                   T.C. Memo. 2009-2



                UNITED STATES TAX COURT



          PHILLIP DAVID HICKEY, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 14874-07L.            Filed January 5, 2009.



     R asserted trust fund recovery penalties under
sec. 6672, I.R.C., against P and sent a preassessment
notice to P’s last known address by certified mail.
The U.S. Postal Service (USPS) returned the notice
unclaimed. R assessed the penalties and mailed a
notice and demand for payment. R issued a final notice
of intent to levy. P requested a CDP hearing,
asserting that the assessment is invalid and that
payments were not properly applied.

     R issued a notice of determination and a
supplemental notice of determination sustaining the
proposed levy, and P filed a timely petition.

     Held: The notice of proposed assessment was
mailed to P’s last known address pursuant to secs.
6672, I.R.C., and 6212(b), I.R.C.
                                - 2 -

          Held, further, the assessment of the sec. 6672
     penalty following the notice mailed to P’s last known
     address did not violate P’s due process rights.

          Held, further, R’s supplemental determination is
     sustained.




     Phillip David Hickey, pro se.

     A. Gary Begun, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PANUTHOS, Chief Special Trial Judge:    This case is before

the Court on petitioner’s request for judicial review of an

Internal Revenue Service (IRS) determination to sustain a notice

of intent to levy to collect assessed trust fund recovery

penalties.

     Respondent assessed trust fund recovery penalties, plus

statutory interest, against petitioner as follows:

                  Tax Period         Trust Fund Recovery
               (quarter ending)        Penalty Assessed

               March 2001                $77,594.44
               June 2001                  92,967.61
               September 2001             66,715.50
                 Total                   237,277.55


     This collection action requires us to decide:    (1) Whether

petitioner’s challenges to the underlying tax liabilities require

any adjustment to those liabilities; and (2) whether the IRS
                                - 3 -

abused its discretion in determining that collection by levy may

proceed.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code (Code), as amended, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

                          FINDINGS OF FACT

     Some of the facts have been stipulated, and we so find.

     Petitioner was an attorney and resided in Michigan when he

filed the petition.   Petitioner was a 49.5-percent owner of

Tartar Acquisitions, Ltd. (Tartar).     Tartar owned three golf

courses.   Petitioner signed general and payroll account checks

for Tartar during 2001.   Petitioner was the person in charge of

the company, and he admitted:   (1) That he was a responsible

person with respect to Tartar’s employment taxes; (2) that he

failed to pay the employment taxes; and (3) that his failure was

willful.

     By certified mail on January 28, 2005, the IRS sent notices

dated January 27, 2005, to petitioner’s last known address.1

The IRS included Letter 3164A(DO), which stated that IRS

information indicated that petitioner was a responsible person

with respect to Tartar’s unpaid employment taxes.     The mailing

also included Letter 1153(DO), which stated that attempts to


     1
       The postmark on the returned notice indicates it was
mailed Jan. 28, 2005. For convenience, we will refer to this as
the Jan. 27, 2005, notice.
                                - 4 -

collect the Federal employment taxes had not resulted in full

payment.   The letter informed petitioner that the IRS proposed to

assess a penalty against him personally for the unpaid taxes.

The letter also informed petitioner that he had the right to

appeal and that he had to mail a written appeal within 60 days of

the date of the letter to preserve his right to appeal.    The USPS

attempted delivery of the January 27, 2005, notice on January 31,

February 6, and February 16, 2005, before returning the notice to

the IRS marked “Unclaimed”.    The IRS received the unclaimed

notice on February 28, 2005.

     On April 15, 2005, the IRS assessed the civil penalties

against petitioner for the three periods at issue.    The parties

agree that the assessment was timely.    Also on April 15, 2005,

the IRS sent a notice and demand for payment to petitioner’s last

known address.

