Michael Gordon Banks v. Commissioner ( 2019 )


Menu:
  •                                T.C. Memo. 2019-166
    UNITED STATES TAX COURT
    MICHAEL GORDON BANKS, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent
    Docket No. 5783-18L.                           Filed December 19, 2019.
    Michael Gordon Banks, pro se.
    Sharyn M. Ortega, for respondent.
    MEMORANDUM FINDINGS OF FACT AND OPINION
    KERRIGAN, Judge: This collection due process (CDP) case was
    commenced in response to a Notice of Determination Concerning Collection
    Action(s) Under Section 6320 and/or 6330 (notice of determination) dated
    February 27, 2018, sustaining the filing of a Federal tax lien in relation to
    petitioner’s unpaid tax liabilities for 2013 and 2015 (years at issue). The issue for
    -2-
    [*2] our consideration is whether respondent’s determination to sustain the
    collection action was proper.
    Unless otherwise indicated, all section references are to the Internal
    Revenue Code in effect at all relevant times. We round all monetary amounts to
    the nearest dollar.
    FINDINGS OF FACT
    Some of the facts have been stipulated and are so found. The stipulation of
    facts and the attached exhibits are incorporated herein by this reference.1
    Petitioner resided in California when he timely filed his petition.
    On May 30, 2017, respondent sent petitioner a Notice of Federal Tax Lien
    Filing and Notice of Your Right to a Hearing Under IRC 6320 regarding
    petitioner’s unpaid tax liabilities of $368 for 2013 and $21,917 for 2015.
    Petitioner timely filed a Form 12153, Request for a Collection Due Process or
    Equivalent Hearing. On the Form 12153 petitioner indicated that he was
    interested in an offer-in-compromise as well as a withdrawal of the notice of
    Federal tax lien (NFTL). He contended that the NFTL was not properly filed.
    Petitioner’s CDP hearing request was assigned to a settlement officer. On
    September 27, 2017, the settlement officer mailed petitioner a letter advising him
    1
    These facts are relevant portions of the administrative record.
    -3-
    [*3] that his CDP hearing request was being postponed until action was taken on
    his offer-in-compromise, which was pending before the start of collection
    proceedings.2 When petitioner had requested an offer-in-compromise, he was
    advised that while his offer was being investigated, an NFTL might be filed to
    protect the Government’s interest. Subsequently, the settlement officer found out
    that petitioner’s offer-in-compromise had been previously rejected and that he had
    requested an appeal of the rejection. Petitioner’s appeal of his rejection was then
    reassigned to the same settlement officer who was handling the CDP hearing
    request.
    The settlement officer reviewed petitioner’s Form 13711, Request for
    Appeal of Offer in Compromise. On November 13, 2017, the settlement officer
    sent petitioner a letter scheduling a telephone CDP hearing for December 14,
    2017. The letter explained to petitioner that his rejected offer-in-compromise had
    been reviewed and that there was no change to the determination. The letter
    2
    Petitioner filed a Form 656, Offer in Compromise, on November 16, 2016.
    On July 11, 2017, respondent sent petitioner a letter stating that his offer-in-
    compromise could not be accepted and that if he did not contact respondent within
    10 days, his offer would continue to be processed on the basis of the information
    petitioner had already submitted. On August 14, 2017, respondent’s Centralized
    Offer in Compromise unit (COIC) issued petitioner a letter stating that his offer
    was rejected because he had net equity of $110,960 available to pay his $23,431
    tax liability in full. On September 11, 2017, petitioner appealed the rejection.
    -4-
    [*4] further stated that his balance due accounts could be placed in currently
    noncollectible (CNC) status, resulting in suspension of collection action, and that
    his accounts could be removed from CNC status if his financial status improved.
    On December 1, 2017, petitioner sent the settlement officer a letter
    addressing his disagreements regarding the rejection of his offer-in-compromise.
