RANDY ALAN CARPENTER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5327-17L.
UNITED STATES TAX COURT
Filed April 18, 2019.
152 T.C. No. 12
P pleaded guilty to violating
R assessed against P the full amount of restitution ordered in reliance on
Held:
Held, further, a payment schedule included in an order for criminal restitution that is due immediately does not limit R‘s authority to collect administratively unpaid amounts of such restitution.
Held, further, Appeals did not abuse its discretion in sustaining the collection actions at issue.
Randy Alan Carpenter, pro se.
Johnny Craig Young, Abby Moua, and Scott Lyons, for respondent.
OPINION
COHEN, Judge: In this collection due process (CDP) case petitioner seeks review under
Following our Opinion in Klein v. Commissioner, 149 T.C. 341 (2017), respondent conceded and abated the statutory interest and additions to tax determined with respect to the assessments at issue. After concessions we must decide two issues of first impression. The first is whether
Background
The parties submitted this case fully stipulated under Rule 122. The stipulated facts are incorporated in our findings by this reference. Petitioner resided in North Carolina when he filed his petition.
I. The Underlying Criminal Case
Following a prosecution in the U.S. District Court for the Western District of North Carolina, petitioner entered into a plea agreement pursuant to rule 11(c)(1)(C) of the Federal Rules of Criminal Procedure. Petitioner agreed to plead
On April 15, 2014, the District Court held a sentencing hearing during which the court accepted the plea agreement and sentenced petitioner to 27 months in prison, followed by one year of supervised release for each count to run concurrently. The District Court also accepted without objection a presentencing report and the Government‘s calculation of the Federal tax loss for petitioner‘s 2005 and 2006 tax years. As a separate component of the sentence, the District Court ordered petitioner to pay restitution to the IRS of $507,995.
During the sentencing hearing the judge‘s oral pronouncements closely followed the order and text of the District Court‘s standard form, judgment in a criminal case (judgment form), and the District Court followed the judgment form to organize its oral pronouncements while summarizing the language used in the judgment form. See United States v. Randy Alan Carpenter, No. 12cr00116-GCM (W.D.N.C., Apr. 17, 2014) (AO 245B (WDNC Rev. 02/11) Judgment In A Criminal Case). When dealing with the conditions of supervised release, in both its oral pronouncements at the sentencing hearing and in its written judgment, the District Court ordered petitioner to file tax returns with the IRS as required by law. The sentencing judge orally pronounced that petitioner “shall cooperate with the Internal Revenue Service to pay outstanding taxes“. The District Court‘s written judgment stated that petitioner shall “pay all outstanding taxes, interest and penalties” as an additional condition of his supervised release.
The District Court next addressed criminal monetary penalties and imposed a mandatory $200 special assessment, did not impose a fine, and ordered petitioner to pay restitution in the full amount of the tax loss. Because the total criminal monetary penalties were more than $2,500, the District
Once the District Court set the amount of the total criminal monetary penalties and waived interest payments on those, it addressed when payment was due. In both its oral pronouncements at the sentencing hearing and in its written judgment the District Court ordered that the restitution was “due and payable immediately” and that “if * * * [petitioner] can‘t pay” the entire amount of restitution, he must pay $100 per month beginning 60 days after his release from imprisonment. The District Court further stated in its oral pronouncements that petitioner must continue making payments “until the monies are repaid.” At no point during the sentencing hearing did the District Court orally state that the $100 monthly installment was the maximum amount that petitioner must pay per month. The District Court‘s written judgment was consistent with its oral pronouncements at the sentencing hearing. The District Court ordered that restitution was due in full and payable immediately, and it ordered petitioner to comply with its payment schedule as a special condition of petitioner‘s supervised release in the event he had not fully repaid the restitution prior to his release from imprisonment.
On May 27, 2016, after his release from prison, petitioner began serving a term of supervised release. While on supervised release petitioner complied with the District Court‘s payment schedule. As a result, on March 7, 2017, the District Court modified the conditions of petitioner‘s supervised release to allow his supervision to expire on May 26, 2017, with an outstanding balance of $501,546.90 “remaining due
II. Collection Activities
A. USAO
After petitioner‘s sentencing hearing the U.S. Attorney‘s Office (USAO) for the Western District of North Carolina took steps to collect the court-ordered restitution amount from petitioner. On or about April 17, 2014, the USAO filed a Federal notice of lien for fine and/or restitution imposed pursuant to the Anti-Terrorism and Effective Death Penalty Act of 1996 in the amount of $508,195 with the Office of the Clerk of Superior Court of Avery County, North Carolina. At some point prior to the start of the petitioner‘s supervised release term, the USAO began collection through the Federal Payment Levy Program (FPLP), which levied on petitioner‘s Social Security benefits resulting in monthly restitution payments of $283.95. On or about December 23, 2015, the USAO forwarded to the IRS $2,340.70 that it had collected from petitioner through the FPLP levy, and the IRS recorded it as a payment against petitioner‘s 2005 liability. (The IRS account transcript for petitioner‘s 2005 liability records and credits payments total $7,648.10 as of April 3, 2018.)
