 (KBJ), 2020 WL 6596703, at *3 (D.D.C. Feb. 28, 2020)
(applying Rule 55(b)(2) to unpaid taxes, statutory penalties,
and interest when the amounts are not properly itemized).
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 1 of 13

2
$38,004.67 as to Dean Clark for employment tax liabilities; and
$13,894.51 as to Dean Clark for unemployment tax liabilities.
These amounts reflect balances due as of January 10, 2023 and
are subject to statutory additions and interest, which continue
to accrue pursuant to 26 U.S.C. §§ 6601, 6621, and 6622, and 28
U.S.C. § 1961(c).
STANDARD OF REVIEW
When a party moves for a default judgment under Rule
55(b)(2), the court “may examine a plaintiff's complaint, taking
all well-pleaded factual allegations as true, to determine
whether it alleges a cause of action.” Ramos-Falcon v.
Autoridad de Energia Electrica, 301 F.3d 1, 2 (1st Cir. 2002).
The defaulting party is “taken to have conceded the truth of the
factual allegations in the complaint.” Ortiz-Gonzalez v.
Fonovisa, 277 F.3d 59, 62 (1st Cir. 2002). Admitting the truth
of the factual allegations, however, “does not admit the legal
sufficiency of [the] claims.” 10 James W. Moore, Moore's
Federal Practice § 55.32[1][b] (3d ed. 2013). For that reason,
the court reviews the admitted facts in light of the elements of
the claims pleaded before entering a default judgment. Sampson
v. Lambert, 903 F.3d 798, 805-06 (8th Cir. 2018); Neff v.
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 2 of 13

3
Mediation Processing Servs., LLC, No. 21-CV-310-JL, 2021 WL
7082838, at *1 (D.N.H. Sept. 27, 2021), report and
recommendation adopted, No. 21-CV-310-JL, 2021 WL 7082833
(D.N.H. Oct. 14, 2021).
BACKGROUND
By virtue of their default, the Clarks concede the
following facts alleged in the government’s complaint. The
government made joint income tax assessments against the Clarks
for tax periods ending in the years 2012, 2013, 2014, 2015,
2017, and 2018. See Compl. (Doc. No. 1, ¶ 5). The government
provided proper notice of these tax liabilities, which included
the tax assessment amount, as well as penalties, costs, and
statutory interest, to the Clarks. Id. The Clarks, however,
failed to pay these liabilities, and as of January 24, 2022, the
Clarks were liable to the government in the amount of
$94,052.22. Id. ¶ 7.
As to Dean Clark, the government made employment and
unemployment tax assessments against him, as the sole proprietor
of DMC Surveyors, for tax periods ending in the years 2010 and
2011. Id. ¶¶ 4, 8, 13. The government similarly provided Dean
Clark with proper notice of these tax liabilities, as well as
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 3 of 13

4
penalties, costs, and statutory interest, but he failed to pay
these liabilities. Id. ¶¶ 9, 14. As of January 24, 2022, Dean
Clark was liable to the government in the amount of $47,488.66
for employment tax liabilities and in the amount of $13,282.62
for unemployment tax liabilities. Id. ¶¶ 10, 15.
On August 4, 2022, the government filed suit against the
Clarks, seeking to reduce their tax liabilities to judgment.
The Clarks were served with a copy of the summons and complaint,
and they each executed a Waiver of the Service of Summons on
August 11, 2022. (Doc. No. 8). When the Clarks did not file a
response to the complaint within the time allowed, the Clerk of
Court entered default against them (Doc. No. 9), and the
government moved for default judgment. (Doc. No. 10).
On December 5, 2022, the court held a hearing on the
government’s motion for default judgment, and on January 31,
2023, the government submitted a supplemental brief. (Doc. No.
13). The supplemental brief included additional support and
clarification of the Clarks’ tax liability amounts through a
supplemental declaration of Mary Bishop. Bishop stated that as
of January 10, 2023, the Clarks had a joint income tax liability
in the amount of $92,361.39, and that Dean Clark’s employment
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 4 of 13

5
and unemployment tax liabilities were in the amounts of
$38,004.67 and $13,894.51.
DISCUSSION
The government brings a single claim against the Clarks
jointly and two claims against Dean Clark as the sole proprietor
of DMC Surveyors.2 In Count I, the government seeks to reduce
the Clarks’ income tax liabilities to judgment. In Counts II
and III, the government seeks to reduce Dean Clark’s employment
and unemployment tax liabilities to judgment.
2 DMC Surveyors was a sole proprietorship owned and operated
by Dean Clark. See Compl. (Doc. No. 1, ¶ 4). Accordingly, Dean
Clark, individually, is responsible for the liabilities of DMC
Surveyors. See U.S. v. Emerson, 927 F. Supp. 23, 27 n.1 (D.N.H.
1996) (“For purposes of this opinion and the assessment of the
civil penalty Alan Emerson and his sole proprietorship, Alan
Emerson d/b/a Emerson Aviation, are treated as the same
financial entity, with the assets and liabilities of the
business chargeable to the individual.”); see also Kingvision
Pay-Per-View, Ltd. V. McCoy, No. 00–288–M, 2001 WL 274800, at *2
(D.N.H. Jan. 11, 2001) (noting that naming a sole proprietorship
as a separate defendant is “unnecessary surplusage” where the
individual proprietor is liable).
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 5 of 13

