                            152 T.C. No. 12



                   UNITED STATES TAX COURT



        RANDY ALAN CARPENTER, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 5327-17L.                          Filed April 18, 2019.



       P pleaded guilty to violating I.R.C. sec. 7206(1) by willfully
filing false returns for 2005 and 2006. At sentencing, the District
Court ordered P to pay restitution to the IRS, ordered that restitution
was due immediately, and set a schedule of payments. The District
Court also ordered that P pay all outstanding tax as an additional
condition of his supervised release. Though P made each scheduled
payment, he did not pay the full restitution amount.

       R assessed against P the full amount of restitution ordered in
reliance on I.R.C. sec. 6201(a)(4). When P did not pay the assessed
amount R began collection action. Before the first payment was due
under the schedule set by the District Court, R sent a final notice of
intent to levy and filed a notice of Federal tax lien. Following a CDP
hearing IRS Appeals sustained the proposed collection actions. P
contends that I.R.C. sec. 6201(a)(4) does not grant R independent
administrative authority to collect amounts of criminal restitution. P
also contends a schedule of restitution payments limits the amount R
                                        -2-

      may administratively collect absent a further order by the sentencing
      court.

             Held: I.R.C. sec. 6201(a)(4) grants R independent authority to
      collect administratively amounts of criminal restitution assessed
      under that section.

             Held, further, a payment schedule included in an order for
      criminal restitution that is due immediately does not limit R’s
      authority to collect administratively unpaid amounts of such
      restitution.

            Held, further, Appeals did not abuse its discretion in sustaining
      the collection actions at issue.



      Randy Alan Carpenter, pro se.

      Johnny Craig Young, Abby Moua, and Scott Lyons, for respondent.



                                     OPINION


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

review under sections 6320(c) and 6330(d)(1) of the Internal Revenue Service

(IRS) Office of Appeals’ (Appeals) determination sustaining a Letter 3172, Notice

of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 (NFTL),

and a Letter 1058, Final Notice of Intent to Levy and Notice of Your Right to a

Hearing (FNIL). Both letters relate to an order of criminal restitution for tax
                                         -3-

losses, which prompted the IRS assessment and administrative collection efforts

pursuant to section 6201(a)(4). That provision authorizes the Secretary, following

a taxpayer’s criminal conviction for failure to pay any tax imposed by title 26, to

“assess and collect the amount of restitution” ordered by the sentencing court “in

the same manner as if such amount were such tax.” Sec. 6201(a)(4). Unless

otherwise indicated, all section references are to the Internal Revenue Code

(Code) in effect at all relevant times, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

      Following our Opinion in Klein v. Commissioner, 149 T.C. 341 (2017),

respondent conceded and abated the statutory interest and additions to tax

determined with respect to the assessments at issue. After concessions we must

decide two issues of first impression. The first is whether section 6201(a)(4)

grants the IRS independent authority to collect administratively amounts assessed

under that section; we hold that it does under these facts. The second is whether

the schedule of payments in the sentencing court’s criminal restitution order limits

IRS administrative collections; we hold that it does not. We must also decide

whether to sustain the issuance of the FNIL and the NFTL filing on an amount of

restitution that included statutory interest and additions to tax that respondent

subsequently conceded and abated. We hold that each be sustained only in an
                                         -4-

amount that reflects the restitution obligation due from petitioner. Finally, we

must decide whether the Appeals settlement officer who conducted petitioner’s

CDP hearing abused his discretion in sustaining the FNIL and the filing of the

NFTL; we hold that he did not.

                                    Background

      The parties submitted this case fully stipulated under Rule 122. The

stipulated facts are incorporated in our findings by this reference. Petitioner

resided in North Carolina when he filed his petition.

I.    The Underlying Criminal Case

      Following a prosecution in the U.S. District Court for the Western District

of North Carolina, petitioner entered into a plea agreement pursuant to rule

11(c)(1)(C) of the Federal Rules of Criminal Procedure. Petitioner agreed to plead

guilty to certain charges and pay restitution for tax losses in exchange for a

sentence within a lower range than the one calculated under the U.S. Sentencing

Guidelines. Pursuant to the agreement petitioner pleaded guilty to one count of

violating section 7206(1) by willfully making and subscribing to a false Federal

income tax return for 2005, and to one count of violating section 7206(1) by

willfully making and subscribing to a false Federal income tax return for 2006.
                                           -5-

Petitioner admitted that the false returns resulted in his failure to correctly report

all of his gross income for those years.

      On April 15, 2014, the District Court held a sentencing hearing during

which the court accepted the plea agreement and sentenced petitioner to 27 months

in prison, followed by one year of supervised release for each count to run

concurrently. The District Court also accepted without objection a presentencing

report and the Government’s calculation of the Federal tax loss for petitioner’s

2005 and 2006 tax years. As a separate component of the sentence, the District

Court ordered petitioner to pay restitution to the IRS of $507,995.

      During the sentencing hearing the judge’s oral pronouncements closely

followed the order and text of the District Court’s standard form, judgment in a

criminal case (judgment form), and the District Court followed the judgment form

to organize its oral pronouncements while summarizing the language used in the

judgment form. See United States v. Randy Alan Carpenter, No. 12cr00116-GCM

(W.D.N.C., Apr. 17, 2014) (AO 245B (WDNC Rev. 02/11) Judgment In A

Criminal Case). When dealing with the conditions of supervised release, in both

its oral pronouncements at the sentencing hearing and in its written judgment, the

District Court ordered petitioner to file tax returns with the IRS as required by law.

