United States of America v. Gower et al
Filing
22
OPINION AND ORDER granting 1 Petition for Judicial Approval of a Levy upon a Principal Residence; the Internal Revenue Service is permitted to levy upon the principal residence of James N. Gower and Valencia D. Gower to satisfy part or all of th eir unpaid federal income tax liabilities for the tax years 2008 through 2013; the levy shall be executed by any authorized officer of the IRS; Clerk is directed to terminate any pending motions and close the case. Signed by Magistrate Judge James R. Klindt on 7/10/2018. (BHC)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
UNITED STATES OF AMERICA,
Petitioner,
vs.
Case No. 3:16-cv-1247-J-39JRK
JAMES N. GOWER and VALENCIA D.
GOWER,
Respondents.
________________________________/
OPINION AND ORDER1
I. Status
This cause is before the Court on the Petition for Judicial Approval of a Levy upon a
Principal Residence (Doc. No. 1; “Petition”), filed September 29, 2016, that seeks this
Court’s approval of an Internal Revenue Service (“IRS”) administrative levy on the principal
residence of James N. Gower and Valencia D. Gower (“Respondents”) to satisfy
Respondents’ unpaid federal income tax liabilities for the 2008 through 2013 tax years.
Petition at 2. In support of the Petition, Petitioner submitted the sworn declaration of
Revenue Officer Lindsey Williams. See Declaration of Lindsey Collins2 in Support of Petition
for Judicial Approval of a Levy upon a Principal Residence (Doc. No. 1-1; “Declaration”), filed
1
Pursuant to 26 U.S.C. § 6334(e)(1)(A), a United States Magistrate Judge has jurisdiction
to enter an order on a petition seeking the court’s approval to levy upon a taxpayer’s principal residence,
such as the one presently before the Court. See also Order, United States v. Saylor, No. 2:08-cv-300-FtM34SPC (M.D. Fla. Aug. 11, 2008), Doc. No. 12 (vacating report and recommendation based on the
jurisdiction of a United States Magistrate Judge to approve a levy against a principal residence).
2
Although the Declaration refers to the revenue officer as Lindsey Collins, she has since
married and changed her name to Lindsey Williams. See Transcript of February 22, 2017 Evidentiary
Hearing (Doc. No. 16; “Transcript” or “Tr.”) at 11. The Court refers to her as Revenue Officer Williams.
September 29, 2016. Through its Petition and the Declaration, Petitioner has made a prima
facie showing that the levy is appropriate by representing that: 1) Respondents were given
notice of the tax assessments and demands for payment, but they have failed to pay the
liabilities in full; 2) the IRS has satisfied all necessary legal requirements and administrative
procedures; and 3) the IRS “has exhausted all reasonable alternative means of
collecting . . . Respondents’ tax debt, and no reasonable alternatives exist to satisfy
Respondents’ unpaid tax liabilities.” Petition at 3-4; see also Declaration at 2-3.
After the Petition was filed, the Court entered an Order to Show Cause directing
Respondents to file a written response showing why the Court should not grant the Petition.
See Order to Show Cause (Doc. No. 5), entered October 5, 2016, at 3. Subsequently,
Respondents filed their response to the Order to Show Cause. See Respondents’ Response
to Order to Show Cause and Request for Hearing (Doc. No. 10; “Response”), filed November
23, 2016. In the Response, Respondents requested an evidentiary hearing and argued that:
(1) the Petition is premature; (2) the assessment of tax for tax year 2008 may be “improper
or erroneous”; (3) a levy on Respondents’ home would “create an extreme hardship” on
Respondents; and (4) Respondents have been unable to satisfy their tax liabilities because
of “extreme personal hardship and a lack of funds, not an intent to avoid their tax
obligations.” Response at 1-4. The Court granted Respondents’ request for an evidentiary
hearing and took the matter under advisement. Order (Doc. No. 11), entered November 30,
2016, at 1.
On February 3, 2017, Petitioner filed its Memorandum in Support of Petition for
Judicial Approval of a Levy upon a Principal Residence (Doc. No. 14; “Petitioner’s Mem.”).
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In its Memorandum, Petitioner argues that Respondents “do not identify any assets (other
than their house) which could be used to pay all or part of their tax debt.” Petitioner’s Mem.
at 4. With regard to Respondents’ argument that the assessment of tax for 2008 may be
erroneous, Petitioner asserts that “[t]he merits of the underlying tax liability[ ] . . . are not a
proper basis for challenging the Petition.” Id. at 4-5. Lastly, Petitioner contends that “it is not
the function of this Court to decide whether or not the proposed levy will constitute an
economic hardship to [Respondents].” Id. at 5.
On February 22, 2017, the Court held an evidentiary hearing at which it heard
testimony from Revenue Officer Williams; Mrs. Gower’s brother, James C. Dubberly, Jr.; and
Respondents. See Clerk’s Minutes (Doc. No. 15) at 1; Transcript. The Court received
Petitioner’s Exhibits 1-9, with no objection from Respondents; Respondents’ Exhibits 1-2,
over Petitioner’s objections; and Respondents’ Exhibits 3-11, with no objection from
Petitioner. See Clerk’s Minutes at 2. At the end of the hearing, the Court directed
Respondents to file a supplemental memorandum and Petitioner to file a response. See Tr.
at 160; Clerk’s Minutes. The Court also allowed the parties to file replies. Tr. at 155-59;
Clerk’s Minutes at 2.
Respondents’ Memorandum in Response and Objection to Petition (Doc. No. 18;
“Respondents’ Mem.”) was filed on April 25, 2017. In general, Respondents argue that the
Petition should be denied for three reasons: 1) Petitioner failed to establish that there are no
reasonable alternatives for collection; 2) Revenue Officer Williams did not properly consider
whether Respondents qualified for an Effective Tax Administration Offer (“ETA Offer”) as an
alternative for collection; and 3) the Petition is not ripe because levy of Respondents’
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residence is barred by the pending installment agreements. See Respondents’ Mem. at 1420. Petitioner filed its Response in Support of Petition for Judicial Approval of a Levy upon
a Principal Residence (Doc. No. 19; “Petitioner’s Resp.”) on May 31, 2017. Respondents
then filed a Reply on June 14, 2017. See Respondents’ Reply to Petitioner’s Response in
Support of Petition for Judicial Approval of a Levy upon a Principal Residence (Doc. No. 20;
“Reply”). On June 28, 2017, Petitioner filed a Sur-Reply. See Sur-Reply in Support of Petition
for Judicial Approval of a Levy upon a Principal Residence (Doc. No. 21; “Sur-Reply”).3
II. Legal Framework
A. Requirements for Levy on Taxpayer’s Principal Residence/Release of Levy
Federal law provides that if a person “liable to pay any tax” fails to pay said tax after
receiving a demand to do so, a lien arises “in favor of the United States upon all property and
rights to property, whether real or personal, belonging to such person.” 26 U.S.C. § 6321.
The IRS is authorized to collect such tax “by levy upon all property and rights to
property . . . belonging to such person or on which there is a lien . . . for the payment of such
tax.” 26 U.S.C. § 6331(a).
Prior to the levy, the IRS must provide to the taxpayer written notice of its intent to
levy and notice of the taxpayer’s right to a pre-levy Collection Due Process (“CDP”) hearing.
26 U.S.C. §§ 6330(a)(1), 6331(d)(1); 26 C.F.R. § 301.6330-1(a)(1). These notices must be
provided at least thirty days before the levy, and they must be “given in person,” “left at the
[taxpayer’s] dwelling or usual place of business,” or “sent by certified or registered mail,
3
The arguments advanced by the parties in the post-hearing filings are discussed in more
detail infra at Part IV.
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return receipt requested, to [the taxpayer’s] last known address.” 26 U.S.C. §§ 6330(a)(2),
6331(d)(2).
If the taxpayer wishes to have a CDP hearing, he or she must request a hearing within
thirty days of receipt of the CDP Notice, 26 C.F.R. § 301.6330-1(b)(1), and the request must
be in writing and state the grounds for the requested hearing, 26 U.S.C. § 6330(b)(1). At the
CDP hearing, the taxpayer may raise any issue relevant to the tax liability or the proposed
levy, including challenges to the “appropriateness of the collection actions” and to the
amount of the underlying tax liability. 26 U.S.C. § 6330(c)(2).
