Opinion
17312-22L
10-25-2024
SCOTT HAMPTON CUMBEE AND SHARALENE R. CUMBEE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Alina I. Marshall Judge
This collection due process (CDP) case is before the Court on the parties' Cross-Motions for Summary Judgment under Rule 121.
Unless otherwise indicated, Rule references are to the Tax Court Rules of Practice and Procedure, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (Code), in effect at all relevant times, and monetary amounts are rounded to the nearest dollar.
Petitioners seek review pursuant to section 6330(d) of the determination by the Internal Revenue Service (IRS or respondent) to uphold the filing of a Notice of Federal Tax Lien (NFTL) with respect to their federal income tax liabilities for tax years 2015 and 2016 (years in issue). Respondent contends that he is entitled to summary judgment in his favor because there are no disputed issues of material fact and the determination to sustain the collection action was proper as a matter of law. Petitioners contend that they are entitled to summary judgment because the IRS issued an invalid statutory notice of deficiency (SND) with respect to their underlying liabilities and because its Independent Office of Appeals (Appeals) failed to provide access to their case file in violation of section 7803(e)(7), as enacted by the Taxpayer First Act (TFA), Pub. L. No. 116-25, § 1001(a), (e)(2), 133 Stat. 981, 984-85 (2019).
For the reasons set forth below, we shall grant respondent's Motion for Summary Judgment and deny petitioners' Motion for Summary Judgment.
Background
The following facts are derived from the parties' pleadings and their Motion papers, including the declarations and exhibits attached thereto. See Rule 121(c). They are stated solely for purposes of deciding the Cross-Motions and not as findings of fact in this case. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994).
On June 8, 2016, petitioners filed a federal income tax return for 2015 pursuant to an extension. Petitioners reported an income tax liability of $10,226, which they had not fully paid as of the time of filing. On July 18, 2016, respondent assessed the reported amount. Respondent subsequently assessed underpayment interest, section 6651(a)(2) additions to tax for late payment, and section 6654 additions to tax for failure to make estimated payments. As a result of corresponding payments and withholdings, as of October 31, 2016, petitioners had a zero balance for 2015.
On April 15, 2017, petitioners filed a federal income tax return for 2016. Petitioners reported an income tax liability of $28,677, which they had not fully paid as of the time of filing. On May 29, 2017, respondent assessed this amount. Respondent subsequently assessed underpayment interest. As a result of corresponding payments and withholdings, as of September 25, 2017, they had a zero balance for 2016.
On April 20, 2018, respondent's Examination division issued to petitioners a Letter 950, or "30-day letter," notifying them of proposed changes to their income tax liabilities and section 6662(a) accuracy-related penalties for 2015 and 2016. IRS revenue agent Kimberly Sims (RA Sims) made the initial penalty determination. On April 18, 2018, prior to the issuance of the 30-day letter, RA Sims' immediate supervisor, group manager Timothy Ratliff (GM Ratliff), approved the penalties by signing a civil penalty approval form. GM Ratliff also signed the 30-day letter. On June 13, 2018, RA Sims issued to petitioners a letter informing them that additional changes had been made with respect to their returns for 2015 and 2016, which reduced the amounts proposed in the 30-day letter.
On October 31, 2018, respondent mailed to petitioners by certified mail two copies of the same SND, with one copy directed to petitioner Scott Hampton Cumbee (Mr. Cumbee) and the other to petitioner Sharalene R. Cumbee (Mrs. Cumbee). Both copies were addressed to petitioners' residence at Dusk Trail Road, Ridge Spring, South Carolina. Dusk Trail Road has been petitioners' last known address since 2008. In the SND, respondent determined that petitioners were liable for income tax deficiencies of $26,226 and $36,494 for 2015 and 2016, respectively. Respondent also determined that petitioners were liable for section 6662(a) accuracy-related penalties of $5,227 and $7,299 for 2015 and 2016, respectively. Petitioners did not petition the Court with respect to the SND.
