Alan Reyes v. Comm'r of Internal Rev. , 449 F. App'x 478 ( 2011 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 11a0807n.06
No. 10-1431
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
ALAN CHRISTOPHER REYES, ) Dec 02, 2011
) LEONARD GREEN, Clerk
Petitioner - Appellant, )
)
v. ) ON APPEAL FROM THE
) UNITED STATES TAX COURT
COMMISSIONER OF INTERNAL )
REVENUE, ) OPINION
)
Respondent - Appellee. )
Before: GIBBONS, STRANCH, and ROTH,* Circuit Judges.
JANE B. STRANCH, Circuit Judge. Alan Christopher Reyes appeals pro se from the Order
and Decision of the United States Tax Court granting summary judgment in favor of the
Commissioner of Internal Revenue and authorizing the Commissioner to proceed by levy to collect
Reyes’s unpaid federal income taxes, interest, and penalties for the tax years 1999 through 2004, as
determined by a Notice of Determination dated January 23, 2009. Reyes contends that he was not
under any lawful obligation to file an individual federal income tax return for the tax years in
question, that the Commissioner denied him a Collections Due Process (CDP) hearing, and that we
should overturn the Tax Court’s decision as factually and legally erroneous. Because Reyes’s
*
The Honorable Jane R. Roth, Circuit Judge for the United States Court of Appeals for the
Third Circuit.
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arguments do not demonstrate the existence of a genuine issue of material fact, or that the IRS is not
entitled to judgment as a matter of law, we AFFIRM the decision of the Tax Court.
I. FACTS AND PROCEDURAL HISTORY
In September 2007, Reyes, who was represented by counsel, filed Tax Court Petition No.
20316-07 challenging assessments of federal income tax deficiencies, penalties, additions to tax, and
interest for tax years 2000, 2001, 2003, and 2004. In January 2008, the Tax Court entered a decision
based on the parties’ stipulation that Reyes owed the specified income tax deficiencies, penalties and
interest for those tax years.
When Reyes failed to pay the amounts due, in September 2008 the Commissioner sent Reyes
a Notice of Intent to Levy for tax years 1999 through 2004 in the total amount of $230,634.12. The
notice advised Reyes of his right to request a CDP hearing. The Commissioner conceded before the
Tax Court that Reyes did not actually receive previous IRS notices of deficiency for tax years 1999
and 2002.
In October 2008, Reyes, through counsel, submitted a request to the IRS Office of Appeals
for a CDP hearing on the Notice of Intent to Levy for tax years 1999 through 2004. In the space for
“Collection Alternative,” Reyes checked boxes asking for an “Installment Agreement” or an “Offer
in Compromise.” IRS Appeals Settlement Officer Jesse Voysest responded by letter to Reyes in
December 2008, acknowledging his request and setting a telephonic CDP hearing on January 7,
2009. Voysest faxed a copy of the letter to Reyes’s counsel.
In the letter, Voysest informed Reyes that the telephonic conference call would be his
“primary opportunity to discuss . . . the reasons you disagree with the collection action and/or to
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discuss alternatives to the collection action.” Voysest asked Reyes to contact him within fourteen
days if the time set for the hearing was not convenient, if the telephone contact number had changed,
or if Reyes preferred a face-to-face meeting. The letter also explained in detail the issues Voysest
would consider during the hearing. He explained that, in order to consider alternative collection
methods such as an installment agreement or an offer in compromise, Reyes must provide a
completed Collection Information Statement (Form 433-A), signed federal income tax returns for
tax years 2006 and 2007, and proof of estimated tax payments for tax years 2006, 2007, and 2008.
Voysest emphasized that he could not consider collection alternatives if Reyes did not provide the
specified information. Voysest further explained that if Reyes did not “participate in the conference
or respond to this letter, the determination and/or decision letter that we issue will be based on your
CDP request, any information you previously provided to this office about the applicable tax periods,
and the Service’s administrative file and records.” Voysest sent Reyes the applicable forms and a
return envelope.
On the day set for the CDP hearing, Reyes’s counsel faxed a letter to Voysest reporting a
breakdown in the attorney-client relationship necessitating counsel’s formal withdrawal from further
representation of Reyes in all matters, including the scheduled CDP hearing. Noting that Reyes
would need time to secure alternate representation, counsel asked Voysest to continue the CDP
hearing.
After receiving counsel’s letter of withdrawal, Voysest attempted to contact Reyes directly,
using two telephone numbers for Reyes listed in the IRS file. One number was not in service and
the other was disconnected. In reviewing the file, Voysest noted that Reyes’s liabilities were based
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on substitute for return assessments, Reyes was delinquent in filing tax returns for 2006 and 2007,
and Reyes had not provided Form 433-A as previously requested. Voysest concluded that the
collection alternatives Reyes sought were not viable alternatives at that time. He closed the CDP
hearing, sustained the proposed collection action, and prepared the appropriate case-closing
documents.
