8.7.15  Administrative Cost and Qualified Offer Cases

Manual Transmittal

September 24, 2012

Purpose

(1) This transmits new IRM 8.7.15, Technical and Procedural Guidelines, Administrative Cost and Qualified Offer Cases.

Material Changes

(1) New IRM 8.7.15 contains the administrative cost and qualified offer guidance that was previously published in IRM 8.7.1.10.

(2) Revised IRM to reflect new organizational titles resulting from the Appeals 2012 Alignment Project.

(3) References and links updated throughout.

(4) IRM 8.7.15.1.2.1, AO Procedures for Processing Claim Cases with IRC 7430, was revised to update the procedures for processing claim cases with IRC 7430

(5) IRM 8.7.15.1.7, Appeals Procedures for Closing IRC 7430 Administrative Cost Cases, was revised to update the procedures for closing IRC 7430 Administrative Cost cases.

(6) Updated Exhibit 8.7.15-3, IRS Administrative Costs Data Sheet, to correct the title of the signatory and make minor formatting changes.

Effect on Other Documents

IRM 8.7.1 dated 11/06/2007 is superseded.

Audience

Appeals Employees

Effective Date

(10-01-2012)


Susan L. Latham
Director, Policy, Quality and Case Support

8.7.15.1  (11-06-2007)
Introduction to IRC 7430 Costs

  1. The provisions of IRC 7430 allow a prevailing party to be awarded a settlement for reasonable administrative costs incurred in connection with an administrative proceeding within the IRS, and reasonable litigation costs incurred in connection with a court proceeding. The costs must be incurred in situations involving administrative or court proceedings connected to the determination, collection or refund of any tax, interest or penalty.

    1. "Administrative proceeding" means any procedure or other action before the IRS.

    2. "Court proceeding" means any civil action brought in a court of the United States, including the Tax Court and the United States Claims Court.

  2. In court proceedings, the prevailing party must exhaust all administrative remedies available before the court can consider awarding reasonable litigation costs. This requires the taxpayer to utilize their right to an Appeals conference, when available. For example -

    1. If the 30-day letter is issued and the taxpayer decides not go to Appeals but instead goes to Appeals when the court is petitioned on the 90-day letter, the taxpayer is not entitled to administrative or legal costs under IRC 7430 because all administrative remedies are not exhausted.

    2. If the Service decides not to issue the 30-day letter and only issues the 90-day letter, IRC 7430 applies because the taxpayer was not given the opportunity to go to Appeals.

  3. For a definition of the terms commonly used in these cases, Exhibit 8.7.15-1

  4. See IRM 35.10.1, Awards of Litigation and Administration Costs and Fees, for detailed information about IRC 7430 costs.

8.7.15.1.1  (10-01-2012)
Appeals Involvement in IRC 7430 Cases

  1. Appeals receives the following four types of cases where a request for IRC 7430 costs may be present. The first three types are discussed in this IRM.

    1. Claim cases with a request for administrative costs under IRC 7430(a)(1), and neither the substantive issues nor administrative cost issues were ever before a court of the United States with jurisdiction over the issues (including the Tax Court or United States Court of Federal Claims).

      Note:

      If the substantive issue and/or the IRC 7430 costs were previously under the jurisdiction of a U.S. court (including Tax Court or U.S. Court of Federal Claims), Appeals denies the claim and lets the taxpayer know the claim cannot be considered or settled in Appeals. Appeals does not have jurisdiction to settle these cases.

    2. Docketed cases in Appeals for settlement of substantive issues where the taxpayer raises the administrative or litigation costs and fees issue. The case is not a claim for refund. It may or may not have a qualified offer.

    3. Pre-90-day cases that include a qualified offer to resolve the substantive issues and the qualified offer was filed after the 30-day letter was issued.

    4. Collection Due Process hearings under IRC §§6320 and 6330. See IRM 8.22.8.22, Qualified Offers.

  2. When a case is assigned, the Appeals Technical Employee (ATE) needs to determine whether the case has the IRC 7430 cost issue, and if it does, determine if the case meets the statutory and filing requirements of IRC 7430 for granting an award of reasonable administrative and litigation costs and fees.

