4.24.10 Appeals Referral Procedures

Manual Transmittal

February 15, 2019

Purpose

(1) This transmits a revision to IRM 4.24.10, Excise Tax, Appeals Referral Procedures.

Material Changes

(1) Refer to the table below for a detailed list of changes made.

IRM Section Number Description of Change
4.24.10.1 Program Scope and Objectives Content updated to reflect organizational name change.
4.24.10.1.4 Program Objectives and Review Content updated to reflect organizational name change.
Exhibit 4.24.10-1 Acronyms Table updated for organizational name change.
Exhibit 4.24.10-2 Excise Tax Letter Chart According to Situation Electronic links updated.

(2) Editorial changes have been made when necessary throughout this IRM to update electronic links and organizational name changes.

Effect on Other Documents

This material supersedes IRM 4.24.10 dated August 6, 2018.

Audience

This section contains guidelines and instructions for Excise Tax Examination managers (excise managers), revenue agents and fuel compliance agents (excise examiners) who refer excise tax cases (excise cases) to Appeals.

Effective Date

(02-15-2019)

Lisa M. Piehl
Acting Director, Examination - Specialty Policy
Small Business/Self Employed

Program Scope and Objectives

  1. General Overview - This IRM provides specific information for excise managers and excise examiners who refer excise cases to Appeals. A taxpayer has the right to appeal an IRS decision in an independent forum that allows for a fair and impartial administrative appeal.

  2. Purpose - This IRM explains the referral process for excise cases to Appeals.

  3. Audience - This IRM is for Excise Tax Examination managers and excise examiners who refer excise cases to Appeals.

  4. Policy Owner - Director, Examination - Speciality Policy is responsible for the administration, procedures and updates related to the referral of excise cases to Appeals.

  5. Program Owner - Director, Examination - Specialty Examination owns Excise Tax Examination.

  6. Primary Stakeholders - Appeals, Counsel, Field and Specialty Exam Quality (FSEQ) and Specialty Examination are the primary stakeholders for this IRM.

Background

  1. It is essential that excise managers, senior management officials and excise examiners fully understand the referral process for excise cases to Appeals for compliance purposes.

Authority

  1. IRC 7803(a)(3) provides the taxpayer the right to appeal an IRS decision in an independent forum.

Responsibilities

  1. Director, Examination - Specialty Policy is the executive responsible for Excise Tax Examination policy and procedures.

  2. Director, Examination - Specialty Examination is the executive responsible for examination operational compliance.

  3. Chief, Estate & Gift Tax/Excise Tax Examination is responsible for ensuring that information about referring an excise case to Appeals is communicated to and carried out by excise managers and excise examiners.

Program Objectives and Review

  1. Program Goals - The information explained in this IRM describes the referral process for excise cases to Appeals. The proper application of this information will enable excise managers, senior management officials and excise examiners to more fully understand the referral process, thereby increasing compliance.

  2. Program Reports - Information regarding the reporting of program objectives are included on, but not limited to, the Headquarters Examination Monthly Briefing, Program Manager Monthly Briefing, Examination Operational Review and Business Performance Reviews, which are provided by the Director, Examination - Specialty Policy.

  3. Program Effectiveness - Program effectiveness is measured by the Examination Quality Review Staff, in FSEQ, which supports the SB/SE quality improvement program utilizing National Quality Review System (NQRS) to conduct independent case reviews from a statistically valid sample of examination case work. National, area and territory trend analyses on the quality attributes are used to establish baselines to assess program performance, identify opportunities to improve work processes, analyze causes for failure, assess the feasibility of possible solutions and measure the success of quality improvement efforts.

  4. Annual Review - Program Manager, Excise Tax Policy is responsible for reviewing the information in this IRM annually to ensure accuracy and promote consistent tax administration.

