                               T.C. Memo. 2018-198



                         UNITED STATES TAX COURT



             THE COMMUNITY LAW FIRM, INC., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 18478-17L.                        Filed December 3, 2018.



      Atyria S. Clark, for petitioner.

      Cassidy B. Collins and Katherine Holmes Ankeny, for respondent.



                           MEMORANDUM OPINION


      LAUBER, 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 statutory 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. We round all monetary amounts to the nearest dollar.
                                         -2-

[*2] Revenue Service (IRS or respondent) to uphold a notice of intent to levy. The

IRS issued the levy notice to assist in collecting petitioner’s unpaid employment

tax liabilities. Respondent has moved for summary judgment under Rule 121,

contending that there are no disputed issues of material fact and that his

determination to sustain the proposed collection action was proper as a matter of

law. We agree and accordingly will grant the motion.

                                    Background

      The following facts are based on the parties’ pleadings and motion papers,

including the attached declarations and exhibits. See Rule 121(b). Petitioner had

its principal place of business in California when it petitioned this Court.

      Petitioner filed Forms 941, Employer’s Quarterly Federal Tax Return, re-

porting payroll taxes due for the quarters ending June 30, September 30, and De-

cember 31, 2014. But it did not pay the taxes shown as due. As of March 2015,

petitioner’s aggregate outstanding liability for those three quarters was about

$2,000. On March 6, 2017, the IRS served a levy notice on petitioner in an effort

to collect the unpaid liabilities, and petitioner timely requested a CDP hearing.

      In its hearing request petitioner checked the boxes “Installment Agreement”

and “Offer in Compromise.” Petitioner explained that it disputed the levy action

“because there are collection alternatives available,” including an installment
                                         -3-

[*3] agreement or an offer-in-compromise (OIC). Petitioner requested that a

previous installment agreement, on which it had defaulted, be reinstated.

Petitioner did not indicate an intention to challenge its underlying liability for any

quarter in question.

      After receiving petitioner’s case a settlement officer (SO) from the IRS Ap-

peals Office confirmed that the liabilities in question had been properly assessed

and that all other requirements of applicable law and administrative procedure had

been met. The SO discovered that petitioner was not current in its Federal tax ob-

ligations, having failed to file employment tax returns for the five calendar

quarters subsequent to the quarters at issue.

      The SO scheduled a telephone CDP hearing for July 6, 2017. The SO in-

formed petitioner that, in order for her to consider a collection alternative, peti-

tioner must provide: (1) a completed Form 433-B, Collection Information State-

ment for Businesses, (2) signed copies of delinquent Forms 941 for all quarters

from March 31, 2015, to March 31, 2016, and (3) Form 656, Offer in Compro-

mise. Petitioner submitted none of these documents and did not otherwise

communicate with the SO before the hearing.

      Petitioner’s representative failed to call in for the CDP hearing on July 6,

2017. That same day the SO sent petitioner a second letter requesting the financial
                                       -4-

[*4] information she had requested previously. The SO extended to July 20 the

deadline for submitting that information.

      On July 18, 2018, petitioner sent the SO a fax requesting that the IRS

reinstate the installment agreement on which petitioner had defaulted. But it

provided no financial information to support that request and no evidence that it

had filed the delinquent employment tax returns. The SO concluded that she could

not consider reinstating the prior installment agreement because petitioner was not

in compliance with its ongoing tax obligations and because it had not provided the

necessary financial information. The SO accordingly closed the case and on

August 4, 2017, issued petitioner a notice of determination sustaining the pro-

posed levy. Petitioner timely sought review in this Court.

                                    Discussion

A.    Summary Judgment Standard

      The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). Under Rule 121(b), we may grant summary judgment when

there is no genuine dispute as to any material fact and a decision may be rendered

as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judg-
                                        -5-

[*5] ment, we construe factual materials and inferences drawn from them in the

light most favorable to the nonmoving party. Ibid. However, the nonmoving

party may not rest upon the mere allegations or denials in his pleadings but instead

must set forth specific facts showing that there is a genuine dispute for trial. Rule

121(d); see Sundstrand Corp., 98 T.C. at 520. We conclude that there are no

material facts in dispute and that this case is appropriate for summary adjudication.

B.    Standard of Review

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

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

But our case law tells us what standard to adopt. Where the validity of the tax-

payer’s underlying tax liability is properly at issue, we review the IRS’ determina-

tion de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Where (as

here) the taxpayer’s underlying liability is not before us, we review the IRS

decision for abuse of discretion only. See Thompson v. Commissioner, 140 T.C.

173, 178 (2013) (“A taxpayer is precluded from disputing the underlying liability

if it was not properly raised in the CDP hearing.”); sec. 301.6330-1(f)(2), Q&A-

F3, Proced. & Admin. Regs. 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); see
                                         -6-

[*6] also Keller v. Commissioner, 568 F.3d 710, 716 (9th Cir. 2009), aff’g in part

T.C. Memo. 2006-166 and aff’g in part, vacating in part decisions in related cases.

C.    Analysis

      In deciding whether the SO abused her discretion in sustaining the proposed

collection action we consider whether she: (1) properly verified that the require-

ments of applicable law or administrative procedure have been met, (2) considered

any relevant issues petitioner raised, and (3) considered “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 estab-

lishes that the SO properly discharged all of her responsibilities under section

6330(c).