    In the letter petitioner alleged that respondent might have engaged in criminal
    activity and requested that the CDP hearing be delayed. In response to petitioner’s
    letter the settlement officer sent petitioner a letter rescheduling the CDP hearing
    for January 9, 2018. The letter reiterated the offer to place his balance due
    accounts in CNC status.
    On December 12, 2017, petitioner sent the settlement officer another letter
    expressing his concerns about the rejection of his offer-in-compromise. His letter
    did not include financial documents in support of his position.
    In preparation for the CDP hearing the settlement officer reviewed the offer-
    in-compromise and concluded that it was rejected properly because petitioner had
    sufficient net equity in his assets of $110,960 available to pay his $23,431
    outstanding tax liability in full. The CDP hearing was held on January 9, 2018.
    The settlement officer explained to petitioner that she had not received any
    additional information to support petitioner’s appeal of the rejection of his offer-
    -5-
    [*5] in-compromise. Petitioner did not raise his underlying liabilities but argued
    that the filing of the NFTL was premature and that the NFTL should be
    withdrawn.
    After the hearing petitioner sent the settlement officer a letter complaining
    about respondent’s Fresh Start Program. With the letter he sent various
    attachments, including a letter he had received from the Taxpayer Advocate
    Service (TAS). The TAS letter, dated August 10, 2017, was in response to
    petitioner’s inquiry dated July 7, 2017. The letter informed petitioner that his
    offer-in-compromise was being rejected. The letter further stated: “The IRS has
    determined that the lien should be withdrawn.”
    Upon receipt of petitioner’s letter the settlement officer followed up with
    the TAS regarding the status of the NFTL withdrawal. She attempted to contact
    the appropriate person with the TAS and left a message regarding the NFTL. The
    settlement officer concluded that there was no new financial information in
    support of petitioner’s appeal of the rejection of his offer-in-compromise. The
    settlement officer verified that all legal and procedural requirements had been met
    and the collection action taken was appropriate under the circumstances.
    -6-
    [*6] On February 27, 2018, respondent issued to petitioner the notice of
    determination sustaining the NFTL filing for the years at issue.3 Petitioner raised
    the following issues in his petition: (1) an agent of respondent falsified
    information; (2) the balance due does not reflect amounts that have been paid; (3)
    his ability to pay should be considered; and (4) the amount of the lien for 2013 is
    inaccurate and the lien should be withdrawn as referenced in the letter from the
    TAS.4
    OPINION
    I.      Standard of Review
    The Secretary is required to provide a taxpayer with written notice of the
    filing of an NFTL against the taxpayer’s property or rights to property. Sec.
    6320(a)(1). The notice must also inform the taxpayer of his or her right to a CDP
    hearing before an impartial officer or employee of the Appeals Office. Sec.
    6320(a)(3), (b). At the CDP hearing the taxpayer may raise any relevant issue
    relating to the unpaid tax or the NFTL, including spousal defenses, challenges to
    3
    The chart on page 1 of the Appeals Case Memorandum attached to
    respondent’s notice of determination contains a typographical error, listing tax
    year 2016 where it should list 2015.
    4
    In his petition, petitioner incorrectly refers to separate liens for tax years
    2013 and 2015. Respondent filed only one NFTL regarding petitioner’s unpaid
    tax liabilities for both years at issue.
    -7-
    [*7] the appropriateness of the collection action, and offers of collection
    alternatives. Secs. 6320(b)(4), 6330(c)(2)(A). The taxpayer may challenge the
    existence or the amount of the underlying tax liability for any period only if he or
    she did not receive a notice of deficiency or did not otherwise have an opportunity
    to dispute the liability. Sec. 6330(c)(2)(B); Sego v. Commissioner, 
    114 T.C. 604
    ,
    609 (2000).
    Following the hearing the settlement officer must determine whether