Terms/Definitions/Acronyms

  1. The table below contains terms and their definitions used throughout this IRM.

    Term Definition
    30 Day Letter Formal, written communication issued to the taxpayer that reports the examination findings.
    Appeals Case Memorandum Standardized report issued by Appeals to the field that provides feedback on how a referred case was resolved.
    Ex Parte Communications Any communication between an Appeals employee and a party to a disputed case outside the presence of the opposing party or his or her representative. To determine whether a communication is ex parte, refer to IRM 4.2.7.2, Definitions.
    Fast Track Settlement (FTS) A jointly administered program offered by IRS to expedite case resolution at the earliest opportunity.
    Joint Committee (JC) Review The JC Review oversees the preparation of JC reports for all examined/surveyed cases for Internal Revenue Code section 6405 refunds of income, estate and gift taxes, and certain excise taxes in excess of $2 million (current statutorily prescribed amount), ($5 million for C Corps) regardless of the business operating division.
  2. Refer to Exhibit 4.24.10-1 for acronyms used throughout this IRM.

Related Resources

  1. Refer to IRM 4.2.7, General Examining Procedures, Ex Parte Communication Procedures, for guidance concerning ex parte communications.

  2. Refer to IRM 4.10.7.5.5, Examination of Returns, Issue Resolution, SB/SE Fast Track Settlement, for guidance concerning Fast Track Settlement (FTS).

  3. Refer to IRM 4.24.20.3.4, Excise Tax Report Writing Guide, Unagreed Reports, for information about preparing unagreed cases that do not meet the timeframe for Appeals eligibility, which requires at least 365 days on the protection of the statute of limitations (SOL) period for assessing excise tax or where the taxpayer did not file a formal protest or sign an agreement and where proposed additions to tax will be assessed.

  4. Refer to IRM 4.24.21.5.4, Case Closings, Closing Procedures for Unagreed Examinations Not to be Forwarded to Appeals, for information about closing procedures for unagreed cases that do not meet the timeframe for Appeals eligibility that require at least 365 days on the SOL or where the taxpayer did not file a protest or sign an agreement, and where the proposed additions to tax will be assessed.

  5. IRS formally adopted a Taxpayer Bill of Rights (TBOR) in June 2014, which provides the nation’s taxpayers with a better understanding of their rights and helps reinforce the fairness of the tax system. In 2015, Congress charged the Commissioner with ensuring IRS employees are familiar with and act in accordance with taxpayer rights as afforded by IRC 7803(a)(3). IRS employees must be informed about taxpayer rights and be conscientious in the performance of their duties to honor, respect and effectively communicate those rights that may aid in reducing taxpayer burdens. IRS employees must administer the law with integrity and fairness and exercise professional judgment in conducting enforcement activities. Refer to Pub 1, Your Rights as a Taxpayer.

Appeals Process

  1. It is imperative that the excise examiner fully understands the appeals process and its impact on overall IRS compliance efforts.

  2. Cases closing to Appeals for the first time on or after September 2, 2014, require at least 365 days on the SOL when they are received in Appeals.

  3. Additionally:

    1. There must be at least 210 days remaining on the SOL when a case is received in Excise Tax Examination, if Appeals returns the case to Excise Tax Examination for consideration of new information or new issues raised by the taxpayer.

    2. There must be at least 180 days remaining on the SOL when a case is received in Appeals, if Appeals previously released jurisdiction on the case and returned it to Excise Tax Examination for additional work.

  4. For purposes of case processing, the excise examiner should be aware of the 365 day requirement and plan accordingly when issuing a Letter 950-E, 30 Day Letter - Straight Deficiency on Over-Assessment for Excise Tax Examination Case, which is a written communication issued to the taxpayer that reports examination findings. If the case has 240 days or more remaining on the SOL, the excise examiner should follow the guidance under IRM 4.24.20.3.4, which includes issuing the 30 Day Letter, if the taxpayer has not expressed agreement. If the case is to go forward unagreed and the taxpayer wants to exercise his or her appeal rights, the taxpayer will need to sign a statute extension before the case arrives in Appeals so that 365 days remain on the SOL when the case is received in Appeals. The taxpayer will need to sign a statute extension that allows for sufficient time for preparing the rebuttal, shipping and processing the case in Technical Services (Tech Services) and allowing for 365 days on the SOL when it is projected to be received in Appeals. If the case has less than 240 days remaining on the statute, the report should be issued with Letter 5153-E, Examination Report Transmittal - Statute, or Letter 5153-A, Examination Report Transmittal - Statute Less Than 240 Days (Claim), whichever is applicable.

