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121 T.C. No. 2
UNITED STATES TAX COURT CURTIS B. KEENE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 11604-02L. Filed July 8, 2003. P filed a petition for levy
action under sec. 6330(d), I.R.C., disputing R’s notice of
determination concerning collection action with respect to his 1991
tax liability on the ground that he was not permitted by the IRS
Appeals Office to make an audio recording of his sec. 6330 hearing,
in violation of sec. 7521(a)(1), I.R.C. Subsequently, P filed an
amended petition again asserting his claimed right to audio record
such hearing. P had previously submitted documents to R in his
request for a collection due process hearing that asserted several
frivolous and groundless arguments. R informed P by letter that he
could make no audio recording. P gave R the required advance request
to record. P appeared for the hearing but was told by R that he
could not record it. P decided that he did not want to have a
hearing if he could not record it, and he left with his recording
equipment. P contends that sec. 7521(a)(1), I.R.C., provides him
with the right to audio record his sec. 6330 hearing because it
constitutes an “in-person interview”. R contends that P does not
have a right to audio record the hearing because it is not an “interview”
within the meaning of sec. 7521(a)(1), I.R.C Held, P is
entitled, pursuant to sec. 7521(a)(1), I.R.C., to make an audio
recording of his sec. 6330 hearing with the Internal Revenue Service
Appeals Office. Rollin G. Thorley and Robin
Ferguson, for respondent.
OPINION OF THE SPECIAL TRIAL JUDGE This case involves the 1991 tax
year.[2] Petitioner
and his spouse, Fanny Keene, filed a timely joint Federal income tax
return on which they reported wages of $32,047; taxable IRA
distributions of $21,996; taxable pensions and annuities of $47,764;
a business income loss of $48,483 on Schedule C from the operation
of Hizzoner’s Restaurant; and total tax of $9,327 with Federal
income tax withheld of $2,837, and tax owed of $6,845. Respondent
assessed the amount due as reported on the return. In 1992 and 1993
installment payments totaling $1,400 were made and applied to the
amount of tax assessed. On or about May 14, 1993, petitioner filed
for bankruptcy, and that proceeding was closed on February 4, 1994.
During the years 1995, 1996, and 1997, overpaid credits totaling
$552.97 were applied to the 1991 amount assessed. Also in 1997,
there was a subsequent payment by levy of $523.17 and a
miscellaneous payment of $494.22; both amounts were applied to the
1991 income tax liability. Five payments of $350 each were later
made and applied to the 1991 tax liability. [2] See Keene v. Commissioner, T.C. Memo. 2002-277, in which we granted
the Commissioner’s motion for summary judgment sustaining the
determination to proceed with the collection of the taxpayer’s
Federal income tax liabilities for 1997 and 1998, and imposed a
penalty of $5,000 under sec. 6673(a)(1). That case did not involve
the sec. 7521(a)(1) audio recording issue presented in the instant
case. Due
to my ignorance, I mistakenly reported as “income” what were
actually “sources” of income. In addition, the amounts that I
incorrectly listed as “income” were, in fact, amounts that are
exempt from taxation. There was a three-page attachment
to the amended return in which petitioner (not his spouse) made
frivolous and groundless arguments why he did not owe the assessed
tax. By letter dated April 25, 2001,
the amended return and attachment were determined by the Examination
Branch, Ogden Compliance Service Center, to be frivolous. On
November 1, 2001, after receiving additional groundless statements
from petitioner, the Director of IRS Compliance Services disallowed
petitioner’s claim for refund. On January 21, 2002, respondent
issued to petitioner a Final Notice–-Notice Of Intent To Levy And
Notice Of Your Right To A Hearing with regard to petitioner’s
unpaid Federal income tax for 1991. On February 11, 2002, petitioner
submitted to respondent a Form 12153, Request for a Collection Due
Process Hearing, which attached a statement setting forth the
following contentions: I
never received a “notice and demand” for payment for any 1991
income taxes. No
law authorizes the IRS to claim that I owe more in income taxes than
the “zero” I reported on my 1991 amended 1040X income tax
return. The
IRS Decoding manual provides additional proof that I cannot own more
in 1991 income taxes than the “zero” shown on my 1991 income tax
return. The
Secretary has not authorized any action for the collection of taxes
and penalties as required by 26 USC 7401. The
Attorney General has not directed that any action against me for the
enforced collection of any income taxes and penalties for the year
1991 “be commenced” as is required by 26 USC 7401. In
addition to everything else, Sections 6331, 7701 and 7608 clearly
establish that IRS Revenue Officers or Revenue Agents have no
authority to seize property in payment of income taxes. Petitioner concluded his
statement with a declaration of his intent to tape record the
requested hearing. By letter dated May 3, 2002,
Appeals Officer Donna Fisher (the Appeals officer) informed
petitioner that his hearing was scheduled for May 16, 2002. The
Appeals officer’s letter also stated: Further,
no audio or stenographic recordings are allowed on Appeals cases
effective as of May 2, 2002, forward. Therefore, your request to
tape record and/or bring a court reporter to the Collection Due
Process hearing is denied. By letter dated May 10, 2002,
petitioner informed the Appeals Office that he would not be able to
attend the hearing scheduled for May 16, 2002, and requested that it
be rescheduled. Petitioner also requested that the Appeals officer
provide him with the statutory or regulatory authority barring him
from recording the hearing. By letter dated May 14, 2002, the
Appeals officer informed petitioner that his hearing was rescheduled
for June 3, 2002. The Appeals officer also enclosed with her letter
a copy of an internal, apparently unpublished, Memorandum to All
Appeals Area Directors dated May 2, 2002, from the Acting Chief of
the Office of Appeals in Washington, D.C., which stated as follows: Effective
immediately, audio and stenographic recordings will no longer be
allowed on Appeals cases. Taxpayers and/or representatives who have
already requested such recording will be informed of the change in
practice immediately, and advised that the request cannot be
allowed. Prior
to enactment of IRC 7521, Service Compliance functions voluntarily
allowed audio recordings. Appeals
decided to follow this practice at that time. IRC 7521, enacted in
1988, provided for the allowance of audio recordings of conferences
relative to the determination or collection of a tax, between the
taxpayer and the Internal Revenue Service, provided that the Service
was given at least ten (10) days advance notice of the taxpayer’s
intent to record the conference. Although
Appeals makes liability and collectibility determinations, Appeals’
procedures differ from Examination and Collection function contacts
that are not discretionary for the taxpayer. Contact with Appeals is
discretionary for the taxpayer, and as such, recording has always
been discretionary for Appeals. It
should also be noted that Appeals was deliberately excluded in
Notice 89-51 that dealt with the audio recording provision, as
Counsel determined that IRC 7521 was not applicable to Appeals. Recently
Appeals has had several incidents of audio recordings being altered
to imply Appeals employees were making inappropriate comments. In
some cases, those altered recordings were broadcast on the radio. We
are also aware of instances where excerpts of stenographic records
were combined in inappropriate ways and published in anti-tax
newsletters and other anti-government publications. These
actions have had the result of undermining the appearance of Appeals’
competence, impeding Appeals ability to adequately function in its
role as a dispute resolution function. These incidents have
interfered with our customers’ perception of our ability to carry
our Appeals’ mission to be fair and impartial in our
considerations; and therefore cannot be allowed to continue. In
addition, Appeals has always been concerned that the practice of
recording conferences and hearings could inappropriately interfere
with the informal nature of Appeals conferences, and therefore might
improperly impede settlement. Therefore,
the decision has been made to eliminate all audio as well as
stenographic recordings of Appeals conferences and hearings. That
decision is effective immediately upon the date of this memorandum. This
memorandum supersedes guidance issued in Internal Revenue Manual
8.7.2.3.4 and 8.6.1.2.5 on the subject of recording hearings and
conferences. The IRM will be updated to reflect these changes during
the next regular update of that section. On June 3, 2002, petitioner,
after giving to the Appeals Office his advance request to record,
appeared for the hearing. When the Appeals officer informed him that
he would not be permitted to use an audio recorder, petitioner
decided that he did not want to have a hearing if he could not
record it, so he left with his recording equipment. On June 11, 2002, respondent
issued to petitioner a Notice of Determination Concerning Collection
Actions(s) Under Section 6320 and/or 6330. The notice of
determination stated that respondent determined that, after
balancing the need for efficient collection against petitioner’s
arguments, it was appropriate to proceed with the levy action. On July 12, 2002, petitioner
filed with the Court a timely Petition for Lien or Levy Action. The
only issue raised in the petition pertains to the Appeals officer’s
decision to preclude petitioner from recording the hearing. The
petition states in pertinent part: Petitioner
states that the determination action by the Appeals Office in this
instant case was not only inappropriate, biased and prejudiced, but
also an illegal action designed to deny the petitioner his due
process rights to make a full and complete official record of a
hearing with the government a potential adversarial relationship. On August 12, 2002, petitioner
filed an Amended Petition elaborating on his argument that he should
have been permitted to audio record the hearing. After filing an answer to the
amended petition, respondent filed the motion for summary judgment
that is pending before the Court. Respondent maintains that there is
no dispute as to material facts and that he is entitled to judgment
as a matter of law sustaining the notice of determination dated June
11, 2002. Respondent’s position is that section 7521(a)(1),[3] which
authorizes taxpayers to record “in-person interviews”, is not
applicable to hearings pertaining to collection actions under
section 6320 or 6330. Petitioner filed an objection to respondent’s
motion. [3] Sec. 7521, which is entitled “Procedures Involving Taxpayer Interviews”,
provides in part: (1)
Recording by Taxpayer.–-Any officer or employee of the Internal
Revenue Service in connection with any in-person interview with any
taxpayer relating to the determination or collection of any tax
shall, upon advance request of such taxpayer, allow the taxpayer to
make an audio recording of such interview at the taxpayer’s own
expense and with the taxpayer’s own equipment. (2)
Recording by IRS Officer or Employee.–-An officer or employee of
the Internal Revenue Service may record any interview described in
paragraph (1) if such officer or employee— (A) informs the taxpayer of such
recording prior to the interview, and (B)
upon request of the taxpayer, provides the taxpayer with a
transcript or copy of such recording but only if the taxpayer
provides reimbursement for the cost of the transcription and
reproduction of such transcript or copy. This matter was called for
hearing at the Court’s motions session held in Washington, D.C.
