Opinion
13308-19L
07-07-2022
PERCY SQUIRE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Elizabeth A. Copeland Judge
This case originated with a timely petition received on July 17, 2019, challenging a Notice of Determination Concerning Collection Actions under IRC Sections 6320 or 6330 (Notice of Determination), which notice was dated June 14, 2019. The Notice of Determination sustained a proposed levy related to Petitioner's unpaid income tax for tax year 2016. The Notice of Determination sustained the proposed levy because Petitioner did not provide necessary information for the Internal Revenue Service's (IRS') Office of Appeals to consider a collection alternative and because, based on Petitioner's tax liability balance for 2017, Petitioner was not in compliance with his obligation to keep current with estimated tax payments.
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 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.
On November 16, 2020, Respondent filed with the Court a Motion for Summary Judgment and to Impose a Penalty under I.R.C. Section 6673 and, in support of that motion, filed a memorandum in support and a declaration of Jacqualine Dunn. Also on November 16, 2020, Respondent filed a second Motion to Permit Levy. On January 28, 2021, Mr. Squire filed Petitioner's Combined Verified Opposition to Respondent's Motion to Permit Levy and For Summary Judgment. On April 08, 2021, Mr. Squire filed Petitioner's Motion to Dismiss requesting dismissal of this case. This Respondent's two motions, (1) the Motion for Summary Judgment, and (2) the Motion to Permit Levy were set for remote hearing on April 26, 2021. Both parties appeared on that date and were heard.
On September 16, 2019, Respondent filed a Motion to Permit Levy. On January 02, 2020, the Court denied Respondent's Motion to Permit Levy. We determined that based on the minimal record in the case at that time, Respondent failed to establish good cause to remove the suspension of the levy under section 6330(e)(1).
Background
Mr. Squire is an attorney admitted to practice before this Court. He has a history of repeated filings with this Court. Mr. Squire filed his 2016 tax return late showing a balance due. Related to the 2016 tax year, the IRS first issued a notice and demand and then mailed Mr. Squire, on August 20, 2018, a Notice LT 11, Notice of Intent to Levy and Notice of Your Right to a Hearing. The amount of the proposed levy was $19,731.35, which amount represented the 2016 tax year's self-reported but unpaid tax liability plus penalties and interest calculated as of the date of the notice.
On July 14, 2011, Mr. Squire filed his first docketed case, No. 16587-11L. On March 5, 2021, he filed case No. 6044-12L, which was dismissed for lack of jurisdiction because the petition was untimely. On February 29, 2016, Mr. Squire's wholly owned LLC filed docketed case, No. 4812-16L. In addition to this case, Mr. Squire has docketed case No. 1816-21L filed on January 21, 2021.
Mr. Squire timely filed a Form 12153, Request for Due Process or Equivalent Hearing. The Form 12153 was dated September 16, 2018. Mr. Squire checked the box indicating that he sought an Offer in Compromise (OIC) as a collection alternative and the box stating, "I Cannot Pay Balance." Also, on Form 12153 he wrote, "I have submitted an offer and compromise due to unjustified income interruption from 2011-2015. I cannot pay the entire balance." In December of 2018, the IRS sent a letter to Mr. Squire indicating their receipt of his Form 12153. That letter to Mr. Squire asked him to complete an OIC Form 656-B. The letter also informed him that he "must be compliant before any type of collection alternatives can be considered."
Settlement Officer Jacqualine J. Dunn (SO Dunn) with the Office of Appeals was assigned to Mr. Squire's case. On April 24, 2019, SO Dunn mailed Mr. Squire a letter acknowledging that the IRS had received Mr. Squire's request for a collection due process (CDP) hearing. SO Dunn requested a telephone conference on June 3, 2019 and asked for Mr. Squire to provide an OIC and a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. The letter also noted that SO Dunn could not consider an OIC if there was not supporting documentation. SO Dunn advised Mr. Squire that the "records show that you have filed several OICs over the years; however, it does not show a current OIC." SO Dunn did not receive an OIC for the 2016 tax year.
Mr. Squire has provided the Court with two filed OICs neither of which was available to SO Dunn during the CDP hearing process; one dated June of 2020 and one dated January of 2021. The June 2020 OIC did not appear to have the 2016 tax period included for consideration. The January 2021 OIC was dated January 26, 2021, just two days prior to Mr. Squire filing his Opposition to Motion to Permit Levy by Respondent in this case. On March 5, 2021, the IRS closed their file on the January 2021 OIC determining that Mr. Squire did not qualify for the low-income certification. He had not submitted the $205 application fee nor any of the required payments with the OIC. [Docket Index No. 26]. At the hearing Mr. Squire admitted that he had not made any estimated tax payments relating to the current year, which action alone would preclude the IRS from accepting any OIC.
