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Revenue Procedure 94-67

SECTION 1. PURPOSE

SECTION 2. DESCRIPTION OF AN AIR AGREEMENT

SECTION 3. SCOPE OF AN AIR AGREEMENT
.01 In general
.02 Issues excluded from the AIR agreement process.
.03 Issues requiring approval or assistance.
.04 Impact of an AIR agreement.
.05 Avoiding whipsaw cases.

SECTION 4. PROCEDURES FOR REQUESTING AN AIR AGREEMENT
.01 Initiating the request.
.02 Statement of issues, facts, laws, and arguments.
.03 Statement regarding relief from double taxation.
.04 Copies of all contracts and other documents.
.05 Statement regarding additional examination and/or inspection of books of account and records.
.06 Perjury statement.
.07 Signatures.

SECTION 5. PROCESSING A REQUEST FOR AN AIR AGREEMENT
.01 CEP taxpayer notified.
.02 Factual development.
.03 Coordination with other functions.
.04 Evaluation of the request.
.05 Chief Counsel review.
.06 Granting the request.
.07 Joint Committee review.
.08 No appeal.

SECTION 6. WITHDRAWAL FROM THE PROCESS
.01 Withdrawal by the CEP taxpayer or the District Director.
.02 Effect of withdrawal.

SECTION 7. FORM AND CONTENT OF AN AIR AGREEMENT
.01 Form.
.02 Content

SECTION 8. DISCLOSURE

SECTION 9. MISCELLANEOUS
.01 Record keeping requirements
.02 Double taxation
.03 Record retention
.04 No user fee

SECTION 10. EFFECT ON OTHER DOCUMENTS

SECTION 11. EFFECTIVE DATE


SECTION 1. PURPOSE

Accelerated Issue Resolution ("AIR") is a process to advance the resolution of issues arising from an audit of a Coordinated Examination Program ("CEP") taxpayer from one or more tax periods to other tax periods. This revenue procedure explains when and how a taxpayer subject to a CEP audit requests an AIR agreement from the District Director. The AIR process is one of the procedures used by the Service to advance the resolution of issues with respect to tax periods ending prior to the date of an AIR agreement. This revenue procedure does not alter the District Director's authority to audit the returns of a CEP taxpayer nor limit or expand the District Director's authority to resolve any issues, including the authority in Delegation Order No. 236, 1991-1 C.B. 313.

SECTION 2. DESCRIPTION OF AN AIR AGREEMENT

An AIR agreement is a closing agreement under § 7121 of the Internal Revenue Code between the Service and a CEP taxpayer relating to one or more specific issues arising from an audit of a CEP taxpayer for a taxable period(s) ending prior to the date of agreement. See Rev. Proc. 68-16, 1968-1 C.B. 770, which describes the preparation of closing agreements under § 7121.

SECTION 3. SCOPE OF AN AIR AGREEMENT

.01 In general. Except as provided in sections 3.02 and 3.03 of this revenue procedure, an AIR agreement may be entered into with respect to (1) any issue under the jurisdiction of the District Director arising from an audit of a CEP taxpayer for a taxable period(s) ending prior to the date of the agreement, and (2) related specific items affecting other taxable periods. See Delegation Order No. 97 (Rev. 31), paragraph 4, 1992-2 C.B. 357.

.02 Issues excluded from the AIR agreement process. An AIR agreement will not include issues in cases outside the jurisdiction of the District Director. In addition, an AIR agreement will not include:

(1) issues that are subject to an Advance Pricing Agreement under Rev. Proc. 91-22, 1991-1 C.B. 526;

(2) issues under the jurisdiction of the Assistant Commissioner (Employee Plans and Exempt Organizations);

(3) any partnership items as defined in § 6231, or any other issues subject to the procedures set forth in §§ 6221 through 6233;

(4) any issue if its resolution is contrary to a private letter ruling, technical advice memorandum, or closing agreement previously issued to or entered into with the CEP taxpayer, or is contrary to any proposed position indicated by the Service with respect to a private letter ruling request that was withdrawn following notification by the Service that it would take a position adverse to that sought by the CEP taxpayer; or

(5) an issue of the CEP taxpayer designated for litigation by the Office of Chief Counsel.

