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

UNITED STATES TAX COURT
DANNY R. LOVE, Pet it io n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 3 7 8 8-1 8L. Fi l edJ u l y 2 2, 2 0 19
.

Dan n y R. Lo v e, p ro s e. M art h a J . W eb er an dW i l l i am W . Ki es s l i n g , fo r res p o n d en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION LAUBER, J u d g e: Inth is co l l ect i o n du e p ro ces s (CDP) cas e, p et it i o n er
s eek s rev i ew p u rs u an tt o s ect i o n s 6 3 2 0 (c) an d6 3 3 0(d )(1 ) 1 o f a d et erm i nat i o n b y th e In t ern al Rev en u e Serv i ce (IRS o r res p o n d en t ) reg ard i n g co l l ect i o n act i o n .

1 Al l s t atut o ry

referen ces are t o th e In t ern al Rev en u e Co de i n effect atal l rel ev an t t i m es . W e ro u n dal l m o n et ary am o u n t s t o t h e n eares td o l lar.- 2
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[* 2 ] Pet i t i o n er co n ten d s th atth e IRS Ap p eal s Offi ce erred i n reject i n g h i s p ro p os edo ffer-i n -co m

p ro m i s e (OIC) an di n d ecl in i n g t o ab at e i nt eres t an dfai l u ret o -p ay ad d i t i o n s t o t ax . Fi nd in g n o ev i den ce o f erro r, we wi l l s us t ai n th e d et erm i n at i o n . FINDINGS OF FACT Th i s cas e was tri ed i n M em p h i s, Ten n es s ee. Th e p art i es s ubm i t t edattri al two s ti p u l at i o n s o f fact wi th at t ach edex hi b i t s th atare i n co rp orat edb y thi s referen ce. Th o s e s ti p u l at i o ns i n cl u de t h e en t i re ad m in is trat iv e reco rd o f t h e CDP cas e. 2 Pet i t io n er res i dedi n Ten n es s ee wh en h e p et i t i o n edth i s Co u rt . Pet i t i o ner fi l edFed eral i n co m e t ax retu rn s fo r 2 0 1 2 , 2 0 13 , an d 2 0 1 4 . Fo r 2 0 1 2 h e d i dn o tp ay

th e fu l l am o u n t o f t ax s ho wnas du e o n h i s retu rn . Th e IRS
as s es s edfo r t h aty ear t h e t ax h e rep o rt edp l u s i n t eres t . 3 Fo r 2 0 13 an d2 0 14 p et i
t i on er l i k ewi s e fai l edt o p ay th e t ax s h o wn as du e o n h i s retu rn s . Th e IRS as s es s ed th o s e am o u n t s p l u s i n t eres tan dad d i t i o n s t o t ax fo r fai l u re t o p ay . As o f Decem
b er 2 0 16 , p et i t io n er’ s o u t st an d i n g l i ab i l i ty fo r t h es e t h ree y ears was $ 3 9 , 7 1 3
.

2 Pet i t i on er o b

j ect edt o th e ad m i s s i o n o f s ev eral o f h i s IRS acco u nttran s cri pt s o n g ro u n d s o f rel ev an cy . W e b el i ev e t h e t ran scri p ts t o b e rel ev an ti n d et erm i n i n g p et i t io n er’ s el i gi b i l i ty fo r t h e IRS’ “ fi rs tt im e ab at e” p o l i cy . See i n fra p p . 8 -9 . W e acco rd i n g l y

o v erru l edp et i t i o n er’ s o b j ect i o n s . 3 Th e IRS i ni ti al l y

as s es s edfo r 2 01 2 , b u t l at er ab at ed , ad d i t i o n s t o t ax fo r fai l u re t o fi l e an dfai l u re t o p ay . Th ey are n o l o n g er i n i s s u e.- 3
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[* 3 ] In an effo rt t o co l l ectth es e u np ai dl i ab i l i ti es th e IRS s en tp et i t i o ner, o n Decem b er 2 0 , 2 0 1 6 , a No t i ce o f Fed eral Tax Li enFi l i ng an dYo u r Ri g h tt o a Heari n g . OnJ an u ary

1 8 , 2 0 1 7 , p et i t i o n er s ub m i t t eda t i m el y req u es tfo r a CDP h eari n g , ex pres s i n g i n t eres ti n an OIC an dwi th drawal o f t h e NFTL. A week l at er h e
s en tth e IRS a l et ter acco m pan i edb y a Fo rm

