SCOTUS Reports

Tag: 26 U.S.C. § 7122

  • Reed v. Commissioner, 141 T.C. 248 (2013): Jurisdiction and Authority in Collection Due Process Hearings

    Reed v. Commissioner, 141 T. C. 248 (U. S. Tax Court 2013)

    In Reed v. Commissioner, the U. S. Tax Court upheld the IRS’s decision to sustain a levy notice against Tom Reed, who failed to file timely tax returns for years 1987-2001. Reed argued that the IRS abused its discretion by not reopening a 2008 offer-in-compromise (OIC) based on doubt as to collectibility. The court clarified its jurisdiction in collection due process hearings and ruled that the IRS cannot be compelled to reopen a previously returned OIC, emphasizing the importance of current financial data in such assessments. This decision reinforces the procedural boundaries of IRS authority in handling tax collection disputes.

    Parties

    Tom Reed, the Petitioner, was the individual taxpayer who failed to file timely Federal income tax returns for the years 1987 through 2001 and subsequently sought to settle his tax liabilities through offers-in-compromise. The Respondent, the Commissioner of Internal Revenue, was represented by the Internal Revenue Service (IRS) and was responsible for the administration and collection of Reed’s tax liabilities.

    Facts

    Tom Reed failed to file his Federal income tax returns timely for the years 1987 through 2001. He later submitted delinquent returns but did not fully satisfy his outstanding tax liabilities. In 2004, Reed submitted his first offer-in-compromise (OIC) to settle these liabilities, proposing to pay $22,000 based on doubt as to collectibility. The IRS rejected this offer, determining that Reed’s reasonable collection potential was higher due to his dissipation of $258,000 from a 2001 real estate sale through high-risk day trading. In 2008, Reed submitted another OIC for $35,196, which the IRS returned as unprocessable because Reed was not in compliance with his current tax obligations. After the IRS issued a final notice of intent to levy, Reed requested a collection due process hearing, during which he contested the handling of his OICs.

    Procedural History

    Reed’s first OIC in 2004 was rejected by the IRS’s Houston Offer in Compromise Unit and upheld on appeal by the Internal Revenue Service Appeals Office in Houston, Texas. His 2008 OIC was returned as unprocessable due to non-compliance with current tax obligations. Following the issuance of a final notice of intent to levy, Reed requested a collection due process hearing, which was conducted by Settlement Officer Liana A. White. After the hearing, White issued a determination notice sustaining the levy notice. Reed then filed a timely petition with the U. S. Tax Court, challenging the determination on the grounds that the IRS abused its discretion by not reopening the 2008 OIC and by rejecting the 2004 OIC. The court reviewed the case de novo, applying an abuse of discretion standard.

    Issue(s)

    Whether the U. S. Tax Court has jurisdiction to review the IRS’s determination to sustain a notice of intent to levy when the taxpayer challenges the handling of prior offers-in-compromise?

    Whether the IRS can be required to reopen an offer-in-compromise based on doubt as to collectibility that was returned to the taxpayer years before the collection due process hearing commenced?

    Whether the IRS abused its discretion in sustaining the notice of intent to levy based on its handling of the taxpayer’s 2004 and 2008 offers-in-compromise?

    Rule(s) of Law

    The U. S. Tax Court has jurisdiction over collection due process hearings under 26 U. S. C. § 6330(d) when the Commissioner issues a determination notice and the taxpayer timely files a petition. The IRS has the authority to compromise unpaid tax liabilities under 26 U. S. C. § 7122(a), but an offer-in-compromise must be based on current financial data. An offer-in-compromise may be considered during a collection due process hearing if proposed by the taxpayer, as per 26 U. S. C. § 6330(c)(2)(A)(iii). The IRS may return an offer-in-compromise if the taxpayer fails to meet current tax obligations, as outlined in 26 C. F. R. § 301. 7122-1(f)(5)(ii).

