Opinion
12120-20L
07-18-2022
WINTHROP G. GARDNER AND LAURIE K. GARDNER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
David Gustafson, Judge.
This is a "collection due process" ("CDP") case brought by petitioners Winthrop Gardner and Laurie Gardner under section 6330(d)(1) to review a determination by the Internal Revenue Service ("IRS") Independent Office of Appeals ("IRS Appeals") sustaining a notice of intent to levy ("NOIL") to collect unpaid Federal income taxes for the year 2017. Respondent, the Commissioner of Internal Revenue, filed his motion for summary judgment (Doc. 6), to which the Gardners filed a response (Doc. 12), and the Commissioner filed his reply (Doc. 10). We will grant the Commissioner's motion.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 ("Treas. Reg."), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure. Some dollar amounts are rounded. Parenthetical references to "Doc." are to documents as they are numbered in the docket record of this case, and the page numbers cited in such references are according to the numbering in the portable document format ("PDF") of the digital file.
Background
The following facts are derived from the parties' pleadings (Docs. 1 & 2) and the declaration attached to the Commissioner's motion (Doc. 7). For reasons we explain below, we conclude that there exists no genuine dispute of material fact and that this case is appropriate for summary adjudication.
The Gardners' unpaid taxes
The Gardners owe unpaid Federal income tax for the years 2009-2017, all based on self-reported liabilities (see Doc. 7 at 25). Review of the Gardners' CDP hearing covering the years 2013, 2014, and 2015 is pending before this Court in docket number 16776-19L, in which we entered our Order and Decision on July 13, 2022. At issue in this case is the IRS's proposed collection only of 2017 taxes, but we mention the facts as to the previous eight years because they were involved in a collection alternative proposed in the CDP hearing at issue here.
If IRS Appeals makes a determination to reject a collection alternative and to sustain collection of one year's income tax liability, and if the taxpayer files a petition under section 6330(d), then the Tax Court "does not have jurisdiction to review the IRS's proposed collection of those other liabilities, but they are relevant to the issues that are within the Court's jurisdiction." Sullivan v. Commissioner, T.C. Memo. 2009-4, at *3 n.2; id. at *18-19, 23 ("the Sullivans' OICs--the IRS's rejection of which must now be reviewed for abuse of discretion--offered to pay a given amount to satisfy not only the income tax liabilities for those six years, but also (i) the Sullivans' income tax liabilities for several other tax years for which they had received no collection notices or determinations from the IRS, and (ii) Mr. Sullivan's liability for trust fund penalties. . . . We therefore proceed to evaluate the appeals officer's exercise of discretion in rejecting the OICs, taking into account all the liabilities that were proposed to be compromised, even though we do not have jurisdiction to review the collection of all those liabilities").
For the year 2017 at issue here, the Gardners owe unpaid Federal income tax based on their own reporting. Their Form 1040, "U.S. Individual Income Tax Return", reported on line 63 a total tax liability of $4,891, but on line 64 they reported payroll withholding of only $3,424, leaving on line 78 an "Amount you owe" of $1,467 (which has subsequently accrued several hundred dollars of interest and penalties due). (Doc. 7 at 5, 9.)
IRS collection attempts
After issuing to the Gardners notice and demand for payment, the IRS sent to the Gardners a Notice CP90 "Intent to seize your assets and notice of your right to a hearing" dated March 18, 2019. (Doc. 7 at 16.) The notice advised the Gardners of their right to request a CDP hearing with IRS Appeals within 30 days. See § 6330(a). The Gardners submitted a Form 12153, "Request for a Collection Due Process or Equivalent Hearing", upon which they identified the proposed levy action as the basis for the hearing and, to specify the collection alternative in which they were interested, checked the box labeled "Installment Agreement". (Doc. 7 at 21-22.)
