[Dec. 55,767(M)]  Travis D. Hiland v. Commissioner.

Dkt. No. 3106-04L , TC Memo. 2004-225, October 6, 2004 .

[Appealable, barring stipulation to the contrary, to CA-9. --CCH.]

[Code Secs. 6330 and 6673]
IRS Levy: Right to hearing: Abuse of discretion: Penalty: Taxpayer delay: Court imposed. -

The imposition of an IRS levy against an individual was not an abuse of its discretion and, as a result, the IRS's collection action against the individual could proceed. The individual had received a Final Notice of Intent to Levy from the IRS because of his failure to pay an outstanding income tax liability. He requested, and was granted, a Collection Due Process hearing before the IRS, in order to present his arguments against the proposed levy. However, he never appeared at the scheduled hearing and did not respond to telephone calls from the hearing officer. The numerous documents that the individual mailed to the hearing officer contained only frivolous arguments and did not address any relevant issues. The Tax Court ruled that the IRS tax assessment was not an abuse of discretion due to the lack of any valid challenges raised by the taxpayer. In addition, the Tax Court assessed a penalty against the individual because it determined that he had instituted the proceedings primarily for the purpose of delay. --CCH.

Travis D. Hiland, pro se; Cameron M. McKesson, for respondent.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate.

Held: Because P has advanced solely groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained.

Held, further, damages under sec. 6673, I.R.C., are due from P and are awarded to the United States in the amount of $1,000.

MEMORANDUM OPINION

WHERRY, Judge: This case is before the Court on respondent's motion for summary judgment pursuant to Rule 121.¹ The instant proceeding arises from a petition for judicial review filed in response to a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330. The issues for decision are: (1) Whether respondent may proceed with collection action as so determined, and (2) whether the Court, sua sponte, should impose a penalty under section 6673.

Background

Petitioner filed with his spouse² a joint Form 1040, U.S. Individual Income Tax Return, for the 2000 taxable year on or about April 15, 2001 . On this return, petitioner reported $0 on all pertinent lines, including $0 of total income and $0 of total tax. Petitioner attached to the return a statement contending, inter alia, that no law established his liability for income taxes or required him to file a return.

Respondent issued to petitioner a statutory notice of deficiency for 2000 on June 12, 2002 . Respondent determined a deficiency of $16,843 and an accuracy-related penalty under section 6662(a) in the amount of $3,368.60. Petitioner responded to the notice with a letter dated June 14, 2002 , acknowledging his receipt of the notice and his right to file a petition with the Tax Court but stating, inter alia: "Before I file, pay, or do anything with respect to your `Notice,' I must first establish whether or not it was sent pursuant to law, whether or not it has the `force and effect of law,' and whether you had any authority to send me the notice in this first place."

Petitioner at no time petitioned this Court for redetermination of the deficiency and penalty reflected in the notice. Respondent assessed tax, penalty, and interest amounts due for 2000 on November 18, 2002 , and sent a notice of balance due on that date. An additional notice of balance due was sent on December 23, 2002 .

On February 27, 2003 , respondent issued to petitioner a Final Notice of Intent To Levy and Notice of Your Right To a Hearing with respect to his unpaid liabilities for 2000.³ Petitioner timely submitted to respondent a Form 12153, Request for a Collection Due Process Hearing, with multiple attachments setting forth his disagreement with the proposed levy. He challenged the validity of, and requested that the Appeals officer have at the hearing copies of documents pertaining to, among other things, the underlying tax liability, the notice and demand for payment, and the authority of various Internal Revenue Service (IRS) personnel.

Settlement Officer Thomas L. Tracy (Mr. Tracy), of the IRS Office of Appeals in Phoenix, Arizona, sent petitioner a letter dated November 10, 2003 , scheduling a hearing for December 5, 2003 , and briefly outlining the hearing process. On December 3, 2003 , petitioner telephoned Mr. Tracy and asked to delay the hearing, on grounds that he needed to attend to his father who had suffered a stroke. Mr. Tracy offered either a telephone hearing or a face-to-face meeting the week of December 15. Petitioner instead asked for a hearing by correspondence, and the parties mutually agreed upon a deadline of December 17, 2003 , for Mr. Tracy's receipt of petitioner's submission. During the conversation, Mr. Tracy advised petitioner that the issues thus far presented by petitioner would be considered frivolous and not relevant. Following the conversation, Mr. Tracy then sent a letter dated December 3, 2003 , expressly confirming the terms of the agreement reached and expanding on the point made about frivolous arguments and penalties therefor under section 6673. The letter concluded with a warning that if Mr. Tracy did not receive petitioner's correspondence by December 17, 2003 , he would make his determination from information in the file. Mr. Tracy also enclosed with the letter copies of Forms 4340, Certificate of Assessments, Payments and Other Specified Matters, and of pertinent cases such as Pierson v. Commissioner [Dec. 54,152], 115 T.C. 576 (2000).

On December 17, 2003 , petitioner called Mr. Tracy and left a message acknowledging the deadline and indicating that he had questions ready for Mr. Tracy.⁴ The message further stated that petitioner was in Mesa visiting his ill father, that he had a flat tire, and that he was unsure whether he could get his correspondence package to Mr. Tracy. On that note, petitioner inquired whether he could deliver the package the next day or could send it by facsimile. He also requested a return call.

Mr. Tracy called back within minutes, but petitioner was unavailable. Mr. Tracy left his phone and fax number. When he did not hear from petitioner, Mr. Tracy called again on December 19, 2003 . The individual who answered the telephone stated that petitioner was not answering the line, so Mr. Tracy left another message for petitioner to return the call.

When petitioner failed to call or to send any documents by facsimile or otherwise, Mr. Tracy closed the case on December 29, 2003 . Respondent on January 8, 2004 , issued to petitioner the aforementioned Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330, sustaining the proposed levy action. An attachment to the notice addressed the verification of legal and procedural requirements, the issues raised by the taxpayer, and the balancing of efficient collection and intrusiveness. According to the attachment, petitioner "presented only frivolous arguments and no relevant issues."

Petitioner's petition disputing the notice of determination was filed with the Court on February 13, 2004 , and reflected an address in Prescott , Arizona . In general, petitioner asks that the Court declare invalid the notice of determination. Petitioner's complaints with respect to the administrative proceedings include the following: No legitimate hearing under section 6330 ever took place; petitioner was denied the opportunity to raise issues he deemed "relevant" (e.g., the "existence" of the underlying tax liability); and cited documentation had not been produced and/or addressed (e.g., record of the assessments, statutory notice and demand for payment, any "valid notice of deficiency", and verification from the Secretary that all applicable requirements were met). Petitioner prays that this Court declare invalid the January 8, 2004 , determination; order the IRS to hold the statutorily mandated "Collection Due Process Hearing"; order the IRS to have at the hearing all documents requested by petitioner; and order the Government to reimburse petitioner for all costs incurred in submitting the instant petition.⁵

Also on February 13, 2004 , petitioner reiterated his request that this Court declare invalid the determination at issue by means of a document and supporting memorandum filed as a motion to dismiss for lack of jurisdiction. Respondent filed a notice of objection on March 15, 2004 , and the Court denied petitioner's motion on April 15, 2004 .

After the pleadings were closed in this case, respondent filed the subject motion for summary judgment. Petitioner was directed to file any response to respondent's motion on or before September 17, 2004 . No such response was received by the Court.

Discussion

Rule 121(a) allows a party to move "for a summary adjudication in the moving party's favor upon all or any part of the legal issues in controversy." Summary judgment is intended to expedite litigation and to avoid unnecessary trials. Fla. Peach Corp. v. Commissioner [Dec. 44,689], 90 T.C. 678, 681 (1988). Rule 121(b) directs that a decision on such a motion shall be rendered "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law."

The moving party bears the burden of demonstrating that no genuine issue of material fact exists and that he or she is entitled to judgment as a matter of law. Sundstrand Corp. v. Commissioner [Dec. 48,191], 98 T.C. 518, 520 (1992), affd. [94-1 USTC ¶50,092] 17 F.3d 965 (7th Cir. 1994). Facts are viewed in the light most favorable to the nonmoving party. Id. However, where a motion for summary judgment has been properly made and supported by the moving party, the opposing party may not rest upon mere allegations or denials contained in that party's pleadings but must by affidavits or otherwise set forth specific facts showing that there is a genuine issue for trial. Rule 121(d).

I. Collection Actions

A. General Rules

Section 6331(a) authorizes the Commissioner to levy upon all property and rights to property of a taxpayer where there exists a failure to pay any tax liability within 10 days after notice and demand for payment. Sections 6331(d) and 6330 then set forth procedures generally applicable to afford protections for taxpayers in such levy situations. Section 6331(d) establishes the requirement that a person be provided with at least 30 days' prior written notice of the Commissioner's intent to levy before collection may proceed. Section 6331(d) also indicates that this notification should include a statement of available administrative appeals. Section 6330(a) expands in several respects upon the premise of section 6331(d), forbidding collection by levy until the taxpayer has received notice of the opportunity for administrative review of the matter in the form of a hearing before the IRS Office of Appeals. Section 6330(b) grants a taxpayer who so requests the right to a fair hearing before an impartial Appeals officer.

Section 6330(c) addresses the matters to be considered at the hearing:

SEC. 6330(c). Matters Considered at Hearing. --In the case of any hearing conducted under this section --

(1) Requirement of investigation. --The appeals officer shall at the hearing obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.

(2) Issues at hearing. --

(A) In general. --The person may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy, including --

(i) appropriate spousal defenses;

(ii) challenges to the appropriateness of collection actions; and

(iii) offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise.

(B) Underlying liability. --The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period 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.

Once the Appeals officer has issued a determination regarding the disputed collection action, section 6330(d) allows the taxpayer to seek judicial review in the Tax Court or a District Court, depending upon the type of tax. In considering whether taxpayers are entitled to any relief from the Commissioner's determination, this Court has established the following standard of review:

where the validity of the underlying tax liability is properly at issue, the Court will review the matter on a de novo basis. However, where the validity of the underlying tax liability is not properly at issue, the Court will review the Commissioner's administrative determination for abuse of discretion. [Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 610 (2000).]

B. Analysis

1. Appeals Hearing

The petition (as well as the previously denied motion to dismiss for lack of jurisdiction) emphasizes petitioner's claim that he was denied the collection hearing to which he was entitled and apparently seeks a remand to Appeals in order to allow a conference to be held. Relevant caselaw precedent and regulatory authority, however, indicate that the circumstances here are not such as to render remand appropriate.

Hearings conducted under section 6330 are informal proceedings, not formal adjudications. Katz v. Commmissioner [Dec. 54,081], 115 T.C. 329, 337 (2000); Davis v. Commissioner [Dec. 53,969], 115 T.C. 35, 41 (2000). There exists no right to subpoena witnesses or documents in connection with section 6330 hearings. Roberts v. Commissioner [Dec. 54,733], 118 T.C. 365, 372 (2002), affd. [2003-1 USTC ¶50,359] 329 F.3d 1224 (11th Cir. 2003); Nestor v. Commissioner [Dec. 54,655], 118 T.C. 162, 166-167 (2002); Davis v. Commissioner [Dec. 53,969], supra at 41-42. Taxpayers are entitled to be offered a face-to-face hearing at the Appeals Office nearest their residence. Where the taxpayer declines to participate in a proffered face-to-face hearing, hearings may also be conducted telephonically or by correspondence. Katz v. Commissioner [Dec. 54,081], supra at 337-338; Dorra v. Commissioner [Dec. 55,517(M)], T.C. Memo. 2004-16; sec. 301.6330-1(d)(2), Q&A-D6 and D7, Proced. & Admin. Regs. Furthermore, once a taxpayer has been given a reasonable opportunity for a hearing but has failed to avail himself or herself of that opportunity, we have approved the making of a determination to proceed with collection based on the Appeals officer's review of the case file. See, e.g., Taylor v. Commissioner [Dec. 55,528(M)], T.C. Memo. 2004-25; Leineweber v. Commissioner [Dec. 55,518(M)], T.C. Memo. 2004-17; Armstrong v. Commissioner [Dec. 54,865(M)], T.C. Memo. 2002-224; Gougler v. Commissioner [Dec. 54,824(M)], T.C. Memo. 2002-185; Mann v. Commissioner [Dec. 54,658(M)], T.C. Memo. 2002-48. Thus, a face-to-face meeting is not invariably required.

Regulations promulgated under section 6330 likewise incorporate many of the foregoing concepts, as follows:

Q-D6. How are CDP hearings conducted?

A-D6. * * * CDP hearings * * * are informal in nature and do not require the Appeals officer or employee and the taxpayer, or the taxpayer's representative, to hold a face-to-face meeting. A CDP hearing may, but is not required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer or the taxpayer's representative, or some combination thereof. * * *

Q-D7. If a taxpayer wants a face-to-face CDP hearing, where will it be held?

A-D7. The taxpayer must be offered an opportunity for a hearing at the Appeals office closest to taxpayer's residence or, in the case of a business taxpayer, the taxpayer's principal place of business. If that is not satisfactory to the taxpayer, the taxpayer will be given an opportunity for a hearing by correspondence or by telephone. If that is not satisfactory to the taxpayer, the Appeals officer or employee will review the taxpayer's request for a CDP hearing, the case file, any other written communications from the taxpayer (including written communications, if any, submitted in connection with the CDP hearing), and any notes of any oral communications with the taxpayer or the taxpayer's representative. Under such circumstances, review of those documents will constitute the CDP hearing for the purposes of section 6330(b). [Sec. 301.6330-1(d)(2), Q&A-D6 and D7, Proced. & Admin. Regs.]

This Court has cited the above regulatory provisions with approval. See, e.g., Taylor v. Commissioner, supra; Leineweber v. Commissioner, supra; Dorra v. Commissioner, supra; Gougler v. Commissioner, supra.

With respect to the instant matter, the record reflects that petitioner was initially offered a face-to-face hearing to be held on December 5, 2003 . When, 2 days before the scheduled date, petitioner informed Mr. Tracy that he could not attend the conference, Mr. Tracy offered to reschedule the in-person meeting for the week of December 15, 2003 . However, petitioner himself elected to proceed by correspondence and agreed on a December 17, 2003 , submission deadline. He then failed to provide any information or materials, although Mr. Tracy continued to wait for a call or facsimile for more than a week beyond the deadline.

In these circumstances, petitioner cannot now be permitted to complain that he was improperly deprived of a sufficient conference. He was given a reasonable opportunity for a hearing and failed to avail himself thereof. Accordingly, a determination made on the basis of the existing record, which reflected only frivolous arguments on the part of petitioner, was appropriate here. Respondent's actions were consistent with the requirements reflected in section 6330 and the attendant regulations and do not provide basis for a remand.

2. Review of Underlying Liabilities

A statutory notice of deficiency for 2000 was issued to petitioner, and communications from petitioner referencing the notice make clear that this document was received. To the extent that petitioner has argued that he should nonetheless be entitled to challenge his underlying liabilities on grounds that the notice was invalid, due to the lack of a delegation of authority from the Secretary to the individual at the Ogden Service Center who signed the notice, this contention is without merit.

The Secretary or his delegate may issue notices of deficiency. Secs. 6212(a), 7701(a)(11)(B) and (12)(A)(i). The Secretary's authority in this matter has been delegated to District Directors and Directors of Service Centers, and may in turn be redelegated to officers or employees under the supervision of such persons. Secs. 301.6212-1(a), 301.7701-9(b) and (c), Proced. & Admin. Regs.; see also Nestor v. Commissioner [Dec. 54,655], 118 T.C. at 165.