8.7.15.1.2  (10-01-2012)
Claim Cases Involving IRC 7430

  1. Appeals considers claims for administrative cost awards if the substantive issues or IRC 7430 cost issues are not and have never been before any court of the United States with jurisdiction over these issues. If the claim does not state that the substantive issues or IRC 7430 costs have not been before a court, contact the taxpayer to confirm these facts.

    Note:

    A claim for refund of administrative costs cannot include a claim for refund of litigation costs.

  2. Once the case is assigned the ATE determines the following:

    1. whether the statutory requirements are met;

    2. whether the claim is properly filed and includes required documents; and

    3. whether the costs requested for refund are reasonable.

  3. If the taxpayer is denied an award (in whole or in part), he/she may appeal the decision by filing a petition with the Tax Court in accordance with the Tax Court's Rules of Practice and Procedure.

  4. The IRS is authorized but not required to notify the taxpayer of the decision to grant or deny an award. If the notice is not sent within 6 months of when the request is filed, the IRS’s failure to respond is considered a decision by the IRS to deny the claim.

  5. The taxpayer can appeal a decision by the IRS to deny the claim, in whole or in part, after the expiration of the 6 month time-frame. An appeal is filed with the Tax Court following the Tax Court Rules of Practice and Procedures. This proceeding requires the use of Tax Court rules 270 through 274. See Treas. Reg. 301.7430-2(c)(7).

  6. Refer to IRM 35.10.1.2, Actions for Administrative Costs.

8.7.15.1.2.1  (10-01-2012)
AO Procedures for Processing Claim Cases with IRC 7430

  1. Prepare the Appeals Case Memorandum (ACM) recommending denial of claim consideration, the costs be allowed in full, denied in full or allowed in part..

  2. Prepare the appropriate decision letter to issue to the taxpayer when the case is closed.

    1. A full disallowance letter - Letter 2600.

    2. Letter Denying Consideration of Administrative Costs - Letter 2601. .

    3. A partial disallowance letter - Letter 2602.

  3. Prepare an approval package that includes the following:

    1. Form 9333, Agreement as to Administrative Costs under Section 7430 (in triplicate), with the taxpayer’s or power of attorney's signature. See Exhibit 8.7.15-2;

    2. IRS Administrative Cost Data Sheet. An example of what this sheet looks like is located in Exhibit 8.7.15-3;

    3. ACM;

    4. Work paper file associated with the administrative cost claim;

    5. Affidavits, statements, documents and information supplied by the taxpayer to support the IRC 7430 award;

    6. Copy of power of attorney;

    7. Copy of Administrative Cost Claim Letter; and

    8. Any other pertinent information.

  4. Forward the approval package to the Tax Policy and Procedures, Exam (TPP Exam) analyst who handles the administrative cost claim program through the Appeals Team Manager. The analyst in TPP Exam reviews the award determination and faxes the claim package to the Director, Tax Policy and Procedure - Exam for approval and signature. The Director of TPP Exam must sign FMS Form 194, the IRS Administrative Costs Data Sheet and Form 9333. The Director of TPP Exam should then fax the signed claim package back to the TPP Exam analyst for processing.

  5. The TPP Exam analyst sends the administrative cost claim package to the Department of Treasury, Financial Management Services, Judgment Fund for payment. The payment will be sent directly to the taxpayer either by mail or direct deposit (if the taxpayer provides the analyst with the direct deposit information). The Director of TPP Exam will receive a payment email from the Judgment Fund. The Director should cascade the email to the analyst who will in turn send the email to the Appeals Technical Employee (ATE).

  6. Once the ATE receives the Judgment Fund payment email, he/she may close the case following normal procedures.

8.7.15.1.3  (10-01-2012)
Appeals Involvement in Docketed IRC 7430 Cases

  1. When Appeals is considering substantive issues in a docketed case and the taxpayer raises the IRC 7430 costs issue, determine if the IRC 7430 statutory requirements are met and if the costs claimed are reasonable. If they are, determine the proper amount of costs to reimburse.

