                  T.C. Memo. 2004-171



                UNITED STATES TAX COURT



           THOMAS G. COLLIER, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 2538-03L.            Filed July 21, 2004.


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

     Held: Because there was no abuse of discretion by
R in concluding that P’s noncompliance with Federal tax
filing obligations would render him ineligible for
collection alternatives, R’s determination to proceed
with collection action is sustained.


Thomas G. Collier, pro se.

James M. Payton, for respondent.
                                   - 2 -

                            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 Actions(s) Under Section 6320 and/or 6330.          The issue

for decision is whether respondent may proceed with collection

action as so determined.

                                Background

       Petitioner filed Federal income tax returns for 1995, 1997,

1998, and 1999 and did not fully pay the reported liabilities.

Respondent subsequently assessed the reported amounts, along with

statutory additions, and sent to petitioner notices of balance

due.       Respondent then issued to petitioner a Final Notice -

Notice of Intent to Levy and Notice of Your Right to a Hearing

dated February 2, 2002, with regard to the 1995, 1997, 1998, and

1999 years.       The notice reflected a total amount due of

$51,373.49, which amount included statutory additions.

       In response to the notice, petitioner’s representative, C.

Page Hamrick III (Mr. Hamrick), timely submitted a Form 12153,

Request for a Collection Due Process Hearing, received by



       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.
                               - 3 -

respondent on February 14, 2002.   The Form 12153 contained the

following explanation of petitioner’s disagreement with the

notice of levy:   “Taxpayer has filed offer in compromise and

requests consideration prior to collection action.”

     Petitioner’s collection case was assigned to Settlement

Officer James M. Payton (Mr. Payton), of the Internal Revenue

Service (IRS) Office of Appeals in Charleston, West Virginia.

Following his receipt of the case in June of 2002, Mr. Payton

checked IRS records for information pertaining to the offer in

compromise referenced in petitioner’s Form 12153.   Mr. Payton

found no indication that petitioner had filed an offer in

compromise, although Forms 1040, U.S. Individual Income Tax

Return, showing that petitioner was due refunds, had been filed

for 2000 and 2001.

     Mr. Payton spoke to Mr. Hamrick by telephone on September

26, 2002.   During that conversation, Mr. Hamrick indicated that

petitioner also had outstanding employment tax liabilities

related to his business and provided Mr. Payton with the employer

identification number.   Mr. Hamrick stated that he would contact

petitioner to schedule a meeting for October and would then

communicate an exact date to Mr. Payton.

     When petitioner failed to return Mr. Hamrick’s calls,

Mr. Hamrick on November 5, 2002, gave Mr. Payton permission to

contact petitioner directly.   Mr. Payton immediately sent
                               - 4 -

petitioner a letter requesting that petitioner contact him no

later than November 18, 2002, to arrange a convenient meeting.

Petitioner telephoned Mr. Payton on November 19, 2002, and a

conference was scheduled for November 27, 2002, at 10:00 a.m.

     A face-to-face hearing between petitioner and Mr. Payton was

conducted on November 27, 2002, as scheduled.   Petitioner

communicated that, in addition to his employment as a wage-

earning operator for a third-party entity, he was the self-

employed owner of an air conditioning repair business.   He

further indicated that he employed three individuals but was

unable to stay current with his employment tax responsibilities.

     Petitioner at the hearing also provided Mr. Payton with a

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

Self-Employed Individuals, and stated that he thought Mr. Hamrick

had filed an offer in compromise on his behalf.   Mr. Payton

explained that the IRS had no record of receiving an offer in

compromise but that petitioner would not be eligible for such an

alternative because he was not in compliance with requirements

for filing returns for and paying employment tax obligations.

During the hearing, petitioner raised no issues other than

resolution of the unpaid liabilities by means of an offer in

compromise.   Specifically, for instance, he did not raise the

correctness of the underlying income tax liabilities which were

the subject of the collection action.
                                 - 5 -

     The aforementioned Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 was issued to

petitioner on January 7, 2003.    The notice summarized

respondent’s determination:   “You are not in compliance with

filing and paying payroll taxes, therefore Appeals [sic] only

alternative is to sustain the proposed Levy.”    An attachment to

the notice provided further details, including the following

discussion under the heading “Issues raised by the Taxpayer”:

     Issue: You didn’t want the Internal Revenue Service to
     take any levy actions. You thought your Power of
     Attorney filed an Offer-In-Compromise as doubt to
     collectibility on your behalf.

