                                T.C. Memo. 2020-49



                         UNITED STATES TAX COURT



                    PAULETTE ETOTY, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 6871-19L.                          Filed April 20, 2020.



      Paulette Etoty, pro se.

      Valerie Vlasenko and Thomas A. Deamus, for respondent.



                           MEMORANDUM OPINION


      LAUBER, Judge: In this collection due process (CDP) case, petitioner

seeks review of a determination by the Internal Revenue Service (IRS or respond-

ent) that a levy on petitioner’s State income tax refund should not be sustained.

Respondent has moved for summary judgment under Rule 121, contending that
                                        -2-

[*2] there are no disputed issues of material fact and that his determination was

proper as a matter of law.1 We agree and accordingly will grant the motion.

                                    Background

      The following facts are based on the parties’ pleadings and motion papers,

including the attached declarations and exhibits. See Rule 121(b). Petitioner re-

sided in New York when she petitioned this Court.

      Petitioner filed a timely Federal income tax return for 2008. Because of

insufficient withholding, her return showed a balance due, which she failed to pay.

She was incarcerated from 2009-2015; upon her release her poor health prevented

her from resuming her previous work as a docketing clerk.

      In September 2016 petitioner called an IRS Automated Collection System

(ACS) officer and indicated that she could not pay her 2008 balance, which then

totaled $1,337. The ACS officer conducted a hardship review and determined that

petitioner qualified for currently not collectible (CNC) status. The IRS placed her

account in CNC status as of September 2, 2016.

      On April 30, 2018, despite petitioner’s CNC status, the IRS sent her a No-

tice CP92, Seizure of Your State Tax Refund and Notice of Your Right to a Hear-

      1
       All statutory 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. We round all monetary amounts to the nearest dollar.
                                        -3-

[*3] ing. This notice informed her that the IRS had seized a $216 refund of New

York income tax and applied it against her 2008 Federal tax liability. The notice

advised petitioner that she had the right to appeal by requesting a CDP hearing.

      Petitioner timely requested a CDP hearing. She indicated that she sought a

collection alternative, checking the boxes for “Offer in Compromise” and “I Can-

not Pay Balance.”2 She did not challenge her underlying tax liability for 2008.

      Petitioner’s CDP hearing request was sent to the IRS Automated Collection

Service Support (ACSS) office in Kansas City, Missouri. In a letter dated June 7,

2018, the ACSS office agreed with petitioner’s submission that she was unable to

pay her 2008 balance due. This letter instructed her to submit a Form 12256,

Withdrawal of Request for Collection Due Process or Equivalent Hearing, in order

to defer the levy. She replied that she wanted a hearing and was not withdrawing

her CDP request. In July 2018 the IRS notified petitioner that her request for a

CDP hearing was being forwarded to the Office of Appeals.

      The case was assigned to an Appeals Account Resolution Specialist (spe-

calist) in Memphis, Tennessee. The specialist reviewed petitioner’s administrative

file and confirmed that her 2008 tax liability had been properly assessed and that


      2
        Petitioner also checked the box for “lien withdrawal,” but the IRS has not
filed a notice of Federal tax lien for 2008.
                                        -4-

[*4] all other requirements of applicable law and administrative procedure had

been met. The specialist sent petitioner a letter scheduling a telephone CDP

hearing, advising her that she needed to submit Form 656, Offer in Compromise,

to enable the IRS to consider that form of collection relief. The letter requested

that petitioner complete and submit a Form 656 within 14 days, but she submitted

nothing before the hearing.

      The hearing was held as scheduled on September 19, 2018. The specialist

explained the CDP process and discussed possible collection alternatives. Peti-

tioner indicated that she did not want her future refunds taken. The specialist ad-

vised her that the IRS would not levy on future State tax refunds so long as her

account remained in CNC status, but explained that the IRS could still apply Fed-

eral income tax overpayments against her 2008 liability. The specialist indicated

that, if petitioner submitted an OIC that was accepted, she would receive future

Federal tax refunds so long as she complied with the terms of the OIC. Petitioner

said she would consider that option, but she never submitted a Form 656.

      On February 8, 2019, petitioner called the specialist to ask that the IRS not

withhold the Federal tax refund she hoped to receive for 2018. At that time she

had not yet filed a return for 2018. The specialist promptly returned petitioner’s

call and explained that the Appeals Office could not stop a potential refund from
                                        -5-

[*5] being applied to her 2008 account because she had not yet filed a 2018 return.

The specialist suggested that petitioner contact the Taxpayer Advocate Service

and complete Form 911, Request for Taxpayer Advocate Service Assistance, as

soon as she filed her 2018 return.

      On March 29, 2019, having received no Form 656 or other communication

from petitioner about an OIC, the specialist decided to close the case. On April

16, 2019, the IRS issued a notice of determination in which it did not sustain the

levy on petitioner’s State tax refund because her account had been placed in CNC

status. The notice determined that “the Notice of Intent to Levy no longer bal-

ances the efficient collection of taxes with your legitimate concern that the collec-

tion action be no more intrusive than necessary.”

      Although the levy was not sustained, petitioner sought review in this Court.

