concluding that the review of a CDP decision rendered by an Appeals officer under section 6330 is limited to the administrative record before the Appeals officer
How later courts described this case
- concluding that the review of a CDP decision rendered by an Appeals officer under section 6330 is limited to the administrative record before the Appeals officer
- suggesting it might be appropriate not to admit testimony or other evidence when the taxpayer has failed to cooperate in presenting relevant evidence at the section 6330 hearing
- distinguishing situation where taxpayer refuses to furnish relevant evidence requested at section 6330 hearing
- “[W]hen reviewing for abuse of discretion under section 6330(d), . . . our review is not limited to the administrative record.”
Written by the judges who cited it.
The opinion
Haines, J., concurring: I concur with the result reached by the majority that we are not limited by the Administrative Procedure Act in this case, our review is not limited to the administrative record, and respondent abused his discretion in his determination to proceed with collection of petitioner’s 1998 tax liability. I write separately to make two points.
First, we have held that an offer-in-compromise is governed by general principles of contract law. Dutton v. Commissioner, 122 T.C. 133, 138 (2004); majority op. p. 108. We have not extended that holding to mean that the general principles of contract law must be determined by application of the law of the State where the taxpayer resides.
The majority opinion uses the Restatement of Contracts to provide the circumstances in which a failure to perform is “material”. Majority op. p. 108 (citing 1 Restatement, Contracts 2d, sec. 241 (1981)). The majority opinion further states that “Arkansas law adopts this analysis.” Majority op. p. 109. Readers of this Opinion should not infer that the use of State law of a taxpayer’s residence, rather than general contract principles, is necessary to reach the majority’s result. Given the number of offers-in-compromise negotiated and overseen by the Commissioner, if the terms of each offer-in-compromise had to be analyzed on the basis of the State law of a taxpayer’s residence, the result would be an administrative nightmare for the Commissioner. General contract principles as expressed in the Restatement of Contracts should control these determinations.
Second, an offer-in-compromise is an agreement between the taxpayer and the Government which settles a tax liability for payment of less than the full amount owed. 2 Administration, Internal Revenue Manual (cch), sec. 5.8.1.1.1, at 16,253. In the case at bar, petitioner paid $100,000 to compromise individual income tax and statutory additions totaling $989,475. Majority op. pp. 86-87. By defaulting petitioner, respondent now seeks to collect the remaining sums previously compromised.
Noncompliance with the terms of the offer-in-compromise does not automatically result in the offer’s being defaulted. As 2 Administration, Internal Revenue Manual (CCH), sec. 5.19.7.3.22, at 18,507 (Defaults) states:
(1) When a taxpayer fails to meet any term of an offer, the offer may be defaulted and all liabilities reinstated. Any of the following may result in a default of the offer.
Failure to timely file subsequent tax returns and pay all taxes due during the compliance period.
The Internal Revenue Manual further states that “If the taxpayer does not comply with the provisions of the offer in compromise, the offer may be considered in default.” 4 Administration, Internal Revenue Manual (cch), sec. 8.13.2.5.4, at 27,581 (Actions on Defaulted Offers) (emphasis added).
Compromises are favored in the law, Big Diamond Mills Co. v. United States, 51 F.2d 721, 724 (8th Cir. 1931), and, thus, the Commissioner is under an obligation to be clear on the circumstances before making a default determination. In the case at bar, the Appeals officer failed to consider petitioner’s pattern of filing his tax returns on or about October 15, did not speak with petitioner, and failed to independently analyze whether the terms of the offer-in-compromise had been materially breached. Majority op. p. 91. Failure to consider these facts constitutes an abuse of discretion.
Goeke and Wherry, JJ., agree with this concurring opinion.