Joseph E. Lewis v. Commissioner , 128 T.C. No. 6 ( 2007 )

128 T.C. No. 6
UNITED STATES TAX COURT
JOSEPH E. LEWIS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6284-06L. Filed March 28, 2007.
P filed his 2002 income tax return late. P
included payment for the reported tax due with his
return. R assessed additions to tax under sec.
6651(a)(1) and (2), I.R.C., for late filing and late
payment. P requested an abatement of the additions to
tax, which was ultimately denied after a hearing before
R’s Appeals Office. R then initiated a collection
action, and P now seeks review of his liability for
additions to tax under sec. 6330, I.R.C. R moves for
summary judgment pursuant to sec. 301.6330-1(e)(3),
Q&A-E2, Proced. & Admin. Regs. R argues that P had an
opportunity to dispute the underlying liability in a
conference with R’s Appeals Office and thus cannot
properly raise the underlying liability again in a sec.
6330, I.R.C., collection review proceeding.
Held: Sec. 301.6330-1(e)(3), Q&A-E2, Proced. &
Admin. Regs., is valid.
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Held, further, because P had a conference with R’s
Appeals Office, he is precluded from disputing the
assessed additions to tax again in his sec. 6330,
I.R.C., action.
Joseph E. Lewis, pro se.
Linette B. Angelastro, for respondent.
OPINION
GOEKE, Judge: This matter is before the Court on
respondent’s motion for summary judgment. Respondent moves for
summary judgment, pursuant to section 6330(c)(2)(B)1 and section
301.6330-1(e)(3), Proced. & Admin. Regs. Respondent argues that
because petitioner was offered and participated in an Appeals
conference, he is precluded from properly raising his underlying
tax liability again in a subsequent collection review proceeding.
Because we find section 301.6330-1(e)(3), Q&A-E2, Proced. &
Admin. Regs., to be a reasonable expression of Congress’s intent
and because petitioner participated in a conference with Appeals
in which he was permitted to dispute his underlying tax
liability, we hold that petitioner may not properly raise his tax
liability again in a collection review hearing or before this
Court. Accordingly, respondent’s motion will be granted.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
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Background
At the time his petition was filed, petitioner resided in
Lancaster, California. Petitioner is a plumber by trade.
Petitioner and his wife jointly filed their Form 1040, U.S.
Individual Income Tax Return, for the 2002 tax year on January
25, 2004. Petitioner reported a tax due of $11,636 and enclosed
payment of that amount with the return. Petitioner’s return was
originally due on April 15, 2003. Respondent assessed the tax
reported on the return, along with additions to tax, pursuant to
section 6651(a)(1) and (2), of $2,618.10 for late filing and
$581.80 for late payment.
Petitioner then submitted a request to respondent to abate
the assessments of 2002 additions to tax based on reasonable
cause. Petitioner argued that the additions to tax for his late
filing should be abated because his accountant, who possessed
petitioner’s tax documents, was hospitalized with stomach cancer
at the time petitioner’s taxes were due. Petitioner’s request
was ultimately assigned to an Appeals officer. The Appeals
officer reviewed the circumstances of the late filing, including
correspondence from petitioner as well as petitioner’s employer,
and declined to abate the additions to tax. The Appeals officer
then sent petitioner a letter indicating that his appeal had been
denied. On May 28, 2005, respondent issued to petitioner Letter
1058, Final Notice, Notice of Intent to Levy and Notice of Your
Right to a Hearing, advising petitioner that respondent intended
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to levy on petitioner’s property to collect the unpaid liability
for tax year 2002.
Thereafter, petitioner timely submitted Form 12153, Request
for a Collection Due Process Hearing, on June 15, 2005. In his
Form 12153, petitioner again requested an abatement of the late
filing and late payment additions to tax assessed for tax year
2002. Petitioner continued to argue that his late filing be
excused because of his accountant’s illness.
