Opinion
13814-22SL
01-29-2024
MICHAEL HENDRICKS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Adam B. Landy Special Trial Judge.
This collection review case is before the Court on the Commissioner's Motion for Summary Judgment (Motion), filed September 14, 2023. Petitioner Michael Hendricks petitioned this Court, pursuant to section 6330(d), seeking review of the determination by the Internal Revenue Service (IRS) Independent Office of Appeals (Appeals) sustaining a proposed levy to collect his unpaid income tax liability for taxable years 2016 and 2017 (the "Taxable Years at Issue"). The Commissioner moved for summary judgment, pursuant to Rule 121, contending that there are no disputed issues of material fact and that his determination to sustain the proposed levy action was proper as a matter of law. For the reasons stated below, we will grant the Commissioner's Motion.
We use the term "IRS" to refer to administrative actions taken outside of these proceedings. We use the term "Commissioner" to refer to the Commissioner of Internal Revenue, who is the head of the IRS and is respondent in this case, and to actions taken in connection with this case.
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.
Background
The following facts are based on the parties' pleadings and motion papers, the attached declaration, and exhibits which comprise the administrative record. Mr. Hendricks resided in Virginia when he timely filed his Petition.
Mr. Hendricks failed to file an income tax return for the Taxable Years at Issue. Pursuant to section 6020(b), the IRS prepared Substitute for Returns (SFRs) for Mr. Hendricks on August 12, 2019, and August 5, 2020, respectively, for the Taxable Years at Issue. Thereafter, the IRS issued Notices of Deficiency (Notices) to Mr. Hendricks proposing an income tax deficiency and additions to tax, pursuant to sections 6651(a)(1) and 6651(a)(2), for the Taxable Years at Issue, on November 25, 2019, and November 16, 2020, respectively. Mr. Hendricks did not file a petition with this Court to dispute the Notices. Upon default, the IRS assessed the deficiency and additions to tax plus accrued interest for the Taxable Years at Issue on April 6, 2020, and March 29, 2021, respectively, pursuant to section 6201.
The Notices were sent to Mr. Hendricks' address in Chesapeake, Virgina, the same address Mr. Hendricks used at all relevant times in communicating with the IRS and his address of record with the Court as of the filing of the Petition.
On June 28, 2021, the IRS mailed to Mr. Hendricks a Notice of Intent to Levy and Your Collection Due Process Right to a Hearing (Levy Notice) to collect the unpaid liability for the Taxable Years at Issue. Mr. Hendricks timely submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP Hearing Request) to request a collection due process (CDP) hearing. On his CDP Hearing Request, Mr. Hendricks indicated the proposed levy as his basis for requesting a CDP hearing. Mr. Hendricks did not dispute the tax liability but checked the "I Cannot Pay Balance" box as a possible collection alternative. In the "Other" explanation box, Mr. Hendricks alleged that (1) he and his spouse have three special needs children, (2) his spouse no longer works so she can care for the children, and (3) they are behind on medical bills and mortgage payments. Mr. Hendricks also requested an installment agreement.
Settlement Officer Fehrenbach (SO Fehrenbach) was assigned to this administrative proceeding. On December 8, 2021, SO Fehrenbach notified Mr. Hendricks, by letter, of her receipt of his request for a CDP hearing, and scheduled a telephone conference for February 1, 2022. SO Fehrenbach also advised Mr. Hendricks that he needed to provide her with an executed Form 1040 return for taxable years 2015, 2018, 2019, and 2020, and a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals (Form 433-A), prior to the scheduled conference, for consideration of a collection alternative. Mr. Hendricks also did not provide Appeals with the delinquent tax returns or a Form 433-A.
SO Fehrenbach also stated that Mr. Hendricks could file returns for the Taxable Years at Issue to dispute the liabilities based on the SFRs.
On February 1, 2022, Mr. Hendricks failed to call in for the scheduled telephone conference nor did he answer a call from or respond to a voice message left by SO Fehrenbach. On February 2, 2022, SO Fehrenbach sent Mr. Hendricks a letter providing him with an additional 14 days to contact her and to provide her with the requested Form 433-A and delinquent tax returns. Mr. Hendricks failed to respond. Meanwhile, SO Fehrenbach properly verified that all requirements of applicable law and administrative procedure were met before issuance of the Levy Notice to Mr. Hendricks. SO Fehrenbach requested and received copies of the Notices and United States Postal Service (USPS) Form 3877, Firm Mailing Book for Accountable Mail (PS Form 3877), for the Taxable Years at Issue to verify that the Notices were properly sent. SO Fehrenbach also properly considered whether the proposed levy balanced the need for efficient collection of tax with Mr. Hendricks' concern that the action be no more intrusive than necessary, pointing to the fact that an installment agreement could not be entered into or his tax account placed into currently not collectible (CNC) status until Mr. Hendricks provided information regarding his ability to pay and filed all required returns. On May 2, 2022, the IRS issued a Notice of Determination Concerning Collection Actions under Sections 6320 or 6330 (Notice of Determination) sustaining the proposed levy.
