Collection Due Process Deskbook

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Contents

CHAPTER ONE – INTRODUCTION ...................................................................................................................... 3

A. PURPOSE 3

B. STATUTORY PROVISIONS

C. REGULATORY PROVISIONS

D. TAX COURT RULES 4

E. MANUAL PROVISIONS

CHAPTER TWO – CDP NOTICES AND THE RIGHT TO A CDP HEARING ................................................. 5

A. NOTICE OF FEDERAL TAX LIEN FILING AND RIGHT TO HEARING - SECTION 6320

B. NOTICE OF INTENT TO LEVY AND RIGHT TO HEARING - SECTION 6330

C. EXCEPTIONS TO PRE-LEVY NOTICE AND OPPORTUNITY FOR A HEARING

D. NOTICE ISSUANCE 7

E. NOMINEES AND OTHER THIRD PARTIES

F. GENERAL PARTNERS IN PARTNERSHIPS 8

G. OWNERS OF SINGLE-MEMBER LLCS 9

CHAPTER THREE – REQUESTING A HEARING AND THE EFFECT OF REQUESTING A HEARING .5

A. HEARING REQUESTS 9

1. One hearing opportunity per tax and period 9

2. Procedures for requesting a CDP hearing 10

3. Equivalent hearing

B. EFFECT OF REQUESTION A CDP HEARING

1. Statute of limitations

2. Levy action and injunctive relief 13

3. Permitted collection actions

CHAPTER FOUR – THE CDP HEARING ........................................................................................................... 13

A. CDP HEARINGS ARE INFORMAL

B. CONCLUDING THE HEARING AND SUBMISSION DEADLINES

C. FACE-TO-FACE CONFERENCE NOT REQUIRED 15

D. WHEN FACE-TO-FACE CONFERENCE IS NOT OFFERED 16

E. RECORDING OF CDP HEARINGS UNDER SECTION 7521(A)(1)

F. IMPARTIAL APPEALS OFFICER OR EMPLOYEE 17

G. PROHIBITION OF EX PARTE COMMUNICATIONS 19

CHAPTER FIVE – ISSUES CONSIDERED AT THE CDP HEARING ............................................................. 21

A. SECTION 6330(C)(1) VERIFICATION 21

1. Computer transcripts

2. Verifying the proper issuance of notices of deficiency 23

a. Generally

b. Proving notice of deficiency was issued

B. RELEVANT ISSUES UNDER SECTION 6330(C)(2)(A)

1. Appropriate spousal defenses

2. Challenges to appropriateness of collection action

a. Collection action not appropriate if levy causes economic hardship 27

b. Taxes discharged in bankruptcy

c. Criminal restitution cases 28

3. Collection alternatives generally

4. Offer-in-Compromise

a. Doubt as to liability offer-in-compromise

b. Doubt as to collectability offer-in-compromise 32

c. Effective tax administration offer-in-compromise

d. Terminated offer-in-compromise

C. SECTION 6330(C)(2)(B) LIABILITY CHALLENGES

1. Self-reported taxes

2. Taxpayer must raise issues at administrative hearing 37

3. Receipt of a statutory notice of deficiency 37

4. Other opportunity to dispute liability

a. Appeals hearing 39

b. Prior CDP Notice

c. Audit reconsideration

d. Waiver of receipt of notice of deficiency

e. Bankruptcy proceedings 41

f. District court cases

g. TEFRA proceedings

D. THE BALANCING ANALYSIS OF SECTION 6330(C)(3)(C) 42

E. SECTION 6330(C)(4) 42

F. CONSIDERATION OF PRECLUDED ISSUES BY APPEALS

G. SEIZURE AND SALE ISSUE IN POST-LEVY CDP PROCEEDING

CHAPTER SIX – DETERMINATION BY APPEALS.......................................................................................... 44

A. NOTICE OF DETERMINATION 44

B. RETAINED JURISDICTION

CHAPTER SEVEN – JUDICIAL REVIEW........................................................................................................... 45

A. SUBJECT MATTER JURISDICTION

1. Overpayment jurisdiction 46

2 Jursidiction over non-CDP years

3. Jurisdiction over nominee and wrongful levy issues 48

4. Taxpayer precluded from raising issues not raised during CDP hearing 48

B. NOTICE OF DETERMINATION REQUIRED

C. TIMELY PETITION 49

D. STANDARD AND SCOPE OF REVIEW

1. Abuse of discretion standard of review

2. Abuse of discretion scope of review 53

3. De novo standard and scope of review

4. Standard of review for verification, statute of limitations and application of payment issues

5. Determinations under section 6015 57

CHAPTER EIGHT – EFFECT OF BANKRUPTCY ON CDP ............................................................................58

CHAPTER NINE – CDP LITIGATION IN TAX COURT ...................................................................................59

A. SMALL CASE STATUS

B. ISSUES CONSIDERED BY TAX COURT

C. DISMISSAL FOR MOOTNESS

D. DISMISSAL FOR LACK OF JURISDICTION 62

E. VOLUNTARY DISMISSALS

F. REMAND 62

G. SUMMARY JUDGMENT

H. SECTION 6673(A)(1) PENALTIES

CHAPTER 10 – APPELLATE LITIGATION ....................................................................................................... 64

A. VENUE FOR APPEAL 64

B. STANDARD OF REVIEW

Chapter One – Introduction

A. Purpose

This deskbook provides a summary of Collection Due Process (CDP) law current

through July 31, 2014, as a research tool for Chief Counsel. This deskbook focuses on

the case law interpreting sections 6320 and 6330. It includes the positions of Chief

Counsel that are set forth in Actions on Decision and Chief Counsel Notices.

This deskbook is not binding legal authority and should not be used or cited as

precedent. It is not a statement of the position of the Office of Chief Counsel on

the statutes, regulations and cases cited therein. Procedural guidance for CDP

cases can be found in Part 35 of the CCDM and in the Chief Counsel Notices

accessible through the website of the Office of Chief Counsel. This deskbook

does not provide all relevant case citations for any particular point of law but is

intended to be a starting point for research. The attorneys in Branches 3 and 4 of

Procedure and Administration are available to assist you when questions arise in

particular cases.

B. Statutory Provisions

Sections 6320 and 6330 are a codification of section 3401, the Internal Revenue

Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. No. 105-206, 112

Stat. 685 (1998). The CDP provisions became effective January 19, 1999. The

Congressional report explaining the final version of sections 6320 and 6330 is H.R. REP.

NO. 105-599, at 263-267 (1998) (Conf. Rep.).

On December 6, 2006, Congress passed the Tax Relief and Health Care Act of 2006

(TRHCA), Pub. L. 109-432, 120 Stat. 2922 (2006). Section 407 of TRHCA made

revisions to sections 6320, 6330 and 6702 to help the Service combat the problems

associated with the submission of frivolous documents. These provisions provide that

the Service may disregard frivolous CDP hearing requests and may impose a penalty

on such requests.

On May 25, 2007, Congress passed the Small Business and Work Opportunity Act of

2007, Pub. L. 110-28, Title VIII, 121 Stat. 200 (2007). Section 8243 of this act included

an amendment to section 6330(f). Generally, this amendment provides that the Service

may levy to collect certain employment taxes without providing pre-levy CDP rights, if

the taxpayer (or taxpayer’s predecessor) has requested a CDP levy hearing with

respect to unpaid employment taxes arising in the 2-year period before the beginning of

the taxable period with respect to which the levy is served. The taxpayer will instead

receive a post-levy CDP hearing. The amendment is effective with respect to levies

served on or after September 22, 2007.

On September 27, 2010, the Small Business Jobs Act of 2010 was enacted. Section

2104 of the Act amends section 6330(f) to provide that the Service may levy on a

Federal contractor without providing pre-levy CDP rights. The Federal contractor will

instead receive a post-levy CDP hearing. This applies to levies issued after the date of

enactment.

C. Regulatory Provisions

Final regulations became effective January 18, 2002, and apply to notices of lien and

levies issued on or after January 19, 1999. The Treasury Regulations implementing

sections 6320 and 6330 are at Treas. Reg. §§ 301.6320-1 and 301.6330-1 (previously

issued by Treasury Decisions 8979 and 8980, respectively, on January 17, 2002). The

regulations are written primarily in a question and answer format. Amendments to the

final regulations became effective November 16, 2006, and apply to requests for CDP

or equivalent hearings made on or after November 16, 2006. See Treasury Decisions

9290 and 9291, published at 71 F.R. 60835 (Oct. 17, 2006) and 71 F.R. 60827 (Oct. 17,

2006).

The current regulations do not reflect the 2006, 2007 and 2010 amendments to sections

6320 and 6330.

D. Tax Court Rules

Rules 330 through 334 of Title XXXII of the Tax Court Rules of Practice and Procedure,

apply to petitions brought under sections 6320 and 6330.

E. Manual Provisions

The Internal Revenue Manual (IRM) provisions addressing sections 6320 and 6330 are

at IRM sections 5.1.9 (Collection Appeal Rights), 5.19.8 (same), and 8.22 (Collection

Due Process).

The Chief Counsel Directives Manual (CCDM) provisions addressing the litigation of

CDP cases are at:



Issues requiring P&A review: Exhs. 31.1.1-1 and 35.11.1-1 (identical)

Small tax case procedures: 35.1.3.2.1

Initial review of CDP cases: 35.2.1.1.11

Answers in Collection Due Process (CDP) Cases under Sections 6320 and 6330:

35.2.2.13

Motions in Collection Due Process (CDP) Cases: 35.3.23

Discovery in Collection Due Process (CDP) Cases: 35.4.3.8

Closing Collection Due Process (CDP) cases: 35.9.3.6

Settlement of CDP case where DOJ jurisdiction over tax years: 35.5.3.5.2

Trial in Collection Due Process (CDP) Cases: 35.6.2.18

Stipulation of Facts and Submission of Administrative Record in Collection Due

Process (CDP) Cases: 35.4.7.9



Stipulated Decision Documents in Collection Due Process (CDP) Cases:

35.8.6.4

Appeal bond: 36.2.6.2.1.2

Venue on Appeal: 36.2.5.8

Procedures for Getting CDP Cases Closed in the Office of Appeals After Tax

Court Decision is Final: 36.2.6.2.5.5

Sample Documents:



Exhs. 35.11.1-214 through 220—stipulated decision documents in CDP

cases

Exh. 35.11.1-223—motion to dismiss for lack of jurisdiction in CDP cases

where there is no CDP notice of determination

Exh. 35.11.1-224—motion to dismiss for lack of jurisdiction in CDP cases

where the petition includes periods not on the CDP notice of determination

Exh. 35.11.1-225—motion to dismiss for lack of jurisdiction in CDP cases

where there was no valid CDP notice

Exh. 35.11.1-226—motion to dismiss for lack of jurisdiction in CDP cases

where the petition was late-filed

Exh. 35.11.1-222—motion to dismiss on grounds of mootness in CDP cases

Exh. 35.11.1-221—motion to change caption in CDP cases

Exh. 35.11.1-172—motion to remove small tax designation in CDP cases

Exh. 35.11.1-213—motion to remand in CDP cases

Exh. 35.11.1-227—remand memorandum to Appeals in CDP cases

Exh. 35.11.1-231—motion to permit levy in CDP cases

Exh. 35.11.1-229—motion for summary judgment on abuse of discretion

issues in CDP cases

Exh. 35.11.1-228—motion for summary judgment on liability issues in CDP

cases

Exh. 35.11.1-230—declaration used with motion for summary judgment in

CDP cases

Exh. 35.11.1-212—stipulation of facts attaching administrative record in CDP

cases

Exh. 35.11.1-232—motion in limine in CDP cases

Chapter Two – CDP Notices and the Right to a CDP Hearing

A. Notice of Federal Tax Lien Filing and Right to Hearing - Section 6320

Prior to January 19, 1999, there was no requirement in the Code that the Service notify

the taxpayer, or provide a hearing, when a Notice of Federal Tax Lien (NFTL) was filed

against that taxpayer’s property. RRA 1998, section 3401 added section 6320 to the

Code, which requires the Service to provide written notification (CDP notice) to the

taxpayer of the NFTL and of that taxpayer’s right to a CDP hearing not more than five

business days after the filing of the first NFTL for a specific tax period. The right

provided by section 6320 is a right to notice and hearing after the NFTL is filed. In

practice, this notification is given by Letter 3172 - Notice of Federal Tax Lien Filing and

Your Right to a Hearing under I.R.C. § 6320.

B. Notice of Intent to Levy and Right to Hearing - Section 6330

Prior to January 19, 1999, taxpayers had a statutory right to a notice of intent to levy

prior to levy under section 6331(d) (requiring that the Service provide the taxpayer with

a notice of intent to levy 30 days before levy), but no statutory right to a hearing. RRA

1998, section 3401 added section 6330 to the Code, which requires the Service (except

in the case of jeopardy levies, levies on State income tax refunds, disqualified

employment tax levies, or levies on Federal contractors) to provide written notification

(CDP notice) of its intent to levy on any property or right to property of any taxpayer at

least 30 days prior to the levy and inform the taxpayer of the right to a CDP hearing. In

practice, this notification is given by either Letter 1058 - Final Notice, Notice of Intent to

Levy and Notice of Your Right to a Hearing, or LT 11 - Final Notice, Notice of Intent to

Levy and Notice of Your Right to a Hearing. The Letter 1058 is issued by field

collection, in cases assigned to a Revenue Officer. The LT-11 is the culminating notice

in a series of collection notices issued by the Automated Collection System (ACS).

Most delinquent tax accounts are handled by ACS. Cases meeting certain dollar criteria

are handled by field collection.

In enacting section 6330, Congress did not eliminate the section 6331(d) notice

requirement. A taxpayer may be given a non-CDP notice of intent to levy under section

6331(d) (referred to on literal transcripts or Forms 4340 as the “statutory” notice of intent

to levy) prior to being given a CDP notice of intent to levy and right to a hearing under

section 6330 (referred to as the “final” notice of intent to levy). Or the notices could be

combined. The section 6331(d) notice must be given prior to levies that qualify as

exceptions to the pre-levy hearing requirement under section 6330(f). However, the

section 6331(d) notice does not give the taxpayer a right to a CDP hearing.

The taxpayer has the right to no more than two CDP notices, and two hearings, for

every taxable period: a section 6320 notice and hearing after the filing of a NFTL, and a

section 6330 notice and hearing prior to levy (or after levy in the case of jeopardy levies,

levies on state tax refunds, disqualified employment tax levies, and levies on Federal

contractors). The Service may combine hearings for NFTLs and levies as appropriate.

C. Exceptions to Pre-Levy Notice and Opportunity for a Hearing

Section 6330(f) provides four exceptions to the requirement that the taxpayer be given

an opportunity for a hearing before levy: jeopardy levies, levies on state income tax

refunds, disqualified employment tax levies, and levies on Federal contractors. Instead,

the taxpayer shall be given the opportunity for a CDP hearing “within a reasonable

period of time after the levy.” Thus, if the taxpayer has not previously been given CDP

levy rights at the time of the levy, the taxpayer has a right to a hearing after the levy.

After Appeals issues a Notice of Determination in the post-levy hearing, the taxpayer

may appeal that determination to the Tax Court. Bussell v. Commissioner, 130 T.C.

222 (2008); Clark v. Commissioner, 125 T.C. 108 (2005).

With respect to jeopardy levies, hearing rights may be available under section 7429, as

well as under section 6330(f), depending upon the timing of the jeopardy levy. A

jeopardy levy subject to section 7429 appeal rights includes a levy made in connection

with a jeopardy assessment, and also a levy made before the requirements of sections

6331(a) and (d) are satisfied (requiring ten days to pass after notice and demand, and

thirty days to pass after the giving of a notice of intent to levy). See Treas. Reg. §

301.7429-1. Hearing rights for such jeopardy levies are available under sections 7429

and 6330(f). Ang v. Commissioner, T.C. Memo. 2014-53 (rejecting the argument that

section 7429 precludes the Tax Court from reviewing the reasonableness of a jeopardy

levy, and stating that the court reviews appeals’ verification that the jeopardy levy was

reasonable for abuse of discretion). If the prerequisites for levy under section 6331

have been met, and levy is made either before the section 6330(a) CDP notice has

been issued, or before the 30-day period for requesting a CDP hearing has passed, no

review rights are available under section 7429. However, the taxpayer will be entitled to

a post-levy CDP notice and hearing.

The Small Business and Work Opportunity Act of 2007 amended section 6330(f) to

permit levy to collect employment taxes without first giving a taxpayer a pre-levy CDP

notice if the levy is a “disqualified employment tax levy.” I.R.C. § 6330(f)(3). The

amendment is effective for disqualified employment tax levies served on or after

September 22, 2007. This change was intended to limit opportunities for pre-levy CDP

hearings where taxpayers pyramid employment tax liabilities and use the CDP process

to delay collection.

A disqualified employment tax levy, as described in section 6330(h)(1), is a levy to

collect a taxpayer’s employment tax liability if that taxpayer or a predecessor requested

a CDP hearing under section 6330 for unpaid employment taxes arising in the two-year

period prior to the beginning of the taxable period for which the levy is served.

Section 6330(f) was amended on September 27, 2010, by section 2104 of the Small

Business Jobs Act of 2010, to except Federal contractor levies from pre-levy notice and

opportunity for a hearing. Section 2104 is titled “Application of Continuous Levy to Tax

Liabilities of Certain Federal Contractors.” “Federal contractor levy” is defined in section

6330(h)(2) as “any levy if the person whose property is subject to the levy (or any

predecessor thereof) is a Federal contractor.”

D. Notice Issuance

A CDP notice must be given in person, left at the taxpayer’s dwelling or usual place of

business, or delivered to the taxpayer’s last known address by certified or registered

mail. Minemyer v. Commisioner, T.C. Memo. 2012-325 (case dismissed for lack of

jurisdiction where CDP notice not mailed to taxpayer’s last known address); Buffano v.

Commissioner, T.C. Memo. 2007-32. The CDP levy notice (but not the CDP lien notice)

must also be sent return receipt requested. If the CDP notice is not properly sent, and

the taxpayer fails to timely request a hearing, the taxpayer is entitled to a substitute

notice. Treas. Reg. §§ 301.6320-1(a)(2) Q&A-A12, 301.6330-1(a)(3) Q&A-A10.

Graham v. Commissioner, T.C. Memo. 2008-129. A CDP lien notice (Letter 3172) is

valid even if given before the NFTL is actually filed, and the validity of the section 6320

notice does not depend on the validity of the related NFTL. Id. A lien notice solely in

the name of a deceased taxpayer is valid if the lien against the taxpayer as an individual

is valid and if the notice was sent to the decedent’s last known address. Estate of

Brandon v. Commissioner, 133 T.C. 83 (2009).