On June 3, 2019, SO Dunn held a conference with Mr. Squire. During that conference, she again told Mr. Squire that there was no 2016 OIC on file. SO Dunn also informed Mr. Squire that she could not set up a collection alternative for only 2016 and that the 2016 amount could not be added to the periods for which currently non-collectable status was then in place.
During the pendency of his CDP hearing, Mr. Squire had several tax years in default. SO Dunn determined that he owed the government at least $1,173,513, a portion of which was trust fund recovery penalties from the single member LLC, under which he conducts his law practice, Percy Squire Co., LLC.
On June 14, 2019, SO Dunn closed Mr. Squire's case and issued him a Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330 with respect to the 2016 liability. SO Dunn found that Mr. Squire failed to submit the information necessary for her to consider a collection alternative and failed to provide the requested financial information to determine his ability to pay. As such, SO Dunn determined that the proposed levy should be sustained.
Discussion
I. Motion for Summary Judgment
"Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials." Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). A party moving for summary judgment bears the burden of demonstrating that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). Facts are viewed in the light most favorable to the nonmoving party. Dahlstrom v. Commissioner, 98 T.C. 812, 821 (1985). Where a motion for summary judgment has been properly made and supported by the moving party, the nonmoving party "may not rest upon the mere allegations or denials" contained in that party's pleadings but must by affidavits or otherwise "set forth specific facts showing that there is a genuine dispute for trial." Rule 121(d).
After reviewing the motion for summary judgment, other filings, and all of the documents submitted in support of the motion and filings. We find that this case is ripe for summary judgment, as no material facts remain in dispute.
a. Standard of Review
Where the validity of the underlying tax liability is properly at issue, the Court will review the matter on a de novo basis. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Where a taxpayer's underlying liability is not properly at issue, the proper standard of review is abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 609-610 (2000).
Respondent contends that Mr. Squire cannot challenge the underlying tax liability for the tax year 2016 because he did not challenge the underlying tax during the CDP hearing. However, in his opposition to motion for summary judgement, Mr. Squire argued that his "collection arguments challenged 'the existence and amount of the underlying tax liability." Mr. Squire has not provided any relevant documentation to support his statement. In his petition, he did not challenge the underlying liability. He simply pled that he had entered into an agreement with the IRS and therefore withdrew his OIC in reliance. There was no mention of the underlying liability. As such, there is no support in the record of Mr. Squire challenging the underlying tax liability. Moreover, because Mr. Squire did not raise the issue of the underlying liabilities for the periods in this case during his collection due process hearing, he is precluded from disputing the underlying tax liabilities in this proceeding. Giamelli v. Commissioner, 129 T.C. 107, 112-114 (2007). Therefore, we review Respondent's collection activities for an abuse of discretion.
Mr. Squire has provided irrelevant documentation in his support of his argument. He provided the Court with a 2014 letter related to a withdrawal of an OIC, an OIC filed in June 2020, and an OIC dated January 26, 2021. There is no logical connection between a withdrawal letter made in 2014 and the 2016 tax liability. The June 2020 OIC did not appear to include the 2016 tax liability and, as such, is unrelated to the 2016 tax year. Finally, the January 2021 OIC does not appear to be filled out accurately nor does it have anything to do with challenging the underlying tax liability. Moreover, because it was recently filed it would not have been available to SO Dunn in making her decision and thus irrelevant. In March of 2021, the IRS rejected the January 2021 OIC noting that he had not made any of the required initial payments.
Section 6331(a) authorizes the Secretary of the Treasury or his delegate, the IRS, to levy upon property or property rights of a taxpayer liable for taxes who fails to pay those taxes within 10 days after a notice and demand for payment is made. Section 6331(d) provides that the levy authorized in section 6331(a) may be made only if the Secretary has given written notice to the taxpayer 30 days before the levy, absent a jeopardy assessment with respect to an unpaid tax liability or other circumstances not applicable here. Section 6330(a) instructs that the Secretary must also notify the taxpayer of the right to a hearing with regard to such levy and such notice shall also be made 30-days before the first levy.
