TAX COURT OPINION

Case: John M. Gilreath
Docket Number: 29406-11L
Judge: Kroupa
Opinion Type: bench
Filed: 01/28/2013
Pages: 13

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 JOHN M. GILREATH, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, . Respondent. ) ) ) ) ) ) ) ) ORDE R Docket No. 29406-11L 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 trial of this case before Judge Diane L. Kroupa in San Francisco, California on December 13, 2012, containing her 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 appropriate order and decision will be entered. (Signed) Diane L. Kroupa Judge Date: Washington, D.C. January 28, 2013 SERVED JAN 31 2013 Capital Reporting Company 3 Bench Opinion by Judge Diane L. Kroupa December 13, 2012 John M. Gilreath v. Commissioher Docket No. 29406-11L 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. THESE 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 I I authority granted by section 7459(b) and Rule 152. 1 2 3 4 5 6 7 8 9 10 11 12 13 All section references are to the Internal Revenue 14 15 16 17 18 19 Code as amended and in effect for the taxable periods at issue as later defined, and all Rule references are to the Tax Court Rules .of Practice and Procedure. This is a collection review case involving a proposed Federal tax levy to collect petitioner's. section 6672 trust fund liabilities of Datatek 20 Consulting Group Corp.(referred to in this opinion as 21 Datatek), a subsidiary of Diversified Corporate 22 23 24 25 Resources, Inc. (Diversified) for the third and fourth quarters of 2004 (all quarters shall be referred to in this opinion as the taxable periods at issue). 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 This collection review matter is before the 2 Court on respondent's Motion for Summary Judgment. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The Court ordered petitioner to respond or object to respondent's motion and the Court scheduled respondent's motion for a hearing on the Court's San Francisco, California trial session beginning December 10, 2012. Petitioner appeared pro se. Kimberly Kazda appeared on behalf of respondent. FINDINGS OF FACT The record establishes or the parties do not dispute the following facts. Petitioner resided in California at the time he filed the collection review petition in this case. Petitioner was an independent and outside director of Diversified and was its Chair of the Audit Committee from February 19, 2003 through July 20, 2006. During the.time he served in those capacities, Datatek failed to pay its employment tax liabilities for the taxable periods at issue. The settlement officer assigned to collect the unpaid employment'tax liabilities of Datatek made the determination that petitioner was a person who was required to collect and pay over Federal employment taxes, and who willfully failed to do so, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 thus making him personally liable for the unpaid amounts under section 6672. The settlement office'r sent to petitioner a notice of proposed trust fund recovery penalty assessment letter (Letter 1153) regarding the unpaid employment taxes of Datatek for all quarters of 2004. The letter advised petitioner that he had 60 days from the date of the letter to submit a written appeal of the proposed liabilities. No appeal was filed. Respondent therefore assessed all the trust fund liabilities for all four quarters of 2004 against petitioner. This amount was approximately $250,000.. Petitioner denies receiving the letter and argues that he did not have a power of attorney who was authorized to receive the letter or would have requested an appeal on his behalf. Petitioner failed to pay the assessed amounts so respondent issued petitioner a Notice of Intent to Levy and Notice of Your Right to a Hearing that explained petitioner was entitled to a CDP hearing regarding the trust fund recovery liabilities for the taxable periods at issue. Petitioner timely requested a CDP hearing. 24 Petitioner alleged in the hearing request that he 25 should not be held liable for the unpaid employment 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 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 tax liabilities of Datatek. He wrote that he was not a responsible person and that he did not willfully neglect to pay the payroll. The settiement officer assigned the CDP hearing with petitioner sent petitioner (and his power of attorney) a letter scheduling a telephonic CDP hearing with them. The settlement office.r informed petitioner that he could discuss collection alternatives and his reasons for disagreeing with the proposed collection action.. The settlement officer also informed petitioner he cbuld be eligible for a collection alternative. To be eligible, however, petitioner needed to provide his financial information on Form 433 and he needed to file a income tax return for 2010. During the telephonic CDP hearing, petitioner claimed that he was not aware of any prior trust fund recovery case, that he did not request an appeal regarding the trust fund recovery penalties and that he did not have a power of attorney who would have requested an appeal of the trust fund recovery penalty on his behalf. The settlement officer advised petitioner that he would not be allowed to challenge the liability during the CDP hearing if he did have a prior opportunity to dispute 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 the trust fund recovery penalty. Petitioner did not provide the settlement officer with a completed 433 or a copy of his unfiled tax return for 2010. Nor did petitioner offer any collection alternatives. He wanted only to challenge his liability for the unpaid employment taxes of 7 Datatek. 