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6330 - Annotations - Collection Due Process Notice |
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Collection Due Process Notice |
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6330
Annotations: Collection Due Process Notice- Levy Notice of Levy
and Right to Hearing: Collection Due Process Notice Chief Counsel
Advice 200216028, UIL
No. 6330.00-00 Notice
and opportunity for hearing before levy UIL
No. 9999.98-00 Miscellaneous
issues -
Not able to identify under present list [Code
Sec.
6330 ] MEMORANDUM
FOR ASSOCIATE AREA COUNSEL, SB/SE:2 ( FROM:
Mitchel S. Hyman, Senior Technician Reviewer, Branch 1 Collection,
Bankruptcy & Summonses SUBJECT:
Notice to a Single Member Owner of a Disregarded LLC This
Chief Counsel Advice responds to your request for advice on a
Collection Due Process ("CDP") issue relating to a
Limited Liability Company ("LLC"). In accordance with
I.R.C. §6110(k)(3) , this Chief
Counsel Advice should not be cited as precedent. ISSUE If
the Internal Revenue Service ("Service") makes an
assessment against a disregarded LLC and provides a collection due
process ("CDP") notice to the disregarded LLC, must the
Service issue a separate CDP notice to the single member owner if
the Service adds his name to the assessment? CONCLUSION The
Service should issue another CDP notice to the single member
owner, even when the single member owner received actual notice
and was not prejudiced by the Service's error. This approach
ensures that a single member owner will receive the CDP safeguards
that Congress enacted. BACKGROUND An
LLC is a hybrid entity created under state law, which has
attributes of both a partnership and a corporation. See generally,
Uniform Limited Liability Company Act (1995). See also, N.Y. Ltd.
Liab. Treas.
Reg. §301.7701-1 et seq.
(commonly referred to as the check-the-box regulations) provides a
framework for the federal tax classification of entities. Under
the regulations, the classification of an LLC will depend on the
number of members in the LLC and any election filed for the LLC.
For example, an LLC may be either a multi- member or single member
LLC. If it is a multi-member LLC, it may elect to be treated as an
association taxable as a corporation. Treas. Reg.
§301.7701-3(a) . If no election is made, Treas. Reg.
§301.7701-3(b)(1)(i) provides as a default that the
multi-member LLC will be treated as a partnership. Alternatively,
if an LLC is a single member LLC, the question is whether it is
treated as an association taxable as a corporation or as a
disregarded entity. A single member owner could elect to have the
LLC classified as an association taxable as a corporation. Treas. Reg.
§301.7701-3(a) . If no election is made, Treas. Reg.
§301.7701-3(b)(1) (ii) provides that the LLC will be
disregarded as an entity separate from its owner. A disregarded
LLC's "activities are treated in the same manner as a sole
proprietorship, branch, or division of the owner." Treas. Reg.
§301.7701-2(a) . Because
a disregarded LLC is not separate from its owner, the Service may
seek to collect the taxes arising from the LLC's business directly
from the single member owner by administrative collection action,
including the filing of a Notice of Federal Tax Lien
("NFTL"). In pursuing administrative collection action,
collection due process ("CDP") rights under I.R.C. §§6320 and 6330 must be accorded the
single member owner taxpayer. As
a general rule, a single member limited liability company that is
disregarded has no tax filing obligation, as all its activities
are reported by the company's sole owner. As an exception to the
general rule, Notice 99-6 , 1999-3 I.R.B.
12, permits a disregarded LLC to separately calculate, report, and
pay its employment tax obligation with respect to its employees
under its own name and EIN. The Notice makes clear that the owner
of a single member limited liability company that is treated as a
disregarded entity for federal tax purposes is the employer for
purposes of employment tax liability. Consequently, "the
owner retains ultimate responsibility for the employment tax
obligations incurred with respect to employees of the disregarded
entity." Where
the employment tax liability is reported by the disregarded LLC
pursuant to Notice 99-6 , the Service's
current practice is to assess employment taxes in the name and EIN
of the limited liability company. Consequently, a limited
liability company that is a disregarded entity is often assessed
for the employment tax liabilities that are the ultimate
responsibility of the company's single member owner. Also, the
Service makes notice and demand for payment on the disregarded
LLC. For
purposes of discussion in this memorandum, we shall assume the
following as a model situation. The Service has made an assessment
against a disregarded LLC and has made notice and demand for
payment on the LLC. Looking to collect the tax liability, the
Service has provided CDP notices under both sections 6320 and 6330 to the disregarded
LLC. Subsequently, the Service adds the single member owner's name
to the assessment made against the disregarded LLC. LAW
AND ANALYSIS I.R.C.
