Least Restrictive Means - means?

My friend Christopher sent me this note:

Can you think of all the possible enforcements that the Federal government could use that would be less restrictive (RFRA) than an indictment.

For example:

• Answer questions
• Administrative hearing
• Declaratory relief filed for by the government

Christopher and I use the Religious Freedom Restoration Act of 1993 against the feds all the time. We are always looking at ways to expand the envelope. From Christopher's question, I think he is alluding to tax matters. In order to raise the religious issues before the IRS, I have to set up a Request for Determination Letter situation.

When dealing with the IRS, it is best to use the administrative procedure that is set forth in Title 26 of the Code of Federal Regulations, part 601. If the IRS uses the administrative procedure properly, the burden is placed upon the "taxpayer." In order to prevail against the IRS, one has to show that either the evidence that the IRS is using to make its "determination" does not support the determination made, or that the IRS failed to follow the proper procedure.

A synopsis of the procedure is found at §103. However, the detail of the procedure is found at §105.

Subsection (a) shows that the procedure applies only to "returns are filed in the office of the district director of internal revenue or the office of the director of a regional service center." As far as I can tell this would preclude this procedure from being applied to a situation where there is no return filed. Subsection (b) appears to apply in the situation where the IRS makes a return by the IRS under the authority of 26 CFR 301.6020-1. So, for filers and non-filers alike, the procedure set forth in §105 would appear to be binding upon the IRS. If you can show that the IRS violated this procedure, then it should be a slam dunk at Tax Court, or in the District Court if you pay the tax, file a claim for a refund, and get denied.

In the case of a non-filer, subsection (b)(2) would be binding upon the IRS:

A document (or set of documents) signed by the Commissioner or other authorized Internal Revenue Officer or employee shall be a return for a person described in paragraph (b)(1) of this section if the document (or set of documents) identifies the taxpayer by name and taxpayer identification number, contains sufficient information from which to compute the taxpayer's tax liability, and purports to be a return. A Form 13496, “IRC Section 6020(b) Certification,” or any other form that an authorized Internal Revenue Officer or employee signs and uses to identify a set of documents containing the information set forth in this paragraph as a section 6020(b) return, and the documents identified, constitute a return under section 6020(b). A return may be signed by the name or title of an Internal Revenue Officer or employee being handwritten, stamped, typed, printed or otherwise mechanically affixed to the return, so long as that name or title was placed on the document to signify that the Internal Revenue Officer or employee adopted the document as a return for the taxpayer. The document and signature may be in written or electronic form.

I have never seen a 6020(b) return that was signed -- ever. What I have seen is a rubber-stamped 1040 with no information on it whatsoever. This return can be obtained from the IRS using a Privacy Act request under the authority of 26 CFR 301.9000-1 &seq. I first request a copy of the Individual Master File, and then look at the Document Control Numbers and find the DCN for the substitute for return that I want to see. Heck, I just request them all.

None of the 6020(b) returns that I have ever seen have an amount on them. The rest of the documents mentioned in the above regulation will be part of the IMF for that year and the documents associated with the DCNs will be available upon request.

Next, I request an "Office Examination." "Office examinations are conducted primarily by the interview method." "During the interview examination, the taxpayer has the right to point out to the examiner any amounts included in the return which are not taxable, or any deductions which the taxpayer failed to claim on the return."

Before attending the office examination, I draft a "request for determination letter" so that I can argue the facts and law before the examiner and set up a requirement for the IRS to seek "technical advice" as outlined in paragraph (b)(5)(i)(b):

The consideration or examination of the facts relating to a request for a determination letter is considered to be in connection with the examination or consideration of a return of the taxpayer. Thus, a district director may, in his discretion, request technical advice with respect to the consideration of a request for a determination letter.

If I am going to raise an issue under the RFRA93, this is where it is done. One would have to put this on the record before the agency using the request for determination letter procedure. Then, after attending the office examination, the IRS must follow this procedure:

At the conclusion of an office or field examination, the taxpayer is given an opportunity to agree with the findings of the examiner. If the taxpayer does not agree, the examiner will inform the taxpayer of the appeal rights. If the taxpayer does agree with the proposed changes, the examiner will invite the taxpayer to execute either Form 870 or another appropriate agreement form.
-- 26 CFR 601.105(b)(4).

I don't "agree with the findings of the examiner," so I have to be informed of the appeal rights. This is where they generally trip up, because they don't do this properly. However, if they do properly inform me of my appeal rights, the next step is to insist upon the "request for determination letter" procedure.

