T.C. Memo. 2003-271
UNITED STATES TAX COURT
EDWARD H. AND ANNE G. HARRELL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4063-02L. Filed September 17, 2003.
During the course of R’s initial review of Ps’
offer in compromise based upon doubt as to liability
for tax liabilities for 1991, 1992, and 1993, R’s
revenue officer communicated with a member of R’s
counsel’s office. In a review of R’s initial rejection
of Ps’ offer in compromise, R’s Appeals Officer
Petrohovich communicated with the member of R’s
counsel’s office who had previously provided advice to
R’s revenue officer. Following the rejection by R’s
Appeals Office of Ps’ offer in compromise, R issued to
Ps a notice of intent to levy. In response, Ps filed a
request for a hearing pursuant to sec. 6330, I.R.C.
The requested sec. 6330, I.R.C., hearing was conducted
by Appeals Officer Martin (AO Martin), who had no prior
involvement with the tax and tax periods involved in
the review. AO Martin determined that collection by
levy was appropriate and issued to Ps a “NOTICE OF
DETERMINATION CONCERNING COLLECTION ACTION(S) UNDER
SECTION 6320 and/or 6330”.
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Ps filed a petition for judicial review pursuant
to sec. 6330, I.R.C., in response to the determination
by R to proceed with collection by levy of assessed tax
liabilities for 1991, 1992, 1993, and 1999.
Held: AO Martin was an impartial officer at the
time she conducted the sec. 6330, I.R.C., hearing
because at that time she had had no prior involvement
with the unpaid taxes which are the subject of this
case. Sec. 6330(b)(3), I.R.C.
Held, further, in light of the intervening
decision of the U.S. Supreme Court in Young v. United
States, 535 U.S. 43 (2002), this case will be remanded
to the Commissioner to permit Ps to reconsider their
rejection of AO Martin’s suggested installment
agreement based in part on Ps’ required concession of
their 1991-93 tax liabilities, or to offer another
collection alternative pursuant to sec.
6330(c)(2)(A)(iii), I.R.C.
Guy C. Crowgey, for petitioners.
Mary Ann Waters, for respondent.
MEMORANDUM OPINION
NIMS, Judge: This case arises from a petition for judicial
review filed in response to a “NOTICE OF DETERMINATION CONCERNING
COLLECTION ACTION(S) UNDER SECTION 6320 and/or 6330” dated
January 22, 2002 (Notice of Determination). The Notice of
Determination dealt with petitioners’ income tax liabilities for
tax years 1991, 1992, 1993, and 1999. The parties agree that the
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underlying tax liabilities are no longer in dispute.1 The sole
issue for decision is whether respondent’s decision that formed
the basis for the Notice of Determination was an abuse of
discretion. Unless otherwise indicated, all section references
are to the Internal Revenue Code in effect at all relevant times.
This case was submitted fully stipulated, and the facts are
so found. The stipulations of the parties, with accompanying
exhibits, are incorporated herein by this reference.
Background
At the time the petition was filed in this case, petitioners
resided in Virginia Beach, Virginia.
Petitioner Edward H. Harrell filed for chapter 11 bankruptcy
on October 24, 1995. Petitioner Anne G. Harrell filed for
chapter 11 bankruptcy on December 18, 1996. Petitioners’ chapter
11 bankruptcy cases were consolidated on February 27, 1997.
Their consolidated chapter 11 bankruptcy case was dismissed on
June 30, 1997.
1
In Young v. United States, 535 U.S. 43 (2002), the Supreme
Court resolved the question whether tax liabilities in a posture
similar to those of petitioners for tax years 1991-93 could be
discharged in a bankruptcy proceeding. The Supreme Court held
that the 3-year lookback period contained in 11 U.S.C. sec.
507(a)(8)(A)(i) (2000) of the Bankruptcy Code is subject to
equitable tolling during the pendency of a prior bankruptcy
petition. Following the holding of that case, petitioners no
longer argue that their income tax liabilities for tax years
1991-93 were discharged as a result of their bankruptcy
proceeding.
