Once the Appeals officer has issued a determination regarding the disputed collection action, section 6330(d) allows the taxpayer to seek judicial review in the Tax Court or a District Court. In considering whether taxpayers are entitled to any relief from the Commissioner's determination, this Court has established the following standard of review:

where the validity of the underlying tax liability is properly at issue, the Court will review the matter on a de novo basis. However, where the validity of the underlying tax liability is not properly at issue, the Court will review the Commissioner's administrative determination for abuse of discretion. [Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 610 (2000).]

C. Offers in Compromise

Section 7122(a), as pertinent here, authorizes the Secretary of the Treasury to compromise any civil case arising under the internal revenue laws. Regulations promulgated under section 7122 set forth three grounds for compromise of a liability: (1) Doubt as to liability, (2) doubt as to collectibility, or (3) promotion of effective tax administration. Sec. 301.7122-1(b), Proced. & Admin. Regs.³ With respect to the third-listed ground, a compromise may be entered to promote effective tax administration where: (1)(a) Collection of the full liability would cause economic hardship; or (b) exceptional circumstances exist such that collection of the full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner; and (2) compromise will not undermine compliance by taxpayers with the tax laws. Sec. 301.7122-1(b)(3), Proced. & Admin. Regs.

II. Analysis

Nothing in the record indicates that petitioner has at any time throughout the administrative or judicial proceedings attempted to challenge his underlying tax liability. Accordingly, we review respondent's determination to proceed with collection for abuse of discretion. Action constitutes an abuse of discretion under this standard where arbitrary, capricious, or without sound basis in fact or law. Woodral v. Commissioner [Dec. 53,206], 112 T.C. 19, 23 (1999).

In arguing that rejection of his offer was an abuse of discretion and deprived him of a fair hearing, petitioner focuses on the "deadline" allegedly set by Mr. Kroll. In his response to respondent's motion, petitioner makes what he characterizes as an "equitable argument" and contends as follows:

Settlement Officer Kroll should not have unilaterally decided on a "deadline" for submission of documents, and then not communicated the "deadline" to Petitioner's counsel. The administrative record reveals that the Settlement Officer made repeated requests for additional information, all of which except the last were responded to. Additionally, Petitioner, through his counsel, responded to each request, and also responded when there was a delay in providing the documents responsive to the last request. * * *

Petitioner further alleges that the effect of the "deadline" was a failure by Mr. Kroll to take into consideration both the issues raised by the taxpayer and the balancing of efficient collection and taxpayer intrusion.

The difficulty with this argument is that, while petitioner may have preferred more time to provide the materials requested, respondent's conduct in these circumstances can hardly be characterized as arbitrary, capricious, or without sound basis in fact or law. The record reflects that throughout the administrative process petitioner was given multiple and repeated opportunities to submit sufficient information to support his offer in compromise. Petitioner's counsel should also have been well aware of the consequences of failure to provide requested materials. An earlier offer had been returned for this reason, and Mr. Kroll's November 22, 2002 , and January 21, 2003 , letters clearly advised Mr. Karaszkiewicz that a failure to supply the additional information requested would lead to rejection of petitioner's subsequent offer and issuance of a determination letter without further consideration.

Concerning particularly the final "deadline" of which petitioner complains, respondent issued the notice of determination on May 14, 2003 . This date is more than 2 months after Mr. Kroll's final request for information on March 10, 2003 . It is also 6 weeks after the March 25, 2003 , date by which Mr. Karaszkiewicz initially stated he would try to supply the materials and the March 26, 2003 , date on which Mr. Karaszkiewicz said the information would be "quickly" provided. Moreover, we note that it is more than 2 years after petitioner's initial submission of an offer in compromise. In these circumstances, and especially in light of the absence of any further communication from petitioner to alter the implications of the "quickly" language, waiting for 6 weeks falls within the bounds of reasonableness.

Section 6330 entitles taxpayers to "a hearing". No statutory or regulatory provision requires that taxpayers be afforded an unlimited opportunity to supplement the administrative record. Nor are petitioner's contentions regarding lack of warning well taken where the record in this case is replete with explicit deadlines that respondent generously extended for petitioner's benefit. The statute only requires that a taxpayer be given a reasonable chance to be heard prior to the issuance of a notice of determination. The consideration of petitioner's case thus did not fail to comply with the terms for a fair hearing set forth in section 6330.

Consequently, we conclude that there was no abuse of discretion in respondent's decision to reject petitioner's offer in compromise. In absence of the requested information, respondent was unable reasonably to determine that petitioner's circumstances satisfied the conditions necessary for compromise of a tax liability. Evaluation of potentially pertinent grounds for compromise, such as doubt as to collectibility or a showing of economic hardship, would require complete financial data. The record is equally bereft of any indication of exceptional circumstances suggesting that collection here could undermine public confidence in tax administration. Hence, the Court holds that respondent's determination to proceed with collection of petitioner's tax liabilities was not an abuse of discretion. See e.g., Van Vlaenderen v. Commissioner [Dec. 55,382(M)], T.C. Memo. 2003-346; Neugebauer v. Commissioner [Dec. 55,303(M)], T.C. Memo. 2003-276. We shall grant respondent's motion.

To reflect the foregoing,

An appropriate order granting respondent's motion for summary judgment and decision for respondent will be entered.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.

² We note that Mr. Kroll's case activity record in one instance, specifically the entry for March 10, 2003, apparently refers to this letter erroneously as the "1/31/03 letter".

³ Sec. 301.7122-1, Proced. & Admin. Regs., contains an effective date provision stating that the section applies to offers in compromise pending on or submitted on or after July 18, 2002. Sec. 301.7122-1(k), Proced. & Admin. Regs. Previous temporary regulations by their terms apply to offers in compromise submitted on or after July 21, 1999, through July 19, 2002. Sec. 301.7122-1T(j), Temporary Proced. & Admin. Regs., 64 Fed. Reg. 39027 (July 21, 1999). Because the final and temporary regulations do not differ materially in substance in any way relevant here, we need not resolve which section would apply in petitioner's circumstances. We further note that temporary regulations are entitled to the same weight and binding effect as final regulations. Peterson Marital Trust v. Commissioner [Dec. 49,935], 102 T.C. 790, 797 (1994), affd. [96-1 USTC ¶60,225] 78 F.3d 795 (2d Cir. 1996). For simplicity and convenience, citations will be to the final regulations.

[Dec. 55,616(M)] Segudino and Delfa Razo v. Commissioner.

Dkt. No. 16969-02L , TC Memo. 2004-101, April 9, 2004 .

[Appealable, barring stipulation to the contrary, to CA-5.]

[Code Sec. 6330]
Collection Due Process: Hearing: Collection: Individuals: Lien against property: Offers in compromise: Appeals office: Discretion. --

An Appeals officer did not abuse his discretion when the officer sustained a lien and rejected taxpayers' offer in compromise in a Notice of Determination. The offer in compromise to settle debts from three tax years totaling $7,832.90 was only $100, and was the only offer made by the taxpayers at the hearing. The Appeals officer rejected the offer based on the value of the assets. However, the Appeals officer recommended that the taxpayers' account be suspended as "temporarily not collectible" because of age and health concerns combined with the taxpayers inability to pay existing debts in an installment agreement. Because the value of the taxpayers' assets are likely to be the only source from which the taxpayers will be able to pay their liabilities, sustaining the lien and suspending collection efforts preserves the government's priority rights in any foreclosure or bankruptcy proceedings that may occur without creating any immediate economic hardship for the taxpayers.

[Code Sec. 7122]
Collection Due Process: Hearing: Collection:Individuals: Lien against property: Offers in compromise: Appeals office: Discretion. --

The Tax Court did not find any abuse of discretion when an Appeals officer rejected taxpayers' offer in compromise. The offer in compromise to settle debts from three tax years totaling $7,832.90 was only $100. The Appeals officer rejected the offer based on the fact that the quick sale value of any one of several assets would exceed the tax liabilities for the three years. The de minimus offer essentially asked for the entire liability to be forgiven, despite the value of the taxpayers' assets.

David P. Leeper, for petitioners. Michael W. Bentley and Gordon P. Sanz, for respondents.

MEMORANDUM OPINION

GOEKE, Judge: This proceeding was commenced in response to a "NOTICE OF DETERMINATION CONCERNING COLLECTION ACTION(S) UNDER SECTION 6320 AND/OR 6330" (notice of determination). The notice of determination sustained the Federal tax lien, but suspended petitioners' account as "temporarily not collectible". The issue for decision is whether it was an abuse of discretion for respondent's Appeals officer to sustain the lien and reject petitioners' offer to compromise their 1995, 1996, and 1997 liabilities of $7,832.90 for $100. Because of the value of petitioners' assets, we hold that it was not an abuse of discretion.

Background

The parties submitted this case fully stipulated under Rule 122¹ . The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioners, Mr. Razo and Mrs. Razo, resided in El Paso , Texas , at the time they filed their petition. This Court, in an Order dated November 19, 2003 , denied a motion by respondent to dismiss for lack of jurisdiction, as supplemented.

Petitioners filed joint Federal income tax returns for 1995, 1996, and 1997. Each of these returns showed tax due, but petitioners did not submit payment with the returns. On March 1, 2002 , respondent issued petitioners a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under I.R.C. Section 6320, listing their total 1995, 1996, and 1997 liabilities as $7,832.90. On March 4, 2002 , respondent filed a notice of Federal tax lien in El Paso County , Texas .

On March 26, 2002 , petitioners' counsel, acting under a power of attorney from petitioners, submitted on behalf of petitioners a Form 12153, Request for a Collection Due Process Hearing, requesting a hearing under section 6320 with respondent's Appeals Office. Also submitted with the Form 12153 was a Form 656, Offer in Compromise, setting forth petitioners' offer to pay $100 to settle their 1995, 1996, and 1997 tax liabilities. Petitioners' offer in compromise was based on "effective tax administration" (ETA).

A section 6320 hearing was held on August 14, 2002. On October 3, 2002, respondent's Appeals officer issued the notice of determination rejecting petitioners' offer in compromise and sustaining the Federal tax lien, but recommending that petitioners' accounts be suspended as "temporarily not collectible". The Appeals officer based his determination to sustain the lien on the value of certain assets owned by petitioners, which include a house, two vehicles, and personal effects. The Appeals officer measured the quick sale value of petitioners' assets, less encumbrances against them, and found that the net amount of petitioners' equity in the assets greatly exceeded petitioners' tax liabilities for the years 1995-97. For example, one of petitioners' automobiles alone had a quick sale value in excess of the tax liabilities. However, the Appeals officer then noted that petitioners faced various hardships that would impede their ability to earn greater income in the future, or pay off their existing debts in an installment agreement. Mr. Razo is 62 years old and is employed as a manual laborer. Mrs. Razo is unemployed due to health problems. In addition, the Appeals officer noted that petitioners are currently in arrears on their mortgage and car payments, and they owe significant amounts of real estate taxes. The Appeals officer recommended that petitioners' account be suspended as "temporarily not collectible". By suspending their account as "temporarily not collectible", the Appeals officer halted collection activity until petitioners' financial situation changes and either payment is forthcoming or another collection alternative is feasible. The determination would allow the Government to recover a portion of any proceeds from a future sale or foreclosure on any of petitioners' assets. The Appeals officer concluded that although it was unlikely that petitioners would be able to pay their liabilities other than from the value of their assets, the lien would enable the Government to preserve its priority rights in any foreclosure or bankruptcy proceedings. Petitioners timely filed a petition with this Court for review of the Appeals officer's determination.

Discussion

Sections 6320 (pertaining to liens) and 6330 (pertaining to levies) were enacted as part of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3401, 112 Stat. 746, in order to afford taxpayers new procedural protections with regard to collection matters. Section 6320 generally provides that the Secretary cannot proceed with collection of taxes by way of a lien on a taxpayer's property until the taxpayer has been notified in writing and provided with an opportunity for an administrative review in the form of a hearing before an impartial officer of the Internal Revenue Service Office of Appeals. Sec. 6320(b). Generally, hearings under section 6320 are conducted in accordance with the procedural requirements set forth in section 6330(c). Sec. 6320(c). At the hearing, the Appeals officer shall obtain verification that the requirements of any applicable laws and administrative procedures have been met. Sec. 6330(c)(1). Taxpayers may raise appropriate spousal defenses, challenges to the appropriateness of the collection action, and offers of collection alternatives, which may include offers in compromise. Sec. 6330(c)(2)(A)(iii). In certain circumstances, taxpayers may also challenge their underlying tax liability at the hearing. Sec. 6330(c)(2)(B).

In this case, petitioners do not dispute that the Appeals officer obtained verification that the requirements of any applicable laws and administrative procedures had been met. In addition, petitioners do not dispute the existence or amount of their underlying tax liability. The only collection alternative offered by petitioners at their hearing was their offer in compromise for $100. No other issues were raised.

We review the Appeals officer's determination for an abuse of discretion. Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 182 (2000). We must decide whether respondent exercised his discretion arbitrarily, capriciously, or without sound basis in fact or law. Woodral v. Commissioner [Dec. 53,206], 112 T.C. 19, 23 (1999); Fargo v. Commissioner [Dec. 55,514(M)], T.C. Memo. 2004-13. The issue raised with the Appeals officer is the proper point of reference in determining whether the Appeals officer abused his discretion. Magana v. Commissioner [Dec. 54,765], 118 T.C. 488, 493-494 (2002).

Petitioners contend that the Appeals officer abused his discretion in rejecting their offer to compromise the $7,832.90 total liability for $100. Specifically, petitioners argue that their offer in compromise should have been accepted because they will not be able to meet basic living expenses if their assets are lost to foreclosure and respondent's lien is left in place. They point to their poor health, age, and education as evidence that they will experience economic hardship if the value of their equity is not available to them. They also argue that the examples contained in section 301.7122-1(c)(3)(iii), Proced. & Admin. Regs., compel respondent to accept their ETA offer.

We note at the outset that based on the record petitioners are not destitute. The record reflects that petitioners own two automobiles, one with a quick sale value of $10,120, subject to an encumbrance of $921, and the other with a quick sale value of $8,988, subject to an encumbrance of $5,700. Petitioners do not dispute that these figures are correct. The Appeals officer sustained the lien and suspended their account as "temporarily not collectible". There is no evidence that the Government is currently taking any efforts to collect on petitioners' account.

Section 301.7122-1(c)(3), Proced. & Admin. Regs., authorizes the Internal Revenue Service, in compromising liabilities, to take into account circumstances where payment in full would create economic hardship. In this case, the Appeals officer determined that petitioners did not have sufficient income to enter an installment agreement. However, the regulations do not require the Commissioner to relieve a liability completely because the taxpayers are unable to pay the liability from current income. Petitioners have not shown that they are unable to pay at least a part of their liability from their remaining assets. Their $100 de minimis offer effectively asks respondent to forgive their entire liability, despite the value of their assets. On the basis of the undisputed facts presented to the Appeals officer, if petitioners were to sell one of their two automobiles, they could pay the entire amount of the liability at issue. Under these circumstances, we cannot find an abuse of discretion in the Appeals officer's determination to reject petitioners' de minimis offer in compromise. The Government is entitled to preserve its priority regarding petitioners' assets, given their value and the uncertainty regarding their disposition. In the face of petitioners' de minimis offer, respondent's willingness to forgo collection until petitioners' financial situation changes was reasonable and certainly was not an abuse of discretion.

To reflect the foregoing,

Decision will be entered for respondent.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code in effect at the time the petition was filed, and all Rule references are to the Tax Court Rules of Practice and Procedure.

[Dec. 55,749(M)] Albert M. Kun v. Commissioner.

Dkt. No. 16979-02L , TC Memo. 2004-209, September 20, 2004 .

