Court Opinion

ID: 9958278
Source: CourtListenerOpinion
Date Created: 2024-04-08 19:01:46.046223+00
Date Added: 2024-06-11T08:18:08.249574
License: Public Domain

United States Tax Court

                                 T.C. Memo. 2024-39

                            ROBERT A. ZIENKOWSKI,
                                  Petitioner

                                             v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                       —————

Docket No. 9326-22L.                                                Filed April 8, 2024.

                                       —————

Robert A. Zienkowski, pro se.

Alexander S. McCormick, Mayer Y. Silber, and Kerrington A. Hall, for
respondent.

                            MEMORANDUM OPINION

       LAUBER, Judge: In this collection due process (CDP) case peti-
tioner seeks review pursuant to sections 6320 and 6330(d)(1) 1 of the de-
termination by the Internal Revenue Service (IRS or respondent) to sus-
tain a Notice of Federal Tax Lien (NFTL) filing. The notice relates to
petitioner’s unpaid tax liability for 2016. Respondent has filed a Motion
for Summary Judgment under Rule 121, contending that there are no
disputes of material fact and that the settlement officers (SOs) did not
abuse their discretion in sustaining the collection action. We agree and
accordingly will grant the Motion.

        1 Unless otherwise indicated, statutory references are to the Internal Revenue
Code, Title 26 U.S.C., 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 ref-
erences are to the Tax Court Rules of Practice and Procedure.

                                   Served 04/08/24
                                           2

[*2]                                Background

       The following facts are based upon the parties’ pleadings, Motion
papers, Declarations, and attached Exhibits, which include the admin-
istrative record of the CDP proceeding. See Rule 121(c). Petitioner re-
sided in Pennsylvania when he timely petitioned this Court.

       Petitioner timely filed Form 1040, U.S. Individual Income Tax Re-
turn, for 2016 but failed to pay the tax shown as due. As of November
2018, his unpaid balance for 2016 was $57,873. Near the time of his
CDP hearing, petitioner likewise had significant outstanding Federal
income tax liabilities for 2012–2015 ($63,709) and 2017 and 2018
($76,750).

       The IRS assessed the tax petitioner had reported for 2016 and
mailed him a timely notice and demand for payment. See § 6303. He
did not respond to that notice. On November 20, 2018, the IRS accord-
ingly filed an NFTL on Form 668, Notice of Federal Tax Lien. The NFTL
correctly stated petitioner’s name and address (in Bryn Mawr, Pennsyl-
vania), the tax period in issue (the 2016 calendar year), the date of as-
sessment (November 20, 2017), and the unpaid balance due ($57,873).
The NFTL indicated that it was filed with the prothonotary for Mont-
gomery County, Pennsylvania.

        On November 23, 2018, the IRS sent petitioner by certified mail
a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a
Hearing (lien notice). The lien notice attached a copy of the NFTL and
explained that the lien “attaches to all property you currently own and
to all property you may acquire in the future.” On December 10, 2018,
petitioner (through his counsel) timely requested a CDP hearing with
respect to the lien notice. 2

      In his hearing request petitioner checked the box stating that he
sought “withdrawal” of the lien, but he did not specify the grounds for
such withdrawal. He also checked the boxes marked “Installment

        2 Petitioner also received a Notice of Intent to Levy and Your Right to a Hearing

(levy notice) for tax years 2014–2016. However, he did not submit a timely hearing
request with respect to the levy notice, see § 6330(a)(3)(B), and he was thus granted an
“equivalent hearing.” Determinations made by the IRS in an “equivalent hearing” are
not subject to judicial review. See, e.g., Kennedy v. Commissioner, 116 T.C. 255, 263
(2001). Our review in this case is thus confined to the 2016 tax year and to the deter-
minations the IRS made during the CDP hearing convened with respect to the lien
notice.
                                        3

[*3] Agreement,” “Offer in Compromise,” and “I Cannot Pay Balance.”
He attached to his request a completed Form 656, Offer in Compromise
(OIC). However, the IRS returned this OIC to him because he failed to
submit the required partial payment. 3

        The processing of petitioner’s CDP case was delayed by the
COVID pandemic. In the interim, a revenue agent (RA) in the IRS Col-
lection Division reviewed the OICs he had previously submitted. Upon
examining the file documents, including the deed to his home, she no-
ticed that he did not reside in Montgomery County but rather in the
portion of Bryn Mawr situated in Delaware County. On February 11,
2020, she accordingly authorized the filing of another NFTL with the
prothonotary of Delaware County. This NFTL covered petitioner’s un-
paid tax liability for 2016 (which had grown to $69,032) and his unpaid
liabilities for 2017 and 2018 (totaling $76,750). The IRS concurrently
issued petitioner a Letter 3172 with respect to that NFTL filing. The
record does not indicate whether he requested a CDP hearing concern-
ing that notice.

