                               T.C. Memo. 2013-118




                         UNITED STATES TAX COURT




                    SOLUCORP, LTD., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent




      Docket No. 28917-11L.                       Filed May 2, 2013.




      Jeremy M. Klausner, for petitioner.

      Thomas A. Deamus, for respondent.




                           MEMORANDUM OPINION


      WELLS, Judge: This case is before the Court on respondent’s motion for

summary judgment pursuant to Rule 121.1 In its petition, petitioner asks us to


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

[*2] review the determination of the IRS’ Appeals Office to proceed with collection

actions with respect to petitioner’s tax liabilities pursuant to section 6672 for the tax

periods ending on the following dates: December 31, 2004; March 31, June 30,

September 30, and December 31, 2005; March 31, June 30, September 30, and

December 31, 2006; March 31, June 30, September 30, and December 31, 2007;

March 31, June 30, September 30, and December 31, 2008; and March 31 and June

30, 2009 (periods in issue).

                                      Background

      The facts set forth below are based upon examination of the pleadings,

moving papers, responses, and attachments.      Where noted below, we take judicial

notice of certain facts relating to petitioner’s wholly owned subsidiary, EPS Envtl.,

Inc. (EPS), which are set forth in this Court’s order and decision in EPS Envtl., Inc.

v. Commissioner, Docket No. 13182-11L (EPS Envtl., Inc. order and decision).

Petitioner is a Canadian entity with a U.S. mailing address at the time it filed its

petition in Orangeburg, New York.

      EPS did not pay its tax liabilities reported on Forms 941, Employer’s

Quarterly Federal Tax Return, for the periods in issue. At various times from

2007 through 2010, respondent assessed against EPS certain Form 941 tax liabilities

for the periods in issue. Throughout 2009 and 2010 respondent issued
                                         -3-

[*3] to EPS multiple notices of intent to levy and multiple notices of Federal tax lien

filings regarding the Form 941 tax liabilities for the periods in issue. EPS responded

to respondent’s notices by filing Forms 12153, Request for a Collection Due

Process or Equivalent Hearing. During its collection due process (CDP) hearing on

July 13, 2010, EPS did not dispute the underlying liabilities but instead requested,

and was granted, additional time to submit an offer-in-compromise (OIC).2

      On July 17, 2010, after EPS’ CDP hearing, respondent sent petitioner a

Letter 1153 notifying it of respondent’s intent to assess trust fund recovery penalties

pursuant to section 6672 (TFRPs) against it as a responsible person for EPS’ unpaid

Form 941 tax liabilities for the periods in issue. Petitioner did not respond to or

contest the proposed assessment of TFRPs as set forth in the Letter 1153. On

September 7, 2010, respondent assessed against petitioner TFRPs for the periods in

issue and issued to it Forms 6335, NMF First Notice, for each of the periods in issue

to notify it of the assessments and amounts due. On September 8, 2010, the IRS’

Appeals Office received the final signed document needed to




      2
        See EPS Envtl., Inc. v. Commissioner, Docket No. 13182-11L (EPS Envtl.,
Inc. order and decision).
                                          -4-

[*4] process EPS’ OIC application.3 On October 25, 2010, petitioner responded to

the Forms 6335 and requested that, because EPS had submitted an OIC, any

collection action should be suspended. Respondent notified EPS on April 29, 2011,

that its OIC would be rejected and during May 2011 sent EPS notices of

determination sustaining the collection actions against it.4 EPS petitioned this Court

on June 3, 2011, contending that the Appeals Office abused its discretion in

rejecting its OIC and requesting remand for reconsideration on the basis of changed

financial circumstances.5

      On May 21, 2011, respondent issued to petitioner a Letter 1058, Final Notice

of Intent to Levy and Notice of Your Right to a Hearing, regarding the TFRPs for

the periods in issue. On June 14, 2011, petitioner timely submitted a Form 12153

requesting a collection alternative, a face-to-face hearing, and review of the

underlying tax liabilities. Petitioner also alleged that the levy would impose an

undue hardship on it and render it unable to pay its daily operating expenses.


