1 
DEPARTMENT OF DEFENSE 
DEFENSE OFFICE OF HEARINGS AND APPEALS 
In the matter of: )
)
[REDACTED] ) ISCR Case No. 15-05820 
) 
Applicant for Security Clearance ) 
Appearances 
For Government: Ross Hyams, Esq., Department Counsel 
For Applicant: Pro se 
______________ 
Decision 
______________ 
HESS, Stephanie C., Administrative Judge: 
Applicant failed to mitigate the security concerns raised by his delinquent filings of 
his Federal and state tax returns. Eligibility for access to classified information is denied. 
Statement of the Case 
Applicant submitted a security clearance application (e-QIP) on February 6, 2015. 
On October 13, 2017, the Department of Defense (DOD) sent him a Statement of 
Reasons (SOR), alleging security concerns under Guidelines F (Financial 
Considerations). The DOD acted under Executive Order (Ex. Or.) 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) implemented by 
DOD on June 8, 2017.  
Applicant submitted his Answer to the SOR on November 30, 2017, and requested 
a hearing before an administrative judge. Department Counsel was ready to proceed on 
February 21, 2018, and the case was assigned to me on March 20, 2018. On May 22, 
2018, the Defense Office of Hearings and Appeals (DOHA) notified Applicant that the 
04/10/2019
2 
 
hearing was scheduled for June 7, 2018. I convened the hearing as scheduled. 
Government Exhibits (GX) 1 and 2 were admitted into evidence without objection. 
Applicant testified, called one witness, and submitted Applicant’s Exhibit (AX) A, which 
was admitted without objection. DOHA received the transcript (Tr.) on June 12, 2018. 
 
Procedural Issues 
 
 Applicant appeared at the hearing with a personal representative. However, both 
Applicant and the personal representative were unfamiliar with the hearing process. It 
was Applicant’s intention for the personal representative to testify on Applicant’s behalf. 
We resolved this issue as follows: Both parties waived opening statements and the 
personal representative testified on Applicant’s behalf, and then acted as Applicant’s 
personal representative. 
 
 At the start of the hearing, Department Counsel moved to amend the SOR 
allegations, and further stated that he might make an additional motion at the end of the 
hearing. I granted Department Counsel’s motion and Applicant was initially uncertain as 
to whether or not he was prepared to proceed with the hearing. I stated that I would leave 
the record open for 30 days in order to permit Applicant to more fully respond to the 
amended allegations and to submit additional documentation. Under these conditions, 
Applicant determined that he was prepared to proceed with the hearing. Department 
Counsel moved to amend the SOR to conform to the evidence, and I granted his motion 
without objection. The record remained open until July 9, 2018. Applicant timely submitted 
AX B through H, which included a statement addressing the SOR amendments. I admitted 
the additional evidence without objection. 
  
Findings of Fact 
 
Applicant, 56, is a senior software systems engineer currently employed by a 
defense contractor since April 2008. He was previously employed in the same position by 
defense contractors since at least 2002. Applicant worked as a Federal employee from 
1988 until 1997. He earned a bachelor’s degree in electrical engineering in 1985. He and 
his wife married in 1982 and have three adult children. He was granted his first security 
clearance in 1988. (GX 1.)  
 
Under Guideline F, the SOR as amended alleges that Applicant failed to timely file 
his state and federal tax returns for tax years 2011 through 2016. Applicant admits the 
SOR allegations. The delinquent tax filings are documented in Applicant’s responses to 
interrogatories, Answer, and documentary submissions. His admissions are incorporated 
in my findings of fact. 
 
Applicant does not have any formal training in tax preparation. He prepares and 
files his own tax returns using tax-preparation software, due in large measure to his 
concern that accountants and tax preparers are likely targets of hacking. For many years, 
Applicant erroneously believed that if he was entitled to a refund from the IRS, he was 
not required to file his tax return on the annual deadline, but was instead required to file 
3 
 
within three years of the annual deadline or he would forfeit his refund. (GX 2; Tr. 37-38; 
Answer.) Applicant also stated that his state of residence withholds refunds after two 
years, so he historically tried to file his Federal and state taxes within two years of the 
deadline. (Tr. 37-38.) 
 
