                               T.C. Memo. 2017-89



                        UNITED STATES TAX COURT



               CHESTER GEORGE DURDA, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1066-16L.                         Filed May 24, 2017.



      Chester George Durda, pro se.

      Brandon A. Keim, Doreen Marie Susi, and Rachael J. Zepeda for

respondent.



                          MEMORANDUM OPINION


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

seeks review pursuant to sections 6320(c) and 6330(d)(1) of the determination by

the Internal Revenue Service (IRS or respondent) to uphold the filing of a notice
                                        -2-

[*2] of Federal tax lien (NFTL).1 Respondent has moved for summary judgment

under Rule 121, contending that there are no disputed issues of material fact and

that his determination to sustain the proposed collection action was proper as a

matter of law. We agree and accordingly will grant the motion.

                                    Background

      The following facts are based on the parties’ pleadings and respondent’s

motion, including the attached affidavit and exhibits. Petitioner resided in Ari-

zona when he filed his petition.

      Petitioner is a gun dealer with a history of noncompliance with his Federal

tax obligations. During 2009-2011 he did business through a sole proprietorship

called Lancaster Consulting, which manufactured and sold semiautomatic weap-

ons and related parts. Petitioner paid wages to numerous employees and con-

tractors during this period. However, he did not withhold and deposit the required

Federal employment taxes; he did not file the required Federal employment tax re-

turns; and he did not furnish his contractors with required Forms 1099-MISC,

Miscellaneous Income.




      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] The IRS looked into petitioner’s employment tax liabilities for 2009-2011.

It determined the amounts of his liabilities; prepared a substitute for return (SFR)

for each period and type of tax; and determined additions to tax under section

6651(a)(1) and (2) (for failure to timely file and pay, respectively) and a penalty

under section 6656 (for failure to deposit taxes). In May 2013 the IRS sent peti-

tioner a letter accompanied by the SFRs, explaining that he could challenge the

proposed liabilities by filing a written protest followed by a conference with the

IRS Appeals Office.

      Petitioner filed a timely protest in June 2013. The Appeals Office worked

with him for more than a year in an effort to achieve a resolution; it concluded in

November 2014 that no agreement could be reached. The Appeals Office accord-

ingly informed petitioner that his 2009-2011 employment tax liabilities, including

additions to tax and penalty, would be assessed. The IRS duly assessed those lia-

bilities, in the amount of $102,445, in December 2014.

      In an effort to collect these unpaid liabilities, the IRS filed an NFTL and

timely issued petitioner Letter 3172, Notice of Federal Tax Lien Filing and Your

Right to a Hearing. Petitioner timely requested a CDP hearing, indicating that he

could not pay the outstanding balance and requesting withdrawal of the NFTL.
                                        -4-

[*4] The case was assigned to a settlement officer (SO) in Phoenix, Arizona, who

scheduled a face-to-face hearing with petitioner on November 3, 2015.

      At the hearing the SO explained to petitioner that his account had already

been placed in “currently not collectible” (CNC) status because of his financial

difficulties. The SO rejected his request that the NFTL be withdrawn, concluding

that it should remain in place to protect the Government’s interest. Petitioner re-

quested audit reconsideration of the employment tax liabilities; he asserted that he

had issued Forms 1099-MISC to some contractors and asked for additional time to

retrieve copies of these documents. The SO set a deadline of November 20 for

petitioner to supply any documents that he believed relevant to a request for audit

reconsideration.

      Petitioner did not supply any documents by the SO’s deadline. On Decem-

ber 1 petitioner informed the SO that he would discuss his options with an attor-

ney and call the SO back on December 7. Having received no communication

from petitioner by December 15, the SO on that date closed the case and issued a

notice of determination sustaining the NFTL filing.

      Petitioner timely petitioned this Court for review. On February 10, 2017,

respondent filed a motion for summary judgment and later supplemented that

motion. Petitioner responded to the motion as supplemented on March 28, 2017.
                                        -5-

[*5]                                 Discussion

A.     Summary Judgment

       The purpose of summary judgment is to expedite litigation and avoid cost-

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

T.C. 678, 681 (1988). Under Rule 121(b), the Court may grant summary judgment

when there is no genuine dispute as to any material fact and a decision may be ren-

dered as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520

(1992), aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary

judgment, we construe factual materials and inferences drawn from them in the

light most favorable to the nonmoving party. Ibid. However, the nonmoving par-

ty may not rest upon the mere allegations or denials of his pleadings but instead

must set forth specific facts showing that there is a genuine dispute for trial. Rule

121(d); see Sundstrand Corp., 98 T.C. at 520.

       Petitioner in responding to the summary judgment motion alleged no dis-

pute as to any material fact. We find that no material facts are in dispute and that

this case is appropriate for summary adjudication.

