T.C. Memo. 2003-322
UNITED STATES TAX COURT
RONALD E. BOYER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8241-02L. Filed November 20, 2003.
Ronald E. Boyer, pro se.
Jason W. Anderson, for respondent.
MEMORANDUM OPINION
KROUPA, Judge: Petitioner filed his petition under section
6330(d)1 seeking review of respondent’s determination to proceed
with a proposed levy to collect petitioner’s 1986 and 1987
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at all relevant times, all
Rule references are to the Tax Court Rules of Practice and
Procedure, and all dollar amounts are rounded to the nearest
dollar.
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Federal income tax liabilities. The sole issue for decision is
whether respondent’s determination to proceed with the proposed
collection activity is an abuse of discretion. We hold it is
not.
This case was submitted fully stipulated pursuant to Rule
122, and the facts are so found. The stipulation of facts, the
supplemental stipulation of facts, and the accompanying exhibits
are incorporated herein by this reference. Petitioner resided in
Watseka, Illinois, at the time he filed the petition in this
case.
Background
Petitioner and his wife, Tilda Boyer2 (collectively, the
Boyers), filed an untimely joint Federal income tax return for
1986 on November 16, 1987 (the 1986 return). On the basis of the
1986 return, respondent assessed $18,020 in income tax, $356 as
an addition to tax for failure to pay estimated tax under section
6654, $4,029 as an addition to tax for failure to file the 1986
return timely under section 6651(a)(1), $537 as an addition to
tax for failure to pay timely the amount shown as tax on the
return under section 6651(a)(2), plus interest (the 1986 tax
liability). On May 3, 1988, respondent filed a Notice of Federal
Tax Lien (Tax Lien Notice) regarding the 1986 tax liability.
2
Tilda Boyer did not join with her husband in filing the
petition and, therefore, is not a petitioner in this case.
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On or about January 25, 1991, the Boyers entered into an
installment agreement to pay the 1986 tax liability (the 1986
installment agreement). The Boyers made payments pursuant to the
1986 installment agreement for almost 8 years. The Boyers
stopped making payments, in default of the 1986 installment
agreement, on October 5, 1998.
The Boyers filed an untimely joint Federal income tax return
for 1987 on June 6, 1988 (the 1987 return). On the basis of the
1987 return, respondent assessed $8,444 in income tax, $456 as an
addition to tax for failure to pay estimated tax under section
6654, $84 as an addition to tax for failure to pay timely the
amount shown as tax on the return under section 6651(a)(2), plus
interest (the 1987 tax liability). Respondent filed a Tax Lien
Notice regarding the 1987 tax liability on August 8, 1989, and
almost 5 years thereafter, the Boyers entered into an installment
agreement to pay the 1987 tax liability (the 1987 installment
agreement). The Boyers made payments pursuant to the 1987
installment agreement for 4 years but stopped making payment, in
default of the 1987 installment agreement, on February 2, 1998.
Respondent failed to refile a tax lien notice as required by
section 6323(g) regarding the 1987 liability.
On November 7, 1997, the Boyers signed a Form 900, Tax
Collection Waiver, relating to the 1986 and 1987 tax liabilities.
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The waiver extended the statutory period to collect the Boyers’
tax liabilities for both years until December 31, 2005.3
On November 24, 1997, respondent inadvertently and
erroneously released the Federal tax lien relating to the 1986
tax liability. Respondent released the lien by filing a Form
668(Z), Certificate of Release of Federal Tax Lien (RFTL), with
the Office of the County Clerk and Recorder, Iroquois County,
Watseka, Illinois. The RFTL stated in part:
that * * * the requirements of section 6325(a) * * *
have been satisfied for the taxes * * * and for all
statutory additions. Therefore, the lien provided by
Code section 6321 for these taxes and additions has
been released. * * *
After the RFTL was filed, the Boyers continued to make
payments under the 1986 installment agreement. Specifically, the
Boyers made installment payments on May 26 and October 5, 1998.
The Boyers also made installment payments under the 1987
installment agreement after the RFTL was filed.
3
Given that the waiver was signed before Dec. 31, 1999,
the Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3461(c)(2), 112 Stat. 764, provides
that the expiration of the statutory period, unless suspended,
would occur on Dec. 31, 2002, rather than Dec. 31, 2005.
Nevertheless, because the Boyers timely requested a sec. 6330
hearing before Dec. 31, 2002, the statutory period for collection
of the Boyers’ 1986 and 1987 tax liabilities has been suspended
until the final resolution of these collection issues. See sec.