    Holding

    The U. S. Tax Court held that it had jurisdiction to review the IRS’s determination to sustain the notice of intent to levy. The court further held that the IRS cannot be required to reopen an offer-in-compromise based on doubt as to collectibility that was returned to the taxpayer years before the collection due process hearing commenced. Finally, the court held that the IRS did not abuse its discretion in sustaining the notice of intent to levy based on its handling of Reed’s 2004 and 2008 offers-in-compromise.

    Reasoning

    The court reasoned that its jurisdiction to review the IRS’s determination in collection due process hearings is expressly authorized by Congress under 26 U. S. C. § 6330(d). The court rejected the IRS’s argument that it lacked jurisdiction because Reed did not propose a new offer-in-compromise during the hearing, clarifying that the court’s jurisdiction is triggered by the issuance of a determination notice and a timely filed petition.

    Regarding the reopening of the 2008 offer-in-compromise, the court emphasized that such offers must be based on current financial data, as required by 26 U. S. C. § 7122(d)(1) and IRS procedures. The court found that compelling the IRS to reopen an offer based on outdated financial information would impermissibly expand its authority and interfere with the statutory scheme created by Congress.

    The court upheld the IRS’s rejection of the 2004 offer-in-compromise, finding that the inclusion of dissipated assets in calculating Reed’s reasonable collection potential was proper under IRS guidelines. The court also upheld the IRS’s return of the 2008 offer-in-compromise, noting that Reed’s failure to comply with current tax obligations justified the IRS’s action.

    The court concluded that the IRS did not abuse its discretion in sustaining the levy notice, as it verified compliance with legal and administrative requirements, considered all relevant issues raised by Reed, and balanced the intrusiveness of the proposed collection actions against the need for effective tax collection.

    Disposition

    The U. S. Tax Court entered a decision for the respondent, the Commissioner of Internal Revenue, sustaining the final notice of intent to levy.

    Significance/Impact

    Reed v. Commissioner is significant for clarifying the jurisdictional scope of the U. S. Tax Court in collection due process hearings and the IRS’s authority to handle offers-in-compromise. The decision underscores the importance of current financial data in assessing offers based on doubt as to collectibility and reinforces the IRS’s discretion in rejecting or returning such offers. This case impacts taxpayers seeking to settle tax liabilities through offers-in-compromise by emphasizing the need for compliance with current tax obligations and the limited judicial review available for returned offers. Subsequent cases have cited Reed for its analysis of the interaction between 26 U. S. C. §§ 7122 and 6330, further solidifying its doctrinal importance in tax law.

  • Reed v. Commissioner, 141 T.C. No. 7 (2013): Jurisdiction and Discretion in Collection Due Process Hearings

    Reed v. Commissioner, 141 T. C. No. 7 (U. S. Tax Ct. 2013)

    In Reed v. Commissioner, the U. S. Tax Court ruled that it has jurisdiction to review the IRS’s decision to sustain a levy notice, but it cannot compel the IRS to reopen an offer-in-compromise (OIC) that was returned as unprocessable years before a collection hearing. The court affirmed the IRS’s discretion in handling OICs and upheld the levy notice, emphasizing the importance of current financial data in evaluating OICs based on doubt as to collectibility.

    Parties

    Tom Reed, the petitioner, was represented by George W. Connelly, Jr. , Heather M. Pesikoff, and Renesha N. Fountain. The respondent was the Commissioner of Internal Revenue, represented by David Baudilio Mora and Gordon P. Sanz.

    Facts

    Tom Reed failed to timely file Federal income tax returns for the years 1987 through 2001. He later submitted delinquent returns but did not fully satisfy his tax liabilities. Reed made two separate offers-in-compromise (OICs) to settle his outstanding tax liabilities. The first OIC in 2004 was rejected by the IRS, which found that Reed had dissipated real estate proceeds and included them in calculating an acceptable offer amount. The second OIC in 2008 was returned as unprocessable because Reed was not in compliance with current tax obligations. After the IRS issued a final notice of intent to levy, Reed requested a collection due process hearing, arguing that the IRS should reopen the returned 2008 OIC and reconsider the rejected 2004 OIC.

