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Taylor v. Comm'r of Internal Revenue

United States Tax Court
Aug 19, 2022
No. 5944-21L (U.S.T.C. Aug. 19, 2022)

Opinion

5944-21L

08-19-2022

CHRISTOPHER W. TAYLOR, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent


ORDER

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 June 2, 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 Mr. Taylor's unpaid income tax liability for taxable years 2012 through 2014, 2016 and 2017 (the "Taxable Years at Issue").

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.

Upon review of the record, the Court concludes that respondent is not entitled to judgment as a matter of law, and this case will be remanded to respondent's Appeals Office for a new hearing.

I. Background

There is no dispute as to the following facts which are drawn from the petition, respondent's motion, and the associated declaration and exhibits. See Rule 121(b). Mr. Taylor resided in North Carolina when he timely filed his petition.

The administrative record, as filed and which includes transcripts of accounts, show that Mr. Taylor reported but failed to pay federal income taxes for the Taxable Years at Issue. Mr. Taylor failed to withhold sufficient federal income taxes from his wages for the Taxable Years at Issue. As of March 6, 2022, Mr. Taylor's outstanding liability for the Taxable Years at Issue was $37,964.99.

On December 26, 2018, Mr. Taylor submitted Form 656, Offer in Compromise (OIC) to the IRS proposing to compromise his income tax liability for taxable year 2010 in addition to the Taxable Years at Issue. Mr. Taylor offered $2,722.00 payable over 24 months to compromise the liability due for all taxable years. On July 29, 2019, Mr. Taylor amended his OIC and offered the IRS $1,361.00 payable in 24 monthly installments of $57.00 to compromise his income tax liability. The IRS rejected Mr. Taylor's OIC on August 19, 2019, determining that Mr. Taylor had the ability to fully pay the liability due based on financial information submitted and no special circumstances existed to accept the OIC as proposed originally or as amended.

Mr. Taylor appealed the rejection of his OIC on September 17, 2019, disputing the IRS's calculation of his housing expenses and his wages. This appeal was assigned to Settlement Officer M. Banks (SO Banks). SO Banks reviewed Mr. Taylor's administrative file as it related to the OIC rejection and then scheduled a conference call to discuss the OIC rejection with Mr. Taylor on April 30, 2020, at 10 AM ET. The administrative record does not provide whether this telephone conference occurred, and if so, the substance of the conversation between the parties.

Meanwhile, Mr. Taylor's failure to remit full payment, after notice and demand, led the IRS to send to Mr. Taylor Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 on November 5, 2019, for the Taxable Years at Issue. Respondent notified Mr. Taylor that he had recorded a Notice of Federal Tax Lien (NFTL) against all property and rights to property owned by him in Durham County, North Carolina. Mr. Taylor timely submitted Form 12153, Request for Collection Due Process or Equivalent Hearing, to respondent for the Taxable Years at Issue. Mr. Taylor requested an installment agreement as his proposed collection alternative to the NFTL.

Mr. Taylor's CDP hearing was assigned to Settlement Officer J. Alvarado (SO Alvarado). SO Alvarado verified that all legal and administrative requirements for the underlying assessments and the issuance of the NFTL had been met. SO Alvarado also determined that Mr. Taylor submitted an OIC for the IRS's consideration. SO Alvarado requested a copy of the submitted Form 656 and upon receipt, he learned that SO Banks was assigned the review of Mr. Taylor's OIC rejection. Citing the Internal Revenue Manual, SO Alvarado transferred Mr. Taylor's CDP hearing request to SO Banks for review and disposition.

On August 26, 2020, SO Banks sent Mr. Taylor a letter acknowledging Appeals' timely receipt of his completed Form 12153 for the same taxable years as the OIC rejection. The letter indicated that Mr. Taylor's CDP hearing would take place via telephone on September 30, 2020, at 10 AM ET, and that Mr. Taylor should contact SO Banks within 14 days, i.e., September 9, 2020, if that date was not convenient for him. SO Banks also notified Mr. Taylor that she had received his OIC back from the IRS's Centralized Offer in Compromise Unit (COIC). Since the COIC Unit made a preliminary determination to reject Mr. Taylor's OIC, SO Banks requested Mr. Taylor provide her with statements to verify his income from June 2020 through August 2020, and any other information Mr. Taylor desired for SO Banks to review in his support of his OIC by September 28, 2020.

SO Banks held a telephone conference with Mr. Taylor on September 30, 2020. SO Banks noted that Mr. Taylor failed to provide the requested income statements. However, Mr. Taylor countered by stating that his income fluctuations and any additional wage income received is from overtime worked. Consequently, SO Banks sustained the preliminary determination to reject the OIC. SO Banks then reviewed Mr. Taylor's request for an installment agreement and confirmed that the IRS could accept a non-streamlined installment agreement with a monthly payment amount of $1,051. Mr. Taylor stated that he was unable to pay such an amount. SO Banks concluded the telephone conference by stating to Mr. Taylor that he could submit a collection information statement and supporting documents to the IRS's Collection Division to consider another installment agreement. At the conclusion of the telephone conference, SO Banks independently verified that all legal and administrative requirements for the underlying assessments and the issuance of the NFTL had been met.

