Tax court upholds levy after business fails to support installment proposal

DCSL, LLC v. Commissioner, No. 11416-24SL., T.C. Summary Opinion 2025-9, 2025 BL 386099, Court Opinion

The Tax Court upheld the IRS’s decision to proceed with a levy after the taxpayer failed to provide the required financial information to support its proposed installment agreement.

Holding

The Tax Court granted summary judgment for the IRS, finding no abuse of discretion in sustaining a levy against DCSL, LLC, for unpaid payroll tax liabilities. The taxpayer failed to supply the requested documentation regarding the owner’s ability to use personal assets to fund an installment agreement, and thus, the Appeals Officer acted within discretion to reject the proposal.

Why It Matters

• Reinforces that failure to provide requested financial documentation can justify denial of a proposed installment agreement.

• When evaluating collection alternatives, Appeals Officers may consider a business owner’s personal assets and borrowing capacity.

• Illustrates that matters raised after a CDP hearing cannot retroactively establish an abuse of discretion.

• Highlights the limited scope of review in CDP cases where underlying tax liabilities are not at issue.

Timeline

• Dec. 2020 – Dec. 2022: DCSL incurred payroll tax liabilities for multiple quarters.

• October 12, 2023: IRS issued a Notice of Intent to Levy.

• November 11, 2023: DCSL requested a CDP hearing and proposed a $2,500 monthly installment plan.

• March 6, 2024: CDP hearing held by telephone; Appeals requested further information.

• May 8, 2024: Taxpayer failed to provide documentation by the extended deadline.

• June 13, 2024: Appeals issued Notice of Determination sustaining the levy.

• July 12, 2024: Petition filed in Tax Court.

• October 28, 2025: Summary Opinion issued granting IRS motion for summary judgment.

Key Facts

• DCSL, LLC is a Maryland general contracting company taxed as an S corporation.

• Owned and managed by Diego Galeano.

• Unpaid Form 941 payroll tax liabilities remained for the quarters ending March 31, June 30, and September 30, 2022.

• Based on financial analysis, the IRS determined that DCSL could afford higher payments ($4,200 per month).

• Appeals Officer required substantiation of Mr. Galeano’s ability to lend funds to DCSL via home equity, but received no documentation.

• The taxpayer did not respond to the IRS’s summary judgment motion.

Statutory or Regulatory Framework

• IRC §6330: Requires notice and opportunity for a hearing before levy.

• IRC §6330(c)(3): Appeals must verify legal compliance, consider taxpayer issues, and balance collection needs against intrusiveness.

• IRC §6651(a)(2) & §6656: Provide for additions to tax for failure to pay and deposit employment taxes.

• Rule 121, Tax Court Rules of Practice and Procedure: Authorizes summary judgment when no genuine dispute of material fact exists.

Arguments

Taxpayer argued:

• IRS improperly rejected its proposed $2,500 monthly installment agreement.

• Claimed inability to borrow against the owner’s personal home equity.

Government argued:

• No genuine dispute of material fact existed.

• Appeals Officer followed all procedures, verified compliance, and appropriately denied the installment agreement due to missing documentation.

• Levy decision balanced efficiency with minimal intrusiveness.

Court’s Reasoning

• The IRS verified all legal and procedural requirements under §6330(c)(1).

• The only issue raised in the CDP hearing was the installment agreement, not the underlying liability.

• Appeals Officer reasonably relied on the Internal Revenue Manual guidance to consider the owner’s personal lending capacity.

• DCSL failed to provide the required documentation or objections within the given timeframe.

• The taxpayer’s later assertions could not demonstrate abuse of discretion because they were raised after the CDP hearing.

• Appeals Officer properly balanced efficient tax collection with taxpayer concerns.

• The court found no arbitrary or capricious conduct by the IRS.

Forward-Looking Implications

• Businesses must supply complete and timely financial data when proposing collection alternatives in CDP cases.

• Appeals Officers may assess an owner’s personal equity or ability to fund a business’s tax obligations.

• Failure to respond to IRS motions or deadlines can lead to automatic adverse rulings.

• Reinforces the Tax Court’s deference to IRS discretion in levy determinations absent procedural error.

Result

Summary judgment granted for the IRS. The levy was sustained for the quarters ending March 31, June 30, and September 30, 2022.

The Takeaway

Taxpayers seeking installment agreements in CDP proceedings must provide complete and timely financial substantiation. Silence or delay effectively forfeits their opportunity for less intrusive collection relief.