1 5 1 T.C. No . 7

UNITED STATES TAX COURT

J AM ES LOVELAND, J R., AND TINA C. LOVELAND, Pet i t i o ners v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 0 4 82 -1 7 L. Fi l edSep t em b er 2 5 , 2 0 1 8
.
R i s s u eda n o t i ce o f i n t en tt o l ev y t o Ps . Ps s ub m it t edan o fferi n -co m p ro m is e t h ati ncl u d edal l req u es t edfi n an ci al i n fo rm at i o n. R’ s co l l ect i o n s o ffi cer reject edth e o ffer. Ps ch o s e t o fo rg o an Ap p eal s Offi ce h eari n g s o thatth ey co u l dco n ti n u e n eg o t i at i o n s o v er an i n s t al l m en tag reem en t . Th o s e n eg o t iat i o n s fal t ered
. Lat er, R fi l eda n o t i ce o f Fed eral t ax l i enag ai n s tPs ’ p ro p ert y . Ps req u es t eda co l l ect io n du e p ro ces s (CDP) h eari n g u n d er I.R.C. s ec. 6 3 2 0 . Th ey

req u es t edth atR co n s i d er t h e p rev i o u s l y reject edo fferi n -co m p ro m is e. Ps al s o req ues t ed an i n s t al lm en tag reem en tan d req u es t ed rel i ef du e t o eco n o m i c h ard s hi p . Ps d i dn o ts ub m i t fi nan ci al i n fo rm at i on b ey o n dwh atth ey h ad p ro v i d edwi th th e p rev io us l y

reject ed o ffer-i n -co m

p ro m i se. R d ecl in edt o rev i ew t h e o ffer-i n -co m p ro m i se b ecau s e Ps h ad h ada p ri o r o p p ortu n it y

fo r a h eari n g . W i th o u trev i ewi n g th e fi nan ci al i n fo rm at i on th atPs h adp rev io u s l y p ro v i d ed , R al so d ecl i n ed-2
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t o rev iew t he i n st al l m en tag reem en t an dth e cl ai m o f eco n o m ic h ard sh i p b ecau s e Ps d i dn o ts ub m i t fi n an ci al i n fo rm at io n . Un d er s ec. 3 01 .6 3 2 0 -1 (e)(1 ), Pro ced . & Ad m i n . Reg s ., a “ t ax p ay er m ay

n o trai s e an i s s u e t h atwas rai s edan dco n si d eredata p rev io us CDP h eari n g u n d er s ect io n 6 33 0 o r i n an y o th er p rev i o u s ad m i n i s trat iv e o r ju d ici al p ro ceed i n g i f t h e t ax pay er p art i ci p at ed m ean i n g fu l l y

i n s u ch h eari n g o r p ro ceed i n g .” Hel d : A m eet i n g wi th a co l l ect i o ns o ffi cer i s n o ta p ri o r ad m i n i s trat iv e p ro ceed i n g u n d er I.R.C. s ec. 6 3 3 0 (c)(4 )(A)(i ) an ds ec. 3 0 1 .6 32 0-1 (e)(1 ), Pro ced . & Ad m i n . Reg s . Hel d , fu rt h er, t h e Co m

m i s s io n er ab u s edh i s d is cret i o n b y fai l i ng t o co n s i d er t h e p ro p o s edo ffer-i n -co m p ro m is e. Hel d , fu rt h er, t h e Co m

m i s s io n er ab u s edh i s d is cret i o n b y fai l i ng t o co n s i d er t h e p ro p o s edi ns t al l m en tag reem en t . Hel d , fu rt h er, t h e Co m

m i s s io n er ab u s edh i s d is cret i o n b y fai l i ng t o co n s i d er t h e cl ai m o f eco n o m i c h ard sh i p . Hel d , fu rt h er, we wi l l rem an dth i s cas e t o th e Ap p eal s Offi ce fo r fu rt h er co n s i d erat i on co n s i s t en t wi th t h i s Op i n i o n .

J am es Lo vel an d , J r., an dTi n a C. Lo v el an d, p ro s es e. Sam u el M . W arren , fo r res p o n d en t .-3
- OPINION BUCH, J u d g e: Th i s co l l ect i o n cas e co m es b efo re t h e Co u rto n th e Co m m i s s i o n er’ s m ot io n fo r s u m m ary ju d g m en t. Inth atm o t i o n t h e Co m m is s i o n er arg u es th ath e i s en ti t l edt o a ju d g m en ti n h i s fav o r b ecau s e M r. an dM rs . Lo v el an dd i d n o ts ub m i t th e n eces s ary fi n an ci al i n fo rm at i o n du ri n g th ei r ap p eal t o al l o w th e Co m

m i s s io n er t o co n s i d er t hei r p ro p o s edi n s t al l m en tag reem en t . Th e Lo v el an d s co n t en d t h atth ey s ub m i tt edth e n eces s ary fi n an ci al i n fo rm at i o n. Th ey al s o arg u e t h atth e Co m

m is s i o n er d i dn o tco n si d er t h e i ss u es th atth ey rai s edi n th ei r CDP h eari n g i n cl u di n g an o ffer-i n -co m p ro m i s e, an i n st al lm en t ag reem en t , an d eco n o m i c h ard s h i p th atredu cedth ei r ab i l i ty t o p ay . W e fi n dth atth e Co m m i s s i o n er ab u s edh is d i s cret i o n wh en h e fai l edt o co n si der t he o ffer-i n co m p ro m i s e, t h e p ro p o s ed in s tal l m en tag reem en t , an dth e cl ai m o f eco n o m i c h ard s h i p . Back gro u n d M r. Lo v el an di s a ret i redb o i l erm ak er, an d M rs . Lo v el an d i s a ret i red t each er. Th e l as td ecad e h as h el dm o re t han i t s s h are o f ch al l en ges fo r t h e Lo v el an d s . Inth e wak e o f t h e recen treces s i o n an d h o u s i n g cri s i s th e Lo v el an d s l o s tth ei r h o m e t o fo recl os u re. Ataro u n dth e s am e t i m e M r. Lo v el an db ecam e-4
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d i s ab l edas a res u lto f a h eart co n d i ti o n an d h adt o l eav e t h e wo rk fo rce. M rs . Lo v el an ds u rv iv edb reas t can cer. Du ri n g th i s tu m ul tu ou s t i m e t h e Lo v el an d s
s t op p ed p ay i n g th ei r t ax es , res ul t i n g i n o u t st an d in g t ax l i ab i l i t i es fo r 2 0 1 1 , 2 0 1 2 , 2 0 1 3 , an d2 0 1 4 t o t al i n g o v er $ 6 0 ,0 0 0
. In 2 0 1 5 th e Co m

