TAX COURT OPINION

Case: Thompson Enterprises
Docket Number: 25054-10SL
Judge: Armen
Opinion Type: bench
Filed: 02/15/2012
Pages: 15

v/, -s -r:r a tmW s k/ UNITED STATES TAX COURT WASHINGTON, DC 20217 THOMPSON ENTERPRISES, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) ) ) Docket No. 25054-10SL. ORDER . 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 hearing of the above case before Special Trial Judge Robert N. Armen, Jr. at San Diego, California, on January 31, 2012, containing his oral findings of fact and opinion rendered at the conclusion of the hearing. In accordance with the oral findings of fact and opinion, an Order and Decision will be entered for respondent.____ (Signed) Robert N. Armen, Jr. Special Trial Judge Dated: Washington D.C. February 15, 2012 SERVED Feb 17 2012 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 2 Bench Opinion by Special Trial Judge Robert N. Armen, Jr. Thompson Enterprises v. Commissioner Docket No. 25054-10SL February 7, 2012 THE COURT: I. 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. See Rule 152(c), Tax Court Rules of Practice and Procedure. II. This proceeding was heard as a Small Tax Case pursuant to the provisions of.Section 7463(f) (2) of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of Practice and Procedure. See and compare Rules 330 through 334 of the Tax Court Rules of Practice and Procedure. III. 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. Hereinafter in this bench opinion, and unless otherwise indicated, all section numbers refer to the Internal Revenue Code of 1986, as amended, and all Rule numbers refer to the Tax Court Rules of Practice and Procedure. IV. Monica D. Gingras appeared on behalf of Heritage Reporting Corporation (202) 628-4888 3 1 2 3 4 5 6 7 8 Respondent. There was no appearance by Daniel Thompson, a general partner of Petitioner, nor did anyone else appear on behalf of Petitioner. However, the Court did have before it Petitioner's response, filed December 28, 2011, and Petitioner's supplemental response, filed January 25, 2012, to the matter before the Court. V. This docket represents an appeal by Petitioner from the October 12, 2010 determination of Respondent's 9 Office of Appeals sustaining a proposed levy to collect 10 11 12 13 14 15 16 17 18 Petitioner's unpaid employment taxes that were reported on employment tax returns (Forms 941) filed by Petitioner for the second, third, and fourth quarters of the calendar year 2008. (Parenthetically, we note that Petitioner had, at one time, an unpaid unemployment tax liability (940 tax) for the calendar year 2008;I however, a payment on December 21, 2009 served to satisfy the liability, such that the transcript of account (Form 4340) reflects a balance of $0.00.) Presently pending before the Court is Respondent's 19 motion for summary judgment, filed November 16, 2011, and 20 21 22 23 24 25 supplemented January 17, 2012. As previously mentioned, Petitioner filed a response on December 28, 2011, and a supplemental response on January 25, 2012. VI. The record establishes and/or the parties do not dispute the following: Petitioner was formed in the State of California, Heritage Reporting Corporation (202) 628-4888 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 and at all relevant times operated within that State. Daniel Thompson, a general partner of Petitioner, has resided in the State of California at all relevant times. Petitioner's tax liabilities. On December 15, 2009, Respondent sent to Petitioner a final notice of intent to levy and notice of your right to a hearing (hereinafter, "final notice"). Respondent issued the final notice in respect of: (1) Petitioner's outstanding federal employment tax liabilities for the second, third, and fourth quarters of the calendar year 2008; and (2) Petitioner's outstanding federal unemployment tax liability for the calendar year 2008. At that time, the employment and unemployment tax liabilities aggregated $23,066. These liabilities stemmed from unpaid taxes reported by Petitioner on its employment tax and ·unemployment tax returns (Forms 941 and Form 940, respectively). As previously mentioned, a payment on December 21, 2009 served to satisfy Petitioner's outstanding unemployment tax liability for 2008. Thereafter, only Petitioner's employment tax liabilities for the second, third, and fourth quarters of the calendar year 2008 remained outstanding. Administrative appeal. In response to the final notice, Petitioner timely filed with Respondent a Form 12153, a request for a collection due process or equivalent hearing. On the Form 12153, Petitioner requested a Heritage Reporting Corporation (202) 628-4888 5 1 2 3 4 5 6 7 8 9 10 11. 12 13. 