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Cropper v. Commissioner of Internal Revenue

United States Court of Appeals, Tenth Circuit

June 22, 2016

JAMES CROPPER, Petitioner - Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent - Appellee.

         Appeal from the Commissioner of Internal Revenue (CIR No. 5388-13L)

          Lowell H. Becraft, Jr., Huntsville, Alabama, for Petitioner-Appellant.

          Janet A. Bradley, U.S. Department of Justice, Washington, D.C. (Caroline D. Ciraolo, Acting Assistant Attorney General, and Bruce R. Ellisen, U.S. Department of Justice, Washington, D.C., with her on the brief), for Respondent-Appellee.

          Before MATHESON, BALDOCK, and MORITZ, Circuit Judges.

          MORITZ, Circuit Judge.

         When the Internal Revenue Service notified James Cropper of its intent to collect unpaid taxes by levying his property, Cropper requested a collection due process (CDP) hearing with the IRS Office of Appeals. The Office of Appeals determined that the IRS could proceed with the proposed levy. Cropper sought judicial review, and the United States Tax Court sustained the Office of Appeals' determination. Because we agree with the Tax Court that the Office of Appeals didn't abuse its discretion in determining that the IRS could proceed with the levy, we affirm.

         Background

         Preliminarily, in order to place the relevant facts in context, we find it helpful to summarize the statutory and regulatory context in which the facts developed.

         The IRS has authority to collect a tax by levying the property of a taxpayer who fails, within 10 days of receiving a notice and demand, to pay the tax owed. 26 U.S.C. § 6331(a). Before exercising that authority, the IRS must notify the taxpayer of (1) the IRS' intent to levy the property, see id. § 6331(d)(1), and (2) the taxpayer's right to a CDP hearing, see id. § 6330(a)(1).

         In the CDP hearing, [1] a taxpayer may raise "any relevant issue relating to the unpaid tax or the proposed levy including-(i) appropriate spousal defenses; (ii) challenges to the appropriateness of collection actions; and (iii) offers of collection alternatives." Id. § 6330(c)(2)(A). The taxpayer may also challenge "the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." Id. § 6330(c)(2)(B).

         As part of the CDP hearing, the Office of Appeals must "obtain verification from the [IRS] that the requirements of any applicable law or administrative procedure have been met." Id. § 6330(c)(1). And it must consider that verification in determining whether the IRS can proceed with a proposed levy. Id. § 6330(c)(3)(A). Additionally, the Office of Appeals must consider the issues raised by the taxpayer, and "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary." Id. § 6330(c)(3)(B)-(C).

         Following the CDP hearing, the Office of Appeals issues a Notice of Determination. Treas. Reg. § 301.6330-1(f). In the Notice, the Office of Appeals details its findings and decisions on all matters it considered in the hearing; sets forth any agreements it made with the taxpayer, any relief it provided to the taxpayer, and any future actions required from the taxpayer or the IRS; and advises the taxpayer of his or her right to seek judicial review by timely filing a petition in the Tax Court. Treas. Reg. § 301.6330-1(e)(3), Q&A (E8); see also 26 U.S.C. § 6330(d)(1) (permitting taxpayer to petition Tax Court for review "within 30 days of a [Notice of] determination"). The Tax Court reviews the Office of Appeals' administrative "determination[s]-including the verification that 'the requirements of any applicable law or administrative procedure have been met'-for abuse of discretion." Meyer v. Comm'r, 106 T.C.M. (CCH) 599, 2013 WL 6169420, at *4 (2013). If the validity of the underlying tax liability is properly at issue in the CDP hearing, the Tax Court reviews that issue de novo. Craig v. Comm'r, 119 T.C. 252, 260 (2002).

         Keeping that framework in mind, we turn to the facts of this case.

         James Cropper didn't file federal income tax returns for tax years 2006, 2007, or 2008. The IRS prepared substitute returns for each tax year and mailed three separate deficiency notices via certified mail to Cropper's last known address, a post office box in Norwood, Colorado. After Cropper failed to respond to the deficiency notices, the IRS assessed tax liabilities against Cropper for each of the three tax years. The IRS subsequently mailed Cropper (1) a lien notice, dated October 6, 2011, informing him that his property was subject to a federal tax lien; and (2) a levy notice, dated May 7, 2012, informing him of its intent to levy his property.

         In response to the levy notice, Cropper timely requested a CDP hearing. A settlement officer with the Office of Appeals informed Cropper of a scheduled telephone CDP hearing on September 20, 2012. Before the scheduled hearing, the settlement officer obtained documents from the IRS, reviewed Cropper's IRS account transcripts, verified that the IRS followed all applicable administrative and legal procedures before proceeding with the proposed levy, confirmed that the IRS sent all required notices to Cropper's Norwood address, and determined that the tax assessments were therefore valid.

         Because Cropper subsequently failed to participate in the scheduled telephone CDP hearing and didn't respond to the officer's requests to reschedule it, the officer informed Cropper that she would conduct the CDP hearing through written correspondence. Over the next two months, Cropper responded to the officer's letters by asserting that he never received the deficiency notices and never had an opportunity to challenge the underlying tax liabilities. But Cropper failed to submit any documents the officer requested for purposes of the CDP hearing, any ...


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