[Code of Federal Regulations]
[Title 26, Volume 19]
[Revised as of April 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR601.106]
[Page 23-37]
TITLE 26--INTERNAL REVENUE
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY--
(Continued)
PART 601--STATEMENT OF PROCEDURAL RULES--Table of Contents
Subpart A--General Procedural Rules
Sec. 601.106 Appeals functions.
(a) General. (1)(i) There are provided in each region Appeals
offices with office facilities within the region. Unless they otherwise
specify, taxpayers living outside the United States use the facilities
of the Washington, DC, Appeals Office of the the Mid-Atlantic Region.
Subject to the limitations set forth in subparagraphs (2) and (3) of
this paragraph, the Commissioner has delegated to certain officers of
the Appeals offices authority to represent the regional commissioner in
those matters set forth in subdivisions (ii) through (v) of this
subparagraph. If a statutory notice of deficiency was issued by a
district director or the Director, Foreign Operations District, the
Appeals office may waive jurisdiction to the director who issued the
statutory notice during the 90-day (or 150-day) period for filing a
petition with the Tax Court, except where criminal prosecution has been
recommended and not finally disposed of, or the statutory notice
includes the ad valorem fraud penalty. After the filing of a petition in
the Tax Court, the Appeals office will have exclusive settlement
jurisdiction, subject to the provisions of subparagraph (2) of this
paragraph, for a period of 4 months (but no later than the receipt of
the trial calendar in regular cases and no later than 15 days before the
calendar call in S cases), over cases docketed in the Tax Court. Subject
to the exceptions and limitations set forth in subparagraph (2) of this
paragraph, there is also vested in the Appeals offices authority to
represent the regional commissioner in his/her exclusive authority to
settle (a) all cases docketed in the Tax Court and designated for trial
at any place within the territory comprising the region, and (b) all
docketed cases originating in the office of any district director
situated within the region, or in which jurisdiction has been
transferred to the region, which are designated for trial at Washington,
DC, unless the petitioner resides in, and his/her books and records are
located or can be made available in, the region which includes
Washington, DC.
(ii) Certain officers of the Appeals offices may represent the
regional commissioner in his/her exclusive and final authority for the
determination of--
(a) Federal income, profits, estate (including extensions for
payment under section 6161(a)(2)), gift, generation-skipping transfer,
or Chapter 41, 42, 43, or 44 tax liability (whether before or after the
issuance of a statutory notice of deficiency);
(b) Employment or certain Federal excise tax liability; and
(c) Liability for additions to the tax, additional amounts, and
assessable penalties provided under Chapter 68 of the Code,
in any case originating in the office of any district director situated
in the region, or in any case in which jurisdiction has been transferred
to the region.
(iii) The taxpayer must request Appeals consideration.
(a) An oral request is sufficient to obtain Appeals consideration in
(1) all office interview or correspondence examination cases or (2) a
field examination case if the total amount of proposed additional tax
including penalties, proposed overassessment, or claimed refund (or, in
an offer in compromise, the total amount of assessed tax, penalty, and
interest sought to be compromised) is $2,500 or less for any taxable
period. No written protest or brief statement of disputed issues is
required.
(b) A brief written statement of disputed issues is required (a
written protest is optional) to obtain Appeals consideration in a field
examination case if the total amount of proposed additional tax
including penalties, proposed overassessment, or claimed refund (or, in
an offer in compromise, the total amount of assessed tax, penalty, and
interest sought to be compromised) exceeds $2,500 but does not exceed
$10,000 for any taxable period.
[[Page 24]]
(c) A written protest is required to obtain Appeals consideration in
a field examination case if the total amount of proposed additional tax
including penalties, proposed overassessment, or claimed refund (or, in
an offer in compromise, the total amount of assessed tax, penalty, and
interest sought to be compromised) exceeds $10,000 for any taxable
period.
(d) A written protest is required to obtain Appeals consideration in
all employee plan and exempt organization cases.
(e) A written protest is required to obtain Appeals consideration in
all partnership and S corporation cases.
(iv) Sections 6659(a)(1) and 6671(a) provide that additions to the
tax, additional amounts, penalties and liabilities (collectively
referred to in this subdivision as ``penalties'') provided by Chapter 68
of the Code shall be paid upon notice and demand and shall be assessed
and collected in the same manner as taxes. Certain Chapter 68 penalties
may be appealed after assessment to the Appeals office. This post-
assessment appeal procedure applies to all but the following Chapter 68
penalties:
(a) Penalties that are not subject to a reasonable cause or
reasonable basis determination (examples are additions to the tax for
failure to pay estimated income tax under sections 6654 and 6655);
(b) Penalties that are subject to the deficiency procedures of
subchapter B of Chapter 63 of the Code (because the taxpayer has the
right to appeal such penalties, such as those provided under section
6653 (a) and (b), prior to assessment):
(c) Penalties that are subject to an administratively granted
preassessment appeal procedure such as that provided in Sec. 1.6694-
2(a)(1) because taxpayers are able to protest such penalties prior to
assessment;
(d) The penalty provided in section 6700 for promoting abusive tax
shelters (because the penalty is subject to the procedural rules of
section 6703 which provides for an extension of the period of collection
of the penalty when a person pays not less than 15 percent of the amount
of such penalty); and
(e) The 100 percent penalty provided under section 6672 (because the
taxpayer has the opportunity to appeal this penalty prior to
assessment).
The appeal may be made before or after payment, but shall be made before
the filing of a claim for refund. Technical advice procedures are not
applicable to an appeal made under this subdivision.
(v) The Appeals office considers cases involving the initial or
continuing recognition of tax exemption and foundation classification.
See Sec. 601.201(n)(5) and (n)(6). The Appeals office also considers
cases involving the initial or continuing determination of employee plan
qualification under Subchapter D of Chapter 1 of the Code. See
Sec. 601.201(o)(6). However, the jurisdiction of the Appeals office in
these cases is limited as follows:
(a) In cases under the jurisdiction of a key district director (or
the National Office) which involve an application for, or the revocation
or modification of, the recognition of exemption or the determination of
qualification, if the determination concerning exemption is made by a
National Office ruling, or if National Office technical advice is
furnished concerning exemption or qualification, the decision of the
National Office is final. The organization/plan has no right of appeal
to the Appeals office or any other avenue of administrative appeal. See
Sec. 601.201(n)(i), (n)(6)(ii)(b), (n)(9)(viii)(a), (o)(2)(iii), and
(o)(6)(i).