Hence, because petitioner received a valid notice of deficiency and did not timely petition for redetermination, he is precluded under section 6330(c)(2)(B) from disputing his underlying tax liabilities in this proceeding. His remaining contentions generally challenging the "existence" of any statute imposing or requiring him to pay income tax warrant no further comment. See Crain v. Commissioner [84-2 USTC ¶9721], 737 F.2d 1417, 1417 (5th Cir. 1984) ("We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.").

3. Review for Abuse of Discretion

Petitioner has also made various arguments relating to aspects of the assessment and collection procedures that we review for abuse of discretion. Action constitutes an abuse of discretion under this standard where arbitrary, capricious, or without sound basis in fact or law. Woodral v. Commissioner [Dec. 53,206], 112 T.C. 19, 23 (1999).

Federal tax assessments are formally recorded on a record of assessment in accordance with section 6203. The Commissioner is not required to use Form 23C in making an assessment. Roberts v. Commissioner [Dec. 54,733], 118 T.C. at 369-371. Furthermore, section 6330(c)(1) mandates neither that the Appeals officer rely on a particular document in satisfying the verification requirement nor that the Appeals officer actually give the taxpayer a copy of the verification upon which he or she relied. Craig v. Commissioner [Dec. 54,933], 119 T.C. 252, 262 (2002); Nestor v. Commissioner [Dec. 54,655], 118 T.C. at 166.

A Form 4340, for instance, constitutes presumptive evidence that a tax has been validly assessed pursuant to section 6203. Davis v. Commissioner [Dec. 53,969], 115 T.C. at 40 (and cases cited thereat). Consequently, absent a showing by the taxpayer of some irregularity in the assessment procedure that would raise a question about the validity of the assessments, a Form 4340 reflecting that tax liabilities were assessed and remain unpaid is sufficient to support collection action under section 6330. Id. at 40-41. We have specifically held that it is not an abuse of discretion for an Appeals officer to rely on Form 4340, Nestor v. Commissioner [Dec. 54,655], supra at 166; Davis v. Commissioner [Dec. 53,969], supra at 41, or a computer transcript of account, Schroeder v. Commissioner [Dec. 54,829(M)], T.C. Memo. 2002-190; Mann v. Commissioner [Dec. 54,658(M)], T.C. Memo. 2002-48, to comply with section 6330(c)(1).

Here, the record contains a Form 4340 for 2000, dated August 11, 2003 , indicating that assessments were made for the year and that taxes remain unpaid. Petitioner has cited no irregularities that would cast doubt on the information recorded thereon.

In addition to the specific dictates of section 6330, the Secretary, upon request, is directed to furnish to the taxpayer a copy of pertinent parts of the record of assessment setting forth the taxpayer's name, the date of assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed. Sec. 6203; sec. 301.6203-1, Proced. & Admin. Regs. A taxpayer receiving a copy of Form 4340 has been provided with all the documentation to which he or she is entitled under section 6203 and section 301.6203-1, Proced. & Admin. Regs. Roberts v. Commissioner [Dec. 54,733], supra at 370 n.7. This Court likewise has upheld collection action where taxpayers were provided with literal transcripts of account (so-called MFTRAX). See, e.g., Frank v. Commissioner [Dec. 55,096(M)], T.C. Memo. 2003-88; Swann v. Commissioner [Dec. 55,078(M)], T.C. Memo. 2003-70. The December 3, 2003 , letter to petitioner from Mr. Tracy enclosed a copy of Form 4340.

Furthermore, arguments similar to petitioner's statements concerning copies of the tax returns from which assessments were made have been summarily rejected. See, e.g., Bethea v. Commissioner [Dec. 55,305(M)], T.C. Memo. 2003-278; Fink v. Commissioner [Dec. 55,068(M)], T.C. Memo. 2003-61. The Court concludes that petitioner's complaints regarding the assessments and verification are meritless.

Petitioner has denied receiving the notice and demand for payment that section 6303(a) establishes should be given within 60 days of the making of an assessment. However, a notice of balance due constitutes a notice and demand for payment within the meaning of section 6303(a). Craig v. Commissioner [Dec. 54,933], supra at 262-263. The Form 4340 indicates that petitioner was sent notices of balance due for the 2000 tax year.

Thus, with respect to those issues enumerated in section 6330(c)(2)(A) and subject to review in collection proceedings for abuse of discretion, petitioner has not raised any spousal defenses, valid challenges to the appropriateness of the collection action, or collection alternatives. As this Court has noted in earlier cases, Rule 331(b)(4) states that a petition for review of a collection action shall contain clear and concise assignments of each and every error alleged to have been committed in the notice of determination; any issue not raised in the assignments of error shall be deemed conceded. See Lunsford v. Commissioner [Dec. 54,553], 117 T.C. 183, 185-186 (2001); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 183 (2000). For completeness, we have addressed various points advanced by petitioner during the administrative process, but the items listed in section 6330(c)(2)(A) were not pursued even during those proceedings. Accordingly, the Court concludes that respondent's determination to proceed with collection of petitioner's tax liabilities was not an abuse of discretion.

II. Section 6673 Penalty

Section 6673(a)(1) authorizes the Court to require the taxpayer to pay a penalty not in excess of $25,000 when it appears to the Court that, inter alia, proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceeding is frivolous or groundless. In Pierson v. Commissioner [Dec. 54,152], 115 T.C. at 581, we warned that taxpayers abusing the protections afforded by sections 6320 and 6330 through the bringing of dilatory or frivolous lien or levy actions will face sanctions under section 6673. We have since repeatedly disposed of cases premised on arguments akin to those raised herein summarily and with imposition of the section 6673 penalty. See, e.g., Craig v. Commissioner [Dec. 54,933], 119 T.C. at 264-265 (and cases cited thereat).

With respect to the instant matter, we are convinced that petitioner instituted this proceeding primarily for delay. Throughout the administrative and pretrial process, petitioner advanced contentions and demands previously and consistently rejected by this and other courts. He submitted lengthy communications quoting, citing, using out of context, and otherwise misapplying portions of the Internal Revenue Code, regulations, court decisions, and other authorities. Moreover, petitioner was explicitly alerted to Pierson v. Commissioner, supra, and the use of sanctions in analogous situations.

Hence, petitioner received fair warning but has persisted in frivolously disputing respondent's determination. The Court sua sponte concludes that a penalty of $1,000 should be awarded to the United States in this case. To reflect the foregoing,

An appropriate order granting respondent's motion and decision for respondent will be entered.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.

² Petitioner's wife, RuthAnne Hiland, was not involved in the collection proceedings before respondent and is not a party in this case. For simplicity, we hereafter refer only to petitioner in our discussion of relevant events.

³ A second Final Notice of Intent To Levy and Notice of Your Right to a Hearing was also issued on Feb. 27, 2003, with respect to a civil penalty under sec. 6702 for the filing of a frivolous return for the 1999 taxable year. This Court lacks jurisdiction to review any issues related to this penalty. Van Es v. Commissioner [Dec. 54,080], 115 T.C. 324, 328-329 (2000).

⁴ Petitioner may also have attempted to send a facsimile on or about Dec. 16, 2003, indicating that he would need to reschedule the Dec. 17, 2003, correspondence hearing date, but there exists no indication that Mr. Tracy received any such transmission.

⁵ The Court notes that to the extent that the petition seeks reasonable administrative and/or litigation costs pursuant to sec. 7430, any such claim is premature and will not be further addressed. See Rule 231.

[Dec. 55,798(M)] Michael E. Vierow v. Commissioner.

Dkt. No. 19406-03L , TC Memo. 2004-255, November 8, 2004 .

[Appealable, barring stipulation to the contrary, to CA-9. --CCH.]

[Code Sec. 6330]
Collection hearing: Abuse of discretion: Administrative record: Verification requirements. --

The IRS did not abuse its discretion in determining to proceed with collection actions against the taxpayer. The IRS Appeals officer satisfied the verification requirements of Code Sec. 6330(c)(1), which does not require the IRS to rely on a particular document. In addition, the Tax Court properly allowed a certified mail list to be introduced because the court is not limited to the administrative record when reviewing an IRS determination under Code Sec. 6330. Finally, the court refused to remand the case to Appeals because even if there was an IRS Appeals office closer to the taxpayer's residence, the taxpayer's arguments were limited to the Code Sec. 6330(c)(1) verification requirements, which did not require his presence.

Michael E. Vierow, pro se; Rebecca Duewer-Grenville, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

VASQUEZ, Judge: Pursuant to section 6330(d),¹ petitioner seeks review of respondent's determination to proceed with collection of his 1994, 1995, 1996, 1997, and 1998 tax liabilities.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At the time he filed the petition, petitioner resided in Crescent City , California .

In 2000, respondent and petitioner exchanged correspondence regarding petitioner's failure to file income tax returns and his obligation to pay income tax and file income tax returns.

On February 23, 2001 , respondent sent petitioner, via certified mail to the address where petitioner resided, a notice of deficiency for 1994, 1995, and 1996 and a notice of deficiency for 1997 and 1998.

On August 13, 2001 , respondent assessed petitioner's tax liabilities for 1994, 1995, 1996, 1997, and 1998. That same day, respondent sent petitioner statutory notices of balance due for 1994, 1995, 1996, 1997, and 1998.

On September 17, 2001 , respondent sent petitioner notices of balance due for 1994, 1995, 1996, 1997, and 1998.

On October 22, 2001 , respondent sent petitioner statutory notices of intent to levy for 1994, 1995, 1996, 1997, and 1998.

On September 19, 2002 , respondent sent petitioner via certified mail a Final Notice --Notice of Intent to Levy and Notice of Your Right to a Hearing (hearing notice).

On October 18, 2002 , petitioner filed a Form 12153, Request for a Collection Due Process Hearing, regarding his 1994, 1995, 1996, 1997, and 1998 tax years (hearing request). Petitioner attached the hearing notice and a 12-page letter to the hearing request. Petitioner argued that respondent failed to follow the requirements of applicable law and administrative procedure.

On February 24, 2003 , respondent's San Francisco Appeals Office sent petitioner a letter stating that it had received his hearing request and explaining the hearing process.

On May 7, 2003 , Appeals Officer James Chambers sent petitioner a letter requesting that petitioner contact him to schedule a section 6330 hearing (hearing). Appeals Officer Chambers advised petitioner that the hearing could be held in person, by telephone, or by correspondence.

On May 19, 2003 , petitioner sent Appeals Officer Chambers a letter requesting an in-person hearing closer to his home than San Francisco , California . Petitioner suggested that the hearing be held at respondent's office in Eureka, California.²

On June 16, 2003 , Appeals Officer Chambers sent petitioner a letter stating that the San Francisco Appeals Office was the closest option for an in-person hearing. Appeals Officer Chambers again offered petitioner the option of a telephone hearing or to continue his hearing by correspondence. Petitioner chose to have his hearing conducted via correspondence.

As part of the hearing, Appeals Officer Chambers reviewed the administrative file, which included the notices of deficiency and Forms 4340, Certificate of Assessments, Payments, and Other Specified Matters. Appeals Officer Chambers also reviewed a certified mail list, which was not part of the administrative file, to determine whether respondent mailed the notices of deficiency via certified mail to petitioner at his correct address.

On July 28, 2003 , petitioner sent Appeals Officer Chambers a letter in which he argued that in order to meet the verification requirement of section 6330(c)(1) respondent needed to establish that respondent properly (1) issued statutory notices of deficiency for the years in issue, (2) made the assessments for the years in issue, (3) issued notices and demand for payment, (4) issued notice of intent to levy, and (5) issued notice of petitioner's right to a hearing. Petitioner also claimed he had not received any "assessment notices" from respondent for the years in issue.

On October 8, 2003 , respondent sent petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination) for the years in issue. Appeals Officer Chambers determined that the requirements of applicable law and administrative procedure had been met and that collection could proceed.

OPINION

Pursuant to section 6330(c)(2)(A), a taxpayer may raise at the section 6330 hearing any relevant issue with regard to the Commissioner's collection activities, including spousal defenses, challenges to the appropriateness of the Commissioner's intended collection action, and alternative means of collection. Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 609 (2000); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 180 (2000). When the Commissioner issues a determination regarding a disputed collection action, section 6330(d) permits a taxpayer to seek judicial review with the Tax Court or a U.S. District Court, as is appropriate. Petitioner did not challenge the underlying tax liability. Accordingly, we review respondent's determination for an abuse of discretion. Sego v. Commissioner, supra at 610.

1. Evidentiary Issue

At trial, petitioner objected to the introduction of the certified mail list, which was not part of the administrative file. We overruled petitioner's objection. On brief, petitioner argues that in section 6330 cases the Court is subject to the provisions of the Administrative Procedure Act and limited to reviewing the administrative record, and it was an error to conduct a trial de novo.

This case was tried before our Opinion in Robinette v. Commissioner [Dec. 55,698], 123 T.C. 85 (2004). In Robinette, we held that when reviewing the Commissioner's determination pursuant to section 6330, our review is not limited by the Administrative Procedure Act, the evidence we may consider is not limited to the administrative record, and we conduct trials de novo. See also Holliday v. Commissioner [Dec. 54,678(M)], T.C. Memo. 2002-67 (Commissioner permitted to present documents, records, and testimony at trial that were not part of administrative record), affd. 57 Fed. Appx. 774 (9th Cir. 2003).

2. Procedural Issue --Location of the Hearing

Petitioner argues that he was entitled to a hearing at the Appeals Office closest to his home and the San Francisco Appeals Office was not the closest Appeals Office to his home. If a taxpayer receives a notice of lien or intent to levy and requests a hearing at the Commissioner's Appeals Office, the taxpayer must be offered an opportunity for a hearing at the Appeals Office closest to the taxpayer's residence. Parker v. Commissioner [Dec. 55,768(M)], T.C. Memo. 2004-226; see Katz v. Commissioner [Dec. 54,081], 115 T.C. 329, 335-336 (2000); sec. 301.6320-1(d)(2), Q&A-D7, Proced. & Admin. Regs.

Assuming arguendo that there was an Appeals Office closer to petitioner's home than San Francisco , California , we do not think it is necessary or productive to remand this case to Appeals. See Lunsford v. Commissioner [Dec. 54,553], 117 T.C. 183, 189 (2001); Kemper v. Commissioner [Dec. 55,214(M)], T.C. Memo. 2003-195. Petitioner's arguments --in the hearing request, during the correspondence hearing, and at trial --were limited to the verification requirement in section 6330(c)(1). Petitioner's presence was not required in order for respondent to verify whether the requirements of any applicable law or administrative procedure had been met.

3. Abuse of Discretion

As noted supra, petitioner's arguments regard the verification requirement in section 6330(c)(1). Petitioner contends that Appeals Officer Chambers did not verify that respondent (1) properly assessed the taxes for the years in issue and (2) issued petitioner notices of deficiency, notice and demand for payment, notice of intent to levy, and notice of his right to a hearing.

Section 6330(c)(1) does not require the Commissioner to rely on a particular document to satisfy the verification requirement imposed therein. E.g., Schnitzler v. Commissioner [Dec. 54,795(M)], T.C. Memo. 2002-159. We have repeatedly held that the Commissioner may rely on Forms 4340 or transcripts of account to satisfy the verification requirement of section 6330(c)(1). Lindsey v. Commissioner [Dec. 54,703(M)], T.C. Memo. 2002-87, affd. [2003-1 USTC ¶50,294] 56 Fed. Appx. 802 (9th Cir. 2003); Tolotti v. Commissioner [Dec. 54,702(M)], T.C. Memo. 2002-86, affd. [2003-2 USTC ¶50,637] 70 Fed. Appx. 971 (9th Cir. 2003). Petitioner has not alleged any irregularity in the assessment procedure that would raise a question about the validity of the assessments or the information contained in the Forms 4340. See Davis v. Commissioner [Dec. 53,969], 115 T.C. 35, 41 (2000); Mann v. Commissioner [Dec. 54,658(M)], T.C. Memo. 2002-48.

