Beeler v. Commissioner of Internal Revenue, T.C. Memo. 2009-266 (U.S.T.C. 11/24/2009), 20892-07L.
| Decision Date | 24 November 2009 |
| Docket Number | No. 20892-07L.,20892-07L. |
| Parties | JOEL I. BEELER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. |
| Court | U.S. Tax Court |
Richard S. Kestenbaum and Bernard S. Mark, for petitioner.
Marc L. Caine, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
The issue for decision is whether respondent's Appeals officer abused his discretion in sustaining respondent's proposed levy action against petitioner to collect 100 percent of quarterly trust fund recovery penalties (TFRP) for 1981 and 1982. Petitioner argues that respondent's filing of Form 668 (Z), Certificate of Release of Federal Tax Lien, for a related tax lien requires a finding that petitioner's liability for the trust fund tax liabilities has been satisfied. For the reasons stated herein, we find that respondent did not abuse his discretion in sustaining the proposed levy action.
Some of the facts are stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by reference. At the time the petition was filed, petitioner resided in New York.
Petitioner's tax liability for the TFRP accrued during the last three quarters of 1981 and the first quarter of 1982 with respect to withheld income and Social Security taxes of a corporation of which petitioner was an officer and director. The liability was assessed March 26, 1985, under section 6672.1 After assessment respondent filed a notice of Federal tax lien (NFTL) in New York, New York, and Sarasota, Florida.
On November 17, 1986, petitioner commenced an action in the U.S. District Court for the Southern District of New York, seeking a refund of payments made towards the assessed amount. Beeler v. United States, 894 F. Supp. 761 (S.D.N.Y. 1995). On March 9, 1987, the United States counterclaimed against petitioner seeking payment for the unpaid portion of the TFRP and filed third-party actions against the other two directors and officers of the corporation, Robert Liebmann and Stuart Ross. The Government sought to hold each of them liable for the TFRP.
The District Court ordered judgment in favor of the Government on the counterclaim against petitioner and the complaints against Mr. Liebmann and Mr. Ross, finding that they were "responsible persons" who "willfully" failed to pay over withholding taxes. Beeler v. United States, supra at 777. On or about September 1, 1995, the District Court entered an order against petitioner for the TFRP of $154,032.05, plus interest and statutory additions.
Judgments were also entered against Mr. Liebmann and Mr. Ross. Account transcripts for Mr. Liebmann and Mr. Ross on or about November 11, 2007, and May 27, 2002, respectively, contain entries which read: "Statute Expired-Clear to zero and Uncollectable Amount Owed." Account balances for both taxpayers reflect the corresponding computation of the described transactions. Mr. Liebmann and Mr. Ross are not parties to this dispute.
On February 29, 2000, the Internal Revenue Service (IRS) filed a Form 668 (Z), dated February 29, 2000, concerning the New York lien. The IRS also filed a Form 668(Z), dated February 22, 2001, concerning the Sarasota, Florida, lien. Respondent asserts these certificates of release were erroneously filed.
On September 25, 2006, respondent issued petitioner a Letter 1058, Final Notice—Notice of Intent to Levy and Notice of Your Right to a Hearing. Petitioner timely filed a Form 12153, Request for a Collection Due Process Hearing on October 24, 2006. On January 30, 2007, the Appeals officer conducted a collection due process (CDP) hearing with petitioner's representative and discussed three issues: (1) Liability for filing penalties; (2) whether petitioner was liable for TFRP and whether the other two responsible persons made any payments; and (3) whether a release of NFTL meant that the underlying TFRP was satisfied. Petitioner now concedes issues (1) and (2), and focuses on issue (3); specifically, his argument that respondent's release of the NFTL requires a finding that the underlying TFRP was satisfied in full.
On August 17, 2007, respondent issued to petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination) sustaining the proposed levy. On September 14, 2007, petitioner timely filed his petition in this Court challenging respondent's determination.
