8.7.9  Joint Committee (JC) Cases

Manual Transmittal

March 31, 2014

Purpose

(1) This transmits revised IRM 8.7.9, Joint Committee (JC) Cases.

Material Changes

(1) Editorial changes such as IRM updates, formatting and typographical corrections have been made.

(2) Additional editorial changes have been made in this IRM revision:

  1. IRM 8.7.9.5.8: Clarified the Form 5482 instructions.

  2. IRM 8.7.9.6.5: Clarified paragraphs (3)(b) and (3)(c) to be consistent with other IRM examples.

  3. IRM Exhibit 8.7.9-2: Minor revisions made to clarify content.

  4. IRM Exhibit 8.7.9-3: Minor revisions made to the "Note" in the exhibit to clarify content. Numbers corrected so that the total net refund is over $2,000,000.

  5. IRM Exhibit 8.7.9-4: Minor revisions made to the "Note" in the exhibit to clarify content. Paragraphs discussing provisionally allowed carrybacks and supplemental report moved to the end of the exhibit and simplified.

  6. IRM Exhibit 8.7.9-5: Correction made to header for IRC 6405(b) refund column. Revisions made to the "Note" in the exhibit to clarify content.

  7. IRM Exhibit 8.7.9-6: Correction made to header column for IRC 6405(a) refund column.

  8. IRM Exhibit 8.7.9-8: Minor revisions made to clarify content.

  9. IRM Exhibit 8.7.9-9: Correction made to header for IRC 6405(a) refund column. Removed "Net refund or credit" column.

  10. IRM Exhibit 8.7.9-15: Example numbers added, header formats corrected, last example (Example 12) numbers corrected.

Effect on Other Documents

This supersedes IRM 8.7.9 dated September 27, 2012.

Audience

Appeals employees who handle Joint Committee cases.

Effective Date

(03-31-2014)


Lisa Zannitto
Acting Director, Policy, Quality and Case Support

8.7.9.1  (09-27-2013)
Introduction to the Joint Committee (JC)

  1. The Joint Committee on Taxation (JCT) is required by IRC 8022 to investigate:

    1. The operation and effects of the Federal system of internal revenue taxes;

    2. The administration of such taxes by the Internal Revenue Service; and

    3. Measures and methods for the simplification of such taxes.

  2. The JCT is also required by IRC 8022 to publish for public examination and analysis, proposed measures and methods for simplification of such taxes, and to report to the Senate Finance Committee, the House Ways and Means Committee, and, in its discretion, to the Senate or House of Representatives, or both, the results of its investigations, together with such recommendations as may be advisable.

  3. In carrying out its statutory responsibilities, the JCT is vitally concerned with learning whether the tax laws:

    1. Are being applied consistently with Congressional intent;

    2. Require clarification; and

    3. Grant unintended benefits or cause unintended hardships.

  4. The JCT is also concerned with learning whether the positions taken by the Service in Revenue Rulings, Regulations, and in litigation are consistent with Congressional intent. The reports required of the Service, under IRC 6405, are a principal source of information for the JCT.

  5. Delegation Order 4-18 (see IRM 1.2.43.16) delegates, in part, the authority to:

    1. Make and report refunds and credits to the JCT as required by IRC 6405. This is delegated to Appeals Team Managers (ATMs) and Appeals Team Case Leaders (ATCLs) on cases within their jurisdiction. No further re-delegation within Appeals is permitted.

    2. Respond to all formal requests for reconsideration made by the JCT concerning the reports that the IRS was required to submit to the JCT under IRC 6405. This is delegated to the Deputy Chief, Appeals and may not be re-delegated.

  6. The current Joint Committee (JC) jurisdictional amount is any amount of refund or credit in excess of $2,000,000. Include a refund or credit of previously assessed and paid penalty or interest when determining whether an overpayment exceeds $2,000,000. Every refund or credit (of the type of tax to which JC jurisdiction is applicable) in excess of $2,000,000 is reportable to the JCT unless it falls within a specified exception to the reporting requirements. See IRM 8.7.9.3.

  7. The JC staff attorneys (Refund Counsels) will review the JC report and other documents as necessary. Should the Refund Counsel have questions, they are usually resolved informally through phone calls or e-mail exchange. (See IRM 8.7.9.9.1.) In some cases, a written inquiry may be issued. (See IRM 8.7.9.9.2.) Once notification is received that the JCT has released the case, Appeals may process and close the case.

  8. The JC staff review of these reports focuses on the technical aspects of the case and the IRS's resolution of the issues presented.

8.7.9.2  (09-27-2013)
Cases Requiring JC Review

  1. IRC 6405(a) provides that no refund or credit of any income, war profits, excess profits, estate, or gift tax, or any tax imposed with respect to public charities, private foundations, operators' trust funds, pension plans, or real estate investment trusts under IRC Chapter 41, 42, 43 or 44, in excess of $2,000,000 shall be made until after the expiration of 30 days from the date a report is submitted to the JCT for review. This report, required by IRC 6405(a), is to include the taxpayer's name, SSN/EIN, the city and state of the taxpayer's location, amount of the refund or credit, a summary of the facts, and the decision of the Secretary. IRC 6665 treats a penalty as a tax.

  2. IRC 6405(b) requires a similar report to the JCT if net refunds in connection with tentative allowances stemming from carrybacks under IRC 6411 exceed $2,000,000. The report is submitted to the JCT at such time after the refund or credit is made when the Service determines the correct tax.

  3. IRC 6405(c) provides that refunds in excess of $2,000,000, attributable to a taxpayer’s election under IRC 165(i), will be made before submitting a report for review. This section allows a taxpayer to deduct a disaster loss in the taxable year immediately preceding the taxable year in which the disaster occurred. The report shall be prepared when the correct amount of tax is determined. See IRM 8.7.9.6.10.

  4. In accordance with IRC 8023(a), the JCT will also review a number of large deficiency cases each year. See IRM 8.7.9.7.1.6.

8.7.9.3  (09-27-2013)
Cases Not Requiring JC Review (Exceptions to JC Review)

  1. Do not report a refund or credit of:

    1. An unassessed advance payment of tax or cash bond made under provisions of Rev. Proc. 84-58 or as an undesignated remittance or a deposit in the nature of a cash bond made under provisions of Rev. Proc. 2005-18 and which was made before determining the taxpayer's tax liability; or

    2. A refund or credit of an amount paid with a tentative return in excess of the tax liability reported by the taxpayer on a final return. A final return is defined as the last return filed by the due date for that return.

  2. Do not report the abatement of an unpaid portion of an assessment to the JCT (see IRC 6404). The word "credit" , as used in IRC 6405, does not include an abatement. For example, an amount assessed and paid which is determined to be an overassessment when applied to another liability (i.e., another year, another tax, or another taxpayer) constitutes a credit and not an abatement.

  3. Do not report a refund or credit based upon a court decision resulting from trial of the case. If other years of the case affected by the court decision are under Appeals jurisdiction in non-docketed status (or docketed) and the determined refund or credit for such years is in excess of $2,000,000, Appeals writes the JC report. However, a discussion of JC cases under jurisdiction of Counsel is discussed in a subsequent section. See IRM 8.7.9.5.1.

