Court Opinion

ID: 5132295
Source: CourtListenerOpinion
Date Created: 2021-12-07 01:00:21.947129+00
Date Added: 2024-06-11T08:23:29.042541
License: Public Domain

Case: 21-60135     Document: 00516119055          Page: 1     Date Filed: 12/06/2021

              United States Court of Appeals
                   for the Fifth Circuit                              United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                                                     December 6, 2021
                                   No. 21-60135
                                                                        Lyle W. Cayce
                                                                             Clerk

   Francis I. Spagnoletti,

                                                            Petitioner—Appellant,

                                       versus

   Commissioner of Internal Revenue,

                                                            Respondent—Appellee.

                          Appeal from a Decision of the
                            United States Tax Court
                                 No. 10204-19L

   Before Higginbotham, Stewart, and Wilson, Circuit Judges.
   Per Curiam:*
          Under 26 U.S.C. § 6330(a), a taxpayer is guaranteed notice and a
   hearing before the Internal Revenue Service assesses a levy.             Francis
   Spagnoletti failed to pay over one million dollars in taxes he reported due on
   his 2015 and 2016 tax returns. Unsurprisingly, the IRS began collection
   proceedings. After his due process hearing, Spagnoletti asserted the IRS

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
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   failed to comply with the notice and determination requirements of § 6330
   and sued the Commissioner of the IRS. The Tax Court evaluated the record
   of the proceedings against Spagnoletti and, finding no violations of Section
   6330, awarded summary judgment to the Commissioner.                   Because
   Spagnoletti has failed to demonstrate the IRS abused its discretion by
   violating the provisions of § 6330, we AFFIRM.
                                         I.
          Spagnoletti’s tax returns for 2015 and 2016 reported $536,994 and
   $527,032 in taxes due, respectively. Neither return included payments. The
   2015 return was filed on October 17, 2016, two days after its extended due
   date of October 15, 2016. The 2016 return was filed on January 31, 2018,
   more than three months after the extended deadline of October 15, 2017.
   Because both returns were late, Spagnoletti was assessed penalties for failure
   timely to pay in addition to assessments for failure to pay estimated tax.
          On May 25, 2018, the IRS sent a “Notice of Intent to Levy and Notice
   of Your Rights to a Hearing” to Spagnoletti. At that time, Spagnoletti’s tax
   liability for 2015 and 2016 had increased, with interest, to $1,290,696.20.
   Spagnoletti timely filed a “Request for a Collection Due Process or
   Equivalent Hearing” on June 25, 2018. In the request, he asserted that he
   had called the IRS and asked for a 120-day installment plan. A Settlement
   Officer was assigned to Spagnoletti’s case, and she sent him a letter
   scheduling a telephonic hearing for October 25, 2018. The letter stated
   Spagnoletti could reschedule the hearing if that time was not convenient for
   him.
          After the Settlement Officer was unable to reach Spagnoletti on
   October 25, she sent a follow up letter the same day asking Spagnoletti to
   submit any information he wanted placed in the administrative file by
   November 9, 2018. Spagnoletti replied via fax on November 8, 2018,

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   acknowledging the Settlement Officer’s letter and stating “I simply would
   like to resolve this matter by paying the aforementioned tax periods in full
   within 120 days.        I realize that you normally request additional
   documentation to do an installment agreement as referenced in your letter;
   however, I am not requesting an installment agreement but rather full
   payment in 120 days.”
          The Settlement Officer called Spagnoletti on November 13, 2018, to
   hold the telephonic hearing. Spagnoletti reiterated his desire for a 120-day
   payment plan. But the Settlement Officer informed him that because he was
   not in compliance with filing requirements regarding estimated tax payments
   for the current tax year and because he had not provided any additional
   financial information, she could not negotiate a collection alternative. She
   then explained the procedures for closing his case and assessing a levy and
   informed Spagnoletti that it would take more than 120 days to begin the levy
   assessment. She stated that if he wanted to pay his outstanding liability
   within 120 days—as he ostensibly requested—he would have ample time to
   do so before the levy was assessed.
          Spagnoletti made no payments. Instead, 176 days after his hearing,
   the IRS issued a Notice of Determination sustaining the proposed levy
   against him. In response, Spagnoletti filed a petition in the Tax Court
   challenging the determination and alleging the IRS unreasonably delayed
   responding to his request for a simple 120-day agreement.              The
   Commissioner of the IRS, as respondent to Spagnoletti’s Tax Court petition,
   filed a motion for summary judgment asserting, inter alia, that all relevant
   laws and procedures had been followed in Spagnoletti’s case. Spagnoletti
   opposed the motion, contending that virtually none of the requirements for
   notice and an opportunity to be heard under 26 U.S.C. § 6330 had been
   followed by the IRS.