8 The settlement officer reviewed 9 petitioner's account showing the liability was 10 attributable to trust fund liabi,lity obligations of 11 Datatek. The settlement officer also determined that 12 13 14 15 16 17 18 19 20 21 22 petitioner had been given a Letter 1153 on December 16, 2005 and further determined that he failed to file a written appeal within the 60-day period even though the letter had been sent to him. The settlement officer then determined that petitioner had been given an opportunity to contest the unpaid employment tax liabilities for the taxable periods at issue and he could not challenge the existence or amount of the trust fund liability amounts at issue as part of the CDP hearing process. The settlement officer issued a Notice of 23 Determination Concerning Collection Action(s) Under 24 25 Section 6330 for t=rust fund recovery penalties for the taxable periods at.issue. The determination 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 notice stated that respondent sustained the proposed levy action because petitioner had a prior opportunity to challenge the trust fund recovery penalties and that petitioner had failed to provide any financial information or request a collection alternative. Issuing the Determination Notice after 7 October 17, 2006, means that this Court has exclusive 8 9 jurisdiction to redetermine collection review matters even though the Court previously lacked subject 10 matter jurisdiction over trust fund liabilities, the 11 underlying tax liability at issue here. Pension 12 Protection Act of 2006, Pub. L. No. 109-280, § 13 14 15 16 17 18 855(a)120 Stat. 780, amending section 6330(d) (1) to provide all CDP determinations be appealed solely to the Tax Court. As previously stated, respondent filed a summary judgment motion. The Court scheduled respondent's motion for a hearing in San Francisco, 19 California and the Court heard oral arguments from 20 21 22 23 24 25 both parties at the motion hearing. OPINION We are asked to decide whether to grant summary judgment. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. See, e.g., FPL Group. Inc. v. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 Commissioner, 116 T.C. 73, 74 (2001). A motion for summary judgment will be granted if the pleadings and other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. See Rule 121(b); 7 Elect. Arts. Inc. v. Commissioner, 118 T.C. 226, 238 8 9 10 11 12 13 14 (2002). The moving party has the burden of proving that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. See, e.g., Rauenhorst v. Commissioner, 119 T.C. 157, 162 (2002) . The party opposing summary judgment must set forth specific facts that show that a genuine question of material fact . exists and may not rely 15 merely on allegations or denials in the pleadings . 16 Casanova Co. v. Commissioner, 87 T.C. 214, 217 17 18 19 (1986). Based upon our examination of the entire record before us, we find that respondent did not abuse his discretion in determining that the proposed 20 levy action should proceed with respect to 21 petitioner's unpaid trust fund liabilities for each 22 23 of the taxable periods at issue. We begin with the standard of review. 24 Where the validity of the underlying tax liability is 25 properly at issue, the Court will review the matter 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 on a de novo basis. Sego v. Commissioner, 114 T.C. 604, 610 (2000) . Where, as is the case here, the validity of the underlying tax liability is not properly placed at issue, the Court will review respondent's determination for abuse of discretion. Sego v. Commissioner, supra; Goza v. Commissioner, 114 T . C. 176, 181-182 (2000 ) . We therefore mus t decide whether respondent exercised his discretion 9 arbitrarily, capriciously or without sound basis in 10 11 12 13 14 15 16 17 18 19 20 21 22 fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1.999) . We now focus on whether petitioner otherwise had an opportunity to contest the underlying tax liabilities at issue. This Court and other courts have held that the receipt of a Notice of a Proposed Trust Fund Recovery Penalty Assessment otherwise known as a Letter 1153 constitutes a prior opportunity to dispute the underlying.tax liability in Appeals. McClure v. Commissioner, T.C. Memo. 2008- 136; Render v. United States, 389 F. Supp.2d 808, 810-811 (E. D. Mich. 2005); see also Jackling v. Commissioner, 352 F. Supp.2d 129, 132 (D. N.H. 2004); 23 Pelliccio v. United States, 253 F. Supp.2d 258, 261- 24 25 262 (D. Conn. 2003). Petitioner is therefore precluded from contesting the underlying liabilitý 