Opinion
24179-22L
11-03-2023
GUY BAR-AM & AIMEE BAR-AM, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
DIANA L. LEYDEN SPECIAL TRIAL JUDGE
On November 16, 2023, petitioners timely filed a Petition in this case. Petitioners seek review of a Notice of Determination Concerning Collection Actions Under IRS Sections 6320 or 6330 of the Internal Revenue Code (notice of determination), dated October 26, 2022. The notice of determination sustained a proposed levy with respect to petitioners' unpaid tax liabilities for 2011 through 2015.
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.
On June 14, 2023, respondent filed a Motion for Summary Judgment (motion) under Rule 121. Respondent filed in support of the motion a Declaration of Dodi Conlon in Support of Motion for Summary Judgment (declaration), on the same date. Dodi Conlon is an Internal Revenue Service (IRS) Independent Office of Appeals (Appeals Office) settlement officer. Petitioners filed a Notice of No Objection to Motion for Summary Judgment on October 20, 2023, in response to respondent's motion.
The Court uses the term "IRS" to refer to administrative actions taken outside of these proceedings. The Court uses the term "respondent" to refer to the Commissioner of Internal Revenue, who is the head of the IRS and is respondent in this case, and to refer to actions taken in connection with this case.
Upon review of the record on respondent's motion, the Court concludes that there are not any genuine issues of material fact and that respondent is entitled to judgment as a matter of law.
Background
The record on respondent's motion establishes and/or the parties do not dispute the following. Petitioners resided in Arizona at the time the Petition was filed with the Court.
Petitioners filed their federal income tax returns for tax years 2011 through 2015. The IRS selected petitioners' tax years 2011 through 2013 for audit and issued petitioners a notice of deficiency dated June 30, 2015, proposing deficiencies and section 6662(a) penalties for all three years. Petitioners filed a petition challenging the proposed adjustments in that notice of deficiency with the Court at Docket No. 24918-15. A stipulated decision was entered in that case on February 10, 2017, with the parties agreeing to deficiencies and section 6662(a) penalties for the years in issue. For tax years 2014 and 2015, petitioners filed federal income tax returns that showed self-assessed tax owed.
On August 11, 2021, the IRS issued separately to both petitioners a Notice of Intent to Levy and Your Collection due Process Right to a Hearing (notice of intent to levy) with respect to petitioners' 2011 through 2015 tax liabilities. The notice of intent to levy advised petitioners of their right to request a collection due process (CDP) hearing.
Petitioners timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, to challenge the proposed levy with respect to their unpaid tax liabilities for 2011 through 2015. Petitioners checked the box for an installment agreement and offer in compromise as collection alternatives. Petitioners also wrote on the Form 12153: "The taxpayer does not have current income or assets to pay full balance due from tax years 2011-2015. We believe that levy is not appropriate collection resolution and would put the taxpayer and his family in financial hardship. We propose collection alternative of either automatic debit installment agreement or offer in compromise. Thank you."
Petitioners checked the box to request an equivalent hearing, but the record on respondent's motion does not show that they failed to timely request the CDP hearing.
Petitioners' CDP hearing request was assigned to settlement officer Dodi Conlon (SO). The SO verified that she did not have prior involvement with petitioners for the tax years at issue in this case.
The SO sent petitioners and their POA a letter scheduling the requested CDP hearing for July 12, 2022. Both petitioners and their POA failed to call in to the CDP hearing on that date. The SO then sent a "last chance" letter to petitioners and requested a call within 14 days. On August 2, 2022, the SO received a call from petitioners' POA who faxed the SO Form 433A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and stated that petitioners were working on their 2020 tax return wanted an installment agreement. The SO informed the POA that petitioners would need to file their 2020 tax return before she could proceed with a collection alternative.
The SO reviewed the submitted financial documentation and determined that petitioners did not qualify for a partial-pay installment agreement due to the value of their assets and because they had not yet filed their 2020 tax return. The submitted Form 433A included assets of two real estate properties owned by petitioners, investment assets, and motor vehicles. Petitioners' gross income reported on the Form 433A also conflicted with the IRS' internal records, which showed a higher amount of gross income in 2020. On September 6, 2022, the SO received petitioners' 2020 tax return, which showed a balance of $27,170.
The SO and petitioners' POA spoke again on September 22, 2022, and the POA told the SO that petitioners did not believe that their assets were as valuable as they had reported on the Form 433A. The SO stated that she could not value the assets over the phone and would have to appoint a revenue officer to value the assets, to which petitioners' POA agreed. Petitioners' POA informed the SO that they would confer with petitioners and call back with their decision by September 27, 2022. The SO told petitioners' POA that if she did not hear from them by that date, she would close the case and issue a notice of determination. The SO did not hear back from petitioners or their POA and on October 26, 2022, she issued a notice of determination sustaining the notice of intent to levy.
