                                              GEORGE THOMPSON, PETITIONER v. COMMISSIONER                                    OF
                                                      INTERNAL REVENUE, RESPONDENT
                                                        Docket No. 10897–09L.                     Filed March 4, 2013.

                                                      P filed a petition for review pursuant to I.R.C. sec. 6330 in
                                                   response to R’s determination to proceed with collection. P
                                                   sought a collection alternative of a partial payment install-
                                                   ment agreement with a monthly payment of $3,000. The
                                                   Internal Revenue Manual provides guidance for determining
                                                   how much a taxpayer should be able to pay in a partial pay-
                                                   ment installment agreement and how much should be set
                                                   aside for the taxpayer’s necessary living expenses. The
                                                   Internal Revenue Manual provides that in a partial payment
                                                   installment agreement a taxpayer is allowed only necessary
                                                   expenses; conditional expenses are not allowed. In computing
                                                   the necessary expenses, P included tithing to his Church and
                                                   expenses for his children’s college. P claims that both tithing
                                                   and his children’s college expenses are necessary expenses.
                                                   Held: It was not an abuse of discretion for R to classify P’s
                                                   tithing as a conditional expense under the Internal Revenue
                                                   Manual. Held, further, classifying P’s tithing as a conditional
                                                   expense does not violate P’s rights under the Free Exercise
                                                   Clause of the First Amendment. Held, further, classifying P’s
                                                   tithing as a conditional expense was not a violation of the
                                                   Religious Freedom Restoration Act of 1993. Held, further, it
                                                   was not an abuse of discretion for R to classify P’s children’s
                                                   college expenses as a conditional expense under the Internal
                                                   Revenue Manual. Held, further, R’s determination is sus-
                                                   tained.

                                        Robert S. Schwartz, Peter M. Burke, and Monica Vir, for
                                      petitioner.
                                        Carrie L. Kleinjan and Kirsten E. Brimer, for respondent.
                                        RUWE, Judge: This proceeding was commenced in response
                                      to a Notice of Determination Concerning Collection Action(s)
                                      Under Section 6320 and/or 6330. 1 The issues for decision are
                                           1 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
                                                                                                       Continued


                                                                                                                                   173




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                                      174                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      whether it was an abuse of discretion for the settlement
                                      officer to reject petitioner’s contention that: (1) petitioner’s
                                      monthly tithing to his Church and (2) his monthly payments
                                      for his children’s college expenses should be excluded from
                                      the monthly amount available to satisfy his unpaid tax liabil-
                                      ities. Petitioner contends that respondent’s failure to allow
                                      for his tithing obligations violates the Free Exercise Clause
                                      of the First Amendment to the Constitution and the Reli-
                                      gious Freedom Restoration Act of 1993, Pub. L. No. 103–141,
                                      sec. 3, 107 Stat. 1488 (current version at 42 U.S.C. sec.
                                      2000bb–1(a) and (b) (2006)).
                                                                          FINDINGS OF FACT

                                         At the time the petition was filed, petitioner resided in
                                      New Jersey. Petitioner is the president of Compliance
                                      Innovations, Inc., which is owned by a trust. Petitioner and
                                      his wife are the trustees.
                                         Petitioner has been a member of the Church of Jesus
                                      Christ of Latter-Day Saints (Church) his entire life and has
                                      regularly contributed 10% of his monthly income to the
                                      Church. Petitioner is actively involved in the Church and
                                      holds a position as a shift coordinator in the Church’s
                                      Manhattan Temple. Additionally, petitioner is a stake
                                      scouting coordinator for the Church and is responsible for
                                      overseeing six scout troops in different congregations in New
                                      Jersey. Petitioner was not compensated by the Church for his
                                      shift coordinator or stake scouting coordinator responsibil-
                                      ities.
                                         At the time petitioner submitted his Form 433–A, Collec-
                                      tion Information Statement for Wage Earners and Self-
                                      Employed Individuals, he was married and had five children.
                                      At that time, petitioner had a child enrolled in Brigham
                                      Young University and a child enrolled in Sacred Heart
                                      University.
                                      CDP Period Section 6672 Penalties
                                         On January 7, 2008, respondent assessed trust fund
                                      recovery penalties pursuant to section 6672 against peti-
                                      tioner for employment tax liabilities owed by Compliance
                                      Innovations, Inc., of $45,615.67, $23,091.60, $37,269.90, and
                                      of Practice and Procedure, unless otherwise indicated.




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                                      (173)                        THOMPSON v. COMMISSIONER                                       175


                                      $45,217.77 for the periods ending December 31, 2004, June
                                      30 and September 30, 2005, and June 30, 2007. 2 We will
                                      refer to these tax penalties as petitioner’s CDP period tax
                                      penalties.
                                         Respondent sent petitioner a Letter 1058, Final Notice of
                                      Intent to Levy and Notice of Your Right to a Hearing, dated
                                      June 4, 2008, advising him that respondent intended to levy
                                      to collect the unpaid CDP period tax penalties and that peti-
                                      tioner could request a hearing with respondent’s Office of
                                      Appeals. Respondent sent petitioner a Letter 3172, Notice of
                                      Federal Tax Lien Filing and Your Right to a Hearing Under
                                      IRC 6320, dated June 19, 2008, advising him that a notice
                                      of Federal tax lien (NFTL) had been filed with respect to his
                                      unpaid CDP period tax penalties and that he could request
                                      a hearing with respondent’s Office of Appeals. Petitioner
                                      timely submitted Forms 12153, Request for a Collection Due
                                      Process or Equivalent Hearing, in which he did not contest
                                      the amounts of the underlying CDP period tax penalties. By
                                      letter dated August 26, 2008, respondent’s settlement officer 3
                                      acknowledged receipt of petitioner’s collection due process
                                      (CDP) hearing request.
                                      Petitioner’s Non-CDP Period Tax Liabilities
                                        Respondent had previously assessed trust fund recovery
                                      penalties pursuant to section 6672 against petitioner for
                                      employment tax liabilities owed by Compliance Innovations,
                                      Inc., for the periods ending December 31, 1999, and June 30
                                      and September 30, 2000. Additionally, respondent had pre-
                                      viously assessed income tax liabilities owed by petitioner and
                                      his wife for the taxable years 1992, 1995, 1996, 1999, and
                                        2 Under sec. 6672 ‘‘the officers or employees of the employer responsible

                                      for effectuating the collection and payment of trust-fund taxes who will-
                                      fully fail to do so are made personally liable to a ‘penalty’ equal to the
                                      amount of the delinquent taxes.’’ Slodov v. United States, 436 U.S. 238,
                                      244–245 (1978). The taxes withheld from employees and collected by em-
                                      ployers are commonly referred to as ‘‘trust-fund taxes’’ because the Code
                                      provides that the collected taxes are deemed to be a ‘‘special fund in trust
                                      for the United States.’’ Sec. 7501(a). The purpose of sec. 6672 is to assure
                                      payment of the taxes collected by employers. Slodov v. United States, 436
                                      U.S. at 248.
                                        3 Settlement officer is a position within respondent’s Office of Appeals.




