Christopher Gyorgy v. CIR

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13-3363
CHRISTOPHER GYORGY,
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
____________________
Appeal from the United States Tax Court.
No. 19240-11L — Elizabeth Crewson Paris, Judge.
____________________
ARGUED SEPTEMBER 17, 2014 — DECIDED FEBRUARY 27, 2015
____________________
Before FLAUM, KANNE, and ROVNER, Circuit Judges.
KANNE, Circuit Judge. The Internal Revenue Service
(“IRS”) determined that Appellant Christopher Gyorgy
owed approximately $100,000 in unpaid income taxes,
penalties, and interest for tax years 2002 and 2003. The IRS
mailed notices of his deficiencies in 2006 and 2007, including
demands for payment, to the address on his most recently
filed tax return. But Gyorgy no longer lived there and did
not receive the notices. More than two years later, his debts
were still outstanding, so the IRS filed notice of a federal tax
2 No. 13-3363
lien on his property in an effort to collect what he owed.
Gyorgy challenged the IRS’s action in a collection due
process (“CDP”) hearing before the IRS Office of Appeals
(the “Appeals Office”).
The Appeals Office sustained the IRS’s filing of the lien
notice. Its decision rested, in part, on findings that the IRS
(1) properly mailed Gyorgy’s deficiency notices to his “last
known address” under I.R.C. § 6212(b)(1) before filing the
lien; and (2) correctly determined his underlying tax
liabilities. Gyorgy appealed both determinations to the tax
court, which affirmed in relevant part after a bench trial. He
now appeals the tax court’s judgment. We affirm.
I. BACKGROUND
A. The IRS’s Collection Efforts
From 2001 through 2003, Gyorgy earned taxable income
from various sources, including wages from Goodby
Silverstein & Partners (an advertising agency) and interest
and dividends from his investments. But he filed no federal
income tax returns for those years. In fact, he neglected to
file any income tax returns from tax year 2001 through at
least tax year 2007. During that same period, he moved
frequently, living at eight different addresses in four cities
and two states.
To determine Gyorgy’s tax liability for 2001, 2002, and
2003—the years relevant to this appeal—the IRS had to rely
on W-2 forms, 1099 forms, and other information submitted
by third parties to create substitute returns. See I.R.C.
§ 6020(b). When the substitute returns revealed deficiencies
for all three years, the IRS began the process of notifying
Gyorgy and attempting to collect his debts.
No. 13-3363 3
The IRS’s computer system shows that it sent notice of
Gyorgy’s 2001 deficiency on or shortly after March 9, 2004, to
his apartment on Octavia Street in San Francisco. That was
the address he had reported on his most recently filed tax
return, for the 2000 tax year, and it was the most recent
address in the IRS’s computer system. It is unclear whether
the notice was in fact mailed, but in any event Gyorgy no
longer lived on Octavia Street and did not receive it. In
August 2004, the IRS assessed his deficiency for tax year
2001.
The IRS had no record of any address update from
Gyorgy. But the forms submitted to the IRS by third parties
showed a few possible addresses. Gyorgy’s 2002 W-2s listed
Octavia Street as well as an address on Lee Street in
Oakland, California. His W-2 and one of his 1099s for 2003
listed an address on Jean Street in Oakland. In addition, his
1099s and other forms for both years listed his business
address at Goodby Silverstein in San Francisco.
On November 29, 2004, the IRS mailed a form 2797 “R-U-
There” letter to Jean Street. The letter requested Gyorgy’s
assistance in updating IRS records. It asked him to check a
box if Jean Street was his current address, or to write in
another address if it was not, then sign and return the form.
The IRS received no answer to its letter.
The IRS continued to use Octavia Street as Gyorgy’s
address. It sent a deficiency notice there for tax year 2003 on
December 11, 2006, demanding payment of $68,954 in
income taxes, penalties, and interest. 1 Gyorgy did not
1 All figures are rounded to the nearest dollar.
4 No. 13-3363
receive the notice, and the postal service returned it to the
IRS marked “not deliverable as addressed” and “unable to
forward” with a date stamp of “12/17/06.” The IRS took no
further steps (at least none reflected in the record) to locate
Gyorgy or to re-issue the notice after it received the returned
mail. In May 2007, it assessed his deficiency for tax year
2003.
On July 30, 2007, the IRS mailed another deficiency notice
to Octavia Street, this time for tax year 2002. It demanded
payment of $27,621 in taxes, penalties, and interest. Again,
Gyorgy did not receive the notice, and the postal service
returned it to the IRS marked “attempted – not known” and
“unable to forward” with a date stamp of “08/03/07.” The
IRS again took no further steps to locate Gyorgy or re-issue
the notice. In December 2007, it assessed his deficiency for
tax year 2002.
Gyorgy did not pay his debts or petition the tax court for
a redetermination of his deficiencies under I.R.C. § 6213(a) (a
procedure for contesting one’s tax liability after the IRS
issues a deficiency notice). Two years later, his debts were
still outstanding, so the IRS proceeded with collection
efforts. It filed a notice of federal tax lien in the recorder’s
office in Cook County, Illinois, in August 2009 with respect
to Gyorgy’s residence at 8900 Forestview Road in Evanston,
where he had been living since 2008. 2 By then, Gyorgy’s tax
liability had grown to $120,644 ($12,684 for 2001; $30,416 for
2 It is unclear from the record exactly how and when the IRS first located
the property on Forestview Road and connected it to Gyorgy.