A Notice of Determination issued on January 23, 2009, sustaining the proposed levy. The
Notice observed that Reyes had not disputed his liabilities, and it informed him that his request for
a collection alternative could not be considered because he failed to submit his delinquent income
tax returns, tax payments, and the Form 433-A as Voysest requested. The Notice further stated that
rescheduling the telephonic conference was not appropriate because Reyes failed to contact Voysest
after his counsel withdrew, Reyes did not seek a face-to-face meeting, and all of his liabilities for
the tax years in question were based on substitute for return assessments which indicated a prior
history of tax noncompliance. The Notice also determined that the proposed levy action
appropriately balanced the need for efficient collection of taxes with the concern that collection
action be no more intrusive than necessary. Finally, the Notice informed Reyes that he must file a
petition with the United States Tax Court within thirty days if he wished to challenge the Notice.
Acting pro se, Reyes filed a petition with the Tax Court on February 24, 2009, challenging
the Notice of Determination. He did not address his tax liabilities, the determination that he was
ineligible for collection alternatives, or the IRS Office of Appeals’ verification that proper
procedures had been followed. Instead, he argued that he did not receive a proper CDP hearing and
no law or regulation permitted the IRS to collect taxes from him.
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No. 10-1431
The Commissioner moved for partial summary judgment on all issues except with respect
to imposition of a penalty under 26 U.S.C. § 6673(a).1 The Commissioner supported the motion
with Voysest’s declaration, the administrative record, and the Tax Court decision in the prior case.
Reyes filed certain documents and an opposing memorandum in which he raised an assortment of
convoluted arguments, all essentially claiming that he was not required to file federal income tax
returns or pay federal income tax.
In February 2010, the Tax Court issued an Order and Decision treating the motion for partial
summary judgment as a motion for summary judgment and granting it in favor of the Commissioner.
The court identified the principal issue as a challenge to the existence or amount of the underlying
liabilities for the six tax years in question, 1999 through 2004. With regard to tax years 2000, 2001,
2003 and 2004, the court determined that Reyes had a prior opportunity to challenge the deficiency
determinations before the Commissioner and before the Tax Court when he filed the prior petition,
No. 20316-07, and Reyes ultimately stipulated to the deficiencies for those tax years. The court held
Reyes was barred from again challenging the existence or amount of the underlying liabilities for
those four tax years, citing 26 U.S.C. § 6330(c)(2)(B).3 Because the Commissioner conceded Reyes
1
Section 6673(a)(1) “authorizes the Tax Court to require a taxpayer to pay to the United
States a penalty not in excess of $25,000 whenever it appears that proceedings have been instituted
or maintained by the taxpayer primarily for delay or that the taxpayer’s position in such proceeding
is frivolous or groundless.”
3
Section 6330(c)(2)(B) provides:
(B) Underlying liability.–The person may also raise at the hearing challenges to the
existence or amount of the underlying tax liability for any tax period if the person did
not receive any statutory notice of deficiency for such tax liability or did not
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did not receive the notices of deficiency for tax years 1999 and 2002, the court ruled that
§ 6330(c)(2)(B) did not bar Reyes from challenging the existence or amount of the underlying
liabilities for those years.
Nonetheless, the Tax Court ruled that Reyes’s challenge to the existence or amount of the
underlying liabilities for tax years 1999 and 2002 consisted “solely of discredited protestor
rhetoric[.]” The court found that Reyes, a United States citizen and Tennessee resident, was subject
to the federal income tax and was obligated to file a federal income tax return to report his wages
or other compensation. The court found that Reyes received an adequate administrative hearing, but
even if he did not, no useful purpose would be served in remanding the case to the IRS Office of
Appeals, given Reyes’s “tax protestor agenda.” Reyes was not entitled to a collection alternative,
the court explained, due to his failure to comply with his federal tax obligations. Finally, the court
warned Reyes that he might face a substantial penalty under § 6673(a)(1) in the future if he
continued to advance frivolous arguments. The court allowed the Commissioner to proceed to
collect by levy the deficiencies for tax years 1999 through 2004 as determined in the Notice of
Determination dated January 23, 2009. Reyes then filed this appeal.
II. STANDARD OF REVIEW
We review de novo the Tax Court’s grant of summary judgment in a collection due process
(CDP) case. Golden v. Comm’r, 548 F.3d 487, 492 (6th Cir. 2008). Like Rule 56 of the Federal
Rules of Civil Procedure, Rule 121(b) of the Tax Court Rules of Practice and Procedure provides
otherwise have an opportunity to dispute such tax liability.
