T.C. Memo. 2019-9
UNITED STATES TAX COURT
DANIEL JAMES HUMISTON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 25787-16L. Filed February 7, 2019.
Justin J. Andreozzi and Randall P. Andreozzi, for petitioner.
R. Jeffrey Knight, Michael E. D’Anello, and Laurence K. Williams, for
respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
BUCH, Judge: Mr. Humiston filed this collection case under sections
6320(c) and 6330(d) to challenge the Commissioner’s notice of determination
sustaining a notice of Federal tax lien and a proposed levy to collect trust fund -2-
[*2] recovery penalties.1 The penalties are the result of Mr. Humiston’s failure, as
president of Tanning Bed, Inc., to pay tanning excise taxes for the first, second,
and third quarters of 2014. Mr. Humiston argues that the settlement officer abused
his discretion in sustaining the levy because he failed to verify the Commissioner’s
compliance with section 6751(b). The Commissioner argues that the trust fund
recovery penalty is not subject to section 6751(b), but in any event Form 4183,
Recommendation re: Trust Fund Recovery Penalty Assessment, satisfies the
supervisory approval requirement of section 6751(b).
The settlement officer did not abuse his discretion in finding that the
Commissioner had satisfied the requirements of applicable law and administrative
procedure under section 6330(c)(1). The Commissioner’s Form 4183 establishes
supervisory approval under section 6751(b). Because we find no abuse of
discretion, we do not need to address whether the trust fund recovery penalty
requires section 6751(b) approval.
1 Unless otherwise indicated, all section references are to the Internal Revenue Code at all relevant times. All monetary amounts are rounded to the nearest dollar. -3-
[*3] FINDINGS OF FACT
Mr. Humiston is the majority shareholder and president of Tanning Bed,
Inc., a Delaware corporation. During the periods ending March 31, June 30, and
September 30, 2014, Tanning Bed, Inc., failed to remit tanning excise taxes
exceeding $220,000.
In June 2015 a revenue agent made the initial determination to assert the
section 6672 trust fund recovery penalty against Mr. Humiston as a person
required to collect excise tax. The revenue agent generated a Form 4183 asserting
trust fund recovery penalties and had the penalties approved and the form signed
by his immediate supervisor. The following month the Commissioner sent Mr.
Humiston Letter 1153 and Form 2751, Proposed Assessment of Trust Fund
Recovery Penalty, and eventually assessed penalties in January 2016 after not
receiving a response. Because Mr. Humiston failed to pay the liability, the
Commissioner sent Mr. Humiston a notice of Federal tax lien and a notice of intent
to levy to collect the unpaid penalties; Mr. Humiston timely requested a hearing.
In his hearing request Mr. Humiston indicated that he could not pay the
balance of his liability and requested discharge of the lien. He attached to his
request a statement indicating that Tanning Bed, Inc., was going through chapter
11 bankruptcy and was in the process of negotiating a liquidation plan. The -4-
[*4] statement also informed the settlement officer that if a liquidation plan was
confirmed Tanning Bed, Inc., might have funds to pay the tanning excise tax
liability.
Mr. Humiston’s appeal was assigned to a settlement officer who requested
that Mr. Humiston complete a Form 433-A, Collection Information Statement for
Wage Earners and Self-Employed Individuals. A hearing was held, and Mr.
Humiston informed the settlement officer that Tanning Bed, Inc., was selling
assets to pay creditors and that the Commissioner might receive funds to cover the
excise tax liability. The settlement officer requested that Mr. Humiston provide
certain bankruptcy liquidation documents and a list of the Tanning Bed, Inc.
assets.
Several weeks later Mr. Humiston provided the settlement officer with the
bankruptcy petition and a list of its largest creditors. He did not provide any
documents regarding the bankruptcy liquidation, a list of assets, or a Form 433-A.
