4.36.3  Examiner's Responsibilities

4.36.3.1  (05-04-2010)
Introduction

  1. This section sets forth examination group responsibilities and procedures relative to Joint Committee cases. It covers the following areas:

    1. Examination Procedures (3.2)

    2. Types of Joint Committee Specialist Reviews (3.3)

    3. Survey After Assignment (3.4)

    4. Statute of Limitations (3.5)

    5. Documentation Requirements (3.6)

    6. Reporting Prior to Resolution of All Issues (3.7)

    7. Submission of Case to Joint Committee Specialist (3.8)

    8. Inquiries from Joint Committee Specialist Group (3.9)

    9. Disclosure of Correspondence with Joint Committee on Taxation (3.10)

    10. Referral to Taxpayer Advocate Service (3.11)

    11. Examination/Appeals Case Coordination (3.12)

4.36.3.2  (05-04-2010)
Examination Procedures

  1. Joint Committee cases are to be handled by experienced examiners and given the same thorough examination as other cases of a similar size and difficulty. It is the examiner's responsibility to determine the scope and depth of the examination. This includes whether a limited scope or Limited Issue Focused Examination (LIFE) is appropriate. If a LIFE case subsequently becomes a Joint Committee case, the Joint Committee on Taxation (JCT) has the authority to inquire on issues beyond the scope of the agreement. However, the Service is still bound by the LIFE agreement unless fraud or malfeasance is found. The JCT will generally accept business decisions that are made in examinations, but those decisions must be properly supported and documented. In addition, other management initiatives, such as Fast Track Settlement and Accelerated Issue Resolution, may also be used in resolving issues in Joint Committee cases. However, see IRM 4.36.4.10 for applicable closing agreement procedures.

  2. When a loss is attributable to a flow-thru entity, the examiner should, at a minimum, inspect the return and determine whether an examination is warranted. A copy of the flow-thru return should be included in the case file.

  3. When Competent Authority is involved in a Joint Committee case, the Team Manager is responsible for informing the Competent Authority Official that closing agreements must be reviewed by the JCT before being signed by the Service.

  4. Only those cases closed agreed are reported to the JCT. At the time an unagreed case is closed to the Office of Appeals, no report is required. However, once an agreement has been reached and the case still meets JCT criteria, Appeals will be responsible for preparing and submitting a report to the JCT.

  5. Partially agreed cases will require reporting to the JCT if the taxpayer is entitled to a refund over $2 million regardless of the resolution of the unagreed issues. This situation is known as a minimum refund. If the taxpayer signs Form 870 requesting the refund, the examiner will follow the Joint Committee procedures, and the Joint Committee Specialist will prepare and submit a report on the minimum refund. The Appeals Officer will submit a supplemental report when the unagreed issues are finally resolved even if the resolution of such issues does not cause an additional refund or credit. See IRM 4.36.3.7 for detailed information and procedures on minimum refunds.

4.36.3.2.1  (05-04-2010)
Case Identification

  1. Examiners are responsible for identifying all Joint Committee cases in their inventory, or when the case qualifies as the result of the examination. Examiners must ensure that all returns, both source and carryback years, have project code 0077 on ERCS/AIMS. See IRM 4.36.2.4 for guidance in determining the jurisdictional amount.

4.36.3.2.2  (05-04-2010)
Claim Filed During Examination

  1. Where a case is under examination or has been examined but not closed out of the examining group and the taxpayer files a claim for refund or application for tentative allowance sufficient to bring the case within the jurisdiction of the JCT, the examination will be extended to include such source year. Certain cases can be closed and reported to the JCT prior to the resolution of all issues. See IRM 4.36.3.7.2 for the procedures and criteria for tentative allowances from unexamined source years and IRM 4.36.3.7.3 for the procedures and criteria for claims from unexamined source or refund years.

    Example 1:

    Facts:
    Examination resulted in an overassessment of $1,600,000 for 2003. During the examination a claim is filed for 2003 for $410,000 based on a 2005 NOL.

    Conclusion:
    The examination should be extended to include 2005, since the aggregate amount of the refunds or credits under IRC 6405(a) exceeds $2 million.

    Example 2:

    Facts:
    Examination resulted in an overassessment of $700,000 for 2003. During the examination an application for tentative allowance is filed for 2003 for $1,400,000 based on a 2005 NOL.

    Conclusion:
    The examination will not be extended for purposes of JCT consideration since separate computations of jurisdictional limits under either IRC 6405(a) or 6405(b) do not exceed $2 million.

4.36.3.2.3  (05-04-2010)
Discovery that Report Was Not Prepared

  1. Upon discovery that an overpayment in excess of $2 million has been refunded without a report to the JCT, the examiner will notify the manager and the Joint Committee Specialist group.

  2. When a case that requires reporting to the Joint Committee on Taxation was inadvertently not reported, the team that concluded the examination of the case will be responsible for securing the files and preparing the case for Joint Committee review. The normal guidelines will be followed, even though the examination has been completed and closed.

4.36.3.2.4  (05-04-2010)
Claim Filed for Previously Examined Year

  1. If the refund or credit is for a year previously examined, that year should not be reexamined unless such action is necessary under reopening criteria, also known as case return criteria. See IRM 4.36.4.3.

  2. All pertinent years (both refund and source years) must be covered in a current examination or survey action, even if one or more of the refund years has been previously surveyed or examined. All prior audit or survey reports pertaining to such years must be included in the case file. See IRM 4.36.3.6 for report writing requirements.

4.36.3.2.5  (05-04-2010)
Information Given to Taxpayer

  1. Upon completion of the examination, the examiner will solicit an agreement to the findings and inform the taxpayer that a report to the JCT is necessary and additional processing time will be required. The examiner should also advise the taxpayer to expect written notification when the report has been forwarded to the JCT. The examiner should answer any taxpayer questions until Letter 1573A (P) or Letter 1573 (P) is received at which time the Joint Committee Specialist will answer questions about Joint Committee procedures..

4.36.3.2.6  (05-04-2010)
Form 870

  1. Joint Committee cases are considered "Excepted Agreed Cases" and as such the reopening procedures do not apply. IRM 4.10.8.4 states that Form 870, Waiver of Restriction on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, will be used along with Form 4549-A in Joint Committee cases.

4.36.3.2.6.1  (05-04-2010)
Net Deficiency (with Tentative Net Allowance exceeding $2 Million)

  1. In net deficiency cases, the taxpayer has the option of signifying agreement by filing:

    1. A Form 870 without any restrictions or special language; or

    2. An unqualified Form 870 with the following language inserted:
      "This waiver of restrictions on assessment and collection is to take effect as a waiver of restrictions on the earlier of the date that expires 30 days after receipt by the Joint Committee on Taxation of a request for expeditious processing of any refunds due if, during the 30-day period, the Joint Committee on Taxation Staff does not object in writing to the expeditious processing of such refunds or the date the Joint Committee on Taxation completes its review of the report submitted under section 6405 of the Code and releases it from its jurisdiction."

  2. The above qualification can be used to prevent the deficiency from being assessed prior to JCT clearance. Otherwise, the deficiency should be assessed before the JC report is submitted to prevent loss of interest to the government.

