Opinion
15378-19L
04-05-2022
T.T. Hua, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Diana L. Leyden, Special Trial Judge
On August 20, 2019, petitioner timely filed a petition in this case. Petitioner seeks review of a Notice of Determination Concerning Collection Actions Under IRC Sections 6320 or 6330 of the Internal Revenue Code (notice of determination), dated July 31, 2019. The notice of determination sustained a notice of Federal tax lien filing with respect to petitioner's unpaid tax liability for taxable years 2013 and 2014.
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.
On July 14, 2021, respondent filed a motion for summary judgment (motion) seeking to have the Court sustain the notice of determination. On the same day respondent filed a Declaration of Poonam Sharma, Settlement Officer, IRS Office of Appeals, (SO Sharma) in support of the motion (declaration). In the motion respondent stated that petitioner objects to the motion, but petitioner did not file a written response to the motion.
The Court uses the term "IRS" to refer to administrative actions taken outside of these proceedings. The Court uses the term "respondent" to refer to the Commissioner of Internal Revenue, who is the head of the IRS and is respondent in this case, and to refer to actions taken in connection with this case.
On March 2, 2022, this case was assigned to the undersigned for disposition. Upon review of the record on the motion, the Court concludes that there are not any genuine issues of material fact in dispute in this case and the Court concludes that respondent is entitled to judgment as a matter of law as provided herein.
Background
The record on the motion establishes and/or the parties do not dispute the following. Petitioner resided in Florida at the time the petition was filed with the Court.
Petitioner timely filed returns for 2013 and 2014 that reflected tax in the amount of $0.00. On August 10, 2015, respondent issued petitioner at his last known address a notice of deficiency for taxable year 2013. The notice of deficiency for taxable year 2013 reflected a deficiency of $6,247 and a section 6662(a) accuracy-related penalty for substantial understatement of tax of $1,249. On July 18, 2016, respondent issued petitioner at his last known address a notice of deficiency for taxable year 2014. The notice of deficiency for taxable year 2014 reflected a deficiency of $5,959 and a section 6662(a) accuracy-related penalty for substantial understatement of tax of $1,192. Petitioner did not file a petition with the Court to challenge either notice of deficiency.
Respondent sent petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 for taxable years 2013 and 2014 (NFTL), dated September 25, 2018, informing petitioner of his right to request a collection due process (CDP) hearing. The NFTL reflected unpaid balances of assessment for 2013 and 2014, as well as a section 6702A penalty for 2013. October 15, 2018, the Internal Revenue Service (IRS) received petitioner's timely submitted request for a CDP hearing.
Petitioner timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, to challenge the filed notice of Federal tax lien with respect to his unpaid tax liabilities for 2013 and 2014. The Form 12153 did not contain petitioner's signature; rather, it was signed by Tan Danh, in the box labeled "Authorized Representative's Signature", and the box "I request my CDP hearing be held with my authorized representative (attach a copy of Form 2848)" was checked.
Petitioner did not request a CDP hearing with respect to the section 6702A penalty for 2013.
The Form 12153 contained a checked box for lien withdrawal, but not any checked box or other for request any collection alternatives. Section 8 of the Form 12153 titled "Other" contained the following: "Erroneous filing of Federal Tax Lien. Taxpayer Bill of Rights-violated. Violation of 27 CFR 70.151. IRS Procedure not followed Title 26 CFR Sect 301.6203-1". Petitioner also attached a letter, dated October 10, 2018, to his Form 12153 request for a CDP hearing and claimed that the income he received for taxable years 2013 and 2014 was not taxable, as he did not meet the definition of an employee under section 3402. Further, petitioner's letter stated:
Third party assessments are only allowed when the taxpayer does not file an information return consisting of Form 1040. This is additional proof of terroristic actions disregarding the laws of the United States and upholding the foreign alternative agenda and allegiance foreign to those of the United States.
Petitioner's CDP hearing request was assigned to SO Sharma who verified no prior involvement with petitioner for 2013 or 2014.
SO Sharma sent petitioner a letter dated April 22, 2019, informing petitioner that the Appeals Office received his request for a CDP hearing and scheduling a CDP hearing for May 10, 2019. The letter informed petitioner that the Appeals Office determined that one or more issues raised by petitioner in his hearing request had been determined to be a position that the IRS had identified as frivolous and listed in Notice 2010-33 or reflected a desire to delay or impede federal tax administration."
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). We will use the name in effect at the times relevant to this case, i.e., the Office of Appeals or Appeals Office.
On May 7, 2019, petitioner faxed SO Sharma a letter and asserted that he did not raise a frivolous issue in his request for a CDP hearing and continued to assert that he had not received taxable income in either 2013 or 2014.