Petitioner's testimony, the notices of deficiency, the certified mail receipts, and the certified mail list establish that respondent mailed the notices of deficiency via certified mail to petitioner at his correct address. The Forms 4340 establish a proper assessment and that respondent sent petitioner notice and demand for payment and notice of intent to levy. A certified mail return receipt for the hearing notice and the fact that petitioner attached the hearing notice to his hearing request establish that petitioner received the hearing notice. Accordingly, we hold that the Appeals officer satisfied the verification requirement of section 6330(c)(1). Cf. Nicklaus v. Commissioner [Dec. 54,477], 117 T.C. 117, 120-121 (2001).

Petitioner has failed to raise a spousal defense, make a valid challenge to the appropriateness of respondent's intended collection action, or offer alternative means of collection. These issues are now deemed conceded. See Rule 331(b)(4).

In reaching all of our holdings herein, we have considered all arguments made by the parties, and to the extent not mentioned above, we conclude they are irrelevant or without merit.

To reflect the foregoing,

Decision will be entered for respondent.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.

² From the record, it is unclear whether respondent had an Appeals Office in Eureka , California .

[2004-2 USTC ¶50,404]James W. Cox d/b/a Cox Machine & Tool, Plaintiff v. United States of America , Defendant.

U.S. District Court, West. Dist. Okla. ; CIV-04-0085-F, October 12, 2004 .

[ Code Sec. 6330]

Collection actions: Notice of levy: Collection Due Process hearing: Adequate prior notice: Abuse of discretion: Impartial appeals officers. --

An IRS Appeals officer's determination that a levy on an individual's property was appropriate was remanded because the taxpayer did not receive adequate prior notice of the collection due process (CDP) hearing. The Appeals officer considered two telephone conversations with the taxpayer's representative to be a collection due process (CDP) hearing. However, at no time during the phone calls did the taxpayer's representative have any clear notice that the phone calls constituted the taxpayer's CDP hearing. The Appeals officer also abused his discretion by failing to consider the possibility of an installment agreement for the taxpayer and by failing to consider the taxpayer's interests and to review financial statements with the taxpayer to determine if there was a way to reduce expenses in order to make payment on the taxes and avoid enforced collection action. The original appeals officer was disqualified from re-hearing the matter on remand.

ORDER

FRIOT, District Judge: This action is brought by taxpayer James W. Cox, d/b/a Cox Machine & Tool, under the Internal Revenue Code, 26 U.S.C. §6330. That statute is part of the Internal Revenue Service Restructuring and Reform Act of 1998, enacted to provide certain taxpayer protections. See, Mesa Oil, Inc. v. United States [ 2001-1 USTC ¶50,130], 2000 WL 1745280, ^*2 (D. Colo. 2000) (reviewing legislative history and observing that the Act contains over sixty provisions to fortify taxpayer rights and improve customer service by the Internal Revenue Service).

In this action, the taxpayer-plaintiff invokes procedures for judicial review of IRS determinations as provided for under §6330(d) of the Act, challenging the propriety of a determination of the appeals office of the IRS. That appeals office determination is stated in a "Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330" and is referred to in this order as the Notice or the Notice of Determination. The Notice pertains to federal employment taxes which are undisputedly owed by the taxpayer. The Notice determines that a levy by the government to collect the unpaid taxes is appropriate, given the balance of interests between the government's need to efficiently collect the taxes and the taxpayer's legitimate concerns regarding intrusiveness.

The taxpayer raises two types of challenges to the propriety of this determination: the adequacy of the hearing which resulted in the Notice of Determination (referred to as the procedural issues and addressed in Part II.A. of this order); and the correctness of the matters actually determined in the Notice (referred to as the correctness issues and addressed in Part II.B. of this order).

I. Initial Findings and Conclusions

The court has jurisdiction under 26 U.S.C. §3660(d)(1)(B) [ §6330(d)(1)(B)].

The Notice of Determination allowing the levy was issued by the IRS appeals office in Oklahoma City . The taxpayer, James W. Cox d/b/a Cox Machine & Tool, has its principal place of business in Oklahoma City . Venue is proper in this court.

The taxpayer's underlying tax liability is not in dispute. Because it is not, the judicial standard by which this court reviews the correctness of the government's determination stated in the Notice is abuse of discretion. See, Mesa Oil, Inc. v. United States [ 2001-1 USTC ¶50,130], 2000 WL 1745280 at ^*2 (D. Colo. 2000) (applying abuse of discretion standard, defined as an arbitrary, capricious, whimsical, or manifestly unreasonable judgment, in a §6330(d)(1)(B) case). Review of the correctness of the appeals office's determination is limited to the administrative record (AR). (Order, docket entry no. 22.)

The procedural issues raised in this action are legal issues which are considered de novo. ¹ To some extent, review of these procedural issues depends upon the nature of the hearing conducted by the appeals office. Neither party has requested an evidentiary hearing to supplement the administrative record with any additional evidence about the nature of the hearing. The court bases its factual findings regarding the nature of that hearing on the administrative record.

The procedural background of this dispute is as follows.

The Notice of Determination was issued by the appeals office on December 30, 2003. ² (AR at 5.) The Notice was issued following the taxpayer's request for a hearing by the appeals office, under 26 U.S.C. §6330(a)(3)(B). The parties refer to the hearing before the appeals office as a collection due process hearing, and the "In Re" subject line of the Notice refers to the hearing as a collection due process hearing. (AR at 5.) As the government appears to be comfortable with that designation, this order also adopts it, at times, to refer to the hearing in question.

The issue determined by the Notice was the propriety of a proposed IRS levy, intended to collect $28,017.21 in unpaid federal employment taxes which remain due from the taxpayer under Form 941 for the four quarters of 2002. (AR at 77-78.)

That determination is stated in the Notice as follows:

Based on the administrative record, as it currently exists, it is decided that a levy by the Government is appropriate as it balances the Government's need to efficiently collect these tax underpayments with concerns of intrusiveness.

(AR at 5.)

The Notice also references an "attached statement" which the Notice states "shows, in detail, the matters we considered at your Appeals hearing and our conclusions." Attachments to the Notice appear to include ³ the Case Activity Records of the appeals officer who conducted the collection due process hearing. ⁴ (AR at 9-10.) Those records are the appeals officer's work notes, including summaries of telephone conversations in which he participated. The notes are chronologically sequenced and appear to have been written by the appeals officer as he familiarized himself with the dispute, conducted the taxpayer's §6630 [ §6330] collection due process hearing, and informed the taxpayer of the IRS's determination after that hearing.

Telephone conversations described in the appeal officer's Case Activity Records as occurring on December 15, 2003 and December 18 constitute what the government proposes was the taxpayer's collection due process hearing. The Case Activity Record for the December 15 call indicates that this conversation lasted ".75" of an hour. The same records indicate that during this phone conversation the appeals officer was told by the taxpayer's representative that the representative would check on the taxpayer's ability to pay current estimated taxes. The records indicate that on December 18, 2003, there was another telephone call between the taxpayer's representative and the appeals officer, during which the representative informed the IRS that the taxpayer could not make estimated tax payments. The December 18 conversation was essentially a continuation of the telephone call which began on December 15, 2003.

II. Discussion of the Issues Presented with Additional Findings and Conclusions

A. Procedural Issues: Challenges to the Sufficiency of the Hearing

The taxpayer argues that no hearing within the meaning of §6630 [ §6330] was ever held because the telephone conversations in question were procedurally inadequate to constitute such a hearing. Specifically, the taxpayer argues that neither he nor his representative received any prior notice that what the taxpayer's brief calls the "impromptu" phone conversation of December 15, 2003 was intended to constitute his collection due process hearing. Without such advance notice, the taxpayer states that he had no opportunity to prepare for the hearing so that the hearing did not provide a meaningful opportunity for him to present his position regarding the appropriateness of the levy. See, Mesa , id. at ^*6 (legislative history of the 1998 Act indicates Congress intended the taxpayer to have a meaningful hearing followed by judicial review). The second procedural deficiency which the taxpayer identifies is his contention that the hearing was not conducted by an impartial officer as required by §6330(b)(3). ⁵

1. Advance Notice

The government does not contest the taxpayers' position that his representative had no prior notice of the nature of the telephone calls in question. Rather, the IRS responds to the taxpayer's notice argument by observing, correctly, that during the December 15 call the taxpayer's representative was given an opportunity to provide additional information to the appeals officer. The IRS also points out that there is no indication in the record that the taxpayer's representative objected on December 15 to the hearing being held at that time, or objected at that time for lack of notice or on the basis of inadequacy of time to prepare. ⁶

The court finds no indication in the record that the taxpayer or his representative had any prior notice regarding the date or time of the collection due process hearing. The court also finds no indication that even during the phone call of December 15 the taxpayer's representative had any clear notice that the call constituted the taxpayer's collection due process hearing. ⁷

Hearings at the appeals level of the IRS have historically been conducted in an informal setting. Mesa at ^*6, citing 26 C.F.R. §601.106(c) (entitled the "Nature of proceedings before Appeals [office of the IRS])." Testimony in such hearings is not under oath, a stenographer is not present, and there is no right to subpoena witnesses. Id. Congress did not indicate that it varied this standard with the passage of the Act, and no new IRS regulations purport to change this tradition of informality. Id. Thus, it is against this presumptively valid tradition of informality that the court measures the taxpayer's arguments regarding lack of notice. To do so, the court considers IRS policies and regulations, provisions contained in the Act, and general notions of due process.

The IRS regulation that Mesa cites as authority for the accepted informality in proceedings before the appeals office provides that "taxpayers may be represent themselves or may designate a qualified representative to act for them." 26 C.F.R. §601.106(c). This provision presumes at least some advance notice of a hearing so that a taxpayer may secure representation if he or she chooses to do so.

Some of the provisions in the Act itself also suggest that Congress presumed a taxpayer would have prior notice of the time of his or her collection due process hearing. Section 6330(c) provides that the collection due process hearing must address any relevant issues raised by the taxpayer. Without adequate advance notice of when the hearing will take place, the taxpayer can hardly be expected to raise or formulate the relevant issues in any meaningful manner. Looking at the entirety of the Act, §6330(a)'s requirement that a taxpayer must be given notice before a levy can occur, and the statute's general emphasis on the "Time and method for [such] notice," §6330(a)(2), and its requirements regarding "Information [to be] included with [such] notice," §6330(a)(3), clearly underscore the importance of notice to the taxpayer as one of the protections put in place by the Act.

Finally, although it is true that the Act does not import all federal due process protections into its requirements, it is also true that the opportunity to be heard at a meaningful time and in a meaningful manner is a bedrock principle of federal due process. See, Armstrong v. E. Manzo, 380 U.S. 545, 552 (1965) (a fundamental requirement of due process is the opportunity to be heard, granted at a meaningful time and in a meaningful manner). Inadequacy of notice of the hearing required by §6330 inevitably impairs the protections which are explicitly provided for in that section.

The court concludes that a taxpayer who invokes his right to a hearing under §6330 is entitled to at least some minimal notice of the hearing. As the administrative record in this case does not show that any such notice was given before the telephone calls of December 15 or 18, and does not show that there was any agreement by the taxpayer to waive prior notice, the court concludes that no adequate collection due process hearing was provided to the taxpayer. As a result, this case must be remanded to the IRS for the purpose of holding a §6630 [ §6330] due process hearing with adequate prior notice to the taxpayer.

2. Impartial Officer

Plaintiff's second procedural challenge to the collection due process hearing is that the IRS appeals officer who heard this case was not an impartial officer as required by §6630(b)(3) [ §6330(b)(3).] This subsection of the statute is entitled "Impartial officer" and provides that the hearing provided for in §6630 [ §6330] "shall be conducted by an officer who has had no prior involvement with respect to the unpaid tax." ⁸ Having found that remand for a new hearing is necessary on other grounds, the court need not determine whether the appeals officer who originally heard this matter was, at that time, impartial within the meaning of this statute. The court finds that, at least in the circumstances presented here, the statute's requirement that the presiding officer must have had no prior involvement with the unpaid tax disqualifies the original appeals officer from re-hearing the matter. Thus, it is the order of the court that, on remand, the collection due process hearing must be conducted by an appeals officer who has had no prior involvement with any aspect of the tax liability, and the related collection matters, which are involved in this case.

B. Correctness Issues: the IRS's Determination that a Levy Is Appropriate

The taxpayer makes a number of arguments intended to show that the IRS abused its discretion when it determined that a levy was an appropriate collection action.

First, the taxpayer argues that the appeals officer failed to adequately consider his true financial circumstances. The taxpayer asserts that the appeals officer did not investigate whether estimated taxes for the then-current year were actually even required before determining that the taxpayer could not meet his current financial obligations based on the taxpayer's inability to pay estimated taxes. (AR at 9.) ⁹ The taxpayer also argues that many of his financial problems were created by an order from District Court of Oklahoma County, Oklahoma which required him to pay his ex-wife $2,000 per month, but that the IRS failed to consider the fact that this financial obligation was not permanent and that the taxpayer's circumstances would improve when the state court order was no longer in place.

Second, the taxpayer argues that because of the IRS's inadequate investigation of the estimated taxes issue, and because of its reliance on its incorrect conclusion that the taxpayer had "failed to make any [emphasis in original] payments under [a prior installment] agreement" with the IRS (AR at 19), that the IRS improperly found the taxpayer ineligible to be considered for an installment agreement, ¹⁰ which was the less intrusive alternative means of collecting the tax which the plaintiff proposed. The IRS admits that the statement in the Summary and Recommendation which supports the Notice of Determination and states that the taxpayer "failed to make any payments" under the installment agreement, was incorrect in that regard. United States ' Response, at 11, n. 62. The taxpayer contends that he was actually making $500 monthly payments on the earlier installment plan until the IRS terminated the installment agreement for other reasons. Accordingly, the taxpayer argues that the emphasis which it is so apparent from the Summary and Recommendation that the appeals officer placed on the taxpayer's purported earlier default was misplaced.

Third, and somewhat in summary of these arguments, the taxpayer asserts that given the IRS's incorrect analysis of his financial circumstances, given the IRS's improper reliance on the false premise that the taxpayer had failed to make any installment payments under an earlier agreement, and given the taxpayer's position that a levy would put the taxpayer out of business, it follows that the IRS's decision finding the levy appropriate was a decision which failed to balance the need for efficient collection of the tax with the legitimate concerns of the taxpayer that any collection action be no more intrusive than necessary. Thus, the taxpayer urges that the IRS's decision was in direct violation of §6330(c)(3)(C) and constituted an abuse of discretion.

This order only addresses one aspect of these arguments, specifically, the question of whether the IRS balanced the government's and the taxpayer's competing interests. Having reviewed the Notice, the Case Activity Records of the appeals officer, the Summary and Recommendation, and other documents contained in the administrative record, the court finds that the IRS excluded the possibility of an installment agreement for this taxpayer based on its conclusion that the taxpayer could not meet his financial obligations. In support of its view that this exclusion is required when a taxpayer cannot meet his or her financial obligations, the IRS cited Internal Revenue Manual, section 5.14.7.2(4)(A) (Summary and Recommendation, ¶2, AR at 19) for the rule that a taxpayer who cannot meet his financial obligations is not eligible to be considered for an installment agreement. This is not, however, what IRM 5.14.7.2 (4) provides. ¹¹ That provision states:

(4) When an inability to pay delinquent and accrued taxes is indicated, the following considerations are necessary:

(A) if the taxpayer cannot pay operating expenses and current taxes, then deferring action on delinquent and accrued taxes may serve no useful purpose. Appropriate collection action such as levy, seizure, or a trust fund penalty, should be considered, to protect the government's interest. The taxpayer's interests must also be considered, and the financial statement should be reviewed thoroughly with the taxpayer to determine if there is a way to reduce expenses in order to make payment on the taxes and avoid enforced collection action.