[Appealable, barring stipulation to the contrary, to CA-9]

[Code Secs. 6320 and 6330]
Tax lien: Collection Due Process hearing: Assessment: Offer-in-compromise. --

The IRS did not abuse its discretion in determining that filing a Notice of Federal Tax Lien was an appropriate enforcement action. First, the Appeals officer properly relied on a computer transcript to verify that a valid assessment was made. Also, Code Sec. 6330(c)(1) did not require the Appeals officer to give the taxpayer a copy of the record of assessment (Form 4340) at or before the hearing. Finally, the IRS did not abuse its discretion in rejecting the taxpayer's offer-in-compromise. The taxpayer (1) offered no evidence that the Appeals officer failed to properly evaluate the taxpayer's collection information; (2) could not establish any requirement for the Appeals officer to make a finding of net income; and (3) declined to consider an installment agreement.

Albert M. Kun, pro se; Rebecca S. Duewer and Paul R. Zamolo, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

MARVEL, Judge: Pursuant to section 6330(d),¹ petitioner seeks review of respondent's determination to proceed with the collection of petitioner's 1995, 1996, 1997, 1998, and 1999 Federal income tax liabilities.

FINDINGS OF FACT

Some of the facts have been stipulated. We incorporate the stipulated facts and the accompanying exhibits into our findings by this reference. Petitioner resided in San Francisco , California , when he filed the petition.

Petitioner timely filed tax returns for 1995 through 1999 but failed to pay the amounts shown as due on the returns. On May 3, 2001 , respondent sent to petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 for 1995 through 1999. On June 4, 2001 , petitioner mailed to respondent Form 12153, Request for a Collection Due Process Hearing, requesting a hearing with respect to all 5 taxable years. Petitioner's Form 12153 stated: "I believe this bill is incorrect. These taxes were never assessed. I am requesting a minimum of 60 days extension."

On April 22, 2002 , petitioner and petitioner's representative, Hector Vasquez, attended a hearing with Appeals Officer Serena Wong. At the hearing, petitioner contended that respondent had not assessed the income tax liabilities. Petitioner also submitted an offer-in-compromise of $1,000 on the basis of doubt as to collectibility. Petitioner's offer-in-compromise covered his income tax liabilities for 1985 through 2001, which then exceeded $180,000.

In addition to Form 656, Offer in Compromise, petitioner submitted the following completed forms at the hearing: (1) Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and (2) Form 433-B, Collection Information Statement for Businesses. On the Form 433-A, petitioner indicated that he was an unmarried, self-employed attorney and had total monthly income and expenses of $2,707 and $3,302, respectively. On the Form 433-B, petitioner stated that he had total monthly business income and expenses of $6,131 and $3,424, respectively.

On October 11, 2002 , the Appeals Office sent to petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination). In the notice of determination, the Appeals Office determined the following:

1. All legal and procedural requirements for filing the notice of Federal tax lien had been met.

2. Petitioner's income tax liabilities were timely assessed, and the assessments were "properly based on established law, policy and procedure."

3. Petitioner's offer-in-compromise was properly rejected, because petitioner was noncompliant in the payment of both his income tax liabilities and estimated tax payments, petitioner was capable of paying more than the amount offered, no exceptional circumstances were present "such that collection of the full liability will be detrimental to voluntary compliance", and there was no evidence that a compromise would encourage future compliance and promote effective tax administration.

4. Petitioner declined to consider an installment agreement.

5. The notice of Federal tax lien filing balanced the need for efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary.

On October 30, 2002 , petitioner filed a timely petition contesting respondent's determination. Petitioner alleged that "the Internal Revenue Service abused its discretion in making the findings and conclusions it did and abused its discretion in rejecting petitioner's offer in compromise."

OPINION

All property and rights to property of a taxpayer become subject to a lien in favor of the United States on the date a tax liability is assessed against the taxpayer if the taxpayer fails to meet the Commissioner's demand for payment of the tax liability. Secs. 6321 and 6322. Until a notice of Federal tax lien is filed, a lien is without validity and priority against certain persons such as judgment lien creditors of the taxpayer. Sec. 6323(a). After the Secretary files the notice of Federal tax lien, the Secretary must provide the taxpayer with written notice of the filing, informing the taxpayer of the right to request an administrative hearing on the matter. Sec. 6320(a)(1), (3)(B). Section 6320(c) requires that the administrative hearing be conducted pursuant to section 6330(c), (d), and (e).

At the hearing, a taxpayer may raise any relevant issue, including appropriate spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives, such as an offer-in-compromise. Sec. 6330(c)(2)(A). Additionally, at the hearing, a taxpayer may contest the existence and amount of the underlying tax liability if the taxpayer did not receive a notice of deficiency for the tax in question or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B); see also Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 609 (2000).

Following the hearing, the Appeals Office is required to issue a notice of determination regarding the disputed notice of Federal tax lien. In so doing, the Appeals Office is required to take into consideration the verification presented by the Secretary, the issues raised by the taxpayer, and whether the proposed collection action appropriately balances the need for efficient collection of taxes with the taxpayer's concerns regarding the intrusiveness of the proposed collection action. Sec. 6330(c)(3). The taxpayer may petition the Tax Court or, in limited cases, a Federal District Court for judicial review of the Appeals Office's determination. Sec. 6330(d).

If the taxpayer files a timely petition for judicial review, the applicable standard of review depends on whether the underlying tax liability is at issue. Where the underlying tax liability is properly at issue, the Court reviews any determination regarding the underlying tax liability de novo. Sego v. Commissioner, supra at 610. The Court reviews other administrative determinations regarding the notice of Federal tax lien for abuse of discretion. Id.

In the present case, petitioner has not received a notice of deficiency or otherwise had an opportunity to dispute his income tax liabilities for 1995 through 1999. Consequently, petitioner's underlying tax liabilities are properly at issue, and we review any challenge to the underlying tax liabilities de novo. See sec. 6330(c)(2)(B); Montgomery v. Commissioner [Dec. 55,501], 122 T.C. 1, 9 (2004).

A. Petitioner's Challenge to the Underlying Tax Liabilities

In challenging the underlying tax liabilities, petitioner solely contends that "The taxes in question were not due because they were never assessed." Petitioner does not allege any specific irregularity in the assessment procedure.

An Appeals officer may rely on a computer transcript or Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, to verify that a valid assessment was made. Nestor v. Commissioner [Dec. 54,655], 118 T.C. 162, 166 (2002); Schaper v. Commissioner [Dec. 54,843(M)], T.C. Memo. 2002-203; Schroeder v. Commissioner [Dec. 54,829(M)], T.C. Memo. 2002-190. After reviewing the computer transcripts of petitioner's account, Appeals Officer Wong concluded that "Assessments for all years appear correct and based on established law, policy and procedure." The record contains no credible evidence to contradict Appeals Officer Wong's conclusion. Accordingly, we conclude that respondent properly assessed petitioner's income tax liabilities.

B. Petitioner's Challenge to Respondent's Determination To Proceed With the Collection Action

1. Copies of Form 4340

Petitioner asserts that, at the hearing, Appeals Officer Wong should have made available to petitioner a copy of Form 4340, Certificate of Assessments, for each of the taxable years at issue and should have discussed the Forms 4340 with him. We disagree. Although section 6203 provides that "Upon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment", section 6330(c)(1) does not require that the Appeals officer give to the taxpayer a copy of the record of assessment at or before the hearing. See Nestor v. Commissioner, supra at 166-167. Even if petitioner had requested copies of the Forms 4340,² Appeals Officer Wong's failure to give them to petitioner at the hearing is not an abuse of her discretion. See id.

2. Petitioner's Offer-in-Compromise

Petitioner further asserts that it was an abuse of discretion for Appeals Officer Wong to reject his offer-in-compromise. According to petitioner, Appeals Officer Wong (1) failed to apply Internal Revenue Manual section "5.15.1.4.3" for evaluating petitioner's Forms 433-A and 433-B and (2) failed "to make a finding of net income" for purposes of an installment agreement.

In his filings with the Court, petitioner did not explain his contention regarding the Internal Revenue Manual and offered no evidence in support of his position that Appeals Officer Wong did not properly evaluate his collection information. Upon review of the record, it is clear that Appeals Officer Wong carefully considered petitioner's collection information and, on the basis of that information, determined that petitioner's offer-in-compromise should be rejected for several reasons³ in addition to petitioner's ability to pay.

In arguing that the rejection of his offer-in-compromise was an abuse of discretion, petitioner also contends that Appeals Officer Wong failed to make a finding of net income for purposes of an installment agreement. Petitioner has not directed us to, and we are not aware of, any such requirement for purposes of rejecting an offer-in-compromise. Moreover, when Appeals Officer Wong presented to petitioner the opportunity to consider an installment agreement, petitioner declined to do so. Appeals Officer Wong's rejection of petitioner's offer-in-compromise was not an abuse of discretion.

C. Conclusion

We have considered the remaining arguments of both parties for results contrary to those discussed herein and, to the extent not discussed above, conclude those arguments are irrelevant, moot, or without merit.⁴ We shall sustain respondent's determination that the notice of Federal tax lien filing was an appropriate enforcement action with respect to petitioner's 1995, 1996, 1997, 1998, and 1999 income tax liabilities.

To reflect the foregoing,

Decision will be entered for respondent.

¹ All section references are to the Internal Revenue Code in effect at all relevant times.

² There is no evidence, and petitioner did not allege, that he ever requested copies of the Forms 4340 from the Appeals officer at or before the hearing.

³ In addition to determining that the amount of petitioner's offer-in-compromise was inadequate, Appeals Officer Wong rejected petitioner's offer-in-compromise because petitioner had a 17-year history of noncompliance with the Federal income tax laws; had not paid his 2000, 2001, or 2002 Federal income tax liability; and had not made required estimated tax payments as of the date of his hearing. See Londono v. Commissioner [Dec. 55,107(M)], T.C. Memo. 2003-99 (taxpayer's history of noncompliance was basis for rejecting offer-in-compromise).

⁴ In his posttrial memorandum of law, petitioner argued that he was denied due process when this Court granted respondent's two motions to quash subpoenas and denied petitioner's motion for a continuance, but petitioner did not file any motion for reconsideration. We decline to reconsider our rulings on the motions, which were explained in detail on the record before trial.

[Dec. 55,816(M)] Albert M. Kun v. Commissioner.

Dkt. No. 16979-02L , TC Memo. 2004-273, November 30, 2004 .

[Appealable, barring stipulation to the contrary, to CA-9.]

[Code Secs. 6320 and 6330]
Tax lien: Collection Due Process hearing: Motion to vacate. --

An individual's motion to vacate a Tax Court Memorandum decision (88 TCM 262, Dec. 55,749(M), TC Memo. 2004-209) holding that the IRS's filing a notice of federal tax lien was an appropriate enforcement action with respect to the taxpayer's income tax liabilities was denied. The taxpayer did not assert sufficient grounds to support his contentions that his income tax liabilities were not timely assessed. The record demonstrated that the assessments were made within three years of the date the taxpayer filed his returns, and, thus, were timely and that the assessments were properly based on established law, policy and procedure.

Albert M. Kun, pro se; Rebecca S. Duewer and Paul R. Zamolo, for respondent.

SUPPLEMENTAL MEMORANDUM OPINION

MARVEL, Judge: On October 15, 2004 , we received and filed petitioner's motion to vacate or revise decision pursuant to Rule 162.¹ In his motion, petitioner moves that we vacate or revise the decision that we entered on September 21, 2004 , in accordance with our Memorandum Opinion in Kun v. Commissioner [Dec. 55,749(M)], T.C. Memo. 2004-209 (Kun I). In Kun I, we sustained respondent's determination that the notice of Federal tax lien filing was an appropriate enforcement action with respect to petitioner's 1995, 1996, 1997, 1998, and 1999 income tax liabilities. In the motion, petitioner alleged that "this Court had no chance to consider the recent opinion of the United States Supreme Court in United States v. Galletti (March 23, 2004) 124 S Ct Reporter 1548." This Supplemental Memorandum Opinion addresses petitioner's contention.

Background

We adopt the findings of fact in our prior Memorandum Opinion, Kun I. For convenience and clarity, we repeat below the facts necessary for the disposition of this motion.

Petitioner timely filed Federal income tax returns for 1995 through 1999 but failed to pay the amounts shown as due on the returns. On May 3, 2001 , respondent sent to petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 for 1995 through 1999. On June 4, 2001 , petitioner mailed to respondent Form 12153, Request for a Collection Due Process Hearing, requesting a hearing with respect to all 5 taxable years. Petitioner's Form 12153 stated: "I believe this bill is incorrect. These taxes were never assessed."

On April 22, 2002 , petitioner and his representative attended a hearing before Appeals Officer Serena Wong. At the hearing, petitioner contended that respondent had not assessed the income tax liabilities.

On October 11, 2002 , the Appeals Office sent to petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination). In the notice of determination, the Appeals Office determined that petitioner's income tax liabilities were timely assessed, and the assessments were "properly based on established law, policy and procedure."

On October 30, 2002 , petitioner's petition contesting respondent's determination was filed in this Court. In the petition, petitioner alleged that "the Internal Revenue Service abused its discretion in making the findings and conclusions it did and abused its discretion in rejecting petitioner's offer in compromise."

We held a trial in this case on October 22, 2003 , at which petitioner testified. On September 20, 2004 , we filed our Memorandum Opinion in Kun I in which we rejected petitioner's contention that the income tax liabilities had not been timely assessed. We pointed out that petitioner had not alleged any specific irregularity in the assessment procedure and that an Appeals officer may rely on a computer transcript or Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, to verify that a valid assessment had been made. After reviewing the computer transcripts of petitioner's accounts,² Appeals Officer Wong had concluded that "Assessments for all years appear correct and based on established law, policy and procedure." We concluded in Kun I that the record contained "no credible evidence to contradict Appeals Officer Wong's conclusion", and we held that respondent had properly assessed petitioner's income tax liabilities. On September 21, 2004 , we entered our decision in accordance with our opinion in Kun I.

On October 15, 2004 , petitioner's motion to vacate or revise opinion together with a memorandum of points and authorities and petitioner's declaration were filed. In accordance with our order dated October 15, 2004 , respondent submitted a response to petitioner's motion, which was filed on November 9, 2004 .

Discussion

Rule 162 authorizes a party to file a motion to vacate or revise a decision, with or without a new or further trial, within 30 days after the decision has been entered, unless the Court shall otherwise permit. The disposition of a motion to vacate or revise a decision rests within this Court's discretion. Vaughn v. Commissioner [Dec. 43,183], 87 T.C. 164, 166-167 (1986).

Although Rule 162 does not articulate any standard by which we evaluate a motion to vacate decision, Rule 1(a) provides guidance on how to fill the gap:

Where in any instance there is no applicable rule of procedure, the Court or the Judge before whom the matter is pending may prescribe the procedure, giving particular weight to the Federal Rules of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.

We have often referred to rule 60 of the Federal Rules of Civil Procedure, and cases applying rule 60, to assist us in resolving issues raised in a motion to vacate decision under Rule 162. See, e.g., Cinema `84 v. Commissioner [Dec. 55,593], 122 T.C. 264, 267-268 (2004) (involving a final decision); Estate of Miller v. Commissioner [Dec. 49,627(M)], T.C. Memo. 1994-25 (motion filed within 30 days of decision); Pietanza v. Commissioner [Dec. 46,909(M)], T.C. Memo. 1990-524 (motion filed within 30 days of order dismissing case for lack of jurisdiction), affd. without published opinion 935 F.2d 1282 (3rd Cir. 1991).

Rule 60(a) of the Federal Rules of Civil Procedure provides that "Clerical mistakes in judgments, orders or other parts of the record and errors therein arising from oversight or omission may be corrected by the court at any time of its own initiative or on the motion of any party and after such notice, if any, as the court orders." Rule 60(b) provides that, on motion and upon such terms as are just, a court may relieve a party of a final judgment or order for mistake, inadvertence, surprise, or excusable neglect, newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial, fraud, or any other reason justifying relief from the operation, or because the judgment is void, or has been satisfied, released or discharged.