4 3 3 -D, In s t al lm en tAg reem en t , p ro p o s i n g p aym en t s o f $ 3 00 p er m o n th . He i n cl u d edi n fo rm at io n ab o u t h i s fi n an ces
an d ex p l ai n ed th ath e wi s h ed t o p ay $ 3 00 p er m o n th u n t i l the p art i es co u l dreach ag reem en to n an OIC. Aft er recei v i ng p et i t i o n er’ s cas e a s et t l em en t o ffi cer (SO1 ) fro m th e IRS Ap p eal s Offi ce rev i ewedh i s ad m in i st rat i v e fi l e an dco n fi rm edth atthe t ax l i ab i l i t i es i n qu es t i o n h adb een p ro p erl y as s es s edan dth atal l o th er req u i rem en t s o f ap p li cab l e l aw an dad m i n i s trat i v e p ro cedu re h ad b een m et . On Feb ru ary 2 2 , 2 0 1 7 , p et i t i o n er s ub m it t eda Fo rm 6 5 6 , Offer i n Co m

p ro m i s e, p ro po s in g t o s et t l e h i s
o u t s t an d i n g t ax l i ab i l i t i es fo r 2 0 1 2 -2 0 1 6 fo r $ 1,5 0 0
. Th e p art i es ag reedt o h o l da t el ep h o n e CDP h eari n g o n Ap ri l 3 , 2 0 1 7. SO1
o u t l i nedth e CDP p ro ces s an dp et i t i o n er’ s ap peal ri g h t s . Sh e ex p l ai n edth atth e IRS Cen tral i zed Offer i n Co m p ro m i s e u n i t(COIC) wo u l di n v es ti g at e an dco n s i d er h i s OIC p ro p o s al . If th e COIC reject edth at p ro p o s al , th e cas e wo u l db e ret u rn ed t o h er fo r fu rt h er rev i ew.- 4
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[* 4 ] OnAu gu s t2 9 , 2 0 1 7, SO1 recei v edth e cas e fi l e b ackfro m COIC. Itreco m m en d edreject io n o f p et i t i o n er’ s OIC, fi n d in g th ath e h adfai l edt o s ub s t an t i at e
m an y rep o rt ed ex p en s es , th ath e h adthe ab i l i ty t o p ay th e t ax l i ab i l i t i es i n fu l l , an d th atth ere were n o s p eci al ci rcu m s t an ces warran t in g a h ard s h ip ex cep t i on . OnSep t em

b er 1 , 2 01 7 , SO1 cal l edp et i t i o n er t o ad v i s e h i m o f COIC’ s co n cl u s i on . Sh e ex pl ai n edth ats o m e o f h i s rep o rt edex p en s es were n o tal l o wab l e b u t th ato thers m i g h tb e al l o wedi f h e co ul ds ubs t an ti at e t h em . Pet it i on er s up pl i edad
d i t i o nal i n fo rm at i on , an dSO1 th en rev i sedCOIC’ s cal cu l at i o ns . Sh e ad ju s t ed p et i t i o n er’ s al l owab l e ex p en ses up wardb y al lo wi n g v eh i cl e o p erat i n g co s t s o n two m o re v eh i cl es an d i n creas i n g al l owab l e h eal th i n s u ran ce, l i fe i n s u ran ce, an d t ax ex p en s es t o m o re th an d o ub l e t h e am o u nt s p et it i o n er h ado ri g in al l y rep o rt ed
. Bu t s he d ecl i n edt o i n cl u d e as an al l o w ab l e ex p en s e m o n th l y tu i t i on o f $ 1 ,1 6 2 th at p et i t i o n er p ai dt o en ab l e h i s ch i l dren t o at t en d a p ri vat e h i g h s ch o o l
. SO1 ’ s rev i s edcal cu l at i o n s s h o wedthatp et i t i o n er h adm o n th ly h o u s eh o l d i n co m e o f $ 12 ,7 58 an dal lo wab l e m o n th l y ex p en s es o f $ 11 ,0 4 6 , y i el d i n g d i s p o s ab l e m o nt h l y

i nco m e o f $ 1 ,7 1 2 . Aft er rev iewi n g p et i t i o ner’ s rep o rt edas s et s , SO1
co n cl u d ed th at h e h ada reas o n ab l e co l l ect i o n p o t en t i al (RCP) o f $ 2 17 ,4 3 8 , co n s i st i n g o f eq u i ty i n as s et s o f $ 4 2 ,8 14 p l us th e ab i l it y t o p ay $ 17 4 ,6 2 4 i n fu tu re
m o nt h l y i n s t al l m en t s. Fi n d i n g n o d o ubtas t o co l l ect i b i l i ty an dn o s p eci al- 5
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[* 5 ] ci rcu m s t an ces ju s t i fy i n g a h ard s h i p ex cep t i o n , SO1 reject edp et i t i o n er’ s p ro p os edOIC. OnSep t em

