Edward F. Murphy v. Commissioner

125 T.C. No. 15UNITED STATES TAX COURT
EDWARD F. MURPHY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10239-03L. Filed December 29, 2005.
P asks us to review a determination by R’s
settlement officer (SO) that R may proceed with
collection by levy of P’s unpaid tax liability for
1999. P claims that the SO abused her discretion by
(1) rejecting P’s offer in compromise, based
alternatively on doubt as to collectibility and the
promotion of effective tax administration, and (2)
improperly and prematurely concluding P’s hearing. R
objects to P’s testimony as to reasons he did not pay
his 1992-2001 tax liabilities as they came due and the
SO’s testimony as to entries in her case activity notes
and certain aspects of her handling of the case.
1. Held: P’s testimony is excluded.
2. Held, further, SO’s testimony is admitted as
to meaning of notations and abbreviations in her case
activity report; the remainder of her testimony is
excluded.
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3. Held, further, SO did not err in rejecting
offer in compromise based, alternatively, on doubt as
to collectibility and effective tax administration.
4. Held, further, SO did not err in concluding
hearing following P’s failures to meet various due
dates, including due date for revised offer in
compromise.
5. Held, further, there were no improprieties in
SO’s actions or hearing procedures.
6. Held, further, SO did not abuse her discretion
in determining that R may proceed by levy to collect
P’s unpaid tax liability for 1999.
Timothy J. Burke, for petitioner.
Nina P. Ching and Maureen T. O’Brien, for respondent.
HALPERN, Judge: This case is before the Court to review a
determination made by one of respondent’s Appeals officers that
respondent may proceed to collect by levy unpaid taxes with
respect to petitioner’s 1999 tax year. We review the
determination pursuant to section 6330(d)(1).
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
Dollar amounts have been rounded to the nearest dollar.
FINDINGS OF FACT
Some facts have been stipulated and are so found. The
stipulation of facts, with accompanying exhibits, is incorporated
herein by this reference.
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Petitioner resided in Quincy, Massachusetts, at the time the
petition was filed.
On April 15, 2002, respondent issued to petitioner a Final
Notice - Notice of Intent to Levy and Notice of Your Right to a
Hearing. The notice pertains to petitioner’s unpaid Federal
income tax for 1999, in the amount of $16,560 (the unpaid tax).
By letter dated April 23, 2002, petitioner’s representative,
Timothy J. Burke, Esq., submitted an Internal Revenue Service
(IRS) Form 12153, Request for a Collection Due Process Hearing,
to the IRS on petitioner’s behalf. On an attachment to the Form
12153, petitioner asserts: “It is in the best interest of the
government and the taxpayer that an Offer in Compromise be
entered into.” Petitioner raised no other issue on the Form
12153 or during the subsequent hearing accorded him (the section
6330 hearing or, sometimes, the hearing).
On or about September 13, 2002, an Appeals official,
Settlement Officer Lisa Boudreau, was assigned to petitioner’s
case. On September 16, 2002, Ms. Boudreau sent Mr. Burke a
letter scheduling a meeting for September 20, 2002. At Mr.
Burke’s request, that meeting was rescheduled for October 3, 2002
(the October 3 meeting). Ms. Boudreau and Mr. Burke, but not
petitioner, attended the October 3 meeting. At the meeting, Mr.
Burke submitted to Ms. Boudreau certain collection information
statements that had been requested by her and an IRS Form 656,
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Offer in Compromise. By the Form 656, petitioner proposed to
compromise his unpaid income tax liabilities from 1990 through
2001 (later limited to 1992 through 2001 since the period of
limitations on collection for 1990 and 1991 had run).
Petitioner’s unpaid income tax liabilities for 1992 through 2001
(the 1992-2001 liability) total $275,777. Petitioner offered to
pay $10,000 in compromise of the 1992-2001 liability (sometimes,
the offer or the offer in compromise), such amount to be paid
within 24 months of acceptance of the offer. Petitioner checked
boxes on the Form 656 justifying the offer by reason of both
“Doubt as to Collectibility” (i.e., he had insufficient assets
and income to pay the full liability) and “Effective Tax
Administration” (i.e., he had sufficient assets to pay the full
liability but, due to his exceptional circumstances, requiring
full payment would cause an economic hardship or would be unfair
and inequitable). In the portion of the form requesting an
explanation of circumstances affecting the taxpayer’s ability to
fully pay the amount due, petitioner stated: “Please see
attached.” No attachment accompanies the copy of the form
stipulated by the parties.
During the October 3 meeting, Ms. Boudreau asked Mr. Burke
about the exceptional circumstances claimed by petitioner. Mr.
Burke responded that petitioner was ill, but he would not
disclose the nature of the illness, citing petitioner’s wish on
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that point. Ms. Boudreau advised Mr. Burke that, unless
petitioner disclosed the circumstances of his illness, she would
be unable to consider the illness. Mr. Burke said that he
understood and had told his client that already. Among other
things, Mr. Burke did tell Ms. Boudreau that petitioner was an
insurance salesman, owed money on credit cards, owed about
$90,000 to the Commonwealth of Massachusetts, and was divorced,
with his ex-wife receiving residual payments from insurance
contracts that petitioner had sold.
Ms. Boudreau concluded the October 3 meeting by requesting
that petitioner submit by October 31, 2002, additional
information and documents necessary for her to review the offer
in compromise. Petitioner missed that due date. Indeed,
following the October 3 meeting, and through February 10, 2003,
petitioner repeatedly missed due dates that either Ms. Boudreau
or Mr. Burke himself had set for submitting information necessary
for Ms. Boudreau to review the offer in compromise. On one
occasion during that period, due to petitioner’s failure to meet
submission due dates, Ms. Boudreau closed petitioner’s case and
concluded that she should sustain the proposed levy action. She
decided to reopen the case only after petitioner belatedly
complied with a request for certain information.
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By letter dated February 10, 2003, petitioner provided to
Ms. Boudreau the last of the information necessary for her to
review the offer in compromise.
By March 19, 2003, Ms. Boudreau had reviewed the offer in
compromise and supporting information submitted by petitioner and
had concluded that the offer was too low. By letter dated March
19, 2003 (the March 19 letter), Ms. Boudreau informed Mr. Burke
that an acceptable offer in compromise would have to be of at
least $97,884. She enclosed copies of the income/expense and
asset/equity tables that she used to compute that amount. Based
principally on information provided by petitioner, Ms. Boudreau
calculated petitioner’s total monthly income to be $4,235 ($2,618
of net business income and $1,617 of pension income) and his
necessary monthly living expenses to be $3,107, with a difference
of $1,128. Ms. Boudreau multiplied the difference times 60 to
determine the amount petitioner could pay over 60 months; viz,
$67,680. Also based principally on information provided by
petitioner, Ms. Boudreau calculated petitioner’s net realizable
equity to be $30,204. The sum that petitioner could pay over 60
months, $67,680, and his net realizable equity, $30,204, is
$97,884 (the amount Ms. Boudreau had identified as an acceptable
offer in compromise). Ms. Boudreau invited petitioner to submit
an amended offer in compromise in the amount of $97,884 by April
9, 2003.
