Opinion
2787-22SL
04-03-2024
ROBERT WAYNE HUDDLESTON & MARILYN HUDDLESTON, Petitioners 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 parties' cross Motions for Summary Judgment. On February 15, 2023, the Huddlestons filed a Motion for Summary Judgment contending that they are entitled to a refund of certain monies paid for taxable years 2013 and 2014. The Huddlestons' motion does not discuss whether there was an abuse of discretion by the assigned settlement officer during the collection due process (CDP) hearing. On May 5, 2023, the Commissioner filed a Motion for Summary Judgment on the basis that the Huddlestons failed to properly challenge the underlying liability for taxable year 2014 (year in issue), and that there is no abuse of discretion present in this case as the settlement officer considered all issues as required by section 6330(c). For the reasons below, we will deny the Huddlestons' Motion for Summary Judgment, and we will grant the Commissioner's Motion for Summary Judgment.
We use the term "IRS" or "Appeals" 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, motion papers, and the attached declarations and exhibits, which comprise the administrative record. The Huddlestons resided in California when their Petition was filed.
The Huddlestons late filed their 2014 Form 1040 income tax return on April 14, 2016, reporting total tax due of $13,209.00. The IRS assessed the tax due plus additions to tax, pursuant to section 6651(a)(1) and (2), and accrued interest on September 26, 2016. The Huddlestons made several payments towards the liability, but a balance due remained. To collect the balance, the IRS mailed to the Huddlestons Letter 3172, Notice of Federal Tax Lien and Your Right to a Hearing Under IRC 6320 (NFTL), dated January 21, 2020.
The Huddlestons timely filed Form 12153, Request for a Collection Due Process or Equivalent Hearing to dispute the NFTL for the year in issue. On Form 12153, the Huddlestons did not request a collection alternative, per se; they did request that the NFTL be discharged. The hearing request form was also referenced as an attachment but in fact was not attached to the Commissioner's Motion or exhibits.
The Settlement Officers' Case Activity Record Print, which is attached as an exhibit to the Commissioner's Motion, states that the hearing request form discusses tax year 2013, a year not in issue, and for the year in issue, the hearing request form discussed the application of an estimated tax payment of $9,700.
Settlement Officer Blanton (SO Blanton) was assigned to this administrative proceeding. On August 7, 2020, SO Blanton notified the Huddlestons, by letter, of her receipt of their request for a CDP hearing, and a telephonic conference was scheduled for September 1, 2020. SO Blanton acknowledged that the Huddlestons desired to challenge the underlying liability for the year in issue. Therefore, SO Blanton requested all information, including a copy of the filed 2014 Form 1040 return, and if applicable, 2014 Form 1040X amended tax return. SO Blanton also requested that the Huddlestons provide Form 14135 for a NFTL discharge and Form 8857 to request innocent spouse relief. SO Blanton requested this information by August 25, 2020.
During an unscheduled conference call with Mr. Huddleston, SO Blanton stated that the liability for the year in issue was due to a self-filed return with limited payments and withholdings. The parties also discussed that Mr. Huddleston made a payment of $9,700 for 2014, but Mr. Huddleston requested the payment be applied to his daughter's tax account. To clear up any confusion, SO Blanton mailed account transcripts to the Huddlestons for their review. The Huddlestons disputed the information listed on the 2014 account transcripts, and subsequently, they provided SO Blanton with a copy of a 2014 Form 1040 tax return.
SO Blanton rescheduled the hearing from September 1 to September 15, 2020, to allow her an opportunity to review the 2014 return. Upon review, SO Blanton determined that the return provided by the Huddlestons did not match the return information contained in the IRS's records. SO Blanton conducted the rescheduled conference on September 15, 2020, discussed the tax return discrepancies with the Huddlestons, and she provided them with an opportunity to provide additional information to show the tax assessment for the year in issue was improper. SO Blanton also stated that she received a copy of the disputed estimated tax payment of $9,700 for the year in issue, and indeed, the Huddlestons directed the payment be applied to their daughter's tax account, since their daughter's name and social security number were listed in the check memo line. SO Blanton reiterated that she needed a copy of the 2014 Form 1040 signed by the petitioners, along with a properly executed 2014 Form 1040X, to consider any changes to the 2014 liability. She provided the Huddlestons with a deadline of October 1, 2020, to provide copies of the requested returns.
