T.C. Memo. 2009-163
UNITED STATES TAX COURT
ERNEST ENAX, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 29667-07L. Filed July 2, 2009.
Ernest Enax, pro se.
Laura A. Price, for respondent.
MEMORANDUM OPINION
DAWSON, Judge: This matter is before us on respondent’s
motion for summary judgment, filed pursuant to Rule 121, and to
impose a penalty under section 6673.1 Petitioner timely filed a
1
All Rule references are to the Tax Court Rules of Practice
and Procedure, and all section references are to the Internal
Revenue Code.
- 2 -
petition pursuant to sections 6320(c) and 6330(d), appealing
respondent’s determination to uphold the validity of a notice of
Federal tax lien filed with respect to petitioner’s 2001, 2003,
and 2004 unpaid Federal income tax liabilities. In Enax v.
Commissioner, T.C. Memo. 2008-116, the Court sustained
respondent’s determination to proceed with a levy to collect the
unpaid tax liabilities for the years at issue and imposed a
penalty under section 6673 on petitioner of $2,500.
Background
Petitioner resided in Florida when the petition was filed.
A. Deficiencies Assessed for 2001, 2003, and 2004
Petitioner entered zeros on every line of the Forms 1040,
U.S. Individual Income Tax Return, he filed for 2001, 2003, and
2004 and attached documents espousing tax-protester arguments to
each form.
Although respondent accepted the Form 1040 petitioner filed
for 2004 as a valid tax return, respondent did not treat the
Forms 1040 submitted for 2001 and 2003 as valid tax returns.
Instead, using third-party payor information, respondent prepared
substitutes for returns for 2001 and 2003. Respondent mailed to
petitioner separate notices of deficiency for 2001, 2003, and
2004, respectively, on July 7, 2004, May 9, 2005, and April 14,
2006.
- 3 -
Petitioner did not file a petition with the Tax Court to
contest the deficiencies determined in any of the notices of
deficiency, and the deficiencies for 2001, 2003, and 2004 were
assessed on March 28 and November 21, 2005, and August 28, 2006,
respectively. Respondent also assessed penalties against
petitioner under section 6702 for 1997, 2003, and 2004.
B. Notice of Intent To Levy
On March 27, 2007, respondent mailed to petitioner a notice
of intent to levy to collect petitioner’s outstanding Federal
income tax liabilities for 2001, 2003, and 2004 and outstanding
penalties for 1997, 2003, and 2004. Respondent also mailed to
petitioner a notice explaining petitioner’s right to request an
Appeals Office hearing regarding the levy (the levy hearing).
Petitioner timely requested the levy hearing and mailed to
respondent’s Appeals Office numerous tax-protester arguments and
a partially completed Form 433-A, Collection Information
Statement for Wage Earners and Self-Employed Individuals.
Petitioner could not raise the underlying deficiencies
because he received notices of deficiency, but he was given the
opportunity to contest the section 6702 penalties for 1997, 2003,
and 2004. In his communications with the settlement officer,
petitioner raised only tax-protester arguments. As a result, the
settlement officer did not hold a face-to-face hearing with
- 4 -
petitioner, and petitioner’s levy hearing was conducted from May
29 to June 25, 2007, by correspondence and telephone.
On July 17, 2007, respondent’s Appeals Office mailed to
petitioner a notice of determination sustaining respondent’s
proposed levy action (levy determination). On August 6, 2007,
petitioner timely filed a petition in this Court in docket No.
17374-07L contesting the levy determination.2
C. Notice of Lien Filing
On May 29, 2007, respondent mailed petitioner a Notice of
Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320, regarding petitioner’s income tax years 2001, 2003, and
2004. The notice of Federal tax lien was filed on May 30, 2007.
Respondent received from petitioner a signed Form 12153, Request
for a Collection Due Process Hearing, on June 18, 2007.
Petitioner’s lien case was assigned to the same settlement
officer who was conducting his levy hearing. On November 6,
2007, the settlement officer mailed petitioner a letter
2
Petitioner also filed a petition in docket No. 22087-06L
contesting income tax liabilities for tax years 1993 and 1994 and
trust fund recovery penalties for periods within those tax years.
