                               T.C. Memo. 2017-95



                        UNITED STATES TAX COURT



                 SULPHUR MANOR, INC., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 24581-14L.                        Filed May 31, 2017.



      David J. Looby, for petitioner.

      Ann Louise Darnold, for respondent.



                          MEMORANDUM OPINION


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

review pursuant to section 6330(d)(1)1 of the determination by the Internal



      1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended and in effect at all relevant times, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
                                        -2-

[*2] Revenue Service (IRS or respondent) to uphold a notice of intent to levy.

Petitioner timely petitioned this Court with respect to the notice of determination,

and petitioner and respondent have each filed motions for summary judgment

under Rule 121. The remaining questions for decision are whether IRS Settlement

Officer Alcorte (SO Alcorte) abused her discretion in rejecting petitioner’s

proposed installment agreement and sustaining the collection action and whether

she had prior involvement with respect to the unpaid tax. For the reasons

explained below, the Court will grant respondent’s motion for summary judgment

and deny petitioner’s.

                                    Background

      The following facts are based on the parties’ pleadings and motion papers,

including the attached exhibits and affidavits.2 See Rule 121(b). Petitioner oper-

ates a nursing home facility in a rural community of fewer than 5,000 residents.

Its principal place of business was in Oklahoma at the time the petition was filed.




      2
       Each party requests that certain of the other’s affidavits and exhibits be
stricken from the record because they were not part of the original administrative
record. Although there exists conflicting authority as to whether the Court’s
review in CDP cases is limited to the administrative record, neither the U.S. Court
of Appeals for the Tenth Circuit nor the U.S. Court of Appeals for the D.C. Circuit
has specifically ruled on the issue. The Court denies both requests.
                                         -3-

[*3] The case at issue relates to petitioner’s outstanding tax liability from Form

941, Employer’s Quarterly Federal Tax Return, for the period ending December

31, 2013. For that period, petitioner timely filed its Form 941 but failed to pay the

reported tax liability of $88,239.49 for that quarter. On April 7, 2014, respondent

assessed the tax reported on the return and began collection efforts.

      On April 18, 2014, respondent issued to petitioner a Letter 1058, Final

Notice--Notice of Intent to Levy and Notice of Your Right to a Hearing. In

response petitioner timely submitted a Form 12153, Request for a Collection Due

Process or Equivalent Hearing, seeking to enter into a $6,000-per-month

installment agreement for its unpaid employment tax liability. The CDP hearing

request stated that if respondent were permitted to levy, petitioner’s difficulty with

Medicare and Medicaid collections would render it unable to pay either its

employment tax balance or its current taxes. Petitioner’s CDP hearing request,

however, did not dispute the underlying employment tax liability; petitioner

checked the collection alternative boxes for “Installment Agreement” and “I

Cannot Pay Balance”.

      Respondent mailed petitioner a letter dated June 6, 2014, acknowledging

receipt of petitioner’s CDP hearing request, and SO Alcorte subsequently mailed

to petitioner a letter scheduling a CDP hearing for August 28, 2014. SO Alcorte’s
                                          -4-

[*4] letter advised petitioner that it did not qualify for consideration of an

installment agreement because it was not in compliance with its employment tax

deposit requirements for the taxable period ending June 30, 2014. The letter

further advised petitioner that to qualify for a collection alternative it had to

provide to SO Alcorte the following items no later than August 12, 2014: (1) a

completed Form 433-B, Collection Information Statement for Businesses, and

(2) evidence that it had made the required Federal employment tax deposits for the

current taxable period. SO Alcorte informed petitioner that respondent could not

consider collection alternatives without the information requested.

      Petitioner did not submit the requested Form 433-B until August 26, 2014,

two days before the scheduled hearing, asserting that the proposed levy would

result in “economic hardship” and, therefore, “this situation * * * mandate[s] the

release of the proposed levy”. The Form 433-B was signed by petitioner’s

president, Sam Jewell, and listed among petitioner’s assets accounts receivable

from Private Pay, Medicaid Oklahoma, Medicare, and Insurance CoPay--with a

combined balance of $444,196.43--for the period April 30 through June 30, 2014.3




      3
       The record reflects that $305,378.09 of petitioner’s total accounts receiv-
able was owed by the Federal and State Government agencies referenced above.
                                          -5-

[*5] The Form 433-B also listed petitioner’s monthly income of $322,941.18 and

monthly expenses of $276,793, for a net monthly income of $46,148.18.

