Wednesday, February 1, 2012


Terrence C. Wright v. Commissioner, TC Memo 2012-24 , Code Sec(s) 6323; 6330.

TERRANCE CLEM WRIGHT, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent .
Case Information:

Code Sec(s):       6323; 6330
Docket:                Docket No. 5031-11L.
Date Issued:       01/24/2012
HEADNOTE

XX.

Reference(s): Code Sec. 6323; Code Sec. 6330

Syllabus

Official Tax Court Syllabus

Counsel

Terrance Clem Wright, pro se.
Carol-Lynn E. Moran, for respondent.

MEMORANDUM OPINION

RUWE, Judge: This matter is before the Court on respondent's motion for summary judgment (motion) pursuant to Rule 121. 1 Respondent contends that no genuine issue exists as to any material fact and that the determination to maintain a notice of Federal tax lien filed under section 6323 should be sustained. In his response to respondent's motion, petitioner does not contest any of respondent's allegations and seems to indicate that respondent's motion should be granted.

Background

At the time the petition was filed, petitioner resided in Pennsylvania. Petitioner filed income tax returns for the taxable years 1999, 2000, 2001, 2003, 2004, 2005, 2006, 2007, and 2008 (years at issue) but failed to pay all of the liabilities reported on the returns. As a result, respondent assessed the taxes shown on the returns. Respondent sent petitioner a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, dated March 18, 2010, advising petitioner that a notice of Federal tax lien (NFTL) had been filed with respect to his unpaid liabilities for the years at issue and that petitioner could request a hearing with respondent's Office of Appeals. On April 25, 2010, petitioner submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, in which he did not contest the underlying tax liabilities but instead requested an installment agreement. On November 19, 2010, respondent's settlement officer sent petitioner a letter scheduling a telephone conference for January 18, 2011. In the letter, the settlement officer requested that petitioner provide financial information and a monthly payment proposal so that she could make a decision regarding petitioner's request for an installment agreement.

On January 18, 2011, a telephone conference was held between respondent's settlement officer and petitioner. Petitioner advised the settlement officer that he was not currently able to afford to make any installment agreement payments. The settlement officer advised petitioner that while he had provided respondent with some of the financial documents that were requested, he did not provide bank statements, and, as a result, there was insufficient information available for the settlement officer to determine whether petitioner should be placed in currently not collectible (CNC) status. The settlement officer further advised petitioner that he could pursue CNC status when he obtained all of the necessary financial documents.

On February 2, 2011, respondent issued petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330, determining that petitioner would not be granted relief from the NFTL and that petitioner did not qualify for withdrawal of the notice as allowed for by  section 6323(j). On March 1, 2011, petitioner filed a petition with this Court. In the petition, petitioner does not contest the underlying liabilities or the denial of an installment agreement. Instead, petitioner's only contention is that he does not have sufficient funds to pay his admitted liabilities, and he requests suspension of collection action on the basis of economic hardship.

Discussion

Summary judgment is designed to expedite litigation and to avoid unnecessary and expensive trials. Shiosaki v. Commissioner,  61 T.C. 861, 862 (1974). A motion for summary judgment is granted where the pleadings and other materials show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 [73 AFTR 2d 94-1198] (7th Cir. 1994). The burden is on the moving party to demonstrate that no genuine issue as to any material fact remains and that he is entitled to judgment as a matter of law. FPL Grp., Inc. v. Commissioner, 116 T.C. 73, 74-75 (2001). In all cases, the evidence is viewed in the light most favorable to the nonmoving party.Bond v. Commissioner, 100 T.C. 32, 36 (1993). However, the nonmoving party is required “to go beyond the pleadings and by *** [his] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) (quoting Fed. R. Civ. P. 56); see also Rauenhorst v. Commissioner, 119 T.C. 157, 175 (2002); FPL Grp., Inc. & Subs. v. Commissioner ,  115 T.C. 554, 560 (2000). Petitioner's response to respondent's motion fails to indicate that there is a genuine issue for trial. Consequently, we conclude that there is no issue as to any material fact and that a decision may be rendered as a matter of law.

If a taxpayer's underlying liability is properly at issue, the Court reviews any determination regarding the underlying liability de novo.Goza v. Commissioner,  114 T.C. 176, 181 (2000). Petitioner has the burden of proof regarding his underlying liabilities. See Rule 142(a); Smith v. Commissioner T.C. Memo. 2008- , 229. Petitioner made no specific arguments and presented no evidence to bring into doubt the correctness of the underlying tax liabilities as calculated by respondent.

The Court reviews administrative determinations by respondent's Office of Appeals regarding nonliability issues for abuse of discretion. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Goza v. Commissioner, 114 T.C. at 181- 182. The determination of an Appeals officer must take into consideration: (1) the verification that the requirements of applicable law and administrative procedure have been met; (2) issues raised by the taxpayer; and (3) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary. Secs. 6320(c),  6330(c)(3); see also Lunsford v. Commissioner 117 T.C. , 183, 184 (2001).

The notice of determination sets forth the Internal Revenue Service's verification of compliance with applicable law and administrative procedure, and petitioner did not challenge that verification. Consequently, no verification issues under section 6330(c) are at issue. Furthermore, the issues raised in the petition pertain only to collection alternatives based upon his financial hardship, and these issues were considered by the Appeals officer. The Appeals officer determined that the proposed collection action balanced the need for the efficient collection of taxes with the legitimate concern of petitioner that any collection be no more intrusive than necessary.

The Appeals officer determined not to grant petitioner's request that the collection activity against him be suspended on the ground of financial hardship. Suspension of collection activity is a “collection alternative” that the taxpayer may propose and that the Office of Appeals must take into consideration. See , sec. 6330(c)(2)(A)(iii), (3)(B). The Internal Revenue Manual (IRM) makes provision for a taxpayer's account to be declared “currently not collectible” in cases of “hardship”. See IRM pts. 1.2.14.1. 14 (Nov. 19, 1980) (Policy Statement 5-71), 5.16.1.2.9 (May 5, 2009). To justify suspension of collection on the ground that the account should be deemed CNC, petitioner must show that he cannot afford to pay the liabilities; and to do so he must show his financial circumstances, including the money that is available to him and the expenses that he bears. See Pitts v. Commissioner, T.C. Memo. 2010-101 [TC Memo 2010-101]; sec. 301.6320-1(e)(1), Proced. & Admin. Regs. An Appeals officer does not abuse his or her discretion in denying CNC status where the taxpayer has not submitted the necessary financial information. Mahlum v. Commissioner , T.C. Memo. 2010-212 [TC Memo 2010-212]; Swanton v. Commissioner, T.C. Memo. 2010-140 [TC Memo 2010-140]. The Appeals officer requested that petitioner submit bank statements and other financial information so that collection alternatives could be considered. Petitioner submitted some of the requested information but failed to submit bank statements. Because petitioner failed to submit the requested bank statement information, the Appeals officer was unable to accurately ascertain petitioner's financial circumstances and, consequently, determined that she could not calculate the appropriate installment agreement terms or grant petitioner CNC status. In the absence of the requested information, respondent's Appeals officer did not abuse her discretion in denying petitioner's request for collection alternatives. See Mahlum v. Commissioner T.C. Memo. 2010-212 [TC Memo 2010-212]; Swanton v. , Commissioner, T.C. Memo. 2010-140 [TC Memo 2010-140]; Pitts v. Commissioner, T.C. Memo. 2010- 101 [TC Memo 2010-101]. As a result, respondent's determination is sustained.

To reflect the foregoing,

An appropriate order and decision will be entered.

Part 5. Collecting Process
Chapter 16. Currently Not Collectible
Section 1. Currently Not Collectible

5.16.1  Currently Not Collectible
·         5.16.1.2   Currently Not Collectible Conditions
·         5.16.1.3   Special Conditions
·         5.16.1.5   Managerial Approval
·         5.16.1.6   Mandatory Follow Up
·         Exhibit 5.16.1-2   Report of Currently Not Collectible Taxes — Part 1 (Reverse)
5.16.1.1  (04-29-2011)
Currently Not Collectible Policy and Procedure Overview
1.      Policy Statement P-5-71 provides the authority for reporting accounts currently not collectible (CNC). See IRM 1.2.14.1.14, Policy Statements for Collecting Process. Accounts can be removed from active inventory after taking the necessary steps in the collection process.
2.      Accounts may be reported CNC for a variety of reasons using transaction code (TC) 530. It is a requirement that TC 530 be defined by the appropriate closing code (cc). The most commonly used closing codes are displayed in the table below.
Currently Not Collectible Closing Codes
Closing Code
Definition
03
inability to locate the taxpayer or assets
04
partial expiration of the assessment prior to issuance
05
complete expiration of the statutory period for collection or suit initiated to reduce tax claim to judgment
06
for use by revenue officers on international casework, where a taxpayer can pay but the service is unable to collect a liability because the taxpayer resides in a foreign country
07
a corporation, exempt organization, or Limited Liability Company (LLC), where the LLC is identified as the liable taxpayer, liquidated in bankruptcy
08
death of an individual with no collection potential from the decedent/decedent estate
09
accounts below tolerance; see IRM 5.16.1.2.5(1) and (2) Tolerance, for additional information
10
corporations, certain limited liability partnerships, exempt organizations, or LLCs, where the LLC is identified as the liable taxpayer, which are inactive and defunct with no assets
12
inability to contact a taxpayer although the address is known and there is no means to enforce collection
13
a corporation, exempt organization, limited partnership, or LLC, where the LLC is identified as the liable taxpayer, remains in business and is current but is unable to pay back taxes
14
when suspending collection of BMF balance due accounts when the key individual is deployed to a combat zone; see IRM 5.1.7.9.1, Business Masterfile (BMF) Accounts of Taxpayers Deployed to a Combat Zone, for additional information
15
obsolete - this was formerly used for corporate income tax liabilities owed by a financial institution certified as insolvent by the Office of the Controller of the Currency or the Office of Thrift Supervision
17
inability to locate the Single Member Owner (SMO) or assets of the SMO who is liable for taxes assessed under an LLC Employer Identification Number (EIN)
18
inability to contact a Single Member Owner (SMO) who is liable for taxes assessed under an LLC EIN when the SMO address is known, and there are no means to enforce collection
19
accounts below tolerance that are assessed under an LLC EIN, but owed by SMO; see 5.16.1.2.5, Tolerance, for additional information
24 - 32
collection of the liability would create a hardship for taxpayers by leaving them unable to meet necessary living expenses
Reminder:
Hardship closing codes can only be used for individual or joint IMF assessments, sole proprietorships, general partnerships, and LLCs, where an individual owner is identified as the liable taxpayer.
3.     Note:
4.      See IRM 5.16.1.1(17) for a list of the Integrated Collection System (ICS) literals used to close CNC cases.
5.     Note:
6.      A single member LLC that is classified as a disregarded entity will, nevertheless, be treated as an entity separate from its owner for employment tax purposes (effective for wages paid on or after January 1, 2009) and for certain excise tax purposes (effective for liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008). The regulations are not retroactive.
7.      The investigation required to establish a CNC condition varies with the dollar amount and type of case. Generally, a Collection Information Statement (CIS) will be secured prior to reporting an account CNC. The CIS supporting a CNC determination is considered current if it is less than twelve months old.
Note:
Appropriate procedures must be followed when making third party contacts. (See IRM 5.1.17, Third Party Contacts)
.
8.      In general, a Notice of Federal Tax Lien (NFTL) should be filed on accounts being reported CNC when the aggregate unpaid balance of assessments equals or exceeds ≡ ≡ ≡ ≡ ≡ . See IRM 5.12.2, Lien Filing Requirements. If a taxpayer subsequently requests a Collection Due Process (CDP) hearing based upon the NFTL filing, the Revenue Officer (RO) must follow the procedures in IRM 5.1.9.3, Collection Due Process, to forward the case to Appeals.
9.      Conduct a compliance check and document the results in the case history in circumstances when the taxpayer is contacted. See IRM 5.1.11.2.3, Full Compliance Check. Compliance checks are not required when the taxpayer cannot be contacted.
10.    All open filing requirements or Delinquent Return (Del Ret) modules must generally be resolved and closed appropriately when reporting an account CNC. For further instructions see also 5.16.1.2.9(9) .
11.    Document all actions to support the CNC determination. The last history entry will be a summarizing statement supporting the CNC decision. Address any assets owned by the taxpayer in the summarizing statement. If a mandatory follow-up is requested, include the reason in the summarizing statement. See IRM 5.16.1.6 for information on mandatory follow-up.
12.    Only certain CNC cases can be reactivated systemically. Systemic follow-up is limited to hardship, unable to locate and unable to contact cases. Unable to locate and unable to contact cases will reactivate if a new levy source posts to Integrated Data Retrieval System (IDRS). Unable to locate cases will also reactivate if a new address posts to IDRS. Hardship cases can be reactivated if it appears there is a change in the taxpayer's ability to pay indicating collectibility. See IRM 5.16.1.2.9(11).
13.    Revenue Officers (RO), Appeals Officers (AO), and Settlement Officers (SO) may report accounts as CNC.
14.    Tax examiners in Collection Field function (CFf) and Centralized Case Processing (CCP) may report as CNC those accounts that meet existing criteria subject to the limitations:
·         IMF, Non-Masterfile (NMF), or out of business BMF sole proprietors or partners, with less than ≡ ≡ ≡ ≡ ≡ aggregate unpaid balance of assessments.
·         BMF taxpayers (other than accounts for trust fund taxes owed by corporations, LLCs, or limited partnerships) with less than ≡ ≡ ≡ ≡ ≡ aggregate unpaid balance of assessments.
15.    Bankruptcy specialists may report as CNC corporate liabilities where the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ when a corporation has been through a liquidating bankruptcy.
16.    Advisory employees may report accounts CNC when a local probate office indicates that a proof of claim will not generate funds. Transferee issues should be considered. See IRM 5.16.1.2.4(9) and (10) for additional information.
17.    The Inventory Delivery System (IDS), may shelve IMF accounts where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ and BMF accounts where the aggregate unpaid balance including accruals is less than ≡ ≡ ≡ ≡ ≡ .
18.    CNC recommendations generally require the review and approval of the immediate manager to ensure the investigation meets established standards of thoroughness and integrity. See IRM 5.16.1.5. Managerial review criteria can be located in IRM 1.4.50,Collection Group Manager, Territory Manager, and Area Director Operational Aid, exhibit 1.4.50-2.
19.    Quality control is accomplished through mandatory and sample reviews through Embedded Quality (EQ).
20.    Attach the following supporting documents, whenever applicable, to the case file:
·         Collection Information Statements (CIS)
·         Approved Form 4183, Recommendation re: Trust Fund Recovery Penalty Assessment
·         Copies of transferee assessment recommendations
·         Copies of suit recommendations to reduce the tax claim to judgment
·         Replies to Courtesy Investigations
·         Copies of tax returns
·         Other documentation to support the CNC determination
Reminder:
If the account is being reported CNC based on a suit recommendation to reduce the tax claim to judgment, forward the entire case file to Advisory for association with the suit file after the group manager approves the CNC.
Note:
Parts 2 and 3 of the paper Form 53 that are generated by ICS, which show "For processing as Form 3177" at the bottom, should not be included in the closed case file. Parts 2 and 3 should be sent by secure E-mail or mailed separately from the closed case to CCP for input.
21.    Select the following literals when closing cases as CNC using ICS. The related closing codes (cc) are in parentheses:
·         A. Defunct Corp., Exempt Org., Ltd. Ptr., or LLC (10)
·         B. Unable to Pay/Hardship (24-32)
·         C. Bankrupt Corp., Exempt Org., or LLC (07)
·         D. Unable to Locate (03)
·         E. UTL for LLC-SMO Liable (17)
·         F. Unable to Contact (12)
·         G. UTC for LLC-SMO Liable (18)
·         H. In-Business Corp., Exempt Org., Ltd.Ptr., or LLC (13)
·         I. Tolerance (09)
·         J. Tolerance for LLC-SMO Liable (19)
·         K. Decedent/Decedent Estate (08)
·         L. Statute Expired Prior to Issuance (04 )
·         M. Statute Expired After Issuance or Suit Initiated (05)
·         N.. Resolution Trust Corp. Related (15)
·         O. Surveyed (39)
·         P. International - No Field Visit (06)
·         Q. Combat Zone (14)
5.16.1.2  (04-29-2011)
Currently Not Collectible Conditions
1.      When the LLC is the liable taxpayer for some tax module(s) and the owner of the LLC is the liable taxpayer for other tax module(s), separate collection determinations must be made for each liable taxpayer. Select the appropriate tax module(s) for each closing code when utilizing TC 530 for both liable taxpayers. If only one liable taxpayer meets conditions for reporting CNC, and a different collection action is required for the other taxpayer, report the appropriate tax module(s) CNC before proceeding with collection action on the remaining tax module(s). See IRM 5.16.1.3.4.(7) LLC tables for additional information. See IRM 5.1.21, Collecting From Limited Liability Companies.
5.16.1.2.1  (04-29-2011)
Unable to Locate and Unable to Contact
1.      If neither the taxpayer nor assets can be located, use cc 03 to report the account uncollectible. For Single Member Owners (SMO), where the SMO is liable for taxes assessed under an LLC EIN, and the SMO, and assets of the SMO are unable to locate, use cc 17 to report the SMO modules uncollectible.
2.      When the taxpayer's ability to pay cannot be determined because they cannot be contacted and income and assets cannot be identified, use cc 12, Unable to Contact. For SMOs, where the SMO is liable for taxes assessed under an LLC EIN, use cc 18 if the SMO is unable to contact, although the SMO address is known, and there is no means to enforce collection.
3.      For domestic accounts where the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ ≡ research of the following resources is required:
·         Telephone directories
·         Information Return Program (IRP) data, using Corporate Files On-Line (CFOL) command codes SUPOL or IRPTR
·         Postal tracers, when a field call to the master file address confirms the taxpayer is unable to locate or contact See IRM 5.1.18.12,United States Postal Service, for additional guidance on postal tracers.