Petitioner’s case was then assigned to a settlement officer
for a collection review hearing. The settlement officer reviewed
the administrative file and determined that petitioner’s request
for an abatement of the late filing and late payment additions to
tax had already been considered by Appeals. Thus, the settlement
officer determined that petitioner’s underlying liability could
not be raised properly again in his collection review hearing.
Petitioner did not raise any additional issues with respect to
the levy notice.
On March 3, 2006, respondent issued to petitioner a Notice
of Determination Concerning Collection Action(s) under Section
6320 and/or 6330. In response to the notice of determination,
petitioner filed a petition with this Court on March 30, 2006.
The only question raised in the petition is whether there is
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reasonable cause to abate the additions to tax imposed by
respondent under section 6651(a)(1) and (2) for late filing and
late payment.
Discussion
I. Section 301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs.
Respondent argues that pursuant to section 6330(c)(2)(B) and
section 301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs., where a
taxpayer has an opportunity for a conference with respondent’s
Appeals Office before a collection action has begun,2 then the
amount and existence of the underlying tax liability can neither
be raised properly in a collection review hearing nor on appeal
to this Court. Thus, respondent argues for summary judgment on
the ground that petitioner’s participation in a conference with
the Appeals Office to consider his request for abatement of
additions to tax precluded him from raising his underlying
liability in his collection review hearing or in this Court.
We have previously held that where a taxpayer filed amended
returns and was provided with an opportunity for a hearing with
respondent’s Appeals Office, the taxpayer was not entitled to
challenge the underlying liability in a subsequent collection
2
In this case petitioner actually participated in the prior
conference with Appeals. However, it appears respondent’s
position is that merely the offer of a prior conference with
Appeals is a sufficient opportunity to preclude subsequent review
of the liability in a collection review hearing. We do not
decide the more narrow question of whether simply an offer of a
conference with Appeals is sufficient to preclude subsequent
collection review consideration.
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review proceeding. Farley v. Commissioner, T.C. Memo. 2004-168
(noting that the taxpayer still had the opportunity to seek
judicial review by paying the tax and filing suit for a refund in
District Court); see also Bailey v. Commissioner, T.C. Memo.
2005-241 (while acknowledging that the taxpayer had not
challenged the validity of section 301.6330-1(e)(3), Q&A-E2,
Proced. & Admin. Regs., noting that the taxpayer was afforded
several opportunities to dispute his tax liability
administratively). We have also previously held, in a Court-
reviewed Opinion, that a taxpayer who has self-assessed a
liability has not had the opportunity to dispute his tax
liability and may raise the underlying liability in a collection
review proceeding. See Montgomery v. Commissioner, 122 T.C. 1, 9
(2004) (noting that the taxpayers had not had “an opportunity to
‘dispute’ their tax liability * * * in any sense of the term”).
Finally, while not binding on this Court, we note that many
District Courts have held that a taxpayer is precluded from
raising the underlying liability where he was provided with an
opportunity for a conference with Appeals. See, e.g., Abu-Awad
v. United States, 294 F. Supp. 2d 879 (S.D. Tex. 2003) (finding
penalty abatement request was sufficient opportunity to dispute
underlying tax liability for purposes of section 6330(c)(2)(B));
Pelliccio v. United States, 253 F. Supp. 2d 258 (D. Conn. 2003)
(holding that a taxpayer who was notified of his liability and
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offered an opportunity for an Appeals hearing, could not dispute
the liability again in a collection review hearing).
We have not, however, previously addressed the validity of
section 301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs., and
must do so in order to resolve respondent’s summary judgment
motion. We begin our analysis with the statutory language.
Section 6330 was enacted as part of the Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
sec. 3401, 112 Stat. 746 (the Restructuring and Reform Act).
