LIVING CARE ALTERNATIVES OF UTICA, INC., Plaintiff-Appellant, v. UNITED STATES of America, Internal Revenue Service, Defendant-Appellee., United States Court of Appeals, Sixth Circuit., 411 F.3d 621, No. 04-3194, 04-3554., June 2, 2005

LIVING CARE ALTERNATIVES OF UTICA, INC., Plaintiff-Appellant, v. UNITED STATES of America, Internal Revenue Service, Defendant-Appellee.

United States Court of Appeals, Sixth Circuit.

411 F.3d 621

No. 04-3194, 04-3554.

June 2, 2005.

Argued: April 28, 2005.

Decided and Filed: June 2, 2005.

Carla I. Struble, Westerville, Ohio, for Appellant.

Robert J. Branman, United States De╜partment of Justice, Appellate Section, Tax Division, Washington, D.C., for Appellee.

Rachel I. Wollitzer, Jonathan S. Cohen, United States Department of Justice, Ap╜pellate Section, Tax Division, Washington, D.C., for Appellee.

Before: KEITH, MERRITT, and CLAY, Circuit Judges.

OPINION

MERRITT, Circuit Judge.

This opinion addresses separate appeals from two district court cases involving the same parties and almost identical issues. Plaintiff, Living Care Alternatives of Uti╜ca, Inc. ("Living Care"), appeals district court decisions affirming the Internal Rev╜enue Service's Appeals Office decisions to allow tax liens and levies on Living Care's property for unpaid employment taxes for various periods between 1995 and 2001. These appeals require an interpretation of the new Internal Revenue Service Re╜structuring and Reform Act of 1998, Pub.L. No. 105-206, 112 Stat. 685. For the reasons set forth below, we affirm.

SUMMARY OF FACTS

Living Care owns and operates a nurs╜ing home facility in Licking County, Ohio, which has approximately thirty-five beds and forty employees and receives ninety percent of its revenue from Medicare and Medicaid billing. This revenue totals ap╜proximately $100,000 per month. Since the mid-1990's, Living Care has struggled to comply with its tax obligations. The taxes at issue in the instant cases are payroll taxes withheld from employees' paychecks and held in trust by the employ╜er until payments are made to the govern╜ment. From 1995 to 2001, Living Care has intermittently failed to forward the required taxes to the IRS. (Living Care I, Case No. 04-3194 involves annual pay╜ments for tax year 1999 and quarterly payments in 1999 and 2001; Living Care II, Case No. 04-3554 involves annual pay╜ments for tax years 1995, 1998 and 2000 and quarterly taxes for various quarters in 1995, 1996, 1999, 2000 and 2001). ¹ Under a previous levy around 1996 or 1997, Liv╜ing Care entered into an installment agreement with the IRS, but defaulted in 1999. The total current liability (including interest and penalties) is approximately $450,000, although Living Care points out it has paid its newly accrued taxes since July 2002.

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^1. ═ Although the administrative hearing for Living Care II was held first, the District Court decided the case second. It will therefore be referred to as Living Care II.

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In May 2001 and May 2002, the govern╜ment sent Notices of Federal Tax Liens and Notices of Intent to Levy to Living Care, along with a notice of the taxpayer's right to request a hearing before the IRS Appeals Office, which the taxpayer timely invoked. Collection due process hearings were conducted by phone in March 2002 (Living Care II, Case No. 04-3554) and December 2002 (Living Care I, Case No. 04-3194). Notice of Determination letters denying Living Care's claims were mailed June 2002 and March 2003, respectively. Living Care appealed these decisions sepa╜rately to the District Court for the South╜ern District of Ohio. In both cases, which were heard by different judges, the courts affirmed the IRS. ² See Living Care Alternatives of Utica, Inc. v. United States (Living Care I ), No. 02:03-CV-0359, 2003 WL 23311523 (S.D.Ohio Dec.12, 2003); Living Care Alternatives of Utica, Inc. v. United States (Living Care II ), 312 F.Supp.2d 929 (S.D.Ohio 2004). Living Care now appeals these decisions.