4.36.3.2.6.2  (05-04-2010)
Assessment Prior to Review

  1. If the taxpayer chooses an unqualified Form 870, the deficiency will be assessed by the Joint Committee Specialist and the taxpayer will be billed for such deficiency plus interest prior to sending the report to the JCT.

  2. If 6 months or less remain on the statute of limitations, and the taxpayer will not extend the statute, the deficiency must be assessed prior to forwarding the case to the Joint Committee Specialist group.

4.36.3.2.7  (05-04-2010)
Refund Prior to Review

  1. If the taxpayer signs an unqualified Form 870 and the net overassessment is less than $2 million, the overassessment (and deficiency, if any) may be processed prior to reporting the IRC 6405(b) refund to the JCT. This only applies if there is sufficient time open on the statute of limitations to follow deficiency procedures.

4.36.3.2.8  (05-04-2010)
Restricted Interest

  1. Adjustments due to carrybacks will result in restricted interest. Even if there is no tax change to a carryback year, there may be a net interest assessment or abatement. Such computations should be explained to the taxpayer.

  2. The JC Specialist or the Tax Computation Specialist (if assigned) is responsible for the preparation of Part I of Form 2285, Concurrent Determinations of Deficiencies and Overassessments in Cases Involving Restricted Interest Provisions of the Internal Revenue Code. For estate tax, use Form 1366, Tax Analysis Worksheet of Overassessment of Estate Tax Involving Restricted Interest. Form 2285 is required if there are tax changes from current year adjustments and at least one carryback year, or changes from two or more carryback years without any current year adjustments.

  3. In cases with complicated tax and credit computations, the examiner or Tax Computation Specialist (if assigned) should prepare tax analysis worksheet/schedules. These documents will assist in preparing the form. The examiner may use separate and clearly labeled draft type Revenue Agent's Reports (RARs) showing:

    1. Only the general adjustments,

    2. The general adjustments and the earliest carryback,

    3. The general adjustments and the two earliest carrybacks,

    4. Other useful information.

  4. These RARs can be prepared using a properly input BNA file. On the Misc Taxes & Credit Recapture input worksheet there is a line called Disable All Carrybacks (Y/N). When Y is input for the latest source year, the program will compute the tax without that carryback. The Y should be input for the last and next to last year. When all carrybacks are disabled, the RAR will show the general adjustment tax change.

  5. If all of the tax adjustments to a year are due to an increase or decrease of just one carryback year, the Form 3198, Special Handling Notice for Examination Case Processing, needs to have this information. Form 2285 will not be required for this year.

4.36.3.2.9  (05-04-2010)
Claim Disallowance In Agreed Cases

  1. Because of the time required to process a Joint Committee case, the examiner will not solicit Form 2297, Waiver of Statutory Notification of Claim Disallowance, in an agreed claim case involving the disallowance in full or in part of a claim for refund or credit. Such action disadvantages the taxpayer by prematurely starting the running of the two-year period for filing suit. However, Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit, can be used instead of Form 870 if there are no adjustment other than the claim.

  2. The examiner should indicate on Form 3198 (or other special handling form) that a statutory notice of claim disallowance should be issued after release from the JCT.

4.36.3.3  (05-04-2010)
Types of Joint Committee Specialist Reviews

  1. A Joint Committee Specialist is responsible for the preparation of the report that is furnished to the JCT. The review that is conducted by the specialist is either done as a "closed case review" after the case is closed from the group, or as an "in-process review" (formerly known as an "on-site" review) prior to the case being closed from the group.

4.36.3.3.1  (05-04-2010)
Closed Case Reviews

  1. A closed case review is conducted after the case has been forwarded from the examining group to Joint Committee Specialist Group. See IRM 4.36.3.8 for submission procedures.

  2. The Joint Committee Specialist conducts a focused review of the case which includes the RAR and supporting documentation. This review and the preparation of the report to the JCT takes place at the specialist’s post-of-duty.

4.36.3.3.2  (05-04-2010)
In-Process Reviews

  1. In-process reviews are conducted before the case is closed from the examining group. The review is generally conducted at the site of the examination but may also be conducted remotely, such as from the Joint Committee Specialist's office. This process envisions that the report to JCT will be completed prior to the closing of the case. The purpose of the in-process review is to improve the efficiency of the review and reduce the time span between the completion of the RAR and forwarding of the report to the JCT.

  2. Both the examiner and the team manager should consider a case for an in-process review as soon as they believe a report to the JCT will be required; i.e., refund(s) within the jurisdictional amount and an agreed disposition. Early referral will permit the Joint Committee Team Manager to plan for the assignment of a Joint Committee Specialist to meet the need to complete the report by the closing of the case from the group.

  3. The referral form for the in-process program can be accessed electronically on the LMSB:PQAS Joint Committee website at http://lmsb.irs.gov/hq/pqa/4/home.asp or through the Specialist Referral System (SRS) at https://srs.web.irs.gov/Default.asp

4.36.3.3.2.1  (05-04-2010)
Completion of In-Process Review/Preparation of Joint Committee Report

  1. Ideally, the Joint Committee Specialist will perform the review and write the Joint Committee report by the completion of the examination. The review process will not unduly delay the timely closing of the case. In the event the Joint Committee Specialist has not either completed the preparation of the report or received a clearance letter when the group is otherwise ready to close the case, the team manager may forward the case to the Joint Committee Specialist group. The team manager should consider the length of any delay when deciding to retain the case or forward it to the Joint Committee group to await receipt of the clearance letter.

  2. SBSE and LMSB will send Joint Committee case files directly to the Joint Committee Specialist Group. See IRM 4.36.3.8

4.36.3.3.2.2  (05-04-2010)
Case Processing After Joint Committee on Taxation Clearance - In-Process Review

  1. When the clearance letter from the JCT is received, the Joint Committee Specialist will prepare and mail Letter 1574(P), indicating JCT clearance, to the taxpayer and authorized representative, if applicable.

  2. If the case has not been closed to the Joint Committee Specialist group, the specialist will forward a copy of the Letter 1574(P) along with a copy of the JCT clearance letter to the examination team manager for closing to Centralized Case Processing.

  3. After the case has been closed to the Joint Committee group, then it will be treated as a closed case review, and the Joint Committee group will close the case to the Service Center.

4.36.3.4  (05-04-2010)
Survey After Assignment

  1. Where appropriate, Joint Committee cases can be surveyed.

4.36.3.4.1  (05-04-2010)
Survey Criteria

  1. Returns in Joint Committee cases may be surveyed after assignment if the returns would normally have been surveyed before or after assignment except for the fact that the returns require Joint Committee review. The examiner can survey some or all of the returns.

4.36.3.4.2  (05-04-2010)
Survey Documentation

  1. There must be sufficient documentation in the examiner’s case file to justify that an examination is not warranted. If the reason, economic or otherwise, for the overassessment is not readily available from the return or file, attempts should be made to obtain the necessary information from public sources (e.g., annual report, SEC filings, Moody’s, Standard and Poors etc.) or directly from the taxpayer.