  4. The JCT staff compiles statistics of amounts of refunds allowed. In other than expedited refund cases, to avoid double reporting of a refund amount, it is important that only the additional allowance is reported as the Net Refund or Credit when a subsequent report is written on a year previously reported to the JCT. For example, if, in an initial JC report on the year 2005, a Net Refund or Credit of $5,000,000 is allowed, do not report in the Net Refund or Credit column this amount again as part of a $9,000,000, net refund or credit, when a subsequent report for the year 2005 only allows an additional $4,000,000. Report only the $4,000,000.

  5. Excise and employment tax are not subject to JC review. Refunds on trust fund recovery penalty cases and windfall profit taxes are also excluded from review by the JCT.

8.7.9.4  (09-27-2013)
Selection of Large Deficiency Cases for JC Review

  1. Every six months, each "selection area " (each numbered geographic Appeals designated area, the Domestic/International Operations function, and the ATCL function) will submit reports to the JCT on the largest deficiency cases closed in that "selection area" by Appeals during that six month period.

  2. The specific number of cases from each selection area will be designated by the Appeals JC Program Analyst (AJCPA), subject to approval by the JCT Senior Refund Counsel.

  3. Deficiency cases reported to the JCT should be restricted to the types of taxes reportable as refunds or credits under IRC 6405 (e.g., taxes imposed under Chapter 32 or Chapter 45 would not be reported).

    Note:

    If the largest deficiency cases closed are from the same office within the selection area, select the next largest cases closed from the other offices in the "selection area." No office will submit all selected cases from a selection area. The selection process will require coordination within the selection area.

  4. The reports for the period ending March 31 will be submitted on or before the last day of July, and the reports for the period ending September 30 will be submitted on or before the last day of January.

  5. In considering what constitutes the largest deficiency cases closed for the six-month period, do not consider:

    1. An unagreed docketed case transferred to Counsel;

    2. An unagreed case considered in non-docketed status by Appeals which is then petitioned to and docketed in the U.S. Tax Court;

    3. A case that has been or will be reported to the JC as an overpayment case (overpayment cases should have a Feature Code of "JC" – including cases with initially proposed deficiencies, in order to identify them and avoid duplicate reporting as a deficiency case);

    4. Special Enforcement Program (SEP) cases, including High Level Drug Leaders Tax Enforcement Project (DEP) cases; or

    5. Under reporter cases.

  6. If a case is split with some years moving to a non-reporting category, the years remaining in a reporting category will, at closing, be considered to determine the size of the case for reporting purposes.

  7. Consider incoming deficiency amounts, not closing amounts, even if the final determination is a refund.

  8. Time applied to preparing the JC large deficiency package is charged to "Reports" in CARATS.

8.7.9.5  (09-27-2013)
Appeals Responsibility in JC Cases

  1. This subsection covers Appeals Responsibility in JC Cases.

  2. The phrase "reasonably short period of time" is used throughout IRM 8.7.9. The phrase will be defined as:

    • Two months or less.

  3. Appeals can agree to extend this period depending on the facts and circumstances of the case.

  4. If Appeals extends the time frame, the Appeals Officer (AO) or Appeals Team Case Leader (ATCL) who is assigned the case will be required to document the reason in the Case Activity Record (CAR).

8.7.9.5.1  (09-27-2013)
Reporting to the JCT

  1. Appeals is responsible for preparation of the report to the JCT in cases under its jurisdiction. For example, where a tentative allowance under IRC 6411 has been made for years under Appeals jurisdiction, a determination as to the correct amount of the carryback may be made prior to preparation of the JC report for the carryback years in Appeals. If so, the report made by Appeals to the JCT should be based on the correct amount of carryback. See IRM 8.7.9.5.1.3.

  2. IRC 6405 requires that refunds or credits in excess of $2,000,000 must be reported to the JCT. Therefore, normally, no settlement should be made effective until receipt of notice that the JCT has no objection to the proposed overpayment. See IRM 8.7.9.5.7. This section discusses letters to be sent to the taxpayer when the case is submitted to the JCT and after clearance is received from that office.

  3. Appeals is not responsible for JC reports in docketed cases under Counsel's sole jurisdiction. Such reports are prepared and processed by Counsel. Appeals will furnish Counsel additional information with respect to issues on which Appeals obtained agreement. To the extent such information can only be furnished by Compliance, Appeals will so advise Counsel.

  4. Cases transferred to Counsel which will require JCT approval before final disposition, or have potential for such requirement, will be identified on Form 5402, Appeals Transmittal and Case Memo, item 2, Special Features.

  5. Appeals is responsible for the preparation of supplemental reports on all reconsidered cases transferred from Compliance as the result of an informal inquiry or a Staff Review Memorandum (SRM) from the JCT.

  6. On any case which is determined to require a JC report, the AO or ATCL assigned the case must update the Feature Code to "JC" . This will help avoid selecting cases later for reporting to the JCT as large deficiency cases which have already been reported to the JCT as refund cases (where the case initially included proposed deficiencies when received in Appeals). Cases are not to be reported as both refund and as large deficiency cases.

8.7.9.5.1.1  (11-09-2007)
Investor Cases

  1. An AO or ATCL with jurisdiction of a JC investor case will be responsible for seeing that a JC report is made when the TEFRA adjustments result in a refund in excess of $2,000,000 to the taxpayer.

  2. When the case is in Appeals jurisdiction, determine the need for a JC report on TEFRA issues when the tax computations are made at the investor level.

    • Do not suspend a report to the JCT for a refund from TEFRA issues pending the outcome of the non-TEFRA issues.

    • Do not add the refund from TEFRA adjustments to the refund from non-TEFRA adjustments to determine if a JC report is needed.

    • These are separate refunds and, if a report to the JCT is necessary, each refund should be reported separately.

  3. See IRM 8.19.6.12, Closing Joint Committee Investor Cases and IRM 8.19.6.17.1, Statute for Investor's Cases.

8.7.9.5.1.2  (11-09-2007)
Bankruptcy Cases

  1. Bankruptcy does not eliminate JC jurisdiction. JC jurisdiction would be eliminated by a determination of tax liability in the Bankruptcy Court, District Court, United States Claims Court, or the Tax Court.

  2. If Appeals and the taxpayer agree on a case involving a refund or credit of over $2,000,000, Appeals will make a report to the JCT and notify the Tax Division of any action taken.

  3. See IRM 8.7.6, Appeals Bankruptcy Cases, for additional information on bankruptcy procedures.

8.7.9.5.1.3  (09-27-2013)
Appeals/Compliance Case Procedures

  1. Appeals and Compliance often have different years opened for the same taxpayer. When the taxpayer files a tentative refund or refund claim affecting the Appeals year(s) which is attributable to the Compliance year(s), then the following must be considered for JC reporting requirements. These procedures apply only to IRC 6405(b) refunds. If the carryback year(s) also have IRC 6405(a) refunds which are reportable to the JCT, see paragraph (7) of this section.

  2. If Compliance’s examination or survey action of the loss/credit source year(s) is completed before Appeals concludes action on its case, then Compliance will close its case to Appeals and send the return(s), RAR and administrative file to Appeals. Regardless of how Compliance resolves the source year(s) (surveyed, agreed, or unagreed and protested), the source year(s) should be forwarded to Appeals to be associated with the carryback year(s).