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On the same day as the dismissal of their chapter 11
bankruptcy case, petitioners filed a petition for chapter 7
bankruptcy relief. Petitioners were granted a discharge in their
chapter 7 bankruptcy case on June 11, 1998.
On August 29, 1998, notices of Federal tax lien were filed
for petitioners’ income tax liabilities for tax years 1991, 1992,
and 1993.
On or about October 30, 1998, the Internal Revenue Service
(IRS) received from petitioners: (1) A request for an
installment agreement (Request for an Installment Agreement), (2)
financial statements, and (3) an offer in compromise (Offer in
Compromise).
The Request for an Installment Agreement covered: (a)
Income tax liabilities for tax years 1994, 1995, 1996, and 1997;
and (b) Form 940, Employer’s Annual Federal Unemployment Tax
Return, and Form 941, Employer’s Quarterly Federal Tax Return,
tax liabilities for tax periods ended March 31, June 30,
September 30, December 31, 1994, March 31, June 30, September 30,
December 31, 1995, March 31, June 30, and December 31, 1996.
The Offer in Compromise was based on “doubt as to liability”
and covered: (a) Income tax liabilities for tax years 1991,
1992, and 1993; and (b) the Trust Fund Recovery Penalty, see
section 6672, for tax periods ended December 31, 1993, March 31,
and June 30, 1994. As grounds for the Offer in Compromise,
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petitioners alleged that their income tax liabilities for tax
years 1991, 1992, and 1993 were discharged as a result of their
chapter 7 bankruptcy proceeding.
There followed an extended series of communications, some
among various IRS employees themselves, and others between some
of the same IRS employees and petitioners’ representative, Guy C.
Crowgey (Mr. Crowgey). These are summarized as follows.
Revenue Officer Carol Sewel (RO Sewel) spoke with Deborah
Stanley, an attorney in respondent’s counsel’s office, (RC
Stanley) for an interpretation of the meaning of the term “court-
ordered payments” as that term applied to the necessary living
expenses claimed by petitioners as part of the Request for an
Installment Agreement.
RO Sewel spoke with Mr. Crowgey regarding the advice she
received from RC Stanley. Mr. Crowgey disagreed with the
substance of that advice. Mr. Crowgey spoke with RC Stanley
regarding the necessary living expenses claimed by petitioners.
On February 1, 1999, Mr. Crowgey wrote to Chief of
Collection, Mark Rocawich, requesting that the Request for an
Installment Agreement be reassigned from RO Sewel’s group in
Virginia Beach.
On February 5, 1999, the Collection Division referred the
Offer in Compromise to Linda Hawkins, the Offer Coordinator for
respondent’s Examination Division in Richmond, Virginia.
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On May 24, 1999, Revenue Agent R. Wygand, the revenue agent
assigned to review the Offer in Compromise, spoke with Mr.
Crowgey, who requested that the Offer in Compromise be reviewed
by respondent’s counsel’s office.
On June 16, 1999, a memorandum written by RC Stanley
addressing the merits of the Offer in Compromise was sent to
Group Manager Bill Stevens.
On July 12, 1999, respondent issued a letter to petitioners
notifying them of their right to appeal respondent’s
determination that the Offer in Compromise should be rejected.
On August 5, 1999, petitioners filed a protest of the
rejection of the Offer in Compromise.
Appeals Officer Barbara Petrohovich (AO Petrohovich) was
assigned to review the Offer in Compromise. AO Petrohovich was
also assigned to conduct a hearing pursuant to section 6330
regarding certain of petitioners’ tax years not here at issue.
Between August 30, 1999, and January 3, 2000, AO Petrohovich
discussed the dischargeability of taxes in petitioners’
bankruptcy proceeding with RC Stanley approximately three times.
AO Petrohovich initiated the communications with RC Stanley, and
all the communications occurred in RC Stanley’s office, which was
in the same suite of offices as the office of AO Petrohovich
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during the entire time that AO Petrohovich was assigned to review
petitioners’ protest of the IRS’s rejection of the Offer in
Compromise.
On December 15, 1999, AO Petrohovich held a conference with
Mr. Crowgey. She informed Mr. Crowgey that she disagreed with
him regarding the dischargeability of petitioners’ income taxes
for tax years 1991, 1992, and 1993.
