Petitioner seeks review, pursuant to section 6320, of respondent’s determination to proceed with collection of petitioner’s unpaid trust fund recovery penalty liabilities for periods ending March 31 and September 30, 2000, and also petitioner’s Federal income tax liability for her 2008 tax year. 1 The issues we have been asked to decide are: (1) whether the Internal Revenue Service (IRS) Appeals Office settlement officer to whom petitioner’s case and hearing were assigned was an impartial officer pursuant to section 6320(b)(3), and (2) if she was an impartial officer, whether respondent may proceed with collection of petitioner’s unpaid tax liabilities in issue.
FINDINGS OF FACT
Some of the facts and certain exhibits have been stipulated. The parties’ stipulated facts and the attached exhibits are incorporated in this Opinion by reference and are found accordingly. At the time of filing the petition, petitioner resided in Ohio.
On November 29, 2001, petitioner signed Form 2751, Proposed Assessment of Trust Fund Recovery Penalty, and consented to the assessment and collection of trust fund recovery penalties (TFRPs) pursuant to section 6672 of $22,789.42 for the period ending March 31, 2000, and of $14,859.16 for the period ending September 30, 2000. On March 18, 2002, respondent assessed against petitioner TFRPs in the amounts listed above.
Additionally, with respect to petitioner’s 2008 tax year, respondent sent to petitioner, on December 7, 2009, Notice CP2000 proposing an increase in petitioner’s Federal income tax of $2,150. After receiving the Notice CP2000, petitioner filed a Form 1040X, Amended U.S. Individual Income Tax Return, reporting the previously undeclared income for her 2008 tax year. On March 23, 2010, respondent assessed against petitioner the $2,150 tax increase for her 2008 tax year.
On June 21, 2010, petitioner submitted to respondent a completed Form 656, Offer in Compromise (OIC), with attached Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, proposing to compromise for $200 her unpaid tax liabilities arising out of TFRPs assessed against her for the tax periods ending March 31 and September 30, 2000. Petitioner requested that her OIC be accepted under “doubt as to collectibility” criteria and claimed that she had insufficient assets and income to pay the full amount owed.
On March 12, 2011, the IRS Centralized OIC Unit (COIC Unit) sent petitioner a letter confirming receipt of her OIC. From March to May 2011, acting through letters and telephone calls, the COIC Unit requested and petitioner provided additional information, substantiation, and explanation of the representations that petitioner set forth on her OIC and Form 433-A. At a point during their communication, the COIC Unit and petitioner discussed petitioner’s unpaid income tax liability for her 2008 tax year and included that liability among the outstanding amounts that petitioner was seeking to settle through her OIC. On May 31, 2011, respondent rejected petitioner’s OIC because the COIC Unit calculated petitioner’s reasonable collection potential to be $34,497.88. The COIC Unit also recommended that respondent file a notice of Federal tax lien (NFTL) with respect to petitioner’s unpaid tax liabilities.
On June 28, 2011, petitioner appealed to the Appeals Office the rejection of her OIC, listing her income tax liability for her 2008 tax year in addition to the TFRPs for the periods ending March 31 and September 30, 2000, as the liabilities and tax periods involved with the appeal (periods in issue). Petitioner also sent the Appeals Office a letter with additional documents and information to support her OIC and to inform the Appeals Office that her circumstances had changed and that she had lost her job. The Appeals Office confirmed receipt of petitioner’s appeal of her rejected OIC and informed petitioner that Settlement Officer Barbara Smeck had been assigned to her case.
On July 12, 2011, respondent filed an NFTL for the periods in issue and mailed to petitioner a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320. The Letter 3172 informed her that she had a right to a collection due process (CDP) hearing and that she had to request a CDP hearing by August 18, 2011. Petitioner submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, on July 27, 2011, to request a CDP hearing with respect to her unpaid tax liabilities for the periods in issue. On Form 12153, petitioner requested that the Appeals Office discuss collection alternatives and withdraw the NFTL. Settlement Officer Donna Kane was assigned to review petitioner’s case and to provide her with her CDP hearing.
