                                  T.C. Memo. 2019-130



                            UNITED STATES TAX COURT



               WIND SURF AND SAIL POOLS, INC., Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 14898-17L.                            Filed October 1, 2019.



      Joseph Falcone, for petitioner.

      Robert D. Heitmeyer and Samuel M. Warren, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      NEGA, Judge: This case is before the Court on a timely petition for review

of a Notice of Determination Concerning Collection Action(s) Under Section(s)

6320 and/or 6330 (notice of determination).1 Petitioner seeks review of


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
                                        -2-

[*2] respondent’s determination to proceed with the collection of tax arising from

petitioner’s failure to timely file Forms 941, Employer’s Quarterly Federal Tax

Return, for quarters ending September 2013, June 2014, September 2015, and

December 2015, and Forms 940, Employer’s Annual Federal Unemployment

(FUTA) Tax Return, for tax years 2014 and 2015, as well as for failure to pay and

make required deposits of the associated employment and trust fund taxes for all

periods above (periods at issue).2

      The issue for decision is whether the Internal Revenue Service (IRS) Office

of Appeals (Appeals Office) abused its discretion in sustaining the filing of the

notice of Federal tax lien (NFTL) for the periods at issue and rejecting an

installment agreement requested by petitioner.

                               FINDINGS OF FACT

      Some of the facts have been stipulated, and the stipulated facts are

incorporated in our findings by this reference. At the time the petition was filed,



      1
       (...continued)
Revenue Code in effect at all relevant times. All monetary amounts are rounded to
the nearest dollar.
      2
       We use the term “employment and trust fund taxes” to refer to taxes under
the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax
Act (FUTA), and employee income tax withholding. See Xibitmax, LLC v.
Commissioner, T.C. Memo. 2017-133, at *2 n.2.
                                        -3-

[*3] petitioner, Wind Surf & Sail Pools, Inc., was a Michigan corporation

organized and having its principal place of business in Michigan.

      Petitioner’s primary business is the seasonal selling and building of in-

ground swimming pools. Petitioner also maintains a retail outlet.

      Respondent sent petitioner three notices of NFTL filing, advising petitioner

of its right to a collection due process (CDP) hearing. On September 8, 2016,

respondent sent petitioner a notice of NFTL filing (CDP notice 1) with respect to

petitioner’s unpaid Form 940 liability for tax year 2014 of $1,819. On September

20, 2016, respondent sent petitioner a notice of NFTL filing (CDP notice 2) with

respect to petitioner’s unpaid Form 940 liability for tax year 2015 of $2,081 and

petitioner’s unpaid Form 941 liability for the quarter ending December 2015 of

$30,039. On November 3, 2016, respondent sent petitioner a notice of NFTL

filing (CDP notice 3) with respect to petitioner’s unpaid Form 941 liabilities for

quarters ending September 2013, June 2014, and September 2015. The notice

reported outstanding amounts owed of $67,271, $41,940, and $64,224 for

September 2013, June 2014 and September 2015, respectively.

      In response to the notices of NFTL filing, petitioner timely submitted two

Forms 12153, Request for a Collection Due Process or Equivalent Hearing. On

September 29, 2016, petitioner submitted a Form 12153 (CDP request 1) regarding
                                         -4-

[*4] CDP notice 1 and CDP notice 2. In CDP request 1, petitioner sought

withdrawal of the NFTL; and although petitioner did not check the box marked

“Installment Agreement”, it stated: “Taxpayer requests an installment agreement

for all taxes owed. Taxpayer is in federal court against the U.S. to collect these

taxes. No action should be taken against taxpayer.” On November 10, 2016,

petitioner submitted a Form 12153 (CDP request 2) regarding CDP notice 3. In its

request, petitioner stated that it desired a collection alternative and checked the

boxes marked “Installment Agreement”, “Offer in Compromise”, and “I Cannot

Pay Balance”. Petitioner also sought withdrawal of the NFTL and indicated that

“[t]axpayer is going to file an OIC when the U.S. District Court case is settled and

amount of taxes are determined.”

      On February 27, 2017, a settlement officer (SO) from the IRS Appeals

Office mailed petitioner a letter that scheduled a telephone CDP hearing for March

27, 2017. The SO informed petitioner that, in order for her to consider a collection

alternative, petitioner must provide: (1) a completed Form 433-B, Collection

Information Statement for Businesses; (2) signed Forms 940 and 941 for the tax

period ending December 31, 2016; and (3) proof of a timely deposit for all Federal

employment taxes for the current quarter. The SO also informed petitioner that all

items listed above must be received within 14 days of the date of the letter and that
                                        -5-

[*5] the signed tax returns must be received within 21 days of the date of the

letter. Petitioner submitted none of the requested documents and did not otherwise

communicate with the SO before the hearing.

