Spagnoletti v. CIR

Case: 21-60135 Document: 00516119055 Page: 1 Date Filed: 12/06/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 6, 2021
No. 21-60135
Lyle W. Cayce
Clerk
Francis I. Spagnoletti,
Petitioner—Appellant,
versus
Commissioner of Internal Revenue,
Respondent—Appellee.
Appeal from a Decision of the
United States Tax Court
No. 10204-19L
Before Higginbotham, Stewart, and Wilson, Circuit Judges.
Per Curiam:*
Under 26 U.S.C. § 6330(a), a taxpayer is guaranteed notice and a
hearing before the Internal Revenue Service assesses a levy. Francis
Spagnoletti failed to pay over one million dollars in taxes he reported due on
his 2015 and 2016 tax returns. Unsurprisingly, the IRS began collection
proceedings. After his due process hearing, Spagnoletti asserted the IRS
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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No. 21-60135
failed to comply with the notice and determination requirements of § 6330
and sued the Commissioner of the IRS. The Tax Court evaluated the record
of the proceedings against Spagnoletti and, finding no violations of Section
6330, awarded summary judgment to the Commissioner. Because
Spagnoletti has failed to demonstrate the IRS abused its discretion by
violating the provisions of § 6330, we AFFIRM.
I.
Spagnoletti’s tax returns for 2015 and 2016 reported $536,994 and
$527,032 in taxes due, respectively. Neither return included payments. The
2015 return was filed on October 17, 2016, two days after its extended due
date of October 15, 2016. The 2016 return was filed on January 31, 2018,
more than three months after the extended deadline of October 15, 2017.
Because both returns were late, Spagnoletti was assessed penalties for failure
timely to pay in addition to assessments for failure to pay estimated tax.
On May 25, 2018, the IRS sent a “Notice of Intent to Levy and Notice
of Your Rights to a Hearing” to Spagnoletti. At that time, Spagnoletti’s tax
liability for 2015 and 2016 had increased, with interest, to $1,290,696.20.
Spagnoletti timely filed a “Request for a Collection Due Process or
Equivalent Hearing” on June 25, 2018. In the request, he asserted that he
had called the IRS and asked for a 120-day installment plan. A Settlement
Officer was assigned to Spagnoletti’s case, and she sent him a letter
scheduling a telephonic hearing for October 25, 2018. The letter stated
Spagnoletti could reschedule the hearing if that time was not convenient for
him.
After the Settlement Officer was unable to reach Spagnoletti on
October 25, she sent a follow up letter the same day asking Spagnoletti to
submit any information he wanted placed in the administrative file by
November 9, 2018. Spagnoletti replied via fax on November 8, 2018,
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acknowledging the Settlement Officer’s letter and stating “I simply would
like to resolve this matter by paying the aforementioned tax periods in full
within 120 days. I realize that you normally request additional
documentation to do an installment agreement as referenced in your letter;
however, I am not requesting an installment agreement but rather full
payment in 120 days.”
The Settlement Officer called Spagnoletti on November 13, 2018, to
hold the telephonic hearing. Spagnoletti reiterated his desire for a 120-day
payment plan. But the Settlement Officer informed him that because he was
not in compliance with filing requirements regarding estimated tax payments
for the current tax year and because he had not provided any additional
financial information, she could not negotiate a collection alternative. She
then explained the procedures for closing his case and assessing a levy and
informed Spagnoletti that it would take more than 120 days to begin the levy
assessment. She stated that if he wanted to pay his outstanding liability
within 120 days—as he ostensibly requested—he would have ample time to
do so before the levy was assessed.
