                  T.C. Memo. 2008-257



                UNITED STATES TAX COURT



             DAVID CAVAZOS, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 28664-07L.             Filed November 17, 2008.


     P filed a Federal income tax return reporting tax
due for the year 2002, but did not fully pay the
liability. In 2005 P submitted to R an Offer-in-
Compromise (OIC) as to his 2002 liability, which R
rejected because P had not complied with all return-
filing requirements. R issued a notice of intent to
levy, and P requested a hearing under I.R.C. sec. 6330.
During the hearing P conceded that he was not current
with all his filing requirements. P also failed to
propose any collection alternatives, other than his
previously rejected OIC, or to provide R with requested
financial information. R’s appeals officer issued to P
a final notice of determination, in which she
determined that a levy was appropriate. P appealed
that determination to this Court. R moved for summary
judgment, and P opposed R’s motion.

     Held: R’s motion for summary judgment will be
granted. R’s appeals officer did not abuse her
discretion in sustaining the levy when (1) P failed to
submit requested financial information, (2) P proposed
                                  - 2 -

     no other collection alternatives, and (3) P was
     noncompliant with return-filing obligations.



     Frederick J. O’Laughlin, for petitioner.

        G. Chad Barton, for respondent.



                            MEMORANDUM OPINION


        GUSTAFSON, Judge:   This case is an appeal by petitioner

David Cavazos, pursuant to section 6330(d)(1),1 from the

determination by an appeals officer of the Internal Revenue

Service (IRS) to uphold the IRS’s proposed use of a levy to

collect Mr. Cavazos’s unpaid Federal income tax liability for

2002.     The case is before us on a motion for summary judgment

filed by the respondent under Rule 121.

                                Background

     There is no dispute as to the following facts:

     For the year 2002, Mr. Cavazos filed a Form 1040, U.S.

Individual Income Tax Return, on which he reported that he was

liable for $12,577 in tax; but he did not fully pay that self-

reported liability.2    On October 28, 2005, Mr. Cavazos submitted


     1
       Except as otherwise noted, all section references are to
the Internal Revenue Code (26 U.S.C.), and all Rule references
are to the Tax Court Rules of Practice and Procedure.
     2
       Mr. Cavazos did remit $2,000 with his return. However,
Mr. Cavazos’s failure to pay the tax liability in full resulted
                                                   (continued...)
                                - 3 -

to the IRS an Offer-in-Compromise (OIC) proposing to compromise

his income tax liability for 2002.      However, the IRS rejected

that offer no later than January 23, 2007,3 because of

Mr. Cavazos’s noncompliance with return-filing requirements.

     On February 14, 2007, the IRS sent to Mr. Cavazos, pursuant

to section 6330(a), a Notice of Intent to Levy and Notice of Your

Right to a Hearing regarding unpaid taxes for 2002.      Pursuant to

section 6330(b)(1), Mr. Cavazos timely requested a hearing by

sending to the IRS, on March 10, 2007, a Form 12153, Request for

a Collection Due Process [CDP] or Equivalent Hearing.      In his

request for a hearing, Mr. Cavazos stated that a levy would cause

him extreme hardship and that he had already submitted an OIC

regarding the 2002 liability.

     On June 13, 2007, an IRS Appeals resolution specialist sent

Mr. Cavazos a letter enclosing a blank Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed


     2
      (...continued)
in penalties and interest being added to his account. At the
time the IRS issued the Notice of Intent to Levy and Notice of
Your Right to a Hearing, Mr. Cavazos’s outstanding liability for
2002 was $16,537.32.
     3
      There is no dispute that the IRS rejected the October 2005
OIC, but the record bears some discrepancy about the date of that
rejection. A transcript shows rejection on January 23, 2006;
notes from the case activity log of the hearing officer show that
the OIC was “returned 01/23/07”; and the attachment to the notice
of determination states that the OIC was “returned 11/20/2006”.
(Emphasis added.) However, the discrepancy is immaterial for
present purposes, since the relevant fact is that the OIC was no
longer pending at the time of the CDP hearing.
                              - 4 -

Individuals, and requesting that the Form 433-A and all

supporting documents be submitted to the IRS by June 28, 2007, to

describe Mr. Cavazos’s financial situation.4   Mr. Cavazos did not

complete and submit the Form 433-A by that deadline.   On June 28,

2007, an IRS settlement officer sent Mr. Cavazos a letter

acknowledging the receipt of Mr. Cavazos’s request for a CDP

hearing and advising Mr. Cavazos that--

     For me [the settlement officer] to consider alternative
     collection methods such as an installment agreement or offer
     in compromise, you must provide any items listed below. In
     addition, you must have filed all federal tax returns
     required to be filed.[5]

The required items that were then listed in the June 28 letter

included a “completed Collection Information Statement

(Form 433-A for individuals and/or Form 433-B for businesses)”.