    Procedural History

    Reed’s 2004 OIC was rejected by the IRS, and he appealed to the IRS Appeals Office, which upheld the rejection. His 2008 OIC was returned as unprocessable, and despite Reed’s subsequent attempts to have it reconsidered, the IRS maintained its position. After the IRS issued a final notice of intent to levy, Reed requested a collection due process hearing. The Appeals officer sustained the levy notice, and Reed petitioned the U. S. Tax Court, arguing that the IRS abused its discretion in handling the OICs and sustaining the levy notice.

    Issue(s)

    Whether the U. S. Tax Court has jurisdiction to review the IRS’s decision to sustain a levy notice?

    Whether the IRS can be required to reopen an OIC based on doubt as to collectibility that was returned as unprocessable years before a collection hearing commenced?

    Whether the IRS abused its discretion in sustaining the final notice of intent to levy?

    Rule(s) of Law

    The IRS has the authority to compromise unpaid tax liabilities under 26 U. S. C. § 7122(a). Doubt as to collectibility is one ground for compromise, where a taxpayer’s assets and income are less than the unpaid tax liability (26 C. F. R. § 301. 7122-1(b)(2)). The IRS may consider an OIC proposed during a collection hearing under 26 U. S. C. § 6330(c)(2)(A)(iii). However, taxpayers must submit current financial data when proposing an OIC based on doubt as to collectibility.

    Holding

    The U. S. Tax Court held that it has jurisdiction to determine whether the IRS abused its discretion in sustaining the final notice of intent to levy. The court further held that the IRS cannot be required to reopen an OIC based on doubt as to collectibility that was returned to the taxpayer years before the collection hearing commenced. Finally, the court held that the IRS did not abuse its discretion in sustaining the final notice of intent to levy.

    Reasoning

    The court’s reasoning focused on the interaction between 26 U. S. C. § 7122 and § 6330. The court noted that the IRS must evaluate an OIC proposed during a collection hearing based on its authority to compromise unpaid tax liabilities. The court rejected Reed’s theory that the IRS could be compelled to reopen an OIC returned years before a collection hearing, as it would impermissibly expand the IRS’s authority by allowing the evaluation of an OIC based on outdated financial data. The court also found that such a theory would interfere with the statutory scheme by creating additional layers of review for returned OICs. The court upheld the IRS’s decisions on both the 2004 and 2008 OICs, finding that they were based on a reasoned analysis of the facts and applicable law. The court concluded that the IRS did not act arbitrarily, capriciously, or without a sound basis in fact or law in sustaining the levy notice.

    Disposition

    The court entered a decision for the respondent, affirming the IRS’s decision to sustain the final notice of intent to levy.

    Significance/Impact

    Reed v. Commissioner clarifies the scope of the U. S. Tax Court’s jurisdiction in collection due process hearings and the IRS’s discretion in handling OICs. The decision emphasizes the importance of current financial data in evaluating OICs based on doubt as to collectibility and limits the ability of taxpayers to challenge the IRS’s decisions on returned OICs. The case also underscores the IRS’s broad discretion in collection matters and the limited judicial review available to taxpayers in such cases.

  • Johnson v. Commissioner, 136 T.C. 475 (2011): Calculation of Reasonable Collection Potential in Offers-in-Compromise

    Johnson v. Commissioner, 136 T. C. 475 (2011) (United States Tax Court, 2011)

    In Johnson v. Commissioner, the U. S. Tax Court upheld the IRS’s rejection of Stephen Johnson’s offer-in-compromise to settle his tax liabilities, affirming the agency’s discretion in calculating the taxpayer’s reasonable collection potential (RCP). The court found that the IRS did not abuse its discretion by including dissipated assets and projected future income in the RCP calculation, emphasizing the importance of such considerations in assessing the viability of compromise offers. This decision underscores the IRS’s authority in evaluating the financial capability of taxpayers seeking to settle tax debts.

