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 DEPARTMENT OF DEFENSE 
 DEFENSE OFFICE OF HEARINGS AND APPEALS 
  
  
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 15-04561 
  ) 
Applicant for Security Clearance  ) 
 
 
Appearances 
 
For Government: Ray T. Blank, Esq., Department Counsel 
For Applicant: Pro se 
 
 
 
 
___________ 
 
Decision 
___________ 
 
HEINY, Claude, Administrative Judge: 
 
Applicant did not timely file his federal and state tax returns for tax years 2011 
and 2012. He belatedly filed his federal tax returns; however, he has yet to pay the 
federal tax he owes. He has yet to file his state tax returns, and the amount of state tax 
he owes is uncertain for those years. He has failed to rebut or mitigate the security 
concerns under Guideline F, financial considerations. Clearance is denied. 
  
History of the Case 
  
 On January 16, 2016, acting under the relevant Executive Order and DoD 
Directive,1 the DoD issued a Statement of Reasons (SOR) detailing financial 
considerations security concerns. DoD adjudicators could not find that it was clearly 
consistent with the national interest to grant or continue Applicant’s security clearance. 
February 15, 2016, Applicant answered the SOR and requested a hearing. On May 17, 
2016, the Defense Office of Hearings and Appeals (DOHA) issued a Notice of Hearing 
for a hearing to be convened on June 8, 2016. The hearing was held as scheduled.  
  
                                            
1 Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as 
amended; DoD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program 
(January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG) effective within the DoD 
on September 1, 2006. 
 
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Department Counsel offered two exhibits (Ex.) 1 and 2, which were admitted 
without objection. Applicant offered no exhibits. The record was kept open to allow 
Applicant to submit documents. On June 22, 2016, Applicant submitted five documents 
(Ex. A – E), which were admitted. On March 23, 2017, an additional document was 
submitted and admitted as Ex. F. On June 21, 2016, DOHA received a copy of the 
transcript (Tr.) of the hearing.  
 
Findings of Fact 
 
Applicant failed to file his 2011 and 2012 federal and state income tax returns 
and pay the tax associated with those returns. In his SOR response, he admitted the 
SOR allegations. His admissions are incorporated as facts. After a thorough review of 
the pleadings, exhibits, submissions, and transcript, I make the following additional 
findings of fact. 
 
Applicant is 50-year-old senior technical support engineer and manager who has 
been employed by a defense contractor since January 2011, and seeks to retain a 
secret security clearance. (Ex. 1, Tr. 13, 25) From July 1984 through July 2009, he 
served in the U.S. Army honorably retiring as a sergeant first class (E-7). (Ex. A) He 
served in Germany, Panama, Honduras, Korea, and Iraq during his military service. 
From March 2003 through July 2003 and November 2005 through November 2006, he 
served in Iraq, an area designated as an imminent danger pay area. (Ex. A)  
 
Applicant’s salary before taxes and other withholding was approximately $2,800,2 
which on an annual basis would be approximately $72,800. (Ex. C) However, he stated 
his annual salary, without overtime, is $65,000. (Tr. 25) The U.S. Department of 
Veterans Affairs rates Appellant’s disability at 40 per cent for his military service. (Tr. 
17) His disability pay is approximately $600 monthly. (Tr. 17) He receives $300 per 
month from his military retirement pay with the remaining $1,500 going to his ex-wife 
each month. (Tr. 25) He receives approximately $11,000 from his VA disability pay and 
military salary combined and when added to his $65,000 annual salary brings his 
annual income to approximately $76,000. 
 
On Applicant’s May 2013 Electronic Questionnaires for Investigations Processing 
(e-QIP) he indicated his wages had been garnished by the Internal Revenue Service 
(IRS). (Ex. 1) In July 2013, Applicant completed a personal subject interview (PSI) 
during which he was questioned about his finances and failure to pay income tax. (Ex. 
2) During that interview, he stated he had provided his W-2 for tax year 2011 to a friend 
in order for that friend to prepare Applicant’s federal and state tax returns. (Tr. 19) 
Applicant repeatedly asked his friend to return his W-2s, but his friend incorrectly stated 
he had already returned them. In 2013, the friend returned the W-2s without having 
prepared the returns.  
                                            
2 Applicant submitted his pay statements for the two weeks of June 4, 2016, to June 17, 2016. His pay 
statement indicates his pay for two weeks, before deductions and taxes, was approximately $2,800. (Ex. 
C) 
 
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Applicant failed to file his 2012 federal and state income tax returns because he 
was overseas from February 2013 through mid-April 2013.3 (Ex. 2) In December 2012, 
Applicant’s wages were garnished for $480 by the IRS for taxes owed for tax years 
2005 and 2006. (Tr. 21) The debt for those two tax years was satisfied by the single 
month of garnishment.  
 