     Response: On 11/27/2002, we had a face-to-face
     conference. You stated at our meeting that you have
     accrued 941 tax liabilities from 1998 to present and
     will not be able to file timely 941 tax returns or make
     current federal tax deposits at this time.

     IRC §7122 authorizes the Secretary of the Treasury to
     settle, or compromise, federal tax liabilities by
     accepting less than full payment under certain
     circumstances.

     IRM [Internal Revenue Manual] 5.8.3.3(4) (rev. 2-4-
     2000) states that an Offer cannot be processed if the
     taxpayer has not filed all tax returns.

     I researched your account and did not find that there
     was an Offer under consideration. Furthermore, per the
     compliance requirements, you would not qualify for an
     Offer at this time.

     No other relevant issues were raised.

     An imperfect petition challenging this notice of

determination was filed with the Tax Court on February 11, 2003.
                                 - 6 -

On March 17, 2003, petitioner filed an amended petition which set

forth his position as follows:

     Background Information

     Try to pay back taxes over a period of ten-year period
     while in bankrupt court. I could not pay the amount in
     a five year period because of amount for five-year was
     too high. I was behind in alimony payment[.] I had a
     choice to pay it or my taxes.

     Relief

     A chance to pay over a long period of time.

Both the petition and the amended petition reflected an address

for petitioner in Charleston, West Virginia.

     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

May 28, 2004; no such response was received by this Court.    A

hearing on respondent’s motion, at which both petitioner and

counsel for respondent appeared, was held on June 7, 2004, in

Charleston, West Virginia.

                              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.”    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,
                                 - 7 -

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, 98 T.C. 518, 520 (1992), affd. 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
                               - 8 -

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 been furnished notice

of the opportunity for administrative review of the matter in the

form of a hearing before the Internal Revenue Service 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.
                                  - 9 -

                       (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.    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, 114 T.C. 604, 610 (2000).]

     B.   Analysis

     Nothing in the record indicates that petitioner has at any

time throughout the administrative or judicial proceedings,

including the hearing on respondent’s motion, attempted to

challenge his underlying tax liability.     Accordingly, we review

respondent’s determination to proceed with collection 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, 112 T.C. 19, 23 (1999).
                                - 10 -

     On various occasions during the process before Appeals,

petitioner communicated an interest in pursuing an offer in

compromise.     Section 7122(a), as pertinent here, authorizes the

Secretary to compromise any civil case arising under the internal

revenue laws.    Regulations promulgated under section 7122 set

forth three grounds for compromise of a liability:    (1) Doubt as

to liability, (2) doubt as to collectibility, or (3) promotion of

effective tax administration.    Sec. 301.7122-1(b), Proced. &

Admin. Regs.2    With respect to the third-listed ground, a

compromise may be entered to promote effective tax administration

where:   (1)(a) Collection of the full liability would cause

economic hardship; or (b) exceptional circumstances exist such

that collection of the full liability would undermine public

confidence that the tax laws are being administered in a fair and

equitable manner; and (2) compromise will not undermine




     2
       Sec. 301.7122-1, Proced. & Admin. Regs., contains an
effective date provision stating that the section applies to
offers in compromise pending on or submitted on or after July 18,
2002. Sec. 301.7122-1(k), Proced. & Admin. Regs. Previous
temporary regulations by their terms apply to offers in
compromise submitted on or after July 21, 1999, through July 19,
2002. Sec. 301.7122-1T(j), Temporary Proced. & Admin. Regs., 64
Fed. Reg. 39027 (July 21, 1999). The final and temporary
regulations do not differ materially in substance in any way
relevant here, and temporary regulations are entitled to the same
weight and binding effect as final regulations. Peterson Marital
Trust v. Commissioner, 102 T.C. 790, 797 (1994), affd. 78 F.3d
795 (2d Cir. 1996). For simplicity and convenience, the final
regulations are cited.
                                  - 11 -

compliance by taxpayers with the tax laws.    Sec. 301.7122-

1(b)(3), Proced. & Admin. Regs.

