Opinion
10226-21L
10-21-2022
ISANG E. UMOREN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Emin Toro, Judge
Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is hereby
ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of the trial in the above-referenced case before Judge Emin Toro in Washington, D.C., on September 16, 2022, containing the Court's Oral Findings of Fact and Opinion, rendered at the trial session at which this case was heard. In accordance with the Oral Findings of Fact and Opinion, a Decision will be entered for respondent.
September 16, 2022
BENCH OPINION
Toro, Judge
THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. The oral findings of fact and opinion are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Rule 152. Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. We round all monetary amounts to the nearest dollar.
This is a collection due process case in which petitioner, Isang E. Umoren, challenges two notices of determination, both issued on February 23, 2021. The first notice sustained a federal tax lien filing with respect to civil penalties imposed on Mr. Umoren for 2016 and 2017. The second notice sustained a federal tax lien filing and a notice of intent to levy with respect to Mr. Umoren's 2018 income tax liability. For the reasons described in this opinion, we sustain both notices.
On the evidence before us and using the burden of proof principles explained below, the Court will make some findings.
Background
Before proceeding with the findings of fact and our opinion, we offer some background.
Mr. Umoren is no stranger to this Court or to the IRS. In 2012, we entered a decision sustaining frivolous return penalties relating to two of Mr. Umoren's federal income tax returns for the 2006 tax year. See Umoren v. Commissioner, T.C. Memo 2012-117, 2012 WL 1392919. In that case, Mr. Umoren had submitted to the IRS no less than eight and possibly as many as 15 documents that purported to be 2006 tax returns. Id. at *1. The penalties had been triggered by two returns that relied on an assortment of claimed federal income tax withholdings, estimated tax payments, and various unidentified or otherwise unrecognizable credits, among other things, to claim large refunds. Id. We found that none of the amounts shown as tax payments on the returns was actually paid, id., and that nothing in the record suggested Mr. Umoren was entitled to any credits, and that Mr. Umoren had filed the returns either to obscure his correct liability for 2006, or to obtain refunds to which he clearly was not entitled. Id. at *3. We therefore concluded that Mr. Umoren was liable for a section 6702(a) penalty for each of the returns at issue.
With that background in mind, on the evidence before us, and using the burden-of-proof principles explained below, the Court finds the following facts.
FINDINGS OF FACT
About four years after we issued our opinion concerning Mr. Umoren's 2006 returns, Mr. Umoren's federal income tax return for 2015 reported that he owed tax of $46,525. It further reported W-2 or 1099 withholding of $213,387. On the basis of this information, the IRS processed a refund for Mr. Umoren. It applied some of the refund against two frivolous return penalties that had been assessed for prior tax years, applied another portion of the refund against Mr. Umoren's outstanding student loans, and paid out an additional amount in cash to Mr. Umoren.
Mr. Umoren filed yet more income tax returns claiming, for later years, refunds in increasing amounts. Specifically, for 2016, 2017, and 2018, Mr. Umoren filed returns claiming refunds of $8,541,681, $524,292,521, and $3,991,831,808,810 (that is, close to $4 trillion), respectively. We describe these returns and the events leading up to this case in further detail below.
I. Mr. Umoren's 2016 Through 2018 Tax Returns
A. 2016
In his Form 1040, U.S. Individual Income Tax Return, for 2016, Mr. Umoren reported, as relevant here, wages of $25,039 and business income of $336,030. He also reported $10,385,459 of federal income tax withheld from Forms W-2 and 1099 and $166,386 in estimated tax payments and amounts applied from his 2015 return. After taking into account various other items, the return claimed a refund of $8,541,681.
Marilyn Downing, an IRS employee in the Frivolous Return Program in the Ogden, Utah office, reviewed Mr. Umoren's return and, on August 30, 2017, proposed assessing a $5,000 penalty under section 6702(a). Andrea Ipson, a manager in the same program and Ms. Downing's immediate supervisor, approved the penalty by signing Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, on September 5, 2017. The penalty was assessed on November 27, 2017.
B. 2017
The record does not contain a signed copy of Mr. Umoren's original return for 2017. On August 21, 2018, the IRS received Mr. Umoren's Form 1040X, Amended U.S. Individual Income Tax Return. In relevant part, the amended return showed that (1) Mr. Umoren's adjusted gross income should be changed from $6,991,543,155 to a negative $9,069,898; (2) his federal income tax withheld should be changed from $44,946,000,115,216 (this large number-nearly $45 trillion-is not a typographical error by the Court) to $170,173; and (3) his estimated tax payments should be changed from $17,332,895 to $523,972,292. The amended $524 292 521 return sought a refund of $524,292,521. The IRS initially accepted Mr. Umoren's amended 2017 return, excluding the estimated tax payments, but placed a freeze on any refund before it was paid.