The sentencing judge orally pronounced that petitioner “shall cooperate with the
                                          -6-

Internal Revenue Service to pay outstanding taxes”. The District Court’s written

judgment stated that petitioner shall “pay all outstanding taxes, interest and

penalties” as an additional condition of his supervised release.

      The District Court next addressed criminal monetary penalties and imposed

a mandatory $200 special assessment, did not impose a fine, and ordered petitioner

to pay restitution in the full amount of the tax loss. Because the total criminal

monetary penalties were more than $2,500, the District Court considered

petitioner’s ability to pay statutory interest required for any fine or restitution that

was not paid in full within 15 days of the judgment. See 18 U.S.C. sec. 3612(f)

(2012). The District Court found that petitioner did not have the financial ability

to pay either a fine or interest on the amounts of criminal monetary penalties

remaining unpaid 15 days after it entered judgment and waived both. After

waiving statutory interest due according to 18 U.S.C. sec. 3612(f), the District

Court stated: “I don’t know what effect that has on the Internal Revenue Service

with all your penalties and interests [sic] and whatever, it seems to me that if you

hope to get anything out of this guy, freezing his number at $507,995 is a pretty

good idea. And that is what’s ordered by the court.”

      Once the District Court set the amount of the total criminal monetary

penalties and waived interest payments on those, it addressed when payment was
                                        -7-

due. In both its oral pronouncements at the sentencing hearing and in its written

judgment the District Court ordered that the restitution was “due and payable

immediately” and that “if * * * [petitioner] can’t pay” the entire amount of

restitution, he must pay $100 per month beginning 60 days after his release from

imprisonment. The District Court further stated in its oral pronouncements that

petitioner must continue making payments “until the monies are repaid.” At no

point during the sentencing hearing did the District Court orally state that the $100

monthly installment was the maximum amount that petitioner must pay per month.

The District Court’s written judgment was consistent with its oral pronouncements

at the sentencing hearing. The District Court ordered that restitution was due in

full and payable immediately, and it ordered petitioner to comply with its payment

schedule as a special condition of petitioner’s supervised release in the event he

had not fully repaid the restitution prior to his release from imprisonment.

      On May 27, 2016, after his release from prison, petitioner began serving a

term of supervised release. While on supervised release petitioner complied with

the District Court’s payment schedule. As a result, on March 7, 2017, the District

Court modified the conditions of petitioner’s supervised release to allow his

supervision to expire on May 26, 2017, with an outstanding balance of

$501,546.90 “remaining due on * * * [petitioner’s] restitution obligation”. As part
                                         -8-

of this modification the District Court ordered that the amount of restitution still

outstanding “be collected by civil means through the U.S. Attorney’s Office.”

II.   Collection Activities

      A.     USAO

      After petitioner’s sentencing hearing the U.S. Attorney’s Office (USAO) for

the Western District of North Carolina took steps to collect the court-ordered

restitution amount from petitioner. On or about April 17, 2014, the USAO filed a

Federal notice of lien for fine and/or restitution imposed pursuant to the Anti-

Terrorism and Effective Death Penalty Act of 1996 in the amount of $508,195

with the Office of the Clerk of Superior Court of Avery County, North Carolina.

At some point prior to the start of the petitioner’s supervised release term, the

USAO began collection through the Federal Payment Levy Program (FPLP),

which levied on petitioner’s Social Security benefits resulting in monthly

restitution payments of $283.95. On or about December 23, 2015, the USAO

forwarded to the IRS $2,340.70 that it had collected from petitioner through the

FPLP levy, and the IRS recorded it as a payment against petitioner’s 2005 liability.

(The IRS account transcript for petitioner’s 2005 liability records and credits

payments total $7,648.10 as of April 3, 2018.)
                                         -9-

      B.     IRS

      On January 18, 2016, the IRS made restitution-based assessments (RBA)

against petitioner under section 6201(a)(4) for 2005 and 2006. The IRS made

RBAs of $89,045 and $418,950 for 2005 and 2006, respectively, which totaled the

exact amount of restitution ordered by the District Court. That same day the IRS

mailed petitioner a notice and demand for the unpaid restitution. The notice stated

the total RBA amount and the interest due for each year at issue and instructed

petitioner to pay the full amount to the District Court by February 1, 2016.

Petitioner wrote to the IRS to dispute the amounts due and the IRS collection

efforts. As of April 3, 2016, the combined unpaid balance for the assessed

criminal restitution, excluding interest and additions to tax, totaled $500,346.90.

      On May 2, 2016, the IRS sent petitioner two Notices CP504, Notice of

Intent to Levy, with respect to petitioner’s unpaid liabilities for 2005 and 2006.

Both notices stated that the IRS intended to levy on petitioner’s State tax refund or

other property, including Social Security benefits, if he failed to either call the IRS

immediately or pay the amount listed directly to the IRS by May 12, 2016.

Petitioner did not respond to these notices.

      On May 23, 2016, the IRS sent petitioner an FNIL, which indicated that

petitioner owed a total of $759,380.74, representing the total amount of the RBAs
                                        - 10 -

for 2005 and 2006, statutory interest, and additions to tax. The FNIL also stated

that the Government might seize petitioner’s property to satisfy the amount due

but that he could appeal the proposed seizure of his assets by requesting a CDP

hearing under section 6330 by June 22, 2016.

