Mark G. Pfetzer

• Court: United States Tax Court
• Decided: December 30, 2021
• Docket: 10346-18
• Status: Unpublished

Opinion

T.C. Memo. 2021-145

UNITED STATES TAX COURT

MARK G. PFETZER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10346-18L. Filed December 30, 2021.

Mark G. Pfetzer, pro se.

John K. Parchman, for respondent.

MEMORANDUM OPINION

PUGH, Judge: This case was commenced in response to a Notice of

Determination Concerning Collection Action(s) Under Section 6320 and/or 6330

(notice of determination) sustaining a notice of Federal tax lien (NFTL) filing by

the Internal Revenue Service (IRS) to secure petitioner’s unpaid Federal income

tax liabilities for 2004 through 2012. Petitioner timely filed a petition pursuant to

Served 12/30/21 -2-

[*2] section 6330(d), 1 seeking review of respondent’s determination. Resolution of

this case turns on whether the IRS Office of Appeals satisfied the verification

requirements under section 6330(c)(1). 2 We conclude that it did not.

Background

This case was submitted fully stipulated under Rule 122. The stipulated

facts are incorporated in our findings by this reference. Petitioner resided in

Mississippi when he filed the petition.

I. Notice of Determination and Petition

Petitioner failed to file Federal income tax returns for 2004 through 2012.

Respondent prepared substitutes for return pursuant to section 6020(b) and

assessed tax for all nine years. As we explain below, however, the record does not

include notices of deficiency for any of these years, nor did petitioner petition this

Court to challenge notices of deficiency for any of these years.

1 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for all relevant times. All Rule references are to the Tax Court Rules of Practice and Procedure. 2 On July 1, 2019, Congress renamed the IRS Office of Appeals the IRS Independent Office of Appeals. See Taxpayer First Act, Pub. L. No. 116-25, sec. 1001(a), 133 Stat. at 983 (2019). The events in this case largely predate that change, so we use the name in effect at the times relevant to this case, i.e., the Office of Appeals or IRS Appeals. -3-

[*3] Petitioner did not pay the assessed tax deficiencies, and on June 30, 2016,

respondent sent petitioner a Letter 3172, Notice of Federal Tax Lien Filing and

Your Right to a Hearing (lien filing notice). The NFTL covered unpaid tax

liabilities for 2004 through 2012. In response petitioner timely submitted Form

12153, Request for a Collection Due Process or Equivalent Hearing, requesting an

administrative hearing. On Form 12153 petitioner stated that he: (1) did not owe

the asserted tax liabilities for 2010 and 2011, (2) wanted verification that the IRS

performed the procedures required by law, and (3) wanted a face-to-face

administrative hearing at the IRS office closest to him. While petitioner did not

check a box on Form 12153 indicating that he wished to be considered for

collection alternatives, he noted that, in the event his tax liabilities were sustained,

he would want to discuss collection alternatives.

In September 2016 Settlement Officer Laurel K. Smith (SO Smith) sent

petitioner an initial contact letter and scheduled a telephone conference. SO Smith

informed petitioner that she would arrange a face-to-face meeting if he provided

requested information within 14 days from the date of the letter. SO Smith

requested that petitioner submit tax returns for 2010 and 2011 and, if petitioner

wished to be considered for collection alternatives, Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed Individuals, and tax -4-

[*4] returns for 2013, 2014, and 2015. In response petitioner reiterated his request

for a face-to-face hearing and challenged tax assessments for 2004 through 2012.

He questioned the issuance of notices of deficiency for all the years in issue and

alleged that he had never received any such notices.

The parties exchanged further correspondence, but petitioner did not respond

to any of SO Smith’s requests for unfiled tax returns or other documentation.

Thus, SO Smith informed petitioner that he was ineligible for a face-to-face

hearing. SO Smith could not reach petitioner for a scheduled telephone

conference, and he never provided a valid phone number as she requested.