Counsel for respondent appeared at the hearing and was heard.
Although there was no appearance by or on behalf of petitioner at
the hearing, he filed with the Court a written statement pursuant to
Rule 50(c) opposing respondent’s motion on the ground that he was
denied his request to audio record his section 6330 hearing with the
Appeals Office under the provisions of section 7521(a)(1). Discussion Summary judgment is intended to
expedite litigation and avoid unnecessary and expensive trials. See
Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Summary
judgment may be granted with respect to all or any part of the legal
issues in controversy “if the pleadings, answers to
interrogatories, depositions, admissions, and any other acceptable
materials, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that a decision may be
rendered as a matter of law.” Rule 121(b); Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir.
1994). Section 7521(a)(1) expressly
states that, upon the advance request of a taxpayer, an Internal
Revenue Service officer or employee shall permit the taxpayer to
make an audio recording of “any in-person interview * * * relating
to the determination or collection of any tax”. Neither section
7521(a)(1) nor the legislative history[4] directly and clearly defines or otherwise describes the term “in-person
interview”. Where a term is not defined in the statute, it is
appropriate to accord the term its “ordinary meaning”. Northwest
Forest Resource Council v. Glickman, 82 F.3d 825, 833 (9th Cir.
1996). And when there is no indication that Congress intended a
specific legal meaning for the term, courts may look to sources such
as dictionaries for a definition. Muscarello v. United States,
524 U.S. 125, 127-132 (1998); see also Huntsberry v. Commissioner,
83 T.C. 742, 747-748 (1984), in which the Court stated that “where
a statute is clear on its face, * * * we would require unequivocal
evidence of legislative purpose before construing the statute so as
to override the plain meaning of the words used therein.” [4] 4 See
H. Conf. Rept. 100-1104 (Vol. II), at 212-214 (1988), 1988-3 C.B.
473, 702-704. The term “interview” is
defined by Webster’s Third New International Dictionary Unabridged
1183-1184 (1993) as: a
meeting face to face: a private conversation; usu: a formal meeting
for consultation: CONFERENCE Similar definitions appear in
other dictionaries. For example, the American Heritage Dictionary
(4th ed. 1970) defines the term “interview” as “a face to face
meeting arranged for the discussion of some matter”; Webster’s
II New Riverside University Dictionary 639 (1984) defines the term
as “a formal face-to-face meeting”; and Webster’s New
Collegiate Dictionary 600 (1979) defines the term as “a formal
consultation” or “a meeting at which information is obtained”. Petitioner contends that he is
entitled to make an audio recording of his section 6330 hearing
before the Appeals Office because the specific requirements of
section 7521(a)(1) have been satisfied. He stresses that the meeting
is presided over by an officer or employee of the IRS; that the
meeting is “in person”; that the meeting involves the collection
of tax; that he gave advance notice of his intent to record; and he
brought his own recording equipment for that purpose.[5] [5] Petitioner has cited and relied on several existing sections of the
Internal Revenue Manual, as well as Publication 1 entitled “Your
Rights as a Taxpayer”, sec. IV, par. 2, sentence 2, which states
that taxpayers “may make sound recordings of any meeting with our
examination, appeal, or collection personnel”. Although we
recognize that these are not statements of statutory or regulatory
rights, audio recordings by taxpayers of Appeals conferences have
been permitted since the early 1980s, and the practice continued
after the enactment of sec. 7521(a)(1) in 1988 and secs. 6320 and
6330 in 1998. It was not until May 2, 2002, in its unpublished
Memorandum to All Appeals Area Directors that the Appeals Office
began denying taxpayers the right to make audio recordings in
Appeals cases. To the contrary, respondent contends that petitioner has no statutory
right to audio record a section 6330 proceeding because it is a “hearing”,
as distinguished from an “interview”, and, therefore, is not
subject to the provisions of section 7521(a)(1). The distinction,
respondent argues, is that an “interview” is technically one
initiated by the IRS that the taxpayer is under some compulsion to
attend and is for the purpose of gathering information to use in the
determination or collection of tax. In respondent’s view, a
taxpayer “interview” by the Examination or Collection Division
of the IRS is involuntary and inquisitorial in nature and can be
enforced by the issuance of an administrative summons, but, by
contrast, a section 6330 hearing is voluntary on the taxpayer’s
part. There are several reasons why we
conclude that petitioner is entitled to audio record his section
6330 hearing with the Appeals Office. First, the distinction that
respondent seeks to draw between the terms “interview” and “hearing”
in the context of section 6330 is, at best, tenuous and
unpersuasive. As the general and ordinary definitions of “interview”
suggest, we think the exchange of information that occurs between a
taxpayer and an Appeals officer during an administrative hearing
conducted under section 6330 constitutes an “in-person interview”
within the meaning of that term as used in section 7521(a)(1). A section 6330 hearing provides a
taxpayer with the opportunity to raise any relevant issues under
section 6330(c)(2) relating to the proposed collection action,
including appropriate spousal defenses, challenges to the
appropriateness of the collection action, offers of collection
alternatives, and, in appropriate circumstances, challenges to the
underlying tax liability. During the administrative hearing, the
taxpayer is expected to offer documentation, proposals, and
arguments and to answer the Appeals officer’s inquiries regarding
relevant issues. In turn, the administrative hearing provides the
Appeals officer with the opportunity to determine whether the
Commissioner has followed applicable laws and administrative
procedures with regard to the assessment and collection action in
dispute and to develop a record with respect to issues raised by the
taxpayer. In short, the meeting between the taxpayer and the Appeals
officer is face-to-face, private, arranged for the discussion of
specific matters, and formal in the sense that it is prescribed by
law.[6] As previously indicated, these are all characteristics of an “interview”
as that term is commonly defined. [6] In contrast, the procedure involving the conduct of the meeting is
informal. See Davis v. Commissioner, 115 T.C. 35, 41 (2000),
where sec. 7521(a) was not considered. Second, we reject the distinction that respondent seeks to
draw between what he describes as the inquisitorial nature of a
taxpayer interview by the Examination or Collection Division and the
voluntary nature of a section 6330 hearing before the Appeals
Office. It is our view that the section 6330 hearing is an integral
part of the tax collection process and therefore relates to the “collection
of any tax” within the meaning of section 7521(a)(1). After all,
the Commissioner generally may not collect a tax by levy or permit a
notice of Federal tax lien to remain on the public record without
first offering the taxpayer an administrative hearing pursuant to
section 6330. A taxpayer who fails to participate in such a hearing
may expect to receive a notice of determination that the
Commissioner’s proposed collection action is appropriate. Third, respondent’s interpretation of section 7521(a)(1) in
denying the taxpayer’s right to audio record would serve to
undermine the safeguards in IRS collection actions that Congress
created in section 6330 with the enactment of the Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206, 112
Stat. 685. See S. Rept. 105-174, at 67-69 (1998), 1998-3 C.B. 537,
603-605; H. Conf. Rept. 105-599, at 263-266 (1998), 1998-3 C.B. 755,
1017-1020. Significantly, there is nothing in section 6330 or in the
legislative history of that section to suggest that Congress did not
intend to afford taxpayers the right, consistent with section
7521(a)(1), to audio record administrative hearings in collection
actions. Fourth, respondent’s interpretation of section 7521(a)(1)
would lead to the anomalous result of allowing the audio recording
of Examination Division interviews, which are proceedings that we
typically do not review, see Greenberg’s Express, Inc. v.
