Opinion
28239-21L
02-09-2023
DUY T. DOUNG, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Elizabeth A. Copeland Judge
Mr. Doung's counsel mailed a Petition to this Court on August 12, 2021, to contest a notice of determination dated June 25, 2021, sustaining a notice of federal tax lien with respect to Mr. Doung's 2013 tax year. Now before the Court is Respondent's Motion for Summary Judgment, filed December 15, 2022, and Petitioner's Opposition to Motion for Summary Judgment, filed December 27, 2022. Also pending are Petitioner's January 17, 2023, Reply to First Amended Answer and Respondent's January 27, 2023, Response to the Court's Order [to Show Cause] dated January 9, 2023.
I. Mailing of the Petition
In Boechler, P.C. v. Commissioner, 142 S.Ct. 1493 (2022), the Supreme Court held that the 30-day time limit for filing petitions under I.R.C. §§ 6320(c) and 6330(d)(1) is non-jurisdictional and thus subject to equitable tolling within the court's discretion. Mr. Doung's counsel mailed the Petition on August 12, 2021, which was beyond the statutorily determined due date of July 26, 2021. See I.R.C. §§ 6320(c) and 6330(d)(1). Respondent alleged these facts in his First Amended Answer. In Petitioner's Reply, Mr. Doung's counsel stated that he "has no more to add in opposition to the motion to dismiss" and that "[t]he court can make what equitable decision it feels appropriate."
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.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.
Because there is no pending Motion to Dismiss before the Court (rather, there is only Respondent's Motion for Summary Judgment), we are not entirely certain what Mr. Doung's counsel was referencing in his latest filing. We do however note that Respondent did file a Motion to Dismiss for Lack of Jurisdiction on January 4, 2022, which motion we denied pursuant to the decision in Boechler. Prior to our denial, Mr. Doung filed an Opposition to Respondent's Motion to Dismiss, wherein Mr. Doung's counsel declared by affidavit as follows:
On July 13, 2021, I signed a petition [in this case] . . . and took the petition, entry of appearance and designation of place of trial to my office mail room with orders to mail it that day. I have done that for the past ten years and since 1980 have never missed a filing date.
I found out on August 12, 2021 that no postage had been placed on the petition and it was sent back. As such, I immediately filed a second petition, which was received on the dates that district counsel said. But this was the second petition filed and should be accepted.
Attached to the affidavit was a copy of the Petition marked as received by the Tax Court on August 16, 2021. The copy of the Petition is otherwise undated (as are all copies in the record) and does not contain counsel's Tax Court Bar Number, as is required by Rule 23(a)(3). Nowhere in the record is there corroborating evidence of counsel's alleged attempt to timely mail the Petition (such as a copy of the original envelope marked as undeliverable).
Based on his Reply, Mr. Doung evidently intends for his counsel's affidavit to constitute sufficient grounds for equitable tolling of the applicable 30-day time limit. However, we find the equitable tolling issue to be moot because (as we discuss below) we would grant Respondent's Motion for Summary Judgment on the merits even if tolling did apply.
II. The Merits of Respondent's Motion for Summary Judgment
A. Respondent's Factual Allegations
In the Motion for Summary Judgment, Respondent alleges that prior to a CDP hearing taking place the following facts occurred on the following dates (none of which is disputed by Mr. Doung):
October 26, 2015: The Internal Revenue Service (IRS) automated underreporter unit issued to Mr. Doung a statutory notice of deficiency (SNOD) for his 2013 tax year proposing a deficiency of $14,306 and asserting a substantial tax understatement penalty under section 6662(a) and (b)(2) of $2,861, that penalty having been automatically calculated through electronic means.
March 14, 2016: The IRS assessed the taxes (including above listed deficiency and penalty) because the period for petitioning this Court for review of the SNOD had expired.
August 17, 2018: Mr. Doung submitted an offer-in-compromise (OIC) for his 2013 liability.
February 19, 2019: Mr. Doung's OIC was rejected by the IRS.
March 25, 2019: Mr. Doung appealed the rejection of his OIC with the IRS Office of Appeals.
March 26, 2019: The IRS notified Mr. Doung that a notice of federal tax lien (NFTL) had been filed with respect to his 2013 liability.
