Martin David Hoyle v. Commissioner

131 T.C. No. 13UNITED STATES TAX COURT
MARTIN DAVID HOYLE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7217-04L. Filed December 3, 2008.
R sent P a notice of Federal tax lien, and P filed
a request for an Appeals hearing pursuant to sec. 6320,
I.R.C. Subsequently, R sent P a notice of
determination upholding the Federal tax lien, and P
petitioned this Court for review of R’s determination.
P asserts that R failed to mail to P a notice of
deficiency before assessing P’s 1993 tax liability. R
contends that P may not raise the issue of whether R
mailed P a notice of deficiency because P did not raise
the issue at the Appeals hearing.
Held: This Court will review whether R’s Appeals
officer verified compliance with applicable law under
sec. 6330(c)(1), I.R.C., i.e. whether a duly mailed
notice of deficiency preceded the assessment of tax as
required by sec. 6213(a), I.R.C., without regard to
whether P raised the issue at the Appeals hearing.
Giamelli v. Commissioner, 129 T.C. 107 (2007),
distinguished.
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Held, further, if no notice of deficiency was
mailed to P, this Court will not review the underlying
tax liability de novo. If no notice of deficiency was
mailed, the assessment of P’s 1993 tax liability is
invalid, the lien with respect to P’s 1993 tax
liability is improper, and collection therefore may
not proceed.
Held, further, it is unclear what the Appeals
officer relied on to verify that the assessment of P’s
1993 tax liability was preceded by a duly mailed notice
of deficiency. Consequently, we will remand to the
Appeals Office to clarify the record as to the basis
for the Appeals officer’s verification that all
requirements of applicable law were met.
Martin David Hoyle, pro se.
Beth Nunnink, for respondent.
OPINION
WELLS, Judge: Respondent sent a Notice of Determination
Concerning Collection Action(s) Under Section 6320 and/or 6330
(notice of determination) to petitioner with respect to a lien
filed to collect petitioner’s unpaid tax liability for 1993. In
response, petitioner timely filed a petition pursuant to section
6330(d),1 seeking review of respondent’s determination. The
issues to be decided are: (1) Whether petitioner may raise the
issue of whether a notice of deficiency for petitioner’s 1993
1
Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code, as amended.
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taxable year was mailed to petitioner; (2) if petitioner may
raise that issue, whether respondent’s Appeals officer properly
verified that such a notice was sent; and (3) if the Appeals
officer did not properly verify that such a notice was sent,
whether this Court should review the underlying tax liability de
novo.
Background
Some of the facts and certain exhibits have been stipulated.
The stipulations of fact are incorporated in this Opinion by
reference and are found as facts.
At the time he filed the petition, petitioner resided in
Louisiana.
Petitioner and Susan Hoyle timely filed a joint Federal
income tax return for 1993. The address shown on the return was
in Destrehan, Louisiana.
In May 1995 petitioner and Ms. Hoyle filed a Form 2848,
Power of Attorney and Declaration of Representative, designating
Wayne Leland as their representative. The address for petitioner
and Ms. Hoyle shown on the Form 2848 was in Orlando, Florida (the
Orlando address), and the address for Mr. Leland was in Winter
Park, Florida.
During August 1995 petitioner moved back to Destrehan,
Louisiana.
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On April 3, 1996, Mr. Leland sent respondent a letter
revoking his power of attorney and requesting all future notices
be sent to petitioner at the Orlando address.
On August 26, 1996, respondent assessed against petitioner a
deficiency of $20,495 in his income tax for 1993, an accuracy-
related penalty of $4,099, and interest of $5,631.32.
On September 12, 2002, respondent issued to petitioner a
Notice of Federal Tax Lien Filing and Your Right to a Hearing
Under IRC 6320 with respect to his unpaid tax liability for 1993.
Petitioner timely submitted a Form 12153, Request for a
Collection Due Process Hearing. Petitioner raised his underlying
tax liability and questioned whether offsetting overpayments were
properly reflected in the lien amount.
