Opinion
17799-18L
11-01-2021
Michael Balice, Petitioner v. Commissioner of Internal Revenue, Respondent
ORDER GRANTING SUMMARY JUDGMENT AND ORDER TO SHOW CAUSE
DAVID GUSTAFSON JUDGE.
This "collection due process" ("CDP") case is brought under section 6320(a)(3)(B). Petitioner Michael Balice filed a timely petition in this Court on September 10, 2018, seeking our review of a "Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330" ("NOD") dated August 27, 2018, issued by the IRS Office of Appeals ("IRS Appeals"). The NOD sustains a decision by the agency to file a Notice of Federal Tax Lien ("NFTL") against Mr. Balice for his unpaid income tax liabilities for the 2007 and 2008 years. Pending before us are a motion for summary judgment filed by respondent, the Commissioner of Internal Revenue, and a cross motion for summary judgment filed by Mr. Balice, each pursuant to Rule 121. (Docs. 31 & 38.) We will grant the Commissioner's motion and deny Mr. Balice's motion.
Unless otherwise indicated, all section references are to the Internal Revenue Code (26 U.S.C.) in effect at the relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. Dollar amounts are rounded. A citation in this order to a "Doc." refers to a document so numbered in the Tax Court docket record of this case, and a pinpoint citation therein refers to the pagination as generated in the portable document format ("PDF") file.
On July 1, 2019, the IRS Appeals Office was renamed the "Internal Revenue Service Independent Office of Appeals". See Taxpayer First Act, Pub. L. No. 116-25, sec. 1001(a), 133 Stat. at 983 (2019). Some of the events in this case predate that renaming. We use the term "IRS Appeals" without distinction to refer to the office both before and after the name change.
Background
Petitioner's 2007 and 2008 tax liabilities
Mr. Balice did not file Federal income tax returns for 2007 or 2008. In 2012, the IRS prepared substitutes for returns ("SFRs") for Mr. Balice's 2007 and 2008 years under the authority granted by section 6020(b). (Doc. 33 at 138-142.) We take notice of those SFRs as they appear in the record in Mr. Balice's previous case, Docket No. 22235-13, as Exhibits O and P to the Commissioner's motion for summary judgment (Doc. 35 at 383-413) filed in that prior case. The SFRs are dated May 30 and July 20, 2012, and bear the printed name and signature of Joseph Roster, identified as Technical Services Reviewer. Each SFR consists of an "IRC Section 6020(b) Certification" (Form 13496), with an attached "Income Tax Discrepancy Adjustments" (Form 4549-A), "Statement - Income Tax Changes" (Form 5278), and "Explanation of Items" (Form 886-A).
According to the IRS integrated data retrieval system ("IDRS"), Mr. Balice has never voluntarily filed a Federal income tax return. (Doc. 33 at 46.)
On the basis of these SFRs, the IRS mailed to Mr. Balice a statutory notice of deficiency ("SNOD") determining tax deficiencies for each year and additions to tax for fraudulent failure to file under section 6651(f) (for 2007), and for failure to file timely (for 2008) under section 6651(a)(1) and failure to pay timely (for both years) under section 6651(a)(2).
Litigation of petitioner's liability for 2007 and 2008 taxes
Mr. Balice petitioned this Court for redetermination of the adjustments in the SNOD. In that deficiency case, Docket No. 22235-13, Mr. Balice did not dispute the Commissioner's calculations of his income, tax liabilities, additions to tax, or penalties for 2007 or 2008; instead, he raised numerous frivolous arguments protesting the constitutionality of the Federal income tax, its applicability to him, and the SFR assessment procedures. (Doc. 33 at 14-15.) We "grant[ed] the [Commissioner's] motion for summary judgment and sustain[ed] the tax deficiencies and additions to tax determined by the IRS [and] also require[d] Mr. Balice to pay under section 6673(a) a penalty to the United States in the amount of $25,000 for asserting frivolous positions in this Court." Balice v. Commissioner, T.C. Memo. 2015-46, 109 T.C.M (CCH) 1220, 1221 (2015).
