Opinion
34556-21L
06-27-2023
BERNIE L. NEIL AND CAROLYN R. NEIL, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Cary Douglas Pugh Judge
Petitioners timely filed a petition in this case seeking review of the Notice of Determination Concerning Collection Actions Under Section 6320 or 6330 (notice of determination) issued by respondent on November 22, 2021. The notice of determination sustained a proposed levy with respect to petitioners' unpaid federal income tax liabilities for 2013, 2015, 2017, and 2018, and a notice of federal tax lien for 2014 and 2016.
This case was set for trial at the Court's January 17, 2023, Spokane, Washington, trial session. Prior to trial, respondent filed a Motion for Summary Judgment, supported by a Declaration of Brooks W. Lindberg pursuant to Rule 121.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.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.
We granted petitioners' unopposed Motion for Continuance to allow them additional time to respond to respondent's Motion for Summary Judgment and for the parties to discuss settlement and prepare for trial if needed. Petitioners timely filed their response, along with a supporting Declaration of Gary D. Brajcich.
Rule 121(a)(2) provides that "[t]he Court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988).
Our review of the record identified no material factual disputes. We conclude that respondent is entitled to judgment as a matter of law for the reasons summarized below.
Background
The following facts are derived from the parties' pleadings and motion papers, including accompanying declarations and exhibits. See Rule 121(c)(1). Petitioners resided in Spokane, Washington, at the time the petition was filed.
In December 2020 the Internal Revenue Service (IRS) issued petitioners a Notice of Intent to Levy and Notice of Your Rights to a Hearing, with respect to petitioners' unpaid income tax liabilities for 2013, 2015, 2017, and 2018. Petitioners filed a request for a collection due process hearing, dated January 7, 2021. On April 1, 2021, Settlement Officer (SO) Steven A. Lerner sent petitioners and their representative Gary D. Brajcich a letter acknowledging receipt of their request and scheduling a telephonic hearing for May 6, 2021. At the hearing SO Lerner and Mr. Brajcich discussed petitioners' penalty abatement request and Mr. Neil's medical issues over the years which petitioners alleged caused them to be unable to file and to pay their taxes timely. SO Lerner also advised Mr. Brajcich of the notice of federal tax lien filing to come.
The Notice of Intent to Levy was dated December 7, 2020, and specified a January 6, 2021, deadline but the attachment to the Notice of Determination stated that the Notice of Intent to Levy was issued December 22, 2020, making petitioners' hearing request timely. Respondent has not argued otherwise.
The IRS sent petitioners a Notice of Federal Tax Lien and Your Right to a Hearing Under IRC 6320, dated May 4, 2021, with respect to petitioners' unpaid income tax liabilities for 2014 and 2016. Petitioners timely filed a request for a collection due process hearing, dated June 8, 2021. The case was reassigned to SO Charles E. Duff on August 26, 2021. At a hearing on September 30, 2021, SO Duff and Mr. Brajcich again discussed petitioners' request for penalty abatement and both petitioners' medical issues. SO Duff concluded that his review of petitioners' documentation, which included information regarding Mr. Neil's medical issues, did not support relief of penalties because petitioners had sufficient income to hire a tax professional and offered no viable explanation as to why Mrs. Neil failed to timely file and pay their taxes for the tax years at issue. Petitioners failed to provide any financial information to support a collection alternative, despite numerous requests. They raised no other issues. The notice of determination addressing both the proposed levy and the notice of federal tax lien followed.
The first page of the notice of determination lists only the years covered by the proposed levy but in its conclusion sustains both the proposed levy and the notice of federal tax lien. We therefore treat the notice of determination as covering both collection actions.
Discussion
I. Standard of Review
Where the amount of a taxpayer's underlying tax liability is properly at issue in a collection case, we review the IRS's determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). Section 6330(c)(2)(B) permits taxpayers to challenge the existence or amount of their underlying liability only if they did not receive a notice of deficiency or otherwise have a prior opportunity to contest that liability. The "underlying tax liability" includes the tax deficiency, penalties and additions to tax, and statutory interest. Katz v. Commissioner, 115 T.C. 329, 338-41 (2000); see also Duy Duc Nguyen v. Commissioner, T.C. Memo. 2020-97, at *7-8.
Where the underlying tax liability is not properly at issue, we review the IRS's determinations regarding nonliability issues for abuse of discretion. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008), supplemented by 136 T.C. 463 (2011); Goza, 114 T.C. at 182. Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). The burden is on the taxpayer to prove that the settlement officer abused his discretion. Rules 142(a), 122(b); see Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
II. Analysis
Petitioners argue that summary judgment is not appropriate because there is a "genuine issue of material fact." Namely, petitioners take issue with the penalties related to tax years 2013 through 2018 and maintain that the penalties should be waived due to "reasonable cause" on account of, primarily, Mr. Neil's medical issues. Petitioners also point out that they have made subsequent payments towards their tax liability for the tax years at issue.
Critically, they do not dispute that they received the notice of deficiency or otherwise lacked a prior opportunity to contest their underlying liability. By statute, therefore, they cannot challenge their underlying liability again in the administrative hearing or before us. See § 6330(c)(2)(B). Consequently, any disagreement between the parties as to petitioners' underlying liability cannot be a dispute of material fact.
Petitioners do not oppose summary judgment on any other ground. Nor did we in our review of the record identify any abuse of discretion. In deciding whether SO Duff abused his discretion in sustaining the collection action we consider whether he (1) properly verified that the requirements of any applicable law or administrative procedure have been met; (2) considered any relevant issues petitioners raised; and (3) determined whether "any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [petitioners] that any collection action be no more intrusive than necessary." See § 6330(c)(3).
The record shows that SO Duff examined petitioners' account transcripts and verified that the requirements of applicable law and administrative procedure were followed. SO Duff properly balanced the need for efficient collection of taxes with petitioners' legitimate concern that the collection action be no more intrusive than necessary. Petitioners did not offer a collection alternative for consideration and it cannot be an abuse of discretion to sustain a collection action when a collection alternative is not requested. See, e.g., Tucker v. Commissioner, T.C. Memo. 2014-103.
Conclusion
After reviewing the record before us, we conclude that there is no genuine dispute as to any material facts, and respondent is entitled to a decision as a matter of law. Therefore, upon due consideration of the foregoing, it is
ORDERED that respondent's Motion for Summary Judgment, filed November 18, 2022, is granted. It is further
ORDERED AND DECIDED that the determinations set forth in the notice of determination, dated November 22, 2021, for petitioners' unpaid federal income tax liabilities for 2013, 2014, 2015, 2016, 2017, and 2018, and upon which this case is based, are sustained in full.