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.

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.

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.

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 Memorandum and Case Memo, item 2, Special Features.

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.

On any case which is determined to require a JC report, the AO or ATCL assigned the case should 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.

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.

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. 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, attach the original of the memorandum of explanation, Form 9799, Memorandum for the File, to the return.

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 in the National Office or with 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.

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. 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, Statement of Account — When Required

If Form 870–AD/Form 890-AD, 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" .

If a Form 870, or Form 890 type agreement, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment , 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" .

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, as modified."

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" .

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

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).

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.

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.

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 electronically.

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. This discusses JC review before cases are closed.

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.

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.

For post-Appeals mediation issue resolutions on cases subject to JC review, Appeals will not enter into a closing agreement without concurrence from the JCT ( Rev. Proc. Rev. Proc. 2009-44 ). 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.

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

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.

After the report is forwarded to the JCT, inform the taxpayer by Letter 1594(CG) that the case has been reported. Upon receipt of notification that the JCT has released the case (by fax copy of JC clearance letter), inform the taxpayer by Letter 1537(CG) that the JCT has taken no exception to the conclusions reached by the Service. These letters should be prepared on APGolf; however, see Exhibit 8.7.9-8 and Exhibit 8.7.9-9. These two exhibits contain samples of these letters.

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 for additional information on contacting the taxpayer when a SRM has been issued.

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 consolidated case memos containing tax return information of an individual taxpayer when sent with a report involving a corporate taxpayer. Use Form 5482, Record of Disclosure, to account for disclosures (involving individual taxpayers or aliens admitted to permanent U.S. residence) to the JCT.

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.

When completing the two part carbon-less form, Item 3, Record System Number, should be 44.001, Administrative File, and Item 8, Privacy Act Provisions, should be (b)(9).

The copy will be filed with the administrative file for the individual. The original will be forwarded to the AJCPA either by mail or email. (See IRM 8.7.9.7.5. and IRM 8.7.9.7.7.2.) The AJCPA will retain the original Forms 5482 in a separate file for the prescribed five years.

Follow the instructions in IRM 11.3.19, Privacy Act Accounting for Disclosures, IRM 11.3.37, Recordkeeping and Accounting for Disclosures and Exhibit 11.3.37-1 for instructions on preparing the Form 5482.

This subsection covers Processing JC Cases.

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. This $2,000,000 minimum does not apply to the requirement to submit a supplemental report covering unagreed issues pursuant to IRM 8.7.9.7.1.3.

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.

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:

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.

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

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.

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

In multiple-year cases, IRC 6405(a) and IRC 6405(b) amounts are computed separately. Where multiple years are within the same Appeals work unit, assume the following:

The aggregate IRC 6405(a) refund is $3,600,000 and the aggregate IRC 6405(b) refund is $2,700,000. 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 $2,000,000, only the IRC 6405(a) refunds for 1990 and 1994 are reported. The balance of the IRC 6405(b) refund should be noted in the narrative. 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 1990 and 1994 refunds would be reported and the IRC 6405(b) refunds need not be mentioned in the narrative since they are completely offset.

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. This 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).

The ordered procedure for offsetting deficiencies against refunds is as follows:

Because the net refund under IRC 6405(b) is less than $2,000,000, none of the IRC 6405(b) refund years are reportable. However, because the net refund under IRC 6405(a) is in excess of $2,000,000, the 1996, 1997, and 1998 refunds are reportable.

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

Only the IRC 6405(a) refund for 1996 is reportable. However, the tentative refund and deficiency for 1995 should be noted in the JC report.

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. 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.

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.

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.

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

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.

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 in a manner similar to IRC 6405(a) refunds, prior to submitting a report for JC review. 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.

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

In addition, there is a specialty report for estate tax cases.

There are numerous same reports displayed in the exhibits. See Exhibit 8.7.9-2 through Exhibit 8.7.9-7.