b er 1 4 , 2 0 1 7 , SO1 i n fo rm edp et i t i o n er t h ath i s OIC wo u ldb e reject edb u tp ro p o s edan i n s t al l m en tag reem en treq u i ri n g p aym en ts o f $ 6 0 0 p er
m o nt h . Pet i t i o n er s t at edth ath e co u ldn o taffo rdth atam o un tan di ns t eadp ro p o sed
a s i n g l e l u m

p -s u m paym en to f $ 5 ,0 0 0 . SO1 rep l i edth ats h e co u l dn o taccep tth at
o ffer b ecau s e p et it i on er h adth e fi n an ci al ab i l it y t o p ay h i s t ax l i ab i l i t i es i n fu l l
. In Oct o b er 2 0 17 th e cas e was reas s i g nedt o a n ew s et t l em en to ffi cer, SO2
. Pet i t io n er s ub m i t t edi n fo rm at i o n s eek i n g t o ju st ify wi th drawal o f th e NFTL fi l i n g . SO2 rep l iedth ats h e wo ul dreco m m en dwi th drawal i f p et i t i o n er ex ecu t eda d i rect d eb iti ns t al l m en tag reem en t . Th e p art i es u lt i m at el y ag reedo n an i n s t al l m en t ag reem en tu n d er wh i ch p et i t io n er wo u l d p ay $ 3 0 0 p er m o n th b eg i nn i n g i n J an u ary 2 0 1 8 , wi th m o n th l y

p aym en t s i n creas i n g t o $ 6 0 0 i n 2 02 0 an dt o $ 7 0 0 i n 2 0 2 2
. Th ati n s t al l m en tag reem en twas ex ecu t edb y p et i t i o ner an d accep t edb y th e IRS,
an d th e NFTL fi l i n g was wi th drawn . Pet i t i o ner al s o req u es t edab at em en to f as s es s edi n t eres tfo r al l th ree y ears
an d ab at em en to f t h e ad d i t i on s t o t ax fo r 2 0 1 3 an d2 0 1 4
. SO2 ex p l ai n edth ath e h ad s ho wnn o g ro u n ds ju st i fy in g ab at em en to f i n t eres tb u ti n vi t ed h im t o s up p l y d o cu m en t at i o n s up p o rt i ng ab at em en t o f th e ad d i t i o n s t o t ax . Pet i t i o ner s ub m i t t ed- 6
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[* 6 ] a Fo rm

8 4 3 , Cl ai m fo r Refu n dan dReq u es t fo r Ab at em en t, arg u in g th ath i s fai l u res t o p ay were ex cu s ab l e b ecau s e h e h adb een fo rcedt o u s e h i s ret irem en t
s av i n g s t o m ai nt ai n h i s fam il y ’ s s t an d ardo f l i v i n g . SO2 rev i ewedp et it i o n er’ s acco u n t s an dfo u n dthath e h adwi th drawn $ 2 ,7 4 1 an d$ 8 9 ,9 0 0 fro m h is ret i rem en t acco u n ti n 2 0 1 3 an d2 0 1 4, res p ect i v el y . Sh e n ot edth ath e h adn eg l ect edt o h av e an y Fed eral i nco m e t ax wi th h el dfro m th e 2 0 1 4 d i s tri b u t io n. Onthe b as i s o f p et i t i on er’ s rep o rt edi n co m e fo r th es e y ears ($ 1 2 8,8 7 3 an d$ 1 9 1 ,1 9 6 , res pect i v el y ) an d h is o v eral l fi n an ci al s itu at i o n , SO2 d et erm i n edth ath e co u l dp ay h i s Fed eral t ax l i ab i l it i es o n t i m e. Co n cl ud i n g th at
reas on ab l e cau s e fo r fai l u re t o p ay d i d n otex i s t , SO2 d en i edp et i t i o n er’ s ab at em en treq u es t . No t in g t h atth e IRS h ad as s es s edfai l u re-t o-p ay ad d i t i o ns t o t ax ag ai n s tp et i t i o n er o n t h ree p ri o r o ccas i o n s --fo r 2 0 0 9, 2 0 10 , an d2 0 1 1--SO2 fu rt h er d et erm i n edth ats h e co u l dn o t ab at e t h e 2 01 3 an d2 01 4 ad d i t i o n s t o t ax u n d er an ad m i n is trat i v e “ fi rs t t i m e ab at em en t ” p o l i cy . OnJ an u ary

