The Internal Revenue Service has recently decided not to
let people record or have court reporters make transcripts of collection due
process hearings. The prohibition
was transmitted to appeals offices via a letter from the national office earlier
this month.
Collection due process hearings are granted within 30
days following the filing of a notice of federal tax lien (Section 6320 of the
Internal Revenue Code) and thirty days prior to execution of notices of levy
(Section 6330 of the IRC). These two provisions were added by the 1998
restructuring act. When we first
received the report recordings and transcripts from an affiliate, we downloaded
regulations for the two Code sections (Sections 301.6320-1 & 301.6330-1 of
Title 26 of the Code of Federal Regulations). The regulations provide direct and
implicit insight into the nature of collection due process hearings.
First, these collection due process hearings are
informal; they are not formal appeals hearings that fall within requirements of
Sections 553 through 557 of Title 5 of the United States Code (Administrative
Procedures Act) and are evidently exempt from IRS administrative due process
rules (26 CFR § 601.106(f)). The taxpayer is not entitled to subpoena witnesses
or much of anything else. He can, however, raise previously unresolved issues
and propose alternative collection procedure such as an installment payment
agreement. There is no formal testimony at the hearing.
For some time we’ve known that IRS personnel who preside at these
hearings are not impartial appeals officers. They are “settlement officers.”
Settlement officers are revenue officers from collections who are assigned to
the appeals office. Their purpose is to determine how the taxpayer is going to
pay the alleged tax debt. Once we figured out that particular scam, people who
understood it began putting settlement officers on the spot to document their
capacity and purpose on the record. This strategy may be responsible for the
recent national office letter that prohibits audio recordings and official
transcripts.
In order to understand rationale behind the hearing
format, it is necessary to view them in proper context: The 6320 & 6330
hearings are supposed to be post-judgment hearings. In other words, there is an
underlying presumption that the taxpayer has already gone through the formal
administrative appeal process and/or had his day in court. The government has
already secured a judgment lien, as required by Section 3201 of Title 28, and
the “collection due process hearing” is available as a means for working out
collection alternatives short of the levy process.
We’ve resolved the “everybody knows doctrine”
concerning what powers IRS does and doesn’t have with respect to naked
administrative notices of federal tax lien and notices of levy. The simple
explanation is that there is no such authority. The Fifth Amendment due process
clause prohibits government from depriving people of life, liberty or property
without due process of law. It doesn’t take a juris doctorate to understand
that the Fifth Amendment secures judicial due process, so it is obvious that IRS
cannot administratively encumber or convert private property without court
orders. Section 6321 of the IRC simply gives rise to a lien against a
taxpayer’s rights, title and interest in property if he does not pay an
assessed tax on demand. Until there is a judgment to perfect the lien, it is
inchoate-it doesn’t have the force and effect of law and IRS doesn’t have
authority to issue notices of federal tax lien. The earliest that can
legitimately happen is when the Attorney General authorizes a civil action and
the U.S. Attorney for the district files a lis pendens (intent to sue) with the
district court. The Federal Debt Collection Procedures Act authorizes liens as a
pre-judgment remedy under certain circumstances. Per relation-back doctrine,
once a judgment is in place, the government’s claim dates or “relates back
to” the date of the act or omission that gave rise to the claim.
Collection due process hearings prescribed by Code
sections 6320 & 6330 are conducted in IRS appeals offices, but technically
they are true administrative appeals. The descriptive name of the hearing is
misleading, but it doesn’t pass the duck test for a formal administrative
appeal.
Here, however, the relation-back doctrine can be a
double-edged sword:
If the alleged liability was contested at any stage of
the game prior to there being notices of lien or levy, the date of the protest
gives rise to the right to administrative appeal conducted under Administrative
Procedures Act provisions and also opens the door to heavy-duty litigation
against IRS personnel for depriving the victim of procedural and substantive due
process rights. If there is no judgment in place, the collection due process
hearing is a sham proceeding.
The quickest means for interceding is to apply for a
Taxpayer Assistance Order under authority of Section 7811 of the Code.
Procedural details are in Part 13 of the Internal Revenue Manual, the Taxpayer
Advocate Handbook. The Internal Revenue Manual is available on the IRS web site.
Dan Meador
Marland, Oklahoma