E. Nominees and Other Third Parties

A CDP lien notice will only be given to the person described in section 6321 who is

named on the NFTL. Treas. Reg. § 301.6320-1(a)(2) Q&A-A1. A CDP levy notice will

only be given to the person described in section 6331(a). Treas. Reg. § 301.6330

1(a)(3) Q&A-A1. CDP rights are only available to the taxpayer — the person liable to

pay the tax due after notice and demand who refuses or neglects to pay. A nominee of,

or person holding property of, the taxpayer is not entitled to CDP rights. Treas.

Reg. §§ 301.6320-1(a)(2) Q&A-A7, 301.6330-1(a)(3) Q&A-A2, 301.6320-1(b)(2) Q&A

B5, 301.6330-1(b)(2) Q&A-B5; Kendricks v. Commissioner, 124 T.C. 69, 71 n.3 (2005);

Forman v. United States Dept. of Treasury, 2005-1 USTC ¶ 50,418 (N.D. Ill.). See also

Gillum v. Commissioner, 676 F.3d 633 (8th Cir. 2012) (Tax Court does not have

jurisdiction over alter-egos and nominees). Cf. Dalton v. Commissioner, 135 T.C. 393

(2010), rev’d on other grounds, 682 F.3d 149 (1st Cir. 2012) (Tax Court has jurisdiction

to decide nominee interest issue insofar as it pertains to Service’s rejection of an offerin-compromise on the basis that the offer did not include taxpayer’s nominee interest).

F. General Partners in Partnerships

Under state law, general partners in partnerships are liable for taxes assessed against

the partnership. The Supreme Court in United States v. Galletti, 541 U.S. 114 (2004),

held that the Service’s assessment against a partnership serves to make the general

partner liable for the tax. While the Supreme Court in Galletti did not address

administrative collection, Galletti is consistent with the Service’s long-standing legal

position that it can enforce a tax lien and take administrative levy action against a

general partner based on the assessment, notice and demand directed to the

partnership. See Chief Counsel Notice 2005-003, Administrative Collection of a

Partnership's Employment Taxes from the Partners.

After the Service files a NFTL identifying a general partner as being liable for a

partnership’s employment taxes, a CDP notice must be given to the partner. Section

6320(a)(1) requires that written notice of the right to a CDP hearing be given to the

person described in section 6321; that is, any person liable to pay the tax who is

described in the NFTL. Treas. Reg. § 301.6320-1(a)(2) Q&A-A1. Because general

partners are liable to pay the partnership tax liabilities, separate CDP notices should be

given to the partnership and to all general partners listed on the NFTL.

A CDP levy notice must also be given to a general partner prior to levying on that

partner’s property or rights to property. Section 6330(a)(1) requires that written notice

of the right to a CDP hearing be given to a person liable to pay the tax prior to any levy

on the person’s property or rights to property. See Treas. Reg. § 301.6330-1(a)(3)

Q&A-A1. If the Service intends to levy on the property or rights to property of a general

partner, separate CDP notices should be given to the partnership and the general

partner whose property the Service intends to levy.

G. Owners of Single-Member LLCs

The court in Littriello v. United States, 484 F.3d 372 (6th Cir. 2007), upheld a proposed

levy against an owner of a single-member LLC for employment taxes with respect to

employees of the LLC where the owner was made liable for the taxes under the “check

the box” regulations disregarding the LLC. Accord McNamee v. Dept. of Treasury, 488

F.3d 100 (2d Cir. 2007); Kandi v. United States, 295 Fed. Appx. 873 (9th Cir. 2008);

L&L Holding Co., LLC, 2008 WL 1908840 (W.D. La. 2008); Medical Practice Solutions,

LLC. v. Commissioner, 132 T.C. 125 (2009), aff’d, 2010 WL 3565790 (1st Cir. 2010)

(unpublished per curiam), cert. denied 131 S.Ct. 2974 (2011). The “check the box”

regulations were amended on August 16, 2007, to make the disregarded entity liable for

employment taxes in these situations. For employment taxes on employees of

disregarded entities incurred after January 1, 2009, the default rule is that the owner is

no longer liable. Treas. Reg. § 301.7701-2(c)(iv).

Chapter Three – Requesting a CDP Hearing and the Effect of Requesting a

Hearing

A. Hearing Requests

1. One hearing opportunity per tax and period

Sections 6320(b)(2) and 6330(b)(2) each provide that a taxpayer is entitled to only one

CDP hearing before the Office of Appeals with respect to the tax and tax period(s)

covered by the CDP notice. This means that a taxpayer may have an opportunity for

one CDP lien hearing and one CDP levy hearing for each tax and tax period. See

Investment Research Associates, Inc. v. Commissioner, 126 T.C. 183 (2006) (upholds

regulations only allowing hearing from filing of first NFTL); Shirley v. Commissioner,

T.C. Memo. 2014-10 (appeals did not abuse discretion by refusing to consider years for

which petitioner received previous CDP hearings). Section 6320(b)(4) provides that, to

the extent practicable, CDP hearings with respect to liens shall be held in conjunction

with CDP hearings with respect to levies under section 6330. A taxpayer may receive

more than one CDP hearing with respect to the same tax and period when there has

been an additional assessment of tax (not including interest or penalty accruals) for that

period or an additional accuracy-related or filing-delinquency penalty has been

assessed. Treas. Reg. §§ 301.6320-1(d)(2) Q&A-D1, 301.6330-1(d)(2) Q&A-D1; Freije

v. Commissioner, 131 T.C. 1 (2008).

2. Procedures for requesting a CDP hearing

A Form 12153, Request for a Collection Due Process or Equivalent Hearing, is included

with the CDP notice sent to the taxpayer. Use of a Form 12153 to request a CDP

hearing is not required, but if the form is not used, the request must still be in writing

and include the taxpayer’s name, taxpayer identification number (e.g., SSN, ITIN or

EIN), address, and daytime telephone number, and be dated and signed by either the

taxpayer or the taxpayer’s authorized representative. The request must also specify the

type of tax and tax periods at issue, include a statement that the taxpayer requests a

hearing with Appeals with respect to the lien or proposed levy, and provide a reason or

reasons why the taxpayer disagrees with the notice of lien or proposed levy. Treas.

Reg. §§ 301.6320-1(c)(2) Q&A-C1, 301.6330-1(c)(2) Q&A-C1.

If a timely written request for a CDP hearing is submitted that does not contain all of the

required information, the IRS will make a reasonable attempt to contact the taxpayer

and request that the taxpayer comply with the unsatisfied requirements, within a

reasonable time period. Treas. Reg. §§ 301.6320-1(c)(2) Q&A-C1, 301.6330-1(c)(2)

Q&A-C1. A taxpayer may also affirm any timely written request that is signed or alleged

to have been signed on the taxpayer’s behalf by the taxpayer’s spouse or other

unauthorized representative by filing, within a reasonable period of time after a request

by the IRS, a signed, written affirmation that the request was originally submitted on the

taxpayer’s behalf. Id.

The TRHCA amended sections 6320(b)(1) and 6330(b)(1) to provide that the CDP

hearing request must state the grounds for requesting the hearing. The TRHCA also

amended section 6330(g) to provide that the Service may disregard any portion of a

section 6320 or 6330 hearing request that is based upon a position identified as

frivolous by the IRS in a published list or that reflects a desire to delay or impede tax

administration. The disregarded portion will not be subject to any further administrative

or judicial review. The TRHCA also amended section 6702 to allow imposition of a

$5,000 penalty for specified frivolous submissions, including CDP hearing requests,

where any portion of the submission meets one or both of these criteria. The penalty

will be abated if the taxpayer withdraws the frivolous submission 30 days after being

notified by the Service that the submission is a specified frivolous submission. I.R.C.

§ 6702(b)(3). The current notice specifying frivolous positions under section 6702 is

Notice 2010-33, 2010 WL 1347082.

In Thornberry v. Commissioner, 136 T.C. 356 (2011), the Tax Court held that it has

jurisdiction to review the denial of a hearing under section 6330(g). In Chief Counsel

Notice CC-2012-003, Disregarding Frivolous CDP Hearing Requests under Section

6330, the Office of Chief Counsel announced that it disagrees with Thornberry and will

continue to argue that the Tax Court has no jurisdiction to review denials of hearings

under section 6330(g). See also CCDM 35.3.23.5.1.

The section 6320 hearing request must be submitted no later than 30 days after the

expiration of five business days after the date the NFTL is filed. Treas. Reg.

§ 301.6320-1(b)(1). See Newsome v. Commissioner, T.C. Memo. 2007-111. The date

the NFTL is filed is the date the NFTL is received by the recording office to be added to

the public index, not the act of indexing it in the local records. See, e.g., Tracey v.

United States, 394 B.R. 635 (BAP 1st Cir. 2008). Because the Service does not

ordinarily obtain this date from the recording office, the Service uses an estimated filing

date on the Letter 3172 to provide the taxpayer with a “must file” date (the date by which

the section 6320 hearing request must be submitted). The estimated filing date is

calculated by adding 3 business days to the NFTL mailing date. In other words, the

Service assumes that the recording office will receive the NFTL 3 business days after it

is mailed. The “must file” date is then determined by adding 5 business days plus 30

calendar days to the estimated filing date.

The section 6330 hearing request must be submitted no later than 30 days from the

date of the CDP notice (provided the notice was mailed on or before that date). Treas.

Reg. § 301.6330-1(b)(1). Premature requests for a CDP hearing (e.g., requests made

before the Service has issued a CDP notice) are not valid. Andre v. Commissioner, 127

T.C. 68 (2006).

Any written request for a CDP hearing should be filed at the address indicated on the

notice. If an address does not appear on the CDP notice, the taxpayer can obtain the

address by calling, toll-free, 1-800-829-1040, and providing the taxpayer’s identification

number. Treas. Reg. §§ 301.6320-1(c)(2) Q&A-C6, 301.6330-1(c)(2) Q&A-C6. If this

address (or other address authorized in the regulations) is used and the written request

is postmarked within the applicable 30-day response period, then in accordance with

section 7502, the request will be considered timely even if it is not received until after

the 30-day period. Treas. Reg. §§ 301.6320-1(c)(2) Q&A-C4, 301.6330-1(c)(2) Q&A

C4. Section 7503 extends the time for filing if the last day of the 30-day response

period falls on a weekend or legal holiday. Id. If the request is not sent to the correct

address it must be received by the correct office within the 30-day period in order to be

timely. I.R.C. § 7502(a)(2). On the other hand, a request that is hand-carried to a local

Taxpayer Assistance Center will be timely if delivered within the 30-day period pursuant

to Treas. Reg. § 301.6091-1(b)(1) and (2). The 30-day period is not extended for

taxpayers residing outside the United States. Treas. Reg. §§ 301.6320-1(c)(2) Q&A

C5, 301.6330-1(c)(2) Q&A-C5; Sarrell v. Commissioner, 117 T.C. 122 (2001).

3. Equivalent hearing

The Treasury Regulations provide that a taxpayer whose hearing request is untimely is

not entitled to a CDP hearing under section 6320 or 6330, but may receive an

“equivalent hearing.” Treas. Reg. §§ 301.6320-1(i)(1), 301.6330-1(i)(1). A taxpayer

must make a written request for an equivalent hearing that contains all of the same

information required for a CDP hearing request. Treas. Reg. §§ 301.6320-1(i)(2) Q&A

I1, 301.6330-1(i)(2) Q&A-I1. The same rules with respect to perfecting incomplete CDP

hearing requests, and affirming improperly signed CDP hearing requests, also apply to

equivalent hearing requests. Treas. Reg. §§ 301.6320-1(i)(2) Q&A-I1(iii) and (iv),

301.6330-1(i)(2) Q&A-I1(iii) and (iv). A taxpayer who submits an untimely written CDP

hearing request will be offered and may obtain an equivalent hearing without having to

submit an additional written request. Treas. Reg. §§ 301.6320-1(c)(2) Q&A-C7,

301.6330-1(c)(2) Q&A-C7.

A taxpayer must request an equivalent hearing within the one-year period commencing

after the date of a CDP levy notice or, with respect to a CDP lien notice, within the oneyear period commencing the day after the end of the five-business-day period following

the filing of the NFTL. Treas. Reg. §§ 301.6320-1(i)(2) Q&A-I7, 301.6330-1(i)(2) Q&A

I7.

A taxpayer may not appeal to a court any decision (issued in the form of a decision

letter) made by an Appeals or settlement officer as a result of an equivalent hearing.

Treas. Reg. §§ 301.6320-1(i)(2) Q&A-I6, 301.6330-1(i)(2) Q&A-I6; Orum v.

Commissioner, 123 T.C. 1 (2004); Moorhous v. Commissioner, 116 T.C. 263 (2001);

Johnson v. Commissioner, 2000-2 USTC ¶ 50,591 (D. Ore. 2000). However if the

taxpayer files a timely hearing request but is nonetheless given an equivalent hearing

based on Appeal’s erroneous determination that the taxpayer’s CDP hearing request

was untimely, the Tax Court may treat the resulting decision letter as an appealable

CDP determination for purposes of section 6330(d)(1). Craig v. Commissioner, 119

T.C. 252 (2002). A certified mailing list (USPS Form 3877, or the equivalent form

prepared by the IRS) showing the date the CDP notice was sent establishes both the

fact and date of mailing of the notice of the CDP notice. See Walthers v.

Commissioner, T.C. Memo. 2009-139.

B. Effect of Requestion a CDP Hearing

1. Statute of limitations

The limitation periods under section 6502 (relating to collection after assessment),

section 6531 (relating to criminal prosecutions), and section 6532 (relating to other

suits) with respect to the taxes and periods listed on the CDP notice are suspended

beginning on the date the Service receives a timely hearing request. I.R.C.

§ 6330(e)(1); Treas. Reg. §§ 301.6320-1(g)(2) Q&A-G1, 301.6330-1(g)(2) Q&A-G1;

Boyd v. Commissioner, 117 T.C. 127 (2001). The suspension period ends either on the

date the Service receives a written withdrawal of the hearing request, when the

determination resulting from the CDP hearing becomes final by expiration of the time for

seeking review, or upon the exhaustion of any right of appeal. Id.

Section 6330(e)(1) further provides that in no event shall any of the limitation periods

expire before the 90th day after the day on which there is a final determination with

respect to such hearing. If there are fewer than 90 days left in any limitations period

after the suspension ends, the remaining limitations period will be 90 days. Treas. Reg.

§§ 301.6320-1(g)(3), 301.6330-1(g)(3). This means that if less than 90 days remain on

the limitations period after the suspension ends, the difference between the number of

remaining days and 90 days will be added to the limitations period. There is no

automatic 90-day addition to the period.

2. Levy action and injunctive relief

A timely CDP levy hearing request generally suspends any levy action to collect

liabilities listed on the CDP notice for the period during which the hearing and appeals

therein are pending. I.R.C. § 6330(e)(1). There are no restrictions on filing a NFTL,

however, under either section 6320 or 6330. Treas. Reg. §§ 301.6320-1(g)(2) Q&A-G3,

301.6330-1(g)(2) Q&A-G3. For good cause shown, a levy will not be suspended while

an appeal is pending before the Tax Court or Court of Appeals if the underlying tax

liability is not at issue. I.R.C. § 6330(e)(2). The Service must file a motion and the court

must make a good cause determination before the Service may proceed with the levy.

See CCDM 35.3.23.9. The Tax Court grants motions to permit levy in CDP cases

involving taxpayers who raise solely frivolous arguments. See Burke v. United States,

124 T.C. 189 (2005); Howard v. United States, T.C. Memo. 2005-100.

The Anti-injunction Act, section 7421, generally prohibits suits to restrain the

assessment and collection of any tax. The beginning of a levy or proceeding, however,

may be enjoined by the proper court, including the Tax Court, during the time the

suspension under section 6330(e)(1) is in force. The Tax Court cannot enjoin any

action or proceeding unless a timely appeal of a notice of determination has been filed

with the Tax Court and then only with respect to the unpaid tax subject to proposed

levy. I.R.C. § 6330(e)(1); Davis v. Commissioner, T.C. Memo. 2008-238. As a result,

only district courts have jurisdiction over injunction suits for tax years that are not

properly before the Tax Court in a levy review case.

3. Permitted collection actions

Section 6330(e)(1) only prohibits levy if a proposed levy is the basis of the CDP hearing.

Therefore, the Service may levy for taxes covered by a CDP lien notice if the section

6330 notice requirement for those taxes and periods has been satisfied. Treas. Reg.

§§ 301.6320-1(g)(2) Q&A-G3, 301.6330-1(g)(2) Q&A-G3. In addition, nothing in section

6320 or 6330 prohibits the filing of a NFTL. See Beery v. Commissioner, 122 T.C. 184

(2004). If a taxpayer requests a CDP hearing under section 6320 or 6330, the Service

may file a NFTL for the same tax and periods at another recording office or a NFTL for

tax periods or taxes not covered by the CDP notice. Other permitted nonlevy collection

actions include accepting voluntary payments of the tax, initiating judicial proceedings,

offsetting overpayments from other periods, Boyd v. Commissioner, 451 F.3d 8 (1st Cir.

2006), aff’g 124 T.C. 296 (2005), and issuing a “lock-in” letter instructing taxpayer’s

employer to adjust taxpayer’s withholding. Cleveland v. Commissioner, 600 F.3d 739

(7th Cir. 2010); Davis v. Commissioner, T.C. Memo. 2008-238.

Chapter Four – The CDP Hearing

A. CDP Hearings Are Informal

A CDP hearing is informal and the formal hearing requirements of the Administrative

Procedure Act (APA), 5 U.S.C. § 551 et seq., do not apply. Treas. Reg. §§ 301.6320

1(d)(2) Q&A-D6, 301.6330-1(d)(2) Q&A-D6. See also Dalton v. Commissioner, 682

F.3d 149, 155 (1st Cir. 2012); Robinette v. Commissioner, 439 F.3d 455 (8th Cir. 2006);

Living Care Alternatives of Utica, Inc. v. United States, 411 F.3d 621 (6th Cir. 2005);

Davis v. Commissioner, 115 T.C. 35 (2000). Accordingly, recordings of telephone or

face-to-face conferences are not required. Living Care Alternatives, 411 F.3d at 625;

Rennie v. Internal Revenue Service, 216 F. Supp. 2d 1078, 1079 n.1 (E.D. Cal. 2002).

Contra Mesa Oil, Inc. v. United States, 2001-1 USTC ¶ 50,130 (D. Colo. 2000) ( CDP

hearings must be recorded verbatim), nonacq., AOD 2001-5 (nonacquiescence on this

point). While recording of all CDP conferences is not required, the taxpayer does have

the right to record a face-to-face CDP conference in accordance with section

7521(a)(1). Keene v. Commissioner, 121 T.C. 8 (2003).

Taxpayers do not have the right to subpoena and examine witnesses at the hearing.

Treas. Reg. §§ 301.6320-1(d)(2) Q&A-D6, 301.6330-1(d)(2) Q&A-D6; Robinette v.

