See IRM 4.36.1.1.1, Background.

IRC 6405 requires review of certain cases by the JCT. See IRM 4.36.1.1.2, Authority, for more information.

See IRM 4.36.1.1.3, Roles and Responsibilities.

See IRM Exhibit 4.36.1-1, Acronyms Used Throughout IRM 4.36, for a list of commonly used acronyms.

Joint Committee topics may be found on the IRS Knowledge Management website at:Joint Committee Virtual Library. This site contains a wealth of information about all the various aspects of a Joint Committee case, including frequently asked questions, job aids, contact information, and JC forms. It is a place to visit for valuable tools and resources.

IRC 6405(a), as amended, provides that no refund or credit of any income, war profits, excess profits, estate, or gift tax, or any tax imposed with respect to public charities, private foundations, operators’ trust funds, pension plans, or real estate investment trusts under chapter 41, 42, 43, or 44, in excess of the jurisdictional amount(s) shall be made until after the expiration of 30 days from the date upon which a report giving the name of the person to whom the refund or credit is to be made, the amount of such refund or credit, and the summary of the facts and the decision of the Secretary, is submitted to the JCT.

When the examination results in a deficiency, a Joint Committee report must be prepared when the net refund (IRC 6405(a) refund less deficiency) exceeds the $2 million ($5 million for C corporations) jurisdictional amount.

The Joint Committee review of a refund or credit made under IRC 6411, which relates to tentative carryback adjustments, is provided for in IRC 6405(b), as amended. Under the provisions of IRC 6405(b), tentative allowances are refunded prior to reporting to the JCT. Following a survey action or examination, refunds of tentative allowances that exceed the jurisdictional amount(s) are reported to the JCT.

When the examination results in a deficiency, a Joint Committee report must be prepared when the net refund (IRC 6405(b) refund less deficiency) exceeds the jurisdictional amount.

IRC 6405(c) provides that refunds in excess of the jurisdictional amount(s), which are attributable to a taxpayer’s election under IRC 165(i), are made prior to submitting a report for review. This section allows a taxpayer to deduct a disaster loss in the taxable year immediately preceding the taxable year in which the disaster occurred. These losses are attributable to a disaster declared by the President under the Disaster Relief & Emergency Assistance Act. The report shall be prepared when the correct amount of tax is determined.

A refund shown on the return as filed does not qualify as a refund or credit under IRC 6405(a) except as follows:

In computing the IRC 6405 jurisdictional amount, proposed refunds of penalties and previously assessed and paid interest are combined with proposed tax refunds.

Any refund of previously assessed interest, even when not made in connection with a redetermination of the underlying deficiency, must be included in the computation of the jurisdictional amount. Therefore, a refund of previously assessed interest in excess of $2 million ($5 million for C corporations) with no reduction in tax requires a report.

Deficiencies are offset against refunds only when recommended for the same tax entity, for the same category of tax, and in the same examination cycle.

Accordingly, if an overpayment of one category of tax results in a deficiency in another with respect to the same taxpayer, the deficiency is not considered in the computation of the jurisdictional amount.

Likewise, no offset occurs when adjustments resulting in a deficiency with respect to one taxpayer result in a refund with respect to a related taxpayer.

In multiple-year examinations with a net deficiency (i.e., the sum of deficiencies exceed the total of all IRC 6405 refunds), no report is required.

For cases with net overassessments that include deficiency years, a determination must be made as to which, if any, of the refund years must be reported. For refund types exceeding the jurisdictional amount(s), only the years with net refunds (after deficiencies in these years are offset) are reported to the JCT.

Determination of the jurisdictional amount in a multiple-year examination involving deficiencies is a four-step process that is applied separately to each refund type (refunds under IRC 6405(a), (b), and (c)). These four steps are:

If the offsetting described in paragraph (1) does not cause the refund type to be taken out of Joint Committee jurisdiction, then the aggregate amount of that refund type must be reported, and no further computation is required. Where the aggregate net deficiency exceeds the least refund type, the excess offsets the next least refund type. Where two or more refund types are of equal amount, then the remaining deficiency is offset against the remaining refund.

Only the categories of tax designated by IRC 6405 are subject to netting. Only refunds and deficiencies within the same category of tax can be netted. For example, a deficiency of gift tax cannot be netted against an income tax overpayment.

A spreadsheet that computes jurisdictional amounts is available at:Joint Committee Spreadsheet. Additional resources may be found on the IRS Knowledge Management website at:Joint Committee Virtual Library.