T.C. Summary Opinion 2010-24
UNITED STATES TAX COURT
WAYNE J. CONSTANTINE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27172-07S. Filed March 2, 2010.
Wayne J. Constantine, pro se.
Russell F. Kurdys, for respondent.
ARMEN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect when the petition was filed.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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other court, and this opinion shall not be treated as precedent
for any other case.
The instant case arises from a petition for judicial review
filed in response to a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 (notice of
determination). The issue presented is whether respondent may
proceed with the collection action as so determined. Before the
Court now is respondent’s Motion For Summary Judgment And To
Impose a Penalty Under I.R.C. Section 6673.
Background
Petitioner resided in the Commonwealth of Pennsylvania when
the petition was filed.
Petitioner’s Income Tax Liability for 2003
Petitioner did not file a Federal income tax return for
2003. Respondent generated a Substitute for Return pursuant to
section 6020(b) and, consistent with deficiency procedures,
assessed the tax due. See secs. 6212, 6213.
Final Notice of Intent to Levy
On April 2, 2007, respondent issued a Final Notice--Notice
of Intent to Levy and Notice of Your Right to a Hearing. See
sec. 6330(a).
On May 2, 2007, petitioner timely submitted a Form 12153,
Request for a Collection Due Process or Equivalent Hearing. On
the Form 12153 petitioner indicated the reason for disagreement
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with the proposed levy as “see attached pages”, but no additional
pages were attached. The Form 12153 also requested the hearing
to be a face-to-face hearing.
Administrative Developments
A settlement officer from respondent’s Appeals Office was
assigned to petitioner’s collection case. In a letter dated
September 4, 2007, the settlement officer offered petitioner a
telephone hearing on September 25, 2007. The settlement officer
also afforded petitioner the opportunity for a correspondence
conference and requested that petitioner submit financial
information so that the settlement officer could consider
collection alternatives. Petitioner did not submit the financial
information, nor did he call for the telephone hearing on
September 25, 2007.
On October 26, 2007, respondent’s Appeals Office issued a
notice of determination sustaining respondent’s proposed levy.
The notice of determination included a warning that should
petitioner petition this Court, he might be subject to a sanction
for instituting or maintaining an action primarily for delay or
for taking a position that is frivolous or groundless, citing as
precedent Pierson v. Commissioner, 115 T.C. 576 (2000).
On the basis of that notice, petitioner petitioned this
Court, alleging that the levy action was “illegal” because “no
notice of lien was ever filed” and that respondent is without
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authority to collect Federal income taxes “because their Pocket
Commission denies said authority.”
On October 2, 2008, respondent filed a Motion To Remand this
case back to respondent’s Appeals Office so that petitioner could
have the face-to-face hearing he had requested on the Form 12153.
By Order dated October 20, 2008, the Court granted respondent’s
Motion To Remand and ordered the parties to submit status reports
by January 21, 2009. The Court also ordered that the face-to-
face hearing be conducted by an Appeals officer (or settlement
officer) with no prior involvement in the case.
On November 6, 2008, a second settlement officer sent
petitioner a letter scheduling a face-to-face conference on
December 4, 2008. Petitioner and the settlement officer met at
the appointed time and petitioner presented only frivolous
arguments, including challenging the Commissioner’s authority to
make Federal income tax assessments.
On December 12, 2008, petitioner telephoned the settlement
officer to request additional information regarding collection
alternatives. Later that same day, the settlement officer sent
petitioner a letter listing collection alternatives and stating
that before respondent could consider a collection alternative,
petitioner must be in compliance with Federal tax laws by filing
all required delinquent tax returns and submitting a Form 433-A,
Collection Information Statement for Wage Earners and Self-
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Employed Individuals. With the letter the settlement officer
included a Form 433-A and a booklet describing offers-in-
compromise.
By letter dated December 27, 2008, petitioner requested that
the settlement officer place him in currently not collectible
status but did not submit the Form 433-A or file the requisite
delinquent tax returns.
On January 14, 2009, respondent’s Appeals Office issued a
Supplemental Notice of Determination Concerning Collection Action
Under Section 6330 (supplemental notice of determination)
sustaining the proposed levy. The supplemental notice of
determination stated that petitioner is not eligible for a
collection alternative because he had failed to provide the
necessary financial information statements and has not filed tax
returns for 2004, 2005, 2006, and 2007.
Respondent’s Motion for Summary Judgment
On September 22, 2009, respondent filed the Motion For
Summary Judgment And To Impose A Penalty Under I.R.C. Section
6673 that is presently before the Court.
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Hearing on Respondent’s Motion for Summary Judgment
The Court calendared respondent’s motion for hearing on
November 17, 2009, in Pittsburgh, Pennsylvania. Both parties
appeared and were heard.