The settlement officer followed up with Mr. Humiston and requested the
same information. He requested either Form 433-A or documents indicating that
Tanning Bed, Inc., was currently paying down the excise tax liability. A few
weeks later Mr. Humiston provided more bankruptcy documents. The documents
included an order confirming the Tanning Bed, Inc. plan of reorganization and a -5-
[*5] notice of reorganization. The order indicated that Tanning Bed, Inc., was
liquidating its assets with an effective date of January 2, 2017. Mr. Humiston did
not provide documents indicating that the liquidation was currently paying down
the excise tax liability. Nor did he provide the settlement officer with a list of
assets or a Form 433-A.
The settlement officer issued a notice of determination sustaining the notice
of Federal tax lien and the proposed levy on November 17, 2016. In his report he
stated that the Tanning Bed, Inc. plan of liquidation was not in effect until the
following year and that no payments were being made toward the outstanding
excise tax liability. The report also indicated that Mr. Humiston failed to provide
a Form 433-A, an alternative to providing proof of liability payments, and that Mr.
Humiston did not challenge the underlying liability.
Mr. Humiston timely filed a petition while residing in New York. In his
petition he states that he was not instructed to return Form 433-A to the settlement
officer.
The Commissioner filed a motion for summary judgment in March 2018,
and Mr. Humiston filed an objection. We denied the Commissioner’s motion
because it was unclear whether the settlement officer had properly verified the
requirements of section 6751(b). -6-
[*6] At trial the Court heard testimony from the revenue agent who made the
initial determination to assert the trust fund recovery penalties, and we admitted
into evidence Form 4183.
OPINION
The facts in this case are similar to those in Blackburn v. Commissioner,
150 T.C. __ (Apr. 5, 2018). In Blackburn and in this case the Commissioner
asserted a trust fund recovery penalty. The penalty was asserted by a revenue
agent and approved by his immediate supervisor using Form 4183. Each taxpayer
received a prior opportunity to dispute his trust fund recovery penalty and
petitioned our Court after receiving a notice of determination. The question before
the Court is the same as in Blackburn: whether the settlement officer abused his
discretion in failing to verify that the Commissioner satisfied the requirements of
supervisory approval under section 6751(b). Here, as in Blackburn, the
Commissioner argues that section 6751(b) does not apply to trust fund recovery
penalties; but because supervisory approval has been established, we need not
address whether section 6751(b) applies to the trust fund recovery penalties.2
2 See Blackburn v. Commissioner, 150 T.C. __, __ (slip op. at 3) (Apr. 5, 2018). -7-
[*7] I. Standard of Review
When a taxpayer fails to challenge his underlying liability, we review the
settlement officer’s determination for abuse of discretion.3 A settlement officer’s
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T.C. Memo. 2019-9
UNITED STATES TAX COURT
DANIEL JAMES HUMISTON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 25787-16L. Filed February 7, 2019.
Justin J. Andreozzi and Randall P. Andreozzi, for petitioner.
R. Jeffrey Knight, Michael E. D’Anello, and Laurence K. Williams, for
respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
BUCH, Judge: Mr. Humiston filed this collection case under sections
6320(c) and 6330(d) to challenge the Commissioner’s notice of determination
sustaining a notice of Federal tax lien and a proposed levy to collect trust fund -2-
[*2] recovery penalties.1 The penalties are the result of Mr. Humiston’s failure, as
president of Tanning Bed, Inc., to pay tanning excise taxes for the first, second,
and third quarters of 2014. Mr. Humiston argues that the settlement officer abused
his discretion in sustaining the levy because he failed to verify the Commissioner’s
compliance with section 6751(b). The Commissioner argues that the trust fund
recovery penalty is not subject to section 6751(b), but in any event Form 4183,
Recommendation re: Trust Fund Recovery Penalty Assessment, satisfies the
supervisory approval requirement of section 6751(b).
The settlement officer did not abuse his discretion in finding that the
Commissioner had satisfied the requirements of applicable law and administrative
procedure under section 6330(c)(1). The Commissioner’s Form 4183 establishes
supervisory approval under section 6751(b). Because we find no abuse of
discretion, we do not need to address whether the trust fund recovery penalty
requires section 6751(b) approval.