§6201 authorizes the
Service to assess the taxpayer's liability. The Service's
positions regarding assessments against disregarded LLCs is as
follows. Assessments and notices and demand under the name and/or
taxpayer identification number of a disregarded LLC are valid
against the single member owner. This is consistent with the
notion that "notices containing technical defects are valid
where the taxpayer has not been prejudiced or misled by the error
and is afforded a meaningful opportunity to litigate his
claims." Planned Investments, Inc. v. Accordingly,
notice and demand for payment made on the disregarded LLC serves
as notice and demand for payment under section 6303(a) on the
single member owner who actually received the notice and was not
prejudiced by the Service's error.1 Analogous support
for this can be drawn from cases holding that notice and demand
erroneously made on a business or nonexistent partnership was a
valid when the taxpayer received actual notice and was not
prejudiced by the error. For example, in Marvel, the taxpayers
contended that because the notices were in the name of
"Marvel Photo" and not in the name of Fred and Angela
Marvel, the notice and demand for payment did not comply with section 6303(a) . The court
rejected the taxpayers' argument, reasoning that "[a]lthough
the notices were addressed to taxpayers' business rather than to
the individual taxpayers, it is undisputed that taxpayers, doing
business as Marvel Photo, actually received the notices and that
the notices listed the correct taxpayer identification
number." Marvel, 719 F.2d at 1513 [83-1 USTC ¶9659]. Accord,
Barmes v. I.R.S., 116 F.Supp.2d 1007, 1014 (S.D. Ind. 2000)
(holding that Service made a valid notice and demand on Marvin
Barmes, a sole proprietor who actually received the notice, even
though the notice was mistakenly sent to the Barmes partnership).
Given the disregarded status of the LLC for all federal tax
purposes and its close relationship to its single member owner,
the owner who actually receives the notice and demand addressed to
the disregarded LLC and is not prejudiced by the Service's mistake
cannot seriously object to the validity of the notice. Where
an assessment and notice and demand is made with respect to the
disregarded LLC, the Service's practice is to add the single
member owner's name to the assessment to facilitate collection
against the owner. The question arises whether this procedure
requires the Service to send a new CDP notice to the single member
owner. There
is no clear answer to this question. On the one hand, it could be
argued that there is no need to send a new CDP notice to the
single member owner who actually received a CDP notice addressed
to the disregarded LLC and was not prejudiced by the Service's
mistake. Essentially, the Service would apply the standard for
determining the validity of a notice under section 6303 to CDP
notices. Under section
6303 , the Service is not required to identify the
taxpayer correctly when the taxpayer should recognize that the
notice applies to his tax liability. See Marvel, 719 F.2d at 1513
[83-1 USTC ¶9659]; Barmes, 116 F.Supp.2d 1014. There is nothing
in sections
6320 or section
6330 indicating that Congress intended to impose a more
exacting standard for providing a CDP notice than the notice
standard under section 6303 . On
the other hand, it could also be argued that the standard for
providing notice under section 6303 does not apply
to CDP notices because CDP notices serve a different purpose.
Specifically, a CDP notice alerts a taxpayer that a limited period
exists for filing a request for a CDP hearing. I.R.C. §§6320(a)(3)(B) and 6330(a)(2) . There is no
similar right to a hearing under section 6303 . Moreover,
recognizing that a taxpayer has a limited time in which to request
a CDP hearing, Congress could have intended that CDP notices
correctly identify the taxpayer so that there would not be any
confusion or delay. A CDP notice addressed to a disregarded LLC
may cause confusion and mislead a single member owner, because the
single member owner may believe that the Service intends to take
collection action against the assets of the disregarded LLC. The
single member owner may not grasp the abstract tax concept that
the LLC is disregarded for federal tax purposes and that the
Service is actually seeking to collect the tax liability from the
assets of the single member owner. Finally,
requiring that a CDP notice correctly identify the taxpayer
comports with the overall legislative intent underlying the CDP
hearings, which was to provide greater safeguards to a taxpayer
during the Service's collection process. Requiring the Service to
issue a CDP notice correctly identifying the taxpayer provides
greater protection to taxpayers. In
conclusion, we believe the Service should send a new CDP notice
addressed to the single member owner, even when the single member
owner actually received a CDP notice addressed to the disregarded
LLC and was not prejudiced by the Service's mistake. This cautious
approach will ensure that a single member owner's CDP rights will
be protected. If
we can be of any further assistance, please call. 1
Section
6303 provides that "notice shall be left at the
dwelling or usual place of business of such person [liable for the
unpaid tax], or shall be sent by mail to such person's last known
address." [2003-1 USTC ¶50,234] The
district court denied the government's motion to dismiss an
individual's appeal of an IRS Collection Due Process (CDP)
determination for lack of jurisdiction. Although the taxpayer
allegedly failed to file his request for a CDP hearing within the
required 30 days, he was afforded an equivalency hearing to
address his claims. The government argued that the taxpayer was
not entitled to a judicial review of the CDP determination because
the taxpayer's request for a hearing was not timely. However, the
government failed to present evidence that the taxpayer received
the proper notice triggering the 30 day deadline and, as a result,
its motion was denied without prejudice. Back MEMORANDUM
AND ORDER BELOT,
District Judge: Before the court are the following: 1.
2.
Plaintiff's response (Doc. 6); and 3.
Plaintiff
filed this action pro se, styling it as an "appeal of
determination of collection due process hearing pursuant to 26
U.S.C. §6320."
Section
6320 and its companion, §6330,
provide for notice and opportunity for hearing upon filing of
notice of lien and before levy, respectively. Both statutes permit
the taxpayer to request a hearing before an IRS appeals officer
within a 30-day period. The starting dates of the 30-day periods
are set forth in the statutes. On
or about On
or about (Doc.