      Petitioner timely submitted a Form 12153, Request for a Collection Due

Process or Equivalent Hearing, with respect to the FNIL. Petitioner checked the

box on the Form 12153 indicating that he was unable to pay the balance of his

liabilities and that he would like to discuss collection alternatives. He included a

statement that his only source of income was Social Security disability benefits

and that his expenses exceeded his income because of making restitution payments

and supporting three dependents. Petitioner further stated: “I do not owe the taxes

I owe restitution to the court”. He asserted that he had not yet received a

deficiency notice. On or about June 9, 2016, IRS mailed petitioner a letter to

confirm receipt of his Form 12153 and to inform him that unless he filed Federal

income tax returns for 2011 through 2015 he was ineligible for a collection

alternative. This letter also requested that petitioner provide further financial

information in order for Appeals to consider a proposed collection alternative and

included copies of Form 433-A, Collection Information Statement for Wage
                                        - 11 -

Earners and Self-Employed Individuals, and Form 433-B, Collection Information

Statement for Businesses.

      On or about July 1, 2016, petitioner sent a letter to the IRS stating that “I do

not submit that at this time you have the authority to collect ‘federal tax’ from me

for the periods noted * * * [and that] I mistakenly selected the collection

alternative box [on Form 12153].” In the same letter petitioner also stated that

“[b]y this letter, I withdraw my request for a collection alternative consideration.”

Petitioner went on to state:

      I disagree with the existence and amount of the federal tax, penalties,
      and interest as I have not received a notice of deficiency from you for
      the tax and have not had an opportunity to dispute the tax liability
      with you; I noted this on the Form 12153. I offer in support that ‘[i]n
      order to prove a tax deficiency, [you] must show first that the
      taxpayer had unreported income, and second, that the income was
      taxable,’ United States v. Moore, 498 Fed. Appx. 195, 201 (4th Cir.
      2012), quoting United States v. Abodeely, 801 F.2d 1020, 1023 (8th
      Cir. 1986). This has not been done and your intent to levy action is
      premature. Based on any reasoning you may have to proceed, there
      has never been an effort by the government to identify amounts
      deposited that are non-taxable, i.e., the ‘purification’ process. Moore
      at 202, citing United States v. Boulet, 577 F.2d 1165, 1167 (5th Cir.
      1978). I expect my taxpayer ‘right to pay no more than the correct
      amount of tax’ to be upheld.

Petitioner failed to provide sufficient financial information, and he did not file his

missing Federal income tax returns in order to be eligible for collection alternative

consideration.
                                        - 12 -

      On or about June 28, 2016, the IRS filed an NFTL against petitioner with

the Office of the Clerk of Superior Court of Avery County, North Carolina, and

sent petitioner an NFTL filing. Petitioner timely submitted a separate Form 12153

challenging the NFTL filing. On this Form 12153 petitioner did not check the box

requesting consideration for a collection alternative. Instead petitioner included a

statement that the “IRS lacks jurisdiction to lien and levy” to enforce the District

Court’s restitution order. He asserted again that he had not received a notice of

deficiency and had not had an opportunity to dispute the underlying tax liability.

      C.     CDP Hearing

      On August 10, 2016, petitioner’s case was assigned to an Appeals

settlement officer (officer). During the officer’s case review he examined the

District Court’s restitution order, the transcript of the sentencing hearing, IRS

criminal investigation closing reports, and IRS inventory control system notes

related to the making of the RBAs and the subsequent FNIL and the NFTL filing.

The officer reviewed IRS records related to petitioner’s income for the 2011

through 2015 years, which indicated that petitioner received Social Security

benefits and had canceled debt. The officer discussed petitioner’s failure to file

Federal tax returns for 2011 through 2015 with both petitioner and his probation

officer. The officer also secured and reviewed a partially completed copy of Form
                                        - 13 -

433-A from petitioner. The officer reviewed IRS administrative guidance related

to RBAs and caselaw related to criminal restitution orders cited by petitioner. The

officer verified that the total of the RBA amounts made for 2005 and 2006

matched the amount of restitution ordered by the District Court. The officer also

confirmed that the IRS factored into its financial analysis and collections

determination the $100-per-month payment schedule ordered by the District

Court. Accordingly, the officer determined that the IRS had satisfied the relevant

procedural requirements.

      On November 17, 2016, the officer conducted a telephone CDP hearing

with petitioner. During this hearing petitioner argued: (1) that the IRS lacks

authority to enforce criminal restitution orders, (2) that the IRS is prohibited from

initiating administrative collection actions without obtaining an order from the

District Court, and (3) that IRS collections may not exceed the financial

obligations established by the District Court’s monthly payment schedule.

Petitioner did not request a collection alternative or propose an installment

agreement either during the hearing or in his subsequent written arguments

submitted at the officer’s invitation. The officer wrote to petitioner on January 23,

2017, to respond to subsequent written arguments and to inform petitioner that he

would recommend that Appeals sustain the FNIL and the filing of the NFTL.
                                        - 14 -

      D.     Notice of Determination

      On January 30, 2017, the officer sustained the determination, closed the

case, and submitted it for review to his Appeals team manager. The team manager

concurred in the officer’s proposed determinations. Appeals sent petitioner two

notices of determination concerning collection action(s) under section 6320 and/or

6330, one each for the NFTL filing and the FNIL, dated February 3, 2017. At the

time Appeals sent these notices of determination, Klein v. Commissioner, 149 T.C.