  3. In situations where Appeals completes its action on the case before Compliance action is complete, Appeals should determine the status of the source year return(s). If Compliance will complete the examination or survey action in a reasonably short period of time, Appeals should retain the case until Compliance forwards the loss/unused credit source year(s).

  4. In either case, if JC reporting is required as the result of the allowance of the loss/credit carryback(s), Appeals will prepare the report according to the procedures contained herein. Should there be a JCT inquiry due to Compliance’s RAR or survey action, the examiner will respond to the inquiry through the AO or ATCL assigned the case.

  5. If the Compliance examination will not be completed within a reasonably short period of time, Appeals will provisionally allow the loss(es) or credit(s) to the extent of the tentative refund(s). If the Appeals case is subject to JC review, without consideration of the tentative refund(s) from the Compliance year(s), Appeals will prepare a report according to the procedures contained herein. For a sample report, see Exhibit 8.7.9-4.

    Note:

    Under these circumstances, the settlement computation should be modified. See IRM 8.7.9.8.4.

  6. At the conclusion of the source year return(s), if the year(s) still remain under JC jurisdiction, then a supplemental report must be prepared by the office that makes the final determination (Appeals or Compliance). If the year(s) no longer meet JC criteria, then a supplemental report is also required to notify the JCT of the final disposition and that the year(s) no longer qualify as JC year(s). The reporting office will be determined by which office has jurisdiction of the source year return(s) at the time of the final determination.

  7. When a tentative carryback arises:

    • in a year which has not been examined or is currently under examination, and

    • such carryback may result in the requirement of a JC report by Appeals under IRC 6405(b) for year(s) under its jurisdiction, and

    • the carryback affects a year for which an Appeals determination has been made which will require a JC report under IRC 6405(a) ,

      then Appeals should proceed to tentatively close the IRC 6405(a) case by submitting an expedite report to the JCT, unless it appears that the Compliance function will close the loss/unused credit source year(s) within a reasonably short period of time.

  8. If you are reporting an IRC 6405(a) refund to the JCT but tentatively allowing an IRC 6405(b) refund (due to an open Compliance examination):

    • The body of the JC report, tabulations, and computations should not give consideration to the tentative carryback(s). (It is not necessary to exclude the tentative carrybacks from the Appeals Case Memo (ACM) or the settlement computation.)

    • However, the JC report must disclose that there is a tentative carryback and that a supplemental report on the IRC 6405(b) refund will follow after the examination is completed. (See IRM 8.7.9.7.1.3.)

      See IRM 8.7.9.7.1.1 for additional information on expedite refund reports.

  9. If the office with jurisdiction over the loss/credit source year(s) will close the source year(s) in a reasonably short period of time, Appeals should wait for the correct determination of the carryback(s) before reporting the case/year(s) under Appeals jurisdiction to the JCT.

  10. The supplemental report will be made by the office that makes the final determination of the taxpayer's liability for the year(s) previously reported to the JCT. If the refund does not exceed $2,000,000, the office which has jurisdiction at the time of the final determination will notify the JCT and the Appeals JC Program Analyst, in writing, of this fact so that the JCT can close its control of the case. This can be accomplished via E-mail.

8.7.9.5.1.4  (11-09-2007)
Expedite Closing - Cases with Refunds Less than $5,000,000 (Tentative Allowances Not Yet Examined)

  1. Normally, if there are tentative carrybacks involved, the case will not be submitted until the determination of the correct amount of carryback/carryforward is made in the source year.

  2. For tentative refunds less than $5,000,000, if it appears that Compliance will not close the loss/unused credit years within a reasonably short period of time, Appeals should close its case without waiting for the receipt of the loss/unused credit year(s).

  3. Appeals will provisionally allow the claimed carryback modified (if required) by agreed adjustments in taxable years or periods currently under Appeals consideration.

  4. If agreed adjustments have an effect on the taxpayer's liability for other taxable years or periods, Appeals will notify Compliance to take the proper action. See IRM 8.2.3.7, Compliance Follow-Up Action Required on Related Years or Taxpayers.

  5. See IRM 8.7.9.5.1.5.1 for tentative refunds in excess of $5,000,000 which have not yet been examined.

8.7.9.5.1.5  (09-27-2013)
JC Review Before Case is Closed - Advance Review Request

  1. Ordinarily a case will not be submitted for JC review until ready for closing. Occasionally, Appeals will have a case or issue needing an advance review by the JCT.

  2. Under these circumstances the Service is not seeking release or approval of a refund amount, but rather, is seeking review of a specific issue or document (such as a closing agreement). This could occur:

    • On cases subject to JC review (where the formal report will be submitted at a later date), or

    • On cases not subject to JC review, the settlement of which may affect a JC case or year.

  3. Examples of cases needing an advance review by the JCT are discussed in paragraphs (4) through (7) below.

  4. Minimum Refund Case - Occasionally, Appeals will have a case involving a proposed refund or credit in excess of $2,000,000 which cannot be closed because of unagreed issues. All of the following conditions must exist in order to consider reporting to the JCT:

    1. The unagreed issue will materially delay final disposition of the case; the reasons for delay are beyond the control of the Service; and the delay would deprive the taxpayer of a timely refund to which it is clearly entitled, in spite of resolution of the unagreed issues;

    2. The adjustments causing the proposed refund or credit over $2,000,000 are not at issue; and

    3. Disposition of the unagreed issue will not reduce the proposed refund or credit to $2,000,000 or less.

  5. The following examples illustrate other types of JC cases that might be submitted to the JCT even though one or more issues have not been settled:

    1. Non-docketed case involving a proposed overpayment in excess of $2,000,000 and disposition of unagreed issue is dependent on the outcome of a pending court case.

    2. Docketed case with a subsequently filed claim in excess of $2,000,000 which is allowable but has one or more issues that will not be tried or settled for some time.

  6. Closing Agreements: Occasionally, Appeals may wish to resolve an issue on a non-docketed JC case with a closing agreement where it is not known if there will be unagreed issues, or where there are negotiations remaining to take place on other issues.

    1. This could occur on an issue where the Service and the taxpayer wish to resolve the issue with a closing agreement immediately before moving on with other issues in the case.

    2. This could also happen in a non-docketed case in Appeals not subject to JC review, but where the execution of a closing agreement potentially has an effect on another year of the taxpayer not in Appeals which may be subject to JC review.

    3. In such cases, Appeals may request an advance review of the issue or closing agreement.

    4. If the JCT approves the resolution of the issue and closing agreement, Appeals may then execute the closing agreement on behalf of the Service.

    5. The AO or ATCL assigned the case should contact the Appeals JC Program Analyst for procedures and details.

  7. There may also be a need for early resolution of a specific issue on a non-docketed case without waiting for resolution of the complete case, such as Fast Track Settlement or Early Referral cases.

