Opinion
11738-20 L
08-04-2021
James D. Sullivan, Petitioner, v. Commissioner of Internal Revenue, Respondent
ORDER AND DECISION
TAMARA W. ASHFORD, JUDGE
This collection due process (CDP) case brought under section 6330(d)(1) is before the Court on cross-motions for summary judgment filed by the parties pursuant to Rule 121.
Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code in effect at all relevant times. Some monetary amounts are rounded to the nearest dollar.
On February 25, 2021, respondent filed a motion for summary judgment, along with a declaration of Steven M. Webster, in support of the motion. In the motion, respondent contends that no genuine dispute exists as to any material fact and that the determination of the Internal Revenue Service (IRS) Independent Office of Appeals (Appeals) approving a notice of intent to levy (levy notice) with respect to petitioner's unpaid Federal income tax liabilities for the 2008 and 2012 taxable years should be sustained as a matter of law.
Mr. Webster is one of respondent's counsel of record in this case.
By Order served on March 4, 2021, the Court ordered petitioner to file a response to respondent's motion no later than March 17, 2021. On March 11, 2021, petitioner filed a motion for summary judgment. In his motion, petitioner agrees with respondent that summary adjudication of this case is appropriate because no material facts are in dispute but contends that the Court should enter judgment against respondent and in his favor. On March 29, 2021, petitioner then filed an objection to respondent's motion for summary judgment. In his objection, petitioner asserts in pertinent part that the arguments set forth in his petition are not frivolous, that he is able to dispute his underlying tax liability because he had no earlier opportunity to dispute the merits of the tax liabilities, and "[t]here was no valid due process hearing provided * * * [to him] in which he could play a meaningful part."
Background
Respondent determined deficiencies in petitioner's Federal income tax of $223,162 and $77,966 and additions to tax pursuant to section 6651(a)(1) of $55,791 and $19,492 for 2008 and 2012, respectively. Respondent also determined an addition to tax pursuant to section 6654 of $83 for 2008 and an accuracy-related penalty pursuant to section 6662 of $15,593 for 2012. On July 3, 2017, the Court filed a document from petitioner as his petition seeking redetermination of the deficiencies, additions to tax, and penalty. See Sullivan v. Commissioner, Dkt. No. 14612-17. On August 9, 2017, the Court, however, dismissed petitioner's case for lack of jurisdiction on the grounds that petitioner had failed to pay the Court's filing fee (or request a waiver of the fee) and file a proper amended petition despite an order of the Court directing him to do so. Id.
On December 26, 2017, the IRS assessed against petitioner the 2008 and 2012 Federal income tax liabilities. When petitioner failed to pay the assessed liabilities despite the IRS' providing him with notice and demand of the balances due, the IRS sent petitioner a levy notice dated April 29, 2019.
The levy notice advised petitioner that the IRS intended to levy to collect his outstanding liabilities for 2008 and 2012 which, through the date of the levy notice, totaled $583,002, and that he had a right to a hearing to appeal the proposed collection action. The levy notice also advised petitioner that the IRS might file a notice of Federal tax lien at any time to protect its interest.
In response to the levy notice, petitioner timely submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP hearing request). In his CDP hearing request, petitioner requested that the levy notice "must be rescinded" for several reasons; these reasons were either frivolous or illogical. Petitioner did not check any of the boxes indicating that he sought a collection alternative.
For example, as his first reason, petitioner stated:
The IRC is only applicable in DC and U.S. Territories for those born in U.S. Territory, who work for the National Government, or are U.S. Resident Aliens. At all times relevant to this inquiry, the IRC did not apply to me. I was born in one of the 50 states and thus not subject to the territorial jurisdiction of DC and U.S. Territories. I did not work for, or receive income from, the National Government in any capacity, and was not a U.S. Person (a U.S. Taxpayer). I am not one described in IRC 6331(a) as a federal employee, officer or or [sic] elected official. Thus, I received no "taxable income"; the levy is invalid; and the NOIL [i.e., the levy notice] must be rescinded.