(b) In cases already under the jurisdiction of an Appeals office, if
the proposed disposition by that office is contrary to a National Office
ruling concerning exemption, or to a National Office technical advice
concerning exemption or qualification, issued prior to the case, the
proposed disposition will be submitted, through the Office of the
Regional Director of Appeals, to the Assistant Commissioner (Employee
Plans and Exempt Organizations) or, in section 521 cases, to the
Assistant Commissioner (Technical). The decision of the Assistant
Commissioner will be followed by the Appeals office. See
Sec. 601.201(n)(5)(iii), (n)(6)(ii)(d), (n)(6)(iv), and (o)(6)(iii).
(2) The authority described in subparagraph (1) of this paragraph
does not include the authority to:
[[Page 25]]
(i) Negotiate or make a settlement in any case docketed in the Tax
Court if the notice of deficiency, liability or other determination was
issued by Appeals officials;
(ii) Negotiate or make a settlement in any docketed case if the
notice of deficiency, liability or other determination was issued after
appeals consideration of all petitioned issues by the Employee Plans/
Exempt Organizations function;
(iii) Negotiate or make a settlement in any docketed case if the
notice of deficiency, liability or final adverse determination letter
was issued by a District Director and is based upon a National Office
ruling or National Office technical advice in that case involving a
qualification of an employee plan or tax exemption and/or foundation
status of an organization (but only to the extent the case involves such
issue);
(iv) Negotiate or make a settlement if the case was docketed under
Code sections 6110, 7477, or 7478;
(v) Eliminate the ad valorem fraud penalty in any case in which the
penalty was determined by the district office or service center office
in connection with a tax year or period, or which is related to or
affects such year or period, for which criminal prosecution against the
taxpayer (or related taxpayer involving the same transaction) has been
recommended to the Department of Justice for willful attempt to evade or
defeat tax, or for willful failure to file a return, except upon the
recommendation or concurrence of Counsel; or
(vi) Act in any case in which a recommendation for criminal
prosecution is pending, except with the concurrence of Counsel.
(3) The authority vested in Appeals does not extend to the
determination of liability for any excise tax imposed by Subtitle E or
by Subchapter D of chapter 78, to the extent it relates to Subtitle E.
(4) In cases under Appeals jurisdiction, the Appeals official has
the authority to make and subscribe to a return under the provisions of
section 6020 of the Code where taxpayer fails to make a required return.
(b) Initiation of proceedings before Appeals. In any case in which
the district director has issued a preliminary or ``30-day letter'' and
the taxpayer requests Appeals consideration and files a written protest
when required (see paragraph (c)(1) of Secs. 601.103, (c)(1) and (c)(2)
of 601.105 and 601.507) against the proposed determination of tax
liability, except as to those taxes described in paragraph (a)(3) of
this section, the taxpayer has the right (and will be so advised by the
district director) of administrative appeal to the Appeals organization.
However, the appeal procedures do not extend to cases involving solely
the failure or refusal to comply with the tax laws because of moral,
religious, political, constitutional, conscientious, or similar grounds.
Organizations such as labor unions and trade associations which have
been examined by the district director to determine the amounts expended
by the organization for purposes of lobbying, promotion or defeat of
legislation, political campaigns, or propaganda related to those
purposes are treated as ``taxpayers'' for the purpose of this right of
administrative appeal. Thus, upon requesting appellate consideration and
filing a written protest, when required, to the district director's
findings that a portion of member dues is to be disallowed as a
deduction to each member because expended for such purposes, the
organization will be afforded full rights of administrative appeal to
the Appeals activity similar to those rights afforded to taxpayers
generally. After review of any required written protest by the district
director, the case and its administrative record are referred to
Appeals. Appeals may refuse to accept a protested nondocketed case where
preliminary review indicates it requires further consideration or
development. No taxpayer is required to submit a case to Appeals for
consideration. Appeal is at the option of the taxpayer. After the
issuance by the district director of a statutory notice of deficiency,
upon the taxpayer's request, Appeals may take up the case for settlement
and may grant the taxpayer a conference thereon.
(c) Nature of proceedings before Appeals. Proceedings before Appeals
are informal. Testimony under oath is not taken, although matters
alleged as facts may be required to be submitted
[[Page 26]]
in the form of affidavits, or declared to be true under the penalties of
perjury. Taxpayers may represent themselves or designate a qualified
representative to act for them. See Subpart E of this part for
conference and practice requirements. At any conference granted by
Appeals on a nondocketed case, the district director will be represented
if the Appeals official having settlement authority and the district
director deem it advisable. At any such conference on a case involving
the ad valorem fraud penalty for which criminal prosecution against the
taxpayer (or a related taxpayer involving the same transaction) has been
recommended to the Department of Justice for willful attempt to evade or
defeat tax, or for willful failure to file a return, the District
Counsel will be represented if he or she so desires.
(d) Disposition and settlement of cases before Appeals--(1) In
general. During consideration of a case, the Appeals office should
neither reopen an issue as to which the taxpayer and the office of the
district director are in agreement nor raise a new issue, unless the
ground for such action is a substantial one and the potential effect
upon the tax liability is material. If the Appeals raises a new issue,
the taxpayer or the taxpayer's representative should be so advised and
offered an opportunity for discussion prior to the taking of any formal
action, such as the issuance of a statutory notice of deficiency.
(2) Cases not docketed in the Tax Court. (i) If after consideration
of the case by Appeals a satisfactory settlement of some or all the
issues is reached with the taxpayer, the taxpayer will be requested to
sign Form 870-AD or other appropriate agreement form waiving
restrictions on the assessment and collection of any deficiency and
accepting any overassessment resulting under the agreed settlement. In
addition, in partially unagreed cases, a statutory notice of deficiency
will be prepared and issued in accordance with subdivision (ii) of this
subparagraph with respect to the unagreed issue or issues.