3 0 , 2 0 1 8 , th e IRS i s s u edp et i t i o n er a n ot i ce o f d et erm i n at i o n . It
n o t edth atth e NFTL fi l i ng , wh i l e p ro p er o ri g i nal l y , “ [wa] s n ots u s tai n edan dh a[d ] b een w i thd rawn ” fo l l o wi n g ex ecu t i o n o f th e d irect -d eb i ti n s tal l m en tag reem en t. Th e n ot i ce ex p l ai n edth e reas o n s fo r d en y i n g p et i t i o n er’ s OIC an dh i s req u es t s fo r- 7
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[* 7 ] ab at em en to f as s es s edi n t eres t an dfai lu re-t o -p ay ad d i t i o n s t o t ax . 4 Pet i t i o n er t i m el y pet i ti o n edth i s Co u rtfo r rev i ew, co n t en di n g thatth e Ap p eal s Offi ce erred i n reject i ng h i s p ro p o s edOIC, i n d ecl i n i n g t o ab at e i n t eres tfo r al l th ree y ears , an d i n d ecl i n i n g t o ab at e t h e ad di t i o n s t o t ax fo r 2 0 1 3 an d2 0 14
. OPINION A. St an dardo f Rev i ew Nei ther s ect i o n 63 2 0 (c) n o r s ect i o n 6 3 30 (d )(1 ) p res cri b es th e s t an d ardo f
rev i ew t h atth i s Co u rts h o ul dap p l y i n rev iewi n g an IRS ad m in i s trat i v e d et erm i n at i on i n a CDP cas e. Th e g en eral p aram et ers fo r s u ch rev i ew are m ark edo u tb y o u r p reced en t s . Wh ere t h e v al i d it y o f t h e u n d erl y i n g t ax l i ab i l i ty i s ati ss u e, we rev i ew th e Co m m i s s i o n er’ s d et erm i n at i o n d e n o v o. Go za v . Co m m i s s i on er, 1 1 4 T.C. 1 7 6 , 1 8 1 -1 8 2 (2 0 0 0 ). Wh ere t here i s n o d i s p u te co ncern i n g th e u n d erl y i n g t ax l i ab i l i t y , we rev i ew t h e IRS act io n fo r ab u s e o f d is cret i o n . Id . at1 8 2 . Ab u s e o f d is 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 o u s , o r wi th o u t s ou n d b as is i n fact
o r l aw. See M u rp h y

v . Co m m is s i o n er, 1 2 5 T.C. 3 0 1 , 3 20 (2 0 0 5 ), aff’ d , 4 6 9 F.3 d 2 7 (1 stCi r. 2 0 0 6 ).

4 Th e n o ti ce i ncl u d es a t y

p o g rap h i cal erro r, referri n g t o th e ad d it i on s t o t ax as h av in g b een as ses s edfo r “ fai l u re t o fi l e” as o p p o sedt o “ fai l u re t o p ay .”- 8
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[* 8 ] “ A t ax p ay er’ s u n d erl y i n g t ax l i ab il i ty i n cl u d es p en al t i es an dad d i t i o n s t o t ax th atare p arto f t h e u np ai dt ax th atth e Co m m i s s i o n er s eek s t o co l l ect .” Dyk s tra v . Co m m i s s i o n er, T.C. M em o . 2 0 1 7 -1 5 6 , 1 1 4 T.C.M . (CCH) 1 8 3 , 1 8 7 . No th i n g i n th e reco rdi n d i cat es thatp et i t i o n er h ada p ri o r o p po rtu ni ty t o ch al l en g e h i s l i ab i l i t y fo r t h e fai l ure-t o -p ay