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In response to the March 19 letter, Mr. Burke telephoned Ms.
Boudreau on April 1, 2003, and agreed to amend the offer in
compromise by April 18, 2003. No amended offer was received by
that date. On April 25, 2003, Mr. Burke telephoned Ms. Boudreau
and reported that petitioner was in the hospital. He also told
Ms. Boudreau that, no later than April 29, 2003, he would submit
a copy of petitioner’s 2002 Federal income tax return (the 2002
return), which had become due and was necessary to process any
offer in compromise.
April 29, 2003, passed without Ms. Boudreau’s receiving
either the 2002 return or an amended offer in compromise. On
Thursday, May 1, 2003, she called Mr. Burke and left a voice
message directing him to return her call on Monday, May 5, 2003.
Mr. Burke called as requested. He reported that petitioner was
out of the hospital, although he remained ill and continued to
prohibit Mr. Burke from disclosing the nature of his illness.
Mr. Burke also reported that he would meet with petitioner later
that week and contact Ms. Boudreau by May 9, 2003.
Neither Mr. Burke nor petitioner contacted Ms. Boudreau by
May 9, 2003.
On May 12, 2003, Ms. Boudreau noted in her case activity
record that the deadline set for May 9, 2003, as well as previous
deadlines, had been missed. She also noted that no viable
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collection alternative had been proposed and she had decided that
respondent’s proposed collection action should stand.
On May 14, 2003, Ms. Boudreau submitted an IRS Form 5402-c,
Appeals Transmittal and Case Memo, to her supervisor recommending
that the proposed collection action stand. In an attachment to
the Form 5402-c (the attachment), Ms. Boudreau states that she
has verified that all legal and administrative requirements that
needed to be satisfied with respect to collection by levy had
been satisfied. She describes petitioner’s offer to compromise
the 1992-2001 liability (“approximately $260,000”) for $10,000.
She states that the offer was submitted on the alternative
grounds of effective tax administration and doubt as to
collectibility. She concludes that, because she is prohibited
from accepting an offer in compromise based on effective tax
administration unless the Commissioner could collect the
outstanding liability in full, and petitioner has insufficient
resources from which the Commissioner could collect the 1992-2001
liability in full, effective tax administration is unavailable as
a ground for an offer in compromise. She concludes that,
although petitioner cannot pay the entire 1992-2001 liability and
may qualify for an offer in compromise based on doubt as to
collectibility: “[H]e can pay considerably more than the $10,000
being offered.”
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On the attachment, she calculates the amount she believes
that petitioner can pay in much the same way that, in the March
19 letter, she calculated what she described as an acceptable
offer in compromise (at least $97,884). The only apparent
difference is that she reduced her estimate of petitioner’s
monthly net business income from $2,618 to $2,356. She
concludes: “The reasonable collection potential based on the
income and expense figures provided by Mr. Murphy and calculated
utilizing allowable expenses and accepted practices is
$82,164.00.” She recommends that petitioner’s offer in
compromise be rejected.
With respect to balancing the need for the efficient
collection of the taxes due with the concern that the collection
action be no more intrusive than necessary, she concludes: “This
analysis indicates that this action is now necessary to provide
for the efficient collection of the taxes despite the potential
intrusiveness of enforced collection.”
Ms. Boudreau’s proposed disposition of petitioner’s case was
approved by her supervisor on May 19, 2003.
On May 23, 2003, Ms. Boudreau returned a telephone call from
Mr. Burke. She informed him that she had rejected the offer in
compromise because it was too low and had closed the case because
of missed deadlines. Mr. Burke said petitioner was ill and had
finally permitted him to disclose the nature of his illness
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(which Mr. Burke disclosed to Ms. Boudreau). After the phone
conversation, Mr. Burke faxed a letter to Ms. Boudreau asking
that she reconsider her decision to close petitioner’s case. The
letter contains no new financial information and makes no new
offer. Ms. Boudreau reviewed the letter and the case file and
concluded that her decision to reject the offer should stand.
By Notice of Determination Concerning Collection Action(s)
Under Section 6320 and/or 6330, dated May 29, 2003 (the notice of
determination), Ms. Boudreau’s supervisor notified petitioner
that Appeals had sustained respondent’s decision to proceed with
collection of the unpaid tax by levy. An attachment to the
notice of determination explains in some detail the matters
considered at the hearing and the conclusions reached. It
contains, among other things, statements that a review of
petitioner’s administrative file indicated that the statutory and
administrative requirements that needed to be met with respect to
the proposed levy had been satisfied, the offer in compromise was
not a viable collection alternative, and collection by levy was
necessary to provide for the efficient collection of the taxes
despite the potential intrusiveness of enforced collection.
Petitioner timely petitioned this Court for review of the
notice of determination.
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OPINION
I. Introduction
Petitioner has assigned error to Appeals’ (Ms. Boudreau’s)
determination that respondent may proceed to collect the unpaid
tax by levy (the determination). Before addressing the
assignment, we provide a general overview of the authority of the
Secretary of the Treasury (Secretary) to collect unpaid taxes by
levy, the procedures he must follow to do so, and our authority
to review the determination. We also describe the Secretary’s
authority to compromise a tax case. We then state the parties’
arguments and dispose of respondent’s objections to certain
testimony of petitioner’s and Ms. Boudreau’s. Finally, we decide
whether Ms. Boudreau erred in making the determination. We
decide that she did not.
II. Sections 6330 and 6331
Section 6331(a) authorizes the Secretary to levy against
property and property rights where a taxpayer liable for taxes
fails to pay those taxes within 10 days after notice and demand
for payment is made. Section 6331(d) requires the Secretary to
send the taxpayer written notice of the Secretary’s intent to
levy, and section 6330(a) requires the Secretary to send the
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taxpayer written notice of his right to a section 6330 hearing at
least 30 days before any levy is begun.1
If a section 6330 hearing is requested, the hearing is to be
conducted by respondent’s Appeals Office (Appeals), and, at the
hearing, the Appeals officer or employee (without distinction,
Appeals officer) conducting it must verify that the requirements
of any applicable law or administrative procedure have been met.
