T.C. Summary Opinion 2009-85
UNITED STATES TAX COURT
ANDREW BANKS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4407-06S. Filed June 1, 2009.
Michael B. Van Landingham, for petitioner.
Michael T. Sargent, for respondent.
GUSTAFSON, Judge: This case was heard pursuant to the
provisions of section 74631 of the Internal Revenue Code in
effect when the petition was filed. Pursuant to section 7463(b),
the decision to be entered is not reviewable by any other court,
1
Unless otherwise noted, citations herein of sections refer
to the Internal Revenue Code (26 U.S.C.), and citations of Rules
refer to the Tax Court Rules of Practice and Procedure.
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and this opinion shall not be treated as precedent for any other
case.
This case is an appeal by petitioner Andrew Banks under
sections 6320(c) and 6330(d), seeking our review of the
determination by an appeals officer of the Internal Revenue
Service (IRS) sustaining the filing of a notice of Federal tax
lien relating to Mr. Banks’s unpaid income tax liabilities for
tax years 2000, 2001, and 2002. The issue for decision is
whether the IRS abused its discretion in sustaining the filing of
a notice of Federal tax lien. We hold that it did not.
Background
This case was submitted fully stipulated pursuant to
Rule 122. The stipulation of facts filed December 8, 2008, and
the attached exhibits are incorporated herein by this reference.
At the time that he filed his petition, Mr. Banks resided in
South Carolina.
Mr. Banks filed his 2000 Form 1040, U.S. Individual Income
Tax Return, almost 11 months late on March 11, 2002. The return
reported a balance due of $1,879 and an estimated tax penalty of
$96. Mr. Banks did not claim head of household filing status,
dependency exemption deductions, or an earned income credit on
his 2000 return.
Shortly thereafter, on or before April 15, 2002, Mr. Banks
timely filed his 2001 Form 1040, showing an overpayment of
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$2,252. On November 15, 2002, the IRS issued to Mr. Banks a
statutory notice of deficiency for tax year 2001 wherein the IRS
determined a deficiency of $4,877.90 in Mr. Banks’s 2001 income
tax. This deficiency was based on the IRS’s disallowance of
(i) Mr. Banks’s head of household filing status, (ii) the
dependency exemption deduction claimed for a minor child, and
(iii) the earned income tax credit. The notice of deficiency was
mailed to Mr. Banks’s last known address. The last day to
petition the Tax Court for a redetermination of this deficiency
was February 13, 2003. Mr. Banks failed to do so.
Mr. Banks timely filed his 2002 Form 1040 showing an
overpayment of $776. On September 19, 2003, the IRS issued to
Mr. Banks a notice of deficiency for tax year 2002 wherein the
IRS determined a deficiency of $3,375 in Mr. Banks’s 2002 income
tax. Just as before, this deficiency was based on the IRS’s
disallowance of (i) Mr. Banks’s head of household filing status,
(ii) the dependency exemption deduction claimed for a minor
child, and (iii) the earned income tax credit. The notice of
deficiency was mailed to Mr. Banks’s last known address. The
last day to petition the Tax Court for a redetermination of this
deficiency was December 18, 2003. Mr. Banks failed to do so.
On February 28, 2005, the IRS received a letter from
Mr. Banks’s accountant, Mary E. Dwyer, C.P.A., “requesting that
the tax years of 2001 and 2002 be opened for reconsideration
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* * * [because] Mr. Banks has provided [her] with several
documents that will show he was the legal guardian of [his
daughter] for the years 2001 and 2002.” The record does not
reflect that Mr. Banks’s 2001 and 2002 years were ever reopened
for reconsideration.
On June 23, 2005, the IRS filed with the Register of Deeds
of Charleston County, South Carolina, a notice of Federal tax
lien relating to Mr. Banks’s unpaid income tax liabilities for
2000, 2001, and 2002. On June 28, 2005, the IRS issued to
Mr. Banks a Notice of Federal Tax Lien Filing and Your Right to a
Hearing Under IRC 6320 regarding his unpaid taxes for 2000, 2001,
and 2002. On August 3, 2005, Mr. Banks timely requested a
collection due process (CDP) hearing by submitting to the IRS a
Form 12153, Request for a Collection Due Process or Equivalent
Hearing. In his request for a hearing, Mr. Banks stated:
My tax return was denied for these years because the IRS
refuses to accept the amount of proof that I am a single
parent. And, therefore the money I should have receive[d]
to help support my daughter, dependent, has placed me in
debt.
On October 24, 2005, the IRS’s Office of Appeals sent a letter to
Mr. Banks acknowledging that the Office of Appeals had received
his request for a CDP hearing. Then, by letter dated November
18, 2005, the settlement officer scheduled Mr. Banks’s telephone
CDP hearing for December 15, 2005. In that November 18 letter
the settlement officer explained the CDP process, advised
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Mr. Banks of his right to a face-to-face hearing, and instructed
Mr. Banks that in order for the Office of Appeals “to consider
alternative collection methods such as an installment agreement
or offer in compromise, you must provide any items listed below.