4, Affidavit of Richard Turner). Proceeding
after hearing. -- (1)
Judicial review of determination. --The person may, within 30 days
of a determination under this section, appeal such determination
-- (A)
to the Tax Court (and the Tax Court shall have jurisdiction with
respect to such matter); or (B)
if the Tax Court does not have jurisdiction of the underlying tax
liability, to a district court of the If
a court determines that the appeal was to an incorrect court, a
person shall have 30 days after the court determination to file
such appeal with the correct court. The
"determination" referred to in §6330(d)
was made in an IRS "decision letter" dated April 5, 2002
(Doc. 1, Ex. A). Plaintiff filed this action on May 6, 2002. [2003-2 USTC ¶50,612]Donna Jean Barnett, Plaintiff v. A
frivolous return penalty was imposed against an individual who
filed a zero-income return but received unreported wages in the
tax year at issue. Because the Eleventh Circuit has held that
claims asserting that wages are not income are "patently
frivolous", the government was entitled to summary judgment
dismissing the taxpayer's action. [ Code
Sec. 6330] The IRS provided proper notice and demand to an individual of her tax liability before levy and, as a result, was entitled to dismissal of the taxpayer's suit. The taxpayer attached a copy of the notice and demand for payment she received by the IRS to her complaint. The court rejected her argument that the notice was not valid because it was computer generated and did not contain the proper form number.
The
district court dismissed an individual's challenge to an adverse
Collection Due Process determination where evidence established
that the IRS followed proper hearing procedures. The Appeals
officer was not required to provide the taxpayer with a copy of
the verification that the requirements of applicable law and
administrative procedure had been met. The taxpayer was
appropriately prohibited from disputing her underlying tax
liability because she received a notice of deficiency and did not
contest the liability at that time. Moreover, the Appeals officer
was not required to produce documentation of a delegation of
authority to impose or collect the frivolous return penalty.
Finally, the taxpayer unsuccessfully argued that the IRS
improperly denied her a collection alternative after she
challenged the Appeals officer to produce a statute or code
regulation authorizing the imposition of the frivolous return
penalty. REPORT
AND RECOMMENDATION
STANDARD
OF REVIEW
FACTS
DISCUSSION
(1)
Whether the Plaintiff's 1997 Tax Return was Frivolous
(2)
Whether the Plaintiff Received Proper Notice of the IRS's Intent
to Levy to Collect 26
U.S.C. §6330(a)(1)
requires the Secretary to give notice to and demand payment from
any person liable to pay any tax before a levy may be brought
against that person's property. On October 26, 1998, the Plaintiff
was sent a notice of penalty charged from the IRS. (Doc. #1
exhibit D). The Plaintiff contends that the above stated notice
failed to give her proper notice and demand for her tax liability.
The Plaintiff relies heavily on U.S. v. Coson a Ninth
Circuit Court of Appeals decision holding that notice must be
given to a person before a levy is valid. [ 61-1
USTC ¶9219], 286 F.2d 453 (9th Cir. 1961). The facts
in Coson are clearly distinguishable from the instant case.
In Coson, the IRS claimed notice had been given to Coson
because notice had been given to members of a partnership with
which the IRS claimed Coson was affiliated. Coson [ 61-1
USTC ¶9219], 286 F.2d at 461. The Court held that
Coson was not a member of the partnership and therefore not liable
for any part of the partnership's tax liability. (3)
Whether the Plaintiff's CDP Hearing Conformed to the Statutory
Requirements
CONCLUSION Based
on the foregoing Plaintiff failed to provide a genuine issue of
material fact. Plaintiff's arguments are based on the same old
tired and failed arguments used by tax protesters and rejected by
all levels of the judiciary for years. Plaintiff's tax return for
1997 was clearly frivolous and therefore subject to the penalty
imposed under section
6702. In addition, Plaintiff received proper notice
regarding the CDP hearing held ORDER
[Dec. 55,654(M)]Said M. Karara v.
Commissioner. The IRS was granted summary judgment with respect to the sufficiency of a Collection Due Process (CDP) hearing for one year, but was denied summary judgment for another year. An individual had received timely written notice of intent to levy as well as notice of his right to request a CDP hearing with respect to a particular tax year. Furthermore, the IRS Appeals officer's determination to proceed with the collection of tax for that year was not an abuse of discretion; therefore, summary judgment was appropriate. Although the taxpayer had orally consented to include another tax year in the hearing, no levy could be made without proper notice to the taxpayer. His agreement to include that year in a hearing could not substitute for the explicit notice requirements of Code Sec. 6330(a)(2). Summary judgment could not be granted with respect to this year, as the IRS had not produced sufficient evidence to show that it had issued proper notice. Said M. Karara, pro se; D'Aun E. Clark, for respondent. MEMORANDUM
OPINION GERBER,
Chief Judge: Respondent moved for summary judgment on the question
of whether he may proceed with the collection of petitioner's 1993
and 1994 tax liabilities. Respondent contends that all section
63301
prerequisites have been met and that he should be allowed to
proceed with collection. Petitioner filed a cross-motion for
summary judgment, raising several arguments as to why respondent
should not be permitted to proceed with collection. A hearing on
the summary judgment motions was held at Petitioner
resided in On
On
On
On
Petitioner
and the Appeals officer engaged in telephone conferences on
September 5 and October 4 and 5, 2001. During these conferences,
respondent notified petitioner that the assessments were valid and
subject to collection because of petitioner's failure to post a
bond while his appeals were in progress. See sec.