14 15 16 17 collection alternative in the form of an offer-in- compromise. After a couple of preliminary letters had been sent, Respondent's appeals officer in the San Diego Office of Appeals acknowledged in a letter dated August 17, 2010 that Petitioner had requested a collection alternative in the form of an offer-in-compromise, and in turn requested from Petitioner certain documentation essential to the consideration of an offer-in-compromise. Such documentation included Form 656 ("offer-in-compromise"), Form 433-A ("collection information statement") for each general partner, specified supporting documents such as bank statements, and the offer fee and down payment. The documentation requested by the appeals officer was not received. Notice of·determination and commencement of iudicial proceeding. On October 12, 2010, Respondent's 18 Office of Appeals issued to Petitioner a notice of 19 20 21 22 23 24 25 determination concerning collection action(s) under Section 6320 and/or 6330. The notice of determination sustained the proposed levy. Petitioner responded by timely appealing to this Court. See Section 6330 (d) (1). Respondent's motion and Petitioner's two responses. On November 16, 2011, Respondent filed his motion for summary judgment, together with the lengthy declaration of Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Cynthia Chadwell, the appeals officer who was assigned to consider Petitioner's administrative appeal. Thereafter, on December 28, 2011, Petitioner filed a response, objecting to the granting of Respondent's motion. Petitioner did not, however, support any statement in his response with an exhibit or other documentation. In the response, Petitioner acknowledges liability for unpaid employment taxes, and Petitioner seeks, inter alia, a collection alternative in the form of an installment payment arrangement. Petitioner does not contend that this (or any other specific) proposal was actually presented to Respondent's appeals officer during the administrative process, nor does Petitioner contend that financial information and documentation sufficient to evaluate any collection alternative was received by the appeals officer at that time. Indeed, Respondent's motion is largely premised on Petitioner not having proposed any specific collection alternative to the appeals officer nor having submitted the requested financial information and documentation, which premises are supported by Respondent's 21 motion and declaration. 22 23 24 25 (Parenthetically, we note that in the request for a collection due process or equivalent hearing (Form 12153), Petitioner checked the box for "Offer in Compromise" and not the box for "Installment Agreement". However, Respondent Heritage Reporting Corporation (202) 628-4888 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 7 asserts (and Petitioner does not deny in the response) that Petitioner never submitted to the appeals officer a Form 656 or supporting financial information on Form 433-A (or equivalent) and verification, nor the requisite down payment for an offer-in-compromise or the first payment for a periodic payment offer. Thus, in the attachment to the notice of determination, the settlement officer states, inter alia, as follows: "The taxpayer did not submit financial information (Form 433-A and verification) or the offer-in-compromise Form 656, down payment, or first payment for a periodic payment offer. The submission of financial information and the Form 656 along with the down payment or initial payment on a periodic payment offer are Internal Revenue Manual requirements for the consideration of an offer. "The taxpayer did not submit a financial statement and verification so that other collection alternatives to levy could be considered, such as an installment agreement or placing the account in uncollectible status. The submission of financial information is an Internal Heritage Reporting Corporation (202) 628-4888 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 8 Revenue Manual requirement for the .consideration of an installment agreement or placing an account in uncollectible status." It is noteworthy that, as previously stated, Petitioner did not attach to his response any exhibit or other document that might serve to contradict any part of the appeals officer's statement just quoted. See Rule 121(d), Tax Court Rules of Practice and Procedure. Petitioner did in the response make certain allegations (again, unsupported by exhibits) regarding refund offset(s) of $10,131 and a payment of $1,300 that are not reflected on any of the transcripts of account furnished by Respondent (Forms 4340) for either the calendar quarters in issue or the calendar year 2008. For that reason, the Court in