AO Petrohovich determined that she did not see substantial
hazards with regard to respondent’s position rejecting the Offer
in Compromise. She came to this conclusion based on a review of
RC Stanley’s June 16, 1999, memorandum to Group Manager Stevens
that was contained in the collection file, the discussions with
RC Stanley regarding the substance of that memorandum, and her
own review of the court cases referenced by Mr. Crowgey.
On January 6, 2000, Mr. Crowgey contacted Appeals Chief
George Gretes with regard to the handling of petitioners’ case.
Mr. Crowgey told Appeals Chief Gretes that it was his belief that
RC Stanley was an advocate for the Collection Division and that
he wanted someone else in respondent’s counsel’s office to review
this matter.
On February 24, 2000, Appeals Chief Gretes sent a letter to
Mr. Crowgey that had been reviewed by AO Petrohovich. Prior to
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the issuance of this letter, AO Petrohovich corresponded with
Appeals Chief Gretes regarding the contents of the June 16, 1999,
memorandum written by RC Stanley.
On September 1, 2000, Appeals Chief Gretes agreed to the
rejection of the Offer in Compromise.
On September 5, 2000, AO Petrohovich sent a letter to
petitioners, with a copy to Mr. Crowgey, rejecting the Offer in
Compromise. The parties stipulated that petitioners did not
appeal this determination directly to this Court, or to any other
court, since no such appeal was allowed for the IRS’s rejection
of their Offer in Compromise.
On December 25, 2000, the IRS issued to petitioners a “Final
Notice - Notice of Intent to Levy” (Notice of Intent to Levy)
with regard to income tax liabilities for tax years 1991, 1992,
1993, and 1999.
On January 23, 2001, petitioners requested a hearing
pursuant to section 6330 with respect to the Notice of Intent to
Levy.
On January 25, 2001, Mr. Crowgey sent a letter to Appeals
Chief Gretes, with a copy to Daniel Black, National Chief,
Appeals, requesting that “his entire office recuse itself from
this case at this time and this case file either be referred to
another regional office or to the national office in Washington,
D.C.”
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On April 13, 2001, petitioners’ case with respect to the
Notice of Intent to Levy was assigned to Appeals Officer Anne
Martin (AO Martin) in respondent’s Bailey’s Crossroads, Virginia,
office.
AO Martin previously worked directly under Appeals Chief
Gretes. Appeals Chief Gretes was the Appeals Chief for the
Virginia/West Virginia Appeals Office from September 27, 1997,
through August 13, 2000. From September 29, 1997, until October
1, 2000, AO Martin was in the chain of command of Appeals Chief
Gretes. After October 1, 2000, and at all times during her
review of petitioners’ case, AO Martin was not in a chain of
command that included Appeals Chief Gretes.
AO Martin had no involvement with respect to the underlying
tax liabilities at issue in petitioners’ case prior to her
assignment to the case.
On August 22, 2001, Mr. Crowgey and Acting Area 3 Director
of Appeals Brian O’Hanlon discussed the assignment of AO Martin
to petitioners’ case.
On August 28, 2001, AO Martin sent a letter to Mr. Crowgey
confirming a hearing date of September 20, 2001.
On January 22, 2002, respondent issued the Notice of
Determination that forms the basis for the instant case. The
Notice of Determination dealt with petitioners’ income tax
liabilities for tax years 1991, 1992, 1993, and 1999. The Notice
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of Determination found that collection action by levy was proper
and appropriate. Attached to the Notice of Determination is a
memorandum that states, in part:
You feel there was an ex parte communication violation
by the prior Appeals Officer [AO Petrohovich] who
handled the offer in compromise and prior * * *
[section 6330 hearing regarding certain of petitioners’
tax years not here at issue].
The offer in compromise was rejected on September 5,
2000 * * *. The ex parte rules did not become
effective until October 23, 2000.
The tax liabilities will not be abated as the
collection statute was tolled during the period of the
prior bankruptcy.