CDP hearing
The Gardners' request for a CDP hearing was assigned to Settlement Officer Theresa Salinas ("SO Salinas"). (Doc. 7 at 25.) On October 28, 2019, SO Salinas sent to the Gardners an appointment letter scheduling the CDP hearing for November 21, 2019. (Doc. 7 at 23.) To enable IRS Appeals to consider any collection alternatives, the letter requested that the Gardners provide a completed Form 433A, "Collection Information Statement for Wage Earners and Self-Employed Individuals", and file their Federal income tax return for the year 2018 prior to the CDP hearing. (Doc. 7 at 24.)
Mr. Gardner spoke with SO Salinas on November 19, 2019, and requested an extension of time to provide the requested information. SO Salinas granted the extension and rescheduled the CDP hearing for December 5, 2019. (Doc. 7 at 26.) The CDP hearing was again rescheduled to December 11, 2019. (Doc. 7 at 28.) Prior to the CDP hearing, the Gardners filed their 2018 return but did not provide a completed Form 433-A. (Doc. 7 at 27.)
The CDP hearing was held on December 11, 2019, between Mr. Gardner and SO Salinas. (Doc. 7 at 28.) During the hearing, Mr. Gardner stated that he did not prepare the Form 433-A because he understood there to be an installment agreement option which did not require it. Id. SO Salinas confirmed that there is such a "streamlined" option (implementing a so-called "6-year rule"), and accordingly she proposed such an installment agreement. Such an agreement must cover all the tax years for which the taxpayer has delinquent liabilities-in this case the nine years 2009-2017-so SO Salinas's proposed agreement covered all those liabilities and required a monthly payment of $548. Id. SO Salinas thereafter prepared and sent to the Gardners a Form 433-D, "Installment Agreement", formalizing the terms discussed in the CDP hearing, and she requested that the Gardners sign and return it by December 30, 2019. (Doc. 7 at 29.) The Gardners did not sign and return the Form 433-D. (Doc. 7 at 29.)
As we note in our Order and Decision in docket No. 16776-19L, the Gardners had previously had similar communication with a different SO in the CDP hearing for their 2013-2015 tax years, and that SO had proposed a "streamlined" installment agreement that called for monthly payments of $760 for 72 months (six years). Our record in that case (Doc. 8 at 25) shows that it would have covered their liabilities for 2009-2017. The Gardners did not accept that earlier proposed installment agreement.
This six-year provision is provided in section 5.14.5.2 of the Internal Revenue Manual ("IRM"). "It is a well-settled principle that the Internal Revenue Manual does not have the force of law, is not binding on the IRS, and confers no rights on taxpayers." See, e.g., McGaughy v. Commissioner, T.C. Memo. 2010-183, 100 T.C.M. (CCH) 144, 148 (2010) (citations omitted). We cite to its provisions to show the basis for Appeals treatment of the Gardners and to inform our analysis of whether IRS Appeals abused its discretion in making its determination.
On February 13, 2020, SO Salinas made the determination to sustain the proposed levy, and she established an internal reminder to prepare the notice of determination to close the CDP hearing by May 20, 2020. Id. However, in response to the covid-19 pandemic, the IRS suspended all collection activity from April 1 to July 15, 2020. On September 1, 2020, SO Salinas sent to the Gardners a notice of determination sustaining the proposed levy, because the Gardners had still not returned the Form 433-D accepting the proposed terms of the installment agreement and had not provided the financial information that would have been necessary to consider a different installment agreement proposal. (Doc. 7 at 37-41.) The notice of determination advised the Gardners of their right to file a petition in United States Tax Court within 30 days. (Doc. 7 at 38.)
See I.R.S. News Release IR-2020-59 (March 25, 2020).
Tax Court proceedings
The Gardners timely filed their petition in the Tax Court, stating thereon only that "[t]he IRS incorrectly computed the amount of tax owed." (Doc. 1 at 2.)