Far from automatically excluding a taxpayer with an on-going business from the balancing process otherwise required by the Act before a levy may be pursued, this provision states that if a taxpayer cannot meet current tax liabilities, then deferring collection action "may" serve no useful purpose. The provision also states that certain actions such as a levy "should be considered," not that they are required. It also provides that despite a taxpayer's inability to meet obligations, "the taxpayer's interests must also be considered" and that the financial statement of the taxpayer should be reviewed thoroughly with the taxpayer "to determine if there is a way to reduce expenses in order to make payment on the taxes and avoid enforced collection action." (All emphasis added.) Thus, the provision of the Internal Revenue Manual relied upon by the IRS for the rule that the taxpayer was not eligible for consideration of an installment agreement actually indicates that even where the IRS determines that a taxpayer cannot meet his or her tax obligations, the balancing of interests required by the statute must nevertheless continue and less intrusive collection methods must be considered. The cited provision in the manual clearly does not preclude consideration of less intrusive collection actions such as an installment agreement.

The IRS's documents explain that its determination was based on the (now seen to be incorrect) understanding that the taxpayer was not eligible for an installment agreement. Consideration of an installment agreement was consequently precluded. The balancing expressly required by §6630(c)(3)(C) [ §6330(c)(3)(C)] --an analytical requirement which is clearly one of the most prominent remedial features of the 1998 legislation --did not occur.

For these reasons, the court concludes that the Final Determination constituted an abuse of discretion. Remand is therefore necessary to correct not only the procedural inadequacies of the collection due process hearing discussed in Part I.A. of this order, but also because the IRS's substantive determination constituted an abuse of discretion. ¹²

III. Conclusion

Having carefully considered the parties' submissions, the administrative record, and the relevant arguments and authorities, the court determines as follows.

The relief requested in Plaintiff's Brief in Chief is hereby GRANTED. The Final Determination of the appeals office of the IRS in this matter is VACATED and the Notice of Determination is REMANDED to the IRS for a new collection due process hearing.

The hearing on remand will be conducted, with adequate notice, by an appeals officer with no prior involvement in this case. The court mandates no particular method of recording the hearing or documenting the ensuing evaluative process, but the IRS should be mindful that any failure to create a complete and trustworthy record that will facilitate the judicial review provided for by §6330(d)(1) may beget another remand. ¹³ Judge Babcock's comments in Mesa at ^* 7 should provide the IRS with valuable guidance. At the hearing on remand, the appeals officer shall consider all matters cognizable under §6330(c), including the balancing mandated by §6330(c)(3)(C).

Nothing in this order constitutes a finding or suggestion as to the merits of the matter or as to the outcome of the proceedings on remand.

The Notice of Determination is hereby REMANDED to the appeals office of the Internal Revenue Service for proceedings consistent with this order.

¹ The parties appear to presume that all issues are reviewed for abuse of discretion. The court's conclusion that the procedural issues are considered de novo therefore requires some explanation. Although never explicitly stating as much, Mesa [ 2001-1 USTC ¶50,130], 2000 WL 1745280, cited in the text, implicitly recognizes that a different standard of review applies to the procedural issues than applies to correctness issues. Presented with a mix of both types of issues, Mesa quotes the legislative history of the Act for the proposition that a taxpayer may challenge "the determination" of the Appeals Office for abuse of discretion. Mesa , at ^*2. Mesa only refers to the abuse of discretion standard in its discussion of the IRS's inadequate balancing. Id. at ^*3. See also, Custer County Action Ass'n v. Garvey, 256 F.3d 1024, 1029-30 (10 ^th Cir. 2001) (while Federal Aviation Agency's decision is reviewed for abuse of discretion, procedural due process claims regarding the agency's administrative procedures are considered de novo). Moreover, as a practical matter, de novo is the only type of review available when issues concerning the sufficiency of the nature of the §6630 hearing are raised for the first time.

² On December 30, 2003 the Appeals Office issued its first Notice of Determination. (AR at 233.) That Notice found that "The taxpayer has not fully paid this tax liability and none of the four conditions for withdrawing a lien under I.R.C. §6323(j) are present in this case." (AR at 234.) However, I.R.C. §6323(j) and the conditions specified in that statute do not appear to have ever been in issue, so this first Notice was erroneous. On January 7, 2004, the Appeals Office issued a corrected Notice of Determination. (AR at 5.) It is this corrected notice which is the subject of this action. (The first Notice was signed by "Leland Neubauer, Appeals Team Manager." The corrected Notice has a space for Mr. Neubauer's signature but is not actually signed, at least not as it appears in the AR at 5.) The summary materials relied on by both parties as the materials which explain the Appeals Office's determination in the corrected Notice appear to be attachments to the first Notice but may not have been actually attached to the corrected Notice. The Summary and Recommendation appear in the AR at 18-19.

³ The administrative record is not indexed or tabbed by document so it is not always possible to know with certainty which record documents were originally attached as exhibits to other record documents.

⁴ The Case Activity Report is replete with acronyms. Neither party has identified any definitions of these acronyms in the record (or in the briefs for that matter) and the court has simply done the best that it can to decipher these abbreviations. "VMS" is presumed to mean voice mail message; "TC" is presumed to mean a telephone call either initiated or received by the Appeals Officer; "POA" is presumed to mean the taxpayer's power of attorney, or, in this case, the taxpayer's representative; "TP" is presumed to mean the taxpayer; "ES" is presumed to mean estimated taxes; "RO" is presumed to mean the IRS Revenue Officer; "IRM" is presumed to mean the Internal Revenue Service Manual; "IA" is presumed to mean installment agreement; and the "NFTL" is presumed to mean the Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing" based upon which the taxpayer requested a collection due process hearing before the appeals office.

⁵ Before addressing either of these issues, one other procedural matter deserves comment. The taxpayer has not objected to the sufficiency of the hearing on the ground that the appeals officer's notes contained in the Case Activity Record do not provide an adequate record of what transpired during the conversations of December 15 or 18. As this argument has not been made, the court does not address it here except to state the obvious: a hearing officer's personal notes regarding the purported content of conversations between the hearing officer and the parties appearing before him, do not constitute a complete or objective record of what transpired during those conversations; when such notes constitute the only available record, as they do here, any reviewing court would question whether meaningful judicial review is even possible. See, Mesa [ 2001-1 USTC ¶50,130], 2000 WL 1745280, ^*5, ^*7 (an adequate record of evidence or arguments presented at a §6330 hearing "may be made either through audio tape recording, video tape recording, or stenographer; along with all paper documents presented by the parties"). In this action, given the lack of any argument to the contrary by the taxpayer, and given that neither party has objected to review of the record as it stands, the court presumes, and therefore finds, that the Case Activity Records accurately reflect what was said during the telephone conversations which the records purport to describe.

⁶ If the taxpayer's representative did not know the nature of the December 15 phone call even as that phone call was proceeding, this would certainly explain and excuse any failure to object. The result reached in this order, however, does not depend upon a finding that the taxpayer's representative did not, in fact, know that the IRS intended the phone calls to constitute the hearing even as those calls progressed.

⁷ The Case Activity Records indicate that a voice message from the taxpayer's representative was received by the appeals officer on December 15, 2003; that the appeals officer determined that he would "hold [off on] mailing corr[espondence] to POA until after conf.," that he reviewed financial information prior to the conference, that later on December 15 he received another voice mail message from the taxpayer's representative, and that "TC POA and held conf.," presumably meaning that he then made a telephone call to the taxpayer's representative and held the collection due process hearing. The entry for December 18 indicates that the appeals officer received a voice mail message from the taxpayer's representative, and that there was then a "TC POA," presumably meaning a telephone call between the appeals officer and the taxpayer's representative. The Case Activity Record entries for these dates never refer to the telephone calls as a "hearing."

⁸ The requirement of an impartial officer may be waived, 26 U.S.C. §6330(b)(3), but there is no contention that the taxpayer did so.

⁹ Case Activity Records for December 15, 2003, indicate: "TA has not made any ES pmts for the current year and that IBIAs IRM rqmts are that the business reflect the ability to pay current taxes, current operating expenses, and the back taxes. TP will have to bring ES current prior to consideration of IA." Case Activity Records for December 18, 2003, indicate: "w/o the Es pmt TP is not open to IA."

¹⁰ The appeals officer's Summary and Recommendation states, on p. 2 (AR at 19), that "IRM 5.14.7.2.(4)(1) suggest[s] that In-business taxpayers should he able to reflect the ability to pay current operating expenses, current taxes, as well as the ability to pay on the back taxes prior to granting an installment agreement." It further states that "The business does not reflect the ability to pay current taxes, operating expenses, and repay the delinquent taxes." The Summary and Recommendation then goes on to note that the taxpayer had "previously been granted an installment agreement" and that "The Service terminated the agreement September 11, 2002, after the taxpayer failed to make any payments under the agreement." The Summary and Recommendation concludes that "The taxpayer does not currently meet the requirements for granting an installment agreement." Under the heading "Balancing of need for efficient collection with taxpayer concern that the collection action be no more intrusive than necessary," the Summary and Recommendation states: "The taxpayer does not meet the conditions for granting an in-business installment agreement. The taxpayer is not eligible for any other collection alternatives. Accordingly, it is determined that a less intrusive alternative to the levy does not currently exist."

¹¹ The court does not treat the Internal Revenue Manual as having the force of law. United States v. Scott, 37 F.3d 1564, 1582 (10 ^th Cir. 1994), cert. denied sub nom. Skinner v. United States, 513 U.S. 1100, and sub nom. Caldwell v. United States, 514 U.S. 1008 (1995); United States v. MacKay [ 79-2 USTC ¶9679], 608 F.2d 830, 834 (10 ^th Cir. 1979) (manual is merely "an internal IRS operating procedure"); cf., Schweiker v. Hansen, 450 U.S. 785, 789 (1981) (internal Social Security Claims Manual "is not a regulation. It has no legal force."). The relevant Manual provision is cited and quoted here only because, as a factual and analytical matter, it is clear that the appeals officer's palpably incorrect reading of that provision derailed the analytical process required by the statute (as is discussed in this order). That erroneous reading thus goes far to explain the court's conclusion that the Final Determination constituted an abuse of discretion.

¹² This order makes no determination as to the merits of the taxpayer's argument that his financial circumstances were misunderstood by the original appeals officer. However, it will obviously be necessary on remand to carefully examine the taxpayer's arguments concerning his financial circumstances and the actual status of the his payments under the original installment agreement.

¹³ One of the indispensable prerequisites of an adequate record is a record that reliably reflects "that the [appeals officer] actually engaged in the required analysis prior to making her determination." Mesa , at ^*5.

[Dec. 55,833(M)]  Lionel D. Kolker v. Commissioner.

Dkt. No. 5724-04L , TC Memo. 2004-288, December 29, 2004 .

[Appealable, barring stipulation to the contrary, to CA-9. --CCH.]

[Code Sec. 6330]
Collection Due Process determination: Abuse of discretion. --

A Collection Due Process (CDP) determination upholding a levy imposed against an individual was not an abuse of discretion. The IRS Appeals officer justifiably terminated the CDP hearing because the taxpayer raised frivolous arguments and not because she was biased. .

[Code Sec. 6673]
Penalties, civil: Frivolous arguments. --

Because an individual repeatedly wasted the federal tax system's resources with frivolous arguments, the Tax Court imposed a penalty under Code Sec. 6673. The taxpayer had been warned that he risked the imposition of a penalty for making the arguments and he had previously been held liable for the penalty when he raised similar frivolous arguments in prior proceedings. Therefore, the maximum $25,000 penalty was imposed.

Lionel D. Kolker, pro se; Karen Nicholson Sommers, for respondent.

MEMORANDUM OPINION

MARVEL, Judge: This matter is before the Court on respondent's motion for summary judgment, filed pursuant to Rule 121,¹ and to impose a penalty under section 6673.

Summary judgment is a procedure designed to expedite litigation and avoid unnecessary, time-consuming, and expensive trials. Fla. Peach Corp. v. Commissioner [Dec. 44,689], 90 T.C. 678, 681 (1988). Summary judgment may be granted with respect to all or any part of the legal issues presented "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(a) and (b); see Sundstrand Corp. v. Commissioner [Dec. 48,191], 98 T.C. 518, 520 (1992), affd. [94-1 USTC ¶50,092] 17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner [Dec. 44,714], 90 T.C. 753, 754 (1988). The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be drawn in a manner most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner [Dec. 42,486], 85 T.C. 812, 821 (1985).

Background

This is an appeal from respondent's determination upholding the proposed use of a levy to collect petitioner's unpaid Federal income tax liability for 1993 (the 1993 liability). When the petition in this case was filed, petitioner resided in San Diego , California .

Petitioner and Cheryl Kolker filed a joint Federal income tax return for 1993 showing a balance due. Respondent assessed the income tax liability shown on the return as well as interest and penalties/additions to tax.

Respondent sent petitioner a notice and demand for payment, but petitioner did not pay the 1993 liability. Consequently, respondent mailed to petitioner a Final Notice --Notice of Intent to Levy and Notice of Your Right to a Hearing, dated September 11, 2000 , that, among other things, informed petitioner that respondent intended to levy to collect the 1993 liability and that petitioner could request a hearing with respondent's Appeals Office. On September 19, 2000 , petitioner submitted a Form 12153, Request for a Collection Due Process Hearing (hearing request), but respondent has no record of having received it.

On May 21, 2003 , petitioner sent respondent a copy of the hearing request. Because respondent had no record of having received the original request, respondent treated the May 21, 2003 , correspondence as an equivalent hearing request.

Petitioner's equivalent hearing request was assigned to Settlement Officer Cynthia Chadwell (Ms. Chadwell). Ms. Chadwell had had no prior involvement with respect to petitioner's 1993 liability. By letter dated November 13, 2003 , Ms. Chadwell scheduled a telephone hearing for December 4, 2003 , and advised petitioner, among other things, as follows:

(1) The Appeals Office would not offer a face-to-face hearing if the only issues that petitioner wanted to address were frivolous or groundless;

(2) the hearing request was not received within the 30-day period provided in section 6330(a)(3)(B), but petitioner could raise the issue of the timeliness of his request at the hearing;

(3) petitioner should complete and submit Form 433-A, Collection Information Statement for Individuals, with the documents required by the form; and

(4) petitioner should provide proof that he filed his 2001 and 2002 Federal income tax returns.

Petitioner responded to the November 13, 2003 , letter by letter dated November 20, 2003 . In that letter, petitioner requested a face-to-face hearing and stated that he had post office receipts to prove that he had timely requested a hearing under section 6330. By letter dated January 6, 2004 , Ms. Chadwell scheduled a face-to-face hearing for January 21, 2004 . The hearing date was subsequently changed to February 23, 2004 , at petitioner's request.