On August 20, 2018, the IRS mailed Mr. Squire Notice LT 11, Notice of Intent to Levy and Notice of Your Right to a Hearing related to his 2016 tax year. The amount owed on the Notice LT 11 was $19,731.35, which represented the amount of unpaid tax liabilities for the 2016 year plus additional penalties, and interest.
If a taxpayer requests an administrative hearing in a lien or levy case, the hearing is to be conducted by Appeals. I.R.C. §§ 6320(b)(1), 6330(b)(1). At the hearing, the Appeals Settlement Officer must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C. § 6330(c)(1). The taxpayer may raise any relevant issue with regard to the Commissioner's intended collection activities, including spousal defenses, challenges to the appropriateness of the proposed lien or levy, and alternative means of collection. I.R.C. § 6330(c)(2)(A); see also Sego v. Commissioner, 114 T.C. at 609; Goza v. Commissioner, 114 T.C. at 180-181. Taxpayers are "expected to provide all relevant information requested by Appeals, including financial statements," to enable "its consideration of the facts and issues involved in the hearing." Treas. Reg. §§ 301.6320-1(e)(1), 301.6330-1(e)(1).
Among the issues that may be raised at Appeals are "offers of collection alternatives," such as OICs and installment agreements. I.R.C. § 6330(c)(2)(A)(iii). The Court reviews the Appeals' rejection of an OIC or an installment agreement to decide whether the rejection was arbitrary, capricious, or without sound basis in fact or law and therefore an abuse of discretion. Skrizowski v. Commissioner, T.C. Memo. 2004-229; see also Keller v. Commissioner, 568 F.3d 710, 716 (9th Cir. 2009) (a decision "based on an erroneous view of the law or a clearly erroneous assessment of the facts" is an abuse of discretion), aff'g in part T.C. Memo. 2006-166.
Following the hearing, the Appeals Settlement Officer must determine whether the proposed collection action should proceed. In making the determination the Appeals Settlement Officer shall take into consideration: (1) whether the verified requirements of any applicable law or administrative procedure have been satisfied; (2) any relevant issues raised by the taxpayer during the section 6330 hearing; and (3) whether the proposed collection action balances the need for efficient collection of taxes with the taxpayer's legitimate concern that any collection action be no more intrusive than necessary. I.R.C. § 6330(c)(3).
SO Dunn did just that. She verified that all applicable law and administrative procedures were followed in making the assessment. She then considered Mr. Squire's collection alternatives. As previously stated, in order for a taxpayer to sustain a collection alternative, all relevant information requested by Appeals, including financial statements and financial documentation must be provided. Via letter sent on April 24, 2019, SO Dunn very specifically delineated the documentation she would need to see to support an installment agreement or hardship determination and separately delineated the documentation needed to support an OIC. Both alternatives required Mr. Squire to provide his 2018 tax return, verification that he was compliant with making estimated tax payments, and a completed Collection Information Statement (Form 433-A for the first alternative and Form 433-A (OIC) for the second) with all required financial attachments (e.g. pay stubs, bank statements, expense verification and the like). She made clear that for the OIC, she would require verification of payment of the filing fee and any deposit or payment required by such OIC. Mr. Squire provided no documentation at all.
At the CDP hearing Mr. Squire went on to argue that his OIC was withdrawn under the auspices that he would be put in currently not-collectible status as to the 2016 tax year. This position was untenable because the only proof provided by Mr. Squire was a letter dated in November of 2014 withdrawing an OIC; at such time, the 2016 tax return would not have even been due and any discussion as to putting tax year 2016 into any type of collection status would have been premature.
SO Dunn informed Mr. Squire that he was not eligible for a collection alternative because he had not provided the required forms and supporting documentation. SO Dunn also instructed Mr. Squire that he was not in compliance with making required estimated tax payments. We conclude that Mr. Squire did not provide any of the required information requested for Appeals to consider a collection alternative. Mr. Squire provided no documentation nor valid reason for failing to do so. Considering all these facts, SO Dunn determined that the proposed levy was no more intrusive than necessary.
We find no dispute as to any material fact and we find that it was not an abuse of discretion to sustain the collection action.
II. Motion to Permit Levy
A taxpayer's request for a CDP hearing automatically suspends the levy actions "for the period during which such hearing, and appeals therein, are pending." I.R.C. § 6330(e)(1). Section 6330(e)(2) provides that this suspension "shall not apply to a levy action while an appeal is pending if the underlying tax liability is not at issue in the appeal and the court determines that the Secretary has shown good cause not to suspend the levy." Burke v. Commissioner, 124 T.C. 189, 196 (2005). Therefore, the question is whether Respondent has shown "good cause not to suspend the levy" during the appeal process. Id.