341, had not been decided.

                                     Discussion

I.    Disputed Authority To Collect Criminal Restitution

      We address, as an initial matter, petitioner’s challenge to the Secretary’s

administrative collection authority related to criminal restitution. Petitioner argues

that section 6201(a)(4) does not authorize the Secretary to file an NFTL

independently or to levy on property to collect amounts of restitution ordered by a

sentencing court and subsequently assessed under that section. He also contends

that the Secretary must seek a further order from the sentencing court before

administratively collecting amounts in excess of the sentencing court’s original

schedule of monthly restitution payments. Respondent disagrees with petitioner

on both points.
                                        - 15 -

      A.     The FETIA Amendments

      With the enactment of section 6201(a)(4) Congress expanded the

Secretary’s collection authority in relation to criminal restitution ordered after

August 16, 2010. See Firearms Excise Tax Improvement Act of 2010 (FETIA),

Pub. L. No. 111-237, sec. 3, 124 Stat. at 2497. This provision directs that “[t]he

Secretary shall assess and collect the amount of restitution under an order pursuant

to section 3556 of title 18, United States Code, for failure to pay any tax imposed

under this title in the same manner as if such amount were such tax.” Sec.

6201(a)(4)(A) (emphasis added); see also Bontrager v. Commissioner, 151 T.C.

___, ___ (slip op. at 10-11) (Dec. 12, 2018). The Secretary may not make an RBA

“before all appeals of * * * [the restitution order] are concluded and the right to

make all such appeals has expired.” Sec. 6201(a)(4)(B); see also FETIA sec. 3(a).

      Congress exempted the Secretary’s power to assess and to bring collection

actions for RBAs from the usual time limitations. Sec. 6501(c)(11) (“[Criminal

restitution] may be assessed, or a proceeding in court for the collection of such

amount may be begun without assessment, at any time.”); see FETIA sec. 3(b),

124 Stat. at 2498. It also prohibited a taxpayer from collaterally attacking the

underlying restitution amount. Sec. 6201(a)(4)(C) (“The amount of such

restitution may not be challenged * * * on the basis of the existence or amount of
                                         - 16 -

the underlying tax liability in any proceeding authorized under this title[.]”).

Significantly, Congress did allow the taxpayer to retain the ability to challenge the

Secretary’s method of collecting an RBA. See secs. 6320(b), 6330(b); see also

Staff of J. Comm. on Taxation, General Explanation of Tax Legislation Enacted in

the 111th Congress, 461 (J. Comm. Print 2011).

      B.     Assessment Authority

      In Klein v. Commissioner, 149 T.C. 341, we considered whether Congress

intended the assessment of criminal restitution to be a basis for statutory interest

and additions to tax. We held that Congress did not on the basis of its directive

that restitution assessments and collections be made “in the same manner as if

such amount were such tax.” Id. at 351-352 (quoting section 6201(a)(4)(A)). We

concluded that section 6201(a)(4) was intended only to enable the IRS to assess

the exact amount of restitution ordered, which would create “an account receivable

on the taxpayer’s transcript against which the restitution payment can be credited.”

Id. at 352; see also Rozin v. Commissioner, T.C. Memo. 2017-52, at *10-*11

(“The IRS is permitted to immediately assess, without issuing a statutory notice of

deficiency, and collect, as if it were a tax, the restitution ordered * * * separately

from a taxpayer’s [civil] tax liability[.]” (Citations omitted.)). Summary

assessment of criminal restitution is an accounting measure to “facilitate IRS
                                         - 17 -

bookkeeping by transforming the restitution obligation from a deemed assessment

to an actual assessment.” Klein v. Commissioner, 149 T.C. at 358 n.12.

      C.     Collection Authority

             1.     Provisions of Title 26

      The Code requires that upon making an assessment the Secretary issue

notice and demand for payment pursuant to section 6303 before starting

administrative collection efforts. A Federal tax lien automatically arises as of the

date an assessment is made. Sec. 6322. Section 6331 grants the Secretary the

authority to collect on the assessment by levy and distraint. Congress, by its

amendments to the Code in FETIA, expanded the Secretary’s authority to collect

actively on criminal restitution orders following summary assessment. See Muncy

v. Commissioner, T.C. Memo. 2017-83, at *18, aff’d, 890 F.3d 724 (8th Cir.

2018).

      Specifically, Congress exempted assessment of criminal restitution from the

Code’s time provisions and limited the taxpayer’s ability to challenge the

restitution order itself. Petitioner argues that the interplay of these sections binds

the Secretary’s hands to prevent collection other than by court order in accordance

with the provision of title 18. This argument has no merit.
                                        - 18 -

      Section 6201 delays assessment and subsequent collection activities until

after any appeals are concluded or the period for appeals of an order of restitution

has lapsed. Sec. 6201(a)(4)(B). The inclusion of this provision indicates that

Congress intended to grant the Secretary collection authority that is independent

from title 18 and the underlying criminal procedures. This intention is

underscored by provisions in FETIA that amend section 6501 to exclude

specifically criminal restitution from the usual three-year limitation period. See

sec. 6501(c)(11); see also FETIA sec. 3. With this amendment Congress ensured

that any delays that may accompany criminal prosecution and any subsequent

appeals would not hinder the Secretary’s ability to assess and collect criminal

restitution. See generally Internal Revenue Manual pt. 1.2.13.1.11 (Oct. 5, 2005);

Michael I. Saltzman & Leslie Book, IRS Practice and Procedure, para.

