                               T.C. Memo. 2020-45



                        UNITED STATES TAX COURT



                  JASON E. SHEPHERD, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 19146-18L.                        Filed April 13, 2020.



      Jason E. Shepherd, pro se.

      Gary R. Shuler, Jr., for respondent.



                          MEMORANDUM OPINION


      GUY, Special Trial Judge: This collection review case involving a Federal

tax lien is an appeal from a notice of determination issued by the Internal Revenue

Service (IRS) Office of Appeals (Appeals Office). The IRS seeks to collect trust

fund recovery penalties (TFRPs) assessed against petitioner pursuant to section
                                        -2-

[*2] 6672 for the six quarterly periods ending September 30, 2010, through

December 31, 2011 (taxable periods in issue).1

      The case is before the Court on respondent’s motion for summary judgment,

with a supporting declaration, filed pursuant to Rule 121. Petitioner filed a

response in opposition to respondent’s motion. As discussed in detail below, we

will grant respondent’s motion and enter a decision sustaining the collection

action.

                                    Background

      The parties do not dispute the following background facts which are drawn

from the pleadings, respondent’s motion, a declaration executed by Settlement

Officer Maria Smith and exhibits attached thereto, and petitioner’s response to

respondent’s motion. Petitioner resided in Florida when the petition was filed.

I. Employment Taxes and Assessment of TFRPs

      Petitioner was the chief executive officer of Advanced Care Ambulance

Service, LLC (ACAS). Although ACAS filed Forms 941, Employer’s Quarterly




      1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code (Code), as amended and in effect at all relevant times, and Rule
references are to the Tax Court Rules of Practice and Procedure. All monetary
amounts are rounded to the nearest dollar.
                                        -3-

[*3] Federal Tax Return, for the taxable periods in issue, the company failed to

remit the full amount of employment taxes due with those returns.

      On January 14, 2013, Revenue Officer Tammy Russell (RO Russell),

assigned to collect ACAS’ employment taxes, prepared a Form 4183,

Recommendation re: Trust Fund Recovery Penalty Assessment, recommending

that TFRPs be assessed against petitioner as a “responsible person” for the taxable

periods in issue.2 RO Russell’s immediate supervisor approved and signed the

Form 4183 that same day.

      On January 30, 2013, the IRS sent a Letter 1153, Trust Fund Recovery

Penalty Letter, by certified mail addressed to petitioner’s last known address. The

Letter 1153 stated that the IRS proposed to assess TFRPs totaling $165,742 for the

taxable periods in issue and offered petitioner the opportunity to request an

administrative appeal. On February 19, 2013, the U.S. Postal Service returned the

envelope bearing the Letter 1153 to the IRS undelivered and marked

“UNCLAIMED UNABLE TO FORWARD”. On July 22, 2013, the IRS assessed




      2
        Sec. 6672(a) authorizes the assessment of TFRPs and provides that a
responsible person who fails to collect or pay over any tax “shall, in addition to
other penalties provided by law, be liable to a penalty equal to the total amount of
the tax evaded, or not collected, or not accounted for and paid over.”
                                         -4-

[*4] the TFRPs and sent petitioner a notice and demand for payment. He did not

remit payment.

II. Notice of Intent to Levy and Administrative Proceedings

      In October 2013 the IRS mailed a notice of intent to levy to petitioner

regarding the unpaid TFRPs and informing him of the right to request an

administrative hearing with the Appeals Office. Petitioner responded by timely

submitting a Form 12153, Request for a Collection Due Process or Equivalent

Hearing, to the Appeals Office.

      During the course of the administrative hearing that followed petitioner

proposed an installment agreement as an alternative to the levy action and

submitted financial information intended to persuade the Appeals Office that

enforcement of the proposed levy would cause economic hardship. After

considering petitioner’s financial standing, the Appeals Office concluded that the

proposed levy would result in economic hardship and therefore placed petitioner’s

account in currently not collectible status.3




      3
     Currently not collectible status is discussed in detail at Internal Revenue
Manual pt. 5.16.1 (Sept. 18, 2018).
                                         -5-

[*5] III. Petitioner’s Offer-in-Compromise and Administrative Proceedings

      In March 2016 petitioner submitted an offer-in-compromise (OIC) to the

IRS asserting that there was doubt as to his liability and offering $1 in full

satisfaction of the TFRPs. An IRS offer specialist investigated the matter and

informed petitioner in April 2017 that his OIC had been rejected on the ground

that there was no doubt as to his liability for the TFRPs. Petitioner requested

Appeals Office review of the rejection of his OIC. By letter dated December 7,

2017, the Appeals Office informed petitioner that it had sustained the rejection of

his OIC, explaining in relevant part: “Your Doubt as to Liability Offer in

Compromise proposal is rejected in full. The Office of Appeals determined that

part of the liability [for taxable periods ending in 2010] could be reduced, but

doing so required you to sign an Offer in Compromise withdrawal form.”

