Court Opinion

ID: 9410848
Source: CourtListenerOpinion
Date Created: 2023-07-24 19:03:18.197878+00
Date Added: 2024-06-11T17:16:36.881334
License: Public Domain

United States Tax Court

                                 T.C. Memo. 2023-94

           MICHAEL J. STEVENS AND ALEXIS M. STEVENS,
                           Petitioners

                                            v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                       —————

Docket No. 15761-21L.                                             Filed July 24, 2023.

                                       —————

Michael J. Stevens and Alexis M. Stevens, pro sese.

Derek W. Kelley and Michael E. D’Anello, for respondent.

                           MEMORANDUM OPINION

       GREAVES, Judge: In this collection due process (CDP) case,
petitioners seek review pursuant to section 6330(d) of the determination
by the Internal Revenue Service (IRS or respondent) to uphold notices
of intent to levy for tax years 2015 and 2016 (years at issue). 1
Respondent moved for summary judgment under Rule 121, contending
that there are no disputed issues of material fact and that his
determination to sustain the collection actions was proper as a matter
of law. For the reasons set forth below, we will grant respondent’s
motion.

        1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (Code), in effect at all relevant times, regulation references are
to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times,
and Rule references are to the Tax Court Rules of Practice and Procedure.

                                   Served 07/24/23
                                            2

[*2]                                 Background

       The following facts are based on the parties’ pleadings and motion
papers, the attached declarations and exhibits, and the administrative
record. See Rule 121(c). Petitioners resided in Massachusetts when the
petition was filed.

      Petitioners did not file timely Federal income tax returns for the
years at issue. Petitioners eventually filed delinquent returns for the
years at issue, but they did not pay the tax shown as due on the returns.
Respondent assessed the tax as shown on the delinquent returns along
with additions to tax plus accrued interest. Thereafter, petitioners
made some payments towards their tax liabilities; however, outstanding
balances remained for the years at issue for a total outstanding liability
of $100,629. 2

       To collect these outstanding liabilities, respondent issued
Letters 11, Intent to Seize Your Property or Rights to Property, to
petitioners. Petitioners timely submitted Form 12153, Request for a
Collection Due Process or Equivalent Hearing. Petitioners checked the
boxes to indicate that they were interested in an installment agreement
and an offer-in-compromise.

       The settlement officer reviewed petitioners’ file and verified that
all requirements of applicable law and administrative procedure had
been satisfied. On November 6, 2020, the settlement officer sent
petitioners Letter 4837, Appeals Received Your Request for a Collection
Due Process Hearing, confirming receipt of their CDP hearing request
and scheduling a telephone hearing for January 12, 2021. The
settlement officer explained that for her to consider an installment
agreement or an offer-in-compromise, petitioners needed to complete
Form 433–A, Collection Information Statements for Wage Earners and
Self-Employed Individuals, and provide supporting documents. As an
alternative, the settlement officer offered petitioners an installment
agreement with monthly payments of $1,128. 3

      Petitioners attended the CDP hearing but failed to provide a
completed Form 433–A. The settlement officer again offered petitioners

       2   All dollar amounts are rounded to the nearest dollar.
        3 This installment agreement offer was conditioned on “all returns [for

petitioners] have been filed and [petitioners] are current with [their] withholding
and/or estimated tax payments.”
                                           3

[*3] an installment agreement with the same terms as before, which
petitioners rejected. 4 The settlement officer granted petitioners’ request
for additional time to submit Form 433–A with supporting
documentation and Form 656, Offer-in-compromise.

      After the hearing, petitioners indicated to the settlement officer
that they would not apply for an offer-in-compromise. Petitioners
submitted an incomplete Form 433–A that lacked verification
documents, showing a “net difference” between their income and
expenses of $93 to pay their outstanding tax liabilities.

