Opinion
14576-22L
01-05-2023
HARRY G. ZAVISCH, III & EDDY M. ZAVISCH, DECEASED, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER OF DISMISSAL FOR LACK OF JURISDICTION AND ORDER
Adam B. Landy, Special Trial Judge
Pending before the Court is respondent's Motion to Dismiss for Lack of Jurisdiction as to Petitioners' Income Tax Liabilities for Taxable Years 2014, 2015, 2017, 2018 and 2019, filed August 16, 2022. In support of his motion, respondent states that, based upon a diligent search conducted of his records, no Notice of Determination under I.R.C. section 6320 or other notice was issued to petitioners for taxable years 2014, 2015, 2017, 2018 and 2019 permitting them to invoke the Court's jurisdiction for those taxable years.
Background
On September 23, 2021, respondent mailed to petitioners a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320 reflecting an income tax balance due of $776,602.60 for taxable years 2014, 2015, 2018, and 2019. Respondent notified petitioners that he recorded a Notice of Federal Tax Lien (NFTL or Letter 3172) in Bexar County, Texas, attaching to all property petitioners owned and to all property petitioners may acquire in the future. Petitioners failed to request a CDP hearing by the November 1, 2021, deadline stated in Letter 3172.
On February 22, 2022, respondent issued to petitioners another Letter 3172. Respondent notified petitioners that a second NFTL, in Bexar County, Texas covering taxable years 2013, 2014, 2015, 2017, 2018, and 2019, was recorded against all property and rights to property owned by them. The amount of the total tax liability secured by this lien was $952,006.37. This second NFTL provided petitioners with a deadline of April 1, 2022, to request a CDP hearing. On March 31, 2022, petitioners mailed Form 12153, Request for Collection Due Process or Equivalent Hearing (CDP Hearing Request) for taxable years 2013, 2014, 2015, 2017, 2018, and 2019 to respondent. The CDP Hearing Request was sent to the address listed on the second NFTL, 8700 Tesoro Dr., STOP 5340 SANC, San Antonio, TX 78217 (Tesoro Address).
On April 30, 2019, respondent mailed to petitioners Letter 3172 for taxable year 2013. Petitioners filed a timely CDP hearing request on Form 12153. Respondent's Independent Office of Appeals (Appeals) reviewed petitioners' CDP hearing request and sustained the filing of the NFTL. The Settlement Officer determined that petitioners were not entitled to a lien withdrawal because they failed to satisfy any conditions outlined in section 6323(j), and the proposed lien action was proper.
On April 4, 2022, the U.S. Postal Service returned the CDP Hearing Request back to petitioners' counsel with a notation "Return to Sender." Upon inquiry by petitioners' counsel to the Revenue Officer who initiated the second NFTL filing, petitioners learned that the Tesoro Address listed on Letter 3172 was not the correct address to send the CDP Hearing Request. The correct address, 8122 Datapoint Dr., San Antonio, TX 78229 (Datapoint Address), was not listed on the second NFTL sent to petitioners. On April 6, 2022, petitioners' counsel faxed a copy of the CDP Hearing Request to the Revenue Officer for processing which the IRS accepted. As memorialized on Form 5402-c, Appeals Transmittal and Case Memo - CDP (Form 5402-c), signed by the Settlement Officer on April 14, 2022 and approved by the Appeals Team Manager, respondent determined that petitioners' CDP Hearing Request was not timely, and petitioners were not entitled to a hearing.
A petition commencing this case was filed on June 29, 2022. Petitioners seek the Court's review of respondent's determination on Form 5402-c that they did not submit a timely request for a CDP hearing in response to respondent filing of the second NFTL on February 22, 2022, with respect to unpaid income tax liabilities for taxable years 2013, 2014, 2015, 2017, 2018, and 2019. On August 16, 2022, respondent filed the motion to dismiss taxable years 2014, 2015, 2017, 2018 and 2019. In his motion, respondent conceded that petitioners were entitled to a CDP hearing with respect to the second NFTL for the unpaid income tax liability for 2017.
On August 18, 2022, petitioners filed a response to respondent's motion arguing, in summary, that their CDP Hearing Request, with respect to the second NFTL, was timely filed. On October 14, 2022, respondent filed a reply to petitioners' response affirming his position stated in his motion but arguing that the Supreme Court's holding in Boechler, P.C. v. Commissioner, No. 20-1472 (U.S. April 21, 2022) was not applicable to this case because the IRS had not issued a Notice of Determination for taxable years 2014, 2015, 2017, 2018 and 2019 to invoke section 6330(d)(1). Respondent filed a supplement to his motion on November 3, 2022, attaching a copy of the undated Notice of Determination issued to petitioners for their income tax liability for taxable year 2013 and a certified mail receipt for the Notice of Determination postmarked February 26, 2021. Petitioners filed a response to respondent's first supplement on November 4, 2021, restating many of their arguments previously stated. The Court held a telephone conference with the parties on December 15, 2022, to discuss the motion and the parties' arguments.
