7.1.6 Employee Plans Technical - Case Processing Procedures

Manual Transmittal

October 01, 2018

Purpose

(1) This transmits revised IRM 7.1.6, TE/GE Administrative Procedures and Programs, Employee Plans Technical - Case Processing Procedures

Material Changes

(1) This IRM is updated to make editorial changes, change section numbers, and to reflect current versions of annual revenue procedures and IRM procedures

(2) This IRM is updated to reflect the requirements of P.L. 115-97 (H.R.1), the Tax Cuts and Jobs Act of 2017.

Effect on Other Documents

This supersedes IRM 7.1.6, dated September 5, 2017.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(10-01-2018)

Catherine L. Jones
Acting Director, Employee Plans
Tax Exempt and Government Entities

Program Scope and Objectives

  1. Purpose: This IRM describes procedures, as noted in Rev. Proc. 2018-4, for processing:

    • private letter rulings requests

    • nonbank trustee applications

    • Congressional and White House inquires

    • applications for approval of prototype IRAs

    • assistance requests

    • closing agreements

    • other inquiries and requests

  2. Audience: Employee Plans Technical employees

  3. Policy Owner: Director, Employee Plans

  4. Program Owner: Employee Plans

  5. Program Goals: The goal of EP Technical’s programs is to encourage plan sponsors to voluntarily comply with the income tax laws while avoiding plan disqualification.

Background

  1. A plan is qualified if it meets the requirements of IRC 401(a) in form and operation. A qualified plan is entitled to favorable tax treatment.

  2. The office of Employee Plans is made up of:

    • Rulings and Agreements (which includes: Employee Plans Technical (EP Technical), Voluntary Compliance, and Determinations)

    • Examinations

  3. The administrative procedures for Rulings and Agreements and Examinations are in IRM 7.1.1. This IRM provides the procedures EP Technical follows for processing cases.

  4. EP Technical:

    • Issues certain letter rulings, opinion letters and nonbank trustee approvals.

    • Provides technical and actuarial advice to help taxpayers understand the applicable tax laws and ensure that their plans are in compliance. See Rev. Proc. 2018-4, Section 24.01.

    • Provides technical and actuarial help to IRS employees through the Knowledge Management Networks (K-Nets). See IRM 1.4.7.

    • Helps other government employees administer retirement plan laws.

    • Enters into closing agreements to help sponsors avoid plan disqualification.

Authority

  1. See the annually-revised procedures for requesting private letter rulings, determination letters and other advice under the jurisdiction of Employee Plans, and the user fees for these requests in Rev. Proc. 2018-4.

  2. The Tax Exempt and Government Entities Division is authorized to issue letter rulings and closing agreements as described in Rev. Proc. 2018-4. IRM 1.2.53.7(5) (Delegation Order 30-7).

  3. Exhibit 7.1.1-1 lists the major Employee Plans revenue procedures currently in effect.

Roth IRA Recharacterization
  1. The relevant authorities for Roth IRAs are:

    • IRC 408A governs Roth IRAs.

    • 26 CFR 1.408A-4 has rules on converting a traditional IRA to a Roth IRA.

    • 26 CFR 1.408A-5 has rules on recharacterizing IRA and Roth IRA contributions.

  2. Under P.L. 115-97, a conversion of a traditional IRA to a Roth IRA, and a rollover from any other eligible retirement plan to a Roth IRA, made in tax years beginning after December 31, 2017, cannot be recharacterized as having been made to a traditional IRA. A conversion made in the 2017 tax year can be recharacterized up until the due date (with extensions) for filing the return for the 2017 tax year.

  3. P.L. 115-97 did not affect recharacterizations of regular contributions to Roth IRAs and traditional IRAs. A regular contribution is the annual contribution that can be made to an IRA (generally $5,500 for 2018).

  4. The IRS may grant a taxpayer a reasonable extension of time to make certain elections, including one for a Roth IRA recharacterization (26 CFR 301.9100-3). The Director, Employee Plans is authorized to grant reasonable extensions of time to make such an election (Delegation Order 30-3).

Nonbank Trustees
  1. An entity that is not a bank must satisfy requirements in order to receive IRS approval to become a trustee or custodian of certain tax qualified accounts ( 26 CFR 1.408-2(e)).

60-day Waivers for Rollovers
  1. Generally, plan and IRA rollovers must be completed within 60 days after a participant receives the funds to be excluded from gross income (IRC 402(c)(3) and IRC 408(d)(3)).

  2. A taxpayer may apply to the IRS for a waiver of the 60-day rollover requirement, See Rev. Proc. 2003-16 and Rev. Proc. 2018-4.

Preapproved IRAs
  1. The procedures to obtain opinion letters for prototype trusts, custodial accounts or annuities under IRC 408(a), IRC 408(b), IRC 408 (k), IRC 408(p) or IRC 408A can be found in the following Revenue Procedures: Rev. Proc. 87–50; Rev. Proc. 91–44; Rev. Proc. 92–38; Rev. Proc. 97–29; Rev. Proc. 98–59; Rev. Proc. 2002–10 and Rev. Proc. 2010–48, as modified by Appendix A of Rev. Proc. 2018-4.

Technical Assistance and Closing Agreements
  1. See the table below for EP delegation orders and their authority.

    Delegation Order Authorized Person and applicable IRM reference: Acts Authorized:
    8-3 Director, Employee Plans. IRM 1.2.47.4 (5) Enter into and approve a written closing agreement with any person for their federal tax liability
    7-5 Managers in Employee Plans Technical. IRM 1.2.46.6(14) and IRM 1.2.46.6(15) Waive, per IRC 418B(f), any accumulated funding deficiency under IRC 418B greater than $100,000 and equal to or less than $1,000,000, excluding waived amounts for prior plan year(s)
    7-7 Director, Employee Plans. IRM 1.2.46.8(5) and IRM 1.2.46.8(6) Waive all or part of the excise tax under IRC 4971(f) for liquidity shortfalls per IRC 412(m)(5)(E)
    7-9 Managers in Employee Plans Technical. IRM 1.2.46.10(2) and IRM 1.2.46.10(3) To determine that a plan amendment is reasonable and provides only de minimis increases in the plan liabilities per: IRC 412(c)(7)(B)(i) and ERISA 302(c)(7)(B)(i), IRC 401(a)(33)(B)(ii), and ERISA 204(i)(2)(A)
    7-10 Managers in Employee Plans Technical IRM 1.2.46.11(2) and IRM 1.2.46.11(3) To extend the period of years required to amortize any plan unfunded liability per IRC 431(d) and ERISA 304(d)
  2. Delegation Order 8-3 states that the authority to enter into and approve a written closing agreement with any person relating to their federal tax liability is delegated to the Director, Employee Plans. IRM 1.2.47.4(5).