     4
      The request was consistent with agency procedure: In a
section 6330 hearing, “Taxpayers will be expected to provide all
relevant information requested by Appeals, including financial
statements, for its consideration of the facts and issues
involved in the hearing.” Sec. 301.6330-1(e)(1), Proced. &
Admin. Regs. Furthermore, an appeals officer may not consider a
collection alternative unless the taxpayer has provided adequate
financial information, such as a current Form 433-A. See Rev.
Proc. 2003-71, sec. 4.03, 2003-2 C.B. 517, 518; see also Internal
Revenue Manual (IRM), pt. 5.14.1.5 (July 12, 2005).
     5
      See sec. 301.6330-1(d)(2), Q&A-D8, Proced. & Admin. Regs.
(“the IRS does not consider offers in compromise from taxpayers
who have not filed required returns or have not made certain
required deposits of tax”); see also IRM, pts. 5.8.3.4.1,
5.19.1.6.2(3) (Sept. 1, 2005). Likewise, a taxpayer must be in
compliance with all filing and paying requirements before an
installment agreement can be considered. See Giamelli v.
Commissioner, 129 T.C. 107, 111-112 (2007); IRM, pts.
5.14.1.2(9)(e), 5.14.1.5.1, 5.14.1.3(4)(d) (July 12, 2005).
                                 - 5 -

     On July 12, 2007, Mr. Cavazos requested that his collection

review (initially assigned to the Memphis Campus Appeals Office)

be transferred to a local Appeals Office for a face-to-face CDP

hearing, so the IRS transferred the case to the Oklahoma City

Appeals Office.    On August 23, 2007, the IRS settlement officer

sent Mr. Cavazos a letter acknowledging the receipt by the

Oklahoma City Appeals Office of Mr. Cavazos’s request for a CDP

hearing.   In that letter the IRS scheduled Mr. Cavazos’s hearing

and, for a third time, requested that Mr. Cavazos provide

financial information and submit his past-due returns:

     For me [the settlement officer] to consider alternative
     collection methods such as an installment agreement or offer
     in compromise, you must provide any items listed below. In
     addition, you must have filed all federal tax returns
     required to be filed.

           •      A completed and verifiable Collection Information
                  Statement (Form 433-A for individuals and/or Form
                  433-B for business-D&C Masonry, LLC) * * *

           •      Proof of estimated tax payments for the
                  period: 12/2007 * * *

           •      Current taxes will continue to be a recurring
                  problem as long as you fail to make required
                  estimate[d] payments. In the 2006 year you did
                  pay $6,140.00. There is still however no return
                  yet filed for 2006. * * *

     Appeals cannot assist you until you become compliant.
     Therefore, prior to the CDP hearing, I will require:

           •      You to provide proof that you are current with all
                  filing and paying. * * *

     The IRS’s settlement officer conducted a telephone hearing

with Mr. Cavazos’s counsel on November 1, 2007.    During the
                               - 6 -

hearing Mr. Cavazos’s counsel acknowledged that Mr. Cavazos was

not current with his return filing requirements.   Neither before

the hearing nor at the hearing did Mr. Cavazos or his counsel

provide the settlement officer with the Form 433-A or other

documentation requested in the IRS’s letters of June 13, June 28,

and August 23, 2007.

     Furthermore, neither Mr. Cavazos nor his counsel proposed

any collection alternatives at the hearing.   As noted above, more

than two years earlier--on October 28, 2005--Mr. Cavazos had

submitted an OIC to the IRS relating to his income tax liability

for 2002, but the IRS had rejected that OIC no later than January

23, 2007 (i.e., before the IRS issued its notice of intent to

levy and before Mr. Cavazos submitted his request for a CDP

hearing).   That particular collection alternative proposal had

therefore been disposed of before the commencement of

Mr. Cavazos’s collection proceeding; and at the time of his

hearing, Mr. Cavazos therefore had no outstanding requests for

any collection alternative for the appeals officer to consider.