The Commissioner filed his motion for summary judgment, and the Court ordered (Doc. 8) the Gardners to file a response. In that order, we stated:
If Mr. and Mrs. Gardner disagree with the facts set out in paragraphs 1-27 of the "Statement of Facts" section of the Commissioner's memorandum in support of motion for summary judgment (see Doc. 7, pp. 3-11), then their response should point out the specific facts in dispute. The response should state, by number, any assertion with which they disagree, should explain the reason for their disagreement, and should cite whatever evidence supports their position. If Mr. and Mrs. Gardner disagree with the Commissioner's argument as to the law (in the "Argument" section to the Commissioner's motion for summary judgement, see Doc. 7, pp. 10-11), then their response should also set out their position on the disputed legal issues. Q&As that the Court has prepared on the subject: "What is a motion for summary judgment? How should I respond to one?", are available at the Court's website and are printed on the page attached to this order. If Mr. and Mrs. Gardner are unsure how to proceed, they should promptly initiate a telephone conference with the Court and the Commissioner by placing a call to the Chambers Administrator of the undersigned judge. . . .
The Gardners filed their response (Doc. 12) to the Commissioner's motion, and the Commissioner filed his reply (Doc. 10).
Discussion
I. Summary judgment
The purpose of summary judgment is to expedite litigation and avoid unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). 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. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). The moving party (here, the Commissioner) bears the burden of showing that no genuine dispute of material fact exists, and the Court will view any factual material and inferences in the light most favorable to the nonmoving party (here, the Gardners). See Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985).
However, Rule 121(d) imposes a duty on a party opposing summary judgment:
When a motion for summary judgment is made and supported as provided in this Rule, an adverse party may not rest upon the mere allegations or denials of such party's pleading, but such party's response, by affidavits or declarations or as otherwise provided in this Rule, must set forth specific facts showing that there is a genuine dispute for trial. If the adverse party does not so respond, then a decision, if appropriate, may be entered against such party.
The Gardners response to the Commissioner's motion contains no attached affidavit or declaration, but does allege that there are genuine issues of material fact regarding
(1) whether they accepted the installment agreement proposed by SO Salinas, and
(2) whether the Gardners challenged their 2017 liability in the CDP hearing. (Doc. 12 at 5.) However, for reasons we explain, we hold that they fail to demonstrate a genuine issue of material fact on either point. We begin with the liability challenge, because such a challenge affects our scope and standard of review in CDP cases. See § 6330(2)(B), Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).
II. The Gardners' attempted liability challenge
The Gardners petition states only that "[t]he IRS incorrectly computed the amount of tax owed." (Doc. 1 at 2.) We construe this allegation as a challenge to their liability for 2017. However, the Gardners are not entitled to challenge their 2017 liability in this CDP case before the Tax Court because they did not raise this issue in the CDP hearing before IRS Appeals (see Doc. 7 at 25-29, 37-41), nor have they shown that they attempted to do so, see Montgomery v. Commissioner, 122 T.C. 1 (2004) (Goeke, J., concurring). We review only issues that were raised in a CDP hearing. Treas. Reg. § 301.6330-1(f)(2)(Q/A-F3) ("[T]he taxpayer can only ask the court to consider an issue, including a challenge to the underlying tax liability, that was properly raised in the taxpayer's CDP hearing. An issue is not properly raised if the taxpayer fails to request consideration of the issue by Appeals, or if consideration is requested but the taxpayer fails to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence."); see also Giamelli v. Commissioner, 129 T.C. 107, 115-116 (2007). Accordingly, the Gardners' did not establish in the agency-level hearing a basis for our considering their attempted challenge to their 2017 liability and reasonable cause relief from any penalties.
III. Abuse of discretion review
In CDP cases (such as this one) where the underlying liability is not in dispute, we review IRS Appeals' determination for abuse of discretion. Goza, 114 T.C. 181-182. Applying that abuse-of-discretion standard, we decide whether IRS Appeals's determination to sustain the proposed levy action was 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).
