Opinion
14516-20L
11-15-2022
CLIFFORD T. SIGMANN & DEBRA A. SIGMANN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Joseph W. Nega, Judge.
This collection due process (CDP) case is presently calendared for an in-person trial at the session of the Court scheduled to commence on Monday, November 28, 2022, in Detroit, Michigan. On September 27, 2022, respondent filed a Motion for Summary Judgment (respondent's motion). By Order issued October 5, 2022, the Court directed petitioners to file a response to respondent's motion by October 17, 2022. On October 24, 2022, petitioners filed an Objection to Motion for Summary Judgment (petitioners' objection).
I. Background
Petitioners resided in Waterford, Michigan, when they timely filed the Petition in this case. Petitioners timely filed a joint Form 1040 for taxable year 2015, with a self-reported tax liability of $6,799.00. Petitioners made withholding payments for taxable year 2015 in the amount of $8,723.00. Respondent audited petitioners, and, on December 26, 2017, respondent issued to petitioners two copies of a notice of deficiency for taxable year 2015, determining a deficiency of $5,307.00 and an addition to tax under section 6662(a) in the amount of $1,061.40. The notice of deficiency was addressed to petitioners at the address that they listed in the Petition in this case.
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.
Respondent sent an individual copy of the notice of deficiency to each taxpayer, in order "to ensure both spouses receive[d] [the] notice." Respondent informed petitioners that the copies contained "the same information as it relates to [petitioners'] joint account" and advised them that "[a]ny balance owed or due should be paid only once."
On April 8, 2019, respondent issued to each petitioner a Notice CP90, Intent to seize your assets and notice of your right to a hearing (notice of intent to levy), corresponding to petitioners' unpaid tax balances for the 2015 taxable year. On May 3, 2019, petitioners timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, requesting a hearing and consideration of an installment agreement as a collection alternative. On the Form 12153, in the space provided to describe why petitioners disagreed with the notice of intent to levy, petitioner Debra A. Sigmann indicated that she was unsure if certain expense receipts had been provided to respondent by petitioners' representative.
Settlement Officer Terrence Eaton (SO Eaton) was assigned to petitioners' CDP case. On March 3, 2020, SO Eaton sent to petitioners an initial contact letter, stating that he had received petitioners' hearing request and scheduling a telephonic hearing for April 1, 2020. To allow the consideration of an installment agreement, SO Eaton requested that petitioners provide "the amount being proposed to pay per month along with due date and information to explain/support why the amount is correct" and signed Forms 1040 for the 2016, 2017, and 2018 taxable years.
Petitioners did not call into the scheduled CDP hearing conference on April 1, 2020. Also on April 1, 2020, SO Eaton sent to petitioners a "last chance" letter, in which SO Eaton referenced the CDP hearing that petitioners failed to attend. SO Eaton requested that petitioners contact respondent within 14 days of the letter date. The letter afforded petitioners another opportunity to provide the requested information and informed petitioners that, 14 days after the letter date, respondent would make a determination based on the administrative file and any information that petitioners might provide.
On April 17, 2020, SO Eaton attempted to contact petitioners via telephone, but the voicemail box for petitioners was full. SO Eaton again attempted to contact petitioners on May 1, 2020. Again, petitioners' voicemail box was full.
On July 31, 2020, SO Eaton sent to petitioners a second "last chance" letter, requesting that petitioners contact him within 14 days of the letter date and affording petitioners a further opportunity to provide the requested information. SO Eaton again advised that, 14 days after the letter date, respondent would make a determination based on the administrative file and any information that petitioners might provide.
On August 14, 2020, petitioner Debra A. Sigmann contacted SO Eaton and stated that she had not received the March 3, 2020, initial contact letter. Ms. Sigmann and SO Eaton agreed to schedule a conference for September 17, 2020. Ms. Sigmann also informed SO Eaton that petitioners' address had not changed since the mailing of the notice of deficiency. On September 17, 2020, petitioners did not call into the agreed-upon conference.
On November 2, 2020, SO Eaton issued to petitioners a Notice of Determination Concerning Collection Actions Under IRC Sections 6230 or 6330 of the Internal Revenue Code (notice of determination). In the notice of determination, SO Eaton sustained the issuance of the notice of intent to levy for taxable year 2015. The notice of determination stated in relevant part that petitioners failed to provide any of the requested information and failed to participate in either scheduled conference.