ad d i t i o n s t o t ax , an dwe th u s rev iew p et it i o n er’ s req u es tfo r red et erm i n at i o n o f t h i s l i ab il i ty d e n ov o . Ib id . W e rev i ew u n d er an ab u s e-o f-d i s cret io n s t an d ardSO1 ’ s d eci s i o n t o rejectp et i t i on er’ s OIC. See J o h ns o n v . Co m m i s s i o n er, 1 3 6 T.C. 4 75 , 4 8 8 (2 0 1 1 ), aff’ d , 5 0 2 F. Ap p ’ x 1 (D.C. Ci r. 2 0 1 3 ). SO2 ’ s d en i al o f p et i t i o n er’ s req u es tfo r ab at em en t o f i n t eres ti s l i k ewi s e rev i ewed fo r ab u s e o f d i s cret i o n o n l y . See s ec. 6 4 0 4 (h )(1 ); A-Val ey En g’ rs , In c. v . Co m m i s s i o n er, T.C. M em o . 2 0 1 2 -1 9 9 , 1 04 T.C.M
. (CCH) 6 9, 7 2
. B. Un d erl y in g Tax Li ab i l i ty Pet i t i o ner d i s p u t es h i s u n d erl y i n g l i ab i l i ty fo r t h e 2 0 1 3 -2 0 1 4 ad d i t io n s t o t ax . He fi rs tco n t en d s th at SO2 s h o u l dh av e fo u n d h i m el i g i b l e fo r t h e IRS “ fi rs t t i m e ab at e” p o li cy , wh i ch o ffers an ad m i n i s trat i v e wai v er o f ad d i t i o ns t o t ax fo r fai l u re t o p ay

a t ax l i ab i l i ty

o n t i m e. See In t ern al Rev en u e M an ual (IRM ) p t . 2 0 .1 .1 .3 .3 .2 .1 (No v . 2 1 , 2 0 1 7); s ee al s o Lai dl aw v . Co m m is s io n er, T.C. M em o . 2 0 1 7 -1 6 7 . To qu al ify

fo r t h i s wai v er, t h e t ax p ay er m u stn o t h av e h ad an y
u n rev ers edad d it i on s t o t ax i m p o s edu n d er s ect i o n 6 6 51 fo r an y o f t h e p reced i n g- 9
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[* 9 ] th ree y ears . See IRM p t . 2 0 .1 .1 .3
. 3 .2 .1 (4 ). Pet i t i o n er’ s acco u n t tran s cri p t s fo r 2 0 0 9 -2 0 11 s h o wed th at h e h adb een as s es s ed a fai l ure-t o -p ay ad d i t i o n t o t ax fo r each o f t h o s e y ears an d t h atn o n e o f t h es e as s es s m en t s h ad b een ab at edo r
rev ers ed . SO2 th us co rrect l y d et erm i n edth atp et i t i o n er was i nel i g i b l e fo r “ fi rs t t i m e ab at em en t .” 5 SO2 co n s id eredi n t h e al t ern at i ve wh et h er ab at em en to f t h e fai l u re-t o -p ay ad d it i o n s t o t ax co u l d b e ju st i fi edo n g ro u n d s o f reas o n ab l e cau s e. See s ec. 6 6 5 1 (a)(2 ). To p ro v e reas o n ab l e cau s e fo r fai l ure t o p ay , “ th e t ax p ay er m u s ts h ow th ath e ex erci s ed ord in ary b u s in es s care an d p ru d en ce i n p ro v i di n g fo r p aym en t o f h i s t ax l iab i l i ty

an dn ev ert h el es s was ei th er u n ab l e t o p ay th e t ax o r wo ul ds u ffer
u n du e h ard s h i p i f h e p ai d th e t ax o n th e du e d at e.” Hard i n v . Co m m i s s i o n er, T.C. M em o. 2 0 1 2 -1 6 2 , 1 0 3 T.C.M . (CCH) 1 86 1 , 1 8 6 3 (ci ti n g s ect i o n 3 0 1
. 6 6 51 -1 (c)(1 ), Pro ced
. & Ad m i n . Reg s . ). SO2 n o t edth atp et i t i o n er’ s fai l u re t o p ay fo r 2 0 1 4 was at tri b u t ab l e i n p artt o h i s fai l ure t o h av e an y Fed eral i n co m e t ax wi th h el dfro m h i s $ 8 9 ,9 0 0 ret i rem en tp l an d i s tri b u t i o n . Her o v eral l an al y s i s o f p et i t i o n er’ s i n co m e

