SCOTUS Reports

Tag: I.R.C. sec. 6330(c)(2)(B)

  • Rickey B. Barnhill v. Commissioner of Internal Revenue, 155 T.C. No. 1 (2020): Opportunity to Dispute Trust Fund Recovery Penalty Liability

    Rickey B. Barnhill v. Commissioner of Internal Revenue, 155 T. C. No. 1 (2020)

    In Rickey B. Barnhill v. Commissioner, the U. S. Tax Court denied the IRS’s motion for summary judgment, ruling that a taxpayer’s inability to participate in an Appeals conference due to non-receipt of notification did not preclude a subsequent challenge to the Trust Fund Recovery Penalty (TFRP) liability at a Collection Due Process (CDP) hearing. This decision underscores the importance of a meaningful opportunity to dispute tax liabilities before the IRS can bar such challenges in later proceedings, ensuring taxpayers are not denied due process rights.

    Parties

    Rickey B. Barnhill, as the Petitioner, challenged the assessment of Trust Fund Recovery Penalties by the Commissioner of Internal Revenue, the Respondent, in the U. S. Tax Court. The case originated from Barnhill’s appeal of the proposed TFRP assessments and subsequent CDP hearing request following the IRS’s filing of a notice of federal tax lien.

    Facts

    Rickey B. Barnhill was a director at Iron Cross, Inc. , which failed to pay over employment withholding taxes for ten quarters from 2010 to 2012. The IRS sent Barnhill a Letter 1153 proposing to assess TFRPs against him as a responsible person. Barnhill timely filed an appeal with the IRS Office of Appeals (Appeals). Appeals then sent a Letter 5157 to schedule a conference, which Barnhill alleges he never received. As a result, he did not participate in the scheduled conference. Appeals rejected Barnhill’s appeal, assessed the penalties, and filed a notice of federal tax lien. Barnhill requested a CDP hearing to challenge the underlying TFRP liability, but Appeals rejected this challenge, citing the prior opportunity provided by the Letter 1153.

    Procedural History

    The IRS assessed TFRPs against Barnhill after Appeals rejected his initial appeal. Upon receiving a notice of federal tax lien, Barnhill requested a CDP hearing, where he attempted to dispute his underlying liability for the TFRPs. Appeals sustained the lien filing, determining that Barnhill had a prior opportunity to dispute his liability due to his receipt of Letter 1153. Barnhill then filed a petition in the U. S. Tax Court, which denied the Commissioner’s motion for summary judgment, holding that the absence of a meaningful opportunity to dispute the TFRP liability in the initial Appeals conference did not preclude a subsequent challenge at the CDP hearing.

    Issue(s)

    Whether a taxpayer who received a Letter 1153 but did not receive subsequent correspondence (Letter 5157) scheduling an Appeals conference has had an “opportunity,” for purposes of I. R. C. sec. 6330(c)(2)(B), to dispute his underlying TFRP liability, thereby precluding a challenge to that liability at a later CDP hearing?

    Rule(s) of Law

    Under I. R. C. sec. 6330(c)(2)(B), a taxpayer may challenge the existence or amount of the underlying tax liability at a CDP hearing if the taxpayer “did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability. ” A prior conference with Appeals, whether pre- or post-assessment, constitutes an “opportunity” to dispute the liability. See 26 C. F. R. sec. 301. 6320-1(e)(3), Q&A-E2, Proced. & Admin. Regs.

    Holding

    The U. S. Tax Court held that if a taxpayer received a Letter 1153 but did not receive the subsequent Letter 5157, thereby missing the Appeals conference, the taxpayer did not have an “opportunity” to dispute the underlying TFRP liability within the meaning of I. R. C. sec. 6330(c)(2)(B). Therefore, the taxpayer should not be precluded from challenging that liability at a subsequent CDP hearing.

    Reasoning

    The Tax Court reasoned that the mere receipt of Letter 1153 does not constitute an “opportunity” to dispute the TFRP liability; rather, it is the Appeals conference that provides the actual opportunity. The court distinguished between the receipt of a notice and the opportunity it occasions, emphasizing that the statutory text of I. R. C. sec. 6330(c)(2)(B) bars a liability challenge at a CDP hearing only if the taxpayer had a genuine chance to dispute the liability. In Barnhill’s case, the absence of the Letter 5157 meant he was not informed of the conference and thus did not have a meaningful opportunity to participate. The court rejected the Commissioner’s argument that merely receiving the Letter 1153 was sufficient to preclude a subsequent challenge, finding that the lack of participation in the Appeals conference due to non-receipt of the scheduling letter constituted a denial of the opportunity to dispute the liability. The court also found that any error in the TFRP appeal process could not be considered harmless, as it potentially affected the outcome of the appeal and the subsequent CDP hearing.

    Disposition

    The U. S. Tax Court denied the Commissioner’s motion for summary judgment, holding that the absence of a meaningful opportunity to dispute the TFRP liability in the initial Appeals conference did not preclude a subsequent challenge at the CDP hearing.

