TAX COURT OPINION

Case: Conrod Concrete, Inc.
Docket Number: 25285-07L
Judge: Colvin
Opinion Type: bench
Filed: 05/29/2009
Pages: 13

6, ft/~J) O-P - 1~ UNITED STATES TAX COURT WASHINGTON, DC 2021 7 CONROD CONCRETE, INC ., Petitione r COMMISSIONER OF INTERNAL REVENUE, . Respondent Docket No . 25285-07t . { Pursuant to Rule 152(b), Tax Court Rules of Practic e Proce , ORDERED that the Clerk of the'Court shall transmit herewith to Petitioner and to respondent a copy of the pages of the transc'rip't j of the trial in the above case before Judge Joseph Robert Goere atJ Los Angeles, California, on May 8, 2009, containing his'' oral! findings of fact and opinion rendered at the conclusion of the : trial . In accordance with the oral findings of fact and, opi ion, decision will be entered for respondent . (Signed ) Joseph Robert Goeke Judge Dated : Washington, D .C . May 29, 2009 IN THE UNITED STATES TAX COUR T In the matter of : CONROD CONCRETE, INC ., , Petitioner , v . ) Docket No . : 25285- 0 COMMISSIONER OF INTERNAL REVENUE, Respondent . Room 116 7 Edward R . Roybal Cente r & Federal Building 255 East Temple Stree t Los Angeles, Californi a Friday, May 8, 200 9 opinion, pursuant to notice , at 9 :28 a .m . BEFORE : HONORABLE JOSEPH ROBERT GOEKE Judg e APPEARANCES : For the Petitioner : (No Appearance .) . For the Respondent : (No Appearance . ) Heritage Reporting Corporatio n (202) 628-4888 P R 0 C E E D I N G S THE CLERK : Recalling from the calendar, Docket No . 25285-07L , Conrod Concrete, Inc . (Whereupon , a bench opinion was rendered .' .n the above - entitled matter . Heritage Reporting Corporation (202) 628-4888 1 2 3 4 6 7 9 1 0 1 1 12 13 14 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 24 25 Bench Opinion by Judge Joseph Robert Goeke May 8 , Conrod Concrete, Inc . v . Commissioner Docket No . 25285-07 L THE COURT : The Court has decided to ren d oral findings of fact and opinion in this case andi. following represents the Court's oral findings of f and opinion . These oral findings of fact and'opini shall not be relied upon as precedent in any othe r case . The oral Findings of fact and opinion in , this case are made pursuant to the provisions of Section 7459(b) of the Internal Revenue Code and R 152 of the Tax Court Rules of Practice and Pro'cedu r Hereinafter, all Section references are to the ' Internal Revenue Code and Rule References are to ti i Tax Court Rules of Practice and Procedure . Respondent filed a Federal Tax Lien agai n Petitioner for unpaid employment taxes, and Petiti o has petitioned this Court challenging the determination by Respondent's settlement officer th I the lien was a proper collection action . For th e reasons explained hereinafter, we determine that i t was an abuse of discretion to maintain the Notic e Federal Tax Lien as filed . This Court ha s jurisdiction in this case pursuant to Section 6320 Heritage Reporting Corporation (202) 628-488 8 1 6330(d)(1) . Petitioner's principal place of busines s 2 when the Petition was filed in this case was in 3 California . 4 The Notice of . Federal Tax Lien in questio- 5 9 related to employment taxes for the year ending December 2004 and the quarters ending June 2005 , September 2005, December 2005, and March 2006 . ; TmE is no dispute that the Petitioner owes the liabilitie s for which the Notice of Federal Tax Lien was filed ' 1 0 r Petitioner is a concrete contractor . Petitioner ha i 11 . had previous problems paying Federal Employment Ta x 12 obligations in a timely manner . In the mid-1990's,!, 13 Petitioner entered into an installment agreement to , 14 pay delinquent employment taxes, and the delinquent 15 taxes were paid prior to the periods in question i n 16 this case , but only after a ,levy was issued by 17 Respondent to collect the final amounts due . 18 In the present case, the pertinent facts 19 begin with a . meeting between Petitioner's CPA, , 20 Petitioner's President and Bookkeeper and a Revenue 21 Officer of Respondent . This meeting took place o n 22 October 24, 2006 . At the meeting, a payment plan w 23 orally agreed upon . Subsequent to the meeting, th e 24 revenue officer requested that a Notice of Federa l 25 Lien be filed for FICA tax liabilities for theper i Heritage Reporting Corporation (202) 628-4888 1 ending June 30, 2005, September 30, 2005, Decembe r 2 2005, and March 31, 2006, and for FUTA tax liabili t 3 for the 2004 taxable year . 