Scott v. Comm'r

T.C. Memo. 2007-91
UNITED STATES TAX COURT
SAM E. SCOTT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2537-05L. Filed April 17, 2007.
Sam E. Scott, pro se
John F. Driscoll, for respondent.
MEMORANDUM OPINION
GERBER, Judge: In a January 11, 2005, Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330) (Notice) respondent notified petitioner that the
filing of the Notices of Federal Tax Lien (NFTLs) with the Panola
County Chancery Clerk’s Office in Batesville, Mississippi, for
petitioner’s 1991 tax liability was sustained. In a timely
petition, petitioner posed several generalized reasons why he
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believed that there was an abuse of discretion and why respondent
should not be allowed to proceed with collection. The sole issue
for our consideration is whether respondent’s determination to
file NFTLs relating to petitioner’s 1991 tax liability was an
abuse of discretion.
This case was submitted fully stipulated1 pursuant to Rule
122,2 and the parties’ agreed facts and accompanying exhibits are
incorporated herein by this reference.
Background
At the time his petition was filed, petitioner resided in
Hazlehurst, Mississippi. This Court rendered an opinion deciding
the merits of petitioner’s 1991 income tax deficiency, Scott v.
Commissioner, T.C. Memo. 1997-507, and on June 19, 1998, a
decision was entered setting forth the amount of said deficiency.
Petitioner appealed to the Court of the Appeals for the Fifth
Circuit, and this Court’s decision was affirmed (in an
unpublished opinion) on June 3, 1999. See Scott v. Commissioner,
182 F.3d 915 (5th Cir. 1999).
1
This case was submitted fully stipulated at the Trial
Session of the Court held at Jackson, Mississippi, on Feb. 6,
2006. This matter was submitted for disposition by order of the
Chief Judge to Judge Joel Gerber on Feb. 13, 2007.
2
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 and in
effect for the period under consideration.
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Pursuant to this Court’s decision, respondent assessed a
$73,053 deficiency in income tax, a $12,313 delinquency addition
to tax under section 6651(a)(1), a $14,611 accuracy-related
penalty under section 6662, and $72,080.39 of accrued interest.
As of January 31, 2006, the outstanding balance due on
petitioner’s 1991 tax liability, including penalties and interest
to that date, was $288,028.05.
During the period October 22, 2000, through mid-January
2004, respondent offset an aggregate amount of $772.64 against
petitioner’s outstanding 1991 tax liability. The offsets were
the following tax refunds claimed by petitioner and his wife on
their jointly filed returns: $56.48 (claimed for 1999), $600.00
(claimed for 2000), $112.96 (claimed for 2001), and $3.20
(claimed for 2002).
On or about July 15, 2004, petitioner was in touch with
Revenue Officer Beth McCullough who had been assigned to collect
petitioner’s outstanding 1991 tax liability. Petitioner provided
Ms. McCullough with a letter along with a seven-page memorandum,
dated July 15, 2004, which set forth background in support of
petitioner’s request that respondent not file an NFTL with
respect to his 1991 tax liability. In the memorandum petitioner
explained that he was 67 years old, had practiced law in Jackson,
Mississippi, for 43 years, and had a good reputation. Petitioner
also outlined the status of his health explaining that he had
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heart blockage issues, high blood pressure, a malignant tumor,
which was under treatment, and motor problems with his left leg
requiring use of a walker.
Petitioner also outlined his financial condition in the
memorandum explaining that his only steady income was a monthly
$1,727 Social Security payment and that his professional income
from law practice was greatly reduced. He listed monthly
expenses totaling $5,254.81 and various outstanding liabilities,
including credit card debt, bank loans, and mortgages totaling
approximately $422,000. His outstanding 1991 income tax
liability was not included in the $422,000 amount. Petitioner
reflected assets exceeding liabilities by an amount less than
$100,000, after considering his tax liabilities. He proposed a
plan to refinance his assets in order to make an offer-in-
compromise and to delay filing of the NFTLs, which petitioner
believed would “destroy” his credit. Alternatively, he stated
that if respondent filed the NFTLs and pursued collection,
petitioner would be “driven” into bankruptcy.
