Opinion
16776-19L
07-13-2022
WINTHROP G. GARDNER & LAURIE K. GARDNER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Juan F. Vasquez, Judge
This collection due process (CDP) case is before the Court on respondent's Motion for Summary Judgment, with supporting Declaration, filed on July 23, 2020, pursuant to Rule 121. Respondent seeks to sustain a Notice of Determination Concerning Collection Action(s) Under IRC Sections 6320 or 6330 of the Internal Revenue Code (notice of determination), dated August 5, 2019, concerning a proposed levy action to collect petitioners' unpaid tax liabilities for taxable years 2013, 2014, and 2015 (years in issue). Petitioners object to the granting of the Motion.
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 amounts to the nearest dollar.
I. Background
The following facts are based on the parties' pleadings and motion papers, including the attached declarations and exhibits. See Rule 121(b). Petitioners resided in North Carolina when they petitioned this Court.
A. Tax liabilities
On October 14, 2016, petitioners filed a joint Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, for taxable year 2013. Thereon they reported tax of $6,529. They had a withholding credit of $1,700 but did not remit the remaining balance. The Internal Revenue Service (IRS) assessed the reported tax, additions to tax under section 6651(a)(1) and (2), and statutory interest.
On October 14, 2016, petitioners filed a joint Form 1040, U.S. Individual Tax Return, for taxable year 2014. Thereon they reported tax of $7,384. They had a withholding credit of $3,667 but did not remit the remaining balance. The IRS assessed the reported tax, additions to tax under section 6651(a)(1) and (2), and statutory interest.
On October 14, 2016, petitioners timely filed a joint Form 1040 for taxable year 2015 after requesting an extension. Thereon they reported tax of $5,951. They had a withholding credit of $2,995 but did not remit the remaining balance. The IRS assessed the reported tax, an addition to tax under section 6651(a)(2), and statutory interest.
As of July 2018, petitioners' liabilities for the years in issue totaled $18,017.
B. CDP hearing
On July 16, 2018, the IRS issued petitioners a notice of intent to levy and notice of your right to a hearing for the years in issue. In response petitioners timely submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing. Petitioners indicated on the Form 12153 that they were interested in an offer in compromise (OIC). They did not request consideration of their underlying liabilities or seek any other relief.
The IRS Office of Appeals (Appeals) assigned petitioners' CDP hearing to Settlement Officer (SO) Sally A. Bujnoch. SO Bujnoch reviewed IRS transcripts for the years in issue and confirmed that petitioners' liabilities had been properly assessed and that all other legal requirements had been met. SO Bujnoch noted that petitioners did not appear to be current on their estimated tax payments for taxable year 2018.
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). Since both names were in effect at different times relevant to this case, we will refer to them both as Appeals.
On March 27, 2019, SO Bujnoch sent petitioners a letter scheduling a telephone conference for May 21, 2019. Therein SO Bujnoch stated that, in order for the SO to consider an OIC or other collection alternative, petitioners needed to (1) submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals and (2) provide proof that they had made all required estimated tax payments for the year to date. SO Bujnoch asked petitioners to submit the requested items within 14 days from the date of the letter.
Petitioners did not submit anything or otherwise respond to SO Bujnoch before the scheduled telephone conference. On May 21, 2019, SO Bujnoch spoke with petitioners by telephone at the appointed time. During the call petitioners requested an installment agreement. They also told the SO that that they had filed a request for extension for 2018 and had increased their federal income tax withholding. Because they owed less than $50,000, SO Bujnoch offered petitioners a "streamlined" installment agreement, for which petitioners could qualify without submitting financial information. Under the proposed agreement, petitioners would make monthly payments of $760 for 72 months. Petitioners indicated that they wished to accept the proposed agreement.
The proposed agreement would have covered petitioners' liabilities for taxable years 2009- 2017.
On May 22, 2019, SO Bujnoch sent petitioners (1) Form 433-D, Installment Agreement; (2) Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in Section 6330(e)(1); and (3) an accompanying cover letter. The Form 433-D provided for monthly payments of $760. In the cover letter SO Bujnoch asked petitioners to sign and return the Form 433-D by June 7, 2019. Petitioners did not provide the signed form to SO Bujnoch by that deadline or respond in any other way to her May 22, 2019, correspondence.
