Thursday, June 21, 2007

Tax Attorney: Frivolous argument was identified by the Tax Court in Chester E. Davis v. Commissioner, Dkt. No. 4284-06L , TC Memo. 2007-160, June 20, 2007.

The IRS did not abuse its discretion in its determination to sustain the filing of a Notice of Tax Lien and proceed with collection against the taxpayer who asserted tax-protestor type arguments during his Collection Due Process hearing. The IRS Appeals officer was not required to meet with the taxpayer's representative, who was permanently barred from providing tax services and representing taxpayers before the IRS. Barring the representative did not prevent the taxpayer from finding another representative or representing himself, as he ended up doing.

The taxpayer was also not entitled to a face-to-face meeting with the Appeals officer because he raised only tax-protestor arguments of the type that had previously been rejected. No arguments or information was presented to address the merits of the underlying tax liability, the validity of the assessment or whether the proceeding was in compliance with the requirements. Also rejected as frivolous was the taxpayer's argument that the IRS's representatives did not show that they were authorized to represent the Secretary of the Treasury.

The Appeals officer could also use Forms 4340 to verify the assessment and was not required to provide to the taxpayer Form 4340 or other documents maintained by the IRS with respect to the taxpayer's account. The taxpayer was not entitled to contest the underlying tax liability because he received a notice of deficiency to which he did not respond. Even assuming he could contest the liability, the return he presented had only zeros in the boxes.

Finally, the taxpayer was liable for the penalty for advancing frivolous arguments. The penalty was appropriate for taxpayers who abuse the protections provided in collection actions. The taxpayer made arguments that had been previously rejected by the courts, resulting in a waste of time and resources.

Face-to-Face Meeting

Section 6320(a)(1) requires the Secretary to give persons liable to pay taxes a written notice of the filing of an NFTL. Section 6320(a)(3)(B) and (b)(1) provides that the notice shall inform such persons of the right to request a hearing in respondent's Appeals Office. Section 6320(c) provides that an Appeals Office hearing generally shall be conducted consistently with the procedures set forth in section 6330(c), (d), and (e). The Appeals officer must verify at the hearing that the applicable laws and administrative procedures have been followed. Sec. 6330(c)(1). At the hearing, the person against whom the lien is filed may raise any relevant issues relating to the unpaid tax or the lien, including appropriate spousal defenses, challenges to the appropriateness of collection actions, and collection alternatives. Sec. 6330(c)(2)(A). The person may challenge the existence or amount of the underlying tax, however, only if he did not receive any statutory notice of deficiency for the tax liability or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B).

In the instant case, the record indicates that the only issues petitioner raised throughout the section 6320 administrative process and in his petition to this Court were frivolous and/or tax protester type arguments. We do not address petitioner's frivolous arguments with somber reasoning and copious citations of precedent, as to do so might suggest that these arguments possess some degree of colorable merit. See Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).

For example, petitioner contended that the NFTLs are "counterfeited securities". Likewise, he contended that the Notice of Determination was fraudulent because it does not carry a proper number from the Office of Management and Budget. Amongst others, he has also raised the well-worn argument that he is not subject to or required to pay any income tax unless the Commissioner or his agents can show him a statute that expressly states that he is subject to tax.

To the extent petitioner complains that he did not receive a face-to-face hearing, this Court has held that it is neither necessary nor productive to remand cases to an Appeals Office for face-to-face hearings when a taxpayer raises only frivolous arguments. Lunsford v. Commissioner, supra at 189.

The arguments or information expressed by petitioner in the telephonic conference were, at best, superficial and did not go to the merits of the underlying 2001 tax liability. Instead and true to form, petitioner posed the well-worn protester sophistry that he would gladly pay the tax if someone could identify the statute that makes him liable to pay. The only other matter raised by petitioner was his request that the Appeals officer provide him with the underlying assessment document(s) referenced in the Form 4340 certification that had been sent to him.

The Court has also reviewed all of the materials forwarded to respondent by petitioner in connection with the administrative proceeding and, likewise, found them to contain "protester type" and frivolous arguments.

Petitioner did not make any justiciable arguments or present any information that properly addressed the merits of the underlying tax liability,2 the validity of the assessment, or the conduct of the proceeding or compliance with section 6330 requirements. Accordingly, the fact that petitioner was not offered a face-to-face hearing was, in this instance, not an abuse of discretion.