      3
        See EPS Envtl., Inc. order and decision. Respondent alleges that EPS
submitted the OIC on September 13, 2010, and petitioner alleges that EPS
submitted the OIC on July 13, 2010. The date on which EPS completed submission
of its OIC application is not material to the instant case, so we use the date the
Court noted in the EPS Envtl., Inc. order and decision.
      4
          See EPS Envtl., Inc. order and decision.
      5
          See EPS Envtl., Inc. order and decision.
                                          -5-

[*5]   On September 8, 2011, Settlement Officer Iris Reubel (SO Reubel),

employed by the IRS’ Appeals Office, sent petitioner a letter to schedule a

telephone CDP hearing on September 27, 2011. The September 8, 2011, letter

stated that if petitioner wished to reschedule or preferred a face-to-face hearing, it

was to notify SO Reubel by September 22, 2011. In the letter SO Reubel informed

petitioner that the CDP hearing would be its chance to discuss collection

alternatives and its disagreement with the levy. However, the September 8, 2011,

letter also stated that, for SO Reubel to consider collection alternatives, petitioner

had to file all required Federal tax returns and, by September 22, 2011, submit a

completed Form 433-A, Collection Information Statement for Wage Earners and

Self-Employed Individuals and/or Form 433-B, Collection Information Statement for

Businesses, along with additional supporting financial documentation.

       Petitioner neither contacted SO Reubel before the scheduled teleconference

to reschedule the CDP hearing or request a face-to-face hearing nor participated

in the scheduled CDP hearing. On September 27, 2011, SO Reubel sent petitioner

a letter stating that it had failed to participate in the scheduled telephone CDP

hearing and that it had 14 days to provide additional information before she would

make a determination. In response, petitioner urged SO Reubel to suspend

collection action and delay any determination until EPS’ proceeding before this
                                          -6-

[*6] Court was final. On November 18, 2011, SO Reubel sent petitioner a Notice

of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330

sustaining the collection.

      On December 19, 2011, petitioner timely petitioned this Court for review of

respondent’s notice of determination. Respondent filed a motion for summary

judgment on July 31, 2012, and petitioner filed an opposition thereto on August 31,

2012. On November 19, 2012, the Court issued the EPS Envtl., Inc. order and

decision, granting respondent’s motion for summary judgment and denying EPS’

request for respondent to reconsider EPS’ OIC.6

                                       Discussion

      Summary judgment is intended to expedite litigation and avoid unnecessary

and expensive trials; it may be granted where there is no genuine dispute of material

fact and a decision may be rendered as a matter of law. Rule 121(a) and (b); Fla.

Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). The moving party bears

the burden of proving that there is no genuine dispute of material fact, and factual

inferences are viewed in the light most favorable to the nonmoving party.

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965

(7th Cir. 1994). However, the party opposing summary judgment must set

      6
          See EPS Envtl., Inc. order and decision.
                                           -7-

[*7] forth specific facts that show a genuine dispute of material fact exists and may

not rely merely on allegations or denials in the pleadings. Rule 121(d); see also

Celotex Corp. v. Catrett, 477 U.S. 317 (1986); King v. Commissioner, 87 T.C.

1213, 1217 (1986). Because the parties do not dispute any of the material facts, we

conclude that the instant case is ripe for summary judgment.

       We have jurisdiction over this matter because petitioner filed a timely petition

for review in response to respondent’s valid notice of determination to proceed with

collection. See sec. 6330(d)(1). If the validity of the underlying tax liabilities is not

properly in issue, we will review the Appeals Office’s determination for abuse of

discretion. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). However,

where the validity of the underlying tax liabilities is properly in issue, we will review

the matter de novo. Id. Accordingly, we must first determine whether the validity

of the underlying tax liabilities is properly in issue.

