TAX COURT OPINION

Case: John Carlyle Berkery, Sr.
Docket Number: 19070-09L
Judge: Wells
Opinion Type: memo
Filed: 03/09/2011
Pages: 14

JMP T.C. Memo 2011-57 UNITED STATES TAX COURT JOHN CARLYLE BERKERY, SR., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Rèspándent Docket No. r19070-09L. Filed March 9, 201ì. John Carlyle Berkery , Sr . , - pro se . Jacic T. Anagiïostfs, for respondent. MEMORANDUM OPINION WELLS, Judge: This case is before the Court on respondent's motion for summary judgment pursuant. to Rule 121.1 We must IUnless otherwise indicated, section references are to the Internal Revenue Code of 1986, as amended, and Rule references are to the Tax Court Rules of Practice and Procedure. SERVEDMar092011 - 2 - decide whether respondent's settlement officer abused her discretion in sustaining a notice of Federal tax lien filing. Some of the facts and certain exhibits have been stipulated. Background The stipulations of facts and accompanying exhibits are incorporated in this opinion by reference andt are found accordingly. At the time the petition was filed, petitioner resided in Pennsylvania. On April 11, 2007, petitioner filed a Federal income tax return for hià 2004 .tax year, reporting a taxpliabili.ty of $3,258. The following day, on April 12, 2007, he filed a tax return for his 2005 tax year, reporting a staxjliabi,lj.tysof y $3,712. Petitioner did not pay his tax liability for either year . Respondent assessed petitioner' s tax liabilities for his 2004 and 2005 tax years on May 14, 2007. On June 18, 2007, respondent sent notices and demands for payment of balances due for petitioner's tax years 2004 and -2005. On October 29, 2007, petitioner received a call from an employee in respondent's Automated Collection System (ACS) unit. As explained below, the parti$s "5iŠaeree Åbout h transpired during the October 29, 2007, telephone call. During the ensuing months, petitioner did not make any payments on his liabilities for his 2004 and 2005 tax years. 2 - - 3 - On March 20, 2009, respondentsfiled a Notice of Federal Tax Lien (NFTL) with respect to petitioner's 2004 and 2005 tax years. During a telephone call on-March 23, 2009, petitioner entered into an installment agreement with respondent's ACS unit to pay $75 per'month beginning April 12, 2009, and increasing to $145 per month beginning April 12, 2010. At that time, petitioner apparently was not aware that the NFTL had been filed', and he contends that respondent's employee told him-that no lien would be filed if he fulfilled the installment agreement. The next day, March 24,* 2009, respondent mailed petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing, regarding the lien that had been fi-led on March 20. Petitioner received the notice 2 days later, on,March 26, 2009. On or about April 2, :2009, petitioner requested a withdrawal sof the NFTL by submitting to respondent Form 12277, Application for Withdrawal of Filed Form- 668(Y), Notices of Federal Tax Lien. The filing of the NFTL was upheld by Technical Services Advisar Bruce Clark (Bur. Clark) in a letter dated April 13, 2009, stating that after a review of petitioner's file, Mr. Clark -had determined-that the lien was not filed prematurely. The letter informed-petitioner that the lien had been filed before thet March 23, 2009, installment agreement and that÷,2at that time, he was already in default on a previously established installment agreement. The parties appear to disagree about whether petitioner had ever entered into a previous.installment agrehment. Respondent contends that petitioner had entered into an installment - agreement during his October 29, =2007, telephöne conversation with an employee in respondent's ACS office. Petitioner admits that he spoke with respondent's employee on or about that date, but he contends that he did not-enterea formal installment agreement and merely told her that he would do his best to pay as soon as possible. The record does not contain any documentàtion of the alleged -October 29, 2007, installment agreement?. However, because the instant case is before us on respondent's môtion for summary judgment, we are obliged.to view all facts in the light most favorable to the nonmoving party. See Sundstrand Corp.:-v. Commissioner, 98 T.C.. 518, 520 (1992), affd. .17 F.3d·965 (7th Cir. 1994).: For ;purposes of the.instant motion, we will assume that petitioner never entered into an installment agreemént before the- March 23, :2009, installment agreemént. On April 15,-2009, petitioner timely submittedCForm 12153, Request.for -a.Collection Due Process or Equivalent Hearing. On - Form 12153 petitioner requested that the -NFTL be withdrawn so that he could refinance- his'home; and he--requested that respondent allow him to continue with the installment agreement entered into on March 23 as a collection alternative instead.of imposing the lien. Petitioner made one payment-on'the installment agreement in - 5 - May 2009. On June ~17, 2009, respondent'.s'settlement officer'Denise Williams (Ms. Williams) sent spetitioner a letter acknowledging his request for a collection due process (CDP) hearing and scheduling a telephone conference. In the letter, Ms. Williams informed petitioner that the lien would be released after petitioner paid the balances due for 2004 and 2005. Ms. Williams also enclosed copies of Publications 783, Instructions on how to apply for a Certificate of Discharge of Property From Federal Tax Lien, and 784, How to Prepare an Application for a Certificate of Subordination of Federal Tax Lien, which she thought would help petitioner obtain financing for his home. Ms. Williams conducted the CDP hearing by telephone on July 17, 2009. On his Form 12153 and during the 'hearing pet-itioner contended that, because he had not -entered into an installment agreement on October 29, 2007, he could not be in default on that agreement and he therefore should be given the opportuni-ty to meet the terms of the March 23, 2009, installment agreement before respondent filed an NFTL. Petitioner also informed Ms. Williams that the lien reduced his credit score by 100 points, affecting his eligibility for a loan, and he told her that the lien was "counter-productive to both * *:* [respondent] and myself [because] [i]t stops me from getting additional financing - 6 - on my house." After the hearing, respondent issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or' 6330 dated July 30, 2009, sustaining t e lien. Discussion Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials and may be granted where there is no genuine issue of material fact and a decision may be rendered as a matter of law. Rule 121(a) and.(b); Fla. Peach Corpe v. Commissioner,' 90 T.C. 678, 681 (1988). The moving party bears the burden of proving that -there is no genuine issue of material fact, and factual inferences are viewed in the light most favorable to the nonmoving party. Sundstrand Corp. v. Commissioner, supra at 520. However, the party opposing summary judgment must set forth specific facts that show a genuine issue of material fact exists and may not rely merely on allegations or denials in the pleadings. Rule 121(d). Where the underlying tax liability is not in issue, we review the determination of the Appeals Office for abuse of discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000). In reviewing for abuse of discretion, we will reject the determination of the Appeals Office only if the determination was arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301., 308 (2005), affd. 469 - 7 - F.3d 27 (1st Cir. 2006)'. Petitioner.does not dispute the underlying liabilities. Consequently, twe review the determination of the Appeals Office for abuse of discretion. Where, as in the instant case, we review a settlement officer's determination to sustain the filing of an NFTL for abuse of discretion, we review -the reasoning underlying that determination to decide whether.i-t was arbitrary, capricious, or without sound basis in fact or law. We do not substitute our judgment for that of the settlement officer, and we do not decide independently whether we beliefe the lien should be withdrawns- a See id. at 320. Pursuantato section-63215 the Federal Government obtains a e lien against ,"all property and rights to property, whether real or persona·l" of,any person liable for Federal taxes upon demand for payment and failure to pay. See Iannone v. Commissioner, 122 T.C. 287, "293 '(2004).- The lien arises automatically on the date of assessment and persists.until the tax liability is satisfied or becomes «unenforceable by reason, of lapse of time. Sec. 6322; Iannone v. Commissioner, supra at 293.- The purpose of filing, pursuant to section 6323,.notice of the lien that arises under section 6321 is to protect the Government's interest'in a taxpayer's property against the claims of other creditors. Filing an NFTL validates the Government's lien against a subsequent purchaser, holder of a security interest, mechanic's - 8 - lienor, or judgment lien creditor. See sect 6323(a); Stein v. Commissioner,. T . C. Memo . . 