The case was dismissed for lack of jurisdiction because
respondent had not sent petitioner any notice of determination
authorized by sec. 6330 with respect to income tax liabilities
and trust fund recovery penalties assessed against petitioner for
1993 and 1994, nor had respondent made any other determination
with respect to the tax liabilities that would confer
jurisdiction on this Court. As of Dec. 31, 2007, petitioner
remained liable for 21 assessments of taxes and penalties for all
open years totaling $232,959.68.
- 5 -
scheduling a collection due process (CDP) hearing for November
21, 2007, and advising petitioner to contact him no later than
November 19, 2007, in regard to petitioner’s preference for a
conditional face-to-face, telephone, or correspondence hearing.
The settlement officer informed petitioner that
The liability issue (how much you owe or if you
owe) is not open in regard to this hearing. You
previously had a Collection Due Process hearing in
regard to these periods and a Notice of Intent to Levy.
The [levy] hearing date was June 27, 2007. You were
issued a Notice of Determination as a result of this
hearing and you have since filed a petition with the
U.S. Tax Court. Since you were given the right to
appeal the assessments in the past, the liability issue
is not open for this current * * * [lien] hearing * * *
[pursuant to section] 6330(c)(2)(B).
The settlement officer agreed to conduct a face-to-face hearing
to discuss payment of the tax liability, including an installment
agreement or an offer-in-compromise, provided petitioner
submitted: (1) A completed Form 433-A, to be used to determine a
viable collection alternative; and (2) original signed income tax
returns for 2005 and 2006 to satisfy the requirement that
petitioner be current in filing his returns.
The letter included a narrative addressing the details and
issues from the prior levy hearing, encouraged petitioner to
cooperate by submitting the requested documents and information,
and advised petitioner not to raise the same frivolous issues
during the lien hearing. The settlement officer enclosed copies
of the transcripts of petitioner’s 2001, 2003, and 2004 accounts
- 6 -
and a copy of section 6323(j), setting forth the circumstances in
which the Commissioner may withdraw a notice of Federal tax lien.
The settlement officer also directed petitioner’s attention to
“The Truth About Frivolous Tax Arguments” on the IRS Web site.
In response to the settlement officer’s November 6, 2007,
letter, petitioner sent the settlement officer a letter dated
November 14, 2007 (petitioner’s letter). In petitioner’s letter,
petitioner complained that the settlement officer had already
given (during the levy hearing) his “frivolous determination * *
* disregarding the law”. Petitioner also requested “authentic
assessments signed by a person and not a computer printout” and
evidence of the settlement officer’s authority to conduct the
lien hearing.
In response to petitioner’s letter, the settlement officer
telephoned petitioner on November 16, 2007, but petitioner asked
him to communicate in writing. By letter dated November 16,
2007, the settlement officer informed petitioner that the
transcripts of petitioner’s accounts were legally sufficient for
purposes of the lien hearing and that he had previously given
petitioner a copy of the delegation order giving him authority to
conduct the lien hearing. The settlement officer offered to
conduct the lien hearing by telephone at 10 a.m. on November 21,
2007. The settlement officer informed petitioner that if
petitioner did not call at the appointed date and time or provide
- 7 -
the requested documentation, he would make a determination on the
basis of the administrative file.
Petitioner did not call the settlement officer at the
appointed time on November 21, 2007. The only correspondence the
settlement officer received was petitioner’s letter. Because
petitioner did not offer any collection alternatives, the
settlement officer made the determination to uphold the filing of
the Federal tax lien for tax years 2001, 2003, and 2004. On
December 4, 2007, the Appeals Office mailed to petitioner the
notice of determination upholding the filing of the notice of tax
lien.
D. Tax Court Pleadings
On December 26, 2007, petitioner filed a petition virtually
identical to the one filed in the levy case, arguing that he did
not receive a hearing and espousing tax-protester arguments. On
February 4, 2008, petitioner filed an amendment to petition
asserting tax-protester arguments substantially identical to
those in the amendment to petition filed in the levy case.
Petitioner asserts that he complied with all of requirements
for a face-to-face hearing. He asks that his case be remanded to
Appeals for a face-to-face hearing.