Mr. Balice appealed our decision to the Third Circuit Court of Appeals. The Third Circuit affirmed our decision on all grounds and, pursuant to 28 U.S.C. 1915(e)(2)(B), dismissed Mr. Balice's appeal as frivolous. Balice v. Commissioner, 634 Fed.Appx. 349, 350 (3rd Cir. 2016).
Prior litigation of collection of petitioner's 2007 and 2008 tax liabilities
After the Third Circuit dismissed Mr. Balice's appeal, the IRS mailed to him a Letter 3172, "Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320" ("CDP lien notice"), dated February 23, 2016, informing him of the filing of an NFTL for his 2007 and 2008 income tax liabilities and the civil penalty for 2007. (Doc. 33 at 21). Mr. Balice timely submitted a Form 12153, "Request for a Collection Due Process or Equivalent Hearing" ("CDP request"), to IRS Appeals on March 20, 2016. Attached to Mr. Balice's CDP request is a letter stating in part that the purpose of the CDP hearing, according to him, was "to have the IRS Appeals Office review the lawfulness of the determinations and other actions which have been taken in my case regarding the tax years 2007 and 2008." Id. at 25. Upon receiving Mr. Balice's CDP request and accompanying letter, IRS Appeals perceived it as "rais[ing] frivolous issues regarding the lawfulness of the SFR and Underlying Liability." Id. at 34. While processing Mr. Balice's CDP request, IRS Appeals verified that, as of February 19, 2016, the liabilities for 2007 and 2008 and the civil penalty for 2007 were included by the Department of Justice ("DOJ") in a pending suit against him to reduce his tax liabilities to judgment and to foreclose on his property to satisfy the liabilities. Id. at 35. Pursuant to Internal Revenue Manual ("IRM") section 8.22.6.9 (2017), IRS Appeals determined that contact with Mr. Balice was prohibited because "DOJ ha[d] the sole authority to settle or otherwise compromise liabilities" while "litigation to reduce a tax claim to a judgment [was] pending." Accordingly, IRS Appeals suspended Mr. Balice's CDP request pending resolution of DOJ's suit against him. (Doc. 33 at 35-36).
The IRS also mailed to Mr. Balice a Letter 1058, "Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing" ("CDP levy notice"), dated February 17, 2016; i.e., one week earlier than the notice of the lien filing. Mr. Balice's CDP request, submitted on March 20, 2016, listed both lien and levy as the basis for requesting the hearing. However, the sole focus of our review here is the NFTL, because the CDP request was timely submitted as to the CDP lien notice but untimely submitted as to the CDP levy notice. Furthermore, because we previously ordered remand in this case for a supplemental CDP hearing (discussed below), our review is limited to determinations of the supplemental NOD. The supplemental NOD does not discuss levy issues because Mr. Balice did not raise any levy issues in the supplemental CDP hearing. (Doc. 33 at 148-152).
In an unpublished opinion signed August 9, 2017 (id. at 63-90), the United States District Court for the District of New Jersey reduced Mr. Balice's 1998, 2007, and 2008 liabilities to judgment (holding that "Accounting for liabilities, statutory additions, and the $25,000 penalty, Balice owes $117,337.27 for the 2007 tax year and $6,693.51 for the 2008 tax year, as of January 9, 2017") and authorized DOJ to foreclose on his primary residence, which was held by Rosewater Trust, a trust for which Mr. Balice was trustee. Rosewater Trust was found to be Mr. Balice's nominee. United States v. Balice, 2017 WL 3420918 at *10 (D. N.J. 2017).
Although the opinion of the District of New Jersey was filed August 9, 2017, final judgement (Doc. 33 at 91-93) was not entered until June 8, 2018, because Mr. Balice filed a Chapter 13 bankruptcy petition on November 13, 2017. Id. at 41. Mr. Balice's Chapter 13 bankruptcy petition was dismissed on June 14, 2018, and IRS Appeals resumed processing Mr. Balice's request for a CDP hearing on July 6, 2018. Id. at 41. As to 2007 and 2008, the District Court's final judgment held that "judgment is hereby entered against Michael Balice in the amount set forth in the United States' Motion for Summary Judgment and accompanying affidavits, i.e., $124,030.68 as of January 9, 2017 (see Dkt. 187 p. 2), together with all statutory interest and penalties accruing according to law until paid, in connection with the federal income tax assessments against Michael Balice for tax years 2007 and 2008." Id. at 92-93.
