Opinion
18972-17L
07-05-2023
MARK C. MIRKEN & SHERYL L. MIRKEN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Elizabeth A. Copeland, Judge.
Currently pending before the Court is Respondent's Motion for Summary Judgment, filed November 16, 2021. In an Order issued March 11, 2022, we asked Petitioners, Mark & Sheryl Mirken, to respond to that Motion on or before April 11, 2022. To date, the Mirkens have not responded to either the Motion or the Court's Order. While we could enter a decision against them on the basis of their failure to respond, see Rule 121(d), we nevertheless will consider Respondent's Motion on the merits.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Background
The following background is derived from the pleadings, Respondent's Motion for Summary Judgment, filed November 16, 2021, and the Declarations and Exhibits attached to that Motion. We note that the background is stated solely for ruling on the pending Motion for Summary Judgment and not as findings of fact. The Mirkens were residents of Texas when their Petition was filed.
I. The Mirkens' Tax Liability
The Mirkens requested and received an extension until October 15, 2014, to file their 2013 income tax return. They did not file their return until February 17, 2015, about four months after the extended due date. On that return, they self- assessed a liability of $9,281 and a section 6654 addition to tax of $121 (Assessment 1).
Section 6654 imposes upon a taxpayer an addition to tax for failure to pay estimated income tax.
On March 30, 2015, in connection with the self-assessment described above, the Internal Revenue Service (IRS) automatically assessed a section 6651(a)(1) addition to tax of $1,750.50, a section 6651(a)(2) addition to tax of $210.06, and interest of $131.14 (Assessment 2).
Section 6651(a)(1) imposes upon a taxpayer an addition to tax for failure to timely file a return. Likewise, section 6651(a)(2) imposes an addition to tax for failure to timely pay the amount shown as due on a return.
Mrs. Mirken received $20,159 in unemployment compensation in 2013 from the Department of Labor for the State of New Jersey, which was not reported on the Mirkens' return. The IRS's Automated Underreporter Program caught this omission and issued the Mirkens a Notice CP2000, Changes to Your Form 1040, on October 19, 2015, proposing a tax of $4,570 (in connection with the unreported unemployment compensation) and a section 6651(a)(1) addition to tax of $1,002 for tax year 2013. The IRS then issued the Mirkens a Notice of Deficiency on November 23, 2015, for the aforementioned amounts. After the time period for filing a petition with this Court disputing the Notice of Deficiency had passed, see I.R.C. § 6213(a), the IRS assessed on April 11, 2016, the $4,570 deficiency and the $1,002 addition to tax for tax year 2013 (Assessment 3).
II. Collection Due Process (CDP) Proceedings
A. The First CDP Hearing
The Mirkens satisfied Assessment 1, but they did not satisfy Assessments 2 and 3. As such, in an effort to collect the balance due on those two assessments, the IRS sent the Mirkens a Notice CP90, Intent to seize your assets and notice of your right to a hearing (Levy Notice), proposing to levy on the Mirkens' assets to satisfy a balance due of $8,857.05, which included Assessments 2 and 3, plus another section 6651(a)(2) addition to tax of $502.70, and interest of $690.65.
The Mirkens responded to the Levy Notice by timely submitting Form 12153, Request for a Collection Due Process or Equivalent Hearing in which, as relevant here, they indicated that there were challenging a proposed or actual levy, and wanted a collection alternative. The IRS then assigned Settlement Officer Natalie Krueger (SO Krueger) to their case. SO Krueger proceeded to send the Mirkens a letter scheduling a telephonic CDP hearing for July 6, 2017, and asking the Mirkens to provide her with a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, along with applicable financial verification such as bank statements, pay stubs, utitity bills, mortgage statements, etc. attached, as well as "[p]roof of sufficient withholding or sufficient estimated tax payments for tax year 2016 and year-to-date 2017." The Mirkens did not provide the requested information prior to the CDP hearing.
At the CDP hearing, the Mirkens' authorized representative told SO Krueger that they were living on very limited income and considering applying for an offer-in-compromise (OIC) or requesting currently not collectible status. SO Krueger then asked the representative to provide her with a completed Form 433-A, so that she could consider the Mirkens for currently not collectible status. She also instructed the representative that, if the Mirkens apply for an OIC, to submit that application to the Centralized Offer in Compromise (COIC) Unit, and to send her a copy of the OIC application so that she could suspend their CDP case while the OIC was being processed. The representative requested two weeks, until July 21, 2017, to submit such documentation, which SO Krueger granted.
On July 21, 2017, the Mirkens' representative sent SO Krueger a fax, advising her that the Mirkens were requesting an OIC and to therefore suspend their CDP case to allow the OIC application package to be processed; attached to the fax was a draft Form 433-A, which contained no supporting documentation and was stamped "Copy Only-Do Not Process." Because the Mirkens did not follow the agreed upon instructions SO Krueger gave at the CDP hearing (i.e., sending her a copy of the OIC and a completed Form 433-A, with supporting documentation), on August 3, 2017, SO Krueger issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 of the Internal Revenue Code (Notice of Determination) sustaining the Levy Notice as to tax year 2013. The Mirkens then petitioned this Court for review of that Notice of Determination.