Thereafter, respondent, by certified mail, sent petitioner
Notices of Federal Tax Lien Filing and Your Right To a Hearing
Under IRC 6320, dated August 4 and August 10, 2004, which is also
denominated as a “Letter 3172", along with three Notices of
Federal Tax Lien, all of which concerned petitioner’s 1991 tax
liability. The NFTLs were filed on August 6, 2004. On or about
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September 3, 2004, petitioner timely filed a Form 12153, Request
for a Collection Due Process Hearing, listing the following 13
grounds for his disagreement with respondent’s collection
actions: (1) Appropriateness of collection actions; (2)
collection alternatives; (3) impairment of spouse’s rights; (4)
amount of tax; (5) amount of interest; (6) amount of penalty; (7)
inadequacy of notice; (8) due process rights; (9) equal
protection rights; (10) other points to be made at hearing; (11)
adequacy of Appeals rights; (12) timeliness of notice of lien;
and (13) improper filing of lien.
Petitioner’s request for a hearing was assigned to
respondent’s Appeals Officer Horace Grantham, who sent a
September 22, 2004, letter to petitioner, tentatively, to
schedule an October 5, 2004, hearing and requesting petitioner,
within 10 days, to advise of his availability for such hearing.
By that same letter, Appeals Officer Grantham forwarded a Form
433-A, Collection Information Statement for Wage Earners and
Self-Employed Individuals, on which petitioner was to provide
information to enable the Appeals officer to consider collection
alternatives. Petitioner sent a letter, dated September 27,
2004, to the Appeals officer requesting that the October 5, 2004,
date be rescheduled to a date after October 26, 2004. The
Appeals officer replied by a September 29, 2004, letter
rescheduling a hearing for October 27, 2004. The hearing was
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again rescheduled for November 3, 2004, and on November 1, 2004,
petitioner called and requested a further rescheduling to
November 9, 2004. On November 9, 2004, petitioner telephoned
Appeals Officer Grantham and indicated that he had suffered an
injury, and the hearing was finally scheduled for November 16,
2004.
The hearing was held on November 16, 2004, and the following
general topics were discussed: (1) The Appeals process and the
then outstanding amount of petitioner’s 1991 tax liability; (2)
collection alternatives, such as offers-in-compromise and
installment payment plans, were limited due to the fact that
petitioner’s net worth was sufficient to pay his entire 1991 tax
liability; (3) the possibility of respondent’s collecting the
entire amount of the 1991 tax liability from petitioner’s equity
in a retirement account, and a possible tax advantage from
coordination of levies by respondent on that account; (4)
petitioner declined any additional discussion of his 13 items of
disagreement which he had listed on the Form 12153, but he
reserved the opportunity to detail his disagreement in a
subsequent writing; (5) petitioner advised that he would consult
with his certified public accountant (C.P.A.) to determine what
was in his best interest and notify Appeals Officer Grantham by
the end of the week.
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Appeals Officer Grantham concluded that petitioner’s net
worth was sufficient to satisfy the outstanding 1991 tax
liability mainly due to the $308,000 equity in a retirement
account, which was subject to loans of $36,000. The day after
the hearing, Appeals Officer Grantham spoke with Revenue Officer
McCullough to make arrangements for a possible levy on
petitioner’s retirement account.
On November 19, 2004, Appeals Officer Grantham received, by
facsimile, a letter with an attachment from petitioner
supplementing the matters discussed at the November 16, 2004,
hearing. In the November 19, 2004, facsimile, petitioner
reiterated his health-related difficulties, and he also pointed
out that the tax year involved was 1991 so that 13 years of
interest had accrued which represented 75 percent of the
outstanding balance due. Petitioner also emphasized that he had
a good record as a taxpayer during the past 43 years and that
cutting off alternative methods for resolution was not
appropriate. Petitioner advanced Mississippi law in support of
his position that his wife had a right to occupy the “marital
domicile”, and the filing of a lien would impinge on that right
and also lessen the value of the realty without providing
respondent with additional opportunities to collect. Petitioner
also complained that respondent had “appropriated” joint tax
refunds to satisfy part of his individual 1991 tax liability.