Christina Morgan, an IRS employee in the Frivolous Return Program in the Ogden, Utah office, reviewed Mr. Umoren's return and, on March 25, 2019, proposed assessing a penalty under section 6702(a) in the amount of $5,000. Michael Schofield, a manager in the same program and Ms. Morgan's immediate supervisor, approved the penalty by signing Form 8278 on March 29, 2019. The penalty was assessed on May 13, 2019.
C. 2018
In his Form 1040 for 2018, Mr. Umoren reported, as relevant here, wages of $6,982,981,109 and business income of $39,999,989,962,278 (again, not a typographical error by the Court). The return reflected a total tax of $16,008,179,372,794 (that is, a little over $16 trillion). He also reported $11,181,606 of federal income tax withheld from Forms W-2 and 1099, $9,999,999,999,999 (that is, nearly $10 trillion) in estimated tax payments and amount applied from 2017 return, and $9,999,999,999,999 (that is, another 10 trillion) as an amount paid with his request for extension to file. None of these amounts were in fact paid, and Mr. Umoren did not elect on his 2017 amended return to apply any amounts to his 2018 return. After taking into account various other items, Mr. Umoren's 2018 return sought a refund of $3,991,831,808,810 (that is, almost $4 trillion).
Mr. Umoren's IRS account transcript for 2018 shows adjusted gross income of $982,981,109 and an assessment of $363,644,242. The IRS determined that Mr. Umoren's return, as filed, contained a mathematical error and assessed a smaller amount than was reflected in the return.
II. IRS Collection Efforts
Late in 2019, the IRS attempted to collect the amounts it had assessed for 2016, 2017, and 2018 by sending Mr. Umoren two notices of federal tax lien filing and one notice of intent to levy, as described further below.
First, on November 12, 2019, the IRS sent Mr. Umoren a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320. The Notice advised Mr. Umoren that the IRS had filed a Notice of Federal Tax Lien with respect to the penalty under section 6702(a) for the years 2016 and 2017.
Next, on December 4, 2019, the IRS sent Mr. Umoren a Notice of Intent to Levy and Notice of Your Right to a Hearing with respect to his 2018 income tax liability. The levy notice advised Mr. Umoren that he owed $385,826,589 in unpaid income tax and that the IRS "may take collection action" against his property or rights in property in order to collect the unpaid tax.
Finally, on December 10, 2019, the IRS sent Mr. Umoren another Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, also related to his 2018 liability.
All three notices advised Mr. Umoren of his right to seek a collection due process hearing, and Mr. Umoren availed himself of that right by timely filing two separate Forms 12153, Request for a Collection Due Process or Equivalent Hearing, one with respect to 2016 and 2017, and the other with respect to 2018.
On his Form 12153 for 2016 and 2017, Mr. Umoren checked the "Other" box and noted "Don't owe part or any of taxes[;] was process[ed] refunds." On his Form 12153 for 2018, Mr. Umoren checked the "Other" box and wrote, "None of my filings reflect AGI Line 7 [of] $982,981,109[;] therefore not liable to $369,326,711.76."
Both of Mr. Umoren's requests were assigned to Appeals Officer Florence Mathis with the IRS Independent Office of Appeals (IRS Appeals), and for the most part Ms. Mathis handled the two requests together.
Ms. Mathis confirmed that certain procedural requirements concerning the years before her, including the approval of the penalties for 2016 and 2017 required under section 6751(b), were satisfied.
On May 15, 2020, Ms. Mathis advised Mr. Umoren by letter that a telephone conference had been scheduled for August 5, 2020, and offered him an opportunity to request a face-to-face conference. Ms. Mathis also advised that if Mr. Umoren wanted to have IRS Appeals consider an alternative collection method, such as an installment agreement or offer in compromise, he would need to submit to IRS Appeals (1) a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals; (2) proof that Mr. Umoren had paid his estimated tax payments in full for the year to date; (3) copies of bank statements for the period November 1, 2019, to May 15, 2020; and (4) copies of the most recent statements for all Mr. Umoren's retirement and investment accounts.
Mr. Umoren did not contact IRS Appeals for the scheduled telephone conference or request a face-to-face conference. Ms. Mathis sent Mr. Umoren another letter, called a "last chance letter," again asking for the information necessary to consider his case.
On August 6, 2020, Mr. Umoren sent a fax to IRS Appeals. The fax stated that he had refiled the 2016 and 2017 tax years and that correspondence had been sent to the IRS. The fax also included a list of dollar amounts with what appeared to Ms. Mathis to be state abbreviations, as well as certain other unexplained materials.