        Petitioner’s representative submitted to the RA another OIC,
dated March 26, 2020, with an accompanying Form 433–A, Collection
Information Statement for Wage Earners and Self-Employed Individu-
als. This OIC proposed to compromise all of petitioner’s outstanding tax
liabilities for $20,000. The RA indicated in her case activity record her
belief that petitioner had submitted this OIC for the purpose of delay.

       On July 29, 2020, the CDP case was assigned to an SO (SO1) in
the IRS Independent Office of Appeals (Appeals). SO1 reviewed peti-
tioner’s file and verified that all requirements of applicable law and ad-
ministrative procedure had been satisfied. On September 1, 2020, peti-
tioner informed SO1 that he had recently submitted an OIC to the RA.
Petitioner faxed a copy of the OIC submission package to SO1 later that
month.

       Petitioner sold his home in Bryn Mawr in March 2021. The Col-
lection Division received information about the sale proceeds and ad-
justed its calculation of petitioner’s ability to pay accordingly. Peti-
tioner’s 2019 tax return had reported an annual salary of $75,000 and a
pension of $70,860 from the State of Ohio. After calculating monthly

        3 Petitioner submitted numerous OICs before and during the CDP proceeding.

All OICs other than the one dated March 26, 2020 (discussed below), were withdrawn
by petitioner or were returned to him by the IRS because documents were missing.
                                         4

[*4] expenses using the applicable national and local standards, the Col-
lection Division determined that he had a net available monthly income
of $2,119 and a reasonable collection potential in excess of $200,000. On
August 11, 2021, the Collection Division issued him a preliminary rejec-
tion letter rejecting his OIC while indicating that the OIC was being
forwarded to Appeals for final consideration in conjunction with his CDP
case.

       In August 2021 the case was reassigned to a second SO (SO2),
who reviewed petitioner’s file and verified that all requirements of ap-
plicable law and administrative procedure had been satisfied. Peti-
tioner’s 2020 tax return had reported that his salary (as town manager
in Pennsylvania) had doubled to $150,000, substantially increasing his
net available monthly income. SO2 nevertheless offered petitioner an
installment agreement (IA) consistent with the Collection Division’s fi-
nancial analysis, i.e., an agreement requiring payments of $2,119 per
month. During the ensuing six months petitioner submitted numerous
counterproposals, urging his entitlement to monthly expenses in excess
of national and local standards, questioning the treatment of various
expense items (e.g., credit card payments, health insurance costs, hous-
ing and utilities costs, and student loan expenses), and urging that his
ability to pay was adversely affected by his divorce.

       On December 6, 2021, after receiving additional information from
petitioner, SO2 revised his financial analysis. On January 19, 2022, he
offered petitioner an IA calling for payments of $2,095 per month for 72
months. Petitioner rejected that proposal, countering with an offer to
pay $1,000 per month. SO2 rejected that offer but saw merit in peti-
tioner’s argument that he needed time to adjust his finances after his
divorce. SO2 accordingly proposed a 72-month IA that would fully dis-
charge petitioner’s outstanding tax liabilities for all years—totaling
more than $150,000—but require monthly payments of only $1,000 for
the first year, rising to $2,400 for the next five years. Petitioner coun-
tered with a “partial pay” installment agreement (PPIA). 4 SO2 rejected
that offer, reiterating his determination that petitioner had the ability
to pay his tax liabilities in full.

     On February 24, 2022, petitioner’s representative met with SO2’s
Appeals Team Manager (ATM). The ATM agreed with SO2 that

       4 A PPIA is an IA whereby the taxpayer agrees to pay only part of the total
liability. §§ 6159(a), 7122. Under a PPIA, “[t]he taxpayer must agree to pay the max-
imum monthly payment based upon the taxpayer’s ability to pay.” Internal Revenue
Manual (IRM) 5.14.2.2.1(9) (Apr. 26, 2019).
                                    5

[*5] petitioner could not claim monthly expenses for his ex-spouse’s
health insurance premiums, his daughter’s student loan payments, or
housing expenses in excess of the national and local standards.

       Petitioner was afforded the opportunity to provide additional doc-
umentation, but he supplied none. SO2 held open, until March 3, 2022,
his offer of an IA calling for 12 monthly payments of $1,000 followed by
60 monthly payments of $2,400. Having heard nothing further from pe-
titioner or his representative by that date, SO2 decided to close the case.