6330(e). In any event, while the Boyers raised the expiration of
the collection period in the sec. 6330 hearing, petitioner did
not raise it in any pleadings filed with this Court.
Accordingly, it is deemed conceded. See Rule 331(b)(4).
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On August 31, 2001, respondent sent the Boyers a Notice of
Intent to Levy under Section 6331(d) relating to their unpaid
1986 and 1987 tax liabilities. The Boyers timely filed Form
12153, Request for a Collection Due Process Hearing. In their
request, the Boyers raised two issues. First, the Boyers
contended that they had no outstanding tax liability for 1986 or
1987 because the RFTL showed that their outstanding tax liability
was either paid or made unenforceable. Second, the Boyers
contended that the statutory period for collection had expired
for both the 1986 and 1987 tax liabilities. The Boyers did not
raise any spousal defenses or offer collection alternatives.
An Appeals officer wrote a letter to the Boyers dated
March 7, 2002, and explained that, although the transcripts of
their account showed that the lien for 1986 was released as
reflected by the RFTL, the lien for 1986 was released
prematurely. The Appeals officer further explained that the 1986
liability remained due and owing because the Boyers failed to
make all required payments under the 1986 installment agreement.
The Appeals officer also noted that the RFTL related solely to
the 1986 liability, not the 1987 liability. As with the 1986
liability, the balance of the 1987 liability remained due and
owing.
Regarding the Boyers’ argument that the collection period
had expired, the Appeals officer reminded the Boyers that they
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had extended the statutory collection period until December 31,
2005, by signing the Form 900. Therefore, the Appeals officer
explained, the statutory period had not expired.
The Appeals officer informed the Boyers by mail on two
occasions that they had to contact her if they wished to
continue with the appeal process. Neither of the Boyers
responded to the Appeals officer’s two letters or contacted the
Appeals officer. Consequently, on April 12, 2002, respondent
sent the Boyers a Notice of Determination Concerning Collection
Action(s) under Section 6320 and/or 6330 (Determination Notice).
The Determination Notice informed the Boyers that, after
considering the facts of their case and their contentions, the
Appeals officer recommended that the proposed levy action be
pursued to collect their 1986 and 1987 tax liabilities. The
Determination Notice also informed the Boyers of their right to
judicial review of the administrative determination. Petitioner
timely filed his petition with this Court.
Discussion
The Court in collection actions will review a taxpayer’s
liability de novo where the underlying tax liability is at issue.
A taxpayer’s underlying tax liability may be at issue if he or
she “did not receive any statutory notice of deficiency for such
tax liability or did not otherwise have an opportunity to dispute
such tax liability.” Sec. 6330(c)(2)(B). The Court will review
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the Commissioner’s administrative determination for abuse of
discretion with respect to all other issues. Sego v.
Commissioner, 114 T.C. 604, 610 (2000).
Petitioner does not dispute the existence or the amount of
the underlying tax liability.4 Accordingly, the proper standard
for review is whether the Appeals officer abused her discretion
in determining that respondent could proceed with the proposed
levy action.
Petitioner contends that respondent may not proceed with the
proposed collection activity because the RFTL is tantamount to an
admission by respondent that the underlying tax liability has
been fully paid or is unenforceable. Petitioner also asserts
that respondent is equitably estopped from collecting both the
1986 and 1987 tax liabilities. For the reasons explained, we
disagree with petitioner and sustain respondent’s determination
to proceed with the proposed levy action.
A. Effect of Filing Tax Lien Release Certificate
We first address petitioner’s argument that he has no
liability for 1986 or 1987 because the RFTL showed that the tax
lien was extinguished. Section 6325(a) requires the Commissioner
to issue a certificate of release of any lien when the
Commissioner finds that the liability for the amount assessed,
4
The assessments were based upon the 1986 return and 1987
return.
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together with all interest, is fully satisfied or legally
unenforceable. Section 6325(f)(1)5 provides, with certain
exceptions, that a certificate of tax lien release is conclusive
that the lien upon the property referred to in the certificate is
extinguished.
Respondent argues that neither section 6325 nor the caselaw
provides that the filing of a certificate of release of lien
extinguishes the underlying liability. We agree.