* * * * * * *
The notice of intent to levy was appropriate. You had
declined to enter into an installment agreement.
Discussion
I. General Rules
Section 6331(a) authorizes the Commissioner to levy against
property and property rights where a taxpayer fails to pay taxes
within 10 days after notice and demand for payment is made.
Section 6331(d) requires the Secretary to send notice of an
intent to levy to the taxpayer, and section 6330(a) requires the
Secretary to send a written notice to the taxpayer of his right
to a hearing.
Section 6330(b) affords taxpayers the right to a hearing
before an impartial IRS Appeals officer. Pursuant to section
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6330(b)(2), a taxpayer is entitled to only one hearing regarding
the tax period relating to the amount of unpaid tax.
Section 6330(c)(1) requires that the Appeals officer obtain
verification that the requirements of any applicable law or
administrative procedure have been met. Section 6330(c)(2)(A)
provides that the taxpayer may raise at the hearing “any relevant
issue relating to the unpaid tax or the proposed levy” including
spousal defenses, challenges to the appropriateness of collection
actions, and alternatives to collection. The taxpayer cannot
raise issues relating to the underlying tax liability if the
taxpayer received a notice of deficiency for such tax liability
or the taxpayer otherwise had an opportunity to dispute the tax
liability. Sec. 6330(c)(2)(B). Section 6330(c)(3) provides that
a determination of the Appeals officer shall take into
consideration the verification under section 6330(c)(1), the
issues raised by the taxpayer, and whether the proposed
collection action balances the need for the efficient collection
of taxes with the legitimate concern of the taxpayer that any
collection action be no more intrusive than necessary.
Where the Appeals Office issues a notice of determination to
the taxpayer following an administrative hearing regarding a
levy, section 6330(d)(1) provides that the taxpayer will have 30
days following the issuance of the determination to file a
petition for review with the Tax Court or a Federal District
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Court, as appropriate. The taxpayer may appeal the determination
to the Tax Court, rather than a Federal District Court, if the
Tax Court generally has jurisdiction over the type of tax
involved in the case. Sec. 6330(d)(1)(A); Downing v.
Commissioner, 118 T.C. 22, 26 (2002); Landry v. Commissioner, 116
T.C. 60, 62 (2001). Section 6330(e)(1) suspends the levy action
until the conclusion of the hearing and any judicial review of
the determination.
Where the underlying tax liability is properly at issue in
the hearing, we review that issue on a de novo basis. Goza v.
Commissioner, 114 T.C. 176, 181-182 (2000). Where the underlying
tax liability is not at issue, however, we review the
determination to see whether there has been an abuse of
discretion. Id. In this case, the parties agree that the
underlying tax liabilities are no longer at issue; thus we review
respondent’s determination under an abuse of discretion standard.
The Internal Revenue Service Restructuring and Reform Act of
1998 (RRA 1998), Pub. L. 105-206, sec. 1001(a)(4), 112 Stat. 689,
required that respondent develop a plan to prohibit ex parte
communications between officers of the Appeals Office and other
IRS employees that appear to compromise the independence of the
Appeals Office.
On October 4, 2000, respondent issued Notice 99-50, 1999-2
C.B. 444, which concerned a proposed revenue procedure that, when
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finalized, would provide guidance to address, in part, the
directive in RRA 1998 to develop a plan to prohibit ex parte
communication between officers of the Appeals Office and other
IRS employees that appear to compromise the independence of the
Appeals Office. Before issuing final guidance, the Treasury
Department and the IRS invited comments from the public to aid in
the development of this revenue procedure. Notice 99-50, 1999-2
C.B. at 444, states that “The prohibition on ex parte
communication will not take effect until the revenue procedure is
issued in final form. In the interim, existing procedures
relating to communications in the course of Appeals consideration
of disputes remain in effect.”
The effective date of Rev. Proc. 2000-43, 2000-2 C.B. 404,
which deals with ex parte communications between officers of the
Appeals Office and other IRS employees, by its terms is October
23, 2000.