Commissioner, 123 T.C. 85, 98 (2004), rev’d on other grounds, 439 F.3d 455 (8th Cir.

2006). The Appeals officer is not required to give the taxpayer a set of procedures

governing the hearing. Lindsay v. Commissioner, T.C. Memo. 2001-285. Taxpayers do

not have the right to subpoena documents, Barnhill v. Commissioner, T.C. Memo. 2002

116, or examine them. Watson v. Commissioner, T.C. Memo. 2001-213. Section

6330(c)(1) does not require the Appeals officer to provide the taxpayer with copies of

the documents the Appeals officer obtains to verify that the requirements of any

applicable law or administrative procedure were met. Robinette; Nestor v.

Commissioner, 118 T.C. 162 (2002). Despite the informality of the hearing and the lack

of a transcript, there must be a sufficient explanation of the Appeals officer’s findings

and rationale to permit review for abuse of discretion. The notice of determination must

discuss all issues raised and should state why arguments and collection alternatives

raised by the taxpayer were rejected. See Robinette, 439 F.3d at 461-62; Living Care

Alternatives, 411 F.3d at 629; Cavanaugh v. United States, 93 AFTR 2d 1522 (D.N.J.

2004); Cox v. Commissioner, 126 T.C. 237 (2006), rev’d on other grounds, 514 F.3d

1119 (10th Cir. 2008). There must be sufficient documentation in the record to show

what happened at the administrative hearing. Cox, 126 T.C. at 247 (the administrative

file “provides a singularly clear portrayal of administrative developments as they

occurred”). If the record is insufficient to permit abuse of discretion review, the case

may need to be remanded to Appeals.

B. Concluding the Hearing and Submission Deadlines

While there is no period of time in which Appeals must conduct the hearing or issue the

Notice of Determination, Appeals will attempt to conduct the hearing and issue the

determination as expeditiously as possible under the circumstances. Treas. Reg. §§

301.6320-1(e)(3) Q&A-E9, 301.6330-1(e)(3) Q&A-E9. In Murphy v. Commissioner, 125

T.C. 301 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006), the Tax Court held that the Appeals

officer did not prematurely conclude the CDP hearing when the determination was

made eight months after the hearing commenced. When an Appeals officer gives a

taxpayer an adequate timeframe to submit requested items, it is not an abuse of

discretion to move ahead if the taxpayer fails to submit the items within that timeframe.

Glossop v. Commissioner, T.C. Memo. 2013-208. See also Dinino v. Commissioner,

T.C. Memo. 2009-284 (Appeals officer did not abuse discretion by declining to give

taxpayer additional time to submit information); Pisetzner v. Commissioner, T.C. Memo.

2012-64 (taxpayer failed to timely reschedule a telephone conference; section 6330

only requires that a taxpayer be given a reasonable chance to be heard prior to

issuance of a notice of determination). Cf. Szekely v. Commissioner, T.C. Memo. 2013

227 (Appeals abused discretion in closing case and sustaining NFTL where OIC was

received shortly after the deadline set by Appeals); Industrial Investors v Commissioner,

T.C. Memo. 2007-93 (Appeals officer abused his discretion by allowing petitioner only

18 business days to assemble documentation required in support of offer-in

compromise, during part of which time petitioner’s representative was under subpoena

to appear in court); Judge v. Commissioner, T.C. Memo. 2009-135 (settlement officer

abused discretion in failing to grant brief extension of time to submit financial

information). Appeals is not required to consider new information submitted after the

Notice of Determination is issued. Trainor v. Commissioner, T.C. Memo. 2013-14.

C. Face-to-Face Conference Not Required

The regulations provide that a CDP hearing may consist of a face-to-face meeting, one

or more written or oral communications, or some combination thereof. A face-to-face

meeting is not required. Treas. Reg. §§ 301.6320-1(d)(2) Q&A-D6, 301.6330-1(d)(2)

Q&A-D6; Williams v. Commissioner, 718 F.3d 89 (2d Cir. 2013). See Katz v.

Commissioner, 115 T.C. 329 (2000) (combination of telephone calls and written letters);

Radeke v. Commissioner, T.C. Memo. 2012-319 (“An informal telephone conference

which gives the taxpayer the opportunity to discuss the merits of the case, settlement

alternatives, and other issues related to the proposed levy is a proper hearing.”)

Therefore, all communications between the taxpayer and the Appeals officer between

the time of the request for the hearing and the issuance of the notice of determination

are part of the CDP hearing. See TTK Management v. United States, 2001-1 USTC

¶ 50,185 (C.D. Cal. 2000).

A taxpayer who presents in the CDP hearing request relevant, non-frivolous reasons for

disagreement with the proposed levy or lien will ordinarily be offered an opportunity for a

face-to-face conference at the Appeals office closest to the taxpayer’s residence or, if

the taxpayer is a corporation, at the Appeals office closest to its principal place of

business. Treas. Reg. §§ 301.6320-1(d)(2) Q&A-D7, 301.6330-1(d)(2) Q&A-D7. See

Parker v. Commissioner, T.C. Memo. 2004-226 (court remanded for new Appeals

hearing when CDP hearing was scheduled at Appeals office 180 miles from taxpayer’s

residence, and there was a closer Appeals office).

If a taxpayer fails to participate in an offered face-to-face or telephone conference,

Appeals’ determination can be made on the basis of Appeals’ review of the case file.

Maxton v. Commissioner, T.C. Memo. 2007-95. But cf. Cox v. United States, 345 F.

Supp. 2d 1218 (W.D. Okla. 2004) (hearing inadequate when taxpayer was not provided

with notice that the telephone conference with Appeals constituted the CDP

conference); Cavanaugh v. United States, 93 AFTR 2d 1522 (D.N.J. 2004) (court

remanded to Appeals for new face-to-face CDP conference when taxpayer had

requested a face-to-face conference and it was unclear whether taxpayer was advised

that the telephone conference received instead constituted the CDP conference).

D. When Face-to-Face Conference Is Not Offered

A face-to-face CDP conference concerning a taxpayer’s underlying liability will not be

granted if the request for a hearing or other taxpayer communication indicates that the

taxpayer wishes to raise only irrelevant or frivolous issues concerning that liability.

Treas. Reg. §§ 301.6320-1(d)(2) Q&A-D8, 301.6330-1(d)(2) Q&A-D8. See Williams v.

Commissioner, 718 F.3d 89 (2d Cir. 2013).

The TRHCA amended sections 6320(b)(1) and 6330(b)(1) to provide that a taxpayer

must provide reasons for the hearing request, and the Service may disregard any

portion of a hearing request that is based upon a position identified as frivolous by the

IRS in a published list or reflects a desire to delay or impede tax administration. I.R.C.

§ 6330(g). Accordingly, a taxpayer raising no issues or only frivolous issues may not

only be ineligible for a face-to-face conference but may be denied a CDP hearing.

A face-to-face CDP conference concerning a collection alternative, such as an

installment agreement or offer-in-compromise, will not be granted unless other

taxpayers would be eligible for the alternative under similar circumstances. Treas. Reg.

§§ 301.6320-1(d)(2) Q&A-D8, 301.6330-1(d)(2) Q&A-D8. For example, a taxpayer who

proposes an offer-in-compromise as the only issue to be addressed at the hearing, who

has failed to file all required returns and is, therefore, ineligible for an offer-in

compromise, will not be granted a face-to-face CDP conference. See Stockton v.

Commissioner, T.C. Memo. 2009-186 (denial of face-to-face CDP conference not an

abuse of discretion where petitioner made only a blanket request for collection

alternatives, did not explain why he qualified for a specific collection alternative, and had

not timely filed all required returns).

Appeals may, however, in its discretion, grant a face-to-face conference if it is

appropriate to explain the requirements to become eligible for a collection alternative.

The taxpayer will have the opportunity to demonstrate eligibility for a collection

alternative, or become eligible for a collection alternative, in order to obtain a face-to

face conference. Treas. Reg. §§ 301.6320-1(d)(2) Q&A-D8, 301.6330-1(d)(2) Q&A-D8.

If the taxpayer is not offered a face-to-face conference, the taxpayer will receive a

hearing by telephone, correspondence, or some combination thereof (except as noted

above, where the TRHCA amendments preclude the taxpayer from receiving any CDP

hearing).

When a taxpayer raising only frivolous issues contests being denied a face-to-face

conference, such denial is not an abuse of discretion because it would not be necessary

or productive to remand the case to an Appeals office for a new face-to-face hearing.

Williamson v. Commissioner, T.C. Memo. 2009-188; Stockton v. Commissioner, T.C.

Memo. 2009-186; Clough v. Commissioner, T.C. Memo. 2007-106. There is no abuse

of discretion in the refusal of a face-to-face hearing when a taxpayer refuses to present

nonfrivolous arguments, file past-due returns, and submit financial information. Toth v.

Commissioner, T.C. Memo. 2010-227.

The regulations further provide that, if a taxpayer would ordinarily be offered a face-to

face conference with Appeals, but all of the Appeals officers at the location where that

conference would normally be held have had prior involvement with respect to the

unpaid tax and tax period involved in the hearing, the taxpayer will be offered a face-to

face conference at another Appeals office. Treas. Reg. §§ 301.6320-1(d)(2) Q&A-D8,

301.6330-1(d)(2) Q&A-D8. The face-to-face meeting may be held at the normal

location if the taxpayer waives the requirement that the hearing be conducted by an

Appeals officer without prior involvement. Id.

E. Recording of CDP Hearings Under Section 7521(a)(1)

The Tax Court has held that if a taxpayer is offered a face-to-face conference and

requests to record the face-to-face CDP conference, in accordance with section

7521(a)(1), such recording must be allowed. Keene v. Commissioner, 121 T.C. 8

(2003). However, when a taxpayer is improperly denied the right to record, the court

need not remand to Appeals for a new recorded hearing if such a remand would be

unnecessary or unproductive. Carrillo v. Commissioner, T.C. Memo. 2005-290.

In Calafati v. Commissioner, 127 T.C. 219 (2006), the Tax Court held that the taxpayer

had no right to record a telephone CDP conference, as section 7521 only applied to “in

person interviews,” meaning face-to-face meetings between the interviewer and

interviewee.

F. Impartial Appeals Officer or Employee

Sections 6320(b)(3) and 6330(b)(3) require that the hearing be conducted by an officer

or employee in the Internal Revenue Service Office of Appeals who has had no prior

involvement with respect to the same unpaid tax. The statute does not specify that any

particular category or officer conduct the hearing; “an ‘appeals officer’ is any ‘officer or

employee’ in the IRS Office of Appeals to whom is assigned the task of conducting a

CDP hearing under section 6330(b)(3).” Tucker v. Commissioner, 135 T.C.114, 155

(2010), aff’d, 676 F.3d 1129 ( 2012), cert. denied, 133 S.Ct. 646 (2012). In Tucker, the

D.C. Circuit affirmed the Tax Court’s holding that such officers or employees are not

inferior officers for purposes of the Appointments clause of the United States

Constitution, and so are properly hired by the Commissioner of the Internal Revenue

pursuant to section 7804(a). The D.C. Circuit held that Appeals employees are not

inferior officers because they do not exercise sufficient authority over liability and

collection matters; their discretion is constrained by the IRM and other guidelines, by

requirements that they consult with counsel, and by supervision.

Prior involvement includes participation or involvement in a matter (other than a prior

CDP hearing) that the taxpayer may have with respect to the tax and tax period shown

on the CDP notice. Prior involvement exists only when the taxpayer, the tax and the tax

period at issue in the CDP hearing also were at issue in the prior non-CDP matter, and

the Appeals officer or employee actually participated in the prior matter. Treas. Reg.

§§ 301.6320-1(d)(2) Q&A-D4, 301.6330-1(d)(2) Q&A-D4. Thus, where separate CDP

hearings were conducted for the lien and levy for the same tax period, prior involvement

does not include the prior CDP hearing.

Prior involvement includes participation in examination and collection activities (other

than CDP Appeals hearings) with respect to the same taxpayer, type of tax, and tax

period. For example, an Appeals officer has prior involvement under sections

6320(b)(3) and 6330(b)(3) if he served as a mediator during the examination of the

same tax liability or was the revenue officer assigned to collect the same tax liability

subject to the CDP hearing. See also Baber v. Commissioner, T.C. Memo. 2009-30

(settlement officer had prior involvement due to activities relating to his work as an offerin-compromise specialist). The court has also held that prohibited prior involvement

occurs where the appeals officer considered taxpayer’s appeal from a rejection of an

OIC. Moosally v. Commissioner, 142 T.C. No. 10 (2014). In Moosally, the taxpayer

requested a CDP hearing while the OIC appeal was still pending. The court held that

Appeals could not assign the CDP hearing to the appeals officer handling the pre-CDP

appeal, even though the reason for the assignment was so the pre-CDP appeal and the

CDP hearing could be combined.

In Cox v. Commissioner, 514 F.3d 1119 (10th Cir. 2008), rev’g 126 T.C. 237 (2006),

nonacq., AOD 2009-01, 2009-22 I.R.B. 1, the Tenth Circuit held that prior involvement

includes conducting a CDP hearing involving an earlier tax period where the existence

of the tax liability for the later years was a material factor in the decision involving the

earlier year. Thus, where an officer conducted a CDP hearing for the 2000 income tax

liability, and considered the taxpayer’s noncompliance for 2001 and 2002 incomes taxes

at that hearing, he was precluded from conducting a subsequent CDP hearing for 2001

and 2002. The court reversed the opinion of the Tax Court that merely reviewing the

compliance history of the 2001 and 2002 years in a CDP proceeding involving 2000 is

not disqualifying prior involvement. In AOD 2009-01, the IRS announced that it does

not acquiesce in this decision and will not follow it outside the Tenth Circuit.

In MRCA Information Services, Inc. v. United States, 145 F. Supp. 2d 194 (D. Conn.

2000), the court held that an Appeals officer who was assigned to hear a CDP case

involving a corporation’s employment tax liability was not impartial because he had

presided at a hearing involving the section 6672 penalty assessed against the sole

shareholder of that corporation for the same tax periods. To the contrary, example 4 in

Treas. Reg. §§ 301.6320-1(d)(3) and 301.6330-1(d)(3) indicates that this situation

would not constitute prior involvement because the employment tax and the section

6672 assessments involve different taxes.

In Harrell v. Commissioner, T.C. Memo. 2003-271, the Tax Court held that an Appeals

officer is not rendered impartial for purposes of section 6330(b)(3) just because another

employee in the same Appeals office was involved with the same taxpayer, type of tax,

and tax years at issue in CDP.

There is no prohibition on the same Appeals personnel who worked on the original CDP

hearing working on the supplemental hearing on remand. Medical Practice Solutions,

LLC v. Commissioner, T.C. Memo. 2010-98. The hearing on remand is treated as a

continuation of the original hearing.

G. Prohibition of Ex Parte Communications

RRA 1998, section 1001(a) directed the Service to develop a plan to prohibit ex parte

communications between Appeals employees and other employees of the Service. To

ensure an independent Appeals function, ex parte communications between Appeals

employees and other IRS employees are prohibited to the extent that such

communications appear to compromise the independence of the Appeals officers. In

accordance with this directive, the Service has issued Revenue Procedure 2012-18,

2012-10 I.R.B. 455. This revenue procedure is effective for communications between

Appeals employees and other IRS employees, including Counsel, that take place after

May 15, 2012. Rev. Proc. 2012-18 replaces Rev. Proc. 2000-43, which was issued in

October 2000. The term “ex parte communications” is defined in Rev. Proc. 2012-18 as

any communication that takes place between any Appeals employee and employees of

other IRS functions, without the taxpayer/representative being given an opportunity to

participate in the communication. Section 2.02(1). Not all communications between

Appeals employees and other personnel are prohibited; for example, communications

regarding ministerial, administrative or procedural matters are permissible. Section

2.02(5).

Specific instructions are provided in Section 2.02(10) on CDP cases. Communications

to verify compliance with legal and administrative procedures, and to verify

assets/liabilities involving collection alternatives, fall within the ministerial, administrative

or procedural matters exception. Section 2.02(10)(b). When a CDP case is remanded

by the Tax Court, the counsel attorney should prepare a remand memo to Appeals

explaining the reasons for the remand and any special requirements in the order, but

the memorandum should not discuss the credibility of the taxpayer or the accuracy of

facts presented by the taxpayer. A copy of this memorandum is provided to the

taxpayer/representative. Section 2.02(10)(c)(i)(A). The counsel attorney handling the

Tax Court case may provide legal advice to Appeals on remand, and such attorney

should review the supplemental notice of determination before it is issued to the

taxpayer for the limited purpose of ensuring compliance with the court’s order. Section

2.02(10)(c)(ii), (iii). See also Chief Counsel Notice CC-2012-10, Update of Rules

Governing Ex Parte Communications Between Chief Counsel Attorneys and Employees

of Appeals.

Applying guidelines issued under the now superseded revenue procedure on remands,

Rev. Proc. 2000-43, 2000-43 I.R.B. 404, the court in Hoyle v. Commissioner, 136 T.C.

463 (2011), held that communications between the Chief Counsel attorney and the

settlement officer concerning a remanded CDP case were permissible communications

because they were solely procedural, ministerial, or administrative in nature. The court

also held that it was permissible for counsel to provide legal advice to the settlement

officer on remand, and it was also permissible for counsel to locate a certified mailing

list and provide it to the settlement officer for inclusion in the administrative record on

remand. See also Planes v. United States, 98 A.F.T.R. 2d 2006-7044 (M.D. Fla. 2006)

(settlement officer’s communications with IRS counsel about the scope of his authority

to reinstate an offer-in-compromise were not prohibited ex parte communications).

In Hinerfeld v. Commissioner, 139 T.C. 277 (2012), the Tax Court held that IRS

counsel’s recommendation that an OIC be rejected was not a prohibited ex parte

communication because the communication was in accordance with the mandate of

I.R.C. § 7122(b) requiring counsel review. See also Isley v. Commisiioner, 141 T. C.

No. 11 (2013) (communications between IRS counsel and collection employees relating

to counsel’s review of OIC not prohibited ex parte communication because prohibition

only extends to discussions between appeals and other Service functions).

Obtaining IRS transcripts from IRS employees to aid in verification is a permissible

communication. Medical Practice Solutions, L.L.C. v. Commissioner, T.C. Memo. 2010

98.

In Drake v. Commissioner, 125 T.C. 201 (2005), the Tax Court ordered a remand to

Appeals for a new CDP hearing when an ex parte communication occurred between an

Appeals employee and an IRS bankruptcy advisor that was not shared with the

taxpayer, in violation of Rev. Proc. 2000-43. The subject communication was a

memorandum from the bankruptcy advisor that questioned the credibility and motives of

the taxpayer’s counsel in a prior bankruptcy proceeding. Cf. Hotchkiss v.

