Alfred Q. Campbell, III v. Commissioner

T.C. Memo. 2019-127
UNITED STATES TAX COURT
ALFRED Q. CAMPBELL, III, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3597-17L. Filed September 24, 2019.
Alfred Q. Campbell III, pro se.
Martha Jane Weber and William Walter Kiessling, for respondent.
MEMORANDUM OPINION
LAUBER, Judge: In this collection due process (CDP) case petitioner seeks
review pursuant to section 6330(d)1 of the determination by the Internal Revenue
1
All statutory references are to the Internal Revenue Code in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure. We round all monetary amounts to the nearest dollar.
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[*2] Service (IRS or respondent) to uphold the issuance of a notice of intent to
levy. The IRS initiated the collection action with respect to petitioner’s Federal
income tax liabilities for 2009 and 2010. Representing that he will abate the 2010
liability, respondent has moved for summary judgment with respect to the
collection action for 2009 and asked the Court to impose a penalty under section
6673. Petitioner has filed a cross-motion for summary judgment in which he
contends that the notice of deficiency for 2009 was “not issued by an authorized
delegate of the Secretary.” We will grant respondent’s motion with respect to the
2009 collection action but deny it with respect to the penalty, and we will deny
petitioner’s cross-motion.
Background
The following facts are based on the parties’ pleadings and motion papers,
including the attached declarations and exhibits. See Rule 121(b). Petitioner re-
sided in Tennessee when he filed his petition.
Petitioner has failed to file Federal income tax returns for the past two dec-
ades, if not longer. He has been a frequent visitor to this Court. See Campbell v.
Commissioner, T.C. Memo. 2013-57 (CDP case involving petitioner’s unpaid
income tax liabilities for 2001-2007); Campbell v. Commissioner, T.C. Dkt. No.
21555-05L (Nov. 8, 2006) (bench opinion), aff’d per order, No. 07-1196 (6th Cir.
-3-
[*3] Oct. 26, 2007) (CDP case involving petitioner’s unpaid income tax liabilities
for 2000).
Among the years for which petitioner failed to file returns were 2009 and
2010, the years at issue. For each year the IRS prepared a substitute for return
(SFR) that met the requirements of section 6020(b). On the basis of the SFRs the
IRS issued to petitioner for each year a notice of deficiency addressed to him at
P.O. Box 34358, Memphis, Tennessee 38184 (Memphis address). The notice of
deficiency for 2009 was issued on December 10, 2012, and the notice of deficien-
cy for 2010 was issued on May 23, 2013. Petitioner failed to petition this Court
within 90 days of either notice. See sec. 6213(a). The IRS accordingly assessed
deficiencies, additions to tax, and interest.
On November 30, 2015, in an effort to collect these unpaid liabilities, the
IRS sent petitioner a Notice of Intent to Levy and Notice of Your Right to a Hear-
ing. That notice was mailed to him at P.O. Box 468, Waynesboro, Tennessee
38485 (Waynesboro address). That was a new address of which the IRS had re-
ceived notice on April 30, 2013. See infra pp. 7-8.
Petitioner timely requested a CDP hearing. In his hearing request he assert-
ed that he had not received either notice of deficiency. He expressed interest in a
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[*4] collection alternative but only after “the IRS can show that it has properly
assessed me and I have been provided the opportunity to dispute these taxes.”
The case was assigned to a settlement officer (SO) from the IRS Appeals
Office, who scheduled a telephone CDP hearing for November 15, 2016. To veri-
fy the assessments the SO requested petitioner’s administrative file, which indicat-
ed that both notices of deficiency had been mailed to his Memphis address but had
been returned to the IRS unclaimed. The SO concluded that petitioner was not en-
titled to dispute his underlying tax liability for 2009 or 2010 because the notices
had been mailed to his Memphis address. See sec. 6330(c)(2)(B); Sego v. Com-
missioner, 114 T.C. 604, 611 (2000). The SO expressed willingness to consider a
collection alternative, provided that petitioner submitted the necessary financial
information and became current in his Federal tax obligations by filing returns for
2011-2016.
On November 15, 2016, the SO attempted to call petitioner for the sched-
uled conference but was unable to reach him. At that time petitioner had not sub-
mitted any financial documentation or copies of any tax returns. The SO sent him
a “last chance” letter asking that he provide, within 14 days, any information that
he wished the SO to consider. Petitioner replied by reiterating the contentions set
forth in his hearing request, demanding a face-to-face hearing, challenging the
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[*5] validity of the 2009 and 2010 notices of deficiency, and requesting
documentation to show how the IRS calculated the levy amount.