In addition, you must have filed all federal tax returns due.”
The items listed below were:
• A completed Collection Information Statement (Form 433-
A for individuals and/or Form 433-B for businesses.)
• Signed tax return(s) for the following periods. Our
records indicate they have not been filed:
Type of Tax: Income
Period or Periods: December 31, 2003 & December 31,
2004
The settlement officer asked for the requested information to be
submitted within 14 days and stated: “I cannot consider
collection alternatives at your conference without this
information.”
Mr. Banks failed to contact the settlement officer at the
time designated for his CDP hearing. By letter dated December
15, 2005, the settlement officer gave Mr. Banks another
opportunity to reschedule his CDP hearing and/or submit
information for her consideration. Mr. Banks availed himself of
the opportunity to reschedule his CDP hearing, and his telephone
CDP hearing was held on January 11, 2006. At the time of the
hearing, Mr. Banks had yet to supply the settlement officer with
the information requested in her November 18 letter.
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During Mr. Banks’s CDP hearing, he informed the settlement
officer that he wished to withdraw his request for a CDP hearing,
and he requested information regarding the reopening of the
examination of his 2001 and 2002 Federal income tax returns. By
letter dated January 11, 2006, the settlement officer sent to
Mr. Banks a Form 12256-c, Withdrawal of Request for Collection
Due Process Hearing, requesting that Mr. Banks sign and return
the form no later than January 18, 2006. The settlement officer
also forwarded to Mr. Banks IRS Publication 3598, which describes
the IRS’s audit reconsideration process.
Mr. Banks failed to return the Form 12256-c to the
settlement officer by that January 18 deadline. Furthermore,
Mr. Banks had still failed to provide the settlement officer with
his financial information and outstanding tax returns as
requested in her November 18 letter. As a result, on
February 2, 2006, the Office of Appeals issued to Mr. Banks a
Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330, which sustained the filing of the
notice of Federal tax lien. The Office of Appeals upheld the
filing because Mr. Banks “failed to provide the requested
financial information so a collection alternative could be
decided * * * [and] [t]here is no record of Form 1040 for periods
ending December 31, 2003 and December 31, 2004.”
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On March 2, 2006, Mr. Banks timely petitioned this Court to
review the notice of determination issued on February 2, 2006.
Paragraph 4 of his petition summarizes his position as follows:
My tax problems relate to dependency issues and proof of
residency. I don’t have a long form birth certificate for
this dependent, but, I have supplied many documents proving
my case including the rulings from the Family Court of
Charleston, S.C. giving me custody of this dependent. I
believe a blood test is going to cost me six or seven
hundred dollars.
Discussion
I. Applicable Legal Principles
A. Collection Review Procedure
If a taxpayer fails to pay any Federal income tax liability
after notice and demand, section 6321 imposes a lien in favor of
the United States on all the property of the delinquent taxpayer,
and section 6323(f) authorizes the IRS to file notice of that
lien.
However, Congress has added to chapter 64 of the Internal
Revenue Code provisions (in subchapter C, part I, and in
subchapter D, part I) for “Due Process for Liens” and “Due
Process for Collections”. The IRS must comply with those
provisions after filing a tax lien. Within 5 business days the
IRS must provide written notice of that filing to the taxpayer.
Sec. 6320(a). After receiving such a notice, the taxpayer may
request an administrative hearing before the Office of Appeals.
Sec. 6320(b)(1).
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The pertinent procedures for the administrative hearing,
known as the CDP hearing, are set forth in section 6330(c).
First, the appeals officer must obtain verification from the
Secretary that the requirements of any applicable law or
administrative procedure have been met. Sec. 6330(c)(1).
Second, the taxpayer may raise any issue relevant to the unpaid
tax or proposed collection action at the hearing, including
challenges to the appropriateness of the collection action and
offers of collection alternatives. Sec. 6330(c)(2)(A).
Additionally, the taxpayer may contest the existence and amount
of the underlying tax liability, but only if he did not receive a
notice of deficiency or otherwise have an opportunity to dispute
the tax liability. Sec. 6330(c)(2)(B).
The appeals officer must determine whether the lien should
be released. The appeals officer is required to take into
consideration: (1) “verification from the Secretary that the
requirements of any applicable law and administrative procedure
have been met” (see sec. 6330(c)(3)(A), citing sec. 6330(c)(1));
(2) relevant issues raised by the taxpayer (see sec.
6330(c)(3)(B), citing sec. 6330(c)(2)); and (3) “whether any
proposed collection action balances the need for the efficient
collection of taxes with the legitimate concern of the person
that any collection action be no more intrusive than necessary”
(see sec. 6330(c)(3)(C)). If the Office of Appeals then issues a
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notice of determination to uphold the lien, the taxpayer may
appeal the determination to this Court within 30 days (see secs.