For international accounts, the same sources will be checked whenever available for the country in question.
4.      For domestic accounts where the aggregate unpaid balance of assessments is over ≡ ≡ ≡ ≡ ≡ ≡ , attempt to develop leads by researching the following additional sources:
·         Motor vehicle records
·         Employment commissions
·         On-line courthouse records for real and personal property
·         Local licensing authorities when a taxpayer has a business that requires a license
·         On-line services that help in locating taxpayers, such as Accurint, follow security guidelines when using public internet search engines
·         CC RTVUE/BRTVU/TRDBV if the due date of the last filed return was within the past two years. Use RTVUE/BRTVU to determine if a copy of the return should be secured to further develop leads to locate the taxpayer, assets or levy sources

For international accounts, besides using these sources when and where practical, a Tax Attache could be consulted for further potential sources of value for the country in question.
5.      The above list is not all inclusive. Local management may require that additional information sources be checked, for example U.S. Coast Guard and local licensing agencies where boat ownership is common.
6.      For accounts with an aggregate unpaid balance of assessments over ≡ ≡ ≡ ≡ ≡ ≡ , a field call to the taxpayer's last known address is required. In addition, a field call must be made to the courthouse to check real and personal property records if not available on line. See IRM 5.1.18.4, Real Property Records.
Note:
For taxpayers residing outside the United States, and territories other than Puerto Rico and the U.S. Virgin Islands, a field call may not be practical. Any taxpayer contact (including a field call) that requires foreign travel must be coordinated with the U. S. Competent Authority (delegated to the Deputy Commissioner (International), Large Business and International), who may authorize such travel based on treaties or other international arrangements.
Reminder:
W&I ACS call sites, SB/SE ACS large dollar sites, and tax examiners in the Collection Field function are exempt from the requirement to make field calls.
7.      For Individual Master File (IMF) taxpayers, sole proprietor taxpayers, and for LLCs where an individual owner is identified as the liable taxpayer, secure and analyze a full credit report if the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ . This includes cases where recently filed returns will result in liabilities in excess of ≡ ≡ ≡ ≡ ≡ . For additional information on credit reports see IRM 5.1.18.17.2, Credit Reports.
8.      When the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ , research the following additional sources:
·         Check CC AMDIS to determine if there is a current open examination. If there is an open examination, contact the revenue agent to see if he/she has a new address for the taxpayer or has identified any additional assets.
·         Request a passport check when the taxpayer travels overseas frequently or there is reason to believe the taxpayer travels overseas frequently in accordance with IRM 5.1.18.13, United States Passport Office.
9.      Consider requesting that a taxpayer be placed on the Department of Homeland Security lookout list if you have been unable to locate or contact the taxpayer and if they live outside the U.S. or travel outside the U.S. See IRM IRM 5.1.12.26, Treasury Enforcement Communications System.
10.    Consider a mandatory follow-up if there is a definite indication that contact should be made in the future.
11.    Federal Employee/Retiree Delinquent Investigation (FERDI) cases cannot be reported as UTL or UTC. Follow procedures in IRM 5.1.7.7, Federal Employee/Retiree Initiative (FERDI).
5.16.1.2.2  (05-05-2009)
Statute Expiration
1.      Ensuring that the proper action is taken on an account before the collection statute expires is a priority. The actions required to resolve short statute issues will depend on the circumstances. See IRM 5.1.19, Collection Statute Expiration and/or IRM 25.6.1.9, Statute of Limitations - Assessments.
5.16.1.2.2.1  (05-05-2009)
Imminent Statute Expiration
1.      An imminent Collection Statute Expiration Date (CSED) module is any module with twelve months or less remaining on the collection statute. See IRM 5.1.19.5, Imminent CSEDs, for specific procedures used to verify, monitor, work, and document these types of cases.
2.      Imminent CSED modules should be worked to an appropriate conclusion prior to the statute expiration whenever circumstances permit. For further guidance, see IRM 5.1.19.5.2, Working Imminent CSEDs.
3.      The RO must discuss imminent CSED modules with their group manager and document an appropriate plan of action to resolve the module(s) prior to the expiration of the statute. For further guidance, see IRM 5.1.19.5.3, Documenting Imminent CSEDs.
4.      If payments are applied to a module with multiple CSEDs they should be applied in order of the date in which the CSED will expire, starting with the one that will expire first. This includes proceeds from seizures, levies, installment agreements and other undesignated voluntary payments. For proceeds from a levy or installment agreement, the CSED module where the payment will be applied must be included on the levy or installment agreement.
5.      Do not solicit voluntary payments on accounts barred by statute. If a taxpayer makes a payment on an account barred by statute, inform them that payment is not required and ask if he/she still wishes to make the payment or have it returned. The taxpayer must be advised that the payment is purely voluntary and will be treated as a gift to the United States Treasury. If the taxpayer's intentions cannot be ascertained, return the payment.
6.      Proceeds from the sale of assets seized prior to the expiration of the statute can be applied after the date of expiration. The affected modules require that TC 520 cc 80 be input. Any outstanding balance will be closed using TC 530 cc 05 after the application of sale proceeds and after the statute expires. See IRM 5.12.2.20, Refiling the NFTL, to determine if the NFTL needs to be refiled. The RO should request input of TC 520 cc 80 to allow for application of the proceeds from the seizure. Once the proceeds are posted, the RO must request input of TC 521, no closing code required.
7.      Proceeds that are received as the result of a levy which was served prior to the CSED may be applied to the expired module(s). See IRM 5.11.2.2.1, Legal Basis for Releasing Levies.
Note:
Unlike interest which may be assessed and collected as long as the underlying tax can be collected (see IRC 6601(g)), penalties may have a different CSED apart from any other assessment on the module(s). See IRM 5.1.19.2.1, Transaction Codes That Carry Their Own CSED. The Service, however, is not required to make a separate assessment of the accruals on Failure to Pay (FTP) penalties (i.e., the IRC 6651(a)(2) and IRC 6651(a)(3) additions to tax) in order to collect the accruals.
5.16.1.2.2.2  (09-19-2005)
Non-Master File Expired Statute
1.      For non-master file accounts, if only a portion of the liability expired prior to issuance, report the expired portion on Form 53, using TC 530 cc 04 and annotate 'Statutory Period for Collection Expired'.
2.      If the statute expired on a portion of the liability prior to issuance and the balance expires after issuance, use TC 530 cc 05 for the entire amount. It is not necessary to use cc 04 for a portion of the liability and cc 05 for the balance when the entire balance can be closed using cc 05.
3.      Complete all actions such as payment tracers and adjustments prior to input of either cc 04 or 05.
5.16.1.2.2.3  (05-05-2009)
Master File Partial Statute Expiration
1.      The majority of master file accounts on which the collection statute has expired, either on part of the liability or on the entire liability prior to issuance, will be identified by Taxpayer Delinquent Account (TDA) issuance code 534.
2.      If only a portion of the module has expired, adjust the balance by reporting the expired portion on Form 3870, Request for Adjustment, using TC 534.
Caution:
Do not use cc 04 for master file accounts as this will cause the entire account to go to status 53.
3.      If the remaining balance is determined to be uncollectible, use the appropriate closing code such as hardship, unable to contact, etc.
5.16.1.2.2.4  (05-05-2009)
Master File Complete Statute Expiration
1.      Use closing code 05 when the entire module balance expires after issuance.
2.      Closing code 05 is also used in circumstances where a suit has been filed to reduce a tax claim to judgment. The filing extends the collection statute so that if a judgment is obtained, the tax may be collected by levy until the tax is paid. If the collection statute expires prior to the filing of the suit, report the account CNC using cc 05. A report of the circumstances of the statute expiration is not required under these circumstances.
Note:
Closing code 05 can only be input after the statute has expired.
3.      If a suit is being recommended based on anticipated improvement in the taxpayer's financial condition - such as discharge of a debt, inheritance or other significant property acquisition - report the account CNC based on the taxpayer's current circumstances (e.g. hardship, unable to locate, etc.).
4.      The suit must be filed prior to the statute's expiration. The recommendation should be initiated in sufficient time so that it can be forwarded to Area Counsel at least nine months before the expiration of the statute. A copy of the recommendation will be kept with the case file. For further information on suits, see IRM 5.17.4, Legal Reference Guide for Revenue Officers - Suits by the United States.
5.      Guidelines for determining the feasibility of recommending a suit are found in IRM 25.3.2, Suits by the United States.
5.16.1.2.2.5  (05-05-2009)
Report of Statute Expiration
1.      The employee assigned the case at the time of the statute expiration will be required to report the expiration in accordance with the procedures in IRM 5.1.19.5, Imminent CSEDs . This requirement applies to situations where a statute expires on any party to a joint assessment where the balance is collectible from the other party(s). These procedures apply to cases where a module has been reported CNC with closing codes 04 and 05 or in cases where it is permissible to let the collection statute expire in inventory with group manager's prior concurrence.
2.      To report an expired collection statute on a case where the RO has taken all appropriate actions without resolving the module(s) prior to the expiration of the statute, use the procedure in IRM 5.1.19.5.4, Expiration of a Collection Statute.
3.      To report an expired collection statute on a case where the RO has not taken all appropriate actions to resolve the module(s) prior to the expiration of the statute, use the procedure in IRM 5.1.19.5.5, Collection Statutes That Expire Without Prior Approval.
5.16.1.2.3  (06-29-2010)
Bankrupt Corporations, Exempt Organizations and Limited Liability Companies
1.      If a corporation has been in bankruptcy and no further proceeds will be received from the bankruptcy and anticipated collection from abandoned or after-acquired property is insufficient to warrant further collection efforts, use cc 07.
Reminder:
Collection employees should always contact Insolvency prior to using cc 07.
2.      Closing code 07 may also be used for exempt organizations that have been through liquidating bankruptcy and LLC accounts, (where the LLC is identified as the liable taxpayer), that have been through liquidating bankruptcy.
Note:
See IRM 5.1.21, Collecting from Limited Liability Companies, for sources that may be used to identify the liable taxpayer.
3.      A NFTL should not be filed regardless of the dollar amount, if the taxpayer is a corporation, exempt organization or LLC (where the LLC is identified as the liable taxpayer), and the entity has gone through a liquidating bankruptcy or receivership. Document the proceeding number in the case history.
4.      The trust fund recovery penalty (TFRP) assessment must be considered and Form 4183, Recommendation Re: Trust Fund Recovery Penalty Assessment, must be approved prior to reporting the trust fund liabilities CNC using criteria in IRM 5.7.4.5, Trust Fund Recovery Penalty (TFRP).
5.      If the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ request information on the latest filed income tax return (Form 1120 or 990) by using BRTVU/TRDBV to help identify additional assets. If assets are indicated, secure a copy of the return to pursue any leads. Requests for returns should be limited to returns filed within the prior two years.
6.      If the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ , any portion of the assessment results from an examination and/or fraud penalty, request a copy of the revenue or special agents file formerly known as RAR. Review the file for additional assets, inconsistencies in the taxpayer's financial disclosure and potential for transferee assessment.
7.      If the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ ≡ , check cc AMDIS. If there is an open examination, contact the agent to determine if there are additional assets or to provide information which may limit the scope of the examination based on lack of collectibility.
8.      Corporations and liquidating LLCs, (where the LLC is the liable taxpayer), that have filed a Chapter 7 bankruptcy petition and have been designated a "No Asset" case, being closed as TC 530 cc 07 by the Centralized Insolvency Operation (CIO) do not require managerial approval.
5.16.1.2.4  (04-29-2011)
Decedent and Decedent Estates
1.      Use closing code 08 to report an account CNC on a decedent or decedent estate .
2.      Closing code 08 is appropriate for IMF joint liabilities only when both taxpayers are deceased and a determination has been made that there is no collection potential from assets owned at death.
3.      Closing code 08 may be used when the primary taxpayer is deceased and a determination has been made that there is no collection potential from the decedent's individual or business assets or persons in possession of such assets. Collection may also be pursued from the surviving spouse on joint liabilities using MFT 31 mirrored accounts. See IRM 5.16.1.3.2.1 for additional information.
4.      Do not use cc 08 when only the secondary taxpayer is deceased. A TC 540 should be input on the secondary taxpayer's SSN. Collection may be pursued from the decedent's individual or business assets or persons in possession of such assets. Collection may also be pursued from the primary taxpayer on joint liabilities. If the primary taxpayer is determined to be uncollectible, the account should be closed using a hardship closing code. A CIS must be secured from the primary taxpayer.
5.      Closing code 08 also applies to BMF sole proprietorships and partnerships only if all of the partners are deceased and taxes were due at the time of death.
6.      In situations where the owner of an LLC is identified as the liable taxpayer and is deceased, cc 08 is appropriate.
7.      In all decedent and decedent estate cases attempt to secure the following:
·         Date of death
·         County/city in which the taxpayer died
·         The taxpayer's place of residence at the time of death
·         The name, address and telephone number of the fiduciary
·         Probate records that list an inventory and appraisement of decedent assets
Caution:
Closing code 08 does not apply to corporations even though one or more of the officers may be deceased or to LLCs (where the LLC is identified as the liable taxpayer) and one or more of the members is deceased.
8.      Additional sources may be used to determine the date of death including:
·         On-line locator services (follow security guidelines when using public internet search engines)
·         Obituaries
·         Family members
·         Death certificates
9.      Field employees will consult with Advisory for the purpose of filing a proof of claim when there is an estate proceeding.
Note:
See IRM 5.5, Decedent Estates and Estate Taxes , and IRM 5.17.13, Legal Reference Guide for Revenue Officers, Insolvencies and Decedents' Estates, regarding proof of claim.
10.    Consider a transferee assessment if circumstances warrant and document the ICS history.
Note:
See IRM 5.17.14, Legal Reference Guide for Revenue Officers regarding Fraudulent Transfers and Transferee and Other Third Party Liability.
11.    When reporting accounts CNC using cc 08, do not request separate input of TC 540 to delete the master file filing requirements. TC 530 cc 08 generates a TC 540.
5.16.1.2.5  (04-29-2011)
Tolerance
1.      The following accounts may be closed as CNC, tolerance without further action, where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ :
·         IMF (other than MFT 55)
·         BMF (other than MFT 13)
·         NMF
·         IRAF
Use closing code 09. These accounts do not require managerial approval. This does not apply to cases with TDA issuance codes of N (False Refund Claim Case), 914 (active CI case), or TRSF (transferred from another area office). This does not apply to bankrupt corporations, which should be closed using cc 07.
2.      The following accounts may be closed as CNC, tolerance, where the aggregate unpaid balance, including accruals, is less than ≡ ≡ ≡ ≡ ≡ ≡ :
·         IMF MFT 55
·         BMF MFT 13
Use closing code 09. These accounts do not require managerial approval.
3.      When there are multiple periods where any one period exceeds the tolerance level, do not use cc 09. Close all periods using the appropriate CNC closing code such as unable to locate, hardship, etc.
Exception:
A new LLC closing code 19 has been established for LLCs where the SMO is liable. If the SMO liable periods meet the tolerance criteria, they can be closed using cc 19, and the LLC liable periods can be closed using a different closing code or different type of closure. See IRM 5.16.1.3.4.(7) LLC tables. Modules closed using cc 19 do not require managerial approval.
5.16.1.2.6  (04-29-2011)
Defunct Corporations, Exempt Organizations, Limited Partnerships, and Limited Liability Companies
1.      Closing code 10 applies to any corporation or exempt organization that is no longer operating and from which all assets have been dispersed. Closing code 10 may be used to close Form 1041, U.S. Income Tax Return for Estates and Trusts, assessments on trusts or estates, if there are no assets to collect from and transferee issues have been considered for all transfers of assets or distributions to beneficiaries or grantors.
2.      Closing code 10 may also be used for limited partnership cases when the partnership agreement limits the liability of the partners under local law, when the business is no longer operating and from which all assets have been dispersed.
3.      Closing code 10 may also be used for LLC cases (where the LLC is identified as the liable taxpayer), when the business is no longer operating and from which all assets have been dispersed.
4.      When there is limited collection potential from a corporation with corporate income tax liability, investigate and consider the following collection actions against shareholders, successor entities or others receiving corporate property:
A.     Foreclosure of any Federal Tax Liens against property in the hands of other entities if they were in place before distribution
B.     Assertion of transferee liability against recipients of corporate property
C.     Enforcement of liens attaching to corporate property before the distribution (levy, suit)
D.     Assertion of fiduciary liability against any parties acting in a fiduciary capacity
E.     Suit to set aside the fraudulent transfer of specific property
F.     Establishing the recipient as a nominee, alter ego, or successor in interest of the taxpayer and proceeding appropriately
The above options, particularly assertion of transferee liability, should be considered when collecting unpaid deficiency income tax assessments against insolvent corporations that utilized an Intermediary Transaction or other type of tax shelter to shelter income.
5.      When a corporation has been dissolved under state receivership proceedings or other state dissolution actions, use closing code 10. See IRM 5.5.4, Working Non-Bankruptcy Insolvency Cases.
Note:
Seek Counsel's input in cases of state receivership. Revenue Officers should consider consulting with Insolvency prior to contacting Counsel. See IRM 5.17.13.1, Legal Reference Guide for Revenue Officers, Insolvencies and Decedents' Estates, for further information in circumstances involving assignments for the benefit of creditors, corporate dissolutions, etc.
Reminder:
In situations where transferee liability exists, action may be needed to protect the statute of limitations of the transferee as well as the transferor. See IRM 25.6.22.6.2.4, Extension of Assessment Statute of Limitations by Consent, Dissolved Corporations.
6.      Form 4183, Recommendation re: Trust Fund Recovery Penalty Assessment, must be approved before reporting the employment and/or excise taxes CNC when the liability meets the criteria in IRM 5.7.4, Investigation and Recommendation of TFRP. Form 4183 will also include the additional TFRP liabilities from any unfiled returns. See IRM 5.7.4.3, Calculating the TFRP.
Note:
If the corporate Bal Due modules are being reported CNC prior to assessment of the TFRP, an Other Investigation (OI) will be created on ICS to control completion of the TFRP assessment.
7.      If the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ , request information on the latest filed income tax return (Form 1120, 1065 or 990) by using BRTVU/TRDBV to verify the CIS and identify additional assets. If assets are indicated, secure a copy of the return to pursue any leads. Requests for returns should be limited to returns filed within the prior two years.
8.      If the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ ≡ check cc AMDIS. If there is an open examination, contact the agent for evidence of assets.
9.      If the aggregate unpaid balance of assessments exceeds ≡ ≡ ≡ ≡ ≡ ≡ and any portion of the assessment results from an examination and/or fraud penalty, request a copy of the revenue agents file, (formerly known as RAR), by requesting the Document Locator Number (DLN) of the TC 29X/30X. Review the file for additional assets, inconsistencies in the taxpayer's financial disclosure and potential for transferee assessment.
10.    If the corporation or LLC is chartered in a state that permits corporate or LLC reactivation or reinstatement, and it appears likely that the same entity will resume business, consider a mandatory follow-up.
5.16.1.2.7  (04-29-2011)
In-Business Corporations, Exempt Organizations, Limited Partnerships, or Limited Liability Companies
1.      Accounts may be reported CNC using cc 13 when an operating corporation, exempt organization, or limited partnership cannot pay its back taxes and enforcement cannot be taken because the business has no distrainable accounts receivable or other receipts or equity in assets.
2.      Closing code 13 may also be used for LLC cases (where the LLC is identified as the liable taxpayer), when an operating business cannot pay its back taxes and enforcement cannot be taken because the LLC has no distrainable income or equity in assets.
