In Chinweze v. Commissioner, TC Memo 2022-56 the Tax Court finds that the petitioner received his statutory notice of deficiency even though he stated that he did not. Proof of non-receipt is generally tricky. Here, the Court did not need to find that he did not receive the notice in order to deny his request to have the merits of his liability considered during the Collection Due Process (CDP) case. Mr. Chinweze presents a disorganized and unsympathetic case but the decision could make it tougher for others who make a similar argument of non-receipt. Perhaps the case relies on the facts and does not set any precedent but it provides a cautionary tale for others seeking to argue non-receipt in order to gain access to the opportunity to argue the merits of their liability in a CDP case.
Mr. Chinweze is a tax lawyer admitted to practice before the Tax Court. He apparently practiced as a sole practitioner during the years at issue – 2008 to 2010. He did not file his federal tax returns for those years. I imagine that this makes the Tax Court a little nervous that one of its bar members falls into the non-filer category. I have not seen it discipline a practitioner for non-filing in looking at prior disciplinary actions. It does not take the same tack as the IRS Office of Professional Responsibility nor am I suggesting that it should; however, a Tax Court bar member who fails to file would generally not get a case off on the best footing from a sympathy perspective.
According to the Court, the returns were filed in 2012 without remittance reflecting small liabilities. The IRS audited the returns proposing relatively substantial increases and certain penalties. A notice of deficiency was sent on March 4, 2014, by certified mail to an address he subsequently used in his correspondence with Appeals. Mr. Chinweze did not petition the Tax Court and the IRS assessed the proposed deficiencies.
The IRS sent a notice of intent to levy on March 6, 2015 at which time he owed over $160,000. On March 17, 2015 it sent a second CDP notice after filing notice of federal tax lien. He requested a CDP hearing with respect to the second CDP notice. Even though the CDP notices were sent only 11 days apart, his failure to request a CDP hearing with respect to the first notice created a bar to the litigation of the merits of his tax liability because it served as a prior opportunity to litigate the merits – an opportunity he passed up. So, even if he could conclusively prove that he did not receive the notice of deficiency, his effort to litigate the merits was never going to get off the ground.
Despite the fact that his merits argument lacked legs, the Settlement Officer (SO) considering his CDP case asked him to submit information supporting his claim that he did not owe the assessed amount. Mr. Chinweze did not respond the the SO’s attempts to obtain information. This also could provide a basis for cutting off his effort to litigate the merits of his liability.
After hearing nothing from Mr. Chinweze, the SO sent out the notice of determination and he filed a petition in Tax Court. The case was remanded to insure proper verification of the assessments and this may have been when the penalties were dropped by the IRS probably because of Graev problem in the approval. Because of the time from of the case the IRS was not paying careful attention to penalty approval at that time.
In the supplemental hearing the SO gave Mr. Chinweze four dates to comply with sending information. He never responded. He has not built a sympathetic case based on his education and professional background or his lack of responsiveness. Certainly, that must color the decision of the Court.
The Court finds that the IRS records regarding the mailing of the notice of deficiency are not sufficiently complete to create a presumption of proper mailing. The case provides a detailed list of cases on this issue. The Court, however, points out that the Form 3877 still provides probative information upon which the Court could concluded the IRS did mail the notice to Mr. Chinweze. Again the Court provides a detailed list of cases.
Mr. Chinweze’s only evidence is his statement he did not receive the notice. The Court says:
We are unconvinced. Mr. Chinweze was an experienced tax lawyer and filed a CDP request setting forth specific challenges to the NFTL filing (i.e., the liability amount and mitigating factors). His failure to contest receipt of the notice of deficiency in his CDP request undermines the credibility of his subsequent claim, particularly in light of the compelling evidence of mailing and the accompanying presumption of delivery.
The Court cites several more cases. If nothing else, this case provides a good roadmap of the challenges for others who want to argue non-receipt. Undoubtedly, Mr. Chinweze’s unsympathetic background plays a role in this outcome but you can see that the hill is still a steep one to climb even for taxpayers who would invoke much more sympathy.
Having determined that he received the notice, the Court did not need to further explain that he missed the boat by not seeking a CDP hearing from the levy notice but the Court also explains in one paragraph why he loses his opportunity to raise the merits of the liability for a second reason.
If he wants to fight the merits now, he needs to come up with a fair amount of cash in order to full pay the liability allowing him to satisfy the Flora rule and file a claim for refund. He can full pay any of the three years at issue and fight over that year. To the extent the issues are the same in each of the years, he could fight and win one and then seek a claim for abatement. Still, he has a lot of work ahead to fight the merits of this liability.