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ISCR Case 19-03645 — CASE

ISCR Case 19-03645denied

Case Headnote

ISCR Case No. 19-03645

Mar 24, 2022· Hon. Moira D. Modzelewski· appeal

Summary

A woman in her early sixties was denied a security clearance under Guideline F (Financial Considerations) due to a consistent failure to file federal and state income tax returns from 2010 through 2018. The applicant also failed to pay taxes owed for the 2010 tax year, a debt that had accumulated to over $230,000 with penalties and interest.

Despite the applicant citing personal hardships, the judge determined she did not demonstrate responsible action regarding her tax obligations. Disqualifying conditions AG ¶ 20(a) and AG ¶ 20(c) were raised, while mitigating conditions AG ¶ 20(b) and AG ¶ 20(g) were considered but ultimately not sufficient to overcome the security concerns.

The denial was affirmed on appeal because the applicant did not provide evidence of arrangements to pay her outstanding tax debts or demonstrate compliance with tax authorities.

Conditions Referenced

Disqualifying

AG ¶ 20(a)raisedInability to Satisfy Debts
AG ¶ 20(c)raisedDelinquent Debts

Mitigating

AG ¶ 20(b)rejectedCircumstances Beyond ControlThe judge found that the applicant did not act responsibly under the circumstances.
AG ¶ 20(g)rejectedArrangements with Tax AuthorityThe judge determined that the applicant's actions did not demonstrate compliance with tax obligations.

Key Rule Quoted

“The general standard is that a clearance may be granted only when ‘clearly consistent with the interests of the national security.’”
— Department of the Navy v. Egan, 484 U.S. 518, 528 (1988)

Procedural Posture

SOR issuedJun 22, 2020
Answer filed—
Hearing heldJan 5, 2022
Decision dateMar 24, 2022Decision affirmed on appeal.

Cite For

Failure to File Tax Returns as a Disqualifying Condition Under Guideline F
The Importance of Acting Responsibly Regarding Financial Obligations
The Standard for National Security Eligibility Regarding Financial Considerations

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

Appeal at a glance· Full written decision

Affirmed

The appeal involved an Applicant who was denied a security clearance due to financial concerns related to failure to file tax returns from 2010 to 2018. The Applicant argued that she had mitigated her tax issues by hiring a tax attorney. The Board affirmed the Administrative Judge's decision, finding that the Applicant did not demonstrate sufficient evidence of responsible action regarding her tax liabilities.

Appealed bythe applicant

Applicant representationPro se (self-represented)

Judge belowEdward W. Loughran — denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Mitigation wrongly applied / not applied — raised by the applicantRejected
Applicant argued that she mitigated her tax situation by hiring a tax attorney.

Why the Board ruled this way

The Board found that the Judge's decision was supported by substantial evidence and that the Applicant did not demonstrate that she acted responsibly in addressing her financial issues. The Board concluded that the Judge's analysis was not arbitrary or capricious and that the decision was sustainable on the record.

Standard of review applied

Harmful-error gatekeeperSubstantial-evidence reviewArbitrary-and-capricious reviewProcedural complianceNo de-novo re-decisionNo new evidence on appeal

Appeal Board panel

James F. Duffy — Chair
James E. Moody
Moira Modzelewski

Descriptive structured reading of this decided, public Appeal Board decision — what the case says, not a prediction or advice.

Full decision

The complete, official text — footnotes and signatures included — is in the original PDF.

Decision text, by section

DEFENSE OFFICE OF HEARINGS AND APPEALS

APPEAL

APPEARANCES

_______________________________________________ ) In the matter of: )

)

------- )

ISCR Case No. 19-03645

)

) Applicant for Security Clearance ) _______________________________________)

DEPARTMENT OF DEFENSE DEFENSE LEGAL SERVICES AGENCY DEFENSE OFFICE OF HEARINGS AND APPEALS APPEAL BOARD POST OFFICE BOX 3656 ARLINGTON, VIRGINIA 22203 (703) 696-4759 Date: March 24, 2022

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Pro se The Department of Defense (DoD) declined to grant Applicant a security clearance. On June 22, 2020, DoD issued a statement of reasons (SOR) advising Applicant of the basis of that decision—security concerns raised under Guideline F (Financial Considerations) of DoD Directive 5220.6 (January 2, 1992, as amended) (Directive) and the adjudicative guidelines (AG), which became effective on June 8, 2017. Department Counsel requested a hearing. On January 5, 2022, after the record closed, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Edward W. Loughran denied Applicant’s request for a security clearance. Applicant appealed pursuant to Directive ¶¶ E3.1.28 and E3.1.30. The SOR alleged two financial concerns under Guideline F—that Applicant failed to file her federal income tax returns for tax years 2010 through 2018 and that she failed to file her state income tax returns for those same years. The Judge found against Applicant on both allegations.