3.      Secure a complete CIS. The CIS must support the CNC recommendation. If the taxpayer has equity in assets, the reason collection is not being pursued must be documented in the history. The income and expense analysis must show that the taxpayer can make current tax deposits, but cannot make payments on the back taxes. The income and expenses should be verified against tax returns, bank statements or other financial statements provided by the taxpayer. See IRM 5.15.1, Financial Analysis, for detailed information on financial analysis of business entities.
4.      The taxpayer must be current with all filing and paying requirements and must demonstrate an ability to remain current prior to closing as cc 13. The case will be monitored for filing and paying compliance and if the taxpayer does not remain current, the case will be reactivated.
5.      A TFRP investigation must be completed and a recommendation on Form 4183 must be approved prior to disposition of the account. See IRM 5.7.4, Investigation and Recommendation of TFRP, for further information.
6.      Consider issuance of Letter 903(DO) to prevent accrual of additional liabilities and document the decision. For additional information, see IRM 5.7.2.1, Letter 903 (DO).
7.      There is no systemic follow-up on cc 13. Initiate a mandatory follow-up 18 to 24 months after the date of the Form 53. Requests that exceed 24 months must include an explanation in the history or CCP will limit the time to 24 months. The mandatory follow-up will include securing a new CIS, conducting a full compliance check, and reviewing the corporation's or LLC's latest income tax return. This review will determine whether the account will be reactivated or scheduled for additional mandatory follow-up.
8.      If the taxpayer has incurred subsequent liabilities while collection on a prior liability was suspended, the taxpayer must be investigated to verify the taxpayer's financial condition, a NFTL determination made, and a TFRP recommendation made on applicable taxes. See IRM 5.7.4, Investigation and Recommendation of TFRP .
5.16.1.2.8  (04-29-2011)
Insolvent Financial Institutions
1.      Income tax liabilities of certain institutions formerly under control of the Resolution Trust Corporation (RTC) are subject to the InterAgency Agreement (Dec. 10, 1992) between the IRS and the RTC. The Federal Deposit Insurance Corporation (FDIC), as the successor to the RTC, is subject to this agreement but only for the RTC's remaining inventory. Upon receipt of a copy of the FDIC Certification of Treasury Funds Usage in connection with a Thrift subject to this Agreement, annotate the case history, request TC 530 cc 15, and submit for managerial approval. Consult with SB/SE Area Counsel thru Technical Services Advisory on statute expiration issues to determine whether or not a collection suit should be initiated and/or is required and document the case history. See IRM 5.1.12.13, Insolvent Financial Institutions - Provisions of the IRS-RTC/FDIC Agreement, for additional information.
2.      This procedure applies only to corporate income tax liabilities worked in Insolvency.
5.16.1.2.9  (04-29-2011)
Hardship
1.      Follow the procedures in IRM 5.15.1, Financial Analysis Handbook, to determine the correct resolution of the case based on the taxpayer's assets and equity, income and expenses:
·         A hardship exists if a taxpayer is unable to pay reasonable basic living expenses.
·         The basis for a hardship determination is from information about the taxpayer's financial condition provided on Form 433–A,Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433–B, Collection Information Statement for Businesses.
·         Generally, these cases involve no income or assets, no equity in assets or insufficient income to make any payment without causing hardship.
·         An account should not be reported as CNC if the taxpayer has income or equity in assets, and enforced collection of the income or assets would not cause hardship.
·         Hardship accounts are closed using cc 24 through 32. See Exhibit 5.16.1-2.
Reminder:
Hardship closing codes can only be used for individual or joint IMF assessments, sole proprietorships, general partnerships, and LLCs, where an individual owner is identified as the liable taxpayer. See IRM 5.16.1.2.4 for decedent cases.
2.      Verification of a CIS is not required if the aggregate unpaid balance of assessments is less than ≡ ≡ ≡ ≡ ≡ and the information on the CIS appears reasonable.
3.      Under certain conditions, a CIS is not required before reporting an account CNC. The aggregate unpaid balance of assessments, including any prior CNC's, must be less than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and at least one of the following conditions must exist:
·         The taxpayer has a terminal illness or excessive medical bills.
·         The taxpayer is incarcerated.
·         The taxpayer's only source of income is social security, welfare, or unemployment.
·         The taxpayer is unemployed with no source of income. Consider a mandatory follow-up or Manually Monitored Installment Agreement (MMIA) for seasonal workers.
Note:
Employees are required to secure documentation from the taxpayer prior to declaring the account uncollectible if internal documents such as IRPTR and RTVUE do not confirm the taxpayers' circumstance.
4.      The following verification is required for accounts when the aggregate unpaid balance of assessments is between ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :
·         IRPTR or SUPOL
·         RTVUE/TRDBV
Note:
RTVUE/TRDBV is required only if the last filed return was for one of the immediate two preceding years. If RTVUE reveals new income or asset information secure a copy of the return(s) for the purpose of identifying income or assets.
5.      For accounts where the aggregate unpaid balance of assessments is above ≡ ≡ ≡ ≡ ≡ the following additional verification is required:
·         Full credit report on IMF and sole proprietor taxpayers and LLCs (where an individual owner is identified as the liable taxpayer)
·         Motor vehicle records
·         Real and personal property courthouse records, see IRM 5.1.18.4, Real Property Records
·         On-line locator services, such as Accurint, follow security guidelines when using public internet search engines
·         CC AMDIS. If there is open Examination activity, contact the revenue agent to determine any additional sources of collection or the need to limit the scope of the examination based upon collectibility.
·         Audit File or Special Agents Report if the assessment originated in Examination or Criminal Investigation (CI). The file can be secured by requesting the DLN of the TC 29X/30X.
Note:
If unable to obtain any information from the special agent, consider consulting with Advisory. If there is a TC 910 on the module, the taxpayer may have filed a financial statement with the probation office.
Note:
Credit reports are optional for accounts with an aggregate balance below ≡ ≡ ≡ ≡ ≡ ≡ .
6.      IMF accounts and BMF accounts of sole proprietorships, partnership and LLCs, (where an individual owner is identified as the liable taxpayer) that cannot be collected due to bankruptcy, will be closed using hardship closing codes.
7.      IRC 6343(e) requires the immediate release of a levy on salary or wages due a taxpayer upon agreement with the taxpayer that the tax is not collectible. See IRM 5.11.2, Serving Levies, Releasing Levies and Returning Property. Case histories must be reviewed to ensure that wage levies are released prior to declaring an account uncollectible under hardship closing codes. The case history must be documented.
Reminder:
If TC 670 with designated payment code (DPC) 05 (levy) is present on any module or a regular series of payments is noted, ensure that the disposition of the levy is known.
8.      A compliance check will be made and the results documented in the case history for all hardship determinations per IRM 5.16.1.1(5). All open filing requirements or Del Ret modules must generally be resolved and closed appropriately when reporting an account CNC.
9.      Open Del Ret modules may be resolved by closing as little or no tax due, or income below filing requirement (P-5-133), if warranted by the facts of the case. See IRM 5.1.11, Delinquent Return Accounts, for options to resolve delinquent return accounts. If the taxpayer is required to file and refuses a referral or summons may be appropriate. See IRC IRM 25.5, Summons Handbook for summons procedures.
Caution:
If a hardship determination is verified, a levy cannot be issued or left in place to persuade a taxpayer to file.
Note:
Accounts may be reported CNC hardship if a CIS can be verified, even if there are unfiled returns. If the unfiled return is needed to confirm the hardship determination (i.e., income, expenses and/or assets reported on the CIS), the Bal Dues should be held until the return is secured and the CIS can be verified, but levies cannot be issued to collect the Bal Dues if all other income/asset checks appear to confirm hardship.
10.    Use the hardship closing code that most closely corresponds to the taxpayer's total living expenses allowed. See Form 433A, Collection Information Statement for Wage Earners and Self-Employed Individuals; Section 4, Monthly Income and Expense Analysis; Line 45, Total Living Expenses. If the closing code chosen does not correspond to the taxpayer's allowed expenses, document the reason for the deviation in the summarizing statement for the CNC decision. Generally, do not select a code below the taxpayer's total living expenses allowed. Do not use a higher code simply to prevent re-issuance of the account.
Example:
Monthly living expenses allowed x 12 (months) = Annual living expense amount. Select the hardship closing code with the closest dollar amount above the annual living expense amount.
Note:
If the closest closing code amount is only $300.00 more than the annual living expense amount, the next higher closing code would be selected. The history would be documented that an increase in Total Positive Income (TPI) of only $300.00 above total living expenses allowed annually would not enable the taxpayer to make monthly payments.
11.    The systemic process for reactivating hardship CNC accounts relies on an increase in TPI above a predetermined amount based on the hardship closing code when the case is closed as CNC:
·         The TPI is reviewed annually when a taxpayer files an income tax return.
·         For BMF accounts on sole proprietorships, partnerships and LLCs (where the owner is identified as the liable taxpayer), TPI is determined by the annual income of the individual, general partner or member of the LLC.
·         The Social Security Number (SSN) of the individual, general partner or member of an LLC (where the owner is identified as the liable taxpayer) must be cross-referenced on IDRS.
·         Evaluate BMF entities to determine if a TC 130 should be input on the SSN of an individual, general partner or member of an LLC ( where the owner is identified as the liable taxpayer). Forward Part 3 of Form 53 to CCP for input.
12.    Taxpayers must be advised that interest and penalties will continue to accrue on the account even though the collection action is suspended. In addition, before reporting an account CNC, other collection options such as Offer in Compromise should be discussed with the taxpayer.
13.    Case Closing Letter 4223, Case Closed - Currently Not Collectible, will be issued to the taxpayer and/or Power of Attorney (POA) when a case is closed as CNC - hardship. The case closing letter will only be used when the collection investigation on the taxpayer entity is concluded. Letter 4223 is available on the publishing web site located at http://publish.no.irs.gov/.
5.16.1.2.10  (06-29-2010)
International
1.      Collection investigation and distraint actions by the Service in cases involving taxpayers residing in foreign countries are not treated the same as those involving taxpayers residing in the United States. The Service is only able to collect from taxpayers residing in foreign countries to the extent provided for in tax treaties. Revenue Officers working taxpayers who reside in foreign countries use TC 530 cc 06 for cases where it is known that the taxpayer has assets and ability to pay in part or in full but has not done so and where we have no further ability to collect as assets are outside the U.S. Currently, there are only five countries with which the United States has treaties that provide for mutual collection assistance. These countries are Canada, Denmark, France, the Netherlands, and Sweden. See IRM 5.1.12.25, Outgoing Mutual Collection Assistance Requests. International revenue officers also use TC 530 cc 06 in instances where they have initiated an Outgoing Mutual Collection Assistance Request (MCAR) request and have no other collection avenues to pursue. The TC 530 cc 06 closure can occur prior to the resolution of the Outgoing MCAR request by the foreign country. Taxpayers residing in U.S. possessions and territories (a.k.a. insular areas) are treated the same as those residing in the United States and are not appropriate for closing as TC 530 cc 06.
2.      When the taxpayer travels overseas frequently or there is reason to believe the taxpayer travels overseas frequently in accordance with IRM 5.1.18.13, United States Passport Office, request a passport check if the aggregate unpaid balance of assessments is:
·         ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more for international taxpayers.
·         ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more for domestic taxpayers.
5.16.1.3  (04-29-2011)
Special Conditions
1.      In certain circumstances employees will be required to take additional actions to ensure that CNC accounts are properly closed.
2.      When recommending an account be reported CNC with MFT 74 or MFT 76 Bal Due modules showing on IDRS SUMRY or BMFOLI, follow the procedures below:
A.     Determine the correct type of CNC based on IRM 5.16.1 criteria, excluding the MFT 74 or 76 modules.
Exception:
If the total balance due including the MFT 74 and 76 modules exceeds the tolerance amount, you will not be able to close the case as tolerance.
B.     Input the CNC request on ICS excluding the MFT 74 and 76 modules.
C.     Follow the same processing procedures for a CNC case.
D.     Document the closing ICS history that the MFT 74 and 76 modules should be excluded from the CNC.
E.     The MFT 74 and 76 modules can be ignored for purposes of reporting an account CNC.
Note:
If an ICS Bal Due was created for an MFT 74/76 module, and all other Bal Due modules on the case are being closed as CNC, the ICS created Bal Due modules for the MFT 74/76 modules must be closed as "Erroneously Created " . Since these modules are not on IDRS, they will not systemically close on ICS.
5.16.1.3.1  (05-05-2009)
Transferee Cases
1.      If a transferee assessment has been recommended and the liability is not collectible from other sources, report the transferor account CNC under the appropriate closing code. See IRM 5.1.14.2, Transferee Liability and Fraudulent Conveyances, for further guidance.
2.      Document the consideration of transferee liability prior to case disposition.
5.16.1.3.2  (04-29-2011)
Assessments Against Two or More Taxpayers
1.      Assessments against more than one taxpayer can only be reflected as CNC on IDRS and ICS if all of the liable taxpayers are determined to be uncollectible. In order to request a CNC hardship closing code on a joint IMF liability, where the taxpayers are now divorced or legally separated, both taxpayers would need to be uncollectible.
2.      If one taxpayer qualifies for CNC hardship on a joint liability, or one taxpayer on the joint assessment requests separate treatment from their spouse, proceed with the CNC mirroring process. See IRM 5.16.1.3.2.1 for additional information.
Reminder:
Employees should review joint accounts of divorced taxpayers to ensure that collection is not being pursued on a taxpayer that has already been determined to be uncollectible.
3.      An accepted offer in compromise will release the taxpayer who made the offer from the entire liability if the taxpayer complies with all the terms of the offer. Offer credits are applied to the original liability reducing the overall debt. If the liability against the remaining taxpayer is determined to be uncollectible, the amount to be reported as CNC is the balance of assessments after credits.
Note:
For specific procedures concerning partnership liabilities see IRM 5.8.4.20.2, Partnership Liabilities and IRM 5.15.1.36.1, Entity Types.
5.16.1.3.2.1  (04-29-2011)
Joint Liability Separate CNC Requests - MFT 31 Mirrored Assessments
1.      When a taxpayer files a joint income tax return with a balance due, both taxpayers are equally responsible for payment of the tax liability. One or both taxpayers on the jointly filed return may request and qualify for separate treatment and meet CNC criteria. Revenue Officers are to follow procedures in IRM 5.15.1, Financial Analysis Handbook, to determine the correct resolution based on the taxpayers' assets and equity, income and expenses.
2.      If it is determined that one of the taxpayers on the joint return may not be collectible then the MFT 30 joint account must be mirrored into two separate MFT 31 accounts to allow the RO to report one of the liable taxpayers CNC and to pursue collection on the other liable taxpayer.
3.      A mirrored assessment is identical to the MFT 30 assessment. The MFT 30 joint assessment will be replaced with two separate accounts using the MFT 31 account code. The purpose in creating the MFT 31 accounts is to pursue collection or withhold collection on each spouse separately, when needed. A mirrored account is identified on IDRS by MFT 31. The CNC mirroring process will be identified by TC 971 AC 109 on each account.
4.      The MFT 30 account must be "mirrored" into two separate MFT 31 accounts when one taxpayer on a jointly filed return needs to be treated separately from the other taxpayer based upon the following triggering event(s):
·         Joint MFT 30 liability
·         Either taxpayer is determined to be CNC
·         Taxpayer requests separate treatment from their spouse or former spouse
5.      The RO will conduct the following analysis:
·         Verify joint liability
·         Analyze taxpayer's ability to pay (using financial information)
·         Determine if one of the taxpayers meets CNC criteria
·         Conduct full compliance check
·         Consider appropriate enforcement actions such as levy or NFTL
·         Document the taxpayer's request for separate treatment from their spouse or former spouse
6.      A separate CNC on a joint liability cannot be referred for mirroring if any of the following conditions exist:
·         Invalid SSN or TIN
·         Name control is not the same as on CC INOLE
·         A credit balance exists on the module to be mirrored
·         If either TIN begins with a "9"
·         Bankruptcy
·         International Entities
Note:
A compliance check should be made and documented when considering a CNC hardship case. Folow procedures in IRM 5.16.1.2.9(9) if there unfiled returns.
5.16.1.3.2.2  (04-29-2011)
NFTL on Mirrored Tax Period(s)
1.      If a NFTL is already filed on the MFT 30 tax period(s), (check for TC 582 and/or TC 360), then no additional lien filing is necessary when the account is mirrored. The NFTL transaction codes will transfer over to the mirrored accounts.
2.      If there is no indication that a NFTL is already filed on the MFT 30 tax period(s) involved and a lien filing is necessary and the lien should be filed to protect the government's interest against both taxpayers, the RO will request filing of the NFTL prior to sending the account forward for mirroring. The MFT 30 case must be held until the NFTL filing requirements are met, the NFTL is requested and the TC 582 lien indicator is pending. See IRM 5.12.2.2, Lien Filing Requirements - Creation and Duration; IRM 5.12.2.3, Lien Filing Requirements - Taxpayer Contact; and IRM 5.12.6.3, Creating the Notice of Federal Tax Lien Form 668(Y)(c), using ALS.
3.      If a NFTL is only required on the mirrored tax period(s) against one spouse, the case may be packaged with a completed NFTL request via Form 12636, Request for Filing or Refiling Notice of Federal Tax Lien, and forwarded with Form 3210, Document Transmittal, to SB/SE CSCO PSC for processing.
4.      If a determination is made that no lien is to be filed on the mirrored account, a statement must be documented on Form 3210.
5.16.1.3.2.3  (04-29-2011)
Processing Actions for Mirroring Assessment
1.      Perform and document complete research prior to making a referral for the mirroring process. A manual Form 53 can be selected from the ICS template listing in preparing a referral for mirroring.
2.      Document the following information on Form 3210:
A.     "MFT 31 Mirror" in the remarks section
B.     Taxpayer name line and MFT 30 TIN
C.     Name and TIN of taxpayer account to be mirrored
D.     Current address of the taxpayer to be mirrored
E.     All telephone numbers of taxpayer
F.     Tax years to be included
G.     Indicate appropriate TC 530 cc (24 - 32)
H.     RO name, T-sign and phone number
Note:
If a NFTL is not required, annotate on Form 3210 that lien determination was made and no lien is to be filed.
3.      If a NFTL is required on the mirrored assessment, attach Form 12636 to Form 3210. Annotate "MFT 31 Mirror" , on Form 12636. Complete Form 12636 with date, RO name, T-sign, and phone number.
4.      Attach Form 53 package to Form 3210 for routing to SB/SE CSCO PSC for input of TC 530 on the mirrored tax periods. Form 53 must be annotated with "MFT 31 Mirror Assessment" in red or bold. Group assessed and mirrored tax periods together in Item 16 of Form 53, beginning with assessed liabilities; write "mirrored" at the beginning of the mirrored periods header.
5.      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡
6.      SB/SE CSCO PSC will create the MFT 31 modules identified by TC 971 AC 109, process the NFTL request and input the appropriate CNC closing action(s).
7.      Send case closing Letter 4223, Case Closed Currently Not Collectible, on the MFT 31 mirrored assessment when the account is reported as CNC hardship.
5.16.1.3.3  (05-05-2009)
Cases Reported Currently Not Collectible Based Upon a Prior Form 53
1.      If another delinquent module becomes due and owing after the initial CNC, the new account may be reported CNC without further investigation if the prior CNC determination is no more than twelve months old. A NFTL determination is required per IRM 5.12.2.4,Notice of Federal Tax Lien Determination.
2.      Exceptions are:
·         Trust fund taxes which require a TFRP determination or which accrued after the date of the prior CNC determination
·         Prior bankruptcy (07) dispositions; contact Insolvency to determine other collection sources
·         The taxpayer has a new address and the case was reported as CNC unable to locate or unable to contact
·         When a case was closed TC 530 cc 39, shelved
3.      Combined Annual Wage Reporting (CAWR) assessments may be reported CNC without investigation if they meet the criteria in IRM 5.7.4, Investigation and Recommendation of TFRP, and if the prior CNC closing code is 10. If the prior cc is 07, contact Insolvency to determine collection potential.
4.      Federal Unemployment Tax Act (FUTA) state matching assessments may be reported as CNC without further investigation if the prior CNC closing code is 10. If the prior CNC closing code is 07, contact Insolvency to determine collection potential.
