                               T.C. Memo. 2016-235



                            UNITED STATES TAX COURT



                  JO ANN SNODGRASS, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 27515-13L.                          Filed December 27, 2016.



      Jo Ann Snodgrass, pro se.

      Natasha V. Chevalier, for respondent.



                             MEMORANDUM OPINION


      PUGH, Judge: This case was commenced in response to a Notice of

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

(notice of determination), sustaining respondent’s notice of intent to levy to collect

petitioner’s unpaid Federal income tax liabilities for 2000, 2002, 2003, 2004, and

2005 (the subject years).
                                         -2-

[*2]                                  Background

       This case was submitted fully stipulated under Rule 122.1 The stipulated

facts are incorporated in our findings by this reference. Petitioner resided in Texas

at the time she filed her petition.

       From 2000 to 2010 petitioner lived at 2432 23d St., Lubbock, Texas 79411

(2432 address). Petitioner received $43,698 of taxable wages and $4,674 of self-

employment income in 2000; $16,747 of taxable wages and $13,223 of self-

employment income in 2002; $14,347 of taxable wages and $15,008 of

nonemployee compensation in 2003; $8,939 of taxable wages, $2,964 of taxable

pension distributions, and $7,327 of nonemployee compensation in 2004; and

$8,174 of nonemployee compensation and $7,000 of capital gains in 2005. She

failed to file a Federal income tax return for any of these years. Respondent’s

records also show that she had not filed a return since 1983; nor did she file a

return for 2010, 2011, 2012, or 2013.

       Because petitioner failed to file a return for any of the subject years,

respondent prepared substitutes for returns under section 6020. On September 6,

2004, respondent sent, by certified mail, notices of deficiency for tax years 2000

       1
        Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended and in effect at all relevant times. Rule
references are to the Tax Court Rules of Practice and Procedure.
                                        -3-

[*3] and 2002 to petitioner at 2430 23d St., Lubbock, Texas 79411 (2430 address).

The administrative record includes substitute U.S. Postal Service (USPS) Forms

3877, Certified Mailing List, for 2000 and 2002. Both show the 2430 address, list

the number of pieces mailed, and include a USPS date stamp and a signature by

the receiving postmaster. The notices of deficiency were returned to respondent as

unclaimed.

      On November 9, October 5, and October 13, 2009, respondent sent, by

certified mail, notices of deficiency for tax years 2003, 2004, and 2005,

respectively, to petitioner at the 2432 address. The substitute Forms 3877 for

2003, 2004, and 2005 all show the 2432 address, list the number of pieces mailed,

and include a USPS date stamp but no signature by the receiving postmaster. The

certified mail article number on each substitute Form 3877 matches the certified

mail article number shown on the corresponding notice of deficiency. The notice

of deficiency for 2003 was returned to respondent as unclaimed, and the notices of

deficiency for 2004 and 2005 were returned as undeliverable. Envelopes stamped

by the USPS as unclaimed or undeliverable are included in the record as

attachments to the corresponding notice of deficiency. The envelopes do not bear

an address but rather have windows through which the address on the notice
                                         -4-

[*4] would be viewable. Petitioner did not file a petition with the Court

challenging any of the five notices of deficiency.

      The administrative record also includes respondent’s Automated Substitute

for Return Account Transcript (ASFR transcript) for petitioner and the INOLES

transcript for petitioner. Both transcripts reflect the 2430 address for petitioner on

the date the notices of deficiency for 2000 and 2002 were mailed. The ASFR

transcript also shows that Forms W-2, Wage and Tax Statement, a Form 1099-

MISC, Miscellaneous Income, and a Form 1099-C, Cancellation of Debt, were

sent to petitioner at the 2430 address as well as at a 2215 University Avenue

address. The INOLES transcript also shows that a Form 1099-MISC was sent to

petitioner at both of these addresses. The ASFR transcript and the INOLES

transcript reflect the 2432 address for petitioner on the dates that the notices of

deficiency for 2003, 2004, and 2005 were mailed.

      The administrative record does not indicate how respondent learned about

the 2430 address or the 2432 address; nor did petitioner offer any evidence

showing that she advised respondent of her address at any time before her

correspondence with respondent as part of the collection actions in issue here.

      On October 1, 2012, respondent sent petitioner a Final Notice of Intent to

Levy and Notice of Your Right to a Hearing with respect to her unpaid tax
                                         -5-

[*5] liabilities for 2000, 2002, 2003, 2004, and 2005, at 1607 70th St., Lubbock,

Texas (the address she indicated on her petition). On November 2, 2012,

petitioner timely submitted a Form 12153, Request for a Collection Due Process or

Equivalent Hearing. Petitioner requested a face-to-face hearing and alleged that

she did not believe she was liable for the assessed tax, never had a chance to

challenge the liability, and, if determined liable, would like to discuss collection

alternatives.