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                                      176                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      2000. 4 These penalties and taxes were unpaid. Petitioner
                                      had previously entered into a partial payment installment
                                      agreement with respondent, on or about August 8, 2006, for
                                      payment of the non-CDP period tax liabilities and penalties.
                                      Subsequently, respondent determined that petitioner had
                                      defaulted on the partial payment installment agreement and
                                      sent him a Notice of Defaulted Installment Agreement under
                                      Section 6159(b)—Notice of Intent to Levy Under Section
                                      6331(d), dated June 4, 2008. As of August 1, 2008, petitioner
                                      owed $731,451.18 for the non-CDP period tax liabilities and
                                      penalties.
                                      Proceedings Before IRS Appeals
                                         On September 19, 2008, petitioner’s counsel requested a
                                      partial payment installment agreement that would encom-
                                      pass all of petitioner’s tax liabilities and penalties for the
                                      CDP and non-CDP periods. The Internal Revenue Service
                                      (IRS) settlement officer requested that petitioner submit a
                                      Form 433–A. Petitioner submitted the Form 433–A on Feb-
                                      ruary 11, 2009. The Form 433–A reported that petitioner had
                                      a monthly income of $27,633 ($331,596 per year) and
                                      monthly expenses of $24,416 ($292,992 per year). Included in
                                      the total monthly expenses were ‘‘other expenses’’ of $5,294,
                                      which consisted of: (1) Church tithing expenses of $2,110; (2)
                                      Church service expenses of $232; and (3) college expenses of
                                      $2,952. 5 Petitioner’s counsel requested a partial payment
                                      installment agreement whereby petitioner would pay $3,000
                                      a month for his unpaid tax liabilities and penalties for both
                                      the CDP and non-CDP periods. As of August 1, 2008, peti-
                                      tioner owed $888,351.15 for his tax liabilities and penalties
                                      for the CDP and non-CDP periods. As a result, even if we
                                      were to assume that the balance of petitioner’s tax liabilities
                                      and penalties would not accrue interest during the install-
                                      ment agreement, it would take petitioner more than 24 years
                                      to fully pay his balance.
                                         4 We will refer to the sec. 6672 penalties for the periods ending Decem-

                                      ber 31, 1999, and June 30 and September 30, 2000, and the income tax
                                      liabilities for the taxable years 1992, 1995, 1996, 1999, and 2000, as peti-
                                      tioner’s non-CDP period tax liabilities and penalties.
                                         5 On an annual basis this equals: (1) $25,320 for Church tithing; (2)

                                      $2,784 for Church service expenses; and (3) $35,424 for college expenses.




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                                      (173)                          THOMPSON v. COMMISSIONER                                              177


                                        In determining the monthly amount petitioner should pay,
                                      the settlement officer allowed only $19,244 6 of petitioner’s
                                      monthly expenses as necessary expenses. These consisted of:

                                                           Allowed expenses                                                    Amount
                                                Food, clothing, and miscellaneous ......................                        $2,680
                                                Housing and utilities ...........................................               14,619

                                                Transportation .....................................................             1,538
                                                Health care ...........................................................          1,122
                                                Court-ordered alimony ........................................                     600
                                                Life insurance ......................................................              117
                                                Taxes ....................................................................      28,568


                                                    Total ..................................................................    19,244
                                                   1The $4,619 allowed for housing and utilities was in excess
                                                of the amount listed on the IRS’ national standard guide-
                                                lines.
                                                   2These are current taxes and do not include the unpaid tax
                                                liabilities and penalties for the CDP and non-CDP periods.

                                      The settlement officer determined that petitioner’s claimed
                                      ‘‘other expenses’’ of $5,294 did not qualify as necessary
                                      expenses under the guidelines of the Internal Revenue
                                      Manual. As a result, the settlement officer determined that
                                      petitioner could afford a partial payment installment agree-
                                      ment with a monthly payment of $8,389. 7 Petitioner did not
                                      agree to a partial payment installment agreement with a
                                      monthly payment of $8,389.
                                         Respondent then issued petitioner a Notice of Determina-
                                      tion Concerning Collection Action(s) Under Section 6320 and/
                                      or 6330, dated April 8, 2009, sustaining the filing of the
                                      NFTL and the proposed levy action. Petitioner timely filed a
                                      petition with this Court.

                                                                                         OPINION

                                        Section 6331(a) provides that if any person liable to pay
                                      any tax neglects or refuses to pay such tax within 10 days
                                      after notice and demand for payment, then the Secretary is
                                      authorized to collect such tax by levy upon the person’s prop-
                                      erty. Section 6331(d) provides that, at least 30 days before
                                           6 $230,928
                                                   annually.
                                           7 Even
                                               if we were to assume that interest would not accrue on the bal-
                                      ance of petitioner’s tax liabilities and penalties, it would take petitioner
                                      nine years to fully pay the balance with a monthly payment of $8,389.