5.16.1.3.4  (04-29-2011)
Limited Liability Companies
1.      Limited Liability Companies (LLC's) are business entities that are organized and established under state law which specifically limits the liability of the owners for debts of the LLC. The identity of the party liable for taxes is either the LLC or the owner of the LLC.
Note:
See IRM 5.1.21, Collecting from Limited Liability Companies, for guidance in identifying the liable taxpayer. This includes information on the classification for federal tax purposes of a single member LLC (as a disregarded entity or an association taxable as a corporation) and a multi-member LLC (as a partnership or an association).
Note:
A single member LLC that is classified as a disregarded entity will, nevertheless, be treated as an entity separate from its owner for employment tax purposes (effective for wages paid on or after January 1, 2009) and for certain excise tax purposes (effective for liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008). The regulations are not retroactive.
2.      Prior to reporting any modules as CNC, ensure the appropriate TC 971 Action Codes 364/365/366 have been input to identify the liable taxpayer for each tax module.
3.      Where the LLC is identified as the liable taxpayer, consider the following:
·         Collectibility is based on the income and assets of the LLC.
·         The NFTL is filed in the name of the LLC.
·         The assets of the members of the LLC are not subject to collection action.
·         The TFRP must be considered with respect to the members or employees of the LLC who meet the definition of responsibility under IRC 6672.
4.      Where the SMO is identified as the liable taxpayer, consider the following:
·         Collectibility is determined based on the income and assets of the owner.
·         The NFTL is filed in the name of the SMO.
Note:
See IRM 5.12.2.6.3, Preparing the NFTL - Limited Liability Company (LLC), for further instructions concerning NFTLs against single member disregarded LLCs.
5.      Because state law specifies that the owner of an LLC has no direct ownership in LLC assets, the property of the LLC is not available for collection action when the owner is identified as the liable taxpayer. Consider the following:
·         In situations where an individual owner of an LLC is identified as the liable taxpayer, that individual is directly responsible for the entire liability and the TFRP is not required as to the owner.
·         When the owner of an LLC is a partnership, the liable taxpayer is the partnership and the partnership is responsible for the liability. Counsel should be consulted to determine if individual partners are directly responsible for the liability or if a TFRP should be considered with respect to anyone who meets the definition of responsibility and willfulness under IRC 6672. Revenue officers should consider consulting with Advisory prior to contacting Counsel.
·         When the owner of an LLC is a corporation, the liable taxpayer is the corporation and the corporation is responsible for the liability. Consider the TFRP with respect to employees of the LLC or of the corporation who meet the definition of responsibility and willfulness under IRC 6672.
6.      If assessments in the name and EIN of an LLC include some tax periods where the LLC is identified as the liable taxpayer and other tax periods where the owner of the LLC is identified as the liable taxpayer, separate collection determinations must be made for each identified taxpayer.
Caution:
Administrative collection action should never include both the name of the LLC and the name of the SMO. Only the name of the liable taxpayer should be included.
7.      There will be situations where one case resolution is appropriate for the single member owner and a separate case resolution is appropriate for the LLC, and special case processing is required. When modules, where the single member owner is liable, will be closed as UTL, UTC or tolerance, use cc 17, 18 or 19. Case resolution actions must be taken in a specific order as shown in the table below:
If CNC is the appropriate case resolution for . . .
And. . .
Then request CNC. . .
all modules for both liable taxpayers
the same closing code is appropriate for both liable taxpayers
for all modules using appropriate closing code and submit for approval on ICS.
all modules for both liable taxpayers
different closing codes are appropriate for each liable taxpayer
for one liable taxpayer using appropriate closing code and submit for approval on ICS. Following approval of the CNC on the first liable taxpayer, request CNC for remaining modules for the other liable taxpayer using appropriate closing code and submit for approval on ICS to close case.
Caution:
If closing one taxpayer as unable to locate (CC 03), unable to contact (CC 12) or tolerance (CC 09), you must close modules using the other closing code first.
one liable taxpayer
modules for the other liable taxpayer will remain open orrequire a separate case resolution
for that liable taxpayer, using appropriate closing code and submit for approval on ICS. Then take necessary action on remaining modules for other liable taxpayer.
Note:
Requests for closing specific modules as unable to locate (CC 03), unable to contact (CC 12) or tolerance (CC 09), require manual input of TC 530 by sending Form 53 by secure E-mail to CCP.
8.      Counsel should be consulted whenever legal issues are encountered. Consider consulting Advisory prior to contacting Counsel.
5.16.1.3.5  (05-05-2009)
Preparer/Promoter Penalties
1.      The IRC 6700 civil penalty is assessed against the promoters of abusive tax shelters. The IRC 6701 civil penalty is assessed against any person who aids and abets the understatement of a tax liability. See IRM 20.1.6.12, Penalty for Promoting Abusive Tax Shelters IRC 6700, and IRM 20.1.6.13, Penalties for Aiding and Abetting IRC 6701, for detailed descriptions of the IRC 6700 and IRC 6701 civil penalties. Persons against whom these penalties have been assessed often conceal assets and distort their financial picture through a wide variety of sophisticated means, making it difficult to immediately determine the true collection potential of promoter penalty assessment accounts with a high degree of confidence. Assets currently concealed or placed beyond the government's reach may be discovered or become available during subsequent investigations.
2.      IRC 6700 and IRC 6701 balance due accounts should be assigned to an Abusive Tax Avoidance Transaction (ATAT) trained RO. Contact the Area ATAT Coordinator for reassignment of a promoter penalty assessment account. See IRM 5.20.8.3, Coordination with the Exam Function, for a web link to the Small Business/Self-Employed (SB/SE) abusive tax web site for a list of Area ATAT coordinators for collection. In addition to the requirements of IRM 5.16, the procedures in IRM 5.20.8, Abusive Tax Avoidance Transactions - Promoter/Preparer Investigations, should be followed prior to closing a promoter penalty assessment account as CNC.
5.16.1.4  (04-29-2011)
Requesting Currently Not Collectible Input for Assessed and Pre-assessed Tax Periods
1.      Input of a TC 530 may be requested on Form 53, Report of Currently Not Collectible Taxes, Form 3177, Notice of Action for Entry on Master File, and Form 4844, Request for Terminal Action. The information required includes the SSN/EIN, name control, tax period(s), MFT and the closing code.
Note:
Parts 2 and 3 of a paper Form 53 generated by ICS, which show "For processing as Form 3177" , at the bottom, should be sent by secure E-mail or mailed separately from the closed case to CCP for input.
2.      For ICS cases, the group manager’s approval of the CNC allows the TC 530 and closing code to upload to IDRS. At least one of the tax periods must be in status 26 on IDRS for the upload to be successful.
3.      ICS will not send a TC 530 to IDRS on pre-assessed/unassessed tax periods. Consider the following:
·         If a NFTL will be required on the pre-assessed tax periods, the ICS case with a combination of assessed and unassessed tax periods must be held until all tax periods for CNC have been assessed. Once assessed on IDRS, create the "ICS Only Bal Due Notice" tax periods on ICS. Wait ten days after assessment to request the NFTL on ICS in accordance with IRM 5.12.2.2, Lien Filing Requirements - Creation and Duration, and IRM 5.12.2.3, Lien Filing Requirements Taxpayer Contact. After the NFTL indicator (TC 582) is pending, the case can be closed as CNC on ICS. It is not necessary to wait until all tax periods are in Status 26, as long as at least one tax period is in Status 26.
·         If a NFTL will not be required on the pre-assessed tax periods, create the pre-assessed tax periods on ICS as "ICS Only Bal Due Pre-assessed Modules" . This will generate "pre-assessed" to print on the Form 53 for each pre-assessed tax period. Complete the CNC process on ICS. If there are both assessed and pre-assessed tax periods, the assessed tax periods will upload the TC 530 to IDRS. The pre-assessed tax periods will not upload and therefore must be processed to CCP for input of TC 530 after assessment. Attach a copy of the signed tax return for each pre-assessed tax period to the CNC file. For additional information see the Who/Where tab on SERP or click on this link http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm.
4.      For cases not processed on ICS, prepare Form 53 and complete the following actions:
·         If a NFTL is required on the pre-assessed tax periods, the case must be held until the assessments are made. After NFTL filing requirements are met in accordance with IRM 5.12.2.2, Lien Filing Requirements - Creation and Duration, and IRM 5.12.2.3, Lien Filing Requirements Taxpayer Contact, complete Form 12636, Request for Filing or Refiling Notice of Federal Tax Lien, available through the template process. Complete all applicable fields and forward Form 12636 to the Centralized Lien Unit (CLU) for processing. For additional information, please click on the Who/Where tab on SERP, scroll down to Lien Payoff/Release Numbers to visit the Centralized Lien Unit Site, or click on this link http://serp.enterprise.irs.gov/databases/who-where.dr/als.dr/case-processing-lien-units.htm. Forward the CNC file to CCP for input of TC 530 on the assessed tax periods after the NFTL indicator (TC 582) is pending. Click on this link for the CCP addresses. http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm.
·         If a NFTL is not required annotate Form 53 "Assessed/Unassessed" in red or bold. Group assessed and unassessed tax periods together in Item 16 of Form 53, beginning with assessed liabilities; write "Unassessed" at the beginning of the unassessed periods header. Attach a copy of the signed tax return for each pre-assessed tax period to the file. Forward the file to CCP for input of TC 530 on the assessed tax periods and monitoring of the unassessed tax periods. Click on this link for the CCP addresses http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm.
5.      Completion of item 15 on Form 53 will depend on the nature of the closure and the procedures needed to close the account. Only certain records need to be checked depending on the dollar level and type of account, SeeIRM 5.16.1.2 for further guidance.
6.      Form 53 requires managerial approval prior to input of a CNC request. See IRM 5.16.1.5 for additional information. Unapproved requests will be returned to the initiator.
5.16.1.5  (05-05-2009)
Managerial Approval
1.      The decision to place an account in CNC status requires the approval of a manager. The approval should normally be that of the recommending employee's immediate manager. Acting managers may be given authority to approve CNC's.
Exception:
As noted in IRM 5.16.1.2.3(8), corporations and liquidating LLCs (where the LLC is the liable taxpayer), that have filed a Chapter 7 bankruptcy petition and have been designated a "No Asset" case that are being closed as TC 530 cc 07 by the Centralized Insolvency Operation do not require managerial approval. IRM 5.16.1.2.5., for tolerance accounts being closed with TC 530 cc 09 and cc 19 that do not require managerial approval.
2.      The manager's review must address the thoroughness of the investigation to ensure that a hardship condition exists before approving a recommendation to declare an account uncollectible. If a mandatory follow-up is required, the manager must verify it meets the criteria in IRM 5.16.1.6. See IRM 1.4.50 Exhibit 1.4.50 - 2,Criteria for Review of Completed Work, for additional information.
3.      If additional actions are needed to CNC an account, the manager should indicate what additional steps need to be taken before the CNC can be approved such as partial collection from available assets, consideration of an installment agreement or an offer in compromise.
5.16.1.6  (04-29-2011)
Mandatory Follow Up
1.      Systemic follow-up is limited to hardship, unable to locate, and unable to contact cases. The systemic process for reactivating hardship CNC cases relies on an increase in Total Positive Income (TPI) above a predetermined amount based on the hardship closing code when the case is closed as CNC. The TPI is reviewed annually when a taxpayer files an income tax return. For BMF cases on sole proprietorships, partnerships and LLCs, (where the owner is identified as the liable taxpayer), the TPI is determined by the annual income of the individual, general partner or member. The Social Security Number (SSN) of the individual, general partner or member of an LLC, (where the owner is identified as the liable taxpayer), must be cross-referenced on IDRS. These cases do not require a mandatory follow-up.
2.      In some circumstances a mandatory follow-up action is requested to ensure protection of the revenue potential on a CNC case including specific assets such as vestment in funds or full payment of an encumbrance of real property.
3.      Request mandatory follow-up only when required or when there is a likelihood that revenue will be collected by taking the requested action.
4.      Do not request a mandatory follow-up in the following instances:
A.     To update and review a CIS on the chance that a taxpayer's financial condition will change.
B.     If follow-up will occur in less than 90 days; these cases should be held in the RO inventory.
C.     To check on future compliance with filing requirements.
D.     To verify that payments are being made on an installment agreement.
E.     To verify that estimated tax payments are being made.
F.     To determine offset of a potential refund.
G.     To attempt to locate a taxpayer whose accounts were reported CNC with closing code 03, 06 or 19.
H.     If the aggregate account balance, including accruals, is less than the following Bal Due deferral levels:
IMF - ≡ ≡ ≡ ≡ ≡ ≡ , (except MFT 55 - ≡ ≡ ≡ ≡ ≡ )
BMF - ≡ ≡ ≡ ≡ ≡ ≡ ≡ , (except MFT 13 - ≡ ≡ ≡ ≡ ≡ ≡ )
NMF - ≡ ≡ ≡ , (except ≡ ≡ ≡ ≡ ≡ for NMF accounts on telephone excise tax when the SSN is determined)
IRAF - ≡ ≡ ≡ ≡
Example:
Financial information shows the taxpayer's allowable expenses exceed income and there is no equity in assets. The taxpayer has fallen on hard times but expects to be back to work in a year and able to pay the tax debt. Allowable expenses are $22,000. Report the account CNC using cc 25. Do not request a mandatory follow-up. The account will be reissued systemically when the taxpayer files a return with income of $28,000 or more.
Example:
Financial information shows the taxpayer's allowable expenses exceed income. The taxpayer has equity in their home sufficient to pay the tax debt and requests an extension of eight months to allow them time to refinance their residence. Do not report this account as CNC. Continue to pursue equity in asset using appropriate IRM procedures.
Example:
Financial information shows the taxpayer's allowable expenses exceed income and no equity in assets. The taxpayer is incarcerated and his/her release date is two years from today's date. Report the account CNC using cc 24.
5.      Request mandatory follow-up when there is evidence that the taxpayer's ability to pay will improve and either computer generated reactivation is not available or the improvement will happen significantly sooner than systemic reactivation can occur. Generally, the expectation is that revenue will be collected as a result of the follow-up request. Circumstances include:
A.     IMF accounts where the taxpayer will pay off a debt which creates positive cash flow for payment of the tax.
Example:
Financial information shows the taxpayer's allowable expenses equal income. The taxpayers have equity in their home but already have a second mortgage and cannot qualify at this time for a third. The second mortgage will be paid in ten months. Allowable expenses are $42,000. Report the account CNC using cc 27 with a mandatory follow-up in twelve months to see whether, based on the current equity in assets, the IRS may be able to secure payment from the taxpayer through either a new second mortgage and/or an installment agreement.
B.     In business corporation cases and other employment tax cases (proprietorship, partnership, or LLC) where the taxpayer is still in business in accordance with IRM 5.16.1.2.7(7).
C.     BMF accounts for which the principals file as the secondary SSN on a joint income tax return.
Example:
If a couple files jointly under the wife's SSN, and the husband owes on a sole proprietorship that is reported uncollectible, the BMF case would have the husband's SSN as the cross reference. Since reactivation is determined by an annual review of TPI on the cross reference SSN and the husband is filing under the wife's SSN, this case would not reactivate.
D.     The account is reported CNC using cc 12 or cc 18 and there is a definite indication contact should be made in the future.
Example:
The taxpayer is out of the country or temporarily cannot be reached.
E.     The taxpayer is reported CNC as a defunct business (other than a sole proprietorship) but requires a follow-up because there is an indication that the business will be due funds in the future.
F.     The taxpayer is a seasonal worker, and the tax would be collectible if the taxpayer is contacted when working.
G.     Non-master file accounts.
H.     Cases in which the 65 cycle suppression of reactivation built into the systemic follow-up program would prevent timely action.
I.      Cases where a notice of levy was issued to attach retirement income and assets or income from a law suit which the taxpayer is not yet eligible to receive.
J.      Cases that require a NFTL refile and/or waiver.
6.      For cases not processed on ICS, document the specific follow up actions and the date required in the Mandatory Follow-up Action section of Form 53, (or equivalent) in sufficient detail to ensure appropriate follow-up. Also document the case history to permit review of the follow-up action after part 4 of Form 53 is detached. As each follow-up action is completed, update part 4 to show the date of the next follow-up.
7.      When a CNC case is closed through ICS with a mandatory follow-up request, after managerial approval, ICS systemically creates a Non-Field OI and assigns it to CCP. The RO then sends the paper file to CCP to monitor the follow-up action. Form 3210, Document Transmittal, and the CNC case file should be annotated in bold or red "Mandatory Follow-up 53" . See the Who/Where tab on SERP for the CCP addresses or click on this link. http://sbse.web.irs.gov/CCP/Contacts/CCP_Addresses.htm
8.      CCP will maintain a file for mandatory follow-up requests. These files will not be retired to the federal records center. CCP will:
·         File the cases by month and year of the requested action as determined by the originator.
·         File the cases alphabetically if a systemic monitoring program is used.
·         Generate and control subsequent actions with an ICS OI.
Note:
CCP will monitor in-business CNC cases for compliance. If the taxpayer incurs additional liabilities, an OI will be issued to resolve the liabilities. If the additional liabilities are not resolved, the CNC accounts will be reactivated for collection action.
9.      If the account remains in CNC after a follow-up, update the closing code to reflect current conditions. If a new closing code is needed request input of TC 530 with the new closing code on the CNC modules. Indicate on the request document, Form 4844, that the modules are not on IDRS. Forward Form 4844 to CCP after securing the required managerial approval.
Example:
If a case was closed as Unable to Contact using cc 12, and the taxpayer is subsequently contacted and determined to be a hardship, the closing code for the CNC periods should be updated to a hardship closing code.
Example:
If the case was closed as an in-business corporation using cc 13, and the follow-up determines the taxpayer is now defunct, the closing code for the CNC periods should be updated to cc 10 for a defunct corporation.
5.16.1.7  (05-05-2009)
Quality Review of Currently Not Collectible Accounts
1.      Quality review of CNC accounts is conducted through Embedded Quality (EQ).
2.      CNC cases with closing codes other than 39 are included in a weekly random sample of closed Balance Due taxpayer cases. See IRM 5.13.1.10, NQRS Sampling.
3.      EQ quality review attributes pertaining to CNC and other closures are found in IRM 5.13.2, Embedded Quality Attribute Definitions.
Exhibit 5.16.1-1  
Form 53 Report of Currently Not Collectible Taxes — Part 1 (Front)
(1) Enter the name of the taxpayer as it appears on the Bal Due account or notice and the last known address of the taxpayer. Underline the name control.
(1a) Self explanatory.
(2) Available for local use.
(3) Check the appropriate box. The date of NFTL filing is not required.
(4) Complete whenever a Form 53 is assigned to an employee for reinvestigation.
(5) An entry is required if the criteria for TC 130 contained in IRM 5.1.12.21, Refund Offset, are met.
(6) Check the appropriate box. Complete this item to cross reference an individual SSN to a related EIN when the individual's TPI on subsequently filed returns is used to reactivate the account. See IRM 5.16.1.2.9(11). Forward Part 3 of Form 53 to CCP for TC 130 input.
(7) Complete this item when mandatory follow-up action is required. See IRM 5.16.1.6.
(8) Enter the date of the full compliance check. If not applicable, as in unable to locate or unable to contact cases, write "N/A" .
(9) If the taxpayer is deceased, enter the date of death.
(10) Check "Yes" to only close the BMF filing requirements. Check "No" if the BMF entity remains liable for any returns. Leave blank for IMF or NMF accounts. Forward Part 2 of Form 53 to CCP for input.
(11) Enter "1" for Advisory or CCP, "2" for Collection Field function (CFf), "3" for CSCO, or "4" for ACS.
(12) Enter the employee identification number.
(13) No entry required.
(14) Enter the closing code that fits the situation of the accounts being reported CNC. A listing of the closing codes is contained on the reverse of Part 1 or see Exhibit 5.16.1-2.
(15) Only certain records need to be checked depending on the dollar level and type of account. See IRM 5.16.1.2.
(16) Item 16 a — enter the TIN. If different master file accounts on the same taxpayer are reported, the appropriate TIN may be entered once for each group of accounts. Ditto marks may be used for successive TIN entries.
Items 16 b – d are self explanatory. Include notice modules.
 
