T.C. Memo. 2004-171
UNITED STATES TAX COURT
THOMAS G. COLLIER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2538-03L. Filed July 21, 2004.
P filed a petition for judicial review pursuant to
sec. 6330, I.R.C., in response to a determination by R
that levy action is appropriate.
Held: Because there was no abuse of discretion by
R in concluding that P’s noncompliance with Federal tax
filing obligations would render him ineligible for
collection alternatives, R’s determination to proceed
with collection action is sustained.
Thomas G. Collier, pro se.
James M. Payton, for respondent.
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MEMORANDUM OPINION
WHERRY, Judge: This case is before the Court on
respondent’s motion for summary judgment pursuant to Rule 121.1
The instant proceeding arises from a petition for judicial review
filed in response to a Notice of Determination Concerning
Collection Actions(s) Under Section 6320 and/or 6330. The issue
for decision is whether respondent may proceed with collection
action as so determined.
Background
Petitioner filed Federal income tax returns for 1995, 1997,
1998, and 1999 and did not fully pay the reported liabilities.
Respondent subsequently assessed the reported amounts, along with
statutory additions, and sent to petitioner notices of balance
due. Respondent then issued to petitioner a Final Notice -
Notice of Intent to Levy and Notice of Your Right to a Hearing
dated February 2, 2002, with regard to the 1995, 1997, 1998, and
1999 years. The notice reflected a total amount due of
$51,373.49, which amount included statutory additions.
In response to the notice, petitioner’s representative, C.
Page Hamrick III (Mr. Hamrick), timely submitted a Form 12153,
Request for a Collection Due Process Hearing, received by
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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respondent on February 14, 2002. The Form 12153 contained the
following explanation of petitioner’s disagreement with the
notice of levy: “Taxpayer has filed offer in compromise and
requests consideration prior to collection action.”
Petitioner’s collection case was assigned to Settlement
Officer James M. Payton (Mr. Payton), of the Internal Revenue
Service (IRS) Office of Appeals in Charleston, West Virginia.
Following his receipt of the case in June of 2002, Mr. Payton
checked IRS records for information pertaining to the offer in
compromise referenced in petitioner’s Form 12153. Mr. Payton
found no indication that petitioner had filed an offer in
compromise, although Forms 1040, U.S. Individual Income Tax
Return, showing that petitioner was due refunds, had been filed
for 2000 and 2001.
Mr. Payton spoke to Mr. Hamrick by telephone on September
26, 2002. During that conversation, Mr. Hamrick indicated that
petitioner also had outstanding employment tax liabilities
related to his business and provided Mr. Payton with the employer
identification number. Mr. Hamrick stated that he would contact
petitioner to schedule a meeting for October and would then
communicate an exact date to Mr. Payton.
When petitioner failed to return Mr. Hamrick’s calls,
Mr. Hamrick on November 5, 2002, gave Mr. Payton permission to
contact petitioner directly. Mr. Payton immediately sent
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petitioner a letter requesting that petitioner contact him no
later than November 18, 2002, to arrange a convenient meeting.
Petitioner telephoned Mr. Payton on November 19, 2002, and a
conference was scheduled for November 27, 2002, at 10:00 a.m.
A face-to-face hearing between petitioner and Mr. Payton was
conducted on November 27, 2002, as scheduled. Petitioner
communicated that, in addition to his employment as a wage-
earning operator for a third-party entity, he was the self-
employed owner of an air conditioning repair business. He
further indicated that he employed three individuals but was
unable to stay current with his employment tax responsibilities.
Petitioner at the hearing also provided Mr. Payton with a
Form 433-A, Collection Information Statement for Wage Earners and
Self-Employed Individuals, and stated that he thought Mr. Hamrick
had filed an offer in compromise on his behalf. Mr. Payton
explained that the IRS had no record of receiving an offer in
compromise but that petitioner would not be eligible for such an
alternative because he was not in compliance with requirements
for filing returns for and paying employment tax obligations.