    Parties

    Stephen J. Johnson, the Petitioner, sought review of the IRS’s determination regarding his tax liabilities for the years 1999 and 2000. The Respondent was the Commissioner of Internal Revenue.

    Facts

    Stephen Johnson, a former investment banker, established Asiawerks Global Investment Group, Pte. , Ltd. in Singapore in 1999. His primary income sources during the relevant years were his salary from Asiawerks and annual tribal income. Johnson had significant taxable income in 1999 and 2000, amounting to $1. 7 million and $1. 8 million, respectively, which resulted in federal income tax liabilities of $514,164 for 1999 and $565,268 for 2000. Despite filing his tax returns in 2002, Johnson paid no income tax for these years. The IRS assessed his tax liabilities and, upon Johnson’s failure to pay, issued notices of federal tax lien (NFTL) and proposed levy to collect a total of $1,586,952. 45, including interest and penalties. Johnson requested a collection due process (CDP) hearing, during which he proposed multiple offers-in-compromise (OICs), which he amended several times. During the CDP proceedings, Johnson liquidated investments but did not use the proceeds to pay his tax liabilities, instead reinvesting them into Asiawerks or using them for personal expenses. The IRS ultimately rejected Johnson’s final OIC of $140,000 and issued a notice of determination sustaining the lien and levy actions.

    Procedural History

    Johnson filed a petition with the U. S. Tax Court challenging the IRS’s determination. The IRS moved for remand due to the lack of explanation in the notice of determination regarding the calculation of Johnson’s RCP. The Tax Court granted the remand, and a supplemental CDP hearing was conducted. Following the remand, the IRS issued a supplemental notice of determination, again rejecting Johnson’s OIC and sustaining the collection actions. The case was submitted to the Tax Court on a stipulated record.

    Issue(s)

    Whether the IRS’s Office of Appeals abused its discretion in rejecting Stephen Johnson’s offer-in-compromise?

    Whether the IRS properly included dissipated assets and projected future income in calculating Johnson’s reasonable collection potential?

    Rule(s) of Law

    The Internal Revenue Code authorizes the Secretary to compromise civil or criminal cases arising under the internal revenue laws (26 U. S. C. § 7122(a)). The IRS may compromise a tax liability based on doubt as to collectibility if the taxpayer’s assets and income are less than the full amount of the liability (26 C. F. R. § 301. 7122-1(b)(2)). An offer-in-compromise based on doubt as to collectibility will be accepted only if it reflects the taxpayer’s reasonable collection potential (RCP), which is calculated by adding the net equity in the taxpayer’s assets to the taxpayer’s monthly disposable income multiplied by the number of months remaining in the statutory period for collection (Rev. Proc. 2003-71, § 4. 02(2)). Dissipated assets may be included in the RCP calculation if the taxpayer cannot substantiate their use for necessary living expenses (IRM pt. 5. 8. 5. 5(1)).

    Holding

    The U. S. Tax Court held that the IRS did not abuse its discretion in rejecting Johnson’s offer-in-compromise and sustaining the proposed collection actions. The court affirmed the IRS’s inclusion of dissipated assets and future income potential in calculating Johnson’s RCP, finding that Johnson failed to substantiate that the dissipated assets were used for necessary living expenses and that his projected future income was reasonably calculated.

    Reasoning

    The Tax Court’s reasoning focused on the IRS’s discretion in evaluating OICs and calculating RCP. The court noted that the IRS’s decision to reject an OIC is reviewed for abuse of discretion, and it will not be disturbed unless it is arbitrary, capricious, or without sound basis in fact or law. The court found that Johnson’s repeated amendments and withdrawal of his OICs indicated that he was no longer offering the previously proposed amounts, thus justifying the IRS’s non-acceptance of those offers. Regarding the calculation of RCP, the court upheld the IRS’s inclusion of dissipated assets, such as the proceeds from Johnson’s investment liquidations, because Johnson failed to provide documentation substantiating their use for necessary living expenses. The court also upheld the IRS’s calculation of Johnson’s future income potential, considering his professional background and earning history, and found that the IRS reasonably disallowed certain expenses, such as a monthly loan payment, due to lack of substantiation. The court rejected Johnson’s arguments that the IRS reneged on any deal and that the length of the CDP proceedings constituted an abuse of discretion, emphasizing that the IRS’s actions were within its authority and justified by Johnson’s changing financial circumstances and failure to provide required documentation.