Commissioner, T.C. Memo. 2010-32 (communications between Appeals officer and

special agent not prohibited where they did not address the substance of the issues in

the case but were merely administrative and procedural).

In Moore v. Commissioner, T.C. Memo. 2006-171, nonacq., AOD 2007-02, the Tax

Court held that improper ex parte communications among an Appeals officer, offer

specialist, and revenue officers previously involved in collection of the tax at issue could

not be remedied by sharing the contents of the communications with the taxpayer and

allowing the taxpayer an opportunity to respond. The court ordered a remand to

Appeals for the purpose of identifying an appropriate remedy to avoid prejudicing the

taxpayer as a result of the ex parte communications. The court further ordered that, if

the appropriate remedy was a new CDP hearing before a new Appeals officer, all

references to the prohibited ex parte communications and any copy of the opinion

should be deleted from the administrative file.

As explained in AOD 2007-02, the IRS disagrees that the violations in Moore warranted

a remand to Appeals and the deletions from the administrative record. According to the

AOD, the court should have invoked the harmless error rule and found that the Appeals

officer did not abuse her discretion. Even though the information was received through

prohibited ex parte communications, the Appeals officer cured the violations of the ex

parte communications by disclosing the information to the taxpayer and giving the

taxpayer adequate opportunity to respond during the hearing. The violation of the ex

parte communications rules, therefore, constituted harmless error and a remand to

Appeals was unnecessary.

In Industrial Investors v. Commissioner, T.C. Memo. 2007-93, the court held that a

cover memo from a revenue officer with the file submitted to Appeals putting the

revenue officer’s “spin” on the case and advocating a decision adverse to the taxpayer

was a prohibited ex parte communication.

Chapter Five – Issues Considered at the CDP Hearing

A. Section 6330(c)(1) Verification

Sections 6320(c) and 6330(c)(1) require the Appeals officer to obtain verification from

the Secretary that the requirements of any applicable law or administrative procedure

have been met. Verification can be obtained at any time prior to the issuance of the

determination by Appeals. Treas. Reg. §§ 301.6320-1(e)(1), 301.6330-1(e)(1). The

requirements the Appeals officer are verifying are those things that the Code, Treasury

Regulations, and the IRM require the Service to do before collection can take place.

Conway v. Commissioner, 137 T.C. 209 (2011) (verifying issuance of notice and

demand); McCall v. Commissioner, T.C. Memo. 2009-75 (where “quick” assessments

were mislabeled on the transcripts as jeopardy assessments, no abuse of discretion

because all procedures were followed to make quick assessments). The basic

requirements that must be verified are the IRS’s proper assessment of the liability, the

taxpayer’s failure to pay after notice and demand, and the IRS’s giving of a CDP notice.

Dinino v. Commissioner, T.C. Memo. 2009-284. The Notice of Determination must

expressly state that Appeals verified the timeliness of assessments and other matters,

specify what transcripts and transcript information Appeals relied upon, and include

those transcripts in the administrative record. Medical Practice Solutions, LLC v.

Commissioner, T.C. Memo. 2009-214 (remand where copies of transcripts not in the

record).

If a tax can be assessed without the issuance of a notice of deficiency, Appeals must

verify that a valid assessment was made, that notice and demand was issued, that the

liability was not paid, and (in the case of a CDP levy hearing) that a CDP levy notice

was properly issued to the taxpayer. Ron Lykins, Inc. v. Commissioner, 133 T.C. 87

(2009). Where assessment of the tax requires issuance of a notice of deficiency,

Appeals must also obtain verification that either valid notices of deficiency were sent to

the taxpayer at his or her last known address, or that an appropriate waiver was signed.

Hoyle v. Commissioner, 131 T.C. 197 (2008) (verifying that the assessment was

preceded by a properly mailed notice of deficiency); Marlow v. Commissioner, T.C.

Memo. 2010-113 (verifying that consent to assessment was signed by taxpayers);

Ulrich v. Commissioner, 585 F.3d 1235 (9th Cir. 2009) (taxpayers signed consent to

assessment and so waived their right to notices of deficiency). Appeals must similarly

verify that the required preassessment notice (letter 1153) was properly sent to the

taxpayer prior to assessment of the section 6672 trust fund recovery penalty. Mason v.

Commissioner, 132 T.C. 301 (2009).

If a penalty is subject to the preassessment written management approval provision of

section 6751(b)(1), appeals should address that as part of verification. See generally

Chief Counsel Notice CC-2011-004, Written Management Approval Required to Assess

the Section 6702 Penalty for Frivolous Tax Submissions (November 1, 2010)

(concluding that section 6702 penalties for frivolous tax submissions are subject to

managerial approval requirement) and Chief Counsel Notice CC-2014-004, Written

Supervisory Approval Not Required to Assess Certain Section 6702 Penalties (May 20,

2014).

Appeals’ verification duty arises regardless of whether the taxpayer raises any issues at

the hearing. Hoyle, 131 T.C. at 202-203.

In Conway v. Commissioner, 137 T.C. 209 (2011), the court, relying on Treas. Reg. §

301.6303-1(a), which provides that failure to provide notice and demand within 60 days

does not invalidate the notice, held the CDP levy notice sent to the taxpayer Nakano

was a valid notice and demand under section 6303. However, the court held that the

CDP lien notice sent to taxpayer Conway was not a valid notice and demand under

section 6303, in part because the same notice cannot serve as both a section 6303

notice and demand and a post-lien notice under section 6320(a)(1). See also Harris v.

Commissioner, T.C. Memo. 2012-275 (notice and demand requirement is satisfied by

receipt of notices of balance due and the final levy notice).

1. Computer transcripts

Section 6330(c)(1) does not require the Appeals officer to rely on any particular

document for verification. Craig v. Commissioner, 119 T.C. 252, 261-262 (2002); Best

v. Commissioner, T.C. Memo. 2014-12. Verification of many procedures and legal

requirements can be obtained by the Appeals officer from the Service through its

computer records and paper administrative files.

The Form 4340 is a computer-generated list of assessments, payments, and other

activity on a taxpayer’s account that appears in the official records of the IRS. Oropeza

v. Commissioner, T.C. Memo. 2009-244. A presumption of official regularity attaches to

the Forms 4340 because they are official, certified records of account activity. It is not

an abuse of discretion for an Appeals officer to rely on a Form 4340 to verify that legal

and administrative requirements have been satisfied. Craig v. Commissioner, 119 T.C.

252, 261-263 (2002); Battle v. Commissioner, T.C. Memo. 2009-171 (verifying notice

and demand). “Form 4340 ‘is generally regarded as being sufficient proof, in the

absence of evidence to the contrary, of the adequacy and propriety of notices and

assessments that have been made.’” Orum v. Commissioner, 123 T.C. 1, 9 (2004)

(quoting Gentry v. United States, 962 F.2d 555, 557 (6th Cir. 1992)). An Appeals officer

may rely on a Form 4340 to verify the validity of an assessment, and to verify the

taxpayer’s outstanding liability, unless the taxpayer can identify an irregularity in the

assessment procedure or other irregularity. McLaine v. Commissioner, 138 T.C. 10

(2012); Roberts v. Commissioner, 118 T.C. 365 (2002). See generally R.H. Stearns Co.

v. United States, 291 U.S. 54, 63 (1934) (official acts are entitled to a presumption of

regularity that all required prerequisites have been complied with and official duties

have been properly discharged); United States v. Chemical Found., Inc., 272 U.S. 1, 14

15 (1926) (presumption is that public officials discharged their official duties properly,

absent clear evidence to the contrary). But “if the taxpayer alleges that he did not

receive a notice of deficiency and/or denies that he waived the restrictions on

assessment, the Appeals officer will be required to do more than consult the

computerized records; he must ‘examine underlying documents.’” Marlow v.

Commissioner, T.C. Memo. 2010-113, slip. op. at 21 (citing Hoyle v. Commissioner, 131

T.C. 197, 205 n.7 (2008); Meyer v. Commissioner, T.C. Memo. 2013-268 (where

taxpayer alleges no notice of deficiency was mailed, he has identified an irregularity,

thereby requiring Appeals to do more than consult computerized records).

If the taxpayer asks Appeals for a copy of the record of assessment pursuant to section

6303, Appeals meets its obligation by giving the taxpayer a Form 4340 that reports the

information described in Treas. Reg. § 301.6203-1. Best v. Commissioner, T.C. Memo.

2014-12.

Similarly, it is not an abuse of discretion for an Appeals officer to rely on computer

transcripts other than the Form 4340 for verification, unless the taxpayer can identify an

irregularity in the assessment or other procedures. Clayton v. Commissioner, T.C.

Memo. 2009-114; Cipolla v. Commissioner, T.C. Memo. 2004-6. The Appeals officer

may rely on computer transcripts to verify the validity of an assessment as long as the

transcript relied upon contains the information required in Treas. Reg. § 301.6203-1.

Meeh v. Commissioner, T.C. Memo. 2008-282; Williams v. Commissioner, T.C. Memo.

2005-94. An Appeals officer may rely on a computer transcript to verify that a notice

and demand for payment has been sent to the taxpayer in accordance with section

6303. Kun v. Commissioner, T.C. Memo. 2004-273.

2. Verifying the proper issuance of notices of deficiency

a. Generally

Sections 6320(c) and 6330(c)(1) require that the Appeals officer determine whether the

assessment was properly made. If the tax liability was incorrectly assessed under the

math error procedures, the resulting tax assessment is invalid and must be abated. See

I.R.C. § 6213(b)(1). Similarly, if the statutory notice of deficiency was not sent to the

taxpayer’s last known address, the resulting assessment may be invalid. See Hoyle v.

Commissioner, 131 T.C. 197 (2008) (remanding to Appeals to clarify the record as to

what it relied upon in determining that the notice of deficiency was properly sent);

Blocker v. Commissioner, T.C. Memo. 2005-279 (assessment following return of

undelivered notice of deficiency valid because sent to last known address). Verification

requires independent confirmation of the validity of assessments, including determining

whether the notice of deficiency was properly issued, even if the taxpayer does not raise

the validity of the assessment as an issue. Hoyle, 131 T.C. at 202-203.

b. Proving notice of deficiency was issued

When the existence of a notice of deficiency is not in dispute, an Appeals officer may

rely on a properly completed certified mailing list (Form 3877) to verify proper mailing.

Meyer v. Commissioner, T.C. Memo. 2013-268. However if the form was not properly

completed or there are other “red flags”, it is not an abuse of discretion for Appeals to

find that the notice was properly issued if the administrative record shows that Appeals

relied on other evidence, or explains the defects. Id. (remand where Appeals failed to

inquire into and explain irregularities on the Form 3877, including whether the

rectangular “IRS Ogden” stamp is an official USPS postmark).

When the Service shows that a notice of deficiency exists and produces a properly

completed certified mailing list or its equivalent, it is entitled to a presumption of mailing.

Crain v. Commissioner, T.C. Memo. 2012-97. This shifts the burden of going forward to

the taxpayer and if the taxpayer fails to meet the burden, then the Service has

successfully shown mailing. O’Rourke v. United States, 587 F.3d 537 (2d Cir. 2009). A

postmarked certified mailing list that is missing some required information does not

create a presumption of mailing. However, if the missing information is minor and there

is evidence that the notice of deficiency existed, this imperfect certified mailing list may

provide sufficient evidence of mailing. O’Rourke, supra (distinguishing the Third

Circuit’s opinion in Pietanza v. Commissioner, 92 T.C. 729 (1989), aff’d without

published opinion, 935 F.2d 1282 (3d Cir. 1991), because in Pietanza the Service failed

to establish that a valid final notice of deficiency was ever prepared). When, however, a

Form 3877 contains defects that are serious on their face, the “IRS would be well

advised to submit additional evidence of mailing” such as habit testimony, supporting

documents, or certified mail receipts. O’Rourke, 587 F.3d at 542. See, e.g., White v.

Commissioner, T.C. Summ. Op. 2012-53 (where Form 3877 is incomplete, Service

attempts to introduce printouts from United States Postal Service’s (USPS) “Track and

Confirm” system; the printouts are inadmissible because Service failed to provide notice

before trial that it intended to seek admission of the printouts as self-authenticating

documents pursuant to rule 902(11) of the Federal Rules of Evidence).

In Butti v. Commissioner, T.C. Memo. 2008-82 (Butti I), the court held that collection

could not proceed because respondent failed to prove that a notice of deficiency was

issued to the taxpayer prior to the assessment. Even though respondent introduced a

certified mailing list showing that the notice of deficiency was properly mailed, a copy of

the notice of deficiency was missing and so could not be introduced into evidence. The

court held, in reliance on Pietenza v. Commissioner, 92 T.C. 729 (1989), aff’d without

published opinion, 935 F.2d 1282 (3d Cir. 1991), that where a taxpayer challenges the

existence of the notice of deficiency, the certified mailing list will not by itself establish

the existence of the notice of deficiency. See AOD 1992-05 (nonacquiescence in Tax

Court’s holding in Pietenza, stating that a presumption of regularity should be given to a

certified mailing list despite the absence of a copy of the notice of deficiency). See also

Clayton v. Commissioner, T.C. Memo. 2009-114 (distinguishing Butti I on the grounds

that the taxpayer was given multiple opportunities to challenge the existence of the

notice of deficiency and failed to take advantage of them). Cf. Butti v. Commissioner,

T.C. Memo. 2009-198 (Butti II) (distinguishing Butti I and sustaining collection for

subsequent tax years where a copy of the notice of deficiency was introduced); Casey

v. Commissioner, T.C. Memo. 2009-131 (distinguishing Butti I where the Appeals officer

documented in her case notes that she examined the notice of deficiency, which was

later lost).

In Rivas v. Commissioner, T.C. Memo. 2012-20, the court held that the Service

established a presumption of mailing in the absence of a certified mailing list, by

introducing copies of the notices of deficiency and the returned envelopes containing

the notices, and testimony from a USPS employee about USPS procedures for certified

mail and explaining the stamps and marks on the envelopes.

Where the notice of deficiency is missing, the certified mailing list with other

corroborating evidence may prove that the notice was properly issued. See United

States v. Ahrens, 530 F.2d 781 (8th Cir. 1976) (relying on the presumption of official

regularity, applicable to the official acts of public officers; “in the absence of clear

evidence to the contrary, courts presume that they have properly discharged their

official duties”); United States v. Zolla, 724 F.2d 808 (9th Cir. 1984); Follum v.

Commissioner, 128 F.3d 118, 121 (2d Cir. 1997). See also Haag v. United States, 485

F.3d 1 (1st Cir. 2007) (finding that CDP notice was sent based on computer records and

a copy of taxpayer’s signed certified mail receipt). The Eleventh Circuit has applied the

presumption of official regularity to the Service’s mailing of a notice of deficiency, even

where the government could not produce any record of the mailing. United States v.

Dixon, 672 F. Supp. 503 (M.D. Ala. 1987), aff’d, 849 F. 2d 1478 (11th Cir. 1988). See

also United States v. Chila, 871 F.2d 1015, 1018 (11th Cir. 1989) (recognizing Dixon as

binding precedent). But see Bonaventura v. United States, 428 Fed. Appx. 916 (11th

Cir. 2011) (where records are missing, affirming district court’s finding that Form 1153

was not sent).

If the existence of the deficiency notice itself is not disputed, and absent evidence to the

contrary, the Form 3877 or certified mail list by itself is sufficient to establish that the

deficiency notice was properly mailed to the taxpayer. See Coleman v. Commissioner,

94 T.C. 82, 90-91 (1990); Figler v. Commissioner, T.C. Memo. 2005-230; Virgin v.

Commissioner, T.C. Memo. 1991-63 (certified mail list performs same function as USPS

Form 3877). A properly prepared USPS Form 3877 or the equivalent IRS certified mail

list bearing a USPS date stamp or the initials of a postal employee is proof of

compliance with the Service’s established procedures for mailing deficiency notices and

constitutes direct documentary evidence of the date and fact of mailing. Barnes v.

Commissioner, T.C. Memo. 2010-30.

In Magazine v. Commissioner, 89 T.C. 321, 324-26 (1987), nonacq., 1988-1 C.B. 1, the

Tax Court held that respondent could not prove mailing a notice of deficiency based

solely on evidence of respondent’s mailing customs and practices. The court concluded

that while “habit evidence” was admissible, respondent also had to present direct

testimony or documentary evidence of mailing to show that the notice was in fact

mailed. Id. at 326. It further noted that Form 3877 is often the only direct evidence of

the mailing of a notice of deficiency. Id. at 327, n.8. See also Webb v. Commissioner,

T.C. Memo. 1996-449 (production of certified mailing list with some corroborating

evidence, such as testimony from Service employee on procedures surrounding

preparation and mailing of the notices of deficiency was sufficient to prove existence of

notice of deficiency). Cf. Marlow v. Commissioner, T.C. Memo. 2010-113 (where the

Forms 4549 consents to assessment are lost, respondent may use secondary evidence

such as computer records and testimony of IRS employees to prove the contents of the

forms).

The Service’s failure to strictly comply with its mailing procedures is not fatal if the

record contains evidence otherwise sufficient to prove proper mailing of the deficiency

notice. See, e.g., Massie v. Commissioner, T.C. Memo. 1995-173 (postal clerk did not

initial certified mail list but respondent submitted credible evidence in the form of a

manager’s testimony regarding respondent’s mailing procedures); Bobbs v.

Commissioner, T.C. Memo. 2005-272 (USPS clerk did not initial certified mail list but

address reflected on the list was taxpayer’s undisputed last known address and

taxpayer did not argue respondent failed to follow his established mailing procedures).

The same evidence that establishes that the Commissioner mailed a notice of

deficiency to a taxpayer’s last known address is sufficient to establish that the

Commissioner properly sent a notice of a proposed TFRP assessment under section

6672(b)(1). Orian v. Commissioner, T.C. Memo. 2010-234.

B. Relevant Issues Under Section 6330(c)(2)(A)

Sections 6320(c) and 6330(c)(2)(A) provide that the taxpayer may raise during the

hearing any relevant issue relating to the unpaid tax. Taxpayers will be expected to

provide any relevant information requested by Appeals, such as financial statements,

for its consideration of the facts and issues involved in the hearing. Treas. Reg. §§

301.6320-1(e)(1), 301.6330-1(e)(1). Relevant issues include the following:

1. Appropriate spousal defenses

A taxpayer may raise any appropriate spousal defense during a CDP hearing. I.R.C.

§ 6330(c)(2)(A)(i). A taxpayer is precluded from requesting relief under sections 66 and

6015 if the Commissioner has already made a final determination as to spousal

defenses in a statutory notice of deficiency or final determination letter. Treas. Reg.

§§ 301.6320-1(e)(2), 301.6330-1(e)(2); Treas. Reg. §§ 301.6320-1(e)(3) Q&A-E4,

301.6330-1(e)(3) Q&A-E4. If the taxpayer had raised a spousal defense under section

66 or 6015 and meaningfully participated in a prior administrative or judicial proceeding

that has become final, section 6330(c)(4) prevents the taxpayer from raising the

defense in a subsequent CDP hearing or judicial review proceeding. Treas. Reg.

