Opinion
19691-22L
03-29-2024
A CARING HART, LLC, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Tamara W. Ashford, Judge
This matter is before the Court to decide on respondent's Motion for Summary Judgment, filed December 26, 2023, pursuant to Rule 121. Respondent contends that no genuine dispute exists as to any material fact and that the determination of the Internal Revenue Service (IRS) Independent Office of Appeals (Appeals) upholding the filing of a notice of federal tax lien (NFTL) with respect to (1) petitioner's unpaid "Form 941" liabilities for the taxable periods ending June 30, 2017, March 31, 2018, June 30, 2018, September 30, 2018, December 31, 2018, March 31, 2019, June 30, 2019, March 31, 2020, and June 30, 2020 (periods at issue), and (2) petitioner's unpaid "Form 1065" liabilities for the 2015-18 taxable years (years at issue) should be sustained as a matter of law.
Unless otherwise indicated, Rule references are to the Tax Court Rules of Practice and Procedure, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times.
By Order served on the parties on December 27, 2023, the Court ordered petitioner to file a response to respondent's motion no later than January 26, 2024. On January 17, 2024, petitioner filed a Response to Motion for Summary Judgment, opposing respondent's motion. This case was called from the calendar for the remote Trial Session of the Court on February 26, 2024. Petitioner and counsel for respondent appeared and were heard regarding the status of this case, including respondent's motion. The Court took respondent's motion under advisement. As explained below, we will grant summary judgment for respondent.
Background
Petitioner failed to pay the liabilities for the periods at issue and the years at issue that the IRS had assessed against it despite the IRS's having provided petitioner with notice and demand for payment. Consequently, the IRS sent petitioner Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 (lien notice), advising petitioner that an NFTL had been filed with respect to those liabilities and that it had the right to request a hearing by January 4, 2021, to appeal the collection action and discuss payment method options.
In response to the lien notice petitioner submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP hearing request). On its CDP hearing request petitioner did not challenge the underlying liabilities but did request the collection alternative of an installment agreement. As the reason for its CDP hearing request petitioner stated:
On its CDP hearing request petitioner also checked the box requesting a discharge of the lien, but "N/A" was written next to the checked box.
I have entered into an installment agreement. This lien causes me not to be able to borrow to pay what I owe. I have also made payments that are not shown on the lien.
The IRS received petitioner's CDP hearing request on December 11, 2020, and the request was initially assigned to Appeals Officer Catherine Ficco Glauda (AO Ficco Glauda). On March 1, 2021, upon confirming that (1) she had no prior involvement with petitioner for the types of taxes and periods and years associated with petitioner's CDP hearing request and (2) all applicable legal and administrative requirements had been met prior to the filing of the NFTL, AO Ficco Glauda spoke with petitioner's president, Crystal Hart, via telephone about the CDP hearing request. During that conversation, Ms. Hart informed AO Ficco Glauda that petitioner had a new power of attorney, Peter W. Kirksey, who would be submitting an offer in compromise on petitioner's behalf. On March 2, 2021, AO Ficco Glauda spoke with Mr. Kirksey via telephone; Mr. Kirksey advised that an offer in compromise would be submitted on petitioner's behalf directly to the IRS Centralized Offer in Compromise Unit (COIC Unit).
On March 8, 2021, the IRS COIC Unit received from Mr. Kirksey on petitioner's behalf a completed Form 656, Offer in Compromise, on which petitioner proposed to pay $40,000 to satisfy its liabilities for the periods at issue and the years at issue, payable in monthly installments of $100 per month for the first 23 months and a final payment of $37,000 for the 24th month (OIC). As the reason for the OIC petitioner checked the box on the form indicating "Doubt as to Collectability-I do not have enough in assets and income to pay the full amount." Petitioner also indicated on the form that it would be borrowing funds to pay for the offer.
Along with the OIC, the IRS received from Mr. Kirksey on petitioner's behalf a completed Form 433-B, Collection Information Statement for Businesses, with supporting documentation. The supporting documentation included an executive summary explaining petitioner's position, bank statements for petitioner's Navy Federal Credit Union account, and a profit and loss statement for petitioner.
On March 9, 2022, an offer specialist with the IRS COIC Unit spoke with Mr. Kirksey via telephone, informing him that based on the submitted financial information, the IRS COIC Unit had preliminarily determined that petitioner's OIC should be rejected because petitioner's reasonable collection potential was $207,215. During the conversation, Mr. Kirksey did not raise any additional issues and informed the offer specialist that he would discuss petitioner's case with Appeals. Accordingly, by letter to petitioner dated March 10, 2022 (with a copy to Mr. Kirksey), the IRS notified petitioner that a preliminary decision had been made to reject its OIC based on its current financial information and that the offer amount needed to be increased before acceptance of an OIC could be considered. The letter also advised petitioner that its OIC was being forwarded to Appeals so that a final determination with respect to the OIC could be made by Appeals in conjunction with the CDP hearing request.