After reviewing Mr. Balice's CDP request and accompanying letter in detail, IRS Appeals determined that Mr. Balice was disputing the underlying liabilities by raising frivolous arguments. Id. at 43. Because Mr. Balice raised frivolous arguments regarding the underlying liabilities and presented no collection alternatives, IRS Appeals issued a NOD sustaining the notice of federal tax lien on August 27, 2018. Id. at 114-118. No hearing was held.
Petitioner's instant petition to the Tax Court
Mr. Balice filed a timely petition commencing this case on September 10, 2018, challenging the NOD because "no hearing was ever actually conducted, " "[l]evy enforcement was never suspended while the CDP hearing result (determination) was pending," and "[p]etitioner is not the person liable by law for the payment of the disputed tax." (Doc. 1 at 1-2.) At the time he filed the petition, Mr. Balice resided in New Jersey. By order dated October 21, 2019 (Doc. 23), we remanded this case to IRS Appeals to conduct an in-person hearing for consideration of all non-frivolous issues, and specifically to confirm the proper assessment of tax and penalties for Mr. Balice's benefit and to consider collection alternatives.
IRS Appeals's supplemental determination on remand
On remand, Mr. Balice's CDP hearing was assigned to Settlement Officer Jesse Voyset ("SO Voyset"). Prior to the CDP hearing, SO Voyset sent Mr. Balice Form 433A, "Collection Information Statement for Wage Earners and Self-Employed Individuals", to determine his reasonable collection potential for consideration of collection alternatives. (Doc. 33 at 44.) Mr. Balice's CDP hearing was held in-person on December 11, 2019. Id. at 45. At the CDP hearing, SO Voyset advised Mr. Balice that his 2007 and 2008 tax liabilities were based on SFRs pursuant to section 6020(b) because Mr. Balice did not file tax returns. SO Voyset gave Mr. Balice copies of his account transcripts for the 2007 and 2008 tax years, and further advised Mr. Balice that he received a notice of deficiency that gave him an opportunity to dispute the underlying liabilities in Tax Court (which Mr. Balice did). Id. at 46. SO Voyset determined that Mr. Balice did not qualify for any collection alternatives because he was not in compliance with his filing requirements for 2016, 2017, and 2018. Id. SO Voyset advised Mr. Balice of the audit reconsideration process and provided him with the income documents reported to the IRS by third parties for the years Mr. Balice would need to file tax returns. Id. SO Voyset advised Mr. Balice that the IRS followed the applicable laws and administrative procedures and that the notice of federal tax lien would be sustained, then issued a supplemental NOD to that effect. Id. at 46, 149-152.
Respondent's motion for summary judgment and petitioner's response
The Commissioner filed his motion for summary judgment (Doc. 31), contending that there is no genuine dispute of material fact with respect to the following: (1) that under section 6330(c)(4)(A), Mr. Balice is precluded from challenging his underlying liabilities and validity of the tax liens for the 2007 and 2008 tax years; and (2) that SO Voyset did not abuse his discretion in sustaining the NFTL. In support of his motion, the Commissioner provided the following: (1) certificates of official record showing the state of Mr. Balice's tax accounts, as of January 7, 2020, for the 1992, 1993, 1996, 1998, 2001, 2007, and 2008 years; and (2) the declaration of SO Voyset, accompanied by the Commissioner's administrative file for Mr. Balice's CDP case. (Docs. 32 & 33.)
