T.C. Memo. 2006-43
UNITED STATES TAX COURT
LEONARD O. PARKER, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4053-03L. Filed March 15, 2006.
Leonard O. Parker, Jr. pro se.
Hieu C. Nguyen, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
HAINES, Judge: This is a case under sections 6320 and
6330.1 Petitioner failed to pay income tax liabilities for 1992,
1993, and 1994 (years at issue). As a result, respondent filed a
Notice of Federal Tax Lien (NFTL). The issues for decision are:
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended. Amounts are rounded to
the nearest dollar.
- 2 -
(1) Whether the amount assessed in each year at issue was
correct; (2) whether petitioner’s April 7, 1994, bankruptcy
filing barred the assessment of his 1994 income tax liability;
(3) whether the assessments for the tax years at issue were
timely; (4) whether penalties under section 6651(a)(2) should be
abated; (5) whether interest on the tax liabilities for all tax
years at issue should be abated; (6) whether petitioner received
proper notice of the filing of the NFTL; and (7) whether
collection alternatives were properly considered.
FINDINGS OF FACT
Petitioner resided in Torrance, California, when he filed
the petition. Prior to becoming a California resident, he was a
resident of New Orleans, Louisiana.
Petitioner filed tax returns in which he reported income of
$37,353 for 1992, $12,265 for 1993, and $8,123 for 1994, and
income taxes due of $4,924.32, $2,874.95, and $1,133.74, for
those respective years. Petitioner failed to pay the income
taxes due other than a partial payment of $156 for 1994.
Respondent assessed petitioner's 1992-94 Federal income tax
liabilities on September 20, 1993, August 5, 1996, and October 9,
1995, respectively. The assessment for each tax year was made
within 3 years from the date the return for that year was filed.
Petitioner filed for bankruptcy on three separate occasions:
The bankruptcy proceeding filed on April 7, 1994, was dismissed
- 3 -
June 28, 1996; the proceeding filed on November 26, 1997, was
closed May 12, 1998; and the proceeding filed on June 30, 1998,
was closed October 27, 1998.
In 1999, petitioner filed two Forms 656, Offer-in-
Compromise, to settle the 1992-94 tax liabilities. The first
offer filed on February 18, 1999, was rejected on June 6, 1999,
after petitioner failed to respond to respondent’s request for
verifiable financial statements. The second offer, filed August
10, 1999, was rejected on September 26, 2000, because petitioner
again failed to provide necessary financial information and
failed to provide an original signature on the Form 656.
On March 21, 2001, respondent’s Automatic Collection Service
(ACS) requested an NFTL. On March 29, 2001, an NFTL was prepared
which was filed on April 5, 2001, by respondent with the New
Orleans Parish Recorder’s Office. Petitioner had no offer-in-
compromise in effect or pending at the time the NFTL was filed.
On April 5, 2001, the New Orleans Taxpayer Advocate Services
Office (Taxpayer Advocate) told petitioner a 45-day “hold” would
be placed on all collection actions to allow petitioner to submit
another offer-in-compromise.
On April 11, 2001, respondent timely sent, via certified
mail, a Notice of Federal Tax Lien Filing and Your Right to a
Hearing Under IRC 6320, to petitioner regarding his unpaid income
tax liabilities for the years at issue. The Notice indicated on
- 4 -
April 5, 2001, a Federal tax lien was filed with respect to
petitioner’s unpaid income tax liabilities for the years at
issue. The lien was recorded on April 17, 2001.
On April 18, 2001, the Taxpayer Advocate sent a letter to
petitioner explaining why his previous offers were rejected. The
letter also stated petitioner needed to complete another offer
containing current financial information and file it through the
Taxpayer Advocate’s Office.
On May 13, 2001, petitioner timely filed a Form 12153,
Request for a Collection Due Process Hearing. Petitioner’s
request contained his New Orleans address and telephone number.
In his hearing request, he alleged the notice of tax lien filing
was untimely, an offer-in-compromise was pending, and the
Taxpayer Advocate had placed a hold on collection.
On July 13, 2001, the Taxpayer Advocate’s Office sent
another letter to petitioner expressing: “[we] have never
received [your] current Form 656 or financial statements with
verification.” Again, petitioner failed to work with respondent
to resolve his 1992-94 tax liabilities.
Petitioner became a permanent resident of Southern
California later in 2001.
Respondent’s Appeals Office sent a letter dated March 19,
2002, to petitioner’s New Orleans address informing him that
Appeals had scheduled a conference with petitioner on March 27,
- 5 -
2002 (i.e., 8 days after the letter was sent), in respondent’s
Jackson, Mississippi, Appeals Office. Jackson is approximately
180 miles from New Orleans.
