B-169138, APRIL 2, 1970, 49 COMP. GEN. 666

B-169138, APRIL 2, 1970, 49 COMP. GEN. 666

WITNESSES -- ADMINISTRATIVE PROCEEDINGS -- CORPORATION, ETC., SUMMONED THE WORD "PERSON" AS USED IN 26 U.S.C. 7602, WHICH AUTHORIZES THE ISSUANCE OF A SUMMONS INCIDENT TO AN INQUIRY INTO THE "LIABILITY OF ANY PERSON FOR ANY INTERNAL REVENUE TAX," MEANS, AS DEFINED IN SECTION 7701(A)(1), "AN INDIVIDUAL, A TRUST, ESTATE, PARTNERSHIP, ASSOCIATION, COMPANY OR CORPORATION" AND, THEREFORE, WHEN A SUMMONS IS DIRECTED TO A CORPORATION OR AN UNINCORPORATED ASSOCIATION TO COMPEL ATTENDANCE AS A WITNESS AT A HEARING BEFORE AN INTERNAL REVENUE OFFICER, THE WITNESS FEES AND ALLOWANCES AUTHORIZED IN 5 U.S.C. 503(B) FOR APPEARANCES AT AGENCY HEARINGS AND PRESCRIBED IN 28 U.S.C. 1821, TO COMPENSATE PERSONS APPEARING AS WITNESSES, ARE PAYABLE DIRECTLY TO THE BUSINESS ORGANIZATION AND NOT TO THE INDIVIDUAL APPEARING ON ITS BEHALF, AS THE ORGANIZATION INCURS THE SAME COSTS TO COMPLY WITH A SUMMONS AS DOES A NATURAL PERSON.

TO THE SECRETARY OF THE TREASURY, APRIL 2, 1970:

REFERENCE IS MADE TO THE LETTER OF FEBRUARY 18, 1970, FROM THE ASSISTANT SECRETARY FOR ADMINISTRATION REQUESTING A DECISION AS TO WHETHER WITNESS FEES AND ALLOWANCES PROVIDED FOR BY 5 U.S.C. 503(B) MAY BE PAID TO OTHER THAN A NATURAL PERSON TO WHOM A SUMMONS HAS BEEN DIRECTED. WE UNDERSTAND INFORMALLY FROM A MEMBER OF YOUR STAFF THAT YOU ARE SPECIFICALLY CONCERNED WITH WHETHER SUCH FEES MAY BE PAID TO BANKS AND OTHER UNINCORPORATED ASSOCIATIONS AND CORPORATIONS WHICH ARE SUMMONED IN REGARD TO TAX AUDITS AND, IF SO, TO WHOM SUCH FEES ARE PAYABLE.

SECTION 503(B) PROVIDES THAT A WITNESS, NOT FURTHER DEFINED, IS ENTITLED TO THE FEES AND ALLOWANCES ALLOWED BY STATUTE FOR WITNESSES IN THE COURTS OF THE UNITED STATES WHEN HE IS SUBPOENAED TO, AND APPEARS AT, AN AGENCY HEARING. SECTION 1821 OF TITLE 28 REGULATES THE AMOUNT OF SUCH FEES.

THE FIFTH CIRCUIT COURT OF APPEALS, IN ROBERTS V UNITED STATES, 397 F. 2D 968 (1968), HAS HELD THAT BOTH TAXPAYERS, WHOSE TAX LIABILITY IS UNDER INVESTIGATION, AND WITNESSES, WHO HAVE KNOWLEDGE OF THE AFFAIRS OF THESE TAXPAYERS, WHO ARE SUMMONED TO, AND APPEAR AT, PROCEEDINGS BEFORE AN INTERNAL REVENUE OFFICER, ARE ATTENDING A "HEARING" WITHIN THE MEANING OF THAT WORD IN 5 U.S.C. 503(B) AND ARE ENTITLED TO THE PAYMENT OF WITNESS FEES AS PROVIDED BY THAT SECTION FOR THEIR APPEARANCE. THIS OFFICE REACHED A SIMILAR CONCLUSION IN 48 COMP. GEN. 97 (1968). BASED UPON THESE DECISIONS, YOU ASK FOR A DECISION AS TO WHETHER WITNESS FEES ARE PAYABLE TO OTHER THAN A NATURAL PERSON, SUCH AS A CORPORATION OR AN UNINCORPORATED ASSOCIATION, TO WHOM A SUMMONS HAS BEEN DIRECTED.

