Lindsay Manor Nursing Home, Inc. v. Comm'r
| Decision Date | 23 March 2017 |
| Docket Number | Docket No. 24596-14L.,T.C. Memo. 2017-50 |
| Parties | LINDSAY MANOR NURSING HOME, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
David J. Looby, for petitioner.
Ann Louise Darnold, for respondent.
PARIS, Judge: In this collection due process (CDP) case, petitioner seeks review pursuant to section 6330(d)(1)1 of the determination by the Internal Revenue Service (IRS or respondent) to uphold a notice of intent to levy. Petitioner filed a motion for summary judgment under Rule 121 that the Court addressed in part in its Opinion Lindsay Manor Nursing Home, Inc. v. Commissioner (Lindsay Manor I), 148 T.C. ___ (Mar. 23, 2017). And respondent filed a subsequent motion for summary judgment under Rule 121. The remaining questions for decision are whether IRS Settlement Officer Alcorte (SO Alcorte) abused her discretion in rejecting petitioner's proposed installment agreement and sustaining the collection action. For the reasons explained below, the Court will grant respondent's motion for summary judgment and deny the remainder of petitioner's motion for summary judgment.
The following facts are based on the parties' pleadings and motion papers, including the attached exhibits and affidavits.2 See Rule 121(b). Petitioner operates a nursing home facility in a rural community of fewer than 3,000 residents. Its principal place of business was in Oklahoma at the time the petition was filed.
Petitioner has a long history of noncompliance with its Federal employment tax obligations dating back to the mid-2000s.3 On multiple prior occasions petitioner was given an installment agreement which the IRS revoked for noncompliance with either the terms of the agreement or its Federal tax filing and payment obligations. The case at issue relates to petitioner's outstanding tax liability from Form 941, Employer's Quarterly Federal Tax Return, for the period ending December 31, 2013.
Petitioner timely filed its Form 941 for the quarterly period ending December 31, 2013, but failed to pay its tax liability for that quarter. On April 14, 2014, respondent assessed the tax of $108,911 reported on the return and began collection efforts.
On April 24, 2014, respondent issued to petitioner a Letter 1058, Final Notice--Notice of Intent to Levy and Notice of Your Right to a Hearing. In response petitioner timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, seeking to enter into a $6,000-per-month installment agreement for its unpaid employment tax liability. This request stated that if respondent were permitted to levy, petitioner's difficulty with Medicare and Medicaid collections would render it unable to pay either the employment tax balance it owed or its current taxes. Petitioner's request, however, did not dispute the underlying employment tax liability; petitioner checked the collection alternative boxes for "Installment Agreement" and "I Cannot Pay Balance".
Respondent mailed to petitioner a letter dated June 6, 2014, acknowledging receipt of petitioner's hearing request, and SO Alcorte subsequently mailed to petitioner a letter scheduling a CDP hearing for August 21, 2014. SO Alcorte's letter advised petitioner that it did not qualify for consideration of an installment agreement because it was not in compliance with its employment tax deposit requirements for the taxable period ending June 30, 2014. The letter further advised petitioner that to qualify for a collection alternative it had to provide to SO Alcorte the following items no later than August 11, 2014: (1) a completed Form 433-B, Collection Information Statement for Businesses, and (2) evidence that it had made the required Federal employment tax deposits for the current taxable period. SO Alcorte informed petitioner that respondent could not consider collection alternatives without the information requested.
Petitioner did not submit the requested Form 433-B until August 20, 2014, one day before the scheduled hearing, asserting that the proposed levy would result in "economic hardship" and, therefore, "this situation * * * mandate[s] the release of the proposed levy". The Form 433-B was signed by petitioner's president, Sam Jewell, listing among petitioner's assets accounts receivable from Private Pay, Medicaid Oklahoma, Medicare, and Insurance CoPay--with a combined balance of $306,598.61 for the period April 30 through June 30, 2014.4 The Form 433-B also listed petitioner's monthly income of $254,138.335 and monthly expenses of $257,176.14.