        On March 27, 2017, the SO held a telephone CDP hearing with petitioner’s

representative. During the hearing, the SO again requested the financial

information she had previously requested. The SO granted petitioner until March

31, 2017, to provide the missing information and set a followup telephone

conference for April 3, 2017. On March 30, 2017, petitioner submitted unsigned

copies of its Form 940 and Form 941 for the tax period ending December 31,

2016.

        On April 4, 2017, the SO held another telephone conference with

petitioner’s representative and informed him that she had received the tax returns

but could not process them because they were unsigned. The SO informed

petitioner’s representative that petitioner would need to submit a signed Form 940

and Form 941 along with payroll records which indicated liability for the first

quarter of 20173 and that if petitioner did not provide the requested documents her

next action would be to issue a notice of determination sustaining the enforcement

        3
       The SO also requested Form 941 for the quarter ending March 31, 2017, to
ascertain whether petitioner was currently in compliance with all deposit
obligations.
                                          -6-

[*6] actions. On April 4, 2017, petitioner’s representative faxed to the SO a

signed Form 940 and Form 941 for the tax period ending December 31, 2016, and

a cover letter stating that “the taxpayer said they were up to date for the first

quarter 941.”

      On April 18, 2017, the SO left petitioner’s representative a lengthy

voicemail acknowledging receipt of the signed tax returns and requesting that, as

soon as the Form 941 for the quarter ending March 31, 2017, was available, a copy

be provided to show compliance. The SO also requested that, as mandatory

deposits of the associated employment and trust fund taxes were made, proof be

provided. Petitioner submitted none of the requested documents and did not

otherwise communicate with the SO.4

      On May 30, 2017, the SO conducted a final review of the case and

determined that all legal and procedural requirements had been met regarding the

NFTL. On June 15, 2017, the SO issued a notice of determination sustaining the

NFTL filing and concluded that she could not consider any collection alternatives


      4
       On April 18, 2017, the SO received a call from the U.S. Department of
Justice (DOJ) to verify that the SO had received the tax returns for tax period
ending December 31, 2016. The SO confirmed that she had received the returns
and they had been processed. Further, DOJ stated that petitioner’s District Court
case was closed. The SO did not share any information with DOJ as to the
Appeals Office’s position on the CDP hearing.
                                         -7-

[*7] because petitioner had not filed a Form 941 for the quarter ending March 31,

2017,5 and had not submitted a completed Form 433-B, supporting financial

information, or proof of ongoing compliance with deposit requirements.

      On July 10, 2017, petitioner timely filed a petition with this Court. On July

16, 2018, respondent filed a motion for summary judgment, and on August 13,

2018, petitioner filed a response objecting to the motion. On September 17, 2018,

this case was called from the calendar at the Court’s trial session in Detroit,

Michigan. The parties appeared and filed a stipulation of facts with exhibits. As a

result of the trial, we will deny respondent’s motion for summary judgment.

                                      OPINION

I.    Standard of Review

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

review that this Court should apply in reviewing an IRS administrative

determination in a CDP case. The general parameters for such review are marked

out by our precedents. Where the validity of the taxpayer’s underlying tax liability

is properly at issue, we review the IRS’ determination de novo. Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000). Where (as here) the taxpayer’s


      5
       Petitioner’s Form 941 for the quarter ending March 31, 2017, was due on
April 30, 2017, but was untimely filed on January 19, 2018.
                                        -8-

[*8] underlying liability is not before us, we review the IRS’ determination for

abuse of discretion only. See Thompson v. Commissioner, 140 T.C. 173, 178

(2013). Abuse of discretion may be found if an action is arbitrary, capricious, or

without sound basis in fact or law. Giamelli v. Commissioner, 129 T.C. 107, 111

(2007); Woodral v. Commissioner, 112 T.C. 19, 23 (1999). We do not generally

consider issues that were not properly raised in the CDP hearing. See Giamelli v.

Commissioner, 129 T.C. at 113.