    Note:

    If the docketed case contains a qualified offer, discuss it with the Field Counsel Attorney to determine whether it meets the requirements of a qualified offer and whether there is a need to expedite the settlement procedures. See IRM 35.10.1.3.1, Requirements for Qualified Offers.

  2. Determine if the 90-day offer period expired. If the case is within 90 days of when the qualified offer was filed, it is an expedite case. Contact the Appeals Director, TPP Exam and request immediate assistance from the analyst responsible for IRC 7430 costs. Also, discuss the expedite nature of the case with the ATM.

  3. Request that Account and Processing Support (APS) enter "7430 qualified offer" in the notes section of the Appeals Case Summary Record.

  4. Once a determination is made, send the Field Counsel Attorney a memorandum stating the rationale for the proposed settlement.

    1. Include both the IRC 7430 costs issue and the substantive issues in the Appeals settlement.

  5. If the Field Counsel Attorney concurs with the recommended settlement, he/she prepares a memorandum stating the reason for accepting the settlement and why the fee is justified. The settlement is included in the decision document/stipulation of agreed issues.

    1. IRM 35.8.2.6, Preparing Decision Documents for Cases Involving Claims for Attorney Fees under IRC 7430, explains when the IRC section 7430 cost issue is raised in settled or litigated cases and the parties agree on the disposition of the issue, the decision document must include either a provision stating the petitioner is not entitled to the cost, or a provision stating the petitioner is entitled and the amount he/she is entitled to under IRC 7430.

    Note:

    When a basis for settlement of the IRC 7430 issue is not reached in Appeals, forward the case to Field Counsel. The taxpayer files a motion for fees under Tax Court Rule 231(a)(2).

  6. If the parties agree to all issues except the IRC 7430 costs, the parties must submit a stipulation of settlement that includes the elements described in TC Rule 231(c). The rule provides the stipulation of settlement accompanies a motion for costs.

8.7.15.1.3.1  (11-06-2007)
Processing Docketed Cases with IRC 7430

  1. Prepare the Appeals Case Memorandum (ACM) recommending settlement to allow the IRC 7430 cost issue in full or in part, or to deny the costs. Include a discussion of the disposition of costs in the ACM.

  2. If a settlement is reached between the petitioner and Appeals, prepare a docketed IRC 7430 package for the Field Counsel Attorney to use in processing the costs. This package includes the following:

    1. IRS Administrative Cost Data Sheet.

    2. ACM.

    3. Work paper file associated with administrative cost claim including affidavits, statements, documents and information supplied by the taxpayer to support the IRC 7430 award.

    4. Memorandum to the field counsel attorney requesting concurrence with the settlement of the IRC 7430 costs.

    5. Memorandum from the field counsel attorney indicating agreement with the settlement.

  3. Send the package to the Field Counsel Attorney with the request to prepare the decision document. Also send an information copy of the package to the Appeals Director, TPP Exam.

  4. Follow normal closing procedures for docketed cases when the Field Counsel Attorney is required to prepare the decision documents.

  5. Payment of the award is processed by the Field Counsel Attorney.

8.7.15.1.4  (10-01-2012)
Pre-90-Day Cases with a Qualified Offer

  1. Qualified offers are another way for the taxpayer to be a prevailing party. If an offer meets the criteria in IRC 7430(g) it is considered a qualified offer.

  2. Qualified offers must be expedited if they are received during the period the offer remains open. Make every attempt to resolve the issues within 90 days of when the qualified offer is filed. With the assistance of the ATM, decide if the substantive issues can be resolved within 90 days of receipt of the qualified offer.

  3. This time frame can be extended by the taxpayer. Since there is no specific form to do this, any written request is acceptable. The request must be faxed to the Appeals Director, TPP Exam, who ensures it is submitted to Counsel for immediate review.

  4. If the issue is not resolved within 90 days of when the qualified offer is filed, the taxpayer has a valid qualified offer for consideration by the court in awarding administrative costs and litigation costs, unless the case is subsequently settled before the court makes a determination or the taxpayer files a subsequent qualified offer. If either of these occurs, the qualified offer under consideration by Appeals is no longer a valid qualified offer.