Commissioner, 62 T.C. 324, 327 (1974), but not allowing the
recording of section 6330 hearings, which are proceedings that we
are statutorily charged with reviewing, see sec. 6330(d)(1). Fifth, respondent’s
interpretation of section 7521(a)(1) would complicate judicial
review of the determination made by the Appeals Office with respect
to the Commissioner’s proposed levy or filing of the notice of
Federal tax lien. For example, when a taxpayer’s underlying tax
liability is not properly at issue in the administrative hearing, we
review the Appeals Office’s determination for abuse of discretion.
Lunsford v. Commissioner, 117 T.C. 183, 185 (2001). Having a
transcript of the administrative hearing would certainly facilitate
that review. Cf. Mesa Oil, Inc. v. United States, 86 AFTR 2d
2000-7312, 2001-1 USTC par. 50130 (D. Colo. 2000) (holding, without
explicit consideration of section 7521(a)(1), that a verbatim
recording of a section 6330 hearing was necessary in that case to
have a judicially reviewable administrative record). In addition, when reviewing for
abuse of discretion, we generally consider “only arguments,
issues, and other matter that were raised at the collection hearing
or otherwise brought to the attention of the Appeals Office”. Magana
v. Commissioner, 118 T.C. 488, 493 (2002). Having a transcript
would eliminate a possible dispute between the parties concerning
the scope of the issues that were raised by the taxpayer in the
administrative hearing. Moreover, not having a transcript may
contravene the intent of Congress in providing for a fair and
impartial administrative hearing and may have a negative impact on
this Court’s review of the Appeals Office determination. Finally, we observe that section
301.6320-1(d)(2), Q&A-D6, Proced. & Admin. Regs., and
section 301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.,
state as follows: “A transcript or recording of any face-to-face
meeting or conversation between an Appeals officer or employee and
the taxpayer or the taxpayer’s representative is not required”.
This statement appears in the context of a description, in general
terms, of the conduct of a section 6330 hearing. In the instant
case, we need not and do not decide whether every section 6330
hearing must be recorded. Instead, we decide only whether a taxpayer
who seeks to audio record a section 6330 hearing has the right to do
so by virtue of section 7521(a)(1). In answering that inquiry in the
affirmative, it is unnecessary to decide in this case whether the
cited regulations are invalid. Conclusion Accordingly, we hold that,
pursuant to section 7521(a)(1), petitioner is entitled to audio
record his section 6330 hearing with the Appeals Office. Respondent’s counsel
acknowledged at oral argument on the motion for summary judgment
that, if the Court decides the audio recording issue against
respondent, the proper action would be to remand the case and allow
petitioner to have a hearing that he could record. Therefore, in
these circumstances, we shall remand this case to respondent’s
Appeals Office with direction that petitioner be offered a section
6330 hearing that may be audio recorded pursuant to section
7521(a)(1). We shall withhold action on respondent’s motion for
summary judgment to permit the record to be supplemented. In
ordering this remand, we admonish petitioner that, if he persists in
making frivolous and groundless tax protester arguments at the audio
recorded hearing rather than raising relevant issues, as specified
in section 6330(c)(2), relating to the unpaid tax or the proposed
levy, the Court will grant respondent’s motion for summary
judgment and impose a penalty against him pursuant to section
6673(a)(1). See Pierson v. Commissioner, 115 T.C. 576,
580-581 (2000); Keene v. Commissioner, T.C. Memo. 2002-277. Our conclusion in this case that
petitioner is entitled to audio record his section 6330 hearing with
the Appeals Office is not inconsistent with Kemper v.
Commissioner, T.C. Memo. 2003- 195, decided this day. Indeed,
the two cases are different. In Kemper, the taxpayers chose to
participate in the Appeals Office hearing, and, subsequently, in
filing their petition with this Court, they included not only a
section 7521(a)(1) argument, but also arguments that were frivolous
or groundless. By contrast, no Appeals Office hearing was held in
this case because of petitioner’s insistence that it be recorded,
and the petition raised only the section 7521(a)(1) issue. Because
of the narrow scope of the pleadings in the present case, respondent
has acknowledged that, if the Court should decide the section
7521(a)(1) issue in petitioner’s favor, this case should be
remanded in order to permit a recorded hearing. In Kemper,
the pleadings were not narrow in scope, and the Court was able to
address all of the nonsection 7521(a)(1) issues pleaded by the
taxpayers without the need for remanding the case to develop such
issues at an Appeals Office hearing. To reflect the foregoing, An
appropriate order will be issued. Reviewed by the Court. WELLS, GERBER, COLVIN, HALPERN,
LARO, FOLEY, VASQUEZ, GALE, THORNTON, MARVEL, HAINES, GOEKE, and
WHERRY, JJ., agree with this majority opinion. HALPERN, J., concurring: I agree
with the majority that section 7521(a)(1) entitles a taxpayer to
make an audio recording of (“to record”) any oral interview
constituting part (or all) of the hearing required by section
6330(b). I write separately to explain why it is within our
authority to enforce that entitlement and why, in some cases, we
should not exercise that authority. With certain restrictions, and
subject to certain conditions, not here relevant, section 7521(a)(1)
makes it the duty of any officer or employee of the Internal Revenue
Service to allow a taxpayer to record any in-person interview
relating to the determination or collection of any tax. Although
section 7521(a)(1) establishes a duty, and a corresponding right, it
provides no sanction for violation of that duty or procedure for
enforcement of that right. And while the Supreme Court has said: “There is no presumption or
general rule that for every duty imposed upon * * * the Government *
* * there must exist some corollary punitive sanction for departures
or omissions, even if negligent”, United States v. Montalvo-Murillo,
495 U.S. 711, 717 (1990), section 706 of the Administrative
Procedure Act (the APA), 5 U.S.C. secs. 551–559, 701-706 (2000)
(hereafter, sections of which are cited as APA “sec. _”)
provides, in pertinent part, that a court reviewing an agency
adjudication (which a determination made under section 6330(c)(3) is[1]) “shall * * * hold unlawful and set aside agency action * * * found to
be * * * without observance of procedure required by law”. We thus
have our authority for refusing to sustain a determination made
under section 6330 when the Appeals Officer has refused to allow the
taxpayer to record an in-person interview. [1] See
Lunsford v. Commissioner, 117 T.C. 159, 170-171 (2001) (Halpern, J.,
concurring). APA sec. 706 concludes, however:
“In making the foregoing determinations, the court shall review
the whole record or those parts of it cited by a party, and due
account shall be taken of the rule of prejudicial error.”
(Emphasis added.) The “rule of prejudicial error” (otherwise the
doctrine of harmless error), as applied to an administrative action,
provides that the reviewing court shall disregard procedural errors
unless the complaining party was prejudiced thereby. See the
discussion of APA sec. 706 and harmless error in Nestor v.
