4.36.4 Joint Committee Review Team Procedures126.96.36.199 Introduction188.8.131.52 Notice of Suspended Referrals (NSR) and Case Return Transmittals (CRT)184.108.40.206.1 Substantial Error220.127.116.11.2 Fraud or Malfeasance18.104.22.168.3 Serious Administrative Omissions22.214.171.124.4 Unprocessable Cases126.96.36.199.5 Corrections Favorable to the Taxpayer188.8.131.52 Processing of Joint Committee Report184.108.40.206 Inquiries from Joint Committee on Taxation220.127.116.11.1 Types of Inquiries18.104.22.168.2 Response Time Frames 22.214.171.124 Disclosure of Correspondence with the Joint Committee on Taxation 126.96.36.199 Withdrawal of Report from Joint Committee Jurisdiction188.8.131.52.1 Taxpayer Notification Letters184.108.40.206 Closing Agreements220.127.116.11 Fast Track Settlements18.104.22.168 Suspense Cases22.214.171.124 Bankruptcy Cases126.96.36.199 TEFRA and Non-TEFRA Investor Procedures188.8.131.52 Disclosure of Individual Information - Form 5482, Record of Disclosure Exhibit 4.36.4-1 Letter 1573 (P) Exhibit 4.36.4-2 Letter 1574 (P) Exhibit 4.36.4-3 Dispute Resolution Chart Part 4. Examining ProcessChapter 36. Joint Committee ProceduresSection 4. Joint Committee Review Team Procedures 4.36.4 Joint Committee Review Team Procedures Manual Transmittal September 23, 2015 Purpose (1) This transmits revised IRM 4.36.4, Joint Committee Procedures, Joint Committee Review Team Procedures. Material Changes (1) IRM 184.108.40.206 was rewritten to include an introduction and add the JC electronic referral process. Link to acronym database and list of acronyms included. (2) Updated IRM 220.127.116.11 on case return criteria to add Notice of Suspended Referral as the vehicle to return an electronic referral. (3) Updated IRM 18.104.22.168 and IRM 22.214.171.124 to reflect current practices. (4) TEFRA and Non-TEFRA procedures were updated in IRM 126.96.36.199. (5) Removed subsections on expedite refunds. (6) Removed Exhibit 4.36.4-1 (Pattern Letter 1573-A) because it is obsolete. (7) Editorial corrections have been made throughout this IRM section and subsections were renumbered where appropriate. Effect on Other DocumentsThis section supersedes IRM 4.36.4, Joint Committee Specialist Procedures, dated May 4, 2010. AudienceLB&I, SB/SE, TE/GE Effective Date(09-23-2015)Tina MeauxDirector, Pre-Filing and Technical Guidance (PFTG)Large Business and International Division 188.8.131.52 (09-23-2015) Introduction The Joint Committee Review (JCR) team of the Internal Revenue Service (IRS) oversees the preparation of Joint Committee reports for all agreed service-wide examined/surveyed cases for IRC 6405 refunds of income, estate and gift taxes, and certain excise taxes in excess of current statutory threshold of $2 million ($5 million for C corporations) regardless of the business operating division. JCR is part of the Large Business & International business operating division. The Joint Committee Specialist reviews the service-wide JC case files for procedural, computational and technical accuracy and prepares the JC report that is submitted to the Joint Committee on Taxation’s Refund Staff after review and release of the JC refunds. A complete list of commonly-used acronyms in Joint Committee cases can be found in IRM 184.108.40.206. In addition, the meaning 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 Program (LB&I) JCS Joint Committee Specialist (LB&I JCR Program) NSR Notice of Suspended Referral PC Project Code Rev. Rul. Revenue Ruling SRM Staff Review Memorandum 220.127.116.11 (09-23-2015) Notice of Suspended Referrals (NSR) and Case Return Transmittals (CRT) If the JC review cannot be completed due to technical, computational, or procedural errors, a Notice of Suspended Referral (NSR) form or a Case Return Transmittal (CRT) form will be sent to the examiner and team manager to outline errors for correction so the review of the JC case can be completed and processed. The case return criteria stated below identify five classified errors deemed significant enough to warrant return of the case to the examination team for correction. Substantial error Fraud or malfeasance Serious administrative omission Unprocessable cases Corrections favorable to the taxpayer Cases returned to the examination team by the Joint Committee Review team under these criteria must contain a clear and substantial error or involve an unexamined large, unusual, or questionable item. Where appropriate, the Joint Committee Review team should contact the examination team prior to returning the JC case for resolution of the identified problem with the JC case. Every effort should be made by the examination team