Pansier v. Comm'r , 108 T.C.M. 636 ( 2014 )

T.C. Memo. 2014-255
UNITED STATES TAX COURT
GARY LEE PANSIER AND JOAN RENEE PANSIER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3143-13L. Filed December 22, 2014.
Alf R. Langan, for petitioners.
Frederic J. Fernandez and George W. Bezold, for respondent.
MEMORANDUM OPINION
COHEN, Judge: This case was commenced in response to two notices of
determination concerning collection action sustaining proposed levies to collect
petitioner Gary Pansier’s unpaid tax liabilities for 1995 through 1998 and to
collect petitioners’ unpaid tax liabilities for 1999 through 2006. The issue for
decision is whether rejection of petitioners’ offer-in-compromise (OIC) was an
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[*2] abuse of discretion. Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at all relevant times, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
Background
Some of the facts have been stipulated, and the stipulated facts are
incorporated in our findings by this reference. Additional facts concerning
petitioners’ long-pursued disputes with the Internal Revenue Service (IRS) and
their conduct of this case are relevant and are set forth here in response to
arguments made in their posttrial briefs. Petitioners resided in Wisconsin when
the petition was filed.
Petitioner Gary Pansier (Pansier) was required to but did not file Federal tax
returns for 1995 through 1998. On August 4, 2000, a statutory notice of
deficiency was sent to him, but he did not file a petition in this Court for those
years. The determined taxes and additions to tax totaling over $83,000 were duly
assessed.
In November 2005, Pansier was indicted by a Federal grand jury on counts
including obstructing the due administration of the IRS, filing false IRS forms,
and passing fictitious financial instruments. In October 2007, after a jury trial, he
was sentenced to 24 months’ imprisonment in docket No. 07-3771 in the U.S.
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[*3] District Court for the Eastern District of Wisconsin (District Court case). His
conviction was affirmed, and the factual and procedural background was described
by the Court of Appeals for the Seventh Circuit. United States v. Pansier, 576
F.3d 726 (7th Cir. 2009). Among other things, the Court of Appeals commented:
“Pansier initially opted to proceed pro se and filed numerous pretrial motions,
some of which were incomprehensible or irrelevant, while others, including
multiple motions to dismiss the indictment, discovery motions, and a motion for
bill of particulars, arguably presented substantive issues.” Id. at 730.
Pansier was ordered to file returns for 1999 through 2006 and to cooperate
with the IRS as a result of the judgment in the District Court case. On December
31, 2008, petitioners filed delinquent joint Federal income tax returns for 1999
through 2006. They did not pay the amounts due as shown on the returns.
Instead, they petitioned for bankruptcy before they filed the returns. They were
granted a general discharge in June 2009. They then challenged their tax
liabilities in an adversary proceeding in the bankruptcy court, claiming that the tax
liabilities for 1995 through 2006 had been discharged. The bankruptcy court
concluded that their Federal tax liabilities had not been discharged. This
conclusion was affirmed and the factual and procedural background was described
by the Court of Appeals for the Seventh Circuit in an order filed December 19,
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[*4] 2011. Pansier v. IRS (In re Pansier), 451 Fed. Appx. 593 (7th Cir. 2011). In
that order, the Court of Appeals explained:
For over a decade, Gary and Joan Pansier have wrangled with the
Internal Revenue Service and the state of Wisconsin over unpaid
income taxes. See, e.g., In re Pansier, 417 Fed. Appx. 565 (7th Cir.
2011); United States v. Pansier, 576 F.3d 726 (7th Cir. 2009); Pansier
v. United States, No. 09-2450, ECF No. 22 (Bankr. E.D. Wis. Sept.
28, 2010); Pansier v. United States 225 B.R. 657 (E.D. Wis. 1998).
In this appeal, the Pansiers contend that the bankruptcy court erred in
concluding that their federal income tax liability for the years 1995
through 2006 was not discharged by their bankruptcy. We affirm the
judgment.