2004 -124 ; Lindsay v. iCommissioner, T . C. Memo. 2001-285, affd.: 56 Fed. Appx. 800 -(9th Cir.:2003). If;the Commissioner. chooses to file an NFTD, he must provide the taxpayer with written notice snot more than 5.business days *- after othe.fil-ing, and he must advise taxpayer of-the right to a hearing be fore the Appeals Of f ice . Sec . 6320 (a) ; - If the taxpayer requests such a hearing, the Appeals Officeimust verify thate the, requirements of any applicable law or administrative procedure have been met. Secs. 6320(c):, 6330(c) (1). ;The ~Appeals officer must also determine whether the proposed collection - action balances the need for the efficient collection -of.taxes with the legitimate concern of the taxpayer that 'any collection action be rno more 'intrusive than necessary. Secs.,6320(c), 6330(c) (3). Finally, the Appeals officer must consider any si issues raised by the taxpayer at the hearing, including ' appropriate spousal - def enses, challenges :to the ; appropriateness of collection actions, and offers of collectión alternatives such as an.installment agreement. Secs. 6320(c)., 9330(c) (2) and (3)7. , Under certain circumstances, the Commissioner has the discretion to withdraw an NFTL -that has- been filed.. Section 6323(j) (1) provides: SEC. 6323(j). Withdrawal of Notice in Certain Circumstances.-- - 9 - In general.--The Secretary may withdraw a -notice of a lien filed under this section and this (1) chapter shall be applied as if the withdrawn notice had not been filed, if the Secretary determines that-- (A) the-filing of'such notice was premature or otherwise not procedures of the Secretary, in accordance with administrative (B) the ·taxpayer has entered into an' agreement under section 6159 to satisfy the tax liability for which the lien was imposed by.means of provides otherwise, installment payments, unless such agreement I (C) the withdrawal of such notice will - facilitate the collection of the tax liability, or (D) with the consent of the taxpayer or the National Taxpayer Advocate, notice would be in the best taxpayers (as determined by the National Taxpayer Advocate) and the United States. the withdrawal of such interests of the Section 6323(j) (1) is permissive. Although section 6323(j) (1) allows the Commissioner to withdraw the NFTL for any of the listed reasons, it does not require him to do so. The regulations make the Commissioner's discretion explicit: "If the Commissioner determines conditions for withdrawal are present, the Commissioner may (but is not required to) authorize the withdrawal." Sec. 301.6323(j)-1(c), Proced. & Admin. Regs. (emphasis added). At the Appeals hearing, petitioner advanced two contentions. His first contention is that respondent should withdraw the NFTL and allow him to proceed with the March 23, 2009, installment - 10 - plan, to which petitioner had agreed before learning about the NFTL. Secondly, he contends that the NFTL should be withdrawn so that he can,refinance his home enabling him t:o pay his tax liabilities. . In support of his first contention, petitioner argues that Mr. Clark was mistaken.when he found that petitioner had entered into a previous installment agreement,. Petitioner contends that, because he .had never entered -into. such an agreement, he could not be in default, and he therefore should.be permitted to fulfill his obligations under the March 23, 2009, installment agreement before the filing of an NFTL. We conclude that the issue of whether there was a previous installment agreement tis irrelevant to, the issue of the proper filing of an NFTL. In Crisan v. Commissioner, T.C. Memo. 2007-67, the Commissioner filed an NFTL against the taxpayers after the parties had begun negotiating an installment ägreement. As in the instant case, the taxpayers learned about the NFTL only after they had entered the installment agreement, and, as is alleged in the instant case, the Commissioner had made representations to the taxpayers that no further collection actiòns would be taken while they were negotiating the installment acjreement . Like . . L • petitioner, the taxpayers in Crisan argued that the NFTL would damage their credit, making it difficult for them to obtain additional financing-, and that the NFTL had been filed s ' prematurely becauser they had just entered into an installment 0 agreement. We held that the implementation of ah installment agreement did not preclude the Commiss'ioner from filing an NFTU, nor was the Commission~er required to withdraw the NFTL aften the installment agéeement bécame