On May 10, 2019, petitioner called SO Sharma for the scheduled CDP hearing. During the hearing petitioner informed SO Sharma that he received the notices of deficiency for the tax years in issue. Petitioner contended that respondent should have relied on his filed Form 1040 income tax returns instead of the Forms 1099, which the IRS received and reflected unreported income. He further requested that the lien be withdrawn. SO Sharma explained that, without a collection alternative, the lien could only be removed if the balance petitioner owed was paid. SO Sharma explained the available collection alternatives to petitioner, but petitioner declined to request any such alternatives. Petitioner did not raise any other issues and requested that the IRS issue the notice of determination.
SO Sharma subsequently issued to petitioner the notice of determination, determining that the NFTL was filed appropriately and sustained the notice of Federal tax lien filing for taxable years 2013 and 2014.
Discussion
A. Summary Judgment
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Either party may move for summary judgment upon all or any part of the legal issues in controversy. Rule 121(a). The Court may grant summary judgment only "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits or declarations, if any, show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law." Rule 121(a) and (b); see Naftel v. Commissioner, 85 T.C. 527, 529 (1985).
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); Naftel v. Commissioner, 85 T.C. at 529. In deciding whether to grant summary judgment, the factual materials and inferences drawn from them must be considered in the light most favorable to the nonmoving party. FPL Grp., Inc. v. Commissioner, 115 T.C. at 559; Bond v. Commissioner, 100 T.C. at 36; Naftel v. Commissioner, 85 T.C. at 529. The party opposing summary judgment must set forth specific facts which show that a question of genuine material fact exists and may not rely merely on allegations or denials in the pleadings. Rule 121(d); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); Grant Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325 (1988); King v. Commissioner, 87 T.C. 1213, 1217 (1986).
B. Hearings Under Section 6320 [NFTL]
Section 6321 imposes a lien in favor of the United States on all property and rights to property of a taxpayer where there exists a failure to pay any tax liability after demand for payment. The lien generally arises automatically at the time assessment is made. I.R.C. § 6322. Section 6323(a), however, provides that the lien shall not be valid against any purchaser, holder of a security interest, mechanic's lienor, or judgment lien creditor until the Commissioner files a notice of Federal tax lien with the appropriate public officials. Section 6320 sets forth procedures to afford protections for taxpayers upon the filing of a notice of Federal tax lien.
Section 6320(a)(1) establishes the requirement that the Commissioner notify in writing the taxpayer described in section 6321 of the filing of a notice of Federal tax lien under section 6323. This notice required by section 6320 must be sent not more than five business days after the notice of Federal tax lien is filed and must inform the taxpayer of the opportunity for administrative review of the matter in the form of a CDP hearing before the Appeals Office. I.R.C. § 6320(a)(2)(C), (3).
If a CDP hearing is requested, section 6320(b) and (c) grants the 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). At the CDP hearing the Appeals Officer conducting the hearing must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C. § 6330(c)(1); see I.R.C. § 6320(c). The taxpayer may raise at the hearing "any relevant issue relating to the unpaid tax", including appropriate spousal defenses, challenges to the appropriateness of the collection action, and offers of collection alternatives. I.R.C. § 6330(c)(2)(A); see I.R.C. § 6320(c). Within 30 days after the Appeals Office issues a notice of determination, the taxpayer may appeal the determination to the Court. I.R.C. § 6330(d)(1); see I.R.C. § 6320(c).
In reviewing an IRS administrative determination in a CDP case, if the underlying tax liability is properly in dispute the Court reviews the issue de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). The Court reviews all other determinations for abuse of discretion. Id. at 182. Petitioner timely petitioned the Court for review of the notice of determination.
The Court's review of CDP cases is limited to issues that taxpayers raised during their CDP hearings. Giamelli v. Commissioner, 129 T.C. 107, 112-113 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002); I.R.C. § 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. Petitioner contested the underlying 2013 and 2014 income tax liabilities, but did not request any collection alternative to the filed notice of Federal tax lien.
C. Underlying Tax Liability
The term "underlying tax liability" in section 6330(c)(2)(B) includes tax, additions to tax, and interest. See Katz v. Commissioner, 115 T.C. 329, 339 (2000). The taxpayer may challenge the existence or amount of his underlying tax liability in a CDP hearing only if he did not receive a notice of deficiency or otherwise have a prior opportunity to contest the underlying tax liability. I.R.C. § 6330(c)(2)(B); see Montgomery v. Commissioner, 122 T.C. 1, 8-10 (2004). The IRS sent a notice of deficiency for both 2013 and 2014 to petitioner's last known address, petitioner agreed he received the notices of deficiency, and petitioner did not petition this Court with respect to either notice of deficiency. Therefore, petitioner may not challenge the existence or amount of the underlying income tax liabilities.
D. Abuse of Discretion
In deciding whether the SO abused her discretion in sustaining the collection action the Court considers whether the SO: (1) properly verified that the requirements of applicable law and administrative procedure had been met; (2) considered any relevant issues petitioner raised; and (3) considered "whether any 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." See I.R.C. § 6330(c)(3).
In reviewing for abuse of discretion, the Court generally considers only the arguments, issues, and other matters that were raised at the hearing or otherwise brought to the attention of the Appeals Office. Giamelli v. Commissioner, 129 T.C. at 115.