Id. at 594. Referring to an erroneous concession in an earlier Tax Court case that
had been dismissed in August 2009 for lack of jurisdiction, the Court of Appeals
continued:
In this case, the bankruptcy court did not abuse its discretion in
concluding that judicial estoppel would be inappropriate because the
Tax Court never adopted the IRS’s prior, inconsistent position as to
the existence of a tax liability for the years 1999 through 2006. Thus
there is no risk of contrary decisions creating the appearance that one
court or another was deceived. The Tax Court never decided the
amount or existence of the Pansiers’ tax liability because that court
lacked subject-matter jurisdiction. The erroneous representation by
the IRS that the Pansiers had zero liability was irrelevant to the
jurisdictional issue and was not even mentioned in the Tax Court’s
decision. Accordingly, the bankruptcy court did not abuse its
discretion when it declined to estop the IRS from asserting that the
Pansiers have a tax debt for the years 1999 through 2006.
Id. at 597.
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[*5] On March 8, 2010, a Final Notice of Intent to Levy and Your Right to a
Hearing was sent to Pansier for 1995 through 1998, and a Final Notice of Intent to
Levy and Your Right to a Hearing was sent to petitioners for 1999 through 2006.
Petitioners responded to the notices in a letter contending that the subject years
were being litigated in the bankruptcy court. In order to preserve their rights, they
submitted a Form 12153, Request for a Collection Due Process or Equivalent
Hearing, for all of the years.
From April 2010--when the Form 12153 was received by the IRS Office of
Appeals (Appeals Office)--through June 29, 2011, various Appeals Office
employees exchanged correspondence with petitioners concerning petitioners’
contention that a hearing was premature because of the pending bankruptcy
proceedings. On June 29, 2011, Settlement Officer Anthony Diamantopoulos sent
a letter to petitioners scheduling a face-to-face hearing on August 5, 2011, with
respect to the liabilities for 1999 through 2006. The letter stated that petitioners
could not dispute the liabilities because they had had a prior opportunity to do so
when they filed for bankruptcy. Petitioners responded by again contending that a
hearing was premature, recounting their view of “many years of bureaucratic
ineptitude”, and demanding:
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[*6] Because it is your duty and commitment to us as an officer of the
Internal Revenue Service to “be responsive,” we require a point-by-
point reply to this letter in order that we can reach an understanding
regarding our due process rights for tax periods 1995 through 2006.
Please corroborate all of your statements with the applicable law, just
as we have provided for you in this letter.
On February 17, 2012, after extensive review of petitioners’ accounts and of
the bankruptcy proceedings, the settlement officer noted various procedural
complexities with respect to petitioners’ accounts, including an earlier wrongful
levy resulting in a refund due petitioners. The settlement officer sent a detailed
response to petitioners, explaining that the scheduling was not premature because
the bankruptcy case had been closed at the time of the March 2010 notice of levy
and the automatic stay was lifted, proper assessments were made and proper
notices and demands sent, and the Court of Appeals had rendered its decision and
affirmed the bankruptcy court’s ruling that the tax liability was not discharged.
The letter stated that collection alternatives could not be considered because
petitioners had not completed and submitted a Form 433-A, Collection
Information Statement for Wage Earners and Self-Employed Individuals,
previously sent to them. The settlement officer enclosed another copy of Form
433-A in case petitioners wished to proceed with the appeal and enclosed, as an
alternative, a form for withdrawing the appeal.
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[*7] Petitioners responded in a letter dated March 1, 2012, in which they rejected
each of the settlement officer’s explanations. They argued that Form 433-A did
not apply to them because they were not wage earners and did not derive income
from self-employment. They stated: “[W]e require an applicable form that
includes the law making it mandatory for us to provide you with financial
information, in order to ‘proceed with our appeal.’” They also disputed the effect
of the bankruptcy court rulings and demanded a face-to-face hearing in
Milwaukee.
In a letter dated March 26, 2012, the settlement officer explained:
This is in response to your letter received on March 26, 2012 (copy
enclosed) in reference to the requested Form 433-A. Please
understand that the form may be used by individuals who have other
income (other than wages or self-employment income). There is no
separate form for individuals who are retired and on a fixed income.
