T.C. Memo. 2011-57
UNITED STATES TAX COURT
JOHN CARLYLE BERKERY, SR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19070-09L. Filed March 9, 2011.
John Carlyle Berkery, Sr., pro se.
Jack T. Anagnostis, for respondent.
MEMORANDUM OPINION
WELLS, Judge: This case is before the Court on respondent’s
motion for summary judgment pursuant to Rule 121.1 We must
1
Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended, and Rule references
are to the Tax Court Rules of Practice and Procedure.
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decide whether respondent’s settlement officer abused her
discretion in sustaining a notice of Federal tax lien filing.
Background
Some of the facts and certain exhibits have been stipulated.
The stipulations of facts and accompanying exhibits are
incorporated in this opinion by reference and are found
accordingly.
At the time the petition was filed, petitioner resided in
Pennsylvania.
On April 11, 2007, petitioner filed a Federal income tax
return for his 2004 tax year, reporting a tax liability of
$3,258. The following day, on April 12, 2007, he filed a tax
return for his 2005 tax year, reporting a tax liability of
$3,712. Petitioner did not pay his tax liability for either
year. Respondent assessed petitioner’s tax liabilities for his
2004 and 2005 tax years on May 14, 2007. On June 18, 2007,
respondent sent notices and demands for payment of balances due
for petitioner’s tax years 2004 and 2005.
On October 29, 2007, petitioner received a call from an
employee in respondent’s Automated Collection System (ACS) unit.
As explained below, the parties disagree about what transpired
during the October 29, 2007, telephone call. During the ensuing
months, petitioner did not make any payments on his liabilities
for his 2004 and 2005 tax years.
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On March 20, 2009, respondent filed a Notice of Federal Tax
Lien (NFTL) with respect to petitioner’s 2004 and 2005 tax years.
During a telephone call on March 23, 2009, petitioner
entered into an installment agreement with respondent’s ACS unit
to pay $75 per month beginning April 12, 2009, and increasing to
$145 per month beginning April 12, 2010. At that time,
petitioner apparently was not aware that the NFTL had been filed,
and he contends that respondent’s employee told him that no lien
would be filed if he fulfilled the installment agreement.
The next day, March 24, 2009, respondent mailed petitioner a
Notice of Federal Tax Lien Filing and Your Right to a Hearing,
regarding the lien that had been filed on March 20. Petitioner
received the notice 2 days later, on March 26, 2009. On or about
April 2, 2009, petitioner requested a withdrawal of the NFTL by
submitting to respondent Form 12277, Application for Withdrawal
of Filed Form 668(Y), Notice of Federal Tax Lien. The filing of
the NFTL was upheld by Technical Services Advisor Bruce Clark
(Mr. Clark) in a letter dated April 13, 2009, stating that after
a review of petitioner’s file, Mr. Clark had determined that the
lien was not filed prematurely. The letter informed petitioner
that the lien had been filed before the March 23, 2009,
installment agreement and that, at that time, he was already in
default on a previously established installment agreement.
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The parties appear to disagree about whether petitioner had
ever entered into a previous installment agreement. Respondent
contends that petitioner had entered into an installment
agreement during his October 29, 2007, telephone conversation
with an employee in respondent’s ACS office. Petitioner admits
that he spoke with respondent’s employee on or about that date,
but he contends that he did not enter a formal installment
agreement and merely told her that he would do his best to pay as
soon as possible. The record does not contain any documentation
of the alleged October 29, 2007, installment agreement. However,
because the instant case is before us on respondent’s motion for
summary judgment, we are obliged to view all facts in the light
most favorable to the nonmoving party. See Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994). For purposes of the instant motion, we will assume
that petitioner never entered into an installment agreement
before the March 23, 2009, installment agreement.
On April 15, 2009, petitioner timely submitted Form 12153,
Request for a Collection Due Process or Equivalent Hearing. On
Form 12153 petitioner requested that the NFTL be withdrawn so
that he could refinance his home, and he requested that
respondent allow him to continue with the installment agreement
entered into on March 23 as a collection alternative instead of
imposing the lien.
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Petitioner made one payment on the installment agreement in
May 2009.
On June 17, 2009, respondent’s settlement officer Denise
Williams (Ms. Williams) sent petitioner a letter acknowledging
his request for a collection due process (CDP) hearing and
scheduling a telephone conference. In the letter, Ms. Williams
informed petitioner that the lien would be released after
petitioner paid the balances due for 2004 and 2005. Ms. Williams
also enclosed copies of Publications 783, Instructions on how to
apply for a Certificate of Discharge of Property From Federal Tax
Lien, and 784, How to Prepare an Application for a Certificate of
Subordination of Federal Tax Lien, which she thought would help
petitioner obtain financing for his home.
Ms. Williams conducted the CDP hearing by telephone on July
17, 2009. On his Form 12153 and during the hearing petitioner
contended that, because he had not entered into an installment
agreement on October 29, 2007, he could not be in default on that
agreement and he therefore should be given the opportunity to
meet the terms of the March 23, 2009, installment agreement
before respondent filed an NFTL. Petitioner also informed Ms.
