Michael Boulware v. Commissioner of IRSMichael Boulware v. Commissioner of IRS
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For the foregoing reasons, we affirm the judgment of the District Court.
So ordered.
Richard Farber and Patrick Urda, Attorneys, U.S. Department of Justice, were on the brief for appellee.
Before: SRINIVASAN, Circuit Judge, and WILLIAMS and GINSBURG, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge GINSBURG.
GINSBURG, Senior Circuit Judge:
In 1993 the Internal Revenue Service began a criminal investigation into Michael Boulware‘s financial dealings, which ultimately led to his convictions for tax evasion and tax fraud. See United States v. Boulware, 558 F.3d 971 (9th Cir. 2009). Boulware is the president and sole owner of two companies, Hawaiian Isle Enterprises, Inc. and HIE Holdings, Inc., which paid his legal and professional fees in the criminal trial and other litigation from 1998-2002. Because Boulware did not report the payments, which totaled approximately $2 million, as income, the IRS issued deficiency notices. The Tax Court held that the payments were taxable as corporate distributions, HIE Holdings, Inc. v. Comm‘r, 97 T.C.M. (CCH) 1672 (2009), the Ninth Circuit affirmed, 521 Fed. Appx. 602 (2013), and the Supreme Court denied certiorari. --- U.S. ---, 134 S. Ct. 712, 187 L. Ed. 2d 553 (2013).1
Boulware did not post a bond while pursuing his appeals, which permitted the IRS immediately to collect on his liability. See
Settlement Officer Kimberly Martin conducted Boulware‘s CDP hearing by telephone and mail, though Boulware requested a face-to-face hearing on multiple occasions. During a May, 2012 telephone conversation, Martin set three requirements for entering into an installment payment agreement with Boulware. First, Boulware would have to agree to pay $29,000 per month, which Martin calculated was his “ability to pay” based upon Boulware‘s most recent tax returns and other financial documents. Second, Boulware would have to become compliant with all current tax obligations, including his estimated taxes for 2012. Finally, he would have to liquidate various personal assets, including a 401K account and two life insurance policies all together worth approximately $950,000, and put the proceeds toward his deficiency. Boulware
Boulware challenged that determination in Tax Court, arguing that Martin had abused her discretion by rejecting his proposed installment agreement and by refusing his request for a face-to-face hearing. The Tax Court upheld the determination, Boulware v. Comm‘r, 107 T.C.M. (CCH) 1419 (2014), and Boulware now appeals.
I.
Where the underlying tax liability is not at issue in a CDP proceeding, we review the determination of the IRS for abuse of discretion. Byers v. Comm‘r, 740 F.3d 668, 675 (D.C. Cir. 2014). Boulware argues that Martin‘s rejection of Boulware‘s proposed installment agreement was an abuse of discretion for three reasons.
First, Boulware argues that Martin erroneously believed she lacked discretion to approve a payment plan for a presently delinquent taxpayer. As the Tax Court found, however, Martin was not mistaken about her discretion. Boulware, 107 T.C.M. (CCH) 1419, at *22-23. The agency does not abuse its discretion by denying a request for an installment agreement when the taxpayer is not in compliance with his current tax obligations. See Christopher Cross, Inc. v. United States, 461 F.3d 610, 613, (5th Cir. 2006) (“[t]he failure to timely pay owed taxes is a perfectly reasonable basis for rejecting an offer in compromise relating to other unpaid taxes“); Starkman v. Comm‘r, 104 T.C.M. (CCH) 199 (2012).
Second, Boulware argues that Martin failed to consider the alleged “special circumstances” involved in forcing him to liquidate his 401K account and life insurance policies while his appeal was still pending. The Internal Revenue Manual in effect at the time of the CDP hearing provided that taxpayers “do not qualify for installment agreements if balance due accounts can be fully or partially satisfied by liquidating assets,” IRM § 5.14.1.4(5) (2012), and the agency ordinarily does not abuse its discretion by rejecting an installment agreement because a taxpayer refuses to liquidate assets. See Bibby v. Comm‘r, 16 T.C.M. (CCH) 665 (2013). The Commissioner may waive the liquidation requirement, however, if he determines that “factors such as advanced age, ill-health, or other special circumstances ... prevent the liquidation of the assets.” IRM § 5.14.1.4(5). According to Boulware, his circumstances were special because his retirement accounts and life insurance policies could not be restored if he were to prevail in his appeal and he could not re-build his retirement account at his advanced age. Nothing in the tax code exempts retirement accounts from collection, however, and if the pendency of an appeal were by itself a special circumstance that stayed collection, then the statutory requirement of a bond pending
We need not decide whether the aggregation of Boulware‘s particular circumstances were “special,” however, because, as the Tax Court explained, Boulware failed to raise the argument during his CDP hearing. Boulware, 107 T.C.M. (CCH) 1419, at *26-28; see
Third, Boulware argues that Martin improperly considered his criminal conviction for tax evasion in rejecting his proposed installment agreement. Nothing in the record supports this contention, however.
II.
Pursuant to Treasury Regulation
From Boulware‘s offer to pay less per month than half his assessed “ability to pay,” Martin “understandably questioned the sincerity of his interest in paying his outstanding tax liabilities.” Boulware, 107 T.C.M. (CCH) 1419, at *31. Moreover, the Treasury regulations instruct that a “face-to-face CDP conference concerning a collection alternative ... will not be granted unless other taxpayers would be eligible for the alternative in similar circumstances.”
III.
In sum, we hold the Commissioner did not abuse his discretion by rejecting Boulware‘s proposed payment plan or by denying his request for a face-to-face hearing. The judgment of the Tax Court is, therefore,
Affirmed