     The IRS issued petitioner a notice of intent to levy for the

assessed civil penalties on September 4, 2006, and a final notice

of intent to levy, together with notice of petitioner’s right to

an IRS Appeals Office hearing, on December 6, 2006.    Petitioner

submitted a timely Form 12153, Request for a Collection Due

Process Hearing, stating that he never received any preassessment
                               - 5 -

notice for the employment taxes and that he did not have an

opportunity to dispute his liability for those taxes.2

     The parties scheduled a hearing for May 24, 2007.

Petitioner was ill in May 2007 and did not attend any hearing.

On June 11, 2007, the IRS issued a notice of determination

sustaining the levy on the basis of the administrative record,

which included papers petitioner submitted to the Appeals

officer.   Petitioner timely petitioned for judicial review, and

we remanded this case to the IRS Appeals Office so that

petitioner could participate in a collection hearing.

     At the collection hearing held on January 17, 2008,

petitioner disputed the amount of the underlying tax liability,

questioning whether all of the $20,000 payments made by Tartar

had been properly credited.   He also challenged the validity of

the assessment.

     In a supplemental notice of determination dated March 6,

2008, the settlement officer (SO) explained that petitioner could

challenge his liability for the employment taxes because he had

not received the preassessment notice.   The SO also explained

that the IRS had reversed credits for three $20,000 payments by

Tartar after the drawee bank dishonored the checks.   The SO also

explained that she had found a fourth $20,000 payment, made on


     2
       In his collection hearing request, petitioner referred to
a notice of deficiency, but it is clear that his dispute involves
his not receiving the notice of proposed assessment.
                               - 6 -

February 1, 2002, which cleared, and that this payment had

initially been posted to Tartar’s account for the period ending

March 31, 2002.   However, by that date Tartar was no longer

conducting business, and the SO acknowledged that Tartar had no

reporting obligation for that period.   Before issuing the

supplemental notice of determination, the SO requested that

petitioner indicate by January 25, 2008, how he wanted this

$20,000 payment applied, extending him the opportunity to

designate the payment to Tartar’s trust fund liabilities.     The

March 6, 2008, supplemental notice of determination also

indicated that the $20,000 payment would be moved to the March

31, 2001, period as an undesignated payment (because petitioner

had not responded to the SO’s request for instructions as of

February 25, 2008) and that if the IRS applied any of the payment

to the trust fund taxes, then it would adjust petitioner’s

account accordingly.

     The SO considered and rejected petitioner’s claim that the

January 27, 2005, notice was invalid because of petitioner’s

failure to claim the notice and the IRS’s subsequent failure to

do more to attempt to notify him of the proposed assessment after

the USPS returned the unclaimed mail.   The SO recited that

petitioner did not express any interest in collection

alternatives and did not provide the information required to

consider collection alternatives.   Finally, the SO concluded that
                                 - 7 -

the legal and procedural requirements had been met in issuing the

notice of intent to levy, that collecting by levy was no more

intrusive than necessary, and that the Appeals Office should

sustain the levy.

     At trial petitioner argued that he had not been credited for

all of the payments made toward the employment tax liability,

that the assessment was invalid because he did not receive notice

of the proposed assessment, that any later assessment would be

outside the period of limitations, and that the IRS violated his

due process rights under the Fifth Amendment to the Constitution

by assessing without attempting further notice after the USPS

returned the notice unclaimed.    Petitioner asked the Court to

prevent the IRS from collecting erroneously assessed penalties.

                             OPINION

     We have jurisdiction under section 6330(d)(1) to review the

IRS’s determination that the levy notice was proper and that the

IRS may proceed to collect by levy.3

     In reviewing the Commissioner’s decision to sustain

collection actions, where the validity of the underlying tax

liability is properly at issue, the Court reviews the


     3
       The Pension Protection Act of 2006, Pub. L. 109-280, sec.
855, 120 Stat. 1019, amended sec. 6330(d) and granted this Court
exclusive jurisdiction over all sec. 6330 determinations made
after Oct. 16, 2006. Perkins v. Commissioner, 129 T.C. 58, 63
n.7 (2007). Here, the Internal Revenue Service (IRS) made the
initial determination Jun. 11, 2007, and the supplemental
determination Mar. 6, 2008.
                                - 8 -

Commissioner’s determination of the underlying tax liability de

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

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

any other administrative determination regarding proposed

collection actions for abuse of discretion.     Sego v.

