T.C. M em o . 2 0 1 7 -9 7

UNITED STATES TAX COURT

HENNESSEY M A

NOR NURSING HOM E, INC., Pet it i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 4 5 94 -1 4 L. Fi l edM ay 3 1 , 2 0 1 7
.

Dav i dJ . Lo o b y , fo r p et i ti o n er. An n Lo u i se Darn ol d , fo r res p o n d en t .

M EM ORANDUM OPINION PARIS, J u d g e: Inthi s co l l ect i o n du e p ro ces s (CDP) cas e, p et i t i o ner s eek s
rev i ew p urs u an tt o s ect i o n 6 3 3 0 (d )(1 ) 1 o f t h e d et erm i n at i o n b y th e In t ern al

1 Un l es s o th erwi s e i nd i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev enu e Co de o f 1 98 6 , as am en d edan di n effect atal l rel ev an tt i m es , an dal l Ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an dPro cedu re.- 2
-

[* 2 ] Rev enu e Serv i ce (IRS o r res p o n d en t ) t o up h o l da n o t i ce o f i n t en tt o l ev y . Pet i t io n er t i m el y

p et it i o n edth i s Co u rtwi th res p ectt o th e n o t ice o f d et erm i n at i o n , an d p et i t i o n er an dres p o n d en th av e each fi l edm o ti o n s fo r s u m m ary ju d g m en t
u n d er Ru l e 1 2 1 . Th e qu es t i o n s fo r d eci s i o n are wh et h er IRS Set t l em en t Offi cer Al co rt e (SO Al co rt e) ab u s edh er d i s cret io n i n reject i n g p et i t io n er’ s p ro po s ed i n s t al l m en tag reem en tan ds u s t ai n i n g th e co l l ect i o n act i o n an dwh et h er s h e h ad p ri o r i nv o l v em en twi th res p ectt o th e u np ai d t ax . Fo r t h e reas on s ex p l ai n edb el o w, th e Co u rtwi l l g ran tres po nd en t ’ s m o t i o n fo r s u m m ary ju d g m en tan d d en y p et i t i o n er’ s. Back gro u n d Th e fo l l o w i n g fact s are b as edo n th e p art i es ’ p l ead i n g s an dm o t i o n p ap ers , i n cl u d i n g th e at t ach edex h i b i t s an daffi d av i t s . 2 See Ru l e 1 2 1(b ). Pet i t i o n er
o p erat es a n u rs i n g h o m e faci l i ty i n a ru ral co m

m u n i ty o f fewer t h an 3 ,0 0 0
res i den t s. It s p ri n ci p al p l ace o f b u s i n es s was i n Ok l ah o m a atth e t i m e t h e p et i t i o n
was fi l ed
.

2 Each p arty

req u es t s thatcert ai n o f t h e o th er’ s affi dav i t s an d ex h i b i t s b e s tri ck en fro m

the reco rdb ecau se t h ey

were n otp arto f t h e o ri g i n al ad m i ni s trat i v e reco rd . Al th o u g h there ex i st s co n fl i ct i ng au th o ri ty as t o wh et h er t he Co urt ’ s rev i ew i n CDP cas es i s l i m i t edt o th e ad m i n i s trat iv e reco rd , n ei th er t he U.S. Co u rt o f Ap peal s fo r t h e Ten th Ci rcu i tn o r t h e U.S. Co u rt o f Ap p eal s fo r t h e D.C. Ci rcu i t h as s p eci fi cal l y ru l edo n th e i s su e. Th e Co u rtd en i es b o th req u es t s .- 3
-

[* 3 ] Pet i t i o ner h as a h i s t o ry o f n o n co m

p l i an ce wi th i t s Fed eral em p l o ym en tt ax
o b l i g at i o ns d at i n g b acks ev eral y ears . 3 Pet i t i o ner en t ered i n t o p rev i o u s i n s t al l m en t ag reem en t s wh i ch th e IRS rev o k edfo r p et it i o n er’ s n o n co m p l i an ce wi th ei th er t h e t erm s o f t h e ag reem en t s o r i t s Fed eral t ax fi l i n g an d p aym en to b l i g at i o ns . Th e
cas e ati s s u e rel at es t o p et i t i o n er’ s o u t s tan d i n g t ax l i ab i l i ty fro m Fo rm

9 4 1 , Em p l o y er’ s Qu art erl y

Fed eral Tax Retu rn , fo r t he p eri o den d i n g Decem ber 3 1 , 2 0 1 3
. Pet i t i o ner t i m el y

fi l edi t s Fo rm

9 41 fo r t h e qu art erl y

p eri o den d i n g Decem b er 3 1 , 2 0 13 , b u tfai l ed t o p ay i ts rep ort edt ax l i ab i l i ty

o f $ 5 4 ,4 1 7 .0 3 fo r th atqu art er. On Ap ri l 1 4 , 2 0 1 4, res p o n d en tas s es s edthe t ax rep o rt edo n the ret u rn
an d b eg an co l l ect i o n effo rt s. OnAp ri l 2 4 , 2 0 1 4, res p o n d en ti s s u edt o p et it i on er a Let t er 1 0 5 8 , Fi n al No t ice--No t i ce o f In t en t t o Lev y an dNo t ice o f Yo ur Ri g h t t o a Heari n g . In
res p o n s e p et i t i o n er t i m el y s ubm i t t eda Fo rm

1 2 1 53 , Requ es tfo r a Co l l ect i o n Du e Pro ces s o r Equ i v al en tHeari n g , s eek i n g t o en t er i n t o a $ 6,0 0 0 -p er-m o n th i n s t al l m en tag reem en tfo r i t s u np ai dem p l o ym en tt ax l i ab i l i ty . Th is req u es ts t at ed