Appeals Officer's Authority

There is little need to dwell on petitioner's argument that the administrative proceeding was flawed because respondent's representatives did not show that they were properly authorized to represent the interests of the Secretary of the Treasury. To the extent that petitioner's argument implies that only the Secretary of the Treasury could conduct a proper proceeding it is frivolous. In the context of whether there was an abuse of discretion or any meaningful procedural flaw attributable to any failure of respondent's representative to prove to petitioner that they were authorized, we find that factor to be irrelevant. See Nestor v. Commissioner, 118 T.C. 162, 166 (2002). This is especially true in this case where petitioner's arguments are without substance and where he failed to present any meaningful arguments or information bearing on the merits of the underlying tax liability or respondent's collection efforts.

Form 4340

Petitioner argues that under section 6330 he is entitled to the underlying assessment documents and, ostensibly, that the Form 4340 certification does not meet the statutory requirements. The Appeals officer used Forms 4340, to verify the assessments. We have held that "it was not an abuse of discretion for the Appeals officer to use Forms 4340 for purposes of complying with section 6330(c)(1)." Nestor v. Commissioner, supra at 166; see also Davis v. Commissioner, 115 T.C. 35, 41 (2000); Lindsay v. Commissioner, T.C. Memo. 2001-285, affd. 56 Fed. Appx. 800 (9th Cir. 2003).

Section 6330(c)(1) does not require the Appeals officer to provide taxpayers with a copy of a document verifying that the requirements of any applicable law or administrative procedure have been met. Section 301.6330-1(e)(1), Proced. & Admin. Regs., requires that the Appeals officer obtain verification before issuing the determination, not that he or she provide it to the taxpayer. Further, there is no legal requirement that the Appeals officer provide a taxpayer with copies of the delegations of authority, assessment records, or other underlying documents maintained by respondent with respect to a taxpayer's account. Nestor v. Commissioner, supra at 166. Accordingly, the Appeals officer in this case sufficiently verified the 2001 tax assessments and was not required to provide more.

The 2001 Tax Liability

A taxpayer may challenge the existence or amount of the underlying tax, however, only if he did not receive any statutory notice of deficiency for the tax liability or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B). Where the validity of the underlying tax liability is properly in issue, the Court will review the matter de novo. Where the validity of the underlying tax is not properly in issue, however, the Court will review the Commissioner's administrative determination for abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. at 181-182.

In this case petitioner was not entitled to contest the underlying tax liability for 2001, the only year that this Court has jurisdiction to consider. Even if petitioner had been entitled to contest the underlying tax liability, other than protester arguments, he presented nothing more than an income tax return with a zero in each pertinent box. Accordingly, respondent's motion for summary judgment will be granted, and petitioner's cross-motion for summary judgment will be denied.

Section 6673 Penalty

Respondent has requested that the Court impose a penalty under section 6673 on the ground that the arguments advanced by petitioner to respondent and the Court are frivolous. Section 6673(a)(1) authorizes the Court to impose a penalty not in excess of $25,000 when it appears to the Court that, inter alia, proceedings have been instituted or maintained by the taxpayer primarily for delay or that the position of the taxpayer in such proceeding is frivolous or groundless. In Pierson v. Commissioner, 115 T.C. 576, 581 (2000), we issued a warning concerning the imposition of a penalty under section 6673(a)(1) on those taxpayers abusing the protections afforded by sections 6320 and 6330 through the bringing of dilatory or frivolous lien or levy actions. The Court has since repeatedly disposed of cases premised on arguments akin to those raised herein summarily and with imposition of the section 6673 penalty. See, e.g., Craig v. Commissioner, 119 T.C. 252, 264-265 (2002) (and cases cited therein).

Petitioner's arguments in this case are frivolous and without substance. He has taken numerous unrelated legal concepts, most of which have been rejected by the courts, and posed them as reasons why he is not compelled to report or pay Federal income tax. He has wasted the time and tied up the resources of the Government with matters that are without substance or merit. Accordingly, a $2,000 penalty under section 6673 will be imposed against petitioner.3

To reflect the foregoing,

An appropriate order and decision will be entered.

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