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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)       ISCR Case No. 10-00158
)
Applicant for Security Clearance )
Appearances
For Government: Braden M. Murphy, Esquire, Department Counsel
For Applicant: Pro se
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Decision
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CURRY, Marc E., Administrative Judge:
Applicant failed to pay his federal and state income taxes for tax years 1990,
1991 and 1993, and did not pay his federal income taxes from tax years 2002 through
2007. Although he has recently been satisfying his back taxes through payment plans, it
is too soon to conclude he has mitigated the financial considerations security concern
given the recurrent nature of the problem and the amount that remains in arrears.
Clearance is denied.
Statement of the Case
On November 10, 2010, the Defense Office of Hearings and Appeals (DOHA)
issued a Statement of Reasons (SOR) to Applicant detailing security concerns under
Guideline F, financial considerations. The action was taken under Executive Order
10865, Safeguarding Classified Information within Industry (February 20, 1960), as
amended; Department of Defense Directive 5220.6, Defense Industrial Personnel
Security Clearance Review Program (January 2, 1992), as amended (Directive); and
the  adjudicative guidelines (AG) implemented by the Department of Defense on
December 1, 2006.
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Applicant answered the SOR on December 30, 2010, admitting all of the
allegations. He requested a hearing, and the case was assigned to me on February 24,
2011. On March 4, 2011, a notice of hearing was issued scheduling the case for March
24, 2011. The hearing was conducted as scheduled. I received six Government
exhibits, marked as Government Exhibits (GE) 1 through 6, 22 Applicant exhibits,
marked as Applicant’s Exhibits (AE) A through U, and Applicant’s testimony. DOHA
received the transcript (Tr.) on March 31, 2011. At the conclusion of the hearing, I left
the record open at Applicant’s request to submit additional exhibits. Within the time
allotted, he submitted 12 exhibits that I admitted as AE V to AE GG.
Ruling of Procedure
At the close of the hearing, Department Counsel moved to amend the SOR as
follows:
1.j You are indebted to the IRS for unpaid federal income taxes for tax
years 2002-2007 in the approximate amount of $26,000.00. As of March
24, 2011, these debts remain unpaid.
1.k You are indebted to the IRS for unpaid federal income taxes for tax
year 2008 in the approximate amount of $224.00. As of March 24, 2011,
this debt remains unpaid.
Applicant did not object, and I granted the motion. Applicant admits both of these
allegations.  
Findings of Fact
Applicant is a 54-year-old married man with four children. Two are adults and two
are teenagers. A previous marriage ended in divorce in 1985. All of Applicant’s children
are from his second marriage. 
Applicant earned a bachelor of science degree in computer science and
mathematics in 1978. He has taken some postgraduate courses in mathematics. (Tr.
29) Applicant has spent his career performing contract work for various companies as a
software engineer. (Tr. 31) His tasks range from “engineering design verification testing
to software development.” (AE T) With the exception of one brief layoff, he has worked
with the same company since January 2009. According to Applicant’s main client, he “is
a well-respected member to the team for development, test and support tasks
throughout the projects in which he [is] involved.” (Id.)
Applicant did not pay his federal income taxes for tax years 1990 and 1991.  By
June 1992, when the U.S. Internal Revenue Service (IRS) filed a lien against Applicant’s
property, the delinquency had accrued to approximately $36,000. (Answer; GE 3 at 8)
Applicant also did not pay his federal income taxes for tax year 1993. By June 1994, the
delinquency had accrued to approximately $11,200. (AE L at 2) The record is unclear
Applicant ultimately executed a quitclaim deed and returned the home to the seller. (Tr. 43)1
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whether Applicant paid any federal income tax due in 1992. During an interview with an
investigator, he said that he did not pay his 1992 federal income taxes, but none of the
documentary evidence establishes that he owed any taxes that year.
Applicant did not pay his state taxes for 1992 and 1993. (AE D) The original
amounts due were $803 and $515, respectively. (Id.) By December 2010, these debts
had collectively accrued, with penalties, to $6,226. (Id.)
Applicant attributes his failure to pay his taxes during the early 1990s to a severe
job downturn that hampered his ability to maintain full-time employment and compelled
him to relocate. (Tr. 51) Because an earthquake had destroyed the municipal
infrastructure surrounding his home, he was unable to sell it.  (Tr. 49) Consequently,1
Applicant’s bills mounted. (Tr. 51)
Applicant relocated and obtained a full-time job in 1995. However, he did not
earn enough to pay his income tax delinquencies. (Tr. 54) Applicant did contact the
state revenue authority once in the mid-1990s to resolve his delinquent state income
taxes; however, it was unwilling to negotiate a monthly payment arrangement.