3 Co n t ai n ed wi th i n res po nd en t ’ s ad m i ni s trat i v e fi l e fo r p et it i on er i s an In t eg rat edCo l lect i o n Sy s tem h i s t ory tran s cri pt . Pet i ti o n er d i s p ut es n ei th er i t s au th en t i ci ty

n o r t h e co n t en ts o f t h e s t at em en t s wi th i n . Th e t ran s cri p tn o tes i n d i cat e t h atres p o n d en th adp rev i o u s l y l ev i edo n p et i t io n er’ s as set s .- 4
-

[* 4 ] th ati f res po n d en twere p erm i tt edt o l ev y , p et i t io n er’ s d i ffi cu l ty wi th M ed i care an dM ed i cai dco l l ect i o n s wo u l dren d er i t u n ab l e t o p ay ei th er t h e
em pl o y m en tt ax b al an ce i to wedo r i t s cu rren tt ax es . Pet i ti o n er’ s req ues t , h o wev er, d i dn o td i s p u t e t h e u n d erl y i ng em p l o ym en tt ax l i ab i l it y ; p et i ti o n er ch eck edth e co l l ect io n al t ern at i v e b o x es fo r “ In s t al l m en t Ag reem en t ” an d“ I Can no tPay

Bal an ce”. Res p o n d en tm ai l ed p et i ti o n er a l et t er d at edJ u n e 6 , 2 0 1 4 , ackn owl ed g i n g recei p t o f p et i t i o n er’ s h eari ng req u es t, an dSO Al co rt e s ub seq u en t l y m ai l ed p et i t i o n er a l et t er s ch edu l i n g a CDP h eari n g fo r Au g u s t1 9 , 2 0 1 4
. SO Al co rt e’ s l et t er ad v i s edp et i t i on er t h ati td i dn otqu al i fy fo r co n s i d erat i o n o f an i n s t al l m en t ag reem en tb ecau se i t was n o ti n co m p l ian ce wi th i ts em

pl oym en tt ax d ep o s i t req u i rem en t s fo r the t ax ab l e p eri o den d i n g J u n e 3 0 , 2 0 1 4. Th e l et t er fu rth er ad v is edp et i t i o n er t hatt o qu al i fy fo r a co l l ect i o n al t ern at i v e i th adt o p ro v id e t o SO Al co rt e t he fo ll o wi ng i t em s n o l at er t h an Au g u s t 1 1, 2 0 14 : (1 ) a co m p l et edFo rm 4 3 3 -B, Co l l ect i o n In fo rm at i o n St at em en tfo r Bu s i n es s es , an d(2 ) ev i d en ce t h ati t h ad m ad e t h e req u i redFed eral em p lo ym en tt ax d ep o s it s fo r th e cu rren tt ax ab l e p eri o d . SO Al co rt e i n fo rm edp et i t i o n er t h atres p o n den tco u l dn ot co n s i d er
co l l ect i o n al t ern at i v es wi th o ut th e i n fo rm at io n req u es ted
.- 5
-

[* 5 ] Pet i t i o ner s ub m i t t edth e req u es t edFo rm 4 3 3-B o n Au g u s t1 1 , 2 0 1 4,
as s ert i n g th atth e p ro p o sed l ev y wo u l dres u l ti n “ eco n o m i c h ard s h i p ” an d , th erefo re, “ thi s s i tu at i o n * * * m an d at e[s ] the rel eas e o f t he p ro p o s edl ev y ”. Th e Fo rm 4 3 3 -B was s i gn edb y

p et i t i o n er’ s p res i d en t , Sam J ewel l , an dl i s t edam o n g p et i t i o n er’ s as s et s acco u n t s recei v ab l e fro m Pri vat e Pay , M ed i cai dOk l ah o m a, M ed i care, an d In s u ran ce Co Pay --wi th a co m b in edb al an ce o f $ 1 9 8,7 4 9 .1 1 --fo r t h e p eri o dAp ri l 3 0 th ro u g h J un e 3 0 , 2 0 1 4
. 4 Th e Fo rm 4 33 -B al s o l i st edp et i t i o n er’ s
m o nt h l y i n co m e o f $ 1 5 5 ,6 9 5 .8 6 an dm o n th l y ex p en s es o f $ 1 41 ,6 2 9 .8 3, refl ect i n g
a n etm o n th l y

i n co m e o f $ 1 4,0 6 6 .0 3. In p rep arat i o n fo r th e CDP h eari n g SO Al co rt e n o t edi n h er cas e act i v i ty rep o rtth atp et i t i o n er d i dn o tap p ear t o qu al i fy fo r ani n st al lm en tag reem en t b ecau s e i t s as set s were s u ffi ci en tt o p ay th e o u t st an d in g l i ab i l i ty

i n fu l l . Sh e al s o
n o t edth atp et i t i o n er o ffered n o ex pl an at i o n reg ard i ng i t s p ro p o sedm o nt h l y i n s t al l m en tp aym en t s o f o n l y $ 6 ,0 0 0 wh i l e i t s n etm o n th l y rev en u e was $ 1 4 ,0 6 6
. An ds h e rev i ewedth e ad m i n i s trat i v e reco rd
. Th e ad m i ni s trat iv e reco rdd et ai l s p rev i o u s i n st al l m en tag reem en t s b et ween
res p o n d en t an d p et it i o n er. Each fo l l o weda s i m i l ar p at t ern : p et i t i o n er fai ledt o