  3. Delegation Order 7-5 states that the authority to waive, in accordance with IRC 418B(f), any accumulated funding deficiency under Code section 418B, which, exceeds $100,000, but does not exceed $1,000,000, exclusive of any amount with respect to which a waiver was requested for a prior plan year or years, is delegated to the Managers in Employee Plans Technical. IRM 1.2.46.6(14) and IRM 1.2.46.6(15).

  4. Delegation Order 7-7 states that the authority to waive all or part of the excise tax imposed under Code section 4971(f) with respect to liquidity shortfalls within the meaning of Code section 412(m)(5)(E) is delegated to the Director, Employee Plans. IRM 1.2.46.8(5) and IRM 1.2.46.8(6).

  5. Delegation Order 7-9 states that the authority to determine that a plan amendment is reasonable and provides for only de minimis increases in the liabilities of the plan in accordance with: Code section 412(c)(7)(B)(i) and section 302(c)(7)(B)(i) of the Employee Retirement Income Security Act of 1974, as amended, (ERISA), Code section 401(a)(33)(B)(ii), and § 204(i)(2)(A) of ERISA is delegated to the Managers in Employee Plans Technical. IRM 1.2.46.10(2) and IRM 1.2.46.10(3).

  6. Delegation Order 7-10 states that the authority to determine that the period of years required to amortize any unfunded liability of a plan may be extended in accordance with Code section IRC § 431(d) and section 304(d) of ERISA is delegated to the Managers in Employee Plans Technical IRM 1.2.46.11(2) and IRM 1.2.46.11(3).

  7. A complete list of delegation orders governing Employee Plans Rulings and Agreements can be found on IRS.gov at http://www.irs.gov/uac/Delegation-Orders-by-Process1.

Responsibilities

  1. The Manager, EP Technical, supervises and is responsible for the group managers and employees in EP Technical.

  2. The EP Technical group managers supervise and are responsible for the employees in EP Technical.

  3. EP Technical employees work on assignments from their group managers.

Definitions

  1. Taxpayer’s Authorized Representative: is a person the taxpayer designates to represent him/her before the IRS. Authorization is generally made on a Form 2848, Power of Attorney and Declaration of Representative, although other forms of authorization are acceptable per Circular 230. IRS employees are prohibited from discussing a taxpayer’s information with any party who is not specifically authorized by the taxpayer, unless the taxpayer is present during the contact.

  2. Case File: the incoming request and all correspondence between the IRS and the taxpayer or the taxpayer’s authorized representative, including,

    1. Copies of letters and faxes

    2. Any prepared memos that reflect the rationale for the case result

  3. Initiator:

    1. The tax law specialist, agent or actuary assigned the case

    2. The main point of contact with the taxpayer or the taxpayer’s authorized representative

    3. The person responsible for developing the case and drafting any correspondence

  4. Reviewer: is a tax law specialist or actuary assigned to work with the initiator on a case. The reviewer’s function is to guide and to help the initiator to develop the case, by:

    1. Reviewing correspondence for technical, procedure and editorial accuracy

    2. Providing technical expertise on the issue in the case

      Note:

      The group manager signs and dates private letter rulings and nonbank trustee approvals; however, he/she may delegate the authority to sign a letter ruling to the reviewer.

Letter Ruling Request Submitted under Rev. Proc. 2018-4

  1. This section discusses general procedures for processing letter ruling requests. A letter ruling is a written statement that applies the tax laws or other non-tax employee benefit laws to the taxpayer’s specific set of facts.

  2. EP Technical processes a letter ruling only if it complies with all of the procedural requirements of Rev. Proc. 2018-4 in Appendix E checklist. See Appendix D of Rev. Proc. 2018-4 for a sample private letter ruling request.

  3. A taxpayer must submit a letter ruling request with the correct user fee listed in Rev. Proc. 2018-4.

User Fee

  1. The User Fee Screener is a tax law specialist the Manager EP Technical designates to review user fees that come in with a letter ruling request.

  2. If the user fee amount is correct, the User Fee Screener forwards the case to the Manager, EP Technical (designee), to assign to a group.

  3. User Fee Screener: If the taxpayer submits an insufficient user fee under Rev. Proc. 2018-4,

    1. Send a letter to the taxpayer or authorized representative requesting payment of the full user fee within 30 calendar days. The letter states that we’ll close the case, take no further action, and refund the paid deficient fee if we don’t receive the full amount within 30 days.

    2. Prepare a User Fee Screener: if the full fee is not promptly paid, prepare a letter, if the taxpayer doesn’t pay the fee in 30 days, to the taxpayer/ or authorized representative informing him /her that we closed the case and will refund the user fee separately.

    3. Prepare the user fee refund form titled "REQUEST FOR REFUND OF USER FEE (Rev. March 25, 2015)" .

      Note:

      The Manager, EP Technical or group manager: signs the letter, User Fee Refund form, and TRAC Control Sheet and sends all with the case file to the administrative staff to mail and close.

    4. Manager, EP Technical or group manager: sign the letter, the User Fee Refund form, and the TRAC Control Sheet and transmit the letter, refund form, and case file to the administrative staff to mail and close.

    5. Send the User Fee Refund Form to the EP/EO Adjustments Unit in Covington, KY to process.

  4. If the file has a procedural or jurisdictional deficiency under Rev. Proc. 2018-4, then EP Technical can’t issue a letter ruling and will refund the user fee.

    1. Initiator: prepare a letter to the taxpayer or authorized representative and prepare the REQUEST FOR REFUND OF USER FEE (Rev. March 25, 2015) form.

    2. Manager, EP Technical or group manager: sign the letter to the taxpayer or authorized representative regarding the refund of the user fee, the User Fee Refund form, and the TRAC control sheet and send the letter, refund form, and case file to the administrative staff to mail and close.