to resolve JC inquiries informally received by the Joint Committee Review team before the issuance of a CRT or NSR is warranted. Should the examination team require more than 15 days to resolve the JC inquiry, a written memorandum should be prepared outlining the specific information requested and returned to the examination team via completion of the appropriate box or boxes on the CRT or NSR. If the Further Consideration box is checked on either the form for the Case Return Transmittal or the Notice of Suspended Referral, the case is a priority assignment and is to be worked and resolved within 30 days by the examination team. If the JC case is returned back to the examination team via a NSR, the examination team must update ERCS to remove the Aging Reason Code (ARC) 27. If the issues identified in the CRT or NSR for the reason of returning the JC electronic case (NSR) or JC physical case (CRT) back to the examination team are not resolved, the examination team must provide a status report every 30 days to the Joint Committee Review team until resolved . Upon resolution, the examination team must provide a written response to the issues and concerns noted by the Joint Committee Review team when the JC case was returned to the examination team. If the examination team does not agree with the position taken by the Joint Committee Review team or the Joint Committee on Taxation (JCT) (with respect to a JC report submitted to the JCT), the administrative file will be returned via a CRT. Generally, the examination team should resolve outstanding issues in consultation with the Area Counsel. Disagreements not resolved at this level will be elevated to the appropriate management official. See Exhibit 4.36.4-3. The following subsections describe conditions that will result in the return of a case. Also see IRM 18.104.22.168.1. 22.214.171.124.1 (09-23-2015) Substantial Error A substantial error may be a misapplication or misinterpretation of law or fact, or represent a clear omission of a material issue or item. A determination of a substantial error is based not only on the overall dollar amount, but also its materiality relative to other return items. A timing error may be deemed material. Evidence of a substantial error will generally be ascertained on the basis of the revenue agent report (RAR) and relevant workpapers. When the JC Specialist determines that there is a clear indication of a substantial error, the JC Specialist will contact the examiner to resolve the item(s) in question. See IRM 126.96.36.199.1.1 for examples of substantial error. 188.8.131.52.2 (05-04-2010) Fraud or Malfeasance A case will be returned if there is evidence of fraud, malfeasance, collusion, concealment, or misrepresentation by the taxpayer or representative. See IRM 184.108.40.206.1.2. 220.127.116.11.3 (05-04-2010) Serious Administrative Omissions The existence of other circumstances indicating that failure to return the case would be a serious administrative omission. For example: Failure to do so could result in serious criticism of the Service’s administration of the tax laws, A position, if left uncorrected, would establish a precedent that would seriously impede subsequent efforts to uphold the Commissioner’s position, or Would result in inconsistent treatment of similarly situated taxpayers. Also see IRM 18.104.22.168.1.3, Serious Administrative Omissions, for more information and examples. 22.214.171.124.4 (09-23-2015) Unprocessable Cases The case cannot be processed by Centralized Case Processing (CCP) and the errors cannot be corrected without significant effort (i.e. case requires new agreements, AIMS establishment, etc.) See IRM 126.96.36.199.1.4. 188.8.131.52.5 (05-04-2010) Corrections Favorable to the Taxpayer Corrections in favor of the taxpayer must be made. See IRM 184.108.40.206.1.5. 220.127.116.11 (09-23-2015) Processing of Joint Committee Report Upon completion of the review of the JC case, the Joint Committee Specialist will: Prepare the JC report to the Joint Committee on Taxation (see IRM 4.36.5) in the final form. Complete and attach Form 4081, Transmittal Memorandum-Joint Committee Case. Submit the JC report to the authorized JCR official for approval. Promptly forward the JC report, by express mail, to the JCT’s Refund Counsel in Washington, DC. The report must be mailed within two business days of approval. See IRM 18.104.22.168 for address instructions. 22.214.171.124 (09-23-2015) Inquiries from Joint Committee on Taxation Inquiries from the JCT are considered Congressional inquiries and are high priority. They are generally questions involving a JC case that require clarification, additional information, and/or conference call after the Joint Committee Review team submits the JC report package to the JCT for oversight authority and release of the JC refunds. 