      In preparation for the CDP hearing SO Alcorte reviewed the administrative

record and noted in her case activity report that petitioner did not appear to qualify

for an installment agreement because its assets in accounts receivable were

sufficient to pay the outstanding liability in full. She noted on petitioner’s Form

433-B that its net monthly income was $46,148.18.

      On August 28, 2014, the parties held the scheduled CDP hearing.

Petitioner’s representative did not contest petitioner’s underlying tax liability but

instead reiterated that it would suffer economic hardship if the proposed collection

action were sustained. SO Alcorte explained to petitioner’s representative that she

would not consider petitioner’s economic hardship argument because the

economic hardship exception under section 6343(a)(1)(D) is not available to

corporations. She noted that because (1) petitioner’s accounts receivable were

sufficient to pay its outstanding liability in full, (2) petitioner was not in

compliance with its Federal employment tax deposit obligations, and (3) the

economic hardship exception was unavailable to corporations, she would be

sustaining the proposed collection action and closing the case.
                                        -6-

[*6] SO Alcorte verified that the assessment was properly made and that all other

requirements of applicable law and administrative procedure had been met. She

thereupon closed the case and, on September 17, 2014, issued to petitioner a

notice of determination sustaining the notice of intent to levy for its employment

tax liability for the tax period ending December 31, 2013.

                                     Discussion

I.    Summary Judgment and Standard of Review

      The purpose of summary judgment is to expedite litigation and avoid

unnecessary and time-consuming trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). The Court may grant summary judgment when there is no

genuine dispute as to any material fact and a decision may be rendered as a matter

of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). If a moving party properly makes and supports

a motion for summary judgment, “an adverse party may not rest upon the mere

allegations or denials of such party’s pleading” but must set forth specific facts, by

affidavit or otherwise, showing that there is a genuine dispute for trial. Rule

121(d).
                                        -7-

[*7] Upon due consideration of the parties’ motions, supporting declarations,

and responses thereto, the Court concludes that no material facts are in dispute and

that judgment may be rendered for respondent as a matter of law.

      Where the validity of the underlying tax liability is properly at issue in a

collection case, the Court will review the matter on a de novo basis. Sego v.

Commissioner, 114 T.C. 604, 610 (2000). Where, as here, there is no dispute

concerning the underlying tax liability, the Court reviews the Commissioner’s

administrative determination to proceed with collection for abuse of discretion.4

Id. Abuse of discretion exists when a determination is arbitrary, capricious, or

without sound basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301,

320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006).

II.   Collection Due Process

      In deciding whether the SO abused her discretion in sustaining the proposed

collection action, the Court considers whether she: (1) properly verified that the

requirements of any applicable law or administrative procedure have been met;

      4
        Regardless of whether petitioner could have contested its underlying
liability at the CDP hearing, this Court may consider a challenge to such a liability
only if the taxpayer properly raised it before the SO, Giamelli v. Commissioner,
129 T.C. 107, 115 (2007), and again in its petition to this Court, see Rule
331(b)(4) (“Any issue not raised in the assignments of error shall be deemed to be
conceded.”). Petitioner did not raise this issue with SO Alcorte or in its petition.
The Court accordingly deems it conceded.
                                        -8-

[*8] (2) considered any relevant issues petitioner raised; and (3) determined

whether “any proposed collection action balances the need for the efficient

collection of taxes with the legitimate concern of * * * [petitioner] that any

collection action be no more intrusive than necessary.” See sec. 6330(c)(3).

      Review of the record reveals that SO Alcorte conducted a thorough review

of petitioner’s account, determined that the taxes had been properly assessed, and

verified that other requirements of applicable law and administrative procedure

were followed.

      Petitioner’s primary contention is that section 301.6343-1(b)(4)(i), Proced.

& Admin. Regs. (defining economic hardship only with respect to individual

taxpayers), is invalid and that SO Alcorte abused her discretion in failing to

consider its request for relief under the economic hardship provision of section

6343(a)(1)(D). This contention is incorrect. This Court recently released its

Opinion in Lindsay Manor Nursing Home, Inc. v. Commissioner (Lindsay Manor

I), 148 T.C. __ (Mar. 23, 2017), finding that section 301.6343-1(b)(4)(i), Proced.