Commissioner, 118 T.C. 162, 173 (2002) (Halpern, J.,
concurring). In this proceeding, petitioner did not proceed with his
section 6330 hearing after the Appeals Officer refused him
permission to record it, and respondent’s sole ground for summary
judgment is the absolute inapplicability of section 7521(a)(1) to a
section 6330 hearing. Respondent asked that, if we reject his
argument (which we do), we remand the case so that petitioner could
be accorded a hearing that he could record. For that reason, we need
not determine whether the Appeals Officer’s initial refusal to
allow recording is harmless error. In Kemper v. Commissioner,
T.C. Memo. 2003-195, decided this day, the taxpayer husband was
denied the right to record his meeting with the Appeals Office but
attended anyway. Judge Chiechi acknowledges that here (in Keene) we
hold that section 7521(a) requires the Appeals Office to allow a
taxpayer to record a section 6330 hearing, yet she concludes that it
is unnecessary, and would be unproductive, to remand her case for
another, recorded hearing. She relies on Lunsford v. Commissioner,
117 T.C. 183 (2001), in which, it appears to me, we concluded that
the Appeals Officer did not err by refusing to consider meritless
arguments. Undoubtedly (given our holding in this case), the Appeals
Office in Kemper did err in not permitting the taxpayer husband to
record his meeting. Nevertheless, the burden is on the party seeking
judicial review of an agency action to demonstrate prejudice from
any error. DSE, Inc. v. United States, 169 F.3d 21, 31 (D.C.
Cir. 1999). Since Judge Chiechi finds that the taxpayers in Kemper
advance nothing but frivolous arguments and groundless claims, I
fail to see how they are prejudiced by the Appeals Office’s error
in failing to allow the taxpayer husband to record his meeting. I
would reach the same result in Kemper as Judge Chiechi, but I would
arrive there by a different path. GALE and MARVEL, JJ., agree with
this concurring opinion. VASQUEZ, J., concurring: I agree
with the majority opinion; however, I write separately to address
two additional points. 1. We Are Not Invalidating the
Regulations The majority opinion does not
invalidate section 301.6320- 1(d)(2) or 301.6330-1(d)(2),
Q&A-D6, Proced. & Admin. Regs. Contra J. Swift’s
dissenting op. pp. 34-36. In both sections 301.6320-1(d)(2) and
301.6330-1(d)(2), Q-D6, Proced. & Admin. Regs., asks: “How are
CDP hearings conducted?” In both sections 301.6320-1(d)(2) and
301.6330-1(d)(2), A-D6, Proced. & Admin. Regs., answers, in
pertinent part: CDP hearings are much like Collection Appeal Program (CAP) hearings in that they are informal in nature and do not require the Appeals officer or employee and the taxpayer, or the taxpayer’s representative, to hold a face-to-face meeting. A CDP hearing may, but is not required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer or the taxpayer’s representative, or some combination thereof. A transcript or recording of any face-to-face meeting or conversation between an Appeals officer or employee and the taxpayer or the taxpayer’s representative is not required. * * * The “is not required”
language contained in the regulations means that the actions
described therein are permissible but not mandatory. The regulations first provide
that a face-to-face meeting is not required. This, however, does not
prohibit face-to-face meetings--many section 6330 hearings are
face-to-face meetings. The regulations simply provide that it is not
mandatory that a section 6330 hearing be a face-to-face meeting. Likewise, the regulations do not
prohibit recording or transcription of any face-to-face meeting or
conversation, they merely provide that a recording or transcription
of the section 6330 hearing is not required. In other words,
recording or transcription of the section 6330 hearing is not
mandatory; however, it is permissible. Furthermore, allowing taxpayers
to record the hearing does not require that the Commissioner do so
as well. Although the Commissioner also may choose to record the
hearing, sec. 7521(a)(2), just because the taxpayer records the
hearing this does not require the Commissioner also to record it.[1] [1] I realize, however, as a practical matter that if a taxpayer records the
hearing the Commissioner will likely record it also. If the Secretary had sought to prohibit recordings and transcriptions (and
face-to-face meetings for that matter), he could have chosen such
phrases as a recording “is not allowed”, “is not permitted”,
“is prohibited”, or “shall not be made”. He did not. The
regulations instead contain the language “is not required” which
permits, but does not mandate, a recording.[2] [2] Other answers contained in sec. 301.6330-1(d)(2), Proced. & Admin.
Regs. contain “mandatory” language. Sec. 301.6330- 1(d)(2),
A-D1, Proced. & Admin. Regs. (“The taxpayer is not entitled
to another CDP hearing under section 6330 if the additional
assessment represents accrual of interest, accrual of penalties, or
both.”), A-D5, Proced. & Admin. Regs. (“The taxpayer must
sign a written waiver.”), and A-D7, Proced. & Admin. Regs. (“The
taxpayer must be offered an opportunity for a hearing at the
Appeals office closest to [sic] taxpayer’s residence or, in the
case of a business taxpayer, the taxpayer’s principal place of
business.”) (Emphasis added.) 2. Welcoming a Transcript Having a transcript of the
section 6330 hearing will allow us to perform better the review
provided to taxpayers by section 6330(d). Until now, in order to determine
what issues taxpayers raised at the section 6330 hearing, the Court
was faced with “he said-she said” situations--needless “credibility
contests” between the taxpayer and the Appeals officer. In many
cases this contest was not fully developed because the only evidence
submitted to determine what issues were raised at the hearing was
the notice of determination. I have tried a number of cases in
which it was difficult to determine what issues the taxpayer raised
at the section 6330 hearing. Sometimes it is obvious that the
Appeals officer had extreme difficulty understanding what issues the
taxpayer raised at the hearing. In those cases, we were left merely
with the confusing testimony of the taxpayer and the Appeals officer’s
testimony regarding what issues he or she “believed” the
taxpayer raised. Instead of merely having the
notice of determination or the testimony of witnesses as evidence of
what issues the taxpayer raised at the hearing, now the parties will
be able to submit as evidence a transcript of the hearing. In Bourbeau
v. Commissioner, T.C. Memo. 2003-117, the taxpayer and the
Commissioner recorded the section 6330 hearing and a court reporter
transcribed the hearing. The taxpayer attached a copy of the
transcript to his amended petition, and the Commissioner attached a
copy of the transcript to his motion for summary judgment. I found
the transcript of the hearing to be extremely helpful in rendering a
decision in Bourbeau--especially in the context of a pretrial
motion. The transcript made it clear what issues the taxpayer in
Bourbeau did, and did not, raise at the hearing. See also Struhar
v. Commissioner, T.C. Memo. 2003-147 (in which a tape recording
of the taxpayer’s section 6330 hearing helped the Court decide
what transpired at the hearing). I look forward to such clarity in
the future. LARO, FOLEY, MARVEL, and GOEKE,
JJ., agree with this concurring opinion. WHERRY, J., concurring:
Respondent has taken the position that section 7521 does not apply
to the hearings afforded under sections 6320 and 6330, on grounds
that such hearings are not “interviews” within the meaning of
section 7521. The majority rightly concludes, relying in large part
on the ordinary meaning of the term “interview”, that taxpayers
are entitled to make audio recordings of section 6320 and 6330
hearings. I write separately to highlight several additional reasons
why the majority is correct. First, it is significant that the
express language of section 7521 grants a right which turns on the
subject matter of the interview and not on either (1) the particular
function within the Internal Revenue Service (Service) of the
officer or employee conducting the interview or (2) the voluntary or
involuntary nature of the interview. The statute requires the
Service to permit taping whenever an interview is held relating to
the determination or collection of tax. Second, neither legislative
history nor administrative pronouncements directs a different
result. Legislative history with respect to section 7521 expressly
covered the “initial inperson audit interviews" and
"initial in-person collection interviews". H. Conf. Rept.
100-1104, at 212-214 (1988), 1988-3 C.B. 473, 702-704. The Service
subsequently took the following administrative position in defining
"taxpayer interview": For
purposes of section 7520 of the Code [later redesignated section
7521], the term “taxpayer interview” means a meeting between an
officer or employee of the Examination function, the Employee Plans
and Exempt Organization function, or the Collection function of the
Service, and a taxpayer or authorized representative, as defined in
section 7520(b)(2), when the determination or the collection of any
tax is at issue. Because the Office of Appeals is
typically treated by the Service as an independent function,
separate and distinct from the Examination, Employee Plans and
Exempt Organization, and Collection functions, respondent maintains
that a hearing with an Appeals officer is not an in-person interview
within the ambit of section 7521. I do not agree with this
contention. As to hearings under sections 6320 and 6330, Appeals,
although separate, is in my view an integral component of the
overall Examination, Employee Plans and Exempt Organization, and
Collection functions. Notice 89-51 is not controlling
here since, by its own terms, its legal effect is similar to that of
revenue rulings and revenue procedures. This Court and the Court of
Appeals for the Ninth Circuit, to which appeal in the instant case
would normally lie, have indicated that revenue rulings "do not
rise to the dignity of those ‘rules and regulations’ which under
the authority of sec. 7805(a) are prescribed by respondent ‘with
the approval of the Secretary.’ Sec. 301.7805-1(a), Proced. &
Admin. Regs." Estate of Lang v. Commissioner, 64 T.C.