       The settlement officer adjusted income and expenses to match the
documentation that petitioners provided and local and national expense
standards. The settlement officer increased petitioners’ income by $429
to reflect Mrs. Stevens’s most recent paystub submitted with Form
433–A. As for petitioners’ expenses, the settlement officer made the
following reductions related to the national and local averages:
(1) reduction of vehicle operating expenses to $442, (2) reduction of
health insurance expenses to $806, and (3) reduction of out-of-pocket
health care costs to $224. The settlement officer eliminated “other
expenses” because petitioners failed to attach a list detailing the
expenses. Finally, the settlement officer added current tax expenses of
$1,667 to petitioners’ expenses. After she netted the adjusted income
against the adjusted expenses, Form 433–A showed that petitioners
could afford payments of $746 per month. The settlement officer offered
an installment agreement of this amount to petitioners, which they
rejected.

      The settlement officer granted petitioners an extension of time
until February 22, 2021, to verify the “other expenses” and provide
information as to why the settlement officer should deviate from the
national and local standards. Petitioners failed to offer any additional
documents. The settlement officer again offered the installment
agreement of $746 per month, and petitioners again rejected it. On
April 2, 2021, respondent issued petitioners a notice of determination
sustaining the proposed levies.

      Petitioners timely filed a petition with this Court for review of the
notice of determination, contending that they were not provided an
opportunity to enter into an alternative payment plan. On November 4,

       4 Petitioners also argued that they previously paid their 2016 tax liability, but

account transcripts show that they made no payments for that year.
                                    4

[*4] 2021, respondent filed a Motion for Summary Judgment. We
ordered petitioners to file a response, if any, by December 8, 2021, but
no response was filed.

                               Discussion

I.    Summary Judgment

       Absent an agreement to the contrary, our decision in this case is
appealable to the U.S. Court of Appeals for the First Circuit. See
§ 7482(b)(1)(G)(i), (2). That court has held that, where de novo review is
not applicable, the scope of review in a CDP case is confined to the
administrative record. See Murphy v. Commissioner, 469 F.3d 27, 31
(1st Cir. 2006), aff’g 125 T.C. 301 (2005). For the reasons discussed
below, de novo review is not available in this case, and petitioners have
offered no reason to believe that the administrative record is incomplete.
Accordingly, “summary judgment serves as a mechanism for deciding,
as a matter of law, whether the agency action is supported by the
administrative record and is not arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” Belair v.
Commissioner, 157 T.C. 10, 17 (2021) (quoting Van Bemmelen v.
Commissioner, 155 T.C. 64, 79 (2020)). We conclude that as a matter of
law, the determination is supported by the administrative record and is
not arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.

II.   Standard of Review

       Section 6330(b) permits a taxpayer to challenge an IRS levy
before the Appeals Office, and section 6330(d) provides for Tax Court
review of an Appeals Office determination. The Code does not prescribe
the standard of review that this Court should apply in reviewing an IRS
administrative determination in a CDP case; rather, we are guided by
our precedents. Where the validity of a taxpayer’s underlying liability
is properly at issue, we review the IRS determination de novo. See Goza
v. Commissioner, 114 T.C. 176, 181–82 (2000). Where a taxpayer’s
underlying liability is not properly at issue, we review the IRS
determination for abuse of discretion only. See id. at 182. Petitioners
did not allege in the petition or argue at any later point that the
underlying liabilities are at issue. Thus they have conceded this issue.
See Rule 331(b)(4); see also Seminole Nursing Home, Inc. v.
Commissioner, T.C. Memo. 2017-102, at *7 n.4, aff’d, 12 F.4th 1150
                                            5

[*5] (10th Cir. 2021). We review the settlement officer’s determination
for abuse of discretion.