Petitioner did not withdraw his OIC.

IV. Notice of Federal Tax Lien and Administrative Proceedings

      In February 2018, after determining that petitioner’s financial standing had

improved, the IRS removed his account from currently not collectible status, filed

a notice of Federal tax lien in respect of the unpaid TFRPs, and sent petitioner

notice of that action and of his right to request an administrative hearing with the

Appeals Office. Petitioner submitted a timely request for an administrative
                                          -6-

[*6] hearing and asserted that he should not be held liable for the TFRPs. He did

not raise any other issue or offer a collection alternative to the lien.

       The Appeals Office concluded that petitioner had a prior opportunity to

challenge his liability for the TFRPs and was barred from reasserting that claim in

accordance with section 6330(c)(2)(B). In the absence of any other issue for

review the Appeals Office issued a notice of determination to petitioner sustaining

the lien.

V. Petition and Remand to the Appeals Office

       Petitioner invoked the Court’s jurisdiction by filing a timely petition for

review of the notice of determination. In the petition and throughout this action

petitioner has asserted that he should not be considered a responsible person who

is subject to TFRPs in respect of ACAS’ unpaid employment taxes.

       After the petition was filed the Court granted respondent’s motion to

remand the case to the Appeals Office for further proceedings to consider whether

the IRS had properly assessed the TFRPs. The Appeals Office reviewed that

matter and issued a detailed supplemental notice of determination summarizing the

background facts outlined above and concluding that the TFRPs were properly

assessed.
                                        -7-

[*7]                                 Discussion

       Summary judgment is intended to expedite litigation and avoid unnecessary

and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988).

Either party may move for summary judgment upon all or any part of the legal

issues in controversy. Rule 121(a). Summary judgment is warranted only if there

is no genuine dispute of any material fact and the moving party is entitled to

judgment as a matter of law. Rule 121(b); Naftel v. Commissioner, 85 T.C. 527,

529 (1985).

       The moving party bears the burden of proving that no genuine dispute exists

as to any material fact and that he is entitled to judgment as a matter of law. See

FPL Grp., Inc. & Subs. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v.

Commissioner, 100 T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. at 529.

In deciding whether to grant summary judgment the factual materials and

inferences drawn from them must be considered in the light most favorable to the

nonmoving party. See FPL Grp., Inc. & Subs. v. Commissioner, 115 T.C. at 559.

Where a motion for summary judgment is properly supported, however, the

nonmoving party must set forth specific facts showing that there is a genuine

dispute for trial. Rule 121(d).
                                          -8-

[*8] Respondent’s motion for summary judgment is well founded based on the

averments therein, the supporting declaration, and related exhibits. Although

petitioner filed a response in opposition to respondent’s motion, he has not

identified any material fact that remains in dispute or presented a genuine issue for

trial.

I. Collection Due Process

         Section 6321 provides that if any person liable to pay any tax neglects or

refuses to pay the same after demand, the unpaid amount, including any interest,

addition to tax, or assessable penalty, shall be a lien upon all property and rights to

property belonging to such person in favor of the United States. Although section

6322 provides that the lien imposed by section 6321 generally arises when the tax

is assessed, section 6323(a) provides that the lien is not valid as against certain of

the person’s creditors until a notice of lien is filed in accordance with section

6323(f).

         Section 6320(a) provides that the Commissioner shall notify a person in

writing when a notice of lien is filed under section 6323 and of the person’s right

to request an administrative hearing with the Appeals Office. If a person makes a

timely request for an administrative hearing, the hearing will be held before an

impartial officer or employee of the Appeals Office. Sec. 6320(b). For purposes
                                         -9-

[*9] of section 6320, subsections (c), (d), (e), and (g) of section 6330 generally

apply. Sec. 6320(c).

      When conducting administrative hearings in collection matters, the Appeals

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

procedure have been met in processing the case. Sec. 6330(c)(1), (3)(A). The

Appeals Office also must consider any issues raised by the person relating to the

unpaid tax or collection action, including offers of collection alternatives,

appropriate spousal defenses, and challenges to the appropriateness of the

collection action. Sec. 6330(c)(2)(A), (3)(B). A person may challenge the

existence or amount of the underlying tax liability if the person did not receive a

notice of deficiency or did not otherwise have an opportunity to dispute such tax

liability. Sec. 6330(c)(2)(B). Finally, the Appeals Office must consider whether

the collection action balances the need for efficient collection against the person’s

concern that collection be no more intrusive than necessary. Sec. 6330(c)(3)(C).