In the early 2000s, Applicant changed careers for approximately two years, and
started a handyman/painting business. (Tr. 54; Exs. 2-3) The business was lucrative.
(Tr. 106)  Applicant failed, however, to set aside enough money in escrow to pay his
income taxes.  Consequently, he owed approximately $28,000 of federal income tax in
tax years 2002 and 2003, which he was unable to pay. (AE V; Tr. 64) 
Applicant returned to the engineering field in approximately 2004. He continued
not to pay his federal income taxes. By 2008, he collectively owed $36,200 for tax years
2002 through 2005, and 2007. (AE V)  He attributes his failure to pay his income tax to
confusion in reporting income and expenses stemming from his out of state contract
work. (GE 3 at 8)
According to Applicant, the statute of limitations for the IRS to collect any of the
delinquencies from the 1990s expired in 2007. (Tr. 57, 85) Consequently, he does not
intend on making any payment arrangements.
In 2008, Applicant began attempting to resolve his remaining federal income tax
delinquencies. It has been “a very lengthy and painful process.” (Tr. 71) Initially, he filed
amended returns from tax years 2002 through 2007, and requested a collections due
process proceeding (CDP). (Tr. 65) The process “dragged on for months and months.”
(Tr. 66) The IRS scheduled the first CDP, and ruled against Applicant after he failed to
appear. (Tr. 88) Applicant then requested another CDP in December 2009, arguing that
he was unable to attend the first CDP because it was not in the state where he lived.
(Tr. 88) Although the IRS agreed to schedule another CDP, it had not done so as of
December 2010. (Tr. 89)
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Applicant then retained a tax consulting firm in February 2010. (AE O) These
consultants assisted Applicant with the resolution of both his federal and state income
tax delinquencies. (Id. at 2) By August 2010, the consulting firm had negotiated a
payment plan for Applicant to repay the state income tax delinquency. (AE F) Since
then, Applicant has been paying $200 per month. (Id.; AE J) The money is automatically
withdrawn from his checking account.
As of the hearing date, Applicant and his tax consulting firm were still attempting
to execute a payment plan. They had begun in July 2010, but were delayed because
Applicant had two open cases in the IRS tracking system, the one he initiated in 2008,
and the case the tax firm initiated in February 2010. It took the IRS approximately six
months to close the first case and authorize Applicant’s payment plan through the
second case. (Tr. 90-96) 
The tax firm advised Applicant not to start satisfying the delinquency until the IRS
closed the first case. Applicant submitted a post-hearing exhibit indicating that on April
18, 2011, he began repaying the federal income tax delinquency with a $150 payment.
(AE FF) Applicant anticipates satisfying the federal income tax delinquency in five
years. (Tr. 70)
Applicant testified that he owed unpaid federal income taxes for tax year 2008 in
the amount of $224. Upon contacting the IRS, he discovered that he failed to list an
education credit when filing the return. When included and recalculated properly,
Applicant owed no money for tax year 2008.  (AE GG)
Applicant filed his 2009 federal and state income tax returns on time. He received
a $4,100 federal income tax refund and a $2,300 state income tax refund. (AE Q) The
record is unclear as to whether the refunds were applied to the income tax
delinquencies.
The SOR lists three delinquent medical bills (¶¶ 1.a, 1.b, 1.g) Subparagraph 1.a
totals $37. It covers emergency medical services received in 2007. (AE C at 2)
Applicant paid it in December 2010. (AE B) Subparagraph 1.b totals $2,400. It stems
from a surgery Applicant underwent in approximately 2006. As of March 2011, Applicant
had made three $150 payments under a payment plan he arranged in January 2011.
(Tr. 22 ; AE C at 1-2) Subparagraph 1.g totals $305. Applicant arranged a payment plan
in July 2010, and had satisfied it by October 2010. (AE M)
Applicant maintains a budget.  (AE R) Together with his wife, who works part-
time, Applicant earns approximately $175,000 per year, and has $2,050 of after-
expense monthly income. Applicant’s budget includes $800 set aside monthly in an
escrow account to satisfy his income tax delinquencies. (Id. at 1) Applicant’s salary
includes a significant raise he recently negotiated. (AE P; Tr. 45)
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Policies
When evaluating an applicant’s suitability for a security clearance, the
administrative judge must consider the revised adjudicative guidelines. In addition to
introductory explanations for each guideline, the adjudicative guidelines list potentially
disqualifying conditions and mitigating conditions.
