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Part 7. Rulings and Agreements

Chapter 11. Employee Plans Determination Letter Program

Section 1. Overview (Cont. 1)

7.11.1  Overview (Cont. 1)

7.11.1.8 
Special Procedures

7.11.1.8.6  (09-01-2002)
IRC Sections 414(m) and (n)

  1. A request for a determination letter solely as to the qualification of a plan because of a change in the affiliated service group membership may be subject to a limited analysis. Use proposed regulations under IRC Section 414(m) , Alert Guideline #8 (Employee Leasing), and Alert Guideline #10 (Affiliated Service Group) , as appropriate, to analyze for compliance with IRC Section 414(m) and (n). See also, Rev. Proc. 2002–6, 2002–1 I.R.B. 203.

  2. Generally, a determination letter will cover IRC Sections 414(m) or 414(n) only if the employer requests such a determination and submits the required information.

  3. If the IRS considers whether the plan of the employer satisfies the requirements of IRC Sections 414(m) or (n), the determination letter issued to the employer will state that questions arising under IRC Sections 414(m) or (n) have been considered and that the plan satisfies the qualification requirements relating to those sections. Absent such a statement, a determination letter does not apply to any qualification requirement arising by reason of such provisions.

  4. Issue Letter 1517(DO/CG) for qualified plans submitted solely because of a change in the affiliated group membership where such change does not adversely affect the qualified status of the plans.

7.11.1.8.7  (09-01-2002)
Master or Prototype Plans

  1. Prepare Form 3558, Technical Coordination Report, (and forward to Director, EP Division OP:E:EP), if a master or prototype plan which has an outstanding opinion letter is found to contain a form deficiency. Provide a thorough explanation of the deficiency in item 11A.

    1. If no other deficiencies are found, issue a favorable letter to the adopting employer.

    2. If other deficiencies are found, treat the plan as individually designed and secure appropriate amendments to correct all deficiencies (including the form deficiencies present in the adopted master or prototype plan).

    Note:

    A form deficiency is a plan provision, or the absence of a plan provision, that is disqualifying regardless of whether the provision operated to affect any plan participants.

7.11.1.8.8  (09-01-2002)
Plans Not Timely Amended

  1. All plans must comply with the IRC Section 401 requirements at the time they are effective. If it is discovered during the determination letter process that a plan was not timely amended, follow these procedures:

    1. Contact the plan sponsor to discuss the problem.

    2. Secure appropriate amendments.

    3. Obtain a statement from the plan sponsor that the benefits of both the current and former participants will be restored to the levels they would have been had the plan been timely amended.

    4. Coordinate the case with the Area CAP (Closing Agreement Program) Coordinator after securing the amendments and statement.

    5. Ensure the appropriate dollar sanction is paid.

    6. Suspend processing the determination letter request pending the resolution of the case under CAP.

  2. Non-amenders discovered during the determination letter process are not eligible for the walk-in CAP compliance program. See IRM 7.9, Section 2, EPCRS.

7.11.1.9  (09-01-2002)
Administrative Remedy Where Determination Letter is Delayed

  1. An applicant for a determination letter will have the right to a status conference if the determination letter application has been pending for at least 270 days. The status conference may be by telephone or in person, as mutually agreed upon. See Rev. Proc. 2002–6, 2002–1 I.R.B. 203 section 6.20.

  2. During the conference, any issues relevant to the processing of the determination letter application may be addressed, but the conference will not involve substantive discussion of technical issues. Subsequent status conferences may be requested if at least 90 days have elapsed since the preceding status conference.

    Note:

    No tape, stenographic, or other verbatim recording of a status conference may be made by any party.

  3. A request for a status conference with the Area Office should be in writing to,

    1. if identified, to the specialist assigned the case, or,

    2. if the applicant does not know who is reviewing the application, to the Manager, EP Determinations, Cincinnati, Ohio Office.