Later, Mr. Umoren called Ms. Mathis again regarding the last chance letter and told her that the information he faxed "show[s] that he doesn't owe the balance." But Ms. Mathis disagreed, and told Mr. Umoren that unless he provided additional information, she would sustain the lien and levy notices for all three years. Ms. Mathis also advised Mr. Umoren that the information he had faxed did not pertain to the civil penalties, that the penalties had been assessed due to a frivolous tax submission, and that any additional documentation should be submitted by August 27, 2020.
Mr. Umoren subsequently submitted a letter that stated, among other things, that "the correct 2018 AGI . . . is $6,982,981,109 and not . . . $928,981,109." Other statements in the letter were more difficult to follow, but appeared to include an allegation that the tax rate applied to Mr. Umoren's income had been too high, and that certain refunds with respect to his 2019 return should offset his liability for 2018. Attached to the letter, in Ms. Mathis's words, were "lists [of] random names, dates, and money amounts [along with] random notices from [the] IRS and letter[s] from other companies as well as [from Maryland and the District of Columbia]." Ms. Mathis reviewed the information and determined that it did not appear relevant to the issues before her.
Ms. Mathis attempted to contact Mr. Umoren once more, but was unable to reach him. On February 23, 2021, Ms. Mathis issued two notices of determination. One notice sustained the federal tax lien filing with respect to the civil penalties for 2016 and 2017. The other notice sustained the federal tax lien filing and notice of intent to levy with respect to Mr. Umoren's 2018 income tax liability. Mr. Umoren timely sought review of those determinations in our Court. He resided in Washington, D.C., at the time he filed the petition in this case.
III. Tax Court Proceedings
During these proceedings, Mr. Umoren has filed a great number of papers. They contain indistinct arguments, seemingly random figures, and nebulous assertions.
At a hearing on May 9, 2022, we warned Mr. Umoren to review section 6673, which authorizes us to impose penalties in our discretion for advancing groundless arguments in the Tax Court, before he continued prosecuting his case in this manner. Mr. Umoren pressed his case at trial, and we will now address the arguments raised by the parties.
OPINION
I. Relevant Legal Principles
A. CDP Principles
Section 6331 authorizes the IRS to levy on (that is, to seize) property or property rights of any person who is liable for any tax and has failed to pay that tax after proper notice and demand. Because the power to levy is a strong remedy for collecting unpaid tax, section 6330 gives a taxpayer the right to a hearing with IRS Appeals and generally bars the IRS from making a levy unless the IRS notifies the taxpayer in writing of the right to a hearing before the levy is made. IRC § 6330(a) and (b).
Additionally, pursuant to section 6321, the Federal Government obtains a lien against "all property and rights to property, whether real or personal" of any person liable for federal tax upon demand for payment and failure to pay. See Iannone v. Commissioner, 122 T.C. 287, 293 (2004). The lien arises when the assessment is made. See IRC § 6322. The IRS files a notice of federal tax lien to preserve priority and put other creditors on notice. See IRC § 6323. But section 6320(a)(1) requires the IRS to provide a taxpayer a written notice of the filing of a notice of federal tax lien upon that taxpayer's property. The notice of filing must inform the taxpayer of the right to request a hearing with IRS Appeals. IRC § 6320(a)(3)(B) and (b)(1).
If the taxpayer "requests a hearing in writing" under section 6320(a)(3)(B) or section 6330(a)(3)(B), IRS Appeals must hold that hearing and make a determination. IRC §§ 6320(b)(1); 6330(b)(1) and (c). The provisions of section 6330 govern the conduct of a hearing requested under that section, and subsections (c), (d) (other than paragraph (2)(B) thereof), and (e) of section 6330 govern the conduct of a hearing requested under section 6320. See IRC § 6320(c); see also Moosally v. Commissioner, 142 T.C. 183, 187 (2014).
At the hearing, the taxpayer may raise any relevant issues. IRC § 6330(c)(2)(A). The taxpayer may challenge the underlying tax liability at the hearing if the taxpayer did not receive a statutory notice of deficiency or otherwise have an opportunity to dispute the tax liability. IRC § 6330(c)(2)(B). In addition to considering issues raised by the taxpayer under section 6330(c)(2), IRS Appeals must also verify that the requirements of any applicable law or administrative procedure have been met, IRC § 6330(c)(1), and consider "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person [involved] that any collection action be no more intrusive than necessary," IRC § 6330(c)(3)(C). See generally Byers v. Commissioner, 740 F.3d 668, 672 (D.C. Cir. 2014), aff'g T.C. Memo 2012-27; Moosally, 142 T.C. at 187; Weber v. Commissioner, 138 T.C. 348, 354 (2012).