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                                      178                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      enforcing collection by way of a levy on the person’s property,
                                      the Secretary is obliged to provide the person with a final
                                      notice of intent to levy, including notice of the administrative
                                      appeals available to the person.
                                         Section 6321 provides that if any person liable to pay any
                                      tax neglects or refuses to do so after demand, the amount
                                      shall be a lien in favor of the United States upon all property
                                      and rights to property, whether real or personal, belonging to
                                      such person. Section 6323 authorizes the Commissioner to
                                      file an NFTL. Pursuant to section 6320(a) the Commissioner
                                      must provide the taxpayer with notice of and an opportunity
                                      for an administrative review of the propriety of the NFTL
                                      filing. See Katz v. Commissioner, 115 T.C. 329, 333 (2000).
                                         Under certain circumstances a taxpayer may raise chal-
                                      lenges to the underlying liabilities. See sec. 6330(c)(2)(B). If
                                      a taxpayer requests a CDP hearing in response to an NFTL
                                      or a notice of intent to levy, he may also raise at that hearing
                                      any other relevant issue relating to the unpaid tax or the
                                      proposed levy or lien. Secs. 6330(c)(2), 6320(c). Relevant
                                      issues include possible alternative means of collection such
                                      as an installment agreement. Sec. 6330(c)(2)(A)(iii).
                                         If a taxpayer’s underlying liability is properly at issue, the
                                      Court reviews any determination regarding the underlying
                                      liability de novo. Goza v. Commissioner, 114 T.C. 176, 181–
                                      182 (2000). Petitioner has the burden of proof regarding his
                                      underlying liabilities. See Rule 142(a). A taxpayer is pre-
                                      cluded from disputing the underlying liability if it was not
                                      properly raised in the CDP hearing. See Giamelli v. Commis-
                                      sioner, 129 T.C. 107, 114 (2007). Petitioner did not raise
                                      issues regarding the existence or amounts of his underlying
                                      tax penalties for the CDP period or his tax liabilities and
                                      penalties for the non-CDP period in either his request for a
                                      CDP hearing or his petition. Consequently, petitioner’s
                                      underlying tax liabilities and penalties are not properly
                                      before the Court.
                                         The Court reviews administrative determinations by the
                                      Commissioner’s Office of Appeals regarding nonliability
                                      issues for abuse of discretion. Hoyle v. Commissioner, 131
                                      T.C. 197, 200 (2008); Goza v. Commissioner, 114 T.C. at 182.
                                      The determination of the Office of Appeals must take into
                                      consideration: (1) the verification that the requirements of
                                      applicable law and administrative procedure have been met;




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                                      (173)                        THOMPSON v. COMMISSIONER                                       179


                                      (2) issues raised by the taxpayer; and (3) whether any pro-
                                      posed collection action balances the need for the efficient
                                      collection of taxes with the legitimate concern of the person
                                      that any collection be no more intrusive than necessary. Sec.
                                      6330(c)(3); see Lunsford v. Commissioner, 117 T.C. 183, 184
                                      (2001). The settlement officer based her determination on the
                                      factors required by section 6330(c)(3).
                                         The Court does not make an independent determination of
                                      what would be an acceptable collection alternative. See
                                      Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff ’d, 469
                                      F.3d 27 (1st Cir. 2006); Lipson v. Commissioner, T.C. Memo.
                                      2012–252, at *9. The extent of our review is to determine
                                      whether the settlement officer’s decision was arbitrary, capri-
                                      cious, or without sound basis in fact or law. See Murphy v.
                                      Commissioner, 125 T.C. at 320. If the settlement officer fol-
                                      lowed all statutory and administrative guidelines and pro-
                                      vided a reasoned, balanced decision, the Court will not
                                      reweigh the equities. See Lipson v. Commissioner, at *9
                                      (citing Fifty Below Sales & Mktg., Inc. v. United States, 497
                                      F.3d 828, 830 (8th Cir. 2007)).
                                         Section 6159 authorizes the Commissioner to enter into
                                      written agreements allowing taxpayers to pay tax in install-
                                      ment payments if he deems that the ‘‘agreement will facili-
                                      tate full or partial collection of such liability.’’ The decision
                                      to accept or reject installment agreements lies within the
                                      discretion of the Commissioner. 8 See Kuretski v. Commis-
                                      sioner, T.C. Memo. 2012–262, at *9; sec. 301.6159–1(a),
                                      (c)(1)(i), Proced. & Admin. Regs. The Commissioner has cre-
                                      ated guidelines for settlement officers to follow in deter-
                                      mining the terms of a partial payment installment agree-
                                      ment for a taxpayer who cannot fully pay his liability but can
                                      pay some of it. See, e.g., Internal Revenue Manual (IRM) pt.
                                      5.14.2.1 (Sept. 26, 2008).
                                         In evaluating a taxpayer’s ability to pay, the Commissioner
                                      classifies a taxpayer’s expenses into two categories: (1) nec-
                                      essary expenses and (2) conditional expenses. Pixley v.
                                      Commissioner, 123 T.C. 269, 272 (2004); IRM pt. 5.14.2.1.1(4)
                                      (Sept. 26, 2008). ‘‘The total necessary expenses establish the
                                       8 Petitioner does not meet the requirements of sec. 6159(c), which if met

                                      would require respondent to enter into a full payment installment agree-
                                      ment.




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                                      180                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      minimum a taxpayer and family needs to live.’’ IRM pt.
                                      5.15.1.7(1) (May 9, 2008). If a taxpayer requests a partial
                                      payment installment agreement, then the taxpayer is
                                      allowed only necessary expenses; conditional expenses are
                                      not allowed. See id. pt. 5.14.2.1.1(4).
                                      Issue 1. Tithing
                                         This issue involves whether petitioner’s asserted religious
                                      obligation to tithe can trump his obligation to pay substan-
                                      tial amounts of delinquent penalties and taxes in a reason-
                                      ably prompt manner. Petitioner introduced evidence,
                                      including a biblical passage from the Old Testament, to sup-
                                      port his position. See Malachi 3:8–10. This brings to mind
                                      another biblical passage suggesting an answer to this type of
                                      dilemma: ‘‘Render therefore to Caesar the things that are
                                      Caesar’s, and to God the things that are God’s.’’ Matthew
                                      22:21. However, even this formulation presents the dilemma
                                      of determining which things fall into the two respective cat-
                                      egories. While we may be incapable of determining what
                                      belongs to God, we believe that we can, and must, decide
                                      what is Caesar’s. Therefore, we will consider this issue using
                                      the latter approach based on existing procedures and prece-
                                      dents.
                                         Petitioner argues that the settlement officer abused her
                                      discretion by classifying his tithing as a conditional expense
                                      in determining the amount he could afford to pay in a partial
                                      payment installment agreement. Petitioner makes three
                                      separate arguments. First, petitioner argues that given his
                                      positions in the Church, tithing is required by the Internal
                                      Revenue Manual to be treated as a necessary expense.
                                      Second, petitioner argues that classifying his tithing as a
                                      conditional expense is a violation of his rights under the Free
                                      Exercise Clause of the First Amendment. Third, petitioner
                                      argues that classifying his tithing as a conditional expense is
                                      a violation of the Religious Freedom Restoration Act of 1993.
                                      Respondent disagrees with each of petitioner’s arguments.
                                      We will discuss each of petitioner’s arguments in turn.