4 Th e reco rdrefl ect s that$ 8 9 ,7 1 5
. 3 3 o f p et i t i o n er’ s t o t al acco u n t s recei v ab l e was o w edb y

th e Fed eral an dSt at e Go v ern m en tag en ci es referen cedab ov e.- 6
-

[* 6 ] rem i tt o th e IRS t h e req u i s i t e em pl o y m en tt ax d ep o s i ts ; p et i t i o n er at t em p t ed t o en t er i n t o i n st al l m en tag reem en t s , s ev eral o f wh i ch were g ran t ed ; an dfo r o n e
reas on o r an o th er, p et i ti o n er d efau l t ed o n t h o s e ap p ro v edag reem en t s . OnAu gu s t1 9 , 2 0 1 4, the p art ies h el d the s ch edu l edCDP h eari n g . Pet i t io n er’ s rep res en tat i v e d i dn o tco n t es tp et i t i o n er’ s u n d erl y i n g t ax l iab i l i ty b u t i n s t eadrei t erat ed th ati two u lds u ffer eco n o m i c h ard s h i p i f t h e p ro p o sedco l l ect i o n act i on were s u st ai n ed . SO Al co rt e ex p l ai n ed th ats h e wo u ldn o t co n s i d er p et i t i o n er’ s eco n o m i c h ard s h i p arg u m en tb ecau s e t h e eco no m i c h ard s hi p
ex cep t i o n u n d er s ect i o n 6 3 4 3 (a)(1 )(D) i s n o tav ai l ab l e t o co rp orat i o n s . Sh e n o t ed th atb ecau s e (1 ) p et i t io n er’ s acco u n t s recei v ab le were s uffi ci en t t o p ay i t s
o u t s t an d i n g l i ab i li ty

i n fu ll , (2 ) p et i t i o n er’ s m o n th l y i n co m e was s u ffi ci en tt o al l o w i tt o m ak e a l arg er p aym en t , (3 ) p et i t i o n er was n o ti n co m p l ian ce wi th i t s Fed eral em

p l o ym en tt ax d ep o s ito b l i g at io ns , an d(4 ) t h e eco n o m i c h ard s h i p
ex cep t i o n i s n o t av ai lab l e t o co rp o rat io n s , s h e wo u l d b e s us t ai n i n g th e p ro p o s ed
co l l ect i o n act i on an dcl o s i n g th e cas e. SO Al co rt e v eri fi edth atth e as s es s m en twas p ro p erl y m ad e an dth atal l o t h er req u i rem en t s o f ap p l icab l e l aw an dad m i n i st rat i v e p ro cedu re h adb een m et . Sh e th ereu p o n cl o s edth e cas e an d , o n Sep t em b er 1 7 , 2 0 1 4, i ss u ed t o p et i ti o n er a- 7
-

[* 7 ] n o t i ce o f d et erm i n at i on s u s t ai n i n g the n o t i ce o f i n t en tt o l ev y wi th res p ectt o th e Fo rm 9 4 1 t ax p eri o den d i n g Decem b er 3 1 , 2 01 3
. Di s cu s s i o n I. Su m

m ary J u dg m en tan dSt an d ard o f Rev i ew Th e p u rp os e o f s u m

m ary ju d g m en t i s t o ex p ed it e l i t i g at i o n an d av o i d
u n n eces saryan dt i m e-co n s u m i n g tri al s . Fl a. Peach Co rp . v . Co m m is s i o n er, 9 0 T.C. 6 7 8 , 6 8 1 (1 9 8 8 ). Th e Co urtm ay g ran t s umm ary

ju d g m en twh en th ere i s n o g en ui n e d i s p u t e as t o an y m at eri al fact an da d eci s i o n m ay b e ren dered as a m at t er
o f l aw. Ru l e 1 2 1 (b ); Su n d st ran dCo rp . v . Co m m i ss i o n er, 9 8 T.C. 5 1 8 , 5 2 0 (1 9 9 2 ), aff’ d , 1 7 F.3 d9 65 (7 th Ci r. 1 99 4 ). If a m o v i n g p art y p ro p erl y m ak es an ds up p o rt s
a m ot i o n fo r s u m

m ary ju d g m en t , “ anad v ers e p arty m ay n o tres t upo n th e m ere al l eg at i o n s o r d en i al s o f s uch p art y ’ s p l ead i n g” b u tm u s ts etfo rt h s peci fi c fact s , b y affi d av i t o r o th erwi s e, s h o wi ng th atth ere i s a g en ui n e d i s p u t e fo r t ri al . Ru l e 1 2 1 (d ). Up o n du e co n si d erat i o n o f t h e p art i es ’ m o t i o n s , s up p o rt i n g d ecl arat i o n s , an d res p on s es th eret o , th e Co u rtco n cl u d es th at n o m at eri al fact s are i n d i sp u t e an d th atju dg m en t m ay

b e ren dered fo r res p o nd en t as a m at t er o f l aw. Wh ere t h e v al id i ty

o f t h e u n d erl y i n g t ax l i ab i l i ty i s p ro p erl y

ati ss ue i n a
co l l ect i o n cas e, t h e Co u rtwi l l rev i ew t h e m at t er o n a d e n o v o b as i s . Seg o v .- 8
-

[* 8 ] Co m m i s s i o n er, 1 1 4 T.C. 6 0 4 , 6 1 0 (2 0 0 0). Wh ere, as h ere, t h ere i s n o d i s p u t e
co n cern in g th e u n d erl y i n g t ax l i ab i l it y , th e Co u rtrev iews th e Co m m i s s i o n er’ s ad m i n is trat i v e d et erm i nat i o n t o p ro ceed wi th co l l ect i o n fo r ab us e o f d i s cret i o n . 5 Id . Ab u s e o f d i s cret i o n ex i s t s wh en a d et erm i n at i on i s arb i trary , cap ri ci ou s , o r wi th o u ts o u n d b as i s i n facto r l aw. See M u rp h y v . Co m m i ss i o ner, 1 2 5 T.C. 3 0 1 , 3 2 0 (2 00 5 ), aff’ d, 4 6 9 F.3 d2 7 (1 s tCi r. 2 0 06 ). II. Co l l ect io n Du e Pro ces s In d eci d i ng wh et her t h e SO ab u s edh er d is cret i o n i n s u s t ai ni n g th e p ro p o s ed
co l l ect i o n act i on , th e Co u rtco ns i d ers wh et h er s h e: (1 ) p ro p erl y v eri fi edth atth e req u i rem en t s o f an y

ap p l i cab l e l aw o r ad m in i s trat iv e p ro cedu re h av e b een m et ; (2 ) co n s i d ered an y

rel ev an ti s s u es p et i t i o n er rai s ed ; an d (3 ) d et erm i n edwh et h er

