Opinion
19364-19L
06-06-2023
ROBERT D. TALBOT, 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, June 12, 2023, in Anchorage, Alaska. On April 13, 2023, respondent filed a Motion for Summary Judgment (respondent's motion) and a Declaration of Michelle M. Sisti in Support of Motion for Summary Judgment.
By Order issued April 18, 2023, the Court directed petitioner to file a response to respondent's motion on or before May 17, 2023. As of the date of this Order, petitioner has not filed a response to respondent's motion. The Court could grant respondent's motion on that ground alone. See Rule 121(d). Nevertheless, the Court has considered respondent's motion on its merits and concludes that there are no genuine issues of material fact in dispute and that respondent is entitled to judgment as a matter of law.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
I. Background
A. Tax Returns, Notices of Deficiency, and Previous Tax Court Cases
Petitioner did not file federal individual income tax returns for tax years 2007, 2008, and 2009. Pursuant to section 6020(b), respondent prepared substitutes for returns (SFRs) for tax years 2007, 2008, and 2009, and a statutory Notice of Deficiency was issued, dated March 20, 2012 (2012 SNOD).
In regard to tax years 2007, 2008, and 2009, petitioner has had previous cases with the Tax Court for those same years regarding a previous Notice of Determination, first at Docket No. 26598-14L, in which a Memorandum Opinion was issued on October 17, 2016, at T.C. Memo 2016-191, addressing a filed Notice of Federal Tax Lien (NFTL). Therein, the Court found that the settlement officer (SO) relied only on an incorrect IRS Form 3877 to determine whether the SNOD was sent to petitioner's last known address and concluded that the settlement officer failed to properly determine that a notice of deficiency for tax years 2007, 2008, and 2009 was sent to petitioner's last known address before assessment. The Court concluded that the SO's determination to proceed with the collection of petitioner's tax liabilities for those years was therefore an abuse of discretion, and the previously filed NFTL for tax years 2007, 2008, and 2009 was not sustained. A decision was entered on December 14, 2016, not sustaining the Notice of Determination pertaining to taxable years 2007, 2008, and 2009.
A subsequent case with the Tax Court for those same tax years regarding the 2012 SNOD and another previous Notice of Determination, at Docket No. 10506-16L, was also filed and closed by Order and Decision, issued on July 27, 2017, addressing a Notice of Intent to Levy. The Court did not sustain this Notice of Determination pertaining to taxable years 2007, 2008, and 2009. The Court found that the levy case was also premised upon the 2012 SNOD discussed in T.C. Memo. 2016-191 and, as in that case, suffered from the same notice flaw-that the certificate of mailing reflected an incorrect address.
After both decisions in these previous cases, respondent represented that the tax previously assessed for those years would be abated, and a new Notice of Deficiency would be issued and served. Both of these prior Tax Court cases are included in the administrative record. Transcripts in the record reflect that respondent abated the previous tax assessments for each tax year at issue.
On November 20, 2017, respondent issued to petitioner another statutory Notice of Deficiency for tax years 2007, 2008, and 2009 (2017 SNOD), mailed to petitioner by certified mail at the address 690 Knik Goose Bay Rd., 250, Wasilla, Alaska 99654. The 2017 SNOD was delivered by certified mail on November 24, 2017. The IRS Form 3877 certified mail list reflects the correct address. The last day for petitioner to petition the Tax Court was February 18, 2018. Petitioner did not file a petition with the Tax Court in response to the 2017 SNOD. The transcripts reflect that, on June 11, 2018, respondent assessed the tax and additions to tax reflected on the Notice of Deficiency for tax years 2007, 2008, and 2009.
Petitioner listed the 690 Knik Goose Bay Rd. address as his current address on the Form 12153, Request for a Collection Due Process or Equivalent Hearing that he submitted to commence the underlying CDP proceeding at issue in this case.
B. Notice of Intent to Levy and Right to Request a Hearing
On August 21, 2018, respondent issued a Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice) to petitioner's 690 Knik Goose Bay Rd. address (the same address used in the 2017 SNOD). The levy notice stated that petitioner's federal tax was still unpaid, made demand for full payment, and informed petitioner that failure to pay his 2007-2009 tax liabilities could result in respondent's right to levy petitioner's property. The levy notice further informed petitioner of his right to file a CDP hearing request to appeal the proposed levy action.
On September 19, 2018, petitioner sent a Form 12153, Request for a Collection Due Process or Equivalent Hearing, in response to the levy notice. Petitioner did not request collection alternatives but checked "other" as his reason for requesting a CDP or equivalent hearing. Petitioner attached a letter to his Form 12153, wherein he requested a face-to-face CDP hearing, stating that his 2007-2009 income was not taxable ("I don't believe I am liable for the assessed tax"), that he never received a valid SNOD, and requesting to discuss collection alternatives, among other reasons. As noted above, petitioner's current address on the Form 12153 was the same 690 Knik Goose Bay Road address used on the 2017 SNOD and levy notice.