In this case, petitioner's motion simply repeats his argument, made throughout the proceedings, that respondent did not timely assess the liabilities in question. He relies upon an opinion of the United States Supreme Court in United States v. Galletti [2004-1 USTC ¶50,204], 541 U.S. 114, 124 S. Ct. 1548 (2004), and specifically on language in the opinion to the effect that an assessment must be made within 3 years after the return was filed, sec. 6501(a), and "shall be made by recording the liability of the taxpayer in the office of the Secretary", sec. 6203. See id. at ___, 124 S. Ct. at 1552. Petitioner contends that "It is clear from the record that the Respondent failed to comply with this requirement. The assessment has not been reordered (sic) until September 11, 2003 well outside the 3 years requirement." As respondent points out in his response to petitioner's motion, however, petitioner does not state any basis for his belief. According to respondent, "the record before the Court indicates that Petitioner's 1995 through 1999 income tax liabilities were assessed within 3 years of Petitioner filing his tax returns."

Petitioner failed to present any evidence at trial in support of his contention that his 1995-99 income tax liabilities were not timely assessed, and that failure also infects his motion. We can find nothing in the record to support his allegation; in fact, the record demonstrates that the assessments in question were timely. Moreover, there is nothing in the Supreme Court's opinion in United States v. Galletti, supra, to suggest that our Memorandum Opinion in this case was in error or that our decision must be vacated.

Petitioner has not asserted sufficient grounds for vacating the decision, nor has he cited any opinion of any court that would support his motion. Consequently, we shall deny petitioner's motion to vacate or revise the decision.

An appropriate order denying petitioner's motion to vacate or revise decision will be issued.

¹ All Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code in effect at all relevant times.

² The parties stipulated to the admissibility of certified copies of Forms 4340, Certificate of Assessments, Payments and Other Specified Matters, with respect to petitioner's accounts for 1995-99. The Forms 4340 show that petitioner's income tax returns were filed and the tax liabilities shown thereon were assessed on the following dates:

  Year          Date return filed            Date tax assessed

  1995              
8/13/96
                      
9/16/96

  1996              
8/18/97
                      
9/15/97

  1997              
8/17/98
                      
9/21/98

  1998              
8/16/99
                      
9/20/99

  1999              
8/14/00
                      
9/25/00

[Dec. 55,323(M)] Carl R. Neugebauer v. Commissioner.

Docket No. 8552-02L , T.C. Memo. 2003-292, 86 TCM 467, Filed October 21, 2003 . [Appealable, barring stipulation to the contrary, to CA-9.]


[Code Secs. 6330 and 7122]

Offers in compromise: Rejection of offer: Abuse of discretion by IRS: Collection Due Process. --

The IRS did not act arbitrarily, capriciously, or without sound basis in fact or law when it rejected a delinquent taxpayer's offer in compromise. Thus, its determination to proceed with the collection action against him was sustained. The taxpayer failed to submit a properly completed Form 656, Offer in Compromise, and the required financial information for the consideration of his request.

Carl R. Neugebauer, pro se. Karen Nicholson Sommers, for the respondent.

MEMORANDUM OPINION

LARO, Judge: Petitioner, while residing in Murrieta , California , petitioned the Court under section 6330(d) to review respondent's proposed collection activity in the form of a levy. Respondent proposed this action to collect petitioner's Federal income tax liability for 1989. Currently, the case is before the Court on respondent's motion for summary judgment under Rule 121(a). Petitioner responded to respondent's motion under Rule 121(b).

We shall grant respondent's motion for summary judgment. Section references are to the applicable versions of the Internal Revenue Code. Rule references are to the Tax Court Rules of Practice and Procedure.

Background

Petitioner filed a delinquent Federal income tax return for 1989. Respondent sent a notice of deficiency to petitioner with respect to his income tax liability for that year. Petitioner then petitioned the Court contesting his liability specified in the notice of deficiency. Because the petition was not filed within the time prescribed by section 6213(a) or 7502, we dismissed the case for lack of jurisdiction.

On or about April 18, 1994 , an income tax deficiency and related penalties and interest were assessed against petitioner with respect to 1989. Petitioner failed to pay fully the amounts assessed. On or about May 7, 2001 , respondent issued to petitioner a letter entitled "Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing Under IRC 6330".

On or about June 8, 2001 , petitioner submitted a Form 12153, Request For A Collection Due Process Hearing. On January 10, 2002 , petitioner submitted an offer in compromise and a collection information statement in connection with his request for a hearing. Respondent's Appeals officer determined that the offer in compromise should not be accepted because the offer and supporting financial information were incomplete. Petitioner did not comply with the Appeals officer's request to provide the complete information. On January 17, 2002 , a hearing was held between respondent's Appeals officer and petitioner's counsel Judy E. Hamilton. In connection with the hearing, the Appeals officer reviewed Internal Revenue Service transcripts of account for petitioner's 1989 tax liability.

On April 12, 2002 , respondent sent petitioner a Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330 (Notice of Determination) regarding petitioner's 1989 Federal income tax liability. On May 13, 2002 , petitioner filed with the Court a Petition for Lien or Levy Action. Neither in the petition nor in the previous request for a hearing did petitioner raise any issues with respect to the existence or the amount of the underlying tax liability. instead, petitioner alleges that he was denied his right to a hearing under section 6330, that he was denied participation in the proceedings relating to offer in compromise, and that he was subjected to punitive conduct by personnel of the Internal Revenue Service (IRS). In addition, petitioner maintains that the factual foundation of the Notice of Determination lacked veracity. Petitioner asks the Court to remand this case to Appeals for further consideration of an offer in compromise or, alternatively, to transfer this case to the appropriate Federal District Court .

On July 8, 2002 , respondent filed with the Court a Motion to Dismiss for Lack of Jurisdiction and to Strike as to Trust Fund Recovery Penalty Liabilities on the basis that the Court did not have jurisdiction under section 6330(d) to decide respondent's determination as to those liabilities. On September 26, 2002 , we granted the motion.

On July 11, 2003 , respondent moved for summary adjudication as to the remaining issues. On August 20, 2003 , petitioner filed with the Court a reply to that motion.

Discussion

Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner [Dec. 44,689], 90 T.C. 678, 681 (1988). Summary judgment may be granted with respect to all or any part of the legal issues in controversy "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(a) and (b); Sundstrand Corp. v. Commissioner [Dec. 48,191], 98 T.C. 518, 520 (1992), affd. [94-1 USTC ¶50,092] 17 F.3d 965 (7th Cir. 1994). The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences are drawn in a manner most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner [Dec. 42,486], 85 T.C. 812, 821 (1985); Jacklin v. Commissioner [Dec. 39,278], 79 T.C. 340, 344 (1982).

As will be shown in the discussion that follows, petitioner has raised no genuine issue as to any material fact. Respondent supported his motion for summary judgment with the pleadings, exhibits, and an affidavit of one of his attorneys. Petitioner's reply was supported by materials not responsive to the merits of respondent's motion. The reply also did not set forth any specific facts showing a genuine issue for trial. We view "the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits", and find no genuine issue as to any material fact. Rule 121(b). Accordingly, we conclude that this case is ripe for summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317 (1986).

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, the Secretary may collect such tax by levy on the person's property. Section 6331(d) states that at least 30 days before enforcing collection by levy on the person's property, the Secretary must furnish the person with a final notice of intent to levy, including notice of the administrative appeals available to the person.

Under section 6330, the Commissioner cannot proceed with collection by levy until the person has been given notice and the opportunity for an administrative review of the matter (in the form of an Appeals Office hearing) and, if dissatisfied, with judicial review of the administrative determination. Davis v. Commissioner [Dec. 53,969], 115 T.C. 35, 37 (2000); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 179 (2000). In the case of such judicial review, the Court will review a taxpayer's liability under the de novo standard where the validity of the underlying tax liability is at issue. A taxpayer's underlying tax liability may be at issue if he or she "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." Sec. 6330(c)(2)(B). The Court will review the Commissioner's administrative determination for abuse of discretion with respect to all other issues. Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 610 (2000).

Here, petitioner does not dispute the existence or the amount of an underlying tax liability. Therefore, the proper standard for our review of respondent's determination is abuse of discretion. Under section 6330(c)(3), the determination of an Appeals officer must take into consideration (A) the verification that the requirements of applicable law and administrative procedures have been met, (B) issues raised by the taxpayer, and (C) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection be no more intrusive than necessary.

Here, the Appeals officer addressed all these matters. He satisfied the first requirement by reviewing the Internal Revenue Service transcripts of petitioner's account. Hill v. Commissioner [Dec. 54,922(M)], T.C. Memo. 2002-272; Weishan v. Commissioner [Dec. 54,704(M)], T.C. Memo. 2002-88; Kuglin v. Commissioner [Dec. 54,661(M)], T.C. Memo. 2002-51.

The Appeals officer satisfied the second requirement by considering the issues raised by petitioner. The only issue raised by petitioner was his inability to pay the liability in full, and, in that regard, petitioner requested that he be allowed to satisfy the liabilitythrough an offer in compromise. The Appeals officer addressed this request by reviewing the information submitted, explaining that it was incomplete, and asking for additional information. Petitioner failed to submit a properly completed Form 656, Offerin Compromise, and the required financial information for the consideration of his request.

As to the third requirement, the Appeals officer properly balanced the need for efficient collection of taxes through the proposed levy against the concern that any collection action be no more intrusive than necessary. Petitioner failed to provide the information required in order to consider an alternative collection action.

Throughout the proceeding, petitioner's conduct demonstrates propensity to cause delay in collecting his outstanding tax liabilities. We sustain respondent's determination regarding the proposed levy as a permissible exercise of discretion. We note as to the allegations set forth in the petition that petitioner did receive a hearing under section 6330, that petitioner was given an opportunity to participate in the proceeding relating to an offer in compromise, and that petitioner's unsupported allegations raise no triable issue of fact concerning "punitive conduct" by the IRS personnel.

Regarding the petitioner's request to refer this case to a different forum, we observe that this Court has jurisdiction over the appeal of the administrative determinations where the underlying tax liability concerns unpaid income taxes, as opposed to certain other taxes. See, e.g., Goza v. Commissioner, supra at 182. We decline to grant the petitioner's request.

We have considered all arguments raised by the parties and have found those arguments not discussed herein to be irrelevant and/or without merit. Accordingly,

An appropriate order and decision will be entered for respondent.

[2004-2 USTC ¶50,360]Richard E. Olsen, Plaintiff v. United States of America , Defendant.

U.S. District Court, Dist. Mass. ; Civ. 03-11199-RCL, June 16 2004 .

[ Code Sec. 6330]

Collection: Levy: CDP hearing: Appeal of determination. --

An IRS Appeals officer did not abuse her discretion at a collection due process hearing when she upheld a proposed levy on a taxpayer who admittedly owed more than $100,000 in taxes and yet unsuccessfully offered to compromise the liability with a payment of $5,000. Since the taxpayer's underlying tax liability was not an issue, the Appeals officer's decision was reviewed using an abuse of discretion standard. The IRS Appeals officer did not abuse her discretion when she upheld the proposed levy. Despite the paltry size of the plaintiff's offer in compromise of his tax liability, the Appeals officer took several steps to assist the taxpayer in perfecting his offer for processing. Given the steps that the officer took to obtain the information necessary to evaluate the offer, it was not an abuse of discretion for her to find that there was insufficient information to evaluate the offer and thus conclude that the offer could not be accepted.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO AFFIRM AND DISMISS

I. Introduction

LINDSAY, District Judge: Invoking due process rights guaranteed under a section of the Restructuring and Reform Act of 1998, 26 U.S.C. §6330, the plaintiff, Richard E. Olsen ("Olsen" or the "plaintiff"), seeks judicial review of a decision of an appeals officer of the Internal Revenue Service ("IRS"). The decision, which allowed a levy on the plaintiff's property to secure the satisfaction of unpaid taxes, was made after the plaintiff requested and received a hearing to challenge the proposed enforcement action. The United States , as the defendant in this action, argues that the appeals officer acted properly in rejecting the plaintiff's appeal, and on that basis moves to affirm the officer's decision and dismiss the plaintiff's complaint. This memorandum and order addresses the defendant's motion. ¹ .

II. Facts

On March 14, 2001, the IRS gave Olsen final notice of its intent to levy on his assets. See United States ' Motion To Affirm Appeals Officer's Determination And Dismiss The Complaint ("Defendant's Motion"), Ex. A. The notice was given in accordance with section 6330 of the Internal Revenue Code, see 26 U.S.C. §6330(a), and indicated that Olsen owed nearly $105,000 in unpaid taxes. See Defendant's Motion, Ex. A. Section 6330 allows a taxpayer to challenge a proposed tax enforcement action within thirty days of receiving the final notice, see 26 U.S.C. §6330(b). Thus, on March 22, 2001, Olsen filed a formal "Request for a Collection Due Process Hearing." See Defendant's Motion, Ex. B. The plaintiff stated in his request that he was appealing the proposed tax levy "to object to the Service's actions in attempting to undertake collections [sic] actions when an Offer in Compromise is the more effective and efficient means of collecting past due taxes." Id. Olsen did not submit an offer in compromise at that time.

The IRS appeals officer originally assigned to Olsen's case began the review of Olsen's file on April 25, 2001. See Defendant's Motion, Ex. E. At that time, the appeals officer noted in the "Case Activity Records" for Olsen's appeal that "the taxpayer's [sic] are not in filing compliance, yet the [taxpayer] wants to make an [Offer in Compromise]." Id. The appeals officer further noted that, since Olsen had made a timely request for a collection due process hearing, Olsen would have "an opportunity to file [the missing] returns by the appointment date." Id. Olsen's case remained inactive for nearly a year thereafter.

On March 12, 2002, the original appeals officer sent Olsen's attorney, Timothy J. Burke ("Burke"), a letter notifying him that Olsen's hearing had been scheduled for March 26, 2002. See Defendant's Motion, Ex. C. In the letter, the appeals officer informed Burke that, at the hearing, Olsen could "present facts, arguments, and legal authority to support [his] position." Id. The letter also included a list of "items" that Olsen would have to submit if he wanted the hearing officer to "consider collection alternatives such as an offer in compromise, an installment agreement, etc. in your hearing ...." Id. These "items" included a "completed Collection Information Statement (Form 433-A for individuals and/or Form 433-B for businesses)," income tax returns for the years 1996-2000, and proof of estimated tax payments for 2001. See id. It is unclear from the record whether the hearing took place on the scheduled date.

On July 26, 2002, Burke filed a formal offer in compromise with the IRS on Olsen's behalf. See Defendant's Motion, Ex. B. In the offer in compromise, Olsen proposed payment of $5000 to settle his income tax liability for the years 1996-2000. See id. Olsen stated that the basis for the offer in compromise was doubt as to the ability of the IRS to collect the full amount of the taxes owed, because among other things, his "financial history for the past ten years shows a pattern of financial reverses which is broken by an occasional year of success." Id. With the offer in compromise, Olsen included a "Collection Information Statement for Wage Earners and Self-Employed Individuals" (i.e. IRS Form 433-A), and copies of his income tax returns for the applicable years. See id. The IRS received the offer in compromise and subsequently asked Burke to send income tax returns with original, rather than photocopied, signatures. See Defendant's Motion, Ex. E.

On November 7, 2002, Olsen's appeal was transferred to a new appeals officer. See id. On that date, the new appeals officer reviewed the plaintiff's case history. See id. Olsen's case file indicated that he owned two cars which were unencumbered by liens and that he leased a third automobile. See id. In the "Case Activity Records" for Olsen's appeal, the appeals officer noted that Olsen had submitted an offer in compromise in connection with his appeal, but that he had yet to send his original income tax returns for the years 1996-2000. See id. Responding to this and other deficiencies in Olsen's offer in compromise, the appeals officer sent Burke a letter on November 13, 2002, informing him of the outstanding problems with Olsen's offer in compromise. See Defendant's Motion, Ex. C. The letter gave instructions as to how those problems could be resolved so that the offer could be processed. See id. The appeals officer also requested the submission of certain financial information and included a blank Collection Information Statement for Businesses (i.e. IRS Form 433-B) for Olsen to fill out and return. See id.

