T.C. Memo. 2008-54
UNITED STATES TAX COURT
OTTO’S E-Z CLEAN ENTERPRISES, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6139-07L. Filed March 5, 2008.
Karen Lynne Baker, for respondent.
MEMORANDUM OPINION
MARVEL, Judge: This matter is before the Court on
respondent’s motion for summary judgment filed pursuant to Rule
121.1
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 (Code).
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Background
This is an appeal from respondent’s determination to proceed
with the collection of petitioner’s unpaid employment tax; i.e.,
unpaid withholding and FICA tax liabilities with respect to its
Form 941, Employer’s Quarterly Federal Tax Return, for the
quarter ending December 31, 2005, and unpaid FUTA tax liabilities
with respect to its Forms 940, Employer’s Annual Federal
Unemployment Tax Return, for 2003, 2004, and 2005.2 Petitioner’s
principal place of business was in Rockford, Illinois, when its
petition was filed.
Petitioner operates a vacuum cleaner retail sales and
service business for Oreck products. Petitioner failed to file
its Form 941 for the quarter ending December 31, 2005, and its
Forms 940 for 2003, 2004, and 2005. Pursuant to section 6020(b),
respondent prepared substitute returns for petitioner for the
quarter and years mentioned above and made assessments against
petitioner as follows:
Quarter/ Additions to Tax
Form Tax year Amount of tax Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6656
941 12/31/05 $6,568.93 $1,478.01 $197.07 $985.33
940 2003 1,243.78 254.99 169.99 -0-
940 2004 2,170.00 459.22 183.69 -0-
940 2005 2,170.00 488.25 65.10 -0-
2
We use the term “employment tax” to refer to taxes under
the Federal Insurance Contributions Act (FICA), secs. 3101-3128,
the Federal Unemployment Tax Act (FUTA), secs. 3301-3311, and
income tax withholding, secs. 3401-3406 and 3509.
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On September 11, 2006, respondent issued petitioner a Final
Notice of Intent to Levy and Notice of Your Right to a Hearing in
connection with petitioner’s unpaid Form 940 and Form 941 tax
liabilities. Petitioner timely submitted a Form 12153, Request
for a Collection Due Process Hearing. In its request, petitioner
stated that “no explanation has been provided of the reason for
the levy nor a computation of amount for which a levy is
intended.”
On January 17, 2007, Settlement Officer Marilyn Ganser
(Appeals officer) held a telephone hearing with petitioner’s
representative, Donald A. Statland (Mr. Statland). At the
hearing, the Appeals officer informed Mr. Statland that
petitioner had failed to file its Form 941 tax returns for the
quarters ending June 30 and September 30, 2006. The Appeals
officer also explained that petitioner had filed no Form 1120,
U.S. Corporation Income Tax Return, since the inception of its
business. Additionally, the Appeals officer noted that
petitioner’s president, Andrew Otto, had not filed a Form 1040,
U.S. Individual Income Tax Return, since 1998. The Appeals
officer gave petitioner a January 31, 2007, deadline to provide a
current financial statement and to file all of the above-
mentioned delinquent returns. After the hearing, the Appeals
officer sent Mr. Statland copies of the returns respondent
prepared under section 6020(b). Petitioner did not file the
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requested tax returns or submit a current financial statement to
the Appeals officer by the January 31, 2007, deadline.
On February 15, 2007, the Appeals officer issued a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 sustaining the proposed levy.
On March 14, 2007, petitioner timely filed its petition.
Petitioner argues that there is no proposed deficiency as set
forth in the notice of determination. Petitioner further alleges
that the Appeals officer’s determination was erroneous because it
contravened the applicable Code provisions, rules, and
regulations. However, petitioner states that the basis of its
allegations “cannot be fully set forth at this time given the
unclear basis for the Commissioner’s conclusions.” Lastly,
petitioner contends it was improperly denied the right to an in-
person section 6330 hearing.
On October 4, 2007, we issued petitioner a notice setting
its case for trial during the Court’s March 10, 2008, Chicago,
Illinois, trial session. On November 21, 2007, respondent filed
his motion for summary judgment. On December 7, 2007, Mr.
Statland submitted a motion to withdraw as petitioner’s
representative, citing petitioner’s refusal to cooperate and
failure to respond to his repeated communication attempts. Mr.