See Treas. Reg. § 301.6330-1(g)(2), Q&A-G1. ("the suspension period continues until . . . the Notice of Determination resulting from the CDP hearing becomes final upon either the expiration of the time for seeking judicial review or upon exhaustion of any right to appeals following judicial review.")
Mr. Squire also argues that the IRS has been continuing to levy despite the section 6330(e)(1) stay requirements. However, only the 2016 tax year is at issue in this case. Mr. Squire has many tax years which have unpaid balances, and the IRS may continue to levy on previous periods that are not currently pending before this Court. There was no levy on the tax year 2016, which is the tax year before this Court.
Per the discussion supra pp. 4-7, Mr. Squire did not offer a legitimate challenge to the existence or amount of his tax liabilities for the year in issue at any stage of these proceedings. Accordingly, the first element of section 6330(e)(2) is satisfied. However, the question remains is whether Respondent has shown good cause why the levy should no longer be suspended.
We have held that Respondent may show good cause that a levy should not be suspended where the taxpayer has used the collection review procedure to espouse frivolous and groundless arguments and otherwise needlessly delay collection. Burke v. Commissioner, 124 T.C. at 196-197. As discussed in the next section, Mr. Squire has willfully exploited the collection review procedure primarily to delay collection of the taxes he self-reported. This is the fifth CDP petition filed by Mr. Squire and his single-member limited liability company over a ten year period, including a recently filed case currently pending with this Court.
The other petitions are Docket Nos. 16587-11L, 6044-12L, 4812-16L, and 1816-21L.
In Mr. Squire's Opposition to Respondent's Motion to Permit Levy and For Summary Judgment he argues that he has a pending OIC. This "pending" OIC is an OIC dated January 26, 2021. He failed to acknowledge that his actions of continuing to file returns with balances due caused the default of any prior collection agreement. He currently owes over $1,173,513 and each year that balance increases. Even with the January 2021 OIC filed during the pendency of this case, he failed to make his required monthly payments. Throughout his CDP hearing he failed to produce any documentation or forms that were requested of him. Furthermore, SO Dunn had repeatedly informed Mr. Squire that there was no OIC on file for the 2016 tax year. As such Respondent has shown good cause to permit the levy.
At the April 26, 2021 hearing he notified the Court that his OIC had been rejected as of March 5, 2021.
Upon due consideration, appearing from the undisputed allegations in Respondent's motion that the underlying tax liabilities for taxable year 2016 are not at issue and that Respondent has shown good cause for removing suspension of the levy and we shall also grant Respondent's Motion to Permit Levy.
III. Motion to Dismiss
Mr. Squire field his Motion to Dismiss on April 08, 2021. In his motion he cites Wagner v. Commissioner, 118 T.C. 330 (2002). In Wagner, we found that Respondent would not be prejudiced by the taxpayer withdrawing the case. Id. However, we find significant that Respondent asked for sanctions. The case law under Rule 41(a)(2) of the Federal Rules of Civil Procedure supports that a court should grant dismissal "unless the defendant will suffer clear legal prejudice, other than the mere prospect of a subsequent lawsuit, as a result." Wagner v. Commissioner, 118 T.C. at 333 (quoting McCants v. Ford Motor Co., 781 F.2d 855, 856-857 (11th Cir. 1986)). "The crucial question to be determined is, would the defendant lose any substantial right by the dismissal." Wagner v. Commissioner, 118 T.C. at 333 (quoting Durham v. Fla. E. Coast Ry. Co., 385 F.2d 366, 368 (5th Cir. 1967). Respondent's motion to impose a penalty under I.R.C. § 6673(a) is a counterclaim. Hines v. United States, 658 F.Supp.2d 139, 147-148 (D.C. Cir. 2009). Respondent filed this counterclaim against Mr. Squire prior to him filing his Motion to Dismiss.
A similar motion to dismiss was filed at Docket No. 1816-21L and will be addressed by separate order.