Sec. 6330(b)(1), (c)(1). The taxpayer may raise at the hearing
any relevant issue relating to the unpaid tax or the proposed
levy. Sec. 6330(c)(2)(A). The taxpayer is entitled to propose
an offer in compromise or other alternative to immediate
collection. See sec. 6330(c)(2)(A)(iii). The taxpayer may
contest the existence or amount of the underlying tax liability
1
A taxpayer receiving a notice of Federal tax lien has
hearing rights similar to the hearing rights accorded a taxpayer
receiving a notice of intent to levy. See sec. 6320(c). Indeed,
the record in this case contains a Notice of Federal Tax Lien
Filing and Your Right to a Hearing under Section 6320, dated May
3, 2002, addressed to petitioner, and concerning his unpaid
Federal income tax for 1999 (the notice of Federal tax lien).
Respondent has proposed that we find that (1) the Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330, dated May 29, 2003 (notice of determination), which
we described supra in our Findings of Fact, relates only to the
Final Notice - Notice of Intent to Levy and Notice of Your Right
to a Hearing, issued Apr. 15, 2002, which we also described supra
in our Findings of Fact, and (2) the notice of determination was
issued under sec. 6330 only. Petitioner states that he does not
dispute those proposed findings of fact, and we find accordingly.
Therefore, we do not in this case concern ourselves with the
notice of Federal tax lien or any determination under secs. 6320
and 6330 in connection therewith.
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at the hearing if the taxpayer did not receive a statutory notice
of deficiency with respect to the underlying tax liability or did
not otherwise have an opportunity to dispute that liability.
Sec. 6330(c)(2)(B).
At the conclusion of the hearing, the Appeals officer must
determine whether and how to proceed with collection, taking into
account, among other things, collection alternatives (e.g., an
offer in compromise) proposed by the taxpayer and whether any
proposed collection action balances the need for the efficient
collection of taxes with the legitimate concern of the taxpayer
that the collection action be no more intrusive than necessary.
See sec. 6330(c)(3).
We have jurisdiction to review the Appeals officer’s
determination where we have jurisdiction over the type of tax
involved in the case. Sec. 6330(d)(1)(A); see Iannone v.
Commissioner, 122 T.C. 287, 290 (2004). Where the underlying tax
liability is properly at issue, we review the determination de
novo. E.g., Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).
Where the underlying tax liability is not at issue, we review the
determination for abuse of discretion. Id. at 182. In reviewing
for an abuse of discretion under section 6330(d)(1), generally we
consider only arguments, issues, and other matters that were
raised at the section 6330 hearing or otherwise brought to the
attention of Appeals. Magana v. Commissioner, 118 T.C. 488, 493
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(2002); see also sec. 301.6330-1(f)(2), Q&A-F5, Proced. & Admin.
Regs. Whether an abuse of discretion has occurred depends upon
whether the exercise of discretion is without sound basis in fact
or law. Freije v. Commissioner, 125 T.C. 14, 23 (2005).
III. Offers in Compromise
Section 7122(a) authorizes the Secretary to compromise any
civil or criminal case arising under the internal revenue laws.
Section 7122(c) authorizes the Secretary to prescribe guidelines
for the officers and employees of the IRS to determine whether an
offer in compromise is adequate. Regulations implementing
section 7122 set forth three grounds for the compromise of a
liability: (1) Doubt as to liability, (2) doubt as to
collectibility, and (3) to promote effective tax administration
(effective tax administration). Sec. 301.7122-1(b), Proced. &
Admin. Regs. Doubt as to liability is not at issue in this case.
Doubt as to collectibility exists in any case where the
taxpayer’s assets and income are less than the full amount of the
liability. Sec. 301.7122-1(b)(2), Proced. & Admin. Regs.
Generally, under respondent’s administrative pronouncements, an
offer to compromise based on doubt as to collectibility will be
acceptable only if the offer reflects the reasonable collection
potential of the case (i.e., that amount, less than the full
liability, that the IRS could collect through means such as
administrative and judicial collection remedies). Rev. Proc.
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2003-71, sec. 4.02(2), 2003-2 C.B. 517. The offer must include
all unpaid tax liabilities and periods for which the taxpayer is
liable. Internal Revenue Manual (IRM) pt. 5.8.1.7 (Sept. 1,
2005) (Liabilities to be Compromised).2 In some cases, the
Secretary will accept an offer of less than the reasonable
collection potential of the case if there are special
circumstances. Rev. Proc. 2003-71, supra. Special circumstances
are (1) circumstances demonstrating that the taxpayer would
suffer economic hardship if the IRS were to collect from him an
amount equal to the reasonable collection potential of the case
or (2) if no demonstration of such suffering can be made,
circumstances justifying acceptance of an amount less than the
reasonable collection potential of the case based on public
policy or equity considerations. IRM pt. 5.8.4.3.4 (Sept. 1,
2005) (Effective Tax Administration and Doubt as to
Collectibility with Special Circumstances). To demonstrate that
compelling public policy or equity considerations justify a
compromise, the taxpayer must be able to demonstrate that, due to
exceptional circumstances, collection of the full liability would
undermine public confidence that the tax laws are being
2
All citations to the Internal Revenue Manual are to the
manual as found at http://www.irs.gov/irm/index.html (last
visited Dec. 27, 2005).
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administered in a fair and equitable manner. Sec. 301.7122-
1(b)(3)(ii), Proced. & Admin. Regs.
Where, because the reasonable collection potential of the
case exceeds the taxpayer’s liability, doubt as to collectibility
is not a ground for compromise, the Secretary may enter into a
compromise on the ground of effective tax administration. Sec.
301.7122-1(b)(3), Proced. & Admin. Regs. Before the Secretary
will enter into a compromise on the ground of effective tax
administration, the taxpayer must show, among other things, that
collection in full would cause him economic hardship or, if he
cannot, that compelling public policy or equity considerations
justify such compromise. Id.
IV. The Parties’ Arguments
In support of his assignment of error, petitioner avers that
(1) acceptance of an offer in compromise was in the best
interests of respondent and petitioner, and (2) Ms. Boudreau
improperly and prematurely concluded the section 6330 hearing.
With respect to the averments, petitioner asks us to consider not
only the administrative record of the hearing, which consists of
documents stipulated by the parties (the hearing record), but
also petitioner’s and Ms. Boudreau’s trial testimony.
Respondent answers that Ms. Boudreau did not abuse her
discretion in rejecting the offer in compromise and determining
that respondent may proceed to collect the unpaid tax by levy,
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nor did she prematurely and improperly conclude the hearing.
Respondent objects to the admission of both petitioner’s and
Ms. Boudreau’s trial testimony on the ground that the testimony
is not relevant to our deciding whether Ms. Boudreau abused her
discretion.
