Kurt H. Haben v. Commissioner , 2015 T.C. Summary Opinion 55 ( 2015 )

PURSUANT TO INTERNAL REVENUE CODE
SECTION 7463(b),THIS OPINION MAY NOT
BE TREATED AS PRECEDENT FOR ANY
OTHER CASE.
T.C. Summary Opinion 2015-55
UNITED STATES TAX COURT
KURT H. HABEN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9852-14S L. Filed September 8, 2015.
Kurt H. Haben, pro se.
Alexander R. Roche, for respondent.
SUMMARY OPINION
GUY, Special Trial Judge: This case was heard pursuant to the provisions
of section 7463 of the Internal Revenue Code in effect when the petition was
filed.1 Pursuant to section 7463(b), the decision to be entered is not reviewable by
1
Unless otherwise indicated, all section references are to the Internal
(continued...)
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any other court, and this opinion shall not be treated as precedent for any other
case.
The Internal Revenue Service (IRS) Office of Appeals (Appeals Office)
issued to petitioner a notice of determination sustaining a proposed levy to collect
penalties assessed against him pursuant to section 6672 for the taxable periods
ending June 30, 2009, September 30, 2009, and September 30, 2012 (periods at
issue). Petitioner invoked the Court’s jurisdiction by filing a timely petition for
review of the determination pursuant to section 6330(d). Petitioner resided in
Illinois when the petition was filed.
The issues for decision are: (1) whether petitioner may contest his liability
for the section 6672 penalties in dispute; (2) if so, whether he is liable for the
section 6672 penalties; and (3) if not, whether the Appeals Office abused its
discretion in determining to proceed with the proposed levy action.
Background
Some of the facts have been stipulated and are so found. The stipulation of
facts and the accompanying exhibits are incorporated herein by this reference.
1
(...continued)
Revenue Code, as amended and in effect at all relevant times. Monetary amounts
are rounded to the nearest dollar.
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I. Petitioner’s Background
Petitioner earned a bachelor’s degree from DePaul University and a master’s
degree from Rosary College. He is a certified public accountant. From 1986 until
December 2012 petitioner was employed by American Consolidated
Transportation Cos., Inc. (ACTC). For much of that time, and during the periods
at issue, he served as ACTC’s comptroller.
II. Corporate Structure
ACTC is a holding company for several subsidiary corporations, including
Central States Coach Repairs, Inc. (CSCR). Karen Bingham is the majority owner
and chief executive officer of ACTC and its subsidiary corporations.
III. Bankruptcy Proceedings
Beginning in 2006 and in the years that followed ACTC lost several
important contracts. As its revenues declined, ACTC experienced financial
difficulties and was unable to pay amounts due on certain bank loans. In July
2009 ACTC and CSCR filed for bankruptcy. CSCR subsequently failed to pay
over to the IRS Federal employment taxes for the periods at issue.
IV. Investigation and Assessment of Section 6672 Penalties
Revenue Officer Jennifer Gardner (RO Gardner) investigated CSCR’s
failure to pay over its employment taxes. On December 13, 2012, she interviewed
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petitioner and Ms. Bingham to determine whether they should be considered
“responsible persons” subject to the provisions of section 6672. RO Gardner
provided petitioner with Notice 609, Privacy Act Notice, and Notice 784, Could
You Be Personally Liable for Certain Unpaid Federal Taxes? RO Gardner
considered petitioner to be combative during the interview and, when the
interview was completed, he declined to sign Form 4180, Report of Interview with
Individual Relative to Trust Fund Recovery Penalty or Personal Liability for
Excise Taxes. Petitioner resigned his position at ACTC on December 19, 2012.
On January 15, 2013, the IRS mailed to petitioner a Letter 1153, Trust Fund
Recovery Penalty Letter, stating that the IRS proposed to assess section 6672
penalties against him as a person who failed to pay over CSCR’s employment
taxes. The Letter 1153 described how petitioner could challenge the proposed
assessments by submitting to the Appeals Office a formal written protest. The
Letter 1153 was sent to petitioner at his home address--a residence that he shared
with his wife and son. Petitioner does not dispute that the IRS sent the Letter
1153 by certified mail to his correct last known address.
Bill Walsh, the U.S. Postal Service (USPS) letter carrier who delivered mail
to petitioner’s address in early 2013, testified at trial and described in detail the
USPS procedures that he followed in attempting to deliver the Letter 1153 to
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petitioner. In accordance with USPS procedures and consistent with notations that
he placed on the envelope in which the Letter 1153 was mailed to petitioner,
Mr. Walsh first attempted to deliver the letter at petitioner’s residence on
January 17, 2013. When no one answered the door, however, he placed a USPS
Form 3849, Delivery Notice/Reminder/Receipt, in petitioner’s mailbox notifying
him that the USPS had attempted to deliver an item of certified mail from the IRS
and that he could visit his local post office to take delivery of the item or call the
post office to request that the item be redelivered. Although Mr. Walsh left two
additional Forms 3849 in petitioner’s mailbox on January 22 and February 1,
2013, petitioner did not appear at the post office to pick up the item, nor did he
call to request that the item be redelivered. The USPS subsequently returned the
envelope bearing the Letter 1153 to the IRS marked in relevant part “RETURN
TO SENDER UNCLAIMED UNABLE TO FORWARD”.