II.   Analysis

      Section 6321 imposes a lien in favor of the United States on all property and

property rights of a taxpayer who is liable for taxes after a demand for payment of

the taxes has been made and the taxpayer fails to pay. The lien arises when the

assessment is made. Sec. 6322. The IRS files an NFTL to preserve priority and

put other creditors on notice. See sec. 6323. Section 6320(a) requires the

Secretary to send written notice to the taxpayer of the filing of an NFTL and of the

taxpayer’s right to an administrative hearing on the matter.

      The CDP hearing generally shall be conducted consistent with procedures

set forth in section 6330(c), (d), (e), and (g). Sec. 6320(c). Our review of the

record establishes that the SO properly discharged all of her responsibilities under

section 6330(c).
                                          -9-

[*9] Taxpayers may raise at a CDP hearing any relevant issue, including

challenges to the appropriateness of the collection action and possible collection

alternatives. Sec. 6330(c)(2)(A). A taxpayer is expected to provide all relevant

information requested by the Appeals Office for its consideration of the facts and

issues involved in the hearing. See sec. 301.6320-1(e)(1), Proced. & Admin.

Regs.

        Petitioner has not disputed its underlying tax liability or that the Appeals

Office performed the necessary verification under section 6330(c)(1). Instead,

petitioner asserts that the SO abused her discretion in denying its request for an

installment agreement because she seemed to raise the bar every time petitioner

proved that it was in compliance with its tax obligations by requesting new

financial information, such as the request for Form 941 for the quarter ending

March 31, 2017.6 Section 6159(a) gives the IRS authority to enter into installment

        6
         In its CDP request 2, petitioner checked the box for NFTL withdrawal, but
it failed to submit any documentation to show that it qualified for any of the
categories justifying NFTL withdrawal under sec. 6323(j). In CDP request 2
petitioner also indicated a desire for an offer-in-compromise (OIC). But it did not
submit a completed Form 656, Offer in Compromise, or otherwise pursue an OIC
in its communications with the SO. “There is no abuse of discretion when
Appeals fails to consider an offer-in-compromise when a Form 656 was not
submitted.” Gentile v. Commissioner, T.C. Memo. 2013-175, at *9, aff’d, 592 F.
App’x 824 (11th Cir. 2014). Similarly, in this hearing request, petitioner also
indicated “I Cannot Pay Balance” but did not address this issue during the CDP
                                                                       (continued...)
                                         - 10 -

[*10] agreements to satisfy tax liabilities when it is determined that they will

facilitate full or partial collection. See Thompson v. Commissioner, 140 T.C. at

179. Subject to exceptions not relevant here, the decision to accept or reject an

installment agreement lies within the IRS’ discretion. See Kuretski v.

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

301.6159-1(a), (c)(1)(i), Proced. & Admin. Regs.

      Although petitioner indicated a desire to enter into an installment

agreement, petitioner did not provide the SO with a Form 433-B, proof of ongoing

compliance with deposit requirements, or any other necessary information that

would justify granting its request. The SO gave petitioner ample time to submit

the required documentation before closing the case. We have consistently held

that it is not an abuse of discretion for an Appeals officer to reject collection

alternatives and sustain collection action where (as here) the taxpayer has failed,

after being given sufficient opportunities, to supply the required forms and

information. See Huntress v. Commissioner, T.C. Memo. 2009-161, 98 T.C.M.

(CCH) 8, 10-11 (2009); Prater v. Commissioner, T.C. Memo. 2007-241, 94

T.C.M. (CCH) 209, 210 (2007). We have likewise held that it is not an abuse of


      6
       (...continued)
hearing or in its petition.
                                         - 11 -

[*11] discretion for an Appeals officer to reject a collection alternative where the

taxpayer is not in compliance with its ongoing tax obligations. Petitioner was not

in compliance with its filing obligations, having failed to file Form 941 for the

quarter ending March 31, 2017. See Cox v. Commissioner, 126 T.C. 237, 257

(2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir. 2008); Hull v.

Commissioner, T.C. Memo. 2015-86, at *15.

         Finding no abuse of discretion, we will sustain the proposed collection

action.7 In reaching our decision, we have considered all arguments made, and, to

the extent not mentioned, we conclude that they are moot, irrelevant, or without

merit.

         To reflect the foregoing,


                                                  An appropriate order and decision

                                         will be entered for respondent.




         7
        Regarding the scope of our review, respondent argues that the “the Sixth
Circuit [the likely appellate venue] abides by the record rule. So the evidence in
this case should be confined to the administrative records.” We need not resolve
the question of the scope of our review. Whether or not we limit our review to the
administrative record, we conclude that the SO did not abuse her discretion.