  2. The examiner’s request for retained copies of the taxpayer's tax returns, prior RARs, or information otherwise available from public sources is within the confines of a survey action. If the taxpayer is contacted, the examiner should point out that the Service proposes to accept the return as filed; that such action is subject to review by the JCT; and that certain additional information is needed to properly prepare the report.

  3. However, if the examiner makes an inspection of any portion of the taxpayer's books and records (except as provided in this section) or discusses any potential issues with the taxpayer, the return may not be surveyed under this procedure. See IRM 4.36.3.2 (1), above, for limiting the scope of the examination.

4.36.3.4.3  (05-04-2010)
Survey Forms

  1. Non-LMSB returns will be surveyed using Form 1900, Income Tax Survey After Assignment. LMSB will use its own survey form. The survey form will explain fully the reasons for the survey and include references to pertinent portions of the examiner's case file.

  2. Each year must be shown separately on the survey form. Entries for the tentative allowance column are from Form 1139 or Form 1045. Entries for the claim amount column are from Form 1120X or Form 1040X. The form requires both the examiner's and manager's signature.

4.36.3.4.4  (05-04-2010)
Procedural Requirements – Survey Cases

  1. All pertinent years (the refund years and the source years i.e., NOL, credit, etc.) not currently being examined must be covered in the survey action, even though one or more of the refund years may have been previously closed either by survey or examination. Also, all prior examination reports pertaining to such years must be included in the case file.

  2. Surveys of tax returns may be made on the basis of the taxpayer's retained copies. However, care must be taken to insure that the tax shown on the copies agrees with current transcripts (no more than 30 days old at time of submission).

  3. The documentation requirements of IRM 4.36.3.6 are applicable.

  4. Form 3198 or other special handling form will be completed and marked "Mandatory Review" and "Joint Committee Case" .

  5. Form 5351, Examination /Non-Examined Closings, will be signed by the manager and included in the case file.

  6. Form 5344, Examination Closing Record, is required where there are unpaid survey claims (Form 1120X or 1040X).

  7. The case file should contain a detailed explanation justifying the survey action. An explanation of the reason for the overassessment and prior audit history should also be included.

  8. Form 5231, Joint Committee Case Check List, must be prepared.

  9. Form 10484, Joint Committee Case Survey Worksheet, must be prepared and attached to Form 1900 or other survey form.

4.36.3.4.5  (05-04-2010)
Refund Counsel Inquiries on Survey Cases

  1. If an inquiry from the Refund Counsel cannot be resolved without taxpayer contact, the Joint Committee Specialist should contact the Refund Counsel to discuss any problems that exist.

  2. If the Refund Counsel and the Service believe the requested information is critical, the taxpayer's returns will be examined only to the extent necessary to respond to the inquiry. The examination may take the form of a telephone call to the taxpayer, perhaps coupled with a letter of explanation to the taxpayer or representative, or limited in scope to an in-process examination of specific portions of the taxpayer's books and records that are relevant to respond to the inquiry. Therefore, survey procedures are no longer applicable and a RAR is required.

  3. Absent formal instructions to the contrary, requests by Refund Counsel for additional documentation in specific cases will not be considered precedents for similar documentation in other cases involving the same issue.

4.36.3.5  (05-04-2010)
Statute of Limitations

  1. Every effort will be made to obtain consents to extend the statute of limitations so that at least 12 months remain on the statute for both source and carryback years,when the case is submitted to the Joint Committee Specialist group. If the taxpayer will not extend the statute and there are less than nine months remaining, the Joint Committee Specialist group must be contacted immediately.

4.36.3.5.1  (05-04-2010)
Restricted Consents

  1. Restricted consents will not be used in Joint Committee cases since it would restrict the rights of the JCT to perform their oversight function.

4.36.3.5.2  (05-04-2010)
Alpha Statutes

  1. The statute date of the carryback years should be updated on AIMS with the correct alpha code, when the regular statute has expired or is about to expire. See IRM Exhibit 25.6.23-3 for instructions on updating the statute on AIMS.

  2. AA is used for unpaid claims and replace the day. The month and year do not change.

  3. When the claim or tentative allowance has already been paid, BB (NOL) and DD (credits) replace the day. The month and year will be changed to those of the earliest source year return.

4.36.3.5.3  (05-04-2010)
Examination Action on Short Statutes

  1. If the case file includes a return on which there is reasonable prospect of a deficiency that could become barred within a six-month period, the examiner will either obtain a consent or take appropriate action necessary to protect the interests of the Government. A memo from the team manager explaining the action taken should be included in the file.

  2. Examiners are required to comply with IRM 25.6, Statute of Limitations.

  3. Form 895, Notice of Statute Expiration, must be placed on the outside of the case folder on top of all other documents, whenever a statute will expire within 180 days.

  4. Any case file that contains a return that has a statute that will expire within 180 days must be in a red folder.

4.36.3.5.4  (08-15-2004)
Statute Control During Review and Report Process

  1. If the case is in the possession of the Joint Committee Specialist group, that group will maintain statute controls under existing procedures throughout the review and reporting process. These controls must be kept until notification is received that the JCT has taken no exception to the Service’s conclusions and any deficiency (if applicable) has been assessed.

  2. If the examining group retains the case, but it is updated to status 26 because a report has been forward to the JCT, the examining group is responsible for maintaining the required controls.

4.36.3.6  (05-04-2010)
Documentation Requirements

  1. IRC 6405 requires a report to be submitted to the JCT. These reports are the principal source of information for the JCT. The examiner is expected to adequately explain and to furnish necessary supporting information for the issues reflected in the RAR. Therefore, care must be taken to ensure that the case files contain sufficient information for the preparation of the report.

4.36.3.6.1  (05-04-2010)
Revenue Agent's Report Requirements

  1. A Form 5231, Joint Committee Case Checklist, must be completed by the examiner for each case and will be included as an enclosure to the examination report. An RAR will be prepared for all examined cases, including all of the following:

    1. Form 4665, Report Transmittal

    2. Form 870, Waiver of Restriction on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment

    3. Form 4549-A, Income Tax Examination Changes

    4. Computation schedules for other taxes and credits

    5. AMT schedules, even if there is no AMT liability

    6. Written explanation of adjustments on Forms 886-A or 5701 must be attached to the Form 4549-A

    7. All electronic data files used to generate the RAR must be included.

    8. A complete extra copy of Form 4549-A, 886-A or 5701 for submission to the JCT.

  2. Per IRM 4.10.8.3.1(8), when there are tentative NOL carrybacks, the RAR should show the correct NOLD amount. If the NOLD is allowed in full, the entire NOLD would be shown as an adjustment. If the NOLD is not allowed, the adjustment would be zero. The taxable income should be before the NOL carryback. The tax as previously adjusted should include the tentative allowance tax decrease.

4.36.3.6.2  (05-04-2010)
Closing Agreements

  1. Closing agreements must not be executed on behalf of the Government until reviewed by the Joint Committee on Taxation. See IRM 4.36.4.8.

  2. Except as explained below, if a case requires the execution of a closing agreement and must be reported to the JCT, the case files should be provided to the Joint Committee Specialist group with the closing agreement not executed on behalf of the IRS. Upon receipt of the clearance letter, the file will be returned to the examining group for execution of the closing agreement. The examination group will close the case to the Centralized Case Processing after the closing agreement has been signed by the appropriate official.