       On March 31, 2022, Appeals issued petitioner a notice of determi-
nation sustaining the NFTL filing for 2016. It explained that his OIC
(offering to compromise all of his outstanding tax liabilities for $20,000)
and his various IA proposals (offering to pay his tax liabilities only in
part) were both rejected because he had the ability to pay his liability in
full. Noting that petitioner “did not raise a specific issue regarding the
filed Notice of Federal Tax Lien,” Appeals nevertheless “considered
whether any of the criteria for allowing withdrawal of the lien existed in
your case.” On that point, Appeals concluded: “There is nothing in the
Collection administrative file and you have not provided any additional
information that indicates you meet any of the conditions outlined in
[section 6323(j)]. As a result, the [SO] determined that the [NFTL] was
appropriately filed and withdrawal of the lien was not warranted.”

       Acting through his attorney, petitioner timely petitioned this
Court in April 2022, contending that SO2 abused his discretion in re-
jecting his proposed OIC and IAs and sustaining the collection action.
In August 2022 we granted a Motion to Withdraw filed by petitioner’s
counsel, who represented that she and petitioner “ha[d] reached an im-
passe as to an approach to addressing this Petition.” On August 31,
2023, respondent filed a Motion for Summary Judgment, urging that
SO2 did not abuse his discretion in rejecting petitioner’s proposed col-
lection alternatives and in sustaining the NFTL filing.

       Petitioner responded to the Motion on October 10, 2023. The sole
argument he advances in his Response is that SO2 “abused his discre-
tion in sustaining an improperly filed lien.” In a nutshell, he argues that
the November 2018 NFTL filing was invalid because it was not filed in
Delaware County, where his residence on that date was located, but ra-
ther in Montgomery County.
                                    6

[*6]                           Discussion

I.     Summary Judgment Standard

       The purpose of summary judgment is to expedite litigation and
avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp.
v. Commissioner, 90 T.C. 678, 681 (1988). The Court may grant sum-
mary judgment when there is no genuine dispute as to any material fact
and a decision may be rendered as a matter of law. Rule 121(a)(2);
Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d,
17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary
judgment, we construe factual materials and inferences drawn from
them in the light most favorable to the nonmoving party. Sundstrand
Corp., 98 T.C. at 520. However, the nonmoving party may not rest upon
mere allegations or denials in his pleadings but instead must set forth
specific facts showing that there is a genuine dispute for trial. Rule
121(d); see Sundstrand Corp., 98 T.C. at 520. We find that there exist
no genuine disputes of material fact and that summary adjudication is
appropriate.

II.    Standard of Review

       Neither section 6320(c) nor section 6330(d)(1) prescribes the
standard of review that this Court should apply in reviewing an IRS
administrative determination in a CDP case. The general parameters
for such review are marked out by our precedents. Where (as here) the
taxpayer’s underlying tax liability is not at issue, the Court reviews the
IRS decision for abuse of discretion. Goza v. Commissioner, 114 T.C.
176, 182 (2000). Abuse of discretion exists when a determination is ar-
bitrary, capricious, or without sound basis in fact or law. See Murphy v.
Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir.
2006).

III.   Abuse of Discretion

       In deciding whether the SOs abused their discretion, we consider
whether they (1) properly verified that the requirements of applicable
law or administrative procedure have been met, (2) considered any rel-
evant issues petitioner raised, and (3) considered “whether any proposed
collection action balances the need for the efficient collection of taxes
with the legitimate concern of [petitioner] that any collection action be
no more intrusive than necessary.” § 6330(c)(3); see § 6320(c). We con-
clude that the SOs satisfied all of these statutory requirements.
                                      7

[*7]   A.     Verification

        Section 6330(c)(1) requires the SO to “obtain verification . . . that
the requirements of any applicable law or administrative procedure
have been met.” Petitioner contends that the NFTL filed in November
2018 was invalid because it was filed in the wrong county. In so arguing,
he cites section 6323(f)(1)(A)(i), which provides that an NFTL shall be
filed “in one office within the State (or the county, or other governmental
subdivision), as designated by the laws of such State, in which the prop-
erty subject to the lien is situated.” Because petitioner’s residence was
then located in Delaware County, he urges that the NFTL was invalid
because it was filed in neighboring Montgomery County. Neither peti-
tioner nor his representative advanced this contention at any point dur-
ing the CDP proceeding. However, we are obligated to address satisfac-
tion of the verification requirement whether or not the taxpayer raised
it in the CDP proceeding. See Hoyle v. Commissioner, 131 T.C. 197,
202–03 (2008), supplemented by 136 T.C. 463 (2011).

