Opinion
19364-19L
08-05-2022
ROBERT D. TALBOT, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Elizabeth Crewson Paris, Judge.
This case is before the Court on respondent's Motion for Summary Judgment filed January 27, 2021, docket entry 17. Respondent seeks to have the Court sustain respondent's Notice of Determination Concerning IRS Collection Actions Under Internal Revenue Code Sections 6320 or 6330 (notice of determination) dated September 24, 2019, sustaining a proposed levy for unpaid tax liability for 2007, 2008, and 2009.
On February 18, 2021, docket entry 20, the Court directed petitioner to file a response to respondent's motion to which the petitioner filed a request for extension of time on May 10, 2021, docket entry 21. On July 8, 2021, the petitioner filed a (cross) Motion for Summary Judgment and a response in opposition to respondent's Motion for Summary Judgment, docket entries 23 and 24 respectively. Respondent filed a response in opposition to petitioner's (cross) motion for summary judgment on August 16, 2021, docket entry 26, and petitioner has filed his reply to the response in opposition on September 30, 2021, docket entry 27.
The issue for decision is whether the Appeals Office abused its discretion by not allowing petitioner to: (1) challenge his underlying tax liabilities for the years at issue, and (2) did not consider collection alternatives and sustaining the proposed levy.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Background
The following facts are drawn from respondent's Motion for Summary Judgment, petitioner's Cross-Motion for Summary Judgment, respondent's supporting declaration and the exhibits attached to that declaration, and the parties' respective written objections. They are stated solely for purposes of deciding the parties' Motions. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). Petitioner resided in Alaska when he timely filed his petition with this Court.
On the basis of the following, the Court will deny both respondent's and petitioner's Motion for Summary Judgments and remand this case to respondent's Appeals Office.
Tax Returns, Notices of Deficiency and previous Tax Court cases
Mr. Talbot did not file federal individual income tax returns for tax years 2007-2009. Pursuant to section 6020(b) the Internal Revenue Service (IRS) prepared substitutes for returns for tax years 2007, 2008, and 2009, and a statutory Notice of Deficiency was issued dated March 20, 2012 (2012 NOD).
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 at Docket number 26598-14L of which a Memorandum and Decision was issued on October 17, 2016, at T.C. Memo. 2016-191 addressing a filed Notice of Federal Tax Lien (NFTL). The Court concluded that the Settlement officer incorrectly determined that the notice of deficiency for the taxable years 2007, 2008, and 2009 were sent to petitioner's last known address before assessment. The settlement officer's determination to proceed with the collection of petitioner's tax liabilities for those years was therefore an abuse discretion, and the previously filed NFTL for the 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.
The Court, in the 2014 petition, determined that the statutory notice of deficiency in that case was the 2012 NOD which was addressed to the correct last known address. But, the IRS Form 3877 certified mailing listed an incorrect address, and the defective mailing list did not entitle a presumption of mailing.
A subsequent case with the Tax Court for those same tax years regarding the 2012 NOD and another previous Notice of Determination at Docket number 10506-16L was also filed and closed by Order and Decision issued on July 27, 2017 addressing a Notice of Levy. The Court did not sustain the Notice of Determination pertaining to taxable years 2007, 2008, and 2009.
The Court found that the levy case was also premised upon the same 2012 NOD 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 those case decisions 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 previous 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, the IRS issued Mr. Talbot another Statutory Notice of Deficiency for 2007, 2008, and 2009 (2017 NOD) mailed to petitioner's now known last-known address by certified mail to 690 Knik Goose Bay Rd., 250, Wasilla, Alaska 99654. The petitioner's last-known address was also petitioner's current address when he requested a hearing on Form 12153. The letter was delivered by certified mail on November 24, 2017. The IRS Form 3877 certified mail list reflects the correct address. The last day to petition the Tax Court was February 18, 2018. Petitioner did not petition the Tax Court in response to the 2017 NOD.
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.
Notice of Intent to Levy and Right to Request Hearing
On August 21, 2018, respondent issued a Notice of Intent to Levy and Notice of Your Right to a Hearing to petitioner's last known address, the same address as the 2017 NOD. The notice stated petitioner's federal tax is still unpaid and made demand for full payment and stated that failure to pay his 2007-2009 tax liabilities could result in respondent's right to levy petitioner's property. The Notice of Intent to Levy 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 Final Notice of Intent to Levy and Your Right to a Hearing. Petitioner did not request collection alternatives but checked "other" for his reason requested for a CDP hearing; attaching a letter requesting a face-to-face Collection Due Process Hearing, stating his 2007-2009 income was not taxable (he is not liable for the assessed tax), he never received a valid notice of deficiency, and requesting to discuss collection alternatives, among other reasons. Petitioner's address on the Form 12153 was the same as his last known address on the 2017 NOD and Notice of Levy.
