TAX COURT OPINION

Case: Michael Wayne Hawkins
Docket Number: 3814-12L
Judge: Marvel
Opinion Type: bench
Filed: 06/05/2013
Pages: 14

UNITED STATES TAX COURT WASHINGTON, DC 20217 MICHAEL WAYNE HAWKINS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent KVC ) ) ) ) ) Docket No. 3814-12 L. ) ) ) ) OR D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of the proceedings of the above case before Judge L. Paige Marvel at Jacksonville, Florida, on May 24, 2013, containing her oral findings of fact and opinion. In accordance with the oral findings and fact and opinion, an order directing remand will be issued. (Signed) L. Paige Marvel Judge Dated: Washington, D.C. June 5, 2013 SERVED Jun 06 2013 Capital Reporting Company 3 1 2 Bench Opinion by Judge L. Paige Marvel May 24, 2013 3 Michael Wayne Hawkins v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Docket No. 3814-12L THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AND THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF .FACT AND OPINION. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986 as amended and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, section references made in this bench opinion are to the Internal Revenue Code of 1986 as amended and Rule references are to the Tax 19 Court Rules of Practice and Procedure. 20 21 22 23 24 Petitioner Michael Wayne Hawkins appeared pro se. Joel D. McMahan appeared on behalf of respondent. Pursuant to section 6330(d), petitioner seeks review of respondent's determination to proceed 25 with the collection by levy of outstanding trust fund 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 recovery penalties (TFRPs) totaling $22,226.27 that were assessed pursuant to section 6672 against petitioner with respect to unpaid Federal employment tax liabilities of ProSteel Builders Corp. (ProSteel) for the quarters ended March 31, 2007, and June 30, 2007. The issues for decision are: (1) whether petitioner was entitled to challenge the merits of the underlying TFRPs in the section 6330 hearing, and (2) whether the Appeals Office abused its discretion in upholding the proposed levy. Facts Some of the facts have been stipulated. The stipulation of facts and facts drawn from stipulated exhibits are incorporated herein by this reference. When he petitioned this Court, petitioner resided in Florida. On May 26, 2009, respondent sent to petitioner a Letter 1153, Trust Funds Recovery Penalty Letter, via certified mail to his last known address. The Letter 1153 notified petitioner that respondent proposed to assess a penalty against him as a person required to collect, account for, and pay over withheld taxes for ProSteel. On June 17, 2009, petitioner filed a timely appeal of respondent's proposal to assess the TFRPs against him. This 866.488.DEPO www.CapitalReportingCompany.com· Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 appeal was assigned to Appeals Officer Maria Fales. On December 16, 2010, Appeals Officer Fales issued a determination letter to petitioner, advising petitioner of her determination that he should be held liable for the TFRPs proposed in the Letter 1153. Respondent then assessed the TFRPs against petitioner. Respondent subsequently mailed to petitioner a Letter 1058, Final Notice of Intent to Levy and Notice of Your Right to a Hearing, with respect to the underlying TFRPs. On May 9, 2011, petitioner sent a Form 12153, Request for a 13 Collection Due Process or Equivalent Hearing, to 14 15 16 17 18 19 20 21 22 23 24 25 respondent, requesting a hearing under section 6330. In the Form 12153, petitioner indicated that he could not afford to pay the balance of the underlying TFRPs and stated as follows: I have filed bankruptcy. Middle District of Florida, Case No. 6:09-bk-15277-KSJ. Any collection attempts would be in violation of Federal law and my opportunity for a fresh start. The IRS had the opportunity to challenge this and failed to do so. This particular claim was included. IRS failed to go after the assets of the Company 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 (over $17M) and allowed creditors to reprocess. 3 Petitioner's section 6330 hearing request was 4 5 6 7 8 9 10 11 12 13 14 assigned to Settlement Officer Joe M. Breazeale (Settlement Officer Breazeale) in respondent's Appeals Office. Settlement Officer Breazeale requested various financial information from petitioner, including a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and a Form 433-B, Collection Information Statement for Businesses. Petitioner submitted a Form 433-A, and a copy of one of his recent bank statements but did not submit a Form 433-B because he 15 maintained that he did not currently own a business. 