“ an y p ro p o s edco ll ect i o n act io n b al an ces th e n eedfo r t h e effi ci en tco l l ect i o n o f t ax es wi th th e l eg it i m at e co n cern o f * * * [p et i t i o ner] th atan y co l lect i o n act i o n b e
n o m o re i n tru s i v e t h an n eces s ary .” See s ec. 6 3 3 0(c)(3 ).

5 Reg ard l es s o f wh et h er p et i t i o n er co u l dh av e co n t es t edi t s u n d erl y i n g l i ab i l i ty atth e CDP h eari n g , th i s Co u rtm ay co n s id er a ch al l en g e t o s u ch a l i ab il i t y o n l y i f th e t ax p ay er p ro p erl y

rai s edi tb efo re t h e SO, Gi am el l i v . Co m m is s i o n er, 1 2 9 T.C. 1 0 7 , 1 1 5 (2 0 0 7 ), an dag ai n i n i t s p et i ti o n t o th is Co u rt , s ee Ru le 3 3 1 (b )(4 ) (“ An y

i s su e n o trai s edi n th e as s i g n m en t s o f erro r s hal l b e d eem edt o b e co n ced ed .”). Pet i t i o ner d i dn o trai s e t h i s i s s u e wi th SO Al co rt e o r i n i ts p et i t i o n . Th e Co u rtacco rd in g l y

d eem s i tco n ced ed
.- 9
-

[* 9 ] Rev i ew o f th e reco rdrev eal s th atSO Al co rt e co n du ct ed a t h o ro u g h rev i ew
o f p et i ti o n er’ s acco u n t , d et erm in ed th atth e t ax es h adb een p ro p erl y as s es s ed , an d
v eri fi ed th ato th er req u i rem en t s o f ap p l icab l e l aw an dad m i n is trat i v e p ro cedu re were fo l l owed
. Pet i t i o ner’ s p ri m ary

co n t en t i o n i s th ats ect i o n 3 0 1 .6 3 4 3-1 (b )(4 )(i ), Pro ced
. & Ad m i n . Reg s . (d efi n i ng eco no m i c h ard s h ip o n ly wi th res p ectt o i nd i v i du al t ax p ay ers ), i s i n val i dan dth atSO Al co rt e ab u s edh er d i s cret i o n i n fai l i n g t o
co n si d er i t s req u es tfo r rel i ef u nd er t h e eco n o m i c h ard s h i p p ro vi s i o n o f s ect i o n 6 3 4 3 (a)(1 )(D). Th is co n t en t i o n i s i n co rrect . Th i s Co urtrecen t l y rel eas ed i t s Op i ni o n i n Li nd say

M an o r Nu rs i n g Ho m e, In c. v . Co m m i s si o n er (Li nd s ay

M an o r I), 1 48 T.C. _

_ (M ar. 2 3 , 2 01 7 ), fi n d i n g th ats ect i o n 3 0 1 .6 34 3 -1 (b )(4 )(i ), Pro ced
. & Ad m i n . Reg s ., i s v al i d an dth atth e eco no m i c h ard s hi p rel ief p ro vi d edb y s ect i o n 6 3 4 3 (a)(1 )(D) i s av ai l ab l e o nl y t o i n d i v i du al t ax pay ers . An di n a co m p an i o n M em oran du m

Op in i o n , Li n d s ay

M an o r Nu rs i ng Ho m e, In c. v . Co m m i ss i o ner, T.C. M em o . 2 01 7 -5 0 , th e Co u rtco n cl u d ed th atth e SO d i dn otab u s e h er d i s cret i o n i n fai li n g t o co ns i der a req u es t fo r eco n o m ic h ard s h i p rel i ef m ad e b y a co rp o rat e t ax p ay er. SO Al co rt e d i dn o tab u s e h er d i s cret i o n i n d ecl i ni n g t h i s req u es tei th er. Pet i t i o ner arg u es al tern at i v el y th atSO Al co rt e ab u s edh er d i s cret io n i n reject i n g i t s i n s t al l m en tag reem en treq u es t an di n fai l i n g t o ad equ at el y co n s i d er i t s- 1 0 -

[* 1 0 ] “ eco n o m i c h ard sh i p” i n th e b al an ci n g an al y s i s req u iredb y s ect i o n 6 3 3 0 (c)(3 ). 6 Fi n al l y , p et i t i o n er s u g g es t s th at SO Al co rt e was n o ti m part i al as req u i redb y

s ect i o n 6 3 3 0 (b )(3 ). A. Pet i t i o ner’ s In st al lm en tAg reem en t Req u es t In i t s d i s cret io n , th e IRS m ay accep tan i ns t al l m en tag reem en ti f i t d et erm i n es th atd o i n g s o wi l l faci l i t at e fu l l o r p art i al co l l ect i o n o f a t ax l i ab i l i ty . See s ec. 6 1 5 9 (a). Th e IRS al s o h as d i s cret i o n t o rejecta p ro po s edi n s t al l m en t ag reem en t(s ub