Within 30 days of the IRS Appeals' determination, the taxpayer may "petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter)." IRC § 6330(d)(1).
But in a collection due process case we generally lack jurisdiction to consider matters related to nondetermination years. Freije v. Commissioner, 125 T.C. 14, 27 (2005). We may, however, consider facts and issues from other years to the extent they "are relevant in evaluating a claim that an unpaid tax has been paid." Id. An available credit from another year is a fact that may affect the taxpayer's correct liability for the year that is the subject of the collection action. Weber, 138 T.C. at 372. But a credit must actually exist in order to constitute an available credit. A mere claim for a credit "is not an 'available credit'" and such a claim "need not be resolved before the IRS can proceed with collection of the liability at issue." Id. Before a taxpayer can contend in a collection case that over payments ought to be applied to satisfy the liability at issue, he must show that he has satisfied the threshold requirements for claiming a credit or refund. See Weber, 138 T.C. at 363 and Brady v. Commissioner, 136 T.C. 422, 427-431 (2011).
B. Standard of Review
Neither section 6320(c) nor section 6330(d)(1) prescribes the standard for the Court to apply in reviewing IRS Appeals' administrative determination in a collection case. The framework for that review is set out in our cases.
When the validity of the underlying tax liability is properly at issue in a collection review proceeding, the Court will review the matter de novo. Giamelli v. Commissioner, 129 T.C. 107, 111 (2007); Davis v. Commissioner, 115 T.C. 35, 39 (2000). When the underlying liability is not properly before us, we review IRS Appeals' determination for abuse of discretion. Byers v. Commissioner, 740 F.3d at 675 (citing Tucker v. Commissioner, 676 F.3d 1129, 1135-37 (D.C. Cir. 2012), aff'g 135 T.C. 114 (2010) and T.C. Memo 2011-67); Giamelli, 129 T.C. at 111; and Goza v. Commissioner, 114 T.C. 176, 182 (2000). Abuse of discretion exists when a determination is arbitrary, capricious, or without sound basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); see also Estate of Duncan v. Commissioner, 890 F.3d 192, 197 (5th Cir. 2018), aff'g T.C. Memo 2016-204; Keller v. Commissioner, 568 F.3d 710, 716 (9th Cir. 2009), aff'g in part T.C. Memo 2006-166.
C. Burden of Proof and Other Matters
Generally, the taxpayer has the burden of proof regarding his underlying liabilities. See Rule 142(a); Thompson v. Commissioner, 140 T.C. 173, 178 (2013). But in any proceeding involving the issue of liability for a section 6702(a) penalty, "the burden of proof with respect to such issue shall be on the Secretary." IRC § 6703(a); see Clarkson v. Commissioner, T.C. Memo 2022-92, at *8; Osband v. Commissioner, T.C. Memo 2013-188, at *16-17.
Under our rules, the petitioner in a CDP case must provide in his petition "[c]lear and concise assignments of each and every error which the petitioner alleges to have been committed in the notice of determination. Any issue not raised in the assignments of error shall be deemed to be conceded." Rule 331(b)(4).
II. Analysis
A. 2016 and 2017
1. Additional Considerations on the Standard of Review
Frivolous return penalties imposed under section 6702(a) are "assessable penalties" not subject to deficiency procedures. See IRC § 6703(b); see also Clarkson, T.C. Memo 2022-92, at *7. Mr. Umoren did not receive, and could not have received, a statutory notice of deficiency that would have enabled him to petition this Court for redetermination of the frivolous return penalties assessed for 2016 and 2017. Mr. Umoren was thus entitled to challenge his underlying liabilities for the penalties during his CDP hearing, Callahan v. Commissioner, 130 T.C. 44, 49-50 (2008), and in fact, he challenged them. Typically, this would mean that we review those challenges de novo.
We have said, however, that when the "underlying tax liability" is a section 6702 frivolous return penalty, the taxpayer is entitled to de novo review only if he raises a "meaningful" challenge to the penalty at his CDP hearing. See Id.; see also Goza, 114 T.C. at 182. We need not decide in this case whether Mr. Umoren "meaningfully" challenged his section 6702 penalties-or which standard of review applies-because our decision would be the same regardless of the standard of review. See Kasper v. Commissioner, 150 T.C. 8, 14 (2018); see also Rowen v. Commissioner, 156 T.C. 101, 106 (2021). Thus, we turn to the merits.