By letter dated December 9, 2003, respondent’s Appeals
officer informed petitioner that he was precluded from raising
the underlying tax liability because he had had a previous
opportunity to dispute the underlying tax.
By letter dated March 31, 2004, respondent sent petitioner a
notice of determination upholding the filing of a Federal tax
lien with respect to petitioner’s 1993 tax liability. On April
30, 2004, petitioner filed with this Court a timely petition for
review of respondent’s determination.
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Discussion
Section 6320(a)(1) requires the Commissioner to give any
person liable to pay tax (hereinafter referred to as a taxpayer)
written notice of the filing of a tax lien upon that taxpayer’s
property. The notice must inform the taxpayer of the right to
request a hearing in the Commissioner’s Appeals Office. Sec.
6320(a)(3)(B) and (b)(1). Section 6330(c), (d), and (e) governs
the conduct of a hearing requested under section 6320. Sec.
6320(c).
At the hearing, the taxpayer may raise any relevant issues
including appropriate spousal defenses, challenges to the
appropriateness of collection actions, and collection
alternatives. Sec. 6330(c)(2)(A). However, the taxpayer may
challenge the underlying tax liability only if the taxpayer did
not receive a statutory notice of deficiency for the tax
liability and did not otherwise have an opportunity to dispute
the tax liability. Sec. 6330(c)(2)(B). In addition to
considering issues raised by the taxpayer under section
6330(c)(2), the Appeals officer must also verify that the
requirements of any applicable law or administrative procedure
have been met. Sec. 6330(c)(1), (3).
Where the validity of the underlying tax liability is
properly in issue, the Court will review the matter de novo.
Where the validity of the underlying tax is not properly in
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issue, however, the Court will review the Commissioner’s
determination for abuse of discretion. Sego v. Commissioner, 114
T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182
(2000).
I. Whether Petitioner May Raise the Issue of Whether a Notice
of Deficiency Was Mailed to Petitioner
At the Appeals hearing, the Appeals officer “shall” verify
that the requirements of all applicable laws and administrative
procedures have been followed. Sec. 6330(c)(1). One requirement
of applicable law is the mandate of section 6213(a) that, with
limited exceptions not relevant here, no deficiency may be
assessed until after a notice of deficiency is mailed to the
taxpayer at his last known address.2 Accordingly, as a general
rule, if the Commissioner has not duly mailed a notice of
deficiency, no collection of an assessment of the deficiency may
proceed. Manko v. Commissioner, 126 T.C. 195, 200-201 (2006);
Freije v. Commissioner, 125 T.C. 14, 34-37 (2005).
Petitioner asserts that respondent failed to mail a notice
of deficiency before assessing the tax in issue. Respondent
2
See sec. 6213(a), which restricts the assessment of a
deficiency unless the assessment is duly preceded by the mailing
of a notice of deficiency to the taxpayer’s last known address.
Freije v. Commissioner, 125 T.C. 14, 34-37 (2005); Butti v.
Commissioner, T.C. Memo. 2008-82 (holding that the Commissioner
abused his discretion in determining to proceed with collection
where there was no proof that a notice of deficiency was sent to
the taxpayer before assessment of the tax deficiencies in issue).
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argues that petitioner did not raise the issue of the mailing of
a notice of deficiency at the hearing and therefore cannot now
raise the issue before this Court.3 There is nothing in the
administrative record indicating that petitioner raised the
notice of deficiency issue during the hearing; however, at the
trial, petitioner testified that he told respondent’s Appeals
officer that he had not received a notice of deficiency.
In any event, whether petitioner raised the issue of mailing
or receipt of a notice of deficiency with the Appeals officer is
not determinative. We have held that this Court will not review
issues raised under section 6330(c)(2) if they were not raised at
the Appeals hearing. Giamelli v. Commissioner, 129 T.C. 107, 115
(2007). However, our Opinion in Giamelli did not address this
Court’s authority to review issues relating to the Appeals
officer’s verification obligation under section 6330(c)(1).4 We
3
Respondent also notes that petitioner did not raise the
issue of receipt of a notice of deficiency in his petition.
