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Galloway v. Commissioner (T.C. Memo. 2021-24)

On February 24, 2021, the Tax Court issued a Memorandum Opinion in the case of Galloway v. Commissioner (T.C. Memo. 2021-24). The primary issue presented in Galloway was whether, during his CDP hearing, the petitioner was “improperly barred from resuscitating an offer-in-compromise” that had been rejected prior to the NFTL filing.

Background

By the time his second offer was rejected, the petitioner owed $81,500 in tax for 2014.  In 2016, he submitted an OIC for $9,138, which was rejected on the grounds that he could pay the full amount due.  Rather than appealing that rejection to Appeals, the petitioner submitted a new Form 656, Offer in Compromise, in January 2017, proposing to settle for $8,900. The petitioner argued “exceptional circumstances” with respect to his 2017 offer, including being fired for drinking in 2012 and having a “sustained period of unemployment thereafter.”

Ah, the old “can’t collect from an ol’ drunk” argument.  Interesting strategy Cotton.  Let’s see how it plays out.

It didn’t play out well.  Collection summarily rejected the crapulent offer.

Abuse of Discretion

In an abuse of discretion case related to a CDP hearing, the Tax Court has three tasks that it performs.  The Tax Court considers whether the settlement officer:

  1. properly verified that the requirements of any applicable law or administrative procedure have been met;
  2. considered any relevant issues the taxpayer raised; and
  3. considered whether “any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary.” IRC § 6330(c)(3).

Verification

The Tax Court has authority to review satisfaction of the verification requirement regardless of whether the taxpayer raised that issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 200-203 (2008), supplemented by 136 T.C. 463 (2011). The petitioner did not challenge verification, so the Tax Court lets this element go.

Issues Raised

The petitioner asserted that the 2017 OIC was improperly rejected and that he should have been given the opportunity to resubmit that collection alternative or negotiate a different amount. In the Tax Court proceeding, the petitioner contended that the settlement officer abused her discretion by failing to consider his arguments regarding the errors in the 2017 OIC rejection and by dissuading him from presenting an OIC.

The Tax Court found, however, that the petitioner was precluded from raising the 2017 OIC in his CDP proceeding, because IRC § 6330(c)(4)(A) prohibits a taxpayer from raising an issue during a CDP hearing where:

  1. the issue was raised and considered at a previous IRC § 6320 hearing or in any other previous administrative or judicial proceeding; and
  2. the taxpayer participated meaningfully in such a hearing or proceeding. See also Treas. Reg. § 301.6320- 1(e)(1).

Balancing

The petitioner failed to raise balancing of the need for efficient tax administration with the intrusiveness of the collection actions in his petition; therefore, he conceded the issue.

In any event, the Tax Court found that the settlement officer expressly concluded in the notice of determination that the filing of the NFTL balanced the need for efficient tax collection with the petitioner’s legitimate concerns about intrusiveness because he had an outstanding tax liability and the filing of the NFTL was in the best interest of the IRS, and the petitioner did not provide a valid justification to withdraw the lien.

(T.C. Memo. 2021-24) Galloway v. Commissioner

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