During the hearing, petitioner raised no issues other than
resolution of the unpaid liabilities by means of an offer in
compromise. Specifically, for instance, he did not raise the
correctness of the underlying income tax liabilities which were
the subject of the collection action.
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The aforementioned Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 was issued to
petitioner on January 7, 2003. The notice summarized
respondent’s determination: “You are not in compliance with
filing and paying payroll taxes, therefore Appeals [sic] only
alternative is to sustain the proposed Levy.” An attachment to
the notice provided further details, including the following
discussion under the heading “Issues raised by the Taxpayer”:
Issue: You didn’t want the Internal Revenue Service to
take any levy actions. You thought your Power of
Attorney filed an Offer-In-Compromise as doubt to
collectibility on your behalf.
Response: On 11/27/2002, we had a face-to-face
conference. You stated at our meeting that you have
accrued 941 tax liabilities from 1998 to present and
will not be able to file timely 941 tax returns or make
current federal tax deposits at this time.
IRC §7122 authorizes the Secretary of the Treasury to
settle, or compromise, federal tax liabilities by
accepting less than full payment under certain
circumstances.
IRM [Internal Revenue Manual] 5.8.3.3(4) (rev. 2-4-
2000) states that an Offer cannot be processed if the
taxpayer has not filed all tax returns.
I researched your account and did not find that there
was an Offer under consideration. Furthermore, per the
compliance requirements, you would not qualify for an
Offer at this time.
No other relevant issues were raised.
An imperfect petition challenging this notice of
determination was filed with the Tax Court on February 11, 2003.
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On March 17, 2003, petitioner filed an amended petition which set
forth his position as follows:
Background Information
Try to pay back taxes over a period of ten-year period
while in bankrupt court. I could not pay the amount in
a five year period because of amount for five-year was
too high. I was behind in alimony payment[.] I had a
choice to pay it or my taxes.
Relief
A chance to pay over a long period of time.
Both the petition and the amended petition reflected an address
for petitioner in Charleston, West Virginia.
After the pleadings were closed in this case, respondent
filed the subject motion for summary judgment. Petitioner was
directed to file any response to respondent’s motion on or before
May 28, 2004; no such response was received by this Court. A
hearing on respondent’s motion, at which both petitioner and
counsel for respondent appeared, was held on June 7, 2004, in
Charleston, West Virginia.
Discussion
Rule 121(a) allows a party to move “for a summary
adjudication in the moving party’s favor upon all or any part of
the legal issues in controversy.” Rule 121(b) directs that a
decision on such a motion shall be rendered “if the pleadings,
answers to interrogatories, depositions, admissions, and any
other acceptable materials, together with the affidavits, if any,
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show that there is no genuine issue as to any material fact and
that a decision may be rendered as a matter of law.”
The moving party bears the burden of demonstrating that no
genuine issue of material fact exists and that he or she is
entitled to judgment as a matter of law. Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994). Facts are viewed in the light most favorable to the
nonmoving party. Id. However, where a motion for summary
judgment has been properly made and supported by the moving
party, the opposing party may not rest upon mere allegations or
denials contained in that party’s pleadings but must by
affidavits or otherwise set forth specific facts showing that
there is a genuine issue for trial. Rule 121(d).
I. Collection Actions
A. General Rules
Section 6331(a) authorizes the Commissioner to levy upon all
property and rights to property of a taxpayer where there exists
a failure to pay any tax liability within 10 days after notice
and demand for payment. Sections 6331(d) and 6330 then set forth
procedures generally applicable to afford protections for
taxpayers in such levy situations. Section 6331(d) establishes
the requirement that a person be provided with at least 30 days’
prior written notice of the Commissioner’s intent to levy before
collection may proceed. Section 6331(d) also indicates that this
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notification should include a statement of available
administrative appeals. Section 6330(a) expands in several
respects upon the premise of section 6331(d), forbidding
collection by levy until the taxpayer has been furnished notice
of the opportunity for administrative review of the matter in the
form of a hearing before the Internal Revenue Service Office of
Appeals. Section 6330(b) grants a taxpayer who so requests the
right to a fair hearing before an impartial Appeals officer.