m i s si o n er i s su eda n o t i ce o f i n t en tt o l ev y , i n res p o ns e t o wh i ch th e Lo v el an d s en tered i n t o n eg o t i at i o ns wi th a co l l ect i o ns o ffi cer. As a p art
o f t h o s e n eg o t i at i o ns the Lo v el an d s m ad e an o ffer-i n -co m p ro m is e. To s ub m i tth e
o ffer t h ey co m p let eda Fo rm

4 3 3 -A (OIC), Co l l ect i on In fo rm at i o n St at em en tfo r W ag e Earn ers an dSel f-Em p lo y edIn d i v i du al s , an dap p en deda ran g e o f fi n an ci al i n fo rm at i o n i n cl u di n g b an ks t at em en t s , p en s i o n an di n co m e d o cu m en t at i o n , an d i n fo rm at i o n ab o utex p en s es an das s et s. As a p arto f t h ato ffer-i n -co m p ro m i s e, t h e Lo v el an d s arg uedthatthei r h eal t h p ro bl em s an dth e fo recl o s ure co ns t i tu ted
s p eci al ci rcu m s t an ces th atl i m i t edth ei r ab i l i ty t o p ay . Th e co l l ect i o n s o ffi cer reject edth e o ffer-i n-co m p ro m i s e. Sh e fo u n d , o n th e b as i s o f t h e fi n an ci al i nfo rm at io n p ro v id ed , th atth e Lo v el an d s co u l dp ay th e fu l l
am ou n tan dth atth e “ s p eci al ci rcu m s t an ces * * * [t h e Lo v el an d s ] rai s ed* * * d i d
n o twarran ta d eci s i o n t o accep t* * * [t h e] o ffer.” Th e Lo v el an d s i n i t i al l y ap p eal edth e d eci s i o n . Th ey al s o wan t edt o p u rs ue an i n s t al l m en t ag reem en t , b u t th ey were i n fo rm ed th at a p ro p o s edi n s tal l m en t ag reem en t wo u l d n o tb e-5
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co n si d eredi f t h ey

h ada p en d i n g ap p eal o f t he reject ed o ffer-i n -co m pro m i s e. As a
res u l t, th e Lo v el an d s wi th drew t h ei r ap p eal s o th atth ey co u ldco n t i n u e
n eg ot i at i on s wi th the co ll ect i o n s o ffi cer. As a p arto f t h os e n eg ot iat i o n s o v er th e i n st al lm en tag reem en t, th e Lo v el an d s ag reedt o m ak e v o l un t ary p aym en t s o f $ 8 00 each m o nt h . M r. Lo v el an d b el i ev edth atth e ag reem en tco n s t i tu t edan accep t edi n st al lm en tag reem en t. Th e Lo v el an d s m ad e atl eas ttwo $ 8 0 0 p aym en t s. Wh i l e t h ey

were wo rk i n g o n th e i n s tal l m en t ag reem en t wi th the co l l ect i o n s
o ffi cer, t h e Lo v el an d s were al s o wo rk i n g t o b orro w m o n ey , s ecu redb y an ad d it i o n al m o rt g ag e ag ai n s ta p ro p ert y th ey o wn ed . Th ey

p l an n edt o u s e t h e p ro ceed s fro m

th e l oan t o m ak e an$ 1 1 ,5 00 p aym en t t o b ri ng th ei r t ax l i ab i l i ty b el o w $ 5 0 ,0 0 0, wh i ch wo u l dqu al i fy th em fo r s tream l i n edp ro ces s in g o f th ei r i n s t al l m en tag reem en t . Th ey s ub m i tt eda l o an ap p li cat i o n o n Oct ob er 2 1 , 2 0 1 6
. Onth e s am e d ay

th e Co m m i s s i o n er fi l eda n o t i ce o f Fed eral t ax l i en o n the p ro p erty . W i th t h e Fed eral t ax l i en h av i n g b een fi l ed , th e Lo v el an d s were u n ab l e t o s ecu re t h e l o an an dth e s et tl em en tn eg o t i at i o n s cam e t o a h al t. Th e Co m m is s i o n er i s s u eda n o t i ce o f Fed eral t ax l i en fi li n g o n Oct o b er 2 5 , 2 0 1 6 , an dth e Lo v el an ds t i m el y req u es t edan Ap p eal s Offi ce h eari n g u n d er s ect i o n-6
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6 3 2 0
. 1 As p arto f t hatap p eal , th e Lo vel an d s req u es t edth atthe l i en b e rel eas ed
an d arg u edth atth e l i en “ d i s rupt eda m o rt gag e refi n an ce an d h as cau sedeco n o m i c h ard s h i p .” OnJ an u ary

