                           143 T.C. No. 2



                  UNITED STATES TAX COURT



             RENALD EICHLER, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 725-12L.                         Filed July 23, 2014.



       After R assessed trust fund recovery penalties against him, P
requested a partial pay installment agreement. Before P’s request had
been input into the IRS computer system or acted upon, R sent P
Letters CP 90, Final Notice--Notice of Intent to Levy and Notice of
Your Right to a Hearing. P timely requested a collection due process
(CDP) hearing, renewing his request for an installment agreement and
asserting that the Letters CP 90 should be withdrawn as invalid
pursuant to I.R.C. sec. 6331(k)(2), which prohibits the IRS from
making a levy while an offer for an installment agreement is pending.
During the CDP hearing R’s settlement officer conditioned
acceptance of an installment agreement on P’s making an $8,520
downpayment. P declined this proposal as resulting in economic
hardship. R’s final determination sustained the proposed levy on the
ground that P had declined R’s proposed installment agreement; it
rejected P’s request that the Letters CP 90 be withdrawn as invalid.

      Held: I.R.C. sec. 6331(k)(2) did not preclude R from issuing the
Letters CP 90 after P submitted his offer for an installment agreement.
                                        -2-

             Held, further, R’s determination not to rescind the Letters CP
      90 was not an abuse of discretion under relevant provisions of the
      Internal Revenue Manual.

            Held, further, because the record does not allow for meaningful
      review of R’s determination regarding the appropriateness of the
      $8,520 downpayment as a condition of an installment agreement, this
      case will be remanded for further proceedings.



      Mark Harrington Westlake, for petitioner.

      John R. Bampfield, for respondent.



                                     OPINION


      THORNTON, Chief Judge: Petitioner seeks review pursuant to section

6330(d) of respondent’s determination sustaining a proposed levy.1 This case is

before us on the parties’ cross-motions for summary judgment.




      1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure. All monetary amounts are rounded to the
nearest dollar.
                                        -3-

                                    Background

      The record reveals or the parties do not dispute the following.

      When he filed his petition, petitioner lived in Tennessee. On December 20,

2010, respondent assessed against him these section 6672 trust fund recovery

penalties: $89,760 for the fourth quarter of 2008, $82,725 for the first quarter of

2009, and $16,889 for the second quarter of 2009.

      By letter dated April 11, 2011, petitioner’s representative, Mark Harrington

Westlake, sent to the Internal Revenue Service’s (IRS) Service Center in Atlanta,

Georgia, a letter requesting, among other things, a “partial payment installment

agreement” of $350 per month for the three quarters previously mentioned as well

as the fourth quarter of 2007. This letter was accompanied by a completed and

signed Form 433-A, Collection Information Statement for Wage Earners and Self-

Employed Individuals, and supporting financial documentation.

      On April 28, 2011, respondent received petitioner’s request.2 Pursuant to

Internal Revenue Manual (IRM) pt. 5.14.1.3 (Mar. 4, 2011), the IRS Collection

Division is required to input certain codes--“TC 971 AC 043” for installment

agreement requests not immediately approved and “TC 971 AC 063” for requests


      2
        The record does not show why it took respondent 17 days to receive
petitioner’s April 11, 2011, letter.
                                           -4-

immediately approved--into the IRS computer system within 24 hours of receiving

an installment agreement request if it meets certain requirements. Although

petitioner’s request met these requirements, the IRS Collection Division failed to

input any code until June 6, 2011, when the “TC 971 AC 043” code was input.

      In the meantime, on May 9, 2011, respondent had sent to petitioner three

Letters CP 90, Final Notice--Notice of Intent to Levy and Notice of Your Right to

a Hearing (notices of intent to levy), with respect to petitioner’s unpaid trust fund

recovery penalties for the last quarter of 2008 and first two quarters of 2009.3

      On May 13, 2011, the IRS Service Center in Atlanta, Georgia, sent

petitioner a letter in response to the installment agreement request, stating:

      We have not resolved this matter because we haven’t completed all
      the processing necessary for a complete response. However, we will
      contact you again within 45 days with our reply. You don’t need to
      do anything further now on this matter.

      *           *         *          *          *          *           *

      We’ve delayed sending you further notices while we research this
      matter. If you receive or have received additional notices * * *,
      please contact us.