This case was reassigned to Settlement Officer Garza (SO Garza) on September 9, 2021. SO Garza reviewed the case file, the prior settlement officer's case history, and independently verified that all requirements of law and administrative procedure were met. SO Garza confirmed that the Huddlestons disputed the underlying liability and requested the discharge of the NFTL. SO Garza initiated contact with the Huddlestons, on September 9, 2021, to attempt to reach a resolution. The Huddlestons failed to respond to SO Garza, to provide any documents to challenge the underlying liability, or to permit review of a collection alternative. On December 23, 2021, the IRS issued a Notice of Determination Concerning Collection Actions under Sections 6320 or 6330 of the Internal Revenue Code (Notice of Determination) sustaining the filing of the NFTL.
SO Garza also noted that the Huddlestons previously filed a 2014 Form 1040X amended return on August 7, 2018, which the IRS reviewed and processed on September 9, 2019, resulting in no adjustments to their tax liability for the year in issue.
On January 24, 2022, the Huddlestons timely filed their Petition with this Court to dispute the Notice of Determination. The Huddlestons contend that (1) the IRS "wrongly altered the monetary amounts on [their Form 1040 return]", (2) their 2014 Form 1040 return was timely filed, and (3) the income tax shown to be due for 2014 was paid in full. On February 15, 2023, the Huddlestons filed a Motion for Summary Judgment. On May 5, 2023, the Commissioner also filed a Motion for Summary Judgment.
Discussion I. Scope of Review
The U.S. Court of Appeals for the Ninth Circuit has held that the scope of review in the CDP context is confined to the administrative record where a de novo review is not applicable. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009). Since the Huddlestons resided in California when the Petition was filed, we apply the scope of review mandated by the Ninth Circuit in which an appeal in this case would lie but for section 7463(b). See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
II. 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). Based on the record, we conclude there is no genuine dispute as to a material fact, and we may render a decision as a matter of law.
III. Hearings Under Section 6320
Section 6321 imposes a lien in favor of the United States upon all property and rights to property of taxpayers where there exists a failure to pay any tax liability after notice and demand for payment. The lien arises at the time assessment is made. § 6322. Although section 6322 provides that the lien imposed by section 6321 arises at the time the tax is assessed, section 6323(a) explains that the lien imposed by section 6321 is not generally valid against the taxpayers' creditors until a notice of lien is filed in accordance with section 6323(f).
Section 6320 provides that the IRS shall notify taxpayers when a notice of lien is filed under section 6323. This notice required by section 6320 must be sent not more than five business days after the notice of tax lien is filed and must inform the taxpayers of the opportunity for administrative review by hearing before Appeals. § 6320(a)(2)(C), (3). Section 6320(b) and (c) grants a requesting taxpayer the right to a fair hearing before an impartial Appeals officer generally to be conducted in accordance with the procedures described in section 6330(c), (d), and (e).
IV. 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 case law 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 (2000); Goza v. Commissioner, 114 T.C. 176, 180-81 (2000). We review all other determinations for abuse of discretion. Goza, 114 T.C. at 182.
A. Challenge to the Underlying Liability
Taxpayers may challenge the existence or amount of the underlying liability in a CDP proceeding only if the taxpayers "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." §§ 6320(c); 6330(c)(2)(B); see also Treas. Reg. § 301.6320-1(e)(3), Q&A-E2. However, taxpayers do not properly raise an issue, including concerning their underlying tax liability, if they fail to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to do so. Treas. Reg. § 301.6320-1(f)(2), Q&A-F3; see Pough v. Commissioner, 135 T.C. 344, 350 (2010).