V. Admissibility of Trial Testimony
A. Trial Testimony
At the trial of this case, over the objection of respondent,
petitioner testified as to his marriage and divorce, his military
service, his health, and his credit card debt, all as it affected
his ability to pay his tax liabilities as they came due. Also
over the objection of respondent, petitioner testified as to the
onset in April 2003 of cardiovascular problems that limit his
ability to work. Over the objection of respondent, Ms. Boudreau
testified as to various entries in her case activity record and
certain aspects of the process by which she reached her decisions
to reject the offer in compromise and close petitioner’s case.
The Court noted respondent’s objections but reserved its ruling.
B. Positions of the Parties
1. Respondent’s Position
Respondent’s relevancy objection is based on the fact that
petitioner’s underlying tax liability was not raised at the
hearing and is not before the Court. Accordingly, respondent
argues, the appropriate standard for our review of the
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determination is abuse of discretion and the appropriate scope of
review, pursuant to the record rule, is the hearing record. The
record rule is the general rule of administrative law that a
court can engage in judicial review of an agency action only on
the basis of the record amassed by the agency. 2 Pierce,
Administrative Law, sec. 11.6, at 822 (4th ed. 2002); see United
States v. Carlo Bianchi & Co., 373 U.S. 709, 714 (1963).
Respondent recognizes that there are exceptions to the general
rule; e.g., “where the administrative record fails to disclose
the factors considered by the agency”,3 “where necessary for
background information”,4 and “where the agency failed to
consider all relevant factors”.5 Nevertheless, respondent
argues that none of those exceptions exist here.
Respondent also recognizes that, recently, in Robinette v.
Commissioner, 123 T.C. 85, 101 (2004), we held that, in reviewing
for an abuse of discretion under section 6330(d), we are not
limited to the administrative record. In Robinette, we were
asked to review an Appeals officer’s determination that the
3
Respondent cites Citizens to Preserve Overton Park, Inc.
v. Volpe, 401 U.S. 402, 420 (1971), overruled on unrelated
grounds by Califano v. Sanders, 430 U.S. 99, 105 (1977).
4
Respondent cites Thompson v. U.S. Dept. of Labor, 885
F.2d 551, 555 (9th Cir. 1989).
5
Respondent cites Fla. Power & Light Co. v. Lorion, 470
U.S. 729, 744 (1985); accord Franklin Sav. Association v.
Director, 934 F.2d 1127, 1137-1138 (10th Cir. 1991).
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Commissioner could proceed to collect unpaid taxes that had been
compromised pursuant to an agreement that required the taxpayer
to file his income tax returns on time for a period of 5 years
(or face collection of the compromised amount). The taxpayer had
breached the agreement by failing to file timely a return
governed by the agreement. We received into evidence in addition
to the administrative record both testimony and documents that
showed (1) the taxpayer’s good faith efforts to file his return
in a timely manner, (2) the Appeals officer’s refusal to consider
certain evidence that the return was filed timely, and (3) his
unwillingness at the hearing to consider in depth his authority
to reinstate the offer in compromise. Id. at 103-104. We found
the testimony and documents relevant to the question of whether
the Appeals officer had abused his discretion in approving
collection of the compromised taxes. Id. at 104. We found that
he had abused his discretion, in part because he (1) “had a
closed mind to the arguments presented on petitioner’s behalf”
and (2) “failed to consider the facts and circumstances of this
case.” Id. at 107.
If we do not adopt his implicit suggestion that we overrule
Robinette v. Commissioner, supra, and apply the record rule in
reviewing for abuse of discretion under section 6330(d),
respondent asks that we distinguish the facts of this case from
those of Robinette and exclude petitioner’s and Ms. Boudreau’s
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trial testimony. Respondent points out that, in Robinette, some
of the Judges of the Court expressed reservation to, in all
circumstances, allowing testimony or admitting other evidence not
presented to Appeals. E.g., Robinette v. Commissioner, 123 T.C.
at 115 (Wells, J., concurring) (distinguishing situation where
taxpayer refuses to furnish relevant evidence requested at
section 6330 hearing), id. at 116 (Thornton, J., concurring)
(suggesting it might be appropriate not to admit testimony or
other evidence when the taxpayer has failed to cooperate in
presenting relevant evidence at the section 6330 hearing), id. at
120 (Wherry, J., concurring) (“[The holding of the case] should
not be construed as sanctioning the dilatory introduction at
trial of new facts or documents previously withheld and not
produced at the Appeals hearing in order to justify reversal or
remand of the Appeals or settlement officer’s determination.”).
Respondent argues that petitioner should not be allowed to
introduce his testimony and the testimony of Ms. Boudreau because
his conduct during the hearing was marked by missed due dates and
constant requests for extensions of time to provide requested
information. Respondent points out that the only issue raised by
petitioner was an offer in compromise, and he was given ample
opportunity to present an acceptable offer before he missed yet
another self-established due date (without warning Ms. Boudreau)
and she closed the case. As a result, respondent concludes, our
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review of Ms. Boudreau’s exercise of discretion should be based
solely on the information presented to, and considered by, her.
2. Petitioner’s Position
On brief, petitioner argues: “[T]he infirmities in the
Respondent’s Determination, record and procedures require the
introduction of extrinsic evidence for an in depth review of the
Respondent’s Hearing.”
C. Discussion
1. Introduction
Petitioner’s underlying tax liability is not at issue. The
appropriate standard of review is, as respondent claims, abuse of
discretion. See supra section II. of this report.
We decline to overrule Robinette v. Commissioner, 123 T.C.
85 (2004).6 We shall, however, sustain respondent’s objection to
6
Recently, the Court of Appeals for the First Circuit
reviewed a District Court judgment that, pursuant to sec.
6330(d)(1), had affirmed an Appeals Office determination made
pursuant to sec. 6330(c)(3) that a levy to collect certain unpaid
employment taxes and penalties could proceed. Olsen v. United
States, 414 F.3d 144 (1st Cir. 2005), affg. 326 F. Supp. 2d 184(D. Mass. 2004). The Court of Appeals upheld the record rule as
defining the scope of judicial review of such a determination
where, as in the case it was reviewing, the underlying tax
liability is not in issue. See id. at 155. The Court of Appeals
distinguished Robinette v. Commissioner, 123 T.C. 85 (2004), on
the ground that it is premised on considerations that are unique
to the Tax Court. Olsen v. United States, supra at 154 n.9.
Therefore, we are not required by the doctrine of Golsen v.
Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d 985 (10th
Cir. 1971), to follow Olsen with respect to the appropriate scope
of our review, notwithstanding that, barring stipulation of the
(continued...)
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the admission of petitioner’s trial testimony and, with one
exception, also sustain it with respect to the admission of Ms.
Boudreau’s trial testimony. Our reasons are as follows.
