Submitted Oct. 22, 2013.
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Irvin B. Nathan, Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, Donna M. Murasky, Deputy Solicitor General, Mary L. Wilson, Senior Assistant Attorney General, were on the brief for petitioner.
John R. Shuman and Sara G. Shuman, pro se, filed a statement in lieu of brief.
Before THOMPSON, Associate Judge, and WAGNER and SCHWELB, Senior Judges.
SCHWELB, Senior Judge:
In the 1984 film " The Terminator" — a work of fiction starring Arnold Schwarzenegger— artificially intelligent machines attempted to exterminate what was then left of the human race. In the appeal now before us, a man-made computer system did not go so far but, defying the will of those who programmed it, it caused significant grief and distress to those who had a right to rely on its accuracy. Unfortunately, the machine involved belonged to the branch of the District of Columbia government responsible for calculating and collecting citizens' taxes. In this case, we are charged with resolving a controversy that had its inception in an erroneous data entry made almost a decade ago into the computer system of the District of Columbia's Office of Tax & Revenue (OTR), and OTR's errant computer program has played a key role in the litigation.
The taxpayers affected by this unfortunate data entry are respondents John R. Shuman and Sara G. Shuman. It is now undisputed that the Shumans were entitled to a refund of $790 from OTR with respect to their 2004 tax return, but this amount was mistakenly entered into OTR's computer system as tax due from the Shumans. This erroneous entry, and the prolonged inability of OTR (apparently continuing to the present day) to correct it, have caused repeated and vexatious problems for the taxpayers, cost the District and its agencies a great deal of money, and raised troubling questions as to what, if any, authority the District's Office of Administrative Hearings (OAH) may have to provide an effective remedy, and as to whether the controversy was litigated in the appropriate forum.
In this case, in the order under review, an Administrative Law Judge (ALJ) of the OAH granted extensive monetary and equitable relief, including the equivalent of
an injunction, the imposition of conditional monthly fines potentially adding up to many tens of thousands of dollars, and the unconditional transfer of a large amount of money from one District agency (OTR) to another (OAH). Such remedies, to the extent that they are precedented at all, have heretofore been associated with contempt proceedings before judicial rather than administrative bodies. We conclude that the ALJ exceeded her authority in granting the relief that she did, and we therefore reverse her decision and vacate the ALJ's order, without prejudice to any proceedings the Shumans may choose to institute in the Superior Court and any defenses that OTR may assert in that forum.
I. FACTUAL BACKGROUND
Because of the complexity of this controversy and the repeated failure of OTR to correct its errors and to avoid future mistaken claims against the Shumans, we recite the history of the case in some detail. The Shumans timely filed a joint income tax return in the District of Columbia for the 2004 tax year, and they paid the tax due in full. The following year, the Shumans filed an amended return and requested a refund in the amount of $790, which OTR duly issued to them. Two years later, however, on September 13, 2007, OTR sent the Shumans a " Statement of Account" advising them that they owed the District $790, together with interest and penalties, for the 2004 tax year. Believing this claim to be unfounded, the Shumans promptly contacted OTR and requested that the error be corrected. On September 21, 2007 OTR issued another Statement of Account and effectively confessed error, acknowledging that the Shumans had no outstanding tax liability for 2004. The unfounded claim was thus withdrawn.
When the Shumans filed their return for the 2007 tax year, however, they requested a refund for that year in the amount of $4,132. OTR issued a refund check in their favor, but for only $3,342, which was $790 less than the amount requested. Undoubtedly more astonished than pleased, the Shumans immediately inquired about the reduction of their refund, and they were once again reassured that they would receive the balance. Nevertheless, on March 13, 2008, OTR sent the Shumans a " Notice of Offset" advising them that OTR had reduced their refund for the 2007 tax year by $790 in order to satisfy an alleged tax liability for 2004. By this time, the Shumans may have been a trifle bewildered, for the effective confession of error which they had received half a year earlier had apparently come to naught. On August 25, 2008, seeking a prompt and inexpensive remedy, the Shumans brought OAH into the case by filing a " Taxpayer's Protest of a Proposed Assessment" with that agency. The Shumans requested OAH to rule that OTR was required to issue a $790 refund, which reflected OTR's error as to the 2004 tax year and, consequently, the amount by which OTR had improperly reduced the Shumans' refund for the 2007 tax year. A few days later, however, on September 4, 2008, OTR sent the Shumans another Notice of Offset, reiterating that their refund for 2007 would be reduced by $790.
At this point, having noted the discrepancies, OTR apparently launched an investigation and discovered that the incorrect offset notices had been sent to the Shumans as a result of the erroneous information, described at the outset of this opinion, which had been entered into OTR's computer system with respect to the 2004 tax year. Specifically, the $790 refund that the District owed to the Shumans for 2004 had been mistakenly entered into the system
as an amount owed by the Shumans to the District. On October 2, 2008, the ALJ, who has handled this matter on behalf of OAH throughout these proceedings, exercised jurisdiction over the case without immediate objection by OTR, and she held a status conference. A representative of OTR agreed at this conference that the Shumans were entitled to receive a refund check for the amount in dispute. OTR did indeed send the Shumans a check for $790 on October 21, 2008, as it had agreed to do, but OTR seemingly nullified this action by issuing a new Notice of Offset on October 28, 2008, again claiming that the Shumans owed $790 in unpaid taxes for the 2004 year. In addition, OTR sent the Shumans a refund check for $1,799.76, but simultaneously issued an offset notice for $19,151. According to OTR, both of these items pertained to the 2004 tax year.