5 Federal Tax Lien filing was discussed at the Octobe 6 24, 2006, meeting . Nevertheless, it is clear tha t 7 Petitioner had received written notifications befo g 8 the meeting that the filing of a Notice of Federa l 9 Lien was a possibility . 10 . On October 25, 2006, a Notice-of Federa l 11 Lien regarding the above liabilities was filed'wit Y 12 Los Angeles County and the Secretary of the State o; 13 California . The unpaid balance of assessment shown 14 the lien filing document was $814,091 .55 . Petitio n 15 was sent a Form Letter Number 3172 by Respondent a n 16 timely requested a Collection Due Process Hearin g 17 regarding the filed Notice of Federal Tax Lien . In'' 18 attac ment to the appeal form filed by the Petition h 19 with Respondent's Appeal's Office regarding the fi l 20 of the Notice of Federal Tax Lien, Petitioner' s 21 counsel stated in part as follows . : 22 "The taxpayer does not dispute that it o w 23 the amounts listed in the Notice of Federal Tax Lie 24 Due to a severe cash flow problem, the taxpayer wa s 25 unable to make all of ;the employment tax payment s Heritage Reporting Corporation (202) 628-4888 r 1 required during each of the periods listed in~the 2 Notice of Federal Tax Lien . " 3 "On October 24, 2006, Richard Rodriguez, he 4 taxpayer's President, met with IRS Revenue Office r 5 Jerry Pristell . During this meeting, the taxpayer 6 agreed to enter into an'installment agreement withl he 7 IRS to repay its outstanding liability in monthl y 8 installments of $40,000 . The taxpayer further agreed 9 that, in addition to the monthly installments,! i t 10 would make supplemental payments to the IRS iniorde , 11 to repay this liability more quickly as surplus fun's 12 became available . During the meeting, Revenue?OffCer 13 Pristell did not reveal to the taxpayer that h e 14 intended to record a Federal Tax Lien in connection :' ' is with this liability . Based upon the agreementireaa'ed 16 during the meeting,'Richard Rodriguez reasonabl y 17 concluded that this matter had been resolved . They RS 18 was satisfied with the installment agreement, and th e I 19 IRS would not engage in any further collection ' 20 activity provided that the taxpayer made his payment s 21 pursuant to the terms of the installment agreement " 22 "Unbeknownst to the taxpayer, Revenue } 23 Officer Pristell did, in fact, intend to engage i n 24 further collection activity . Specifically, h e 25 intended to file a Federal Tax Lien . Had Richard Heritage Reporting Corporation (202) 628-4888 1 Rodriguez been informed by the Revenue officer that h e 2 would file a Fe'deral .Tax Lien, he would have trie d 3 make other arrangements. to prevent this from 4 happening . In addition, Richard Rodriguez would ha r e 5 presented evidence to the Revenue Officer that th e recording of the Notice would have a significant adverse effect on the taxpayer's ability to continu to operate its business . Due to .the nature of ; the taxpayer's business, it must be able to secur e significant amounts of credit in order for it to be 11 able to purchase large quantities of building 12 materials and also meet its employee payroll 13 obligations . The recording of the Notice will . 14 effectively eliminate or significantly reduce the 15 taxpayer's ability to obtain credit that it need s 16 function . This will prevent the taxpayer from .bein 17 able to continue .its business or will require the 18 taxpayer to materially cut back on the volume of i 19 business . Either scenario is not in the taxpayer's ; 20 best interest, nor in the best interest of thetIRS . 21 This is because any reduction in the taxpayer' s is likely to prevent the taxpayer from its outstanding liability as quickly a s Based upon Petitioner's position as quot e Heritage Reporting Corporation (202) 628-4888 11 l 1 above, the appeals process focused on whether th e 2 Federal Tax Lien should be withdrawn . Petitioner Pa. 3 discontinued payments pursuant to the agreemen t 4 reached with the Revenue Officer on October 24, 20 0 5 after the Notice of Federal Tax Lien was filed . 6 Instead, Petitioner proposed to the Appeals Office 7 seven-month repayment schedule if . the Notice o f 8 Federal Tax Lien'would be withdrawn . The Appeal s 9 Office ultimately rejected Petitioner's proposal an' r 10 issued a Notice of Determination on October 1511 200, 11 The Petitioner then timely filed a Petition seekin g 12 review of this determination in this Court. 