On April 15, 2019, respondent assessed the deficiencies and penalties set forth in the SND together with underpayment interest. Also on April 15, 2019, respondent issued to petitioners a notice and demand for payment for 2015 and 2016. Petitioners subsequently made some payments with respect to 2015, but these payments were insufficient to satisfy the outstanding balance. Petitioners did not make any subsequent payments with respect to 2016.
On February 6, 2020, respondent filed a NFTL in Saluda County, South Carolina with respect to petitioners' unpaid, assessed balances for the years in issue. These assessed balances were approximately $26,783 and $48,074 for 2015 and 2016, respectively, when the NFTL was filed. Also on February 6, 2020, respondent mailed Letter 3172 (DO), Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, to petitioners at their Dusk Trail residence. On March 2, 2020, respondent assessed additional interest and amounts identified in petitioners' account transcripts as "penalt[ies] for late payment of tax."
Based on the transaction code identified in the transcripts (276) and the timing of the assessments, we understand these "penalties" to be section 6651(a)(3) additions to tax. See IRM 20.2.5.3 (Oct. 2, 2020) (associating transaction code 276 with section 6651(a)(3) additions to tax); 5.19.23.4.1 (Mar. 25, 2020) (same); 21.3.8.10.3.4(2) (Oct. 1, 2006) (same); see also § 6651(a)(3) (providing that in the event of the failure "to pay any amount in respect of any tax required to be shown on a return . . . which is not so shown (including an assessment made pursuant to section 6213(b)) within 21 calendar days from the notice and demand therefore . . ., unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount of tax stated in such notice and demand 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.").
On March 13, 2020, petitioners timely requested a CDP hearing by mailing to respondent a Form 12153, Request for a Collection Due Process or Equivalent Hearing. As part of their hearing request, petitioners requested a collection alternative and withdrawal of the NFTL filing. As the reason for these requests, petitioners asserted that "no taxes are due for 2015 and 2016" and disputed their liability for the "failure to pay, failure to file, and failure to deposit penalties asserted." Petitioners also asserted that they had not been provided an appeal with respect to the examination of their returns "resulting in the Taxpayers' CPA representative having to file amended returns."
On March 17, 2020, the IRS received petitioners' Form 12153. On July 22, 2020, respondent's Automated Collection Service (ACS) unit received the form. On or about February 10, 2021, the ACS unit referred petitioners' hearing request to Appeals via Form 12153-B, Referral Request for CDP Hearing from ACS Support.
On June 8, 2021, Appeals settlement officer Robin L. Roth (SO Roth) received petitioners' case and confirmed that she had no prior involvement with petitioners for the types of taxes and years in issue. SO Roth noted in her case activity record for that date that she had performed validation and statute review and that all legal and procedural requirements for the NFTL had been met. SO Roth further noted on that date that petitioners' liabilities resulted from examination assessments and that she was ordering copies of the corresponding SND and certified mail list. SO Roth subsequently received the requested copies.
Also on June 8, 2021, SO Roth mailed to petitioners a Letter 4837. In the letter, SO Roth scheduled a teleconference with petitioners for July 8, 2021. She also informed petitioners that: "You have the right to access the administrative file in your case. If you want access to the file, please contact me within 14 days of the date of this letter." In addition, SO Roth requested that petitioners provide a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and a completed Form 656, Offer in Compromise, along with any documentation required for its completion, within 14 days of the date of the letter (i.e., by June 22, 2021).
On June 16, 2021, Mr. Cumbee called SO Roth and asked whether his lawyer, Joseph M. Arndt, III, (Mr. Arndt) could discuss the case with her. SO Roth agreed that he could. On June 30, 2021, SO Roth noted that she received a fax and voicemail from Mr. Arndt requesting the administrative file but that Mr. Arndt appeared to be requesting the file from the underlying examination of petitioners' returns (hereinafter, exam file), not the administrative file for the instant CDP proceeding, and that he made the request after the 14-day deadline provided in the Letter 4837.
Mr. Arndt represents petitioners in this case.