Discussion
The Tax Court is a court of limited jurisdiction. It may therefore exercise jurisdiction only to the extent expressly provided by statute. Naftel v. Commissioner, 85 T.C. 527, 529 (1985). In addition, jurisdiction must be proven affirmatively, and petitioners invoking our jurisdiction bear the burden of proving that we have jurisdiction over their case. See Fehrs v. Commissioner, 65 T.C. 346, 348 (1975); Wheeler's Peachtree Pharmacy, Inc. v. Commissioner, 35 T.C. 177, 180 (1960). In a case seeking review of a determination concerning collection action under section 6320 jurisdiction depends, in part, upon the issuance of a valid notice by respondent. See Rule 330(b), Tax Court Rules of Practice and Procedure; Lunsford v. Commissioner, 117 T.C. 159, 161 (2001); Offiler v. Commissioner, 114 T.C. 492, 498 (2000) (holding that the Court lacked jurisdiction to review the notice where (1) the taxpayer did not timely request a hearing with the Appeals Office under section 6330 and (2) there was no Appeals determination for this Court to review).
Section 6321 imposes a lien in favor of the United States upon all property and rights to property of taxpayers where there exists a failure to pay any tax liability after notice and demand for payment. The lien arises at the time assessment is made. § 6322. Although section 6322 provides that the lien imposed by section 6321 arises at the time the tax is assessed, section 6323(a) explains that the lien imposed by section 6321 is not generally valid against the taxpayers' creditors until a notice of lien is filed in accordance with section 6323(f).
Section 6320 provides that the IRS shall notify taxpayers when a notice of lien is filed under section 6323. This notice required by section 6320 must be sent not more than five business days after the notice of tax lien is filed and must inform the taxpayers of the opportunity for administrative review by hearing before Appeals. § 6320(a)(2)(C), (3). Section 6320(b) and (c) grants requesting taxpayers the right to a fair hearing before an impartial Appeals Officer generally to be conducted in accordance with the procedures described in section 6330(c), (d), and (e).
1. Jurisdiction over Lien Action for taxable years 2014, 2015, 2018 and 2019
Generally, taxpayers are entitled to one administrative hearing with respect to the taxable period to which the unpaid tax relates upon the issuance of a NFTL. § 6320(b)(2); Freije v. Commissioner, 131 T.C. 1, 5 (2008). If taxpayers do not timely request an administrative hearing in response to a CDP notice regarding an NFTL, they forgo the right to an administrative hearing and judicial review with respect to the first NFTL as well as any subsequent NFTLs respondent may file for the same taxable periods and the same tax liabilities. See Treas. Reg. § 301.6320-1(b)(2), Q&A-B1, Q&A-B4; Inv. Research Assocs., Inc. v. Commissioner, 126 T.C. 183, 191 (2006) (finding that the taxpayer did not submit a timely request for an administrative hearing with the Appeals Office following the issuance of a CDP notice regarding an NFTL filed in Florida, and therefore, the taxpayer was not entitled to an administrative hearing after respondent filed a second NFTL in Illinois for the same taxable periods).
On September 23, 2021, respondent sent a NFTL to petitioners with respect to their unpaid income tax liabilities for 2014, 2015, 2018 and 2019. This NFTL was sent to petitioners at their last known address and by certified mail, as required by Treas. Reg. § 301.6320-1(a)(2), Q&A-10. Since respondent properly mailed the February 22, 2022, NFTL to petitioners, actual receipt is not a prerequisite to the validity of the CDP Notice. Treas. Reg. § 301.6320-1(a)(2), Q&A-11. Petitioners did not submit a CDP Hearing Request to the IRS prior to the November 1, 2021, deadline as stated on Letter 3172 as to the September 23, 2021, NFTL for 2014, 2015, 2018, and 2019. See § 6320(a)(3)(B); Treas. Reg. § 301.6320-1(b)(1).
On February 22, 2022, respondent sent another NFTL to petitioners with respect to their unpaid income tax liabilities for 2014, 2015, 2018 and 2019 but also included the unpaid income tax liability for 2013 and 2017. Neither party has produced any documents showing that the February 22, 2022, NFTL was a substitute CDP notice or lien filing although the second NFTL improperly listed the Tesoro Address as the address to submit their CDP Hearing Request. See Treas. Reg. § 301.6320-1(b)(2), Q&A-B3. Therefore, petitioners waived their right to an administrative hearing and judicial review with respect to their unpaid income tax liabilities for 2014, 2015, 2018 and 2019 with respect to the second lien. Consequently, respondent did not hold a CDP hearing or issue a Notice of Determination. This Court does not have jurisdiction in this case to review any issues related to petitioners' unpaid income tax liabilities for 2014, 2015, 2018 and 2019 without an Appeals determination. §§ 6320(c), 6330(d)(1); Rule 330(b).
