Opinion
11798-23L
02-23-2024
NESTOR J. ANAVITATE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Elizabeth A. Copeland, Judge
Before the Court is Respondent's Motion for Summary Judgment, filed January 4, 2024, Declaration of Max Valerio in Support of Respondent's Motion for Summary Judgment, filed January 4, 2024, and Petitioner's Response to Respondent's Motion for Summary Judgment, filed February 8, 2024.
Background
The following background statement is drawn from the parties' pleadings and other submissions and is stated solely for purposes of ruling on Respondent's Motion, not as findings of fact. Petitioner, Nestor Anavitate, resided in New York when he timely filed his Petition.
Mr. Anavitate runs a business called Base One Security Patrol LLC (Base One), which is classified as a corporation for tax purposes. Mr. Anavitate untimely filed his 2019 individual income tax return, and he did not pay the liabilities shown as due on the return.
On December 2, 2019, Mr. Anavitate was interviewed by Internal Revenue Service (IRS) Revenue Officer Wraga (RO Wraga) regarding Base One's employment tax liabilities and/or tax withholding obligations. On that date Mr. Anavitate signed Form 4180, Report of Interview with Individual Relative to Trust Fund Recovery Penalty or Personal Liability for Excise Taxes, indicating that he was personally responsible for collecting employment taxes and/or withholding income taxes in connection with Base One's employees. On December 5, 2019, Mr. Anavitate submitted Form 433-B, Collection Information Statement for Businesses, pursuant to RO Wraga's representation that Form 433-B would be necessary for entering an installment agreement to satisfy Base One's tax liabilities. On December 6, 2019, Mr. Anavitate signed Form 2751, Proposed Assessment of Trust Fund Recovery
Penalty, consenting to the assessment and collection of penalties under section 6672, or "trust fund recovery penalties" (TFRPs), with respect to tax periods ending December 31, 2016, March 31, 2017, June 30, 2017, September 30, 2017, June 30, 2018, September 30, 2018, December 31, 2018, March 31, 2019, June 30, 2019, and September 30, 2019. In his Response to Respondent's Motion, Mr. Anavitate alleges that RO Wraga represented that Mr. Anavitate's signature on Form 2751 was "part of the paperwork needed for" an installment agreement.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
The Form 2751 does not clarify whether the assessments to which Mr. Anavitate consented were against Base One, against him personally, or both.
Also on December 6, 2019, Respondent issued to Mr. Anavitate Form 1153, proposing TFRP assessments for tax periods ending December 31, 2016, June 30, 2017, June 30, 2018, December 31, 2018, and June 30, 2019. On December 18, 2020, Respondent issued to Mr. Anavitate a second Form 1153, proposing TFRP assessments for tax periods ending December 31, 2019, and March 31, 2020. Mr. Anavitate did not contest either of the Forms 1153.
Sometime during or after February 2020, RO Wraga issued levies to some or all of the Base One clients whom Mr. Anavitate listed on Form 433-B as owing amounts to Base One. It is unclear from the record how much money was collected through these levies.
On February 3, 2022, Respondent filed a Notice of Intent to Levy and Notice of Your Rights to a Hearing (levy notice) proposing a levy to collect Mr. Anavitate's income tax liability for 2019 and TFRPs for periods ending December 31, 2016, June 30, 2018, September 30, 2018, December 31, 2018, March 31, 2019, June 30, 2019, December 31, 2019, and March 31, 2020. Mr. Anavitate timely requested a collection due process (CDP) hearing via Form 12153, on which he checked the box "I cannot pay balance." He also asked the IRS to "provide to us a detailed break-down of the invoice payments received by the IRS from our clients to satisfy the lien and how such payments have been applied to the outstanding balance." Finally, he indicated his interest in an offer in compromise.
Settlement Officer Douglas (SO Douglas) sent Mr. Anavitate a letter on August 1, 2022, scheduling the CDP hearing for August 23, 2022, and informing Mr. Anavitate of the documents he would need to submit to be considered for a collection alternative. Mr. Anavitate did not provide any of these documents by SO Douglas's deadline of August 22, 2023, or subsequently. During the CDP hearing, Mr. Anavitate attempted to contest his TFRP liabilities, but SO Douglas stated that he had waived his right to contest those liabilities by signing the Form 2751 and failing to respond to the Letters 1153.
Mr. Anavitate's CDP case was reassigned to Settlement Officer DeSantis (SO DeSantis) on January 12, 2023. SO DeSantis spoke with Mr. Anavitate by phone on January 31, 2023, telling him that his request for the administrative file of the case (which he had sent on August 25, 2022) was being processed. Mr. Anavitate confirmed that he did not want to discuss collection alternatives. SO DeSantis spoke by phone with Mr. Anavitate again on June 7, 2023, to confirm receipt of the administrative file. Mr. Anavitate confirmed that the file included account transcripts for Base One's corporate tax liabilities, but he further wanted to know how much of the levy proceeds were provided by each client. SO DeSantis stated that he did not have that information and that Mr. Anavitate could file a FOIA request to pursue the matter.
On June 26, 2023, SO DeSantis issued to Mr. Anavitate a Notice of Determination Concerning Collection Actions under IRS Sections 6320 or 6330 of the Internal Revenue Code, sustaining the levy notice. On July 25, 2023, Mr. Anavitate timely filed his Petition contesting the Notice of Determination.