404, 406-407 & n.4 (1975), affd. in part on this issue and revd.
in part on other grounds 613 F.2d 770 (9th Cir. 1980); see also United
States v. Mead Corp., 533 U.S. 218, 228 (2001). Moreover, notwithstanding Notice
89-51, the Service until May 2002 preempted litigation as to its
construction of section 7521 by providing taxpayers with the right
to record Appeals conferences or hearings and, in the process,
explicitly recognized the integral role played by Appeals in the
Examination, Employee Plans and Exempt Organization, and Collection
functions. See 5 Administration, Internal Revenue Manual (CCH), sec.
8626.1, at 25,784 (e.g., 10-23-91 revision), which provided: General
Guidelines (1) The audio recording of an Appeals conference is generally permitted,
if the taxpayer, or the taxpayer’s authorized representative
requests it, and supplies the recording equipment. In such cases,
the appeals officer will also make an audio recording of the
conference with IRS equipment. (2) IRC 7521 (formerly IRC 7520) provides that taxpayers may make audio
recordings of interviews with the IRS that determine liability or
collectibility. Although Appeals conferences differ in nature
from taxpayer interviews in the auditing or collecting functions,
Appeals still decides liability or collectibility on cases in which
those issues have been referred to us. Procedures for making
audio recordings are described in Notice 89-51, 1989-1 C.B., and
Appeals employees will follow the provisions of Notice 89-51 when
allowing recordings in cases within Appeals jurisdiction. [Emphasis
added.] In fact, Appeals officers from
time to time have performed limited audit functions when necessary
to expediently resolve tax cases. Further, in recent years, both
Congress and the Service have increasingly utilized Appeals officers
and settlement officers during the examination and collection phases
of a tax case. See, e.g., secs. 6320, 6330, 7123; see also Rev.
Proc. 2003-41, 2003-25 I.R.B. 1047 (fast-track mediation
procedures); Rev. Proc. 2003-40, 2003-25 I.R.B. 1044 (fast-track
settlement procedures); Announcement 2003-36, 2003-25 I.R.B. 1093 (taxexempt
bond mediation program); Rev. Proc. 2002-67, 2002-43 I.R.B. 733 (tax
shelter settlement initiative); Rev. Proc. 2002- 52, 2002-31 I.R.B.
242 (simultaneous Appeals consideration and competent authority
assistance procedure); I.R.S. News Release IR-2000-42 (June 27,
2000) (Mutually Accelerated Appeals Process for coordinated
examinations of large corporate taxpayers); Rev. Proc. 99-28, 1999-2
C.B. 109 (procedures for early referral of “unresolved issues from
the Examination or Collection Division to the Office of Appeals”).
Given this involvement of Appeals in the Examination, Employee Plans
and Exempt Organizations, and Collection functions, section 7521
cannot logically be interpreted as properly excluding the Appeals
Office simply because it is the Appeals Office.[1] [1] While the Service Litigation Guideline Memorandum GL-17
(GL-17) is more explicit in stating that it is the Service’s
position "that section 7521 does not apply to an administrative
appeals conference", it is a litigating position not
controlling on this Court. The authority cited in GL-17 for
excluding Appeals conferences from sec. 7521 is Notice 89-51. As
noted above, I find that authority unpersuasive. GL-17 also makes a distinction
between those third-party interviews where a witness is compelled to
testify by legal process, such as a summons or subpoena, vis-a-vis
those situations where the witness testifies voluntarily. The
memorandum notes that pursuant to the Administrative Procedures Act
(APA), 5 U.S.C. secs. 551-559, 701-706 (2000), if the testimony of
the witness was compelled by legal process, recording should be
allowed since that witness would under APA sec. 555(c) be entitled,
at his or her cost, to a copy of the official transcript of his or
her testimony. The compelled versus voluntary
distinction, however, is irrelevant to taxpayer interviews which are
governed by sec. 7521. The result under that section should not be
affected by whether or not the taxpayer interview was compelled by
legal process or was voluntary. Sec. 7521, unlike APA sec. 555(c),
does not differentiate between voluntary and compelled taxpayer
interviews. ----------------------- When Congress enacted sections
6320 and 6330 in 1998, section 7521(a), permitting taxpayers to
record any in-person interviews relating to the determination or
collection of any tax, was already 10 years old. Admittedly,
Congress could have enacted sections 6320 and 6330 with the
assumption that the rights granted in section 7521, as those rights
apply to section 6320 and 6330 Appeals hearings, would be governed
by Notice 89- 51. However, it seems to me more likely that Congress,
if it considered this issue, would have assumed that the right to
record in-person interviews, as applied to section 6320 and 6330
Appeals hearings, would be administered by the Service in the same
manner as the Service had for the 10 years since its enactment
administered section 7521. In any event, because taxpayers had the
right to tape Appeals proceedings at the time sections 6320 and 6330
were enacted, nothing can be presumed from Congress’s silence
regarding the right to record these hearings. Third, several
considerations of fairness or practicality support the taxpayer’s
right to record hearings under section 6320 or 6330. In particular,
it is noteworthy that both section 7521 and sections 6320 and 6330
were enacted to add to the taxpayer’s procedural rights. The
usefulness of a transcript for purposes of review of sections 6320
and 6330 proceedings also cannot be ignored. Lastly, the concerns
apparently generating the Service’s retraction of recording rights
in the Appeals context can perhaps be handled effectively in ways
less drastic than a complete curtailment. GERBER, LARO, FOLEY, MARVEL, and
GOEKE, JJ., agree with this concurring opinion. SWIFT, J., dissenting: I agree
with the Lunsford treatment of the taxpayers’ frivolous arguments
that is reflected in the Kemper opinion being released
simultaneously herewith. Kemper v. Commissioner, T.C. Memo.
2003-195. In Kemper, we conclude, because of the frivolous nature of
the taxpayers’ underlying arguments, that the Court need not
address the taxpayers’ arguments regarding the recording under
section 7521 of collection due process (CDP) Appeals hearings. The
same approach should be utilized herein to dispose of Keene’s
underlying frivolous arguments to the collection action proposed by
respondent.[2] [2] Under
Lunsford v. Commissioner, 117 T.C. 183, 188-189 (2001),
generally frivolous CDP cases can and should be dealt with summarily
by the courts. In addition to the grounds set forth herein in Judge Chiechi’s
dissenting opinion, as the basis for my dissent I respectfully add
the following. The Regulations Q&A-D6 of both sections
301.6320-1(d)(2) and 301.6330- 1(d)(2), Proced. & Admin. Regs.,
provides that in the context of CDP Appeals hearings the IRS is not
required to record “any” taxpayer conversation with an Appeals
officer. In appropriate cases, the IRS may choose to do so and may
permit taxpayers to do so, but, under the regulations, the IRS may
not be required in “any” case to record a CDP Appeals hearing,
nor is the IRS required to permit taxpayers to do so. Procedure and
Administrative regulations sections 301.6320-1(d)(2) and
301.6330-1(d)(2) provide identically as follows: A-D6.
The formal hearing procedures required under the Administrative
Procedure Act, 5 U.S.C. 551 et seq., do not apply to CDP hearings.