      The Court has jurisdiction under section 6330(d) to review administrative

determinations in collection actions. Where the underlying tax liability is properly

at issue, the Court will review the matter on a de novo basis. Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000). Where the underlying liability is

not properly at issue, the Court will review the administrative determination for
                                         - 10 -

[*10] abuse of discretion. Id. An abuse of discretion occurs if the Appeals Office

exercises its discretion “arbitrarily, capriciously, or without sound basis in fact or

law.” Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

II. TFRPs

      Section 6672 imposes a penalty for the willful failure to collect, account for,

and pay over income and employment taxes of employees. Section 6671 provides

in relevant part that assessable penalties, including TFRPs under section 6672,

shall be assessed and collected in the same manner as taxes against a person,

including an officer or employee of a corporation, who is under a duty to comply

with the requirements of section 6672.

III. Challenge to Underlying Liability

      As previously mentioned, a person may challenge the existence or amount

of the underlying tax liability in a collection review proceeding if the person did

not receive a notice of deficiency or did not otherwise have an opportunity to

dispute such tax liability. Sec. 6330(c)(2)(B). Although petitioner did not receive

a notice of deficiency,4 the Appeals Office determined that he nevertheless had an

earlier opportunity to challenge his liability for the TFRPs within the meaning of


      4
      The assessment and collection of TFRPs are not subject to deficiency
procedures. See Mason v. Commissioner, 132 T.C. 301, 317 (2009).
                                       - 11 -

[*11] section 6330(c)(2)(B) and consequently was barred from reasserting that

claim in the administrative proceeding concerning the lien at issue.

      Respondent maintains that petitioner had two prior opportunities to contest

his liability for the TFRPs. First, when he obtained Appeals Office review of the

notice of intent to levy issued to him in 2013, and a second time in 2016 and 2017

when he submitted his OIC in respect of the TFRPs.5

      Although the phrase “opportunity to dispute” is not defined in the Code, the

Secretary has promulgated regulations regarding section 6330(c)(2)(B) pursuant to

the authority prescribed in section 7805(a). Section 301.6330-1(e)(3), Q&A-E2,

Proced. & Admin. Regs., states in pertinent part:

           Q-E2. When is a taxpayer entitled to challenge the existence or
      amount of the tax liability specified in the CDP Notice?

             A-E2. A taxpayer is entitled to challenge the existence or
      amount of the underlying liability for any tax period specified on the
      CDP Notice if the taxpayer did not receive a statutory notice of
      deficiency for such liability or did not otherwise have an opportunity
      to dispute such liability. Receipt of a statutory notice of deficiency
      for this purpose means receipt in time to petition the Tax Court for a
      redetermination of the deficiency determined in the notice of
      deficiency. An opportunity to dispute the underlying liability
      includes a prior opportunity for a conference with Appeals that was
      offered either before or after the assessment of the liability. * * *


      5
       Because we agree with respondent on the first point, we need not consider
the impact of the administrative proceeding related to petitioner’s OIC.
                                       - 12 -

[*12] In Lewis v. Commissioner, 128 T.C. 48, 61 (2007), the Court upheld an

earlier version of the regulation quoted above as a reasonable interpretation of

section 6330 in the context of the assessment and collection of a tax not subject to

the deficiency procedures. The Courts of Appeals that have reviewed the

regulation have reached the same conclusion. See Our Country Home Enters., Inc.

v. Commissioner, 855 F.3d 773, 787 (7th Cir. 2017); Keller Tank Servs. II, Inc. v.

Commissioner, 854 F.3d 1178, 1199 (10th Cir. 2017); Iames v. Commissioner,

850 F.3d 160, 164 (4th Cir. 2017).

      As the Court explained in Lewis v. Commissioner, 128 T.C. at 60-61:

              Ultimately, while it is possible to interpret section
      6330(c)(2)(B) to mean that every taxpayer is entitled to one
      opportunity for a precollection judicial review of an underlying
      liability, we find it unlikely that this was Congress’s intent. As we
      see it, if Congress had intended to preclude only those taxpayers who
      previously enjoyed the opportunity for judicial review of the
      underlying liability from raising the underlying liability again in a
      collection review proceeding, the statute would have been drafted to
      clearly so provide. The fact that Congress chose not to use such
      explicit language leads us to believe that Congress also intended to
      preclude taxpayers who were previously afforded a conference with
      the Appeals Office from raising the underlying liabilities again in a
      collection review hearing and before this Court.

      The record reflects that petitioner was previously afforded a conference with

the Appeals Office when he requested and obtained an administrative hearing

regarding the notice of intent to levy issued to him in 2013. Although petitioner
                                        - 13 -

[*13] had the opportunity to do so, he did not ask the Appeals Office to review his

liability for the TFRPs. Instead, he persuaded the Appeals Office that immediate

collection would cause economic hardship and as a result his account was placed

in currently not collectible status.

