T.C. Memo. 2004-8
UNITED STATES TAX COURT
JOHNNIE L. TILLMAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11709-02L. Filed January 6, 2004.
Johnnie L. Tillman, pro se.
James A. Kutten, for respondent.
MEMORANDUM OPINION
COHEN, Judge: This proceeding was commenced in response to
a Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330. The issue for decision is whether
there was an abuse of discretion in rejecting petitioner’s offer
to compromise for $100 petitioner’s unpaid Federal income tax
liabilities for 1993, 1994, and 1995 exceeding $13,000 and
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instead determining that the account should be treated as
“currently not collectible (CNC)”; the account should be
revisited when petitioner’s income exceeds $35,000; and “levies
will not be pursued.” Unless otherwise indicated, all section
references are to the Internal Revenue Code in effect for the
years in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
Background
Petitioner resided in Missouri at the time the petition was
filed. On December 19, 1996, petitioner executed a Form 870,
Waiver of Restrictions on Assessment and Collection of Deficiency
in Tax, consenting to additional income tax assessments for 1993,
1994, and 1995. The additional taxes were assessed on
February 17, 1997. On July 15, 2000, the Internal Revenue
Service (IRS) mailed to petitioner a Final Notice - Notice of
Intent to Levy and Notice of Your Right to a Hearing. Attached
to the notice was a schedule showing then unpaid balances of
$1,566.69 for 1993, $5,901.55 for 1994, and $5,693.97 for 1995.
Petitioner requested a hearing under section 6330,
designating Frank L. Zerjav (Zerjav), C.P.A., as his
representative. In August 2000, petitioner submitted to the IRS
a Form 656, Offer in Compromise, in which he offered to pay the
total of $100 in satisfaction of his liabilities for 1993, 1994,
and 1995. On February 26, 2001, Appeals Officer James B. Wallace
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(Wallace) wrote to Zerjav suggesting that Zerjav contact Wallace
to arrange a mutual date and time for the hearing to be conducted
with respect to petitioner’s liability. On October 16, 2001,
Wallace sent to Zerjav a letter requesting completion of an offer
in compromise package, including financial information. On
December 5, 2001, Wallace wrote to Zerjav scheduling a hearing
for January 15, 2002.
On January 14, 2002, Wallace received from Zerjav various
information concerning petitioner’s finances. In a telephone
conversation on January 14, 2002, Zerjav advised Wallace that
petitioner wanted to pursue an offer in compromise. No
person-to-person hearing took place on January 15, 2002.
Appeals Officer Wallace reviewed the financial information
submitted by petitioner. He considered petitioner’s income and
the income of petitioner’s mother, because petitioner’s mother
lived with petitioner and was supported in part by petitioner.
Wallace concluded that, after allowable expenses, petitioner
could pay $82 per month toward his tax liability. In a letter
dated February 28, 2002, Wallace proposed three alternatives:
(1) A cash offer of $3,936 (computed as 48 months multiplied by
$82 per month); (2) a short-term deferred payment offer of
$4,920, payable over 2 years (60 months multiplied by $82 per
month); and (3) a deferred payment offer of $6,888 (84 months
multiplied by $82 per month). Wallace’s proposals were based on
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allowing all of the expenses claimed by petitioner in his
financial forms and were calculated in accordance with the IRS
Manual. Petitioner did not accept any of Wallace’s proposals.
On March 8, 2002, Wallace wrote to Zerjav suggesting a
resolution of the section 6330 proceeding, wherein collection of
petitioner’s 1993, 1994, and 1995 income tax liabilities would be
held in suspense until petitioner’s income exceeded $35,000 per
year. Petitioner did not accept that proposal. On May 29, 2002,
Wallace met with Zerjav and discussed collection alternatives.
Zerjav insisted on an offer in compromise in the amount of $100
and offered no other collection alternatives.
On June 11, 2002, a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 was sent to
Zerjav as petitioner’s representative. The determination was
summarized as follows:
The decision by Appeals is that this account is to be
placed in currently not collectible (CNC) status based
on the taxpayer’s current financial situation. The
taxpayer’s account should be revisited when his income
exceeds $35,000. As a result of this action, levies
will not be pursued.