2 3 , 2 0 1 7 , an Ap peal s o ffi cer s en t th e Lo vel an d s a l et t er
s ch edu l i n g a h eari n g fo r M arch 2 , 2 0 1 7 , an di n fo rm i n g th em th at , fo r a co l l ect i o n al t ern at i v e t o b e co n si d ered , th ey wo u l dn eed t o s ub m i t a “ co m p l et edCo l l ect i o n In fo rm at i o n St at em en tFo rm 4 33 -A fo r i n d iv idu al s” as wel l as s up p o rt i n g d o cu m en t s . In res p o n s e t o t h e J anu ary 2 3 , 2 0 1 7 , l et ter M r. Lo vel an d s en ta l et t er req u es t i ng th atth e Ap p eal s o ffi cer t ak e “ a s eco n d l o o k at* * * [t h e] o ffer i n
co m p ro m i s e.” He at t ach eds ev eral d o cu m en t s t o the l et ter i n cl u di n g th e
co m p l et edFo rm

4 3 3 -A (OIC), t h e Lo v el an d s ’ earl i er l et ter req u es t i n g an ap p eal o f th e p rev i o u s d eci s i o n t o rejectth e o ffer-i n -co m p ro m i s e, an da Fo rm

4 3 3 -D, In s t al l m en tAg reem en t , fo r $ 8 0 0 p er m o n th . In th e l et t er h e s t at ed : “ Pay i n g an y
am ou n tatth i s t im e wi l l res u l ti n eco n o m i c h ard s hi p o r h as t en m y d em is e.” He cal l edth e Co m

m i s si o ner’ s at t en t i o n t o h i s h eal th p ro b l em s an ds p eci fi cal l y as k ed wh atwo u l db e cl as si fi ed as ex cep t i o n al ci rcu m s t an ces .

1 Al l s ect i o n referen ces are t o th e In tern al Rev en u e Co d e i n effect fo r al l rel ev an t t i m es , an d al l Ru l e referen ces are t o the Tax Co urtRu l es o f Pract ice an d Pro cedure, u n les s o th erwi s e i n d i cat ed
.-7
-

Th e Ap p eal s o ffi cer d ecl i n edt o rev iew t h e o ffer-i n -co m p ro m i s e an d t h e p ro p os ed$ 8 0 0 -p er-m o n th p art i al -p ay i n s tal l m en t ag reem en t . Ind ecl i n in g t o
rev i ew ei th er t he o ffer-i n -co m p ro m i s e o r th e p ro po s edi n s t al l m en t ag reem en t , th e Ap p eal s o ffi cer co n cl u d ed th atth e o ffer-i n -co m p ro m i s e was n o tp ro p erl y ap p eal ed
an d th atth e Lo v el an d s h adn o t s ub m i t t edth e n eces saryfi n an ci al i n fo rm at i o n fo r th e p ro p o s edp art i al -p ay

i n s t al l m en t ag reem en t . Al th ou g h the Ap peal s o ffi cer d i dn otrev i ew t h e Lo v el an d s ’ p art i al -p ay i n s t al l m en tag reem en t , s h e d i d cal cu l at e a m o n th ly p aym en tam o u n t th atwo u l d al l o w th e Lo v el an d s t o fu ll y p ay th e l iab i l it y

i n 8 4 m o n th s . Sh e d et erm i nedo n th e b as i s o f t h e am o un tthe Lo v el an d s o wed th atth ey wo u l dqu al i fy fo r an8 4-m o n t h i n s t al l m en tag reem en to f $ 8 5 3 p er m o n th t o fu l ly d i sch arg e t h e l i ab i l i ty . OnM arch 2 , 2 01 7 , th e Ap p eal s o ffi cer co n du ct ed a h eari n g o v er th e p h o n e wi th M r. Lo v el an d . Duri n g the h eari n g th e Ap p eal s o ffi cer ex pl ai nedth e h eari n g p ro ces s t o M r. Lo v el an dan das k edwh eth er M r. Lo v el an dh adap p eal edth e reject i o n o f h i s o ffer-i n-co m pro m i s e. M r. Lo v el an dex p l ai n edth ath e h adn o t ap p eal edb ecau s e h e h adh o p edt o wo rk o u t an i n s t al l m en tag reem en t . M r. Lo v el an di n fo rm edthe Ap p eal s o ffi cer t h atth e Lo v el an d s h adb een wo rk i n g t o
s ecu re a l o anag ai n s t th ei r p ro pert y an dth atth e fi l i ng o f t h e n o t i ce o f Fed eral t ax-8
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l i enh adh al t edth e l o an ap p l i cat i o n. He s ai dth ath e wan t edth e l i en rem o v eds o th ath e co u l d co n ti n u e t h e refi n an ci n g p ro ces s . Th e Ap p eal s o ffi cer reject edth e Lo v el an d s ’ p ro p os ed$ 80 0 -p er-m o n th p art i al -p ay

i n s t al l m en tag reem en t . Th ere i s n o ev id en ce i n th e ad m i ni s trat i v e
reco rdth atth e Ap p eal s o ffi cer co n s i d eredth e fi n an ci al i n fo rm at i on th at th e Lo v el an d s h adp ro v i d ed
. OnAp ri l 7 , 2 0 1 7 , th e Ap p eal s o ffi cer cl o s edth e Lo v el an d s ’ ap p eal
. On Ap ri l 1 1 , 2 0 17 , a n o t i ce o f d et erm i n at i on was s en t t o t h e Lo v el an d s i n fo rm i n g th em o f t h e Co m

m is s i o n er’ s d et erm in at i on an dth ei r ri g ht t o ap p eal th e d eci s i o n t o th e Tax Co u rt . Th e n o t i ce s t at es th atth e Lo v el an d s req u es tedth e wi th drawal o f th e l i en an d an i ns t al l m en t ag reem en t . Th e n o t ice al s o s t at es th atth e Ap p eal s
o ffi cer d idn o t co n s i d er t h ei r p ro p o s edi n st al lm en tag reem en tb ecau s e t h e Lo v el an d s “ d i dn o tp ro v i d e an y fi n an ci al i nfo rm at i on .” Nei th er t he n o t i ce o f d et erm i n at i o n n o r t h e cas e h i s to ry n o t es d i s cu ss edM r. Lo vel an d ’ s m ed ical
co n di t i o n o r t h e effect o f h is d i s ab i l i ty o n t h e Lo v el an d s ’ ab i l i ty t o p ay th e t ax l i ab i l i ty . OnM ay 1 1 , 2 0 1 7 , wh il e res i d i n g i n M i ch ig an , th e Lo v el an d s fi l eda p et i t i o n fo r red et erm i n at io n o f t h e d eci s i o n t o s u s t ai n th e l i en . Inth at p et i t io n th e Lo v el an d s s tat edth atth ey d i sag reedwi th th e d et erm i n at i o n b ecau se i tcau s ed-9
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eco n om i c h ard s hi p , th ei r “ Du e Pro ces s ri g h t s were v i o l at ed ”, an dth ei r “ [s ] p eci al ci rcu m s t an ces [were] n o t tru l y co n s i d ered
. ” OnJ an u ary