If you have any questions or need assistance in completing the form,
feel free to contact me at the telephone number shown above. I have
enclosed another copy for your convenience. Please provide the
requested financial information (with the relevant supporting
documentation listed on page 4 of the Form 433-A) if you wish
consideration of collection alternatives on your Collection Due
Process request. You may include any other relevant information you
would like me to consider, as well.
Provide the above information and documentation no later than April
12, 2012 (one week later than the previous deadline of April 5, 2012).
Appeals will proceed to issue a notice of determination based on your
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[*8] previous response(s) and information contained in the
administrative file if no additional information is submitted by
April 12, 2012.
Petitioners responded with an eight-page letter dated April 10, 2012, repeating
their positions, citing at length (but misinterpreting) court cases and statutory
authorities, and stating that CP 504 notices that instructed “[t]o prevent collection
action, please pay the current balance now” had been received in November 2009
and the balances shown had been paid. The letter enclosed copies of notices for
1999 through 2006. The enclosed notices for 1999 through 2004 showed only
interest due for those years. Petitioners’ liability for each year exceeded the
interest shown on the forms.
The record is uncertain and disputed between the parties as to whether
boxes for “Amount Due” were blank when the Forms CP 504 were received by
petitioners, as they contend, or whether petitioners altered the forms to delete
other components of the current balance and the greater amounts due, as
respondent contends. Petitioners acknowledge that they
did remit money orders of $121.88 for 1999, $112.24 for 2000,
$74.31 for 2001, $95.40 for 2002, $109.73 for 2003, and $79.37 for
2004. These amounts were typed into the blank Amount Due box to
indicate what we were paying, because these were the only amounts
shown on the Account Summary, and the only amounts that appeared
under the Current Balance.
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[*9] The Forms CP 504 for 2005 and 2006 showed amounts due of $7,270.48 and
$6,764.24, respectively, and these amounts were not paid.
Petitioners stated in their April 10, 2012, letter:
We are submitting our Offer-in-Compromise which is based upon the
stipulation that tax periods 1995, 1996, 1997, and 1998 are abated
due to doubt as [to] collectibility and the statutory prerequisites for
notice and demand were not met. The same situation applies for 1999
through 2006, and 1999 through 2004 balances due according to the
CP 504 were paid on November 19, 2009. We do offer to pay the
balance for 2005 and 2006 in monthly increments, paid over a 36
month period in order to avoid further appeal proceedings in the
amount $389.85 totaling $14,034.72.
They again set out at length their view of the law regarding OICs and threatened
further litigation. They also enclosed a Form 433-A on which they had obliterated
the title and substituted “RETIRED INDIVIDUALS ON PENSION FINANCIAL
STATEMENT”.
On April 24, 2012, petitioners were advised that their OIC had been referred
to the IRS Centralized Offer in Compromise Unit, which would research and
verify the offer information petitioners had provided. However, by letters dated
June 27, 2012, the settlement officer wrote to petitioners as follows:
Please be advised that Appeals has decided it no longer desires the
assistance from the IRS Centralized Offer in Compromise (COIC)
Unit in evaluating the appropriateness of your office in compromise.
As a result, Appeals has requested and received your offer file from
the COIC Unit.
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[*10] Appeals retains jurisdiction on your offer in compromise
because it was submitted as a collection alternative in connection
with your Collection Due Process (CDP) appeal. COIC has not
provided Appeals with any analysis, recommendation, or other
information related to your offer that may impact or influence our
final determination. If we had received such information, the law
requires that we notify you of the communication or information
received and give you an opportunity to respond.
Based on questionable documentation you submitted to Appeals with
your offer, we do not believe it is in the government’s best interest to
consider a compromise at this time. Consequently, a recommendation
will be made to reject your offer.
Please let us know by July 16, 2012 if you are willing to consider
another payment arrangement, such as an installment agreement, in
resolving this tax matter. If you are not interested in pursuing a
payment plan on your outstanding liability with our office, please
advise us and we will proceed to issue you a Notice of Determination
on your CDP request with instructions on how to petition our
determination in Tax Court. If you do not respond by July 16, 2012, a
recommendation will be made to issue a Notice of Determination
sustaining the proposed levy action and rejecting your offer in
compromise as a collection alternative.