However, we note that petitioner raised the issue in response to
a motion for summary judgment previously filed by respondent and
denied by this Court. Additionally, respondent did not object to
petitioner’s testimony at trial on this issue. Moreover,
respondent cross-examined petitioner on this issue at trial and
addressed this issue in his posttrial brief. On the basis of the
foregoing, we deem the pleadings amended to conform to the
evidence in accordance with Rule 41(b).
4
In Clough v. Commissioner, T.C. Memo. 2007-106, this Court
did hold that an Appeals officer’s verification under sec.
6330(c)(1) was erroneous as a matter of law where the Appeals
officer explicitly stated that she did not verify the mailing of
a notice of deficiency. In Clough, the Commissioner did not
(continued...)
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consider in the instant case whether issues arising under section
6330(c)(1) may be raised before this Court without regard to
whether they were raised by the taxpayer at the Appeals hearing.
In Giamelli v. Commissioner, supra at 112, we noted that
this Court’s review in a section 6330(d) proceeding focuses on
the Appeals officer’s section 6330 determination. We examined
the language and the legislative history of section 6330 and
concluded that both anticipate Tax Court review of a
“determination”. Id. at 114. The Appeals Officer must base the
section 6330(c) determination on the verification obtained under
section 6330(c)(1) as well as the issues raised under section
6330(c)(2). Sec. 6330(c)(3). If a section 6330(c)(2) issue is
not raised at the hearing, it cannot be part of the Appeals
officer’s determination. Giamelli v. Commissioner, supra at 113.
In contrast, the Appeals officer must consider compliance with
applicable law in the determination regardless of whether it is
raised by the person challenging the collection action at the
Appeals hearing. Sec. 6330(c)(1), (3)(A).
We expressed a concern in Giamelli that the Appeals
officer’s role would be eliminated if we were to allow an issue
to be raised under section 6330(c)(2) after the Appeals hearing
4
(...continued)
object to this Court’s consideration of the issue, and
accordingly, our opinion in Clough did not address whether a
taxpayer must raise the sec. 6330(c)(1) verification at the
Appeals hearing.
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and if the issue were litigated without any prior consideration
by any level of the Commissioner’s organization. Giamelli v.
Commissioner, supra at 114-115. We feared that the lack of
consideration by the Commissioner’s Appeals Office would
frustrate the administrative review process created by section
6330. Id. That concern, however, does not arise with respect to
issues raised under section 6330(c)(1). Because the
Commissioner’s Appeals officer is required to base the
determination, in part, on the verification obtained under
section 6330(c)(1), the Commissioner’s organization is required
by the statute to verify that all legal requirements have been
followed. Respondent cannot now argue that the Appeals officer
had no opportunity to consider whether respondent met the
requirements of applicable law, including the section 6213(a)
requirement of a duly mailed notice of deficiency.
In Giamelli v. Commissioner, supra at 113, we also
considered the Commissioner’s interpretive regulation in section
301.6320-1(f)(2), Q&A-F5, Proced. & Admin. Regs. That regulation
as revised in 2006 indicates that in seeking review of a notice
of determination, a taxpayer “can only ask the court to consider
an issue * * * that was properly raised in the taxpayer’s * * *
[collection due process] hearing.” Sec. 301.6320-1(f)(2), Q&A-
F3, Proced. & Admin. Regs. That regulation appears to use the
term “issue” in reference to those issues enumerated in section
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6330(c)(2) and not in reference to the “verification” required by
section 6330(c)(1). Moreover, even if that regulation was
intended to apply to the section 6330(c)(1) verification, the
regulation requires only that the issue be raised in the hearing,
not that the taxpayer himself raise it. Apart from the question
of whether the Commissioner may issue a regulation purporting to
limit this Court’s review authority, the verification requirement
is raised at every Appeals hearing by section 6330(c)(1). In any
event, the regulation is consistent with our holding that this
Court has the authority to review an issue arising under section
6330(c)(1) regardless of whether the taxpayer raised it at the
Appeals hearing.