2. Underlying Liability Under Section 6702
Section 6702(a) imposes a civil penalty of $5,000 for filing "frivolous tax returns." A frivolous return penalty applies when three conditions are met. First, the taxpayer must have filed a document that "purports to be a return of a tax imposed by this title." IRC § 6702(a)(1). Second, the purported return must be a document that either "does not contain information on which the substantial correctness of the self-assessment may be judged" or "contains information that on its face indicates that the self-assessment is substantially incorrect." Id. Third, the taxpayer's conduct must either be "based on a position which the Secretary has identified as frivolous" or must "reflect a desire to delay or impede the administration of Federal tax laws." IRC § 6702(a)(2). We take these three requirements in turn.
On the evidence and testimony before us, the first requirement is obviously met. Mr. Umoren filed Forms 1040 claiming refunds; consequently, these Forms 1040 purport to be federal income tax returns. He admitted as much at trial. Therefore, we find that the first requirement is satisfied.
As to the second requirement, we look to the face of the return to determine whether the self-assessment was substantially incorrect. Grunsted v. Commissioner, 136 T.C. 455, 459 (2011). Here, the self-assessment reflected in each of the returns clearly was substantially incorrect.
Mr. Umoren's 2016 return claimed $10,385,459 of federal income tax withheld from Forms W-2 and 1099. This may not be uncommon for some high-income taxpayers. But we cannot reconcile that figure in Mr. Umoren's case, considering that he reported only (approximately) $25,000 in wages and approximately $168,000 in other business income in that year. In other words, the return on its face shows that the self-assessment is substantially incorrect.
Mr. Umoren's initial 2017 return claimed withholding credits of approximately $44 trillion. He abandoned that claim in his amended return, instead claiming negative adjusted gross income of $9,069,898, estimated tax payments of $523,972,292, and a refund of $524,292,521. We find these figures facially implausible.
In light of this record, it is not difficult for us to conclude that Mr. Umoren's 2016 and 2017 returns contain information indicating that his self-assessments were substantially incorrect. IRC § 6702(a)(1)(B). Mr. Umoren provided no credible basis for us to conclude otherwise with respect to either return, whether in documentation provided at trial or through his testimony. In fact, he testified at trial that he neither received the reported income during the years at issue nor paid to the Treasury the reported withholding credits. Rather, he maintained (as discussed in greater detail below) that he had "earned" the relevant income based on his contractual arrangements with third parties, foreign governments, and even the U.S. Government and was entitled to some unspecified credits for having opened new markets and created jobs in many different industries and as a result of a "breach" by those parties of their obligations. In view of the foregoing, we find that the second requirement is satisfied.
As to the third requirement, we look to Mr. Umoren's intent at the time he filed the returns to discern whether the filing "reflect[ed] a desire to delay or impede the administration of federal tax laws." IRC § 6702(a)(2)(B). An individual's intent is seldom established by direct evidence; more often than not, intent is inferred after the facts and circumstances surrounding the event in question are considered. Dean v. Commissioner, 57 T.C. 32, 43-45 (1971).
The evidence in this case consists of Mr. Umoren's testimony and the documents received in evidence at trial. According to Mr. Umoren, the refunds he claimed on his 2016 and 2017 returns were in part attempts to collect debts owed to him by the United States and others. He additionally claims that he is entitled to tax unspecified tax credits for creating jobs within the United States and overseas. (When asked at trial, he could not identify the particular Code section that authorized such a credit, but insisted that it was a "pretty standard thing.") He offered similar justifications in his prior case before the Court, and we provide the same answer here as we did there. Put simply, we continue to find it inconceivable that an individual, in good faith, could expect to collect debts from the United States or other parties through refund claims made on a federal income tax return, particularly after being told in a prior opinion of our Court that any such expectation was unfounded. See Umoren v. Commissioner, T.C. Memo 2012-117, at *3. And with respect to the credits, Mr. Umoren offers not a single citation to show that he is entitled to any credit, let alone credits in the astronomical amounts he claims. Even if he had a colorable argument on this point, which, to be clear, he does not, credits whose existence the Government contests cannot be used to offset real liabilities that are the subject of a CDP proceeding. See Weber, 138 T.C. at 372.
In short, we agree with the Commissioner that Mr. Umoren sought to obtain refunds to which he was not entitled. As a whole, the record supports the conclusion that Mr. Umoren acted with a desire to impede the administration of Federal tax laws within the meaning of section 6702(a)(2)(B). See also Umoren, T.C. Memo 2012-117, at *3. Therefore, we find that the third requirement is satisfied.