Statland also submitted a motion requesting additional time for
petitioner to obtain new counsel and/or respond to respondent’s
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summary judgment motion. On December 12, 2007, we granted both
of Mr. Statland’s motions and gave petitioner until January 16,
2008, to file a response to respondent’s summary judgment motion.
Petitioner did not submit a response by the extended deadline.
Discussion
A. Summary Judgment
Summary judgment is a procedure designed to expedite
litigation and avoid unnecessary, time-consuming, and expensive
trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681
(1988). Summary judgment may be granted with respect to all or
any part of the legal issues presented “if the pleadings, answers
to interrogatories, depositions, admissions, and any other
acceptable materials, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that a
decision may be rendered as a matter of law.” Rule 121(b);
Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd.
17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753,
754 (1988). The moving party bears the burden of proving that
there is no genuine issue of material fact, and factual
inferences will be drawn in a manner most favorable to the party
opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C.
812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344
(1982). The nonmoving party, however, cannot rest upon the
allegations or denials in his pleadings but must “set forth
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specific facts showing that there is a genuine issue for trial.”
Rule 121(d); Dahlstrom v. Commissioner, supra at 820-821.
B. Section 6330
Section 6330(a) provides that no levy may be made on any
property or right to property of any person unless the Secretary
has notified such person in writing of the right to a hearing
before the levy is made. If the person makes a request for a
hearing, a hearing shall be held before an impartial officer or
employee of the Internal Revenue Service (IRS) Office of Appeals.
Sec. 6330(b)(1), (3). At the hearing, a taxpayer may raise any
relevant issue, including challenges to the appropriateness of
the collection action and collection alternatives. Sec.
6330(c)(2)(A). Taxpayers, however, are expected to provide all
relevant information requested by Appeals, including financial
statements, for its consideration of the facts and issues
involved in the hearing. Sec. 301.6330-1(e)(1), Proced. & Admin.
Regs. A taxpayer is precluded from contesting the existence or
amount of the underlying tax liability unless the taxpayer did
not receive a notice of deficiency for the tax in question or did
not otherwise have an opportunity to dispute the tax liability.
Sec. 6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604,
609 (2000).
Following a hearing, the Appeals Office must make a
determination whether the proposed levy may proceed. In so
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doing, the Appeals Office is required to take into consideration:
(1) The verification presented by the Secretary that the
requirements of applicable law and administrative procedures have
been met, (2) the relevant issues raised by the taxpayer, and (3)
whether the proposed levy action appropriately balances the need
for efficient collection of taxes with a taxpayer’s concerns
regarding the intrusiveness of the proposed levy action. Sec.
6330(c)(3). A hearing officer may rely on a computer transcript
or Form 4340, Certificate of Assessments, Payments and Other
Specified Matters, to verify that a valid assessment was made and
that a notice and demand for payment was sent to the taxpayer in
accordance with section 6303. Nestor v. Commissioner, 118 T.C.
162, 166 (2002); Schaper v. Commissioner, T.C. Memo. 2002-203;
Schroeder v. Commissioner, T.C. Memo. 2002-190. Absent a showing
of irregularity, a transcript that shows such information is
sufficient to establish that the procedural requirements of
section 6330 have been met. Nestor v. Commissioner, supra at
166-167.
Section 6330(d)(1), as amended and applicable to this case,3
grants the Court jurisdiction to review the determination made by
the Appeals officer at the hearing. The Court has jurisdiction
to review the Commissioner’s determination under section 6330
3
Sec. 6330(d)(1) was amended by the Pension Protection Act
of 2006, Pub. L. 109-280, sec. 855, 120 Stat. 1019, effective for
determinations made after Oct. 16, 2006.
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regardless of the type of tax giving rise to the underlying tax
liability. Sec. 6330(d)(1); Callahan v. Commissioner, 130 T.C.
___ (2008) (frivolous return penalty gave rise to underlying tax
liability). Where the validity of the underlying tax liability
is properly at issue, the Court will review the underlying tax
liability de novo. Sego v. Commissioner, supra at 610. Where
the underlying tax liability is not properly at issue, the Court
will review the administrative determination of the Appeals
Office for abuse of discretion. Lunsford v. Commissioner, 117
T.C. 183, 185 (2001); Sego v. Commissioner, supra at 610; Goza v.