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                                      (173)                        THOMPSON v. COMMISSIONER                                       181


                                           A. Necessary vs. Conditional Expenses Under the Internal
                                              Revenue Manual
                                         An expense must satisfy the necessary expense test to be
                                      considered a necessary expense. See IRM pt. 5.15.1.7. The
                                      necessary expense test has two prongs, one of which must be
                                      satisfied in order for an expense to be considered a necessary
                                      expense. The expense must provide for either (1) the tax-
                                      payer’s health and welfare or (2) the taxpayer’s production of
                                      income. See id.
                                         Petitioner did not receive compensation for his positions in
                                      the Church. As a result, his tithing payments are not for the
                                      production of income. Petitioner has failed the second prong
                                      of the necessary expense test. Therefore, to be considered a
                                      necessary expense the tithing payments must satisfy the first
                                      prong of the necessary expense test; i.e., provide for peti-
                                      tioner’s ‘‘health and welfare’’. See id. pt. 5.15.1.7(1).
                                         Petitioner relies on a part of the Internal Revenue Manual
                                      that specifically discusses whether a minister’s 9 tithing is an
                                      allowable expense. It states that a minister’s tithe will be
                                      considered a necessary expense if it is a ‘‘condition of employ-
                                      ment or meets the necessary expense test.’’ Id. pt. 5.15.1.10
                                      (May 9, 2008). The Internal Revenue Manual states that the
                                      amount tithed must be ‘‘the amount actually required and
                                      does not include a voluntary portion’’, id. ex. 5.15.1–1 Q&A
                                      (1) (May 9, 2008), and instructs the settlement officer to
                                      review the minister’s employment contract, id. pt. 5.15.1.10.
                                           1. Employment
                                        Petitioner argues that the tithes are necessary expenses
                                      because tithing is a condition of petitioner’s ‘‘employment’’
                                      with the Church, notwithstanding the fact that petitioner
                                      received no financial remuneration for his positions with the
                                      Church. Respondent disagrees.
                                        Petitioner testified that he is ‘‘employed’’ by the Church as
                                      a shift coordinator and stake scouting coordinator. At trial
                                      petitioner testified that he must tithe in order to maintain
                                      these positions with the Church. Petitioner produced a letter
                                           9 For
                                              purposes of analyzing petitioner’s argument we will assume, with-
                                      out deciding, that petitioner’s positions in the Church qualify him as a
                                      minister within the meaning of the Internal Revenue Manual. Respondent
                                      has not contested this.




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                                      182                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      from a bishop in his Church that stated petitioner would
                                      have to resign his positions with the Church if he did not
                                      tithe. 10 Petitioner acknowledged that if he was released from
                                      these positions his family’s financial welfare would not be
                                      affected.
                                         Petitioner argues that the term ‘‘employment’’ in the
                                      Internal Revenue Manual is not limited to compensated
                                      employment and can include uncompensated employment.
                                      Petitioner cites a dictionary which defines employment as an
                                      ‘‘[a]ctivity in which one engages and employs his time and
                                      energies’’. Webster’s Third New International Dictionary 743
                                      (2002). Respondent cites a different dictionary that defines
                                      employment as ‘‘[w]ork for which one has been hired and is
                                      being paid by an employer.’’ Black’s Law Dictionary 566 (8th
                                      ed. 2004).
                                         We note that no case has specifically decided whether the
                                      term ‘‘employment’’ as used in IRM pt. 5.15.1.10 is limited to
                                      compensated employment or can include uncompensated
                                      employment. IRM pt. 5.15.1.10 provides that expenses can
                                      meet the requirements for being a necessary expense if they
                                      provide for the health and welfare of the taxpayer or they are
                                      for the production of income and instructs settlement officers
                                      to review the minister’s employment contract. Employment is
                                      generally connected with the production of income. The parts
                                      in the Internal Revenue Manual allowing charitable con-
                                      tributions made as a ‘‘condition of employment’’ apply to a
                                      broad range of people including ministers, business execu-
                                      tives, and employees. See id. ex. 5.15.1–1 Q&A (1). Peti-
                                      tioner’s interpretation of the Internal Revenue Manual would
                                      seem to allow the expenses associated with any uncompen-
                                      sated activity as a necessary expense. This would make no
                                      sense.
                                         On the other hand, the Commissioner’s compelling interest
                                      in collecting taxes would be harmed if a minister, or any
                                      other taxpayer, loses his entire income as a result of the
                                      Commissioner not allowing a taxpayer to tithe a portion of
                                      his income if tithing is required to receive the income. As a
                                      result, the Internal Revenue Manual instructs settlement
                                        10 This letter was admitted into evidence without objection. We accept

                                      this statement for petitioner’s case, but we make no finding that this is
                                      the official position of the Church.