The taxpayer’s principal residence is exempt from levy unless “a judge or magistrate
[judge] of a district court of the United States approves (in writing) the levy of such
residence.” 26 U.S.C. § 6334(e)(1)(A). The Government initiates the proceeding for judicial
approval of levy on a principal residence by filing a petition showing that: 1) “the underlying
liability has not been satisfied”; 2) “the requirements of any applicable law or administrative
procedure relevant to the levy have been met”; and 3) “no reasonable alternative for
collection of the taxpayer’s debt exists.” 26 C.F.R. § 301.6334-1(d)(1). In the petition, the
Government “will ask the court to issue to the taxpayer an order to show cause why the
principal residence property should not be levied and will also ask the court to issue a notice
of hearing.” Id.
The taxpayer is then granted a hearing to rebut the Government’s prima facie case
if the taxpayer files an objection within the time period specified by the court “raising a
genuine issue of material fact demonstrating” one or more of the following: 1) “the underlying
tax liability has been satisfied”; 2) “the taxpayer has other assets from which the liability can
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be satisfied”; or 3) “the [IRS] did not follow the applicable laws or procedures pertaining to
the levy.” 26 C.F.R. § 301.6334-1(d)(2). “The taxpayer is not permitted to challenge the
merits underlying the tax liability in the proceeding.” Id. Failure to file a timely objection may
result in an order approving the levy. Id.
If the levy is approved by the Court and issued by the IRS, “[a] taxpayer who wishes
to obtain a release of [the] levy must submit a request for release in writing or by telephone
to the district director for the Internal Revenue district in which the levy was made.” 26 C.F.R.
§ 301.6343-1(c). The IRS “must release the levy upon all or a part of the property or rights
to property levied upon if [it] determines” that “[t]he levy is creating an economic hardship
due to the financial condition of [the] individual taxpayer.” 26 C.F.R. §§ 301.6343-1(b),
(b)(4)(i). A levy results in economic hardship if “satisfaction of the levy in whole or in part
[would] cause [the] individual taxpayer to be unable to pay his or her reasonable basic living
expenses.” 26 C.F.R. § 301.6343-1(b)(4)(i).4 If the taxpayer submits a request for release
4
The IRS determines the taxpayer’s reasonable basic living expenses by considering “any
information provided by the taxpayer,” including the following:
(A) The taxpayer's age, employment status and history, ability to earn, number of
dependents, and status as a dependent of someone else;
(B) The amount reasonably necessary for food, clothing, housing (including utilities,
home-owner insurance, home-owner dues, and the like), medical expenses (including health
insurance), transportation, current tax payments (including federal, state, and local), alimony,
child support, or other court-ordered payments, and expenses necessary to the taxpayer's
production of income (such as dues for a trade union or professional organization, or child
care payments which allow the taxpayer to be gainfully employed);
(C) The cost of living in the geographic area in which the taxpayer resides;
(D) The amount of property exempt from levy which is available to pay the taxpayer's
expenses;
(E) Any extraordinary circumstances such as special education expenses, a medical
catastrophe, or natural disaster; and
(continued...)
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based on economic hardship, the IRS is required to determine whether the levy is creating
a hardship unless the request “is made five or fewer days prior to a scheduled sale of the
property to which the levy relates.” 26 C.F.R. § 301.6343-1(c)(3)(iii).
B. Alternative Methods of Collection
Taxpayers who are unable to pay their tax liability in full have several alternatives to
enforced collection by the IRS. According to the Internal Revenue Manual (“IRM”), the IRS
is “required to consider alternative methods of collection prior to seizure.” IRM 5.10.1.4.2(1),
2007 WL 9622073, at *1. The two alternative methods of collection relevant in this
matter—the Offer in Compromise (“OIC”) and the installment agreement—are discussed
below.
1. Offer in Compromise
An OIC is an offer made by the taxpayer to the IRS to enter into “a contract . . . in
which the IRS agrees to accept an amount different from what the taxpayer owes in taxes.”
Begner v. United States, 428 F.3d 998, 999 (11th Cir. 2005); see also 26 C.F.R. § 601.203.5
Taxpayers seeking to make an OIC must submit a Form 656 to the IRS pursuant to 26
C.F.R. § 601.203(b). Any compromise of a tax liability by the IRS must be made “prior to
reference [of the matter] to the Department of Justice ([‘DOJ’)] for prosecution or defense.”
4
(...continued)
(F) Any other factor that the taxpayer claims bears on economic hardship and brings to the
attention of the director.
26 C.F.R. § 301.6343-1(b)(4)(ii).
5
The Code of Federal Regulations (“Regulation(s)”) does not expressly state that OICs may
be submitted only by the taxpayer. See 26 C.F.R. § 601.203. The federal statutes, Regulations, and IRM
sections relating to OICs, however, are premised on the taxpayer making the OIC and the IRS accepting
or rejecting it. See, e.g., 26 U.S.C. § 7122; 26 C.F.R. § 601.203(c)(1), (3); IRM 5.8.11.1(4).
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26 U.S.C. § 7122(a).6 There are three grounds for such a compromise: 1) doubt as to
liability;7 2) doubt as to collectibility;8 and 3) promotion of effective tax administration. 26
C.F.R. § 301.7122-1(b). Offers that are considered on the ground of promoting effective tax
administration are also referred to as ETA Offers. See IRM 5.8.11.1(1).
The IRS may accept an ETA Offer if “the Secretary determines that, although
collection in full could be achieved, collection of the full liability would cause the taxpayer
economic hardship within the meaning of [26 C.F.R.] § 301.6343–1.” 26 C.F.R.
§ 301.7122-1(b)(3)(i).9 There are a number of non-exclusive factors that support a finding
that collection would cause economic hardship for purposes of an ETA Offer:
(A) Taxpayer is incapable of earning a living because of a long term illness,
medical condition, or disability, and it is reasonably foreseeable that taxpayer's
financial resources will be exhausted providing for care and support during the
course of the condition;
(B) Although taxpayer has certain monthly income, that income is exhausted
each month in providing for the care of dependents with no other means of
support; and
(C) Although taxpayer has certain assets, the taxpayer is unable to borrow
against the equity in those assets and liquidation of those assets to pay
outstanding tax liabilities would render the taxpayer unable to meet basic living
expenses.
26 C.F.R. § 301.7122-1(c)(3)(i).
6
The “Attorney General or his delegate” is authorized to compromise a tax liability after
reference of the case to the DOJ for prosecution or defense. 26 U.S.C. § 7122(a).
7
“Doubt as to liability exists where there is a genuine dispute as to the existence or amount
of the correct tax liability under the law.” 26 C.F.R. § 301.7122-1(b)(1).
8
“Doubt as to collectibility exists in any case where the taxpayer’s assets and income are less
than the full amount of the liability.” 26 C.F.R. § 301.7122-1(b)(2).
9
Economic hardship is defined supra at Part II.A.
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If doubt as to liability, doubt as to collectibility, and economic hardship do not
constitute grounds for compromise, the IRS may accept an ETA Offer “where compelling
public policy or equity considerations identified by the taxpayer provide a sufficient basis for
compromising the liability.” 26 C.F.R. § 301.7122-1(b)(3)(ii). This ground for compromise
requires that the taxpayer show “exceptional circumstances” that would cause collection of
the full liability to “undermine public confidence that the tax laws are being administered in
a fair and equitable manner.” Id. Further, “[n]o compromise to promote effective tax
administration may be entered into if compromise of the liability would undermine compliance
by taxpayers with the tax laws.” 26 C.F.R. § 301.7122-1(b)(3)(iii).
2. Installment Agreement
The IRS is authorized “to enter into written agreements with any taxpayer under which
such taxpayer is allowed to make payment on any tax in installment payments if the [IRS]
determines that such agreement will facilitate full or partial collection of such liability.” 26
U.S.C. § 6159(a). The IRS is not required to enter into an installment agreement unless the
tax liability is $10,000 or less and certain conditions are met. See 26 U.S.C. § 6159(c).