On April 23, 2018, respondent issued the notice of determination sustaining

the filing of the NFTL. The notice of determination stated that petitioner could not

challenge the underlying tax liability for: (1) 2004 through 2008 because he had

had a prior opportunity to contest the liabilities for each year when respondent

previously issued a notice of intent to levy3 and (2) 2009 through 2012 because

respondent issued notices of deficiency for those years. In arriving at this

conclusion SO Smith reviewed computerized transcripts to confirm that notices of

3 Petitioner filed a petition challenging the proposed levy with respect to tax years 2004 through 2006 (docket No. 7033-11L), but his case was dismissed for lack of prosecution. Petitioner’s arguments then were essentially identical to the ones he makes in this case. -5-

[*5] deficiency and notice and demand were sent to petitioner’s last known address

and determined that the lien filing notice was sent to petitioner and that there was

not a collection alternative or bankruptcy case pending that would affect the filing

of the NFTL. She also concluded that petitioner was not eligible for a collection

alternative because he failed to provide requested financial information and was

not in compliance with his filing requirements. Lastly, after balancing the need for

efficient collection of tax with petitioner’s concern that the collection action be no

more intrusive than necessary, SO Smith sustained the filing of the NFTL.

Petitioner filed a petition with the Court challenging the notice of

determination. He assigned error to SO Smith’s alleged failure (1) to verify that all

applicable administrative procedures required by law were followed and (2) to

grant petitioner a face-to-face hearing at the nearest IRS office.

II. Motion for Summary Judgment and Remand

After this case was set for trial, respondent moved for summary judgment.

In support of his motion respondent attached the notices of deficiency and

substitute U.S. Postal Service Forms 3877, Certified Mailing List, to prove proper

mailing of the notices but only for tax years 2009 through 2012. The Court denied

respondent’s motion for summary judgment and remanded the case to IRS

Appeals. In doing so we explained that questions remained as to “what was in the -6-

[*6] administrative record and what the settlement officer relied upon to verify that

all requirements of applicable law and administrative procedures were met” under

section 6330(c)(1). In our order of remand we directed respondent to Hoyle v.

Commissioner, 131 T.C. 197, 205 n.7 (2008), supplemented by 136 T.C. 463

(2011), in which the Court held that when a taxpayer alleges that the notice of

deficiency was not mailed, the Appeals officer must not only consult transcripts

but also examine “underlying documents”--such as the taxpayer’s return, a copy of

the notice of deficiency, and a certified mailing list--to verify the proper mailing of

the notice of deficiency under section 6330(c)(1). See also sec. 6320(c).

On remand, SO Smith requested that petitioner submit additional

documentation, including Form 433-A and unfiled tax returns for 2013 through

2018. And petitioner continued to allege that respondent never mailed him notices

of deficiency for 2004 through 2008 and that the notices of deficiency for 2009

through 2012 were mailed to the wrong address.

In a subsequent telephone conference petitioner reiterated that he did not

receive the notices of deficiency for any of the years in issue, and SO Smith

countered that petitioner could not challenge the underlying liabilities. After the

conference the parties exchanged further correspondence repeating their respective

positions. Eventually, IRS Appeals issued a Supplemental Notice of -7-

[*7] Determination Concerning IRS Collection Actions under Internal Revenue

Code Sections 6320 or 6330 (supplemental notice of determination) sustaining the

NFTL filing. In the supplemental notice of determination SO Smith stated that she

relied on transcripts to ensure that assessments were made and a notice of the

assessment had been sent to petitioner for each year in issue.

III. Proceedings Under Rule 122

The parties then filed a joint motion to submit this case pursuant to

Rule 122, which we granted, and a joint stipulation of facts that included the

following exhibits: the lien filing notice, petitioner’s hearing request,

correspondence between petitioner and respondent during the initial administrative

hearing and during remand, the notice of determination and supplemental notice of

determination, SO Smith’s case activity record (case notes), and TXMODA

transcripts for 2004 through 2012.4 Not included as stipulated exhibits are

(1) respondent’s complete administrative record; (2) any of the notices of

deficiency; or (3) any proofs of mailing to petitioner’s last known address.