& Admin. Regs., is valid and that the economic hardship relief provided by section

6343(a)(1)(D) is available only to individual taxpayers. And in a companion

Memorandum Opinion, Lindsay Manor Nursing Home, Inc. v. Commissioner,

T.C. Memo. 2017-50, the Court concluded that the SO did not abuse her discretion
                                          -9-

[*9] in failing to consider a request for economic hardship relief made by a

corporate taxpayer. SO Alcorte did not abuse her discretion in declining this

request either.

      Petitioner argues alternatively that SO Alcorte abused her discretion in

rejecting its installment agreement request and in failing to adequately consider its

“economic hardship” in the balancing analysis required by section 6330(c)(3).5

Finally, petitioner suggests that SO Alcorte was not impartial as required by

section 6330(b)(3).

      A.     Petitioner’s Installment Agreement Request

      In its discretion, the IRS may enter into an installment agreement if it

determines that doing so will facilitate full or partial collection of a tax liability.

See sec. 6159(a). The IRS also has discretion to reject a proposed installment

agreement (subject to certain restrictions not applicable here). See Thompson v.

Commissioner, 140 T.C. 173, 179 (2013); sec. 301.6159-1(a), (c)(1)(i), Proced. &

Admin. Regs. Consequently, in reviewing this determination, the Court does not


      5
       In Lindsay Manor I, this Court found that sec. 301.6343-1(b)(4)(i), Proced.
& Admin. Regs., is valid; accordingly, the economic hardship exception is
available only to individuals. To the extent that petitioner’s other arguments
attempt to rehash this issue, they are summarily disregarded. The Court will,
however, address petitioner’s economic position with respect to SO Alcorte’s sec.
6330(c)(3)(C) balancing analysis.
                                           - 10 -

[*10] substitute its judgment for that of Appeals and decide whether in its opinion

petitioner’s installment agreement should have been accepted. See Woodral v.

Commissioner, 112 T.C. 19, 23 (1999); Keller v. Commissioner, T.C. Memo.

2006-166, aff’d in part, 568 F.3d 710 (9th Cir. 2009). Instead, the Court reviews

this determination for abuse of discretion.

      Petitioner argues that it was an abuse of discretion for SO Alcorte to reject

its proposed installment agreement. The record, however, demonstrates that SO

Alcorte’s rejection of petitioner’s installment agreement was proper for either of

her reasons: (1) the value of petitioner’s assets exceeded the underlying liability

and (2) petitioner was not in compliance with its Federal employment tax deposit

obligations.6

                1.   Petitioner’s Assets

      SO Alcorte rejected petitioner’s proposed installment agreement after

determining that it could fully or partially satisfy its tax liability--$88,239.49--by

liquidating or borrowing against its assets--$444,196.43 in accounts receivable




      6
        The Court finds disingenuous petitioner’s argument that SO Alcorte’s notes
in her case activity report constituted a predetermination. The notes indicate SO
Alcorte’s preparation for petitioner’s CDP hearing and reflect a thorough review
of the late-submitted Form 433-B and its attachments. This is not an abuse of
discretion.
                                         - 11 -

[*11] alone.7 See Internal Revenue Manual (IRM) pt. 5.14.1.4(5) and (6) (June 1,

2010)(“Taxpayers do not qualify for installment agreements if balance due

accounts can be fully or partially satisfied by liquidating assets[.]”); see also

Boulware v. Commissioner, T.C. Memo. 2014-80 (finding that settlement officer’s

reliance on this IRM provision was not an abuse of discretion), aff’d, 816 F.3d 133

(D.C. Cir. 2016). And other than its argument for economic hardship relief,

petitioner does not suggest that any exception to the general rule applies. The

record does not show any abuse of discretion by SO Alcorte in rejecting this offer.