On December 31, 2002, Burke mailed to the appeals officer Olsen's original income tax returns for the years 1996-2000. See Defendant's Motion, Ex. E. Olsen's offer in compromise was consequently processed by the IRS and became ripe for consideration. See id. Burke, however, failed to return IRS Form 433-B to the appeals officer at the time he forwarded to her Olsen's original tax returns. Because the appeals officer required the financial information sought in IRS Form 133-B to evaluate the plaintiff's offer in compromise, she requested this information by letters to Burke dated January 27, 2003, and April 8, 2003. See Defendant's Motion, Ex. C. In both of these letters, the appeals officer identified with specificity the forms she needed, and stated that the information was necessary for her to complete her analysis of Olsen's offer. See id. In the letter dated April 8, 2003, the appeals officer warned that "[i]f the information requested is not provided ... my determination may be made with the information currently available." Id. Despite the appeals officer's entreaties, neither Burke nor Olsen ever provided the appeals officer with the requested information. See Defendant's Motion, Ex. E.

On May 29, 2003, the appeals officer denied Olsen's appeal and sustained the proposed collection action. See Defendant's Motion, Ex. F. In the notice accompanying her determination, the appeals officer stated that the offer in compromise could not be accepted because Olsen had failed to send the requested business and financial statements for his venture capital businesses. See id. The appeals officer concluded that the proposed collection action was "now necessary to provide for the efficient collection of the taxes, despite the potential intrusiveness of enforced collection." Id. Less than a month later, Olsen filed a complaint with this court challenging the appeals officer's determination. See Complaint.

III. Discussion

A. Standard of Review

The Restructuring and Reform Act of 1998 created collection due process hearings and entitles taxpayers to judicial review of the determinations made at those hearings. See 26 U.S.C. §6330. Unfortunately, the statute is silent as to the appropriate standard for reviewing such determinations. Moreover, because the law was only recently enacted, the issue of the applicable standard of review has not yet been decided by the First Circuit. The legislative history accompanying the statute, however, indicates that where, as here, the appellant's underlying tax liability is not at issue, "the appeals officer's determination as to the appropriateness of the collection activity will be reviewed using an abuse of discretion standard of review." H. Rep. No. 105-599 at 266 (1998).

Citing this language in the House Conference Report, other courts have evaluated decisions by appeals officers at collection due process hearings under the abuse of discretion standard. See, e.g., Dudley's Commercial and Industrial Coating, Inc. v. United States [ 2003-1 USTC ¶50,397], 292 F.Supp.2d 976, 985 (M.D. Tenn. 2003); Kitchen Cabinets, Inc. v. United States [ 2001-1 USTC ¶50,287], 2001 WL 237384 *2 (N.D. Tex. 2001); TTK Management v. United States [ 2001-1 USTC ¶50,185], 2000 WL 33122706 *1-2 (C.D. Cal. 2000). The abuse of discretion standard employed by these courts is not only supported by the legislative history, it is also consistent with the standard articulated in other statutes providing for judicial review of administrative decisions. See MCRA Information Services v. United States [ 2000-2 USTC ¶50,683], 145 F.Supp.2d 194, 199 n. 8 (citing the abuse of discretion standard adopted by Congress in the Administrative Procedure Act, 5 U.S.C. §706(2)). For these reasons, I will apply the abuse of discretion standard in reviewing the appeals officer's determination in this case.

B. Analysis

Section 6330(c) of the Restructuring and Reform Act sets forth the issues an appeals officer must consider at a collection due process hearing. See 26 U.S.C. §6330(c). Specifically, the statute requires the appeals officer to consider: (1) whether the requirements of any applicable law or administrative procedure have been met; (2) any issues raised by the appellant relating to the unpaid tax, including offers of collection alternatives such as offers in compromise; and (3) whether the proposed collection action balances the need for the efficient collection of taxes with the taxpayer's legitimate concern that the collection action be no more intrusive than necessary. See id.

In his complaint, the plaintiff asserts that the appeals officer abused her discretion by failing adequately to consider the offer in compromise the plaintiff submitted during the pendency of his appeal. The plaintiff specifically complains that the appeals officer's "failure to communicate with [the plaintiff concerning] the [defendant's] view of the terms of an acceptable Offer establishes that the hearing required under law was not properly concluded." Complaint ¶23. In support of this position, the plaintiff points to Treasury regulations regarding the consideration and negotiation of offers in compromise. See, e.g., 26 C.F.R. §301.7122-1. ² The plaintiff contends that these regulations required the appeals officer to respond affirmatively to the plaintiff's offer, and that her failure actively to negotiate with the plaintiff constituted an abuse of her discretion.

In light of the plaintiff's claim, it is important, before turning to the administrative record, that I identify with precision which decision of the appeals officer is subject to judicial review. 26 U.S.C. §6330(d) provides for judicial review of an administrative appellate decision to sustain a proposed collection action. It does not impose on the appeals officer, however, any obligations concerning the negotiation of offers in compromise, or provide for judicial oversight of those negotiations. The acceptance or rejection of such offers is governed by a different statute, which sets forth the standards and procedures for evaluating offers in compromise. See 26 U.S.C. §7122. Under that statute, a taxpayer challenging the rejection of an offer in compromise is entitled to administrative, but not judicial review. See 26 U.S.C. §7122(d). Thus, whether the appeals officer observed relevant Treasury regulations in negotiating an offer in compromise with the plaintiff is an issue that falls outside the scope of judicial review under §6330. ³

Under §6330, the scope of my review is limited to whether the appeals officer abused her discretion when, after holding a collection due process hearing, she upheld the proposed enforcement action. Section 6330(c)(2)(iii) allows a taxpayer to raise at that hearing any offers of collection alternatives, including offers in compromise. Here, the plaintiff took advantage of that opportunity, and submitted an offer in compromise to the appeals officer. My task therefore is limited to determining whether the appeals officer adequately considered the offer in compromise that the plaintiff had on the table when his appeal was denied.

Based on all of the record evidence, I conclude that the appeals officer did not abuse her discretion when she upheld the proposed enforcement action. The administrative record establishes that the plaintiff, in challenging the collection action, did not contest that he owed nearly $105,000 in unpaid taxes. The plaintiff's offer, however, was to pay only $5000 in exchange for the full exoneration of his tax liability. Despite the paltry size of the plaintiff's offer in comparison to his liability, it appears from the administrative record that the appeals officer took several steps to assist the plaintiff in perfecting his offer for processing. She communicated with the plaintiff's attorney on multiple occasions to inform him of deficiencies in the plaintiff's offer in compromise, and to request information necessary for consideration of the offer.

While the plaintiff cured the deficiencies that prevented his offer from being processed, he did not provide all of the requested financial information necessary for consideration of the offer in compromise. Of particular importance, the plaintiff did not provide collection information statements for his business ventures. As a consequence of the plaintiff's failure to provide the requested information, the appeals officer found that there was insufficient information to evaluate the plaintiff's offer in compromise and concluded that the offer could not be accepted. Given the affirmative steps taken by the appeals officer to obtain the financial information necessary to evaluate the offer, I conclude that this determination was not an abuse of discretion.

Because the plaintiff did not contest his underlying tax liability, the only other issue for the appeals officer to consider in evaluating the plaintiff's appeal was "whether [the] proposed collection action balance[d] the need for the efficient collection of taxes with the legitimate concern that any collection action be no more intrusive than necessary." 26 U.S.C. §6330(c)(3)(C). Here, the plaintiff has presented no evidence that the appeals officer abused her discretion when she decided that the collection action proposed by the IRS appropriately balanced these competing concerns. In the case activity record maintained in connection with the plaintiff's appeal, the appeals officer identified particular property of the plaintiff, including three motor vehicles, on which a federal tax lien could be placed to secure the satisfaction of his unpaid taxes. This review of the plaintiff's financial circumstances and case history establishes that the appeals officer did not arbitrarily or capriciously sustain the proposed enforcement action without considering the plaintiff's legitimate interest in minimally intrusive tax collection. I therefore conclude that the appeals officer did not abuse her discretion when she denied the plaintiff's appeal and upheld the proposed tax enforcement action.

For these reasons, the defendant's motion to affirm the appeals officer's determination is GRANTED, and the plaintiff's complaint is DISMISSED.

So ordered.

¹ In addition to opposing the defendant's motion to affirm and to dismiss, the plaintiff has filed his own motion to remand this case for further consideration by the appeals officer. Since the plaintiff's motion for remand raises the same issues as the defendant's motion, this memorandum and order will dispose of both motions.

² The plaintiff also contends that the appeals officer, in rejecting the offer in compromise, did not follow applicable guidelines set forth in the Internal Revenue Manual. See Internal Revenue Manual §5.8.1.1. Courts have held, however, that "[t]he Internal Revenue Manual confers no rights on taxpayers," and that "[t]he procedures contained therein are intended only to aid in the internal administration of the IRS." Chavez v. United States, 2004 WL 1124914 *4 (W.D. Tex. May 18, 2004) (citing In re Carlson [ 97-2 USTC ¶50,702], 126 F.3d 915, 922 (7th Cir. 1997)); see also U.S. v. Horne [ 83-2 USTC ¶9548], 714 F.2d 206, 207 (1st Cir. 1983).

³ Tellingly, the specific federal regulation which the plaintiff claims the appeals officer violated was promulgated by the Secretary of the Treasury pursuant to authority conferred by section 7122, not section 6330. See 26 C.F.R. §301.7122-1; see also Chavez, 2004 WL 1124914 *3.

[Dec. 55,999(M)] Kenneth Hawkins v. Commissioner.

Dkt. No. 1468-03L , TC Memo. 2005-88, April 19, 2005 .

[Appealable, barring stipulation to the contrary, to CA-11.]

[Code Secs. 6320, 6330 and 7122]
Collection Due Process: Offer-in-Compromise: Federal tax lien: Economic hardship: Abuse of discretion. --

An IRS Appeals officer's determination to proceed with collection of an individual's unpaid tax liability was not an abuse of discretion. Although the taxpayer's allegation of economic hardship was worthy of review, the Tax Court determined that the taxpayer's substantial equity in his home, against which he could borrow, weighed against a finding of economic hardship. The taxpayer's reasonable basic living expenses did not include the maintenance of an affluent or luxurious standard of living. Accordingly, the IRS did not abuse its discretion by rejecting the taxpayer's offer to compromise and deciding to proceed with collection.

Kenneth Hawkins, pro se; Vivian N. Rodriguez, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

GERBER, Chief Judge: On January 2, 2003 , respondent sent petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320¹ and/or 6330 (notice of determination), in which respondent sustained the filing of a Federal tax lien for petitioner's 1993, 1995, and 1996 tax liabilities. Petitioner had previously made two offers-incompromise regarding these tax liabilities. Respondent rejected the first offer and returned the second.

The issue for consideration is whether respondent abused his discretion by sustaining the filing of the Federal tax lien.

FINDINGS OF FACT²

Petitioner resided in Pompano Beach , Florida , when the petition in this case was filed. He was self-employed for taxable years 1993, 1995, and 1996 (collectively, the subject years), operating a business known as "Professional Investigations and Consulting Inc.". Petitioner filed untimely tax returns for all subject years, with unpaid tax liabilities for 1995 and 1996 and a small refund for 1993. At all relevant times, petitioner had an unpaid Federal income tax liability outstanding for each of the subject years, much of which arose out of self-assessment.³ Petitioner was not married and did not file joint returns for the taxable years under consideration. Petitioner did not petition this Court to redetermine any of the tax liabilities, and the underlying tax liabilities are not in dispute.

Petitioner married during 1997, and on February 10, 1997 , he and his wife purchased a residence as tenants by the entireties. Petitioner contributed $50,000, or one-half of the downpayment.

Between October 25, 1994 , and December 2, 1997 , respondent assessed tax and additions to tax against petitioner for 1993, 1995, and 1996, based on audit examinations and amounts shown as due on income tax returns. On December 3, 1997 , petitioner sent respondent a Form 656, Offer-in-Compromise (first offer), based on doubt as to collectibility for the subject years, offering to settle the total outstanding tax liabilities for $16,209. At that time, petitioner's outstanding and unpaid tax liability was $26,266.06. Petitioner on Form 433-A, Collection Information Statement for Individuals, claimed that he had a 50-percent interest in his home and monthly net business income and living expenses of $1,400 and $1,648, respectively. On February 13, 2001 , respondent sent petitioner a notice rejecting petitioner's first offer, stating that the amount owed was legally due and appeared to be collectible.

On September 5, 2001 , petitioner submitted a second offerin-compromise (second offer) for the subject years, this time for $2,200. In the second offer, petitioner's only reference to his wife's physical condition was the statement: "my wife is unemployable. She is on Social Security Disability and earns no income." At that time, petitioner's total outstanding tax liability had increased to $38,165.32. Petitioner claimed on the Form 433-A that he had a 25-percent interest in his home and monthly net business income and living expenses of $2,550 and $3,384, respectively.⁴ On Form 433-A, petitioner explained his home ownership as follows: "As I borrowed my contribution toward the purchase of the home, and as a result of the fact that my wife's assets were the basis for the ability to obtain the mortgage in the first place, my interest in the house is 25% while hers is 75%." On June 17, 2002 , respondent returned the offer, stating that petitioner did not have any changed circumstances and that the offer was not materially different from the prior offer.

For the first offer, respondent accepted petitioner's claimed amount of monthly business net income but determined petitioner's allowable living expenses to be $433 on the basis of the national standard expenses table amount. For the second offer, respondent determined petitioner's net monthly business income to be $3,108, on the basis of petitioner's claimed revenue and expenses after disallowing some expenses that were doublecounted as both business and personal expenses. To estimate petitioner's living expenses, respondent first computed petitioner's and his wife's shares of monthly income, on the basis of the recomputed $3,108 income and petitioner's wife's $1,638 of Social Security and interest income reported for her 2000 taxable year. On the basis of this information, respondent determined that petitioner generated 65 percent of the income and petitioner's wife generated 35 percent of the income.

Respondent then applied this percentage to recompute petitioner's expenses on the basis of petitioner's own calculations or amounts indicated for local or national standards. Respondent allowed the full amount of the claimed life insurance expense but prorated petitioner's claimed health insurance premium and taxes by 65 percent. Also, respondent allowed the full Broward County local standard amount for transportation but allowed only a 65-percent prorated amount of the local standard for housing and of the national standard expense.

Respondent also determined, for both offers, petitioner's equity in assets, on the basis of petitioner's submitted information, statements from third parties, and a review of public records. Respondent determined the value of petitioner's home to be $342,096 for the first offer, on the basis of a valuation by the Broward County Property Appraiser. For the second offer, respondent determined the value of petitioner's home had increased to at least $610,000, because a similar home with a tax assessment lower than petitioner's home had sold for that much in the same development. The combination of petitioner's equity and earnings multiple resulted in a determination that petitioner's reasonable collection potential (RCP) exceeded both the amount of the offer and the outstanding tax liability for both offers.⁵

On June 24, 2002 , respondent filed a notice of Federal tax lien on petitioner's property. On June 28, 2002 , respondent sent petitioner a Notice of Federal Tax Lien and Your Right to a Hearing. On July 3, 2002 , petitioner filed a Form 12153, Request for a Collection Due Process Hearing. Petitioner attended the October 24, 2002 , hearing but did not present any collection alternatives or make any additional offer and refused to consider any collection alternatives that did not entail removal of the tax lien. On January 2, 2003 , respondent sent petitioner a notice of determination in which the filing of the Federal tax lien was sustained.

OPINION⁶

Petitioner made two offers in this case to settle his Federal income tax liability. Respondent accepted neither offer, then placed a Federal tax lien on petitioner's property. We decide whether respondent abused his discretion in filing the lien. That question depends on whether respondent's failure to accept petitioner's offers was an abuse of discretion. Nearly 4 years separated the first and second offer, and the second offer was substantially less than the first. Because the making of the second offer was so long after the first and the second offer preceded the filing of the lien, we need to consider only whether respondent abused his discretion in rejecting the second offer.⁷

Section 6320 provides that a taxpayer shall be notified in writing by the Secretary of the filing of a Federal tax lien and provided with an opportunity for an administrative hearing. Sec. 6320(b). Hearings under section 6320 are conducted in accordance with the procedural requirements set forth in section 6330. Sec. 6320(c).