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that summary judgment may be granted “if the pleadings, answers to interrogatories, depositions,
admissions, and any other acceptable materials, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that a decision may be rendered as a matter of law.”
We review de novo the determinations of the IRS Appeals Office with respect to underlying tax
liabilities; however, we review all other decisions for an abuse of discretion. Living Care
Alternatives of Utica, Inc. v. United States, 411 F.3d 621, 626 (6th Cir. 2005).
III. ANALYSIS
The IRS Office of Appeals provided Reyes with an opportunity for a CDP hearing, and Reyes
has failed to establish that his due process rights were violated. We will not consider in any depth
Reyes’s new contention, raised for the first time before us, that only alien individuals with green card
status are residents of the United States who must file federal income tax returns and pay federal
income taxes. See Lewis v. Whirlpool Corp., 630 F.3d 484, 490 (6th Cir. 2011) (noting well-settled
rule that we do not consider arguments made for the first time on appeal).
A. Reyes received a proper CDP hearing opportunity
Congress created CDP hearings with passage of the Internal Revenue Service Restructuring
and Reform Act of 1998. Living Care Alternatives, 411 F.3d at 624. Before that Act was passed,
“the IRS had the right to levy on taxpayer property without any prior opportunity for a hearing or
procedural due process, so long as post-deprivation procedures were provided.” Id. The Supreme
Court sustained that approach eighty years ago, see id. (citing Phillips v. Comm’r, 283 U.S. 589
(1931)), and while the provision of CDP hearings reveals congressional intent to provide taxpayers
with additional procedural protections prior to IRS action, the Act must be interpreted in its historical
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context. Id. Tax levies are not typical collection actions because the IRS enjoys greater latitude than
normal creditors. Id.
Title 26 U.S.C. § 6330(b) grants a taxpayer the right to a hearing on a notice of levy.
“Proceedings are informal and may be conducted via correspondence, over the phone or face to
face.” Living Care Alternatives, 411 F.3d at 624. The hearing officer must be an impartial IRS
employee who has had no prior involvement with respect to the unpaid tax. Id. (citing 26 U.S.C.
§ 6320(b)(3)). A taxpayer may challenge the underlying tax liability at the CDP hearing only if he
“did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an
opportunity to dispute such tax liability.” 26 U.S.C. § 6330(c)(2)(B). In addition, any other relevant
issue concerning the unpaid tax may be raised during the hearing, including spousal defenses,
challenges to the appropriateness of collection actions, and alternative collection options. 26 U.S.C.
§ 6330(c)(2)(A). As we previously explained:
By statute, the IRS Appeals Officer must: 1) conduct a verification that the IRS has
met all legal requirements and fulfilled its procedural obligations to move forward
with the lien or levy, 2) consider defenses and collection alternatives proffered by the
taxpayer and, 3) make a determination that the “proposed collection action balances
the need for the efficient collection of taxes with the legitimate concern of the person
that any collection action be no more intrusive than necessary.” 26 U.S.C.
§ 6330(c)(3) (emphasis added). This final balancing factor is novel in American tax
law and injects into the calculus an equitable consideration for the taxpayer and his
concerns.
Living Care Alternatives, 411 F.3d at 624-25. Upon completion of such review, the IRS Appeals
Officer sends a final decision to the taxpayer in a Notice of Determination letter. Id. at 625. The
taxpayer may then seek judicial review if the decision is unfavorable. Id.
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In Wasson v. Comm’r, 59 F. App’x 808, 809 (6th Cir. 2003), we upheld a Tax Court ruling
that a taxpayer’s due process rights were not violated by the failure to conduct a CDP hearing. In
that case, the IRS Appeals Officer tried to contact Wasson multiple times to schedule a CDP hearing,
to no avail. Id. at 809. Wasson failed to present any evidence to support his claim that he contacted
the IRS Appeals Officer numerous times, and Wasson did not explain his lack of response to the IRS
Appeals Officer. Id. We held that a due process violation did not occur under these circumstances.
In this case, Voysest actually scheduled a CDP hearing, but Reyes did not appear. When
Reyes’s counsel withdrew from representation, Voysest tried to contact Reyes directly, but the two
telephone numbers Reyes had previously provided to the IRS were useless. Reyes alleged in his
petition that he contacted Voysest about rescheduling the CDP hearing and Voysest declined to set
a new date for the hearing, but, like the taxpayer in Wasson, Reyes provided no evidence to support
this claim.
