DocketNumber： Docket No. 23525-12L
Judges： LARO
Filed Date： 5/6/2014
Status： Non-Precedential
Modified Date： 4/18/2021
Decision will be entered for respondent.
LARO,
(1) whether respondent abused his discretion in denying petitioner's request for an installment agreement relating to the years at issue. We hold he did not; and
(2) whether respondent abused his discretion in denying petitioner's request for a face-to-face hearing. We hold he did not.
Petitioner was a resident of Hawaii when he petitioned this Court.
Petitioner is the president and 100% shareholder of Hawaiian Isle Enterprises, Inc., and HIE Holdings,2014 Tax Ct. Memo LEXIS 81">*82 Inc. Petitioner's income tax liabilities for the years at issue are based upon an opinion rendered by this Court on June 8, 2009, in
Following this Court's entry of decision in the deficiency case, on July 19, 2010, petitioner moved to waive the As mentioned above, the posting of a bond is not a requirement to an appeal of our decisions. Instead, the posting of the bond serves to guarantee that the2014 Tax Ct. Memo LEXIS 81">*83 Commissioner will be able to collect the deficiencies determined by this Court (plus interest) and to preclude the Commissioner otherwise from assessing and collecting those amounts before the appellate review is complete. Absent petitioners' posting of a bond fixed at our customary amount, we consider it to be inappropriate in the setting at hand to preclude the Commissioner, if he desires, from assessing and collecting those deficiencies (plus interest) during the pendency of petitioners' appeal. Such an appeal, which would first go to the Court of Appeals for the Ninth Circuit and then most likely to the U.S. Supreme Court, could easily last more *83 than 2 years. To the extent that the Government during the pendency of the appeal lacked a lien as to the full amount of the deficiencies that we determined (plus interest), the Government will stand simply as an unsecured creditor that remains vulnerable to petitioners' dissipation of their assets. We understand that the posting of the bond entails privation and perhaps some suffering, and we have empathy for petitioners' situation. Yet, the purpose of the bond is to protect the Government when and if it is necessary to collect the deficiencies2014 Tax Ct. Memo LEXIS 81">*84 and interest due by virtue of our decisions. In this regard, we take note of the fact that Michael Boulware hid millions of dollars of assets from the Government and from others in the context of these cases and that he participated in other deceptive behavior, some of which led to his criminal conviction. Given Michael Boulware's conduct, the need to protect the Government with a full bond is self-evident. * * *
In the same order we set the amount of the bond in accordance with our customary practice for appeal bonds, quoting The customary practice of the Tax Court is to fix an appeal bond equal to the amount of the deficiency for which review is sought, plus any additions to the tax and interest running from the time of the filing of the return until the time when the appellate review of the decision is expected to be completed—ordinarily 2 1/2 years after the last date on which a petition for review could be filed; but of course, the amount of the bond cannot exceed twice the deficiency. * * *
On August 19, 2010, petitioner appealed the deficiency case to the Court of Appeals for the Ninth Circuit but did not post a bond pending appeal. On appeal *84 petitioner moved the2014 Tax Ct. Memo LEXIS 81">*85 Court of Appeals for the Ninth Circuit for a stay of collection pending appeal, which the court denied on March 11, 2011.
On February 24, 2011, respondent sent petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under
On June 14, 2011, petitioner submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to his tax liabilities for the years at issue. On the form petitioner selected two checkboxes marked "Filed Notice of Federal Tax Lien" and "Proposed Levy or Actual Levy" as the basis for his hearing request. In an attachment to the Form 12153 petitioner stated his belief that a lien withdrawal was warranted because: 1. In addition to the years 1998, 1999, 2001 & 2002 MHB [Michael H. Boulware] has received tax assessments for the years 2003 & 2004 and is currently working with Gary Lipetzky (Honolulu IRS Appeals) to resolve unagreed issues. 2. MHB has also appealed the decision of the Tax Court that resulted in taxes due for the years 1998, 1999, 2001 & 2002. MHB contends that the filing of those liens were premature and should have occurred after the appeals process has run its course. It is our belief that the amount of taxes that2014 Tax Ct. Memo LEXIS 81">*87 the IRS has assessed may not be correct.
On or about May 26, 2011, petitioner submitted a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, in which he disclosed his monthly income and expenses as well as his personal assets. In *86 this Form 433-A petitioner disclosed monthly wage income of $33,000, monthly rental income of $9,500, and monthly living expenses of $27,033.