  5. If a valid Form 872-B, Consent to Extend the Time to Assess Miscellaneous Excise Taxes, is not received, the case will be processed based on the proposed changes as an unagreed case not eligible for consideration by Appeals. Refer to IRM 4.24.21.5.4.

Excise Letter Chart - Letter Numbers and Descriptions

  1. To strengthen administrative control, the facts and circumstances determine the appropriate letter to issue with the examination report.

  2. Refer to Exhibit 4.24.10-2, Excise Tax Letter Chart - Letter Chart According to Situation, which identifies those letters that are appropriate to issue to the taxpayer depending on the facts and circumstances.

  3. Refer to Exhibit 4.24.10-3, Excise Tax - Letter Numbers and Descriptions, which lists the letter found in Exhibit 4.24.10-2.

Appeals Referral Process

  1. Generally, Appeals procedures for unagreed income tax cases are applicable to excise cases, with the exception of the statutory notice provisions, which do not apply.

  2. If the taxpayer requests a review of the case findings by Appeals as a result of the issuance of a 30 Day Letter, the IRS must abide by that request, if certain requirements are satisfied:

    1. There must be at least 365 days remaining on the SOL at the time Appeals receives the case.

    2. Under the Appeals process, the excise examiner may document whether the taxpayer provided or confirmed the requested information. If the taxpayer later discovers further or additional information he or she wants considered, that information may be provided or confirmed for an impartial, independent review.

    3. A request for an appeal may be made using small case procedures if the total amount of proposed additions to tax and penalties, proposed overassessment, or claimed refund, credit or abatement for each tax period is $25,000 or less. These procedures require a written request stating the issues and grounds for the disagreement for Appeals consideration.

    4. If the taxpayer does not qualify for the small case procedures, a formal protest must be prepared by the taxpayer and/or the taxpayer’s representative.

  3. Formal protests are reviewed at the group level, as designated by management, within seven days of receipt to decide whether:

    1. The protest is adequate.

    2. The case requires further development by the excise examiner.

    3. The examination report should be modified.

    4. The taxpayer’s written protest includes the required documents.

    5. A rebuttal needs to be prepared.

  4. The taxpayer’s formal protest must include the following:

    1. The taxpayer’s name, address and daytime telephone number.

    2. A statement that the taxpayer wants to appeal the excise examiner’s findings to Appeals.

    3. A copy of the letter showing the proposed changes and findings being protested/disputed, or the date and symbols of the letter.

    4. The tax periods or years involved.

    5. A list of the adjustments with which the taxpayer disagrees and an explanation as to why.

    6. A statement of facts supporting the taxpayer’s position on any contested issue.

    7. The law or other authority the taxpayer relies upon, if any.

    8. A declaration of truth under penalties of perjury. This may be done by adding the following signed declaration to the protest document: "Under the penalties of perjury, I declare that I examined the facts stated in this protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct and complete."

  5. If the taxpayer’s representative submits the protest for the taxpayer, the representative must substitute a declaration stating:

    1. That the representative submitted the protest and accompanying documents.

    2. Whether the representative knows personally that the facts stated in the protest and accompanying documents are true and correct.

  6. An incomplete protest must be returned to the taxpayer and additional time granted to perfect the document. If the protest contains information warranting further consideration, the case should be returned to the excise examiner for further development. Cases returned for additional development should be considered priority work and given expedited consideration. If the excise examiner or excise manager determines there is something wrong in the protest that does not change the determination but requires further comment or explanation and is not confidential in nature, a rebuttal can be prepared and included in the case file before being sent to Appeals. If a rebuttal is prepared, a copy must be provided to the taxpayer.

  7. The excise manager is authorized to meet with the taxpayer to discuss any disputed issues in an attempt to resolve them, obtain taxpayer agreement and limit taxpayer burden.

  8. Managerial involvement is required for all unagreed cases. A written statement must be in the case file containing evidence of the excise manager’s involvement in the unagreed case and the attempts made to resolve the disputed issue(s).