4 The TXMODA transcripts contain current account information from the IRS master file. TXMODA is the command that IRS employees enter into the integrated data retrieval system (IDRS) to obtain a transcript. See Crow v. Commissioner, T.C. Memo. 2002-149, 2002 WL 1298743, at *4 n.6. IDRS is essentially the interface between IRS employees and its various computer systems. Id. -8-

[*8] Discussion

This is a Court of limited jurisdiction; we exercise our jurisdiction only as

explicitly authorized by statute. Sec. 7442; see Naftel v. Commissioner, 85 T.C.

527, 529 (1985). Section 6330(d)(1) grants this Court jurisdiction to review a

timely petition challenging the Commissioner’s notice of determination to sustain a

collection action. See Callahan v. Commissioner, 130 T.C. 44, 48 (2008).

Because petitioner filed a timely petition challenging respondent’s notice of

determination, we have jurisdiction in this case.

In a collection case our standard of review depends on whether the

underlying tax liability is in issue. Where the taxpayer’s underlying tax liability is

properly in issue, the Court reviews the Commissioner’s determination de novo.

Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114

T.C. 176, 181-182 (2000). The Court reviews administrative determinations made

by IRS Appeals regarding nonliability issues for abuse of discretion. Sego v.

Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. at 182. Abuse

of discretion exists when a determination is arbitrary, capricious, or without sound

basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d,

469 F.3d 27 (1st Cir. 2006). The burden is on the taxpayer to prove that the -9-

[*9] settlement officer abused her discretion. Rules 142(a), 122(b); see Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).

Section 6320(a)(1) requires the Commissioner to give any person liable to

pay tax written notice of the filing of an NFTL upon that taxpayer’s property. The

notice must inform the taxpayer of the right to request a hearing in the IRS Office

of Appeals. Sec. 6320(a)(3)(B), (b)(1). Section 6330(c), (d), and (e) governs the

conduct of a hearing requested under section 6320. Sec. 6320(c).

As part of the administrative hearing process the settlement officer must

verify that the requirements of any applicable law or administrative procedure have

been met. Sec. 6330(c)(1). Relevant to our analysis is the requirement in section

6213(a) that, with limited exceptions not applicable here, no deficiency may be

assessed until after a notice of deficiency is mailed to the taxpayer. The IRS may

summarily assess an amount of tax shown on a return filed by a taxpayer but must

wait 90 days after issuing a notice of deficiency before assessing a tax deficiency.

Secs. 6201(a), 6212(a), 6213(a); Jordan v. Commissioner, 134 T.C. 1, 12 (2010),

supplemented by T.C. Memo. 2011-243. If assessment of a deficiency is not

preceded by a notice of deficiency as required by section 6213(a), then the

assessment is invalid as is any lien based on that assessment. Hoyle v.

Commissioner, 131 T.C. at 205. Accordingly, we have held that section - 10 -

[*10] 6330(c)(1) requires the settlement officer, as a part of her review of an action

to collect Federal tax, to verify that a valid notice of deficiency was issued to the

taxpayer. Jordan v. Commissioner, 134 T.C. at 12.

Section 6330(c)(1) does not require that the settlement officer review a

particular document to satisfy the verification requirement. See Roberts v.

Commissioner, 118 T.C. 365, 371 n.10 (2002), aff’d, 329 F.3d 1224 (11th Cir.

2003). Generally, the settlement officer may rely on a Form 4340, Certificate of

Assessments, Payments, and Other Specified Matters, or a transcript containing

similar information. See Jordan v. Commissioner, 134 T.C. at 13.