B.     Standard of Review

       Although neither section 6320(c) nor section 6330(d)(1) prescribes the

standard of review that this Court should apply in reviewing an IRS administrative
                                         -6-

[*6] determination in a CDP case, our case law tells us what standard to adopt.

Where the validity of a taxpayer’s underlying tax liability is properly at issue, we

review the IRS’ determination de novo. Goza v. Commissioner, 114 T.C. 176,

181-182 (2000). Where the taxpayer’s underlying liability is not properly at issue,

we review the IRS decision for abuse of discretion only. Id. at 182. Abuse of

discretion exists when a determination is arbitrary, capricious, or without sound

basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d,

469 F.3d 27 (1st Cir. 2006); see also Keller v. Commissioner, 568 F.3d 710, 716

(9th Cir. 2009), aff’g in part T.C. Memo. 2006-166.

      A taxpayer may raise a CDP challenge to the existence or amount of his un-

derlying tax liability only if he “did not receive any statutory notice of deficiency

for such tax liability or did not otherwise have an opportunity to dispute such tax

liability.” Sec. 6330(c)(2)(B). In determining whether the taxpayer had a prior

opportunity to dispute his liability, the regulations distinguish between liabilities

that are subject to deficiency procedures and those that are not. Employment tax

liabilities are not subject to deficiency procedures. See, e.g., Leyshon v. Commis-

sioner, T.C. Memo. 2015-104, 109 T.C.M. (CCH) 1535, 1538, aff’d, 649 F. App’x

299 (4th Cir. 2016). With respect to such liabilities, the regulations provide that

“[a]n opportunity to dispute the underlying liability includes a prior opportunity
                                          -7-

[*7] for a conference with Appeals that was offered either before or after the

assessment of the liability.” Sec. 301.6330-1(e)(3), Q&A-E2, Proced. & Admin.

Regs.2

         Petitioner had a prior opportunity to dispute his employment tax liabilities

with the IRS Appeals Office, and he took advantage of that opportunity by filing a

written protest in June 2013. He participated in multiple conferences with Ap-

peals, which attempted unsuccessfully to reach a resolution with him. Because

petitioner disputed in a prior Appeals Office hearing the same tax liabilities that

are in question here, section 6330(c)(2)(B) barred him from contesting those lia-




         2
        Courts, including ours, have repeatedly sustained the validity of this regu-
lation even though the taxpayer (as here) had no right to judicial review of the
prior Appeals Office determination. See Our Country Home Enters., Inc. v. Com-
missioner, __ F. 3d __, 2017 WL 1679402, at *10 (7th Cir. May 3, 2017) (con-
cluding that the regulation “reasonably interprets § 6330(c)(2)(B)’s ‘opportunity to
dispute’ language to include prior conferences with the Appeals Office, excluding
conferences prior to the IRS’s assessment of a tax subject to deficiency proce-
dures”); Keller Tank Servs. II, Inc. v. Commissioner, __ F.3d __, 2017 WL
1424973, at *15-*17 (10th Cir. Apr. 20, 2017); Iames v. Commissioner, 850 F.3d
160, 165 (4th Cir. 2017) (finding the regulation to be a “straightforward in-
terpretation of [s]ection 6330(c)(2)(B)”); Hassell Family Chiropractic, DC, PC v.
Commissioner, 368 F. App’x 695, 696 (8th Cir. 2010), aff’g T.C. Memo.
2009-127; Lewis v. Commissioner, 128 T.C. 48, 60-61 (2007); Bitter v. Commis-
sioner, T.C. Memo. 2017-46, at *11; Mangum v. Commissioner, T.C. Memo.
2016-24, 111 T.C.M. (CCH) 1099, 1102 (declining to reconsider Lewis).
                                        -8-

[*8] bilities during the CDP process. We accordingly review the SO’s action for

abuse of discretion only.3

      C.     Analysis

      The only question is whether the IRS properly sustained the NFTL filing to

facilitate collection of petitioner’s unpaid 2009-2011 employment tax liabilities.