  3. In those situations where an issue is resolved early in the examination, such as Fast Track Settlement or Early Referral to Appeals, and it is known or likely that the case will required a report to the JCT, the examiner will request an advanced review of the closing agreement by the JCT prior to the case closing. If the examiner wishes to pursue this option, the examiner will prepare a cover memo and forward a copy of the closing agreement and any relevant supporting documents to the Joint Committee Specialist group. A specialist will forward the documents to the JCT. After review by JCT, the agreement can be signed by the appropriate Service official. (See Exhibit 4.36.3-6).

  4. When the examination is still in process, there is a disclosure issue in sending a closing agreement to the JCT. The examiner will solicit written authorization from the taxpayer to provide the closing agreement to the JCT. If the taxpayer refuses, a redacted copy will be sent.

4.36.3.6.2.1  (05-04-2010)
Competent Authority

  1. Closing agreements based on Competent Authority must also be submitted to the JCT prior to being signed by the Service.

4.36.3.6.3  (05-04-2010)
Prefiling Agreements

  1. At the conclusion of a Compliance Assurance Process review, if it is determined that the filed tax return will result in a JC refund claim, JC procedures will apply. Closing agreements in these cases must be submitted to the JCT prior to being signed by the Service.

  2. For a Full Acceptance return, once the post-filing review is complete, the Account Coordinator will prepare the necessary documents for submission to the JC Specialist group.

  3. For a Partial Acceptance return, once all of the remaining issues have been fully resolved, the report will be sent to the JCT.

4.36.3.6.4  (05-04-2010)
Taxpayer Information

  1. Information concerning the financial history and changes in capital structure of corporations will be furnished in every case. This should include:

    1. Date and place of incorporation,

    2. A brief statement of the principal business activity and/or principal products and any major changes in these during years under examination,

    3. If stock is closely held, who controls the corporation,

    4. Names of subsidiaries or affiliates (if numerous, state the number and indicate where names can be found in case file), and

    5. Any changes in capital structure such as mergers, acquisitions, dispositions, etc, during the years under examination or survey.

    6. Whether the stock is publicly held and on which exchange it is listed.

  2. If an issue arises as to the proper carryback period of losses or credits of a newly acquired member of a consolidated group, the report will state whether the newly acquired corporation was organized by or for a preexisting member of the consolidated group.

  3. The transmittal letter will explain the cause or causes of the overassessments. If the overassessments result from a net operating loss, the economic reason for such loss must be briefly explained.

4.36.3.6.5  (05-04-2010)
Spreadsheets

  1. Spreadsheets for regular tax (Exhibit 4.36.3-1) and AMT/Environmental tax (Exhibit 4.36.3-2) must be included with the case. For cases with life/non-life insurance groups, spreadsheets should be modified to include separate columns for the life insurance groups and the non-life insurance groups.

  2. Additional spreadsheets should be prepared if the taxpayer has credits carried from numerous years. Separate spreadsheets should also be prepared for foreign tax credits involving different categories or baskets.

4.36.3.6.6  (05-04-2010)
Transcripts of Accounts

  1. While original returns are desirable, taxpayer-provided copies of returns, LIN returns, or links to electronically filed returns will be accepted.

  2. Current transcripts (no more than 30 days old at time of submission) of the taxpayer's account will be secured for all years covered in the examination or survey report.

  3. The examiner must check the transcript against information in the case file to determine whether all payments of estimated tax, advance payments or deposits, balances due, deficiencies, overassessments, and refunds or credits, including tentative allowances and abatements, are reflected.

4.36.3.6.7  (05-04-2010)
Change of Accounting

  1. Copies of Form 3115, Change of Accounting Method, and approval memorandum from Counsel will be included in the case file.

4.36.3.6.8  (05-04-2010)
Manager/Examiner/Taxpayer Contact Information

  1. The manager's and examiner’s name, address and telephone numbers must be entered on Form 4665, Report Transmittal, or survey form. The name and title of the corporate officer who is to receive correspondence must also be included.

4.36.3.6.9  (05-04-2010)
Short Taxable Periods

  1. Short taxable periods have numerous possible tax consequences. In order to fully understand the tax implications of the tax years reported, the examination report will disclose the existence and cause of any short taxable period.

4.36.3.6.10  (05-04-2010)
Large, Unusual or Questionable Items

  1. Any large, unusual or questionable items will be fully explained even if not adjusted, on Form 4665.

4.36.3.7  (05-04-2010)
Reporting Prior to Resolution Of All Issues

  1. Certain cases can be reported to the JCT prior to the resolution of all issues.

4.36.3.7.1  (05-04-2010)
Cases with Unagreed Issues - "Minimum Refund"

  1. Upon completion of the examination, if the taxpayer is entitled to an IRC 6405(a) refund, and there are unagreed issues, the case may be a "minimum refund" case.

  2. A minimum refund is an amount that the taxpayer is due to receive after offsetting any potential unagreed deficiency. The taxpayer would receive the net refund amount regardless of the outcome of the unagreed issues.

  3. A minimum refund may be processed before the case is sent to Appeals if:

    1. The unagreed issues require a substantial period of time to resolve (one year or more for Coordinated Industry Cases (CIC), six months or more for all other cases), and the delay would deprive the taxpayer of a timely refund to which it is clearly entitled, in spite of the resolution of the unagreed issues, and

    2. The taxpayer signs Form 870 indicating agreement with the minimum refund. See examples below for determining the "minimum" refund due the taxpayer.


    Example 1

      Year 1 Year 2 Total
    Agreed Overassessment (4,500,000) (2,000,000) (6,500,000)
    Unagreed Deficiency 1,000,000 500,000 1,500,000
    Total results of examination (3,500,000) (1,500,000) (5,000,000)
    Minimum amount entitled to receive     5,000,000
           


    Example 2

    Agreed overassessment (3,000,000)
    Unagreed overassessment (2,000,000)
    Total results of examination (5,000,000)
    Minimum amount entitled to receive 3,000,000

  4. If the minimum refund exceeds $2 million, and the taxpayer has indicated agreement with the examiner’s findings by signing Form 870, the Joint Committee Specialist Group must report the refund to the Joint Committee on Taxation before releasing the unagreed issues to Appeals. A final report will be submitted to the JCT by Appeals when the unagreed issues are finally resolved.

  5. Once Joint Committee clearance is received on the minimum refund report, the examiner must process the minimum refund and ensure that the overassessment posts to the master file before the unagreed issues can be forwarded to Appeals. The case file must be clearly documented and verification included in the case file that the minimum refund has been issued to the taxpayer.

  6. A minimum refund may also apply when there are unfinished flow-thru entity examinations. See IRM 4.36.4.13 for TEFRA and non-TEFRA flow-thru suspense procedures.

4.36.3.7.1.1  (05-04-2010)
Documentation Requirements on Minimum Refund Cases

  1. If a taxpayer indicates agreement to issues in the examination report, but refuses to sign the Form 870 indicating formal agreement with the minimum refund, the examiner will document the taxpayer’s indication of agreement as well as their reason for not signing Form 870. In this situation, the examiner will treat the entire case as unagreed, including the "agreed issues" , and write up all issues in unagreed report format.

