T.C. Memo. 2010-243
UNITED STATES TAX COURT
ASSURED SOURCE, INC., A MICHIGAN CORPORATION, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4658-09L. Filed November 2, 2010.
Joseph Falcone, for petitioner.
Rebecca M. Clark, for respondent.
MEMORANDUM OPINION
PARIS, Judge: On February 6, 2009, respondent mailed to
petitioner a Notice of Determination Concerning Collection
Action(s) Under Section 6320 and/or 6330 (notice of
determination) which sustained respondent’s proposed levy to
collect petitioner’s assessed liabilities for trust fund recovery
penalties for tax periods ending March 31, June 30, and September
- 2 -
30, 2007. The parties stipulate that the only issue for decision
is whether respondent abused his discretion by refusing to
consider collection alternatives during a collection due process
(CDP) hearing when petitioner was not in compliance with all of
its tax return filing requirements on the date of the CDP
hearing.
Background
This case has been submitted under Rule 122.1 The facts and
exhibits have been stipulated and are incorporated herein by
reference. At the time the petition was filed, petitioner’s
mailing address was in Troy, Michigan.
Petitioner, a holding company of several limited liability
companies that engaged in employee leasing, and the responsible
party in this case, is a Delaware corporation with its principal
place of business in Michigan. On February 19, 2008, respondent
sent to petitioner a Letter 1153, Trust Funds Recovery Penalty
Letter, informing petitioner of his intent to assess against it
trust fund recovery penalties under section 6672 because of its
failure to withhold and pay employment taxes of one of its
subsidiaries, Assured Source National, L.L.C. (ASN),2 for the
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
2
The Court notes that ASN was the employer in this case.
Petitioner is the responsible party for ASN.
- 3 -
first three quarters of 2007. The Letter 1153 gave petitioner 60
days to file a protest of the proposed assessments of the
penalties. Petitioner failed to file a protest, and the
penalties were assessed.
On August 12, 2008, respondent sent to petitioner a Final
Notice--Notice of Intent to Levy and Notice of Your Right to a
Hearing with respect to the assessed penalties. On September 10,
2008, petitioner timely filed a Form 12153, Request for a
Collection Due Process or Equivalent Hearing, in which it stated
that its liabilities for the penalties had been paid through
voluntary payments, it had submitted a request for abatement on
Form 843, Claim for Refund and Request for Abatement, and the
collection activity had been stayed.3
On October 21, 2008, the settlement officer (SO) sent to
petitioner a letter which scheduled a telephone CDP hearing and
also informed petitioner that it had to provide a Form 433-B,
Collection Information Statement for Businesses, if it wanted to
be considered for any collection alternatives. Petitioner was
also given an opportunity to identify and substantiate any
3
The record reflects that during or before September of
2009, petitioner voluntarily sent to the IRS 10 checks for
$20,000 each in partial payment of its outstanding trust fund
liabilities. However, as of October 2009, when the case was
submitted to the Court, the balance of the trust fund liability
for the tax period ending Mar. 31, 2007, was $12,142.72 plus
interest; for the tax period ending June 30, 2007, was
$296,552.47 plus interest; and for the tax period ending Sept.
31, 2007, was $228,717.18 plus interest.
- 4 -
payments of the penalty assessments and was offered a face-to-
face hearing. Petitioner submitted to the Internal Revenue
Service (IRS) a Form 843, Claim for Refund and Request for
Abatement; however, petitioner failed to submit the required bond
with that form. Consequently, respondent did not process the
claim.
On November 12, 2008, petitioner requested a postponement of
the CDP hearing as it was working on an installment agreement
with a revenue officer (RO). The SO sent petitioner a letter by
facsimile rescheduling the hearing for December 2, 2008, and
confirming her conversation with petitioner that if it could work
out an arrangement with the RO, petitioner would withdraw the
request for a CDP hearing. The letter also informed petitioner
that in order for the SO to consider any collection alternatives,
she needed, before the hearing, a copy of petitioner’s Form 1120,
U.S. Corporation Income Tax Return, for tax year 2007 and Form
433-B with all the required attachments such as bank and loan
statements.
On December 2, 2008, petitioner contacted the SO to request
another postponement of the CDP hearing because it was still
working with the RO on an installment agreement. The SO reminded
petitioner that by December 4, 2008, the date on which the
hearing was to take place, it had to provide the requested
financial information and a Form 1120 for tax year 2007;
- 5 -
otherwise, it would not be considered for collection
alternatives.
On December 4, 2008, a telephone CDP hearing was held
between the parties. However, petitioner had submitted neither
the requested financial information nor a Form 433-B to the SO by
that date. In addition, petitioner had yet to file a Form 1120
for tax year 2007.4
On February 6, 2009, respondent mailed to petitioner the
notice of determination upholding the proposed levy to collect
the penalty assessments for the tax periods at issue. Petitioner
timely filed a petition with this Court on February 26, 2009.
