Williams v. Commissioner ( 2013 )

12-2446-ag
Williams v. Comm'r
U NITED S TATES C OURT OF A PPEALS
F OR THE S ECOND C IRCUIT
August Term 2012
(Submitted: May 13, 2013 Decided: May 21, 2013)
Docket No. 12-2446-ag
_____________________
O LIVER W. W ILLIAMS ,
Petitioner-Appellant,
H ARRIET S. W ILLIAMS ,
Petitioner,
V.
C OMMISSIONER OF I NTERNAL R EVENUE ,
Respondent-Appellee.
_____________________
Before:
C HIN and L OHIER , Circuit Judges, and S WAIN , District
Judge. *
_____________________
*
The Honorable Laura Taylor Swain, of the United States
District Court for the Southern District of New York, sitting by
designation.
Appeal from an Order and Decision of the United
States Tax Court (Armen, J.) granting summary judgment in
favor of the Commissioner of Internal Revenue and
sustaining a proposed levy to recover outstanding income
tax liabilities for the 2000, 2001, and 2002 taxable years.
A FFIRMED .
_____________________
Oliver W. Williams, pro se, Ossining, New
York, Petitioner-Appellant.
Patricia McDonald Bowman, Joan I.
Oppenheimer, for Kathryn Keneally,
Assistant Attorney General, United
States Department of Justice, Tax
Division, Washington, District of
Columbia, for Respondent-Appellee.
_____________________
P ER C URIAM :
Petitioner-appellant Oliver W. Williams, an
attorney, appeals pro se from an Order and Decision dated
May 14, 2012 of the United States Tax Court (Armen, J.)
granting summary judgment in favor of respondent-appellee
Commissioner of Internal Revenue (the "Commissioner") and
sustaining a proposed levy to collect outstanding income
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tax liabilities owed by Williams and his wife for the 2000,
2001, and 2002 taxable years. We affirm.
BACKGROUND
Between 1995 and 2002, Williams and his wife
("taxpayers") underpaid their federal income taxes. In
2006, the Internal Revenue Service (the "IRS") notified
taxpayers that it planned to seek a federal tax lien
against the outstanding tax liability. The tax court ruled
against the taxpayers, sustaining the IRS's proposed tax
lien, and on appeal -- where taxpayers did not contest the
underlying tax liability for those taxable years -- we
affirmed. See Williams v. Comm'r, 299 F. App'x 92, 93-94
(2d Cir. 2008) (summary order).
By 2010, of the tax liability at issue in the
previous litigation, only three years of income tax
liability remained in dispute: 2000, 2001, and 2002. On
October 15, 2010, the IRS sent taxpayers a Final Notice of
Intent to Levy and of Your Right to a Hearing. The notice
stated that the IRS intended to levy $17,949.76,
$22,698.26, and $19,955.01, inclusive of penalties and
interest, for the 2000, 2001, and 2002 taxable years,
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respectively. In addition, the IRS notified taxpayers of
their right to contest the levy in a collection due process
("CDP") hearing. Taxpayers, proceeding without
representation, timely requested a CDP hearing; they (1)
claimed they had no tax liability; (2) contended that, even
if tax were owed, it was not collectible; and (3)
challenged certain IRS procedures.
By letter dated January 25, 2011, Thomas A.
Conley, a settlement officer with the IRS Office of Appeals
("Appeals Office") scheduled a February 24, 2011 telephone
conference with taxpayers. The letter indicated that
Conley could not consider collection alternatives unless
taxpayers completed a Collection Information Statement and
verified their income and expenses. Conley further
informed taxpayers that they were required to submit all
outstanding federal income tax returns. In response, on
three separate occasions, taxpayers requested an in -person
hearing in New York City; Conley told them, however, that
an in-person CDP hearing was not possible unless taxpayers
provided the requested information. Taxpayers did not
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comply with the document request and did not call in for
the scheduled telephone conference.
On March 21, 2011, the Appeals Office issued a
Notice of Determination sustaining the proposed levy.
Taxpayers timely filed a petition in the tax court,
appealing the determination and alleging, inter alia, that
the Appeals Office had failed to grant them a face-to-face
CDP hearing and wrongly sustained the levy. The
Commissioner moved for summary judgment, arguing that
Conley had acted within his discretion in sustaining the
levy without granting the request for an in-person hearing.