(ii) If after consideration of the case by Appeals it is determined
that there is a deficiency in income, profits, estate, gift tax,
generation-skipping transfer, or Chapter 41, 42, 43, or 44 tax liability
to which the taxpayer does not agree, a statutory notice of deficiency
will be prepared and issued by Appeals. Officers of the Appeals office
having authority for the administrative determination of tax liabilities
referred to in paragraph (a) of this section are also authorized to
prepare, sign on behalf of the Commissioner, and send to the taxpayer by
registered or certified mail any statutory notice of deficiency
prescribed in sections 6212 and 6861 of the Code, and in corresponding
provisions of the Internal Revenue Code of 1939. Within 90 days, or 150
days if the notice is addressed to a person outside of the States of the
Union and the District of Columbia, after such a statutory notice of
deficiency is mailed (not counting Saturday, Sunday, or a legal holiday
in the District of Columbia as the last day), the taxpayer may file a
petition with the U.S. Tax Court for a redetermination of the
deficiency. In addition, if a claim for refund is disallowed in full or
in part by the Appelate Division and the taxpayer does not sign Form
2297, Appeals will prepare the statutory notice of claim disallowance
and send it to the taxpayer by certified mail (or registered mail if the
taxpayer is outside the United States), with a carbon copy to the
taxpayer's representative by regular mail, if appropriate. In any other
unagreed case, the case and its administrative file will be forwarded to
the appropriate function with directions to take action with respect to
the tax liability determined in Appeals. Administrative appeal
procedures will apply to 100-percent penalty cases, except where an
assessment is made because of Chief Counsel's request to support a
third-party action in a pending refund suit. See Rev. Proc. 69-26.
(iii) Taxpayers desiring to further contest unagreed excise (other
than those under Chapters 41 through 44 of the Code) and employment tax
cases and 100-percent penalty cases must pay the additional tax (or
portion thereof of divisible taxes) when assessed, file claim for refund
within the applicable statutory period of limitations (ordinarily 3
years from time return was required to be filed or 2 years from payment,
whichever expires later), and upon disallowance of claim or after 6
[[Page 27]]
months from date claim was filed, file suit in U.S. District Court or
U.S. Claims Court. Suits for refund of taxes paid are under the
jurisdiction of the Department of Justice.
(3) Cases docketed in the Tax Court. (i) If the case under
consideration in Appeals is docketed in the Tax Court and agreement is
reached with the taxpayer with respect to the issues involved, the
disposition of the case is effected by a stipulation of agreed
deficiency or overpayment to be filed with the Tax Court and in
conformity with which the Court will enter its order.
(ii) If the case under consideration in Appeals is docketed in the
Tax Court and the issues remain unsettled after consideration and
conference in Appeals, the case will be referred to the appropriate
district counsel for the region for defense of the tax liability
determined.
(iii) If the deficiency notice in a case docketed in the Tax Court
was not issued by the Appeals office and no recommendation for criminal
prosecution is pending, the case will be referred by the district
counsel to the Appeals office for settlement as soon as it is at issue
in the Tax Court. The settlement procedure shall be governed by the
following rules:
(a) The Appeals office will have exclusive settlement jurisdiction
for a period of 4 months over certain cases docketed in the Tax Court.
The 4-month period will commence at the time Appeals receives the case
from Counsel, which will be after the case is at issue. Appeals will
arrange settlement conferences in such cases within 45 days of receipt
of the case. In the event of a settlement, Appeals will prepare and
forward to Counsel the necessary computations and any stipulation
decisions secured. Counsel will prepare any needed settlement documents
for execution by the parties and filing with the Tax Court. Appeals will
also have authority to settle less than all the issues in the case and
to refer the unsettled issues to Counsel for disposition. In the event
of a partial settlement, Appeals will inform Counsel of the agreement of
the petitioner(s) and Appeals may secure and forward to Counsel a
stipulation covering the agreed issues. Counsel will, if necessary,
prepare documents reflecting settlement of the agreed issues for
execution by the parties and filing with the Tax Court at the
appropriate time.
(b) At the end of the 4-month period, or before that time if Appeals
determines the case is not susceptible of settlement, the case will be
returned to Counsel. Thereafter, Counsel will have exclusive authority
to dispose of the case. If, at the end of the 4-month period, there is
substantial likelihood that a settlement of the entire case can be
effected in a reasonable period of time, Counsel may extend Appeals
settlement jurisdiction for a period not to exceed 60 days, but not
beyond the date of the receipt of a trial calendar upon which the case
appears. Extensions beyond the 50-day period or after the event
indicated will be granted only with the personal approval of regional
counsel and will be made only in those cases in which the probability of
settlement of the case in its entirety by Appeals clearly outweighs the
need to commence trial preparation.
(c) During the period of Appeals jurisdiction, Appeals will make
available such files and information as may be necessary for Counsel to
take any action required by the Court or which is in the best interests
of the Government. When a case is referred by Counsel to Appeals,
Counsel may indicate areas of needed factual development or areas of
possible technical uncertainties. In referring a case to Counsel,
Appeals will furnish its summary of the facts and the pertinent legal
authorities.
(d) The Appeals office may specify that proposed Counsel settlements
be referred back to Appeals for its views. Appeals may protest the
proposed Counsel settlements. If Counsel disagrees with Appeals, the
Regional Counsel will determine the disposition of the cases.
(e) If an offer is received at or about the time of trial in a case
designated by the Appeals office for settlement consultation, Counsel
will endeavor to have the case placed on a motions calendar to permit
consultation with and review by Appeals in accordance with the foregoing
procedures.
(f) For issues in docketed and nondocketed cases pending with
Appeals
[[Page 28]]
which are related to issues in docketed cases over which Counsel has
jurisdiction, no settlement offer will be accepted by either Appeals or
Counsel unless both agree that the offer is acceptable. The protest
procedure will be available to Appeals and regional counsel will have
authority to resolve the issue with respect to both the Appeals and
Counsel cases. If settlement of the docketed case requires approval by
regional counsel or Chief Counsel, the final decision with respect to
the issues under the jurisdiction of both Appeals and Counsel will be
made by regional counsel or Chief Counsel. See Rev. Proc. 79-59.