In sum, the cornerstone of our holding in Giamelli was that
in reviewing an Appeals officer’s determination under section
6330(d), we decline to consider issues that are not a part of
that determination. Logically, it follows that we may review
those issues that were considered or should, by reason of the
statutory mandate, have been considered by the Appeals officer in
arriving at the determination. Unlike section 6330(c)(2) issues,
which will be a part of the determination we are reviewing only
if the issues were raised by the taxpayer at the Appeals hearing,
the section 6330(c)(1) verification is required to be a part of
every determination.
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Accordingly we hold that this Court will review the Appeals
officer’s verification under section 6330(c)(1) without regard to
whether the taxpayer raised it at the Appeals hearing.
Consequently, the issue of whether respondent’s Appeals officer
verified that a notice of deficiency was sent to petitioner
preceding the assessment, as required by section 6213(a), is
properly before the Court.
II. Whether the Appeals Officer Verified That a Notice of
Deficiency Was Mailed to Petitioner
The record contains two copies of a notice of deficiency
that respondent asserts were mailed on March 28, 1996. One copy
was addressed to petitioner at the Orlando address, and one copy
was addressed to Mr. Leland at his address in Winter Park,
Florida.5 In the notice of determination the Appeals officer
summarily concluded that “all statutory, regulatory, and
administrative procedures have been followed.” He also noted
that petitioner’s file contained a copy of a notice of deficiency
“properly sent” to petitioner. However, the Appeals Officer did
not indicate in the notice of determination what he relied on to
verify that the notice was properly mailed.
Respondent asserts that in the absence of clear evidence to
the contrary, respondent may rely on a presumption of official
5
Because it is not clear that the notice of deficiency was
mailed, we need not reach the question of whether either of these
addresses was petitioner’s last known address for purposes of
sec. 6212(b).
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regularity. We have held that exact compliance with Postal
Service Form 3877 mailing procedures raises a presumption of
official regularity in favor of the Commissioner and is
sufficient, absent evidence to the contrary, to establish that
the notice was properly mailed. Coleman v. Commissioner, 94 T.C.
91 (1990); see also United States v. Zolla, 724 F.2d 808, 810
(9th Cir. 1984). It may be true that an Appeals officer could
rely on a properly completed Postal Service Form 3877 to meet his
verification obligation under section 6330(c)(1); however, in the
instant case, the administrative record did not contain a Postal
Service Form 3877. Accordingly, the Appeals officer could not
have based his verification on that form.
In response to the absence of documentation of proper
mailing in the administrative record, respondent contends that
both petitioner and Mr. Leland actually received the notice of
deficiency. Respondent suggests that even without proof of
mailing in accordance with section 6212, the notice of deficiency
is valid if it is actually received by the taxpayer or his duly
authorized attorney-in-fact in time to petition this Court for
review. See Berger v. Commissioner, 404 F.2d 668 (3d Cir. 1968),
affg. 48 T.C. 848 (1967); see also Freiling v. Commissioner, 81
T.C. 42 (1983); Balkissoon v. Commissioner, T.C. Memo. 1992-322,
affd. 995 F.2d 525 (4th Cir. 1993).
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Relying on Mr. Leland’s letter dated April 3, 1996, revoking
the power of attorney signed by petitioner, respondent contends
that the revocation letter is proof that Mr. Leland received the
notice of deficiency on petitioner’s behalf. Respondent asserts
that Mr. Leland’s letter is in response to the notice of
deficiency and further contends that Mr. Leland “acknowledged”
receipt of the notice of deficiency. However, nothing in the
letter, or elsewhere in the record, for that matter, supports
respondent’s contentions. The letter from Mr. Leland does not
mention the notice of deficiency, and there is nothing else in
the record that could be construed as an acknowledgment of
receipt of the notice of deficiency by Mr. Leland.