Judge’s Findings of Fact: The Judge’s factual findings are summarized below, in pertinent part: Applicant is in her early sixties. She is married and the guardian for a minor grandchild. For tax years 2010 through 2018, Applicant did not file her federal and state returns on time as required. For tax year 2010, she and her husband filed a return in 2013, after the IRS filed a substitute return. They had a taxable income of $285,000, paid no taxes on the income during the tax year, and paid no taxes upon filing. Applicant disputes the amount of her 2010 tax liability, claiming that their actual income was instead about $220,000. By July 2021, the 2010 federal tax debt had grown, with interest and penalties, to $223,400. For tax years 2011–2018, Applicant failed to file until at least early 2020. Applicant attributes her tax issues to a series of events beginning in 2008 that included: intermittent unemployment; legal guardianship of her grandchild; multiple deaths in her immediate family, with attendant funeral and travel costs; a burglary of her home; her husband’s stroke; vehicle accidents; and the recent illness of a sibling. Around 2019, following her second clearance interview, Applicant retained a tax attorney to assist in filing overdue returns and negotiating an installment agreement. Applicant asserted that she has now filed her state and federal income tax returns for 2011 through 2019. She submitted various tax documents that indicate she has recently filed for tax years 2013 through 2019 with both Federal and state tax authorities. It appears that Applicant owes for several of those tax years (approximately $7,800 in additional Federal tax debt and approximately $2,100 in state tax debt). She has not submitted any supporting documents for tax years 2011 and 2012. Judge’s Analysis: The Judge’s analysis is quoted below, in pertinent part: Applicant went through an extremely difficult period, and those events were beyond her control. The real question is whether she acted responsibly under the circumstances. . . . [Applicant] asserted that her tax liability for 2010 is greatly exaggerated because she received an inaccurate IRS Form 1099, and that her actual income was about $220,000. She would receive more credit for that statement if she had paid any of the taxes from 2010. From 2010 to the present, Applicant has paid nothing for her 2010 federal income taxes. . . . She currently owes the IRS more than $230,000 for tax years 2010, 2015, 2017, and 2019. Her liability for her state income taxes and her federal income taxes for years 2011 and 2012 is unknown. Applicant has not acted responsibly under the circumstances. AG ¶ 20(b) [the conditions that resulted in the financial problem were largely beyond the person’s control . . . and the individual acted responsibly under the circumstances] is not applicable. AG ¶ 20(g) [the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements] is applicable

to the filed income tax returns. It is not applicable to the returns that have not been filed and the federal income taxes that have not been paid. [Decision at 5–6.]

DISCUSSION

On appeal, Applicant does not challenge any of the Judge’s material findings. She does, however, challenge his conclusion that she has not mitigated the security concerns, asserting that “I mitigated my Tax situation by hiring a Tax Attorney as soon as possible . . . .” Appeal Brief at 1. However, the fact that an Applicant retains an attorney and files delinquent tax returns does not compel a Judge to issue a favorable decision. The Judge must examine the record evidence and decide whether the favorable evidence outweighs the unfavorable evidence, or vice versa. The timing of corrective action is an appropriate factor for the Judge to consider in the application of both AG ¶ 20(b) and AG ¶ 20(g). See, e.g., ISCR Case No. 17-01807 at 3–4 (App. Bd. Mar. 7, 2018). Moreover, Applicant failed to produce any evidence that she has made arrangements with the IRS to begin payments on her sizeable federal tax debt, much less that she has begun payment on that debt. Her argument that she has mitigated her tax delinquencies by hiring a tax attorney is not persuasive. Additionally, Applicant reiterates the personal and family difficulties that have beset her over the past ten years—evidence that was before the Judge and included in his decision. To the extent that Applicant is arguing that the Judge misweighed that evidence, her arguments are not sufficient to demonstrate that the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. See, e.g., ISCR Case No. 19-01400 at 2 (App. Bd. Jun. 3, 2020). Even if Applicant’s financial difficulties initially arose due to circumstances beyond her control, the Judge may still consider whether Applicant has since acted in a reasonable manner when dealing with those difficulties. See, e.g., ISCR Case No. 03-04779 at 4 (App. Bd. Jul. 20, 2005). The Judge examined the relevant evidence and articulated a satisfactory explanation for the decision. The decision is sustainable on this record. “The general standard is that a clearance may be granted only when ‘clearly consistent with the interests of the national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). See also Directive, Encl. 2, App. A ¶ 2(b): “Any doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.”

ORDER

The decision is AFFIRMED. Signed: James F. Duffy James F. Duffy Administrative Judge Chairperson, Appeal Board Signed: James E. Moody James E. Moody Administrative Judge Member, Appeal Board Signed: Moira Modzelewski Moira Modzelewski Administrative Judge Member, Appeal Board