Section 6330 generally provides that respondent cannot proceed
with the collection of a person’s taxes by levy until the person
has been given notice and the opportunity for an administrative
review of the matter (in the form of an Appeals Office hearing)
and, if dissatisfied, with judicial review of the administrative
determination. See Davis v. Commissioner, 115 T.C. 35, 37
(2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000). Section
6330(d) provides for judicial review of the administrative
determination in the Tax Court or a Federal District Court, as
may be appropriate.3
3
Sec. 6330(d)(1) has now been amended to provide for
judicial review of the administrative hearing exclusively in the
Tax Court. Pension Protection Act of 2006, Pub. L. 109-280, sec.
855(a), 120 Stat. 1019 (effective for determinations made more
than 60 days after the date of enactment).
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Section 6330(c) prescribes the matters that a person may
raise at an Appeals Office hearing. Section 6330(c)(2)(A)
provides that a person may raise collection issues such as
spousal defenses, the appropriateness of respondent's intended
collection action, and possible alternative means of collection.
See Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v.
Commissioner, supra. Section 6330(c)(2)(B) establishes
circumstances under which a person may challenge the existence or
amount of his or her underlying tax liability. Under section
6330(c)(4), however, a person is prohibited from raising in a
collection review proceeding an issue that was raised and
considered at a previous administrative or judicial proceeding if
the person seeking to raise the issue “participated meaningfully”
in such hearing or proceeding.4
Because respondent has not argued section 6330(c)(4) as a
basis for summary judgment, we decide this matter solely with
respect to petitioner’s ability to raise his underlying liability
pursuant to section 6330(c)(2)(B). Section 6330(c)(2)(B)
4
Respondent has previously stated that “Because section
6330(c)(2)(B) explicitly applies to challenges to tax liability,
section 6330(c)(4) with its more stringent requirement of
meaningful participation applies to non-liability issues.”
Office of Chief Counsel Notice CC-2003-016 at 20 (May 29, 2003).
While not clear whether respondent continues to adhere to this
limited interpretation of sec. 6330(c)(4), respondent has not
argued sec. 6330(c)(4) as a basis to preclude review of the
underlying liability in this case. See Office of Chief Counsel
Notice CC-2006-019 at 33 (Aug. 18, 2006) (updating and replacing
Office of Chief Counsel Notice CC-2003-016 and merely restating
the language of sec. 6330(c)(4)).
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provides:
(2). Issues at hearing.--
* * * * * * *
(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
otherwise have an opportunity to dispute such tax
liability.
Respondent has promulgated regulations regarding section
6330(c)(2)(B) pursuant to his authority under section 7805(a).
Section 301.6330-1(e), Proced. & Admin. Regs., provides in
pertinent part:
(e) Matters considered at CDP hearing.--(1) In
general. * * * The taxpayer also may raise challenges
to the existence or amount of the tax liability
specified on the CDP Notice for any tax period shown on
the CDP Notice if the taxpayer did not receive a
statutory notice of deficiency for that tax liability
or did not otherwise have an opportunity to dispute
that tax liability. * * *
Section 301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs.,
provides in pertinent part:
(3) Questions and answers. The questions and
answers illustrate the provisions of this paragraph (e)
as follows:
* * * * * * *
Q-E2. When is a taxpayer entitled to challenge
the existence or amount of the tax liability specified
in the CDP Notice?