jectt o cert ai n res tri ct i o ns n o tap p l i cab l e h ere). See Th o m p s o n v . Co m m i s s i o n er, 1 4 0 T.C. 1 7 3 , 1 7 9 (2 0 1 3); s ec. 3 01 .6 1 5 9 -1 (a), (c)(1 )(i ), Pro ced . & Ad m i n . Reg s. Co n s equ en t l y , i n rev iewi ng th i s d et erm in at io n , th e Co u rtd o es n o t
s ub s t i tu t e i t s ju d g m en t fo r t h ato f Ap p eal s an d d eci de wh et h er i n i t s o p in i o n p et i t i o n er’ s i n st al lm en tag reem en ts h o u l dh av e b een accep t ed
. See W o o dral v . Co m m i s s i o n er, 1 1 2 T.C. 1 9 , 2 3 (1 9 9 9 ); Kel l er v . Co m m i ss i o ner, T.C. M em o . 2 0 0 6 -1 6 6 , aff’ d i n p art , 5 6 8 F.3 d7 1 0 (9 th Ci r. 2 0 0 9 ). In st ead , th e Co urtrev i ews th i s d et erm i n at i on fo r ab u s e o f d i s cret i o n.

6 In Li n d s ay

M an o r I, t h i s Co u rtfo u n dth ats ec. 3 0 1 .6 3 4 3 -1 (b )(4 )(i ), Pro ced
. & Ad m i n . Reg s ., i s v al i d; acco rd in g l y , th e eco n o m i c h ard s h i p ex cep t io n ap p l i es o n l y t o i n d iv idu al s . To th e ex t en tth atp et i t i on er’ s o th er arg u m en t s at t em p tt o reh as h th i s i s su e, t h ey

are s umm ari l y

d i s reg ard ed . Th e Co u rtwi l l , h o wev er, ad dres s p et i ti o n er’ s eco n o m i c p o s i t i o n wi th res p ectt o SO Al co rt e’ s s ec. 6 3 3 0 (c)(3 )(C) b al an ci n g an al y si s .- 1 1 -

[* 1 1 ] Pet i ti o n er arg u es th ati twas an ab u s e o f d i s cret i o n fo r SO Al co rt e t o reject i t s p ro po s edi n s t al l m en tag reem en t . Th e reco rd , h owev er, d em o n s trat es th atSO Al co rt e’ s reject i on o f p et i t i o ner’ s i n s t al lm en tag reem en twas p ro p er fo r ei th er o f h er reas o n s : (1 ) t h e v al u e o f p et i t i o n er’ s as s et s ex ceed edth e u n d erl y i n g l iab i l i t y
an d (2 ) p et it i on er was n o t i n co m p l i an ce wi th i t s Fed eral em pl o ym en tt ax d ep o s i t
o b l i g at i o ns . 7 1
. Pet i t i o ner’ s As s et s SO Al co rt e reject edp et i t i o n er’ s p ro p o s ed i n s t al l m en tag reem en taft er d et erm i n i n g th ati tco u l dfu l l y o r p art i al l y s at is fy i t s t ax l i ab i l i ty --$ 5 4 , 4 17 .0 3 --b y l i qu i dat i n g o r b orro wi n g ag ai n s ti t s as s et s --$ 1 9 8 , 7 49 .1 1 i n acco u n t s recei vab l e al o n e. See In t ern al Rev en u e M an u al (IRM ) p t . 5 .1 4.1 .4 (5 ) an d(6 ) (J u n e 1 , 2 0 1 0 ) (“ Tax p ay ers d o n o t qu al i fy fo r i n s t al l m en tag reem en t s i f b al an ce du e acco u n t s can b e fu l l y o r p art i al l y s at i s fi edb y

l i qu i d at i n g as set s [.] ”); s ee al s o Bo ul ware v . Co m m i s s i o n er, T.C. M em o . 2 0 1 4 -8 0 (fi n d in g th ats et t l em en to ffi cer’ s rel i an ce o n th i s IRM p ro v i s i o n was n o tan ab u s e o f d i s cret i o n ), aff’ d , 8 1 6 F.3 d1 3 3 (D.C. Ci r. 2 0 1 6 ). An do th er th an i t s arg u m en t fo r eco n o m i c h ard s hi p rel ief, p et i t i o n er d o es

7 Th e Co urt fi nd s d i s i n g en u o u s p et it i on er’ s arg u m en t th atSO Al co rt e’ s n o t es i n h er cas e act i v i ty

rep o rtco n s t i tu t eda p red et erm i n at i o n. Th e n o t es i n d i cat e SO Al co rt e’ s p rep arat i o n fo r p et i t i o n er’ s CDP h eari ng an drefl ecta t h o ro u gh rev i ew o f t h e l at e-s ub m i t tedFo rm 4 3 3 -B an di t s at tach m en t s . Th i s i s n o tan ab u se o f d i s cret i o n .- 1 2 -

[* 1 2 ] n o ts u g g es tth atan y ex cep t i o n t o the g en eral ru le ap pl i es . Pet it io n er h ad d efau l t edo n s ev eral p rev i o u s i n s t al lm en tag reem en ts , an d t h e reco rdd o es n o t
s h o w an y ab u s e o f d is cret i o n b y