On July 12, 2023, Mr. Anavitate filed a petition contesting a notice of federal tax lien that Respondent filed with respect to the same liabilities relevant to this case (as well as Mr. Anavitate's 2016 income tax liability). See Tax Court docket No. 11097-23L.
Discussion
I. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Under Rule 121(a)(2), we may grant summary judgment when there is no genuine dispute as to any material facts and a decision may be rendered as a matter of law. 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 no genuine dispute as to any material fact remains and that he is entitled to judgment as a matter of law. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74-75 (2001). In deciding whether to grant summary judgment, we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Sundstrand, 98 T.C. at 520 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). However, the nonmoving party may not rest upon the mere allegations or denials in his pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Sundstrand, 98 T.C. at 520.
II. Standard of Review for CDP Cases
Sections 6320(c) and 6330(d)(1) grant this Court jurisdiction to review an SO's determination in connection with a CDP hearing. Section 6330(c)(2) prescribes the matters that a taxpayer may raise at a CDP hearing, including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. The existence or amount of the underlying tax liability may be contested at a CDP hearing only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. See I.R.C. § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180- 81 (2000).
If the validity of the underlying tax liability is properly at issue, the Court will review the taxpayer's liability de novo. Sego, 114 T.C. at 609-10. Where the validity of the underlying liability is not properly at issue, the Court will review the SO's determination for abuse of discretion only. Id. at 610. Abuse of discretion exists when a determination is 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).
In determining whether an SO abused his discretion, we turn to section 6330(c)(3), which requires the SO to (1) verify that the requirements of applicable law and administrative procedure have been met, (2) consider issues raised by the taxpayer, and (3) consider whether the proposed collection action balances the need for the efficient collection of taxes with the taxpayer's legitimate concern that any collection action be no more intrusive than necessary. Thompson v. Commissioner, 140 T.C. 173, 178-79 (2013). In reviewing the determination, we do not substitute our judgment for that of the SO or make an independent determination of what would be an acceptable collection alternative. Id. at 179. If the SO "followed all statutory and administrative guidelines and provided a reasoned, balanced decision," we "will not reweigh the equities." Id.
III. Evaluation of SO DeSantis's Determination
Mr. Anavitate attempted to challenge the TFRP liabilities during his CDP hearing with SO Douglas. However, in his Petition and his Response to Respondent's Motion, he did not challenge the initial amounts of the TFRP liabilities (that is, prior to the application of any levy proceeds from Base One's clients) or of the income tax liabilities. Therefore, we deem Mr. Anavitate to concede the initial amounts of the underlying liabilities, see Rule 331(b)(4) ("Any issue not raised in the assignments of error [in the petition] shall be deemed to be conceded."), and we review SO DeSantis's determination for abuse of discretion only.
SO DeSantis was required to verify, among other things, that the liabilities subject to the levy notice were properly assessed and remained outstanding. See Ron Lykins, Inc. v. Commissioner, 133 T.C. 87, 97 (2009). In the Petition, Mr. Anavitate alleged that RO Wraga "explained signing the Trust Penalty Recovery Assessment was part of [the] paperwork needed for a payment installment agreement." Construing this allegation in the light most favorable to Mr. Anavitate, we find a genuine dispute as to whether Mr. Anavitate's signature on Form 2751 and his failure to contest the Letters 1153 were induced by a fraudulent misrepresentation (viz, that he would not be consenting to the liability amounts nor foreclosing his future rights to challenge them). If there was a fraudulent inducement, then the TFRP assessments may not have been proper. Cf. Bennett v. Commissioner, T.C. Memo. 1997-145, 73 T.C.M. (CCH) 2389, 2393 (discussing the conditions under which the Commissioner may be estopped from relying on a taxpayer's consent to extend the period of limitations for assessment). While we are not determining such estoppel applies here, the record before us is unclear on this question; and we must deny Respondent's Motion and allow the parties to further clarify the facts.
Additionally, in the Petition Mr. Anavitate asserts his entitlement to "a detailed break-out of ALL payments collected from our clients in response to the levies that were issued to them by the IRS on our company's behalf." We construe this assertion liberally as an allegation that Mr. Anavitate's TFRP liabilities for some or all of the tax periods at issue were satisfied by virtue of collections from Base One. See Rule 31(d) ("A pleading must be construed so as to do justice."); Haines v. Kerner, 404 U.S. 519, 520 (1972) (explaining that pleadings by pro se litigants are held "to less stringent standards than formal pleadings drafted by lawyers"). TFRP liability is joint and several, but the government is entitled to only one satisfaction. Brown v. United States, 591 F.2d 1136, 1142-43 (5th Cir. 1979). Since the record before us does not disclose the amounts collected by levy to satisfy Base One's liabilities nor how those amounts were applied, we cannot discern whether Mr. Anavitate had outstanding TFRP liabilities for all the tax periods at issue when SO DeSantis sustained the levy notice. (We note that neither Base One's account transcripts nor Mr. Anavitate's civil penalty transcripts are in the current record.)
Since we cannot determine at present that SO DeSantis established that all legal prerequisites for a levy were satisfied, we must deny Respondent's Motion.
We also note that in the Declaration of Max Valerio in Support of Motion for Summary Judgment, Respondent attached an account transcript for Mr. Anavitate's 2016 income tax liability (which is not relevant to this case) and did not attach a transcript for Mr. Anavitate's 2019 income tax liability (which is relevant).
Upon due consideration, it is
ORDERED that Respondent's Motion for Summary Judgment, filed January 4, 2024, is denied.