CDP Hearing
On April 29, 2019, respondent's Office of Appeals issued a letter to Mr. Talbot 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 telephone conference was instead scheduled. Additionally, issues petitioner raised in his hearing request were identified as "frivolous," and in-person conferences would not be provided unless the frivolous arguments were withdrawn. Petitioner would not be able to dispute the liability during the hearing if the administrative record indicated petitioner received a copy of the statutory notice of deficiency. However, if the record indicated that petitioner did not receive a statutory notice of deficiency, the underlying liability could be challenged but petitioner would need to file tax returns for 2007, 2008, and 2009. And petitioner was instructed to provide, within fourteen (14) days, a completed Collection Information Statement Form 433-A and signed tax returns for tax years 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, and 2018 for the Settlement Officer to consider alternative collection methods.
A subsequent letter from Appeals included a copy of the Notice of Deficiency and the certified mail information. Unfortunately, Mr. Talbot's administrative file contained multiple copies of the previous NOD addressed in the previous Tax Court cases. The letter to Mr. Talbot included the current and correct IRS Form 3877 certified mail list from the 690 Knik Goose Bay Rd., 250 Wasilla, AK 99654 address, mailed November 20, 2017, and delivered November 24, 2017, but it also included the prior notice of deficiency mailed to old addresses. None of the notices included in the correspondence package from Appeals to Mr. Talbot were the current NOD, nor did they contain an issue date or the last day to petition the Tax Court. The Appeals Officer did not receive the 2017 NOD for review until June 2019, well after he mailed his correspondence package to petitioner.
In petitioner's letter dated August 7, 2019, petitioner protested multiple things in regard to his proposed hearing, to include the lack of the dates on the notices of deficiency included in the prior correspondence setting up his CDP hearing. The letter reflected a change in address.
On August 13, 2019, the Appeals Officer responded to petitioner, acknowledged petitioner's address change and allowed for information to be considered until August 27, 2019. On August 14, 2019, the day after the scheduled CDP hearing the Appeals officer forwarded the 2017 Notice of Deficiency to include the certified mailing information from November 20, 2017 to petitioner for his review and informing petitioner that he would have until September 12, 2019 to provide any information that he wanted considered before the Notice of Determination was issued. The August 14 letter did not set a new hearing date. Unfortunately, Appeals did not mail the correct NOD until the day after the scheduled hearing.
Petitioner's September 18, 2019, letter to Appeals indicates that a telephone conversation between petitioner and the settlement officer took place 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 a Notice of Determination Concerning IRS Collection Actions under Internal Revenue Code Sections 6320 or 6330 (notice of determination) sustaining a proposed levy for unpaid tax liability for tax years 2007-2009. In response to respondent's Notice of Determination, Mr. Talbot timely filed a petition with this Court on October 28, 2019.
Discussion
Summary Judgment
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(b) 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). 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. Id. However, the nonmoving party may not rest upon the mere allegations or denials in its pleadings but instead 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.
Jurisdiction
Section 6331(a) authorizes the Secretary to levy upon property and property rights of a taxpayer who fails to pay a tax within 10 days after notice and demand. Before the Secretary may levy upon the taxpayer's property, the Secretary must first notify the taxpayer of the Secretary's intent to levy. Sec. 6331(d)(1). The Secretary must also notify the taxpayer of his right to a CDP hearing. Sec. 6330(a)(1). If the taxpayer requests a CDP hearing, the hearing is conducted by the Office of Appeals. Sec. 6330(b)(1). At the hearing the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed collection action. Sec. 6330(c)(2)(A). Once the Settlement Officer makes a determination, the taxpayer may appeal to this Court for review. Sec. 6330(d)(1).
Underlying Tax Liabilities
Section 6330(c)(2)(B) precludes a taxpayer from challenging the existence or amount of the underlying liability unless the taxpayer did not receive a notice of deficiency for that liability or did not otherwise have an opportunity to dispute the liability. A properly completed Form 3877 reflecting the timely mailing of a Notice of Deficiency to a taxpayer at 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, 2012 WL 1021284, at *3. Compliance with Form 3877 mailing procedures raises a presumption of official regularity in favor of respondent that where un-rebutted, can establish that a taxpayer received the Notice of Deficiency. Id. at 8-9.