7.11.1.10  (09-01-2002)
Interested Party Concerns

  1. An interested party is defined in Reg. 1.7476–1(b).

  2. Refer to the following materials for the rules regarding notice to interested parties.

    1. See SPR Reg. 601.201(o)(3)(xv) on the timing of the notice.

    2. See SPR Reg. 601.201(o)(3)(xvi) on the content of the notice.

    3. See Reg. 1.7476–1(b) on who must be given notice.

7.11.1.10.1  (09-01-2002)
Notice Procedures

  1. Interested party notices are reviewed for plans submitted on Form 5310. Each of these applications will be screened on EDS for an affirmative answer to the notice question and for the timeliness of the notice.

  2. The application will be returned as incomplete with a request for a copy of the notice if the applicant:

    1. fails to indicate whether or not notice has been given;

    2. indicates the notice has not been given;

    3. indicates the notice has been given, but fails to enter the date of the notice; or,

    4. based on the date entered, did not file the notice timely.

  3. When the application is resubmitted, screen for the correct responses but not for the notice.

    1. If the notice is not attached to the resubmitted application, or the notice is not timely, contact the applicant to correct the defect and suspend action on the case for 30 days.

    2. If no response is received, close the case as a withdrawal (closing code 04) . Do not refund the user fee.

  4. When the notice is received, review it for compliance with the requirements under the regulations.

    1. If these requirements are not met, a determination letter will not be issued.

    2. If the applicant does not correct the defect, the case will be closed as a withdrawal (Closing Code 04) and the user fee will not be refunded.

7.11.1.10.2  (09-01-2002)
Interested Party Comments

  1. Consider all comments received in arriving at a decision and note on Form 5621 their effect on the recommendation.

    1. DOL, PBGC, and interested parties will be afforded an opportunity to discuss the written comments previously submitted.

    2. A copy of all comments (submitted pursuant to section 601.201(o)(5)(a), (b), and (c) of the Statement of Procedural Rules (SPR) on the application) will be made available to the applicant, as well as a copy of all correspondence, with respect to a comment, between the Service and the person submitting the comment.

    3. The comments and correspondence, with respect to any such comments, will be made available to the applicant in the same manner that additional information material is made available to interested parties under Rev. Proc. 2002–6, 2002–1 I.R.B. 203.

  2. Any oral representation or modification of the facts as represented or alleged in the application for a determination, or in a comment filed by an interested party, which is not in writing will not become part of the administrative record and will not be taken into account in determining the plan’s qualified status.

  3. If an interested party alleges that proper notification was not given to interested parties, a copy of the notification must be reviewed to determine whether or not proper notification was given. The application will be returned as incomplete if notification was not proper.

  4. Interested party comments received on individually designed plans, volume submitter, and master and prototype plans will be acknowledged on receipt.

  5. Evaluate all comments received from interested parties promptly. See Rev. Proc. 2002–6, 2002–1 I.R.B. 203.

    1. If the comments will not affect plan qualification, notify the employer and the interested parties who commented. Use Pattern Letter 1939(P) and 1936(P), respectively, by certified or registered mail.

    2. If the comments will adversely affect the plan, use Pattern Letter 1937(P) to advise the employer to file an application if a determination letter is desired.

  6. Area Offices will forward to District Counsel for a pre-issuance review favorable determination letter cases which are adverse to an interested party if it can be reasonably anticipated by the specialist that the interested party will litigate the qualification question.

7.11.1.10.2.1  (09-01-2002)
PBGC Notice on Plan Termination

  1. Each year the PBGC refuses to acknowledge the termination of certain pension plans because of some type of employer error, most commonly failure to give the required notice to plan participants. Employers are notified that a termination has not occurred, and if the employer wishes to terminate the plan, it must begin the termination process again. In many instances, these employers will also be seeking determination letters from the IRS. However, since no termination has occurred a Form 5310 filing is inappropriate.

    1. PBGC has asked the Service to refrain from issuing determination letters to those plans. PBGC will notify the Service of plans they refuse to acknowledge as terminated.

  2. If PBGC notifies us, check our current open inventory to see if any of these cases are in the process of seeking a determination letter.

    1. If an application is found in open status, return the application and user fee (if applicable). Inform the applicant that a termination did not occur on the date proposed.