§§ 301.6320-1(e)(3) Q&A-E5, 301.6330-1(e)(3) Q&A-E5. Further, section 6015(g)(2)

bars a taxpayer who meaningfully participated in a judicial proceeding from raising relief

under section 6015 for any tax year for which the court has rendered a final decision on

the taxpayer’s tax liability if section 6015 relief was available at the time of the decision.

The taxpayer also may not raise any factual issues decided by the court that are

relevant to relief under section 6015. Treas. Reg. § 1.6015-1(e).

2. Challenges to appropriateness of collection action

Pursuant to section 6330(c)(2)(A)(ii), a taxpayer may challenge whether the collection

action is appropriate.

a. Collection action not appropriate if levy causes economic hardship

In Vinatieri v. Commissioner, 133 T.C. 392 (2009), the Tax Court ruled that upholding a

proposed levy that would prevent the taxpayer from meeting her living expenses was an

abuse of discretion. The court reasoned that proceeding with the proposed levy would

have been unreasonable because section 6343(a)(1)(D) would have required its

immediate release given that the Appeals officer determined that the levy would cause

an economic hardship due to the financial condition of the taxpayer. As stated in Chief

Counsel Notice CC-2011-005, Considering Economic Hardship in Determining the

Appropriateness of a Levy, Chief Counsel’s position is that the Tax Court correctly held

that Appeals abused its discretion, since if a levy will create an economic hardship

under section 6343(a)(1)(D), it is not appropriate to levy. See also Lantz v.

Commissioner, 607 F.3d 479 (7th Cir. 2010) (in dicta, court states that where levy would

cause taxpayer to be unable to pay his or her reasonable basic living expenses, taxes

must be declared as currently not collectible and levy should not proceed); Antico v.

Commissioner, T.C. Memo. 2013-35 (remand because Appeals failed to consider

economic hardship). See also Waldeigh v. Commissioner, 134 T.C. 280 (2010)

(remand to clarify record as to whether levy on retirement income would cause

economic hardship) But cf. Kyereme v. Commissioner, T.C. Memo. 2012-174 (no

abuse of discretion in sustaining filing of NFTL notwithstanding taxpayer’s currently not

collectible status and claim that the NFTL would force him to rely on public assistance).

b. Taxes discharged in bankruptcy

If a taxpayer has received a bankruptcy discharge and that taxpayer’s tax liabilities are

dischargeable, the taxpayer is no longer personally liable for the taxes and the Service

is enjoined from collecting the liability from the taxpayer personally. See 11 U.S.C. §

524(a); see also In re Rivera Torres, 309 B.R. 643, 647 (1st Cir. B.A.P. 2004). If,

however, the Service filed a NFTL before the bankruptcy petition date, the lien

continues to attach to prepetition property of the taxpayer that was exempt or

abandoned from the estate once the bankruptcy is discharged. 11 U.S.C. §

522(c)(2)(B); Waldeigh v. Commissioner, 134 T.C. 280 (2010). A lien remains attached

to property excluded from the estate, such as an ERISA-qualified pension plan, even if

a NFTL was not filed before the petition date. United States v. Rogers, 558 F. Supp. 2d

774 (N.D. Ohio 2008).

c. Criminal restitution cases

An award of criminal restitution does not bar the Service from assessing and collecting

a civil tax liability from the taxpayer. Gillum v. Commissioner, T.C. Memo. 2010-280,

aff’d, 676 F.3d 633 (8th Cir. 2012).

In Creel v. Commissioner, 419 F.3d 1135 (11th Cir. 2005), the Eleventh Circuit affirmed

the Tax Court’s unpublished Order and Decision holding that it was inappropriate to

proceed with collection because the tax liability was satisfied by criminal restitution

payments. The Eleventh Circuit recognized the general rule that the government can

seek restitution through criminal proceedings and pursue recovery of excess civil tax

liability in subsequent civil proceedings. The court, nevertheless, found based on the

unique facts of this case that the restitution payments satisfied the civil tax liability. In

Chief Counsel Notice CC-2007-008, Litigating Cases Involving Criminal Restitution

(February 27, 2007), the Office of Chief Counsel concluded that Creel was wrongly

decided. See also Chief Counsel Notice CC-2013-012, Deficiency and Litigation Issues

Concerning Tax Periods For Which Criminal Restitution Has Been Ordered (July 31,

2013) (addressing the issues that arise when litigating Tax Court cases that include tax

periods covered by a restitution order) and Chief Counsel Notice CC-2011-018, The

Assessment and Collection of Criminal Restitution (August 26, 2011) (addressing the

Service’s authority to assess criminal restitution for failure to pay any tax under section

6201(a)(4)).

3. Collection alternatives generally

The taxpayer is allowed to raise collection alternatives as part of the CDP hearing.

I.R.C. § 6330(c)(2)(A)(iii). Section 6330(c)(2)(A)(iii) and Treas. Reg. §§ 301.6320

1(e)(3) Q&A-E6 and 301.6330-1(e)(3) Q&A-E6 list the following as examples of

collection alternatives:



posting of a bond;

substitution of other assets;

an installment agreement;

an offer-in-compromise; and

withholding collection action to facilitate future payment.

In addition, Treas. Reg. § 301.6320-1(e)(3) Q&A-E6 provides that collection

alternatives in lien cases include a proposal to withdraw the NFTL to facilitate the

collection of the tax liability, subordination of the NFTL, and discharge of specific

property from the NFTL. See Alessio Azzari, Inc. v. Commissioner, 136 T.C. 178 (2011)

(Appeals erred in concluding that NFTL could not be subordinated). See also Sullivan

v. Commissioner, T.C. Memo. 2012-337, n. 8 (treating Currently Not Collectible Status

as a collection alternative). Acceptance of an installment agreement does not

necessarily preclude the filing of a NFTL. Karakaedos v. Commissioner, T.C. Memo.

2012-53.

The two most common statutorily authorized collection alternatives at issue in CDP

cases are OICs pursuant to section 7122, and installment agreements authorized

pursuant to 6159. The most common type of OIC is one based on doubt as to

collectability premised on the taxpayer’s inability to pay the tax liability in full. The most

common type of IA is one that fully pays the tax in installments over an agreed period of

time. Prior to 2004, an installment agreement had to provide for full payment of the tax

liability, including interest and penalties. In 2004, Congress amended section 6159 to

authorize the IRS to enter installment agreements that do not provide for full payment;

such agreements are referred to as partial payment installments. Watchman v.

Commissioner, T.C. Memo. 2012-113 (rejecting taxpayers’ argument that their full

payment installment agreement waived interest and penalties).

In determining whether to accept an offer-in-compromise or installment agreement,

Appeals must determine the taxpayer’s reasonable collection potential (RCP), which will

establish the taxpayer’s ability to pay the tax either in full at the present in time, or in

installments over a period of time. The Service will not accept a compromise that is less

than the RCP, absent a showing of special circumstances. Johnson v. Commissioner,

136 T.C. 475, 486 (2011), aff’d, 502 Fed. Appx. 1 (D.C. Cir. 2013). The Service may

reject an offer-in-compromise because the taxpayer’s ability to pay is greater than the

amount he proposes to pay under the compromise proposal. Id. When Appeals

determines that a taxpayer has dissipated assets in disregard of the taxpayer’s

outstanding tax liability, the dissipated assets may be included in the minimum amount

that is to be paid under an acceptable offer-in-compromise. Id. Where a taxpayer’s

offer was substantially lower than the RCP, appeals did not abuse its discretion in failing

to give the taxpayer an opportunity to amend the offer prior to rejection. Brombach v.

Commissioner, T.C. Memo. 2012-265 (also holding that taxpayer failed to show special

circumstances).

The Service relies on standardized guidelines to determine a taxpayer’s RCP in order to

evaluate collection alternatives. Section 7122(d)(2) requires the Service “to develop

and publish schedules of national and local allowances designed to provide that

taxpayers entering into a compromise have an adequate means to provide for basic

living expenses.” See also Treas. Reg. § 301.7122-1(c)(2)(i). National standards are

used to determine a taxpayer’s food, clothing, health care, personal care, and

miscellaneous expenses. Local standards are used to determine a taxpayer’s housing,

utilities, and transportation expenses. See IRM 5.15.1.8 and 5.15.1.9. The Tax Court

has sustained the Commissioner’s use of the IRS’s national and local allowances as

guidelines for basic living expenses in evaluating the adequacy of proposed installment

agreements and offer-in-compromises. Beeler v. Commissioner, T.C. Memo. 2009-266.

See Bromback v. Commissioner, T.C. Memo. 2012-265 (appeals does not abuse its

discretion by using local housing allowances lower than a taxpayer's actual housing

expenses if the taxpayer has not shown that he will be harmed by having to live on the

lesser amount); Aldridge v. Commissioner, T.C. Memo. 2009-276 (taxpayer has the

burden of providing information to Appeals to justify a departure from the local

standards); Gregg v. Commissioner, T.C. Memo. 2009-19 (“Petitioner did not provide

evidence demonstrating that she would not have adequate means to provide for her

basic living expenses if the national standards were used. And where a taxpayer does

not present this evidence, we have held that use of the national standards is not an

abuse of discretion by the Commissioner.”); Fernandez v. Commissioner, T.C. Memo.

2008-210 (no abuse of discretion where the Appeals officer used the standard

allowance instead of the taxpayer's actual housing and utilities expense). Where

Appeals has followed the Commissioner's guidelines to ascertain a taxpayer's RCP and

rejected the taxpayer's collection alternative on that basis, the Tax Court has found no

abuse of discretion. McClanahan v. Commissioner, T.C. Memo. 2008-161. The Tax

Court does not independently review whether an offer-in-compromise or other collection

alternative is acceptable. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d,

469 F.3d 27 (1st Cir. 2006). The Tax Court’s review is limited to whether the Appeals

officer’s rejection of the offer was arbitrary, capricious, or without sound basis in fact or

law. Id.

In rejecting a proposed collection alternative, Appeals must consider all relevant

evidence provided by the taxpayer, give the taxpayer reasonable time to submit

requested documentation, follow statutory and regulatory requirements, and explain in

detail in the notice of determination why collection alternatives offered by the taxpayer

were rejected. See, e.g., Lites v. Commissioner, T.C. Memo. 2005-206 (abuse of

discretion when Appeals officer, in rejecting installment agreement, found without

explanation taxpayers’ disposable income to be higher than the financial information

submitted by the taxpayers). See also Samuel v. Commissioner, T.C. Memo. 2007-312

(Appeals erred in not giving taxpayer opportunity to revise offer-in-compromise);

Fairlamb v. Commissioner, T.C. Memo. 2010-22 (remand because Appeals’ rationale

for rejecting the offer is unclear).

Acceptance of collection alternatives is generally within the discretion of the Service and

Appeals acts within its discretion when it follows guidelines in the Treasury Regulations

and IRM in evaluating the collection alternative. For example, IRM guidelines provide

that an offer-in-compromise will be returned as not processable if all tax returns for

which the taxpayer has a filing requirement are not filed within the time required by the

Service. It is accordingly not an abuse of discretion for Appeals to determine that the

taxpayer is ineligible for an offer if the taxpayer has not filed all required tax returns or is

otherwise not in compliance with the tax laws. Balsamo v. Commissioner, T.C. Memo.

2012-109; Huntress v. Commissioner, T.C. Memo. 2009-161; Treas. Reg. §§ 6320

1(d)(2) Q&A-D8, 6330-1(d)(2) Q&A-D8. The failure to be current on payment of

estimated taxes is a reasonable basis for rejecting an offer. Christopher Cross, Inc. v.

United States, 461 F.3d 610 (5th Cir. 2006). See also Keller v. Commissioner, 568 F.3d

710 (9th Cir. 2009) (Appeals did not err when it looked at the facts and circumstances of

each case and rejected the offers based on IRM guidelines); Salazar v. Commissioner,

T.C. Memo. 2008-38 (Appeals did not abuse discretion in rejecting an offer-in

compromise that would risk collecting from a distribution in the taxpayer’s bankruptcy

case). On the other hand, the IRM does not have the force of law and does not confer

enforceable rights on taxpayers. Fargo v. Commissioner, 447 F.3d 706, 713 (9th Cir.

2006); Reed v. Commissioner, T.C. Memo. 2014-41.

In Alessio Azzari, Inc. v. Commissioner, 136 T.C. 178 (2011), the court held that it was

an abuse of discretion for Appeals to reject an installment agreement because the

taxpayer was not current with employment tax deposits, where Appeals’ erroneous

refusal to consider subordination of the NFTL contributed to petitioner’s falling behind

on its tax deposits.

The taxpayer is required to submit financial information for consideration of a collection

alternative. It is not an abuse of discretion for Appeals to reject a collection alternative

because the taxpayer failed to submit requested financial information. Tucker v.

Commissioner, T.C. Memo. 2014-103; Huntress v. Commissioner, T.C. Memo. 2009

161; Ranuio v. Commissioner, T.C. Memo. 2010-178 (Appeals may request financial

information pertaining to the taxpayer’s nonliable spouse in a community property

state); TGI Enterprises, Inc. v. Commissioner, T.C. Memo. 2009-123; Olsen v. United

States, 414 F.3d 144, 154 (1st Cir. 2005); Kindred v. Commissioner, 454 F.3d 688, 696

(7th Cir. 2006); Orum v. Commissioner, 412 F.3d 819, 820 (7th Cir. 2005). See also

Treas. Reg. §§ 301.6320-1(e)(1), 301.6330-1(e)(1) (“Taxpayers 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.”) See also Hartman v.

Commissioner, 638 F.3d 248 (3d Cir. 2011) (“[W]e agree with the Tax Court that the

IRS did not abuse its discretion in sustaining the proposed levy where Hartmann failed

to comply with the requirements for filing a proposed collection alternative.”). Further,

the taxpayer is expected to meet reasonable deadlines set by Appeals to submit

requested information, and it is not an abuse of discretion to issue the determination if

the taxpayer fails to submit the requested items within the reasonable timeframe given

by Appeals. Pough v. Commissioner, 135 T.C. 344 (2010). The collection of

information during a CDP hearing is not subject to the Paperwork Reduction Act, and so

the lack of a control number on a Form 433A (Collection Information Statement) does

not relieve the taxpayer of the consequences of failing to submit the form to Appeals.

Pitts v. Commissioner, T.C. Memo. 2010-101.

In the absence of the taxpayer proving eligibility for a formal statutory collection

alternative such as an OIC or IA, the taxpayer may be eligible for Currently Not

Collectible (CNC) status, which is a non-statutory, reversible, administrative designation

where the Service determines that collection will not proceed because the tax is

currently not collectible or because of economic hardship. See generally IRM 5.16.1.

4. Offer-in-Compromise

Section 7122(a) authorizes the Secretary of the Treasury to compromise any civil or

criminal case arising under the internal revenue laws before the case is referred to the

Department of Justice. See also Treas. Reg. § 301.7122-1. This is the statutory

authority for the Service’s offer-in-compromise program. Section 7122(c) also sets out

the requirements for making a partial payment or periodic payments along with the

offer-in-compromise. See Tucker v. Commissioner, T.C. Memo. 2014-103 (Appeals did

not abuse its discretion in rejecting an OIC for failure to make required periodic

payments). Where the OIC is properly processed and rejected in part based on

collectability grounds, Appeals did not abuse its discretion in retaining the section

7122(c) partial payment in conjunction with its rejection of the OIC. Isley v.

Commissioner, 141 T.C. No. 11 (2013). In Isley, the Tax Court held that where the

taxes at issue in a CDP hearing were the subject of a referral to the Department of

Justice, section 7122(a) requires that an appeals officer at a CDP hearing obtain prior

approval by the Department of Justice of a proposed compromise. The court

nonetheless held that section 7122(a) is not an absolute bar to appeals consideration of

the OIC during the CDP hearing, but the OIC must be approved by Justice.

The regulations under section 7122 set forth three grounds for the compromise of a tax

liability: doubt as to liability, doubt as to collectability, or promotion of effective tax

administration. Treas. Reg. § 301.7122-1(b); Moore v. Commissioner, T.C. Memo.

2013-278.

a. Doubt as to liability offer-in-compromise

When a taxpayer files an offer-in-compromise based on doubt as to liability, the

taxpayer challenges the existence or amount of the underlying liability. Therefore,

under section 6330(c)(2)(B), the taxpayer does not have the legal right to consideration

of a doubt as to liability offer submitted in a CDP administrative hearing if the taxpayer

previously received a notice of deficiency or otherwise had an opportunity to dispute the

liability. Kindred v. Commissioner, 454 F.3d 688, 699-700 (7th Cir. 2006); Baltic v.

Commissioner, 129 T.C. 178 (2007). Contra Siquieros v. United States, 2005-1 USTC

¶ 50,244 (W.D.Tex. 2004) (finding that the taxpayer’s offer based on doubt as to liability

was not synonymous with a challenge to the underlying liability).

b. Doubt as to collectability offer-in-compromise

Doubt as to collectability exists in any case where the taxpayer’s assets and income are

less than the full amount of the assessed liability. Treas. Reg. § 301.7122-1(b)(2). A

doubt as to collectability offer-in-compromise must generally offer an amount equal to

the taxpayer’s reasonable collection potential, absent a showing of special

circumstances. Murphy v. Commissioner, 125 T.C. 301 (2005), aff’d, 469 F.3d 27 (1st

Cir. 2006) (no abuse of discretion where Appeals officer rejected offer-in-compromise

that was substantially less than reasonable collection potential); Estate of Mangiardi v.

Commissioner, T.C. Memo. 2011-24 (in evaluating an offer-in-compromise for estate

tax, the estate’s reasonable collection potential includes the amount the Service may

collect under section 6324(a)(2) from a beneficiary who had received nonprobate

distributions). Appeals doesn't abuse its discretion by rejecting an offer-in-compromise

that falls short of a taxpayer's RCP. Bromback v. Commissioner, T.C. Memo. 2012-265.

The Commissioner may accept an OIC based on doubt as to collectability that is less

than the reasonable collection potential if special circumstances are present. Anderson

v. Commissioner, T.C. Memo. 2013-261 (remand to consider petitioner’s health

problems); Antico v. Commissioner, T.C. Memo. 2013-35 (remand because Appeals did

not make findings as to special circumstances). See generally Keller v. Commissioner,

568 F.3d 710, 719 (9th Cir. 2009), aff’g in part and vacating in part Ertz v.

Commissioner, T.C. Memo. 2007-15 (no abuse of discretion where Appeals officer

rejected offer-in-compromise based on speculative future medical expenses); Moore v.

Commissioner, T.C. Memo. 2013-278 (petitioner failed to show special circumstances).

