Opinion
15688-23L
09-10-2024
RICHARD HESLOP & MARY HESLOP, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Joseph W. Nega, Judge.
This collection due process (CDP) case was previously calendared for trial at the in-person session of the Court scheduled to commence on Monday, September 23, 2024, in Cincinnati, Ohio. On May 22, 2024, respondent filed a Motion for Summary Judgment (respondent's motion). By Order issued May 23, 2024, the Court directed petitioners to respond to respondent's motion by June 24, 2024. On June 24, 2024, petitioners filed a response to respondent's motion. The Court concludes that there is no genuine issue as to any material fact and that respondent is entitled to judgment as a matter of law.
I. Background
On March 3, 2023, respondent sent to petitioners Letter 1058, Notice of Intent to Levy and Notice of Your Rights to a Hearing (levy notice), relating to petitioners' federal income tax liabilities for tax years 2013, 2015, 2016, 2017, and 2018 (tax years at issue).
Petitioners timely filed Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respondent's Independent Office of Appeals (Appeals), dated March 29, 2023, objecting to respondent's proposed collection action and requesting to enter into an installment agreement as a collection alternative.
On June 21, 2023, Settlement Officer Natalie Krueger (SO Krueger), the Appeals Officer assigned to petitioners' CDP hearing request, mailed to petitioners and their representative a letter, scheduling a telephonic CDP conference with petitioners for July 12, 2023. The letter also informed petitioners that, for SO Krueger to consider a collection alternative such as an installment agreement, they must provide her: (1) a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals; (2) signed tax returns for tax years 2020 and 2022; and (3) documentation to support the information provided on Form 433-A. Petitioners were given 14 days from the date of the letter to submit a completed Form 433-A with supporting documentation and 21 days to submit their tax returns for tax years 2020 and 2022.
On July 6, 2023, petitioners' representative left a voicemail for SO Krueger, informing her that he would be out of the country through July 22, 2023, and seeking to reschedule the CDP hearing. SO Krueger agreed to reschedule the CDP hearing for August 2, 2023.
As of August 2, 2023, petitioners had not provided SO Krueger with any of the requested information. On August 2, 2023, SO Krueger attempted to call petitioners' representative to conduct the CDP hearing, but petitioners' representative was unavailable. SO Krueger left a message for petitioners' representative, informing him that she was calling regarding petitioners' CDP hearing and requesting that he return her call. Also on August 2, 2023, SO Krueger sent to petitioners and their representative Letter 4000 (last chance letter), informing petitioners that she had not received any of the information needed to consider their proposed collection alternative and that their representative had been unavailable for the CDP hearing. SO Krueger gave petitioners an additional 14 days from the date of the last chance letter to furnish the requested information and advised petitioners that, should they fail to provide the requested information within the 14-day period ending on August 17, 2023, she would make a determination in their CDP hearing based on the administrative file. The last chance letter provided SO Krueger's contact information, including phone number and work hours, and, therein, SO Krueger implored petitioners to contact her if they had any questions.
On August 10, 2023, petitioners' representative left SO Krueger a voicemail requesting a return call. SO Krueger returned the call that same day, but petitioners' representative was unavailable. SO Krueger left petitioners' representative a voicemail informing him that (1) she had rescheduled the CDP hearing to August 2, 2023, per his request, but he was unavailable for the rescheduled hearing; (2) she had issued a last chance letter with a deadline of August 17, 2023, for petitioners to submit the requested documents; and (3) she would review any information received by the August 17 deadline and make a determination in petitioners' CDP hearing accordingly.
On August 15, 2023, petitioners' representative left SO Krueger another voicemail requesting that she return his call. SO Krueger returned the call that same day but he was again unavailable. SO Krueger attempted to leave petitioners' representative a message but was unable to because his voicemail was full; she tried to contact him by phone three more times that day to no avail. On August 16, 2023, SO Krueger again attempted to call petitioners' representative, but he was again unavailable. SO Krueger left a voicemail stating that she was returning his call, had returned his previous call several times with no success, and had left messages when able to do so.
As of August 24, 2023, petitioners had not provided SO Krueger with any of the requested information. SO Krueger sustained respondent's proposed levy action and closed petitioners' CDP case file on August 24, 2023.
On September 5, 2023, respondent sent to petitioners Notice of Determination Concerning Collection Actions under IRS Sections 6320 or 6330 of the Internal Revenue Code (notice of determination), sustaining the proposed levy action for unpaid income taxes for the tax years at issue.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
On October 4, 2023, petitioners timely filed a Petition with this Court, challenging, for the first time, the existence and amount of the underlying tax liabilities for the tax years at issue and seeking review of SO Krueger's decision to sustain respondent's proposed levy action.
