Opinion
7332-22L
05-15-2024
JOAN E. FARR, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Tamara W. Ashford Judge
This matter is before the Court to decide respondent's Motion for Summary Judgment, filed December 5, 2023, pursuant to Rule 121. Respondent contends that no genuine dispute exists as to any material fact and that the notice of determination of the Internal Revenue Service (IRS) Independent Office of Appeals (Appeals) approving a notice of intent to levy (levy notice) and the supplemental notice of determination of Appeals upholding the filing of a notice of federal tax lien (NFTL), each with respect to petitioner's unpaid excise tax liabilities under sections 4958(a)(1) and (b) for the 2010-12 taxable years (years at issue), should be sustained as a matter of law.
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, in effect at all relevant times, and regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times.
As discussed infra p. 3, the section 4958(b) liabilities are reflected in the IRS's records as liabilities for the taxable years ending January 31, February 28, and March 31, 1950 (1950 assessments).
By Order served on the parties on December 7, 2023, the Court ordered petitioner to file a response to respondent's motion no later than January 8, 2024. As of the date of this Order and Decision, petitioner has not responded to either respondent's motion or the Court's Order.
Because no response to respondent's motion was filed despite the Court's Order directing petitioner to do so, the Court could enter a decision against her for that reason alone. See Rule 121(d). We will nevertheless consider the motion on its merits.
Background
Petitioner's excise tax liabilities for the years at issue are the result of this Court's having determined deficiencies in excise tax due from petitioner under sections 4958(a)(1) and (b) for the years at issue. See Farr v. Commissioner, T.C. Memo. 2018-2, aff'd, 738 Fed.Appx. 969 (10th Cir. 2018), cert denied, 139 S.Ct. 1263 (2019). Accordingly, on May 15, 2018, the IRS assessed the determined amounts (plus interest).
When petitioner failed to pay the assessed liabilities (plus interest) despite the IRS's having provided her with notice and demand for payment, the IRS sent her a levy notice dated March 25, 2021. The levy notice advised petitioner that the IRS intended to levy to collect her outstanding excise tax liabilities for the years at issue which, through April 4, 2021, totaled $109,027.85, and that she had a right to a hearing to appeal the proposed collection action. The levy notice also advised petitioner that the IRS might file an NFTL at any time to protect its interest.
We note that the levy notice contained a clerical error: the levy notice erroneously stated that the periods at issue with respect to the section 4958(b) liabilities were May 15, 2018; that date is the assessment date.
In response to the levy notice petitioner timely submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP hearing request). On her CDP hearing request she challenged her underlying liabilities, stating the following:
I did not engage in benefit transactions with my non-profit org[anization], Assoc. for Honest Attorneys (A.H.A!). We always averaged $25K or less [and] only had to file a Form 990N. The total of $109K is fictitious, fraudulent [and] based on speculation only. Case # 2746-15 was taken all the way to the U.S. Sup. Ct. but was not heard. I tried to pay $48K 2 yrs. ago [and] it was refused. Also, the 10-yr statute of limitations to collect is past[.]
She also requested the collection alternative of "I Cannot Pay Balance" and checked the box for lien withdrawal (despite no such lien having been filed when she submitted her CDP hearing request).
We note that petitioner also indicated (erroneously at the time) that her CDP hearing request was in response not only to the levy notice but to an NFTL as well.
The IRS received petitioner's CDP hearing request on April 5, 2021. The next day, the IRS sent petitioner Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, advising her that an NFTL had been filed on April 6, 2021, with respect to her outstanding excise tax liabilities for the years at issue and that she had the right to request a hearing to appeal the collection action and discuss payment method options.
Petitioner's CDP hearing request was assigned to Settlement Officer David Melcher (SO Melcher), and by letter to petitioner dated July 26, 2021, he acknowledged receipt of the request and scheduled a telephone CDP hearing for August 17, 2021. He also indicated that the scheduled hearing was her opportunity to discuss with him the reasons she disagreed with the proposed levy or to discuss collection alternatives. In the letter SO Melcher also outlined the issues he had to consider during the hearing, and to that end he advised petitioner that she was precluded from raising her underlying liabilities during the hearing because those liabilities had been sustained by the Tax Court, which constituted her having had a prior opportunity to challenge the liabilities.