Additionally, Reyes did not controvert Voysest’s finding that any postponement of the CDP
hearing would be futile. Although the initial indication was that Reyes wished to discuss an
installment plan or an offer in compromise, he failed to provide any of the documents or payments
requested and thus did not satisfy the prerequisites for consideration of collection alternatives.
Therefore, Voysest acted appropriately when he declined to reschedule the CDP hearing. See Deems
v. Comm’r, No. 10-13378, 2011 WL 1849369, at *2 (11th Cir. May 17, 2011) (unpublished per
curiam) (rejecting claim that IRS Appeals Settlement Officer denied taxpayer face-to-face CDP
hearing where Officer sent written communications to Deems, attempted to contact him by telephone
after providing notice of the date and time for telephone conference, and Deems refused to provide
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requested financial information or support his request to discuss collection alternatives). Wasson
and Deems, although unpublished cases, are persuasive authority in support of our decision that no
due process violation occurred in this case.
Voysest complied with the statutory requirements before issuing a Notice of Determination.
See Living Care Alternatives, 411 F.3d at 624-25. He determined that he could serve as an impartial
Appeals Settlement Officer because he had had no prior involvement in the case. See 26 U.S.C.
§ 6330(b)(3). He found that all legal requirements and procedural obligations had been met to move
forward with the levy. See 26 U.S.C. § 6330(c)(1). He confirmed that there would be no spousal
defenses because Reyes was single, and Reyes was not entitled to collection alternatives for the
reasons previously stated. See 26 U.S.C. § 6330(c)(2); Hartman v. Comm’r, 638 F.3d 248, 250-51
(3d Cir. 2011) (per curiam) (upholding summary judgment for Commissioner where taxpayer failed
to supply IRS with prerequisite filings and tax payments necessary to discuss collection alternatives).
Finally, Voysest balanced the need for the efficient collection of taxes against Reyes’s legitimate
concern that any collection action should be no more intrusive than necessary. See 26 U.S.C.
§ 6330(c)(3)(C). All of these findings were set forth in the Notice of Determination sent to Reyes.
See 26 U.S.C. § 6330(c)(3). Therefore, the Tax Court did not err when it determined that Reyes
received a proper CDP hearing opportunity and that his due process rights were not violated.
B. Reyes’s remaining arguments are without merit
With regard to tax years 2000, 2001, 2003 and 2004, the Tax Court correctly concluded that
Reyes had a prior opportunity to challenge those deficiency determinations before the Commissioner
and the Tax Court when he pursued the prior petition, No. 20316-07. Because Reyes ultimately
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stipulated to the deficiencies for those tax years, the Tax Court correctly held that Reyes was barred
from again challenging the existence or amount of those underlying liabilities. See Golden, 548 F.3d
at 494-95 (observing that, if a claim of liability or non-liability relating to a particular tax year is
litigated, a judgment on the merits is res judicata as to any subsequent proceeding involving the
same claim and the same tax year). With regard to the deficiencies for tax years 1999 and 2002, the
Tax Court appropriately ruled that § 6330(c)(2)(B) did not bar Reyes from challenging the existence
or amount of the underlying liabilities for those years, but that Reyes’s challenges were nothing more
than “discredited protestor rhetoric[.]”
On appeal, Reyes asserts for the first time a new argument that his domicile is within the
United States, but he is not a resident of the United States as defined in 26 U.S.C. § 7701(b)(1)(A)
because he is not an alien individual with green card status. Among other things, he asserts that only
alien individuals are residents of the United States for purposes of filing returns and paying taxes
under the Tax Code.
We decline to devote substantial time and effort to the task of unwinding Reyes’s
misconstruction of various Tax Code provisions. His argument is the converse of another well-
known tax protestor argument based on the significance of resident status, and it is similarly lacking
in merit. See e.g., Ford v. Pryor, 552 F.3d 1174, 1177 n.2 (10th Cir. 2008) (holding as frivolous
taxpayer’s argument that he was not subject to the income tax because he is a “non resident alien”
and awarding sanctions of $8,000); Ambort v. United States, 392 F.3d 1138, 1139 (10th Cir. 2004)
(noting Ambort conducted tax seminars instructing attendees that, although they were United States
residents, they could legally claim to be “nonresident aliens” exempt from most federal income
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taxes); United States v. Brooks, 174 F.3d 950, 952-53 (8th Cir. 1999) (affirming taxpayer’s
conviction on tax charges where taxpayer claimed he was a “non-resident alien”).
IV. CONCLUSION
The Tax Court did not commit any error of fact or law when it granted summary judgment
in favor of the Commissioner. The Tax Court also did not err when it warned Reyes that any future
attempts to advance frivolous arguments could result in a substantial penalty against him under
§ 6673. Accordingly, we AFFIRM.
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