TAX COURT OPINION

Case: Peter M. Creelman
Docket Number: 25102-09SL
Judge: Laro
Opinion Type: bench
Filed: 01/30/2013
Pages: 14

CZ UNITED STATES TAX COURT WASHINGTON, DC 20217 PETER M. CREELMAN, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 25102-09SL. ) ) ) ) ) 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 herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge David Laro, at Phoenix, Arizona, on December 10, 2012, containing his Oral Findings of Fact and Opinion rendered at the trial session at which the case was heard. In accordance with the Oral Findings of Fact and Opinion, an Order and Decision granting respondent's Motion for Summary Judgment will be entered in this case. (Signed) David Laro Judge Dated: Washington, D.C. January 30, 2013 SERVEDFeb012013 Capital Reporting Company 3 1 2 3 4 5 Bench Opinion by Senior Judge David Laro December 10, 2012 Peter M. Creelman v. Commissioner Docket No. 25102-09SL THE COURT: The Court has decided to render 6 Oral Findings of Fact and Opinion in this case, and 7 8 9 10 11 12 13 14 15 16 17 the following are the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. This case was heard pursuant to the provisions of section 7463. Pursuant to the provisions of 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, section references are to the Internal Revenue Code, and Rule references are to the Tax Court Rules of Practice and Procedure. 18 Petit'ioner refers to Peter M. Creelman, SO Gaxiola 19 20 21 22 23 24 refers to Settlement Officer Eleanor Gaxiola, SO Wood refers to Settlement O.fficer James Wood, IRS refers to the Internal Revenue Service, and Appeals refers to the IRS Office of Appeals. Petitioner resided in Arizona when he filed the petition. Presently before the Court is respondent's 25 motion for summary judgment under Rule 121. The 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 Court ordered petitioner to respond to the motion, 4 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 and he filed a timely response. The record reveals there is no genuine dispute of material fact and a decision may be rendered as a matter of law. We will grant respondent's motion for summary judgment. Background The facts of this case are rather straightforward. Petitioner did not file his Federal income tax return for 2002, was subsequently issued a statutory notice of.deficiency, and petitioned the Court for review. He later signed a decision document in which he agreed he had an income tax deficiency and certain additions to tax for 2002; the Court entered the decision document on September 29, 2006 (Dkt. No. 16726-05). Petitioner also failed to file his Federal income tax returns for 2004 and 2005. Based on the substitutes for return (SFR) prepared for petitioner, respondent determined there were tax deficiencies for these two years and issued to petitioner statutory notices of deficiency accordingly. Petitioner did not petition the Court to review these notices of deficiency; respondent subsequently assessed tax liabilities, additions to tax, and interest for 2004 and 2005. On October 19, 2007, respondent sent 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 petitioner a Final Notice of Intent to Levy and 2 Notice of Your Right to a Hearing for 2002 (2002 levy 3 4 5 6 7 8 9 notice) to collect petitioner's unpaid tax liability for 2002. On November 12, 2008, respondent sent petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing under I.R.C. 6320 for 2002, 2004, and 2005 (NFTL), advising petitioner that respondent had filed a tax lien to collect petitioner's unpaid liabilities. On December 8, 10 2008, respondent sent petitioner a Final Notice-- 11 Notice of Intent to Levy and Notice of Your Right to 12 13 14 15 a Hearing for 2004 and 2005f(2004 and 2005 levy notice) to collect petitioner's 2004 and 2005 unpaid tax liabilities. Petitioner timely submitted a Request for a 16 Collection Due Process Hearing (CDP request) with 17 respect to the NFTL issued for 2002, 2004, and 2005. 18 Petitioner also timely submitted a CDP request dated 19 20 21 22 23 24 25 January 6, 2009 (CDP levy request) with respect to the 2004 and 2005 levy notice; however, the CDP levy request was untimely as to the 2002 levy notice. SO Gaxiola held a CDP hearing by correspondence with respect to the filing of the NFTL and issued a Notice of Determination dated September 16, 2009. Petitioner timely petitioned the Court for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 review. Subsequently, the Court remanded the case to Appeals because Appeals inadvertently failed to consider issues relating to the proposed levies. We directed Appeals to hold a hearing regarding the levy notices by January 18, 2011. SO Wood held a face-to-face CDP hearing on January 6, 2011, with respect to the 2004 and 2005 levy notice (CDP levy hearing). Petitioner brought 9 Michael Bigley to the hearing who presented to 10 11 12 13 14 15 16 Appeals at the last minute a signed Form 2848, Power of Attorney and Declaration of Representative, on which Mr. Bigley represented that he was not an attorney, a certified public accountant (CPA), an enrolled representative, or an unenrolled representative allowed to appear on behalf of petitioner under 31 C.F.R.§ 10.7. Appeals allowed F 17 Mr. Bigley to be present as petitioner's witness, but 18 not as his representative; SO Wood also allowed Mr. 19 Bigley to make an opening statement. Following the 20 21 22 23 24 25 in-person conference, petitioner filed his 2004 and 2005 Federal income tax returns. While not obligated to do so, respondent accepted the late filed tax returns and reduced the tax deficiencies as well as the additions to tax accordingly. Before the conclusion of the CDP levy hearing, petitioner 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 submitted checks to SO Wood for the amounts of tax deficiencies for 2002, 2004, and 2005; however, they did not include the additions to tax and interest due for 2004 and 2005, and there remained a balance due when SO Wood issued the Supplemental Notice of 6 Determination dated May 16, 2012. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Discussion Summary judgment may be granted with respect to all or any part of the legal issues in controversy where the record establishes "that there is no genuine dispute as to any material fact and that a decision may be rendered as a. matter of law." Rule 121(a) and (b). As the moving party, respondent bears the burden of proving that there is no genuine dispute of material fact, and factual inferences are viewed in the light most favorable to petitioner as the nonmoving party. Craig v. Commissioner, 119 T.C. 252, 260 (2002). Where a motion for summary judgment is made, an adverse party "must set forth specific facts showing that there is a genuine dispute for trial." Rule 121(d). Here, respondent supported his 22 motion with the pleadings, declarations, and various 23 24 25 exhibits. Petitioner filed a timely response with exhibits, which included a letter dated June 19, 2012 to respondent's counsel. After reviewing the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 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 parties' moving papers and accompanying exhibits, we find there is no genuine dispute as to any material fact and conclude this case is ripe for summary judgment. We review respondent's determinations in the CDP hearings only for abuse of discretion because petitioner's underlying liability was not and could not be at issue. Giamelli v. Commissioner, 129 T.C. 107, 11 (2007) . Section 6330 (c) (2) (B) allows a taxpayer to challenge the amount or the existence of the underlying liability only if "the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability. " For 2002, petitioner received a statutory notice of deficiency, petitioned the Court to review it, and signed a decision document in which he agreed he had an income tax deficiency as well as additions to tax. For 2004 and 2005, the record shows petitioner received statutory notices of deficiency for those years but failed to petition the Court to review the notices. Hence, petitioner is not permitted to raise issues relating to his underlying liabilities for these three years at either the CDP hearings or now before the Court. Accordingly, abuse of discretion 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company is the proper standard of review by which we will reverse respondent's determinations only if they were arbitrary, capricious, or without sound basis in fact 9 or law. In his petition, petitioner makes the following arguments: (1) respondent improperly applied Title 27 regulations relating to lien and levy procedures because Title 27 applies only to enforcement in connection with alcohol, tobacco, and firearms; (2) substitute for return authorized under section 6020(b) cannot be made in lieu of Form 1040, U.S. Individual Income Tax Return; (3) petitioner was not required to file his Federal income tax returns for the years at issue and is thus not liable for any addition to tax for late filing or interest for late payment of tax; and (4) the levy procedure authorized under section 6331 applies only to governmental employees. These arguments are frivolous and have been flatly rejected by courts. See United States v. Cochrane, 985 F.2d 1027, 1031 (9th Cir. 1993); Craig v. Commissioner, 119 T.C. at 263-264 (2002). We will not entertain these assertions with somber reasoning and copious citation of precedent because to do so might suggest that they have some colorable merit. 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 Capital Reporting Company 10 1 2 Petitioner also makes the following arguments, which we shall credit as non-frivolous. 3 With respect to the filing of the NFTL for 2002, 2004 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 and 2005, petitioner asserts that respondent erred by denying petitioner a facepto-face CDP hearing, that respondent should not have filed the tax lien with the Maricopa County Recorder's Office before petitioner had an opportunity to challenge the filing of the lien, and that the amount to which the NFTL relates does not accurately reflect petitioner's current outstanding liability taking into account previous payments and levies. With respect to the proposed levies for 2004 and 2005, petitioner argues that respondent failed to provide a notice of intent to levy as required by section 6331(d) or afford petitioner a CDP hearing before he levied petitioner's Washington Mutual bank account in July 2008 (July 2008 levy), that respondent failed to issue a "notice of seizure" and "warrant for 20 distraint" to the bank before the July 2008 levy, and 21 22 that Appeals erred by not allowing Mr. Bigley to represent petitioner during t.he in-person CDP hearing 23 with SO Wood. We will address each assertion in 24 25 turn. NFTL 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 Even though a CDP hearing may consist of a face-to-face conference, it may also be conducted by correspondence, by telephone, or by review of documents. A request for a face-to- face conference would normally be granted if the taxpayer asserted relevant and non-frivolous arguments concerning his underlying tax liability or if the taxpayer proposed a collection alternative provided that the taxpayer has fulfilled certain obligations before any proposed 10 collection alternative could be considered. 