Opinion
1953-20L
10-21-2021
Richard Hudec, Petitioner v. Commissioner of Internal Revenue, Respondent
ORDER AND DECISION
Christian N. Weiler Judge
This matter is before the Court regarding the Commissioner of Internal Revenue's (respondent) motion for summary judgment filed on November 19, 2020. In opposition of respondent's motion, petitioner filed a response on January 15, 2021. A remote hearing on respondent's motion for summary judgment was held by the Court on Monday, March 2, 2021, during the Court's Miami, Florida remote trial session. Upon due consideration of the parties' arguments, and for the reasons stated below, the Court will grant respondent's motion for summary judgment.
Background
None of the facts in this section are in dispute. See Rule 121(b). Petitioner resided in Florida when he filed his petition.
The facts in this Order are principally derived from the administrative record developed before Appeals; however, our review of Appeals' determination is not limited to the administrative record. In Robinette v. Commissioner, 123 T.C. 85, 95 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006), we held that "when reviewing for abuse of discretion under section 6330(d), we are not limited by the Administrative Procedure Act * * * and our review is not limited to the administrative record." The Courts of Appeals for the First, Eighth and Ninth Circuits have concluded otherwise, holding that the so-called "record rule" applies to Collection Due Process (CDP) cases before this Court. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff'g in part T.C. Memo. 2006-166, and aff'g in part, rev'g in part decisions in related cases; Murphy v. Commissioner, 469 F.3d 27 (1st Cir. 2006); Robinette v. Commissioner, 439 F.3d 455 (8th Cir. 2006), rev'g 123 T.C. 85 (2004). Under sec. 7482(b)(1)(G), appeal in this case would lie in the Court of Appeals for the Eleventh Circuit, absent a stipulation by the parties to the contrary. Since the Eleventh Circuit has not addressed the issue, our review of Appeals' determination in this case is not limited by the record rule. See Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
The Internal Revenue Service (IRS) sent petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (Levy Notice), dated February 14, 2019, advising petitioner that respondent intended to levy to collect unpaid liabilities for tax years 2002 and 2003. The IRS then sent petitioner a Letter 3712, Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320, dated March 7, 2019. In response to these notices sent by the IRS, petitioner submitted to the IRS a completed Form 12153, Request for Collection Due Process Hearing, on or about March 15, 2019, requesting a hearing with the IRS Office of Appeals (Appeals). On the Form 12153, petitioner marked the Offer In Compromise box and provided the following explanation, "I cannot pay the amount owed in my lifetime. I would like to propose a different way to pay the money I owe. I have already paid part of my taxes."
On July 1, 2019, Congress renamed the IRS Office of Appeals the IRS Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, sec. 1001(a), 133 Stat. at 983 (2019). The events in this case largely predate that change, so we use the name in effect at the times relevant to this case, i.e., the Office of Appeals.
IRS Appeals Settlement Officer Shari Green was assigned to petitioner's Collection Due Process (CDP) hearing. On October 17, 2019, Ms. Green confirmed she had no prior involvement in petitioner's case for the taxes and tax periods associated with the CDP hearing request. She considered whether all legal and procedural requirements were followed by the IRS, by confirming that an assessment was properly made per section 6201 for each tax period, and notice and demand was mailed by the IRS to petitioner's last known address within 60 days from assessment, as required by section 6303. Ms. Green requested a copy of the statutory Notice of Deficiency (SND) issued by the IRS for tax years 2002 and 2003 to confirm petitioner had a prior opportunity to challenge the underlying tax liabilities at issue. She also confirmed there were remaining balances due at the time when the IRS issued the Levy Notice to petitioner.
Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986 (Code), as amended and in effect for the taxable years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure.
On October 18, 2019, Ms. Green sent petitioner a letter scheduling a CDP telephone hearing for November 21, 2019. In the same letter to petitioner, Ms. Green requested that petitioner file his delinquent Form 1040, U.S. Individual Income Tax Return, for tax year 2018, along with verification that the tax return was filed and paid in full. She also requested a completed IRS Form 656, Offer In Compromise, and any supporting documentation. Ms. Green directed petitioner to the IRS website to obtain IRS Form 656, and she noted that petitioner is to also include IRS Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and Form 433-B (OIC), Collection Information Statement for Businesses, for all businesses in which petitioner held an ownership interest. Ms. Green specifically requested all documents pertaining to Bering Court Land Trust.
Ms. Green further noted that if petitioner opts to not submit an Offer in Compromise, that he is still to complete and return Form 433-A (OIC) and Form 433-B (OIC), along with verification of personal and business income, expenses, and assets. Finally, Ms. Green requested that all of the requested information be provided to her within 21 days from the date of her letter. A copy of Ms. Green's October 18, 2019, letter to petitioner was also mailed to Ronald E. Wise, EA, as petitioner's authorized power of attorney.