Item 16 e is used when the account balance consists only of accruals. Write "Unassessed Periods" in this column. See IRM 5.16.1.4(4).
(17) Self explanatory.
(18) Self explanatory.
(19) Self explanatory.
(20) Self explanatory.
(21) Proposed Action - Item
a. Check N/A if TFRP is not required. Date Submitted - will be the date the manager signs Form 4183 on ATFR.
b. Date Submitted - will be date transferee recommendation is sent to Advisory.
c. Date Submitted - will be date suit recommendation is sent to Advisory.
d. Self explanatory.
e. Check appropriate box if OIC was discussed with taxpayer as possible case resolution.
f. If an OIC was filed and rejected, enter the amount of the offer.
g. If Installment Agreement was discussed with taxpayer as possible case resolution, check appropriate box.
(22) Mandatory Follow up Action(s). Document specific follow-up action and date required in sufficient detail to ensure appropriate follow-up. An entry is required whenever Item 7 is checked "Yes" .
Exhibit 5.16.1-2  
Report of Currently Not Collectible Taxes — Part 1 (Reverse)
(1) The most common MFT codes and type of Tax are listed for quick reference. See Document 6209 Section 11 Collection (5) TDA Closing Codes for additional information regarding closing codes and type of tax.
(2) The handbook text explains the use of the closing codes.
(3) Values for the hardship closing codes are as follows:

24
$20,000

25
$28,000

26
$36,000

27
$44,000

28
$52,000

29
$60,000

30
$68,000

31
$76,000

32
$84,000
More Internal Revenue Manual



Charles Pitts v. Commissioner, TC Memo 2010-101 , Code Sec(s) 6330; 6320.

CHARLES PITTS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
Case Information:

Code Sec(s):       6330; 6320
Docket:                Dkt No. 6463-09L.
Date Issued:       05/6/2010.
Judge:   Opinion by Gustafson, J.
Tax Year(s):        Years 1991, 1992, 1993.
Disposition:       Decision for Commissioner.
HEADNOTE

[pg. 590]
1. Collection due process—review of administrative determination—financial hardship—hearings—Americans with Disabilities and Paperwork Reduction Acts. IRS's administrative determination to proceed with lien filing for disabled taxpayer's more than decade-old liabilities, and to deny his financial hardship request for “currently not collectible” (CNC) status, was upheld on summary judgment: taxpayer didn't submit Form 433-A or otherwise provide financial information necessary to establish CNC eligibility/status; and any belief on part of taxpayer or his representative that recent IRS news release immunized taxpayer from obligation to provide stated financial information was off base. Also, claims that IRS violated ADA by not giving taxpayer in-person hearing at his home was belied by fact that taxpayer agreed to hearing by correspondence. ADA claim was also otherwise misguided because there was no statutory right to in-person CDP hearing, because ADA wasn't applicable, and/or because IRS did accommodate taxpayer in respect to hearing. And alternative argument, that PRA invalidated Form 433-A's use in CDP hearing, was meritless since PRA provisions regarding “collection of information” didn't even apply in CDP context.

Reference(s): ¶ 63,305.01(5) ; ¶ 63,205.01(5) Code Sec. 6330; Code Sec. 6320

Syllabus

Official Tax Court Syllabus

 P's duly assessed income taxes for 1991, 1992, and 1993 were still unpaid in 2008. The IRS filed a notice of Federal tax lien and gave P notice of the filing and of his right to a collection due process (CDP) hearing before R's Office of Appeals (Appeals) under I.R.C. sec. 6320(b). P requested a hearing. Appeals scheduled a hearing and asked P to submit financial information on Form 433-A, “Collection Information Statement for Wage Earners and Self-Employed Individuals”. P's representative requested that P's liability be classified as “currently not collectible” because of financial hardship, that the hearing take place in P's home because P is disabled, and that P be excused from submitting Form 433-A because of his hardship. Appeals offered to conduct the hearing by telephone or correspondence and repeated the request for Form 433-A. P did not provide the requested information, and Appeals issued a notice of determination sustaining the filing of the notice of lien. P appealed to this Court pursuant to I.R.C. sec. 6330(d)(1) and filed a motion for summary judgment. R filed a cross-motion.
Held: Appeals did not abuse its discretion in declining to conduct a face-to-face hearing in P's home.
Held, further, the Paperwork Reduction Act of 1995, 44 U.S.C. ch. 35 (2006), does not apply to CDP hearings; and Appeals did not abuse its discretion in requiring P's financial information on Form 433-A.
Counsel

Anthony M. Bentley, for petitioner.
Mimi M. Wong, for respondent.

GUSTAFSON, Judge

MEMORANDUM OPINION

This case is an appeal by petitioner Charles Pitts, pursuant to section 6330(d)(1), 1 asking this Court to review the notice of determination issued by the Internal Revenue Service (IRS) sustaining the filing of a notice of Federal tax lien to collect Mr. Pitts's unpaid Federal income tax for tax years 1991, 1992, and 1993. The case is currently before the Court on the parties' cross-motions for summary judgment. For the reasons explained below, we will deny petitioner's motion and grant respondent's motion.

Background

The following facts are based on Forms 4340, “Certificate of Assessments, Payments, and Other Specified Matters”, for Mr. Pitts's taxable years at issue; on the undisputed documents submitted in support of the parties' cross-motions; and on court records of which we take judicial notice. Mr. Pitts did not raise any genuine issue as to these facts. [pg. 591]

Mr. Pitts's non-payment of his taxes

Mr. Pitts filed no tax returns for the years 1991, 1992, and 1993. He has still not paid his income tax liabilities for those years, the collection of which is now the subject of this litigation. In September 1999 the IRS prepared substitutes for return and thereafter sent Mr. Pitts a statutory notice of deficiency pursuant to section 6212(a), determining deficiencies and additions to tax for those years. Mr. Pitts challenged that determination by filing a petition in the Tax Court in March 2000, commencing Pitts v. Commissioner, docket No. 3187-00. That case was concluded when Mr. Pitts agreed to the entry of a stipulated decision on February 9, 2001; and on August 6, 2001, the IRS assessed against Mr. Pitts the following amounts of tax and additions to tax pursuant to that decision, as well as interest thereon, totaling about $68,000: 2

                           Additions to Tax
                    ----------------------------
Year       Tax      Sec. 6651(a)(1)    Sec. 6654     Interest
====       ===      ===============    =========     =========
1991     $ 9,463       $2,365.75       $  540.80    $12,878.82
1992       9,782        2,445.50          426.66     11,480.56
1993       8,098        2,024.50          339.30      8,177.41
         -------       ---------       ---------    ----------
  Total   27,343        6,835.75        1,306.76     32,536.79
In February 2003 Mr. Pitts filed a petition in the U.S. Bankruptcy Court for the Southern District of New York, commencing In re Pitts, No. 03-11021. That filing had the effect of staying IRS collection of his liabilities, pursuant to 11 U.S.C. sec. 362(a) (2000). The IRS filed a proof of claim in that proceeding that asserted Mr. Pitts's liability for his 1991 to 1993 taxes; Mr. Pitts objected to the proof of claim; and the bankruptcy court overruled the objection. We take judicial notice of the records of the bankruptcy court, which show that Mr. Pitts's bankruptcy case was closed in August 2008.

The IRS's notice of lien

On October 21, 2008, the IRS sent to Mr. Pitts a Letter 3172, “Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320.” The letter stated that the IRS had filed a notice of lien against Mr. Pitts with respect to his unpaid tax liabilities for 1991, 1992, and 1993, and that he had a right to request a so-called collection due process (CDP) hearing before the IRS Office of Appeals.

Initial attempt to schedule the CDP hearing

Through his counsel, Anthony M. Bentley, Mr. Pitts timely submitted to the IRS a Form 12153, “Request for a Collection Due Process or Equivalent Hearing”. Mr. Pitts's Form 12153 did not indicate what relief or collection alternative he desired, but the phrase “Bankruptcy Discharge” was written on the form.

In response to Mr. Pitts's request, a Settlement Officer 3 in the IRS Office of Appeals sent him and Mr. Bentley a letter dated December 30, 2008, which stated that Mr. Pitts's CDP hearing had been scheduled to be conducted as a telephone conference call on January 29, 2009. The letter stated, “For me to consider alternative collection methods *** , you must provide any items listed below”, which included a “completed Collection Information Statement (Form 433-A *** )”. A blank Form 433-A, “Collection Information Statement for Wage Earners and Self-Employed Individuals”, for Mr. Pitts to fill out was attached to the letter.