Mr. Hendricks timely filed a Petition and then an Amended Petition with this Court. He did not contest the unpaid liability for the Taxable Years at Issue. Mr. Hendricks did allege that the levy was improper because such a levy would cause financial hardship; that his family is a one-income family with three special needs children; and that he and his spouse are attempting to file all delinquent tax returns. On September 14, 2023, the Commissioner filed his Motion contending he is entitled to judgment. On September 15, 2023, we ordered Mr. Hendricks to file a response to the Motion, if any, by October 12, 2023. Mr. Hendricks has not responded.
Discussion
I. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid costly, unnecessary, and time-consuming trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). We may grant summary judgment when there is no genuine dispute of material fact, and a decision may be rendered as a matter of law. Rule 121(a)(2); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). We construe the facts and draw all inferences in the light most favorable to the nonmoving party to decide whether summary judgment is appropriate. Id. The nonmoving party may not rest upon mere allegations or denials in its pleadings and must set forth specific facts showing there is a genuine dispute for trial. Rule 121(d). On the basis of the record, we conclude that there is no genuine dispute as to a material fact, and we may render a decision as a matter of law.
II. Hearings Under Section 6330
Section 6331(a) authorizes the Secretary to levy upon property and taxpayer's rights to property if the taxpayer is liable for any tax and neglect or refuse to pay those taxes within 10 days after notice and demand for payment is made. Section 6331(d) requires the Secretary to give the taxpayer notice of his intent to levy, and the notice must describe the administrative review available to the taxpayer, before proceeding with the levy. See also § 6330(a)(1).
Section 6330 provides procedures for administrative and judicial review of the IRS's proposed levy actions. Any taxpayer receiving a notice of proposed levy may request an administrative hearing with Appeals. § 6330(b). Appeals, in turn, is obliged to verify that the requirements of any applicable law or administrative procedure have been met. § 6330(c)(1), (3)(A). The person may raise at the administrative hearing any relevant issue relating to the unpaid tax or the collection action, including challenges to the appropriateness of the collection action and offers of collection alternatives. § 6330(c)(2)(A), (3)(B). The person may also raise at the hearing challenges to the existence or amount of the underlying liability if the person did not receive a statutory notice of deficiency for the tax liability or did not otherwise have an opportunity to dispute it. § 6330(c)(2)(B). Finally, Appeals must consider whether the collection action balances the need for efficient collection against the person's concern that collection be no more intrusive than necessary. § 6330(c)(3)(C).
III. Standard of Review
Section 6330(d) grants this Court jurisdiction to review the administrative determination made by Appeals in connection with a CDP hearing, but this section does not state the standard of review we should apply in reviewing Appeals' determination in this case. We are guided by our prior caselaw precedents. Where the validity of the taxpayer's underlying tax liability is properly at issue, we review Appeals' determination on a de novo basis. See Sego v. Commissioner, 114 T.C. 604, 609-10; Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). We review all other determinations for abuse of discretion. Goza, 114 T.C. at 182.
A. Challenge to the Underlying Liability
A taxpayer may challenge the existence or amount of the underlying liability in a CDP proceeding only if the taxpayer "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." § 6330(c)(2)(B); see also Treas. Reg. § 301.6330- 1(e)(3), Q&A-E2. For purposes of determining whether a taxpayer may challenge the underlying liabilities, actual receipt of the notice of deficiency must be determined. See Sego, 114 T.C. at 610. A notice of deficiency is presumed to have been received by the taxpayer if it was properly mailed to him at his last known address. See Buffano v. Commissioner, T.C. Memo. 2016-121, at *6-7.