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Petitioner also attempted to question whether the section
6651(a)(1) addition to tax and the section 6662 penalty were
overstated.
In the November 19, 2004, facsimile petitioner also
contended that the outstanding amounts of the addition to tax and
penalty reflected on the NFTLs exceeded the 25 percent and 20
percent amounts, respectively, set forth in sections 6651(a)(1)
and 6662 and, therefore, were invalid. Finally, petitioner
contended that the hearing did not provide him with either
substantive or procedural due process because:
1. There are no standards or procedures for conduct
of the hearing.
2. There is no provision for making a written record
of the hearing.
3. No burden of proof is provided, nor is taxpayer
informed as to what is grounds for relief.
4. The presiding officer at the hearing is employed
by the IRS, an adversary party, and therefore cannot
be impartial for due process purposes.
5. No evidence is required or presented by IRS to
establish that due process rights have been afforded.
6. The hearing is a post-deprivation hearing which
does not comply with due process requirements.
There is no due process requirement for filing the lien.
7. Taxpayer was not allowed at the hearing to present
an offer in compromise. The provisions of [section]
6631 require that every IRS notice that includes an
amount of interest required to be paid by the taxpayer
must include a detailed computation of the interest
charged. This was not done in this case as is
demonstrated by the IRS’s notices.
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Petitioner sent no further communications to Appeals Officer
Grantham, and, accordingly, no further information was advanced
about any particular collection alternative. On January 11,
2005, the Notice was sent to petitioner, and he timely instituted
this proceeding on February 9, 2005. In essence, the Notice
explained that because a review of petitioner’s assets revealed
that he had sufficient equity to pay the tax liability in full,
there was no prospect for the consideration of an offer-in-
compromise. The Notice also indicated that petitioner stated
that he would consult with his C.P.A. and advise respondent about
ways to gain a tax advantage from coordination of levies, but
petitioner failed to provide this information. Also reiterated
in the notice of determination, was that petitioner had declined
to discuss “the issues * * * [he] raised in * * * [his] request
for a hearing”. The Notice concluded with the determination that
the filing of the NFTLs with the Panola County Chancery Clerk’s
Office in Batesville, Mississippi, for petitioner’s 1991 income
tax liability was sustained.
In addition to the above Notice, respondent sent the
following Letters to petitioner regarding his 1991 tax liability:
1. Letter CP-14: Sent on or about November 9, 1998, which
normally contains payment history and contact telephone numbers.
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2. Letter CP-501: Sent on or about December 28, 1998,
which contained tax liability information and contact telephone
numbers.
3. Letters CP-503: Sent on or about February 1, 1999, and
October 28, 2002, which contained tax liability information and
contact telephone numbers.
4. Letters CP-504: Sent on or about March 8, 1999, April
12, 1999, September 4, 2000, and July 7, 2003, which contained
tax liability information and contact telephone numbers.
5. Letter 3174: Sent on or about August 29, 2003, by
Internal Revenue Officer Beth McCullough advising that if the
1991 tax balance due were not paid by September 12, 2003, an NFTL
would be filed.
6. Letter 3172: Sent on August 4, 2004, by Revenue Officer
McCullough notifying of the filing of an NFTL for petitioner’s
1991 tax liability.
Discussion
Petitioner, who had practiced law in Mississippi for 43
years, represents himself in this proceeding where, for various
reasons, he contends there was an abuse of discretion in
respondent’s filing of an NFTL. On several occasions, petitioner
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has listed 13 broad contentions3 which he believes support his
assertion that there has been an abuse of discretion.
Petitioner, however, in this shotgunlike approach has not
provided meaningful detail or legal support for his contentions,
either to respondent or to the Court.4
Petitioner vigorously pursued respondent’s determination of
his 1991 income tax deficiency, and he was unsuccessful in this
Court and in his Appeal to the Court of Appeals for the Fifth
Circuit. Scott v. Commissioner, T.C. Memo. 1997-507, affd. 182
F.3d 915 (5th Cir. 1999). Accordingly, petitioner may not
contest the existence or amount of the underlying tax liability
because he received a notice of deficiency, and he had a full
opportunity to dispute the underlying tax liability. Sec.
