25.3.2 Suits by the United States

Manual Transmittal

December 08, 2017

Purpose

(1) This transmits revisions to IRM 25.3.2, Litigation and Judgments, Suits by the United States.

Background

While this section provides procedural guidelines on recommending suits, this revision marks adoption of the updated instructions for completing the new and revised forms needed to submit a suit recommendation.

Material Changes

(1) Editorial changes made throughout to update text and references.

(2) IRM 25.3.2.1: Revised title and added content to comply with the new Internal Management Documents System, Internal Revenue Manual (IRM) internal control requirements.

(3) IRM 25.3.2.1.1: Moved to IRM 25.3.2.2.2, Service of Process.

(4) IRM 25.3.2.2: Revised subsection reorganizing and adding clarifying content.

(5) IRM 25.3.2.3: The Official Use Only (OUO) content in paragraphs 3 through 5 on the Criteria for Bringing Suit, has been revised by Counsel and the Department of Justice.

(6) IRM 25.3.2.4.1: Revised subsection reorganizing and adding clarifying content.

(7) IRM 25.3.2.4.2: Revised subsection reorganizing and adding clarifying content.

(8) IRM 25.3.2.4.4: Revised subsection updating identification of suit package forms including new forms for a table of contents with contact list, a data capture spreadsheet, and a narrative report, suit form revisions, and moved instructional content for the forms to separate individual subsections.

(9) IRM 25.3.2.4.4.1: New subsection containing instructions for new Form 4477-C, Civil Suit Table of Contents and Contact List.

(10) IRM 25.3.2.4.4.3: New subsection containing instructions for the revised Form 4477, Civil Suit Recommendation.

(11) IRM 25.3.2.4.4.4: New subsection containing instructions for the new Form 4477-B, Narrative Report, which is a template based on IRM 5.17.12.20.2, Format of the Narrative Report and which contains the text and data tables for the narrative report.

(12) IRM 25.3.2.4.4.5: New subsection containing instructions for the revised Form 4478, Civil Suit Checklist, which clarifies content for the Revenue Officer and adds a checklist segment for the Advisor.

(13) IRM 25.3.2.4.4.6: New subsection containing instructions for the revised Form 4479, Civil Suit - Property, Liens, and Claims, which combines, when there is property, the property data along with associated liens and claimants to that property.

(14) IRM 25.3.2.4.4.7: New subsection containing instructions for the revised Form 4480, Civil Suit - Service of Legal Papers, no longer used as a property descriptor but instead now amalgamates, for noticing purposes, the contact information for all those needing to be a party to the suit.

(15) IRM 25.3.2.4.4.8: New subsection containing instructions for the revised Form 4481, Advisory Transmittal, for use by advisors to provide any additional notes related to the recommendation.

(16) IRM 25.3.2.4.5: Renamed and revised subsection to, Suit Recommendation Considerations; additionally relocating the content related to the Narrative Report to IRM 25.3.2.4.4.3 containing instructions for the new Form 4477-B.

(17) IRM 25.3.2.4.5.5, Moved Cases with Imminent CSEDs content to this section and moved Settlement Recommendation content to IRM 25.3.2.5.

(18) IRM 25.3.2.5, Moved Settlement Recommendation content to this section and moved Cases with Imminent CSEDs content to IRM 25.3.2.4.5.5.

(19) IRM 25.3.2.6: Revised subsection reorganizing and adding clarifying content.

(20) IRM 25.3.2.7: Revised subsection reorganizing and adding clarifying content.

(21) IRM 25.3.2.7.1: Revised subsection reorganizing and adding clarifying content.

(22) IRM 25.3.2.7.2: Revised subsection reorganizing and adding clarifying content.

(23) IRM 25.3.2.7.3: Revised subsection reorganizing and adding clarifying content.

Effect on Other Documents

IRM 25.3.2, dated March 30, 2015, is superseded.

Audience

SBSE Collection Employees and all Operating Divisions

Effective Date

(12-08-2017)

Kristen Bailey
Director, Collection Policy
Small Business/Self-Employed

Program Scope and Objectives

  1. The federal government in certain circumstances initiates litigation action against a taxpayer or third party when collection enforcement actions alone cannot resolve the case.

  2. Purpose: This section provides the procedural instructions for collection staff recommending suits by the government to further collection of liabilities owed.

  3. Audience: This IRM is used by Collection employees initiating suits by the government. Generally, a request that a legal action be brought against a taxpayer or third party to collect unpaid tax is initiated by the Field Collection function or Advisory. However, litigation recommendations can be initiated by any Collection employee. Primarily Collection Advisory staff or Field Collection Revenue Officers use this IRM when assisting Counsel and the Department of Justice with defense actions related to these types of suits.

  4. Policy Owner: Director, Collection Policy. Collection Policy is an organization under Small Business/Sell-Employed Division (SBSE), Collection.

  5. Program Owner: Collection Policy is responsible for overseeing the guidance for the Legal Reference Guide for Revenue Officers and in particular this IRM on Investigations and Reports.

  6. Primary Stakeholders: The primary stakeholders are Chief Counsel and Department of Justice attorneys.

  7. Program Goals: The goal of the program aligns with IRS Strategic Goal II to, Effectively enforce the law to ensure compliance with tax responsibilities and combat fraud and Objective 1 to: Enforce Domestic and International Compliance by Strengthening expertise, adopting innovative Approaches and Streamlining Procedures.

Background

  1. There are a number of judicial actions that may be brought by the United States against taxpayers or third parties. See IRM 5.17.4, Suits by the United States and IRM 5.17.14, Fraudulent Transfers and Transferee and Other Third Party Liability, for a review of the principal types of actions that may be brought by the United States.

  2. A suit is generally commenced by the filing of a complaint with the court. A copy of the complaint accompanied by a summons must be served upon all persons named as a party to the action. The persons against whom the action is brought are referred to as the "defendants" . The party bringing the complaint is the "plaintiff" .

  3. Advisory is responsible for internal control of and actions pertaining to most litigation by and against the United States. Exceptions where Advisory does not control suits against the United States include:

    1. Bankruptcy actions, which are controlled by Insolvency.

    2. Tax Court litigation, which is controlled by Appeals or in some cases Area Counsel. This would include IRC 7345 Passport litigation, when filed in Tax Court.

    3. Refund litigation not involving trust fund recovery penalties, which is controlled by campus refund litigation units. See IRM 3.17.243.7.2, Refund Litigation Campus Contacts for the appropriate campuses and contacts.

  4. After receipt of a civil suit recommendation and supporting documents, Area Counsel examines the case carefully from a legal viewpoint to determine whether suit is warranted on the facts presented.

  5. If it is determined that suit is warranted, Area Counsel prepares a suit letter to the Department of Justice, Tax Division (DOJ), authorizing and requesting that a suit be filed.

    Note:

    In certain cases, the suit letter may need to be reviewed by the appropriate Associate Chief Counsel Office. See IRM Exhibit 35.11.1-1, Litigation Exhibits - Issues Requiring Associate Office Review. For example, such review is required for cases recommending assertion of the penalty for failure to honor a levy. If national office review is required, additional time will be needed before the case can be forwarded to DOJ.

  6. When DOJ receives the suit letter from Area Counsel, the case becomes the responsibility of DOJ. If DOJ determines that a suit should be filed, the pleadings will generally be prepared and filed by the Tax Division attorney assigned to the case.

  7. Because sufficient time is needed for each step in this process, suit recommendations should be prepared well in advance of the Collection Statute Expiration Date (CSED). See CSED Calculator and IRM 25.3.2.4.5.5, Cases with Imminent CSEDs, below, for further discussion.

Authority

  1. The legal authority for Civil Actions by the United States is found in the United States Code, Title 26, Subtitle F, Chapter 76, Subchapter A, Sections 7401 through 7410. Collection uses:

    1. IRC 7401. Authorization.

    2. IRC 7402. Jurisdiction of district courts.

    3. IRC 7403. Action to enforce lien or to subject property to payment of tax.

    4. IRC 7404. Authority to bring civil action for estate taxes.

    5. IRC 7405. Action for recovery of erroneous refunds.

    6. IRC 7406. Disposition of judgments and moneys recovered.

    7. IRC 7407. Action to enjoin tax return preparers.

    8. IRC 7408. Actions to enjoin specified conduct related to tax shelters and reportable transactions.

  2. The authority to approve most suit recommendations is delegated to Collection Territory Managers and Advisory Territory Managers. However, Area Director approval is required, if the recommendation is to either:

    1. Secure judicial approval to seize a principal residence; or

    2. Foreclose the federal tax lien against the principal residence of any person.

    See Delegation Order SBSE- 1-23-9 (formerly SBSE DO 145.2, Rev 3), Approval of Form 4477, Civil Suit Recommendation.

    Note:

    An electronic signature is an acceptable method of written approval for these enforcement actions. See also IRM 5.11.2.2.2(10), Preparing the Notice of Levy.