Petitioner testified that he did not receive any Forms 3849 from the USPS in
early 2013 and that he was unaware that the IRS had proposed to assess section
6672 penalties against him. Petitioner further testified that he may have been
traveling away from home when the USPS attempted to deliver the Letter 1153,
and he speculated that Mr. Walsh may have placed the Forms 3849 in the wrong
mailbox.
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V. Collection Activities
The record includes Forms 4340, Certificate of Assessments, Payments, and
Other Specified Matters, summarizing activities in petitioner’s accounts for the
periods at issue. The account transcripts show that on April 12, 2013, respondent
assessed the section 6672 penalties in dispute and sent to petitioner notices of the
amounts due for each period and demand for payment.
Petitioner testified that he first learned that the section 6672 penalties had
been assessed when the IRS notified him that it would withhold a Federal income
tax refund that he had claimed for 2012. The record shows that on April 15, 2013,
the IRS applied petitioner’s overpayment of $2,273 for 2012 to offset a portion of
the section 6672 penalty assessed for the taxable period ending June 30, 2009.2
On September 30, 2013, the IRS sent to petitioner a Final Notice of Intent to
Levy and Notice of Your Right to a Hearing notifying him that he owed section
6672 penalties and related interest totaling $31,022 for the periods at issue and
that the IRS proposed to collect the amount due by way of a levy action.
Petitioner submitted to the Appeals Office a timely request for an administrative
2
The record does not reflect when petitioner was actually notified that his
refund for 2012 had been withheld and so applied.
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hearing asserting that he should not be held responsible for CSCR’s failure to pay
over its employment taxes.
During the course of the Appeals Office administrative hearing, petitioner
maintained that he was not liable for the section 6672 penalties at issue. The
Appeals Office determined, however, that petitioner had failed to take advantage
of a prior opportunity to challenge the assessments in question, and, therefore, he
could not contest the existence or amount of his liabilities during the
administrative hearing. Petitioner did not offer an alternative to or otherwise
challenge the appropriateness of the proposed levy action.
On April 10, 2014, the Appeals Office issued to petitioner a Notice of
Determination Concerning Collection Action(s) Under Section 6320 and/or 6330
sustaining the proposed levy action. Petitioner filed with the Court a timely
petition for review of the determination, continuing to press his claim that he is not
liable for the section 6672 penalties at issue.
Discussion
I. Section 6672 Trust Fund Recovery Penalties
Employers are required to withhold, and subsequently pay over to the IRS,
Federal income and employment taxes from the wages of their employees. See
secs. 3102(a), 3202(a), 3402(a)(1), 3403. In accordance with section 7501(a),
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employment taxes are held to be a special fund in trust for the United States and
consequently are referred to as “trust fund taxes”. See Slodov v. Commissioner,
436 U.S. 238, 242-243 (1978); Pollock v. Commissioner, 132 T.C. 21, 25 n.10
(2009).
A. Responsible Person
Section 6672(a) provides in relevant part that any person who is required to
collect, truthfully account for, and pay over any tax imposed in title 26 and who
willfully fails to do so is liable for a penalty equal to the amount of tax not
accounted for and paid over. The term “person” is defined in section 6671(b) and
includes any officer or employee of a corporation who is charged with performing
the duties described in section 6672(a). Such persons are referred to as
“responsible persons”, and the term may be broadly applied. Mason v.
Commissioner, 132 T.C. 301, 321 (2009).
B. Assessment of Section 6672 Penalties
Pursuant to section 6672(b)(1), the Commissioner normally may not assess
a penalty unless he first notifies the responsible person of the proposed assessment
either in person or by written notice sent by mail to the person’s last known
addresses. See Mason v. Commissioner, 132 T.C. 317-318; Obiakor v.
Commissioner, T.C. Memo. 2015-112. A Letter 1153 provides a responsible
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person with notice of a proposed assessment under section 6672 and an
opportunity to protest the matter with the Appeals Office. Mason v.
Commissioner, 132 T.C. 317.
As previously mentioned, petitioner maintains that he was not a responsible
person who willfully failed to pay over employment taxes of CSCR. The Court
may consider this issue, however, only if we conclude that petitioner was entitled
to contest his liability for the section 6672 penalties at issue during the Appeals
Office administrative hearing.
II. Administrative Hearings and Judicial Review Under Section 6330
Section 6331(a) authorizes the Secretary to levy upon the property and the
property rights of a taxpayer liable for taxes who fails to pay those taxes within 10
days after notice and demand for payment is made. The levy authorized by section
6331(a) may be made with respect to unpaid tax only if the Secretary has given
written notice to the taxpayer no less than 30 days before the levy. Sec. 6331(d).