Williams that the lien reduced his credit score by 100 points,
affecting his eligibility for a loan, and he told her that the
lien was “counter-productive to both * * * [respondent] and
myself [because] [i]t stops me from getting additional financing
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on my house.” After the hearing, respondent issued a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 dated July 30, 2009, sustaining the lien.
Discussion
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials and may be granted where
there is no genuine issue of material fact and a decision may be
rendered as a matter of law. Rule 121(a) and (b); Fla. Peach
Corp. v. Commissioner, 90 T.C. 678, 681 (1988). The moving party
bears the burden of proving that there is no genuine issue of
material fact, and factual inferences are viewed in the light
most favorable to the nonmoving party. Sundstrand Corp. v.
Commissioner, supra at 520. However, the party opposing summary
judgment must set forth specific facts that show a genuine issue
of material fact exists and may not rely merely on allegations or
denials in the pleadings. Rule 121(d).
Where the underlying tax liability is not in issue, we
review the determination of the Appeals Office for abuse of
discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000).
In reviewing for abuse of discretion, we will reject the
determination of the Appeals Office only if the determination was
arbitrary, capricious, or without sound basis in fact or law.
See Murphy v. Commissioner, 125 T.C. 301, 308 (2005), affd. 469
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F.3d 27 (1st Cir. 2006). Petitioner does not dispute the
underlying liabilities. Consequently, we review the
determination of the Appeals Office for abuse of discretion.
Where, as in the instant case, we review a settlement
officer’s determination to sustain the filing of an NFTL for
abuse of discretion, we review the reasoning underlying that
determination to decide whether it was arbitrary, capricious, or
without sound basis in fact or law. We do not substitute our
judgment for that of the settlement officer, and we do not decide
independently whether we believe the lien should be withdrawn.
See id. at 320.
Pursuant to section 6321, the Federal Government obtains a
lien against “all property and rights to property, whether real
or personal” of any person liable for Federal taxes upon demand
for payment and failure to pay. See Iannone v. Commissioner, 122
T.C. 287, 293 (2004). The lien arises automatically on the date
of assessment and persists until the tax liability is satisfied
or becomes unenforceable by reason of lapse of time. Sec. 6322;
Iannone v. Commissioner, supra at 293. The purpose of filing,
pursuant to section 6323, notice of the lien that arises under
section 6321 is to protect the Government’s interest in a
taxpayer’s property against the claims of other creditors.
Filing an NFTL validates the Government’s lien against a
subsequent purchaser, holder of a security interest, mechanic’s
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lienor, or judgment lien creditor. See sec. 6323(a); Stein v.
Commissioner, T.C. Memo. 2004-124; Lindsay v. Commissioner, T.C.
Memo. 2001-285, affd. 56 Fed. Appx. 800 (9th Cir. 2003).
If the Commissioner chooses to file an NFTL, he must provide
the taxpayer with written notice not more than 5 business days
after the filing, and he must advise taxpayer of the right to a
hearing before the Appeals Office. Sec. 6320(a). If the
taxpayer requests such a hearing, the Appeals Office must verify
that the requirements of any applicable law or administrative
procedure have been met. Secs. 6320(c), 6330(c)(1). The Appeals
officer must also determine whether the 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. Secs. 6320(c),
6330(c)(3). Finally, the Appeals officer must consider any
issues raised by the taxpayer at the hearing, including
appropriate spousal defenses, challenges to the appropriateness
of collection actions, and offers of collection alternatives such
as an installment agreement. Secs. 6320(c), 6330(c)(2) and (3).
Under certain circumstances, the Commissioner has the
discretion to withdraw an NFTL that has been filed. Section
6323(j)(1) provides:
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SEC. 6323(j). Withdrawal of Notice in Certain
Circumstances.--
(1) In general.--The Secretary may withdraw a
notice of a lien filed under this section and this
chapter shall be applied as if the withdrawn notice had
not been filed, if the Secretary determines that--
(A) the filing of such notice was premature
or otherwise not in accordance with administrative
procedures of the Secretary,
(B) the taxpayer has entered into an
agreement under section 6159 to satisfy the tax
liability for which the lien was imposed by means
of installment payments, unless such agreement
provides otherwise,
(C) the withdrawal of such notice will
facilitate the collection of the tax liability, or
(D) with the consent of the taxpayer or the
National Taxpayer Advocate, the withdrawal of such
notice would be in the best interests of the
taxpayer (as determined by the National Taxpayer
Advocate) and the United States.
Section 6323(j)(1) is permissive. Although section 6323(j)(1)
allows the Commissioner to withdraw the NFTL for any of the
listed reasons, it does not require him to do so. The
regulations make the Commissioner’s discretion explicit: “If the
Commissioner determines conditions for withdrawal are present,
the Commissioner may (but is not required to) authorize the
withdrawal.” Sec. 301.6323(j)-1(c), Proced. & Admin. Regs.
(emphasis added).
At the Appeals hearing, petitioner advanced two contentions.
His first contention is that respondent should withdraw the NFTL
and allow him to proceed with the March 23, 2009, installment
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plan, to which petitioner had agreed before learning about the
NFTL. Secondly, he contends that the NFTL should be withdrawn so
that he can refinance his home, enabling him to pay his tax
liabilities.