During Applicant’s PSI, he stated he planned on filing his tax returns within a 
month of the July 2013 interview. At the hearing, he said the returns were not filed as 
planned during the month following the interview due to oversight on his part. (Ex. 2, Tr. 
14, 30) At the hearing, he again asserted he would be contacting the IRS in a week and 
would be arranging a repayment plan to address his delinquent taxes. 
 
When no return was received for 2011, the IRS filed a return for him. That return 
indicated he owed $17,072 in federal income tax for tax year 2011. (Ex. F) After filing 
his return, his taxes were adjusted and, as of February 2017, Applicant owed $4,658 in 
federal income tax for tax year 2011. If he paid the amount by March 13, 2017, he 
would not incur additional interest or penalty charges. (Ex. F) He has provided no 
documents showing payment of the debt.  
 
When Applicant failed to file his 2012 federal tax return, the IRS computed his tax 
owed, penalties, interest, and determined he owed $11,448 as of July 22, 2016. (Ex. D) 
The IRS payoff calculator states “Caution self-identified combat zone.” (Ex. D) He has 
filed his 2012 income tax return, but had not received an adjustment letter from the IRS. 
From February 2013 through April 2013, when his 2012 federal return was due, he was 
working overseas. (Tr. 14)  
 
 Applicant filed, but not timely filed, his federal income tax returns for tax years 
2013 and 2014. (Tr. 24) As of June 2016, he had not filed his federal return for 2015. He 
has not paid any federal taxes due for tax years 2013 through 2015. He has no idea 
how much federal tax he owes for years 2012 through 2015. (Tr. 33)  
 
 Applicant has not filed his state tax returns for tax years 2011 through 2015 and 
does not know how much he owes for state tax. (Tr. 23) It was suggested4 that his W-2s 
for the tax years in question would show how much federal and state tax was withheld 
from his pay. (Tr. 28, 35) No W-2s were received from Applicant. His wage statement 
during two weeks in June 2016 indicated $515 had been withheld for federal taxes and 
$121 had been withheld for state taxes. (Ex. C)  
                                            
3 Taxpayers are allowed an automatic 2-month extension of time to file a federal return and pay any 
federal income tax that is due, if they are outside the United States on the filing due date. Even with an 
extension, interest will be assessed on any tax not paid by the regular due date. For taxpayers acting 
under the directions of U.S. Armed Forces in a combat zone, the filing is extended 180 days. Applicant 
did not file his 2012 federal taxes by the due dates of the exceptions.  
 
4 It was also suggested to Applicant that it was in his interest to provide copies of his tax returns, any 
repayment agreements he had with the IRS and state taxing authority, and any payments in accord with 
said agreements. No such documents were received.  
 
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 Applicant contacted the IRS and was told to file his tax returns, and then he 
would be contacted as to how much was owed. At that time, repayment arrangements 
could be made. (Tr. 31) He has yet to make a payment to the IRS or to the state for tax 
years 2011 and 2012. (Tr. 32) 
 
Applicant is current on his utilities, truck payment, and other month-to-month 
obligations. (Ex. 2) Prior to his father’s death, Applicant helped his father financially. (Tr. 
26) 
 
Policies 
 
The U.S. Supreme Court has recognized the substantial discretion of the 
Executive Branch in regulating access to information pertaining to national security 
emphasizing, “no one has a ‘right’ to a security clearance.” Department of the Navy v. 
Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has the 
authority to control access to information bearing on national security and to determine 
whether an individual is sufficiently trustworthy to have access to such information.” Id. 
at 527. The President has authorized the Secretary of Defense or his designee to grant 
applicant’s eligibility for access to classified information “only upon a finding that it is 
clearly consistent with the national interest to do so.” Exec. Or. 10865, Safeguarding 
Classified Information within Industry § 2 (Feb. 20, 1960), as amended.  
 
Eligibility for a security clearance is predicated upon the applicant meeting the 
criteria contained in the adjudicative guidelines. These guidelines are not inflexible rules 
of law. Instead, recognizing the complexities of human behavior, these guidelines are 
applied in conjunction with an evaluation of the whole person. An administrative judge’s 
overarching adjudicative goal is a fair, impartial, and commonsense decision. An 
administrative judge must consider all available, reliable information about the person, 
past and present, favorable and unfavorable.  
 
The Government reposes a high degree of trust and confidence in persons with 
access to classified information. This relationship transcends normal duty hours and 
endures throughout off-duty hours. 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 
about potential, rather than actual, risk of compromise of classified information. 
Clearance decisions must be “in terms of the national interest and shall in no sense be 
a determination as to the loyalty of the applicant concerned.” See Exec. Or. 10865 § 7. 
Thus, nothing should be construed to suggest that I have based this decision, in whole 
or in part, on any express or implied determination about applicant’s allegiance, loyalty, 
or patriotism. It is merely an indication the applicant has not met the strict guidelines the 
President and the Secretary of Defense have established for issuing a clearance.  
 