The Notices were sent to Mr. Hendricks' last known address, and he did not dispute that he received the Notices. Furthermore, the administrative record contains two properly completed PS Form 3877, which is direct evidence of both the fact and date of mailing and is sufficient to establish proper mailing of the Notices in the absence of contrary evidence. See Clough v. Commissioner, 119 T.C. 183, 187-91 (2002); Stein v. Commissioner, T.C. Memo. 1990-378, 1990 WL 102394; see also Coleman v. Commissioner, 94 T.C. 82, 91 (1990). The settlement officer properly determined that the underlying liability was not at issue. See § 6330(c)(2)(B). Thus, we review the Commissioner's administrative determination for abuse of discretion. See Pough v. Commissioner, 135 T.C. 344, 350 (2010); Goza, 114 T.C. at 182.
B. Abuse of Discretion
In reviewing SO Fehrenbach's determination for abuse of discretion, we consider whether she (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues Mr. Hendricks raised, and (3) considered whether any proposed collection action balances the Government's need for the efficient collection of taxes with Mr. Hendricks' legitimate concern that any collection action be no more intrusive than necessary. § 6330(c). The Court concludes that SO Fehrenbach satisfied all three requirements.
1. Verification Requirements
Section 6330(c)(1) requires a settlement officer to "obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met." We have authority to review satisfaction of the verification requirement regardless of whether Mr. Hendricks raised that issue at the CDP hearing. Hoyle v. Commissioner, 131 T.C. 197, 202-03 (2008), supplemented by 136 T.C. 463 (2011). Mr. Hendricks did not challenged the verification requirement, and we conclude that SO Fehrenbach properly verified that the procedural requirements were met. Rule 331(b)(4); see also Ansley v. Commissioner, T.C. Memo. 2019-46, at *19.
2. Issues Raised During the CDP Hearing
A settlement officer is required to consider any relevant issue raised by a taxpayer during a CDP hearing. § 6330(c)(2)(A), (3)(B). In his CDP Hearing Request, Mr. Hendricks raised the issue of his inability to pay the tax liabilities for the Taxable Years at Issue. SO Fehrenbach requested Mr. Hendricks submit the delinquent Form 1040 returns for taxable years 2015, 2018, 2019, and 2020, and a completed Form 433-A so that she could consider a collection alternative.
SO Fehrenbach correctly determined that Mr. Hendricks was not entitled to a collection alternative because he was not in compliance with his ongoing tax obligations and failed to provide a collection information statement after multiple extensions. No abuse of discretion exists when a settlement officer rejects a taxpayer's collection alternative and sustains the proposed collection action where the taxpayer fails, after being given sufficient time, to supply the settlement officer with the required forms and supporting financial information. Wright v. Commissioner, T.C. Memo. 2012-24, 2012 WL 204181, at *3; Mahlum v. Commissioner, T.C. Memo. 2010-212, 2010 WL 3835741; Swanton v. Commissioner, T.C. Memo. 2010-140, 2010 WL 2541153, at *6; Pitts v. Commissioner, T.C. Memo. 2010-101, 2010 WL 1838282; Treas. Reg. § 301.6330-1(e)(1). Further, we have held that it is not an abuse of discretion for a settlement officer to reject a collection alternative, such as an installment agreement, where the taxpayer is not in compliance with his ongoing filing obligations. See Wolfson v. Commissioner, T.C. Memo. 2022-46; see also Hull v. Commissioner, T.C. Memo. 2015-86; Starkman v. Commissioner, T.C. Memo. 2012-236, 2012 WL 3321078. Accordingly, the Court concludes that SO Fehrenbach did not abuse her discretion in declining to place Mr. Hendricks' tax account in CNC status or establish an installment agreement.
3. Balancing Obligations
Mr. Hendricks did not allege that SO Fehrenbach 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." § 6330(c)(3)(C). Mr. Hendricks has conceded this issue, too. See Rule 331(b)(4). We are satisfied that Appeals properly considered its balancing obligations as required by section 6330(c)(3)(C) and did not abuse its discretion in sustaining the proposed levy action.
IV. Conclusion
We conclude that SO Fehrenbach did not abuse her discretion in sustaining the proposed levy. Finding no abuse of discretion, we will grant summary judgment for the Commissioner and sustain the proposed collection action.
Upon due consideration of the Commissioner's Motion, and for cause, it is
ORDERED that the Commissioner's Motion for Summary Judgment, filed September 14, 2023, is granted. It is further
ORDERED AND DECIDED that the determinations set forth in the Notice of Determination Concerning Collection Actions under Sections 6320 or 6330 of the Internal Revenue Code, dated May 2, 2022, upon which this case is based, are sustained.