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^2. ═ Other tax periods were the subject of other collection due process hearings and at least three other district court appeals. According to Living Care's Briefs, these cases are await╜ing various decisions in the district courts. See Living Care Proof Br. (Case No. 04-3554) at 21 n. 7.

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ANALYSIS

I. Judicial Review of Collection Due Process Proceedings

Collection due process hearings were created by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. No. 105-206, 112 Stat. 685 ("the Restructuring and Reform Act"). ³ The method or standards for judicial review of these hearings is not yet settled, hence the problems in these cases. Prior to this Act, the IRS had the right to levy on taxpayer property without any prior opportunity for a hearing or procedural due process, so long as post-deprivation procedures were provided. The Supreme Court sustained this approach almost seventy-five years ago. See Phillips v. Commissioner, 283 U.S. 589, 595, 51 S.Ct. 608, 75 L.Ed. 1289 (1931). While passage of the Restructur╜ing and Reform Act does indicate Con╜gress's intent to provide taxpayers with additional protection in the form of proce╜dures prior to IRS action, it must be inter╜preted in this historical context. Tax liens and levies are not typical collection actions; the IRS has much greater latitude and leeway than a normal creditor. See gener╜ally Leslie Book, The Collection Due Process Rights: A Misstep or a Step in the Right Direction? 41 Hous. L.Rev. 1145 (2004) (discussing the history of due pro╜cess in tax collection proceedings).

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^3. ═ The Commissioner of Internal Revenue shall develop and implement a plan to reorga╜nize the Internal Revenue Service. The plan shall . . . eliminate or substantially modify the existing organization of the Internal Revenue Service which is based on a national, region╜al, and district structure; . . . establish organ╜izational units serving particular groups of taxpayers with similar needs; and . . . ensure an independent appeals function within the Internal Revenue Service, including the pro╜hibition of ex parte communications between appeals officers and other Internal Revenue Service employees to the extent that such communications appear to compromise the independence of the appeals officers.

The Internal Revenue Service Restructuring and Reform Act of 1998, Pub.L. No. 105-206, ╖ 1001, 112 Stat. 685, 689 (1998).

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The Tax Code grants taxpayers the right to a hearing both on notice of lien and on notice of levy. See 26 U.S.C. ╖ 6320(b); 26 U.S.C. ╖ 6330(b). Proceed╜ings are informal and may be conducted via correspondence, over the phone or face to face. See Treas. Reg. ╖ 601.106(c) & ╖ 301.6330-1, Q & A-D6. No transcript, recording, or other direct documentation of the proceeding is required. See id. ╖ 301.6330-1, Q & A-D6. Taxpayers do have a right to an impartial hearing officer "who has had no prior involvement with respect to the unpaid tax . . . before the first hearing." 26 U.S.C. ╖ 6320(b)(3). A taxpayer may challenge his underlying tax liability at the collection due process hear╜ing, only if he "did not receive any statuto╜ry notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." 26 U.S.C. ╖ 6330(c)(2)(B). Any other relevant issue relating to the unpaid tax may be raised during the hearing, including spousal de╜fenses, challenges to the appropriateness of collection actions, and alternative collec╜tion options (such as posting of a bond, installment agreements, or offers in com╜promise). 26 U.S.C. ╖ 6330(c)(2)(A). By statute, the IRS Appeals Officer must: 1) conduct a verification that the IRS has met all legal requirements and fulfilled its pro╜cedural obligations to move forward with the lien or levy, 2) consider defenses and collection alternatives proffered by the tax╜payer and, 3) make a determination that the "proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intru╜sive than necessary." 26 U.S.C. ╖ 6330(c)(3) (emphasis added). This final balancing factor is novel in American tax law and injects into the calculus an equita╜ble consideration for the taxpayer and his concerns. Not surprisingly, the taxpayer in the instant cases relies quite heavily on this factor in its arguments for relief.

On completion of his review, the Appeals Officer sends his final decision to the tax╜payer in a Notice of Determination letter. The statutes then allow for judicial review of this determination by whatever federal court has jurisdiction over the underlying tax (either the Tax Court or the District Courts).

