                               T.C. Memo. 2020-18



                         UNITED STATES TAX COURT



               NORTHSIDE CARTING, INC., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1117-18L.                         Filed January 23, 2020.



      Jeff Thomson (an officer), for petitioner.

      Marie E. Small, 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)1 of the determination by



      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.
                                        -2-

[*2] the Internal Revenue Service (IRS or respondent) to uphold collection actions

with respect to unpaid employment taxes for three calendar quarters during 2015

and 2016. 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 actions 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 papers, including the attached declarations and exhibits. See Rule 121(b).

Petitioner had its principal place of business in Massachusetts when it petitioned

this Court.

      Petitioner was incorporated in Massachusetts in 1996 and is engaged in the

trash removal and recycling business. The company is family run and has about

50 employees. Petitioner filed Forms 941, Employer’s Quarterly Federal Tax Re-

turn, reporting payroll taxes due for the quarters ending September 30 and Decem-

ber 31, 2015 (2015 quarters), and June 30, 2016 (2016 quarter). But it did not pay

the full balance of the taxes shown as due on those returns. In an effort to collect

these unpaid liabilities the IRS proceeded with collection actions.
                                        -3-

[*3] A.      Collection Actions

      On June 20 and September 12, 2016, the IRS mailed petitioner Notices

CP297A, Notice of Seizure and Notice of Your Right to a Hearing (2016 levy

notices), for the 2015 quarters. The levy notices informed petitioner that it could

request a CDP hearing within 30 days of each notice. Petitioner did not submit a

hearing request by the dates prescribed.

      The IRS subsequently mailed petitioner a notice of Federal tax lien filing

(lien notice) for the 2015 quarters, informing petitioner that it could request a CDP

hearing by January 6, 2017. In a letter postmarked December 30, 2016, petitioner

requested a hearing for the 2016 levy notices and the lien notice, checking the

boxes indicating its interest in an “Installment Agreement” and an “Offer in

Compromise.” This hearing request was timely with respect to the lien notice but

not with respect to the 2016 levy notices.

      On March 13, 2017, respondent mailed petitioner a Notice CP297A (2017

levy notice) for the 2016 quarter. The 2017 levy notice informed petitioner that it

could request a CDP hearing by April 12, 2017. Petitioner timely requested a

hearing, checking the box for “Installment Agreement.”
                                        -4-

[*4] B.      CDP and Equivalent Hearing

      On April 3, 2017, petitioner’s hearing request regarding the 2015 quarters

was assigned to a settlement officer (SO) in the IRS Appeals Office in Boston,

Massachusetts. The SO reviewed petitioner’s account transcripts and determined

that the requirements of applicable law and administrative procedure had been

met. The SO observed that, in addition to its unpaid tax liabilities for the 2015

quarters, petitioner had unpaid employment taxes for other periods totaling more

than $700,000.

      On April 4, 2017, the SO mailed petitioner a letter scheduling a hearing for

May 4, 2017. The SO informed petitioner that, in order for him to consider an in-

stallment agreement (IA) or an offer-in-compromise (OIC), petitioner needed to

supply: (1) a completed Form 433-B, Collection Information Statement for Busi-

nesses, with supporting documentation; (2) signed copies of unfiled tax returns for

2015 and 2016; (3) a Form 656, Offer in Compromise, or a proposal for an IA; and

(4) proof of timely deposit of all Federal employment taxes for the current quarter.

Petitioner did not submit any of the requested information before the hearing.

      On May 4, 2017, the hearing was held as scheduled with petitioner’s corpo-

rate officer, Jeff Thomson. The SO explained that he would be conducting a CDP

hearing with respect to the NFTL filing only, since petitioner’s hearing request
                                        -5-

[*5] with respect to the levy notices was untimely. As to them petitioner would be

given an “equivalent hearing.”2

      During the call the SO noted that petitioner’s outstanding tax liabilities

totaled $783,272. Mr. Thomson acknowledged that petitioner owed the taxes.