II. Parties’ Contentions
Respondent contends that AO Martin was an impartial Appeals
officer as that term is used in section 6330(b)(3). Respondent
also contends that AO Martin correctly considered
(1) whether the legal and procedural requirements
were met with regard to the Final Notice - Notice of
Intent to Levy, (2) whether there were any valid
challenges to the liability, and (3) whether the
collection action balanced the need for efficient
collection of taxes with * * * [petitioners’]
legitimate concern that any collection action be no
more intrusive than necessary.
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Respondent contends that AO Martin considered the merits of
all issues raised by petitioners and, through her own research,
determined that petitioners’ position was without merit. In
addition, respondent claims that AO Martin considered
petitioners’ dischargeability argument. Respondent further
claims that petitioners offered no collection alternatives to AO
Martin, and when she proposed the collection alternative of an
installment agreement encompassing the entire amount of the
liabilities, petitioners rejected it. Respondent argues that
because “petitioners were given all their due process rights and
there has been no showing of an error in judgment or any other
abuse of discretion by the Appeals officer assigned to this CDP
case [conducted pursuant to section 6330], the determination that
the levy action was proper and appropriate should be sustained.”
Petitioners contend that AO Martin abused her discretion in
determining that “ex parte procedure rules did not apply” to
petitioners’ previous section 6330 hearing (relating to years not
here at issue) and AO Petrohovich’s rejection of the Offer in
Compromise. Petitioners further contend that
Appeals Officer Martin has failed to present an
adequate record for appellate review, and Appeals
Officer Martin lacks impartiality as being a former
member of the same office hearing the original
collection due process appeal [relating to years not
here at issue] and denial of * * * [petitioners’] Offer
in Compromise.
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Petitioners claim that RC Stanley had extensive involvement
with petitioners’ case at the collection phase and provided
assistance to AO Petrohovich. Petitioners argue that RC
Stanley’s communications with AO Petrohovich “jeopardized Appeals
Officer Petrohovich’s impartiality as a hearing officer, which
denied * * * [petitioners] a fair hearing and opportunity to have
a meaningful appeal of the denial of the * * * Offer in
Compromise.”
Petitioners request a new section 6330 hearing with an
impartial Appeals officer.
III. Analysis
As stated above, the parties agree that the underlying
liabilities are no longer at issue. The parties disagree about
two main points: (1) The impartiality of AO Martin, and (2)
whether AO Martin abused her discretion in determining that the
communications between AO Petrohovich and RC Stanley did not
violate petitioners’ rights.
A. Impartiality of Appeals Officer Martin
Section 6330(b)(3) provides:
(3) Impartial officer.--The hearing under this
subsection shall be conducted by an officer or employee
who has had no prior involvement with respect to the
unpaid tax specified in subsection (a)(3)(A) before the
first hearing under this section or section 6320. A
taxpayer may waive the requirement of this paragraph.
The operative terms of section 6330(b)(3) provide that
“impartial” concerns the Appeals officer’s prior involvement with
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respect to the unpaid tax before the hearing. See also Perez v.
Commissioner, T.C. Memo. 2002-274. The statute does not define
the meaning of the term “prior involvement”; however, the
questions and answers in section 301.6330-1(d)(2), Q&A-D4,
Proced. & Admin. Regs., provide that
Prior involvement by an employee or officer of Appeals
includes participation or involvement in an Appeals
hearing (other than a CDP hearing held under either
section 6320 or section 6330) that the taxpayer may
have had with respect to the tax and tax periods shown
on the CDP notice.
We agree with respondent that AO Martin was an impartial
officer for purposes of section 6330(b)(3). AO Martin did not
participate in, and was not involved in, any previous Appeals
Office hearing concerning petitioners’ tax years 1991, 1992,
1993, and 1999.
As stated above, AO Martin previously worked in the chain of
command of Appeals Chief Gretes. AO Petrohovich also worked in
the chain of command of Appeals Chief Gretes. When AO Martin
conducted her review of petitioners’ case, she was no longer in a
chain of command that included Appeals Chief Gretes. We assume,
for the sake of argument, that AO Martin and AO Petrohovich were
members of the same Appeals Office at some point prior to AO
Martin’s review of petitioners’ case.