10.01[2][e][i], at 10-8, S10-2 (rev. 2d ed. 2002 & Supp. 2018-2). In the light of

the time provisions and the provision precluding direct challenges to the

underlying restitution liability, we conclude that Congress intended to expand the

Secretary’s independent collection authority, not restrict it, as petitioner contends.

             2.     Provisions of Title 18

      Petitioner asserts that the payment schedule included in the District Court’s

restitution order limits the amounts the Secretary may collect. Petitioner bases his
                                        - 19 -

argument on the provision directing that the Secretary “shall assess and collect the

amount of restitution under an order pursuant to section 3556 of title 18”. Sec.

6201(a)(4)(A). The parties agree that the restitution in this case is an “amount of

restitution under an order pursuant to section 3556 of title 18” within the meaning

of section 6201(a)(4). Respondent otherwise disagrees with petitioner’s

interpretation.

      Section 3556 of title 18 grants the District Court authority to include

restitution orders as an independent part of a criminal defendant’s sentence. Title

18 does not specifically grant the District Court authority to order restitution for

violations of title 26. Where a case involves violations of title 26, such as the

present one, 18 U.S.C. sec. 3556 (2012) grants the District Court discretionary

authority to order restitution in accordance with 18 U.S.C. sec. 3663 (2012). See

also 18 U.S.C. sec. 3663(a)(3) (“The court may also order restitution in any

criminal case to the extent agreed to by the parties in a plea agreement.”); 18

U.S.C. sec. 3664(f)(1)(A) (2012) (requiring a District Court using its discretionary

authority under 18 U.S.C. sec. 3663 to impose restitution “in the full amount of

each victim’s losses” and “without consideration of the economic circumstances of

the defendant.”). When exercising this discretion, a sentencing court must specify

in its restitution order the manner and schedule according to which the defendant
                                        - 20 -

must pay. See 18 U.S.C. secs. 3663(d), 3664(f)(2) (requiring the District Court to

consider the defendant’s financial resources and other assets, his income, and his

obligations when determining the manner in which, and the schedule according to

which, the defendant is to pay restitution), (3)(A) (“A restitution order may direct

the defendant to a make a single, lump-sum payment, partial payments at specified

intervals, in-kind payments, or a combination of payments at specified intervals

and in-kind payments.”). Once imposed, an order of restitution is a final judgment

that may not be modified absent certain enumerated statutory exceptions. See 18

U.S.C. sec. 3664(o); see also United States v. Bratton-Bey, 564 F. App’x 28, 29

(4th Cir. 2014); United States v. Grant, 715 F.3d 552, 557 (4th Cir. 2013).

      None of the restitution-related provisions of title 18 required the Secretary

to seek a court order before collecting criminal restitution. Cf. 18 U.S.C. sec.

3664(m)(1)(A) (providing that restitution orders may be enforced by the United

States in the same manner that it recovers fines or “by all other available and

reasonable means”). Nothing in the text or the legislative history of section

6201(a)(4) indicates that Congress intended to limit or otherwise subordinate the

Secretary’s authority to assess and collect criminal restitution when it is due to the

provisions of title 18. We conclude that section 6201(a)(4) refers to 18 U.S.C. sec.
                                        - 21 -

3556 as a means to direct the Secretary to the amount of criminal restitution that

must be assessed and collected.

      D.     Orders of Criminal Restitution

      Even if the provisions of title 18 were binding on the Secretary, restitution

orders with conditions such as petitioner’s would not limit the Secretary’s

collection efforts. In general, a restitution obligation is due immediately unless in

the interests of justice the court specifies otherwise. 18 U.S.C. sec. 3572(d)(1)

(2012). To determine whether a sentencing court specified that a restitution

obligation is due immediately Federal courts look to the judge’s oral

pronouncements at the time of sentencing and the subsequent written judgment.

Where the written judgment conflicts with the court’s oral pronouncements, the

oral pronouncements control. See Rakes v. United States, 309 F.2d 686, 687-688

(4th Cir. 1962) (“[T]he defendant in a criminal case must be personally present at

every stage of the trial * * *. Thus, it follows that the sentences to be served in

these cases are those pronounced in the defendant’s presence in open court and not

those set out in the written judgments of the court.”). An expanding number of

Federal courts have recognized a “crucial distinction” between cases where the

court expressly orders that restitution is due only through a payment schedule that

does not require immediate payment in full and cases where the court specifies
                                       - 22 -

restitution is immediately due in full. See United States v. Williams, 898 F.3d

1052, 1055 (10th Cir. 2018) (interpreting a judgment that included a payment

schedule and specified that the amount owed was due in full immediately; holding

that the payment schedule did not preclude garnishment as an additional means to

collect the restitution judgment).

             1.    Restitution Ordered Due Immediately

      When payment of restitution is ordered due immediately, as it was in this

case, numerous Federal courts have held that the Government is not limited by

judicially crafted payment schedules and may freely pursue other means of

securing restitution, including a writ of garnishment. See 18 U.S.C. secs.

3664(m), 3613(a) (2012); see, e.g., Williams, 898 F.3d at 1055 (“We agree with

the courts that have recognized this distinction and thus AFFIRM the District

Court’s conclusion that the government may seek garnishment * * * because the

total amount of restitution was ordered ‘due immediately’ at the time of

judgment.” (explaining United States v. Martinez, 812 F.3d 1200 (10th Cir.