CDP hearings are much like Collection Appeal Program (CAP) hearings
in that they are informal in nature and do not require the Appeals
officer or employee and the taxpayer, or the taxpayer’s
representative, to hold a face-to-face meeting. A CDP hearing may,
but is not required to, consist of a face-to-face meeting, one or
more written or oral communications between an Appeals officer or
employee and the taxpayer or the taxpayer’s representative, or
some combination thereof. A transcript or recording of any
face-to-face meeting or conversation between an Appeals officer or
employee and the taxpayer or the taxpayer’s representative is not
required. The taxpayer or the taxpayer’s representative does not
have the right to subpoena and examine witnesses at a CDP hearing. I interpret the above regulations
broadly to provide a rule that the recording of CDP Appeals hearings
may not be required regardless of whom it is that physically is to
provide the recording equipment (the IRS or the taxpayer) and
regardless of whom it is that technically is to make the recording
(the IRS or the taxpayer). Contrary to the regulations as I
read them, Keene holds in the affirmative, majority op. p. 17, that
the IRS was required to allow Keene to record his CDP Appeals
hearing and orders a new hearing be scheduled for Keene that is to
be recorded. This opinion effectively
invalidates the above regulations. Recent cases in the Federal
District Courts have treated taxpayers’ requests to tape record
CDP Appeals hearings as discretionary with the IRS and have treated
taxpayers’ refusals to participate in the CDP Appeals hearings
unless they were permitted to tape record these hearings as a waiver
of the taxpayers’ right to a face-to-face hearing. See Muhammad
v. United States, 91 AFTR 2d 1985, at 1987 (D.S.C. 2003); Henry
v. Bronstein, 90 AFTR 2d 7134, at 7135, 2002-2 USTC par. 50,781,
at 86,147 (D. Md. 2002). In one recent case, Rennie v. IRS,
216 F. Supp. 2d 1078 (E.D. Cal. 2002), the District Court also noted
the mischief taxpayers may create with amateur, uncertified
transcripts of Appeals hearings, stating as follows: Also
attached to the Complaint is what purports to be a transcript of the
Collection Due Process Hearing. The hearing was tape recorded by
plaintiff and he has prepared the transcript of it. The transcript
is not certified. Moreover, from the court’s research, the
Collection Due Process hearings are supposed to be informal and
there is not [a] requirement that the hearings be recorded. [Id. at
1079 n.1.] Frivolous Arguments Keene’s frivolous arguments are
well documented. In an attachment to Keene’s CDP Appeals hearing
request, Keene provides a detailed, single-spaced, multipage
explanation of the underlying arguments for his appeal of respondent’s
proposed collection action. Keene’s lengthy explanation is full of
scripted, frivolous, tax protester arguments. Therein, Keene claims
that his rights as a taxpayer were ignored by the IRS from the
beginning, and he asserts that the only acceptable remedy is for the
IRS to “start all over again”. He states as follows: The
IRS has ignored most of my rights even though I have pointed this
out, in detail, time after time in letters originating as far back
as 11/7/1991. I have carefully documented the IRS’ total disregard
of my rights to date. Should the IRS deny this request for a due
process hearing it will only be adding to the overwhelming evidence
I have accumulated showing the IRS’ illegal denial of my rights to
hearings and information. Now,
should you [the Appeals officer], finally decide to grant me a
simple hearing at this very late stage in the due process system I
will expect you to find that this entire matter, for the tax period
1040 ending 12/31/1991, be remanded back to the very beginning of
this process. This remand must go back to include all of the
hearings and all of the information due me as outlined in my
previous letters. Otherwise my rights will have been violated. * * * The written explanation attached
to Keene’s CDP hearing request itself provides the Court with an
adequate record of Keene’s arguments that serve as the underlying
basis for his challenge to respondent’s proposed collection
action. A tape recording to establish that record is not necessary.
It is overwhelmingly clear that there is no merit to Keene’s
underlying arguments, and I believe that, under Lunsford v.
Commissioner, 117 T.C. 183 (2001), this Court ought to dispose
of Keene’s challenge to respondent’s proposed collection action
summarily and without deciding the section 7521(a)(1) issue (i.e.,
the approach taken in Kemper v. Commissioner, supra). At the most, if some delay is to
be tolerated in disposing of Keene’s petition challenging
respondent’s proposed collection action, an order should be issued
asking Keene to advise the Court in writing, within a specified time
period, what underlying arguments he would make (if he were given
another opportunity to have a CDP Appeals hearing and to have the
hearing recorded) that are not already reflected in the referred-to
written attachment to his CDP hearing request. If Keene files a
response to such an order containing only frivolous arguments, this
case could easily be disposed of without ever addressing the legal
issue raised under section 7521(a)(1). I acknowledge that, in the few
nonprotester CDP cases that seem to exist, recorded transcripts of
CDP Appeals hearings may be helpful, and nothing that we adopt in
the Kemper or Keene opinions will prevent the IRS and taxpayers from
agreeing to record CDP Appeals hearings in appropriate situations. In summary, to conclude that the
IRS should be required to record CDP Appeals hearings or to permit
taxpayers to record such hearings -- whenever taxpayers make such
requests and regardless of how difficult the taxpayers and how
frivolous their underlying arguments -- strikes me as contrary to
the above regulations, as inappropriate judicial meddling with
respondent’s Appeals hearings, as inefficient use of judicial
resources, and as conducive to further delay in the collection of
taxes the Federal Government desperately needs. CHIECHI, J., dissenting: In
holding that section 7521(a)(1) requires respondent to allow
petitioner to make an audio recording of his section 6330(b) Appeals
Office hearing, the majority fails to apply the rules of statutory
construction on which the majority claims to rely. In remanding this
case to Appeals in order to allow petitioner to have a hearing that
he may audio record, the majority has rewarded the delaying tactics
of petitioner, who has a long history of raising frivolous and/or
groundless reasons why he claims he owes no Federal income tax
(tax),[1] has rewarded his noncompliance with Rule 331, and has
caused an unwarranted delay in the instant proceedings. I dissent
from all the actions of the majority. [1]As an
illustration of petitioner’s past conduct, see Keene v.
Commissioner, T.C. Memo. 2002-277, where the Court granted summary
judgment and imposed a penalty under sec. 6673(a)(1) in the amount
of $5,000. In order to resolve the issue whether section 7521(a)(1) requires
respondent to allow petitioner to make an audio recording of his
section 6330(b) Appeals Office hearing, it is necessary to determine
whether the phrase “in-person interview” used in that section
includes a hearing before Appeals under section 6330(b) (and section
6320(b)). In order to resolve that question, it first is necessary
to determine whether section 7521(a)(1) requires the Internal
Revenue Service (IRS) to allow a taxpayer to make an audio recording
of a hearing or conference before Appeals outside the context of
section 6330(b) (and section 6320(b)). That is because: (1) Section
6330(b) (and section 6320(b)) was not even part of the Internal
Revenue Code (Code) when Congress enacted section 7521(a)(1) into
the Code in 1988; and (2) we concluded in Davis v. Commissioner,
115 T.C. 35, 41 (2000), that the type of hearing by Appeals that
Congress contemplated when it enacted section 6330(b) is “the type
of informal administrative Appeals hearing that has been
historically conducted by Appeals”, which is the administrative
office of last resort for taxpayers.[2] [2]I
disagree with the suggestion in footnote 6 of the majority opinion
that Davis v. Commissioner, 115 T.C. 35 (2000), addressed only the
procedure involving the conduct of a hearing before Appeals under
sec. 6330(b) (and sec. 6320(b)). Although the ultimate holding in
Davis was that a hearing before Appeals pursuant to sec. 6330 does
not include the right to subpoena witnesses, the following passage
makes it clear that Davis focused not only on the procedure but also
on the nature and function of Appeals: When
Congress enacted section 6330 and required that taxpayers be given
an opportunity to seek a prelevy hearing with Appeals, Congress was
fully aware of the existing nature and function of Appeals. Nothing
in section 6330 or the legislative history suggests that Congress
intended to alter the nature of an Appeals hearing so as to compel
the attendance or examination of witnesses. * * * The references in
section 6330 to a hearing by Appeals indicate that Congress
contemplated the type of informal administrative Appeals hearing
that has been historically conducted by Appeals and prescribed by
section 601.106(c), Statement of Procedural Rules. Davis v.
Commissioner, supra at 41. Assuming arguendo that the
majority were correct in suggesting that Davis addressed only the
procedure involving the conduct of an Appeals hearing under sec.
6330(b) (and sec. 6320(b)), the right to make an audio recording at
an “in-person interview” provided in sec. 7521(a)(1) relates
only to a procedure involving the conduct of such an “in-person
interview”. See H. Conf. Rept. 100-1104 (Vol. II), at 212-214
(1988), 1988-3 C.B. 473, 702-704. As discussed below, Congress
enacted sec. 7521(a)(1) into the Code as one of several procedures
involving “in-person interviews” set forth in sec. 7521. Indeed,
sec. 7521 is entitled “PROCEDURES INVOLVING TAXPAYER INTERVIEWS”.
See H. Conf. Rept. 100-1104, at 212 (1988), 1988-3 C.B. 473, 702. ---------------- Congress enacted all the
provisions of section 7521, including section 7521(a)(1), as part of
the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L.
100-647, 102 Stat. 3342. Congress prescribed in section 7521 several
procedures involving taxpayer interviews.[3] All
of those procedures relate to the same taxpayer interviews; i.e.,
the same “in-person interviews”. [3]Sec.
