Opinion
9279-23L
02-23-2024
RETHA R. MCCOY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Elizabeth A. Copeland Judge
This collection due process (CDP) case is calendared for trial during the Court's April 8, 2024, New York, New York, trial session. On January 25, 2024, Respondent filed with the Court the administrative record for this case. See Rule 93. On February 6, 2024, Respondent filed a Motion for Summary Judgment (Motion). We have reviewed Respondent's Motion and the documents in support of it. For the reasons stated below, we will deny Respondent's Motion. Ms. McCoy resided in New Jersey when she petitioned this Court.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
Background
On August 23, 2021, the Internal Revenue Service (IRS), through its Automated Collection System (ACS), sent Ms. McCoy a Notice of Intent to Levy and Your Collection Due Process Right to a Hearing (levy notice). The levy notice listed unpaid tax debts for Ms. McCoy's 2007-12 tax years (years in issue). The IRS received Ms. McCoy's Form 12153-C, Request for a Collection Due Process or Equivalent Hearing (CDP hearing request), by mail on September 21, 2021, to which she attached Form 668(Z), Certificate of Release of Federal Tax Lien (lien release).The lien release pertained to her 2009-12 tax years and was dated February 19, 2020. In her CDP hearing request she highlighted collection alternatives by checking the "Currently Unable to Pay" and "Other (explain)" boxes in the proposed collection alternatives section, and specifically referenced the "ATTACHED Lien Releases."
Ms. McCoy listed only years 2009-12 on Form 12153-C and attached a copy of the levy notice. In his Motion, Respondent concedes that "[a]lthough not requested in the Form 12153, the hearing included periods 2007 and 2008."
Ms. McCoy attached to her CDP hearing request a second lien release pertaining to her 2017 tax year. The second lien release is not relevant to this proceeding because her 2017 tax year is not at issue.
On February 10, 2023, Ms. McCoy's CDP hearing request was referred to the IRS's Independent Office of Appeals (Appeals) as evidenced by a Form 12153-B, Referral Request for CDP Hearing from ACS Support (ACS referral request). The ACS referral request indicated that the "BALANCE DUE WAS THE RESULT OF EXAM ASSESSMENT." Settlement Officer Donna Connolly (SO Connolly) was assigned to the case. On March 7, 2023, SO Connolly noted in her case activity report, "Reason for liability: failure to make ES payments." On March 14, 2023, she sent Ms. McCoy a letter titled Appeals Received Your Request for a Collection Due Process Hearing in which she scheduled a telephonic CDP hearing for April 5, 2023, and requested a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, Ms. McCoy's signed Federal income tax returns for 2019-21, and proof that she was current with her estimated tax payments for the then year to date. Ms. McCoy did not communicate with SO Connolly prior to the scheduled CDP hearing, nor was she in attendance on April 5, 2023. SO Connolly then mailed Ms. McCoy a letter titled Collection Due Process Last Chance Letter, on April 11, 2023, informing her that she had one final opportunity to present information to Appeals. In that letter, SO Connolly stated that if Ms. McCoy did not respond by April 25, 2023, Appeals would make a final determination. Ms. McCoy never responded.
On May 11, 2023, Appeals sent Ms. McCoy a Notice of Determination Concerning IRS Collection Actions under Internal Revenue Code Section 6320 or 6330 (notice of determination) sustaining the proposed levy action for her 2007-12 tax years. The notice of determination states that "[t]he CDP notice was for unpaid income tax liabilities for [Ms. McCoy's] 2007 thru 2012 tax year [sic] and is due to an exam agreed adjustment." The administrative record contains a copy of Ms. McCoy's case history that indicates her tax liabilities for years 2009-12 were the result of restitution-based assessments, not an exam. The descriptions of the assessments in the case history are therefore at odds with those provided in the notice of determination, ACS referral request, and SO Connolly's case activity report. Attached to Respondent's Motion is a press release from the U.S. Attorney's Office for the District of New Jersey (press release) reporting that Ms. McCoy pled guilty to making and subscribing a false tax return for 2012 and admitted to failures to report income on her 2009-11 tax returns. Respondent mentions the press release in its Motion, stating "[a]n internet search reveals that in 2016, [Ms. McCoy] admitted to omitting significant amounts of income from her 2009-2012 federal income tax returns and pled guilty to filing false tax returns." Respondent did not further explain the significance of the press release as it relates to his Motion. There is no mention of the lien release in either the notice of determination or SO Connolly's case activity record. In addition, the record seems to indicate a prior levy on JP Morgan Chase in the amount of $152,172 recorded on October 14, 2021, with no further explanation.