      3
       The notices of intent to levy referenced Publication 594, The IRS
Collection Process. Publication 594 explains, among other things, that the IRS is
prohibited from levying against a taxpayer’s property while an installment
agreement request “is being considered”.
                                        -5-

This May 13, 2011, letter erroneously stated that it was in reference to petitioner’s

2008 Federal income tax rather than the trust fund recovery penalties at issue in

this case.

      On June 1, 2011, the Office of Appeals (Appeals) received a timely Form

12153, Request for a Collection Due Process or Equivalent Hearing, from

petitioner indicating the following reason for his request:

      I previously submitted Form 433-A with supporting documentation
      and a request for an installment agreement. (Copy attached) The Final
      Notice (CP 90) was issued prematurely. I request that the Final
      Notice be withdrawn and that the installment payment agreement I
      requested be implemented. In the alternative I REQUEST AN IN
      PERSON HEARING IN NASHVILLE, TN.

By cover letter accompanying the Form 12153 petitioner asserted that the notices

of intent to levy should be withdrawn pursuant to section 6331(k) and IRM pt.

5.11.1.2.2.8 (Jan. 1, 2006).

      On September 1, 2011, an IRS settlement officer, Suzanne Magee (SO

Magee), notified petitioner that she was in receipt of his request for an Appeals

hearing and that she had scheduled an in-person conference for October 4, 2011.

      On September 26, 2011, Mr. Westlake sent SO Magee a letter asserting that

petitioner’s installment agreement request had been submitted and was pending
                                            -6-

when the notices of intent to levy had been issued. Mr. Westlake requested that

the notices be rescinded. He also stated:

      Please note that since the prior Form 433-A was submitted the
      taxpayers have become obligated for two additional court ordered
      payments on judgments. Moreover, they continue to receive dunning
      notices from many of the unsecured creditors shown on the exhibit to
      the Form 433-A. I am hopeful that my correspondence to those
      creditors will persuade them that filing further lawsuits will be futile.

      Dr. Renald Eichler is 76 years of age and Dr. Priscilla Eichler is 71
      years of age.

      They have lived in their home since 1971. The current indebtedness
      against the home, i.e., $720,000 was incurred in an effort to prop up
      the non-profit educational corporation for which both of them
      worked. Those efforts were unsuccessful. The non-profit corporation
      itself lost its assets in foreclosure. I believe that it may have
      attempted a reorganization before it closed.

      We had originally requested a partial payment installment agreement
      in the amount of $350 per month. However, the taxpayers’ financial
      situation has deteriorated and accordingly, we are now requesting that
      the accounts be designated “Currently Not Collectible.”

Mr. Westlake also submitted with the letter a completed Form 433-A and

supporting financial documentation. The Form 433-A reflected total gross

monthly income of $5,464, of which $3,079 was attributable to petitioner and

$2,385 was attributable to his wife.4 The Form 433-A reported monthly expenses

of $5,573, including the following:

      4
          Petitioner’s wife is not a party to this proceeding.
                                        -7-

                     Expense                              Amount

            Food, clothing, & misc.                         $985
            Housing and utilities                          3,500
            Vehicle operating costs                          488
            Health insurance--Humana                         112
            Out-of-pocket healthcare costs                   288
            Court-ordered payments                           200
            Taxes (income and FICA)                          212

The Form 433-A also reported debts of approximately $260,000 “on credit cards

and store accounts and judgments.”

      On October 4, 2011, SO Magee conducted an in-person conference with

petitioner, petitioner’s wife, and Mr. Westlake. At the hearing Mr. Westlake once

again argued that the notices of intent to levy had been issued prematurely because

petitioner had submitted an installment agreement offer that was pending when the

notices were issued. SO Magee determined that the issuance of the notices of

intent to levy was not premature and that these notices should not be rescinded.

After discussing potential collection alternatives, SO Magee requested additional

supporting documentation.

      On October 17, 2011, petitioner provided the requested supporting

documentation to SO Magee. By cover letter Mr. Westlake renewed his objection

that the notices of intent to levy had been issued prematurely and that they should
                                        -8-

be rescinded. He also requested a $25-per-month installment agreement as a

collection alternative to the proposed levy.

      On October 19, 2011, after reviewing petitioner’s documentation, SO

Magee phoned Mr. Westlake and left him a voicemail message, requesting certain

bank statements to substantiate some of petitioner’s expenses and indicating that

the notices of intent to levy would not be rescinded.

