Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
Turn Off the Tape Recorder at Telephonic Collection Due Process Hearings:
Why the District Court Was Wrong in Simien v. Internal Revenue Service
Gregory W. Carey
Before the Service may levy the property of a taxpayer, the taxpayer has a due process right to a fair hearing (a collections due process or CDP hearing) with the Office of Appeals of the Service pursuant to section 6330. In Simien v. Internal Revenue Service, the District Court for the Western District of Louisiana held that a taxpayer should be permitted to make an audio recording of a telephonic CDP hearing pursuant to section 7521(a)(1), which provides that the Service must allow a taxpayer to make an audio recording of any “in-person interview” related to the “determination or collection of any tax.” In reaching this conclusion, the district court disagreed with and refused to follow the United States Tax Court’s then-recent decision, Calafati v. Commissioner. The crux of the disagreement between the two courts is the scope of section 7521(a)(1)—specifically, whether a telephonic CDP hearing qualifies as an “in-person interview.”
This disagreement arises because section 7521 does not define the phrase “in-person interview” and the legislative histories of sections 7521 and 6330 provide little guidance on the meaning of the phrase. Therefore, both courts resorted to looking to the ordinary usage of the term based on various definitions of “in-person” found in dictionaries. Importantly, both Calafati and Simien were decided after Keene v. Commissioner, wherein the Tax Court concluded that a CDP hearing was an “interview” within the meaning of section 7521(a)(1). Nevertheless, the Tax Court did not address the applicability of section 7521(a)(1) to telephonic CDP hearings because the CDP hearing at issue in Keene was face-to-face. This open question was raised—and answered differently—first in Calafati and then in Simien. The Tax Court in Calafati concluded that an “in-person interview” under section 7521(a)(1) refers only to face-to-face interviews and, therefore, a telephonic CDP hearing was not an “in-person interview.” The district court in Simien relied on a definition of “in-person” that led it to reach an opposite conclusion. Calafati and Simien are the only cases that directly address this specific question and, therefore, this disagreement leaves the law and the Service’s policy unsettled.This Note will explain why the district court in Simien was wrong in expanding the definition of “in-person interview” to include a telephonic CDP hearing. The Note will also examine why— even if one supports the Calafati court’s interpretation of section 7521(a)(1)’s applicability to CDP hearings—the Calafati decision leaves in place the Service’s unfair policy of allowing audio recording of one type of CDP hearing, those held face-to-face, while prohibiting the recording of telephonic CDP hearings. Further, if the Tax Court’s interpretation of section 7521(a)(1) in Calafati is correct, taxpayers will need Congress to amend section 7521(a)(1) to extend the statute’s reach to audio recordings of CDP hearings. Part I examines the applicable portions of sections 6330 and 7521, as well as the facts and circumstances of Simien, Calafati, and Keene. Part II examines the specific dispute between Simien and Calafati regarding the meaning of “in-person” as determined through the respective courts’ examination of the term’s ordinary meaning and the legislative histories of sections 6330 and 7521(a)(1). Part III examines the Service’s changing policy regarding audio recordings that has contributed to the current state of flux in the law. Part IV concludes that though the Calafati court’s interpretation of 7521(a)(1) was correct, that decision leaves in place the Service’s policy of only permitting audio recording of face-to-face CDP hearings and suggests that the Service does not even have the statutory authority to permit audio recordings of telephonic CDP hearings. Therefore, in order to compel the Service to change its policy to permit taxpayers to make audio recordings of telephonic CDP hearings, Congress should amend section 7521(a)(1).