6
I. Liability
“26 U.S.C. § 6651(a)(2) imposes a penalty for failure to
pay taxes due on or before the date prescribed for payment of
such unless it is shown that such failure is due to reasonable
cause and not due to willful neglect.” Kennedy v. United
States, 542 F. Supp. 1046, 1049 (D.N.H. 1982) (quotation
omitted). Under the statute, “the imposition of such penalties
is mandatory absent a satisfactory demonstration by the taxpayer
that its failure to comply was due to reasonable cause and not
due to willful neglect . . . .” Id. (quotation omitted). 26
U.S.C. § 6654 similarly imposes a penalty for failure to make
estimated tax payments.
A. Timeliness of the Government’s Claims
Court proceedings to collect a tax liability must be made
“within 10 years after the assessment of the tax.” 26 U.S.C. §
6502(a)(1). The limitations period is tolled, however, while an
offer-in-compromise or installment agreement is pending, and if
such offer is rejected or terminated by the government, for 30
days thereafter. 26 U.S.C. § 6331(i),(k).
The earliest assessment date for the Clarks’ income tax
liabilities is July 29, 2013. See Compl. (Doc. No. 1, ¶ 5).
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 6 of 13

7
Where the government filed its complaint on August 4, 2022, its
claim as to the Clarks is timely.
The earliest assessment date for Dean Clark’s employment
and unemployment tax liabilities is April 16, 2012. On May 14,
2014, Dean Clark made an offer for an installment agreement as
to his employment and unemployment tax liabilities. Id. (Doc.
No. 1, ¶¶ 11, 16). The offer remained pending until September
8, 2014. Id. Pursuant to 26 U.S.C. § 6331 (i) and (k), the
limitations period was tolled during the pendency of the offer
and for 30 days thereafter (from May 14, 2014 through October 8,
2014, for a total of 147 days). Thus, accounting for the
tolling period, the government’s statute of limitations would
have run on September 10, 2022. Where the government filed its
complaint on August 4, 2022, its action against Dean Clark is
also timely.
B. Sufficiency of the Claims
In its complaint, the government sufficiently alleges facts
to support its claims against the Clarks. Specifically, the
government adequately states that the Clarks owed income tax
liabilities for the tax years 2012, 2013, 2014, 2015, 2017, and
2018. Despite receiving proper notice of these tax liabilities,
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 7 of 13

8
the Clarks failed to pay the liabilities. In addition, the
government adequately alleges that Dean Clark, as the sole
proprietor of DMC Surveyors, owed but failed to pay employment
and unemployment tax liabilities for the 2010 and 2011 tax years
despite receiving proper notice of such liabilities.
Accordingly, the government is entitled to default judgment as
to liability on Counts I, II, and III.
II. Damages3
In the case of defaulting defendants, “the amount of
damages are not necessarily established as a result of the
default.” Int’l Union of Operating Eng’rs, Local 4 v. Stanley
Excavation, 243 F.R.D. 25, 27 (D. Me. 2007) (quotation omitted).
Rather, allegations of damages “must be established by proof
unless the damages involve a sum certain or are for
liquidated damages.” Id. (quotation omitted). While delinquent
tax assessments can constitute liquidated damages, see KPS &
Assocs. v. Designs by FMC, Inc., 318 F.3d 1, 20 (1st Cir. 2003),
3 The court did not hold a hearing on damages. Rule
55(b)(2) “makes an evidentiary hearing an available tool, not a
prerequisite, to the determination of a damage award.”
AngioDynamics, Inc. v. Biolitec AG, 780 F.3d 429, 436 (1st Cir.
2015).
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 8 of 13