1. Collection Alternatives
In determining whether there was an abuse of discretion the Court does not conduct an independent review and substitute its judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. at 320. If the Appeals Officer follows all statutory and administrative guidelines and provides a reasoned, balanced decision, the Court will not reweigh the equities. Thompson v. Commissioner, 140 T.C. 173, 179 (2013).
Here, the record reflects that petitioner did not check a box on the Form 12153 to request any collection alternative, nor did the letter petitioner attached to the Form 12153 contain any request for a collection alternative. Further, SO Sharma informed petitioner of collection alternatives during his CDP hearing, but he stated that he did not wish to pursue a collection alternative.
2. Verification
The record shows that the Appeals Office properly verified that the requirements of all applicable laws and administrative procedures were met in the processing of petitioner's case and that the filed NFTL 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.
Respondent attached to his motion a computer printout of petitioner's transcript of account that shows a balance due for taxable years 2013 and 2014. It is well established that a Form 4340 or a computer printout of a taxpayer's transcript of account, absent a showing of irregularity, provides sufficient verification of the taxpayer's outstanding liability to satisfy the requirements of section 6330(c)(1) (requirement that the Appeals Officer conducting a collection due process (CDP) hearing obtain verification "that the requirements of any applicable law or administrative procedure had been met"). See, e.g., Davis v. Commissioner, 115 T.C. 35, 40-41 (2000); Roberts v. Commissioner, T.C. Memo 2004-100; Tornichio v. Commissioner, T.C. Memo 2002-291. Petitioner has not demonstrated any irregularity in the preparation of the foregoing transcripts, and we see no reason to depart from that principle in this case. See Davis v. Commissioner, 115 T.C. at 41; Tornichio v. Commissioner, T.C. Memo 2002-291. The transcripts and materials that are referenced in and/or attached as exhibits to respondent's motion and accompanying declarations, along with statements of SO Sharmain the notice of determination, show that required assessment and collection procedures were followed.
The IRS cannot assert certain penalties unless they are approved by a supervising manager in writing. I.R.C. § 6751(b). Respondent bears the burden of production with respect to the required managerial approval. Graev v. Commissioner, 149 T.C. 485 (2017). Section 6751(b)(1) provides that, subject to certain exceptions in section 6751(b)(2), no penalty shall be assessed unless the initial determination of such assessment is personally approved in writing by the immediate supervisor of the individual making such determination or such higher-level official as the Secretary may designate. Written approval of the initial penalty determination under section 6751(b)(1) must be obtained no later than the date the notice of deficiency is issued or the date the Commissioner files an answer or amended answer asserting such penalty. Chai v. Commissioner, 851 F.3d 190, 221 (2d Cir. 2017), aff'g in part, rev'g in part T.C. Memo. 2015-42; see also Graev v. Commissioner, 149 T.C. 485 (2017), supplementing 147 T.C. 460 (2016). However, there exists an exception to the requirement that a penalty must have written managerial approval, if the penalty was "automatically calculated through electronic means." I.R.C. § 6751(b)(2)(B). The Court has generally held that penalties having been determined by an IRS computer program without human input or review, such as the IRS Automated Underreporter (AUR) in the present case, are considered automatically calculated by electronic means, and therefore, under section 6751(b)(2)(B), do not require written managerial approval. See Walquist v Commissioner, 152 T.C. 61, 73 (2019).
In this case respondent removed the section 6662(a) penalty for 2013, and for 2014, respondent has met his burden of production under section 6751(b) because that penalty was automatically calculated through electronic means.
In the NFTL dated September 25, 2018, respondent asserted a section 6702A penalty for a frivolous tax submission in taxable year 2013. The record indicates that petitioner did not raise this penalty during his CDP hearing and thus the Court will not address this issue as it is not properly before the Court. See Giamelli v. Commissioner, 129 T.C. at 115.
The Court also notes that throughout the record, petitioner made arguments in the form of tax protestor rhetoric which have been universally rejected by this and other courts. The Court shall not painstakingly address petitioner's assertions "with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit." Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir.1984).
E. Conclusion
In sum the Court concludes that there is no genuine dispute as to a material fact and that respondent is entitled to judgment as a matter of law sustaining the notice of determination, as supplemented, on which this case is based.
The Court takes this opportunity to inform petitioner that the Court may impose a penalty up to $25,000 if a taxpayer institutes or maintains a frivolous or groundless position or institutes or maintains a proceeding primarily for delay. Petitioner is warned that should he continue to pursue frivolous or groundless arguments before the Court, or if he institutes or maintains a case primarily for delay in the future, he may be subject to penalties under section 6673 up to the amount of $25,000. Premises considered, it is
ORDERED that respondent's motion for summary judgment, filed July 14, 2021, is granted. It is further
ORDERED and DECIDED that respondent may proceed with the proposed collection action (notice of Federal tax lien filing) with respect to petitioner's remaining tax liabilities for taxable years 2013 and 2014 as determined in the notice of determination, dated July 31, 2019, upon which this case is based.