                  T.C. Memo. 2006-192



                UNITED STATES TAX COURT



            WOODROW REYNOLDS, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 17810-04L.                Filed September 11, 2006.


     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 P has advanced only frivolous
arguments, R’s determination to proceed with collection
action is sustained.

     Held, further, a penalty pursuant to sec. 6673(a),
I.R.C., is due from P and is awarded to the United
States in the amount of $1,500.


Woodrow Reynolds, pro se.

Timothy S. Murphy, for respondent.
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             MEMORANDUM FINDINGS OF FACT AND OPINION


     WHERRY, Judge:   This case is before the Court on a petition

for judicial review of a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330.   The issues

for decision are:   (1) Whether respondent may proceed with

collection action as so determined; and (2) whether the Court

should sua sponte impose a penalty pursuant to section 6673(a).1

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulations of the parties, with accompanying exhibits, are

incorporated herein by this reference.   At the time this petition

was filed, petitioner resided in Muskegon, Michigan.

     For the 1999 and 2000 taxable years, petitioner submitted to

the Internal Revenue Service (IRS) Forms 1040, U.S. Individual

Income Tax Return, that contained entirely zeros.   On October 2,

2002, respondent issued to petitioner a notice of deficiency for

the 2000 taxable year showing a deficiency of $19,566 and a

penalty pursuant to section 6662(a) and (b)(1) of $3,913.20.    On

November 27, 2002, respondent issued to petitioner a notice of

deficiency for the 1999 taxable year that showed a deficiency of

$14,611 and additions to tax pursuant to sections 6651(a)(1) and

6654(a) of $3,294.55 and $630.07, respectively.   Petitioner,


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) of 1986, as amended.
                                - 3 -

following his receipt of the October 2, 2002, notice of

deficiency sent a letter in December 2002, to Mr. Richard

Creamer, the director of the compliance center that issued such

notices, requesting documentation of the Secretary’s delegation

to Mr. Creamer of authority to issue statutory notices of

deficiency.   Petitioner did not receive a response and did not

file a petition contesting either of the determined tax

deficiencies with this Court.

     On December 9, 2003, respondent mailed to petitioner a Final

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

for the 1999 and 2000 taxable years, reflecting a total unpaid

balance of $53,723.18.   Petitioner timely submitted a Form 12153,

Request for a Collection Due Process Hearing, and attached a

lengthy letter threatening legal action against any revenue

officer or revenue agent who tries to collect tax from him and

containing tax-protester rhetoric, including such arguments as:

(1) There is no Code section that makes petitioner liable for

income taxes; (2) the IRS does not have the authority to change

the amount of taxes that a taxpayer claims to owe on a submitted

tax return; (3) an Appeals officer must present to a taxpayer

documentation from the Secretary verifying that any applicable

law and administrative procedure have been met; and (4)

petitioner did not receive a statutory notice and demand for

payment.   Petitioner also demanded documentation proving that the
                               - 4 -

Secretary delegated authority to various IRS directors and

employees involved in petitioner’s case.

     Mr. Lawrence Phillips, the settlement officer assigned to

petitioner’s case, mailed petitioner a letter dated July 20,

2004, that advised petitioner on the procedures of a collection

hearing.   The letter warned that “items that you mention in your

CDP request are items that: 1. Courts have determined are

frivolous or groundless, or 2. Appeals does not consider.    These

are moral, religious, political, constitutional, conscientious,

or similar grounds.”   Mr. Phillips further enclosed with the

letter copies of Forms 4340, Certificate of Assessments,

Payments, and Other Specified Matters, for 1999 and 2000.

     The collection hearing was held via telephone on August 5,

2004.   During the hearing petitioner again demanded documentation

and reiterated tax-protester rhetoric.   Petitioner also

questioned Mr. Phillips as to why his hearing was being conducted

by a settlement officer and not an Appeals officer.

     On August 18, 2004, respondent mailed to petitioner the

above-mentioned Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330 for the 1999 and 2000

taxable years.   Petitioner timely filed a petition with this

Court for redetermination of the collection action.   Therein, in

addition to contentions akin to those set forth in his Form

12153, petitioner argued:   (1) Notices of Deficiency that are
                                 - 5 -

signed by the director of the service center and not the

Secretary are invalid; (2) he did not receive a proper collection

hearing because Mr. Phillips was a settlement officer, not an

Appeals officer; and (3) he was improperly precluded from raising

relevant issues that challenged the validity of the underlying

tax liabilities.