On July 8, 2021, SO Roth and Mr. Arndt had a telephone conversation in which they discussed Mr. Arndt's file request. After this conversation, SO Roth emailed the "TFA mailbox," a specialized internal IRS email address, to ask whether she should provide the administrative file in response to a request submitted after the deadline she provided, and, if so, whether she should include information from the exam file, since she requested that file to verify the validity of the assessment. On July 12, 2021, SO Roth noted that she had received email approval to "honor . . . [the] TFA request." She also noted that she would wait until she received the exam file so that she could obtain the SND and scan it along with the CDP administrative file.
On July 13, 2021, SO Roth received a fax from Mr. Arndt dated July 8, 2021. Akin to petitioners' CDP hearing request, in the fax cover sheet, Mr. Arndt asserted that petitioners had not received an Appeals hearing with respect to the examination of the years in issue or a detailed denial of their protest, that the assessment of their liabilities was therefore invalid, and that removing the assessments would allow for correct assessment of amended returns filed for 2015 and 2016. Mr. Arndt also included with the fax portions of the TFA along with interim IRS guidance issued to Appeals on June 17, 2020, with respect to case file access under the TFA. See I.R.S. Interim Guidance Mem. AP-08-0620-0008 (June 17, 2020). On July 15, 2021, SO Roth and Mr. Arndt spoke again by telephone, and SO Roth informed Mr. Arndt of the received approval.
On July 26, 2021, SO Roth reviewed the exam file. She found in the file a signed, dated copy of the SND, which bore two certified mail numbers. These numbers matched the numbers included on the corresponding certified mail list with respect to the copies of the SND sent to Mr. and Mrs. Cumbee. SO Roth concluded that petitioners were unable to raise their underlying liabilities and attempted to call Mr. Arndt to advise him that he would need to do a FOIA request for the exam file.
On or about August 17, 2021, SO Roth mailed a copy of the CDP administrative file to Mr. Arndt. The documents included in the file were identical to the documents transmitted to Appeals by ACS. On August 25, 2021, SO Roth had a copy of the SND from the exam file scanned and then sent the exam file back to file storage. The copy of the CDP administrative file that SO Roth sent to Mr. Arndt was subsequently returned to her as undeliverable. SO Roth resent the file copy, and, on October 1, 2021, Mr. Arndt confirmed its receipt.
On October 13, 2021, SO Roth received a voicemail from Mr. Arndt stating that he had not received the exam file. SO Roth called him back and left a voicemail confirming that this was correct and that he needed to separately submit a FOIA request for the exam file. She also faxed a copy of the SND to him and petitioners and asked Mr. Arndt to reply by October 22, 2021. On October 15, 2021, Mr. Arndt left a voicemail for SO Roth requesting to discuss the case with her manager.
On November 5 and 12, 2021, Mr. Arndt spoke with SO Roth's Appeals Team Manager, Jennifer Zipkin (ATM Zipkin). Mr. Arndt asserted that he needed a complete copy of the exam file for 2015 and 2016 to determine whether the underlying liability could be disputed and that he considered the fact that petitioners received the SND not to be determinative. He said that he was under the impression that he was to receive those complete files. ATM Zipkin noted that "for the benefit of customer service," SO Roth was to request those exam files and have them sent to Mr. Arndt.
On November 15, 2021, SO Roth submitted a request for the exam file. SO Roth did not receive the file in response to this request. On January 27, 2022, SO Roth again requested the exam file, but still did not receive it.
On March 2, 2022, SO Roth asked Appeals Officer Matthew McLaughlin (AO McLaughlin) to review petitioners' case. On March 16, 2022, AO McLaughlin noted in the case activity record that SO Roth had verified that the SND was properly issued to petitioners and that, because they had presented no reasonable explanation as to why they did not receive either copy of the SND, SO Roth had correctly determined that petitioners were precluded from challenging the underlying liability. AO McLaughlin also noted that new Internal Revenue Manual (IRM) part 8.6.1.2.1 did not interpret the TFA to allow a taxpayer to request documents that are not in the CDP administrative file when Appeals receives it. AO McLaughlin thus concluded that because petitioners were precluded from challenging their underlying liability, their CDP case should not be held up waiting for the exam file any longer and their CDP conference should proceed.