April 16, 2019: The IRS received Mr. Doung's Form 12153, Request for a Collection Due Process or Equivalent Hearing (hereinafter referred to as the CDP request) to challenge the NFTL, but it was not assigned to a CDP Settlement Officer (SO) for several months.
July 16, 2019: IRS Appeals sustained the rejection of Mr. Doung's OIC.
March 2, 2021: SO Joe Alvarado, who was assigned to the CDP case, noted that IRS Appeals had sustained the rejection of Mr. Doung's August 17, 2018, OIC and sent Mr. Doung a letter scheduling a telephonic CDP hearing for March 30, 2021. In that same March 2ndletter, SO Alvarado proposed an installment agreement of $1,738 per month for paying the subject liabilities and invited Mr. Doung to submit an updated Form 433-A, "Collection Information Statement," if he wanted SO Alvarado to consider an alternative to the proposed installment agreement. Mr. Doung never submitted an updated Form 433-A.
On July 1, 2019, the IRS Office of Appeals was renamed the IRS Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001, 133 Stat. 981, 983 (2019). Because this case involves time periods both before and after that change, we will refer to that Division of the IRS as the Office of Appeals or Appeals.
During the CDP process, Mr. Doung's counsel missed the March 30, 2021, CDP hearing and proceeded to miss several rescheduled telephonic hearings with SO Alvarado. When the hearing was finally held on May 24, 2021, SO Alvarado explained his conclusion that all procedural prerequisites for the NFTL had been satisfied, and he reiterated the proposed installment agreement. Mr. Doung's counsel indicated that he would discuss the proposal with Mr. Doung but would recommend instead that Mr. Doung obtain a loan to pay off some portion of the liability. SO Alvarado asked Mr. Doung's counsel to respond by June 7, 2021, regarding payment options, but neither Mr. Doung nor his counsel ever responded.
In assessing the case, SO Alvarado consulted the administrative record (consisting of internal IRS records and transcripts) and reported his verification that (1) the 2013 liability was properly assessed, (2) notice and demand for payment was timely sent to Mr. Doung, (3) there remained a balance due, and (4) the NFTL was properly issued. SO Alvarado also concluded that the lien on Mr. Doung's property balanced the need for efficient collection of taxes with Mr. Doung's legitimate concern that collection efforts be no more intrusive than necessary. He then issued a notice of determination on June 25, 2021, sustaining the NFTL filing.
In the Petition, Mr. Doung assigned error to the notice of determination in only the following respect: "[SO Alvarado's] review was unreasonable as Petitioner offered to borrow as much money as he could to retire a debt that is beyond his means. He did not offer to borrow monies to pay off the balance, as the balance is well beyond his capabilities."
B. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Under Rule 121(b), we may grant summary judgment when there is no genuine dispute as to any material facts and a decision may be rendered as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). The burden is on the moving party to demonstrate that no genuine dispute as to any material fact remains and that it is entitled to judgment as a matter of law. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74-75 (2001). In deciding whether to grant summary judgment, we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Sundstrand, 98 T.C. at 520 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). However, the nonmoving party may not rest upon the mere allegations or denials in his pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Sundstrand, 98 T.C. at 520.
C. Standard of Review for CDP Cases
Sections 6320(c) and 6330(d)(1) grant this Court jurisdiction to review a settlement officer's determination in connection with a CDP hearing. Section 6330(c)(2) prescribes the matters that a taxpayer may raise at a CDP hearing, including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. The existence or amount of the underlying tax liability may be contested at a CDP hearing only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. See § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180-81 (2000).
If the validity of the underlying tax liability is properly at issue, the Court will review the taxpayer's liability de novo. See Sego, 114 T.C. at 609-10. Where the validity of the underlying liability is not properly at issue, the Court will review the SO's determination for abuse of discretion. Id. at 610. Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). This Court considers a challenge to the underlying liability in a CDP case only if the taxpayer properly raised a challenge in the CDP proceeding. See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. The taxpayer does not properly raise an issue, including the underlying liability, during the CDP hearing if he "fails to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence." Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.