.03 Issues requiring approval or assistance. If a request for an AIR agreement is with respect to an issue or issues that require the approval of another agency, office, or Service function, the District Director must request consent from the agency, office, or Service function to enter into an AIR agreement with respect to these issues. It is within the discretion of the other agency, office, or Service function to grant consent or otherwise provide assistance to the District Director. The following are
examples of situations in which approval is required before the District Director may enter into an AIR agreement:

(1) issues coordinated through the Industry Specialization Program;

(2) Appeals Coordinated issues and Appeals Industry Specialization Program issues;

(3) issues currently under Competent Authority consideration for any year, issues in which the taxpayer intends to seek relief from double taxation under a treaty, and issues with respect to which the taxpayer has obtained Competent Authority assistance in prior years;

(4) issues within the jurisdiction of the Department of Justice (for example, refund cases);

(5) issues controlled by a Regional Commissioner; or

(6) issues in multi-district cases.

.04 Impact of an AIR agreement. The direct or indirect impact of an AIR agreement upon other years, issues, or related cases should be given careful consideration. Coordination with other Service functions on related years, issues, or cases should be effected at the earliest practicable date.

.05 Avoiding whipsaw cases. Where appropriate, an AIR agreement may include related parties so the government will not be subject to conflicting claims of taxpayers.

SECTION 4. PROCEDURES FOR REQUESTING AN AIR AGREEMENT

.01 Initiating the request. A request for an AIR agreement is submitted in writing by the CEP taxpayer to the Case Manager in the office of the District Director with jurisdiction over the return or returns of the CEP taxpayer currently under examination. The District Director may suggest that a CEP taxpayer make such a submission.

.02 Statement of issues, facts, laws, and arguments. A request for an AIR agreement must contain a written statement of all issues, facts, law, and analysis relating to the request. This statement must:

(1) state the issues for which an AIR agreement is sought and the taxable periods to which those issues relate; and

(2) discuss the material facts and provide an analysis of the facts and the law as they apply to the issues in the request for an AIR agreement.

.03 Statement regarding relief from double taxation. A request for an AIR agreement must state whether the CEP taxpayer ever applied for Competent Authority assistance with respect to the AIR issues for the years under consideration or for prior years and if the taxpayer intends to seek relief from double taxation for the AIR agreement issues, as described in section 9.02 of this revenue procedure.

.04 Copies of all contracts and other documents. True copies of all contracts, agreements, instruments, schedules, and other documents pertinent to a request for an AIR agreement must be submitted by the CEP taxpayer upon request. The CEP taxpayer must submit upon request certified English translations of all applicable foreign laws and a copy of those laws. For guidelines on the acceptability of such documents, see Rev. Rul. 67-308, 1967-2 C.B. 254. Each document submitted should be labelled.

.05 Statement regarding additional examination and/or inspection of books of account and records. A request for an AIR agreement must contain a statement that the CEP taxpayer agrees:

(1) that the inspection of books of account or records under the AIR procedures will not preclude or impede (under § 7605(b) or any administrative provisions adopted by the Service) a later examination of a return or inspection of books of account or records with respect to any tax year needed to resolve the issue(s) involved in the request for an AIR agreement; and

(2) that the Service need not comply with any applicable procedural restrictions (for example, providing notice under § 7605(b)) before beginning such examination or inspection.

.06 Perjury statement. A request for an AIR agreement, and any supplemental submission (including additional documents), must include a declaration in the following form:

Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the facts presented in support of the request for the AIR agreement are true, correct, and complete.

The declaration must be signed by the person or persons currently authorized to sign the returns of the CEP taxpayer for the period or periods covered by the request.

