Opinion
13701-13L
01-03-2023
BARRY CHARLES PORTNOY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Ronald L. Buch, Judge.
In this collection case brought pursuant to sections 6320 and 6330, Mr. Portnoy seeks review of a notice of determination in which the Commissioner sustained a notice of federal tax lien and a notice of intent to levy for unpaid trust fund recovery penalties. See I.R.C. § 6672. We are asked to decide whether the Commissioner abused his discretion when issuing the notice of determination. Before us is the Commissioner's motion for summary judgment filed pursuant to Rule 121. Because the Commissioner did not abuse his discretion, we will grant the motion for summary judgment.
Unless otherwise indicated, all section references are to the Internal Revenue Code, all regulatory references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), and all Rule references are to the Tax Court Rules of Practice and Procedure, in effect at all relevant times. All monetary amounts are rounded to the nearest dollar.
Background
Mr. Portnoy has outstanding trust fund recovery penalty liabilities for the periods ending June 30, 2009, September 30, 2009, December 31, 2009, March 31, 2010, June 30, 2010, September 30, 2010, and December 31, 2010. Although Mr. Portnoy appealed the Commissioner's determination to assess the penalties, the IRS Office of Appeals (Appeals) sustained the determination. The penalties were assessed in 2012.
On July 1, 2019, the IRS Office of Appeals was renamed the IRS Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, § 1001, 133 Stat. 981, 983 (2019). Because Mr. Portnoy's appeal took place before that renaming, we refer to the office by its former name.
The Commissioner attempted to collect the liability. The Commissioner mailed Mr. Portnoy a Letter 1058, Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing, on October 11, 2012. The Commissioner also mailed Mr. Portnoy a Notice of Federal Tax Lien on October 23, 2012. When the Commissioner mailed the notices, Mr. Portnoy's total liability was $1,244,686.
Mr. Portnoy requested a collection hearing using Form 12153, Request for a Collection Due Process or Equivalent Hearing. On the form, he disputed the lien and levy but did not indicate that he would like to discuss collection alternatives. As the reason for his dispute, he wrote "doubt to liability." Appeals received his request and assigned his case to a settlement officer.
On December 7, 2012, the settlement officer assigned to Mr. Portnoy's case responded to his request. He sent him a letter scheduling a collection hearing and requesting that he provide a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and four months of bank statements within 14 days. The letter informed Mr. Portnoy that he must submit the requested information to be eligible for a collection alternative. On January 4, 2013, Mr. Portnoy asked the settlement officer if he had received the requested materials he sent, but the settlement officer had not received them. They agreed to reschedule the hearing to January 24, 2013, and Mr. Portnoy agreed to resend the requested materials. Before the rescheduled hearing, the settlement officer received Mr. Portnoy's completed and signed Form 433-A along with partial copies of three bank statements.
On January 24, 2013, the settlement officer and Mr. Portnoy met for the scheduled hearing. During the hearing, Mr. Portnoy outlined his financial situation and they thoroughly reviewed his Form 433-A. The settlement officer considered collection alternatives but informed Mr. Portnoy that he would sustain the lien. With respect to the levy, the settlement officer indicated that he would likely recommend the case as "currently not collectible" provided that Mr. Portnoy submit additional information to verify his inability to pay. Mr. Portnoy agreed to submit the information by February 8, 2013.
By May 20, 2013, the settlement officer had not received the information and he decided to sustain the collection action. The settlement officer reviewed Mr. Portnoy's account transcript and the administrative record and verified that all applicable laws and procedures had been complied with. Because Mr. Portnoy had already appealed the assessments and he failed to provide the required information, the settlement officer determined that collection action was appropriate under the circumstances. On May 30, 2013, the settlement officer mailed Mr. Portnoy a notice of determination sustaining the lien and levy. While residing in Pennsylvania, Mr. Portnoy filed a petition challenging the notice of determination.
The Commissioner filed a motion for summary judgment on August 15, 2014, in which he argues that Mr. Portnoy's underlying liability is not properly at issue and that the settlement officer did not abuse his discretion. The Court ordered Mr. Portnoy to file a response by September 22, 2014. However, before that deadline, and before he filed a response, Mr. Portnoy filed a petition with the United States Bankruptcy Court for the Eastern District of Pennsylvania, triggering the Bankruptcy Code's automatic stay provision. See 11 U.S.C. § 362(a)(8). On August 28, 2014, the Court issued an order staying all proceedings. On May 25, 2022, after the bankruptcy proceeding had closed, the Court lifted the stay and ordered Mr. Portnoy to file a response to the Commissioner's motion by June 22, 2022. Mr. Portnoy did not file a response.