Appeals requested petitioner to provide any documents to be
considered during the Jackson hearing no later than 3 days after
the date Appeals sent the letter. Further, Appeals did not
inform petitioner the proposed conference was the hearing under
section 6320(b) petitioner had requested when he submitted the
Form 12153.
Petitioner received the Appeals’ March 19, 2002, letter on
March 25, 2002, 2 days before the date Appeals had chosen for the
conference. The same day, petitioner faxed a response to Appeals
stating he was unable to attend or adequately prepare for the
conference in Jackson, and the Appeals deadline for sending
affidavits and documents in advance of the conference had already
passed. Petitioner stated he would be available for the
conference via telephone. Petitioner and Appeals held their
telephone conference on March 27, 2002.
On February 12, 2003, respondent issued to petitioner a
Notice of Determination Concerning Collection Action(s) in which
respondent determined the filing of the tax lien for 1992-94 was
appropriate.
Petitioner timely filed a petition with this Court.
The case was tried before this Court in Los Angeles, California.
- 6 -
At trial, respondent contended: (a) Respondent was not required
to provide petitioner an opportunity for a hearing at the Appeals
Office closest to petitioner’s residence, and (b) petitioner
waived any right to a hearing because petitioner had a telephone
conference with Appeals in lieu of attending the conference in
Jackson, Mississippi. Parker v. Commissioner, T.C. Memo. 2004-
226.
The Court ruled respondent was required to provide
petitioner with an opportunity for a hearing at the Appeals
Office closest to his residence. Id. Further, the Court found
petitioner did not explicitly or implicitly waive his right to a
hearing at respondent’s Appeals Office. Id. The Court remanded
the case to respondent’s Office of Appeals with instructions to
offer petitioner a face-to-face conference at the Appeals Office
closest to petitioner’s residence in Southern California. Id.
On December 15, 2004, petitioner met with Settlement Officer
Adlai Climan (Mr. Climan) at respondent’s Los Angeles Appeals
Office. This office was the closest Appeals Office to
petitioner’s Southern California address.
At the hearing, petitioner asserted the amounts due were
incorrect, the assessments for tax years 1992-94 were untimely,
the NFTL was not timely filed, and the penalties and interest on
the assessed liabilities should be abated. In addition,
petitioner asserted his April 7, 1994, bankruptcy filing barred
- 7 -
the assessment of his 1994 tax liability on October 9, 1995.
Collection alternatives were also discussed at length.
Petitioner indicated he wished to enter into an offer-in-
compromise or an installment agreement as a means of settling the
tax liability.
Petitioner and Mr. Climan discussed petitioner’s current
financial circumstances. Petitioner stated he received State
assistance of $221 monthly, and $149 monthly in food stamps. He
further asserted he had no assets. The parties’ discussion
focused upon the possible use of an offer-in-compromise.
As a result of his alleged limited resources, petitioner
informed Mr. Climan he was not financially able to pay the $150
offer-in-compromise application fee. Mr. Climan told petitioner
that if his representations concerning his financial position
were true, he would qualify for the application fee waiver.
Further, Mr. Climan assured petitioner if everything petitioner
stated regarding his current financial position was true, if
petitioner “put an offer-in-compromise for $100 on [Mr. Climan’s]
desk [he] would make it fly like a bird.”
At the end of the hearing, Mr. Climan gave petitioner a
previously prepared letter which stated petitioner had until
January 5, 2005, to submit the Form 656 Offer-in-Compromise and
- 8 -
Form 433-A.2 The letter further stated that if Mr. Climan did
not “receive such documents by January 5, 2005, [he would] make a
determination based on the information contained in the case
file.” In addition to the letter, petitioner was provided all
the necessary forms with accompanying instructions on how to
complete an offer-in-compromise.
Petitioner failed to submit the offer or any financial
statement. As a result, no collection alternatives were
considered. Mr. Climan closed the case and determined the NFTL
was appropriate and in accordance with all procedural guidelines.
A further trial of this case was held in Los Angeles,
California, on March 23, 2005. At trial, petitioner reiterated
the issues presented during the section 6320 hearing. Petitioner
further asserted that the Appeals officer at that hearing had not
addressed the issues and concerns raised, but had attempted to
talk him into submitting another offer-in-compromise. Petitioner
testified he did not submit the offer-in-compromise because he
could not afford the $150 application fee. In addition, he
disagreed with Mr. Climan over whether the recorded lien would
remain in effect until the compromised balance of the tax
liability was completely paid.