On August 17, 2021, SO Melcher held a telephone CDP hearing with petitioner. During the hearing petitioner confirmed that she was not seeking a collection alternative. She attempted to raise her underlying liabilities but SO Melcher informed her, reiterating what he had advised in his July 26, 2021, letter, that she was precluded from doing so because she had previously challenged those liabilities in Tax Court. Petitioner questioned the 1950 assessments, contending that they had not been at issue in the Tax Court litigation and that the period of limitations for collection of those assessments had expired. In response SO Melcher stated that he would look further into these assessments and get back to her.
Following the telephone CDP hearing SO Melcher took additional steps to verify the 1950 assessments, including securing and reviewing the IRS's "non-master file" account transcripts for petitioner. He verified that the questioned assessments were in fact not for the 1950 taxable year but for the years at issue; the section 4958 assessments were made on petitioner's non-master file accounts, but because those accounts cannot handle more than one assessment per taxable period and the section 4958(a)(1) assessments were made on the 2010-12 accounts, the section 4958(b) assessments had to be made on "dummy" accounts, which were the accounts with the 1950 dates.
On October 18, 2021, SO Melcher called petitioner and discussed the section 4958 assessments. He explained that (1) all assessments were legally and procedurally valid and (2) the Tax Court had previously addressed all of the deficiencies giving rise to those assessments; therefore, as he mentioned during the telephone CDP hearing, she could not raise her underlying liabilities in this CDP proceeding. SO Melcher also explained what her appeal rights were and time frames. During the call petitioner did not raise any other issues.
On January 25, 2022, SO Melcher concluded that the issuance of the levy notice to petitioner was appropriate. Accordingly, Appeals issued a notice of determination dated March 3, 2022, to petitioner, sustaining the proposed levy and detailing the basis for the determination in an attached summary.
On March 21, 2022, petitioner, while residing in Kansas, timely filed a Petition with this Court for review of the notice of determination. In her Petition, she explained why she disagreed with the notice of determination, stating the following:
I don't owe this money since I did not engage in benefit transactions with my non-profit organization, the A.H.A!.
During the trial in 2018, abuse of discretion and fraud on the court occurred resulting in a false judgment against me.
A review of the briefs, evidence and affidavits filed in Case #2746-15 shows the truth. U.S. Sup. Ct. Docket No. 18-9002.
The targeting of myself and my non-profit was directed by Oklahoma Senator Jim Inhofe because I ran against him for the United States Senate. The IRS admitted to targeting non-profits in 2013.
This amount is excessive and unwarranted, and I am unable to pay for reasons of hardship. I am drawing Social Security and a small pension, and caring for my disabled son who is terminally ill and can't work. I have no savings or investments.
On December 28, 2022, respondent filed an unopposed Motion for Remand because SO Melcher did not conduct a CDP hearing with respect to the NFTL issued to petitioner and, pursuant to section 6320(b)(4), petitioner should have been afforded such a hearing. On December 30, 2022, the Court granted respondent's motion, remanding the case to Appeals so that a settlement officer could conduct a CDP hearing with respect to the NFTL.
On March 31, 2023, Appeals assigned petitioner's case on remand to Settlement Officer Danielle McCormick (SO McCormick). On April 11, 2023, SO McCormick called petitioner to schedule a supplemental CDP hearing. Petitioner expressed that she did not want to meet in person and that there was no need to schedule a future telephone supplemental CDP hearing; she was ready to discuss her case with SO McCormick. Accordingly, the supplemental CDP hearing proceeded.
During the supplemental CDP hearing petitioner again raised her underlying liabilities, asserting that the section 4958 assessments were "bogus" and "fake," "she was being targeted by a senator," and she had filed a lawsuit against several federal government agencies (including the IRS) which she plans "to take all the way to the Supreme Court." SO McCormick reiterated to petitioner that because she had a prior opportunity to dispute her underlying liabilities, she was precluded from doing so during the supplemental CDP hearing.