SO Al co rt e i n reject in g th i s o ffer. 2
. Co m

pl i an ce W it h Fed eral Tax Ob l i g at i o n s In reject i n g p et i ti o n er’ s p ro p o s edi n s tal l m en tag reem en t , SO Al co rt e al s o
n o t edth atp et i t i o n er was n o ti n co m p l i an ce wi th i ts cu rren tFed eral em p lo ym en t t ax d ep o s i to b l i gat i o n s . Es t ab l i s h edIRS p o l i cy req u i res t ax p ay ers t o b e i n
co m p l ian ce wi th cu rren t fi l i n g an des t i m at ed t ax p aym en t req u i rem en t s t o b e el i g i b l e fo r co l l ect i on al tern at i v es . See Reed v . Co m m i s s i o n er, 1 4 1 T.C. 2 4 8 , 2 5 6
- 2 5 7 (2 01 3 ). Gen eral ly , cu rren t co m p l i an ce wi th t ax l aws i s a p rereq u i s it e t o b ei n g el i g i b l e fo r co l l ect i on al tern at i v es . See Co x v . Co m m is s i o n er, 1 2 6 T.C. 2 3 7 , 2 5 7 (2 0 0 6), rev ’ do n o th er g ro u n d s , 5 1 4 F.3 d 1 1 1 9 (1 0 th Ci r. 2 0 0 8). An dd es pi t e p et i t i o n er’ s co nt en t i o n , SO Al co rt e was wel l wi th in h er d i s cret i on t o req u ire
co m p l ian ce wi th cu rren t t ax o b l i g at i o n s . See Gi am el l i v . Co m m i s s i on er, 1 2 9 T.C. 1 0 7 , 1 1 1 -1 1 2 (2 0 07 ); cf. Ch ri s t o p h er Cro s s, In c. v . Un i t edSt at es , 4 6 1 F.3 d6 1 0 , 6 1 3 (5 th Ci r. 2 0 06 ) (fi n di n g n o ab us e o f d i s cret i o n wh en s et t l em en to ffi cer reject edco l l ect i o n al t ern at i v e b ecau s e t ax p ay er was n o ti n co m p l i an ce wi th i t s t ax p aym en t o b l i g at io n s ); Reed v . Co m m i s s i o n er, 1 41 T.C. at2 5 7 (s am e).- 1 3 -

[* 1 3 ] Pet i ti o n er arg u es th atSO Al co rt e ab u s ed h er d i scret i o n b ecau s e--ev en th o u g h i twas n o t i n co m

p l i an ce--s h e fai l edt o co n s id er t h at i t s i n ab i l it y t o rem ai n
cu rren twi th i t s Fed eral t ax d ep o s i t s was a res u l to f i t s n o n recei p to f M ed i care an d M ed i cai dfu nd i n g fro m

th e Fed eral an dSt at e Go v ern m en t s . Fo r s upp o rt , p et i t i o n er ci t es Al es s i o Azzari , In c. v . Co m m i s s i o n er, 1 3 6 T.C. 1 7 8 (2 0 1 1 ). In Al es s i o Azzari , In c., a l en d er s t o p pedl en d i n g m on ey t o th e t ax p ay er aft er th e Co m m i s s i o n er’ s s et t l em en to ffi cer erro n eo us l y d et erm i n ed th atth e Co m m i s s i o n er d i dn o tn eedt o s ub o rd i n at e h i s l i eno n th e t ax p ay er’ s acco u n t s t o th e l en d er’ s l i en o n th e s am e acco u n t s . Id . at1 8 1 -1 8 3. As a res u l t , th e t ax p ay er
was u nab l e t o s t ay

cu rren twi th i t s em

p l o ym en tt ax d ep o s it s aft er b ei n g i n
co m p l ian ce fo r s i x co n s ecu t i v e qu art ers . Id . at1 8 3. Th e Co m m i s s io ner d en i edth e t ax p ay er’ s i n st al l m en tag reem en treq u es tb ecau s e t h e t ax p ay er was n o l o n g er i n
co m p l ian ce. Id . at1 8 3-1 8 4
. Th e Co u rth el d th ati twas an ab us e o f d i s cret i o n fo r th e Co m m i s s i o n er t o d en y

th e t ax p ay er’ s req u es tfo r an i n s tal l m en t ag reem en to n th e b as i s o f t h e t ax pay er’ s fai l u re t o s t ay cu rren t o n i t s t ax d ep o s i t s b ecau s e t h e
s et t l em en to ffi cer’ s erro neo u s i n t erp ret at io n o f l aw l edt o th e l en der’ s d eci si o n t o
s t op l en d i n g m o n ey

t o th e t ax p ay er, wh i ch l edt o th e t ax p ay er’ s n otb ei n g i n
co m p l ian ce. Id . at1 9 4.- 1 4 -

[* 1 4 ] Un l i k e t h e t ax p ay er i n Al es s i o Azzari , In c., p et i t i o n er was i n d i s p u t ab l y n o t i n co m p l ian ce wh eni t req u es t edan i n s t al l m en t ag reem en t . An db ecau s e s ect i o n 3 0 1 .6 3 4 3 -1 (b )(4 )(i ), Pro ced . & Ad m i n . Reg s ., i s v al id , SO Al co rt e’ s i n t erp ret at i o n
was n oterro n eo u s. See Li n d s ay M an o r I. Acco rd i ng l y , SO Al co rt e d i dn otab u s e h er d i s cret i o n i n reject i n g p et i t i o n er’ s i n st al lm en tag reem en t req ues to n th e g ro u nd s th atp et i t i o n er was n o ti n co m p li an ce. B. SO Al co rt e’ s Bal an ci n g An al y s i s Pet i t i o ner n ex t arg u es th atSO Al co rt e ei th er d i dn o tco n ductth e req u i red
s t atu to ry b al an ci n g t es t o r d i d n o tex pl ai n h er reas o n fo r co n cl u di n g th ati ts req u i rem en t s were m et . Pet i t i on er s u g g es ts th ati t “p ro p os eda v i ab l e co l lect i o n al t ern at i v e t hati t co u l daffo rdt o p ay o n a m o n th ly

b as is wh i l e s t ay i n g cu rren to n i t s fed eral t ax dep o s i tp aym en ts th atwas l es s i n tru s i v e t han en fo rcedl ev y act i o n ”. Th i s Co u rtal s o fo u n di n Li n d s ay M an o r I t h atth e s ect i o n 6 3 30 (c)(3 )(C) b al an ci n g t es tp ro p erl y

t ak es i n t o acco un t a t ax p ay er’ s s p eci fi c eco n o m i c real i t i es
an d th e co n s equ en ces o f a p ro p o s edco l l ect io n act i o n . On the b as i s o f th e Co u rt ’ s th o ro u g h an al y s i s o f t h e reco rdi n th i s cas e, t he Co u rtco n cl u des th atth ere i s n o
m at eri al i s s u e o f fact reg ard i n g wh et h er SO Al co rt e p ro p erl y b al an ced“ th e n eed fo r t h e effi ci en tco l l ect i on o f t ax es ” wi th th e l eg i t i m at e co n cern o f p et i t i o n er t h at