2. Petitioner’s Trial Testimony
In Robinette v. Commissioner, supra, we admitted testimony
and documents not provided to Appeals on a showing that the
evidence presented at trial related to issues raised at the
taxpayer’s section 6330 hearing and was relevant and admissible
under the Federal Rules of Evidence.
The sole issue raised by petitioner at the section 6330
hearing was a collection alternative; i.e., the offer in
compromise. Petitioner submitted to Ms. Boudreau an IRS Form
656, Offer in Compromise, on which he checked boxes indicating
that the basis of the offer was either doubt as to collectibility
or effective tax administration. He indicated on the form that
there were special circumstances (which he may have neglected to
describe). During the October 3 meeting, Ms. Boudreau asked Mr.
Burke to describe petitioner’s special circumstances. Mr. Burke
responded, but not fully, since petitioner had prohibited him
from discussing the nature of petitioner’s illness. At trial,
Mr. Burke stated that petitioner wished to testify so that he
6
(...continued)
parties to the contrary, appeal of this case would lie to the
Court of Appeals for the First Circuit. See sec. 7482(b).
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could explain why he had failed to pay the 1992-2001 liability as
it came due. That explanation, claimed Mr. Burke, would convince
the Court that it would not have been contrary to public policy
for Ms. Boudreau to have accepted the offer in compromise. On
brief, petitioner argues that he qualifies for an offer in
compromise based on “equity”; i.e., “requiring the Respondent to
act fairly in compromising outstanding taxes in those instances
where a rigid interpretation of the Respondent’s rules * * *
precludes the resolution of an issue.” Considerations of
hardship, public policy, and equity figure in compromises
grounded on both doubt as to collectibility and effective tax
administration. See supra section III. of this report. We
accept that, at the section 6330 hearing, petitioner attempted to
convince Ms. Boudreau that special circumstances justified her
agreeing to an offer in compromise based on hardship, public
policy, or equity considerations. Therefore, as was the case in
Robinette v. Commissioner, supra, petitioner’s trial testimony
relates to an issue he raised at the section 6330 hearing.
Nevertheless, petitioner’s testimony regarding special
circumstances is not relevant to the question of whether Ms.
Boudreau abused her discretion in rejecting the offer in
compromise to the extent the offer was grounded on effective tax
administration. If for no other reason, that is because Ms.
Boudreau’s rejection of petitioner’s offer to the extent that the
- 24 -
offer was grounded on effective tax administration was based on
her conclusion that respondent could not collect the full 1992-
2001 liability from petitioner (the potential of collection in
full being a prerequisite to any consideration of special
circumstances, such as hardship or equity, justifying an offer in
compromise grounded on effective tax administration). We also
think that petitioner’s testimony is not relevant to the question
of whether Ms. Boudreau abused her discretion in rejecting the
offer to the extent the offer was grounded on doubt as to
collectibility. The 1992-2001 liability ($275,777) exceeds both
the amount Ms. Boudreau determined to be the reasonable
collection potential of the case ($82,164) and the amount
petitioner offered ($10,000). Because the offer was in an amount
less than what she determined to be the reasonable collection
potential, Ms. Boudreau could not consider the offer unless there
were special circumstances. Nevertheless, petitioner did not
timely provide her with all of the evidence that he now believes
should be taken into account in determining whether there are
special circumstances. An appeals officer does not abuse her
discretion when she fails to take into account information that
she requested and that was not provided in a reasonable time. As
explained in the next paragraph, that is the case here with
respect to petitioner’s trial testimony. Here, evidence that
petitioner might have presented at the section 6330 hearing (but
- 25 -
chose not to) is not admissible in a trial conducted pursuant to
section 6330(d)(1) because it is not relevant to the question of
whether the Appeals officer abused her discretion. See Fed. R.
Evid. 401; Morlino v. Commissioner, T.C. Memo. 2005-203.
Petitioner was represented by counsel, Mr. Burke, at all
stages of the section 6330 hearing. Petitioner had been informed
by Mr. Burke that, unless petitioner disclosed the nature of his
illness, Ms. Boudreau would not take illness into account.
Nevertheless, petitioner refused to disclose the nature of his
illness until after Ms. Boudreau had twice decided to close his
case for missed due dates and, in the second instance, lack of a
viable collection alternative. Petitioner had more than an
adequate opportunity to provide Ms. Beaudreau with all of the
evidence he thought necessary to convince her of special
circumstances during the course of the hearing and before May 12,
2003, when Ms. Boudreau decided that respondent’s proposed
collection action should stand. Moreover, petitioner does not
claim any change in his circumstances arising after the
conclusion of the hearing. See Magana v. Commissioner, 118 T.C.
at 494 (an allegation of recent, unusual illness or hardship
might warrant the consideration of that new argument). We did
not in Robinette v. Commissioner, supra, sanction the dilatory
introduction at trial of new facts or documents previously
withheld and not produced at the section 6330 hearing in order to
- 26 -
justify reversal or remand of the Appeals office determination.
See id. at 115, 116, 120 (Wells, Thornton, and Wherry, JJ.,
concurring, respectively). Accordingly, as stated, petitioner’s
testimony with respect to special circumstances is not admissible
because it is irrelevant.
3. Ms. Boudreau’s Trial Testimony
Petitioner wishes to introduce Ms. Boudreau’s trial
testimony to show infirmities in the determination, the hearing
record, and the Appeals procedures applicable to section 6330
hearings. Much of that testimony was in response to Mr. Burke’s
questions to Ms. Boudreau concerning the content of her case
activity record and how she arrived at her decision to reject the
offer in compromise. Among other things, Mr. Burke questioned
her as to abbreviations and notations in the case activity
record, her use of national standards for determining necessary
living expenses in evaluating offers in compromise, what factors
she took into account in rejecting the offer, and whether she
notified petitioner that he could appeal her decision to reject
the offer in compromise. On brief, petitioner catalogues the
infirmities that he claims justify Ms. Boudreau’s trial
testimony: The notice of determination fails to state what
“current IRS policy and procedures” were being relied on by Ms.
Boudreau and whether she rejected the offer in compromise based
on doubt as to collectibility or effective tax administration.
- 27 -
Ms. Boudreau’s case activity report contains unexplained
notations and abbreviations. Respondent made no transcript or
recording of the hearing. The records provided by respondent
fail to include any information on “National Standards”, “Local
Standards”, or “other basis for ascertaining ‘allowable
expenses’”, or grounds for deviating from those national or local
standards.
Those are not claims that petitioner made at the hearing.
