Opinion ID: 794995
Heading Depth: 3
Heading Rank: 1

Heading: The Kindreds' Right to Submit an Offer in Compromise

Text: 17 The Kindreds initially argue that they should have been permitted to submit an offer in compromise premised on doubt as to liability during the CDP hearing process under IRC § 6330(c)(2)(A)(iii). The failure to entertain such an offer, they assert, constitutes an abuse of discretion on the part of the appeals officer. In addition, they take issue with the Tax Court's determination that the Kindreds, by attempting to introduce collection alternatives, were simply trying to challenge their underlying tax liability under the guise of an offer in compromise based on doubt as to liability. 18 As stated above, IRC § 6330(c)(2)(A) gives taxpayers faced with an IRS levy the right to proffer collection alternatives at the CDP hearing stage, including offers-in-compromise. 20 This right, however, carries with it certain obligations on the part of the taxpayer. For instance, Treas. Reg. § 301.6330-1(e)(1) states that [t]axpayers will be expected to provide all relevant information requested by [the appeals officer], including financial statements, for its consideration of the facts and issues involved in the hearing. In addition, the regulations implore taxpayer participation in the CDP hearing process. Indeed, Treas. Reg. § 301.6330-1(e)(3)A-E8(ii) specifically provides that, taxpayers are encouraged to discuss their concerns with the IRS office collecting the tax. Suggested collection plans submitted during a CDP hearing are weighed according to whether [the] collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection be no more intrusive than necessary. Treas. Reg. § 301.6330-1(e)(3)A-E8(i). The decision to entertain, accept or reject an offer in compromise is squarely within the discretion of the appeals officer and the IRS in general. See IRC § 7122; Treas. Reg. § 301.7122-1(c)(1). 19 The Kindreds' argument that they should have been allowed to submit an offer in compromise is frivolous. To begin with, the Tax Court's review, as well as our review, is strictly confined to only those issues which were originally raised during the CDP hearing. See Treas. Reg. § 301.6330-1(f)(2), Q-F5 & A-F5; Living Care v. United States, 411 F.3d 621, 625 (6th Cir.2005). Although the record of the CDP hearing proceedings in this case is sparse, 21 it is clear that the Kindreds failed to ever actually make an offer in compromise, much less submit one to the IRS appeals officer for consideration in accordance with the requirements set forth in IRC §§ 6330(c)(3) and 7122. Without an actual offer in compromise to consider, it would be most difficult for either the Tax Court or this court to conclude that the appeals officer might have abused his discretion; for the appeals officer could not mistakenly reject something which has not been presented to him. See Kendricks v. Commissioner, 124 T.C. 69, 79, 2005 WL 546430 (2005) (holding that: Since there was no offer in compromise before [the appeals officer], there was no abuse in discretion in [the officer] failing to consider an offer in compromise.); Magana v. Commissioner, 118 T.C. 488, 493, 2002 WL 1150745 (2002) (holding that it would be anomalous . . . to conclude that [an] Appeals Office abused its discretion under section 6330(c)(3) in failing to grant relief, or in failing to consider arguments, issues, or other matters not raised by the taxpayers or not otherwise brought to the attention of [an] Appeals Office during a CDP hearing). 20 The Kindreds attempt to dodge the proverbial bullet, however, by stating that the IRS appeals officer would not permit them to submit an offer in compromise. However, we have been unable to discern anything in the record which would lend support to this statement or lead us to believe that the appeals officer did any such thing. Indeed, it is eminently clear that the Kindreds failed to participate in the CDP hearing process in any meaningful way. For example, it is undisputed that, when asked to do so, the Kindreds failed to provide financial information of any kind to the appeals officer as required by Treas. Reg. § 301.6330-1(e)(1). This alone would have provided the appeals officer with a reason to refuse to consider any proffered offer in compromise. See Olsen, 414 F.3d at 151 (stating that failure to respond to inquiries for information in a timely manner constitutes grounds for giving no further consideration to an offer in compromise.). 21 What's more, the Kindreds even failed to attend their scheduled hearing in Las Vegas, Nevada, on January 15, 2004. The appeals officer, if he had seen fit, could have issued a determination that day sustaining the levy and denying the Kindreds any additional time to submit an offer in compromise. However, he did not do so and instead offered the Kindreds another fourteen days—until January 29, 2004—to submit the requested financial information along with an offer in compromise. True to form, the Kindreds failed to do so and, thus, on February 13, 2004 a determination sustaining the levy was issued. 22 The only explanation given for this complacency was offered by the Kindreds' representative during the administrative proceedings, who stated: I explained to [the appeals officer] that I would require adequate time, based upon the near lack of records and need to acquire information from the Service itself, to prepare any [offer in compromise]. He [(the appeals officer)] extended the hearing until January 29, 2004 but would not give any additional time for preparing the [offer in compromise]. I was unable to submit an [offer in compromise]. This statement, at the very least, serves to undermine the veracity of the Kindreds' claim that they were not permitted to submit an offer in compromise. To the contrary, their own representative's statement illustrates the fact that they were given numerous opportunities to submit the required financial information and/or an offer in compromise, but failed to do so. The fact that the Kindreds were unable, or unwilling, to timely supply the financial information that the regulations require in order for the IRS to consider an offer in compromise, see Treas. Reg. § 301.6330-1(e)(1), falls far short of establishing that the appeals officer's determination was hasty under the circumstances 23 and certainly does not mean that he abused his discretion by refusing to allow the Kindreds to submit such an offer. 24 See, e.g., Olsen, 414 F.3d at 151; Murphy v. Commissioner, 125 T.C. 301, 323, 2005 WL 3555953 (2005) (holding that it was reasonable for appeals officer to sustain levy where the taxpayer had a two month period of time to submit a reasonable offer in compromise, but failed to do so); Chandler v. Commissioner, T.C. Memo 2005-99 (2005) (when petitioner failed to supply requested financial information after being given six weeks to do so it was not an abuse of discretion for the appeals officer to issue a determination sustaining a levy); Roman v. Commissioner, T.C. Memo 2004-20 (2004) (reasonable for appeals officer to sustain levy where, after being give six weeks to do so, the taxpayer failed to supply the requisite financial information in conjunction with an offer in compromise). 22 Also, while our review of the Tax Court's decision is de novo, we pause for the sake of completeness and note that the Tax Court had good reason to believe that the Kindreds wished to submit an offer in compromise only as a guise to lodge an impermissible collateral attack on their underlying liability. As recently as their brief before this court the Kindreds maintained their former intention to introduce an offer which would be predicated on doubt as to liability. It is true that the Kindreds would be precluded from challenging their underlying liability during a CDP proceeding, see infra pp. 699-700. However, as discussed above we are convinced that there are more fundamental reasons for concluding that the appeals officer did not abuse his discretion in not considering an offer in compromise, e.g., because no offer was in front of him and because the Kindreds failed to supply the necessary financial information.