PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b),THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE. T.C. Summary Opinion 2014-114
UNITED STATES TAX COURT
KENNETH JOHN MELIKIAN AND SHARON KAYE MELIKIAN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17257-13S L. Filed December 29, 2014.
Kenneth John Melikian and Sharon Kaye Melikian, pro sese.
John Chinnapongse and Connor J. Moran, for respondent.
SUMMARY OPINION
KERRIGAN, Judge: This case was heard pursuant to the provisions of
section 7463 of the Internal Revenue Code in effect when the petition was filed.
Pursuant to section 7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent for any other case. -2-
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the relevant times, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
This proceeding was commenced in response to a Notice of Determination
Concerning Collection Action(s) under Section 6320 and/or 6330 (notice of
determination) dated June 20, 2013. The issue for our consideration is whether
respondent may proceed with the collection action as determined.
Background
Petitioners resided in California when the petition was filed. Some of the
facts are stipulated and are so found.
Petitioners’ liabilities at issue arise from income tax returns they filed for
tax years 2002, 2003, 2006, 2009, 2010, and 2011 (tax years at issue). On
December 18, 2012, respondent filed a notice of Federal tax lien (NFTL) and
issued petitioners a Letter 3172, Notice of Federal Tax Lien Filing and Notice of
Your Right to Hearing, for the tax years at issue. Petitioners sent respondent a
Form 12153, Request for a Collection Due Process or Equivalent Hearing, which
respondent received on January 25, 2013. Petitioners requested a collection due
process (CDP) hearing for the tax years at issue and requested that the NFTL be -3-
withdrawn because they had an installment agreement. Their request for a hearing
did not dispute the underlying tax liabilities.
On April 3, 2013, the settlement officer sent petitioners a letter to schedule a
telephone CDP hearing for May 1, 2013. On May 21, 2013, the settlement officer
sent petitioners a letter detailing her attempts to contact them and requesting that
they submit by June 5, 2013, information that they wanted to be considered.
On June 4, 2013, the settlement officer received by facsimile a letter from
petitioner husband requesting that the NFTL be withdrawn and a copy of a
December 12, 2012, letter from the Internal Revenue Service regarding
petitioners’ installment agreement. The December 12, 2012, letter states that
“[e]nforcement action could include filing a lien against your property.” On June
5, 2013, the settlement officer held a CDP hearing with petitioner husband, who
raised the issues of an NFTL’s being filed when there was an installment
agreement in place and also equitable estoppel.
On June 20, 2013, the settlement officer issued the notice of determination
sustaining the NFTL. In deciding to sustain the NFTL, the settlement officer
noted that petitioners had defaulted on prior installment agreements. On July 29,
2013, petitioners filed a petition raising the issue of an NFTL’s being filed when -4-
there is an installment agreement. Petitioners also contended that respondent
should have been estopped from filing the NFTL.
Petitioners do not dispute the underlying income tax liabilities for the tax
years at issue or the settlement officer’s verification of compliance with applicable
law and administrative procedure.
Discussion
Section 6320(a)(1) requires the Secretary to provide written notice to a
taxpayer when the Secretary has filed an NFTL against the taxpayer’s property and
property rights. See secs. 6321, 6323. Additionally the Secretary must notify the
taxpayer of his or her right to a CDP hearing. Sec. 6320(a)(3).
Where the validity of the underlying tax liability is properly in issue, we
review the underlying tax liability de novo. Sego v. Commissioner, 114 T.C. 604,
610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). In cases such as
this where there is no challenge to the underlying liability, the Court reviews
administrative determinations by the Appeals Office regarding nonliability issues
for abuse of discretion. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Goza
v. Commissioner, 114 T.C. at 182. In determining abuse of discretion, we
consider whether the determination was arbitrary, capricious, or without sound
basis in fact or law. See, e.g., Murphy v. Commissioner, 125 T.C. 301, 320 -5-
(2005), aff’d, 469 F.3d 27 (1st Cir. 2006); Woodral v. Commissioner, 112 T.C. 19,
23 (1999). The Court does not conduct an independent review and substitute its
judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. at
320. If the settlement officer follows all statutory and administrative guidelines
and provides a reasoned, balanced decision, the Court will not reweigh the
equities. Link v. Commissioner, T.C. Memo. 2013-53, at *12.