  3. This IRM provides instructional procedures for initiating suits by the government. See also IRM 25.3.1.4, Litigation and Judgments, General Guidelines, Authorization for Filing Suits, Counterclaims or Third Party Complaints, regarding the legal authority under IRC § 7401 for filing suits, counterclaims, or third party complaints.

    • Specific policies related to collection work are located in IRM 1.2.14, Policy Statements for Collecting Process Activities.

    • Specific delegations of authority related to collection work are located in IRM 1.2.44, Delegations of Authority for the Collecting Process, IRM 1.2.52, Delegations of Authority for Special Topics Activities, and in Collection Functional Delegation Authorities.

Roles and Responsibilities

  1. IRM 5.17.1, Legal Reference Guide for Revenue Officers, General Information provides a list of the parties with an explanation of their role with suits.

Program Management and Review

  1. Program Reports: Suits are individual to the case and are of a wide variety and scope. When it is appropriate the Collection employee will provide a case Narrative Report for Area Counsel and the Department of Justice identifying all pertinent facts so that appropriate legal action may be taken. Narrative Reports are discussed in IRM 5.17.12, Legal Reference Guide for Revenue Officers, Investigation and Reports.

  2. Program Effectiveness: Whenever litigation involving collection matters is pending or the institution of affirmative legal action to effect collection is being considered, revenue officers will, in the main, be investigators of facts. They will be required to prepare reports concerning any facts ascertained. Advisory reviews the revenue officer recommendation package for clarity and completeness. The approving official reviews the package and if the recommendation represents an effective utilization of collection techniques, approves the package for Counsel’s consideration. The lawyers charged with the responsibility make the ultimate decision of whether to proceed but must rely on those facts and reports provided by the revenue officer when making case decisions.

Program Controls

  1. Collection Advisory maintains a copy of any suit documentation until the suit is closed. After case closure see Document 12990 Records and Information Management Records Control Schedules, under section Internal Revenue Service Records Control Schedule (RCS) 28, Tax Administration Collection, in:

    • PART III - Administrative Records - All Collection Functions, item number 38, Litigation Files, and in

    • PART IV - Delinquent Accounts, Delinquent Returns, And Office Services Records, item 45, Suits to Foreclose Federal Tax Liens, item 53, Civil Suit Recommendation, Form 4477, and in item 54 (a), Special Procedures Function Case Files.

  2. Preserving electronically stored information is covered in:

    • IRM 25.3.1.7, Preserving Electronically Stored Information In Litigation Cases,

    • IRM 25.3.1.7.21, References, and

    • Chief Counsel Notice 2016-005.

Terms and Acronyms

  1. The table lists commonly used acronyms and their definitions:

    Acronym Definition
    AC Action Code
    ALS Automated Lien System
    ASED Assessment Statute Expiration Date
    ATAT Abusive Tax Avoidance Transactions
    BAL DUE Balance Due
    CAP Collection Appeals Program
    CDP Collection Due Process
    CSED Collection Statute Expiration Date
    DEL RET Delinquent Return
    DOJ Department of Justice
    ESI Electronically Stored Information
    ICS Integrated Collection System
    IRC Internal Revenue Code
    LLC Limited Liability Company
    NFTL Notice of Federal Tax Lien
    OI Other Investigation
    PALS Property Appraisal and Liquidation Specialist
    RAR Revenue Agent Report
    Rev. Revision
    RCS Records Control Schedules (Internal Revenue Service)
    SB/SE or SBSE Small Business / Self-Employed Division
    SFR Substitutes For Return
    TBOR Taxpayer Bill of Rights
    TC Transaction Code
    TFRP Trust Fund Recovery Penalty

Related Resources

  1. For procedural guidelines on recommending, working, and responding to suits and claims for damages both for and against the United States, see:

    1. IRM 5.17.4, Suits by the United States,

    2. IRM 5.17.5, Suits Against the United States,

    3. IRM 5.17.14, Fraudulent Transfers and Transferee and Other Third Party Liability,

    4. IRM 25.3.2.4.4, Required Forms, which can also be found searching the Publishing catalog, Suit Forms,

    5. IRM 25.3 series, Litigation and Judgments,

    6. IRM 4.10.3.3.6, Requests to Tape Record Interviews,

    7. IRM 5.1.12.3, Taxpayer Recording of Interviews, and

    8. Training Publication 29957-102, Suit and Litigation Guide for Revenue Officers (Participant Guide).

  2. The IRS adopted an additional Taxpayer Bill of Rights (TBOR) in June 2014. There are three previous TBOR, which have been incorporated into IRM instructions over the years. Employees are responsible for being familiar with and acting in accord with all taxpayer rights provisions and instructions including the 2014 TBOR. See IRC 7803(a)(3),Commissioner of Internal Revenue; other officials, Execution of duties in accord with taxpayer rights. For additional information about Taxpayer Bill of Rights see:

    • TBOR 1: IRM 13.1.1.1.1, Taxpayer Bill of Rights (TBOR),

    • TBOR 2: IRM 13.1.1.1.2 , Taxpayer Bill of Rights 2 (TBOR 2),

    • TBOR 3: IRM 13.1.1.1.3 , Internal Revenue Service Restructuring and Reform Act of 1998 (RRA98) also known as TBOR 3

    • TBOR 4: Taxpayer Bill of Rights (TBOR)

Pre-Referral Preparation, Consultations, and Communications

  1. The first element, when planning and preparing any recommendation for suit action, is to review all current IRM chapters and sections applicable to the type of suit planned. Also review the IRM 25.3.2.4.4, Required Forms used to recommend a suit. Their format provides insight into what is important internally for those reviewing and approving the recommended action as well as what is important to the Department of Justice in litigating the action.

  2. A second essential element is to keep the lines of communication open between the employee initiating the suit, his or her group manager, Advisory, and Area Counsel. This communication remains key throughout the litigation and post-litigation.

  3. Direct process and strategy questions to your group manager, Advisory, and if necessary Area Counsel.

  4. While direct communication with Area Counsel by IRS employees who initiate suits is not prohibited, Advisory must be kept apprised of any such communications to avoid duplication of efforts and enhance proper case controls and actions.

  5. At any point in the process of investigating, preparing, or referring a suit recommendation, a conference may be desirable with Advisory, management and, if needed, Area Counsel. Such conferences are designed to assist and expedite the referral process. To schedule a conference, the employee initiating the suit should contact Advisory.

  6. Document any communications with Area Counsel or other attorneys, as appropriate, in the Integrated Collection System (ICS) case history.

Area Counsel Assistance

  1. Area Counsel is always available for the purpose of rendering legal advice in determining the most desirable course of action available and the probability of success in litigation.

  2. If information is discovered early in the investigation casting doubt as to whether a legal action could be successfully pursued, much time and effort can be saved if timely legal assistance is requested.

  3. In complex cases or cases raising potential legal issues, consult with Area Counsel to ensure that legal action is appropriate in a given case.

  4. Ensure that Advisory is aware of requests for Area Counsel advice and the advice provided. Formal requests for legal assistance must be routed through Advisory, unless there is a local agreement to the contrary.

Service of Process

  1. In order to serve the summons and complaint upon the defendants, the defendants' correct names and addresses must be provided. The addresses provided must be up to date.

    Note:

    A physical address, as opposed to a post office box number, is needed for service of process.

  2. If the defendant moves around or has more than one home, provide enough information so that a determination of the defendant's domicile can be made. This is where the taxpayer resides and differs from their "last known address." The correct home address is also important for purposes of determining correct Notice of Federal Tax Lien filing locations and other property rights (e.g., whether the defendant lives in a community property state).

    If the defendant is Then
    an individual provide the correct name and home address of the individual.
    an individual doing business under another name provide both the name and home address of the individual and the name and address of the business.
    a corporation provide the complete name and address of the corporation and its officers, state of incorporation, and statutory agent for service of process. Check with the Secretary of State in the state in which the business is located to confirm whether the business is in fact a corporation. Identify the local service agents for out of state corporations.
    a partnership provide the names and addresses of the general partners.
    a limited liability company (LLC) consult with Advisory or Area Counsel regarding state law to determine proper service of process. Most state statutes require an LLC to designate an agent upon whom service of process may be made.
  3. Direct any questions regarding the information needed for service of process to Advisory. If necessary, Advisory will consult with Area Counsel.

Criteria for Bringing Suit

  1. Do not recommend a suit without first considering all available administrative remedies and exhausting those that are applicable and effective. If there are untried administrative tools which you determine would be ineffective, unfeasible, or inappropriate, explain this in your suit recommendation.

  2. Generally, do not recommend a suit if the amount expected to be collected is less than the amount set forth in the paragraphs, below. If there are overriding concerns which dictate a suit for less than this amount, fully explain them in the recommendation. Such overriding concerns may exist in:

    1. Situations with significant potential impact on the overall collection program, or

    2. Situations in which reduction of the tax claim to judgment is needed due to an imminent CSED and significant future collection potential can be reasonably anticipated.

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  6. Criteria for filing certain types of suits can be found in IRM 5.17.4, Suits by the United States, and IRM 5.17.12, Investigations and Reports.

