Opinion
12030-20L
02-24-2023
STEPHEN P. SMITH, JR., 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 two accompanying declarations. By Order issued January 19, 2023, the Court directed petitioner to respond to respondent's motion by February 17, 2023. On February 21, 2023, petitioner filed an Objection to Motion for Summary Judgment.
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
In April 2018, petitioner filed Forms 1040, U.S. Individual Income Tax Return for tax years 2014, 2015, 2016, and 2017. Respondent summarily assessed the tax self-reported by petitioner, sections 6651(a)(1) and (a)(2) additions to tax, and interest.
On April 23, 2019, respondent issued to petitioner a notice of federal tax lien (NFTL). The NFTL corresponded to petitioner's unpaid balances for tax years 2014 through 2017. On May 30, 2019, petitioner submitted to respondent a signed Form 12153, Request for a Collection Due Process or Equivalent Hearing. On the Form 12153, petitioner checked boxes corresponding to (1) an installment agreement, (2) an offer in compromise, and (3) an inability to pay. Petitioner's CDP case was assigned to Settlement Officer (SO) Carl McAdams. On February 27, 2020, SO McAdams issued to petitioner a letter scheduling a telephone conference for March 17, 2020, and requesting a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals.
On March 11, 2020, petitioner sent a fax to SO McAdams, requesting that the telephone conference be rescheduled to allow petitioner additional time to consult with an attorney. On March 16, 2020, petitioner sent another fax to SO McAdams, requesting an additional 30 days until the telephone conference, in order to provide time for a tax attorney to prepare on petitioner's behalf. SO McAdams called petitioner and agreed to reschedule the telephone conference for April 17, 2020. On March 23, 2020, petitioner sent a third fax to SO McAdams; citing challenges to his business due to the onset of the COVID-19 pandemic, petitioner requested that the telephone conference be rescheduled for July 17, 2020. SO McAdams called petitioner and agreed to reschedule the telephone conference for July 15, 2020.
On July 15, 2020, SO McAdams called petitioner; on that call, petitioner discussed a prior bankruptcy that he had filed that involved tax years not at issue in the CDP proceeding. SO McAdams advised him that he could not intervene on non-CDP tax years and instead directed petitioner to respondent's insolvency unit. SO McAdams also requested that petitioner complete a Form 433-A; the parties agreed to reschedule for another telephone conference on July 30, 2020. SO McAdams requested that petitioner mail him a completed Form 433-A in advance of the July 30 conference.
On July 27, 2020, SO McAdams called petitioner in response to a voicemail that petitioner left. On that call, petitioner again discussed the non-CDP tax years involved in his prior bankruptcy, and SO McAdams advised that he had no jurisdiction over such years in the CDP proceeding. Petitioner requested that SO McAdams reschedule the July 30 telephone conference for another 30 days in the future; SO McAdams declined to do so. Petitioner informed SO McAdams that he would not provide the requested Form 433-A.
On July 30, 2020, SO McAdams called petitioner for the scheduled telephone conference. SO McAdams advised petitioner that he could not consider a collection alternative due to the lack of a completed Form 433-A, and petitioner again stated that he would not provide a Form 433-A. SO McAdams informed petitioner that he would close the CDP case and issue a notice of determination.
On August 24, 2020, SO McAdams issued to petitioner a Notice of Determination Concerning Collection Actions Under IRC Sections 6320 or 6330 of the Internal Revenue Code. On October 5, 2020, petitioner filed a Petition with this Court. In the Petition, petitioner referenced his prior bankruptcy and an alleged payment he made to respondent for a liability corresponding to a non-CDP tax year. Petitioner further argued that this alleged payment should be credited by respondent against his 2014 through 2017 liabilities.
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
As noted above, 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 phrase "underlying tax liability" includes the tax due, any additions to tax or penalties, and statutory interest. See Katz v. Commissioner, 115 T.C. 329, 339 (2000). This Court considers a challenge to underlying liability in a CDP case only if the taxpayer properly raised a challenge in the CDP proceeding. See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). A taxpayer does not properly raise an issue, including the underlying liability, during the CDP hearing if he "fails to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity to present such evidence." Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.
Petitioner's underlying liability was summarily assessed; therefore, petitioner did not receive a notice of deficiency. See § 6201(a)(1); § 6665(b); § 6601(e)(1). The record also establishes that petitioner has not had a prior opportunity to dispute his underlying liability for the years at issue. See Montgomery v. Commissioner, 122 T.C. 1, 8-10 (2004). Respondent contends that petitioner failed to properly raise a challenge to his underlying liability during the CDP proceeding. We are less certain. SO McAdams's case activity notes memorialize that petitioner attempted to discuss the non-CDP years on several occasions but was directed by SO McAdams not to do so. The case activity notes (as well as the administrative record as whole) are silent as to the specifics of petitioner's statements and/or arguments about the non-CDP years.
The case activity notes also reference a fax that petitioner sent to SO McAdams on July 14, 2020, discussing the non-CDP years, which was apparently not received (and thus is not a part of the administrative record) due to a broken fax machine at SO McAdams's office.
Construing his pro se allegations in the Petition liberally, see Adams v. Commissioner, No. 1527-21P, 160 T.C. No. 1, slip op. at 10 (Jan. 24, 2023), petitioner contends that he is entitled to credit an alleged overpayment from a non-CDP year toward his liability for the tax years at issue. We infer that this contention is what petitioner attempted to raise with SO McAdams during the CDP proceeding. Even so, we need not decide whether this was sufficient to entitle petitioner to de novo review. This Court has recently recognized tension in our precedents as to whether an issue like that raised by petitioner-that an overpayment from a non-CDP year should have been applied against the CDP liability-is subject to de novo or abuse of discretion review. See Schwartz v. Commissioner, T.C. Memo. 2022-125, at *8; Mohsen v. Commissioner, T.C. Memo. 2021-99, at *8. However, under either standard of review, we would sustain SO McAdams's determination. Petitioner has not pointed to any specific facts suggesting that there was indeed a credit available to him for a non-CDP year, see Rule 121(d), and we lack jurisdiction to adjudicate his "mere claim of an overpayment." See Weber v. Commissioner, 138 T.C. 348, 371-72 (2012); Del-Co Western v. Commissioner, T.C. Memo. 2015-142, at *6-7 (describing CDP jurisdiction as encompassing consideration of non-CDP year overpayments "only when a credit from another tax year indisputably exists"). Accordingly, we will sustain SO McAdams's determination in this regard.
Any error by SO McAdams in not affording petitioner an additional opportunity to present his arguments as to the non-CDP years was harmless. See Ruhaak v. Commissioner, 157 T.C. 103, 118 (2021) (deeming SO's decision not to afford telephone conference as "at most, harmless error" where taxpayer's underlying arguments could not have affected the determination) (citing Perkins v. Commissioner, 129 T.C. 58, 70-71 (2007)).
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. See § 6320(c).
We are satisfied from the record that SO McAdams verified that the relevant legal requirements were met. Finally, given that petitioner did not submit the requested financial documentation, SO McAdams did not abuse his discretion in declining to consider a collection alternative. See, e.g., Sullivan v. Commissioner, T.C. Memo. 2012-337, at *19-20.
III. 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 that the Notice of Determination Concerning Collection Actions Under IRC Sections 6320 or 6330 of the Internal Revenue Code, dated August 24, 2020, upon which this case is based, is sustained, and respondent may proceed with the collection action as determined for tax years 2014, 2015, 2016, and 2017.