       If a taxpayer fails to pay any Federal income tax liability after notice and

demand, section 6331(a) authorizes the Commissioner to collect the tax liability

by levy on the taxpayer’s property. Section 6330(a)(1) provides that no levy may

be made on any property or right to property of any taxpayer unless the

Commissioner has notified such taxpayer in writing of the right to a hearing under
                                         -8-

[*8] section 6330 before such levy is made. Respondent made petitioner aware of

its right to a hearing when respondent sent petitioner the Letter 1058 on May 21,

2011. Petitioner properly requested a section 6330 CDP hearing by submitting a

Form 12153. On the Form 12153 petitioner requested de novo review of the

underlying tax liabilities. Additionally, in its petition and response to respondent’s

motion for summary judgment, petitioner challenged the underlying tax liabilities by

claiming that it was not the correct taxpayer (i.e., a responsible person pursuant to

section 6672) and that EPS was the correct taxpayer.

      Generally, at a CDP hearing a taxpayer may raise appropriate spousal

defenses, challenge the appropriateness of collection actions, and offer collection

alternatives. Sec. 6330(c)(2)(A). The taxpayer may challenge the existence or

amount of the underlying tax liability only if the taxpayer did not receive a notice

of deficiency or did not otherwise have an opportunity to challenge the underlying

liability. Sec. 6330(c)(2)(B). However, where the assessments against the taxpayer

are TFRPs, the Commissioner does not issue and mail a notice of deficiency. See

sec. 6212(a). Instead, the Commissioner is required to provide the taxpayer with

notice of the TFRPs before assessment. Sec. 6672(b)(1). Letter 1153 provides a

taxpayer with section 6672(b) notice and the means of protesting a proposed TFRP

assessment administratively with the Commissioner. Mason v.
                                         -9-

[*9] Commissioner, 132 T.C. 301, 317 (2009). We have held that receipt of a

Letter 1153 constitutes an opportunity to dispute the taxpayer’s liability. Morgan v.

Commissioner, T.C. Memo. 2011-290, 2011 WL 6762929, at *3 (citing McClure v.

Commissioner, T.C. Memo. 2008-136).

      On July 17, 2010, respondent sent petitioner a Letter 1153 notifying it of

respondent’s intent to assess TFRPs against it for the periods in issue. Petitioner

did not respond to or contest the proposed assessment of TFRPs as set forth in the

Letter 1153. When we review a motion for summary judgment, factual inferences

are viewed in the light most favorable to the nonmoving party, but the party

opposing summary judgment must set forth specific facts that show a genuine

dispute of material fact exists. See Rule 121(d); Sundstrand Corp. v.

Commissioner, 98 T.C. at 520. Petitioner does not allege that it did not receive the

Letter 1153. Accordingly, we conclude that petitioner received the Letter 1153 and,

therefore, had a prior opportunity to challenge the underlying liabilities. See

Mason v. Commissioner, 132 T.C. at 317-318; Morgan v. Commissioner, 2011
                                          - 10 -

[*10] WL 6762929, at *3. Consequently, petitioner is precluded from challenging

the underlying liabilities. 7

       Because the validity of the underlying tax liabilities is not properly at issue,

we will review respondent’s administrative determination for abuse of discretion.

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

T.C. at 181-182. In reviewing for abuse of discretion, we will reject the

determination of the Appeals Office if the determination was arbitrary, capricious,

or without sound basis in fact or law. See Rule 142(a); Murphy v. Commissioner,

125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). However, we do not

substitute our judgment for that of the Appeals Office, and we do not decide

independently whether we believe the levy should be withdrawn. See Murphy v.