1 7 , 2 0 1 8 , th e Co m

m i s s i o n er fi l eda m o t i o n fo r s umm ary ju d g m en t , arg u i n g th atthe Lo v el an d s h adn o ts ub m i t t edth e req u es tedp ap erwo rk
an d fi n an ci al i n fo rm at i o n an d t h ati twas n otan ab u s e o f d i s cret io n t o refu s e t o
co n si d er t h e o ffer-i n-co m p ro m i s e o r t o refu s e t o wi th draw t h e l ien . Inth e m o t i o n fo r s u m m ary ju d g m en tth e Co m

m i ss i o ner s tat ed th atth e d ecl arat i o n o f t h e Ap p eal s o ffi cer t h atco n du ct edth e h eari n g wo u l db e fo rt h co m i ng . M ean wh i l e t h e Co u rto rd eredth e Lo v el an d s t o res p o n d t o th e m o t io n . Th ey
s ub m i t t eda res p o ns e s t at i n g th atth ey “ d i s ag ree wi th th e Co m

m i s s i o n er an dth e fact s h e h as p ro vi ded .” Th ey arg u edth atth ey

d i d s ub m i t fi n an ci al i n fo rm at i o n wh en th ey s ub m i t t ed th e Fo rm 4 3 3 -A (OIC) an d s ub s tan t i at i n g d ocu m en t s an dth at th e l i en h as cau s edeco n o m i c h ard s h i p . Th ey al s o ci tedreg u l at i o n s t h atd et ai l
co m p ro m i s es t o p ro m o t e effect i v e t ax ad m i n i st rat i o n rel at edt o t ax p ay ers wi th
m ed i cal co n d i t i on s o r d i s ab i l i t ies th atl i m i tth ei r ab i l i ty t o p ay . It w as n ’ tu n t i l aft er t h e Lo v el an d s fi l edth ei r res p o n s e t h atth e Co m m i s s i o n er s ub m it t edth e d ecl arat i o n o f t he Ap p eal s o ffi cer. Th e Co u rt
co n ti n u edth e cas e t o g i v e t h e Lo v el an d s th e o p p ortu n it y t o res p o n dt o th e d ecl arat io n .-1 0
-

In th ei r res po n s e th e Lo v el an d s ag ai n arg u e t h at th ey p ro v i d edfi n an ci al i n fo rm at i o n . Th ei r res p o n s e i n cl u d edth e l i s to f d o cu m en t s th ey s ub m i t t ed . Th e Lo v el an d s al s o at t ach edt o th e res p o n s e co p ies o f t h e Fo rm 4 3 3 -A (OIC) an dth e
s ub s t an t i at i n g d ocu m en ts as wel l as th e reject edl oan ap p l i cat i o n an dth ei r 2 0 1 5 Fo rm 1 0 4 0 , U.S. In d i v i du al In co m e Tax Return . Di s cu ss i o n Th e qu es ti o n b efo re t h e Co u rti s wh et h er t h e Co m m i s s i o n er i s en t i t ledt o
s u m m ary ju d g m en ti n h i s fav o r as a m at t er o f l aw. To an s w er th at , we m u s tfi rs t
an s wer t h ree q u es t i o n s : fi rs t , wh et h er t h e Co m m i s s io n er ab u s edh i s d i scret i o n b y fai l i n g t o co n s i d er t h e Lo vel an d s ’ p ro p o sedo ffer-i n -co m p ro m i se; s eco n d , wh et h er th e Co m m i s s i o n er ab u s edh i s d i s cret i on b y fai l i n g t o co n s i der t h e fi n an ci al d o cu m en t s s ub m it t edwi th th e Fo rm 4 3 3-A (OIC) wh en co n s i d eri n g th e Lo v el an d s ’ p ro p o s edi ns t al l m en tag reem en to f $ 8 00 p er m o nt h ; an d t h i rd , wh et h er th e Co m m i s s i o n er ab u s edh i s d i s cret i on wh en h e fai l edt o co n s i d er wh et h er t h e Lo v el an d s ’ “ s p eci al ci rcu m s t an ces ” an dcl ai m o f eco n o m ic h ard s h i p warran t edan i n s t al l m en tag reem en to r s om e o th er co l l ect io n al t ern at i v e as a co m p ro m is e t o p ro m o t e effect i v e t ax ad m i n i s trat i o n as d es cri b edi n s ect i o n 3 0 1 .7 1 22
- 1 (c)(3 )(i )(A), (B), o r (C), Pro ced . & Ad m i n . Reg s .-1 1
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I. Su m

m ary J u dg m en t Un d er Ru l e 1 2 1 (a), ei th er p art y m ay m o v e fo r s u m

m ary ju d g m en treg ard i n g al l o r an y p arto f t h e l eg al i s s u es i n co n tro v ers y . Th e p u rp o s e o f s u m m ary ju d g m en ti s t o ex p ed i t e l i ti g at i o n an d av o i du n n eces saryan dex p en si v e t ri 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 ). W e m ay g ran t s umm ary ju d g m en to n l y

i f t h ere i s n o g en u i n e d i s p u t e as t o an y m at eri al fact . Ru l e 1 2 1 (b ); Naft el v . Co m