        Section 6321 provides that, “[i]f any person liable to pay any tax
neglects or refuses to pay the same after demand,” then a lien in favor
of the United States arises and attaches to “all property and rights to
property, whether real or personal, belonging to such person.” The lien
arises automatically at the time of the assessment and continues until
the liability is fully satisfied or becomes unenforceable. See § 6322; Es-
tate of Brandon v. Commissioner, 133 T.C. 83, 85 (2009).

        “An NFTL is valid if it is filed on Form 668, Notice of Federal Tax
Lien . . . , and includes the identity of the taxpayer, the tax liability giv-
ing rise to the lien, and the date the assessment arose.” Miccosukee
Tribe of Indians of Fla. v. Commissioner, T.C. Memo. 2015-216, 110
T.C.M. (CCH) 446, 448; Treas. Reg. § 301.6323(f)-1(d). “If these require-
ments are met, the NFTL is valid notwithstanding any other provision
of law regarding the form or content of a notice of lien, including State
law.” Miccosukee Tribe of Indians, 110 T.C.M. (CCH) at 448–49. The
NFTL that the IRS filed in November 2018 was made on Form 668, iden-
tified petitioner as the taxpayer, properly identified the tax liability giv-
ing rise to the lien, and noted the correct assessment date. The NFTL
was therefore valid.

       Petitioner has supplied no authority (and we have found none) for
the proposition that an NFTL is invalid if filed in a governmental sub-
division other than the subdivision in which the taxpayer’s residential
property is located. Conceivably, the fact that the initial NFTL for 2016
                                    8

[*8] was filed in Montgomery County rather than in neighboring Dela-
ware County might have complicated an IRS effort to foreclose the lien
on petitioner’s residence (which he sold in 2021). See Berkery v. Com-
missioner, T.C. Memo. 2011-57, 101 T.C.M. (CCH) 1258, 1260 (noting
that the purpose of filing an NFTL is to protect the Government’s inter-
est in a taxpayer’s property against the claims of other creditors). But
the lien attached not only to the property petitioner then owned but also
to “all property [he might] acquire in the future.”

       The Letter 3172, to which the NFTL filing was attached, was like-
wise valid, properly informing petitioner of the collection action in ques-
tion. Section 6320 merely requires the IRS to send notice to the taxpayer
that it has filed an NFTL and inform the taxpayer of his right to seek a
CDP hearing. See § 6320(a)(1), (2), (3)(B). “Minor defects may be over-
looked where the taxpayer knows of and pursues the right to adminis-
trative and judicial review.” Miccosukee Tribe of Indians, 110 T.C.M.
(CCH) at 448; Graham v. Commissioner, T.C. Memo. 2008-129,
95 T.C.M. (CCH) 1504, 1509. We accordingly conclude that the SOs
properly verified that all requirements of applicable law and adminis-
trative procedure were satisfied.

      B.     Proposed Installment Agreements

       In his Petition, petitioner urged that SO2 erred in rejecting his
proposed IAs and PPIA. Section 6159(a) authorizes the IRS to enter into
a written agreement allowing a taxpayer to pay a tax liability in install-
ments if it concludes that the agreement “will facilitate full or partial
collection of such liability.” The decision to accept or reject an IA lies
within the Commissioner’s discretion. See Thompson v. Commissioner,
140 T.C. 173, 179 (2013).

       In evaluating petitioner’s offers, SO2 adjusted his reported ex-
penses to conform to applicable local and national cost-of-living stand-
ards. Although petitioner questioned the downward adjustments SO2
made here, we have repeatedly held that an SO does not abuse his dis-
cretion by adhering to such standards. See Ansley v. Commissioner, T.C.
Memo. 2019-46, 117 T.C.M. (CCH) 1242, 1246; Friedman v. Commis-
sioner, T.C. Memo. 2013-44, 105 T.C.M. (CCH) 1288, 1290. It was peti-
tioner’s burden to justify a departure from these standards. See Fried-
man, 105 T.C.M. (CCH) at 1290. SO2 reasonably concluded that peti-
tioner had not met that burden, and petitioner advanced no argument
to the contrary in his Response to the Motion for Summary Judgment.
                                           9