We review the record to determine whether the SO: (1) properly verified that the

requirements of applicable law or administrative procedure have been met; (2)

considered any relevant issues petitioner raised; and (3) considered whether “any

proposed collection action balances the need for the efficient collection of taxes




      3
        During the CDP hearing the SO expressed willingness to entertain a re-
quest for audit reconsideration and set a deadline for petitioner’s submission of
relevant documents. A grant of audit reconsideration is discretionary and any aud-
it is conducted outside the CDP process; a settlement officer’s determination on
this point is usually not subject to judicial review. See Jones v. Commissioner,
T.C. Memo. 2007-142 (holding that the IRS did not abuse its discretion by de-
clining to wait for the results of a request for audit reconsideration before issuing
notices of determination sustaining a proposed levy and NFTL). See generally
Tucker v. Commissioner, 135 T.C. 114, 148 (2010) (concluding that the IRS’
authority to conduct an audit reconsideration “is grounded in section 6404(a),”
governing abatement of tax, and “is not precluded by a prior CDP determination”),
aff’d, 676 F.3d 1129 (D.C. Cir. 2012); Daniel v. Commissioner, T.C. Memo.
2009-28, 97 T.C.M. (CCH) 1120, 1121 (describing audit reconsideration as a
proceeding “separate and apart from the instant CDP collection case”). In any
event, petitioner did not qualify for audit reconsideration because he did not
submit any documents by the SO’s deadline or during the ensuing three weeks.
                                        -9-

[*9] with the legitimate concern of * * * [petitioner] that any collection action be

no more intrusive than necessary.” See sec. 6330(c)(3).

      Our review of the record establishes that the SO properly verified that the

tax liabilities in question had been properly assessed and that all requirements of

applicable law and administrative procedure had been satisfied.4 The SO informed

petitioner that his account had been placed into CNC status, so that the IRS would

forbear from active collection efforts unless his financial situation improved.

However, the SO rejected petitioner’s request that the NFTL be withdrawn, con-

cluding that it was necessary to protect the Government’s interest while petitioner

remained in CNC status.




      4
       Section 6751(b)(1) provides that “[n]o penalty under this title shall be as-
sessed unless the initial determination of such assessment” receives written super-
visory approval. This provision does not apply to “any addition to tax under sec-
tion 6651, 6654, or 6655.” Sec. 6751(b)(2)(A). The SO therefore was not re-
quired to verify that the additions to tax assessed against petitioner under sections
6651(a)(1) and (2), for failure to file employment tax returns and failure to pay
employment taxes, respectively, had been approved by a supervisor. Section
6656, although included in a subchapter captioned “Additions to the Tax and Ad-
ditional Amounts,” provides that if a person fails to deposit the required taxes,
“there shall be imposed upon such person a penalty” in a specified amount. The
record includes an IRS penalty approval form, signed by the examining agent’s
supervisor, approving imposition of the section 6656 penalty for failure to deposit
taxes. To the extent that the supervisory-approval requirement of section
6751(b)(1) applies to the section 6656 penalty assessed against petitioner, we con-
clude that the IRS satisfied it.
                                        - 10 -

[*10] Section 6323(j) authorizes the Secretary to withdraw an NFTL filing if he

determines that: (1) the filing was erroneous; (2) the taxpayer has entered into an

installment agreement that renders the NFTL unnecessary; (3) withdrawal of the

NFTL “will facilitate the collection of the tax liability”; or (4) withdrawal of the

NFTL “would be in the best interests of the taxpayer (as determined by the Nation-

al Taxpayer Advocate) and the United States.” The SO correctly determined that

the first, second, and fourth justifications for withdrawal have no application here.

      As to the third possible justification, petitioner represented that he had ter-

minated his business activities and was living on Social Security. Since petition-

er’s tax liabilities had been determined to be “currently not collectible,” the SO

reasonably decided that withdrawal of the NFTL would not “facilitate collection”

of those liabilities and that maintenance of the NFTL was necessary to protect the

Government’s interest. “[N]othing in section 6320 or 6330 prohibits the filing of

an NFTL, even while a taxpayer’s account is considered to be in CNC status.”

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

Kyereme v. Commissioner, T.C. Memo. 2012-174, 103 T.C.M. (CCH) 1929,

1932-1933 (sustaining an NFTL filed against a taxpayer in CNC status as appro-

priate to balance the interests of the Government and the taxpayer).
                                        - 11 -

[*11] Although petitioner indicated his desire to have the NFTL withdrawn, he

did not provide the SO with any financial or other information that would justify

granting his request. Because NFTL withdrawal is a collection alternative, see

sec. 301.6320-1(e)(3), Q&A-E6, Proced. & Admin. Regs., petitioner was required

to provide the SO with relevant information for him to consider in determining

whether withdrawal of the NFTL might be warranted. Petitioner did not do so.

He “therefore did not properly raise the issue before the Appeals Office or this

Court.” LG Kendrick, LLC v. Commissioner, 146 T.C. 17, 39 (2016), aff’d, __ F.

App’x __, 2017 WL 1325249 (10th Cir. Apr. 11, 2017). Finding that the SO did

not abuse his discretion in this or any other respect, we will grant respondent’s

motion for summary judgment and sustain the collection action upholding the

NFTL filing.

      To reflect the foregoing,


                                                 An appropriate order and decision

                                       will be entered.