    proceeding with the proposed collection action is appropriate. In making that
    determination the settlement officer is required to take into consideration:
    (1) whether the requirements of any applicable law or administrative procedure
    have been met, (2) any relevant issues raised by the taxpayer, and (3) whether the
    proposed collection action balances the need for the efficient collection of taxes
    with the legitimate concern of the taxpayer that the collection action be no more
    intrusive than necessary. Secs. 6320(c), 6330(c); see also Lunsford v.
    Commissioner, 
    117 T.C. 183
    , 184 (2001).
    The Court considers an underlying liability on review only if the taxpayer
    properly raised the issue during the CDP hearing. Sec. 301.6320-1(f)(2), Q&A-
    F3, Proced. & Admin. Regs.; see also Giamelli v. Commissioner, 
    129 T.C. 107
    ,
    -8-
    [*8] 115 (2007). Petitioner did not raise the underlying liabilities for the years at
    issue during his CDP hearing.
    Where the validity of the underlying tax liability is not at issue, we review
    the settlement officer’s administrative determinations regarding nonliability issues
    for abuse of discretion. Sego v. Commissioner, 
    114 T.C. 610
    . Abuse of
    discretion exists when a determination is arbitrary, capricious, or without sound
    basis in fact or law. See Murphy v. Commissioner, 
    125 T.C. 301
    , 320 (2005),
    aff’d, 
    469 F.3d 27
    (1st Cir. 2006). The Court does not conduct an independent
    review and substitute its judgment for that of the settlement officer. 
    Id. If the
    settlement officer follows all statutory and administrative guidelines and provides
    a reasoned, balanced decision, the Court will not reweigh the equities. Link v.
    Commissioner, T.C. Memo. 2013-53, at *12. The settlement officer verified that
    all legal procedures were followed.
    This Court may review the settlement officer’s verification under section
    6330(c)(1) without regard to whether the taxpayer raised it at the CDP hearing.
    Secs. 6320(c), 6330(c)(1), (3)(A); see also Hoyle v. Commissioner, 
    131 T.C. 197
    ,
    202-203 (2008), supplemented by 
    136 T.C. 463
    (2011). A settlement officer is
    required to base the notice of determination, in part, on the verification obtained
    under section 6330(c)(1) by ensuring that all legal requirements have been met.
    -9-
    [*9] Hoyle v. Commissioner, 
    131 T.C. 201-202
    ; see also sec. 6320(c). The
    section 6330(c)(1) verification is required for every determination. Hoyle v.
    Commissioner, 
    131 T.C. 202
    .
    II.    Scope of Review
    Absent a stipulation to the contrary, an appeal in this case would normally
    lie with the U.S. Court of Appeals for the Ninth Circuit. See sec. 7482(b)(1)(G)(i).
    Under Ninth Circuit precedent the scope of our review is generally limited to the
    administrative record. See Keller v. Commissioner, 
    568 F.3d 710
    , 718 (9th Cir.
    2009) (adopting Robinette v. Commissioner, 
    439 F.3d 455
    , 459-460 (8th Cir.
    2006), rev’g 
    123 T.C. 85
    (2004)), aff’g in part as to this issue T.C. Memo. 2006-
    166, and aff’g in part, vacating in part decisions in related cases. Section
    301.6330-1(f)(2), Q&A-F4, Proced. & Admin. Regs., defines the administrative
    record as Appeals’ case file, including “any * * * documents or materials relied
    upon by the Appeals officer * * * in making the determination under section
    6330(c)(3)”.
    III.   Abuse of Discretion
    A.      Rejection of the Offer-in-Compromise
    Section 7122(a) authorizes the Secretary to compromise any civil or
    criminal case arising under the internal revenue laws. Regulations implementing
    - 10 -
    [*10] section 7122 set forth three grounds for the compromise of a liability:
    (1) doubt as to liability, (2) doubt as to collectibility, and (3) promotion of
    effective tax administration. Sec. 301.7122-1(b), Proced. & Admin. Regs. Doubt
    as to collectibility exists where the taxpayer’s assets and income are less than the
    full amount of the liability. 
    Id. subpara. (2).
    The offer must include all unpaid tax
    liabilities and periods for which the taxpayer is liable. Murphy v. Commissioner,
    