On January 15, 2009, the ALJ held another status conference to try to resolve the issues raised by the most recent claims. In conformity with an assurance provided at this status conference, OTR certified that the Shumans would have no tax liability for tax years 2004 to 2007 if they returned the erroneously issued $1,799.76 refund check. The ALJ issued a final order on February 2, 2009, directing the Shumans to return this check, and she ordered that the case be dismissed without prejudice when that had been accomplished.
This should surely have ended the matter, but it did not. On account of persistent problems with its computer system, OTR continued to issue erroneous forms and notices to the Shumans regarding the $790 refund. OTR issued an Internal Revenue Service (" IRS" ) Form 1099-G for tax years 2004 and 2007, in which it incorrectly alleged that the Shumans had received $23,891 and $7,292 in refunds for those years. In response, on February 9, 2009, the Shumans moved to reopen the case, asserting that they had not received refunds in the claimed amounts. At this point, half a year after the Shumans had complained to OAH, OTR argued for the first time that OAH lacked jurisdiction over " information" returns such as the IRS Form 1099-G because these forms do not assess a tax, and because OAH's statutory jurisdiction is limited to dealing with tax assessments. This claim of lack of jurisdiction is one of OTR's principal contentions before this court.
On February 26, 2009, OTR sent the Shumans still another Notice of Offset, now asserting that the Shumans' refund for the 2004 tax year should be reduced by $1,580, which of course is $790 doubled. The Shumans promptly filed an amended motion to vacate the dismissal and to reopen the case. On March 16, 2009, the ALJ granted the motion to reopen, and she stayed the motion to vacate dismissal pending a status conference. At that conference, Pamela Westray, then operations manager for OTR's Customer Service Administration, explained that a " glitch" in OTR's computer system had caused the computer to generate the erroneous notices automatically. Ms. Westray believed that she could override the automatic generation of the notices by " suppressing" the Shumans' account for 2004 and by " writing off" the incorrect outstanding balance. As we shall see, however, it turned out that she was mistaken; the computer system, though inanimate, would not be so easily diverted.
On April 13, 2009, following the status conference, the ALJ issued an order directing OTR to " suppress" the Shumans's accounts for the tax years 2004 to 2007, and to submit written proof of compliance with her order within 30 days. She also warned that if OTR sent another erroneous notice claiming tax due for the 2004
tax year, despite its certification that the Shumans had no further obligations for 2004, OTR would be subject to potential monetary sanctions for failure to comply with a lawful order. See D.C.Code § 2-1831.09(b)(8) (2001). The ALJ directed that the case remain open for six months, so that OTR's compliance with the order could be monitored. On December 29, 2009, the Shumans not having received any tax bills or notices concerning 2004 for more than six months, the ALJ again ordered that the case be closed. In her order, however, the ALJ included the caveat that " a[n]y further indication of OTR or its computers or contractors sending another offset notice or a tax bill or taking any other action to collect monies relating to [the Shumans'] 2004 tax year account will subject Respondent OTR to the possibility of a monetary sanction being imposed." In other words, the ALJ was now going well beyond determining whether the Shumans' protests were correct, and essentially enjoining OTR from sending any further incorrect notices or bills, with possible monetary sanctions looming in the background.
II. ENFORCEMENT PROCEEDINGS
Enforcement issues first arose with a (comparatively) minor reporting violation. OTR failed to submit written proof of compliance with the order by the 30-day deadline, and the ALJ ordered OTR to show cause why sanctions should not be imposed. OTR responded that it had suppressed the Shuman' accounts within the deadline as ordered, but acknowledged that it had failed to submit proof of compliance to OAH. It does not appear that any specific sanctions were issued as a result of this purely procedural failure on the part of OTR, although the ALJ did mention it in her Final Order on Sanctions.
Meanwhile, on June 3, 2009, the Shumans received a letter from Muniservices LLC, a company that had a contract with OTR under which it was to identify taxpayers who were believed not to have paid all of the taxes owed by them to the District of Columbia. According to Muniservices, the Shumans had potential additional tax obligations as a result of their allegedly having done certain kinds of business in the District. The Shumans responded that during the relevant time period, they had not conducted in the District any of the types of business described in the letter. At the hearing on the order to show cause, OTR acknowledged that its suppression of the Shumans's accounts had not been communicated to Muniservices, which collected its information from a separate data base. In addition, after the case had been closed, the Shumans received another IRS Form 1099-G in which OTR erroneously reported that they had received a refund of $1,580 in 2009 for the 2004 tax year. OTR also issued new Notices of Offset on March 14, 15, and 16, 2011, all of which related to ...