Michael Boulware v. Commissioner of IRS
OPINION  filed (Pages: 6) for the Court by Judge Ginsburg. [14-1147]
USCA Case #14-1147
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Submitted October 26, 2015
Decided March 11, 2016
MICHAEL H. BOULWARE,
COMMISSIONER OF INTERNAL REVENUE SERVICE,
On Appeal from the Decision
of the United States Tax Court
Jonathan H. Steiner was on the briefs for appellant. John
D. Cline entered an appearance.
Richard Farber and Patrick Urda, Attorneys, U.S.
Department of Justice, were on the brief for appellee.
Before: SRINIVASAN, Circuit Judge, and WILLIAMS and
GINSBURG, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
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GINSBURG, Senior Circuit Judge: In 1993 the Internal
Revenue Service began a criminal investigation into Michael
Boulware’s financial dealings, which ultimately led to his
convictions for tax evasion and tax fraud. See United States
v. Boulware, 558 F.3d 971 (9th Cir. 2009). Boulware is the
president and sole owner of two companies, Hawaiian Isle
Enterprises, Inc. and HIE Holdings, Inc., which paid his legal
and professional fees in the criminal trial and other litigation
from 1998-2002. Because Boulware did not report the
payments, which totaled approximately $2 million, as income,
the IRS issued deficiency notices. The Tax Court held that
the payments were taxable as corporate distributions, HIE
Holdings, Inc. v. Comm’r, 97 T.C.M. (CCH) 1672 (2009), the
Ninth Circuit affirmed, 521 F. App’x 602 (2013), and the
Supreme Court denied certiorari. 134 S. Ct. 712 (2013).1
Boulware did not post a bond while pursuing his appeals,
which permitted the IRS immediately to collect on his
liability. See 26 U.S.C. § 7485(a)(1). Both the Tax Court and
the Ninth Circuit denied Boulware’s motions to stay
collection pending appeal. Hawaiian Isles Enters., Inc. v.
Comm’r, No. 10-72589 (9th Cir. Mar. 11, 2011). The IRS
then began a collection action by notifying Boulware of its
intent to record a federal tax lien against him, and in May,
2011 it mailed Boulware final notice of its intent to levy his
assets. The notice informed Boulware of his right to a
Collection Due Process (CDP) hearing, and Boulware timely
The amounts of the underlying deficiencies have been fully
litigated and are not in dispute here. In this case, we address only
the IRS’s collection action in connection with the underlying
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Settlement Officer Kimberly Martin conducted
Boulware’s CDP hearing by telephone and mail, though
Boulware requested a face-to-face hearing on multiple
occasions. During a May, 2012 telephone conversation,
Martin set three requirements for entering into an installment
payment agreement with Boulware. First, Boulware would
have to agree to pay $29,000 per month, which Martin
calculated was his “ability to pay” based upon Boulware’s
most recent tax returns and other financial documents.
Second, Boulware would have to become compliant with all
current tax obligations, including his estimated taxes for 2012.
Finally, he would have to liquidate various personal assets,
including a 401K account and two life insurance policies all
together worth approximately $950,000, and put the proceeds
toward his deficiency. Boulware then mailed Martin a
counter-offer in which he proposed paying $12,500 per
month2 and waiting until he had exhausted his appeals to
liquidate his retirement account and life insurance policies.
His offer did not address his delinquent estimated taxes for
2012. In a letter of June 28, 2012, Martin rejected Boulware’s
proposal because it failed to meet any of the three
requirements she had set. In August, Martin issued a “notice
of determination” sustaining the levy action.
Boulware challenged that determination in Tax Court,
arguing that Martin had abused her discretion by rejecting his
proposed installment agreement and by refusing his request
for a face-to-face hearing. The Tax Court upheld the
Boulware indicated that he planned to divert much of his salary
from his companies to pay back monies he had borrowed from
them, which in turn would significantly reduce his taxable income
and therefore his “ability to pay.” Boulware had not made any
payments on his officer loan accounts since 1987, and did not
explain why he wanted to do so then.
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determination, Boulware v. Comm’r, 107 T.C.M. (CCH) 1419
(2014), and Boulware now appeals.
Where the underlying tax liability is not at issue in a CDP
proceeding, we review the determination of the IRS for abuse
of discretion. Byers v. Comm’r, 740 F.3d 668, 675 (D.C. Cir.
