Opinion
16039-19L
07-21-2022
JOEL ADRIAN BROWN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Patrick J. Urda, Judge
In this collection due process (CDP) case petitioner, Joel Adrian Brown, seeks review pursuant to sections 6320 and 6330 of a determination by the Internal Revenue Service (IRS) Independent Office of Appeals upholding the filing of a notice of federal tax lien (NFTL) with respect to unpaid federal income tax liabilities for his 2014 and 2016 tax years. During a supplemental CDP hearing, the settlement officer assigned to this case accepted Mr. Brown's offer of an installment agreement to satisfy his outstanding tax liabilities.
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. We round all monetary values to the nearest dollar.
On July 1, 2019, the Office of Appeals was renamed the Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001(a), 133 Stat. 981, 983 (2019). We will use the name in effect at the time of the issuance of the supplemental notice of determination, i.e., the Independent Office of Appeals.
One issue remains in dispute: whether the settlement officer assigned to Mr. Brown's case abused her discretion in not withdrawing the federal tax lien. The Commissioner has moved for summary judgment, contending that the determination to sustain the NFTL filing while also accepting the installment agreement was proper as a matter of law. The record before us is insufficient to decide whether the settlement officer abused her discretion in not withdrawing the lien. We will therefore deny the motion for summary judgment and remand this case for a supplemental hearing.
Background
The following facts are based on the parties' pleadings and motion papers, including the attached declaration and exhibits. See Rule 121(b). Mr. Brown lived in Florida when he timely petitioned this Court.
I. IRS Collection Activities
Mr. Brown, an attorney, failed to pay the full amount of tax reported on his 2014 and 2016 federal income tax returns. [Doc. 23 at 12-16.] The IRS began attempts to collect Mr. Brown's 2014 liability in 2017, issuing a notice of intent to levy. [Doc. 24 at 6-10.] He did not request a CDP hearing within the time to do so for that collection action. [Doc. 23 at 13.]
As of November 20, 2018, Mr. Brown owed $65,846 in tax, penalties, and interest for 2014 and $41,394 for 2016. [Doc. 24 at 11.] In another attempt to collect Mr. Brown's outstanding liabilities, the IRS filed an NFTL with respect to 2014 and 2016 and sent Mr. Brown notice of that filing. [Id. at 11-14.]
Mr. Brown timely requested a CDP hearing, indicating the he sought to challenge both the proposed lien and the NFTL filing. [Doc. 24 at 15-16.] In his CDP request, Mr. Brown expressed interest in the full panoply of collections alternatives as well as lien withdrawal. [Id. at 16.] He further asserted that he was "not liable for all or part of the taxes." [Id.]
The case thereafter was assigned to a settlement officer who scheduled a telephone CDP hearing for June 25, 2019, and requested certain documentation from Mr. Brown. [Doc. 24 at 22-25.] Although Mr. Brown did not provide any information before the hearing, it was held as scheduled. [Id. at 190.]
The call covered three principal topics: (1) Mr. Brown's assertion that his liabilities were overstated; (2) his request for currently-not-collectible status, which led the settlement officer to grant him time to submit documentation in support of collection alternatives; and (3) lien withdrawal. [Doc. 24 at 190.] According to her case activity notes, the settlement officer explained that Mr. Brown had failed to articulate how lien withdrawal would be in the IRS's interest, and, in any event, lien withdrawal could not be considered because he was not current with his estimated tax obligations. [Id.] The settlement officer noted, however, that he could request lien withdrawal in the future should he meet certain requirements under an installment agreement. [Id.]
Mr. Brown thereafter submitted documentation in support of collection alternatives, which was followed by communications between the parties about Mr. Brown's eligibility for an installment agreement and his assertion that his liabilities were incorrect. [Doc. 24 at 69, 86.] On July 30, 2019, the settlement officer issued a notice of determination sustaining the NFTL filing. [Id. at 89-93.] The notice asserted that Mr. Brown was not eligible for a partial payment installment agreement because he was not current with estimated tax payments. [Id. at 91.]
The notice also considered and rejected lien withdrawal. [Doc. 24 at 93.] In this regard, the notice stated that an NFTL may be withdrawn where, inter alia, a "taxpayer entered into an agreement under IRC 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise." [Id.] The notice concluded that (1) "there was no information received to support the [lien] withdrawal," (2) "we did not find any conditions that would warrant a withdrawal of the Federal Tax Lien," and (3) Mr. Brown "did not provide a valid justification of withdrawing the lien." [Id.]
II. Tax Court Proceedings
Mr. Brown filed a timely petition in this Court. [Doc. 1.] In his petition, he focused on the settlement officer's assertion that he did not dispute his liability and contended that the settlement officer "erred by not granting . . . relief for a collection alternative of currently not collectible status, installment agreement or offer in compromise." [Id. at 3.] Mr. Brown did not address lien withdrawal in his petition.
We later remanded this case for a supplemental CDP hearing so that the settlement officer might explore Mr. Brown's challenge to his underlying liabilities. [Doc. 8.] According to the settlement officer's case activity notes, the parties had numerous conversations about an installment agreement to resolve Mr. Brown's liabilities. [Doc. 24 at 191-95.] These notes do not reflect that either party broached the topic of lien withdrawal during the supplemental hearing. [Id.] The parties ultimately entered into an installment agreement, which did not address lien withdrawal. [Id. at 228.]