    2. If the application is not in inventory or a letter has already been issued, no further action is necessary.

7.11.1.11  (09-01-2002)
Determination Letter Procedures

  1. Procedures are provided for processing determination letter applications that are closed favorably or unfavorably. Procedures involving applications processed other than favorably, are addressed on such topics as:

    • Cases subject to technical review

    • Submitting cases to Appeals

    • Requesting technical advice

    • Enforcement Follow-up

    • Declaratory Judgment

  2. Processing procedures for closing cases are also found in the following IRMs—

    • IRM 7.13.1, Employee Plans Automated Processing Procedures

    • IRM 7.14.1, EP/EO Determination System (EDS) Employee Plans User Manual

  3. These procedures will assist EP specialists, group managers and reviewers when processing cases for closing.

7.11.1.11.1  (09-01-2002)
General Processing

  1. Several steps must be taken to prepare a case for closing.

    1. All completed case files will be sent through the group manager for closing.

    2. If a case requires action by another group or area prior to final closing, forward the case directly to that area after it has received group manager approval and the status of the case has been updated.

7.11.1.12  (09-01-2002)
Cases Subject to Review

  1. Case reviews will be performed on all mandatory and selected sample determination cases.

    1. Certain types of cases, which are generally more complex, may be subject to mandatory review. This determination is made by HQ (EP Division) with the concurrence of the Manager, EP Determinations.

    2. The Tax Exempt Quality Measurement System (TEQMS) is designed to measure the quality of work on EP determination and examination cases. A statistically valid sample of cases are reviewed by Quality Assurance. The cases are evaluated by use of a checksheet to determine whether the cases meet certain predetermined standards. The review of these TEQMS selected cases has replaced Sample Review.

7.11.1.12.1  (09-01-2002)
Mandatory Review Procedures

  1. Employee Plans determination letter applications involving the following types of issues are subject to mandatory review by specialists in EP Determinations Quality Assurance. These types of cases include the following—

    1. Foreign Plans;

    2. Volume submitter plan advisory letters; (2nd level review may be done at group level).

    3. Proposed adverse determination letters;

    4. Cases in which interested party comments are received;

    5. Termination cases with reversions of more than $5,000,000, termination cases with over 1000 participants and 2% of all other terminations;

    6. Technical advice requests (see Rev. Proc. 2002–5, 2002–1 I.R.B. 173, (revised annually) for a list of issues on which technical advice must be requested);

    7. Technical assistance requests; and,

    8. Requests for review of a case by the group manager.

7.11.1.13  (09-01-2002)
Favorable Closing Procedures

  1. Guidance is provided on issuing letters to applicants of determination letters. See also, IRM 7.13.1, Employee Plans Automated Processing Procedures for additional information on processing cases for closing.

  2. Also discussed under this section are—

    • withdrawals and

    • unexecuted amendments

7.11.1.13.1  (09-01-2002)
Favorable

  1. The specialist assigned the case should prepare the closing letter (on EDS) or prepare the EP Determination Letter Closing and Transmittal worksheet to initiate preparation of the closing letter. This document will be provided to each EP Determination Specialist via e-mail. Designate on Form 8326, EP Transmittal Sheet, any particular update information necessary for Master File Pipeline Subsystem (MPS) , an automated system that is part of EDS. See IRM 7.13.1 Employee Plans Automated Processing Procedures.

  2. For all cases, review the information entered in each field for accuracy and make necessary corrections. Fields in which an "X" appears on Form 8326 must be updated with valid data before the case can be closed.

  3. Route the case file to the group manager for approval and transmission to the Cincinnati EP Records Unit for closure.

    1. If the case requires mandatory review, or has been selected as a TEQMS case prepare Form 3198, Special Handling Notice, and attach to the front of the case file.

    2. Before forwarding a case for closing, complete Form 8326, arrange the case file and complete any forms required by HQ. The manager is responsible for reviewing the case to ensure that all procedural requirements are satisfied.

