T.C. Summary Opinion 2010-43
UNITED STATES TAX COURT
PAMELA L. JOHNSON-THOMAS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4330-08S. Filed April 13, 2010.
Pamela L. Johnson-Thomas, pro se.
Ronald S. Collins, Jr., for respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time the petition was filed. Pursuant to section
7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent
for any other case. Unless otherwise indicated, subsequent
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section references are to the Internal Revenue Code, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
On January 18, 2008, respondent issued a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 (notice of determination). Respondent issued a
supplemental notice of determination on February 12, 2009. The
notice of determination and supplemental notice of determination
disallowed petitioner’s claim for interest abatement with respect
to her unpaid 1988 and 1989 Federal income tax liabilities
(income tax liabilities). The issues for decision are whether
respondent abused his discretion in denying petitioner’s request
for interest abatement under section 6404(e) and sustaining the
proposed collection action with respect to petitioner’s income
tax liabilities.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by reference. When petitioner filed her
petition, she resided in Pennsylvania.
Petitioner did not timely file a return for 1988 or 1989.
She filed her 1988 Federal income tax return on June 1, 1990, and
her 1989 Federal income tax return on July 7, 1995. She reported
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a tax liability of $2,479 for 1988 and $4691 for 1989 but did not
remit payment with her returns.
I. Bankruptcy
Petitioner filed for bankruptcy during the 1990s on two
separate occasions. On July 3, 1991, she filed her first
petition for bankruptcy, but it was dismissed on October 26,
1992. On June 17, 1993, she filed her second petition, and on
December 2, 1996, the bankruptcy court dismissed the petition due
to an apparent misfiling. Neither bankruptcy case resulted in
the discharge of her income tax liabilities.
II. Installment Agreement
In 19932 petitioner entered into an installment agreement to
pay her unpaid Federal payroll tax liability for her 1988 Form
940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
1
At trial petitioner contested this amount. She offered
what purported to be the second page of a 1989 Federal income tax
return indicating that she reported zero tax due for 1989.
However, the validity of the copy of the “return” she provided at
trial is highly questionable. The Court finds that petitioner
reported a tax of $469 as shown in the certified Form 4340,
Certificate of Assessments, Payments, and Other Specified
Matters. In addition, petitioner failed to contest her 1989
underlying tax liability at the collection due process hearing
and is foreclosed from doing so here. A taxpayer must raise an
issue at a collection due process hearing to preserve it for this
Court’s consideration. Giamelli v. Commissioner, 129 T.C. 107,
115 (2007); sec. 301.6330-1(f)(2), Q&A-F5, Proced. & Admin. Regs.
2
The record is unclear as to when petitioner entered into
the installment agreement. As early as Jan. 1, 1993, petitioner
made a payment pursuant to an installment agreement for her 1988
business tax liability. The Court hereinafter refers to the
installment agreement as entered into in 1993.
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(business tax liability). Petitioner continued to make payments
under this installment agreement and eventually satisfied her
business tax liability in 1999 or 2000.
III. Personal Income Tax Liabilities
Some time before 2000, petitioner realized that her
outstanding income tax liabilities remained unpaid.3 Petitioner
contacted the Internal Revenue Service (IRS) to determine the
amount of her outstanding liabilities so that she could begin
making payments. She alleges that she was prevented from making
payments because each time she contacted the IRS, the IRS was
unable to find her account.4
On October 2, 2001, petitioner filed a Form 911, Application
for Taxpayer Assistance Order, requesting assistance from the IRS
Taxpayer Advocate Service (TAS).5 TAS advised petitioner to file
an offer-in-compromise (offer) to settle her 1988 and 1989 income
tax liabilities. Petitioner filed two offers with respondent,
3
Form 4340 indicates that on Jan. 1, 2000, petitioner
entered into an installment agreement for her unpaid 1988 and
1989 Federal income tax liabilities. The Form 4340 shows no
payments pursuant to this installment agreement and a reversal of
the installment agreement more than 2 years later. The parties
made no reference to the existence of this installment agreement.