No. 13-3363 5
2002; and $77,544 for 2003). The IRS sent notification of the
lien filing to the subject property on Forestview Road.
Gyorgy received the notice and timely requested a CDP
hearing. He questioned whether the IRS had followed the
necessary procedures and claimed he was not liable for the
assessed taxes.
B. The Collection Due Process Hearing
The Appeals Office conducted its CDP review between
2009 and 2011. The appeals officer assigned to Gyorgy’s case
asked him to submit original tax returns and supporting
documentation if he disagreed with the IRS’s calculation of
his liabilities. To aid the task, she enclosed copies of the
third-party information reported to the IRS and summaries
of his income for each year. But Gyorgy—who was
proceeding pro se—provided no returns or other
information to challenge his liability.
Nor did Gyorgy participate meaningfully in the CDP
process. The appeals officer initially scheduled a telephone
conference to discuss his objections, but he did not
participate or timely request an alternative date. Instead, he
sent a letter the day before the hearing insisting on meeting
face-to-face. The appeals officer agreed to do so, but only if
Gyorgy filed his overdue tax returns from 2001 through 2010
(his non-filing appears to have been habitual). He refused, so
the Appeals Office based its review on the information in the
administrative file.
The Appeals Office issued a notice of determination
sustaining the IRS’s lien notice on July 15, 2011. It concluded
that the IRS “follow[ed] all legal and procedural
requirements in the assessment and collection process.” In
6 No. 13-3363
particular, it found that the IRS properly issued Gyorgy’s
deficiency notices to Octavia Street because that was the
address on his most recently filed tax return, and because he
had not “clearly and concisely notified the IRS of a change of
address.” The Appeals Office also upheld the IRS’s
determination of Gyorgy’s tax liabilities because, although
he claimed he was not liable, he never actually challenged
the agency‘s calculations.
Gyorgy filed a timely petition in tax court on August 15,
2011, challenging the Appeals Office’s determination. See
I.R.C. § 6330(d)(1); Tax Ct. R. 331(a).
C. Proceedings before the Tax Court
The tax court granted a de novo review of Gyorgy’s
underlying tax liability and held a bench trial on January 28,
2013. At trial, the IRS presented the deficiency notices,
evidence, and testimony in support of its calculations, but
Gyorgy—who was again proceeding pro se—presented no
evidence and no argument on the issue of liability.
The tax court also heard testimony concerning Gyorgy’s
whereabouts between 2000 and 2008. He testified that he
lived on Octavia Street until the spring of 2002; on Lee Street
in Oakland until the spring of 2003; on Jean Street in
Oakland until November 2004; in an apartment in Irvine,
California, until the spring of 2005 (he could not recall the
address); on Quail Bush in Irvine until the winter of 2006; in
a temporary apartment on Ridge Street in Evanston, Illinois,
until the spring of 2007; on Colfax Street in Evanston until
the spring of 2008; and since then on Forestview Road in
Evanston. He admitted, “It’s hard to keep track of it all.”
No. 13-3363 7
Gyorgy claimed that, even though he was not filing tax
returns during this period, he called the IRS’s 1-800 number
and submitted a change-of-address form to the post office
every time he moved. He also claimed he wrote one or two
letters to the IRS informing it of his new addresses (though
he could not recall which ones). On cross-examination he
could not recall the dates or other details of any calls or
letters. For example, when asked when exactly he wrote to
the IRS, he said, “I don’t have specific dates. It’s such a blur.
One [letter] here, one there, mostly through phone calls.” He
had no documentation to support his testimony.
The Commissioner called Debra Dufek, the appeals team
manager who supervised Gyorgy’s case. She testified that
Octavia Street was his address of record when the IRS
mailed the deficiency notices at issue, and that he did not
update his address until 2009. Gyorgy did not cross-examine
her. The IRS also produced verifications that it had received
no returns from Gyorgy from 2001 through 2007. Gyorgy
acknowledged—and admits on appeal—that he did not file
tax returns for those years.
The tax court orally issued findings of fact and an
opinion on January 31, 2013. It reviewed Gyorgy’s tax
liability de novo and all other determinations for abuse of
discretion. The court vacated the lien notice as to tax year
2001 because the Commissioner was unable to produce a
copy of the deficiency notice or other proof that a notice was
mailed. The Commissioner did not appeal that ruling, so tax
year 2001 is not at issue here.
The tax court sustained the lien notice, however, for the
2002 and 2003 tax years. It agreed with the Appeals Office
that the deficiency notices for those years were validly sent
8 No. 13-3363
to Octavia Street because Gyorgy had not notified the IRS of
a new address. It also upheld the IRS’s calculation of
Gyorgy’s 2002 and 2003 tax liabilities because he “did not
forward any arguments … or present any evidence” on that
issue.
The tax court entered a final decision giving effect to its
bench opinion and disposing of the parties’ claims on March
25, 2013. Gyorgy filed a timely motion to vacate, 3 which the
tax court denied on July 22, 2013. That denial reset the clock
for Gyorgy to appeal the March 25 decision. See Fed. R. App.
P. 13(a)(1)(B). He filed a timely notice of appeal on October
21, 2013. See I.R.C. § 7483; Fed. R. App. P. 26(a)(1)(C).
We have jurisdiction under I.R.C. § 7482(a)(1).