2014). Boulware argues that Martin’s rejection of Boulware’s
proposed installment agreement was an abuse of discretion for
First, Boulware argues that Martin erroneously believed
she lacked discretion to approve a payment plan for a
presently delinquent taxpayer. As the Tax Court found,
however, Martin was not mistaken about her discretion.
Boulware, 107 T.C.M. (CCH) 1419, at *22-23. The agency
does not abuse its discretion by denying a request for an
installment agreement when the taxpayer is not in compliance
with his current tax obligations. See Christopher Cross, Inc.
v. United States, 461 F.3d 610, 613 (5th Cir. 2006) (“[t]he
failure to timely pay owed taxes is a perfectly reasonable
basis for rejecting an offer in compromise relating to other
unpaid taxes”); Starkman v. Comm’r, 104 T.C.M. (CCH) 199
Second, Boulware argues that Martin failed to consider
the alleged “special circumstances” involved in forcing him to
liquidate his 401K account and life insurance policies while
his appeal was still pending. The Internal Revenue Manual in
effect at the time of the CDP hearing provided that taxpayers
“do not qualify for installment agreements if balance due
accounts can be fully or partially satisfied by liquidating
assets,” IRM § 18.104.22.168(5) (2012), and the agency ordinarily
does not abuse its discretion by rejecting an installment
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agreement because a taxpayer refuses to liquidate assets. See
Bibby v. Comm’r, 16 T.C.M. (CCH) 665 (2013). The
Commissioner may waive the liquidation requirement,
however, if he determines that “factors such as advanced age,
ill-health, or other special circumstances . . . prevent the
liquidation of the assets.” IRM § 22.214.171.124(5). According to
Boulware, his circumstances were special because his
retirement accounts and life insurance policies could not be
restored if he were to prevail in his appeal and he could not
re-build his retirement account at his advanced age. Nothing
in the tax code exempts retirement accounts from collection,
however, and if the pendency of an appeal were by itself a
special circumstance that stayed collection, then the statutory
requirement of a bond pending appeal, 26 U.S.C. §
7485(a)(1), would be rendered nugatory.
We need not decide whether the aggregation of
Boulware’s particular circumstances were “special,” however,
because, as the Tax Court explained, Boulware failed to raise
the argument during his CDP hearing. Boulware, 107 T.C.M.
(CCH) 1419, at *26-28; see Treas. Reg. § 301.6330-1(f)(2)
(“In seeking Tax Court review of a Notice of Determination,
the taxpayer can only ask the court to consider an issue . . .
that was properly raised in the taxpayer’s CDP hearing”).
Third, Boulware argues that Martin improperly
considered his criminal conviction for tax evasion in rejecting
his proposed installment agreement. Nothing in the record
supports this contention, however.
Pursuant to Treasury Regulation 26 CFR § 301.63301(d)(2), “a taxpayer who presents in the CDP hearing request
relevant, non-frivolous reasons for disagreement with the
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proposed levy will ordinarily be offered an opportunity for a
face-to-face conference at the Appeals office closest to
taxpayer’s residence.” Boulware argues he presented nonfrivolous reasons for disagreeing with Martin’s proposed
liquidation of his 401K account and life insurance policies,
wherefore he should have received a face-to-face hearing. A
taxpayer has no right to such a hearing, however. The
Treasury regulations expressly provide “CDP hearings . . . are
informal in nature and do not require the Appeals officer or
employee and the taxpayer, or the taxpayer’s representative,
to hold a face-to-face meeting.” Treas. Reg. § 301.63301(d)(2)(A-D6).
From Boulware’s offer to pay less per month than half
his assessed “ability to pay,” Martin “understandably
questioned the sincerity of his interest in paying his
outstanding tax liabilities.” Boulware, 107 T.C.M. (CCH)
1419, at *31. Moreover, the Treasury regulations instruct that
a “face-to-face CDP conference concerning a collection
alternative . . . will not be granted unless other taxpayers
would be eligible for the alternative in similar circumstances.”
Treas. Reg. § 301.6330-1(d)(2)(A-D8).
Boulware’s failure to comply with his tax obligations made
him generally ineligible for a collection alternative, Martin’s
denial of a face-to-face hearing was reasonable.
In sum, we hold the Commissioner did not abuse his
discretion by rejecting Boulware’s proposed payment plan or
by denying his request for a face-to-face hearing. The
judgment of the Tax Court is, therefore,
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