Petitioners responded with a 5-page, 39-paragraph recital of their continuing
claims of irregularity by the IRS, again threatening a complaint for civil damages
and concluding:
Your failure to respond to each issue raised in this letter will be
construed as an admission on your part and utilized in any future U.S.
Tax Court proceedings as evidence that your rejection of an offer-in-
compromise was arbitrary, capricious, or without sound basis in fact
or law.
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[*11] In addition, your failure to provide us with an explanation as to
why our offer in compromise was rejected, based on an unidentified
“questionable document” theory strongly indicates a breach of the ex
parte communication rules. You failed to notify us of the situation, or
share the communication or information in question, or afford us the
opportunity to respond.
Therefore, we ask that in order to cure this breach, you recuse
yourself and have the case assigned to a new Appeals Officer as soon
as possible, because it appears that the independence and objectivity
of your decisions has been compromised, and “the appearance of
independence is best assessed from the perspective or [sic] the
taxpayer, not the IRS.”
The notices of determination on which this case is based were sent January
8, 2013. The notice to Pansier stated that he owes over $232,000 in personal
income tax for 1995 through 2006. Petitioners’ joint liability was stated to be over
$110,000 for 1999 through 2006. The notices included a detailed history of the
administrative proceedings, including the following statement:
The basis for rejecting the taxpayer’s offer is supported by IRM
section 5.8.7.7.1. It is worth noting that IRM section 5.8.7.7.2 (4)
states that an offer will not be rejected on public policy grounds
solely because the taxpayer was criminally prosecuted for a tax
violation. The distinction made in this case is that the documentation
submitted with the offer in compromise included forged or altered
IRS notices to sway the Settlement Officer’s decision in favor of the
offer. The documents were intended to support the taxpayer’s
contention that liabilities were not actually owed for certain tax years,
therefore, adding credence to the taxpayer’s position that the amount
offered was fair and in the government’s best interest.
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[*12] Apparently, similar tactics used by the taxpayer that resulted in
a tax fraud conviction were used in the submission of the offer in
compromise documentation. Specifically, altered CP 504 notices for
the years 1999 to 2004 were submitted reflecting only accrued
interest charges, which were paid on November 23, 2009. IRS
computer records confirm that the amounts reflected on these notices
are inaccurate. Further, in analyzing the copies submitted, the actual
balance due amounts were removed and changed to reflect only the
computer generated accrued interest as the current balance due. This
was accomplished by completely eliminating the “Current Balance
Due” and “Penalty” figures from each notice and replacing the
“Amount Due” with the computer generated “Interest” amount. The
font used for the altered “Amount Due” figures does not match the
computer font used for the actual “Interest” figures.
Appeals will not proceed with the evaluation or recommend
acceptance of any offer in compromise from a taxpayer who submits
false or inaccurate documentation. At the very least, such actions
diminish the credibility of the taxpayer and provide reason to
question the authenticity of documentation relied upon by Appeals to
determine the taxpayer’s ability to pay. To overlook this or to
recommend acceptance of an offer from a taxpayer who engages in
such tactics undermines the integrity of the Offer in Compromise
Program. Therefore, Appeals concludes that the offer in compromise
submitted by the taxpayer is not in the government’s best interest and
is rejected.
While proceeding pro se in this case, petitioners pursued discovery,
moved for summary judgment, moved for protective orders, repeatedly moved for
reconsideration of the Court’s orders, moved for an interlocutory appeal, proposed
their own stipulation of facts, filed a pretrial memorandum citing various
authorities, including rules of evidence, and otherwise disputed every step taken
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[*13] by respondent or by the Court during the pendency of this case. Respondent
filed a motion for summary judgment accompanied by a declaration of the
settlement officer. Petitioners pointed out that the declaration did not include the
required statement that it was executed under penalty of perjury. The motion for
summary judgment and petitioners’ cross-motion were denied because of a
genuine dispute as to whether petitioners had altered the Forms CP 504 submitted
with their OIC. Respondent also filed documents without proper redaction under
Rule 27, an error that was subsequently corrected by agreement between the
parties.