(g) Cases classified as ``Small Tax'' cases by the Tax Court are
given expeditious consideration because such cases are not included on a
Trial Status Request. These cases are considered by the Court as ready
for placing on a trial calendar as soon as the answer has been filed and
are given priority by the Court for trial over other docketed cases.
These cases are designated by the Court as small tax cases upon request
of petitioners and will include letter ``S'' as part of the docket
number.
(e) Transfer and centralization of cases. (1) An Appeals office is
authorized to transfer settlement jurisdiction in a non-docketed case or
in an excise or employment tax case to another region, if the taxpayer
resides in and the taxpayer's books and records are located (or can be
made available) in such other region. Otherwise, transfer to another
region requires the approval of the Director of the Appeals Division.
(2) An Appeals office is authorized to transfer settlement
jurisdiction in a docketed case to another region if the location for
the hearing by the Tax Court has been set in such other region, except
that if the place of hearing is Washington, DC, settlement jurisdiction
shall not be transferred to the region in which Washington, DC, is
located unless the petitioner resides in and the petitioner's books and
records are located (or can be made available) in that region.
Otherwise, transfer to another region requires the approval of the
Director of the Appeals Division. Likewise, the Chief Counsel has
corresponding authority to transfer the jurisdiction, authority, and
duties of the regional counsel for any region to the regional counsel of
another region within which the case has been designated for trial
before the Tax Court.
(3) Should a regional commissioner determine that it would better
serve the interests of the Government, he or she may, by order in
writing, withdraw any case not docketed before the Tax Court from the
jurisdiction of the Appeals office, and provide for its disposition
under his or her personal direction.
(f) Conference and practice requirements. Practice and conference
procedure before Appeals is governed by Treasury Department Circular 230
as amended (31 CFR Part 10), and the requirements of Subpart E of this
part. In addition to such rules but not in modification of them, the
following rules are also applicable to practice before Appeals:
(1) Rule I. An exaction by the U.S. Government, which is not based
upon law, statutory or otherwise, is a taking of property without due
process of law, in violation of the Fifth Amendment to the U.S.
Constitution. Accordingly, an Appeals representative in his or her
conclusions of fact or application of the law, shall hew to the law and
the recognized standards of legal construction. It shall be his or her
duty to determine the correct amount of the tax, with strict
impartiality as between the taxpayer and the Government, and without
favoritism or discrimination as between taxpayers.
(2) Rule II. Appeals will ordinarily give serious consideration to
an offer to settle a tax controversy on a basis which fairly reflects
the relative merits of the opposing views in light of the hazards which
would exist if the case were litigated. However, no settlement will be
made based upon nuisance value of the case to either party. If the
taxpayer makes an unacceptable proposal of settlement under
circumstances indicating a good faith attempt to reach an agred
disposition of the case on a basis fair both to the Government and the
taxpayer, the Appeals official generally should give an evaluation of
the case in such a manner as to enable the taxpayer to ascertain the
kind of settlement that would be recommended
[[Page 29]]
for acceptance. Appeals may defer action on or decline to settle some
cases or issues (for example, issues on which action has been suspended
nationwide) in order to achieve greater uniformity and enhance overall
voluntary compliance with the tax laws.
(3) Rule III. Where the Appeals officer recommends acceptance of the
taxpayer's proposal of settlement, or, in the absence of a proposal,
recommends action favorable to the taxpayer, and said recommendation is
disapproved in whole or in part by a reviewing officer in Appeals the
taxpayer shall be so advised and upon written request shall be accorded
a conference with such reviewing officer. The Appeals office may
disregard this rule where the interest of the Government would be
injured by delay, as for example, in a case involving the imminent
expiration of the period of limitations or the dissipation of assets.
(4) Rule IV. Where the Appeals official having settlement authority
and the district director deem it advisable, the district director may
be represented at any Appeals conferences on a nondocketed case. This
rule is also applicable to the Director, Foreign Operations District in
the event his or her office issued the preliminary or ``30-day letter''.
(5) Rule V. In order to bring an unagreed income, profits, estate,
gift, or Chapter 41, 42, 43, or 44 tax case in prestatutory notice
status, an employment or excise tax case, a penalty case, an Employee
Plans and Exempt Organization case, a termination of taxable year
assessment case, a jeopardy assessment case, or an offer in compromise
before the Appeals office, the taxpayer or the taxpayer's representative
should first request Appeals consideration and, when required, file with
the district office (including the Foreign Operations District) or
service center a written protest setting forth specifically the reasons
for the refusal to accept the findings. If the protest includes a
statement of facts upon which the taxpayer relies, such statement should
be declared, to be true under the penalties of perjury. The protest and
any new facts, law, or arguments presented therewith will be reviewed by
the receiving office for the purpose of deciding whether further
development or action is required prior to referring the case to
Appeals. Where Appeals has an issue under consideration it may, with the
concurrence of the taxpayer, assume jurisdiction in a related case,
after the office having original jurisdiction has completed any
necessary action. The Director, Appeals Division, may authorize the
regional Appeals office to accept jurisdiction (after any necessary
action by office having original jurisdiction) in specified classes of
cases without written protests provided written or oral requests for
Appeals consideration are submitted by or for each taxpayer.
(6) Rule VI. A taxpayer cannot withhold evidence from the district
director of internal revenue and expect to introduce it for the first
time before Appeals, at a conference in nondocketed status, without
being subject to having the case returned to the district director for
reconsideration. Where newly discovered evidence is submitted for the
first time to Appeals, in a case pending in nondocketed status, that
office, in the reasonable exercise of its discretion, may transmit same
to the district director for his or her consideration and comment.
(7) Rule VII. Where the taxpayer has had the benefit of a conference
before the Appeals office in the prestatutory notice status, or where
the opportunity for such a conference was accorded but not availed of,
there will be no conference granted before the Appeals office in the 90-
day status after the mailing of the statutory notice of deficiency, in
the absence of unusual circumstances.
