Opinion
36381-21L
09-16-2024
Brenda L. Benson, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Mark V. Holmes Judge
This collection-due-process (CDP) case was on the Court's September 12, 2022 San Francisco, California trial calendar. It is an appeal from respondent's determination to sustain enforced collection of petitioner's 2014 tax debt by levy. We continued the case because the IRS had misplaced the administrative file, without which it was impossible to compile the administrative record. Respondent eventually found the file, compiled the administrative record, and moved for summary judgment.
The major issue in respondent's motion is whether the settlement officer abused her discretion in denying petitioner an opportunity to challenge her underlying liability. On this issue our standard of review is abuse of discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). Our scope of review is the administrative record. Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009).
Background
Petitioner is in our court to challenge respondent's determination to seize her property to pay her outstanding tax bill of about $20,000 for 2014. The IRS sent her a notice that it had already taken a small state income-tax refund in March 2020. The notice invited her to challenge this seizure and respondent's plans to take more of her property by asking for a CDP hearing. She timely filed the right form, on which she both requested an installment agreement, and said she wanted reconsideration of the amount due.
Because petitioner resided in California when she petitioned the court, this case is appealable to the Ninth Circuit. See § 7482(b)(1)(G). (All section references are to the Internal Revenue Code and regulations in effect for the years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure, unless we say otherwise.)
She got her CDP hearing in July 2021, but was ill at the time and sent her brother to represent her using a power of attorney instead. Petitioner had not completed and sent in any financial information, which meant that the IRS would not consider an installment agreement. But at the hearing her brother voiced her concerns over the denial of her business expenses for 2014. When respondent's settlement officer (SO) followed up by asking whether petitioner had received a notice of deficiency for that amount, her brother said yes.
That was enough for the SO-she prepared and mailed a notice of determination that denied petitioner any relief.
Petitioner then timely appealed to our Court. In her petition, however, the only issue she raised is the disallowance of "gasoline and travel expenses." In tax jargon, this means that she is "challenging the underlying tax liability"-she's not saying that the IRS should collect a tax debt that she admits she owes, but that she either doesn't owe the IRS any money, or least as much money, as it says she does.
Analysis
The Code plainly states that a taxpayer who gets a notice of deficiency cannot challenge her underlying tax liability. § 6330(c)(2)(B). This is the meaning of the phrase in the notice of determination that "you could not dispute the liability in Appeals due to a prior opportunity."
This is also where things got complicated, because petitioner alleges in her response to the summary-judgment motion that, despite what her brother said at the CDP hearing, she did not in fact receive any such notice.
Was the failure by the SO to doublecheck what petitioner's brother said enough to deny summary judgment?
We begin with the basics: Respondent abuses his discretion when he makes an error of law, rests his determination on a clearly erroneous finding of fact, or when he rules irrationally. Antioco v. Commissioner, 105 T.C.M. (CCH) 1234, 1237 (2012). To determine if respondent abused his discretion, we review the administrative record to see whether he: (1) properly verified that the requirements of applicable law or administrative procedure have been met; (2) considered any relevant issues petitioner raised; and (3) considered whether the proposed collection action balances the need for efficient tax collection with the petitioner's legitimate concern that any collection action be no more intrusive than necessary. I.R.C. § 6330(c)(3); see also, e.g., Lloyd v. Commissioner, 113 T.C.M. (CCH) 1287, 1289 (2017).
For this case, we limit our analysis to the first item-whether the SO properly verified that the requirements of applicable law or administrative procedure have been met. This obligation to verify is independent of the arguments a taxpayer raises in a CDP hearing, and we have held that we can review respondent's verification regardless of whether the taxpayer raised it because it is mandatory under section 6330(c)(1) for the IRS to do so in making every CDP determination. See Hoyle v. Commissioner, 131 T.C. 197, 202-3 (2008).
That means that the SO in this case was required to verify receipt of a notice of deficiency for 2014 before determining to proceed with collection under section 6213(a). Id. at 203. The record does not tell us how the SO satisfied the verification requirement. Her case activity record tells us that she relied on "IRS records." But the rest of the administrative record doesn't support respondent's claim that a notice of deficiency was mailed to petitioner, or even that it ever existed. Petitioner's account transcript (which is also in the administrative record) doesn't state that such notice was issued. There is no U.S. Postal Service Form 3877 to show proper mailing of a notice. Respondent argues in his motion that the SO relied on transcripts from the Integrated Data Retrieval System (IDRS). But, there is no IDRS transcript in the administrative record to substantiate this claim. And if the SO relied on the IDRS transcript, it should have been in the administrative record. For our purposes the administrative record, as defined in Treasury Regulation § 301.6330-1(f)(2), Q&A-F4 (emphasis added), includes:
"the case file, including the taxpayer's request for hearing, any other written communications and information from the taxpayer or the taxpayer's authorized representative submitted in connection with the CDP hearing, notes made by an Appeals officer or employee of any oral communications with the taxpayer or the taxpayer's authorized representative, memoranda created by the Appeals officer or employee in connection with the CDP hearing, and any other documents or materials relied upon by the Appeals officer or employee in making the determination under section 6330(c)(3) . . ."
We do recognize that petitioner failed to raise this lack of verification in her petition, but in its absence we cannot conclude that respondent is entitled to judgment as a matter of law. See Rule 331(b)(3); Rule 41(a). In exercising our discretion, then, we will remand this case to IRS Appeals.
It is therefore
ORDERED that respondent's motion for summary judgment is denied. It is also
ORDERED that this case is remanded to the Office of Appeals for a supplemental hearing to determine whether petitioner may challenge her underlying tax liability for the 2014 tax year, and for further proceedings consistent with this order. It is also
ORDERED that on or before January 13, 2025 respondent file either a supplemental notice of determination or a status report on his progress in doing so.