Opinion
10751-21L
03-17-2022
BENJAMIN OBI, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
David Gustafson, Judge.
This is a "collection due process" ("CDP") case brought under section 6320. Petitioner Benjamin Obi invokes our jurisdiction under section 6330(d)(1) to review a determination by the Internal Revenue Service ("IRS") Independent Office of Appeals ("IRS Appeals") sustaining the filing of a notice of Federal tax lien ("NFTL") covering his unpaid Federal income tax liabilities for the years 2014, 2015, 2016, and 2017. Respondent, the Commissioner of Internal Revenue, filed his motion for summary judgement (Doc. 8), to which Mr. Obi filed his response (Doc. 11), and the Commissioner filed his reply (Doc. 12). We will grant the Commissioner's motion.
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. Dollar amounts are rounded. Parenthetical references to "Doc." are to documents as they are numbered in the docket record of this case, and the page numbers cited in such references are according to the numbering in the portable document format ("PDF") of the digital file.
Background
The following facts are derived from the parties' pleadings and the Declaration of Counsel Attorney Thomas Burke in Support of Motion for Summary Judgment (Doc. 9). For the purposes of this order, we assume these facts to be true because they are uncontested by Mr. Obi.
Mr. Obi owes unpaid Federal income tax, interest, and penalties for the years 2014, 2015, 2016, and 2017 totaling approximately $22,720. (Doc. 9 at 76-86). Mr. Obi's liabilities for 2014 and 2015 are based on assessments made by the IRS through its automated underreporting system (Doc. 9 at 14), and Mr. Obi's liabilities for 2016 and 2017 are based on his voluntarily filed Federal income tax returns (Doc. 9 at 14).
After these liabilities were assessed, the IRS sent to Mr. Obi notices and demands for payment. (Doc. 9 at 14.) Mr. Obi was granted an installment agreement on December 15, 2016; however, this agreement defaulted twice-the second time in December 2018-due to assessments of new tax liabilities. (Doc. 9 at 14.) IRS Appeals determined that Mr. Obi then "defaulted [his] voluntary payment agreement" (Doc. 9 at 14), evidently meaning that he failed to make payments. Mr. Obi seems to allege-and we assume true-that the reason for this default was that payment envelopes were not reaching him in a timely manner and that the IRS failed to implement automatic payments from his checking account in the manner he requested. (Doc. 11 at 2-3.)
We cannot tell for certain whether Mr. Obi alleges a single instance-in 2019 during the CDP process-of the IRS's failure to make the automatic withdrawals he offered, or whether he alleges also an earlier instance in 2018. We assume in his favor that there were two such instances and that he was sincerely trying to make payments to the IRS.
The IRS then filed in June 2019 a "Notice of Federal Tax Lien" (Doc. 9 at 22) in Newark, New Jersey, and sent to Mr. Obi a Letter 3172, "Notice of Federal Tax Lien Filing and your Right to a Hearing Under IRC 6320" (Doc. 9 at 21), thereby giving him 30 days to request a CDP hearing. See § 6320(a)(3)(B). Mr. Obi timely submitted in July 2019 a Form 12153, "Request for a Collection Due Process or Equivalent Hearing", upon which he identified the filed NFTL as the basis for his hearing and requested a collection alternative of an installment agreement. (Doc. 9 at 24.) It appears that in October 2019 he submitted a proposed installment agreement on Form 433-D, "Installment Agreement" (Doc. 1 at 11), along with a voided check to enable the IRS to set up, as he again requested, monthly payments to be made automatically from his checking account. On that form he proposed that such payments begin to be withdrawn in November 2019 and that they increase in November 2020. (In his petition (Doc. 1 at 2), Mr. Obi states, "I entered into installment agreement with IRS effective 11/2/20 [sic]", but he provides no indication that the IRS ever accepted his offer of such an agreement.)
Meanwhile, Mr. Obi's CDP request was assigned to Settlement Officer Rachel Widebrook ("SO Widebrook"). SO Widebrook sent to Mr. Obi an appointment letter scheduling a telephone hearing on November 4, 2020, and requesting that Mr. Obi provide the following information before the hearing: (1) a completed Form 433-A, "Collection Information Statement for Wage Earners and Self-Employed Individuals"; (2) personal bank statements for the last 3 months; (3) a copy of his most recent paystub; (4) a signed Form 1040, "U.S. Individual Income Tax Return", for the 2019 year (a year subsequent to the years involved in the lien); and (5) verification of sufficient Federal income tax withholding adjustments to prevent additional tax liabilities. (Doc. 9 at 14-15.) Mr. Obi did not provide the requested information prior to the hearing, and he did not contact SO Widebrook at the scheduled date and time. (Doc. 9 at 15.) SO Widebrook then sent to Mr. Obi a second letter requesting that he provide that information and that he contact her by November 19, 2020. (Doc. 9 at 15.) Mr. Obi contacted SO Widebrook on November 13, 2020, and the CDP hearing was conducted at that time.