      On October 26, 2012, Mr. Westlake provided the requested bank statements

to SO Magee. A joint bank account petitioner shared with his wife showed a

balance of $15,214 as of October 20, 2011. Mr. Westlake again renewed his

request for a $25-per-month installment agreement and rescission of the notices of

intent to levy.

      SO Magee reviewed petitioner’s Form 433-A and supporting financial

documentation. She concluded that an appropriate collection alternative would be

an installment agreement of $25 per month for one year increasing to $734 per

month in November 2012, provided that petitioner also submitted with his

installment agreement a downpayment of $8,520.

      On October 28, 2011, SO Magee called Mr. Westlake to confirm receipt of

the additional financial documentation. She also communicated to Mr. Westlake

her proposed installment agreement collection alternative to the proposed levy.
                                        -9-

      By letter dated November 8, 2011, Mr. Westlake agreed to SO Magee’s

proposal that petitioner pay $25 per month, increasing to $734 per month in

November 2012. He disagreed, however, that petitioner should be required to

make an $8,520 downpayment, stating: “Please refer to my prior correspondence

explaining that $15,000 had originally been borrowed from family members. I

have since confirmed that the funds were loaned to Mrs. Eichler by her sister.

Repayment of that loan would fully deplete the savings account.” He also

indicated that if SO Magee was “unable or unwilling to accept the proposed $25

per month installment agreement with an automatic twelve month increase, but

without the initial $8,520 payment and with the rescission of the [notices of intent

to levy] * * *, please issue your final determination”.

      On December 8, 2011, Appeals issued to petitioner a Notice of

Determination Concerning Collection Action(s) Under Section 6320 and/or 6330

(notice). In the notice Appeals sustained the proposed levy. The notice stated that

“under current procedures” the notice of intent to levy “is deemed valid and will

not be rescinded even when there is a pending installment agreement.” The notice

also stated: “Based on the financial information provided during the hearing

process Appeals determined the appropriate collection resolution to be an

installment agreement with down payment of $8,520 then $25 per month for 12
                                        - 10 -

months to increase to $734 per month thereafter. The down payment is your

percentage share of a joint savings account with your wife.”

                                     Discussion

A. Summary Judgment Standard

      Summary judgment is intended to expedite litigation and avoid unnecessary

and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988).

Summary judgment may be granted where there is no genuine dispute as to any

material fact and a decision may be rendered as a matter of law. Rule 121(b). The

moving party bears the burden of showing that there is no genuine dispute as to

any material fact, and factual inferences will be read in a manner most favorable to

the party opposing summary judgment. See id.; Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994).

B. Statutory Framework

      Section 6331(a) provides that if any person liable to pay any tax neglects or

refuses to pay such tax within 10 days after notice and demand for payment, then

the Secretary is authorized to collect such tax by levy upon that person’s property.

Section 6330(a) requires the Secretary to send written notice to the person of that

person’s right to request an Appeals hearing before a levy is made. If an Appeals

hearing is requested, the Appeals officer must, at the hearing, verify that the
                                       - 11 -

requirements of any applicable law or administrative procedure have been met.

Sec. 6330(b)(1), (c)(1). Section 6330(c)(2) prescribes the matters that a person

may raise at the Appeals hearing, including spousal defenses, challenges to the

appropriateness of the Commissioner’s intended collection action, and possible

alternative means of collection, including offers-in-compromise (OIC) and

installment agreements. The existence or amount of the underlying tax liability

may also be contested, but only if the person did not receive a notice of deficiency

or did not otherwise have an opportunity to dispute the tax liability. Sec.

6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604, 609 (2000).

C. Standard of Review

      Petitioner has not challenged his underlying tax liabilities. We review

respondent’s determination for abuse of discretion, asking whether it was

arbitrary, capricious, or without sound basis in fact or law. See, e.g., Murphy v.

Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006); Sego

v. Commissioner, 114 T.C. at 610.

D. Whether Respondent’s Determination Not To Rescind the Notices of Intent To
   Levy Was an Abuse of Discretion

      Petitioner argues that respondent abused his discretion in refusing to rescind

the notices of intent to levy. He argues that section 6331(k)(2) precludes the IRS
                                         - 12 -

from issuing a notice of intent to levy while an installment agreement offer is

pending.