    3. User Fee Screener: send the User Fee Refund Form to the EP/EO Adjustments Unit in Covington, KY to process.

Group Manager Review

  1. When, the group manager receives a taxpayer’s letter ruling request:

    1. Review the File. Check to see whether we received the correct user fee, the case was timely submitted, the request is substantially complete, and the issues are within EP’s jurisdiction to rule.

    2. Expedited Handling. Check to see whether the taxpayer has requested expedited handling under Rev. Proc. 2018–4, Section 6.03(3). Decide whether to grant the request.

      Example:

      Examples of situations when it may be appropriate to use expedited case handling: a court or government agency, has imposed a specific deadline, or a transaction must be completed expeditiously to avoid an imminent business emergency, provided the taxpayer can show that the deadline or business emergency and the need for expedited handling resulted from circumstances that he/she could not reasonably have anticipated or controlled.

    3. Sensitive Case. Determine whether the case involves a sensitive issue that needs higher level review. If so, discuss the issue with the Manager, EP Technical, to determine whether to prepare a Sensitive Issue Report for the TE/GE Commissioner

    4. Assignment to initiator. Assign the case to an initiator and reviewer within one week of the group assignment.

Initiator Review

  1. Acknowledgment Letter. Within one week of assignment, send an acknowledgment letter to the taxpayer or authorized representative. Use TE/GE letterhead for the letter and identify: the date that the IRS received the request, the control date, the case control number, and your telephone number.

  2. Technical Case History Sheet. Create a technical case history sheet to record case actions. The initiator, reviewer, and manager will make entries on the technical case history sheet, as appropriate. The technical case history sheet should reflect:

    • your full name

    • case control number

    • taxpayer’s EIN

    • case name and page number on each page (page _ of _)

    • detailed descriptions of relevant actions

    • hours worked

    • other IRS employees’ actions

  3. Prepare for Three-Week Meeting. Begin preparing for the Three-Week Meeting. Review the request to:

    1. Ensure it complies with the requirements of Rev. Proc. 2018-4.

    2. Identify any issues you need to discuss with the reviewer.

  4. The group manager may or may not assign a reviewer to the case depending on available resources and the initiator’s expertise. If a reviewer isn’t assigned to the case, the initiator will keep the group manager current on the case issues and development.

Three-Week Meeting

  1. Schedule the Three-Week Meeting within three weeks after case assignment. The Three-Week Meeting enables the initiator, reviewer and the group manager if needed to become familiar with the case’s basic facts, perform a preliminary review of the procedural and substantive issues, and strategize initial case processing decisions. The initiator and reviewer address the following topics at the Three-Week Meeting:

    1. Acknowledgment letter. Confirm that the acknowledgment letter has been sent.

    2. User fee. Confirm that the taxpayer paid the correct user fee in Rev. Proc. 2018-4.

    3. Jurisdiction to rule. Confirm that EP Technical has the jurisdiction to issue a letter ruling (see Rev. Proc. 2018-4, Sections 24 and 25).

      Example:

      Plan qualifications are generally handled through the determination letter process under Rev. Proc. 2018-4; not through the letter ruling process.

    4. Procedural requirements. Determine whether the request satisfies the procedural requirements of Rev. Proc. 2018-4. If not, you may request additional information to resolve. If a taxpayer requests a ruling on other transactions, instead of automatically issuing a procedural closing, the taxpayer may withdraw one of the requested rulings. In other cases, you may need to prepare a procedural closing letter.

      Example:

      When the request involves a topic on which the IRS lacks jurisdiction, has a "no-rule" position, or is inherently hypothetical or factual, prepare a procedural closing letter.

    5. Expedited handling. Check to see whether the taxpayer has requested expedited handling under Rev. Proc. 2018–4, Section 6.03(3). Decide whether to grant the request with your manager’s approval. See examples of when it’s appropriate to grant expedite handling in IRM 7.1.6.2.2 (1)(b)

    6. Sensitive case. Determine whether the case involves a sensitive issue that needs higher level review. If so, the initiator should consult with the group manager and the Manager, EP Technical, to determine whether to prepare a Sensitive Issue Report for the TE/GE Commissioner.

    7. Sufficient information. Determine whether the case file contains sufficient information. If you need additional information /documentation, decide whether to (1) issue a Thirty-Day Letter to get the information, or (2) schedule a Conference of Right and obtain the information through the Conference and the taxpayer’s post-conference submission.

    8. Actuarial recommendation. For actuarial ruling requests for which an actuary acts as the initiator, the actuary writes a recommendation for the group manager. The recommendation gives the case facts, applicable law, analysis and conclusion to recommend an adverse or favorable ruling. The recommendation is a complete document that often contains information that is not necessary or appropriate to include in a ruling.

    9. Preliminary ruling position. Discuss the merits of the case, including whether the preliminary ruling position appears to be favorable or adverse to the taxpayer.

    10. Technical Issue Meeting. Determine whether to schedule a Technical Issue Meeting. Schedule a Technical Issue Meeting when the issues are unique or complex or of first impression. All managers and reviewers in EP Technical, as well as other invited TE/GE employees generally attend the meeting. Its purpose is to discuss the issues in depth and decide on appropriate case action.

    11. Conference of Right. If the preliminary position is adverse, discuss the timetable for scheduling a Conference of Right per IRM 7.1.6.2.6 and Rev. Proc. 2018-4, Section 28.01.

    12. Division Counsel referral. Determine whether the case involves an issue that you should refer to Division Counsel for help.

      Example:

      Refer cases raising issues of first impression or involving the interpretation of a new statutory provision or new regulation. Refer cases that involve a ruling request specifically within Division Counsel’s jurisdiction.

Thirty-Day Letter

  1. Prepare the Thirty-Day Letter. If the initiator and reviewer determine at the Three-Week Meeting that they need additional information, the initiator prepares and sends a Thirty-Day Letter to the taxpayer or authorized representative requesting the information. Set a response due date of 30 calendar days after the letter’s date (see Rev. Proc. 2018-4, Section 27.05). Consider requesting the information by phone and following up with the Thirty Day Letter. Calling the taxpayer may help identify the information that would help to resolve the request and avoid multiple requests. Fax and mail the Thirty-Day Letter as soon as possible. Call the taxpayer and confirm he/she received the letter.

  2. Multiple requests. Try to request additional information and documentation in a single Thirty-Day Letter. Avoid multiple Thirty-Day Letters which could delay case processing and be burdensome to the taxpayer. Also, you can gather additional information at the Conference of Right and through the taxpayer’s Post-Conference submission. The initiator and reviewer will inform the group manager when they need to send multiple information requests.