an order dated December 29, 2011, directed Respondent to supplement his motion and attach transcripts of account reflecting such alleged offset(s) and payment. The Court also calendared Respondent's motion for hearing on January 31, 2012 in San Diego, California. On January 17, 2012, Respondent filed a supplement to his motion for summary judgment. In the supplement, Respondent represented that on January 3, 2012, Daniel and Darlene Thompson were issued a joint notice of deficiency in respect of their income tax liability for the taxable Heritage Reporting Corporation (202) 628-4888 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 (calendar) year 2009. Respondent attached to the supplement account transcripts for Mr. and Mrs. Thompson for 2009 and 2010. Those transcripts show that the Thompsons presently have a credit balance in respect of their income tax account for 2009 of $5,016 and a credit balance in respect of their income tax account for 2010 of $5,115. These two credit balances account for the $10,131 referenced by Petitioner in its December 28, 2011 response. It should be emphasized that these credit balances relate to the joint income tax accounts of Mr. and Mrs. Thompson and that, at least for 2009, a notice of deficiency was recently issued to them, which notice may occasion the commencement of a redetermination action in this Court by Mr. and/or Mrs. . Thompson. See Section 6213(a). Regarding the $1,300 payment, transcripts of account for Petitioner's employment and unemployment tax · liabilities show, in addition to federal tax deposits aggregating $2,673.20 for the three calendar quarters in issue (941 tax) and the 2008 calendar year (940 tax), a subsequent payment of $31.48 on December 21, 2009, which $31.48 payment served to full pay the assessed balance of Petitioner's liability for unemployment tax for the calendar year 2008. On January 25, 2012, Petitioner filed a supplemental response. Attached to the supplemental Heritage Reporting Corporation (202) 628-4888 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 10 response were a number of documents, including a Form 656 and copies of the joint income tax returns for 2009 and 2010 for Mr. and Mrs. Thompson that were referenced in Respondent's January 17, 2012 supplement. Respondent's motion, as supplemented, was called for hearing on January 31, 2012 in San Diego. Counsel for Respondent appeared and was heard. As previously stated, neither Mr. Thompson nor anyone else appeared on behalf of Petitioner. VII. Summary judgment. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp.. v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be.granted with respect to all or any part of the legal issues in controversy "if the pleadings, answers to interrogatories, depositions, admissions, and any 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." Rule 121(a) and (b). When a motion for summary judgment is made and properly supported, Rule 121(d) provides that the adverse party may not rest on the mere allegations or denials of such party's pleadings, but must instead respond, by affidavit or in an otherwise acceptable manner, by setting forth specific facts showing that there is a genuine issue Heritage Reporting Corporation (202) 628-4888 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 11 for trial. If the adverse party fails to do so, then a decision,.if appropriate, may be entered against such party. After carefully reviewing the record, we are satisfied that there is no genuine issue as to any material fact, and a decision may be rendered as a matter of law. Accordingly, we shall grant Respondent's motion for summary judgment, as supplemented. · VIII. Procedures applicable to proposed levies. Section 6330 generally provides that the Commissioner cannot proceed with collection by levy.until the person has been given notice and the opportunity for an administrative review of the matter (in the form of an Appeals Office hearing) and, if dissatisfied, with.judicial review of the administrative determination. See Davis v. Commissioner, 115 T.C. 35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000). Section 6330(c) prescribes the matters that a person may raise at an Appeals Office hearing. In sum, Section 6330(c) provides that a person may raise collection issues such as spousal defenses, the appropriateness of the Commissioner's intended collection action, and possible alternative means of collection. Section 6330(c) (2) (B) provides that the existence and amount of the underlying tax liability can be contested at an Appeals Office hearing only if the person did not receive a notice of deficiency for the Heritage Reporting Corporation (202) 628-4888 12 tax in question