Mr. Balice asserts three primary arguments in his objection to the Commissioner's motion for summary judgment (Doc. 39). He argues that the Commissioner's motion should be denied because (1) the DOJ suit in the District of New Jersey was not stayed pending the outcome of his CDP hearing with IRS Appeals, (2) the NFTL for 2007 and 2008 has already been reduced to judgment and enforced through foreclosure, and (3) that the SFR assessments for 2007 and 2008 are invalid. The following documents are appended to Mr. Balice's response: (1) a copy of a letter written to Senator Daniel P. Moynihan by Cornelia Ashby, dated February 17, 2000, concerning the IRS SFR program; (2) excerpts of the IRM concerning SFR assessment procedures; (3) a copy of a letter written to Richard Durjak by Michael White of the Office of the Federal Register concerning implementing regulations for section 6020 in title 26 of the Code of Federal Regulations ("C.F.R."); and (4) a notarized statement by Mr. Balice disputing the calculation of his income for the 2007 and 2008 SFRs and the validity of the SFR assessments for those years. Each of these documents includes in text boxes Mr. Balice's digitally added commentary disputing the validity of the SFR assessment procedures. (Doc. 39 at 28-35.)
Petitioner's motion for summary judgment
Additionally, Mr. Balice filed his own motion for summary judgment (Doc. 38) on April 28, 2020. In his motion for summary judgment, Mr. Balice asserts the same arguments as in his objection to the Commissioner's motion for summary judgment, that (1) the applicable laws and procedures were not followed because enforcement through the DOJ suit in the District of New Jersey was not suspended while his CDP hearing was pending before IRS Appeals, (2) the liens at issue have already been enforced through foreclosure, and (3) the SFRs created by the IRS for his 2007 and 2008 years are invalid because they were "not actually created, nor 'subscribed', as required by law on both counts." (Doc. 38 at 16-17.)
Discussion
I. Applicable Legal Principles
A. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). 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).
The moving party bears the burden of showing that no genuine dispute of material fact exists, and the Court will view any factual material and inferences in the light most favorable to the nonmoving party. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985). However, Rule 121(d) imposes a duty on a party resisting summary judgment:
When a motion for summary judgment is made and supported as provided in this Rule, an adverse party may not rest upon the mere allegations or denials of such party's pleading, but such party's response, by affidavits or as otherwise provided in this Rule, must set forth specific facts showing that there is a genuine dispute for trial.
The Commissioner has made and supported his motion for summary judgment as provided in Rule 121 with the certified copies of Mr. Balice's tax account transcripts, the declaration of SO Voyset, and sworn copies of the Commissioner's administrative file for Mr. Balice's CDP hearing. Therefore, pursuant to Rule 121(d), it is incumbent upon Mr. Balice to set forth specific facts, by affidavit or as otherwise provided in Rule 121, showing there is a genuine dispute for trial. As discussed in greater detail below, we find that Mr. Balice has not set forth specific facts showing that there is a genuine dispute for trial because the support for his response to the Commissioner's motion relates only to his contention disputing the validity of the SFR assessments--a liability issue that (as we explain below) we will not consider. See sec. 6330(c)(4)(A). Accordingly, we find that no material facts are in dispute, and the issue of whether SO Voyset abused his discretion in sustaining the NFTL can be resolved on the record before us. We hold that there is no genuine dispute of material fact that, as a matter of law, SO Voyset did not abuse his discretion in sustaining the NFTL.
B. Collection Due Process Procedures
When a taxpayer fails to pay any Federal income tax liability within 10 days after notice and demand, section 6321 imposes a lien in favor of the United States on all the property of the delinquent taxpayer, and section 6323(f) authorizes the IRS to file notice of that lien. However, within five business days after filing a NFTL, the IRS must provide written notice to the taxpayer. Sec. 6320(a). After receiving such notice, the taxpayer may request an administrative CDP hearing before IRS Appeals. Sec. 6320(b)(1).
At the CDP hearing, IRS Appeals must determine whether the proposed collection action may proceed. In making that determination, the IRS Appeals officer is statutorily required to consider the following: (1) whether the requirements of any applicable law or administrative procedure have been met; (2) any issues raised by the taxpayer, including (relevant here) challenges to the appropriateness of the collection action and proposed collection alternatives; and (3) whether the proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. Secs. 6320(c), 6330(c).