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 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 during the CDP hearing or with this Court. We briefly describe an overview of collection proceedings. If any person liable for Federal tax liability neglects or refuses to make payment within ten days of notice and demand, the Commissioner is authorized to collect the tax by levy on that person's property. See sec. 6331(a). At least 30 days after enforcing collection by levy on the person's property, the Secretary is obliged to provide the person with a final notice of intent to levy, including notice of the administrative appeals available to the person. See sec. 6331(d). The person is entitled, upon request, to an administrative review hearing before Appeals. Sec. 6330(b) (1). If the taxpayer requests a hearing, he or she may raise at that hearing any relevant issues relating to the unpaid tax or the proposed levy. Sec. 6330 (c) (2). Relevant issues include any appropriate spousal defenses, challenges to the appropriateness of collection, and possible alternative means of collection such as an installment agreement or an offer-in-compromise. Sec. 6330(c) (2) (A). After the hearing, the Appeals officer is required to make a determination that addresses issues the taxpayer raised, verifies that all requirements of applicable 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 6 7 8 9 10 11 12 law and administrative procedures have been met, and balances the need for the efficient collection of taxes with the legit·imate concern of the person that any collection action be no more intrusive than necessary . Sec 6330 (c) (3)·(C) . We apply these principles to the facts here. Petitioner argued at the motion hearing that he should not be liable for any trust fund liabilities of Datatek as he had no control of Datatek's business or its day-to-day operations. He was merely an outside director of Diversified, the parent corporation. He might have been a director and the 13 Chair of the Audit Committee, but because these 114 positions were merely with a related corporation, he 15 16 17 18 19 20 21 22 23 24 25 should not be held liable. We cannot nor will we I place any weight upon .petitioner's arguments. Mere denials are insufficient to overcome summary judgment. In addition, now is not the time for petitioner to make these arguments. The appropriate time was when he received Letter 1153. Issues that were not raised to Appeals cannot later be raised to this Court. Giamelli v., Commissioner, 129 T.C. 107 (2007) . The record reflects that the settlement officer properly verified that all the legal and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 procedural requirements had been met. The settlement 2 officer confirmed, using a transcript of petitioner's 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 account, that assessments were properly made for each of the taxable periods at issue, that appropriate and timely notices were sent regarding the assessments, and that petitioner was properly informed of his rights with respect to the proposed levy action. The record also reflects that the settlement officer addressed all the issues petitioner raised including petitioner's inability to contest the underlying liability. Here, petitioner failed to submit any requested documents or financial information the settlement officer requested. We have frequently and consistently held that a settlement officer does not abuse any discretion if the taxpayer fails to submit the required and requested information. Kendricks v. Commissioner, 124 T.C. 69, 79 (2005). The record also reflects that the settlement officer properly balanced the need for 20 efficient collection of taxes with petitioner's 21 22 23 24 25 legitimate concern that any collection be no more intrusive than necessary. Petitioner has not raised any challenges to the appropriateness of collection, did not assert any spousal defenses, or otherwise offer any additional 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 collection alternatives . See sec.. 6330 (c) (2) . 2 Accordingly, these issues are. now deemed conceded. 3 4 5 6 7 8 9 10 11 12 13 14 15 Rule 331(b) (4). In conclusion, we find that petitioner has not presented any evidence or persuasive arguments to convince us that respondent abused his discretion. We therefore conclude that respondent did not abuse his discretion in upholding respondent ' s proposed levy action to collect from petitioner the outstanding trust fund liabilities for each of the taxable periods at issue. To reflect the foregoing, decision will be entered for respondent and an appropriate order will be issued sustaining the determination set forth in the Notice of Determination Concerning Collection 16 Action (s) Under Section 6320 and/or 6330, upon which 17 18 19 20 21 22 23 this case is based, regarding petitioner's unpaid trust fund liabilities for the taxable periods at issue. An order will also be issued granting respondent's motion for summary judgment. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 10:32 a.m., the above- 24. entitled matter was concluded. ) 25 866.488.DEPO www.CapitalReportingCompany.com