As discussed below we will grant Respondent's request for sanctions. Mr. Squire has repeatedly filed with the Court petitions to delay IRS collection actions. He continues to rely on submitting to the IRS unfounded OICs that are not supported by even the minimum required level of financial substantiation. Mr. Squire is an attorney and is well versed in utilizing the Court's resources for delay. Should we dismiss the case without prejudice, it is likely that Mr. Squire will continue his pattern of filing for delay. Furthermore, Respondent would be prejudiced against his pursuit of a section 6673(a)(1) penalty against Mr. Squire in this case. This is the loss of a substantial right, as Respondent cannot institute another case just to seek a section 6673(a) penalty. See I.R.C. § 6673(a). If dismissal is granted Mr. Squire could continue to avoid IRS collection activity and the imposition of section 6673(a) penalties by continuing to petition this Court for future IRS collection action only to subsequently (after delay) ask for dismissal; just as he has done here and at Docket No. 1816-21L. As such we deny Mr. Squire's Motion to Dismiss.
III. Penalty
Respondent argues that Mr. Squire is using the CDP statutes solely as a mechanism to delay collections. To support this argument, Respondent points to the fact that Mr. Squire has filed five petitions, including this case, over a ten year period, all of which have disputed Notices of Determination Concerning Collection Action. As noted, in January 2021, Mr. Squire filed yet another petition with this Court. Respondent relies on the outcomes of two of Petitioner's prior cases, the fact that Mr. Squire has not been making the required estimated tax payments, has been filing OICs without the required substantiation or payments, as particularly noted with the January 2021 OIC filing provided to this Court by Mr. Squire. These actions support Respondent's contention that Mr. Squire is exploiting the collection review procedure to unreasonably delay Respondent from collecting taxes from him and his LLC.
Section 6673(a)(1) provides, in pertinent part, for a penalty of up to $25,000 if a taxpayer has, inter alia, instituted or maintained before the Tax Court proceedings in which the taxpayer's position is frivolous or groundless and/or primarily for delay. Section 6673(a)(1) applies to collection due process cases. Pierson v. Commissioner, 115 T.C. 576, 581 (2000). "The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled principles before they file returns and litigate." Takaba v. Commissioner, 119 T.C. 285, 295 (2002). "A taxpayer's position is frivolous if it is contrary to established law and unsupported by a reasoned, colorable argument for change in the law." Goff v. Commissioner, 135 T.C. 231, 237 (2010).
We agree with Respondent. Mr. Squire has been warned on multiple occasions, including a previous case in our Court not to file an OIC solely to delay collection. See Docket No. 4812-16L, wherein in an Order and Decision filed on August 10, 2016, Mr. Squire was warned that "[W]e take this opportunity to admonish and advice petitioner that the Court may well impose such a penalty should it [Percy Squire Co., LLC] or Mr. Squire return to this Court without due cause to again unreasonably delay respondent from collecting petitioner's tax liabilities in the future." In this present case Mr. Squire waited until January 26, 2021, to file an OIC. Furthermore, he has been warned on multiple occasions that for an OIC to be granted he must be current on his estimated tax payments. Even after warnings he is still not current on his estimated tax payments. This is the fifth CDP case filed by Mr. Squire and each petition has sought to forestall action by Respondent in collecting his unpaid outstanding tax liabilities. The arguments Mr. Squire raised before Appeals and this Court have no merit given that he was not currently in compliance with his current tax obligations and did not timely furnish items of information reasonably requested by the Appeals Settlement Officers. Furthermore in his opposition to Respondent's motion to permit an immediate levy, Mr. Squire has not provided any explanation to support his arguments or reasons we should not sustain Respondent's request. Previously we did not impose a penalty pursuant to section 6673(a)(1) because we had not warned Mr. Squire. See Lizalek v. Commissioner, T.C. Memo. 2009-122, WL 1530160 at *8 (2009). He was thus warned but continued undeterred. We will grant Respondent's motion for penalties under section 6673(a)(1).
To reflect the foregoing, it is
ORDERED that Respondent's Motion for Summary Judgment and to Impose a Penalty Under I.R.C. § 6673 filed November 16, 2020, is granted. It is further
ORDERED that Respondent's Motion to Permit levy, filed November 16, 2020, is granted, and the suspension of the levy imposed under section 6330(e)(1) is lifted and is no longer applicable. It is further
ORDERED that we impose against Petitioner a penalty of $5,000 under section 6673(a)(1). It is further
ORDERED that Petitioner's Motion to Dismiss is denied. It is further
ORDERED AND DECIDED that Respondent's Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 dated June 14, 2019, upon which this case is based, is sustained; Respondent may proceed with collection action as determined in that notice.