                  T.C. Summary Opinion 2006-63



                     UNITED STATES TAX COURT



                JAMES WELDON AARON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14787-04S.           Filed April 24, 2006.



     James Weldon Aaron, pro se.

     Monica J. Miller, for respondent.



     PANUTHOS, Chief Special Trial Judge:   This case was heard

pursuant to the provisions of sections 6330(d) and 7463 of the

Internal Revenue Code in effect when the petition was filed.   The

decision to be entered is not reviewable by any other court, and

this opinion should not be cited as authority.   Unless otherwise

indicated, all subsequent section references are to the Internal

Revenue Code in effect at relevant times.
                                - 2 -

     This proceeding arises from a petition for judicial review

filed in response to a Notice of Determination Concerning

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

determination) sent to petitioner on July 12, 2004.   The issue

for decision is whether respondent abused his discretion in

sustaining a notice of Federal tax lien filed against petitioner.

                              Background

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

found.   The record consists of the stipulation of facts with

attached exhibits, an additional exhibit introduced at trial, and

the testimony of petitioner.    At the time of filing the petition,

petitioner resided in Sebring, Florida.

     Respondent made assessments against petitioner for income

taxes, related penalties, and interest for the taxable years

1994, 1995, 1996, and 2002.    Respondent sent a notice and demand

for payment for each of the years at issue, but petitioner failed

to remit payment.

     In February 2003, petitioner submitted an offer-in-

compromise (OIC), in which he offered to pay $3,000 to compromise

his tax liabilities for the taxable years 1994, 1995, and 1996.1

The OIC was based on doubt as to collectibility and promotion of

effective tax administration.    In a written statement attached to


     1
        The OIC also included the taxable years 1992 and 1993 but
did not include the taxable year 2002. The taxable years 1992
and 1993 are not before the Court.
                                - 3 -

the OIC, petitioner claimed he was unable to pay his tax

liabilities because he:   (1) Earned $7.35 an hour as a customer

service representative; (2) had a wife2 and three children; (3)

had a monthly car payment; and (4) contributed to the support and

maintenance of his then-94-year-old mother.

     Respondent processed petitioner’s OIC and assigned it to an

offer specialist.   The offer specialist sent petitioner a letter

in July 2003 requesting, among other things, “Information to

substantiate current income for yourself and your spouse (W2s,

1099s, etc)”.   The letter states in part:

     If you or your spouse are involved with any businesses
     as an officer, a partner, an owner, or an investor,
     provide a copy of the last three (3) Federal income tax
     reports, if other than Form 1040; schedule of
     disbursements made to you, including loans, dividends,
     interest, wages for the past three (3) years; names of
     officers directors, and stockholders.

     Petitioner and the offer specialist exchanged correspondence

over the next several months.   At some point during that time,

respondent learned that petitioner was operating a paralegal

business that was not mentioned in his OIC.   On February 11,

2004, the offer specialist asked petitioner to provide a

statement of his income from the paralegal business signed under

penalty of perjury.   Petitioner refused to provide the statement.

At or about the same time, the offer specialist determined that

petitioner’s offer of $3,000 was insufficient because the total


     2
         Petitioner’s wife is not a party to this case.
                                 - 4 -

value of his real property interests exceeded his unpaid tax

liabilities.

         Respondent returned the OIC to petitioner on February 27,

2004, with a letter that states:     “We requested substantiation of

your financial information.     We have not received all of the

required information.     Therefore, we have closed your offer.”

Respondent filed a notice of Federal tax lien against petitioner

on March 9, 2004, for the taxable years 1994, 1995, 1996, and

2002.     The total amount reflected on the notice of Federal tax

lien was $4,619.60.     Respondent issued a Notice of Federal Tax

Lien Filing and Your Right to a Hearing Under IRC 6320 to

petitioner on March 12, 2004.

     Petitioner timely submitted a Form 12153, Request for a

Collection Due Process Hearing.     The Form 12153 states only that

petitioner wished to continue pursuing an OIC.     Petitioner and

respondent’s settlement officer held a face-to-face hearing in

May 2004.     Petitioner did not dispute his underlying liabilities

or raise a spousal defense.     The settlement officer informed

petitioner that his offer of $3,000 was insufficient because of

the total value of his real property interests.3    The settlement


     3
        In his OIC, petitioner indicated he owned four parcels of
real property. The notice of determination, however, states that
petitioner and the offer specialist “reviewed the nine parcels of
real property in which * * * [petitioner] ha[s] an interest.” A
notarized document that petitioner signed on Feb. 16, 2004, also
indicates that he had interests in nine parcels of real property.
                                                   (continued...)
                                 - 5 -

officer suggested an installment agreement because petitioner

lacked liquid assets with which to pay his tax liabilities.