7485. In response, petitioner raised the argument that
respondent, in waiving the right to respond to the petition for
writ of certiorari, had also waived opposition to the issues
presented in the petition. Petitioner also argued that because of
respondent's waiver petitioner is entitled to a $300 refund. On
Discussion Respondent
moved for summary judgment on the question of whether he may
proceed to collect petitioner's 1993 and 1994 income tax
liabilities. Summary judgment is intended to expedite litigation
and avoid unnecessary trials. Fla. Peach Corp. v. Commissioner
[Dec.
44,689], 90 T.C. 678, 681 (1988). A motion for summary
judgment may be granted if there is no genuine issue as to any
material fact. See Rule 121(b); Elec. Arts, Inc. v.
Commissioner [Dec.
54,680], 118 T.C. 226, 238 (2002). The moving party
bears the burden of showing that there is no genuine issue of
material fact, and factual inferences will be read in a manner
most favorable to the party opposing summary judgment. Bond v.
Commissioner [Dec.
48,822], 100 T.C. 32, 36 (1993); Dahlstrom v.
Commissioner [Dec.
42,486], 85 T.C. 812, 821 (1985). This case is ripe for
summary judgment with respect to petitioner's 1994 tax year.
Genuine issues of material fact exist, however, with respect to
petitioner's 1993 tax year. I.
Section 6330 Hearing Prerequisites If
a taxpayer neglects or refuses to pay a Federal tax liability
within 10 days of notice and demand, the Secretary is authorized
to collect such liability by levy on the taxpayer's property. Sec.
6331(a). Pursuant to section
6330(b), a taxpayer has a right to a hearing before the
Commissioner may levy. We first address whether respondent met the
hearing prerequisites of section
6330 with respect to petitioner's 1993 and 1994 tax
years. Section
6330(b) provides that administrative hearings be held
by an impartial officer of the Internal Revenue Service Office of
Appeals. If dissatisfied with the Appeals Office determination, a
taxpayer may seek judicial review of the decision in this Court or
a District Court of the The
matters to be considered at the hearing are specified by section
6330(c), which provides: (1) The Appeals officer shall
obtain verification that the requirements of applicable law and
administrative procedure have been met; (2) certain issues may be
heard, including spousal defenses, appropriateness of collection
activities, and collection alternatives; and (3) a challenge to
the underlying liability may be raised if the taxpayer did not
receive a statutory notice of deficiency or otherwise receive an
opportunity to dispute the liability. Sec.
6330(c). Petitioner
and an impartial Appeals officer conducted an administrative
hearing comprising three separate telephone calls. For purposes of
the hearing, petitioner and respondent agreed to place
petitioner's 1993 and 1994 tax years at issue. Because this Court
had previously entered a decision, the merits of petitioner's
underlying tax liability were not at issue at the administrative
hearing and are not at issue here. Therefore, we review
respondent's administrative determination to proceed with
collection for an abuse of discretion. Sec.
6330(c)(2)(B); Sego v. Commissioner [Dec.
53,938], 114 T.C. 604, 610 (2000). Because petitioner
was not entitled to question the underlying tax liability, his
administrative hearing was limited to collection issues, including
spousal defenses, the appropriateness of respondent's intended
collection action, and collection alternatives. Petitioner raises
two issues with respect to the appropriateness of respondent's
collection actions.2 Respondent
assessed petitioner's 1993 and 1994 tax liabilities on Section
6330(e)(1) precludes the Commissioner from proceeding
with a proposed levy that is the subject of a hearing while the
hearing and any related appeals are pending. See Craig v.
Commissioner [Dec.
54,933], 119 T.C. 252, 258 (2002). Therefore, as of There
is no indication in the summary judgment documents as to whether
petitioner raised the collection stay agreement issue in the
administrative hearing. Moreover, it appears that respondent
complied with its terms. The Supreme Court's denial of the
petition for writ of certiorari on Petitioner
makes a second argument as to why respondent should be precluded
from proceeding with collection. The essence of petitioner's
argument is that respondent failed or waived the right to respond
to petitioner's petition for writ of certiorari. Petitioner
further contends that the waiver of the right to respond
constitutes a waiver or bar to respondent with respect to
petitioner's position that he owes no tax for 1993 and 1994. Petitioner
bases his position on rule 15 of the Rules of the Supreme Court,
which, among other provisions, sets forth procedures for waiver of
the right to respond to a petition for writ of certiorari.