  4. All favorable letters will be prepared in the name of the Director, EP Rulings and Agreements.

    IF...case is closed THEN...use Letter
    favorable upon plan termination 1132(DO/CG)
    favorable 835(DO/CG)
    favorable for a master (group) trust as defined in Rev. Rul. 81–100, 1981–1 C.B. 326 1520(P)
    favorable to a member of an affiliated service group whose plan continues to meet the requirements of IRC Section 414(m) after a change has occurred in the affiliated service group members 1517(DO/CG)
    NOTE: The favorable determination letter need not be sent by certified or registered mail unless DOL, PBGC or interested parties have submitted comments. In such case, a copy of the favorable determination letter will be sent to the applicant and to the commenting parties by certified or registered mail. IRM 7.14 EP/EO Determination System (EDS) Employee Plans User Manual.
    by return of an application that involves a type of plan not within the jurisdiction of the District Director 1924(DO/CG)
    because it is a plan that contains a cash or deferred arrangement that is intended to (but does not) qualify 2232(DO/CG)

  5. Where a favorable determination letter is to be issued to the applicant after appeals consideration, the appeals office will issue the determination letter.

  6. Unagreed cases may be referred to Appeals for reconsideration of the issue that is proposed adverse.

  7. Unagreed issues may also be referred to the Employee Plans Division (located in HQ) for technical advice. See annual Rev. Procs. 2002–5, 2002–1 I.R.B. 173 and 2002–6, 2002–1, I. R. B. 203.

7.11.1.13.2  (09-01-2002)
Withdrawal of Applications

  1. A request for a determination letter may be withdrawn at any time prior to appealing a proposed adverse to Appeals.

    1. The withdrawal must be made in writing.

    2. Use Letter 2044(DO/CG) to acknowledge a withdrawal.

    3. A letter acknowledging the withdrawal may be issued at any time after receipt of the applicant’s written request. (The 60-day comment period by interested parties is not applicable).

    4. Notify DOL when a case is withdrawn. See DOL Notification Procedures, IRM 4.71 Employee Plans Examination of Returns.

  2. The Manager EP Determination may require that withdrawal cases be subject to mandatory review.

    1. If designated as a mandatory review case, submit the case file, before issuing letter acknowledging withdrawal, to Cincinnati Quality Assurance.

    2. Attach Form 3198 to identify it as a mandatory review case.

    3. Prepare Form 8326 and route it to the Cincinnati Records Unit to update the status of the case on MPS.

    4. Prepare Form 5666, EP/EO Referral Information Report, and forward to the EP Classification Unit in Monterey Park.

  3. The Service must send a copy of the determination letter (or withdrawal letter, if one was issued) to each interested party who sends in comments about a plan for which a determination letter application is received.

    1. Pattern Letter 1935(P) is used to transmit the determination letter to the interested party.

7.11.1.13.3  (09-01-2002)
Unexecuted Amendments

  1. Letters 835(DO/CG) & 1132(DO/CG) contain caveats to be used when a favorable determination letter is issued conditioned upon the execution of proposed amendments.

  2. It is not necessary to secure a copy of the executed amendments subsequent to issuing the favorable determination letter. Follow-up action to determine whether the proposed amendments have been executed will be accomplished during a later examination of the plan. At that time, it will be determined if the amendments were properly executed as had been requested, and a copy will be secured.

    Note:

    Agents should not insist on the execution of proposed amendments prior to issuing a favorable determination letter. However, this does not preclude the agent from working with applicants and practitioners towards voluntary submission of executed amendments prior to issuing a favorable determination letter.

7.11.1.14  (09-01-2002)
Unagreed Cases

  1. Procedures are provided on processing determination letter application cases which are closed unfavorable to the taxpayer.

  2. In accordance with the provisions of RRA section 3504, when issuing a letter of proposed deficiency which allows the taxpayer an opportunity for administrative review with Appeals, the examiner must explain to the taxpayer the entire process from examination through collection, including the assistance available to the taxpayer from the National Taxpayer Advocate.

    1. In the case of proposed adverse determination letters, use Letter 1755 (DO/CG) and enclose Notice 1214 and Notice 402, Appeal Procedures — Adverse Determination Letter on Qualification.

7.11.1.14.1  (09-01-2002)
Unagreed Case Development

  1. Since plans involving unagreed issues have the potential of becoming the subject of United States Tax Court (USTC or may also be referred to as the Tax Court) consideration under IRC Section 7476, all unagreed issues must be adequately developed.