We review a district court's grant of summary judgment de novo . ⁴ Both the parties and the district court judges in these cases agreed that it was proper to review the IRS Appeals Office de novo with respect to decisions about the under╜lying tax liability and for abuse of discre╜tion with respect to all other decisions, see Bartley v. United States, 343 F.Supp.2d. 649, 652 (N.D.Ohio 2004), but the parties disagreed about whether the underlying liability was actually challenged in these cases. See Part II.A., infra. Finally, the district court may only review issues that were originally raised in the collection due process hearing. See Treas. Reg. 301.6330-1(f)(2), Q-F5 & A-F5.

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^4. ═ The District Court in Living Care II, 312 F.Supp.2d at 933, determined that motions for summary judgment make no sense in the context of judicial review of agency decisions. Therefore, the court treated the motions for summary judgment as cross-motions for judgment on the pleadings. Many courts, includ╜ing this one, have allowed motions for sum╜mary judgment when reviewing collection due process hearings. See e.g., Herip v. Unit╜ed States, 106 Fed.Appx. 995 (6th Cir.2004) (unpublished).

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Judicial review of collection due process hearings presents a real problem for reviewing courts. Congress overlaid the Restructuring and Reform Act on a previous system that involved very little judicial oversight. The result is a surpris╜ingly scant record, comprised almost exclu╜sively of the parties' appellate briefs and the Notice of Determination letter. No transcript or official record of the hearing is required and, accordingly, one rarely exists. Since normal review of administra╜tive decisions requires the existence of a record, see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), overruled on unrelated grounds by Califano v. Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977), Congress must have been con╜templating a more deferential review of these tax appeals than of more formal agency decisions. This might explain why, of six collection due process cases reviewed by the Sixth Circuit, five have been dis╜posed of under our Court's Rule 34 and all six have been unpublished. None has overturned the IRS decision or required a remand. See Herip v. United States, 106 Fed.Appx. 995 (6th Cir.2004) (unpub╜lished); Minion v. Commissioner, No. 03-1337, 2003 WL 22434751 (6th Cir. Oct. 24, 2003) (unpublished); Wasson v. Commis╜sioner, No. 02-2134, 2003 WL 1516288 (6th Cir. Mar.21, 2003) (unpublished); Hauck v. Commissioner, No. 02-2301, 2003 WL 21005238 (6th Cir. May 2, 2003) (unpub╜lished); Brown v. Commissioner, No. 02-1630, 2002 WL 31863695 (6th Cir. Dec.19, 2002) (unpublished); Diefenbaugh v. Weiss, No. 00-3344, 2000 WL 1679510 (6th Cir. Nov.3, 2000) (unpublished).

II. Living Care's Claims

Living Care raises four identical claims in each case. They will therefore be ana╜lyzed together.

A. District Court Applied an Incorrect Standard of Review

Living Care agrees with the gov╜ernment that, in order to receive a de novo review of the Appeals Officers' decisions, it had to have challenged the validity of the underlying tax liability at the collection due process hearings. Otherwise, the Ap╜peals Officers' decisions are reviewed for abuse of discretion. ⁵

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^5. ═ Since the statute itself is silent as to the appropriate standard, the legislative history of the Restructuring and Reform Act is often cited for establishing this two-tiered ap╜proach.

Where the validity of the tax liability was properly at issue in the hearing, and where the determination with regard to the tax liability is part of the appeal, no levy may take place during the pendency of the ap╜peal. The amount of the tax liability will in such cases be reviewed by the appropriate court on a de novo basis. Where the validi╜ty of the tax liability is not properly part of the appeal, the taxpayer may challenge the determination of the appeals officer for abuse of discretion.

Goza v. Commissioner , 114 T.C. 176, 181, 2000 WL 283864 (2000) (quoting with ap╜proval H.R. Conf. Rept. No. 105-599, at 266 (1998)).

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Living Care's evidence that it challenged the validity of the underlying liability is exceptionally weak. One of the Notice of Determination letters does not mention this issue at all and the other states "The underlying tax was not challenged." Liv╜ing Care therefore argues that the Appeals Officers misconstrued and misunderstood its attempts to challenge the tax.

