T.C. Memo. 2009-28
UNITED STATES TAX COURT
BRADFORD M. DANIEL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4968-07L. Filed February 9, 2009.
Martin J. Nash and Michael B. Axman, for petitioner.
Nancy L. Karsh, for respondent.
MEMORANDUM OPINION
SWIFT, Judge: This matter is before us on respondent’s
motion for remand to respondent’s Appeals Office and on
petitioner’s motion for partial summary judgment.
Because petitioner does not object to respondent’s motion
for remand, respondent’s motion for remand to respondent’s
- 2 -
Appeals Office (on the issue as to whether petitioner’s offer-in-
compromise (OIC) should be accepted on the ground of doubt as to
collectibility) will be granted. We are left, however, with the
question raised in petitioner’s motion for partial summary
judgment to which respondent objects (whether on remand to
respondent’s Appeals Office petitioner’s OIC also should be
considered on the basis of doubt as to liability).
Unless otherwise noted, all section references are to the
Internal Revenue Code.
Background
Petitioner resided in Florida at the time the petition was
filed.
On petitioner’s 1998 individual Federal income tax return,
petitioner reported the sale of a flower business and a $266,085
Federal income tax liability relating thereto. With the filing
of the return, however, petitioner paid only $6,000. Respondent
assessed the $266,085 reported tax liability; and after no
additional payments were received from petitioner, respondent
filed a Federal tax lien against petitioner relating to the
outstanding $260,085 balance in petitioner’s 1998 Federal income
taxes.
On December 17, 2004, respondent notified petitioner of the
Federal tax lien filing and of his right to request a collection
- 3 -
Appeals Office hearing under section 6320. Petitioner, however,
anxious for relief from respondent’s lien filing, on February 22,
2005, requested a withdrawal of respondent’s tax lien filing
under respondent’s general Collection Appeals Program (CAP) and
section 6323(j), not under the collection due process (CDP)
provisions of section 6320.
Petitioner proceeded with the CAP appeal; and upon denial by
respondent’s Office of Compliance Services of the requested
withdrawal of respondent’s lien filing, petitioner appealed the
decision to respondent’s Office of Technical Services (Technical
Services). Technical Services sustained the denial of the
requested lien withdrawal, and petitioner appealed that decision
under CAP to respondent’s Appeals Office. After review,
respondent’s Appeals Office handling the CAP appeal sustained the
denial of the requested lien withdrawal.
On April 28, 2005, respondent also issued to petitioner a
notice of proposed levy action relating to petitioner’s $260,085
outstanding 1998 Federal income taxes. Petitioner challenged
respondent’s proposed levy by filing with respondent’s Appeals
Office a CDP appeal under section 6330.
Also on April 28, 2005, petitioner separately submitted to
respondent’s OIC office an OIC relating to his $260,085
- 4 -
outstanding 1998 Federal income taxes based on doubt as to both
liability and collectibility.1
Upon learning of petitioner’s pending CDP appeal and without
acting on petitioner’s OIC, respondent’s OIC office forwarded
petitioner’s OIC to respondent’s Appeals Office for consideration
in connection with petitioner’s CDP appeal.
On November 7, 2006, petitioner’s section 6330 CDP hearing
with respondent’s Appeals Office was held. At the hearing
respondent’s Appeals officer refused to consider the correctness
of petitioner’s underlying 1998 Federal income tax liability on
the ground that petitioner already had two prior opportunities to
challenge that underlying tax liability (first, in a section 6320
CDP hearing relating to the tax lien filing and second, in the
CAP proceeding.)2 Also, in the section 6330 CDP hearing,
respondent’s Appeals officer did not consider petitioner’s OIC.
Petitioner’s OIC remains outstanding.
On January 30, 2007, respondent’s Appeals Office issued a
notice of determination sustaining respondent’s proposed levy.
On March 2, 2007, petitioner filed this action.
1
Under petitioner’s OIC, petitioner offered to pay
respondent a total of $55,000--$30,000 within 90 days, and $500
monthly thereafter for 50 months.
2
Respondent now acknowledges that petitioner’s CAP appeal
under sec. 6323(j) did not constitute a prior opportunity to
litigate the underlying tax liability for purposes of sec.
6330(c)(2)(B).
- 5 -
On July 2, 2007, respondent filed the instant motion for
remand, and petitioner filed the instant motion for partial
summary judgment.
The above motions were calendared for hearing on
February 13, 2008, in Tampa, Florida. At the hearing the parties
agreed to put the motions on hold until after petitioner provided
to respondent for audit reconsideration documentation that might
substantiate petitioner’s entitlement to claimed net operating
loss carrybacks that might significantly reduce or eliminate
petitioner’s outstanding 1998 Federal income tax liability. This
audit reconsideration was to take place separate and apart from
the instant CDP collection case and with the understanding that
the instant CDP case would be held in abeyance pending the
review.
Over the course of the next 8 months the parties negotiated
and sought to settle this case, each making settlement offers but
without success. Since early fall of 2008, in part because of an
illness of petitioner’s lead counsel no further progress has been
made in this case, and the parties now ask this Court to act on
the pending motions.