But he stated that petitioner wished to execute an IA as a collection alternative and

sought additional time to supply the necessary financial information. The SO

agreed and asked petitioner to provide by May 9, 2017, a completed Form 433-B,

three months of bank records, a current profit and loss statement, a proposed IA,

signed quarterly tax returns for the two most recent calendar quarters, and a list of

assets, accounts receivable, and accounts payable.

      On May 9, 2017, Mr. Thomson sent the SO petitioner’s quarterly tax return

for the period ended March 31, 2017; a Form 940, Employer’s Annual Federal

Unemployment (FUTA) Tax Return, for 2016; and a Form 433-B with attached

lists of assets. Mr. Thomson did not include a proposed IA, a profit and loss

statement, or a list of accounts receivable and accounts payable.


      2
       An equivalent hearing resembles a CDP hearing in that it is held with the
IRS Appeals Office, the SO considers the same issues that would have been con-
sidered at a CDP hearing, and the SO generally follows the same procedures. See
Craig v. Commissioner, 119 T.C. 252, 258 (2002). The chief difference is that the
SO’s decision following an equivalent hearing is embodied in a “decision letter”
as opposed to a “notice of determination.” Ibid.
                                          -6-

[*6] On May 22, 2017, the SO called Mr. Thomson to discuss the information

that had been provided and the documents that were still missing. Mr. Thomson

stated that petitioner now hoped to pay its tax liabilities in full after selling an

asset and collecting a large account receivable. Several days later Mr. Thomson

faxed to the SO documents indicating that petitioner might soon receive $550,000

from these sources. The SO determined on the basis of these documents that a

45-day extension of time to pay was reasonable.

      Accordingly, on May 30, 2017, the SO sent petitioner, and asked that peti-

tioner sign and return to him, a Form 12257, Summary Notice of Determination,

Waiver of Right to Judicial Review of a Collection Due Process Determination,

Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in

Section 6330(e)(1). Mr. Thomson signed the Form 12257 and returned it to the

SO on June 12, 2017. Petitioner thereby agreed that “the Notice of Federal Tax

Lien was properly filed,” that petitioner was being granted an extension of time to

pay its liability in full, and that petitioner’s “payment of $827,633.40 [wa]s due by

July 17, 2017.”

      On June 30, 2017, the SO received from petitioner a Form 2848, Power of

Attorney and Declaration of Representative, authorizing Philip McCoy to repre-

sent petitioner. During a subsequent telephone conference Mr. McCoy stated that
                                        -7-

[*7] petitioner was unable to meet its payment commitment as set forth in the

Form 12257 but instead wished to negotiate a collection alternative. Mr. McCoy

indicated that petitioner would propose an IA with a large downpayment. The SO

expressed willingness to consider this request, provided that petitioner promptly

supplied a three-month profit and loss statement with supporting bank records.

      On August 4, 2017, the SO received from Mr. McCoy a proposal for an IA

with a $400,000 initial payment followed by monthly installments of $10,000.

The letter mentioned that petitioner was gathering information to request abate-

ment of penalties on the basis of reasonable cause. On August 23, 2017, Mr.

McCoy transmitted petitioner’s financial statements for the first half of 2017 but

without supporting bank records. The financial statements showed that petitioner

experienced losses in excess of $800,000 during this period.

      On September 14, 2017, the CDP case involving the levy notice for petition-

er’s 2016 quarter was transferred to the SO. He reviewed petitioner’s account and

verified that the tax and penalty for that period had been properly assessed. As of

September 29, 2017, petitioner’s outstanding liability for the 2016 quarter was

$87,779.

      On October 25, 2017, the SO called Mr. McCoy and expressed doubt that

petitioner, given its substantial losses, could meet the terms of the proposed IA.
                                         -8-

[*8] Mr. McCoy replied that petitioner had jettisoned several unprofitable

contracts and that some of its employees were family members who would be

willing to take pay cuts. The SO gave petitioner two weeks to supply a profit and

loss statement for the third quarter of 2017 and a salary reduction analysis.