  2. Examiners will advise taxpayers that in order for Appeals to accept the case, they will be required to provide an adequate response to all issues in the protest, even the ones the taxpayer agreed to informally. A proper protest must be secured from the taxpayer and the appropriate rebuttal must be prepared by the examiner prior to forwarding the case to Appeals. Appeals will return the case if all issues are not addressed.

  3. If the taxpayer refuses to address all issues in the unagreed report, and refuses to sign the Form 870, the examiner should consider other appropriate actions such as the issuance of a Statutory Notice of Deficiency or Statutory Notice of Claim Disallowance. See IRM 4.10.8.11.11)

4.36.3.7.2  (05-04-2010)
Tentative Allowances from Unexamined Source Years-Report Required

  1. A case will be submitted to the Joint Committee Specialist group with tentative allowances from unexamined source years, if:

    1. It qualifies as a Joint Committee case without regard to the carryback from the unexamined source years, and

    2. The examination of the source years will not be completed for a substantial period of time (six months or one year for CIC taxpayers).

  2. When an NOL, capital loss, or credit carryback is allowed subject to future examination of the subsequent year, the examination report, (Form 4549-A) should contain the following statement:
    "The net operating loss (or capital loss or credit) carryback from the year ending XX/XX/XXXX, reflected herein, is subject to correction upon examination of the tax return from which it originated."

  3. If, because of the examination, the tentative allowances are reduced to less than the jurisdictional amount, the examiner will notify the Joint Committee Specialist group in writing. Otherwise, these source years and their carrybacks will be submitted for review at the completion of their examination or survey.

  4. If the current examination would not be a Joint Committee case but for those carrybacks, the case should not be submitted to the Joint Committee Specialist group for review until the examination action is completed on those source years.

4.36.3.7.3  (05-04-2010)
Request for Refund – Claims from Unexamined Source or Refund Years – Modified Expedite Refund Report

  1. The Service can issue a conditional refund in excess of $2 million prior to the completion of the examination or survey action if:

    1. The taxpayer has requested the refund;

    2. The examiner and manager, in the exercise of their discretion, are satisfied that the claim issues resulting in the refund will reasonably lead to allowance of all or a substantial part of the claimed refund;

    3. No disadvantage to the government will occur;

    4. The taxpayer posts security;

    5. The examination will not be completed within six months from the date the taxpayer requests the refund; and

    6. There is sufficient time on the statute of limitations to complete the examination;

  2. This procedure is also applicable if the taxpayer files a claim after the due date to correct errors on its original return. An amended return filed before the due date does not require that a report be submitted to the JCT.

  3. A Modified Expedite Refund Report will be prepared by the Specialist and submitted to the JCT.

  4. A Supplemental Report may be required at the completion of the examination.

  5. See Exhibit 4.36.3-4 for the procedures to be followed.

4.36.3.7.4  (08-15-2004)
Posting of Security Modified Expedite Refund Report

  1. The taxpayer is required to post a bond or other similar security for the amount of the refund as a condition for submitting a Modified Expedite Refund Report. The Director of Field Operations (LMSB) or Area Director (SBSE) is responsible for determining the sufficiency of collateral. Refer to IRC 7101, the Regulations thereunder and IRM 5.6.1, Collateral Agreements and Security Type Collateral, for further guidance. At the discretion of the Director of Field Operations (LMSB) or Area Director (SBSE), an additional amount of bond or security may be required with respect to interest on the refund in the event all or part of the refund must be repaid. This amount should be measured by the reasonably anticipated time to complete the examination and the interest rate currently in effect under IRC 6621. The posting of the bond must be accomplished prior to the submission of the claim to the Joint Committee Specialist group. A copy of the security agreement signed by the taxpayer must accompany the Modified Expedite Refund Report. The security agreement will be executed on behalf of the Service subsequent to the expiration of the 30-day period after the submission of the report. The refunds must not be released until the Joint Committee Specialist notifies the examiner that the appropriate documents may now be executed and such action has been taken.

  2. It is necessary to submit a copy of the executed security or collateral agreement with the modified expedite refund report. The agreement should reflect the amount of the proposed refund, plus previously assessed interest, if any, and estimated refund interest, if required. The agreement must be executed by the taxpayer prior to submission. Upon expiration of the 30-day period after submission of the report, the Director of Field Operations or Area Director having jurisdiction over the case should execute the agreement on behalf of the Service. Coordination with local Counsel in the development of the security agreement is required.

  3. Any security or collateral agreement needs to specify that in fully agreed cases the agreement will not terminate until the JCT determines (if required by law) that it has taken no exception to the results of the examination. See Exhibit 4.36.3-3 for a sample security agreement.

4.36.3.8  (05-04-2010)
Submission of Case to the Joint Committee Specialist Group

  1. When closing a case to the Joint Committee Specialist Group, the examiner will check the Joint Committee box on the Form 3198 under Special Features and indicate"Ship to Joint Committee Specialist Group" under Other Instructions.

  2. All Joint Committee cases (including those from SB/SE and TEGE) should be mailed directly to the Joint Committee Specialist Group within 30 days of the taxpayer agreement date or survey report date. Returns should be updated to status 21 with Technical Services Code 901 when they are mailed to the Joint Committee Specialist Group. The Joint Committee Specialist Group will update the returns to status 26 when they are received.

  3. Returns from an operating division other than LMSB and SB/SE (e.g.TEGE) will remain under that division's control during the Joint Committee review process.

4.36.3.8.1  (05-04-2010)
Status Report

  1. If, for some reason, the case cannot be submitted to the Joint Committee Specialist group within the 30 day time frame, a memorandum containing the case name, years, earliest statute of limitations, reason for the delay, and expected submission date will be submitted to the Joint Committee Specialist group. Also see Exhibit 4.36.3-5 for more information on time frames and status report requirements.

4.36.3.8.2  (05-04-2010)
Contact Information

  1. Check the Joint Committee Specialist web site at http://lmsb.irs.gov/hq/pqa/4/Joint_Committee/jc_phones.asp for current Joint Committee Specialist contact information.

4.36.3.9  (05-04-2010)
Inquiries from Joint Committee Specialist Group

  1. There are times when it may be necessary for the Joint Committee Specialist to contact the examiner for additional information or clarification regarding a Joint Committee case. Inquiries will be treated with the highest priority.

  2. The need for additional information or clarification may arise while the case is being reviewed by the Joint Committee Specialist or as a result of a formal or informal inquiry the specialist may have received from the JCT. They should be treated as a priority. In the event the field group does not respond to an inquiry within 15 days, the case will be returned to the examination group.

  3. There may be times when it is more expedient for the examiner to communicate directly with the JCT. The specialist will arrange for this contact and remain involved to ensure the staff attorney receives a timely and satisfactory response.

    Caution:

    All IRS personnel should remember that the JCT Staff Attorneys are congressional staff and any inquiry from them constitutes a congressional inquiry.