5 Th e n o ti ce o f d et erm i n at i o n m i st ak en l y reci t edth at p et i t io n er h adb een as s es s ed“ fai l u re t o fi l e” ad d i ti on s t o t ax fo r 2 0 0 9 -2 01 1 . See s up ra n o t e 4 . Th i s ty p o g rap h i cal erro r cau s ed s om e co nfu s i o n fo r p et i t i o ner, wh o em p h as i zedi n h i s p et i t i o n th ath e h adco ns i st en t ly fi l ed Fed eral i n co m e t ax retu rn s . Th ere are n o fai l u re-t o-fi l e ad d it i o n s t o t ax fo r 2 0 1 3 -2 0 1 4 , an dth ere were n o n e fo r 2 0 0 9 -2 0 1 1
. Th e IRS h adp rev i o u s ly

ab at edad d i t io n s t o t ax fo r 2 01 2 , s ee s up ra n o t e 3 , an d th ey d i dn o ten t er i n t o SO2 ’ s an al y s i s .- 1 0 -

[* 1 0 ] an d as s et s rev eal edth ath e co u ldp ay h i s 2 0 1 3 an d2 0 1 4 t ax l i ab i l i t i es o n t i m e an dwo ul dn o th av e s u ffered u n du e h ard sh i p b y d o i n g s o . Sh e th u s d et erm i n edco rrect ly

thath e h adn o ts h o wnreas o n ab le cau s e fo r fai l u re t o p ay . C. Ab u se o f Di s cret i on In rev iewi n g an SO’ s d et erm i n at io n s, we co n s i d er wh et h er s h e: (1 ) p ro p erl y
v eri fi ed th atth e req u irem en t s o f ap p l i cab l e l aw o r ad m in i st rat i ve p ro cedu re h av e b een m et , (2 ) co n si d eredan y rel ev an ti s s ues p et i t i o ner rai s ed , an d(3 ) co n s i d ered

“ wh et h er an y

p ro p o s edco l lect i o n act i o n b al an ces th e n eedfo r t h e effi ci en tco l l ect i on o f t ax es wi th the l eg i t i m at e co n cern o f * * * [p et i ti o n er] thatan y co l l ect i o n act i on 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 30 (c)(3 ). Ou r rev i ew o f th e reco rdrev eal s th atSO1 co n du ct eda t h oro u g h rev i ew o f p et i t i o n er’ s acco u n t , d et erm i n edth atth e l i ab i l i t i es i n qu es t i o n h adb een p ro p erl y as s es s ed , an dv eri fi ed th atal l o th er req u irem en t s o f ap p l i cab l e l aw an d ad m i n i st rat i v e p ro cedu re were fo l l o w ed
. 1
. Offer-i n -Co m

p ro m i s e Pet i t i o ner’ s m ai n co n t en t i o n attri al was th atSO1 ab u s edh er d is cret i o n i n reject i n g h i s p ro p o sed OIC. Th e IRS m ay co m pro m i s e an o u t s t an d i n g t ax l i ab i l i t y
o n th ree g ro u n d s : (1 ) d oub tas t o l i ab i l i ty , (2 ) d o ub t as t o co l l ect i bi l i ty , o r (3 ) t he p ro m o t io n o f effect i v e t ax ad m i n i s trat i o n . See s ec. 7 1 2 2 (a); s ec. 3 0 1 .7 1 2 2 -1 (b ),- 1 1 -

[* 1 1 ] Pro ced . & Ad m i n. Reg s . Th e IRS m ay co m pro m i s e a t ax d eb to n t h e b as i s
o f d o ub tas t o co l l ect i b i l i ty wh ere t h e t ax p ay er’ s as s et s an d i n co m e m ak e i t
u n l i k el y th atth e IRS wi ll b e ab l e t o co l l ectthe en t i re b al an ce. Sec. 3 0 1.7 1 2 2
- 1 (c)(2 ), Pro ced . & Ad m i n . Reg s .

“ [A] n o ffer t o co m

pro m i s e b as edo n d o ubtas t o co l l ect i b i l i ty wi l l b e accep t ab l e o n l y i f t h e o ffer refl ect s th e reas on ab l e co l l ect i o n p o t en t i al o f t h e cas e (i .e., th atam o u n t* * * th at th e IRS co u l d co l l ectth ro u g h m ean s s u ch as ad m i n i s trat i v e
an d ju d i ci al co l l ect i o n rem ed i es ).” M u rp h y , 1 2 5 T.C. at3 0 9 . Inrev i ewi n g SO1 ’ s d et erm i n at i o n t o rejectan OIC, we d o n o tm ak e an i n d ep en d en tev al u at i on o f wh at
wo u l db e an accep t ab l e co l l ect i o n al t ern at i v e. Id . at3 2 0 . Rat her, o u r rev i ew i s l i m i ted t o d et erm i n i n g wh et h er SO1 ab u s edh er d i s cret i o n . Id . at3 18
. Pet i t i o ner s ub m i t t edan O IC b as edo n d o ub tas t o co l l ect i b i l i ty . At th att i m e h i s t ax l iab i l i t i es fo r 2 01 2 -2 0 1 4 were al m o s t$ 4 0 , 0 0 0 . He s ubm i t t eda Fo rm 6 5 6 p ro p os i n g t o co m