3
The broad contentions include:
(1) Appropriateness of collection actions; (2)
collection alternatives; (3) impairment of
spouse’s rights; (4) amount of tax; (5) amount of
interest; (6) amount of penalty; (7) adequacy of
notice; (8) due process rights; (9) equal
protection rights; (10) other points to be made at
hearing; (11) adequacy of Appeals rights; (12)
timeliness of notice of lien; and (13) improper
filing of lien.
4
Petitioner’s pleading, submissions to respondent, and
his legal briefs filed with the Court are terse and contain
broad platitudes without meaningful rationale or support in
statutes, regulations or case precedent. We do not hold
petitioner to a higher standard because of his extensive
legal career, but simply note that he had the ability or
capacity to provide the Court with legal support, if any
exists, for his allegations or assertions.
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6330(c)(2); Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza
v. Commissioner, 114 T.C. 176, 180-181 (2000). Moreover,
petitioner would also be barred from litigating a second time his
1991 income tax liability based on the principles of res
judicata.
Our consideration in this case is therefore limited solely
to the question of whether there was an abuse of discretion in
respondent’s determination to proceed with collection action and
in particular to file an NFTL. Where the underlying tax
liability is not at issue, the Court will review the Appeals
officer’s determination for abuse of discretion. Sego v.
Commissioner, supra. In this case, petitioner’s 1991 tax
liability was assessed in accord with the decision of this Court.
Property and rights to property of petitioner become subject to a
lien arising in favor of the United States at the time of the
assessment because petitioner failed to pay the tax liability
after notice and demand for payment. Secs. 6321 and 6322. The
lien is not entitled to priority5 with respect to the claims of
certain other creditors of petitioner until an NFTL is filed.
Sec. 6323(a).
As of January 31, 2006, petitioner’s outstanding balance due
for his 1991 tax liability, including penalties and interest to
5
“Priority” used in this context refers to respondent’s
claim or right to payment vis-a-vis other creditors’ claims
against petitioner’s property or rights to property.
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that date, was $288,028.05. At the hearing afforded to
petitioner, however, it was determined that his equity in assets,
including a retirement account which approximated the amount of
the tax liability, exceeded his outstanding income tax liability.
For that reason, the Appeals officer did not believe there was a
prospect for the consideration of an offer-in-compromise,
although the Appeals officer was open to working out a schedule
to levy on the retirement account in a manner that would minimize
the tax and/or penalty burden on retirement account distributions
used to pay the outstanding tax liability.
Many of petitioner’s contentions in support of his argument
that there was an abuse of discretion have their roots in
respondent’s failure to consider and/or agree to collection
alternatives or to delay in filing an NFTL so as to lessen the
detrimental effect on petitioner or his wife. We proceed to
evaluate petitioner’s contentions.
I. Whether Petitioner Was Entitled to a Hearing Prior to
Respondent’s Filing an NFTL
Petitioner has contended that he was not afforded due
process because respondent did not provide him with a hearing
prior to filing an NFTL. See Beery v. Commissioner, 122 T.C.
184, 190 (2004). Section 6320(a) provides for notification of
the filing of an NFTL in writing not more than 5 business days
after the date of the filing of an NFTL. The express statutory
language does not entitle petitioner to a hearing prior to the
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filing of the NFTL. Under section 6320(a), respondent may file
the NFTL before notifying petitioner or providing him with a
hearing. We note, however, that petitioner did discuss his
outstanding liability and the potential for the filing of an NFTL
with respondent’s collection officer prior to the filing.
As a general matter
The right of the United States to collect its internal
revenue by summary administrative proceedings has long
been settled. Where * * * adequate opportunity is
afforded for a later judicial determination of the
legal rights, summary proceedings to secure prompt
performance of pecuniary obligations to the government
have been consistently sustained. [Fn. ref. omitted.]
Phillips v. Commissioner, 283 U.S. 589, 595 (1931);6 see also
United States v. Natl. Bank of Commerce, 472 U.S. 713 (1985).
