T.C. Memo. 2014-140
UNITED STATES TAX COURT
SYNERGY ENVIRONMENTAL, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9376-12L. Filed July 15, 2014.
Paul E. Kent, for petitioner.
Lisa R. Woods and Bryant Smith, for respondent.
MEMORANDUM OPINION
HAINES, Judge: This matter is currently before the Court pursuant to the
parties’ joint motion to submit this case on a stipulated record under Rule 122.1
1
Unless otherwise indicated, all Rule references are to the Tax Court Rules
of Practice and Procedure, and all section references are to the Internal Revenue
Code, as amended and in effect at all relevant times. Amounts are rounded to the
nearest dollar.
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[*2] Petitioner filed a petition with this Court in response to a Notice of
Determination Concerning Collection Action Under Section 6320. The issue for
decision is whether respondent abused his discretion by rejecting petitioner’s
proposed offer-in-compromise (OIC).
Background
Some of the facts have been stipulated and are so found. Those exhibits
attached to the stipulation which were found admissible are incorporated by this
reference. Petitioner, a defunct corporation, maintained its principal place of
business in California when the petition was filed.
On August 31, 2010, respondent received an OIC (August 31 OIC) from
petitioner, offering $600 to compromise unpaid Federal income tax liabilities for
tax years ending September 30, 1997, 1998, 1999, and 2000 (years at issue).
Respondent rejected the August 31 OIC.
In June 2011 respondent issued petitioner a notice (lien notice) indicating
that a notice of Federal tax lien had been filed with respect to its outstanding tax
liabilities for the years at issue and informing it that it was entitled to a hearing
under section 6320.
In late July 2011 petitioner appealed the rejection of the August 31 OIC to
the IRS Appeals Office (Appeals). A few days later petitioner timely requested a
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[*3] section 6320 hearing regarding the lien notice with Appeals. In the hearing
request, petitioner proposed an OIC as a collection alternative.
Appeals assigned the section 6320 hearing and the appeal of the August 31
OIC rejection to Appeals Officer Owyang (AO Owyang), who was not previously
involved with the August 31 OIC. AO Owyang held the hearing. Petitioner did
not challenge the underlying liabilities during the hearing but did propose the
August 31 OIC as a collection alternative. In mid-March 2012 AO Owyang sent
petitioner a determination notice sustaining the notice of lien filing. With respect
to the August 31 OIC as a collection alternative, the determination notice stated
that “[b]ecause the Offer in Compromise was filed on 07/29/2010, a year earlier
than the Request for a Collection Due Process Hearing for the filed federal tax
lien, any decision on the Offer in Compromise is covered under an earlier, separate
work unit.” Around two weeks after AO Owyang sent the determination notice,
he sent a separate letter to petitioner sustaining respondent’s rejection of the
August 31 OIC. Attached to the letter was an “Appeals Case Memorandum”
explaining the decision.
Petitioner filed a petition with this Court challenging the determination.
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[*4] Discussion
A lien in favor of the United States on all property and rights to property of
a person liable for taxes (taxpayer) is imposed when a demand for the taxes has
been made and the taxpayer fails to pay. Sec. 6321. The lien arises when an
assessment is made. Sec. 6322. Generally, in order for the lien to be valid against
third parties, the Secretary must file a lien notice with certain State or local
authorities where the taxpayer’s property is situated. Sec. 6323(a), (f); Lindsay v.
Commissioner, T.C. Memo. 2001-285, aff’d, 56 Fed. Appx. 800 (9th Cir. 2003).
The Secretary must furnish the taxpayer with written notice of the filing of a
lien notice and of the taxpayer’s right to a hearing concerning the lien. Sec.
6320(a)(1), (3). If the taxpayer timely requests a hearing, the hearing is to be
conducted by an officer or employee of Appeals who has had no prior involvement
with respect to the unpaid taxes. Sec. 6320(b)(1), (3), (c).
We have jurisdiction to review Appeals’ determinations. Secs. 6320(c),
6330(d). Determinations with respect to the underlying tax liability are reviewed
de novo, whereas determinations concerning collection matters are reviewed for
abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.