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. According to AG ¶ 2(c), 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 access to
classified information will be resolved in favor of national security.” 
Under Directive ¶ E3.1.14, the Government must present evidence to establish
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is
responsible for presenting “witnesses and other evidence to rebut, explain, extenuate,
or mitigate facts admitted by applicant or proven by department counsel. . . .” The
applicant has the ultimate burden of persuasion for obtaining a favorable security
decision.
Analysis
Guideline F, Financial Considerations
Under this guideline, “failure or inability 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 information” (AG
¶ 18).  Applicant satisfied his medical delinquencies listed in subparagraphs 1.a and 1.b,
and has been making steady payments toward the satisfaction of the medical
delinquency listed in subparagraph 1.g. Therefore, I resolve these allegations in his
favor.
Applicant’s longstanding and recurrent income tax delinquencies trigger the
application of AG ¶¶ 19(a), “inability or unwillingness to satisfy debts,” and 19(c), “a
history of not meeting financial obligations.”
The following mitigating conditions are potentially applicable under AG ¶ 20:
(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
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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, or a death, divorce or separation), and the individual acted
responsibly under the circumstances;
(c) the person has received or is receiving counseling for the problem
and/or there are clear indications that the problem is being resolved or is
under control; and
(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts.
From 1990 to 1993, Applicant accrued approximately $47,000 of federal income
tax delinquencies and more than $6,000 of state income tax delinquencies. Although he
attributed his failure to pay his income taxes to difficult financial circumstances, he
made no effort to pay these delinquencies even when his finances were in good shape,
such as when he operated a handyman/painting business in the early 2000s. 
Compounding the seriousness of the security concern, Applicant accrued
additional, significant tax delinquencies over a six-year period, from 2002 to 2007.
Currently, he still owes $25,000 to the IRS and approximately $6,000 in delinquent state
income taxes from 1991 and 1992. He no longer owes any delinquent federal taxes
stemming from the 1990s not because he satisfied them, but because they are no
longer legally collectible. Neither AG ¶¶ 20(a), nor 20(b) apply.
Applicant has been attempting to resolve his delinquent income taxes for the past
three years. When efforts stalled, he retained a tax consulting firm. With the consulting
firm’s help, he has arranged payment plans for both his delinquent state and federal
income taxes. He has been making monthly payments on the state plan since August
2010, and on the federal plan since January 2011. Since 2007, he has filed his returns
on time, and has not accrued any additional delinquencies.
Applicant maintains a budget. He has ample income to adhere to the tax
payment plans, in part, because of a significant raise he negotiated with his employer.
AG ¶¶ 20(c) and 20(d) partially apply.   
Whole-Person Concept
Under the whole-person concept, the administrative judge should consider the
nine adjudicative process factors listed at AG ¶ 2(a): 
(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
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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.
Applicant’s inability to pay his income taxes in the early 1990s was triggered in
part by a natural disaster and job instability. However, as his circumstances improved in
the early 2000s, he took no action to resolve these delinquencies. Also, he again
accrued delinquent income taxes, failing to pay his income taxes every year between
2002 and 2007. The nature, extent, and seriousness of the conduct is significant, and
any mitigation generated by the surrounding circumstances of the early 1990s tax
delinquencies is undercut by the recurrence of additional tax delinquencies ten years
later.
There is a significant presence of rehabilitation. Applicant’s finances are
organized, he has arranged payment plans to which he has been adhering, and he sets
aside an ample amount of money each month to pay his tax delinquencies. However,
Applicant continues to owe approximately $25,000 to the IRS, and never made
arrangements for an additional $47,000, which is now legally uncollectible, from earlier
tax years. Under these circumstances it is too soon to conclude Applicant has mitigated
the financial considerations security concern.
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.b: For Applicant
Subparagraphs 1.c-1.f: Against Applicant
Subparagraph 1.g: For Applicant
Subparagraphs 1.h-1.j: Against Applicant
Subparagraph 1.k: For Applicant
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Conclusion
In light of all of the circumstances presented by the record in this case, it is not
clearly consistent with the national interest to continue Applicant eligibility for a security
clearance. Eligibility for access to classified information is denied.
                                             
MARC E. CURRY
Administrative Judge