OPINIONThis collection review proceeding was filed pursuant to section 6330. Section 6330(a) provides that no levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of the right to a hearing before the levy is made. Section 6330(b)(1) and (3) provide that if a person requests a hearing, that hearing shall be held before an impartial officer or employee of the IRS Office of Appeals. At the hearing a taxpayer may raise any relevant issue, including challenges to the appropriateness of the collection action. Sec. 6330(c)(2)(A). A taxpayer is precluded from contesting the existence or amount of the underlying tax liability at the hearing unless the taxpayer failed to 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, 114 T.C. 604, 609 (2000).
Following a hearing, the Appeals officer must make a determination whether the levy action may proceed and is required to consider: (1) Whether the Secretary has met the requirements of applicable law and administrative procedure; (2) the relevant issues raised by the taxpayer; and (3) whether the proposed collection action appropriately balances the need for efficient collection of taxes with a taxpayer's concerns that the levy action be no more intrusive than is necessary. Sec. 6330(c)(3).
Section 6330(d) grants the Court jurisdiction to review the determination by the Appeals officer to proceed with collection action via the levy after the CDP hearing. Where the validity of the underlying tax liability is at issue in a collection review proceeding, the Court will review the matter de novo. Davis v. Commissioner, 115 T.C. 35, 39 (2000). Where the underlying tax liability is not at issue, however, the Court will review the determination of the Appeals officer for abuse of discretion. Goza v. Commissioner, 114 T.C. 176, 182 (2000).
Because petitioner had an opportunity before the CDP hearing to contest his 1982 tax liability in the District Court action, the underlying liability is not properly at issue in this case, and we review respondent's determination for abuse of discretion. Abuse of discretion is proven by showing that the Commissioner exercised his discretion arbitrarily, capriciously, or without sound basis in fact or law. Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Pursuant to the Pension Protection Act of 2006, Pub. L. 109-280, sec. 855, 120 Stat. 1019, this Court has exclusive jurisdiction to review determinations under section 6330, effective for determinations made after October 16, 2006. Generally, as described under section 6330(c)(2), failure of the taxpayer to raise an issue during the section 6330 hearing will preclude our consideration of that issue. Giamelli v. Commissioner, 129 T.C. 107, 112-113 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002). However, the Appeals officer's mandated verification under section 6330(c)(1) that the requirements of any applicable law or administrative procedure have been met is subject to review without regard to a challenge by the taxpayer at the hearing. Hoyle v. Commissioner, 131 T.C. ____, ____ (2008) (slip op. at 11).
Petitioner argues that: (1) The statute of limitations bars collection, and (2) the tax liability is satisfied. These issues are within those requiring verification by the Appeals officer under section 6330(c)(1) and therefore are subject to our review. See id.
Section 6502(a) prescribes the period during which any tax may be collected following assessment. At the time of the initial assessment in this case, section 6502 provided a 6-year period for collection by levy. Congress amended section 6502 twice. In 1988 Congress amended section 6502 so that a court proceeding filed by the United States during the 6-year period extended the collection period until any liability was satisfied. Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L. 100-647, sec. 1015(u), 102 Stat. 3373. The purpose of the 1988 amendment was to conform liens and levies. Before the amendment, a judicial proceeding would not toll the limitations period for levies, but would for liens. See United States v. Wodtke, 627 F. Supp. 1034, 1041 (N.D. Iowa 1985), affd. without published opinion 871 F.2d 1092 (8th Cir. 1988). The legislative history of TAMRA states that the 1988 amendment was to conform section 6502 so that a court proceeding filed during the 6-year period would keep the collection period open. H. Conf. Rept. 100-1104 (Vol. II), at 5-6 (1988), 1988-3 C.B. 473, 495-496. In 1990 Congress amended section 6502 to extend the 6-year period for collection to 10 years. Omnibus Budget Reconciliation Act of 1990, Pub. L. 101-508, sec. 11317(a), (c), 104 Stat. 1388-458. The 1988 amendment is effective for all levies issued after November 10, 1988, and the 1990 amendment applies to taxes assessed after November 5, 1990, and taxes assessed on or before November 5, 1990, if the period specified in section 6502 for collection of such taxes has not expired.
Section 6502 currently provides that an assessed tax may be collected by levy or by a proceeding in court if the levy is made or the proceeding began within 10 years after date of assessment. Sec. 6502(a)(1). If a timely proceeding is commenced in court, the period during which such tax may be collected by levy shall not expire until the liability for the tax is satisfied....
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