New IRM part 8.6.1.2.1 was included as part of the aforementioned interim IRS guidance. See I.R.S. Interim Guidance Mem. AP-08-0620-0008 (June 17, 2020).
On March 23, 2022, SO Roth held a teleconference with Mr. Arndt. SO Roth explained that she could not provide the exam file because it was not part of the CDP administrative file and again told Mr. Arndt that he could obtain a copy of the exam file via a FOIA request. SO Roth also offered to discuss collection alternatives, but Mr. Arndt refused to do so without reviewing the exam file. Mr. Arndt instead asked to speak directly with AO McLaughlin.
On April 8, 2022, AO McLaughlin spoke with Mr. Arndt by telephone. Mr. Arndt there asserted that petitioners did not remember receiving the SND, but he gave no reason as to why petitioners would not have received it. Mr. Arndt also asserted that the examination underlying the SND had been conducted improperly and that AO McLaughlin should obtain the opinion of Area Counsel regarding Appeals' obligation to provide case file access. AO McLaughlin told Mr. Arndt that the underlying liability issue was precluded because of petitioners' receipt of the SND but invited Mr. Arndt to fax him with evidence of the asserted impropriety. Mr. McLaughlin also informed Mr. Arndt that he would not ask for the opinion of Area Counsel because it was unnecessary for petitioners' case.
On April 15, 2022, Mr. Arndt sent two faxes to AO McLaughlin. One was a copy of the fax dated July 8, 2021, that Mr. Arndt had previously sent to SO Roth. The other included, inter alia, a letter dated May 19, 2018, from a William L. Rawl, Jr., CPA, which stated that petitioners were appealing the findings related to the examination of their returns for 2015 and 2016.
On April 28, 2022, AO McLaughlin issued a letter to Mr. Arndt in response. In the letter, AO McLaughlin reiterated that the file referred to in the TFA "is the file that first arrives in Appeals, and not any other potentially related files; a FOIA request is needed in order for you to receive any other files." With regard to the May 19, 2018, letter included in Mr. Arndt's fax, AO McLaughlin also expressed that there was no indication that the letter had actually been mailed to the IRS or received by the IRS, that the IRS had no record of receiving a power of attorney on or about the date of that letter (which was inconsistent with a statement in the letter that a Form 2848, Power of Attorney, would be faxed on May 21, 2018), and that a copy of the SND was not sent to any registered power of attorney. AO McLaughlin thus concluded that "[t]his letter is not persuasive evidence that the taxpayers timely filed an appeal of the proposed assessments before the Notice of Deficiency was issued, so Appeals maintains its position that the underlying liabilities are a precluded issue, and we will proceed with the case on that basis."
On May 17, 2022, SO Roth received a voicemail from Mr. Arndt asking her to call him back to discuss the case. She called him and left a voicemail stating that she could discuss a collection alternative or currently not collectible status. She asked him to call her back by May 20, 2022. On May 25, 2022, SO Roth noted that she received no reply from Mr. Arndt. She called him again and left another voicemail advising that she would hold the case open through June 1, 2022, and that she would issue a determination letter if she received no reply. On June 9, 2022, SO Roth received a voicemail and fax from Mr. Arndt in which he again attempted to dispute the underlying liability. SO Roth called him back and left a voicemail repeating that she could discuss a collection alternative or currently not collectible status, but not the underlying liability. She asked him to call her back.
On June 15, 2022, having received no response from Mr. Arndt, SO Roth determined to close the case. On June 28, 2022, SO Roth issued to petitioners a Notice of Determination Concerning Collection Actions under IRS Sections 6320 or 6330 of the Internal Revenue Code (NOD) with a copy to Mr. Arndt. In the NOD, SO Roth upheld the filing of the NFTL with respect to petitioners' liabilities for 2015 and 2016. In an attachment to the NOD, SO Roth explained that the issuance of the SND precluded petitioners from disputing their underlying liabilities, petitioners had not requested a collection alternative, and there was no information in the CDP administrative file, or otherwise provided by petitioners, to suggest withdrawal of the NFTL filing should be considered. SO Roth also stated in the attachment that collection had followed all legal and procedural requirements and that the determination to sustain the NFTL balanced the government's need to collect the balance due with petitioners' concerns that the collection action be no more intrusive than necessary.