The taxpayer is required to submit a written offer-in-compromise for consideration of the

offer. Appeals does not abuse its discretion in failing to consider an offer that petitioner

never made. O’Neil v. Commissioner, T.C. Memo. 2009-183 (taxpayer discussed an

offer-in-compromise with Appeals officer on multiple occasions but failed to submit one

in writing); Huntress v. Commissioner, T.C. Memo. 2009-161; Kindred v. Commissioner,

454 F.3d 688, 696 (7th Cir. 2006) (“Without an actual offer in compromise to consider, it

would be most difficult for either the Tax Court or this court to conclude that the Appeals

officer might have abused his discretion; for the Appeals officer could not mistakenly

reject something which has not been presented to him.”).

In Tucker v. Commissioner, 676 F.3d 1129 (D.C. Cir. 2012), cert. denied, 133 S. Ct. 646

( 2012), the District of Columbia Circuit Court of Appeals affirmed the Tax Court’s

holding that it was not an abuse of discretion for Appeals to include funds that the

taxpayer had lost while “day trading” stock in the taxpayer’s reasonable collection

potential as dissipated assets. It was also not an abuse of discretion for Appeals to

reject the taxpayer’s deferred payment offer-in-compromise and to instead insist on a

partial payment installment agreement where Appeals believed that the liability could be

paid in full.

In Dalton v. Commissioner, 682 F.3d 149 (1st Cir. 2012), rev’g 135 T.C. 393 (2010), the

First Circuit held that it was not an abuse of discretion to reject an offer-in-compromise

on the ground that it did not include the value of a third-party’s property, concluding that

the IRS’s determination that the taxpayer held an interest in the property under federal

nominee law was reasonable.

In Murphy v. Commissioner, 125 T.C. 301 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006), the

Tax Court rejected the taxpayer’s argument that section 7122 requires the Service to

provide administrative appeal rights within a CDP hearing from the rejection of an offerin-compromise. The court noted that there was administrative review as part of the

CDP process and that the taxpayer had the right to appeal the CDP determination by

seeking judicial review.

In Reed v. Commissioner, 141 T.C. No. 7 (2013), reconsideration denied, T.C. Memo.

2014-41, the Tax Court held that the Service cannot be required to reopen an OIC that

was returned as nonprocessible a few years before the CDP hearing, since the old OIC

would be based on outdated financial data, and the statutory scheme does not permit

review of the Service’s return of an OIC. In denying reconsideration, the court also held

that it is not an abuse of discretion to return an OIC because of a taxpayer’s failure to

meet current tax obligations.

c. Effective tax administration offer-in-compromise

The Service has the authority to enter into an offer-in-compromise based on effective

tax administration where the taxpayer can demonstrate that full collection would cause

the taxpayer economic hardship, or if there are compelling public policy or equity

considerations. Anderson v. Commissioner, T.C. Memo. 2013-261; Treas. Reg. §

301.7122-1(b)(3). The Service may not enter into a compromise to promote effective

tax administration where doing so would undermine compliance with the tax laws. Id.

The ability to make full payment is a prerequisite to an effective tax administration offerin-compromise. Treas. Reg. § 301.7122-1(b)(3)(ii). Compromise based on compelling

public policy or equity considerations is established when exceptional circumstances

exist such that collection of the full liability would undermine public confidence that the

tax laws are being administered in a fair and equitable manner. Treas. Reg. §

301.7122-1(b)(3)(ii). See Pomeroy v. Commissioner, T.C. Memo. 2013-26 (factors to

be considered include a taxpayer’s long-term illness or medical condition that prevents

him from earning a living and that will exhaust his financial resources); Bogart v.

Commissioner, T.C. Memo. 2014-46 (remand to consider compromise based on public

policy or equity circumstances where petitoners’ bookkeeper embezzled funds from

their S-corporation). This basis is not established by vague assertions that the

imposition of the tax is unfair. See generally Keller v. Commissioner, 568 F.3d 710, 719

(9th Cir. 2009), aff’g in part and vacating in part Ertz v. Commissioner, T.C. Memo.

2007-15 (no abuse in discretion in rejecting offers based on taxpayers’ argument that

they were victimized by a tax shelter promoter). Cf. Service Employees International

Union, 100 v. United States, 598 F.3d 1110 (9th Cir. 2010) (district court did not have

discretion to reduce penalties for failure to timely file information returns).

In Fargo v. Commissioner, 447 F.3d 706 (9th Cir. 2006), the court held that it was not

an abuse of discretion to reject an offer based on “effective tax administration” grounds.

The court stated that “[t]axpayers' hardship claim is particularly weak given that the

relevant inquiry is only whether the Commissioner abused his discretion. Although one

might find some ground upon which to quibble with the Commissioner's decision, it is

impossible to hold that the Commissioner employed an erroneous view of the law or a

clearly erroneous assessment of the facts.” See also Speltz v. Commissioner, 454 F.3d

782 (8th Cir. 2006) (also affirming rejection of effective tax administration offer).

d. Terminated offer-in-compromise

In Robinette v. Commissioner, 439 F.3d 455 (8th Cir. 2006), rev’g 123 T.C. 85 (2004),

the Eighth Circuit held that the failure to file one return (even a refund return) during the

5-year compliance period after an offer-in-compromise is accepted provides a legal

basis for terminating the offer. The Eighth Circuit held that the Tax Court erred in

reaching the question of “materiality” of breach, as the taxpayer’s failure to file a timely

income tax return was a breach of an express condition of the offer. Pursuant to the

Eighth Circuit’s decision, the taxpayer must strictly comply with the terms and conditions

of the offer-in-compromise. In Trout v. Commissioner, 131 T.C. 239 (2008), the Tax

Court adopted the express conditions analysis of the Eighth Circuit, holding that the IRS

did not abuse its discretion by terminating an offer after the taxpayer failed to file his

returns and the IRS sent warning letters to him.

C. Section 6330(c)(2)(B) Liability Challenges

Under section 6330(c)(2)(B), a taxpayer may challenge the existence or amount of the

underlying tax liability in a CDP hearing if the taxpayer did not receive a statutory notice

of deficiency for the tax liability or did not otherwise have an opportunity to dispute the

tax liability. See Callahan v. Commissioner, 130 T.C. 44 (2008) (taxpayer may

challenge frivolous return penalty under section 6702 because no notice of deficiency

was issued and no Appeals conference was offered); Alexander v. Commissioner, T.C.

Memo. 2012-75 (rejecting taxpayer’s challenge to the section 6702 penalty on the

merits). See also Kuretski v. Commissioner, - F.3d - (D.C. Cir. June 20, 2014)

(taxpayers barred from arguing reasonable cause in defense of section 6651(a)(2)

addition to tax where they failed to file a written statement explaining why they had

reasonable cause for nonpayment); Springer v. Commissioner, 580 F.3d 1142 (10th Cir.

2009) (section 6330(c)(2)(B) does not bar taxpayer from challenging penalties that did

not exist and thus were not at issue in the prior deficiency proceedings); Brennan v.

Commissioner, T.C. Memo. 2013-123 (taxpayer cannot challenge additions to tax that

were included on notice of deficiency, but could raise computational errors on an

assessment made after issuance of the notice of deficiency).

Underlying tax liability means the tax imposed by the Internal Revenue Code.

“Underlying tax liability” has also been defined by the court as “the tax on which the

Commissioner based his assessment.” Robinette v. Commissioner, 123 T.C. 85, 93

(2004), rev’d, 439 F.3d 455 (8th Cir. 2006). The term “underlying tax liability” includes

the total amount of tax (including interest and penalties) assessed for a particular tax

period, including tax assessed under the deficiency procedures, tax reported on a tax

return, or a combination of both. Callahan v. Commissioner, 130 T.C. 44, 49-50 (2008);

Montgomery v. Commissioner, 122 T.C. 1, 7-8 (2004). See also Gray v. Commissioner,

138 T.C. 295 (2012) (court’s jurisdiction includes jurisdiction to review determination to

abate a penalty where the penalty forms part of the underlying tax liability); Farhoumand

v. Commissioner, T.C. Memo. 2012-131 (underlying liability includes all amounts

assessed for the tax period for which the CDP notice was issued, even if not asserted

on the notice; taxpayer can raise merits of section 6654(a) addition to tax that is not

listed on the notice).

Whether or not issues concerning the validity of assessments and application of credits

and payments are treated as liability or nonliability issues, will determine whether their

consideration will be barred under section 6330(c)(2)(B). See, e.g., Olender v.

Commissioner, T.C. Memo. 2008-205 (argument that assessment is invalid because it

was made after the expiration of the statute of limitations on assessment is an

underlying liability issue that is barred). Chief Counsel Notice CC-2014-002, Proper

Standard of Review for Collection Due Process Determinations, states the Office of

Chief Counsel’s longstanding position that issues involving whether the Service has

complied with all applicable legal and administrative procedural requirements involve

nonliability issues that are not subject to preclusion under section 6330(c)(2)(B).

Nonliability issues include whether the assessment is valid (e.g., whether a notice of

deficiency or letter 1153 was properly issued) and whether the assessment and

collection statute of limitations were complied with. The notice similarly states the

position that issues involving the amount of payments and overpayment credits the

taxpayer has made and their proper application, are nonliability issues that are not

subject to preclusion under section 6330(c)(2)(B). See discussion at Chapter 7, Section

D.4 (Standard of review for verification, statute of limitation and application of payment

issues).

Section 6330(c)(2)(B) does not preclude claims for spousal relief under sections 66 or

6015 because these claims do not dispute the existence of the liability but rather seek

relief from the liability. Treas. Reg. §§ 301.6320-1(e)(3) Q&A-E3, 301.6330-1(e)(3)

Q&A-E3. Claims for interest abatement under section 6404 are also not disputes about

the existence of liability, because they seek relief from liability for interest.

If a taxpayer is barred from challenging the existence or amount of the underlying tax

liability in a CDP hearing, the taxpayer is also precluded from raising the validity of the

liability as an issue in a judicial review proceeding under section 6330(d). Goza v.

Commissioner, 114 T.C. 176 (2000).

Section 6330(c)(2)(B) does not displace the doctrine of res judicata as to liability

determinations. See Goodman v. Commissioner, T.C. Memo. 2006-220 (res judicata

and section 6330(c)(2)(B) both apply to preclude relitigation of liability determined in

prior stipulated tax court decision); Golden v. Commissioner, 548 F.3d 487 (6th Cir.

2008) (res judicata precludes raising statute of limitation on assessment for tax agreed

to in stipulated decision). But see Lykins, Inc. v. Commissioner, 133 T.C. 87 (2009)

(res judicata does not bar taxpayer from claiming net operating loss carrybacks and

does not bar respondent from recapturing tentative refunds).

Section 6330(c)(2)(B) also does not displace other provisions in the Internal Revenue

Code that preclude challenging the underlying liability in any proceeding. See, e.g.,

I.R.C. § 6201(a)(4)(C) (assessment of criminal restitution may not be challenged on the

basis of the existence or amount of the underlying tax liability in any proceeding).

1. Self-reported taxes

In Montgomery v. Commissioner, 122 T.C. 1 (2004), acq., AOD. 2005-03, 2005 WL

3451063, the Tax Court construed the term “underlying tax liability” under section

6330(c)(2)(B) to encompass the tax reported due on a self-filed tax return. The court

accordingly held that the taxpayers could challenge the amount of the tax reported on

their 2000 return in the CDP proceeding.

Even under Montgomery, a taxpayer may not challenge the existence or amount of selfreported tax liability for a taxable year if the taxpayer received a notice of deficiency with

respect to that year or had some other prior opportunity to dispute the tax liability. The

fact that the taxpayer disputes items on the return that were not adjusted by the Service

in the notice of deficiency is immaterial. Of course, if the Tax Court entered a decision

involving the same tax liability in a deficiency proceeding, the doctrine of res judicata

would preclude the taxpayer from disputing that liability in the CDP proceeding. See

Chief Counsel Notice CC-2006-05, Change in Litigating Position Regarding Challenges

to Self-Reported Liability in Collection Due Process Cases; Goodman v. Commissioner,

T.C. Memo. 2006-220 (prior tax court stipulated decision is res judicata precluding

taxpayer from disputing liability in CDP); Golden v. Commissioner, 548 F.3d 487 (6th

Cir. 2008).

The Tax Court held in Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006), that section

6330 does not give the court jurisdiction to determine an overpayment or order a refund

or credit of taxes paid. Therefore, the court cannot order a credit or refund if the court

determines an amount of underlying tax liability for a taxable year that is less than the

taxpayer’s withholding, estimated tax, and other tax payments paid or credited for that

year. A judicial determination of the amount of the underlying tax liability in a CDP case

may, however, estop both parties from contesting the amount of that same liability in a

subsequent refund action (subject to section 6511 limitations on filing refund claims).

2. Taxpayer must raise issues at administrative hearing

A taxpayer is precluded from disputing the underlying tax liability in a CDP judicial

review proceeding if the taxpayer failed to properly raise the merits of the underlying tax

liability as an issue during the CDP hearing. Giamelli v. Commissioner, 129 T.C. 107

(2007). The merits are not properly raised if the taxpayer challenges the underlying tax

liability, but fails to present Appeals with any evidence with respect to that liability after

being given a reasonable opportunity to present such evidence. Treas. Reg. §§

301.6320-1(f)(2) Q&A-F3, 301.6330-1(f)(2) Q&A-F3. See Pough v. Commissioner, 135

T.C. 344 (2010) (petitioner did not file amended tax returns during the hearing). A

taxpayer would be precluded from challenging a self-reported tax liability when, prior to

issuing the notice of determination, the Appeals officer gave the taxpayer a reasonable

opportunity to file an amended return or provide requested information substantiating

his liability challenge but the taxpayer failed to do so. See Montgomery v.

Commissioner, 122 T.C. 1, 19-20 (2004) (Marvel, J. and Goeke, J., concurring);

Newstat v. Commissioner, T.C. Memo. 2005-262. Taxpayers are not precluded from

raising liability because they did not raise the issue in the Form 12153 hearing request;

liability is properly raised if the taxpayers raise it at any time during the CDP hearing.

Fielder v. Commissioner, T.C. Memo. 2012-284.

3. Receipt of a statutory notice of deficiency

If the taxpayer contests receipt of the notice of deficiency, respondent must introduce

evidence of actual mailing. Rivas v. Commissioner, T.C. Memo. 2012-20. However,

respondent must show that the notice of deficiency was received, not merely issued, in

order to establish that taxpayer is precluded from raising liability. If respondent shows

that the notice of deficiency was properly issued, then respondent has established that

the assessment was properly made. However respondent must go one step further to

prove receipt in order to establish that the taxpayer cannot raise liability.

Receipt of a statutory notice of deficiency under section 6330(c)(2)(B) means receipt in

time to petition the Tax Court for a redetermination of the deficiency. Treas. Reg. §§

301.6320-1(e)(3) Q&A-E2, 301.6330-1(e)(3) Q&A-E2; Butti v. Commissioner, T.C.

Memo. 2009-198; Kuykendall v. Commissioner, 129 T.C. 77 (2007) (receipt within 12

days of filing date insufficient time to petition court). Respondent has the burden of

proving by a preponderance of the evidence that the receipt requirement has been

satisfied. Sego v. Commissioner, 114 T.C. 604 (2000).

Absent direct evidence that the taxpayer actually received the notice of deficiency or

refused its delivery, respondent can rely on the presumptions of official regularity and

delivery to meet his burden of proof. Sego v. Commissioner, 114 T.C. 604, 610 (2000)

(holding that presumptions of official regularity and of delivery justify the conclusion that

the statutory notice was sent and that attempts to deliver were made in the manner

contended by respondent); Bailey v. Commissioner, T.C. Memo. 2005-241 (there is a

strong presumption in the law that a properly addressed letter will be delivered, or

offered for delivery, to the addressee).

The presumptions of regularity and delivery arise if the record reflects that the notice of

deficiency was properly mailed to the taxpayer. Sego, supra; Bailey v. Commissioner,

T.C. Memo. 2005-241. A properly completed Form 3877 (certified mailing list) reflecting

the timely mailing of a notice of deficiency to a taxpayer’s correct address, absent

evidence to the contrary, establishes that the notice was properly mailed to the

taxpayer. Diamond v. Commissioner, T.C. Memo. 2012-90. But see JAG Brokerage,

Inc. v. Commissioner, T.C. Memo. 2012-315 (if taxpayer is a corporation, receipt by an

individual authorized to act for the corporation would seem to be required).

If the presumptions of official regularity and delivery arise, then the burden shifts to the

taxpayer to rebut the presumptions. See Conn v. Commissioner, T.C. Memo. 2008-186

(taxpayer rebutted presumption of receipt by establishing that he was in prison when

statutory notice of deficiency was mailed to his last known address). The presumptions

of official regularity and delivery may be rebutted if the notice of deficiency is returned to

the Service marked “undeliverable.” Cf. Lehmann v. Commissioner, T.C. Memo. 2005

90 (liability challenge precluded where taxpayer deliberately provided bad address to

prevent delivery of IRS correspondence). If the notice is returned unclaimed, the

presumptions may be rebutted by credible testimony denying receipt. Tatum v.

Commissioner, T.C. Memo. 2003-115. In Tatum, a denial of receipt of USPS Form

3849 (Notice of Attempted Delivery), combined with evidence that the Postal Service

returned the notice of deficiency after only one attempt at delivery, was sufficient to

rebut the presumptions.

If the notice of deficiency is returned to the Service unclaimed, the presumptions are not

rebutted by testimony denying receipt if sufficient contrary evidence exists that the

taxpayer refused to accept delivery or took deliberate steps to thwart delivery of the

deficiency notice. Sego v. Commissioner, 114 T.C. 604 (2000); Lehmann v.

Commissioner, T.C. Memo. 2005-90. The taxpayer may not decline to retrieve his mail

when he was able to do so, and successfully deny receipt for purposes of prior

opportunity. Onyango v. Commissioner, 142 T.C. No. 24 (2014).

