Olsen v. U.S.

• Decision Date: 08 July 2005
• Docket Number: No. 04-2156.,04-2156.
• Citation: 414 F.3d 144
• Parties: Richard E. OLSEN, Plaintiff, Appellant, v. UNITED STATES, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

414 F.3d 144

Richard E. OLSEN, Plaintiff, Appellant, v. UNITED STATES, Defendant, Appellee.

No. 04-2156.

United States Court of Appeals, First Circuit.

Heard March 7, 2005.

Decided July 8, 2005.

Timothy J. Burke for appellant.

Jonathan S. Cohen, Tax Division, Department of Justice, with whom Eileen J O'Connor, Assistant Attorney General, John Schumann, Tax Division, Department of Justice, and Michael J. Sullivan, United States Attorney, were on brief for appellee.

Before BOUDIN, Chief Judge, CAMPBELL, Senior Circuit Judge, and GERTNER,^* District Judge.

CAMPBELL, Senior Circuit Judge.

Plaintiff-Appellant Richard E. Olsen ("Olsen") appeals from a judgment of the United States District Court for the District of Massachusetts affirming an administrative determination by the Internal Revenue Service ("IRS") Office of Appeals permitting the IRS to collect by levy unpaid employment taxes and penalties owed by Olsen. See Olsen v. United States, 326 F.Supp.2d 184 (D.Mass.2004). We affirm.

I. Background

On March 14, 2001, the IRS sent Olsen a "Notice of Intent to Levy" on his property in order to collect delinquent federal employment taxes for which he was liable as a "responsible person" under § 6672 of the Internal Revenue Code, 26 U.S.C. § 6672 (2000). Given in accordance with 26 U.S.C. § 6330(a), the notice indicated that Olsen owed about $105,000 in unpaid employment taxes, penalties, and interest for the wages of employees of Interactive Arts, Inc.¹ The notice of levy advised Olsen of his right to request, within thirty days, an administrative appeal to challenge the proposed collection action. See 26 U.S.C. § 6330(a) (2000).

On March 20, 2001, Olsen filed a timely "Request for a Collection Due Process Hearing" (hereafter sometime "CDP hearing") with respect to the unpaid employment taxes. In the CDP hearing request, Olsen said he was "filing this appeal to object to the Service's actions in attempting to undertake collections actions when an Offer in Compromise is the more effective and efficient means of collecting past due taxes."

On March 12, 2002, the IRS appeals officer assigned to Olsen's case sent to Olsen's attorney, Timothy J. Burke ("Burke"), a letter notifying him that Olsen's CDP hearing was scheduled for March 26, 2002. The officer advised Burke that the hearing would be informal and that "[y]ou may present facts, arguments, and legal authority to support your position." The letter listed items that Olsen had to submit if he wanted the appeals officer to "consider collection alternatives such as an offer in compromise, an installment agreement, etc. in [the] hearing." These items included a "completed Collection Information Statement (Form 433-A for individuals and/or Form 433-B for businesses. . .)." Because Olsen had not filed income tax returns for the years 1996 to 2000, the officer stated that Olsen also had to complete, and file with her, income tax returns for those years. It does not appear from the record that a face-to-face hearing actually took place on March 26.²

On or about July 26, 2002, sixteen months after his request for a CDP hearing, Olsen filed a formal offer in compromise, proposing payment of $5,000 to settle his income tax liability for the years 1996 to 2000. Olsen did not state in the offer that it was also submitted to settle the unpaid employment taxes that were the subject of the notice of intent to levy and his request for a CDP hearing. Without questioning the IRS's claims as to the amount of either form of tax liability, Olsen indicated as the basis for his offer in compromise his "Doubt as to Collectibility — `I have insufficient assets and income to pay the full amount.'" Olsen stated that "the tax that is owed will never be paid," and that "[his] financial history for the past ten years shows a pattern of financial reverses which is broken by an occasional year of success." He also stated "[h]is spouse is a piano teacher whose income has not approached $30,000 on an annual basis for the past ten years." He indicated that the source of the $5,000 he was offering to pay was "FUNDS FROM FAMILY."

With his offer in compromise, Olsen submitted a "Collection Information Statement for Wage Earners and Self-Employed Individuals" (Form 433-A) and copies of his income tax returns for the years 1996 to 2000. In the Form 433-A, Olsen reported having no checking or savings accounts, no investments, and no automobiles, and indicated that he receives $2,000 in net business income each month. On August 2, 2002, the IRS appeals officer called Burke to ask that he provide Olsen's income tax returns containing original signatures that could be filed with the IRS.

