Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-03244/USCOURTS-ca8-06-03244-0/pdf.json

Parties Involved:
Fifty Below Sales & Marketing
Appellant
United States of America
Appellee

Document Text:

1

The Honorable Ann D. Montgomery, United States District Judge for the

District of Minnesota.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-3244/3245

___________

Fifty Below Sales & Marketing, Inc., *

a Minnesota corporation, *

*

Plaintiff/Appellant, * Appeals from the United States

* District Court for the

v. * District of Minnesota.

* 

United States of America, *

*

Defendant/Appellee. *

___________

Submitted: March 16, 2007

Filed: August 14, 2007

___________

Before WOLLMAN, JOHN R. GIBSON, and MURPHY, Circuit Judges.

___________

JOHN R. GIBSON, Circuit Judge.

Fifty Below Sales & Marketing, Inc., appeals from the district court's1

 entry of

summary judgment against it in its two suits to require the Internal Revenue Service

to enter installment agreements in lieu of levying on Fifty Below's property. Fifty

Below contends that in declining to enter an installment agreement, the IRS appeals

officer failed to consider Fifty Below's current ability to make payments under a

proposed installment agreement and failed to balance the need for efficient tax

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collection against the need to minimize the intrusiveness of such collection. We

affirm the judgments of the district court.

Fifty Below is a Minnesota corporation that provides Internet marketing

services and designs web pages. Since it began operations in 1997, it has had

employment tax arrearages, both in the taxes which it withholds from employees

(income and Federal Insurance Contribution Act (FICA) taxes) and in the Federal

Unemployment Act taxes it owes in its own right. It brought two suits under 26

U.S.C. § 6330(d)(1) (2000), amended by Pension Protection Act of 2006, Pub. L. No.

109-280, § 855(a), 120 Stat. 780, appealing from the decisions of the Internal Revenue

Service appeals officer in collections due process proceedings. The appeals officer

in the first proceeding concluded that the IRS's Notice of Intent to Levy, dated January

21, 2005, was properly issued. The second appeal involves a separate Notice of Intent

to Levy and a separate decision by the appeals officer; however, the parties agreed to

be bound in the second case by the result in the first. 

The district court's review of a collection due process decision rendered by an

appeals officer under section 6330 is limited to the administrative record before the

appeals officer, subject to exceptions that are not applicable here. Robinette v.

Comm'r, 439 F.3d 455, 461-62 (8th Cir. 2006); see generally Murphy v. Comm'r, 469

F.3d 27, 31 (1st Cir. 2006) (listing exceptions to administrative record rule). Review

of the administrative decision is markedly deferential: if the amount of tax owed is not

in dispute, courts may disturb the administrative decision only if it constituted "a clear

abuse of discretion in the sense of clear taxpayer abuse and unfairness by the IRS."

Robinette, 439 F.3d at 459 (internal quotation marks omitted). The courts so far have

not established a test for deciding when the IRS has committed "clear taxpayer abuse,"

but we can say with assurance that where the IRS followed the statutes and regulations

governing grants of relief, see Speltz v. Comm'r, 454 F.3d 782, 784-85 (8th Cir.

2006), and the appeals officer took into account the taxpayer's proposed alternative

and the statutory balancing test, followed the prescribed procedures, gave a reasoned

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decision, and did not rely on any improper criteria or facts that are contrary to the

evidence, we may not reverse simply because we would have weighed the equities

differently than the appeals officer did. See Orum v. Comm'r, 412 F.3d 819, 820-21

(7th Cir. 2005). 

Our review of the district court's decision is de novo. See Living Care

Alternatives of Utica, Inc. v. United States, 411 F.3d 621, 625 & n.4 (6th Cir. 2005)

(treating district court's decision under § 6330(d) as grant of summary judgment).

 

The statute permits a taxpayer in a collection due process hearing to raise the

issue of "collection alternatives [to the proposed levy], which may include the posting

of a bond, the substitution of other assets, an installment agreement, or an offer-incompromise." § 6330(c)(2)(A)(iii). The IRS must follow any applicable statutory or

regulatory criteria that govern the question of whether to allow the particular

collection alternative the taxpayer has requested, Speltz, 454 F.3d at 784-85, in this

case, a collection installment agreement. The circumstances under which the IRS may

enter into an installment agreement are governed by 26 U.S.C. § 6159 and 26 C.F.R.

§ 301.6159-1. Fifty Below does not contend that the IRS district director violated any

particular provision of sections 6159 or 301.6159-1. Nor does it contend that the

appeals officer relied on factual determinations contrary to the evidence. Cf. Speltz,

454 F.3d at 783, 786 (declining to consider whether concededly incorrect factual

determination was abuse of discretion because issue not raised before Tax Court).