Spagnoletti made no payments. Instead, 176 days after his hearing,
the IRS issued a Notice of Determination sustaining the proposed levy
against him. In response, Spagnoletti filed a petition in the Tax Court
challenging the determination and alleging the IRS unreasonably delayed
responding to his request for a simple 120-day agreement. The
Commissioner of the IRS, as respondent to Spagnoletti’s Tax Court petition,
filed a motion for summary judgment asserting, inter alia, that all relevant
laws and procedures had been followed in Spagnoletti’s case. Spagnoletti
opposed the motion, contending that virtually none of the requirements for
notice and an opportunity to be heard under 26 U.S.C. § 6330 had been
followed by the IRS.
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After examining the record, the Tax Court determined that the IRS
had followed the requirements of § 6330. Specifically, the court found that
Spagnoletti had not challenged his underlying tax liability during the due
process hearing; he was not entitled to a Notice of Deficiency, because his
tax liabilities were self-reported; it was not improper to issue one notice of
levy encompassing the 2015 and 2016 tax years; and the Settlement Officer
did not abuse her discretion in rejecting his request for a 120-day payment
plan. Spagnoletti now appeals.
II.
“We apply the same standard of review to decisions of the Tax Court
that we apply to district court decisions[,]” Green v. Comm’r, 507 F.3d 857,
866 (5th Cir. 2007) (citation omitted), so we review Spagnoletti’s challenges
to summary judgment de novo. Jones v. Comm’r, 338 F.3d 463, 466 (5th Cir.
2003) (citing Perez v. United States, 312 F.3d 191, 193 (5th Cir. 2002)). In
doing so, we apply the same standards as the Tax Court. “The Tax Court’s
review is ‘limited to issues that were properly raised during the [collection
due process] hearing.’” Estate of Duncan v. Comm’r, 890 F.3d 192, 198 (5th
Cir. 2018) (quoting Keller Tank Servs. II, Inc. v. Comm’r, 854 F.3d 1178, 1189
(10th Cir. 2017)).
When “the underlying tax liability is properly at issue,” we review
“the underlying liability de novo and review[] the other administrative
determinations for an abuse of discretion.” Christopher Cross, Inc. v. United
States, 461 F.3d 610, 612 (5th Cir. 2006) (internal quotation marks omitted)
(quoting Jones, 338 F.3d at 466). In this context, abuse of discretion means
“a clear abuse of discretion in the sense of clear taxpayer abuse and
unfairness by the IRS[.]” Id. (internal quotation marks omitted) (quoting
Robinette v. Comm’r, 439 F.3d 455, 459 (8th Cir. 2006)).
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A.
Spagnoletti initially asserts that because he challenged his underlying
tax liability during his collection due process hearing, his case should have
been reviewed de novo by the Tax Court. Consequently, he argues, the Tax
Court erred by not considering his underlying liability after he raised it.
Spagnoletti’s assertion borders on frivolous. Before the Tax Court,
the Commissioner submitted records documenting the Settlement Officer’s
interactions with Spagnoletti. These documents make clear that “liability
was not raised as an issue for the period(s) being considered in this hearing.”
Further, in his briefs filed in the Tax Court and on appeal, Spagnoletti
concedes, “[I] did not raise an issue as to the reported tax due as reported on
[my] tax returns for 2015 and 2016; however, [I] did request a 120 day period
to pay the taxes as had been done for many years without an installment
agreement.” As the record demonstrates, Spagnoletti never contested his
underlying tax liability—he self-reported it for both tax years at issue. Thus,
the Tax Court did not abuse its discretion in declining to review Spagnoletti’s
tax liability de novo.
Even if de novo review of Spagnoletti’s tax liability applied, on the
record before us, the outcome would be the same. Spagnoletti reported how
much money he owed the federal government in taxes. Both returns were
filed late, leading to the imposition of penalties and interest. He never
contested any of this, and the record gives no hint that the amounts he
reported were incorrect. This issue lacks merit.
B.
Spagnoletti next asserts the IRS abused its discretion by violating 28
U.S.C. § 6330(c)(3). This section requires that the Settlement Officer (1)
obtain verification at the hearing that the requirements of law and
administrative procedure have been met, (2) consider issues raised by the
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taxpayer, and (3) consider “whether any 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.” 28
U.S.C. § 6330(c)(3).