2015))); United States v. Wykoff, 839 F.3d 581, 582 (7th Cir. 2016); United States

v. Behrens, 656 F. App’x 789, 790 (8th Cir. 2016) (“[T]he payment schedule set

forth in the judgment did not preclude the instant garnishment, because the

judgment [also] specified that the amount owed was due in full on the date of
                                        - 23 -

judgment; and notably, the judgment imposed the obligation to make installment

payments without limiting the government’s ability to institute civil collections

proceedings.”); United States v. Schwartz, 503 F. App’x 443, 445-446 (6th Cir.

2012); United States v. Shusterman, 331 F. App’x 994, 996-997 (3d Cir. 2009);

United States v. Ekong, 518 F.3d 285, 286 (5th Cir. 2007) (per curiam) (rejecting

argument that immediate payment not required where nothing to the contrary in

the judgment); United States v. Rush, No. 14cr00023, 2016 U.S. Dist. LEXIS

94307, at *2-*3 (W.D. Va. July 19, 2016) (and cases cited thereat); United States

v. Robles, No. 06-20286-CR-Gold/Goodman, 2014 U.S. Dist. LEXIS 4402, at

*1-*2 (S.D. Fla. Jan. 14, 2014); United States v. Hawkins, 392 F. Supp. 2d 757,

759 (W.D. Va. 2005) (“[A] payment schedule simply serves as another collection

method for the benefit of the victim rather than as a benefit to the defendant.”);

United States v. James, 312 F. Supp. 2d 802, 807 (E.D. Va. 2004).

             2.    Restitution Ordered Due According to Payment Schedule

      Correspondingly, in cases where a sentencing court expressly declines to

order restitution immediately payable, the Government’s collection efforts may not

exceed the amounts due according to the schedule. See, e.g., United States v.

Hughes, 813 F.3d 1007, 1008-1009 (D.C. Cir. 2016); Martinez, 812 F.3d at 1203-

1204 (determining restitution not due immediately where District Court expressly
                                       - 24 -

declined to order immediate payment of entire amount); Bratton-Bey, 564 F.

App’x at 30 n.2 (holding defendant not under current obligation to pay restitution

where District Court granted defendant’s request and ordered restitution due only

after his release from incarceration according to payment schedule rather than due

immediately); Grant, 715 F.3d at 555; United States v. Kay, No. 11-218(1)

ADM/TNL, 2017 U.S. Dist. LEXIS 30668, at *11 (D. Minn. Mar. 3, 2017) (“Since

the Judgment in this case specified that Kay’s repayment was due only in

installments, the full restitution amount was not due immediately.”); United States

v. Villongco, No. 07-009 (BAH), 2016 U.S. Dist. LEXIS 89285, at *6-*7, *20-*24

(D.D.C. July 11, 2016) (interpreting sentencing judge’s oral pronouncements that

payment due immediately, in context of his further explanation that it intended

dates and amounts of payments due to be established by inmate financial

responsibility program, as requiring periodic, rather than immediate, payments;

quashing Government’s writ of garnishment filed eight years after defendant’s

term of supervised release ended for accounts identified in defendant’s

presentencing report because defendant was in compliance with the restitution

order); United States v. Roush, 452 F. Supp. 2d 676, 681 n.9 (N.D. Tex. 2006)

(construing payment schedule to control where District Court’s written judgment

differentiated between payment of fines due immediately and payment of
                                        - 25 -

restitution due only as scheduled), vacated and remanded on other grounds, 466

F.3d 380 (5th Cir. 2006).

      In Hughes the U.S. Court of Appeals for the District of Columbia Circuit

considered a restitution judgment wherein the District Court made conflicting

statements about whether its restitution judgment was due immediately or

according to a payment schedule. In that case the District Court ordered $442,330

in restitution for Hughes’ role in her employer’s fraudulent billing practices. Her

employer, Blackhawk, had previously been ordered to pay over $1 million.

Hughes, 813 F.3d at 1008. During Hughes’ sentencing hearing the District Court

stated that “she would not be on the hook at all [for restitution] if Blackhawk paid

its fine.” Id. The District Court further explained during its oral pronouncements

      that ‘payment of restitution shall begin after the adjustment is figured
      where the fine for [Blackhawk] will be applied,’ and later added that
      Hughes was to pay ‘the balance of any restitution owed at a rate of
      not less than $50 each month * * * if it turns out that * * * there is an
      amount outstanding that [Hughes] owe[s]’ after Blackhawk’s fine is
      subtracted. * * *

Id. at 1009 (quoting transcript of sentence, Dec. 20, 2011) (alterations in original).

The District Court also stated once during its oral pronouncements that restitution

was “immediately payable”. Id.
                                        - 26 -

      The Circuit Court determined that the District Court’s brief statement that

restitution was immediately payable to be “boilerplate language”. Id. The Circuit

Court held that including “boilerplate language” that restitution was immediately

payable in the District Court’s oral rendition of a restitution order was not

controlling in the context of the District Court’s “specific and repeated references”

to the contrary. Id. (emphasis added). In this context the “district court * * *

expressed * * * [its] clear intention” that Hughes’ restitution obligation was to

begin only after payments by her employer had been subtracted. Id.