m i s si o ner, 8 5 T.C. 5 2 7 , 5 2 9 (1 9 8 5 ). Th e p art y m o v in g fo r s u m m ary ju d g m en tb ears th e b u rd en o f d em on s trat i n g t h atth ere i s n o g enu i n e d i s p u t e as t o
an y m at eri al fact . Su n d st ran d Co rp . v . Co m m i s s 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 ). In d eci d i ng wh et her t o g ran ts u m m ary ju d g m en t , the Co urtm us tco n s i d er th e fact u al m at eri al s an dth e i n feren ces drawn fro m th em i n th e l ig h tm o st fav o rab l e t o th e n on m o v i ng p arty . FPL Grp ., In c. v . Co m m i s s i on er, 1 1 5 T.C. 5 5 4 , 5 5 9 (2 00 0 ). Wh en a m o t io n fo r s u m m ary ju d g m en t i s m ad e an d p ro p erl y
s up p ort ed , th e n o nm o v i n g p art y m ay n o tres t o n m ere al l eg at i o n s o r d en ial s b u t
m u sts etfo rt h s p eci fi c fact s s h o wi n g th atth ere i s a g en u i n e d i s p ut e fo r t ri al . Ru l e 1 2 1 (d ).-1 2
-

II. J u d i ci al Rev i ew o f Ap peal s Det erm i n at i o ns In a CDP h eari n g, a t ax p ay er m ay rai s e an y i s s u e t h at i s rel ev an t t o an
u np ai dt ax , n o t i ce o f Fed eral t ax l i en , o r p ro p o s edl ev y , i n cl u d in g ch al l en g es t o th e ap p ro p ri at en es s o f t h e co l l ect i o n act i o n an do ffers o f co l l ect i on al t ern at i v es . Secs
. 6 3 2 0 (c), 6 3 3 0(c)(2 )(A). In ad di t i o n , a t ax p ay er m ay ch al l en ge t h e ex i s t en ce o r
am ou n to f t h e u nd erl y i n g t ax l i ab il i ty i f t h e t ax pay er d i dn o th av e t h e o p p o rtu n i t y t o d i s p u t e t h e l i ab i l i ty . Sec. 6 3 3 0 (c)(2 )(B). Wh en th e u nd erl y i n g l i ab i l i ty i s n otati s s u e, we rev i ew t h e Co m m i s s i o n er’ s
co l l ect i o n d et erm i n at i o n fo r ab u s e o f d i s cret i o n . Seg o v . Co m m i s s io ner, 1 1 4 T.C. 6 0 4 , 6 1 0 (2 0 0 0); Go za v . Co m m i s si o ner, 1 1 4 T.C. 1 7 6 , 1 8 1 -1 8 2 (2 0 0 0 ). In
rev i ewi n g fo r ab u s e o f d i s cret i o n we d o n o t co n du ctan i n d ep en d en t rev i ew o f t h e
co l l ect i o n al t ern at i v es . W e d o n o ts ub st i tu t e o u r ju d g m en tfo r t h ato f t h e Co m m i s s i o n er; w e o n ly

en su re t h atth e Co m

m i s si o n er’ s d eci si on was n o t arb i trary , cap ri ci o us , o r wi th ou ts o u n d b as i s i n fact o r l aw. See Kl ei n v . Co m m i s s i o n er, 1 4 9 T.C. _

_ , _

_ (s l i p o p . at1 2 ) (Oct . 3 , 2 0 1 7); M u rp h y v . Co m m i s s i o n er, 1 2 5 T.C. 3 0 1 , 3 2 0 (2 0 0 5), aff’ d, 4 6 9 F.3 d2 7 (1 s tCi r. 2 0 0 6 ). Gen eral ly , th e Co m

m i s s i o n er’ s d et erm i n at i o n m u s tt ak e t h ree t h in g s i n t o
co n si d erat io n : (1 ) v eri fi cat i o n th atth e req ui rem en t s o f ap p li cab l e l aw an d ad m i n is trat i v e p ro cedu re h av e b een m et ; (2 ) i s s u es rai s edb y the t ax p ay er; an d(3 )-1 3
-

wh et h er an y

p ro p o s edco l l ect i o n act i o n b al an ces th e n eed fo r effi ci en t t ax
co l l ect i o n wi th the l eg i t i m at e co n cern o f th e t ax p ay er th atan 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 h an n eces s ary . Secs . 6 3 2 0 (c), 6 3 3 0(c)(3 ); Lu n s fo rdv . Co m m i s s i o n er, 1 1 7 T.C. 1 8 3 , 1 8 4 (2 0 0 1). If t h e Co m m i s s i on er “ h as n o t
co n si d eredal l rel ev an t fact o rs * * * th e p ro p er co urs e, ex cep t i n rare ci rcu m s t an ces , i s t o rem an d* * * fo r ad d i t i o nal i n v es t i g at i on o r ex pl an at i o n .” Fl a. Po wer & Li g h tCo . v . Lo ri o n , 4 7 0 U.S. 7 2 9 , 7 4 4 (1 9 8 5 ). Th e Lo v el an ds rai s edth ree i s s u es . Inth ei r fo rm al req u es t fo r a h eari n g , th e Lo v el an d s s ou gh tt o h av e t h e l i en rel eas edan d t o h av e an$ 8 0 0 -p er-m on th p art i al
p ay i n s t al l m en tag reem en tco n s i d ered . Inh i s l et t er, M r. Lo v el an dreq u es t edth at th e Co m m i s s i o n er rev iew t h e o ffer-i n -co m pro m i s e an d ex p l ai n th e t erm