     On November 5, 2007, the Appeals Office issued to

Mr. Cavazos a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330, sustaining the levy

action as the least intrusive collection alternative.    The notice

reflected that the Appeals Office had “obtain[ed] verification

* * * that the requirements of any applicable law or
                              - 7 -

administrative procedure ha[d] been met” (as required by

section 6330(c)(1)),6 and reported that the Appeals Office had

determined that the levy was appropriate.   The attachment to the

Notice of Determination stated, inter alia:

     IRC § 6330 Collection Due Process Hearing
     * * * Your POA [i.e., your representative with a Power of
     Attorney] * * * requested the CDP hearing to be rescheduled
     for 11/01/2007. The request was granted[;] however you were
     to provide the requested documents as set forth in the CDP
     hearing letter sent to you and your POA dated 08/23/2007.
     Nothing has been received.

     The CDP hearing was held 11/01/2007 with your POA via
     telephone. He indicates you are not current with filing
     required tax reports (12/2006 Form 1040) and you also have
     not provided the necessary documents to make a viable
     collection alternative. Thus, the proposed levy action is
     deemed no more intrusive than necessary.

     Collection Alternatives
     There were no collection alternatives proposed during the
     CDP hearing process.

     Other Issues Raised
     No relevant issues were raised during the CDP hearing
     process. * * *

     On December 11, 2007, Mr. Cavazos petitioned the Tax Court,

seeking review, pursuant to section 6330(d)(1), of the IRS’s



     6
      Mr. Cavazos has not disputed that the “verification”
required by section 6330(c)(1) was obtained, nor that the
preconditions for a levy, see sec. 6331(a), (d), had been
satisfied. An IRS transcript in the hearing record shows that
the IRS had assessed Mr. Cavazos’s self-reported liability
(pursuant to sec. 6201(a)(1), and within the time prescribed by
sec. 6501(a)), and that the IRS had made notice and demand
(pursuant to sec. 6303) that Mr. Cavazos pay the liability. The
Notice of Intent to Levy and Notice of Your Right to a Hearing
that the IRS issued to Mr. Cavazos on February 14, 2007,
fulfilled the requirements of sections 6330(a) and 6331(d).
                               - 8 -

determination.   At the time he filed his petition, Mr. Cavazos

resided in Oklahoma.   In his petition, Mr. Cavazos assigns as

error in the determination the findings “that: (A) levy is

appropriate; and (B) that the proposed levy is no more intrusive

than necessary.”

     On August 13, 2008, the IRS filed a motion for summary

judgment, contending that the determination did not constitute an

abuse of discretion by the IRS.   On October 2, 2008, Mr. Cavazos

filed his response.

                            Discussion

     Where the pertinent facts are not in dispute, a party may

move for summary judgment to expedite the litigation and avoid an

unnecessary (and potentially expensive) trial.   Fla. Peach Corp.

v. Commissioner, 90 T.C. 678, 681 (1988).   Summary judgment may

be granted where there is no genuine issue as to any material

fact and a decision may be rendered as a matter of law.   Rule

121(a) and (b); see Sundstrand Corp. v. Commissioner, 98 T.C.

518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994); Zaentz v.

Commissioner, 90 T.C. 753, 754 (1988).   The party moving for

summary judgment (here, the IRS) bears the burden of showing that

there is no genuine issue as to any material fact, and factual

inferences will be drawn in the manner most favorable to the

party opposing summary judgment (here, Mr. Cavazos).   Dahlstrom

v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.
                                     - 9 -

Commissioner, 79 T.C. 340, 344 (1982).         The instant case can be

resolved on the basis of the undisputed facts.

       If a taxpayer fails to pay any Federal income tax liability

within 10 days of notice and demand, the Secretary is authorized

to collect the tax by levy on the person’s property.         Sec.

6331(a).       However, Congress has added certain provisions to the

Code (in chapter 64, subchapter D, part I) as “Due Process for

Collections”, and those provisions must be complied with before

the IRS can proceed with a levy:

       Before a levy, the taxpayer must be notified of the right to

an administrative hearing before the Appeals Office of the IRS.

