Stewart v. C.I.R.

Not Reported in F.Supp.2d, 2004 WL 838045

W.D.Pa.,2004.

March 01, 2004 (Approx. 2 pages)

United States District Court,

W.D. Pennsylvania.

Suzanne Diehl STEWART d/b/a Diehl Moving and Storage,

v.

COMMISSIONER OF INTERNAL REVENUE SERVICE.

No. 03-271.

March 1, 2004.

Suzanne Diehl Stewart, Greensburg, PA, pro se.

Paul E. Skirtich, United States Attorney's Office, Pittsburgh, PA, Dara B. Oliphant, United States Department of Justice, Washington, DC, for defendant.

MEMORANDUM OPINION

LANCASTER, J.

*1 This case involves the collection of employment withholding taxes, penalties and interest. Pending is a motion by defendant (“IRS”) for summary judgment (Doc. No. 2). Accordingly, we must view any factual disputes in the light most favorable to plaintiff.

There is a lengthy history to the parties' efforts to resolve the tax liabilities in this case. Plaintiff (“Diehl” or “the Company”) is a small, financially troubled, family-operated business. It suffered business setbacks due to a large fire and to Suzanne Diehl Stewart's and Esther Diehl's medical troubles. Plaintiff does not deny that it owed taxes. Rather, it contends that the method by which the IRS applied payments that the Company did make resulted in additional penalties and interest.

There are two incidents in dispute. The first (the “Kennedy dispute”) involves Diehl's liability for taxes for the last quarter of 1995, the first quarter of 1996 and the first and third quarters of 2001. The second (the “Phillips dispute”) involves Diehl's liability for taxes in the second quarter of 1996, the first quarter of 1997 and the last quarter of 2001.

The Kennedy Dispute

The IRS filed Notices of Levy and Notices of Filing of Liens in March 2002. On April 18, 2002, plaintiff timely requested a collection due process hearing (“CDP Hearing”). On May 16, 2002, IRS Settlement Officer Mark Kennedy was assigned to conduct the due process hearing. He had no prior involvement with the unpaid tax liability. The CDP Hearing was scheduled for July 11, 2002. Plaintiff requested an extension of time on June 17, 2002. On July 10, 2002 (the day before the originally scheduled hearing date), Kennedy conducted a telephone conversation with Suzanne Diehl Stewart. He did not state that this phone call constituted the CDP Hearing. During the call, plaintiff was given an opportunity to submit any additional information it wanted the IRS to consider by August 13, 2002. Because the IRS already had all the relevant information, plaintiff did not send any more documentation. On August 20, 2002, Kennedy sent Diehl a letter acknowledging that certain tax payments had been misapplied, and correcting those errors. Plaintiff was again invited to dispute the corrections or submit other documents, but did not. On January 22, 2003, the IRS mailed plaintiff a Notice of Determination, concluding that “[a]ll required legal and administrative procedures were followed” and that the IRS lien and levy were sustained. Exhibit K-9.

The Phillips Dispute

At roughly the same time, plaintiff was also interacting with IRS Settlement Officer Susan Phillips to resolve other employee withholding tax liabilities concerning the second quarter of 1996, the first quarter of 1997 and the fourth quarter of 2001 (the “Phillips Dispute”). Phillips had no prior involvement in the matter. On September 30, 2002, the parties held an “informal meeting” to discuss the matter. At the meeting, Phillips specifically stated that “this was an informal meeting and was not the due process hearing.” Stewart Affidavit ¶ 29. At the meeting, Diehl acknowledged that the IRS had corrected the misapplication of tax payments that were the subject of the meeting, but also requested an abatement of penalties. Phillips stated that if Diehl remained current for three consecutive quarters, the IRS would abate some of these penalties. Diehl asserts that it fulfilled this condition within two weeks, and made several phone calls and at least one letter in an effort to confirm that penalties would be abated. During these calls, plaintiff confirmed that all payments and assessments were correct. Phillips sent her penalty computations to Diehl and invited her to respond. No further response was received. In January 2003, plaintiff received Phillips' decision that the Notices were issued properly.

Legal Analysis

*2 Plaintiff makes a very simple, straight-forward argument. She contends that the IRS appeals settlement officers involved in the two incidents failed to hold a “hearing” as required by 26 U.S.C. § 6330. She then reasons that since a “hearing” was not held, the IRS' decision to proceed with collection activities is invalid.