A-E2. A taxpayer is entitled to challenge the
existence or amount of the tax liability specified in
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the CDP Notice if the taxpayer did not receive a
statutory notice of deficiency for such liability or
did not otherwise have an opportunity to dispute such
liability. Receipt of a statutory notice of deficiency
for this purpose means receipt in time to petition the
Tax Court for a redetermination of the deficiency
asserted in the notice of deficiency. An opportunity to
dispute a liability includes a prior opportunity for a
conference with Appeals that was offered either before
or after the assessment of the liability.[5]
Where, as here, respondent has promulgated interpretive
regulations with respect to a statutory provision, we have
generally applied the analysis set forth by the Supreme Court in
National Muffler Dealers Association, Inc. v. United States, 440
U.S. 472 (1979). Under National Muffler, an interpretive
regulation is valid if it implements a congressional mandate in a
reasonable manner. Id. at 476-477. An interpretive regulation
5
The regulations have been amended, and the answer A-E2 now
provides:
A taxpayer is entitled to challenge the existence or
amount of the underlying liability for any tax period
specified on the CDP Notice if the taxpayer did not
receive a statutory notice of deficiency for such
liability or did not otherwise have an opportunity to
dispute such liability. Receipt of a statutory notice
of deficiency for this purpose means receipt in time to
petition the Tax Court for a redetermination of the
deficiency determined in the notice of deficiency. An
opportunity to dispute the underlying liability
includes a prior opportunity for a conference with
Appeals that was offered either before or after the
assessment of the liability. An opportunity for a
conference with Appeals prior to the assessment of a
tax subject to deficiency procedures is not a prior
opportunity for this purpose.
Sec. 301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs. (applicable
to requests for hearings on or after November 16, 2006).
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is reasonable if it “harmonizes with the plain language of the
statute, its origin, and its purpose.” Id. at 477.
Following its decision in National Muffler, the Supreme
Court decided Chevron U.S.A., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837 (1984). In Chevron, the Court stated that
when reviewing an agency’s regulatory implementation of a
statute, we look first to whether Congress has directly spoken to
the precise question at issue. Id. at 842. If congressional
intent is clear, our inquiry ends, and we apply the unambiguously
expressed intent of Congress. Id. at 842-843. However, if
congressional intent is not clear, the question is whether the
regulation is based on a permissible construction of the statute.
Id.
This Court has, on a number of occasions, considered
Chevron’s effect on National Muffler and the review of
interpretive tax regulations. See, e.g., Swallows Holding, Ltd.
v. Commissioner, 126 T.C. 96, 131 (2006) (discussing the review
of Federal tax regulations under National Muffler in relation to
Chevron and stating that Chevron restated National Muffler in a
more practical two-part test); Cent. Pa. Sav. Association & Subs.
v. Commissioner, 104 T.C. 384, 392 (1995) (same) (noting the
Supreme Court’s application of National Muffler after Chevron).
Whether our analysis is guided by National Muffler or by Chevron,
the result would be the same.
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In evaluating the validity of section 301.6330-1(e)(3), Q&A-
E2, Proced. & Admin. Regs., we first consider whether Congress
has spoken directly to the precise question at issue. In
answering this question, we are instructed not to confine our
examination to a particular statutory provision in isolation.
Square D Co. & Subs. v. Commissioner, 118 T.C. 299, 308 (2002)
(citing FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120,
133 (2000)), affd. 438 F.3d 739 (7th Cir. 2006). The meaning,
or ambiguity, of certain words or phrases may become evident only
when placed in context. FDA v. Brown & Williamson Tobacco Corp.,
supra at 132-133 (citing Brown v. Gardner, 513 U.S. 115, 118
(1994)). It is a “‘fundamental canon of statutory construction
that the words of a statute must be read in their context and
with a view to their place in the overall statutory scheme.’”
Id. (quoting Davis v. Mich. Dept. of Treasury, 489 U.S. 803, 809
(1989)).
Neither the Restructuring and Reform Act nor the Code
defines what is meant by “otherwise have an opportunity to
dispute” a tax liability. Further, a fair reading of the section
suggests different possible meanings. On the one hand, it can be
read to mean an opportunity to challenge the underlying liability
in a forum ultimately subject to judicial review. On the other
hand, it can be read to include challenges subject to judicial
review as well as challenges heard by respondent’s Appeals Office
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in circumstances where no subsequent prepayment judicial review
of the determination is available. We examine these competing
possibilities in turn.