1 Unless otherwise indicated, all section references are to the Internal Revenue Code at all relevant times. All monetary amounts are rounded to the nearest dollar. -3-
[*3] FINDINGS OF FACT
Mr. Humiston is the majority shareholder and president of Tanning Bed,
Inc., a Delaware corporation. During the periods ending March 31, June 30, and
September 30, 2014, Tanning Bed, Inc., failed to remit tanning excise taxes
exceeding $220,000.
In June 2015 a revenue agent made the initial determination to assert the
section 6672 trust fund recovery penalty against Mr. Humiston as a person
required to collect excise tax. The revenue agent generated a Form 4183 asserting
trust fund recovery penalties and had the penalties approved and the form signed
by his immediate supervisor. The following month the Commissioner sent Mr.
Humiston Letter 1153 and Form 2751, Proposed Assessment of Trust Fund
Recovery Penalty, and eventually assessed penalties in January 2016 after not
receiving a response. Because Mr. Humiston failed to pay the liability, the
Commissioner sent Mr. Humiston a notice of Federal tax lien and a notice of intent
to levy to collect the unpaid penalties; Mr. Humiston timely requested a hearing.
In his hearing request Mr. Humiston indicated that he could not pay the
balance of his liability and requested discharge of the lien. He attached to his
request a statement indicating that Tanning Bed, Inc., was going through chapter
11 bankruptcy and was in the process of negotiating a liquidation plan. The -4-
[*4] statement also informed the settlement officer that if a liquidation plan was
confirmed Tanning Bed, Inc., might have funds to pay the tanning excise tax
liability.
Mr. Humiston’s appeal was assigned to a settlement officer who requested
that Mr. Humiston complete a Form 433-A, Collection Information Statement for
Wage Earners and Self-Employed Individuals. A hearing was held, and Mr.
Humiston informed the settlement officer that Tanning Bed, Inc., was selling
assets to pay creditors and that the Commissioner might receive funds to cover the
excise tax liability. The settlement officer requested that Mr. Humiston provide
certain bankruptcy liquidation documents and a list of the Tanning Bed, Inc.
assets.
Several weeks later Mr. Humiston provided the settlement officer with the
bankruptcy petition and a list of its largest creditors. He did not provide any
documents regarding the bankruptcy liquidation, a list of assets, or a Form 433-A.
The settlement officer followed up with Mr. Humiston and requested the
same information. He requested either Form 433-A or documents indicating that
Tanning Bed, Inc., was currently paying down the excise tax liability. A few
weeks later Mr. Humiston provided more bankruptcy documents. The documents
included an order confirming the Tanning Bed, Inc. plan of reorganization and a -5-
[*5] notice of reorganization. The order indicated that Tanning Bed, Inc., was
liquidating its assets with an effective date of January 2, 2017. Mr. Humiston did
not provide documents indicating that the liquidation was currently paying down
the excise tax liability. Nor did he provide the settlement officer with a list of
assets or a Form 433-A.
The settlement officer issued a notice of determination sustaining the notice
of Federal tax lien and the proposed levy on November 17, 2016. In his report he
stated that the Tanning Bed, Inc. plan of liquidation was not in effect until the
following year and that no payments were being made toward the outstanding
excise tax liability. The report also indicated that Mr. Humiston failed to provide
a Form 433-A, an alternative to providing proof of liability payments, and that Mr.
Humiston did not challenge the underlying liability.
Mr. Humiston timely filed a petition while residing in New York. In his
petition he states that he was not instructed to return Form 433-A to the settlement
officer.
The Commissioner filed a motion for summary judgment in March 2018,
and Mr. Humiston filed an objection. We denied the Commissioner’s motion
because it was unclear whether the settlement officer had properly verified the
requirements of section 6751(b). -6-
[*6] At trial the Court heard testimony from the revenue agent who made the
initial determination to assert the trust fund recovery penalties, and we admitted
into evidence Form 4183.