“ an y co l l ect i o n act i o n b e n o m o re i n tru s i v e t han n eces s ary .” See s ec. 6 3 30 (c)(3 ).- 1 5 -

[* 1 5 ] At th e t i m e p et it i o n er req u es t edth i s i n st al lm en tag reem en t, i th add efau l t ed
o n p rev i o u s i ns t al l m en tag reem en t s , s ev eral o f wh i ch i n v o lv eds ub s t an t i al l y
s i m i l ar m o nt h l y

p aym en ts i tth en p ro m i s edt o p ay . Al tho u gh p et i ti o n er arg u edth at a l ev y wo u l dren d er i tu n ab l e t o m eeti t s p ayro l l an dp at i en to b l i g at io n s , th e ad m i n is trat i v e reco rds h o w s t h atwh en p et i t i o n er co m p l ai n edo f b ei n g u n ab l e t o
m eeti t s p ayro l l an dp at i en to bl i g at i on s b ecau s e o f a l ev y , i tfo u n d t h e req u i s i t e fu n d in g aft er res p o n d en trefu s edt o rel eas e th e l ev y . Pet i t i o ner’ s Fo rm

4 3 3 -B s h owedth ati ts m o n th l y i n co m e ex ceed ed i t s
m o nt h l y ex p en s es . SO Al co rt e n o t edp et i t i o n er’ s acco u n ts recei v ab l e, wh i ch were t o g et h er s u ffi ci en tt o p ay the o u t s t an d i n g l iab i l i t i es i n fu l l . Th es e acco u n t s i n cl u d edd el ay edp aym en ts fro m M ed i care an dM ed i cai d , b utp et i t i on er d idn o t
s u g g es tth atth ey w ou l db e u np ai d
. Al th ou g h p et i t i o n er co m

p l ai n s o f t h e p o s s i b il i ty

o f b ei n g fo rcedt o cl o s e i t s d o o rs t o i t s p at i en t s an d em p l o y ees , th e reco rdi n d i cat es thatp et it i on er ex p res s ed
s i m i l ar co n cern s wi th i t s earl i er i n s t al l m en t ag reem en ts an dth atth o s e co n cern s d i dn o t p ro v e t ru e--p et i t io n er d i s p l ay s res i l i en ce d es p i te i t s h ab i tu al
n o n co m p l i an ce wi th t h e i n t ern al rev en u e l aws . On th e b as i s o f p et i t i o ner’ s
co n si s t en th i s t o ry

o f n o n co m

p li an ce an di t s co nt i n ual ab i l i ty t o fi n d an drem i t
s u ffi ci en tp aym en td es p i t e t h e b al an ce s h eet , th i s Co u rtfi n d s th at SO Al co rt e g av e- 1 6 -

[* 1 6 ] du e wei gh tt o p et i t i on er’ s s p eci fi c ci rcu m s t an ces . Th e Go v ern m en t ’ s i n t eres ti n effi ci en t ly

co ll ect i n g p et i ti o n er’ s l i ab i l i ty s i m pl y t i p p edth e s cal e t h e
o th er way . Fu rt herm o re, i t i s wel l es t ab l i s h edth atreject i ng a co l l ect i o n al t ern at i v e b ecau s e o f n o n co m

p li an ce wi th es t im at edt ax p aym en treq ui rem en t s d o es n o t
v i o l at e t h e p ro p er b al an ci n g req u i rem en t . See, e.g ., Oru m v . Co m m i s si on er, 1 2 3 T.C. 1 (2 0 0 4 ), aff’ d , 4 1 2 F.3 d8 1 9 (7 th Ci r. 2 0 0 5); Fri ed m an v . Co m m i s s i o n er, T.C. M em o . 2 01 5 -1 9 6 ; Sch wart z v . Co m m i s si on er, T.C. M em o . 2 00 7 -1 5 5 . In p rep arat i o n fo r t h e CDP h eari n g SO Al co rt e d i s co v eredth atp et i t i o n er was n o ti n
co m p l ian ce wi th i ts cu rren tem p l oym en tt ax d ep o s i t o b l i g at i o n s fo r t he t ax ab l e p eri o den d i n g J u n e 3 0 , 2 0 1 4, an dth ati td i dn o tp ro v i de p ro o f o f m ak in g i t s req u i redSep t em

b er 3 0 , 2 0 1 4 , d ep o s i t . Up o n co n s id erat i on o f p et i t i o ner’ s fi nan ci al p o si t io n an di t s fai lu re t o rem ai n i n co m p l i an ce wi th i t s em

p l o ym en tt ax req u i rem en t s , SO Al co rt e d et erm i n ed th atth ere was n o al t ern at i v e t o s us t ai n i n g th e n o ti ce o f i n t en tt o l ev y ; s h e ex p lai n edh er reas o n i ng b eh i n dh er d eci si on i n th e
n o t i ce o f d et erm i n at i on . Acco rd i n g ly , th e u n d is pu t ed m at eri al fact s es t ab li s h that SO Al co rt e d i dn o tab u s e h er d i s cret i on i n co n du ct i ng th e s ect i o n 6 3 30 (c)(3 )(C) b al an ci n g t es t .- 1 7 -