      On March 11, 2013, Settlement Officer Avalos (SO Avalos) sent petitioner

a letter scheduling a telephonic conference for May 1, 2013, and requesting that

she submit financial information and past-due tax returns for 2006 through 2011

(past-due returns). The letter advised petitioner that she might not be able to

challenge her underlying liabilities but offered her an opportunity to file returns

for the subject years. There followed a series of exchanges in which petitioner

ignored SO Avalos’ requests for information, reiterated her position that she never

received the notices of deficiency, asked for proof of her liabilities, asked for a

copy of the Internal Revenue Service (IRS) rules governing the administrative

hearing, and requested a face-to-face hearing. SO Avalos explained that petitioner

did not qualify for a face-to-face hearing because she was not in compliance with

her tax return filing obligations and had not provided requested financial
                                         -6-

[*6] information; and SO Avalos repeated the requests for the financial

information and past-due returns. Petitioner did not call at the scheduled time for

the telephonic conference on May 1, 2013. Respondent’s case activity report

reflects that SO Avalos checked IRS records for petitioner’s address of record at

the time the notices of deficiency were mailed and erroneously states that all of the

notices of deficiency were mailed to the 2432 address.

      On June 24, 2013, respondent issued to petitioner a notice of determination

upholding respondent’s proposed levy to collect her income tax liabilities for the

subject years. This initial notice of determination also erroneously states that all

five notices of deficiency were sent to petitioner at the 2432 address.

      Petitioner timely petitioned the Court for redetermination. Because she

claims that she had not received the notices of deficiency, and the administrative

record did not specify what documents SO Avalos reviewed to verify that the

notices of deficiency were properly mailed, the parties jointly moved that the case

be remanded to the Appeals Office, and we remanded the case.

      As part of the remand, on November 25, 2014, SO Avalos sent petitioner a

letter (mistakenly dated June 6, 2014) that scheduled a telephonic supplemental

hearing for January 6, 2015, and again requested financial information and past-

due returns. SO Avalos also obtained copies of the substitute Forms 3877 for all
                                        -7-

[*7] of the subject years. On December 19, 2014, petitioner again requested a

face-to-face hearing and refused to provide any of the requested information until

respondent proved that the notices of deficiency were issued. Petitioner again

failed to call SO Avalos for the scheduled hearing on January 6, 2015. On January

12, 2015, SO Avalos sent petitioner another letter with copies of the notices of

deficiency. The letter explained that the notices of deficiency “were sent to the

address of record at the time they were issued” and reiterated that to receive a

face-to-face hearing petitioner had to be in compliance with her tax return filing

obligations and provide financial information. The letter again requested the

financial information and past-due returns. Petitioner responded by letter January

21, 2015. In her letter petitioner claimed that the notices of deficiency were

incomplete and were not sent to the correct address and that there was no proof of

mailing. She requested that the tax be abated and asked that the case be

transferred to an Appeals officer in Texas (SO Avalos was in California). She

never provided the financial information or the past-due returns. On April 14,

2015, SO Avalos issued a supplemental notice of determination (supplemental

notice) upholding the proposed levy. The supplemental notice repeated that “our

records indicate all required notices were issued to your address of record at the

time they were mailed.” The supplemental notice also recited the documents
                                         -8-

[*8] reviewed to confirm that notice and demand requirements were met, including

the notices of deficiency and the substitute Forms 3877 for all five subject years

showing that the notices of deficiency were mailed to petitioner’s last known

address of record, along with the envelopes showing the notices of deficiency

were returned as unclaimed or undeliverable. This supplemental notice accurately

recited the addresses used on the five notices of deficiency (the 2430 address for

2000 and 2002 and the 2432 address for 2003, 2004, and 2005).

                                      Discussion

      Petitioner claims that she did not receive a notice of deficiency for any of

the subject years or otherwise have a prior opportunity to contest her underlying

liabilities and that she properly raised the issue of her underlying liabilities with

SO Avalos. For the first time on brief petitioner also claims that respondent’s

substitute Forms 3877 contained irregularities. Petitioner did not dispute what

was in the administrative record.