Once IRS Appeals issues its determination, the taxpayer "may, within 30 days of a determination * * * petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter)." Sec. 6330(d)(1).
C. Treatment of Frivolous Arguments
Litigants who advance frivolous arguments in the Tax Court are not entitled to, and should not expect to receive, opinions rebutting their frivolous arguments. Wnuck v. Commissioner, 136 T.C. 498 (2011). The IRS publishes and updates a list of frivolous positions pursuant to section 6702(c). See Notice 2010-33, 2010-17 I.R.B. 609. Under section 6673, "the Tax Court, in its decision, may require the taxpayer to pay to the United States a penalty not in excess of $25,000" for instituting proceedings primarily for delay, maintaining frivolous positions, or unreasonably failing to pursue available administrative remedies.
D. Tax Court Review
Where the validity of the underlying liability is properly at issue in the appeal of a collection determination, the Tax Court reviews de novo the determination of the underlying liability. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). A taxpayer's underlying tax liability may be at issue if, before the CDP proceeding, the taxpayer did not receive a notice of deficiency determining the liability or did not otherwise have an opportunity to dispute the tax liability before IRS Appeals. Sec. 6330(c)(2)(B).
As to collection-related issues other than the underlying liability, we review IRS Appeals' determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 609-610 (2000). Thus, we review IRS Appeals's determination to sustain the NFTL for abuse of discretion. Applying that abuse-of-discretion standard, we decide whether IRS Appeals's determination was arbitrary, capricious, or without sound basis in fact or law. See Schwartz v. Commissioner, 348 Fed.Appx. 806, 808 (3rd Cir. 2009) (citing Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006)).
II. Analysis
A. Mr. Balice's 2007 and 2008 liabilities are settled.
For multiple reasons, Mr. Balice's challenge to his liabilities for 2007 and 2008 is unavailing:
1. Section 6330(c)(4)(A) bars a liability challenge.
First, Mr. Balice received from the IRS an SNOD regarding his liabilities for income tax and additions to tax for 2007 and 2008, and he disputed these liabilities before this court in Balice v. Commissioner, T.C. Memo. 2015-46, 109 T.C.M 1220 (2015), wherein the liabilities at issue were sustained. Because Mr. Balice had a prior opportunity to dispute his 2007 and 2008 liabilities, he is now barred by section 6330(c)(4)(A) from disputing them any further.
2. Res judicata bars relitigation of the liabilities.
Second, Mr. Balice not only had an opportunity to dispute the liabilities but also in fact did dispute his liabilities for 2007 and 2008 in Tax Court, Federal district court, and the Third Circuit--and each tribunal has sustained the liabilities. We therefore can properly decline to consider Mr. Balice's challenges to his underlying liabilities for 2007 and 2008, pursuant to the doctrine of res judicata. As the Supreme Court explained:
[W]hen a court of competent jurisdiction has entered a final judgment on the merits of a cause of action, the parties to the suit and their privies are thereafter bound "not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose." * * *
* * * Income taxes are levied on an annual basis. Each year is the origin of a new liability and of a separate cause of action. Thus if a claim of liability or non-liability relating to a particular tax year is litigated, a judgment on the merits is res judicata as to any subsequent proceeding involving the same claim and the same tax year. * * *Commissioner v. Sunnen, 333 U.S. 591, 597-598 (1948) (quoting Cromwell v. County of Sac, 94 U.S. 351, 352 (1876).
3. Collateral estoppel bars a contention about the invalidity of the SFRs.
Even if we were to ignore the foregoing bars against Mr. Balice's liability challenge in general, his specific contention that the SFRs are invalid is similarly barred by collateral estoppel. In Mr. Balice's previous case where these SFRs were submitted, the Court already held:
The IRS * * * prepared for each year a substitute for return (SFR) that met the requirements of section 6020(b) * * *. [T]he IRS prepared SFRs for petitioner for 2007 and 2008 and executed for each year the certification required by section 6020(b). These returns constituted valid Federal income tax returns of petitioner for 2007 and 2008. [109 T.C.M. (CCH) at 1221.]