Petitioners’ contention that AO Martin is not impartial
because she is “a former member of the same office hearing * * *
[a previous] collection due process appeal and denial of * * *
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[petitioners’] Offer in Compromise” is without merit. One
Appeals officer’s prior involvement with respect to the unpaid
tax for a different period, at issue in a previous section 6330
hearing, is not imputed to all other Appeals officers who work in
the same Appeals Office as the Appeals officer with such prior
involvement. Consequently, AO Martin’s status as an impartial
officer is not compromised because she worked in the same Appeals
Office as AO Petrohovich, who conducted a previous section 6330
hearing regarding certain of petitioner’s tax years not here at
issue. Similarly, one Appeals officer’s prior involvement with
respect to the unpaid tax for the same period, at issue in the
review of an offer in compromise, is not imputed to all other
Appeals officers who work in the same Appeals Office as the
Appeals officer with such prior involvement. Consequently, AO
Martin’s status as an impartial officer is not compromised
because she worked in the same Appeals Office as AO Petrohovich,
who previously reviewed the Offer in Compromise outside the
context of a section 6330 hearing. We conclude that AO Martin
was an impartial officer as required by section 6330(b)(3).
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B. Communications Between Respondent’s Counsel Stanley and
Appeals Officer Petrohovich2
We also agree with respondent that AO Martin did not abuse
her discretion in determining that the communications between AO
Petrohovich and RC Stanley did not violate petitioners’ rights.
RRA 1998 required that respondent develop a plan to prohibit
ex parte communications between officers of the Appeals Office
and other Internal Revenue Service employees that appear to
compromise the independence of the Appeals Office. Respondent
issued Rev. Proc. 2000-43, 2000-2 C.B. 404, to fulfill this
statutory mandate.
Petitioners are correct that Rev. Proc. 2000-43, places
limits on communications between the Appeals Office and certain
employees in the Office of Chief Counsel. Under the guidance set
forth in Rev. Proc. 2000-43, an “ex parte communication” is a
communication taking place between the Appeals Office and another
Service function without the participation of the taxpayer or the
taxpayer’s representative. Rev. Proc. 2000-43, sec. 3, Q&A-D11,
2000-2 C.B. 406, provides that
Appeals employees should not communicate ex parte
regarding an issue in a case pending before them with
2
As stated above, AO Petrohovich conducted two separate
reviews of petitioners’ tax liabilities. She conducted a sec.
6330 hearing with respect to certain of petitioners’ tax years
not here at issue. She also conducted a review of the initial
denial of the Offer in Compromise. Her review of the Offer in
Compromise was not conducted pursuant to sec. 6330.
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Counsel field attorneys who have previously provided
advice on that issue in the case to the IRS employees
who made the determination Appeals is reviewing. * * *
Rev. Proc. 2000-43, sec. 4, 2000-2 C.B. 409, states that it is
“effective for communications between Appeals Officers and other
Internal Revenue Service employees which take place after October
23, 2000”. The communications between AO Petrohovich and RC
Stanley, however, took place before October 23, 2000.
But even if the aforementioned communications had, in fact,
taken place after October 23, 2000, such communications would not
have disqualified AO Martin’s status as an impartial officer
under section 6330(b)(3). The record shows that AO Martin did
not engage in impermissible ex parte communications and had no
prior involvement with respect to the unpaid taxes that are the
subject of this case.
C. Review Conducted by Appeals Officer Martin
AO Martin independently reviewed the merits of the Offer in
Compromise. Based on her independent review of the facts and
applicable law, she concluded that “The tax liabilities will not
be abated as the collection statute was tolled during the period
of the prior bankruptcy.”
We will, however, for reasons hereinafter stated, return
this case to the Commissioner solely to provide petitioners with
another opportunity to consider AO Martin’s proffered collection
alternative of an installment agreement of the entire amount of
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petitioners’ tax liability, including all penalties and interest,
or to make an offer of a collection alternative as provided in
section 6330(c)(2)(A)(iii). Petitioners will not be permitted to
further challenge AO Martin’s status as an impartial officer, as
defined in section 6330(b)(3), or otherwise, or to raise any new
or additional issues.