In large part, its argument is based on the premise that "nursing homes are dif╜ferent." Living Care's facility receives al╜most all of its income from government programs (Medicare and Medicaid) that require strict compliance with comprehen╜sive regulatory regimes. These regimes limit the possibility for profit, control and limit admission of new patients, and man╜date high standards in the areas of staff╜ing, food, and medical care. Living Care argues that the regulatory regime became particularly oppressive starting in the mid 1990's.

These government mandated changes resulted in Living Care not being able to pay all its withholding obligations. The government required that Living Care meet the increased mandated care re╜quirements and staffing requirements. Living Care did this and when the deci╜sion had to be made between paying for resident care and taxes, Living Care paid for the food, utilities, medications, staffing etc [sic] and delayed the pay╜ment of taxes-taxes were not simply refused or neglected.

Living Care Proof Br. (Case No. 04-3554) at 18. Living Care maintains that it relied on the above argument during the collec╜tion due process hearings and that this argument was equivalent to challenging the underlying liability itself. ⁶ Furthermore, it argues that the identical requests in its Complaints to the District Courts that the "tax liability be removed" also constituted a challenge to the validity of the liability.

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^6. ═ In another section of its Brief, Living Care presents the argument this way:

Here Living Care submits that the District Court erred in concluding that Living Care did not challenge the underlying tax liabili╜ty. Living Care may not have talked "tax code" language, but it did talk the normal language of the nursing home business. Living Care explained the Catch 22 of gov╜ernment funding and mndates, [sic] where the government gives on the one hand and takes with the other. Government require╜ments ruled all aspects of operation and mandated that Living Care do and provide certain things, while at the same time kept out new residents and decreased occupan╜cy, penalized the nursing home for low occupancy and decreased funding. Yet the government required the payment of taxes timely and then the payment of interest and penalties (but which Medicaid will not al╜lowed to be reimbursed [sic]). This chal╜lenge was made by Living Care in language that has meaning to a nursing home opera╜tor. It may not be how an accountant, attorney or IRS agent would phrase such a challenge. But the taxpayer did challenge it in the Request for Hearing and at the hearing.

Living Care Proof Br. (Case No. 04-3554) at 32.

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The plain meaning of "challenging validi╜ty of the underlying tax liability" requires more than the taxpayer's actions in these cases. Passionately arguing that it is bad public policy to tax a nursing home that was trying in good faith to comply with a comprehensive regulatory scheme is not the same as challenging the validity of the tax. Similarly, requesting that a district court "remove" a tax liability does not constitute a claim at the IRS hearing and is not an assertion that the liability was not valid in the first place; to the contrary, it seems to be admitting it was valid and then requesting that payment be excused. Therefore, all aspects of the Appeals Offi╜cers' decisions are reviewed for abuse of discretion.

B. Abuse of Discretion in the Balancing Analysis

The Tax Code requires that an IRS Appeals Officer, in making a final deter╜mination after a collection due process hearing, decide "whether any proposed collection action balances the need for the efficient collection of taxes with the legiti╜mate concern of the [taxpayer] that any collection action be no more intrusive than necessary." 26 U.S.C. ╖ 6330(c)(3)(C). ⁷ There is little discussion or guidance about this requirement in legal scholar╜ship or case law. But see, Book, The Collection Due Process Rights, supra, at 1185-93. In most cases, reviewing courts have merely affirmed the Appeals Offi╜cer's determination that he conducted the balancing test and that he found the re╜sults to be consistent with the decision to proceed with levying the property. See e.g., Jackling v. IRS, 352 F.Supp.2d 129 (D.N.H.2004); Elkins v. United States, No. 4:03-CV-97-1 (CDL), 2004 WL 3187094 (M.D.Ga. Sept.29, 2004). One no╜table exception to this pattern is found in Mesa Oil, Inc. v. United States, No. Civ.A. 00-B-851, 2000 WL 1745280 (D.Colo. Nov. 21, 2000) (unpublished), where an oil company fell behind in its payroll tax deposits over a six quarter period, totaling about $425,000. There the district court, reviewing an IRS Appeals Officer's collection due process hearing and Notice of Determination, remanded the case to the IRS for development of a more complete record and clarification of the reasoning behind the determination that the balancing test was met. The court was especially concerned that the Notice of Determination included "no statement of facts, no legal analysis, and no explanation of how or why the pro╜posed levy balanced the need for collection with [the taxpayer's] interests" but merely a "blank recitation of the statute." Id . at *4; accord Cox v. United States, 345 F.Supp.2d 1218 (W.D.Okla.2004) (citing positively Mesa Oil's remand for further development of the record and ruling that balancing did not occur because the IRS erroneously believed taxpayer was ineligible for installment agreement). Mesa Oil's remand is an exception to the gener╜al practice of reviewing courts showing deference to Appeals Officers' conclusions regarding the balancing analysis.