Applicant attributes his late tax filings primarily to the complexity of his taxes, his 
misconception about filing requirements, and his efforts to maintain balance in his family 
and work lives. (Answer.) The issues and events that Applicant identifies as having made 
his tax accounting and preparation complex, and his filings and payments delinquent, are 
discussed more fully below. 
 
In 2002, Applicant’s wife was in a serious car accident in which she was gravely 
injured. She suffered from ongoing health issues for many years that required frequent 
medical attention. Applicant incurred significant medical costs, and itemized these on his 
tax returns. (GX 2; Tr. 50.) Applicant’s wife’s health deteriorated in 2012 and 2013, and 
she underwent surgery in 2014 as a result of the injuries she received in the accident. 
Through the years, Applicant prioritized his wife’s medical care and concern over her 
health over preparing his tax returns. (Answer.) 
 
In approximately 2008, Applicant started a two-pronged business venture. He 
purchased a used recreational vehicle (RV) with the intention of refurbishing it and 
reselling it. He also bought an online subscription service that was theoretically designed 
to permit Applicant to purchase deeply discounted vacation packages to resell. A 
component of the vacation-sale business was to recruit other people to purchase and sell 
the packages, and Applicant would receive a percentage of their sales. Applicant did not 
generate any reportable income from either part of the business, nor did he ever obtain a 
business license. (GX 2; Answer.) However, the business did generate expenses that 
Applicant itemized on his tax returns. Applicant did not keep business records in real time 
and this complicated his ability to gather information in order to timely file his tax returns. 
(Tr. 53-58.) Applicant officially closed the business in June 2016. (Answer.) 
 
In tax year 2011, Applicant’s then-employer issued stock options to its employees, 
including Applicant. Because of the way the employer issued the stock options, the value 
of the options was imputed to the employees as income, which necessarily increased 
their tax obligations. The employer sent Applicant an IRS Schedule K-1 that was incorrect. 
Applicant contacted the employer, which in turn contacted the IRS to amend the Schedule 
K-1s. It took several years for this issue to be corrected, and Applicant did not file his tax 
returns while the issue was pending. (GX 2.) It is unclear when the schedule K-1 was 
amended. Applicant sold the stocks in April 2017 and received his last Schedule K-1 in 
March 2017. (Tr. 63-65.) 
 
It took Applicant approximately 440 hours to do the accounting and tax preparation 
for tax year 2014. Despite this large investment of time, Applicant miscalculated his tax 
obligation and owed approximately $90. He filed the 2014 Federal return in July 2017, 
and paid the amount due in September 2017. (GX 2; Tr. 45-46; Answer.) 
 
4 
 
Applicant spoke extensively about his delinquent tax filings during his personal 
subject interview (PSI) in May 2015. Applicant identified tax year 2011 as the year he 
began having difficulty in his tax accounting and preparation in both his e-QIP and his 
PSI. He stated because of his difficulties filing his 2011 tax returns, he was unable to 
timely file 2012, 2013, and 2014. He filed his 2011 Federal return on April 21, 2015. He 
anticipated filing his 2013 and 2014 tax returns soon. Additionally, the IRS sent inquiries 
to Applicant for non-filing of tax returns in at least 2012, 2013, and 2016. (GX 2; Answer.) 
 
Applicant signed his responses to DOHA’s interrogatories on October 4, 2017. The 
interrogatories required Applicant to submit IRS account transcripts for tax years 2011 
through 2016. Applicant stated that his 2016 state and Federal tax returns remained 
unfiled. However, his 2015 state and Federal returns were also unfiled. He filed his 2015 
Federal return on October 10, 2017. Applicant filed for an extension for his 2016 Federal 
return. However, he missed the October 15, 2017, deadline and filed the return on 
November 24, 2017. (GX 2; Tr. 43-45; Answer.). 
 