      Under these circumstances the Appeals Office correctly determined that

petitioner had an earlier opportunity to challenge the TFRPs within the meaning of

section 6330(c)(2)(B). See Bland v. Commissioner, T.C. Memo. 2012-84, 2012

WL 967651, at *7-*8 (holding that an equivalent levy hearing with the Appeals

Office constituted a prior opportunity to dispute TFRPs under section

6330(c)(2)(B)). Consequently, we sustain the determination of the Appeals Office

that petitioner was not entitled to challenge his liability for the TFRPs as part of

the administrative proceeding under review.

IV. Verification--Validity of Assessments

      We next consider whether the Appeals Office properly verified that the

requirements of any applicable law or administrative procedure were met in

processing petitioner’s case. See sec. 6330(c)(1). We review the verification

requirement for abuse of discretion, see Gardner v. Commissioner, 145 T.C. 161,

183 (2015), aff’d, 704 F. App’x 720 (9th Cir. 2017), and do so without regard to

whether the taxpayer raised it at the Appeals Office hearing, see Hoyle v.
                                        - 14 -

[*14] Commissioner, 131 T.C. 197, 202-203 (2008), supplemented by 136 T.C.

463 (2011).

       A. Section 6751(b)(1)--Supervisory Approval

       Section 6751(b) requires written approval of the initial penalty

determination before the date when the taxpayer is first sent written notification of

the penalties proposed. Clay v. Commissioner, 152 T.C. 223, 249 (2019); see also

Chai v. Commissioner, 851 F.3d 190, 221 (2d Cir. 2017), aff’g in part, rev’g in

part T.C. Memo. 2015-42. In Chadwick v. Commissioner, 154 T.C. __, __ (slip

op. at 11-17) (Jan. 21, 2020), we recently confirmed that TFRPs are penalties

within the scope of section 6751(b)(1) and as such may not be assessed unless the

initial determination of such assessment is personally approved (in writing) by the

immediate supervisor of the individual making such determination. We concluded

that “Letters 1153 were the documents in which the IRS first formally

communicated to * * * [the taxpayer] its definite decision to assert the TFRPs.”

Id. at __ (slip op. at 17).

       The record shows that on January 14, 2013, RO Russell prepared a Form

4183 recommending that TFRPs be assessed against petitioner for the taxable

periods in issue and her immediate supervisor approved and signed the form that

same day. On January 30, 2013, the IRS sent a Letter 1153 to petitioner by
                                         - 15 -

[*15] certified mail with the aim of notifying him of the proposed TFRP

assessments. The TFRPs were assessed on July 22, 2013.

      In the light of the steps outlined above and consistent with the Court’s

analysis in Chadwick, respondent satisfied the requirements of section 6751(b) in

this case. In particular RO Russell’s immediate supervisor authorized the

assessment of the TFRPs in dispute before the IRS first attempted to notify

petitioner (by Letter 1153) that TFRPs would be imposed against him. See

Blackburn v. Commissioner, 150 T.C. 218, 223 (2018) (holding that the existence

of a penalty approval form in the record was sufficient to establish the settlement

officer’s verification of assessments when the administrative record reflects

compliance with administrative procedures).

      B. Section 6672(b)(1)--Preassessment Notice

      Before TFRPs may be assessed, the Commissioner normally must mail a

Letter 1153 to the responsible person’s last known address advising that a penalty

will be assessed. Sec. 6672(b)(1). Although the IRS properly mailed Letter 1153

to petitioner by certified mail, addressed to his correct (last known) address, the

U.S. Postal Service returned it to the IRS undelivered and marked “UNCLAIMED

UNABLE TO FORWARD”. Although petitioner did not actually receive the

Letter 1153, it is well settled that the mailing of section 6672 notification to a
                                       - 16 -

[*16] taxpayer’s last known address is sufficient to advise a responsible officer of

the assertion of a TFRP. See Mason v. Commissioner, 132 T.C. 301, 322-323

(2009) (citing Hickey v. Commissioner, T.C. Memo. 2009-2, for the proposition

that where the notice has been mailed to the taxpayer’s last known address, it is

not necessary for the taxpayer to receive it before the Commissioner can assess a

TFRP).

V. Conclusion

      To recapitulate, the Appeals Office correctly determined that petitioner was

barred from challenging his liability for the TFRPs in accordance with section

6330(c)(2)(B). Petitioner did not raise any other issue regarding the collection

action or propose an alternative such as an OIC or an installment agreement. The

Appeals Office properly verified that the requirements of any applicable law or

administrative procedure were met in processing petitioner’s case and otherwise

did not abuse its discretion. Consequently, the Court will grant respondent’s

motion for summary judgment and enter a decision sustaining the collection

action.


                                                An appropriate order and decision

                                       will be entered.
