T.C. Memo. 2010-56
UNITED STATES TAX COURT
KENNY A. PEARCE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19796-07L. Filed March 23, 2010.
Kenny A. Pearce, pro se.
William F. Castor, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
THORNTON, Judge: Pursuant to section 6330(d), petitioner
seeks judicial review of respondent’s determination to proceed
with a proposed levy to collect petitioner’s unpaid Federal
income tax liability for 2000.1 The issues for decision are:
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code.
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(1) Whether respondent is prohibited from making the proposed
levy under section 6331(k)(2) because of a pending offer by
petitioner for an installment agreement; and (2) whether
respondent abused his discretion in rejecting an installment
agreement that petitioner offered during the collection due
process hearing (CDP hearing).
FINDINGS OF FACT
On November 18, 2005, petitioner’s representative submitted
Form 9465, Installment Agreement Request, offering an installment
agreement to pay $1,500 per month toward petitioner’s Federal
income tax liabilities for 1996 and 1998 through 2004. By letter
dated March 21, 2006, respondent’s revenue officer informed
petitioner’s representative that the installment agreement offer
had been denied and that he had 30 days to appeal the denial by
scheduling a conference with the revenue officer’s group manager
(the manager). The letter also stated that additional
information was needed “to continue in the financial review”.
In a letter dated April 18, 2006, petitioner’s
representative requested an appeal through respondent’s
Collection Appeals Program (CAP). On April 20, 2006, the revenue
officer spoke with petitioner’s representative, advised him that
he needed to schedule a conference with the manager, and advised
him that respondent would provide information concerning the
amounts and conditions of an acceptable installment agreement
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only if petitioner provided sufficient information to make such a
determination.
On April 24, 2006, the manager spoke with petitioner’s
representative, who indicated that he wanted more time to discuss
an acceptable installment agreement amount with the revenue
officer. By letter dated April 24, 2006, petitioner’s
representative withdrew the CAP request, stating that he would
first meet with the revenue officer and would then renew his CAP
request if they could not reach agreement.
On May 8, 2006, petitioner’s representative spoke with the
revenue officer to learn what she might consider to be an
acceptable amount for an installment agreement. The revenue
officer indicated that she was still reviewing petitioner’s bank
statements and other financial information and could not yet
provide an acceptable amount. By letter dated June 7, 2006,
petitioner’s representative provided the revenue officer with
some additional bank statements and indicated a desire to “move
forward with the CAP process and/or conclude an Installment
Agreement.”
On April 4, 2007, respondent sent petitioner a Letter 1058,
Final Notice--Notice of Intent to Levy and Notice of Your Right
to a Hearing, with respect to his 2000 Federal income tax
liability. In response, on April 24, 2007, petitioner’s
representative submitted Form 12153, Request for a Collection Due
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Process or Equivalent Hearing, indicating that petitioner
intended to make an installment agreement offer and that he
disagreed with the proposed levy because “A prior Installment
Agreement is still pending.”
On July 11, 2007, respondent’s settlement officer held a CDP
hearing with petitioner’s representative. The settlement officer
concluded that petitioner’s previous installment agreement offer
was no longer pending after April 24, 2006, when petitioner’s
representative withdrew the CAP request. The settlement officer
stated that he could consider collection alternatives only if
petitioner were in compliance with filing requirements and the
financial information supported a proposal. The settlement
officer stated that he would consider giving petitioner time to
file his delinquent 1997 Form 1040, U.S. Individual Income Tax
Return, if they could reach a resolution on a collection
alternative. Petitioner’s representative indicated that
petitioner still wanted an installment agreement and thought that
$3,000 per month might be an appropriate amount. The parties
agreed, however, that the financial information then available
was insufficient to determine petitioner’s ability to pay.
Accordingly, the settlement officer was unable to recommend an
installment agreement of $3,000 per month. Petitioner’s
representative had no other proposal.
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On August 6, 2007, respondent issued a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 (notice of determination), with respect to
petitioner’s 2000 tax year, sustaining the proposed levy. In the
notice of determination respondent determined that no installment
agreement offer was pending when the notice of intent to levy was
issued and that an installment agreement was not appropriate
because petitioner had failed to provide documentation needed to
determine his ability to pay and had failed to file his 1997 Form
1040. Petitioner, residing in Arkansas, petitioned this Court
for review.
OPINION
A. Collection Procedures
Section 6330 requires the Secretary to furnish a person
notice and opportunity for a hearing before making a levy on the
person’s property. At the hearing the person may raise any
relevant issue relating to the unpaid tax or proposed levy,
including spousal defenses, challenges to the appropriateness of
the collection action, and offers of collection alternatives.
Sec. 6330(c)(2)(A). Once the Commissioner’s Appeals Office
issues a notice of determination, the person may seek judicial
review in this Court. Sec. 6330(d)(1).
Because petitioner has not challenged his underlying tax
liability, our review is for abuse of discretion. Sego v.
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Commissioner, 114 T.C. 604, 610 (2000). Under this standard of
review, the question is whether respondent’s determination was
arbitrary, capricious, or without sound basis in fact or law.