As this Court has often stated, receipt of a notice of
deficiency serves as a taxpayer’s ticket to the Tax Court. See,
e.g., Manko v. Commissioner, 126 T.C. 195, 200 (2006); Bourekis
v. Commissioner, 110 T.C. 20, 26 (1998). For income, estate, and
certain excise taxes, respondent cannot assess a deficiency
before first issuing a notice of deficiency. Sec. 6213(a).6
Upon receipt, the notice of deficiency entitles a taxpayer to
petition this Court to have a Judge, and not the Commissioner,
review his or her tax liability de novo prior to the assessment
and collection of the tax. See Manko v. Commissioner, supra.
Thus, pursuant to section 6330(c)(2)(B), a taxpayer who actually
received a notice of deficiency may not raise the underlying
liability again in a collection review proceeding because he has
previously litigated the liability, by petitioning this Court, or
declined such an opportunity to litigate the liability, by
failing to petition this Court.
6
This case does not involve a deficiency determination
requiring respondent to issue a notice of deficiency under sec.
6212 on which assessment is restricted by sec. 6213.
Accordingly, we do not address the applicability of sec.
301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs., and the phrase
“otherwise have an opportunity” in sec. 6330(c)(2), to situations
requiring a notice of deficiency.
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A notice of deficiency is not, however, the only ticket to
the Tax Court. In other contexts, a taxpayer may enjoy
prepayment judicial review of a tax liability without having been
issued a notice of deficiency. For instance, with respect to the
Commissioner’s classification of individuals as employees for
purposes of employment taxes, an employer is afforded a process
akin to the deficiency procedures.7 Sec. 7436(d). In these
cases, where the Commissioner seeks to reclassify individuals as
employees, he may issue a notice of determination with respect to
the employment classification to the employer. Sec. 7436(b).
This notice of determination entitles a taxpayer to petition this
Court for de novo review of the employee classification as well
as the proper amount of tax owing from this classification. Sec.
7436(a) and (b). A taxpayer may also seek prepayment review in
this Court of a request for an abatement of interest. Sec.
6404(h)(1). A taxpayer might also be afforded prepayment
judicial review of a tax liability in a bankruptcy proceeding.
11 U.S.C. sec. 505(a) (2000); see also Sabath v. Commissioner,
T.C. Memo. 2005-222.
Thus, it is possible to interpret “otherwise have an
opportunity to dispute” to refer to those situations where a
taxpayer was afforded one of the other, nondeficiency, avenues
for prepayment judicial review. Accordingly, reading section
7
For this purpose, employment taxes are those taxes imposed
under subtit. C.
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6330(c)(2)(B) as a whole, one might conclude that Congress
intended only for taxpayers who previously litigated, or were
afforded the opportunity to litigate their tax liabilities, by
receipt of a notice of deficiency or otherwise, to be precluded
from once again raising the underlying tax liability in a
collection review hearing. In other words, by enacting the
collection review procedures, Congress intended that every
taxpayer have one prepayment opportunity to litigate his tax
liability before the Commissioner brings his collection authority
to bear.
Such an interpretation finds some support in the legislative
history of the Restructuring and Reform Act. Section 6330
originated in section 3401 of the Senate version of H.R. 2676,
the bill that, after amendment, was enacted as the Restructuring
and Reform Act. The predecessor of section 6330(c)(2)(B) in the
Senate version provided without limitation that a taxpayer could
raise in a section 6330 proceeding “challenges to the underlying
tax liability as to existence or amount.” H.R. 2676, sec.
3401(b), 105th Cong., 2d Sess. (1998), 144 Cong. Rec. S4163
(daily ed. May 4, 1998). Judicial review of all collection
review determinations, including those regarding the underlying
liability, was to be conducted on an abuse of discretion
standard. S. Rept. 105-174, at 68 (1998), 1998-3 C.B. 537, 603-
604.
