Slack v. Comm'r of Internal Revenue

• Docket Number: 15137-21L
• Decision Date: 08 September 2023
• Parties: ROBERT L. SLACK, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

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ROBERT L. SLACK, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 15137-21L

United States Tax Court

September 8, 2023

ORDER AND DECISION

Joseph W. Nega, Judge

This collection due process (CDP) case is presently calendared for an in-person trial at the session of the Court scheduled to commence on Monday, October 2, 2023, in St. Louis Missouri.^[1] On August 1, 2023, respondent filed a Motion for Summary Judgment (respondent's motion). By Order issued August 2, 2023, the Court directed petitioner to respond to respondent's motion before September 1, 2023. To date, petitioner has not filed a response.

I. Background

Petitioner failed to file federal income tax returns for tax years 2016 2017, 2018, and 2019. On February 19, 2019, respondent sent to petitioner a notice of deficiency for tax year 2016, determining a deficiency of $29,975; additions to tax under sections 6651(a)(1) and (a)(2) and section 6654; and interest. Petitioner did not file a Petition to challenge the February 19, 2019 notice with the Court at that time.

On February 25, 2020, respondent issued to petitioner a LT11, Notice of Intent to Levy and Notice of Your Right to a Hearing (notice of intent to levy), which corresponded to petitioner's federal income tax liability for tax year 2016; interest; and sections 6651(a)(1) and (a)(2) and section 6654 additions to tax. Petitioner timely submitted to respondent a Form 12153, Request for a Collection Due Process or Equivalent Hearing, dated March 26, 2020. Petitioner also attached a short statement to the Form 12153 in which petitioner explained that he withdrew funds from his retirement accounts in 2016 in order to fund litigation against his employer. In this statement, petitioner stated that he expected to have "minimal (if any) tax obligation for [tax year 2016]" once he filed his 2016 tax return.

Petitioner's CDP case was assigned to Settlement Officer (SO) Aaron L. Holbrook. On December 22, 2020, SO Holbrook mailed to petitioner a letter scheduling a telephone conference for January 20, 2021, and requesting tax returns for 2018 and 2019 in order to be able to consider collection alternatives. Petitioner did not join the January 20, 2021 conference call but did call SO Holbrook on January 21, 2021. During this phone call, petitioner confirmed that he received the February 19, 2019 notice of deficiency. Petitioner also agreed to file tax returns for tax years 2016, 2017, 2018, and 2019 by February 11, 2021. On February 9, 2021, petitioner called SO Holbrook to request a deadline extension for filing the delinquent returns. SO Holbrook extended the deadline to February 19, 2021. Petitioner did not file any of the delinquent returns. On March 3, 2021, petitioner left SO Holbrook a voicemail, stating that petitioner was still working on the delinquent returns. SO Holbrook closed petitioner's file on March 9, 2021.

On March 15, 2021, respondent issued to petitioner a Notice of Determination Concerning Collection Actions under IRS Sections 6320 or 6330 of the Internal Revenue Code (notice of determination), sustaining the proposed levy for unpaid tax liability for tax year 2016. Petitioner filed a Petition with this Court on May 3, 2021.

II. Discussion

A. Summary Judgment Standard

The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90 T.C 678, 681 (1998). 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). In deciding whether to grant summary judgment, we construe factual materials and draw inferences therefrom in the light most favorable to the nonmoving party. Sundstrand Corp., 98 T.C. at 520. However, the nonmoving party may not rest upon mere allegations or denials of his pleadings but, rather, must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.

B. Standard & Scope of Review

Section 6330(d)(1) grants this Court jurisdiction to review the SO's determination in connection with a CDP hearing. See Boechler, P.C. v. Commissioner, 142 S.Ct. 1493, 1501 (2022) (holding that the 30-day deadline in § 6330(d)(1) is nonjurisdictional). Section 6330(c)(2) prescribes the matters that a taxpayer may raise at a CDP hearing, including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. The existence or amount of the underlying tax liability may be contested at a CDP hearing only if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. See § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180-81 (2000).