See, e.g., Murphy v. Commissioner, 125 T.C. 301, 320 (2005),
affd. 469 F.3d 27 (1st Cir. 2006).
In his petition, petitioner assigns as error: (1) That the
notice of intent to levy was improper because petitioner had made
an offer for an installment agreement that was still pending when
respondent issued the notice; and (2) respondent improperly
denied petitioner’s request for an installment agreement in the
CDP hearing.
B. Pendency of Installment Agreement Offer
The Internal Revenue Service (IRS) generally may not levy on
the property of a person who has pending an offer for an
installment agreement with respect to the unpaid tax. Sec.
6331(k)(2)(A). “A proposed installment agreement becomes pending
when it is accepted for processing.” Sec. 301.6331-4(a)(2),
Proced. & Admin. Regs. “The proposed installment agreement
remains pending until the IRS accepts the proposal, the IRS
notifies the taxpayer that the proposal has been rejected, or the
proposal is withdrawn by the taxpayer.” Id. If the IRS rejects
the offer, the prohibition against levy continues for another 30
days unless the person files an appeal with respondent’s Office
of Appeals, in which case the prohibition continues during the
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pendency of the appeal. Sec. 6331(k)(2)(B); sec. 301.6331-
4(a)(1), Proced. & Admin. Regs. If the IRS rejects a proposed
installment agreement and within 30 days the taxpayer makes a
good-faith revision of it, the prohibition on levy applies while
the revised proposal is pending. Sec. 301.6331-4(a)(3), Proced.
& Admin. Regs.
On November 18, 2005, petitioner, through his
representative, made an offer for an installment agreement to pay
his outstanding tax liabilities, including his 2000 tax
liability. By letter dated March 21, 2006, the revenue officer
formally informed petitioner’s representative that the offer had
been rejected. Petitioner nevertheless alleges that an
installment agreement offer was pending as of April 4, 2007, the
date the notice of intent to levy was issued with respect to his
2000 liability.2
Petitioner has not filed a brief and has otherwise done
little to help the Court understand his position. As best we
understand it, petitioner believes that on April 24, 2006, the
2
As a threshold matter, it might be questioned whether sec.
6331(k)(2) bars the IRS from issuing a notice of intent to levy,
as opposed to actually making a levy, during the pendency of an
installment agreement offer. Petitioner’s contentions assume
that it does, and respondent has not expressly argued otherwise.
Because we conclude that there was no installment agreement offer
pending either when respondent issued the notice of intent to
levy or when he made his final determination to proceed with the
proposed levy, we need not and do not give this issue further
consideration.
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IRS effectively rescinded its March 21, 2006, denial of
petitioner’s installment agreement offer by acknowledging that
petitioner’s November 18, 2005, offer remained pending. The
record does not support this position. The record indicates that
by letter dated April 24, 2006, petitioner’s representative
withdrew his request for a CAP appeal, indicating that he wished
to meet with the revenue officer, ostensibly to discuss with her
what might be an acceptable installment agreement amount. In
fact, petitioner’s representative and the revenue officer had
further communications but were unable to reach agreement on an
installment agreement. Insofar as the record reveals, these
discussions did not result either in petitioner’s making a good-
faith revision of his November 18, 2005, offer or in the revenue
officer’s making an offer that might be considered to have been
pending when either the notice of intent to levy or the notice of
determination was issued.
We further conclude that no appeal of the rejected
installment agreement offer was pending when respondent issued
either the notice of intent to levy or the notice of
determination. In her March 21, 2006, letter rejecting
petitioner’s installment offer, the revenue officer advised
petitioner that he had 30 days to appeal by scheduling a
conference with her manager. Although petitioner’s
representative requested an appeal in his April 18, 2006, letter,
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he withdrew the request in his April 24, 2006, letter. Insofar
as the record reveals, he never filed a new request for an
appeal, much less within the 30-day deadline set forth in the
revenue officer’s March 21, 2006, letter.
Petitioner’s representative informally made a new offer for
an installment agreement during the CDP hearing. As discussed
below, however, the settlement officer properly rejected it
before issuing the notice of determination.
In sum, we conclude that there was no offer for an
installment agreement pending when respondent issued the notice
of intent to levy or the notice of determination.
C. Installment Agreement Offer Proposed During CDP Hearing
During the CDP hearing on July 11, 2007, petitioner’s
representative proposed a new installment agreement. The
settlement officer rejected it partly because petitioner failed
to provide documentation necessary to determine his ability to
pay. Although petitioner asserts in his petition that he
cooperated with the IRS in “every material respect”, the record
does not support this assertion. We conclude that the settlement
officer did not abuse his discretion in rejecting the proposed
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installment agreement.3 See Orum v. Commissioner, 123 T.C. 1, 13
(2004), affd. 412 F.3d 819 (7th Cir. 2005).
To reflect the foregoing,
Decision will be entered
for respondent.
3
As an additional ground for rejecting the proposed
installment agreement, the notice of determination cites
petitioner’s failure to file his 1997 Federal income tax return.
Petitioner attacks this determination on various grounds, none of
which we find to be well founded. In any event, because we
sustain respondent’s determination on other grounds, it is
unnecessary to address this issue further.