Section 6330(a) requires that the written notice include the amount of the unpaid
tax and information about the taxpayer’s right to an administrative hearing.
If the taxpayer requests an administrative hearing, the Appeals Office is
charged with conducting the hearing. Sec. 6330(b)(1). In rendering an
administrative determination in a collection review proceeding under section
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6330, the Appeals Office must verify that the requirements of any applicable law
and administrative procedure have been met in processing the taxpayer’s case.
Sec. 6330(c)(1), (3)(A). The Appeals Office also must consider any issues raised
by the taxpayer relating to the collection action, including offers of collection
alternatives, relevant spousal defenses, and challenges to the appropriateness of
the collection action. Sec. 6330(c)(2)(A), (3)(B). A taxpayer may also challenge
the existence or amount of his or her underlying tax liability if the taxpayer did not
receive a notice of deficiency or did not otherwise have an earlier opportunity to
dispute the tax liability. Sec. 6330(c)(2)(B). Finally, the Appeals Office must
consider whether the collection action balances the need for efficient collection
against the taxpayer’s concern that collection be no more intrusive than necessary.
Sec. 6330(c)(3)(C).
Section 6330(d)(1) grants this Court jurisdiction to review the
administrative determination made by the Appeals Office. If the taxpayer’s
underlying tax liability is properly in dispute, the Court will review the
determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).
Where the underlying tax liability is not properly at issue, the Court will review
the determination for abuse of discretion. Id. at 182; see also Sego v.
Commissioner, 114 T.C. 604, 610 (2000). An abuse of discretion occurs if the
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Appeals Office exercises its discretion “arbitrarily, capriciously, or without sound
basis in fact or law.” Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
III. Whether Petitioner May Contest His Liability for Section 6672 Penalties
Petitioner contends that he was entitled to contest his liability for the section
6672 penalties before the Appeals Office because he did not receive the Letter
1153 that the IRS mailed to him on January 15, 2013. Respondent contends that
he properly sent the Letter 1153 by certified mail and that petitioner in effect
turned his back on the opportunity to contest the proposed assessments by
declining to claim his mail. The Court has previously held that a taxpayer may not
deliberately refuse to accept delivery of a Letter 1153 (or a notice of deficiency)
and nevertheless maintain that he or she did not have a prior opportunity to dispute
the underlying liability within the meaning of section 6330(c)(2)(B). See
Giaquinto v. Commissioner, T.C. Memo. 2013-150; see also Campbell v.
Commissioner, T.C. Memo. 2013-57.
Bill Walsh, the USPS letter carrier responsible for delivering petitioner’s
mail in early 2013, described the USPS procedures that he followed in attempting
to deliver the Letter 1153 to petitioner. Mr. Walsh impressed the Court as a
forthright and credible witness. The record shows that Mr. Walsh left Forms 3849
in petitioner’s mailbox on January 17, January 22, and February 1, 2013,
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informing him that an item of certified mail from the IRS was being held for him
at the local post office.
Like the taxpayer in Giaquinto v. Commissioner, at *13, petitioner was fully
aware that the IRS was evaluating whether he should be considered a responsible
person under section 6672. RO Gardner had informed petitioner of this fact when
she interviewed him in December 2012, she characterized petitioner as
“combative” during the interview process, and she noted that he declined to sign
Form 4180 summarizing the substance of the interview.
Petitioner failed to offer a persuasive explanation why he did not receive
any of the three Forms 3849 that Mr. Walsh left in his mailbox. Although
petitioner vaguely suggested that he may have been traveling away from home in
early 2013 or that Mr. Walsh may have placed the Forms 3849 in the wrong
mailbox, he did not offer any objective evidence in support of either proposition.
Considering all the facts and circumstances, the Court concludes that petitioner
deliberately failed to claim the Letter 1153. In accordance with section
6330(c)(2)(B), it follows that petitioner was precluded from contesting his liability
for the section 6672 penalties at issue during the Appeals Office administrative
hearing.
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IV. Review for Abuse of Discretion
Because petitioner’s underlying liability is not properly at issue, we review
the Appeals Office’s determination to proceed with the proposed levy action for
abuse of discretion. The record shows that the Appeals Office properly verified
that the requirements of applicable law and administrative procedure were met in
processing petitioner’s case. See sec. 6330(c)(1), (3)(A). Petitioner did not offer a
collection alternative (such as an installment agreement or an offer-in-
compromise) or otherwise challenge the appropriateness of the collection action.
See sec. 6330(c)(2)(A), (3)(B). And in the absence of a financial statement or
similar information from petitioner, we are satisfied that the Appeals Office
balanced the need for efficient collection against concerns that collection be no
more intrusive than necessary. See sec. 6330(c)(3)(C). On this record, we
conclude that the Appeals Office did not abuse its discretion in determining to
proceed with the proposed levy action.
To reflect the foregoing,
Decision will be entered
for respondent.