Procedures for IRS Employees Initiating Suits

  1. Success in litigation is highly dependent upon the factual development of the case. The Department of Justice and Area Counsel rely on the IRS to provide accurate and complete information that is both favorable and unfavorable to the Government's position.

  2. The following procedures are intended to assist revenue officers and other IRS employees who initiate suit recommendations in developing suit packages that are accurate and complete.

Preliminary Actions

  1. Review current IRM sections for relevant requirements and local law guides l applicable to the type(s) of suit being considered. Discuss any questions about case theories with your manager, with Advisory, or with Counsel to ensure that the recommendation can substantiate the theory pursed from the case facts and evidence gathered.

  2. Timeliness of the suit recommendation’s submission is important. As a general rule, suit recommendations must be forwarded to Advisory with sufficient time to perfect the referral and forward it to Area Counsel at least nine months before the earliest CSED. See IRM 25.3.2.4.5.5, Cases with Imminent CSEDs. Check with Advisory and/or Area Counsel to determine how much time is needed to initiate litigation and make sure the suit recommendation is submitted with sufficient time remaining before statutory deadlines expire.

    Note:

    In certain cases, Area Counsel’s suit letter may need to be reviewed by the appropriate Associate Chief Counsel Office. See IRM Exhibit 35.11.1-1, Litigation Exhibits - Issues Requiring Associate Office Review. For example, such review is required for cases recommending assertion of the penalty for failure to honor a levy. If national office review is required, additional time will be needed before the case can be forwarded to DOJ.

  3. Identify and preserve all Electronically Stored Information (ESI) that will be subject to litigation discovery.

  4. Make a complete compliance and collection determination.

  5. Review all relevant statutes of limitations on assessment, collection, or other actions.

    1. Verify that all assessments were timely.

    2. Identify all applicable CSEDs (see CSED Calculator).

    3. Verify that all extensions and suspensions relating to statutory limitations were proper and correctly computed.

    4. For a potential action to recover erroneous refunds, identify the refund dates and determine the latest date for filing suit (normally, two years after the refund date, but five years if there is adequate evidence of fraud or misrepresentation of material fact).

    5. Evaluate any actual or potential statute problems to determine their seriousness, whether they can be resolved, and their potential effect on a suit recommendation. Correct problems as possible/allowable.

  6. Conclude Trust Fund Recovery Penalty (TFRP) determinations and assessments where applicable.

  7. Review all statutory liens and Notices of Federal Tax Lien (NFTLs) and take needed actions to preserve and protect the lien and NFTL

    a) Ensure all statutory liens are intact. If a lien has been inadvertently or erroneously released repair the lien by:
      IRM 5.12.3.14, revoking the release
      IRM 5.12.3.15, reinstating the lien, and
      IRM 5.12.3.16, reestablishing the lien’s priority through filing a new NFTL
    b) When multiple NFTLs have been filed, maintain a chart identifying the refile date for each statutory lien listed on each NFTL. Awareness of the refile dates found on NFTLs in column e is important. The Automated Lien System (ALS) will compute refile dates when NFTLs are filed systemically. Recalculate all refile dates for any manually prepared NFTLs. Where statutory liens have already been refied, include in the refile chart the next (e.g., second or even third) refile date. IRM 5.12.8, Notice of Lien Refiling contains instructions for calculating refile dates.
    c) Identify any situations where property has been transferred after the statutory lien has come into existence but before the NFTL has been filed. This is called lien-tracing. Again, that definition is found in IRM 5.12.7.6.3(1).
    d) Ensure NFTLs are filed properly to protect the Government's position with respect to all federal tax liens for all property involved (real and personal). Make sure all unpaid assessments are addressed. File additional NFTLs as needed.
    e) Ensure that all previously filed NFTLs are correct. File amended NFTLs as needed. See IRM 5.12.7.9.3, Amending the NFTL Using the ALS Amend Option
    f) Ensure compliance with and documentation of IRC § 6320 and IRC § 6330 Collection Due Process (CDP) requirements if applicable. See IRM 25.3.2.4.5.3, Collection Due Process (CDP) Requirements Met, below.
    g) Ensure all needed NFTL refilings have been made, if appropriate. Refile any NFTLs that are in the refile period. See IRM 5.12.8, Federal Tax Liens - Notice of Lien Refiling.

    Note:

    The IRS uses NFTLs that contain self-releasing provisions that will extinguish the underlying statutory lien if the NFTL is not timely refiled during the refiling period. Therefore, NFTLs must be timely refiled in all jurisdictions in which they are filed in order to prevent the statutory lien from being extinguished.

    h) Request approval for and file nominee, transferee, alter ego, or successor in interest notices of federal tax lien as needed prior to suit referral to protect the Government's interest during the pendency of the action. See IRM 5.12.7.6, Special Condition NFTLs (Nominee, Alter Ego, Transferee, Successor in Interest). See also IRM 5.12.7.6.1, Nominee Lien Notices, IRM 5.12.7.6.3, Transferee Lien Notices, IRM 5.12.7.6.2, Alter Ego Lien Notices, and IRM 5.12.7.6.4, Successor In Interest Lien Notices.
  8. Identify information both favorable and unfavorable to the government’s position by identifying significant actions taken by the:

    1. government such as previous injunctions, criminal prosecutions, levying, or seizing assets, and

    2. taxpayer such as Collection Appeals Program (CAP) submissions, Installment Agreements, Offers in Compromise, bankruptcies, tax court, or transferring assets out of the reach of the government.

Investigation and Evidence Gathering

  1. Plan and perform a complete investigation and gather evidence appropriate to the situation, type of suit, and possible defense strategies.

  2. Apply the guidelines provided in IRM 5.17.12, Investigations and Reports, and in particular subsections IRM 5.17.12.3 through IRM 5.17.12.9 regarding testimony and documentary evidence gathering.

  3. Interviews are used to develop information and establish evidence. In addition to IRM 5.17.12, guidance on who to interview, where to conduct interviews, preparation and planning, types of interviews, documenting interviews, the interviewee’s rights during interviews, and interview techniques can be found throughout the IRM. For example:

    1. IRM 4.10.3.3, Interviews: Authority and Purpose,

    2. IRM 9.4.5, Investigative Techniques - Interviews,

    3. IRM 4.10.7.3.2, Oral Testimony,

    4. IRM 5.1.10.7.1, Rights During Interviews, and

    5. IRM 25.1.2.4 , Investigative Techniques.

  4. Use all possible sources and secure facts and evidence needed to support your recommendation. Use summonses, affidavits, etc. as needed. Do not limit the case information provided to Advisory and Area Counsel. Counsel or the Department of Justice (DOJ) will determine what information is relevant and what will be presented at trial. Present all of the information you have secured in the suit recommendation so that Counsel can determine what information is relevant.

  5. Witnesses may assert privileges in response to a summons, such as attorney-client, work product doctrine, accountant-client, and fifth amendment. Privileges can restrict gathering of certain evidence. See IRM 5.17.6, Legal Reference Guide for Revenue Officers - Summonses.

  6. Anticipate possible defenses and plan your investigation to address any related concerns.

  7. As soon as the possibility of a suit is recognized, order original returns for all periods involved in the suit, Substitutes For Returns (SFRs), Revenue Agent Reports (RARs) and, if applicable, TFRP/Appeals administrative files. Forward them with the suit recommendation package.

    Note:

    In cases where the tax liability has already been determined in a court proceeding (e.g., a final Tax Court decision), original returns are not needed. Secure a copy of the Tax Court decision.

  8. If original returns or the administrative file cannot be located or obtained and it is anticipated that these documents may be needed, consider the feasibility of going forward with a suit recommendation without these documents. Consult with Advisory and Area Counsel to resolve any questions.

  9. Make an equity determination using the methods described in IRM 5.10.1.4.3, Equity Determination. Consider securing a commercial title search using guidelines in IRM 5.10.1.4.3.3(4), Equity Determination - Verify Ownership and Identify Encumbrances.

  10. Identify all parties holding any claim to or interest of record in the property involved in the recommendation, regardless of the validity, priority, or status thereof. They must all be named as defendants in the recommended action against the property. Determine the current physical address of these parties and the identity and physical/potential service address of any service agents or others empowered to receive legal service for these parties.

  11. Conduct or update a complete public records check no more than 30 calendar days before submission of the suit recommendation for review and approval. Complete, current information is vital. See IRM 5.1.18.4.1, Courthouse Records Check.

  12. Identify residents or other occupants of real property involved. Determine name, mailing/service addresses, relationship to the taxpayer, basis of occupancy, and other pertinent information.

  13. Compile lists of names and complete addresses of affected parties and other potential witnesses as well as their potential contributions/testimony and reliability.

  14. Review IRM references for specific suit types involved to aid in identification of issues to be addressed, such as IRM 5.17.4, Suits by the United States, and IRM 5.17.12, Investigation and Reports.

  15. Secure certified copies of relevant publicly recorded documents (notices of lien, deeds, mortgages, Uniform Commercial Code security interests, etc.) for inclusion in the referral package.

    Note:

    Certified copies are needed because they may be admitted as evidence without testimony or corroboration.

