Opinion
18453-22SL
08-30-2023
SANDRA S. HOFFMANN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Joseph W. Nega Judge
This collection due process (CDP) case is presently calendared for an in-person trial at the session of the Court scheduled to commence on Monday, October 2, 2023, in St. Louis, Missouri. On August 1, 2023, respondent filed a Motion for Summary Judgment (respondent's motion). By Order issued August 2, 2023, the Court directed petitioner to respond to respondent's motion on or before August 23, 2023. To date, petitioner has not filed a response.
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.
I. Background
Petitioner filed a tax return for tax year 2017 showing taxable income of $166,040. Petitioner transferred $49,882 out of a qualified retirement account over the course of two distributions during 2017 and did not include those distributions in taxable income in petitioner's 2017 tax return. Respondent received documentation from petitioner's bank indicating that the distributions should have been included in petitioner's taxable income for tax year 2017. On February 18, 2020, respondent sent to petitioner a notice of deficiency for tax year 2017 determining an increase to taxable income of $49,882, a corresponding increase in tax of $16,923, and an accuracy-related penalty under section 6662(a) of $3,385. Petitioner did not file a Petition to challenge the February 18, 2020 notice of deficiency with the Court.
On August 16, 2021, respondent issued to petitioner a CP90, Notice of Intent to Seize Your Assets and of Your Right to a Hearing (intent to levy notice), which corresponded to petitioner's federal income tax liability for tax year 2017; interest; an addition to tax under section 6651(a)(2) and a section 6662(a) accuracy-related penalty. On August 30, 2021, petitioner timely submitted to respondent a Form 12153, Request for a Collection Due Process or Equivalent Hearing. On the Form 12153, petitioner disputed the underlying liability, writing:
The Taxpayer transferred sums of $29,882.25 and $20,000 from Entrust Group as a direct rollover into a qualified account. However, the Taxpayer mistakenly completed normal distribution forms and is now being taxed on teh [sic] amounts as normal distributions from a qualified account, which is not what occurred. The Taxpayer has made repeated attempts to contact the IRS to resolve the issue to no avail.
Petitioner did not request collection alternatives on the Form 12153.
Petitioner's CDP case was assigned to Appeals Officer (AO) Marilyn M. Daniel. On February 25, 2022, AO Daniel mailed to petitioner a letter scheduling a telephone conference for April 26, 2022, and requesting additional information. Petitioner did not join the April 26, 2022 conference call. On April 26, 2022, AO Daniel sent a follow up letter to petitioner requesting that petitioner contact AO Daniel by May 10, 2022. Petitioner's counsel contacted AO Daniel on May 4, 2022. After several missed phone calls in both directions, AO Daniel talked with petitioner's counsel on May 17, 2022. During that phone call, AO Daniel stated that petitioner needed to file an amended return and provide a corrected Form 1099-R from Entrust by June 17, 2022-giving petitioner a further 30 days to gather the necessary documents. During the phone call on May 17, 2022, AO Daniel also asked petitioner's counsel whether petitioner received the February 18, 2020 notice of deficiency. Petitioner's counsel claimed that petitioner had never received the notice of deficiency and had "only received final notices." Petitioner did not submit the requested documents to AO Daniel.
On July 21, 2022, respondent issued to petitioner a Notice of Determination Concerning Collection Actions under IRS Sections 6320 or 6330 of the Internal Revenue Code (notice of determination), sustaining the proposed levy for unpaid tax liability for tax year 2017. Petitioner, through counsel, timely filed a Petition with this Court on August 19, 2022.
II. Discussion
A. 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 (1998). The Court may grant summary judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judgment, we construe factual materials and draw inferences therefrom in the light most favorable to the nonmoving party. Sundstrand Corp., 98 T.C. at 520. However, the nonmoving party may not rest upon mere allegations or denials of his pleadings but, rather, must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.
B. Standard & Scope of Review
Section 6330(d)(1) grants this Court jurisdiction to review the AO'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 § 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. See Sego, 114 T.C. at 609-10. Where the validity of the underlying tax liability is not properly at issue, the Court will review the SO's determination for abuse of discretion. 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 cases appealable to the U.S. Court of Appeals for the Eighth Circuit (as is this one), our scope of review when reviewing nonliability issues is limited to the administrative record. See Robinette v. Commissioner, 439 F.3d 455, 461-62 (8th Cir. 2006), rev'g 123 T.C. 85 (2004); but see Bowman v. Commissioner, 93 T.C.M. (CCH) 1204, 1207 (2007) (holding that the Court may consider a notice of deficiency that was not considered during the CDP hearing), aff'd, 285 Fed.Appx. 309 (8th Cir. 2008).
C. Underlying Liability
A taxpayer may challenge the existence or amount of underlying tax liability in a CDP proceeding only "if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." § 6330(c)(2)(B). The phrase "underlying tax liability" includes the tax due, any additions to tax or penalties, and statutory interest. See Katz v. Commissioner, 115 T.C. 329, 339 (2000).
