T.C. Memo. 2018-113
UNITED STATES TAX COURT
DANIEL A. COLON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13933-16L. Filed July 19, 2018.
Nancy Ortmeyer Kuhn, for petitioner.
Trevor B. Maddison, for respondent.
MEMORANDUM OPINION
RUWE, Judge: Pursuant to section 6330(d)(1),1 petitioner seeks review of
the Internal Revenue Service Office of Appeals determination to proceed with
1 Unless otherwise indicated, 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] collection action by levy of unpaid trust fund recovery penalties (TFRPs) for
the tax periods ending September 30 and December 31, 2011. The only issue for
decision is whether respondent abused his discretion by sustaining the proposed
levy.
Background
The parties submitted this case fully stipulated pursuant to Rule 122.2 Some
of the facts have been stipulated and are so found. The stipulation of facts and the
attached exhibits are incorporated herein by this reference.3
Petitioner resided in the Commonwealth of Virginia when he filed his
petition.
During the periods at issue, petitioner was the chief executive officer of two
related entities: (1) Saint Catherine Physician Services (SCPS) and (2) Saint
Catherine Hospital (SCH). The Commissioner investigated petitioner for TFRP
liabilities for both entities.
2 We issued an order on October 17, 2017, granting the parties’ joint motion to submit the case without trial pursuant to Rule 122. 3 We will issue an order overruling respondent’s objection to the introduction of Exhibits 20-P through 41-P, which are attached to the stipulation of facts. -3-
[*3] SCPS-TFRP Investigation and Appeals Hearing
On June 27, 2012, the Commissioner issued petitioner a Letter 1153(DO)
notifying petitioner of his intent to assess TFRPs against petitioner for SCPS’
unpaid employment taxes for the tax periods ending September 30 and December
31, 2011. In the letter the Commissioner also informed petitioner of his right to
appeal or protest the proposed assessment with the Office of Appeals. On or about
August 23, 2012, petitioner timely appealed the proposed assessment.
Petitioner’s appeal was assigned to Appeals Officer (AO) Frederick
Anderson. Petitioner had a hearing to dispute the TFRPs. On or about March 25,
2015, AO Anderson notified petitioner that he intended to recommend that the
TFRPs be assessed. In response, petitioner’s counsel requested that the case be
forwarded to the area director so that petitioner could challenge the proposed
assessment. On May 14, 2015, the Office of Appeals notified petitioner that the
TFRPs would be assessed. On May 26, 2015, the Commissioner timely assessed
the TFRPs against petitioner for SCPS’ unpaid employment taxes for the tax
periods ending September 30 and December 31, 2011. AO Anderson secured
supervisory approval for the penalty assessment. -4-
[*4] SCH-TFRP Investigation and Appeals Hearing
The record is unclear as to whether petitioner received a Letter 1153 from
the Commissioner for TFRPs for SCH, but petitioner disputed the proposed
TFRPs for SCH’s unpaid employment tax liabilities for the tax periods ending
June 30, September 30, and December 31, 2011, and March 31, 2012. Petitioner’s
case was assigned to AO Beverly F. Levine. On October 29, 2015, the Office of
Appeals issued petitioner a letter (October 29, 2015, letter) stating:
We have considered your protest and the evidence and arguments in support of your position against the Trust Fund Recovery Penalty assessment.
We are returning your case file to the Area Director with the determination that you be relieved of liability for the tax periods indicated above.
The October 29, 2015, letter referred to the tax periods ending “6/2011 09/2011
12/2011 03/2012”. It did not refer to a specific entity, list the entity it applied to,
or have an employment identification number. But that letter listed Beverly F.
Levine, who was handling the SCH liability, as the person to contact.
CDP Hearing for SCPS
On November 10, 2015, the Commissioner issued petitioner a Letter 1058,
Final Notice of Intent to Levy and Notice of Your Right to a Hearing, for the
TFRPs related to SCPS. Petitioner timely filed a request for a collection due -5-
[*5] process (CDP) hearing, in which he claimed: “IRS Appeals relieved Mr.
Colon of liability for identical tax periods for the Trust Fund Recovery Penalty
Assessment in a related case and related taxpayer * * *. Therefore, he should be
relieved for [sic] liability for these Trust Fund Recovery Penalties as well.”
