IRS Logo

4.36.2  Identification of Joint Committee Cases

Manual Transmittal

September 22, 2015

Purpose

(1) This transmits revised IRM 4.36.2, Joint Committee Procedures, Identification of Joint Committee Cases.

Material Changes

(1) Added link to acronym database and list of acronyms in IRM 4.36.2.1.

(2) Examples have been updated and reformatted. New examples were added to illustrate the $5 million C corporation jurisdictional amount.

(3) Various editorial changes were made throughout.

Effect on Other Documents

This section supersedes IRM 4.36.2, Identification of Joint Committee Cases, dated May 4, 2010.

Audience

LB&I, SB/SE, TE/GE

Effective Date

(09-22-2015)

Tina Meaux
Director, Pre-Filing and Technical Guidance (PFTG)
Large Business and International Division

4.36.2.1  (09-22-2015)
Introduction

  1. This section:

    • Describes the statutory provisions requiring review of certain cases by the Joint Committee on Taxation (JCT)

    • Identifies such cases

    • Provides guidance for computation of the qualifying IRC 6405 jurisdictional amount

  2. A complete list of commonly-used acronyms in Joint Committee cases can be found in IRM 4.36.1.1. In addition, the meanings of most IRS acronyms can be found in the Acronym Database, http://rnet.web.irs.gov/Other/acronymdb.asp. The following acronyms are not listed in the database:

    ACRONYMS
    ARC Aging Reason Code
    CRT Case Return Transmittal
    GBC General Business Credit
    GHW Global High Wealth
    JCR Joint Committee Review (LB&I)
    JCS Joint Committee Specialist (LB&I JCR )
    NSR Notice of Suspended Referral
    PC Project Code
    Rev. Rul. Revenue Ruling
    SRM Staff Review Memorandum

4.36.2.2  (09-22-2015)
Joint Committee Cases Reportable to the JCT

  1. IRC 6405(a), IRC 6405(b) and IRC 6405(c) require the submission of reports by the IRS in cases involving refunds in excess of the jurisdictional amount of $2 million ($5 million for C corporations).

4.36.2.2.1  (09-22-2015)
Unpaid Refunds IRC 6405(a): Allowed Claims and Examination Results

  1. 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.

  2. 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 $2 million ($5 million for C corporations) jurisdictional amount.

4.36.2.2.2  (09-22-2015)
Tentative Refunds IRC 6405(b)

  1. The Joint Committee review of a refund or credit made under IRC 6411, which relates to 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.

  2. 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.

4.36.2.2.3  (05-04-2010)
Disaster Loss Refunds IRC 6405(c)

  1. 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.

4.36.2.2.4  (09-22-2015)
Prepayment Credits IRM 6402

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

    1. A report is required with respect to a refund attributable to amounts credited under IRC 835(d) in excess of $5 million made to a mutual insurance company which is a reciprocal underwriter. This credit is not deemed a prepayment credit. See Rev. Rul. 69-196, 1969-1 C.B. 303.

    2. Refunds under claim of right (IRC 1341) are reportable when the decrease in tax computed under IRC 1341(a)(5)(B) exceeds the tax computed under IRC 1341(a)(5)(A) by more than the jurisdictional amount. See Rev. Rul. 67-358, 1967-2 C.B. 412.

    3. Refunds of fuel tax credits are reportable to the extent that they reduce the regular tax liability and the refund (regular tax less fuel tax credits) is over the jurisdictional amount

4.36.2.3  (09-22-2015)
Refunds Not Reportable To the Joint Committee On Taxation

  1. JCT review is limited to designated categories of tax. Excluded from review are employment taxes, trust fund recovery penalty cases, windfall profit taxes and specified excise taxes. In addition, the following refunds are not reportable:

    1. A refund or credit of estimated or withheld income tax, made without examination.

    2. A refund or credit of an unassessed advance payment or deposit made prior to determination of a taxpayer’s tax liability, or a refund or credit of an amount paid on an early-filed return that exceeds the amount of the tax liability reported by the taxpayer on the last return filed on or before the due date of that return.

    3. Abatement of an unpaid tax liability in excess of the jurisdictional amount. For example, an abatement of an unpaid portion of an assessment under IRC 6404 regardless of the amount is not a refund or credit under IRC 6405.

    4. An overpayment determined by the United States Tax Court (USTC) or any other court of competent jurisdiction as a result of the trial of a case (rather than by a stipulation of settlement).Non-reportable overpayments determined by the USTC or other courts are limited to overpayments from only those years in the court decision. Refund from any years outside of the specific court decision may be reportable if they meet the jurisdictional amount.

4.36.2.4  (09-22-2015)
Determining Joint Committee Jurisdictional Amount

  1. The exam group is responsible for determining whether a case is reportable to the JCT. Any questions with respect to the jurisdictional amount must be resolved in consultation with a Joint Committee Review or Area Counsel.