Petitioner was not willing to enter into an installment

agreement; instead, he wanted to discharge his liabilities

through a lump-sum payment as part of an OIC.

     Petitioner and the settlement officer spoke by telephone in

the weeks following the face-to-face hearing.    The settlement

officer sent petitioner a proposed installment agreement that

called for monthly payments of $140 until petitioner’s

liabilities were paid in full.     Petitioner did not sign the

proposed installment agreement.    On July 12, 2004, respondent

issued a notice of determination to petitioner sustaining the

filing of the notice of Federal tax lien.    The notice of

determination states that the “requirements of various applicable

legal and administrative procedures have been met”.    It also

states that the notice of Federal tax lien was filed “since the

unpaid balance of assessment was $5,000 or more [Internal Revenue

Manual 5.12.1.13-Filing Guidelines]”.

                           Discussion

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

all property and rights to property of a person when a demand for

the payment of the person’s liability for taxes has been made and



     3
      (...continued)
The discrepancy has not been explained.
                                - 6 -

the person fails to pay those taxes.     Such a lien arises when an

assessment is made.    Sec. 6322.   Section 6323(a) requires the

Secretary to file a notice of Federal tax lien if the lien is to

be valid against any purchaser, holder of a security interest,

mechanic’s lienor, or judgment lien creditor.     Lindsay v.

Commissioner, T.C. Memo. 2001-285, affd. 56 Fed. Appx. 800 (9th

Cir. 2003).

     Section 6320 provides that a taxpayer shall be notified in

writing by the Secretary of the filing of a notice of Federal tax

lien and provided with an opportunity for an administrative

hearing.   An administrative hearing under section 6320 is

conducted in accordance with the procedural requirements of

section 6330.   Sec. 6320(c).   At the administrative hearing, a

taxpayer is entitled to raise any relevant issue relating to the

unpaid tax, including a spousal defense or collection

alternatives such as an offer-in-compromise or an installment

agreement.    Sec. 6330(b) and (c)(2); sec. 301.6320-1(e)(1),

Proced. & Admin. Regs.    A taxpayer also may challenge the

existence or amount of the underlying tax liability, including a

liability reported on the taxpayer’s original return, if the

taxpayer “did not receive any statutory notice of deficiency for

such tax liability or did not otherwise have an opportunity to
                               - 7 -

dispute such tax liability.”   Sec. 6330(c)(2)(B); see also Urbano

v. Commissioner, 122 T.C. 384, 389-390 (2004); Montgomery v.

Commissioner, 122 T.C. 1, 9-10 (2004).

     At the conclusion of the hearing, the Appeals officer must

determine whether and how to proceed with collection, taking into

account, among other things, collection alternatives proposed by

the taxpayer and whether any proposed collection action balances

the need for the efficient collection of taxes with the

legitimate concern of the taxpayer that the collection action be

no more intrusive than necessary.   See sec. 6330(c)(3).

     Section 6330(d) provides for judicial review of the

administrative determination in the Tax Court or a Federal

District Court, as may be appropriate.   Where the validity of the

underlying tax liability is properly at issue, the Court will

review the matter de novo.   However, where the validity of the

underlying tax liability is not properly at issue, the Court will

review the Commissioner’s administrative determination for abuse

of discretion.   Goza v. Commissioner, 114 T.C. 176, 181-182

(2000).

     Petitioner does not seek to challenge his underlying tax

liabilities.   We therefore review respondent’s determination for

abuse of discretion.   See Lunsford v. Commissioner, 117 T.C. 183,

185 (2001); Goza v. Commissioner, supra.   We generally consider

only arguments, issues, and other matters that were raised at the
                                   - 8 -

administrative hearing or otherwise brought to the attention of

the Appeals Office.       Magana v. Commissioner, 118 T.C. 488, 493

(2002); sec. 301.6320-1(f)(2), Q&A-F5, Proced. & Admin. Regs.

        The sole collection alternative petitioner proposed was an

OIC.4       Section 7122(a) authorizes the Secretary to compromise any

civil case arising under the internal revenue laws.       As is

relevant here, grounds for compromise of a liability include

doubt as to collectibility or promotion of effective tax

administration.       Sec. 301.7122-1(b), Proced. & Admin. Regs.

        Before discussing each of these grounds, we address

respondent’s contention, raised for the first time in his

pretrial memorandum, that petitioner’s failure to pay his 2002

tax liability rendered him noncompliant with Federal tax laws.