On July 27, 2022, petitioners timely filed the Petition while continuing to reside at their Dusk Trail Road address in Ridge Spring, South Carolina. In the Petition, petitioners asserted that the NOD was based on errors. In this regard, petitioners alleged that Mr. Rawls timely requested an appeal of the April 20, 2018, 30-day letter, but that the IRS provided neither an appeal nor a denial with respect to their request. Petitioners further alleged that RA Sims "bypassed" Mr. Rawls by issuing the June 13, 2018, letter, and that Mr. Rawls was unaware of both this letter and the SND because the IRS did not issue him a copy of either. Petitioners also asserted that respondent, through the actions of Appeals, abused his discretion in refusing both to produce the case file as required by the TFA and to obtain the opinion of Area Counsel regarding this requirement. Finally, petitioners alleged that there is no deficiency due from them for 2015 and 2016 and that "there are no penalties to be assessed under section 6651(a)(1), (2) or 6654."
On March 14, 2023, respondent filed his Motion for Summary Judgment. On March 16, 2023, the Court ordered that petitioners, on or before April 7, 2023, file a written notice setting forth any objections to respondent's Motion. On May 4, 2023, the Court ordered that the time for petitioners to file an objection be extended to June 5, 2023. On June 16, 2023, the Court again ordered that the time for petitioners to object to respondent's Motion for Summary Judgment be extended, this time to July 14, 2023. In the June 16, 2023, order, the Court specified that if petitioners disagreed with the facts set forth in respondent's Motion, "any response should identify the specific points in dispute, explain why those points are in dispute, and provide specific examples, if necessary." The Court further specified in the order that "[i]f petitioners disagree with respondent's arguments as to the law, then any response should set forth petitioners' position on the disputed legal issues." On July 14, 2023, petitioners filed their Motion for Summary Judgment.
Discussion
I. Summary Judgment
The purpose of summary judgment is to expedite litigation and avoid costly and unnecessary trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). We shall grant a motion for summary judgment only when there is no genuine dispute of material fact and a decision may be rendered as a matter of law. Rule 121(b); Elec. Arts, Inc. & Subs. v. Commissioner, 118 T.C. 226, 238 (2002); see also Take v. Commissioner, 82 T.C. 630, 633 (1984) (explaining that this rule applies to each motion where both parties move for summary judgment), aff'd, 804 F.2d 553 (9th Cir. 1986). In considering the parties' Cross-Motions, we construe the facts and draw all inferences in the light most favorable to each nonmoving party to decide whether summary judgment is appropriate. Sundstrand, 98 T.C. at 520. However, the nonmoving party may not rest upon the mere allegations or denials in their 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. Finding that no genuine disputes of material fact exist, we conclude that summary adjudication is appropriate.
II. Standard and Scope of Review
We have jurisdiction to review Appeals' determination pursuant to section 6330(d)(1). See § 6320(c); Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). Where the underlying tax liability is properly at issue, the Court will review that issue on a de novo basis. Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). Where the underlying liability is not properly at issue, the Court will review the administrative determination regarding the collection action for abuse of discretion. Id. An abuse of discretion occurs if Appeals exercises its discretion "arbitrarily, capriciously, or without sound basis in fact or law." Woodral v. Commissioner, 112 T.C. 19, 23 (1999). According to our precedent, we are not limited in our review of this case only to facts found in the administrative record. Robinette v. Commissioner, 123 T.C. 85 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006).
