Opinion
12456-20L
03-08-2023
RICHARD HERBERT FRIEDBERG, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler, Judge
Petitioner timely filed his petition in this case seeking review of a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination). The notice of determination issued by the Commissioner of Internal Revenue (Commissioner) sustained a proposed levy with respect to petitioner's unpaid trust fund recovery penalties for the tax periods ending June 30, 2010 and September 30, 2010.
On November 15, 2021 this Court issued a Notice of Trial setting this case for trial during the week of March 28, 2022 at the Court's Tampa, Florida trial session. On February 11, 2022 respondent filed a motion for summary judgment, along with a declaration of William T. Maule in support of respondent's motion. On March 3, 2022 petitioner filed a motion for continuance of trial. In support of petitioner's motion for continuance, he indicates that he "has not had sufficient time to obtain copies of bankruptcy proceedings… and certified information from the trustee."
On March 14, 2022 the Court granted petitioner's motion for continuance, retained jurisdiction over the case, and gave petitioner until July 15, 2022 to file a response to respondent's motion for summary judgment. On July 5, 2022 petitioner filed another motion for continuance seeking additional time to file a response to respondent's motion for summary judgment. In support of petitioner's second motion for continuance, he once again indicates that he "has not had sufficient time to obtain copies of bankruptcy proceedings… and certified information from the trustee."
On July 13, 2022 the Court granted petitioner's second motion for continuance, and gave petitioner until January 17, 2023 to file a response to respondent's motion for summary judgment.
On January 17, 2023 petitioner filed a response in opposition to respondent's motion for summary, along with his own declaration, in response to the declaration of William T. Maule filed by respondent.
Background
The following facts are derived from the parties' pleadings and motion papers, including accompanying declarations and exhibits. See Rule 121(b). Petitioner resided in Florida at the time the petition was filed.
The facts in this order are principally derived from the administrative record developed before Appeals; however, our review of Appeals' determination is not limited to the administrative record. In Robinette v. Commissioner, 123 T.C. 85, 95 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006), we held that "when reviewing for abuse of discretion under section 6330(d), we are not limited by the Administrative Procedure Act . . . and our review is not limited to the administrative record." The Courts of Appeals for the First, Eighth, and Ninth Circuits have concluded otherwise, holding that the so-called record rule applies to CDP cases before this Court. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff'g in part T.C. Memo. 2006-166, and aff'g in part, vacating in part decisions in related cases; Murphy v. Commissioner, 469 F.3d 27 (1st Cir. 2006), aff'g 125 T.C. 301 (2005); Robinette v. Commissioner, 439 F.3d 455. Under section 7482(b)(1)(G), appeal in this case would lie in the Court of Appeals for the Eleventh Circuit, absent a stipulation by the parties to the contrary. Since the Eleventh Circuit has not addressed this issue, our review of Appeals' determination in this case is not limited by the "record rule." See Golsen v. Commissioner, 54 T.C. 742, 756-57 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
On May 29, 2012, the IRS determined that petitioner was a responsible party, and proposed to assert trust fund recovery penalties pursuant to I.R.C. § 6672, for the tax periods ending in June 2010 and September 2010. The IRS mailed Letter 1153 to petitioner informing him of the IRS's intent to assess trust fund recovery penalties and informing him of his right to file a formal written protest. No protest from petitioner was received, so the IRS then proceeded and assessed trust fund recovery penalties against petitioner in the amounts of $55,370.62 and $56,721.12 for the tax periods ending June 2010 and September 2010, respectively.
On September 17, 2012 Notice CP15B was issued by IRS to petitioner informing him of these assessments and demanding payment. On May 15, 2017 the IRS issued a Notice of Intent to Levy to petitioner to seek to collect from petitioner the unpaid trust fund recovery penalties. On June 8, 2017 petitioner filed Form 12153 Request for a Collection Due Process or Equivalent Hearing in response to the IRS's Notice of Intent to Levy.
On Form 12153, petitioner checked that he was unable to pay the balance and how the IRS was prohibited from collecting the unpaid trust fund recovery penalties because he had filed for personal bankruptcy. In response the IRS issued a letter dated November 1, 2017 to petitioner acknowledging petitioner's bankruptcy proceeding and held petitioner's CDP hearing in abeyance until the bankruptcy proceeding was concluded.
By letter dated January 27, 2020 IRS Independent Office of Appeals (Appeals) acknowledged receipt of petitioner's CDP request and scheduled a hearing for March 5, 2020. In the January 27th letter, Appeals outlined the actions the Settlement
Officer is required to consider, as well as the need for a completed Form 433-A, for the Settlement Officer to consider a collection alternative by petitioner. Appeals also indicated how petitioner had been delinquent in his personal income tax return filings for years 2012 and 2014 through 2018.