The settlement officer later issued a supplemental notice of determination again sustaining the NFTL filing. [Doc. 24 at 249-52.] In the supplemental notice, the settlement officer reported the parties' installment agreement. [Id. at 249-51.] She also set forth again (in identical language) her reasons for rejecting lien withdrawal. [Id. at 251-52.] Among other things, she reiterated that a lien "may be withdrawn" where a taxpayer has entered into an installment agreement, but then repeated that "we did not find any conditions that would warrant a withdrawal of Federal Tax Lien" and that "there was no information received to support the request." [Id.]
Discussion
I. General Principles
A. 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) 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. 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. The nonmoving party, however, may not rest upon the mere allegations or denials of his pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
B. Standard of Review
We have jurisdiction to review the Independent Office of Appeals' determination pursuant to sections 6320(c) and 6330(d)(1). See Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). Where the validity of the underlying tax liability is not at issue, we review all other determinations for abuse of discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). In reviewing for abuse of discretion, we must uphold the Independent Office of Appeals' determination unless it is arbitrary, capricious, or without sound basis in fact or law. See Murphy, 125 T.C. at 320.
II. Abuse of Discretion
A. General Framework
In determining whether the Independent Office of Appeals abused its discretion, we consider whether the settlement officer: (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues Mr. Brown raised, and (3) weighed "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [Mr. Brown] that any collection action be no more intrusive than necessary." § 6330(c)(3); see also § 6320(c).
B. Analysis
Only one issue remains between the parties: whether the settlement officer abused her discretion in deciding against lien withdrawal. We begin by clearing a little underbrush. Rule 331(b)(4) generally provides that a petition shall contain "[c]lear and concise assignments of each and every error" in the notice of determination, stating that "[a]ny issue not raised in the assignments of error shall be deemed to be conceded." When a case is remanded, however, we review the determination as supplemented, see LG Kendrick, LLC v. Commissioner, 146 T.C. 17, 36 (2016), aff'd, 684 Fed.Appx. 744 (10th Cir. 2017), and thus our pleading rule does not prohibit Mr. Brown from challenging the supplemental notice.
The Commissioner asserts that Mr. Brown failed to properly raise the issue of lien withdrawal. [Doc. 23 at 9.] In reviewing a determination under section 6330(c)(2), we only consider issues that a taxpayer properly raised during the CDP hearing. Treas. Reg. §§ 301.6320-1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3; see Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). The taxpayer does not properly raise an issue during the 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. §§ 301.6320-1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3.
Although Mr. Brown checked the box for lien withdrawal on his CDP request, he did not present the Independent Office of Appeals with any evidence supporting his entitlement to a withdrawal of the NFTL filing during the initial CDP hearing. In denying Mr. Brown's request for lien withdrawal, the settlement officer thus explained that (1) "there was no information received to support [lien] withdrawal," (2) "we did not find any conditions that would warrant a withdrawal of the Federal Tax Lien," and (3) Mr. Brown "did not provide a valid justification of withdrawing the lien." [Doc. 24 at 93.] If that were the end of the matter, we would be hard pressed to reach a conclusion other than that Mr. Brown had not properly raised the issue before the Independent Office of Appeals. LG Kendrick, 146 T.C. at 39; see also Reynolds v. Commissioner, T.C. Memo. 2021-10, at *39; cf. §§ 6320, 6330(c)(3)(B).
The supplemental hearing complicates things, however. The settlement officer issued a supplemental notice of determination, denying lien withdrawal on the exact grounds (and in identical language) as in the original notice. [Doc. 24 at 252.] We review this supplemental determination, see, e.g., Kelby v. Commissioner, 130 T.C. 79, 86 (2008), and "we can't uphold a notice of determination on grounds other than those actually relied upon" by the settlement officer, Antioco v. Commissioner, T.C. Memo. 2013-35, at *25.
The settlement officer here repeated the same analysis for denying lien withdrawal as in the original notice, but failed to account for the significant change that resulted from Mr. Brown's entry into an installment agreement. The installment agreement itself belied the grounds for denial reiterated in the supplemental notice, as the installment agreement constituted information to support lien withdrawal and provided a valid justification under section 6323(b)(1)(B) for withdrawing the lien.
Of course, a settlement officer has wide discretion to deny lien withdrawal where a taxpayer has entered into an installment agreement. Relief under section 6323(j) "is permissive, and nothing in it requires [the Commissioner] to withdraw the NFTL because of [an] installment agreement." Berkery v. Commissioner, T.C. Memo. 2011-57, 2011 WL 820834, at *5; see also Roudakov v. Commissioner, T.C. Memo. 2017-121, at *11; Treas. Reg. § 301.6323(j)-1(c) ("If the Commissioner determines conditions for withdrawal [of an NFTL] are present, the Commissioner may (but is not required to) authorize the withdrawal."). The fundamental problem here is that the supplemental notice does not explain the settlement officer's determination in light of the installment agreement, leaving us without any ability to judge whether the settlement officer acted within her discretion when she denied lien withdrawal.
We accordingly will order a remand for a supplemental hearing so that the settlement officer can consider and address the issue of lien withdrawal in light of the installment agreement. Therefore it is
ORDERED that the Commissioner's motion for summary judgment, filed October 1, 2021, is denied without prejudice. It is further
ORDERED that this case is remanded to the Independent Office of Appeals for a supplemental administrative hearing at an Appeals office located closest to Mr. Brown's residence or at such other place as may be mutually agreed upon for a date and time certain but not later than October 17, 2022. It is further
ORDERED that, on or before November 16, 2022, the parties shall file a joint status report regarding the status of this case and include any supplemental notice of determination.