While in Robinette v. Commissioner, supra, we admitted at trial
evidence not provided to Appeals on a showing that (besides being
relevant and otherwise admissible under the Federal Rules of
Evidence) the evidence related to issues raised at the taxpayer’s
section 6330 hearing, we did not say that such a showing is
prerequisite to admissibility. An irregularity in the conduct of
the hearing or some defect in the record may not be apparent
until after the hearing is concluded and the taxpayer receives
notice of the resulting determination. The circumstances may
justify allowing the taxpayer to raise the issue at trial and
introduce evidence notwithstanding the taxpayer’s failure to
raise the issue at the section 6330 hearing.7 We address each of
7
Even given application of the record rule, circumstances
with respect to conduct of the hearing may justify
supplementation of the record. See, e.g., Olsen v. United
States, 414 F.3d at 155 (in the context of a section 6330
hearing); Lands Council v. Powell, 395 F.3d 1019, 1030 (9th Cir.
(continued...)
- 28 -
the infirmities that petitioner claims justify the admission of
Ms. Boudreau’s testimony.
First, petitioner claims that the notice of determination
fails to state the current policies and procedures relied on by
Ms. Boudreau. We have summarized the contents of the notice of
determination (and attachment) in our findings of fact, and there
is no question but that it addresses all of the issues required
by law. See sec. 6330(c); sec. 301.6330-1(e)(3), A-E10 & A-E1,
Proced. & Admin. Regs. Moreover, as respondent points out on
brief, the policies and procedures of the IRS, as set forth in
the law, accompanying regulations, and Internal Revenue Manual,
are all available to the general public.8 Respondent concedes
that petitioner could have questioned Ms. Boudreau about any
policy or procedure that he believed she did not follow.
Instead, petitioner questioned her about her use of national
standards for determining necessary living expenses in evaluating
offers in compromise. Such a discussion is not relevant in this
particular case, argues respondent, because, with one exception,
Ms. Boudreau accepted the living expenses claimed by petitioner
in the collection information statements he submitted to her when
7
(...continued)
2005); Orion Intl. Techs. v. United States, 60 Fed. Cl. 338, 343-
344 (2004).
8
See supra note 2 for direction to the Internal Revenue
Manual.
- 29 -
she decided that the offer in compromise was unacceptable. The
one exception was her disallowance of an expense characterized by
petitioner as being attributable to secured debt, when, in truth,
as petitioner later admitted, the expense was attributable to
unsecured credit card debt (which, according to the collection
information statement petitioner filled out, generally cannot be
claimed as a necessary living expense). We agree with respondent
that, since national standards for determining necessary living
standards did not enter into her decision to reject the offer in
compromise, Ms. Boudreau’s testimony on that score is irrelevant,
and we exclude it on that basis. See Fed. R. Evid. 401.
It is true that the notice of determination does not state
Ms. Boudreau’s reason (or reasons) for rejecting the offer in
compromise. An attachment to the notice states only that the
offer in compromise cannot be accepted under current IRS policy
and procedures. The parties, however, have stipulated a copy of
the Form 5402-c, Appeals Transmittal and Case Memo, submitted by
Ms. Boudreau on May 14, 2003, to her supervisor. As we have
found, the Form 5402-c does set forth in detail Ms. Boudreau’s
analysis leading to her rejection of the offer in compromise on
both of the grounds (doubt as to collectibility and effective tax
administration) put forth by petitioner. The hearing record is
clear that Ms. Boudreau rejected the offer in compromise on both
grounds advanced by petitioner, and no testimony by her on that
- 30 -
score is necessary for us to review the determination. See Fed.
R. Evid. 403 (waste of time or needless presentation of
cumulative evidence grounds for excluding relevant evidence).
Ms. Boudreau’s case activity report does contain unexplained
notations and abbreviations, and her testimony is necessary to
explain those notations and abbreviations. Therefore, that
testimony is admissible.
It is also true, as petitioner claims, that there is no
transcript or recording of the hearing. No provision of section
6330 requires the recording of a section 6330 hearing, and, in
fact, section 301.6330-1(d)(2), A-D6, Proced. & Admin. Regs.,
states: “A transcript or recording of any face-to-face meeting
or conversation between an Appeals officer or employee and the
taxpayer or the taxpayer's representative is not required.”
Moreover, petitioner never asked to record Mr. Burke’s meeting
with Ms. Boudreau. Cf. Keene v. Commissioner, 121 T.C. 8, 19
(2003). Here, we need ascertain only whether Ms. Boudreau abused
her discretion when she did not accept a compromise based on
petitioner’s insistence that he could pay no more than
approximately 4 percent of his uncontested tax liability and
concluded that, under the circumstances, the use of the levy
process was “no more intrusive than necessary.” Sec. 6330(c).
Petitioner’s offer, his responses and lack thereof to Ms.
Boudreau’s requests, and her conclusions, are adequate for such
- 31 -
review. See Fed. R. Evid. 403; cf. Olsen v. United States, 414
F.3d 144, 155 (1st Cir. 2005).
Petitioner complains that the records provided by respondent
contain no information on national or local living expense
standards. While that is true, the Internal Revenue Manual,
which is available to petitioner on the IRS Web site,9 discusses
the national standards, local standards, and other bases for
determining allowable expenses when evaluating offers in
compromise. See, e.g., IRM secs. 5.8.5.5.1 through 5.8.5.5.3
(Sept. 1, 2005). Moreover, as described supra, Ms. Boudreau
allowed in full petitioner’s validly claimed expenses. An
Appeals officer does not abuse her discretion when she allows a
taxpayer’s claimed expenses. See Schulman v. Commissioner, T.C.
Memo. 2002-129. Ms. Boudreau’s testimony describing national or
local expense standards is, therefore, irrelevant. See Fed. R.
Evid. 401.
In summary, we shall allow into evidence Ms. Boudreau’s
testimony explaining notations and abbreviations in her case
activity report and exclude the remainder of her testimony.
D. Conclusion
Respondent’s objection to the admission of petitioner’s
testimony is sustained. Respondent’s objection to the admission
9
See supra note 2.
- 32 -
of Ms. Boudreau’s testimony is sustained in part and overruled in
part.
VI. Abuse of Discretion
A. Introduction
We must now decide whether Ms. Boudreau abused her
discretion in determining that respondent may proceed by levy to
collect the unpaid tax. Petitioner claims that Ms. Boudreau did,
because (1) acceptance of an offer in compromise was in the best
interests of respondent and petitioner and (2) Ms. Boudreau
improperly and prematurely concluded the hearing.
B. The Appeals Officer Did Not Err in Rejecting the Offer
in Compromise
We do not conduct an independent review of what would be an
acceptable offer in compromise. Fowler v. Commissioner, T.C.
Memo. 2004-163. The extent of our review is to determine whether
the Appeals officer’s decision to reject the offer in compromise
actually submitted by the taxpayer was arbitrary, capricious, or
without sound basis in fact or law. Skrizowski v. Commissioner,
T.C. Memo. 2004-229; Fowler v. Commissioner, supra; see Woodral
v. Commissioner, 112 T.C. 19, 23 (1999).