p ro m i s e t h o s e l i ab i l i t i es fo r $ 1 ,5 0 0 an d l at er i ncreas edth ato ffer (o ral ly ) t o $ 5 ,0 0 0 . Bu taft er ex am i n i n g p et i t i o ner’ s as set s an di n co m e, SO1 d et erm i n ed th ath e h adan RCP o f $ 2 1 7 ,4 3 8 --an am o u n tv as tl y ex ceed i ng th e o ffers h e h ad m ad e. Th e IRM i ns tru ct s s et t lem en t o ffi cers th at an OIC p ro p o s i n g a p aym en t
s ub s t an t i al l y

b el o w th e t ax pay er’ s RCP s h o u ldn o rm al l y b e reject ed . IRM p t . 5 .8
. 4.9 (M ay

1 0 , 2 0 1 3 ). “ [A] s et t l em en to ffi cer d o es n o t ab u s e h er d i s cret io n- 1 2 -

[* 1 2 ] wh en s h e rel ies o n rel ev an tIRM p ro v i s i o n s i n ev al u at i n g co l l ect i o n al t ern at i v es .” M o ri art y

v . Co m m i ss i o n er, T.C. M em o . 2 01 7 -2 0 4 , 1 1 4 T.C.M . 4 4 1 , 4 4 4 , aff’ dp er o rd er, 1 2 2 A.F.T.R.2 d 2 01 8 -5 9 8 4 (6 th Ci r. 2 0 18 ); s ee Ei ch l er v . Co m m i s s i o n er, 1 4 3 T.C. 3 0 , 3 9 (2 0 1 4 ). Attri al p et it i on er co nt en d edth atth e an al y s i s o f h is m on th l y d i s p o s ab l e i n co m e d i d n o tt ak e i n t o acco u ntal l o f h i s ex p en s es , ch i efl y h i s ch il dren ’ s p ri v at e
s ch o ol tu i t i o n . 6 Bu tth e IRM i n s tru ct s s et t l em en to ffi cers th atp ri v at e s ch o o l tu it i on i s an al l o wab le ex pen s e o nl y i f “ req u iredfo r a p h y s i cal l y o r m en t al l y ch al
l en g edch i l dan dn o p ub l i c edu cat i on p ro v i d i ng s i m i l ar s erv i ces i s av ai l ab l e.” IRM p t . 5 .1 5 .1 .1 0 (3 ) (No v. 1 7, 2 0 1 4 ). 7 Inev al u at i n g OICs i n p art i cu l ar, “ [e] x p en ses fo r d ep en den t s t o at t en d* * * p ri v at e s ch o o l s wi l l n otb e al l o wedu n l es s th e d ep en d en t s h av e s p eci al n eed s th atcan n otb e m etb y p ubl i c s ch o ol s.” IRM p t .

6 Pet i t i on er al s o co n t en d edth atSO1 d i dn o tt ak e p ro per acco u n to f h i s cred i t cardo b l i g at io n s . Th e IRM p ro v i d es th at“ [c] red i tcard s are g en eral l y co n s i d ereda m et h o d o f p aym en t , rat her t h an a s p eci fi c ex pen s e.” IRM p t. 5
. 1 5 .1
. 1 0 (3 ) (No v . 1 7 , 2 0 1 4 ). “ [P] aym en ts fo r t he p o rt i o n o f t h e cred i tcard d eb trefl ect i n g n eces s ary l i vi n g ex p en s es are p ro v i d edfo r as al l o wab l e ex p en ses .” Ib i d . Th e SO p ro p erl y al l o wed fo r t h e n eces s ary l iv i n g ex p en s es p ai dfo r wi th p et it i o n er’ s cred i t card
. See Ro s en d al e v . Co m

m i ss i o n er, T.C. M em o. 2 0 1 8 -9 9
. 7 Th e qu ot edl an g u ag e ap p eared i n th e ci t edp o rt i o n o f t h e IRM du ri n g 2 0 1 6 , wh en th e SOs co n du ct edth ei r rev i ew. In 2 01 8 th e IRM was up dat ed ; th e qu o t ed l an g u ag e n o w ap p ears atIRM p t . 5 .1 5
. 1
. 1 1 (Au g . 2 9 , 2 0 1 8 ).- 1 3 -