(8) Rule VIII. In cases not docketed in the United States Tax Court
on which a conference is being conducted by the Appeals office, the
district counsel may be requested to attend and to give legal advice in
the more difficult cases, or on matters of legal or litigating policy.
(9) Rule IX--Technical advice from the National Office--(i)
Definition and nature of technical advice. (a) As used in this
subparagraph, ``technical advice'' means advice or guidance as to the
interpretation and proper application of internal revenue laws, related
statutes, and regulations, to a specific set of
[[Page 30]]
facts, furnished by the National Office upon request of an Appeals
office in connection with the processing and consideration of a
nondocketed case. It is furnished as a means of assisting Service
personnel in closing cases and establishing and maintaining consistent
holdings in the various regions. It does not include memorandum on
matters of general technical application furnished to Appeals offices
where the issues are not raised in connection with the consideration and
handling of a specific taxpayer's case.
(b) The provisions of this subparagraph do not apply to a case under
the jurisdiction of a district director or the Bureau of Alcohol,
Tobacco, and Firearms, to Employee Plans, Exempt Organization, or
certain penalty cases being considered by an Appeals office, or to any
case previously considered by an Appeals office. The technical advice
provisions applicable to cases under the jurisdiction of a district
director, other than Employee Plans and Exempt Organization cases, are
set forth in Sec. 601.105(b)(5). The technical advice provisions
applicable to Employee Plans and Exempt Organization cases are set forth
in Sec. 601.201(n)(9). Technical advice may not be requested with
respect to a taxable period if a prior Appeals disposition of the same
taxable period of the same taxpayer's case was based on mutual
concessions (ordinarily with a form 870-AD, Offer of Waiver of
Restrictions on Assessment and Collection of Deficiency in Tax and of
Acceptance of Overassessment). However, technical advice may be
requested by a district director on issues previously considered in a
prior Appeals disposition, not based on mutual concessions, of the same
taxable periods of the same taxpayer with the concurrence of the Appeals
office that had the case.
(c) The consideration or examination of the facts relating to a
request for a determination letter is considered to be in connection
with the consideration and handling of a taxpayer's case. Thus, an
Appeals office may, under this subparagraph, request technical advice
with respect to the consideration of a request for a determination
letter. The technical advice provisions applicable to a request for a
determination letter in Employee Plans and Exempt Organization cases are
set forth in Sec. 601.201(n)(9).
(d) If an Appeals office is of the opinion that a ruling letter
previously issued to a taxpayer should be modified or revoked and it
requests the National Office to reconsider the ruling, the reference of
the matter to the National Office is treated as a request for technical
advice. The procedures specified in subdivision (iii) of this
subparagraph should be followed in order that the National Office may
consider the recommendation. Only the National Office can revoke a
ruling letter. Before referral to the National Office, the Appeals
office should inform the taxpayer of its opinion that the ruling letter
should be revoked. The Appeals office, after development of the facts
and consideration of the taxpayer's arguments, will decide whether to
recommend revocation of the ruling to the National Office. For
procedures relating to a request for a ruling, see Sec. 601.201.
(e) The Assistant Commissioner (Technical), acting under a
delegation of authority from the Commissioner of Internal Revenue, is
exclusively responsible for providing technical advice in any issue
involving the establishment of basic principles and rules for the
uniform interpretation and application of tax laws in cases under this
subparagraph. This authority has been largely redelegated to subordinate
officials.
(ii) Areas in which technical advice may be requested. (a) Appeals
offices may request technical advice on any technical or procedural
question that develops during the processing and consideration of a
case. These procedures are applicable as provided in subdivision (i) of
this subparagraph.
(b) As provided in Sec. 601.105(b)(5) (ii)(b) and (iii)(a), requests
for technical advice should be made at the earliest possible stage of
the examination process. However, if identification of an issue on which
technical advice is appropriate is not made until the case is in
Appeals, a decision to request such advice (in nondocketed cases) should
be made prior to or at the first conference.
(c) Subject to the provisions of (b) of this subdivision, Appeals
Offices are
[[Page 31]]
encouraged to request technical advice on any technical or procedural
question arising in connection with a case described in subdivision (i)
of this subparagraph which cannot be resolved on the basis of law,
regulations, or a clearly applicable revenue ruling or other precedent
issued by the National Office.
(iii) Requesting technical advice. (a) It is the responsibility of
the Appeals Office to determine whether technical advice is to be
requested on any issue being considered. However, while the case is
under the jurisdiction of the Appeals Office, 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.
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 Appeals
Officer is of the opinion that the circumstances do not warrant referral
of the case to the National Office, he/she will so advice the taxpayer.
(See subdivision (iv) of this subparagraph for taxpayer's appeal rights
where the Appeals Officer declines to request technical advice.)
(b) When technical advice is to be requested, whether or not upon
the request of the taxpayer, the taxpayer will be so advised, except as
noted in (j) of this subdivision. If the Appeals Office initiates the
action, the taxpayer will be furnished a copy of the statement of the
pertinent facts and the question or questions proposed for submission to
the National Office. The request for advice should be so worded as to
avoid possible misunderstanding, in the National Office, of the facts or
of the specific point or points at issue.
(c) After receipt of the statement of facts and specific questions,
the taxpayer will be given 10 calendar days in which to indicate in
writing the extent, if any, to which he/she may not be in complete
agreement. An extension of time must be justified by the taxpayer in
writing and approved by the Chief, Appeals Office. Every effort should
be made to reach agreement as to the facts and specific points at issue.
If agreement cannot be reached, the taxpayer may submit, within 10
calendar days after receipt of notice from the Appeals Office, a
statement of his/her understanding as to the specific point or points at
issue which will be forwarded to the National Office with the request
for advice. An extension of time must be justified by the taxpayer in
writing and approved by the Chief, Appeals Office.
(d) If the taxpayer initiates the action to request advice, and his/
her statement of the facts and point or points at issue are not wholly
acceptable to the Appeals Office, the taxpayer will be advised in
writing as to the areas of disagreement. The taxpayer will be given 10
calendar days after receipt of the written notice to reply to such
notice. An extension of time must be justified by the taxpayer in
writing and approved by the Chief, Appeals Office. If agreement cannot
be reached, both the statements of the taxpayer and the Appeals Office
will be forwarded to the National Office.