      On October 27, 2017, Mr. McCoy informed the SO that petitioner wished to

request penalty abatement. The SO agreed to consider that relief if petitioner sub-

mitted Form 843, Claim for Refund and Request for Abatement, by November 9,

2017, a deadline that the SO later extended to November 15, 2017.

      On December 11, 2017, having received none of the requested documents or

any further communication from Mr. McCoy or petitioner, the SO decided to close

the case. On December 20, 2017, the SO issued a decision letter (sustaining the

2016 levy notices) and a notice of determination (sustaining the NFTL filing for

the 2015 quarters and the 2017 levy notice). The notice of determination ex-

plained that petitioner did not qualify for an IA because it “did not submit all the

requested financial information to support * * * [its] collection information

statement” and because it was not in compliance with its current filing and

payment obligations. At that time IRS records indicated that petitioner “ha[d] not

filed Form 941 for the tax quarter 09/30/2017” and was “not current with * * *

[its] Federal Tax Deposits for the payroll tax quarter ending 12/31/2017.”
                                          -9-

[*9] Petitioner’s request for penalty abatement was not considered because

petitioner failed to submit a formal written request for abatement by the SO’s

deadline.

C.       Court Proceedings

         On January 22, 2018, petitioner timely petitioned this Court, attaching both

the decision letter and the notice of determination. Petitioner stated that it dis-

agreed with the IRS determination because the SO “did not calculate the proper

amount of tax due” or “apply payment to outstanding balances,” “did not fully

consider an offer in compromise,” “did not consider * * * [petitioner’s] penalty

abatement request,” and “agreed to a settlement and then issued a decision without

following through with the agreement.”

         On August 7, 2018, respondent filed a motion for summary judgment. The

Court directed petitioner to respond to that motion by August 31, 2018, warning

that failure to respond could result in a decision against it. See Rule 121(d). Peti-

tioner filed no response. On September 17, 2018, the Court denied respondent’s

motion for summary judgment, noting possible gaps in the record then before the

Court.

         The parties subsequently conferred and expressed hope that the case could

be resolved without trial. But a year passed and they were unable to reach agree-
                                       - 10 -

[*10] ment. On October 3, 2019, respondent filed a second motion for summary

judgment and an accompanying declaration, which supplemented the

administrative record. We directed petitioner to respond to the motion by

November 6, 2019, warning that “under Tax Court Rule 121(d), judgment may be

entered against a party who fails to respond to a Motion for Summary Judgment.”

Petitioner filed no response.

                                    Discussion

A.    Jurisdiction

      The Tax Court is a court of limited jurisdiction, and we must first ascertain

whether a case before us is one that Congress has authorized us to consider. Sec.

7442; Estate of Young v. Commissioner, 81 T.C. 879, 881 (1983). In a CDP case

such as this, our jurisdiction depends on the issuance of a notice of determination

following a timely request for a CDP hearing and the filing of a timely petition for

review. Sec. 6330(d)(1); Orum v. Commissioner, 123 T.C. 1, 8, 11-12 (2004),

aff’d, 412 F.3d 819 (7th Cir. 2005). A decision letter ordinarily does not consti-

tute a “determination” within the meaning of section 6330(d), and we normally

lack jurisdiction to consider a taxpayer’s challenge to the outcome of an equiva-

lent hearing. See Kennedy v. Commissioner, 116 T.C. 255, 263 (2001).
                                       - 11 -

[*11] Petitioner’s hearing request with respect to the 2016 levy notices was

untimely. Petitioner therefore was not entitled to a CDP hearing and was instead

given an equivalent hearing. See supra note 2. The SO’s decision reflected in the

decision letter was not a “determination” within the meaning of section 6330(d),

and it is not subject to our review. See Kennedy, 116 T.C. at 263.

      However, petitioner’s hearing requests were timely with respect to the

NFTL filing for the 2015 quarters and the 2017 levy notice. Accordingly, peti-

tioner was appropriately given a CDP hearing with respect to those matters, and

we have jurisdiction to review the notice of determination sustaining those pro-

posed collection actions.