  5. All other requirements under IRC 7430 dealing with administrative costs and litigation costs apply to qualified offer cases. However, IRC 7430(c)(4)(E) places additional limitations on qualified offer cases not placed on other administrative and litigation cost cases.

  6. If the taxpayer references qualified offer or IRC 7430(g) in the protest or in a separate letter in response to the 30-day letter or statutory notice of deficiency, contact the Appeals Director, TPP Exam. An analyst in TPP Exam immediately determines if it is a qualified offer and discusses required actions with the ATE.

  7. If the requirements for a qualified offer are met and it is considered valid, request that Account and Processing Support (APS) input "IRC section 7430 Qualified Offer" in the notes section of the Appeals Case Summary Record.

  8. Appeals assumes jurisdiction of the case even if the taxpayer fails to prepare a proper protest.

  9. If the requirements for a qualified offer are not met, inform the taxpayer that the offer is not valid. Explain how to correct the offer in case the taxpayer wishes to file another qualified offer. Proceed with resolving the substantive issues in the case. Identify the qualified offer as an issue that was considered.

  10. If the case is received with a qualified offer that is not within the 90 day time frame, continue with the normal case resolution procedures.

    Note:

    When considering the issues for settlement, remember if issues raised in the qualified offer are not settled by Appeals or Counsel, and subsequently there is a judgment entered by the court equal to or less than the amount in the qualified offer for the identified issues, the government is liable for IRC 7430 costs.

  11. If it is determined a SND or a notice of claim disallowance needs to be issued, the position taken must be a position the government can defend if the case is litigated, otherwise the government is liable for IRC 7430 costs from the date the last qualified offer was filed. The IRC 7430 costs are those incurred for the issues identified in the qualified offer and only if the judgment is equal to or less than the amount the taxpayer offered.

  12. For detailed information on qualified offers, see IRM 35.10.1.3, Qualified Offer Rule and IRM 35.10.1.3.1, Requirements for Qualified Offers.

8.7.15.1.5  (10-01-2012)
Recovering IRC 7430 Administrative Costs

  1. The costs the taxpayer is allowed to recover in an administrative proceeding are the administrative costs beginning after the earliest of the issuance of the 30 day letter, the NODA or the SND. The following represents some examples:

    For example: If the case comes to Appeals in pre-90-day status, the costs incurred by the taxpayer to have the protest prepared and a qualified representative present the taxpayer’s position in Appeals are included in administrative costs. If Appeals decides that the taxpayer’s position is correct on all but one issue, a notice of deficiency is prepared for the issue on which the taxpayer's position is not correct. If the taxpayer later files a claim for administrative costs, only the costs incurred for the issue in the SND are administrative costs for purposes of an award under IRC section 7430. Since the government conceded the other issues before the receipt of the NODA, the taxpayer cannot recover these administrative costs in any future claim for IRC 7430 costs. Since the taxpayer received a NODA regarding one issue, the taxpayer is entitled to claim the costs for preparing the protest and qualified representation in Appeals for that one issue.

  2. To recover administrative costs, the taxpayer must file a written claim with the IRS function that has jurisdiction over the tax matter underlying the claim for costs. See Treas. Reg. 301.7430-2(c)(3) for details of the contents of the request.

    1. If the taxpayer does not know the IRS function with jurisdiction of the issue, he/she sends the request to the IRS office that considered the substantive issue.

  3. The request for administrative costs must be filed within 90 days after the final decision of the IRS is issued or otherwise furnished to the taxpayer. The final decision is the document that resolves the tax liability for the taxpayer including tax, additions to tax and penalties in the administrative proceeding such as Form 870 agreement or notice of assessment (if received earlier).

8.7.15.1.6  (10-01-2012)
Payment of Awards for IRC 7430 Costs

  1. Prepare the documents for consideration and payment of administrative and litigation cost awards. IRM 8.7.15.1.2.1. The payment is made by the Department of the Treasury Financial Management Services Judgment Fund.