      We are persuaded by the reasoning of those courts that regularly impose

restitution in sentencing defendants. Absent a District Court’s expressly declining

to order restitution payable immediately, its restitution judgment imposes an

immediate obligation to pay on the defendant. When a District Court includes a

payment schedule in a judgment that also orders restitution immediately payable,

as it did in this case, the payment schedule does not limit the amounts the

Government may collect from the defendant. See Hawkins, 392 F. Supp. 2d at

759 (“[A] payment schedule simply serves as another collection method for the

benefit of the victim rather than as a benefit to the defendant * * * [and] is simply

one means of ensuring that restitution will be paid by the defendant.”); see also

United States v. Dawkins, 202 F. 3d 711, 716 (4th Cir. 2000) (holding that it is
                                          - 27 -

permissible for a sentencing court to order the entire restitution amount due

immediately if it also sets a payment schedule to be followed in the event that the

defendant cannot make immediate payment in full); James, 312 F. Supp. 2d at 806.

In this case the District Court’s oral statements regarding petitioner’s ability to pay

all at once the total amount of criminal monetary penalties, including restitution,

were made in the context of its decision to waive interest payments. See 18 U.S.C.

sec. 3612(f)(1) (“The defendant shall pay interest on any fine or restitution of

more than $2,500, unless the fine [or restitution] is paid in full before the fifteenth

day after the date of the judgment.”).

      At no point during the District Court’s oral rendition of its restitution order

did it expressly decline to impose an immediately payable restitution obligation on

petitioner. Rather, the District Court expressly ordered that “[p]ayment [of

petitioner’s restitution obligation was] to begin immediately”. The District Court

clarified that it did not intend to limit IRS collection activities in both its oral

pronouncements and written judgment. During the sentencing hearing, after

waiving interest on unpaid restitution required according to title 18, the District

Court orally stated: “I don’t know what effect that has on the Internal Revenue

Service with all your penalties and interests [sic] and whatever”. In its written

judgment the District Court ordered petitioner to “pay all outstanding taxes,
                                         - 28 -

interest and penalties.” The District Court’s inclusion of a $100-per-month

payment schedule in its restitution judgment serves only as another means of

ensuring that petitioner fulfilled his restitution obligation in the event he could not

pay the full amount before his release from imprisonment. We hold that the

District Court’s payment schedule does not limit the Secretary’s administrative

collection authority. The Secretary may properly file an NFTL and levy on

property to collect the full unpaid amounts of the RBAs.

II.   Collection of Unpaid Liabilities

      Having determined that section 6201(a)(4) grants the Secretary collection

authority over criminal restitution orders, we turn to petitioner’s challenge of the

Secretary’s methods of collection. In general, the Secretary has authority to

collect taxes imposed by the Code. Sec. 6301. The Code equips the Secretary

with certain tools to carry out his collection efforts. Section 6321 provides one

such tool that creates a lien in favor of the United States on all property and

property rights of a taxpayer liable for Federal tax who neglects or refuses to pay

the tax after the Secretary’s notice and demand for payment. Section 6320(a)(2)

requires the Secretary to provide to the taxpayer written notice of the filing of an

NFTL within five business days after the filing. The Secretary may also levy upon

the taxpayer’s property and rights to property. See sec. 6331(a). Section
                                         - 29 -

6331(d)(1) requires that a taxpayer be given notice before a levy may be made,

and section 6330(a) sets out the prelevy notice requirements.

      With respect to either an NFTL filing or a proposed levy the taxpayer may

request a CDP hearing before an impartial Appeals officer to review the propriety

of the collection action. Secs. 6320(b), 6330(b). The officer conducting the

hearing must verify that the requirements of any applicable law or administrative

procedure have been met. Sec. 6330(c)(1). The taxpayer may raise at the hearing

any relevant issues relating to the unpaid tax or the proposed levy, including

(1) appropriate spousal defenses, (2) challenges to the appropriateness of

collection actions, and (3) offers of collection alternatives such as an installment

agreement. Secs. 6320(c), 6330(c)(2)(A). However, the taxpayer may not

challenge the existence or amount of the underlying tax liability unless he or she

did not receive a statutory notice of deficiency for that liability or did not

otherwise have an opportunity to dispute the liability. Sec. 6330(c)(2)(B). A

taxpayer is strictly prohibited from challenging the existence or amount of an

underlying tax liability that is related to an order of criminal restitution. Sec.

6201(a)(4)(C).

      Following a CDP hearing the officer must determine whether and how to

proceed with collection of the liability. The officer’s determination must take into
                                          - 30 -

account all issues properly raised by the taxpayer as well as whether any proposed

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

taxpayer’s legitimate concern that any collection action be no more intrusive than

necessary. Sec. 6330(c)(3).

III.   Standard of Review for Collection Actions

       Within 30 days of a CDP determination by Appeals a taxpayer may petition

this Court for review of that determination. Sec. 6330(d)(1). We review the

determination de novo where the validity of the underlying tax liability was

properly at issue during the hearing. Goza v. Commissioner, 114 T.C. 176,

181-182 (2000). Otherwise, where the taxpayer’s underlying liability is not

properly at issue, we review the IRS decision for abuse of discretion only. Id.

Whether an abuse of discretion has occurred depends on whether the exercise of

discretion is arbitrary, capricious, or without sound basis in fact or law. See, e.g.,

Woodral v. Commissioner, 112 T.C. 19, 23 (1999); Venhuizen v. Commissioner,

T.C. Memo. 2012-270, at *12.