  2. Refunds with respect to separate taxpayers are not combined in computing the jurisdictional amount. A deficiency against one taxpayer is not offset against an overpayment of another taxpayer, even where the changes resulted from the reallocation of income or deductions among related entities, e.g. between a parent corporation and its unconsolidated subsidiary.

  3. All refunds from open source years need to be considered in determining the jurisdictional amount. For example, if tentative refunds added together exceed $2 million ($5 million for C Corporations), both source years and tentative refund years will be reported. This is true if none, one or all of the separate tentative refunds exceed $2 million ($5 million for C Corporations). See Example 1.

  4. IRC 6405(a) and IRC 6405(b) refunds or credits are not combined in determining jurisdictional amount. See Example 2.

  5. Tentative refunds paid prior to the current examination cycle should be considered in computing the jurisdictional amount if the current exam cycle is:

    1. Open with respect to the statute of limitations

    2. Not previously examined or surveyed

    See Example 3.

  6. Prior examination refunds that did not meet the jurisdictional amount and were refunded prior to the current examination cycle are not combined with current refunds in computing the jurisdictional amount.

  7. Refunds previously reported to the Joint Committee on Taxation are not included in the computation of the jurisdictional amount.

    Note:

    The following examples reflect the jurisdictional amounts as of the date of this IRM revision:

    Example 1:
    Facts:
    Tentative allowances - IRC 6405(b):
    $2M Threshold $5M Threshold

    2011 NOL carryback to 2009
    2012 GBC carryback to 2011
    $ 1,500,000
       550,000
    $4,500,000
       550,000
    Jurisdictional Amount - 6405(b) $ 2,050,000 $5,050,000
    Conclusion:
    Both refunds must be reported. The 2012, 2011, and 2009 returns must be surveyed or examined.
    Example 2:
    Facts:
    Tentative allowances - IRC 6405(b):
    $2M Threshold $5M Threshold
    2012 NOL carryback to 2010 $1,800,000 $4,800,000
    Audit results - IRC 6405(a):
    2011 Examination refund $450,000 $450,000 
    Conclusion:
    No report is required since the IRC 6405(a) and IRC 6405(b) refunds or credits are not aggregated.
    Example 3:
     
    Facts:
    Tentative allowances - IRC 6405(b):
    $2M Threshold $5M Threshold
    2012 NOL carryback to 2010
    2011 NOL carryback to 2009
    $1,700,000
    200,000
    $4,700,000
    200,000
      $1,900,000 $4,900,000
    Previous tentative allowance - IRC 6405(b):  
    2010 Capital Loss carryback to 2007  $300,000 $300,000  
    Conclusion:
    If not barred by the statute of limitations and not considered in a prior examination (or survey), the 2010 capital loss carryback to 2007 is added in determining the jurisdictional amount. A report is required.

4.36.2.4.1  (09-22-2015)
Inclusion of Interest and Penalties in Joint Committee Jurisdictional Amount

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

    Example:
    Facts:
    Tentative allowances - IRC 6405(b):
    $2M Threshold $5M Threshold
    Proposed Refund $1,950,000 $4,950,000
    Overpayment: Previously assessed and paid interest 60,000 60,000
      $2,010,000 $5,010,000
    Conclusion:
    Where a refund is proposed with respect to a previously assessed deficiency, the interest previously assessed on that deficiency is included in the computation of the jurisdictional amount.
  2. 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.

4.36.2.4.2  (05-04-2010)
Treatment of Deficiencies

  1. 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.

  2. 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.

  3. 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.

4.36.2.4.3  (02-15-2002)
Multiple Year Examination with Net Deficiency

  1. 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.

4.36.2.4.4  (09-22-2015)
Computing Jurisdictional Amount In Multi-Year Exam With Deficiency

  1. 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 Joint Committee.

  2. 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:

    1. To determine the net deficiency for tax year, offset the deficiency for that year against the lesser of tentative allowance or disaster losses. If either (or both) the aggregate tentative allowances or disaster losses for that year are offset in their entirety, then the year is not reportable with respect to that refund type.

    2. Determine the aggregate net deficiency for all net deficiency years.

    3. Determine the aggregate net overpayment by refund type for all net refund years.

    4. Apply the aggregate net deficiency against the least of the aggregate IRC 6405 refund types (even if the least aggregate amount is below Joint Committee jurisdictional amount(s)). If the balance of a refund type falls below the jurisdictional amount(s) after the offset of deficiencies, then that refund type is not reportable.

  3. 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, the excess offsets the next least type of refund. Where two or more refund types are of equal amount, then the remaining deficiency is offset against the remaining refund.

  4. 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.