    Note:

    Do not alter certified documents in any way. This restriction includes any sort of alteration or defacement to the documents, including marking or writing on them, affixing labels or tabs, cutting them, punching holes in them, or stapling or unstapling them.

  16. Computation of the actuarial interest factor of the party liable for unpaid taxes is required in some jurisdictions when foreclosure of the tax lien is to be pursued against property, especially homestead property, co-owned by non-liable persons, or property used as a homestead by one or more non-liable persons.

    1. Check with Advisory to determine if this requirement applies in your area.

    2. If required, request the computation by sending a request via secured e-mail to *TE/GE-EP-Actuarial.

    3. Provide all data needed for the computation, including type of property ownership, birth dates of all owners (from INOLE or other source), and any other significant factors (health, etc.).

    4. Request a response that can be printed out as a hard copy that can be included as an exhibit in the suit recommendation.

  17. Check for any ongoing audits, pending additional assessments, IRS criminal investigations, or other open internal investigation. Coordinate with the other functions regarding data already secured, the impact of the proposed litigation on other cases (and vice versa), and other pertinent factors.

  18. All suit recommendations should include information pertaining to any CDP notices that were issued and/or hearings conducted pursuant to IRC § 6320 and IRC 6330, including court proceedings and their final disposition. A summary of all issues raised in these proceedings (where relevant) should be included.

    Note:

    IRC § 6330 notice is not required to file suit to collect unpaid taxes. However, providing information to Counsel regarding any CDP notices that were issued, whether or not a hearing was requested, and the results of any hearing and subsequent judicial appeal, is important for purposes of protecting the Government's interests in litigation. See IRM 25.3.2.4.5.3, Collection Due Process (CDP) Requirements Met, below.

  19. The duty to retain and preserve evidence also applies to electronically stored information (ESI), including all ICS files. See IRM 25.3.1.7, Preserving Electronically Stored Information In Litigation Cases, for information on ESI. See also Chief Counsel’s, Litigation Hold site.

General Recommendation Organization

  1. Submit all forms, reports, and exhibits in quadruplicate, unless other procedures apply in your area. This requirement does not generally apply to original returns, RARs, SFRs, TFRP files, etc. Consult Advisory to determine local requirements.

    Note:

    Creating a time line of actions may help for the later preparation of the narrative report.

  2. All suit forms and reports must be typed and are available in ICS or through the Publishing web site. Use current revisions of the forms.

  3. Include complete, accurate information in the recommendation.

  4. Organize recommendation packages so that all items can be readily located and identified.

    1. Include an index or table of contents for exhibits.

    2. Use tabbed dividers to clearly label suit package items, exhibits, and other contents, or use other organizational aids as appropriate.

Required Forms

  1. The following forms must be completed for all suit recommendations, except as provided in paragraph (3) below:

    • Form 4477-C, Civil Suit Table of Contents and Contact List which is designed to be used with either a civil suit or to secure judicial approval to seize a principal residence,

    • Form 4481, Advisory Transmittal,

    • Form 4477, Civil Suit Recommendation,

    • Form 4477-B , Civil Suit Narrative Report,

      Note:

      Creating a time line of actions may help for the later preparation of the narrative report.

    • Form 4480, Civil Suit - Service of Legal Papers, and

    • Form 4478, Civil Suit Checklist,

  2. If the suit involves specific property, also complete the following forms:

    • Form 4479, Civil Suit - Property, Liens, and Claims

    Note:

    All applicable items must be completed.

  3. Forms and other items required to be included with recommendations for proceedings to secure judicial approval to seize a principal residence are different from those for other recommendations for judicial action. Refer to IRM 5.10.2, Securing Approval for Seizure Action and Post-Approval Actions, for instructions for such actions. Form 4477-C is designed to capture those forms.

Form 4477-C: Civil Suit Table of Contents and Contact List Instructions
  1. The purpose of this form is to provide a standardized order of document presentation for the recommendation package and an easily accessible contact list of participants in the process.

  2. Contact List: Select the appropriate position title from the drop down menu, fill in the contact information for that participant, and continue selecting participant contacts for the current level within the recommendation process. As the recommendation moves through the process, new participants are added. Selections include: Revenue Officer, RO Group Manager, Insolvency, Insolvency Group Manager, Advisor, Advisor Group Manager, Territory Manager, Area Director, Area Counsel Attorney, and Department of Justice Attorney. As the list is updated, ensure that the advisor and revenue officer have the updated revision.

  3. Table of Contents:
    Step One - Type of Recommendation: Select from the menu under the header Forms, Property Forms, Property Attachments and Other Exhibits the type of recommendation. The choice selected will determine which required forms are provided. The two selections are:

    1. All Other Suit Recommendations, and

    2. Seizure of a Principal Residence,

  4. Step Two - Begin Building Recommendation Package: Review the form list provided for the type of recommendation package and begin putting the forms in the order listed. This would be the same whether it is an electronic package or a paper package.

    Note:

    At the revenue officer stage of preparation, some of the forms will not have been prepared or will only be partially prepared. Advisory builds on what the revenue officer begins and also adds their transmittal as needed.

    All Other Suit Recommendations:
    Form 4477-C Table of Contents and Contacts
    Form 4481 Advisory Transmittal
    Form 4477 Civil Suit Recommendation
    Form 4477-B Suit Narrative Report
    Form 4480 Civil Suit Service of Legal Papers
    Form 4478 Civil Suit Checklist
     
    Seizure of a Principal Residence Forms:
    Form 4477-C Table of Contents and Contacts
    Form 4481 Advisory Transmittal
    Form 4477 Civil Suit Recommendation
    Form 4477-B Suit Narrative Report
    Form 4480 Civil Suit Service of Legal Papers
    Form 13719 Pre-Seizure Checklist and Approval Request
  5. Step Three - Property Forms and Property Related Exhibits: Area Counsel and the Department of Justice want the property and claimant forms and their associated exhibits together. The Principal Residence Seizure package will always have property forms and exhibits; however, other recommendations may or may not have property identified.

    All Other Suit Recommendations Forms and Exhibits:
    Form 4479 Property Liens and Claims If property is subject of recommendation; otherwise proceed to Step Four.
      Exhibits: The drop down list of property exhibits is listed below. Choose an appropriate selection and Adjust the text by overwriting the line as needed to provide a distinctive exhibit title for the recommendation.
      1. Required: for real property - Deed with Legible Legal Description; If Available: for property other than real, some other type of property identification.
      2. Additional deed
      3. Mortgage
      4. Lien / Claim
      5. Commercial title report with explanation of title search results
      6. County Statement - Property Tax Collections
      7. UCC or Other Creditor payoff statement or denial
      8. Appraisal
      9. Photos
      10. Department of Motor Vehicles (DMV) documents.
    Seizure of a Principal Residence Property Forms and Exhibits:
    Form 2434-B Notice of Encumbrances Against or Interests in Property Offered for Sale
    Form 2433 Notice of Seizure
      Exhibits: The drop down list of property exhibits is listed below. Choose an appropriate selection and Adjust the text by overwriting the line as needed to provide a distinctive exhibit title for the recommendation.
      1. Required: Deed with Legible Legal Description
      2. Required: Estimated minimum net sale proceeds calculation (worksheet, memo, or excerpt from ICS history)
      3. Letter 1040, Creditor Information Request and its attachment Form 12470, Request for Information From Creditor
        4. Form 14071 Request for Information from Lien Holder
      5. Commercial title report with explanation of title search results
      6. Appraisal
      7. Photos
  6. Step Four - Other Exhibits: Continue selecting exhibits until the recommendation package is complete. Use the drop down list for identifying the type of exhibit. Choose the an appropriate selection and Adjust the text by overwriting as needed to provide the a distinctive exhibit title for the recommendation. The list is as follows:

    1. Notices of Federal Tax Lien;

    2. Levy/Seizure/Final Demand Served/Sale;

    3. CDP - Collection Due Process, CAP - Collection Appeals Program, and Third Party Notifications: Letters 1058, 3172, 3164, Notices of Determination, Tax Court Decisions, and CAP Appeal(s);

    4. Transcripts IDRS MFTRA-J (i.e. Form 4340 Certified Transcript);

    5. Tax Return;

    6. Taxpayer Representative, Form 2848;

    7. ICS History;

    8. Forms 433, 656, Collection Information Statements, Installment Agreements,, Offers, and documentation;

    9. Audit, Appeals, Tax Court Decisions;

    10. Records Checks, Title Searches, Credit Checks;

    11. Bank Statements;

    12. Photos;

    13. Miscellaneous/Other.

Form 4477-A - Data Capture Spreadsheet
  1. Form 4477-A will be added once the programming has been completed. For now the form will not be a part of the package.

    Note:

    The purpose of the form will be to capture all the data needed for the litigation in one spreadsheet and use that spreadsheet to populate other forms in the package.

Form 4477 - Civil Suit Recommendation Instructions
  1. Identify the Taxpayer, TIN, earliest CSED, and earliest expiring NFTL.