“No levy may be made to collect a tax liability that is the subject of an installment
agreement during the period that a proposed installment agreement is pending with the
IRS,[10] for [thirty] days immediately following the rejection of a proposed installment
agreement, during the period that an installment agreement is in effect, and for [thirty] days
immediately following the termination of an installment agreement.” 26 C.F.R. § 301.6159-
10
An installment agreement becomes pending “when it is accepted for processing.” 26 C.F.R.
§§ 301.6159-1(b)(2), 301.6331-4(a)(2).
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1(f)(1); see also 26 C.F.R. § 301.6331-4(a)(1). Further, the IRS may not “refer a case to the
[DOJ] for the commencement of a proceeding in court, against a person named in an
installment agreement or proposed installment agreement, if levy to collect the liability is
prohibited” during the three time periods set out above. 26 C.F.R. §§ 301.6159-1(f)(3)(ii),
301.6331-4(b)(2).
A levy is not prohibited during these time periods, however, if: 1) “the taxpayer files
a written notice with the IRS that waives the restriction on levy . . .”; 2) “the IRS determines
that the proposed installment agreement was submitted solely to delay collection”; or 3) “the
IRS determines that collection of the tax to which the installment agreement or proposed
installment agreement relates is in jeopardy.” 26 C.F.R. §§ 301.6159-1(f)(2),
301.6331-4(a)(4). According to the IRM, “[t]he determination that the offer of an installment
agreement is merely to delay collection must be apparent to any impartial observer, i.e.,
there is clearly no reality to the offer.” IRM 5.11.1.4.8(4), 2007 WL 9242947 at *2. The IRM
provides the following as an example: “The taxpayer offers to make a periodic, token
payment such as $1 a month.” Id. Collection is considered to be in jeopardy only if at least
one of the conditions allowing a jeopardy assessment exists. Id.11
III. Findings of Fact
Respondents, a married couple, are residents of Fernandina Beach, Florida where
the residence at issue (“the Property”) is located. See Tr. at 26, 103; Petitioner’s Ex. 6 (Doc.
11
The conditions under which a jeopardy assessment may be made are found in IRM
1.2.13.1.27(5), 2007 WL 2989240, at *1. Whether collection is considered to be in jeopardy is not at issue
here.
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No. 15-7 at 2) (general warranty deed).12 Respondents purchased the Property in May 2013
for $242,290.92, using all the proceeds from the sale of their former residence in Tampa,
Florida ($223,152.20). Petitioner’s Ex. 8 (Doc. No. 15-9 at 4) (settlement statement for the
purchase of the Property); id. at 3 (settlement statement for the sale of the Tampa
residence); Tr. at 145 (Mrs. Gower’s testimony). At the time of the purchase, Respondents
had outstanding tax liabilities for tax years 2008 through 2011.13 See Petitioner’s Ex. 1 (Doc.
No. 15-2 at 3-23).
Mr. Gower is a certified public accountant and a certified internal auditor. Tr. at 110.
Mr. Gower testified his last position as an internal auditor ended in 2008 when “the economy
went down” and his employer eliminated his job. Tr. at 111. His subsequent attempts at
securing employment in that field were unsuccessful. See Tr. at 112-13, 125.14 He applied
for retail jobs, but was also unsuccessful. Tr. at 126.15 He was later able to obtain
12
The parties’ exhibits to the evidentiary hearing are collectively filed under Doc. No. 15, with
Petitioner’s being Doc. Nos. 15-2 through 15-10, and Respondents’ being Doc. Nos. 15-12 through 1522.Some exhibits do not contain page numbers, and some exhibits contain page numbers that are not
sequential. For ease of reference, citations to every exhibit follow the pagination assigned by the Court’s
electronic filing system (CM/ECF).
13
At the time of the purchase, Respondents did not yet owe income taxes for tax year 2012
because they obtained an extension of time to file their 2012 tax return. See Petitioner’s Ex. 1 (Doc. No. 15-2
at 25). They timely filed it in October 2013. See id.
14
Mr. Gower testified that after his job was eliminated in 2008, he sought employment at
Jacksonville Electric Authority (“JEA”) and at Siemens in Orlando, Florida, but he was not hired. Tr. at 112113. Regarding his application with JEA, he stated that “the background check apparently stopped [him] from
getting that job.” Tr. at 125. He testified he does not know specifically what prevented him from being hired,
but stated that it was “[p]robably this tax lien.” Tr. at 126.
15
Mr. Gower testified he “applied for a stocking job at ABC” but was not hired, he assumed,
because of the background check. Tr. at 126. He also sought employment at T.J. Maxx, but did not receive
an interview. Tr. at 126.
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employment in the insurance sales business and has worked in the field since.16 See Tr. at
113, 124-25; Respondents’ Ex. 3 (Doc. No. 15-14 at 39).
Mrs. Gower has a bookkeeping business, but by 2009 she had only one client, and
in 2012 that client stopped doing business with Mrs. Gower. Tr. at 133-34; see also
Respondents’ Ex. 4 (Doc. No. 15-15 at 5); Respondents’ Ex. 5 (Doc. No. 15-16 at 5);
Respondents’ Ex. 6 (Doc. No. 15-17 at 5); Respondents’ Ex. 7 (Doc. No. 15-18 at 6);
Respondents’ Ex. 8 (Doc. No. 15-19 at 5); Respondents’ Ex. 9 (Doc. No. 15-20 at 7);
Respondents’ Ex. 10 (Doc. No. 15-21 at 4); Respondents’ Ex. 11 (Doc. No. 15-22 at 6).17
She also works part time as a secretary at a lawyer’s office. Respondents’ Ex. 3 (Doc. No.
15-14 at 39); Tr. at 140. She testified she “go[es] on the internet every day looking for
administrative bookkeeping jobs that pay more than what [she is] making now.” Tr. at 151.18
In their 2015 tax return, filed in October 2016, Respondents reported that their total income
was $15,708 and that their adjusted gross income was $13,359. Respondents’ Ex. 11 (Doc.
16
Mr. Gower did not specify when he began working in the insurance sales business;
according to the tax returns, it appears it was in 2010. See Respondents’ Ex. 5 (Doc. No. 15-16 at 3);
Respondents’ Ex. 6 (Doc. No. 15-17 at 7); Respondents’ Ex. 7 (Doc. No. 15-18 at 8); Respondents’ Ex. 8
(Doc. No. 15-19 at 7); Respondents’ Ex. 9 (Doc. No. 15-20 at 5); Respondents’ Ex. 10 (Doc. No. 15-21 at
5); Respondents’ Ex. 11 (Doc. No. 15-22 at 4).
17
Although Mrs. Gower testified she did not have any clients by sometime in 2012, the tax
returns for tax years 2012 through 2015 show that she derived income from her bookkeeping business. See
Respondents’ Ex. 8 (Doc. No. 15-19 at 5); Respondents’ Ex. 9 (Doc. No. 15-20 at 7); Respondents’ Ex. 10
(Doc. No. 15-21 at 4); Respondents’ Ex. 11 (Doc. No. 15-22 at 6).
18
At the hearing, Mr. Dubberly indicated that Respondents have been unable to obtain
employment because of “background checks.” Tr. at 106-07. When Mrs. Gower was asked to name the
positions she had applied for but was unable to obtain due to background checks, she testified she applied
to work at “Randstad,” AT&T, and “Baptist Hospitals,” but she could not “remember any others specifically.”
Tr. at 152-53. Mrs. Gower then stated, however, that she did not provide any background information in the
job applications, and that she “just fill[ed] out . . . a generic application.” Tr. at 152-53.
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No. 15-22 at 2) (2015 tax return); Petitioner’s Ex. 1 (Doc. No. 15-2 at 35) (showing filing
date).
As noted above, at issue in this case are Respondents’ unpaid federal income tax
liabilities for the 2008 through 2013 tax years. For these tax years, Respondents filed joint
federal income tax returns reporting unpaid income taxes.19 See Petitioner’s Ex. 1 (Doc. No.
