T.C. Memo. 2012-203
UNITED STATES TAX COURT
MISS LARAS DOMINION INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 28745-10L. Filed July 18, 2012.
Stanley Dale Blyth, for petitioner.
Paul Richard Zamolo and Tiffany Wu, for respondent.
MEMORANDUM OPINION
KROUPA, Judge: This collection review matter is before the Court in
response to a Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 63301 (determination notice). The sole issue for decision is
1
All section references are to the Internal Revenue Code, and all Rule
references are to the Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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whether respondent’s determination to proceed with the proposed collection action
was an abuse of discretion. We hold it was not.
Background
This case was submitted fully stipulated under Rule 122. The stipulation of
facts and the accompanying exhibits are incorporated by this reference. Petitioner is
a corporation, and its principal place of business was in Oakland, California, when it
filed the petition.
Respondent sent petitioner a Letter 1058, Final Notice, Notice of Intent to
Levy and Notice of Your Right to a Hearing, concerning its employment tax
liabilities for the tax periods ending September 30, 2005, October 31 and December
31, 2007 and December 31, 2008 (tax periods at issue). Petitioner timely requested
a collection due process hearing (hearing), seeking an installment agreement or an
offer-in-compromise as a collection alternative.
Settlement Officer Deborah Conley was assigned to conduct petitioner’s
hearing, which she scheduled with petitioner’s counsel. Petitioner’s counsel sent
SO Conley Form 433-B, Collection Information Statement for Businesses. The
Form 433-B indicates petitioner had monthly income of $25,216 and monthly
expenses of $28,093. The Form 433-B also indicates that petitioner expected its
income to decrease by 10% to 100% over the next three years.
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SO Conley and petitioner’s counsel had a telephone hearing during which
petitioner’s counsel proposed an installment agreement. The proposed installment
agreement called for petitioner to make monthly payments of $1,000. Petitioner did
not raise any other issues during the hearing, including the underlying tax liability or
an offer-in-compromise as a collection alternative.
SO Conley evaluated petitioner’s proposed installment agreement. She
determined that the financial information petitioner submitted did not demonstrate
that it could pay ongoing monthly expenses, pay current tax obligations and make
additional monthly payments of $1,000 under the proposed installment agreement.
Consequently, SO Conley sent petitioner the determination notice sustaining the
proposed collection action. Petitioner timely filed a petition.
Discussion
We are asked to decide whether SO Conley abused her discretion in
determining the proposed levy action was appropriate to collect petitioner’s unpaid
employment tax liabilities for the periods at issue. We begin with the general rules
that apply to collection actions.
The Commissioner may collect a tax by levy upon the property of the
taxpayer liable if the taxpayer neglects or refuses to pay the tax liability within 10
days after notice and demand for payment. Sec. 6331(a). The Commissioner
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generally must provide the taxpayer written notice of the right to a hearing before
the levy is made. Sec. 6330(a). The taxpayer is entitled, upon request, to a hearing
before the Appeals Office. Sec. 6330(b)(1). The taxpayer may raise at that hearing
any relevant issues relating to the unpaid tax or the proposed collection action. Sec.
6330(c)(2). Relevant issues include any appropriate spousal defenses, challenges to
the appropriateness of collection actions and possible alternative means of collection
such as an installment agreement or an offer-in-compromise. Sec. 6330(c)(2)(A).
Taxpayers are expected to provide all relevant information requested by the
settlement officer for consideration of the facts and issues involved in the hearing.
Sec. 301.6330-1(e) (1), Proced. & Admin. Regs.
After the hearing, the Appeals officer is required to make a determination that
addresses issues the taxpayer raised, verify that all requirements of applicable law
and administrative procedure have been met and balance the need for the efficient
collection of taxes with the legitimate concern of the person that any collection
action be no more intrusive than necessary. Sec. 6330(c)(3).
We now turn to the standard of review. Where, as is the case here, the
validity of the underlying tax liability is not properly placed at issue, the Court will
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review the Commissioner’s determination for abuse of discretion.2 Goza v.