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

An abuse of discretion occurs when the exercise of discretion is

without sound basis in fact or law.     Murphy v. Commissioner, 125

T.C. 301, 308 (2005), affd. 469 F.3d 27 (1st Cir. 2006).    If the

Court finds that a taxpayer is liable for deficiencies, additions

to tax, and/or penalties, then other aspects of the

Commissioner’s administrative determination sustaining the

collection action will be reviewed for abuse of discretion.    See

Downing v. Commissioner, 118 T.C. 22, 31 (2002); Godwin v.

Commissioner, T.C. Memo. 2003-289, affd. 132 Fed. Appx. 785 (11th

Cir. 2005).

     At the collection hearing, a taxpayer may raise any relevant

issues relating to the unpaid tax or proposed levy, including

spousal defenses, challenges to the appropriateness of the

collection actions, and offers of collection alternatives.    In

addition, he may challenge the existence or amount of the

underlying tax liability, but only if he did not receive a notice

of deficiency or otherwise have an opportunity to dispute such

liability.    Sec. 6330(c)(2)(B).
                                - 9 -

     In making a determination following a collection hearing,

the IRS must consider:   (1) Whether the requirements of any

applicable law or administrative procedure have been met, (2) any

relevant issues raised by the taxpayer, and (3) whether the

proposed collection action balances the need for efficient

collection with legitimate concerns that the collection action be

no more intrusive than necessary.    Sec. 6330(c)(3).

     Petitioner makes three challenges to the existence or amount

of the underlying tax liability:    (1) That several payments of

$20,000 were made against the employment tax liability but the

IRS did not properly credit one or more such payments; (2) that

the assessment was invalid because he did not receive any advance

notice of the proposed assessment; and (3) that the assessment

was constitutionally procedurally defective because the IRS

failed to attempt to notify him of the proposed assessment after

the USPS returned the initial notice.

1. Payments Properly Credited

     Petitioner asserted that several $20,000 payments had been

made toward the employment tax liability and that he believed one

or more of those payments cleared Tartar’s bank.

     The SO determined that three of four $20,000 checks did not

clear and that the IRS had properly reversed credits for those

three payments after the drawee bank dishonored the checks.    The

SO also determined that a fourth $20,000 payment did clear and
                              - 10 -

had been applied to Tartar’s account (for a period after Tartar’s

reporting obligations ceased because it had stopped conducting

business).   She offered petitioner the opportunity to specify how

that fourth payment should be applied and then moved that payment

to the earliest period at issue in this case.4

     Petitioner did not demonstrate at the section 6330 hearing

or at trial that either he or Tartar is entitled to credit for

any further payments.   See Rule 142.

2. Validity of Assessment Following Unclaimed Notice

     Petitioner argues that the assessment of the trust fund

recovery penalty was improper because he did not receive the

notice the IRS sent to him and because the IRS made no further

effort to notify him of the proposed assessment after the USPS

returned the unclaimed notice to the IRS.

     Section 6671(a) provides that certain assessable penalties

(which include the section 6672 trust fund recovery penalties)

are assessed and collected in the same manner as taxes and that




     4
       The record indicates that petitioner did not respond to
the request for instructions regarding the application of this
$20,000 payment and that the settlement officer (SO) applied the
payment to Tartar’s account for the earliest period at issue in
this case (the quarter ending March 2001) as an undesignated
payment. Petitioner did not challenge this application of this
payment, and he did not allege at trial that he had instructed
the SO to apply this payment any differently. The record does
not explain why petitioner passed up the opportunity to reduce
his personal liability by directing the SO to apply this payment
to Tartar’s trust fund liabilities.
                             - 11 -

any references to “tax” in the Code shall be deemed also to refer

to such penalties.