The SO concluded that petitioner was not eligible for a face-to-face hearing,
that he could not challenge his underlying tax liabilities, and that he had failed to
furnish information required to consider a collection alternative. On January 11,
2017, the IRS issued petitioner a notice of determination sustaining the proposed
levy, and he timely petitioned this Court. He alleged in his petition that: (1) he
did not receive either notice of deficiency and thus did not have a prior oppor-
tunity to challenge his 2009 and 2010 tax liabilities, (2) the IRS did not follow
proper assessment procedures, and (3) the IRS improperly denied him a face-to-
face hearing.
On May 8, 2017, respondent filed a motion to remand the case to the IRS
Appeals Office. Respondent noted that petitioner denied receiving the notices of
deficiency and that the administrative file did not include copies of those notices.
Respondent accordingly requested that the case be remanded to enable the Ap-
peals Office to “make a complete determination about whether the assessments for
2009 and 2010 are valid.” We granted that motion on June 8, 2017.
On remand the SO obtained copies of each notice of deficiency and of U.S.
Postal Service (USPS) Forms 3877, Firm Mailing Book for Accountable Mail.
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[*6] The notices were issued by the IRS Service Center in Ogden, Utah. Each
took the form of a Letter 3219 (SC/CG) and was signed on behalf of the
Commissioner by Bill Banowsky, the Director of Campus Compliance Operations
at the Ogden Service Center.2 The Forms 3877 showed that each notice of
deficiency had been sent to petitioner by certified mail to his Memphis address.
The SO confirmed that the 16-digit certified mail numbers appearing on the
notices matched those on the Forms 3877 and that the envelope containing each
notice had been returned to the IRS by USPS as unclaimed.
The SO sent petitioner a letter scheduling a supplemental CDP hearing for
September 6, 2017. The letter requested that petitioner confirm his mailing ad-
dress from December 2012 through December 2013, the period during which the
two notices of deficiency were mailed. The letter also asked petitioner to submit
fully completed tax returns for 2009 and 2010 if he wished to challenge his under-
lying tax liabilities for those years. Petitioner submitted no information to the SO
before the hearing.
2
Respondent provided the declaration of Denice D. Vaughan, Director of
Small Business/Self-Employed Operations Support within the IRS. She explained
the Ogden Service Center’s organizational structure and confirmed that “Depart-
ment Managers, Campus Compliance Services (Small Business/Self-Employed)”
reported to “Campus Senior Managers,” who reported directly to Mr. Banowsky as
“Director, Campus Compliance Operations.”
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[*7] The supplemental hearing was held as scheduled. The SO again asked peti-
tioner to verify his address, but petitioner replied with frivolous arguments. When
the SO reiterated that request, petitioner refused, said “bye bye,” and terminated
the call. At no point during or before the hearing did petitioner submit any evi-
dence relevant to his underlying tax liability for 2009 or 2010.
On February 23, 2018, the SO issued petitioner a supplemental notice of
determination sustaining the levy. It concluded that the assessments were valid
because the administrative file contained sufficient information to verify that the
notices of deficiency had been properly mailed to petitioner’s last known address.
It concluded that petitioner could not challenge his underlying tax liabilities and
was ineligible for a collection alternative because he had refused to supply any
financial information.
On March 12, 2019, respondent filed a motion for summary judgment. Al-
though petitioner had refused to answer the SO’s questions about his address
during 2012-2013, respondent noted that petitioner had supplied information on
that point during an earlier CDP case involving his unpaid tax liabilities for 2001-
2007. See Campbell v. Commissioner, T.C. Memo. 2013-57.3 In that case
3
Petitioner contended in that case that he did not receive the notices of defi-
ciency for 2001-2007, which the USPS had returned to the IRS as unclaimed. We
(continued...)
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[*8] petitioner filed, on April 30, 2013, a notice of change of address. That notice
informed the IRS and the Court that petitioner’s address, as of that date, had
changed from the Memphis address to the Waynesboro address.