II. ANALYSIS
The tax court upheld the Appeals Office’s determination
that the IRS (1) properly mailed deficiency notices to
Gyorgy’s last known address before filing the lien, and
(2) correctly determined his underlying tax liabilities. We
find no error in the first conclusion, and we hold that
Gyorgy waived any challenge to the second conclusion. 4
3 On June 10, 2013, Gyorgy filed a motion for leave to file the motion to
vacate. The tax court granted leave on June 27 and entered the motion to
vacate on the docket. That was after the time to appeal normally would
have expired (June 24). See I.R.C. § 7483. But under tax court precedent,
we treat the motion to vacate as though it were filed at the same time as
the motion for leave, i.e., on June 10. See Stewart v. Comm’r, 127 T.C. 109,
117 (2006). Gyorgy’s motion to vacate was therefore timely.
4 Gyorgy also raised a third issue for the first time in his reply brief. He
claims the IRS did not prove it actually mailed deficiency notices for 2002
(continued…)
No. 13-3363 9
We begin with an overview of the CDP process and the
taxpayer’s right to appeal. The Internal Revenue Code (the
“Code”) directs the Treasury Secretary—acting through the
IRS—to determine, assess, and collect federal taxes. See I.R.C.
§§ 6201(a), 6301. It also requires taxpayers to file returns as
prescribed by the IRS. See id. § 6011(a). If the IRS finds that a
person has unpaid taxes for a given year, it must notify him
of the deficiency before it can collect the debt. See id.
§§ 6212(a), 6213(a). Once the IRS mails notice, the taxpayer
may petition the tax court to redetermine the correct amount
of the deficiency. Id. §§ 6213(a), 6214(a). If he does not file a
timely petition (normally within ninety days), then the
deficiency “shall be assessed, and shall be paid upon notice
and demand.” Id. § 6213(c).
If the taxpayer does not pay, then his tax liabilities
become a lien on his real and personal property. Id. § 6321.
To protect the government’s rights against other secured
creditors with respect to the encumbered property, the IRS
must generally file a notice of the tax lien with the
appropriate state authority. See id. § 6323(a), (f). It must then
inform the taxpayer that it filed the lien notice. Id. § 6320(a).
The taxpayer is entitled to challenge the lien in a CDP
hearing before the Appeals Office, which is an independent
bureau within the IRS. Id. § 6320(b). The “hearing” is
informal and may consist of correspondence, telephone
conversations, or in-person meetings. Treas. Reg. § 301.6330-
(…continued)
and 2003. While we see little merit in this argument, we do not consider
it because “[t]he reply brief is not the appropriate vehicle for presenting
new arguments.” United States v. Feinberg, 89 F.3d 333, 341 (7th Cir. 1996).
10 No. 13-3363
1(d)(2), Q&A-D6; Kindred v. Comm’r, 454 F.3d 688, 691 n.7,
695 n.19 (7th Cir. 2006). In general, the taxpayer may raise
any relevant issue. I.R.C. § 6330(c)(2)(A). That includes a
challenge to his underlying tax liability 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.” Id. § 6330(c)(2)(B). The appeals officer must
consider the issues raised by the taxpayer and verify that the
IRS followed proper procedures. Id. § 6330(c)(3).
After the hearing, the Appeals Office issues a notice of
determination containing its findings and conclusions. Treas.
Reg. § 301.6330-1(e), Q&A-E8. If the taxpayer is dissatisfied,
he can appeal the determination to the tax court. I.R.C.
§ 6330(d)(1). If his underlying tax liability was properly at
issue in the CDP hearing, the tax court reviews that issue de
novo. Goza v. Comm’r, 114 T.C. 176, 181-82 (2000). It reviews
the Appeals Office’s other determinations for abuse of
discretion. Id.; see also Jones v. Comm’r, 338 F.3d 463, 466 (5th
Cir. 2003) (“In a collection due process case in which the
underlying tax liability is properly at issue, the Tax Court …
reviews the underlying liability de novo and reviews the
other administrative determinations for an abuse of
discretion.” (citing Craig v. Comm’r, 119 T.C. 252, 260 (2002))).
The tax court’s decision is in turn subject to review in the
appropriate court of appeals. I.R.C. § 7482(a)(1). We review
tax court decisions “in the same manner and to the same
extent as decisions of the district courts in civil actions tried
without a jury.” Id.
With this background in hand, we turn to the two issues
on appeal.
No. 13-3363 11
A. Validity of the Deficiency Notices
Before the IRS can assess or collect a tax deficiency, it
must “send notice of such deficiency to the taxpayer” under
§ 6212 of the Code (subject to a few exceptions that are
irrelevant here). See id. §§ 6212(a), 6213(a). Gyorgy contends
that the IRS violated this mandate when it mailed the
deficiency notices for 2002 and 2003 to his former address on
Octavia Street, and that the notices were therefore invalid.
The Appeals Office disagreed and found that the IRS
properly issued the notices. Because that conclusion was an
administrative determination unrelated to the amount of
Gyorgy’s tax liability, the tax court’s standard of review was
abuse of discretion. Goza, 114 T.C. at 182; Jones, 338 F.3d at
466. We apply that same standard on appeal. See Kindred, 454
F.3d at 694; Williams v. Comm’r, 718 F.3d 89, 91-92 (2d Cir.
2013) (per curiam). Accordingly, our review is “highly
deferential.” Kindred, 454 F.3d at 694 n.16.
Judicial review of an administrative decision is ordinarily
confined to the record that was before the agency. Fla. Power
& Light Co. v. Lorion, 470 U.S. 729, 743-44 (1985); Cronin v.