Appeals Officer Karina Rego (AO Rego) sent petitioner a letter dated October 22, 2019, acknowledging receipt of his CDP hearing request and scheduling a telephonic CDP hearing with him on December 10, 2019. She also outlined the issues she had to consider during the hearing and informed petitioner that in order for her to consider collection alternatives he must submit to her within 14 days a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, proof that estimated tax payments were paid in full for the year to date, six months of personal bank statements, proof of all income and expenses, and a most recent mortgage statement. Additionally, she advised petitioner that one or more issues raised in his CDP hearing request had been identified by the IRS as frivolous and listed in IRS Notice 2010-13 or had (if not identified as frivolous) reflected a desire to defy or impede Federal tax administration. Further, she advised petitioner that he would not be afforded a face-to-face hearing if the issues he desired to discuss included frivolous issues or issues that the IRS considered an attempt to defy or impede Federal tax administration; he might be allowed a face-to-face hearing on any legitimate issue he raised if he were to withdraw, within 30 days, the frivolous issues or the issues considered as an attempt to delay or impede Federal tax administration. Finally, she warned petitioner that if he did not amend or withdraw his CDP hearing request, his case would be sent back to IRS Collection and that he might be subject to a $5,000 penalty pursuant to section 6702(b).
On December 10, 2019, petitioner did not call AO Rego at the appointed time for the telephonic CDP hearing. Later that same day, AO Rego sent petitioner a followup letter wherein she requested that he call her within 14 days and if he did not, Appeals would make a determination by reviewing his administrative file and whatever information he had provided.
In response to AO Rego's December 10, 2019, letter, petitioner sent her a letter dated December 19, 2019, advising that he had not received her October 22, 2019, letter and thus was not aware of the December 10, 2019, telephonic CDP hearing. He requested that she reschedule the hearing and resend her request for information. Finally, he asserted that his CDP hearing request "was not for reasons of delay or an attempt to argue any frivolous or groundless positions".
In response to petitioner's December 19, 2019, letter, AO Rego sent petitioner a letter dated February 6, 2020, advising him that she had attempted to contact him by telephone after receipt of his letter. She also explained that he was precluded from challenging his underlying tax liabilities for 2008 and 2012 because he had had a prior opportunity to do so when he filed a petition with the Court. She also explained, citing Internal Revenue Manual pt. 5.11.1.3.3.9(2) and (4) (Aug. 1, 2014), that by making a timely CDP hearing request, the levy notice could not be rescinded. She also advised petitioner that he would need to provide certain documentation to her by February 20, 2020, if he sought a collection alternative; otherwise, she would make a determination to sustain the levy notice.
Petitioner did not send AO Rego the requested documentation; instead, he sent her a letter dated February 20, 2020, in which he raised frivolous issues, disputed his underlying tax liabilities, and requested a face-to-face hearing. He also stated that he was not interested in any collection alternative.
In response to petitioner's February 20, 2020, letter, AO Rego sent petitioner a letter dated February 25, 2020, acknowledging receipt of his February 20, 2020, letter and reiterating why he had a prior opportunity to challenge his underlying liabilities for 2008 and 2012 and thus could not challenge these liabilities during the CDP hearing. She also denied his request for a face-to-face hearing and explained why. Finally, she advised petitioner that if he wished to pursue a collection alternative, he would need to provide to her by March 10, 2020, the documentation she had requested in her February 6, 2020, letter; otherwise, she would make a determination to sustain the levy notice.
In response to AO Rego's February 25, 2020, letter, petitioner sent her a letter dated March 10, 2020, in which he asserted that he had not received an opportunity for any CDP hearing because (1) he had not received AO Rego's October 22, 2019, letter notifying him of any December 10, 2019, telephonic CDP hearing and (2) his "second opportunity" was "merely my return of your phone call with absolutely no advance knowledge that you were expecting a telephonic hearing." Additionally, he recited how the IRS had "ignored my requests, my arguments and the points of law I have made although they come directly from the IRC." He also again stated that he was not interested in any collection alternative.