    1. Each specialist is responsible for securing as much information as possible from the applicant, upon which the determination is based.

    2. For cases in which the cause for potential disqualification is factual (as opposed to a deficiency in a plan document), develop a body of facts sufficient to support the Service’s position in any appeal or tax court action.

  2. Consider the application form and attachments as well as all other available data in arriving at a conclusion as to the qualification of the plan.

    1. Point out all unacceptable features and afford the applicant an opportunity to make appropriate modification.

    2. The applicant and/or authorized representative may be asked to appear at the Area office where the application is being considered to further discuss the issues.

    3. If the specialist has previously been unable to reach accord with the applicant on the issues, the group manager should participate in the conference.

    4. Secure executed amendments for each issue to which the applicant agrees.

7.11.1.14.2  (09-01-2002)
Burden of Proof

  1. The provisions added to IRC Section 7491, by RRA section 3001, provide that the burden of proof in a court proceeding will shift from the taxpayer to the Internal Revenue Service under certain situations. See IRM 7.4.1.

    1. One issue that has arisen concerns the extent to which the burden of proof rules are relevant to the EP determinations program, specifically the determination of the exempt status of a retirement plan’s trust.

  2. IRC Section 7491(a) provides as a general rule that if, in any court proceeding, a taxpayer introduces credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any tax imposed by Subtitle A or B, the Service shall have the burden of proof with respect to such issue.

    1. The taxpayer must also meet other requirements (e.g., substantiation and net worth) in order for the burden of proof to shift to the Service. See 7.4.1 for more details on burden of proof.

    2. The tax liability of a party to the court proceeding must be at issue for the burden of proof to shift.

  3. This Q and A was prepared by the Office of Chief Counsel, in response to our request for guidance.

    1. Does the shift in the burden of proof provision under new section 7491(a) apply to the determination of the exempt status of a retirement plan’ s trust or an organization? Section 7491(a) provides as a general rule that if, in any court proceeding, a taxpayer introduces credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any tax imposed by Subtitle A or B, the Service shall have the burden of proof with respect to such issue. Accordingly, the tax liability of a party to the court proceeding must be at issue for the burden of proof to shift.

    2. If a petitioner files a declaratory judgment action under section 7476 of the Code, or an action under section 7428, the issue before the court will be the initial or continuing qualification of a retirement plan or the initial qualification or continuing qualification of an organization under section 501(c)(3). The liability of the petitioner for any tax imposed under subtitle A or B of the Code will not be before the court in either case. Therefore, the burden shifting provisions of section 7491(a) will not apply. If the Service issues an adverse determination based on its revocation of a favorable determination letter to a retirement plan trust or to an exempt organization and that entity petitions the court on the basis of the adverse determination, then the burden shifting provisions are not implicated because the USTC proceeding does not involve a determination of the entity’s tax liability. On the other hand, if the Service issues a notice of deficiency to a charitable organization, VEBA, or retirement plan with regard to unrelated business income, then a court proceeding would implicate the burden shifting provisions of section 7491(a) . Likewise, if the Service issues a notice of deficiency to a plan participant or beneficiary asserting additional income tax liability because the plan was not qualified and therefore the taxpayer was not entitled to certain favorable tax treatment, e.g., the taxpayer could not roll over a lump sum distribution into an IRA, then the burden shifting provisions of IRC Section 7491 would apply in a court proceeding contesting that determination. Similarly, a plan, an organization claiming exempt status, or a contributing employer or donor could contest a deficiency notice and shift the burden of proof.

7.11.1.14.3  (09-01-2002)
Proposed Adverse

  1. If a proposed adverse determination letter is to be issued:

    1. specify each reason why the plan fails to qualify in clear, concise, and complete language.

    2. discuss each feature of the plan to which exception is taken, including those for which unexecuted amendments have been received. Correcting amendments are not acceptable in this instance until they are adopted. Use Letter 1755(DO/CG).