11 Petitioner has admitted that he did not desire any 12 13 14 15 16 17 18 19 20 21 22 23 24 25 collection alternative. By letters dated May 7, 2009, June 6, 2009, June 20, 2009, and August 3, 2009, petitioner raised only frivolous arguments similar to those raised in the petition and in his response to respondent's summary judgment motion. Thus, SO Gaxiola did not abuse her discretion when she denied petitioner a face-to-face hearing and conducted the CDP hearing in form of a correspondence hearing. Indeed, the record clearly shows that nothing petitioner raised during the CDP hearing could not be effectively addressed through the correspondence hearing. See Gould v. Commissioner, 139 T.C. , (slip op. at 29) (Nov. 26, 2012). We also conclude that respondent properly 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 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 filed the NFTL and is under no obligation to withdraw it or correct the amount owed on the lien until petitioner satisfies his tax liability in full. Section 6321 automatically creates a.lien in favor of the United States on all property and property rights of a taxpayer liable for Federal tax who neglects or refuses to pay the tax upon a notice and demand of payment. The record shows respondent had issued a notice and demand to petitioner before respondent filed. the NFTL and there was a balance owed. Thus, contrary to petitioner's contention, respondent need not provide further notice before he filed the tax lien. Once the NFTL has been properly filed, the lien will remain in effect until such time when the liabilities are fully satisfied or by lapse of time. Because petitioner has not fully satisfied his tax liability, the lien remains effective. See Sefs. 6321 and 6322. In sum, Appeals did not abuse its discretion in sustaining the filing of the NFTL. Proposed Levies We first note that the proposed levy for 2002 was not and could not be at issue in the CDP levy hearing. SO Wood correctly determined that petitioner made his CDP levy request more than a year after respondent issued the 2002 levy notice, well 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 beyond the 30-day window in which petitioner could file a timely request. Sec. 6330(a) (3) (B). 3 Consequently, SO Wood may only consider the proposed 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 . levies for 2004 and 2005 in the CDP levy hearing. Because the July 2008 levy on petitioner's bank account relates to the 2002 levy notice, respondent did not abuse his discretion in not considering petitioner's arguments relating to it. In any event, the 2002 levy notice issued in October 2007 served as timely notice under section 6331(d) with respect to the July 2008 levy on petitioner's bank account. Further, we summarily reject petitioner's argument that respondent erred by failing to issue a "notice of seizure" and "warrant for distraint." Section 3692 of the 1939 Internal Revenue Code formerly required that a warrant of distraint accompany a notice of levy. But Congress repealed this section in 1954 and replaced it with section 6331 which does not require a warrant of distraint. The regulations explicitly state that a levy is made by serving a notice of levy on the person in possession of property subject to levy, including bank accounts. Sec. 301.6331-1(a) (1), Proced. & Admin. Regs. We also do not find any merit·in 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 petitioner's contention that Appeals abused its discretion and violated petitioner's due process rights when it disallowed Mr. Bigley to represent petitioner in the CDP levy hearing. By statute Congress has provided that attorneys in good standing and certified public accountants may represent taxpayers before the IRS. 5 U. S. C. § 500 (b) - (c) . Congress also enacted section 7521 to allow only attorneys, certified public accountants, and certain enrolled representatives with a power of attorney to represent a taxpayer in an interview relating to the determination and collection of any tax. By authority expressly granted in 31 U.S.C. § 330 (a), the Commissioner has placed further restriction by valid regulation under 31 C.F.R. § 10.7 to limit circumstances under which a non-practitioner or an unenrolled representative may represent a taxpayer. 18 Wright v. Everson, 543 F.3d 649, 657 (9th Cir. 2008). 19 20 Mr. Bigley signed the Form 2848 which he submitted to Appeals on the day petitioner was due to 21 meet with SO Wood. The Form 2848 indicated that Mr. 22 Bigley was not a person qualified under section 7521 23 24 25 or 31 C.F.R. § 10.7 to appear on behalf of petitioner. Mr. Bigley only attempted to avail himself of 5 U.S.C. § 500 (d) (1) on the Form 2848 866.488.DEPO www.CapitalReportingCompany.com I Capital Reporting Company 15 1 2 3 4 5 6 7 8 9 under the theory that that section does not deny him the right to represent petitioner before the IRS. But as the Court of Appeals for the Ninth Circuit held in Wright, that section does not displace the limitations provided in 31 C.F.R. § 10.7. See Id. Thus, Appeals' adherence to the regulation was not an abuse of its discretion and did not abridge petitioner's due.process rights. In sum, we hold that respondent did not act 10 arbitrarily, capriciously, or without sound basis in 11 12 13 14 15 16 17 18 19 20 fact or law in sustaining the filing of the NFTL and the proposed levies. In reaching this holding, we have considered all arguments raised by the parties. To the extent not discussed herein, we find them to be irrelevant, moot, or without merit. Accordingly, we will issue an Order and Decision granting respondent's motion for summary judgment, sustaining Appeals' determination, and allowing respondent to proceed with the collection actions that are the subject of this proceeding. This concludes the 21 Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 12:07 p.m., the above- entitled matter was concluded.) . 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com