15-2 at 3-4, 10, 15, 20, 25, 29); Respondents’ Ex. 4 (Doc. No. 15-15) (2008 tax return);
Respondents’ Ex. 5 (Doc. No. 15-16) (2009 tax return); Respondents’ Ex. 6 (Doc. No. 15-17)
(2010 tax return); Respondents’ Ex. 7 (Doc. No. 15-18) (2011 tax return); Respondents’ Ex.
8 (Doc. No. 15-19) (2012 tax return); Respondents’ Ex. 9 (Doc. No. 15-20) (2013 tax return).
Consequently, the IRS made assessments against Respondents for unpaid federal income
taxes, penalties, and interest. Declaration at 2. Despite these assessments, however,
Respondents have not paid the liability in full.20 Id. at 3. According to IRS records, as of
November 16, 2016, Respondents owe $153,235.45 in federal income taxes, penalties, and
interest. See Petitioner’s Ex. 1 (Doc. No. 15-2 at 8 (reporting a balance of $68,919.63 for tax
year 2008), 13 (reporting a balance of $12,894.48 for tax year 2009), 18 (reporting a balance
19
The tax returns for tax years 2008 through 2010 were filed late even though Respondents
were given extensions of time to file the returns. See Petitioner’s Ex. 1 (Doc. No. 15-2 at 3, 10, 15) (showing
filing dates and extensions). Respondents timely filed their tax returns for 2011 through 2013 after receiving
extensions of time to file the returns. See Petitioner’s Ex. 1 (Doc. No. 15-2 at 20, 25, 29) (showing filing
dates and extensions).
20
For tax years 2008 through 2013, Respondents paid a total of $94,195 in income tax
withholdings: $10,019 in 2008; $8,548 in 2009; $12,434 in 2010; $9,098 in 2011; $19,130 in 2012; and
$34,966 in 2013. Respondents’ Ex. 4 (Doc. No. 15-15 at 3) (2008); Respondents’ Ex. 5 (Doc. No. 15-16 at
3) (2009); Respondents’ Ex. 6 (Doc. No. 15-17 at 3) (2010); Respondents’ Ex. 7 (Doc. No. 15-18 at 3)
(2011); Respondents’ Ex. 8 (Doc. No. 15-19 at 3) (2012); Respondents’ Ex. 9 (Doc. No. 15-20 at 3) (2013).
Mrs. Gower testified that in the 2008 tax return, Respondents self-reported that they owed, approximately,
an additional $30,000. Tr. at 130-31; compare Petitioner’s Ex. 1 (Doc. No. 15-2 at 3) ($8,789 in tax
assessed) with Respondents’ Ex. 4 (Doc. No. 15-15 at 3) ($38,806 in total tax owed). In February 2012,
Respondents made a payment toward their 2008 taxes in the amount of $3,522.96. Petitioner’s Ex. 1 (Doc.
No. 15-2 at 3).
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of $13,962.16 for tax year 2010), 23 (reporting a balance of $18,508.39 for tax year 2011),
27 (reporting a balance of $22,975.01 for tax year 2012), 30 (reporting a balance of
$15,975.78 for tax year 2013), 33 (reporting a balance of $0 for tax year 2014), 36 (reporting
a balance of $0 for tax year 2015)). Interest and penalties continue to accrue.
Respondents never made an OIC, Tr. at 37, but they did request installment
agreements when they filed their 2008 through 2012 tax returns. When they filed their 2008
tax return, they requested an installment agreement of $1.00 per month, and with the 2009
through 2011 tax returns they requested $20.00 per month. See Respondents’ Ex. 4 (Doc.
No. 15-15 at 10) (2008 tax return); Respondents’ Ex. 5 (Doc. No. 15-16 at 16) (2009 tax
return); Respondents’ Ex. 6 (Doc. No. 15-17 at 14) (2010 tax return); Respondents’ Ex. 7
(Doc. No. 15-18 at 12) (2011 tax return). They did not request an installment agreement for
tax years 2012 and 2013. See Respondents’ Ex. 8 (Doc. No. 15-19) (2012 tax return);
Respondents’ Ex. 9 (Doc. No. 15-20) (2013 tax return). At the hearing, when asked whether
she believed the IRS would accept these requests, Mrs. Gower testified that “[a]t least [she]
would get some type of response, where [the IRS] could contact [her] and say, [t]his is what
we need to do, this is how it works.” Tr. at 150. On January 23, 2014, a computer input code
for a pending installment agreement was entered into the IRS’s electronic account. See
Petitioner’s Ex. 1 (Doc. No. 15-2 at 5, 11, 16, 21, 25). The record does not show any other
activity regarding the installment agreement requests.
The IRS filed a lien on the Property in March 2014. Respondents’ Ex. 3 (Doc. No. 1514 at 11) (March 19, 2014 note indicating the “[l]ien was filed in . . . Nassau [C]ounty”). The
lien was recorded on March 31, 2014 for tax years 2008 through 2012. See id. at 41. On
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January 22, 2015, the IRS recorded a lien on the Property for tax year 2013. See id. The
Property is not subject to any mortgages, but it is subject to property taxes in the amount of
$9,050.27 and a $3,116.28 lien from Amelia National Golf Club, all of which are superior to
the tax lien. Declaration at 3-4.
On August 5, 2014, Revenue Officer Williams conducted a field visit to the Property21
during which she met with Mrs. Gower. Respondents’ Ex. 3 (Doc. No. 15-14 at 18). Revenue
Officer Williams directed Mrs. Gower to obtain a loan from three different banks on the equity
of the Property, but Mrs. Gower did not “seem very willing to do this.” Id.; Tr. at 89.22
Revenue Officer Williams advised Mrs. Gower that if she were unwilling to explore collection
alternatives, the next enforcement action would be to issue a levy on the Property.
Respondents’ Ex. 3 (Doc. No. 15-14 at 18, 42); Tr. at 89.
During the field visit, Revenue Officer Williams provided Mrs. Gower with documents
containing information about the collection process and explained them to her. See
Respondents’ Ex. 3 (Doc. No. 15-14 at 18, 42); Tr. at 41-42. Revenue Officer Williams
specifically testified this information covered OICs. Tr. at 42. Her testimony is corroborated
by her internal records that show Respondents were provided with a copy of Publications 1,
594, and 1660 during the field visit. See Respondents’ Ex. 3 (Doc. No. 15-14 at 42)
(indicating Respondents were provided with copies of Publications 1, 594, and 1660 “with
instructions”); id. at 18 (indicating Revenue Officer Williams explained the contents of
21
She also conducted a field visit in March 2014, but Respondents were not home at the time.
See Respondents’ Ex. 3 (Doc. No. 15-14 at 9).
22
Mr. Gower testified they attempted to secure a loan on the Property “at three different banks”
but were unsuccessful, he “suppose[d],” due to their “unreliable income.” Tr. at 115. Revenue Officer
Williams confirmed that Respondents tried to obtain loans on the Property. Tr. at 90.
-15-
Publications 1, 594, and 1660 to Mrs. Gower). Publication 594 describes the process of
applying for an OIC. See IRS Pub. 594, 2012 WL 8144686, at *4. During their testimony,
Respondents were equivocal about whether they received information about OICs. See Tr.
at 115, 132, 150.23 The undersigned credits Revenue Officer Williams’s testimony that she
provided Respondents with documents containing information about OICs.24
Shortly after the revenue officer’s August 5, 2014 field visit, Respondents hired Aurora
Capital Solutions (“Aurora”) as their representative and authorized it to act on their behalf in
all transactions with the IRS. Tr. at 120, 131-32, 145. By letter dated August 29, 2014,
Aurora sent the following documents to the IRS: the last six months of Respondents’ bank
statements; Mr. Gower’s earned commissions “year-to-date”; copies of their life insurance
policies, car insurance policy, and homeowner’s insurance policy; tax statements; and
registrations for two of their three vehicles.25 Petitioner’s Ex. 4 (Doc. No. 15-5 at 2). In
October 2014, Aurora submitted a Collection Information Statement (“CIS”) to the IRS
23
Respondents’ testimony with regard to whether the IRS provided them with information
about OICs was unclear and evasive. Mr. Gower testified he did not see any documents regarding OICs,
but he did not expressly deny that he received them. Tr. at 115. Mrs. Gower initially testified she did not
recall Revenue Officer Williams providing her with any paperwork about OICs, Tr. at 132, but she later
testified that she remembered reading “the form about . . . the income and expense statement about doing
that,” but that she did not remember what other documents she received from the revenue officer, Tr. at 150.