     The Internal Revenue Manual provides generally that an offer

in compromise is not processable if all tax returns for which the

taxpayer has a filing requirement have not been filed.    2

Administration, Internal Revenue Manual (CCH), sec.

5.8.3.2.1(1)(a), at 16,281 (Nov. 30, 2001).    The Internal Revenue

Manual further specifies:   “In-business taxpayers must have

timely filed and timely deposited all employment taxes for two

quarters preceding the offer submission.   They must have also

timely paid all federal tax deposits due in the quarter in which

the offer is submitted.”    Id.

     The Tax Court, moreover, acknowledging such provisions of

the Internal Revenue Manual, has ruled as follows:

     The Commissioner’s decision not to process an offer in
     compromise or a proposed collection alternative from
     taxpayers who have not filed all required tax returns
     is not an abuse of discretion. Londono v.
     Commissioner, T.C. Memo. 2003-99; Ashley v.
     Commissioner, T.C. Memo. 2002-286; Richter v. United
     States, 90 AFTR 2d 2002-5998, 2002-2 USTC par. 50,607
     (C.D. Cal. 2002); AJP Mgmt. v. United States, 87 AFTR
     2d 2001-347, 2001-1 USTC par. 50,184 (C.D. Cal. 2000);
     TTK Mgmt. v. United States, 87 AFTR 2d 2001-350, 2001-1
     USTC par. 50,185 (C.D. Cal. 2000). The Commissioner
     may set reasonable priorities for Internal Revenue
     Service staff as needed to effectively administer the
     revenue laws. The decision not to accept the offer in
     compromise submitted by petitioner on account of her
     failure to file all required returns was an entirely
     reasonable exercise of the Commissioner’s discretion in
     administering the offer in compromise program.
     [Rodriguez v. Commissioner, T.C. Memo. 2003-153.]
                               - 12 -

     The instant case, in addition to presenting the threshold

problem that petitioner has never in fact filed an offer in

compromise that was accepted for processing, falls squarely

within the above-quoted rationale.      The record contains certified

transcripts (Forms 4340, Certificate of Assessments, Payments,

and Other Specified Matters) reflecting petitioner’s failure to

file:    (1) Forms 941, Employer’s Quarterly Federal Tax Return for

the periods ending December 31, 2000, March 31, 2001, December

31, 2001, March 31, 2002, June 30, 2002, and September 30, 2002;

and (2) Forms 940, Employer’s Annual Federal Unemployment (FUTA)

Tax Return, for the years 2001 and 2002.

     Petitioner readily acknowledged such noncompliance during

the administrative process.   At the hearing on respondent’s

motion, petitioner at times seemed to be claiming that, as of the

hearing date, all required filings had been made.     However, he

also expressly conceded that at least one quarterly return was

not filed and offered no documentary support as to any other

alleged submissions.

     In light of this history and on this record, no abuse of

discretion was committed by respondent in concluding that

petitioner would not be eligible for an offer in compromise or

similar collection alternative.3   Furthermore, with respect to


     3
       We note, for example, that the Internal Revenue Manual
likewise highlights compliance with all individual and business
                                                   (continued...)
                             - 13 -

other 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 or valid

challenges to the appropriateness of the collection action.     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 and that any issue

not raised in the assignments of error shall be deemed conceded.

See Lunsford v. Commissioner, 117 T.C. 183, 185-186 (2001); Goza

v. Commissioner, 114 T.C. 176, 183 (2000).   Accordingly, the

Court concludes that respondent’s determination to proceed with

collection of petitioner’s tax liabilities was not an abuse of

discretion.

     To reflect the foregoing,


                                        An appropriate order

                                   granting respondent’s motion

                                   and decision for respondent

                                   will be entered.




     3
      (...continued)
filing requirements as a prerequisite to approval of an
installment agreement. 2 Administration, Internal Revenue Manual
(CCH) sec. 5.14.1.4.1, at 17,510 (July 1, 2002).