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^7. ═ The other two issues that must be addressed are verification that applicable law and proce╜dures were followed and other relevant issues raised at the hearing (such as defenses and collection alternatives). See 26 U. S. C. ╖ 6330(c).

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In the instant appeals, Living Care presents three related arguments to sup╜port its claim that the balancing test was not met, or more accurately, that the Ap╜peals Officers abused their discretion in conducting the balancing test. First, Liv╜ing Care claims the Appeals Officers failed to include the existence of senior lienhold╜ers in their balancing analyses, in spite of the discussion of this fact during the hear╜ings. ⁸ Second, the Officers failed to con╜sider that, because of these senior lien╜holders, the net effect of an IRS levy would be to shut. down the business with╜out generating any tax revenue for the government. Since the IRS liens would be junior to existing creditors and the exist╜ing debt exceeded the value of the proper╜ty, the IRS would collect nothing. Finally, in its Reply Brief in the Living Care II case (Case No. 04-3554), Living Care cor╜rectly alleges, albeit for the first time, that the IRS has a statutory duty to investi╜gate, prior to executing a levy, the exis╜tence of liens on the property and deter╜mine "that the equity in such property is sufficient to yield net proceeds from the sale of such property to apply to [taxpay╜er's] liability." 26 U.S.C. ╖ 6331(j)(2)(C).

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^8. ═ Living Care also attempts to argue that the Appeals Officers disregarded all additional in╜formation provided during the hearing, in╜stead relying only on the information in its Request for Hearing. This argument is un╜dermined, at least in Living Care II, by statements in the Notice of Determination such as "During our conference you agreed that. . ." J.A. Living Care II (Case No. 04-3554) at 17, and ". . . you admitted during our conference that . . . " Id . at 18.

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The government first responds that the Appeals Officers were aware of the other lienholders, as evidenced by the statement in the Notice of Determination from Living Care I that "[i]f the business sells, pro╜ceeds will be distributed according to priority of claims. (Lien priority)." In Liv╜ing Care II, the government argues that Living Care's Request for Hearing makes no mention of these senior liens and that there is no evidence they were mentioned during the hearing. The lack of evidence from the hearing is potentially misleading since there is no formal record of the hearing and the government itself pre╜pared the only account of what was dis╜cussed. The government's stronger argu╜ment, made in the alternative, is that even if the senior liens were raised and ignored, there is no requirement that the govern╜ment consider in its balancing analysis whether it will receive any revenue from a levy and sale, or whether the business will have to close down due to the levy and sale. It cites several cases for these prop╜ositions. See Medlock v. United States, 325 F.Supp.2d 1064 (C.D.Cal.2003); Cardi╜nal Healthcare, Inc. v. United States, No. 01-4300-JLF, 2002 WL 31002880 (S.D.Ill. July 25, 2002); Kitchen Cabinets, Inc. v. United States, No. Civ.A.3:00CV0599M, 2001 WL 237384 (N.D.Tex. Mar.6, 2001). The case law supports the proposition that the government is not required to continue subsidizing failing businesses by foregoing tax collection. Any other conclusion would create a bizarre tax system with perverse incentives for businesses to maintain them╜selves on the edge of insolvency in order to enjoy immunity from tax enforcement.