The Court has held that where a taxpayer is not currently in

compliance with Federal tax laws, a determination that the

taxpayer is not entitled to an OIC does not constitute abuse of

discretion.       Rodriguez v. Commissioner, T.C. Memo. 2003-153; see

also Orum v. Commissioner, 412 F.3d 819, 821 (7th Cir. 2005),

affg. 123 T.C. 1 (2004).       The Court also has held, however, that



        4
        Petitioner’s OIC does not address the taxable year 2002.
It is unclear whether he later proposed an OIC as a collection
alternative for that year. On the basis of our discussion and
resolution of the issue for decision, infra, the result in this
case will not change if we find that petitioner offered to
compromise his 2002 tax liability. We therefore assume, without
deciding, that the issue of an OIC for the taxable year 2002 was
raised and is properly before the Court.
                                - 9 -

we generally do not consider an issue that is raised for the

first time at trial.    See, e.g., Foil v. Commissioner, 92 T.C.

376, 418 (1989), affd. 920 F.2d 1196 (5th Cir. 1990); Markwardt

v. Commissioner, 64 T.C. 989, 997 (1975).      Respondent has offered

no explanation for not raising the issue of petitioner’s

noncompliance earlier.   We do not consider this issue, nor does

it affect the outcome of this case.

Doubt as to Collectibility

     The Secretary may compromise a tax liability for doubt as to

collectibility when “the taxpayer’s assets and income are less

than the full amount of the assessed liability.”      Sec.

301.7122-1(b)(2), Proced. & Admin. Regs.      Respondent determined

that the total value of petitioner’s interests in real property

exceeded the amount of his unpaid tax liabilities.      At trial,

petitioner stated he “had no problem” with respondent’s

determination with respect to his real property interests.        He

also conceded that he had sufficient assets to pay his tax

liabilities for the years at issue.      Accordingly, he is not

entitled to compromise his tax liabilities on the basis of doubt

as to collectibility.

Effective Tax Administration

     The Secretary may compromise a liability on the ground of

effective tax administration when:      (1) Collection of the full

liability will create economic hardship; or (2) exceptional
                              - 10 -

circumstances exist such that collection of the full liability

would undermine public confidence that the tax laws are being

fairly and equitably administered.     Speltz v. Commissioner, 124

T.C. 165, 172-174 (2005); sec. 301.7122-1(b)(3), Proced. & Admin.

Regs.

     1.   Economic Hardship

     Factors supporting (but not conclusive of) a determination

that collection would cause economic hardship include, but are

not limited to:

          (A) Taxpayer is incapable of earning a living
     because of a long term illness, medical condition, or
     disability, and it is reasonably foreseeable that
     taxpayer’s financial resources will be exhausted
     providing for care and support during the course of the
     condition;

          (B) Although taxpayer has certain monthly income,
     that income is exhausted each month in providing for
     the care of dependents with no other means of support;
     and

          (C) Although taxpayer has certain assets, the
     taxpayer is unable to borrow against the equity in
     those assets and liquidation of those assets to pay
     outstanding tax liabilities would render the taxpayer
     unable to meet basic living expenses.

Sec. 301.7122-1(c)(3)(i), Proced. & Admin. Regs.

     Petitioner does not contend that he has a long-term illness,

medical condition, or disability.    Nor does he claim that

borrowing against the equity in his real property interests would

render him unable to meet basic living expenses.    Although

petitioner contributes to the support of his family, he has
                               - 11 -

neither argued nor demonstrated that his monthly income is

exhausted caring for them or that they have no other means of

support.   Accordingly, petitioner has not shown that collection

of the full liability would cause him economic hardship.

     2.    Compelling Public Policy or Equity Considerations

     Petitioner argues that his due process rights were violated

when respondent’s offer specialist asked him to provide a sworn

statement of his income from the paralegal business.     According

to petitioner, the offer specialist requested the statement only

after informing him that she would reject his OIC because of the

real property interests he owned.    Petitioner claims he asked the

offer specialist to make her request in writing, but she refused.

Petitioner contends that the offer specialist’s actions were

“arbitrary and capricious” and “denied * * * [him] due process”.

Although petitioner’s argument is vague, we interpret his

position to be that his OIC should have been accepted on the

basis of public policy or equity considerations.

     The Secretary may enter into a compromise to promote

effective tax administration where compelling public policy or

equity considerations identified by the taxpayer provide a

sufficient basis for compromising the liability.     Sec. 301.7122-

1(b)(3)(ii), Proced. & Admin. Regs.     A compromise will be

justified only where, because of exceptional circumstances,

collection of the full liability would undermine public
                                - 12 -

confidence that the tax laws are being administered in a fair and

equitable manner.    A taxpayer proposing a compromise on the basis

of effective tax administration will be expected to demonstrate

circumstances that justify a compromise even though a similarly

situated taxpayer may have paid his liability in full.     Id.

