DocketNumber: Docket Nos. 23833-08L, 24600-08L.
Citation Numbers: 137 T.C. 209, 2011 U.S. Tax Ct. LEXIS 49, 137 T.C. No. 16
Judges: PARIS
Filed Date: 12/19/2011
Status: Precedential
Modified Date: 1/13/2023
Appropriate decisions will be entered.
R assessed trust fund recovery penalties against Ps (P-C and P-N). R did not issue Ps Forms 3552, Notice of Tax Due on Federal Tax Return, within 60 days of the assessments. R filed a notice of Federal tax lien (NFTL) on P-C's property. R then issued a CDP lien notice to P-C and a CDP levy notice to P-N. R issued Ps Forms 3552 after issuing the CDP notices. Ps argue that R's determinations to proceed with collection were an abuse of discretion because R had not complied with the requirement of
*210 PARIS,
The parties submitted this case for decision fully stipulated. See
Conway founded and operated National Airlines, Inc. (National), which was based in Las Vegas, Nevada. Conway was National's chief executive officer (CEO), its president, and chairman of its board of directors during the tax periods at issue. Nakano was National's chief financial officer during the tax periods at issue. National began flying passengers in 1999, but by December 2000 it was under bankruptcy protection. National ceased operations at the end of 2001. When National stopped doing business, it had reported but unpaid transportation excise taxes2 for the tax periods at issue of $1,832,501.01, $3,497,448.32, and $4,803,626.85, respectively.
Respondent determined *52 that petitioners were responsible for National's failure to pay the excise taxes. On March 14, 2003, respondent notified petitioners that he proposed to assess TFRPs against them. On May 9, 2003, petitioners filed protests of the proposed TFRP assessments with IRS Appeals. Almost 3 years later, on March 23, 2006, IRS Appeals notified petitioners that it had rejected their protests. Five days later, on March 28, 2006, TFRPs were assessed against petitioners. The notice of tax due, although dated March 28, 2006, was not issued until June 6, 2006.3*53 *54
On May 22, 2006, respondent sent Nakano a Form 1058, Final Notice--Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice). The levy notice reflected respondent's intent to levy on Nakano's property and rights to property to collect the TFRPs assessed against him. The levy notice listed the type and amount of tax owed for each of the tax periods at issue. The levy notice also stated: "To prevent collection action, please send your full payment *212 today." The levy notice informed Nakano of his right to a collection due process hearing (CDP hearing) with IRS Appeals before respondent carried out *55 the levy. Fifteen days later, on June 6, 2006, respondent issued Nakano a Form 3552, Notice of Tax Due on Federal Tax Return, for each of the tax periods at issue (collectively, Nakano's Forms 3552).4
On May 18, 2006, respondent sent Conway a Letter 3164B. The letter stated that "We are attempting to collect unpaid taxes from you", but it did not state the amounts, types, or periods of the unpaid taxes.
On May 26, 2006, respondent filed an NFTL with the Clark County Recorder's Office in Nevada. The NFTL stated: As provided by
Nakano and Conway timely requested CDP hearings on June 16 and July 3, 2006, respectively, to contest the proposed levy and NFTL filing. At the request of petitioners' counsel, they received a joint CDP hearing. In their CDP hearing requests, petitioners claimed the following: (1) The TFRP assessments were invalid and (2) respondent failed to *213 issue notice and demand for payment *57 within 60 days of the assessments, thus precluding him from collecting the TFRP assessments via lien and levy.6
Petitioners' CDP hearing was originally assigned to Settlement Officer David Villaverde (SO Villaverde), who held a face-to-face hearing with petitioners' counsel. On the results of the CDP hearing, SO Villaverde determined that "some errors were found to have been made by the Service * * * [but] there were no fatal errors made." Specifically, SO Villaverde agreed that respondent did not issue notice and demand to petitioners within 60 days of the TFRP assessments. However, he believed that this failure did not prevent respondent from collecting the TFRP assessments via lien and levy. Rather, SO Villaverde determined that "the Service *58 does have the collection tools available 10 days after the untimely notice was sent on June 6, 2006, which would be on or after June 16, 2006." On the basis of this determination, SO Villaverde thought withdrawing the NFTL filing and rescinding the levy notice were appropriate courses of action given that the NFTL was filed and the levy notice was issued before June 16, 2006.
Before SO Villaverde made final determinations in petitioners' CDP hearing, he was promoted to Appeals team manager. Petitioners' case was reassigned to Settlement Officer Veronica Hernandez (SO Hernandez). After reviewing the record and meeting with petitioners' counsel, SO Hernandez concluded that, while the untimely issuance of notice and demand did not invalidate the TFRP assessments, respondent should withdraw the NFTL filing and rescind the levy notice. The Appeals team manager, however, disagreed with SO Hernandez's conclusions and ultimately overruled her.7 Thus, IRS Appeals ultimately determined that: (1) The TFRP assessments were valid and (2) failure to issue timely notice and demand did not invalidate the NFTL filing or the proposed levy. Petitioners timely petitioned the Court for review of the determinations. *59 See
Once the Commissioner assesses a TFRP against a person, he must give that person notice and demand for payment.
If a person liable for a tax, including a TFRP, fails to pay it after demand, the unpaid amount, including any interest and additions to tax, becomes a lien in favor of the United States upon that person's property and rights to property.
If a person liable to pay a tax, including *61 a TFRP, does not pay it within 10 days after notice and demand, it becomes lawful for the Commissioner to levy on that person's property and rights to property to collect the unpaid amount, including interest and additions to tax.
If a person requests a CDP hearing to appeal an NFTL filing or a proposed levy, he receives one before IRS Appeals.