  8. Because these types of cases/issues for JC review are rare, handle each informally on a case-by-case basis. If it appears the case/issue could be submitted under these provisions, the AO or ATCL assigned the case will contact the Appeals JC Program Analyst via e-mail with a written explanation of the circumstances so that the analyst can discuss the case/issue with the JCT staff or suggest direct contact. If the e-mail includes the taxpayer's name, the e-mail must be encrypted. If the JCT agrees to accept the case/issue for review, the AO or ATCL will prepare and submit the advance review request.

  9. See Exhibit 8.7.9-10 for an example of an advance review request. While this is a sample request for review of a closing agreement, the language may be modified to suit the particular situation.

    Note:

    The request is signed by the appropriate party in the same manner as a JC report.

  10. The request is sent directly to the Joint Committee Senior Refund Counsel at the address specified in IRM 8.7.9.7.7.2. The formal report should be submitted through the Appeals JC Program Analyst. See IRM 8.7.9.7.5.

  11. Attachments to the advance review request should include the Form 5402, the ACM, agreement forms (for example, Form 870-AD) or closing agreement).

  12. After completion of the advance review request, the JCT will notify Appeals by encrypted e-mail that they have completed their review. Appeals may close the carryback year(s) upon receipt of this notification.

  13. A formal report will be submitted when the case is finally closed. Reference to the prior advance review request should be made in the narrative.

  14. If a case is going to be put into suspense in Compliance pending the results of litigation in another case, do not write a JC report prior to suspense action because a JC report is required when a determination is made based on the results of the litigation.

8.7.9.5.1.5.1  (09-27-2013)
Informal Review - Cases with Refunds in Excess of $5,000,000 (Tentative Allowances Not Yet Examined)

  1. Normally, if there are tentative carrybacks involved, the case will not be submitted to the JCT until the determination of the correct amount of carryback/carryforward is made in the source year. However, under certain conditions, an "informal" JC review of a case may be conducted to facilitate Appeals closing of the case.

  2. An informal report may be submitted for JC review when:

    1. Appeals has year(s) ready to close with tentative refunds under IRC 6405(b) in excess of $5,000,000;

    2. The source year examination or appeals process has not been completed (thus, not ready to be reported with the carryback year(s)); and

    3. The source year will not be completed in a reasonably short period of time.

  3. If a case meets this criteria, Appeals should prepare and submit an informal JC report for the carryback year(s) before closing those year(s). See Exhibit 8.7.9-11 for a sample report. Also see IRM 8.7.9.5.1.5.

  4. After completion of the informal review, the JCT will notify Appeals by encrypted e-mail that they have completed their review. Appeals may close the carryback year(s) upon receipt of this notification.

    Note:

    These provisions do not apply when the carryback years would otherwise be reportable without the tentative allowances.

  5. The formal JC report for the carryback year(s) will be made by the office which resolves the source year with finality at the time of such resolution. See IRM 8.7.9.5.1.3.

8.7.9.5.2  (11-09-2007)
Discovery of Failure to Report to JC

  1. If it is discovered that an overpayment under IRC 6405 in excess of $2,000,000 has been refunded without a report to the JCT, prepare a report as soon as possible. This must be done even though the statutory period of limitations has expired for one or more years. Explain the failure to submit a timely report in the JC letter.

8.7.9.5.3  (09-27-2013)
Period of Limitations on JC Cases

  1. Consents are ordinarily obtained where the period of limitations expires in less than 180 days from date of submission of a report to the JCT. Do not use restricted consents in JC cases.

  2. In cases where there is no reasonable prospect of a deficiency, a statutory notice is not arbitrarily issued. Taxpayers will usually cooperate and sign a consent if the reason is explained. If a consent is unnecessary for a related or reference return in the file, prepare a memorandum (or other approved form such as Form 10495) for the file setting out the facts. Attach the original of the memorandum to the return, and give a copy to APS to update ACDS.

  3. As in other cases under its jurisdiction, Appeals is responsible for protecting the period of limitations in JC cases, including the time the report is with the Appeals JC Program Analyst or the JCT. Appeals maintains a follow-up system to ensure that an assessment period does not expire while the report is being reviewed outside the office.

8.7.9.5.4  (09-27-2013)
Transcript/Statement of Account for JC Cases

  1. When Appeals first determines a case will require a report to the JCT, the AO or ATCL assigned the case will request a transcript for years subject to JC review, if none is in the file.

  2. Do not prepare a statement of account for a JC case except where required for reasons other than JC status. See IRM 8.17.3.1, Explanation of the Statement of Account.

8.7.9.5.5  (09-27-2013)
Agreements (other than Closing Agreements) on JC Cases

  1. If Form 870–AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment, Form 890-AD, Estate Tax Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, or similar type AD agreement is used in a JC case, the following paragraph is ordinarily typed on the agreement:

    "Accepted as of the date the Joint Committee on Taxation completes its review without objection or the date accepted for the Commissioner, whichever is later."

  2. If a Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment or Form 890,Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment - Estate, Gift, and Generation - Skipping Transfer Tax type agreement is the agreement used in a JC case, the following paragraph is ordinarily typed on the agreement:

    "This agreement is submitted to take effect on the date the Joint Committee on Taxation completes its review without objection."

  3. If Appeals action is based on mutual concessions and would have produced a deficiency for the carryback year, prior to considering the carryback provisionally allowed by Appeals, a Form 870–AD will be secured showing zero deficiency with a footnote reflecting the amount of deficiency before provisional allowance of the carryback.

    • The purpose of this is to make clear, especially where the provisionally allowed carryback eliminates the Appeals deficiency, that the Appeals settlement of issues in the carryback year is intended to be final.

    • All agreement forms in which a carryback is provisionally allowed should contain this statement: "You may be liable for restricted interest on what might have been the deficiency before the carryback. See Rev. Proc. 60–17, 1960–2 C.B. 942."

  4. Do not obtain Form 2297, Waiver of Statutory Notification of Claim Disallowance, in a JC case until the JCT has released the case unless the Form 2297 is modified as follows:

    "This waiver takes effect on the same date the agreement form (fill in appropriate form number) used in this case becomes effective" .

  5. The date the JCT completes its review will be the date of the clearance letter that is forwarded to Appeals.

  6. In Fast Track Settlement (FTS) cases, the Service will report a proposed settlement reached as a result of FTS to the JCT in accordance with IRC 6405. The taxpayer acknowledges that the Service may reconsider a proposed settlement, as reflected in a signed FTS Session Report, upon receipt of comments on the proposed settlement from the JCT (Rev. Proc. 2003-40).

8.7.9.5.6  (09-27-2013)
Closing Agreements Related to JC Cases

  1. Closing agreements must not be executed on behalf of the Service until after the "report and wait" requirements of IRC section 6405 have been met. Therefore, do not execute any closing agreement on behalf of the Commissioner until after the JCT clears the case.

  2. In any case under Appeals jurisdiction requiring a report to the JCT which includes a closing agreement as to determination of tax liability; a determination covering specific matters; or a combined agreement, indicate in the report the tentative approval of the closing agreement. Submit proposed agreements with the JCT report. If the JCT takes no exception to the report, the Appeals official signs the closing agreement. Also submit a copy of any closing agreement that arose out of any prior examination of the reported years.