Following a CDP hearing the settlement officer must determine whether to
sustain the filing of the NFTL. In making that determination, the settlement
officer is required by section 6330(c)(3) to consider: (1) whether the requirements
of any applicable law or administrative procedure have been met; (2) any issues
appropriately raised by the taxpayer; and (3) whether the proposed collection
action balances the need for the efficient collection of taxes and the legitimate
concern of the taxpayer that any collection action be no more intrusive than
necessary. Lunsford v. Commissioner, 117 T.C. 183, 184 (2001); Diamond v.
Commissioner, T.C. Memo. 2012-90, slip op. at 6-7; see also sec. 6320(c).
Section 6323(j)(1) provides:
(1) In general.--The Secretary may withdraw a notice of a lien filed under this section and this chapter shall be applied as if the withdrawn notice had not been filed, if the Secretary determines that-- -6-
(A) the filing of such notice was premature or otherwise not in accordance with administrative procedures of the Secretary,
(B) the taxpayer has entered into an agreement under section 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise,
(C) the withdrawal of such notice will facilitate the collection of the tax liability, or
(D) with the consent of the taxpayer or the National Taxpayer Advocate, the withdrawal of such notice would be in the best interest of the taxpayer (as determined by the National Taxpayer Advocate) and the United States.
Petitioners did not dispute that they had defaulted on their installment
agreements. Respondent contends that the NFTL was filed to protect the
Government’s interest.
Petitioners contend that they were told that if they remained in compliance
in regard to their installment agreement, an NFTL would not be filed. Petitioners
further contend that respondent was estopped from filing the NFTL. Even though
petitioner husband raised the issue of equitable estoppel at the CDP hearing, he
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PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b),THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE. T.C. Summary Opinion 2014-114
UNITED STATES TAX COURT
KENNETH JOHN MELIKIAN AND SHARON KAYE MELIKIAN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17257-13S L. Filed December 29, 2014.
Kenneth John Melikian and Sharon Kaye Melikian, pro sese.
John Chinnapongse and Connor J. Moran, for respondent.
SUMMARY OPINION
KERRIGAN, Judge: This case was heard pursuant to the provisions of
section 7463 of the Internal Revenue Code in effect when the petition was filed.
Pursuant to section 7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent for any other case. -2-
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the relevant times, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
This proceeding was commenced in response to a Notice of Determination
Concerning Collection Action(s) under Section 6320 and/or 6330 (notice of
determination) dated June 20, 2013. The issue for our consideration is whether
respondent may proceed with the collection action as determined.
Background
Petitioners resided in California when the petition was filed. Some of the
facts are stipulated and are so found.
Petitioners’ liabilities at issue arise from income tax returns they filed for
tax years 2002, 2003, 2006, 2009, 2010, and 2011 (tax years at issue). On
December 18, 2012, respondent filed a notice of Federal tax lien (NFTL) and
issued petitioners a Letter 3172, Notice of Federal Tax Lien Filing and Notice of
Your Right to Hearing, for the tax years at issue. Petitioners sent respondent a
Form 12153, Request for a Collection Due Process or Equivalent Hearing, which
respondent received on January 25, 2013. Petitioners requested a collection due
process (CDP) hearing for the tax years at issue and requested that the NFTL be -3-
withdrawn because they had an installment agreement. Their request for a hearing
did not dispute the underlying tax liabilities.