      Although section 6331(a) grants the Secretary authority to levy upon a

taxpayer’s property or rights to property, various subsections of section 6331

prohibit the Secretary from levying under certain circumstances. See sec. 6331(f),

(g), (i), (j), (k). Section 6331(k)(2) provides:

            (2) Installment agreements.--No levy may be made under
      subsection (a) on the property or rights to property of any person with
      respect to any unpaid tax--

                    (A) during the period that an offer by such person
             for an installment agreement under section 6159 for
             payment of such unpaid tax is pending with the
             Secretary; and

                   (B) if such offer is rejected by the Secretary, during the
             30 days thereafter (and, if an appeal of such rejection is filed
             within such 30 days, during the period that such appeal is
             pending)

      By its terms this statute bars the IRS, while a taxpayer’s offer for an

agreement request is pending, from making a levy; it does not bar the IRS from

issuing notices of intent to levy.5 Accord United States v. Austin, No. 09-

      5
       The notice of determination does not expressly reflect any determination as
to whether petitioner’s installment agreement offer was in fact “pending” when the
IRS issued the notices of intent to levy. Rather, the notice of determination
proceeds upon the premise that a notice of intent to levy is valid and will not be
                                                                       (continued...)
                                        - 13 -

10405-RWZ, 2010 WL 1711294, at *3 n.2 (D. Mass. Apr. 26, 2010), aff’d, 526

Fed. Appx. 2 (1st Cir. 2013); Politte v. United States, No. 07CV1950 JLS (CAB),

2009 WL 3166924, at *5 (S.D. Cal. Aug. 6, 2009); see also Living Care Alts. of

Utica, Inc. v. United States, 411 F.3d 621, 629 (6th Cir. 2005) (holding that

section 6331(f) and (j), which provides, similarly to section 6331(k), that “no levy

may be made” before the IRS has taken certain actions, do not bar the IRS from

issuing notices of intent to levy before taking these actions); Medlock v. United

States, 325 F. Supp. 2d 1064, 1079 (C.D. Cal. 2003) (same).6 The regulations


      5
        (...continued)
rescinded “even when there is a pending installment agreement.” In this
proceeding respondent argues for the first time that the installment agreement was
not pending when the notices of intent were issued. In support of this argument,
respondent points to the May 13, 2011, letter from the IRS Service Center in
Atlanta which stated that “we haven’t completed all the processing necessary for a
complete response”. It is unclear from the record to what extent this delay in
processing petitioner’s installment agreement offer was attributable to the IRS’
failure to input the offer into its computer system until June 6, 2011. In any event,
because we decide the issue of the effect of sec. 6331(k)(2) in respondent’s favor
even if we assume, as apparently did Appeals, that petitioner’s offer was pending
when the IRS issued the notices of intent to levy, it is unnecessary to consider
respondent’s argument raised for the first time in this proceeding. Cf. Antioco v.
Commissioner, T.C. Memo. 2013-35 (declining to uphold a notice of
determination on grounds other than those relied upon in the notice (citing SEC v.
Chenery Corp., 332 U.S. 194 (1947), and SEC v. Chenery Corp., 318 U.S. 80
(1943))); Jones v. Commissioner, T.C. Memo. 2012-274 (same); Salahuddin v.
Commissioner, T.C. Memo. 2012-141 (same).
      6
          We are mindful that in Tucker v. Commissioner, T.C. Memo. 2011-67
                                                                     (continued...)
                                         - 14 -

expressly provide that while levy is prohibited “[t]he IRS may take actions other

than levy to protect the interests of the Government”. Sec. 301.6331-4(b)(1),

Proced. & Admin. Regs. A notice of intent to levy is an action other than a levy to

protect the interests of the Government; unlike a levy, it is merely preliminary to a

collection action, rather than a collection action barred by section 6331(k)(2). See

Politte, 2009 WL 3166924, at *5. Accordingly, under the regulations, consistent

with the plain language of the statute, the IRS was not prohibited from issuing the

notices of intent to levy after petitioner submitted his offer for an installment

agreement.