(e) (1) In the case of requests for technical advice, the taxpayer
must also submit, within the 10-day period referred to in (c) and (d) of
this subdivision, whichever is applicable (relating to agreement by the
taxpayer with the statement of facts and points submitted in connection
with the request for technical advice), the statement described in (f)
of this subdivision of proposed deletions pursuant to section 6110(c) of
the Code. If the statement is not submitted, the taxpayer will be
informed by the Appeals Office that the statement is required. If the
Appeals Office does not receive the statement within 10 days after the
taxpayer has been informed of the need for the statement, the Appeals
Office may decline to submit the request for technical advice. If the
Appeals Office decides to request technical advice in a case where the
taxpayer has not submitted the statement of proposed deletions, the
National Office will make those deletions which in the judgment of the
Commissioner are required by section 6110(c) of the Code.
[[Page 32]]
(2) The requirements included in this subparagraph relating to the
submission of statements and other material with respect to proposed
deletions to be made from technical advice memoranda before public
inspection is permitted to take place do not apply to requests for any
document to which section 6104 of the Code applies.
( f ) In order to assist the Internal Revenue Service in making the
deletions required by section 6110(c) of the Code, from the text of
technical advice memoranda which are open to public inspection pursuant
to section 6110(a) of the Code, there must accompany requests for such
technical advice either a statement of the deletions proposed by the
taxpayer, or a statement that no information other than names,
addresses, and taxpayer identifying numbers need be deleted. Such
statements shall be made in a separate document. The statement of
proposed deletions shall be accompanied by a copy of all statements of
facts and supporting documents which are submitted to the National
Office pursuant to (c) or (d) of this subdivision, on which shall be
indicated, by the use of brackets, the material which the taxpayer
indicates should be deleted pursuant to section 6110(c) of the Code. The
statement of proposed deletions shall indicate the statutory basis for
each proposed deletion. The statement of proposed deletions shall not
appear or be referred to anywhere in the request for technical advice.
If the taxpayer decides to request additional deletions pursuant to
section 6110(c) of the Code prior to the time the National Office
replies to the request for technical advice, additional statements may
be submitted.
(g) If the taxpayer has not already done so, he/she may submit a
statement explaining his/her position on the issues, citing precedents
which the taxpayer believes will bear on the case. This statement will
be forwarded to the National Office with the request for advice. If it
is received at a later date, it will be forwarded for association with
the case file.
(h) At the time the taxpayer is informed that the matter is being
referred to the National Office, he/she will also be informed of the
right to a conference in the National Office in the event an adverse
decision is indicated, and will be asked to indicate whether a
conference is desired.
(i) Generally, prior to replying to the request for technical
advice, the National Office shall inform the taxpayer orally or in
writing of the material likely to appear in the technical advice
memorandum which the taxpayer proposed be deleted but which the Internal
Revenue Service determined should not be deleted. If so informed, the
taxpayer may submit within 10 days any further information, arguments,
or other material in support of the position that such material be
deleted. The Internal Revenue Service will attempt, if feasible, to
resolve all disagreements with respect to proposed deletions prior to
the time the National Office replies to the request for technical
advice. However, in no event shall the taxpayer have the right to a
conference with respect to resolution of any disagreements concerning
material to be deleted from the text of the technical advice memorandum,
but such matters may be considered at any conference otherwise scheduled
with respect to the request.
(j) The provisions of (a) through (i) of this subdivision, relating
to the referral of issues upon request of the taxpayer, advising
taxpayers of the referral of issues, the submission of proposed
deletions, and the granting of conferences in the National Office, are
not applicable to technical advice memoranda described in section 6110
(g)(5)(A) of the Code, relating to cases involving criminal or civil
fraud investigations and jeopardy or termination assessments. However,
in such cases, the taxpayer shall be allowed to provide the statement of
proposed deletions to the National Office upon the completion of all
proceedings with respect to the investigations or assessments, but prior
to the date on which the Commissioner mails the notice pursuant to
section 6110 (f)(1) of the Code of intention to disclose the technical
advice memorandum.
(k) Form 4463, Request for Technical Advice, should be used for
transmitting requests for technical advice to the National Office.
(iv) Appeal by taxpayers of determinations not to seek technical
advice. (a) If
[[Page 33]]
the taxpayer has requested referral of an issue before an Appeals Office
to the National Office for technical advice, and after consideration of
the request, the Appeals Officer is of the opinion that the
circumstances do not warrant such referral, he/she will so advise the
taxpayer.
(b) The taxpayer may appeal the decision of the Appeals 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
the taxpayer believes the matter should be referred to the National
Office for advice. An extension of time must be justified by the
taxpayer in writing and approved by the Chief, Appeals Office.
(c) The Appeals Officer will submit the statement of the taxpayer to
the chief, Appeals Office, accompanied by a statement of the officer's
reasons why the issue should not be referred to the National Office. The
Chief will determine, on the basis of the statements submitted, whether
technical advice will be requested. If the Chief determines that
technical advice is not warranted, that official will inform the
taxpayer in writing that he/she proposes to deny the request. In the
letter to the taxpayer the Chief will (except in unusual situations
where such action would be prejudicial to the best interests of the
Government) state specifically the reasons for the proposed denial. The
taxpayer will be given 15 calendar days after receipt of the letter in
which to notify the Chief whether the taxpayer agrees with the proposed
denial. The taxpayer may not appeal the decision of the Chief, Appeals
Office not to request technical advice from the National Office.
However, if the taxpayer does not agree with the proposed denial, all
data relating to the issue for which technical advice has been sought,
including the taxpayer's written request and statements, will be
submitted to the National Office, Attention: Director, Appeals Division,
for review. After review in the National Office, the Appeals Office will
be notified whether the proposed denial is approved or disapproved.
(d) While the matter is being reviewed in the National Office, the
Appeals 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. This notification will be made within 30 days
after receipt of the data in the National Office. The review will be
solely on the basis of the written record and no conference will be held
in the National Office.
(v) Conference in the National Office. (a) 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.