Commissioner, 114 T.C. 176, 182 (2000). We must consider whether the
Commissioner’s actions were arbitrary, capricious or without sound basis in fact or
law in reviewing an administrative determination for abuse of discretion. See
Woodral v. Commissioner, 112 T.C. 19, 23 (1999). The taxpayer bears the burden
of proving abuse of discretion. Rule 142(a); Titsworth v. Commissioner, T.C.
Memo. 2012-12.
Petitioner asserts that SO Conley abused her discretition in rejecting the
proposed installment agreement as a collection alternative. We disagree. The
Secretary has discretionary authority to enter into installment agreements to satisfy
tax liabilities when it is determined that doing so will facilitate full or partial
collection. Sec. 6159(a). This Court has generally held that it is not an abuse of
discretion when an Appeals Office employee relies on guidelines published in the
Internal Revenue Manual (IRM) to evaluate a proposed installment agreement. See,
e.g., Orum v. Commissioner, 123 T.C. 1, 13 (2004), aff’d, 412 F.3d 819 (7th Cir.
2005); Aldridge v. Commissioner, T.C. Memo. 2009-276; Etkin v. Commissioner,
T.C. Memo. 2005-245. The IRM guidelines state that the procedures for processing
2
Petitioner did not contest the existence or amount of his underlying tax
liabilities at the hearing, so we need not consider that issue. See Giamelli v.
Commissioner, 129 T.C. 107 (2007).
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an installment agreement for a business are applicable only if taxpayers can pay
operating expenses as well as current and delinquent taxes. See IRM pt. 5.14.7.1
(Sept. 26, 2008).
Here, SO Conley relied on the IRM guideline that a taxpayer must be able to
pay its operating expenses as well as current and delinquent taxes to qualify for an
installment agreement in evaluating petitioner’s proposed installment agreement.
She determined, relying on petitioner’s Form 433-B, that its monthly expenses
exceeded its monthly income and thus that it could not pay current operating
expenses and current taxes and make payments on delinquent taxes. Consequently,
she rejected petitioner’s proposed installment agreement.3
Petitioner contends SO Conley disregarded information showing that it could
make the relevant payments under the proposed installment agreement. In
particular, petitioner claims SO Conley disregarded its assertion at the hearing that
changes in the economy had resulted in a temporary downturn in its revenues and
that going forward it could make the monthly payments under the proposed
3
We note that other than the proposed installment agreement, petitioner did
not raise any other collection alternatives at the hearing. In particular, petitioner
never requested that SO Conley suspend collection activity against it or indicated
that it could not pay the employment tax liabilities for the periods at issue. Indeed,
petitioner indicated that it was willing to pay $1,000 per month towards the
employment tax liabilities for the periods at issue. In addition, petitioner did not
propose an offer-in-compromise.
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installment agreement. The record does not reflect that petitioner ever made any
such assertion at the hearing or before the determination notice was issued. Nor
does the record reflect that petitioner provided any documentation supporting the
claimed assertion at the hearing. Moreover, the purported assertion directly
conflicts with information petitioner provided on Form 433-B that it expected its
income to decrease by 10% to 100% over the next three years. Finally, petitioner’s
claimed assertion is wholly insufficient to establish that it would be able to pay its
operating expenses along with its current and delinquent taxes. We have held that
when our review is limited to abuse of discretion, we will not recalculate a
taxpayer’s ability to pay and substitute our judgment for that of the settlement
officer. Aldridge v. Commissioner, T.C. Memo. 2009-276; see also Speltz v.
Commissioner, 124 T.C. 165, 179-180 (2005), aff’d, 454 F.3d 782 (8th Cir. 2006);
Bergevin v. Commissioner, T.C. Memo. 2008-6. We find that SO Conley’s
determination to reject petitioner’s proposed installment agreement was not
arbitrary, capricious or without sound basis in fact or law. It was therefore not an
abuse of discretion.
Petitioner has not otherwise presented any evidence or persuasive
arguments to convince us that SO Conley abused her discretion. We therefore
conclude that SO Conley did not abuse her discretion in sustaining the proposed
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levy action to collect the outstanding employment tax liabilities for the tax periods at
issue.
We have considered all arguments made in reaching our decision and, to the
extent not mentioned, we conclude that they are moot, irrelevant or without merit.
To reflect the foregoing,
Decision will be entered for
respondent.