On June 24, 2024, in response to respondent's motion, petitioners filed a letter with the Court, stating that, on June 14, 2024, they sent to respondent the documents needed to consider an Offer in Compromise (OIC) as a collection alternative to the proposed levy action.
II. Discussion
A. Summary Judgment Standard
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 (1998). 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). In deciding whether to grant summary judgment, we construe factual materials and draw inferences therefrom in the light most favorable to the nonmoving party. Sundstrand Corp., 98 T.C. at 520. However, the nonmoving party may not rest upon mere allegations or denials of his pleadings but, rather, 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.
B. Standard and Scope of Review
Section 6330(d)(1) grants this Court jurisdiction to review SO Krueger's determination in connection with petitioners' CDP hearing. Section 6330(c)(2) prescribes the matters that a taxpayer may raise at a CDP hearing, including spousal defenses, challenges to the appropriateness of the collection action, collection alternatives, and challenges to the existence or amount of the underlying tax liability.
If the validity of the underlying tax liability is properly at issue, the Court will review the taxpayer's liability de novo. Sego v. Commissioner, 114 T.C. 604, 609-10 (2000). Where the validity of the underlying tax liability is not properly at issue, the Court will review the SO's determination for abuse of discretion. Id. at 610.
The scope of the Court's review in a CDP case is limited. Generally, the Court considers only the issues that the taxpayer has raised during the CDP hearing. Giamelli v. Commissioner, 129 T.C. 107, 113 (2007).
C. Underlying Liability
As noted above, we generally consider only those issues raised by the taxpayer during the CDP hearing. Id. The existence or amount of the underlying tax liability may be contested at a CDP hearing only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. See § 6330(c)(2)(B); Sego, 114 T.C. at 609; Goza v. Commissioner, 114 T.C. 176, 180-81 (2000). 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, 339 (2000).
Petitioners did not challenge the validity of the underlying tax liability for any of the tax years at issue on their Form 12153 nor during the CDP hearing before Appeals. Petitioners requested only that respondent consider an installment agreement as a collection alternative to the proposed levy action. As such, petitioners cannot challenge the validity of the underlying tax liability for any of the tax years at issue before us. Giamelli, 129 T.C. at 115 ("[W]e do not have authority to consider section 6330(c)(2) issues that were not raised before the Appeals Office."). Because petitioners cannot challenge the underlying tax liability for any of the tax years at issue before this Court, we review SO Krueger's decision to uphold the proposed levy action for abuse of discretion only.
D. Abuse of Discretion
Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). In determining whether SO Krueger's determination to sustain the proposed levy action was an abuse of discretion, we turn to section 6330(c)(3), which requires the SO to (1) verify that respondent satisfied the requirements of applicable law and administrative procedure; (2) consider issues raised by the taxpayer; and (3) consider whether the proposed collection action balances the need for efficient collection of taxes with the taxpayer's legitimate concern that any collection action be no more intrusive than necessary. Thompson v. Commissioner, 140 T.C. 173, 178-79 (2013).
In reviewing the determination, we do not substitute our judgment for that of the SO or make an independent determination of what would be an acceptable collection alternative. Id. at 179. If the SO "followed all statutory and administrative guidelines and provided a reasoned, balanced decision," we "will not reweigh the equities." Id.
1. Verification of Procedures
When a taxpayer requests a CDP hearing, the SO must review the case file to verify that respondent satisfied all applicable laws and administrative procedures as to the levy action. § 6330(c)(1). The verification generally requires that the SO confirm that respondent properly assessed the taxes against the taxpayer and that respondent issued all legally required notices to the taxpayer. We generally review for compliance with the verification requirement regardless of whether petitioner raised the issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 202- 03 (2008), supplemented by 136 T.C. 463 (2011).
In the notice of determination and her case activity notes, SO Krueger reported that she verified that (1) respondent properly assessed the income taxes for the tax years at issue; (2) the IRS mailed a notice and demand to petitioners' last known address within 60 days of assessment; (3) respondent mailed a levy notice to petitioners' last known address; (4) the petitioners had a balance due and owing when the levy notice was issued; and (5) she had no prior involvement with petitioners for the type of taxes and tax years at issue here. On the record before us, we are satisfied that SO Krueger verified that respondent properly assessed petitioners' tax liability and that respondent fulfilled all other relevant legal requirements.