      A taxpayer may raise at a CDP hearing relevant issues relating to the collec-

tion action and may make offers of collection alternatives. See sec. 6330(c)(2)(ii)

and (iii). This right, however, carries with it certain obligations on the taxpayer’s

part. As provided in the regulations, “[t]axpayers will be expected to provide all

relevant information requested by * * * [the Appeals officer], including financial

statements, for * * * [her] consideration of the facts and issues involved in the

hearing.” Sec. 301.6330-1(e)(1), Proced. & Admin. Regs.
                                          -7-

[*7] In its hearing request petitioner indicated its desire for a collection alterna-

tive, specifically, reinstatement of a prior installment agreement on which it had

defaulted.2 Section 6159 authorizes the Commissioner to enter into an installment

agreement if he determines that it will facilitate full or partial collection of a tax-

payer’s unpaid liability. See Thompson, 140 T.C. at 179. Subject to exceptions

not relevant here, 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, 140 T.C. at 179; Murphy, 125

T.C. at 320; Lipson v. Commissioner, T.C. Memo. 2012-252, 104 T.C.M. (CCH)

262, 264. Rather, our review is limited to determining whether the SO abused her

discretion, that is, whether her decision to reject the taxpayer’s proposal was




      2
       In its hearing request petitioner also indicated a desire for an OIC. But it
did not submit a completed Form 656 or otherwise pursue an OIC in its communi-
cations with the SO. “There is no abuse of discretion when Appeals fails to con-
sider an offer-in-compromise when a Form 656 was not submitted.” Gentile v.
Commissioner, T.C. Memo. 2013-175, 106 T.C.M. (CCH) 75, 77, aff’d, 592 F.
App’x 824 (11th Cir. 2014).
                                         -8-

[*8] arbitrary, capricious, or without sound basis in fact or law. Thompson, 140

T.C. at 179; Murphy, 125 T.C. at 320.

      Although petitioner indicated a desire for an installment agreement, it did

not provide the SO with any financial or other information that would justify

granting its request. Petitioner failed to participate in the CDP hearing and failed

to participate meaningfully in the overall administrative process. The SO gave

petitioner ample time to submit the required documentation and did not abuse her

discretion by closing this case when she did. We have consistently held that it is

not an abuse of discretion for an Appeals officer to reject collection alternatives

and sustain collection action where the taxpayer has failed, after being given

sufficient opportunities, to supply the required forms and information. See

Huntress v. Commissioner, T.C. Memo. 2009-161, 98 T.C.M. (CCH) 8, 10-11;

Prater v. Commissioner, T.C. Memo. 2007-241, 94 T.C.M. (CCH) 209, 210;

Roman v. Commissioner, T.C. Memo. 2004-20, 87 T.C.M. (CCH) 835, 838.

      In any event IRS records show that petitioner was not current in its tax fil-

ing obligations for at least five calendar quarters subsequent to the quarters at

issue when the SO made her determination.3 The SO could properly have rejected

      3
      Petitioner contends that a dispute of material fact exists as to whether it
was current in its filing obligations when the notice of determination was issued.
                                                                        (continued...)
                                        -9-

[*9] a collection alternative on this ground alone. See Cox v. Commissioner, 126

T.C. 237, 257-258 (2006), rev’d on other grounds, 514 F.3d 1119 (10th Cir.

2008); Hull v. Commissioner, T.C. Memo. 2015-86, 109 T.C.M. (CCH) 1438,

1441. Finding no abuse of discretion in any respect, we will grant summary

judgment for respondent and affirm the proposed collection action.

D.    Section 6673(a)(1) Penalty

      Section 6673(a)(1) authorizes this Court to impose a penalty not in excess

of $25,000 “[w]henever it appears to the Tax Court” that a taxpayer has instituted

or maintained a proceeding “primarily for delay” or has taken a position that is

“frivolous or groundless.” The purpose of section 6673 is to compel taxpayers to

conform their conduct to settled tax principles and to deter the waste of judicial

resources. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); Bruh-

wiler v. Commissioner, T.C. Memo. 2016-18, 111 T.C.M. (CCH) 1071, 1074.

      Petitioner was before this Court in a previous CDP case, Community Law

Firm, Inc. v. Commissioner, T.C. Dkt. No. 11498-14SL (Feb. 11, 2015) (bench


      3
       (...continued)
The IRS transcript of petitioner’s account shows no return posted for the calendar
quarters ending March 31, 2015, through March 31, 2016. Petitioner asserts that it
requested extensions of time to file those returns, but it cites no record evidence to
support that assertion. It has not shown a genuine dispute of a material fact. See
Rule 121(d); Sundstrand Corp., 98 T.C. at 520.
                                         - 10 -

[*10] opinion). In that case, as in this case, we sustained the SO’s determination

because petitioner had “failed to provide any financial information in support of a

collection alternative and otherwise failed to engage in the administrative review

process.” Ibid.4

      Petitioner is a law firm. We presume that its principals are conscious of

their Federal tax obligations and their responsibility to participate meaningfully in

administrative proceedings they have commenced. Petitioner’s track record in this

Court suggests that it may be invoking the CDP process “primarily for delay,” see

sec. 6673(a), wasting the resources both of the Government and this Court.

Petitioner is warned that it may face penalties if it continues to do this.

      To implement the foregoing,


                                                  An appropriate order and decision

                                        will be entered for respondent.




      4
        Respondent represents petitioner has initiated “another CDP hearing for
Form 941 liabilities for the quarter ended March 31, 2014,” the quarter imme-
diately preceding the three calendar quarters at issue here.
