2021 TC Memo 10
Tax Ct.2021Background
- Petitioner Reynolds pleaded guilty to tax-related crimes; the federal district court ordered $193,812 in restitution for tax years 2000–2003.
- IRS assessed restitution-based assessments (RBAs) under I.R.C. § 6201(a)(4) in 2013 matching the court-ordered amounts and later credited some payments and a tax refund.
- IRS issued a Final Notice of Intent to Levy (FNIL) and filed a Notice of Federal Tax Lien (NFTL); petitioner timely requested CDP hearings.
- Appeals sustained the FNIL and NFTL; Appeals and IRS relied on IRM guidance concerning RBAs, coordination with DOJ, and limits on installment agreements for restitution claims.
- Petitioner argued (1) IRS lacks authority to collect RBAs administratively, (2) DOJ’s apparent $65/month billing prevented IRS collection, (3) Appeals failed to coordinate with DOJ per the IRM, and (4) Appeals abused discretion by rejecting an installment plan, CNC status, and NFTL withdrawal.
- Tax Court: declined to revisit Carpenter, found IRS authority to collect RBAs under § 6201(a)(4), held Appeals did not abuse discretion (but ordered abatement/adjustment of conceded interest/penalties and crediting of DOJ payments).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to administratively assess/collect RBAs under §6201(a)(4) | Reynolds: IRS lacks authority to pursue administrative collection of restitution assessments | IRS: §6201(a)(4) authorizes administrative assessment/collection of restitution; Carpenter controls | Court: IRS has authority; declines to revisit Carpenter (Carpenter upheld) |
| Effect of DOJ "payment plan" / §6331(k)(2)(C) | Reynolds: DOJ billing of $65/month creates a payment plan that bars IRS collection | IRS: No §6159 installment agreement existed; §6331(k)(2)(C) inapplicable; DOJ billing is separate | Court: DOJ payments do not bar IRS FNIL/NFTL; §6331(k)(2)(C) not applicable |
| Appeals verification / coordination with DOJ and IRM compliance | Reynolds: Appeals failed to verify/coordinate with DOJ per IRM, violating §6330(c)(1) | IRS: Advisors and ROs obtained the judgment, communicated with DOJ/Advisory; periodic credits show coordination; IRM not legally binding | Court: No verification failure; IRM nonbinding and record shows coordination; no remand required |
| Rejection of proposed installment agreement (PPIA) / IA standards | Reynolds: IRS should accept IA equal to court-ordered payment (≈ $100 or 10% income) or allow partial IA | IRS: IRM bars IAs that would pay less/fewer payments than court plan; IA must facilitate full collection of restitution | Court: Appeals acted within discretion in rejecting PPIA because it would not satisfy full restitution per IRM |
| Denial of CNC status and NFTL withdrawal | Reynolds: Appeals abused discretion by denying CNC and not withdrawing NFTL | IRS: Petitioner failed to provide adequate financial evidence (Form 433-A omitted spouse, income, expenses); withdrawal is discretionary under §6323(j) | Court: Denial of CNC and NFTL sustainment not an abuse of discretion; petitioner failed to properly raise/justify lien withdrawal; IRS to abate conceded interest/penalties and credit DOJ payments |
Key Cases Cited
- Carpenter v. Commissioner, 152 T.C. 202 (Tax Ct. 2019) (upholding IRS authority to assess and administratively collect court-ordered restitution under §6201(a)(4))
- Klein v. Commissioner, 149 T.C. 341 (Tax Ct. 2017) (holding restitution awards are not subject to tax underpayment interest and failure-to-pay penalties)
- Murphy v. Commissioner, 125 T.C. 301 (Tax Ct. 2005) (standard of review for Appeals determinations is abuse of discretion when underlying liability not in dispute)
- Sego v. Commissioner, 114 T.C. 604 (Tax Ct. 2000) (taxpayer may contest underlying liability at CDP only if no prior opportunity to do so)
- Goza v. Commissioner, 114 T.C. 176 (Tax Ct. 2000) (same principle on contesting underlying liability at CDP)
- Weiss v. Commissioner, 147 T.C. 179 (Tax Ct. 2016) (Internal Revenue Manual lacks force of law and does not create taxpayer rights)
- Chadwick v. Commissioner, 154 T.C. 84 (Tax Ct. 2020) (standards for currently not collectible status and Appeals consideration)