                                 T.C. Memo. 2014-96



                           UNITED STATES TAX COURT



                  DANIEL RICHARD KURKA, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 9365-12L.                          Filed May 21, 2014.



      Daniel Richard Kurka, pro se.

      Melanie Senick, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      GOEKE, Judge: This case is before the Court for review of a Notice of

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

(notice of determination). After concessions,1 the issues remaining for decision


      1
          Petitioner disagreed with respondent’s determination of his 1997 tax
                                                                        (continued...)
                                        -2-

[*2] are whether petitioner is liable for a frivolous submission penalty under

section 67022 and whether the Internal Revenue Service (IRS) Appeals Office

properly sustained respondent’s collection action. We hold that petitioner is liable

for the penalty and that the Appeals Office properly sustained the collection

action.

                                 FINDINGS OF FACT

      Petitioner resided in Alaska when he filed his petition.

      Petitioner has not filed a Federal income tax return since 1994. On July 24,

2003, respondent issued a notice of deficiency for Federal income tax he

determined petitioner owed for taxable year 1997. Petitioner did not timely

petition this Court to review the notice of deficiency, and respondent began the

process of collecting the tax.

      In 2009 petitioner filed Form 12153, Request for a Collection Due Process

or Equivalent Hearing, in response to a proposed levy for Federal income tax

owed for 1997. On April 29, 2010, petitioner participated in a telephone


      1
        (...continued)
liability. He offered into evidence a corrected return. Respondent has accepted
the reduced tax liability petitioner reported on the corrected return.
      2
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at the relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                         -3-

[*3] conference with a settlement officer (SO). Petitioner argued he did not owe

tax, because the “IRS was never ratified by Congress.” After the conference the

Appeals team manager informed petitioner that his argument constituted a

frivolous position, but petitioner maintained that the IRS had no authority to tax

him. On April 30, 2010, respondent mailed petitioner a letter denying his request

for hearing because of his frivolous position. Respondent also imposed a $5,000

frivolous submission penalty under section 6702 for submitting a collection due

process (CDP) hearing request based on a frivolous position.

      In July 2011, respondent mailed to petitioner Letter 1058, Final Notice of

Intent to Levy and Notice of Your Right to a Hearing, informing petitioner that

respondent intended to levy on his property to collect the $5,000 frivolous

submission penalty. Respondent also mailed to petitioner Letter 3172, Notice of

Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, informing

petitioner that respondent had filed a Federal tax lien on petitioner’s property for

$21,226.90--$16,226.90 for unpaid 1997 income tax and $5,000 for the section

6702 penalty.

      Petitioner timely requested a CDP hearing concerning both the lien and the

proposed levy. An SO mailed petitioner a letter, notifying him that she had

scheduled a telephone CDP hearing for December 14, 2011. The letter requested
                                        -4-

[*4] that petitioner submit wage information and signed Federal income tax

returns for taxable years 2001 through 2010 so that the Appeals Office could

consider alternative collection methods. Petitioner did not send any of the

requested information.

      During the telephone hearing petitioner asked to record the hearing. After

the SO denied his request, petitioner asked if the hearing could be held by

correspondence instead. On December 14, 2011, the SO sent petitioner a “CDP

hearing by correspondence” letter concerning the lien for the unpaid tax and

penalty and the proposed levy for the penalty. The SO advised petitioner that if he

did not respond to the letter by January 16, 2012, the SO would make a

determination based on the information already in the file. Petitioner never

responded to the correspondence hearing letter.

      On March 8, 2012, respondent mailed petitioner a notice of determination

sustaining the Federal tax lien and permitting the collection action to proceed for

petitioner’s 1997 income tax liability and the frivolous submission penalty. The

Appeals Office made the determination using information in the file and computer

transcripts of petitioner’s account history because petitioner (1) never responded

to the correspondence hearing letter, (2) did not provide the requested information,

and (3) was not in filing compliance. The notice of determination stated that
                                         -5-

[*5] petitioner “challenged the existence or amount of the liability but he did not

participate in the hearing so his issue could not be discussed.”

      Petitioner timely petitioned this Court for review of respondent’s

determination.

                                      OPINION

      We have jurisdiction to review determinations of an Appeals Office to

sustain a levy or the filing of a notice of Federal tax lien. Sec. 6320(c) (lien

cases); sec. 6330(d)(1) (levy cases). Section 6330(c)(2)(B) permits challenges to

the existence or amount of the underlying liability in collection proceedings only

when the taxpayer did not receive a notice of deficiency or otherwise have an

opportunity to challenge the liability. When the validity of the underlying liability

was properly at issue in the CDP hearing, we review de novo the Appeals Office’s

determination as to that liability. Goza v. Commissioner, 114 T.C. 176, 181-182

(2000). Where a taxpayer’s underlying tax liability is not in dispute, the Court

reviews the Commissioner’s determination for abuse of discretion. Id. at 182.

Petitioner did not receive a notice of deficiency for the frivolous submission

penalty and had no prior opportunity to challenge it. Accordingly, we review de

novo respondent’s determination that petitioner was liable for the penalty.
                                        -6-

[*6] Section 6702 imposes a $5,000 civil penalty for specified frivolous

submissions. A specified frivolous submission is a specified submission where

any portion is based upon a position the Secretary has identified as frivolous or

which reflects a desire to delay or impede the administration of Federal tax laws.

Sec. 6702(b)(2)(A). Specified submissions include requests for a hearing under

section 6320 (notice and opportunity for hearing upon filing of notice of lien) and

under section 6330 (notice and opportunity for hearing before levy). Sec.

6702(b)(2)(B)(i). One frivolous argument the Secretary identifies is “[the IRS] is

not an agency of the United States government but rather a private-sector

corporation or an agency of a State or Territory without authority to administer the

internal revenue laws.” Notice 2010-33, 2010-17 I.R.B. 609, 612. Positions in the

specified submission that are the same as or similar to listed arguments are

frivolous. Notice 2008-14, 2008-1 C.B. 310.

      In 2009 petitioner requested a CDP hearing under section 6330 in response

to a proposed levy for Federal income tax owed for 1997. During petitioner’s

telephone conference in 2010, he argued that he did not owe tax, because the “IRS

was never ratified by Congress” and thus the IRS had no authority to tax him.

This position triggers the penalty because it approximates the listed frivolous
                                         -7-

[*7] argument that the IRS does not have the authority to administer the internal

revenue laws.

      For more than a decade petitioner ignored his responsibility to file Federal

income tax returns. When the IRS caught him, he still had an opportunity to avoid

penalties simply by cooperating. Instead, he refused to produce records and

persisted in making frivolous arguments about the IRS’ authority to collect taxes.

By the letter of the statute he made a frivolous submission, and we see no reason

he should escape the resulting penalty. Accordingly, we sustain respondent’s

determination that petitioner is liable for the section 6702 civil penalty of $5,000.

      Petitioner has made no argument nor presented any evidence indicating

respondent’s collection procedures were improper. Respondent has complied with

the lien and levy procedures outlined in sections 6320 and 6330, and we

accordingly sustain respondent’s decision to allow the collection action to

proceed.

      In reaching our holdings herein, we have considered all arguments made

and, to the extent not mentioned above, we conclude they are moot, irrelevant, or

without merit.
                                 -8-

[*8] To reflect the foregoing,


                                            Decision will be entered under

                                       Rule 155.