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                                      (173)                        THOMPSON v. COMMISSIONER                                       183


                                      officers to review the minister’s employment contract to
                                      ensure that tithing is in fact a condition of employment. The
                                      Internal Revenue Manual’s focus on the employment contract
                                      is consistent with the normal concept that an employment
                                      contract increases a taxpayer’s ability to pay by providing the
                                      taxpayer with compensated employment. The IRS policy
                                      underpinning tax collection also supports this interpretation.
                                      A settlement officer is concerned with collecting as much of
                                      the outstanding tax liability as the taxpayer can afford to
                                      pay. Thus, the most logical reading of the part in the
                                      Internal Revenue Manual that considers whether a min-
                                      ister’s, or any other taxpayer’s, tithing is a ‘‘condition of
                                      employment’’ is a question that is related to determining
                                      whether the tithing is related to the taxpayer’s production of
                                      income. Accordingly, we hold that it was not an abuse of the
                                      settlement officer’s discretion to interpret the phrase ‘‘condi-
                                      tion of employment’’ as used in the Internal Revenue Manual
                                      to be limited to ‘‘compensated employment’’.
                                           2. Health and Welfare
                                         Petitioner also argues that tithing is a necessary expense
                                      because it provides for his and his family’s ‘‘health and wel-
                                      fare’’ as that phrase is used in Internal Revenue Manual pt.
                                      5.15.1.7(1). Respondent disagrees.
                                         Petitioner testified that not being able to tithe would nega-
                                      tively affect his spiritual welfare. Additionally, petitioner
                                      testified that losing his positions with the Church would be
                                      a blow to his and his family’s welfare. Petitioner argues that
                                      the term ‘‘health’’ includes spiritual health and that since his
                                      tithing uplifts his spiritual health, his tithing is a necessary
                                      expense. Respondent disagrees.
                                         Petitioner provided no evidence of specific spiritual benefits
                                      that would be affected whether or not he tithed. Petitioner
                                      cited no cases that support his argument that the phrase
                                      ‘‘health and welfare’’ in the Internal Revenue Manual encom-
                                      passes a taxpayer’s spiritual health and welfare. Respondent
                                      cited Freeman v. Commissioner, 320 Fed. Appx. 651, 652 (9th
                                      Cir. 2009), aff ’g T.C. Dkt. No. 10251–06L (May 24, 2007)
                                      (bench opinion), an unpublished opinion that affirmed a
                                      bench opinion of this Court. Freeman was a collection due
                                      process proceeding where the Commissioner had filed an




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                                      184                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      NFTL against the taxpayer. Id. The Commissioner had
                                      rejected the taxpayer’s offer-in-compromise. Id. On appeal
                                      the taxpayer argued that ‘‘the Tax Court erred by rejecting
                                      his claim that his tax liabilities should be offset by necessary
                                      expenses consisting of his charitable donations of $471.75 per
                                      month, which he considers essential to his health and wel-
                                      fare.’’ Id. The Court of Appeals for the Ninth Circuit held
                                      that ‘‘the Tax Court did not err by concluding that these
                                      charitable contributions do not meet the ‘necessary expense’
                                      test during an offer in compromise under the Internal Rev-
                                      enue Manual.’’ Id.
                                        We find that it was reasonable for the settlement officer to
                                      interpret the phrase ‘‘health and welfare’’ so as to not include
                                      petitioner’s ‘‘spiritual’’ health and welfare. Indeed, it would
                                      generally be inappropriate for the Commissioner or this
                                      Court to make determinations concerning what is or is not
                                      necessary for a particular person’s religious or ‘‘spiritual’’
                                      health or welfare. See Hernandez v. Commissioner, 490 U.S.
                                      680, 693–694 (1989), for a discussion of the problems of
                                      entanglement between church and State if the Government
                                      were required to delve into spiritual matters. 11 Accordingly,
                                      we hold that it was not an abuse of the settlement officer’s
                                      discretion to determine that petitioner’s tithing was not a
                                      necessary expense under the Internal Revenue Manual.
                                           B. Free Exercise of Religion
                                         Petitioner argues that the settlement officer’s classification
                                      of his tithing as a conditional expense violates the Free Exer-
                                      cise Clause of the First Amendment because if he is not able
                                      to tithe then his Church will require him to resign his min-
                                      isterial positions with the Church. Petitioner contends that
                                      the settlement officer’s classification of petitioner’s tithe as a
                                      conditional expense is tantamount to the settlement officer
                                      deciding who can be a minister in petitioner’s Church.
                                         The First Amendment to the Constitution provides that
                                      ‘‘Congress shall make no law respecting an establishment of
                                      religion, or prohibiting the free exercise thereof ’’. Petitioner
                                      is correct that the Free Exercise Clause prevents the Govern-
                                           11 ‘‘ ‘[P]ervasive
                                                        monitoring’ for ‘the subtle or overt presence of religious
                                      matter’ is a central danger against which we have held the Establishment
                                      Clause guards.’’ Hernandez v. Commissioner, 490 U.S. 680, 694 (1989)
                                      (quoting Aguilar v. Felton, 473 U.S. 402, 413 (1985)).




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                                      (173)                        THOMPSON v. COMMISSIONER                                       185


                                      ment from interfering in a church’s selection of its ministers.
                                      See Hosanna-Tabor Evangelical Lutheran Church v. EEOC,
                                      565 U.S. ll, 132 S. Ct. 694, 703 (2012) (‘‘The Establish-
                                      ment Clause prevents the Government from appointing min-
                                      isters, and the Free Exercise Clause prevents it from inter-
                                      fering with the freedom of religious groups to select their
                                      own.’’). However, the settlement officer has not interfered
                                      with the Church’s decision of whether to keep petitioner as
                                      a minister. Petitioner offered into evidence a letter from a
                                      bishop in his Church that stated if he did not pay his tithe
                                      he would be required to resign his positions with the Church.
                                      However, petitioner overlooks the fact that it is his Church
                                      who is requiring him to resign his positions if he does not
                                      tithe. The settlement officer did not require petitioner to
                                      resign his positions nor did she pressure the Church to
                                      require petitioner to resign. The Free Exercise Clause pro-
                                      hibits the Government from interfering in a church’s selec-
                                      tion of its ministers. See id. at ll, 132 S. Ct. at 703. The
                                      Free Exercise Clause does not prohibit a church from
                                      requiring its ministers to tithe in order to maintain their
                                      ministership. If the Church decides that petitioner must
                                      resign his ministerial positions because he does not tithe,
                                      then that is solely the decision of the Church.
                                         Paying taxes ‘‘is a burden, common to all taxpayers, on
                                      their pocketbooks, rather than a recognizable burden on the
                                      free exercise of their religious beliefs.’’ Pixley v. Commis-
                                      sioner, 123 T.C. at 274. ‘‘Constitutional protection of funda-
                                      mental freedoms ‘does not confer an entitlement to such
                                      funds as may be necessary to realize all the advantages of
                                      that freedom.’ ’’ Id. (quoting Harris v. McRae, 448 U.S. 297,
                                      318 (1980)). Petitioner is not entitled by the Constitution to
                                      be relieved of paying his substantial delinquent tax liabilities
                                      and penalties in order to pay his tithe. Requiring petitioner
                                      to pay taxes may result in his having less money to tithe.
                                      However, this is not a violation of the Free Exercise Clause.
                                      See id. at 275 (the Commissioner’s classification of the tax-
                                      payer’s tithing expenses as conditional expenses did not vio-
                                      late the Free Exercise Clause); see also Hernandez v.
                                      Commissioner, 490 U.S. at 700 (‘‘[P]etitioners’ claimed
                                      exemption stems from the contention that an incrementally
                                      larger tax burden interferes with their religious activities.