                                OPINION

I.   Collection Action

     A. General Rules

     Pursuant to section 6331(a), if a taxpayer liable to pay

taxes fails to do so within 10 days after notice and demand for

payment, the Secretary is authorized to collect such tax by levy

upon the taxpayer’s property.     The Secretary is obliged to

provide the taxpayer with 30 days’ advance notice of levy

collection and of the administrative appeals available to the

taxpayer.    Sec. 6331(d).   Upon a timely request a taxpayer is

entitled to a collection hearing before the IRS Office of

Appeals.    Sec. 6330(b)(1).

     At the collection hearing, the taxpayer may raise “any

relevant issue relating to the unpaid tax or the proposed levy,”

including appropriate spousal defenses, challenges to the

appropriateness of collection actions, and offers of collection

alternatives.    Sec. 6330(c)(2)(A).     The taxpayer may not contest

the validity of the underlying tax liability unless the taxpayer
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did not receive a notice of deficiency for such tax liability or

did not otherwise have an earlier opportunity to dispute such tax

liability.     Sec. 6330(c)(2)(B).   In rendering a determination,

the Appeals officer must take into consideration verification

that any applicable law and administrative procedure have been

met, relevant issues relating to the unpaid tax or proposed levy,

and “whether any proposed collection action balances the need for

the efficient collection of taxes with the legitimate concern of

the person that any collection action be no more intrusive than

necessary.”     Sec. 6330(c)(3).

     The taxpayer is entitled to appeal the determination of the

Appeals Office made on or before October 16, 2006, to the Tax

Court or a U.S. District Court, depending on the type of tax at

issue.     Sec. 6330(d).2   Where the validity of the underlying tax

liability is properly at issue, the Court will review the matter

de novo.     Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000).      The Court reviews

any other administrative determination regarding the proposed

levy action for an abuse of discretion.      Sego v. Commissioner,

supra at 610; Goza v. Commissioner, supra at 182.




     2
      Determinations made after Oct. 16, 2006, are appealable
only to the Tax Court. See Pension Protection Act of 2006, Pub.
L. 109-280, sec. 855, 120 Stat. 1019.
                                - 7 -

     B. Analysis

           1. Appeals Hearing

     Petitioner argues that he did not receive a proper

collection hearing because his hearing was conducted by a

settlement officer, not an Appeals officer.    While section

6330(c) references “appeals officer”, the remainder of section

6330 and corresponding regulations more broadly use the terms

“officer” and “employee”.   Section 6330(b)(3) provides that the

collection hearing shall be “conducted by an officer or employee

who has had no prior involvement with respect to the unpaid tax”.

The regulations further explain that “A CDP hearing will be

conducted by an employee or officer of Appeals who * * * has had

no involvement with respect to the tax for the tax periods to be

covered by the hearing”.    Sec. 301.6330-1(d)(1), Proced. & Admin.

Regs.   Accordingly, there is no requirement that the collection

hearing be conducted by an Appeals officer; the hearing need only

be conducted by an officer or employee of the Appeals Office,

which includes a settlement officer.    Rohner v. United States, 91

AFTR 2d 2003-2135 (N.D. Ohio 2003).

           2. Review of Underlying Liability

     Petitioner claims that he received invalid notices of

deficiency and was improperly precluded from challenging the

underlying tax liabilities at the collection hearing.    In

particular, petitioner contends that the notices of deficiency
                               - 8 -

are invalid because they were signed by the compliance center

director of the Ogden Service Center instead of the Secretary and

there was no documentation delegating authority to such director.

It is well established that the Secretary or his delegates may

issue notices of deficiency.   Secs. 6212(a), 7701(a)(11)(B) and

(12)(A)(i).   A notice of deficiency prepared and issued by a

director is valid, and the director is not obligated to produce a

copy of the order delegating such authority from the Secretary.

Nestor v. Commissioner, 118 T.C. 162, 165-166 (2002); Secs.

301.6212-1(a), 301.7701-9(b), Proced. & Admin. Regs.

     In addition, petitioner contends that the Secretary cannot

recalculate the amount of taxes he determined on his “zero”

returns.   Petitioner’s submitting “zero” returns does not

preclude the Commissioner from determining petitioner’s tax

liability.

     The Court is satisfied that petitioner received valid

notices of deficiency for the 1999 and 2000 taxable years and had

the opportunity to challenge the validity of the underlying tax

liabilities but failed to do so.   Accordingly, petitioner was

properly precluded from contesting the validity of the underlying

tax liabilities at the collection hearing.