16 17 18 19 20 21 22 23 24 25 On the Form 433-A, petitioner disclosed that he had gross monthly income of $1,627.50, that he was employed by ICA Solutions, Inc., that he had filed for bankruptcy in Orlando, FL, that he had a bank account at PNC Bank with a balance as of October 30, 2011 of $1,985.49, that he had no equity in any investments and no credit, and that he had monthly expenses (including $2,000 of housing costs) exceeding his monthly income. The case activity record of Settlement 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 Officer Breazeale reveals that he spoke with 2 3 4 5 6 7 8 9 petitioner on several occasions including during the hearing and that he conducted research into petitioner's financial situation. The case activity record states that petitioner and his wife own a home, that petitioner owns a small boat, and that petitioner's wife is the single member of Gami LLC, a company in which petitioner previously owned an interest, and that petitioner's wife owns ICA 10 Solutions. The record does not disclose whether the 11 12 13 14 15 16 17 18 19 settlement officer discussed these matters with petitioner during the hearing process nor does the record disclose whether the settlement officer made any determination about petitioner's ability to pay the TFRPs or the effect of the bankruptcy on respondent's ability to collect the TFRPs. On January 10, 2012, the Appeals Office issued a notice of determination to petitioner, sustaining the proposed levy. However, the Appeals 20 Office did not explain the basis for rejecting some 21 22 23 24 25 of petitioner's arguments and the analysis of other arguments contained in the notice of determination is sparse at best. In particular, the notice of determination does not explain why the Appeals Office rejected petitioner's legal arguments, including his 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 argument that his bankruptcy filing precluded collection of the underlying TFRPs and that respondent had failed to collect the underlying TFRPs from ProSteel. The notice of determination also made no attempt to analyze petitioner's ability to pay; rather, it concluded without explanation that the Form 433-A and one personal bank statement that petitioner submitted during the administrative hearing were "not sufficient to make a collection determination." The notice of determination does not explain why Settlement Officer Breazeale concluded that the information petitioner provided was insufficient. Petitioner explained to Settlement 14 Officer Breazeale during the hearing process that, 15 16 because he had no longer owned any business, it was not necessary for him to submit a Form 433-B. 17 Petitioner also offered Settlement Officer Breazeale 18 19 20 21 22 23 24 25 access to his bankruptcy file to confirm his inability to pay, which Settlement Officer Breazeale declined. It appears from the case activity record that Settlement Officer Breazeale was concerned that petitioner and his wife owned a home, a boat, and one or more businesses, which petitioner did not disclose on the Form 433-A he submitted. However, it does not appear from the case activity record that Settlement 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 Officer Breazeale discussed his concerns with 2 3 4 5 6 7 8 9 10 11 12 petitioner or gave him an opportunity to address them. In any event, none of this was explained in the notice of determination. The Appeals Office offered petitioner an installment agreement of $750 per month "which would full pay all of the tax liabilities that you currently owe in approximately 60 months." Such an agreement would have required petitioner to pay $45,000, on liabilities totaling $22,226.27. The notice of determination does not explain this computational discrepancy. 13 Discussion 14 15 16 17 18 19 20 21 22 23 24 25 Section 6330(a) provides that no levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of his right to a hearing under section 6330 before the levy is made. The notice must be given in person, left at the dwelling or usual place of business of such person, or sent by certified or registered mail, return receipt requested, to such person's last known address not less than 30 days before the day of the first levy with respect to the unpaid tax liability. Sec. 6330(a) (2). If a taxpayer who receives a notice pursuant to section 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6330 timely requests a hearing in accordance with the provisions of section 6330, that person is entitled 10 to a hearing before respondent's Appeals Office. Sec. 6330(b). A hearing under section 6330 is conducted in accordance with section 6330 (c). In a section 6330 hearing, the hearing officer must obtain verification that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(c) (1). The taxpayer may raise any relevant issue relating to the unpaid tax or the levy at issue in the hearing. Sec. 6330(c) (2). However, the taxpayer may not raise an issue regarding the existence or amount of the underlying tax liability for any tax period with respect to which the taxpayer received a notice of deficiency or otherwise had an opportunity to dispute the tax liability. Sec. 6330 (c) (2) (B). A taxpayer has the opportunity to dispute his or her liability for a TFRP when he or she receives a Letter 1153. Mason v. Commissioner, 132 T.C. 301, 317-318 (2009); see also Lewis v. Commissioner, 128 T.C. 48, 61 (2007); sec. 301.6330-1(e) (3), Q&A-E2, Proced. & Admin. Regs. (an opportunity to dispute a liability "includes a prior opportunity for a conference with 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Appeals"). 