ELDO KLINGENBERG, Pеtitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9643-10L.
UNITED STATES TAX COURT
Filed October 18, 2012.
T.C. Memo. 2012-292
WHERRY, Judge
Held: R‘s determinations are sustained.
Eldo Klingenberg, pro se.
Najah J. Shariff, for respondent.
WHERRY, Judge: This case is before the Court on a petition filed on April 26, 2010, and amended on June 30, 2010, for review of a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination), issued on March 23, 2010.1 Petitioner seeks review of respondent‘s determinations to proceed with his levy for the 1991 through 1997 tаx years and for his determination to proceed with a levy and the filing of a lien for the 2004 tax year.
These collection actions stem from substitutes for returns respondent prepared pursuant to
Some of the facts have been stipulated. The stipulations, with accompanying exhibits, are incorporated herein by this reference. At the time the petition was filed, petitioner resided in California.
Petitioner is a self-employed plumber and a habitual nonfiler who last filed a Federal income tax return for tax year 1990. See Klingenberg v. Commissioner, T.C. Memo. 2011-247. For the 1991 through 1997 and 2004 tax years petitioner neither filed Federal income tax returns nor made any payments on his account.
Ms. Sherron Crowley, who during the relevant period was a special enforcement procedures revenue agent and whose job was to obtain returns from individuals who were considered high-income nonfilers, was assigned to petitioner‘s case. Special Agent Crowley conducted an audit and examination for petitioner‘s 1991 through 1997 tax years. During this time she attempted to contact petitioner to have him voluntarily file the delinquent income tax returns; despite her efforts petitioner did not file any.
To determine petitioner‘s income, Special Agent Crowley began by looking at Forms 1099-MISC, Miscellaneous Income, issued to petitioner that third-party contractors had submitted to the Internal Revenue Service (IRS). She would then contact the contractors for their records relating to petitioner. Special Agent
After contacting the contractors, individual customers, and the suppliers, Special Agent Crowley reconstructed petitioner‘s income. Special Agent Crowley deducted from the receipts the costs of the supplies purchased from the suppliers. When Special Agent Crowley had invoices for expenses but was unable to contact the particular customer, she estimated the income for that project by applying an average of profit percentages that petitioner had made on his other contracts. From all of this information she prepared a substitute for return for each taxable year in the audit period.
On March 28, 2002, respondent sent petitioner four notices of deficiency for his 1991 through 1997 tax years by certified mail to each of his two last known addresses. One of these addresses was the same address petitioner provided as his current address on his petition with this Court. Two of the notices of deficiency
On February 25, 2008, respondent sent petitioner a notice of deficiency for his 2004 tax year by certified mail to his last known address. Petitioner did not petition this Court for redetermination of the deficiency. On July 28, 2008, respondent assessed a deficiency and additions to tax for petitioner‘s 2004 tax year.
On October 16, 2008, respondent mailed petitioner a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to A Hearing Under IRC 6320, advising that respondent wоuld on October 17, 2008, file a notice of Federal tax lien (NFTL) for tax year 2004. On November 24, 2008, respondent received an incomplete copy of petitioner‘s Form 12153, Request for a Collection Due Process or Equivalent Hearing, which was postmarked on November 15, 2008, but did not include an attachment thereto referenced on page 2 of the Form 12153. By letter dated December 1, 2008, respondent requested that petitioner provide a complete collection due process (CDP) hearing request. Resрondent received petitioner‘s
On December 16, 2008, respondent mailed petitioner a Final Notice and Notice of Intent to Levy and Notice of Your Right to a Hearing (final notice of intent to levy) for the 1991 through 1997 and 2004 tax years. This final notice of intent to levy showed that petitioner owed the following amounts:2
| Year | Unpaid amount from prior notices | Additional penalty | Additional interest | Total |
|---|---|---|---|---|
| 1991 | $125,485 | -0- | $57,852 | $183,337 |
| 1992 | 290,523 | -0- | 133,718 | 424,241 |
| 1993 | 480,174 | -0- | 220,528 | 700,702 |
| 1994 | 461,810 | -0- | 211,531 | 673,341 |
| 1995 | 360,819 | -0- | 164,740 | 525,559 |
| 1996 | 198,990 | 18,187 | 94,542 | 311,719 |
| 1997 | 82,272 | 8,208 | 39,088 | 129,568 |
| 2004 | 25,543 | 645 | 594 | 26,782 |
| Total | 2,025,616 | 27,040 | 922,593 | 2,975,249 |
On January 15, 2009, respоndent received a timely Form 12153 request for a CDP hearing for the 1991-97 and 2004 tax years. In an attachment petitioner again requested a face-to-face hearing and demanded that the IRS verify that all procedures were followed properly. He stated that he did not believe he was liable for tax, that he “should NOT be held responsible for the penalties accrued“, and that he wanted to “challenge this ‘liability’ seeing that I NEVER had a chance to challenge it before“. Again, in the alternative, petitioner аsserted that “If this liability is indeed a proper assessment and can be proven that it is authentic and owed, I would like to discuss what collection alternatives are available to me, to include, but not limited to Offer in Compromise, Installment Agreements, and any other payment arrangements that may be available to me.” Finally petitioner claimed that “[i]t is not my intention to discuss any issues that the IRS or the Courts considered to be frivolous. If you have considered any of my prior issues that I raised in the past to be frivolous, I hereby rеnounce them.”