That holding in the prior case resolves and precludes this matter when Mr. Balice attempts to raise it in this case. This preclusion results from the application of the doctrine of "collateral estoppel", under which, "once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action * * *." Allen v. McCurry, 449 U.S. 90, 94 (1980).
4. Mr. Balice's SFR contention has no merit.
Mr. Balice repeatedly asserts that no SFR was "subscribed" in compliance with section 6020(b). If we were to disregard the foregoing bars and were to address Mr. Balice's contention that the liabilities should be overturned because the SFRs were not properly "subscribed" pursuant to section 6020(b), we would nonetheless have to conclude that the contention has no merit.
a. The SFR contention does not apply to most of the liabilities.
An SFR is not a necessary prerequisite to the IRS's determination of a tax liability or of an addition to tax under section 6651(a)(1) for failure to file in an SNOD. See 26 C.F.R. sec. 301.6651-1(a)(1) ("In case of failure to file a return required * * * there shall be added to the tax required to be shown on the return the amount specified below unless the failure to file the return within the prescribed time is shown * * * to be due to reasonable cause and not to willful neglect."). In this case, the validity of the SFR could affect only Mr. Balice's liability for the failure-to-pay addition to tax under section 6651(a)(2), which accrues on "an amount shown as tax on any return". See Wheeler v. Commissioner, 127 T.C. 200, 208-209, aff'd, 521 F.3d 1289 (10th Cir.2008). Thus, if he were entitled to make the contention and if it had merit, it would apply only to a fraction of the liabilities at issue here.
b. The SFRs are validated by the presumption of regularity.
In support of his motion for summary judgment (and in opposition to Mr. Balice's cross-motion), the Commissioner submitted certified account transcripts (Doc. 33 at 138-142) that include dated entries stating "Substitute tax return prepared by IRS". We have also taken notice of copies of the SFRs in the record in Mr. Balice's previous case (described above). Each SFR consists of an "IRC Section 6020(b) Certification" (Form 13496), with an attached "Income Tax Discrepancy Adjustments" (Form 4549-A), "Statement - Income Tax Changes" (Form 5278), and "Explanation of Items" (Form 886-A), in apparent compliance with 26 C.F. R. sec. 301.6020-1(b)(2). See sec. 6020(b)(2) ("Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes"). Because we view not an original but a digital copy in the court record, we cannot tell whether the signature was in ink by hand or was instead applied otherwise, but 26 C.F. R. sec. 301.6020-1(b)(2) provides that a substitute "return may be signed by the name or title of an Internal Revenue Officer or employee being handwritten, stamped, typed, printed or otherwise mechanically affixed to the return".
We see no basis for Mr. Balice's contention that the SFRs were not duly "subscribed"--particularly in view of the presumption of regularity. See Walker v. Commissioner, T.C. Memo. 2018-22, at *19 n.6 (citing United States v. Ahrens, 530 F.2d 781, 785 (8th Cir. 1976)) (The presumption of regularity supports the official acts of public officers and, in the absence of clear evidence to the contrary, courts presume that they have properly discharged their official duties. (citing United States v. Chem. Found., Inc., 272 U.S. 1, 14-15 (1926)).
c. The available information fortifies that presumption.
Mr. Balice is evidently not deterred by the presence of a signature on the SFRs but rather makes a much broader contention: "Form 1040 is not a listed form that is include in the list that is shown in the Internal Revenue Manual Section 5291 as being authorized for use by I.R.S. employees under that code section" and that authority to execute SFRs for non-filed Forms 1040 has never been delegated." (Doc. 39 at 7-8). He undertakes to prove this by citing "Section 5291" and two other documents--"Delegation Orders DD-OKC-150 [a delegation order of the District Director of the Oklahoma City District] and Commissioner Delegation Order No. 182, (Rev. 1)"--and by providing purported photocopies of Section 5291 and the Oklahoma City order, both dated 1987, but (notably) no photocopy of Delegation Order No. 182. If his two photocopies are authentic, they pertain to delegations regarding substitutes for employment tax, excise tax, and partnership returns and would not apply to this case. But contrary to his inference, the documents he cites certainly do not deny the fact that other delegations have been made for preparing SFRs that are within the subject matter of income taxes and would apply to this case.