E. Tax Court Decision in the Levy Case
On April 28, 2008, the Court filed its Memorandum Opinion in
Enax v. Commissioner, T.C. Memo. 2008-116, sustaining
- 8 -
respondent’s determination to proceed with the levy to collect
tax liabilities for the years at issue. The Court observed that
petitioner (1) had made only tax-protester arguments during the
levy hearing, (2) was not current on his tax obligations for 2005
and 2006 at the time of the levy hearing, (3) had a history of
not filing tax returns and of making tax-protester arguments, and
(4) had outstanding assessed Federal income taxes and penalties
in excess of $237,000. The Court held that petitioner was not
entitled to a face-to-face levy hearing pursuant to section
301.6330-1(d)(2), Q&A-D8, Proced. & Admin. Regs., granted
respondent’s motion for summary judgment, and sustained
respondent’s proposed levy to collect petitioner’s outstanding
1997, 2001, 2003, and 2004 Federal income taxes and penalties.
The Court also imposed a penalty of $2,500 under section 6673
because petitioner made only tax-protester arguments during both
the levy hearing and the levy proceedings in the Tax Court.
Petitioner did not appeal the decision entered in docket No.
17374-07L on September 15, 2008, and it is final.
F. Order to Show Cause
Rule 91(a) requires the parties to stipulate “all facts, all
documents and papers or contents or aspects thereof, and all
evidence which fairly should not be in dispute.” Petitioner
refused to do so. Pursuant to Rule 91(f), respondent filed a
motion for an order to show cause (OSC) why the facts and
- 9 -
evidence set forth in respondent’s proposed stipulation of facts
should not be deemed established for purposes of this case. On
October 7, 2008, the Court issued an OSC directing petitioner to
file a response in compliance with the provisions of Rule
91(f)(2), showing why the matters set forth in respondent’s
motion papers should not be deemed admitted. Because petitioner
did not file a response to the OSC, the OSC was made absolute on
November 12, 2008, and the facts and evidence set forth in
respondent’s proposed stipulation of facts were deemed
established for the purposes of this case.
G. Motion for Summary Judgment and To Impose Sanctions
On December 3, 2008, respondent filed the motion for summary
judgment and to impose sanctions under section 6673(a). On
January 8, 2009, petitioner filed a response to respondent’s
motion, making additional tax-protester arguments.
Discussion
A. Summary Judgment
Summary judgment is used to expedite litigation and avoid
unnecessary and expensive trials. A decision will be rendered on
a motion for summary judgment if the pleadings, answers to
interrogatories, depositions, admissions, and 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). Because the
- 10 -
effect of granting a motion for summary judgment is to decide the
case against a party without allowing that party an opportunity
for a trial, summary judgment should be “cautiously invoked” and
granted only after a careful consideration of the case.
Associated Press v. United States, 326 U.S. 1, 6 (1945); Kroh v.
Commissioner, 98 T.C. 383, 390 (1992).
Respondent, as the moving party, has the burden of
showing the absence of a genuine issue as to any material fact.
For purposes of summary judgment, the party opposing the motion
is to be afforded the benefit of all reasonable doubt, and the
material submitted by both sides must be viewed in the light most
favorable to the opposing party; that is, all doubts as to the
existence of an issue of material fact must be resolved against
the movants. E.g., Adickes v. S.H. Kress & Co., 398 U.S. 144,
157(1970); Kroh v. Commissioner, supra at 390.
B. Federal Tax Lien: Section 6320 Procedures
If a taxpayer is liable for Federal taxes and fails to pay
the taxes after demand, section 6321 creates a lien in favor of
the United States on all property and rights to property
belonging to the taxpayer. The Federal tax lien arises by
operation of law when the IRS assesses the amount of unpaid tax
and continues until the liability is satisfied or becomes
unenforceable by reason of lapse of time. Sec. 6322.
- 11 -
In order to preserve priority of the lien and to put other
creditors on notice, a notice of Federal tax lien must be filed.
See sec. 6323. If a notice of Federal tax lien is filed, the
Secretary must furnish the taxpayer with written notice of the
filing not more than 5 business days after the day the notice of
Federal tax lien is filed. Sec. 6320(a)(1) and (2). The notice
must inform the taxpayer of the amount of the unpaid tax and the
right to request (within the 30-day period beginning on the sixth
day after the filing of the lien) an administrative review in the
form of a hearing. Sec. 6320(a)(3).
The hearing generally must be conducted in accordance with
the procedures set forth in section 6330(c), (d), and (e). Sec.