The petition in this case disputed consideration of
petitioner’s mother’s income by the Appeals officer and other
details of the Appeals officer’s analysis and complained of the
lack of “independent review” of the rejection of the offer in
compromise. The petition also alleged:
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h) The entire offer consideration process was
conducted by the Appeals Division which further
violates the intent of Congress under the IRS
Restructuring and Reform Act of 1998 (the Act) to the
extent petitioner has been denied independent review of
the rejected offer as required under the Act.
5. Petitioner has at all times acted in good faith
in connection with his tax affairs. Therefore denial
of an offer that would give him a “fresh start” is
misplaced. Moreover, no alternatives such as income
collateral agreements were made available to either the
Petitioner or his representative prior to issuance of
the rejection.
After the case was set for trial, respondent filed a Motion for
Summary Judgment. Although petitioner was ordered to serve on
respondent and file with the Court a written response to the
Motion for Summary Judgment, he failed to do so. However, when
the case was called for hearing on the Motion for Summary
Judgment, petitioner was permitted to present the testimony of
Zerjav as a means of explaining his position. See Rule 121(b),
(d).
Zerjav testified:
Our firm represents not only Mr. Tillman but
literally hundreds of other folks who have sought
relief--tax relief through an offer in compromise
program. In this particular instance, a collection
action, a collecting hearing, due process was
requested. And the process of evaluating suitability
for an offer in compromise was handled not by an offer
specialist but, rather, by the appeals officer assigned
to the case.
Allegations of error in the petition in this case, apparently
prepared by Zerjav, are identical to those in at least one other
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petition in this Court. See Chandler v. Commissioner, T.C. Memo.
2004-7 (filed this date).
Discussion
The primary dispute in this case arises from an apparent
misunderstanding by petitioner and his representative of the
effect of sections 6320 and 6330. Sections 6320 (pertaining to
liens) and 6330 (pertaining to levies) were enacted as part of
the Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3401, 112 Stat. 746, to provide new
procedural protections for taxpayers in collection matters.
Section 6330 generally provides that the Commissioner may not
proceed with a collection of taxes by way of a levy on a
taxpayer’s property until the taxpayer has been given notice of,
and the opportunity for, an administrative review of the matter.
The statute specifically provides that “such hearing shall be
held by the Internal Revenue Service Office of Appeals.” Sec.
6330(b)(1). A taxpayer is entitled to only one hearing with
respect to the taxable period involved in the proposed lien or
levy. Sec. 6330(b)(2). If the taxpayer is dissatisfied with the
determination made after the hearing, judicial review of the
determination, such as that sought in this case, is available.
See generally Goza v. Commissioner, 114 T.C. 176, 179-181 (2000).
Section 6330(c) specifies the matters considered at the
hearing. In this case, there is no dispute that the requirements
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of applicable laws and procedures regarding the assessment have
been met, sec. 6330(c)(1), and there is no dispute with respect
to the underlying tax liability, sec. 6330(c)(2)(B). We review
respondent’s determination for abuse of discretion. Goza v.
Commissioner, supra at 182. Section 6330(c)(2)(A) provides:
(A) In general.--The person may raise at the
hearing any relevant issue relating to the unpaid tax
or the proposed levy, including–-
(i) appropriate spousal defenses;
(ii) challenges to the appropriateness of
collection actions; and
(iii) offers of collection alternatives,
which may include the posting of a bond, the
substitution of other assets, an installment
agreement, or an offer-in-compromise.
The only collection alternative offered by petitioner during the
process before Appeals was an offer in compromise for $100.
Petitioner complains that there was no review within the
Appeals Office and that there was an abuse of discretion by the
Appeals officer in not referring the offer in compromise
evaluation to IRS collection personnel. In some cases,
assistance from revenue officers may be sought. See, e.g.,
Van Vlaenderen v. Commissioner, T.C. Memo. 2003-346. Petitioner
does not, however, have a right under section 6330 to more than
one hearing or to a hearing before anyone other than the Office
of Appeals. Sec. 6330(b).
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We infer that the failure to eliminate petitioner’s total
liability for the 3 years in issue by a single payment of $100, a
result that petitioner’s representative had achieved in other
cases, led to the pursuit of this proceeding in response to what
otherwise would be regarded as a favorable determination.
Petitioner has not offered, nor have we found in the record, any
reason why the determination to suspend collection and not to
pursue levies is an abuse of discretion. That his representative
achieved a $100 compromise of liabilities in other cases is
irrelevant. We conclude that the material facts are not in
dispute and that respondent is entitled to judgment as a matter
of law.
To reflect the foregoing,
An appropriate order and
decision will be entered.