Opinion
6301-22L
02-24-2023
HARRY C. YORK, Petitioner 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, March 6, 2023, in Boston, Massachusetts. On January 5, 2023, respondent filed a Motion for Summary Judgment (respondent's motion) and a Declaration of Nathan T. Harding in Support of Motion for Summary Judgment. By Order issued January 19, 2023, the Court directed petitioner to respond to respondent's motion before February 17, 2023. To date, petitioner has not responded.
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.
I. Background
On November 12, 2019, respondent issued to petitioner a notice of deficiency, determining a deficiency of $193,323 and a substantial understatement of tax penalty of $38,665 for tax year 2017. The deficiency corresponded to third-party income reporting of proceeds received by petitioner from the sale of securities. Petitioner did not timely file a petition disputing respondent's determinations, and on March 30, 2020, respondent duly assessed the liabilities as determined.
On June 28, 2021, respondent issued to petitioner a notice of intent to levy with respect to petitioner's liability for tax year 2017. On August 10, 2021, respondent received from petitioner's authorized representative, James Barron, CPA, a signed Form 12153, Request for a Collection Due Process or Equivalent Hearing, disputing the proposed levy. On the Form 12153, petitioner did not check any of the boxes indicating an interest in collection alternatives; instead, petitioner stated that he was disputing the 2017 assessment due to the determined deficiency's alleged failure to account for petitioner's cost basis in the sold securities. Petitioner's CDP case was assigned to Settlement Officer (SO) Jennifer L. Ayotte. On November 10, 2021, SO Ayotte issued to petitioner and Mr. Barron a letter scheduling a telephone conference for December 13, 2021.
The Form 12153 was signed by petitioner on July 11, 2021, and respondent has not contended that the CDP request was untimely.
On December 10, 2021, Mr. Barron called SO Ayotte to discuss the case; both agreed to proceed with the hearing during that call. Mr. Barron explained that petitioner sought to have the 2017 liability reconsidered to account for his basis in the sold securities. SO Ayotte in turn explained that petitioner was precluded from challenging his underlying liability due to the prior notice of deficiency. SO Ayotte suggested that petitioner could instead pursue audit reconsideration outside of the CDP proceeding. SO Ayotte also asked Mr. Barron if petitioner was interested in a collection alternative; Mr. Barron stated his opinion that petitioner was likely not qualified for a collection alternative due to his financial situation. SO Ayotte informed Mr. Barron that she would sustain the proposed levy.
On February 11, 2022, respondent issued to petitioner a Notice of Determination Concerning Collection Actions Under Sections 6320 or 6330 of the Internal Revenue Code (notice of determination). On March 14, 2022, petitioner filed a Petition with this Court.
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 the SO's determination in connection with a 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. The existence or amount of the underlying tax liability may be contested at a CDP hearing only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. See § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180- 81 (2000).
If the validity of the underlying tax liability is properly at issue, the Court will review the taxpayer's liability de novo. See Sego, 114 T.C. at 609-10. Where the validity of the underlying tax liability is not properly at issue, the Court will review the SO's administrative determination for abuse of discretion. Id. 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).
C. 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 petitioner. Respondent has also produced a copy of a properly completed USPS Form 3877, date-stamped November 12, 2019, which lists a piece of mail addressed to petitioner at his Mendon, MA address, with a certified mailing number matching the number found on the notice of deficiency. We conclude that respondent is entitled to a presumption of official regularity with respect to the notice of deficiency. See, e.g., Klingenberg v. Commissioner, T.C. Memo. 2012-292, at *14-15 (presumption of official regularity raised where Commissioner established that notices of deficiency were sent by certified mail to taxpayer's last known address).
Petitioner has not claimed that he did not receive the notice of deficiency, nor has he pointed to any specific facts that would rebut respondent's presumption. Because petitioner has failed to rebut the presumption, we conclude that petitioner received the notice of deficiency. Further, because petitioner had a prior opportunity to challenge his underlying liability, he was precluded from raising a challenge to his underlying liability both in the CDP proceeding and before this Court. Accordingly, we review SO Ayotte's determination to sustain the levy action for abuse of discretion only.
While petitioner's path to review of the underlying liability issue is blocked in this Court, we note that he may still have other available administrative and judicial avenues to resolve possible error, such as audit reconsideration, a doubt-as-to-liability offer in compromise, or a refund suit in federal district court.
D. Verification & Balancing Obligations
Section 6330(c)(1) and (3) require that the settlement officer: (1) properly verify that the requirements of applicable law or administrative procedure have been met and (2) consider whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection be no more intrusive than necessary. As part of the former obligation, the settlement officer must verify that a valid assessment was made for liabilities at issue. See Ron Lykins, Inc. v. Commissioner, 133 T.C. 87, 97 (2009). On the record before us, we are satisfied that SO Ayotte verified that petitioner's liability was properly assessed and that other relevant legal requirements were met. Finally, given that petitioner did not propose a collection alternative, SO Ayotte did not abuse her discretion in otherwise sustaining the proposed levy. See, e.g., Davison v. Commissioner, T.C. Memo. 2019-26, at *18 ("It is not an abuse of discretion for an Appeals officer to sustain a collection action and not consider collection alternatives when the taxpayer has proposed none."), aff'd, 805 Fed.Appx. 259 (5th Cir. 2020).
The record does not indicate that SO Ayotte verified whether the assessment of the section 6662 penalty complied with section 6751(b)(1)'s supervisory approval requirement. However, SO Ayotte was under no obligation to do so; the section 6662 penalty at issue was "automatically calculated through electronic means" and thus was not subject to section 6751(b)(1). See § 6751(b)(2); Walquist v. Commissioner, 152 T.C. 61, 70-74 (2019).
E. Conclusion
Accordingly, we will grant respondent's motion.
Upon due consideration and for cause, it is
ORDERED that respondent's Motion for Summary Judgment, filed January 5, 2023, is granted. It is further
ORDERED AND DECIDED that the Notice of Determination Concerning Collection Actions Under Sections 6320 or 6330 of the Internal Revenue Code, dated February 11, 2022, upon which this case is based, is sustained, and respondent may proceed with the collection action as determined for tax year 2017.