After conducting the *62 CDP hearing, IRS Appeals determines whether to sustain the NFTL filing or proposed levy.
Nakano contends that IRS Appeals failed to verify that the requirements of applicable law had been met. Specifically, he argues that respondent did not: (1) Properly assess the TFRPs against him or (2) give him notice and *63 demand within 60 days of any assessment. Nakano ultimately claims that this failure rendered IRS Appeals' determination to proceed with the proposed levy an abuse of discretion.
Respondent contends that he gave Nakano valid notice and demand when he issued Nakano the levy notice on May 22, 2006. The levy notice went beyond the typical notice of intent to levy by including a demand for immediate payment of the specific amounts of TFRP owed, listed by period at issue, within 60 days of the assessments. In this limited circumstance, the Court agrees that this levy notice constitutes notice and demand.
"'The form on which a notice of assessment and demand for payment is made is irrelevant as long as it provides the taxpayer with all of the information required under * * *
Nakano also argues that the TFRP assessments are invalid because: (1) The assessments were untimely; (2) Nakano's Forms 4340, Certificate of Assessments, Payments, and Other Specified Matters, incorrectly characterized the assessments as jeopardy assessments rather than quick assessments; and (3) respondent did not timely issue notice and demand. The Court disagrees. While Nakano's notice of determination states that "It was believed to have been established that the assessment[s], although made late in error, * * * [were] still * * * valid [assessments]", the record contradicts this statement. Both the Forms 4340 and Nakano's Forms 3552 show that respondent assessed the TFRPs on March 28, 2006. Aside from the statement in the notice of determination, no evidence suggests that respondent did not timely assess the TFRPs. Also, Nakano has shown no prejudice, and, therefore, mislabeling the quick assessments *65 as jeopardy assessments does not invalidate them. See
Respondent properly assessed the TFRPs against Nakano and issued him valid notice and demand for payment. Thus, IRS Appeals correctly verified that all legal and administrative requirements had been met. Therefore, IRS Appeals did not abuse its discretion when it sustained the proposed levy.
Like Nakano, Conway contends that IRS Appeals failed to verify that the requirements of applicable law had been met. Specifically, he argues that respondent did not give him notice and demand within 60 days of the assessment.9 Respondent, however, contends that he issued Conway valid *218 notice and demand when he sent Conway the Letter 3164B, the lien notice, and Conway's Forms 3552. Alternatively, respondent argues that he did not need to issue notice and demand to Conway because Conway's role as National's CEO put him on notice of the unpaid amounts and respondent's *66 demand for payment. The Court disagrees with both of respondent's arguments.
First, the Letter 3164B did not constitute valid notice and demand. The Letter 3164B merely reflected that unpaid taxes were owed but did not state the amounts, types, or periods of the unpaid taxes. Respondent contends that the Letter 3164B did not have to state the amounts owed because, by the time respondent issued the Letter 3164B, Conway's multiple communications with IRS Appeals (before the assessments) regarding the amounts of the unpaid TFRPs had provided him with constructive notice. Even if Conway had previously seen the proposed assessments,
Next, the lien notice did not constitute valid notice and demand under
Unlike the statutory requirements above that the postassessment notice and demand precedes the postlien notice, respondent did the reverse. On June 1, 2006, respondent issued the lien notice to Conway. On June 6, 2006, respondent issued to Conway the Forms 3552, notice of tax due. Thus, the NFTL filed on May 26, 2006, predated the notice and demand for payment reflected on Forms 3552 issued to Conway on June 6, 2006. Similarly, the Forms 3552 issued to Conway on June 6, 2006, even though constituting valid notice and demand under the applicable regulation, cannot support the instant NFTL filing because the filing predated the issuance of the Forms 3552.
Alternatively, respondent argues that he did not need to issue notice and demand to Conway because Conway's role as National's CEO put him on notice of the unpaid amounts and respondent's demand for payment. Respondent relies on
Because respondent failed to give notice and demand before filing the NFTL, the NFTL filing was premature and respondent should have withdrawn the NFTL pursuant to
*220 To reflect the foregoing,
1. Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended and in effect when the petition was filed; all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2.
3. Petitioners each filed a refund suit in Federal District Court after respondent denied their refund claims submitted at the end of May 2006.
While the refund suits were pending, respondent filed a collection action against petitioners in the U.S. District Court for the District of Nevada.
Upon motions to reconsider, however, the District Courts lifted the injunctions on the basis of the distinction between divisible taxes, which are limited to taxes imposed under subtitle C, and airline excise taxes, which are imposed by subtitle D.
4. Nakano's Forms 3552 were dated Mar. 28, 2006, which was contemporaneous with the assessment. The record does not reflect why they were not issued until June 6, 2006.↩
5. Like Nakano's Forms 3552, Conway's Forms 3552 were dated Mar. 28, 2006. Also, as is the case with Nakano, the record does not reflect why Conway's Forms 3552 were not issued until June 6, 2006. See
6. Petitioners also claimed in their CDP hearing requests that they were not responsible for National's failure to pay the excise taxes and thus were not liable for the TFRPs. During the actual CDP hearing, however, petitioners conceded that they were not entitled to challenge the underlying liabilities. Thus, petitioners' underlying liabilities are not at issue here but were the subject matter of U.S. District Court complaints. See
7. The record does not reflect whether the Appeals team manager who overruled SO Hernandez was former SO Villaverde or another person.↩
8. See
9. To be sure, Conway also argues that respondent improperly assessed the TFRPs against him. Because respondent did not give Conway notice and demand before the NFTL filing, thus invalidating the filing and rendering IRS Appeals' determination an abuse of discretion, the Court need not address this argument. See
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