In their Motion, the Huddlestons contend that they already paid the liability due, and the IRS has not properly applied the payment to their tax account for the year in issue. The Huddlestons were provided numerous opportunities to present evidence that their self-prepared, self-filed 2014 Form 1040 tax return reported the correct tax liability, and they paid such liability. Both settlement officers allowed a reasonable amount of time for the Huddlestons to file an amended tax return, if desired. Furthermore, the record clearly reflects that the Huddlestons elected the estimated tax payment be applied to their daughter's tax account, not their tax account for the year in issue. Notwithstanding, this Court has held that the question of "whether the IRS properly credited a payment is not a challenge to a tax liability; i.e., the amount of tax imposed by the Code for a particular year. It is instead a question of whether the liability remains unpaid." Melasky v. Commissioner, 151 T.C. 89, 92 (2018). This analysis is subject to the abuse of discretion standard. Therefore, the underlying tax liability is not at issue in this case.
B. Abuse of Discretion
In reviewing SO Garza's determination for abuse of discretion, we consider whether he (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues the Huddlestons raised, and (3) considered whether any proposed collection action balances the Government's need for the efficient collection of taxes with the Huddlestons' legitimate concern that any collection action be no more intrusive than necessary. § 6330(c). The Court concludes that SO Garza satisfied the 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 the Huddlestons raised that issue at the CDP hearing. Hoyle v. Commissioner, 131 T.C. 197, 202-03 (2008), supplemented by 136 T.C. 463 (2011). The Huddlestons did not challenge the verification requirement, and we conclude that SO Garza properly verified that all procedural requirements were met. See Rule 331(b)(4); see also Ansley v. Commissioner, T.C. Memo. 2019-46, at *19.
2. Issues Raised During the CDP Hearing
We conclude that the Appeals Office properly discharged its responsibilities under section 6330(c)(2). The settlement officer correctly determined that the IRS applied the estimated tax payment to the proper tax account. Therefore, there is no abuse of discretion in that regard. On their CDP hearing request form, the Huddlestons requested a lien discharge and innocent spouse relief. During the pendency of the CDP hearing, the Huddlestons also requested an installment agreement, offer in compromise, and currently not collectible status. They failed to provide a financial statement or other information for review of any collection alternative by SO Garza. It is not an abuse of discretion to reject a collection alternative or sustain a collection action if the taxpayer fails to submit requested information by a reasonable deadline set by the Appeals Office. See McLaine v. Commissioner, 138 T.C. 228, 242-43 (2012); Pough v. Commissioner, 135 T.C. 344, 351 (2010); Kendricks v. Commissioner, 124 T.C. 69, 79 (2005).
Next, there was no abuse of discretion regarding the rejection of the Huddlestons' request for lien subordination, discharge, or withdrawal. The IRS may withdraw a NFTL if it is determined that (1) the filing was premature or otherwise not in accordance with administrative procedures; (2) the taxpayer has entered into an installment agreement, unless such agreement provides otherwise; (3) withdrawal will facilitate collection; or (4) with the consent of the taxpayer or the National Taxpayer Advocate, withdrawal would be in the best interests of the taxpayer and the United States. § 6323(j). There is no evidence that the Huddlestons provided any information warranting subordination, discharge, or withdrawal of the NFTL. Consequently, the settlement officer properly sustained the filing of the NFTL.
3. Balancing Requirements
The Huddlestons did not allege that SO Garza 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). The Huddlestons have conceded this issue, too. See Rule 331(b)(4). We are satisfied that Appeals properly considered its balancing obligations and did not abuse its discretion in sustaining the NFTL filing.
V. Conclusion
We conclude that SO Garza did not abuse his discretion in sustaining the NFTL filing. Finding no abuse of discretion, we will deny the Huddlestons' motion, and we will grant summary judgment for the Commissioner.
The foregoing considered, it is
ORDERED that the Huddlestons' Motion for Summary Judgment, filed February 15, 2023, is denied. It is further
ORDERED that the Commissioner's Motion for Summary Judgment, filed May 5, 2023, is granted. It is further
ORDERED AND DECIDED that the Commissioner's Notice of Determination, dated December 23, 2021, upon which this case is based, is sustained.