B.    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). Under Rule 121(b) we 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. 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 judg-

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

most favorable to the nonmoving party. Ibid. However, the nonmoving party may
                                        - 12 -

[*12] not rest upon the mere allegations or denials in 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.

      Because petitioner did not respond to the motion for summary judgment, we

could enter decision against it for that reason alone. See Rule 121(d). We will

nevertheless consider the motion on its merits. We conclude that no material facts

are in genuine dispute and that this case is appropriate for summary adjudication.

C.    Standard of Review

      Neither section 6320(c) nor section 6330(d)(1) prescribes the standard of

review that we should apply in reviewing an IRS administrative determination in a

CDP case. The general parameters for such review are marked out by our prece-

dents. Where the validity or amount of the taxpayer’s underlying liability is at is-

sue, we review the Commissioner’s determination de novo. Goza v. Commission-

er, 114 T.C. 176, 181-182 (2000). Where the taxpayer’s underlying liability is not

properly before us, we review the IRS action for abuse of discretion. Id. at 182.

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).
                                        - 13 -

[*13] D.     Underlying Liability

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

underlying tax liability only if he “did not receive any statutory notice of defi-

ciency for such tax liability or did not otherwise have an opportunity to dispute” it.

Sec. 6330(c)(2)(B); see sec. 6320(c). However, a taxpayer is precluded from

challenging his underlying liability in this Court “if it was not properly raised in

the CDP hearing.” Thompson v. Commissioner, 140 T.C. 173, 178 (2013); see

Giamelli v. Commissioner, 129 T.C. 107, 114 (2007). “An issue is not properly

raised if the taxpayer fails * * * to present to Appeals any evidence with respect to

that issue after being given a reasonable opportunity.” Moriarty v. Commissioner,

T.C. Memo. 2017-204, 114 T.C.M. (CCH) 441, 443 (quoting section 301.6330-

1(f)(2), Q&A-F3, Proced. & Admin. Regs.), aff’d, 122 A.F.T.R.2d (RIA) 2018-

5984 (6th Cir. 2018); see Obeirne v. Commissioner, T.C. Memo. 2018-210, at *9.

      During the CDP hearing neither Mr. Thomson nor Mr. McCoy disputed

petitioner’s employment tax liabilities for the three quarters in question. Although

petitioner asserted in its petition that the SO “did not calculate the proper amount

of tax due” or “apply payment to outstanding balances,” petitioner is precluded

from advancing those arguments in this Court because it failed to raise an under-

lying liability challenge at the IRS Appeals Office. See Thompson, 140 T.C.
                                        - 14 -

[*14] at 178; Giamelli, 129 T.C. at 114; secs. 301.6330-1(f)(2), Q&A-F3,

301.6320-1(f)(2), Q&A-F3, Proced. & Admin. Regs. We accordingly review the

SO’s action for abuse of discretion only. Goza, 114 T.C. at 182.

E.    Abuse of Discretion

      In reviewing the SO’s determinations we consider whether he: (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 collec-

tion of taxes 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 discharged all of his responsibilities

under section 6330(c).

      Petitioner urged in its petition that the SO “did not fully consider an offer in

compromise” and “did not consider * * * [its] penalty abatement request.” But

petitioner did not submit a completed Form 656 or otherwise pursue an OIC with

the SO, advancing an IA as its sole collection alternative. “There is no abuse of

discretion when Appeals fails to consider an offer-in-compromise when a Form

656 was not submitted to Appeals.” Gentile v. Commissioner, T.C. Memo.

2013-175, 106 T.C.M. (CCH) 75, 77, aff’d, 592 F. App’x 824 (11th Cir. 2014).
                                          - 15 -

[*15] Nor did Mr. McCoy submit a written request for penalty abatement on a

Form 843 despite being given repeated opportunities to do so. The SO did not

abuse his discretion in declining to consider penalty abatement under these

circumstances. See Pough v. Commissioner, 135 T.C. 344, 351 (2010).