On March 29, 2022, petitioner's CDP hearing request and OIC were reassigned to Appeals officer Robert Carbaugh (AO Carbaugh). On April 22, 2022, AO Carbaugh verified that (1) he had no prior involvement with petitioner for the types of taxes and periods and years associated with petitioner's CDP hearing request and (2) all applicable legal and administrative requirements had been met prior to the filing of the NFTL. On the same day, AO Carbaugh called Mr. Kirksey and left him a voicemail requesting that he call him back to discuss petitioner's CDP hearing request and OIC if he still represented petitioner.
On June 1, 2022, AO Carbaugh held a telephonic CDP hearing with Mr. Kirksey. During the hearing, AO Carbaugh reviewed the IRS COIC Unit's reasonable collection potential determination with Mr. Kirksey. Mr. Kirksey did not raise any specific issues with the calculations underlying that determination. During the hearing, AO Carbaugh offered the opportunity for petitioner to increase its offer.
On June 2, 2022, Mr. Kirksey faxed to AO Carbaugh petitioner's bank statement for May 2022, and copies of three checks made out to the U.S. Treasury by Ms. Hart for trust fund payments of petitioner. AO Carbaugh reviewed this documentation and determined that petitioner's reasonable collection potential was $134,392. He also determined that the collection alternatives of an installment agreement and placing taxpayer's account in currently not collectible status were not viable options for petitioner.
AO Carbaugh waited until July 27, 2022, for petitioner to increase its offer, but petitioner never submitted any other offers. Accordingly, on July 27, 2022, Appeals issued to petitioner (with a copy to Mr. Kirksey) a notice of determination sustaining the filing of the NFTL.
Petitioner timely filed a petition with this Court for review of the notice of determination. At the time the Petition was filed, petitioner's principal place of business was in Virginia. In its Petition, petitioner does not dispute its underlying liabilities, but asserts that it (1) neither received AO Carbaugh's updated reasonable collection potential computations nor had the opportunity to increase its offer and (2) was fully prepared to increase its offer to satisfy the IRS's determination.
Discussion
The purpose of summary judgment is to expedite litigation and avoid unnecessary and expensive trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). The Court shall grant summary judgment if the moving party shows that there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(a)(2); see also Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992) aff'd, 17 F.3d 965 (7th Cir. 1994). The burden is on the moving party to demonstrate that there is no genuine dispute as to any material fact; consequently, factual inferences will be viewed in a light most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). The nonmoving party may not rest upon the mere allegations or denials of its pleadings, but must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Sundstrand Corp., 98 T.C. at 520. On the basis of the record in this case, we conclude that there is no genuine dispute as to any material fact. Consequently, we may render a decision as a matter of law.
Under section 6321, if any person liable to pay any tax neglects or refuses to do so after notice and demand, the amount, including any interest, addition to tax, or assessable penalty, shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. Section 6323 authorizes the Commissioner to file an NFTL. Pursuant to section 6320(a), the Commissioner must provide the person with written notice of and an opportunity for an administrative hearing to review the propriety of the filing of the NFTL.
If an administrative hearing is requested in a lien case, the hearing is to be conducted by Appeals. § 6320(b)(1), (c). At the hearing, the taxpayer may raise any relevant issues including, as relevant here, challenges to the appropriateness of the collection action and collection alternatives. §§ 6320(c), 6330(c)(2)(A). Following the hearing, the Appeals officer must determine among other things whether the collection action is appropriate. In reaching the determination, the Appeals officer must take into consideration: (1) whether the requirements of applicable law and administrative procedure have been met, (2) all relevant issues raised by the taxpayer, and (3) whether the collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that collection be no more intrusive than necessary. § 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C. 183, 184 (2001); Scanlon v. Commissioner, T.C. Memo. 2018-51, at *17.
Section 6330(d)(1) grants this Court jurisdiction to review the determination made by Appeals in a lien case. Where, as is the case here, the underlying tax liability is not at issue, we review Appeals' determination for abuse of discretion; that is, whether the determination was arbitrary, capricious, or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). We do not conduct an independent review and substitute our own judgment for that of the Appeals officer. Murphy, 125 T.C. at 320.