6320(c). The taxpayer may raise any relevant issue at the
hearing, including challenges to “the appropriateness of
collection actions” and may make “offers of collection
alternatives, which may include the posting of a bond, the
substitution of other assets, an installment agreement, or an
offer-in-compromise.” Sec. 6330(c)(2)(A). At the hearing, the
taxpayer may challenge the existence and amount of the underlying
tax liability if he or she did not receive a notice of deficiency
or did not otherwise have an opportunity to dispute the tax
liability. Sec. 6330(c)(2)(B).
During the hearing the Appeals officer must consider issues
properly raised by the taxpayer, verify that the requirements of
- 12 -
applicable law and administrative procedures have been met, and
consider whether any proposed collection action balances the need
for the efficient collection of taxes with the taxpayer’s
legitimate concern that any collection action be no more
intrusive than necessary. Sec. 6330(c)(3)(C).
Where the validity of the underlying tax liability is at
issue in a collection review proceeding, 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 Appeals officer’s determinations regarding the
collection action for abuse of discretion. Goza v. Commissioner,
114 T.C. 176 (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 T.C. 19, 23 (1999).
Petitioner was not entitled to dispute the underlying
liabilities during the lien hearing because he received statutory
notices of deficiency regarding the tax liabilities for the years
at issue--2001, 2003, and 2004.
Petitioner argues that he was entitled to a face-to-face
lien hearing to discuss collection alternatives. We disagree.
Section 301.6320-1(d)(2), Q&A-D8, Proced. & Admin. Regs.,
provides:
A face-to-face CDP conference concerning a collection
alternative, such as an installment agreement or an
- 13 -
offer to compromise liability, will not be granted
unless other taxpayers would be eligible for the
alternative in similar circumstances. For example,
because the IRS does not consider offers to compromise
from taxpayers who have not filed required returns * *
* as set forth in Form 656, “Offer in Compromise,” no
face-to-face conference will be granted to a taxpayer
who wishes to make an offer to compromise but has not
fulfilled those obligations. * * * In all cases, a
taxpayer will be given an opportunity to demonstrate
eligibility for a collection alternative and to become
eligible for a collection alternative, in order to
obtain a face-to-face conference. * * *
The settlement officer agreed to conduct a face-to-face hearing
to discuss payment of the tax liability, including an installment
agreement or an offer in compromise, provided petitioner
submitted: (1) A completed Form 433-A, to be used to determine a
viable collection alternative; and (2) original signed income tax
returns for 2005 and 2006 to satisfy the requirement that
petitioner be current in filing his tax returns. The settlement
officer gave petitioner an opportunity to demonstrate he was
eligible for a collection alternative by submitting the Form 433-
A and an opportunity to become eligible for a collection
alternative by submitting tax returns for 2005 and 2006.
Petitioner did not provide the requested Form 433-A or his 2005
and 2006 income tax returns. Consequently, the settlement
officer was not required to hold a face-to-face hearing to
discuss collection alternatives.
Petitioner failed to avail himself of the opportunity to
submit an offer-in-compromise or propose an installment
- 14 -
agreement. The determination of the Appeals Office sustaining
the filing of the notice of Federal tax lien was not arbitrary,
capricious, or without sound basis in fact or law. We sustain
the determination.
C. Section 6673 Penalty
Petitioner was repeatedly warned that section 6673 provides
for a penalty, not in excess of $25,000, whenever it appears to
the Tax Court that proceedings before it have been instituted or
maintained primarily for delay or the taxpayer’s position is
frivolous or groundless. Indeed, in Enax v. Commissioner, T.C.
Memo. 2008-116, the Court imposed a $2,500 penalty on petitioner
for making frivolous arguments challenging the levy to collect
the tax liabilities at issue in this lien case. That sanction
did not deter petitioner, and he later raised additional
frivolous tax-protester arguments in this case in his response to
the motion at hand filed with the Court. Petitioner’s history of
making frivolous and groundless claims for the obvious purpose of
delay justifies a penalty. We will impose a penalty of $5,000.
Where a taxpayer pursues proceedings in this Court, as petitioner
does, merely as a continuation of his refusal to acknowledge and
satisfy his tax obligations, his pro se status does not excuse
his actions.
- 15 -
To reflect the foregoing,
An appropriate order and
decision will be entered.