C. Proceedings in this Court
On August 5, 2019, Appeals issued a notice of determination sustaining the proposed levies. Petitioners timely filed a Petition with this Court for review. In their Petition, they state: "Taxpayers are unable to pay amounts subject to levy plus other amounts and . . . seek determination to place their status as to all accounts as 'uncollectible.'"
On July 23, 2020, respondent filed a Motion for Summary Judgment. We ordered petitioners to file an Objection on or before August 27, 2020. Petitioners did not file an Objection by that deadline. On October 13, 2020, this case was called and recalled at the Winston-Salem, North Carolina, Remote Trial Session of the Court. Petitioner Winthrop G. Gardner appeared and requested additional time to respond to respondent's Motion. By Order dated October 13, 2020, we directed petitioners to show cause why respondent's Motion for Summary Judgment should not be granted on or before November 20, 2020.
On November 25, 2020, petitioners filed a Motion for Extension of Time. On January 11, 2021, petitioners filed an Opposition to Motion for Summary Judgment (Opposition). By Order filed on April 6, 2021, we partially granted petitioners' Motion for Extension of Time, in that we would consider petitioners' January 11, 2021, Opposition. In their Opposition, petitioners asserted that they were entitled to deductions for student loan interest for taxable years 2013 and 2014. They did not dispute respondent's description of their CDP hearing.
II. Discussion
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), we 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 may not rest upon the mere allegations or denials in his or her pleadings but must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.
We conclude that there are no material facts in dispute and that this case is appropriate for summary adjudication.
B. Standard of review
Section 6330(d)(1) does not prescribe the standard of review that this Court should apply in reviewing an IRS administrative determination in a CDP case. The general parameters for such review are marked out by our precedents. Where the validity of the taxpayer's underlying liability is properly at issue, we review the SO's determination of that issue de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000). Where there is no dispute as to the taxpayer's underlying liability, we review the IRS decision for abuse of discretion. Cropper v. Commissioner, 826 F.3d 1280, 1284 (10th Cir. 2016), aff'g T.C. Memo. 2014-139; Goza v. Commissioner, 114 T.C. 176, 182 (2000). Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006).
C. Underlying liabilities
Section 6330(c)(2)(B) provides that a taxpayer may challenge his or her underlying tax liability during a CDP hearing if the taxpayer did not receive a statutory notice of deficiency or did not otherwise have a prior opportunity to dispute the underlying tax liability. The phrase "underlying tax liability" includes the tax due, any additions to tax or penalties, and statutory interest. See Katz v. Commissioner, 115 T.C. 329, 338-39 (2000). This Court considers a taxpayer's challenge to an underlying liability in a CDP case only if he or she properly raised that challenge at the administrative hearing. Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). An issue is not properly raised at the administrative hearing if the taxpayer fails to request consideration of that issue or if the taxpayer requests consideration but fails to present any evidence after receiving a reasonable opportunity to do so. Id. at 115-16; Gentile v. Commissioner, T.C. Memo. 2013-175, at *6-7, aff'd, 592 Fed.Appx. 824 (11th Cir. 2014).
In their Opposition to respondent's Motion, petitioners seek to reduce their underlying liabilities for 2013 and 2014 by claiming deductions for student loan interest. However, the record contains no evidence that petitioners raised that issue with SO Bujnoch. Petitioners' Form 12153 does not reference the deduction for student loan interest. Nor do SO Bujnoch's case activity records. According to those records, the only relief petitioners sought during their May 21, 2019, telephone conference was an installment agreement. Petitioners have not set forth any evidence suggesting otherwise.
In any event, even if petitioners were thought to have requested a reduction of their underlying liabilities, they clearly did not present (and do not contend that they presented) any evidence regarding those liabilities during the CDP hearing. See Gentile, T.C. Memo. 2013-175, at *6-7. Petitioners submitted no evidence of their student loan interest payments to SO Bujnoch, and they therefore failed to mount a proper challenge to their underlying liabilities at the CDP hearing. That being so, they cannot maintain that challenge here. See Giamelli, 129 T.C. at 115; Gentile, T.C. Memo. 2013-175, at *6-7.
D. Abuse of discretion
In deciding whether SO Bujnoch abused her discretion in sustaining the collection action, we consider whether she (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues petitioners raised, and (3) considered "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)(3); Ludlam v. Commissioner, T.C. Memo. 2019-21, at *9- 10, aff'd per curiam, 810 Fed.Appx. 845 (11th Cir. 2020). Our review of the record establishes that the SO properly discharged all of her responsibilities under section 6330(c).