Appeals did not receive a written response from petitioner to the January 27, 2020 letter; however, petitioner called the Settlement Officer on February 27, 2020 and left a voice message indicating that he had questions regarding the requested documents. According to the Case Activity Record, the Settlement Officer checked with an IRS Bankruptcy Specialist and in turn decided to hold off on the CDP hearing until she received further guidance from the Bankruptcy Specialist regarding the Bankruptcy Court's automatic stay. It was not until March 11, 2020 when the Settlement Officer received further guidance from the Bankruptcy Specialist and in which she returned the petitioner's February 27, 2020 call. According to the Case Activity Record dated March 11, 2020, the Settlement Officer did not contact petitioner "on the scheduled date and time because of request from bankruptcy specialist wanting to verify that Appeals could move forward with CDP Request." While also on March 11, 2020 the Case Activity Record indicates how the Settlement Officer issued a "Last Chance Letter 4000 dated March 16, 2020 to taxpayer." Then on March 31, 2020, the Case Activity Record indicates how the Settlement Officer sustained the issued Notice of Levy since the "[t]axpayer was not available for the scheduled telephone conference called hearing" and the taxpayer "did not respond to Last Chance Letter and did not provide any documents to be considered with in [the] CDP Request."
Discussion
Under Rule 121(a), either party may move for summary judgment regarding all or any part of the legal issues in a controversy. We may grant summary judgment only if there is no genuine dispute of material fact. Rule 121(b). The party moving for summary judgment bears the burden of demonstrating that there is no genuine dispute of material fact. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd 17 F.3d 965 (7th Cir. 1994). Furthermore, we construe the facts and draw all inferences in the light most favorable to the nonmoving party to decide whether summary judgment is appropriate. Bond v. Commissioner, 100 T.C. 32, 36 (1993). The nonmoving party may not rest upon the mere allegations or denials of his pleading but must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Bond v. Commissioner, 100 T.C. at 36.
Where, as here, 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. See Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Keller v. Commissioner, 568 F.3d 710, 716 (9th Cir. 2009), aff'g in part, vacating in part. The burden is on the taxpayer to prove that the settlement officer abused his or her discretion. Rules 142(a), 122(b); see Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
If a taxpayer neglects or refuses to pay taxes within 10 days after notice and demand, section 6331(a) authorizes the Commissioner to collect such tax by levy upon the taxpayer's property. Section 6331(d) provides that a levy pursuant to section 6331(a) may be made with respect to any unpaid tax only after the Commissioner has notified the taxpayer in writing of the intended levy at least 30 days before any levy action is begun. Section 6330 requires that written notice inform the taxpayer of the right to request a CDP hearing. I.R.C. § 6330(a)(3)(B). If a CDP hearing is requested, the hearing is to be conducted by the IRS Independent Office of Appeals. I.R.C. § 6330(b)(1). The Appeals officer conducting the hearing must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C. § 6330(c)(1). The taxpayer is also given the opportunity to 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 offers of collection alternatives. I.R.C. § 6330(c)(2)(A). Within 30 days after Appeals issues a notice of determination the taxpayer may appeal the determination to this Court. I.R.C. § 6330(d)(1).
Among other arguments, petitioner contends in his written response that summary judgment is not appropriate because he never was afforded a CDP hearing and therefore did not have an opportunity to present information or other written evidence to dispute his tax liability. Petitioner also contends that the actions of the Settlement Officer were arbitrary, capricious and without sound basis in fact or law since petitioner never had an opportunity to submit information which would have permitted consideration of collection alternatives. Finally, petitioner disputes respondent's conclusion that there remains no genuine issue of material fact in dispute for trial, based on a review of the administrative record and the pleadings in this case.
In deciding whether a Settlement Officer abused his/her discretion in sustaining the collection action we consider whether that Officer: (1) properly verified that the requirements of any applicable law or administrative procedure have been met; (2) considered any relevant issues petitioners raised; and (3) determined whether "any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [petitioners] that any collection action be no more intrusive than necessary." See § 6330(c)(3).
In an attachment to the Appeals' Notice of Determination (attachment), the Settlement Officer indicated that petitioner left her a voicemail on February 27, 2020 indicating questions regarding the forms being requested. In Letter 4837, which provided the information and date for the scheduled CDP hearing, the Settlement Officer also indicated that she would call petitioner at his number on March 5, 2020 at 9:00am. However, in the attachment she wrote "[t]he Settlement Officer held off on making, [sic] contact with [petitioner] on the scheduled date of March 05, 2020 just to verify that [petitioner's] accounts were cleared of the prior bankruptcy filing." The Settlement Officer did not contact petitioner until March 11, 2020 where she left a voicemail requesting a return call. Petitioner did not return her call, so the Settlement Officer issued a Last Chance Letter 4000, on March 16, 2020, giving petitioner 14 days to respond.
Construing these facts and drawing all inferences in the light most favorable to petitioner, we determine that we cannot conclude this matter by summary adjudication in favor of respondent. We find there remains material issues of fact in dispute; namely, whether the Settlement Officer afforded the petitioner a CDP hearing in this case, since on the date of the scheduled hearing (March 5, 2020) there was significant internal confusion within Appeals precluding the CDP hearing from proceeding as scheduled.
Therefore, upon due consideration of the foregoing, it is
ORDERED that respondent's Motion for Summary Judgment, filed February 11, 2022, is denied. It is further
ORDERED that on or before May 4, 2023, the parties shall file a joint status report (or separately, if preferred) advising the Court the issues remaining for trial and recommending a schedule for further proceedings in this case.