A few weeks before the scheduled trial date, petitioners moved for a
continuance, citing Pansier’s health issues. Respondent opposed the motion,
arguing that it was just another attempt to delay and obstruct collection of
petitioners’ liabilities. The motion for continuance was denied in an order dated
May 8, 2014, stating in part:
Petitioners * * * indicate willingness to stipulate to certain matters
and have raised objections to others. Documentary exhibits should be
attached to the stipulation, with objections noted in it. Petitioners are
obviously reluctant, for health considerations or otherwise, to appear
at trial and give testimony under oath and subject to cross-
examination, continuing to assert that the Court should accept at face
value the many declarations that they have filed in this case.
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[*14] The order directed the execution of a stipulation and that each party show
cause why the case should not be submitted on the stipulation. Thereafter, counsel
entered an appearance for petitioners, and the case was submitted fully stipulated
under Rule 122. Briefs were submitted by counsel.
Discussion
Section 6330 provides for notice and an opportunity for a hearing before a
levy proposed by the IRS to collect unpaid taxes may proceed. Under section
6330(c)(2)(A), a taxpayer may raise any relevant issue at a hearing, including
“challenges to the appropriateness of collection actions”, and may make “offers of
collection alternatives, which may include the posting of a bond, the substitution
of other assets, an installment agreement, or an offer-in-compromise.” Challenges
to the underlying liability may be raised if the person requesting the hearing did
not receive any statutory notice of deficiency for the liability or did not otherwise
have an opportunity to dispute the liability. Sec. 6330(c)(2)(B). A taxpayer
is expected to provide all relevant information requested by the Appeals Office for
its consideration of the facts and issues involved in the hearing. See sec.
301.6330-1(e)(1), Proced. & Admin. Regs. Where the validity of the underlying
tax liability is not properly at issue, as is the case here, we review the actions of
the Appeals Office, including that Office’s interpretation of law, for abuse of
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[*15] discretion. See Weber v. Commissioner, 138 T.C. 348, 355 (2012);
Swanson v. Commissioner, 121 T.C. 111, 119 (2003).
Respondent persists in insisting that petitioners altered the Forms CP 504 to
delete amounts showing balances owed substantially in excess of the interest
shown and paid by petitioners. Respondent’s current records reflect greater
balances owing and demand forms sent in November 2009, but they do not include
copies of the Forms CP 504 actually sent to petitioners. Petitioners insist that the
forms showed only interest but acknowledge inserting the interest amounts in the
“Amount Due” boxes on the forms; they claim that they did so to show the
amounts paid. In their pretrial memorandum, they assert that “[t]he Petitioners
simply used the paid CP 504 Notices as a bargaining tool in compromise of the
liabilities that could never be paid off in their lifetime.”
We cannot determine credibility in this factual dispute without the
testimony of petitioners and an opportunity for cross-examination by respondent.
It is not improbable, however, that during the pendency of the Tax Court case
dismissed in August 2009 for lack of jurisdiction, assessments for the years in
issue did not appear on the accounts. In its 2011 order affirming the bankruptcy
court and quoted in our findings, the Court of Appeals described an erroneous
concession by the IRS during the course of the earlier Tax Court case that
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[*16] petitioners did not have a liability for 1999 through 2006. That concession
may well have been based on incomplete or erroneous records that did not reflect
assessments for those years because of the pendency of the Tax Court case. See
sec. 6213. We are willing to assume, therefore, that the forms petitioners received
for 1999 through 2004 showed only interest. The issue in this case, however, is
not whether the settlement officer’s suspicions were correct but whether the
settlement officer’s rejection of the OIC was arbitrary, capricious, or without
sound basis in fact or law. Giamelli v. Commissioner, 129 T.C. 107, 111 (2007);
Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Petitioners argue that the settlement officer should have tried to explain to
them why the positions they were taking during the Appeals process were
erroneous and that the settlement officer therefore abused his discretion in
rejecting the OIC. They state:
That petitioners altered the title of the 433-A illustrates both their
lack of understanding of the applicability of Form 433-A to their
circumstances and their distrust of respondent’s explanations that the
form did apply to them. This was a clear sign to SO Diamantopoulos
that he was dealing with taxpayers who were prone to
misinterpretation of the rules and regulations applicable to them. He
could, and perhaps should, have taken care to ensure that he
explained himself clearly to them going forward. That he did not do
so is at the core of the origin of this litigation.