U.S. Dept. of Agric., 919 F.2d 439, 443-44 (7th Cir. 1990). But
the tax court here looked beyond the CDP record when it
considered trial testimony regarding the deficiency notices
and Gyorgy’s addresses. Whether it was appropriate for the
tax court to consider that additional evidence—either
because it was not bound by the administrative-record rule
or because one of the exceptions to that rule applied—is a
question we need not decide today because neither party
12 No. 13-3363
objects to the tax court’s expansion of the record.5
Accordingly, we will consider both the CDP record and the
evidence adduced at trial in deciding whether the Appeals
Office abused its discretion.
Gyorgy’s main complaint is that he did not receive the
deficiency notices at issue. But that does not render them
invalid, for nothing in § 6212 requires actual notice.
Rappaport v. United States, 583 F.2d 298, 301 (7th Cir. 1978)
(per curiam). On the contrary, subpart (b)(1) provides that a
deficiency notice “shall be sufficient” if it is “mailed to the
taxpayer at his last known address.” I.R.C. § 6212(b)(1). This
rule gives the IRS a “safe harbor” by permitting constructive
notice where, for instance, the taxpayer has “failed to inform
the Service of a change of address.” Borgman v. Comm’r, 888
F.2d 916, 917 (1st Cir. 1989). Congress was concerned that
requiring actual notice in such cases would impose an
almost impossible burden on the IRS to keep track of every
taxpayer’s whereabouts. See Gaw v. Comm’r, 45 F.3d 461, 465
(D.C. Cir. 1995) (discussing the legislative history of the last-
known-address rule), nonacq., 1996-1 C.B. 1, 1996-2 C.B. 1;
Lewis v. Comm’r, 72 T.C.M. (CCH) 790, 792 (1996) (same);
H.R. Rep. No. 70-2, at 22 (1927) (“It is obviously impossible
5 The tax court held in Robinette v. Commissioner, 123 T.C. 85, 95 (2004),
that “when reviewing for abuse of discretion under section 6330(d) …
our review is not limited to the administrative record.” On appeal, the
Eighth Circuit reversed, holding that the administrative-record rule
applies in such cases. Robinette v. Comm’r, 439 F.3d 455, 459-62 (8th Cir.
2006). The First and Ninth Circuits agree with the Eighth. See Keller v.
Comm’r, 568 F.3d 710, 718 (9th Cir. 2009); Murphy v. Comm’r, 469 F.3d 27,
31 (1st Cir. 2006). This court has not decided the issue, and we do not
reach it today.
No. 13-3363 13
for the Commissioner to keep an up-to-date record of
taxpayers’ addresses.”); S. Rep. No. 70-960, at 30 (1928)
(same).
The last-known-address rule Congress adopted
“provides a method of notification which insures that the
vast majority of taxpayers will be informed that a tax
deficiency has been determined against them.” Jones v.
United States, 889 F.2d 1448, 1450 (5th Cir. 1989). The vast
majority, but not all: as Gyorgy points out, a taxpayer who
no longer lives at his last known address likely will not
receive notice and will therefore miss his opportunity to
petition the tax court for a redetermination under I.R.C.
§ 6213(a) (requiring the filing of a petition within ninety
days after notice is mailed). But such taxpayers have other
avenues to contest their liability. They can, for example, raise
liability in a CDP hearing, see I.R.C. § 6330(c)(2)(B), seek an
audit reconsideration, see Tucker v. Comm’r, 135 T.C. 114, 148
(2010), aff’d, 676 F.3d 1129 (D.C. Cir. 2012), or pay the tax and
then seek a refund, see I.R.C. § 7422(a); 28 U.S.C. § 1346(a)(1).
Or, of course, they can avoid the problem in the first place by
keeping the IRS informed of their current address. See
Goulding v. United States, 929 F.2d 329, 331 (7th Cir. 1991)
(holding that the taxpayer bore responsibility to notify the
IRS of a different address).
The determinative question, then, is not whether Gyorgy
received the deficiency notices for 2002 and 2003 (he did
not), but whether the IRS mailed them to his “last known
address” under § 6212(b)(1). To decide that question, we first
discuss the governing definition of “last known address”
and then apply it to this case.
14 No. 13-3363
1. Definition of “Last Known Address”
In numerous places—not just § 6212(b)(1)—the Code
authorizes or requires the IRS to send notice to a taxpayer’s
“last known address.” 6 But the Code itself does not define
that phrase, and for many years neither did the
implementing regulations. So the task of construing “last
known address” was left to the courts.
In Eschweiler v. United States and earlier decisions, we
defined it as the address “where ‘the Commissioner
reasonably believes the taxpayer wished to be reached at the
time the notice of deficiency was sent.’” 946 F.2d 45, 48 (7th
Cir. 1991) (per curiam) (quoting Goulding, 929 F.2d at 331); see
also McPartlin v. Comm’r, 653 F.2d 1185, 1189 (7th Cir. 1981)
(endorsing the tax court’s definition: the “last permanent
address of a definite duration to which the taxpayer has
directed the Commissioner to send all communications"
(internal quotation marks and citation omitted)). We held
that “the IRS need only exercise reasonable diligence” under
the particular circumstances of each case to determine the
taxpayer’s last known address. Eschweiler, 946 F.2d at 48
(citing Eschweiler v. United States, 877 F.2d 634, 636 (7th Cir.
1989)).