 Initially, the Government must establish, by substantial evidence, conditions in 
the personal or professional history of the applicant that may disqualify the applicant 
from being eligible for access to classified information. The Government has the burden 
of establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. 
 
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“Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. 
Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). The guidelines 
presume a nexus or rational connection between proven conduct under any of the 
criteria listed therein and an applicant’s security suitability. See ISCR Case No. 95-0611 
at 2 (App. Bd. May 2, 1996). 
 
Once the Government establishes a disqualifying condition by substantial 
evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the 
facts. Directive ¶ E3.1.15. An applicant “has the ultimate burden of demonstrating that it 
is clearly consistent with the national interest to grant or continue his or her security 
clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). The burden of 
disproving a mitigating condition never shifts to the Government. See ISCR Case No. 
02-31154 at 5 (App. Bd. Sep. 22, 2005). “[S]ecurity clearance determinations should err, 
if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b).  
 
Analysis 
 
Financial Considerations 
 
AG ¶ 18 articulates the security concern relating to financial problems:  
 
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. An individual who is financially 
overextended is at risk of having to engage in illegal acts to generate 
funds.  
 
AG ¶ 19 provides three disqualifying conditions that could raise a security 
concern and may be disqualifying in this case: “(a) inability or unwillingness to satisfy 
debts;” “(c) a history of not meeting financial obligations;” and “(g) failure to file annual 
federal, state, or local income tax returns as required . . . .” Applicant failed to file his 
federal and state tax returns for tax years 2011 and 2012 and owes federal and state 
tax for those years. Applicant is unaware of how much tax is owed, but it is at least 
$4,658. AG ¶¶ 19(a), (c), and (g) apply. Once the Government established disqualifying 
conditions, an additional inquiry about the possible applicability of mitigating conditions 
is required. 
 
 AG ¶ 20 list four Financial Considerations Mitigating Conditions that might apply: 
 
(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; 
 
 
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(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; 
 
The Appeal Board concisely explained an applicant’s responsibility for proving 
the applicability of mitigating conditions as follows:  
 
Once a concern arises regarding an Applicant’s security clearance 
eligibility, there is a strong presumption against the grant or maintenance 
of a security clearance. See Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9th 
Cir. 1990), cert. denied, 499 U.S. 905 (1991). After the Government 
presents evidence raising security concerns, the burden shifts to the 
applicant to rebut or mitigate those concerns. See Directive ¶ E3.1.15. The 
standard applicable in security clearance decisions is that articulated in 
Egan, supra. “Any doubt concerning personnel being considered for 
access to classified information will be resolved in favor of the national 
security.” Directive, Enclosure 2 ¶ 2(b).  
 
ISCR Case No. 10-04641 at 4 (App. Bd. Sept. 24, 2013).  
 
The DOHA Appeal Board has commented about tax-filing issues: 
 
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. ISCR Case No. 01-05340 at 3 (App. Bd. 
Dec. 20, 2002). As we have noted in the past, a clearance adjudication is 
not directed at collecting debts. See, e.g., ISCR Case No. 07-08049 at 5 
(App. Bd. Jul. 22, 2008). By the same token, 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. Id. A person who fails 
repeatedly to fulfill his or her legal obligations does not demonstrate the 
high degree of good judgment and reliability required of those granted 
access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 
(App. Bd. Aug. 18, 2015). See Cafeteria & Restaurant Workers Union 
Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 
886 (1961). 
 
 
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ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). See ISCR Case No. 14-05476 
at 5 (App. Bd. Mar. 25, 2016) (citing ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 
2002)); ISCR Case No. 14-01894 at 4-5 (App. Bd. Aug. 18, 2015).  
 
The Appeal Board clarified that even in instances where an “[a]pplicant has 
purportedly corrected [the applicant’s] federal tax problem, and the fact that [applicant] 
is now motivated to prevent such problems in the future, does not preclude careful 
consideration of [a]pplicant’s security worthiness in light of [applicant’s] longstanding 
prior behavior evidencing irresponsibility” including a failure to timely file federal income 
tax returns. See ISCR Case No. 15-01031 at 3 and note 3 (App. Bd. June 15, 2016) 
(characterizing “no harm, no foul” approach to an applicant’s course of conduct and 
employed an “all’s well that ends well” analysis as inadequate to support approval of 
access to classified information with focus on timing of filing of tax returns after receipt 
of the SOR).  
 