The appeals officer conducting the collection due process hearing must consider the

taxpayer's proffered collection alternatives, as well as "whether any proposed

collection action balances the need for the efficient collection of taxes with the

legitimate concern of the [taxpayer] that any collection action be no more intrusive

than necessary." § 6330(c)(3)(C). 

Fifty Below contends that the appeals officer failed to consider a relevant

factor, that is, whether Fifty Below has the current ability to pay in accordance with

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its proposed installment plan. To the contrary, the administrative record shows that

the appeals officer did consider whether Fifty Below could pay in accordance with its

proposal, but he concluded that it could not do so. The attachment to the Notice of

Determination Concerning Collection Action under Section 6330 states:

You stated of [sic] Form 12153 that you wanted the IRS to accept a

payment plan. The corporation first accrued an employment tax liability

with its first employment tax return in 1997 and has been in collection

status ever since. The corporation has had 8 years worth of opportunities

to get and remain current. Unfortunately, other than 2001 and 2002, the

corporation has failed to get and remain current. The result has been that

the longer your business has been in business, the larger the employment

tax liability has grown.

The corporation has been given alternatives to collection action in the

past including an accepted Offer in Compromise and installment

agreements. These have been defaulted by the corporation due to

noncompliance. The last tax due employment tax return was the recently

filed 941 for the first quarter of 2005. Given all factors, including a

multimillion dollar employment tax liability, noncompliance thru the last

filed employment tax return, the length of this problem and past failures,

Appeals has determined that an Installment Agreement is not appropriate

. . . .

This excerpt shows that the appeals officer took into account Fifty Below's history of

failure to live up to two previous installment agreements and an earlier proposed Offer

in Compromise, as well as its noncompliance with current obligations. These are

legitimate considerations weighing against accepting a taxpayer's offer. Christopher

Cross, Inc. v. United States, 461 F.3d 610, 613 (5th Cir. 2006); Orum, 412 F.3d 820-

21. He also took into account the multi-million dollar size of the taxpayer's existing

liability, plus the fact that Fifty Below had continued to fall further and further behind

as time went on, which the IRS refers to as "pyramiding" taxes, and which

legitimately weighs against a taxpayer's request for a second (or third or fourth)

chance. Orum, 412 F.3d at 821. Moreover, the appeals officer's notes, which are part

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of the administrative record, 26 C.F.R. § 301.6330-1; see Robinette, 439 F.3d at 462,

are rife with discourse about whether Fifty Below could meet the proposed monthly

installments of $50,000, followed by $75,000, followed by $100,000. The appeals

officer was skeptical of Fifty Below's claim that it could cut its payroll expenses

enough to make a difference:

The records provided by the taxpayer show that they have reduced

payroll by 11%. Note too that the taxpayers made the same claim that

they had reduced employees and gotten their financial house in order in

2002. This was just before they accrued another $1,000,000 in new

liabilities. 

He did not believe that Fifty Below's business was likely to generate enough income

to avoid further pyramiding of taxes:

In my 17 years working for the IRS, I have yet to see a small business

(gross receipts $5 million or less) put away $2.5 million in trust fund

taxes through an installment agreement. The balance due simply boggles

the mind when balanced against other competing expenses and priorities

of the business.

He also expressed skepticism about the company's projected financial results, which

he considered unfounded and inconsistent with Fifty Below's current failures to make

payments it had promised to make: "The P&L projections are pretty much

guesstimates. The fact that [taxpayer] proposed payments for the month of March and

April and both months have come and gone without payments doesn't help." The

administrative record abundantly substantiates that the appeals officer did in fact

consider Fifty Below's current ability to pay.

Fifty Below further argues that the appeals officer failed to conduct the

statutorily prescribed balancing test, but the attachment to the Notice of Decision

shows that he did: 

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Balancing the need for efficient collection with the taxpayer conern that

the collection action be no more intrusive than necessary.

P-5-1 states that enforcement is a necessary component of a voluntary

assessment system. Since you have been unable to get and remain

current, the IRS has little choice but to pursue enforcement action to

collect this account.

Fifty Below contends that the appeals officer did not take into account the possibility

of entering an installment agreement. This contention is patently contrary to the

record, which shows that the appeals officer thoroughly considered the installment

proposal, but rejected it because he thought history showed Fifty Below would not be

able to comply with its own proposal. There is no abuse of discretion of any kind

here, not to mention a showing of clear abuse of the taxpayer by the IRS. See

Robinette, 439 F.3d at 459.

We affirm the judgments of the district court.

______________________________

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