  3. Taxpayer fails to respond. If the taxpayer or the authorized representative fails to respond to the Thirty-Day Letter that you’ve verified he/she received by calling them, the initiator consults with the reviewer and group manager to decide the next action. See Rev. Proc. 2018-4, Section 27.10 for procedures to extend the 30-day deadline. Appropriate action might be:

    1. Send a follow-up request with a firm due date (generally 10 calendar days). Specifically state in the follow-up letter that we may close the case if they don’t respond to the follow-up request and they must request in writing to extend the time to respond. The appropriate IRS official must approve the requested.

    2. Schedule a Conference of Right.

    3. Issue a letter ruling based on the information on hand

    4. Close the case with no action.

  4. Discuss response with reviewer. Initiator: when you receive the response to the Thirty-Day Letter, meet with the reviewer to discuss the response and determine the next step. If you both:

    1. Conclude that the ruling position is favorable, prepare a favorable letter ruling.

    2. Believe the preliminary ruling position is adverse, schedule the Conference of Right with the taxpayer or authorized representative.

    3. Determine, in consultation with your manager, to hold a Technical Issues Meeting to discuss the case further, prepare a short memo summarizing the case and send the memo to your group manager.

  5. The group manager schedules a Technical Issue Meeting and distributes the memo and any appropriate background material to the attendees.

Conference of Right

  1. Schedule a Conference of Right when the IRS’ preliminary ruling position on the taxpayer’s request is adverse. See Rev. Proc. 2018-4, Section 28 for procedures.

  2. Schedule a Conference. Initiator:

    1. Contact the taxpayer or the taxpayer’s authorized representative to schedule the Conference of Right. The Conference must be held within 21 calendar days after contact, unless the taxpayer or the authorized representative requests an extension of time and it’s approved by the group manager. Send a written confirmation of the Conference to the taxpayer or authorized representative identifying the case issues with the caveat that other issues may be raised at the conference.

    2. When scheduling the Conference, advise the taxpayer or authorized representative that only individuals they’ve authorized in writing to represent them may attend (unless the taxpayer will authorize other persons) and you receive signed Forms 2848 for those individuals before the Conference.

    3. Schedule the Conference by sending a letter setting the date, time and location or telephone number if the taxpayer or authorized representative doesn’t respond to your request to schedule a conference. State in the letter that not attending waives the Conference of Right.

    4. The taxpayer is entitled to only one Conference of Right on the issues. So, address all case issues at the Conference to avoid the need for additional conferences. However, the IRS may hold additional conferences in its discretion.

  3. Hold "Pre-Meeting." Hold a "pre-meeting" with the reviewer (and others as appropriate) to prepare for the conference. Distribute relevant information or an explanatory memo to attendees to help them prepare for the Conference.

  4. Conference Attendees.

    1. Only individuals for whom the initiator has received a signed Form 2848 may attend the Conference on behalf of the taxpayer if the taxpayer is not present. Individuals listed on a properly executed Form 8821 may also attend, but only to the extent permitted by Form 8821.

    2. If the conference is held by telephone, confirm that all attendees are listed on the Form 2848.

    3. The IRS is generally represented by the initiator, reviewer and the group manager. However, other IRS or government representatives may attend in particular cases.

  5. Conference of Right. Initiator:

    1. Confirm that all attendees are listed on the Form 2848. However, if the taxpayer attends the conference, anyone may attend with the taxpayer’s permission.

    2. Inform the taxpayer or authorized representative, at the beginning of the conference, that 1) this is the "Conference of Right" under Rev. Proc. 2018-4, 2) Rev. Proc. 2018-4 requires that any additional information is due within 21 calendar days after the conference date (see Section 28.06 of Rev. Proc. 2018-4) and 3) the Conference is informal and no party may make a tape, stenographic, or other verbatim recording of a conference.

    3. Present the reasons for the IRS’ preliminary adverse position.

    4. Discuss the technical and factual issues presented by the ruling request with the taxpayer or the taxpayer’s authorized representative.

    5. Summarize the outstanding issues and the information or documentation that could resolve the issues in the case.

  6. Prepare Conference Report. Prepare a conference report within two business days after the Conference and submit it to the reviewer and group manager for comments or concurrence.

  7. When appropriate, prepare a follow up letter/request to send to the taxpayer or authorized representative.

Post-Conference Submission

  1. 21-Day Due Date. The taxpayer or authorized representative must submit any post-conference information within 21 calendar days after the Conference date absent an approved extension, of time. Inform the taxpayer and make a note of any approved extensions of time in the technical case history sheet. The taxpayer or representative may want to send a confirmation letter regarding the extension.

  2. Post-Conference Information. Once the post-conference submission is received, the initiator and reviewer discuss it to determine the case’s final recommended disposition

  3. Final Disposition

    1. If the group manager, in consultation with the initiator and reviewer, concludes that the final disposition of the case is favorable to the taxpayer, the initiator drafts a favorable letter ruling.

    2. If the decision is adverse, the initiator offers the taxpayer or authorized representative an opportunity to withdraw the ruling request, noting that we cannot refund the user fee as per section 30.10 of Rev. Proc. 2018-4. If the request is not withdrawn, issue an adverse ruling.

Referral to Division Counsel

  1. You may need to refer certain cases to Division Counsel for their comments or concurrence. For these cases, the initiator and reviewer prepare a Technical Assistance Request to Division Counsel which:

    1. Summarizes the case.

    2. Explains TE/GE’s position.

    3. Attaches a copy of the proposed letter ruling and other background information.

  2. Prepare the Technical Assistance Request for signature by the Director, EP Rulings and Agreements. The initiator uses an Action Routing Sheet to send the Technical Assistance Request through the reviewer, group manager, and Manager, EP Technical, to the Director, EP Rulings and Agreements, who signs and dates the Technical Assistance Request and forwards the case to Division Counsel for consideration.

Final Letter Ruling and Related Correspondence

  1. The initiator drafts outgoing correspondence. This consists of the:

    • letter ruling

    • redacted letter ruling for disclosure purposes -prepare after the reviewer and group manager approve the final draft of the letter ruling.