(b) 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. This conference will
usually be held at the branch level in the appropriate division
(Corporation Tax Division or Individual Tax Division) in the Office of
the Assistant Commissioner (Technical), and will usually be attended by
a person who has authority to act for the branch chief. In appropriate
cases the Appeals Officer may also attend the conference to clarify the
facts in the case. If more than one subject is discussed at the
conference, the discussion constitutes a conference with respect to each
subject. At the request of the taxpayer or the taxpayer's
representative, the conference may be held at an earlier stage in the
consideration of the case than the Service would ordinarily designate. A
taxpayer has no ``right'' of appeal from an action of a branch to the
director of a division or to any other National Office official.
[[Page 34]]
(c) In the process of review of a holding proposed by a branch, it
may appear that the final answer will involve a reversal of the branch
proposal with a result less favorable to the taxpayer. Or it may appear
that an adverse holding proposed by a branch will be approved, but on a
new or different issue or on different grounds than those on which the
branch decided the case. Under either of these circumstances, the
taxpayer or the taxpayer's representative will be invited to another
conference. The provisions of this subparagraph limiting the number of
conferences to which a taxpayer is entitled will not foreclose inviting
a taxpayer to attend further conferences when, in the opinion of
National Office personnel, such need arises. All additional conferences
of this type discussed are held only at the invitation of the Service.
(d) It is the responsibility of the taxpayer to furnish to the
National Office, within 21 calendar days after the conference, a written
record of any additional data, line of reasoning, precedents, etc., that
were proposed by the taxpayer and discussed at the conference but were
not previously or adequately presented in writing. Extensions of time
will be granted only if justified in writing by the taxpayer and
approved by the appropriate Technical branch chief. Any additional
material and a copy thereof should be addressed to and sent to the
National Office which will forward the copy to the appropriate Appeals
Office. The Appeals Office will be requested to give the matter prompt
attention, will verify the additional facts and data, and will comment
on it to the extent deemed appropriate.
(e) A taxpayer or the taxpayer's representative desiring to obtain
information as to the status of the case may do so by contacting the
following offices with respect to matters in the areas of their
responsibility:
Telephone numbers, (Area
Official Code 202)
Director, Corporation Tax Division 566-4504, 566-4505.
Director, Individual Tax Division 566-3767 or 566-3788.
(vi) Preparation of technical advice memorandum by the National
Office. (a) Immediately upon receipt in the National Office, the
technical employee to whom the case is assigned will analyze the file to
ascertain whether it meets the requirements of subdivision (iii) of this
subparagraph. If the case is not complete with respect to any
requirement in subdivision (iii) (a) through (d) of this subparagraph,
appropriate steps will be taken to complete the file. If any request for
technical advice does not comply with the requirements of subdivision
(iii)(e) of this subparagraph, relating to the statement of proposed
deletions, the National Office will make those deletions from the
technical advice memorandum which in the judgment of the Commissioner
are required by section 6110(c) of the Code.
(b) If the taxpayer has requested a conference in the National
Office, the procedures in subdivision (v) of this subparagraph will be
followed.
(c) Replies to requests for technical advice will be addressed to
the Appeals office and will be drafted in two parts. Each part will
identify the taxpayer by name, address, identification number, and year
or years involved. The first part (hereafter called the ``technical
advice memorandum'') will contain (1) a recitation of the pertinent
facts having a bearing on the issue; (2) a discussion of the facts,
precedents, and reasoning of the National Office; and (3) the
conclusions of the National Office. The conclusions will give direct
answers, whenever possible, to the specific questions of the Appeals
office. The discussion of the issues will be in such detail that the
Appeals office is apprised of the reasoning underlying the conclusion.
There shall accompany the technical advice memorandum a notice, pursuant
to section 6110(f)(1) of the Code, of intention to disclose the
technical advice memorandum (including a copy of the version proposed to
be open to public inspection and notations of third party communications
pursuant to section 6110(d) of the Code) which the Appeals office shall
forward to the taxpayer at such time that it furnishes a copy of the
technical advice memorandum to the taxpayer pursuant to (e) of this
subdivision and subdivision (vii)(b) of this subparagraph.
(d) The second part of the reply will consist of a transmittal
memorandum.
[[Page 35]]
In the unusual cases it will serve as a vehicle for providing the
Appeals office administrative information or other information which,
under the nondisclosure statutes, or for other reasons, may not be
discussed with the taxpayer.
(e) It is the general practice of the Service to furnish a copy of
the technical advice memorandum to the taxpayer after it has been
adopted by the Appeals office. However, in the case of technical advice
memorandums described in section 6110(g)(5)(A) of the Code, relating to
cases involving criminal or civil fraud investigations and jeopardy or
termination assessments, a copy of the technical advice memorandum shall
not be furnished the taxpayer until all proceedings with respect to the
investigations or assessments are completed.
(f) After receiving the notice pursuant to section 6110(f)(1) of the
Code of intention to disclose the technical advice memorandum, the
taxpayer, if desiring to protest the disclosure of certain information
in the memorandum, must, within 20 days after the notice is mailed,
submit a written statement identifying those deletions not made by the
Internal Revenue Service which the taxpayer believes should have been
made. The taxpayer shall also submit a copy of the version of the
technical advice memorandum proposed to be open to public inspection on
which the taxpayer indicates, by the use of brackets, the deletions
proposed by the taxpayer but which have not been made by the Internal
Revenue Service. Generally, the Internal Revenue Service will not
consider the deletion of any material which the taxpayer did not, prior
to the time when the National Office sent its reply to the request for
technical advice to the Appeals office, propose be deleted. The Internal
Revenue Service shall, within 20 days after receipt of the response by
the taxpayer to the notice pursuant to section 6110(f)(1) of the Code,
mail to the taxpayer its final administrative conclusion regarding the
deletions to be made.
(vii) Action on technical advice in Appeals offices. (a) Unless the
Chief, Appeals Office, feels that the conclusions reached by the
National Office in a technical advice memorandum should be reconsidered
and promptly requests such reconsideration, the Appeals office will
proceed to process the taxpayer's case taking into account the
conclusions expressed in the technical advice memorandum. The effect of
technical advice on the taxpayer's case is set forth in subdivision
(viii) of this subparagraph.