Respondent also relies on “circumstantial evidence” of
delivery. Specifically, respondent asserts that the notice of
deficiency that respondent allegedly sent to petitioner was not
returned as undeliverable and that, even if petitioner had moved,
the notice of deficiency should have been forwarded to him by the
United States Postal Service. Respondent’s arguments are less
than convincing because if the notice was not mailed, it could
have been neither returned to respondent nor forwarded to
petitioner at his new address.
In sum, it is unclear what the Appeals officer relied on to
verify that the assessment of petitioner’s 1993 tax liability was
preceded by a duly mailed notice of deficiency. Because it is
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not clear from the record that respondent sent a notice of
deficiency to petitioner before assessing the deficiencies in
issue, we must decide whether it is appropriate for this Court to
review petitioner’s underlying tax liability de novo or whether
instead we should remand to the Appeals Office for clarification
of the basis for the Appeals officer’s verification that all
requirements of applicable law were met.6
III. Whether This Court Should Review the Underlying Tax
Liability De Novo
Respondent asserts that if petitioner did not receive the
notice of deficiency, this Court should review the underlying tax
liability de novo. However, this Court has held that
“petitioner’s opportunity in a section 6330 proceeding to dispute
the underlying tax liability does not cure an assessment made in
derogation of his right under section 6213(a) to a deficiency
proceeding.” Freije v. Commissioner, 125 T.C. at 36. If
respondent’s assessment of petitioner’s 1993 tax liability was
not preceded by a notice of deficiency as required by section
6213(a), the assessment is invalid. See id.; Bach v.
Commissioner, T.C. Memo. 2008-202 n.4; Butti v. Commissioner,
T.C. Memo. 2008-82. Under sections 6321 and 6322, a tax lien
arises in favor of the United States at the time an assessment is
6
In appropriate circumstances we have remanded cases to the
Appeals Office to clarify the record. See Dalton v.
Commissioner, T.C. Memo. 2008-165; Dailey v. Commissioner, T.C.
Memo. 2008-148; Oman v. Commissioner, T.C. Memo. 2006-231.
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made. If respondent did not validly assess petitioner’s 1993 tax
liability, then no lien would have arisen with respect to that
tax liability and collection could not proceed. Accordingly, if
the assessment was invalid, the determination to proceed with
collection was error as a matter of law. For these reasons, we
decline to review petitioner’s underlying tax liability at this
time.
IV. Conclusion
On the basis of the foregoing, we are unable to ascertain
the basis for the Appeals officer’s verification that all
requirements of applicable law were met. Consequently, we will
remand this case to the Appeals Office for it to clarify the
record as to what the Appeals officer relied upon in determining
that the notice of deficiency was properly sent to petitioner.7
7
We note that Chief Counsel Notice CC-2006-19 (Aug. 18,
2006) states that an Appeals Officer “may rely on a Form 4340 to
verify the validity of an assessment, unless the taxpayer can
identify an irregularity in the assessment procedure” (emphasis
added) and acknowledges that, where it is alleged that a notice
of deficiency was not mailed, the Appeals officer may be required
“to examine underlying documents in addition to the tax
transcripts, such as the taxpayer’s return, a copy of the notice
of deficiency, and the certified mailing list”. The Chief
Counsel’s advice is consistent with our view that, where a
taxpayer alleges no notice of deficiency was mailed he has (in
the words of the Chief Counsel Notice) “[identified] an
irregularity”, thereby requiring the Appeals officer to do more
than consult the computerized records. We are remanding this
case in order for the Appeals Office to “examine underlying
documents” and make a record of what was relied upon in making
the determination that the notice of deficiency was “properly
sent.”
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We have considered all of the contentions and arguments of
the parties that are not discussed herein, and we find them to be
without merit, irrelevant, or moot.
To reflect the foregoing,
An appropriate order will
be issued.