7521 sets forth procedures regarding “Recording of Interviews”,
sec. 7521(a), “Safeguards” and “Right of Consultation” with
respect to such interviews, sec. 7521(b)(1) and (2), and “Representatives
Holding Power of Attorney” who appear at such interviews, sec.
7521(c). It was not until 1998, 10 years
after Congress made section 7521 part of the Code, that Congress
enacted section 6330 relating to proposed levies (and section 6320
relating to liens) as part of the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, 112 Stat.
685, in order to give taxpayers certain rights, including the right
to a hearing before the Appeals Office, sec. 6330(b) (relating to
proposed levies); sec. 6320(b) (relating to liens), and the right to
Court review of a determination made by that office under section
6330(c), sec. 6330(d)(1). Consequently, in order to analyze properly
the meaning of the phrase “in-person interview” in section
7521(a)(1), it is necessary to undertake such an analysis in the
context of hearings or conferences historically conducted before
Appeals, which were extant in 1988 when Congress enacted section
7521 as part of TAMRA and which we held in Davis v. Commissioner,
supra, were the types of informal administrative Appeals hearings
that Congress contemplated when it enacted section 6330(b). It is
inappropriate to analyze, as the majority does, the meaning of the
phrase “in-person interview” in the context of reasons grounded
in the operation and purpose of section 6330 (and section 6320),
which Congress did not make part of the Code until 10 years after it
enacted section 7521. The majority begins its analysis
of the meaning of the phrase “in-person interview” in section
7521(a)(1) by stating: Neither
section 7521(a)(1) nor the legislative history directly and clearly
defines or otherwise describes the term “in-person interview”.
Where a term is not defined in the statute, it is appropriate to
accord the term its “ordinary meaning”. Northwest Forest
Resource Council v. Glickman, 82 F.3d 825, 833 (9th Cir. 1996).
And when there is no indication that Congress intended a specific
legal meaning for the term, courts may look to sources such as
dictionaries for a definition. Muscarello v. United States,
524 U.S. 125, 127-132 (1998); see also Huntsberry v. Commissioner,
83 T.C. 742, 747-748 (1984), in which the Court stated that “where
a statute is clear on its face, * * * we would require unequivocal
evidence of legislative purpose before construing the statute so as
to override the plain meaning of the words used therein.” [Fn.
ref. omitted.] Majority op. pp. 10-11. The majority fails to apply the
rules of statutory construction on which it claims to rely when, in
determining the meaning of the phrase “in-person interview” in
section 7521(a)(1), it turns to the dictionary definition of the
term “interview”. Although I agree with the majority that
Congress did not “directly * * * define” the phrase “in-person
interview” in section 7521(a)(1) or any other provision in section
7521 or in the legislative history, I disagree with the majority
that neither the statute nor the legislative history “clearly * *
* otherwise describes” that phrase. Section 7521 itself and the
legislative history of that section clearly describe what Congress
intended when it used the phrase “in-person interview”. In determining what Congress had
in mind when it used the phrase “in-person interview” in section
7521(a)(1), the majority improperly focuses only on section
7521(a)(1) for guidance. In determining what Congress intended,
section 7521(a)(1) may not be read in a vacuum. It must be examined
in the context of the entire statute (i.e., section 7521) that
Congress enacted in 1988 for the purpose of prescribing certain
procedures that it made applicable to all “in-person interviews”.
If the majority had undertaken such an examination, it would have
become clear to the majority what Congress meant when it used the
phrase “in-person interview” in section 7521. Section 7521(b)(1) provides: SEC. 7521. PROCEDURES INVOLVING
TAXPAYER INTERVIEWS. (b) Safeguards.-- (1) Explanations of
processes.--An officer or employee of the Internal Revenue Service
shall before or at an initial interview provide to the taxpayer-- (A) in the case of an in-person
interview with the taxpayer relating to the determination of any
tax, an explanation of the audit process and Section 7521(b)(1) thus clearly describes what Congress intended when it
used the phrase “in-person interview” in section 7521. Not only section 7521 itself, but
the legislative history of that section also is instructive in
determining what Congress had in mind when it used the phrase “in-person
interview” in section 7521(a)(1). The conference report relating
to section 7521, H. Conf. Rept. 100-1104, at 212-214 (1988), 1988-3
C.B. 473, 702-704 (conference report), provides in pertinent part: Prior
to initial in-person audit interviews, the IRS must explain to
taxpayers the audit process and taxpayers’ rights under that
process. In addition, prior to initial in-person collection
interviews, the IRS must explain the collection process and
taxpayers’ rights under that process. For this purpose, routine
telephone conversations initiated by either the taxpayer or the IRS
are not considered initial interviews. A written statement handed to
the taxpayer at an audit or collection interview or within a short
time before the interview is sufficient. * * * H. Conf. Rept. 100-1104, at 213
(1988), 1988-3 C.B. 473, 703. Section 7521(b)(1) and the
conference report make clear that, when Congress used the phrase “in-person
interview” in section 7521, it did not have in mind either the
dictionary definition of the term “interview” on which the
majority improperly relies or the historically voluntary and
informal hearings or conferences before Appeals. The descriptions by
Congress in section 7521 itself and its legislative history leave no
doubt that what Congress meant when it used the phrase “inperson
interview” in section 7521, including section 7521(a)(1), is an
in-person audit interview and an in-person collection interview,
which take place during the audit process and the collection
process, respectively, and the function of which is to investigate
and determine facts relating to the determination and the collection
of any tax. Thus, it makes perfect sense that Congress decided in
section 7521 to allow taxpayers, sec. 7521(a)(1), as well as the
IRS, sec. 7521(a)(2), to record such types of interviews. That is
because in-person audit interviews and in-person collection
interviews are interviews initiated by the IRS that taxpayers are
under some compulsion to attend and that the IRS conducts for the
purpose of gathering information to use in the determination of and
the collection of tax, respectively; i.e., interviews of taxpayers
initiated by the examination division and by the collection
division, respectively, and therefore not infrequently involuntary,
which are investigative or inquisitorial in nature and which can be
enforced by the issuance of an administrative summons. In contrast to the in-person
audit interviews and the inperson collection interviews that
Congress intended section 7521 to address, hearings or conferences
before Appeals extant at the time in 1988 Congress made section 7521
part of the Code historically were, and remain, conferences
initiated by taxpayers and therefore voluntary, which are conducted
in an informal setting in order to review and consider actions taken
by the examination division or the collection division of the IRS
and to discuss the facts and the law relating to such actions for
the purpose of settling or resolving those matters without resort to
litigation. See secs. 601.106 and 601.203, Statement of Procedural
Rules. An Appeals officer does not have the same investigative
authority that a revenue agent involved in an examination matter or
a revenue officer involved in a collection matter has. Indeed, where
alleged new facts are presented at Appeals that require
authentication or verification, an Appeals officer may ask the
examination division or the collection division of the IRS to
authenticate and/or to investigate those alleged new facts.[4] That
is because the function of the examination division and the
collection division, respectively, is to investigate and determine
facts relating to the determination and the collection of any tax. [4]Sec.
601.106(f)(5) and (6), Statement of Procedural Rules, provides in
pertinent part: (f)
Conference and practice requirements. Practice and conference
procedure before Appeals is governed by Treasury Department Circular
230 as amended (31 CFR Part 10), and the requirements of Subpart E
of this part. In addition to such rules but not in modification of
them, the following rules are also applicable to practice before
Appeals: (5)
Rule V. In order to bring an unagreed income, profits, estate, gift,
or Chapter 41, 42, 43, or 44 tax case in prestatutory notice status,
an employment or excise tax case, a penalty case, an Employee Plans
and Exempt Organization case, a termination of taxable year
assessment case, a jeopardy assessment case, or an offer in
compromise before the Appeals office, the taxpayer or the taxpayer’s
representative should first request Appeals consideration and, when
required, file with the district office (including the Foreign
Operations District) or service center a written protest setting
forth specifically the reasons for the refusal to accept the
findings. If the protest includes a statement of facts upon which
the taxpayer relies, such statement should be declared to be true
under the penalties of perjury. The protest and any new facts, law,
or arguments presented therewith will be reviewed by the receiving
office for the purpose of deciding whether further development or
action is required prior to referring the case to Appeals. * * * (6)
Rule VI. A taxpayer cannot withhold evidence from the district
director of internal revenue and expect to introduce it for the
first time before Appeals, at a conference in nondocketed status,
without being subject to having the case returned to the district
director for reconsideration. Where newly discovered evidence is
submitted for the first time to Appeals, in a case pending in
nondocketed status, that office, in the reasonable exercise of its
discretion, may transmit same to the district director for his or
her consideration and comment. ----------------
Thus, it makes perfect sense that, when Congress enacted
section 7521(a)(1) and the other “PROCEDURES INVOLVING TAXPAYER
INTERVIEWS” set forth in section 7521, it did not intend to
include hearings or conferences historically held before Appeals for
the purpose of attempting to settle or otherwise resolve actions
taken by the examination division or the collection division of the
IRS without resort to litigation. And it makes no sense that
Congress would have required that section 7521(a)(1) and the other
procedures in section 7521 apply to such hearings or conferences.