The statutes we consider provide for prompt notice after the
collection action (filing the NFTL) and for a hearing and
judicial review. Secs. 6320, 6330. Therefore, petitioner’s
contention that there was a lack of due process must fail.
Petitioner also contended that respondent did not provide
him with a timely notice under section 6320 (sent to his last
known address within 5 business days of the NFTL filing), but the
record reflects that respondent met the time requirement and
6
We note that petitioner, unlike the taxpayer in Phillips,
litigated his liability on the merits before a lien arose and in
that sense was afforded a prior judicial determination of his
legal rights.
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provided petitioner with a hearing in response to his
disagreement with the collection action.
II. Whether Respondent Failed To Adopt or Employ Uniform
Rules or Procedures for the Hearing Pursuant to
Sections 6320 and/or 6330; Whether the Administrative
Procedures Act Applies to the Hearings; and Whether It
Is Respondent’s Obligation To Record the Hearing
Petitioner makes the vague argument that no uniform rules or
procedures existed for the conduct of the administrative hearing
and/or that he was not apprised of same. Respondent counters
that there were available to petitioner, in addition to the
above-referenced statutes, section 301.6320-1, et seq., Proced. &
Admin. Regs., and section 301.6330-1, et seq., Proced. & Admin.
Regs., which provide rules and procedures for the hearing and the
related process. We agree with respondent and find petitioner’s
contention to be without merit or substance.
Petitioner also contends that the provisions of the
Administrative Procedure Act, 5 U.S.C. sec. 551-557 (1994)
should apply to the sec. 6320/6330 hearing. Respondent has
stated in procedural regulations that a hearing under sections
6320 and 6330 is not under the formal hearing provisions of the
Administrative Procedure Act. See sec. 301.6320-1(d)(2), Q&A-D6,
Proced. & Admin. Regs.; sec. 301.6330-1(d)(2), Q&A-D6, Proced. &
Admin. Regs. Petitioner complained that the hearing was not
recorded by respondent, but petitioner did not seek, nor was he
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denied the opportunity, to record the hearing.7 In Davis v.
Commissioner, 115 T.C. 35, 41-42 (2000), we emphasized that the
hearing process is informal and does not require testimony under
oath or certain other formalities. Petitioner does not raise any
other specific or particular aspect of the Administrative
Procedure Act that should have been applied, and, in any event,
he did not say in what manner it would have made a difference in
this case if such procedures had been followed. Accordingly, we
find no merit in these contentions.
III. Whether Respondent Was Required To Provide Petitioner
With Specific Information About the Rules,
Regulations, and or Procedures Governing Hearings; and
Whether There Is Any Limitation on Respondent’s Use of
Information Gained at the Hearing To Further
Subsequent Collection of the Tax
Although contending that respondent is required to provide
taxpayers with specific information about the rules, regulations,
and/or procedures governing hearings, petitioner has not cited
any statute, regulation, or case that mandates such a
requirement. Respondent contends that no such requirement
exists. Section 6331(d)(4) requires the Internal Revenue Service
to inform a taxpayer in nontechnical terms of the administrative
appeal rights available with respect to a levy. Similar
obligations, respecting liens, as well as levies, are imposed by
7
At the time of petitioner’s hearing, this Court had
decided that taxpayers, in certain circumstances, have the right
to record a sec. 6320/6330 hearing. Keene v. Commissioner, 121
T.C. 8 (2003).
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regulation sections 301.6320-1(a)(2) Q&A-A10 and 301.6330-1(a)(3)
Q&A-A7. In that regard, petitioner was sent Publication 1660,
with the August 4, 2004, Letter 3172, Notice of Federal Tax Lien
Filing and Your Right To A Hearing Under IRC 6320. Publication
1660 describes the Appeals rights available to taxpayers, along
with mention of hearing issues provided for in sections 6320(c)
and 6330(c). In addition, the Appeals officer explained the
hearing process to petitioner and encouraged him to provide
additional information or issues. Accordingly, there is little
for petitioner to complain about in the setting of this case.
