Sometimes it is nice to have a record of what transpired. This is true even if the recording is never used. Just the fact that the recording is being made, and everyone is aware that it is being made, can change the tone and substance of the meeting.
The law allows taxpayers to record meetings that are held in person, but what about meetings that are held over the phone?
We have a tax code section that says when the IRS has to allow recordings for “in-person interviews,” but it does not say that taxpayers cannot record calls with the IRS. Thus, the law only says when the IRS has to allow recordings, it says nothing about when taxpayers can or cannot make recordings.
The court recently addressed this in Calafati v. Commissioner, 127 T.C. 219 (2006). The Calafati case addresses the right to record taxpayer interviews in collection due process hearings with the IRS Office of Appeals. It only addresses the limited question of whether a taxpayer has a “right” to record interviews for these hearings.
The law is not settled for when the IRS has to allow it. Since the Calafati case was decided, at least one court has refused to follow the holding in Calafati as discussed below.
The Facts in Califanti’s Case
The Calafati case involved a collection due process hearing with the IRS Office of Appeals. The taxpayer had filed a Form 12153, Request for a Collection Due Process Hearing, in response to the IRS sending him a Notice of Intent to Levy.
The taxpayer was afforded a telephone conference with the IRS Office of Appeals. He was not told that Appeals would not let him record the telephone conference.
When he called in for the conference, the taxpayer told the appeals officer that he intended to record the conference. The appeals officer told the taxpayer that this was not permitted. The conference was then noted as nothing having been discussed given that Appeals would not allow the conference to be recorded.
Recording IRS Appeals Conferences
The question for the court was whether the taxpayer had a right to record the Appeals conference. It is not all that common, but some taxpayers opt to record conversations that they have with the IRS.
The only law we have on point does not bar recording conversations. It merely says when the IRS has to allow them.
In this case, the court ruled that taxpayers may not record IRS collection due process hearings (AKA Section 6330 hearings) if the hearing is conducted via telephone. It is worth pausing to consider the purpose of the collection due process hearing and the appeals conference and whether this is an instance of adhering to the process and losing sight of the policies for the process in the first place.
Why Recording Conferences Should Be Allowed
The collection due process hearing is a hearing with the IRS Appeals Office granted by Section 6330. This hearing gives taxpayers the opportunity to stop IRS collection activities until an IRS employee hears the taxpayer’s concerns. This satisfies the Constitutional mandate that citizens have the right to be heard prior to the government taking their property. The CDP hearing is a “right.”
In addition to the Constitution, Congress has said that taxpayers can record some IRS communications. Specifically, Sec. 7521 authorizes taxpayers to record certain “in-person” interviews of taxpayers.
In analyzing these two statutes, i.e., Sec. 6330 and 7521, the U.S. Tax Court has previously held that taxpayers were entitled to record IRS collection due process hearings if they were conducted “in person.” In this case, Calafati’s tax attorney was trying to extend this prior ruling to cover IRS collection due process hearings that were held via the telephone.
Since the statute did not provide for Calafati’s position, the U.S. Tax Court relied on the ordinary definition of “in person” from the Merriam Webster’s Dictionary to conclude that the taxpayer was not able to record the hearing.
The non-tax attorney might assume that this opinion provides a clear answer and that this will be the end of this line of inquiry. Fortunately (or unfortunately, depending on your persuasion) this will probably not be the case. The Calafati case is limited and leaves open a number of questions.
Section 7521 does not say anything about whether a taxpayer can record IRS calls that are not “taxpayer interviews.” Clearly, a routine call is not an interview. This is especially true if the taxpayer is not even on the phone.
Section 7521 also only focuses on when the IRS has to allow recordings. It does not obligate the taxpayer to notify the IRS that they are making a recording. It also does not provide any penalty or sanction for doing so, as explained below.
Section 7521 only applies to “audio recordings.” What exactly is an “audio recording?” Does an “audio recording” include the taxpayer having a third party listen in on and transcribe the conversation? Does an “audio recording” include a “video recording” made by a taxpayer that includes an audio component? For example, can a taxpayer put the IRS employee on speakerphone and record his or herself talking into the phone? Both of these examples should be admissible in court if certain requirements were met, as it appears that the law does not prohibit them.
Calafati also does not address whether the physical presence of both parties is necessary for the hearing is “in person.” Instead, the court in Calafati uses the definition “in one’s bodily presence.” Can “bodily presence” be satisfied by the taxpayer going to their local IRS service center and having an IRS employee present while the taxpayer calls the IRS appeals office? What if taxpayers use new technologies, such as real-time video conferencing?
Calafati also doesn’t address the realities of our current IRS tax collection system. Today the IRS does not allow timely collection due process hearings in some localities. This may be due to the IRS appeals offices in those localities being too busy to handle the hearings or, more likely, not having the budget to travel. In these cases the hearing is assigned to any number of IRS appeals offices located across the nation.
For example, many of my collection due process hearings for my Texas clients have been assigned to the Fresno, California and Austin, Texas appeals offices. Does this mean that taxpayers have to pay to travel out to these far away locations in order to exercise their right to make an “audio recording” of their collection due process hearing?
Did Congress intend to limit a taxpayer’s right to record these types of interviews only if the taxpayer could afford and/or have the time to travel to these faraway destinations? This doesn’t even begin to address those situations where taxpayers are not physically able to travel to faraway destinations due to medical conditions, etc.
Update: District Court Has Rejected the Holding in Calafati
Since Calafati was decided, another court has considered a similar case and reached the opposite conclusion. This is the Simien v. IRS, 2007-1 U.S.T.C. 50,352 (W.D. La. 2007) case.
The District Court in Simien rejected the U.S. Tax Court’s holding in Calafati. The court concluded that CDP hearings can be recorded as they are not “in-person interviews.”
The focus on “in-person interviews” is apt as routine calls with IRS employees would not fall within the gambit of this limitation even under Calafati. These two court cases are premised on the conclusion that conversations with the IRS Office of Appeals are hearings. Routine calls with IRS agents, for example, cannot be said to be a hearing.
They also do not provide a bar against recording, but rather, only address the question as to whether the taxpayer has a “right” or “entitlement” to record conversations. The collection due process hearings at issue in these court cases are rights. The taxpayer has a right to a collection due process hearing. The question presented in the court cases was whether the taxpayer lost this “right” if they wanted to record the hearing.
It should also be noted that there is no penalty or sanction for recording IRS conversations under Federal law. As long as the state law permits it (and most do as they have one-party-consent laws), the only penalty or sanction is the recording not being admissible in court. The taxpayer might not be able to admit the recording into evidence in court. The U.S. Tax Court has only addressed this in the context of hearings before the IRS Office of Appeals, so there is no answer as to whether the tax court would admit this evidence in other cases that do not involve collection due process hearings.
Neither the court cases nor the Tax Code bar recording of routine IRS calls. Collection due process hearings before the IRS Appeals Office may be different if the taxpayer is seeking to introduce the recording of the hearing into evidence. If the District Court is correct in Simien, the taxpayer even has a right to record calls in collection due process hearings.
Routine IRS calls can be recorded and will likely be admissible in court. But if they are for a collection due process hearing before the IRS Office of Appeals and are going to be introduced as evidence in the U.S. Tax Court, the tax court will likely not admit the recording into evidence.