Commissioner, 114 T.C. 176, 182 (2000). The Appeals officer
abuses his discretion if his determination is exercised
“arbitrarily, capriciously, or without sound basis in fact.”
Mailman v. Commissioner, 91 T.C. 1079, 1084 (1988).
Petitioner alleged in its petition that respondent’s
determination to sustain the proposed levy was in error.
Specifically, petitioner alleged that it was improperly denied a
face-to-face section 6330 hearing. However, petitioner did not
respond to respondent’s motion for summary judgment and did not
provide any affidavit or other documentation to refute
respondent’s determination that a proper section 6330 hearing was
held.
While a hearing may consist of a face-to-face meeting, a
proper section 6330 hearing may also occur by telephone or
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correspondence under certain circumstances. Katz v.
Commissioner, 115 T.C. 329, 337-338 (2000); sec.
301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs. The undisputed
facts establish that petitioner’s representative agreed to
participate and did participate in a telephone section 6330
hearing with the Appeals officer.4
Petitioner did not respond to respondent’s motion for
summary judgment and, consequently, has offered no discernable
argument with regard to the alleged error in respondent’s
determination. In the petition petitioner does not mention any
specific Code provisions, rules, or regulations that respondent’s
determination allegedly violates, and petitioner does not set out
any specific facts. Rule 331(b)(4) and (5) requires that a
petition in a levy action contain “Clear and concise assignments
of each and every error which the petitioner alleges to have been
committed in the notice of determination” as well as “Clear and
concise lettered statements of the facts on which the petitioner
bases each assignment of error.” The petition must contain
sufficient allegations of fact to permit the Court to determine
whether the Commissioner can proceed with the collection of the
taxpayer’s tax liabilities. See Poindexter v. Commissioner, 122
T.C. 280, 285 (2004), affd. 132 Fed. Appx. 919 (2d Cir. 2005).
4
We note that the exhibits attached to the motion for
summary judgment do not establish that petitioner at any time
requested a face-to-face sec. 6330 hearing.
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If the petition fails to set forth the factual basis for the
claims of error, summary judgment in favor of the Commissioner is
warranted. Id. at 286.
Because petitioner fails to describe in any detail why
respondent’s determination is erroneous and fails to provide any
factual basis to support its allegation, we are precluded from
further assessing whether respondent’s determination is erroneous
as petitioner claims. While petitioner contends in the petition
that it cannot present its arguments because the basis for
respondent’s claim is unclear, this assertion is baseless. The
notice of intent to levy and the notice of determination describe
in detail the basis for respondent’s determination, and Mr.
Statland participated in a telephone section 6330 hearing with
respondent’s Appeals officer at which the parties discussed
petitioner’s unpaid tax liabilities.
On the basis of the undisputed information submitted in
support of respondent’s motion, we conclude that respondent
satisfied all of the requirements of section 6330. The Appeals
officer verified that all requirements of applicable law or
administrative procedures were met. The Appeals officer verified
that the proper assessments were made and that notice and demand
for payment was sent to petitioner’s last known address. In
response to petitioner’s request, the Appeals officer conducted a
section 6330 hearing with petitioner’s representative, Mr.
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Statland. At the hearing, the Appeals officer requested a
current financial statement from petitioner and stated that no
collection alternatives could be discussed until petitioner filed
its delinquent returns. The Appeals officer’s position is
reasonable; it is consistent with established IRS policy that a
taxpayer must be in compliance with current filing and estimated
tax payment requirements to be eligible for collection
alternatives. See Londono v. Commissioner, T.C. Memo. 2003-99.
Petitioner did not respond to the Appeals officer or provide the
requested information by the deadline set. The Appeals officer
concluded that the proposed levy action balanced the need for
efficient collection of taxes with petitioner’s concerns that the
collection action be no more intrusive than necessary.
Accordingly, we conclude that the undisputed facts establish that
the Appeals officer did not abuse her discretion in sustaining
the proposed levy action.5
On this record, we conclude that there is no genuine issue
of material fact requiring a trial, and we hold that respondent
is entitled to the entry of a decision sustaining the proposed
levy as a matter of law.
5
To the extent petitioner’s sec. 6330 hearing request and
petition can be construed as containing arguments pertaining to
its underlying tax liability, we dismiss these assertions given
that petitioner has provided no legal or factual support for
challenging its underlying tax liability.
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To reflect the foregoing,
An appropriate order and
decision will be entered.