Opinion
15197-21SL
10-31-2023
VALLEY MISSIONS, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Diana L. Leyden, Special Trial Judge
Pending in this case is respondent's Motion for Summary Judgment, filed June 6, 2023 (motion), which was accompanied by a Declaration of June Lee in Support of Motion for Summary Judgment (declaration). On August 30, 2023, petitioner filed a Response to Motion for Summary Judgment (response).
On October 16, 2023, the undersigned conducted a conference call with respondent's counsel, Kara L. Davidson Duyck and Catherine Caballero, and Michael Austin, on behalf of petitioner. On the call the parties discussed how petitioner's tax payments were applied and how the IRS issued refunds and the Court requested that respondent file a first supplement to his motion, attaching copies of the account transcripts and refund checks for the tax periods in issue.
On October 17, 2023, respondent filed a First Supplement to Motion for Summary Judgment (first supplement to motion), and attached thereto copies of the account transcripts and refund checks for the tax periods in issue.
Respondent's motion was calendared for the Court's October 23, 2023, Fresno, California, remote Trial Session. However, on October 19, 2023, Michael Austin on behalf of petitioner sent an email to the undersigned's chambers administrator objecting to a remote trial or hearing, and by Order served October 20, 2023, this case was stricken from the Court's October 23, 2023, Fresno, California, remote Trial Session, jurisdiction was retained by the undersigned, respondent's motion was taken under advisement, and petitioner was directed to file a first supplement to petitioner's response.
On October 20, 2023, petitioner filed a First Supplement to Response to Motion for Summary Judgment (first supplement to response), and attached thereto copies of petitioner's Forms 941, Employer's Quarterly Federal Tax Return, for the periods in issue. Upon review of the record on respondent's motion, the Court believes that there remain genuine issues as to material facts with respect to petitioner's quarterly tax payments and how they were applied, and that the settlement officer did not verify whether the payments directed by petitioner were applied as directed.
Background
Petitioner timely filed Employer's Quarterly Federal Tax Returns for the 4thquarter of 2016 and the 3rd and 4th quarter of 2018. The Internal Revenue Service (IRS) sent petitioner an LT 11, Notice of intent to levy and notice of your right to a hearing, dated September 30, 2019. Petitioner timely requested a Collection Due Process (CDP) hearing by filing a Form 12153 dated October 13, 2019, checked the boxes for collection alternatives of Installment Agreement, Offer in Compromise, and I Cannot Pay Balance, and also disputed the underlying liability asserting that the IRS misapplied or lost directed payments.
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.
A settlement officer (SO) from the IRS Independent Office of Appeals (Office of Appeals) was assigned to the case. The SO contacted Michael Austin who had a power of attorney on file for petitioner and conducted a telephone CDP hearing on March 22, 2021. Mr. Austin asserted that the tax returns for the quarters in dispute had been filed and that because petitioner had directed payments made there was not any tax liability remaining. The SO, referencing account transcripts for the periods, contended that refunds had been sent to petitioner and consequently there remained balances due. Petitioner, through Mr. Austin, did not request any collection alternatives at the CDP hearing because petitioner continued to challenge that there were tax liabilities remaining for the quarters in issue. After the hearing the SO sent Mr. Austin the account transcripts that she referred to.
Subsequently, the SO issued a Notice of Determination Concerning Collection Actions under IRC Sections 6230 or 6330 of the Internal Revenue Code (notice of determination) dated April 6, 2021, sustaining the proposed levy. The notice of determination indicated that petitioner had proposed an Installment Agreement, Offer in Compromise, or hardship under Currently Not Collectible status as collection alternatives, but had not provided the financial forms required for the Office of Appeals to consider these alternatives. The notice of determination also indicated that petitioner had disputed the liability and in bold read "You raised no other issues."
Petitioner timely filed a Petition disputing the notice of determination. Petitioner's principal place of business was in California at the time it filed its Petition.
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 movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Rule 121(a)(2). Respondent, as the moving party, bears the burden of proving that not any 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).The Court has reviewed the account transcripts filed by respondent as a supplement to his motion and has compared them with the copies of the Employer's Quarterly Federal Tax Returns filed by petitioner as a supplement to its response to respondent's motion.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
The Employer's Quarterly Federal Tax Returns that are currently in the record for the quarters in issue reflect several directed payments to be applied to the "next return" and overpayments that petitioner directed be refunded. A taxpayer may "designate how voluntary tax payments should be applied" by the IRS. Dixon v. Commissioner, 141 T.C. 173, 185 (2013). The IRS "must honor a taxpayer's designation of a voluntary tax payment." Id. at 186; see also I.R.C. § 6656(e)(1). The designated amounts differ markedly from amounts listed as applied or refunded on the account transcripts. Thus, the Court concludes that the SO did not verify that petitioner's directed payments were applied as petitioner directed.
Accordingly, the Court will remand the case to the Office of Appeals for further consideration, so that a new settlement officer can review petitioner's tax returns, determine if the IRS properly applied petitioner's directed tax payments and refunds, and provide petitioner a supplemental hearing prescribed by I.R.C. sections 6320 and 6330.
Upon due consideration, it is
ORDERED that on the Court's own motion this case is remanded to the IRS Independent Office of Appeals for the purpose of affording petitioner a supplemental hearing pursuant to I.R.C. sections 6320 and 6330. It is further
ORDERED that the above-referenced supplemental hearing shall take place at a reasonable and mutually agreed upon date and time, but no later than January 2, 2024. It is further
ORDERED that, on or before February 1, 2024, the parties shall file with the Court a joint status report regarding the then-present status of this case.