126.96.36.199.1 (09-23-2015) Types of Inquiries The JCT makes two types of inquiries: Informal – Telephone or e-mail Formal – Written memorandum via Staff Review Memorandum (SRM) Inquiries from the JCT’s Refund Counsel should be treated with the highest priority. There are times when it may be necessary for the Joint Committee Review team to contact the examination team for additional information or clarification regarding a Joint Committee case. Inquiries will be treated with the highest priority and the Joint Committee team will ensure timely resolution of outstanding concerns. There may be times when it is more expedient for the examination team to communicate directly with the JCT. The Joint Committee Review team will arrange for this contact and remain involved to ensure the JCT receives a timely and satisfactory response. When a case is referred back to the examination team for reconsideration and the unresolved issue(s) are unagreed, minimum refund procedures may apply. If the case is subsequently protested and resolved by IRS’s Appeals division, the Appeals Officer will prepare the necessary response to the JCT. The need for additional information or clarification may arise while the case is being reviewed by Joint Committee Review or as a result of a formal or informal inquiry Joint Committee Review may have received from the JCT. They should be treated as a priority. Caution: All IRS personnel should remember that any inquiry from personnel of the Joint Committee on Taxation constitutes a Congressional inquiry. 188.8.131.52.2 (09-23-2015) Response Time Frames Every effort should be made to respond to the JCT inquiry in a timely manner. Informal inquiries should be initially responded to within 3 working days of issuance. Formal written inquiries should be responded to within 15 days. If the response to either type of inquiry will take longer than 15 days, a memorandum providing a status report should be submitted to the JCT immediately and every 30 days thereafter. The memorandum should contain the case name, tax years, earliest statute of limitations, status explanation/reason for delay, and expected completion date. If an inquiry is outstanding more than 60 days, the Joint Committee Review team will contact the examination team concerning the status of the inquiry. If a JCT inquiry is outstanding more than 90 days, the issue should be elevated to the appropriate management official. 184.108.40.206 (09-23-2015) Disclosure of Correspondence with the Joint Committee on Taxation Generally, any IRS records generated during an examination or other processing giving rise to the credit or refund should be considered agency records subject to the Freedom of Information Act (FOIA). Any correspondence from the JCT should also be considered agency records subject to FOIA but should not be released to the taxpayer without permission from the JCT. If the JCT communication contains a legend that says the document should be treated as a Congressional record and is beyond the scope of FOIA, it should be treated as such. When the JCT expresses a differing position with respect to an issue, the Service may: Adopt that position and present it to the taxpayer as its own; or Communicate its reason for disagreement to the JCT. See IRM 220.127.116.11 for additional requirements. 18.104.22.168 (09-23-2015) Withdrawal of Report from Joint Committee Jurisdiction If adjustments reducing the net refund or credit below the jurisdictional amount are made or proposed by the examination team, after a report has been submitted to the JCT but before JCT has issued a clearance letter on the case, the Joint Committee Review team will contact the JCT advising them of withdrawal of the case from their consideration. Contact with the JCT should be made at the earliest opportunity once an agreement (Form 870 or equivalent), is secured. The JCT will be provided the taxpayer’s information, briefly discuss the adjustments, set forth the taxable income or loss and tax liability as finally determined, and request that the case be released from JCT jurisdiction. 