  2. Send the documents to the TPP Exam analyst who handles administrative costs and processes the payment. Verify the payment is processed and the check issued is sent to the Appeals Technical Employee. Once received, close the case following normal closing procedures.

  3. The Field Counsel Attorney prepares the documents for payment of administrative and litigation costs when the case is docketed or the substantive issue or IRC 7430 issue is now or previously has been before a U.S. Court. After the decision to award litigation costs is made and Counsel processes the award, return the case to Account and Processing Support for closing.

  4. Non-docketed qualified offer cases and docketed qualified offer cases do not involve payment of awards at the Appeals Technical Employee level.

8.7.15.1.7  (10-01-2012)
Appeals Procedures for Closing IRC 7430 Administrative Cost Cases

  1. If the request is disallowed the taxpayer is given the opportunity to go to Tax Court. If the taxpayer doesn't petition or the Tax Court denies the request, close the case off ACDS following the instructions in paragraph (4).

  2. If the request is allowed the case is processed in this manner:

    1. Appeals Technical Employee completes Form 9333, Agreement as to Administrative Costs Under Section 7430 - Exhibit 8.7.15-2.

    2. Appeals Technical Employee completes IRS Administrative Cost Data Sheet - Exhibit 8.7.15-3

    3. The administrative cost claim agreement package (as described in IRM 8.7.15.1.2.1 (3) above) is forwarded to the TPP Exam analyst who handles administrative cost claims. The analyst will forward approved claims to the Treasury Judgment Fund for processing and payment. See below for ACDS update.

    4. No costs are paid unless the taxpayer or the representative signs the agreement form.

  3. When the Form 9333 and IRS Administrative Cost Data Sheet are forwarded to Director, TPP update ACDS:

    1. LACTION = Enter FLDSVCS.

    2. LTODATE = Enter the date information sent.

    3. LFROMDATE = Enter the date information is received back from Director, TPP (Exam).

  4. When the agreement is signed and forwarded to TPP (Exam) for payment and payment notification is received from the Judgment Fund, follow general instructions for closing ACDS. In addition:

    1. CLOSINGCD =
      14 - if the request was disallowed
      15 - if the request was allowed
      16 - if the request was partially allowed.

    2. DATECLSD =
      If allowed - enter the date agreement (Form 9333) is signed by the Area Director, Appeals Team Manager or Appeals Team Case Leader.
      If disallowed - enter the date of the letter to the taxpayer.

    3. ACTION – ACKCLS.

    4. TODATE – Enter the date mailed to Collection, Campus and Appraisal Services for payment or the date a partial or full disallowance letter is issued.

    5. FROMDATE – Enter the date receipt is acknowledged.

    6. Paycode = 7.

    7. APPEALS AMTDIS – Enter the amount disallowed. (If the full amount of the claim is allowed, no entry is made on the return information screen.)

Exhibit 8.7.15-1 
Definitions Common in IRC 7430 Cases

IRC 7430 CostsCommonly Used Terms
  1. Administrative proceedings is defined in IRC 7430(c)(5) and explained in Treas. Reg. 301.7430-3(a). Generally it means any procedure or other action before the Internal Revenue Service that is commenced after November 10, 1988. However, an administrative proceeding does not include matters of general application, including hearings on regulations, comments on forms, or proceedings involving revenue rulings or revenue procedures; proceedings involving requests for private letter rulings or similar determinations; proceedings involving most technical advice memoranda, and proceedings in connection with collection actions excluding claims for refunds after payment of the assessed tax and proceedings described in Treas. Reg. 301.7430-8(c) and Treas. Reg. 301.7433-2.

  2. Administrative proceeding date is defined in IRC 7430(c)(7) and Treas. Reg. 301.7430-3(c). The term administrative proceeding date means the earlier of--

    1. The date of the receipt by the taxpayer of the NODA; or

    2. The date of the SND.

  3. Attorney Fees is defined in IRC 7430(c)(3). For the purposes of reasonable litigation costs and administrative costs these are fees for services of an individual who is authorized to practice before the Tax Court or before the IRS. Pro bono services are covered if the fees are paid to the individual or his employer. The costs must be incurred after receipt of the NODA, SND, or the first letter of proposed deficiency that allows the taxpayer for an administrative review in the IRS, whichever is the earliest received.