When an Appeals officer issues a determination regarding a disputed collection action, a taxpayer may seek judicial review with the Tax Court or a District Court, as appropriate. Sec. 6330(d); see Davis v. Commissioner [Dec. 53,969], 115 T.C. 35, 37 (2000); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 179 (2000). Where the validity of the underlying tax liability is properly at issue, the Court will review the matter de novo. Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 610 (2000). However, when the validity of the underlying tax is not at issue, the Court will review the Commissioner's administrative determination for an abuse of discretion. Id. ; Goza v. Commissioner, supra at 181-182. Petitioner does not dispute the validity of the underlying tax. Accordingly, our review is for an abuse of discretion.

We do not conduct an independent review of what would be acceptable offers-in-compromise. We review only whether the Appeals officer's rejection of the offer-in-compromise was arbitrary, capricious, or without sound basis in fact or law. Woodral v. Commissioner [Dec. 53,206], 112 T.C. 19, 23 (1999). The Court considers whether the Commissioner abused his discretion in rejecting a taxpayer's position with respect to any relevant issues, including offers of collection alternatives, which include an offer-in-compromise. See sec. 6330(c)(2)(A).

Section 7122(a) authorizes the Secretary to compromise any civil case arising under the internal revenue laws. The three standards that the Secretary may use to compromise a liability are doubt as to liability, doubt as to collectibility, and the promotion of effective tax administration. Sec. 7122(c)(1); sec. 301.7122-1T(b), Temporary Proced. & Admin. Regs., 64 Fed. Reg. 39024 (July 19, 1999).⁸ Petitioner bases both offers on doubt as to collectibility.

Section 7122(c) provides the standards for evaluation of such offers. Under section 7122(c)(2):

(A) *** the Secretary shall develop and publish schedules of national and local allowances designed to provide that taxpayers entering into a compromise have an adequate means to provide for basic living expenses.

(B) Use of schedules.-The guidelines shall provide that officers and employees of the Internal Revenue Service shall determine, on the basis of the facts and circumstances of each taxpayer, whether the use of the schedules published under subparagraph (A) is appropriate and shall not use the schedules to the extent such use would result in the taxpayer not having adequate means to provide for basic living expenses.

Under the regulations for doubt as to collectibility cases:

A determination of doubt as to collectibility will include a determination of ability to pay. * * * To guide this determination [of the amount of the taxpayer's basic living expenses], guidelines published by the Secretary on national and local living expense standards will be taken into account. [Sec. 301.7122-1T(b)(3)(ii), Temporary Proced. & Admin. Regs., supra.]

Thus, use of the national and local average statistics published by the Internal Revenue Service is an appropriate method to determine a taxpayer's monthly expenses. By using national and local averages for some of petitioner's expenses rather than petitioner's submitted expenses, the Appeals officer characterized petitioner as able to provide for basic living expenses. Thus, the Appeals officer did not violate statutory limits by using the tables. See sec. 7122(c)(2)(B). In addition, petitioner has not shown that his submitted expenses were more appropriate than the national or local averages. Respondent's proration of some of petitioner's expenses was appropriate because even though petitioner claims to incur all of the household expenses because of his wife's disability and lack of income, information returns show that his wife still generates passive income. While that income should not be considered in determining petitioner's collection potential, it should be considered in determining petitioner's responsibility for shared living expenses. 1 Administration, Internal Revenue Manual, sec. 5.8.5.5.3, at 16,342. Accordingly, respondent's use of the national and local averages combined with a prorated expense allowance was a reasonable way to estimate petitioner's expenses.

The denial of petitioner's offers was based on objective computations of petitioner's disposable income and assets, computed separately for each offer. The revenue officer even considered the alleged decrease, to 25 percent, in petitioner's equity ownership in the home between the first and the second offer.⁹ Respondent refused the second offer after applying the national and local averages to estimate petitioner's expenses because the RCP exceeded the full amount of the tax liability and was certainly much more than petitioner's offer. In fact, petitioner's second offer falls short of a reasonable offer even if his own calculation of expenses is used. The equity in petitioner's home alone exceeds both the offer and the full amount of the tax liability, even at 25-percent ownership. Even if we recalculated petitioner's RCP in a manner most favorable to petitioner, using a negative multiple of petitioner's cashflows with which he could offset equity in his other assets,¹⁰ the RCP would far exceed petitioner's $2,200 offer and cover most of the outstanding $38,165.32 tax liability.¹¹ Thus, petitioner's second offer was inadequate.

Petitioner argues that respondent's haste in filing the notices of lien shows that respondent was predisposed to reject petitioner's second offer. Respondent, however, filed the Federal tax lien 1 week after petitioner's second offer was returned, and we are not persuaded that in doing so respondent failed to properly consider petitioner's second offer or abused his discretion in any other manner.

Amongst petitioner's numerous arguments only one has any potential for success --his allegation that he was suffering from economic hardship when he submitted the second offer. Petitioner relies on the internal revenue manual to support his position that even if he has the ability to pay the liability, an offer-in-compromise may be accepted if he suffers from economic hardship. See 1 Administration, Internal Revenue Manual (CCH), sec. 5.8.11.2.1, at 16,385-5. Factors related to economic hardship may include: (1) Long-term illness, medical condition, or disability may render the taxpayer incapable of earning a living, (2) the taxpayer may have a set monthly income and no other means of support, and the income is exhausted each month caring for dependents, and (3) the taxpayer may be unable to borrow against the equity in assets so that enforced collection is unlikely. Id. Petitioner alleges that the first and third factors are relevant to his situation.

Petitioner alleges that his wife's permanent disability makes the first factor relevant. The only evidence petitioner offered concerning his wife's disability was: (1) His statement in the second offer that his wife was unemployable, was on Social Security disability, and earned no income; and (2) his own general testimony that his wife became disabled in 1999. When he made his offer petitioner did not state the nature of her disability, present any evidence of its financial effect, or even allege that it caused economic hardship. The only monthly expense submitted in the second offer that could have related to his wife's disability was health insurance of $340, representing only 10 percent of the claimed expenses. The lack of any evidence or specificity to support petitioner's allegation left respondent without an adequate basis for making any findings concerning the financial impact of the alleged disability. There is no indication that the revenue officer summarily refused to consider any changed circumstances of petitioner. Rather, petitioner did not provide sufficient proof of the nature and extent of his alleged hardship.

Furthermore, when economic hardship is a factor in a doubtas-to-collectibility situation, the unique circumstances of the taxpayer to be considered in determining the taxpayer's reasonable basic living expenses do not include the maintenance of an affluent or luxurious standard of living. Sec. 301.7122-1T(b)(4)(i), Temporary Proced. & Admin. Regs, 64 Fed. Reg. 39024 (July 21, 1999); sec. 301.6343-1(b)(4)(i), Proced. & Admin. Regs. Substantial equity in a home worth at least $610,000 would weigh against a finding that petitioner was suffering economic hardship when he made the second offer.

Moreover, petitioner's allegations with regard to his home ownership show that petitioner's assertions are unreliable. Petitioner admitted on cross-examination that he made a 50-percent, $50,000 initial contribution to the downpayment. In addition, he stated in his first offer he had a 50-percent interest in his home before his wife's disability. He then alleged in his second offer that his home equity had dropped to 25 percent after the disability, even though he alleged that his wife's condition necessitated his making all the mortgage payments. Even though respondent accepts this decreased ownership for purposes of the second offer, petitioner's attempts to show a reduction in equity are superficial at best. Irrespective of petitioner's actual equity position, his inconsistent, self-serving explanations show that his allegations regarding his economic well-being and alleged hardship are unreliable.

Next, petitioner argues that the third factor of economic hardship, the inability-to-borrow factor, is relevant to his situation. See supra p. 14. Citing 1 Administration, Internal Revenue Manual (CCH), sec. 5.8.11.2.1, at 16,385-5, petitioner alleges that the existence of the Federal tax lien makes it impossible to borrow against his home because "in today's financial market credit scoring is everything." The only evidence that petitioner offers is Washington Mutual's general policy:

Federal tax liens do not subordinate to any other liens.

If the transaction is a refinance and the applicant has entered into a repayment agreement, the lien (which is also evidenced in the title report) must be paid in full at closing.

At the section 6320 hearing, the Appeals officer stated that respondent would be willing to sign a certificate of subordination to subordinate the lien to a new lender. Financing could be available in this situation. Most importantly, petitioner has not shown that the lien affected his ability to borrow, or that he has attempted to borrow only to be thwarted by the existence of the lien. Therefore, it appears that petitioner had sufficient equity in his home against which he could borrow.

In sum, without more specific evidence of petitioner's wife's condition, respondent could not make any findings as to his economic hardship. Moreover, even if respondent used all the expenses petitioner submitted with the claim, petitioner's second offer was still unreasonably low. Accordingly, respondent did not abuse his discretion by rejecting petitioner's second offer.

Under section 6320, the Appeals officer must consider collection alternatives as well as whether any proposed collection action balances the need for efficient collection of taxes with the legitimate concern that collection be no more intrusive than necessary. Secs. 6320(c), 6330(c)(2)(A)(iii), (3)(C). Even considering the circumstances in a light most favorable to petitioner, petitioner had the ability to pay over $36,000 yet offered only $2,200 to compromise the outstanding $38,165.32 tax liability. Petitioner suggested no reasonable collection alternatives and would not even entertain any collection alternative that did not involve the removal of the Federal tax lien. In light of petitioner's inflexible stance, respondent's collection activity was no more intrusive than necessary. The Appeals officer thus complied with the requirements of sections 6320(c) and 6330(c) when he conducted the hearing and made a determination to keep in place the lien on petitioner's assets.

Petitioner has the ability to pay his undisputed tax liability. Most of the liabilities that respondent is attempting to collect were due with the self-assessed returns petitioner filed nearly a decade ago.

We have considered all of the contentions and arguments of the parties that are not discussed herein, and we find them to be without merit, irrelevant, or moot. We hold that respondent did not abuse his discretion and correctly determined to proceed with collection.

To reflect the foregoing,

A decision will be entered for respondent.

¹ Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code in effect for the years at issue.

² The parties' stipulation of facts is incorporated by this reference.

³ All of the 1995 and 1996 liabilities arose from unpaid tax shown on petitioner's self-assessed tax returns, while an audit for the 1993 taxable year resulted in a deficiency determination for that taxable year.

⁴ The total living expenses for both offers were calculated by petitioner as follows:

  Expense                                             First     Second

                                                      Offer      Offer  

  National standard1                                     $448       -0-

  Housing/utilities                                     1,000    $2,042

  Transportation                                           --       800

  Health insurance premium                                200       340

  Taxes                                                    --       100

  Life insurance                                           --       102

                                                   ____________________

  Total                                                 1,648     3,384

1 Includes clothing and clothing services, food, housekeeping         

supplies, personal care products and services, and miscellaneous.     

⁵ The calculations can be summarized as follows:

                                  First Offer         Second Offer  

  Equity in home1                         $20,688             $41,746

  IRA                                       2,000               1,809

  Cash on hand                                                  5,738

                                       __________          __________

  Net value of assets                      22,688              49,293

  Monthly income                           $1,400              $3,108         

  Less: Expenses                             (433)             (2,423)         

                                        __________          __________         

  Disposable income                           967                 685         

  Multiple                                    ´ 48                ´ 48         

                                        __________          __________         

  Value of income                          46,416              32,880

                                       __________          __________

  Reasonable collection                    69,104              82,173

  Tax liability                            26,266              38,165

  OIC                                      16,209               2,200

1 Value based on 50 percent ownership for first offer and 25 percent

ownership for second offer.                                         

⁶ Petitioner served untimely discovery requests upon respondent. In addition, petitioner attempted to offer documentary evidence with his posttrial brief. Petitioner argues that he has been prejudiced by not being able to gather or submit evidence necessary to adequately present his case. Petitioner did not timely move the Court to compel discovery. See Rule 104(b). More importantly, petitioner has provided no evidence that respondent failed to comply with petitioner's requests or misled petitioner in any way. Finally, we will not treat documents attached to briefs as evidence. Rule 143(b); Clifton-Bligh v. Commissioner [Dec. 55,050(M)], T.C. Memo. 2003-44. We note that, even if the documents offered by petitioner were admissible, they would not change the outcome of this case.

⁷ We consider the first offer only to the extent helpful to determine whether respondent abused his discretion in rejecting the second offer.

⁸ Sec. 7122(c) is effective only for offers-in-compromise submitted after July 22, 1998. Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3462, 112 Stat. 764. Sec. 301.7122-1T(b), Temporary Proced. & Admin. Regs., 64 Fed. Reg. 39024 (July 19, 1999), is effective for offers submitted after July 19, 1999, but sec. 301.7122-1, Proced. & Admin. Regs., applies to offers pending on or submitted on or after July 18, 2002. We do not need to address the applicability of the statute and the regulations to the first offer because we focus on the second offer. The second offer was made on Sept. 5, 2001, and returned on June 17, 2002, after the effective date of the statutory change and the temporary regulation but before the effective date of the new regulation. The statute and the temporary regulation are therefore effective for the second offer. See Galvin v. Commissioner [Dec. 55,289(M)], T.C. Memo. 2003-263, for a discussion of the addition of sec. 7122(c).

⁹ Calculation of 50-percent or only 25-percent home ownership also shows that respondent in no way considered petitioner's wife's assets in determining petitioner's reasonable collection potential, despite petitioner's allegations to the contrary.

¹⁰ The regulations and the internal revenue manual are both silent on how to apply a negative future income. See sec. 301.7122-1T(c), Temporary Proced. & Admin. Regs., supra; 1 Administration, Internal Revenue Manual (CCH), sec. 5.8.5.5, at 16, 339.

¹¹ The collection potential based on negative income is shown in the following calculation:

                                                        Second Offer  

  Equity in home                                               $41,746

  IRA                                                            1,809

  Cash on hand                                                   5,738

                                                             __________

  Net value of assets                                           49,293

  Monthly income                                                $3,108         

  Less: Expenses                                                (3,384)       

                                                             __________         

  Disposable income                                               (276)         

  Multiple                                                         ´ 48         

                                                             __________         

  Value of income                                              (13,248)

                                                             __________

  Reasonable collection                                          36,045

[2005-2 USTC ¶50,494]Comfort Plus Health Care, Inc., Plaintiff v. Commissioner of Internal Revenue Service, Defendant.

U.S. District Court, Dist. Minn. ; Civ. 04-4963 (JNE/JGL), July 14, 2005 .

[ Code Secs. 6159, 6330, 6651 and 7421]

Tax Court: Failure to pay federal employment taxes: Collection Due Process hearing: Abuse of discretion: Administrative record: Verification of tax liability: Reasonable cause: Federal tax lien: Offers in compromise. --

The IRS did not abuse its discretion in determining to proceed with collection actions against the taxpayer. The Appeals officer had no prior involvement in the determination of the taxpayer's unpaid taxes and, thus, did not violate the impartiality requirement under Code Sec. 6330(b)(3). In addition, because the taxpayer failed to supply evidence to dispute the record, the Appeals officer did not abuse his discretion in determining that the transcripts accurately stated the tax owed. Furthermore, the Tax Court confirmed that the Appeals officer's decision contained sufficient information for judicial review, and indicated that he performed the required balancing of the need for efficient collection of taxes against the legitimate concern that the action be no more intrusive than necessary. Finally, the taxpayer's request for injunctive relief against the IRS's collection actions was denied. The IRS was entitled to summary judgement on the taxpayer's claims, and the Taxpayer's Bill of Rights did not provide an exception to the anti-injunction provisions of Code Sec. 7421.

