Opinion
20432-21L
06-24-2022
RICHARD MAYS OWEN, JR., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Adam B. Landy, Special Trial Judge
This collection review case is before the Court on respondent's Motion for Summary Judgment, supported by a declaration and exhibits, filed January 18, 2022, pursuant to Rule 121. Respondent seeks to sustain a determination made by the Internal Revenue Service (IRS) Independent Office of Appeals (Appeals) to proceed with the proposed lien action to collect petitioner's unpaid income tax liability for 2014. For the reasons stated below, we will grant respondent'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.
I. Background
The following facts are based on the parties' pleadings and motion papers, including the associated declaration and exhibits. See Rule 121(b). Petitioner resided in Texas when he timely filed his petition.
Petitioner failed to remit full payment of the income tax liability due of $14,855.00 upon filing his 2014 Form 1040 tax return. Thereafter, respondent sent petitioner several notices and demands for payment. Petitioner remitted some payments towards the liability due but not in a sufficient amount to fully pay the total tax liability. As of November 14, 2018, petitioner's outstanding liability for 2014 was $9,425.27.
On February 1, 2018, respondent mailed to petitioner a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320, reflecting a balance due of $616.68 for taxable year 2016. Respondent notified petitioner that he 1 had recorded a Notice of Federal Tax Lien (NFTL) on February 14, 2018, in Bexar County, Texas. Petitioner failed to request a Collection Due Process (CDP) hearing by the March 12, 2018, deadline stated in Letter 3172.
On May 31, 2018, respondent issued to petitioner another Letter 3172. Respondent notified petitioner that two NFTLs, in Austin County, Texas and Harris County, Texas and for taxable years 2014 and 2016, were recorded against all property and rights to property owned by him. The amount of the total tax liability secured by the liens was $9,324.81. Of this amount due, $8,582.13 was related to the liability for taxable year 2014.
Petitioner timely submitted Form 12153, Request for Collection Due Process or Equivalent Hearing, to respondent's Revenue Officer G. Keller (RO Keller) on June 25, 2018, for taxable years 2014 and 2016. Petitioner requested a lien withdrawal as his proposed collection alternative to the NFTL. Notably, petitioner did not request an installment agreement, offer in compromise, or that his tax account be placed in currently not collectible status. Finally, on his Form 12153, petitioner stated that "[t]his lien was filed in two counties not of my residence or property as harassment. 'Some' lien already on file where I live (Bexar Co.) and [Revenue Officer] put in writing no collection until review of my 1040X-2014." In addition to submitting the Form 12153, petitioner submitted a 2014 Form 1040X, Amended U.S. Individual Income Tax Return for processing. Petitioner claimed additional business expenses not reported on two Schedule Cs attached to his originally-filed 2014 tax return.
On July 25, 2017, petitioner provided a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals (Form 433-A) to RO Keller. This Form 433-A reported equity in assets of approximately $106,000 and net monthly income of $1,400. However, as stated below, petitioner failed to provide an updated Form 433-A to SO Marquez during the CDP hearing.
Petitioner's case was assigned to Settlement Officer J. Marquez (SO Marquez). SO Marquez verified that all legal and administrative requirements for the underlying assessments and the issuance of the NFTLs had been met. On October 12, 2018, SO Marquez issued to petitioner a letter acknowledging Appeals' timely receipt of his completed Form 12153. The letter indicated that petitioner's CDP hearing would take place via telephone on November 14, 2018, at 11 AM CST with Edward Villanueva, representative for petitioner, and that petitioner (or his representative) should contact SO Marquez within 14 days, i.e., October 26, 2018, if that date was not convenient for them. The letter also requested petitioner return within 14 days: 1) a completed Form 1040 tax return for taxable year 2017; 2) a completed Form 433-A; and 3) copies of the last six monthly statements for financial accounts. SO Marquez did not receive any of the requested documents.
On November 14, 2018, Edward Villanueva contacted SO Marquez to postpone the telephone conference until the first week of December 2018 due to petitioner's illness. SO Marquez granted the request and rescheduled the telephone conference 2 for December 6, 2018, at 11 AM CST. During the December 6th telephone conference, SO Marquez explained to Mr. Villaneuva that the CDP hearing request was valid only for 2014, not 2016, since petitioner had a prior opportunity to challenge the NFTL. SO Marquez also stated to Mr. Villaneuva that petitioner was not eligible for a lien withdrawal, pursuant to section 6323(j), because his case did not meet any of the statutory requirements. SO Marquez further clarified that the NFTLs were not filed as "harassment" since petitioner owned property in each county of which Mr. Villanueva concurred. Finally, since petitioner's total liability, including taxable year 2014, was below $50,000, SO Marquez proposed a streamlined installment agreement plan pending the outcome of respondent's review of the 2014 amended tax return.
Petitioner did not check the box for equivalent hearing, and SO Marquez was unable to consider the issues related to 2016 during the CDP hearing for 2014.