Commissioner, 125 T.C. at 320. Instead, we consider whether, in the course of

making its determination, the Appeals Office (1) verified that the requirements of

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

       7
        Moreover, underlying liability, and other sec. 6330(c)(2) issues, must be
raised with the Appeals Office at the CDP hearing to be properly raised before this
Court. Giamelli v. Commissioner, 129 T.C. 107, 115 (2007); secs.
301.6320-1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.
Although petitioner made vague references to challenging the underlying liabilities
in its Form 12153, it never provided any legal or factual support disputing the
underlying liabilities during the administrative proceeding and did not participate in
the CDP hearing with SO Reubel. Accordingly, we do not further consider any
challenges to the underlying tax liabilities.
                                         - 11 -

[*11] relevant issue raised by the taxpayer that relates to the unpaid tax or the

proposed levy, and (3) determined whether any proposed collection action balances

the need for the efficient collection of taxes with the legitimate concern of the

person that any collection action be no more intrusive than necessary. Sec.

6330(c)(1)-(3).

      Petitioner contends that the Appeals Office abused its discretion by not

suspending collection action pending the outcome of the EPS proceeding before

this Court.8 Specifically, petitioner contends that respondent’s collection action,

determination, and motion for summary judgment were premature until the EPS

proceeding was fully adjudicated. We disagree. Section 6672(a) imposes a

penalty on persons, other than the employer, who are responsible for withholding

taxes (trust fund taxes). Freeman v. Commissioner, T.C. Memo. 2011-38, 2011

WL 490871, at *3. “[L]iability under section 6672(a) is not derived from, or

dependent upon, an employer’s outstanding [trust fund] tax [withholding]

obligation. Rather, the section imposes a penalty upon persons who fail to



      8
        In its Form 12153 petitioner requested a collection alternative and contended
that the proposed levy would cause undue hardship because it would be unable to
pay its operating expenses. However, petitioner made no additional arguments with
respect to those issues in its petition, moving papers, or other communications.
Accordingly, we deem those issues abandoned. See Lunsford v. Commissioner, 117
T.C. 183, 187 (2001).
                                         - 12 -

[*12] perform a specified statutory task.” Bradley v. United States, 936 F.2d 707,

710 (2d Cir. 1991). The liability imposed on responsible persons pursuant to

section 6672 is separate and distinct from the employer’s liability for trust fund

taxes. Id.; see Mason v. Commissioner, 132 T.C. at 321; Morgan v. Commissioner,

2011 WL 6762929, at *2; Freeman v. Commissioner, 2011 WL 490871, at *3.

Consequently, the Commissioner is not required to attempt to collect the underlying

trust fund taxes from the employer before attempting to collect the section 6672

penalty against a responsible person. See United States v. Huckabee Auto Co., 783

F.2d 1546, 1549 (11th Cir. 1986); Hornsby v. IRS, 588 F.2d 952, 954 (5th Cir.

1979); Mason v. Commissioner, 132 T.C. at 321. Petitioner’s liabilities for section

6672 penalties are separate and distinct from EPS’ Form 941 tax liabilities. See

Freeman v. Commissioner, 2011 WL 490871, at *3. Accordingly, the Appeals

Office did not abuse its discretion in sustaining collection actions against petitioner

for its outstanding TFRPs for the periods in issue.

      Petitioner has neither advanced any argument nor averred in its opposing

affidavit any evidence that would cause us to conclude that the determination to

sustain the collection action was arbitrary, capricious, or without sound basis in

fact. The Appeals Office determined that the requirements of applicable law and
                                         - 13 -

[*13] administrative procedure were met and concluded that the proposed collection

actions appropriately balanced the need for efficient collection of taxes with

petitioner’s concerns regarding the intrusiveness of the collection actions.

Consequently, we hold that the Appeals Office did not abuse its discretion when it

issued a notice of determination upholding the proposed collection actions.

      In reaching these holdings, we have considered all the parties’ arguments,

and, to the extent not addressed herein, we conclude that they are moot, irrelevant,

or without merit.

      To reflect the foregoing,


                                                  An appropriate order and decision

                                             will be entered.