or did not otherwise have an earlier opportunity to dispute the tax liability. See Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, supra. Section 6330(d) provides for judicial review of the administrative determination. In a case such as the present one where the underlying tax liabilities are not at issue and the taxpayer has expressed an interest in a collection alternative, the Court reviews the administrative determination of Respondent's Office of Appeals for abuse of discretion. Lundsford v. Commissioner, 117 T.C. 183, 185 (2001); Sego v. Commissioner, supra at 610; Goza v. Commissioner, 114 T.C. 176, 182 (2000). An appeals officer abuses his or her discretion if discretion is exercised arbitrarily, capriciously, or without sound basis in law, or if it is not justifiable in light of the facts and circumstances. Mailman v. Commissioner, 91 T.C. 1079, 1084 (1988); Willis v. Commissioner, T.C. Memo. 2003-302. The instant case. The only matter raised by Petitioner in the request for a hearing with Respondent's 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Office of Appeals was a collection alternative. 23 24 25 (Parenthetically, we note that the record is unclear regarding what type of collection alternative Petitioner may seek.) However, it is not an abuse of discretion for an Heritage Reporting Corporation (202) 628-4888 13 appeals officer to sustain a proposed levy where the taxpayer fails to provide requested information necessary to consider collection alternatives. See Lampf v. Commissioner, T.C. Memo. 2011-282, discussing in detail the requisite forms and supporting documentation that must be submitted in order to support consideration of a collection alternative such as an offer-in-compromise; Dinino v. Commissioner, T.C. Memo. 2009-284; Prater v. Commissioner, T.C. Memo. 2007-241; Chandler v. Commissioner, T.C. Memo. 2005-99. And, a fortiori, it is not an abuse of discretion for an appeals officer to sustain a proposed levy where the taxpayer does not submit, during the administrative process, a Form 656 or.does not otherwise present a specific collection alternative proposal for the Appeals officer to consider. See Pough v. Commissioner, 135 T.C. 344, 352 (2010); Kendricks v. Commissioner, 124 T.C. 69, 79 (2005). In the latter regard, it is of no moment that Petitioner, in the response filed December 28, 2011, did make a specific proposal regarding an installment payment arrangement 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20. because the time to have done so was during the 21 22 23 24 25 administrative process and not during the judicial phase of the case. Similarly, the fact that Petitioner also made a proposal in the supplemental response filed January 25, 2012 is of no consequence for the same reason. Finally, the fact that Petitioner's representative during the administrative Heritage Reporting Corporation (202) 628-4888 14 process may have failed to convey a proposal, together with the requisite documentation, to the appeals officer does not serve to impugn the discretion of the appeals officer in declining to allow a collection alternative. Under these circumstances, we conclude that the appeals officer did not act arbitrarily or capriciously, nor did she lack sound basis in law, nor was her decision unjustifiable in the light of the facts and circumstances before her. In short, the appeals officer did not abuse her discretion in recommending that the levy could proceed. IX. In view of the foregoing, we conclude that Respondent is entitled to judgment as a matter of law sustaining the notice of determination. Accordingly, we shall grant Respondent's motion, as supplemented, and thereby sustain the determination of Respondent's Office of Appeals permitting the proposed levy. X. In sum, we shall enter an order and decision in which we shall: (1) grant Respondent's motion for summary judgment filed November 16, 2011, and supplemented January 17, 2012; and (2) decide that Respondent may proceed 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 with the proposed levy to collect Petitioner's outstanding 22 23 24 25 federal employment tax liabilities for the second, third, and fourth quarters of the calendar year 2008, the taxable periods in issue, as determined by Respondent's Office of Appeals in its notice of determination dated October 12, Heritage Reporting Corporation (202) 628-4888 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 2010, upon which notice this case is based. XI. This concludes the Court's oral findings of fact and opinion in this case. (whereupon, at 1:01 p.m., the bench opinion in the above-entitled matter was concluded.) 15 // // // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888