2. Issues Raised by the Taxpayer
We next turn to the issue of whether SO Krueger abused her discretion by rejecting petitioners' request for an installment agreement and issuing a notice of determination sustaining respondent's levy action after petitioners failed to produce the requested financial information and tax returns. On the administrative record before us, we see no abuse of discretion because "[i]t is not an abuse of discretion for Appeals to move ahead with its final determination after an Appeals officer gives a taxpayer an adequate timeframe to submit requested items and the taxpayer fails to submit those items." Belair v. Commissioner, 157 T.C. 10, 17 (2021) (citing Pough v. Commissioner, 135 T.C. 344, 351 (2010)).
Petitioners had an adequate timeframe and opportunity to provide the requested documents. They had 14 days to submit a completed Form 433-A with supporting documentation and 21 days to submit the requested tax returns for tax years 2020 and 2022. Petitioners failed to do so. When petitioners failed to attend the rescheduled CDP hearing and supply the requested documents and tax returns for consideration, SO Krueger sent to petitioners and their representative a last chance letter, informing petitioners that she had not received any of the information needed to consider their request for an installment agreement and granting petitioners an additional 14 days to provide the requested documents and tax returns. Again, petitioners failed to furnish the requested documents and tax returns. SO Krueger made at least seven attempts to contact petitioners' representative by phone and left multiple messages requesting that petitioners submit the documents and tax returns that she needed to consider their proposed collection alternative. None of the requested information were ever submitted before the commencement of this case.
We conclude that SO Krueger did not abuse her discretion by closing petitioners CDP case file and sustaining respondent's proposed levy action. See, e.g., First Rock Baptist Church Child Dev. Center v. Commissioner, 148 T.C. 380, 391 (2017) (holding that the SO did not abuse his discretion in rejecting an installment agreement when the taxpayer was not in compliance with its tax return filing obligations for tax years after those at issue); Brown v. Commissioner, T.C. Memo 2016-82, at *25 (holding that the SO did not abuse his discretion in sustaining the collection actions when petitioners failed to provide requested financial information necessary for determining their financial status), aff'd, 697 Fed.Appx. 1 (D.C. Cir. 2017).
In response to respondent's motion, petitioners filed a letter with the Court stating that, on June 14, 2024, they had sent to respondent the documents needed to consider an OIC. But that filing has no bearing on our review of SO Krueger's determination because SO Krueger gave petitioners an adequate timeframe to provide the documents and tax returns that she needed to consider their request for a collection alternative during the CDP hearing.
The policy of Appeals is to consider financial information submitted after the deadline included in the last chance letter and up to the issuance of the notice of determination. See Internal Revenue Manual (IRM) 8.22.4.2.1(1) (May 12, 2022) ("[T]he Appeals hearing officer is responsible for making a determination based on the facts and the law known to Appeals during the time of the hearing."); IRM 8.22.9.10(1) (Nov. 13, 2013) ("A CDP hearing continues until the determination or decision letter is issued."). Thus, petitioners had until September 5, 2023-more than two months after the initial request for the information-to submit the requested documents.
3. Balancing
The SO must balance "the need for efficient collection of taxes" against "the legitimate concern . . . that any collection action be no more intrusive than necessary." § 6330(c)(3)(C). We generally review for compliance with the balancing requirement regardless of whether petitioner raised the issue at the CDP hearing. See Hoyle, 131 T.C. at 202-03.
In the notice of determination, SO Krueger reported that she balanced the intrusiveness of the proposed levy against the need for efficient collection and found that the proposed levy is no more intrusive than necessary. In light of petitioners' repeated failures to comply with deadlines for submitting requested documents and their failure to attend the CDP hearing, we conclude that SO Krueger's determination to sustain the levy action appropriately balanced the statutorily-prescribed interests. See Belair, 157 T.C. at 19; Pough v. Commissioner, 135 T.C. 344, 352 (2010).
III. Conclusion
Finding no abuse of discretion, we will grant respondent's motion.
Upon due consideration and for cause, it is ORDERED that respondent's Motion for Summary Judgment, filed May 22, 2024, is granted. It is further
ORDERED AND DECIDED that the Notice of Determination Concerning Collection Actions Under IRS Sections 6320 or 6330 of the Internal Revenue Code, dated September 5, 2023, upon which this case is based, is sustained, and respondent may proceed with the collection action as determined for tax years 2013, 2015, 2016, 2017, and 2018.