The instructions section of IRS Form 1040, updated annually, specifically sets forth 
the filing requirements for that tax year. For example, in 2011 married couples filing jointly 
with both spouses under the age of 65 with a gross income of at least $20,600 were 
required to file a Federal return by April 18, 2016.1 Applicant’s income has exceeded the 
annual minimum gross income for tax years 2011 through 2016.2 (Answer.) Applicant was 
generally entitled to receive refunds from the IRS. However, he forfeited his 2011 refund 
by filing the return more than three years after the filing deadline on April 21, 2015. 
Applicant filed automatic extensions for several tax years, but did not meet the October 
15 deadlines. (GX 2; Tr. 40-43; Answer.)  
 
Applicant filed an extension for his 2017 Federal tax return, which moved his 
deadline to October 15, 2018. However, Applicant’s accounting and tax preparation 
resulted in Applicant’s owing Federal tax for 2017. He was required by Federal law to 
submit his payment by the April 2018 filing deadline. On May 31, 2018, Applicant filed the 
return with a check for $2,500 for tax payment. (AX A.) Further, this submission occurred 
one week after Applicant acknowledged receipt of the Notice of Hearing.3 Regarding his 
2017 return, Applicant stated: 
 
It is interesting that my 2017 "Application for Automatic Extension of Time 
to File" projects us receiving a $300 refund while my actual tax filing shows 
us owing additional taxes. In other words, we made yet another mistake. It 
is a humbling lesson learned for me going forward that estimates (just like 
2014) can be wrong. (AX B.) 
 
                                            
1 The relevant pages from 2011 1040 instructions from www.irs.gov are appended to the record as Administrative 
Exhibit (AD EX) IV. 
 
2 See www.irs.gov. 
 
3 The email acknowledging receipt of the Notice of Hearing is appended to the file as AD EX II. Appellant’s sheet of 
corrections of the transcript is amended to the file as AD EX III. 
5 
 
It is unclear when Applicant realized he was required to file by the IRS deadlines 
regardless of whether or not he was entitled to a refund, but it was at some point prior to 
filing his Answer on November 30, 2017. However, Applicant also stated in his Answer 
that his “previous security investigations revealed this same issue since [his] wife’s wreck 
in 2001 and since the start of [his] business in 2008.” Upon receiving the SOR, he realized 
that his practice of delinquently filing his tax returns could have a negative impact on his 
security clearance. (Tr. 67-70.)  
 
Applicant does not owe any balance for his 2014 state tax. However, as of 
September 28, 2017, Applicant had not filed his 2015 and 2016 state tax returns. 
(Answer.) Applicant filed his 2017 state tax return on May 31, 2018. (AX A.) 
 
Applicant thinks filing his tax returns will be simplified now that he no longer has to 
wait for a Schedule K-1 or incorporate the information from it into his tax calculations, but 
instead receives a standard employee W-2. (Tr. 66.) Applicant stated that because he 
was operating under the misconception that he had three years to file if he was owed a 
refund from the IRS, he did not think he was violating any laws. (Tr. 70.) Applicant stated 
several times that he remains circumspect about hiring a tax preparer or accountant out 
of concern that Applicant’s personal information will be hacked. His current intention is to 
continue preparing his own tax returns. (Tr. 64-73.) Applicant does not have any 
delinquent accounts or other financial issues. (AX C-AX H.) Now that Applicant is aware 
of the negative impact his delinquent filing of his Federal and state tax returns could have 
on his security eligibility, he intends to timely file all future tax returns. (Tr. 70-71.) 
  