Spagnoletti contends the Settlement Officer abused her discretion by
not verifying that the IRS met legal and administrative requirements. He
asserts the IRS violated relevant law by not providing him a “Notice of
Deficiency” and by combining two tax years in his “Notice of
Determination.” These contentions are readily dispatched. First,
Spagnoletti was not entitled to receive a “Notice of Deficiency.” He was
only assessed the unpaid taxes he self-reported on his return, and “[a] ‘notice
of deficiency’ is only required in situations where there is a deficiency . . . and
not in situations where, as here, a taxpayer fails to pay the amount of tax
shown on the returns.” Jones, 338 F.3d at 466 (citing Perez, 312 F.3d at 196);
see also 26 U.S.C. § 6201(a)(1). Likewise, imposition of statutory interest and
additions to self-reported unpaid tax liabilities are not subject to deficiency
procedures. 26 U.S.C. § 6665(a). And Spagnoletti provides no authority for
his contention that the IRS violated the law by combining two tax years in the
notice of levy it sent to him. Therefore, we decline to address this issue
further. See Roy v. City of Monroe, 950 F.3d 245, 251 (5th Cir. 2020) (quoting
Procter & Gamble Co. v. Amway Corp., 376 F.3d 496, 499 n.1 (5th Cir. 2004)).
Spagnoletti has failed to demonstrate the Settlement Officer abused her
discretion on this point.
Next, Spagnoletti asserts that the Settlement Officer failed to consider
issues raised by the taxpayer because she did not consider his request for a
120-day repayment plan. But this is directly contradicted by the record.
Spagnoletti’s case activity report documents the Settlement Officer’s
conversations with him during which he raised the possibility of a 120-day
repayment plan. She explained to Spagnoletti that because he had failed to
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pay his estimated tax payments for the current tax year, she could not
approve an alternative payment or settlement plan for his prior year liability.
See Christopher Cross, Inc., 461 F.3d at 613 (stating that a “taxpayer must be
current on payments” in order “to submit an offer in compromise”
(quotation and internal quotation marks omitted)). Instead of merely
rejecting his offer, she also suggested to Spagnoletti that if he wanted to pay
his liability within 120 days, he would have ample time to do so because it
would take longer than that to close his case and assess the levy against him.
Against this record, Spagnoletti utterly fails to demonstrate an abuse of
discretion on this point.
Finally, Spagnoletti contends that the Settlement Officer abused her
discretion by not balancing the need for efficient tax collection against his
legitimate concerns related to intrusiveness. Once again, though,
Spagnoletti’s position runs headlong into a contrary factual record. The
“Notice of Determination” transmitted to Spagnoletti stated that because he
had not responded to any of the IRS’s requests for information, the IRS could
not consider any applicable collection alternatives besides a levy against him.
This notice is reinforced by the other instances when the IRS explicitly told
Spagnoletti—and he acknowledged—that the IRS could not entertain a
settlement offer if he did not provide the necessary financial disclosures to
the IRS. Further, Spagnoletti’s preferred outcome, repaying his self-
reported tax liability within 120 days, was available to him. The “Notice of
Determination” sustaining the proposed levy against him was not sent until
May 8, 2019, 176 days after his hearing. Rather than availing himself of the
intervening time to pay his taxes as he had offered, Spagnoletti failed to pay
a single penny. His conduct undermines any argument that the Settlement
Officer abused her discretion, and this issue lacks merit.
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III.
At bottom, Francis Spagnoletti, a lawyer and an officer of the court,
has manipulated the due process protections provided by 26 U.S.C.
§ 6330(a) and the courts to avoid paying over $1,000,000 in taxes on his 2015
and 2016 income for half a decade—taxes that he himself initially reported as
due. His appeal to this court amounts to an extension of that strategy of hair-
splitting delay tactics. It is well past time to pay up.
AFFIRMED.
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