Mr. Villaneuva reminded SO Marquez that petitioner filed a 2014 amended tax return. Accordingly, SO Marquez suspended the CDP hearing until the IRS's Compliance Division reviewed the amended return. After its review, the Compliance Division rejected petitioner's amended tax return, as filed, since petitioner failed to substantiate the additional expenses claimed on the two Schedule Cs. Petitioner appealed this determination to a separate office within Appeals. Appeals concurred in decision to disallow the claimed expenses for lack of substantiation.
Petitioner was notified on May 14, 2021, that respondent's Appeals Officer T. Ritchey (AO Ritchey) considered the amended return, and AO Ritchey determined that petitioner was not entitled to additional business expenses claimed.
On April 9, 2021, SO Marquez sent petitioner a letter offering him a last chance to obtain a collection alternative since he failed to provide the requested substantiation documents. This letter also indicated that petitioner should contact SO Marquez within 14 days, i.e., April 23, 2021, regarding any collection alternatives sought. On April 23, 2021, petitioner contacted SO Marquez whereby SO Marquez offered petitioner a streamlined installment agreement of $1,749 per month as a collection alternative. Petitioner responded that (1) he was unable to pay the proposed monthly installment payment; and (2) he was not going to provide SO Marquez with an updated Form 433-A because the request was too intrusive.
On May 14, 2021, respondent issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 of the Internal Revenue Code (notice) with respect to taxable year 2014. In the notice, SO Marquez sustained the filing of the NFTLs on the basis that the IRS's Compliance Division met all legal and procedural requirements. SO Marquez also stated that petitioner failed to agree to an Installment Agreement or provide any financial documents during the hearing to set up a collection alternative. SO Marquez also determined that petitioner was not entitled to a lien withdrawal because he failed to satisfy any conditions outlined in section 6323(j). Thus, SO Marquez sustained the proposed lien action. 3
On June 1, 2021, petitioner timely filed a petition alleging that an offer in compromise and a payment plan had already been approved for 2014, but that a Revenue Officer "fraudulently declined" the collection alternative without proper notice and without presenting him with a "positive outcome". Petitioner did not specifically allege that SO Marquez abused his discretion in issuing the notice.
On January 18, 2022, respondent filed a Motion for Summary Judgment. Respondent contends that he is entitled to summary judgment because petitioner did not properly challenge the underlying tax liability for 2014, and SO Marquez did not abuse his discretion in sustaining the proposed collection action. Although requested to do so, petitioner failed to file a response in opposition to respondent's motion.
II. Discussion
A. Summary Judgment Standard
Summary judgment serves to "expedite litigation and avoid unnecessary and expensive trials." Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). We may grant summary judgment when there is no genuine dispute of 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). In deciding whether to grant summary judgment, we construe factual materials and inferences drawn from them in a light most favorable to the nonmoving party. Sundstrand Corp., 98 T.C. at 520. The nonmoving party may not rest upon mere allegations or denials in its pleadings and must set forth specific facts showing there is a genuine dispute for trial. Rule 121(d); see also Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
Under Rule 121(d), if an adverse party does not respond to the motion for summary judgment, then this court may enter a decision where appropriate against that party. See Aguirre v. Commissioner, 117 T.C. 324, 327 (2001). Petitioner failed to respond to the motion for summary judgment. The Court could grant respondent's motion on that ground alone. Moreover, the record in this matter shows that respondent is entitled to summary judgment on the merits of the case.
B. Hearings Under Section 6320 [Lien]
Section 6321 imposes a lien in favor of the United States upon all property and rights to property of a taxpayer where there exists a failure to pay any tax liability after notice and demand for payment. The lien arises at the time assessment is made. § 6322. Although section 6322 provides that the lien imposed by section 6321 arises at the time the tax is assessed, section 6323(a) explains that the lien imposed by section 6321 is not generally valid against the taxpayer's creditors until a notice of lien is filed in accordance with section 6323(f).
Section 6320 provides that the IRS shall notify a taxpayer when a notice of lien is filed under section 6323. This notice required by section 6320 must be sent not more than five business days after the notice of tax lien is filed and must inform the 4 taxpayer of the opportunity for administrative review by hearing before Appeals. § 6320(a)(2)(C), (3). Section 6320(b) and (c) grants a requesting taxpayer the right to a fair hearing before an impartial Appeals officer generally to be conducted in accordance with the procedures described in section 6330(c), (d), and (e).
C. Standard of Review
Neither section 6320(c) nor section 6330(d)(1) prescribes the standard of review that this Court should apply in reviewing an IRS administrative determination in a CDP case. We are guided by our prior case law precedents. Where the validity of a taxpayer's underlying tax liability is properly at issue, we review Appeals' determination de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-82 (2000).
1. Challenge to the Underlying Liability
In reviewing a determination under section 6330(c)(2), the Court considers only issues that the taxpayer properly raised during the CDP hearing. Treas. Reg. §§ 301.6320-1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3; see Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). Therefore, "[a] taxpayer is precluded from disputing the underlying liability [in this Court] if it was not properly raised in the CDP hearing." Thompson v. Commissioner, 140 T.C. 173, 178 (2013). During a CDP hearing, a taxpayer does not properly raise an issue, including an issue concerning his underlying tax liability, if he fails to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence. Treas. Reg. § 301.6320-1(f)(2), Q&A-F3; see Pough v. Commissioner, 135 T.C. 344, 349 (2010). The taxpayer must also raise the issue in his petition to this Court to preserve it for review. See Rule 331(b)(4) ("Any issue not raised in the assignments of error shall be deemed to be conceded.").