On April 3, 2013, the settlement officer sent petitioners a letter to schedule a
telephone CDP hearing for May 1, 2013. On May 21, 2013, the settlement officer
sent petitioners a letter detailing her attempts to contact them and requesting that
they submit by June 5, 2013, information that they wanted to be considered.
On June 4, 2013, the settlement officer received by facsimile a letter from
petitioner husband requesting that the NFTL be withdrawn and a copy of a
December 12, 2012, letter from the Internal Revenue Service regarding
petitioners’ installment agreement. The December 12, 2012, letter states that
“[e]nforcement action could include filing a lien against your property.” On June
5, 2013, the settlement officer held a CDP hearing with petitioner husband, who
raised the issues of an NFTL’s being filed when there was an installment
agreement in place and also equitable estoppel.
On June 20, 2013, the settlement officer issued the notice of determination
sustaining the NFTL. In deciding to sustain the NFTL, the settlement officer
noted that petitioners had defaulted on prior installment agreements. On July 29,
2013, petitioners filed a petition raising the issue of an NFTL’s being filed when -4-
there is an installment agreement. Petitioners also contended that respondent
should have been estopped from filing the NFTL.
Petitioners do not dispute the underlying income tax liabilities for the tax
years at issue or the settlement officer’s verification of compliance with applicable
law and administrative procedure.
Discussion
Section 6320(a)(1) requires the Secretary to provide written notice to a
taxpayer when the Secretary has filed an NFTL against the taxpayer’s property and
property rights. See secs. 6321, 6323. Additionally the Secretary must notify the
taxpayer of his or her right to a CDP hearing. Sec. 6320(a)(3).
Where the validity of the underlying tax liability is properly in issue, we
review the underlying tax liability de novo. Sego v. Commissioner, 114 T.C. 604,
610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). In cases such as
this where there is no challenge to the underlying liability, the Court reviews
administrative determinations by the Appeals Office regarding nonliability issues
for abuse of discretion. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Goza
v. Commissioner, 114 T.C. at 182. In determining abuse of discretion, we
consider whether the determination was arbitrary, capricious, or without sound
basis in fact or law. See, e.g., Murphy v. Commissioner, 125 T.C. 301, 320 -5-
(2005), aff’d, 469 F.3d 27 (1st Cir. 2006); Woodral v. Commissioner, 112 T.C. 19,
23 (1999). The Court does not conduct an independent review and substitute its
judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. at
320. If the settlement officer follows all statutory and administrative guidelines
and provides a reasoned, balanced decision, the Court will not reweigh the
equities. Link v. Commissioner, T.C. Memo. 2013-53, at *12.
Following a CDP hearing the settlement officer must determine whether to
sustain the filing of the NFTL. In making that determination, the settlement
officer is required by section 6330(c)(3) to consider: (1) whether the requirements
of any applicable law or administrative procedure have been met; (2) any issues
appropriately raised by the taxpayer; and (3) whether the proposed collection
action balances the need for the efficient collection of taxes and the legitimate
concern of the taxpayer that any collection action be no more intrusive than
necessary. Lunsford v. Commissioner, 117 T.C. 183, 184 (2001); Diamond v.
Commissioner, T.C. Memo. 2012-90, slip op. at 6-7; see also sec. 6320(c).
Section 6323(j)(1) provides:
(1) In general.--The Secretary may withdraw a notice of a lien filed under this section and this chapter shall be applied as if the withdrawn notice had not been filed, if the Secretary determines that-- -6-
(A) the filing of such notice was premature or otherwise not in accordance with administrative procedures of the Secretary,
(B) the taxpayer has entered into an agreement under section 6159 to satisfy the tax liability for which the lien was imposed by means of installment payments, unless such agreement provides otherwise,
(C) the withdrawal of such notice will facilitate the collection of the tax liability, or
(D) with the consent of the taxpayer or the National Taxpayer Advocate, the withdrawal of such notice would be in the best interest of the taxpayer (as determined by the National Taxpayer Advocate) and the United States.