9
courts have applied Rule 55(b)(2) to make a judicial
determination on damages when the government’s assessments are
not sufficiently clear and fail to properly itemize unpaid
taxes, statutory penalties, and interest. See Greer, 2020 WL
6596703, at *3; United States v. Myers, 236 F. Supp. 3d 702, 710
(E.D.N.Y. 2017) (entering default judgment under Rule
55(b)(2) and explaining how interest and statutory accruals on
unpaid taxes should be calculated).
“Tax assessments by the IRS are presumed correct.” United
States v. Limanni, No. 12–cv–114–JD, 2015 WL 1345033, at * 2
(D.N.H. Mar. 23, 2015) (citing Hostar Marine Transport Sys.,
Inc. v. United States, 592 F.3d 202, 208 (1st Cir.2010)); United
States v. Chesir, No. CV–08–2552, 2011 WL 3040536, at *3
(E.D.N.Y. June 27, 2011) (presuming the government’s tax
calculations, set forth in affidavits, to be correct in a
default judgment action); see also United States v. Beckwith,
No. 2:18-cv-00322-NT, 2019 WL 6534123, at *4 (D. Me. Dec. 4,
2019) (noting that certificates of assessments are presumptive
proof of notice of the assessments and demands for payment).
The presumption of correctness can only be overcome by
sufficient evidence to contradict the tax liability. Limanni,
2015 WL 1345033, at * 2.
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 9 of 13

10
In support of its request for damages, the government
submitted a supplemental declaration of Mary Bishop, a Revenue
Officer Advisor with the Internal Revenue Service (“IRS”).
(Doc. No. 13-4). Bishop testified to her review of tax records
maintained by the IRS in its Integrated Data Retrieval System
(“IDRS”). Decl. of Mary Bishop (“Bishop Decl.”) (Doc. No. 13-4,
¶¶ 3-5). The IDRS stores and tracks taxpayer account
information. Id. ¶ 5. It also generates reports for taxpayer
balances due based on the tax assessments and based on its
interest and penalty computations. Id. In particular, Bishop
used the INTST-D module to calculate the amount of accrued tax,
interest, and penalties due as of January 10, 2023 for the
Clarks. Id. ¶¶ 7-8). A copy of the INTST-D printouts for the
federal income tax liabilities of the Clarks, as well as the
printouts for the federal employment and unemployment tax
liabilities of Dean Clark, are attached to Bishop’s declaration.
See Exs. A, B, and C to Bishop Decl. (Doc. No. 13-4, at 10-41).
These printouts contain a breakdown of the accrued tax,
interest, and penalties for each tax year. Id.
For example, as to the Clarks’ federal income tax
liability, Bishop attests to the balance due for tax year 2012
totaling $8,432.35. The INTST-D printout for that year verifies
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 10 of 13

11
the total balance due and provides a breakdown of the assessment
amount, penalties, and interest. Id. (Doc. No. 13-4, at 10).
The court verified the balances due for the 2012, 2013, 2014,
2015, 2017, and 2018 tax years using the INTST-D printouts, and
concludes the government is entitled to judgment in the amount
of $92,361.39 as to the Clarks for federal income tax
liabilities.
The court similarly reviewed the INTST-D printouts for Dean
Clark’s employment tax liabilities and concludes that the
government is entitled to judgment in the amount of $38,004.67
for those tax liabilities. Further, the INTST-D printouts for
Dean Clark’s unemployment tax liabilities confirm that the
government is entitled to judgment in the amount of $13,894.51
for those liabilities. These balances reflect tax liabilities
as of January 10, 2023, and do not include statutory additions
and interest, which continue to accrue pursuant to 26 U.S.C. §§
6601, 6621, and 6622, and 28 U.S.C. § 1961(c).
CONCLUSION
For the foregoing reasons, the court recommends that the
district judge: (1) grant the government’s motion for default
judgment (Doc. No. 10) as to all claims (Counts I, II, and III);
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 11 of 13

12
and (2) enter judgment in the amounts of $92,361.39 as to the
Clarks for income tax liabilities, $38,004.67 as to Dean Clark
for employment tax liabilities, and $13,894.51 as to Dean Clark
for unemployment tax liabilities; these amounts are as of
January 10, 2023 and are subject to statutory additions and
interest, which continue to accrue pursuant to 26 U.S.C. §§
6601, 6621, and 6622, and 28 U.S.C. § 1961(c).
Any objections to this Report and Recommendation must be
filed within fourteen days of receipt of this notice. See Fed.
R. Civ. P. 72(b)(2). The fourteen-day period may be extended
upon motion. Only those issues raised in the objection to this
Report and Recommendation are subject to review in the district
court. See Sch. Union No. 37 v. United Natl Ins. Co., 617 F.3d
554, 564 (1st Cir. 2010). Any issues not preserved by such
objection(s) are precluded on appeal. See id. Failure to file
any objections within the specified time waives the right to
appeal the district court's order. See Santos-Santos v. Torres-
Centeno, 842 F.3d 163, 168 (1st Cir. 2016).
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 12 of 13

13
__________________________
Andrea K. Johnstone
United States Magistrate Judge
June 28, 2023
cc: Counsel of record
Case 1:22-cv-00298-LM Document 15 Filed 06/28/23 Page 13 of 13