    Disposition

    The U. S. Tax Court entered a decision for the respondent, allowing the IRS to proceed with collection actions against Stephen Johnson’s outstanding tax liabilities.

    Significance/Impact

    Johnson v. Commissioner reaffirms the IRS’s discretion in evaluating offers-in-compromise and calculating reasonable collection potential. The case highlights the importance of taxpayers providing complete and current financial information during CDP hearings, especially regarding the use of dissipated assets and the substantiation of expenses. The decision also clarifies that settlement officers lack the authority to accept OICs, and that the IRS’s consideration of future income potential is a legitimate factor in assessing a taxpayer’s ability to pay. This ruling serves as a reminder to taxpayers of the need to engage fully and transparently with the IRS during the OIC process to avoid the inclusion of dissipated assets in their RCP calculation.

  • Pixley v. Commissioner, 123 T.C. 269 (2004): Tithing Expenses in Offers in Compromise

    Pixley v. Commissioner, 123 T. C. 269 (U. S. Tax Ct. 2004)

    In Pixley v. Commissioner, the U. S. Tax Court ruled that tithing expenses cannot be considered in determining a taxpayer’s ability to pay outstanding tax liabilities in an offer in compromise, unless the tithing is a condition of employment. The court upheld the IRS’s decision to disallow tithing expenses for Bradley and Monica Pixley, finding no abuse of discretion. The ruling underscores the IRS’s authority to set guidelines for compromise offers and emphasizes the government’s interest in maintaining a uniform tax system, which supersedes any potential infringement on religious freedom.

    Parties

    Bradley M. and Monica Pixley, the petitioners, challenged the determination of the Commissioner of Internal Revenue, the respondent, regarding the disallowance of tithing expenses in their offer in compromise for unpaid tax liabilities from 1992 and 1993.

    Facts

    Bradley Pixley, an ordained Baptist minister, served as a pastor at Grace Community Bible Church in Tomball, Texas, from September 1995 to June 2001. After moving to California, he worked as an echocardiographer at Children’s Hospital in Los Angeles. In October 2000, the IRS issued a notice of intent to levy against the Pixleys for their unpaid tax liabilities totaling $19,366. 69 for 1992 and $39,851. 27 for 1993. In response, the Pixleys submitted an offer in compromise, which included a monthly tithing expense of $520, claiming it as a necessary living expense. The IRS Appeals officer rejected this offer, disallowing the tithing expense due to lack of substantiation that it was a condition of Mr. Pixley’s employment at the time of the offer in compromise.

    Procedural History

    The Pixleys requested a Collection Due Process (CDP) hearing following the IRS’s notice of intent to levy. During the CDP hearing, they submitted an offer in compromise, which was rejected by the Appeals officer on March 14, 2002, for failing to substantiate that the tithing was a condition of employment. The Pixleys then filed a petition with the U. S. Tax Court for review of the Appeals Office determination. The Tax Court reviewed the case under the abuse of discretion standard, as the underlying tax liability was not at issue.

    Issue(s)

    Whether, in evaluating the Pixleys’ offer in compromise, the IRS Appeals officer should have considered the Pixleys’ tithing expenses in determining their ability to pay their outstanding tax liabilities?

    Whether the IRS’s disallowance of tithing expenses for this purpose violates Mr. Pixley’s First Amendment right to free exercise of religion?