At the hearing petitioner stated that he had filed tax
returns for 2003, 2004, 2005, 2006, 2007, and 2008 in August 2009
and had submitted an offer-in-compromise on September 15, 2009.
Petitioner did not bring copies of the filed tax returns or offer
in compromise to the hearing. At that time respondent indicated
that his records did not reflect the filing of the tax returns
and that the offer in compromise had been received but was not
processable because of the present litigation. The Court
adjourned the hearing until the following morning to give
petitioner time to gather the returns and present them to the
Court.
The next morning, November 18, 2009, the Court recalled
respondent’s motion for hearing. At that time petitioner
presented copies of Federal income tax returns for 2003, 2004,
2005, 2006, 2007, and 2008, which he repeated had been filed in
August 2009. The returns appeared to be processable (as opposed
to “zero” returns) and showed an amount due for each year.
Counsel for respondent admitted that the 2007 and 2008 returns
were reflected on petitioner’s account transcripts for those
years; however, the transcripts for 2003 through 2006 did not
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reflect that returns were filed. Because respondent had
generated substitutes for return for 2003 through 2006, a tax
return subsequently filed by a taxpayer is handled differently
than a subsequently filed tax return for years in which there was
not a substitute for return, as in 2007 and 2008.
In addition to the tax returns, petitioner presented copies
of a completed Form 656, Offer in Compromise, and a completed
Form 433-A, which he had submitted to respondent on September 15,
2009. Petitioner also explained that he had started having
Federal income tax withheld from his paychecks in April 2009.
Discussion
A. Summary Judgment
Summary judgment is intended to expedite litigation and
avoid unnecessary 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 in
controversy “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(a) and (b).
After carefully reviewing the record, we are satisfied that
there is no genuine issue as to any material fact, and a decision
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may be rendered as a matter of law. Accordingly, we shall grant
respondent’s motion insofar as it pertains to summary judgment.
B. Respondent’s Proposed Levy
Section 6330 generally provides that the Commissioner cannot
proceed with collection by levy until the taxpayer has been given
notice and the opportunity for an administrative review of the
matter (in the form of an Appeals Office hearing) and, if
dissatisfied, with judicial review of the administrative
determination. See Davis v. Commissioner, 115 T.C. 35, 37
(2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000).
Hearings conducted under section 6330 are informal
proceedings, not formal adjudications. Katz v. Commissioner, 115
T.C. 329, 337 (2000); Davis v. Commissioner, supra at 41.
Taxpayers are generally entitled to be offered a face-to-face
hearing at the Appeals Office nearest their residence. However,
a face-to-face meeting is not invariably required, and the
hearing may be conducted by telephone or by correspondence. Katz
v. Commissioner, supra at 337-338; Dorra v. Commissioner, T.C.
Memo. 2004-16; sec. 301.6330-1(d)(2), Q&A-D6 and -D7, Proced. &
Admin. Regs. Furthermore, there is no requirement that a face-
to-face hearing must be offered to a taxpayer who merely wishes
to pursue frivolous arguments. Lunsford v. Commissioner, 117
T.C. 183, 189 (2001); Ho v. Commissioner, T.C. Memo. 2006-41.
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Section 6330(c) prescribes the matters that a taxpayer may
raise at an Appeals Office hearing. In sum, section 6330(c)
provides that a taxpayer may raise collection issues such as
spousal defenses, the appropriateness of the Commissioner’s
intended collection action, and possible alternative means of
collection. Section 6330(c)(2)(B) provides that the existence
and amount of the underlying tax liability may be contested at an
Appeals Office hearing only if the person did not receive a
notice of deficiency for the tax in question or did not otherwise
have an earlier opportunity to dispute the tax liability. See
Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v.
Commissioner, supra at 180-181. It is well settled that where
the validity of the underlying tax liability is properly at issue
in a collection review proceeding, the Court will review the
matter on a de novo basis. Goza v. Commissioner, supra at
181-182. Section 6330(c)(2)(B) bars petitioner from challenging
the existence or amount of his underlying tax liability in this
collection review proceeding because he previously had the
opportunity to dispute the determined deficiency. See Nestor v.
Commissioner, 118 T.C. 162, 165-166 (2002); Thomas v.
Commissioner, T.C. Memo. 2003-231.2
2
Even if petitioner did not receive a notice of
deficiency, he did not challenge the existence or amount of the
underlying tax liability at the Appeals hearing but made only
frivolous arguments.
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Where the validity of the underlying tax liability is not
properly at issue, the Court will review the Commissioner’s
administrative determination for abuse of discretion. Goza v.