  9. If the taxpayer requests a transfer of jurisdiction for an appeal, and the written protest is complete, the case file will be routed to Appeals.

  10. A case can be transferred to Appeals with a copy of the taxpayer’s return, if:

    1. A transcript of account is attached to the copy of the return.

    2. The case does not involve fraud, jeopardy assessment or JC Review.

  11. Disposal Code 07 must be used for an unagreed case that is transferred to Appeals.

  12. Letter 2280-X, Transfer to Appeals, must be prepared, signed and dated by the excise manager. Letter 2280-X notifies the taxpayer of the case transfer to Appeals for consideration. If a rebuttal is prepared, it must be sent to the taxpayer with Letter 2280-X.

  13. Requests from Appeals for additional information for further verification of facts in a protested case will be completed expeditiously.

  14. Refer to IRM 4.10.8.16.6, Examination of Returns, Report Writing, Taxpayer’s Appeal Rights, for appeal rights for inadequate taxpayer records cases.

  15. Refer to IRM 8.7.10, Technical and Procedural Guidelines, Excise Taxes and IRA Adjustments, for more information on Appeals procedures for excise cases.

  16. If Appeals cannot resolve the case to the taxpayer’s satisfaction, the taxpayer’s only recourse will be paying the additional tax when assessed and filing a claim for refund within the applicable SOL. Upon disallowance of the claim or six months from the date the claim was filed, the taxpayer may then file suit in the U.S. District Court or the U.S. Court of Federal Claims to recover the tax paid.

Case Routing Procedures for Unagreed Excise Tax Cases to Appeals

  1. Appeals has specially trained Appeals Officers (AOs) who handle excise tax and dyed diesel penalty cases referred to Appeals. For information about using the spreadsheet tool to obtain the proper address to route a case to Appeals refer first to the Appeals Home Page at http://appeals.web.irs.gov/APS/caserouting.htm, then refer to Case Routing Addresses and Instructions at https://organization.ds.irsnet.gov/sites/AppealsCOS/APS/SitePages/CaseRouting.aspx.

  2. All unagreed excise cases are routed to Appeals via Tech Services.

    1. In the "Forward to Technical Services" section of Form 3198, Special Handling Notice for Examination Case Processing, the boxes "Unagreed to Appeals" and "Other" must be checked.

    2. In the "Other" section, the excise examiner will enter the address of the Appeals office based on the information provided by utilizing the Spreadsheet Tool found on the Appeals webpage.

Appeals Preconference Procedures

  1. After giving the taxpayer or the taxpayer’s representative an opportunity to participate, a preconference meeting may be held between the AO and the excise examiner. This may be about a protested case addressing an unusual or complex issue. A determination regarding what is an unusual or complex issue will be left to the discretion of the AO and the excise examiner.

  2. The purpose of a preconference meeting is to discuss the issue, the protest and the written rebuttal in a case containing a complex or unusual issue. A frank discussion of the issue will help to identify additional information that may be needed on the issue. The need for resources, specialists, or expert witnesses, etc. can be discussed at this preconference meeting. Excise Tax Examination is encouraged to share its views on disputed issues, including the assessment of the facts and the law to recommended adjustments on a particular issue. However, the preconference meeting is not for securing a commitment from Appeals to defend a particular issue or settlement position, or otherwise negotiate the settlement posture of Appeals on a case.

  3. A preconference meeting will take place prior to an Appeals/taxpayer conference.

  4. If a preconference meeting is requested by the excise examiner and/or the excise manager, the request should accompany the case file when sent to Appeals. The request must be conveyed in a written memorandum and signed by the excise manager and must be associated with the case file.

  5. Review of taxpayer’s formal protest and preparation of the rebuttal in non-docketed cases:

    1. Before forwarding the case to Appeals, the excise examiner must review any new information, new issue or new arguments raised by the taxpayer or the taxpayer’s representative in the protest to determine Excise Tax Examination's position before preparing a written rebuttal. The rebuttal is not intended to restate positions taken in the examination report, but to address any new information or new issues raised in the protest. A copy of the excise examiners’s rebuttal will be provided to the taxpayer and/or the taxpayer’s representative before sending the case to Appeals for consideration.