effective. In Ramirez v. Commishioner, T.C. Memo.' 20052179,' the taxpayer had eñtere'd into an installment agreement after the filing of the NFTL and contended that he should be released from the NFTL. In that case we likewise héld that the installment agreement did not preclude the 'Commissioner from maintaining a. lien until'the balánce of the taxpayer's taxes was' paid See also Dorra v. Commissioner, T.C. Memo. 2004-16. The taxpayer in. Stein v. Commissioner, sußra, argued that the Appeals Office abused-its discretion by re'ject'ing an installment agreement. We stated that even if the Appeals officer had accepted the installment agreement as as collection alternative, the Commissioner- would not have been required to withdraw the NFTL until the full liability had been paid. Section 6323(j) (1) is permissive, and nothing in it requires respondent to withdraw the NFTL because of the installment agreement. Accordingly, we'hold 'that the decision of ' respondent's Appeals Office to sustain the NFTL despite'the installment agreement was not an abuse of discretion. - 12 - In support of petitioner's second contention, that the NFTL. has made it impossible for him to refinance h s home ands thus obtain money to pay.his tax liabilities., he s ates sthat his credit score has been reduced: by -100 points. In her letter acknowledging his request for a CDP hearing, Ms. Williams supplied petitioner with information describing how to apply for a certificate of subordination to-the NFTL and how to -obtain a certificate of discharge from the NFTL. Although he contends that the NFTL has made:it.impossible for him LtO refinance his home, petitioner has offered-no evidence that he has been , rejected for a -loan because of the NFTL, or even that he has applied for a loan,since respondent filed the NFTL. Nore has petitioner presented any evidence that suggests the alternatives offered by Ms. Williams,, i.e.,.applying for a certificate of subordination of the NFTL or obtaining a cert ficate of- discharge from the NFTL, would be insufficient to satis y his supposed need to obtain financing. It -is no doubt true that the NFTL lowered petitioner's credit score, but this fact does not establish that refinancing petitioner's home would be impossible or that the NFTL otherwise interferes with petitioner's ability.to pay his tax obligations. Accordingly, there is no evidence in the record to suggest that the NFTL is impairing petitioner's ability to pay his, outstanding tax liabilities. Where a motion for summary judgment - 13 - has been properly made and supported, the opposing party may not rest upon mere allegations or denials in that zpartyls pleadings - but must, by affidavits or otherwise, set forth specific facts showing that there :Üs a genuine issue for trial. Rule 121(d). Respondent's motion was properly made and supported.. Petitioner has not offered specific facts to support his contention that the NFTL impairs petiti-oner's ability to pay his tax liability. Consequently, we conclude that there is no genuine issue for a trial regarding that fact The record shows that Ms. Williams had sufficient evidence on which she could reasonably base her conclusion that withdrawing the NFTL would not facilitate collection. Petitioner had almost 2 years before the filing of the NFTL during which he made no effort to refinance his home, and petitioner made no payments on his tax liabilities during that entire period. Petitioner's payment history casts doubt on the good faith of his efforts to pay. Accordingly, we conclude that respondent's settlement officer did not abuse her discretion when she determined that withdrawing the NFTL would not facilitate collection of the tax liabilities. Respondent's settlement officer considered all of petitioner's contentions, verified compliance by the Internal Revenue Service with all applicable laws and regulations, and considered whether the proposed collection actions balanced the -'14 - need for efficient tax collection -with petitioner's concern that they be no more .intrusive than necessary. - On the basis of the -record before us, we conclude that there is no:genuine issue of material fact for tria We hold that respondent's settlement*offiaer did not-abuse her discretion in sustaining tthe filingrof the NFTL. In reaching these holdings, we have 'considéred all the parties' sarguments,I and;- to the extent not addressed herein, iwe conclude that they are moot, irrelevant, or without merit. To reflect -the foregoing An ordei- and decision will be entered for respondent.