24
In making credibility determinations, courts consider various factors including a witness’s
demeanor, the consistencies or inconsistencies within the witness’s testimony, and any interest the witness
may have in the outcome of the hearing; but the Court does not consider the official rank or status of the
witness. United States v. Ramirez-Chilel, 289 F.3d 744, 749-50 (11th Cir. 2002); see also Anderson v. City
of Bessemer City, 470 U.S. 564, 575 (1985) (indicating various factors to consider when making credibility
determinations, such as demeanor, inflection of voice, and whether the testimony is “so internally
inconsistent or implausible on its face that a reasonable factfinder would not credit it”). Here, the Court has
considered the relevant factors in making the credibility determination.
25
Only the six months of bank statements are part of the record. See Petitioner’s Ex. 4 (Doc.
No. 15-5 at 3-17) (copies of bank statements).
-16-
detailing Respondents’ income and expenses.26 See Petitioner’s Ex. 2 (Doc. No. 15-3) (copy
of CIS); Tr. at 55 (Revenue Officer Williams’s testimony indicating that CIS was submitted
by Aurora).27 According to Revenue Officer Williams, Aurora did not provide sufficient
supplemental documents to verify Respondents’ income.28 Tr. at 29-30, 55-56; Respondents’
Ex. 3 (Doc. No. 15-14 at 34, 42).29 On November 4, 2014, Aurora informed Revenue Officer
Williams that Respondents’ “parents are loaning money to them.” Respondents’ Ex. 3 (Doc.
No. 15-14 at 27) (capitalization omitted).
Also on November 4, 2014, Revenue Officer Williams sent Respondents a “Summary
of Taxpayer Contact” form requesting that Respondents provide certain information and take
a number of actions by November 20, 2014. Petitioner’s Ex. 5 (Doc. No. 15-6 at 2).
Specifically, Respondents were requested to provide the following information: 1) the closing
statement from the sale of their Tampa residence;30 2) the names of Respondents’ parents
who loaned Respondents money and copies of any available checks corresponding to such
loans; and 3) the decisions on any loans requested on the equity of the Property. Id.
Respondents were asked to take the following actions: 1) cash out $2,055 from their 401(k)
26
A CIS, also referred to as Form 433-B, “is used [by the IRS] to obtain current financial
information necessary for determining how a wage earner or self-employed individual can satisfy an
outstanding tax liability.” IRS Pub. 1854, 2018 WL 2106630, at *1.
27
Revenue Officer Williams did not mention Aurora by name, but she referred to Respondents’
“representative in Colorado.” Tr. at 55. Aurora was based in Colorado. See, e.g., Petitioner’s Ex. 7 (Doc. No.
15-8 at 10) (letter showing Aurora’s address).
28
It appears the verification documents that were needed included “bank statements, wage
statements, mortgage documentation, [and] encumbrance information for any vehicles.” Tr. at 27.
29
IRS records refer to Aurora as “POA,” which stands for “Power of Attorney.” See Power of
Attorney, IRS, https://www.irs.gov/charities-non-profits/power-of-attorney-3 (last visited July 10, 2018).
30
The form refers to a house in Orlando, but Revenue Officer Williams testified that this is an
error and that “[i]t is supposed to be Tampa.” See Tr. at 33.
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and provide the IRS with the proceeds; 2) obtain a loan against the remaining cash value of
their life insurance policies and provide the IRS with the proceeds; 3) make an “estimated
payment” toward their 2014 taxes; and 4) try to sell the Property and provide the IRS with
the proceeds. Id. According to Revenue Officer Williams, the IRS received the requested
documents, but Respondents never attempted to sell the Property, no payments were made
toward their 2014 taxes,31 and the IRS never received any proceeds from any cashout of the
401(k) or loan against the cash value of the life insurance policies.32 Tr. at 34; see also
Respondents’ Ex. 3 (Doc. No. 15-14 at 34, 36).
Revenue Officer Williams conducted an investigation of the Property and determined
that its sale would yield $142,833.45 in net proceeds, “which would be sufficient to satisfy
a significant portion of [Respondents’] outstanding federal tax liability.” Declaration at 4. On
January 12, 2015, the IRS sent Respondents and Aurora a notice informing Respondents
of its intent to levy pursuant to 26 U.S.C. § 6331 and of Respondents’ right to a CDP hearing.
See Petitioner’s Ex. 7 (Doc. No. 15-8 at 2-16). Respondents did not request a CDP hearing.
Tr. at 28, 154-55. On March 25 and April 13, 2015, the IRS sent notices to Respondents and
Aurora advising Respondents that they must pay the amount they owe to the IRS to prevent
collection action. See Petitioner’s Ex. 7 (Doc. No. 15-8 at 17-21 (notices dated March 25,
31
Although Respondents did not make a payment toward their 2014 taxes by the November
20, 2014 deadline, they did pay their 2014 taxes in April 2015. See Petitioner’s Ex. 1 (Doc. No. 15-2 at 32).
32
In a letter dated January 27, 2015, Aurora notified the IRS that Respondents made a
request to cash out their 401(k), and that they “had further conversations with the life insurance company
to get something in writing, and they were eventually able to secure a loan in the amount of $7,000.00 for
this.” Petitioner’s Ex. 9 (Doc. No. 15-10 at 2); see also id. at 12-13 (401(k) surrender request). The letter
further states that “[t]he funds from the . . . two accounts will be remitted immediately upon receipt . . . .” Id.
at 2. The record does not reflect that the IRS received the proceeds from these accounts, and Revenue
Officer Williams confirmed she never received them. Tr. at 34; Respondents’ Ex. 3 (Doc. No. 15-14 at 36).
Respondents did not testify or argue otherwise.
-18-
2015), 22-26 (notices dated April 13, 2015)). On January 19, 2016, the IRS sent
Respondents another notice that again advised them they must pay their outstanding tax
liabilities to prevent enforced collection. See id. at 27-28.33 Respondents testified they
received these notices, but that they did not make any payments. Tr. at 146-47, 154.
In April 2015, Revenue Officer Williams submitted to several IRS officials a seizure
memorandum recommending that the IRS commence a civil action seeking approval of a
principal residence seizure in Respondents’ case. See Respondents’ Ex. 3 (Doc. No. 15-14
at 38-43). In the seizure memorandum, she stated that an “[OIC] and [i]nstallment
[a]greement were considered,” but “the equity in their homestead precludes acceptance of
an OIC or [installment agreement].” Id. at 39.34 She noted that “the [CIS Aurora]
provided has minimal information regarding [Respondents’] financial situation.” Id. at 42. She
indicated that the information she received showed Respondents borrowed $20,000 from
Mrs. Gower’s mother. Id. Revenue Officer Williams found that “[n]o hardship will occur as a
result of the principal residence seizure as it will not cause a change in [Respondents’]
income and the mother will be able to continue to assist with living expenses.” Id.35 As noted
above, the civil action was then commenced on September 29, 2016. See Petition.
33
This notice was not sent to Aurora presumably because Aurora was no longer representing
Respondents at the time. See Tr. at 145-46, 148-49 (Mrs. Gower’s testimony that Aurora stopped
representing Respondents around August 2015, but she did not know why).
34
This statement was apparently erroneous because Revenue Officer Williams testified that
“no one would have considered [an OIC] because . . . one was not filed.” Tr. at 64.
35
It appears Respondents borrowed the $20,000 in 2014. See Respondents’ Ex. 3 (Doc. No.
15-14 at 30); Petitioner’s Ex. 9 (Doc. No. 15-10 at 3-10). Mrs. Gower’s mother has since passed away, but
the record does not specify when. Tr. at 135-36.