     C. Review for Abuse of Discretion

     Given the foregoing, the notice of determination at issue is

subject to review for abuse of discretion because the existence
                                - 9 -

or amounts of petitioner’s underlying tax liabilities is not

properly at issue.    An abuse of discretion has occurred if the

“Commissioner exercised * * * [his] discretion arbitrarily,

capriciously, or without sound basis in fact or law.”      Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).

     Petitioner alleges he did not receive a statutory notice and

demand for payment.    Section 6303(a) provides that “the Secretary

shall, as soon as practicable, and within 60 days, after the

making of an assessment of a tax pursuant to section 6203, give

notice to each person liable for the unpaid tax, stating the

amount and demanding payment thereof.”    If the notice is mailed,

it shall be sent to the taxpayer’s last known address.     Sec.

6303(a).   A notice of balance due constitutes a notice and demand

for payment for purposes of section 6303(a).    Craig v.

Commissioner, 119 T.C. 252, 262-263 (2002).    Forms 4340 show that

respondent promptly sent petitioner notices of balance due for

both 1999 and 2000.

     Petitioner also contends that the Appeals officer must

present to the taxpayer documentation from the Secretary

verifying that any applicable law and administrative procedure

have been met.   Section 6330(c)(1) provides that 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.”    However, section
                                - 10 -

6330(c)(1) only requires that the officer obtain such

verification before making a determination; it does not require

the officer to present a copy of the verification to the

taxpayer.     Nestor v. Commissioner, supra at 166-167.   Nor does

section 6330(c)(1) require the officer to rely on a particular

document to satisfy the verification requirement imposed by that

section.     Craig v. Commissioner, supra at 261-262.   The officer

may rely on a Form 4340 to make such a verification because it

“provides at least presumptive evidence that a tax has been

validly assessed”.     Davis v. Commissioner, 115 T.C. 35, 40

(2000).     Petitioner actually received copies of the relevant

Forms 4340 and has made no showing that would tend to call into

question the accuracy of the information reported thereon.      No

abuse of discretion was committed with respect to the

verification requirement.

     Petitioner did not show that there was any irregularity in

the assessment procedure that would raise a question about the

validity of the assessments.     Respondent noted verification in

the notice of determination that all requirements of applicable

law and administrative procedure had been met and that respondent

had properly balanced the need for efficient collection against

any legitimate concerns of intrusiveness raised by petitioner.

Petitioner has not presented any evidence or persuasive arguments

that respondent abused his discretion but instead has repeatedly
                                 - 11 -

raised frivolous tax protester arguments.      Hence, the Court

concludes that respondent’s determination to proceed with

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

discretion, and respondent may proceed with the proposed

collection.

II.   Section 6673 Penalty

      Section 6673(a)(1) authorizes the Tax Court to impose a

penalty not in excess of $25,000 on a taxpayer for proceedings

instituted primarily for delay or in which the taxpayer’s

position is frivolous or groundless.      “A petition to the Tax

Court, or a tax return, is frivolous if it is contrary to

established law and unsupported by a reasoned, colorable argument

for change in the law.”      Coleman v. Commissioner, 791 F.2d 68, 71

(7th Cir. 1986).

      Respondent warned petitioner about the section 6673(a)(1)

penalty in the notice of determination, and the Court warned

petitioner at trial that he may be subject to such a penalty if

he continued to raise frivolous arguments.      Although respondent

has not asked the Court to impose a penalty pursuant to section

6673(a)(1), the Court may sua sponte impose such a penalty

against a taxpayer.   Pierson v. Commissioner, 115 T.C. 576, 580-

581 (2000).   The Court is convinced that petitioner’s position is

frivolous and made for delay because it is based on tax-protester

rhetoric, which has been rejected by this Court and many others.
                              - 12 -

See Roberts v. Commissioner, 118 T.C. 365 (2002), affd. 329 F.3d

1224 (11th Cir. 2003); Lunsford v. Commissioner, 117 T.C. 183

(2001); Goza v. Commissioner, 114 T.C. 176 (2000); Keenan v.

Commissioner, T.C. Memo. 2006-45; Frey v. Commissioner, T.C.

Memo. 2004-87.   Therefore, the Court concludes that a penalty of

$1,500 should be imposed on petitioner.

     The Court has considered all of petitioner’s contentions,

arguments, requests, and statements.    To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.

     To reflect the foregoing,


                                      An appropriate decision will

                                 be entered.
