The opinion of the court was delivered by: D. LOWELL JENSEN
On November 18, 1992 the Court heard plaintiff's motion for attorneys' fees. Robert S. Albery of Gordon & Rees appeared on behalf of plaintiff. Assistant United States Attorney Thomas Moore appeared on behalf of defendant. Having considered the papers submitted, the arguments of counsel, the applicable law, and the entire record herein, the Court DENIES plaintiff's motion for attorneys' fees.
This action concerns a non-debtor spouse whose state retirement fund was levied by the IRS because her husband owed back taxes. In August 1991, the Internal Revenue Service gave notice to plaintiff Georgia Cort's husband, Arnold Cort, that he owed approximately $ 122,000 in back taxes and fines. These alleged back taxes were the result of Arnold Cort's failure to report certain income on his 1986 income tax returns.
As a result of the attempted levy, plaintiff filed an action in this Court for a Temporary Restraining Order ("TRO"). On November 26, 1991, this Court deferred the hearing on plaintiff's motion and the government agreed to forego pursuing its lien until such time as this Court determined whether the defendant was entitled to levy upon plaintiff's retirement benefits. The parties stipulated that plaintiff's scheduled hearing on the TRO be changed to a motion for summary judgment on the issue of whether the government was entitled to levy upon plaintiff's retirement benefits. This Court subsequently heard argument on plaintiff's summary judgment motion.
The Court did not rule on that motion as it became moot when Arnold Cort and the United States entered into a settlement agreement as to the IRS claim against Arnold Cort. Plaintiff now moves for the recovery of attorneys' fees and costs which were incurred in the prosecution of the underlying action as to the IRS levy.
A. Legal Standard for Recovery of Attorneys' Fees Against the United States in a Tax Case
U.S. Code Section 7430 of Title 26 ("Section 7430"), which governs the awarding of attorneys' fees and costs against the United States in a tax case, provides that:
(a) In General--In any administrative or court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, the prevailing party may be awarded a judgment or a settlement for--
(2) reasonable litigation costs incurred in connection with such court proceeding.
(1) A judgment for reasonable litigation costs shall not be awarded under subsection (a) in any court proceeding unless the court determines that the prevailing party has exhausted the administrative remedies available to such a party within the Internal Revenue Service.
(c)(4)(A) The term "prevailing party" means any party in any proceeding to which subsection (a) applies (other than the United States or any ...