Court Opinion

ID: 6500041
Source: CourtListenerOpinion
Date Created: 2022-07-14 19:01:05.954683+00
Date Added: 2024-06-11T09:15:23.294025
License: Public Domain

United States Tax Court

                                 T.C. Memo. 2022-76

                       NOEL CHRISTOPHER KNIGHT,
                               Petitioner

                                            v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                       —————

Docket No. 11719-20L.                                             Filed July 14, 2022.

                                       —————

Noel Christopher Knight, pro se.

Sharyn M. Ortega, Brian A. Pfeifer, and Daniel J. Kleid, for respondent.

                           MEMORANDUM OPINION

       LAUBER, Judge: In this collection due process (CDP) case peti-
tioner seeks review pursuant to sections 6320(c) and 6330(d)(1) of deter-
minations by the Internal Revenue Service (IRS or respondent) to up-
hold collection actions. 1 Respondent has filed a Motion for Summary
Judgment, contending that petitioner is not entitled to challenge his un-
derlying tax liability and that the settlement officer did not abuse her
discretion. We agree and accordingly will grant the Motion.

                                      Background

      The following facts are derived from the parties’ pleadings and
motion papers, including accompanying declarations and exhibits. See
Rule 121(b). These declarations and exhibits include a copy of the

        1 Unless otherwise indicated, all statutory references are to the Internal Reve-

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

                                   Served 07/14/22
                                     2

[*2] administrative record of the CDP proceeding. Petitioner is a lawyer
who resided in California when he filed his Petition.

       Petitioner has unpaid income tax liabilities for 2011–2017. As of
February 2021 these liabilities totaled about $95,000. In an attempt to
collect this debt the IRS issued him notices of intent to levy (levy notices)
as follows:

                       Tax Year          Levy Notice Issued
                         2011               03/11/2014
                         2012               03/11/2014
                         2013               03/06/2017
                         2014               06/26/2018
                         2015               06/26/2018
                         2016               06/26/2018
                         2017               04/15/2019

On April 23, 2019, the IRS sent petitioner a notice of Federal tax lien
(NFTL) filing (lien notice) for 2011–2017.

       In 2018 petitioner requested and received a CDP hearing for the
levy notices associated with tax years 2014–2016. In May 2019, after
receiving the lien notice and the 2017 levy notice, he requested another
CDP hearing, stating that he was disputing the levy and lien notices for
all seven years. As the basis for his challenge, he asserted that “IRS
figures are incorrect,” that his representative had “calculated [the] cor-
rect figure[s],” and that amended returns would be submitted accord-
ingly.

       The IRS determined that petitioner’s hearing request was un-
timely as to the levy notices for 2011–2013, because those notices had
been issued in 2014 and 2017. See § 6330(a)(3)(B) (requiring that hear-
ing be requested within 30 days of levy notice). The IRS determined
that petitioner likewise was not entitled to a hearing regarding the levy
notices for 2014–2016 because he had been afforded a CDP hearing in
2018 with respect to those notices. The IRS thus informed petitioner
that his hearing would be limited to the levy notice for 2017 and the lien
notices for 2011–2017.

      Petitioner’s case was assigned to a settlement officer (SO) in the
IRS Independent Office of Appeals (Appeals). She reviewed the file and
                                    3

[*3] verified that all requirements of applicable law and administrative
procedure had been met. On December 23, 2019, the SO sent petitioner
and his representative letters scheduling a telephone conference. The
letters noted that, in order for Appeals to consider an underlying liabil-
ity challenge, petitioner should submit amended tax return(s) within 21
days. If petitioner desired consideration of a collection alternative, he
was instructed to submit specified financial information and proof that
he had made estimated tax payments for 2019. He submitted none of
this documentation before the telephone conference.

       Petitioner’s representative participated in the telephone confer-
ence on January 30, 2020. The SO explained why petitioner was ineli-
gible for a CDP hearing regarding the levy notices for 2011–2016. The
representative told the SO that petitioner was waiting for the IRS to
accept an amended return he had filed for 2015 and that he intended to
file amended returns for 2016–2018 as well. The representative said
that petitioner was interested in a payment plan for 2011–2014, the
years for which he did not dispute his liabilities.

       The SO explained that any installment agreement had to cover
petitioner’s outstanding balance for all open years. The SO estimated
an acceptable monthly payment as $1,620 but was told that petitioner
probably could not pay that amount. In that event petitioner was in-
structed to submit Form 433–A, Collection Information Statement for
Wage Earners and Self-Employed Individuals, so that the SO could de-
termine his ability to pay. Petitioner’s representative was directed to
submit amended returns and a completed Form 433–A promptly. Oth-
erwise the SO would close the case.

       The SO received no documents or communication from petitioner
or his representative during the ensuing two months. On March 23,
2020, after balancing the appropriateness of the collection action against
its intrusiveness, the SO prepared to close the case. Her efforts were
interrupted by an IRS-wide suspension on collection activity owing to
the COVID-19 pandemic. On August 18, 2020, still having received
nothing from petitioner or his representative, Appeals issued a notice of
determination sustaining the NFTL filings for 2011–2016 and a sepa-
rate notice sustaining the NFTL filing and proposed levy for 2017.

       Petitioner timely petitioned this Court. The only issue he raised
in his Petition was the correct amount of his underlying tax liability for
2015. He asserted that the IRS erroneously attributed to him “nearly
                                    4

[*4] $100,000+ of separation/divorce related income,” funds that he al-
leged were not his income but were held in a client trust account.

       On March 17, 2021, respondent filed a Motion for Summary Judg-
ment. Respondent contends that he is entitled to summary judgment
because petitioner’s underlying tax liabilities are not at issue and be-
cause the SO did not abuse her discretion in sustaining the collection
actions. Petitioner timely opposed the Motion, again advancing as his
sole argument a challenge to his underlying tax liability for 2015.