The administrative record in this case shows that on October 28, 2019, Ms. Green received a copy of an unsigned and undated SND issued to petitioner by the IRS. She confirmed the SND was addressed to petitioner at his last known address, and that the certified mailing log received from the IRS shows the SND was issued to petitioner on November 17, 2017, and delivery was made on November 25, 2017.
Ms. Green did not receive a telephone call from petitioner or petitioner's representative at the scheduled appointment for the CDP hearing. On November 25, 2019, Ms. Green sent a second letter to petitioner and Mr. Wise advising them that petitioner had missed his CDP hearing appointment and petitioner was to contact her within 14 days from the date of the letter. In this letter, Ms. Green also advised petitioner that if she did not hear from petitioner, she would go forward and make a determination on his CDP hearing request, based on the IRS file and any other information he has previously provided.
Ms. Green did not hear from petitioner, so on December 31, 2019, Appeals issued to petitioner a Notice of Determination, Concerning Collection Actions under IRC Section 6320 or 6330 of the Internal Revenue Code. In the summary of determination, Appeals states "the filing of the Notice of Federal Tax Lien ("Lien") and issuance of the Notice of Intent to Levy ("Final Notice") were proper. The filing of the Lien is sustained. It is necessary to protect the government's interest in your assets. Proposed levy action is also sustained. You did not respond to Appeals. You did not request or submit a request for Lien Subordination, Discharge, and/or Withdrawal. You did not submit an Offer in Compromise, the only collection alternative requested. You did not submit financial information necessary to evaluate your ability to pay."
On January 30, 2020, the Court received and filed petitioner's timely mailed petition. In his petition, among other contentions, he asserts "the appeals officer stated that I received Letter 4737 and Letter 4000. I did not receive these letters. We get a lot of junk mail and with 5 people collecting mail, they possibly discarded in error as "junk mail" or were placed in the many catalogs or other solicitation mail we receive and dispose."
Respondent filed its answer on March 11, 2020, and later filed a motion for summary judgment, as discussed above. On March 2, 2021, a remote hearing on respondent's motion for summary judgment between the parties and the Court was held.
Discussion
I. Summary Judgment
A party may move for summary judgment regarding all or any part of the legal issues in controversy. See Rule 121(a); Wachter v. Commissioner, 142 T.C. 140, 145 (2014). We may grant summary judgment if the pleadings, stipulations and exhibits, and any other acceptable materials show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law. See Rule 121(a) and (b); see also CGG Americas, Inc. v. Commissioner, 147 T.C. 78, 82 (2016); Elec. Arts, Inc., & Subs. v. Commissioner, 118 T.C. 226, 238 (2002). We construe the facts and draw all inferences in the light most favorable to the nonmoving party to decide whether summary judgment is appropriate. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). The moving party has the burden of proving that there is no genuine issue of material fact. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). However, the nonmoving party may not rest upon the mere allegations or denials in its pleadings but instead must "set forth specific facts showing that there is a genuine dispute for trial." Rule 121(d); see also Sundstrand Corp. v. Commissioner, 98 T.C. at 520.
II. Standard and Scope of Review
Section 6330(d)(1) provides this Court jurisdiction to review Appeals' determination. Where the validity of the underlying tax liability is not properly at issue, the Court will review the administrative determination by Appeals for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). However, our review of the determination by Appeals is not limited to the administrative record before us. Robinette v. Commissioner, 123 T.C. 85, 95 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006).
III. Arguments of the Parties
At the remote hearing, petitioner made three arguments. First, that he was not living at 3994 Bering Court at the time Ms. Green's correspondence was sent, and that Ms. Green failed to contact him by telephone. Second, petitioner disputed a portion of his liability for tax year 2003, since he believes that his cancellation of indebtedness reflected on his 2003 Form 1040 belonged in year 2005. Finally, petitioner disputed a portion of the tax balances due, since he asserts the IRS has failed to properly credit his account for his prior criminal restitution of some $97,000, and under a criminal forfeiture order of $1.25M, the United States Marshals Service seized and sold his home for approximately $619,241.73.
Respondent disputed that Appeals abused its discretion, noting how Ms. Green sent prior correspondence to petitioner at his last known address. Similarly, respondent is willing to stipulate (and has since stipulated) to petitioner's prior restitution payments of $97,000; however, respondent disputed receipt of $619,241.73. Respondent notes how petitioner's civil forfeiture suit plea agreement does not apply any forfeiture of funds toward his restitution and how no part of the forfeited assets have been received by the IRS. Finally, respondent disputed that Appeals abused its discretion with respect to the issues of restitution and forfeiture of assets by petitioner, since the issues were not raised by petitioner during his CDP hearing.