WE UNDERSTAND THAT IN A TAX AUDIT A SUMMONS IS DIRECTED TO A CORPORATION OR UNINCORPORATED ASSOCIATION IN ORDER TO REQUIRE THE PRODUCTION OF BOOKS AND RECORDS AND TO TAKE TESTIMONY VALIDATING THE BOOKS AND EXPLAINING THE ENTRIES THEREIN. THE BUSINESS ORGANIZATION ITSELF CAN THEN SELECT THE EMPLOYEE WHO CAN BEST TESTIFY CONCERNING THE BOOKS AND RECORDS. FURTHER UNDERSTAND THAT WHEN THE TESTIMONY OF A PARTICULAR OFFICER OR EMPLOYEE IS DESIRED, HE IS SUMMONED SEPARATELY.

UNDER SECTION 7602 OF TITLE 26, U.S.C.THE SECRETARY OF THE TREASURY, OR HIS DELEGATE, RELEVANT TO AN INQUIRY INTO THE LIABILITY OF ANY PERSON FOR ANY INTERNAL REVENUE TAX, IS AUTHORIZED TO SUMMON " *** THE PERSON LIABLE FOR TAX OR REQUIRED TO PERFORM THE ACT, OR ANY OFFICER OR EMPLOYEE OF SUCH PERSON, OR ANY PERSON HAVING POSSESSION, CUSTODY, OR CARE OF BOOKS OF ACCOUNT CONTAINING ENTRIES RELATING TO THE BUSINESS OF THE PERSON LIABLE FOR THE TAX OR REQUIRED TO PERFORM THE ACT, OR ANY OTHER PERSON THE SECRETARY OR HIS DELEGATE MAY DEEM PROPER, TO APPEAR BEFORE THE SECRETARY OR HIS DELEGATE AT THE TIME AND PLACE NAMED IN THE SUMMONS AND TO PRODUCE SUCH BOOKS, PAPERS, RECORDS, OR OTHER DATA, AND TO GIVE SUCH TESTIMONY UNDER OATH AS MAY BE RELEVANT OR MATERIAL TO SUCH INQUIRY *** ."

A "PERSON" UNDER 26 U.S.C. 7701(A)(1) IS DEFINED AS "AN INDIVIDUAL, A TRUST, ESTATE, PARTNERSHIP, ASSOCIATION, COMPANY OR CORPORATION." THEREFORE, A SUMMONS ISSUED UNDER SECTION 7602 MAY LAWFULLY BE DIRECTED TO A CORPORATION OR UNINCORPORATED ASSOCIATION TO COMPEL ITS ATTENDANCE AS A WITNESS AT A HEARING BEFORE AN INTERNAL REVENUE OFFICER.

ONE OF THE PRINCIPAL PURPOSES OF THE CODE PROVISIONS PROVIDING FOR THE PAYMENT OF WITNESS FEES IS TO COMPENSATE PERSONS TO WHOM A SUMMONS IS DIRECTED FOR THE EXPENSES INCURRED FOR COMPLYING THEREWITH. A BUSINESS ORGANIZATION WHICH IS SUMMONED AS A WITNESS INCURS THE SAME COSTS OF COMPLIANCE AS DOES A NATURAL PERSON. SINCE NOTHING IN THE WORDING OF THE STATUTES HERE INVOLVED (5 U.S.C. 503(B) AND 28 U.S.C. 1821) OR ANYTHING IN THE LEGISLATIVE HISTORIES OF THESE STATUTES INDICATES A CONGRESSIONAL INTENT TO DISTINGUISH BETWEEN NATURAL PERSONS AND BUSINESS ORGANIZATIONS, WE BELIEVE THAT CORPORATIONS AND UNINCORPORATED ASSOCIATIONS WHICH ARE SUMMONED UNDER 26 U.S.C. 7602 ARE ENTITLED TO THE PAYMENT OF THE SAME WITNESS FEES AS ARE NATURAL PERSONS. SUCH FEES ARE PAYABLE DIRECTLY TO THE BUSINESS ORGANIZATION AND NOT TO THE INDIVIDUAL WHO APPEARED ON ITS BEHALF.