  4. Court Proceedings is defined in IRC 7430(c)(6). It means any civil action brought in a court of the United States including the Tax Court and the United States Court of Federal Claims.

  5. Most significant issue or set of issues is defined in Treas. Reg. §301.7430-5(e). Where the taxpayer has not substantially prevailed with respect to the amount in controversy the taxpayer may nonetheless be a prevailing party if the taxpayer substantially prevails with respect to the most significant issue or set of issues presented. The issues presented include those raised as of the administrative proceeding date and those raised subsequently. Only in a multiple issue proceeding can a most significant issue or set of issues presented exist. However, not all multiple issue proceedings contain a most significant issue or set of issues presented. An issue or set of issues constitutes the most significant issue or set of issues presented if, despite involving a lesser dollar amount in the proceeding than the other issue or issues, it objectively represents the most significant issue or set of issues for the taxpayer or the Internal Revenue Service. This may occur because of the effect of the issue or set of issues on other transactions or other taxable years of the taxpayer or related parties.

  6. Net worth and size limitations is defined in IRC 7430(c)(4)(D) and explained in Treas. Reg. §301.7430-5(f). The determination is made on the administrative proceeding date.

    1. An individual taxpayer or an estate meets the net worth and size limitations if the taxpayer's net worth does not exceed two million dollars. For this purpose, individuals filing a joint return shall be treated as one taxpayer except in the case of a spouse relieved of liability under IRC 6015 .

    2. A taxpayer that is an owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization (other than an organization described in Treas. Reg. §301.7430-5(f)(3)) meets the net worth and size limitations if the taxpayer's net worth does not exceed seven million dollars, and the taxpayer does not have more than 500 employees.

    3. There are special rules for charitable organizations and certain cooperatives. Those listed in Treas. Reg. §301.7430-5(f)(3) meet the net worth and size limitations if the organization or cooperative association does not have more than 500 employees.

  7. Notice of the decision of the Internal Revenue Service Office of Appeals (NODA) is defined in Treas. Reg. §301.7430-3(c)(2). A notice of the decision of Appeals is the final written document, mailed or delivered to the taxpayer, that is signed by an individual in the Office of Appeals who has been delegated the authority to settle the dispute on behalf of the Commissioner, and states or indicates that the notice is the final determination of the entire case. A notice of claim disallowance issued by the Office of Appeals is a NODA.

  8. Notice of deficiency is defined in Treas. Reg. §301.7430-3(c)(3). A notice of deficiency is a notice described in IRC 6212(a), including a notice rescinded pursuant to IRC 6212(d). For purposes of determining reasonable administrative costs, a notice of final partnership administrative adjustment and a notice of final S corporation administrative adjustment will be treated as a SND.

  9. Prevailing party is defined in IRC 7430(c)(4) and explained in Treas. Reg. §301.7430-5. For purposes of an award of reasonable administrative costs in the case of administrative proceedings commenced after July 30, 1996, a taxpayer is a prevailing party only if the position of the IRS was not substantially justified, if the taxpayer substantially prevails as to the amount in controversy or with respect to the most significant issue or set of issues presented; and the taxpayer satisfies the net worth and size limitations. An exception to this is that a party shall be treated as the prevailing party regardless of whether he substantially prevailed If the taxpayer files a valid 7430(g) qualified offer. In that situation, the prevailing party rules of IRC 7430(c)(4)(E) will apply instead. A taxpayer is a prevailing party by reason of making a qualified offer if the taxpayer's liability under the last qualified offer would equal or exceed the amount of the taxpayer's liability under the judgment entered by the court.

  10. Prevailing Party under IRC 7430(g) is explained in IRC 7430(c)(4)(E). Additional limitations apply to IRC 7430(g) qualified offer cases. These additional limitations are:

    1. The determination of the prevailing party shall be made by reference to the last qualified offer with respect to the tax liability at issue in the proceeding.