C. CDP Hearing
On April 29, 2019, Settlement Officer Kevin Pernick (SO Pernick), an employee in respondent's Independent Office of Appeals (Appeals), issued to petitioner a letter, informing him that his CDP hearing request was received and that a telephonic hearing was scheduled for August 13, 2019. The letter stated that, although petitioner requested an in-person conference, a telephonic conference was instead scheduled. The letter indicated that issues raised by petitioner in his hearing requested were identified as "frivolous" and that an in-person conference would not be provided unless these frivolous arguments were withdrawn. The letter also advised that petitioner would not be able to dispute the underlying liability during the hearing if the administrative record indicated that petitioner received a copy of the SNOD. However, if the record indicated that petitioner did not receive a SNOD, the underlying liability could be challenged, but petitioner would need to file tax returns for tax years 2007, 2008, and 2009. Petitioner was also instructed to provide, within fourteen (14) days, a completed Form 433-A and signed tax returns for tax years 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, and 2018 in order for the SO to consider collection alternatives.
By letter dated May 3, 2019, SO Pernick wrote to petitioner and purported to enclose a copy of the SNOD at issue. The letter to petitioner included the current and correct IRS Form 3877, reflecting the certified mailing of a SNOD on November 11, 2017, to petitioner's 690 Knik Goose Bay Rd. address; however, it mistakenly included the prior 2012 SNOD mailed to old addresses. None of the notices included in the correspondence packet were the 2017 SNOD, nor did they contain an issue date or the last day to petition the Tax Court. Further, SO Pernick did not receive the 2017 SNOD for review until June 2019, well after he mailed his correspondence packet.
By letter dated August 7, 2019, petitioner raised multiple points of protest regarding his proposed hearing, including the lack of dates on the SNODs included in the prior correspondence setting the CDP hearing. The letter also reflected a change in petitioner's address.
By letter dated August 13, 2019, SO Pernick responded to petitioner, acknowledged petitioner's address change, and allowed for additional information to be considered until August 27, 2019. By letter dated August 14, 2019 (i.e., the day after the scheduled CDP hearing), SO Pernick forwarded to petitioner the 2017 SNOD and corresponding IRS Form 3877 and informed petitioner that he would have until September 12, 2019, to provide any information that he wanted to have considered before the issuance of a Notice of Determination. The August 14, 2019 letter did not set a new hearing date.
Petitioner subsequently mailed a letter to SO Pernick, dated September 18, 2019, which indicated that a telephone conversation took place between petitioner and SO Pernick on September 10, 2019, during which petitioner requested a hearing at that time or to reschedule the hearing for another time. Petitioner's request was denied.
On September 24, 2019, respondent issued to petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 of the Internal Revenue Code, sustaining the proposed levy for unpaid tax liability for tax years 2007, 2008, and 2009. Petitioner timely filed a Petition with this Court on October 28, 2019.
D. Remand and Supplemental CDP Hearing
On January 27, 2021, respondent filed a Motion for Summary Judgment (respondent's 2021 motion) and accompanying Declaration of Scott W. Forbord in Support of Motion for Summary Judgment, and, on July 8, 2021, petitioner filed a Motion for Summary Judgment, as well as a motion in opposition to respondent's 2021 motion.
By Order issued August 5, 2022, (prior order) the Court, inter alia, denied both petitioner's motion and respondent's 2021 motion without prejudice, remanded this case to Appeals to consider collection alternatives, and ordered that respondent offer to petitioner a supplemental CDP hearing.
On August 10, 2022, respondent issued a remand memorandum and sent the case file to the Appeals Team Manager in Los Angeles, as the Los Angeles office was responsible for the original CDP hearing. On or around October 21, 2022, this case was assigned to Appeals Officer Janelle Lourdeau (AO Lourdeau), an Appeals employee in the Seattle office (the Appeals office closest to petitioner's residence). On October 25, 2022, AO Lourdeau sent to petitioner a letter, scheduling a supplemental CDP hearing via telephone for December 1, 2022 (first scheduling letter). The first scheduling letter also informed petitioner that, in order for AO Lourdeau to consider a collection alternative, petitioner would need to be in filing and tax payment compliance and would need to provide verification of his ability to pay, including a completed Form 433-A and Forms 1040 for tax years 2016, 2017, 2018, 2019, 2020, and 2021, by November 29, 2022.