OPINION
The facts in this case are similar to those in Blackburn v. Commissioner,
150 T.C. __ (Apr. 5, 2018). In Blackburn and in this case the Commissioner
asserted a trust fund recovery penalty. The penalty was asserted by a revenue
agent and approved by his immediate supervisor using Form 4183. Each taxpayer
received a prior opportunity to dispute his trust fund recovery penalty and
petitioned our Court after receiving a notice of determination. The question before
the Court is the same as in Blackburn: whether the settlement officer abused his
discretion in failing to verify that the Commissioner satisfied the requirements of
supervisory approval under section 6751(b). Here, as in Blackburn, the
Commissioner argues that section 6751(b) does not apply to trust fund recovery
penalties; but because supervisory approval has been established, we need not
address whether section 6751(b) applies to the trust fund recovery penalties.2
2 See Blackburn v. Commissioner, 150 T.C. __, __ (slip op. at 3) (Apr. 5, 2018). -7-
[*7] I. Standard of Review
When a taxpayer fails to challenge his underlying liability, we review the
settlement officer’s determination for abuse of discretion.3 A settlement officer’s
determination is an abuse of discretion if it is arbitrary, capricious, or without
sound basis in fact or law.4
II. Analysis
In determining whether the settlement officer abused his discretion we must
consider whether he: (1) properly verified that the requirements of applicable law
and administrative procedure had been met, (2) considered any relevant issues
petitioner raised, and (3) considered whether the proposed collection action is no
more intrusive than necessary.5
Mr. Humiston argues that the settlement officer failed to verify during his
hearing the requirements of section 6751(b) supervisory approval. But in
Blackburn v. Commissioner, 150 T.C. at __ (slip op. at 10), we held that the
3 Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000); see Blackburn v. Commissioner, 150 T.C. at __ (slip op. at 9) (“We review the verification requirement for abuse of discretion.”). 4 See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). 5 See sec. 6330(c)(3). -8-
[*8] existence of Form 4183 in the record was sufficient to establish the settlement
officer’s verification of section 6751(b) compliance and that “[w]e have
consistently upheld a settlement officer’s verification of assessments when the
administrative record reflects compliance with administrative procedures.” Here
the Commissioner introduced testimony of the revenue agent who asserted the
penalties and the Form 4183 that he used to obtain supervisory approval. Because
Form 4183 is in the record, we find the settlement officer’s verification was not an
abuse of discretion.6
Mr. Humiston also argues that he provided the settlement officer with the
correct bankruptcy paperwork and at no point did the settlement officer require
Form 433-A. The record shows otherwise. The settlement officer requested that
Mr. Humiston provide evidence that the Tanning Bed, Inc. liquidation was
applying payments against the excise tax liability and provide a list of the
Tanning Bed, Inc. assets. In the alternative the settlement officer requested a
Form 433-A showing Mr. Humiston’s personal financial information. While Mr.
Humiston did provide paperwork relating to the bankruptcy and liquidation, the
6 See, e.g., Blackburn v. Commissioner, 150 T.C. at ___ (slip op. at 10); Kane v. Commissioner, T.C. Memo. 2018-122, at *10-*11; Rosendale v. Commissioner, T.C. Memo. 2018-99, at *14; Gallagher v. Commissioner, T.C. Memo. 2018-77, at *13. -9-
[*9] documents were not the documents requested by the settlement officer and
they did not show that Tanning Bed, Inc., was making payments towards the
excise tax liability. Additionally Mr. Humiston did not provide the settlement
officer with Form 433-A. A settlement officer does not abuse his discretion in
sustaining the proposed collection action when the taxpayer fails to submit
requested financial information.7 Because Mr. Humiston did not provide the
requested information, and because the settlement officer met the requirements of
section 6330(c)(3), there was not an abuse of discretion in sustaining the notice of
Federal tax lien and the proposed levy.8
To reflect the foregoing,
Decision will be entered for
7 LaForge v. Commissioner, T.C. Memo. 2013-183, at *9-*10; Cavazos v. Commissioner, T.C. Memo. 2008-257, 96 T.C.M. (CCH) 341, 343 (2008). 8 See LaForge v. Commissioner, T.C. Memo. 2013-183; Cavazos v. Commissioner, T.C. Memo. 2008-257.