Petitioner checked the collection alternative box for “I Cannot Pay Balance”.
Petitioner’s CDP hearing was initially assigned to Settlement Officer (SO)
Robert Carbaugh. On January 21, 2016, SO Carbaugh sent petitioner a letter
acknowledging his request for a CDP hearing. In that letter SO Carbaugh notified
petitioner that in order for him to consider a collection alternative, petitioner
needed to submit a completed Form 433-A, Collection Information Statement for
Wage Earners and Self-Employed Individuals, and proof that estimated tax
payments were paid in full for the year to date.
On February 4, 2016, petitioner’s counsel called SO Carbaugh to contest the
levy, and she submitted via facsimile a copy of the October 29, 2015, letter. On
February 4, 2015, SO Carbaugh sent an email to AO Levine requesting certain
documents related to AO Levine’s TFRP hearing with petitioner to ascertain
whether petitioner was relieved of liability for the TFRPs.4 At some point
4 Although not explicitly stated in the email, it is evident that SO Carbaugh tried to determine whether petitioner was relieved of liability for the TFRPs (continued...) -6-
[*6] thereafter, a notice of determination was drafted stating that collection action
was not sustained because AO Levine relieved petitioner “of the Trust Fund
Recovery Penalty for the periods ending 06/30/2011, 09/30/2011, 12/31/2011, and
03/31/2012.” The notice was signed by Appeals Team Manager Rhonda Warren
but was never issued. In the case activity record for the CDP hearing, SO
Carbaugh stated that he informed petitioner’s counsel that “a determination will be
made to NOT sustain” the collection action.
On February 26, 2016, SO Khalilah A. Pollock sent an email to Richard W.
Bliss stating: “There has been a mistake in the processing and handling of * * *
[petitioner’s] case. Please DO NOT issue the notice of determination.”5
On or about April 7, 2016, petitioner’s CDP hearing was reassigned to SO
Maria Smith. SO Smith determined that the October 29, 2015, letter applied only
to petitioner’s TFRP liabilities for SCH and not the liabilities for SCPS; thus,
petitioner was not relieved of the TFRPs for SCPS. According to the case activity
record, petitioner’s counsel and SO Smith had a telephone conference call on May
4, 2016, during which SO Smith explained to petitioner’s counsel that the October
4 (...continued) related to SCPS because that was the liability the Commissioner sought to collect. 5 SO Pollock’s and Mr. Bliss’ relationship to petitioner’s CDP hearing is unclear. -7-
[*7] 29, 2015, letter did not relieve petitioner of his TFRP liabilities for SCPS.
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T.C. Memo. 2018-113
UNITED STATES TAX COURT
DANIEL A. COLON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13933-16L. Filed July 19, 2018.
Nancy Ortmeyer Kuhn, for petitioner.
Trevor B. Maddison, for respondent.
MEMORANDUM OPINION
RUWE, Judge: Pursuant to section 6330(d)(1),1 petitioner seeks review of
the Internal Revenue Service Office of Appeals determination to proceed with
1 Unless otherwise indicated, 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] collection action by levy of unpaid trust fund recovery penalties (TFRPs) for
the tax periods ending September 30 and December 31, 2011. The only issue for
decision is whether respondent abused his discretion by sustaining the proposed
levy.
Background
The parties submitted this case fully stipulated pursuant to Rule 122.2 Some
of the facts have been stipulated and are so found. The stipulation of facts and the
attached exhibits are incorporated herein by this reference.3
Petitioner resided in the Commonwealth of Virginia when he filed his
petition.
During the periods at issue, petitioner was the chief executive officer of two
related entities: (1) Saint Catherine Physician Services (SCPS) and (2) Saint
Catherine Hospital (SCH). The Commissioner investigated petitioner for TFRP
liabilities for both entities.