While this is not part of the appeal process of which they will inform you, it is still a very important step in the administrative process. Notice that even though it appears that the request for determination is discretionary, this is belied by subparagraph (b)(5)(iii)(a):

It is the responsibility of the district office to determine whether technical advice is to be requested on any issue before that office. However, while the case is under the jurisdiction of the district director, a taxpayer or his/her representative may request that an issue be referred to the National Office for technical advice on the grounds that a lack of uniformity exists as to the disposition of the issue, or that the issue is so unusual or complex as to warrant consideration by the National Office. This request should be made at the earliest possible stage of the examination process. While taxpayers are encouraged to make written requests setting forth the facts, law, and argument with respect to the issue, and reason for requesting National Office advice, a taxpayer may make the request orally. If, after considering the taxpayer's request, the examiner is of the opinion that the circumstances do not warrant referral of the case to the National Office, he/she will so advise the taxpayer. (See subdivision (iv) of this subparagraph for taxpayer's appeal rights where the examiner declines to request technical advice.)

See, they recognize that this is part of the appeal rights, but they will never inform you of this procedure. This is a violation of the administrative procedure and should ultimately result in a finding by the Tax Court or by the District Court that the procedure was violated, sending this matter back to Examinations. Referring to subdivision (iv), one finds a pre-appeal procedure that has to be resolved prior to the formal appeal process of which one will be advised.

(b) The taxpayer may appeal the decision of the examining officer not to request technical advice by submitting to that official, within 10 calendar days after being advised of the decision, a statement of the facts, law, and arguments with respect to the issue, and the reasons why he believes the matter should be referred to the National Office for advice.
-- 26 CFR 601.105(b)(5)(iv)(b)

This appears to be a kink in the appeals process chain. Because they will not inform one of this pre-appeal process, then one can later argue that the IRS did not inform you fully of your appeal rights. Now, read (iv)(c) to see that the Chief Examiner has to inform you of his decision to deny your request for determination. One then has 15 days to inform the Chief Examiner as to whether or not one agrees with the denial. I don't agree with this denial, so the next part of the procedure must be followed by the IRS:

However, if he does not agree with the proposed denial, all data relating to the issue for which technical advice has been sought, including taxpayer's written request and statements, will be submitted to the National Office, Attention: Director, Examination Division, for review. After review in the National Office, the district office will be notified whether the proposed denial is approved or disapproved.
-- 26 CFR 601.105(b)(5)(iv)(c)

So, if you ask, they have to submit it anyway. I have never seen any determination ever come back from the National Office in these situations. However, if a determination does come back from the National Office, it has to come back within 30 days. If it does not, then this is a violation of the procedure.

If, after a study of the technical advice request, it appears that advice adverse to the taxpayer should be given and a conference has been requested, the taxpayer will be notified of the time and place of the conference. If conferences are being arranged with respect to more than one request for advice involving the same taxpayer, they will be so scheduled as to cause the least inconvenience to the taxpayer. The conference will be arranged by telephone, if possible, and must be held within 21 calendar days after contact has been made. Extensions of time will be granted only if justified in writing by the taxpayer and approved by the appropriate Technical branch chief.
-- 26 CFR 601.105(b)(5)(v)(a)

I have never seen such a conference scheduled. If they fail to schedule it timely, then this is a violation of the procedure. Also, during the pendency of this procedure, "the district office will suspend action on the issue (except where the delay would prejudice the Government's interests) until it is notified of the National Office decision." See 26 CFR 601.105(b)(5)(iv)(d).

Also, because they never inform you of your appeal rights with regard to this procedure, this becomes a violation of the administrative procedure if a request for determination letter is offered and they never send it in to the National Office. Again, the IRS will argue that this is not part of the "appeal process," but this is belied by the revelation that "A taxpayer is entitled, as a matter of right, to only one conference in the National Office unless one of the circumstances discussed in (c) of this subdivision exists." See 26 CFR 601.105(b)(5)(iv)(b).

Subsection (c), mentioned above, relates to the possibility that the National Office might change the results of the examination, which sends this matter back to the Office Examination stage.

Accordingly, if one requests an Office Examination and shows up with a Request for Determination Letter, the entire procedure set forth in subsection (b)(5) has to be followed or it becomes a violation of the administrative procedure. In such a case, I end up paying the tax, filing a claim based upon the violation of procedure, and when denied, sue in the District Court. I pay and sue because 90% of the time the Tax Court will rule against you, and 90% of the time the District Court will rule in your favor.