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                                      186                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      This argument knows no limitation. We accordingly hold that
                                      petitioners’ free exercise challenge is without merit.’’).
                                         Petitioner’s position would allow religious organizations to
                                      control vital Government functions. This is not the intention
                                      or purpose of the Free Exercise Clause of the First Amend-
                                      ment. Rather, it prohibits the Government from exercising
                                      control over religious functions. Laws of general applicability
                                      that require persons to meet certain general requirements of
                                      citizenship, such as paying taxes, cannot be avoided by the
                                      fact that they indirectly make it more difficult to fulfill a
                                      purely religious duty, such as a member tithing a certain
                                      amount to his church or making a pilgrimage to a shrine in
                                      a foreign country. See United States v. Lee, 455 U.S. 252, 260
                                      (1982); Pixley v. Commissioner, 123 T.C. at 274–275; Adams
                                      v. Commissioner, 110 T.C. 137, 139 (1998), aff ’d, 170 F.3d
                                      173 (3d Cir. 1999). ‘‘ ‘[T]he tax system could not function if
                                      denominations were allowed to challenge the tax system’ on
                                      the ground that it operated in a manner that violates their
                                      religious belief.’’ Hernandez v. Commissioner, 490 U.S. at 700
                                      (quoting United States v. Lee, 455 U.S. at 260). Accordingly,
                                      we hold that the settlement officer did not violate petitioner’s
                                      rights under the Free Exercise Clause by classifying his
                                      tithing as a conditional expense.
                                           C. Religious Freedom Restoration Act of 1993
                                        Petitioner argues that not classifying tithing as a nec-
                                      essary expense violates the Religious Freedom Restoration
                                      Act of 1993 (RFRA). The RFRA provides:
                                              (a) In general. Government shall not substantially burden a person’s
                                           exercise of religion even if the burden results from a rule of general
                                           applicability, except as provided in subsection (b).
                                              (b) Exception. Government may substantially burden a person’s exer-
                                           cise of religion only if it demonstrates that application of the burden to
                                           the person—
                                              (1) is in furtherance of a compelling government interest; and
                                              (2) is the least restrictive means of furthering that compelling govern-
                                           mental interest.
                                              [42 U.S.C. sec. 2000bb–1(a) and (b)(1) and (2) (2006).]

                                      Petitioner argues that a partial payment installment agree-
                                      ment with a $3,000 monthly payment would have been the




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                                      (173)                        THOMPSON v. COMMISSIONER                                       187


                                      least restrictive means of collecting his tax liabilities and
                                      penalties. 12
                                          The Commissioner has a compelling interest in collecting
                                      taxes and in administering the tax system, which petitioner
                                      concedes. See Adams v. Commissioner, 110 T.C. at 139
                                      (‘‘[M]andatory participation in the Federal income tax
                                      system, irrespective of religious belief, is a compelling
                                      governmental interest.’’); see also Hernandez v. Commis-
                                      sioner, 490 U.S. at 699–700 (the Government has a ‘‘ ‘broad
                                      public interest in maintaining a sound tax system,’ free of
                                      ‘myriad exceptions flowing from a wide variety of religious
                                      beliefs’ ’’ (quoting United States v. Lee, 455 U.S. at 260)).
                                          For purposes of this case we will assume, without deciding,
                                      that the refusal to allow tithing as a necessary expense
                                      substantially burdens petitioner’s exercise of religion. 13
                                      Thus, we must decide whether the settlement officer abused
                                      her discretion by failing to use the least restrictive means of
                                      furthering the Government’s compelling interest in collecting
                                      petitioner’s tax liabilities. The parties cite no cases that have
                                      decided whether the Commissioner’s refusal to allow tithing
                                      expenses in the context of entering into an installment agree-
                                      ment violates the RFRA. This appears to be an issue of first
                                      impression.
                                          The RFRA does not require the Government to diminish its
                                      compelling interest; it is required only to use the least
                                      restrictive means to further its compelling interest. See 42
                                      U.S.C. sec. 2000bb–1(b)(2). The fact that there is a less
                                      restrictive means than that used by respondent does not vio-
                                      late the RFRA if the less restrictive means requested by peti-
                                      tioner does not further respondent’s compelling interest.
                                           12 We
                                               note that petitioner wrongly characterizes the settlement officer’s
                                      required monthly payment of $8,389 as part of a full payment installment
                                      agreement. The settlement officer offered petitioner a partial payment in-
                                      stallment agreement with a monthly payment of $8,389. As previously ex-
                                      plained, an $8,389 monthly payment for petitioner’s tax liabilities and pen-
                                      alties would not have resulted in full payment. See supra p. 177.
                                         13 Respondent does not agree that classifying petitioner’s tithing as a

                                      conditional expense is a substantial burden on petitioner’s exercise of reli-
                                      gion. However, on brief respondent provides little argument or analysis to
                                      support this position and focuses primarily on the Government’s compel-
                                      ling interest and arguing that he has met the least restrictive means re-
                                      quirement.