3. Other Issues
Having reviewed Mr. Umoren's arguments regarding his liability for section 6702 penalties, we pause briefly to consider his alternative argument (pressed mainly in his papers) that the penalties were not properly approved under section 6751. That section requires that the initial determination to assess certain penalties be personally approved (in writing) by the immediate supervisor of the individual making such determination before the first formal communication of the determination is made to the taxpayer. Clay v. Commissioner, 152 T.C. 223, 249 (2019), aff'd, 990 F.3d 1296 (11th Cir. 2021); Graev v. Commissioner, 149 T.C. 485, 492-93 (2017), supplementing and overruling in part 147 T.C. 460 (2016). The record here reflects that each penalty was approved by the relevant supervisor before it was assessed. Ms. Mathis confirmed this point as part of her review of this case. And there is no indication that the penalties were communicated to Mr. Umoren before the required approval. Accordingly, we conclude that Ms. Mathis properly confirmed both penalties' compliance with the supervisory approval requirement under section 6751(b)(1).
At trial, Mr. Umoren argued that the IRS had been inconsistent in how it treated him. He asserted that specific IRS employees with whom he had communicated either on the phone or in person had in fact "processed" his returns for 2016 and 2017 and told him that he would be paid the refunds shown on those returns. He maintained it was improper for other IRS employees who never spoke with him to conduct a subsequent review of his return and impose penalties. Mr. Umoren offers no support for the novel proposition that the Commissioner is somehow barred from making additional assessments after a return is "processed." The position has no merit, of course, as countless examinations (colloquially known as "audits") the IRS conducts each year take place after the IRS has "processed" a return and even after the IRS has made an initial payment on a requested refund. There is nothing inappropriate in IRS personnel in the Frivolous Returns Program, who are charged with ferreting out frivolous submissions, reviewing such returns and imposing penalties on those returns after the returns have been initially processed.
Mr. Umoren also argued at trial that the IRS account transcripts available to him online show no balances for the relevant years and for at least one year they show a refund. The documents Mr. Umoren submitted in support of this contention are incomplete and do not permit us to evaluate fully his claim. The Commissioner, by contrast, has produced evidence (which we credit) that the amounts at issue remain unpaid and that the refund Mr. Umoren refers to has been "frozen" because the IRS contests its validity.
Mr. Umoren has not alleged any other errors with respect to the conduct of the CDP hearing. See Lundsford v. Commissioner, 117 T.C. 183, 187 (2001) (The Court need not consider arguments not raised in the parties' pleadings and trial memoranda.); see also, e.g., Hawkins v. Commissioner, T.C. Memo 2015-245 at *6 (defects with CDP hearing not alleged in petition are deemed conceded) (first citing Triola v. Commissioner, T.C. Memo 2014-166, at *9-10; and then citing Dinino v. Commissioner, T.C. Memo 2009-284). Accordingly, we will sustain the February 23, 2021, Notice of Determination, which in turn sustained the Notice of Federal Tax Lien Filing with respect to Mr. Umoren's liability for section 6702 penalties for 2016 and 2017.
B. 2018
1. Standard of Review
Next, we consider the Notice of Determination dated February 23, 2021, sustaining the Notice of Federal Tax Lien Filing and Notice of Intent to Levy with respect to Mr. Umoren's income tax liability for the 2018 taxable year. Nothing in the record indicates that Mr. Umoren had a prior opportunity to dispute his underlying income tax liability for 2018. See Montgomery v. Commissioner, 122 T.C. 1, 9 (2004). He timely raised this issue before the Appeals Officer, and the Commissioner agrees that it is properly before us. We thus review Mr. Umoren's challenge to his 2018 income tax liability de novo.
2. Underlying Liability for 2018
For Mr. Umoren's 2018 tax year, the Commissioner assessed tax of $363,644,242. This amount is rather striking in the circumstances here, and we would have been receptive to an argument from Mr. Umoren that his actual income in 2018 was insufficient to support such a large assessment.
But Mr. Umoren refused, after repeated invitations, to make that argument. Notwithstanding efforts by IRS collections, IRS Appeals, the Commissioner's counsel, and this Court to solicit information regarding his true liability for 2018, Mr. Umoren stands by his original return. As a reminder, that return reported wages of nearly $7 billion and business income of almost $40 trillion (or about twice as much as the gross domestic product of the United States for 2018). And so, in the face of an assessment derived from adjusted gross income of $982,981,109, Mr. Umoren persists in arguing that his actual adjusted gross income was higher than the amount used by the Commissioner. He eventually testified that he actually received only about $25,000 of that income. But the Commissioner pointed out that an excerpt of a bank statement for 2015 that Mr. Umoren provided at trial showed two debits (that is, increases in Mr. Umoren's balance) totaling around $20,000 in one month, casting doubt on the reliability of the $25,000 figure.