The government's response to Liv╜ing Care's statutory argument (which the government first offered at oral argument since Living Care first raised the statute in its Reply Brief) is that the statutory duty has not yet arisen. All that the statute requires is that the IRS investigate the equity in a property prior to levying on it, not prior to the collection due process hearing. The only court that has appar╜ently addressed this issue did so in the context of the collection due process verifi╜cation requirement and agreed that the statutory investigation was not required prior to a collection due process hearing. In Medlock, 325 F.Supp.2d at 1079, the district court said:

Appeals Officer Rich was not required, during the [Collection Due Process] Ap╜peal process, to determine whether the equity in Medlock's property was suffi╜cient to yield net proceeds . . . or inves╜tigate the status of Medlock's property . . . . According to the plain language of the relevant statutory sections, [6331(f) and 6331(j)] these actions must be taken before a taxpayer's property may be levied upon by the IRS but are prema╜turely raised at this stage of the collec╜tion process. Appeals Officer Rich's al╜leged failure to perform those actions therefore does not constitute a violation of [the collection due process statutes].

We agree with this reasoning and find no statutory violation arising from the IRS's failure to investigate at this time the avail╜able equity in the taxpayer's property. This failure cannot, therefore, provide the basis for overturning the Appeals Officers' balancing analyses or final decisions.

C. Insufficient Record for Review

Living Care includes this issue in its request for a de novo review by this court, "with a hearing that more closely resembles an evidentiary hearing and gives the taxpayer the opportunity to have what he presents actually recorded for fu╜ture review." Living Care Proof Br. (Case No. 04-3554) at 37. Since it would be inappropriate for this Court to hold an evidentiary hearing under these circum╜stances, we consider this claim as a request to remand the cases either to the district courts or to the IRS for develop╜ment of a more thorough record. Not surprisingly, Living Care cites Mesa Oil in support of its request. Only the court in Mesa Oil has gone so far as to remand to the IRS in a collection due process case with an order that the new hearing have a record "made either through audio tape recording, video tape recording, or stenog╜rapher." Mesa Oil, 2000 WL 1745280 at *7. The court there expressed concern that the Notice of Determination's lack of anal╜ysis amounted to no record whatsoever and therefore did not allow for a meaning╜ful review. While this is a conventional remedy in administrative law cases, it was extraordinary in the area of tax collection. As discussed earlier, the notion of due process in tax collection is not the same as in other areas of the law. The IRS has historically had broad discretion and the right to levy on property without any pre╜seizure process. The 1998 reform did pro╜vide for additional procedural protections, but it still does not require the creation of a formal record and conventional adminis╜trative review. Admittedly, this makes ap╜plication of the abuse of discretion stan╜dard quite difficult, but at the very least, in order to overturn the IRS decisions, we must be convinced that the type of taxpay╜er abuse that Congress sought to remedy has occurred in the case. Neither of these cases presents such egregious facts.

In both cases below, the District Courts distinguished the Notices of Determination they were reviewing from the one in Mesa Oil .

Unlike the court in Mesa Oil, this court has before it a report from the collection due process hearing which sets forth the issues raised by Living Care, as well as a discussion of those issues. The [Ap╜peals Officer's] report explains the col╜lection alternatives raised by Plaintiff and why those collection alternatives were impracticable and unreasonable. In the instant case the [Officer] enumer╜ated specific reasons why the IRS's levy action and lien filing balanced the [needs of both parties.]

Living Care I, 2003 WL 23311523 at *3. And similarly, in Living Care II, "the [Ap╜peals Officer's] Determination in this case is clearly more through [sic] and appropri╜ate in its factual review and analysis than was the one which apparently confronted the court in Mesa Oil." Living Care II, 312 F.Supp.2d at 935.

The Notices of Determination in these cases satisfy due process and provide a sufficient basis for an abuse of discretion review, as that standard is applied in tax levy and lien appeals.

D. Abuse of Discretion Not to Allow Offer in Compromise

While Living Care raises this claim in both cases, only the Notice of Determina╜tion in Living Care I contains problematic language, meaning the Living Care II claim is without merit.