Sec. 6330(a) and (b)(1).         At that hearing, the taxpayer may

generally raise relevant issues relating to the unpaid tax or the

proposed levy, including offers of collection alternatives, which

may include, among other things, an installment agreement or an

OIC.       Sec. 6330(c)(2)(A).    The appeals officer must then make a

determination whether the proposed levy action may proceed.          The

appeals officer is required to take into consideration:

(1) “verification from the Secretary that the requirements of any

applicable law and administrative procedure have been met” (see

sec. 6330(c)(3)(A), citing sec. 6330(c)(1)7); (2) relevant issues


       7
      The legislative history of this provision explains that
“the IRS is required to verify that all statutory, regulatory,
and administrative requirements for the proposed collection
action have been met.” H. Conf. Rept. 105-599, at 264 (1998),
                                                   (continued...)
                             - 10 -

raised by the taxpayer (see sec. 6330(c)(3)(B), citing

sec. 6330(c)(2)8); and (3) whether the proposed levy

appropriately balances the need for efficient collection of taxes

with a taxpayer’s concerns regarding the intrusiveness of the

proposed levy action (see sec. 6330(c)(3)(C)).   If the Appeals

Office then issues a notice of determination upholding the


     7
      (...continued)
1998-3 C.B. 747, 1018 (emphasis added); see Green-Thapedi v.
Commissioner, 126 T.C. 1, 6 (2006). In the case of a levy to
collect self-reported income tax liability, the basic
requirements (see sec. 6331(a), (d)) for which the appeals
officer must obtain verification are: the IRS’s timely assessment
of the liability (secs. 6201(a)(1), 6501(a)); the giving to the
taxpayer of notice and demand for payment of the liability
(sec. 6303); and the giving to the taxpayer of notice of
intention to levy and of the taxpayer’s right to a hearing (secs.
6330(a) and 6331(d)). See Cox v. Commissioner, 126 T.C. 237, 255
(2006) (holding the verification requirement to be met “where the
Appeals officer had secured formal or informal transcripts
showing both that the taxes were properly assessed and that the
taxpayer had been notified of those assessments through issuance
of notices of balance due”), revd. on other grounds, 514 F.3d
1119 (10th Cir. 2008). As noted supra note 6, those requirements
were verified in this instance.
     8
      Under section 6330(c)(2), a taxpayer may raise collection
issues under subsection (c)(2)(A) and may, under certain
circumstances, challenge the underlying tax liability under
subsection (c)(2)(B). Where the underlying tax liability is
properly at issue in a section 6330 hearing, the Court will
review the matter de novo. Davis v. Commissioner, 115 T.C. 35,
39 (2000). However, where the underlying liability is not at
issue, we review the appeals officer’s determinations regarding
the collection action for an abuse of discretion. Goza v.
Commissioner, 114 T.C. 176 (2000). Mr. Cavazos has not
challenged his underlying liability. Accordingly, we review the
IRS’s determination for abuse of discretion; that is, whether the
determinations were arbitrary, capricious, or without sound basis
in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320
(2005), affd. 469 F.3d 27 (1st Cir. 2006); Sego v. Commissioner,
114 T.C. 604, 610 (2000).
                                - 11 -

proposed levy, the taxpayer may appeal the determination to this

Court within 30 days (see sec. 6330(d)(1)), as Mr. Cavazos has

done.

     In his petition Mr. Cavazos disputes the determination that

a levy is an appropriate action to collect his income tax,

penalties, and interest owing for 2002; but his position is

without merit.     The appeals officer acted reasonably in rejecting

collection alternatives and determining instead that the levy was

appropriate, for the reasons recounted in the attachment to the

determination and addressed here:

     First, the appeals officer’s determination was reasonable in

view of Mr. Cavazos’s repeated failure to provide requested

financial information, especially the Form 433-A.    It is not an

abuse of discretion for an appeals officer to reject collection

alternatives and sustain the proposed collection action on the

basis of the taxpayer’s failure to submit requested financial

information.     Prater v. Commissioner, T.C. Memo. 2007-241;

Chandler v. Commissioner, T.C. Memo. 2005-99; Roman v.

Commissioner, T.C. Memo. 2004-20.     In doing so, the appeals

officer followed the requirements of the regulations and

Rev. Proc. 2003-71, 2003-2 C.B. 517.     See supra note 4.