4.36.3.9.1  (05-04-2010)
Types of Inquiries

  1. There are two types of inquiries:

    1. Informal – Telephone or e-mail.

    2. Formal – Written memorandum via a Case Return Transmittal (CRT).

  2. See IRM 4.36.4.3 for case return criteria and Exhibit 4.36.4-4 for guidance on dispute resolution.

4.36.3.9.2  (05-04-2010)
Response Time Frames

  1. Every attempt should be made to respond to the inquiry in a timely manner. Informal inquiries should be addressed within 3 working days. Formal written inquiries should be addressed and resolved within 30 days.

  2. If the response will take longer than 30 days, a short memorandum providing a status report should be submitted every 30 days to the Joint Committee Specialist group and to the responsible Territory Manager. The memorandum should contain the case name, tax years, earliest statute of limitations, status explanation/reason for delay, and expected completion date. See Exhibit 4.36.3-5 for a summary of all applicable time frames.

4.36.3.9.3  (05-04-2010)
Proposed Changes to the RAR

  1. If the examiner and the team manager do not agree with the position of the Joint Committee Specialist, the situation will be discussed with the Joint Committee Team Manager. If a solution cannot be resolved on a mutually satisfactory basis, the dispute will be elevated according to the schedule in Exhibit 4.36.4–4.

4.36.3.10  (05-04-2010)
Disclosure of Correspondence with Joint Committee on Taxation

  1. Generally, any IRS records generated during an examination or other process giving rise to the credit or refund should be considered agency records subject to the Freedom of Information Act.

  2. Informal or formal correspondence, including e-mail, from the JCT should also be considered agency records subject to FOIA but should not be released to the taxpayer without the permission of the JCT. If the JCT communication contains a legend that says the document should be treated a Congressional record and is beyond the scope of FOIA, it should be treated as such.

  3. When the JCT raises an issue on a case, the Service has two options:

    1. agree to adopt that position and present it to the taxpayer as the position of the Service; or

    2. reply to the Committee with the reasons for disagreement.

  4. Any documents created by the Service in connection with a response to any JCT correspondence should also not be released to the taxpayer without permission of the JCT.

4.36.3.11  (05-04-2010)
Referral to Taxpayer Advocate Service

  1. If, during a taxpayer contact,

    1. the taxpayer asks to be referred to the Taxpayer Advocate Service (TAS), or

    2. the taxpayer meets TAS case criteria (see IRM 13.1.7), and

    3. you cannot resolve the issue,

    then complete Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and refer the taxpayer to the TAS. See http://tas.web.irs.gov/ for more information.

  2. Do not refer a taxpayer to TAS if you are able to resolve the taxpayer's problem or take steps to resolve the taxpayer's problem within 24 hours, unless the taxpayer asks to be referred to TAS.

4.36.3.12  (05-04-2010)
Examination /Appeals Case Coordination

  1. Appeals and Examination often have different years opened for the same taxpayer; however, when the taxpayer files a tentative refund or refund claim affecting the Appeals years which is attributable to the Examination year, then the examiner needs to consider the situation in light of Joint Committee reporting requirements. See IRM 8.7.9.5.1.3 for details.

Exhibit 4.36.3-1 
Regular Tax Spreadsheet

Joint Committee Spreadsheet
Regular Tax
Name:XYZ, Inc
EIN: 99–9999999
  199412 199512 199612 199712 199812
Taxable Income (Loss) per Return
Prior Adjustments: Date/Type
2,000,000 10,000,000 8,000,000 (4,000,000) (25,000,000)
1/01/1997 - RAR   500,000      
1/01/1998- Amended Return _________ _________ (500,000)
_________
_________ ___________
Taxable Inc (Loss) Before Current Adjustments 2,000,000 10,500,000 7,500,000 (4,000,000) (25,000,000)
Current Adjustments _________ _________ _________ 500,000 4,000,000
Taxable Income (Loss) Before NOLD 2,000,000 10,500,000 7,500,000 (3,500,000) (21,000,000)
Less: NOL Deductions          
Carryback from 199712 (2,000,000) (1,500,000)   3,500,000  
Carryback from 199812     (7,500,000)   7,500,000
Carryback to 199912 _________ _________ _________ __________ 13,500,000
Corrected Taxable Income 0
=========
9,000,000
========
0
=========
0
==========
0
==========
Corrected Tax before Credits 0 3,060,000 0 0 0
Less: Foreign Tax Credit          
Current Year (10,000) (20,000) (20,000) 0 (10,000)
Carryover from 199412 10,000 (10,000)      
Carryover from 199612   (20,000) 20,000    
Carryover to 199912         10,000
Less: General Business Credits          
Current Year (60,000) (50,000) 0 0 0
Carryover from 199412 60,000 (60,000)      
Less: Prior Year Min Credit          
Per Return 0 0 0 0 0
Prior Adjustments 0 0 0 0 0
Current Adjustments 0
_________
(46,985)
_________
0
_________
0
__________
0
___________
Balance of Tax 0 2,853,015 0 0 0
Plus: Recapture Taxes 0 0 0 0 0
Plus: Alternative Min Tax          
Per Return 0 0 0 0 0
Prior Adjustments 0 0 0 0 0
Current Adjustments 46,985 0 160,000 0 0
Plus: Environmental Tax          
Per Return 600 8,400 n/a n/a n/a
Prior Adjustments 0 600 n/a n/a n/a
Current Adjustments 0
_________
0
_________
n/a
_________
n/a
__________
n/a
___________
Total Corrected Tax Liability 47,585
_________
2,862,015
_________
160,000
_________
0
__________
0
___________
Total Tax per Return 610,600 3,331,800 2,700,000 0 0
Plus: Increases (Decreases)          
1/01/1997 - RAR   170,600      
1/01/1998 - Amended Return     (170,000)    
Less: Tentative Refund(s)          
9/15/1998 - Carryback from 199712 (563,015) (799,385)      
9/15/1999 - Carryback from 199812 _________ _________ (2,370,000) __________ ___________
Net Tax Paid 47,585
_________
2,703,015
_________
160,000
_________
0
__________
0
___________
Deficiency (Overassessment) 0
=========
159,000
=========
0
=========
0
==========
0
===========