  2. Check all potentially applicable suit types in Item 5. Area Counsel and the Department of Justice (DOJ) will determine the exact type(s) of suit to pursue. With most, if not all suits, DOJ would like the option of reducing the government’s tax claim to judgment. Include that recommendation or explain why it would not be in the government’s benefit. The reverse would be true if there are circumstances where a recommendation to reduce claims to judgment needs to move forward but a foreclosure at this time is not warranted. Again, explain the circumstances.

  3. Item 6 is the summary of the data totals with the exception of the estimated recovery amount. The estimated amount recoverable in Item 6 should be consistent with the amounts provided on Form 4479, Property, Liens, and Claims. The estimated amount recoverable will be calculated by subtracting from the forced sale value of the property any amounts owed to secured lien holders with priority over the federal tax lien. Generally, the forced sale value of the property will be calculated by reducing the fair market value of the property by a certain percentage to reflect the fact that the sale is a forced sale of the property. See IRM 5.10.1.4.3.2 , Equity Determination - Fair Market Value, for guidance on determining fair market value, and IRM 5.10.4.2.1.3, Minimum Bid - Forced Sale Value, for guidance on determining forced sale value.

  4. Item 7 is a summary of relevant taxpayer activity. Activities, which may be required by law, may affect arguments for or against the government in court, or may impact the CSED calculation. Appeals can be complicated. There could be multiple actions.

    1. APPEALS: Select all options where a taxpayer has taken an issue to Appeals. Select the type of Appeals and then select the determination or resolution by Appeals. Drop down selections are provided for convenience. If there have been multiple appeals of the same type, document the most recent but explain all previous appeals in the Narrative Report. Attach as an exhibit any Appeals determination or resolution responses to the taxpayer or the IRS. Notate on Form 4477 the Narrative Report paragraph number where the issue is fully explained and the exhibit number.

    2. Other Relevant Activity: Select all options where the taxpayer or IRS has pursued one of the identified actions. If there have been multiple appeals of the same type, document the most recent but explain all previous appeals in the Narrative Report. Attach as an exhibit any documents associated with that action. Notate on Form 4477 the Narrative Report paragraph number where the issue is fully explained and the exhibit number(s) for the associated documents.

      Note:

      Checking the innocent spouse indicator identifies that there is a spouse who is not liable for some or all of the tax liability involved in the suit. This would be particularly relevant where the suit involves the pursuit of property.

  5. Item 8 is where the initiator, the initiator’s manager, and advisory reviewer sign concurrence progressively as the recommendation is completed and reviewed.

  6. Item 9 contains the suit recommendation approvals. The last approval signature should be that of the IRS official with the delegated authority to approve the suit. See IRM 25.3.2.1.2, Authority and SB/SE Delegation Order 1-23-9 (formerly SBSE DO 145.2, Rev. 3), Approval of Form 4477, Civil Suit Recommendation.

Form 4477-B, Civil Suit Narrative Report, Instructions and Exhibits
  1. Purpose: The narrative report is required for all suit recommendations because it outlines the facts and circumstances of the case. When well prepared, it is the single most important part of a suit recommendation. It must be coherent, concise, and complete. Form 4477-B is designed to ensure all suit recommendations are appropriately justified and documented. .By utilizing a standardized approach following the IRM requirements, its design assists revenue officers, reviewers, and approvers with the preparation, review, and approval process for the recommendation.

  2. Review:IRM 5.17.12, Legal Reference Guide for Revenue Officers, Investigations and Reports, for guidance in conducting investigations and preparing narrative reports. Use the Form 4477-BCivil Suit Narrative Report template, which parallels IRM 5.17.12.20, The Narrative Report.

  3. Organize: the report into (1) Introduction, (2) Body, and (3) Conclusion and Recommendation sections ensure:

    1. Use Correct spelling and grammar.

    2. Paragraphs should be numbered to enhance organization and ability to refer to them. Use a separate paragraph for each item, event, or topic.

    3. Organize material in sequential/chronological order.

    4. Exclude extraneous information.

    5. Fully address all relevant issues.

    6. Large or intricate sets of information or complicated interrelations and/or situations should be as cogent as possible. Consider replacing lengthy narrative sections with tables and/or spreadsheets that summarize the facts or situations. The summaries should be attached as exhibits and referenced appropriately.

    7. Guidance as to what must be included in each section can be found in IRM 5.17.12.20.1, Contents of the Narrative Report, and IRM 5.17.12.20.2, Format of the Narrative Report.

  4. Exhibits: An index of exhibits or table of contents (Form 4477-C) should be used to enhance organization of the recommendation package.

    1. All documents and other supporting data should be attached as exhibits or attachments to exhibits and clearly referenced and explained in the report. This would include Notices of Federal Tax Lien, judgments, state tax liens, or documents evidencing other competing claims. Significant items on suit forms should be discussed or cited appropriately.

    2. See IRM 25.3.2.4.4.1, Civil Suit Table of Contents and Contact List Instructions.

Form 4477-B, Instruction Details
  1. General information: The Narrative Report is designed as a fillable form with instructions for each section. Each section allow for three numbered paragraphs. Use only those needed and leave the others blank. Not all sections of the narrative will be applicable to each specific suit recommendation. Leave sections which are not applicable blank. Once reviewed and considered complete the narrative report is converted from a fillable file to a flat file by clicking the button at the top of the first page titled Double-Click to Finalize Report. The flat file removes all the instructions leaving the narrative itself. The navigation choices at the top of the first page also allow the user to move back and forth between the fillable fields and the non-finalized flat file.

    1. While preparing the narrative report, there are navigation buttons that allow the user to see what the finished product will look like without finalizing the report. The report opens with the fillabile fields. To see what the finished product will look like click the button at the top titled, Hide Narrative Entry Page.

    2. To go back to the fillable fields click the button titled, Show Narrative Entry Pages. Those choices are only at the top of the document.

    3. If lower in the document then click at the top of any page the button titled, 1st Page of Narrative Report to go back to the beginning. And use the buttons titled, Next Page and Previous Page to allow maneuvering within the report.

    4. The data tables in the narrative report are completed in the flat file portion. The Hide Narrative Entry Page is used to enter table data in the flat file and then return to the fillable fields. This is discussed in more detail below in paragraph four.

    5. If the Double-Click to Finalize Report button is clicked in error or changes are needed after the report has been finalized there is a hidden escape button, which allows return to the fillable fields in order to make the appropriate corrections. That hidden escape button is located at the bottom left of the first page of the report. Slowly move the cursor over the very bottom left of the page until the cursor changes to a hand. Click the hand and the fillable fields will return.

  2. Pre-Introduction: Prior to beginning the introduction there are several fields to complete.

    1. Taxpayer Name and TIN;

    2. Earliest CSED;

    3. Earliest NFTL Refile;

    4. Click to add fields if the suit recommendation includes a real property foreclosure;

    5. Click to add fields if the suit recommendation contains third parties such as with a fraudulent transfer or third parties named on special condition NFTLs.

  3. INTRODUCTION: Selection of the type of suit recommendation from the drop-down pick list will determine whether certain additional information segments in the Body will be required to be completed for particular types of recommendations (see IRM 5.17.12.20.2.2.1 through IRM 5.17.12.20.2.2.4 and IRM 5.10.2.3). It will also determine whether approval of the recommendation is at the Territory Manager or Area Director level (see functional SBSE Collection Delegation Order 1-23-9).

  4. BODY: The document is set up with established headers to walk the user through preparation. It follows IRM 5.17.12.20.2.2. Some particular items to be aware of include but are not limited to:

    a. Personal History of the Taxpayer: The drop-down pick list will generate the requirement instructions for either an individual or non-individual taxpayer.
    b. Additional items for certain types of suits: This section is located after the personal history of the taxpayer. The appropriate additional items will appear depending on the type of suit selected at the beginning of the report. Additional Item sections are discussed in IRM 5.17.12.20.2.2.1 through IRM 5.17.12.20.2.2.4). There are also additional items for a principal residence seizure, if that is the type of action chosen at the top of the report. If the suit has additional items needing to be discussed in the report, the filliable fields for that suit will automatically become part of the report.
    c. Data Tables: Some data tables are required and some are not.
      Basis for Assessment - this is a required table of the assessments.
      Notices of Federal Tax Lien and Special Condition NFTL - this is a required table of all the notices that have been filed and is completed based on how many NFTL each statutory lien for an assessment is listed.
      Appeals - Collection Due Process - this is a required table documenting that the CDP notices were sent and whether they were appealed. This section also contains a fillable fields for the name and address to whom a CDP notice was sent.
      Appeals - Other - This table may not be applicable and not required.
      Bankruptcy - This table may not be applicable and not required.
    c. Chronological Presentation: Creating a time line of actions may help for the later preparation of this portion of the narrative report.

    Note:

    The liability figures provided to the Department of Justice need to be up to date. If the amounts included in the suit package are more than six months old at the time the suit recommendation is approved, recompute and include more up to date amounts.

  5. CONCLUSION and RECOMMENDATION: There are no auto select or population elements for the conclusion and recommendation segment of the narrative. This segment is a free form summary analysis that concludes the narrative report and reiterates the recommended action.