Specifically, petitioner contends that the waiver of the right to
respond foreclosed respondent from taking collection action
against petitioner. Petitioner's reliance on rule 15 of the Rules
of the Supreme Court is misplaced and without substance. The
rule's purpose relates solely to procedural requirements for
filing briefs in opposition, reply briefs, and supplemental briefs
with respect to petitions for writs of certiorari. The rule has no
bearing on petitioner's underlying tax liability or on whether
respondent may proceed with collection activity.4
Respondent's waiver was not a concession with respect to
petitioner's tax liabilities. Respondent
provided petitioner with an opportunity for a hearing pursuant to section
6330(b). The Appeals officer properly considered and
met the section
6330 hearing requirements with respect to petitioner's
1993 and 1994 tax years. II.
Section 6330 Notice Requirements The
next issue we consider is whether respondent met the notice
requirements of section
6330(a) for petitioner's 1993 and 1994 tax years.
Before proceeding with a levy, the Secretary must meet several
notice requirements. Section
6330(a)(1) provides that no levy may be made on any
property of a taxpayer unless the Secretary, before proceeding
with the levy, has notified the person in writing of the right to
a hearing. Section
6330(a)(2) specifies that such notice be: (1) Given in
person; (2) left at the taxpayer's dwelling or usual place of
business; or (3) sent by certified or registered mail to the
taxpayer's last known address. Further, such notice must be
furnished at least 30 days before the first levy action. See sec.
6330(a)(2). Petitioner
received timely written notice of respondent's intent to levy and
petitioner's right to request a hearing for his 1994 tax year.
However, the record does not reflect, one way or the other,
whether a notice of intent to levy was issued with respect to
petitioner's 1993 tax year. Petitioner raised this issue with
respondent before his administrative hearing. For simplicity,
petitioner and respondent agreed to and held a hearing with
respect to both the 1993 and 1994 tax liabilities. However, the
plain meaning of section
6330(a)(1) is that no levy may be made without proper
notice to a taxpayer. Petitioner's agreement to include his 1993
tax year cannot substitute for the explicit notice requirements of
section
6330(a)(2). Respondent may not proceed with a levy with
respect to petitioner's 1993 tax liability without satisfying
these requirements. Sufficient
evidence was not produced for us to ascertain whether respondent
issued to petitioner a Final Notice --Notice of Intent to Levy and
Notice of Your Right to a Hearing for his 1993 tax year. This is a
genuine issue of material fact, and accordingly, the cross-motions
for summary judgment with respect to this issue are denied. Apart
from this single flaw, respondent met all of the section
6330 prerequisites with respect to petitioner's 1993
and 1994 tax years. The Appeals officer verified that respondent
had complied with all legal and procedural requirements pertaining
to the proposed levy. In addition, the Appeals officer balanced
the need to efficiently collect tax with concerns that the means
of collection be no more intrusive than necessary. Finally,
because of a lack of viable collection alternatives, the Appeals
officer concluded that the proposed levy was legally and
procedurally correct. Accordingly,
we hold that respondent's determination to proceed with collection
of petitioner's 1994 tax liability was not an abuse of discretion. To
reflect the foregoing, An
order will be issued granting in part and denying in part
respondent's motion for summary judgment and denying petitioner's
cross-motion.
[Dec. 55,681] Keith and Cherie Orum v. Commissioner. The Tax Court lacked jurisdiction over an IRS decision letter sustaining a levy against married taxpayers. Since the taxpayers' request for a Collection Due Process (CDP) hearing was untimely, their decision letter could not be treated as a notice of determination over which the court had jurisdiction. M. Craig, Dec. 54,933 (2002), distinguished. Moreover, although the taxpayers claimed that they had not received their first CDP notice, IRS records showed that it was sent via certified mail to their last known address. The 30-day period to request a CDP hearing began on the date that notice was issued and was not affected by a second notice of intent to levy that the IRS issued several months later. Finally, the IRS did not abuse its discretion when it rejected the taxpayers' proposed installment agreement and offer in compromise relating to another tax year. They failed to respond to an IRS request for additional financial information, they had defaulted on a prior installment agreement, and it appeared that their assets and income were sufficient to pay their liabilities. Keith
Orum, pro se; Sean R. Gannon, for respondent. Ps
filed joint Federal income tax returns for 1998 and 1999 but did
not make full payment of the tax liabilities. On In
February 2002, Ps submitted an offer-in-compromise. R rejected the
request on the basis of financial information submitted by Ps. R
granted Ps an equivalent hearing for 1998 and a sec.
6330, I.R.C., hearing for 1999. During the hearings, R
requested additional financial information from Ps by Ps
filed a petition to dispute the decision letter and the notice of
determination. R filed a motion to dismiss for lack of
jurisdiction with respect to 1998. 1.
Held: The 2.
Held, further, R's motion to dismiss for lack of
jurisdiction is granted. Ps did not file a sec.
6330, I.R.C., hearing request within 30 days of the 3. Held, further, R did not abuse his discretion in issuing the notice of determination for 1999, and the proposed collection action is sustained. OPINION HAINES, Judge: Respondent sent petitioner Keith Orum (Mr. Orum) and petitioner Cherie Orum (Mrs. Orum) a Decision Letter Concerning Equivalent Hearing Under Section 6320 and/or 6330 (decision letter) for 1998 and a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination) for 1999. The issues for decision are: (1) Whether the Court lacks jurisdiction under section 6330(d)(1)1 with regard to 1998; and (2) whether there was an abuse of discretion in the determination that the proposed collection action for 1999 should be sustained. Background Some
of the facts have been stipulated. The stipulated facts and the
attached exhibits are incorporated herein by this reference. At
the time of the filing of the petition, petitioners resided in Petitioners
filed joint Federal income tax returns for 1998 and 1999 on On
On
On
On
On
Mr.