Mr. Bentley replied by a letter that the IRS received on January 14, 2009, which stated: [pg. 592]

I am instructed by my client that the conference would be preferred to be held face-to-face at his home/business address, (the address to which you direct his correspondence) with me in attendance as well as the taxpayer, on 2/24/09 at 1530 hours, or at such later date that may be mutually convenient.
The taxpayer requests that the Treasury Department extend reasonable accommodation to him under the ADA in meeting as indicated above, due to his disability which makes him essentially homebound. He suffers from, inter alia, acute COPD [chronic obstructive pulmonary disease], his only income is Social Security (due to his recent layoff[)], and his medical bills already amount to more than he can afford, to the extent they are over and above his Medicare benefits.
His principal issue he wishes to discuss with you concerns the suspension of collection due to hardship because of the above factors.
Although Mr. Bentley never submitted to the IRS (or to the Court) substantiation of Mr. Pitts's medical condition, we assume for purposes of summary judgment that Mr. Pitts does suffer from COPD and that he is “essentially homebound”. We also assume (as Mr. Bentley stated at the hearing held January 11, 2010) that Mr. Pitts lives in a fifth-floor walk-up apartment and that he is a “hoarder”—i.e., “[s]omeone who has tons and tons of paper and a variety of other things around that represent all of his possessions”.

Second attempt to schedule the CDP hearing

When the Settlement Officer received Mr. Bentley's letter, she attempted to phone him and left him a voice mail message asking him to “compromise on a date and time” and offering to hold a face-to-face conference at 290 Broadway, which was the Office of Appeals location nearest to Mr. Pitts's home.

Mr. Bentley responded to the voice mail with a letter dated January 16, 2009, which stated:

It would appear that my letter to you received in your office on January 14, 2009 has lacked clarity; it requests the Department of the Treasury to render reasonable accommodation to my client in having a face-to face conference at his home due to his disability which makes him substantially homebound.
My letter also requests a date specific for that meeting as the date chosen by you, in the words of your letter, “is not convenient” either to my client nor to me, due to scheduling conflicts previously arranged, and we have offered you, in my letter, any date post 2/24/09 should that date be inconvenient.
I have enclosed an edited version of my original letter with emphasis on those terms which constitute requests under the Americans with Disabilities Act for “reasonable accommodation” which your voice mail message appears to be refusing, and would ask you to clarify your position.
The Settlement Officer again left a voice mail message for Mr. Bentley, explaining that the Office of Appeals does not conduct CDP hearings at taxpayers' homes and that the CDP hearing could be held by correspondence or by telephone. She asked that Mr. Pitts choose the manner of hearing he would prefer and propose a date and time.

Decision to conduct the CDP hearing by correspondence

Mr. Bentley replied by a letter dated January 18, 2009:

write responsive to your voice mail message of January 16, 2009, which I found to be polite, informative and helpful.
As a result of the information that you relayed in your message, it seems that the only effective course of action remaining to my client in view of his disability would be to seek “hardship” relief in the form of, initially, a temporary suspension of collection activity.
Would you please be so kind as to inform me, or provide me by mail, what steps need be taken by the taxpayer to invoke this process?
I must advise that as I will be involved in a series of medical procedures over the next weeks as treatment for re-[pg. 593] cently diagnosed stage three kidney disease, I will be unable to telephone you as requested in your last voice mail message during normal business hours, but I will be able to proceed by correspondence, which choice is also selected and approved by my client for the balance of the Appeals process. [Emphasis added.]
Second request for Form 433-A

On January 21, 2009, the Settlement Officer left a voice mail message for Mr. Bentley, explaining that in order to seek suspension of collection due to hardship, Mr. Pitts would need to fill out the Form 433-A that had been enclosed with the Settlement Officer's letter of December 30, 2008. She asked that the form be filled out and returned by January 29, 2009, so that she could review the form and then discuss the case with Mr. Bentley.

Mr. Bentley replied by a letter dated January 22, 2009, which stated:

I write responsive to your voice mail message of January 21, 2009, which suggests that you have not read the correspondence I have sent you despite your having acknowledged its receipt.
For your convenience, therefore, I have enclosed copies of my letters to you of January 13, 2009; January 16, 2009, and January 18, 2009 which state the position of my client.
As to your reference to your letter of December 30, 2008, it, by its terms, excludes the necessity of the taxpayer providing a 433A form if the collection alternative sought is a hardship suspension of collection.
To the extent the above was not your intended meaning in your letter, I would call your attention to Internal Revenue Service Release #IR-2009-2, Jan. 6, 2009 which states that “IRS assistors may be able to suspend collection without documentation to minimize burden [sic] on the taxpayer” and request that if you are not so empowered, kindly transfer this case to an “assistor” who is so authorized.
We will otherwise respond to your December letter, as has been detailed to you in the enclosed prior received correspondence, for the reasons stated therein, not later than 2/24/09.
IRS News release IR-2009-02 (Jan. 6, 2009) attached to Mr. Bentley's letter included the following paragraph to which he referred:

Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.
Third request for Form 433-A

In response to Mr. Bentley's letter, the Settlement Officer sent him a “last chance” letter on January 29, 2009 (the date on which the CDP hearing had originally been scheduled). This letter is not in the record, but the Settlement Officer described it in detail in her work notes:

SO composed last chance letter. Letter advised POA/TP [i.e., Mr. Bentley (the “power of attorney”) and Mr. Pitts (the taxpayer)] that IR-2009-02 referring to postponement of collection actions, to suspend collection actions in certain hardship cases, does refer to the IRS to suspend collection without documentation. These guidelines would also depend upon the taxpayers situation. IR-2009-2 directs taxpayers who are behind on tax payments & needs assistan[ce] that when contacting IRS, there could be additional help available for taxpayers facing unus[u]al hardship situations. That to suspend collection actions if the individual has recently encountered financial problems. IRS manual indicates only partial financial analysis is required prior to reporting an account as Cu[r]rently Not Collectible (CNC) if the aggregate assessed balance, including prior CNC accounts, is less [pg. 594] than $5,000. Balances above that amount require[] a full financial analysis and the Collection Information Statement with documentation is required. The taxpayer balance is $67,772.30. Please keep in mind this does not stop penalties and interest from accruing as long as the assessed balance is still outstanding. As the taxpayer did not file a tax return for 2005 and 2006 additional documentation is required. Taxpayer's CDP request was signed November 15, 2008. Appeals Contact Letter [was] dated December 30, 2008 and allow[ed] the taxpayer sufficient time to prepare for the conference on January 29, 2009. Though the taxpayer is 'essentially homebound' a conference could not be extended to date requested, February 24, 2009. Last chance composed and sent. F/U [follow-up] = 14 days = 02-12-2009 [i.e., February 12, 2009].
This “last chance” letter thus gave Mr. Pitts until February 12, 2009, to submit the requested information. This date was between the date that the Settlement Officer had initially scheduled for the CDP hearing (January 29, 2009) and the alternative date that Mr. Bentley had proposed (February 24, 2009).

Issuance of the notice of determination

Petitioner does not dispute the fact that the “last chance” letter was sent or the content of the letter. However, Mr. Bentley made no response to the letter on behalf of Mr. Pitts. Consequently, on February 25, 2009, the Office of Appeals issued to Mr. Pitts a “Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330.” The notice of determination sustained the filing of the notice of lien. An attachment to the notice stated that “the liabilities were not discharged in the taxpayer's bankruptcy” and that “no collection alternatives were available to the taxpayer as documentation was not supplied.”

Tax Court proceedings

Mr. Bentley timely filed a petition in this Court on behalf of Mr. Pitts, appealing the notice of determination. The petition asserts that the Office of Appeals abused its discretion in declining to suspend collection activity, and it asserts three specific errors:

(1) Respondent violated the ADA Amendments Act of 2008 [amending the Americans with Disabilities Act, 42 U.S.C. chapter 126]
(2) Respondent violated Title 5 CFR § 1320.6 [implementing the Paperwork Reduction Act of 1995, 44 U.S.C. chapter 35]
(3) Respondent declined to recognize underlying liability included components discharged in bankruptcy
Petitioner moved for summary judgment on November 9, 2009; respondent cross-moved on December 7, 2009; and the motions were argued at a hearing on January 11, 2010.

Discussion

I. Applicable legal principles

A. Summary judgment standards

Where the pertinent facts are not in dispute, a party may move for summary judgment to expedite the litigation and avoid an unnecessary trial. Summary judgment may be granted where there is no genuine issue as to any material fact and a decision may be rendered as a matter of law. Rule 121(a) and (b). The party moving for summary judgment bears the burden of showing that there is no genuine issue as to any material fact, and factual inferences will be drawn in the manner most favorable to the party opposing summary judgment. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 [73 AFTR 2d 94-1198] (7th Cir. 1994).

In his opposition to respondent's motion, Mr. Pitts asserts that “cross-examination of respondent is required to understand the reason for the blatant date alteration in respondent's log introduced in support of his motion for summary judgment.” He apparently refers to respondent's Exhibit L, “Case Activity Record Print”, which reflects entries that the Settlement Officer made to record her work on the case, including her contacts with Mr. Pitts's representative, Mr. Bentley. To the extent that respondent's assertion of a material fact in the case is based on an entry in that record, if petitioner raises a genuine issue as [pg. 595] to that fact, then summary judgment would be precluded. However, Rule 121(d) provides:

When a motion for summary judgment is made and supported as provided in this Rule, an adverse party [such as Mr. Pitts] may not rest upon the mere allegations or denials of such party's pleading, but such party's response, by affidavits or as otherwise provided in this Rule, must set forth specific facts showing that there is a genuine issue for trial. ***
In compliance with Rule 121(b), respondent made and supported a showing of the authenticity of the Case Activity Record Print and of the facts of the case; but Mr. Pitts's only response is his unelaborated assertion about “blatant date alteration”. Most of the dates in the chronology set out above are corroborated in petitioner's submissions, and he does not specify which dates were altered, nor how the alterations would affect the outcome of the case. We therefore hold that respondent's factual assertions are not controverted.

In ruling on respondent's motion, we draw all inferences in favor of Mr. Pitts, and we find that there is no genuine issue as to any material fact and respondent is entitled to judgment as a matter of law.

B. Collection review procedure

1. In general
When a taxpayer fails to pay any Federal income tax liability after demand, section 6321 imposes a lien in favor of the United States on all the property of the delinquent taxpayer, and section 6323 authorizes the IRS to file notice of that lien. However, within five business days after filing a notice of tax lien, the IRS must provide written notice of that filing to the taxpayer.  Sec. 6320(a). After receiving such a notice, the taxpayer may request an administrative hearing before the Office of Appeals.  Sec. 6320(a)(3)(B), (b)(1). Administrative review is carried out by way of a hearing before the Office of Appeals pursuant to section 6330(b) and (c); and, if the taxpayer is dissatisfied with the outcome there, he can appeal that determination to the Tax Court under section 6330(d), as Mr. Pitts has done.

2. Agency-level review in lien cases
In the case of a notice of lien, section 6320(c) provides that the procedures for the agency-level CDP hearing before the Office of Appeals are set forth in section 6330(c):

First, the appeals officer must “obtain verification from the Secretary that the requirements of any applicable law or administrative procedure have been met.” Sec. 6330(c)(1). 4 The notice of determination set forth the IRS's compliance with these requirements, and Mr. Pitts made no challenge as to verification in his petition (or in his motion), so no verification issues under section 6330(c)(1) are at issue.

Second, the taxpayer may “raise at the hearing any relevant issue relating to the unpaid tax or the proposed [lien or] levy, including” challenges to the appropriateness of the collection action and offers of collection alternatives.  Sec. 6330(c)(2)(A). Mr. Pitts's contentions pertain to collection alternatives, which we will discuss below.

Additionally, the taxpayer may contest the existence and amount of the underlying tax liability, but only if he did not receive a notice of deficiency or otherwise have a prior opportunity to dispute the tax liability.  Sec. 6330(c)(2)(B). Mr. Pitts did receive a notice of deficiency and did have prior opportunities to challenge the underlying liabilities for 1991, 1992, and 1993 when he not only litigated them in his prior case (docket No. 3187-00)—in which his liabilities were determined by stipulated decision—but also attempted to challenge them in his bankruptcy case. 5 He cannot now make a third challenge to that determination in this CDP case. Mr. Pitts previously contended (in the CDP hearing and in his petition in this case) that the liabilities were subsequently discharged [pg. 596] in bankruptcy; but he did not assert this contention in his motion, in his opposition to respondent's motion, 6 or at the hearing; and we find that he has abandoned this bankruptcy discharge contention.

Finally, the appeals officer must determine “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.”  Sec. 6330(c)(3)(C). The notice of determination found “that the filing of the NFTL [notice of Federal tax lien] balances the need for efficient collection of taxpayer's accounts with taxpayer's legitimate concerns that the collection action be no more intrusive than necessary.” Mr. Pitts made no contention of any defect in the balancing conducted by the Office of Appeals in this case.

3. Tax Court review
When the Office of Appeals issues its determination, the taxpayer may “appeal such determination to the Tax Court”, pursuant to section 6330(d)(1), as Mr. Pitts has done. In such an appeal (where the underlying liability is not at issue), we review the determination of the Office of Appeals for abuse of discretion. That is, we decide whether the determination was arbitrary, capricious, or without sound basis in fact or law. See Murphy v. Commissioner,  125 T.C. 301, 320 (2005), affd. 469 F.3d 27 [98 AFTR 2d 2006-7853] (1st Cir. 2006).

II. Respondent's entitlement to summary judgment

A. Mr. Pitts's failure to produce financial information

The Office of Appeals determined not to grant Mr. Pitts's request to suspend collection activity against him on the ground of financial hardship, and we review that determination for an abuse of discretion. Suspension of collection activity is, in CDP parlance, a “collection alternative” that the taxpayer may propose, see sec. 6330(c)(2)(A)(iii), and that the Office of Appeals must “take into consideration”,  sec. 6330(c)(3)(B). The Internal Revenue Manual (IRM) makes provision for a taxpayer's account to be declared “currently not collectible” (CNC) in cases of “hardship”. See IRM pts. 1.2.14.1.14 (Nov. 19, 1980) (Policy Statement 5-71), 5.16.1.2.9 (May 5, 2009).

However, the regulations state that “[t]axpayers will be expected to provide all relevant information requested by Appeals, including financial statements, for its consideration of the facts and issues involved in the hearing.” 26 C.F.R. Sec. 301.6320-1(e)(1), Proced. & Admin. Regs. It could hardly be otherwise. For a taxpayer to justify suspension of collection on the ground that the account should be deemed “currently not collectible”—i.e., that he cannot afford to pay the liability—he must of course show that he cannot afford to pay the liability. To do so, he must show his financial circumstances—i.e., the money that is available to him and the expenses that he bears. 7 Form 433-A is the means by which the IRS obtains this financial information from the taxpayer—but Mr. Pitts failed to submit this information despite three requests for it (on December 30, 2008, January 21, 2009, and January 29, 2009). In the absence of that information, the Office of Appeals did not abuse its discretion in declining to put Mr. Pitts's account into CNC status.

