UNITED STATES TAX COURT

WASHINGTON, DC 20217


THOMAS WANE MARETT,†††††††††††††††††) 
      Petitioner†       ††††††††††††) 
         v.               ††††††††††)†† Docket No. 4048-06l
††††††††††††††††††††††††††††††††††††)†  
†††††††††††††††††††              †††)
COMMISSIONER OF INTERNAL REVENUE,†† )
      Respondent                    )  
††††††††
O R D E R

††††††††††† This matter is before the Court on respondentís Motion for Summary Judgment, filed May 10, 2006, and respondentís Motion for Penalty under I.R.C. Section 6673, also filed May 10, 2006.† As motions, without prejudice, and remand this case to respondentís Office of Appeals.

Background

††††††††††† On May 17, 2004, respondent mailed a notice of deficiency to petitioner for the taxable year 2000.† In the notice of deficiency, respondent determined a deficiency attributable to petitionerís failure to report nonemployee compensation, an IRA distribution, and interest income.† Respondent also determined that petitioner was liable for additions to tax under section 6651 (a) (1) (failure to file a return) and section 6654 (failure to pay estimated tax). [1]

On October 12, 2004, petitioner filed a petition for redetermination with the Court at docket No. 19642-04.† On January 7, 2005, the Court entered an Order of Dismissal for Lack of Jurisdiction on the ground that the petition at docket No. 19642-04 was not timely filed. [2]

On May 23, 2005, respondent issued to Petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing under section 6330 regarding his unpaid tax for 2000. On or about June 14, 2005, Petitioner timely submitted to respondent a Form 12153, Request for a Collection Due Process (CDP) Hearing. Petitionerís request stated:

I request collection alternatives including OIC [offer in compromise] and payment schedule. Collection actions are inappropriate. Procedural defects by the IRS exist.

By letter dated September 12, 2005, respondentís Appeals Office in Charlotte, North Carolina, informed Petitioner that his case was assigned to that office for consideration and that his review would proceed by telephone, mail, and/ or personal interview. By letter dated September 15, 2005, petitioner informed the Appeals Office that ďwe request a persona interview/hearing, and do not wish to conduct this interview/hearing via telephone.Ē By letter dated October 24, 2005, Appeals officer K. Keeley informed petitioner that she had received his request for a hearing, that ďitems that you mentioned in your previous correspondence are items that are frivolous or groundless or are moral, religious, political constitutional, conscientious, or similar groundsĒ, and that petitioner was not entitled to a face-to-face hearing based on the items set forth in his request or a DCDP hearing. The Appeals officer further informed petitioner that she was scheduling a correspondence conference for him on November 21, 2005 at 11:00 am, and that petitioner should submit a collection information statement and demonstrate that he was current in all Federal tax return filings and deposit requirements before the hearing. By letter dated November 2, 2005, Appeals Officer Keeley forwarded to petitioner †a Form 4340 (Certificate of Assessments, payments, and Other Specified Matters) for 2000. By letter dated November 2, 2005, petitioner against asserted that he wanted to discuss collection alternatives and that he wanted to bring all required documents to a face-to-face hearing. The parties subsequently exchanged additional correspondence dealing whether petitioner was entitled to a face-to-face hearing.

On January 27, 2006, respondent issued to petitioner a Notice of Determination Concerning Collection Action(s) Under 6320 and/or 6630 determining that it was appropriate to proceed with the proposed levy. On February 24, 2006, petitioner filed a petition for lien or levy action (collection action) with he Court. In the petition, petitioner stated that he was denied a proper administrative hearing under section 6330. Respondent timely filed an answer to the petition and then filed the motions currently pending before the Court. Petitioner filed an opposition to respondentís Motion for Summary Judgment.

This case was called for hearing at the Courtís Motions Session in DC, on July 5, 2006. Counsel for respondent appeared at the hearing and offered argument in support of respondentís two motions. There was no appearance by or on behalf of petitioner and the hearing nor did petitioner file a written statement pursuant to Rule 50(c).

During the hearing, the Court directed respondentís attention to the Form 4340 (attached to an exhibit to the Declaration offered in support of respondentís motion for summary judgment) concerting petitionerís account for 2000 and, in particular, the fact that on October 4, 2004, respondent assessed a penalty for failure to pay tax in the amount of $805.77. [3]

Counsel for respondent conceded that no such penalty had been determined in the notice of deficiency that respondent issued to petitioner for 2000.

Discussion

Summary judgment under Rule 121 is appropriate when there is no genuine issue as to any material† fact and a decision may be rendered as a matter of law. Krause v. Commissioner, †92 T.C. 1003, 1016 (1989). The moving party bears the burden of proving that there is no genuine issue of material fact. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985). In deciding a motion for summary judgment, the Court will construe factual inferences in a manner most favorable to the opposing party. Naftel v. Commissioner, 85 T.C. 527, 529 (1985).

Respondent contends that the record is devoid of any grounds upon which this Court could find that the Appeals Officer abused her discretion in determining that respondent could proceed to collect petitionerís unpaid tax for 2000 by levy. Respondent asserts that petitioner failed to raise any valid issues during the administrative proceedings and that a face-t0-face administrative hearing was unnecessary and unwarranted.