As part of the duty to verify that the requirements of any applicable law or administrative procedure have been met, the Settlement Officer must verify that the IRS made a valid assessment. See sec. 6330(c)(1); Hoyle v. Commissioner, 131 T.C. 197, 202-203 (2008). An assessment is not valid unless it is duly preceded by the mailing of a notice of deficiency to the taxpayer's last known address. Sec. 6213(a); Hoyle v. Commissioner, 131 T.C. at 202-203.
In this case, a Notice of Deficiency relating to petitioner's 2007, 2008, and 2009 tax years was issued to petitioner on November 20, 2017 (the 2017 NOD). The Notice was properly sent by certified mail to petitioner's home address, which was also petitioner's current address, at the time he filed his request for hearing on Form 12153. The IRS Form 3877 certified mail list reflects the correct mailing information and therefore entitles respondent to a presumption of mailing, Crain v. Commissioner, T. C. Memo 2012-97, Talbot v. Commissioner, T.C. Memo 2016-191. Petitioner does not believe that respondent has followed all of the applicable rules and regulations and sets forth that the Notice of Deficiency was void as a matter of law under the requirements of Section 6213(a). Petitioner does not deny receipt of the Notice of Deficiency, nor did petitioner file a petition contesting it. Petitioner's cross motion for summary judgment has made identical arguments to the response in opposition.
Respondent's motion for summary judgment recognizes that the Office of Appeals delivered copies of the incorrect NOD and not a copy of the 2017 NOD in the original correspondence package to petitioner. The Office did deliver, in the original correspondence package, IRS Form 3877 certified mailing list dated November 20, 2017, for petitioner's review before the hearing date. On June 20, 2019, prior to the hearing date, but after the original correspondence package was mailed, the Appeals Officer received the original statutory notice of deficiency dated November 20, 2017 and verified that it was delivered to petitioner's last known address. Respondent also recognizes that the petitioner was not provided a copy of the 2017 NOD until after the scheduled hearing date.
Petitioner timely responded prior to the hearing date and called into question the flaws in the NOD copies included in the appeals correspondence package. Petitioner did not receive the 2017 NOD until after the scheduled CDP hearing date.
The Office of Appeal's flawed correspondence package did not provide adequate time or information for the petitioner to prepare for the hearing. Petitioner was seemingly concerned that respondent was attempting to collect on an assessment of tax that two prior Tax Court decisions had found to be defective. Upon delivering the correct copy of the 2017 NOD, Appeal's should have rescheduled a hearing to consider the correct assessment documents.
The Court remands a collection due process case to respondent's Appeals Office when the Court determines that a further hearing would be "helpful", "necessary", or "productive". Kelby v. Commissioner, 130 T.C. 79, 86 n.4 (2008); Lunsford v. Commissioner, 117 T.C. 183, 189 (2001); Churchill v. Commissioner, T.C. Memo. 2011-182. "[T]he further hearing is a supplement to the taxpayer's* * * original hearing, not a new hearing." Kelby v. Commissioner, 130 T.C. at 86. After the further hearing, the Commissioner issues a supplemental notice of determination, which constitutes the position of the Commissioner for purposes of the Court's subsequent review. Id.
Both respondent and petitioner have failed to prove that no genuine dispute as to any material fact exists. It would be both helpful and productive to remand petitioner's case to respondent's Appeals Office for a supplemental CDP hearing.
After due consideration and for cause, it is
ORDERED that respondent's Motion for Summary Judgment, filed January 27, 2021, docket entry 17, is denied without prejudice to refile. It is further
ORDERED that petitioner's Motion for Summary Judgment, filed July 8, 2021, docket entry 23, is denied without prejudice to refile. It is further
ORDERED that this case is remanded to respondent's Appeals Office to consider petitioner's collection alternatives. It is further
ORDERED that respondent shall offer petitioner a supplemental CDP hearing at respondent's Appeals Office located closest to petitioner's residence (or at such other place as may be mutually agreed upon) at a reasonable and mutually agreed upon date and time but no later than November 2, 2022. It is further
ORDERED that, on or before December 19, 2022, the parties shall file with the Court a joint status report which includes a supplemental Notice of Determination.