Because petitioner acknowledged that the Memphis address was his correct
address before April 30, 2013, respondent urges in his motion for summary judg-
ment that the 2009 notice of deficiency, which was mailed to the Memphis address
on December 10, 2012, was properly sent to his last known address. On the other
hand, because respondent had been notified that petitioner’s address had changed
to the Waynesboro address as of April 30, 2013, respondent concedes that the no-
tice of deficiency for 2010, which was mailed to the Memphis address on May 24,
2013, was not sent to his last known address and was thus invalid. Respondent
represents that petitioner’s 2010 tax liability will accordingly be abated.4
In his cross-motion petitioner contends that the notice of deficiency for
2010 was not sent to his last known address (as respondent concedes) and was
3
(...continued)
concluded that he had deliberately refused delivery of those notices, that he was
thus deemed to have received them, and that he was accordingly precluded from
challenging his underlying tax liabilities. Campbell v. Commissioner, T.C. Memo.
2013-57, 105 T.C.M. 1394, 1396-1397.
4
Respondent anticipates that the IRS will issue a new notice of deficiency
for 2010 to petitioner at his current address. Because petitioner has never filed a
return for 2010, the tax for that year may be assessed at any time. Sec. 6501(c)(3).
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[*9] thus invalid. Petitioner does not dispute that the 2009 notice was sent to his
last known address. But he contends that it was nevertheless invalid because it
was not signed by “an authorized delegate of the Secretary as required by 26
U.S.C. §§ 6212(a), 7701(a)(11)(B), and 7701(a)(12)(A)(i).”
Discussion
A. Summary Judgment Standard
The purpose of summary judgment is to expedite litigation and avoid costly,
time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90
T.C. 678, 681 (1988). The Court may grant summary judgment when there is no
genuine dispute as to any material fact and a decision may be rendered as a matter
of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),
aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judg-
ment, we construe factual materials and inferences drawn from them in the light
most favorable to the nonmoving party. Sundstrand Corp., 98 T.C. 520. How-
ever, the nonmoving party may not rest upon mere allegations or denials of his
pleadings but instead must set forth specific facts showing that there is a genuine
dispute for trial. Rule 121(d); see Sundstrand Corp., 98 T.C. 520. We conclude
that there are no material facts in dispute and that this case is appropriate for
summary adjudication.
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[*10] B. Standard of Review
Section 6330(d)(1) does not prescribe the standard of review that this Court
should apply in reviewing an IRS administrative determination in a CDP case.
But our case law tells us what standard to adopt. Where the validity of the taxpay-
er’s underlying tax liability is properly at issue, we review the IRS’ determination
de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Where the tax-
payer’s underlying liability is not before us, we review the IRS determination for
abuse of discretion only. See id. at 182. Abuse of discretion exists when a de-
termination is arbitrary, capricious, or without sound basis in fact or law. Murphy
v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006).
C. Underlying Liability
A taxpayer may raise a CDP challenge to the existence or amount of his
underlying tax liability if he “did not receive any statutory notice of deficiency for
such tax liability or did not otherwise have an opportunity to dispute * * * [it].”
Sec. 6330(c)(2)(B). Respondent has represented that petitioner’s underlying tax
liability for 2010 will be abated. The current focus of live dispute is thus petition-
er’s liability for 2009.
At the CDP hearing petitioner sought to challenge his underlying tax liabil-
ity for 2009 by asserting that he did not receive the notice of deficiency for that
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[*11] year. Since he does not dispute that he resided at the address to which that
notice was mailed, it seems likely that he refused delivery of the notice, as he did
for the notices of deficiency that the IRS sent him for 2000 and for 2001-2007.
See Campbell, 105 T.C.M. at 1396-1397; Campbell, T.C. Dkt. No. 21555-
05L.
We need not, however, decide that question. Assuming arguendo that peti-
tioner did not receive the 2009 notice, he was entitled to challenge his liability for
that year at the CDP hearing. Sec. 6330(c)(2)(B). But “[a] taxpayer is precluded
from disputing the underlying liability if it was not properly raised in the CDP
hearing.” Thompson v. Commissioner, 140 T.C. 173, 178 (2013); see Giamelli v.
Commissioner, 129 T.C. 107, 114 (2007). “‘An issue is not properly raised if the
taxpayer fails * * * to present * * * any evidence with respect to that issue after
being given a reasonable opportunity’ to do so.” Moriarty v. Commissioner, T.C.
Memo. 2017-204, 114 T.C.M. 441, 443 (quoting section 301.6330-1(f)(2),
Q&A-F3, Proced. & Admin. Regs.), aff’d per order, 2018 WL 4924349 (6th Cir.
Sept. 19, 2018); see Obeirne v. Commissioner, T.C. Memo. 2018-210, at *9.
