ISCR Case No. 25-00834

______________ ______________ DEFENSE LEGAL SERVICES AGENCY DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: Applicant for Security Clearance ) ) ) ) ) ISCR Case No. 25-00834 Appearances For Government: Aubrey M. De Angelis, Esq., Department Counsel For Applicant: Patricia M. Ballard, Esq., Peter H. Noone, Esq. 10/01/2026 Decision OLMOS, Bryan J., Administrative Judge: Applicant did not mitigate the security concerns raised under Guideline F (Financial Considerations). Eligibility for access to classified information is denied. Statement of the Case On November 25, 2025, the Defense Counterintelligence and Security Agency (DCSA) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F. The DCSA issued the SOR under Executive Order (Exec. Or.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended, Department of Defense (DOD) Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the Security Executive Agent Directive 4 (SEAD 4), National Security Adjudicative Guidelines (AG), effective June 8, 2017. On December 9, 2025, Applicant answered the SOR (Answer) and requested a hearing before an administrative judge from the Defense Office of Hearings and Appeals (DOHA). The hearing was originally scheduled to convene on July 21, 2026, but was continued at the request of Applicant. The hearing was convened as rescheduled on September 2, 2026. Department Counsel offered into evidence Government Exhibits (GX) 1-3, and Applicant offered into evidence Applicant Exhibits (AX) A-E. All exhibits

were admitted without objection. Applicant testified and the record closed at the conclusion of the hearing. DOHA received the hearing transcript (Tr.) on September 8, 2026. Findings of Fact The SOR alleges that Applicant failed to file, as required, State A income tax (SIT) returns for tax years (TYs) 2007 through 2011 and TYs 2016 through 2023 (SOR ¶ 1.c), and that he owed $5,853 in delinquent taxes to State A for TYs 2023 and 2024 (SOR ¶ 1.d). Further, the SOR alleges that he failed to file, as required, federal income tax (FIT) returns for TYs 2018 through 2023 (SOR ¶ 1.a), and that he owed $50,864 in delinquent federal taxes for TYs 2020 through 2023 (SOR ¶ 1.b). In his Answer to the SOR, he admitted all the allegations and provided extenuating and mitigating information. His admissions are incorporated into my findings of fact. After a review of the pleadings and evidence submitted, I make the following additional findings of fact. Applicant is 53 years old. He was married from March 1995 to April 2001 and again from January 2010 to September 2014. Both marriages resulted in divorce. He has one adult-aged child from a separate relationship and two minor children from his second marriage. He was granted primary custody of his minor children following the divorce and received sole custody of them in about 2020. They continue to live with him. He does not have any additional cohabitants and owns his home. (Answer; GX 1, 3; Tr. 23-25, 87-89) Applicant has maintained a long career in information technology (IT). He has worked as a W-2 employee and as an independent contractor on multiple occasions. In 2024, he began working as an independent contractor with Company A specializing in cloud computing. He has not previously held a security clearance and submitted his first security clearance application (SCA) in August 2024. (GX 1, 3; Tr. 11, 23-24, 51-53) In addition to his income from working in IT, Applicant purchased his first real estate property in 1999 and began renting it in 2005. He purchased additional rental properties over time and as recently as 2022. At the time of the hearing, he stated he owned five rental properties, each with a mortgage, and his current home, which is paid off, as well as a couple of lots. He created multiple limited liability companies (LLCs) and an S corporation (S Corp) to navigate his investments. (GX 1, 3; Tr. 24-26, 32-41, 54-61) As his investments and income streams grew over time, so did the complexity of his tax filings. For several years, he tried to manage his income tax returns on his own and described a “fix-it-later approach” as tax problems arose. He also admitted he “procrastinated” as the problem “snowballed.” (GX 2-3; Tr. 32-41) The earliest evidence of tax noncompliance in the record reflects that Applicant failed to timely file his SIT returns, beginning with TY2007. While he claimed he continued to timely file his FIT returns during this period, he admitted that the Internal Revenue 2