On June 22, 2011, Revenue Officer Colin P. Kelly (RO Kelly) prepared a monthly income and expense analysis for petitioner. On the basis of petitioner's 2010 tax return, which disclosed monthly rental income of $13,673, RO Kelly increased petitioner's monthly rental income to $13,000, for a total monthly income of $46,000. In addition, RO Kelly determined that only $16,372 of petitioner's claimed monthly living expenses constituted allowable expenses. Accordingly, RO Kelly determined petitioner's monthly ability to pay to be $29,628. With regard to petitioner's equity in assets, RO Kelly noted that petitioner had a
On or around June 27, 2011, petitioner's case was transferred to respondent's Seattle Appeals Office. On or around August 1, 2011, petitioner's case was again transferred to respondent's Portland Appeals Office. In a letter dated August 19, 2011, respondent informed petitioner that his case had been received for consideration by the Portland Appeals Office.
On February 13, 2012, Settlement Officer Kimberly A. Martin (SO Martin) sent petitioner a letter informing him that a telephone conference had been *87 scheduled for March 13, 2012, and that this conference would be his primary opportunity to discuss his reasons for disagreement with the collection action or to discuss collection alternatives. This letter further informed petitioner that his CDP hearing request regarding the proposed levy action was timely but his CDP hearing request regarding the NFTL was not. Nonetheless, SO Martin informed petitioner that she would offer him an equivalent hearing with respect to the NFTL but he could not challenge her equivalent hearing determination. In her letter SO Martin further informed petitioner: You are not able to dispute the liability because2014 Tax Ct. Memo LEXIS 81">*89 the tax liability that is the subject of this hearing is based on a judicial decision and although you have appealed this decision to the Ninth Circuit Court of Appeals the Service is not required to withhold collection absence [sic] the posting of a bond which was not done. In addition, the Ninth Circuit ruled in case number 10-72589 in order dated 3/11/2011 that your motion to stay collection was denied. Your request to have the Collection Due Process hearing postponed pending the outcome of your appeal cannot be granted. Appeals cannot approve an installment agreement or accept an offer-in-compromise unless all required estimated tax payments for the current year's income tax liability have been made. If you wish to pursue one of these alternatives during the CDP hearing process, you must arrange for the payment of any required estimated tax payments.
On February 27, 2012, petitioner sent SO Martin a letter asking for a face-to-face hearing. On February 28, 2012, SO Martin replied to petitioner, stating: You[r] request for a face to face conference can be discussed once you have provided the information in my 2/13/2012 letter and we have held the telephone conference. There is currently not a Settlement Officer located in Hawaii to hold a face to face conference.
On February 29, 2012, SO Martin informed petitioner2014 Tax Ct. Memo LEXIS 81">*91 that she had rescheduled the conference call to April 19, 2012, and that she had extended the *89 due date for the requested financial documents to March 30, 2012. With regard to petitioner's face-to-face hearing request, she stated: As for the face to face hearing request we can discuss that during our telephone conference. If after the telephone conference(s) you still are requesting a face to face hearing we can discuss various possibilities. The travel budget and if we have other cases requiring face to face meetings in Hawaii during that time are factors we consider. Sometimes in these situations we can arrange to have you meet with a local Appeals Officer and I could participate on the telephone. We can explore various options if needed.
On March 30, 2012, petitioner sent SO Martin the requested financial documents, including an updated Form 433-A. In this Form 433-A petitioner disclosed monthly wage income of $33,000, monthly rental income of $9,500, and monthly living expenses of $19,933. Petitioner further disclosed that his
On the basis of various rental agreements SO Martin determined that petitioner owned a 60-year leasehold interest in 2864 Mokumoa St., Honolulu, Hawaii, for $17,000 a month, which he in turn subleased to HIE Holdings, Inc., for *90 $32,533 a month. However, because petitioner paid real estate and general excise taxes for the rental property, SO Martin increased petitioner's monthly rental income to only $13,673, as disclosed in his 2010 return. Accordingly, SO Martin determined petitioner's total monthly income to be $46,673. Using local and national standards SO Martin further determined petitioner's allowable monthly expenses to be $17,341. SO Martin thus concluded that petitioner had the ability to pay $29,332 a month in an installment agreement.
On April 3, 2012, petitioner again requested a continuance of the telephone conference. Petitioner explained that on March 29, 2012, he had received an order from the Court of Appeals for the Ninth Circuit directing him to submit certain briefing by April 19,2014 Tax Ct. Memo LEXIS 81">*93 2012. Petitioner requested that the conference call be rescheduled to April 26 or 27, 2012. On April 10, 2012, SO Martin replied to petitioner, agreeing to reschedule the conference to May 2, 2012.