2
Form 433-A, Collection Information Statement for Wage
Earners and Self Employed Individuals.
- 9 -
At the conclusion of trial, petitioner agreed to submit an
offer-in-compromise and respondent agreed to expedite the review
process. The parties’ agreement was incorporated into an order
issued by the Court on March 23, 2005. Petitioner failed to
mention to respondent and the Court that petitioner intended the
submission of an offer to be contingent upon respondent’s
withdrawing the NFTL when the offer was accepted. On March 23,
2005, Mr. Climan and his manager met with petitioner. Petitioner
was given detailed instructions as to how to complete all the
forms necessary to submit an offer-in-compromise. During this
meeting Mr. Climan again informed petitioner that respondent
would not withdraw the NFTL until the compromised liability was
paid. Later, respondent’s counsel reiterated respondent’s
position concerning removal of the lien.
On April 21, 2005, petitioner informed counsel for
respondent he would not submit an offer.
OPINION
Section 6321 imposes a lien in favor of the United States
upon all property and rights to property of a taxpayer who is
liable for a tax and fails to pay the tax liability after demand
for payment. The lien generally arises at the time the
assessment is made and continues until the liability for the
assessed amount is paid or becomes unenforceable because of lapse
of time. Sec. 6322. Pursuant to section 6323(a), a lien is not
- 10 -
valid against certain third parties until the Secretary files a
notice of lien with the appropriate public office under section
6323(f).
Section 6320 sets forth the notice and hearing procedures
which must be followed when a tax lien is filed. Under this
provision the Secretary is required to send written notice to the
taxpayer liable for the tax not more than 5 business days after
the NFTL is filed. Sec. 6320(a)(1) and (2). The notice must
advise the taxpayer of his right to appeal. Sec. 6320(a)(3). A
taxpayer, who so requests, must be granted a hearing before an
impartial Appeals officer. Sec. 6320(b) and (c). The hearing is
generally conducted in accordance with the procedures described
in section 6330(c), (d), and (e).
Section 6330(c) prescribes the matters a taxpayer may raise
at an Appeals Office hearing, such as, spousal defenses, the
appropriateness of the Commissioner’s intended collection action,
and possible alternative means of collection, including an offer-
in-compromise or installment agreement. Sego v. Commissioner,
114 T.C. 604, 609 (2000). The existence and amount of the
underlying tax liability can be contested at an Appeals Office
hearing if the taxpayer did not receive a notice of deficiency
for the taxes in question or did not otherwise have an
opportunity to dispute such tax liability. Sec. 6330(c)(2)(B).
- 11 -
If the taxpayer does not agree with the Appeals officer's
written determination, the taxpayer can appeal the determination
to the Tax Court or to a United States District Court (if the Tax
Court does not have jurisdiction over the underlying tax
liability). Sec. 6330(d)(1).
To determine the correct standard of review, the Court must
first decide whether petitioner's underlying tax liability is
properly at issue. Sego v. Commissioner, supra at 610; Goza v.
Commissioner, 114 T.C. 176, 181-182 (2000). The term “underlying
tax liability” under section 6330(c)(2)(B) includes amounts self-
assessed under section 6201(a), together with penalties and
interest. Sec. 6201(a)(1); Montgomery v. Commissioner, 122 T.C.
1, 9 (2004); sec. 301.6203-1, Proced. & Admin. Regs..
The amount of the underlying tax liability may be placed at
issue if the taxpayer did not receive a statutory notice of
deficiency or otherwise have an opportunity to dispute the tax
liability. Sec. 6330(c)(2)(B); see Behling v. Commissioner, 118
T.C. 572, 576-577 (2002). In this case, petitioner was not
issued a notice of deficiency and did not have a prior
opportunity to dispute the tax liability. Therefore, the proper
standard of review for the arguments challenging the underlying
tax liability is de novo. Sego v. Commissioner, supra at 609-
610.
- 12 -
Petitioner makes several arguments: (1) The amounts
assessed for tax years 1992-94 were incorrect; (2) petitioner’s
April 7, 1994, bankruptcy filing barred the assessment of his
1994 tax liability; (3) the assessments for tax years 1992-94
were untimely; (4) penalties under section 6651(a)(2) should be
abated; (5) interest on the tax liabilities for all tax years at
issue should be abated; (6) petitioner did not receive proper
notice of the filing of the NFTL; and (7) collection alternatives
were not properly considered.
The facts in this case do not support petitioner’s
arguments. Petitioner asserts the assessed amounts of taxes are
incorrect for all tax years at issue. However, the taxes so
assessed were reported by petitioner on his own Federal income
tax returns. The assessed taxes were properly entered on the
NFTL. The Court finds no evidence or reason to believe that any
of the amounts are incorrect.