Pursuant to the majority’s holding that the phrase “in-person
interview” includes an Appeals hearing, not only taxpayers, see
sec. 7521(a)(1), but also Appeals officers, see sec. 7521(a)(2),
have the right to make an audio recording of Appeals hearings. I
believe that such audio recordings will inhibit unnecessarily and
inappropriately the give-and-take that typically takes place at such
hearings and conferences in order to attempt to negotiate
settlements or otherwise resolve actions taken by the examination
division or the collection division of the IRS without resort to
litigation. In this connection, it is
important to keep in mind that the majority’s holding under
section 7521(a)(1) applies not only to Appeals hearings held
pursuant to section 6330(b) (and section 6320(b)) but also extends
to all hearings and conferences before Appeals in deficiency and
other contexts. The phrase “in-person interview” in section 7521
cannot be read to apply only to hearings before Appeals under
section 6330(b) (and section 6320(b)). That phrase must apply to all
hearings or conferences before Appeals, or to no such hearings and
conferences. That is because: (1) There was no right to a section
6330 hearing (or a section 6320 hearing) in 1988 when Congress
enacted section 7521 into the Code; and (2) we held in Davis v.
Commissioner, 115 T.C. at 41, that “The references in section 6330
to a hearing by Appeals indicate that Congress contemplated the type
of informal administrative Appeals hearing that has been
historically conducted by Appeals”. It is a cardinal rule of
statutory construction that, when Congress made section 6330(b) (and
section 6320(b)) part of the Code in 1998, it is presumed to have
been aware that it used the phrase “in-person interview” in
section 7521. If Congress had intended for the hearing before
Appeals under section 6330(b) (and section 6320(b)) to constitute an
“in-person interview” under section 7521, it would have used
that phrase in section 6330(b) (and section 6320(b)), or at least
referred to section 7521. It did neither.[5] [5] At a minimum, if Congress had intended for the Appeals hearing under sec.
6330(b) (and sec. 6320(b)) to constitute an “in-person interview”
for purposes of sec. 7521, Congress would have so stated in the
legislative history of sec. 6330(b) (and sec. 6320(b)). It did not. The
fact that from 1989 until May 2002 IRS Appeals exercised its
discretionary authority and permitted audio recordings of hearings
before it does not mean that the IRS’s position was that sec.
7521(a)(1) required such audio recordings. That was made clear in
Notice 89-51, 1989-1 C.B. 691 (Notice 89-51), and Litigation
Guideline Memorandum GL-17. Notice
89-51 states in part: For
purposes of section 7520 of the Code [later redesignated section
7521], the term “taxpayer interview” means a meeting between an
officer or employee of the Examination function, the Employee Plans
and Exempt Organization function, or the Collection function of the
Service, and a taxpayer or authorized representative, as defined in
section 7520(b)(2), when the determination or the collection of any
tax is at issue. Litigation
Guideline Memorandum GL-17 provides in part: It is
also our position that section 7521 does not apply to an
administrative appeals conference * * * Since
1989 until May 2, 2002, when Appeals, in an unpublished internal
memorandum to all Appeals Area Directors, exercised its
discretionary authority to end the audio recording of conferences or
hearings before Appeals that it had previously allowed, Notice 89-51
and Litigation Guideline Memorandum GL-17 represented the
interpretation of the IRS that the phrase “inperson interview”
in sec. 7521 does not apply to any Appeals conference or hearing but
applies only to in-person audit interviews and in-person collection
interviews. Congress is presumed to have had knowledge of that
interpretation by the IRS of the phrase “in-person interview” in
sec. 7521 when in 1998 it added the provisions for a hearing before
Appeals in sec. 6330(b) (and sec. 6320(b)) without mentioning sec.
7521 and by using the term “hearing” instead of “interview”.
See Fla. Natl. Guard v. Fed. Labor Relations Auth., 699 F.2d
1082, 1087 (11th Cir. 1983) (“Congress is deemed to know the
executive and judicial gloss given to certain language and thus
adopts the existing interpretation unless it affirmatively acts to
change the meaning.”). -------- In support of its conclusion that
the phrase “in-person interview” in section 7521(a)(1) includes
a hearing before Appeals under section 6330(b) (and section
6320(b)), the majority states: Majority op. p. 15. The foregoing statement is
incorrect. We are no more charged with reviewing “section 6330
hearings” than we are charged with reviewing “Examination
Division interviews”. In the lien and levy proceeding context, we
are charged with reviewing a determination of Appeals made under
section 6330(c)(3). See sec. 6330(d)(1). That determination is set
forth in the notice of determination that Appeals issues to each
taxpayer who has complied with the requirements of section 6330
(and/or section 6320). In the deficiency context, we are charged
with reviewing a notice of deficiency, see sec. 6213(a); we are not
charged with reviewing “Examination Division interviews”. The
case cited by the majority, Greenberg’s Express, Inc. v.
Commissioner, 62 T.C. 324, 327 (1974), merely holds that, in
reviewing a notice of deficiency, we typically do not go behind that
notice.[6] [6]In
reviewing a notice of deficiency under sec. 6213, our standard of
review is usually de novo. There are, however, instances in which,
in reviewing a notice of deficiency, our standard of review is abuse
of discretion (for example, in cases involving a change in
accounting method determined by the IRS). Regardless of whether our
standard of review in a deficiency case is de novo or abuse of
discretion, we typically do not go behind the notice of deficiency. Greenberg’s
Express, Inc. v. Commissioner, 62 T.C. 324, 327 (1974). In reviewing a notice of
determination under sec. 6330, our standard of review is abuse of
discretion, unless the validity of the underlying tax liability is
properly placed at issue, in which event our standard of review is
de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza
v. Commissioner, 114 T.C. 176, 181-182 (2000). Regardless of
whether our standard of review in a proposed levy (or lien) case is
abuse of discretion or de novo, we typically do not go behind the
notice of determination. As another reason for concluding
that the phrase “in-person interview” in section 7521(a)(1)
includes a hearing before the Appeals Office under section 6330(b)
(and section 6320(b)), the majority states: respondent’s
interpretation of section 7521(a)(1) would complicate judicial
review of the determination made by the Appeals Office with respect
to the Commissioner’s proposed levy or filing of the notice of
Federal tax lien. For example, when a taxpayer’s underlying tax
liability is not properly at issue in the administrative hearing, we
review the Appeals Office’s determination for abuse of discretion.
* * * Having a transcript of the administrative hearing would
certainly facilitate that review. * * * Majority op. pp. 15-16. The foregoing rationale for
holding that section 7521(a)(1) requires the IRS to permit a
taxpayer to make an audio recording of an Appeals hearing under
section 6330(b) (and section 6320(b)) is not sound. Although having
a transcript of the administrative hearing under section 6630(b)
(and section 6320(b)) might “facilitate” in an appropriate case
review of the Appeals’ determination made under section
6330(c)(3), it is a non sequitur to conclude that, therefore,
section 7521(a)(1) requires that a taxpayer have the right to make
an audio recording of a hearing under section 6330(b) (and section
6320(b)). If the majority had concluded, as I believe it should
have, that the phrase “inperson interview” in section 7521(a)(1)
does not include a hearing before Appeals, the Court would be at
liberty in any appropriate case under section 6330 (or section
6320), in order to “facilitate” our review of Appeals’s
determination under section 6330(d)(1), to remand the case in order
to have a transcript of the section 6330 hearing (or section 6320
hearing). See Mesa Oil, Inc. v. United States, 86 AFTR 2d
2000-7312, 2001-1 USTC par. 50130 (D. Colo. 2000). The majority also states as a
ground for concluding that section 7521(a)(1) requires that a
taxpayer have the right to make an audio recording of a hearing
before Appeals that when reviewing for abuse of discretion, we generally consider “only arguments, issues, and other matte |