If the validity of the underlying tax liability is properly at issue, the Court will review the taxpayer's liability de novo. See Sego, 114 T.C. at 609-10. Where the validity of the underlying tax liability is not properly at issue, the Court will review the SO's determination for abuse of discretion. Id. at 610. 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).

In cases appealable to the U.S. Court of Appeals for the Eighth Circuit (as is this one), our scope of review when reviewing nonliability issues is limited to the administrative record. See Robinette v. Commissioner, 439 F.3d 455, 461-62 (8th Cir. 2006), rev'g 123 T.C. 85 (2004); but see Bowman v. Commissioner, T.C. Memo. 2007-114, 93 T.C.M. (CCH) 1204 (2007) (holding that the court may consider a notice of deficiency that was not considered during the CDP hearing), aff'd, 285 Fed.Appx. 309 (8th Cir. 2008).

C. Underlying Liability

A taxpayer may challenge the existence or amount of underlying tax liability in a CDP proceeding only "if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." § 6330(c)(2)(B). The phrase "underlying tax liability" includes the tax due, any additions to tax or penalties, and statutory interest. See Katz v. Commissioner, 115 T.C. 329, 339 (2000).

A properly completed Form 3877 that reflects the timely mailing of a notice of deficiency to a taxpayer to the taxpayer's correct address by certified mail, absent evidence to the contrary, establishes that the notice was properly mailed to the taxpayer. Diamond v. Commissioner, T.C. Memo. 2012-90, 103 T.C.M. (CCH) 1480, 1482. Compliance with Form 3877 mailing procedures raises a presumption of official regularity in favor of respondent that, where unrebutted, can establish that a taxpayer received the notice of deficiency. See Sego, 114 T.C. at 611.

Here, respondent produced a copy of the notice of deficiency for tax year 2016 issued to petitioner on February 19, 2019. This notice was properly sent by certified mail to the same address that petitioner listed on the Petition, which appears to have been petitioner's last known address at the times the notice was sent. Respondent has also produced a copy of a properly completed Form 3877 for the notice of deficiency with a certified mailing number matching the number found on the notice and a date-stamp matching the date of the notice. Respondent is thus entitled to a presumption of official regularity with respect to the mailing of the notice of deficiency on February 19, 2019. See, e.g., Klingenberg v. Commissioner, T.C. Memo. 2012-292, at *14-15 (finding presumption of official regularity raised where Commissioner established noticed of deficiency were sent by certified mail to petitioner's last known address); Crain v. Commissioner, T.C. Memo. 2012-97, 103 T.C.M. (CCH) 1533, 1536.

During the CDP proceeding, petitioner admitted that he received the notice of deficiency sent on February 19, 2019. We conclude that petitioner received the notice of deficiency and is therefore barred from challenging the underlying liability in this Court. Because there is no challenge to the underlying liability before this Court, we review SO Holbrook's decision to uphold the proposed levy for abuse of discretion only.

D. Abuse of Discretion

1. Issues Raised

We now turn to the remaining issues, which we review for abuse of discretion. Construing the Petition liberally, petitioner alleges that SO Holbrook abused his discretion by closing the file and issuing a notice of determination after not receiving requested documentation from petitioner between December 22, 2020 and March 15, 2021. On the administrative record before us, we see no abuse of discretion. SO Holbrook allowed petitioner an adequate timeframe to provide the delinquent returns and petitioner never provided any of the delinquent returns. SO Holbrook allowed for a deadline extension from February 11, 2021 to February 19, 2021 and did not abuse his discretion by refusing to allow further deadline extensions when petitioner did not submit any of the four delinquent returns and offered no reason for the delay. See e.g., Belair v. Commissioner, 157 T.C 10, 17 (2021) ("It is not an abuse of discretion for Appeals to move ahead with its final determination after an Appeals officer gives a taxpayer an adequate timeframe to submit requested items and the taxpayer fails to submit those items.");^[2] Shanley v. Commissioner, T.C. Memo. 2009-17, 97 T.C.M. (CCH) 1062, 1066 (2009) (holding that it was not an abuse of discretion to allow the taxpayer less than 50 days to provide...