Ms. Smeck sent petitioner a letter on August 25, 2011, requesting that she submit, by September 26, 2011, additional financial information and substantiation, as well as an updated Form 433-A. Petitioner responded to Ms. Smeck’s request on September 25, 2011, and provided her with financial information and some of the other requested documents. Petitioner later sent to Ms. Smeck additional documentation to support her OIC.
On September 29, 2011, Ms. Kane informed petitioner that her CDP case and hearing would be reassigned because petitioner had already submitted an OIC that was under consideration. Petitioner’s CDP case and hearing request were transferred from Ms. Kane to Ms. Smeck, who was at that time reviewing petitioner’s appeal of her rejected OIC.
During November 2011, Ms. Smeck reviewed petitioner’s rejected OIC and the financial information she had submitted and also called petitioner to discuss her issues with her CDP hearing and the option of placing her account in “currently not collectible” status.
On February 7, 2012, respondent issued two Notices of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notices of determination), one with respect to petitioner’s income tax liability for her 2008 tax year and the other with respect to the TFRPs for the periods ending March 31 and September 30, 2000. In the notices of determination, respondent sustained the filing of the NFTL and the rejection of petitioner’s OIC for the periods in issue. On March 9, 2012, petitioner timely petitioned this Court for review of respondent’s notices of determination.
OPINION
Pursuant to section 6321, the Federal Government obtains a lien against “all property and rights to property, whether real or personal” of any person liable for Federal tax upon demand for payment and failure to pay. See Iannone v. Commissioner,
Section 6330(c), (d) (other than paragraph (2)(B) thereof), and (e) governs the conduct of a hearing requested under section 6320. Sec. 6320(c). At the hearing, the taxpayer may raise any relevant issues including appropriate spousal defenses, challenges to the appropriateness of collection actions, and collection alternatives. Sec. 6330(c)(2)(A). The taxpayer may challenge the underlying tax liability at the hearing only if the taxpayer did not receive a statutory notice of deficiency or otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B). In addition to considering issues raised by the taxpayer under section 6330(c)(2), the Appeals Office must also verify that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(c)(1), (3).
If a taxpayer requests a hearing in response to an NFTL pursuant to section 6320, a hearing must be conducted by an impartial officer or employee of the Appeals Office.
3
Sec. 6320(b)(1), (3). An impartial officer or employee is one who has had no prior involvement with respect to the unpaid tax specified in section 6320(a)(3)(A) before the first hearing under section 6320 or section 6330. Id. Although the Internal Revenue Code does not define the term “no prior involvement”, see Harrell v. Commissioner,
Petitioner contends that Ms. Smeck was not an impartial officer because she reviewed petitioner’s appeal of her rejected OIC for the periods in issue before conducting petitioner’s CDP hearing for the same periods in issue. Petitioner contends that the CDP hearing was improper pursuant to section 6320(b)(3) and requests that we remand her case to the Appeals Office to properly reconsider the NFTL and petitioner’s collection alternatives. Respondent, on the other hand, contends that Ms. Smeck was an impartial officer because she had not yet issued a determination and that there is no “prior” involvement when a reviewing officer has not made any determination with respect to the previously rejected OIC. Moreover, respondent contends that section 6320 contemplates simultaneous review of all issues related to collections during the CDP hearing and that a simultaneous review benefits taxpayers. 5
In support of her contention, petitioner cites Cox v. Commissioner,
As we noted above, the Tax Court in Cox determined that there was no violation of the impartial officer requirement because (1) the officer’s prior involvement was only peripheral to, and not the subject of or directly in dispute in, a proceeding before the Court, and (2) there was no greater or different harm where both the officer’s prior involvement and current consideration were in the context of a CDP hearing. Cox v. Commissioner,
Respondent also contends that the Court of Appeals’ holding in Cox is not precedential for the instant case, which is appealable to the U.S. Court of Appeals for the Sixth Circuit. 6 Respondent is correct that we follow a Court of Appeals’ decision where appeal lies to that Court of Appeals and, therefore, it does not follow under the Golsen rule that we apply the Court of Appeals’ holding in Cox in the instant case. 7
As the instant case is distinguishable from Cox, we next address whether the facts before us indicate prior involvement. Ms. Smeck reviewed petitioner’s appeal of her rejected OIC for the periods in issue for nearly three months before petitioner’s CDP hearing for the same periods in issue was also transferred to her. During those three months, Ms. Smeck requested from petitioner and evaluated various documents, forms, and other, financial information to calculate petitioner’s reasonable collection potential and evaluate petitioner’s rejected OIC. Accordingly, through her review of petitioner’s rejected OIC, 8 Ms. Smeck had prior involvement with petitioner’s unpaid tax liabilities for the periods in issue before she was assigned to handle petitioner’s CDP hearing for the same taxes and periods in issue. Consequently, we hold that, pursuant to section 301.6320-l(d)(2), Proced. & Admin. Regs., Ms. Smeck is not an impartial officer pursuant to section 6320(b)(3) and petitioner is entitled to a new CDP hearing before an impartial officer.