In determining whether a settlement officer abused his or her discretion, we turn to section 6330(c)(3), which requires the SO to (1) verify that the requirements of applicable law and administrative procedure have been met, (2) consider issues raised by the taxpayer, and (3) consider whether the proposed collection action balances the need for the efficient collection of taxes with the taxpayer's legitimate concern that any collection action be no more intrusive than necessary. Thompson v. Commissioner, 140 T.C. 173, 178-79 (2013). In reviewing the determination, we do not substitute our judgment for that of the SO or make an independent determination of what would be an acceptable collection alternative. Id. at 179. If the SO "followed all statutory and administrative guidelines and provided a reasoned, balanced decision," we "will not reweigh the equities." Id.
D. Review of SO Alvarado's Determination
Here, Mr. Doung's underlying liability for his 2013 tax year is not properly at issue. Respondent alleged that the SNOD was timely and properly mailed to Mr. Doung, and Mr. Doung has not disputed this. Mr. Doung did state in his CDP request that "[t]hese amounts are grossly inflated and will be greatly reduced. All collection should stop." Even liberally construing such statement as a challenge to the underlying liability, that challenge was abandoned during the CDP hearing, as no evidence or alternative computations of the underlying liability were presented to SO Alvarado. Moreover, the underlying liability was not raised in the Petition, and Mr. Doung and his counsel failed to respond to two separate opportunities this Court gave them to address whether he was raising a liability challenge. Therefore, to the extent Mr. Doung's hearing request might be deemed to raise a challenge to the underlying liability, he has abandoned the issue.
Accordingly, we review SO Alvarado's determination for abuse of discretion. Under that standard, we find no grounds for reversing the determination or remanding the case to Appeals. Our review of the administrative record confirms that all requirements of applicable law and administrative procedure relevant to the NFTL appear to have been met.
While Respondent notes in his Motion for Summary Judgment that the record does not affirmatively demonstrate SO Alvarado's consideration of the supervisory approval requirement of section 6751(b)(1) as it relates to the IRS's assertion of the penalty for underpayment of tax due to substantial understatement of income tax, the SNOD in this case was issued by the IRS's automated underreporter unit, and the computational substantial understatement penalty was automatically assessed. Section 6751(b)(2) provides that the supervisory approval requirement does not apply to any penalty "automatically calculated through electronic means." Therefore, we can independently confirm that the section 6751(b)(1) requirement was not relevant to Mr. Doung's 2013 liability. Furthermore, Mr. Doung did not raise any challenge-whether at the CDP hearing or in this litigation-to the validity of the penalty assertion.
We likewise conclude that SO Alvarado acted reasonably in sustaining the lien despite Mr. Doung's counsel's discussion of collection alternatives during the CDP hearing. Mr. Doung never submitted an updated Form 433-A to substantiate his financial circumstances at the time of the CDP hearing, nor did Mr. Doung or his counsel respond by the deadline SO Alvarado set for either accepting the SO's proposed installment agreement or proposing an alternative. "It is not an abuse of discretion for an Appeals officer to sustain a collection action and not consider collection alternatives when the taxpayer has proposed none." Davison v. Commissioner, T.C. Memo. 2019-26, at *18, aff'd, 805 Fed.Appx. 259 (5th Cir. 2020).
Finally, we find no fault in SO Alvarado's conclusion that the lien adequately balances the interests of the Government and those of Mr. Doung. Since Mr. Doung did not provide updated information about his financial circumstances despite ample opportunity to do so, SO Alvarado had no basis for determining that the lien was causing undue hardship.
The only substantive contention in Petitioner's Opposition to the Motion for Summary Judgment is that "this is a very old case." The protracted nature of a CDP case is not itself a reason to overturn an SO's determination, provided that the relevant period of limitations for collection has not yet run, see §§ 6502, 6330(e). Had Mr. Doung desired to end this process sooner, he could have engaged substantively with SO Alvarado's invitation to consider an installment agreement or propose alternatives.
Upon due consideration, and for cause, it is ORDERED that the Court's Order to Show Cause, dated January 9, 2023, is discharged. It is further
ORDERED that Respondent's Motion for Summary Judgment, filed December 15, 2022, is granted. It is further
ORDERED AND DECIDED that the determination set forth in the Notice of Determination Concerning Collection Actions under IRC Sections 6320 or 6330 of the Internal Revenue Code, dated June 25, 2021, upon which this case is based, validating Respondent's recording of a Federal Tax Lien affecting Petitioner's 2013 tax year, is sustained.