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STA PAINTING CO. v. INTERNAL REVENUE SERVICE

February 11, 2004.

STA PAINTING CO.
v.
INTERNAL REVENUE SERVICE



The opinion of the court was delivered by: RICHARD B. SURRICK, District Judge

MEMORANDUM & ORDER

On September 4, 2002, a Complaint for Redetermination was filed by STA Painting Co. ("STA"), pursuant to 26 U.S.C. § 6330, seeking review of the determinations of an Internal Revenue Service ("IRS") Appeals Officer issued on August 15, 2002, sustaining certain collection activities by the IRS against Plaintiff for non-payment of employment taxes. Defendant IRS has moved for summary judgment seeking affirmation of the Appeal Officer's determinations. (Doc. No. 8.) Plaintiff has filed a cross motion for summary judgment seeking remand alleging that the Appeals Officer's decision rejecting an installment agreement was an abuse of discretion. (Doc. No. 9.) For the following reasons, we will grant Defendant's motion and deny Plaintiff's cross motion.

I. Background

  STA, a commercial painting contractor, filed this suit seeking review of three determinations by James J. Polsenki ("Appeals Officer") rejecting Plaintiff's attempt to settle its employment tax deficiency through an installment agreement rather than through lien or levy of its assets. Plaintiff has properly sought review of the Appeals Officer's determinations pursuant to 26 U.S.C. § 6330(d). Page 2

  In May of 2001, the IRS sent STA a notice of intent to levy for its failure to pay employment taxes for the periods ending June 30, 2000, September 30, 2000, and December 31, 2000. This notice informed STA of its right to a collection due process ("CDP") hearing pursuant to 26 U.S.C. § 6330(a)(1).*fn1 On June 15, 2001, STA requested a CDP hearing and provided the IRS with specific reasons why a levy was inappropriate. STA requested payment through an installment plan. (Def.'s Mot. for Summ. J. Ex. 1.) STA met with the Appeals Officer twice in September of 2001, to discuss its liability. It proposed an installment agreement in which it would pay $3,000 a week until the principal for each quarter had been paid off, and a lump sum payment of $85,000 to be paid by December 31, 2001. (Def.'s Mot. for Summ. J. Ex. 5.) STA claims that pursuant to this installment proposal, twenty-one $3,000 payments or $63,000 was paid to the IRS between October 5, 2001, and August 30, 2002. STA also made lump sum payments to the IRS of $6956.64 on September 19, 2001, and $8024.30 on September 23, 2001. Despite these payments, on August 15, 2002, the Appeals Officer advised STA that it was ineligible for an installment agreement due to its lack of compliance and that a levy was the appropriate collection action. (Def.'s Mot. for Summ. J. Ex. 6.)

  In June of 2001, the IRS also notified Plaintiff that it was filing a notice of a lien, pursuant to 26 U.S.C. § 6320,*fn2 for the deficiency in employment taxes for the periods ending June 30, 2000 and September 30, 2000. (Def.'s Mot. for Summ. J. Ex. 2.) Again, STA requested a CDP hearing appealing the notice of the lien, arguing that the appeal of the Page 3 aforementioned levy action (described above) prevented the IRS from filing a "collection action," while the appeal was pending. (Def.'s Mot. for Summ. J. Ex. 3.) After meeting with the Appeals Officer, the IRS responded to this argument on August 15, 2002, informing STA that since it did not meet any of the requirements for withdrawal of the notice of lien, this lien would remain in full force and effect until the liability was fully paid. (Def.'s Mot. for Summ. J. Ex. 7.)

  In September of 2001, the IRS sent STA a notice of intent to levy for STA's failure to pay employment taxes for the period ending March 31, 2001. STA again requested a CDP hearing, incorporating the arguments made to the IRS in its earlier CDP requests. (Def.'s Mot. for Summ. J. Ex. 4.) STA's proposal for an installment agreement covered this period of delinquency as well. (Def.'s Mot. for Summ. J. Ex. 5.) In addition, STA discussed the installment plan with the Appeal Officer on December 11, 2001. Again, the IRS denied STA's request, advising that STA was ineligible for the installment agreement due to its lack of compliance. (Def.'s Mot. for Summ. J. Ex. 8.)

 II. Review of the IRS Determination

 Summary Judgment Standard of Review

  Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). The party moving for summary judgment bears the initial burden of demonstrating that there are no facts supporting the non-moving party's legal position. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986).

  The parties in this matter have agreed that it may be disposed by cross motions for Page 4 summary judgment and that discovery is inappropriate. The parties agree that the only issue in this case is whether the decisions of the Appeals Officer were correct as a matter of law. Although the parties move for summary judgment, we shall construe the motions as motions for judgment, seeking affirmance or reversal of the IRS's determinations.*fn3

 Standard of Review for Appeal Officer Determination

  This case is properly before us under 26 U.S.C. § 6330(d)(1)(B) which provides that "the person may, within 30 days of a determination under this section, appeal such determination — if the Tax Court does not have jurisdiction of the underlying tax liability, to a district court of the United States."*fn4 Even though § 6330 provides for judicial review, it is silent with respect to the standard of review to be applied by the district court. The Third Circuit has not yet spoken to the issue, however, district courts in this and other districts> have applied an abuse of discretion standard. Christian v. Comm'r of IRS, No. Civ. A. 02-9120, 2003 WL 21499013, *1 (E.D. Pa. June 5, 2003): see also Danner v. United States, 208 F. Supp.2d 1166, 1170 (E.D. Wash. 2002); Page 5 MRCA Info. Servs. v. United States, 145 F. Supp.2d 194, 199 (D. Conn. 2000) (comprehensive review of the House Report accompanying the enactment of the IRS Restructuring and Reform Act of 1998, H.Rep. No. 105-599 at 266 (1998), concluding that an abuse of discretion standard of review is appropriate when a district court reviews an IRS Appeal officer's determination pursuant to 26 U.S.C. § 6330). We will also apply that standard.

  The abuse of discretion standard requires a court to determine whether the administrative decision was based on a consideration of the relevant factors and whether or not there was a clear error of judgment. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971). Moreover, an agency must articulate a "rational connection between the facts found and the choice made." Bowman Trans. v. Arkansas-Best Freight, 419 U.S. 281, 285 (1974). `"The task of this court, is not to determine whether in its own opinion . . . `that an installment agreement would best serve both the interest of the IRS and [taxpayer], `but to determine whether there is an ...


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