Respondent contends judicial review of non-liability issues in CDP cases should be limited to the administrative record, citing to the U.S. Courts of Appeals for the First, Eighth, and Ninth Circuits. See Keller v. Commissioner, 568 F.3d 710 (9th Cir. 2009); Murphy v. Commissioner, 469 F.3d 27 (1st Cir. 2006); Robinette v. Commissioner, 439 F.3d 455. The Court to which an appeal in this case would ordinarily lie, however, is the U.S. Court of Appeals for the Fourth Circuit, who respondent concedes has made no ruling with respect to our holding in Robinette. See § 7482(b)(1)(G)(i). As such, we look to our own precedent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
III. Whether Petitioners May Dispute Their Underlying Liabilities
Taxpayers may challenge their underlying liability at a CDP hearing only if they did not receive a SND or did not otherwise have a prior opportunity to dispute the liability. See § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 610-11 (2000); Goza, 114 T.C. at 182-83. A SND is presumed to have been received by the taxpayers if it was properly mailed to their last known address. See § 6212(b)(1); Sego, 114 T.C. at 611. The Commissioner generally has prevailed in foreclosing challenges to the underlying liability where he establishes that a SND was mailed to the taxpayers' last known address and no factors are present that rebut the presumption of delivery. Campbell v. Commissioner, T.C. Memo. 2013-57, at *9.
On October 31, 2018, respondent mailed to petitioners by certified mail two copies of the same SND. Both copies of the SND were addressed to petitioners' residence at Dusk Trail Road, Ridge Spring, South Carolina. Dusk Trail Road has been petitioners' last known address since 2008, and petitioners have continued to receive mail at that address during these proceedings.
Petitioners allege that there is no deficiency due from them for either year in issue and that "there are no penalties to be assessed under section 6651(a)(1), (2) or 6654." During the administrative process, Mr. Arndt indicated both that petitioners received the SND and that petitioners did not remember receiving the SND. But in the Petition, petitioners-who continue to be represented by Mr. Arndt-make no allegation that they did not receive the SND. Instead, they allege that it was their CPA who did not receive a copy. They also allege that, in issuing the SND, the IRS ignored their request for an appeal of the 30-day letter issued on April 20, 2018, and that RA Sims "bypassed" their CPA by issuing the June 13, 2018, letter, which their CPA also did not receive.
Sections 6651(a)(1), (2) and 6654 provide for additions to tax. We note that respondent did not assess any section 6651(a)(1) additions to tax, which are for late filing, with respect to the years in issue. We also note that petitioners had a zero balance with respect to the additions to tax that he did assess under sections 6651(a)(2) and 6654 when the NFTL was filed and that it was section 6662 penalties that were determined in the SND.
In their Motion for Summary Judgment, petitioners similarly fail to allege that they did not receive the SND. There, they instead allege that "no Statutory Notice of Deficiency was ever issued on the L950 examination reports of April 20, 2018" and that the SND "was procured by fraud, making it void ad imitio [sic]." In support of this allegation, petitioners contend that the June 13, 2018, letter, in which their proposed liabilities were reduced from those in 30-day letter, is "patently an illegal and unauthorized fake form of the L950" and that the June 13, 2018, letter was the sole and proximate cause of the SND, "causing [the SND] to be illegal."
Inasmuch as petitioners are attempting to challenge their underlying liabilities in this proceeding, they cannot do so. Petitioners maintain the SND was invalid. But, the SND was sent to their last known address by certified mail and petitioners have made no allegation that they did not receive it. Petitioners are thus presumed to have received the SND. There is no dispute that petitioners did not file a petition with respect to the SND, and they may not challenge it now or otherwise contest their underlying liabilities in this proceeding. See, e.g., Schwersensky v. Commissioner, T.C. Memo. 2006-178, 92 T.C.M. (CCH) 177, 179; Copeland v. Commissioner, T.C. Memo. 2003-46, 85 T.C.M. (CCH) 894, 897; Coleman v. Commissioner, T.C. Memo. 2002-132, 83 T.C.M. (CCH) 1748, 1749-50.
Petitioners' allegation that their CPA was not provided a copy of the SND is of no moment. Even assuming it to be true, a failure to send a copy of a SND to a designated representative under a power of attorney does not invalidate the notice. See McDonald v. Commissioner, 76 T.C. 750, 752 (1981); Allen v. Commissioner, 29 T.C. 113, 116 (1957).