  2. Discuss each disqualifying feature separately on an enclosure to the letter. The discussion of each issue should contain the following:

    1. Article and/or section of the plan

    2. Pertinent facts

    3. Code and regulations citations

    4. Revenue ruling and court case citations

    5. Arguments of the specialist and the applicant

    6. Conclusion

  3. The group manager should review the draft of the proposed adverse letter to ensure the case has been fully developed as to facts, issues, and law.

  4. Route through the Quality Assurance staff for pre-issance review and attach Form 3198 to the case file.

  5. The case will be returned to the group which will be responsible for mailing the 1755 (DO/CG) letter to the taxpayer and representative.

7.11.1.14.4  (09-01-2002)
Final Adverse Determination Letters

  1. If the Area Office does not receive, within 30 days after the issuance of the proposed adverse determination letter, any request from the applicant that Appeals consider the application, a final adverse determination letter (Letter 1724 (DO/CG)) will be issued.

    1. This letter will be forwarded to the District Counsel for a pre-issuance review.

    2. Upon completion of that review, the final adverse determination letter will be signed by the authorized official in accordance with D.O. No. 112 (as revised) and sent to the applicant by certified or registered mail.

    3. A copy of the determination letter will also be sent to notify DOL, PBGC, and interested parties. See IRM 4.71 Employee Plans Examination of Returns.

  2. If technical advice (regarding a qualification issue) is requested (whether initiated by the Area Office or the applicant), and the response is adverse to the applicant, the applicant is not entitled to an appeal.

    1. If the applicant refuses to correct the deficiency, the Area Office will prepare a final adverse letter using Letter 2052(DO/CG), and forward the case to Counsel for pre-issuance review.

    2. When the case is returned to the Area Office for closing and issuance of the letter, a copy of the letter will be sent to commenting interested parties, DOL and, if applicable, PBGC as indicated in (1) above.

  3. If a final adverse determination letter is to be issued to the applicant following the appeal of the proposed adverse determination to Appeals, Appeals will issue it after review by Counsel.

    1. After the final adverse determination letter is issued the case file will be retained by Appeals pending the applicant’s possible petition to the USTC.

    2. Appeals uses Form M–5378 (Cases Docketed by the USTC) to determine whether the applicant has filed a petition.

    3. If Appeals is not notified within 120 days after issuance of the final adverse determination letter that the applicant has filed a petition with the USTC, the case can be closed out by Appeals and returned to the files. Form 8671 or Form 4646 control card will be closed at this time.

    4. If the applicant files a timely petition with the USTC, Appeals will furnish the case file to Counsel. Upon completion of the declaratory judgment process in the USTC the case file will be returned by Counsel to the Area Office. Should the USTC find the applicant’s plan to qualify the Area Office, upon notification by Counsel, will issue a favorable determination letter.

      Note:

      The following pattern caveat will be added to the letter: "This favorable determination is being issued pursuant to consideration of your plan by the USTC. Our final adverse determination letter dated (specify date) is hereby rescinded."

7.11.1.15  (09-01-2002)
Technical Case Review

  1. Due to the centralization of the determination letter program, all cases selected for mandatory or TEQMS review will be completed by the Quality Assurance staff in Cincinnati, Ohio.

  2. The reviewer is in a position to identify unique issues and techniques which should be brought to the attention of technical personnel. The reviewer should be satisfied that the specialist has explained clearly and concisely the position of the Service when proposed changes were anticipated.

  3. As part of their duties, the EP Reviewer is responsible for—

    1. each determination letter case selected for review to ensure compliance with applicable law, and in cases selected for TEQMS review, meets the applicable elements and standards.

    2. attending to each case which may result in the issuance of a proposed adverse determination letter, or nonqualification letter, or in which interested party comments have been received.

  4. When applicable, as part of the review, ensure that documents are properly prepared for notification of the Department of Labor (DOL) , Pension Benefit Guaranty Corporation (PBGC) or interested parties.

  5. To ensure that user fee payments submitted for determination letters are properly processed, payments must be verified for each determination letter case selected for review

  6. Cases must be forwarded to District Counsel for a pre-issuance review involving favorable determination letter cases which are adverse to an interested party if it can be reasonably anticipated by the Quality Assurance staff that the interested party will litigate the qualification question.