Discussion
A. Standard of Review
Under section 6331, if a person liable to pay any tax
neglects or refuses to pay the same within 10 days after notice
and demand, it shall be lawful for the Secretary to collect such
tax by levy upon all property and rights to property belonging to
such person. A taxpayer may appeal the proposed levy to the IRS
under section 6330 by requesting an administrative hearing. If
the hearing culminates in an adverse determination, the taxpayer
4
While petitioner’s Form 1120 for tax year 2007 was
originally due on Mar. 15, 2008, petitioner was granted an
extension to file it on or before Sept. 15, 2008. On Feb. 15,
2009, petitioner faxed an unsigned copy of the Form 1120 for tax
year 2007 to the SO. Petitioner did not file its Form 1120 for
tax year 2007, which showed no income tax due, until Apr. 23,
2009.
- 6 -
is afforded the opportunity for judicial review of the
determination in the Tax Court pursuant to section 6330(d).
Petitioner seeks review of respondent’s determination. Where the
validity of the underlying tax liability is properly at issue,
the Court will review the matter de novo. Davis v. Commissioner,
115 T.C. 35, 39 (2000). Where the underlying tax liability is
not properly at issue, the Court will review the Commissioner’s
administrative determination for abuse of discretion. Sego v.
Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114
T.C. 176, 181-182 (2000).
The Court has described review for “abuse of discretion” as
entailing an inquiry whether the determination is arbitrary,
capricious, clearly unlawful, or without sound basis in fact or
law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
B. Abuse of Discretion
Petitioner contends that respondent’s refusal to consider a
collection alternative because petitioner had not filed its 2007
income tax return was unreasonable and an abuse of discretion.
The IRS’ decision not to process an offer-in-compromise or other
proposed collection alternative from a taxpayer who has not filed
all required tax returns is generally not an abuse of discretion.
See Giamelli v. Commissioner, 129 T.C. 107, 111-112 (2007);
Collier v. Commissioner, T.C. Memo. 2004-171.
- 7 -
The parties stipulated that “the basis for denying the
collection alternatives was petitioner’s failure to comply with
the filing requirements.” The parties further stipulated that
“Petitioner failed to become compliant with its 1120 filings
during the [CDP] hearing.” The record reflects that during the
course of the hearing the SO repeatedly advised petitioner that
in order for collection alternatives to be considered, it had to
file its overdue corporate income tax return for tax year 2007,
which was due September 15, 2008, and submit on Form 433-B
sufficient financial information to permit its ability to pay the
trust fund penalty assessment to be evaluated. Petitioner,
however, failed to submit the Form 1120 for tax year 2007 until
April 23, 2009--more than 75 days after the issuance of the
notice of determination. See Murphy v. Commissioner, 125 T.C.
301, 314-315 (2005) (the dilatory submission of a tax return in
no respect supports petitioner’s claim that the SO abused her
discretion), affd. 469 F.3d 27 (1st Cir. 2006). Nor did
petitioner submit the requisite financial information to the SO.
Consequently, this Court finds that respondent did not abuse his
discretion by declining to entertain a collection alternative
during the hearing.
C. Balancing Test Under Section 6330(c)(3)(C)
On brief petitioner also contends that respondent abused his
discretion because the SO failed to engage in an analysis of
- 8 -
“whether any proposed collection action balances the need for the
efficient collection of taxes with the legitimate concern of the
* * * [taxpayer] that any collection action be no more intrusive
than necessary” under section 6330(c)(3)(C). IRS guidelines
require a taxpayer to be current with filing and payment
requirements to qualify for an installment agreement. Internal
Revenue Manual pt. 5.14.1.2(8)(F) (Sept. 26, 2008). The Court
has many times upheld, as within his discretion, the
Commissioner’s decisions not to process offers-in-compromise or
other proposed collection alternatives from taxpayers who have
not filed all required tax returns. See, e.g., Collier v.
Commissioner, supra; Londono v. Commissioner, T.C. Memo. 2003-99;
Ashley v. Commissioner, T.C. Memo. 2002-286. Petitioner has
offered no explanation for its delinquent filing of its
corporation income tax return for 2007. Despite being provided
with opportunities to do so, petitioner did not comply with the
SO’s requests to file that return and to submit the financial
information needed for the SO to entertain a reasonable
collection alternative. Because petitioner was not in compliance
with its filing requirements and submitted no financial
information, this Court finds that respondent did not abuse his
discretion in declining to consider collection alternatives, nor
- 9 -
in determining to proceed with the levy to collect petitioner’s
outstanding liabilities for trust fund assessments.
To reflect the foregoing,
Decision will be entered
for respondent.