On May 2, 2012, SO Martin conducted the telephone conference. During the conference petitioner stated that he might still request a face-to-face hearing. In response SO Martin explained that they would discuss petitioner's financial information first and then decide whether a face-to-face hearing was still necessary or desirable. With regard to an installment agreement, SO Martin stated that it could cover only the years at issue—it could not cover tax years 2003 and 2004 *91 because they were the subject of a pending Tax Court case, nor could it cover tax years 1989 through 1997 because the returns for those years were still under audit. SO Martin further informed petitioner that he had to be in full compliance with his current tax obligations to qualify for a collection alternative. Therefore, SO Martin advised petitioner that he needed to make his 2011 estimated tax payments before she would consider an installment agreement.
SO Martin also advised petitioner that he had to liquidate his equity2014 Tax Ct. Memo LEXIS 81">*94 in certain assets before she would consider an installment agreement. These assets included petitioner's
On May 18, 2012, petitioner sent SO Martin a letter proposing a $12,500-per-month installment agreement, which would cover tax years 1989, 1990, 1991, 1992, 2003, and 2004, in addition to the years at issue. With regard to the liquidation of assets, petitioner stated: As you are aware, the tax liability in this matter remains subject to dispute, and the Tax Court deficiency determination is currently on appeal before the Ninth Circuit. Mr. Boulware does not want to liquidate the 401K and life insurance policy (incurring taxes and creating other hardships) unless and until said liability becomes final. *92 Mr. Boulware would therefore propose that a collateral agreement be entered into with the IRS, under which Mr. Boulware agrees to voluntarily liquidate and pay to the IRS these assets within 45 days of the exhaustion2014 Tax Ct. Memo LEXIS 81">*95 of all appeal rights on the Tax Court decision. In addition, the Companies plan to take steps to decrease Mr. Boulware's officer loan account balance. As you are aware, the Companies are currently paying Boulware rent on the property located at 1864 Mokumoa Street. Going forward, the Company plans to instead credit payment of such rent against Mr. Boulware's officer loan account. This will decrease Boulware's monthly income (to just his wages of $33,000 per month), but will free up additional funds for the Companies, which will be available for payment of the Companies tax liabilities. * * * Please note that Mr. Boulware is currently involved in negotiation and possible litigation of alleged tax deficiencies from other years, and that he will continue to incur attorneys' and professional fees and costs related to those proceedings, which expenses are not reflected on Mr. Boulware's Form 433-A. He may also face significant State taxes.
On June 28, 2012, SO Martin responded regarding petitioner's proposed installment agreement. With regard to the scope of the installment agreement, SO Martin advised petitioner as follows: [Y]our request to include2014 Tax Ct. Memo LEXIS 81">*96 tax periods that are not assessed into an installment agreement cannot be granted. You have petitioned the Tax Court on the Statutory Notice of Deficiency for the 2003 and 2004 tax years and the 89, 90, 91 and 92 tax years are still in the examination stage of the audit process. Your payment proposal of $12,500/month cannot be accepted. * * * [T]he proposed dollar amount does not reflect * * * [petitioner's] ability to pay. The taxpayer is allowed ordinary expenses for his health and welfare, the professional fees and costs not reflected in the form 433A do not qualify as necessary living expenses. In your most recent letter you state that the taxpayer does not want to liquidate his assets as you still have litigation pending before the Ninth Circuit and proposes waiting until all of his appeal rights have been exhausted. As previously stated in my initial conference letter, the subject tax liabilities are based on a judicial decision and although you have appealed the decision to the Ninth Circuit Court of Appeals the Service is not required to withhold collection2014 Tax Ct. Memo LEXIS 81">*97 absence [sic] the posting of a bond which was not done. In addition the Ninth Circuit ruled on 3/11/2011 that your motion to stay collection was denied. Your request to enter into a collateral agreement and wait to liquidate the taxpayer's assets cannot be granted.
SO Martin concluded her letter as follows: Unless the taxpayer is willing to liquidate his 401K plan and life insurance, be in compliance,
On July 23, 2012, petitioner sent SO Martin a letter requesting an extension of time until August 15, 2012, to respond to her letter dated June 28, 2012, and to make estimated tax payments for 2012. In that same letter petitioner requested a face-to-face hearing before the issuance of a notice of determination.
On July 30, 2012, SO Martin discussed the case with her Appeals team manager, who agreed that petitioner was not entitled to additional time to respond for the following reasons: (1) petitioner was not in full compliance; (2) petitioner was unwilling to liquidate his assets; and (3) petitioner was unwilling to enter into an installment agreement that reflected his ability to pay.