    • cover letter to the authorized representative

  2. Prepare the letter ruling as follows.

    1. Always address a letter ruling to the taxpayer; send a copy provided to the taxpayer’s authorized representative.

    2. Type the appropriate index number(s) from the Uniform Issue List in the upper left hand corner.

    3. State, in the first paragraph, that it is in response to a ruling request received from the taxpayer. List the dates of all correspondence from the taxpayer or authorized representative.

    4. State, in the second paragraph that the following facts and representations have been submitted under penalties of perjury in support of the ruling requested.

    5. List in the next paragraph(s) the relevant and necessary facts presented by the taxpayer’s correspondence. It may be appropriate to use the taxpayer’s own language.

    6. After listing the relevant facts and representations, the next paragraph states that, "based on the above facts and representations, you request a ruling that...:" Insert the taxpayer’s ruling request here.

    7. The next section provides the legal sources upon which the ruling is based. Generally, cite in this order: Code sections, Treasury regulations, and other IRS published guidance.

    8. After stating the legal sources, begin a new paragraph applying the law to the facts and stating the conclusion. If more than one ruling is requested, consider addressing each ruling in a separate paragraph.

    9. After the conclusion, insert the following:

      • A statement that no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the Code or Treasury regulations which may be applicable thereto

      • Any caveats, or assumptions on which the ruling is based, as appropriate. For example, “This ruling does not apply to amounts required to be distributed under section 401(a)(9) of the Code.”

      • A statement that this letter is directed only to the taxpayer who requested it. IRC 6110(k)(3) provides that it may not be used or cited as precedent.

      • If a copy of the ruling is being sent to the authorized representative, the following paragraph should be added: Pursuant to a power of attorney on file with this office, a copy of this letter ruling is being sent to your authorized representative.

      • The next paragraph provides the initiator’s contact information: If you wish to inquire about this ruling, please contact [Name of Initiator] (ID Badge Number [**-******]) at [telephone number]. Please address all correspondence to SE: T: EP: RA: [Group Symbol].

    10. At the end of the letter, after the signature block, list the enclosures (Notice 437, Notice of Intention to Disclose (Rulings) and a deleted copy of the ruling). After the list of enclosures, list the cc copies to the authorized representative(s).

  3. Prepare a redacted version of ruling letter for the taxpayer and the IRS Disclosure Office after the reviewer and your manager approve it as follows:

    1. Create an electronic copy of the unredacted letter ruling and then remove all identifying references to names, addresses, plan names, states, cities, persons to contact, telephone numbers, courtesy copies, and any other identifying information that the taxpayer has requested be "deleted." Use either blank spaces, asterisks, or pound signs so that the rest of the page does not change.

    2. Do not delete group symbols, the uniform Issue list number, or the manager’s name in the signature block.

    3. Print two originals of the redacted letter ruling on TE/GE letterhead for Disclosure and the taxpayer.

  4. Prepare a cover letter to the authorized representative if the taxpayer has one. Indicate on the reference line that it refers to a Letter Ruling Request for [name of the taxpayer]. The letter then states: The enclosed documents are being provided to you under the provisions of a power of attorney currently on file with the Internal Revenue Service.

    1. Include your contact information.

    2. List as enclosures a copy of the original ruling letter, a copy of the redacted ruling and a copy of Notice 437, Notice of Intention to Disclose (Rulings).

  5. Reviewer final review. Review all final correspondence before sending the case to the group manager for signature, dating, closing, and mailing.

Procedural Closing

  1. See table below for explanations of types of ruling request closings and initiator procedures:

    Type of closing Initiator procedures
    Administrative closing:
    It’s inappropriate to issue a letter ruling because
    • The subject is an area generally not ruled on as listed in section 24 of Rev. Proc. 2018-4, or

    • The request satisfies the criteria for declining to rule per section 25.

    Closing letter:
    1. Prepare a closing letter (no action) addressed to the taxpayer or authorized representative on TE/GE letterhead.

    2. Explain the reasons why the IRS is unable to issue a ruling.

    3. State that we’ll refund the user fee separately.

    4. Refer to Rev. Proc. 2018-4, Section 7.

    5. Your group manager signs the letter.

    Administrative closing User fee refund
    1. Complete a Request for Refund of User Fee form.

      1. Part I - fill out based on file’s user fee input sheet.

      2. Part II - your manager fills out at case closing.

    2. Refund user fee:

      1. entirely, when closed as administrative closing.

      2. partially, when taxpayer overpaid the required fee.

    Ruling request withdrawn.
    The taxpayer or authorized representative withdraws a letter ruling request; he or she must do so in writing and before a ruling is issued.
    1. Prepare a letter to the taxpayer or authorized representative acknowledging that the request has been withdrawn.

    2. State that as explained, the user fee will not be refunded.

    3. Your group manager signs the letter.

      Note:

      Even if the letter ruling request is withdrawn, the IRS may prepare a memo on the case and refer it to the field, if the facts and circumstances so warrant.

    Closing case with no action.
    Case closed due to lack of procedural compliance (refund user fee refund) or for lack of information (don’t refund user fee)
    1. Prepare a letter to the taxpayer or authorized representative

    2. Explain the reasons why the IRS is unable to issue a ruling

    3. State, if applicable, that the user fee will be refunded under a separate cover letter.

    4. Your group manager signs the letter.

  2. User fees are refunded through the reviewer, group manager, and manager, EO/EP Adjustment Unit.

  3. Reviewer final review. Review all final correspondence before sending the case to the group manager for signature and closing.

Assemble Case File for Signature and Closing

  1. Initiator: when the case is ready for signature and closing, assemble the case file in this order and send to your group manager for signature and closing:

    1. Documents for manager's signature - TRAC Control Sheet, User Fee Refund Sheet (if any), Original Letter Ruling to taxpayer, two Original Deleted Letter Rulings, Original Cover Letter to authorized representative. Also include the routing slip to Disclosure and the Notice 437.

    2. Administrative documents - User Fee Case Input Sheet, Technical Case History Sheet, Conference Reports, Routing Slips, memo to reviewer and selected drafts (if any)

    3. Correspondence - Taxpayer's Incoming Letter and subsequent correspondence

    4. Any other documents (research, emails from reviewers, etc.)

  2. EP Technical Group Manager:

    1. Sign the TRAC Control Sheet, the User Fee Refund Form (if any which also must be approved by the EP/EO Adjustment Unit), and all outgoing correspondence. Date outgoing letters. You may delegate signature authority to the reviewer, in which case the reviewer signs the documents.