Service (IRS) audited his TY2008 FIT return in 2010. That year, he hired Ms. W, a tax professional, to respond to the audit. He then retained her services to assist with future tax filings. However, even with tax preparation assistance, he continued to not file his SIT returns year after year. He acknowledged that he received correspondence from State A regarding his tax situation on several occasions and was aware of his ongoing tax obligations. (GX 1-3; AX A-C; Tr. 40-42, 80-82) Following his marriage in 2010, and the births of his two children in 2010 and 2011, Applicant prioritized personal and professional commitments over addressing his State A tax liabilities. He acknowledged that his ongoing delays exacerbated his tax problems. His divorce in 2014 added further strain to his tax affairs as he concentrated his efforts on securing primary custody of his children. While he timely filed his SIT returns for TYs 2012 through 2015, he was unable to maintain compliance and failed to timely file SIT returns for TYs 2016 through 2023. (GX 1-3; AX A-C; Tr. 28-31, 64-66) Applicant’s tax situation grew more complicated when his former spouse began claiming the dependent-care credit for their children. Although the children resided with Applicant and he believed he was entitled to the tax credit, his electronic return was repeatedly rejected due to the duplicate claim. This forced him to file paper tax returns with substantiating evidence to support the deduction. He also conceded that his own procrastination contributed to the delays, noting he occasionally waited years to physically mail his income tax returns. (GX 1-3; Tr. 30-34, 60-62) Applicant failed to timely file his FIT returns for TYs 2018 through 2023. Regarding his mounting tax problems, he stated, I always believed that I would file eventually and set up a payment plan and pay off whatever I owed with penalties and interest. In my mind, I was just deferring the obligations, not escaping it. However, he also diverted funds intended for tax obligations into real estate investments. Furthermore, while he retained Ms. W as his tax preparer, he conceded ongoing difficulties in maintaining his financial records and providing documentation to her in a timely manner. (GX 1-3; AX A-C; Tr. 31-34, 75-82) In his August 2024 SCA, Applicant disclosed that he failed to file his FIT and SIT returns and pay taxes owed for TYs 2018 through 2024. He claimed that, for several years, his electronic tax filings were rejected because his former spouse had “illegally” claimed their children as her dependents even though they lived with him. He stated he had made payment arrangements and was working to resolve his tax delinquencies. (GX 1) During his September 2024 interview with a government investigator, Applicant reiterated that his tax issues stemmed from his former spouse repeatedly claiming their 3

children as dependents, despite the children residing with him. Because of the conflicting claims, the IRS consistently rejected his electronic tax filings. To resolve this, he had to physically mail his tax returns along with his divorce decree and court filings to secure IRS acceptance and processing. He stated he was currently working with a tax professional to resolve his delayed filings and noted that he had established several payment plans with the IRS to address outstanding balances. (GX 3) In his May 2025 response to interrogatories, Applicant stated, “a large reason that I have not filed in a timely manner is due to my inability to file electronically.” However, he also admitted that he failed to timely mail his income tax returns when the electronic returns were rejected. He stated, “I was not aware or realized the importance of filing taxes, but I do now.” He claimed, “I will file state and federal taxes on time going forward.” (GX 2) In his December 2025 Answer to the SOR, Applicant acknowledged his tax situation and stated, “I procrastinated, used the money for investments in real estate instead of being accountable in paying and filing on time.” He admitted his actions reflected a “poor lack of judgment.” However, he stated all his FIT and SIT returns had been filed, and all delinquent taxes had been paid. He stated he now had an accountant to ensure timely tax filings and payments going forward. (Answer) At the hearing, Applicant acknowledged his legal obligation to timely file FIT and SIT returns and pay federal and State A income taxes each year. Although he cited prolonged difficulties with his former spouse and complicated income streams for his tax difficulties, he conceded that he procrastinated and improperly diverted tax funds toward real estate investments. He candidly admitted that these choices demonstrated a “lack of judgment and follow through.” Recognizing that he was “not successful” managing his accounts independently, he retained a bookkeeper in approximately 2023 to “streamline” his business finances. He stated he has since cured his delinquencies by filing all outstanding FIT and SIT returns and paying all associated tax liabilities in full. (Tr. 28-34, 59-66) IRS account transcripts reflect various filing dates, penalties, and payments as follows: Applicant’s TY2018 FIT return was filed late, in March 2020, and he received penalties for late filing, late payment and a dishonored payment. In addition to an initial withholding, he made a $1,579 payment in May 2021 and has a $0 balance due for this tax year. (Answer; GX 2-3; AX A) Applicant’s TY2019 FIT return was filed late, in May 2021, and he received penalties for not prepaying his taxes as well as for late filing and late payment. In addition to an initial withholding, he made a payment of $19,343 in May 2021 and a total of $2,227 4

