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.