                               T.C. Memo. 2019-43



                         UNITED STATES TAX COURT



           COASTAL LUXURY MANAGEMENT INC., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 24206-16L.                        Filed April 29, 2019.



      Timothy S. Vick and Jeannette K. Witten, for petitioner.

      Jeffery D. Rice and Janice B. Geier, for respondent.



                           MEMORANDUM OPINION


      VASQUEZ, 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
       All section references are to the Internal Revenue Code 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. The

issue for decision is whether respondent’s settlement officer (SO) abused her

discretion in rejecting petitioner’s proposed installment agreement and sustaining

the proposed collection action.

                                     Background

      Some of the facts have been stipulated and are so found. We incorporate

the stipulation of facts and the attached exhibits by this reference. Petitioner is a

hospitality management company that operates food and wine festivals in

California. At the time the petition was timely filed, petitioner’s principal place of

business was California. Petitioner’s chief executive officer was David Bernahl at

all relevant times.

      This case relates to petitioner’s outstanding tax liabilities from Forms 940,

Employer’s Annual Federal Unemployment (FUTA) Tax Return, for tax years

2011 and 2012. Also at issue are petitioner’s outstanding employment tax

liabilities from Forms 941, Employer’s Quarterly Federal Tax Return, for the

following quarters:
                                         -3-

 [*3] Mar. 31               June 30               Sept. 30              Dec. 31

         ---                   ---                  2012                  2012

        2013                  2013                  2013                  2013

        2014                  2014                  2014                  2014

      On October 27, 2015, respondent mailed petitioner a Letter 1058, Final

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

Form 940 and Form 941 liabilities. According to the Letter 1058, petitioner’s

liabilities totaled $1,403,904.33.

      Petitioner timely submitted a Form 12153, Request for a Collection Due

Process or Equivalent Hearing. Therein petitioner’s counsel checked the box for

an installment agreement and did not dispute the underlying liabilities or request

any other relief. Petitioner’s counsel also stated on the form that petitioner was

behind on its tax obligations because an employee had embezzled funds.

      Petitioner’s case was assigned to SO Deborah J. Cartwright. In a letter to

petitioner dated January 6, 2016, SO Cartwright scheduled a CDP hearing for

March 10, 2016. SO Cartwright’s letter advised petitioner that to qualify for a

collection alternative it had to provide to her, at least 14 days before the hearing,

the following: (1) a completed Form 433-B, Collection Information Statement for

Businesses, (2) petitioner’s Form 940 for 2013, and (3) evidence that it had made
                                        -4-

[*4] the required Federal employment tax deposits for the current taxable period.

Petitioner did not provide SO Cartwright any of the requested documents before

the scheduled hearing.

      On March 10, 2016, SO Cartwright conducted a telephone hearing with

petitioner’s counsel. SO Cartwright advised petitioner’s counsel that petitioner

needed to provide the SO with its missing tax returns,2 Form 433-B, and

installment agreement proposal. SO Cartwright set a deadline of April 11, 2016,

for providing the documents. Later that day petitioner’s counsel faxed SO

Cartwright a completed Form 433-B and copies of the requested tax returns. Over

the next few weeks, SO Cartwright and petitioner’s counsel had numerous

exchanges regarding additional missing tax returns. Petitioner’s counsel provided

SO Cartwright copies of the requested returns.

      On June 2, 2016, SO Cartwright made a preliminary determination that

petitioner was in filing compliance. However, petitioner had yet to provide her

with a specific installment agreement proposal. In a letter to petitioner dated June

2, 2016, SO Cartwright requested a proposal with “a specific dollar amount”. On




      2
        SO Cartwright’s prehearing review of respondent’s records indicated that
petitioner had failed to file several returns.
                                         -5-

[*5] June 20, 2016, SO Cartwright received a fax from petitioner’s counsel

proposing a monthly payment of $500.

      In September 2016 SO Cartwright reviewed petitioner’s Federal tax deposit

compliance. According to respondent’s records, petitioner had not made any

Federal tax deposits for its employment tax liability for the period ending

September 30, 2016 (9/30/2016 deposits). In a letter to petitioner dated September

12, 2016, SO Cartwright requested proof that petitioner either had made the

9/30/2016 deposits or was not required to make them. SO Cartwright set a

deadline of September 26, 2016. A week later, SO Cartwright received a fax from

petitioner’s counsel requesting a status update on the proposed payment plan. The

fax did not mention the 9/30/2016 deposits.

      On September 20, 2016, SO Cartwright faxed petitioner’s counsel another

letter requesting information about the 9/30/2016 deposits. SO Cartwright stated

in her letter that petitioner had been assessed a Federal tax deposit penalty for the

previous quarter ending June 30, 2016, and owed a large balance for that quarter.

She reminded petitioner’s counsel of the September 26, 2016, deadline and stated

that she would issue a closing letter if she did not receive information by that date.

The following day petitioner’s counsel called SO Cartwright and requested a one-
                                          -6-

[*6] week extension to allow time for petitioner to catch up on the 9/30/2016

deposits.3 SO Cartwright granted the extension.

      SO Cartwright received no further word from petitioner or its counsel. On

October 4, 2016, the SO reviewed respondent’s computer records and saw that no

deposits had been made. SO Cartwright verified that the assessments of the

liabilities at issue were properly made and that all other requirements of applicable

law and administrative procedure had been met. She closed the case and issued to

petitioner a notice of determination dated October 12, 2016, sustaining the notice

of intent to levy.