in payments in June 2024. He has a $0 balance due for this tax year. (Answer; GX 2-3; AX A) Applicant’s TY2020 FIT return was filed late, in August 2024, and he received penalties for not prepaying his taxes as well as for late filing and late payment. In addition to an initial withholding, he made a payment of $25,000 in December 2025, resulting in an overpayment and refund of $6,868. (Answer; GX 2-3; AX A) Applicant’s TY2021 FIT return was filed late, in August 2024, and he received penalties for late filing and late payment. In addition to an initial withholding, he made a total of $31,449 in payments in December 2025, resulting in an overpayment and refund of $16,079. (Answer; GX 2-3; AX A) Applicant’s TY2022 FIT return was filed in October 2023, one week past the extended filing deadline. He received a penalty for late payment. In addition to an initial withholding, he made monthly payments of $728 for about six months in 2025 and then submitted a payment of $13,591 in December 2025. He has a $0 balance due for this tax year. (Answer; GX 2-3; AX A) Applicant’s TY2023 FIT return was filed late, in May 2025, and he received penalties for not prepaying his taxes as well as for late filing and late payment. In addition to an initial withholding, he made a payment of $13,000 in May 2025 and a payment of $2,989 in December 2025. He has a $0 balance due for this tax year. (Answer; GX 2-3; AX A) Applicant’s TY2024 FIT return was timely filed in October 2025, following his request for an extension. He received penalties for not prepaying his taxes as well as for late payment. In addition to an initial withholding, he made a total of $30,628 in payments in December 2025. He has a $0 balance due for this tax year. (Answer; GX 3; AX A) Applicant’s TY2025 FIT return was timely filed in July 2026, following his request for an extension. He received penalties for not prepaying his taxes as well as for late payment. In addition to an initial withholding, he made a payment of $10,000 in April 2026 and a payment of $10,096 in July 2026. With an additional payment of $2,200 in August 2026, he now has an overpayment of $16 for this tax year. (AX A) Regarding Applicant’s SIT compliance, documentation reflects that his State A tax returns for TYs 2007 through 2011 and TYs 2016 through 2023 were filed late, though the exact submission dates are unspecified. While State A previously issued correspondence to Applicant concerning an “intent to offset” and “proposed assessments,” an August 2026 State A payment and balance ledger confirms that he owes no outstanding State A taxes for TYs 2007 through 2025. He testified that he paid off the remainder of his State A tax debt in December 2025. (Answer; GX 2-3; AX B; Tr. 40-42) 5