Patrick C. Nwaneri, Nwaneri & Assocs., P.L.L.C., for plaintiff. Michael R. Pahl, Department of Justice, for defendant.

ORDER

ERICKSEN, District Judge: Comfort Plus Health Care, Inc. (Comfort Plus) brought this action against the Commissioner of Internal Revenue Service (IRS) to obtain judicial review of a determination of an IRS Appeals Officer (AO). ¹ The case is before the Court on Comfort Plus's motions to remand the case to the IRS for further administrative proceedings, for a preliminary injunction, and for a new hearing to consider newly discovered evidence, and on the IRS's motions for summary judgment and to strike exhibits. For the reasons set forth below, the Court denies Comfort Plus's motions and grants the IRS's motions.

I. BACKGROUND

Comfort Plus is engaged in the business of providing in-home health care. Comfort Plus claims that two employees engaged in fraudulent activities from 1998 to 2002 that cost Comfort Plus approximately $400,000. Comfort Plus contends that these losses caused it to unintentionally default in payment of federal employment taxes.

On March 15, 2004, the IRS served Comfort Plus with a Notice of Intent to Levy. In a letter dated March 30, 2004, the IRS cla imed that Comfort Plus owed taxes and penalties totaling more than $400,000. In that letter, the IRS also indicated the possibility of abating penalties by correcting certain tax forms, but noted that it had not received any amended returns. The IRS also indicated that it would not consider a payment agreement because Comfort Plus had defaulted on two payment agreements, "continued to pyramid" tax liability, was not staying current with its Federal tax deposits, and appeared to be insolvent. On April 16, 2004, the IRS filed a Notice of Federal Tax Lien.

Comfort Plus exercised its right to a collection-due-process (CDP) hearing under 26 U.S.C. §6330 (2000), which provides for the right to a hearing before a levy may be made on any property or right to property. The evidence before the AO included the IRS Transcripts of assessments and payments (Transcripts) and a spreadsheet submitted by Comfort Plus entitled "Tax Analysis & Reconciliation." Comfort Plus claims the latter was prepared by its accountant and demonstrates a tax liability of approximately $123,000. Comfort Plus did not provide the AO any underlying documentation to support its tax analysis. In a Notice of Determination dated November 30, 2004, the AO found that the filing of the Notice of Federal Tax Lien and Notice of Intent to Levy were appropriate.

On December 8, 2004, Comfort Plus filed this action to obtain judicial review of the Notice of Determination. In its Complaint, Comfort Plus claims (1) that the IRS wrongfully determined that it owes taxes and penalties totaling more than $400,000, (2) that it is entitled to abatement of penalties because its failure to pay was due to reasonable cause, and (3) that the IRS wrongfully denied Comfort Plus other relief it sought, such as an offer-in-compromise and an installment plan.

II. DISCUSSION

A. Comfort Plus's motion for preliminary injunction

On May 26, 2005 , Comfort Plus withdrew its initial motions for a temporary restraining order and a preliminary injunction. On June 13, 2005 , Comfort Plus filed an "Urgent Motion for Preliminary Injunction." The motion seeks to restrain the IRS from levying on or seizing any property of Comfort Plus, enforcing any collection action against Comfort Plus, closing down Comfort Plus's business, or compelling Comfort Plus to declare bankruptcy pursuant to any Federal Tax Lien, pending the determination of this suit.

The Anti-Injunction Act provides in relevant part:

Except as provided ... no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.

26 U.S.C. §7421(a) (2000). "The manifest purpose of §7421 is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for a refund." Enochs v. William Packing & Navigation Co. [ 62-2 USTC ¶9545], 370 U.S. 1, 7-8 (1962). However, "if it is clear that under no circumstances could the Government ultimately prevail" and "equity jurisdiction otherwise exists," collection may be enjoined. Id. As discussed below, a review of the administrative record reveals that the IRS has a chance of ultimately prevailing. In fact, the IRS is entitled to summary judgment on Comfort Plus's claims. Therefore, the Court denies Comfort Plus's request for injunctive relief pursuant to the Anti-Injunction Act. ²

B. Motion to strike

The IRS moves to strike three exhibits on which Comfort Plus relies, specifically Comfort Plus's fraud audit summary report and the felony guilty plea petitions of two former employees. Because these exhibits were not part of the administrative record, the IRS argues they are outside of the scope of this Court's review. Comfort Plus has submitted no evidence demonstrating that these exhibits were part of the administrative record. In fact, its own exhibits appear to demonstrate otherwise. In addition, the IRS has submitted the sworn declaration of Michael R. Pahl, wherein Pahl states that the above documents were not part of the administrative record. Because the Court's review is limited to the administrative record, see Hart v. United States [ 2003-2 USTC ¶50,680], 291 F.Supp.2d 635, 642 (N.D. Ohio 2003), the Court strikes the exhibits.

C. Motions to remand and for summary judgment

Comfort Plus asks the Court to remand the Notice of Determination to the IRS for a new appeal hearing because (1) the AO was not impartial, (2) the AO failed to make an adequate record of the administrative proceedings so as to damage Comfort Plus's right to judicial review, and (3) the AO did not consider whether the proposed collection action balances the need for efficient collection of taxes with the taxpayer's legitimate concern that the action be no more intrusive than necessary. The Court reviews the validity of tax assessments de novo and other AO determinations for an abuse of discretion. See Borchardt v. Comm'r of Internal Revenue, 338 F. Supp. 2d 1040, 1043 (D. Minn. 2004).

The IRS opposes Comfort Plus's motion to remand and also moves for summary judgment. Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party "bears the initial responsibility of informing the district court of the basis for its motion," and must identify "those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies its burden, Rule 56(e) requires the nonmoving party to respond by submitting evidentiary materials that designate "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In determining whether summary judgment is appropriate, a court must look at the record and any inferences to be drawn from it in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

1. Jurisdiction

As a threshold matter, the IRS contends that the Court lacks jurisdiction to consider Comfort Plus's allegations regarding tax liability for periods that it did not request a CDP hearing within 30 days of the Notice of Intent to Levy, as required by 26 U.S.C. §6330. It is undisputed that Comfort Plus did not request a hearing within the required time for certain quarters of unpaid employment taxes, which are set forth in Exhibit O attached to the Complaint. Accordingly, the Court lacks subject-matter jurisdiction over any disputes regarding these quarters. See Living Care Alternatives of Utica v. United States [ 2004-1 USTC ¶50,225], 312 F.Supp.2d 929, 932 (S.D. Ohio 2004). Nevertheless, because Comfort Plus's allegations are not quarter-specific, the Court still must address all issues raised by Comfort Plus.


2. Impartial appeals officer

Comfort Plus argues that this case must be remanded to the IRS for a second CDP hearing because the AO was not impartial. In support of its argument, Comfort Plus relies exclusively on a letter sent to Comfort Plus by the AO on August 27, 2004, after Comfort Plus requested a CDP hearing. The August 27, 2004 letter reads in relevant part:

Your request for a Collection due Process hearing has been referred to Appeals for consideration. In reviewing your case, I see that the IRS has filed multiple Notices of Federal Tax Lien and issued multiple Notices of Intent to Levy and you disagree with these actions....

To give you an idea of how the Collection Due Process works, I've enclosed an Appeals Orientation Guide that explains the Appeals process. In short, my role as an Appeals Settlement Officer is to:

1. Verify that the IRS complied with all legal and administrative procedures.

My review of your case file indicates that the proper procedures were followed in filing the Notices of Federal tax Lien and issuing the Notices of Intent to Levy. The Revenue Officer advised the taxpayer of his Power of Attorney of the pending actions. These actions were undertaken due to noncompliance of the business.

Comfort Plus claims that the language used in the letter demonstrates that the AO violated the statute's impartiality mandate by substantively reviewing the matter prior to the hearing.

Section 6330(b)(3) requires that the CDP hearing "be conducted by an officer or employee who has had no prior involvement with respect to the unpaid tax ... before the first hearing." The statute does not define the meaning of "prior involvement." At least one court has noted that certain text following IRS Treasury Regulation §301.6330-1T explains:

Prior involvement by an employee or officer of Appeals includes participation or involvement in an Appeals hearing (other than a CDP hearing held under either section 6320 or section 6330) that the taxpayer may have had with respect to the tax and the tax period shown on the CDP notice.

See MRCA Info. Servs. v. United States [ 2000-2 USTC ¶50,683], 145 F.Supp.2d 194, 200 (D. Conn. 2000).

Based on the record, there is no evidence that the AO in this case had the type of prior "involvement with respect to the unpaid tax" that is contemplated by the statute. While the AO reviewed the status, arguments, and procedural requirements of Comfort Plus's file prior to the hearing, there is no evidence that the AO had any prior involvement in the determination of the amount of taxes owed or played any substantive role in a prior hearing other than the CDP hearing held under section 6330. Comfort Plus maintains that the AO must not prepare for the hearing by reading the file, but instead must come to the hearing tabula rasa. The Court notes the dis tinction between preparation and impartiality and rejects the argument. Accordingly, the Court denies the motion to remand insofar as Comfort Plus asserts the AO was not impartial.



3. Failure to create an adequate record

Comfort Plus argues that the AO's decision contains insufficient information for meaningful judicial review on several issues and asks the Court to remand the matter for a new CDP hearing. The IRS, on the other hand, contends that the AO's decision contains enough information to permit judicial review and moves for summary judgment on the disposition of these issues.

a. Challenge to tax owed

In its Complaint, Comfort Plus challenges the amount of tax and penalties owed. Specifically, Comfort Plus contends that the AO failed to credit overpayments. The parties dispute the standard of review. According to Comfort Plus, this portion of the AO's decision should be reviewed de novo. The IRS argues that because Comfort Plus's claim centers on its assertion that the AO failed to properly credit Comfort Plus's tax payments, this decision is reviewed for an abuse of discretion.

The Complaint does not determine the nature or extent of this review of the Notice of Determination. Instead, the scope of the Court's review under section 6330(d) is limited to issues properly raised and considered during the CDP hearing. See Living Care [ 2004-1 USTC ¶50,225], 312 F.Supp.2d at 934. The record shows that the validity of the underlying taxes was not at issue before the AO. Instead, the AO considered and rejected Comfort Plus's claim that the IRS failed to credit overpayments. Therefore, the Court will review the AO's determination as to the amount of tax and penalties owed for an abuse of discretion.

The IRS asserts that the Transcripts reflect that Comfort Plus owes approximately $468,000. Comfort Plus does not dispute that the Transcripts reflect that amount. Based on its own spreadsheets, Comfort Plus contends it owes less money because the IRS failed to properly credit various overpayments. Comfort Plus also claims that the AO failed to point out what makes the Transcripts correct and failed to disprove the accuracy of Comfort Plus's spreadsheets. At the CDP hearing, however, Comfort Plus did not present any underlying evidence of the payments it contends were not credited. Instead, Comfort Plus relied on its spreadsheets without any indication that the accountant who prepared the spreadsheets had personal knowledge of any failure on the part of the IRS to credit overpayments.

IRS Certificates of Assessments and Payments are sufficient to establish the validity of federal tax assessments. United States v. Gerards, 999 F.2d 1255, 1256 (8th Cir. 1993); United States v. Langert [ 95-2 USTC ¶50,504], 902 F.Supp. 999, 1002 (D. Minn. 1995). The AO reviewed Comfort Plus's spreadsheets and determined that they contained numerous errors. In addition, the AO noted that he reviewed the records and found no lost payments or outstanding credit balances. Because Comfort Plus failed to bring forth competent underlying evidence to dispute the Transcripts, such as checks or federal tax deposits not credited, the Court concludes that the AO did not abuse his discretion in determining that the Transcripts accurately set forth the tax owed. In addition, the Court finds that the AO's decision contains sufficient information for judicial review. Therefore, the Court denies Comfort Plus's motion to remand and grants the IRS's motion for summary judgment on this issue. ³

b. Abatement of penalties

Comfort Plus also challenges the AO's decision not to abate penalties or interest on the ground that Comfort Plus had "reasonable cause" for its failure to pay employment tax. Specifically, Comfort Plus claims that the fraud of its two employees account for the existence of the alleged deficiency in some trust fund taxes. The Court reviews the AO's determination as to the appropriateness of the collection activity for abuse of discretion.

The IRS is authorized to abate certain penalties upon a showing of reasonable cause by the taxpayer. See 26 U.S.C. §6651 (2000). The Code of Federal Regulations sets forth the standards a taxpayer must meet to demonstrate reasonable cause for failure to pay taxes:

A failure to pay will be considered to be due to reasonable cause to the extent that the taxpayer has made a satisfactory showing that he exercised ordinary business care and prudence in providing for payment of his tax liability and was nevertheless either unable to pay the tax or would suffer an undue hardship ... if he paid on the due date. ... A taxpayer will be considered to have exercised ordinary business care and prudence if he made reasonable efforts to conserve sufficient assets in marketable form to satisfy his tax liability and nevertheless was unable to pay all or a portion of the tax when it became due.

26 C.F.R. §301.6651-1.

In his August 27, 2004 , letter to Comfort Plus, the AO explained in detail the requirements for a proper request for penalty relief. For example, the AO explained that Comfort Plus must identify specific payments for which it seeks relief and that it must pay the tax due before the IRS will abate a penalty for failure to pay for reasonable cause. The AO also informed Comfort Plus that the IRS would examine its compliance history to determine overall payment patterns. In the Notice of Determination, the AO noted that both the Revenue Officer and the Settlement Officer gave Comfort Plus specific instructions on how to prepare and perfect a request for penalty abatement. The AO also noted that Comfort Plus neither prepared nor perfected such a request. In addition, the record contains no evidence that Comfort Plus could have paid its taxes but for the employee embezzlement. Finally, the AO noted that Comfort Plus still owed back taxes and that the Transcripts demonstrated Comfort Plus's history of failing to comply with employment tax obligations.

For these reasons, the Court finds that the AO did not abuse his discretion in determining that Comfort Plus's penalties and interest should not be abated and, therefore, grants the IRS's motion for summary judgment on this issue. In addition, the Court finds that the AO's decision contains sufficient information on the issue of abatement of penalties to allow for judicial review and, therefore, denies Comfort Plus's motion to remand.

c. Rejecting an offer-in-compromise or installment plan

Comfort Plus asserts that the AO abused his discretion by failing to consider alternate collection methods, including an offer-in-compromise or installment plan. The IRS is authorized to enter into installment agreements if it determines that the agreement will facilitate collection of the liability. 26 U.S.C. §6159(a) (2000). The IRS has the discretion to accept or reject any proposed installment agreement. 26 C.F.R. §301.6159-1(b).

In the Notice of Determination, the AO noted that Comfort Plus failed to prepare the required form for a written offer-in-compromise. In addition, the AO explained that the starting point for an Offer in Compromise is the tax due and noted that Comfort Plus had only offered "five cents on the dollar." The AO also explained that Comfort Plus's offer to pay installments of $1,000 per month was wholly inadequate in light of its total balance due. Finally, the AO noted that "no documentation has been provided that would support the abatement of the civil penalties." Comfort Plus claims, without citation to any authority, that the IRS's failure to counter-offer was improper. Comfort Plus further contends that the IRS's primary basis for rejecting an offer-in-compromise or installment plan was an erroneous belief that Comfort Plus was not current on its second quarter 2004 payments.

The Court finds that the AO's decision contains sufficient information for judicial review and denies Comfort Plus's motion to remand. Moreover, even if Comfort Plus is correct in claiming that it was current on its 2004 taxes, there is an adequate basis for the AO's determination that Comfort Plus did not meet all of the requirements of an offer- in-compromise. See MRCA Info. Servs. [ 2000-2 USTC ¶50,683], 145 F.Supp.2d at 199 (explaining the task of the court is not to determine whether in its opinion an installment agreement would be appropriate, but to determine whether there is an adequate basis in law for the AO's decision). Therefore, the Court finds that the AO did not abuse his discretion in rejecting an offer- in-compromise or installment agreement. Accordingly, the Court grants the IRS's motion for summary judgment on this issue.