13 At trial, the Appeals Officer was called 14 a witness by Respondent and testified that sheiwa s 15 aware that the Notice of Lien had an adverse effec t 16 Petitioner's ability to obtain large contracts'. 17 Nevertheless, the Notice of Determination summariz e 18 her conclusions as follows : 19 "Appeals must be careful that resolutio n 20 taxes is done on a basis that is fair and impartial! 21 and is done in a manner that will enhance voluntary 22 compliance . The corporation has established a ;pat t 23 of noncompliance . Based on the case circumstance s 24 the Notice of Lien balances the need for efficien t 25 collection of the tax with the taxpayer 's concern Heritage Reporting Corporation (202) 628-4888 1 it is more intrusive than necessary . Collectio n alternatives cannot be considered since the taxpaye r has failed to stay in compliance . Based on the above circumstances, the 1 r r 5 was filed appropriately and will not be withdrawn .'k At trial, Respondent offered additional evidence in addition to the testimony of the settlement officer . This evidence included documentation to support .the determination that th Petitioner had a pattern of noncompliance . The documentation included information concerning the delinquent employment taxes in the mid-1990's whi c Z led to installment agreement and finally X11 to collect those deficiencies . In addition, the settlement officer testified that she was aware o f { delinquently filed employment tax return for the 1 quarter of 2006 when she first received Petitioner ' appeal, and she subsequently became aware of unpai d employment tax liabilities for quarters in 2007 . Petitioner argued before this Court tha t was an abuse of discretion for the Appeals Office r to accept the seven-month installment agreement and 8 9 1 0 1 1 1 2 1 3 14 1 5 16 1 7 1 8 1 9 2 0 2 1 22 23 withdraw the Federal Tax Lien pending the installme 24 period . Petitioner argued that the Notice of Fede r 25 Tax Lien filing was more intrusive than necessary o ' Heritage Reporting Corporation (202) 628-4888 I the facts of this case since it crippled Petitioner' s 2 ability to obtain bonds necessary for large 3 construction contracts . 1 0 The parties agree that the appropriate standard of review in this case is abuse o f discretion . Goza v . Commissioner , 114 T .C . 17 6, 1 8 (2000) . Respondent argues that Petitioner's patter, of delinquency regarding the payment of employment taxes before and after the periods before the ;Cour t 10 demonstrate that the Appeals Office correctly{ 11 exercised the balancing test required between th e 12 intrusive nature of collection activity and the nee I 13 to protect Respondent's ability to collect the ;taxe , . 14 accrued . Petitioner argues that the Appeals Offic e 15 should have had faith that the Petitioner would have 16 met the terms of its seven-month repayment off3er ari 17 should have withdrawn the Notice of Federal Tax Li e 18 which was filed . 19 On the facts of this case, we find that 'the 20 determination by Respondent's Appeals Office was no 21 arbitrary or capricious and was not an abuse o f 22 discretion . Petitioner's pattern of treating it s 23 Federal Employment Tax obligations as elective ' 24 payments when faced with financial pressures supports' 25 the determination by Respondent's Appeals Office that Heritage Reporting Corporatio n (202) 628-4888 1 the Notice of Federal Tax Lien should remain as filed . 2 Accordingly, a decision will be entered fo r 3 Respondent . 4 This concludes the Court's oral findings )f 5 fact and opinion in this case . (Whereupon, at 9 :45 a .m ., the bench opin n in the above-entitled matter was concluded . ) E 12 13 14 15 16 17 1 8 19 20 21 // 2 2 23 24 25 Heritage Reporting Corporation (202)'628-4888 C CERTIFICATE OF TRANSCRIBER AND PROOFREADER ' CASENAME : CONRRDrCONC RETE, INC . DOCKETNUMBER : 25285-07 L I, the undersigned, do hereby certify that the foregoin g pages, numbers 1 through 11, inclusive, are the true, accurate and complete transcript prepared from the tap e ad e by electronic recording by Cynthia Mizell, on May 8 200 1, before the United States Tax Court at its session in LosI Angeles, in accordance with the applicable provisions of[ the current verbatim reporting contract of the Court, and ha e verified the accuracy of the transcript by comparing th e printed transcript against the verbal recording . (Signature of Transcriber) ( .Print - Transcriber Name ) PAT KIN G 05/13/09 (Date) (Signature of Transcriber) PAT KIN G ;(Print - Transcriber Name ) 05/13/09 (Date) I!