Discussion
A. Summary Judgment
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Either party may move for summary judgment upon all or any part of the legal issues in controversy. Rule 121(a). The Court may grant summary judgment only if the movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Rule 121(a)(2).
Respondent, as the moving party, bears the burden of proving that no genuine dispute exists as to any material fact and that respondent is entitled to judgment as a matter of law. See FPL Grp., Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v. Commissioner, 100 T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. 527, 529. In deciding whether to grant summary judgment, the factual materials and inferences drawn from them must be considered in the light most favorable to the nonmoving party. FPL Grp., Inc. v. Commissioner, 115 T.C. at 559; Bond v. Commissioner, 100 T.C. at 36; Naftel v. Commissioner, 85 T.C. at 529. The party opposing summary judgment must set forth specific facts which show that a question of genuine material fact exists and may not rely merely on allegations or denials in the pleadings. Rule 121(d); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Grant Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325 (1988); King v. Commissioner, 87 T.C. 1213, 1217 (1986).
B. Hearings Under Section 6330 (Levy)
Section 6331(a) authorizes the Commissioner to levy upon property and property rights of a taxpayer liable for taxes who fails to pay those taxes within 10 days after notice and demand for payment. Section 6331(d) provides that the levy authorized by section 6331(a) may be made with respect to any unpaid tax only after the Commissioner has notified the person in writing of his intention to make the levy at least 30 days before any levy action is begun. Section 6330 elaborates on section 6331 and provides that the written notice must inform the taxpayer of her right to request a CDP hearing. I.R.C. § 6330(a)(3)(B); Treas. Reg. § 301.6330-1(b)(1).
If a CDP hearing is requested, the hearing is to be conducted by the Appeals Office. I.R.C. § 6330(b)(1). At the hearing the SO conducting it must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C. § 6330(c)(1). The taxpayer may raise at the CDP hearing "any relevant issue relating to the unpaid tax or the proposed levy", including appropriate spousal defenses; challenges to the appropriateness of collection actions; and offers of collection alternatives. I.R.C. § 6330(c)(2)(A). Within 30 days after the Appeals Office issues a notice of determination the taxpayer may appeal the determination to the Court. I.R.C. § 6330(d)(1).
In reviewing an IRS administrative determination in a CDP case, if the underlying tax liability is properly in dispute, the Court reviews the determination regarding the underlying tax liability de novo. Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). Petitioners have not disputed the underlying tax liabilities.
The Court reviews all other determinations for abuse of discretion. Id. at 182. 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).
The Court's review of CDP cases is limited to issues that taxpayers raised during their CDP hearings. Giamelli v. Commissioner, 129 T.C. 107, 112-13 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.
C. Scope of Review
Respondent asserts that in nonliability CDP cases such as this the scope of our review is limited to the administrative record. That is true for such cases appealable to the U.S. Courts of Appeals for the First, Eighth, and Ninth Circuits. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff'g in part as to this issue T.C. Memo. 2006-166; Murphy v. Commissioner, 469 F.3d 27, 31 (1st Cir. 2006), aff'g 125 T.C. 301 (2005); Robinette v. Commissioner, 439 F.3d 455, 459-60 (8th Cir. 2006), rev'g 123 T.C. 85 (2004).
This case is appealable to the U.S. Court of Appeals for the Ninth Circuit, see I.R.C. § 7482(b)(1)(G)(i), and thus, the Court will limit its review to the administrative record. See Golsen v. Commissioner, 54 T.C. 742, 756-57 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
D. Abuse of Discretion
In deciding whether the SO abused her discretion in sustaining the collection action the Court considers whether the SO: (1) properly verified that the requirements of applicable law and administrative procedure had been met; (2) considered any relevant issues petitioner raised; and (3) considered "whether any 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." See I.R.C. § 6330(c)(3).
In reviewing for abuse of discretion, the Court generally considers only the arguments, issues, and other matters that were raised at the hearing or otherwise brought to the attention of the Appeals Office. Giamelli v. Commissioner, 129 T.C. at 115.
1. Collection Alternatives
In determining whether there was an abuse of discretion the Court does not conduct an independent review and substitute its judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. at 320. If the SO follows all statutory and administrative guidelines and provides a reasoned, balanced decision, the Court will not reweigh the equities. Thompson v. Commissioner, 140 T.C. 173, 179 (2013). The administrative record indicates that petitioners did not submit the Form 656 required for an offer in compromise. Therefore, the Court will not review whether the SO abused her discretion as to that collection alternative. Rather the only collection alternative raised and considered according to the administrative record was an installment agreement.