(b) The Appeals office will furnish the taxpayer a copy of the
technical advice memorandum described in subdivision (vi)(c) of this
subparagraph and the notice pursuant to section 6110(f)(1) of the Code
of intention to disclose the technical advice memorandum (including a
copy of the version proposed to be open to public inspection and
notations of third-party communications pursuant to section 6110(d) of
the Code). The preceding sentence shall not apply to technical advice
memorandums involving civil fraud or criminal investigations, or
jeopardy or termination assessments, as described in subdivision
(iii)(j) of this subparagraph (except to the extent provided in
subdivision (vi)(e) of this subparagraph) or to documents to which
section 6104 of the Code applies.
(c) In those cases in which the National Office advises the Appeals
office that it should not furnish a copy of the technical advice
memorandum to the taxpayer, the Appeals office will so inform the
taxpayer if he/she requests a copy.
(viii) Effect of technical advice. (a) A technical advice memorandum
represents an expression of the views of the Service as to the
application of law, regulations, and precedents to the facts of a
specific case, and is issued primarily as a means of assisting Service
officials in the closing of the case involved.
(b) Except in rare or unusual circumstances, a holding in a
technical advice memorandum that is favorable to the taxpayer is applied
retroactively. Moreover, since technical advice, as described in
subdivision (i) of this subparagraph, is issued only on closed
transactions, a holding in a technical advice memorandum that is adverse
to the taxpayer is also applied retroactively unless the Assistant
Commissioner or Deputy Assisitant Commissioner (Technical) exercises the
discretionary authority under section
[[Page 36]]
7805(b) of the Code to limit the retroactive effect of the holding.
Likewise, a holding in a technical advice memorandum that modifies or
revokes a holding in a prior technical advice memorandum will also be
applied retroactively, with one exception. If the new holding is less
favorable to the taxpayer, it will generally not be applied to the
period in which the taxpayer relied on the prior holding in situations
involving continuing transactions of the type described in
Sec. 601.201(l)(7) and Sec. 601.201(l)(8).
(c) The Appeals office is bound by technical advice favorable to the
taxpayer. However, if the technical advice is unfavorable to the
taxpayer, the Appeals office may settle the issue in the usual manner
under existing authority. For the effect of technical advice in Employee
Plans and Exempt Organization cases see Sec. 601.201(n)(9)(viii).
(d) In connection with section 446 of the Code, taxpayers may
request permission from the Assistant Commissioner (Technical) to change
a method of accounting and obtain a 10-year (or less) spread of the
resulting adjustments. Such a request should be made prior to or at the
first Appeals conference. The Appeals office has authority to allow a
change and the resulting spread without referring the case to Technical.
(e) Technical advice memorandums often form the basis for revenue
rulings. For the description of revenue rulings and the effect thereof,
see Secs. 601.601(d)(2)(i)(a) and 601.601(d)(2)(v).
(f) An Appeals office may raise an issue in a taxable period, even
though technical advice may have been asked for and furnished with
regard to the same or a similar issue in any other taxable period.
(g) Limitation on the jurisdiction and function of Appeals--(1)
Overpayment of more than $200,000. If Appeals determines that there is
an overpayment of income, war profits, excess profits, estate,
generation-skipping transfer, or gift tax, or any tax imposed by
chapters 41 through 44, including penalties and interest, in excess of
$200,000, such determination will be considered by the Joint Committee
on Taxation, See Sec. 601.108
(2) Offers in compromise. For jurisdiction of Appeals with respect
to offers in compromise of tax liabilities, see Sec. 601.203.
(3) Closing agreements. For jurisdiction of Appeals with respect to
closing agreements under section 7121 of the Code relating to any
internal revenue tax liability, see Sec. 601.202.
(h) Reopening closed cases not docketed in the Tax Court. (1) A case
not docketed in the Tax Court and closed by Appeals on the basis of
concessions made by both the Appeals and the taxpayer will not be
reopened by action initiated by the Service unless the disposition
involved fraud, malfeasance, concealment or misrepresentation of
material fact, or an important mistake in mathematical calculations, and
then only with the approval of the Regional Director of Appeals.
(2) Under certain unusual circumstances favorable to the taxpayer,
such as retroactive legislation, a case not docketed in the Tax Court
and closed by Appeals on the basis of concessions made by both Appeals
and the taxpayer may be reopened upon written application from the
taxpayer, and only with the approval of the Regional Director of
Appeals. The processing of an application for a tentative carryback
adjustment or of a claim for refund or credit for an overassessment (for
a year involved in the prior closing) attributable to a claimed
deduction or credit for a carryback provided by law, and not included in
a previous Appeals determination, shall not be considered a reopening
requiring approval. A subsequent assessment of an excessive tentative
allowance shall likewise not be considered such a reopening. The
Director of the Appeals Division may authorize, in advance, the
reopening of similar classes of cases where legislative enactments or
compelling administrative reasons require such advance approval.
(3) A case not docketed in the Tax Court and closed by Appeals on a
basis not involving concessions made by both Appeals and the taxpayer
will not be reopened by action initiated by the Service unless the
disposition involved fraud, malfeasance, concealment or
misrepresentation of material fact, an important mistake in mathematical
[[Page 37]]
calculation, or such other circumstance that indicates that failure to
take such action would be a serious administrative omission, and then
only with the approval of the Regional Director of Appeals.
(4) A case not docketed in the Tax Court and closed by the Appeals
on a basis not involving concessions made by both Appeals and the
taxpayer may be reopened by the taxpayer by any appropriate means, such
as by the filing of a timely claim for refund.
(i) Special procedures for crude oil windfall profit tax cases. For
special procedures relating to crude oil windfall profit tax cases, see
Sec. 601.405.
((5 U.S.C. 301 and 552) 80 Stat. 379 and 383; sec. 7805 of the Internal
Revenue Code of 1954, 68A Stat. 917 (26 U.S.C. 7805))
[32 FR 15990, Nov. 22, 1967]
Editorial Note: For Federal Register citations affecting
Sec. 601.106, see the List of CFR Sections Affected, which appears in
the Finding Aids section of the printed volume and on GPO Access.