2 We issued an order on October 17, 2017, granting the parties’ joint motion to submit the case without trial pursuant to Rule 122. 3 We will issue an order overruling respondent’s objection to the introduction of Exhibits 20-P through 41-P, which are attached to the stipulation of facts. -3-
[*3] SCPS-TFRP Investigation and Appeals Hearing
On June 27, 2012, the Commissioner issued petitioner a Letter 1153(DO)
notifying petitioner of his intent to assess TFRPs against petitioner for SCPS’
unpaid employment taxes for the tax periods ending September 30 and December
31, 2011. In the letter the Commissioner also informed petitioner of his right to
appeal or protest the proposed assessment with the Office of Appeals. On or about
August 23, 2012, petitioner timely appealed the proposed assessment.
Petitioner’s appeal was assigned to Appeals Officer (AO) Frederick
Anderson. Petitioner had a hearing to dispute the TFRPs. On or about March 25,
2015, AO Anderson notified petitioner that he intended to recommend that the
TFRPs be assessed. In response, petitioner’s counsel requested that the case be
forwarded to the area director so that petitioner could challenge the proposed
assessment. On May 14, 2015, the Office of Appeals notified petitioner that the
TFRPs would be assessed. On May 26, 2015, the Commissioner timely assessed
the TFRPs against petitioner for SCPS’ unpaid employment taxes for the tax
periods ending September 30 and December 31, 2011. AO Anderson secured
supervisory approval for the penalty assessment. -4-
[*4] SCH-TFRP Investigation and Appeals Hearing
The record is unclear as to whether petitioner received a Letter 1153 from
the Commissioner for TFRPs for SCH, but petitioner disputed the proposed
TFRPs for SCH’s unpaid employment tax liabilities for the tax periods ending
June 30, September 30, and December 31, 2011, and March 31, 2012. Petitioner’s
case was assigned to AO Beverly F. Levine. On October 29, 2015, the Office of
Appeals issued petitioner a letter (October 29, 2015, letter) stating:
We have considered your protest and the evidence and arguments in support of your position against the Trust Fund Recovery Penalty assessment.
We are returning your case file to the Area Director with the determination that you be relieved of liability for the tax periods indicated above.
The October 29, 2015, letter referred to the tax periods ending “6/2011 09/2011
12/2011 03/2012”. It did not refer to a specific entity, list the entity it applied to,
or have an employment identification number. But that letter listed Beverly F.
Levine, who was handling the SCH liability, as the person to contact.
CDP Hearing for SCPS
On November 10, 2015, the Commissioner issued petitioner a Letter 1058,
Final Notice of Intent to Levy and Notice of Your Right to a Hearing, for the
TFRPs related to SCPS. Petitioner timely filed a request for a collection due -5-
[*5] process (CDP) hearing, in which he claimed: “IRS Appeals relieved Mr.
Colon of liability for identical tax periods for the Trust Fund Recovery Penalty
Assessment in a related case and related taxpayer * * *. Therefore, he should be
relieved for [sic] liability for these Trust Fund Recovery Penalties as well.”
Petitioner checked the collection alternative box for “I Cannot Pay Balance”.
Petitioner’s CDP hearing was initially assigned to Settlement Officer (SO)
Robert Carbaugh. On January 21, 2016, SO Carbaugh sent petitioner a letter
acknowledging his request for a CDP hearing. In that letter SO Carbaugh notified
petitioner that in order for him to consider a collection alternative, petitioner
needed to submit a completed Form 433-A, Collection Information Statement for
Wage Earners and Self-Employed Individuals, and proof that estimated tax
payments were paid in full for the year to date.
On February 4, 2016, petitioner’s counsel called SO Carbaugh to contest the
levy, and she submitted via facsimile a copy of the October 29, 2015, letter. On
February 4, 2015, SO Carbaugh sent an email to AO Levine requesting certain
documents related to AO Levine’s TFRP hearing with petitioner to ascertain
whether petitioner was relieved of liability for the TFRPs.4 At some point
4 Although not explicitly stated in the email, it is evident that SO Carbaugh tried to determine whether petitioner was relieved of liability for the TFRPs (continued...) -6-
[*6] thereafter, a notice of determination was drafted stating that collection action
was not sustained because AO Levine relieved petitioner “of the Trust Fund
Recovery Penalty for the periods ending 06/30/2011, 09/30/2011, 12/31/2011, and
03/31/2012.” The notice was signed by Appeals Team Manager Rhonda Warren
but was never issued. In the case activity record for the CDP hearing, SO
Carbaugh stated that he informed petitioner’s counsel that “a determination will be
made to NOT sustain” the collection action.