    2. Reasonable administrative and litigation costs shall only include costs incurred on and after the date of the offer.

    3. IRC 7430(c)(4)(E) will not apply to any judgment issued pursuant to a settlement.

    4. IRC 7430(c)(4)(E) will not include any proceeding where the amount of tax liability is not at issue.

  11. Position of the United States is defined in IRC 7430(c)(7) and explained in Treas. Reg. 301.7430-5(b). It is the position of the United States in an administrative proceeding as of the administrative proceeding date, and it is the position taken by the United States in a judicial proceeding.

  12. Presumption is explained in Treas. Reg. 301.7430-5(c)(3). If the Internal Revenue Service did not follow any applicable published guidance in an administrative proceeding commenced after July 30, 1996, the position of the Internal Revenue Service, on those issues to which the guidance applies and for all periods during which the guidance was not followed, will be presumed not to be substantially justified. This presumption may be rebutted. The term applicable published guidance means final or temporary regulations, revenue rulings, revenue procedures, information releases, notices, announcements, and, if issued to the taxpayer, private letter rulings, technical advice memoranda, and determination letters.

  13. Qualified offer is defined in IRC 7430(g)(1) and explained in Treas. Reg. §301.7430-7. A qualified offer means a written offer made by the taxpayer to the United States during the qualified offer period, specifies the offer amount, is designated at the time it is made as a qualified offer and remains open during the period beginning on the date it is made and ending on the earliest of the date the offer is rejected, the date the trial begins, or the 90th day after the date the offer is made.

  14. Qualified offer period is defined in IRC 7430(g)(2) as the period beginning on the date the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in Appeals is sent and ending on the date which is 30 days before the date the case is first set for trial.

  15. Reasonable Costs:

    1. Reasonable litigation costs are defined in IRC 7430(c)(1) and explained in Treas. Reg. §301.7430-4(c)(3). They include reasonable court costs; and based upon prevailing market rates for the kind or quality of services furnished, reasonable expenses of expert witnesses, study analysis, engineer reports, and fees paid or incurred for attorney fees based upon defined limitations.

    2. Administrative costs are defined in IRC 7430(c)(2) and explained in Treas. Reg. 301.7430-4. They are any costs described in the regulation that are incurred in connection with an administrative proceeding and incurred on or after the administrative proceeding date.

  16. Substantially justified is defined in IRC 7430(c)(4)(B) and explained in Treas. Reg. 301.7430-5(c). The position of the Internal Revenue Service is substantially justified if it has a reasonable basis in both fact and law. A significant factor in determining whether the position of the Internal Revenue Service is substantially justified as of a given date is whether, on or before that date, the taxpayer has presented all relevant information under the taxpayer's control and relevant legal arguments supporting the taxpayer's position to the appropriate Internal Revenue Service personnel.

Exhibit 8.7.15-2 
Sample Form 9333

IRC 7430 CostsForm 9333
Internal Revenue Service Department of the Treasury
   
   
Under IRC 7430 of the Internal Revenue Code, pertaining to administrative costs,
(Taxpayer's Name, Address, and Identification Number)
   
   
   
makes the following agreement with the Commissioner of Internal Revenue:
   
It is hereby determined and agreed that the following reasonable administrative costs are recoverable from the Internal Revenue Service:
Fees paid for the services of a qualified representative
 1994 40 hours @ $ 98.88 per hour = $ 3,955.20
 1995 30 hours @ 101.41 per hour = $ 3,042.30
  $ 6,997.50
Expenses of expert witness = $ 5,495.00
Cost of engineering report and testing = $ 2,200.00
Total recoverable costs $14,692.50
   
   
  Form 9333 (5–99)
   
   
Internal Revenue Service  
Department of the Treasury  
   
Under IRC 7430 of the Internal Revenue Code, pertaining to administrative costs,
(Taxpayer's Name, Address, and Identification Number)
   
   
   
makes the following agreement with the Commissioner of Internal Revenue:
   
It is hereby determined and agreed that the following reasonable administrative costs are recoverable from the Internal Revenue Service:
 
Cost incurred between June 30, 1996 and December 1997:
Fees paid for the services of a qualified representative, 40 hours @ $110.00 per hour = $4,400.00
   
