Blosser v. Comm'r

T.C. Memo. 2007-323

UNITED STATES TAX COURT

JUDY HEDRICK BLOSSER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9350-06L. Filed October 29, 2007.

Brian Carl Bernhardt, for petitioner.

Veena Luthra, for respondent.

MEMORANDUM OPINION

GOEKE, Judge: This matter is before the Court on the

parties’ cross-motions for summary judgment pursuant to Rule

121.1 The issue in this collection case is whether respondent’s

1
Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code of 1986, as amended.
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Appeals Office abused its discretion in sustaining respondent’s

proposed levy action against petitioner to collect income tax

liabilities for the taxable years 1994, 1995, and 1996 and

denying petitioner’s request for alternative collection methods.

We conclude that there are no genuine issues as to any material

facts, a decision may be rendered as a matter of law, and the

Appeals Office abused its discretion.

Background

At the time she filed her petition, petitioner resided in

Harrisonburg, Virginia.

Petitioner did not file Federal income tax returns for

taxable year 1994, 1995, or 1996. Respondent issued notices of

deficiency for those years and determined tax deficiencies of

$2,892, $6,368, and $2,937, respectively.

On November 22, 2005, respondent mailed to petitioner a

Letter L-1058, Final Notice of Intent to Levy and Notice of Your

Right to a Hearing, informing petitioner that respondent proposed

to levy on her property to collect Federal income taxes owed for

1994, 1995, and 1996. After assessing penalties and interest and

applying withholding credits, respondent determined that

petitioner owed a total of $26,011.04.

On December 9, 2005, petitioner timely filed a Form 12153,

Request for a Collection Due Process Hearing, regarding the

proposed levy. Petitioner claimed that she could not afford to
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pay the income tax owed, and as evidence of her financial

situation she attached a Form 433-F, Collection Information

Statement, dated September 22, 2005. The Form 433-F detailed

petitioner’s income, expenses, and assets at that time.

Petitioner also stated that she anticipated having to find a new

job in January of 2006.

By letter dated February 28, 2006, an Appeals Office

settlement officer notified petitioner that she had scheduled a

telephone hearing for April 6, 2006. The letter requested

petitioner to submit within 14 days a completed Form 433-A,

Collection Information Statement For Wage Earners and Self-

Employed Individuals, a completed offer in compromise package,

and signed Federal income tax returns for taxable years 1999

through 2003 so that the Appeals Office could consider collection

alternatives in a collection hearing. Petitioner did not send

any of the requested information.

According to the administrative record, during the telephone

hearing petitioner told the settlement officer that she had lost

her full-time job and had acquired a part-time job. Petitioner

stated that she was unable to make a payment at that time and

thought that she would be granted currently not collectible (CNC)

status because she had sent a Form 433-F to another Internal

Revenue Service officer. The settlement officer told petitioner

that her account had been on CNC status but was removed from said
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status in September of 2005. The settlement officer inquired why

petitioner had not provided another collection information

statement (CIS). Petitioner explained that she had not been able

to because of a family tragedy. Petitioner also explained that

she did not file tax returns for 1999 through 2003 because she

was incarcerated during those years. The settlement officer told

petitioner that she could not consider collection alternatives at

that time because petitioner had failed to provide current

financial information, file tax returns for the specified years,

or provide verification as to why she did not file the requested

returns. The settlement officer also told petitioner that she

would be receiving a notice of determination and had the right to

challenge the Appeals Office’s determination in this Court.

Petitioner told the settlement officer that she intended to

prepare current financial information in order to request

reinstatement of CNC status.

On April 20, 2006, respondent mailed petitioner a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination), sustaining the proposed

levy action. The Appeals Office determined that petitioner (1)

did not provide current financial information, (2) failed to file

the requested tax returns, and (3) failed to provide any reason

why she did not file the requested returns.
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Petitioner timely petitioned this Court for review of

respondent’s determination pursuant to section 6330(d).

Petitioner submitted with her posttrial brief records indicating

that she had been incarcerated from 1999 to 2003.

Discussion

Summary judgment may be granted where there is no genuine

issue of any material fact and a decision may be rendered as a

matter of law. Rule 121(a) and (b); Beery v. Commissioner, 122

T.C. 184, 187 (2004). The moving party bears the burden of

proving that there is no genuine issue of material fact, and

factual inferences will be viewed in the manner most favorable to

the nonmoving party. Dahlstrom v. Commissioner, 85 T.C. 812, 821

(1985). In this case, there is no apparent disagreement as to

the material facts and circumstances. Accordingly, this case is

ripe for resolution by means of summary judgment.

Section 6330(a)(1) gives a taxpayer the right to a hearing

with the Appeals Office before the Secretary can levy on the

taxpayer’s property. Under section 6330(d)(1), where a

taxpayer’s underlying tax liability is not at issue, we generally

review the Appeals Office’s determination following the hearing

for an abuse of discretion. Goza v. Commissioner, 114 T.C. 176,

181-182 (2000). An abuse of discretion occurs if the Appeals

Office exercises its discretion arbitrarily, capriciously, or

without sound basis in fact or law. Woodral v. Commissioner, 112
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T.C. 19, 23 (1999). Because petitioner does not dispute her

underlying tax liability, we apply the abuse of discretion

standard.

Under section 6330(c)(3), in making a determination the

Appeals Office must (1) verify that the requirements of

applicable law and administrative procedures have been met, (2)

consider the issues the taxpayer raised at the hearing, including

collection alternatives, and (3) determine whether any proposed

collection action balances the need for the efficient collection

of taxes with the legitimate concern of the person that any

collection be no more intrusive than necessary. Petitioner

argues only that the Appeals Office abused its discretion by

failing to consider the collection alternative she proposed

during the telephone hearing.