Orum sent respondent a Form 12153, Request for a Collection Due
Process Hearing (hearing request), for 1998 and 1999, dated On
or about On
You
are not entitled to a Collection Due Process Hearing for 1998.
According to our records a final notice was sent to you by
certified mail for this year on You
marked Form 12153 appealing the filed Notice of Federal Tax Lien.
You are not entitled to a hearing on this issue as our records
show no lien has been filed. You
subsequently submitted an offer in compromise under doubt as to
collectibility and Effective Tax Administration. I have returned
this offer to you under separate cover. You can resubmit your
offer once you are current with filing your tax returns. However,
let me explain why your offer would not be accepted. It appears
that based upon the financial information you provided you have
the ability to pay in full over the life of the collection
statute, therefore there is no doubt as to collectibility. The
explanation you provided for Effective Tax Administration does not
meet the economic hardship criteria for consideration of your
offer. Our
records show that you have not made any estimated payments for
2001 and 2002. You need to get current with your estimated tax
payments for 2002 in order for me to consider any collection
alternatives, such as an installment agreement to resolve your tax
liabilities. Please
make your estimated tax payments for 2002 prior to the conference,
so that we can discuss any alternatives to the proposed levy
action. On
During
the On
On
On
Your
due process hearing request was not filed within the time
prescribed under Section
6320 and/or 6330.
However, you received a hearing equivalent to a due process
hearing except that there is no right to dispute a decision by the
Appeals Office in court under IRC
Sections 6320 and/or 6330. *
* * * * * * It
has been determined that no relief is to be granted and that the
proposed enforcement action (levy) is sustained. You failed to
provide the additional financial information as requested in order
for us to consider your request for an installment agreement. Further,
the attachment to the decision letter stated: You
filed joint income tax returns for 1998 and 1999 with a balance
due. You were sent a final notice of intent to levy by certified
mail for 1998 on You
did not make your monthly payments as required. A final notice was
sent to you by certified mail on On
It
has been determine [sic] that no relief is to be granted and that
the proposed enforcement action (levy) is sustained. You failed to
provide additional financial information as requested in order for
us to consider your request for an installment agreement. The
attachment to the notice of determination stated: On
your Form 12153, you requested the continuation of a payment plan.
You raised no other issues on your written protest. Subsequent
to making your request for a Collection Due Process Hearing, you
submitted an Offer in Compromise, Form 656 under doubt as to
collectibility effective tax administration. Your offer was
received Keith
Orum contacted the Settlement Officer on l
The reason you provided for Effective Tax Administration does not
meet the economic hardship criteria. l
Based upon the financial information you provided it appears you
have the ability to pay the liabilities in full within the
statutory period for collection l
You had not made any estimated tax payments for 2001 and 2002 Keith
provided an adequate explanation why a Form 1065 for 1998 was not
filed. The only other partner resigned prior to 1998. The
partnership dissolved, but Keith continued to use the partnership
federal employer's identification number (FEIN) for reporting
employment tax returns. * * * Keith said he understood why an
offer could not be considered and expressed an interest in an
installment agreement. *
* * * * * * A
scheduled telephone conference was held on *
* * * * * * We
received an estimated tax payment for 2002 in the amount of $8,500
on BALANCING
EFFICIENT COLLECTION AND INTRUSIVENESS You
have failed to provide by an agreed deadline the additional
financial information requested. This information is necessary in
order for us to consider an installment agreement. Absent your
willingness to provide this information, alternatives to the
proposed levy action such as an installment agreement could not be
considered. * * * On
On
The
Court held a hearing on respondent's motion and trial for this
case in Discussion
Section
6331(a) provides that if any person liable to pay any
tax neglects or refuses to pay such tax within 10 days after
notice and demand for payment, then the Secretary is authorized to
collect such tax by levy upon the person's property. Section
6331(d) provides that, at least 30 days before
enforcing collection by way of a levy on the person's property,
the Secretary is obliged to provide the person with a final notice
of intent to levy, including notice of the administrative appeals
available to the person. Section
6330(a) provides that the Secretary shall notify a
person in writing of his or her right to a section
6330 hearing with the Appeals Office regarding the
proposed levy. The written notice must be given in person, left at
the person's dwelling or usual place of business, or sent by
certified or registered mail to the person's last known address. Sec.
6330(a)(2). Section
6330(a)(2) provides that the prescribed notice (notice
of intent to levy) shall be provided not less than 30 days before
the day of the first levy with respect to the amount of the unpaid
tax for the taxable period. Further, section
6330(a)(3)(B) provides that the notice of intent to
levy shall explain that the person has the right to request a section
6330 hearing during the 30-day period under section
6330(a)(2). Where
the Appeals Office issues a notice of determination to the
taxpayer following a section
6330 hearing regarding a levy action, section
6330(d)(1) provides that the taxpayer will have 30 days
following the issuance of such determination letter to file a
petition for review with this Court or a Federal District Court,
as may be appropriate. Offiler v. Commissioner [Dec.