      Where the validity of the underlying tax liability is in issue, the Court

reviews the Commissioner’s determination de novo. Goza v. Commissioner, 114

T.C. 176, 181-182 (2000). When, as here, the IRS prepares a substitute for return

pursuant to section 6020(b), the taxpayer may raise her liability in an

administrative hearing if she did not receive a notice of deficiency or otherwise
                                         -9-

[*9] have a prior opportunity to contest the liability. See secs. 6320(c),

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

Court considers a taxpayer’s challenge to her underlying liability in a collection

action case only if she properly raised that challenge at her administrative hearing.

Giamelli v. Commissioner, 129 T.C. 107, 115-116 (2007); see secs. 301.6320-

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

is not properly raised at the administrative hearing if the taxpayer fails to request

consideration of that issue by the settlement officer or if she requests consideration

but fails to present any evidence after being given a reasonable opportunity to do

so. Giamelli v. Commissioner, 129 T.C. at 115-116; see McRae v. Commissioner,

T.C. Memo. 2015-132, at *8 (holding that the taxpayer failed to explicitly contest

his underlying liability during the administrative hearing and failed to provide any

evidence concerning his liability); see also Zook v. Commissioner, T.C. Memo.

2013-128, at *6-*7 (holding that the taxpayer failed to properly raise her

underlying liabilities when she failed to provide any documentation of the

underlying liabilities and asserted frivolous arguments).

      The settlement officer must verify that the requirements of any applicable

law or administrative procedure have been met, consider issues properly raised by

the taxpayer, and consider whether the proposed collection action balances the
                                        - 10 -

[*10] need for the efficient collection of taxes with the taxpayer’s legitimate con-

cern that any collection action be no more intrusive than necessary. Sec. 6330(b),

(c)(3). Where the validity of the underlying tax liability is not properly at issue,

the Court will review the settlement officer’s administrative determination on the

issues above for abuse of discretion. Sego v. Commissioner, 114 T.C. at 610.

I. Last Known Address

      As part of the settlement officer’s determination, she must verify that a valid

notice of deficiency was issued to the taxpayer at the taxpayer’s last known

address. Sec. 6330(c)(1); Jordan v. Commissioner, 134 T.C. 1, 12 (2010); Hoyle

v. Commissioner, 131 T.C. 197, 200 (2008). Petitioner’s first argument is that the

notices of deficiency for 2000 and 2002 are invalid because they were not sent to

her last known address as required by section 6212(b). If a notice of deficiency is

mailed to the taxpayer at the taxpayer’s last known address, actual receipt of the

notice is immaterial; the notice is valid. See, e.g., United States v. Zolla, 724 F.2d

808, 810 (9th Cir. 1984).

      Section 301.6212-2(a), Proced. & Admin. Regs., defines the taxpayer’s “last

known address” as the address on the taxpayer’s most recently filed and properly

processed return unless the IRS has been given “clear and concise notification” of

a different address. Section 301.6212-2(b)(2), Proced. & Admin. Regs., provides
                                       - 11 -

[*11] that the IRS will update a taxpayer’s address of record on the basis of data

accumulated and maintained in the USPS National Change of Address (NCOA)

database. See also Rev. Proc. 2001-18, sec. 2.02, 2001-1 C.B. 708, 708,

superseded by Rev. Proc. 2010-16, sec. 3.02, 2010-19 I.R.B. 664, 665 (which also

provides the same rule). The address in the NCOA database is the last known

address for the taxpayer unless (and until) the taxpayer files and the IRS processes

a Federal income tax return with an address different from the address in the

NCOA database or gives “clear and concise notification” of a different address.

Sec. 301.6212-2(b)(2)(ii)(A) and (B), Proced. & Admin. Regs.

      We also have held that the IRS was justified in believing that a notice of

deficiency was mailed to the correct address and that the taxpayer simply failed to

claim the notice of deficiency when the notice of deficiency was returned to the

IRS marked “Unclaimed” and there was no evidence in the record that the IRS was

aware either before or immediately after the mailing of a notice of deficiency that

the address of record was not correct. See Thomas v. Commissioner, T.C. Memo.

1998-438, aff’d without published opinion, 194 F.3d 1305 (4th Cir. 1999).

Conversely, the IRS was found to have failed to exercise reasonable diligence by

sending a notice of deficiency to an address from which prior correspondence was
                                       - 12 -

[*12] returned as undeliverable. See Terrell v. Commissioner, 625 F.3d 254 (5th

Cir. 2010).