Although Applicant claimed he is up to date on all his tax obligations, he also acknowledged that he received numerous penalties from the IRS over the last several years for not prepaying his taxes and for late filings and late payments. He admitted that, as an independent contractor receiving a Form 1099, he does not have any income taxes deducted from his pay, and he is responsible for tax payments. Yet, for TY2026, he admitted he had not paid any income taxes. He further admitted that Ms. W, his tax preparer, discussed quarterly tax payment obligations with him but he was “still working on that” since they had just finished his tax return for TY2025. He claimed he set aside 35% of his monthly income to pay taxes for TY2026 once he knew the specific amount he owed. He believed he had a system in place with his tax preparer and a bookkeeper to maintain his tax compliance going forward. (Tr. 32-36, 68-70, 89-93) Applicant submitted an August 2026 letter from Ms. W, his tax preparer since 2010, stating that he was “fully compliant with all tax filings” and “has systems in place that will ensure he remains compliant with all future filings and payments.” The letter did not detail the “systems” Applicant now has in place to ensure tax compliance nor did it address the status of Applicant’s tax payments toward TY2026. (AX C) Beyond his tax situation, Applicant maintains strong financial stability. As part of his September 2025 response to interrogatories, he provided a budget reflecting a monthly income of $18,616 and a net remainder after expenses of $5,491. He keeps a “rainy day” fund and stated his income “comfortably” exceeds his expenses. Recent credit reports reflect no delinquent accounts. (GX 3; AX E; Tr. 28-30; 46-47) Applicant submitted four reference letters from business associates and friends who have known him over the last decade. They expressed general awareness of the concerns arising from the SOR and praised Applicant’s reliability, trustworthiness and professionalism. They highlighted that he had navigated a complicated divorce and is a dedicated father and member of the community. They believed that he consistently exhibited the judgment, trustworthiness, and reliability necessary to hold a security clearance. (AX D) Policies It is well established that no one has a right to a security clearance. As the Supreme Court held in Department of the Navy v. Egan, “the clearly consistent standard indicates that security determinations should err, if they must, on the side of denials.” 484 U.S. 518, 531 (1988) When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information. 6

These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with the factors listed in the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(a), the entire process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” The administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision. The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record. Likewise, I have not drawn inferences grounded on mere speculation or conjecture. Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel and has the ultimate burden of persuasion to obtain a favorable security decision.” A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence. This relationship transcends normal duty hours and endures throughout off-duty hours. The Government reposes a high degree of trust and confidence in individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information. Analysis Guideline F, Financial Considerations The security concern for financial considerations is set out in AG ¶ 18: Failure to live within one’s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual’s reliability, trustworthiness, and ability to protect classified or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling, mental 7

health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds. I have considered the disqualifying conditions for financial considerations under AG ¶ 19 and the following are potentially applicable: (c) a history of not meeting financial obligations; and (f) failure to file or fraudulently filing annual Federal, state, or local income tax returns or failure to pay annual Federal, state, or local income tax as required. Failure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information. See ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002). A person who fails repeatedly to fulfill his or her legal obligations, such as maintaining compliance with tax obligations, does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015). Applicant’s admissions, testimony and record evidence reflect that he failed to file his SIT returns, as required, for TYs 2007 through 2011 and TYs 2016 through 2023, and he failed to file his FIT returns, as required, for TYs 2018 through 2023. Additionally, he owed delinquent federal and State A taxes. All the above security concerns are established for SOR ¶¶ 1.a-1.d. I have considered the mitigating conditions for financial considerations under AG ¶ 20 and the following are potentially applicable: (a) the behavior happened so long ago, was so infrequent, or occurred under such circumstances that it is unlikely to recur and does not cast doubt on the individual’s current reliability, trustworthiness, or good judgment; (b) the conditions that resulted in the financial problem were largely beyond the person’s control (e.g., loss of employment, a business downturn, unexpected medical emergency, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances; (d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and 8