III.    Abuse of Discretion

       In deciding whether the settlement officer abused her discretion
in sustaining the collection actions, we consider whether she (1) properly
verified that the requirements of applicable law or administrative
procedure have been met, (2) considered any relevant issues petitioners
raised, and (3) considered “whether any proposed collection action
balances the need for the efficient collection of taxes with the legitimate
concern of [petitioners] that any collection action be no more intrusive
than necessary.” See § 6330(c). In their petition, petitioners sought
review of the settlement officer’s determination regarding an offer-in-
compromise and an installment agreement. 5

       Section 7122(a) authorizes the IRS to compromise an outstanding
tax liability, and the regulations set forth three grounds for such a
compromise: (1) doubt as to liability; (2) doubt as to collectability; or
(3) promotion of effective tax administration.           See Treas. Reg.
§ 301.7122-1(b). Petitioners failed to properly raise the issue at the CDP
hearing because they presented no evidence regarding their eligibility
for an offer-in-compromise, failed to submit an offer-in-compromise, and
stated that they were abandoning the argument. See Moriarty v.
Commissioner, T.C. Memo. 2017-204, at *9, aff’d, No. 18-1077, 2018 WL
4924349 (6th Cir. Sept. 19, 2018). Therefore, the issue is not properly
before us.

       Section 6159(a) authorizes the Secretary of the Treasury or his
delegate to enter into a written agreement allowing the taxpayer to pay
tax in installments if the Secretary or his delegate determines that such
an agreement will facilitate full or partial collection of the liability.
Respondent generally has the discretion to accept or reject any proposed
installment agreement. See § 6159; Treas. Reg. § 301.6159-1(c)(1).

      A settlement officer does not abuse her discretion when she moves
forward with a determination after the taxpayer has an adequate period

        5 Petitioners do not assign error to the settlement officer’s verification that the

requirements of applicable law or administrative procedure had been met. Thus, they
waive this argument. See Rule 331(b)(4); see also Seminole Nursing Home, Inc., T.C.
Memo. 2017-102, at *7 n.4. Even if petitioners assigned error, the administrative
record supports a finding that the settlement officer properly verified compliance with
all applicable law and administrative procedure.
                                    6

[*6] to respond and fails to do so. See Pough v. Commissioner, 135 T.C.
344, 351 (2010) (citing Shanley v. Commissioner, T.C. Memo. 2009-17).
This principle applies in a case like this one, where petitioners failed to
provide information the settlement officer requested in order to verify
their Form 433–A. See Hartmann v. Commissioner, T.C. Memo.
2018-154, at *10–11, aff’d, 785 F. App’x 906 (3d Cir. 2019). Petitioners
rejected both installment agreement offers and did not offer an
alternative installment agreement. Petitioners agreed to a deadline of
February 22, 2021, to accept the installment agreement or submit
additional financial documentation. The settlement officer waited a
little over a month to issue the notice of determination, sustaining the
collection actions. The settlement officer did not abuse her discretion by
issuing the notice of determination when she did. See id. at *10 (“[A]n
SO is not required to negotiate indefinitely or wait any specific time
before issuing a determination.”).

       Petitioners appear to argue that the settlement officer erred in
calculating their ability to pay by reducing their expenses. The
settlement officer determined petitioners’ monthly income and expenses
on the basis of their Form 433–A, adjusting their income up and certain
reported expenses down to conform to applicable local and national
standards. Although petitioners appear to challenge those downward
adjustments, we have repeatedly held that a settlement officer does not
abuse her discretion by adhering to such standards, even if doing so
would force a taxpayer to change his or her lifestyle. See Speltz v.
Commissioner, 124 T.C. 165, 179 (2005), aff’d, 454 F.3d 782 (8th Cir.
2006); Friedman v. Commissioner, T.C. Memo. 2013-44, at *9–10 (noting
that the burden is on the taxpayer to justify departure from local
standards). Petitioners submitted no additional financial information
that would permit the settlement officer to deviate from the national
and local standards.

       The settlement officer offered petitioners two installment
agreements that reasonably balanced the need for efficient collection of
taxes with their legitimate concern that the collection action be no more
intrusive than necessary. Petitioners rejected these offers without
providing a counteroffer or additional financial documents. The
settlement officer did not abuse her discretion in calculating petitioners’
ability to pay. Finding no abuse of discretion in any respect, we will
grant respondent’s Motion for Summary Judgment under Rule 121.
                                   7

[*7]   To reflect the foregoing,

       An appropriate order and decision will be entered.