Keene v. Comm'r

121 T.C. No. 2, 121 T.C. 8, 2003 U.S. Tax Ct. LEXIS 21

• Court: United States Tax Court
• Decided: July 8, 2003
• Docket: No. 11604-02L
• Status: Published

Opinions

OPINION

Dawson, Judge:

This case was assigned to Special Trial Judge Robert N. Armen, Jr., pursuant to the provisions of section 7443A(b)(4) and Rules 180, 181, and 182.¹ The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

Armen, Special Trial Judge:

This matter is before the Court on respondent’s motion for summary judgment, filed pursuant to Rule 121. The only issue raised by the parties is whether, pursuant to the provisions of section 7521(a)(1), petitioner is entitled to audio record his section 6330 hearing with the Internal Revenue Service Appeals Office.

Background

Petitioner was a resident of Las Vegas, Nevada, when he filed his petition herein.

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. On or about February 10, 2001, a Form 1040X, Amended U.S. Individual Income Tax Return, for the year 1991 was filed showing that no income tax was due for that year and claiming a refund of $2,837, which was the amount of Federal income tax withheld. The explanation petitioner gave for filing the 1991 amended return was:

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 the 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.

I claim there is no underlying, statutory liability in connection with the income taxes at issue.

I claim there is no statute requiring me “to pay” the income taxes at issue.

No law authorizes the IES 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 IKM 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.

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 history⁴ 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.”

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; nsu: 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

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.

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.

1 All Rule references are to the Tax Court Rules of Practice and Procedure, and, unless otherwise indicated, all section references are to the Internal Revenue Code, as amended.

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.

3 Sec. 7521, which is entitled “Procedures Involving Taxpayer Interviews”, provides in part:

SEC. 7521(a). Recording of Interviews.—

(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.

4 See H. Conf. Rept. 100-1104 (Vol. II), at 212-214 (1988), 1988-3 C.B. 473, 702-704.

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.

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.