Mr. Obi was given a deadline of November 30, 2020 to provide the five requested items of financial information. However, as of January 14, 2021, Mr. Obi had not provided that information. (Doc. 9 at 15.) SO Widebrook issued a determination sustaining the filing of the NFTL based on Mr. Obi's history of defaulting installment agreements, failing to provide the requested financial information, and failing to comply with his tax return filing obligations. (Doc. 9 at 15-16)
IRS Appeals sent to Mr. Obi a Notice of Determination on March 1, 2021, which included a copy of SO Widebrook's determination and notified Mr. Obi of his right to dispute it by filing a petition in the United States Tax Court within 30 days. (Doc. 9 at 12-13.)
Mr. Obi then filed his timely petition with the Tax Court, showing that he had offered an installment agreement in October 2019, was making payments accordingly, but often encountered delays in receiving the return envelope for his payments by mail. (Doc. 1 at 2.) The petition shows that he requested that his installment payments be automatically drafted from his bank account, and that he sent to the IRS a void check to facilitate that process. (Doc. 1 at 3.) Attached to Mr. Obi's petition is a copy of a Form 433-D, "Installment Agreement", dated October 11, 2019, as well as a copy of the letter he sent to the IRS on April 1, 2020, requesting automatic withdrawal of his installment payments and including a void check. (Doc. 1 at 10-11.)
Respondent, the Commissioner of Internal Revenue, filed his motion for summary judgement (Doc. 8) on January 21, 2022. Mr. Obi filed his response (Doc. 11) on February 14, 2022, and the Commissioner filed his reply (Doc. 12) on March 1, 2022.
Discussion
I. Summary Judgment
The purpose of summary judgment is to expedite litigation and avoid unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). The Court 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); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). The moving party (here, the Commissioner) bears the burden of showing that no genuine issue of material fact exists, and the Court will view any factual material and inferences in the light most favorable to the nonmoving party (here, Mr. Obi). See Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985).
II. Collection Due Process Procedures
When a taxpayer fails to pay any Federal income tax liability within 10 days after notice and demand, section 6321 imposes a lien in favor of the United States on all the property of the delinquent taxpayer, and section 6323(f) authorizes the IRS to file notice of that lien. However, no later than five business days after filing an NFTL, the IRS must provide written notice of that filing to the taxpayer. § 6320(a). After receiving such a notice, the taxpayer may request an administrative CDP hearing before IRS Appeals. § 6320(b)(1).
At the CDP hearing, IRS Appeals must determine whether the proposed collection action may proceed. In making that determination, the appeals officer must consider the following: (1) whether the requirements of any applicable law or administrative procedure have been met; (2) any issues raised by the taxpayer, including (relevant here) challenges to the appropriateness of the collection action and proposed collection alternatives; and (3) whether the proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. §§ 6320(c), 6330(c).
Once IRS Appeals issues its determination, the taxpayer "may, within 30 days of a determination * * * petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter)." § 6330(d)(1).
III. Tax Court Review
In CDP cases where (as in this case) the underlying liability is not in dispute, we review IRS Appeals' determination for abuse of discretion. Downing v. Commissioner, 118 T.C. 22, 30-31 (2002). Applying that abuse-of-discretion standard, we decide whether IRS Appeals' determination to decline an installment agreement and to sustain the NFTL was 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).
IV. Analysis
A. The Commissioner has shown that IRS Appeals did not abuse its discretion
The Commissioner's motion shows that SO Widebrook verified that the requirements of applicable law and administrative procedure were met, considered Mr. Obi's proposed collection alternative of an installment agreement, and considered whether the proposed collection action balanced the need for efficient collection of taxes with the legitimate concern of the taxpayer that any collection be no more intrusive than necessary. See §§ 6320(c), 6330(c). SO Widebrook denied Mr. Obi's proposed collection alternative of an installment agreement because he did not provide the requested financial information and had not filed his 2019 tax return. (Doc. 9 at 15-16.) It is not an abuse of discretion by IRS Appeals to issue a determination if a taxpayer fails to submit requested information to consider a collection alternative within a given reasonable timeframe. Pough v. Commissioner, 135 T.C. 344, 351 (2010). Furthermore, although not raised by Mr. Obi in the CDP hearing, SO Widebrook considered whether withdrawal of the NFTL was appropriate under section 6323(j), but determined that Mr. Obi did not meet any requirements for lien withdrawal. (Doc. 9 at 16.) Based on the information available to her, it was not an abuse of discretion for SO Widebrook to sustain the filing of the NFTL.
