816 F.3d 133
D.C. Cir.2016Background
- Michael Boulware, owner of two companies, had approximately $2 million in corporate payments for legal/professional fees that he did not report as income; Tax Court held they were taxable distributions and that ruling was affirmed on appeal.
- Boulware did not post a bond while appealing the underlying tax liability, allowing the IRS to proceed with collection immediately under 26 U.S.C. § 7485(a)(1).
- The IRS issued a notice of intent to levy and Boulware timely requested a Collection Due Process (CDP) hearing; Settlement Officer Kimberly Martin conducted the hearing by telephone and mail despite Boulware’s requests for a face-to-face meeting.
- Martin conditioned an installment agreement on (1) $29,000/month payments (her calculated ability to pay), (2) current tax compliance including 2012 estimated taxes, and (3) liquidation of certain assets (401(k) and life insurance policies totaling ~ $950,000).
- Boulware proposed $12,500/month, delayed liquidation until appeals exhausted, and did not address delinquent 2012 estimated taxes; Martin rejected the proposal and issued a notice of determination sustaining the levy.
- Boulware petitioned the Tax Court claiming abuse of discretion for (a) refusing his installment plan, (b) requiring liquidation of retirement/life insurance assets, and (c) denying a face-to-face hearing; the Tax Court upheld the IRS determination and the D.C. Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Appeals officer abused discretion by rejecting proposed installment agreement | Boulware: Martin wrongly thought she lacked discretion to approve installment plan for a delinquent taxpayer | IRS: Officer properly denied an agreement because taxpayer was not in current tax compliance and agency may require compliance | No abuse of discretion; denial proper because taxpayer was not compliant |
| Whether requiring liquidation of 401(k)/life policies constituted abuse of discretion or ignored special circumstances | Boulware: Liquidation would be irreversible and his advanced age made this a special circumstance | IRS: IRM permits liquidation requirement and will waive only for special factors; appeal pendency alone is not special; taxpayer failed to raise special-circumstance claim in CDP proceeding | No abuse; Court need not decide whether facts were special because claim was not raised at CDP hearing |
| Whether Appeals officer improperly considered Boulware’s criminal conviction when rejecting the plan | Boulware: Officer considered his tax-evasion conviction improperly | IRS: No record evidence shows conviction was considered | No abuse; no record support that conviction influenced decision |
| Whether taxpayer was entitled to a face-to-face CDP hearing | Boulware: He presented non-frivolous reasons (liquidation objection) and should have been offered in-person conference | IRS: Regulations make face-to-face meetings discretionary; denial reasonable given noncompliance and doubt about sincerity | No abuse; regulations do not guarantee face-to-face meeting and denial was reasonable |
Key Cases Cited
- Byers v. Commissioner, 740 F.3d 668 (D.C. Cir. 2014) (standard of review: abuse of discretion in CDP matters)
- Christopher Cross, Inc. v. United States, 461 F.3d 610 (5th Cir. 2006) (failure to timely pay taxes is a reasonable basis to reject collection alternatives)
- United States v. Boulware, 558 F.3d 971 (9th Cir. 2009) (criminal tax convictions of Michael Boulware)