Section 6159(a) authorizes the Commissioner to enter into written agreements allowing taxpayers to pay tax in installments if he deems that the "agreement will facilitate full or partial collection of such liability." See also Thompson v. Commissioner, 140 T.C. at 179. The decision to accept or reject installment agreements lies within the discretion of the Commissioner. Id.; see also Treas. Reg. § 301.6159-1(a), (c)(1)(i).
The Court generally has held that there is not any abuse of discretion when an SO relies on guidelines published in the Internal Revenue Manual (IRM) to evaluate a proposed installment agreement. See, e.g., Orum v. Commissioner, 123 T.C. 1, 13 (2004), aff'd, 412 F.3d 819 (7th Cir. 2005); Tillery v. Commissioner, T.C. Memo. 2015-170; Arede v. Commissioner, T.C. Memo. 2014-29; Maselli v. Commissioner, T.C. Memo. 2010-19; Aldridge v. Commissioner, T.C. Memo. 2009-276; Etkin v. Commissioner, T.C. Memo. 2005-245. When a collection alternative is at issue, IRM pt. 8.22.4.2.1(4) (May 12, 2022) directs an SO to the appropriate IRM sections containing the administrative policies and procedures relating to that alternative; as relevant here, IRM pt. 5.14.1 governs installment agreement acceptance and rejection determinations.
IRM pt. 5.14.1.4.2(1) (September 22, 2021) directs an SO to consider a taxpayer's filing and paying compliance before determining that the best manner of paying delinquent taxes is through an installment agreement, and IRM pt. 5.14.1.4.2(4) (September 22, 2021) requires that a taxpayer be current with filing and payment requirements to be eligible for an installment agreement. See IRM pts. 5.14.1.2(11)(D) (September 22, 2021), 8.22.7.5(6) (August 26, 2020); see also Giamelli v. Commissioner, 129 T.C. at 111; Boulware v. Commissioner, T.C. Memo. 2014-80, aff'd, 816 F.3d 133 (D.C. Cir. 2016); Pavlica v. Commissioner, T.C. Memo. 2007-163; Londono v. Commissioner, T.C. Memo. 2003-99.
According to IRM pt. 5.14.1.4(5) (September 22, 2021), if a taxpayer can fully or partially satisfy balance due accounts by using cash, withdrawing cash from bank accounts or other accounts, borrowing on equity in real or personal property, or selling real or personal property, the SO is directed to request that full or partial payment be made on balance due accounts by conversion of assets (through borrowing or selling) or by cash or other liquid assets (such as securities or money market accounts). This IRM subpart also identifies factors that preclude requiring liquidation of the assets, such as the taxpayer's advanced age, ill health, or other special circumstances; the necessity of the assets for the production of income or the health and welfare of the taxpayer's family; or the taxpayer's qualification for a guaranteed, streamlined, or Express installment agreement. This Court has consistently held that an SO does not abuse her discretion when she rejects an installment agreement because a taxpayer refuses to liquidate assets to satisfy his tax liabilities. See, e.g., Tillery v. Commissioner, T.C. Memo. 2015-170 at *16; Boulware v. Commissioner, T.C. Memo. 2014-80 at *24; Bibby v. Commissioner, T.C. Memo. 2013-281; O'Donnell v. Commissioner, T.C. Memo. 2013-247; McCarthy v. Commissioner, T.C. Memo. 2013-214; Lipson v. Commissioner, T.C. Memo. 2012-252 at *9-*10.
2. Spousal Defenses
Petitioners failed to raise any spousal defenses during the CDP hearing. Thus, the Court does not consider this matter here. See Giamelli v. Commissioner, 129 T.C. at 113-15; Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.
3. Verification
The record shows that the Appeals Office properly verified that the requirements of all applicable laws and administrative procedures were met in the processing of petitioners' case and that the proposed levy balances the Government's need for the efficient collection of taxes with petitioners' concerns that the collection action be no more intrusive than necessary.
E. Conclusion
In sum the Court concludes, and petitioners do not disagree, that there is not any genuine dispute as to a material fact and that respondent is entitled to judgment as a matter of law sustaining the notice of determination, as supplemented, upon which this case is based.
Premises considered, it is
ORDERED that respondent's motion for summary judgment, filed June 14, 2023, is granted. It is further
ORDERED AND DECIDED that respondent may proceed with the proposed collection action (levy) in respect of petitioners' remaining tax liabilities for 2011 through 2015 as determined in the notice of determination dated October 26, 2022, upon which this case is based.