    125 T.C. 309
    ; see also Internal Revenue Manual (IRM) pt. 5.8.1.7(1) (Jan. 1,
    2016).
    Pursuant to the authority granted in section 7122(d) the Secretary has
    developed guidelines and procedures to evaluate the adequacy of an offer-in-
    compromise, including regulations, the IRM, and other publications used by the
    Internal Revenue Service (IRS). See also Rev. Proc. 2003-71, sec. 2.02, 2003-2
    C.B. 517, 517. The IRM informs a settlement officer that the COIC unit
    determines whether an offer-in-compromise is processable.
    If the COIC rejects an offer-in-compromise as not being processable, a
    taxpayer may appeal the decision to the IRS Office of Appeals, which will
    consider disputed items and make a final determination following IRM pt.
    8.23.3.3, Appeals OIC Evaluation Procedures. IRM pt. 8.22.7.10.1.1(3) (Sept. 23,
    2014). In making a final determination the settlement officer should consider any
    - 11 -
    [*11] new information, particularly if it pertains to an issue disputed at the time of
    rejection. IRM pt. 8.23.3.3(5) (Aug. 18, 2017). The settlement officer reviews the
    taxpayer’s offer-in-compromise to determine whether the basis for the rejection
    was appropriate. IRM pt. 5.8.12.6.1(1) (Apr. 26, 2018). The settlement officer
    should assess whether the determination of the taxpayer’s reasonable collection
    potential is fully supported by the documented facts and circumstances in the case
    file. IRM pt. 5.8.12.6.1(3) (Oct. 28, 2014).
    We conclude that the settlement officer’s decision to sustain the COIC’s
    rejection of petitioner’s offer-in-compromise was not an abuse of discretion. On
    the Form 656 petitioner offered to pay $12,000 to settle his $23,431 of outstanding
    tax liabilities. The COIC had rejected petitioner’s offer-in-compromise because
    petitioner had assets that would allow him to pay his tax liabilities in full. The
    settlement officer reviewed petitioner’s case file and determined that his offer-in-
    compromise was properly rejected because of the valuation of his assets, which
    showed that he had net equity of $110,960 available to pay his outstanding tax
    liabilities in full.
    Petitioner contends that respondent falsified information, but he never
    produced evidence of any criminal activity. He asserted that his ability to pay
    should be considered even though he did not dispute the asset valuation, which is
    - 12 -
    [*12] sufficient grounds for rejecting his $12,000 offer. Nevertheless, the
    settlement officer provided petitioner with an opportunity to produce additional
    information to show that the COIC’s rejection was inappropriate in accordance
    with the procedures laid out in IRM pt. 8.23.3.3(5). The settlement officer also
    provided petitioner additional time to prepare for the CDP hearing when petitioner
    requested an extension.
    Petitioner did not provide any new information to support his dispute of the
    COIC’s rejection. The settlement officer’s offer to place petitioner’s account in
    CNC status and suspend collection activities demonstrates respondent’s
    willingness to assess reasonably and fairly petitioner’s ability to pay his tax
    liabilities. Accordingly, we find that the settlement officer did not abuse her
    discretion in sustaining the COIC’s rejection of petitioner’s offer-in-compromise.
    B.     Withdrawal of the NFTL
    Section 6323(j)(1) provides in part:
    In general.--The Secretary may withdraw a notice of a lien filed under
    this section and this chapter shall be applied as if the withdrawn
    notice has not been filed, if the Secretary determines that--
    (A) the filing of such notice was premature or otherwise
    not in accordance with administrative procedures of the
    Secretary,
    - 13 -
    [*13]               (B) the taxpayer has entered into an agreement under
    section 6159 to satisfy the tax liability for which the lien was
    imposed by means of installment payments, unless such
    agreement provides otherwise,
    (C) the withdrawal of such notice will facilitate the
    collection of the tax liability, or
    (D) with the consent of the taxpayer or the National
    Taxpayer Advocate, the withdrawal of such notice would be
    in the best interests of the taxpayer (as determined by the
    National Taxpayer Advocate) and the United States.
    Petitioner was advised in advance that a lien could be filed. Respondent
    provided petitioner with requisite notice within the required period.
    Petitioner contends that the NFTL should not have been filed because he
    made an offer-in-compromise. Respondent contends that the NFTL was filed to
    protect the Government’s interest. Section 6321 imposes a Federal tax lien in
    favor of the United States on all property and rights to property of any person
    when a demand for payment of an outstanding tax liability has been made and the
    person fails to pay. Petitioner has not paid his outstanding tax liabilities. The fact
    that petitioner made an offer-in-compromise did not preclude respondent from
    maintaining a lien while tax is still outstanding. See Ramirez v. Commissioner,
    T.C. Memo. 2005-179; sec. 301.6323(j)-1(c), Proced. & Admin. Regs.
    - 14 -
    [*14] Petitioner also contends the NFTL should be withdrawn as referenced in the
    TAS letter. However, petitioner did not produce any evidence to support
    removing the lien. His contention that the lien should be withdrawn in accordance
    with the TAS letter is without merit.
    Section 6323(j)(1)(D) provides that an NFTL may be withdrawn if the
    Secretary determines that withdrawal would be in the best interests of both the
    taxpayer and the United States. While the statute requires the TAS to determine
    whether withdrawal would be in the best interest of the taxpayer, it also explicitly
    requires a determination by the Secretary or his designee that withdrawal is in the
    best interest of the United States. IRM pt. 5.12.9.3.4(1) (Oct. 14, 2013). Neither
    the Secretary nor his designee determined that the withdrawal of the NFTL was in
    the best interest of the United States.
    Section 6323(j)(1) is permissive. Crisan v. Commissioner, T.C. Memo.
    2007-67, slip op. at 7. The Commissioner may withdraw an NFTL pursuant to
    section 6323(j)(1), but respondent’s failure to do so in this case is not an abuse of
    discretion. See 
    id., slip op.
    at 7-8. We find that respondent followed proper
    procedures in accordance with the law with respect to the filing of the NFTL. The
    settlement officer did not abuse her discretion in sustaining the filing of the NFTL.
    - 15 -
    [*15] C.    Conclusion
    We conclude the settlement officer did not abuse her discretion. We have
    considered all other arguments made in reaching our decision, and to the extent
    not discussed above, we conclude that they are moot, irrelevant, or without merit.
    To reflect the foregoing,
    Decision will be entered for
    respondent.
    

Document Info

Docket Number: 5783-18L

Filed Date: 12/19/2019

Precedential Status: Non-Precedential

Modified Date: 2/3/2020