The IRS determined petitioner’s 2009 liability by preparing an SFR on the
basis of third-party reporting. The SO invited petitioner, if he wished to dispute
that liability, to submit a properly completed 2009 tax return stating what he
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[*12] believed his correct tax liability for 2009 to be. Petitioner refused to do so,
and he submitted no evidence of any kind to the SO on this subject. Indeed, he
advanced only frivolous arguments during the hearing and peremptorily
terminated the call. Because petitioner did not properly challenge his 2009 tax
liability at the CDP hearing, he is not entitled to advance that challenge in this
Court. We thus review the SO’s action for abuse of discretion only. See
Thompson, 140 T.C. 178; Alamo v. Commissioner, T.C. Memo. 2017-215, 114
T.C.M. 489, 496, aff’d, 751 F. App’x 583 (5th Cir. 2019).
D. Abuse of Discretion
In determining whether the SO abused his discretion we consider whether
he: (1) properly verified that the requirements of any applicable law or adminis-
trative procedure had been met, (2) considered any relevant issues petitioner
raised, and (3) determined whether “any proposed collection action balances the
need for the efficient collection of taxes with the legitimate concern of * * * [pe-
titioner] that any collection action be no more intrusive than necessary.” See sec.
6330(c)(3). Our review of the record establishes that the SO properly discharged
all of his responsibilities under section 6330(c).
This case was remanded to the Appeals Office to enable the SO to verify
that the assessments were valid. On remand the SO secured copies of the notices
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[*13] of deficiency and of the corresponding certified mail lists. The certified
mail list for 2009 showed that the notice for that year had been sent by certified
mail to petitioner’s Memphis address, which the SO determined to be his last
known address. Petitioner does not dispute that as of December 10, 2012, the
Memphis address was his last known address. Indeed, on April 30, 2013, he filed
in docket No. 13687-11 a change of address form averring that the Memphis
address was his correct address before April 30, 2013. If a notice of deficiency is
mailed to the taxpayer at his last known address, actual receipt of the notice is
immaterial; the notice is valid. See, e.g., United States v. Zolla, 724 F.2d 808, 810
(9th Cir. 1984). We conclude that the SO did not abuse his discretion in
determining that the 2009 assessment was valid because the notice of deficiency
for that year was sent to petitioner’s last known address.
Petitioner contends for the first time in his cross-motion for summary judg-
ment that the notice of deficiency for 2009 was invalid on the theory that it was
not issued by the Secretary or his delegate. See secs. 6212(a), 7701(a)(11)(B),
(12)(A). Petitioner did not advance this argument at the initial CDP hearing, at the
supplemental CDP hearing, or in his petition to this Court. Assuming arguendo
that this argument is properly before us, we reject it.
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[*14] The notice was issued by the IRS Service Center in Ogden, Utah. It took
the form of a Letter 3219 (SC/CG), and it was signed on behalf of the Commis-
sioner by Bill Banowsky, the Director of Campus Compliance Operations at the
Ogden Service Center. The notice of deficiency is standard in all respects and
displays no irregularities of any kind.
The case law recognizes a “presumption of official regularity” supporting
the proposition that public officers, absent evidence of the contrary, have properly
discharged their official duties by following prescribed procedures. See R.H.
Stearns Co. v. United States, 291 U.S. 54, 63 (1934); United States v. Chem.
Found., Inc., 272 U.S. 1, 14-15 (1926); United States v. Ahrens, 530 F.2d 781, 785
(8th Cir. 1976); Walker v. Commissioner, T.C. Memo. 2018-22, 115 T.C.M.
(CCH) 1082, 1086 n.6. During the supplemental hearing petitioner did not chal-
lenge the capacity of the Ogden Service Center to issue the notice of deficiency,
and he presented no facts or argument of any kind concerning the issuing officer’s
authority.
The SO on remand did what he was instructed to do: He secured copies of
the 2009 notice of deficiency and the certified mail list, he confirmed that the same
16-digit certified mail number appeared on both documents, and he verified that
the notice was properly mailed to petitioner’s Memphis address. Absent any
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[*15] argument by petitioner or irregularity on the face of the notice, the SO could
rely on the presumption of official regularity to conclude that the signature on the
notice was that of a duly authorized IRS officer. See Perlmutter v. Commissioner,
44 T.C. 382, 399 (1965) (applying the presumption to the authority of an IRS
officer to issue a notice of deficiency), aff’d, 373 F.2d 45 (10th Cir. 1967). The
SO did not abuse his discretion in verifying the assessment without consulting IRS
delegation orders.