      Petitioner timely petitioned this Court with respect to the notice of

determination. After the case was tried in San Francisco, California, the Court

ordered the parties to file simultaneous briefs. Respondent timely filed a

simultaneous opening brief. Petitioner, which is represented by counsel, failed to

file a brief as directed by the Court.4


      3
        Petitioner’s counsel stated that petitioner was attempting to sell an asset,
the proceeds of which would cover its current deposit obligations and a portion of
its outstanding tax liabilities.
      4
        When a party fails to file a brief, such a failure has been held by this Court
to justify the dismissal of all issues as to which the nonfiling party has the burden
of proof. See Rule 123; Stringer v. Commissioner, 84 T.C. 693 (1985), aff’d
without published opinion, 789 F.2d 917 (4th Cir. 1986). Nevertheless, we will
                                                                          (continued...)
                                         -7-

[*7]                                  Discussion

I.     Standard and Scope of Review

       Section 6330(d)(1) does not prescribe the standard of review that this Court

should apply in reviewing an administrative determination in a CDP case. The

general parameters for such review are marked out by our precedents. Where the

validity of the underlying tax liability is at issue, the Court reviews the

Commissioner’s determination de novo. Goza v. Commissioner, 114 T.C. 176,

181-182 (2000). Where, as here, the underlying tax liability is not at issue, the

Court reviews the Commissioner’s determination for abuse of discretion. See id.

at 182. 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).

       The Court of Appeals for the Ninth Circuit, to which an appeal in this case

would lie absent a stipulation to the contrary, has limited the review of the

administrative determinations in CDP hearings to the administrative record. See

Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009) (“[O]ur review is

confined to the record at the time the Commissioner’s decision was rendered.”),


       4
       (...continued)
exercise our discretion not to do so here and instead proceed on the merits.
                                           -8-

[*8] aff’g in part as to this issue T.C. Memo. 2006-166 and aff’g in part, vacating

in part decisions in related cases. Accordingly, we will not look beyond the

administrative record in deciding whether SO Cartwright abused her discretion in

sustaining the notice of intent to levy.

II.   Analysis

      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,

(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). Our review of the record

reveals that SO Cartwright properly discharged all of her responsibilities under

section 6330(c).

      In its hearing request petitioner expressed interest in a collection alternative,

specifically, an installment agreement. Section 6159 authorizes the Commissioner

to enter into an installment agreement if he determines that it will facilitate full or

partial collection of a taxpayer’s unpaid liability. See Thompson v.

Commissioner, 140 T.C. 173, 179 (2013). Subject to exceptions not relevant here,
                                        -9-

[*9] the decision to accept or reject an installment agreement lies within the

Commissioner’s discretion. See sec. 301.6159-1(a), (c)(1)(i), Proced. & Admin.

Regs.; see also Rebuck v. Commissioner, T.C. Memo. 2016-3; Kuretski v.

Commissioner, T.C. Memo. 2012-262, aff’d, 755 F.3d 929 (D.C. Cir. 2014). In

reviewing the SO’s determination we do not independently evaluate what would

be an acceptable collection alternative. Thompson v. Commissioner, 140 T.C. at

179; Murphy v. Commissioner, 125 T.C. at 320; Lipson v. Commissioner, T.C.

Memo. 2012-252. Rather, our review is limited to determining whether SO

Cartwright abused her discretion, that is, whether her decision to reject petitioner’s

proposal was arbitrary, capricious, or without sound basis in fact or law. See

Thompson v. Commissioner, 140 T.C. at 179; Murphy v. Commissioner, 125 T.C.

at 320.

      In rejecting petitioner’s proposed installment agreement, SO Cartwright

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

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

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,
                                        - 10 -

[*10] 257 (2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir. 2008).

Accordingly, SO Cartwright was well within her discretion to reject petitioner’s

request for an installment agreement for its failure to remain in compliance with

current tax obligations. See Giamelli v. Commissioner, 129 T.C. 107, 111-112

(2007); see also Christopher Cross, Inc. v. United States, 461 F.3d 610, 613 (5th

Cir. 2006) (finding no abuse of discretion when SO rejected offer in compromise

because taxpayer was not in compliance with its tax payment obligations); Reed v.

Commissioner, 141 T.C. at 257 (same).

      In its pretrial memorandum petitioner argues that SO Cartwright contributed

to petitioner’s inability to stay current on its employment tax deposit obligations

by refusing to consider petitioner’s “financial quagmire”. See Alessio Azzari, Inc.

v. Commissioner, 136 T.C. 178, 193-194 (2011) (holding that SO’s rejection of

taxpayer’s installment agreement request for failure to make Federal tax deposits

was an abuse of discretion because SO’s misinterpretation of law interfered with

taxpayer’s ability to make deposits). Having failed to raise this argument on brief,

petitioner has abandoned it. See Thiessen v. Commissioner, 146 T.C. 100, 106
                                      - 11 -

[*11] (2016) (“[I]ssues and arguments not advanced on brief are considered to be

abandoned.”).5

      Finding no abuse of discretion in any respect, we will sustain the proposed

collection action.

      In reaching our holding, we have considered all arguments made, and to the

extent not mentioned, we consider them irrelevant, moot, or without merit.

      To reflect the foregoing,


                                               Decision will be entered for

                                      respondent.




      5
        In any event the administrative record establishes that SO Cartwright
considered petitioner’s financial circumstances and granted petitioner’s counsel’s
request for a one-week extension of the deadline for submitting information about
the 9/30/2016 deposits. Petitioner did not make the deposits or contact SO
Cartwright by the extended deadline. Under these circumstances SO Cartwright
acted well within her discretion to close the case and sustain the proposed
collection action.