In fact, the pertinent delegation order actually in effect when Mr. Balice's SFRs were subscribed was a document he cited (D.O. No. 182), but in a later version--i.e., Delegation Order No. 182 (Rev. 7), 1997 WL 33479277. (It was first effective May 5, 1997, and was in place until superseded by Delegation Order No. 5-2, dated September 9, 2012. See I.R.M. 1.2.44.2.) That delegation order granted "[a]uthority * * * [t]o prepare or execute returns required by any internal revenue law or regulation when the person required to file such return fails to do so." This delegation order had no exclusion of returns for income tax. Mr. Balice's arguments based on 1987 delegations pertaining to other taxes are wildly off target and show nothing about any supposed invalidity of the IRS's SFRs at issue here.
Even if we were to consider Mr. Balice's challenges to his underlying liabilities, the argument he advances is frivolous and would fail on the merits. Mr. Balice's contention disputing his liabilities for 2007 and 2008 is that the SFR assessments against him are invalid because tangible returns were "not actually * * * created nor subscribed." (Doc. 38 at 17). However, as we note from the record of Mr. Balice's prior deficiency case in this Court, the SFRs for 2007 and 2008 are dated, bear the printed name and signature of Joseph Roster (identified as Technical Services Reviewer), and consist of an "IRC Section 6020(b) Certification" (Form 13496), with an attached "Income Tax Discrepancy Adjustments" (Form 4549-A), "Statement - Income Tax Changes" (Form 5278), and "Explanation of Items" (Form 886-A).
B. Mr. Balice's Other Allegation of Error
1. Failure to enjoin DOJ suit pending outcome of CDP hearing
Mr. Balice alleges that IRS Appeals abused its discretion by sustaining the NFTL because the applicable laws and procedures of section 6330(e) were not followed--in particular, because enforcement of the lien through the DOJ suit in the District of New Jersey was not suspended while Mr. Balice's CDP hearing was pending before IRS Appeals. However, 26 C.F.R. sec. 301.6330-1(g)(2)(Q&A G3), Proc. & Admin. Regs., states that, while a request for a CDP hearing is pending, the IRS "may take other non-levy collection actions such as initiating judicial proceedings to collect the tax shown on the CDP Notice." Such "judicial proceedings" includes referring the collections case to the DOJ for foreclosure, as the IRS did here. In fact, the 2007 and 2008 liabilities, once finalized after Mr. Balice's appeal to the Third Circuit, were added, on February 19, 2016, to an already pending DOJ suit against Mr. Balice to reduce his tax liabilities to judgment and foreclose the NFTLs on his property. (Doc. 33 at 35). Therefore, referral by the IRS to DOJ predated Mr. Balice's request for a CDP hearing by approximately one month.
Furthermore, any argument that the DOJ suit should have been stayed pending the outcome of Mr. Balice's CDP hearing should have been raised in the District of New Jersey while that suit was pending, and any failure to enjoin such suit was properly appealable to the Third Circuit. See 28 U.S.C. sec. 1294(1). It is not within the authority of the Tax Court to review the actions (or inactions) of a Federal district court holding valid jurisdiction over a matter before it. See, e.g., Young v. Commissioner, 58 T.C.M. 1, 3 (1989) ("this Court would not review the rulings of the district court that ordered enforcement of the summonses"); Vallone v. Commissioner, 88 T.C. 794, 806 (1987) ("We would point out, however, that we are not called upon to review the correctness of the District Court's determination with respect to the denial of the petition to enforce the summonses").
