Validity of notice is based on how and where it was sent, not who received it

By James A. Beavers, CPA, CGMA, J.D., LL.M.

A notice of the right to a Collection Due Process (CDP) hearing that was sent to a taxpayer at his actual address started the running of the 30-day period to request a CDP hearing even though it was received by a person who was not the taxpayer's employee or authorized to receive his mail.

Background

As of July 13, 2018, Wiley Ramey owed almost $250,000 in tax, interest, and penalties to the IRS for the tax years 2012 to 2016. The IRS wanted to levy Ramey's assets to collect what he owed, and, as it was required, it sent Ramey a Notice LT11, Notice of Intent to Levy and Notice of Your Right to a Hearing, for those years.

The notice informed Ramey that the IRS intended to levy on his property and property rights, and if he wanted to appeal the proposed levy in a CDP hearing, he was required to file a request for a hearing by Aug. 12, 2018. It further warned Ramey that if he did not timely file his request for a CDP hearing, he would not be able to contest Appeals' decision in his case in Tax Court.

The notice was mailed to Ramey by U.S. Postal Service (USPS) certified mail, return receipt requested, to an address in San Simeon, Calif., that he shared with a number of other businesses. Three days after the IRS mailed the notice, the USPS delivered it to the San Simeon address, leaving it with a person who Ramey claimed was not his employee and was not authorized to sign for or receive certified mail on his behalf. Ramey personally received the notice sometime before the Aug. 12 deadline for filing a request for a CDP hearing.

Ramey wanted a CDP hearing, so he filled out a Form 12153, Request for a Collection Due Process or Equivalent Hearing, and submitted it to the IRS. The Form 12153 was dated Aug. 16, 2018, and the envelope it was sent in was postmarked Aug. 20, 2018. The IRS received it on Aug. 24, 2018.

Because Ramey sent the Form 12153 more than 30 days after the IRS sent its notice to him, Appeals gave Ramey an administrative "equivalent hearing" under Regs. Sec. 301.6330-1(i)(1). After the equivalent hearing, the IRS issued Ramey a decision letter in which it sustained the notice, stating "Your request for a CDP Hearing was not timely since it was not received within the 30-day time period as set in the statute."

Ramey petitioned the Tax Court to review the IRS's decision. The IRS filed a motion to dismiss the case for lack of jurisdiction, claiming it had not issued a Notice of Determination Concerning Collection Action (notice of determination) pursuant to a CDP hearing or any other notice to Ramey that conferred jurisdiction on the Tax Court for the years at issue.

Sec. 6330 and the regulations

Sec. 6330 gives a taxpayer on whose property or property rights the IRS intends to levy the right to a CDP hearing by IRS Appeals, generally before the levy is made. Under Sec. 6330(a)(2), the IRS is required to notify the taxpayer of the right to a CDP hearing by a notice either given to the taxpayer in person, left at the taxpayer's dwelling or usual place of business, or sent by certified or registered mail, return receipt requested, to the person's last known address. The notice must be provided to the taxpayer in one of these ways not less than 30 days before the day of the first levy with respect to the amount of the unpaid tax.

If the taxpayer desires to have a CDP hearing, the taxpayer must request the hearing during the 30-day period described in Sec. 6330(a)(2). Within 30 days of IRS Appeals' determination in a CDP hearing, the taxpayer may petition the Tax Court to review the determination, and, if the taxpayer does so, the Tax Court has jurisdiction to review the determination.

The regulations under Sec. 6330 provide that a notice of a right to a hearing (CDP hearing notice) properly sent to the taxpayer's last known address or left at the taxpayer's dwelling or usual place of business is sufficient to start the 30-day period within which the taxpayer may request a CDP hearing. Actual receipt of the hearing notice by the taxpayer is not necessary for a CDP notice to be valid (Regs. Sec. 301.6330-1(a)(3), A-A9). The CDP hearing must be requested within the 30-day period commencing on the day after the date of the CDP hearing notice.

If the taxpayer fails to request the hearing within 30 days, the taxpayer forgoes the right to a CDP hearing. However, if the taxpayer makes an untimely request for a CDP hearing, the IRS must offer the taxpayer an equivalent hearing, which the taxpayer may obtain without an additional request.

The regulations provide that Appeals will generally follow its procedures for a CDP hearing in an equivalent hearing. However, instead of issuing a notice of determination at the conclusion of an equivalent hearing, Appeals issues a decision letter. Unlike an Appeals decision from a CDP hearing in a notice of determination, Sec. 6330 does not allow a taxpayer to appeal the IRS Appeals decision from an equivalent hearing in a decision letter.