One of the three areas that Appeals Officers must consider in making their fi╜nal Determination is offers of collection alternatives made by the taxpayer. At both hearings, Living Care presented plans to either sell the business as a going concern and use the proceeds to pay its tax liabilities or to present an offer in compro╜mise. Living Care rejected the possibility of an installment agreement, since such an agreement would have to be funded from company profits and Medicare and Medic╜aid billing generally do not allow for profit. Also, under a previous levy around 1996 or 1997, Living Care had entered into an installment agreement with the IRS, and then defaulted in 1999.

The Living Care II Notice of Determi╜nation (dated June 21, 2002), see J.A. (Case No. 04-3554) at 12, rejected these plans because the business had currently been on the market for over a year without generating a sale or contract and Living Care was not, at that time, current on its tax payments. The taxpayer must be cur╜rent on payments for the previous two quarters to be eligible to submit an offer in compromise. These facts, coupled with Living Care's prior default in 1999 on its installment agreement, fully support the decision to reject the alternatives offered.

The Living Care I Notice of Deter╜mination (dated March 25, 2003), see J.A. (Case No. 04-3194) at 51, however, con╜tains contradictory statements. On page 2, the Notice states, "Tax deposits are being made and the taxpayer appears to be current for both the 3rd and 4th quar╜ters of 2002." Id. at 54. On page 6, in a section discussing the option of an offer in compromise, it states,

The two quarters preceding the current quarter are the 2nd and 3rd. The tax╜payer owes tax for the 2nd; consequent╜ly, the taxpayer will not be eligible until the 1st quarter of 2003 . . . . Therefore, as of the date of this report, the taxpay╜er is not eligible for an offer in compro╜mise.

Id. at 58 (emphasis added). The hearing date in Living Care I was December 12, 2002. The date on the Notice of Determi╜nation was March 25, 2003. Either the Appeals Officer intended to express his eligibility determination in terms of the date of the hearing and simply made a typographical error, or he erroneously de╜termined that Living Care was not eligible as of the date of the report , even though his statements on page 2 express recogni╜tion that Living Care had made the last two quarter's payments on time.

The government offers several valid re╜sponses. First, and most simply, that it was a mere typographical error that does not reach the level of abuse of discretion. This interpretation would have the Court focus on the date of the hearing, since both sides agree that at that time Living Care was not eligible to submit an offer in com╜promise. In the alternative, the govern╜ment argues even if the Appeals Officer did misapply the law, Living Care still had an obligation to actually file an offer in compromise, which it failed to do. There╜fore, even if it was eligible, its failure to file the proper financial paperwork and IRS forms led to the same result-a rejec╜tion of its collection alternatives. Finally, the government presents a litany of addi╜tional bases on which the Appeals Officer could have validly rejected Living Care's alternative collection option. These in╜clude Living Care's failure to meet the two quarters requirement as of the time of the hearing, its default under the previous in╜stallment payment plan in the late 1990's, the escalating amount of unpaid tax liabili╜ty clue to accruing interest and penalties, and the government's need to collect the taxes quickly because of Living Care's fi╜nancial difficulties.

There is no need to rely on any one of these explanations alone. It is clear that the IRS was well within its discretion to reject Living Care's plan to present an offer in compromise. If the Appeals Offi╜cer mistakenly felt his hands were tied because of the two quarters requirement, there are administrative remedies avail╜able to point out such mistakes and allow the IRS an opportunity to re-examine its earlier decision. Treas. Reg. ╖ 301-6330-1(b)(1) ("The Appeals office that makes a determination under section 6330 retains jurisdiction over that determina╜tion, including any subsequent administra╜tive hearings that may be requested by the taxpayer regarding levies and any collec╜tion action taken or proposed with respect to Appeals' determination."). But for this Court, reviewing the Appeals Officers' de╜cisions for abuse of discretion, Living Care has failed to present sufficient evidence to justify a remand. Otherwise, without a clear abuse of discretion in the sense of clear taxpayer abuse and unfairness by the IRS, as contemplated by Congress, the judiciary will inevitably become involved on a daily basis with tax enforcement de╜tails that judges are neither qualified, nor have the time, to administer.

For the reasons discussed above, we affirm the decision of the District Courts in these cases.

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