4
When petitioner filed her 1988 and 1989 returns, she filed
under her former name, Butts. In 1992 her name was changed
because of a change in marital status.
5
At this time petitioner was aware of the purported problem
associated with finding her account; i.e., the requirement that
an asterisk follow her Social Security number.
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but respondent rejected both offers. She then requested and
respondent denied an abatement of interest associated with her
income tax liabilities.
On April 26, 2005, respondent issued a Final Notice, Notice
of Intent to Levy and Notice of Your Right to a Hearing (Final
Notice). Petitioner timely filed Form 12153, Request for a
Collection Due Process Hearing, requesting a face-to-face
hearing. Respondent received petitioner’s request and advised
petitioner that her request was being processed. Respondent then
transferred petitioner’s case to the Philadelphia Appeals Office
on July 20, 2005.
When petitioner’s case arrived at the Philadelphia Appeals
Office on August 22, 2007, respondent assigned her case to
settlement officer Robert Richards (SO Richards). SO Richards
met with petitioner on December 12, 2007, and discussed
petitioner’s interest abatement request. Petitioner did not
dispute her underlying tax liabilities and did not request or
present collection alternatives. Her only argument was directed
at the abatement of interest.
Respondent issued to petitioner a notice of determination
denying petitioner’s request for interest abatement and
sustaining the collection action. Petitioner timely filed a
petition with this Court contesting the determination.
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Discussion
Under section 6320(a) the Secretary is required to notify
the taxpayer in writing of the filing of a Federal tax lien and
inform the taxpayer of his right to a hearing. Section 6330(a)
similarly provides that no levy may be made on a taxpayer’s
property or right to property unless the Secretary notifies the
taxpayer in writing of his right to a hearing before the levy is
made. If the taxpayer requests a hearing under either section
6320 or 6330, a hearing shall be held before an impartial officer
or employee of the IRS Office of Appeals. Secs. 6320(b)(1), (3),
6330(b)(1), (3). At the hearing a taxpayer may raise any
relevant issue, including appropriate spousal defenses,
challenges to the appropriateness of the collection action, and
collection alternatives. Sec. 6330(c)(2)(A). A taxpayer is
precluded from contesting the existence or amount of the
underlying tax liability unless the taxpayer did not receive a
notice of deficiency for the tax in question or did not otherwise
have an opportunity to dispute the tax liability. Sec.
6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604, 609
(2000).
Following a hearing, the Appeals Office must determine
whether the Secretary may proceed with the proposed collection
action. In so doing, the Appeals Office is required to consider:
(1) The verification presented by the Secretary that the
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requirements of applicable law and administrative procedure have
been met; (2) the relevant issues raised by the taxpayer; and (3)
whether the proposed collection action appropriately balances the
need for efficient collection of taxes with a taxpayer’s concerns
regarding the intrusiveness of the proposed collection action.
Sec. 6330(c)(3).
Where a taxpayer makes a request for an abatement of
interest in an Appeals hearing, the Court has jurisdiction to
review the determination of the Appeals Office pursuant to
section 6330(d)(1). See sec. 6404(e); Katz v. Commissioner, 115
T.C. 329, 340-341 (2000).
For tax years beginning before July 31, 1996, section
6404(e)(1) provided in pertinent part that the Secretary may
abate the assessment of interest on: (1) Any deficiency
attributable to any error or delay by an officer or employee of
the IRS in performing a ministerial act;6 or (2) any payment of
any tax described in section 6212(a) to the extent that any error
or delay in such payment is attributable to such officer or
employee being erroneous or dilatory in performing a ministerial
act. A ministerial act is a procedural or mechanical act that
does not involve the exercise of judgment or discretion by the
6
Petitioner does not have a deficiency, but rather an
underpayment of tax. See secs. 6211, 6404(e)(1)(A). Therefore,
petitioner’s interest abatement claim will be determined under
sec. 6404(e)(1)(B). See secs. 6211, 6212(a).