    2. Close the case on TRAC.

    3. Return file to the initiator.

  3. Initiator: Final Closing Steps:

    1. After the letters are signed and dated, make copies of the deleted and undeleted letter ruling, the TRAC Control Sheet, and the letter to the authorized representative.

    2. Use intradepartmental mail to send Disclosure a routing slip, an original deleted ruling, a copy of the undeleted ruling, a copy of the completed TRAC Control Sheet and a copy of the Notice 437.

    3. Mail the taxpayer the original undeleted ruling, an original of the redacted letter ruling and the Notice 437.

    4. Mail copies of the documents sent to the taxpayer to the authorized representative, if any, with the original cover letter to the authorized representative.

    5. Assemble and label copies for the Group Reading File, the Case File, the initiator and the reviewer.

    6. Return case file to group manager who sends the case file to the administrative staff for scanning.

60-Day Waiver Letter Rulings

  1. EP Technical issues letter rulings extending the 60-day period for rolling over a distribution from an IRA IRC 403(a) annuity, IRC 403(b) plan, IRC 457 eligible governmental plan, or qualified plan if the requirements under IRC 402(c)(3) and IRC 408(d)(3)(l) are satisfied.

    1. Internal Revenue Code requirements. IRC 402(c)(3) and IRC 408(d)(3) generally require that any amount distributed from a qualified trust or individual retirement plan must be transferred to an eligible retirement plan by the 60th day after the day of receipt in order to be excludable from gross income.

    2. EGTRRA. The Secretary may waive the 60-day rollover requirement (EGTRAA, Section 644, amended IRC 402(c)(3) and added new IRC 408(d)(3)(I)). The waiver authority only applies to the 60-day requirement and not to other requirements that apply to rollovers.

    3. See guidance on applying to the IRS for a waiver of the 60-day rollover requirement (Rev. Proc. 2003-16).

  2. IRS issues a ruling waiving the 60-day rollover requirement when not waiving the requirement is against equity or good conscience, including casualty, disaster or other events beyond the reasonable control of the taxpayer. In determining whether to grant a waiver, IRS considers all relevant facts and circumstances, including:

    1. Errors committed by a financial institution

    2. Inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error

    3. The use of the amount distributed (for example, in the case of payment by check, whether the check was cashed)

    4. The time elapsed since the distribution occurred

  3. Automatic approval. Taxpayers have automatic approval in specific limited circumstances for errors committed by a financial institution. Taxpayers do not have to apply to the IRS for automatic approvals (see Rev. Proc. 2003-16, Section 3.03).

  4. Rather than request a letter ruling from EP Technical and pay a user fee, a taxpayer may want to use the self-certification procedure under Rev. Proc. 2016-47. However, self-certification does not constitute a waiver.

Processing 60-Day Waivers

  1. Letter ruling procedures apply. To request a waiver from EP Technical, a taxpayer must apply for a waiver using the procedures for letter rulings and pay the user fee as provided in Rev. Proc. 2018-4. Accordingly, the letter ruling procedures in IRM 7.1.6.2 apply to 60 day waiver requests.

  2. Checklist. When evaluating whether the incoming request contains sufficient information on which to rule, use the Checklist for Letter Rulings From Employee Plans Rulings and Agreements, in Appendix E of Rev. Proc. 2018-4. Send an additional information request for any applicable checklist information not submitted.

Drafting 60-Day Waiver Letter Ruling

  1. When preparing the letter ruling, use the IRA Pattern Letter for rollovers from an IRA, and the Plan Pattern Letter for rollovers from a qualified plan.

  2. The pattern letters help the review process and require you to focus on the reason for granting the waiver (such as, error committed by a financial institution or its employee, existence of a medical condition preventing the taxpayer from completing the rollover, or diminished mental capacity impairing the taxpayer’s ability to make financial decisions).

Additional Review Requirements

  1. Quality control review. Send all letter rulings for a waiver of the 60-day rollover requirement for quality control review before closing. The Manager, EP Technical, designates a quality control reviewer.

  2. Adverse letter rulings. All adverse waiver rulings must be approved by the Manager, EP Technical or his/her designee.

Assemble Case File for Signature and Closing

  1. When the case is ready for signature and closing, assemble the case file and send it through the reviewer to the group manager for signature and closing per IRM 7.1.6.2.

Roth Recharacterization Letter Ruling

  1. Under P.L. 115-97, taxpayers can’t recharacterize these transactions, made in tax years beginning after December 31, 2017, as having been made to a traditional IRA:

    1. A conversion of a traditional IRA to a Roth IRA.

    2. A rollover from any other eligible retirement plan to a Roth IRA.

      Note:

      A conversion made in the 2017 tax year can be recharacterized up until the due date (with extensions) for filing the return for the 2017 tax year.

  2. Recharacterizations of regular contributions to Roth IRAs and traditional IRAs were not affected by P.L. 115-97. A regular contribution is the annual contribution that an individual can make to an IRA (generally, $5,500 for 2018).

  3. EP Technical issues letter rulings granting an extension of time to recharacterize contributions an individual made to a Roth IRA (see section 301.9100 of the Procedure and Administration Regulations). EP Technical:

    1. Only considers requests for an extension if the conversion or rollover occurred before January 1, 2018.

    2. Considers requests for an extension of time to elect to recharacterize regular contributions to a Roth IRA

  4. Applicable law:

    • IRC 408A deals with Roth IRAs.

    • 26 CFR 1.408A-4 has rules on converting a traditional IRA to a Roth IRA.

    • 26 CFR 1.408A-5 explains recharacterization of contributions made to traditional IRAs and Roth IRAs contributions.

  5. A taxpayer may elect to recharacterize an IRA contribution made to one type of IRA as having been made to another type of IRA (IRC 408A(d)(6) and 26 CFR 1.408A-5).

  6. A taxpayer must elect to recharacterize election generally before the due date for filing the taxpayer’s federal income tax return, plus extensions, for the year of the contribution. A taxpayer may recharacterize a conversion or rollover to a Roth IRA made before January 1, 2018 up until the return due date (with extensions) for the tax year of the conversion.

  7. To recharacterize a contribution made to a Roth IRA:

    1. The taxpayer must notify the Roth IRA trustee of his or her intent to recharacterize the amount.

    2. The taxpayer must provide the Roth IRA trustee (and the transferee trustee, if different from the transfer or Roth IRA trustee) with information that is sufficient to effectuate the recharacterization.