7.11.1.15.1  (09-01-2002)
Review Procedures

  1. For cases reviewed by the Quality Assurance Staff, the following procedures apply.

  2. If the reviewer disagrees with the specialist’s recommendation, the case file may be returned for correction and/or further development. Use Form 5456, Reviewer’s Memorandum EP/EO, for this purpose.

    1. The reviewer should complete the review of the resubmitted recommendations and conclusion as soon as possible.

    2. After all issues are resolved, the reviewer is responsible for the issuance of the favorable determination letter.

  3. If the case involves an adverse issue, and the reviewer agrees with the recommendation, the proposed adverse determination letter is prepared by the specialist and sent by certified or registered mail.

  4. If an applicant agrees in writing to the proposed adverse determination, the specialist is responsible for issuing a final adverse determination letter after the pre-issuance review by Counsel.

  5. If the applicant fails to request an appeals conference within 30 days from the issuance of the proposed adverse determination letter, but had previously indicated the intention to do so, the Area Office may, upon showing of good cause, extend the time to file the appeal up to 21 days.

    1. If the applicant fails to reply, the specialist will prepare a final adverse determination letter (Pattern Letter 1724 (P)) . Transmit this letter with the case file to Counsel for pre-issuance review.

    2. Upon completion of Counsel’s review, the case file is returned to the Area Office for issuance of the final adverse determination letter to the applicant by certified or registered mail.

  6. If the applicant files a timely appeal, the specialist will evaluate any new facts or arguments.

    1. Where the specialist concludes that the applicant’s protest does not alter the original adverse conclusion, forward the case file to Appeals (where possible, within 5 workdays after receipt of the applicant’s appeal).

    2. Use Form 8326 (EP Transmittal Sheet) as an interim control.

  7. If an amendment is received in the Area Office while the case file is with Appeals, associate the amendment with the case file.

  8. If, while the case is being considered by Appeals, the applicant presents additional facts or circumstances which had not previously been made available to the Area Office, the case should be returned to the Area Office for further consideration if the new information is significant.

    1. If referred to the Area Office, notify the applicant.

    2. If the adverse conclusion is not reversed, return the case to Appeals for further consideration. Prepare a memorandum for the file concerning the effect on its determination of the additional information presented by the applicant.

    3. Appeals may seek technical advice on any issues in controversy.

  9. After full consideration of the case including any conference, Appeals will issue a final determination letter or report to reflect the appeals decision and supporting reasons.

    1. Form 5402, Appeals Transmittal Memorandum and Supporting Statement to the Manager EP Determination is prepared to relay the decision.

  10. If the Area Office does not agree with Appeals decision, a dissenting memorandum may be filed. Transmit to Appeals through the Regional Chief Compliance Officer.

    Note:

    The Regional Chief Compliance Officer, in consultation with the Chief, Appeals Office, should monitor cases involving dissenting memorandums and, if appropriate, furnish guidance on handling similar cases.

  11. The Manager, EP Determinations Quality Assurance will forward completed cases for issuance of the final determination letter.

7.11.1.15.2  (09-01-2002)
Cases Returned by Quality Assurance Staff

  1. Route cases returned from review by the Manager EP Determinations Quality Assurance through the group manager. The technical reviewer must update MPS information, as necessary.

  2. The specialist will consider the issues raised by the reviewer and complete all necessary action as soon as possible. Reconsideration of a determination due to any post review is considered a continuation of the original analysis.

    IF the applicant... THEN issue a...
    fails to make requested changes or amendments to correct issues raised... proposed adverse letter.
    makes suggested changes or amendments to correct issues raised... new favorable letter.

  3. Use Letter 1755(DO/CG) as a pattern for the proposed adverse determination letter provided the first paragraph is revised as follows:
    "We have reconsidered our previous determination dated (enter date), and have made a proposed determination that this plan does not meet the requirements of section 401 of the Internal Revenue Code. Enclosed is an explanation of this determination, which is effective for plan year(s) ending (enter effective year(s) of determination)."

  4. Use Letter 835(DO/CG) as a pattern for the favorable letter provided the first paragraph is revised as follows:
    "We have reconsidered your request for a determination letter regarding this plan and, based on the information supplied, have made a favorable determination. Please keep this letter in your permanent records."