When a taxpayer specifically alleges that he never received a notice of

deficiency, however, a settlement officer may not rely solely on tax transcripts to

verify that a notice has been issued and mailed to the taxpayer’s last known

address. Hoyle v. Commissioner, 131 T.C. at 205 n.7. Instead, the settlement

officer must examine “underlying documents in addition to the tax transcripts, such

as the taxpayer’s return, a copy of the notice of deficiency, and the certified

mailing list”. Id. (quoting Chief Counsel Notice CC-2006-19 (Aug. 18, 2006)). In

cases in which a copy of the notice of deficiency and a matching Form 3877 have

been produced, the Court has found that the evidence of mailing was sufficient (if

no contrary evidence suggests that the notice had not been mailed). See, e.g., - 11 -

[*11] Schlegel v. Commissioner, T.C. Memo. 2016-90; Garrett v. Commissioner,

T.C. Memo. 2015-228; Spivey v. Commissioner, T.C. Memo. 2001-29, aff’d, 29

F. App’x 575 (11th Cir. 2001).

Petitioner asserted during the administrative hearing and now before us that

respondent failed to verify that a notice of deficiency was issued and mailed to

petitioner’s last known address for each tax year in issue. Respondent attempts to

deflect this challenge by asserting that it relates to the underlying tax liability,

which he argues petitioner cannot challenge. But proper verification is not a

challenge to the underlying liability; it is a stand-alone requirement in section

6330(c)(1) and is independent of the issues that may be considered under section

6330(c)(2) (such as the taxpayer’s underlying tax liability). Hoyle v.

Commissioner, 131 T.C. at 200-203.

We remanded this case to IRS Appeals to clarify the record as to what SO

Smith relied upon in determining that the notices of deficiency were properly

issued and sent to petitioner’s last known address, directing the parties specifically

to Hoyle. Respondent has not pointed to evidence in the record showing that SO

Smith examined underlying documents but rather has argued that her examination

of the lien filing notice and the computerized tax transcripts satisfied the

verification requirement in section 6330(c)(1). - 12 -

[*12] The stipulated record does not include the notices of deficiency or Forms

3877. 5 Under similar circumstances, we have held that we were unable to

determine that the settlement officer properly verified that the notices of deficiency

were mailed to the taxpayer’s last known address as required under section

6330(c)(1) and (3) and Hoyle. See, e.g., Kearse v. Commissioner, T.C. Memo.

2019-53; Rivas v. Commissioner, T.C. Memo. 2017-56 (stating that when the

Appeals officer did not examine underlying documents to ascertain proper mailing

of the notice of deficiency, he failed to fulfill a verification requirement under

section 6330(c)(1); but sustaining the determination on the basis of the record

before the Court). Without the notices of deficiency or Forms 3877 in the

stipulated record, we must come to the same conclusion here.

Conclusion

Restricted as we are to the stipulated evidence before us under Rule 122, we

must hold that SO Smith has not fulfilled her duty of verification under section

6330(c)(1): She did not verify that valid notices of deficiency were issued and

mailed to petitioner at his last known address for any of the tax years in issue by

5 While notices of deficiency for four of the years in issue (2009 through 2012) and matching Forms 3877 were attached to the respondent’s motion for summary judgment, those documents are not included in the stipulation of facts. See Rules 91(e), 122. - 13 -

[*13] reviewing underlying documentation after petitioner raised questions about

the existence or mailing of the notices of deficiency. See Hoyle v. Commissioner,

131 T.C. at 205 n.7.

We therefore cannot sustain the conclusion in the supplemental notice of

determination that applicable legal and administrative requirements had been met

with respect to the assessment of the deficiencies for 2004 through 2012 as

required by section 6330(c)(1).6 Consequently, we hold that IRS Appeals abused

its discretion in sustaining the filing of the NFTL with respect to petitioner’s

unpaid income tax liabilities for 2004 through 2012. Any contentions we have not

addressed are irrelevant, moot, or meritless.

An appropriate decision will be

entered.

6 Thus, we need not consider petitioner’s argument that he was improperly denied a face-to-face hearing.