 Applicant’s witness, a security specialist who has worked with Applicant for more 
than 11 years, holds a security clearance. She is aware of the SOR allegations. She 
testified that Applicant is trustworthy and reliable, stating that he has identified and helped 
to rectify several data spillages that were potentially damaging, and that he has never 
caused a security-related incident. (Tr. 28-31.) Applicant provided character references 
from his supervisor since 2003, a friend of over 30 years, a coworker since 2008, and a 
former coworker and friend of 28 years. Each is aware of the SOR allegations. 
Collectively, they stated that Applicant is a person of integrity who is skilled in his 
profession. Given Applicant’s character and trustworthiness, they highly recommend 
Applicant for continued access to classified information. (Answer.) 
 
Policies 
 
 “[N]o 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 applicants 
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.  
 
6 
 
Eligibility for a security clearance is predicated upon the applicant’s meeting the 
criteria contained in the AG. These guidelines are not inflexible rules of law. Instead, 
recognizing the complexities of human behavior, an administrative judge applies these 
guidelines 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 and 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 that 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 made “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, a decision to deny a security clearance 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. 
“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. 92-1106 at 3, 
1993 WL 545051 at *3 (App. Bd. Oct. 7, 1993).  
 
 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 burden of proving a mitigating condition, 
and the burden of disproving it never shifts to the Government. See ISCR Case No. 02-
31154 at 5 (App. Bd. Sep. 22, 2005).  
 
An applicant “has the ultimate burden of demonstrating that it is clearly consistent 
with the national interest to grant or continue his security clearance.” ISCR Case No. 01-
20700 at 3 (App. Bd. Dec. 19, 2002). “[S]ecurity clearance determinations should err, if 
they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b).  
 
 
 
 
7 
 
Analysis 
 
Guideline F, Financial Considerations 
 
The concern under this guideline 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. 
  
 This concern is broader than the possibility that an individual might knowingly 
compromise classified information in order to raise money. It encompasses concerns 
about an individual’s self-control, judgment, and other qualities essential to protecting 
classified information. An individual who is financially irresponsible may also be 
irresponsible, unconcerned, or negligent in handling and safeguarding classified 
information. See ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012). 
  
The record evidence establishes the following disqualifying condition: 
 
AG ¶ 19(f): failure to file . . . annual Federal, state, or local income tax 
returns or failure to pay annual Federal, state, or local income tax as 
required.  
 
 The following mitigating conditions are potentially applicable: 
 
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 doubt on the individual=s current reliability, trustworthiness, or good 
judgment; 
 
AG ¶ 20(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; and 
 
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. 
 
 Applicant did not timely file his Federal and state tax returns for 2011 through 2016, 
despite receiving extensions for many years. He did not timely pay his 2014 and 2017 tax 
obligations. The 2011 inaccurate tax reporting by Applicant’s employer and Applicant’s 
wife’s medical expenses were conditions that were beyond Applicant’s control. These 
8 
 
conditions added complexity to Applicant’s accounting and tax preparation, which 
contributed to his inability to timely file his tax returns. It is understandable that Applicant 
wanted to maintain balance with his personal and professional lives and to prioritize his 
wife’s care. Further, it is not unreasonable for Applicant to be concerned that his personal 
information could be at risk through hacking. Nevertheless, Applicant did not act 
responsibly under the circumstances. There are a myriad of options that Applicant could 
have employed to protect his personal information when using the services of a tax 
professional. For example, Applicant could ensure that the tax professional computed 
Applicant’s taxes without entering his personal information. The computed tax information 
could then be entered by Applicant and submitted to the taxing authority. 
 
 Applicant also attributes his pattern of failing to timely file his tax returns to his 
misconception about his filing requirements. Applicant is college educated and has 
worked as a software systems engineer since at least 2002. The 1040 instructions clearly 
set forth the filing requirements and these requirements have applied to Applicant for all 
tax years in question. It is unclear exactly when Applicant fully understood that he is 
required to file his Federal tax return annually by the IRS deadlines established by the 
IRS. 
  