B. IRS
On January 18, 2016, the IRS made restitution-based assessments (RBA) against petitioner under
On May 23, 2016, the IRS sent petitioner an FNIL, which indicated that petitioner owed a total of $759,380.74, representing the total amount of the RBAs for 2005 and 2006, statutory interest, and additions to tax. The FNIL also stated that the Government might seize petitioner‘s property to satisfy the amount due but that he could appeal the proposed seizure of his assets by requesting a CDP hearing under
Petitioner timely submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to the FNIL. Petitioner checked the box on the Form 12153 indicating that he was unable to pay the balance of his liabilities and that he would like to discuss collection alternatives. He included a statement that his only source of income was Social Security disability benefits and that his expenses exceeded his income because of making restitution payments and supporting three dependents. Petitioner further stated: “I do not owe the taxes I owe restitution to the court“. He asserted that he had not yet received a deficiency notice. On or about June 9, 2016, IRS mailed petitioner a letter to confirm receipt of his Form 12153 and to inform him that unless he filed Federal income tax returns for 2011 through 2015 he was ineligible for a collection alternative. This letter also requested that petitioner provide further financial information in order for Appeals to consider a proposed collection alternative and included copies of Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and Form 433-B, Collection Information Statement for Businesses.
On or about July 1, 2016, petitioner sent a letter to the IRS stating that “I do not submit that at this time you have the authority to collect ‘federal tax’ from me for the periods noted * * * [and that] I mistakenly selected the collection alternative box [on Form 12153].” In the same letter petitioner
I disagree with the existence and amount of the federal tax, penalties, and interest as I have not received a notice of deficiency from you for the tax and have not had an opportunity to dispute the tax liability with you; I noted this on the Form 12153. I offer in support that ‘[i]n order to prove a tax deficiency, [you] must show first that the taxpayer had unreported income, and second, that the income was taxable,’ United States v. Moore, 498 Fed. Appx. 195, 201 (4th Cir. 2012), quoting United States v. Abodeely, 801 F.2d 1020, 1023 (8th Cir. 1986). This has not been done and your intent to levy action is premature. Based on any reasoning you may have to proceed, there has never been an effort by the government to identify amounts deposited that are non-taxable, i.e., the ‘purification’ process. Moore at 202, citing United States v. Boulet, 577 F.2d 1165, 1167 (5th Cir. 1978). I expect my taxpayer ‘right to pay no more than the correct amount of tax’ to be upheld.
Petitioner failed to provide sufficient financial information, and he did not file his missing Federal income tax returns in order to be eligible for collection alternative consideration.
On or about June 28, 2016, the IRS filed an NFTL against petitioner with the Office of the Clerk of Superior Court of Avery County, North Carolina, and sent petitioner an NFTL filing. Petitioner timely submitted a separate Form 12153 challenging the NFTL filing. On this Form 12153 petitioner did not check the box requesting consideration for a collection alternative. Instead petitioner included a statement that the “IRS lacks jurisdiction to lien and levy” to enforce the District Court‘s restitution order. He asserted again that he had not received a notice of deficiency and had not had an opportunity to dispute the underlying tax liability.
C. CDP Hearing
On August 10, 2016, petitioner‘s case was assigned to an Appeals settlement officer (officer). During the officer‘s case review he examined the District Court‘s restitution order, the transcript of the sentencing hearing, IRS criminal investigation closing reports, and IRS inventory control system notes related to the making of the RBAs and the subsequent FNIL and the NFTL filing. The officer reviewed IRS records related to petitioner‘s income for the 2011 through 2015 years, which indicated that petitioner received Social Security benefits and had canceled debt. The officer discussed
On November 17, 2016, the officer conducted a telephone CDP hearing with petitioner. During this hearing petitioner argued: (1) that the IRS lacks authority to enforce criminal restitution orders, (2) that the IRS is prohibited from initiating administrative collection actions without obtaining an order from the District Court, and (3) that IRS collections may not exceed the financial obligations established by the District Court‘s monthly payment schedule. Petitioner did not request a collection alternative or propose an installment agreement either during the hearing or in his subsequent written arguments submitted at the officer‘s invitation. The officer wrote to petitioner on January 23, 2017, to respond to subsequent written arguments and to inform petitioner that he would recommend that Appeals sustain the FNIL and the filing of the NFTL.