On February 26, 2016, SO Khalilah A. Pollock sent an email to Richard W.
Bliss stating: “There has been a mistake in the processing and handling of * * *
[petitioner’s] case. Please DO NOT issue the notice of determination.”5
On or about April 7, 2016, petitioner’s CDP hearing was reassigned to SO
Maria Smith. SO Smith determined that the October 29, 2015, letter applied only
to petitioner’s TFRP liabilities for SCH and not the liabilities for SCPS; thus,
petitioner was not relieved of the TFRPs for SCPS. According to the case activity
record, petitioner’s counsel and SO Smith had a telephone conference call on May
4, 2016, during which SO Smith explained to petitioner’s counsel that the October
4 (...continued) related to SCPS because that was the liability the Commissioner sought to collect. 5 SO Pollock’s and Mr. Bliss’ relationship to petitioner’s CDP hearing is unclear. -7-
[*7] 29, 2015, letter did not relieve petitioner of his TFRP liabilities for SCPS.
SO Smith also explained that she could assist with collection alternatives.
Petitioner’s counsel seems to have told SO Smith that the October 29, 2015, letter
applied to SCH and SCPS, and that petitioner was not interested in a collection
alternative. SO Smith then told petitioner’s counsel that she would have no choice
but to issue a notice of determination.
On May 19, 2016, the Office of Appeals issued petitioner a notice of
determination sustaining the proposed levy, which was signed by Appeals Team
Manager Rhonda Warren. Petitioner timely filed a petition with this Court.
Discussion
A. Standard of Review
Where the validity of a taxpayer’s underlying liability is properly at issue,
the Court reviews any determination regarding the underlying liability de novo.
Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Where the taxpayer’s
underlying liability is not properly at issue, we review the Office of Appeals’
determination for abuse of discretion only. Hoyle v. Commissioner, 131 T.C. 197,
200 (2008); Goza v. Commissioner, 114 T.C. at 182. A determination is an abuse
of discretion if it is arbitrary, capricious, or without sound basis in fact or law. -8-
[*8] Murphy v. Commissioner, 125 T.C. 301, 308, 320 (2005), aff’d, 469 F.3d 27
(1st Cir. 2006).
A taxpayer may raise a CDP challenge to the existence or amount of his
underlying tax liability only if he “did not receive any statutory notice of
deficiency for such tax liability or did not otherwise have an opportunity to dispute
such tax liability.” Sec. 6330(c)(2)(B). Receipt of a Letter 1153 constitutes a
prior opportunity to dispute the taxpayer’s liability. Solucorp, Ltd. v.
Commissioner, T.C. Memo. 2013-118, at *9; Morgan v. Commissioner, T.C.
Memo. 2011-290, 2011 WL 6762929, at *3; McClure v. Commissioner, T.C.
Memo. 2008-136, 2008 WL 2120973, at *3-*4; see Mason v. Commissioner, 132
T.C. 301, 317-318 (2009). Petitioner does not dispute that he received a Letter
1153, and the parties stipulated that petitioner had a hearing to dispute the TFRPs
for SCPS with the Office of Appeals.6 Therefore, petitioner is not entitled to
contest the underlying TFRPs in this Court, and we will review the determination
to sustain the proposed levy only for abuse of discretion.
6 The stipulation states: “Petitioner had an Appeals hearing to dispute his underlying liability for Saint Catherine Physician Services.” -9-
[*9] B. Analysis
In deciding whether SO Smith abused her discretion in sustaining the
proposed levy, we review the record to determine whether she: (1) properly
verified that the requirements 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 establishes that SO Smith properly considered all of these
factors when making her determination.
Petitioner contends that AO Anderson abused his discretion by finding
petitioner liable for the TFRPs for SCPS. AO Anderson conducted petitioner’s
hearing with the Office of Appeals to determine whether petitioner was liable for
the underlying TFRPs. Thus, petitioner is not challenging the determination to
sustain the proposed levy but is challenging AO Anderson’s decision regarding
the underlying liability. We cannot consider AO Anderson’s decision in this case.
See sec. 6330(c)(2)(B).