      Petitioner also argues that respondent should have rescinded the notices of

intent to levy pursuant to IRM pt. 5.11.1.2.2.8 and IRM pt. 5.14.1.3. In the first

instance we observe that provisions of the IRM do not carry the force and effect of


      6
        (...continued)
(upholding Appeals’ rejection of an OIC), aff’d, 676 F.3d 1129 (D.C. Cir. 2012),
in the “Background” section of the opinion, a footnote indicated that the IRS had
withdrawn a notice of intent to levy that it had issued after the taxpayer had
submitted an OIC. By way of explanation, the footnote stated: “Section
6331(k)(1) provides for a restraint on levy while an OIC is pending, and the
issuance of the notice of levy violated that restriction.” Id., slip op. at 8 n.6. This
dictum, however, did not represent a holding or a predicate to any holding in
Tucker, as made explicit in the same footnote: “The issuance of that first levy
notice (and its subsequent withdrawal) was not part of the CDP hearing or
determination and is not part of the CDP appeal at issue here.” Id. Accordingly,
the dictum in Tucker concerning sec. 6331(k)(1) does not control this case.
                                         - 15 -

law or confer rights on taxpayers. See, e.g, Fargo v. Commissioner, 447 F.3d 706,

713 (9th Cir. 2006), aff’g T.C. Memo. 2004-13. In any event, we conclude that

respondent did not abuse his discretion in applying these provisions.

      IRM pt. 5.11.1.2.2.8 appears in the part of the IRM that provides

information and guidance to revenue officers in the collection process. It directs

the IRS Collection Division to rescind notices of intent to levy in certain

circumstances, one of which is when a notice of intent to levy is issued while levy

action is prohibited and the taxpayer timely requests an Appeals hearing. By

contrast, IRM pt. 8.22.2.2.2.2(5) (Dec. 14, 2010) states that Appeals should not

rescind a notice of intent to levy that was issued during the pendency of an

installment agreement, even where levy is prohibited. Petitioner argues that these

two provisions are inconsistent and that we should treat IRM pt. 5.11.1.2.2.8 as

controlling. We disagree. The IRM is not necessarily inconsistent in directing the

Collection Division and Appeals to take different actions. SO Magee did not

abuse her discretion in following the IRM provisions directed to and applicable to

Appeals, of which she was a part.

      In sum, we hold that respondent did not abuse his discretion in declining to

rescind the notices of intent to levy.
                                        - 16 -

E. Respondent’s Determination Requiring Petitioner To Make an $8,520
   Downpayment as a Condition of His Installment Agreement

      Petitioner also argues that respondent abused his discretion in determining

that petitioner should make an $8,520 downpayment as a condition of his

installment agreement.7 Petitioner argues that having to make the $8,520 down

payment would cause economic hardship for him and his wife.

      Section 6159 authorizes the Secretary to enter into an installment agreement

upon determining that the proposed installment agreement would facilitate full or

partial collection of the tax liability. Recognizing that the Secretary has the

discretion to accept or reject any proposed installment agreement, see sec.

301.6159-1(c)(1)(i), Proced. & Admin. Regs., the Court gives due deference to the

Secretary’s determination, see Marascalco v. Commissioner, T.C. Memo. 2010-

130, aff’d, 420 Fed. Appx. 423 (5th Cir. 2011).

      The IRM describes procedures the IRS uses in determining whether a

proposed installment agreement facilitates the collection of an unpaid tax liability.

These procedures require taxpayers to liquidate assets in order to qualify for an




      7
        Petitioner does not take issue with SO Magee’s determination requiring
installment payments of $25-per-month for one year followed by payments of
$734 per month thereafter.
                                       - 17 -

installment agreement in the absence of special circumstances such as old age, ill

health, or economic hardship. See IRM pt. 5.14.1.4(5)-(6) (June 1, 2010).

      During petitioner’s Appeals hearing Mr. Westlake asserted repeatedly that

petitioner and his wife were elderly and had limited financial resources and that

making the $8,520 downpayment would pose an undue economic hardship for

them. Additionally, Mr. Westlake asserted that the funds in the joint bank account

did not actually belong to petitioner. We find no indication in the record that SO

Magee expressly considered these issues.

      Because the record does not allow for meaningful review in this regard, and

there is a genuine dispute of material fact, we will deny the parties’ cross-motions

for summary judgment and remand this case for Appeals to clarify the basis for SO

Magee’s determination with regard to the appropriateness of requiring the

disputed downpayment in the light of the concerns petitioner raised. See Hoyle v.

Commissioner, 131 T.C. 197, 204-205 (2008). Upon remand Appeals shall

consider any new collection alternative that petitioner may wish to propose, taking

into account any changed circumstances and other relevant factors.

      To reflect the foregoing,


                                                An appropriate order will be issued.