In any event Mr. Banowsky had delegated authority to sign the notice of
deficiency for 2009. That notice was issued on December 10, 2012. At that time
Delegation Order 4-8 (Rev. 1) set forth the categories of officials to whom the
Commissioner had delegated authority to sign and issue notices of deficiency. See
Internal Revenue Manual (IRM) pt. 1.2.43.9 (Sept. 4, 2012). Among the officers
listed are “Department Managers, Campus Compliance Services (Small Busi-
ness/Self-Employed).” Delegation orders are generally directed to the lowest level
position expected to take a particular action. See IRM pt. 1.11.4.4.1 (Oct. 10,
2008). Thus, “[e]very intervening line supervisory position up to and including
the Commissioner has the same authority.” Winslow v. Commissioner, 139 T.C.
270, 274 (2012) (quoting IRM pt. 1.11.4.4.1(1)(A)).
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[*16] Mr. Banowsky was the top IRS official in charge of compliance services at
the IRS Ogden campus. At that facility “Department Managers, Campus Compli-
ance Services (Small Business/Self-Employed)” reported to “Campus Senior Man-
agers.” “Campus Senior Managers” reported directly to Mr. Banowsky as “Direc-
tor, Campus Compliance Operations.” See supra note 2. Because Mr. Banowsky
was in the direct line of supervisors over “Department Managers,” who are specifi-
cally listed in Delegation Order 4-8 (Rev. 1), Mr. Banowsky was authorized to
sign and issue the notice of deficiency for 2009.
Finally, petitioner contends that he was improperly denied a face-to-face
hearing. The regulations provide that a “CDP hearing may, but is not required to,
consist of a face to face meeting.” Sec. 301.6320-1(d)(2), Q&A-D6, Proced. &
Admin. Regs. We have repeatedly held that section 6330 does not require a face-
to-face CDP hearing. Katz v. Commissioner, 115 T.C. 329, 337-338 (2000); Wil-
liamson v. Commissioner, T.C. Memo. 2009-188. In particular, we have held that
an SO’s denial of a face-to-face hearing does not constitute an abuse of discretion
where a taxpayer advances frivolous arguments or declines (as petitioner repeated-
ly did) to provide past due returns or necessary financial information. See Zastrow
v. Commissioner, T.C. Memo. 2010-215; Moline v. Commissioner, T.C. Memo.
2009-110, aff’d, 363 F. App’x 675 (10th Cir. 2010); Williams v. Commissioner,
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[*17] T.C. Memo. 2008-173. Petitioner did not submit any offer of a collection
alternative. Even if he had, he was not in compliance with his tax filing
obligations for tax years 2011-2016. The SO could properly have rejected any
proposed collection alternative on that ground alone. See Cox v. Commissioner,
126 T.C. 237, 258 (2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir. 2008);
Hull v. Commissioner, T.C. Memo. 2015-86, 109 T.C.M. 1438, 1441.
Finding no abuse of discretion in any respect, we will sustain the proposed
collection action for tax year 2009.
E. Section 6673(a)(1) Penalty
Section 6673(a)(1) authorizes this Court to impose a penalty not in excess
of $25,000 “[w]henever it appears to the Tax Court” that a taxpayer has instituted
or maintained a proceeding “primarily for delay” or has taken a position that is
“frivolous or groundless.” The purpose of section 6673 is to compel taxpayers to
conform their conduct to settled tax principles and to deter the waste of judicial
resources. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); Bruh-
wiler v. Commissioner, T.C. Memo. 2016-18, 111 T.C.M. 1071, 1074.
Petitioner was before this Court in two previous CDP cases. Campbell, T.C.
Memo. 2013-57; Campbell, T.C. Dkt. No. 21555-05L. In both cases he failed to
file returns and denied receiving the notices of deficiency that followed. He ad-
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[*18] vanced frivolous arguments in the earlier case, and we imposed a penalty of
$2,500 under section 6673(a).
It seems likely that petitioner has been invoking the CDP procedure “pri-
marily for delay” for a long period of time. In this case, however, respondent has
made a full concession for one of the two tax years at issue. Since petitioner, de-
spite his worst efforts, has secured some relief by commencing this litigation, we
will not impose a penalty on him at this time. But he is warned that we will not
hesitate to do so if he commences future litigation in this Court primarily for pur-
poses of delay.
To reflect the foregoing,
An appropriate order and decision
will be entered granting in part and denying
in part respondent’s motion for summary
judgment, and granting in part and denying
in part petitioner’s cross-motion.