7.11.1.16  (09-01-2002)
Requesting Technical Advice

  1. The Area Office may, at the applicant’s request or on its own initiative, request technical advice on controversial issues. See IRM 7.1.5 TEGE Administrative Procedures and Programs and Rev. Proc. 2002–5, 2002–1 I.R.B, 173 (revised annually).

    1. Technical advice is requested on Form 5565, Request for Technical Advice-EP/EO.

    2. Technical advice cases are subject to mandatory review.

    3. Identify technical advice cases with a Form 3198, Special Handling Notice (attach to the front of the case file).

  2. A request for technical advice should encompass all issues which could form the basis for an adverse determination.

  3. When technical advice is obtained on issues that relate to the qualification of the plan, such advice will preclude any further appeal of those issues within the Service.

  4. Technical advice must be requested on the following matters:

    1. Disqualification, revocation or modification of a collectively-bargained plan;

    2. Disqualification, revocation or modification of a plan in violation of the exclusive benefit rule because of certain fiduciary actions;

    3. Spin-off termination or termination-reestablishment transactions where the Area Office proposes that the transaction is a part of an integrated transaction that would result in the application of substance over form doctrine;

    4. Employer who had a prior termination reestablishment or spin-off termination within 15 years of the time of the transaction; and

    5. Cases requiring approval of the Assistant Commissioner, TE/GE pursuant to IRC Section 7805(b).

    6. Cases involving the conversion from a traditional defined benefit formula to a cash balance formula.

7.11.1.17  (09-01-2002)
Appeals Procedure

  1. These procedures apply to EP determination letter application cases. They do not apply to qualification or other controversies involving employee plans which arise during examination of returns filed by such plans or related trusts, contributors to or creators of such plans, or participants in such plans.

  2. Cases transferred to Appeals on the EP/EO Determination System (EDS) will be processed in accordance with instructions contained in IRM 7.13.1.

  3. Additional information involving cases referred to Appeals is found in IRM 7.1 TEGE Administrative Procedures and Programs.

7.11.1.17.1  (09-01-2002)
Appeals’ Terms

  1. A "proposed adverse determination letter" is a letter issued by the Area Office which states that the applicant’s plan fails to meet the requirements of IRC Sections 401 or 403(a) and pursuant to which the applicant may request consideration of the plan by appeals.

  2. A "final determination letter" is a letter issued by the Area Office or appeals which, in the case of a(n)—

    1. favorable determination, (is issued by certified or registered mail solely where either an interested party, the DOL or the PBGC has commented on the application for determination), states that the applicant’s plan satisfies the applicable qualification requirements of the Code, or

    2. adverse determination, issued by certified or registered mail, subsequent to a letter of proposed adverse determination, notifies the applicant of the final determination.

  3. The "administrative record" is the group of documents related to an applicant’s request for a determination letter, and consists of—

    1. the request for determination, the retirement plan and any related trust instruments, and any written modifications thereof made by the applicant during the application proceedings;

    2. all other documents submitted by, or on behalf of, the applicant with respect to the request for determination;

    3. all written correspondence between the Service and the applicant with respect to the request for determination and any other documents issued to the applicant;

    4. all written comments submitted pursuant to SPR 601.201(o)(5)(i)(a), (b) and (c) and all correspondence concerning comments submitted between the Service and persons (including PBGC and DOL) submitting such comments;

    5. in any case in which the Service makes an investigation regarding the facts as represented or alleged by the applicant in his/her request for determination, or in comments submitted pursuant to ERISA 3001(b)(1), a copy of the official report of such investigation.

  4. The "case file" is the physical accumulation of documents which relate to the applicant’s request for determination and consists of:

    1. the administrative record, and

    2. documents which are not part of the administrative record, e.g., workpapers, reviewer’s memoranda, etc.

  5. Technical personnel must use Form 5464 to maintain a complete log of all contacts made with the applicant or interested parties, including notes on the matters discussed.

    1. Such information, though not a part of the administrative record, could be helpful in determining whether progress toward reaching an administrative determination was hampered due to causes beyond the applicant’s control.