53,912], 114 T.C. 492, 498 (2000). This Court's
jurisdiction under section
6330 depends upon the issuance of a valid determination
letter and the filing of a timely petition for review. Sec.
6330(d)(1); Lunsford v. Commissioner [Dec.
54,552], 117 T.C. 159, 164 (2001). The
parties dispute whether a valid determination letter was issued
for 1998 to give the Court jurisdiction under section
6330(d)(1). Respondent argues that this Court should
dismiss the case as to 1998 upon the grounds that the decision
letter does not constitute a determination sufficient to invoke
the Court's jurisdiction pursuant to section
6330(d)(1). In objecting to respondent's motion,
petitioners argue that: (1) They did not receive the A.
Was the As
noted above, the notice of intent to levy must be given in person,
left at the person's dwelling or usual place of business, or sent
by certified or registered mail to the person's last known
address. Secs.
6330(a)(2) and 6331(d)(2);
secs. 301.6330-1(a),
301.6331-2(a)(1),
Proced. & Admin. Regs. The regulations under sections
6330 and 6331
reference section
301.6212-2, Proced. & Admin. Regs., to define
"last known address". Secs.
301.6330-1(a), 301.6331-2(a)(1),
Proced. & Admin. Regs. Under section
6212, in general, the Commissioner is entitled to treat
the address on a taxpayer's most recent tax return as the
taxpayer's last known address, unless the taxpayer has given
"clear and concise notification of a different address."
Kennedy v. Commissioner [Dec.
54,315], 116 T.C. 255, 260 n.4 (2001); Abeles v.
Commissioner [Dec.
45,203], 91 T.C. 1019, 1035 (1988); sec.
301.6212-2(a), Proced. & Admin. Regs. Although
respondent did not enter the We
also note that the parties stipulated that petitioners filed a tax
return for 1998 before the The
only evidence that petitioners presented is testimony from Mr.
Orum that he and Mrs. Orum did not receive the B.
Does the Court Lack Jurisdiction Over 1998? Petitioners
argue that the Section
6330(a)(1) provides, in relevant part, that the notice
before levy "shall be required only once for the taxable
period to which the unpaid tax specified in paragraph (3)(A)
relates." Petitioners misinterpret this sentence. We
interpret this sentence to mean that the Commissioner need send
only one notice of intent to levy for a taxable period. The
Commissioner may issue more than one notice of intent to levy to a
taxpayer. See sec.
301.6330-1(b)(2), Q&A-B2, Q&A-B4, Proced. &
Admin. Regs. Although more than one notice may be issued, the
taxpayer is still entitled to only one hearing for the relevant
tax period. Sec.
6330(b)(2); sec.
301.6330-1(b)(1), Proced. & Admin. Regs. This
interpretation is buttressed by the regulations under section
6330, which provide: Q-B2.
Is the taxpayer entitled to a CDP hearing when the IRS, more than
30 days after issuance of a CDP Notice under section
6330 with respect to the unpaid tax and periods,
provides subsequent notice to that taxpayer that the IRS intends
to levy on property or rights to property of the taxpayer for the
same tax and tax periods shown on the CDP Notice? A-B2.
No. Under section
6330, only the first pre-levy or post-levy CDP Notice
with respect to the unpaid tax and tax periods entitles the
taxpayer to request a CDP hearing. If the taxpayer does not timely
request a CDP hearing with Appeals following that first
notification, the taxpayer foregoes the right to a CDP hearing
with Appeals and judicial review of Appeals' determination with
respect to levies relating to that tax and tax period. The IRS
generally provides additional notices or reminders (reminder
notifications) to the taxpayer of its intent to levy when no
collection action has occurred within 180 days of a proposed levy.
Under such circumstances, a taxpayer may request an equivalent
hearing as described in paragraph (i) of this section. *
* * * * * * Q-B4.
If the IRS sends a second CDP Notice under section
6330 (other than a substitute CDP Notice) for a tax
period and with respect to an unpaid tax for which a CDP Notice
under section
6330 was previously sent, is the taxpayer entitled to a
section
6330 CDP hearing based on the second CDP Notice? A-B4.
No. The taxpayer is entitled to only one CDP hearing under section
6330 with respect to the tax and tax period. The
taxpayer must request the CDP hearing within 30 days of the date
of the first CDP Notice for that tax and tax period. Sec.
301.6330-1(b)(2), Q&A-B2, Q&A-B4, Proced. &
Admin. Regs. On
Under
the circumstances, respondent was not obliged to conduct a section
6330 hearing as contemplated under section
6330(b). See sec.
301.6330-1(i)(1), Proced. & Admin. Regs. In place
of the section
6330 hearing, the Appeals Office granted petitioners an
equivalent hearing for 1998. This
case is distinguishable from Craig v. Commissioner [Dec.