As an initial matter, we conclude that we must review the IRS' decisions for abuse of discretion. As this court stated in Bartolomeo v. United States, 292 F.Supp.2d 728 (W.D.Pa.2003):

Although section 6330(d) does not specify the standard of review a district court should apply to an appeal of a Notice of Determination by the IRS Appeals Office, the legislative history unequivocally indicates that Congress intended the Court to review Appeals Office decisions for abuse of discretion where, as here, the amount of the tax liability was not in dispute at the hearing. H. Conf. Rept. 105-599, at 266 (1998) (“Where the validity of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officers for abuse of discretion.”); see also Goza v. Comm'r of Internal Revenue [CCH Dec. 53,803], 114 T.C. 176, 179-80, 2000 WL 283864 (2000); MRCA Info. Servs. v. United States 145 F.Supp.2d 194, 199 (D.Conn.2000). An abuse of discretion involves “a clearly erroneous finding of fact, an errant conclusion of law, or an improper application of law to fact.” Valenti v. Mitchell, 962 F.2d 288, 299 (3d Cir.1992) (citation omitted).

We conclude that the motion for summary judgment must be granted. The statute governing CDP Hearings, 26 U.S.C. § 6330, does not impose any requirements on the format or procedures that must be followed. As set forth by the Tax Court in Day v. Commissioner of Internal Revenue, T.C. Memo.2004-30 (U.S.Tax Ct.2004):

Section 6330 provides that, upon request and in the circumstances described therein, a taxpayer has a right to a “fair hearing”. Sec. 6330(b). A “fair hearing” consists of the following four elements: (1) An impartial officer will conduct the hearing; (2) certain issues may be heard such as an offer-in-compromise; (3) the conducting officer will receive verification from the Secretary that the requirements of applicable law and administrative procedure have been met; and (4) a challenge to the underlying tax liability may be raised only if the taxpayer did not receive a statutory notice of deficiency or receive an opportunity to dispute such liability. Sec. 6330(b) and (c); see Lunsford v. Commissioner, 117 T.C. 183, 183-184, 2001 WL 1521580 (2001); Vossbrinck v. Commissioner, T.C. Memo.2002-96.

The regulations governing CDP Hearings, 26 C.F.R. § 301.6330-1, are more illuminating. A CDP Hearing is “informal in nature.” The Appeals Officer is not required to hold a face-to-face meeting. A transcript is not required. The taxpayer does not have a right to subpoena and examine witnesses. Indeed, if the time and location of a meeting is not satisfactory to the taxpayer, the Appeals Officer's review of the request for the hearing, the case file, and any other written or oral communications “will constitute the CDP hearing for the purposes of section 6330(b).” Id. (Q & A A-D6 and A-D7).

*3 Although Kennedy and Phillips did not hold a formal, properly-designated “hearing” in the traditional sense, their reviews of the file and interactions with Diehl complied with the low standard imposed by the applicable regulations. As to the Kennedy dispute, Diehl was given a full opportunity to present her arguments and to supplement the record. Plaintiff has admitted that the IRS already had all the relevant documentation. As to the Phillips dispute, in addition to the “informal meeting,” plaintiff engaged in several subsequent phone conferences with the IRS. Phillips also forwarded her written penalty computations to plaintiff and Diehl responded by letter with additional requests for abatement. In both situations, Diehl had notice of the issue, was informed of the IRS' position, and was given a full opportunity to be heard.

Moreover, the IRS' motion for summary judgment is well-taken due to the nature of the plaintiff's argument. In both the Kennedy Dispute and Phillips Dispute, plaintiff concedes that it owed taxes and that the IRS' revised calculations (after the corrections made during the process) are correct. There was no need for a formal “hearing” because there were no factual issues in dispute and the IRS, through its extensive interactions with Diehl, already possessed the relevant information. Plaintiff essentially asked for mercy. This is a particularly discretionary function on which the court must defer to the decision of the defendant.

In accordance with the foregoing, defendant's motion for summary judgment (Doc. No. 2) is GRANTED. Judgment will be entered in favor of defendant and against plaintiff. The clerk is instructed to mark this case closed.

SO ORDERED.

W.D.Pa.,2004.

Stewart v. C.I.R.

Not Reported in F.Supp.2d, 2004 WL 838045 (W.D.Pa.), 93 A.F.T.R.2d 2004-1463, 2004-1 USTC P 50,212

Judges | Attorneys

Judges

Lancaster, Hon. Gary L.
United States District Court, Western Pennsylvania
Pittsburgh, Pennsylvania 15219

Attorneys

Attorneys for Defendant

Oliphant, Dara
Washington, District of Columbia 20005

Skirtich, Paul E.
Pittsburgh, Pennsylvania 15219

END OF DOCUMENT