If the notice of deficiency is not returned to the Service, the presumptions generally are

not rebutted if the taxpayer fails to deny receipt of the deficiency notice and there is no

other evidence indicating nonreceipt. Bailey v. Commissioner, T.C. Memo. 2005-241

(finding presumption of delivery not rebutted when only evidence to rebut presumption

was taxpayer’s testimony that he did not recall receiving notice of deficiency but

taxpayer admitted he received other mail at address on the notice). Even when the

taxpayer denies receipt of the notice of deficiency, the denial alone may not be sufficient

to rebut the presumptions if the record contains evidence impairing the taxpayer’s

credibility. Rivas v. Commissioner, T.C. Memo. 2012-20 (taxpayer did not explain why

he failed to pick up the notices of deficiency after notification of delivery was placed in

his post office box); Figler v. Commissioner, T.C. Memo. 2005-230 (respondent

produced evidence that the taxpayer had refused delivery of other IRS documents and

lied at his prior divorce proceeding); Cyman v. Commissioner, T.C. Memo. 2009-144

(preponderance of evidence showed that taxpayer refused delivery of notices of

deficiency). See also Klingenberg v. Commissioner, T.C. Memo. 2012-292 (where

notices of deficiency not returned to respondent as undeliverable, and taxpayer

regularly received mail at address where notices were sent, presumption not rebutted);

Campbell III v. Commissioner, T.C. Memo. 2013-57 (court finds based on certified

mailing list and USPS testimony, that petitioner refused delivery, so he is deemed to

have received notices); Giaquinto v. Commissioner, T.C. Memo. 2013-150 (court finds

that petitioners deliberately failed to claim delivery of Letter 1153 where IRS showed it

sent the letter by certified mail, accordingly petitioner precluded from contesting section

6672 liability). Cf. Crouch III v. Commissioner, T.C. Summ. Op. 2009-143 (presumption

of delivery rebutted by credible testimony that notice was not received and taxpayer’s

history of promptly responding to tax-related notices).

In Calderone v. Commissioner, T.C. Memo. 2004-240, the Tax Court permitted the

taxpayer to challenge his underlying tax liability where respondent was unable to prove

proper mailing and the taxpayer denied receipt. Although it was undisputed that the

taxpayer’s tax representative received a copy of the notice of deficiency in time to file a

timely petition challenging the notice, the court found the representative had failed to

properly represent the taxpayer and did not impute the tax representative’s receipt to

the taxpayer. In Lepore v. Commissioner, T.C. Memo. 2013-135, the court held that

the taxpayer could raise liability for the section 6672 penalty, finding taxpayer’s

testimony that he did not receive the letter 1153 to be credible even though the letter

was delivered to his home but was apparently discarded or lost.

4. Other opportunity to dispute liability

a. Appeals hearing

A prior opportunity to dispute a liability includes an opportunity for a conference with

Appeals offered either before or after assessment of the liability. Treas. Reg. §§

301.6320-1(e)(3) Q&A-E2, 301.6330-1(e)(3) Q&A-E2. A prior opportunity does not

include a separate Appeals conference that was held concurrently with the CDP

hearing. Mason v. Commissioner, 132 T.C. 301 (2009); Perkins v. Commissioner, 129

T.C. 58 (2007).

In Lewis v. Commissioner, 128 T.C. 48 (2007), the Tax Court held that a prior

opportunity to dispute the underlying tax liability for purposes of section 6330(c)(2)(B)

includes a prior conference conducted with Appeals, even where a taxpayer has no

right of judicial review of the prior Appeals determination. The court held that the

taxpayer was not permitted to contest his liability in the CDP hearing and in the Tax

Court because he had previously contested the same liability in a hearing before

Appeals, seeking abatement of late filing and late payment penalties. In the process of

reaching this decision, the court upheld the validity of the CDP regulations as a

reasonable interpretation of section 6330(c)(2)(B).

The Tax Court limited its holding in Lewis to situations in which the taxpayer has

actually had a conference with Appeals about the liability in question. The court

reserved judgment on the question of whether the mere opportunity to contest a liability

in an Appeals hearing from which the taxpayer is not entitled to judicial review, is

sufficient to prevent the taxpayer from raising the liability during CDP.

An opportunity for a conference with Appeals prior to assessment of a tax subject to

deficiency procedures is not a prior opportunity under section 6330(c)(2)(B). Treas.

Reg. §§ 301.6320-1(e)(3) Q&A-E2, 301.6330-1(e)(3) Q&A-E2. Thus, receipt of a 30

day letter preceding a notice of deficiency is not an opportunity to dispute underlying tax

liability under section 6330(c)(2)(B).

An opportunity to dispute a tax liability under section 6330(c)(2)(B) includes an

opportunity to dispute in Appeals taxes to which deficiency procedures do not apply,

e.g., employment tax, excise tax (except those in Chapters 41-44), and the trust fund

recovery penalty. For example, a notice of a proposed trust fund recovery penalty

assessment (Letter 1153) is a prior opportunity because it gives the taxpayer the right to

an Appeals hearing. Mason v. Commissioner, 132 T.C. 301 (2009); Orian v.

Commissioner, T.C. Memo. 2010-234. The same evidence that establishes that the

Commissioner properly mailed a notice of deficiency should be sufficient to establish

that the Commissioner properly sent a Letter 1153. Mason, 132 T.C. at 317-19.

b. Prior CDP Notice

If the taxpayer received a prior CDP notice under section 6320 or 6330 for the same tax

and taxable period, whether or not the taxpayer requested a CDP hearing, the taxpayer

has had an opportunity to dispute the existence and amount of that liability and may not

challenge it in a subsequent CDP hearing. Treas. Reg. §§ 301.6320-1(e)(3) Q&A-E7,

301.6330-1(e)(3) Q&A-E7; Daniel v. Commissioner, T.C. Memo. 2009-28. See also Bell

v. Commissioner, 126 T.C. 356 (2006) (CDP notice of determination provided prior

opportunity to dispute liability by giving taxpayer the opportunity to file a petition in Tax

Court, even where Appeals in prior CDP hearing erroneously determined that taxpayer

was precluded from disputing liability).

c. Audit reconsideration

An audit reconsideration conducted prior to the CDP hearing with the Examination

function will not alone constitute a prior opportunity. Crouch III v. Commissioner, T.C.

Summ. Op. 2009-143. However, an audit reconsideration will preclude a challenge to

the underlying tax liability under section 6330(c)(2)(B) only if the taxpayer was offered

the opportunity for a conference with Appeals to dispute the results of the

reconsideration.

d. Waiver of receipt of notice of deficiency

If a taxpayer signed a form (e.g., Form 4549, Form 870) consenting to the immediate

assessment and collection of a tax liability, the taxpayer made a choice not to receive a

notice of deficiency and, therefore, is precluded from contesting the underlying tax

liability. Aguirre v. Commissioner, 117 T.C. 324 (2001) (Form 4549); Lance v.

Commissioner, T.C. Memo. 2009-129 (Form 870). Cf. Marlow v. Commissioner, T.C.

Memo. 2009-129 (assessment invalid if IRS cannot prove the taxpayer signed consent).

e. Bankruptcy proceedings

If the Service filed a proof of claim regarding an unpaid tax liability in a bankruptcy

proceeding, the debtor could have filed an objection to the proof of claim. 11 U.S.C. §

502. If the bankruptcy court had jurisdiction to determine the liability, the taxpayer is

precluded from challenging the underlying tax liability in a subsequent CDP hearing

(without regard to whether the debtor or Trustee actually filed an objection to the proof

of claim). Everett Associates, Inc. v. Commissioner, T.C. Memo. 2012-143; Salazar v.

Commissioner, T.C. Memo. 2008-38, aff’d, 338 Fed. Appx. 75 (2d Cir. 2009); Kendricks

v. Commissioner, 124 T.C. 69, 77 (2005).

f. District court cases

A tax lien foreclosure suit or a suit to reduce assessments to judgment involving the tax

liability included on a CDP notice is a prior opportunity under section 6330(c)(2)(B),

because the taxpayer would be entitled to challenge the liability in the suit. See

MacElvain v. Commissioner, T.C. Memo. 2000-320.

g. TEFRA proceedings

Section 6221 provides that the tax treatment of “partnership items” shall be determined

at the partnership level, i.e., either administratively pursuant to a TEFRA final

partnership administrative adjustment (FPAA) or judicially pursuant to a timely

petitioned Tax Court review of an FPAA. Section 6330(c)(2)(B) does not displace other

statutory preclusions on challenging liability. Goodman v. Commissioner, T.C. Memo.

2006-220. Outside of a partnership-level proceeding, a taxpayer may not challenge a

liability to the extent that it would affect the tax treatment of a partnership item

determined in an FPAA. Crowell v. Commissioner, 102 T.C. 683, 692-93 (1994). Thus,

actual receipt of an FPAA in time to timely petition the Tax Court may not be relevant to

whether a taxpayer can raise liability issues involving partnership items. Section 6221

does not, however, preclude a taxpayer from challenging a non-partnership item aspect

of a tax liability or from raising a partner-level defense to a partnership-level

penalty. See also Keller v. Commissioner, 568 F.3d 710 (9th Cir. 2009), rev’g in part

T.C. Memo. 2007-15 (Ninth Circuit held that the Tax Court has jurisdiction in partnerlevel CDP proceedings to determine whether imposition of increased interest for taxmotivated transactions was warranted, where the partners had no prior judicial forum to

raise the issues during the prior TEFRA partnership litigation).

D. The Balancing Analysis of Section 6330(c)(3)(c)

Appeals must decide whether any proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of the taxpayer that any collection

action be no more intrusive than necessary. I.R.C. § 6330(c)(3)(C). Trout v.

Commissioner, 131 T.C. 239 (2008); Wadleigh v. Commissioner, 134 T.C. 280 (2010)

(remand for Appeals to determine whether levy on retirement income will cause

economic hardship). Reviewing courts show deference to Appeals’ conclusion

regarding the balancing analysis. Living Care Alternatives of Utica, Inc. v. United

States, 411 F.3d 621, 627 (6th Cir. 2005). Appeals is not required to consider in its

balancing analysis whether there is sufficient equity in property to levy, whether it will

receive any revenue from levy and sale, or whether the taxpayer’s business will have to

close down due to the levy and sale. Living Care Alternatives of Utica, 411 F.3d at 628

29; Kraft v. Commissioner, 142 T.C. No. 14 (2014) (the inquiry of whether there is

enough equity in property to be levied occurs later in the collection process). In Kraft,

the court held that appeals did not abuse its discretion in rejecting the taxpayer’s

proposal that the IRS levy on a third-party trust in lieu of levying on other assets of the

taxpayer.

E. Section 6330(c)(4)

Section 6330(c)(4)(A) provides that an issue may not be raised during a CDP hearing if:

(1) the issue was raised and considered at a previous CDP hearing or in any other

previous administrative or judicial proceeding; and (2) the person seeking to raise the

issue participated meaningfully in such hearing or proceeding. See also Treas. Reg.

§§ 301.6320-1(e)(1), 301.6330-1(e)(1); McIntosh v. Commissioner, T.C. Memo. 2003

279. If an issue is precluded under section 6330(c)(4)(A), it may not be raised in the

Tax Court. Isley v. Commissioner, 141 T.C. No. 11 (2013) (offset issue considered in

prior district court refund proceeding). In Kovacevich v. Commissioner, T.C. Memo.

2009-160, the court raised, without deciding, the issue of whether section 6330(c)(4)(A)

is a matter that must be pleaded as an affirmative defense under Tax Court Rule 39.

“Previous administrative proceeding” in section 6330(c)(4)(A) is limited to a hearing with

Appeals. This interpretation is consistent with the definition of “opportunity” for

purposes of section 6330(c)(2)(B). See Treas. Reg. §§ 301.6320-1(e)(3) Q&A-E2,

301.6330-1(e)(3) Q&A-E2. For example, a taxpayer who appealed the rejection of an

offer-in-compromise to Appeals, and participated meaningfully in that Appeals hearing,

would be precluded from contesting that rejection in a subsequent CDP proceeding. If

the taxpayer participated meaningfully in a proceeding at the exam level, however, but

did not appeal the rejection of the offer to Appeals, section 6330(c)(4) would not apply.

Section 6330(c)(4)(A) may be asserted as a basis for issue preclusion with respect to

both liability and non-liability issues. In Lewis v. Commissioner, 128 T.C. 48 (2007), the

Tax Court held that a prior opportunity to dispute the underlying tax liability, for

purposes of section 6330(c)(2)(B), includes participation in a prior conference

conducted with Appeals. In footnote 4 of its opinion, the court questioned why

respondent did not argue that the taxpayer was also precluded from raising liability

under section 6330(c)(4). See Westby v. Commissioner, T.C. Memo. 2007-194 (holding

that sections 6330(c)(2)(B) and 6330(c)(4) precluded reconsideration of liability

determined in prior tax court deficiency case).

Section 6330(c)(4)(B), added to the statute in 2006 along with section 6330(g),

provides that the taxpayer is precluded from raising during a CDP hearing any position

identified as frivolous by the IRS in a published list or that reflects a desire to delay or

impede tax administration. The current notice specifying frivolous positions under

section 6702 is Notice 2010-33, 2010 WL 1347082.

F. Consideration of Precluded Issues by Appeals

An Appeals officer may, in that Appeals officer’s sole discretion, consider issues

precluded under sections 6330(c)(2)(B) or 6330(c)(4), or any spousal defense under

sections 66 or 6015 for which the Service made a final determination and/or which was

raised and considered in a prior judicial proceeding that has become final. Any

determination, however, made by the Appeals officer with respect to such precluded

issue shall not be treated as part of the notice of determination issued by Appeals and

will not be subject to judicial review. Even if a finding concerning a precluded issue is

referenced in a notice of determination, it is not reviewable by the Tax Court. Treas.

Reg. §§ 301.6320-1(e)(3) Q&A-E11, 301.6330-1(e)(3) Q&A-E11; Behling v.

Commissioner, 118 T.C. 572 (2002); Swanson v. Commissioner, 121 T.C. 111, 118

(2003).

G. Seizure and Sale Issue in Post-Levy CDP Proceeding

In Zapara v. Commissioner, 652 F.3d 1042, 1045 (9th Cir. 2011), aff’g 124 T.C. 223

(2005), reconsideration denied, 126 T.C. 215 (2006), the Ninth Circuit Court of Appeals

affirmed the Tax Court’s decision holding that in a post-levy hearing concerning a

jeopardy levy, it had jurisdiction to review the Service’s failure to sell property pursuant

to section 6335(f). The Court of Appeals rejected the Government’s argument that the

section 6330 hearing, and judicial review of the hearing, must be focused on proposed

levies and not actual levy and seizure actions. The Court of Appeals also held that the

Tax Court properly exercised its authority to fashion an equitable remedy in ordering the

IRS to give a credit to the taxpayer of the value of the property, and that such relief was

not precluded by the exclusivity provision in section 7433. The Service has issued an

Action on Decision not acquiescing in this decision, on the basis that damages under

section 7433 is the exclusive remedy for a violation of section 6335(f). AOD 2012-6;

2013-12 I.R.B. 657 (but agreeing that the taxpayer can raise issues regarding the sale

of levied upon property at the CDP hearing).

Chapter Six – Determination by Appeals

A. Notice of Determination

Delegation Order No. App 8-a authorizes Appeals officers, settlement officers, and

Appeals Account Resolution Specialists to make determinations under sections 6320

and 6330, and Appeals team managers to approve these determinations. In making a

CDP determination under section 6320(c) or 6330(c)(3), an Appeals officer is required

to: (A) verify that the requirements of any applicable law or administrative procedure

have been met; (B) consider issues validly raised at the hearing under section

6330(c)(2); and (C) determine whether the proposed collection action balances the

need for efficient collection of taxes with the taxpayer's legitimate concern that the

collection action be no more intrusive than necessary. See also Treas. Reg.

§§ 301.6320-1(e)(3) Q&A-E1, 301.6330-1(e)(3) Q&A-E1.

Typically, an Appeals or settlement officer conducts the hearing and drafts the

determination, which is reviewed, approved and issued by an Appeals team manager.

Section 6330 does not require that the Appeals officer making the determination be the

same officer or employee that conducted the hearing. Sullivan v. Commissioner, T.C.

Memo. 2009-4. The taxpayer has no right to comment on the settlement officer’s report

to her manager, nor does the taxpayer have a right to meet or interact with the

manager. Kuretski v. Commissioner, - F.3d – (D.C. Cir. June 20, 2014).

The determination, sent by certified or registered mail and entitled “Notice of

Determination Concerning Collection Action(s) under Section 6320 and/or 6330,” is

issued as a dated letter, Letter 3193, which informs the taxpayer of the right to judicial

review by the Tax Court. See Treas. Reg. §§ 301.6320-1(e)(3) Q&A-E8, 301.6330

1(e)(3) Q&A-E8. The notice of determination should be sent to the taxpayer’s last

known address, consistent with the requirements for sending notices of deficiency.

Weber v. Commissioner, 122 T.C. 258 (2004); Sebastian v. Commissioner, T.C. Memo.

2007-138 (notice of determination sent to taxpayer’s last known address valid;

erroneous zip code was inconsequential error because it did not adversely affect proper

delivery of notice). The letter provides a summary of the determination and includes an

enclosure containing a complete description by the Appeals officer of the basis of his or

her determination.

If the case is remanded to Appeals by the Tax Court, the Tax Court retains jurisdiction

over the case and Appeals, after holding a supplemental hearing, will issue a

supplemental notice of determination (Letter 3978). The supplemental notice of

determination does not inform the taxpayer of his right to judicial review because the

case is already docketed with the Tax Court. The Commissioner submits the

supplemental notice to the court with a status report.

B. Retained Jurisdiction

Section 6330(d)(2) dictates that the Office of Appeals shall retain jurisdiction with

respect to any determination made under section 6330. The statute sets forth two

specific instances in which Appeals may exercise retained jurisdiction:



With respect to collection actions taken or proposed with respect to the

determination reached by Appeals (section 6330(d)(2)(A)); or



With respect to consideration of a person’s “change in circumstances” that

affects the determination reached by Appeals (section 6330(d)(2)(B)).

In Tucker v. Commissioner, 135 T.C. 114 (2010), aff’d, 676 F.3d 1129 (D.C. Cir.), cert.

denied, 133 S.Ct. 646 (2012), the Tax Court stated that as a result of the retention of

jurisdiction, collection personnel could not contradict Appeals’ collection determination

absent a change in circumstances. However, the court stated that Appeals itself could

modify its determination. Id. at 141. More generally, both the Tax Court and the Court

of Appeals held in Tucker that collection and liability determinations by Appeals in a

CDP hearing are not necessarily final and binding determinations.

Retained jurisdiction is available only when the person has first exhausted all other

administrative remedies. Treas. Reg. §§ 301.6320-1(h)(2) and 301.6330-1(h)(2)

emphasize that Appeals’ authority to exercise retained jurisdiction is separate and

distinct from Appeals’ more general authority to conduct CDP proceedings. See Van

Camp v. Commissioner, T.C. Memo. 2012-336. The regulations provide that exercise

of retained jurisdiction does not constitute a continuation of the original CDP

proceeding. Accordingly, limitations periods suspended during the original CDP hearing

are not similarly suspended under retained jurisdiction review. Treas. Reg.

§§ 301.6320-1(h)(2) Q&A-H1, 301.6330-1(h)(2) Q&A-H1. Similarly, the regulations

provide that since a taxpayer is entitled to only one hearing under section 6320 and

section 6330 per tax period, decisions resulting from retained jurisdiction consideration

cannot be appealed to the Tax Court. Treas. Reg. §§ 301.6320-1(h)(2) Q&A-H2,

301.6330-1(h)(2) Q&A-H2.