    Significance/Impact

    This decision clarifies the requirement for a meaningful opportunity to dispute tax liabilities before such challenges can be barred in subsequent proceedings. It reinforces the importance of due process in tax collection actions, ensuring that taxpayers are not denied the right to challenge their liabilities based on procedural deficiencies in the IRS’s appeals process. The case may influence future IRS procedures and taxpayer rights in TFRP assessments and CDP hearings, emphasizing the necessity of effective communication and the provision of actual opportunities for taxpayers to engage in the appeals process.

  • Eric Onyango v. Commissioner of Internal Revenue, 142 T.C. No. 24 (2014): Notice of Deficiency and Taxpayer’s Obligation to Retrieve Mail

    Eric Onyango v. Commissioner of Internal Revenue, 142 T. C. No. 24 (U. S. Tax Court 2014)

    In Eric Onyango v. Commissioner of Internal Revenue, the U. S. Tax Court ruled that a taxpayer cannot claim non-receipt of a notice of deficiency if they fail to retrieve their mail despite having reasonable opportunities to do so. The court emphasized that Onyango, who was aware of ongoing tax issues, did not regularly check his mailbox, leading to the non-delivery of the notice. This decision clarifies the taxpayer’s responsibility in ensuring receipt of important tax documents, impacting how taxpayers must engage with postal services to stay informed of their tax obligations.

    Parties

    Eric Onyango, Petitioner, pro se; Commissioner of Internal Revenue, Respondent, represented by Lauren N. May and K. Elizabeth Kelly.

    Facts

    Eric Onyango, a resident of Chicago, Illinois, filed his tax return for the year 2006 and subsequently submitted amended returns. The Internal Revenue Service (IRS) conducted an examination of Onyango’s 2006 and 2007 tax years, proposing adjustments. After unsuccessful attempts to contact Onyango, the IRS issued a notice of deficiency on August 6, 2010, which was mailed to Onyango’s legal residence. The U. S. Postal Service made several unsuccessful attempts to deliver the notice, leaving notices of attempted delivery at Onyango’s address. Onyango did not regularly check his mailbox and discovered the notices of attempted delivery only in late October or early November 2010. By the time he checked at the post office, the certified mail had been returned to the IRS as unclaimed.

    Procedural History

    The IRS issued a notice of deficiency for Onyango’s 2006 and 2007 tax years on August 6, 2010. Onyango did not timely file a petition in response to this notice. Subsequently, the IRS issued a notice of intent to levy and a notice of Federal tax lien filing, to which Onyango responded by requesting hearings. The Appeals Office sustained the proposed collection actions, leading to the filing of petitions by Onyango with the U. S. Tax Court, which conducted a partial trial to address whether Onyango could dispute his underlying tax liability for 2006 under I. R. C. sec. 6330(c)(2)(B).

    Issue(s)

    Whether a taxpayer who declines to retrieve certified mail containing a notice of deficiency, despite having reasonable opportunities to do so, can successfully contend that they did not receive the notice for purposes of I. R. C. sec. 6330(c)(2)(B)?

    Rule(s) of Law

    Under I. R. C. sec. 6330(c)(2)(B), a person may dispute the existence or amount of the underlying tax liability for any tax period if the person did not receive a notice of deficiency for that tax liability or did not otherwise have the opportunity to dispute that tax liability. The court emphasized that the taxpayer has a responsibility to retrieve mail when reasonably able to do so.

    Holding

    The U. S. Tax Court held that Onyango could not decline to retrieve his mail, despite having multiple opportunities to do so, and subsequently claim non-receipt of the notice of deficiency for purposes of I. R. C. sec. 6330(c)(2)(B). Consequently, Onyango was not entitled to dispute the underlying tax liability for his taxable year 2006.

    Reasoning

    The court’s reasoning focused on the taxpayer’s responsibility to engage with the postal system to receive important tax documents. The court found Onyango’s testimony about not knowing about the notices until late October or early November 2010 unreliable. Even accepting this testimony, the court emphasized that Onyango was aware of the ongoing tax examination and the potential issuance of a notice of deficiency. Despite this knowledge, Onyango did not regularly check his mailbox, which was a critical factor in the court’s decision. The court applied the legal principle that a taxpayer cannot willfully avoid receiving a notice of deficiency and then claim non-receipt under I. R. C. sec. 6330(c)(2)(B). The court rejected Onyango’s contention that he did not receive the notice, finding that his failure to retrieve the mail was not justified given his awareness of the tax issues and the multiple opportunities to retrieve the mail.

    Disposition

    The U. S. Tax Court entered decisions for the respondent, the Commissioner of Internal Revenue, affirming that Onyango was not entitled to dispute his underlying tax liability for 2006 under I. R. C. sec. 6330(c)(2)(B).

    Significance/Impact

    This case has significant implications for taxpayers’ obligations regarding the receipt of tax notices. It establishes that taxpayers must take reasonable steps to ensure they receive and review their mail, especially when they are aware of ongoing tax issues. The decision underscores the importance of engaging with the postal system and clarifies that willful avoidance of mail retrieval can preclude a taxpayer from disputing a tax liability under I. R. C. sec. 6330(c)(2)(B). This ruling may influence future cases where taxpayers claim non-receipt of notices, emphasizing the duty of taxpayers to actively manage their postal communications related to tax matters.