      Petitioner offered no evidence that she gave “clear and concise notification”

of any address other than that used by respondent, and she did not file a return for

any tax year after 1983. She offered no evidence that she notified respondent of

any address other than the one shown in respondent’s ASFR transcript and

INOLES transcript and used on the notices of deficiency for 2000 and 2002 on the

date these notices were mailed. She offered no evidence that she updated the

NCOA database. The record shows that the notices of deficiency issued for 2000

and 2002 were returned to the IRS as unclaimed rather than undelivered, as

evidenced by the USPS stamp on both envelopes. Therefore, we hold that

respondent was justified in believing the notices of deficiency were sent to the

correct address and that respondent exercised reasonable diligence in determining

that these notices were mailed to petitioner at her last known address. See Arroyo

v. Commissioner, T.C. Memo. 2013-112.

      While the administrative record shows that the original notice of

determination erroneously stated that all the notices of deficiency were mailed to

petitioner at the 2432 address, that error was corrected later, and the supplemental

notice informed her that respondent’s records showed that the 2000 and 2002
                                         - 13 -

[*13] notices of deficiency were mailed to her at her last known address of record.

We therefore find no abuse of discretion in SO Avalos’ verification on remand as

to the mailing of these notices of deficiency to petitioner’s last known address.

II. Mailing Irregularities

      Petitioner also argues that the notices of deficiency for 2003, 2004, and

2005 are not valid because they were not properly mailed, alleging defects in the

substitute Forms 3877 and citing Coleman v. Commissioner, 94 T.C. 82 (1990).

Where, as here, a taxpayer identifies an irregularity in the assessment procedure,

the settlement officer cannot rely solely on tax transcripts to verify that a notice of

deficiency has been sent. See Hoyle v. Commissioner, 131 T.C. at 205 n.7

(“[W]here a taxpayer alleges no notice of deficiency was mailed he has * * *

‘[identified] an irregularity[.]’” (alteration in original)). Instead, the settlement

officer is directed to examine “underlying documents in addition to the tax

transcripts, such as the taxpayer’s return, a copy of the notice of deficiency, and

the certified mailing list”. See id. (quoting Chief Counsel Notice CC-2006-19

(Aug. 18, 2006)); Schlegel v. Commissioner, T.C. Memo. 2016-90, at *10;

Marlow v. Commissioner, T.C. Memo. 2010-113, 2010 WL 2011617, at *8 n.4;

Casey v. Commissioner, T.C. Memo. 2009-131.
                                         - 14 -

[*14] Petitioner argues that respondent is not entitled to a presumption of official

regularity, see, e.g., Hoyle v. Commissioner, 131 T.C. at 203, because the

substitute Forms 3877 for tax years 2003, 2004, and 2005 are not signed by the

receiving USPS employee and are not signed or initialed by the IRS employees

who issued the notices of deficiency. We need not consider petitioner’s objection

because we have actual evidence of mailing. See Coleman v. Commissioner, 94

T.C. at 91; see also Portwine v. Commissioner, T.C. Memo. 2015-29, aff’d,             F.

App’x      , 2015 WL 757374 (10th Cir. Aug. 24, 2016); Massie v. Commissioner,

T.C. Memo. 1995-173, aff’d without published opinion, 82 F.3d 423 (9th Cir.

1996); Wheat v. Commissioner, T.C. Memo. 1992-268, 1992 WL 95632, at *4.

        Petitioner argues that this evidence does not establish that the notices of

deficiency were mailed to her last known address because the notices were

returned to respondent as either unclaimed or undelivered. We disagree. The

returned envelopes show that the notices of deficiency were delivered to the USPS

for mailing. Petitioner stipulated that the address shown on the notices of

deficiency and on the substitute Forms 3877 for 2003, 2004, and 2005 was her

correct address on the dates the notices of deficiency for those years were mailed.

In Bobbs v. Commissioner, T.C. Memo. 2005-272, 2005 WL 3157919, we found

that a Form 3877 that had a USPS date stamp and an address that the taxpayer did
                                        - 15 -

[*15] not challenge established by a preponderance of the evidence that the notice

of deficiency was mailed to the taxpayer’s last known address. Id., 2015 WL

3157919, at *2-*3.

      We conclude that the dated copies of the notices of deficiency and the

returned envelopes, combined with the substitute Forms 3877, bearing matching

certified mail article numbers, are sufficient to show that the notices of deficiency

for 2003, 2004, and 2005 were mailed to petitioner at her last known address. The

supplemental notice of determination referred to these documents as part of SO

Avalos’ verification review. Consequently, we hold that SO Avalos properly

verified, pursuant to section 6330(c)(1), that “the requirements of any applicable

law or administrative procedure have been met”.