  3. If the case in Appeals does not require a JC report, but the closing agreement affects a case which is or will be reported to the JCT, advance review of the closing agreement may be requested using an informal procedure with a cover memo explaining the reasons for the request. A copy of the closing agreement and the ACM discussing the issue should be submitted with the cover memo. See IRM 8.7.9.5.1.5. The JCT will normally transmit their concurrence with the closing agreement and issue settlement by encrypted e-mail.

  4. DO NOT enter into a closing agreement on an early referral case without concurrence from the JCT if there is a potential that the primary case will require a JC report. (Rev. Proc. 99-28.) See IRM 8.7.9.5.1.5 for discussion of instructions for JC advance review requests.

  5. DO NOT enter into a closing agreement on any related affiliate or related tax year, not subject to JC review, where the execution of a closing agreement will have an effect on a JC case (regardless of where jurisdiction of the JC case resides), until the JC case has been reviewed by the JCT.

  6. If the closing agreement relates to a proposed distribution from a DISC under IRC 992(c), or from resolution of a COLI issue, a request for expedited JC review may be made in a cover memo explaining the reasons for the request. See IRM 8.7.9.5.1.5.

  7. For post-Appeals mediation issue resolution on cases subject to JC review, Appeals will not enter into a closing agreement without concurrence from the JCT (Rev. Proc. 2009-44, 2009-2, C.B. 462). Also, do not enter into a closing agreement on any related affiliate or related tax year, not subject to JC review, where the execution of the closing agreement will have an effect on a JC case, until the JCT has completed its review.

  8. DO NOT execute a closing agreement on an "expedite" refund Appeals case until notification of the JC clearance has been received.

  9. Appeals should not enter into a closing agreement on a JC case when Competent Authority is involved in the case. In addition, when Competent Authority is involved in a JC case, the Competent Authority official must be notified that JCT review of the closing agreement is required before executing the closing agreement on behalf of the Service.

8.7.9.5.7  (09-27-2013)
Communications with the Taxpayer on JC Cases

  1. After the report is forwarded to the JCT, the AO or ATCL assigned the case informs the taxpayer that the case has been reported by mailing Letter 1594 (CG), Joint Committee Submission.

  2. Upon receipt of the clearance letter from the JCT, the Appeals JC Program Analyst will send a copy of the JC clearance letter by encrypted e-mail to the AO or ATCL listed as the contact on the JC letter.

  3. Upon receipt of the JC clearance letter, the AO or ATCL informs the taxpayer that the JCT has taken no exception to the conclusions reached by the Service by mailing Letter 1537 (CG), Joint Committee No Exception.

  4. Letter 1594 (CG) and Letter 1537 (CG) should be prepared on APGolf; however, see Exhibit 8.7.9-12 and Exhibit 8.7.9-13. These two exhibits contain samples of these letters.

    Note:

    These letters are not required for large deficiency cases.

  5. If the processing of the case is delayed, the AO or ATCL should provide the taxpayer with the reasons for the delay and provide periodic updates. The time, method and nature of the information to the taxpayer is discretionary. However, see IRM 8.7.9.9.2.1 for additional information on contacting the taxpayer when a Staff Review Memorandum (SRM) has been issued.

8.7.9.5.8  (03-31-2014)
Disclosure Provisions for JC Cases - Form 5482

  1. Reports to the JCT involving individual taxpayers or aliens admitted to permanent U.S. residence are disclosures to third parties under provisions of the Privacy Act of 1974. This also applies to disclosures of tax return information of an individual taxpayer or aliens admitted to permanent U.S. residence when sent with a report involving a corporate taxpayer.

  2. Use Form 5482, Record of Disclosure, to account for disclosures (involving individual taxpayers or aliens admitted to permanent U.S. residence) to the JCT. Form 5482 is also required for deceased taxpayers.

  3. A disclosure concerning an individual taxpayer or alien admitted to permanent U.S. residence occurs when Appeals signs, dates, and forwards the JC report. At this point, Form 5482 is completed recording the requested information pertaining to the taxpayer upon whom the disclosure is being made. After this information is recorded, annotate the case file to show the means used to account for the disclosure.

  4. When completing the Form 5482, see instructions below:

    1. Block 1: Enter the taxpayer's name

    2. Block 2: Enter the date the package is shipped to the Joint Committee

    3. Block 3: Enter "44.001, Administrative File"

    4. Block 4: See paragraph (5) below for detailed information

    5. Block 5: Enter Joint Committee address used on the report (shown in IRM 8.7.9.7.7.2)

    6. Block 6: Select "No"

    7. Block 7: Leave blank

    8. Block 8: Select "(b)(9)"

    9. Block 9: Enter AO or ATCL name - person who worked the case

    10. Block 10: Enter office symbols

  5. See below for sample language for block 4 of Form 5482:

    Sample Language for block 4, Form 5482
    Information Disclosed: * Form 5402, Appeals Transmittal and Case Memo
      Appeals Case Memo
      Settlement Computation
      Joint Committee Report and any other such documents referring to the taxpayer's tax liability or other disclosures of tax return information

    *List report and attachments submitted to JCT as appropriate. See examples above.
    Purpose of Disclosure:
    (make selection according to type of report)
    Refund report to Joint Committee on Taxation pursuant to IRC 6405.
    (For refund case)
      Large Deficiency Case report to Joint Committee on Taxation pursuant to IRC 8023(a). (For large deficiency case)

  6. An electronic copy of the Form 5482 will be forwarded to the Appeals JC Program Analyst (AJCPA) by encrypted e-mail with the JCT report submitted for review. (See IRM 8.7.9.7.5). The AJCPA will retain the Form 5482 in a separate file for the prescribed five years.

  7. A copy of the Form 5482 will also be retained with the administrative file.

  8. Additional information can be found in IRM 11.3.19, Privacy Act Accounting for Disclosures..

8.7.9.5.9  (09-27-2013)
JC Case Procedures

  1. This subsection covers procedures for working JC cases.

8.7.9.5.9.1  (09-27-2013)
Agreed Pre-90–Day JC Cases

  1. For pre-90-day cases to be reported to the JCT, use modified agreement forms. See IRM 8.7.9.5.5. Also, see IRM 8.7.9.7.2 for information detailing the years to be included in the report.

  2. The AJCPA will transmit a copy of the JC clearance letter via encrypted e-mail to the AO or ATCL assigned the case. They should put a copy of the JC clearance letter in the administrative file.

  3. Upon receipt of the JC clearance letter, the AO or ATCL informs the taxpayer by mailing Letter 1537 (CG), Joint Committee No Exception, that the JCT has taken no exception to the conclusions reached by the Service. See Exhibit 8.7.9-13 for a sample Letter 1537 (CG). APGolf should be used to prepare the letter.

  4. In agreed cases involving Form 872-A, see discussion below:

    1. In agreed cases involving Form 872–A, Special Consent to Extend the Time to Assess Tax, where termination of Appeals consideration is intended, use Form 872–T,Notice of Termination of Special Consent to Extend the Time to Assess Tax.

    2. In agreed cases involving Form(s) 872–A, where termination of Appeals consideration is not intended because additional time may be required to process a complex case, add the following paragraph (or similar one) to Letter 1537 (CG):

      "Form 872–T, Notice of Termination of Special Consent to Extend the Time to Assess Tax, referred to in consent Form(s) 872–A, executed for tax period(s) extended to _________, will be mailed to you at a later date" .