After receiving petitioner's March 10, 2020, letter, AO Rego discussed the case with the Appeals Team Manager, who advised her that petitioner's request for a face-to-face hearing should be denied because (1) a telephonic CDP hearing had already been held, (2) the challenge to the tax liability was precluded, and (3) no collection alternative had been offered. On June 18, 2020, AO Rego informed petitioner of this decision and that the levy notice would be sustained. Accordingly, on August 19, 2020, Appeals issued to petitioner a notice of determination sustaining the levy notice. A summary detailing the matters considered by Appeals and its conclusions was attached to the notice of determination and included the following explanations:
SUMMARY AND RECOMMENDATION
All legal and administrative procedures were followed when the Final Notice of Intent to Levy was issued. You were challenging the tax liability; however, the challenge to the tax liability is precluded in this hearing. You had a prior opportunity when you petitioned the Tax Court and the Tax Court rendered a decision to dismiss for lack of jurisdiction after you failed to file an amended petition and pay the court filing fee. You also requested a rescission of the Final Notice; however, the Final Notice cannot be rescinded once a request for a Collection Due Process request is made. You did not offer a collection alternative. In addition, you requested a face-to-face hearing after you had already been granted a telephonic hearing. It was determined that since you already had your hearing, the challenge to the liability is precluded and you are not offering a collection alternative, that your request for a face-to-face hearing is denied. Therefore, the issuance of the Final Notice of Intent to Levy is sustained, and the proposed levy action is appropriate.
LEGAL AND ADMINISTRATIVE REVIEW
Appeals Officer, Karina I Rego, verified the requirements of any applicable law or administrative procedure were met. IRS records confirmed the proper issuance of the notice and demand, Notice of Intent to Levy and/or Notice of Federal Tax Lien (NFTL) filing, and notice of a right to a Collection Due Process (CDP) hearing.
ISSUES YOU RAISED
Collection Alternatives Requested
You offered no alternatives to collection.
Challenges to the Liability
You disagree with your liability because you do not believe you owe the liability. However, the challenge to the liability is precluded. You had a prior opportunity when you petitioned the Tax Court and the Tax Court rendered a decision to dismiss for lack of jurisdiction after you failed to file an amended petition and pay the court filing fee.
You raised no other issues.
BALANCING ANALYSIS
The proposed levy action balances the need for efficient collection of taxes. The Appeals Officer considered your legitimate concern that any collection action be no more intrusive than necessary. However, you solely raised a challenge to the liability and that challenge is precluded. You also did not offer a collection alternative. Therefore, the proposed levy action is appropriate, and the issuance of the Final Notice is sustained.
On September 14, 2020, petitioner, while residing in North Carolina, timely filed a petition with this Court for review of the notice of determination. In his petition, he makes numerous arguments that are frivolous in nature; his primary argument appears to be that the internal revenue laws do not apply to him and that he is not precluded from raising issues related to his underlying liabilities.
Discussion
The purpose of summary judgment is to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be granted where the moving party shows through "the pleadings * * * and any other acceptable materials, together with the affidavits or declarations, if any, * * * that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b); see also Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). The burden is on the moving party to demonstrate that there is no genuine dispute as to any material fact; consequently, factual inferences will be viewed in a light most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). The nonmoving party may not rest upon the mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Sundstrand Corp. v. Commissioner, 98 T.C. at 520. The parties agree that there is no genuine dispute as to any material fact. Consequently, we may render a decision as a matter of law.
Under section 6331(a), if any person liable to pay any tax neglects or refuses to do so after notice and demand, the Commissioner is authorized to collect the unpaid amount by way of a levy upon all property belonging to such a person upon which there is a lien. Pursuant to section 6330(a), the Commissioner must provide the person with written notice of an opportunity for an administrative hearing to review the proposed levy.
