An IRS Appeals officer was justified in sustaining a proposed levy against rapper Tyga for his 2019 tax debt, given that he has accrued over $8 million in outstanding liabilities because of chronic tax noncompliance, the Tax Court held.
“We conclude that the settlement officer acted reasonably in upholding the collection action because of Mr. Stevenson’s consistent refusal to meet his estimated tax payment obligations,” Tax Court Judge Patrick J. Urda wrote in a September 11 memorandum opinion in Stevenson v. Commissioner.
Urda was reviewing a collection due process petition filed by Michael R. Stevenson, described in the opinion as “a very successful rapper who goes by the stage name Tyga.”
The rapper — who has also made headlines for dating celebrities like Blac Chyna and Kylie Jenner — was contesting an IRS Independent Office of Appeals determination sustaining a notice of intent to levy for his unpaid income tax liability for 2019. The $2.3 million owed for that year covers tax, interest, and penalties.
Tyga’s representative had told an IRS Appeals settlement officer at a November 2021 CDP hearing that the artist was interested in pursuing an installment agreement to pay off the 2019 tax debt. The representative said Tyga had been paying $65,000 per month under a previous IRS installment agreement but that his ability to continue paying that amount was questionable because of ongoing litigation and a downturn in touring revenues.
Noting that the IRS’s records didn’t show any estimated tax payments by Tyga for 2021, the officer told the representative that any installment agreement would require full filing and payment compliance. Because the representative hadn’t provided the necessary financial documentation for considering an agreement, the Appeals officer gave him two weeks to provide the information and proof that Tyga was in compliance with his estimated tax payments.
Missed Deadlines
After missing the two-week deadline, Tyga’s representative provided the requested information to the Appeals officer in December 2021, along with a letter indicating that the rapper planned to make an estimated tax payment that month.
The letter proposed an installment agreement of $13,000 per month to satisfy Tyga’s outstanding liabilities for 2012 through 2019, based on documentation reporting monthly net business income of $73,211 and living expenses of $60,145, which included a monthly expense of $37,224 for current-year taxes.
In a phone call with Tyga’s representative, the Appeals officer reiterated the need for filing and payment compliance before any collection alternative could be considered. Noting that a review of the rapper’s account showed that he had consistently failed to make estimated tax payments over the previous nine years, the officer pointed out that Tyga still hadn’t made any payments in 2021, despite a projected liability exceeding $335,000 for the first three quarters.
After Tyga made a payment for those quarters, the Appeals officer referred the case to the IRS collection division, but it opted against preparing a financial analysis after he failed to provide proof of paying any estimated taxes in 2022. Proceeding with a review of Tyga’s proposed installment agreement in July 2022, the Appeals officer concluded that he could pay $87,169 per month. Because no estimated tax payments had been made for 2022, the officer agreed to give the representative one month for Tyga to make his payments and provide proof, but the deadline passed without any information.
The representative notified the Appeals officer in August 2022 that he planned to submit an offer in compromise, but the officer responded that an offer couldn’t be considered because of Tyga’s lack of compliance with his estimated tax obligations, noting that he had “accrued over $8 million in outstanding liabilities . . . and he continues to not meet his tax obligations.”
The officer again gave additional time for Tyga to provide proof of estimated tax payments, but nothing was submitted by the deadline. At the end of September 2022, the IRS issued a notice of determination sustaining the proposed levy, citing Tyga’s lack of compliance with making his required estimated tax payments.
No Abuse of Discretion
Upholding the notice of determination, Urda concluded that the Appeals officer satisfied the requirements of section 6330(c)(3)(C). That is, the officer verified that all requirements of applicable law or administrative procedure had been met; considered any relevant issues raised by Tyga; and considered whether the proposed collection action would balance the need for efficient collection of taxes with the taxpayer’s concern that any collection action would be no more intrusive than necessary.
Urda rejected Tyga’s contention that the Appeals officer abused her discretion by failing to give him enough time to submit an OIC. The rapper “was not in compliance with his 2022 estimated tax payments — a chronic problem over the previous decade — and rejection of collection alternatives was plainly within the settlement officer’s discretion,” Urda wrote.
Nor did the officer abuse her discretion by declining to give Tyga more time to become current with his estimated tax payments, Urda said, noting that the officer had given him several chances to become compliant.
“Against this long backdrop of oft-fruitless accommodation, we cannot fault the settlement officer for ultimately determining that enough was enough,” Urda wrote. “The settlement officer was within her discretion in denying another extension of time and rejecting any collection alternatives for lack of compliance with estimated tax obligations.”
In Stevenson v. Commissioner, T.C. Memo. 2023-115, the petitioner was represented by David C. Holtz and Scott Burkholder of Holtz, Slavett & Drabkin APLC.