Ms. Boudreau concluded that petitioner could not pay his
liability (the 1992-2001 liability) in full and, therefore, did
not qualify for an offer in compromise based on effective tax
administration. Certainly, her conclusion about petitioner’s
- 33 -
inability to pay in full agrees with the information petitioner
provided her, and we see no error in that conclusion or in her
decision, based on that conclusion, to reject effective tax
administration as a ground for compromising the 1992-2001
liability. Section 301.7122-1(b)(3)(ii), Proced. & Admin. Regs.,
makes the ability to make full payment a precondition to any
offer in compromise based on effective tax administration.10
Nor do we see any error in Ms. Boudreau’s decision to reject
petitioner’s offer of $10,000 in settlement of the 1992-2001
liability of $275,777 on the ground of doubt as to
collectibility. She reviewed the information submitted by
petitioner during the hearing. She found that petitioner was
operating a business and earning more than $30,000 a year.
Combined with his monthly pension income, and after subtracting
10
In his reply brief, petitioner, for the first time,
raises a challenge to sec. 301.7122-1, Proced. & Admin. Regs., in
so far as it sets forth the requirements that a taxpayer must
meet to qualify for a compromise on the basis of effective tax
administration. Petitioner bases his challenge on changes made
to sec. 7122 by the Internal Revenue Service Restructuring and
Reform Act of 1998, Pub. L. 105-206, sec. 3462(a) and (c)(1), 112
Stat. 764, 766. See H. Rept. 105-599, at 287-289 (1998), 1998-3
C.B. 747, 1041-1043 (addressing effective tax administration).
That argument is raised too late for consideration. See Rule
334(b)(4); Aero Rental v. Commissioner, 64 T.C. 331, 338 (1975);
Kelly v. Commissioner, T.C. Memo. 1996-529. Petitioner does not
lose much by our so ruling, since, as described supra sec. III.
of this report, the same factors are taken into account in
considering offers in compromise grounded on effective tax
administration and those grounded on doubt as to collectibility
based on special circumstances.
- 34 -
his claimed expenses, she found that, from his net monthly income
alone, he could, over time, afford to pay more than $10,000
towards the 1992-2001 liability.11 She also calculated that he
had net realizable equity of $30,204, which was more than the
$10,000 he had offered. She calculated a reasonable collection
potential of $82,164. Because the offer was less than the
reasonable collection potential she had calculated, the offer
was, in the absence of special circumstances, unacceptable under
the Commissioner’s procedures for the submission and processing
of offers in compromise. See Rev. Proc. 2003-71, sec. 4.02(2),
2003-2 C.B. 517. Petitioner has not challenged Rev. Proc. 2003-
71, supra. Moreover, petitioner provided Ms. Boudreau with
insufficient information to justify her accepting an offer based
on special circumstances in any amount less than what she had
calculated as the reasonable collection potential of the case.
Therefore, we must determine only whether the Appeals officer’s
calculations are reasonable. See, e.g., Galvin v. Commissioner,
T.C. Memo. 2003-263; McCorkle v. Commissioner, T.C. Memo. 2003-
34; Schulman v. Commissioner, T.C. Memo. 2002-129. We conclude
that her computations were reasonable, and she did not err in
11
Ms. Boudreau did not calculate the present value of his
net monthly income, and we are unsure whether her assumption in
calculating what petitioner could pay is that petitioner would
make installment payments. Taking into account any reasonable
interest rate, however, the present value of petitioner’s net
monthly income is still a substantial amount.
- 35 -
rejecting the offer in compromise based on doubt as to
collectibility.
C. The Appeals Officer Did Not Improperly and Prematurely
Conclude the Hearing
1. Introduction
On brief, petitioner argues not only that Ms. Boudreau
prematurely concluded the hearing but also that she (1) did not
conduct the hearing in good faith, (2) failed to negotiate during
consideration of the offer, (3) was inflexible in considering
petitioner’s case, (4) was biased in concluding that the hearing
had to be promptly concluded, and (5) was not impartial since she
both conducted the hearing and negotiated the offer. Petitioner
further argues bias in the section 6330 hearing procedures
because (1) there was no administrative review of Ms. Boudreau’s
rejection of the offer, and (2) petitioner had no right to appeal
Ms. Boudreau’s rejection of the offer.
2. Hearing Was Not Prematurely Concluded
In Clawson v. Commissioner, T.C. Memo. 2004-106, fewer than
3 months passed between the taxpayer's filing a request for a
section 6330 hearing concerning a proposed levy and an adverse
determination by the Appeals officer. Approximately 1 month
passed after the Appeals officer's offer of a telephonic
conference until the adverse determination, and only 9 days
passed after the telephone conference until the adverse
- 36 -
determination. The taxpayer argued that the Appeals officer
abused his discretion because he reached his decision to sustain
the proposed levy in “barely one month” after he contacted
petitioners. We held: “[T]here is neither requirement nor
reason that the Appeals officer wait a certain amount of time
before rendering his determination as to a proposed levy.” As
authority, we cited section 301.6330-1(e)(3), Q&A-E9, Proced. &
Admin. Regs., which provides that there is no period of time in
which Appeals must conduct a section 6330 hearing or issue a
notice of determination: “Appeals will, however, attempt to
conduct a * * * [section 6330 hearing] and issue a Notice of
Determination as expeditiously as possible under the
circumstances.”
In this case, Ms. Boudreau reached her decision that
respondent’s collection action should stand more than 8 months
after she was assigned to petitioner’s case. On being assigned
to the case, she contacted petitioner’s representative, Mr.
Burke, and promptly met with him. She received from him an offer
in compromise and certain supporting information. She requested
from him additional information and documents necessary for her
to review the offer. Mr. Burke missed numerous due dates for
submitting additional information, and, on one occasion, she
closed the case because of Mr. Burke’s failure to meet submission
due dates. It took Mr. Burke more than 4 months to provide to
- 37 -
Ms. Boudreau the last of the information necessary for her to
review the offer in compromise. When her review showed that the
offer was not acceptable, she gave petitioner the opportunity to
submit an acceptable offer. Again, due dates were missed, and no
new offer was submitted. Ms. Boudreau waited almost 2 months for
an acceptable offer before deciding that respondent’s proposed
collection action should stand. Eleven days after she made her
decision (and 6 days before the notice of determination was
issued), Mr. Burke finally disclosed to Ms. Boudreau the nature
of petitioner’s illness. Ms. Boudreau considered that
information and decided that her decision should stand. We do
not think that Ms. Boudreau prematurely concluded the hearing.