[* 1 7 ] C. SO Al co rt e’ s Im p art i al i ty Nex t , p et i t i o n er arg u es th atSO Al co rt e’ s rev i ew o f th e d ocu m en t s i t p ro v id edb efo re th e CDP h eari n g v i o l at es i ts s ect i on 6 3 3 0 (b )(3 ) ri g h t t o a CDP h eari n g b y

an o ffi cer wh o h adn o p ri o r i nv o lv em en twi th res p ectt o th e u np ai dt ax . Sect io n 6 3 3 0 (b )(3 ) req u i res a CDP h eari n g t o b e “ co n du ct edb y an o ffi cer o r
em pl o y ee wh o h as h adn o p ri o r i n v o l v em en twi th res p ectt o th e u np ai dt ax * * * b efo re t h e fi rs t h eari n g”. Pri o r i n v o l v em en t ex is t s o n l y wh en (1 ) t h e t ax p ay er, t h e t ax , an d th e t ax p eri o dati s s u e i n th e CDP h eari n g al s o were ati s s u e i n th e p ri o r
n o n -CDP m at t er an d (2 ) t h e Ap p eal s o ffi cer o r em p l oy ee act u al l y

p art i ci p at edi n th e p ri or m at t er. Sec. 3 01 .6 3 3 0-1 (d )(2 ), Q&A-D4 , Pro ced . & Ad m i n . Reg s. Pet i t i o ner d o es n o targ u e th at SO Al co rt e h adp ri o r i n v o l v em en t i n an earl ier, n o n -CDP m at t er; rat h er, i targ u es th at , b ecau s e s h e h adrev i ewed p et i t i o n er’ s d o cu m en t s b efo re t h e CDP h eari n g , SO Al co rt e was n o ti m part i al
. Pet i t io n er i s i n co rrect . Th e reg u l at i o ns cl earl y s t at e t h atp ri o r i n v o l v em en tm ean s th atan Ap p eal s o ffi cer act u al l y p art i ci p at edi n an earl i er, n o n -CDP m at t er. Id
. Becau s e p et i t i o n er d o es n o t as s ertth atSO Al co rt e p art i ci p at edi n a p ri or n o n -CDP
m at t er, i t s arg u m en tm

u s tfai l
. SO Al co rt e v eri fi edth ats h e h ad n oth adan y p ri or i n v o lv em en twi th res p ect t o the s p eci fi c t ax p eri o d s ati s s u e. Becau s e SO Al co rt e d i d n otp art i ci p at e i n a- 1 8 -

[* 1 8 ] p ri o r n on -CDP m at t er co n cern i n g t h e s am e t ax , t ax p ay er, an dt ax p eri o dat i s su e, s h e was an el i g i b l e Ap p eal s o ffi cer t o p res i d e o v er t h e CDP h eari n g . Acco rd in g ly , th e u n d i sp u t edm at eri al fact s es t ab l i s h th atSO Al co rt e d i dn o tab u s e h er d i s cret i o n b y

rev i ewi n g th e i n fo rm at i o n p et i t i o n er p ro v i d edb efo re i t s CDP h eari n g . III. Co n cl u si o n Fi n al l y , p et i t i o n er arg u es th atth e Co u rts h o u ldrem an d t h i s cas e fo r ad d it i o n al co n si d erat i o n . Th e Co u rti s n o tco nv i n cedth ata rem an di s n eces s ary o r
wo u l db e p ro du ct i v e. See Lu n s fo rdv . Co m m i ss i o n er, 1 1 7 T.C. 1 8 3 , 1 89 (2 0 0 1 ); Kak eh v . Co m

m i s s i o n er, T.C. M em o . 2 0 1 5 -1 0 3 , at* 1 3 . Th e p u rp os e o f a rem an d i s n o tt o affo rda “ d o o v er” fo r a t ax p ay er wh o s e m i s s t ep s du ri n g the CDP p ro ces s
res u l ted i n i t s co l l ect io n al t ern at i v e’ s b ei n g reject ed
. See Kak eh v . Co m m i s s i o n er, at* 1 3
. Itap p ears t o th e Co u rtth atp et i t i o ner i s s eek i n g a “ d o o v er” h ere. 8 Fi n d i n g n o ab u s e o f d i s cret i o n i n an y res p ect , th e Co urtwi l l g ran t
res p o n d en t’ s m o t i o n fo r s umm ary ju d g m en tan dd en y p et i t io n er’ s . Th e Co u rth as
co n si d eredal l o f t h e arg u m en t s m ad e b y th e p art i es , an dt o t h e ex t en t th ey are n o t

8 At t ach edt o p et it io n er’ s m o t io n fo r s u m m ary ju dg m en t i s an affi dav i td at ed M arch 2 7 , 2 0 1 5 , o f Sam

J ewel l , p res i den to f Hen n es s ey M an o r Nu rs i n g Ho m e, In c., wh i ch s t at es : “ Hen n es s ey i s cap ab l e o f p ay i n g $ 1 4 ,0 0 0 p er m o n th
. ” Th e o n l y i ns t al l m en tam o u n tco n s i d eredatth e CDP b y SO Al co rt e was th e $ 6 , 0 0 0 refl ect edo n p et i t i o ner’ s d o cu m en t at i o n p ro v i d edatth e h eari n g .- 1 9 -

[* 1 9 ] ad dres s edh erei n , th ey are co n s i d ered u nn eces s ary , m o o t , i rrel ev an t , o r wi th o u tm eri t . To refl ectthe fo reg o i n g , Anap p ro p ri at e o rd er an dd eci s i o n wi l l b e en t ered
.