In preparation for the CDP hearing SO Alcorte noted in her case activity report that petitioner did not appear to qualify for an installment agreement because its assets were sufficient to pay the outstanding liability in full. She also noted that petitioner offered no explanation regarding how it would make its proposed monthly installment agreement payments while its net revenue was negative. And she reviewed the administrative record.
The administrative record details previous installment agreements between respondent and petitioner. Each followed a similar pattern: petitioner failed to remit to the IRS the requisite employment tax deposit; petitioner would not pay the amount in full until respondent sent a final notice of intent to levy; petitioner would attempt to enter into an installment agreement; and for one reason or another, petitioner defaulted on that agreement. Detailed notes accompanying these installment agreements elaborate upon the extensive consideration given to petitioner's unique circumstances and the impact of collection action on its employees and patients. These notes also show that despite ongoing collection action by lien and by levy, petitioner was able to continuously provide sufficient care to its patients and wages to its employees.
On August 21, 2014, the parties held a CDP hearing. Petitioner's representative did not contest petitioner's underlying tax liability but instead reiterated that it would suffer economic hardship if the proposed collection action were sustained.6 SO Alcorte explained to petitioner's representative that she would not consider petitioner's economic hardship argument because the economic hardship exception does not apply to corporations. She noted that because (1) petitioner's accounts receivable were sufficient to pay its outstanding liability in full, (2) petitioner was not in compliance with its Federal employment tax deposit obligations, and (3) the economic hardship exception is not applicable to corporations, she would be sustaining the proposed collection action and closing the case.
SO Alcorte verified that the assessment was properly made and that all other requirements of applicable law and administrative procedure had been met. She thereupon closed the case and, on September 17, 2014, issued to petitioner a notice of determination sustaining the notice of intent to levy with respect to the Form 941 tax period ending December 31, 2013.
Petitioner timely petitioned this Court with respect to the notice of determination and, on March 31, 2015, filed a motion for summary judgment. Respondent filed his motion for summary judgment on October 14, 2015. The Court has issued its Opinion in Lindsay Manor I, finding that section 301.6343-1(b)(4)(i), Proced. & Admin. Regs., is valid and that the circumstances of nonindividual taxpayers may properly be considered under the intrusiveness analysis of the section 6330(c)(3)(C) balancing test. The Court proceeds to address respondent's motion for summary judgment and the portion of petitioner's motion not addressed in Lindsay Manor I.
The purpose of summary judgment is to expedite litigation and avoid unnecessary and time-consuming trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). The Court may grant summary judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994). If a moving party properly makes and supports a motion for summary judgment, "an adverse party may not rest upon the mere allegations or denials of such party's pleading" but must set forth specific facts, by affidavit or otherwise, showing that there is a genuine dispute for trial. Rule 121(d).
Upon due consideration of the parties' motions, supporting declarations, and responses thereto, the Court concludes that no material facts are in dispute and that judgment may be rendered for respondent as a matter of law.
Where the validity of the underlying tax liability is properly at issue, the Court will review the matter on a de novo basis. Sego v. Commissioner, 114 T.C. 604, 610 (2000). Where, as here, there is no dispute concerning the underlying tax liability, the Court reviews the Commissioner's administrative determination for abuse of discretion.7 Id. 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).
In deciding whether the SO abused her discretion in sustaining the collection action, the Court considers whether she: (1) properly verified that the requirements of any applicable law or administrative procedure have been met; (2) considered any relevant issues petitioner raised; and (3) determined whether "any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of * * * [petitioner] that any collection action be no more intrusive than necessary." Sec. 6330(c)(3).
Review of the record reveals that SO Alcorte conducted a thorough review of petitioner's account, determined that the taxes had been properly assessed, and verified that other requirements of applicable law and administrative procedure...
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