  5. The AO or ATCL will close the case in the usual manner

8.7.9.5.9.2  (09-27-2013)
Agreed Docketed JC Cases

  1. In an agreed docketed JC case, under sole jurisdiction of Appeals, a settlement is entered into by having the taxpayer sign the proposed stipulation which is subject to JC review. The proposed stipulation is not filed with the United States Tax Court until notification of JCT clearance has been received.

  2. After notification that the JCT has completed its review, the AO or ATCL assigned the case furnishes Counsel with a copy of the notification. Counsel then files the stipulation. After the Tax Court's decision is entered, close the case in the usual manner.

  3. In any case involving partial settlement stipulations, the AO or ATCL assigned the case will consider whether the case might ultimately be subject to JC review. If there is a distinct possibility that disposition of the remaining issues by way of settlement or concession will result in a net refund in excess of $2,000,000, add the following language to the settlement stipulation:

    "The settlement stipulation(s) contained herein are conditioned on completion of review by the Joint Committee on Taxation, without objection, if such review is required by IRC 6405" .

8.7.9.5.9.3  (11-09-2007)
Unagreed JC Case Refunds Where Tax Court Has No Jurisdiction

  1. Where the Tax Court has no jurisdiction, report any determined but unagreed refund or credit in excess of $2,000,000 to the JCT before allowance and follow the same procedure as an agreed refund or credit.

8.7.9.5.9.4  (11-09-2007)
Unagreed Deficiency JC Cases

  1. Where an Appeals determination results in the issuance of a notice of deficiency, and the deficiency years are unrelated to a JC refund or credit, the work unit should be separated for purposes of a JC review.

  2. The determined refund or credit is referred to the JCT for review in accordance with the same procedures as an agreed refund or credit.

  3. The notice of deficiency does not require JC review and should be issued without unnecessary delay.

  4. Once the taxpayer files a petition with respect to the unagreed deficiency years, the petitioned years are to be processed as any other docketed case.

  5. Examples of this situation are shown below:

    Example 1  
    Tentative 6405(b) refund to taxpayer $3,000,000
    Less unagreed Appeals determined deficiency $1,400,000
    Tentative net refund $1,600,000

    In Example 1, the case is not reportable to the JCT because the net refund does not exceed $2,000,000. The notice of deficiency may be issued without delay.

    Example 2  
    Tentative 6405(b) refund to taxpayer $3,000,000
    Less unagreed Appeals determined deficiency 600,000
    Tentative net refund $2,400,000

    In Example 2, the case is reportable to the JCT because the net refund exceeds $2,000,000. The JC report should be submitted and clearance by the JCT obtained prior to issuance of the notice of deficiency.

  6. If the deficiency years are related to a JC refund or credit, submit the case to the JCT before issuing the notice of deficiency.

8.7.9.5.9.5  (11-09-2007)
Agreed Refund, Unagreed Deficiency — Docketed JC Cases

  1. If Appeals, in a case under its sole jurisdiction, reaches agreement with the taxpayer on a refund or credit in excess of $2,000,000 for a docketed year, but does not reach agreement on a deficiency determined for another docketed year, the case may be reported to the JCT before disposition of the unagreed deficiency.

  2. When the JCT completes its review of the determined refund or credit, Appeals transmits the case file to Counsel for disposition of unagreed deficiencies and agreed refund or credit. Disposition may be by settlement or trial. This procedure serves to expedite disposition of the case by stipulating the determined overpayment without further JC review.

8.7.9.6  (11-09-2007)
Determining JC Jurisdiction

  1. Computations will be prepared by the Tax Computation Specialist (TCS) to determine jurisdictional limits under IRC 6405(a), IRC 6405(b), and IRC 6405(c). See IRM 8.7.9.8.1.

8.7.9.6.1  (09-27-2013)
Previous Refunds

  1. If a refund or credit has been reported to the JCT and a further overpayment in the same taxable year is determined, no additional report is required unless the further refund or credit also exceeds $2,000,000. If a refund or credit previously allowed did not require a report to the JCT, it is not combined with a subsequent refund or credit for determining JC jurisdiction.

  2. A supplemental report covering the final resolution of unagreed issues pursuant to IRM 8.7.9.7.1.3, paragraph (2) is required regardless of the amount. The $2,000,000 minimum does not apply.

  3. If a refund or credit has been reported to the JCT and a deficiency in the same taxable year is subsequently determined, no additional report is required to report any adjustments that reduce the previously reported refund or credit.

8.7.9.6.2  (11-09-2007)
Separate Taxpayers

  1. The amounts proposed for allowance to each separate taxpayer provide the basis for determining whether the case requires a report to the JCT. Overpayments proposed in other related cases do not enter into the computation. A deficiency determined in the case of one taxpayer is not to be offset against an overpayment determined in the case of another taxpayer, even though the changes resulted from the shifting of income or deductions from one taxpayer to the other.

8.7.9.6.3  (09-27-2013)
Combining Transactions

  1. If IRC 6405(b) refunds or credits stemming from carrybacks under IRC 6411 tentative allowances do not exceed $2,000,000 when added together, they are not aggregated with and reported with IRC 6405(a) refunds. Similarly, IRC 6405(a) refunds or credits not exceeding $2,000,000, when added together, are not to be aggregated with or reported with IRC 6405(b) refunds. The interpretation of this paragraph is illustrated by the following examples:

    Example 1:
    Facts:  
    Tentative Allowances (IRC 6405(b) pursuant to IRC 6411):  
      2005 NOL carryback to 2003 $1,500,000
      2005 GBC carryback to 2004 550,000
      Jurisdiction amount – IRC 6405(b) $2,050,000
      Conclusion:  
      Both refunds must be reported.  

    Example 2:
    Facts:  
    Tentative Allowances (IRC 6405(b) pursuant to IRC 6411):  
      2005 NOL carryback to 2003 $1,000,000
      2005 GBC carryback to 2004 $500,000
      Jurisdiction amount – IRC 6405(b) $1,500,000
      Conclusion:  
      Neither refund will be reported since the combined amount does not meet the jurisdictional criteria.  

    Example 3:  
    Facts:  
    Examination of 2004 return  
    Tentative allowances (IRC 6405(b) pursuant to IRC 6411):  
      2004 NOL carryback to 2002 $1,250,333
      2004 NOL carryback to 2003 $1,625,000
    Previous tentative allowance:  
      2002 Capital Loss carryback to 1999 $140,000
    Conclusion:  

    The 2002 Capital Loss and its carryback to 1999 need to be reported along with the 2004 tentative allowances if the statute of limitations has not expired and the returns have not been previously closed by examination action approving the 2002 Capital Loss carryback and tentative allowance in 1999.

    Example 4:  
    Facts:  
    Tentative allowance (IRC 6405(b) pursuant to IRC 6411):
      2005 NOL carryback to 2003 $2,250,000
    Audit results:  
      2003 IRC 6405(a) refund $450,000
    Conclusion:  

    A report is required for 2003 and 2005 for the IRC 6405(b) refund resulting from the tentative allowance. The IRC 6405(a) refund should be mentioned in the report. In addition, because the IRC 6405(a) refund of $450,000 is not reportable, it can be processed prior to the submission of the report.