“ ex cep t i o n al ci rcu m s t an ce” wi th res p ectt o o ffers -i n-co m p ro m i s e. Th e Co m m i s s i o n er d i dn o tco ns i d er t h e i n s t al lm en tag reem en to r t h e o ffer-i nco m p ro m i s e an dm ad e n o m en ti o n o f ex cep t i o n al ci rcu m s t an ces i n th e ad m i n is trat i v e reco rd
. A. Co n s i d erat i o n o f t h e Li en Rel eas e an dOffer-i n -Co m p ro m i s e Sect io n 7 1 2 2 (a) au th o ri zes th e Secret ary t o “ co m p ro m i s e an y

ci vi l o r cri m i n al cas e ari s i n g u n d er th e i n t ern al rev en u e l aws p ri o r t o referen ce t o t h e Dep art m en to f Ju s t i ce”. Sect i o n 3 0 1 .7 1 2 2 -1 , Pro ced . & Ad m i n. Reg s ., s et s o u tth e-1 4
-

g ro u nd s fo r co m

p ro m i s e as wel l as th e ru l es fo r ev al u at in g p ro p o s edco m p ro m i s es . Th e s ect i o n s g o v ern i n g CDP h eari ng s p ro v id e t h att ax p ay ers m ay o ffer co ll ect i o n al t ern at i v es , “ wh i ch m ay in cl u d e * * * an o ffer-i n -co m p ro m is e.” Secs
. 6 3 3 0 (c)(2 )(A)(i i i ), 6 32 0 (c). W e are faced wi th a u n i qu e qu es t i o n h ere: wh et h er
n eg ot i at i on s wi th a co l l ect i o n s o ffi cer co ns t i tu te a p rev i o u s ad m i n i s trat iv e p ro ceed in g u n d er s ect io n 6 33 0 (c)(4 )(A)(i ) an ds ect i o n 3 0 1 .6 3 20 -1 (e)(1 ), Pro ced
. & Ad m i n . Reg s . Th e Lo vel an d s m ad e ano ffer-i n -co m p ro m i se i n a s ep arat e
co l l ect i o n p ro ceed i n g th ati s n otb efo re u s. Th en , i n the CDP h eari n g u n d erl y i n g th i s cas e, t h ey

ren ewedth ei r o ffer-i n -co m p ro m is e. In res p o ns e t o a J an u ary 2 3 , 2 0 1 7 , l et t er fro m

th e Co m m i s s io n er, t h e Lo v el an d s res ub m i t t edth ei r p rev i o u s l y reject edo ffer-i n -co m

p ro m i s e al o n g wi th thei r fi n an ci al i n fo rm at i o n. 2 Sect io n 6 3 3 0 (c)(4 )(A)(i ) p recl u d es an i s s u e fro m b ei n g rai s edi f “ th e i s s u e
was rai s edan dco n s i dered at a p rev i o u s h eari n g u nd er s ect i o n 6 3 2 0 o r i n an y o t her p rev i o u s ad m i n is trat i v e o r ju d i ci al p ro ceed in g ”. Bu t wh atco n s t i tu t es a p rev i o u s ad m i n is trat i v e p ro ceed i n g? Sect i o n 3 0 1 .6 3 20 -1 (e)(1 ), Pro ced . & Ad m i n . Reg s ., s t at es th at“ th e t ax p ay er m ay n o trai s e an i s s u e t h at was rai s ed an d co n s i d eredata p rev i o u s CDP h eari n g u n d er s ect i o n 6 3 3 0 o r i n an y o th er p rev i o u s ad m i n i s trat i v e

2 Co n trary t o th e Lo v el an d s ’ s ub m i s s i o n , th e Co m m is s i o n er s t at ed th atth ey “ d i d n o tp ro v i de an y

fi n an ci al i n fo rm at i o n .” Th e reco rd i s cl ear t h atth ey d i d
.-1 5
-

o r ju d i ci al p ro ceed i n g i f t h e t ax p ay er p art i ci pat edm ean i n g fu l l y i n s u ch h eari n g o r p ro ceed in g .” Wh et her a p rev i o u s l y reject edco l l ect i o n al t ern at i v e can b e rai s ed at a CDP h eari n g d o es n o th in g e o n wh et h er t h e t ax p ay er h ada p ri or o p p o rtu n i ty t o ch al l en g e t h e reject i o n ; i th i n g es o n wh et h er t h e reject edco l l ect i o n al tern at i v e was actu al l y co n s i d eredata p rev i o u s ad m i ni s trat i ve o r ju d i ci al p ro ceed i n g . Ino th er
wo rd s i ti s n ota qu es t i o n o f wh et h er t h ere was a p ri or o p p o rtu n i ty , b u twh et h er th ere was a p ri o r p ro ceed i n g. Un l i ke t h e s t an d ardfo r rev i ew o f an u n d erl y i n g l i ab i l i ty , wh i ch h i n g es o n th e m ere p ri or o pp o rtu n i ty t o ch al l en g e t he l i ab i l i ty , th e s t an d ardfo r wh et h er a
co l l ect i o n i s s u e can b e rai sedata CDP h eari n g i s wh et h er t h e i ss u e was actu al l y
co n si d eredi n a p rev i ou s ad m i ni s trat i v e o r ju d i ci al p ro ceed i ng . Sec. 3 0 1 .6 3 2 0
- 1 (e)(1 ), Pro ced . & Ad m i n . Reg s . Th e Lo v el an d s h ada p ri o r o p po rtu ni ty fo r a CDP h eari n g reg ard i ng th ei r o ffer-i n -co m p ro m i s e, b u t th ey n ev er av ai led th em s el v es o f t h ato p p o rtu n i ty . Becau s e t h ey o nl y n eg o t iat edwi th th e co l l ect i o n s
o ffi cer an dd i dn o th av e a CDP h eari n g reg ard i ng h er reject i o n o f th ei r o ffer-i n co m p ro m i s e, t h ey

n ev er h ada p ri o r h eari ng . Acco rd i n g l y , th ey m ay req u es t
co n si d erat io n o f t h e s am e o ffer-i n -co m pro m i s e i n a s ub s equ en tCDP h eari n g o n th e s am e t ax fo r t h e s am e p eri o d
.-1 6
-