Form 4478, Civil Suit Checklist, Instructions
  1. The Civil Suit Checklist contains a portion for both the Advisory Reviewer and the Revenue Officer Initiator.

  2. Revenue Officer Section: The Revenue Officer Initiator’s portion concentrates on the case facts and the organization content of the recommendations. There is a button at the top of the form allowing the user to skip to the revenue office portion of the checklist.

    1. Each line should contain either a "Yes" or "NA." ,

    2. Sections II through V are needed only for applicable types of suits, and

    3. Indicate a reference to a form, exhibit, or narrative paragraph in each line marked "Yes" .

      Note:

      Although Form 4478 is a useful checklist, it is not a substitute for a well-developed and organized narrative report.

  3. Advisor Section: The Advisory Reviewer’s portion emphasizes cross-checking the details that are of importance to Counsel and DOJ. Any areas of particular importance are explained more fully on Form 4481, Advisory Transmittal, which is the Advisor’s cover sheet report for the recommendation.

    1. Each line should contain either a "Yes" or "No" , and

    2. Provide a short explanation, reference to a form, exhibit, narrative report paragraph, or Transmittal paragraph if appropriate.

Form 4479, Civil Suit - Property, Liens, and Claims Instructions
  1. Form 4479 combines both the property information and any liens or claims against that property. This form is important to identify all senior creditor interests so they are addressed and junior creditor interests so they are are extinguished,

    1. All deeds, titles, liens, and claims associated with the property listed on each Form 4479 should be included as attachments to the form.

    2. For real property, ensure the legal description is contained in the deed attached to the form.

    3. Personal property must be adequately described to distinguish it from other property. For example, if the property is an automobile, the description should state the make, style, year and vehicle identification number or VIN. If the description is lengthy, reference to an attachment or exhibit can be made rather than duplicating the full description on the form.

    4. Follow the guidelines for describing property contained in IRM 5.10.3.12, Notice of Seizure Form 2433 - Preparation, when describing property involved in a suit recommendation.

  2. Certified copies of relevant documents (deeds, titles, etc.) should be secured and attached to the form as properly referenced exhibits or as referenced attachments to the form.

  3. Make sure the fair market value and forced sale value on the form are consistent with the estimated amounts stated as recoverable (on Form 4477 and in the narrative report). See IRM 5.10.1.4.3.2, Equity Determination - Fair Market Value, for guidance on determining fair market value, and IRM 5.10.4.2.1.3, Minimum Bid - Force Sale Value, for guidance on determining forced sale value.

    Note:

    If the property under consideration for suit or seizure consists of assets where an accurate fair market value is not easily determinable, it is highly recommended that the revenue officer contact the Property Appraisal and Liquidation Specialist (PALS) to discuss how to value the property or to request that the PALS provide an appraisal for the property.

  4. If the property is an insurance policy, include the following information:

    1. Name and address of insurance company,

    2. Policy number,

    3. Date of policy,

    4. Amount of policy,

    5. Name of the insured,

    6. Cash surrender value,

    7. Amount of any loan outstanding and date made,

    8. Whether the loan was an automatic premium loan,

    9. Whether the insurer is holding any accumulated dividends,

    10. Whether the taxpayer has the right to change the beneficiary, and

    11. Name and address of each beneficiary.

  5. Form 4479 must identify all other persons with liens on or other interests in the property listed on the form. See IRM 5.17.4.8.3.2, Identification of Parties and Competing Liens.

    1. NFTLs should not be listed on this form. If there are no other encumbrances, state that fact on the form.

    2. Identify the exhibit or attachment numbers of copies of encumbrances or claims.

    3. List all encumbrances, claims, and interests, regardless of frivolousness, priority, or enforceability. Include as current status information any facts challenging their validity and explain in the narrative report. If transferee (whether improper or not), alter ego, and/or nominee entities are involved, these entities should be included among the claimants.

    4. Include the name, title, and physical address of the person(s) who may be served on behalf of each lienholder or other claimant. If an out of state entity is involved, identify any persons/agents empowered to receive service locally (name, physical address, etc.).If it is a local tax lien, identify the taxing authority.

Form 4480, Civil Suit - Service of Legal Papers Instructions
  1. The Form 4480 is used to provide a composite list of all the parties and their representatives who must be served as a part of the litigation.

    1. Select the party to be served from the drop down list.

    2. Identify and provide the legal name for service of papers and any contact name if appropriate.

    3. Identify and provide the correct address for legal service. This must be a street address. No post office box numbers are allowed.

    4. Identify and provide the power of attorney, representative, or attorney as appropriate if known along with their address for legal service.

  2. Include the name, title, and physical address of the person(s) who may be served on behalf of each title holder, lienholder, or other claimant. If an out of state entity is involved, identify any persons/agents empowered to receive service locally (name, physical address, etc.).

Form 4481, Advisory Transmittal, Instructions
  1. Form 4481 is the cover sheet for the suit recommendation and used by the advisor reviewer to summarize any areas of particular importance such as items identified during the review and noted on Form 4478. It also contains the advisor’s contact information. The form is not intended as a duplication of the recommendation package but replaces any local practice summaries. At the top of the form there are a few set selections the Advisor may use or may select Add a Comment Box to Elaborate in order to enter more individualized comments.

Suit Recommendation Considerations

  1. The following subsections discuss specify areas of consideration to be addressed when preparing the narrative report.

Exhaustion of Administrative Remedies
  1. The Introduction of the narrative report should include a statement that all administrative remedies have been exhausted or are unfeasible and/or inappropriate.

  2. Briefly describe administrative collection actions taken or attempted.

  3. If remaining administrative tools exist that are not being pursued, explain why they are not considered feasible or appropriate.

Actions Involving the Principal Residence of the Taxpayer
  1. There are two options for collecting against property owned by the taxpayer and used as the principal residence of the taxpayer, the taxpayer’s spouse, the taxpayer’s former spouse, or the taxpayer’s minor child:

    1. A proceeding to obtain a court order allowing administrative seizure of a principal residence under IRC § 6334(e) see the following references:
      IRM 5.17.4.9, Proceeding to Seize a Principal Residence,
      IRM 5.10.2.2, Securing Managerial Approval of Seizure Actions, and
      IRM 5.10.2.3, Judicial Approval for Principal Residence Seizures, see also
      Suit and Litigation Guide for Revenue Officers - Proceeding to Secure Judicial Approval to Seize a Principal Residence and narrative,
      or

    2. A suit to foreclose the federal tax lien against a principal residence under IRC § 7403 see the following references:
      IRM 5.17.4.8.2.5, Lien Foreclosure on a Principal Residence,
      IRM 5.17.12.20.2, Format of the Narrative Report, and in particular
      IRM 5.17.12.20.2.2.4, Additional Items for Lien Foreclose of Taxpayer's Principal Residence, see also,
      Suit and Litigation Guide for Revenue Officers - Suit to Foreclose (Enforce) the Federal Tax Lien and narrative.

  2. These two options cannot be used concurrently. The narrative report should explain why one option is being recommended over the other.

  3. Written approval by the Area Director must be obtained for either a suit recommendation for judicial approval of a principal residence seizure or a lien foreclosure of property used as a principal residence. Area Director signature on Form 4477 is adequate written approval.

    Note:

    An electronic signature is an acceptable method of written approval. See also IRM 5.11.2.2.2(10), Preparing the Notice of Levy.

  4. ENTITY REPORT: A manager, management assistant, or IQA may input "Principal Res Forecl" or Seize Principal Res as a program name in ICS as an identifier in creating a sortable query of suit cases. Instructions can be found in the ICS User Guide - Chapter 9 Entity Detail - Maintain Program Names.

Collection Due Process (CDP) Requirements Met
  1. The Body of the narrative report should provide information as to whether applicable CDP requirements for filing a Notice of Federal Tax Lien or issuing a levy have been met, including the following:

    • Date CDP notice was issued to the taxpayer and manner in which it was provided (i.e., given in person, left at the taxpayer's dwelling or usual place of business, or sent by certified or registered mail, return receipt requested, to the taxpayer’s last known address).

    • Date return receipt was received, if applicable and available.

      Note:

      Facsimile prints of IRC § 6320 notices sent after NFTL filing, with certified mailing information, can be generated from the Automated Lien System (ALS).

    • Whether a request for hearing was received.

    • Whether taxpayer received a CDP or equivalent hearing.

    • Date the Notice of Determination or decision letter was issued to the taxpayer.

    • Whether the taxpayer petitioned the Tax Court and the outcome.

  2. Providing information to Counsel regarding any CDP notices that were issued, whether or not a hearing was requested, and the results of any hearing and subsequent judicial appeal, is important for purposes of identifying arguments the taxpayer may raise in litigation and protecting the Government's interests.

  3. If a Notice of Federal Tax Lien was filed, then information regarding the CDP requirements under IRC § 6320 must be provided. If a Notice of Intent to Levy and Notice of Your Right to a Hearing (Letter 1058) was issued, then information regarding the CDP requirements under IRC § 6330 must be provided.