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          After examining the record, the Tax Court determined that the IRS
   had followed the requirements of § 6330. Specifically, the court found that
   Spagnoletti had not challenged his underlying tax liability during the due
   process hearing; he was not entitled to a Notice of Deficiency, because his
   tax liabilities were self-reported; it was not improper to issue one notice of
   levy encompassing the 2015 and 2016 tax years; and the Settlement Officer
   did not abuse her discretion in rejecting his request for a 120-day payment
   plan. Spagnoletti now appeals.
                                        II.
          “We apply the same standard of review to decisions of the Tax Court
   that we apply to district court decisions[,]” Green v. Comm’r, 507 F.3d 857,
   866 (5th Cir. 2007) (citation omitted), so we review Spagnoletti’s challenges
   to summary judgment de novo. Jones v. Comm’r, 338 F.3d 463, 466 (5th Cir.
   2003) (citing Perez v. United States, 312 F.3d 191, 193 (5th Cir. 2002)). In
   doing so, we apply the same standards as the Tax Court. “The Tax Court’s
   review is ‘limited to issues that were properly raised during the [collection
   due process] hearing.’” Estate of Duncan v. Comm’r, 890 F.3d 192, 198 (5th
   Cir. 2018) (quoting Keller Tank Servs. II, Inc. v. Comm’r, 854 F.3d 1178, 1189
   (10th Cir. 2017)).
          When “the underlying tax liability is properly at issue,” we review
   “the underlying liability de novo and review[] the other administrative
   determinations for an abuse of discretion.” Christopher Cross, Inc. v. United
   States, 461 F.3d 610, 612 (5th Cir. 2006) (internal quotation marks omitted)
   (quoting Jones, 338 F.3d at 466). In this context, abuse of discretion means
   “a clear abuse of discretion in the sense of clear taxpayer abuse and
   unfairness by the IRS[.]” Id. (internal quotation marks omitted) (quoting
   Robinette v. Comm’r, 439 F.3d 455, 459 (8th Cir. 2006)).

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                                         A.
          Spagnoletti initially asserts that because he challenged his underlying
   tax liability during his collection due process hearing, his case should have
   been reviewed de novo by the Tax Court. Consequently, he argues, the Tax
   Court erred by not considering his underlying liability after he raised it.
          Spagnoletti’s assertion borders on frivolous. Before the Tax Court,
   the Commissioner submitted records documenting the Settlement Officer’s
   interactions with Spagnoletti. These documents make clear that “liability
   was not raised as an issue for the period(s) being considered in this hearing.”
   Further, in his briefs filed in the Tax Court and on appeal, Spagnoletti
   concedes, “[I] did not raise an issue as to the reported tax due as reported on
   [my] tax returns for 2015 and 2016; however, [I] did request a 120 day period
   to pay the taxes as had been done for many years without an installment
   agreement.” As the record demonstrates, Spagnoletti never contested his
   underlying tax liability—he self-reported it for both tax years at issue. Thus,
   the Tax Court did not abuse its discretion in declining to review Spagnoletti’s
   tax liability de novo.
          Even if de novo review of Spagnoletti’s tax liability applied, on the
   record before us, the outcome would be the same. Spagnoletti reported how
   much money he owed the federal government in taxes. Both returns were
   filed late, leading to the imposition of penalties and interest. He never
   contested any of this, and the record gives no hint that the amounts he
   reported were incorrect. This issue lacks merit.
                                         B.
          Spagnoletti next asserts the IRS abused its discretion by violating 28
   U.S.C. § 6330(c)(3). This section requires that the Settlement Officer (1)
   obtain verification at the hearing that the requirements of law and
   administrative procedure have been met, (2) consider issues raised by the