Petitioner filed a 2014 amended tax return on June 25, 2018. Petitioner claimed additional business expenses not previously claimed for 2014. The record in this case does not reflect that petitioner received a notice of deficiency or had a prior opportunity to challenge the liability for 2014. Therefore, petitioner was entitled to challenge the underlying tax liability for 2014. § 6330(c)(2)(B); Treas. Reg. § 301.6320-1(e)(3), Q&A-E2. From June 25, 2018 through May 14, 2021, the date the notice of determination was issued, petitioner failed to provide any substantiation to respondent's Compliance Division or Appeals Office entitling him to the deductions claimed on the amended return. Petitioner failed to properly raise the issue of the underlying liability, and this Court is unable to provide petitioner with any relief.
2. Abuse of Discretion
Since petitioner did not sustain a challenge to the validity of or amount of his income tax liability for 2014, we will review Appeals' determination for abuse of discretion. See Goza, 114 T.C. at 182; Sego, 114 T.C. at 610. Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. 5 Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). We do not substitute our own judgment for that of the Appeals officer; i.e., we do not conduct an independent determination of what would be an acceptable collection alternative. See, e.g., Johnson v. Commissioner, 136 T.C. 475, 488 (2011), aff'd, 502 Fed.Appx. 1 (D.C. Cir. 2013).
In reviewing Appeals' determinations for abuse of discretion, we consider whether SO Marquez: (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues petitioner raised, and (3) considered whether any proposed collection action balances the Government's need for the efficient collection of taxes with the petitioner's legitimate concern that any collection action be no more intrusive than necessary. See § 6330(c)(3); Sego, 114 T.C. at 609.
As stated above, petitioner advised SO Marquez on April 23, 2021, that he did not want to set up a streamlined installment agreement. Additionally, petitioner stated he would not be providing SO Marquez with another Form 433-A, as requested. We have held that it is not an abuse of discretion for Appeals to reject collection alternatives and sustain a proposed collection action on the basis of a taxpayer's failure to submit requested financial information. See Scanlon v. Commissioner, T.C. Memo. 2018-51; Wright v. Commissioner, T.C. Memo. 2012-24; Huntress v. Commissioner, T.C. Memo. 2009-161. Therefore, SO Marquez did not abuse his discretion in sustaining the proposed collection action on this basis.
On Form 12153, petitioner checked the box for a lien withdrawal. Petitioner failed to provide an application for or any other documents to request a lien withdrawal, pursuant to section 6323(j). Pursuant to section 6323(j)(1), a lien may be withdrawn if: (A) the filing of the notice is premature or otherwise not in accordance with administrative procedures, (B) an installment agreement has been entered to satisfy the liability, (C) the withdrawal will facilitate collection of tax liability, or (D) the National Taxpayer Advocate or the taxpayer consents to the lien withdrawal because it is in the best interest of the taxpayer and the United States.
SO Marquez determined that (1) the NFTL filing was not premature; (2) no installment agreement had been entered into by petitioner and the IRS; (3) an NFTL withdrawal would not facilitate collection because petitioner did not propose a collection resolution; and (4) it was not in the best interest of the taxpayer or IRS to withdraw the NFTL. Petitioner failed to provide any specific facts that SO Marquez abused his discretion in failing to withdraw the NFTL. Although on Form 12153 petitioner also alleged the lien was filed for "harassment" purposes, he failed to set forth any specific facts showing a genuine dispute for trial. See Rule 121(d). Accordingly, we find that SO Marquez did not abuse his discretion in sustaining the notice of lien filing. 6
3. Verification & Balancing Obligations by SO Marquez
SO Marquez properly verified that the requirements of all applicable laws and administrative procedures were met in processing petitioner's case, see section 6330(c)(1), and that the proposed lien action balances the Government's need for the efficient collection of taxes with petitioner's concerns that the collection action be no more intrusive than necessary, see section 6330(c)(3). Petitioner did not argue or state specific facts in his petition that SO Marquez failed to satisfy the verification or balancing requirements, and therefore, petitioner has conceded these issues. See Rules 121(d), 331(b)(4). Consequently, SO Marquez did not abuse his discretion in sustaining the proposed lien action.
III. Conclusion
There are no disputes of material fact and judgment may be rendered as a matter of law. Finding no abuse of discretion, we will grant summary judgment for respondent and sustain the proposed collection action.
Upon due consideration and for cause, it is
ORDERED that respondent's Motion for Summary Judgment, filed January 18, 2022, is granted. It is further
ORDERED AND DECIDED that respondent's Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330 of the Internal Revenue Code, dated May 14, 2021, upon which this case is based, is sustained. 7