Petitioner's hearing under section 6330 was held on February 23, 2004 . The hearing was audiotaped and transcribed. At the hearing, Ms. Chadwell reminded petitioner of her prior requests for information, including a completed Form 433-A, and of her admonition that she would not consider frivolous or groundless arguments. Petitioner stated that he had not completed Form 433-A but that he was interested in resolving the collection issue. Although petitioner produced documentation to show that he had timely requested a hearing pursuant to section 6330, petitioner raised no other relevant issue and presented no evidence to prove either that he did not owe the 1993 liability, that the 1993 liability had been paid, or that a collection alternative was appropriate. Instead, petitioner and a "friend" whom he had brought to the hearing pressed Ms. Chadwell to discuss whether petitioner had an "obligation" to file a return and pay tax. When petitioner and his friend refused to discuss collection alternatives, Ms. Chadwell terminated the hearing.

Respondent subsequently issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330, dated March 3, 2004 , which sustained the proposed levy action. In the notice of determination, respondent concluded that petitioner had not raised any valid issue regarding the merits of the underlying tax liability or the appropriateness of the proposed levy action and determined that all of the requirements imposed by section 6330 for a valid levy had been satisfied. In the notice of determination, respondent concluded that the proposed levy balanced the need for the efficient collection of tax with the concern that the collection action be no more intrusive than necessary, warned petitioner that this Court was authorized to impose "monetary sanctions of up to $25,000 for instituting or maintaining an action before it primarily for delay or for taking a position that is frivolous or groundless", and stated that petitioner's positions in this case had no merit and were groundless.

Petitioner submitted a timely petition appealing respondent's determination, which we filed on April 1, 2004 . In an addendum attached to the petition, petitioner asserted, inter alia, that the Internal Revenue Service (IRS) had not established that he was a taxpayer, that the hearing was a sham, that Ms. Chadwell was biased, and that the law did not create the alleged obligation.

On October 6, 2004 , we received and filed respondent's summary judgment motion. By order dated October 6, 2004 , we ordered petitioner to file a response to respondent's motion on or before October 27, 2004 . Petitioner did not do so.² On November 3, 2004 , we received and filed petitioner's motion to strike respondent's motion for summary judgment, which we denied on November 4, 2004 .

Discussion

A. 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. If the person makes a request for a hearing, a hearing shall be held before an impartial officer or employee of the IRS Office of Appeals. Sec. 6330(b)(1), (3). At the hearing, a taxpayer may raise any relevant issue, including appropriate spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. Sec. 6330(c)(2)(A). Additionally, at the hearing, a taxpayer may contest the existence or amount of the underlying tax liability if the taxpayer did not receive a notice of deficiency for the tax in question or did not otherwise have an earlier opportunity to dispute the tax liability. Sec. 6330(c)(2)(B); see also Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 609 (2000).

Following a hearing, the Appeals Office must make a determination whether the proposed levy action may proceed. In so doing, the Appeals Office is required to take into consideration the verification presented by the Secretary, the issues raised by the taxpayer, and whether the proposed levy action appropriately balances the need for efficient collection of taxes with a taxpayer's concerns regarding the intrusiveness of the proposed levy action. Sec. 6330(c)(3). The determination of the Appeals officer under section 6330, except a determination regarding the underlying tax liability that is made pursuant to section 6330(c)(2)(B), is reviewed for abuse of discretion. Sego v. Commissioner, supra at 610. Where the underlying tax liability is properly at issue, the Court reviews any determination regarding the underlying tax liability de novo. Id.

A hearing officer may rely on a computer transcript or Form 4340, Certificate of Assessments, Payments and Other Specified Matters, to verify that a valid assessment was made and that a notice and demand for payment was sent to the taxpayer in accordance with section 6303. Nestor v. Commissioner [Dec. 54,655], 118 T.C. 162, 166 (2002). Absent a showing of irregularity, a transcript that shows such information is sufficient to establish that the procedural requirements of section 6330 have been met. Id. at 166-167.

In this case, the undisputed facts set forth in respondent's motion, declarations in support of the motion, and attached exhibits establish that respondent has satisfied the requirements of section 6330. Ms. Chadwell, who had had no prior involvement with respect to the unpaid tax liabilities before the section 6330 hearing as required by section 6330(b)(3), verified that proper assessments were made, as reflected on computer transcripts attached to the motion for summary judgment and in the notice of determination, and that the requisite notices had been sent to petitioner. Ms. Chadwell also considered petitioner's argument and rejected it as not relevant and frivolous. Following the hearing, Ms. Chadwell made a determination upholding the proposed levy action, after concluding that the proposed levy action appropriately balanced the need for efficient collection of taxes with petitioner's concerns regarding the intrusiveness of the proposed levy action.

In an addendum to his petition, petitioner listed the following reasons why the proposed levy should not be sustained:

(1) Respondent issued "arbitrary legal opinions" in that:

(a) Respondent determined that petitioner had not made a timely hearing request under section 6330;

(b) despite repeated requests, respondent failed to produce any facts to support his opinion that petitioner was a taxpayer;

(c) petitioner was not permitted to inquire at the hearing what in the Constitution created his alleged obligation to file a return and pay tax;

(d) there is no evidence that the law created any obligation to file a return and pay tax;

(2) respondent asserted the same arguments in motions to dismiss filed in other cases;

(3) respondent delayed 3 years in providing the "sham" hearing in this case; and

(4) without facts, an assessment is arbitrary; an arbitrary assessment presents a justiciable controversy that the Court must decide.

With the exception of the argument regarding the timeliness of his hearing request,³ all of petitioner's arguments are frivolous and groundless. See United States v. Studley [86-1 USTC ¶9390], 783 F.2d 934, 937 (9th Cir. 1986) (taxpayer's argument that he is not a taxpayer is frivolous); Tolotti v. Commissioner [Dec. 54,702(M)], T.C. Memo. 2002-86 (taxpayer's argument that Commissioner must identify constitutional and statutory provisions that make taxpayer liable for Federal income tax is frivolous), affd. [2003-2 USTC ¶50,637] 70 Fed. Appx. 971 (9th Cir. 2003). It is well established that we need not refute frivolous arguments with copious citation and extended discussion. Williams v. Commissioner [Dec. 53,773], 114 T.C. 136, 138-139 (2000) (citing Crain v. Commissioner [84-2 USTC ¶9721], 737 F.2d 1417, 1417 (5th Cir. 1984)).

Petitioner complains about the alleged bias of Ms. Chadwell and describes the hearing as a sham because Ms. Chadwell would not engage in a discussion of the legal basis for his "obligation" to file a tax return and pay tax. The transcript of the hearing amply demonstrates that Ms. Chadwell provided a meaningful opportunity to present relevant, nonfrivolous arguments why the levy should not be allowed to proceed, but petitioner repeatedly refused to provide any such arguments and the information necessary to support them. For example, despite several requests for information regarding petitioner's financial condition made both before and during the hearing, petitioner failed to provide it. When petitioner did not cooperate, Ms. Chadwell justifiably terminated the hearing. Her decision to terminate the hearing was not evidence of bias; rather, it demonstrated that there is a limit to the tax system's tolerance for unproductive and frivolous exchanges regarding a taxpayer's obligations to file returns and pay tax.

On this record, we conclude that there is no genuine issue of material fact requiring a trial in this case, and we hold that respondent is entitled to the entry of a decision sustaining the proposed levy as a matter of law.

B. Section 6673 Penalty

Section 6673(a)(1) authorizes this Court to require a taxpayer to pay to the United States a penalty, not to exceed $25,000, if it appears that the taxpayer has instituted or maintained a proceeding primarily for delay, or that the taxpayer's position is frivolous or groundless. Section 6673(a)(1) applies to proceedings under section 6330. Pierson v. Commissioner [Dec. 54,152], 115 T.C. 576, 581 (2000). In proceedings under section 6330, we have imposed the penalty on taxpayers who have raised frivolous and groundless arguments with respect to the legality of the Federal tax laws. See, e.g., Roberts v. Commissioner [Dec. 54,733], 118 T.C. 365, 372-373 (2002), affd. [2003-1 USTC ¶50,359] 329 F.3d 1224 (11th Cir. 2003); Eiselstein v. Commissioner [Dec. 55,025(M)], T.C. Memo. 2003-22; Yacksyzn v. Commissioner [Dec. 54,716(M)], T.C. Memo. 2002-99.

This is not the first time that petitioner has wasted the time of the Federal courts and the Commissioner with arguments like the ones made in this case. Petitioner attached to his petition a copy of a motion to dismiss for failure to state a claim upon which relief can be granted, which was filed by respondent in Kolker v. Commissioner, docket No. 567-03, another case commenced by petitioner in this Court. In docket No. 567-03, petitioner made arguments identical in most respects to those raised in this case. We granted respondent's motion to dismiss and imposed a penalty of $10,000 under section 6673 because of petitioner's frivolous arguments. The U.S. Court of Appeals for the Ninth Circuit affirmed our order in an unpublished opinion and imposed an additional penalty of $1,500 under section 6673. Kolker v. Commissioner, No. 03-74029 (9th Cir. July 26, 2004 ).

Petitioner has had plenty of warning that he risked incurring a monetary penalty by making these arguments. Petitioner has repeatedly wasted the Federal tax system's resources, and his conduct deserves an appropriate and severe sanction. We shall require petitioner to pay to the United States a penalty under section 6673(a)(1) of $25,000.

An appropriate order and decision will be entered.

¹ All Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code.

² Petitioner submitted a response to respondent's motion on Dec. 1, 2004, but it was returned to petitioner as untimely. On Dec. 17, 2004, petitioner submitted a document entitled "Petitioner's motion accept response as timely", which we filed as of that date and denied on Dec. 23, 2004. The response that was attached repeated the arguments contained in the petition and other submissions.

³ After reviewing petitioner's mailing receipts at the hearing, Settlement Officer Chadwell conceded at the hearing that petitioner had filed a timely hearing request under sec. 6330 and that petitioner is entitled to a hearing under sec. 6330 and to appeal the determination that resulted therefrom.

[2005-1 USTC ¶50,266]Reid & Reid, Inc. v. United States of America .

U.S. District Court, Dist. Md. ; Civ. CCB-03-2697, January 4, 2005 .

[ Code Sec. 6330]

Collection Due Process: Abuse of discretion: Location of hearing. --

The IRS did not abuse its discretion by denying the taxpayer's request for an alternative collection agreement because, according to the Internal Revenue Manual (IRM), installment agreements cannot be approved for taxpayers that are not complying with current deposit and filing requirements. Further, while the IRM instructed that the hearing be held at the taxpayer's place of business, in this case, failure to do so did not amount to an abuse of discretion by the settlement officer.

ORDER

BLAKE, District Judge: For the reasons stated in the accompanying Memorandum, it is hereby Ordered that:

1. the defendant's Motion for Summary Judgment (docket no. 12) is GRANTED;

2. judgment is entered in favor of the defendant, except as to those aspects of the complaint where the court lacks subject matter jurisdiction, which are dismissed; and

3. the clerk shall CLOSE this case.

MEMORANDUM

Reid & Reid, Inc. ("Reid"), a Maryland company, filed its complaint to appeal and contest the Notice of Determination Under Section 6330 of the Internal Revenue Code issued by the Internal Revenue Service ("IRS") with respect to certain payroll taxes owed by Reid. Specifically, Reid alleges that the IRS failed to satisfy the procedural requirements of the Collection Due Process ("CDP") hearing that took place on July 30, 2003 and that this failure amounts to an abuse of discretion. Reid seeks a remand to require the IRS to provide a hearing in full compliance with 26 U.S.C. §6330. The IRS denies abusing its discretion at the CDP hearing and has moved for summary judgment. In addition, the IRS argues that this court lacks subject matter jurisdiction over Reid's claim with regard to corporate income taxes and Reid's appeal of the Notice of Federal Tax Lien.

Having reviewed the parties' briefs, I have concluded that this court has subject matter jurisdiction over the payroll taxes at issue in the complaint and over the IRS's decision following the CDP hearing with respect to the Notice of Intent to Levy, although the court lacks subject matter jurisdiction over Reid's claims to the extent they involve corporate income taxes and the federal tax lien. In addition, I have concluded that the IRS did not abuse its discretion by denying Reid's request for an alternative collection agreement. Accordingly, I will grant the IRS's motion for summary judgment.

BACKGROUND

On January 7, 2003, Reid received a Notice of Intent to Levy from the IRS (Def.'s Ex. 101) and on January 13, 2003, Reid received a Notice of Federal Tax Lien. (Def.'s Ex. 102). On January 15, 2003, Reid mailed the IRS a request for a CDP hearing concerning the Notice of Intent to Levy, but Reid did not request a hearing with respect to the Federal Tax Lien at that time. (Def.'s Ex. 103). Settlement Officer Kathryn Dugan was assigned to conduct a hearing regarding Reid's request. At the hearing, which was held on July 30, 2003 at the Baltimore Appeals Office, Reid requested an alternative collection agreement to pay its tax liability over a period of time. (Reid Aff. ¶5). At the conclusion of the hearing, Officer Dugan granted Reid additional time to supplement the proposal with missing financial information. (Reid Aff. ¶¶7-8). After the hearing, however, while Officer Dugan was considering Reid's request, she discovered that Reid was not in compliance with filing or deposit requirements for the second quarter, for taxes due on July 31, 2003. (Dugan Decl. ¶¶12-15). The IRS contends that installment agreements cannot be accepted for parties that are not meeting their deposit and filing requirements. Consequently, Officer Dugan rejected Reid's installment proposal. In addition, on July 30, 2003, Reid orally requested a separate hearing regarding the federal tax lien. This request was denied because the IRS claims the request was not made within the statutory time period provided by 26 U.S.C. §6320(a)(3)(b).

Reid contends that when the meeting on July 30 concluded, all parties agreed that the hearing would be continued at a later date, after the IRS received the additional information it requested. (Reid Aff. ¶8). On August 8, 2003, Reid provided Officer Dugan with that information. Reid alleges it repeatedly attempted to contact Officer Dugan after the hearing but she did not respond. (Reid Aff. ¶¶10-11). On August 22, 2003, the IRS sent Reid its Decision Letter rejecting Reid's request for a collection agreement. (Dugan Decl. ¶15-16; Def.'s Exs. 106-107). Reid is not challenging the underlying tax liability, but does seek further consideration of alternative collection plans.

ANALYSIS

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment

shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

The Supreme Court has clarified that this does not mean that any factual dispute will defeat the motion:

By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

"A party opposing a properly supported motion for summary judgment 'may not rest upon the mere allegations or denials of [his] pleadings,' but rather must 'set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir. 2003) (alteration in original) (quoting Fed. R. Civ. P. 56(e)). The court must "view the evidence in the light most favorable to ... the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 644-45 (4th Cir. 2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).

Decisions following CDP hearings under 26 U.S.C. §6330 are reviewed under an abuse of discretion standard. See Dudley's Commercial and Industrial Coating, Inc. v. United States Internal Revenue Service [ 2003-1 USTC ¶50,397], 292 F.Supp.2d 976, 985 (M.D. Tenn. 2003); Bartolomeo v. United States [ 2003-2 USTC ¶50,706], 292 F.Supp.2d 728, 732 (W.D. Pa. 2003); MRCA Information Services v. United States [ 2000-2 USTC ¶50,683], 145 F.Supp.2d 194, 199 (D. Conn. 2000). "An abuse of discretion is an arbitrary action not justifiable in light of the facts and circumstances presented in the record." Dudley 's Commercial and Industrial Coating [ 2003-1 USTC ¶50,397], 292 F.Supp.2d at 985 (citations omitted). Although this standard is not explicitly set forth in the statute, the legislative history states:

Where the validity of the tax liability is not properly part of the appeal, the tax payer may challenge the determination of the appeals officer for an abuse of discretion. In such cases, the appeals officer's determination as to the appropriateness of the collection activity will be reviewed using an abuse of discretion standard of review.