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                                      188                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                         The Commissioner has a compelling governmental interest
                                      in expeditiously collecting taxes. See Adams v. Commissioner,
                                      110 T.C. at 139; see also United States v. Lee, 455 U.S. at 260
                                      (‘‘Because the broad public interest in maintaining a sound
                                      tax system is of such a high order, religious belief in conflict
                                      with the payment of taxes affords no basis for resisting
                                      tax.’’); United States v. Philadelphia Yearly Meeting of the
                                      Religious Soc’y of Friends, 322 F. Supp. 2d 603, 610 (E.D. Pa.
                                      2004) (‘‘[T]he Government needs a speedy, cheap, and certain
                                      means of collecting delinquent taxes.’’).
                                         The Commissioner’s interest in expeditiously collecting
                                      taxes is especially compelling given the specific facts of this
                                      case. Petitioner has a long history of not paying his income
                                      tax liabilities. As of the date of trial petitioner still had not
                                      paid his income tax liabilities for the taxable years 1992,
                                      1995, 1996, 1999, and 2000. Additionally, respondent has
                                      assessed trust fund recovery penalties under section 6672
                                      against petitioner for seven different tax periods. Trust fund
                                      recovery penalties are assessed against any ‘‘person required
                                      to collect, truthfully account for, and pay over any tax
                                      imposed by this title who willfully fails to collect such tax,
                                      or truthfully account for and pay over such tax, or willfully
                                      attempts in any manner to evade or defeat any such tax or
                                      payment thereof ’’. Sec. 6672(a); see Thompson v. Commis-
                                      sioner, T.C. Memo. 2012–87, 2012 Tax Ct. Memo LEXIS 88,
                                      at *6. We note that one of the trust fund recovery penalties
                                      was for a tax period that occurred after petitioner had
                                      entered into a previous installment agreement with
                                      respondent. Given petitioner’s history of not paying his own
                                      income taxes, his willfully failing to collect and/or pay over
                                      taxes that should have been withheld from the wages of the
                                      corporation’s employees, and his default on a previous
                                      installment agreement, respondent has a compelling interest
                                      in collecting petitioner’s substantial tax liabilities and pen-
                                      alties as soon as possible.
                                         The Commissioner’s compelling interest in collecting taxes
                                      necessarily implies a compelling interest in collecting a tax-
                                      payer’s tax liability in a timely manner. See Flora v. United
                                      States, 362 U.S. 145, 154 (1960) (‘‘ ‘It is essential to the honor
                                      and orderly conduct of the government that its taxes should
                                      be promptly paid’.’’ (quoting Cheatham v. United States, 92
                                      U.S. 85, 89 (1876))); Phillips v. Commissioner, 283 U.S. 589,




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                                      (173)                        THOMPSON v. COMMISSIONER                                       189


                                      596 (1931); United States v. Philadelphia Yearly Meeting of
                                      the Religious Soc’y of Friends, 322 F. Supp. 2d at 610; see
                                      also Browne v. United States, 22 F. Supp. 2d 309, 311–312
                                      (D. Vt. 1998), aff ’d, 176 F.3d 25 (2d Cir. 1999). Petitioner’s
                                      request for a partial payment installment agreement with a
                                      monthly payment of $3,000 would not fully pay his tax liabil-
                                      ities and penalties in a timely manner. Respondent’s compel-
                                      ling interest in collecting taxes in a timely manner would not
                                      be furthered if respondent was required to allow petitioner to
                                      tithe to his Church instead of paying the substantial tax
                                      liabilities and penalties he owes to the Government.
                                      Although petitioner’s request is less restrictive than the par-
                                      tial payment installment agreement offered by the settle-
                                      ment officer, it does not satisfy respondent’s compelling
                                      interest and is therefore not a satisfactory ‘‘least restrictive’’
                                      alternative that respondent must accept. 14
                                         The Commissioner has created guidelines in the Internal
                                      Revenue Manual for settlement officers to follow in deter-
                                      mining the terms of a partial payment installment agree-
                                      ment. See IRM pt. 5.14.2.1.1. The settlement officer followed
                                      these guidelines in creating the terms of the partial payment
                                      installment agreement offered to petitioner. The settlement
                                      officer did not abuse her discretion by failing to use the least
                                      restrictive means to further respondent’s compelling interest
                                      of collecting petitioner’s significant tax liabilities and pen-
                                      alties in a timely manner.
                                         We hold that the classification of petitioner’s tithing as a
                                      conditional expense: (1) conformed to the guidelines in the
                                      Internal Revenue Manual; (2) was not a violation of peti-
                                      tioner’s rights under the Free Exercise Clause; and (3) did
                                      not violate the RFRA.

                                        14 We note that ‘‘voluntary compliance is the least restrictive means by

                                      which the IRS furthers the compelling governmental interest in uniform,
                                      mandatory participation in the federal income tax system.’’ Browne v.
                                      United States, 176 F.3d 25, 26 (2d Cir. 1999). The partial payment install-
                                      ment agreement that petitioner requested covered 12 different tax periods
                                      going back to 1992. Petitioner had the opportunity to voluntarily pay the
                                      penalties and taxes for each of the 12 tax periods covered by his proposed
                                      partial payment installment agreement when they were initially due. He
                                      failed to do so.




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                                      190                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      Issue 2. College Expenses
                                        On Form 433–A petitioner reported monthly college
                                      expenses of $2,952. 15 Petitioner argues it was an abuse of
                                      discretion for the settlement officer to not allow his children’s
                                      college expenses as a necessary expense. Respondent con-
                                      tends that his children’s college expenses are conditional
                                      expenses.
                                        In a partial payment installment agreement only necessary
                                      expenses are allowed. See id. pt. 5.14.2.1.1(4). The Internal
                                      Revenue Manual discusses both college expenses and edu-
                                      cation expenses.
                                        IRM ex. 5.15.1–1 Q&A (2) provides:
                                              Question. A taxpayer has a child in an expensive university. She has
                                           already paid the university $25,000 for tuition and housing for the
                                           school year, and she intends to pay another $25,000 next July for the
                                           following school year. Should this expense be allowed?
                                              Answer. Yes, if the taxpayer can pay the liability plus accruals within
                                           five years. Otherwise, the expense will not be allowable. * * *