Respondent contends that Ms. Smeck was an impartial officer because she had not yet issued a determination regarding petitioner’s rejected OIC and that there is “current” involvement, but no “prior” involvement, when an officer has not made any determination regarding a rejected OIC. We disagree. The regulations plainly prohibit “prior involvement” and do not specify that the involvement must culminate in the issuance of a determination of any sort. See generally sec. 301.6320-1(d), Proced. & Admin. Regs. Accordingly, we conclude that Ms. Smeck’s participation in petitioner’s OIC appeal constituted “prior involvement” even though she did not issue a determination with regard to the rejected OIC before handling petitioner’s CDP hearing.
Additionally, respondent contends that section 6320 contemplates simultaneous review of all issues related to collections during the CDP hearing and that all collection matters may be handled by the same officer. Respondent relies on three main sources of support for that contention.
Respondent first cites section 301.6320-l(d)(l), Proced. & Admin. Regs., which states that “the CDP hearing requested under section 6320 will be held in conjunction with any CDP hearing the taxpayer requests under section 6330.” We disagree with respondent’s application of section 301.6320-1(d)(1), Proced. & Admin. Regs., to the facts of the instant case. That regulation contemplates a situation in which a taxpayer requests a lien CDP hearing pursuant to section 6320 and, separately, a pre-levy CDP hearing pursuant to section 6330; in those circumstances, the cited regulation provides that the requested CDP hearings may be combined. Sec. 301.6320-l(d)(l), Proced. & Admin. Regs. As we read the legislative history, Congress contemplated one situation where an Appeals officer with prior involvement with respect to the unpaid liability specified in the taxpayer’s case may combine a separate CDP hearing, i.e., where it involves a pre-levy CDP hearing pursuant to section 6330 and a lien CDP hearing pursuant to section 6320 regarding the same unpaid liability. H.R. Conf. Rept. No. 105-599, at 266 (1998), 1998-
Secondly, respondent relies upon Gravette v. Commissioner,
Thirdly, respondent contends that the purpose of section 6320(b)(3) is to prevent an Appeals officer from examining a taxpayer’s underlying liability during the examination function and then handling a CDP hearing involving the same liability during the enforcement function, because the officer’s evaluation of the liability might bias his or her determination of whether the unpaid liability is collectible. However, respondent explains, the bias is not present where the officer is faced solely with the question of whether the tax is collectible, i.e., whether the taxpayer is able to pay outstanding liabilities, and therefore, that Ms. Smeck’s concurrent handling of petitioner’s rejected OIC and CDP hearing does not run afoul of the section 6320(b)(3) prohibition against prior involvement because both matters involved an evaluation of petitioner’s ability to pay the unpaid tax liabilities for the periods in issue. We disagree with respondent’s contention. It is well established that “in the absence of a ‘clearly expressed legislative intention to the contrary’, the language of the statute itself ‘must ordinarily be regarded as conclusive’.” Burlington N. R.R. Co. v. Okla. Tax Comm’n,
Respondent also contends that taxpayers benefit from combining appeals of rejected OICs with CDP hearings because it would allow for judicial review of an OIC submitted outside the context of a CDP hearing. There is no question that this Court is a court of limited jurisdiction. See Logan v. Commissioner,
On the basis of the record before us, we conclude that Ms. Smeck’s review of petitioner’s rejected OIC for her unpaid tax liabilities for the periods in issue constituted “prior involvement” pursuant to section 301.6320-1(d)(2), A-D4, Proced. & Admin. Regs. Accordingly, we hold that Ms. Smeck was not an impartial officer pursuant to section 6320(b)(3) and that respondent did not fulfill his statutory duty to provide petitioner with a “fair” CDP hearing pursuant to section 6320(b). Consequently, petitioner is entitled to a new CDP hearing before an impartial Appeals officer in accordance with section 6320(b) and we will, therefore, exercise our discretion to remand the instant proceedings to the Appeals Office for that purpose. On the basis of the foregoing, we need not address at this time the issue of whether respondent may proceed with collection of petitioner’s unpaid tax liabilities for the periods in issue.