      Finally, petitioner asserts that the “IRS agreed to a settlement and then is-

sued a decision without following through with the agreement.” But the SO did

not agree to a settlement. Petitioner executed a Form 12257, agreeing to pay its

tax liabilities in full, but later said it was unable to fulfill that commitment. In-

stead it proposed an IA with a downpayment of $400,000 and monthly install-

ments of $10,000. The SO requested additional financial information to support

the feasibility of that proposal, but petitioner never supplied that information.

      Section 6159 authorizes the Commissioner to enter into an IA if he deter-

mines that it will facilitate full or partial collection of a taxpayer’s unpaid liability.

See Thompson v. Commissioner, 140 T.C. at 179. Subject to exceptions not

relevant here, the decision to accept or reject an IA lies within the Commissioner’s

discretion. See Rebuck v. Commissioner, T.C. Memo. 2016-3; Kuretski v. Com-

missioner, T.C. Memo. 2012-262, aff’d, 755 F.3d 929 (D.C. Cir. 2014); sec.

301.6159-1(a), (c)(1)(i), Proced. & Admin. Regs. We will not substitute our

judgment for the SO’s, recalculate the taxpayer’s ability to pay, or independently
                                        - 16 -

[*16] determine what would be an acceptable offer. See Thompson, 140 T.C.

at 179; Lipson v. Commissioner, T.C. Memo. 2012-252.

      We have consistently held that it is not an abuse of discretion for an Ap-

peals officer to reject collection alternatives and sustain collection action where

the taxpayer has failed, after being given sufficient opportunities, to supply the

necessary information. See, e.g., Solny v. Commissioner, T.C. Memo. 2018-71,

at *10; Gentile, 106 T.C.M. at 77. Here, the SO expressed doubt that petitioner

could meet the terms of its proposed IA given the losses of $800,000 during the

first half of 2017. Mr. McCoy replied that petitioner’s financial condition might

be turning the corner, stating that it had jettisoned unprofitable contracts and that

its employees were willing to take pay cuts. On October 25, 2017, the SO gave

petitioner two weeks to validate that prognosis by supplying a profit and loss

statement for the third quarter of 2017 and a salary reduction analysis. Having

received neither of those documents during the ensuing seven weeks--a period in

which petitioner missed three deadlines to supply documents--the SO did not

abuse his discretion in closing the case.

      The SO indicated in the notice of determination that petitioner was not in

compliance with its current filing and payment obligations, having failed to file

Form 941 for the third quarter of 2017 and having failed to make required tax de-
                                       - 17 -

[*17] posits during the final quarter of that year. The requirement of current

compliance as a condition of executing an IA “ensures that current taxes are paid

and avoids ‘the risk of pyramiding liability.’” Hull v. Commissioner, T.C. Memo.

2015-86, 109 T.C.M. (CCH) 1438, 1441 (quoting Schwartz v. Commissioner, T.C.

Memo. 2007-155, slip op. at 8); see Orum, 412 F.3d 819. The SO was justified in

declining to execute an IA for that reason alone. See Cox v. Commissioner, 126

T.C. 237, 258 (2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir. 2008);

Cmty. Law Firm, Inc. v. Commissioner, T.C. Memo. 2018-198, at *8-*9; Hull,

109 T.C.M. (CCH) at 1441.

      The SO in this case worked constructively with petitioner and its representa-

tives for more than six months in an effort to achieve a collection alternative. But

an SO is not obligated to negotiate indefinitely. Kreit Mech. Assocs., Inc. v. Com-

missioner, 137 T.C. 123, 134 (2011); Rayle v. Commissioner, T.C. Memo. 2019-

119, at *12. Given petitioner’s nonresponsiveness toward the end of the process,

the SO was justified in closing the case when he did on the basis of the informa-

tion before him at that time. We note that petitioner is free to propose to the IRS

at any time, for its consideration and possible acceptance, an IA supported by the

necessary financial information.
                                      - 18 -

[*18] In consideration of the foregoing,


                                               An appropriate order and decision

                                      will be entered for respondent.
