The Tax Court in Brief July 25 – July 31, 2020
Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.
The Week of July 25 – July 31, 2020
Biggs-Owens v. Comm’r, T.C. Memo. 2020-113
Short Summary: In this collection due process (CDP) case, the Petitioner sought review of an IRS Office of Appeals’ determination to uphold a notice of Federal tax lien (NFTL). That Taxpayer asserted that the Office of Appeals abused its discretion in sustaining the NFTL filing. In particular, she contended that the settlement officer closed the door to a collection alternative before giving her a meaningful chance to bring herself into compliance with outstanding estimated tax obligations.
Whether the IRS settlement officer:(1) properly verified that the requirements of any applicable law or administrative procedure had been met; (2) considered any relevant issues the taxpayer raised; and (3) considered whether “any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of . . . [the taxpayer] that any collection action be no more intrusive than necessary.” Sec. 6330(c)(3).
Primary Holdings: The settlement officer satisfied all of the above-listed requirements.
The Taxpayer was not in compliance with her estimated tax obligations at the time of her CDP proceeding. And the existence of outstanding reported liabilities for several years–apparently stemming from a pattern of insufficient withholding–raises the specter of pyramiding liabilities and supports requiring compliance with current estimated tax liabilities. Thus, even had the Taxpayer proposed a collection alternative with concrete terms, her noncompliance would justify the settlement officer’s decision to reject.
Key Points of Law:
- Where, as here, the underlying tax liabilities are not at issue, the Tax Court reviews the determination of the Office of Appeals for abuse of discretion.
- In reviewing for abuse of discretion, the Tax Court will uphold the Office of Appeals’ determination unless it is arbitrary, capricious, or without sound basis in fact or law.
- “There is no requirement that the Commissioner wait a certain amount of time before making a determination as to a proposed levy.”); sec. 301.6320-1(e)(3), Q&A-E9, Proced. & Admin. Regs.
Insight: The Biggs-Owens case presents a relatively run-of-the-mill collection due process case. The case underscores, as so many CDP cases do, that the Tax Court’s standard of review — abuse of discretion — is a difficult standard for taxpayers to satisfy. Demonstrating that an IRS Appeals officer’s actions were “arbitrary, capricious, or without sound basis in fact or law” requires a convincing showing, and it is important for the taxpayer to demonstrate that they themselves satisfied their obligations during the appeals phase. Taxpayers that fail to make such a demonstration, however, are often not without recourse — in fact, non-judicial avenues of relief often remain available to taxpayers, such as offers in compromise, installment agreements, or other avenues such as bankruptcy. Taxpayers should consult a competent tax attorney to learn about the various options that may be available under their specific circumstances.