Discussion
I. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Under Rule 121(a), either party may move for summary judgment regarding all or any part of the legal issues in controversy. We may grant summary judgment only if there is no genuine dispute as to any material fact. Rule 121(b); Naftel v. Commissioner, 85 T.C. 527, 528-29 (1985). The moving party bears the burden of demonstrating that there is no genuine dispute as to any material fact. 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 draw factual inferences in the light most favorable to the nonmoving party. FPL Grp., Inc. & Subs. v. Commissioner, 115 T.C. 554, 559 (2000). When a motion for summary judgment is made and properly supported, the nonmoving party may not rest on mere allegations or denials, but instead must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d).
Mr. Portnoy has not responded to the Commissioner's motion for summary judgment. As such, he has not disputed any fact that is material to the issues before us. However, as the non-moving party, we draw factual inferences in his favor. See FPL Grp., Inc., 115 T.C. at 559.
II. Standard of Review
In a collection case, where the underlying liability is properly at issue, we review the Commissioner's determination de novo. Where the underlying liability is not properly at issue, we review the Commissioner's determination for an abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000). Whether the underlying liability may be raised in a collection proceeding (and before the Court) turns on whether the taxpayer received a notice of deficiency or otherwise had a prior opportunity to dispute the liability. See I.R.C. § 6330(c)(2)(B).
A. Underlying Liability
Because the trust fund recovery penalty is an "assessable penalty," it is not subject to deficiency procedures, so the issue is whether Mr. Portnoy otherwise had an opportunity to dispute his liability. See Kazmi v. Commissioner, T.C. Memo 2022-13, at *6-7. Section 6672(b)(1) requires the Commissioner to provide the taxpayer with notice of the trust fund recovery penalty before assessment. A notice under section 6672(b)(1) provides a taxpayer with the means for challenging a proposed trust fund penalty assessment administratively with Appeals. Mason v. Commissioner, 132 T.C. 301, 317 (2009). It follows that a taxpayer who previously challenged the trust fund penalty assessment before Appeals received such notice and therefore had a prior opportunity. See Treas. Reg. § 301.6330-1(e)(3), Q&A-E2 (a prior opportunity includes "a prior opportunity for a conference with Appeals that was offered either before or after the assessment."). Mr. Portnoy had a prior opportunity because he challenged assessment of the penalties with Appeals, so his underlying liability is not properly at issue.
B. Abuse of Discretion
Because the underlying liability is not properly at issue, we review the Commissioner's collection determination for an abuse of discretion. Sego, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 182 (2000). An abuse of discretion occurs if the Commissioner's determination is "arbitrary, capricious, or without sound basis in fact or law." Klein v. Commissioner, 149 T.C. 341, 348 (2017). In reviewing for abuse of discretion, we do not conduct an independent review of collection alternatives or substitute our judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). We consider whether the settlement officer: (1) verified that the requirements of applicable law and administrative procedure have been met; (2) considered issues raised by the taxpayer; and (3) considered whether any proposed collection action reasonably balances the need for efficient tax collection with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. See I.R.C. § 6330(c)(3). In confirming that these requirements have been met, a settlement officer may rely on an account transcript. See Craig v. Commissioner, 119 T.C. 252, 262 (2002).
Here, the settlement officer complied with the requirements of section 6330(c). The settlement officer reviewed Mr. Portnoy's account transcript and the administrative record and determined that the Commissioner had complied with all legal and procedural requirements. The settlement officer also considered collection alternatives and informed Mr. Portnoy that he might be eligible for currently not collectible status. However, his eligibility was dependent upon him providing additional financial information. The settlement officer never received that information, so he was unable to verify Mr. Portnoy's eligibility. As such, the settlement officer did not abuse his discretion in sustaining the Commissioner's notice of intent to levy and notice of federal tax lien. See Stanwyck v. Commissioner, T.C. Memo. 2012-180, 103 T.C.M. (CCH) 1955, 1959.
Conclusion
The Commissioner did not abuse his discretion in sustaining the notice of intent to levy and notice of federal tax lien for 2009 and 2010 trust fund recovery penalties. Accordingly, it is
ORDERED that the Commissioner's Motion for Summary Judgment filed August 15, 2014, is granted. It is further
ORDERED AND DECIDED that the determination set forth in the Commissioner's Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330 dated May 30, 2013, and upon which this case is based, is sustained.