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 Following the hearing, the hearing officer 2 must make a determination whether the collection 11 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 action at issue may proceed. In making that determination, the hearing officer must take into consideration the verification presented and any relevant issues raised by the taxpayer and must determine whether the proposed collection action balances the need for the efficient collection of taxes with any legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. Sec. 6330(c) (3). Section 6330(d) (1) grants this Court jurisdiction to review the determination made by the Appeals Office in connection with a hearing under section 6330. Where the underlying tax liability is properly in dispute, see sec. 6330 (c) (2) (B), we review the determination of the Appeals Office de novo. Lunsford v. Commissioner, 117 T.C. 183, 185 (2001); Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). Where the underlying tax liability is not properly in dispute, we rev1ew the determination of the Appeals Office for abuse of discretion. Lunsford v. Commissioner, 117 T.C. at 185; Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 114 T.C. at 182. An abuse of discretion occurs if the Appeals Office exercises its discretion "arbitrarily, capriciously, or without sound basis in fact or law." Woodral v. Commissioner, 112 T.C. 19, 23 (1999). However, we can uphold the Appeals 6 Office's determination only on grounds actually 7 8 9 10 11 12 13 relied upon by the Appeals officer in the notice of determination. See SEC v. Chenery Corp., 318 U.S. 80, 93 95 (1943); Antioco v. Commissioner, T.C. Memo. 2013 35, at *24-*25; Jones v. Commissioner, T.C. Memo. 2012 274, at *22-*23. As detailed above, the notice of determination fails to adequately explain the Appeals 14 Office's reasoning for sustaining the proposed levy. 15 16 17 18 19 20 21 22 23 24 25 The notice of determination fails to explain why several of petitioner's claims or arguments were rejected and it does not explain the settlement officer's inflated installment agreement offer to petitioner. We have held that, under Chenery, 318 U.S. at 93-95, we cannot "uphold a notice of determination on grounds other than those actually relied upon by the Appeals officer." Antioco v. Commissioner, T.C. Memo. 2013 35, at *25. "Those grounds must be clearly set forth so that we do not have to guess about why an Appeals officer decided 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 3 4 5 6 7 8 what he did." Id. Accordingly, we cannot sustain the notice of determination in this case without clarification and supplementation of the administrative record. We have held that we may remand a case to the Appeals Office for further development when the administrative record does not contain sufficient information to permit us to review the Appeals 9 Office's determination. See Lunsford v. 10 11 12 13 14 Commissioner, 117 T.C. at 189; Antioco v. Commissioner, T.C. Memo. 2013 35, at *31-*32; Jones v. Commissioner, T.C. Memo. 2012 274, at *34-*35. We shall issue an order remanding this case to the Appeals Office for further consideration of 15 petitioner's claim that he is unable to pay the 16 17 18 19 20 21 22 liability at issue and for the Appeals Office to explain, in the first instance, its reasons for rejecting each of the arguments that petitioner raised in the section 6330 hearing. Additionally, we specifically direct the Appeals Office to consider the impact of the transfer by petitioner and his wife of their residence to a trust in 2008 on petitioner's 23 ability to pay (including the value of the residence 24 25 and petitioner's claim that the residence is currently "under water") and to explore whether and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 2 3 4 5 6 7 8 9 10 11 12 13 to what extent petitioner continues to hold any interest in businesses previously owned by him. We also expect the Appeals Office to explain the apparent computational issue with respect to the installment agreement previously offered to petitioner. To the extent that the computational issue is explained, in whole or in part, by the settlement officer's attempt to include other alleged liabilities that have not yet been assessed against petitioner in the amount petitioner is expected to pay, we expect the Appeals Office to identify the liability and explain the basis for including that liability in the calculation of the payment amount. 14 Alternatively, the Appeals Office may propose a new 15 16 17 18 installment agreement to petitioner that is consistent with the underlying TFRPs. Because we remand this case to respondent's Appeals Office, we need not decide at this time 19 whether petitioner was entitled to challenge the 20 21 22 23 24 25 underlying TFRPs in his section 6330 hearing but we note that he appears to have already had an opportunity to contest them. See Mason v. Commissioner, 132 T.C. at 317-318. We have considered the parties' remaining arguments and, to the extent not discussed above, 866.488.DEPO www.CapitalReportingCompany.com I Capital Reporting Company 15 conclude that those arguments are irrelevant, moot, or without merit. To reflect the foregoing, an appropriate order will be issued. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN HIS CASE. (Whereupon, at 12:42 p.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com