III. Right To Challenge Underlying Liabilities

      If we assume that petitioner never received the notices of deficiency for any

of the subject years as she claims, she would be entitled to challenge her

underlying liabilities. The administrative record shows that SO Avalos did give

her that opportunity, asking her to submit tax returns for the subject years.

Petitioner did not do so.

      Petitioner’s failure to present evidence as to her correct liabilities, such as

tax returns for the subject years or provide requested financial information amount
                                         - 16 -

[*16] to a failure properly to raise the issue of her underlying liabilities at the

administrative hearing. See McRae v. Commissioner, T.C. Memo. 2015-132; secs.

301.6320-1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.

Because petitioner failed to raise her underlying liabilities properly in her

administrative hearing with SO Avalos, she is not entitled to do so now. Because

her underlying liabilities are not properly before us, we review SO Avalos’

determination for abuse of discretion only. See Goza v. Commissioner, 114 T.C.

at 182; Caudle v. Commissioner, T.C. Memo. 2014-196, aff’d, 603 F. App’x 220

(4th Cir. 2015); secs. 301.6320-1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3,

Proced. & Admin. Regs.

IV. Compliance With Tax Return Filing Obligations

      At the administrative hearing a taxpayer is expected to provide relevant

information requested by the settlement officer for her consideration of the facts

and issues involved in the hearing. Sec. 301.6330-1(e)(1), Proced. & Admin.

Regs. Petitioner refused to participate in the scheduled telephonic hearing and

failed to submit the financial information and past-due returns requested by SO

Avalos.2 Petitioner was not in compliance with her Federal income tax return

      2
       Petitioner did not argue in her petition or in her brief that SO Avalos
abused her discretion by denying petitioner’s request for a face-to-face hearing
                                                                        (continued...)
                                       - 17 -

[*17] filing obligations, nor did she present any collection alternatives. A

settlement officer does not abuse her discretion when she declines to consider a

collection alternative under these circumstances. See Huntress v. Commissioner,

T.C. Memo. 2009-161 (holding no abuse of discretion when the settlement officer

rejects collection alternatives where the taxpayer offered none, failed to provide

financial information, and was not current with filing and payment obligations);

Lance v. Commissioner, T.C. Memo. 2009-129 (holding no abuse of discretion

when taxpayer fails to provide financial information); sec. 301.6330-1(d)(2),

Q&A-D8, Proced. & Admin. Regs.

      Once a taxpayer has been given a reasonable opportunity for a hearing but

fails to avail herself of it, the Commissioner may proceed to make a determination

based on the case file as was done here. See Oropeza v. Commissioner, T.C.

Memo. 2008-94 (upholding a determination based on the case file where the

taxpayer refused to participate in an administrative hearing either in person or by

telephone), aff’d, 402 F. App’x 221 (9th Cir. 2010); secs. 301.6330-1(d)(2), Q&A-


      2
       (...continued)
and to audio record the hearing. In any event, our review of the administrative
record confirms no abuse of discretion here. Calafati v. Commissioner, 127 T.C.
219, 228 (2006); see, e.g., Zastrow v. Commissioner, T.C. Memo. 2010-215;
Moline v. Commissioner, T.C. Memo. 2009-110, aff’d, 363 F. App’x 675 (10th
Cir. 2010).
                                        - 18 -

[*18] D7 and Q&A-D8, 301.6330-1(f)(2), Q&A-F4, Proced. & Admin. Regs. Our

review of the record reveals no abuse of discretion here.

V. Section 6673 Penalty

      Finally, we warned petitioner in our order dated September 21, 2015, that

she appeared to be taking positions that we have deemed frivolous or groundless

or intended for delay. We advised her that section 6673 authorizes the Court to

impose a penalty of up to $25,000 for frivolous and groundless arguments or

whenever it appears to the Court that “proceedings before * * * [us] have been

instituted or maintained by the taxpayer primarily for delay”. Sec. 6673(a)(1)(A).

Notwithstanding her disavowal of any frivolous arguments, that appears to us to

be the case here. Because this is petitioner’s first case before the Court, we will

not impose a penalty; but she may expect a penalty in a future case if she persists

in maintaining the same frivolous and meritless positions despite our warning.

                                     Conclusion

      After review of the entire administrative record, the Court concludes that

SO Avalos satisfied the verification requirements of section 6330 and she did not
                                       - 19 -

[*19] abuse her discretion in sustaining the notice of intent to levy. Any

contentions we have not addressed are irrelevant, moot, or meritless.


                                                      Decision will be entered

                                                for respondent.