.07 Signatures. A request for an AIR agreement must be signed by the CEP taxpayer or the CEP taxpayer's authorized representative. See section 8.01(10) of Rev. Proc. 94-1, 1994-1 I.R.B. 10, 25. It is preferred that Form 2848, Power of Attorney and Declaration of Representative, be used with regard to a request for an AIR agreement under this revenue procedure.

SECTION 5. PROCESSING A REQUEST FOR AN AIR AGREEMENT

.01 CEP taxpayer notified. By written notification, the District Director or his/her designee will:

(1) inform the CEP taxpayer of the issues accepted for consideration and the reason for the rejection of any issue; and

(2) request, in accordance with Rev. Proc. 94-69, that disclosure statements be submitted with respect to the issues being considered for inclusion in an AIR agreement. This request for disclosure statements will not remedy a previous failure to furnish adequate disclosure for any tax period in which the CEP taxpayer was required to furnish disclosure statements.

.02 Factual development. After receiving a request for an AIR agreement and accepting all or part of the issues for consideration, the District Director will contact the CEP taxpayer to discuss any questions that the Service may have, or to ask for any additional information believed to be necessary in order to process the request.

.03 Coordination with other functions. In considering the request for an AIR agreement, the District Director must obtain approval from, or coordinate with, all appropriate agencies, offices, and Service functions as provided in section 3.03 of this revenue procedure, and coordinate as provided in section 3.04. In addition, assistance is to be requested from the Assistant Commissioner (Examination) with respect to a proposed AIR agreement which, if accepted, might constitute an industry-wide model for disposing of a significant issue on a basis not previously used.

.04 Evaluation of the request. The District Director, in coordination with all affected Service functions, will evaluate the request for an AIR agreement by discussing it with the CEP taxpayer, verifying the data supplied, and requesting additional supporting data if necessary. The issues will be developed and facts confirmed consistent with auditing standards and all other applicable rules and regulations in effect regarding proper auditing techniques (including Policy Statement P-4-5).

.05 Chief Counsel review. The District Director must submit the proposed AIR agreement to District Counsel for review before it is executed. The District Director may request the assistance of District Counsel or other Chief Counsel functions at any time during the consideration of the request for an AIR agreement.

.06 Granting the request. The District Director may grant the request for an AIR agreement where:

(1)(a) there appears to be an advantage in having the issues permanently and conclusively closed for the years covered by the AIR agreement, or

(b) the CEP taxpayer shows good and sufficient reasons for desiring a closing agreement and it is determined by the Commissioner that the United States will sustain no disadvantage through consummation of such an agreement (see § 301.7121-1(a) of the Regulations on Procedure and Administration); and

(2) the law is properly applied to the facts without taking into account the hazards of litigation, or the provisions of Delegation Order No. 236 are applicable and are satisfied.

.07 Joint Committee review. When an Air agreement results in a refund or credit requiring a report described in § 6405 that must be submitted to the Joint Committee on Taxation, the report must include a copy of the proposed AIR agreement signed by or for the CEP taxpayer, but not signed by or on behalf of the Commissioner. The Service will not sign the proposed AIR agreement until after the review by the Joint Committee.

.08 No appeal. There is no appeal if the District Director rejects all or part of a request for an AIR agreement.

SECTION 6. WITHDRAWAL FROM THE PROCESS

.01 Withdrawal by the CEP taxpayer or the District Director. At any time prior to the execution of the AIR agreement by the District Director, either the CEP taxpayer or the District Director may withdraw all or part of the request for an AIR agreement from consideration. The withdrawal must be communicated in writing.

.02 Effect of withdrawal. The statement of the taxpayer as set forth in section 4.05 of this revenue procedure will be effective notwithstanding the withdrawal by either the CEP taxpayer or the District Director of any or all of the issues in the request for an AIR agreement. In addition, withdrawal of an issue accepted for consideration will not affect the disclosure period provided in Rev. Proc. 94-69. Therefore, as to those issues withdrawn, any subsequent disclosure will not be timely under Rev. Proc. 94-69.