[*9] Petitioner also proposed a PPIA offering to pay part (but not all)
of his outstanding liability. The Commissioner has issued guidelines,
set forth in the IRM, for settlement officers to follow in considering such
proposals. See Thompson, 140 T.C. at 179. A prerequisite for approval
of a PPIA is that the taxpayer be unable to pay his liability in full. IRM
5.14.2.1.1(2) (Apr. 26, 2019). Given SO2’s calculation showing that pe-
titioner was able to pay his liabilities in full, there was no abuse of dis-
cretion in rejecting the PPIA. 5

        C.      Lien Withdrawal

        Petitioner contends that SO2 abused his discretion in declining to
withdraw the NFTL filing. Section 6323(j) authorizes withdrawal if
(1) “the filing of such notice was premature or otherwise not in accord-
ance with administrative procedures,” (2) the taxpayer has entered into
an IA that renders the NFTL unnecessary, (3) withdrawal of the NFTL
“will facilitate the collection of the tax liability,” or (4) withdrawal of the
NFTL “would be in the best interests of the taxpayer (as determined by
the National Taxpayer Advocate) and the United States.” § 6323(j)(1).

       In his CDP hearing request petitioner checked the box requesting
“withdrawal.” But neither he nor his representative subsequently artic-
ulated any grounds to support lien withdrawal or submitted any evi-
dence that would justify it. There is nothing in SO2’s case activity record
to suggest that this issue was raised at any point during the CDP hear-
ing. Indeed, the notice of determination indicated that petitioner “did
not raise a specific issue regarding the filed Notice of Federal Tax Lien”
and had provided no “additional information that indicates you meet any
of the conditions outlined in [section 6323(j)].”

       Petitioner advanced this argument for the first time in his Re-
sponse to the Motion for Summary Judgment, urging that the NFTL be
withdrawn because it was filed in the wrong county. Not only was this
issue raised too late; as previously discussed, filing an NFTL in a county

        5 In his Petition, petitioner urged that the SOs abused their discretion in re-

jecting his OIC, which offered to compromise for $20,000 his tax liabilities for all open
tax years. But petitioner made substantially larger offers in each of the IAs he sub-
mitted subsequently, indicating that $20,000 was not the limit of his ability to pay.
The SOs plainly did not abuse their discretion in rejecting that OIC.
                                          10

[*10] other than that in which the taxpayer resides does not invalidate
the NFTL. See Miccosukee Tribe of Indians, 110 T.C.M. (CCH) at 448. 6

        Finally, even if petitioner could demonstrate that he was eligible
for lien withdrawal, “[s]ection 6323(j)(1) is permissive, and nothing in it
requires [the IRS] to withdraw the NFTL.” Berkery, 101 T.C.M. (CCH)
at 1260; see Treas. Reg. § 301.6323(j)-1(c) (“If the Commissioner deter-
mines conditions for withdrawal [of an NFTL] are present, the Commis-
sioner may (but is not required to) authorize the withdrawal.”). For all
these reasons, SO2 did not abuse his discretion in declining to withdraw
the NFTL filing.

       Finding no abuse of discretion in any respect, we will grant re-
spondent’s Motion for Summary Judgment and sustain the proposed col-
lection action. We note that petitioner is free to submit to the IRS at
any time, for its consideration and possible acceptance, a collection al-
ternative in the form of an IA or an OIC, supported by the requisite fi-
nancial information. 7

        To reflect the foregoing,

        An appropriate order and decision will be entered.

        6 The IRS may withdraw an NFTL if that action will facilitate collection of the

tax. See § 6323(j)(1)(C). Withdrawal may facilitate collection (for example) where the
taxpayer demonstrates that the NFTL impairs his ability to hold a job and earn in-
come. But the taxpayer must provide substantiating evidence along these lines to Ap-
peals. See Klika v. Commissioner, T.C. Memo. 2012-225, 104 T.C.M. (CCH) 153, 155.
When a taxpayer fails (as here) to present such evidence to Appeals, he is precluded
from advancing the argument in this Court. LG Kendrick, LLC v. Commissioner,
146 T.C. 17, 39 (2016), aff’d, 684 F. App’x 744 (10th Cir. 2017); Treas. Reg.
§ 301.6320-1(f)(2), Q&A-F3.
         7 Petitioner asserts that he has suffered hardship “because of this lien remain-

ing in Montgomery County,” including a $31,000 reduction in annual income occa-
sioned by loss of his job. As noted in the text, petitioner was required to advance any
argument in support of lien withdrawal during the CDP hearing, not for the first time
in this Court. If petitioner’s financial circumstances have meaningfully changed since
the notice of determination was issued, he is free to submit to the IRS a new proposal
for a collection alternative.