Cost incurred in 1998:
Fees paid for the services of a qualified representative, 60 hours @ $120.00 per hour = $7,200.00
 
Expenses of expert witness = $2,800.00
Cost of engineering report and testing = $2,000.00
Total recoverable costs $16,400.00
   
   
  Form 9333 (1–91)
This agreement on administrative costs is final and conclusive on the types of costs listed in this agreement except:
 Damages equaling the total amount of costs in this agreement, plus all costs of litigation shall accrue in favor of the United States of America in the event of fraud, malfeasance, or misrepresentation of material fact.
 By signing this agreement, the above parties certify that they have read and agreed to its terms.
   
Your signature  _____________ Date signed  __________
   
Spouse's signature (if related to a joint
return)  ________________ Date signed  _________
   
Taxpayer's representative  ____________ Date signed  ______
   
Taxpayer (other than individual)  _____________________
   
   
  By  _______________ Date signed  ______
 
    Title  ______________
Accepted for the Commissioner of Internal Revenue
     
  By  _______________ Date signed  ______
 
    Title  ______________
     
   
    Form 9333 (1–91)
     
Instructions
 This agreement must be signed and filed in triplicate. (All copies must have original signatures.)
 The original and copies of the agreement must be identical.
 The name of the taxpayer must be stated accurately.
 The agreement may relate to one or more tax years.
 If an attorney or agent signs the agreement for the taxpayer, the power of attorney (or a copy) authorizing that person to sign must be attached to the agreement. If the agreement is made for a year when a joint income tax return was filed by a husband and wife, it should be signed by or for both spouses. One spouse may sign as agent for the other if the document (or a copy) specifically authorizing that spouse to sign is attached to the agreement.
 If the fiduciary signs the agreement for a decedent or an estate, an attested copy of the letters testamentary or the court order authorizing the fiduciary to sign, and a certificate of recent date that the authority remains in full force and effect must be attached to the agreement. If a trustee signs, a certified copy of the trust instrument or a certified copy of extracts from that instrument must be attached showing:
 (1) The date of the instrument;
 (2) That it is or is not of record in any court;
 (3) The names of the beneficiaries;
 (4) The appointment of the trustee, the authority granted, and other information necessary to show that the authority extends to Federal tax matters; and
 (5) That the trust has not been terminated, and that the trustee appointed is still acting. If a fiduciary is a party, Form 56 Notice Concerning Fiduciary Relationship, is ordinarily required.
 If the taxpayer is a corporation, the agreement must be dated and signed with the name of the corporation, the signature and title of an authorized officer or officers, or the signature of an authorized attorney or agent. It is not necessary that a copy of an enabling corporate resolution be attached.
     Form 9333 (1–91)
   
   
   

Exhibit 8.7.15-3 
IRS Administrative Costs Data Sheet

IRC 7430 CostsIRS Administrative Costs Data Sheet
A. TAXPAYER IDENTIFICATION NUMBER AND TAX PERIOD(S):  _________
 
______________________________________
 
______________________________________
 
B. TAXPAYER (PAYEE) NAME(S) AND ADDRESS:  _________________
 
______________________________________
 
______________________________________
 
______________________________________
 
______________________________________
 
C. AMOUNT TO BE PAID:  __________________________
 
D. LEGAL AUTHORITY FOR PAYMENT: 26 U.S.C. 7430(a)(1) AND 7430(d)(1). There were reasonable administrative costs incurred in connection with this administrative proceeding with the Government.
 
E. DEBTS PAYEE OWES U.S. (IF KNOWN):  ____________________
 
______________________________________
 
______________________________________
 
F. BREAKDOWN OF ADMINISTRATIVE COSTS: __________________
 
  EXPENSES OF EXPERT WITNESSES:    $  __________
 
  COST OF STUDY, ANALYSIS, ETC.:      $  __________
 
  ATTORNEY FEES:          $  __________
 
  Total:          $  __________
  APPROVED FOR PAYMENT:
   
  ________________
  DIRECTOR, TAX POLICY AND PROCEDURE (EXAM, TE/GE & ADR)

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