1. Verification
This Court has authority to review satisfaction of the verification requirement regardless of whether the taxpayer raised that issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 202-03 (2008), supplemented by 136 T.C. 463 (2011). Petitioners did not allege in their Petition that the SO failed to satisfy this requirement and have set forth no specific facts as to this matter. See Rules 121(d), 331(b)(4) ("Any issue not raised in the assignments of error shall be deemed to be conceded."). In any event, our review of the record shows that SO Bujnoch conducted a thorough review of IRS transcripts for the years in issue and verified that all applicable requirements were met.
2. Issues raised
In their Petition, petitioners appear to assign error to respondent's failure to place them in "currently not collectible" (CNC) status. However, there is no evidence in the record that petitioners requested such relief during their hearing. We may not consider issues or arguments that a taxpayer does not raise as part of his or her CDP hearing. Giamelli, 129 T.C. at 112-13 ("The statute [section 6330] contemplates consideration of issues 'raised' by the taxpayer at the hearing. Thus, if an issue is never raised at the hearing, it cannot be a part of the Appeals officer's determination."); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3 ("In seeking Tax Court review of a Notice of Determination, the taxpayer can only ask the court to consider an issue . . . that was properly raised in the taxpayer's CDP hearing.") Consequently, we may not consider petitioners' eligibility for CNC status.
Even if petitioners had requested CNC status during their hearing, SO Bujnoch would not have abused her discretion by rejecting that request. Suspension of collection activity is a collection alternative that a taxpayer may propose and that Appeals must consider. See § 6330(c)(2)(A)(iii), (3)(B); Webb v. Commissioner, T.C. Memo 2021-105, at *8. Generally, CNC status may be available when a taxpayer has no ability to make payments. See Webb, T.C. Memo 2021-105, at *8 (citing Internal Revenue Manual (IRM) pt. 5.16.1.1 (Sept. 18, 2018)). To justify an account's being placed into CNC status, the taxpayer must supply all relevant information requested by Appeals, including financial statements for consideration of the facts and issues involved in the hearing. See Webb, T.C. Memo 2021-105, at *8.; Treas. Reg. § 301.6330-1(e)(1).
In her March 27, 2019, letter, SO Bujnoch asked petitioners to submit a financial statement, which would have enabled her to evaluate petitioners' eligibility for CNC status and other collection alternatives. Petitioners did not submit their financial information by the stated deadline. Instead they expressed interest in a "streamlined" installment agreement, for which a financial statement was not required, during their telephone conference with SO Bujnoch. Accommodating petitioners, SO Bujnoch sent them a proposed "streamlined" installment agreement and asked them to sign and return it to her. Petitioners failed to do so.
We have consistently held that it is not an abuse of discretion for an SO to reject collection alternatives and sustain the proposed collection action where the taxpayer has failed, after being given sufficient opportunities, to supply the SO with the required forms and supporting financial information. See Huntress v. Commissioner, T.C. Memo. 2009-161; Prater v. Commissioner, T.C. Memo. 2007-241; Roman v. Commissioner, T.C. Memo. 2004-20. Petitioners have neither argued nor shown that they did not have sufficient time to respond to the SO's requests. Accordingly, SO Bujnoch did not abuse her discretion by declining to grant petitioners a collection alternative.
3. Balancing
Petitioners do not allege in their Petition that SO Bujnoch failed to consider "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary" and have set forth no specific facts as to this matter. See § 6330(c)(3)(C). They thus have conceded this issue. See Rules 121(d), 331(b)(4); see also Ansley v. Commissioner, T.C. Memo. 2019-46, at *19. In any event, we see nothing to disturb the SO's express conclusion in the notice of determination that the proposed levy action balanced the need for efficient tax collection with any legitimate concerns of petitioners about intrusiveness.
III. Conclusion
Finding no abuse of discretion in any respect, we will grant summary judgment for respondent and affirm Appeals' determination to sustain the proposed collection action. In reaching our holding, we have considered all the parties' arguments and, to the extent not addressed herein, we conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing, it is
ORDERED that the Court's Order to Show Cause, dated October 13, 2020, is made absolute, and respondent's Motion for Summary Judgment, filed July 23, 2020, is granted. It is further
ORDERED AND DECIDED that the determinations set forth in the Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330, dated August 5, 2019, upon which this case is based, are sustained.