Section 6330(c) addresses the matters to be considered at
the hearing:
SEC. 6330(c). Matters Considered at Hearing.--In
the case of any hearing conducted under this section--
(1) Requirement of investigation.--The
appeals officer shall at the hearing obtain
verification from the Secretary that the
requirements of any applicable law or
administrative procedure have been met.
(2) Issues at hearing.--
(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.
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(B) Underlying liability.--The person
may also raise at the hearing challenges to
the existence or amount of the underlying tax
liability for any tax period if the person
did not receive any statutory notice of
deficiency for such tax liability or did not
otherwise have an opportunity to dispute such
tax liability.
Once the Appeals officer has issued a determination
regarding the disputed collection action, section 6330(d) allows
the taxpayer to seek judicial review in the Tax Court or a
District Court. In considering whether taxpayers are entitled to
any relief from the Commissioner’s determination, this Court has
established the following standard of review:
where the validity of the underlying tax liability is
properly at issue, the Court will review the matter on
a de novo basis. However, where the validity of the
underlying tax liability is not properly at issue, the
Court will review the Commissioner’s administrative
determination for abuse of discretion. [Sego v.
Commissioner, 114 T.C. 604, 610 (2000).]
B. Analysis
Nothing in the record indicates that petitioner has at any
time throughout the administrative or judicial proceedings,
including the hearing on respondent’s motion, attempted to
challenge his underlying tax liability. Accordingly, we review
respondent’s determination to proceed with collection for abuse
of discretion. Action constitutes an abuse of discretion under
this standard where arbitrary, capricious, or without sound basis
in fact or law. Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
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On various occasions during the process before Appeals,
petitioner communicated an interest in pursuing an offer in
compromise. Section 7122(a), as pertinent here, authorizes the
Secretary to compromise any civil case arising under the internal
revenue laws. Regulations promulgated under section 7122 set
forth three grounds for compromise of a liability: (1) Doubt as
to liability, (2) doubt as to collectibility, or (3) promotion of
effective tax administration. Sec. 301.7122-1(b), Proced. &
Admin. Regs.2 With respect to the third-listed ground, a
compromise may be entered to promote effective tax administration
where: (1)(a) Collection of the full liability would cause
economic hardship; or (b) exceptional circumstances exist such
that collection of the full liability would undermine public
confidence that the tax laws are being administered in a fair and
equitable manner; and (2) compromise will not undermine
2
Sec. 301.7122-1, Proced. & Admin. Regs., contains an
effective date provision stating that the section applies to
offers in compromise pending on or submitted on or after July 18,
2002. Sec. 301.7122-1(k), Proced. & Admin. Regs. Previous
temporary regulations by their terms apply to offers in
compromise submitted on or after July 21, 1999, through July 19,
2002. Sec. 301.7122-1T(j), Temporary Proced. & Admin. Regs., 64
Fed. Reg. 39027 (July 21, 1999). The final and temporary
regulations do not differ materially in substance in any way
relevant here, and temporary regulations are entitled to the same
weight and binding effect as final regulations. Peterson Marital
Trust v. Commissioner, 102 T.C. 790, 797 (1994), affd. 78 F.3d
795 (2d Cir. 1996). For simplicity and convenience, the final
regulations are cited.
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compliance by taxpayers with the tax laws. Sec. 301.7122-
1(b)(3), Proced. & Admin. Regs.
The Internal Revenue Manual provides generally that an offer
in compromise is not processable if all tax returns for which the
taxpayer has a filing requirement have not been filed. 2
Administration, Internal Revenue Manual (CCH), sec.