The Mirkens submitted their OIC application package to the IRS's COIC Unit on August 7, 2017, after SO Krueger issued the Notice of Determination. They did not subsequently send her a copy of that OIC application. The COIC Unit rejected that OIC request on or about April 26, 2018.
B. Tax Court Review, Remand, and Second CDP Hearing
The pending Motion for Summary Judgment is not the first time Respondent has sought summary adjudication in this case. On March 22, 2018, he filed a Motion for Summary Judgment, to which the Mirkens objected. We issued an Order on August 11, 2018, denying that Motion for Summary Judgment because there was a genuine dispute as to whether SO Krueger verified "that the requirements of any applicable law or administrative procedure have been met." I.R.C. § 6330(c)(1), (c)(3)(A). Specifically, the Mirkens moved several times during the events leading up to this case, and it was therefore unclear whether the Notice of Deficiency (on which Assessment 3 hinges) was sent to their last known address. See I.R.C. § 6212(a) and (b); Treas. Reg. § 301.6212-1(b) (requiring the IRS to mail a notice of deficiency by registered or certified mail to the taxpayer's last known address). Respondent subsequently filed a Motion to Remand, which we granted.
On remand, the Mirkens' CDP case was assigned to Settlement Officer Nathan Villanueva (SO Villanueva). SO Villanueva obtained a history list of the Mirkens' previous addresses for the past eight years and a certified mailing list. The history list shows that, during the week of October 30, 2015, the IRS received the Mirkens' 2014 income tax return (it appears to have been mailed October 14, 2015), wherein they listed an address in Denver, Colorado. The filing of that return caused the IRS's computer systems to automatically update their address-on-file to that Denver address. The certified mailing list shows that, on November 23, 2015, the Notice of Deficiency was mailed, via certified mail, to that same Denver address.
SO Villanueva held a second CDP hearing on March 31, 2021, where he explained his findings to the Mirkens' representative. After the hearing, SO Villanueva faxed copies of the relevant 2013 tax year Notice CP2000 and Notice of Deficiency to the Mirkens' representative. The Mirkens' representative did not thereafter dispute SO Villanueva's findings nor provide any additional basis on which to contest the underlying levy; thus, on August 9, 2021, SO Villanueva issued a Supplemental Notice of Determination Concerning Collection Actions under Internal Revenue Code Sections 6320 or 6330 (Supplemental Notice of Determination), sustaining the Levy Notice. The pending Motion for Summary Judgment followed shortly thereafter.
Discussion I. Summary Judgment
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). Generally, we 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); see also 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 view the factual materials and inferences drawn from them in the light most favorable to the nonmoving party, the Mirkens in this case. See Sundstrand Corp., 98 T.C. at 520 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).
After reviewing Respondent's Motion for Summary Judgment and the documents submitted in support of the Motion, we find that this case is ripe for summary adjudication; and that, for the reasons detailed below, Respondent is entitled to judgment as a matter of law with respect to the levy action at issue.
II. Standard of Review
Our standard of review in CDP cases depends on whether the validity of the underlying tax liability is properly at issue. A taxpayer who did not receive a notice of deficiency or did not otherwise have a prior opportunity to contest their tax liability may contest such liability, including a self-assessed liability, at their CDP hearing. I.R.C. § 6330(c)(2)(B); Montgomery v. Commissioner, 122 T.C. 1, 9 (2004). In that instance, we review the notice of determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). Otherwise, we review the notice of determination for abuse of discretion. Id.
The Mirkens did not dispute their underlying tax liability at their first CDP hearing, in their Petition, at their second CDP hearing, or at any later point in this case. They seek only a collection alternative and allege that SO Krueger abused her discretion is sustaining the Levy Notice before a decision could be rendered on their OIC. They have therefore conceded any challenge to their underlying tax liability, see Rule 331(b)(4) ("Any issue not raised in the assignments of error shall be deemed to be conceded"). Thus, we review the actions of SO Krueger and SO Villanueva for abuse of discretion.
III. Abuse of Discretion
In reviewing for abuse of discretion, we must uphold the Notice of Determination, as supplemented, unless it is arbitrary, capricious, or without sound basis in fact or law. See, e.g., Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Taylor v. Commissioner, T.C. Memo. 2009-27, 97 T.C.M. (CCH) 1109, 1116 (2009). We consider whether SO Krueger and SO Villanueva: (1) properly verified that the requirements of any applicable law or administrative procedure have been met; (2) considered any relevant issues raised by the Mirkens; and (3) determined whether "any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [the Mirkens] that any collection action be no more intrusive than necessary." I.R.C. § 6330(c)(3); Ludlam v. Commissioner, T.C. Memo. 2019-21, at *9-10, aff'd per curiam, 810 Fed.Appx. 845 (11th Cir. 2020).