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The expansive Senate version provoked responses from the
Department of the Treasury and other representatives of the
executive branch expressing concerns that under the Senate bill a
taxpayer could dispute, in a collection review proceeding, tax
liabilities that had been previously litigated. See Statement of
Administration Policy, Executive Office of the President (Office
of Management and Budget), on H.R. 2676--Internal Revenue Service
Restructuring and Reform Act (Reported by the Senate Committee on
Finance) (May 5, 1998), reprinted in Tax Notes Today, 98 TNT
87-18 (May 6, 1998); Letter from Robert E. Rubin, Secretary of
the Treasury to William Archer, Chairman, Committee on Ways &
Means, U.S. House of Representatives (June 2, 1998), reprinted in
Tax Notes Today, 98 TNT 112-40 (June 11, 1998).
The final version of the legislation, devised in conference,
added the language that a person may challenge the existence or
amount of the underlying liability for any tax period “if such
person did not receive any statutory notice of deficiency for
such tax liability or did not otherwise have an opportunity to
dispute such tax liability.” While there is nothing explicit in
the committee reports to explain the added limitation, it is
reasonable to conclude that the conference committee was
addressing the stated criticisms of allowing taxpayers multiple
opportunities for judicial review of their tax liability. See
Montgomery v. Commissioner, 122 T.C. 17 (Gale, J.,
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concurring). Thus, it would follow that the language adopted by
the conference committee was meant to limit those taxpayers who
have previously litigated the underlying liability or declined
the opportunity to do so after receiving a notice of deficiency
or otherwise. Of course, if this were Congress’s intent,
petitioner would not be precluded from raising his liability here
because, while he has had the opportunity for an Appeals Office
hearing, he has not had a prior opportunity to litigate his
underlying tax liability.
This interpretation, however, is not without problems.
First, if Congress were concerned only with preventing taxpayers
from enjoying multiple opportunities to litigate their tax
liability, it certainly did not make this intent clear. That is,
if this were truly the limit of Congress’s intent, it could have
expressed this by stating in simple terms that a person may
challenge the existence or amount of the underlying liability if
the person had not previously had the opportunity to seek
judicial review of the underlying liability.
To interpret section 6330(c)(2)(B) to mean every taxpayer
gets one precollection opportunity to litigate his underlying tax
liability would serve to overturn the tax collection scheme as it
existed prior to the enactment of the Restructuring and Reform
Act where many tax liabilities were not subject to any prepayment
judicial review. For instance, with respect to section 6651,
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6654, and 6655 additions to tax which are unrelated to a
deficiency, respondent may assess the liability without first
issuing a notice of deficiency. Sec. 6665(b); see also sec.
6672(a) (trust fund fraud recovery penalty); sec. 6694 (income
tax return preparer penalty); sec. 6205(b) (employment taxes).
In each of these contexts there is no prescribed process for
prepayment judicial review provided by the Code.8 Thus, a
taxpayer faced with such a liability must first pay the
liability, or a divisible portion thereof, before seeking court
review in a refund action. See Flora v. United States, 362 U.S.
145 (1960) (recognizing exception to requirement of full payment
before refund suit for divisible taxes where taxpayer may pay tax
attributable to one event and then file suit for refund); see
also sec. 6694(c) (allowing suit for refund of tax return
preparer penalty upon payment of 15 percent of the penalty).
Thus, to hold that every taxpayer is entitled to litigate
his underlying nondeficiency liability once a collection action
is initiated would only encourage a taxpayer to wait until a
8
In the context of abatements of additions to tax, such as
those at issue here, prepayment judicial review is restricted by
sec. 6404(b), which provides that “No claim for abatement shall
be filed by a taxpayer in respect of an assessment of any tax
imposed under subtitle A or B.” In contrast, where Congress
desired to allow prepayment judicial review of interest, it has
made this intention clear. Sec. 6404(h) (“The Tax Court shall
have jurisdiction over any action brought * * * to determine
whether the Secretary’s failure to abate interest under this
section was an abuse of discretion”); see also Urbano v.
Commissioner, 122 T.C. 384, 392-395 (2004).