If an administrative hearing is requested in a levy case, the hearing is to be conducted by Appeals. Sec. 6330(b)(1). At the hearing, the taxpayer may raise any relevant issue including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. Sec. 6330(c)(2)(A). A taxpayer may contest the existence or amount of the underlying tax liability at the hearing if the taxpayer did not receive a notice of deficiency with respect to the liability or did not otherwise have an earlier opportunity to dispute the tax liability. Sec. 6330(c)(2)(B); sec. 301.6330-1(e)(3) Q&A-E2, Proced. & Admin. Regs.; Kuykendall v. Commissioner, 129 T.C. 77, 80 (2007); Shere v. Commissioner, T.C. Memo. 2008-8, slip op. at 10. Following the hearing, the Appeals officer must determine among other things whether the proposed collection action is appropriate. In reaching the determination, the Appeals officer must take into consideration: (1) whether the requirements of applicable law and administrative procedure have been met, (2) all relevant issues raised by the taxpayer, and (3) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that collection be no more intrusive than necessary. Sec. 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C. 183, 184 (2001).
Section 6330(d)(1) grants this Court jurisdiction to review the determination made by Appeals in a levy case. Where the underlying liability is properly at issue, the Court reviews any determination regarding the underlying liability de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Where the underlying liability is not properly at issue, we review Appeals' determination for abuse of discretion; that is, whether the determination was arbitrary, capricious, or without a sound basis in fact or law. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Goza v. Commissioner, 114 T.C. at 182.
Petitioner's primary complaint throughout the CDP hearing process was directed towards his underlying liabilities for 2008 and 2012. And now before this Court, he continues to do the same. However, the law is clear: if a taxpayer has received a notice of deficiency with respect to the underlying liability or had an earlier opportunity to dispute the liability, he may not contest the liability in a CDP hearing (or thereafter in this Court). See sec. 6330(c)(2)(B); sec. 301.6330-1(e)(3) Q&A-E2, Proced. & Admin. Regs.; Kuykendall v. Commissioner, 129 T.C. at 80; Shere v. Commissioner, slip op. at 10. The undisputed facts confirm that petitioner received a notice of deficiency for 2008 and 2012. He then petitioned this Court but never filed a proper amended petition or paid the required filing fee as directed to do so by this Court. The resulting case was dismissed for lack of jurisdiction because of his failures. Thus, his underlying liabilities for 2008 and 2012 are not at issue and we will review Appeals' determination for abuse of discretion only.
Even if petitioner's underlying liabilities were properly at issue, his arguments in regards thereto are frivolous in nature. As such, "[w]e perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit." Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).
Petitioner also asserts that he never received a (telephonic) CDP hearing. However, the record reflects that petitioner's primary method of communication during the CDP process was through mailed correspondence. AO Rego attempted to call petitioner several times and had been corresponding with petitioner via mail because that was the way he communicated with her. She explained in her letters to him why he could not challenge his underlying liabilities and, by his own admission, he was not seeking a collection alternative. These communications with petitioner collectively constituted his CDP hearing; he thus received all the process that was due to him. See sec. 301.6330-1(d)(2) Q&A-D6, Proced. & Admin. Regs. ("A CDP hearing may, but is not required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer or the taxpayer's representative, or some combination thereof."); Ragsdale v. Commissioner, T.C. Memo. 2019-33, at *23-*24.
On the basis of our review of the record, we find that AO Rego considered all of the requisite factors under section 6330(c)(3) when making her determination. The record shows that she (1) verified that all legal and procedural requirements were met, (2) considered all issues petitioner properly raised, and (3) determined that the proposed collection action appropriately balances the need for the efficient collection of taxes with the legitimate concern of petitioner that the collection action be no more intrusive than necessary. Thus, it cannot be said that AO Rego abused her discretion in sustaining the levy notice, and we do not find that the notice of determination was arbitrary, capricious, or without a sound basis in fact or law. Accordingly, we grant respondent's motion and deny petitioner's motion. Upon due consideration, it is hereby
ORDERED that respondent's motion for summary judgment, filed February 25, 2021, is granted. It is further
ORDERED that petitioner's motion for summary judgment, filed March 11, 2021, is denied. It is further
ORDERED AND DECIDED that respondent may proceed with the collection action with respect to petitioner's unpaid income tax liabilities for 2008 and 2012, as described in the Notice of Determination Concerning Collection Action(s) Under Sections 6320 or 6330, dated August 19, 2020, upon which this case is based.