Id. (quoting H.Rep. No. 105-599 at 266 (1998)). The history indicates that Congress intended courts to apply an abuse of discretion standard, and neither party argues otherwise.

I. Subject Matter Jurisdiction

The IRS contends this court lacks subject matter jurisdiction to review Reid's CDP hearing to the extent it involves corporate income taxes. United States District Courts only have subject matter jurisdiction to review CDP hearings under 26 U.S.C. §6330 if the subject of the hearing is not within the jurisdiction of the United States Tax Court. 26 U.S.C. §6330(d)(1)(B). Because the United States Tax Court has jurisdiction over income taxes, this court does not. See White v. United States [ 2003-1 USTC ¶50,259], 250 F.Supp.2d 919, 922 (M.D. Tenn. 2003). Reid's complaint, however, states "this case only involves payroll taxes," and it appears only $179.55 of the $145,362.80 owed by Reid stems from corporate income tax liability. (Pl.'s Exhibit A). The remaining amount encompasses form 940 and 941 taxes, which cover Federal Unemployment Tax Act taxes, an excise tax paid by the employer, and a trust fund tax, over which this court possesses subject matter jurisdiction. (Pl.'s Exhibit A). See Moore v. Commissioner of Internal Revenue [ CCH Dec. 53,802], 114 T.C. 171, 175 (2000); Chatterji v. Commissioner of Internal Revenue [ CCH Dec. 30,205], 54 T.C. 1402, 1405 (1970); Living Care Alternatives of Utica, Inc. v. United States [ 2004-1 USTC ¶50,225], 312 F.Supp.2d 929, 933 (S.D. Ohio 2004).

The IRS also argues this court lacks subject matter jurisdiction to review Officer Dugan's decision with respect to the federal tax lien. Under 26 U.S.C. §6320(a)(3)(B), a party has 30 days to request a CDP hearing after the receipt of a Notice of Federal Tax Lien. Reid received a Notice of Federal Tax Lien on January 13, 2003, and did not formally request a hearing regarding the tax lien until July 30, 2003, more than six months later. If a hearing is requested by a party after the expiration of the 30 day statutory period and the IRS provides a hearing, the hearing is considered an equivalent hearing, rather than a statutory CDP hearing. Living Care Alternatives of Utica, Inc. [ 2004-1 USTC ¶50,225], 312 F.Supp.2d at 932. This difference is significant because, unlike CDP hearings, equivalent hearing decisions are not reviewable in United States District Courts. Id.

Reid claims that even though it did not formally request a hearing regarding the lien within 30 days, the IRS should have anticipated that when Reid requested a CDP hearing regarding the Notice of Intent to Levy on January 15, 2003, this hearing request encompassed both the Lien and Levy, because both notices were received within a week of each other and both pertained to the same tax liability owed by Reid. (Pl.'s Mem. Opp'n Summ. J at 7-8). In support of its argument, Reid cites to a Congressional Report concerning the IRS Restructuring and Reform Act of 1998, which stated

[t]he conferees anticipate that the IRS will combine Notice of Intent to Levy and Notice of Lien hearings whenever possible.... If the taxpayer requests a hearing following receipt of a Notice of Lien or Notice of Intent to Levy and, prior to the date of the hearing, receives the other notice, the scheduled hearing will serve both purposes and the taxpayer is obligated to raise all relevant issues at such a hearing.

H.R. Conf. Rep. No. 105-599, at 266 (1998). In addition, 26 U.S.C. §6320(b)(4) states "[t]o the extent practicable, a hearing under this section shall be held in conjunction with a hearing under section 6330."

Though Reid did not formally request a hearing regarding the lien within the time required by statute, the IRS should have anticipated that when Reid requested a hearing concerning the levy, it would also be challenging the lien, because the lien and levy are so closely related and the notice for each arrived within a week of the other. The record, however, indicates that rather than raise any issue regarding the lien at the hearing on July 30, Reid merely requested an additional CDP hearing to address the lien. (Dugan Decl. ¶8). As is evident from the Congressional Report discussed above, while the IRS is encouraged to combine both the lien and levy hearings into one, "the taxpayer is obligated to raise all relevant issues at such a hearing." H.R. Conf. Rep. No. 105-599, at 266 (1998). The record does not indicate, aside from the request for a hearing concerning the lien, that Reid attempted to discuss the lien or was denied this opportunity by the IRS at the July 30 hearing. Therefore, because Reid did not timely request a hearing for the tax lien, the July 30 hearing was an equivalent hearing with respect to the lien, and this court lacks subject matter jurisdiction to review it.

II. The July 30 Collection Due Process Hearing

According to the Internal Revenue Manual ("IRM"), installment agreements cannot be approved for taxpayers that are not currently complying with deposit and filing requirements. See IRM 5.14.1.4.1(5); IRM 5.7.8.3(5). As a result, the IRS argues that any collection alternative proposed by Reid must have been rejected once Officer Dugan learned that Reid was not in compliance with its deposit and filing requirements on July 31. (Def.'s Mem. Supp. Summ. J. at 4). The IRS is correct that under the guidance of the IRM, settlement officers should not grant collection alternatives to taxpayers that are not meeting current tax obligations, however, "the IRS Service Manual is not binding authority on the Court or the IRS." Dudley's Commercial and Industrial Coating, Inc. [ 2003-1 USTC ¶50,397], 292 F.Supp.2d at 987. The provisions of the IRM "only govern the internal affairs of the Internal Revenue Service. They do not have the force and effect of law." United States v. McKee [ 99-2 USTC ¶50,867], 192 F.3d 535, 540 (6 ^th Cir. 1999) (quoting Valen Mfg. Co. v. United States [ 96-2 USTC ¶50,407], 90 F.3d 1190, 1194 (6 ^th Cir. 1996)). See also Oxford Capital Co. v. United States [ 2000-1 USTC ¶50,447], 211 F.3d 280, 285 n. 3 (5 ^th Cir. 2000); Groder v. United States [ 87-1 USTC ¶9259], 816 F.2d 139, 142 (4 ^th Cir. 1987) (citing United States v. Caceres [ 79-1 USTC ¶9294], 440 U.S. 741 (1979)). Consequently, although the IRM offers Settlement Officers valuable guidance, Officer Dugan was not required by law to reject any collection alternative offered by Reid simply because Reid was not in deposit and filing compliance. Nevertheless, Officer Dugan did have "the discretion to accept or reject any proposed installment agreement," (D.'s Reply to Pl.'s Mem. Opp'n Summ. J at 5 (quoting 26 C.F.R. §301.6159-1(b))), and compliance with current filing deadlines is not on its face an unreasonable requirement.

Even when the facts are examined in the light most favorable to Reid, as is required on a motion for summary judgment, the record indicates Officer Dugan did not abuse her discretion by denying Reid's request for a collection alternative or a continuation of the July 30 CDP hearing. The record indicates that at the hearing on July 30, Reid proposed a collection alternative and Officer Dugan explained to Reid the importance of complying with deposit and filing requirements in order for the IRS to accept Reid's proposal. (Reid Aff. ¶5; Pl.'s Ex. D). When the hearing concluded on July 30, ¹ Reid believed the hearing would be continued at a later date following the submission of additional materials. (Reid Aff. ¶¶6-8). Reid submitted the additional materials that had been requested by Officer Dugan, who took them into consideration. (Reid Aff. ¶10; Pl.'s Ex. B). While considering Reid's proposal, however, it became apparent to Officer Dugan that Reid was not in compliance with its deposit and filing requirements, including tax payments due on July 31, 2003. (Dugan Decl. ¶¶11-14; Pl.'s Ex. D). As a result, Officer Dugan rejected Reid's proposal. (Dugan Decl. ¶15; Def.'s Exs. 106-107). In fact, as of May 2004, Reid was still not in compliance. (Dugan Decl. ¶18). Officer Dugan fully explained the basis of her decision in the Appeals Case Memorandum, which stated "since the taxpayer is not in deposit compliance, no collection alternatives can be considered at this time," (Def.'s Ex. 106), and the Decision Letter, which stated that Reid "remain[s] in non-compliance with filing and deposit requirements, so no alternatives to collection can be considered at this time." (Def.'s Ex. 107). Based on the record before this court, such a rejection was appropriate under the guidance of the IRM and within Officer Dugan's discretion as a Settlement Officer.

Finally, Reid argues that it was an abuse of discretion for the settlement officer not to come to Reid's place of business to conduct the hearing, or at least to document why the hearing was not held at the taxpayer's place of business. In support of that argument, Reid relies on IRM 5.7.8.3(1), which provides that Settlement Officers should "[n]ormally arrange to meet the taxpayer and his/her representative at the place of business." Reid's argument is without merit because, as noted earlier, the IRM is merely intended to provide "for the agency's own internal administration," McKee [ 99-2 USTC ¶50,867], 192 F.3d at 540, "thus a violation of these procedures does not establish a cause of action for the taxpayer." Oxford Capital Co. v. United States [ 2000-1 USTC ¶50,447], 211 F.3d at 285 n. 3. Nothing in 26 U.S.C. §§6330 or 6320 requires a settlement officer to conduct the hearing at the taxpayer's place of business, and failing to do so does not amount to an abuse of discretion under the circumstances of this case.

¹ It should be noted that Reid is only entitled to one CDP hearing under 26 U.S.C. §6330(b)(2).

[Dec. 56,126(M)] Francis A. Morlino v. Commissioner.

Dkt. No. 18441-03L , TC Memo. 2005-203, August 24, 2005 .

[Appealable, barring stipulation to the contrary, to CA-1. --CCH.]

[Code Sec. 6330]
Collection Due Process hearing: Abuse of discretion: Evidence. --

An IRS settlement officer did not abuse his discretion by determining to proceed with a levy to collect the taxpayer's unpaid taxes. After a Collection Due Process (CDP) hearing, the taxpayer submitted an offer in compromise that was rejected because the taxpayer repeatedly failed to timely submit a completed questionnaire and information regarding the offer. Although the taxpayer testified that there were extenuating circumstances that caused him to fail to submit the requested information in a timely manner, this evidence was deemed irrelevant because neither the taxpayer nor his counsel ever communicated these circumstances to the settlement officer. Moreover, the taxpayer's argument that the settlement officer set unreasonable deadlines was unsupported by the evidence or the law.

Timothy J. Burke, for petitioner; Nina P. Ching and John V. Cardone, for respondent.

P asks us to review a determination by R's settlement officer (SO) that R may proceed with collection by levy of P's unpaid tax liability for 2001. P claims that the SO abused his discretion by prematurely concluding P's hearing when P did not provide information by the deadline set by the SO. R objects to P's testimony as to extenuating circumstances that prevented him from meeting the deadline.

1. Held: P's testimony is irrelevant since neither he nor his counsel communicated the extenuating circumstances to the SO (nor has P explained his failure to do so).

2. Held, further, R may proceed with collection since the deadline was reasonable.

Timothy J. Burke, for petitioner.

Nina P. Ching and John V. Cardone, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

HALPERN, Judge: This case is before the Court to review a determination made by respondent's Appeals Office that respondent may proceed to collect by levy unpaid taxes with respect to petitioner's 2001 tax year. We review the determination pursuant to section 6330(d)(1).

Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.

FINDINGS OF FACT

Petitioner resided in Kingston , Massachusetts , at the time the petition was filed.

On November 1, 2002 , respondent issued to petitioner a Final Notice-Notice of Intent to Levy and Notice of Your Right to a Hearing. The notice concerns petitioner's unpaid Federal income tax liability for 2001 of approximately $4,780 (the unpaid tax).

By letter dated November 15, 2002 , petitioner's attorney, Timothy J. Burke, submitted to the Internal Revenue Service (IRS) on petitioner's behalf an IRS Form 12153, Request for a Collection Due Process Hearing. On an attachment to the Form 12153, petitioner asserts: "It is in the best interest of the government and the taxpayer that an Offer in Compromise be entered into."

Petitioner raised no other issue on the Form 12153 or during the subsequent hearing accorded him.

On or about November 20, 2002 , petitioner submitted an offer in compromise with respect to the unpaid tax. That offer in compromise was rejected on January 15, 2003 .

On or about May 6, 2003 , an Appeals Office official, settlement officer Eugene O'Shea, was assigned to petitioner's case.

By letter dated July 23, 2003 , addressed to petitioner, Mr. O'Shea introduced himself to petitioner, scheduled a meeting with him for August 5, 2003 , acknowledged petitioner's request for an offer in compromise, and, in connection with that request, provided him with a questionnaire and an IRS Form 656, Offer in Compromise (the questionnaire and the offer form, respectively). The letter instructed petitioner that he was to complete and submit the questionnaire and offer form to Mr. O'Shea by August 5, 2003 , even if the meeting scheduled for that date were to be postponed.

On August 4, 2003 , at Mr. Burke's request, Mr. O'Shea moved the August 5, 2003 , meeting to August 18, 2003 , and gave petitioner until that date, but no later, to provide the requested information and submit the offer form.

On August 18, 2003 , Mr. Burke (but not petitioner) met with Mr. O'Shea. Mr. Burke provided Mr. O'Shea with some, but not all, of the information requested on the questionnaire. He did not submit the offer form. Mr. O'Shea again extended the time for completion of the questionnaire and submission of the offer form, until September 2, 2003 , and he informed Mr. Burke that no further extension of time would be granted.

Petitioner did not submit the missing information or the offer form to Mr. O'Shea by September 2, 2003 , nor did petitioner or Mr. Burke contact Mr. O'Shea between August 18 and September 2, 2003 .

On September 10, 2003 , Mr. O'Shea determined that collection by levy of the unpaid tax should proceed. In part, Mr. O'Shea based his determination on the fact that petitioner had failed to submit information necessary for an offer in compromise. In making his determination, Mr. O'Shea balanced the need for the efficient collection of taxes with the concern that any collection action be no more intrusive than necessary. He verified that the requirements of applicable laws and administrative procedures had been met.

Petitioner was notified of Mr. O'Shea's determination by a Notice Of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 dated October 2, 2003 .

OPINION

I. Introduction

The principal issue in this case is whether the settlement officer, Mr. O'Shea, abused his discretion in determining to proceed by levy to collect the unpaid tax. Before we address that issue, we shall set forth the general rules governing such determinations and our review. We shall then state the parties' arguments and dispose of respondent's objection to certain testimony of petitioner's. Finally, we shall decide whether Mr. O'Shea abused his discretion.

II. Sections 6330 and 6331

Section 6331(a) authorizes the Secretary of the Treasury (Secretary) to levy against property and property rights where a taxpayer liable for taxes fails to pay those taxes within 10 days after notice and demand for payment is made. Section 6331(d) requires the Secretary to send the taxpayer written notice of the Secretary's intent to levy, and section 6330(a) requires the Secretary to send the taxpayer written notice of his right to a section 6330 hearing at least 30 days before any levy is begun.¹

If a section 6330 hearing is requested, the hearing is to be conducted by respondent's Appeals Office, and, at the hearing, the Appeals officer or employee (without distinction, Appeals officer) conducting it must verify that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(b)(1), (c)(1). The taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy. Sec. 6330(c)(2)(A). The taxpayer may contest the existence or amount of the underlying tax liability at the hearing if the taxpayer did not receive a statutory notice of deficiency with respect to the underlying tax liability or did not otherwise have an opportunity to dispute that liability. Sec. 6330(c)(2)(B).

At the conclusion of the hearing, the Appeals officer must determine whether and how to proceed with collection, taking into account, among other things, collection alternatives proposed by the taxpayer and whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary. See sec. 6330(c)(3).