(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. A clearance adjudication is not directed at collecting debts. Neither is it directed toward inducing an applicant to file tax returns. Rather, it is a proceeding aimed at evaluating an applicant’s judgment and reliability. See ISCR Case No. 07-08049 at 5 (App. Bd. Jul. 22, 2008). An applicant who begins to resolve his financial problems only after being placed on notice that his security clearance is in jeopardy may be lacking in the judgment and self-discipline to follow rules and regulations over time or when there is no immediate threat to his own interests. See ISCR Case No. 24-0008 at 2 (App. Bd. Mar. 13, 2025); ISCR Case No. 20-02971 at 4 (App. Bd. June. 15, 2023). In instances where an applicant has purportedly corrected his tax problem and is motivated to prevent such problems in the future, the administrative judge is not precluded from giving careful consideration of the applicant’s security worthiness in light of his “longstanding prior behavior evidencing irresponsibility” including a failure to timely file tax returns. ISCR Case No. 15-01031 at 3 (App. Bd. June 15, 2016); ISCR Case No. 09-02184 at 4 (App. Bd. June 22, 2010). Applicant’s history of tax noncompliance began in 2008 when he failed to timely file his SIT return for TY2007. He detailed that maintaining tax filings became increasingly difficult as his investment streams diversified. Although he retained a tax professional in 2010 to respond to an IRS audit of his TY2008 FIT return, his tax delinquencies expanded to encompass over a decade of SIT returns as well as FIT returns for TYs 2018 through 2023. He cited further complications following his 2014 divorce, particularly an extended dispute with his former spouse regarding her repeated claims of the dependent-care tax credit for their children. In 2023, Applicant realized he was “not successful” at managing his accounts and hired a bookkeeper. In his May 2025 response to interrogatories, he stated he “realized the importance of filing taxes” and timely filed his FIT and SIT returns for TYs 2024 and 2025. By December 2025, shortly after receiving the SOR, he had filed all his delinquent FIT and SIT returns and paid all income taxes owed. He now believes he has established a system to manage his income tax returns and is committed to remaining compliant with his future tax obligations. All the above mitigating conditions must be considered. By contrast, Applicant’s tax noncompliance began with TY2007 and was not resolved until December 2025. Although his divorce and associated disputes with his former spouse created difficulties beyond his control, he compounded these issues through admitted procrastination and his improper diversion of tax funds into real estate investments. These actions reflected questionable judgment. Consequently, the record does not support a finding that his conduct was remote in time or infrequent, nor can it be concluded that his tax difficulties stemmed largely from circumstances beyond his control. Mitigation under AG ¶¶ 20(a) and 20(b) does not apply to the SOR allegations. 9

At hearing, Applicant emphasized that he had resolved his outstanding tax liabilities, timely filed his FIT and SIT returns for the past two years, and committed to working with his tax preparer and bookkeeper to remain tax compliant. However, he has utilized this same tax preparer since 2010, during a period where he was largely noncompliant with tax obligations. Moreover, despite his timely tax filings over the past two years, he continued to incur IRS penalties for not prepaying his taxes and late payments. He further testified that he had made no tax payments for TY2026, even though he discussed quarterly estimated payments with his tax preparer. Instead, he asserted that he was “still working on that” and was holding funds in reserve until his tax liability was determined. Given his history of tax noncompliance, prior diversion of tax funds into investments, and recurring IRS penalties, his recent remedial actions, while commendable, fail to demonstrate a sufficient track record of tax compliance to mitigate security concerns under AG ¶¶ 20(d) or 20(g). Accordingly, no mitigating conditions apply to SOR ¶¶ 1.a–1.d. Whole-Person Concept Under the whole-person concept, the administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all relevant circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(d): (1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the conduct, to include knowledgeable participation; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to which participation is voluntary; (6) the presence or absence of rehabilitation and other permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence. Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F in my whole- person analysis. Applicant is a highly knowledgeable IT professional. Over the last 20 years, he has worked in various W-2 positions and as an independent contractor while also managing multiple investment properties. In 2014, he navigated a difficult divorce and maintains sole custody of his two minor children. His business associates and friends praised his reliability, trustworthiness and professionalism. 10

________________________ In addressing the security concerns for financial considerations, Applicant candidly admitted that he let his tax liabilities compound through procrastination and exercised poor judgment by redirecting tax funds into other investments. Over the last two years, he has timely filed his FIT and SIT returns for TYs 2024 and 2025 and resolved all his outstanding tax filings. In December 2025, he completed payment of all back taxes and has pledged ongoing tax compliance. However, measured against his tax noncompliance dating back to TY 2007, these recent corrective actions do not demonstrate a sufficient track record of reliability to meet his burden in mitigation. A greater sustained period of tax compliance is necessary for him to establish that he can maintain the trustworthiness, reliability, and exercise of good judgment necessary to hold a security clearance. Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. I conclude that he did not mitigate the security concerns for financial considerations. Formal Findings Formal findings for or against Applicant on the allegations set forth in the SOR, as required by section E3.1.25 of Enclosure 3 of the Directive, are: Paragraph 1, Guideline F: AGAINST APPLICANT Subparagraphs 1.a – 1.d: Against Applicant Conclusion It is not clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied. Bryan J. Olmos Administrative Judge 11