The tax court granted the motion. Williams timely
appealed.
DISCUSSION
A. Standard of Review
We review decisions of the tax court "in the same
manner and to the same extent as decisions of the district
courts in civil actions." IRC § 7482(a)(1). Hence, w e
review de novo a grant of summary judgment by the tax
court. See Eisenberg v. Comm'r, 155 F.3d 50, 53 (2d Cir.
1998). To review the tax court's grant of summary
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judgment, we must also review the decision by the Appeals
Office. We have not, however, established the appropriate
standard of review for an appeal arising from a CDP
hearing. 1
The CDP hearing was created by the IRS
Restructuring and Reform Act of 1998. Pub. L. No. 105 -206,
§ 3401, 112 Stat. 685, codified at IRC § 6330. It provided
a taxpayer with an opportunity to challenge an IRS levy
before seizure through an independent appeals process. See
IRC § 6330(a)(1). Although the statute codifies the right
to judicial review of the IRS appeals process by a tax
court, see IRC § 6330(d)(1), it does not identify the
standard of review. The legislative history, however, is
instructive:
1
We have repeatedly set forth the standard of review in
summary orders, see Sher v. Comm'r, 381 F. App'x 62, 63-64 (2d
Cir. 2010) (summary order) (abuse of discretion review when
appellants do not contest underlying tax liability in CDP
hearing); Salazar v. Comm'r, 338 F. App'x 75, 77 (2d Cir. 2009)
(summary order) (same); Reichle v. Comm'r, 303 F. App'x 987, 988
(2d Cir. 2008) (summary order) (same); Block v. Comm'r, 301 F.
App'x 75, 77 (2d Cir. 2008) (summary order) (de novo review of
tax court decisions, applying the same standards as the tax
court: review of CDP hearings for abuse of discretion where
underlying liability is not contested and de novo review when it
is), but we have not issued a precedential opinion in this
respect.
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Where the validity of the tax liability was
properly at issue in the hearing, and where the
determination with regard to the tax liability is
a part of the appeal, no levy may take place
during the pendency of the appeal. The amount of
tax liability will in such cases be reviewed by
the appropriate court on a de novo basis. Where
the validity of the tax liability is not properly
part of the appeal, the taxpayer may challenge the
determination of the appeals officer for abuse of
discretion.
H.R. Conf. Rep. No. 105-599, at 266 (1998). Many courts
have adopted this tiered standard of review. See Kindred
v. Comm'r, 454 F.3d 688, 694 (7th Cir. 2006); Robinette v.
Comm'r, 439 F.3d 455, 458-59 & n.2 (8th Cir. 2006); Living
Care Alts. of Utica, Inc. v. United States, 411 F.3d 621,
626 (6th Cir. 2005). See also Dalton v. Comm'r, 682 F.3d
149, 155-56 (1st Cir. 2012) (reviewing factual and legal
conclusions for reasonableness, which is "part and parcel"
of the abuse of discretion inquiry). We expressly adopt
that standard today. Therefore, because Williams has
abandoned his challenges to the validity of the underlying
tax liability, he may challenge the Appeals Office's
decision only for abuse of discretion. See Jones v.
Comm'r, 338 F.3d 463, 466 (5th Cir. 2003) (per curiam) ("In
a collection due process case in which the underlying tax
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liability is properly at issue, the Tax Court (and hence
this Court) reviews the underlying liability de novo and
reviews the other administrative determinations for an
abuse of discretion.").
B. Determination Without Face-to-Face CDP Hearing
1. Applicable Law
Before the IRS imposes a levy, it must notify a
taxpayer of his right to request a CDP hearing. IRC
§ 6330(a)(1). As part of the hearing, the Appeals Office
must verify "that the requirements of any applicable law or
administrative procedure have been met." Id. § 6330(c)(1).
A CDP hearing, although it provides a taxpayer with an
opportunity to be heard, is "informal in nature" and does
not require a face-to-face meeting. Treas. Reg.