-19-
At the hearing, Mr. Gower testified that Mrs. Gower “brings home $200 a week.” Tr.
at 118. Mrs. Gower stated that in 2016 she made $16,000 and Mr. Gower made “maybe
$3,000.” Tr. at 140-41. Mr. Gower testified that in April 2017 he would start receiving a
pension of approximately $1,300 a month. Tr. at 115; see also Tr. at 138 (Mrs. Gower’s
testimony on Mr. Gower’s anticipated pension). Mrs. Gower testified that Mr. Gower will be
entitled to around $1,800 a month in social security benefits, and that although she will also
collect benefits, she has not determined what those benefits will be. Tr. at 137. She testified
that they have borrowed approximately $4,000 from Mr. Dubberly and, as noted above, they
borrowed $20,000 from her mother. Tr. at 137, 135. According to Mrs. Gower, when her
mother passed away, she received “about $4,000” from her mother’s savings accounts. Tr.
at 136. Mr. Gower testified that in the past they have “had to borrow from [his] 401(k) to
pay . . . back taxes.” Tr. at 119.
Mr. Gower stated that “[Mrs. Gower’s] income is just not even keeping the lights on
sometimes.” Tr. at 117. He testified their vehicle has been at a repair shop for three weeks,
but they have not retrieved it because they have been unable to pay $400 for the repairs. Tr.
at 117-18. He further stated he owes $12,000 in costs to one of the insurance companies
he worked for. Tr. at 114. He testified they have not been on vacation since 2009. Tr. at 119.
Mrs. Gower represented that they are recipients of a food bank and that Mr. Gower goes
there every week. Tr. at 136. According to Mrs. Gower, it would cost them “maybe $800 a
month” to rent an apartment. Tr. at 141. She asserted that if they were to pay monthly rent,
she does not know how they would pay their other living expenses. Tr. at 142.
-20-
Notwithstanding this testimony, Mrs. Gower admitted that they “were living beyond
[their] means,” and this was “one reason [they] sold the [Tampa] house and moved up here.”
Tr. at 119. (As noted, when Respondents moved and purchased the Property in May 2013,
they already had outstanding tax liabilities for tax years 2008 through 2011. See Petitioner’s
Ex. 1 (Doc. No. 15-2 at 3-23)). Mrs. Gower testified that in 2014, they purchased tickets for
the “SEC basketball tournament” in Atlanta because they “wanted to go see the game.” Tr.
at 140; see Tr. at 121 (Mr. Gower’s testimony); Petitioner’s Ex. 4 (Doc. No. 15-5 at 4) (bank
statement showing purchase of tickets). Respondents testified they stayed at a hotel when
they traveled to Atlanta for the game. See Tr. at 121-22, 140; Petitioner’s Ex. 4 (Doc. No. 155 at 4) (bank statement showing hotel expenses).
Revenue Officer Williams testified that the bank statements from 2014 that Aurora
submitted “show that [Respondents] are living above their means,” and “living well beyond
what the reasonable person would consider reasonable expenses.” Tr. at 34-35. Specifically,
she testified that “[t]here was lots of restaurants, eating out,” as well as “large alcohol
purchase[s],” and purchases at a “luxury nail spa.” Tr. at 35. Revenue Officer Williams’s
testimony is consistent with the bank statements. See Petitioner’s Ex. 4 (Doc. No. 15-5 at
3-4, 6-7, 12-13, 15-16). Notably, as stated above, it was in 2014 that Respondents borrowed
$20,000 from Mrs. Gower’s mother. See Respondents’ Ex. 3 (Doc. No. 15-14 at 30);
Petitioner’s Ex. 9 (Doc. No. 15-10 at 3-10). These expenditures, while not extravagant, tend
to undermine Respondents’ description of their alleged dire financial situation as well as call
into question the suggestion that they had to borrow money from others because they could
not afford necessities.
-21-
Mr. Dubberly testified that he is willing to enter into a compromise with the IRS to
settle Respondents’ debt. Tr. at 105. He stated that “[i]f the IRS wants a check, [he] can have
them a cashier’s check within [sixty] days for about $40,000,” and “[i]f they want to go to a
monthly installment, [he will] guarantee it up to [$]75,000.” Tr. at 105. Mr. Dubberly has not
contacted the IRS regarding this proposed settlement and has not provided the IRS with any
financial information regarding Respondents’ case. Tr. at 107-08.
IV. Parties’ Arguments
As previously noted, in its Petition and supporting Declaration, Petitioner made a
prima facie showing that the levy upon the Property is appropriate by establishing the
following: 1) Respondents have failed to pay the underlying liabilities in full; 2) the IRS has
satisfied all necessary legal requirements and administrative procedures; and 3) the IRS has
exhausted all reasonable alternatives for collection. Petition at 4; Declaration at 2-4; see 26
C.F.R. § 301.6334-1(d)(1). Respondents make three arguments in response: 1) Petitioner
failed to establish that there are no reasonable alternatives for collection; 2) Revenue Officer
Williams did not properly consider the applicability of an ETA Offer; and 3) the Petition is not
ripe because levy of the Property is barred by the pending installment agreements.36 See
Respondents’ Mem. at 14-20; Reply at 4-10. The undersigned first sets outs Respondents’
arguments in turn. Then, Petitioner’s contentions in response are discussed.
36
Respondents also assert they “likely qualify for penalty abatements under 26 U.S.C.
§§ 6651(a)(2) and 6651(a)(3) for failure to pay tax and failure to pay assessed tax on these liabilities and
the twenty-five . . . percent late return filing penalty under 26 U.S.C. § 6651(a)(2) . . . .” Respondents’ Mem.
at 19-20. The undersigned does not address this argument as it challenges the merits underlying the tax
liability, which Respondents are not permitted to challenge in this proceeding. See 26 C.F.R.
§ 301.6334-1(d)(2). Further, Respondents do not offer any legal authority indicating that the Court can
require the IRS to reduce Respondents’ penalties. See In re Atkinson, No. 8:08-MC-0110-T-30EAJ, 2009
WL 2187537, at *3 (M.D. Fla. May 13, 2009) (finding that the “[r]espondent cite[d] no legal authority for the
proposition that the court can require the IRS to settle or forgive penalties and interest in lieu of seeking to
levy upon a taxpayer’s residence”).
-22-
A. Respondents’ Arguments
1. Reasonable Alternatives for Collection
Respondents argue that Petitioner “cannot establish that reasonable alternatives for
collection do not exist.” Respondents’ Mem. at 15. They represent that they “do not dispute
that they owe the tax liabilities” or “that the administrative procedure[s] have been met, at
least to the extent that the administrative procedures only require the proper mailing of a
Notice of Intent to Levy on the Taxpayer and the filing of a Notice of Federal Tax Lien.” Id.
In arguing that reasonable alternatives for collection do exist, Respondents point to Mr.
Dubberly’s offer to fund an OIC and the possibility of a private sale of the Property. See
Reply at 7, 10. (As noted above, Respondents never submitted an OIC. Tr. at 37.)
Respondents assert that “[p]rior to contacting tax counsel, [they] were unaware of the
applicability of an ETA Offer to their situation,” and that “Aurora . . . did not advise them that
an [OIC] was ever an option.” Respondents’ Mem. at 18. Therefore, argue Respondents,
their “failure to secure competent representation (i.e., who would be aware of the applicability
of an ETA Offer) while being investigated by the [r]evenue [o]fficer should not impact the
merits of their case.” Id.
Respondents contend that Mr. Dubberly’s testimony that he is willing to pay part of
Respondents’ debt is a “guarantee to fund an [ETA] Offer, which should be more convincing
to the Court than an [ETA] Offer submission by itself.” Reply at 7. Respondents assert that
they are eligible for an ETA Offer because “the sale of [the Property] would cause them an
economic hardship.” Respondents’ Mem. at 16. According to Respondents, “their home is
their sole remaining asset for retirement, they cannot afford rent, and due to [their] advancing
-23-
ages[,] they will find it difficult to earn additional income to pay for food, clothing and shelter.”