In reaching these holdings, we have considered all the parties’ arguments, and, to the extent not addressed herein, we conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
An appropriate order will be issued.
Notes
Unless otherwise indicated, section and Internal Revenue Code references are to the Internal Revenue Code of 1986, as amended and in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
Respondent made petitioner aware of her right to a CDP hearing when he sent petitioner the Letter 3172 on July 12, 2011. Petitioner properly requested a CDP hearing by submitting a Form 12153 on July 27, 2011.
Pursuant to sec. 6320(b)(3), a taxpayer may waive the impartial officer requirement. See also sec. 301.6320-1(d)(2), A-D5, Proced. & Admin. Regs. In the instant case, the administrative record does not contain a completed and signed Form 14041, Waiver for Right to Request a New Settlement/ Appeals Officer Under Section 6320 and/or 6330, and petitioner asserts that she did not sign any such waiver. Moreover, respondent does not contend that petitioner waived the requirements of sec. 6320(b)(3). See Rules 40, 331(b). Accordingly, we conclude that petitioner has not waived the sec. 6320(b)(3) impartial officer requirement.
Sec. 301.6320—1(d)(2),A— D4, Proced. & Admin. Regs., also provides that “[p]rior involvement exists only when the taxpayer, the tax and the tax period at issue in the CDP hearing also were at issue in the prior non-CDP matter, and the Appeals officer or employee actually participated in the prior matter.” We note, however, that at least one Federal court has stated that the provision is invalid. See Cox v. Commissioner,
Petitioner also claims that “Ms. Smeck’s mind was already made up,” and each party claims that the other was disagreeable or uncooperative and acted in bad faith. We have previously suggested that sec. 6320(b)(3) does not entail a challenge to the objectivity of the officer who presides over the CDP hearing. See Criner v. Commissioner,
Golsen v. Commissioner,
Pursuant to Golsen v. Commissioner,
Although the record is unclear as to whether petitioner submitted a formal OIC for the periods in issue or only for the periods ending March 31 and September 30, 2000, we find that the parties informally included her unpaid tax liability for her 2008 tax year in her OIC through the course of their interaction. The issue of whether there is an enforceable OIC with respect to all of the periods in issue is separate and distinct from whether an officer’s review of that OIC is prior involvement pursuant to sec. 301.6320-l(d), Proced. & Admin. Regs. Because the record is clear that Ms. Smeck at least informally reviewed petitioner’s 2008 tax return and liability during petitioner’s OIC appeal, we conclude that Ms. Smeck’s prior involvement covered the periods in issue and make no conclusion regarding the enforceability of petitioner’s OIC.
In our Opinion in Cox v. Commissioner,
We note that respondent could have transferred petitioner’s OIC appeal from Ms. Smeck to Ms. Kane, which would have ensured that petitioner’s OIC was reviewed pursuant to the specific authority to do so pursuant to sec. 6330(c)(2)(A)(iii) during the course of her CDP hearing with Ms. Kane, who would not have had any “prior involvement” with petitioner’s unpaid tax liabilities for the periods in issue outside the context of the CDP hearing.
Moreover, we note that, even if respondent were correct that taxpayers benefit from judicial review of an OIC submitted outside the CDP context, we are in no position in the instant case to evaluate whether that benefit would be greater than the benefit of an independent review of a taxpayer’s collection alternatives by an impartial officer pursuant to sec. 6320(b)(3).