Opinion
15672-19L
04-18-2022
JEFF & TONY ICE CREAM, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Michael B. Thornton Judge
This case is before the Court on respondent's motion for summary judgment, filed December 28, 2020, and accompanied by the declaration of respondent's counsel, David Lau, which contains as exhibits redacted copies of the administrative record and certified transcripts. On May 4, 2021, petitioner filed a response to respondent's motion for summary judgment. On June 23, 2021, respondent filed a reply to petitioner's response to motion for summary judgment..
Background
The following undisputed information is derived from the parties' filings and the administrative record.
On May 20, 2016, respondent sent to petitioner's last known address a notice of deficiency for the taxable years 2008, 2009, 2010, 2011, and 2012. For each of those taxable years, respondent determined that petitioner was liable for a deficiency, an addition to tax under section 6651(a)(1), and a penalty under section 6662(a). On November 10, 2016, respondent sent to petitioner's last known address a second notice of deficiency for the same taxable years, with a corrected amount of the deficiency for the taxable year 2008. Petitioner did not petition this Court with respect to either notice of deficiency.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect for the years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
On August 21, 2017, respondent assessed against petitioner, pursuant to section 6721(e), a civil penalty for intentionally disregarding requirements to file Forms W-2, Wage and Tax Statement, for the period ended December 31, 2014.
On November 15, 2018, respondent sent petitioner a Letter 1058, "Final Notice/Notice of Intent to Levy and Notice of Your Rights to a Hearing", with respect to petitioner's income taxes for the taxable years 2009, 2010 and 2012, as well as a civil penalty for the taxable year 2014. On December 7, 2018, respondent sent petitioner separate Letters 1058 with respect to the income taxes for the taxable years 2008 and 2011.
On December 7, 2018, respondent's collection division received from petitioner a completed Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to the income taxes for the taxable years 2008 through 2012 and the civil penalty for the taxable year 2014. The Form 12153 and attachment thereto indicated that petitioner sought an offer in compromise (OIC) based upon doubt as to liability. Petitioner's Form 12153 stated: "An OIC doubt as to liability will be submitted once a settlement officer is assigned."
On March 18, 2019, a settlement officer in the Internal Revenue Service (IRS) Office of Appeals (Appeals) sent petitioner a letter acknowledging the request for a collection due process (CDP) hearing and scheduling a telephone conference for June 4, 2019. That letter stated: "This will be your opportunity to discuss the reasons you disagree with the collection action or to discuss alternatives to the collection action." The letter further indicated that petitioner should provide a completed Form 656, Offer in Compromise, with supporting documentation. Neither petitioner nor any representative called in for the scheduled hearing or submitted any OIC.
On July 1, 2019, Appeals was renamed the Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001(a), 133 Stat. at 983 (2019). Some of the events in this case predate that renaming. We use the term "Appeals" without distinction to refer to the office both before and after the name change.
By letter to petitioner dated June 4, 2019, the settlement officer noted that petitioner had not responded to his previous conference letter and had not advised that the previously scheduled date or time was not convenient. The letter advised that if petitioner wished to provide any additional information for consideration, it must be mailed or faxed to Appeals within 14 days and that after 14 days Appeals would make a determination on the basis of the administrative file and whatever information petitioner had provided. Petitioner did not respond to the June 4, 2019, letter.
On July 22, 2019, Appeals issued to petitioner a notice of determination sustaining the proposed levy. In an attachment to that notice of determination, the settlement officer stated that he had verified that the requirements of any applicable law or procedure had been met and that all proper notices had been issued to petitioner. The settlement officer concluded that an OIC was not a viable collection alternative as petitioner had not submitted any OIC. The settlement officer further noted that petitioner was precluded from challenging its underlying liability in the CDP hearing because petitioner had had prior opportunities to do so. Finally, the settlement officer concluded that competing interests had been properly balanced, stating: "Without a viable collection alternative, [the] levy balances the need for efficient collection with your legitimate concern that no collection action be more intrusive than necessary." Petitioner, listing a California address, timely petitioned this Court.
Discussion
Section 6331(a) authorizes the Secretary to levy upon property and property rights of a taxpayer liable for tax if the taxpayer fails to pay the tax within 10 days after notice and demand for payment is made. The Secretary is first required, however, to notify the taxpayer in writing of his or her right to a prelevy hearing with Appeals on the issue of whether the levy is appropriate. § 6330(a)(1), (b)(1).
Section 6330(c)(2) prescribes the matters that a person may raise at an Appeals hearing, including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. The existence or amount of the underlying tax liability may be contested at an Appeals hearing only if the taxpayer received no notice of deficiency or otherwise had no opportunity to dispute the tax liability. § 6330(c)(2)(B); see Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180-181 (2000). Where the validity or extent of the taxpayer's underlying liability was properly at issue in a CDP hearing, we review the Commissioner's determination as to that issue de novo. Goza v. Commissioner, 114 T.C. at 181-182.