       Petitioner’s underlying tax liability consists of the criminal restitution,

interest, and additions to tax that the IRS assessed for 2005 and 2006. See Klein

v. Commissioner, 149 T.C. at 348-349 (“[I]n any CDP proceeding, ‘underlying tax

liability’ refers to the assessed liabilit[y] that the IRS is seeking to collect via the
                                        - 31 -

challenged lien or levy.”). Respondent has conceded and abated the statutory

interest and additions to tax that he calculated with reference to the restitution

amount, and the underlying liability remaining in dispute consists of the

summarily assessed criminal restitution. As of April 3, 2016, the combined unpaid

balance for the assessed criminal restitution totaled $500,346.90.

      In order to dispute his or her underlying tax liability in this Court, the

taxpayer must have properly raised that issue at the CDP hearing. See secs.

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

see also Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). Under section

6201(a)(4)(C) petitioner was expressly prohibited from challenging the existence

or amount of the RBAs for the years in issue during his CDP hearing. The proper

time to challenge the amount of his criminal restitution liability would have been

when he was sentenced. He did not avail himself of that option. Unlike in Klein,

here respondent conceded and abated the assessed interest and additions to tax;

therefore we need not review the determination as it relates to those amounts. See

Klein v. Commissioner, 149 T.C. at 345-346 (determining de novo review

appropriate because petitioners did not have opportunity to challenge interest and

additions to tax before their CDP hearing and fully paid restitution amount before

the NFTL was filed, leaving as underlying tax liability remaining in dispute only
                                        - 32 -

statutory interest and additions to tax). Respondent represents that he intends to

file a corrected NFTL that accurately reflects petitioner’s outstanding balance

should the Court sustain the FNIL and the filing of the NFTL for the unpaid RBA

amount. Thus, petitioner is precluded from raising the issue of his underlying tax

liability, and we review respondent’s determination sustaining the FNIL and the

NFTL filing only for abuse of discretion.

IV.   Review of CDP Hearing

      We agree with respondent that the officer did not abuse his discretion. The

officer’s case activity record shows that the officer diligently documented his

review of petitioner’s case, his correspondence, and his conversations with

petitioner. The evidence and the notice of determination itself demonstrate that

the officer (1) properly verified that the requirements of any applicable law or

administrative procedure were met, (2) considered all relevant issues petitioner

raised, and (3) considered whether the proposed collection action balanced the

need for efficient collection of taxes with petitioner’s legitimate concern that the

action be no more intrusive than necessary. See sec. 6330(c)(3). The officer also

confirmed that collection actions undertaken by the USAO and the District Court’s

payment schedule had been taken into account.
                                        - 33 -

      The Appeals representative did not act arbitrarily, capriciously, or without

sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. at 23. Indeed,

petitioner did not specify any abuse of discretion in his petition. See Rule 34(b)(4)

(“Any issue not raised in the assignments of error shall be deemed to be

conceded.”). Petitioner’s only remaining argument is that the underlying tax

liability is incorrect even after respondent’s concession and abatement of the

interest and penalties, and this is an argument that we are unable to consider in a

CDP case where the taxpayer’s liability is the result of an RBA. We conclude that

Appeals did not abuse its discretion in sustaining both the FNIL and the filing of

the NFTL.

      Petitioner failed to take advantage of the opportunities made available to

him through the CDP hearing. During the CDP hearing petitioner was free to

propose an installment agreement whereby he would potentially end up paying a

relatively small amount per month. He might even have convinced the officer that

he could in fact afford to pay no more than the $100 per month set forth in the

sentencing court’s order. (Petitioner is not limited to the CDP hearing and may

propose an installment payment agreement anytime. See sec. 6159). In order to

secure a collection alternative like this, however, petitioner needed to do three

things: (1) make an actual proposal of a collection alternative, (2) submit financial
                                        - 34 -

information establishing that this was all he could afford to pay, and (3) become

current in his tax filing obligations. Petitioner did none of these things.

      Instead of making the required factual showings, petitioner took the extreme

legal position that the IRS simply could not collect from him. That was a mistake.

Petitioner, like any other taxpayer in a CDP case, must affirmatively establish

what is his limited ability to pay. He cannot rely on the sentencing court’s

payment plan to establish that for Federal income tax purposes. In rejecting his

position, we are not ruling that the IRS can always levy to collect 100% of the

restitution regardless of the taxpayer’s financial circumstances.

V.    Conclusion

      Petitioner disputes respondent’s authority to collect criminal restitution in

the absence of a court order. We have held that in adding the provisions of section

6201(a)(4) to the Code, Congress intended to vest the Secretary with independent

authority to assess and administratively collect criminal restitution. We have also

held that a payment schedule set forth in an order for criminal restitution that is

due immediately does not limit the Secretary’s authority to collect administratively

unpaid amounts of such restitution. Furthermore, the officer’s determinations

reflected in the notices of determination were not the result of any abuse of

discretion. Except with respect to the conceded amounts of interest and penalties,
                                      - 35 -

we sustain the IRS FNIL and NFTL filing insofar as the amounts do not exceed

the amount of criminal restitution.

      We have considered all of the parties’ arguments, and to the extent not

discussed above, conclude that those arguments are irrelevant, moot, or without

merit. To reflect the foregoing,


                                                 An appropriate decision will be

                                      entered.
