Hauptman v. Commissioner, 831 F.3d 950

Background

Hauptman, an investment consultant, failed to timely file/pay federal income taxes for 1992–1996; assessed about $13 million (growing to ~$15.5M by 2010). He does not dispute the underlying liability.
In 2007 the IRS issued notices of intent to levy and Hauptman requested collection due process (CDP) hearings, asserting an offer-in-compromise should be accepted.
The Office of Appeals issued notices of determination upholding the levies; Hauptman petitioned the Tax Court. The Tax Court stayed proceedings to permit submission of an offer-in-compromise rather than remanding.
Hauptman submitted a $500,000 offer to settle ~$15.5M, plus financial disclosures that undervalued his businesses relative to prior loan documents; claimed modest monthly income and expenses.
The IRS rejected the offer citing egregious noncompliance, incomplete financial disclosure, apparent ability to pay, and calculated reasonable collection potential of ~$12.16M; Office of Appeals issued supplemental notices of determination rejecting the offer.
Tax Court reviewed whether the IRS abused its discretion in rejecting the offer; it upheld the rejection. The Eighth Circuit affirms.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Tax Court had jurisdiction to review supplemental notices of determination	Tax Court lost jurisdiction because it never formally remanded the case to Appeals before Appeals issued supplemental determinations	Jurisdiction under 26 U.S.C. §6330 attaches when Appeals issues a determination and taxpayer files within 30 days; supplemental determinations relate back to original CDP notice	Court: Jurisdiction proper; statutory prerequisites satisfied and supplemental notice is a supplement, not a new determination
Whether IRS abused its discretion by rejecting Hauptman’s $500,000 offer-in-compromise	Offer should be accepted; purpose of OICs is to allow delinquents to settle liabilities	Appeals properly considered statutory balancing test, found noncompliance, incomplete disclosure, and significant collection potential	Court: No abuse of discretion; Appeals gave reasoned decision following procedures
Whether Appeals’ reliance on Hauptman’s noncompliance was improper	Rejecting offers simply because taxpayer was delinquent would bar all OICs	Appeals relied on continuing failure to report income, prior concealment, and failure to prioritize taxes — not mere past delinquency	Court: Noncompliance as found is a valid basis to reject the offer
Whether Appeals’ valuation of assets/collection potential was contrary to the evidence	Hauptman contends assets were liquidated at lower values than Appeals assumed	Appeals’ calculations were supported by the record; Hauptman pointed to no contrary evidence showing collection potential equals $500,000	Court: Appeals’ valuation stands; Hauptman did not show error or that collection potential was only $500,000

Key Cases Cited

Fifty Below Sales & Mktg., Inc. v. United States, 497 F.3d 828 (8th Cir. 2007) (standard for appellate review of Appeals officer’s rejection of offer-in-compromise)
Gilbert v. Monsanto Co., 216 F.3d 695 (8th Cir. 2000) (de novo review of subject-matter jurisdiction)
Gillum v. Comm’r, 676 F.3d 633 (8th Cir. 2012) (jurisdictional prerequisites for Tax Court review under §6330)
Gray v. Comm’r, 723 F.3d 790 (7th Cir. 2013) (taxpayer must file Tax Court petition within 30 days of Appeals determination)
Ginsberg v. C.I.R., 130 T.C. 88 (Tax Ct. 2008) (supplemental determination relates back to original CDP determination; not a new appeal right)
Keller v. Comm’r, 568 F.3d 710 (9th Cir. 2009) (taxpayer must show actual collection potential supports claimed inability to pay)