B. Mr. Obi has not shown any genuine dispute of material fact
Mr. Obi does not dispute the facts relied upon by the Commissioner. Rather, Mr. Obi's response describes his efforts to establish automatic installment payments from his bank account, and reiterates that his goal in bringing this case is to establish automatic installment payments. According to Mr. Obi, he is not a good candidate for a Federal tax lien because he has no property, and the best option to resolve his outstanding tax liabilities is to grant his request for an installment agreement with automatic withdrawals from his bank account. (Doc. 11 at 3.)
Federal tax liens arise automatically pursuant to section 6321, and the IRS must file notice of its existence in a taxpayer's locality in order to establish its priority with respect to other potential creditors. See § 6323. Filing an NFTL guaranteeing the IRS's right to repayment of outstanding tax liabilities and, at the same time, entering into an installment agreement establishing terms of repayment are not mutually exclusive collection alternatives. On the contrary, the lien and the installment agreement often work in conjunction to collect outstanding tax liabilities. In fact, the existence of the lien is what enables the IRS to agree not to proceed with forced levies while a taxpayer is making installment payments against his liability and is not fully paying that total liability immediately. But for a taxpayer to be entitled to an installment agreement (and to immunity from further forced collection), the taxpayer must show that he is entitled to the benefits of that arrangement. Does the taxpayer have sufficient assets to pay the liability now (so that he has no real justification to delay full payment)? Does the taxpayer actually have the means to make the payments he proposes (so that the IRS will receive the intended benefit of foregoing immediate collection)? Is the taxpayer keeping current on his other tax liabilities (so that an installment agreement will not result in deferred collection of the determination year liabilities while other liabilities simply mount up)? In order to decide whether to enter into an installment agreement, the IRS needs information about the taxpayer's financial and tax-compliance situation.
To the extent Mr. Obi is complaining about a previous failure of the IRS to implement automatic payments in 2018, that failure is, strictly speaking, outside the scope of our review. We do not review the acts of collection personnel but review only IRS Appeals' determination in March 2021 to sustain the lien filing and the denial of an installment agreement. Of course, it might well be that IRS Appeals should have taken into account in March 2021 the (alleged) facts that in 2018 Mr. Obi had sincerely attempted to initiate automatic payments, that he was not to blame for the IRS's failure to implement that request, and that IRS personnel were the cause of that failure. Arguably, this should have inclined IRS Appeals to entertain very favorably his request for a new or revived installment agreement. But the record before us shows no indication that IRS Appeals did not so entertain his request. No matter how sympathetically IRS Appeals regarded Mr. Obi, it would need current financial information from him in order to determine whether in late 2019 or early 2020 it should enter into (or revive) an installment agreement with him.
To the extent Mr. Obi is complaining about a failure of the IRS in late 2019 or 2020 to implement automatic payments in accordance with the installment agreement he proposed in October 2019, he apparently misunderstands the situation. He seems to assume that, by proposing an installment agreement and automatic payments, he effectively entered into that agreement or became entitled to such an agreement. But this begs the question. The very purpose of the CDP hearing was for IRS Appeals to determine whether he was entitled to such an agreement, and it was incumbent on him to show to IRS Appeals that he was so entitled-by providing the information that IRS Appeals reasonably requested. It seems that, by his lights, Mr. Obi was pleading with the IRS to take his money; but in fact he was asking for an installment agreement (and the benefits of it) while failing of refusing to provide the information that would have made such an agreement possible.
Here, based on Mr. Obi's history of defaulting installment agreements, his failure to provide financial information, and his failure to show compliance with his 2019 income tax return filing obligation, it was not an abuse of discretion for IRS Appeals to sustain the filing of the NFTL and to decline to enter into an installment agreement. We point out, however, that Mr. Obi is always free to submit-outside of the CDP process (and without an opportunity for court review)-a new request for an installment agreement with automatic withdrawals of payments from his bank account, but of course he will need to submit to the IRS the appropriate forms and financial information, and he will need to be current with his return-filing obligations.
V. Conclusion
In view of the foregoing, it is ORDERED that respondent's motion for summary judgment is granted. It is further
ORDERED AND DECIDED that respondent may proceed with collection of petitioner's unpaid income tax liabilities for the 2014, 2015, 2016, and 2017 tax years, as described in the "Notice of Determination Concerning Collection Actions Under Sections 6320 or 6330 of the Internal Revenue Code" dated March 1, 2021.