Section 6330 provides that a taxpayer is entitled to an administrative hearing before an impartial Appeals Officer before respondent may proceed to collect unpaid taxes by way of a levy. A taxpayer may raise at an Appeals Office hearing any relevant issue relating to the unpaid tax or proposed levy, including (1) appropriate spousal defenses, (2) challenges to the appropriateness of collection actions, and (3) offers of collection alternatives, which may include n installment agreement of an offer-in-compromise. Sec. 6330(c)(2)(A). the taxpayer may also raise challenges to the existence of amount of the underlying tax liability if the person did not receive a statutory notice of deficiency. Sec 6330(c) (2)(B). In addition, the Appeals officer is charged with verifying that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(c)(1).

Treasury regulations provide that respondent must offer the taxpayer an opportunity for a face-to-face administrative hearing at the Appeals Office closest to the taxpayerís residence. Sec. 301.6330-1(d)(2), Q&A-D7, Preced. & Admin Regs. Where the taxpayer raises only frivolous arguments, however, we have held that it is not an abuse of discretion to deny the taxpayer a face-to-face hearing. See Lunsford v. Commissioner, 117 T.C. 183, 189 (2001) (declining to remand the case to the Appeals Office because the taxpayer raised only frivolous arguments); see also Wright v. Commissioner, T.C. Memo. 2005-291 n.4. In such cases, a face-to-face hearing is not necessary and would not be productive. See, e.g., Lunsford v. Commissioner, supra.

Where a taxpayer advances both valid and frivolous arguments, we have allowed the taxpayer to pursue the former while cautioning the taxpayer to abandon the latter. See Keene v. Commissioner, 121 T.C. 8, 19 (2003) (remanding case to Appeals Office by admonishing the taxpayer not to advance frivolous arguments); Bean v. Commissioner, T.C. Memo. 2006-88 (Governmentís motion for summary judgment was denied because the record ďdid not foreclose the possibility that [the taxpayer] might have raised valid arguments had a hearing been held.Ē). Respondentís internal operating procedures appear consistent with the Courtís approach. See Internal Revenue Manual 8.6.1.2.5.(2) (May 13, 2004) (ďFace-t-face conferences will no longer be offered to or allowed for taxpayers who only raise frivolous issuesĒ) (emphasis added).

Viewing the facts most favorably to petitioner, as we must given respondentís motion for summary judgment, we conclude that material issues of fact are in dispute and that, on this record, respondent is not entitled to judgment as a matter of law. As a preliminary matter, it appears to the Court that Appeals Officer Keeley acted prematurely in labeling as frivolous and groundless the issues raised in petitionerís hearing request. To the contrary, petitionerís hearing request raise valid issues, including alternatives to collection and potential procedural defects. Considering respondentís concession at the hearing on this matter that respondent may have improperly assessed and addition to tax (ďpenaltyĒ) for failure to pay tax, it appears that the Appeals Officer may have failed to properly verify that all applicable laws and/ or administrative procedures were satisfied in this case. Under the circumstances, we shall remand this case for further administrative proceedings before a new Appeals officer who has had no prior involvement with respect to the unpaid tax. Either or both parties shall be permitted to make and audio recording of the administrative hearing. Keene v. Commissioner, supra.

In remanding this case, we add a strong word of caution to petitioner who has been less than revealing in his dealings ith the Appeals Office and the Court. We remind petitioner that he must be current in his Federal tax obligations, see, e.g., sec 6012 (a), in order to make and offer-in-compromise or to qualify for an installment agreement. In addition, petitioner should be prepared to submit to the Appeals Office complete and accurate financial information in support of a collection alternative. Should the Court subsequently determine that petitioner used these proceedings primarily for purposes of delay and/or to advance frivolous and groundless arguments, the Court will strongly consider imposing a penalty on petitioner pursuant to section 6673(a). See Pierson v. Commissioner, 115 T.C. 576 (2000).

Upon due consideration and for cause, it is

ORDERED that respondentís Motion for Summary Judgment, filed May 10, 2006, and respondentís Motion for Penalty Under I.R.C. Section 6673, also filed May 10, 2006, are denied without prejudice. It is further

ORDERED that this case is remanded to respondentís Appeals Office for the purpose of affording petitioner a face-to-face administrative hearing pursuant to section 56330 for the purpose of discussing any valid issue (as more fully discussed in this Order) that petitioner may present. Among other issues, the Appeals officer shall verify that respondent properly assessed and addition to tax for failure to pay under sec 6651 (a)(2) for 2000. It is further

ORDERED that respondent shall offer petitioner an administrative hearing at respondentís Appeals Office located closest to petitionerís residence (or at such other place as may be mutually agreed upon) at a reasonable and mutually agreed upon date and time, but no later than September 15, 2006. The administrative hearing shall be conducted before a new Appeals Officer who has had no prior involvement with respect to the unpaid tax for 2000. it is further

ORDERED that each party shall, on or before October 20, 2006, file with the Court, and serve on the other party and report regarding the then present status of this case. Respondent shall attach as exhibits to his report (1) a supplemental notice of determination and (2) a reasonably current transcript of account (Form 4340, blue ribbon copy) for petitionerís account for 2000. It is further

ORDERED that jurisdiction over this case is retained by the undersigned.

†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††S/ Robert N. Arman, Jr.
†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††† Special Trial Judge


Dated: Washington, D.C.
†††††††††† July 7, 2006


[1] All section references are to the Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedures.

[2] Petitionerís motion to vacate was subsequently denied by this Court, and petitionerís appeal to the Court of Appeals for the 4th Circuit was ultimately dismissed for failure to prosecute.

[3] See sec 6651(a)(2).