On August 7, 2012, SO Martin advised petitioner via telephone that she could not recommend accepting his proposed installment agreement because he was not in full compliance, he was unwilling to liquidate his assets, and he *95 proposed to pay his unsecured corporate loan ahead of the IRS' secured debt.2014 Tax Ct. Memo LEXIS 81">*99 SO Martin further advised petitioner that a face-to-face meeting would serve no purpose since he did not qualify for an installment agreement. Finally, SO Martin informed petitioner of her decision to sustain the lien and levy filings.
On August 21, 2012, SO Martin issued a notice of determination which sustained the issuance of the notice of intent to levy and concluded that petitioner did not qualify for an installment agreement. In the notice of determination SO Martin verified that she had no prior involvement with petitioner's case, verified that all legal and procedural requirements had been met, and balanced the need for efficient collection with petitioner's legitimate concerns that the collection action be no more intrusive than necessary.
When the Commissioner pursues collection by lien or levy, he must notify the affected taxpayer in writing of his or her right to a hearing with an impartial Appeals officer.
As a preliminary matter we note that although the petition in this case is entitled "Petition for Redetermination of Lien or Levy Action under Code
As part of the CDP hearing, Appeals must take into consideration: (1) verification that the requirements of applicable law and administrative procedure have been met; (2) relevant issues raised by the taxpayer concerning the collection action; and (3) whether the proposed collection action balances the need for the efficient collection of tax with the taxpayer's legitimate concern that the collection action be no more intrusive than necessary.
A taxpayer is precluded from challenging the existence or amount of the underlying tax liability unless the individual did not receive a notice of deficiency for the tax liability or was not otherwise2014 Tax Ct. Memo LEXIS 81">*102 provided with an opportunity to dispute the tax liability.
Where the validity of the underlying tax liability is not at issue, we review Appeals' determinations for abuse of discretion.
"
Petitioner argues that SO Martin abused her discretion when she rejected his proposed installment agreement. SO Martin rejected petitioner's2014 Tax Ct. Memo LEXIS 81">*104 proposed installment agreement for three reasons: (1) petitioner was not in full compliance with the tax laws; (2) petitioner refused to liquidate his assets to effect a partial payment; and (3) petitioner's proposed monthly payment did not reflect his ability to pay. We address each of these reasons in turn.
Petitioner argues that SO Martin abused her discretion and erred as a matter of law by requiring him to be current with his estimated tax payments before she would accept his proposed installment agreement. We disagree.
We have consistently held that an Appeals officer does not abuse his discretion in denying a taxpayer's request for an installment agreement when the taxpayer is not in compliance with his current tax obligations as of the date of the CDP hearing.
Petitioner's argument is nearly identical to the taxpayer's argument in
Similarly, we conclude that although SO Martin
Petitioner's reliance on
SO Martin further rejected petitioner's proposed installment agreement because he refused to liquidate his retirement account and his life insurance *103 policies.
We have routinely2014 Tax Ct. Memo LEXIS 81">*108 held that an Appeals officer does not abuse his discretion when he rejects an installment agreement because a taxpayer refuses to liquidate assets to satisfy his tax liabilities. In
In
Petitioner argues that SO Martin abused her discretion because the pendency of an appeal of a decision imposing liability constitutes "special circumstances" warranting an exception to the general rule that assets must be liquidated to qualify for an installment agreement. We disagree.
Petitioner argues, for the first time on brief, that "special circumstances" existed because of the unique nature of the assets that SO Martin asked him to liquidate. According to petitioner his
We may not consider issues or arguments that a taxpayer does not raise as part of his CDP hearing.
Finally, petitioner argues that SO Martin abused her discretion by requiring him to liquidate his life insurance policies when respondent would "almost certainly" not receive any proceeds from that liquidation because they were "encumbered by First Interstate Bank as collateral at all relevant times". Petitioner's argument is at best confused and at worst disingenuous. SO Martin asked petitioner to liquidate the life insurance policies disclosed in his Form 433-A with cash value of $52,437 and policy numbers ending in 1286 and 2912. The life insurance policy assigned to First Interstate Bank had a policy number ending in *108 5184. Thus, SO Martin correctly concluded that there was "no evidence" supporting petitioner's contention that his life insurance policies ending in 1286 and 2912 were encumbered by First Interstate Bank.
Finally, SO Martin rejected petitioner's proposed installment plan of $12,500 a month because it2014 Tax Ct. Memo LEXIS 81">*114 did not reflect his ability to pay, which she determined to be approximately $29,000 a month.