  5. A spreadsheet that computes jurisdictional amounts is available on the Joint Committee Review website.

    Note:

    THE FOLLOWING EXAMPLE REFLECTS THE $2 MILLION JURISDICTIONAL AMOUNT FOR TAXPAYERS OTHER THAN C CORPORATIONS.

    Example 1:   $2M Threshold  
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2005 $10,000   ($1,205,000)
    2006 $225,000    
    2007     ($570,000)
    2008 $180,000    
    2009     ($240,000)
    2010   ($1,460,000)  
    2011   ($800,000)  
    2012   ($410,000)  
    Sub-total deficiency/refund $415,000 ($2,670,000) ($2,015,000)
    Same year offset (2005) ($10,000)   $10,000
    Subtotal $405,000 ($2,670,000) ($2,005,000)
    Offset of least refund type ($405,000)   $405,000
    Net deficiency/refund 0 ($2,670,000) ($1,600,000)
    In excess of jurisdictional amount?   Yes No
    Conclusion:
    A Joint Committee report is required with respect to only the IRC 6405(a) refund for the years 2010, 2011, and 2012. Since the net aggregate IRC 6405(b) refund does not exceed $2 million after the offset of the net deficiency, none of the years with tentative allowances are reportable. The 6405(b) refunds and deficiencies for the years 2005 through 2009, although not reportable, will be noted in the report to the Joint Committee.

    Note:

    THE FOLLOWING EXAMPLE REFLECTS THE $5 MILLION JURISDICTIONAL AMOUNT FOR C CORPORATIONS.

    Example 2:   $5M Threshold  
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2010 $1,005,000   ($5,005,000)
    2011   ($5,005,000)  
    2012 $600,000    
    Subtotal deficiency/refund $1,605,000 ($5,005,000) ($5,005,000)
    Same year offset ($1,005,000)   $1,005,000
    Subtotal deficiency/refund $600,000 ($5,005,000) ($4,000,000)
    Offset of least refund type ($600,000)   $600,000
    Net deficiency/refund $ 0 ($5,005,000) ($3,400,000)
    In excess of jurisdictional amount?   Yes No
    Conclusion:
    A Joint Committee report is required on the IRC 6405(a) refund for 2011. The IRC 6405(b) refund for 2010 is not reportable since the amount after offset is below $5 million; however, the 2010 refund and the deficiencies for 2010 and 2012 will be noted in the Joint Committee report.

    Note:

    THE FOLLOWING EXAMPLE REFLECTS THE $2 MILLION JURISDICTIONAL AMOUNT FOR OTHER THAN C CORPORATIONS.

    Example 3:   $2M Threshold  
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2011 $900,000   ($1,005,000)
    2012   ($2,670,000)  
    2013 $1,005,000    
    Net deficiency/refund $1,905,000 ($2,670,000) ($1,005,000)
    Same year offset ($900,000)   $900,000
    Subtotal $1,005,000 ($2,670,000) ($105,000)
    Offset of least refund type ($105,000)   $105,000
    Subtotal $900,000 ($2,670,000) 0
    Offset of remaining net deficiency ($900,000) $ 900,000  
    Net deficiency/refund $0 ($1,770,000) $0
    In excess of jurisdictional amount?   No No
    Conclusion:
    A Joint Committee report is not required. As netted, none of the refund types meet the jurisdictional amount.

    Note:

    THE FOLLOWING EXAMPLE REFLECTS THE $5 MILLION JURISDICTIONAL AMOUNT FOR C CORPORATIONS.

    Example 4:   $5M Threshold  
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2010 $2,340,000   ($2,230,000)
    2011   ($5,100,000) ($160,000)
    Subtotal $2,340,000 ($5,100,000) ($2,390,000)
    Same year offset ($2,230,000)   $2,230,000
    Subtotal $110,000 ($5,100,000) ($160,000)
    Offset of least refund type ($110,000)   $110,000
    Net deficiency/refund $0 ($5,100,000) ($50,000)
    In excess of jurisdictional amount?   Yes No
    Conclusion:
    A report is required with respect to the IRC 6405(a) refund. The non-jurisdictional refund and deficiency for 2010 will be noted in the Joint Committee report.

    Note:

    THE FOLLOWING EXAMPLE REFLECTS THE $2 MILLION JURISDICTIONAL AMOUNT FOR OTHER THAN C CORPORATIONS.

    Example 5:   $2M Threshold  
    Year Deficiency 6405(a) Refund 6405(b) Refund
    2010 $890,000   ($3,050,000)
    2011   ($210,000)  
    Subtotal $890,000 ($210,000) ($3,050,000)
    Same year offset ($890,000)   ($890,000)
    Net deficiency/refund $0 ($210,000) ($2,160,000)
    In excess of jurisdictional amount?   No Yes
    Conclusion:
    A Joint Committee report is required with respect to the IRC 6405(b) refund for 2010. The refund for 2011 will be noted in the Joint Committee report.

More Internal Revenue Manual