A. Verification
Before issuance of a notice of determination, a settlement officer is required to verify that all requirements of applicable law and administrative procedure have been met. I.R.C. § 6330(c)(1), (c)(3)(A). We have the authority to review satisfaction of this requirement regardless of whether the taxpayer raised a verification issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 200-03 (2008), supplemented by 136 T.C. 463 (2011). As we explained supra pp. 3-4, when we considered Respondent's initial Motion for Summary Judgment, it was unclear whether SO Krueger verified that the Notice of Deficiency was sent to the Mirkens' last known address. On remand, SO Villanueva located a history list containing the Mirkens' addresses for the past eight years, and a certified mailing list, showing that the Notice of Deficiency was mailed to the Mirkens' then-current address in Denver.
Generally, if Respondent produces a certified mailing list showing that that a notice of deficiency was timely sent to the taxpayer's last known address (as he has done here), we will presume that the notice was properly mailed. See Kovach v. Commissioner, T.C. Memo. 2023-67, at *7 (first citing United States v. Zolla, 724 F.2d 808, 810 (9th Cir. 1984); and then citing Cataldo v. Commissioner, 60 T.C. 522, 524 (1973), aff'd per curiam, 499 F.2d 550 (2d Cir. 1974)). Both the history and certified mailing lists confirm that the Notice of Deficiency was mailed to the Mirkens' last known address, which at the time was in Denver and a proper assessment with notice and demand was likewise made. Finally, there was no dispute regarding the Levy Notice, which was received by the Mirkens' representative, resulting in a timely CDP hearing request. At the second CDP hearing, SO Villanueva gave the Mirkens (as communicated to their representative) an opportunity to dispute these findings, which they did not do. We therefore find that the verification requirement was met.
B. Issues Raised
A settlement officer is required to consider any relevant issues raised by the taxpayer during a CDP hearing. I.R.C. § 6330(c)(2)(A), (c)(3)(B). If a taxpayer requests a collection alternative, the taxpayer is "expected to provide all relevant information requested by [the settlement officer], including financial statements, for [the settlement officer's] consideration of the facts and issues involved in the hearing." Treas. Reg. § 301.6330-1(e)(1). A settlement officer cannot consider a taxpayer for a collection alternative unless the taxpayer provides the settlement officer with adequate financial information, such as a current Form 433-A with relevant financial documents attached. See Rev. Proc. 2003-71, § 4.03, 2003-2 C.B. 517, 518. In general, it is not an abuse of discretion for a settlement officer to deny a collection alternative and sustain the proposed collection action if the taxpayer did not provide financial information during the CDP hearing. See Radeke v. Commissioner, T.C. Memo. 2012-319, at *10 (citing Olsen v. United States, 414 F.3d 144 (1st Cir. 2005)); Cavazos v. Commissioner, T.C. Memo. 2008-257, 96 T.C.M. (CCH) 341, 343.
The only issue that the Mirkens raised was that they wanted a collection alternative, namely, an OIC or currently not collectible status. In connection with the original CDP hearing, SO Krueger requested that that the Mirkens submit, at least 3 days prior to the hearing, a completed Form 433-A along with applicable financial verification and proof of estimated tax payment deposits. They did not do so. At the hearing, based on a time frame suggested by the Mirkens' representative, they were given two additional weeks to submit an OIC application to the IRS's COIC Unit, send her a copy of the same (so that she could suspend their CDP case), and to submit a completed Form 433-A (so that she could consider them for currently not collectible status). The Mirkens did not comply with her instructions; instead, their representative sent her a fax with an incomplete Form 433-A, a statement that the Mirkens were applying for an OIC, and a request that she suspend their CDP case. The OIC application package was not mailed to the IRS's COIC Unit until after SO Krueger's deadlines had lapsed and she had issued her Notice of Determination sustaining the levy. That OIC request was subsequently denied by the COIC Unit. In the supplemental hearing on remand, SO Villanueva verified that all requirements of applicable law and administrative procedure had been met as to the original Levy Notice, and provided proof of same to the Mirkens representative. In connection with the supplemental hearing, the Mirkens did not submit any updated financial documents or provide any other basis for relief. It was not an abuse of discretion for SO Villanueva to reject the collection alternatives requested by the Mirkens based his evaluation of the administrative record in this case, including the limited financial information provided by the Mirkens to SO Krueger.
C. Balancing
The Mirkens did not allege in their Petition or argue at any later point that SO Krueger or SO Villanueva failed to consider "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [the Mirkens] that any collection action be no more intrusive than necessary." I.R.C. § 6330(c)(3)(C). In any event, our review of the record reveals nothing to disturb either of the two Settlement Officer's conclusions that such balancing test was met.
IV. Conclusion
In conclusion, our review of the record shows no abuse of discretion in sustaining the proposed levy action at issue. We will therefore grant Respondent's Motion for Summary Judgment.
To reflect the foregoing, it is
ORDERED that Respondent's Motion for Summary Judgment, filed November 16, 2021, is granted. It is further
ORDERED AND DECIDED that the Notice of Determination dated August 3, 2017, as supplemented by the Supplemental Notice of Determination dated August 9, 2021, upon which this case is based, is sustained in full.