Petitioners did not dispute that they had defaulted on their installment
agreements. Respondent contends that the NFTL was filed to protect the
Government’s interest.
Petitioners contend that they were told that if they remained in compliance
in regard to their installment agreement, an NFTL would not be filed. Petitioners
further contend that respondent was estopped from filing the NFTL. Even though
petitioner husband raised the issue of equitable estoppel at the CDP hearing, he
testified that the issue was not addressed and the settlement officer appeared not to
understand the concept. -7-
Abuse of Discretion
Entering into an installment agreement does not preclude the filing of an
NFTL. Crisan v. Commissioner, T.C. Memo. 2007-67, slip op. at 7. Section
6323(j)(1) is permissive. Id. The Commissioner may withdraw an NFTL pursuant
to section 6323(j)(1), but respondent’s failure to do so in this case is not an abuse
of discretion. See id. Petitioners did not produce any evidence to support their
contention that the filing of the NFTL would impair their ability to pay their
outstanding tax liabilities. Respondent filed the NFTL to protect the
The December 12, 2012, letter states that a lien is a method of enforcement
and does not state that an NFTL would not be filed because there is an installment
agreement. We have held that it is not an abuse of discretion for a settlement
officer to refuse to withdraw an NFTL filing because the taxpayers have an
installment agreement. Karakaedos v. Commissioner, T.C. Memo. 2012-53.
On the basis of the facts presented, the Court holds that respondent did not
abuse his discretion in sustaining the filing of the NFTL.
Equitable Estoppel
Equitable estoppel is a judicial doctrine that precludes a party from denying
its own representations which induced another to act to his or her detriment. -8-
Hofstetter v. Commissioner, 98 T.C. 695, 700 (1992). This Court has recognized
that estoppel is applied against the Commissioner “‘with utmost caution and
restraint.’” Id. (quoting Estate of Emerson v. Commissioner, 67 T.C. 612, 617
(1977)).
The taxpayer must establish the following elements before equitable
estoppel will be applied against the Government: (1) a false representation or
wrongful, misleading silence by the party against whom estoppel is claimed; (2) an
error in statement of fact and not in an opinion or statement of law; (3) ignorance
of the true facts; (4) the taxpayer’s reasonable reliance on the acts or statements of
the one who against whom estoppel is claimed; and (5) adverse effects suffered by
the taxpayer from the acts or statements of the one against whom estoppel is
claimed. Norfolk S. Corp. v. Commissioner, 104 T.C. 13, 60 (1995), aff’d, 140
F.3d 240 (4th Cir. 1998). Estoppel requires a finding that the taxpayer relied on
the Government’s representations and suffered a detriment because of the reliance.
Id.
The U.S. Court of Appeals for the Ninth Circuit, to which an appeal in this
case would lie but for section 7463(b), requires the party seeking to apply the
doctrine against the Government to prove affirmative misconduct. Purcell v.
United States, 1 F.3d 932, 939 (9th Cir. 1993). Affirmative misconduct requires -9-
“‘ongoing active misrepresentations’” or a “‘pervasive pattern of false promises’”,
as opposed to an isolated act of misinformation. Id. at 940 (quoting S & M Inv.
Co. v. Tahoe Reg’l Planning Agency, 911 F.2d 324, 329 (9th Cir. 1990)).
Regardless of whether petitioner husband was able to fully discuss this issue at his
CDP hearing, there was no affirmative misconduct.
Petitioners suffered no detriment that is legally recognizable. See Fincourt
B Shelton PC v. Commissioner, T.C. Memo. 2013-273. Petitioners did not change
a position to their detriment. See Reuben v. Commissioner, T.C. Memo. 2001-
193. Accordingly, we hold that equitable estoppel should not be applied against
respondent.
We have considered all arguments made by the parties, and to the extent not
mentioned or addressed, they are irrelevant or without merit.
To reflect the foregoing,
Decision will be entered for