  2. Overpayments requiring JC review should be combined for the same taxpayer where the overpayment years are currently under Appeals jurisdiction in the same work unit. If overpayments or deficiencies have been proposed for the same taxpayer involving other years outside Appeals jurisdiction, such overpayments or deficiencies should not be considered for purposes of the current Appeals JC report.

  3. In determining JC jurisdiction, reduce a credit or refund tentatively allowed under IRC 6411 by any agreed deficiency subsequently determined for that year and by partial agreements secured by Compliance for that year when forwarding the case to Appeals.

    1. If the deficiency from the partial agreement is assessed and paid, then it is not used to determine the jurisdictional amount and not included in the report.

    2. If the deficiency is assessed but not paid, then it can be used to determine the jurisdictional amount and should be included in the report.

    3. If the resulting net refund amount is in excess of $2,000,000, the case is reportable to the JCT.

  4. The finally determined IRC 6405(b) amount (tentative allowance) is not combined with any IRC 6405(a) amount (other refund). Each is kept separate for purposes of determining JC jurisdiction.

  5. The examples below demonstrate different situations.

    Example 1  
    Tentative allowance (IRC 6405(b) pursuant to IRC 6411):
    2005   $2,250,000
    Deficiency determined by Appeals:  
    2005   $700,000
    Net refund $1,550,000

    The case is not reportable to the JCT since the tentative allowance is reduced below the jurisdictional limit by the subsequently determined deficiency.

    Example 2  
    Tentative allowance (IRC 6405(b) pursuant to IRC 6411):
    2005   $2,800,000
    Deficiency determined by Appeals:  
    2005   $700,000
    Net refund $2,100,000

    The case is reportable to the JCT since the tentative allowance is not reduced below the jurisdictional limit by the subsequently determined deficiency.

    Example 3  
    Tentative allowance (IRC 6405(b) pursuant to IRC 6411):
    2005   $2,250,000
    Compliance partial agreement - deficiency assessed, unpaid:
    2005   $150,000
    Deficiency determined by Appeals:  
    2005   $400,000
    Net refund $1,700,000

    The case is not reportable to the JCT since the tentative allowance is reduced below the jurisdictional limit by the partial agreement secured by Compliance and the subsequently determined deficiency.

    Example 4  
    Tentative allowance (IRC 6405(b) pursuant to IRC 6411):
    2005   $2,250,000
    Compliance partial agreement - deficiency assessed, unpaid:
    2005   $150,000
    Deficiency determined by Appeals:  
    2005   $50,000
    Net refund $2,050,000

    The case is reportable to the JCT since the tentative allowance is not reduced below the jurisdictional limit by the partial agreement secured by Compliance and the subsequently determined deficiency.

  6. In multiple-year cases where there is a net deficiency (i.e., the total deficiencies exceed the total of all IRC 6405 refunds), no report is required.

8.7.9.6.4  (09-27-2013)
Computing Separate IRC 6405(a) and IRC 6405(b) Limits

  1. The computations of separate jurisdictional limits for IRC 6405(a) and IRC 6405(b) amounts may be illustrated by the following example:

    Year Net 6405(a) Refund Net 6405(b) Refund
    2005 $1,970,000 $1,940,000

    • The case is not reportable to the JCT because neither the IRC 6405(a) amount of $1,970,000 nor the IRC 6405(b) amount of $1,940,000 is in excess of $2,000,000.

    • However, if either the IRC 6405(a) amount or IRC 6405(b) amount exceeds $2,000,000, review by the JCT of the refund that exceeds $2,000,000 is required.

    • The refund that does not exceed $2,000,000 would not be subject to JC review but should be mentioned in the narrative.

  2. A similar computation can be made for IRC 6405(c) refunds if applicable.

8.7.9.6.5  (03-31-2014)
Multiple Year Cases involving Deficiencies

  1. Multiple year net assessment cases which include deficiencies require a special three step computation to determine which, if any, refund years must be reported.

  2. The three steps are applied separately for each refund type and include:

    1. Determine the aggregate net deficiency for all deficiency years;

    2. Determine the aggregate net overpayment by refund type for all refund years according to IRM 8.7.9.6.4;

    3. Apply the aggregate net deficiency against the smallest of the aggregate IRC 6405 refund types and, if any net deficiency remains, against the next smallest aggregate refund type. If any net deficiency remains, it is applied against the last aggregate refund amount.

  3. For example, where multiple years are within the same Appeals work unit, assume the following:

    Year Deficiency 6405(a) Refund 6405(b) Refund
    2000   $600,000  
    2001     $700,000
    2002 $2,000,000    
    2003     $2,000,000
    2004   $3,000,000  
    Total $2,000,000 $3,600,000 $2,700,000

    1. The aggregate IRC 6405(a) refund is $3,600,000 and the aggregate IRC 6405(b) refund is $2,700,000.

    2. The net deficiency of $2,000,000 should first be applied against the smaller aggregate refund, leaving a net IRC 6405(b) amount of $700,000. Since this is less than the jurisdictional amount of $2,000,000, only the IRC 6405(a) refunds for 2000 and 2004 are reported. The deficiency and the IRC 6405(b) refunds should be noted in the narrative.

    3. If the deficiency had been $3,800,000, the IRC 6405(b) refunds would have been completely offset and the remaining deficiency of $1,100,000 would have been applied against the aggregate IRC 6405(a) refund. Since the net IRC 6405(a) refund of $2,500,000 would have exceeded $2,000,000, both the 2000 and 2004 refunds would be reported. The deficiency and the IRC 6405(b) refunds should be noted in the narrative.

  4. See IRM 8.7.9.6.6 for additional information.

8.7.9.6.6  (09-27-2013)
Offsetting Agreed Deficiency Years Against Overpayment Years

  1. In determining jurisdiction under IRC 6405, Appeals may offset a taxpayer's agreed deficiency for one year against an overpayment for another year open in Appeals, even in a different work unit if closing at the same time, to determine whether there is a net refund or credit in excess of $2,000,000. See IRM 8.7.9.5.9.4 which covers when a notice of deficiency is issued for an unagreed deficiency year. For work units not closing at the same time, there is no reason to delay a closing (and a report to the JCT).

  2. The ordering procedure for offsetting agreed deficiencies against refunds is as follows:

    1. Offset an agreed deficiency for a given year against refunds for that same year.

    2. Determine the remaining aggregate net deficiency for all net deficiency years.

    3. Determine the aggregate net overpayments by refund type (e.g., IRC 6405(a). IRC 6405(b), and IRC 6405(c)) for all refund years.

    4. Apply the aggregate net deficiency against the smallest of the aggregate refund types (even if the smallest amount is below the JC review threshold of $2,000,000). If the balance of that refund type after the offset of the deficiency is not in excess of $2,000,000, then that refund type is not reportable. Otherwise the entire aggregate amount of that refund type must be reported.

    5. If, after offsetting against the smallest refund type, some deficiency remains, then apply the balance of the deficiency against the next smallest aggregate refund type. In the rare event that two or more refund types are equal in size, then the deficiency should be applied first to the refund type associated with the earliest years.