In support of his first contention, petitioner argues that
Mr. Clark was mistaken when he found that petitioner had entered
into a previous installment agreement. Petitioner contends that,
because he had never entered into such an agreement, he could not
be in default, and he therefore should be permitted to fulfill
his obligations under the March 23, 2009, installment agreement
before the filing of an NFTL.
We conclude that the issue of whether there was a previous
installment agreement is irrelevant to the issue of the proper
filing of an NFTL.
In Crisan v. Commissioner, T.C. Memo. 2007-67, the
Commissioner filed an NFTL against the taxpayers after the
parties had begun negotiating an installment agreement. As in
the instant case, the taxpayers learned about the NFTL only after
they had entered the installment agreement, and, as is alleged in
the instant case, the Commissioner had made representations to
the taxpayers that no further collection actions would be taken
while they were negotiating the installment agreement. Like
petitioner, the taxpayers in Crisan argued that the NFTL would
damage their credit, making it difficult for them to obtain
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additional financing, and that the NFTL had been filed
prematurely because they had just entered into an installment
agreement. We held that the implementation of an installment
agreement did not preclude the Commissioner from filing an NFTL,
nor was the Commissioner required to withdraw the NFTL after the
installment agreement became effective.
In Ramirez v. Commissioner, T.C. Memo. 2005-179, the
taxpayer had entered into an installment agreement after the
filing of the NFTL and contended that he should be released from
the NFTL. In that case we likewise held that the installment
agreement did not preclude the Commissioner from maintaining a
lien until the balance of the taxpayer’s taxes was paid. See
also Dorra v. Commissioner, T.C. Memo. 2004-16. The taxpayer in
Stein v. Commissioner, supra, argued that the Appeals Office
abused its discretion by rejecting an installment agreement. We
stated that even if the Appeals officer had accepted the
installment agreement as a collection alternative, the
Commissioner would not have been required to withdraw the NFTL
until the full liability had been paid.
Section 6323(j)(1) is permissive, and nothing in it requires
respondent to withdraw the NFTL because of the installment
agreement. Accordingly, we hold that the decision of
respondent’s Appeals Office to sustain the NFTL despite the
installment agreement was not an abuse of discretion.
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In support of petitioner’s second contention, that the NFTL
has made it impossible for him to refinance his home and thus
obtain money to pay his tax liabilities, he states that his
credit score has been reduced by 100 points. In her letter
acknowledging his request for a CDP hearing, Ms. Williams
supplied petitioner with information describing how to apply for
a certificate of subordination to the NFTL and how to obtain a
certificate of discharge from the NFTL. Although he contends
that the NFTL has made it impossible for him to refinance his
home, petitioner has offered no evidence that he has been
rejected for a loan because of the NFTL, or even that he has
applied for a loan since respondent filed the NFTL. Nor has
petitioner presented any evidence that suggests the alternatives
offered by Ms. Williams, i.e., applying for a certificate of
subordination of the NFTL or obtaining a certificate of discharge
from the NFTL, would be insufficient to satisfy his supposed need
to obtain financing. It is no doubt true that the NFTL lowered
petitioner’s credit score, but this fact does not establish that
refinancing petitioner’s home would be impossible or that the
NFTL otherwise interferes with petitioner’s ability to pay his
tax obligations.
Accordingly, there is no evidence in the record to suggest
that the NFTL is impairing petitioner’s ability to pay his
outstanding tax liabilities. Where a motion for summary judgment
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has been properly made and supported, the opposing party may not
rest upon mere allegations or denials in that party’s pleadings
but must, by affidavits or otherwise, set forth specific facts
showing that there is a genuine issue for trial. Rule 121(d).
Respondent’s motion was properly made and supported. Petitioner
has not offered specific facts to support his contention that the
NFTL impairs petitioner’s ability to pay his tax liability.
Consequently, we conclude that there is no genuine issue for
trial regarding that fact.
The record shows that Ms. Williams had sufficient evidence
on which she could reasonably base her conclusion that
withdrawing the NFTL would not facilitate collection. Petitioner
had almost 2 years before the filing of the NFTL during which he
made no effort to refinance his home, and petitioner made no
payments on his tax liabilities during that entire period.
Petitioner’s payment history casts doubt on the good faith of his
efforts to pay. Accordingly, we conclude that respondent’s
settlement officer did not abuse her discretion when she
determined that withdrawing the NFTL would not facilitate
collection of the tax liabilities.
Respondent’s settlement officer considered all of
petitioner’s contentions, verified compliance by the Internal
Revenue Service with all applicable laws and regulations, and
considered whether the proposed collection actions balanced the
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need for efficient tax collection with petitioner’s concern that
they be no more intrusive than necessary.
On the basis of the record before us, we conclude that there
is no genuine issue of material fact for trial. We hold that
respondent’s settlement officer did not abuse her discretion in
sustaining the filing of the NFTL.
In reaching these holdings, we have considered all the
parties’ arguments, and, to the extent not addressed herein, we
conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
An order and decision will
be entered for respondent.