Th e reg u l at i o n s u n der s ect i o n 6 3 2 0 co n fi rm th is an al y s i s . Inthe q u es t i o n
an d an s wer s ect i o n o f t h e reg u l at i o n s th e Co m m i s s i o ner s peci fi cal l y

co n t em p l at es wh atcan an dcan n o tb e rai s edata CDP h eari n g u n der s ect i o n 6 3 2 0 wh en a t ax p ay er h as recei v eda p ri or n o t i ce u n d er s ect io n 6 3 3 0 fo r t h e s am e p eri o dan d t ax an dd i dn o treq ues t a CDP h eari n g reg ard i ng th at n o t i ce. Q-E7 . Wh ati s s u es m ay

a t ax p ay er rai s e i n a CDP h eari ng u n d er s ect i o n 6 3 2 0 i f t h e t ax pay er p rev io u s l y recei v eda n o t ice u nd er s ect i o n 6 3 3 0 wi th res p ectt o th e s am e t ax an dt ax p eri odan dd i dn o t req u es t a CDP h eari n g wi th res p ectt o th atn o t i ce? A-E7 . Th e t ax p ay er m ay rai s e ap p ro p ri at e s p o u s al d efen s es , ch al len ges t o th e ap p ro p ri at en es s o f t h e NFTL fi li n g, an d o ffers o f co l l ect i o n al t ern at i v es . Th e ex i s t en ce o r am o un t o f th e u nd erl y i n g l i ab i l i ty fo r an y t ax p eri ods p eci fi edi n th e CDP No t i ce m ay b e ch al len gedo n ly

i f th e t ax p ay er d i dn o th av e a p ri o r o pp o rtu n i ty t o d i s p u t e t h e t ax l i ab i l it y . If t he t ax p ay er p rev i o us l y recei v eda CDP No t i ce u n d er s ect i o n 6 3 3 0 wi th res pect t o th e s am e t ax an dt ax p eri o d an dd i dn o treq u es ta CDP h eari n g wi th res p ect t o t h atearl i er CDP No t i ce, th e t ax p ay er h ada p ri o r o p p o rtu ni ty t o d i s p u t e t h e ex i s t en ce o r am o u n to f t h e u n d erl y i n g l i ab i l i ty . Sec. 3 0 1.6 3 2 0 -1 (e)(3 ), Q&A-E7 , Pro ced
. & Ad m i n . Reg s . Wh il e t h is reg u l at i o n i s
ex p li ci tth ata p ri o r o p po rtu n i ty t o d i s p u t e t he u n d erl y in g l i ab i l i ty i n a CDP h eari n g p recl u des i t s co ns i derat i o n i n a s ub s equ en tCDP h eari ng , th e reg u l at i o n i s
n o t i ceab l y

s i l en tas t o “ s p o u s al d efen s es , ch al len g es t o the ap p ro p ri at en es s o f t h e NFTL fi l i n g , an do ffers o f co l lect i o n al t ern at i ves .” Id . Th i s l eav es o p en th e
o p p o rtu ni ty

fo r a t ax pay er t o rai s e a p rev i ou s ly reject edco l l ect i o n al t ern at i v e i f-1 7
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th att ax p ay er d i dn ot h av e a CDP h eari n g o n t h e i s s u e. In fai l i n g t o co n s i d er t h e Lo v el an d s ’ o ffer-i n -co m

p ro m i s e, t h e Co m

m is s i o n er ab u s edh is d i s cret i o n . B. Co n s i d erat i o n o f t h e In s t al l m en tAg reem en t Sect io n 6 1 5 9 (a) g i v es th e Secret ary d i s cret i o n ary

au th o ri ty “ t o en t er i n t o wri t ten ag reem en t s wi th an y t ax p ay er u n d er wh i ch s u ch t ax p ay er i s al l o wedt o
m ak e p aym en to n an y

t ax i n i n s t al l m en tp aym en t s i f t h e Secret ary d et erm i n es th at
s u ch ag reem en t wi l l faci l it at e fu l l o r p art i al co l l ect io n o f s u ch l i ab i l i ty .” Th e Co m m i s s i o n er h as th e d i s cret i o n t o accep t o r reject an i ns t al l m en tag reem en t p ro p os edb y a t ax p ay er. See s ec. 3 0 1 .6 1 5 9-1 (c)(1 )(i ), Pro ced . & Ad m i n . Reg s . W e rev i ew the Co m

m i s s i on er’ s reject i o n o f an i n s t al l m en t ag reem en tfo r ab u s e o f d i s cret i o n . See Oru m

v . Co m m i s s i o n er, 1 23 T.C. 1 , 1 2 -1 3 (2 0 04 ), aff’ d , 4 1 2 F.3 d 8 1 9 (7 th Ci r. 2 0 05 ). As wi th an o ffer-i n -co m pro m i s e, we d o n o tco n du ctan i n d ep en den trev i ew o f wh atwo u l db e an accep t ab l e i n s tal l m en t ag reem en t , n o r d o
we s ubs t i tu t e o u r ju d gm en tfo r th ato f t h e Ap p eal s o ffi cer. See M u rp h y v . Co m m i s s i o n er, 1 2 5 T.C. at3 2 0. Th e Lo v el an ds s ub m it t eda p ro p o s al fo r an $ 8 0 0 -p er-m o n th p art i al -p ay i n s t al l m en tag reem en ti n an t ici p at i o n o f t h ei r CDP h eari n g an d ex p l i ci t l y as k edth e Co m m i s s i o n er t o co n s i d er th ei r p ro p o s al . Th e Co m m i s si o n er refu s edt o rev i ew th e i n s t al l m en tag reem en tp ro p o s al b ecau s e t h e Lo v el an d s “ di dn o tp ro v i d e an y-1 8
-

fi nan ci al i n fo rm at i on .” Th e Lo v el an ds arg u e t h at th ey p ro v i d edfi n an ci al i n fo rm at i o n i n th e fo rm