The Internal Revenue Manual states that settlement officers

may not consider collection alternatives unless the taxpayer has

provided adequate financial information, such as the filing of a

current CIS, and has filed all required tax returns. See 2

Administration, Internal Revenue Manual (CCH), sec.

5.16.1.2.9(1), at 17,810; sec. 5.15.1.1, at 17,653. Petitioner

does not object to this policy, and we have found it to be

reasonable. See Estate of Atkinson v. Commissioner, T.C. Memo.

2007-89. It is also the policy of the Appeals Office to request

a new CIS if the taxpayer’s financial condition changes after the
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submission of an earlier statement, and we have upheld

determinations based on this policy. Etkin v. Commissioner, T.C.

Memo. 2005-245; 2 Administration, Internal Revenue Manual (CCH),

sec. 5.15.1.1(8), at 17,654.

Respondent argues that when a settlement officer follows the

prescribed guidelines in determining whether a collection

alternative is acceptable, the settlement officer’s conclusion

will be considered reasonable and not an abuse of discretion. In

support of this argument, respondent cites Moorhous v.

Commissioner, T.C. Memo. 2003-183, Rodriguez v. Commissioner,

T.C. Memo. 2003-153, and Schenkel v. Commissioner, T.C. Memo.

2003-37.

Petitioner correctly points out that these cases address

whether the Appeals Office abused its discretion by refusing

offers-in-compromise (OICs). Petitioner did not make an OIC but

requested a collection alternative-- that her account be placed

on CNC status. However, we disagree that these cases are

distinguishable, although sections 7122(e) and 6159(e)

specifically require the Secretary to establish procedures for

administrative review of rejections of OICs and terminations of

installment agreements, while there is no statutory mandate for

establishing procedures for placing a taxpayer’s account on CNC

status. We see no reason, however, to hold the Appeals Office to

a higher standard when considering collection alternatives from a
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taxpayer who is seeking complete relief from her undisputed tax

liability than when considering a taxpayer who is offering to pay

part of her tax liability, particularly when the procedural

prerequisites are essentially the same in both situations, and we

agree with respondent to that extent. However, this policy does

not excuse the Appeals Office for disregarding a taxpayer’s

attempts to provide current financial information.

Petitioner argues that even if following its established

policies would have shielded the Appeals Office, it still abused

its discretion in denying her CNC status because she provided the

requested information. In particular, petitioner argues that the

Appeals Office erred (1) by claiming that she had not provided

current financial information despite the facts that she had

provided the Appeals Office with a CIS before the hearing and

further explained the changes in her financial situation during

the hearing, and (2) by refusing to consider her statement that

she was incarcerated from 1999 to 2003 as verification of her

assertion that she earned no income, and therefore had no filing

obligation, for those years, or by failing to ask for additional

verification.

Respondent argues that our review is limited to the

administrative record, and there is nothing in the administrative

record indicating that the Appeals Office abused its discretion.

Indeed, there is little that petitioner offers for us to consider
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apart from the information contained in the administrative file.

Nevertheless, this case is a good example of the problems created

by the lack of a transcript or actual record of the discussions

between the taxpayer and the settlement officer. The only record

of the April 6, 2006, telephone conversation between petitioner

and the settlement officer is the entry made by the settlement

officer in her log for this case. This telephone conversation

was the only “hearing” that petitioner received, and the

settlement officer’s entry is very abbreviated. We are forced to

make certain inferences from the information that is known.

According to the settlement officer’s entry, petitioner

submitted a CIS when she requested a collection hearing, and the

settlement officer knew this. Petitioner told the settlement

officer that she lost her full-time job and gained a part-time

job after she had submitted the CIS. Petitioner explained that

she was unable to provide a new CIS because her family had

recently experienced a tragedy. She also explained that she did

not file Federal tax returns for 1999 to 2003 because she was

incarcerated during those years. After hearing this information,

the settlement officer told petitioner that respondent would be

sending her a notice of determination. There is no indication in

the administrative record that the settlement officer discussed

the particulars of the changes in petitioner’s financial

information from the time she completed the CIS in September
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2005, despite the fact that petitioner claimed in her request for

a collection hearing that she could not pay the underlying tax

liability and that her financial status became worse after she

completed the original CIS. There is also no indication that the

settlement officer considered petitioner’s statement that she was

incarcerated from 1999 to 2003 or made any determination whether

this was sufficient verification that she had no filing

obligations during those years. Had the settlement officer asked

for verification, petitioner would have been able to provide it

just as she provided this Court with records confirming her

incarceration. Given the undisputed facts, we find that the

abrupt decision by the settlement officer indicates she did not

consider the issues petitioner raised during the hearing as

required by section 6330(c)(3)(B) before deciding to issue the

notice of determination, which was an abuse of her discretion.

If section 6330(b) is to be given any force, the Appeals Office

must make its determination after the taxpayer has had the

opportunity to be heard at a fair hearing and after giving

adequate consideration to all meritorious issues the taxpayer has

raised during the hearing.

Accordingly, because we conclude that respondent abused his

discretion by not considering the issues petitioner raised at the

hearing, and no genuine issue of material fact exists requiring
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trial, we shall grant petitioner’s motion for summary judgment

and deny respondent’s motion for summary judgment.

To reflect the foregoing,

An appropriate order and

decision will be entered.