Chapter Seven – Judicial Review

A. Subject Matter Jurisdiction

A taxpayer has 30 days from the date of the notice of determination in which to appeal

the determination to the Tax Court. I.R.C. §§ 6320(c), 6330(d)(1); Treas. Reg.

§§ 301.6320-1(f)(1), 301.6330-1(f)(1).

The Pension Protection Act of 2006, Pub. L. No. 109-280, § 855(a), 120 Stat. 780,

enacted on August 17, 2006, amended section 6330(d)(1) to provide the Tax Court with

exclusive jurisdiction to review CDP determinations. This amendment applies to all

CDP determinations issued on or after October 17, 2006, regardless of the type of

underlying tax. Prior to amendment, section 6330(d)(1) provided for judicial review in

district court in cases where “the Tax Court does not have jurisdiction of the underlying

tax liability,” e.g., employment tax cases and the frivolous return penalty. See

Wagenknecht v. United States, 533 F.3d 412 (6th Cir. 2008).

Pursuant to the amendment, the Tax Court now has jurisdiction over CDP cases

previously within the sole jurisdiction of the district courts, including CDP cases

involving collection of penalties and employment taxes that are not otherwise within the

deficiency jurisdiction of the Tax Court. Callahan v. Commissioner, 130 T.C. 44 (2008)

(frivolous return penalty); Harry v. Commissioner, T.C. Memo. 2009-206 (section 6700

penalty); Salazar v. Commissioner, T.C. Memo. 2008-38 (employment taxes). Tax

Court review in a CDP case pertains to the collection of the assessment listed in the

NFTL filing or notice of intent to levy. Accordingly, CDP jurisdiction is distinguishable

from deficiency jurisdiction in that it does not resolve all issues pertaining to a tax year

or period. Unlike deficiency cases, CDP litigation with respect to a particular tax liability

does not necessarily preclude the Service from making an additional assessment for

that same tax period. Freije v. Commissioner, 131 T.C. 1 (2008).

In Kuretski v. Commissioner, - F.3d – (D.C. Cir. June 20, 2014), the D.C. Circuit

rejected the petitioner’s argument that the President’s right to remove Tax Court judges

under section 7443(f) violated the Constitutional separation of powers. The D.C. Circuit

reasoned that the Tax Court is not an Article III court, but is part of the Executive

branch.

1. Overpayment jurisdiction

The Tax Court only has jurisdiction over the unpaid tax liability the Service is trying to

collect. The court has no jurisdiction in CDP to determine an overpayment for the tax

year at issue or to order a refund of any amounts paid. Greene-Thapedi v.

Commissioner, 126 T.C. 1 (2006). However, if the CDP case involves innocent spouse

relief or interest abatement, and the notice of determination addresses and rejects

innocent spouse relief or interest abatement, the Tax Court has overpayment

jurisdiction with respect to such relief or abatement under sections 6015(g)(1) and

6404(h)(2)(B), subject to the rules provided by sections 6511 and 6512(b). See Minhan

v. Commissioner, 138 T.C. 1(2012), amended on reconsideration 2012 WL 3338426

(2012) (before innocent spouse may be allowed a credit or refund, she must establish

that she made an overpayment); Cutler v. Commissioner, T.C. Memo. 2013-119

(same).

2 Jursidiction over non-CDP years

In some cases, the taxpayer may claim that the liability for a tax year not in suit is less

than the amount paid, and that taxpayer is entitled to an overpayment, or requested

credit elect overpayments, that could be or should have been credited toward the

liability at issue. The Tax Court has held that it can consider such issues regarding

nonsuit years insofar as the tax liability for the nonsuit years may affect the

appropriateness of the collection action for the suit year. In exercising that jurisdiction,

the court does not determine whether any collection with respect to the nonsuit year

may proceed, but only whether collection may proceed for the suit year. Weber v.

Commissioner, 138 T.C. 348 (2012) (assuming, in footnote 5, that review of IRS’s

decision regarding crediting of overpayments is for abuse of discretion, and noting, in

footnote 10, that there may be scenarios implicating years or issues so remote from the

year at issue that they fall outside CDP jurisdiction); Freije v. Commissioner, 125 T.C.

14, 27 (2005); Landry v. Commissioner, 116 T.C. 60 (2001). Before a taxpayer can

contend in a CDP case that overpayments ought to be applied to satisfy the liability at

issue, he must show that he has satisfied the threshold requirements for claiming a

refund. Weber; Brady v. Commissioner, 136 T.C. 422, 427-431 (2011).

While the Tax Court has jurisdiction under the above principles to determine the proper

application of overpayments or credits, where the initial availability of the overpayment

or credit has been determined or is not in dispute, the court does not have jurisdiction in

a CDP case to determine a taxpayer’s entitlement to a refund on the merits for a nonCDP year. Weber (declining to consider taxpayer’s claim to credit for non-CDP section

6672 liability); Precision Prosthetic v. Commissioner, T.C. Memo. 2013-110. Cf. Davis

and Associates LLC v. Commissioner, T.C. Memo. 2008-292 (distinguishing Freije and

Landry, holding that court does not have jurisdiction to decide how payments under an

offer-in-compromise should have been allocated among tax, penalty and interest for a

CDP year).

Weber is consistent with Chief Counsel’s position that the taxpayer may raise

entitlement to a non-CDP period overpayment only if the taxpayer’s claim does not

involve an evaluation of the merits of the non-CDP period liability. Chief Counsel Notice

CC-2011-21, Tax Court Jurisdiction in Collection Due Process Cases to Consider NonCDP Period Liability and Overpayment Issues. Also, as stated in the Notice, the Tax

Court has jurisdiction to determine the existence and amount of an adjustment (such as

a net operating loss carryover or credit carryover) from a non-CDP year that may be

used to reduce the taxable income for the period subject to the CDP hearing. Because

the adjustment affects the amount of tax imposed by the Internal Revenue Code for the

CDP tax period, determination of the adjustment is part of the determination of the

liability subject to the CDP hearing under section 6330(c)(2)(B). The Tax Court

therefore may determine the existence and amount of the adjustment de novo.

Taxpayers frequently submit offers-in-compromise or installment agreements as

proposed collection alternatives during CDP hearings which not only include liabilities

listed on the CDP notice which are properly part of the CDP hearing (CDP periods), but

also include all other outstanding tax liabilities (non-CDP periods) due to the IRS

requirement that all delinquent periods be included. In reviewing the notice of

determination, although the court does not have jurisdiction over the non-CDP years,

the court may consider facts relating to non-CDP periods that are relevant to the offer or

agreement. Sullivan v. Commissioner, T.C. Memo. 2009-4.

3. Jurisdiction over nominee and wrongful levy issues

The Tax Court has jurisdiction to decide the reasonableness of the Service’s

determination that the taxpayer owned property held by a third-party as a nominee for

the taxpayer, and whether the Service’s rejection of an offer-in-compromise on the basis

that the offer did not include the nominee interest was an abuse of discretion. Dalton v.

Commissioner, 682 F.3d 149 (1st Cir. 2012) (holding that the Service’s decision to apply

a balancing test and execution of the balancing test to resolve the nominee question

was reasonable), rev’g 135 T.C. 393 (2010). On the other hand, the court will not

consider the issue of whether a jeopardy levy on a third-party was improper because

the taxpayer does not have standing to seek the return of property to the third-party.

Prince v. Commissioner, 133 T.C. 270 (2009).

4. Taxpayer precluded from raising issues not raised during CDP hearing

The taxpayer may only raise issues, including challenges to the underlying liability, that

were properly raised in the CDP hearing. Giamelli v. Commissioner, 129 T.C. 107

(2007) (holding that the court does not have authority to consider liability issues that

were not raised before the Office of Appeals); Pough v. Commissioner, 135 T.C. 344

(2010). An issue is not properly raised if the taxpayer fails to request consideration of

the issue by Appeals, or if consideration is requested but the taxpayer fails to present to

Appeals any evidence with respect to that issue after being given a reasonable

opportunity to present such evidence. Treas. Reg. §§ 301.6320-1(f)(2) Q&A-F3,

301.6330-1(f)(2) Q&A-F3. The court will not consider issues reviewable for abuse of

discretion that were not raised during the CDP hearing process, because the court

cannot find an abuse of discretion where there is no evidence that the Appeals officer

exercised any discretion at all. Magana v. Commissioner, 118 T.C. 488 (2002).

However, the court will review whether Appeals verified compliance with applicable law

under section 6330(c)(1) without regard to whether the taxpayer raised the issue at the

administrative hearing. Hoyle v. Commissioner, 131 T.C. 197 (2008); Medical Practice

Solutions, LLC v. Commissioner, T.C. Memo. 2009-214.

B. Notice of Determination Required

Jurisdiction under section 6320 or 6330 is contingent upon both the issuance of a valid

notice of determination and the filing of a timely petition. Boyd v. Commissioner, 451

F.3d 8, 11 (1st Cir. 2006); Offiler v. Commissioner, 114 T.C. 492, 498 (2000). A notice

of determination includes a written notice that embodies a determination to uphold the

proposed levy or sustain the NFTL filing. Ballard v. Commissioner, T.C. Memo. 2007

159 (letter instructing taxpayer’s employer to change taxpayer’s withholding status is not

notice of determination subject to judicial review); Salazar v. Commissioner, T.C. Memo.

2006-7 (rejection of an offer-in-compromise not a notice of determination). A written

notice to proceed with collection may, in some circumstances, constitute a

determination conferring jurisdiction on the court even if not titled a notice of

determination. Craig v. Commissioner, 119 T.C. 252 (2002) (decision letter after

equivalent hearing confers jurisdiction, where hearing request was timely); Thornberry

v. Commissioner, 136 T.C. 356 (2011) (letter disregarding taxpayer’s frivolous request

for a hearing confers jurisdiction). In determining the validity of the notice of

determination for jurisdictional purposes, the court does not look behind the notice to

see whether taxpayers were afforded a proper hearing. If the notice of determination is

valid on its face, the court has jurisdiction. Lunsford v. Commissioner, 117 T.C. 159

(2001). But see Wilson v. Commissioner, 131 T.C. 47, 53 n.8 (2008) (limiting Lunsford

to nonjurisdictional defects in the hearing). A taxpayer has no right to judicial review of

an Appeals determination made under the Collection Appeals Program (CAP).

Creditron Financial Corp. v. Commissioner, T.C. Memo. 2013-217.

The Tax Court has jurisdiction to review a notice of determination issued after a levy

pursuant to 6330(f). Treas. Reg. §§ 301.6320-1(f)(1), 301.6330-1(f)(1). Section

6330(f), stating “this section shall not apply,” means that the section 6330(a) pre-levy

notice is not required, not that the court is divested of jurisdiction. Bussell v.

Commissioner, 130 T.C. 222 (2008) (jeopardy levy); Dorn v. Commissioner, 119 T.C.

356 (2002) (jeopardy levy); Clark v. Commissioner, 125 T.C. 108 (2005) (levy on state

income tax refund).

C. Timely Petition

A petition seeking review of a notice of determination must be filed within 30 days from

the notice date. I.R.C. §§ 6320(c), 6330(d)(1); Treas. Reg. §§ 301.6320-1(f)(1),

301.6330-1(f)(1); Stein v. Commissioner, T.C. Memo. 2004-124, slip. op. 15 n.7. The

30 days are 30 calendar days, not 30 business days, and an appeal filed beyond the

30-calendar-day period will be dismissed for lack of jurisdiction. Guerrier v.

Commissioner, T.C. Memo. 2002-3. The statutory period cannot be extended by the

filing of a request for reconsideration with Appeals or the taxpayer’s failure to pick up

the taxpayer’s mail. McCune v. Commissioner, 115 T.C. 114 (2000). The 30-day

period is also not extended when a separate closing letter concerning penalty

abatement is issued to the taxpayer after the notice of determination is issued. Gray v.

Commissioner, 138 T.C. 295 (2012). The 30 day period applies even if underlying tax

liability is at issue, since an assessed tax is not a deficiency. Gray v. Commissioner,

140 T.C. 163 (2013).

If the Tax Court petition, as reflected by the postmark, is mailed within 30 days from the

notice date, the “timely mailing/timely filing” rule set forth in section 7502(a) applies, and

the petition is timely even if filed after the 30-day period. Montgomery v. Commissioner,

122 T.C. 1, 4 n.2 (2004); but see Sarrell v. Commissioner, 117 T.C. 122 (2001) (barring

application of “timely mailing/timely filing” rule in the case of foreign postmarks).

If a taxpayer seeks review of a notice of determination that includes a denial of relief

under section 6015, the taxpayer must file an appeal within 30 days if the taxpayer also

seeks review of other issues raised in the CDP hearing. Treas. Reg. §§ 301.6320

1(f)(2) Q&A-F2, 301.6330-1(f)(2) Q&A-F2. If, however, a taxpayer seeks review of only

the section 6015 determination, Tax Court jurisdiction can be established under section

6015(e) and the taxpayer must file an appeal with the Tax Court within 90 days of the

notice of determination. Id.; I.R.C. § 6015(e)(1)(A); Gray v. Commissioner, 138 T.C.

295 (2012).

Similarly, if a taxpayer seeks review of a notice of determination which includes a

determination not to abate interest under section 6404(e), the taxpayer must file an

appeal within 30 days if the taxpayer also seeks review of other issues raised in the

CDP hearing. If, however, a taxpayer seeks review only of the denial of the request for

abatement of interest, the taxpayer must file an appeal with the Tax Court within 180

days after the notice of determination is mailed. See I.R.C. § 6404(h)(1); Gray v.

Commissioner, 138 T.C. 295 (2012); Wright v. Commissioner, 571 F.3d 215 (2d Cir.

2009). See also Vercel v. Commissioner, T.C. Memo. 2014-20 (petitioner cannot raise

abatement of interest in CDP case where he fails to establish that he did not exceed net

worth limits of section 7430(c)(4)(A)(ii)).

D. Standard and Scope of Review

The standard of review refers to how closely the Tax Court will scrutinize the IRS’s

determination. If the underlying liability is properly at issue, the Tax Court reviews the

liability issue de novo and the other administrative determinations for an abuse of

discretion. Jones v. Commissioner, 338 F.3d 463, 466 (5th Cir. 2003); Craig v.

Commissioner, 119 T.C. 252, 260 (2002); Sego v. Commissioner, 114 T.C. 604, 610

(2000). If liability is not at issue, the Tax Court reviews the entire determination for an

abuse of discretion. Olsen v. United States, 414 F.3d 144, 150 (1st Cir. 2005); Callahan

v. Commissioner, 130 T.C. 44, 50-51 (2005); Goza v. Commissioner, 114 T.C. 176,

181-82 (2000); H.R. REP. NO. 105-599, at 266 (1998) (Conf. Rep.). The standard of

review of questions of law makes no difference as the Tax Court must reject erroneous

views of the law. Best v. Commissioner, T.C. Memo. 2014-12. The scope of review

defines what evidence a court is permitted to examine when applying a particular

standard of review. The scope of review for issues the court reviews de novo in CDP

cases is also de novo. In other words, the court is not limited to reviewing the record

before Appeals and may hold a trial and take new evidence and testimony. The scope

of review of issues subject to abuse of discretion review in the Tax Court is a matter of

controversy. The IRS’s position, supported by the opinions of three circuit courts, is that

review is generally limited to the administrative record. Keller v. Commissioner, 568

F.3d 710 (9th Cir. 2009); Murphy v. Commissioner, 469 F.3d 27 (1st Cir. 2006);

Robinette v. Commissioner, 439 F.3d 455 (8th Cir. 2006) (holding that the

administrative record rule applies in Tax Court CDP cases), rev’g 123 T.C. 85 (2004).

The Tax Court held in Robinette that its review, as a general rule, is not limited to the

administrative record, although the court will often nonetheless limit review to the record

based on relevancy and the general principle that the taxpayer must raise issues before

Appeals in order to preserve them for appeal. See, e.g., Kovacevich v. Commissioner,

T.C. Memo. 2009-160.

Each item in the administrative record does not need to be independently admitted into

evidence in the Tax Court. The Appeals Officer’s testimony at trial that he relied on a

document is sufficient to authenticate it as part of the administrative record. Meyer v.

Commissioner, T.C. Memo. 2013-268.

1. Abuse of discretion standard of review

Nonliability issues subject to abuse of discretion review include all matters involving the

Appeals officer’s determination to proceed with collection, and all matters involving the

conduct of the hearing. Since generally the taxpayer bears the burden of proving the

Commissioner’s determinations are incorrect, the burden is on petitioner to show that

respondent abused his discretion. Johnson v. Commissioner, T.C. Memo. 2007-29,

aff’d in part and vacated in part on other grounds, Keller v. Commissioner, 568 F.3d 710

(9th Cir. 2009).

The Tax Court will overturn a determination it reviews for abuse of discretion standard in

CDP cases if the determination is “arbitrary, capricious, clearly unlawful, or without

sound basis in fact or law.” Robinette v. Commissioner, 123 T.C. 85, 93 (2004), rev’d

on other grounds, 439 F.3d 455 (8th Cir. 2006).

Review of a CDP determination under the abuse of discretion standard is deferential.

Dalton v. Commissioner, 682 F.3d 149 (1st Cir. 2012), rev’g 135 T.C. 393 (2010); Fifty

Below Sales & Marketing, Inc. v. United States, 497 F.3d 828 (8th Cir. 2007); Kindred v.

Commissioner, 454 F.3d 688, 694 n.16 (7th Cir. 2006); Robinette v. Commissioner, 439

F.3d 455, 459 (8th Cir. 2006); Olsen v. United States, 414 F.3d 144, 150 (1st Cir. 2005);

Orum v. Commissioner, 412 F.3d 819, 821 (7th Cir. 2005) (“[T]he Judicial Branch does

not instruct the Executive Branch how to make executive decisions.”); Living Care

Alternatives of Utica, Inc. v. United States, 411 F.3d 621, 631 (6th Cir. 2005) (standard

is “clear abuse of discretion in the sense of clear taxpayer abuse and unfairness by the

IRS, as contemplated by Congress”); Deyo v. United States, 296 Fed. Appx. 157 (2d

Cir. 2008). A court’s job is not to review the Service’s determinations anew but “simply

to confirm that the IRS did not abuse its wide discretion and – as part and parcel of that

inquiry – to ensure that the agency’s subsidiary factual and legal determinations were

reasonable.” Dalton, 682 F.3d at 154. A reviewing court’s role is the same regardless

of whether it is reviewing a factual question, legal question, or mixed question of law

and fact, and that role is “to evaluate the reasonableness of the IRS’s subsidiary

determination.” Id at 10.

In Fifty Below Sales & Marketing, Inc., the Eighth Circuit stated, “we can say with

assurance that where the IRS followed the statutes and regulations governing grants of

relief … and the appeals officer took into account the taxpayer’s proposed alternative

and the statutory balancing test, followed the prescribed proced

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