  3. A spreadsheet that computes jurisdictional amounts is available on the Appeals Technical Suppport SharePoint site: Joint Committee Netting Spreadsheet.

  4. See examples below:

    Example 1:      
    Year Deficiency 6405(a) Refund 6405(b) Refund
    1995 10,000   (1,205,000)
    1996 225,000    
    1997     (570,000)
    1998 180,000    
    1999     (240,000)
    2000   (1,460,000)  
    2001   (800,000)  
    2002   (410,000)  
    Totals 415,000 (2,670,000) (2,015,000)
    Same year offset (10,000)   10,000
    Net deficiency/refund 405,000 (2,670,000) (2,005,000)
    Offset of smallest refund type (405,000)   405,000
    Jurisdictional amount 0 (2,670,000) (1,600,000)

    • Since the net refund under IRC 6405(a) is in excess of $2,000,000, the 2000, 2001 and 2002 refunds are reportable. However, since the net aggregate IRC 6405(b) refund does not exceed $2,000,000 after the offset of the net deficiency, none of the IRC 6405(b) refund years 1995, 1997, and 1999)) are reportable.

    • The deficiencies and the IRC 6405(b) refunds should explained in a paragraph below the table. For example:

    • "In addition, there are IRC 6405(b) refunds in the amounts of $1,205,000, $570,000, and $240,000 for the years 1995, 1997, and 1999 respectively and deficiencies in the amounts of $10,000, $225,000, and $180,00 for the years 1995, 1996, and 1998, respectively,"

    Example 2:      
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2000 1,005,000   (2,005,000)
    2001   (2,005,000)  
    2003 600,000    
    Net Deficiency./Refund 1,605,000 (2,005,000) (2,005,000)
    Same Year offset (1,005,000)   1,005,000
    Subtotal 600,000 (2,005,000) (1,000,000)
    Offset of smallest refund amount (600,000)   600,000
    Jurisdictional amount 0 (2,005,000) (400,000)

    • A report is required on the IRC 6405(a) refund. The IRC 6405(b) refund is not reportable because the amount after offset is less than $2,000,000.

    • However, the deficiencies and the IRC 6405(b) refund should be explained in a paragraph below the table. For example:

    • "In addition, there are deficiencies in the amounts of $1,005,000 and $600,000 for the years 2000 and 2003, respectively, and a IRC 6405(b) refund in the amount of $2,005,000 for the year 2000. "


    Example 3:
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2001 900,000   (1,005,000)
    2002   (2,670,000)  
    2003 1,005,000    
    Net Deficiency/Refund 1,905,000 (2,670,000) (1,005,000)
    Same Year offset (900,000)   900,000
    Subtotal 1,005,000 (2,670,000) (105,000)
    Offset of smallest refund amount (105,000)   105,000
    Subtotal 900,000 (2,670,000) 0
    Offset remaining Net deficiency (900,000) 900,000  
    Jurisdictional Amount 0 (1,770,000) 0

    A report is not required. After the offsetting, none of the refund types exceed $2,000,000.

    Example 4:
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2000 2,340,000   (2,230,000)
    2001   (2,220,000) (160,000)
    Totals 2,340,000 (2,220,000) (2,390,000)
    Same year offset (2,230,000)   2,230,000
    Net deficiency/refund 110,000 (2,220,000) (160,000)
    Offset of smallest refund type (110,000)   110,000
    Jurisdictional amount 0 (2,220,000) (50,000)

    • A report for the IRC 6405(a) refund for 2001 is required. The tentative refunds for 2000 and 2001 and the deficiency for 2000 are noted in the JC report below the table. For example:

    • "In addition, there are IRC 6405(b) refunds in the amounts of $2,230,000 and $160,000 for the years 2000 and 2001 respectively and a deficiency in the amount of $2,340,000 for the year 2000."

    Example 5:
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2000 890,000   (3,050,000)
    2001   (210,000)  
    Totals 890,000 (210,000) (3,050,000)
    Same year offset (890,000)   (890,000)
    Jurisdictional amount 0 (210,000) (2,160,000)

    • A report is required with respect to the IRC 6405(b) refund. The IRC 6405(a) refund for 2001 should be noted in a paragraph below the table. For example:

    • "In addition, there is a IRC 6405(a) refund in the amount of $210,000 for the year 2001."

8.7.9.6.7  (11-09-2007)
No Offsetting Deficiencies under IRC 6405(a) for Different Taxes

  1. In determining jurisdiction under both IRC 6405(a) and IRC 6405(b), all open years under Appeals jurisdiction for the same taxpayer and closing at the same time should be considered one case/work product for the purpose of determining JC jurisdiction, regardless of the way in which Appeals work units are structured.

  2. For IRC 6405(a) only, if a determined overpayment in one tax results in an agreed deficiency in any other tax for the same taxable year, the deficiency should not be applied as an offset in determining the jurisdiction amount. No such limitation applies to IRC 6405(b) offsets.

8.7.9.6.8  (11-09-2007)
Refund of Interest and Penalties

  1. Include a refund or credit of previously assessed and paid penalty or interest (do not include an abatement of unpaid penalty or interest) in determining whether an overpayment exceeds $2,000,000. For example, report a case involving an overpayment of tax of $1,800,000 and an overpayment of previously assessed and paid interest of $202,000 since the total exceeds $2,000,000.

  2. The interest must be the same interest that was previously assessed and paid. If the tax reduction is caused by a tentative carryback, then the interest is not included.

  3. A refund of previously assessed and paid interest in excess of $2,000,000 with no reduction in tax also requires a JC report.

8.7.9.6.9  (11-09-2007)
Estate Tax Credits

  1. Report a refund or credit of estate tax in excess of $2,000,000 to the JCT if it results from a credit allowed for estate, inheritance, legacy, or succession taxes paid to a state, District of Columbia, or a possession of the United States, or allowed for death duties paid to a foreign country.

8.7.9.6.10  (09-27-2013)
Disaster Losses

  1. IRC 6405(c) permits refunds or credits in excess of $2,000,000 attributable to a disaster in an area proclaimed by the President of the United States to be made prior to submitting a report for JC review.

  2. However, the report is only prepared and submitted after the correct amount of tax is determined if the net refund or credit remains in excess of $2,000,000.

8.7.9.7  (11-09-2007)
JC Reports: Types, Format, Assembly and Mailing

  1. This subsection covers JC Reports:

    • Types

    • Format

    • Assembly

    • Mailing

8.7.9.7.1  (09-27-2013)
Types of JC Reports

  1. The following are the various types of reports that are submitted to the JCT:

    • Expedite - IRM 8.7.9.7.1.1

    • Regular - IRM 8.7.9.7.1.2

    • Supplemental - IRM 8.7.9.7.1.3

    • Estate Tax cases - IRM 8.7.9.7.1.4

    • Foreign Sales Corporation (FSC) - IRM 8.7.9.7.1.5

    • Large Deficiency Case - IRM 8.7.9.7.1.6

    • Modified Expedite - IRM 8.7.9.7.1.7

  2. Examples of these reports can be found in Exhibit 8.7.9-2 through Exhibit 8.7.9-9.


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