Further, it has been held that an Appeals officer’s failure to
provide a taxpayer with a written set of all rules, regulations,
and procedures applying to section 6320 and section 6330 hearings
was not an abuse of discretion. See Davis v. Commissioner, supra
at 41-42; Lindsay v. Commissioner, T.C. Memo. 2001-285; see also
Wylie v. Commissioner, T.C. Memo. 2001-65.
With respect to whether respondent can use information
obtained at a section 6320/6330 hearing to advance subsequent
collection, again petitioner did not provide any statute,
regulation, or precedent that would prevent respondent from doing
so. Respondent contends that he is not so limited, but that he
was not aware of any such use in this case. We agree with
respondent that no such limitation has been shown to exist.
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IV. Whether Respondent Complied With the Notice
Requirements for the Filing of a Notice of Federal
Tax Lien, and Whether the Appeals Officer Was Required
To Provide Petitioner With All Documents Maintained by
Respondent With Respect to Him
Petitioner, on brief, makes the barebones argument that
respondent “must comply with notice requirements when filing a
lien.” To make his point, petitioner, on brief, argues that
“Notice of the filing of the lien was not given within five days
in that the liens were filed on August 3, [sic]2005 and the
notice was not dated until August 10, [sic]2005.” In response,
respondent points out that the NFTLs were actually filed with the
County Chancery Courts on August 6, 2004, and the Notices sent to
petitioner were mailed on August 4 and August 10, 2004. The
record bears out respondent on this point. We again note
petitioner’s shotgunlike approach and his propensity to grasp at
straws without providing any meaningful support for his position.8
Petitioner contends that the Internal Revenue Service “must
provide a taxpayer with documents related to him or her in its
file.” Here again, this unsupported contention is without
specificity or distinction. Respondent sent numerous notices,
publications, and other materials to petitioner and provided him
with summaries, Certificate of Assessments and Payments, Forms
4340, with respect to his 1991 tax account. There is no other
8
We also note that petitioner failed to acknowledge that
the notice period is 5 business days, which even under
petitioner’s flawed approach could have explained the difference.
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specific indication by petitioner as to the information or
documents he was or was not provided either prior to or during
the hearing process.
The Appeals officer used Forms 4340 to verify the
assessments. We have held that “it was not an abuse of
discretion for the Appeals officer to use Forms 4340 for purposes
of complying with section 6330(c)(1).” Nestor v. Commissioner,
118 T.C. 162, 166 (2002); Davis v. Commissioner, supra at 41;
Lindsay v. Commissioner, T.C. Memo. 2001-285.
Section 6330(c)(1) does not require the Appeals officer to
provide taxpayers with a copy of a document verifying that the
requirements of any applicable law or administrative procedure
have been met. Section 301.6330-1(e)(1), Proced. & Admin. Regs.,
requires that the Appeals officer obtain verification before
issuing the determination; it does not state that he or she must
provide it to the taxpayer. Further, there is no legal
requirement that the Appeals officer provide a taxpayer with
copies of the delegations of authority, assessment records, or
other underlying documents maintained by respondent with respect
to a taxpayer’s account. Nestor v. Commissioner, supra at 166.
Accordingly, the Appeals officer in this case sufficiently
verified the 1991 tax assessments and was not required to provide
more.
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V. Whether the Penalties and Interest Assessed Against
Petitioner Were Excessive
Petitioner, in his brief, makes a terse reference to the
fact that the interest and penalties are excessive. In his
November 19, 2004, facsimile to Appeals Officer Grantham,
petitioner indicated that the tax year was then 13 years old and
that the income tax liability was only 25 percent of the total,
whereas the penalties and interest represented 75 percent of the
total. He also bemoans the fact that the original 25-percent
addition to tax and 20-percent penalty assessed under sections
6651(a)(1) and 6662, respectively, continue to increase in that
they are interest sensitive. Petitioner contends that the 25
percent and 20 percent amounts set forth in the respective
statutes are intended to be limitations on the maximum amount of
penalty and that the increased amounts are “excessive”.
As already discussed, petitioner was not entitled to raise
the underlying merits of the tax and penalties for 1991 because
he received a statutory notice of deficiency and litigated the
merits of same. See sec. 6330(c)(2)(B). Petitioner has not
shown that the amount of tax, penalties, or interest are
incorrectly computed.9 Instead, he broadly claims they are
9
It is clear that the addition to tax and penalty were
assessed in amounts that coincided with the dollar amounts
contained in our decision in the deficiency proceeding.