D. Notice of Determination
On January 30, 2017, the officer sustained the determination, closed the case, and submitted it for review to his Appeals team manager. The team manager concurred in the officer‘s proposed determinations. Appeals sent petitioner two notices of determination concerning collection action(s) under
I. Disputed Authority To Collect Criminal Restitution
We address, as an initial matter, petitioner‘s challenge to the Secretary‘s administrative collection authority related to criminal restitution. Petitioner argues that
A. The FETIA Amendments
With the enactment of
Congress exempted the Secretary‘s power to assess and to bring collection actions for RBAs from the usual time limitations.
B. Assessment Authority
In Klein v. Commissioner, 149 T.C. 341, we considered whether Congress intended the assessment of criminal restitution to be a basis for statutory interest and additions to tax. We held that Congress did not on the basis of its directive that restitution assessments and collections be made “in the same manner as if such amount were such tax.” Id. at 351-352 (quoting
C. Collection Authority
1. Provisions of Title 26
The Code requires that upon making an assessment the Secretary issue notice and demand for payment pursuant to
2. Provisions of Title 18
Petitioner asserts that the payment schedule included in the District Court‘s restitution order limits the amounts the Secretary may collect. Petitioner bases his argument on the provision directing that the Secretary “shall assess and collect the amount of restitution under an order pursuant to
None of the restitution-related provisions of title 18 required the Secretary to seek a court order before collecting criminal restitution. Cf.
D. Orders of Criminal Restitution
Even if the provisions of title 18 were binding on the Secretary, restitution orders with conditions such as petitioner’s would not limit the Secretary’s collection efforts. In general, a restitution obligation is due immediately unless in the interests of justice the court specifies otherwise.
1. Restitution Ordered Due Immediately
When payment of restitution is ordered due immediately, as it was in this case, numerous Federal courts have held that the Government is not limited by judicially crafted payment schedules and may freely pursue other means of securing restitution, including a writ of garnishment. See
2. Restitution Ordered Due According to Payment Schedule
Correspondingly, in cases where a sentencing court expressly declines to order restitution immediately payable, the Government’s collection efforts may not exceed the amounts due according to the schedule. See, e.g., United States v. Hughes, 813 F.3d 1007, 1008-1009 (D.C. Cir. 2016); Martinez, 812 F.3d at 1203-1204 (determining restitution not due immediately where District Court expresslydeclined to order immediate payment of entire amount); Bratton-Bey, 564 F. App’x at 30 n.2 (holding defendant not under current obligation to pay restitution where District Court granted defendant’s request and ordered restitution due only after his release from incarceration according to payment schedule
In Hughes the U.S. Court of Appeals for the District of Columbia Circuit considered a restitution judgment wherein the District Court made conflicting statements about whether its restitution judgment was due immediately or according to a payment schedule. In that case the District Court ordered $442,330 in restitution for Hughes’ role in her employer’s fraudulent billing practices. Her employer, Blackhawk, had previously been ordered to pay over $1 million. Hughes, 813 F.3d at 1008. During Hughes’ sentencing hearing the District Court stated that “she would not be on the hook at all [for restitution] if Blackhawk paid its fine.” Id. The District Court further explained during its oral pronouncements
that ‘payment of restitution shall begin after the adjustment is figured where the fine for [Blackhawk] will be applied,’ and later added that Hughes was to pay ‘the balance of any restitution owed at a rate of not less than $50 each month * * * if it turns out that * * * there is an amount outstanding that [Hughes] owe[s]’ after Blackhawk’s fine is subtracted.
* * *
The Circuit Court determined that the District Court’s brief statement that restitution was immediately payable to be “boilerplate language”. Id. The Circuit Court held that including “boilerplate language” that restitution was immediately payable in the District Court’s oral rendition of a restitution order was not controlling in the context of the District Court’s “specific and repeated references” to the contrary. Id. (emphasis added). In this context the “district court * * * expressed * * * [its] clear intention” that Hughes’ restitution obligation was to begin only after payments by her employer had been subtracted. Id.