    Note:

    IRC § 6330 notice is not required to file suit to collect unpaid tax. Whether a levy should be issued to the taxpayer prior to suit being recommended will depend upon the facts of the case.

  4. This information can be provided either in the narrative report or included in an exhibit that is referenced in the narrative report. In some situations, it may be necessary to obtain the CDP file.

  5. See IRM 5.1.9.3, Collection Due Process, for additional information regarding CDP requirements.

Statutes of Limitations
  1. The Body of the narrative report should provide information regarding the calculation of the Assessment Statute Expiration Date (ASED) if the date was extended/suspended for some reason and the validity of the assessment may be an issue in the suit. See IRM Exhibit 5.17.4-1, Limitation Upon Assessment.

  2. The Body of the narrative report should provide information regarding the calculation of the CSED for all assessments on all account modules involved in the suit. If the CSED was extended/suspended for any reason, this information must be provided either in the narrative report or included as an exhibit.

  3. Recalculate any CSEDs that were extended/suspended to ensure that the dates are correct. (see also CSED Calculator) Explain any discrepancies between computed and systemic CSEDs.

    Note:

    In most instances, when a bankruptcy case closes and TC520s reversed by a TC521 posting to IDRS, the CSED extension systemically updates on IDRS. However, there may be cases that require manual calculation of the CSED. See IRM 5.9.4.2, Common Bankruptcy Issues - ASED/CSED, IRM 5.9.17.18, Closing a Bankruptcy Case - ASED/CSED Considerations, and IRM 5.9.17.4.3(13), Closing a Bankruptcy Case - Addressing Lien Issues - CSEDs and Refiles, for additional information

  4. The body of the narrative report should provide information regarding the calculation of any other applicable statute of limitations. For example, the calculation of the expiration date for filing a suit to recover an erroneous refund, and, if reliance on the five year period is proposed, the evidence which shows that the refund was induced by fraud or misrepresentation of material fact.

  5. See IRM 5.1.19.3, Case Actions That Can Suspend and/or Extend a CSED, and IRM Exhibit 5.17.4-2, Legal Revenue Officer Guide — Suits by U.S. -- Limitation Upon Collection.

Cases with Imminent CSEDs
  1. As a general rule, suit recommendations must be forwarded to Advisory with sufficient time to perfect the referral and forward it to Area Counsel at least nine months before the earliest CSED.

  2. Whenever it is determined that a suit recommendation cannot be forwarded to Area Counsel with at least nine months before earliest CSED, Advisory must receive written notification of the case and an explanation as to why the suit recommendation is untimely. Advisory will then contact Area Counsel to provide notice of the potential suit recommendation and determine if the suit can be properly initiated before the CSED. It is within Area Counsel's discretion not to accept a suit recommendation where the earliest CSED will expire in less than nine months.

    Note:

    Success in litigation is highly dependent upon the full and complete development of factual and legal issues before the suit is actually filed. Suit recommendations must therefore be forwarded to Area Counsel with sufficient time remaining on the CSED to allow for sufficient review of the suit recommendation, analysis of any legal issues, preparation of the suit letter, and time for the DOJ to draft the pleadings and file the suit.

  3. Recognizing that circumstances may arise where a suit recommendation cannot be forwarded to Area Counsel until shortly before the CSED, steps must be taken to ensure that the CSED is protected on IDRS. See also CSED Calculator. Such actions may also be necessary if a suit recommendation is submitted in timely fashion, but DOJ does not bring the action until shortly before the CSED. These steps are discussed in detail in IRM 25.3.6, Open Litigation Control, Monitoring, and Closing Actions.

  4. Advisory will open an NFOI-135 to both assist and monitor the Revenue Officer's progress with imminent CSED cases.

Settlement Recommendation

  1. The IRS employee initiating the suit may, but is not required to, make a recommendation as to whether the case is susceptible of settlement and, if so, under what circumstances and conditions settlement should be considered. This recommendation should be included in the Conclusions and Recommendation section of the narrative report.

  2. The initiator may recommend that settlement of a suit not be considered based on one or more of the following considerations:

    • The taxpayer is in flagrant noncompliance

    • The taxpayer involved (e.g., a public figure) makes the case sensitive in nature

    • Settlement may create difficulty in collecting from other taxpayers in the community

    • Other factors which would make settlement inappropriate or inadvisable

  3. DOJ will refer any settlement offer based on collectibility to Area Counsel, who will refer it to the Field Collection function through Advisory for verification.

Revenue Officer Referral and Account Disposition

  1. Pre-Suit: This is the time to compile applicable evidence, interview results, research, case data, IRM references, CSEDs, NFTL refile dates, and any legal, process, or procedural questions.

    • Questions should be discussed first with your manager after reviewing the appropriate current IRM.

    • Some questions may be better addressed by Advisory. Advisory will contact Area Counsel, if they have questions.

    • Occasionally the revenue officer may need to contact Area Counsel directly. When this happens, the revenue officer should communicate to Advisory the nature of the question and Area Counsel’s response as it may affect Advisory’s suit package review.

    Caution:

    Timing becomes key in presenting a completed suit referral package when there are pre-suit questions or legal points to clarify. These can dramatically compress the time for preparation and approval of a suit recommendation.

    Reminder:

    Area Counsel prefers to receive approved suit referrals at least nine months prior to the expiration of the first CSED. This is why CSEDs and NFTL refile dates are an important consideration.

  2. Group Manager Review: When the recommendation package is complete, sign and date the Form(s) 4477 and forward the entire package to your group manager for review and signature. The group manager may concur with the recommendation, request revisions, or reject the recommendation. Once revisions have been completed and / or the manager concurs with the referral, they sign and date the Form(s) 4477. They then forward the referral to Advisory. This may be an electronic process or paper mailing process.

    Reminder:

    Suit recommendations must be submitted in quadruplicate unless providing fewer copies is locally acceptable. If acceptable with local Advisory, a single copy may be submitted for initial review by Advisory, and the additional copies made by the revenue office after any needed modifications are made.

  3. Advisory Review: The group manager forwards the suit package to Advisory. Advisory reviews the package following IRM 25.3.2.7. Revenue Officers make any needed corrections, additions, or other revisions identified by Advisory during their review. After the package is perfected, Advisory signs the Form(s) 4477 and forwards the package electronically or physically for approval.

  4. Approval:SBSE Delegation Order 1-23-9 determines whether the Territory Manager or Area Director approves the suit referral. The approving official may approve the referral, request revisions, or reject it. When approved, the appropriate official signs and dates the Form(s) 4477 and returns the package to Advisory.

  5. Area Counsel: Once Advisory receives the approved suit referral back from the approving official, they review the package once more to ensure that it is complete, organized, and assembled. Advisory then forwards the package to Area Counsel. Area Counsel may accept, reject, or request revisions to the referral. During this process Area Counsel may seek the assistance of the revenue officer or Advisory. When Area Counsel is in agreement with pursuing the case facts and legal theories recommended, the assigned attorney will complete a suit referral letter and forward the package to the Department of Justice.

  6. After Referral to Area Counsel: After the case has been successfully referred to Area Counsel and Department of Justice for action:

    1. Close the case appropriately. If the suit referral is the final collection action, it may be appropriate to place the affected Balance Due (BAL DUE) modules in currently not collectible status.

      Caution:

      Taking proper case closing actions helps prevent unwanted case reissuance after litigation has concluded. Discuss case resolution and retention of the closed BAL DUE by Advisory with your group manager and Advisory as needed.

    2. In the unusual event that collection action is contemplated after referral, check with Advisory and Area Counsel to see what restrictions should be observed and to make sure any collection action taken will not cause problems with the litigation. In most cases, no administrative collections should be taken after a suit recommendation is made. See IRM 25.3.1.5, Collection Action During Litigation.

    3. When closing the case, do not forward case files to closed file retention. Forward the administrative case file(s) to Advisory upon closure so that the information therein is available during litigation.

    4. Injunction: While seeking an IRC §7402(a) injunction using the IRM 5.7.2, Letter 903 Process, the RO must continue to monitor the taxpayer's compliance throughout the suit recommendation process, the litigation, and after obtaining the injunction. For post-injunction instructions, see IRM 25.3.2.6.2, Injunction Monitoring for Trust Fund Pyramiding Cases below.

Aging Suit Development Case Suspension

  1. The following suit development cases qualify for suspension of the overage calculation with group manager approval:

    1. Complex or fact-intensive cases where additional time is needed to analyze and gather the facts necessary for developing a suit recommendation.

      Note:

      Suit development cases retain their ICS subcode.

  2. The manager must document approval in the ICS case history.

  3. A Transaction Code (TC) 971 Action Code (AC) 281 is used to suspend overage on these cases. Input the code by selecting Generate TC 971/972 AC 281 from the Collection Activities menu on the Integrated Collection System (ICS). This initiates the upload of TC 971 AC 281 or the reversal TC 972 AC 281 to IDRS.