Petitioner contends that the October 29, 2015, letter precludes the
Commissioner from collecting the TFRPs for SCPS under principles of contract - 10 -
[*10] law. We need not decide how the principles of contract law interact with the
October 29, 2015, letter because the weight of the evidence proves that the letter
does not apply to the TFRPs for SCPS; it applies only to the TFRPs for SCH.
Petitioner’s underlying liability hearing for the SCH TFRPs was assigned to
AO Levine. AO Levine appears to have signed an Appeals Transmittal and Case
Memo-TFRP (ATCM) relieving petitioner of TFRPs for the tax periods “201106”,
“201109”, “201112”, and “201203”. The ATCM lists the related corporate entity
as “SAINT CATHERINE HOSPITAL OF” and does not mention SCPS. There is
nothing in the record drafted by AO Levine regarding the TFRPs for SCPS. The
October 29, 2015, letter listed AO Levine, who was handling the SCH liability, as
the person to contact. Additionally, the October 29, 2015, letter was issued
months after the Commissioner assessed the TFRPs for SCPS.7 Accordingly, the
October 29, 2015, letter does not apply to the TFRPs for SCPS and does not
preclude the Commissioner from collecting these liabilities.
Petitioner contends that section 6672 violates the Fifth Amendment to the
Constitution under the void for vagueness doctrine. The void for vagueness
doctrine “requires the invalidation of laws that are impermissibly vague.” FCC v.
Fox TV Stations, Inc., 567 U.S. 239, 253 (2015). A statute is impermissibly vague
7 The Commissioner assessed the TFRPs for SCPS on May 26, 2015. - 11 -
[*11] if it “fails to provide a person of ordinary intelligence fair notice of what is
prohibited, or is so standardless that it authorizes or encourages seriously
discriminatory enforcement.” United States v. Williams, 553 U.S. 285, 304
(2008). However, “perfect clarity and precise guidance” are not required. Ward v.
Rock Against Racism, 491 U.S. 781, 794 (1989).
Section 6672(a) imposes a TFRP on “[a]ny person required to collect,
truthfully account for, and pay over any tax imposed by this title who willfully
fails to collect such tax, or truthfully account for and pay over such tax, or
willfully attempts in any manner to evade or defeat any such tax or the payment
thereof”. The statute allows a TFRP to be imposed on any person (1) who is
responsible for certain enumerated duties and (2) whose conduct is willful. A man
of ordinary intelligence can determine that the willful failure of a responsible
person to collect, account for, and pay over employment tax is prohibited, and this
fairly clear definition does not lay a foundation for arbitrary enforcement.
Accordingly, section 6672 is not void for vagueness.
Petitioner contends that SO Smith was not an impartial Appeals officer
because her supervisor, Rhonda Warren, had prior involvement with the case.
Under section 6330(b)(3), a CDP hearing to contest a levy must be conducted by
an impartial officer or employee with no prior involvement. Prior involvement is - 12 -
[*12] defined as “participation or involvement in a matter (other than a CDP
hearing held under either section 6320 or section 6330) that the taxpayer may have
had with respect to the tax and tax period shown on the CDP Notice.” Sec.
301.6330-1(d)(2), A-D4, Proced. & Admin. Regs. There is no evidence that Ms.
Warren had any involvement in any matter relating to petitioner except for the
CDP hearing. Accordingly, Ms. Warren’s involvement did not violate section
6330(b)(3).
Petitioner contends that SO Smith did not comply with the verification
requirements of section 6330(c)(1). He seems to argue that it was an abuse of
discretion for SO Smith not to look at the TFRP file for SCHS. An SO is not
required to look at any particular document, Roberts v. Commissioner, 118 T.C.
365, 371 n.10 (2002), aff’d, 329 F.3d 1224 (11th Cir. 2003), and petitioner has not
pointed to anything in the TFRP file that SO Smith needed to verify. Accordingly,
SO Smith did not run afoul of the verification requirements by not looking at the
TFRP file.
Finding no abuse of discretion in any respect, we will sustain the proposed
collection action. In reaching our decision, we have considered all arguments
made by the parties, and to the extent not mentioned or addressed, they are
irrelevant or without merit. - 13 -
[*13] To reflect the foregoing,
An appropriate order and
decision will be entered.