On January 14, 2021, respondent issued to Mr. Taylor a Notice of Determination Concerning Collection Actions under IRC Sections 6320 or 6330 of the Internal Revenue Code (Notice of Determination) with respect to the Taxable Years at Issue sustaining respondent's proposed lien action. In the Notice of Determination, SO Banks stated that she could not grant Mr. Taylor's request for an installment agreement or a lien withdrawal because Mr. Taylor failed to provide the additional information, and there was no information in the administrative file to warrant respondent withdrawing the NFTL.

On February 22, 2021, Mr. Taylor timely filed a petition with this Court. In his petition, Mr. Taylor alleged that sustaining the Notice of Determination "would place a great financial hardship on [him] and [his] family." Apparently, Mr. Taylor also sought consideration of another installment agreement with a payment amount lower than the amount proposed by SO Banks and over a longer period. Finally, Mr. Taylor stated that his monthly income continues to vary, but his monthly expenses have increased.

On June 2, 2022, respondent filed a Motion for Summary Judgment. Respondent contends that he is entitled to summary judgment because SO Banks followed all requirements in section 6330(c) in making the determination to sustain the filing of the NFTL, and SO Banks did not abuse her discretion in this case. Although requested to do so, Mr. Taylor 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). Respondent, as the moving party, bears the burden of proving that no genuine dispute exists as to any material fact and that respondent is entitled to judgment as a matter of law. See FPL Grp., Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v. Commissioner, 100 T.C. 32, 36 (1993). 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. v. Commissioner, 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).

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 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).

Mr. Taylor did not challenge the underlying liability for the Taxable Years at Issue. Therefore, we will review respondent's 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. 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 Banks: (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues Mr. Taylor raised, and (3) considered whether any proposed collection action balances the Government's need for the efficient collection of taxes with Mr. Taylor's legitimate concern that any collection action be no more intrusive than necessary. See § 6330(c)(3); Sego, 114 T.C. at 609.

1. Verification Requirements

This Court has authority to review satisfaction of the verification requirement regardless of whether the taxpayer raised that issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 202-03 (2008), supplemented by 136 T.C. 463 (2011). Although Mr. Taylor did not file a response to dispute the IRS's compliance of the verification requirement, the record clearly reflects that SO Banks failed to properly verify that all legal and procedural requirements had been met in conducting Mr. Taylor's CDP hearing.

Section 6320 requires that Mr. Taylor's CDP hearing be conducted by the IRS Independent Office of Appeals and by an impartial employee who had no prior involvement with respect to the unpaid tax specified in NFTL before the first hearing under this section. See §§ 6320(b)(1), (3). The Treasury Regulations provide that prior involvement exists when the taxpayer, the tax, and the tax period at issue in the CDP hearing also were at issue in the prior non-CDP matter, and the Appeals Officer actually participated in the prior matter. Treas. Reg. §§ 301.6320-1(d)(1), (d)(2), Q&A-D4.

In the Notice of Determination, SO Banks stated that she complied with section 6330(c)(1) insomuch that she had no prior involvement with Mr. Taylor concerning the income tax liability for the Taxable Years at Issue. However, the undisputed facts show that SO Banks was assigned review of Mr. Taylor's OIC rejection for the Taxable Years at Issue, and while she was reviewing the OIC rejection, the IRS assigned her review of Mr. Taylor's CDP hearing for the same tax type and taxable years. Therefore, SO Banks' review of Mr. Taylor's rejected OIC for the same Taxable Years at Issue as the CDP hearing constituted prior involvement in violation of section 6320(b). See Moosally v. Commissioner, 142 T.C. 183 (2014). Consequently, respondent has not complied with the verification requirements in section 6330(c)(1), and summary judgment is not appropriate.

III. Conclusion

Accordingly, Mr. Taylor is entitled to a new CDP hearing before an impartial Appeals Officer in accordance with section 6320(b) and thus, we will remand this case back to the Appeals Office.

Upon due consideration of respondent's motion and for cause, it is ORDERED that respondent's Motion for Summary Judgment, filed June 2, 2022, is denied. It is further

ORDERED that, on the Court's own motion, this case is remanded to respondent's Independent Office of Appeals for the purpose of affording Mr. Taylor an administrative hearing pursuant to I.R.C. § 6320. It is further

ORDERED that respondent shall offer Mr. Taylor an administrative hearing at respondent's Independent Office of Appeals located closest to Mr. Taylor's residence (or at such other place as may be mutually agreed upon) at a reasonable and mutually agreed upon date and time, but no later than December 30, 2022. It is further

ORDERED that the undersigned will retain jurisdiction of this case. It is further

ORDERED that on or before January 31, 2023, each party shall file with the Court a report as to the then-present status of this case. It is further

ORDERED that, in addition to regular service, the Clerk of the Court shall serve this Order on petitioner at 6307 Grandale Drive, Durham, NC 27713.

If the parties believe a telephone conference would be helpful, please contact the undersigned's Chambers Administrator at 202-521-0835 for scheduling purposes.


Summaries of

Taylor v. Comm'r of Internal Revenue

United States Tax Court
Aug 19, 2022
No. 5944-21L (U.S.T.C. Aug. 19, 2022)
Case details for

Taylor v. Comm'r of Internal Revenue

Case Details

Full title:CHRISTOPHER W. TAYLOR, Petitioner v. COMMISSIONER OF INTERNAL REVENUE…

Court:United States Tax Court

Date published: Aug 19, 2022

Citations

No. 5944-21L (U.S.T.C. Aug. 19, 2022)