To the extent petitioners' underlying liabilities consist of section 6651(a)(3) additions to tax, see n.2, we note that receipt of a SND does not constitute a prior opportunity to dispute such additions. See Ramdas v. Commissioner, T.C. Memo. 2013-104, at *39-41. Petitioners, however, have neither alleged nor otherwise demonstrated that they sought review of these additions during their CDP hearing nor have they clearly and concisely assigned any error with respect to them in their pleadings, and it is for these reasons that we consider the section 6651(a)(3) additions to tax no further. See id. at *40-41 (citing Magana v. Commissioner, 118 T.C. 488, 493-94 (2002) and Rule 331(b)(4)); see also LG Kendrick, LLC v. Commissioner, 146 T.C. 17, 37-38 (2016), aff'd, 684 Fed.Appx. 744 (10th Cir. 2017).
IV. Whether SO Roth's Determination to Sustain the Collection Action was an Abuse of Discretion
The underlying liabilities not being in issue, we review SO Roth's determination to sustain the filing of the NFTL for an abuse of discretion. Goza, 114 T.C. at 181-82. Pursuant to section 6330(c)(3), the determination must have taken into consideration the verification that the requirements of applicable law or administrative procedure were met. See § 6330(c)(1). It must also have taken into account the relevant issues raised by petitioners and "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [petitioners] that any collection action be no more intrusive than necessary." See § 6330(c)(2), (3).
A. Verification and Balancing
In his Motion for Summary Judgment, respondent contends that petitioners do not allege in the Petition any error by SO Roth in meeting the verification requirement. In so doing, respondent acknowledges petitioners' allegations of improprieties in the examination of their returns, but further contends that "[i]n context, those complaints are part of an attempted challenge to the existence or amount of the underlying liability and are not an allegation of error with respect to SO Roth's verification under I.R.C. § 6330(c)(1)." Based on these contentions, respondent asserts that petitioners have therefore waived the verification issue, citing Rule 331(b)(4), in which we provide that any issue not clearly and concisely raised in the petition "shall be deemed to be conceded."
In our June 16, 2023, order extending the time for petitioners to respond to respondent's Motion, the Court ordered that if petitioners disagreed with the facts or law set forth in his Motion, petitioners should identify the specific points in dispute and set forth their position on those points. See also Rule 121(b)(2)-(d), (f). In their subsequently filed Motion for Summary Judgment, petitioners assign no error to respondent's contentions as to verification and cite to no law on the issue. Based on our own review of the Petition, we agree that petitioners failed to clearly and concisely assign error to SO Roth's verification that the requirements of applicable law and administrative procedure were met. In light of this, as well as petitioners' failure to raise any objection to respondent's contentions in his Motion regarding the verification issue, see id., we also agree that petitioners have conceded the point. See, e.g., Norman v. Commissioner, T.C. Memo. 2016-98, at *8 n.2 ("[t]he taxpayer must adequately raise the verification issue in his petition in order for this Court to consider it"); Med. Practice Solutions, LLC v. Commissioner, T.C. Memo. 2009-214 ("this Court will review the Appeals officer's verification under section 6330(c)(1) . . . as long as the taxpayer has adequately raised the issue in her appeal" (internal citation omitted)).
Petitioners also make no clear allegations of error with respect to SO Roth's determination that the NFTL filing balances the need for the efficient collection of taxes with petitioners' legitimate concern that any collection action be no more intrusive than necessary, and we deem petitioners to have conceded this issue as well. See Rule 331(b)(4).
B. Issues Raised by Petitioners
During a CDP hearing, a taxpayer may raise any relevant issue relating to the unpaid tax or the collection action, including challenges to the appropriateness of the collection action and offers of collection alternatives. § 6330(c)(2). In their request for a CDP hearing, petitioners requested withdrawal of the NFTL filing as well as an installment agreement or offer-in-compromise. Petitioners do not appear to have pursued these requests during the CDP hearing, however, and in the notice of determination, SO Roth determined that petitioners did not request a collection alternative and that there was no information in the CDP administrative file or otherwise provided by petitioners indicating that withdrawal should be considered. Petitioners have made no clear assignment of error with respect to these determinations. See Rule 331(b)(4).