In submitting its CDP hearing request, petitioner's desire and focus has been to be granted the collection alternative of an offer in compromise based on doubt as to collectability. Section 7122(a) authorizes the Commissioner to compromise a tax liability, i.e., settle a tax liability for less than the full amount owed. See also Internal Revenue Manual (IRM) 8.23.1.1.1(1) (Aug. 23, 2021), 5.8.1.2.1(1) (Sep. 23, 2008).Pursuant to section 7122(d), the Commissioner has prescribed guidelines for evaluating whether an offer in compromise is adequate and should be accepted. See Treas. Reg. § 301.7122-1(b). As relevant here, under these guidelines doubt as to collectability exists in any case where the taxpayer's assets and income are less than the full amount of the liability. Treas. Reg. § 301.7122-1(b)(2). Generally, under the IRS's administrative pronouncements, an offer in compromise on the grounds of doubt as to collectability will be accepted only where (1) it is unlikely that the liability can be collected in full and (2) the offer reflects the taxpayer's total reasonable collection potential (i.e., the amount that the IRS could collect through other means, including administrative and judicial collection remedies). Rev. Proc. 2003-71, § 4.02(2), 2003-2 C.B. 517, 517; IRM 8.23.3.1(4) (Aug. 18, 2017). The IRS will reject an offer in compromise if the reasonable collection potential meets or exceeds the amount offered in the offer in compromise. Reed v. Commissioner, 141 T.C. 248, 256 (2013) (citing IRM 5.8.4.3 (May 6, 2013)). In some cases the IRS may accept an offer of less than the total reasonable collection potential if there are special circumstances. Rev. Proc. 2003-71, § 4.02(2). Petitioner has never contended that special circumstances exist.
The provisions of the IRM can be instructive in understanding the IRS's interpretation of a statute, see Ginsburg v. Commissioner, 127 T.C. 75, 87 (2006), and in ascertaining the procedures the IRS expects its employees to follow, see Wadleigh v. Commissioner, 134 T.C. 280, 294 (2010). The IRM does not, however, have the force of law. See Marks v. Commissioner, 947 F.2d 983, 986 n.1, 292 U.S.App.D.C. 117 (D.C. Cir. 1991), aff'g T.C. Memo. 1989-575; Vallone v. Commissioner, 88 T.C. 794, 807 (1987).
"The decision to entertain, accept or reject an offer in compromise is squarely within the discretion of the appeals officer and the IRS in general." Kindred v. Commissioner, 454 F.3d 688, 696 (7th Cir. 2006). As noted above, we do not substitute our judgment for that of Appeals and decide whether in our opinion petitioner's OIC should have been accepted (or what would be an acceptable alternative). Murphy, 125 T.C. at 320; Ramdas v. Commissioner, T.C. Memo. 2013-104, at *23. If Appeals follows all statutory and administrative guidelines and provides a reasoned, balanced decision, we will not reweigh the equities. Thompson v. Commissioner, 140 T.C. 173, 179 (2013).
The Administrative Record unmistakably shows that petitioner (through Mr. Kirksey) was on notice on two separate occasions-during when its OIC was under consideration by the IRS COIC Unit and when both its CDP hearing request and OIC were under consideration by Appeals-that its offered amount was substantially lower than the reasonable collection potential and needed to be increased. During the June 1, 2022, telephonic CDP hearing, AO Carbaugh offered the opportunity for petitioner to submit an increased offer. However, AO Carbaugh never received any other offer with respect to petitioner's liabilities for the periods at issue and years at issue, and it was not his obligation to negotiate indefinitely or wait any specific amount of time before having the notice of determination issued to petitioner. See Scanlon, T.C. Memo. 2018-51, at *21-22 n.7 (first citing Kuretski v. Commissioner, T.C. Memo. 2012-262, at *11, aff'd, 755 F.3d 929 (D.C. Cir. 2014); then citing Rosenthal v. Commissioner, T.C. Memo. 2014-252, at *15). Ultimately, on July 27, 2022, 56 days after the hearing, Appeals issued to petitioner the notice of determination.
On the basis of our review of the Administrative Record, we find that AO Carbaugh considered all the requisite factors under section 6330(c)(3) when making his determination. The record shows that he (1) verified that all legal and procedural requirements were met, (2) considered all issues petitioner raised, and (3) determined that the proposed collection action appropriately balances the need for the efficient collection of taxes with the legitimate concern of petitioner that the collection action be no more intrusive than necessary. It cannot be said that AO Carbaugh abused his discretion in sustaining the filing of the NFTL, and we do not find that the notice of determination was arbitrary, capricious, or without sound basis in fact or law. Accordingly, we grant respondent's motion and reiterate what we said when this case was called from the calendar for the remote Trial Session of the Court on February 26, 2024, that petitioner is of course free to continue to negotiate with the IRS concerning its liabilities for the periods at issue and the years at issue (including submitting an offer in compromise that is in line with the revised reasonable collection potential), but it is entitled to only one CDP hearing and Tax Court proceeding with respect to the NFTL. See Ragsdale v. Commissioner, T.C. Memo. 2019-33, at *35 (citing Perrin v. Commissioner, T.C. Memo. 2012-22, slip op. at 8). Upon due consideration, it is hereby
ORDERED that respondent's Motion for Summary Judgment, filed December 26, 2023, is granted. It is further
ORDERED AND DECIDED that respondent may proceed with the collection action with respect to petitioner's unpaid liabilities for the periods at issue and the years at issue, as described in the Notice of Determination Concerning Collection Actions under Sections 6320 or 6330 of the Internal Revenue Code, dated July 27, 2022.