             2.     Compliance With Federal Tax Obligations

      In rejecting petitioner’s proposed installment agreement, SO Alcorte also

noted that petitioner was not in compliance with its current Federal employment

tax deposit obligations. Established IRS policy requires taxpayers to be in

      7
        SO Alcorte noted in her case activity report that “there are enough equity in
assets as well as the excess monthly income shows negative figure than proposed”.
And petitioner points to this as an example of SO Alcorte’s abuse of discretion.
However, even assuming that the quoted sentence means that she thought
petitioner’s net income was negative--instead of positive $46,148.18 per month--
this mistake was of no consequence to her ultimate decision in the notice of
determination, which does not mention petitioner’s income. Any actual error was
harmless since an accurate reflection of petitioner’s positive net income would
have been another reason to reject its proposed $6,000-per-month installment
agreement. See Boulware v. Commissioner, T.C. Memo. 2014-80 (finding no
abuse of discretion in rejecting proposed installment agreement when taxpayer
was able to pay twice the amount of the proposed payments), aff’d, 816 F.3d 133
(D.C. Cir. 2016).
                                        - 12 -

[*12] compliance with current filing and estimated tax payment requirements to be

eligible for collection alternatives. See Reed v. Commissioner, 141 T.C. 248, 256-

257 (2013). Generally, current compliance with tax laws is a prerequisite to being

eligible for collection alternatives. See Cox v. Commissioner, 126 T.C. 237, 257

(2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir. 2008). And despite

petitioner’s contention, SO Alcorte was well within her discretion to require

compliance with current tax obligations. See Giamelli v. Commissioner, 129 T.C.

107, 111-112 (2007); cf. Christopher Cross, Inc. v. United States, 461 F.3d 610,

613 (5th Cir. 2006) (finding no abuse of discretion when settlement officer

rejected collection alternative because taxpayer was not in compliance with its tax

payment obligations); Reed v. Commissioner, 141 T.C. at 257 (same).

      Petitioner argues that SO Alcorte abused her discretion because--even

though it was not in compliance--she failed to consider that its inability to remain

current with its Federal tax deposits was a result of its nonreceipt of Medicare and

Medicaid funding from the Federal and State Governments. For support,

petitioner cites Alessio Azzari, Inc. v. Commissioner, 136 T.C. 178 (2011).

      In Alessio Azzari, Inc., a lender stopped lending money to the taxpayer after

the Commissioner’s settlement officer erroneously determined that the Commis-

sioner did not need to subordinate his lien on the taxpayer’s accounts to the
                                        - 13 -

[*13] lender’s lien on the same accounts. Id. at 181-183. As a result, the taxpayer

was unable to stay current with its employment tax deposits after being in

compliance for six consecutive quarters. Id. at 183. The Commissioner denied the

taxpayer’s installment agreement request because the taxpayer was no longer in

compliance. Id. at 183-184. The Court held that it was an abuse of discretion for

the Commissioner to deny the taxpayer’s request for an installment agreement on

the basis of the taxpayer’s failure to stay current on its tax deposits because the

settlement officer’s erroneous interpretation of law led to the lender’s decision to

stop lending money to the taxpayer, which led to the taxpayer’s not being in

compliance. Id. at 194.

      Unlike the taxpayer in Alessio Azzari, Inc., petitioner was indisputably not

in compliance when it requested an installment agreement. And because section

301.6343-1(b)(4)(i), Proced. & Admin. Regs., is valid, SO Alcorte’s interpretation

was not erroneous. See Lindsay Manor I. Accordingly, SO Alcorte did not abuse

her discretion in rejecting petitioner’s installment agreement request on the

grounds that petitioner was not in compliance.

      B.     SO Alcorte’s Balancing Analysis

      Petitioner next argues that SO Alcorte either did not conduct the required

statutory balancing test or did not explain her reason for concluding that its
                                        - 14 -

[*14] requirements were met. Petitioner suggests that it “proposed a viable

collection alternative that it could afford to pay on a monthly basis while staying

current on its federal tax deposit payments that was less intrusive than enforced

levy action”.

      This Court also found in Lindsay Manor I that the section 6330(c)(3)(C)

balancing test properly takes into account a taxpayer’s specific economic realities

and the consequences of a proposed collection action. On the basis of the Court’s

thorough analysis of the record in this case, the Court concludes that there is no

material issue of fact regarding whether SO Alcorte properly balanced “the need

for the efficient collection of taxes” with the legitimate concern of petitioner that

“any collection action be no more intrusive than necessary.” See sec. 6330(c)(3).