6 See, e.g., I.R.C. §§ 6015(e) (notice of final determination regarding
spousal relief); 6110(f)(3)(B), (4)(B) (notice of disclosure proceedings);
6245(b)(1) (notice of partnership adjustment); 6303(a) (notice of tax
assessment and payment demand); 6320(a)(2)(C) (notice of filing of
notice of lien); 6330(a)(2)(C) (notice of right to hearing before levy);
6331(d)(2)(C) (notice of intention to levy); and 6335(a) (notice of seizure).
No. 13-3363 15
In discharging its duty of reasonable diligence, we
allowed the IRS to “rely on the address found in the return
being audited, unless there is clear and concise notification
from the taxpayer directing the Commissioner to use a
different address.” Eschweiler, 946 F.2d at 48 (internal
quotation marks and citation omitted). This rule placed the
burden on the taxpayer to notify the IRS of a change of
address. Id. Other circuits adopted similar rules, with some
differences in the exact formulation. See id. at 48 n.5.
Ten years after Eschweiler, the Treasury Secretary
promulgated a new regulation defining “last known
address” wherever that phrase appears in the Code. See 66
Fed. Reg. 2817 (Jan. 12, 2001) (notice of final rulemaking).
Treasury Regulation § 301.6212-2, entitled “Definition of last
known address,” provides in relevant part:
(a) General rule. Except as provided in
paragraph (b)(2) of this section, a taxpayer's last
known address is the address that appears on the
taxpayer's most recently filed and properly
processed Federal tax return, unless the Internal
Revenue Service (IRS) is given clear and concise
notification of a different address. Further
information on what constitutes clear and concise
notification of a different address and a properly
processed Federal tax return can be found in Rev.
Proc. 90-18 (1990-1 C.B. 491) or in procedures
subsequently prescribed by the Commissioner.
(b) Address obtained from third party—
(1) In general. Except as provided in
paragraph (b)(2) of this section, change of address
16 No. 13-3363
information that a taxpayer provides to a third
party, such as a payor or another government
agency, is not clear and concise notification of a
different address for purposes of determining a
last known address under this section.
(2) Exception for address obtained from the
United States Postal Service—(i) Updating taxpayer
addresses. The IRS will update taxpayer addresses
maintained in IRS records by referring to data
accumulated and maintained in the United States
Postal Service (USPS) National Change of Address
database … (NCOA database)…. [A] new address
in the NCOA database is the taxpayer's last known
address, unless the IRS is given clear and concise
notification of a different address….
The last-known-address inquiry under § 301.6212-2
focuses on the information that was in the IRS’s possession at
the time it mailed the deficiency notice at issue. See I.R.C.
§ 6212(b)(1) (making notice sufficient “if mailed to the … last
known address”) (emphasis added); Treas. Reg. § 301.6212-
2(a) (focusing on the information the IRS “is given”);
Eschweiler, 946 F.2d at 48.
Under subpart (a) of the regulation, a taxpayer’s last
known address is presumptively the one shown on his most
recently filed and processed tax return. To update his
address, the taxpayer must file a new return or give the IRS
“clear and concise notification.” Thus, as under our prior
case law, see Eschweiler, 946 F.2d at 48, it is the taxpayer’s
responsibility to properly notify the IRS if he wants
correspondence sent to an address other than the one on file.
The revenue procedures in effect when the IRS issued
No. 13-3363 17
Gyorgy’s deficiency notices permitted notification either in
writing—through a signed statement, a response to certain
correspondence from the IRS, or the IRS’s change-of-address
form—or by oral statement directly to an IRS employee who
initiated contact with the taxpayer. See Rev. Proc. 2001-18
§ 5.04-05, 2001-1 C.B. 708 (effective Feb. 20, 2001), superseded
by Rev. Proc. 2010-16, 2010-1 C.B. 664 (effective June 1, 2010).
Additionally, subpart (b)(2) of the regulation treats a new
address in the postal service’s NCOA database as sufficient
notification.
Other than information in the NCOA database, however,
a new address obtained from a payer or another third party
does not count as clear and concise notification. Treas. Reg.
§ 301.6212-2(b)(1). This rule is consistent with our prior
decisions allowing the IRS to rely on the documents
submitted by the taxpayer. See, e.g., Eschweiler, 946 F.2d at 49;
see also Greenstein v. Comm’r, 60 T.C.M. (CCH) 379, 382 (1990)
(holding that forms submitted by third parties “[did] not
provide sufficient notification of an address change”).
Indeed, because notice sent to a temporary or unverified
address may be ineffective, “the IRS would run a risk in
relying on address information about a taxpayer submitted
by a third party.” Gille v. United States, 33 F.3d 46, 48 (10th
Cir. 1994). If the deficiency notice is invalid, the IRS’s tax
assessment is generally unenforceable. See I.R.C. § 6213(a).
And if the normally applicable three-year statute of
limitations has expired, see id. § 6501(a), the IRS may be
unable to collect the taxes at all.
Neither party here contends that § 301.6212-2 exceeds the
Treasury Secretary’s authority to “prescribe all needful rules
and regulations for the enforcement of [the Code],” I.R.C.
18 No. 13-3363
§ 7805(a), or that it is otherwise invalid. So for purposes of
this decision we accept the regulation as controlling under
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837, 843-45 (1984). See Stoops v. One Call Commc’ns,
Inc., 141 F.3d 309, 311 (7th Cir. 1998) (accepting regulations
as controlling where neither party challenged their
propriety). In other words, we look to § 301.6212-2 for the
governing definition of “last known address.” Cf. Planes v.