Petitioner is barred from contesting that assessment under the
principle of res judicata as well as sec. 6330(c)(2)(B).
(continued...)
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excessive without providing any statutory, regulatory, or case
precedent in support of his position. To the extent that
petitioner was entitled to question the amount of the penalties
and interest included in the outstanding 1991 tax liability, he
has not provided sufficient information from which we could
conclude that respondent’s assessed amounts are in error.
VI. Whether There Was Compliance by Respondent With
Sections 6631 and 6751
Sections 6631 and 6751, which were enacted as part of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, 112 Stat. 685, requires the Secretary to include
certain information on any notice to a taxpayer of liability for
interest or for a penalty. Sections 6631 and 6751 were effective
for notices sent to taxpayers after December 31, 2000, which date
was extended to June 30, 2001, by the Community Renewal Tax
Relief Act of 2000, Pub. L. 106-554, section 302(b) and (c), 114
Stat. 2763A-632. In addition, sections 302(b) and (c) of the
Community Renewal Tax Relief Act of 2000 also provided that the
requirements of sections 6631 and 6751(a) would be “treated as
met” if any notice issued after June 30, 2001, and before July 1,
9
(...continued)
Although petitioner is not barred from contesting whether the
interest accumulated on the assessment was correctly computed by
respondent, he has not made that argument. See Urbano v.
Commissioner, 122 T.C. 384, 392-393 (2004). Petitioner’s
argument here is that accumulated interest on the addition to tax
and penalty causes those amounts to exceed the statutorily
prescribed percentages of 25 and 20 percent, respectively.
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2003, contained a telephone number at which the taxpayer could
request a copy of assessments and payment histories including
interest and penalties.
In this case, 10 notices were sent to petitioner with
respect to his 1991 tax liability. Six of those notices were
sent prior to the extended June 30, 2001, effective date. One of
the notices sent after June 30, 2001, contained telephone numbers
and is treated as meeting the requirements of sections 6631
and/or 6751(a). The remaining three notices did not meet the
interest computation requirements of section 6631.
The question we must consider is whether respondent’s
failure to comply with the section 6631 computation of interest
requirements on 3 of 10 notices has any effect on the validity or
effectiveness of the 1991 assessment and/or the NFTLs filed by
respondent. The statute requires that respondent include a
computation of the amount of interest on each notice, but there
is no indication of any consequence or remedy for failure to do
so.
In the context of the review of an administrative act or
proceeding, this Court has utilized the “theory of detrimental
reliance” and considered the “rule of prejudicial error"
(otherwise known as the doctrine of harmless error). See, e.g.,
Nestor v. Commissioner, supra at 167; Rochelle v. Commissioner,
116 T.C. 356, 363 (2001), affd. 293 F.3d 740 (5th Cir. 2002).
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The question in such cases usually involves the effect, if any,
that a procedural omission or error would have on the outcome or
validity of respondent’s actions. Generally, reviewing courts
have disregarded procedural omissions or errors
unless there was reliance on and prejudice to the complaining
party.
The Court of Appeals for the First Circuit provided
guidance, suggesting that a balanced approach be used in applying
the rule of prejudicial error, as follows:
be cautious in assuming that the result would be the
same if an error, procedural or substantive, had not
occurred, and there may be some errors too fundamental
to disregard. But even in criminal cases involving
constitutional error, courts may ordinarily conclude
that an admitted and fully preserved error was
“harmless beyond a reasonable doubt.” Agency missteps
too may be disregarded where it is clear that a remand
“would accomplish nothing beyond further expense and
delay.” [Citations omitted.]
Save Our Heritage, Inc. v. FAA, 269 F.3d 49, 61-62 (1st Cir.
2001). It has been held that the party seeking judicial review
of an agency action bears the burden of demonstrating prejudice
from any error. Boyd v. United States, 121 Fed. Appx. 348, 350
(10th Cir. 2005), affg. 322 F. Supp. 2d 1229 (D.N.M. 2004); DSE,
Inc. v. United States, 169 F.3d 21, 31 (D.C. Cir. 1999).