At the appointed time Officer Martin called petitioner for the CDP telephone hearing. Petitioner did not participate in the scheduled January 29, 2010, telephone hearing. Instead he sent Officer Martin a letter dated January 29, 2010, objecting that the date set did not give him enough time to prepare and
On February 23, 2010, Officer Martin mailed petitioner a followup letter expressing regret that petitioner was not available for the hearing and pointing out that petitioner had not, as the original letter requested, called before the telephone hearing to reschedule it if the set time was not convenient. That letter also noted petitioner‘s failure to comply with the requirements for collection alternatives eligibility, which would have made him eligible for a face-to-face hearing, including his failure to provide the requested information and file delinquent tax returns. Officer Martin then explained that
Since you claim you never received the Statutory Notice of Deficiency and the assessments are based on substitute for returns bеcause you do not voluntarily file a return I will give you an opportunity to file original returns for tax years 1991-1997 and 2004. Please provide full and complete documentation of all deductions which is required for an audit reconsideration
She gave petitioner until March 9, 2010, to respond and submit the delinquent income tax returns and any relevant information for her consideration. Officer
Petitioner did not respond or provide Officer Martin with any of the requested information by March 9, 2010. Subsequently Officer Martin made her determination and prepared the case for clоsure. On March 23, 2010, respondent issued petitioner a notice of determination sustaining the levy and lien actions and noting petitioner was not eligible for any collection alternatives.
In petitioner‘s June 30, 2010, amended petition he stated that
Respondent failed to provide Petitioner with a face-to-face Collection Due Process (CDP) Hearing, which Petitioner specifically requested for. Respondent has failed to show that Respondent followed all proper procedures as required by law. Petitioner never received a Notice of Deficiency for the tax year 2004 and therefore was also not given the opportunity to challenge the underlying tax liability.
A trial was held on December 7, 2011, in Los Angeles, California.
I. Standard of Review
A. Administrative Record Rule
Under the Golsen rule, we follow the law of the Court of Appeals for the Ninth Circuit, to which this case, absent a stipulation to the contrary, is appealable. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff‘d, 445 F.2d 985 (10th Cir. 1971). That court has limited the review of the administrative determination to the administrative record. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009) (“our review is confined to the record at the time the Commissionеr‘s decision was rendered“), aff‘g in part T.C. Memo. 2006-166.
Petitioner asserts that he never had an opportunity to dispute his underlying tax liabilities. He contends that he never received notices of deficiency for the periods at issue. Respondent contends that the notices were properly mailed by certified mail to petitioner‘s last known address.
The presumption of official regularity and delivery arises if the record reflects that a notice of deficiency was properly mailed to the taxpayer. Sego v. Commissioner, 114 T.C. 604, 611 (2000); see also United States v. Zolla, 724 F.2d 808 (9th Cir. 1984). Proper mailing includes mailing by certified mail to the taxpayer‘s last known address. Sego v. Commissioner, 114 T.C. at 611. If the presumption applies, this Court may find that a taxpayer received the notice if he fails to rebut the presumption. See Conn v. Commissioner, T.C. Memo. 2008-186. Where the presumption of official regularity and delivery arises, receipt of the notice of deficiency will be presumed in the absence of strong evidence to the contrary. See Sego v. Commissioner, 114 T.C. at 611. A taxpayer‘s self-serving claim that he did not receive the notice of deficiency will generally be insufficient tо rebut the presumption. Our “determination of whether a taxpayer has received a notice of deficiency so as to preclude a challenge to the underlying tax liability under section 6330(c)(2)(B) is made ‘On the preponderance of the evidence.’
Petitioner relies upon three cases: Barnes v. Commissioner, T.C. Memo. 2010-30, Campbell v. Commissioner, T.C. Memo. 2012-82, and Conn v. Commissioner, T.C. Memo. 2008-186. Petitioner argues that these three cases stand for the proposition that “the receipt of a notice of deficiency, not its mailing is the relevant event“. We agree.
Barnes was before the Court on a motion for summary judgment. In that case the Court еxplained that “summary judgment is appropriate where there is no genuine issue as to any material fact and a decision may be rendered as a matter of law.” The taxpayer in Barnes had not yet been given an opportunity to testify at trial and, of particular importance, the notice of deficiency had been returned to the IRS. “Thus there * * * [was] no dispute that * * * [the taxpayer] did not actually receive the notice of deficiency.” Under the specific facts of that case, because there was no evidence the taxpayer had refused delivery, the Court found that the taxpayer had not been given a prior opportunity to contest the underlying liability and remanded the case to Appeals.