    2. The protest rebuttal shall reference the request for a preconference meeting and refer to the separate request memorandum from the excise manager. This will alert the AO to look for the preconference meeting request memorandum.

    3. Factual differences between the examination report and the protest will be reconciled. Rebuttals will be secured from specialists, such as engineers, economists, appraisers, etc., who provided background data, assumptions, etc. used to formulate Excise Tax Examination's position. These reports will be included in the administrative file with the protest and provided to the taxpayer or representative before sending the case to Appeals for consideration.

    4. Excise Tax Examination will seek technical advice on a novel or unique issue prior to Appeals’ consideration.

    5. Changes in the excise examiner’s and the excise manager’s position made during the review process will be reflected clearly in any revised report and will include any tax re-computations.

      Note:

      The excise examiner should not wait until the taxpayer disagrees to secure technical advice or reports from specialists to prepare for the preconference meeting. Doing so might delay the taxpayer’s appeal and limit the time the taxpayer has to respond. If the excise examiner has such information that addresses the taxpayer’s arguments, the information must be provided to the taxpayer with the 30 Day Letter, to assist the taxpayer in the decision of whether to retain an expert or professional to prepare a rebuttal.

  6. If a preconference meeting initiated by either party is accepted by the other party, the acceptance need not be in writing, but the acceptance should be communicated expeditiously to the other party.

  7. A request by either party shall address the unusual or complex factual or legal issue warranting the preconference.

  8. Either the AO or excise examiner can decline the preconference meeting request. The declination must be in writing and signed and conveyed to the other party with copies to respective managers.

  9. Despite these preconference meeting procedures, the AO remains responsible for complying with the SOL procedures outlined in IRM 8.21, Appeals Statute Responsibility.

  10. Participation in a preconference meeting:

    1. The AO will arrange the meeting.

    2. Appeals and Excise Tax Examination will each identify its participants in the meeting.

    3. The participants may include other specialists, as deemed necessary by Excise Tax Examination.

    4. The parties will determine the location and method of the preconference on a case-by-case basis.

Closing Agreement and Appeals to Tax Court

  1. IRM 8.13.1, Closing Agreements, Processing Closing Agreements in Appeals, contains information and instructions regarding closing agreements under IRC 7121 for all types of taxes.

  2. The United States Tax Court has no jurisdiction over cases involving the excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, Form 2290, Heavy Highway Vehicle Use Tax Return, Form 730, Monthly Tax Return for Wagers, and Form 11-C, Occupational Tax and Registration Return for Wagering. These cases may be litigated in either the United States District Court or the United States Court of Federal Claims after payment of the tax by filing a suit for refund of the tax paid.

Appeals Feedback Procedures for Excise Tax Examination Cases

  1. The Appeals Team Manager (ATM) will forward the Appeals Case Memorandum (ACM) and Form 5402, Appeals Transmittal and Case Memo, via encrypted e-mail to SB/SE Excise ACM@irs.gov. The e-mail subject line will include the Appeals Work Unit Number (WUNO) assigned to the case.

  2. Excise Tax Policy will monitor the mailbox for any receipt of Form 5402 and the ACM.

  3. Excise Tax Policy will monitor the status of all unagreed excise cases in Appeals and follow-up on settled cases where Form 5402 and the ACM have not been received in the mailbox.

  4. Upon receipt of an ACM in the mailbox, Excise Tax Policy will send the ACM along with a brief summary of the issue via encrypted e-mail to the SB/SE territory manager in the territory where the case originated.

  5. The Subject Matter Experts (SMEs) in Excise Policy will review the ACM and advise the Excise Tax Policy - Program Manager, SB/SE territory manager and excise manager responsible for the examination, if they agree or disagree with the Appeals settlement within 30 days of receipt of the ACM. If there is a disagreement with how the case was resolved/disposed, Excise Tax Policy should provide feedback to Appeals either informally or through the formal dissent procedures. Formal dissent procedures are found in IRM 8.6.4.1.9, Conference and Settlement Practice, Reaching Settlement and Securing an Appeals Agreement Form, Disagreements to Appeals Determinations. The formal dissent procedures are not intended to replace any informal procedures currently in use. It is expected that Excise Tax Examination and Appeals will continue to address and resolve disagreements over case resolutions at the lowest possible level. The formal dissent procedures are used when the informal process results in Excise Tax Examination continuing to have unresolved and significant concerns about the Appeals disposition of an issue.