In general, a taxpayer must raise an issue at a CDP hearing to preserve it for this Court's consideration. See Perkins v. Commissioner, 129 T.C. 58, 63 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002); § 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. A taxpayer may not raise issues relating to underlying liability for the first time in this Court if those issues were not raised during a CDP hearing. Thompson v. Commissioner, 140 T.C. 173, 178 (2013); Giamelli v. Commissioner, 129 T.C. 107 (2007).
Petitioner's response to respondent's motion for summary judgment concedes that "[t]hrough the I.R.C. § 6330 hearing and this case, petitioner has not sought to challenge the underlying income tax liabilities." For this reason, and because petitioner had prior opportunities to challenge the underlying tax liabilities, those underlying liabilities are not properly at issue in this case and de novo review is inapplicable.
Absent an agreement to the contrary, our decision in this case is appealable to the U.S. Court of Appeals for the Ninth Circuit. See § 7482(b)(1). That court has held that, where de novo review is inapplicable, the scope of review in CDP cases is confined to the administrative record. 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, vacating in part decisions in related cases. Petitioner has supplied no reason to believe that the administrative record in this case is incomplete. Accordingly, in a case such as this, "summary judgment serves as a mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and is not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Belair v. Commissioner, 157 T.C.___, __ (slip op. at 11) (Aug. 2, 2021) (quoting Van Bemmelen v. Commissioner, 155 T.C. 64, 79 (2020)).
In deciding whether the settlement officer abused his discretion in sustaining the proposed collection action, we consider whether he: (1) properly verified that the requirements of any applicable law or administrative procedure had been met; (2) considered any relevant issues petitioner raised; and (3) determined "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).
In petitioner's response to respondent's motion for summary judgment, petitioner seeks a collection alternative in the form of an OIC based on doubt as to liability, asserting in that context that the liabilities assessed by respondent are overstated and that the penalties assessed under section 6662 for the taxable years 2008 through 2012 and under section 6721(e) for the taxable year 2014 were improperly assessed without prior supervisory approval as required under section 6751(b)(1). In respondent's reply to petitioner's response, respondent concedes the aforementioned penalties. Petitioner did not allege in the petition that the assessment of the remaining tax liabilities was otherwise improper, and any such issue is therefore deemed conceded. See Rule 331(b)(4); Pierson v. Commissioner, 115 T.C. 576, 580 (2000) (deeming the taxpayer to have conceded issues not raised in the petition).
Petitioner failed to propose any collection alternative during the pendency of the Appeals hearing and failed to provide a completed Form 656 or necessary financial information despite being provided a reasonable opportunity to do so. See O'Neil v. Commissioner, T.C. Memo. 2009-183 (determining that a taxpayer did not submit an OIC because he failed to submit a Form 656). It is not an abuse of discretion for a settlement officer to sustain a proposed collection action and not consider collection alternatives when the taxpayer has proposed none. See Kindred v. Commissioner, 454 F.3d 688, 696 (7th Cir. 2006) ("Without an actual offer in compromise to consider, it would be most difficult for either the Tax Court or this court to conclude that the appeals officer might have abused his discretion; for the appeals officer could not mistakenly reject something which has not been presented to him."); McLaine v. Commissioner, 138 T.C. 228, 243 (2012); Kendricks v. Commissioner, 124 T.C. 69, 79 (2005); Huntress v. Commissioner, T.C. Memo. 2009-161.
On the basis of the administrative record we also conclude that the settlement officer balanced the need for the efficient collection of taxes with petitioner's legitimate concern that the collection action be no more intrusive than necessary. Petitioner's failure to propose a collection alternative left the settlement officer with no less intrusive means to consider. See e.g., McLaine v. Commissioner, 138 T.C. 228, 243 (2012); Caudle v. Commissioner, T.C. Memo. 2014-196; Lance v. Commissioner, T.C. Memo. 2009-129; Schwersensky v. Commissioner, T.C. Memo. 2006-178.
The administrative record shows that the settlement officer provided adequate opportunities for petitioner to provide information and to participate in a telephone CDP hearing. Petitioner did not participate in the CDP hearing, did not propose a collection alternative, and otherwise failed to raise any issues or provide any information during the CDP administrative proceedings. Other than with respect to the issue of the section 6662 and section 6721(e) penalties, which respondent has conceded, we will grant summary judgment for respondent and sustain the collection action for all taxable years except the taxable year 2014. We note that petitioner is free to submit to the IRS at any time, for its consideration and possible acceptance, a collection alternative supported by the necessary financial information.
Accordingly, upon due consideration, it is
ORDERED: That respondent's motion for summary judgment, filed December 28, 2020, is granted. It is further
ORDERED AND DECIDED: That respondent may proceed with the collection of petitioner's Federal income tax for petitioner's taxable years 2008 through 2012 as described in the Notice of Determination Concerning Collection Actions Under Sections 6320 or 6330 of the Internal Revenue Code dated July 22, 2019, except that, pursuant to respondent's concession, petitioner is not liable for (and respondent may not proceed to collect) the accuracy-related penalties under section 6662(a) assessed against petitioner for the taxable years 2008 through 2012 or the penalty under section 6721(e) assessed against petitioner for the taxable year 2014.