Ms. McCoy timely petitioned this Court on June 10, 2023. In her Petition, Ms. McCoy explains that she has insufficient funds to satisfy her tax liabilities as provided in the levy notice. She makes no reference to the lien release in her Petition.
Discussion
I. Summary Judgment
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). Generally, we 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(a)(2); see also Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). The moving party bears the burden of proving that there is no genuine dispute as to any material fact and we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Id. Respondent contends that there are no genuine issues of material fact in dispute and that the IRS is entitled to collect by levy Ms. McCoy's 2007-12 federal income tax liabilities as a matter of law.
II. Standard of Review
Our standard of review in CDP cases depends on whether the validity of the underlying tax liability is properly at issue. Taxpayers who did not receive a notice of deficiency or did not otherwise have a prior opportunity to contest their tax liability may contest that liability, including a self-assessed liability, at their CDP hearing. I.R.C. § 6330(c)(2)(B); Montgomery v. Commissioner, 122 T.C. 1, 9 (2004). In that instance, we review the notice of determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). Otherwise, we review the notice of determination for abuse of discretion. Id. A taxpayer is precluded from disputing her underlying liability if, as here, it was not properly raised in the administrative hearing. See Giamelli v. Commissioner, 129 T.C. 107, 114 (2007). The validity of Ms. McCoy's underlying tax liability is therefore not at issue in this case. Accordingly, we review for abuse of discretion.
III. Abuse of Discretion
In reviewing for abuse of discretion, we must uphold the notice of determination unless it is arbitrary, capricious, or without sound basis in fact or law. See, e.g., Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Taylor v. Commissioner, T.C. Memo. 2009-27, 97 T.C.M. (CCH) 1109, 1116. Before issuance of a notice of determination, an IRS Settlement Officer is required to verify that all requirements of applicable law and administrative procedure have been met. I.R.C. § 6330(c)(1), (3)(A). This includes verifying that a "valid and accurate assessment" was "made for each tax and period on the CDP notice." See I.R.M. 8.22.9.6.5(2) (Aug. 9, 2017). We have the authority to review satisfaction of this requirement regardless of whether the taxpayer raised a verification issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 200-03 (2008), supplemented by 136 T.C. 463 (2011).
On the motion record presented, we cannot hold that SO Connolly verified that all requirements of applicable law and administrative procedure were met. The ACS referral request states that Ms. McCoy's "BALANCE DUE WAS THE RESULT OF EXAM ASSESSMENT," while SO Connolly noted in her case activity record "Reason for liability: failure to make ES payments," and the notice of determination provides that "[t]he CDP notice was for unpaid income tax liabilities for [Ms. McCoy's] 2007 thru 2012 tax year [sic] and is due to an exam agreed adjustment." The origin of the assessments is further complicated by the case history, included with the administrative record, which indicates that Ms. McCoy's 2009-12 tax liabilities are the result of restitution-based assessments. Neither SO Connolly nor Respondent addressed the restitution-based assessments. Furthermore, the administrative record is confusing and incomplete as to whether proceeds were collected from JP Morgan Chase in October of 2021 and, if so, whether they satisfied some or all of the assessments at issue in this case meaning that verification of administrative procedure may not have been followed. Given these discrepancies, we are unconvinced that SO Connolly verified that the assessments for the years in issue were accurate and valid. Consequently, summary judgment is not appropriate at this time.
We note that there is no indication in either the case activity record or the notice of determination that SO Connolly reviewed the 2009-12 lien release provided by Ms. McCoy. Respondent's Motion does not address why Ms. McCoy received the lien release which states "I certify that the following-named taxpayer . . . has satisfied the taxes listed below and all statutory additions." Ms. McCoy presumably attached the lien release to her request for a CDP hearing to show that she had fully satisfied her 2009-12 tax liabilities. We are aware that Ms. McCoy failed in her Petition to assign error to SO Connolly's review of the lien release, and we recognize that "[a]ny issue not raised in the assignments of error shall be deemed to be conceded." Rule 331(b)(4). However, claims in a petition "should be broadly construed so as to do substantial justice" and a petition filed by a pro se litigant, as is the case here, "should be liberally construed." Gray v. Commissioner, 138 T.C. 295, 298 (2012).
IV. Conclusion
We are well aware that Ms. McCoy was uncooperative with both SO Connelly and Respondent's counsel. She refused to communicate with either party despite being afforded multiple opportunities to do so. Nevertheless, we must deny Respondent's Motion due to SO Connelly's failure to properly verify the 2007-12 assessments.
Upon due consideration of Respondent's Motion and for cause, it is
ORDERED that Respondent's Motion for Summary Judgment, filed February 6, 2024, is denied without prejudice.