An action on decision (AOD) conveys the recommendation of the Office of Chief Counsel concerning whether the Service will follow a significant adverse opinion. An AOD expeditiously alerts Service personnel to Chief Counsel's current litigating position and is issued to enhance Service consistency with respect to future litigation or dispute resolution. While AODs are published in the Internal Revenue Bulletin, they are not intended to serve as statements of Service position that can be relied upon by the public and are not to be cited as precedent.

An AOD is issued by the Associate Chief Counsel office with subject matter jurisdiction over the substantive issue addressed in the AOD.

An AOD is prepared on cases containing significant issues decided adversely to the Government. An issue is decided adversely to the Government when the Service is adversely affected in its legal position by the opinion. An issue may be considered adverse for the purpose of determining whether an AOD should be issued, even if neither the case nor the issue is appealable.

The issue is the basis upon which the court determined the tax liability of the taxpayer. The issue is not synonymous with the argument or theory and does not refer to subsidiary questions of fact or law. The court may reject one or more of the Government's arguments or theories and nevertheless sustain the Government as to the amount of tax liability. The court may render an opinion adverse to Service position, but then, in another case, reverse itself in an unpublished opinion. Although the Service can not appeal the decision in these cases, an AOD may still need to be issued.

Occasionally, it is necessary to prepare an action on an issue not resolved by the court. This can arise in a case in which the Government in the pleadings has taken alternative positions on the same taxable transaction and the court sustains the Government on one of the alternative positions.

Among the factors in determining whether an issue is significant and an AOD should be issued are:

An AOD is generally not prepared on issues decided favorably to the Government, on issues conceded by the Government, or on insignificant issues decided adversely to the Government. An AOD is not prepared for issues that are on appeal, or will be appealed, by the Government. The Government appeal itself indicates the Service's disagreement with the opinion.

When considering publication of an AOD, alternatives, such as regulations, revenue rulings, and notices should also be considered. An AOD may also be used in coordination with, or to supplement, technical pronouncements.

Upon receipt of an adverse opinion the attorney assigned to the case will perform an adverse opinion review. See CCDM 36.1.1.2.1 and CCDM 36.1.1.6. When considering appeal of the adverse opinion, the attorney should consider whether to issue an AOD. See CCDM 36.2.1.1.3 and CCDM 36.2.6.2.2.

The field office may, if it chooses, provide an AOD recommendation by memorandum to the office assigned to consider appeal of the case.

An AOD will be prepared at the time the decision is final, or when the office determines that the decision cannot or will not be appealed.

An AOD should:

The recommendation in every AOD will be summarized as acquiescence, acquiescence in result only, or nonacquiescence.

Generally, the recommendation should be explained in the discussion portion of the AOD. Such an explanation should be included, for example, where the Service is seeking other cases to establish a conflict among the circuits, or where the Service anticipates revoking or modifying a regulation or revenue ruling. In a nonacquiescence to a circuit court case, the discussion section should include a statement that the opinion will be followed in that circuit. The AOD should include the following language to clearly indicate that Service personnel are expected to follow the circuit precedent, unless the case can be distinguished:

This language should not be used in those very rare circumstances when the office determines that the issue will continue to be litigated even in the deciding circuit or that the case does not establish controlling circuit precedent because its holding can be limited to its unique facts. Instead, the AOD should provide clear directions as to how to resolve cases appealable to that circuit.

The format of an AOD is shown in Exhibit 36.4.1–26.

Once the AOD is drafted, it should be fully coordinated prior to approval with any other office that may have an interest in the issues covered by the AOD. If a case involves issues under the jurisdiction of two or more Associate Chief Counsel offices, those offices will confer and determine which office shall issue the consolidated AOD or whether it will be issued jointly by the offices affected. The formal views of the Commissioner will usually be obtained on issues that affect the administrative operations of the Service.

A proposed AOD will be signed by the preparing attorney and initialed by the branch reviewer and the Assistant Chief Counsel reviewer (if any). The AOD is signed by the Associate Chief Counsel. See Exhibit 36.4.1–26.