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collection action begins before disputing the liability. Such a
concern was raised in Secretary Rubin’s letter to Ways and Means
Committee Chairman Archer, in which he warned that the expansive
Senate bill would “encourage * * * [taxpayers] to ignore their
liability until a collection action begins in earnest”. Letter
from Robert E. Rubin, supra. The regulations do not create such
a new remedy for nondeficiency liabilities, and there is nothing
in the Code or the legislative history of the Restructuring and
Reform Act to suggest that this is unreasonable.
The fact that no prepayment judicial forum is prescribed for
certain tax liabilities does not mean that a taxpayer is without
a forum to dispute these liabilities. Upon notice and demand for
payment of a tax liability, a taxpayer may seek review of the
liability by filing a protest with the Commissioner’s Appeals
Office. Secs. 601.103(c), 601.106, Statement of Procedural
Rules. The Appeals Office then provides a taxpayer with an
informal conference in which he or she may present evidence and
arguments in support of the position disputing the liability.
See sec. 601.106(c), Statement of Procedural Rules. The Appeals
officer has the “exclusive and final authority” to determine the
liability. Sec. 601.106(a)(1), Statement of Procedural Rules.
Further, the Appeals procedures provide that the Appeals officer
is duty bound “to determine the correct amount of the tax, with
strict impartiality between the taxpayer and the Government.”
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Sec. 601.106(f)(2), Statement of Procedural Rules. Thus, while
not de novo review by a judge, Appeals nonetheless provides a
taxpayer with an opportunity to dispute a tax liability.
The importance to Congress of a meaningful Appeals process
as part of the overall tax collection scheme is apparent in the
Restructuring and Reform Act. While the opportunity for Appeals
consideration has long been part of the Commissioner’s collection
scheme, it had not previously been mandated by the Code. The
Restructuring and Reform Act sec. 1001, 112 Stat. 689, however,
mandates that an independent appeals function exist within the
IRS:
Reorganization of the Internal Revenue Service
(a) In General.--The Commissioner of Internal
Revenue shall develop and implement a plan to
reorganize the Internal Revenue Service. The plan
shall--
* * * * * * *
(4) ensure an independent appeals function within
the Internal Revenue Service, including the prohibition
in the plan of ex parte communications between appeals
officers and other Internal Revenue Service employees
to the extent that such communications appear to
compromise the independence of the appeals officers.
Furthering this mandate, Senator Roth, Chairman of the Senate
Committee on Finance, explained in his statement introducing the
Restructuring and Reform Act for Senate debate:
One of the major concerns we heard throughout our
oversight initiative was that the taxpayers who get
caught in the IRS hall of mirrors have no place to turn
that is truly independent and structured to represent
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their concerns. This legislation requires the agency
to establish an independent Office of Appeals--one that
may not be influenced by tax collection employees or
auditors.
Appeals officers will be made available in every
state, and they will be better able to work with
taxpayers who proceed through the appeals process.
144 Cong. Rec. 14689 (1998) (Statement of Senator Roth). This
suggests that Congress intended the Restructuring and Reform Act
to result in an Appeals function that acted as something more
than just a rubber stamp for the Commissioner’s determinations.
The importance of the Appeals process in resolving disputes
is also apparent because Congress, as part of the Restructuring
and Reform Act, directed respondent to develop alternative
dispute resolution procedures. Thus, section 7123(b) now
mandates:
SEC. 7123(b). Alternative Dispute Resolution
Procedures.--
(1) Mediation.-- The Secretary shall prescribe
procedures under which a taxpayer or the Internal
Revenue Service Office of Appeals may request non-
binding mediation on any issue unresolved at the
conclusion of--
(A) appeals procedures; * * *
Respondent has now developed procedures whereby a taxpayer can
request mediation of factual and legal issues after settlement
discussions with the Appeals Office have proved unsuccessful.