Exhibit 4.36.3-2 
Alternative Minimum Tax/Environmental Tax Spreadsheet

JOINT COMMITTEE SPREADSHEET
Alt Tax NOL, AMT, Env Tax
Name: XYZ, Inc, Inc & Subs.
TIN:99-9999999
  199412 199512 199612 199712 199812
Alt Taxable Income (Loss) Per Return 2,499,400 8,991,600 8,500,000 (3,500,000) (20,000,000)
Prior Adjustments:          
1/01/1997 - RAR   500,000      
1/01/1998 - Amended Return __________ ________ (500,000) __________ ___________
Alt Tax Inc (Loss) Before Current Adjustments 2,499,400 9,491,600 8,000,000 (3,500,000) (20,000,000)
Current Adjustments          
Regular Tax       500,000 4,000,000
Adjustments/Preferences/ACE _________ ________ _________ 100,000 (500,000)
Alt Taxable Income (Loss) Before ATNOLD 2,499,400 9,491,600 8,000,000 (2,900,000) (16,500,000)
Less: ATNOL Deductions          
Carryback from 199712 (2,249,460) (650,540)   2,900,000  
Carryback from 199812     (7,200,000)   7,200,000
Carryover to 199912 __________ ________ _________ ___________ 9,300,000
Balance 249,940 8,841,060 800,000 0 0
Less: Exemption (15,015) ________ ________ __________ __________
Corrected Alt Taxable Income (Loss) 234,925
=========
8,841,060
========
800,000
========
0
==========
0
==========
ATNOLD Limitation @ 90% (Memo) 2,249,460
=========
8,542,440
========
7,200,000
=========
0
===========
0
===========
Tentative Min Tax Before Credits 46,985 1,768,212 160,000 0 0
Less: AMT Foreign Tax Credit          
Current Year (10,000) (20,000) (20,000) 0 (10,000)
Carryover from 199412 10,000 (10,000)      
Carryback from 199812   (20,000) 20,000    
Carryover to 199912 __________ ________ _________ __________ 10,000
Tentative Minimum Tax 46,985 1,718,212 160,000 0 0
Less: Tax Before Credits Less FTC 0
__________
3,010,000
________
0
_________
0
___________
0
___________
ALT Min Tax as Corrected 46,985
__________
0
________
160,000
_________
0
___________
0
___________
ALT Min Tax per Return 0 0 0 0 0
Plus: Increases (Decreases)          
Amended Returns 0 0 0 0 0
Prior RARs 0 0 0 0 0
Appeals 0
_________
0
________
0
_________
0
___________
0
___________
ALT Min Tax as Previously Adjusted 0
__________
0
________
0
________
0
___________
0
___________
NET ALT Min Tax Increase (Decrease) 46,985
==========
0
========
160,000
========
0
===========
0
===========
Environmental Tax as Corrected 600
__________
9,000
________
     
Environmental Tax per Return 600 8,400      
Plus: Increases (Decreases)          
Amended Returns 0 0      
Prior RARs 0 600      
Appeals 0
__________
0
________
     
Env Tax as Previously Adjusted 600
__________
9,000
________
     
Net Env Tax Increase (Decrease) 0
==========
0
========
     

Exhibit 4.36.3-3 
Sample Security Agreement

This is only an example of a security agreement where an Irrevocable Letter of Credit will be posted as collateral. Any agreement that is drafted must, at a minimum, contain the termination events in paragraph 6. Counsel must be involved in the drafting of the agreement.

AGREEMENT
This AGREEMENT is hereby entered into between (name of taxpayer) (hereinafter "taxpayer" ), having an address at (taxpayer’s address) and the UNITED STATES OF AMERICA (hereinafter USA), having an address in care of its agent, Director, Field Operations (Industry) of Internal Revenue (hereinafter DFO), (industry headquarters address).
Whereas on (date), the taxpayer filed a Form 1120X, Amended U. S. Corporate Tax Return for the tax year ending (date of year end) (hereinafter (YYYYMM) tax year), claiming (reason and amount), resulting in a refund of income tax for the (YYYYMM) period in the amount of (amount of refund) (hereinafter the (YYYYMM refund); and
Whereas the examination of the (YYYYMM) tax year has not commenced; and
Whereas the taxpayer has requested the (YYYYMM) refund be issued prior to the initiation and conclusion of the examination of the tax return for the (YYYYMM) tax year; and
Whereas the taxpayer desires to furnish an Irrevocable Letter of Credit (hereinafter the letter) to the DFO in order to induce the issuance of the (YYYYMM) refund.
Now, THEREFORE, in consideration of the mutual covenants, promises, obligations, and conditions contained herein, the parties hereby agree as follows:
1. Prior to the issuance of the (YYYYMM) refund, the taxpayer shall deliver to the DFO the letter consistent with the terms set forth herein. The letter shall be in favor of the DFO, and the DFO will hold the aforesaid letter in safekeeping in accordance with the terms and conditions herein.
2. The letter to be provided to the DFO shall be for the total amount ($ amount), which represents the sum of the following ($) amount of the tax to be refunded, plus ($), the estimated interest to the date of the refund.
3. The letter is given to indemnify the Internal Revenue Service for all or any part of the (YYYYMM) refund plus interest which may be due back to the Internal Revenue Service in the event the DFO determines there is any income tax due for the (YYYYMM) year.
4. As soon as practicable after delivery of the letter, the DFO shall commence an examination of the (YYYYMM) tax year.
5. If, as a result of the examination, the DFO determines there is a deficiency in the income tax for the (YYYYMM) tax year and notice and demand for payment thereof is issued as permitted by IRC section 6303(a), the Internal Revenue Service may draw upon the letter by draft at sight unless within 90 days from the date of the notice and demand, the taxpayer pays in full the amount(s) so determined (including statutory accruals). The draft shall be accompanied by a statement executed by the DFO (or his delegate) stating that notice and demand have been made and the taxpayer has failed to pay within 90 days of the date of such notice and demand. The foregoing statement shall be sufficient to satisfy any requirements for documentation supporting the taxpayer’s failure to pay within the 90 day period.
6. The taxpayer shall have the right to terminate the letter upon the occurrence of any of the following TERMINATION EVENTS pursuant to the PROCEDURES described below:
(a) TERMINATION EVENTS
(i) in the event the examination results in a fully agreed case (that is, no issues remain to which the taxpayer has not agreed), the later of, the date of payment in full of all such agreed liabilities (if any), plus statutory accruals or the completion of the review of the Joint Committee Supplemental report and release by the Joint Committee on Taxation
(ii) in the event the examination does not result in a fully agreed case, the later of, the date which is 120 days after "notice and demand" have been made upon the taxpayer with respect to the final issue(s) in the case ( taking into account the taxpayer’s ability to pursue all available administrative and judicial procedures to challenge the determination(s) of the DFO in whole or in part), or the completion of the review of the Joint Committee Supplemental report and release by the Joint Committee on Taxation or
(iii) in the event the Internal Revenue Manual provisions addressing the reports to the Joint Committee in cases involving claims for refund prior to completion of an examination are modified so as to no longer require the taxpayer to post a bond or similar security in order to obtain the refund prior to completion of the examination, but only upon mutual consent of the DFO and the taxpayer.
(b) PROCEDURES
In order to terminate the letter, the taxpayer must establish to the DFO that a termination event has occurred. Thereafter, the DFO (or his delegate) and the taxpayer shall execute a statement which sets forth the basis for the termination and the effective date for such termination. The statement shall be prepared by the taxpayer and executed by the DFO within 5 days of receipt of the taxpayer’s request to execute the statement. THE LETTER SHALL NOT BE TERMINATED UNTIL THE STATEMENT HAS BEEN FULLY EXECUTED BY THE PARTIES AND DELIVERED TO THE DFO .
7. The funds under the letter shall continue to remain available to the DFO until the letter is terminated pursuant to the provisions of paragraph 6. In the event the funds may cease to be available to the DFO (i.e. due to the expiration of time or the refusal to extend), the DFO shall have the right to draw upon the full amount of funds available (or any part thereof) beginning ten (10) days prior to the expiration date unless prior to that time, the taxpayer provides another letter (hereinafter the substitute letter) which is comparable in all respects to the letter which is about to expire (hereinafter the first letter). The DFO’s determination as to whether the substitute letter is comparable to the first letter shall be binding on the parties.
8. Nothing contained herein shall be construed as a waiver of or limitation on any collection action(s) available to the DFO pursuant to applicable law.
WITNESS our signatures and seals this ___ day of _____________, (year).