Case law on Tax Court jurisdiction in CDP cases

Tax Court jurisdiction under Sec. 6330(d)(1) depends on (1) the issuance of a valid notice of determination and (2) a timely filed petition (Offiler, 114 T.C. 492 (2000)). If a taxpayer does not make a timely request for a CDP hearing, and, thus, Appeals does not make a determination under Sec. 6330, the Tax Court does not have jurisdiction under Sec. 6330(d) because there is no Appeals determination for the court to review (id. at 498).

A decision letter issued after an equivalent hearing generally is not considered a determination under Sec. 6330 (Moorhous, 116 T.C. 263 (2001)). However, a decision letter issued after a taxpayer has made a timely request for a CDP hearing is a determination under Sec. 6330, regardless of what IRS Appeals calls the document (Craig, 119 T.C. 252 (2002)). This means that if the Tax Court determines that IRS Appeals erred in finding that a taxpayer's CDP hearing request was not timely, the court has jurisdiction to correct the error and review IRS Appeals' decision as a determination under Sec. 6330.

The parties' arguments

The IRS argued in its motion to dismiss that because Ramey had not timely filed his CDP hearing request, he had forfeited his right under Sec. 6330 to a CDP hearing. The IRS also noted that although it provided Ramey an equivalent hearing, a decision letter issued pursuant to an equivalent hearing is not subject to judicial review. Furthermore, the IRS stated that a diligent search of its records had uncovered no notice of determination from a CDP hearing for the years in question. Therefore, the Tax Court did not have jurisdiction over Ramey's case.

Ramey argued that the 30-day period for requesting his hearing was not triggered on July 13, 2018, because the IRS had not given him proper notice of his right to a hearing. According to Ramey, the hearing notice the IRS mailed to him through the USPS did not comply with Sec. 6330 because the person who signed for and received the notice was not his employee or authorized to sign for or receive any certified letters to Ramey.

The Tax Court's decision

The Tax Court granted the IRS's motion to dismiss the case. The court found that the 30-day period for requesting a CDP hearing started when the IRS mailed the LT11 letter containing the notice of intent to levy and the notice of the right to a CDP hearing to Ramey; that Ramey had not requested a CDP hearing within the required 30-day period; and that the IRS had properly made no determination under Sec. 6330 pursuant to a CDP. Because no determination under Sec. 6330 had been made, the Tax Court determined it did not have jurisdiction over Ramey's case.

Addressing Ramey's argument, the Tax Court explained that under Sec. 6330(a)(2), one of the three ways the IRS may deliver a pre-levy CDP notice is by mailing the notice to the taxpayer at the taxpayer's last known address by certified or registered mail, return receipt requested. The Tax Court found that this method of providing notice focuses on the sending of the notice, not the taxpayer's receipt of it, and the IRS's primary responsibility under this method of service is to place the notice in the hands of the USPS. Consequently, so long as the IRS properly addresses the notice to the taxpayer's last known address and mails the notice through the USPS using either certified or registered mail, with return receipt requested, the IRS complies with Sec. 6330(a)(2), regardless of who receives the notice at that address.

The Tax Court noted that some courts had required the IRS to do more in certain cases, for example, where the correct address of the taxpayer is in doubt or if there are clear indications that the notice was not delivered. However, the court found in Ramey's case that the facts did not indicate that the IRS should have used a different address or that the USPS had not delivered the notice as contemplated by Sec. 6330.

In the court's view, Ramey's chief complaint was that the address the IRS used was shared by multiple businesses, which could lead to mail being accepted by a person other than Ramey or someone associated with his business. The court stated that while Ramey was free to share a business address with other businesses, having provided that address to the IRS, he could not complain when the IRS used it. The fact that Ramey's address was used by multiple businesses and that the USPS left the notice with a person at that address who neither worked for Ramey nor was authorized to receive mail on his behalf did not affect whether the IRS had properly followed one of the methods of service of a notice under Sec. 6330(a)(2).

Reflections

As the Tax Court observed in the closing of its opinion, its holding did not leave Ramey without an avenue for challenging his underlying tax liability. He was still free to pay the tax he owed, file a claim for refund, and then file a refund suit in federal district court or the Court of Federal Claims. It also observed that if Ramey's financial circumstances changed, he could continue to negotiate with IRS collection officers about his liabilities for the years in question.

Ramey, 156 T.C. No. 1 (2021)

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