5.8.3.2.1(1)(a), at 16,281 (Nov. 30, 2001). The Internal Revenue
Manual further specifies: “In-business taxpayers must have
timely filed and timely deposited all employment taxes for two
quarters preceding the offer submission. They must have also
timely paid all federal tax deposits due in the quarter in which
the offer is submitted.” Id.
The Tax Court, moreover, acknowledging such provisions of
the Internal Revenue Manual, has ruled as follows:
The Commissioner’s decision not to process an offer in
compromise or a proposed collection alternative from
taxpayers who have not filed all required tax returns
is not an abuse of discretion. Londono v.
Commissioner, T.C. Memo. 2003-99; Ashley v.
Commissioner, T.C. Memo. 2002-286; Richter v. United
States, 90 AFTR 2d 2002-5998, 2002-2 USTC par. 50,607
(C.D. Cal. 2002); AJP Mgmt. v. United States, 87 AFTR
2d 2001-347, 2001-1 USTC par. 50,184 (C.D. Cal. 2000);
TTK Mgmt. v. United States, 87 AFTR 2d 2001-350, 2001-1
USTC par. 50,185 (C.D. Cal. 2000). The Commissioner
may set reasonable priorities for Internal Revenue
Service staff as needed to effectively administer the
revenue laws. The decision not to accept the offer in
compromise submitted by petitioner on account of her
failure to file all required returns was an entirely
reasonable exercise of the Commissioner’s discretion in
administering the offer in compromise program.
[Rodriguez v. Commissioner, T.C. Memo. 2003-153.]
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The instant case, in addition to presenting the threshold
problem that petitioner has never in fact filed an offer in
compromise that was accepted for processing, falls squarely
within the above-quoted rationale. The record contains certified
transcripts (Forms 4340, Certificate of Assessments, Payments,
and Other Specified Matters) reflecting petitioner’s failure to
file: (1) Forms 941, Employer’s Quarterly Federal Tax Return for
the periods ending December 31, 2000, March 31, 2001, December
31, 2001, March 31, 2002, June 30, 2002, and September 30, 2002;
and (2) Forms 940, Employer’s Annual Federal Unemployment (FUTA)
Tax Return, for the years 2001 and 2002.
Petitioner readily acknowledged such noncompliance during
the administrative process. At the hearing on respondent’s
motion, petitioner at times seemed to be claiming that, as of the
hearing date, all required filings had been made. However, he
also expressly conceded that at least one quarterly return was
not filed and offered no documentary support as to any other
alleged submissions.
In light of this history and on this record, no abuse of
discretion was committed by respondent in concluding that
petitioner would not be eligible for an offer in compromise or
similar collection alternative.3 Furthermore, with respect to
3
We note, for example, that the Internal Revenue Manual
likewise highlights compliance with all individual and business
(continued...)
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other issues enumerated in section 6330(c)(2)(A) and subject to
review in collection proceedings for abuse of discretion,
petitioner has not raised any spousal defenses or valid
challenges to the appropriateness of the collection action. As
this Court has noted in earlier cases, Rule 331(b)(4) states that
a petition for review of a collection action shall contain clear
and concise assignments of each and every error alleged to have
been committed in the notice of determination and that any issue
not raised in the assignments of error shall be deemed conceded.
See Lunsford v. Commissioner, 117 T.C. 183, 185-186 (2001); Goza
v. Commissioner, 114 T.C. 176, 183 (2000). Accordingly, the
Court concludes that respondent’s determination to proceed with
collection of petitioner’s tax liabilities was not an abuse of
discretion.
To reflect the foregoing,
An appropriate order
granting respondent’s motion
and decision for respondent
will be entered.
3
(...continued)
filing requirements as a prerequisite to approval of an
installment agreement. 2 Administration, Internal Revenue Manual
(CCH) sec. 5.14.1.4.1, at 17,510 (July 1, 2002).