o f t h ei r co m

p l et edFo rm

4 3 3 -A (OIC). W e h av e p rev i ou s l y

h el dth ati ti s n otan ab u s e o f d i scret i o n fo r t h e Ap p eal s
o ffi cer t o rejecta co l l ect i o n al t ern at i v e wh en th e t ax pay er d o es n o t p ro v i d e t h e fi nan ci al i n fo rm at i on n eces s ary t o ev al u at e t h e m eri t s o f th e co ll ect i o n al t ern at i v e. Ch an d l er v . Co m

m i s si o ner, T.C. M em o . 2 0 0 5-9 9 , 8 9 T.C.M . (CCH) 1 13 3 , 1 1 3 5 (2 0 0 5). Th e Co m

m i s s i o n er req u es t edth at th e Lo v el an d s p ro v id e a co m p l et ed Fo rm 4 3 3 -A, Co l lect i o n In fo rm at io n St at em en t , t o h av e t h ei r p ro p o sedi n s t al l m en t ag reem en tco n s id ered . Th e qu es t i on b efo re u s n o w i s wh et h er th e Lo v el an d s ’ Fo rm 4 3 3 -A (OIC) an dacco m pan y i ng d o cu m en t s s at i s fi edth at req u es t . W e h av e p rev i ou s l y

h el dth ati ti s n otan ab u s e o f d i scret i o n t o d ecl i n e t o
co n si d er a co l l ect i o n al t ern at i v e wh en th e Co m m i s s i o n er h as req u es tedb u t n o t recei v edup d at edfi nan ci al i n fo rm at i o n wh en th at i n fo rm at i o n i s o u to f d at e. Lo n g
v . Co m m i s s i o n er, T.C. M em o . 2 0 1 0 -7 . An d In tern al Rev en u e M an u al p t . 5 .8
. 5.3 (2 ) (Sep t . 3 0 , 2 0 1 3 ) s t at es th at , i f fi n an ci al i n fo rm at i o n b eco m es o l der t h an 1 2 m o n th s an di t ap p ears th ats i g n ifi can tch an g es h av e o ccu rred , a req u es t fo r
up d at ed i n fo rm at i o n m ay b e ap p ro p ri at e. Bu th ere, t he ad m i n i s trat i v e reco rdd o es
n o ti n d i cat e t hatthe Co m m is s i o n er ev er co n s i d eredth e fi n an ci al i n fo rm at i o n , th e ag e o f th at i n fo rm at i o n , o r wh eth er s i g n i fi can tch an g es h ado ccu rred . Th e s t at ed-1 9
-

reas on fo r t h e Co m

m is s i o n er’ s reject io n o f t h e Lo v el an d s’ p ro p o s edi n s t al l m en t ag reem en twas th atth e Lo v el an d s d i dn o t p ro v i d e fi n an ci al i n fo rm at i o n . Bu tth ey d i d . Th e Co m

m i s s io n er ab us edh i s d is cret i on i n fai l i n g t o co n s i der t hat i n fo rm at i o n . C. Co n s i d erat i o n o f Eco n o m ic Hard s h i p Th ro u g h o u tth e n eg o t i at i o n s wi th i n the ad m i n i s trat i v e p ro ces s an dth i s Co u rtp ro ceed in g , th e Lo v el an d s h av e arg u edth atth ei r p o or h eal th affect s th ei r ab i l i ty t o p ay . Whi l e t he Lo v el an d s d i d n o trai s e th e i s s u e o f a co m p ro m i s e u s i n g th e wo rd s “ effect i v e t ax ad m i n i s trat i o n ” u n ti l thi s Co u rtp ro ceed i n g , th ey arg u ed th atco l l ect i o n o f t h e fu l l l i ab i l i ty wo u l dcau s e eco no m i c h ard s h i p . Inth ei r at t ach m en t s t o th e o ffer-i n -co m p ro m i s e th e Lo v el an d s ex p l i ci t l y arg u edth at p ay i n g th e l i ab i l i ty

i n fu l l wo u l dcau s e eco n o m i c h ard s h ip
. Th ere i s n o ev i d en ce i n th e reco rds h o wi n g thatth e Co m m i s si o n er
co n si d eredth e Lo v el an d s ’ cl ai m o f eco n o m ic h ard s h i p o r wh et h er a co m pro m i s e t o p ro m ot e effect iv e t ax ad m in i s trat io n was ap p ro p ri at e. Whi l e t he Co m m i s s i o n er
n o t edth e Lo v el an d s’ eco no m i c h ard s h i p arg u m en ti n th e ad m i n i st rat i v e reco rd
an d th e n o ti ce o f d et erm in at i o n, h e n ev er ev al u at edth at cl ai m . It is an ab u se o f d i scret i o n fo r t h e Co m m i s s i o n er t o n eg l ectt o co ns i d er al l
o f t h e i s su es rai s edb y

a t ax p ay er. Secs . 6 3 2 0 (c), 6 3 3 0 (c)(3 ). Th e Lo v el an d s-2 0
-

ex p li ci t l y rai s edth e i s s u e o f eco n o m ic h ard sh i p , an dthe Co m m i ss i o n er ab u s edh i s d i s cret i o n i n fai li n g t o co ns i d er i t . Co n cl u s io n Onth e b as is o f th e ad m i n i s trat i v e reco rd , th e Co m m i s s i o n er ab us ed h i s d i s cret i o n wh en h e refu s edt o co n s i d er t h e Lo v el an d s ’ o ffer-i n -co m p ro m i s e, refu sedt o co n s i d er t hei r i n s t al l m en tag reem en t , an drefu s edt o co n s i d er wh et h er fu l l p aym en to f t h e l i ab i li ty wo u l dcau s e eco n om i c h ard s h ip . W e wi l l rem an dth i s
cas e t o t h e Ap p eal s Offi ce fo r fu rt h er co n si derat io n co n s i s t en twi th th i s Op i n i o n . Anap p ro p ri at e o rd er wi ll b e i s s u ed
.