The error petitioners have assigned is with respect to Appeals not providing them with the exam file for the years in issue. In the Petition, petitioners contend that production of the exam file was mandated by the TFA and that it was an abuse of discretion not to provide it. In their Motion for Summary Judgment, petitioners further allege that the exam file is a part of their CDP case both because SO Roth reviewed the exam file and because respondent, by virtue of the declaration included with his Motion for Summary Judgment, has claimed that the SND was a result of the 30-day letter.
Petitioners also argued in the Petition that Appeals violated the TFA by refusing to obtain the opinion of Area Counsel with respect to the required case file access. But, petitioners did not include this argument in their Motion for Summary Judgment. And although respondent affirmatively alleged in his Motion for Summary Judgment that Appeals was not required to obtain such advice, petitioners did not respond to this allegation. We conclude, therefore, that petitioners have abandoned this claim. See Rowen v. Commissioner, 156 T.C. 101, 115-16 (2021).
The referenced declaration is that Halvor R. Melom, the attorney assigned to represent respondent in this case. In the declaration, Mr. Melom asserts that he "requested a copy of the '30-day letter' issued by the IRS Examination division during the examination that led to the issuance of the Statutory Notice of Deficiency."
As enacted by the TFA, section 7803(e)(7) provides, in relevant part, that:
In any case in which a conference with the Internal Revenue Service Independent Office of Appeals has been scheduled upon request of a specified taxpayer, the Chief of Appeals shall ensure that such taxpayer is provided access to the nonprivileged portions of the case file on record regarding the disputed issues (other than documents provided by the taxpayer to the Internal Revenue Service) not later than 10 days before the date of such conference.§ 7803(e)(7)(A). The plain language of this provision requires only that the nonprivileged portions of the case file on record "regarding the disputed issues" be provided. As SO Roth, and now this Court, has determined, petitioners were precluded from disputing their underlying liabilities during their CDP hearing. As such, their underlying liabilities could not be one of the disputed issues during the hearing. We therefore see no abuse of discretion in Appeals-who did provide petitioners with a copy of the CDP administrative file, which was identical to that transmitted to Appeals by ACS, and a copy of the SND-not providing petitioners with the exam file, regardless of whether SO Roth reviewed the exam file or the 30-day letter led to the SND. See H.R. Rep. No. 116-39, pt. I, at 31 (2019) ("[Section 7803(e)(7)] requires that the administrative case file referred to Independent Appeals be available"); see also I.R.S. Interim Guidance Mem. AP-08-0622-0006 (June 28, 2022) (§ 7803(e)(7) requires access "to the administrative case file received from Compliance"); I.R.S. Interim Guidance Mem. AP-08-0620-0008 (June 17, 2020) (same).
The parties do not dispute that petitioners are specified taxpayers. See § 7803(e)(7)(C). (#9 R MSJ par 77 n.6)
IRM 8.6.1.2.1, which was issued as part of the June 17, 2020, interim IRS guidance, and which AO McLaughlin consulted, similarly states that "access is only for [nonprivileged] documents related to the disputed issues." See I.R.S. Interim Guidance Mem. AP-08-0620-0008 (June 17, 2020); see also I.R.S. Interim Guidance Mem. AP-08-0622-0006 (June 28, 2022) (stating in revised IRM 8.6.1.2.1 that access is for the "nonprivileged portions of [the taxpayer's] case file regarding the disputed issues").
V. Conclusion
Petitioners were not entitled to dispute their underlying liabilities during their CDP hearing, and SO Roth's determination to sustain the collection action was not an abuse of discretion. We shall therefore grant respondent's Motion for Summary Judgment and deny petitioners' Motion for Summary Judgment.
We have considered all other arguments made and facts presented in reaching our decision, and, to the extent not discussed above, we conclude that they are moot, irrelevant, or without merit.
Upon due consideration, and for cause, it is
ORDERED that respondent's Motion for Summary Judgment, filed March 14, 2023, is granted. It is further
ORDERED that petitioners' Motion for Summary Judgment, filed July 14, 2023, is denied. It is further
ORDERED AND DECIDED that the determination in the Notice of Determination Concerning Collection Actions under IRC Sections 6320 or 6330 of the Internal Revenue Code, dated June 28, 2022, is sustained in full.