    3. The Roth IRA trustee must make the transfer.

  8. See the Procedure and Administration Regulations

    1. Sections 301.9100-1 through -3 govern a taxpayer’s ability to make a retroactive election.

    2. Section 301.9100-2 lists certain elections for which automatic extensions of time to file are granted. These elections are not letter rulings.

    3. Section 301.9100-3 discusses applications for relief and requests for an extension to time to make a regulatory election. An election to recharacterize a Roth IRA contribution is considered a regulatory election. EP Technical issues letter rulings granting extensions of time to recharacterize Roth or traditional IRA contributions.

  9. IRS grants relief under section 301.9100-3 of the Procedure and Administrative Regulations when the taxpayer provides sufficient evidence to establish that both the:

    1. Taxpayer acted reasonably and in good faith, and

    2. Granting of relief will not prejudice the interests of the government.

  10. A taxpayer is deemed to have acted reasonably and in good faith, if in any of the below, the taxpayer:

    1. Filed the request for relief before the IRS discovers the failure to make a timely election.

    2. Inadvertently failed to make the election because of intervening events beyond the taxpayers control.

    3. Failed to make the election because, after exercising reasonable diligence, was unaware of the necessity for the election.

    4. Reasonably relied upon the written advice of the IRS.

    5. Reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election.

  11. Ordinarily, the government’s interests are treated as prejudiced and the IRS won’t grant relief when tax years that would have been affected by the election (had the taxpayer timely made it) are closed by the statute of limitations before the taxpayer's receipt of a ruling granting relief under this section.

Processing Roth Recharacterization Ruling Requests

  1. A taxpayer must apply for a Roth recharacterization letter ruling using the letter ruling procedures in Rev. Proc. 2018-4, and pay the user fee in Rev. Proc. 2018-4. Accordingly, the generally applicable letter ruling procedures in IRM 7.1.6.2 apply to all Roth recharacterization requests.

Assemble Case File for Signature and Closing

  1. When the case is ready for signature and closing, assemble the case file and send it through the reviewer to the group manager for signature and closing per IRM 7.1.6.2.11.

Technical Assistance– Non-Actuarial Requests

  1. Other IRS offices and government agencies may request TE/GE’s technical assistance on issues within TE/GE’s jurisdiction. EP Technical prepares a technical assistance memo to respond to the request.

  2. When a group receives a technical assistance request, the administrative staff signs and dates the Form 3210, sends the form to the requesting office, and adds the case to the TRAC database.

  3. Group manager review. The group manager reviews the case and assigns it to an initiator and reviewer.

  4. Initiator review. The initiator reviews the request to determine whether the requesting office has asked for a response by a firm due date, creates a technical case history sheet, and schedules a Three-Week Meeting with the reviewer.

  5. Three-Week Meeting. At the Three-Week Meeting the initiator and reviewer discuss the case, determine a preliminary position, determine whether to schedule a Technical Issue Meeting, and decide on the approach to processing the case (research, consultation with Division Counsel, etc.).

  6. Draft technical assistance memo. The initiator drafts the technical assistance memo, addresses the memo to the office requesting the assistance, and prepares it for the signature of the Director, EP Rulings and Agreements. The memo generally contains an introduction stating that "This memorandum is in response to your request dated..." The draft memo lists the issues, law, analysis, and conclusion. It provides the initiator’s contact information in the closing paragraph.

  7. Prepare final response. After the reviewer approves the draft technical assistance memo for closing, the initiator prepares the final version on TE/GE letterhead. The initiator assembles the signature package in a yellow folder and sends it through the reviewer, group manager, and Manager, EP Technical, to the Director, EP Rulings and Agreements, for signature.

  8. Enclose with the signature package in a yellow folder:

    1. Action routing slip

    2. Memorandum for signature

    3. Any attachments

Signature by R&A Director

  1. Signature. The Director, EP Rulings and Agreements, signs the technical assistance memo.

  2. Mailing. The R&A Director’s office then either:

    1. Dates the signed technical assistance memo, makes a copy, mails the memorandum to the requesting office and returns the copy and the yellow folder to EP Technical for closing.

    2. Returns the yellow folder with the signed technical assistance memo to EP Technical to mail to the requesting office and closing.

Assemble Case File for Closing

  1. When the technical assistance memo is ready to be closed, assemble the case file as follows and send it to your manager for closing:

    1. Cover Sheet or Routing Slip. Cover Sheet or Routing Slip from the initiator to the reviewer and then the group manager for closing.

    2. TRAC Control Sheet with hours listed separately for the initiator and the reviewer

    3. Outgoing Correspondence - either:

      • Copy of the signed and dated Technical Assistance Memo the original of which was mailed by the office of the Director, EP Rulings and Agreements.

      • Original Technical Assistance Memo signed by the Director, EP Rulings and Agreements, for the group to mail (make a copy of the signed and dated technical assistance memo after it is dated and keep in the case file).

    4. Technical Case History Sheet.

    5. Conference Reports (if any).

    6. Incoming Technical Assistance Request.

    7. Miscellaneous Items.

  2. Make copies of the Technical Assistance Memo for the case file and for:

    • the group reading file (also include a copy of the signed and dated TRAC Control Sheet)

    • the reviewer

    • yourself

Group Manager

  1. The group manager signs the TRAC Control Sheet and sends the case file to the administrative staff for closing and archiving.

Actuarial Assistance

  1. Other IRS offices and government agencies may request actuarial assistance from TE/GE actuarial on issues within, or outside of TE/GE’s jurisdiction. Employee Plans Actuarial prepares a technical assistance memorandum to respond to the request.

  2. When EP Technical receives an actuarial assistance request, the actuary notifies the group manager who adds the request to the TRAC database.

  3. Group manager review. The group manager reviews the request and assigns it to an initiator and reviewer.

  4. Initiator review. The initiator reviews the request to determine whether the requesting office has asked for a response by a firm due date, creates a technical case history sheet, and schedules a Three-Week Meeting with the reviewer if appropriate.

  5. Three-Week Meeting. At the Three-Week Meeting, the initiator and reviewer discuss the case, determine a preliminary position, determine whether to schedule a Technical Issue Meeting, and decide on the approach to processing the case.