On December 7, 2020, petitioners filed a Petition with the Court. In the Petition, petitioners stated that they disagreed with respondent's disallowance of certain Schedule C deductions and that they had provided documentation in support of their position. Similarly, in petitioners' objection, filed October 24, 2022, petitioner Debra A. Sigmann stated that petitioners had documentation to support their position that they wished to submit.
As of September 14, 2022, petitioners had not filed tax returns for the 2016, 2017, or 2018 taxable years.
II. Discussion
A. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C 678, 681 (1998). 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). In deciding whether to grant summary judgment, we construe factual materials and draw inferences therefrom in the light most favorable to the nonmoving party. Sundstrand Corp., 98 T.C. at 520. However, the nonmoving party may not rest upon mere allegations or denials of his pleadings but, rather, must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.
B. Standard of Review
Section 6330(d)(1) grants this Court jurisdiction to review a settlement officer's (SO) determination after a Collection Due Process (CDP) hearing. Section 6330(c)(2) prescribes the matters that a taxpayer may raise at a CDP hearing, including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. Where the validity of the underlying tax liability is properly in issue, the Court reviews the SO's administrative determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). Where the validity of the underlying tax liability is not properly in issue, the Court reviews the SO's administrative determination only for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000).
1. Challenge to the Underlying Liability
A taxpayer may challenge the existence or amount of his underlying tax liability in a CDP proceeding only "if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." § 6330(c)(2)(B). The preclusion of a challenge to the underlying liability pursuant to section 6330(c)(2)(B) generally requires actual receipt of the notice of deficiency by the taxpayer. See Kuykendall v. Commissioner, 129 T.C. 77, 80 (2007). However, where the existence of a notice of deficiency is not disputed, a properly completed United States Postal Service (USPS) Form 3877 by itself is sufficient, absent evidence to the contrary, to establish that the notice of deficiency was properly mailed to a taxpayer. See Coleman v. Commissioner, 94 T.C. 82, 91 (1990). Exact compliance with the Form 3877 mailing procedures raises a presumption of official regularity in favor of the Commissioner. Coleman, 94 T.C. at 91; see Garrett v. Commissioner, T.C. Memo. 2015-228, at *10-14 (discussing presumption of official regularity as a burden-shifting framework). If the presumption is raised and the taxpayer does not rebut the presumption, the Court may find that the taxpayer received the notice of deficiency, thus precluding challenges to the underlying liability under section 6330(c)(2)(B). See, e.g., Sego, 114 T.C. at 611.
Here, respondent has produced a copy of the notice of deficiency issued to petitioners. Respondent has also produced a copy of a properly completed USPS Form 3877, date-stamped December 21, 2017, which lists two pieces of mail, one addressed to each petitioner at their Waterford address, with certified mailing numbers that match the numbers found on the two copies of the notice of deficiency. See, e.g., Klingenberg v. Commissioner, T.C. Memo. 2012-292, at *14-15 (finding the presumption of officially regularity raised where Commissioner established that notices of deficiency were sent by certified mail to taxpayer's last known address). Thus, we conclude that respondent is entitled to a presumption of official regularity with respect to the notice of deficiency.
Petitioners have not claimed that they did not receive the notice of deficiency, nor do they point to any specific facts that would rebut respondent's presumption. Since petitioners have failed to rebut the presumption, we conclude that petitioners received the notice of deficiency. Because petitioners received the notice of deficiency and thus had a prior opportunity to challenge their underlying liability, they are precluded from raising a challenge to their underlying liability before this Court. See § 6330(c)(2)(B). Accordingly, we review SO Eaton's determination to sustain the levy action for abuse of discretion only.
C. Abuse of Discretion
Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). In determining whether SO Eaton's decision sustaining the notice of intent to levy was an abuse of his discretion, we examine whether he complied with section 6330(c)(3), which requires him to (1) verify whether the requirements of applicable law and administrative procedure have been met; (2) consider issues raised by the taxpayer; and (3) consider whether the proposed collection action balances the need for the efficient collection of taxes with the taxpayer's legitimate concern that any collection action be no more intrusive than necessary. See Thompson v. Commissioner, 140 T.C. 173, 178-79 (2013).
In reviewing the determination, we do not substitute our judgment for that of the SO or make an independent determination of what would be an acceptable collection alternative. Id. at 179. If the SO "followed all statutory and administrative guidelines and provided a reasoned, balanced decision," we "will not reweigh the equities." Id.