Petitioner asserts his April 7, 1994, bankruptcy barred the
assessment of his 1994 tax liability. A bankruptcy petition
operates as an automatic stay of certain acts to collect, assess,
or recover any claim against the debtor that arose before the
commencement of the case in bankruptcy.3 11 U.S.C. sec. 362(a)(6)
3
Effective for bankruptcy proceedings commenced after Oct.
22, 1994, the Bankruptcy Code was amended to allow for an
assessment of any tax during a bankruptcy stay. 11 U.S.C. sec.
362(b)(9)(D) (2000).
- 13 -
(1994). Personal income taxes are due on the date the return is
required to be filed. Sec. 6151(a); Holywell Corp. v. Smith, 503
U.S. 47, 58 (1992); Pan Am. Van Lines v. United States, 607 F.2d
1299, 1301 (9th Cir. 1979). Because the liability for the 1994
income tax arose after the commencement of the case in
bankruptcy, the assessment of that tax was not subject to the
bankruptcy stay. The Court finds the bankruptcy stay did not bar
the assessment of petitioner’s 1994 income tax liability.
Petitioner asserts the assessments for the years at issue
were untimely. Section 6501(a) generally provides that an
assessment of income tax liability is to be made within 3 years
after the tax return was filed. The Court finds petitioner’s
income tax for each of the years at issue was assessed within 3
years of the date the tax return for that year was filed.
Petitioner asserts penalties should be abated because they
accumulated due to respondent’s delays and payment will cause an
undue hardship because of his limited financial resources.
Section 6651(a)(2) imposes an addition to the tax for failure to
pay the amount shown as tax on the return by the prescribed date.
To avoid the addition to tax, petitioner must make an affirmative
showing the failure to pay was due to reasonable cause. Sec.
301.6651-1(c), Proced. & Admin. Regs. A showing of reasonable
cause requires the taxpayer to demonstrate he exercised ordinary
business care and prudence in providing for the payment of his
- 14 -
tax liability and nevertheless was unable to pay the tax or would
have suffered undue hardship if he had paid it on the due date.
Id.
On several occasions petitioner asserted he has very
limited financial resources, but he has failed to provide
financial evidence every time he has been asked to substantiate
these statements. Petitioner is unable to show his failure to
pay was due to reasonable cause. The Court concludes petitioner
is liable for the addition to tax under section 6651(a)(2) for
failure to make timely payment of income tax for the years at
issue.
Petitioner asserts the payment of interest should be abated
because it accumulated to his detriment due to respondent’s
delays and payment will cause an undue hardship because of his
limited financial resources.
We apply an abuse of discretion standard when reviewing the
Commissioner's failure to abate interest. Krugman v.
Commissioner, 112 T.C. 230, 239 (1999). Section 6404(e) permits
the Commissioner to abate interest with respect to an error or
delay in payment of tax resulting from an employee of the
Internal Revenue Service’s being erroneous or dilatory in
performing a ministerial act. There is no provision under
section 6404 or the regulations promulgated thereunder that
allows for the abatement of interest due to financial hardship.
- 15 -
Petitioner has not alleged, and the record contains no
evidence, that respondent committed any erroneous or dilatory
acts requiring abatement of interest. Thus, the Court concludes
respondent's decision not to abate interest is not an abuse of
discretion.
Petitioner asserts he did not receive proper notice of the
filing of the NFTL with respect to his unpaid income tax
liabilities for the years at issue. Under section 6320 the
Secretary shall furnish the person described in section 6321 with
written notice of the filing of a notice of lien under section
6323. The notice may be sent by certified mail to the person’s
last known address not more than 5 business days after the day of
filing the Federal tax lien. Sec. 6320(a)(2). Petitioner was
duly sent notice within 5 business days of the filing of the
Federal tax lien. Thus, the Court concludes respondent did not
abuse his discretion in determining petitioner received proper
notice of the filing of the NFTL.
Finally, respondent did not abuse his discretion in
determining further consideration of collection alternatives was
futile. Petitioner repeatedly failed to cooperate and respond to
respondent’s requests for financial information or to submit a
processable offer-in-compromise.
Accordingly, the Court holds that respondent’s determination
upholding the Federal tax lien was not an abuse of his
- 16 -
discretion. The Court further holds respondent may proceed with
collection of tax years 1992, 1993, and 1994.
The Court, in reaching its holding herein, has considered
all arguments made and concludes that any arguments not mentioned
above are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for
respondent.