In her timely filed petition she asked that the IRS be prevented from taking any

future tax refunds because she has “very limited income.” On November 13,

2019, respondent moved for summary judgment. Petitioner filed a response stat-

ing that she would have proposed an OIC if she had understood what was required

of her. She asks that interest on her 2008 tax liability be waived and expressed

willingness to execute an installment agreement requiring payments of $15 a

month for 120 months.
                                         -6-

[*6]                                  Discussion

A.     Summary Judgment Standard

       The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). The Court may grant summary judgment when there is no

genuine dispute as to any material fact and a decision may be rendered as a matter

of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). Where the moving party properly makes and

supports a motion for summary judgment, “an adverse party may not rest upon the

mere allegations or denials of such party’s pleading” but must set forth specific

facts showing a genuine dispute for trial. Rule 121(d). Petitioner has alleged no

dispute of material fact, and we find that summary adjudication is appropriate.

B.     Standard of Review

       Section 6330(d)(1) does not prescribe the standard of review that this Court

should apply in reviewing an IRS administrative determination in a CDP case.

The general parameters for such review are marked out by our precedents. Where

(as here) the taxpayer’s underlying liability is not properly at issue,3 we review the

       3
        Petitioner did not dispute her tax liability for 2008 at the CDP hearing and
is thus precluded from challenging it here. See Thompson v. Commissioner, 140
                                                                         (continued...)
                                         -7-

[*7] IRS’ determination for abuse of discretion. Goza v. Commissioner, 114 T.C.

176, 182 (2000). Abuse of discretion exists when a determination is arbitrary,

capricious, or without sound basis in fact or law. See Murphy v. Commissioner,

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

C.    Abuse of Discretion

      In deciding whether the specialist abused her discretion we consider wheth-

er she: (1) properly verified that the requirements of any applicable law or ad-

ministrative procedure have been met, (2) considered any relevant issues petitioner

raised, and (3) determined whether “any proposed collection action balances the

need for the efficient collection of taxes with the legitimate concern of * * * [peti-

tioner] that any collection action be no more intrusive than necessary.” See sec.

6330(c)(3). Our review of the record establishes that the specialist properly dis-

charged all of her responsibilities under section 6330(c).

      When a taxpayer’s account is placed in CNC status, “the debt is not for-

given or extinguished,” but collection action is deferred for the time being. Shenk

v. Commissioner, T.C. Memo. 2015-193, 110 T.C.M. (CCH) 332, 333. Petition-


      3
        (...continued)
T.C. 173, 178 (2013) (“A taxpayer is precluded from disputing the underlying
liability if it was not properly raised in the CDP hearing.”); sec. 301.6330-1(f)(2),
Q&A-F3, Proced. & Admin. Regs.
                                         -8-

[*8] er’s account was placed in CNC status almost two years before the levy on

her State tax refund. Because the IRS had already determined that petitioner

should not be subjected to collection action, the specialist reasonably concluded

that the levy should not be sustained.

      While petitioner’s CNC status will defer collection action with respect to

any future State tax refunds, the IRS may continue to apply Federal tax overpay-

ments against her assessed liability for 2008. See sec. 6402(a) (allowing the IRS

to apply an overpayment against any Federal tax liability). It is well established

that crediting an overpayment against an outstanding liability is not a levy. See

Greene-Thapedi v. Commissioner, 126 T.C. 1, 7-8 (2006) (“An offset under sec-

tion 6402 does not constitute a levy action and accordingly is not a collection

action that is subject to review in * * * [a] section 6330 proceeding.”); Bullock v.

Commissioner, T.C. Memo. 2003-5, 85 T.C.M. (CCH) 737, 738-739 (“An offset

under section 6402 is distinguishable from, and does not constitute, a levy ac-

tion.”). We lack authority to direct the IRS to take any action with respect to

future Federal tax refunds that petitioner may claim. See Greene-Thapedi, 126

T.C. at 13.

      The specialist invited petitioner to propose an OIC by submitting a Form

656 before the CDP hearing. Petitioner did not do so. During the hearing the spe-
                                        -9-

[*9] cialist reiterated her invitation, explaining that an OIC, once accepted by the

IRS, would enable petitioner to receive Federal tax refunds. Petitioner said she

would consider this option, and the specialist waited more than six months for

petitioner to submit something. The specialist did not abuse her discretion in

closing the case at that point. See Reed v. Commissioner, 141 T.C. 248, 254

(2013) (“A taxpayer must propose an OIC for it to be considered during the

collection hearing.”), supplemented by T.C. Memo. 2014-41; Bergdale v.

Commissioner, T.C. Memo. 2014-152, 108 T.C.M. (CCH) 95, 97.

      In her response to the motion for summary judgment petitioner suggests the

possibility of interest abatement or an installment agreement. However, because

she did not request interest abatement or propose an installment agreement during

the CDP hearing, these matters are not subject to our review at this time. See

Stinchcomb v. Commissioner, T.C. Memo. 2009-259, 98 T.C.M. (CCH) 456, 458;

Macdonald v. Commissioner, T.C. Memo. 2009-63, 97 T.C.M. (CCH) 1320, 1322;

sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.

      While we are sympathetic to petitioner’s situation, she received a favorable

outcome from the CDP hearing in that the levy was not sustained. That was the

only relief the Appeals Office could offer without further documentation from her.

Her failure to submit a Form 656 during the CDP hearing, however, does not pre-
                                        - 10 -

[*10] vent her from entering into an OIC or other collection alternative with the

IRS. See Savoy v. Commissioner, T.C. Memo. 2014-162, 108 T.C.M. (CCH) 168,

174, aff’d, 589 F. App’x 187 (4th Cir. 2015). She is free to submit to the IRS at

any time, for its review and possible acceptance, a collection alternative in the

form of an OIC or an installment agreement, supported by information about her

current financial circumstances.

      To reflect the foregoing,


                                                 An appropriate order and decision

                                       will be entered for respondent.