Discussion
As indicated, petitioner does not object to respondent’s
motion for remand of this case to respondent’s Appeals Office for
purposes of considering petitioner’s OIC on the ground of doubt
- 6 -
as to collectibility. Respondent’s motion for remand will be
granted.
Petitioner, however, moves for partial summary judgment,
seeking an order that respondent’s Appeals Office on remand
consider petitioner’s OIC on the basis of doubt as to liability.
Petitioner focuses on section 6330(c)(4) and emphasizes that
under that section a taxpayer is precluded from raising an issue
in a section 6330 proceeding only if the same issue was raised in
a prior CDP proceeding or in some other administrative or
judicial proceeding in which the taxpayer materially
participated. Because he did not file an appeal under section
6320 of respondent’s December 17, 2004, notice of Federal tax
lien filing, petitioner obviously did not materially participate
in any such proceeding; and petitioner contends that he now
should be allowed to challenge his $266,085 1998 underlying
Federal income tax liability in the instant section 6330 CDP
hearing.
Petitioner also asks that section 301.6330-1(e)(3), Q&A-E7,
Proced. & Admin. Regs., be invalidated in that it supports
respondent’s reading of section 6330(c)(2)(B) and (4).
On brief, petitioner states--
All levies are preceded by an assessment and a notice
of lien. An interpretation which would require a
section 6320 * * * [CDP Appeal] to be filed in order to
raise the issue of the underlying tax liability would
render section 6330(c)(2)(B) superfluous as it applies
to section 6330 and conflict with section 6330(c)(4).
- 7 -
Petitioner’s statement is erroneous on a number of points.
First, not all tax assessments are followed by tax lien filings,
not all levies are preceded by filed tax liens, and respondent
may issue a notice of proposed levy without filing a notice of
tax lien. A statutory lien arises upon assessment and subjects a
taxpayer’s property to the Federal tax lien. Sec. 6322. This
occurs before a notice of Federal tax lien is filed or a notice
of proposed levy is ever issued. Sec. 6321. Because the lien is
already in place, a notice of intent to levy may be issued before
a notice of tax lien is filed and regardless of whether a notice
of tax lien is ever filed.
Second, the two statutory provisions in question address
different types of issues. Section 6330(c)(2)(B) addresses only
the issue as to the underlying tax liability and is triggered
whenever a taxpayer had a prior opportunity to challenge same,
whether the taxpayer did so or not. Section 6330(c)(4) addresses
any other issue that is raised in a section 6320 or 6330
proceeding and is triggered only when the issue was considered
and decided in a prior administrative or judicial proceeding and
when the taxpayer materially participated in the prior
proceeding.
Respondent’s reading of section 6330(c)(2)(B) does not
render superfluous section 6330(c)(4), and respondent’s reading
and application of the language of section 6330(c)(2)(B) does not
conflict with the language of section 6330(c)(4).
- 8 -
Section 301.6330-1(e)(3), Q&A-E7, Proced. & Admin. Regs.,
reflects the same interpretation and application that we adopt of
the statutory provisions before us.3 The regulation provides a
reasonable interpretation of the statute and is valid. See Inv.
Research Associates, Inc. v. Commissioner, 126 T.C. 183 (2006);
see also Lewis v. Commissioner, 128 T.C. 48 (2007); Bell v.
Commissioner, 126 T.C. 356 (2006).
As respondent on brief explains with regard to section
6330(c)(2)(B)--
Requiring taxpayers to challenge an underlying
liability with the first notice filed also promotes
early, efficient, and complete resolution of legitimate
disputes between the IRS and taxpayers concerning the
validity of the federal tax lien. Such disputes are
best resolved at the earliest stages of the collection
3
Sec. 301.6330-1(e)(3), Q&A-E7, Proced. & Admin. Regs.,
states as follows:
Q-E7. What issues may a taxpayer raise in a CDP
hearing under section 6330 if the taxpayer previously
received a notice under section 6320 with respect to
the same tax and tax period and did not request a CDP
hearing with respect to that notice?
A-E7. The taxpayer may raise appropriate spousal
defenses, challenges to the appropriateness of the
proposed collection action, and offers of collection
alternatives. The existence or amount of the tax
liability for the tax for the tax period specified in
the CDP Notice may be challenged only if the taxpayer
did not already have an opportunity to dispute that tax
liability. Where the taxpayer previously received a
CDP Notice under section 6320 with respect to the same
tax and tax period and did not request a CDP hearing
with respect to that earlier CDP Notice, the taxpayer
already had an opportunity to dispute the existence or
amount of the underlying tax liability.
- 9 -
process, because the agency and taxpayer records upon
which resolution of disputes turns will be most
contemporaneous and complete at the time of the first
issuance of a notice.
Because petitioner could have filed an appeal of
respondent’s December 17, 2004, notice of tax lien filing and
therein challenged his underlying 1998 Federal income tax
liability, respondent’s Appeals Office properly refused to allow
petitioner to challenge his 1998 Federal income tax liability in
the subsequent CDP appeal relating to respondent’s notice of
proposed levy. See Baltic v. Commissioner, 129 T.C. 178 (2007).
Appropriate orders will be
issued.