54,933], 119 T.C. 252 (2002), in which we held that we
had jurisdiction under section
6330(d)(1) when the Appeals Office issued a decision
letter to the taxpayer. We
will grant respondent's motion to dismiss for lack of jurisdiction
as to 1998 because the petition was not filed in response to a
notice of determination sufficient to confer jurisdiction on the
Court under section
6330(d)(1). II.
Respondent's Determination for 1999 Petitioners
argue that respondent abused his discretion in the determination
to sustain the proposed collection action for 1999 because
respondent refused to process petitioners' offer-in-compromise and
rejected petitioners' request for an installment agreement. As
discussed above, before a levy may be made on any property or
right to property, a taxpayer is entitled to notice of intent to
levy and notice of the right to a fair hearing before an impartial
officer of the Appeals Office. Secs.
6330(a) and (b)
and 6331(d).
If the taxpayer requests a section
6330 hearing, he may raise in that hearing any relevant
issue relating to the unpaid tax or the proposed levy, including
challenges to the appropriateness of the collection action and
"offers of collection alternatives, which may include the
posting of a bond, the substitution of other assets, an
installment agreement, or an offer-in-compromise." Sec.
6330(c)(2)(A). A determination is then made which takes
into consideration those issues, the verification that the
requirements of applicable law and administrative procedures have
been met, and "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." Sec.
6330(c)(3). Petitioners
raise issues only as to collection alternatives, in that they
dispute respondent's rejection of another installment agreement
and rejection of an offer-in-compromise. We review the
determination for an abuse of discretion because the underlying
tax liability is not at issue. Lunsford v. Commissioner [Dec.
54,553], 117 T.C. 183, 185 (2001); Nicklaus v.
Commissioner [Dec.
54,477], 117 T.C. 117, 120 (2001). Respondent's
rejection of another installment agreement for petitioners was not
an abuse of discretion. Installment agreements are based upon the
taxpayer's current financial condition. See 2 Administration,
Internal Revenue Manual (CCH), sec. 5.19.1.5.4.1, at 18,299-65.
Respondent's determination was based on information petitioners
provided to Ms. Vuicich. See Schulman v. Commissioner [Dec.
54,757(M)], T.C. Memo. 2002-129. At the section
6330 hearing, Ms. Vuicich requested from Mr. Orum
additional financial information by Additionally,
respondent's determination not to enter into an
offer-in-compromise agreement with petitioners was not an abuse of
discretion. Section
7122(a) authorizes the Secretary to compromise any
civil case arising under the internal revenue laws. The
regulations set forth three grounds for the compromise of a
liability: (1) Doubt as to liability; (2) doubt as to
collectibility; or (3) promotion of effective tax administration.
Sec. 301.7122-1T(b), Temporary Proced. & Admin. Regs., 64 Fed.
Reg. 39024 (July 21, 1999);4 see sec.
7122(c)(1). Doubt as to liability is not at issue in
the instant case. The
Secretary may compromise a liability on the ground of doubt as to
collectibility when "the taxpayer's assets and income are
less than the full amount of the assessed liability." Sec.
301.7122-1T(b)(3)(i), Temporary Proced. & Admin. Regs., supra.
Additionally, the Secretary may compromise a liability on the
ground of "effective tax administration" when: (1)
Collection of the full liability will create economic hardship; or
(2) exceptional circumstances exist such that collection of the
full liability will be detrimental to voluntary compliance by
taxpayers; and (3) compromise of the liability will not undermine
compliance by taxpayers with tax laws. Sec. 301.7122-1T(b)(4),
Temporary Proced. & Admin. Regs., supra; see 2
Administration, Internal Revenue Service (CCH), sec. 5.8.11.2, at
16,385-15 (taxpayer's liability may be eligible for compromise to
promote effective tax administration if not eligible for
compromise based on doubt as to liability or doubt as to
collectibility, and taxpayer has exceptional circumstances to
merit the offer). Ms.
Vuicich reviewed petitioners' submitted financial information and
determined that an offer-in-compromise was not appropriate on the
basis of doubt as to collectibility and promotion of effective tax
administration. Ms. Vuicich communicated her determination to Mr.
Orum in the As
a result, we hold that the determination to proceed with
collection for 1999 was not an abuse of respondent's discretion,
and the proposed collection action is sustained. In
reaching our holdings herein, we have considered all arguments
made, and, to the extent not mentioned above, we conclude that
they are moot, irrelevant, or without merit. To
reflect the foregoing, An
appropriate order and decision will be entered.
[2005-2 USTC ¶50,444]Keith Orum and Cherie Orum, Petitioners-Appellants v. Commissioner of
Internal Revenue, Respondent-Appellee. The
IRS did not abuse its discretion in choosing to collect unpaid tax
liabilities by levy from a married couple who had previously
demonstrated the unreliability of their promise to pay. The IRS's
decision to levy on the couple's property was authorized by Code
Sec. 6331(a) because there was no dispute that the
couple owed the tax liability demanded; there was no contention
that any improper criteria were used in making the decision to
levy; the couple received adequate notice and was allowed a
hearing; and the decision made was supported by substantial
evidence. The IRS has the right to decide whether or not to levy
when taxpayers do not live up to the terms of their installment
plan.
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