22.214.171.124.1 (09-23-2015) Taxpayer Notification Letters At the time that Joint Committee Review submits the JC report to the JCT, the Joint Committee Specialist will prepare and mail Letter 1573 (P) to the taxpayer and its authorized representative, if applicable. See Exhibit 4.36.4-1. The examination team will be notified of the case status by email. When the Joint Committee Review team receives the clearance letter or Staff Review Memorandum (SRM) from the JCT, the Joint Committee Specialist will issue Letter 1574 (P) to the taxpayer and its authorized representative, if applicable. See Exhibit 4.36.4-2. The examination team will be apprised of this by email. The Joint Committee case file (including the administrative file copy of the Joint Committee report) will be processed and closed in accordance with established procedures outlined for the Joint Committee electronic case review (See IRM 126.96.36.199.1) or Joint Committee Physical case review (See IRM 188.8.131.52.2). 184.108.40.206 (09-23-2015) Closing Agreements Closing agreements, including those based on Competent Authority determinations, may not be signed by the approving Service official prior to their clearance by the JCT. Notwithstanding, they must be duly executed by taxpayers or their authorized representatives. A copy of the closing agreement will be submitted with the Joint Committee report. Following release by the JCT, closing agreements will be returned to the preparer for proper signatures. In those situations where there is a request for a review of the closing agreement early in the examination (pre-submission review), such as Fast Track Settlement or Early Referral to Appeals, the Joint Committee Specialist will forward a copy of the draft closing agreement (signed by the taxpayer but not by the Service), issue write-ups, a letter from the taxpayer authorizing disclosure to the JCT, and a cover memo prepared by the examination team to the JCT. The Joint Committee Specialist’s contact information will also be provided. See IRM 220.127.116.11.2 and Exhibit 4.36.3-3. After it is reviewed, the JCT will notify the Joint Committee Specialist, who will notify the examination team that the closing agreement can now be signed by the appropriate Service official. 18.104.22.168 (05-04-2010) Fast Track Settlements When a case settled under the Fast Track Settlement Program is submitted for review with an unsigned closing agreement, the Appeals Closing Memorandum (ACM) must be included as part of the file. 22.214.171.124 (09-23-2015) Suspense Cases In the event a Joint Committee case must be placed in suspense, the JC case will be returned to the examination team for appropriate action and closure to CCP upon receipt of clearance by the JCT. 126.96.36.199 (05-04-2010) Bankruptcy Cases Bankruptcy or receivership cases that meet the jurisdictional amounts of IRC 6405 must be reported to the Joint Committee on Taxation. Overpayments or deficiencies should be processed in accordance with the procedures outlined in IRM 4.27, Bankruptcy Handbook. 188.8.131.52 (09-23-2015) TEFRA and Non-TEFRA Investor Procedures JCT will accept reports on cases that have Partnership Control System (PCS) links. If the final determination on the investor's non-TEFRA issues results in a refund to the investor in excess of $2 million ($5 million for C corporations), the JC Specialist will prepare a JC report to the JCT for the non-TEFRA issues even though the review of the TEFRA key case has not been completed. A supplemental report will only be required if a flow-thru adjustment is resolved, the unified TEFRA partnership proceedings are completed and the refund to the investor is greater than $2 million ($5 million for C corporations). The JC Specialist does not need to prepare a supplemental report for the TEFRA proceedings unless the adjustment to the investor from the key case results in an additional refund to the investor in excess of $2 million ($5 million for C corporations). When a JC report is sent to the JCT and there are open PCS links, include language similar to: The taxpayer(s) are involved in unified partnership proceedings. If the resolution of the partnership/ proceedings result in an additional refund to the taxpayer(s) in excess of $2 million ($5 million for C corporations), an additional/supplemental report will be submitted. This report is being submitted prior to completion of the unified proceedings. When the clearance letter is received, the case can be processed by the examination team. In instances where the Joint Committee Review team has the JC case file, the Joint Committee Review team will send the case back to the examination team for the examination team to process. The Joint Committee Review team will inform the examination team of the requirement to resubmit the case for a supplemental report once a PCS link is resolved. The examination team is responsible for: Processing the case since JCR cannot close it to CCP with open links Resubmitting the case to JCR for a supplemental JC report