Campbell is also significantly different from petitioner‘s case. Campbell was likewise before the Court on a motion for summary judgment and again the statutory notice of deficiency had been returned to the Commissioner by the U.S. Postal Service. Besides, unlike petitioner in the case at hand, the taxpayer in Campbell was never given an opportunity for audit reconsideration as a forum to contest the underlying liability.
Finally, in Conn the Court did discuss the fact that mailing alone can be insufficient under
Respondent has shown that the notices of deficiency were mailed by certified mail to petitioner‘s last known mailing address, which is also his current
Petitioner failed to rebut the presumption of official regularity, and we conclude that he received the notices of deficiency. Therefore petitioner is not entitled to challenge his underlying liabilities and we will review respondent‘s administrative determination for abuse of discretion.3 See Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. at 182.
II. Review for Abuse of Discretion
If an administrative hearing is requested, the hearing is to be conducted by the Appeals Office.
A. Denial of a Face-to-Face Hearing
Although a
Petitiоner never raised any nonfrivolous issue. He repeatedly demanded that Officer Martin explain the procedures or laws that were followed and argued that he did not have the opportunity to contest the underlying liabilities. However, petitioner never presented any evidence that the underlying liabilities were incorrect, nor did he suggest a collection alternative or submit any of the requested financial information or income tax returns and estimated tax payments for 2009. It was not an abuse of discretiоn for Officer Martin to deny petitioner a face-to-face hearing. See e.g., Seaver v. Commissioner, T.C. Memo. 2012-55, slip op. at 6.
Among the issues that may be raised at Appeals are “offers of collection alternatives“, such as offers-in-compromise and installment agreements.
Even if petitioner‘s statement on his attachment to Form 12153 that he “would like to discuss what collection alternatives are available to me, to include, but not limited to Offer in Compromise, Installment Agreements, and any other payment arrangements that may be available to me” could be construed as an informal offer or an offer to make an offer-in-compromise or agree to an installment agreement, Officer Martin did not abuse her discretion in refusing to process an offer or an installment agreement. Pеtitioner never suggested any collection alternatives and never even bothered to respond to Officer Martin‘s February 23, 2010, letter. Petitioner did not file his 2006, 2007, and 2008 Federal income tax returns, file Form 433-A, or produce evidence of or make any estimated tax payments for 2009. Petitioner did not qualify for a collection alternative. See Internal Revenue Manual pt. 5.8.7.2.2.1(1) (May 10, 2011) (“A processable offer
In making their determination Officer Martin and/or her supervisor, Appeals Team Manager Marlene M. Okajima, verified that all requirements of applicable law and administrative procedure had been met. Petitioner never offered a concrete collection alternative or raised any nonfrivolous issues and did not provide the requested Forms 433-A or any other financial information. Thus they did not abuse their discretion in acting as they did on respondent‘s behalf.
III. Section 6673 Penalty
We believe petitioner‘s case to be appropriate for a
Petitioner has been warned of the potential for a
We conclude that this case warrants the imposition of a
Furthermore:
Groundless litigation diverts the time and energies of judges from more serious claims; it imposes needless costs on other litigants. Once the legal system has resolved a claim, judges and lawyers must movе on to other things. They cannot endlessly rehear stale arguments. Both appellants say that the penalties stifle their right to petition for redress of grievances. But there is no constitutional right to bring frivolous suits, see Bill Johnson‘s Restaurants, Inc. v. NLRB, 461 U.S. 731, 743, 103 S.Ct. 2161, 2170, 76 L.Ed.2d 277 (1983). People who wish to express displeasure with taxes must choose other forums, and there are many available. * * * [Coleman v. Commissioner, 791 F.2d at 72.]
We are mindful that respondent, having received no help from petitioner, has computed the maximum tax which may be due for each of the eight years at issue here. Because the payment of this tax is now delinquent by up to 20 years, the accrued interest and additions to tax for failure to file returns or make estimated tax payments plus the tax now exceed $3 million. This amount respondent is unlikely to collect. Nevertheless, even though only a token amount, given petitioner‘s actions, a
To reflect the foregoing,
Decision will be entered for respondent.
Notes
Petitioner was given the opportunity to contest the underlying liabilities in the CDP correspondence. Officer Martin explicitly informed petitioner that she would accept returns from him for the years at issue and would initiate an audit reconsideration. This was an opportunity to contest the underlying liabilities. Petitiоner could have properly prepared his delinquent tax returns reflecting the amounts he believed he owed. Petitioner chose not to avail himself of this procedure.
Petitioner was again given the opportunity to provide tax returns for the 1991 through 1997 and 2004 tax years. This time respondent‘s counsel, after the filing of the petition in this case, offered to allow petitioner to file returns for the years at issue. Petitioner again chose not to prepare the returns and contest the underlying liabilities. Petitioner has had multiple opportunities to contest the underlying liabilities.