     Section 6672(a) provides that a person required to collect,

account for, and pay over taxes who willfully fails to do so or

who willfully attempts to evade or defeat any such tax shall be

liable for a penalty equal to the total amount of tax evaded, not

collected, or not accounted for and paid over.   Petitioner

admitted that he was a responsible person required to collect and

pay over withholding taxes for Tartar, that he failed to pay the

taxes, and that his failure was willful.   Therefore, he contests

the underlying tax liability (the section 6672 penalties) only on

procedural grounds.

     Section 6672(b)(1)and (2) provides:   (1) That no penalty may

be imposed unless the Secretary notifies the taxpayer in person

or in writing by mail to an address as determined under section

6212(b) that the taxpayer shall be subject to assessment for such

penalty; and (2) that in-person delivery or mailing of the notice

must precede any notice and demand for payment of the section

6672 penalty by at least 60 days.

     Congress enacted section 6212(b)(1) as a safe harbor that

protects the IRS by establishing a procedure for giving notice to

a taxpayer of a deficiency in the taxpayer’s income, gift, and

certain excise taxes and providing that notice pursuant to that

section shall be sufficient for purposes of assessment.   Under
                              - 12 -

section 6212(b)(1), a notice of deficiency mailed to a taxpayer’s

last known address is valid even if it is never received.   Wiley

v. United States, 20 F.3d 222, 224 (6th Cir. 1994); Frieling v.

Commissioner, 81 T.C. 42, 52 (1983).

     Furthermore, “Under I.R.C. § 6212(b), validity of the notice

turns on whether the IRS used the last known address when the

notice was mailed.   Nothing in the statute suggests that the IRS

is obligated to take additional steps to effectuate delivery if

the notice is returned; indeed, a notice mailed to the last known

address is sufficient even if it is never received.”   King v.

Commissioner, 857 F.2d 676, 681 (9th Cir. 1988), affg. 88 T.C.

1042 (1987); accord Borgman v. Commissioner, 888 F.2d 916, 917-

918 (1st Cir. 1989) (the section 6212(b)(1) safe harbor renders

an unreceived notice valid if the IRS mailed it to the taxpayer’s

last known address), affg. T.C. Memo. 1984-503; see also Gille v.

United States, 33 F.3d 46, 48 (10th Cir. 1994) (notices are not

rendered invalid because they are returned as “undeliverable”;

rather, such notices are valid if they are sent to a taxpayer’s

last known address, irrespective of receipt).

     Finally, legislative history explains that because some

employees might not be aware of their personal liability under

section 6672, Congress imposed a preliminary notice requirement

to require “the IRS to issue a notice to an individual the IRS
                              - 13 -

had determined to be a responsible person”.5   H. Rept. 104-506,

at 39 (1996), 1996-3 C.B. 49, 87.   This history does not appear

to indicate a congressional intent to require any more than that

the IRS send the preassessment notice to a taxpayer’s last known

address.

     It would appear that by the reference to section 6212(b) in

section 6672(b)(1) Congress intended to apply the safe harbor to

notices of proposed assessment of section 6672 penalties.

     The IRS sent the January 27, 2005, notice to petitioner’s

last known address.   The IRS assessed the section 6672 penalty on

April 15, 2005, more than 60 days after mailing the notice and

within the period for assessment established by section 6501(a).6

Because the IRS mailed the section 6672 notice to petitioner’s

last known address and neither personal service nor actual

receipt is required, we conclude that the notice was sufficient.