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   taxpayer, and (3) consider “whether any proposed collection action balances
   the need for the efficient collection of taxes with the legitimate concern of the
   person that any collection action be no more intrusive than necessary.” 28
   U.S.C. § 6330(c)(3).
          Spagnoletti contends the Settlement Officer abused her discretion by
   not verifying that the IRS met legal and administrative requirements. He
   asserts the IRS violated relevant law by not providing him a “Notice of
   Deficiency” and by combining two tax years in his “Notice of
   Determination.”       These contentions are readily dispatched.              First,
   Spagnoletti was not entitled to receive a “Notice of Deficiency.” He was
   only assessed the unpaid taxes he self-reported on his return, and “[a] ‘notice
   of deficiency’ is only required in situations where there is a deficiency . . . and
   not in situations where, as here, a taxpayer fails to pay the amount of tax
   shown on the returns.” Jones, 338 F.3d at 466 (citing Perez, 312 F.3d at 196);
   see also 26 U.S.C. § 6201(a)(1). Likewise, imposition of statutory interest and
   additions to self-reported unpaid tax liabilities are not subject to deficiency
   procedures. 26 U.S.C. § 6665(a). And Spagnoletti provides no authority for
   his contention that the IRS violated the law by combining two tax years in the
   notice of levy it sent to him. Therefore, we decline to address this issue
   further. See Roy v. City of Monroe, 950 F.3d 245, 251 (5th Cir. 2020) (quoting
   Procter & Gamble Co. v. Amway Corp., 376 F.3d 496, 499 n.1 (5th Cir. 2004)).
   Spagnoletti has failed to demonstrate the Settlement Officer abused her
   discretion on this point.
          Next, Spagnoletti asserts that the Settlement Officer failed to consider
   issues raised by the taxpayer because she did not consider his request for a
   120-day repayment plan. But this is directly contradicted by the record.
   Spagnoletti’s case activity report documents the Settlement Officer’s
   conversations with him during which he raised the possibility of a 120-day
   repayment plan. She explained to Spagnoletti that because he had failed to

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   pay his estimated tax payments for the current tax year, she could not
   approve an alternative payment or settlement plan for his prior year liability.
   See Christopher Cross, Inc., 461 F.3d at 613 (stating that a “taxpayer must be
   current on payments” in order “to submit an offer in compromise”
   (quotation and internal quotation marks omitted)).           Instead of merely
   rejecting his offer, she also suggested to Spagnoletti that if he wanted to pay
   his liability within 120 days, he would have ample time to do so because it
   would take longer than that to close his case and assess the levy against him.
   Against this record, Spagnoletti utterly fails to demonstrate an abuse of
   discretion on this point.
          Finally, Spagnoletti contends that the Settlement Officer abused her
   discretion by not balancing the need for efficient tax collection against his
   legitimate concerns related to intrusiveness.          Once again, though,
   Spagnoletti’s position runs headlong into a contrary factual record. The
   “Notice of Determination” transmitted to Spagnoletti stated that because he
   had not responded to any of the IRS’s requests for information, the IRS could
   not consider any applicable collection alternatives besides a levy against him.
   This notice is reinforced by the other instances when the IRS explicitly told
   Spagnoletti—and he acknowledged—that the IRS could not entertain a
   settlement offer if he did not provide the necessary financial disclosures to
   the IRS.    Further, Spagnoletti’s preferred outcome, repaying his self-
   reported tax liability within 120 days, was available to him. The “Notice of
   Determination” sustaining the proposed levy against him was not sent until
   May 8, 2019, 176 days after his hearing. Rather than availing himself of the
   intervening time to pay his taxes as he had offered, Spagnoletti failed to pay
   a single penny. His conduct undermines any argument that the Settlement
   Officer abused her discretion, and this issue lacks merit.

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                                         III.
          At bottom, Francis Spagnoletti, a lawyer and an officer of the court,
   has manipulated the due process protections provided by 26 U.S.C.
   § 6330(a) and the courts to avoid paying over $1,000,000 in taxes on his 2015
   and 2016 income for half a decade—taxes that he himself initially reported as
   due. His appeal to this court amounts to an extension of that strategy of hair-
   splitting delay tactics. It is well past time to pay up.
                                                                  AFFIRMED.

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