We are persuaded by the reasoning of those courts that regularly impose restitution in sentencing defendants. Absent a District Court’s expressly declining to order restitution payable immediately, its restitution judgment imposes an immediate obligation to pay on the defendant. When a District Court includes a payment schedule in a judgment that also orders restitution immediately payable, as it did in this case, the payment schedule does not limit the amounts the Government may collect from the defendant. See Hawkins, 392 F. Supp. 2d at 759 (“[A] payment schedule simply serves as another collection method for the benefit of the victim rather than as a benefit to the defendant * * * [and] is simply one means of ensuring that restitution will be paid by the defendant.”); see also United States v. Dawkins, 202 F. 3d 711, 716 (4th Cir. 2000) (holding that it ispermissible for a sentencing court to order the entire restitution amount due immediately if it also sets a payment schedule to be followed in the event that the defendant cannot make immediate payment in full); James, 312 F. Supp. 2d at 806. In this case the District Court’s oral statements regarding petitioner’s ability to pay all at once the total amount of criminal monetary penalties, including restitution, were made in the context of its decision to waive interest payments. See
At no point during the District Court’s oral rendition of its restitution order did it expressly decline to impose an immediately payable restitution obligation on petitioner. Rather, the District Court expressly ordered that “[p]ayment [of petitioner’s restitution obligation was] to begin immediately”. The District Court clarified that it did not intend to limit IRS collection activities in both its oral pronouncements and written judgment. During the sentencing hearing, after waiving interest on unpaid restitution required according to title 18, the District Court orally stated: “I don’t know what effect that has on the Internal Revenue Service with all your penalties and interests [sic] and whatever”. In its written judgment the District Court ordered petitioner to “pay all outstanding taxes,interest and penalties.” The District Court’s inclusion of a $100-per-month payment schedule in its restitution judgment serves only as another means of ensuring that petitioner fulfilled his restitution obligation in the event he could not pay the full amount before his release from imprisonment. We hold that the District Court’s payment schedule does not limit the Secretary’s administrative collection authority. The Secretary may properly file an NFTL and levy on property to collect the full unpaid amounts of the RBAs.
II. Collection of Unpaid Liabilities
Having determined that
With respect to either an NFTL filing or a proposed levy the taxpayer may request a CDP hearing before an impartial Appeals officer to review the propriety of the collection action.
Following a CDP hearing the officer must determine whether and how to proceed with collection of the liability. The officer’s determination must take intoaccount all issues properly raised by the taxpayer as well as whether any proposed collection action balances the need for the efficient collection of taxes with the taxpayer’s legitimate concern that any collection action be no more intrusive than necessary.
III. Standard of Review for Collection Actions
Within 30 days of a CDP determination by Appeals a taxpayer may petition this Court for review of that determination.
Petitioner’s underlying tax liability consists of the criminal restitution, interest, and additions to tax that the IRS assessed for 2005 and 2006. See Klein v. Commissioner, 149 T.C. at 348-349 (“[I]n any CDP proceeding, ‘underlying tax liability’ refers to the assessed liabilit[y] that the IRS is seeking to collect via thechallenged lien or levy.”). Respondent has conceded and abated the statutory interest and additions to tax that he calculated with reference to the restitution amount, and the underlying liability remaining in dispute consists of the summarily assessed criminal restitution. As of April 3, 2016, the combined unpaid balance for the assessed criminal restitution totaled $500,346.90.
In order to dispute his or her underlying tax liability in this Court, the taxpayer must have properly raised that issue at the CDP hearing. See
IV. Review of CDP Hearing
We agree with respondent that the officer did not abuse his discretion. The officer’s case activity record shows that the officer diligently documented his review of petitioner’s case, his correspondence, and his conversations with petitioner. The evidence and the notice of determination itself demonstrate that the officer (1) properly verified that the requirements of any applicable law or administrative procedure were met, (2) considered all relevant issues petitioner raised, and (3) considered whether the proposed collection action balanced the need for efficient collection of taxes with petitioner’s legitimate concern that the action be no more intrusive than necessary. See
The Appeals representative did not act arbitrarily, capriciously, or without sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. at 23. Indeed, petitioner did not specify any abuse of discretion in his petition. See Rule 34(b)(4) (“Any issue not raised in the assignments of error shall be deemed to be conceded.”). Petitioner’s only remaining argument is that the underlying tax liability is incorrect even after respondent’s concession and abatement of the interest and penalties, and this is an argument that we are unable to consider in a CDP case where the taxpayer’s liability is the result of an RBA. We conclude that Appeals did not abuse its discretion in sustaining both the FNIL and the filing of the NFTL.
Petitioner failed to take advantage of the opportunities made available to him through the CDP hearing. During the CDP hearing petitioner was free to propose an installment agreement whereby he would potentially end up paying a relatively small amount per month. He might even have convinced the officer that he could in fact afford to pay no more than the $100 per month set forth in the sentencing court’s order. (Petitioner is not limited to the CDP hearing and may propose an installment payment agreement anytime. See
Instead of making the required factual showings, petitioner took the extreme legal position that the IRS simply could not collect from him. That was a mistake. Petitioner, like any other taxpayer in a CDP case, must affirmatively establish what is his limited ability to pay. He cannot rely on the sentencing court’s payment plan to establish that for Federal income tax purposes. In rejecting his position, we are not ruling that the IRS can always levy to collect 100% of the restitution regardless of the taxpayer’s financial circumstances.
V. Conclusion
Petitioner disputes respondent’s authority to collect criminal restitution in the absence of a court order. We have held that in adding the provisions of
We have considered all of the parties’ arguments, and to the extent not discussed above, conclude that those arguments are irrelevant, moot, or without merit. To reflect the foregoing,
An appropriate decision will be entered.