T.C. Summary Opinion 2007-188

UNITED STATES TAX COURT

KENNETH HOLTEN BLACK AND MARIE K. MORILUS BLACK, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 8251-06S. Filed November 5, 2007. 

Kenneth Holten Black and Marie K. Morilus Black, pro sese.

John M. Janusz, for respondent.

DEAN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed. Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other

case. Unless otherwise indicated, subsequent section references
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are to the Internal Revenue Code in effect for the year in issue,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.

Background

Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits received into evidence

are incorporated herein by reference. At the time the petition

was filed, petitioners resided in Williamsville, New York.

Petitioners filed a joint Form 1040, U.S. Individual Income

Tax Return, for 2004. The Internal Revenue Service (IRS)

assessed the $24,143 tax shown on the return. The IRS assessed

the following additional amounts: (1) A $143 addition to tax for

failure to pay estimated tax; (2) a $115.96 addition to tax for

failure to pay timely; and (3) $86.09 in accrued interest. After

the application of a $12,547 credit for withholding taxes, the

additional assessments resulted in an $11,941.05 unpaid balance.

The IRS sent petitioners a notice and demand for payment

within 60 days of the assessment. In response, petitioners

submitted an offer-in-compromise (OIC) on September 13, 2005,

which the IRS rejected, and petitioners appealed. While

petitioners’ appeal was pending, the IRS filed a Notice of

Federal Tax Lien (NFTL) at the Erie County Clerk, Buffalo, New

York, on October 20, 2005. The IRS issued to petitioners a

Letter 3172(DO), Notice of Federal Tax Lien Filing and Your Right
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to a Hearing under IRC 6320, on October 21, 2005. In response,

petitioners submitted a timely Form 12153, Request for a

Collection Due Process Hearing, on November 9, 2005.

Petitioners’ hearing was held on January 18, 2006. Pursuant

to the parties’ discussions, petitioners signed a Form 433-D,

Installment Agreement, on February 10, 2006. Petitioners, via a

letter dated February 9, 2006, requested that the NFTL be

withdrawn because the lien’s filing would adversely affect their

credit rating and could cause them financial hardship. 

Additionally, petitioners expressed their concern that a lien

could affect their ability to secure college loans on their son’s

behalf. In response, the IRS sent petitioners a Letter 3193,

Notice of Determination Concerning Collection Action(s) Under

Section 6320 (notice of determination), on March 28, 2006. The

Notice of Determination sustained the NFTL and rejected

petitioners’ withdrawal request. Thereafter, petitioners timely

filed a petition with the Court.

The issues for decision are whether the Appeals officer

abused his discretion in: (1) Sustaining the NFTL; and (2)

determining that the NFTL should not be withdrawn.

Discussion

Section 6321 imposes a lien in favor of the United States on

all property and rights to property of a person liable for any

tax, additions to tax, penalties, interest, and costs that may
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accrue in addition thereto if there has been a demand for payment

and the person has failed to pay. The lien arises at the time of

assessment. Sec. 6322. In order for the Federal tax lien to

have priority over other liens or security interests, the IRS

must file an NFTL. Sec. 6323(a); Behling v. Commissioner, 118

T.C. 572, 575 (2002).

Generally, section 6320(a) states that the IRS must give the

person against whom a Federal tax lien is filed written notice of

the lien’s filing within 5 days after the date of its filing. 

Section 6320(b) also provides the taxpayer with an opportunity

for a hearing before the Office of Appeals. The hearing is

conducted pursuant to subsections (c), (d), and (e) of section

6330. Sec. 6320(c). 

At the hearing, the taxpayer may raise any relevant issue

relating to the unpaid tax including: (1) Challenges to the

appropriateness of the IRS’s collection actions; and (2) offers

of collection alternatives (i.e., an installment agreement,

offer-in-compromise, the posting of a bond, or the substitution

of other assets). Sec. 6330(c)(2)(A)(ii) and (iii); sec.

301.6330-1(e)(3), Q&A-E6, Proced. & Admin. Regs. The Appeals

officer must consider the following in his determination: 

(1) Whether any applicable law or administrative procedure has

been followed; (2) the issues properly raised by the taxpayer;

and (3) whether the proposed collection action balances the need
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for the efficient collection of taxes with the taxpayer’s

legitimate concern that the collection action be no more

intrusive than necessary. Sec. 6330(c)(3).

A taxpayer may appeal the IRS’s determination with this

Court within a 30-day period starting on the day after the date

of the Notice of Determination. Secs. 6320(c), 6330(d)(1). In

reviewing the IRS’s determination, the Court applies an abuse of

discretion standard when the underlying tax liability is not at

issue. Sego v. Commissioner, 114 T.C. 604, 610 (2000). Pursuant

to this standard, petitioners must prove that the filing of the

NFTL and the rejection of their withdrawal request was arbitrary,

capricious, or without sound basis in fact or law. See Woodral

v. Commissioner, 112 T.C. 19, 23 (1999).

1. Filing of the NFTL

Petitioners contend that respondent’s Appeals officer abused

his discretion by sustaining the NFTL.