We have jurisdiction to review the Appeals officer's determination where we have jurisdiction over the type of tax involved in the case. Sec. 6330(d)(1)(A); see Iannone v. Commissioner [Dec. 55,618], 122 T.C. 287, 290 (2004). Where the underlying tax liability is properly at issue, we review the determination de novo. E.g., Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 181-182 (2000). Where the underlying tax liability is not at issue, we review the determination for abuse of discretion. Id. at 182. In reviewing for an abuse of discretion under section 6330(d)(1), generally we consider only arguments, issues, and other matters that were raised at the section 6330 hearing or otherwise brought to the attention of the Appeals Office. Magana v. Commissioner [Dec. 54,765], 118 T.C. 488, 493 (2002); see also sec. 301.6330-1(f)(2), Q&A-F5, Proced. & Admin. Regs. Whether an abuse of discretion has occurred depends upon whether the exercise of discretion is without sound basis in fact or law. See Ansley-Sheppard-Burgess Co. v. Commissioner [Dec. 50,547], 104 T.C. 367, 371 (1995).

III. The Parties' Arguments

By the petition, petitioner assigns error to Mr. O'Shea's determination that collection by levy of the unpaid tax should proceed. In support of his assignments, petitioner avers that (1) acceptance of an offer in compromise was in the best interest of respondent and petitioner, and (2) respondent improperly and prematurely concluded petitioner's section 6330 hearing (the hearing). At trial, petitioner abandoned all issues raised in the petition except that Mr. O'Shea erred by prematurely concluding the hearing. To prove that Mr. O'Shea acted prematurely, petitioner asks us to consider extenuating circumstances that prevented him from meeting deadlines imposed by Mr. O'Shea.

Respondent counters that Mr. O'Shea did not prematurely conclude the hearing and he did not abuse his discretion in determining that respondent may proceed with levy to collect the unpaid tax. Respondent objects to the admission of petitioner's evidence of extenuating circumstances, since the administrative record contains no mention of such circumstances.

IV. Admissibility of Petitioner's Testimony

A. The Testimony

At the trial of this case, over the objection of respondent, petitioner testified as to some of his activities during August and September of 2003. The essence of the testimony is as follows: In August of 2003, petitioner and his wife were forced to leave their home in Massachusetts and travel to California in order to attend to their daughter's family after a seizure temporarily left their daughter's husband paralyzed. They flew to California on August 7, 2003 , and returned home on August 23, 2003 . Much of the information requested by Mr. O'Shea in his letter of July 23, 2003 , and thereafter was stored in leased space outside petitioner's home, which delayed petitioner in assembling the information.

Respondent objected to the testimony on the grounds of relevancy. The Court noted respondent's objection but reserved its ruling.

B. Positions of the Parties

Respondent's relevancy objection is based on the fact that petitioner's underlying liability for the unpaid tax was not raised at the hearing (and is not before the Court). Accordingly, argues respondent, the appropriate standard for our review of Mr. O'Shea's determination is abuse of discretion, and the appropriate scope of review, pursuant to the record rule, is the administrative record made during the hearing. The record rule is the general rule of administrative law that a court can engage in judicial review of an agency action only on the basis of the record amassed by the agency. 2 Pierce, Administrative Law, sec. 11.6, at 822 (4th ed. 2002); see United States v. Carlo Bianchi & Co., 373 U.S. 709, 714 (1963).

Petitioner responds that our holding in Robinette v. Commissioner [Dec. 55,698], 123 T.C. 85 (2004), pertains to the matter and the scope of review is not limited to the administrative record.² Petitioner argues that his testimony "[demonstrates] the inflexibility of the Hearing Officer".

C. Discussion

At trial, petitioner specifically disclaimed that his underlying liability for the unpaid tax is at issue. The appropriate standard of review is, therefore, abuse of discretion. See supra sec. II of this report.

Robinette v. Commissioner, supra, is a case of this Court in which, pursuant to section 6330(d)(1), we reviewed a determination by an Appeals officer to proceed with collection of an unpaid tax. Since the taxpayer's underlying liability was not an issue, we determined that the proper standard of review was abuse of discretion. Id. at 94. Nevertheless, we considered testimony and other evidence that was not part of the administrative record. Id. at 103-104. We noted, however, that any evidence admissible in a trial before this court had to be admissible under the Federal Rules of Evidence. Id. at 103. We rejected the Commissioner's argument that the evidence in question was inadmissible because not relevant. Id. at 103-104 (discussing rules 401 and 402 of the Federal Rules of Evidence). We found the evidence relevant because it tended to show that the Appeals officer abused his discretion in determining to proceed with collection. Id. at 104.

The term "relevant evidence" is defined in rule 401 of the Federal Rules of Evidence to mean "evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." The testimony in the instant case is relevant, and therefore admissible, if and only if the testimony has a tendency to make the existence of any fact that is of consequence in determining whether Mr. O'Shea abused his discretion more probable or less probable than it would be without the evidence. Cf. Robinette v. Commissioner, supra at 103-104.

When considered in light of petitioner's purpose in offering the testimony--to show Mr. O'Shea's inflexibility--the testimony is not relevant for the simple reason that there is no evidence that either petitioner or Mr. Burke ever informed Mr. O'Shea of petitioner's difficulties in assembling the information necessary to respond to Mr. O'Shea's requests. Because Mr. O'Shea was never informed of those difficulties, the difficulties can hardly have had any bearing on Mr. O'Shea's determination to proceed with collection. Stated in the terms of rule 401 of the Federal Rules of Evidence, the testimony cannot possibly have any tendency to make the existence of any fact that is of consequence in determining whether Mr. O'Shea abused his discretion more or less probable--because he was never notified of the extenuating circumstances that are the subject of the testimony.³

Because the testimony is irrelevant, it is inadmissible. See Fed. R. Evid. 402.

D. Conclusion

Respondent's objection to the testimony is sustained.

V. Abuse of Discretion

A. Introduction

We are left to determine whether Mr. O'Shea abused his discretion in determining that respondent may proceed by levy to collect the unpaid tax. Petitioner claims that he did because he prematurely concluded the hearing.

B. Discussion

In Clawson v. Commissioner [Dec. 55,623(M)], T.C. Memo. 2004-106, fewer than 3 months passed between the taxpayer's filing a request for a section 6330 hearing concerning a proposed levy and an adverse determination by an Appeals officer. Approximately 1 month passed after the Appeals officer's offer of a telephonic hearing until the adverse determination, and only 9 days passed after the telephone conference until the adverse determination. The taxpayer argued that the Appeals officer abused his discretion because he reached his decision to sustain the proposed levy in "barely one month" after he contacted petitioners. We held: "[T]here is neither requirement nor reason that the Appeals officer wait a certain amount of time before rendering his determination as to a proposed levy." As authority, we cited section 301.6330-1(e)(3), Q&A-E9, Proced. & Admin. Regs., which provides that there is no period of time in which Appeals must conduct a section 6330 hearing or issue a notice of determination: "Appeals will, however, attempt to conduct a * * * [section 6330 hearing] and issue a Notice of Determination as expeditiously as possible under the circumstances."

In this case, Mr. O'Shea made his determination almost 10 months after petitioner filed the Form 12153, his request for a section 6330 hearing. It is clear from the Form 12153 that petitioner contemplated making an offer in compromise at the hearing. He submitted an offer in compromise on November 20, 2002 , which was rejected on January 15, 2003 (the record contains no further information with respect to the rejected offer in compromise). By letter dated July 23, 2003 , Mr. O'Shea scheduled a meeting with petitioner for August 5, 2003 . Mr. O'Shea enclosed with the letter the questionnaire and offer form, which petitioner was asked to complete and submit by the date of the meeting. The meeting was postponed until August 18, 2003 , and petitioner was given an extension until then to submit the questionnaire and offer form. Petitioner did not complete the questionnaire by the time of the postponed meeting, nor did he submit the offer form at that meeting. Mr. O'Shea again extended the time for completion of the questionnaire and submission of the offer form, establishing a deadline of September 2, 2003 , and telling Mr. Burke that no further extension of time would be granted. Not only did petitioner fail to meet that deadline, but neither petitioner nor Mr. Burke contacted Mr. O'Shea to explain any circumstance of delay or to request an extension of the deadline.

Petitioner does not argue that Mr. O'Shea was without discretion to set a deadline, only that he abused his discretion by setting the deadline too soon. We disagree. Mr. O'Shea's establishment of a deadline of September 2, 2003 , to complete the questionnaire and the offer form was not unreasonable in light of the facts that petitioner: (1) submitted the Form 12153 in November 2002, (2) had from July 23, 2003 (the date Mr. O'Shea provided him with the questionnaire and the offer form), until September 2, 2003 , to complete those documents, and (3) had experience with offers in compromise, which, previously, he had submitted.⁴ While the final 2-week deadline may seem short when considered in isolation, we do not consider it in isolation. Rather, we consider it in context, see, e.g., Roman v. Commissioner [Dec. 55,522(M)], T.C. Memo. 2004-20, which context includes the longer period that petitioner had to comply with Mr. O'Shea's requests and the fact that there is no evidence that either petitioner or Mr. Burke protested the deadline or asked for any extension. If there is fault here, it lies not with Mr. O'Shea in setting a deadline of September 2, 2003 .

C. Other Arguments

1. Introduction

On brief, petitioner describes the following errors, which are either in addition to or supplement his principal assignment of error, that Mr. O'Shea abused his discretion by prematurely concluding the section 6330 hearing: (1) Mr. O'Shea was biased by his belief that the hearing had to be promptly concluded, (2) respondent did not conduct the hearing in good faith, (3) respondent was not flexible in considering petitioner's matter, (4) the lack of ascertainable standards to be followed at section 6330 hearings violates due process, and (5) Mr. O'Shea was not impartial since he both conducted the section 6330 hearing and considered petitioner's offer in compromise.

As a general rule, a party cannot argue on brief an issue not raised in the petition. See Rule 331(b)(4) ("Any issue not raised in the assignments of error shall be deemed to be conceded."). Moreover, as stated supra in section III. of this report, at trial petitioner abandoned all issues raised in the petition except that Mr. O'Shea erred by prematurely concluding the hearing. Respondent asks that we reject all of petitioner's other arguments as having been either conceded or abandoned. We accept respondent's request, except that we do consider petitioner's arguments with respect to bias and inflexibility, since we think that they relate closely to the one issue (premature conclusion) that petitioner has preserved.

2. Bias

Petitioner argues: Mr. O'Shea "was biased by his belief that the hearing had to be promptly concluded." Beside the fact that Mr. O'Shea set, and stuck to, a deadline of September 2, 2003 , for petitioner to submit information necessary for an offer in compromise, petitioner has shown no facts that would support his claim of bias. As we made plain supra in section V.B. of this report, there is no requirement that an Appeals officer wait a certain amount of time before concluding a section 6330 hearing. Petitioner has failed to show bias.

3. Lack of Flexibility

Petitioner argues: Mr. O'Shea "did not act with flexibility but with a clear predisposition toward an inflexible and expeditious determination of petitioner's matter." While it is true that Mr. O'Shea set, and stuck to a deadline of September 2, 2003 , and told Mr. Burke that he would not extend that deadline, the facts in evidence hardly lead to the conclusion that Mr. O'Shea was inflexible. Indeed, he had twice before established due dates for the requested information but, when petitioner failed to comply, extended those due dates. Moreover, there is no evidence that when the September 2, 2003 , deadline was set Mr. Burke made any protest or that, thereafter, as the deadline approached, he or petitioner asked for any extension of the deadline. In fact, Mr. O'Shea's records show no contact with Mr. Burke until September 29, 2003 , when Mr. Burke's secretary called Mr. O'Shea to ask if any more information was needed. She was told by Mr. O'Shea that the information had been due on September 2, 2003 , and the case had been closed (and, indeed, the notice of Mr. O'Shea's determination was mailed to petitioner 4 days later). We do not find that Mr. O'Shea was inflexible. While he may have been predisposed to an expeditious determination of petitioner's matter, we see nothing wrong with that, given the facts before us.

D. Conclusion

Mr. O'Shea did not abuse his discretion in determining that respondent may proceed by levy to collect the unpaid tax.

VI. Conclusion

To reflect the foregoing,

Decision will be entered for respondent.

¹ A taxpayer receiving a notice of Federal tax lien has hearing rights similar to the hearing rights accorded a taxpayer receiving a notice of intent to levy. See sec. 6320(c).

² Recently, the Court of Appeals for the First Circuit reviewed a District Court judgment that, pursuant to sec. 6330(d)(1), had affirmed an Appeals Office determination made pursuant to sec. 6330(c)(3) that a levy to collect certain unpaid employment taxes and penalties could proceed. Olsen v. United States, 414 F.3d 144 (1st Cir. 2005), affg. [2004-2 USTC ¶50,360] 326 F. Supp. 2d 184 (D. Mass. 2004). The Court of Appeals upheld the record rule as defining the scope of judicial review of such a determination when, as in the case it was reviewing, the taxpayer's underlying liability is not in issue. See id. at __. The Court of Appeals distinguished Robinette v. Commissioner [Dec. 55,698], 123 T.C. 85 (2004). Olsen v. United States, supra at __ n.9. Therefore, we are not required by the doctrine of Golsen v. Commissioner [Dec. 30,049], 54 T.C. 742, 757 (1970), affd. [71-2 USTC ¶9497] 445 F.2d 985 (10th Cir. 1971), to follow Olsen, notwithstanding that, barring stipulation of the parties to the contrary, appeal of this case would lie to the Court of Appeals for the First Circuit. See sec. 7482(b).

³ Nor has petitioner offered any excuse for his failure to explain to Mr. O'Shea his difficulties in complying with Mr. O'Shea's Sept. 2, 2003, deadline when compliance with that deadline became problematic. Cf. Magana v. Commissioner [Dec. 54,765], 118 T.C. 488, 494 (2002) (unusual illness or hardship or other special circumstances may justify an exception to the general rule that, in reviewing for an abuse of discretion under sec. 6330(d)(1), the Court will not consider issues not raised at the sec. 6330 hearing).

⁴ In addition to referencing the offer in compromise that petitioner submitted on Nov. 20, 2002, and which was rejected on Jan. 15, 2003, the record contains a copy of another rejected offer in compromise, signed by petitioner on July 9, 2001, and relating to trust fund recovery penalties imposed with respect to employment taxes due in 1997.

[Dec. 56,076(M)] Brian and Tina Nicklaus v. Commissioner.

Dkt. No. 8587-04L , TC Memo. 2005-156, June 27, 2005 .

[Appealable, barring stipulation to the contrary, to CA-9. --CCH.]

[Code Sec. 6020]
Individual: Income tax returns: Substitutes. --

The IRS may prepare substitutes for the couple's income tax returns, and the Tax Court has jurisdiction to review the IRS's determination to collect taxes based on these substitutes. --CCH.

[Code Sec. 6330]
Individual: Income tax liabilities: Levy. --

The IRS's determination to proceed with a levy to collect a married couple's tax liabilities was not an abuse of discretion. The Appeals officer properly verified all applicable laws, and administrative procedures governing assessment and collection of the couple's unpaid tax liabilities were followed. Further, the couple was collaterally estopped from alleging irregularities in the assessment of their income taxes because a prior proceeding determined that their liabilities were properly assessed. Finally, the couple could not dispute their underlying tax liability because they failed to raise the issue in a timely manner and dispute the notice of deficiency when they had the opportunity to do so.