Rev. Proc. 2002-44, 2002-2 C.B. 10; see also Rev. Proc. 2006-44,
2006-44 I.R.B. 800 (establishing arbitration procedures to
resolve certain factual disputes).
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These provisions of the Restructuring and Reform Act make
clear that Congress was concerned with providing taxpayers a
meaningful process, short of litigation, in which they could
resolve tax disputes with respondent. Thus, reading section
6330(c)(2)(B) in this context, it is reasonable to conclude that
Congress intended not only to address those taxpayers who were
previously provided an opportunity to litigate their liability,
but also those provided an opportunity to dispute the liability
short of litigation.
Ultimately, while it is possible to interpret section
6330(c)(2)(B) to mean that every taxpayer is entitled to one
opportunity for a precollection judicial review of an underlying
liability, we find it unlikely that this was Congress’s intent.
As we see it, if Congress had intended to preclude only those
taxpayers who previously enjoyed the opportunity for judicial
review of the underlying liability from raising the underlying
liability again in a collection review proceeding, the statute
would have been drafted to clearly so provide. The fact that
Congress chose not to use such explicit language leads us to
believe that Congress also intended to preclude taxpayers who
were previously afforded a conference with the Appeals Office
from raising the underlying liabilities again in a collection
review hearing and before this Court.
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Thus, in view of the statutory scheme as a whole, as well as
the Restructuring and Reform Act specifically, we find
respondent’s interpretation of section 6330(c)(2)(B) to be
reasonable. National Muffler Dealers Association v. United
States, 440 U.S. at 476-477. A conference with the Appeals
Office provides a taxpayer a meaningful opportunity to dispute an
underlying tax liability.9
II. Respondent’s Motion for Summary Judgment
Summary judgment may be granted where there is no genuine
issue of any material fact and a decision may be entered as a
matter of law. Rule 121(a) and (b); see Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th
Cir. 1994). The moving party bears the burden of proving that
there is no genuine issue of material fact, and factual
inferences will be read in the manner most favorable to the party
opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C.
812, 821 (1985).
We are satisfied that no genuine issues of material fact
exist and judgment as a matter of law is appropriate. Petitioner
9
We reserve judgment today on whether an offer for a
conference with Appeals is sufficient (and if so, what
information would be required to be included in such an offer) to
preclude subsequent collection review consideration if the
taxpayer declines the offer without participating in such a
conference. We note, however, that we read sec. 6330(c)(2)(B) to
allow a taxpayer who has had neither a conference with Appeals
nor an opportunity for a conference with Appeals to raise the
underlying liability in a collection review proceeding before
Appeals and this Court.
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filed his 2002 income tax return on January 25, 2004, and
included payment for the reported tax due of $11,636. Respondent
then assessed additions to tax of $2,618.10 and $581.80 pursuant
to section 6651(a)(1) and (2). Petitioner submitted a request
for abatement of the assessed additions to tax. This request was
referred to respondent’s Appeals Office. The Appeals officer
then considered the circumstances of petitioner’s late filing,
including correspondence submitted on petitioner’s behalf
explaining that petitioner’s accountant, who possessed
petitioner’s tax records, was hospitalized with stomach cancer
until shortly before petitioner’s 2002 tax return was filed. The
Appeals officer then determined that reasonable cause to abate
the additions to tax was not present.
Accordingly, because petitioner had an opportunity, and
availed himself of that opportunity, to dispute the underlying
tax liability in a conference with the Appeals Office, he may not
raise that underlying liability again in a collection review
hearing or before this Court. Sec. 6330(c)(2)(B); sec. 301.6330-
1(e)(3), Q&A-E2, Proced. & Admin. Regs.
Petitioner has not raised any issues, other than the
underlying liability, in opposition to respondent’s proposed
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collection action in his petition. Therefore, for the reasons
stated, we shall grant respondent’s motion for summary judgment.
To reflect the foregoing,
An appropriate order and
decision will be entered for
respondent.