[* 1 3 ] 5 .8 .5 .2 2 .4 (4 ) (Sep t . 3 0 , 2 0 1 3 ); s ee M o ri arty , 1 1 4 T.C.M . (CCH) at 4 4 4
. Pet i t io n er d o es n o tco n t en dth ath i s ch i l dren ’ s p ri vat e s ch o o l tu i t i o n fi t s th es e cri t eri a. In an y ev en t , an y

erro r b y SO1 i n cal cu l at i ng p et i ti o n er’ s m o n th l y d i s p o s ab l e i n co m e was h arm l es s i n ev al u at i n g h i s OIC. Hi s eq u i ty i n as s et s al o n e, $ 4 2 ,8 1 4 , v as t l y

ex ceed edh i s OIC. An dth e i n st al lm en tag reem en t h e act u al l y
ex ecu t eds h o wedth ath e h ad th e fi n an ci al ab il i ty t o p ay h i s as s es s edt ax l iab i l i ti es i n fu l l . Fo r al l thes e reas o n s , we co n cl u d e t h atSO1 d idn o t ab u s e h er d i s cret i o n i n reject i n g h i s OIC. 8 2
. Ab at em en to f In t eres t In t eres to n t ax l i ab i l i ti es ari s es au t o m at i cal l y u n der s ect i o n 6 6 0 1
. Sect i o n 6 4 0 4 (e)(1 )(B) au th o ri zes th e IRS t o ab at e as s es s edi n t eres to n “ an y p aym en t* * * t o the ex t en tth atan y

u n reas o n ab l e erro r o r d el ay i n s u ch p aym en ti s at tri b u t ab le t o
* * * [an IRS] o ffi cer o r em p l o y ee b ei n g erro n eo us o r d il at o ry i n p erfo rm i n g a
m i n i s t eri al o r m an ag eri al act . ” A m an ag eri al acti s “ an ad m i ni s trat i v e act* * * i n v o l v i n g th e t em

p o raryo r p erm an en tl o ss o f reco rd s o r t he * * * m an ag em en to f

8 Attri al p et i ti o n er i n d icat edth ath i s h o u s eh o l dm ay h av e i n creas edm ed i cal ex p en s es g o i n g fo rward . If p et i t i o n er’ s fi n an ci al ci rcu m s t an ces h av e ch an ged , h e i s free t o s ub m i tt o t h e IRS at an y t i m e, fo r i ts co n s id erat i o n an dp o s si b l e accep t an ce, a co l l ect i o n al t ern at iv e i n t h e fo rm o f an OIC o r a rev i s ed i ns t al l m en tag reem en t , s up p o rt edb y th e n eces s ary fi n an ci al i n fo rm at i o n .- 1 4 -

[* 1 4 ] p ers o n n el .” Sec. 3 0 1 .6 4 0 4 -2 (b )(1 ), Pro ced . & Ad m in . Reg s . A m i n i s t eri al acti s a “ p ro cedu ral o r m ech an i cal actth atd o es n o ti n v o l v e t h e ex erci s e o f ju d g m en to r d is cret i o n .” Id . s ub p ara. (2 ). Pet i t i o ner d i dn o ti d en t i fy , du ri n g th e CDP p ro ces s o r at tri al , an y u n reas o n ab l e erro r o r d el ay

b y an y IRS o ffi cer o r em

pl o y ee i n p erfo rm i n g an y m i ni s t eri al o r
m an ag eri al act . Th e CDP p ro ces s as a wh o l e was co m p l et edi n ab o u ta y ear, i n cl u d i n g a fi v e-m o n th p eri o d whi l e COIC rev iewedp et i t i o n er’ s OIC. Pet it i o n er rai s edd i fferen t is s u es at d i fferen ts t ag es o f th e p ro ces s an den g ag ed i n p ro tract ed
n eg ot i at i on s co n cern in g th e i n s t al l m en t ag reem en tan dthe OIC. Bo th SOs res p o n dedp ro m

p tl y t o h i s co m

m u n i cat i o n s , an dth ei r co n si derat io n o f h i s p ro p o s al s

“ i n vo l v e[d ] th e ex erci s e o f ju d gm en to r d i s cret i on .” Ib i d . W e fi n d th atSO2 d i d
n o tab us e h er d is cret i o n i n d en y i n g p et i t i o ner’ s req u es tfo r ab at em en to f i n t eres t . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r
res p o nd en t .