Petitioner failed to call in for the scheduled hearing on December 1, 2022. On December 14, 2022, AO Lourdeau called petitioner, left a voicemail, and requested that petitioner call her back on or before December 16, 2022.
On December 17, 2022, petitioner sent a letter specifically addressed to AO Lourdeau, using the address that she provided in the first scheduling letter.Petitioner did not provide any of the financial information requested by AO Lourdeau (or by SO Pernick before her); instead, petitioner included a copy of the prior order with a handwritten note written across the caption, attached to which was an "International Notice of Distraint Issued to the District Government(s)," which purports to be issued by "James Clinton Belcher, Head of State," appears to be published online by a self-proclaimed judge in the sovereign citizen movement, and raises only frivolous arguments, such as that the IRS is a private debt collection agency.
Respondent reports that AO Lourdeau's specific address is not widely available to the public, nor was it provided to petitioner prior to issuing the first scheduling letter.
On January 5, 2023, AO Lourdeau sent to petitioner a second scheduling letter, resetting a supplemental CDP hearing via telephone for February 8, 2023. Petitioner failed to call in for the scheduled hearing on February 8, 2023. Also on February 8, 2023, AO Lourdeau reached out to petitioner by telephone, which went immediately to voicemail, and left him a message to return her call. As of February 9, 2023, petitioner had not provided any of the documents requested by AO Lourdeau.
On March 28, 2023, AO Lourdeau issued to petitioner a Supplemental Notice of Determination Concerning IRS Collection Actions under Internal Revenue Code Sections 6320 or 6330 (supplemental notice), sustaining the proposed levy action.
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 of Review
Section 6330(d)(1) grants this Court jurisdiction to review the 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 § 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 administrative 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 Ninth Circuit, such as this one, we limit our review in CDP cases to the administrative record in existence at the time the determination was made. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff'g T.C. Memo. 2006-166.
When the Court remands a case to Appeals, the further hearing is a supplement to the taxpayer's original CDP hearing, not a new hearing in and of itself. Kelby v. Commissioner, 130 T.C. 79, 86 (2008) (citing Drake v. Commissioner, T.C. Memo. 2006-151, aff'd, 511 F.3d 65 (1st Cir. 2007)). As such, when a case is remanded to Appeals and supplemental determinations are issued, the position that we review is the position taken in the last supplemental determination. Kelby, 130 T.C. at 86.
C. Underlying Liability
As noted above, a taxpayer may challenge the existence or amount of his 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 Form 3877 that reflects the timely mailing of a notice of deficiency to a taxpayer 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. Id. (citing Sego, 114 T.C. at 611; also citing Clark v. Commissioner, T.C. Memo. 2008-155).
Here, respondent produced a copy of the 2017 SNOD issued to petitioner on November 20, 2017. The 2017 SNOD was properly sent by certified mail to the 690 Knik Goose Bay Rd. address, which we conclude was then petitioner's last known address. Respondent has also produced a copy of a properly completed Form 3877, date-stamped November 24, 2017, which lists one piece of mail, sent to petitioner at the same address, with a certified mailing number matching the number found on the 2017 SNOD. Respondent is thus entitled to a presumption of official regularity with respect to the mailing of the 2017 SNOD. 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.
Again, we note that this was the same address petitioner listed as current on his later Form 12153.
While petitioner expressed concern over the erroneous inclusion of the 2012 -SNOD and lack of inclusion of the 2017 SNOD in the initial correspondence packet sent by SO Pernick, petitioner was provided a copy of both the Form 3877 and the 2017 SNOD in August 2019. Although petitioner vaguely claimed that he did not receive a notice of deficiency in his hearing request, petitioner has produced no evidence to support this claim. As such, we find that petitioner has failed to rebut the presumption that respondent properly mailed the 2017 SNOD to petitioner and thus conclude that petitioner has not raised a fact issue with respect to whether he received the 2017 SNOD.
Furthermore, this Court considers a challenge to underlying liability in a CDP case only if the taxpayer properly raised a challenge in the CDP proceeding. See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. The taxpayer does not properly raise an issue, including the underlying liability, during the CDP hearing if he "fails to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence." Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.
Despite having a reasonable opportunity to do so, petitioner failed to produce any evidence during the CDP proceedings, including the supplemental CDP hearing proceedings, regarding his underlying liability for tax years 2007, 2008, and 2009. We find that petitioner failed to properly raise a challenge to his underlying liability in the CDP proceeding and is thus barred from raising such a challenge before this Court. Accordingly, we review SO Pernick and AO Lourdeau's determinations for abuse of discretion only.