In this case respondent failed to compute the amount of
interest on three notices sent to petitioner after the extended
effective date of sections 6631 and 6751(a). In that regard,
respondent did include a telephone number that petitioner could
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have used to obtain the amount of outstanding interest on his
1991 tax liability. In addition, respondent provided petitioner
with statements of the amount of interest outstanding at the time
the Forms 4340 were presented to him. Petitioner, who is an
experienced attorney, does not contend or allege that he in any
manner was prejudiced by respondent’s failure to provide the
amount of interest on the notices. Petitioner has not stated how
he may have been prejudiced by the omission of the amount of
outstanding interest on the three notices. The fact of the
matter is that petitioner was well aware of the amount of
interest and complained mightily about it.
In this record there was no prejudice on respondent’s
omission of the amount of interest on 3 of the 10 notices sent to
petitioner. Further, petitioner has not shown that he was
prejudiced by such omissions. Accordingly, we find it
unnecessary to consider what type of remedial action, if any,
would be appropriate.
VII. Whether Respondent’s Filing of Notices of Federal Tax
Lien was Improper Deprivation of Property or Property
Rights
Continuing with his shotgun approach to this proceeding,
petitioner contends that “The Fifth Amendment to the United
States Constitution provides that no person shall be deprived of
life, liberty or property without due process of law, which is
not a term without meaning.” Respondent’s use of statutorily
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created summary collection provisions has been approved by the
courts for many years and found to be constitutional. Here,
obviously, there is no taking or deprivation of property without
due process. The administrative proceeding in which petitioner
participated and the litigation in which he now engages are
designed to provide petitioner with due process. See Myers v.
United States, 647 F.2d 591, 602 (5th Cir. 1981). Moreover,
petitioner availed himself of the opportunity to litigate the
merits of respondent’s determination of the underlying tax
liability and pursued his position on appeal to the Court of
Appeals for the Fifth Circuit. It was only after our decision in
that case was final and petitioner’s failure to pay that
respondent used summary collection methods. Here again
petitioner’s contention is without substance or merit.
VIII. Whether Respondent Was Entitled To Offset Tax
Refunds From Joint Returns of Petitioner and His Wife
Against Petitioner’s Outstanding Individual 1991 Tax
Obligation
Petitioner’s individual tax liability, including interest
and penalties, was approximately $288,028.05 (with interest
calculated to January 31, 2006). Respondent offset a total
amount of $772.64 of refunds from petitioner’s and his wife’s
joint 1999 through 2002 Federal income tax returns. Petitioner
broadly contends that respondent is not entitled to offset joint
income tax refunds against the individual tax of one of the joint
filers.
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Initially, the filing of a joint return does not, per se,
make the joint filers equal “owners” of any refund of tax from
said return. Instead, each joint filer is apportioned an
interest in the overpayment to the extent he or she contributed
to the overpayment. See Gens v. United States, 230 Ct. Cl. 42,
673 F.2d 366 (1982). In that regard, petitioner has not shown
that any portion of the overpayments for the years 1999 through
2002 was attributable to his wife. Without such information, we
cannot find that there was any abuse of discretion in not
adjusting or reversing the offsets.
Conclusion and Holding--Although petitioner’s filings were
sparse and terse, we have carefully considered his summary
contentions. To the extent that we have not addressed any
particular aspect of his contentions, they are not worthy of
further consideration or comment. We hold that respondent’s
determination to pursue collection by filing Notices of Federal
Tax Liens was not an abuse of discretion. In this case where
petitioner has not shown how a compromise of his liability would
promote effective tax administration coupled with his admission
that his assets are sufficient to pay the outstanding tax
liability, respondent’s refusal to consider alternatives is not
an abuse of discretion. Petitioner’s contention in this regard
has been that the filing of a lien will affect his credit and
ability to sell or transfer assets. Those reasons do not, per
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se, make it unreasonable for respondent to refuse an offer-in-
comprise.
To reflect the foregoing,
Decision will be entered
for respondent.