United States, No. 8:05-CV-1242, 2006 U.S. Dist. LEXIS 72407,
at *13 (M.D. Fla. Oct. 4, 2006) (following Treas. Reg.
§ 301.6212-2), aff’d per curiam, 239 F. App’x 480 (11th Cir.
2007); Lewis v. Comm’r, 98 T.C.M. (CCH) 174, 176 (2009)
(same). Because our pre-2001 judicial definition of “last
known address” is consistent with § 301.6212-2, however, we
also continue to follow our earlier cases. 7
7 There are two exceptions. First, we follow § 301.6212-2(a)’s
presumption that the last known address is the one listed on the
taxpayer’s most recently filed return; whereas our earlier decisions
presumed it was the address on the return being audited, see Eschweiler,
946 F.2d at 48, though subsequent returns were also relevant, see id. at 48
n.5 (citing McPartlin, 653 F.2d at 1190). Second, we treat a new address in
the NCOA database as sufficient to update the last known address under
§ 301.6212-2(b)(2), even though none of our prior cases established such a
rule. See Nat’l Cable & Telecomm. Ass’n v. Brand X Internet Servs., 545 U.S.
967, 982 (2005) (“A court’s prior judicial construction of a statute trumps
an agency construction otherwise entitled to Chevron deference only if
the prior court decision holds that its construction follows from the
unambiguous terms of the statute and thus leaves no room for agency
discretion.”).
No. 13-3363 19
2. Gyorgy’s Last Known Address
In this case, we must decide whether the Appeals Office
correctly concluded that Octavia Street was Gyorgy’s last
known address when the IRS mailed his deficiency notices
for tax years 2002 and 2003.
The IRS sent the first notice (for 2003) in December 2006
and the second (for 2002) in July 2007. It is undisputed that,
at that time, Gyorgy’s most recently filed return was for tax
year 2000, as he had not filed any subsequent returns.
Because his 2000 return listed Octavia Street as his address,
that was presumptively his last known address. See Treas.
Reg. § 301.6212-2(a).
Gyorgy maintains, however, that Octavia Street was not
his last known address—although he does not say which
one of his addresses the IRS should have used instead. As
best we can discern (his briefs are unclear), Gyorgy offers
three arguments for his position.
First, he claims that although he did not file any new
returns, he updated his address in other ways. The Appeals
Office rejected this contention. It found that the IRS had no
more recent address on file and that the postal service,
having returned the two deficiency notices as “unable to
forward,” could not provide a more current address either.
During the tax court trial, Gyorgy testified that each time he
moved he left his new address with both the post office and
the IRS. But he remembered few details and had no
documentation to support his testimony. The IRS, by
contrast, confirmed through Ms. Dufek’s testimony and
print-outs of the information in its computer systems that it
had no record of a new address for Gyorgy until 2009. On
20 No. 13-3363
this record, we find no error in the Appeals Office’s
conclusion that he did not update his address with either the
IRS or the postal service before the issuance of his deficiency
notices. 8
Second, Gyorgy points to the fact that the W-2 and 1099
forms reported to the IRS by third parties for tax years 2002
and 2003 listed possible addresses other than Octavia Street.
But new address information obtained from a third-party
payer is not “clear and concise notification.” Treas. Reg.
§ 301.6212-2(b)(1). These were only possible, not known,
addresses; if Gyorgy wanted the IRS to use one of them, it
was his responsibility to inform it which address was
correct. See Goulding, 929 F.2d at 331; cf. Marks v. Comm’r, 947
F.2d 983, 986 (D.C. Cir. 1991) (per curiam) (“[T]he
Commissioner had no duty to send duplicate notices to
every single address of which he had knowledge, especially
when he had no reason to believe that any such address was
permanent.”).
In any event, the IRS attempted to verify Gyorgy’s
address by sending the so-called R-U-There letter in 2004 to
the Jean Street residence listed on his most recent W-2. The
IRS received no response. Far from demonstrating that
Gyorgy had updated his address, as he argues, the R-U-
There letter shows that the IRS was unable to determine
whether Jean Street was his current address. It had no clear
8 We therefore need not reach the further question of whether the
telephone calls, letters, and change-of-address forms Gyorgy claims to
have submitted would constitute clear and concise notification of a new
address.
No. 13-3363 21
and concise notification of any address other than Octavia
Street.
Gyorgy’s third argument is that the IRS should have
known he no longer lived on Octavia Street because the
postal service returned both deficiency notices as
undeliverable. That argument fails with respect to the first
deficiency notice because the last-known-address inquiry
focuses on the information the IRS possessed at the time of
mailing. Eschweiler, 946 F.2d at 48. Once the IRS sends notice
to what is at that time the last known address, as it did here,
“’nothing in [section 6212] suggests that the IRS is obligated
to take additional steps to effectuate delivery if the notice is
returned….’” Id. at 49-50 (quoting King v. Comm’r, 857 F.2d
676, 681 (9th Cir. 1988)) (alteration in original).
But the second deficiency notice stands on different
ground, according to Gyorgy. He points out that before the
IRS mailed the second notice in July 2007, the postal service
had already returned the first notice as undeliverable on
December 17, 2006. 9 At that point the IRS knew or should
have known that Octavia Street was no longer Gyorgy’s
correct address; therefore, he argues, it was not entitled to
send the second notice there. As we have already discussed,
9 The postal service apparently stamped the date “12/17/06” on the
returned envelope containing the first deficiency notice. While it would
be reasonable to infer that the notice was in fact returned to the IRS on or
around that date, Gyorgy did not introduce any evidence to that effect at
trial or question the IRS’s witness about when it actually received the
returned mail. Nevertheless, we will grant Gyorgy’s factual inference for
purposes of this opinion, because even having done so, we ultimately
find his argument unpersuasive.