In his correspondence with Appeals, Mr. Bentley resisted the IRS's request that Mr. Pitts complete Form 433-A by citing the recent IRS News release IR-2009-02, supra. Although he did not cite that release or make the same contention in his petition or his motion papers, we note that the contention was not well grounded. Mr. Bentley seemed to read the news release as creating an immunity from the obligation to produce financial information. In fact, the release stated that “IRS assistors may be able to suspend collection without documentation”. (Emphasis added.) And as the Settlement Officer explained to Mr. Bentley, the IRM makes provision for suspen-[pg. 597] sion of collection after “only partial financial analysis” where the liability is less than $5,000. 8 Mr. Pitts's unpaid liability was more than ten times that amount.

Before his accounts could be treated as CNC, Mr. Pitts was obliged to show his financial situation, and he failed to submit Form 433-A to make that showing. 9 The Office of Appeals did not abuse its discretion by requiring the submission of Form 433-A or by denying CNC status in its absence.

B. Mr. Pitts's contentions

Mr. Pitts asserts two errors 10 by the Office of Appeals that, he argues, constituted abuses of its discretion, and we address them separately here. 1. Denial of a face-to-face hearing at Mr. Pitts's home

Mr. Pitts argues that because he is disabled as a result of COPD, the Americans with Disabilities Act (ADA), 42 U.S.C. chapter 126 (2006), required the Settlement Officer to make reasonable accommodation for his disability by conducting a face-to-face CDP hearing in his home. This contention fails for multiple reasons.

First, Mr. Pitts chose to have his CDP hearing by correspondence. After the Settlement Officer explained to Mr. Bentley that the CDP hearing could be held by correspondence or by telephone, Mr. Bentley stated in his letter of January 18, 2009, “I will be able to proceed by correspondence, which choice is also selected and, approved by my client for the balance of the Appeals process.” Having not objected to a non-face-to-face hearing, and having rather chosen to have the hearing by correspondence, Mr. Pitts cannot contend that the Office of Appeals abused its discretion by proceeding on that basis.

Second, the statute does not require a face-to-face hearing.  Section 6320(b)(1) provides that a “hearing shall be held” by the Office of Appeals. The statute does not describe the nature of that hearing. As we have previously observed,

Hearings at the Appeals level have historically been conducted in an informal setting. ***
When Congress enacted section 6330 *** , Congress was fully aware of the existing nature and function of Appeals. Nothing in section 6330 or the legislative history suggests that Congress intended to alter the nature of an Appeals hearing *** .
Davis v. Commissioner, 115 T.C. 35, 41 (2000). Thus, the regulations implementing the CDP process provide that a “CDP hearing may, but is not required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer or the taxpayer's representative, or some combination thereof.” 26 C.F.R. sec. 301.6320-1(d)(2), A-D6, Proced. & Admin. Regs.

Third, a face-to-face hearing could not have been held in Mr. Pitts's home. If a face-to-face CDP hearing was to be held, the applicable regulations direct that such hearing take place “at the Appeals office closest to the taxpayer's residence.”26 C.F.R. sec. 301.6320-1(d)(2), A-D7, Proced. & Admin. Regs. Considerations of efficiency, taxpayer relations, and the safety of IRS personnel surely entered into the formulation of that policy. If there is a circumstance in which we would second-guess the Office of Appeals in its adherence to that policy, it is not present in this case. [pg. 598]

Fourth, the ADA does not apply to the Federal Government. The relevant portion of the act would be subtitle II, “Public Services”, but the definition therein of a “public entity” to which the statute applies does not include the Federal Government. See 42 U.S.C. secs. 12131(1), 12132; Agee v. United States, 72 Fed. Cl. 284, 289 (2006); Smith v. U.S. Court of Appeals, No. C-08-1860 EMC, WL 2079189, *4 (N.D. Cal., May 15, 2008) (order dismissing complaint and granting application to proceed in forma pauperis); Wilks v. FAA, No. C06-940P, WL 1687765, *6 (W.D. Wash., June 8, 2007) (order of dismissal). But if a taxpayer's disability did impede his participation in a CDP hearing, we assume arguendo that, notwithstanding the inapplicability of the ADA, the Office of Appeals would abuse its discretion if it refused to make reasonable accommodations to facilitate his participation. In this case, however, Appeals did accommodate Mr. Pitts by its practice of allowing a hearing to be held by telephone or by correspondence. 11 Particularly in the case of a taxpayer who has counsel, as Mr. Pitts has, the conducting of the hearing by telephone or correspondence yields no apparent prejudice to the taxpayer. The IRS has developed routines for obtaining information in a manner that is susceptible of being recorded, evaluated, and reviewed. The Settlement Officer was not obliged instead to make a field trip to Mr. Pitts's apartment to learn his financial situation; she was entitled rather to require Form 433-A, and Mr. Pitts has made no showing that this method for evaluating his financial situation imposed any particular hardship on him. 2. Paperwork Reduction Act

Mr. Pitts's principal contention in this case is based on the Paperwork Reduction Act (PRA), 44 U.S.C. chapter 35 (2006).   Section 3512(a) of Title 44 of the United States Code provides:

Notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply with a collection of information that is subject to this subchapter if—
(1) the collection of information does not display a valid control number assigned by the Director in accordance with this subchapter; or
(2) the agency fails to inform the person who is to respond to the collection of information that such person is not required to respond to the collection of information unless it displays a valid control number. [Emphasis added.]
In the income tax context, this provision of the PRA is most often cited against the income tax return itself—an argument that is thoroughly discredited—so that most of the caselaw addressing the argument (and finding it frivolous) affirms that the taxpayer's obligation to file a return is not abrogated by supposed violations of the PRA. 12 Mr. Pitts addresses not the tax return but Form 433-A, and he argues that the PRA applies to (and invalidates) its use during the CDP hearing to obtain the financial statement of the taxpayer. He argues that since the request for a financial statement on Form 433-A is “a collection of information”, the PRA applies; but that since Form 433-A displays no “control number”, the form is invalid and taxpayers need not comply with requests to fill it out and submit it. [pg. 599]

Mr. Pitts's argument fails to note the effect of 44 U.S.C. section 3518(c)(1)(B)(ii): 13

(c)(1) Except as provided in paragraph (2), this subchapter shall not apply to the collection of information— ***
(B) during the conduct of— ***
(ii) an administrative action or investigation involving an agency against specific individuals or entities *** . [Emphasis added.]
Section 3518(c)(1) thus excludes administrative hearings—such as CDP hearings that evaluate the propriety of a specific collection action against a specific taxpayer—from the reach of the PRA. Consistent with that exclusion, 44 U.S.C. section 3518(c)(2) describes the “general investigations” that are included within the reach of the PRA, and CDP hearings are not in that description:

(2) This subchapter applies to the collection of information during the conduct of general investigations (other than information collected in an antitrust investigation to the extent provided in subparagraph (C) of paragraph (1)) undertaken with reference to a category of individuals or entities such as a class of licensees or an entire industry. [Emphasis added.]
Petitioner argues, however, that the PRA does reach CDP hearings because the set of taxpayers who request CDP hearings constitute (in the words of section 3518(c)(2)) a “category of individuals” (emphasis added) who generally are asked to submit Form 433-A. This interpretation is unwarranted.

The question under 44 U.S.C. section 3518(c)(2) is not whether many individual taxpayers have CDP hearings (they do), nor whether Form 433-A is used widely (it is), but whether a given CDP hearing is a “general investigation”—and it is not. Rather, a CDP hearing is “an administrative action, investigation, or audit involving an agency [the IRS] against [a] specific individual[]”—in this case, Mr. Pitts. Just as an IRS audit of a specific individual taxpayer is not a general investigation, 14 so a CDP hearing is an administrative action involving a specific individual and is not a general investigation. For that reason, the collection of information during a CDP hearing is not subject to the PRA. The lack of a control number on Form 433-A did not relieve Mr. Pitts from the obligation to submit the form and does not relieve him of the consequences of his failure to do so. When the Office of Appeals did not receive financial information from Mr. Pitts, it was entitled to deny his request to suspend collection of his long-unpaid income tax liabilities for 1991, 1992, and 1993.

Conclusion

On the undisputed facts of this case, it is clear that the Office of Appeals did not abuse its discretion when it denied “currently not collectible” status to Mr. Pitts's liabilities and upheld the filing of a notice of lien. We hold that, as a matter of law, respondent is entitled to the entry of a decision sustaining the determination.

To reflect the foregoing,

An appropriate order and decision will be entered.

1
  Except as otherwise noted, all section references are to the Internal Revenue Code (26 U.S.C.), and all Rule references are to the Tax Court Rules of Practice and Procedure.
2
  As of September 3, 2009—the latest date for which the record gives Mr. Pitts's balance due—he still owed $67,772.30 for the three years. This balance appears not to include the eight years' worth of additional interest that had accrued since August 2001 but had not yet been assessed.
3
  Section 6330(b)(3) provides that the CDP hearing shall be held before “an officer or employee” of the Office of Appeals. Thereafter, the statute refers to this officer or employee as the “appeals officer”. See sec. 6330(c)(1),  (3). In the IRS Office of Appeals, hearings are held before persons with the title Appeals Officer and Settlement Officer. See Reynolds v. Commissioner, T.C. Memo. 2006-192 [TC Memo 2006-192]. In this instance, the “officer or employee” who conducted the hearing had the title Settlement Officer.
4
  In the case of the lien filed against Mr. Pitts, the basic requirements, see sec. 6320, for which the appeals officer was to obtain verification are: assessment of the liabilty, secs. 6201(a)(1), 6501(a); notice and demand for payment of the liability,  sec. 6303; and notice of the filing of the lien and of the taxpayer's right to a CDP hearing, secs. 6320(a) and (b).
5
  See Kendricks v. Commissioner, 124 T.C. 69, 77 (2005) (the taxpayer had the opportunity to dispute the liability within the meaning of section 6330(c)(2)(B) when the IRS submitted a proof of claim for an unpaid tax liability in taxpayer's bankruptcy action).
6
  Respondent's motion asserted that the Office of Appeals “determined that Petitioner's bankruptcy filing did not discharge his tax liabilities for the years at issue because Petitioner's objection to the IRS's proof of claim was overruled and the IRS's proof of claim was allowed in full by the Bankruptcy Court” and that the Office of Appeals did not abuse its discretion “in determining that Petitioner's bankruptcy did not discharge the unpaid tax liabilities”.
7
  See Vinatieri v. Commissioner, 133 T.C. ___, ___ n.7 (2009) (slip op. at 15) (“In Estate of Atkinson v. Commissioner, T.C. Memo. 2007-89 [TC Memo 2007-89], we found reasonable [the] requirement[] that an entity seeking collection alternatives to full payment, including reporting an account as currently not collectible, *** submit[] a full financial statement”).
8
  See IRM pt. 5.16.1.2.9(3) (“Under certain conditions, a CIS [Collection Information Statement] is not required before reporting an account CNC. The aggregate unpaid balance of assessments, including any prior CNC's, must be less than the amount in LEM 5.16.1.2.9(3)”). The LEM (law enforcement manual) is a portion of the IRM that is not made available to the public. See Roberts v. IRS,  584 F. Supp. 1241 [54 AFTR 2d 84-5114] (E.D. Mich. 1984).
9
  The Form 433-A seeks not only information about a taxpayer's current income and expenses but also details of his assets. Although Mr. Pitts represented that his only source of income was Social Security benefits and alleged that he had substantial medical expenses, he substantiated neither claim; and, on the record before us, he made no representations whatever about the presence or value of any assets—the other information required by Form 433-A, which is necessary for evaluating his ability to pay.
10
  In his motion for summary judgment, Mr. Pitts asserts the Paperwork Reduction Act (PRA) argument addressed here in part II.B.2, and in his opposition to respondent's cross-motion he asserted the PRA argument and the Americans with Disabilities Act argument addressed here in part II.B.1. As we noted above in part I.B.2, Mr. Pitts abandoned his contention that the liabilities were discharged in bankruptcy.
11
  Cf. In re Winston, No. 07-20593-D-13L, 2007 WL 1394161 (Bankr. E.D. Cal., May 11, 2007) (memorandum decision indicating that allowing a disabled debtor to participate by telephone in bankruptcy proceedings constitutes a reasonable accommodation).
12
  See, e.g., Wheeler v. Commissioner, 127 T.C. 200 (2006), affd.  521 F.3d 1289 [101 AFTR 2d 2008-1696] (10th Cir. 2008). Some of the opinions holding the PRA inapplicable to tax returns are cited in Revenue Ruling 2006-21, 2006-1 C.B. 745. With regard to tax returns we have rebuffed the argument as recently as in Turner v. Commissioner, T.C. Memo. 2010-44 [TC Memo 2010-44]. In Moore v. Commissioner,  T.C. Memo. 2007-200 [TC Memo 2007-200], affd.  296 Fed. Appx. 821 [102 AFTR 2d 2008-6696] (11th Cir. 2008), when the taxpayer requested during the CDP hearing “that Settlement Officer Feist 'provide evidence verifying the U.S. Individual Income Tax/Forms 1040 and Form 433-A in question are in compliance with the specifications of the PAPERWORK REDUCTION ACT (PRA) and have been issued current and valid control numbers from the Office of Management and Budget” (emphasis added), we characterized the issue as “frivolous”.
13
  The regulations promulgated under this statute are to the same effect. 5 C.F.R. section 1320.4 (2010) provides (with emphasis added):
(a) The requirements of this Part apply to all agencies as defined in § 1320.3(a) and to all collections of information conducted or sponsored by those agencies, as defined in § 1320.3 (c) and (d), wherever conducted or sponsored, but, except as provided in paragraph (b) of this section, shall not apply to collections of information:
***
(2) during the conduct of a civil action to which the United States or any official or agency thereof is a party, or during the conduct of an administrative action, investigation, or audit involving an agency against specific individuals or entities;
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(c) The exception in paragraph (a)(2) of this section applies during the entire course of the investigation, audit, or action, whether before or after formal charges or complaints are filed or formal administrative action is initiated, but only after a case file or equivalent is opened with respect to a particular party. ***
14
  See Lonsdale v. United States, 919 F.2d 1440, 1445 [67 AFTR 2d 91-1049] (10th Cir. 1990) (and cases cited thereat) (the PRA is “inapplicable to 'information collection request' forms issued during an investigation against an individual to determine his or her tax liability” (citing 44 U.S.C. sec. 3518(c)(1)(B)(ii)).


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