2. Jurisdiction over Lien Action for taxable year 2017
Pursuant to section 6330(d), our jurisdiction in a CDP review case depends on the issuance of a valid Notice of Determination and a timely filed petition. Ramey v. Commissioner, 156 T.C. 1, 11 (2021); see also Offiler, 114 T.C. at 498 (2000); Wilson v. Commissioner, 131 T.C. 47, 50 (2008); Andre v. Commissioner, 127 T.C. 68, 69-70 (2006); Lunsford, 117 T.C. at 161. The Court's jurisdiction is further predicated on a timely request for a CDP hearing. Id.; see also Moorhous v. Commissioner, 116 T.C. 263, 269-270 (2001); Kennedy v. Commissioner, 116 T.C. 255, 261-263 (2001). When petitioners do not timely request a CDP hearing, Appeals will not make a determination, and without such determination, this Court has no jurisdiction under section 6330(d). See Offiler, 114 T.C. at 497-98; Ramey, 156 T.C. at 11.
This Court has jurisdiction to review a Notice of Determination issued by the IRS after a CDP hearing. This Court also has jurisdiction to review a decision letter issued by the IRS, after an equivalent hearing, so long as the decision letter is issued after a timely request for hearing under section 6330. See Craig v. Commissioner, 119 T.C. 252, 259 (2002) (holding that a decision letter issued after a timely request for a hearing under section 6330 "is a 'determination' for purposes of section 6330(d)(1)," regardless of the label IRS Appeals places on the document); see also Andre, 127 T.C. at 70. In Ramey, this Court further stated that we have jurisdiction to correct any error and review the IRS's decision as a determination if, in reviewing a CDP case, we determine that Appeals erred in concluding that petitioners' request for a section 6330 hearing was untimely. 156 T.C. at 11-12.
Respondent argues that we have no jurisdiction to review any issues related to taxable year 2017 because he has not issued a Notice of Determination. See generally Treas. Reg. § 301.6320-1(e)(3), Q&A-E8. Respondent mailed to petitioners the second NFTL with rights to a CDP hearing on February 22, 2022, with respect to taxable years 2013, 2014, 2015, 2017, 2018, and 2019. Although the February 22, 2022, Letter 3172 directed petitioners to mail the CDP Hearing Request to the Tesoro Address instead of the Datapoint Address, the parties agree that petitioners timely submitted a CDP Hearing Request for taxable year 2017. Respondent states that petitioners will be afforded a CDP hearing with respect to the second NFTL for 2017 in a proceeding separate and apart from the instant case. However, respondent prepared and provided Form 5402-c to petitioners which stated that petitioners did not timely file a CDP Hearing Request. Therefore, the question is whether Form 5402-c is a "determination" sufficient to provide the Court with jurisdiction to review the issues surrounding taxable year 2017 pursuant to section 6330(d)(1).
The Court desires the parties' additional views on whether Form 5402-c constitutes a "determination" for purposes of section 6330(d)(1) permitting the Court to review petitioners' disagreement with the IRS's administrative decision where (1) a NFTL was filed providing petitioners with a right to a hearing and (2) in response, petitioners made a timely request for a CDP hearing. Additionally, if respondent determines that Form 5402-c constitutes a "determination", the Court would like for the parties to propose a process for resolution of all remaining issues in this case. Until the Court receives the parties' responses, we will take respondent's motion under advisement as to whether the Court has jurisdiction over taxable year 2017.
Upon due consideration of respondent's motion, and for cause, it is
ORDERED that respondent's Motion to Dismiss for Lack of Jurisdiction as to Petitioners' Income Tax Liabilities for Taxable Years 2014, 2015, 2017, 2018 and 2019, filed August 16, 2022, is granted in part, insofar as this case is dismissed for lack of jurisdiction for taxable years 2014, 2015, 2018 and 2019. It is further
ORDERED that all references to taxable years 2014, 2015, 2018 and 2019 in the petition are deemed stricken. It is further
ORDERED that respondent's Motion to Dismiss for Lack of Jurisdiction as it relates to taxable year 2017 is taken under advisement. It is further
ORDERED that, on or before January 27, 2023, respondent shall file a response to the questions posed above regarding the Court's jurisdiction as to the February 22, 2022, NFTL filed, and Form 5402-c issued to petitioners with respect to their unpaid income tax liability for taxable year 2017. It is further
ORDERED that, on or before February 17, 2023, petitioners shall file a reply to respondent's response.