Because the IRS timely assessed the section 6672 penalties



     5
       Congress added the preassessment notice requirement to
sec. 6672 in 1996. See Taxpayer Bill of Rights 2, Pub. L. 104-
168, sec. 901(a), 110 Stat. 1465 (1996) (codifying the
preliminary notice requirement at sec. 6672(b)); Riley v. United
States, 118 F.3d 1220, 1222 (8th Cir. 1997).
     6
       The Internal Revenue Code generally provides a 3-year
period of limitations on the IRS’s assessing taxes. See sec.
6501(a). As to withholding taxes due with respect to a given
calendar year, the statute of limitations begins to run on Apr.
15 of the following year. See sec. 6501(b)(2). The limitations
period for assessing “responsible person” liabilities is
substantially the same. See secs. 6671(a) and 6672(b)(3). The
instant assessment was timely.
                             - 14 -

following a procedurally sufficient notice, we conclude that the

assessment is valid.7

3. Due Process Violation

     Petitioner argues that the IRS violated his rights under the

Due Process Clause of the Fifth Amendment to the U.S.

Constitution by failing to do more than merely send notice of the

proposed assessment to his last known address via certified mail.

Petitioner relies on Jones v. Flowers, 547 U.S. 220 (2006), for

the proposition that the Government must do more to notify an

individual after the USPS returns an initial notice and thereby

makes the Government aware that its attempt to notify the

individual by certified mail failed.8




     7
       Sec. 6303 requires the IRS to give notice and to demand
payment within 60 days of assessment by leaving the notice and
demand at the taxpayer’s dwelling or usual place of business or
mailing it to the taxpayer’s last known address. The relevant
regulations contain a cross-reference to the regulations under
sec. 6212 for the definition of the last known address. Sec.
301.6303-1, Proced. & Admin. Regs. Petitioner does not allege
either that he did not receive the notice and demand or that the
IRS did not send it, and the record indicates that the IRS mailed
the required postassessment notice and demand to petitioner’s
last known address on Apr. 15, 2006, the same day it assessed the
penalties at issue. Because it is clear from the record that,
like the preassessment sec. 6672(b) notice, the IRS mailed the
notice and demand to petitioner’s last known address, it is
apparent that this statutory prerequisite to collection also was
satisfied. Sec. 6331; see also United States v. Chila, 871 F.2d
1015, 1018-1019 (11th Cir. 1989).
     8
       Petitioner stipulated that the IRS mailed the notice by
certified mail to his last known address, but he does not explain
his failure to claim the notice.
                              - 15 -

     In Jones v. Flowers, supra at 225, the Supreme Court

considered whether due process “requires the government to take

additional reasonable steps to notify a property owner when

notice of a tax sale is returned undelivered.”   The Arkansas

statute at issue in Jones, instructed the commissioner of State

lands to use certified mail to notify the property owner at the

owner’s last known address.   Ark. Code Ann. sec. 26-37-301(a)(1)

(1997).9   The trial court and State supreme court held that the

statute complied with constitutional procedural due process.

     After acknowledging that its precedent does not require

actual notice, the Supreme Court decided that notice of the

taking, if otherwise procedurally adequate, was no longer

adequate once it was returned undelivered, holding that the

Fourteenth Amendment required the State to take additional

reasonable steps to notify the property owner.   Jones v. Flowers,

supra at 224-226.

     The Arkansas statute specified the notice required after the

Commissioner of State Lands received tax delinquent land and

before such land may be taken and sold at a tax sale.   In

contrast, section 6212(b)(1) provides that notice of a tax

deficiency mailed to a taxpayer’s last known address shall be



     9
       The Arkansas statute now requires the commissioner of
State lands to mail the notice to the owner by regular mail if
the USPS returns the original certified mail notice unclaimed.
Ark. Code Ann. sec. 26-37-301(a)(3) (Supp. 2007).
                               - 16 -

sufficient for purposes of procedures relating to determination

and   assessment of such deficiencies.   The purposes of these

statutes are different.   The first relates to the notice required

before a property owner loses his property to State action.       The

second concerns notice before the IRS officially records a

taxpayer’s liability for taxes owed (or assessable penalties).

Secs. 6203, 6671(a).   The first raises constitutional due process

concerns under the Fifth and/or Fourteenth Amendments because it

involves a taking.10   The second does not implicate either due

process clause because it does not involve a taking.    Simply put,

the assessment at issue did not deprive petitioner of any

property without due process of law because it did not deprive

him of any property.