22 No. 13-3363
however, the IRS did not have a more recent, reliable
address for Gyorgy in its files. He suggests that it should
have done more to find him through its own investigation.
We disagree.
To be sure, Gyorgy is correct that the IRS must use
reasonable diligence to determine which address is the last
known address under the applicable definition. See, e.g.,
Eschweiler, 946 F.2d at 48; Downing v. Comm’r, 94 T.C.M.
(CCH) 319, 324 (2007). Courts have held, for example, that
the IRS must carefully process and review more recent tax
returns for a new address. See, e.g., McPartlin, 653 F.2d at
1190, 1193 (finding an IRS deficiency notice sent to
taxpayers’ old address invalid where, among other facts,
they had submitted a more recent return disclosing a new
address and another IRS service center had previously sent
mail to the new address); Wallin v. Comm’r, 744 F.2d 674, 676-
77 (9th Cir. 1984) (holding that the IRS was insufficiently
diligent where it knew taxpayer had moved and where a
thorough computer search for her social security number
would have revealed that she filed, under her new last name,
a more recent joint return listing her new address).
Reasonable diligence also requires the IRS to carefully
determine whether the taxpayer has otherwise provided
proper notification of an address change. See, e.g., Ward v.
Comm’r, 907 F.2d 517, 522 (5th Cir. 1990) (holding that the
IRS should have seen a “PN” notification in its computer
systems indicating that a change of address was pending
based on a letter from the taxpayer). And, having
determined the proper address, the IRS must correctly
transcribe it on the mailing envelope. See, e.g., Mulvania v.
Comm’r, 769 F.2d 1376, 1377, 1379 (9th Cir. 1985)
No. 13-3363 23
(invalidating a deficiency notice which the IRS mistakenly
sent to “St. Linda Isle Drive” rather than “57 Linda Isle
Drive,” and which the postal service returned as
undeliverable).
But these cases, and other, similar cases cited by Gyorgy,
do not bolster his position. As the Appeals Office correctly
found, this is not a case where the IRS overlooked a more
recently filed tax return, ignored an address update from the
taxpayer, or misaddressed an envelope. No amount of
diligence would have uncovered a new return or notification
from Gyorgy because he never submitted one.
Seeking to push the IRS’s reasonable-diligence obligation
further, Gyorgy asks us to follow two decisions from the
Fifth Circuit that required the IRS to conduct further
investigation when it had reason to believe the address on
file was no longer correct. In Mulder v. Commissioner, the
postal service had returned two letters sent to the taxpayer’s
address on file, but the IRS sent a deficiency notice to that
address anyway. 855 F.2d 208, 210 (5th Cir. 1988). The court
invalidated the notice. Id. at 212. It held that, in addition to
reviewing its own files, the IRS should have inquired with
the tax-preparer or the Texas motor vehicle or driver’s
license bureau for a new address. Id.In Terrell v. Commissioner, the postal service had returned
three letters to the taxpayer’s address on file, but the IRS had
not yet received notification of her new address. 625 F.3d
254, 257 (5th Cir. 2010). It therefore mailed a determination
denying the taxpayer’s request for spousal relief to the
24 No. 13-3363
address on file. 10 Id. The notice was returned to the IRS as
undeliverable. Id. Again, the Fifth Circuit invalidated the
notice. Id. at 260. It explained that “[w]hen the IRS knows or
should know at the time of mailing that the taxpayer’s
address on file may no longer be valid because of previously
returned letters,” it may not simply rely on the most recent
address on file. Id. at 259. Instead, it must conduct “further
investigation” by, for example, searching DMV records or
contacting the taxpayer’s employer. Id. at 259-60.
There is a tension between these two decisions and the
applicable Treasury regulation, which requires a new tax
return or clear and concise notification to change the last
known address, see Treas. Reg. § 301.6212-2(a), and which
provides that a new address obtained from a third party
(other than the NCOA database) is not sufficient, see id.§ 301.6212-2(b)(1). But we need not decide today whether
that tension can be resolved or whether we would follow
Mulder or Terrell if presented with similar facts. Even if we
adopted the holdings in those cases, they would not help
Gyorgy for two reasons.
First, the IRS’s duty of reasonable diligence is rooted in
equity. See Gaw, 45 F.3d at 468 (characterizing the duty as an
“equitable obligation … distinct from and supplementary to
the statutory obligation imposed by the last known address
requirements of section 6212”); 13 Mertens Law of Federal
Income Taxation § 49C:16, at 2 (2015) (discussing the IRS’s
10 A taxpayer’s deadline to challenge a denial of spousal relief under
§ 6015(e)(1)(A) runs from the time the IRS mails its final determination
“to the taxpayer’s last known address.” I.R.C. § 6015(e)(1)(A)(i)(I).
No. 13-3363 25
“equitable obligation to use reasonable diligence”). It
therefore matters whether the taxpayer claiming its
protection has “clean hands.” See Gutierrez v. Gonzales, 458
F.3d 688, 694 (7th Cir. 2006) (recognizing “the venerable
doctrine that ‘he who comes into equity must come with
clean hands’” (citation omitted)); McPartlin, 653 F.2d at 1191(according significance to the fact that taxpayers were
innocent, having done nothing to conceal their new address
from the IRS).