SECTION 7. FORM AND CONTENT OF AN AIR AGREEMENT

.01 Form. An AIR agreement between the CEP taxpayer and the Service is a closing agreement under § 7121. See Rev. Proc. 68-16, 1968-1 C.B. 770, for further information on the form and content of a closing agreement.

.02 Content. An AIR agreement must comply with the requirements of Revenue Procedure 68-16 and must include:

(1) the names, addresses, telephone numbers, and taxpayer identification numbers of all entities (including subsidiaries) to be included in the agreement;

(2) an acknowledgment by the taxpayer that the materials and representations contained in the request for an AIR agreement were relied upon by the Service, together with a description, either directly or by reference, of other materials and representations upon which the CEP taxpayer and the Service relied in reaching the agreement;

(3) representations by the CEP taxpayer of consistent treatment of the issues subject to the AIR agreement in the years covered by such agreement;

(4) the CEP taxpayer's acknowledgment that:

(a) the inspection of books of account or records under the AIR procedures will not preclude or impede (under § 7605(b) or any administrative provisions adopted by the Service) a later examination of a return or inspection of books of account or records with respect to any tax year needed to resolve the issues involved in the AIR agreement; and

(b) the Service need not comply with any applicable procedural restrictions (for example, providing notice under § 7605(b)) before beginning such examination or inspection;

(5) a statement clearly identifying the resolution of the specific matters covered by the agreement;

(6) computations in sufficient detail to determine the effect of the adjustments at issue; and

(7) a statement of any conditions for implementing the AIR agreement, including any requirements for waiving restrictions on assessment and collection, filing an amended return, paying any tax, abating any overassessment, or refunding or crediting any tax overpayment.

SECTION 8. DISCLOSURE

The information received or generated by the Service during the AIR agreement process constitutes return information as defined in § 6103(b)(2) for purposes of the rules of confidentiality and disclosure described in § 6103(a). An AIR agreement resolves specific audit issues and is not a written determination within the meaning of § 6110.

SECTION 9. MISCELLANEOUS

.01 Record keeping requirements. No aspect of the AIR agreement process will affect the record keeping requirements imposed by any section of the Internal Revenue Code.

.02 Double taxation. An AIR agreement may result in double taxation for which relief may be available under the mutual agreement provision of a tax treaty between a foreign country and the United States. See Rev. Proc. 91-23, 1991-1 C.B. 534. CEP taxpayers that intend to resolve issues under this revenue procedure, and also intend to seek relief from double taxation under a treaty, should not execute the closing agreement provided under this revenue procedure with respect to the issues subject to double taxation. The District Director or his/her designee and the taxpayer are encouraged to consult with the U.S. Competent Authority with respect to these issues. Approval from the U.S. Competent Authority is necessary if the parties want to conclude a closing agreement prior to applying for Competent Authority assistance. Executing an AIR agreement before the issues are considered under the mutual agreement provision of a tax treaty could jeopardize double taxation relief. When appropriate, however, the CEP taxpayer, pursuant to Rev. Proc. 91-23, may be requested to enter into a closing agreement reflecting the terms of the double taxation relief provided with respect to these issues.

.03 Record retention. The CEP taxpayer must maintain:

(1) a copy of the AIR agreement, and

(2) books of account and records sufficient to enable the Service to examine the CEP taxpayer's compliance with the AIR agreement.

.04 No user fee. There is no user fee required with a request for an AIR agreement.

SECTION 10. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 68-16 is modified to the extent that a closing agreement executed under this revenue procedure acquires District Counsel approval.

SECTION 11. EFFECTIVE DATE

This revenue procedure is effective October 31, 1994.

DRAFTING INFORMATION

The principal author of this revenue procedure is Harry Lebedun of the Office of Coordinated Examination Programs. Taxpayers seeking further information regarding this revenue procedure or wishing to make suggestions about the AIR program should contact Mr. Lebedun on (202) 622-3373.

Page Last Reviewed or Updated: 03-Nov-2014