Commissioner, 114 T.C. 176, 181-182 (2000). Petitioner does not dispute the
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[*5] underlying liabilities. Consequently, we review the Appeals officer’s
determination for abuse of discretion.
The abuse of discretion standard requires the Court to decide whether the
Commissioner’s determination was arbitrary, capricious, or without sound basis in
fact or law. Woodral v. Commissioner, 112 T.C. 19, 23 (1999); Keller v.
Commissioner, T.C. Memo. 2006-166, aff’d in part, 568 F.3d 710 (9th Cir. 2009);
Fowler v. Commissioner, T.C. Memo. 2004-163.
The taxpayer may raise at the hearing “any relevant issue” relating to the
unpaid tax or the lien, including offers of collection alternatives such as an OIC.
Secs. 6320(c), 6330(c)(2)(A). The determination by Appeals must take into
consideration any relevant issues raised by the taxpayer. Secs. 6320(c),
6330(c)(3)(B). The determination notice must set forth Appeals’ findings and
decisions as to such issues. See sec. 301.6320-1(e)(3), Q&A-E8, Proced. &
Admin. Regs.
With respect to the August 31 OIC petitioner proposed as a collection
alternative in the section 6320 hearing, the determination notice states only that
“[b]ecause the Offer in Compromise was filed on 07/29/2010, a year earlier than
the Request for a Collection Due Process Hearing for the filed federal tax lien any
decision on the Offer in Compromise is covered under an earlier, separate work
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[*6] unit.” This statement does not find or decide anything with respect to the
appropriateness of the August 31 OIC. Hence, the determination does not contain
all the statements required by section 301.6330-1(e)(3), Q&A-E8, Proced. &
Admin. Regs.
Additionally, the statement indicates that AO Owyang did not consider
petitioner’s August 31 OIC as a collection alternative in making his determination
pursuant to section 6320. That the August 31 OIC was concurrently being
considered in a separate appeal did not obviate the need to consider the August 31
OIC in the section 6320 hearing. See secs. 6320(c), 6330(c)(2), (3), and (4).2 We
think it is necessary to remand this case to Appeals for a supplemental hearing.3
2
We note that this case is distinguishable from West v. Commissioner, T.C.
Memo. 2010-250. In West, the Appeals officer refused to reconsider a collection
alternative that the taxpayer had previously raised in another administrative
proceeding. We held that the Appeals officer did not abuse his or her discretion
because the collection alternative had been raised and decided in the
administrative hearing. Unlike the collection alternative in West, the collection
alternative raised in petitioner’s sec. 6320 hearing, i.e., the August 31 OIC, had
not been considered in a previous hearing as it was still under appeal when the
determination notice was issued.
3
We remand a case to Appeals when the taxpayer did not have a proper
hearing and the further hearing is necessary or will be productive. Lunsford v.
Commissioner, 117 T.C. 183, 189 (2001); Drake v. Commissioner, T.C. Memo.
2006-151, aff’d, 511 F.3d 65 (1st Cir. 2007); Lites v. Commissioner, T.C. Memo.
2005-206. When we remand a case to Appeals, “the further hearing is a
supplement to the taxpayer’s original section 6330 hearing, [and] not a new
(continued...)
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[*7] Accordingly, we will remand this matter to Appeals to consider petitioner’s
August 31 OIC as a collection alternative and to state Appeals’ findings and
decision. In evaluating the August 31 OIC, Appeals should consider petitioner’s
current financial circumstances, petitioner’s current paying and filing compliance,
and any other relevant factors. Petitioner may not raise any new or additional
issues beyond the August 31 OIC.
In reaching our holdings herein, we have considered all arguments made,
and, to the extent not mentioned above, we conclude they are moot, irrelevant, or
without merit.
To reflect the foregoing,
An appropriate order will be
issued.
3
(...continued)
hearing.” See Kelby v. Commissioner, 130 T.C. 79, 86 (2008). The
Commissioner then issues supplemental determinations after the further hearing,
which we can review. Id. Once the Commissioner issues supplemental
determinations, however, we cannot review any of the prior notices of
determination. See id. (“[T]he position of the Commissioner that we review is the
position taken in the last supplemental determination.”).