It is well settled that although a certificate of tax lien
release is conclusive that the lien is extinguished, it is not
conclusive that the tax liability is extinguished. See, e.g.,
Angier Corp. v. Commissioner, 50 F.2d 887, 892 (1st Cir. 1931),
5
Sec. 6325(f) in pertinent part provides:
SEC. 6325(f). Effect of Certificate.--
(1) Conclusiveness.--Except as provided in paragraphs
(2) and (3), if a certificate is issued pursuant to this
section by the Secretary and is filed in the same office as
the notice of lien to which it relates (if such notice of
lien has been filed) such certificate shall have the
following effect:
(A) in the case of a certificate of release, such
certificate shall be conclusive that the lien referred
to in such certificate is extinguished;
* * * * * * *
(2) Revocation of certificate of release or
nonattachment.–-If the Secretary determines that a
certificate of release or nonattachement of a lien imposed
by section 6321 was issued erroneously or improvidently
* * * the Secretary may revoke such certificate and
reinstate the lien–
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affg. in part and vacating in part 17 B.T.A. 1376 (1926);6 Baker
v. Commissioner, 24 T.C. 1021, 1025 (1955); Miller v.
Commissioner, 23 T.C. 565, 569 (1954), affd. 231 F.2d 8 (5th Cir.
1956);7 Foulds v. Commissioner, T.C. Memo. 1989-29; Urwyler v.
United States, 77 AFTR 2d 96-794, 96-1 USTC par. 50,052 (E.D.
Cal. 1996). The plain language of section 6325(f)(1)(A) and of
the RFTL itself clearly shows that the release extinguishes the
tax lien, not the tax liability. Baker v. Commissioner, supra;
Miller v. Commissioner, supra. The underlying tax liability is
not extinguished when a lien is released. The underlying tax
liability remains until the tax is paid in full or the statutory
6
In Angier Corp. v. Commissioner, 50 F.2d 887 (1st Cir.
1931), affg. in part and vacating in part 17 B.T.A. 1376 (1926),
the applicable statute was sec. 613(d), I.R.C. 1928, which
provided:
SEC. 613. LIEN FOR TAXES.
(d) A certificate of release or of partial discharge
issued under this section shall be held conclusive that the
lien upon the property covered by the certificate is
extinguished.
7
In Baker v. Commissioner, 24 T.C. 1021 (1955), and Miller
v. Commissioner, 23 T.C. 565 (1954), affd. 231 F.2d 8 (5th Cir.
1956), the applicable statute was sec. 3675, I.R.C. 1939, which
provided:
SEC. 3675. EFFECT OF CERTIFICATES OF RELEASE OR PARTIAL
DISCHARGE.
A certificate of release or of partial discharge
issued under this subchapter shall be held conclusive
that the lien upon the property covered by the
certificate is extinguished.
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period for collection expires. Sec. 301.6325-1(a)(1), Proced. &
Admin. Regs. Because the tax was not paid in full, nor did the
statutory period for collection expire, petitioner’s 1986 and
1987 tax liabilities were not extinguished.
We also note that section 6325(f)(2), by its terms, allows
the Commissioner to revoke a certificate of tax lien release
where, as in this case, it was issued “erroneously or
improvidently” and to reinstate the lien. This provision, which
allows respondent to reinstate the lien, belies petitioner’s
argument that the erroneously issued certificate in this case
extinguished his liability once and for all.
B. Equitable Estoppel Argument
Petitioner next contends that even if the RFTL did not
extinguish the tax liability, respondent is otherwise equitably
estopped from collecting his 1986 and 1987 tax liabilities.
Petitioner argues that respondent’s conduct over an extended
period of time led petitioner to believe that respondent had
stopped collection action and therefore petitioner no longer had
any tax liability for 1986 or 1987.
Equitable estoppel is a judicial doctrine that requires a
finding that the taxpayer relied on the Government’s
representations and suffered a detriment because of that
reliance. Estoppel precludes a party from denying its own
representations if those representations induced another to act
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to his or her detriment. Hofstetter v. Commissioner, 98 T.C.
695, 700 (1992). The Court has recognized that estoppel is
applied against the Commissioner “with utmost caution and
restraint.” Id.; Kronish v. Commissioner, 90 T.C. 684, 695
(1988); Boulez v. Commissioner, 76 T.C. 209, 214-215 (1981),
affd. 810 F.2d 209 (D.C. Cir. 1987); Estate of Emerson v.
Commissioner, 67 T.C. 612, 617 (1977).