        Second, the appeals officer’s determination was reasonable

in view of Mr. Cavazos’s failure to raise during the collection

hearing any relevant issues or appropriate defenses pertaining to
                               - 12 -

the proposed collection action, and his failure to offer any

collection alternatives for the appeals officer to consider.9      It

is not an abuse of discretion for an appeals officer to sustain a

levy and not consider any collection alternatives when the

taxpayer has proposed none.    Kendricks v. Commissioner, 124 T.C.

69, 79 (2005).

     Third, the appeals officer’s determination was reasonable in

view of Mr. Cavazos’s failure to file his income tax return for

2006.    Mr. Cavazos had been advised that his 2006 return was

overdue, yet he never fulfilled this obligation.    It is not an

abuse of discretion for an appeals officer to reject an OIC on

the ground that the taxpayer has a history of noncompliance with

the tax laws or is noncompliant with current tax obligations.

Giamelli v. Commissioner, 129 T.C. 107, 111-112 (2007).    In doing

so, the appeals officer followed the requirements of the

regulations.    See supra note 5.

     In response to the IRS’s motion, Mr. Cavazos answers that

the appeals officer’s determination constitutes an abuse of

discretion because, while “[r]espondent has requested that


     9
      As stated supra note 3, the record shows that the only OIC
Mr. Cavazos submitted (in October 2005) had been rejected before
the hearing commenced. At one point during the hearing,
Mr. Cavazos’s counsel appears to have suggested that he never
received from the IRS a response to that OIC (perhaps suggesting
that the October 2005 OIC might still have been pending in 2007),
but Mr. Cavazos did not raise this contention in his response to
the motion for summary judgment, and we consider that, if he ever
did maintain this position, he has abandoned it.
                               - 13 -

Petitioner be current with all filing and paying requirement

* * * Petitioner was not provided with notice of what Respondent

required for compliance”.    In other words, though Appeals did

advise Mr. Cavazos that, in order for Appeals to consider any

collection alternatives, Mr. Cavazos needed to be “current with

all filing and paying requirements”, there was nonetheless an

abuse of discretion (Mr. Cavazos contends) because the appeals

officer did not advise Mr. Cavazos on precisely how to become

compliant.    Specifically, Mr. Cavazos contends that the IRS’s

request “is arbitrary when Respondent’s requirements are not

detailed so as to give Petitioner notice of what is required by

Petitioner to become compliant.”

     We decline to hold--as petitioner’s argument would require--

that a section 6330 hearing officer is obliged to remind every

taxpayer that each year on April 15 an income tax return is due.

“As a general rule, taxpayers are charged with knowledge of the

law.”   Niedringhaus v. Commissioner, 99 T.C. 202, 222 (1992).    At

issue here is not an esoteric requirement but the annual filing

of Form 1040.    A taxpayer need not be an expert in tax law to

know that tax returns must be filed and that taxes must be paid

when they are due.    United States v. Boyle, 469 U.S. 241, 251

(1985).   Consequently, it was not the appeals officer’s

responsibility to remind Mr. Cavazos of the most basic tax

obligation.
                               - 14 -

     In fact, however, Mr. Cavazos was given such explicit

reminders:   In the letters of both June 13 and August 23, 2007,

the IRS expressly warned Mr. Cavazos that before Appeals could

consider any collection alternatives, Mr. Cavazos needed to file

all required Federal tax returns.    Furthermore, in the letter of

August 23, 2007, the IRS advised Mr. Cavazos that the agency’s

records showed (1) that there was “no return yet filed for 2006,”

(2) “there is also no ES tax paid for 2007,” and (3) that Mr.

Cavazos still “owe[s] for other non-CDP tax periods” (i.e.,

periods other than 2002).    The IRS further advised Mr. Cavazos

that before a collection alternative could be considered, he

would have to “provide proof that [he was] current with all

filing and paying” requirements delineated above.

     It cannot be seriously maintained that these instructions

were not “detailed so as to give Petitioner notice of what is

required by Petitioner to become compliant”, as petitioner

suggests.    Rather, the IRS’s August 23, 2007, letter clearly

listed the specifics of Mr. Cavazos’s noncompliance.    The IRS’s

request that Mr. Cavazos provide proof of compliance in these

areas before the agency would consider collection alternatives

was hardly arbitrary.

     We conclude that there is no genuine issue of material fact

requiring a trial in this case, and we hold that respondent is
                             - 15 -

entitled to the entry of a decision sustaining the determination

and proposed levy as a matter of law.

     To reflect the foregoing,



                                      An appropriate order and

                                 decision will be entered.