(Taxpayer Name)
By: ______________________________________
(Typed name of signer)
(Position)
UNITED STATES OF AMERICA
By: _______________________________________
(Typed name of signer)
Director of Field Operations (Industry)

Exhibit 4.36.3-4 
Procedures for Cases Involving Claims From Unexamined Source or Refund Years - Modified Expedite Refund

These procedures are an accommodation to taxpayers and are not statutorily required. These procedures are only applicable when the examiner and manager, in the exercise of their discretion, are satisfied that the claim issues resulting in the refund will reasonably lead to allowance of all or a substantial part of the claimed refund.

These procedures are to be followed when taxpayers request prompt payment of Form 1120X claims under the provisions of IRM 4.36.3.6.3. Under these provisions, taxpayers are required to post bonds or other similar types of security (e.g. an irrevocable bank letter of credit) to protect the Government’s interest until resolution of the claim. In these cases, typically Coordinated Industry Cases, examination or survey of the claim will not be completed within six months from the date of the taxpayer’s request.

  1. To invoke Modified Expedite Refund procedures the taxpayer must file a claim and request that it be paid prior to a final determination.

  2. The taxpayer is required to provide a draft of the Security Agreement. In addition, the taxpayer will furnish a draft of the surety bond or other form of collateral to the examining officer, who will arrange a meeting with the appropriate Counsel Office to review the drafts. A Joint Committee Specialist may participate in the meeting. Since a Security Agreement is a legal document, it must contain, at a minimum, that specific language identified as mandatory in Exhibit 4.36.7-3.

  3. The examining officer will return the draft to the taxpayer for preparation of a final version, incorporating any additions and/or deletions provided by Counsel.

  4. The taxpayer will execute and return the approved Security Agreement and collateral documents as required. Upon receipt of the agreement and other required documents the examining officer will inform the taxpayer that the Service will execute the agreement after it has been reviewed without objection by the Joint Committee on Taxation (JCT).

  5. The examining officer will prepare a processing file and submit it to the Joint Committee Specialist staff consisting of the following documents:

    1. Three copies of the executed Security Agreement and collateral documents.

    2. A memorandum, addressed to the Manager, Joint Committee Specialist’s group, which includes a brief taxpayer history and the basis for the refund claims. If claims are for carrybacks of NOLs, then the economic reasons for NOLs should be stated. In addition, the facts and circumstances regarding the proposed return of funds should also be included.

    3. Copies of each Form 1120X claim and first four pages of each related Form 1120 tax return and Form 4626, Alternative Minimum Tax.

    4. Current transcript (no more than 30 days old) for each claim year.

    5. Form 5344, Examination Closing Record, for each claim year. Since this is being used merely for processing purposes the examiner should only complete the taxpayer information section and Box 15.

    6. Forms 872 extending the statute(s) sufficient to allow completion of the examination. This includes the source year for any NOL, Foreign Tax Credit or Capital Loss carrybacks.

    7. The statutes must be protected for all years, including the source year(s), until the supplemental report has been released by the (JCT).

      Note:

      These procedures DO NOT apply to years where the statute is open by claim only. See IRM 4.36.4.15 for statute requirements.

  6. The Joint Committee Specialist will prepare a Modified Expedite Refund Request Report to the JCT. A copy of the Security Agreement and collateral documents executed by the taxpayer (but not yet executed by the Service) will be attached to the report.

  7. If the JCT does not raise concerns about payment of the refund(s) within 30 days from the date the JCT receives the Modified Expedite Refund Request report, the Joint Committee Specialist will notify the examiner that the appropriate documents may now be executed on behalf of the Service by the executive (or authorized delegate) having jurisdiction over the case.

  8. The examining officer will provide the taxpayer with a copy of the fully executed documents.

  9. Joint Committee Specialist Staff will coordinate the processing of the refund through Case Processing Support.

  10. The examining group will continue to be responsible for obtaining all necessary letter of credit extensions and statute extensions until the case is closed.

Exhibit 4.36.3-5 
Customer Service Time Frames

The following time frames are established to facilitate timely actions in the Joint Committee process. All time frames refer to calendar days unless otherwise noted. Status reports and other communications may be made by fax. Consult the Joint Committee web site at http://lmsb.irs.gov/hq/pqa/4/home.asp for current JC Specialist contact information.

Action Responsible Party Time frame Follow-up action (if time frame not met) IRM Reference
Transmit Case to the JC Specialist Group* Manager/ Examiner Submit case within 30 days of agreement date Submit reason for delay to JC Specialist Group 4.36.3.8
Submission of JC Report to the Joint Committee on Taxation Specialist/JC Team Manager/JC Coordinator Send report within 2 working days of managerial approval Provide explanation of delay to Joint Committee Team Manager 4.36 4.4
Informal Inquiry from Specialist (by telephone or e-mail) Examiner Initial response with 3 working days Provide status report to Specialist every 30 days 4.36.3.9
Informal Inquiry from JCT (by telephone or e-mail) Specialist Initial response within 3 working days Provide status report to JCT every 30 days 4.36.4.5
Formal Inquiry from Specialist (CRT) Manager/ Examiner Response due within 30 days Provide status report to Specialist and Territory Manager every 30 days 4.36.3.9
CRT follow-up inquiry Joint Committee Team Manager Contact Field Team Manager if CRT is outstanding more than 90 days Provide status of outstanding CRT 4.36.4.5
CRT follow-up Program Manager Contact Territory Manager if CRT is outstanding more than 180 days Provide status of outstanding CRT 4.36.4.5
Formal Inquiry from JCT (written memorandum) Specialist Respond within 30 days Provide status report to JCT every 30 days 4.36.4.5

Any physical movement of cases should be done with Form 3210, Document Transmittal. Acknowledgement of Form 3210 should be monitored and inquiries into any unacknowledged Forms 3210 should be made after 21 calendar days.

*If a JC case has a special priority, such as a short statute of limitations, taxpayer hardship or other program deadline, fax an advance copy of the Form 3210 to the appropriate JC Specialist. State the reason for the priority on the Form 3210. The faxed Form 3210 serves to inform the JC Specialist of the pending arrival of the case and assists in workload planning. In other cases, faxing the Form 3210 is optional, but recommended.

Exhibit 4.36.3-6 
Sample Request For Advanced Review of Closing Agreement

Internal Revenue Service
Memorandum
Date:
To: Senior Refund Counsel, Joint Committee on Taxation
Thru: Joe Brown, Joint Committee Specialist
From: Mary Smith, LMSB Team Manager
________________________________________
Subject: Request for Advance Review of Closing Agreement - Taxpayer, Inc.
In accordance with IRM 4.36.3.6.2 and 4.36.4.10 we are requesting your office review the attached closing agreement in advance of a Section 6405 report. [Insert concise statement as to the issue and the source of resolution. For example, "This was a COLI issue that was resolved in the Fast Track Process.]"
If you have any questions, please call me at (123) 456-7890
 
Attachments:
Form 906 - Closing Agreement
Explanation of Adjustment

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