There will be only one AOD for each case. In general, AODs will not be issued in any case until litigation of the case is concluded or litigation of any cases with related issues is concluded.

The office may decide that issuance of an AOD is warranted, but may choose to defer issuance to a later date. A deferred AOD may be appropriate where Service position is unsettled, where a published ruling is contemplated on the issue, or where the decision must await other legal or policy determinations.

During the preparation or review of an AOD, consideration should be given, where appropriate, to whether there is a need for changes in the regulations or for new legislation. If an amendment to regulations is necessary for the purpose of clarifying the law or facilitating the administration of the issue involved as it may arise in future cases, or to accord with the court's decision if it is to be followed, the attorney should prepare a memorandum describing the changes needed along with the reasons for those changes. If the attorney believes that revision of the Internal Revenue Code is necessary, a similar memorandum should be prepared. These memoranda should be circulated along with the AOD.

If the holding of the court is contrary, in whole or in part, to a technical pronouncement such as a revenue ruling or procedure, consideration must be given to whether the technical pronouncement should be revoked or modified to accord with the court's opinion. If the recommendation is for acquiescence, the discussion portion should state in what manner the litigating position of the office, as stated in the technical pronouncement, is incorrect. An accompanying memorandum should be prepared by the Associate Chief Counsel office attorney, which discusses in greater detail than in the AOD the basis for the conclusion that the technical pronouncement should be modified or revoked.

After signature by the Associate Chief Counsel, the AOD will be returned to the Technical Services Support Branch, Office of the Associate Chief Counsel (P&A). The Technical Services Support Branch will forward the AOD for publication in the Internal Revenue Bulletin. The original will be returned to the office originating the AOD for inclusion in the legal file.

Upon final approval of an AOD, there will be no advance distribution until publication in the Internal Revenue Bulletin of the action's recommendation for acquiescence, nonacquiescence, or acquiescence in result only.

After publication of the recommendation, the AOD will be released to the public and distributed to Service personnel within ten working days.

An AOD will be dated at the top with the same date as the Internal Revenue Bulletin in which the recommendation is published.

After the AOD recommendation appears in the IRB, the Technical Services Support Branch, Office of the Associate Chief Counsel (P&A) will forward a copy of the AOD to the printer for distribution to Counsel, Appeals, and Service personnel, and the Freedom of Information Reading Room.

Prior to publication, attorneys should not discuss the issuance or possible issuance of an AOD with the public or with taxpayers in the course of their dealings.

After publication, the public may generally be informed of the AOD's position on such issues and that copies of such action are available in the Internal Revenue Bulletin.

In order to ensure rapid coordination of Service litigating positions, so that all Counsel offices can act uniformly in handling docketed and nondocketed cases, changes in Service litigating positions will be announced in Notices and be posted electronically through email and to the Intranet. These Chief Counsel Notices will bear a uniform title: CHANGE IN LITIGATING POSITION, and will bear a cancellation date as follows:

Each Chief Counsel Notice will bear a Chief Counsel Uniform Issue List number to facilitate research of these documents. These Notices, like all Chief Counsel Notices, will be made available to the public through the FOIA reading room.

Each Associate Chief Counsel, where appropriate, may delegate signature authority for these Notices to the Assistant Chief Counsel level. Although the earliest possible coordination of changes in Service litigating positions is intended through Chief Counsel Notices, the orderly preparation, scope and purpose of AODs and LGMs should continue.

Chief Counsel Notices are available on the Chief Counsel Intranet System.

As a result of revisions in the technical or litigating position of the office, it is necessary from time to time to reconsider outstanding AODs. Published actions for either acquiescence or nonacquiescence may be affected by new regulations or rulings, changes in existing regulations or rulings, subsequent court decisions, technical or litigation positions taken in letters to the Department of Justice, or other official memoranda. Attorneys in the National Office or in the field, on their own initiative or at the direction of their supervisors, should consider and initiate any appropriate revisions of outstanding actions whenever the need appears. The Department of Justice also may request revisions of published actions in connection with cases involving similar issues that are being litigated by them. Such requested revisions should be processed as quickly as is practicable.