In reviewing for abuse of discretion the Court does not recalculate a taxpayer's ability to pay nor substitute its judgment for that of the settlement officer.
*109 SO Martin determined petitioner's monthly income on the basis of his financial disclosures and determined his allowable expenses according to local and national standards. We have held that a settlement officer does not abuse his discretion by adhering to local and national standards even if adherence to those2014 Tax Ct. Memo LEXIS 81">*115 standards would force taxpayers to change their lifestyle.
Petitioner argues that SO Martin abused her discretion by not negotiating the amount of the monthly payment. Petitioner continues: "Boulware never had to make the difficult determination of what he could afford to pay on a monthly basis"; and he asserts that the liquidation requirement "obviated Boulware's need to determine what he was able to pay in an installment agreement". We disagree. During the CDP hearing on May 2, 2012, SO Martin informed petitioner that, according to her calculations, he had the ability to pay approximately $29,000 per month. Yet after this hearing petitioner offered to pay a mere
Petitioner argues that he did not receive a proper CDP hearing because SO Martin denied him a face-to-face hearing. CDP hearings are* * * informal in nature and do not require the Appeals officer or employee and the taxpayer, or the taxpayer's representative, to hold a face-to-face meeting. A CDP hearing may, but is not required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer or the taxpayer's representative, or some combination thereof. * * * * * * * * * * Except as provided * * * [below], a taxpayer who presents in the CDP hearing request relevant, non-frivolous reasons for disagreement with the proposed levy will ordinarily be offered an opportunity for a face-to-face conference at the Appeals office closest to taxpayer's residence. * * * * * *2014 Tax Ct. Memo LEXIS 81">*117 * * * * *111 * * * A face-to-face CDP conference concerning a collection alternative, such as an installment agreement or an offer to compromise liability, will not be granted unless other taxpayers would be eligible for the alternative in similar circumstances. * * * Appeals in its discretion, however, may grant a face-to-face conference if Appeals determines that a face-to-face conference is appropriate to explain to the taxpayer the requirements for becoming eligible for a collection alternative. * * * For purposes of determining whether a face-to-face conference will be granted, the determination of a taxpayer's eligibility for a collection alternative is made without regard to the taxpayer's ability to pay the unpaid tax. * * *
Petitioner requested a face-to-face CDP conference to discuss a collection alternative—i.e., his proposed installment agreement. At the time petitioner made his request he was not eligible for an installment agreement because he was not in compliance with the tax laws and he refused to liquidate his assets.2014 Tax Ct. Memo LEXIS 81">*118
Moreover, we have consistently held that a taxpayer is not automatically entitled to a face-to-face CDP hearing.
Finally, petitioner alleged in his petition a number of errors that he has failed to argue on brief. Accordingly, we consider these issues to be conceded.
Any arguments not discussed in this opinion are irrelevant, moot, or lacking in merit.
*113 To reflect the foregoing,
1. All section references are to the Internal Revenue Code (Code) in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. Petitioner's deficiencies for the years at issue are $264,868 for 1998, $589,740 for 1999, $740,405 for 2001, and $395,755 for 2002.↩
3. At that time, petitioner's unpaid balances for the years at issue were $439,971.16 for 1998, $977,521.35 for 1999, $1,159,597.56 for 2001, and $605,653.35 for 2002.↩
4. Recently, the Court of Appeals for the District of Columbia Circuit held in
5. These standards have not materially changed in the version of the Internal Revenue Manual (IRM) that applies to this case:
6. Petitioner cites
7. Petitioner has not cited any case for the proposition that the nature of a retirement account or life insurance policy constitutes "special circumstances".
8. Pursuant to
9. We note that pursuant to an independent calculation of petitioner's monthly payment potential, RO Kelly determined that petitioner could pay $29,628 a month towards his outstanding tax liabilities.↩
10. Petitioner alleges that SO Martin refused to grant him a face-to-face hearing because he was a resident of Hawaii. Petitioner's assertion is belied by the record. SO Martin repeatedly stated that she would grant petitioner a face-to-face hearing if it became necessary. Although SO Martin was in Oregon, she told petitioner about various options for holding a face-to-face meeting—e.g., she could travel to Hawaii to conduct the hearing or she could participate remotely via teleconference while an Appeals officer in Hawaii conduced the hearing. On the basis of the administrative record we find that SO Martin denied petitioner's request for a face-to-face hearing, not because he resided in Hawaii, but because he was not eligible for a collection alternative.