      This case is similar to Jones v. Flowers, supra, in that a

notice was returned unclaimed.   However, Jones is distinguishable

because the notice at bar is not a notice of the forfeiture of

property or of a governmental taking of property.11    Instead,

this is a notice of proposed assessment.    There was no taking at

issue in this case on January 27, 2005, when the IRS mailed the


      10
       “No person shall * * * be deprived of life, liberty, or
property, without due process of law”. U.S. Const. amend. V.
      11
       However, the Supreme Court did suggest a parallel between
the Arkansas statute and sec. 6335(a), which requires the
Treasury to give notice to the owner of property before selling
it to pay back taxes. Jones v. Flowers, 547 U.S. 220, 228 n.2
(2006). Neither sec. 6335(a) nor a Federal tax taking is the
subject of the notice at issue in this case.
                              - 17 -

notice to petitioner’s last known address.   Nor was there a

taking on April 15, 2005, when the IRS assessed the trust fund

recovery penalties.

     On December 6, 2006, the IRS issued the final notice of

intent to levy and provided petitioner with an opportunity for a

collection hearing.   Petitioner requested and received what is

colloquially called a collection due process hearing.

Furthermore, at that hearing the SO afforded petitioner the

opportunity to challenge the existence and amount of the

underlying tax liability precisely because petitioner had not had

a prior opportunity to dispute his personal liability for the

unpaid employment taxes.   See sec. 6330(c)(2)(B).

     Petitioner’s reliance on Jones v. Flowers, supra, is

misplaced because the notice of proposed assessment mailed to his

last known address was valid, see sec. 6212(b)(1), the assessment

was timely and proper, see secs. 6501(a), 6672(b)(2), and neither

deprived petitioner of any property.12   Thus, the assessment of


     12
       Furthermore, the Constitution’s procedural due process
protections require that individuals receive “notice and
opportunity for hearing appropriate to the nature of the case.”
Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 313
(1950). The notice the IRS mailed on Dec. 6, 2006, provided
petitioner notice of the proposed levy and an opportunity to
present his case to an Appeals officer. Petitioner exercised his
right to challenge that collection action and argued his case
before the settlement officer at a hearing on Jan. 17, 2008.
This case is before us to review the IRS’s levy action.

      Although petitioner did not specifically argue that he must
                                                   (continued...)
                              - 18 -

the section 6672 penalty following notice mailed to petitioner’s

last known address did not violate his rights to procedural due

process.

4.   Conclusion

     The supplemental notice of determination indicates that the

SO considered relevant issues petitioner raised, whether the IRS

met the requirements of applicable law and administrative

procedure, and whether the proposed collection action balances

collection efficiency and intrusiveness.   Petitioner did not

raise any spousal defenses or pursue any collection alternatives.

In response to the issues petitioner raised, the SO considered

and rejected his challenge to the validity of the assessment as

well as his constitutional argument, and she considered his

assertions about the $20,000 payments (ultimately crediting one

such payment to the earliest period at issue).13




     12
      (...continued)
be entitled to preassessment judicial review, it is well settled
that a taxpayer may gain access to a refund forum by paying the
tax for one employee, requesting a refund, and filing suit, sec.
6672(c); Steele v. United States, 280 F.2d 89 (8th Cir. 1960),
and that this procedure is not violative of any constitutional
guaranties, Phillips v. Commissioner, 283 U.S. 589 (1931); Bomher
v. Reagan, 522 F.2d 1201, 1202 (9th Cir. 1975); Kalb v. United
States, 505 F.2d 506 (2d Cir. 1974).
     13
       In the absence of any evidence to the contrary, we are
satisfied that the SO’s evaluating the $20,000 payments and
finding one cleared payment in her search of IRS records
demonstrate that she properly considered this issue.
                             - 19 -

     The SO satisfied the requirements of section 6330, and we

conclude that respondent’s decision sustaining the proposed levy

action was neither erroneous nor an abuse of discretion.

     To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.
