Brown v. Commissioner

A Second Attempt at 'Deemed Acceptance'

Michael D. Brown lost his attempt to have a $320,000 offer-in-compromise (OIC) "deemed accepted" by the IRS. Brown argued that the IRS failed to reject his offer within the 24-month timeframe stipulated by Section 7122(f) of the Internal Revenue Code, which states that an OIC "shall be deemed to be accepted" if the IRS does not reject it within 24 months of its submission. However, the Tax Court rejected this argument, pointing out that it had already ruled against Brown on the exact same offer in a previous case. The dispute concerned income tax liabilities for the years 2009, 2011, and 2014, as well as additions to tax/penalties for 2001, 2002, 2003, 2005, 2006, 2007, 2009, and 2010.

The Tale of Two CDP Hearings

As previously discussed, the core dispute revolved around Internal Revenue Code Section 7122(f), which stipulates that an Offer-in-Compromise (OIC) "shall be deemed to be accepted" if the IRS does not reject it within 24 months of its submission. However, the Tax Court rejected this argument, pointing out that it had already ruled against Brown on the exact same offer in a previous case. The dispute concerned income tax liabilities for the years 2009, 2011, and 2014, as well as additions to tax/penalties for 2001, 2002, 2003, 2005, 2006, 2007, 2009, and 2010.

The procedural history involves two separate Collection Due Process (CDP) hearings stemming from the same underlying tax liabilities. On April 19, 2018, Brown submitted an OIC to the IRS, offering $320,000 to settle his liabilities for 2009, 2010, and other tax years. On November 5, 2018, the IRS returned the OIC, citing pending investigations regarding Brown's tax liabilities. This return occurred less than 24 months after the OIC's submission.

The litigation unfolded in two separate Tax Court dockets. The first, Docket No. 11519-20L, concerned a notice of federal tax lien filing. The second, Docket No. 14660-22L (the current case), arose from a notice of proposed levy to collect income tax liabilities for 2009, 2011, and 2014, and additions to tax and penalties for earlier years. Critically, the Tax Court had already addressed the status of the April 2018 OIC in the lien case (Docket No. 11519-20L), a decision that was subsequently affirmed by the Ninth Circuit Court of Appeals.

Binding Precedent Blocks Summary Judgment

Brown, undeterred by the earlier ruling in the lien case, moved for summary judgment in the levy case (Docket No. 14660-22L), hoping for a different outcome. He argued that his April 2018 offer-in-compromise (OIC) should be "deemed accepted" under Section 7122(f). Section 7122(f) states that an OIC is considered accepted if the IRS fails to reject it within 24 months of its submission.

The Tax Court, however, found that the core issue – the status of the April 2018 OIC – had already been decided in Brown v. Commissioner, 158 T.C. 187 (2022), a case involving the same taxpayer and the same OIC. Invoking the doctrine of stare decisis, the principle that courts should follow established precedent, the Tax Court explained that it was bound by its prior holding. The court stated that the return of the OIC in November 2018 constituted a rejection, effectively stopping the 24-month clock under Section 7122(f). Therefore, it was inappropriate to deem the OIC accepted, and Brown's argument failed. Consequently, the Tax Court denied Brown's motion for summary judgment. Utilizing its power under Tax Court Rule 121(g), which allows the court to grant summary judgment to the non-moving party if warranted, the court granted summary judgment sua sponte (on its own motion) in favor of the IRS.

Impact: No Loophole for Parallel Cases

The Tax Court's decision underscores that taxpayers cannot relitigate the same offer-in-compromise (OIC) issue in a collection due process (CDP) hearing for a levy if that issue was already decided in a prior CDP hearing concerning a lien. In other words, the court will prevent taxpayers from taking a second bite at the apple in a parallel case. While the core tax dispute is resolved against the taxpayer, the Court withheld entering a final decision solely to determine the petitioner's residence—whether it was Texas or Nevada—for the purpose of establishing the appropriate venue for any potential appeal.