The applicable laws and administrative procedures were

satisfied. The parties agree that petitioners received the

required notice and demand for payment within the 60-day

timeframe mandated by section 6303. And the record shows that

petitioners received notice of the lien’s filing and their right

to request a hearing within the 5-day period prescribed by

section 6320.
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The Appeals officer considered petitioners’ challenge to the

appropriateness of the NFTL, noting that petitioners requested

that the NFTL be withdrawn and not reinstated unless they 

defaulted on their installment agreement. They were concerned

about the negative effect the NFTL might have on their credit

rating and the impact it might have on their ability to secure

college loans for their son. The Appeals officer concluded that

petitioners’ reasons for withdrawal did not satisfy the

conditions authorizing withdrawal. The NFTL’s filing was not

premature because “[an] overpayment or [other] credit was not

available” and the NFTL could be maintained in conjunction with

the installment agreement without hindering collection of the

liability. See sec. 6323(j); sec. 301.6323(j)-1(b), Proced. &

Admin. Regs. 

The Appeals officer also considered petitioners’ prior

submission of a collection alternative. The record shows that an

OIC had been submitted and was determined to be unacceptable. 

Petitioners did not meet the criteria for an OIC because they had

the ability to pay the liability in full. The Commissioner had

also determined that petitioners could obtain an installment

agreement that would pay the liability in full within the time

prescribed by section 6502(a) and would not impose a financial

hardship on petitioners. Cf. secs. 301.6343-1(b)(4), 301.7122-

1(b) and (c), Proced. & Admin. Regs.
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The Appeals officer balanced the need for efficient

collection of taxes against petitioners’ concern over the NFTL’s

intrusiveness. The Appeals officer testified that the lien was

filed to protect the Government’s interest: his research

indicated that petitioners were subject to the claims of

competing creditors and petitioners could become liable to the

State of New York for additional tax for the same year. The

Appeals officer testified that since petitioners’ OIC had been

rejected, he concluded that an installment agreement was in their

best interest because penalties and interest were accruing during

the pendency of the IRS’s acceptance, and the installment

agreement would forestall the IRS’s proposed levy action.

Finally, Form 656, Offer in Compromise, which petitioners

signed, specifically states that an NFTL “may be filed at any

time while your offer is being considered”.

Therefore, the Court concludes that respondent’s Appeals

officer did not abuse his discretion in upholding the NFTL. 

Accordingly, respondent’s determination is sustained. 

2. Withdrawal of the NFTL

In pertinent part, section 6323(j) provides that the IRS may

withdraw an NFTL if it determines: (1) The filing of the NFTL

was premature or not in accordance with administrative

procedures; (2) the taxpayer has entered into an installment

agreement, unless the agreement provides otherwise; (3)
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withdrawal will facilitate collection; or (4) with the taxpayer’s

consent the lien’s withdrawal “would be in the best interests of

the taxpayer * * * and the United States.”

Petitioners contend that respondent’s Appeals officer abused

his discretion when he refused to withdraw the NFTL because: (1)

The NFTL’s filing was premature; (2) an installment agreement was

subsequently agreed to; and (3) it would be in petitioners’ and

the United States’ best interests to remove the NFTL due to the

damage it would cause to petitioners’ credit rating.

The NFTL was not filed prematurely. Petitioners’ tax

liability was assessed, and notice and demand for payment was

mailed to petitioners within 60 days of the assessment. The IRS

issued a Notice 504, Balance Due-Urgent; a Letter 1058, Final

Notice of Intent to Levy; as well as A Notice of Federal Tax Lien

and Your Right to a Hearing under IRC 6320. The lien’s filing

occurred after assessment and notice and demand; at each step,

petitioners were properly notified.

Entering into an installment agreement does not preclude the

filing of an NFTL, nor is the IRS required to withdraw an NFTL

after an installment agreement has become effective. Sec.

6323(j)(1); see also Ramirez v. Commissioner, T.C. Memo.

2005-179; Stein v. Commissioner, T.C. Memo. 2004-124. Section

6323(j)(1) is permissive: the IRS “may” withdraw an NFTL, but

failure to do so is not an abuse of discretion. Sec. 6323(j)(1);
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sec. 301.6323(j)-1(c), Proced. & Admin. Regs.; see also Crisan v.

Commissioner, T.C. Memo. 2007-67.

Finally, petitioners did not submit any evidence to

demonstrate that the withdrawal would facilitate collection or

would be in the best interests of the taxpayer and the United

States. Petitioners testified that the NFTL may cause their

interest rates to increase on their other debts so withdrawal of

the NFTL would help them and in turn the United States. But

petitioners’ assertion that the withdrawal of the lien would

facilitate collection and would be in the United States’ best

interest is only conjectural. There has been no showing that the

filing of the lien has in fact caused the interest rates on their

other obligations to increase sufficiently to impair collection.

The Court concludes that respondent’s Appeals officer did

not abuse his discretion in refusing to withdraw the NFTL. 

Accordingly, respondent’s determination is sustained. 

To reflect the foregoing,

An appropriate decision will

be entered.