In any event, this is Mr. Umoren's case, and he bears the burden of proving his underlying liability. Rule 142(a), Thompson, 140 T.C. at 178. But he continued to maintain that he had earned, through various contracts, approximately $40 trillion.
Our rules also required Mr. Umoren to include in his petition "each and every error which [he] alleges to have been committed in the notice of determination." Rule 331(b)(4). Any issue he did not raise in the assignments of error is deemed conceded. Id. He also is precluded from raising any issue that he did not raise at the hearing with IRS Appeals. “An issue is not properly raised if the taxpayer fails . . . to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity' to do so." Moriarty v. Commissioner, T.C. Memo 2017-204, at *9 (quoting Treas. Reg. § 301.6330-1(f)(2), Q&A-F3), aff'd, 2018 WL 4924349 (6th Cir. Sept. 19, 2018).
Mr. Umoren is representing himself, and so we construe his filings liberally. See Rule 31(d) ("All pleadings shall be so construed as to do substantial justice."); Erickson v. Pardus, 551 U.S. 89, 94 (2007) (documents filed by pro se litigants are "to be liberally construed") (citing Estelle v. Gamble, 429 U.S. 97, 106 (1976)); see also Gray v. Commissioner, 138 T.C. 295, 298 (2012), suppl. by 140 T.C. 163 (2013); cf. Haines v. Kerner, 404 U.S. 519, 520 (1972).
But liberal construction does not mean that we can ignore the self-represented party's actual argument and decide the case on an argument that the party declines to make, after having been invited to do so. And the arguments that Mr. Umoren has made are frivolous. He contends, essentially, that the United States and other parties owe him money due to one or more "breaches" dating back to at least the 1990s, and that the amounts claimed on his return are in part an attempt to collect this debt. He further contends that he is entitled to unspecified credits for "opening new markets" to the United States and creating jobs through his business activities. As we have already discussed, these arguments are beyond the pale. Mr. Umoren, however, has continued to push them and to reject those that might have served him better in connection with the IRS's collection efforts.
In short, in light of what Mr. Umoren told the Appeals Officer and what he has told the Court, we are unable to find in his favor although we have serious reservations about the amounts of income and tax liability reflected in Mr. Umoren's 2018 return and actually assessed. By insisting on the correctness of his return, and offering no proof of the payments reflected on that return, Mr. Umoren has left us with no alternative other than to sustain the Commissioner's action for 2018.
III. Other Matters
A. 2015
Although the petition listed 2015 as one of the years under review, Mr. Umoren now agrees that no notice of determination has been issued for that year so as to grant us jurisdiction. Accordingly, Mr. Umoren's 2015 tax year is not at issue in this case.
B. Mr. Umoren's Motions
Before trial, in the course of these proceedings, Mr. Umoren filed a number of motions: See docket entries 19, 22, 25, 35, 36, 37, 39, 43, 46, 49, and 50. Although they are styled with different (and in some cases unusual) captions, we view these motions as, in one motions form or another, motions for summary judgment or supplements to such motions. Without restyling them, we will deny the motions for the reasons described in this opinion.
C. Allegations of Bias
Mr. Umoren claims that the Commissioner has been biased in dealing with him, citing conflicting communications regarding his various liabilities (such as, for example, communications telling him that he was owed refunds based on the returns he filed). We understand the frustration that can arise when a taxpayer receives conflicting communications from the IRS. But the IRS is a large and complex organization with numerous systems and processes, each with a different function in the tax enforcement scheme. Receiving what appear to be automated communications concerning potential refunds does not, without more, mean that a taxpayer is in fact entitled to a refund or will receive it. This is particularly true when the notice is generated based on inaccurate information provided by the taxpayer and when the taxpayer has been told by a court with respect to a prior year that the type of refund the taxpayer seeks is not authorized by the Code.
D. Section 6673 Penalty
Section 6673(a)(1) authorizes the Tax Court to impose a penalty not in excess of $25,000 whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or whenever the taxpayer's position in such proceeding is frivolous or groundless.
A position maintained by the taxpayer is "frivolous" when it is "contrary to established law and unsupported by a reasoned, colorable argument for change in the law." Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); see also Hansen v. Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) (section 6673 penalty upheld because taxpayer should have known claim was frivolous).
"By comparison, the term 'groundless' has been applied to cases in which the taxpayer's position is unfounded in fact. In determining whether a groundless claim exists, the Tax Court has looked to the dictionary definition, noting that the word 'groundless' literally means 'having no ground or foundation: lacking cause or reason for support.'" Leyshon v. Commissioner, T.C. Memo 2015-104 at *22 (citations and internal quotation marks omitted), aff'd 649 Fed.Appx. 299 (4th Cir. 2016). Thus, "a position is groundless if it lacks merit or has no justiciable facts in the petition and no valid ground or basis." Id. at *23.