Examples of where a compromise is allowed for purposes of public

policy and equity include:     (1) A taxpayer who was hospitalized

regularly for a number of years and was unable to manage his

financial affairs incurs significant tax liabilities, penalties

and interest; and (2) a taxpayer learns at audit that he received

erroneous advice from the IRS and, as a result, is facing

additional taxes, penalties, and additions to tax.     Speltz v.

Commissioner, supra at 173; sec. 301.7122-1(c)(3)(C)(iv), Proced.

& Admin. Regs.

     Petitioner has identified no public policy or equity

considerations that would justify a compromise on the basis of

effective tax administration.     The Government may request

additional information from a taxpayer after an OIC is accepted

for processing.     Sec. 301.7122-1(d)(2), Proced. & Admin. Regs.

The taxpayer’s refusal to provide the requested information

within a reasonable time is grounds for returning the OIC.       Id.

Petitioner failed to mention the paralegal business in his OIC.

When the offer specialist learned of the existence of this

business, she was entitled to request additional information,
                               - 13 -

which she did in July 2003 and February 2004.   Petitioner’s

refusal to provide the requested information was grounds for

returning his OIC.   Accordingly, petitioner has not shown that

compromising his tax liabilities would promote effective tax

administration.

Applicable Law and Administrative Procedure

     Petitioner’s final argument is that respondent failed to

comply with section 6330(c).   This section provides that the

officer conducting the administrative hearing must verify that

the requirements of applicable law and administrative procedure

have been met.    For example, the hearing officer must verify that

the taxpayer was properly issued a notice of Federal tax lien,

which must include the amount of unpaid tax, the taxpayer’s right

to request an administrative hearing, the administrative appeals

available to the taxpayer, and the procedures relating to the

release of liens.    Sec. 6320(a)(1)-(3); see also Anderson v.

Commissioner, T.C. Memo. 2003-112.

     Petitioner’s sole contention with respect to section 6330(c)

is that the Internal Revenue Manual (IRM) prohibits the filing a

notice of Federal tax lien if the taxpayer’s unpaid balance of

assessment is under $5,000.    The total amount reflected on the

notice of Federal tax lien that respondent filed against

petitioner was $4,619.60.   Thus, petitioner argues, the

settlement officer erred in determining that petitioner’s “unpaid
                              - 14 -

balance of assessment was $5,000 or more” and thereby violated

section 6330(c).   We disagree.

     IRM sec. 5.12.2.8.2 (March 1, 2004)5 states that a notice of

Federal tax lien generally should not be filed if the taxpayer’s

aggregate unpaid balance of assessment is less than $5,000.   It

also states, however, that a notice “may be filed when, in the

judgment of the revenue officer, it is in the best interest of

the government to record the lien” and a group manager approves.

IRM sec. 5.12.2.8.2(1)(a).   Thus, there is no absolute

prohibition on filing a notice of Federal tax lien if the unpaid

balance of assessment is less than $5,000.

     Even if respondent did fail to comply with the provisions of

the IRM, those provisions govern only the internal affairs of the

Internal Revenue Service; they do not have the force and effect

of law.   Valen Manufacturing Co. v. United States, 90 F.3d 1190,

1194 (6th Cir. 1996); United States v. Horne, 714 F.2d 206, 207

(1st Cir. 1983); see also Miller v. Commissioner, 114 T.C. 184,

195 (2000) (“The authoritative sources of Federal tax law are the

statutes, regulations, and judicial decisions”), affd. sub nom.

Lovejoy v. Commissioner, 293 F.3d 1208 (10th Cir. 2002).   The

procedures in the IRM do not confer rights on taxpayers.   United


     5
        The notice of determination refers to IRM sec. 5.12.1.13
(Apr. 30, 2002), which was replaced by IRM sec. 5.12.2.8.1 and
5.12.2.8.2 (Mar. 1, 2004). For purposes of this opinion, there
is no substantive difference between the older and newer IRM
provisions.
                               - 15 -

States v. Horne, supra at 207; United States v. Mapp, 561 F.2d

685, 690 (7th Cir. 1977).   As the Court of Appeals for the

Eleventh Circuit has stated:   “The IRS operating procedures

contained in the IRM do not delineate substantive rights of

individuals but instead simply establish intra-agency operating

procedures.   As such, they are a species of rule that is not

judicially enforceable against the agency.”   First Alabama Bank,

N.A. v. United States, 981 F.2d 1226, 1230 (11th Cir. 1993).

Accordingly, petitioner’s argument fails.

     On the basis of our review of the record, we conclude that

respondent satisfied the requirements of section 6330(c) and did

not abuse his discretion in sustaining the notice of Federal tax

lien filed against petitioner.   Respondent’s determination

therefore is sustained.   In reaching our holding, we have

considered all arguments made, and, to the extent not mentioned,

we conclude that they are moot, irrelevant, or without merit.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