The taxpayer must establish the following elements before
equitable estoppel will be applied against the Commissioner:
(1) The Commissioner knew the facts; (2) the Commissioner
intended that his conduct be acted upon, or must have acted so
that the taxpayer asserting estoppel had a right to believe it
was so intended; (3) the taxpayer must have been ignorant of the
facts; and (4) the taxpayer must have reasonably relied on the
Commissioner’s conduct to the taxpayer’s substantial injury.
Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123, 1137 (7th Cir.
1988). The party claiming estoppel has the burden of
demonstrating the elements. See Lyng v. Payne, 476 U.S. 926, 935
(1986); United States v. Asmar, 827 F.2d 907, 912 (3d Cir. 1987).
The Court of Appeals for the Seventh Circuit, to which this
case is appealable, requires a fifth element for equitable
estoppel to apply against the Commissioner. The fifth element
requires the taxpayer asserting estoppel to demonstrate that the
Commissioner has engaged in “affirmative misconduct.” See Gibson
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v. West, 201 F.3d 990, 994 (7th Cir. 2000) (citing Edgewater
Hosp., Inc. v. Bowen, supra at 1138-1139). Affirmative
misconduct is more than mere negligence. It requires an
affirmative act to misrepresent or mislead. See Mendrala v.
Crown Mortgage Co., 955 F.2d 1132, 1141-1142 (7th Cir. 1992).
Petitioner argues that, on the basis of respondent’s
conduct, respondent should be equitably estopped from collecting
the unpaid 1986 and 1987 tax liabilities. Petitioner cites the
following conduct: (1) Respondent filed the RFTL to release the
Federal tax lien relating to the 1986 tax liability,
(2) respondent failed to refile the Federal tax lien notice
relating to the 1987 tax liability, and (3) respondent failed to
take any collection action for over 3 years after the RFTL was
filed. Petitioner asserts that this conduct caused petitioner to
believe that he no longer had any tax liability for 1986 and
1987. Believing that he had no tax liability gave petitioner a
false sense of security and caused him to incur more debt than he
otherwise would have incurred.
Petitioner’s equitable estoppel argument fails for several
reasons. First, petitioner contends that he mistakenly thought
that the RFTL extinguished not only the tax lien but the tax
liability as well. Petitioner misunderstood the effect of the
RFTL. This mistake was not induced by respondent. See Miller v.
Commissioner, 23 T.C. 565, 569 (1954) (if the taxpayers in fact
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relied upon such certificates as a discharge of their total tax
liability, they did so because of a mistake on their part as to
the effect of a predecessor of section 6325), affd. 231 F.2d (5th
Cir. 1956). The Commissioner is not estopped from acting by a
mistake of law of the taxpayer. See id.
Furthermore, we do not find that petitioner could have
reasonably relied upon respondent’s conduct to conclude that the
Boyers no longer had any tax liability for either 1986 or 1987.
Respondent assessed the liabilities, gave notice and made demand
for payment, entered into agreements with the Boyers for payment
of the liabilities, and requested the Boyers to extend the
statutory period for collection for both 1986 and 1987. None of
these actions is either individually or collectively consistent
with respondent releasing the Boyers from their liabilities.
Moreover, the RFTL relating to the 1986 tax liability was
filed only 17 days after the Boyers agreed to extend the
collection period for that liability. Given this short
timeframe, a prudent person most likely would have contacted
respondent to ask why the RFTL had been filed and what effect, if
any, filing the RFTL had on the underlying tax liabilities.
Without asking for an explanation or contacting respondent, it
was unreasonable for the Boyers to think that respondent would
simply extinguish their tax liabilities a mere 17 days after the
Boyers agreed to extend the statutory period.
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In addition, the record is void of any persuasive evidence
that respondent induced petitioner to take any action adverse to
himself. Petitioner’s only allegation of “detriment”--that he
suffered a false sense of security that caused him to incur
additional debt--is uncorroborated.
Finally, we do not find that respondent’s conduct in this
case constitutes affirmative misconduct. Respondent’s only
affirmative act was filing the RFTL, which petitioner has not
shown is anything but an inadvertent error. Further,
respondent’s failure to refile the tax lien notice regarding the
1987 tax liability and dilatoriness in pursuing collection
actions do not rise to the level of affirmative misconduct. We
conclude that respondent is not estopped from collecting the
Boyers’ 1986 and 1987 tax liabilities.
We hold that respondent did not abuse respondent’s
discretion in determining to proceed with the collection action
of the Boyers’ 1986 and 1987 tax liabilities. We have considered
all of petitioner’s contentions, arguments, and requests. To the
extent that they are not mentioned herein, we find them to be
moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.