Our reasons for remanding this case to the Commissioner are
as follows:
As previously described, petitioner Edward H. Harrell filed
for chapter 11 bankruptcy on October 24, 1995, and petitioner
Anne G. Harrell similarly filed on December 18, 1996. Their
cases were consolidated on February 27, 1997, and dismissed on
June 30, 1997. On the same day as the dismissal of their chapter
11 case, petitioners filed a petition for chapter 7 bankruptcy
relief.
Petitioners based their Offer in Compromise for their 1991,
1992, and 1993 tax years on “doubt as to liability”, taking the
position that their liability for these years was discharged
under chapter 7 of the Bankruptcy Code. They theorized that the
returns for those years were filed outside the 3-year lookback
period contained in the Bankruptcy Code. See 11 U.S.C. sec.
507(a)(8)(A)(i) (2000).
AO Martin, based on her review of the facts and applicable
law, including case law, concluded that there was equitable
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tolling of the lookback period during the pendency of
petitioners’ respective and consolidated cases under chapter 11
of the Bankruptcy Code. Consequently, she reasoned, petitioners’
1991, 1992, and 1993 tax liabilities were not discharged under
chapter 7 because they fell within the 3-year lookback period.
Furthermore, in suggesting an installment agreement, AO
Martin required that if accepted it had to cover petitioners’ tax
liabilities for all unpaid years, including the challenged 1991,
1992, and 1993 liabilities. As previously noted, petitioners no
longer challenge their 1991-93 liabilities.
As of January 22, 2002, the date of the Notice of
Determination upon which this case is based, the United States
Supreme Court had not as yet decided Young v. United States, 535
U.S. 43 (2002), which had been argued on January 9, 2002, but was
not decided until March 4, 2002. In this case, the Supreme Court
affirmed the decision of the United States Court of Appeals for
the First Circuit in Young v. United States, 233 F.3d 56 (1st
Cir. 2000), in which the Court of Appeals held that the 3-year
lookback period in bankruptcy cases is automatically tolled
during the pendency of an earlier proceeding under the Bankruptcy
Code. In Young, 233 F.3d at 60, the Court of Appeals pointed out
that five other Courts of Appeals had adopted the rule that the
lookback period is automatically tolled during a prior
bankruptcy. By contrast, the Court of Appeals noted that three
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other Courts of Appeals had held that the lookback period is not
automatically tolled by a prior bankruptcy proceeding but that
equitable considerations could permit tolling on a case-by-case
basis. Id.
We believe that at the time petitioners rejected AO Martin’s
suggested installment agreement, and at the time the Notice of
Determination was issued, there was sufficient reason to raise a
doubt as to petitioners’ tax liabilities for 1991, 1992, and
1993, so as to justify petitioners’ rejection of an installment
agreement based in part upon a concession of the 1991-93
liabilities.
The Supreme Court granted certiorari in Young v. United
States, 533 U.S. 976 (2001), on September 25, 2001, which
predated by more than 3 months respondent’s Notice of
Determination. If AO Martin’s research had revealed the grant of
certiorari, prudence might have prompted postponing further
action pending the likelihood that the Supreme Court would
eventually resolve the equitable tolling issue, and lay to rest
the “doubt as to liability” question for purposes of petitioners’
Offer in Compromise. Since the Supreme Court resolved the
tolling issue only after the above-described crucial events had
transpired, we believe that petitioners are entitled to
reconsider their rejection of the proposed installment agreement,
and if they desire to do so, offer a collection alternative.
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While we are reluctant to label respondent’s issuance of the
Notice of Determination an abuse of discretion based upon a
somewhat technical reason for doing so, we hold that it is
appropriate to remand this matter to the Commissioner for the
sole purpose of permitting petitioners, if they wish to do so, to
accept AO Martin’s suggested installment agreement, as described
above, or to offer another collection alternative pursuant to
section 6330(c)(2)(A)(iii). Again we repeat that petitioners may
not further challenge AO Martin’s status as an impartial officer,
or raise any new or additional issues.
To reflect the foregoing,
An appropriate Order will
be issued.