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Commissioner. Sec. 301.6404-2T(b)(1), Temporary Proced. & Admin.
Regs., 52 Fed. Reg. 30163 (Aug. 13, 1987). Section 6404(e)
affords a taxpayer relief only if no significant aspect of the
error or delay can be attributed to the taxpayer and only after
the Commissioner has contacted the taxpayer in writing about the
deficiency or payment in question. H. Rept. 99-426, at 844
(1985), 1986-3 C.B. (Vol. 2) 1, 844 (“This provision does not
therefore permit the abatement of interest for the period of time
between the date the taxpayer files a return and the date the IRS
commences an audit, regardless of the length of that time
period.”).
The Commissioner’s authority to abate interest involves the
exercise of discretion, and we must give due deference to the
Commissioner’s exercise of discretion. See sec. 6404(h); Woodral
v. Commissioner, 112 T.C. 19, 23 (1999); Mailman v. Commissioner,
91 T.C. 1079, 1082 (1988). To prevail, a taxpayer must prove
that the Commissioner abused his discretion by exercising it
arbitrarily, capriciously, or without sound basis in fact or law.
See sec. 6404(h)(1); Rule 142(a); Woodral v. Commissioner, supra
at 23; Mailman v. Commissioner, supra at 1084. The mere passage
of time does not establish error or delay in performing a
ministerial act. See Cosgriff v. Commissioner, T.C. Memo. 2000-
241 (citing Lee v. Commissioner, 113 T.C. 145, 150 (1999)).
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The Court discusses below the relevant periods in
determining whether respondent abused his discretion in refusing
to abate interest accruals on petitioner’s income tax
liabilities.7
I. January 1, 1997 Through October 1, 2001
Petitioner alleges that after her second bankruptcy case was
dismissed, she entered into an installment agreement in January
1997 with the IRS and requested that the installment agreement
include both her income tax and business tax liabilities.
Although petitioner alleges that respondent’s failure to
include all her liabilities in the alleged 1997 installment
agreement contributed to a delay in payment, there is no credible
evidence beyond petitioner’s testimony that she entered into an
installment agreement in 1997. The record indicates that
petitioner entered into only one installment agreement, the 1993
installment agreement, solely in satisfaction of her business tax
liability. After her second bankruptcy case was dismissed in
7
The Court finds that respondent did not abuse his
discretion in refusing to abate interest between the time
petitioner filed her 1988 and 1989 returns and the time she
allegedly entered into an installment agreement in 1997.
Petitioner’s nonpayment of her income tax liabilities during this
time was due in substantial part to her own acts. She was in
bankruptcy for most of this time, she untimely filed both
returns, and she has failed to identify any ministerial act on
the part of the IRS that led to a delay in the payment of her
income tax liabilities.
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December 1996, petitioner had an opportunity but chose not to
make payments towards her income tax liabilities.
Petitioner further testified that around 2000 she began
receiving notices from the IRS addressing her with different
names regarding her 1988 and 1989 income tax liabilities.8
Petitioner alleges that she contacted the IRS to determine her
correct liability but that the IRS was unable to find her
account. Beyond testifying that the IRS was unable to find her
account, petitioner did not provide any further explanation of
the substance of her conversations with the IRS agents.
Specifically, petitioner did not clarify whether she explained
the full extent of her circumstances to the IRS agents, i.e.,
that she had filed the returns at issue using her former name,
that her name had subsequently changed because of a change in
marital status, and that she had received correspondence from the
IRS using different names. Accordingly, the Court is unable to
conclude that any delay in payment on petitioner’s account was
not due in significant part to petitioner’s own acts. See Urban
Redev. Corp. v. Commissioner, 294 F.2d 328, 332 (4th Cir. 1961)
(the Court may reject a taxpayer’s uncorroborated, self-serving
testimony), affg. 34 T.C. 845 (1960); Tokarski v. Commissioner,
8
At trial petitioner appeared confused as to why she would
receive correspondence from the IRS under different names. As
discussed supra, however, petitioner filed her 1988 and 1989
returns under her former name, Butts.