4. Balancing need for efficient collection of taxes with the taxpayer's legitimate concern that the action be no more intrusive than necessary.

The AO, in making his determination, must consider "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary." 26 U.S.C. §6330(c)(3). Comfort Plus claims that the AO failed to perform this balancing because he did not consider certain hardships Comfort Plus would suffer if forced to make full and immediate payment of its past taxes due. Comfort Plus also argues that the AO failed to consider that Comfort Plus is "current in its payment of taxes due for the current year."

In a nearly four-page, single-spaced decision, the AO set out the history and present status of Comfort Plus's tax problems that led to the CDP hearing, which Comfort Plus participated in via telephone. The AO presented and addressed the individual issues raised by Comfort Plus, concluded that the full balance was legally due and owing, and noted that Comfort Plus had neglected or refused to pay. The AO also concluded that the Notice of Federal Tax Lien balances the efficient collection of taxes with Comfort Plus's concern that the collection be no more intrusive than necessary. In light of the facts and circumstances in the record, the Court finds that the AO did not fail to perform the required balancing. Accordingly, the Court denies Comfort Plus's motion to remand. In addition, the Court concludes that the decisio n to enforce the federal tax lien in this case was not an abuse of discretion.



5. Assessment of penalties for failure to pay tax for second quarter of 2004

In the Notice of Determination, the AO concluded that Comfort Plus "failed to make proper federal tax deposits in the proper amounts by the proper deadlines." Comfort Plus claims, based on the post-Notice of Determination affidavit testimony of its CEO, that it was current on its taxes for the second quarter of 2004. However, Comfort Plus did not provide the AO any underlying documentation to support this assertion prior to the AO's decision. Comfort Plus also asserts that the AO abused his discretion in determining that a penalty was properly assessed for Comfort Plus's failure to pay tax for the second quarter of 2004 because the AO refused to allow Comfort Plus additional time to resolve the dispute with the IRS Service Center before making his decision. There is no record evidence that Comfort Plus requested additional time. In addition, Comfort Plus does not cite to any authority requiring an AO to delay collection for the stated grounds. Accordingly, the Court finds that the AO did not abuse his discretion in determining that Comfort Plus failed to timely pay its second quarter 2004 taxes and grants the IRS's motion for summary judgment on this issue.



D. Comfort Plus's motion for new hearing to consider newly discovered evidence

Comfort Plus argues it has newly discovered evidence that demonstrates the IRS failed to forward to the AO documents that reveal employee embezzlement. According to Comfort Plus, the embezzlement caused it to default on its tax payments. Comfort Plus also asserts that this evidence implicitly reveals that the AO did not address the issue of embezzlement and, for that reason, the decision should be remanded.

The documents identified by Comfort Plus are a "fraud audit summary" and the felony guilty plea petitions of two former employees. After reviewing these documents, the Court finds that consideration of these document s would not alter the outcome of the case. The "fraud audit summary" was apparently prepared by, or on behalf of, Comfort Plus and, like its "Tax Analysis & Reconciliation" spreadsheets, is not supported by any underlying documentation. In addition, neither the "fraud audit summary" nor the guilty pleas establish that Comfort Plus could have paid its taxes but for employee embezzlement. Accordingly, the Court denies Comfort Plus's motion for a new hearing to consider newly discovered evidence.

III. CONCLUSION

Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT:

1. Comfort Plus's Amended Motion to Remand Administrative Decision [Docket No. 14] is DENIED.

2. Comfort Plus's Urgent Motion for Preliminary Injunction [Docket No. 41] is DENIED.

3. IRS's Motion for Summary Judgment [Docket No. 21] is GRANTED.

4. IRS's Motion to Strike [Docket No. 35] is GRANTED.

5. Comfort Plus's Motion for a New Hearing to Consider Newly Discovered Evidence Prior to Judgment [Docket No. 44] is DENIED.

6. Comfort Plus's Complaint [Docket No. 1] is DISMISSED WITH PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.

¹ The Court has jurisdiction over this matter pursuant to 26 U.S.C. §6330(d)(1)(B) (2000).

² The Court is troubled by Comfort Plus's decision to file a second motion for a preliminary injunction in light of the fact that counsel for Comfort Plus withdrew Comfort Plus's initial motions for injunctive relief in the face of the IRS's assertion that the Anti-Injunction Act applied.

³ The Court notes that the result would be the same under the less deferential de novo standard of review. This is because, as explained above, there is nothing in the administrative record to support Comfort Plus's claim that it owed less money than the amount reflected in the Transcripts.

[Dec. 56,098(M)] Donald A. Singer and Virginia M. Singer v. Commissioner.

Dkt. No. 147-04L , TC Memo. 2005-175, July 18, 2005 .

[Appealable, barring stipulation to the contrary, to CA-11.]

[Code Secs. 6330 and 7122]
Collection: Liens and levies: Offer in compromise: Authority to compromise. --

An IRS settlement officer did not abuse her discretion in rejecting a married couple's offer in compromise. The officer rejected the offer after determining that the taxpayers had sufficient income and assets to satisfy the liability in full. The officer complied with the requirements of Code Sec. 6330 and did not abuse her discretion under Code Sec. 7122. --CCH.

Donald A. Singer and Virginia M. Singer, pro sese; Pamela L. Mable, for respondent.

MEMORANDUM OPINION

WELLS, Judge: Respondent issued petitioners a Notice of Determination Concerning Collection Action(s) under Section 6320 and/or 6330 (notice of determination).¹ In response to that notice, petitioners timely filed a petition for lien or levy action under Code section 6320(c) or 6330(d). We review for abuse of discretion respondent's notice of determination.

Background

Some of the facts have been stipulated. The stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioners are husband and wife. At the time of filing the petition, petitioners resided in Gainesville , Georgia .

On July 1, 2002 , respondent sent petitioners a final notice of intent to levy pursuant to section 6330 for taxable years 1997 and 1999. Subsequently, respondent received from petitioners a timely Form 12153, Request for Collection Due Process Hearing.² The handwritten Form 12153 stated: "WE DO NOT DISPUTE AMOUNTS DUE, HOWEVER, DUE TO DIFFICULTIES IN GAINING INCOME ON THE PART OF TAXPAYER DONALD A. SINGER, AND DIFFICULTY IN GAINING EMPLOYMENT A TAX LIEN ON PROPERTY AT THIS TIME WOULD SEVERELY HURT CHANCES OF GAINING EMPLOYMENT OR INCOME."

On April 14, 2003 , petitioners submitted Form 656, Offer in Compromise, and Form 433-A, Collection Information Statement for Individuals, setting forth an offer in compromise based on doubt as to collectibility.³ Petitioners offered to pay $10,000, with $3,000 as an initial payment and 21 monthly payments of $333 thereafter. As of June 18, 2003 , petitioners owed approximately $33,006.31 in taxes, penalties, and interest for the years in issue. Both the offer in compromise and the hearing request were assigned to Settlement Officer Marilyn Q. Alls.

On July 7, 2003 , a hearing was conducted by telephone between Settlement Officer Alls and petitioner Donald A. Singer. Settlement Officer Alls had no prior involvement with the taxes that were the subject of the proceeding. In the hearing, Settlement Officer Alls verified that all legal and procedural requirements had been met. Amounts due had been properly assessed, notice and demand had been made, the taxes were still outstanding, and a levy source was identified and available. Settlement Officer Alls verified that the proposed action balanced the need for efficient collection of taxes with the concern that any collection action be no more intrusive than necessary.

In her review, Settlement Officer Alls determined that petitioners had the ability to pay the liability in full over the life of the collection period. Consequently, the offer was rejected.⁴

Settlement Officer Alls explained to petitioner Donald A. Singer that the offer was rejected because petitioners had the ability to pay their tax liability in full over the life of the collection period. Settlement Officer Alls proposed a collection alternative in the form of an installment plan requiring a $10,000 downpayment and monthly payments of $275. She orally requested that petitioners respond to her offer or propose an alternative method for paying the full amount by July 31, 2003 . However, petitioners did not respond. They neither offered an alternative payment plan nor submitted any additional information regarding changed financial circumstances.

Having reached no agreement on an installment payment amount, respondent issued the notice of determination to petitioners by certified mail on December 5, 2003 . Subsequently, petitioners timely petitioned the Court in the instant lien or levy action, requesting lower monthly installment payments on the basis of changed financial circumstances. The petition stated:

Seek relief in the form of a reduction in the monthly payment set forth in the notice of determination dated 12/52003 [sic]. Since the submission of our Offer In Compromise and the notice of determination our monthly expenses have increased. Monthly term life insurance premiums have increased $50.00 on a five year renewable basis, prescription drug co-payments have increased and city and county property taxes on our home have increased. Also, no consideration was given to the monthly interest payments which we will incur on the $10,000 line of credit we will need for the initial payment.

Discussion

Section 6330 provides that no levy may be made on any property or right to property of a person unless the Secretary first notifies the person in writing of the right to a hearing before the Appeals Office. Section 6330(c)(1) provides that the Appeals officer must verify at the hearing that applicable laws and administrative procedures have been followed. At the hearing, the person may raise any relevant issue relating to the unpaid tax or the proposed levy, including appropriate spousal defenses, challenges to the appropriateness of collection actions, and collection alternatives. Sec. 6330(c)(2)(A). However, the person may challenge the existence or amount of the underlying tax liability only if the person did not receive any statutory notice of deficiency for the tax liability or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B); Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 610 (2000).

In the instant case, petitioners do not dispute the underlying tax liability. Rather, petitioners dispute respondent's rejection of the offer in compromise. Accordingly, we review the administrative determination for abuse of discretion. See Sego v. Commissioner, supra at 610; Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 181-182 (2000).

Section 7122(a) authorizes the Secretary to compromise any civil case arising under internal revenue laws. The Secretary may compromise a liability for doubt as to collectibility when "the taxpayer's assets and income are less than the full amount of the assessed liability." Sec. 301.7122-1(b)(2), Proced. & Admin. Regs.

Settlement Officer Alls reviewed petitioners' submitted financial information and determined that an offer in compromise was not appropriate on the basis of doubt as to collectibility because petitioners had the ability to pay the liability in full over the life of the collection period.⁵ We conclude that Settlement Officer Alls reasonably determined that petitioners had sufficient income and assets to satisfy the tax liability.⁶ Consequently, respondent's refusal to enter into an offer in compromise was not an abuse of discretion. See Crisan v. Commissioner [Dec. 55,350(M)], T.C. Memo. 2003-318 (holding the Commissioner's refusal to enter into an offer in compromise was not an abuse of discretion on the basis of a review of the financial information submitted to the settlement officer).

On the basis of the foregoing, we conclude that all the requirements of section 6330 have been satisfied, and respondent may proceed with his proposed collection actions.

To reflect the foregoing,

Decision will be entered for respondent.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended.

² On Form 12153, petitioners incorrectly marked the line contesting the filing of a notice of Federal tax lien, but later, on May 9, 2003, petitioners sent a letter by facsimile correcting the mistake and challenging the proposed levy action.

³ Petitioners did not check any of the boxes in sec. 6 of Form 656 to indicate the offer was based on doubt as to collectibility or otherwise. However, the statement attached to petitioners' Form 656 claims they are unable to pay and mentions no exceptional circumstances, such as permanent disability, that would merit compromise based on effective tax administration.

⁴ This determination was summarized in a "Rejection Narrative Doubt as to Collectibility" dated Nov. 13, 2003.

⁵ The "Rejection Narrative Doubt as to Collectibility" prepared by Settlement Officer Alls shows that petitioners had Net Realizable Equity consisting of bank accounts, a pension account, and real estate totaling $12,054.38. Petitioners' monthly gross income was $5,089.50 and allowable expenses only $4,404.93, leaving a net difference of $684.57. This indicates an ability to pay more than $50,000 over the life of the collection period, exceeding the liability of $33,006.31.

⁶ We note that, at trial, petitioner presented no evidence of increased expenses. Nevertheless, Settlement Officer Alls testified that, at respondent's request, she had reviewed petitioners' file before trial, and, even after she made additional allowances for expenses, including interest on the possible $10,000 line of credit and $50 more for insurance, petitioners do not qualify for an offer in compromise based on doubt as to collectibility. Thus, we believe that it is neither necessary nor productive to remand this case to IRS Appeals to consider petitioners' arguments. See Lunsford v. Commissioner [Dec. 54,553], 117 T.C. 183, 189 (2001).

[2004-2 USTC ¶50,392]Bobby R. Splawn, Plaintiff v. United States of America , Defendant.

U.S. District Court, East. Dist. Tenn. , at Chattanooga ; 1:03-cv-108, August 3, 2004 .

[ Code Secs. 6330 and 7122]

Offer in compromise: Doubt as to collectibility: Judicial review: Abuse of IRS discretion. --

The IRS did not abuse its discretion when it rejected an individual's offer in compromise. The taxpayer made his offer to compromise his tax liability for unpaid trust fund taxes based on doubt as to the collectibility of the taxes. After reviewing the taxpayer's offer and his available assets, the IRS proposed to accept an offer in compromise for a larger sum of money because there was evidence that the taxpayer had additional assets that could be used to pay his tax liability. However, the taxpayer did not respond to the IRS counter offer. Since the taxpayer did not dispute his underlying tax liability, the court's review was limited to whether the IRS abused its discretion. Although the taxpayer submitted an affidavit stating that he did not own certain assets, he failed to produce any evidence or documents to support this statement. Because the taxpayer's offer was based on the uncollectibility of the tax due, the court concluded that the IRS did not abuse its discretion when it rejected the taxpayer's offer in compromise.

MEMORANDUM

EDGAR, Chief District Judge: This action is brought by taxpayer and plaintiff, Bobby R. Splawn ("Splawn"), against the United States of America seeking judicial review pursuant to 26 U.S.C. §6330. Splawn seeks to have this Court review an Internal Revenue Service ("IRS") Office of Appeals decision and determine that the IRS abused its discretion when it rejected an offer in compromise of $5,000 to settle Splawn's $118,179.99 tax obligation. The IRS has filed a motion for summary judgment [Court File No. 10], Splawn has responded [Court File No. 12], and the IRS has filed a reply [Court File No. 15].



I. Facts

On November 26, 2001, the IRS sent Bobby Splawn a "Final Notice of Intent to Levy" for collection of a trust fund recovery penalty assessed pursuant to 26 U.S.C. §6672 for taxes owed for the second quarter of 1992. The amount of the tax obligation was calculated at $118,179.99, representing the total of an "assessed balance" of $58,392.19 and "statutory additions" of $59,787.80. [Court File No. 11, Ex. 1, Ex. A]. Splawn states that his liability arises due to his role as an owner of John Cuneo, Inc., a corporation which owns Safety Fire Sprinkler, Inc., the company where the debt originated. [Court File No. 13 at 2]. He does not dispute his liability based on this relationship, and neither Splawn, nor the IRS, address the source of Splawn's liability further.

On December 4, 2001, Splawn filed a request for a collection due process hearing pursuant to 26 U.S.C. §6330. This hearing occurred on October 31, 2002, before Scott Biggs ("Biggs"), a Settlement Officer with the IRS Office of Appeals. Biggs had no prior involvement in the determination of Splawn's tax liability. [Court File No. 11 at 2].

After the hearing, Splawn filed an Offer in Compromise using IRS Form 656. [Court File No. 11, Ex. 1, Ex. C]. Splawn offered $5,000 payable within 60 days to settle his tax obligation of $118,179.99. In the area of the form marked "Explanation of Circumstances," Splawn wrote: "Due to age and health considerations my ability to continue to work beyond additional two years is extremely doubtful. I am currently recovering from colon cancer." [Court File No. 11, Ex. 1, Ex. C]. In his affidavit, Splawn specifies that he is 70 years old. [Court File No. 14].