Applicant’s tax liability resulted from failing to timely file his federal and state tax 
returns for 2011 and 2012. He has not filed his 2015 federal tax return or state tax 
returns for tax years 2011 through 2015. The SOR alleges only tax years 2011 and 
2012, but all years of failing to timely file and pay taxes are considered5. In July 2013, 
Applicant was questioned about his finances and his failure to file returns for 2011 and 
2012. He has been on notice of the Government concern about his finances and non-
filing of his taxes for more than three years. 
 
Applicant’s tax returns were due by April 2012 and April 2013, unless he received 
an extension. His failure to file did not happen so long ago and the tax owed for those 
years has not been paid. Additionally, there were four returns that were not timely filed, 
which is not infrequent. AG ¶ 20(a) does not apply. There is no showing the failure to 
file was largely beyond his control. His friend was supposed to file his 2011 returns but 
misplaced Applicant’s W-2s. Applicant could have requested new W-2s for those that 
were misplaced. There was no medical emergency, business downturn, or other event 
beyond his control preventing his filing of his tax returns in a timely manner. 
Additionally, the state returns have not been filed, and whatever state and federal 
delinquent taxes have not been paid. Failing to pay one’s tax does not show Applicant 
has acted responsibly under the circumstances. AG ¶ 20(b) does not apply. 
 
There is no showing Applicant has received financial counseling or that the 
problem is resolved. AG ¶ 20(c) does not apply. Applicant has not initiated a good-faith 
effort to repay his delinquent taxes and still owes his federal tax and may owe state 
taxes for the years in question. AG ¶ 20(d) does not apply. 
 
 
                                            
5 The DOHA Appeal Board has long held that the administrative judge may consider non-SOR-alleged 
conduct to assess an applicant’s credibility; to evaluate an applicant’s evidence of extenuation, mitigation, 
or changed circumstances; to consider whether an applicant has demonstrated successful rehabilitation; 
to decide whether a particular provision of the Adjudicative Guidelines is applicable; or to provide 
evidence for a whole-person analysis under Section 6.3 of the Directive. See, e.g., ISCR Case No. 03-
20327 (App. Bd. Oct. 26, 2006); ISCR Case No. 09-07219 (App. Bd. Sep. 27, 2012).  
 
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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 the circumstances. 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 
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 have incorporated my comments 
under Guideline F in my whole-person analysis. Some of the factors in AG ¶ 2(a) were 
addressed under Guideline F, but some warrant additional comment.  
 
Applicant served honorably in the U.S. Army being twice stationed in an area 
designated as an imminent danger area. He is not living beyond his means. Payments 
on his utilities, truck payment, and month-to-month obligations are current. He is not 
receiving calls or mail from creditors demanding payment on delinquent accounts. His 
taxes were the only financial problems raised by the SOR. Additionally, to his credit, he 
listed the IRS garnishment on his e-QIP. 
 
Applicant’s annual household income is approximately $76,000. He has made no 
payment on his delinquent taxes for 2011 and 2012. He has been aware of the 
Government’s concern about his delinquent debts since his July 2013 interview when 
he was specifically confronted about his finances and unfiled tax returns. Additionally, 
the January 2016 SOR put him on notice of the Government’s concern about his unfiled 
tax returns and unpaid tax. The tax is still owed and he has failed to document that a 
repayment agreements have been made with the IRS or the state taxing authority.  
 
The issue is not simply whether all Applicant’s debts have been paid—it is 
whether his financial circumstances raise concerns about his fitness to hold a security 
clearance. (See AG & 2(a)(1).) Overall, the record evidence leaves me with questions 
and doubts as to Applicant’s eligibility and suitability for a security clearance. For all 
these reasons, I conclude Applicant has not mitigated the security concerns arising from 
his financial considerations.  
 
This decision should not be construed as a determination that Applicant cannot 
or will not attain the state of true reform and rehabilitation necessary to justify the award 
of a security clearance. The awarding of a security clearance is not a once-in-a-lifetime 
 
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occurrence, but is based on applying the factors, both disqualifying and mitigating, to 
the evidence presented. Under Applicant=s current circumstances a clearance is not 
recommended, but should Applicant be afforded an opportunity to reapply for a security 
clearance in the future, having filed his state tax returns and paid his federal and state’s 
past-due taxes, established compliance with a repayment plan, or otherwise addressed 
the obligations, he may well demonstrate persuasive evidence of his security 
worthiness. However, a clearance at this time is not warranted.  
 
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, Financial Considerations: AGAINST APPLICANT  
 
Subparagraphs 1.a through 1.d:  Against Applicant 
 
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 grant or continue Applicant’s eligibility for 
a security clearance. Eligibility for access to classified information is denied.  
 
 
 
_________________________ 
Claude R. Heiny 
Administrative Judge