6320(c), 6330(d)(1)), as Mr. Banks has done. On review, the
Court will generally consider only arguments, issues, and other
matters that were actually raised by the taxpayer at the CDP
hearing. Giamelli v. Commissioner, 129 T.C. 107, 115 (2007);
Magana v. Commissioner, 118 T.C. 488, 493 (2002).
B. Standard of Review
Where the underlying tax liability is properly at issue in a
section 6330 hearing, the Court will review the matter de novo.
Davis v. Commissioner, 115 T.C. 35, 39 (2000). However, where
the underlying liability is not at issue, we review the
determination of the Office of Appeals for an abuse of
discretion. Goza v. Commissioner, 114 T.C. 176 (2000).
Mr. Banks has 3 tax years at issue in this CDP review, i.e.,
2000, 2001, and 2002.
Mr. Banks’s tax liability for 2000 was a self-reported
liability that he has not challenged. His petition states that
his “tax problems relate to dependency issues”–-i.e., issues not
implicated on his 2000 return. Therefore, the underlying
liability for 2000 is not in dispute. As for 2001 and 2002,
Mr. Banks does challenge his underlying liability for each of
those years, in that he disagrees with the IRS’s adjustments to
his filing status, dependency exemption deductions, and earned
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income tax credit. However, Mr. Banks stipulated that the IRS
mailed the notices of deficiency for 2001 and 2002 to his last
known address as required by law. Mr. Banks therefore had a
prior opportunity to challenge the validity of those underlying
tax liabilities by petitioning the Tax Court from those notices
of deficiency. Mr. Banks failed to do so and accordingly is
barred under section 6330(c)(2)(B) from challenging in this
proceeding the existence or amount of his underlying tax
liabilities for tax years 2001 and 2002. See Goza v.
Commissioner, supra.
Therefore, since Mr. Banks’s underlying liabilities for
2000, 2001, and 2002 are not properly at issue, we review the
IRS’s determination for an abuse of discretion; that is, we
decide whether the determinations were arbitrary, capricious, or
without sound basis in fact or law. See Murphy v. Commissioner,
125 T.C. 301, 320 (2005), affd. 469 F.3d 27 (1st Cir. 2006); Sego
v. Commissioner, 114 T.C. 604, 610 (2000).
II. The Office of Appeals Did Not Abuse Its Discretion by
Upholding the Filing of the Notice of Federal Tax Lien
Mr. Banks was required by Rule 331(b)(4) to make “[c]lear
and concise assignments of each and every error which * * * he
alleges to have been committed in the notice of determination.”
Mr. Banks did not do so. His petition simply reiterated his
disagreement with the IRS’s changes to his tax returns. At best,
this is a continued challenge to the underlying liability, which
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we have already determined is not properly before us.
Furthermore, under Rule 331(b)(4), any issue not raised in the
petition’s assignments of error “shall be deemed to be conceded”.
Therefore, because Mr. Banks did not assign any errors to the
notice of determination, we could decide this case in
respondent’s favor on that ground alone. See Swain v.
Commissioner, 118 T.C. 358 (2002).
Nonetheless, we address the question whether the Office of
Appeals abused its discretion by upholding the Federal tax lien,
and we find that, for three reasons, the appeals officer acted
reasonably in determining that the Federal tax lien was
appropriate.
First, the appeals officer’s determination to sustain the
proposed collection action was reasonable in view of Mr. Banks’s
failure to provide the requested financial information, i.e., a
Form 433-A, Collection Information Statement for Wage Earners and
Self-Employed Individuals. It is not an abuse of discretion for
an appeals officer to sustain the proposed collection action on
the basis of the taxpayer’s failure to submit requested financial
information. See Cavazos v. Commissioner, T.C. Memo. 2008-257;
Prater v. Commissioner, T.C. Memo. 2007-241; Chandler v.
Commissioner, T.C. Memo. 2005-99; Roman v. Commissioner, T.C.
Memo. 2004-20.
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Second, the appeals officer’s determination was reasonable
in view of Mr. Banks’s failure to file his income tax returns for
2003 and 2004. Mr. Banks had been advised that his 2003 and 2004
returns were overdue, yet he never fulfilled his filing
obligations. It is not an abuse of discretion for an appeals
officer to sustain a proposed collection action when the taxpayer
is not in compliance with current tax obligations. See Giamelli
v. Commissioner, supra at 111-112.
Third, the appeals officer’s determination was reasonable in
view of Mr. Banks’s failure to raise during the CDP hearing any
relevant issues or appropriate defenses pertaining to the
proposed collection action and his failure to offer any
collection alternatives for the appeals officer to consider. It
is not an abuse of discretion for an appeals officer to sustain a
proposed collection action and not consider any collection
alternatives when the taxpayer has proposed none. See Kendricks
v. Commissioner, 124 T.C. 69, 79 (2005).
To reflect the foregoing,
Decision will be entered for
respondent.