if the flow-thru adjustment (once resolved) results in a refund to the investor of more than $2 million ($5 million for C corporations) Note: Compliance employees with jurisdiction over the investor will be responsible for resubmitting the case to JCR each time a link is resolved and the refund is more than $2 million ($5 million for C Corporations). A supplemental report will not be required when the flow-thru adjustment is resolved, the unified TEFRA partnership proceedings are completed and the refund to the investor is $2 million ($5 million for C corporations) or less. Coordinating, if necessary, with Technical Services, TEFRA Coordinators, TEFRA Issue Practice Group (IPG) on all technical and procedural issues and concerns TEFRA references for examiners include: IRM 184.108.40.206.2 - TEFRA Issues are Resolved Prior to Non-TEFRA Issues IRM 220.127.116.11.3 - Closing a Non-TEFRA Investor With an Open TEFRA Linkage Accelerated Closing Procedures when the partner wants to agree to all adjustments, TEFRA and Non-TEFRA, before audits have been completed on the key case If the taxpayer is entitled to a minimum refund in excess of $2 million ($5 million for C corporations), a JC report will be prepared prior to completion of the flow-thru examination. The minimum refund procedures for cases with unagreed issues are applicable. See IRM 18.104.22.168.1. 22.214.171.124 (05-04-2010) Disclosure of Individual Information - Form 5482, Record of Disclosure Tax information about individuals or aliens admitted to permanent U.S. residence provided to the JCT pursuant to IRC 6405 requires Privacy Act accounting on Form 5482, Record of Disclosure. The Joint Committee Specialist will complete Form 5482, Record of Disclosure if the individual is a U.S. citizen or alien admitted to permanent U.S. residence. The form is a two-part form. The original will be filed with the examination administrative file for the individual and the copy will be retained by the Joint Committee Specialist team for five years. Additional Forms 5482 need to be completed if information concerning years and/or individuals not previously accounted for is disclosed to the JCT. See IRM 11.3.19, Privacy Act Accounting for Disclosures, for additional information about the form. Form 5482 should be completed at the time the Joint Committee report is forwarded to the JCT. When completing the form, Item 3, Record System Number, should be 42.001 and Item 8, Privacy Act Provisions, should be (b)(9). Exhibit 4.36.4-1 Letter 1573 (P) Name of Taxpayer Taxpayer Identification Number: Attn: Corporate Officer Form(s): Street Address -- Suite/RM # Contact Person: City, State, Zip Code Telephone Number: Employee Identification Number: Date: Tax PeriodsSource Years:Refund Years: Dear CORPORATE OFFICER: Introduction (Choose appropriate paragraph) (Exam no-change with tentative allowances) Based on the recent examination of your income tax returns for the indicated tax periods, the Internal Revenue Service has proposed to the Joint Committee on Taxation that these returns be accepted as adjusted by the tentative allowance refund(s) shown on the Form 1045/1139 which you previously filed. (Survey with tentative allowances) The Internal Revenue Service has proposed to the Joint Committee on Taxation, in a special report mandated by section 6405(b) of the Internal Revenue Code of 1986, that your income tax returns for the indicated tax periods be accepted as adjusted by tentative refund or credit allowances, based on Form 1139/1045 which you had previously filed. (Survey with claims) The Internal Revenue Service has proposed to the Joint Committee on Taxation, in a special report required by section 6405(a) of the Internal Revenue Code of 1986, that your income tax returns for the indicated tax periods be accepted as amended by refund claims per Form 1120X/1040X which you had previously filed. (Exam, report previously furnished) The Internal Revenue Service submitted a special report to the Joint Committee on Taxation, as required by section 6405(a) of the 1986 Internal Revenue Code, outlining the findings of a recent examination of the company's income tax return for the indicated years, shown in a report of examination, dated MM/DD/YYYY, previously furnished to you. Agreement to the tax changes was indicated by the MM/DD/YYYY signing of a waiver Form 870. Payment (Choose appropriate paragraph) (Overpayments over $2 million or $5 million for C corporations) The tax overassessment(s)/overpayment(s) shown in the report cannot be processed for refund or credit until after the case is released by the Joint Committee on Taxation. (Qualified Waiver) The "qualified" waiver Form 870, showing offsetting deficiencies and overassessments, will become effective on the date the Joint Committee on Taxation releases its jurisdiction of the case. The remaining deficiencies, plus interest, shown on an "unqualified" waiver Form 870, will be assessed; if you have not made payment, we will bill you. (Advance Payment) The advance payment, which you made on MM/DD/YYYY, will be applied against these amounts. (Expedite Refund) When the Joint Committee on Taxation receives this report, the 30-day period, during which we are statutorily prohibited from issuing the refunds, will commence. If the Joint Committee on Taxation does not raise any concerns regarding the Service’s position, we will process the refunds as soon as possible after the expiration of this 30-day period. (Straight Deficiency) If you have not paid the deficiency shown in the report, we will bill you soon for the deficiency, plus interest. (Straight Overpayment) Since the overassessment shown on the report is less than the jurisdictional amount of $2 million ($5 million for C corporations), the report will be processed prior to release by the Joint Committee on Taxation. Other (Choose appropriate paragraph) (Restricted Interest) Even though there is/are no tax change(s) for some of these examined years, the indicated adjustments to income, deductions and/or credits result in assessable "restricted interest" on the potential tax deficiency prior to application of the net operating loss or credit carryback. (872-A) This letter does not terminate the Internal Revenue Service consideration referred to in consent Form 872-A filed for the tax period ended MM/DD/YYYY. Closing We will notify you when the Joint Committee on Taxation completes consideration of your case. If you have any questions, please contact the person whose name and telephone number are shown above. Sincerely, Joint Committee Specialist Enclosurecc: Authorized representativeName of Representative Letter 1573 (P) (Rev. 7-2015) Exhibit 4.36.4-2 Letter 1574 (P) Name of Taxpayer Taxpayer Identification Number: Attn: Corporate Officer Form(s): Street Address -- Suite / RM # Contact Person: City, State, Zip Code Telephone Number: Employee Identification Number: Date: Tax PeriodsSource Years:Refund Years: Dear Corporate Officer: We have been advised that the Joint Committee on Taxation has completed its consideration of our special report (made to satisfy the requirements of section 6405 of the Internal Revenue Code of 1986) on these income tax returns and has taken no exception to the conclusions reached by the Internal Revenue Service. Processing (Choose appropriate paragraph) The tax changes shown on the examination report, previously furnished to you, are being processed for refund or credit. The overassessment(s) shown on the approved Form 1040X/1120X claims are being processed for refund or credit. The tax changes have previously been processed. Use the following if necessary This letter does not terminate the Internal Revenue Service consideration referred to in consent Form 872-A filed for the tax periods ended MM/DD/YYYY. Sincerely, Joint Committee Specialist cc: Authorized representativeName of Representative Letter 1574 (P) (Rev. 10-2003) The following wording is used if the refund is made before the Joint Committee on Taxation has released its jurisdiction: The Joint Committee on Taxation has taken no exception to our processing of the overpayments shown on the examination report previously furnished to you OR being accepted per your amended return claims on Form 1040X/1120X previously filed by you. Accordingly, the overpayments will soon be processed for refund or credit. This letter is not a notification that the Joint Committee has completed its consideration of the conclusions reached by the Service regarding these income tax returns. At a later time, we will let you know when the Joint Committee completes such consideration. Exhibit 4.36.4-3 Dispute Resolution Chart Types of Dispute First Level Second Level Third Level Comments Proposed Change to RAR - JC Specialist Inquiry Team Manager & JC Review Team Manager Territory Manager & JC Review Program Manager DFO/Compliance Area Director and Director, PFTG If no agreement reached, the Director, PFTG with concurrence from Chief Counsel, will make the decision. Proposed Change to RAR-JCT Inquiry Team Manager & JC Review Team Manager Territory Manager & JC Review Program Manager DFO/Compliance Area Director and Director, PFTG; JCT Senior Refund Counsel and Chief Counsel If no agreement reached, the Director, PFTG with concurrence from Chief Counsel, will make the decision.