Commissioner, supra at 181-182. The Court has described the
abuse of discretion standard as meaning “arbitrary, capricious,
or without sound basis in fact or law.” Giamelli v.
Commissioner, 129 T.C. 107, 111 (2007) (citing Woodral v.
Commissioner, 112 T.C. 19, 23 (1999)). In reviewing for abuse of
discretion, we generally consider “only arguments, issues, and
other matter that were raised at the collection hearing or
otherwise brought to the attention of the Appeals Office.”
Magana v. Commissioner, 118 T.C. 488, 493 (2002). Although
special circumstances might cause us to depart from this
approach, we are unable to discern any such circumstances in the
present case.
Petitioner was given the opportunity for an administrative
hearing on two occasions. By letter dated September 4, 2007, the
first settlement officer offered petitioner a telephone hearing
on September 25, 2007. Additionally, the letter offered
petitioner the opportunity to present his information through
correspondence. Petitioner did not call the first settlement
officer at the appointed time on September 25, 2007, nor did
petitioner submit any correspondence to the settlement officer.
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Shortly thereafter respondent’s Appeals Office issued the notice
of determination.
The second occasion arose when petitioner’s case was
remanded back to the Appeals Office pursuant to respondent’s
motion for a second administrative hearing. This time petitioner
participated in a face-to-face hearing on December 4, 2008. At
that hearing petitioner made only frivolous arguments, and only
afterward did petitioner request a collection alternative, i.e.,
to be placed in currently not collectible status. Petitioner’s
request was not accompanied by the requisite financial statements
and, at that time, petitioner had not filed tax returns for 2004
through 2007. On January 14, 2009, the second settlement officer
issued the supplemental notice of determination stating that
petitioner was not eligible for a collection alternative because
he did not submit financial information and was not in
compliance. Courts have consistently held that a determination
that a taxpayer is not entitled to a collection alternative does
not constitute an abuse of discretion if the taxpayer did not
provide financial information during the administrative hearing
and was not currently in compliance with Federal tax laws, i.e.,
had not filed all required tax returns. E.g. Olsen v. United
States, 414 F.3d 144 (1st Cir. 2005) (no abuse of discretion in
rejecting an offer-in-compromise when the taxpayer failed to
provide financial information during the administrative hearing);
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Willis v. Commissioner, T.C. Memo. 2003-302 (no abuse of
discretion because the taxpayer failed to provide sufficient
financial documentation); Moorhous v. Commissioner, T.C. Memo.
2003-183 (no abuse of discretion because current financial
information was not provided by the taxpayer during the
administrative hearing); cf. Vinatieri v. Commissioner, 133 T.C.
__ (2009) (release of levy required when the taxpayer
demonstrates financial hardship despite noncompliance with filing
required returns).
In view of the foregoing, respondent’s motion shall be
granted insofar as it pertains to summary judgment.
C. Section 6673 Penalty
We turn now to that part of respondent’s motion that
requests the imposition of a penalty on petitioner under section
6673.
As relevant herein, section 6673(a)(1) authorizes the Tax
Court to require a taxpayer to pay to the United States a penalty
not in excess of $25,000 whenever it appears that proceedings
have been instituted or maintained by the taxpayer primarily for
delay or that the taxpayer’s position in such proceeding is
frivolous or groundless. The Court has indicated its willingness
to impose such penalty in lien and levy cases, Pierson v.
Commissioner, 115 T.C. at 580-581, and has in fact imposed a
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penalty in many such cases, e.g., Cipolla v. Commissioner, T.C.
Memo. 2004-6.
We are inclined to think that petitioner commenced the
present case primarily for delay given the meritless arguments in
his petition and in his statements at the December 4, 2008
hearing. However, petitioner has since reformed his ways by
filing processable tax returns, having Federal income tax
withheld from his paychecks, and indicating that he now agrees
that he is subject to Federal income tax.3 Because petitioner
changed his position since instituting these proceedings we shall
not impose a penalty under section 6673.
As a result, we shall deny respondent’s motion insofar as it
pertains to imposition of a penalty under section 6673.
Conclusion
We have considered all of the arguments made by petitioner,
and, to the extent that we have not specifically addressed them,
we conclude that they are unpersuasive.
3
At the hearing petitioner stated:
Your Honor, the only thing I can say is I made a
mistake. I’m just looking for a second chance to
correct things and just get on with my life. Like I
said, the only I guess excuse I have is I should have
read things for myself instead of relying on others.
* * * I should have been paying from all those years.
Like I said, I just made a mistake. There’s not much
more I can say other than that.
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To reflect the foregoing,
An appropriate order
and decision will
be entered granting
respondent’s motion as it
pertains to summary judgment
and denying it as it pertains
to imposition of a penalty
under section 6673.