    Note:

    TC 971/972 AC 281 input is limited to the group manager, acting group managers, group secretaries, and ICS Quality Analysts (IQAs), to suspend overage suit development cases.

    • Generate TC 971/972 AC 281 offers two choices. The first will generate a TC 971 AC 281 to suspend the overage clock. The second will generate a TC 972 AC 281 which turns the overage clock back on.

    • ICS can only upload these transactions to IDRS if there is an open IDRS BAL DUE or Delinquent Return (DEL RET) module. Otherwise the option to generate is blocked.

      Note:

      If there is no open module on ICS, prepare a manual Form 4844, Request for Terminal Action.

  4. The identifier SUITmust be in the location block on ICS in order for the overage suspension to function properly. Group Managers generate the identifier by:

    1. Selecting Entity Detail then selecting Name/Address,

    2. Selecting the taxpayer’s address and clicking view/edit,

    3. Entering SUIT in the location block and saving.

    Note:

    If SUIT is not input in the location block, the case will erroneously be included on the Area fraud report.

  5. The case no longer qualifies for suit development status and the TC 972 AC 281 is input when:

    1. The suit recommendation has been referred to the DOJ,

    2. The suit recommendation is no longer being pursued, or

    3. Other actions, such as CNC classification, are being recommended to dispose of the case.

  6. If appropriate, the revenue officer will create an Other Investigation (OI) when additional assistance is requested by the DOJ after the suit has been referred.

  7. See also:

    • IRM 5.20.2.4, Abusive Tax Avoidance Transactions (ATAT), Aging of ATAT and Suit Development Cases, and

    • IRM 25.1.8.8, Fraud Handbook, Field Collection, Aging of Collection Fraud Cases.

Injunction Monitoring for Trust Fund Pyramiding Cases

  1. Once the Court orders an injunction, the Revenue Officer is responsible to monitor compliance with the injunction for a specified period of time. Generally, the monitoring period is for five years. Monitoring may be done with the case in active inventory or as an Other Investigation (OI).

    See also IRM 5.17.4.17, Civil Injunctions under IRC § 7402(a) to Restrain Pyramiding, and
    IRM 5.7.2.3, Referrals For Civil Enforcement, for more information on obtaining injunctions.

  2. Injunctions are monitored for the taxpayer's compliance with specific instructions in the Order. Generally, the Order will direct the taxpayer to provide the documentation directly to the Revenue Officer. Specific items include but are not limited to:

    1. Confirmation from the taxpayer on depositing compliance;

    2. Confirmation from the taxpayer on filing compliance;

    3. Confirmation of any change in the business;

    4. Notating any taxpayer attempts to transfer or disperse assets;

    5. Notifying advisory, IRS counsel, and DOJ, if the taxpayer has a “curable” violation (so DOJ can send an official warning); and

    6. Notifying advisory, IRS counsel, and DOJ, if the taxpayer officially defaults injunction, including in the notification a recommendation for follow-up.

  3. Curable Violation: An injunction may allow a certain number of violations in complying with the conditions of the Court Order, as long as those violations are timely cured as provided in the Order. The Order will require the taxpayer be sent a notification of a curable violation and how it must be cured.

  4. The Revenue Officer is responsible for timely notifying of Advisory and Area Counsel, who will notify DOJ, of any curable violation in the Court's Order. DOJ is responsible to send the taxpayer an official notification for the curable violations and allowing the taxpayer to cure the violation.

    Note:

    If the Revenue Officer is in direct contact with DOJ, the RO is responsible to timely update both Area Counsel and Advisory.

  5. Official Default: If the curable violations are exceeded, any further breach causes the injunction to officially default. The Order will indicate whether DOJ is required to notify the taxpayer in this event. The Revenue Officer will not only notify Advisory, Area Counsel, and DOJ of an official default, but will also submit a recommendation for resolution, through Advisory and Area Counsel, to DOJ.

  6. Advisory will:

    1. Create and maintain an NFOI-135 to ensure that the injunction file remains available in the event future actions are needed,

    2. Assist the Revenue Officer with DOJ notifications, if there is either a curable violation or an official default of the injunction,

    3. Assist the Revenue Officer as necessary, with resolution recommendations, if the injunction officially defaults, and

    4. Review the Revenue Officer resolution recommendation and process appropriately through Area Counsel to DOJ.

  7. ENTITY REPORT: A manager, management assistant, or IQA may input "Injunction Monitor" as a program name in ICS as an identifier in creating a sort query of cases. Instructions can be found in the ICS User Guide - Chapter 9, Entity Detail - Maintain Program Names.

Advisory Procedures

  1. Pre-suit referral: Advisory’s role begins with any revenue officer request for assistance determining whether suit action is appropriate or request for assistance putting together a suit package.

    First, if needed, refer the revenue officer to or walk them through the current revisions for IRM suit references including but not limited to:
      IRM 25.3.1 Specifically discuss Electronically Stored Information.
      IRM 25.3.2 Suggest they read the entire IRM.
      IRM 5.17.1 Specifically discuss the Revenue Officer’s Role.
      IRM 5.17.4 Specifically point out the location for the particular type of litigation they are pursuing.
      IRM 5.17.12 Point out locations for type of suit they are pursuing and emphasize reading through entire segment on the Narrative Report.
      local law guides.
    Second, discuss the case theories they are proposing again utilizing the appropriate IRM sections.
  2. Suit Referral Received: Once the suit package has been received, the role of Advisory in reviewing suit packages is to ensure that the package is complete. In reviewing the suit package, the Advisor should:

    • Evaluate and critically review the suit recommendation

    • Ensure that the suit recommendation meets all criteria for bringing suit

    • Consider whether additional development is needed

    • Determine whether necessary documents have been included and obtain any omitted documents

    • Ensure that the suit recommendation is approved by the appropriate officials. See IRM 25.3.2.1.2, Authority, above.

Initial Processing

  1. As soon as possible after receipt, Advisory must review the suit recommendation to identify imminent CSEDs or other indicators of urgency. Process accordingly.

  2. Open a case on ICS no later than 10 calendar days after receipt of suit recommendation.

  3. No later than 45 calendar days after receipt of the suit package:

    1. Review the suit package to determine if it meets all criteria for bringing suit or whether additional information is needed,

    2. Contact the originator to acknowledge receipt and to request any missing information or address other issues as appropriate,

    3. Identify any missing information or other issues for follow-up.

  4. Use Form 4478, Civil Suit Checklist, the Advisor Review - Checklist when reviewing the recommendation package. See IRM 25.3.2.4.4.5, Form 4478, Civil Suit Checklist, Instructions.

  5. Form 5942, Reviewer’s Report - Technical Services Advisory, may be issued, as appropriate, to secure additional documentation or information needed from the originating employee.

  6. References:

    • IRM 5.17.4, Suits by the United States, for guidance regarding the most common types of suits brought by the United States to collect taxes.

    • IRM 5.17.12, Investigations and Reports, for guidance regarding the types of reports to be prepared by initiating employees and the information to be included when recommending that certain judicial actions be brought by the United States.

    • IRM 25.3.6, Open Litigation Control, Monitoring, and Closing Actions provides instructions on review, documents, specific types of suits, Advisory case controls, monitoring, payment processing, and DOJ requested actions.

Returned Recommendations and Those Needing Further Development

  1. If a suit recommendation cannot be pursued or further development is needed, return the suit recommendation to the initiating employee no later than 14 calendar days after determining that it will be returned. Include an explanation for the return, using Form 5942, Reviewer’s Report - Technical Services Advisory, if appropriate.

  2. Close the ICS control module.

Approved Recommendations

  1. Processable Recommendation: If a suit recommendation is processable, complete, and correct, Advisory will

    • Forward it to the appropriate official(s) for approval, which is indicated by signing Form 4477, Civil Suit Recommendation.

    • Ensure that the suit recommendation is approved by the appropriate official(s). See IRM 25.3.2.1.2, Authority, above.

      Note:

      An electronic signature is an acceptable method of written approval. See also IRM 5.11.2.2.2(10), Preparing the Notice of Levy.

    • When the required approval is received, forward the original and two copies of the suit package to Area Counsel with Form 4481, Transmittal - Legal Action. Retain one set of the suit package and associate it with the Advisory suit control file.

      Note:

      If the review and approval process takes more than 60 days, Advisory will request the initiating employee to conduct an updated public records check and Advisory will promptly forward the updated information to Area Counsel.

  2. If applicable, request the initiating employee to complete any needed BAL DUE case action and forward the administrative case file(s) to Advisory upon closure so that the information therein is available during litigation.

  3. Gather additional documents that are needed and take appropriate actions described in IRM 25.3.6, Open Litigation Control, Monitoring, and Closing Actions.

  4. Advisory stays in communication with Area Counsel and DOJ throughout the litigation and beyond. DOJ may ask assistance from Advisory for taking certain actions and Advisory may need to have the revenue officer perform certain of those actions. See IRM 25.3.5, Judgment Followup, IRM 25.3.6 , Open Litigation Control, Monitoring, and Closing Actions, and IRM 25.3.7, Reconciling Non-Insolvency LAMS Report.