    Rule(s) of Law

    Under 26 U. S. C. § 7122(a), the Commissioner is authorized to compromise a taxpayer’s outstanding tax liabilities. Section 7122(c)(1) requires the Secretary to prescribe guidelines for determining whether an offer in compromise is adequate. The Internal Revenue Manual (IRM) provides that charitable contributions, including tithes, are necessary expenses if they provide for the taxpayer’s health and welfare or are a condition of employment. However, the burden is on the taxpayer to substantiate such claims.

    Holding

    The U. S. Tax Court held that the IRS Appeals officer did not abuse his discretion in disallowing the Pixleys’ tithing expenses in their offer in compromise, as the Pixleys failed to substantiate that the tithing was a condition of Mr. Pixley’s employment at the time of the offer. Furthermore, the court held that the disallowance of tithing expenses did not violate Mr. Pixley’s First Amendment right to free exercise of religion.

    Reasoning

    The court reasoned that the IRS’s guidelines in the IRM allow for the inclusion of tithing expenses as necessary living expenses if they are a condition of employment. However, the Pixleys did not provide evidence that Mr. Pixley was employed as a minister at the time the offer in compromise was evaluated or that tithing was a condition of his employment. The court emphasized the importance of the taxpayer’s burden to substantiate claims of necessary expenses. Regarding the First Amendment challenge, the court found that the disallowance of tithing expenses constituted a financial burden common to all taxpayers and did not impose a recognizable burden on the free exercise of religious beliefs. The court further noted that even if such a burden existed, it would be justified by the government’s compelling interest in maintaining a sound tax system, as supported by precedents such as Hernandez v. Commissioner and United States v. Lee.

    Disposition

    The U. S. Tax Court sustained the IRS’s determination to proceed with collection of the Pixleys’ tax liabilities by levy, as the disallowance of tithing expenses in the offer in compromise was upheld.

    Significance/Impact

    Pixley v. Commissioner clarifies that tithing expenses are not automatically considered in determining a taxpayer’s ability to pay in an offer in compromise unless they are substantiated as a condition of employment. The case reinforces the IRS’s authority to set guidelines for compromise offers and underscores the government’s interest in maintaining a uniform and effective tax system. It also highlights the limits of First Amendment protections in the context of tax obligations, affirming that financial burdens resulting from tax liabilities do not infringe upon the free exercise of religion. This ruling may affect how taxpayers structure their offers in compromise and how the IRS evaluates such offers, particularly when religious contributions are involved.

  • Orum v. Comm’r, 123 T.C. 1 (2004): Jurisdictional Requirements for Collection Due Process Hearings

    Orum v. Commissioner, 123 T. C. 1 (2004)

    In Orum v. Commissioner, the U. S. Tax Court ruled it lacked jurisdiction over the 1998 tax year due to the Orums’ failure to timely request a Collection Due Process (CDP) hearing following the IRS’s initial notice of intent to levy. The court upheld the IRS’s determination for the 1999 tax year, finding no abuse of discretion in rejecting the taxpayers’ proposed installment agreement and offer-in-compromise. This decision clarifies the strict jurisdictional requirements for CDP hearings and the IRS’s discretion in handling collection alternatives.

    Parties

    Keith and Cherie Orum (Petitioners) v. Commissioner of Internal Revenue (Respondent)

    Facts

    Keith and Cherie Orum, a married couple, filed joint federal income tax returns for 1998 and 1999 but did not fully pay their tax liabilities. On June 23, 2000, the IRS sent the Orums a Notice of Intent to Levy and Notice of Your Right to a Hearing for 1998 by certified mail. The Orums did not request a hearing in response to this notice. On December 14, 2001, after the termination of an intervening installment agreement, the IRS sent the Orums another Notice of Intent to Levy for both 1998 and 1999. The Orums requested a hearing for both years on December 31, 2001. In February 2002, they submitted an offer-in-compromise, which the IRS rejected based on the financial information provided. The IRS granted an equivalent hearing for 1998 and a CDP hearing for 1999, during which the Orums failed to provide requested additional financial information by the specified deadline. Consequently, the IRS issued a decision letter for 1998 and a notice of determination for 1999, both sustaining the proposed collection actions.