During a CDP hearing, IRS Appeals must determine whether the proposed collection action may proceed. In making that determination, the appeals officer must consider the following: (1) whether the requirements of any applicable law or administrative procedure have been met; (2) any issues raised by the taxpayer, including (relevant here) challenges to the appropriateness of the collection action and proposed collection alternatives; and (3) whether the proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. § 6330(c).
A. The Commissioner's motion shows that IRS Appeals did not abuse its discretion.
The Commissioner's motion shows that, in the CDP hearing and the notice of determination, IRS Appeals did not abuse its discretion in sustaining the proposed levy action, because (1) SO Salinas verified that the applicable law and administrative procedures for collection of unpaid taxes by levy were followed, (2) the Gardners neither proposed any collection alternatives nor did they submit the requested financial information, and (3) SO Salinas balanced the relative interests of the government and the Gardners in collecting their unpaid taxes by levy. (Doc. 7 at 41). It is not an abuse of discretion by IRS Appeals to issue a determination if a taxpayer fails to propose (or to consider a proposal of) a collection alternative or to submit within a reasonable time requested information that is necessary in order for IRS Appeals to consider a collection alternative. See, e.g., Pough v. Commissioner, 135 T.C. 344, 351 (2010); Shanley v. Commissioner, T.C. Memo. 2009-17.
B. The Gardners have not shown any genuine dispute of material fact.
The Gardners' attempt to establish a genuine dispute of material fact by asserting that they did not accept the installment agreement proposed by SO Salinas. (Doc. 12 at 5-6.) But this fact is not in dispute. The declaration submitted in support of the Commissioner's motion for summary judgment shows that (as the Gardners insist) they did not accept the installment agreement proposed by SO Salinas, because they did not sign and return the provided Form 433-D. (Doc. 7 at 41.) See also IRM part 5.14.5.2 (specifying that a streamlined installment agreement requires the taxpayer to sign and return a Form 433-D). The parties therefore agree that the Gardners did not accept the installment agreement proposed by SO Salinas, and there is accordingly no dispute of this fact.
The Gardners assert that we should not rely on the Commissioner's declaration because it is unsworn. However, unsworn declarations are legitimized by 28 U.S.C. § 1746 ("Unsworn declarations under penalty of perjury"), and the Commissioner's declaration attached to his motion complies with its provisions.
The Commissioner's motion also asserts that, during the December 2019 hearing with Appeals, Mr. Gardner "agree[d] to an installment agreement". The Gardners dispute this assertion, insisting that it would have been impossible for them to make the monthly payments that Appeals proposed. However, we assume the Gardners' version of the facts, so there is no genuine dispute of material fact. We assume that they did not agree to SO Salinas's proposal of a 6-year installment agreement and that their non-agreement is the reason that they did not sign and return the proposed installment agreement. The remaining material fact is that the Gardners did not accept or otherwise respond to the SO's proposal, nor make any proposal of their own, nor provide financial information about themselves that would have been necessary for any collection alternative. They simply stopped communicating with IRS Appeals, and we cannot criticize Appeals for closing the case 8 months later.
Based on these undisputed facts, we hold that IRS Appeals did not abuse its discretion in sustaining proposed levy action and that the Commissioner's motion should accordingly be granted. We note that the Gardners remain able (outside of the CDP process and not subject to Tax Court review) to file an amended return for 2017 (or any other year for which they wish to amend their self-reported tax liability) and to submit a request for penalty relief based on reasonable cause, see § 6651(a)(1), Treas. Reg. § 301.6651-1(c), IRM part 20.1.1.3.2, and to proposed collection alternatives to the IRS.
In view of the foregoing, it is
ORDERED that respondent's motion for summary judgment is granted, for the reasons stated in that motion and in this order. It is further
ORDERED AND DECIDED that respondent may proceed with collection of petitioner's unpaid income tax liabilities for 2017, as described in the "Notice of Determination Concerning Collection Actions Under Sections 6320 or 6330 of the Internal Revenue Code" dated September 1, 2020.