The taxpayer in Mulder made no attempt to obscure his
whereabouts. On the contrary, he notified the IRS of his new
address before it sent his deficiency notice, but the IRS
apparently did not process the new information in time. 855
F.2d at 211 n.5. The taxpayer in Terrell, too, was innocent. She
filed her tax returns on time, but the IRS happened to send
the notice at issue several days before it received her new
return reflecting a new address. 625 F.3d at 257.
Gyorgy, by contrast, neglected to file his tax returns year
after year, moved frequently, and left the IRS in the dark
concerning his whereabouts. This case is more like the
scenario before the Tenth Circuit in Gille, where the taxpayer
had not filed tax returns for several years. 33 F.3d at 47. The
IRS prepared a substitute return in 1987 for tax year 1983
and sent a deficiency notice to the address listed on the last
return filed by the taxpayer, for tax year 1982. Id. The postal
service had already returned a letter sent to that address as
undeliverable, but the IRS lacked notice of a new address. Id.
at 47-48. The IRS sent four more mailings, including the
deficiency notice itself, to the address on file, and the postal
service returned them. Id. at 47. Yet the Tenth Circuit upheld
the validity of the deficiency notice. Id. at 48. “Under these
26 No. 13-3363
circumstances,” it explained, “taxpayer, who did not bother
to file a tax return after 1982, will not now be heard to
complain that the IRS was not adequately diligent in its
efforts to track him down.” Id.We reached a similar conclusion in Eschweiler, where the
taxpayer had gone roughly four years without filing a tax
return. 946 F.2d at 47 n.3. Although the IRS knew before it
sent his deficiency notice that the taxpayer’s lease at the
address on file had expired, id. at 47, we rejected the notion
that this knowledge gave rise to “a duty of greater
diligence,” id. at 49 n.6. The IRS was entitled to rely on the
most recent address in its files, and the deficiency notice was
valid even though the taxpayer no longer lived there. Id. at
47, 50.
The same reasoning applies here. Gyorgy is in no
position to complain that the IRS should have done more to
track him down. The IRS properly relied on the address
listed on his most recently filed tax return.
Second, even assuming arguendo that the IRS had a duty
to conduct further investigation for Gyorgy’s address, he
does not identify what reasonable steps it could have taken
to find him. There is no evidence that the IRS had record—
let alone clear and concise notification—of an address where
he could have been reached in 2006 and 2007. It had already
tried, to no avail, to verify the Jean Street address on his 2003
W-2. It appears, in fact, that Gyorgy did not want to be
found. From 2001 through 2008, he filed no tax returns,
moved seven times, never remained in the same place for
more than roughly eighteen months, and often moved on
after only a few months. Yet he never notified the IRS of his
new addresses. The IRS cannot be expected to keep track of
No. 13-3363 27
an itinerant taxpayer in such circumstances. See Marks, 947
F.2d at 986 (“[A] taxpayer’s effort ‘to obscure the change in
his address so as to confound the IRS’ is a factor relevant in
assessing whether the Commissioner acted properly.”
(citation omitted)).
For the reasons above, we conclude that the Appeals
Office did not abuse its discretion in finding that Octavia
Street was Gyorgy’s last known address when the IRS mailed
his deficiency notices for tax years 2002 and 2003, or in
concluding that the notices were valid.
B. Gyorgy’s Underlying Tax Liability
Because Gyorgy did not receive the deficiency notices at
issue, he had a right to contest his underlying tax liability in
his CDP hearing. See I.R.C. § 6330(c)(2)(B). He also had a
right to de novo review of that issue in tax court. See Goza, 114
T.C. at 181-82. The tax court acknowledged that right and
gave Gyorgy a bench trial. We normally assess de novo the
tax court’s legal conclusions after trial, and we review its
factual findings and its applications of law to fact for clear
error. Kikalos v. Comm’r, 434 F.3d 977, 981-82 (7th Cir. 2006).
But here there is nothing for us to review. Gyorgy
presented no arguments and no evidence before the tax
court to challenge the IRS’s calculation of the taxes and
penalties he owes. He presented nothing before the Appeals
Office either. 11 After finding that the Commissioner made an
11 By not presenting any challenge to his liability in the CDP hearing,
Gyorgy arguably waived his right to do so in tax court. Treasury
Regulation § 301.6330-1(f)(2), A-F3 provides that “the taxpayer can only
ask the court to consider an issue, including a challenge to the
(continued…)
28 No. 13-3363
adequate showing and noting the absence of any challenge
from Gyorgy, the tax court upheld the IRS’s determination of
his liabilities for 2002 and 2003. On appeal, Gyorgy does not
identify any alleged error in the tax court’s decision; he has
therefore waived any challenge to his tax liability. See United
States v. Bryant, 750 F.3d 642, 651 (7th Cir. 2014) (“Failure to
develop an argument on appeal results in waiver….”);
Mahaffey v. Ramos, 588 F.3d 1142, 1146 (7th Cir. 2009)
(“Perfunctory, undeveloped arguments without discussion
or citation to pertinent legal authority are waived.”).
III. CONCLUSION
We AFFIRM the judgment of the tax court.
(…continued)
underlying tax liability, that was properly raised in the taxpayer’s CDP
hearing. An issue is not properly raised if … the taxpayer fails to present
to Appeals any evidence with respect to that issue after being given a
reasonable opportunity to present such evidence.” The Commissioner,
however, did not make this argument on appeal.