Id. at 17. Respondents state that “[i]f the Court determines filing an [OIC] is necessary for
a ‘collection alternative’ to exist,” then they “propose that the Court require . . . Respondents
to file an [OIC] within thirty . . . days of the Court’s determination.” Reply at 8.
Alternatively, Respondents argue that “[i]f the Court is not convinced that the
availability of an ETA Offer is fatal to the case of Petitioner, then [Respondents] should be
permitted the ability to market and sell the property at its highest and best price.”
Respondents’ Mem. at 19. According to Respondents, “the forced sale of the Property would
result in proceeds less than the current encumbrances against the Property.” Id.
Respondents contend that their request for a private sale of the Property “is proposed as a
last resort and is primarily due to the minimal funds that the [IRS] anticipates realizing from
the forced sale.” Reply at 10.
2. Revenue Officer’s Consideration of ETA Offer
Respondents argue that the IRS did not make “an actual determination regarding
hardship and alternatives to collection.” Respondents’ Mem. at 18. According to
Respondents, in concluding that an OIC was not viable, Revenue Officer Williams
“determined that there would be no hardship, apparently because [Respondents] could
borrow unlimited sums of money from [Mrs.] Gower’s mother.” Id. Respondents contend that
Revenue Officer Williams erred in doing so because the factors used in determining whether
collection would cause economic hardship “do not reference an ability to borrow from family
members.” Id. Respondents assert that “[t]he existence of a viable collection alternative and
-24-
the [r]evenue [o]fficer’s failure to comply with the applicable Treasury Regulations and [IRM]
provisions should be deemed fatal to the . . . Petition.” Id. at 19.
3. Pending Installment Agreement
Respondents finally contend that “the [IRS] is statutorily barred from levy or seizure
of the Property” because “there was a [p]ending [i]nstallment [a]greement as of January 23,
2014 on all tax years at issue, excluding 2013.” Id. at 20. According to Respondents, their
installment agreement requests “are not frivolous.” Reply at 8.
B. Petitioner’s Arguments
1. Reasonable Alternatives for Collection
Petitioner asserts that there are no reasonable alternatives for collection and that
Respondents failed to show there are other assets from which the liability can be satisfied.
Petitioner’s Resp. at 5-12; Sur-Reply at 1-2; see 26 C.F.R. § 301.6334-1(d)(1)-(2). Petitioner
contends Mr. Dubberly’s offer to fund an OIC is insufficient to show that there are reasonable
alternatives for collection because “such an offer is hypothetical, since neither Mr. Dubberly
nor . . . Respondents have made any such offer to the IRS.” Petitioner’s Resp. at 8. Further,
argues Petitioner, the amounts Mr. Dubberly is willing to pay are insufficient to satisfy the tax
liabilities. Id. Petitioner also asserts that “[c]ompromising [Respondents’] tax liabilities in
these circumstances would undermine compliance with tax laws, and would not encourage
taxpayers to view the tax laws as fair and equitable.” Id. at 11 (citations omitted).
Petitioner contends that Respondents’ offer to sell the Property at market value is not
a reasonable alternative for collection because the “IRS [previously] pursued
having . . . Respondents sell the Property but, because of [their] unwillingness, that was not
-25-
a viable collection alternative.” Id. at 15. Petitioner also asserts that “a grant of the Petition
does not mean that a levy will issue or that . . . Respondents will be precluded from pursuing
a private sale of their home.” Id. (citation omitted).
2. Revenue Officer’s Consideration of ETA Offer
As to Revenue Officer Williams’s determination regarding the applicability of an OIC
in Respondents’ case, Petitioner argues that Respondents “have not made an [OIC], and the
fact that they have sufficient equity in the Property makes them ineligible for . . . an [OIC].”
Id. at 5. Petitioner asserts that “[a]n offer is a prerequisite to engaging in an [OIC]—otherwise
the IRS is negotiating against itself.” Sur-Reply at 3. According to Petitioner, prior to the
issuance of the levy, “[h]ardship is only a consideration in the IRS’s analysis of an ETA
[O]ffer, which . . . Respondents did not make and for which they are not eligible . . . .”
Petitioner’s Resp. at 6 n.6. Petitioner asserts that “hardship is not a factor for the Court to
consider in analyzing the Petition.” Id. “In any event,” contends Petitioner, “Revenue Officer
[Williams] considered the appropriateness of an [OIC], which is all that she was required to
do.” Sur-Reply at 3.
3. Pending Installment Agreement
Lastly, Petitioner argues that because Respondents’ installment agreement requests
are “frivolous on their face, the IRS can formally deny the pending request[s] for an
installment agreement and eliminate the restriction [they] impose[ ] before issuing a levy.”
Petitioner’s Resp. at 12; see also id. at 13-14. Petitioner further asserts that while “[26 U.S.C.
§] 6331(k) imposes some restrictions on the IRS before a levy is issued . . . , it does not
prohibit the Court from granting the Petition.” Id.
-26-
V. Conclusions of Law
The undersigned finds that Petitioner has made a prima facie showing that the levy
is appropriate by demonstrating that the underlying tax liabilities have not been satisfied, all
legal requirements and administrative procedures pertaining to the levy have been met, and
there are no reasonable alternatives for collection of Respondents’ debt. See 26 C.F.R.
§ 301.6334-1(d)(1). Respondents have failed to rebut Petitioner’s prima facie case. The
undersigned addresses the issues raised by Respondents in the following order: 1) whether
Petitioner established that there are no reasonable alternatives for collection; 2) whether
Revenue Officer Williams’s determination that Respondents were ineligible for an OIC was
incorrect; and 3) whether the pending installment agreements prohibit levy of the Property.
Respondents have not shown that there are other assets from which the tax liabilities
can be satisfied. Respondents’ proposed alternatives—an OIC funded by Mr. Dubberly and
a private sale of the Property—do not constitute reasonable alternatives for collection. Mr.
Dubberly’s offer to pay a lump sum of $40,000 or “up to [$]75,000” in monthly installments,
Tr. at 105, is inadequate as these amounts are insufficient to satisfy Respondents’
$153,235.45 debt, and the expected net proceeds of the forced sale of the Property
($142,833.45) far exceed Mr. Dubberly’s offer. In any event, an OIC has not been
submitted,37 and the offers made by Mr. Dubberly are merely hypothetical. Thus, Mr.
Dubberly’s offer to fund an OIC does not constitute a reasonable alternative for collection.
37
If Respondents submit an OIC, only the Attorney General or his delegate may compromise
the tax liability because this matter was already referred to the DOJ for prosecution; thus, the IRS no longer
has authority to accept an OIC. See 26 U.S.C. § 7122(a). It is not clear from the record when the matter was
referred to the DOJ, but it was some time before August 23, 2016. See Respondents’ Ex. 3 (Doc. No. 15-14
at 63) (August 23, 2016 note indicating, “[M]oving forward w/DOJ on suit”).
-27-
See In re Atkinson, 2009 WL 2187537, at *3 (finding that a $23,800 home equity loan does
not constitute a reasonable alternative for collection because “the levy and sale of [the
r]espondent’s residence will likely allow the IRS to recover more than this amount and may
even result in full satisfaction of [the r]espondent’s debt of approximately $54,000”); In re The
Tax Indebtedness of Hattrup, 118 A.F.T.R.2d (RIA) 2016-6584 (D. Kan. Feb. 10, 2016)
(finding that “[b]ecause any future income from [a] start-up business is highly speculative,
it is not sufficient to show that [the] respondent has the present ability to satisfy the tax
liability”).38
Likewise, a private sale of the Property is not a reasonable alternative for collection.
Respondents’ argument that the Petition should be denied because the forced sale of the
Property will likely yield less proceeds than a private sale of the Property is not persuasive.
As noted above, when Respondents sold their former residence in Tampa, they did not use
any of the proceeds to pay their outstanding tax liabilities for tax years 2008 through 2011.