2. Continued enforcement of the Federal tax lien
Mr. Balice alleges that IRS Appeals' decision to sustain the NFTL was an abuse of discretion because the liens had already been enforced through foreclosure. However, section 6321 states that a Federal tax lien attaches to "all property and rights to property, whether real or personal, belonging to such person", and section 6322 states that a Federal tax lien "shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time." Thus, a Federal tax lien may continue to exist even after its enforcement in one instance, where the assessed liability or judgment (including penalties and interest) remains partly unsatisfied. See 26 C.F.R. sec. 301.6325-1(a)(1) ("In all cases, the liability for the payment of the tax continues until satisfaction of the tax in full or until the expiration of the statutory period for collection"). According to the certified account transcripts provided by the Commissioner, the total remaining balance for tax years 2007 and 2008, as of December 9, 2019, is $33,584, including penalties and interest. (Doc. 33 at 147-148). Therefore, a valid Federal tax lien still exists with respect to the unpaid portions of Mr. Balice's 2007 and 2008 liabilities, and is attached to all his property and rights to property, whether real or personal.
C. Penalty for maintaining frivolous positions
Mr. Balice's attempting to relitigate his liabilities for 2007 and 2008 is frivolous, because he has already lost the matter twice in prior litigation--once before this Court in his previous deficiency case and again before the District Court in the Government's collection suit. In his previous deficiency case, Mr. Balice advanced the same arguments regarding his liabilities for 2007 and 2008 that he now makes on brief, and for which he incurred a penalty in that case under section 6673. See id. at *6. Mr. Balice was warned in his prior case that these arguments were frivolous, and he was also warned by IRS Appeals that these arguments were frivolous, yet he has persisted in repeating these arguments to the Court. Our preliminary determination is that this behavior warrants imposition of another penalty under section 6673 because Mr. Balice must be aware that his arguments are frivolous and risk incurring the section 6673 penalty, and that he is no longer entitled to challenge his liabilities for 2007 and 2008.
Before determining whether to impose any penalty under section 6673 and in what amount, we will give Mr. Balice an opportunity to show cause why the penalty either should not be imposed against him or, if it is, why it should not be the maximum amount of $ 25, 000. In this connection he may wish to consider our opinion in Leyshon v. Commissioner, 109 T.C.M. 1535, 1540-1542 (2015), which lists some of the factors that the Court may consider when deciding whether to impose a section 6673 penalty. In particular, Mr. Balice could offer to the Court his assurance that he will not hereafter attempt to relitigate his liabilities for 2007 and 2008. An unequivocal commitment to that effect by Mr. Balice could prompt a reduction in the amount of any penalty to be imposed under section 6673.
III. Conclusion
In conclusion, we find that there is no genuine dispute of material fact regarding whether IRS Appeals abused its discretion by sustaining the NFTL covering Mr. Balice's 2007 and 2008 liabilities. Mr. Balice raised no genuine dispute to counter the Commissioner's showing, through certified copies of Mr. Balice's tax account transcripts and the declaration of SO Voyset containing sworn copies of the Commissioner's administrative file for Mr. Balice's CDP hearing, that SO Voyset verified the requirements of applicable law and administrative procedure were met, properly declined to entertain Mr. Balice's liability challenge, considered issues raised by the taxpayer concerning the appropriateness of the collection action and proposed collection alternatives (Mr. Balice did not propose any collections alternatives), and determined that the proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary as required by sections 6320(c) and 6330(c). We will therefore grant the Commissioner's motion. Mr. Balice's motion, on the other hand, simply reiterates the arguments he made in his response to the Commissioner's motion for summary judgment, and it does not offer any support for his contentions.
In view of the foregoing, it is
ORDERED that Mr. Balice's motion for summary judgment is denied. It is further
ORDERED that the Commissioner's motion for summary judgment is granted, and decision will be entered for the Commissioner. It is further
ORDERED that, no later than December 3, 2021, Mr. Balice shall show cause (i.e., shall explain in writing in a submission filed with the Court) why the Court should not impose on him a penalty in an amount of up to $25,000 under section 6673(a)(1) for maintaining frivolous and dilatory positions. It is further
ORDERED that, no later than January 4, 2022, the Commissioner shall file a reply to Mr. Balice's response to the order to show cause.