§ 301.6330-1(d)(2), A-D6. A taxpayer who presents
"relevant, non-frivolous reasons" for disagreeing with the
proposed levy will "ordinarily" be offered an in-person
hearing, id. at A-D7; a face-to-face meeting, however, is
not required. In fact, a CDP "hearing" may consist of "one
or more written or oral communications" between the Appeals
Office and the taxpayer or merely a "review of the
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documents in the case file." Id. at A-D6 & A-D7. Even if
the CDP hearing consists of an in-person meeting or a
telephone conversation, a "transcript or recording . . . is
not required." Id. at A-D6.
At the CDP hearing, the taxpayer may challenge the
propriety of the collection action, propose a collection
alternative, or raise any other releva nt issue pertaining
to the unpaid tax. Id. § 6330(c)(2)(A). Generally,
however, a taxpayer may not challenge the underlying tax
liability unless he "did not otherwise have an opportunity
to dispute such tax liability." Id. § 6330(c)(2)(B); see
also Deutsch v. Comm'r, 478 F.3d 450, 452 (2d Cir. 2007)
(petitioner's attorney consented to tax assessment and
waived right to contest liability, precluding a later
challenge). The IRS may request, and a taxpayer "will be
expected to provide[,] all relevant information requested
by Appeals, including financial statements, for its
consideration of the facts and issues involved in the
hearing." Treas. Reg. § 301.6330-1(e)(1). Moreover, if
offering collection alternatives, a taxpayer must first
file all required tax returns before seeking an in -person
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conference. See id. § 301.6330-1(d)(2), at A-D8 (noting
that IRS generally will not entertain offers to compromise
in person unless the taxpayers would be eligible in other
circumstances).
2. Application
Williams argues that Conley abused his discretion
by issuing a determination on the proposed levy without
first affording him an in-person CDP hearing. This
argument has no merit.
As an initial matter, Williams assumes that he is
entitled to a face-to-face conference. This misstates the
law, and numerous courts have concluded that the IRS may
issue a final determination without an in-person hearing.
See, e.g., Murphy v. Comm'r, 469 F.3d 27, 30 (1st Cir.
2006) (CDP hearing process is informal and "no face-to-face
meetings are necessary"); Kindred, 454 F.3d at 691 n.7, 695
n.19 (CDP hearings need not be face-to-face); see also
Treas. Reg. § 301.6330-1(d)(2), A-D6.
Moreover, the IRS was justified in denying a face-
to-face hearing here for three reasons. First, Williams
presented Conley with only frivolous arguments. See Treas.
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Reg. § 301.6330-1(d)(2), A-D7 & A-D8. He challenged his
underlying tax liability even though he had received "an
opportunity to dispute such tax liability" in the prior
litigation. IRC § 6330(c)(2)(B); see Williams, 299 F.
App'x at 93. He also argued that collection was time-
barred even though a tolling statute extended the statute
of limitations for the duration of any CDP hearing and
subsequent related appeals. See IRC § 6502(a)(1) (ten-year
statute of limitations for collection of taxes); id. §
6330(e)(1) (tolling statute); see also Lunsford v. Comm'r,
117 T.C. 183, 189 (2001) (taxpayers who abandoned arguments
and raised only previously-rejected legal arguments were
not entitled to CDP hearing).
Second, despite requests from Conley to do so,
Williams never submitted the 2009 tax return or the other
requested documentation. The IRS will not grant a face-to-
face hearing to "a taxpayer who wishes to make an offer to
compromise" but has not yet filed required returns or made
certain deposits of tax. Treas. Reg. § 301.6330-1(d)(2),
at A-D8. Because Williams did not comply with the document
request, Conley acted within his discretion to deny an in-
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person hearing. See, e.g., Klingenberg v. Comm'r, 104
T.C.M. 470, at *7 (2012) (no abuse of discretion to
deny face-to-face hearing where, inter alia, taxpayer never
submitted requested financial information or tax returns) ;
see also Rodriguez v. Comm'r, 85 T.C.M. 1414, at *4-5
(2003).
Third, Conley consulted internal IRS procedures
before denying the face-to-face hearing. These guidelines
directed the Appeals Office to deny in-person hearing
requests when a taxpayer made only frivolous or dilatory
arguments, or did not file all required returns.
Accordingly, Conley did not abuse his discretion by denying
an in-person hearing or by sustaining the proposed levy,
and, therefore, the tax court did not err by so conclu ding.
CONCLUSION
For the foregoing reasons, the Order and Decision
of the tax court is AFFIRMED.
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