On November 7, 2002, Olsen's appeal was transferred to a new appeals officer. The officer noted in the case activity records that a levy source had been identified, viz., a 1998 Toyota Camry owned by Olsen, with no lien, purchased in 2000. The records noted that Olsen's wife owned a 2000 Volkswagen Passat with no lien and that she leased a 2000 Ford Taurus. The appeals officer also indicated that joint income tax returns by Olsen and his wife reflected, among other income, income from a venture capital business owned by Olsen as well as income of $131,000 from a partnership known as Tektonic Partners LLC for 1999 and income of $165,750 from this partnership for 2000.

On November 13, 2002, the appeals officer wrote to Burke, informing him that "[a]t this point the offer [in compromise] is not processable" as income tax returns with original signatures had not yet been filed. The officer also pointed out that the offer in compromise only listed the periods for the income tax returns from 1996 to 2000 and made no reference to the employment tax liabilities that were the subject of the notice of levy and Olsen's request for a CDP hearing. The officer requested that Burke "update [the offer in compromise] to include the trust fund recovery penalty balance due periods as well." (Insofar as appears, this was never done.) The officer also asked Burke to provide certain other information including: an income tax return for the year 2001; a Collection Information Statement (Form 433-B) for Olsen's venture capital business; a Form 433-B for Tektonic Partners LLC; and partnership income tax returns (Form 1065) for Tektonic Partners LLC. The appeals officer also inquired as to the status of the 1998 Camry, which was not reflected in Olsen's financial statements. She requested a response by December 4, 2002.

On December 10, 2002, Burke mailed to the appeals officer Olsen's income tax return for 2001 and a Form 1065 for Tektonic Partners LLC for 2001, which indicated income from Tektonic Partners LLC in the amount of $158,010. Burke wrote: "Kindly note that the taxpayer does not have an interest in Tektonic Partners. Accordingly, please appri[s]e me as to your reasons for requesting that the taxpayer prepare a financial statement for an entity owned by his spouse." According to the 2001 tax return for Tektonic Partners LLC, Mrs. Olsen now owned 100% of Tektonic Partners LLC.

On December 23, 2002, Burke sent to the appeals officer additional information, including Olsen's requested income tax returns with original signatures for the years 1996 to 2000. The officer forwarded the income tax returns for filing elsewhere within the IRS. At this point, some of the requested information still had to be provided, but the officer concluded that receipt and filing of the original tax returns allowed her to process the offer in compromise, which, on January 3, 2003, she began to do.

The case activity records reflect that, on January 15, 2003, Burke called the appeals officer and informed her that he had sent the remainder of the requested information. The records also reflect that he told the officer that the offer in compromise was "for all periods" and that he would "amend it if necessary."³

On January 27, 2003, the appeals officer wrote to Burke and asked for the following information requested in November but never received: a Form 433-B for Olsen's venture capital business, a Form 433-B for Tektonic Partners LLC, and a statement on the status of the 1998 Camry. The officer also requested for the first time the following additional information: Forms 433-B and Forms 1065 for three other Tektonic partnerships and the source of unexplained deposits totaling over $115,000 into Mrs. Olsen's bank account during the six-month period for which bank statements had been provided. The appeals officer wrote: "Although you had informed me that one of the [Tektonic] partnerships is 100% owned by Mrs. Olsen, the requested information is still necessary." The letter also indicated that the officer had learned of a Tektonic Partners located in Boston, and asked whether this was one of the partnerships in which Mr. or Mrs. Olsen had an interest. The officer requested that the previously requested documents be provided by February 14, 2003, and the rest of the information by February 28, 2003.

On January 29, 2003 and March 1, 2003, Burke sent to the appeals officer some but not all of the requested information. He stated in the January letter that the 1998 Camry was owned and used by Olsen's daughter. With the March letter, Burke included tax returns for the year 2001 for the Tektonic partnerships, stating that "[a]ll interests in these entities are held by [Olsen's] spouse."

On April 8, 2003, the appeals officer sent another letter to Burke, identifying the information that was necessary to complete her review of the offer in compromise. The officer requested information she had requested twice before (in November and January) and had still not received, including a Form 433-B for Olsen's venture capital business and a Form 433-B for Tektonic Partners LLC. The officer also requested the following information, which had been requested in January but still not received: Forms 433-B for each of the other three Tektonic partnerships, the...