During the supplemental CDP hearing petitioner also stated that she wanted the lien removed or withdrawn. Regarding lien removal, SO McCormick advised that it sounded like she was interested in a lien discharge. After discussing the discharge process, petitioner stated that she did not want a lien discharge as it would do her no good. They then discussed the requirements for lien withdrawal. Petitioner agreed that she was not entitled to withdrawal under section 6323(j)(1)(A)-(C), but believed she was entitled to withdrawal under section 6323(j)(1)(D), which allows for lien withdrawal when it would be in the best interest of the taxpayer and the United States. Petitioner offered to remove the IRS as a defendant in her lawsuit if the IRS withdrew the lien. SO McCormick declined the offer, indicating to petitioner that withdrawing the lien would not be in the best interest of the United States because the assessment of her excise tax liabilities for the years at issue were valid and she had no intention of paying those assessed liabilities.
On April 13, 2023, SO McCormick concluded that the filing of the NFTL was appropriate. Accordingly, Appeals issued a supplemental notice of determination dated June 21, 2023, to petitioner, sustaining the filing of the NFTL and detailing the basis for the determination in an attached summary.
Discussion
The purpose of summary judgment is to expedite litigation and avoid unnecessary and expensive trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). The Court shall grant summary judgment if the moving party shows that there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(a)(2); see also 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 there is no genuine dispute as to any material fact; consequently, factual inferences will be viewed in a light most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). The nonmoving party may not rest upon the mere allegations or denials of his or her pleadings, but must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Sundstrand Corp., 98 T.C. at 520. On the basis of the record in this case, we conclude that there is no genuine dispute as to any material fact. Consequently, we may render a decision as a matter of law.
Under section 6321, if any person liable to pay any tax neglects or refuses to do so after notice and demand, the amount, including any interest, addition to tax, or assessable penalty, shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. Section 6323 authorizes the Commissioner to file an NFTL. Furthermore, if any person liable to pay any tax neglects or refuses to do so after notice and demand, section 6331(a) authorizes the Commissioner to collect the unpaid amount by way of a levy upon all property and rights to property belonging to such person or upon which there is a lien. Pursuant to section 6320(a), the Commissioner must provide the person with written notice of and an opportunity for an administrative hearing to review the propriety of the filing of the NFTL. Likewise, pursuant to section 6330(a), the Commissioner must provide the person with written notice of and an opportunity for an administrative hearing to review the proposed levy.
If an administrative hearing is requested in a lien and/or levy case, the hearing is to be conducted by Appeals. §§ 6320(b)(1), (4), 6330(b)(1). At the hearing, the taxpayer may raise any relevant issue relating to the unpaid tax, the notice of lien fling, or the proposed levy, including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. §§ 6320(c), 6330(c)(2)(A). Additionally, the taxpayer may challenge the existence or amount of his or her underlying tax liabilities if he or she did not receive a notice of deficiency with respect to the liabilities or did not otherwise have an earlier opportunity to dispute the liability. §§ 6320(c), 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180-81 (2000); Archer v. Commissioner, T.C. Memo. 2016-230, at *14.
Following the hearing the Appeals officer must determine among other things whether the completed or proposed collection actions are appropriate. In reaching the determination, the Appeals officer must take into consideration: (1) whether the requirements of applicable law and administrative procedure have been met, (2) all relevant issues raised by the taxpayer, and (3) whether any proposed or completed collection actions balance the need for the efficient collection of taxes with the legitimate concern of the taxpayer that collection be no more intrusive than necessary. §§ 6320(c), 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C. 183, 184 (2001); Scanlon v. Commissioner, T.C. Memo. 2018-51, at *17.