See Roman v. Commissioner, T.C. Memo. 2004-20 (reasonable to
issue adverse section 6330 determination when, after 6 weeks,
taxpayer had failed to submit information requested with respect
to offer in compromise); see also Olsen v. United States, 414
F.3d at 154 (“Given * * * [the taxpayer’s] failure to cooperate
fully despite the appeals officer's repeated attempts to obtain
the information deemed necessary to evaluate the offer (and, in
particular, * * * [the taxpayer’s] claimed inability to pay), we
cannot say the appeals officer abused her discretion in
determining the collection action to be ‘no more intrusive than
necessary.’”).
- 38 -
3. Other Arguments
Respondent argues that we should disregard petitioner’s
other arguments since he did not raise them in the petition. See
Rule 331(b)(4). We construe the petition broadly, however, see
Rule 31(d), and give petitioner the benefit of the doubt that his
averment that Ms. Boudreau improperly concluded the hearing
encompasses his other arguments. In any event we have made
extensive findings from the record, which we think belie
petitioner’s claims. We address each claim briefly.
Petitioner claims: Ms. Boudreau “did not conduct the
hearing in good faith.” As an example, petitioner recites that
Ms. Boudreau made her initial contact with petitioner by a letter
sent on September 16, 2002, which scheduled a meeting for
September 30, 2002. Petitioner recites: “This action is
assuredly indicative of the Settlement Officer’s predisposition
toward an expedient conclusion of Petitioner’s matter.” We do
not reach that conclusion since, when Mr. Burke telephoned Ms.
Boudreau on September 17, 2002, apparently in response to her
letter, she agreed to move the meeting to October 3, 2002.
Petitioner complains that Ms. Boudreau’s “lack of economic
perspicacity” reflected in her calculations (using national and
local expense standards) “shows that the Hearing was not
conducted in good faith.” We cannot agree with that complaint
since Ms. Boudreau adopted petitioner’s claimed expenses as a
- 39 -
basis for her calculations. Considering all of petitioner’s
claims of bad faith, we fail to find that Ms. Boudreau conducted
the hearing in bad faith.
Petitioner claims: Ms. Boudreau “did not act with
flexibility but with a clear predisposition toward an inflexible
and expeditious determination of the Petitioner's matter.” The
facts in evidence hardly lead to that conclusion. Ms. Boudreau
tolerated numerous missed due dates. She reopened the case after
she had closed it on account of a missed due date. After
rejecting the offer in compromise, she invited another offer.
When that offer was not timely received, she closed the case but
considered reopening it when Mr. Burke belatedly telephoned her.
We do not find that Ms. Boudreau was inflexible. While she may
have been predisposed to an expeditious conclusion of
petitioner’s case, we see nothing wrong with that, given the
facts before us.
Petitioner claims: Ms. Boudreau “was biased by her belief
that the hearing had to be promptly concluded.” Besides the fact
that Ms. Boudreau rejected the offer and, after almost 2 months,
gave up on petitioner’s promise to submit a new offer, petitioner
has shown no facts that would support his claim of bias. As we
made plain supra p. 35 of this report, there is no requirement
that an Appeals officer wait a certain amount of time
- 40 -
before concluding a section 6330 hearing. Petitioner has failed
to show bias.
Petitioner claims: Ms. Boudreau “was not impartial as
[since] she both conducted the hearing and negotiated the offer.”
That, however, is precisely the scheme contemplated by section
6330. Section 6330(c)(2)(A)(iii) permits a taxpayer to offer
collection alternatives, including offers in compromise, at a
section 6330 hearing, and section 6330(c)(3) provides that the
determination of the Appeals officer conducting the section 6330
hearing shall take into consideration any collection alternative
offered by the taxpayer at the hearing. Petitioner argues: “It
is constitutionally impermissible for the Respondent to assign
the same person to negotiate an OIC [offer in compromise] and
thereafter rule on the fairness of her negotiations.” Section
6330(b)(3) ensures a measure of impartiality by requiring that,
unless the taxpayer waives the requirement, the section 6330
hearing be conducted by an Appeals officer who has had no prior
involvement with the unpaid tax at issue in the hearing.
Petitioner’s claim is without merit.
Petitioner claims: Ms. Boudreau “failed to negotiate during
the consideration of the OIC.” Petitioner argues: “In failing
to negotiate a reasonable offer the Settlement Officer failed to
meet her responsibility to hold a fair hearing at which she was
to negotiate, be flexible and to make it easier for taxpayers to
- 41 -
enter into OICs.” We need not in this case decide whether the
Secretary “must” negotiate an offer in compromise. See Olsen v.
United States, 414 F.3d at 157 (“section 7122 commits the
acceptance and negotiation of offers in compromise to the
Secretary’s discretion”). In this case, although Ms. Boudreau
rejected the offer in compromise, she told petitioner what would
be an acceptable offer in compromise and provided petitioner
almost 2 months to submit a new offer before she closed the case.
In that regard, there was no error in her actions. Cf. id. (with
respect to taxpayer’s argument that Appeals officer failed to
negotiate and make a counter-offer during course of section 6330
hearing: “Given * * * [the taxpayer’s] sluggish and inadequate
response, the appeals officer was certainly not required, nor was
she able, to make a meaningful counter-offer.”).
Finally, petitioner complains that the absence of
administrative review of the rejected offer in compromise as well
as the Secretary's failure to grant him administrative appeal
rights evidences bias in the section 6330 hearing procedures.12
Here, the record shows that Ms. Boudreau’s decision to reject the
offer was reviewed and approved by her supervisor. Moreover,
petitioner does have the right to appeal; viz, to this Court.
12
Sec. 301.7122-1(f), Proced. & Admin. Regs., requires
administrative review of a rejected offer in compromise and
accords the taxpayer a right of appeal.
- 42 -
See sec. 6330(d). In response to these same arguments, the Court
of Appeals for the First Circuit has said:
Represented by counsel, * * * [the taxpayer] decided to
submit his offer in compromise to the IRS Office of
Appeals pursuant to § 6330 in the first instance.
Under § 6330, he had no right to more than one hearing
nor to a hearing before anyone other than the Office of
Appeals. See 26 U.S.C. § 6330(b) (2000). Moreover, if
a taxpayer desires to challenge an appeals officer's
determination, § 6330 provides for judicial review,
which * * * [the taxpayer] elected to pursue, not
another administrative appeal. Id. § 6330(d).
Olsen v. United States, supra at 157. Petitioner’s complaint is
without merit.
4. Conclusion
We find no merit in petitioner’s arguments that Ms. Boudreau
improperly and prematurely concluded the hearing.
D. Conclusion
Ms. Boudreau did not abuse her discretion in determining
that respondent may proceed by levy to collect the unpaid tax.
VII. Conclusion
To reflect the foregoing,
Decision will be entered
for respondent.