                                         Petitioner would not fully pay his tax liabilities within five
                                      years under the terms of the partial payment installment
                                      agreements proposed by either petitioner or the settlement
                                      officer. Therefore, the college expenses would not be a nec-
                                      essary expense under IRM ex. 5.15.1–1 Q&A (2).
                                         IRM pt. 5.15.1.10 provides that educational expenses are
                                      necessary ‘‘[i]f it is required for a physically or mentally chal-
                                      lenged child and no public education providing similar serv-
                                      ices is available.’’ Respondent argues that IRM pt. 5.15.1.10
                                      applies only to expenses for primary or secondary schooling,
                                      and does not apply to college expenses. Petitioner argues that
                                      the language of IRM pt 5.15.1.10 does not explicitly limit
                                      educational expenses to primary or secondary schooling;
                                      therefore, it was an abuse of discretion for the settlement
                                      officer to not allow his children’s college expenses as a nec-
                                      essary expense in computing the amount that petitioner had
                                      available to pay his delinquent tax liabilities. Petitioner has
                                      not cited any case that supports his interpretation that IRM
                                      pt. 5.15.1.10 applies to college expenses. 16
                                           15 $35,424
                                                  per year.
                                           16 We
                                              note that it ‘‘is a well-settled principle that the Internal Revenue
                                      Manual does not have the force of law, is not binding on the IRS, and con-
                                      fers no rights on taxpayers.’’ McGaughy v. Commissioner, T.C. Memo.




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                                      (173)                        THOMPSON v. COMMISSIONER                                       191


                                        The Internal Revenue Manual specifically provides the
                                      requirements for college expenses to be allowed as a nec-
                                      essary expense. See IRM ex. 5.15.1–1 Q&A (2). It would not
                                      be logical for the Internal Revenue Manual to provide two
                                      different tests that can produce two different results for the
                                      same expense. Since the Commissioner specifically provided
                                      a test for college expenses it would be reasonable to conclude
                                      that the term ‘‘education expenses’’ referred to in IRM pt.
                                      5.15.1.10 does not include within its meaning college
                                      expenses. If we accepted petitioner’s interpretation, we would
                                      then need to decide whether the two tests in the Internal
                                      Revenue Manual form a conjunctive or disjunctive test. In
                                      other words, does a taxpayer need to satisfy both tests for
                                      college expenses to be a necessary expense, or does the tax-
                                      payer need to satisfy only one of the tests?
                                        IRM pt. 5.15.1.10 provides that educational expenses can
                                      be considered a necessary expense if ‘‘no public education
                                      providing similar services is available.’’ If we interpret IRM
                                      pt. 5.15.1.10 to apply to college expenses, then expenses for
                                      a private college could be a necessary expense while expenses
                                      for a public college would per se never be a necessary
                                      expense. This makes no sense. IRM pt. 5.15.1.10 is under-
                                      standable when it is interpreted to apply only to primary or
                                      secondary schooling. Public primary and secondary schools
                                      are usually paid for by the State and local governments, not
                                      the parents of the children who attend them. However, pri-
                                      vate primary and secondary schools are normally paid for by
                                      the parents of the children attending the schools. Private pri-
                                      mary and secondary schools can be expensive. The most
                                      reasonable interpretation of IRM pt. 5.15.1.10 is that a tax-
                                      payer must demonstrate that there is not a free public pri-
                                      mary or secondary school that he could send his child to. If
                                      there were a free public primary or secondary school that
                                      could provide educational services to the mentally challenged
                                      child, then the settlement officer would not allow the tax-
                                      payer to pay tuition to a private primary or secondary school
                                      in lieu of paying the taxes he owes to the Government. We

                                      2010–183, 2010 Tax Ct. Memo LEXIS 215, at *20; see United States v.
                                      Caceres, 440 U.S. 741 (1979); Fargo v. Commissioner, 447 F.3d 706, 713
                                      (9th Cir. 2006), aff ’g T.C. Memo. 2004–13; United States v. Horne, 714
                                      F.2d 206, 207 (1st Cir. 1983).




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                                      192                 140 UNITED STATES TAX COURT REPORTS                                   (173)


                                      find respondent’s position that IRM pt. 5.15.1.10 applies to
                                      only expenses for primary and secondary education, and does
                                      not apply to expenses for college, to be reasonable. 17 The
                                      settlement officer’s use of that interpretation was not an
                                      abuse of discretion.
                                         Petitioner briefly argues that Form 433–A requires the
                                      settlement officer to allow his children’s college expenses.
                                      Form 433–A states that ‘‘[w]e generally do not allow you to
                                      claim tuition for private schools, public or private college
                                      * * * [h]owever, we may allow these expenses, if you can
                                      prove that they are necessary for the health and welfare of
                                      you or your family or for the production of income.’’ First, we
                                      note that Form 433–A does not have the force of law and con-
                                      fers no rights on taxpayers. See Pomeroy v. United States,
                                      864 F.2d 1191, 1194–1195 (5th Cir. 1989) (‘‘ ‘[P]rocedures or
                                      rules adopted by the IRS are not law.’ ’’ (quoting Keado v.
                                      United States, 853 F.2d 1209, 1214 (5th Cir. 1988)));
                                      McGaughy v. Commissioner, T.C. Memo. 2010–183, 2010 Tax
                                      Ct. Memo LEXIS 215, at *20. Second, we note the discre-
                                      tionary nature of the wording of Form 433–A: ‘‘we may allow
                                      these expenses’’. Form 433–A clearly states that the expenses
                                      may not be allowed, and that discretion to allow the expenses
                                      lies with the IRS. We hold that Form 433–A does not require
                                      the settlement officer to classify petitioner’s college expenses
                                      as a necessary expense.

                                                                                Conclusion
                                        We hold that the determination to proceed with collection
                                      was not an abuse of the settlement officer’s discretion, and
                                      the proposed collection action is sustained.
                                        In reaching our decision, we have considered all arguments
                                      made by the parties, and to the extent not mentioned or
                                      addressed, they are irrelevant or without merit.




                                         17 Petitioner claimed that each of his five children had a ‘‘neurological

                                      disability’’ which required them to attend Brigham Young University. Even
                                      if he had established this, it would not make any difference in our analysis
                                      with respect to the allowability of college expenses.




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                                      (173)                        THOMPSON v. COMMISSIONER                                       193


                                           To reflect the foregoing,
                                                                           Decision will be entered for respondent.
                                                                               f




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