Section 6330(d)(1) grants this Court jurisdiction to review the determination made by Appeals in a levy and/or lien case. Where the underlying liabilities are properly at issue, the Court reviews any determination by Appeals regarding the underlying liabilities de novo. Goza v. Commissioner, 114 T.C. 181-82. Where the underlying liabilities are not properly at issue, we review any determination by Appeals for abuse of discretion; that is, whether the determination was arbitrary, capricious, or without sound basis in fact or law. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Goza v. Commissioner, 114 T.C. at 182.
Petitioner's primary complaint throughout the CDP hearing process has been directed towards her underlying liabilities under section 4958 for the years at issue. And now before this Court she continues to do the same. However, the law is clear: if a taxpayer received a notice of deficiency with respect to his or her underlying liabilities or had an earlier opportunity to dispute the liabilities, he or she may not contest the liabilities in a CDP hearing (or thereafter in this Court). See §§ 6320(c), 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. at 609; Goza v. Commissioner, 114 T.C. at 180-81; Archer v. Commissioner, T.C. Memo. 2016-230, at *14; Treas. Reg. §§ 301.6230-1(e)(3), Q&A-E2, 301.6330-1(e)(3), Q&A-E2.
The undisputed facts confirm that petitioner received a notice of deficiency for the years at issue with respect to excise taxes under section 4958. She then timely petitioned this Court disputing that notice of deficiency and, after a trial, the Court sustained those excise tax deficiencies and entered a decision in favor of respondent. Thus, petitioner's underlying liabilities for the years at issue are not at issue and we will review Appeals' determinations for abuse of discretion only.
On the basis of our review of the Administrative Record, we find that SO Melcher and SO McCormick considered all the requisite factors under section 6330(c)(3) when making their determinations. Indeed, petitioner does not contend otherwise and that thus the determinations were arbitrary, capricious, or without a sound basis in fact or law.
Besides, it cannot be said that an abuse of discretion was committed by SO McCormick regarding her rejection of petitioner's request for lien withdrawal. The IRS's authority to withdraw a lien under section 6323(j) is discretionary. Banks v. Commissioner, T.C. Memo. 2019-166, at *14, aff'd, 855 Fed.Appx. 429 (9th Cir. 2021). A filed NFTL may be withdrawn if it is determined that (1) the filing was premature or not in accordance with administrative procedures, (2) the taxpayer has entered into an installment agreement to satisfy the liability, unless such agreement provides otherwise, (3) the withdrawal will facilitate collection, or (4) with the consent of the taxpayer or the National Taxpayer Advocate, withdrawal would be in the best interest of the taxpayer and the United States. § 6323(j); Hillsman v. Commissioner, T.C. Memo. 2008-240, slip op. at 8.
During the supplemental CDP hearing petitioner agreed that she did not satisfy the first three criteria for lien withdrawal. Additionally, during that hearing petitioner expressed that she had no intention of paying her outstanding excise tax liabilities for the years at issue. Consequently, the IRS was justified in keeping the NFTL in place. See Banks, T.C. Memo. 2019-166. We conclude that it was not an abuse of discretion for SO McCormick to determine that petitioner failed to establish that she met the criteria for lien withdrawal and that therefore the filed NFTL should be sustained.
Respondent having shown that there is no genuine dispute of material fact and that he is entitled to judgment as a matter of law, we will grant his motion for summary judgment. With regard to petitioner's outstanding excise tax liabilities for the years at issue, she should note that she is of course free to continue to negotiate with the IRS concerning those liabilities, but she is entitled to only one CDP hearing and Tax Court proceeding with respect to the collection actions. See Ragsdale v. Commissioner, T.C. Memo. 2019-33, at *35 (citing Perrin v. Commissioner, T.C. Memo. 2012-22, slip op. at 8). Upon due consideration, it is hereby
ORDERED that respondent's Motion for Summary Judgment, filed December 5, 2023, is granted. It is further
ORDERED AND DECIDED that respondent may proceed with the collection actions with respect to petitioner's unpaid excise tax liabilities for the 2010-12 taxable years, as described in the Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330, dated March 3, 2022, and the Supplemental Notice of Determination Concerning IRS Collection Actions Under Internal Revenue Code Sections 6320 or 6330, dated June 21, 2023.