## Facts

- Thomas W. Brombach previously resolved Tax Court deficiency litigation by stipulated decision requiring payment of $60,000 plus interest.
- Brombach did not pay the settlement amount for years; accrued interest increased the outstanding liability to roughly $152,000.
- The IRS filed a Notice of Federal Tax Lien (NFTL) and provided notice of the filing and the right to a collection due-process (CDP) hearing under I.R.C. § 6320.
- Brombach timely requested a CDP hearing and proposed an offer-in-compromise (OIC) of $28,000 based on doubt as to collectibility, asserting that amount matched his reasonable collection potential (RCP).
- The Appeals officer reviewed Brombach’s financial information, calculated RCP at more than $113,000, rejected the OIC as inadequate, and sustained the NFTL.
- In Tax Court, evidence showed Brombach undervalued assets and used methods that materially understated RCP; the court also found the Appeals officer overstated certain asset values.
- After adjustments, the court found Brombach’s actual RCP was about $73,000—well above the $28,000 offer.

## Issues

1. Whether the Appeals officer abused discretion in rejecting Brombach’s $28,000 OIC and sustaining the NFTL in the CDP determination.
2. Whether errors in the Appeals officer’s RCP calculation rendered the rejection of the OIC arbitrary, capricious, or without sound basis in fact or law.
3. Whether special circumstances or economic hardship justified acceptance of an offer substantially below RCP.

## Decision

- The Tax Court entered decision for the Commissioner and sustained the CDP determination.
- The court held the Appeals officer did not abuse discretion in rejecting the $28,000 OIC because it was substantially below Brombach’s actual RCP and no special circumstances supported acceptance below RCP.
- The court sustained the NFTL as a reasonable collection measure given the magnitude of the unpaid liability and Brombach’s long nonpayment history.

## Legal Principles

- In CDP cases where the underlying liability is not properly at issue, the Tax Court reviews the IRS determination for abuse of discretion, asking whether the determination was arbitrary, capricious, or without sound basis in fact or law.
- For OICs based on doubt as to collectibility, the IRS generally will not accept an offer less than the taxpayer’s reasonable collection potential absent special circumstances.
- In a CDP hearing, Appeals must (1) verify compliance with applicable law and procedure, (2) consider issues raised by the taxpayer including collection alternatives, and (3) balance efficient tax collection against the taxpayer’s interest in no more intrusive collection than necessary. I.R.C. § 6330(c)(3).
- A court’s differing RCP computation does not establish abuse of discretion if Appeals’ analysis remains within a reasonable range and supported by the administrative record and verified information.

## Conclusion

The Tax Court sustained the federal tax lien and upheld Appeals’ rejection of Brombach’s $28,000 offer-in-compromise, concluding the decision was reasonable because the offer was far below the taxpayer’s actual reasonable collection potential and the record showed no hardship or other special circumstances warranting compromise below that level.


Brombach v. Commissioner, T.C. Memo. 2012-265 (2012)