Taxpayer may record examination meeting about transfer pricing

Plain-English summary

IRS employees planned to meet with a taxpayer about transfer-pricing studies used to determine its tax liability. Chief Counsel advised that the meeting was an in-person taxpayer interview covered by IRC § 7521 because it involved Examination personnel and directly related to determining tax. The IRS therefore had to allow the taxpayer to make an audio recording. The taxpayer still had to give ten days’ advance notice and use its own equipment at its own expense.

Ruling snapshot

• Question: Must the IRS allow a taxpayer to audio-record an examination meeting about transfer-pricing studies?
• Outcome: Advice given
• Key authorities: IRC § 7521(a)(1); Notice 89-51; Keene v. Commissioner, 121 T.C. 8 (2003)

Full text (IRS public release)

ID: CCA_2015100810122346 [Third Party Communication:

UILC: 7521.00-00 Date of Communication: Month DD, YYYY]

Number: 201552029
Release Date: 12/24/2015
From: -----------------------
Sent: Thursday, October 08, 2015 10:12:23 AM
To: ------------------
Cc: -----------------
Bcc:
Subject: RE: 7521 Question

-----------,

You asked whether the Service was required to allow audio recording of a meeting
between Service employees and a taxpayer, during which the subject matter to be
discussed was transfer pricing studies used to determine the taxpayers tax liability.

Section 7521(a)(1) provides that any officer or employee of the 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.” Shortly after section 7521 was enacted, the Service defined “taxpayer
interview” for purposes of section 7521 as a meeting between an employee of “the
Examination function, the Employee Plans and Exempt Organization function, or the
Collection function of the Service” and a taxpayer “when the determination or the
collection of any tax is at issue.” See Notice 89-51, 1989-1 C.B. 691. The Service
expanded this definition to include all Appeals face to face conferences after the Tax
Court’s decision in Keene v. Commissioner, 121 T.C. 8 (2003), which held that section
7521 applied to CDP hearings. The Tax Court also held that the voluntary nature of the
meeting was immaterial, and rejected a narrow view of the word “interview.”

Since the meeting at issue is a meeting between an employee of the Examination
function of the Service and the taxpayer and the transfer pricing being discussed
directly relates to the determination of tax at issue, the Service must allow the taxpayer
to audio record the meeting, provided the taxpayer complies with the Service’s
requirements. The taxpayer must make the request ten days in advance and must
provide its own equipment at its own expense.

Please feel free to contact me if you have any additional questions or concerns. Thank
you.