Biggs subsequently informed Splawn, through his attorney, that he would accept a offer in compromise in the amount of $110,994, a figure that includes settlement of the joint income tax liability of Splawn and his wife, or in the amount of $60,602, if the joint income tax liability was not included. [Court file No. 11, Ex. 1, Ex. D]. Splawn did not submit any further offers in compromise to the IRS. On March 6, 2003, a notice of determination was issued which informed Splawn of the denial of his proposed collection alternative and his right to dispute the determination in the United States District Court. [Court File No. 11, Ex. 1, Ex. F]. On April 4, 2003, this action asserting that the IRS Office of Appeals "erred in finding that the collection enforcement action was appropriate," because "[c]ertain factors were considered that should not have been considered, and certain factors were disregarded instead of being appropriately considered." [Court File No. 1].



II. Standard of Review

Summary judgment is appropriate where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). In ruling on a motion for summary judgment, the Court must view the facts contained in the record and all inferences that can be drawn from those facts in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); National Satellite Sports, Inc. v. Eliadis Inc., 253 F.3d 900, 907 (6th Cir. 2001). The Court cannot weigh the evidence or determine the truth of any matter in dispute. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

The moving party bears the initial burden of demonstrating that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To refute such a showing, the non-moving party must present some significant, probative evidence indicating the necessity of a trial for resolving a material factual dispute. Celotex Corp., 477 U.S. at 322. A mere scintilla of evidence is not enough. Anderson, 477 U.S. at 252; McLean v. Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000). The Court's role is limited to determining whether the case contains sufficient evidence from which a jury could reasonably find for the non-moving party. Anderson, 477 U.S. at 248, 249; National Satellite Sports, 253 F.3d at 907.

In addition to the general summary judgment standard, the Court must also consider the standard of review as determined by the relevant portions of the tax code. 26 U.S.C. §6330(d) provides the United States District Courts with jurisdiction over certain appeals from hearings before agents of the Internal Revenue Service regarding levies on taxpayers' assets. Although, §6330(d) does not set forth the appropriate standard of review, the statute's legislative history does:

The determination of the appeals officer may be appealed to Tax Court or, where appropriate, the Federal district court. Where the validity of the tax liability was properly at issue in the hearing, and where the determination with regard to the tax liability is part of the appeal, no levy may take place during the pendency of the appeal. The amount of the tax liability will in such cases be reviewed by the appropriate court on a de novo basis. Where the validity of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officer for abuse of discretion. In such cases, the appeals officer's determination as to the appropriateness of collection activity will be reviewed using an abuse of discretion standard of review.

H.Rep. No. 105-599 at 266 (1998) (emphasis added). In this case, because liability is not contested, the abuse of discretion standard applies. Although the Sixth Circuit has not yet addressed the application of the abuse of discretion standard in the context of 26 U.S.C. §6330, several district courts within the circuit have adopted the abuse of discretion standard. See Dudley's Commercial and Indus. Coating Inc. v. United States Internal Revenue Service [ 2003-1 USTC ¶50,397], 292 F.Supp.2d 976, 985 (M.D. Tenn. 2003) (citing Geller v. United States [ 2001-2 USTC ¶50,703], No. C2-00-1116, 2001 WL 1346669 (S.D. Ohio 2001); Jon H. Berkey, P.C. v. Dept of Treasury [ 2001-2 USTC ¶50,708], No. 00-CV-75149, 2001 WL 1397680 (E.D. Mich. 2001)).

The Sixth Circuit has provided some guidance in defining the application of the abuse of discretion standard when a court reviews an agency's exercise of discretion. See Dudley's, 292 F.Supp.2d at 985 (citing Gonzales v. I.N.S., 996 F.2d 804, 808 (6th Cir. 1993); Balani v. I.N.S., 669 F.2d 1157, 1161 (6th Cir. 1982); N.R.L.B. v. Guernsey-Muskingum Electric Coop., Inc., 285 F.2d.8, 11 (6th Cir. 1960)). "The Sixth Circuit has held that an agency abuses its discretion if its decision 'was made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis ....'" Id.



III. Analysis

Splawn does not dispute the validity of his tax liability and, to the best of the Court's ability to determine, Splawn did not dispute his liability at the hearing before the Office of Appeals. Following his proposal of an offer in compromise during the hearing, Splawn submitted a written offer in compromise as permitted by 26 U.S.C. §7122.

The IRS has identified three grounds for compromising the amount of a tax obligation: (1) "doubt as to liability," (2) "doubt as to collectibility," and (3) to "promote effective tax administration." 26 C.F.R. §301.7122-1(b). On the form used for offers in compromise, Splawn identified "doubt as to collectibility" as the reason for his offer. [Court File No. 11, Ex.1, Ex. C]. The regulations explain that "[d]oubt as to collectibility exists in any case where the taxpayer's assets and income are less than the full amount of the liability." 26 C.F.R. §301.7122-1(b)(3).

Splawn argues that the IRS Office of Appeals abused its discretion when it rejected his offer in compromise in the amount of $5,000 to settle a $118,179.99 tax liability. In his complaint, Splawn suggests that Biggs's refusal of this offer was improperly based on "[c]ertain factors which should not have been considered," and others that were improperly "disregarded." [Court File No. 1].

Although not identified in the complaint, in his response to the government's motion for summary judgment Splawn elaborates on the "factors" that were improperly considered or not considered. It appears that Splawn believes real estate owned by his wife was improperly considered when Biggs reached the determination that the $5,000 offer was insufficient. [Court File No. 13 at 2]. Splawn also suggests that Biggs failed to consider that his age and health would prevent him from continuing employment, and that this resulted in the inaccurate calculation that after allowing for living expenses, from his income, Splawn could pay a total of $28,875 over the 15 months toward satisfying his trust fund recovery penalty tax obligation. [Court File No. 13 at 2; Court File No. 11, Ex.1, E at 3].

In reply, the IRS points out that even if the value of the real estate Splawn argues is owned by his wife ($7,533), and Splawn's estimated future income ($28,875) were subtracted from the amount deemed by Biggs to be a sufficient offer in compromise to settle the trust fund recovery penalty tax obligation ($60,602), the value of Splawn's interest in other collectable assets would be $24,194, a figure nearly five times the amount that Splawn offered in compromise. [Court File No. 15 at 2].

Notably, in response to the motion for summary judgment, Splawn has not offered any evidence of his current income or any other financial documents to suggest that Biggs's calculations inaccurately assessed the value of his assets. While he does submit his own affidavit stating that the real estate included in Biggs's calculation is "owned by ... [his] wife," he provides no further evidence in support of this contention. [Court File No. 14]. Absent some assertion or further evidence identifying the property and the circumstances under which Splawn's wife acquired ownership, it is impossible for this Court to consider Splawn's affidavit statement to be more than a mere scintilla of evidence. See Anderson, 477 U.S. at 252. Accordingly, this statement is insufficient to prevent the Court from granting summary judgment to the government where the IRS's decision is considered only for an abuse of discretion. Furthermore, the government correctly notes that even without including the real property or income figures that Splawn disputes, his remaining assets suggest he is capable of meeting much more of his tax obligation. Splawn does not contend that the IRS inaccurately attributed ownership of any other assets.

Splawn does point to an unpublished case from the Southern District of Ohio which helpfully summarizes some of the factors upon which a hearing officer may reject a collection alternative.

Decisions by appeals officers to reject collection alternatives may be based upon a number of factors, including, but not limited to: (1) whether the taxpayer had previously agreed to a collection alternative, but failed to fulfill the obligations under the alternative; (2) whether the taxpayer supported a collection alternative with relevant financial information to show that payments could be made under the alternative; (3) whether the taxpayer is current on its tax obligations; (4) the escalating amount of the outstanding tax liability; and (5) the IRS's need to collect the tax liability.

Stop 26-Riverbend, Inc. v. U.S. [ 2003-1 USTC ¶50,360], No. C2-02-0285, 2003 WL 1908747, *2 (S.D. Ohio March 12, 2003); see also 26 C.F.R. §301.6330-1(e)(1) (matters considered at a Collection Due Process hearing). However, Splawn's response brief does not apply these factors to the facts of the case before this Court. [Court File No. 13].

As the Court applies the factors, the third and fifth appear to weigh strongly against Splawn's position that the IRS abused its discretion in rejecting his offer in compromise. Regarding the third factor, although Splawn repeatedly states that he has offered to pay the approximately $12,000 he and his wife owe in income tax for 2000, beyond stating that he "had agreed to pay those taxes," at no time does he say that he has in fact paid that tax liability. [Court File No. 14; Court File No. 13 at 2]. This suggests that it is questionable whether Splawn is now current on all other tax obligations. Addressing the fifth factor, the IRS's need to collect a tax liability is hardly satisfied when a taxpayer offers $5,000 to satisfy a $18,179.99 obligation assessed as a trust fund recovery penalty.

Splawn also makes the sweeping and unsupported claim that "[t]he settlement officer's decision [to reject his offer in compromise] failed to balance the need for efficient collection of taxes with Mr. Splawn's legitimate concern that any collection be no more intrusive than necessary, particularly in view of the nature of the tax, the date of the obligation, and statutory additions to the amount owed." [Court File No. 13 at 3]. The Internal Revenue Code provides that a determination by an IRS appeals officer must take into consideration "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." 26 U.S.C. §6330(c)(3)(C). In the absence of additional evidence or argument in support of Splawn's position that the appeals officer failed to consider this balance, this Court will not conclude that the IRS abuses its discretion when rejecting an offer in compromise of $5,000 for a debt of $118,179.99, a mere four percent of the amount owed, and where the appeals officer has determined that after allowing for living expenses, the taxpayer is capable of meeting much more of his tax obligation.



III. Conclusion

For the reasons stated above, the IRS's motion for summary judgment will be GRANTED. Splawn's claims will be DISMISSED. A judgment will enter.

JUDGMENT

For the reasons stated in the accompanying memorandum, the United States of America 's motion for summary judgment [Court File No. 10] is GRANTED. Bobby R. Splawn's claims are DISMISSED. The parties shall bear their own costs.

This is a final judgment. The Clerk of Court shall close the case.

SO ORDERED.

[Dec. 55,701(M)] Thomas G. Collier v. Commissioner.

Dkt. No. 2538-03L , TC Memo. 2004-171, July 21, 2004 .

[Appealable, barring stipulation to the contrary, to CA-4.]

[Code Sec. 6330]
Collection Due Process: Standard of review: Abuse of discretion: Offer in compromise. --

An IRS Appeals officer did not abuse his discretion by concluding that the taxpayer's noncompliance with his tax filing obligations would make him ineligible for collection alternatives including an offer-in-compromise. Since the taxpayer failed to raise any other issue at his Collection Due Process hearing, the court concluded that the determination to proceed with collection was not an abuse of discretion.

Thomas G. Collier, pro se; James M. Payton, for respondent.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action is appropriate.

Held: Because there was no abuse of discretion by R in concluding that P's noncompliance with Federal tax filing obligations would render him ineligible for collection alternatives, R's determination to proceed with collection action is sustained.

MEMORANDUM OPINION

WHERRY, Judge: This case is before the Court on respondent's motion for summary judgment pursuant to Rule 121.¹ The instant proceeding arises from a petition for judicial review filed in response to a Notice of Determination Concerning Collection Actions(s) Under Section 6320 and/or 6330. The issue for decision is whether respondent may proceed with collection action as so determined.

Background

Petitioner filed Federal income tax returns for 1995, 1997, 1998, and 1999 and did not fully pay the reported liabilities. Respondent subsequently assessed the reported amounts, along with statutory additions, and sent to petitioner notices of balance due. Respondent then issued to petitioner a Final Notice --Notice of Intent to Levy and Notice of Your Right to a Hearing dated February 2, 2002 , with regard to the 1995, 1997, 1998, and 1999 years. The notice reflected a total amount due of $51,373.49, which amount included statutory additions.

In response to the notice, petitioner's representative, C. Page Hamrick III (Mr. Hamrick), timely submitted a Form 12153, Request for a Collection Due Process Hearing, received by respondent on February 14, 2002 . The Form 12153 contained the following explanation of petitioner's disagreement with the notice of levy: "Taxpayer has filed offer in compromise and requests consideration prior to collection action."

Petitioner's collection case was assigned to Settlement Officer James M. Payton (Mr. Payton), of the Internal Revenue Service (IRS) Office of Appeals in Charleston , West Virginia . Following his receipt of the case in June of 2002, Mr. Payton checked IRS records for information pertaining to the offer in compromise referenced in petitioner's Form 12153. Mr. Payton found no indication that petitioner had filed an offer in compromise, although Forms 1040, U.S. Individual Income Tax Return, showing that petitioner was due refunds, had been filed for 2000 and 2001.

Mr. Payton spoke to Mr. Hamrick by telephone on September 26, 2002 . During that conversation, Mr. Hamrick indicated that petitioner also had outstanding employment tax liabilities related to his business and provided Mr. Payton with the employer identification number. Mr. Hamrick stated that he would contact petitioner to schedule a meeting for October and would then communicate an exact date to Mr. Payton.

When petitioner failed to return Mr. Hamrick's calls, Mr. Hamrick on November 5, 2002 , gave Mr. Payton permission to contact petitioner directly. Mr. Payton immediately sent petitioner a letter requesting that petitioner contact him no later than November 18, 2002 , to arrange a convenient meeting. Petitioner telephoned Mr. Payton on November 19, 2002 , and a conference was scheduled for November 27, 2002 , at 10:00 a.m.

A face-to-face hearing between petitioner and Mr. Payton was conducted on November 27, 2002 , as scheduled. Petitioner communicated that, in addition to his employment as a wage-earning operator for a third-party entity, he was the self-employed owner of an air conditioning repair business. He further indicated that he employed three individuals but was unable to stay current with his employment tax responsibilities.

Petitioner at the hearing also provided Mr. Payton with a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and stated that he thought Mr. Hamrick had filed an offer in compromise on his behalf. Mr. Payton explained that the IRS had no record of receiving an offer in compromise but that petitioner would not be eligible for such an alternative because he was not in compliance with requirements for filing returns for and paying employment tax obligations. During the hearing, petitioner raised no issues other than resolution of the unpaid liabilities by means of an offer in compromise. Specifically, for instance, he did not raise the correctness of the underlying income tax liabilities which were the subject of the collection action.

The aforementioned Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 was issued to petitioner on January 7, 2003 . The notice summarized respondent's determination: "You are not in compliance with filing and paying payroll taxes, therefore Appeals [sic] only alternative is to sustain the proposed Levy." An attachment to the notice provided further details, including the following discussion under the heading "Issues raised by the Taxpayer":

Issue: You didn't want the Internal Revenue Service to take any levy actions. You thought your Power of Attorney filed an Offer-In-Compromise as doubt to collectibility on your behalf.

Response: On 11/27/2002 , we had a face-to-face conference. You stated at our meeting that you have accrued 941 tax liabilities from 1998 to present and will not be able to file timely 941 tax returns or make current federal tax deposits at this time.

IRC §7122 authorizes the Secretary of the Treasury to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances.

IRM [Internal Revenue Manual] 5.8.3.3(4) (rev. 2-4-2000 ) states that an Offer cannot be processed if the taxpayer has not filed all tax returns.

I researched your account and did not find that there was an Offer under consideration. Furthermore, per the compliance requirements, you would not qualify for an Offer at this time.

No other relevant issues were raised.

An imperfect petition challenging this notice of determination was filed with the Tax Court on February 11, 2003 . On March 17, 2003 , petitioner filed an amended petition which set forth his position as follows:

Background Information

Try to pay back taxes over a period of ten-year period while in bankrupt court. I could not pay the amount in a five year period because of amount for five-year was too high. I was behind in alimony payment[.] I had a choice to pay it or my taxes.

Relief

A chance to pay over a long period of time.

Both the petition and the amended petition reflected an address for petitioner in Charleston , West Virginia .

After the pleadings were closed in this case, respondent filed the subject motion for summary judgment. Petitioner was directed to file any response to respondent's motion on or before May 28, 2004 ; no such response was received by this Court. A hearing on respondent's motion, at which both petitioner and counsel for respondent appeared, was held on June 7, 2004 , in Charleston , West Virginia .