      At the time petitioner requested this installment agreement, the submitted

Form 433-B showed that its monthly income exceeded its monthly expenses with a

net monthly income of $46,148.18. SO Alcorte noted petitioner’s accounts

receivable, which were together sufficient to pay the outstanding liabilities in full.

These accounts included delayed payments from Medicare and Medicaid, but

petitioner did not suggest that they would be unpaid.

      Although petitioner complains of the possibility of being forced to close its

doors to its patients and employees, this Court finds that SO Alcorte gave due
                                         - 15 -

[*15] weight to petitioner’s specific circumstances. The Government’s interest in

efficiently collecting petitioner’s liability simply tipped the scale the other way.

      Furthermore, it is well established that rejecting a collection alternative be-

cause of noncompliance with estimated tax payment requirements does not violate

the proper balancing requirement. See, e.g., Orum v. Commissioner, 123 T.C. 1

(2004), aff’d, 412 F.3d 819 (7th Cir. 2005); Friedman v. Commissioner, T.C.

Memo. 2015-196; Schwartz v. Commissioner, T.C. Memo. 2007-155. In prepara-

tion for the CDP hearing SO Alcorte discovered that petitioner was not in compli-

ance with its current employment tax deposit obligations for the taxable period

ending June 30, 2014, and that it did not provide proof of making its required

September 30, 2014, deposit. Upon consideration of petitioner’s financial position

and its failure to remain in compliance with its employment tax requirements, SO

Alcorte determined that there was no alternative to sustaining the notice of intent

to levy; she explained the reasoning behind her decision in the notice of determi-

nation. Accordingly, the undisputed material facts establish that SO Alcorte did

not abuse her discretion in conducting the section 6330(c)(3)(C) balancing test.

      C.     SO Alcorte’s Impartiality

       Next, petitioner argues that SO Alcorte’s review of the documents it

provided before the CDP hearing violates its section 6330(b)(3) right to a CDP
                                        - 16 -

[*16] hearing by an Appeals officer who had no prior involvement with respect to

the unpaid tax.

      Section 6330(b)(3) requires a CDP hearing to be “conducted by an officer or

employee who has had no prior involvement with respect to the unpaid tax * * *

before the first hearing”. Prior involvement exists only when (1) the taxpayer, the

tax, and the tax period at issue in the CDP hearing also were at issue in the prior

non-CDP matter and (2) the Appeals officer or employee actually participated in

the prior matter. Sec. 301.6330-1(d)(2), Q&A-D4, Proced. & Admin. Regs.

      Petitioner does not argue that SO Alcorte had prior involvement in an

earlier, non-CDP matter; rather, it argues that, because she had reviewed

petitioner’s documents before the CDP hearing, SO Alcorte was not impartial.

Petitioner is incorrect. The regulations clearly state that prior involvement means

that an Appeals officer actually participated in an earlier, non-CDP matter. Id.

Because petitioner does not assert that SO Alcorte participated in a prior non-CDP

matter, its argument must fail.

      SO Alcorte verified that she had not had any prior involvement with respect

to the specific tax period at issue. Because SO Alcorte did not participate in a

prior non-CDP matter concerning the same tax, taxpayer, and tax period at issue,

she was an eligible Appeals officer to preside over the CDP hearing. Accordingly,
                                        - 17 -

[*17] the undisputed material facts establish that SO Alcorte did not abuse her

discretion by reviewing the information petitioner had provided before its CDP

hearing.

III.   Conclusion

       Finally, petitioner argues that the Court should remand this case for

additional consideration. The Court is not convinced that a remand is necessary or

would be productive. See Lunsford v. Commissioner, 117 T.C. 183, 189 (2001);

Kakeh v. Commissioner, T.C. Memo. 2015-103, at *13. The purpose of a remand

is not to afford a “do over” for a taxpayer whose missteps during the CDP process

resulted in its collection alternative’s being rejected. See Kakeh v. Commissioner,

at *13. It appears to the Court that petitioner is seeking a “do over” here.

       Finding no abuse of discretion, the Court will grant respondent’s motion for

summary judgment and deny petitioner’s. The Court has considered all of the

arguments made by the parties, and to the extent they are not addressed herein,

they are considered unnecessary, moot, irrelevant, or without merit.

       To reflect the foregoing,


                                                 An appropriate order and decision

                                       will be entered.