    Procedural History

    The Orums filed a petition with the U. S. Tax Court to dispute the decision letter for 1998 and the notice of determination for 1999. The Commissioner filed a motion to dismiss for lack of jurisdiction with respect to 1998. The Tax Court heard arguments on the motion and conducted a trial on the merits of the 1999 determination. The court applied a de novo standard of review for jurisdictional issues and an abuse of discretion standard for the determination regarding 1999.

    Issue(s)

    Whether the Tax Court lacks jurisdiction under 26 U. S. C. § 6330(d)(1) with regard to the 1998 tax year?

    Whether there was an abuse of discretion in the determination that the proposed collection action for the 1999 tax year should be sustained?

    Rule(s) of Law

    26 U. S. C. § 6330(a)(2) requires the IRS to provide written notice of the right to a CDP hearing before levying on a taxpayer’s property. Section 6330(a)(3)(B) stipulates that the taxpayer must request a CDP hearing within 30 days of the notice. If the taxpayer misses this deadline, they are not entitled to a CDP hearing but may receive an equivalent hearing. Section 6330(d)(1) grants the Tax Court jurisdiction over a levy action only if the taxpayer files a timely petition following the issuance of a notice of determination from a CDP hearing. The IRS may reject an offer-in-compromise if the taxpayer’s financial information does not support a finding of doubt as to collectibility or promotion of effective tax administration, as per 26 C. F. R. § 301. 7122-1T(b).

    Holding

    The Tax Court held that it lacked jurisdiction over the 1998 tax year because the Orums did not request a CDP hearing within 30 days of the June 23, 2000, notice of intent to levy. The subsequent December 14, 2001, notice did not entitle the Orums to a CDP hearing for 1998. For the 1999 tax year, the court held that the IRS did not abuse its discretion in rejecting the Orums’ proposed installment agreement and offer-in-compromise, and the proposed collection action was sustained.

    Reasoning

    The court’s reasoning on the jurisdictional issue for 1998 focused on the strict statutory requirements of 26 U. S. C. § 6330. The court found that the June 23, 2000, notice was properly sent to the Orums’ last known address, and their failure to request a hearing within 30 days precluded jurisdiction under § 6330(d)(1). The court rejected the Orums’ argument that the December 14, 2001, notice entitled them to a CDP hearing, citing regulations that limit a taxpayer to one CDP hearing per tax period and that subsequent notices do not reset the 30-day window. The court distinguished this case from Craig v. Commissioner, where jurisdiction was upheld due to a timely, albeit unsigned, request for a hearing.

    For the 1999 determination, the court applied the abuse of discretion standard. The IRS’s rejection of another installment agreement was upheld because the Orums failed to provide requested financial information and had defaulted on a previous agreement. The court found that the IRS reasonably concluded from the Orums’ financial information that they had the ability to pay their tax liabilities in full, thus justifying the rejection of the offer-in-compromise on grounds of doubt as to collectibility and effective tax administration. The court considered the IRS’s analysis of the Orums’ financial situation as well as policy considerations of efficient tax collection and the integrity of the tax system.

    Disposition

    The Tax Court granted the Commissioner’s motion to dismiss for lack of jurisdiction with respect to 1998 and upheld the determination for 1999, sustaining the proposed collection action.

    Significance/Impact

    Orum v. Commissioner underscores the strict jurisdictional requirements for CDP hearings, emphasizing that taxpayers must adhere to the 30-day window following the initial notice of intent to levy to preserve their right to judicial review. The decision also reinforces the IRS’s broad discretion in evaluating offers-in-compromise and installment agreements, highlighting the importance of timely and complete financial disclosure by taxpayers. Subsequent courts have cited Orum in addressing similar jurisdictional and discretion issues, impacting how taxpayers and practitioners approach CDP hearings and collection alternatives.