1. Verification and Balancing Obligations
First, we briefly address whether SO Eaton satisfied his obligations (1) to verify that the requirements of applicable law and administrative procedure were met and (2) to consider whether the proposed collection action balanced the need for the efficient collection of taxes with the concern that the collection be no more intrusive than necessary. We are satisfied that he did so.
Petitioners do not allege in their Petition that SO Eaton failed to properly verify that the requirements of applicable law or administrative procedure had been met. Thus, petitioners have conceded this issue. See Rule 331(b)(4); see also Dinino v. Commissioner, T.C. Memo. 2009-284, 2009 WL 4723652, at *7 (citing Rule 331(b)(4) for the proposition that the Court is required to consider the verification requirement under § 6330(c)(1) only if the taxpayer has adequately raised the issue in his petition).
Nevertheless, our review of the record establishes that SO Eaton properly verified that the requirements of applicable law or administrative procedure were followed. In both his case activity notes and the notice of determination, SO Eaton documented that he verified: (1) that the assessment was properly made for tax year 2015; (2) that notice and demand was mailed to petitioner's last known address; (3) that a balance was due and owing when the notice of intent to levy was issued; and (4) that SO Eaton had no prior involvement with respect to tax year 2015.
Likewise, in the notice of determination, SO Eaton documented that he had conducted a balancing analysis and concluded that sustaining the notice of intent to levy and respondent's proposed levy action was appropriate, due to petitioners' failure to "provide any evidence" showing that their concerns outweighed respondent's need for efficient and effective tax administration. Accordingly, we find that SO Eaton complied with sections 6330(c)(1) and (3).
2. Collection Alternatives
A taxpayer in a CDP proceeding has the right to request a collection alternative, such as an offer in compromise or an installment agreement. See § 6330(c)(2)(A)(iii). In his discretion, respondent may accept an installment agreement if it determines that doing so will facilitate full or partial collection of a tax liability. See § 6159(a). Respondent also has discretion to reject a proposed installment agreement (subject to certain restrictions). See Thompson v. Commissioner, 140 T.C. 173, 179 (2013); Treas. Reg. § 301.6159-1(a), (c)(1)(i). This Court has consistently held that it is not an abuse of discretion for an SO to reject a collection alternative where the taxpayer has failed to submit requested financial information. See, e.g. McLaine v. Commissioner, 138 T.C. 228, 243 (2012); Pough v. Commissioner, 135 T.C. 344, 351 (2010); Kindred v. Commissioner, 454 F.3d 688, 697 (7th Cir. 2006). Moreover, it is not an abuse of discretion for an SO to decline to consider a collection alternative where no specific collection alternative proposal is ever placed before the reviewing officer. See, e.g., Kindred v. Commissioner, 454 F.3d at 696; Kendricks v. Commissioner, 124 T.C. 69, 79 (2005).
Petitioners requested collection alternatives on their Form 12153, checking the box for an "Installment Agreement." In response, SO Eaton requested that petitioners submit "the amount being proposed to pay per month along with due date and information to explain/support why the amount is correct" and signed Forms 1040 for the 2016, 2017, and 2018 taxable years. SO Eaton informed petitioners that he could not consider any collection alternatives, including an installment agreement, without the information requested. Petitioners did not provide the requested documentation and information, despite being asked to do so on multiple occasions. Petitioners have not advanced any argument or set forth any specific facts that would allow us to conclude that SO Eaton erred in his determination to sustain the notice of intent to levy and reject collection alternatives. See Pough, 135 T.C. at 351 ("[W]hen an Appeals officer gives a taxpayer an adequate timeframe to submit requested items, it is not an abuse of discretion to move ahead if the taxpayer fails to submit the requested items.").
III. Conclusion
In sum, petitioners have failed to set forth specific facts, by affidavit or otherwise, showing that there is a genuine dispute of fact. See Rule 121(d). After carefully reviewing the administrative record in support of respondent's motion, we see no basis to conclude that SO Eaton abused his discretion in any respect in sustaining the levy action. Finding no abuse of discretion, we conclude that respondent is entitled to judgment as a matter of law.
Upon due consideration and for cause, it is
ORDERED that respondent's Motion for Summary Judgment, filed September 27, 2022, is granted. It is further
ORDERED AND DECIDED that the determination set forth in Notice of Determination Concerning Collection Actions Under IRC Sections 6320 or 6330 of the Internal Revenue Code, dated November 20, 2020, upon which this case is based, is sustained, and respondent may proceed with the collection actions as determined in the Notice of Determination for the 2015 taxable year.