Brian Nicklaus and Tina Nicklaus, pro se; Aimee R. Lobo-Berg, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

COLVIN, Judge: Respondent sent petitioners a Notice of Determination Concerning Collection Action(s) Under Sections 6320 and/or 6330 (the levy determination) on April 15, 2004 , in which respondent determined to proceed with collection by levy from both petitioners of income tax liabilities for 1993 and 1994 and from Brian Nicklaus for 1995-2000.

The sole issue for decision is whether respondent's determination was an abuse of discretion. We hold that it was not.

Unless otherwise stated, section references are to the Internal Revenue Code. Rule references are to the Tax Court Rules of Practice and Procedure. References to petitioner are to Brian Nicklaus.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. Petitioners are married and had a mailing address in Stevenson , Washington , when the petition was filed.

A. Petitioners' Prior Tax Court Case Relating to Respondent's Lien for Petitioners' Tax Years 1993-96

Petitioners had a prior case in this Court, Nicklaus v. Commissioner [Dec. 54,477], 117 T.C. 117 (2001), in which we sustained respondent's determination that notices of Federal tax lien for petitioners' 1993-96 income tax liabilities had been properly recorded.

Petitioners filed Federal income tax returns for 1993 and 1994 in September 1995. Id. at 117. Respondent prepared substitutes for petitioners' 1995 and 1996 returns and issued a notice of deficiency to petitioners for their 1993-96 tax years. Id. Petitioners did not file a petition with this Court for 1993-96. Id.

Respondent assessed tax, penalties, and interest for petitioners' 1993-96 tax years and sent them a notice of balance due for those years. Id. at 117-118. Prior to November 25, 1998 , petitioners received a notice from respondent that respondent intended to collect tax owed by petitioners for those years by levy. Id. at 118. On November 25, 1998 , respondent issued a notice of levy to two banks with respect to petitioners' tax liabilities for 1993-95. Id.

Respondent filed notices of Federal tax lien with respect to petitioners' 1993-96 tax years on July 16, 1999 . Id. at 118. Petitioners timely requested a hearing. Id. Respondent's Appeals Office conducted the hearing and gave petitioners copies of Forms 4340, Certificate of Assessments and Payments, for 1993-96. Id. at 119. After the hearing, respondent issued a notice of determination sustaining the notice of Federal tax lien. Id. at 119-120.

Petitioners timely filed a petition with this Court to obtain judicial review of respondent's notice of determination relating to the lien. A trial was held. On brief, petitioners said that the sole issue was whether the requirements for issuing a Form 4340 had been met. Id. at 120. In our opinion in that case, we held that the requirements for sustaining the notice of Federal tax lien had been met because Form 4340 establishes a presumption that tax was validly assessed, and petitioners had not shown any irregularity in respondent's assessment procedures. Id. at 120-122.

B. Respondent's Notice of Levy for Petitioner's Tax Years 1993-2000 and Tina Nicklaus's Tax Years 1993-94

Respondent prepared substitutes for petitioner's returns for tax years 1997-99 on February 1, 2001 , and for 2000 on July 11, 2002 . Respondent issued notices of deficiency to petitioner for 1997-2000 on dates not stated in the record. Petitioner did not file a petition in this Court for those years. Respondent assessed tax, additions to tax, and interest for petitioner's tax years 1997-99 on July 14, 2003 , and for his tax year 2000 on September 8, 2003 .

On September 9, 2004 , respondent sent a Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing to Tina Nicklaus for income taxes for 1993 and 1994 and to petitioner for 1993-2000. Petitioners filed separate requests for a hearing under section 6330(b).

Appeals Officer Jean Duncan ( Duncan ) was assigned to petitioners' case. Duncan gave petitioners Forms 4340 for 1993-2000 before the hearing under section 6330(b). As part of their section 6330(b) hearing, petitioners gave Duncan seven documents including petitioner's description of respondent's actions with respect to petitioners' 1993-2000 tax years and copies of various transcripts.

Duncan reviewed respondent's administrative records for petitioners and all documents submitted by petitioners. Duncan considered petitioners' arguments and concluded that petitioners had not shown that there were any irregularities in assessment procedures for the years in issue.

Respondent sent petitioners a Notice of Determination with respect to the levy concerning their income tax liability for 1993 and 1994 on April 15, 2004 . Respondent sent a Notice of Determination to petitioner with respect to the levy concerning income tax he owed for 1995-2000 on April 15, 2004 . Petitioners timely filed a petition in this Court.

On Forms 4340 for 1995 and 1996, Tina Nicklaus's Social Security number is partially incorrect and petitioner's first name is misspelled.

OPINION

A. Contentions of the Parties and Background

Petitioners contend that respondent's transcripts show that respondent did not follow proper assessment procedures and that this Court lacked jurisdiction in their prior case before this Court and in this case. Petitioners ask that we vacate the decision in their prior case and that we remand this case to respondent.¹

Respondent contends that petitioners are collaterally estopped from alleging irregularities in the assessment of their tax liabilities for 1993-96. Respondent also contends that all requirements have been met for respondent to collect taxes that petitioners owe for 1993-2000.

Section 6330 (pertaining to levies) provides for administrative and judicial review of certain collection actions. The Commissioner is required to give a taxpayer written notice that a Federal tax lien has been filed and/or that the Commissioner intends to levy and to explain to the taxpayer that such collection actions may be challenged on various grounds at an administrative hearing. See Davis v. Commissioner [Dec. 53,969], 115 T.C. 35, 37 (2000); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 179 (2000).

Section 6330(c)(1) requires the Appeals Office to obtain verification that "the requirements of any applicable law or administrative procedure have been met." Section 6330(c)(2) prescribes the matters that a person may raise at an administrative hearing. Section 6330(c)(2)(A) provides that a person may raise issues such as spousal defenses, the appropriateness of the Commissioner's intended collection action, and possible alternative means of collection. See Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 609 (2000); Goza v. Commissioner, supra.

B. Whether This Court Has Jurisdiction in This Case

Petitioners contend that this Court lacks jurisdiction in this case because (1) the underlying tax liability at issue is for employment or excise tax, and (2) respondent may not file a substitute for return for individual income tax.

1. Whether the Underlying Liability Is for Employment or Excise Tax

Petitioner contends that records that he obtained from respondent under the Freedom of Information Act, 5 U.S.C. sec. 552 (2000), show that employment or excise taxes, but not income taxes, are at issue in this case, and that respondent's records show that petitioners were employers. We disagree.

On each of the Forms 4340 for the years in issue, respondent certified that respondent assessed individual income tax. On the Final Notice - Notice of Intent to Levy & Your Notice Of a Right To A Hearing, respondent identified Form 1040, U.S. Individual Income Tax Return, as the form for the underlying tax which respondent seeks to collect. Petitioners wrote "1040" in the space for "Tax Form Number(s)" on their requests for a hearing under section 6330. The notice of determination states that it relates to income tax and the form number is Form 1040. We conclude that respondent seeks to collect Federal individual income tax from petitioners for 1993-94 and from petitioner for 1995-2000.

2. Whether Respondent May Prepare Substitutes for Individual Income Tax Returns

Petitioners contend that respondent may not prepare substitutes for returns for them because part 5.1.11.6.10 of the Internal Revenue Manual (IRM) (May 27, 1999) lists seven returns² that may be prepared under the authority of section 6020(b) and does not mention Form 1040.

We disagree. The Internal Revenue Service may prepare substitute returns for taxpayers who fail to do so themselves. Sec. 6020(b)(1);³ Cabirac v. Commissioner [Dec. 55,124], 120 T.C. 163, 171-172 (2003); Millsap v. Commissioner [Dec. 45,179], 91 T.C. 926, 936 (1988); see also United States v. Updegrave, 80 AFTR 2d 97-5290, 97-1 USTC par. 50,465 (E.D. Pa. 1997). IRM provisions not cited by petitioners state that respondent may prepare substitutes for Forms 1040 under section 6020(b). See, e.g., IRM, pt. 3.0.273.40.3(6) (Jan. 1, 2005), pt. 5.1.15.2 (July 30, 1999). We conclude that respondent may prepare substitutes for petitioners' individual income tax returns for the years in issue,⁴ and that this Court has jurisdiction to review respondent's determination to proceed with collection.

C. Whether Petitioners Are Collaterally Estopped From Contending That Irregularities Exist in Assessment of Their Tax Liabilities for 1993-96

We held in Nicklaus v. Commissioner, 117 T.C. at 121, that respondent had properly assessed petitioners' tax liabilities for 1993-96 and that those liabilities remain unpaid. Respondent contends that collateral estoppel precludes petitioners from alleging irregularities in the assessment of their Federal income taxes for 1993-96.

If collateral estoppel applies, issues which were litigated and decided in an earlier case cannot be relitigated by the parties or their privies. Montana v. United States, 440 U.S. 147, 153 (1979); Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 n.5 (1979); Commissioner v. Sunnen, 333 U.S. 591, 597 (1948). Collateral estoppel protects adversaries from the expense and vexation of multiple lawsuits, conserves judicial resources, and fosters reliance on judicial action by minimizing the possibility of inconsistent decisions. Montana v. United States, supra at 153-154; Meier v. Commissioner [Dec. 44,995], 91 T.C. 273, 282-284 (1988).

Collateral estoppel applies if the following requirements are met: (1) The issue in the second suit is identical to the issue decided in the first suit, Commissioner v. Sunnen, supra at 599-600; (2) there is a final judgment rendered by a court of competent jurisdiction, Peck v. Commissioner [Dec. 44,544], 90 T.C. 162, 166 (1988), affd. [90-1 USTC ¶50,311], 904 F.2d 525 (9th Cir. 1990); Gammill v. Commissioner [Dec. 32,722], 62 T.C. 607, 613 (1974); (3) the parties to the second suit are the same as the parties to the first suit or in privity with them, Peck v. Commissioner, supra at 166-167; Gammill v. Commissioner, supra at 614-615; (4) the parties actually and necessarily litigated the matters at issue, and the resolution of those matters was essential to the prior decision, Commissioner v. Sunnen, supra at 598, 601; (5) the controlling facts and legal principles remain unchanged, id. at 599-600; and (6) there are no special circumstances that would warrant making an exception to the normal rules of issue preclusion, Montana v. United States, supra at 162; Meier v. Commissioner, supra at 291-292.

These requirements are met in this case. First, petitioners disputed respondent's assessment procedures for 1993-96 in the prior case and in this case. Thus, identical matters are at issue in the prior case and in the instant case. Second, our decision in the prior case is final. Third, the parties in this case are the parties in the prior case. Fourth, during the prior trial, petitioners and respondent actually and necessarily litigated respondent's assessment procedures for 1993-96 and whether respondent's proposed collection action for those years was appropriate. The resolution of those matters was essential to the decision in the first suit. Fifth, the controlling facts and legal principles have not changed. Meier v. Commissioner, supra at 291. Sixth, petitioners do not contend, and we do not find, that special circumstances are present that would warrant not applying the normal rules of issue preclusion. See Montana v. United States , supra; Meier v. Commissioner, supra at 291-292. Thus, petitioners are collaterally estopped from alleging irregularities in the assessment of their Federal income taxes for 1993-96.

D. Whether Requirements for Collection of Petitioners' Tax Liabilities Have Been Met

1. Errors on Form 4340

An assessment is made by recording the tax liability in the office of the Secretary in accordance with rules or regulations prescribed by the Secretary. Sec. 6203. A Form 4340, absent evidence to the contrary, is sufficient to establish that the assessment was properly made. United States v. Zolla [84-1 USTC ¶9175], 724 F.2d 808, 810 (9th Cir. 1984); Psaty v. United States [71-1 USTC ¶9346], 442 F.2d 1154, 1159 (3d Cir. 1971); Nicklaus v. Commissioner, supra at 121.

Treasury regulations require that the summary record, through supporting records, identify the taxpayer. Sec. 301.6203-1, Proced. & Admin. Regs. Petitioners point out that respondent misspelled petitioner's first name and used an incorrect Social Security number for Tina Nicklaus on the Forms 4340 for 1995 and 1996. Petitioners contend that the errors show that the Forms 4340 are unreliable, and thus the requirements for collection of their tax liabilities for the years in issue have not been met. We disagree.

The Forms 4340 for 1995 and 1996 pertain only to the tax liability of petitioner. Respondent correctly stated petitioner's middle initial, last name, and Social Security number on those Forms 4340. The erroneous Social Security number for petitioner's spouse on the Forms 4340 for 1995 and 1996 does not affect this case because: (1) Respondent seeks to collect by levy petitioner's, and not his spouse's, unpaid tax for those years; and (2) an incorrect Social Security number on a Form 4340 does not invalidate the assessment shown on the form if the taxpayer is sufficiently identified. See Frey v. United States , 87 AFTR 2d 2001-2309, 2001-1 USTC par. 50,417 (N.D. Tex. 2001), affd. [2002-2 USTC ¶50,690], 34 Fed. Appx. 151 (5th Cir. 2002). The Forms 4340 for 1995 and 1996 sufficiently identify petitioner as the taxpayer whose tax was assessed by respondent.

2. Determination by Respondent

Section 6330(c)(1) requires that, in order for the Commissioner to proceed with proposed collection, the Appeals officer must verify that the requirements of any applicable law or administrative procedure have been met. The record shows that Duncan properly verified that all applicable laws and administrative procedures governing the assessment and collection of petitioner's unpaid tax liabilities were met.

3. Conclusion

We conclude that respondent's determination to proceed with collection from petitioners was not an abuse of discretion.

E. Underlying Tax Liability

Petitioners contend for the first time in their posttrial brief that they may dispute their underlying tax liability. We disagree. First, we need not consider this issue because petitioners raised it untimely. See Glass v. Commissioner, 124 T.C. __, __ (2005); Leahy v. Commissioner [Dec. 43,153], 87 T.C. 56, 64-65 (1986). In their petition, amended petition, and at trial, petitioners disputed only the assessment procedures.

Second, a taxpayer may dispute his or her underlying tax liability at the section 6330 hearing only if he or she did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B). Petitioners do not contend that they did not receive notices of deficiency for the years in issue. Instead, petitioners contend only that the notices of deficiency applied to employment or excise tax, not income tax. We have rejected this contention at paragraph B-1, above.

We conclude that petitioners may not dispute their underlying tax liability.

F. Conclusion

We conclude that respondent's determination to proceed with levy action to collect petitioners' tax liabilities for 1993-2000 was not an abuse of discretion.

To reflect the foregoing,

Decision will be entered for respondent.

¹ Petitioners do not contend that sec. 7491(a) applies in this case and have not established that they met the requirements of sec. 7491(a)(2).

² The seven returns are: Form 940, Employer's Annual Federal Unemployment Tax Return; Form 941, Employer's Quarterly Federal Tax Return; Form 943, Employer's Annual Tax Return for Agricultural Employees; Form 720, Quarterly Federal Excise Tax Return; Form 2290, Heavy Vehicle Use Tax Return; Form CT-1, Employer's Annual Railroad Retirement Tax Return; and Form 1065, U.S. Partnership Return of Income.

³ Sec. 6020 provides:

SEC. 6020. RETURNS PREPARED FOR OR EXECUTED BY SECRETARY. --

(a) Preparation of return by Secretary. --If any person shall fail to make a return required by this title or by regulations prescribed thereunder, but shall consent to disclose all information necessary for the preparation thereof, then, and in that case, the Secretary may prepare such return, which, being signed by such person, may be received by the Secretary as the return of such person.

(b) Execution of Return by Secretary. --

(1) Authority of Secretary to execute return. --If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

(2) Status of returns. --Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes.

⁴ Respondent does not contend and we need not decide whether the returns prepared by respondent in this case meet the requirements of sec. 6020(b) in all respects.