 Further, Applicant has been given notice that the government is concerned about 
timely filing of taxes by the questions asked on his 2015 e-QIP, and likely during his 
previous background investigations. Applicant was also questioned extensively about his 
failure to timely file his taxes during his May 2015 PSI. Applicant had to have understood 
the security concern raised by his pattern of delinquently filing his tax returns when he 
received DOHA’s interrogatories in September 2017. The fact that Applicant filed his 2015 
tax return the day after he completed his responses to interrogatories underscores the 
fact that Applicant understood that his failure to timely file his tax returns had security 
clearance implications.  
 
 However, despite having received the SOR in October 2017, Applicant did not file 
his 2016 Federal tax return until November 24, 2017, well after the extension deadline. 
He did not timely pay his 2018 Federal tax obligation. Applicant filed his 2017 return, the 
first return filed within an extension period, and paid his tax obligation only after receiving 
the hearing notice. Applicant asserted that he will timely file his future tax returns now that 
he is aware of the security clearance implications. 
 
 Applicant’s overarching motivation for his last-minute efforts to comply with his tax-
filing obligations, as well as his future promise of compliance, is protecting his security 
clearance. The appeal board has regularly held that “applicants who only begin to address 
their security-significant conduct when their personal interests are at stake may be lacking 
in judgment and reliability. See, e.g., ISCR Case No. 15-06707 at 3 (App. Bd. Aug. 15, 
2017.)  
 
 In specifically addressing mitigating condition 20(g) in ISCR Case No. 17-01807 
(App. Bd. Mar. 7, 2018), the appeal board observed: 
 
9 
 
The mere filing of delinquent tax returns or the existence of a payment 
agreement with an appropriate tax authority does not compel a Judge to 
issue a favorable decision. As with the application of any mitigating 
condition, 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 [this mitigating condition]. pp 3-4. 
 
 Applicant’s pattern of failing to timely file his Federal and state tax returns is recent 
and raises concerns about his willingness to abide by rules and regulations, and his 
current reliability and judgment. While many factors contributed to Applicant’s failure to 
timely file his Federal and state tax returns for many years, he did not act reasonably 
under those circumstances. None of the mitigating conditions apply. 
 
Whole-Person Concept 
  
 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. In applying the whole-
person concept, an 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 in light of the nine adjudicative process factors listed at AG ¶ 2.  
 
 I have incorporated my comments under Guideline F in my whole-person analysis. 
Some of the factors in AG ¶ 2 were addressed under that guideline, but I have also 
considered the following: 
  
 Applicant has held a security clearance since 1988. His supervisor, coworkers, and 
friends highly recommend Applicant for a continued security clearance. He is a skilled 
professional. However, through his failure to timely file and pay his taxes, Applicant has 
not demonstrated the judgment and reliability required of individuals granted access to 
classified information. 
 
 After weighing the disqualifying and mitigating conditions under Guideline F, and 
evaluating all the evidence in the context of the whole person, I conclude Applicant has 
not mitigated the security concerns raised by his failure to timely file his tax returns taxes 
as required. Accordingly, I conclude he has not carried his burden of showing that it is 
clearly consistent with the national interest to grant him continued eligibility for access to 
classified information. 
 
 
 
 
 
 
 
10 
 
Formal Findings 
 
As required by section E3.1.25 of Enclosure 3 of the Directive, I make the following 
formal findings on the allegations in the SOR: 
  
 Paragraph 1, Guideline F (Financial Considerations): AGAINST APPLICANT 
 
  Subparagraphs 1.a and 1.b:    Against Applicant 
 
Conclusion 
 
 I conclude that it is not clearly consistent with the national interest to continue 
Applicant’s eligibility for a security clearance. Eligibility for access to classified information 
is denied. 
 
 
 
Stephanie C. Hess 
Administrative Judge