A properly completed United States Postal Service Form 3877 that reflects the timely mailing of a notice of deficiency to the taxpayer's correct address by certified mail, absent evidence to the contrary, establishes that the notice was properly mailed to the taxpayer. Diamond v. Commissioner, T.C. Memo. 2012-90, 103 T.C.M. (CCH) 1480, 1482. Compliance with Form 3877 mailing procedures raises a presumption of official regularity in favor of respondent that, where unrebutted, can establish that a taxpayer received the notice of deficiency. See Sego, 114 T.C. at 611.
Here, respondent produced a copy of the notice of deficiency for tax year 2017 issued to petitioner on February 18, 2020. This notice was properly sent by certified mail to the same address that petitioner listed on the Petition which appears to have been petitioner's last known address at the times the notices were sent. Respondent has also produced a copy of a properly completed Form 3877 for the notice of deficiency with a certified mailing number matching the number found on the notice and a date-stamp matching the date of the notice. Respondent is thus entitled to a presumption of official regularity with respect to the mailing of the notice of deficiency on February 18, 2020. See, e.g., Klingenberg v. Commissioner, T.C. Memo. 2012-292, at *14-15 (finding presumption of official regularity raised where Commissioner established noticed of deficiency were sent by certified mail to petitioner's last known address); Crain v. Commissioner, T.C. Memo. 2012-97, 103 T.C.M. (CCH) 1533, 1536.
Petitioner has offered nothing to rebut the presumption of regularity other than a singular bare assertion by Petitioner's counsel that the notice of deficiency was never received during a phone call with AO Daniel. Without any further evidence to indicate that the notice of deficiency was not actually received by petitioner, the presumption of regularity controls, and we conclude that petitioner received the notice of deficiency. Petitioner is therefore barred from challenging the underlying liability in this Court.
Because petitioner had a prior opportunity to challenge the underlying liability, we review AO Daniel's decision to uphold the proposed levy for abuse of discretion only.
D. Abuse of Discretion
1. Issues Raised
We now turn to the remaining issues, which we review for abuse of discretion. Petitioner alleges that AO Daniel abused her discretion by closing the file and issuing a notice of determination after not receiving requested documentation from petitioner between February 25, 2022 and July 21, 2022. Petitioner did not request any collection alternatives. See DAF Charters, LLC v. Commissioner, 152 T.C. 250, 267 (2019) ("It is not an abuse of discretion for an Appeals officer to sustain a collection action and not consider collection alternatives when the taxpayer has proposed none."). On the administrative record before us, we see no abuse of discretion. See Belair v. Commissioner, 157 T.C. 10, 17 (2021) ("It is not an abuse of discretion for Appeals to move ahead with its final determination after an Appeals officer gives a taxpayer an adequate timeframe to submit requested items and the taxpayer fails to submit those items.").
2. Verification & Balancing Obligations
We finish with the issues of verification and balancing, which we generally may review regardless of whether raised by the taxpayer in the CDP proceeding. See Hoyle v. Commissioner, 131 T.C. 197, 202-03 (2008), supplemented by 136 T.C. 463 (2011). Section 6330(c)(1) and (3) require that the AO: (1) properly verify that the requirements of applicable law or administrative procedure have been met and (2) consider whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection be no more intrusive than necessary. On the record before us, we are satisfied that AO Daniel verified (1) that the notice and demand for payment was mailed to petitioners' last known address within 60 days of the assessment; (2) that there was a balance due when the intent to levy notice was issued; and (3) as the AO assigned to the case, she had no prior involvement with petitioner. It is not entirely clear which specific documents AO Daniel relied on to verify that the notice of deficiency was sent to the taxpayer's last known address; however, petitioner has conceded all arguments about verification in this case by failing to raise such arguments in the petition. See Rule 331(b)(4) ("Any issue not raised in the assignments of error shall be deemed to be conceded."); see also Craig v. Commissioner, 119 T.C. 252, 261-62 (2002) ("Section 6330(c)(1) does not require the Appeals officer to rely upon a particular document . . . in order to satisfy this verification requirement."); Luniw v. Commissioner, T.C. Memo. 2023-49, at *6 (deeming verification issues conceded where not alleged in petition). Finally, we conclude that AO Daniel's determination to sustain the proposed levy appropriately balanced the statutorily-prescribed interests. See Belair, 157 T.C. at 19; Pough v. Commissioner, 135 T.C. 344, 352 (2010).
III. Conclusion
Finding no abuse of discretion, we will grant respondent's motion.
Upon due consideration and for cause, it is
ORDERED that respondent's Motion for Summary Judgment, filed August 1, 2023, is granted. It is further
ORDERED AND DECIDED that the Notice of Determination Concerning Collection Actions Under IRS Sections 6320 or 6330 of the Internal Revenue Code, dated July 21, 2022, upon which this case is based, is sustained, and respondent may proceed with the collection action as determined for tax year 2017.