                               Discussion

A.    Summary Judgment Standard

       Our decision in this case is most likely appealable to the U.S.
Court of Appeals for the Ninth 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 Keller
v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff’g in part T.C.
Memo. 2006-166, and aff’g in part, vacating in part decisions in related
cases. For the reasons discussed below, de novo review is not applicable
in this case, and petitioner has given no reason for us 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 arbi-
trary, 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)).

B.    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 the validity
of a taxpayer’s underlying liability is properly at issue, we review the
IRS determination de novo. Sego v. Commissioner, 114 T.C. 604, 610
(2000); Goza v. Commissioner, 114 T.C. 176, 181–82 (2000). Where the
taxpayer’s underlying liability is not in dispute, we review the IRS deci-
sion for abuse of discretion only. Jones v. Commissioner, 338 F.3d 463,
466 (5th Cir. 2003); Goza, 114 T.C. at 182. Abuse of discretion exists
when a determination is arbitrary, 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).
                                          5

[*5] C.     Underlying Liability

        The only issue raised in petitioner’s Petition and in his Opposition
to respondent’s Motion is the correct amount of his underlying tax lia-
bility for 2015. Under Rule 34(b)(4), “[a]ny issue not raised in the [Peti-
tion’s] assignments of error shall be deemed to be conceded.” We con-
clude that petitioner has waived any challenge to his underlying liabili-
ties for 2011–2014, 2016, and 2017.

        As for 2015, a taxpayer may challenge his underlying liability at
a CDP hearing only if he did not receive a statutory notice of deficiency
for that liability or did not otherwise have a prior opportunity to dispute
it. §§ 6320(c), 6330(c)(2)(B); Sego, 114 T.C. at 609. Petitioner had a prior
opportunity to dispute his 2015 income tax liability, viz., during the
2018 CDP hearing that he was afforded regarding the levy notices for
2014–2016. During that prior hearing he was entitled to challenge his
underlying liability for 2015.

        An earlier CDP hearing is considered a prior opportunity to chal-
lenge the taxpayer’s underlying liability for whatever tax years were
then in issue. See Treas. Reg. §§ 301.6320-1(e)(3), Q&A–E2, 301.6330-
1(e)(3), Q&A–E2. This is true whether or not the taxpayer actually
raised his underlying liability at the prior hearing. See § 6330(c)(4)(A);
Bell v. Commissioner, 126 T.C. 356, 358 (2006); Treas. Reg. §§ 301.6320-
1(e)(1), 301.6330-1(e)(1). The SO explained to petitioner that he was not
entitled to a hearing regarding the 2014–2016 levy notices because that
would be an improper “second request.” See § 6330(b)(2) (providing that
“[a] person shall be entitled to only one hearing . . . with respect to the
taxable period” for which there is an unpaid tax). And the SO correctly
noted in her case activity record that petitioner’s “[p]rior CDP levy ap-
peal request was received for 2014–2016 tax years, and the [taxpayer]
cannot raise the liability issue [for those years] under CDP.” Because
petitioner challenges his underlying liability only for 2015—which we
find that he cannot do—we will review the SO’s actions for abuse of dis-
cretion only. 2

         2 In opposing summary judgment petitioner contends that there is a dispute of

fact as to whether he authorized his representative during the CDP hearing to forgo
an underlying liability challenge by relying exclusively on the filing of amended re-
turns. Because the 2018 CDP hearing barred petitioner from challenging his 2015
liability on any ground, this factual dispute (assuming it to exist) is immaterial. In
any event petitioner’s representative did not submit to the SO—despite the SO’s
                                         6

[*6] D.     Abuse of Discretion

       In deciding whether the SO abused her discretion in sustaining
the collection action, we consider whether she (1) properly verified that
the requirements of applicable law and administrative procedure have
been met, (2) considered any relevant 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 [peti-
tioner] that any collection action be no more intrusive than necessary.”
§ 6330(c)(3). Our review of the record establishes that the SO properly
discharged all of her responsibilities under section 6330(c).

       The SO addressed the possibility of an installment agreement,
but petitioner’s representative demurred to her proposal of a $1,620
monthly payment. The representative offered no concrete counter-
proposal, and an SO is not obligated to pursue a collection alternative
where no such proposal is made. McLaine v. Commissioner, 138 T.C.
228, 243 (2012); Nimmo v. Commissioner, T.C. Memo. 2020-72, 119
T.C.M. (CCH) 1504, 1506. Moreover, petitioner’s refusal to accept the
SO’s proposal was based on his alleged inability to pay, but he declined
to submit Form 433–A and the supporting financial information neces-
sary to substantiate his allegation. An SO does not abuse her discretion
in sustaining a collection action after a taxpayer fails to submit re-
quested financial information. McLaine, 138 T.C. at 243; Sullivan v.
Commissioner, T.C. Memo. 2012-337, 104 T.C.M. (CCH) 713, 718. The
SO gave petitioner ample time, both before and after his CDP hearing,
to supply this information, and she did not abuse her discretion by clos-
ing the case when she did.

       Finding no abuse of discretion in any respect, we will grant re-
spondent’s Motion and sustain the collection actions. To reflect the fore-
going,

       An appropriate order and decision will be entered for respondent.

request by letter dated December 23, 2019—either a copy of an amended 2015 return
or any other evidence regarding petitioner’s 2015 liability. That issue therefore was
not “properly raised in the taxpayer’s CDP hearing,” Treas. Reg. § 301.6330-1(e)(3),
Q&A–F3, and it could not properly be advanced in this Court, see Thompson v. Com-
missioner, 140 T.C. 173, 178 (2013).