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87 T.C. 74, 77 (1986) (same). The Court finds that respondent
did not abuse his discretion in refusing to abate interest on
petitioner’s income tax liabilities from January 1, 1997, through
October 1, 2001.
II. October 2, 2001 Through April 25, 2005
On October 2, 2001, after discovering the alleged problem
associated with her account, petitioner filed a Form 911.
On August 27, 2002, and October 21, 2003, petitioner filed
offers with respondent; however, respondent rejected both offers.
After these unsuccessful attempts to settle her tax liabilities,
on September 21, 2004, petitioner requested that respondent abate
the accrued penalties and interest on her income tax liabilities.
On February 9, 2005, respondent granted petitioner’s request for
abatement of penalties but denied the interest abatement request.
Despite petitioner’s assertion that respondent’s delays
contributed to unnecessary interest accruals, the record includes
evidence to the contrary. From October 2, 2001, through April
25, 2005, the parties engaged in extensive communications
regarding petitioner’s 1988 and 1989 income tax liabilities
followed by petitioner’s pursuit of collection alternatives.
There is no evidence of an IRS error or delay in the performance
of a ministerial act. Accordingly, the Court finds that
respondent did not abuse his discretion in refusing to abate
interest from October 2, 2001, through April 25, 2005.
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III. April 26, 2005 Through August 22, 2007
On April 26, 2005, respondent issued a Final Notice to
petitioner for her 1988 and 1989 income tax liabilities. Upon
receiving it, petitioner timely filed a Form 12153, requesting a
face-to-face hearing. Respondent received petitioner’s request
and notified petitioner on May 12, 2005, that her hearing request
was being sent to Appeals for consideration.
When the IRS receives a Form 12153, the running of the
period of limitations on collection for the tax year at issue is
suspended. See secs. 6330(e), 6502. The IRS records the
suspension of the limitations period by posting the appropriate
codes to the taxpayer’s account. Respondent attempted to record
the suspension of the limitations period following receipt of
petitioner’s request for a hearing. The record indicates,
however, that when respondent attempted to post the codes to
petitioner’s account, the codes “went unpostable” for the 1988
and 1989 tax years. The unpostables seemed to prevent any
further action on petitioner’s request for a hearing. The
problem continued and was indicated on case activity records
until October 25, 2005. From October 26, 2005, through July 19,
2007, there is no indication that respondent was processing or
otherwise working on petitioner’s request for a hearing.9
9
On Aug. 20, 2007, the activity record indicated that
because of problems with unpostable TC 971 AC 069 and TC 520
(continued...)
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Finally on August 22, 2007, the Philadelphia Appeals Office
received petitioner’s hearing request and respondent assigned the
case to SO Richards.
For over two years petitioner’s hearing request was put on
hold as a result of respondent’s inability to post codes to
petitioner’s account. Although this contributed to a significant
delay in the processing of petitioner’s hearing request, there is
no indication that this delay caused petitioner to delay in
making payments. She was aware of her income tax liabilities and
chose to forgo making payments on her reported income tax
liabilities to pursue alternative avenues of relief. Therefore,
respondent’s refusal to abate interest during this time was not
an abuse of discretion.
In summary, respondent did not abuse his discretion in
refusing to abate interest, and the Court sustains respondent’s
determination in full. Additionally, because petitioner did not
present viable alternatives to collection, the Court finds that
respondent’s determination to sustain the intended collection
action was not an abuse of discretion. See Premium Serv. Corp.
v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir. 1975).
9
(...continued)
codes, the case was sent to the Kansas office for resolution.
When it was returned, the problem with unpostables remained, so
it was sent back to the Kansas office. The case remained in the
Kansas office for a year and a half. There is no indication as
to why the task of posting codes to petitioner’s account resulted
in such a delay in the processing of her Appeals request.
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To reflect the foregoing,
Decision will be entered
for respondent.