    Note:

    Formal dissents will not generally be appropriate in an Appeals case where "hazards of litigation" were considered in the settlement of the case or in cases resolved by applying "judgment," unless such judgment is clearly erroneous.

  6. Dissents will be prepared by Excise Tax Policy and forwarded to the appropriate Appeals area director, through the Excise Tax Policy - Program Manager within 90 days (extensions may be mutually agreed upon) of receipt by Excise Tax Examination of an ACM. Refer to IRM 8.6.4.1.9 for detailed dissent routing guidance. Excise Tax Policy and Appeals may also hold post settlement conferences. The purpose of the post settlement conference is to discuss the settlement reached and its subsequent impact on the taxpayer. The post settlement conference is not intended to be a critique of the settlement nor is it intended to replace dissent procedures.

  7. An Excise Tax Policy Analyst will prepare monthly reports for the Excise Tax Policy - Program Manager covering areas such as those issues sustained, SME responses to the ACM, formal dissents issued and responses to the dissents, premature referrals and emerging issues/trends.

Acronyms

The table below contains acronyms and their definitions used throughout this IRM.

Acronym Definition
ACM Appeals Case Memorandum
ADR Alternative Dispute Resolution
AO Appeals Officer
ATM Appeals Team Manager
AWSS Agency-Wide Shared Services
FSEQ Field and Specialty Exam Quality
FTS Fast Track Settlement
JC Review Joint Committee Review
NQRS National Quality Review System
SB/SE Small Business/Self Employed
SOL Statute of Limitations
SME Subject Matter Expert
TBOR Taxpayer Bill of Rights
WUNO Work Unit Number

Excise Tax - Letter Chart According to Situation

If... And... Send...
TP is eligible for Appeals Statute ≥ 240 days
  • Letter 950-E - Deficiency

  • Letter 569-X - Claim

TP is eligible for Appeals Statute < 240 days
  • Letter 5153-E - Deficiency

  • Letter 5153-A - Claim

Previously Sent
  • Letter 950-E

  • Letter 569-X

TP indicated he/she is going to send in a protest but has not yet responded
  • Letter 923-E - Deficiency

  • Letter 923-C - Claim

Previously Sent
  • Letter 950-E and/or Letter 923-E or Letter 686

  • Letter 569-X

Inadequate protest received and/or Letter 907-X has been sent
  • Letter 1025-E - Deficiency

  • Letter 1025-A - Claim

Previously Sent
  • Letter 950-E

  • Letter 569-X

TP sends in additional info
  • Letter 692-E - Deficiency

  • Letter 692-A - Claim

Previously Sent
  • Letter 950-E

  • Letter 569-X

TP requests an extension to respond to 30 Day Letter
  • Letter 686

Case is closed to Appeals Rebuttal prepared
  • Letter 2280-X

Case is closed to Appeals Rebuttal not prepared
  • Letter 2280-X

Excise Tax - Letter Numbers and Descriptions

Letter Description
569-X Claim Disallowance Letter
Letter 686 Extension of Time for Certain Actions
Letter 692-A Request for Consideration of Additional Findings (Claim)
Letter 692-E Excise Tax - Request for Consideration of Additional Findings
Letter 907-X Request to Extend Assessment Statute
Letter 923-C Letter Extending Time to File Protest (claim)
Letter 923-E Letter Extending Time to File Protest Excise
Letter 950-E 30 Day Letter - Straight Deficiency or Overassessment for Excise Examination Cases
Letter 1025-A Letter of Protest (Claims)
Letter 1025-E Letter of Protest - Excise Tax
Letter 2280-X Transfer to Appeals
Letter 5153-A Examination Report Transmittal - Statute Less Than 240 Days (Claim)
Letter 5153-E Examination Report Transmittal - Statute