D. Abuse of Discretion
Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. Murphy, 125 T.C. at 320. In determining whether either SO Pernick or AO Lourdeau's decisions sustaining the levy notice were abuses of discretion, we turn to section 6330(c)(3), which requires the SO/AO 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/AO or make an independent determination of what would be an acceptable collection alternative. Id. at 179. If the SO/AO "followed all statutory and administrative guidelines and provided a reasoned, balanced decision," we "will not reweigh the equities." Id.
1. Verification
Before issuance of a notice of determination, an SO/AO is required to verify that all requirements of applicable law and administrative procedure have been met. § 6330(c)(1), (3)(A). We have the authority to review satisfaction of this requirement regardless of whether the taxpayer raised a verification issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 200-03 (2008), supplemented by 136 T.C. 463 (2011).
Here, SO Pernick verified that (i) assessments were properly made for the 2007, 2008, and 2009 tax periods; (ii) the notice and demand for payment was mailed to petitioner's last known address within 60 days of the assessment; (iii) there was a balance due when the levy notice was issued; and (iv) as the SO assigned to the case, he had no prior involvement with petitioner.
Likewise, AO Lourdeau verified that (i) assessments were properly made for the 2007, 2008, and 2009 tax periods; (ii) the notice and demand for payment was mailed to petitioner's last known address within 60 days of the assessment; (iii) there was a balance due when the levy notice was issued; and (iv) as the SO assigned to the case, he had no prior involvement with petitioner.
Although petitioner expressed uncertainty regarding general compliance with IRS policies in a letter to SO Pernick, our review of the record nonetheless confirms that both SO Pernick and AO Lourdeau satisfied the verification requirement.
2. Balancing and Issues Raised
We also conclude that both SO Pernick and AO Lourdeau appropriately conducted a balancing analysis in sustaining the proposed collection actions. Although petitioner requested collection alternatives be considered, petitioner did not provide any information requested, despite numerous opportunities to do so. Thus, SO Pernick and AO Lourdeau were well within their discretion to proceed with the proposed collection action and decline to consider a collection alternative. See, e.g., McLaine v. Commissioner, 138 T.C. 228, 243 (2012); Pough v. Commissioner, 135 T.C. 344, 351 (2010); Kindred v. Commissioner, 454 F.3d 688, 697 (7th Cir. 2006).
The only other non-frivolous issue raised by petitioner was his request for a face-to-face CDP hearing. A taxpayer who presents relevant, non-frivolous reasons for disagreement will ordinarily be offered a face-to-face conference at the Appeals office closest to the taxpayer's residence. Treas. Reg. § 301.6330-1(d)(2)Q&A-D7. However, a face-to-face hearing is not a requirement of section 6330. Katz, 115 T.C. at 337-38. Further, it is not an abuse of discretion for an SO/AO to deny a request for a face-to-face conference after the SO/AO has determined that the hearing would not be productive due to frivolous or groundless arguments. See, e.g., Zigmont v. Commissioner, T.C. Memo. 2010-253, 100 T.C.M. (CCH) 447, 450. It is not an abuse of discretion to proceed with collection if the taxpayer has not filed all required tax returns. See, e.g., Moline v. Commissioner, T.C. Memo 2009-110, 97 T.C.M. (CCH) 1571, 1572, aff'd, 363 Fed.Appx. 675 (10th Cir. 2010). Further, a face-to-face conference concerning collection alternatives will not be granted unless the taxpayer is current on filing requirements and required tax deposits and submits required financial information. See Treas. Reg. § 301.6330-1(d)(2)Q&A-D8.
Here, petitioner raised several frivolous arguments that were not withdrawn. Further, petitioner failed to file tax returns for tax years 2007, 2008, and 2009 or provide any of the requested forms or financial information. Accordingly, we find that neither SO Pernick nor AO Lourdeau abused their discretion in determining that petitioner was not eligible for a face-to-face CDP hearing.
III. Conclusion
In sum, petitioner has failed to set forth specific facts, by affidavit or otherwise, showing that there is a genuine dispute of fact. See 121(d). After carefully reviewing the administrative record in support of respondent's motion, we see no basis to conclude that either SO Pernick or AO Lourdeau abused their discretion in any respect in sustaining the levy notice. Finding no abuse of discretion, we find that respondent is entitled to judgment as a matter of law.
Upon due consideration, and for cause, it is
ORDERED that this case is stricken for trial from the Court's June 12, 2023, Anchorage, Alaska, trial session, and that the parties need not appear. It is further
ORDERED that respondent's Motion for Summary Judgment, filed April 13, 2023, is granted. It is further
ORDERED AND DECIDED that the Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 dated, September 24, 2019, as supplemented, by the Supplemental Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 dated March 28, 2023, for the taxable years 2007, 2008, and 2009, is sustained.