Opinion
1099-23L
10-20-2023
MARC ALESSANDRO, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Elizabeth A. Copeland Judge
This case is set for trial at the New York, New York Trial Session of the Court scheduled to commence on October 23, 2023.
On February 10, 2023, Petitioner, Marc Alessandro, filed his Petition disputing the determination of the Commissioner of Internal Revenue (Commissioner or Respondent) to sustain a proposed levy to collect Mr. Alessandro's outstanding federal income tax liability for tax year 2017. On August 18, 2023, the Commissioner filed a Motion for Summary Judgment. On September 25, 2023, Mr. Alessandro filed an Objection to the Commissioner's Motion and a Declaration in Support of his Objection.
Background
The following background is drawn from the Commissioner's Motion and the attached Exhibits and Petitioner's Objection thereto. It is stated solely for the purpose of ruling on the Motion and not as findings of fact.
October 20, 2021: The Internal Revenue Service (IRS) mailed to Mr. Alessandro a Notice of Intent to Levy and Your Collection Due Process Right to a Hearing (levy notice), indicating an outstanding income tax liability (plus interest and penalties) of $60,967.
October 25, 2021: Mr. Alessandro sent to the IRS Form 12153, Request for a Collection Due Process or Equivalent Hearing, on which he checked the box indicating his desire for the IRS Independent Office of Appeals
(IRS Appeals) to consider an installment agreement as an alternative to the proposed levy.
October 4, 2022: Settlement Officer (SO) Donna Connolly sent Mr. Alessandro a letter informing him of a telephone conference scheduled for November 3, 2022, to conduct his requested collection due process (CDP) hearing. The letter also informed Mr. Alessandro that, in order to be eligible for a collection alternative, he would need to submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, as well as an income tax return for tax year 2022and proof of full payment of estimated tax payments for the then current year.
November 3, 2022: Neither Mr. Alessandro nor his representative phoned SO Connolly as directed.
November 8, 2022: SO Connolly sent Mr. Alessandro a letter informing him that she would consider any materials sent within 14 days of the letter but would otherwise issue a notice of determination thereafter.
November 28, 2022: SO Connolly spoke by phone with Mr. Alessandro's representative, who requested two additional weeks to submit materials needed for SO Connolly to consider a collection alternative.
December 20, 2022: SO Connolly left a voice message for Mr. Alessandro's representative, noting that she had not yet received any additional materials.
January 12, 2023: Having heard nothing further from Mr. Alessandro or his representative, IRS Appeals issued a Notice of Determination sustaining the levy notice. The Notice of Determination stated in part the following: "Our records indicate that the assessments for December 31, 2014 and 2017 was [sic] Substitute for Return assessments done by the Service under the authority of IRC § 6020(b). You sent in a return on June 22, 2021 and it was posted."
This reference to tax year 2022 in AO Connolly's letter appears to be an error (typographical or otherwise), since Mr. Alessandro's 2022 income tax return would not have been due until sometime the following year (i.e., 2023).
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 (here, the Commissioner) 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 (here, Mr. Alessandro). 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.
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.
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. 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).
This Court considers a challenge to the 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. Here, the record does not definitively reflect whether the IRS assessed Mr. Alessandro's 2017 liability on the basis of a substitute for return, see I.R.C. § 6020(b), or a late-filed return submitted by Mr. Alessandro himself sometime after the notice of deficiency was issued. Regardless, there is no evidence in the record that Mr. Alessandro raised a challenge to the liability reflected in the levy notice, and he raised no such challenge in his Petition. We therefore review SO Connolly's determination for abuse of discretion only.
In determining whether an SO abused her 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. Review of SO Connolly's Determination
We have authority to review a SO's satisfaction of the verification requirement regardless of whether the taxpayer raised the issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 200-03 (2008), supplemented by 136 T.C. 463 (2011). However, Rule 331(b)(4) also provides that "[a]ny issue not raised in the assignments of error [in the taxpayer's petition] shall be deemed to be conceded." Mr. Alessandro did not assert in his Petition that SO Alessandro failed to satisfy this requirement and has not directed our attention to any facts that would support such a finding. In any case, on the basis of our review of the record, we find no indication that any applicable requirements for proceeding with the proposed levy were not met. For instance, the record contains a copy of the levy notice properly addressed to Mr. Alessandro, along with evidence that a notice of deficiency was issued for his 2017 tax year and that a balance remains due.
On his Form 12153, Mr. Alessandro requested consideration of an installment agreement. However, he failed to submit the documentation that SO Connolly repeatedly requested and that IRS Appeals uses to determine whether a proposed installment agreement is appropriate. It is not an abuse of discretion for an SO to deny a collection alternative when the taxpayer fails to submit requested relevant documents within a reasonable timeframe. Pough v. Commissioner, 135 T.C. 344, 351 (2010).
According to the Commissioner's Motion, during the call on November 28, 2022, Mr. Alessandro's representative conveyed to SO Connolly that Mr. Alessandro "could not get a lien." The Petition clarifies that "[a]ny tax lien or levy would cause [Mr. Alessandro] to lose his license [as a financial planner] and would then [cause him to] lose his ability to earn income." In his Objection and Declaration, Mr. Alessandro amplifies this concern representing that he would need to report a tax lien on his registration form submitted to the Financial Industry Regulatory Authority (FINRA), likely triggering loss of clients and/or unemployment. However, despite the assertion in the Petition that a lien or levy would jeopardize Mr. Alessandro's career, the Objection and Declaration describe only the effects that a lien filing might have on Mr. Alessandro. Since tax levies are not matters of public record (and since, so far as we can discern, FINRA does not require licensed financial planners to report tax levies), we see no grounds for second-guessing SO Connolly's conclusion that the proposed levy balances the need for the efficient collection of taxes with Mr. Alessandro's legitimate concern that any collection action be no more intrusive than necessary.
Therefore, we will sustain the Notice of Determination and allow the IRS to proceed with the proposed levy. However, if and when the IRS considers filing a notice of tax lien to secure Mr. Alessandro's liabilities, we admonish the Commissioner to take due account of the potential effects of such a filing on Mr. Alessandro's ability to continue earning income as a financial planner. We also note that Mr. Alessandro is free to submit to the IRS at any time, for its consideration and possible acceptance, a collection alternative such as an installment agreement or offer-in-compromise, supported by the requisite financial information.
In his Declaration filed September 25, 2023, Mr. Alessandro represents that he "just filed for an Offer in Compromise." We emphasize that our decision here does not preclude the IRS from considering and accepting Mr. Alessandro's proposal. However, for clarity we note that Mr. Alessandro apparently proposed this offer-in-compromise only after IRS Appeals issued the Notice of Determination. SO Connolly could not have abused her discretion by failing to consider a collection alternative that Mr. Alessandro had not yet proposed. Therefore, this late-breaking offer-in-compromise-whatever its merits may be-does not affect our decision.
Upon due consideration, it is
ORDERED that Respondent's Motion for Summary Judgment, filed August 18, 2023, is granted. It is further
ORDERED AND DECIDED that the determination set forth in the Notice of Determination Concerning Collection Actions under IRS Sections 6320 or 6330 of the Internal Revenue Code, dated January 12, 2023, upon which this case is based, sustaining Respondent's proposed levies to collect Petitioner's 2017 income tax liability, is sustained.