Tr. at 145. Instead, they used the entirety of the proceeds ($223,152.20) to purchase the
Property. Tr. at 145; Petitioner’s Ex. 8 (Doc. No. 15-9 at 2). Further, in November 2014, the
IRS suggested that Respondents sell the Property and provide the IRS with the proceeds,
38
Respondents’ reliance on United States v. Henry, No. 8:08-cv-1265-T-27MAP, 2008 WL
5413156 (M.D. Fla. Nov. 3, 2008) is misplaced. Citing Henry, Respondents argue that an OIC is a
reasonable alternative for collection because they filed their 2014 and 2015 tax returns. See Respondents’
Mem. at 15-16. In Henry, this Court granted the Government’s petition for approval of levy after finding, inter
alia, that no reasonable alternatives for collection existed. Henry, 2008 WL 5413156, at *4. The Court noted
the “[d]efendant remain[ed] ineligible for alternatives such as an [OIC] because she ha[d] failed to file her
tax returns for multiple tax years since 1995.” Id. The Court did not hold, however, that taxpayers who have
outstanding tax liabilities are eligible for an OIC as long as they file their tax returns. Here, whether
Respondents filed their 2014 and 2015 tax returns is irrelevant for purposes of approving or denying the
Petition. As noted, an OIC is not an alternative for collection because Respondents have not made an OIC,
and the offers made by Mr. Dubberly at the hearing are insufficient to satisfy Respondents’ debt and are
hypothetical.
-28-
Petitioner’s Ex. 5 (Doc. No. 15-6 at 2); but Respondents never did so, Tr. at 34.39 This
conduct evidences a lack of genuine willingness on Respondents’ part to sell the Property
to satisfy their outstanding tax liabilities. The undersigned finds no support for the proposition
that the Petition should be denied based on Respondents’ mere suggestion that they are
willing to sell the Property. If Respondents wish to sell the Property, a grant of the Petition
does not preclude Respondents from attempting to reach an agreement with the IRS to avoid
a forced sale of the Property.40 See United States v. Peterson, No. C-08-04709RMW, 2009
WL 322867, at *1-2 (N.D. Cal. Feb. 9, 2009) (granting petition for approval of levy even
though the respondent “appear[ed] to be working hard to pay the government,” and the
respondent “stated that he [was] trying to obtain a loan on the home to permit him to pay his
tax debt”).
As to Respondents’ argument regarding Revenue Officer Williams’s conclusion that
they were ineligible for an OIC, this argument is meritless because, as noted, Respondents
never submitted an OIC. Although Revenue Officer Williams’s seizure memorandum
erroneously states that an OIC was considered, she testified at the hearing that an OIC was
never filed, so there was no OIC to consider. Respondents’ Ex. 3 (Doc. No. 15-14 at 39)
(seizure memorandum); Tr. at 64 (testimony). Because the record shows that Respondents
39
The IRS also suggested to Respondents other alternatives for collection, such as cashing
out their 401(k) or obtaining a loan against the remaining cash value of their life insurance policies. See
Petitioner’s Ex. 5 (Doc. No. 15-6 at 2). Respondents, however, never provided the IRS with these proceeds.
See Tr. at 34; Respondents’ Ex. 3 (Doc. No. 15-14 at 36).
40
Respondents’ argument that the forced sale of the Property will result in proceeds less than
the encumbrances against the Property is also unpersuasive. The value of the Property and the amount of
any encumbrances are moving targets. A realistic property value and an accurate determination of the
amount of the encumbrances are matters that have to be determined close in time to the Property being
placed on the market, whether the sale is private or forced.
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never filed an OIC, it is clear that Revenue Officer Williams would not have considered an
OIC. Thus, given that there was no OIC for the IRS to consider, the IRS was not required to
take into account equitable considerations—such as whether levy of the Property would
cause economic hardship on Respondents—when considering alternatives for collection.
Further, such equitable considerations play no role in the Court’s determination of
whether to approve a levy upon the Property. See United States v. DelVecchio, No.
09-14247-CIVLYNCH, 2010 WL 2600697, at *3 (S.D. Fla. Mar. 12, 2010) (finding “[t]here is
simply no requirement under the law that the government satisfy [the r]espondents’
ephemeral standard of ‘addressing the question of economic hardship’ before levying a
delinquent taxpayer’s principal residence”). Respondents had the opportunity to challenge
the appropriateness of the levy at a CDP hearing. See 26 U.S.C. § 6330(c)(2); 26 C.F.R.
§ 301.6330-1. Despite being notified of their right to request a CDP hearing, Respondents
never requested one. See Tr. at 28, 154-55; Petitioner’s Ex. 7 (Doc. No. 15-8 at 2-9) (notices
advising Respondents of right to request CDP hearing). If the IRS ultimately levies upon the
Property, Respondents may request a release of the levy under 26 C.F.R. § 301.6343-1 and
raise the issue of economic hardship at that time.41 But, as Respondents concede, “the Court
is not instructed to look at hardship as a specific cause to deny the Petition . . . .”
Respondents’ Mem. at 17. As to Respondents’ request that the Court require them to file an
OIC within thirty days of this Order, Respondents offer no legal authority, nor can the
undersigned find any, requiring or allowing the Court to do this.
41
The IRS may then consider the impact, if any, of Mrs. Gower’s mother’s death on
Respondents’ financial situation and whether the $20,000 they borrowed from her in 2014 is an indicator of
economic hardship in light of their various expenditures during 2014. See supra at p. 21.
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To the extent Respondents contend they were “unaware” of the applicability of an
ETA Offer to their situation, id. at 18, Revenue Officer Williams provided them with
documents containing information about OICs. See Tr. at 41-42; Respondents’ Ex. 3 (Doc.
No. 15-14 at 18, 42). Moreover, Respondents’ “failure to secure competent representation
(i.e., who would be aware of the applicability of an ETA Offer) . . . ,” Respondents’ Mem. at
18, is not a basis for denying the Petition.
Finally, the pending installment agreements do not prohibit the IRS from levying upon
the Property. The undersigned finds that the proposed installment agreements were
submitted “solely to delay collection” because there is clearly no reality to Respondents’
requests to make periodic, token payments of $1 and $20 a month. See 26 C.F.R.
§§ 301.6159-1(f)(2), 301.6331-4(a)(4); IRM 5.11.1.4.8(4), 2007 WL 9242947 at *2.42 Indeed,
Mrs. Gower’s testimony appears to indicate that the installment agreement requests were
not a genuine offer to settle Respondents’ tax liabilities; instead, they were an attempt to “get
some type of response” from the IRS. Tr. at 150. Thus, the pending installment agreements
do not bar the Court from approving the Petition.
VI. Conclusion
Based on the foregoing, the undersigned finds that Petitioner has demonstrated by
a preponderance of the evidence that the underlying federal income tax liabilities for the
2008 through 2013 tax years have not been satisfied, Petitioner has followed all
requirements of applicable law and administrative procedure relevant to the levy, and there
42
The undersigned notes, however, that the IRS is not bound by the Court’s finding, and it
may make its own determination as to whether the installment agreement requests were submitted solely
to delay collection. See 26 C.F.R. §§ 301.6159-1(f)(2), 301.6331-4(a)(4).
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are no reasonable alternatives for collection of Respondents’ debt. Respondents have failed
to rebut Petitioner’s prima facie showing.
Accordingly, it is
ORDERED:
1.
The Petition for Judicial Approval of a Levy upon a Principal Residence (Doc.
No. 1) is GRANTED.
2.
The Internal Revenue Service is permitted to levy upon the principal residence
of James N. Gower and Valencia D. Gower, located at 95012 Sunflower Court, Fernandina
Beach, Florida 32034 (“the Property”), to satisfy part or all of their unpaid federal income tax
liabilities for the tax years 2008 through 2013. The Property is legally described as follows:
Lot 145, AMELIA NATIONAL UNIT ONE, according to Plat thereof as recorded
in Book 7, Pages 48 through 71, inclusive of the Public Records of Nassau
County, Florida. Parcel ID # 1505160003058000.
3.
The levy shall be executed by any authorized officer of the Internal Revenue
Service.
4.
The Clerk is directed to terminate any pending motions and close the case.
DONE AND ORDERED at Jacksonville, Florida on July 10, 2018.
bhc
Copies to:
Counsel of record
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