The statute grants the Court discretion in deciding whether to impose the penalty. See Neonatology Associates, 115 T.C. at 102. The Court may impose sanctions if the taxpayer should have known that his position is frivolous or groundless. See IRC § 6673(a)(1); Coleman v. Commissioner, 791 F.2d at 71 (holding that the inquiry is objective); Winslow v. Commissioner, 139 T.C. 270, 276 (2012); Takaba v. Commissioner, 119 T.C. at 287; Connolly v. Commissioner, T.C. Memo 2008-95.
As we said earlier, Mr. Umoren is not a stranger to this Court. See Umoren, T.C. Memo 2012-117. In his previous case, Mr. Umoren also asserted that he was entitled to "enormous refunds" from the Government, and then, as now, we found that he was liable for penalties under section 6702(a)(2)(B) owing to his "desire to delay or impede the administration of Federal tax laws." Id., at *3 (quoting IRC § 6702(a)(2)(B)). And information in the record with respect to Mr. Umoren's 2015 tax year, as well as communications in the record from other tax authorities, suggests that he may have had some success in securing refunds based on these strategies.
The Court warned Mr. Umoren at a hearing on May 9, 2022, that if he asserted groundless arguments in the Tax Court, the Court could, in its discretion, impose penalties in an amount not to exceed $25,000. IRC § 6673(a)(1). The Court urged him to review section 6673 in deciding how to continue with the litigation. Despite this warning, Mr. Umoren filed numerous papers with the Court advancing the groundless and frivolous arguments we have rejected here. See docket entries 43, 46, 49, 50, 52, 55, 56, 63, 66, 68, 72, 78, 80, 81, and 84.
Moreover, contrary to the Court's rules, Rule 91(a), he was uncooperative in working with the Commissioner's counsel to agree to a Stipulation of Facts for basic matters, such as his original tax returns for the relevant years, printouts of account transcripts, and the like, which would have saved the parties and the Court considerable time and resources in preparing for trial and trying the case.
All of these actions confirm that Mr. Umoren took frivolous and groundless positions and prosecuted his case in such a way as to facilitate delay, burdening the Government and this Court with all the actions necessary for an inevitable outcome in the Commissioner's favor. The penalty under section 6673 is designed to address petitioners who conduct themselves in this manner.
We do not doubt the sincerity with which Mr. Umoren advances his positions. "Some people believe with great fervor preposterous things that just happen to coincide with their self-interest." Coleman v. Commissioner, 791 F.2d at 69. As the Court said in a similar case, such sincerity is but "a manifestation of a sad fact about human nature; [that is,] that we can talk ourselves into things that we know, on some other level of our consciousness, cannot be true. Therefore, whatever sincerity [Mr. Umoren] has will not exempt him completely from liability, though we do take it into account." Transcript of Bench Opinion at 10, Wnuck v. Commissioner (No. 26068-09) (Jan. 12, 2011).
Accordingly, we will impose a penalty under section 6673. Leyshon, T.C. Memo 2015-104 at *24-29 consider (setting out factors we consider in deciding whether to impose a penalty). In determining the amount of the penalty, we take all of the foregoing facts and circumstances into account, including the fact that we have already sustained, in two Tax Court cases combined, $20,000 in frivolous return penalties and that Mr. Umoren appears intent on continuing to press his groundless claims. We take no pleasure now in imposing a penalty of $2,000. Mr. Umoren "should realize that if in the future he continues to persist with frivolous [and groundless] litigation . . . then he would be communicating to the Court that a $2,000 penalty is insufficient to affect his behavior and the Court instead should consider a much larger penalty, up to the maximum of $25,000." Leyshon, T.C. Memo 2015-104 at *33. We have considered all the other arguments of the parties, and to the extent not discussed above, we find those arguments to be irrelevant, moot, or without merit. To summarize, we will sustain both notices of determination issued on February 23, 2021, and impose a penalty under section 6673 in the amount of $2,000. to reflect the foregoing, an appropriate order and decision will be entered.
This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 3:03 p.m., the above-entitled matter was concluded.)
CERTIFICATE OF TRANSCRIBER AND PROOFREADER
CASE NAME: Isang E. Umoren v. Commissioner
DOCKET NO.: 10226-21L
We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 36 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Adrian Morris on September 16, 2022, before the United States Tax Court at its session in Washington, DC, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording.
Susan Patterson, CDLT-174
Transcriber
Date 10/16/2022
Lori Rahtes, CDLT-108
Proofreader
Date 10/16/22