IV. Analysis
Following the CDP hearing, Appeals must determine whether proceeding with the proposed collection action is appropriate. In making that determination the assigned Appeals officer is required to take into consideration: (1) whether the requirements of any applicable law or administrative procedure have been met; (2) any relevant issues raised by the taxpayer; and (3) whether the proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary. Sec. 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C. 183, 184 (2001).
A. Whether Respondent Met the Requirements of Applicable Law and Administrative Procedure
Before issuance of a notice of determination, the Appeals officer must verify that all requirements of applicable law and administrative procedure have been met. Sec. 6330(c)(1), (3)(A). This Court may review the Appeals officer's verification under section 6330(c)(1) without regard to whether the taxpayer raised it at the CDP hearing. Sec. 6330(c)(1), (3)(A); see also Hoyle v. Commissioner, 131 T.C. 197, 202-203 (2008).
Here, Ms. Green determined that respondent followed the requirements of applicable law and administrative procedure in filing the Notice of Intent to Levy. The Notice of Determination states that the liabilities were duly assessed, and the requisite notices were timely mailed to petitioner. There is no evidence before the Court that the requirements of applicable law and administrative procedure were not satisfied.
B. Relevant Issues Raised by Petitioner
Appeals is required to consider any relevant issue raised by a taxpayer during a hearing, including challenges to the appropriateness of collection action and collection alternatives offered by the taxpayer. Sec. 6330(c)(2)(A), (3)(B). This Court may review the Appeals officer's determination under section 6330(c)(2) when the taxpayer has first raised the relevant issue at the CDP hearing. Sec. 6330(c)(2), (3)(B). Consequently, it is important for the taxpayer to make clear while in Appeals the relief being requested, as it is not appropriate for the Tax Court to consider the issue on a subsequent judicial appeal if relevant issues are not first raised at the CDP hearing level. Sec. 301.6320-1(f)(2), Q&A-F3, Proced. & Admin. Regs.; see Giamelli v. Commissioner, 129 T.C. 107, 113-115 (2007).
It is the taxpayer's responsibility to provide the IRS clear and concise notification of any change in address. See sec. 301.6212-2(a), (b)(2), Proced. & Admin. Regs. (defining the taxpayer's last known address as the address on the taxpayer's most recently filed and properly processed return unless the IRS has been given "clear and concise notification" of a different address). The taxpayer may submit a change of address by indicating a new address on his next return, by filing a written or electronic change of address with the IRS or by providing an updated address to the United States Postal Service for inclusion in its national change of address database. Sec. 301.6212-2(a), Proced. &. Admin. Regs.
Based on the record, Ms. Green received no communication from petitioner, despite the fact that she sent petitioner multiple letters. At the hearing, petitioner acknowledged that he likely received Ms. Green's correspondence but erroneously disregarded it, and that his current address with Appeals was the address used by Ms. Green. Furthermore, tracking down the present whereabouts of petitioner is not Ms. Green's obligation - rather it is the obligation of a taxpayer to communicate with Appeals. See Alta Sierra Vista, Inc. v. Commissioner, 62 T.C. 367, 374-375 (1974).
The issues related to petitioner's restitution payments and forfeiture of assets are now being raised for the first time and were not presented to, or considered by, Appeals. The only communication received from petitioner was the initial CDP hearing request form. On the CDP hearing form itself, none of the issues related to application of restitution payments and forfeiture of assets by petitioner were raised. Accordingly, the Court is compelled not to consider these issues, since they were not properly raised while petitioner was in Appeals. Giamelli v. Commissioner, 129 T.C. at 115.
Accordingly, in our review of Appeals' actions -- which is limited to the determination reached by the Appeals officer based on the information she had before her -- this Court is compelled to find that petitioner has not identified or otherwise shown how Appeals abused its discretion in this matter.
C. Balancing the Need for Efficient Collection of Taxes with Concerns that Collection Be No More Intrusive Than Necessary
The final item to consider is "whether the proposed collection action balances the need for efficient collection of taxes with legitimate concerns of the taxpayer that any collection action be no more intrusive than necessary." Sec. 6330(c)(3)(C). Ms. Green performed a balancing test, concluding that the Lien and Final Notice were necessary to protect the government's interest in petitioner's assets, after balancing the needs of collection with the concerns of petitioner. Based on the administrative record before us, we are compelled to agree with Ms. Green and conclude that Appeals did not abuse its discretion in so deciding. Pough v. Commissioner, 135 T.C. 344, 352 (2010).
Accordingly, summary judgment for respondent is appropriate in this matter. We have considered all of the arguments that the parties made and to the extent they are not addressed herein, we consider them to be moot, irrelevant, or without merit.
Considering the foregoing, it is
ORDERED that respondent's motion for summary judgment, filed on November 19, 2020, is granted. It is further
ORDERED AND DECIDED that respondent's determination as set forth in the Notice of Determination dated December 31, 2019, upon which this case is based, is sustained.