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[*17] Their argument is based on the assertion that petitioners were
unsophisticated and sincerely confused lay persons. They acknowledge the
“almost belligerent tone of their cover letter sent along” with the OIC. They
characterize the 1999 through 2004 forms as “ancillary to the offer, as they
pertained to years not covered by the OIC”. They assert that the offer included
only years 2005 and 2006 because they doubted that the IRS could collect for
earlier years, not because they denied liability for those years. They fault the
settlement officer for not returning the offer to them with an explanation that they
should include the other years as well.
With respect to the period of delay between the settlement officer’s June
2011 letter, petitioners’ response that any hearing would be premature, and the
settlement officer’s February 2012 letter, during which time the settlement officer
researched petitioners’ accounts and the bankruptcy proceedings, petitioners state:
SO Diamantopoulos had sufficient information from and about
petitioners that he knew or should have known that they were
combative and that they had specific beliefs regarding their tax
liabilities. Petitioners requested a face-to-face CDP hearing with him
that would have afforded them the opportunity to attempt to persuade
SO Diamantopoulos of the correctness of their views, but he ignored
that request and instead pushed them into submitting an OIC. Just as
importantly, by denying petitioners the opportunity to meet with him,
SO Diamantopoulos evaded an opportunity to explain petitioners’
errors to them. All he had to do was to respond to their letter that the
bankruptcy appeal did not preclude IRS from pursuing collection
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[*18] action and that they should still meet with him on August 5,
2011. Instead, he chose not to respond.
They conclude that the settlement officer “was the Service professional in this
matter, and as such, he was in a position to explain to the taxpayers where they
were in error vis-à-vis their assertions regarding the collectability of their 1995
through 2004 taxes.”
By the time they submitted their OIC in 2012, petitioners knew that their
liabilities had been confirmed by the bankruptcy court and the Court of Appeals.
They were precluded from disputing them in a proceeding under section 6330, a
section they cited frequently in their correspondence with the settlement officer
and in their filings in this Court. See sec. 6330(c)(2)(B). They also knew from the
opinion of the Court of Appeals that they could not rely on errors by the IRS to
erase their liabilities. They undoubtedly recognized that Forms CP 504 showing
only interest were erroneous. They knew that the greater balances owed and
unpaid, based upon the returns that they had filed for 1999 through 2004, were
still outstanding.
Petitioners admit that they altered the “Amount Due” boxes on the forms so
that the amounts shown as due were the amounts that they submitted in payment.
In view of Pansier’s history of submitting false documents and the settlement
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[*19] officer’s verification of the amounts actually due far in excess of the
amounts shown on the forms, it was not unreasonable for the settlement officer to
conclude that petitioners had deliberately misrepresented their total liabilities in
submitting the OIC.
The record in this case and the history of petitioners’ disputes with the IRS
demonstrate that petitioners would be unwilling to accept any disagreement with
their strongly held convictions that they were right. They rejected or ignored the
holdings of the District Court, the bankruptcy court, the Court of Appeals, and this
Court. They sent lengthy letters to various IRS offices and filed numerous and
repetitive motions in this case that purported to cite cases and legal authorities,
thus asserting their familiarity with the law. They engaged in hostile, obstructive,
and frivolous conduct at every stage of the proceedings. We do not accept the
suggestion that the settlement officer could have persuaded them to change their
position or should have engaged in further attempts to do so. Endless indulgence
of their combative tactics, or a remand by this Court for the purpose of
reconsideration, would be futile. See Lunsford v. Commissioner, 117 T.C. 183,
189 (2001). Considering all of the circumstances, we conclude that the settlement
officer did not act arbitrarily or capriciously and that there were sound reasons for
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[*20] rejecting the OIC. We cannot conclude that the notices of determination
were an abuse of discretion.
To reflect the foregoing,
Decision will be entered for
respondent.