  6. Assistance response. The initiator drafts the assistance response, as appropriate. Address the response is addressed to the individual/office requesting the assistance. The draft response generally contains:

    1. An introduction stating that “This is in response to your request dated .”

    2. The issues, law, analysis, and conclusion.

    3. A closing paragraph with the initiator contact information.

  7. Get your group manager’s concurrence on unique requests and those having a significant impact.

Request for Technical Assistance

  1. Employee Plans Technical may request technical assistance from another office (such as a Division Counsel referral) for:

    1. Issues in a letter ruling or assistance request within the jurisdiction of another office. EP Technical asks the other office to provide a response to the issue to include in the ruling or assistance memorandum.

    2. Other cases where the issue is unique. EP Technical gives the Office of Division Counsel a copy of its proposed response and requests Division Counsel’s concurrence in the conclusion.

Preparing a Technical Assistance Request

  1. Prepare a request over the signature of the technical assistance for Director, EP Rulings and Agreements.

  2. Format of technical assistance request:

    1. Memo format briefly summarizing the facts and issues that the other office should address.

    2. Attach a copy of the incoming letter ruling request/assistance request to the request for technical assistance.

    3. If the memo requests Division Counsel’s concurrence, in addition to a summary of the facts and issues, briefly describe EP Technical’s finding on the issues and the reasons for the request. Attach a copy of the draft ruling, if applicable, and a copy of the relevant portions of the background file.

Signature and Mailing

  1. Signature. After the memo is drafted, reviewed, and prepared in final on TE/GE letterhead, send it for the approval of the reviewer, group manager, the Manager of EP Technical, and Director, EP Rulings and Agreements with an Action Routing Sheet.

  2. Mailing. After the memo is signed, the Office of the Director EP Rulings and Agreements generally sends it with a Form 3210, and returns a copy of the signed, dated memo to the initiator, along with the Action Routing Sheet. Keep both in the case file.

  3. Scanned copy to Division Counsel. Send an electronic scanned copy of the technical assistance request to Division Counsel and other IRS Counsel as appropriate.

Congressional Correspondence

  1. Members of Congress often ask the IRS for help in responding to their constituents on tax issues. IRS Legislative Affairs Office receives a letter, adds it to "e-trak cc" (a Service-wide document tracking application) and assigns it a response due date. Legislative Affairs then sends the letter to TE/GE for reply.

  2. EP Technical prepares a response addressed to the member of Congress. Occasionally, the member of Congress asks the IRS to respond directly to the constituent and send a copy of the response to the member of Congress.

  3. Congressional letters have strict due dates that are listed on the "e-trak cc" control sheet. It is imperative to send the response to the member of Congress by the due date.

Assignment

  1. Case receipt. The Employee Plans Technical "e-trak cc" - Coordinator receives Congressional correspondence on "e-trak cc."

  2. Paper copy of case. The Coordinator creates a TRAC control sheet and sends the TRAC control sheet and a paper copy of the case to an EP Technical Group.

  3. Forward emails. The Coordinator then sends two emails to the group manager: The first email contains the CCU case detail results (the Legislative Affairs control sheet). The second email forwards the incoming correspondence.

  4. Assignment. The group manager then assigns the case to an initiator and forwards the two emails to the Initiator for response. Depending on the case, the group manager may also assign a reviewer to the case.

Letter Style and Format

  1. In the first paragraph of the response:

    1. Identify the constituent.

    2. Summarize the nature of the constituent’s inquiry.

    3. Note that the inquiry was forwarded from another office of the IRS or from another agency (if applicable).

    Example:

    Your inquiry was forwarded from the Department of Labor to this office for response.

  2. Although the tone of the response should be informative, do not refer to IRC or Treasury regulations unless necessary. However, you may cite at the end of a sentence in brackets.

    Example:

    The taxpayer or distributee must include amounts distributed from an IRA in his or her gross income [IRC 408(d)(1)].

  3. Prepare the response using active, not passive, language.

    Example:

    Write that the taxpayer "received a letter from his employer" rather than "a letter was received from his employer," or his employer "informed him" rather than "he was informed" by his employer.

  4. Write your response concisely and clearly address the taxpayer’s question. At the same time, try not to state a conclusion when explaining the law that applies to the taxpayer’s specific set of facts. The answer in a Congressional inquiry should be similar to the type of answer given in a General Information Letter, calling attention to a well-established interpretation or principle of tax law. See IRM 7.1.6.8.

  5. Prepare the response using the name and title of the Director, Employee Plans in the signature block (although the response is signed by the Technical Group manager on behalf of the Director). For this reason, the proper closing is "Sincerely," not "Sincerely yours," which is used for most of EP Technical other letters.

  6. Review Process:

    1. The initiator prepares the draft. The reviewer, the technical advisor to the Director of Employee Plans reviews and approves the draft. (Email a copy of the draft and incoming submission to the technical advisor for approval).

    2. If the Congressional inquiry relates to a change made by P.L. 115-97, send the approved draft to the senior technical advisor to the commissioner of TE/GE who coordinates the proposed response with the Tax Implementation Reform Office.

    3. Legislative Affairs reviews the draft.

    4. Given the due dates for responses to Congressional inquiries, the initiator should be actively involved in ensuring that the proposed response moves smoothly through the chain of review.

Review by Legislative Affairs

  1. Legislative Affairs reviews proposed responses to Congressional Inquiries before IRS issues them.

  2. When the response is ready for Legislative Affairs’s review, email the draft response to:ExecutiveSecretariatEReview@irs.gov.. Include the following information:

    1. E-Trak number (in the subject line).

    2. Last name of Congressional member (in the subject line).

    3. Draft response letter in MS Word format.

    4. Incoming correspondence from the member of Congress.

Obtain Final Signature

  1. After Legislative Affairs has approved a draft letter, prepare the final version with Legislative Affairs’ changes on TE/GE letterhead. Send the following documents, using a yellow folder, through the reviewer and group manager, for signature on behalf of the Director, Employee Plans.

  2. Routing slip. Place the Action Routing Slip on top of the yellow folder and send to reviewer and the group manager.

  3. Outgoing letter for signature. Place the original outgoing letter for signature on the right hand side of the inside of the yellow folder.

  4. Background material. Place on the left side inside of the yellow folder:

    1. Official file copy of the letter (initialed and dated in the lower left hand corner by the initiator, the reviewer and the group manager).

    2. Most recent draft of response showing Legislative Affairs’ revisions.

    3. Incoming request.

  5. Group manager: when you receive a signature package, sign the letter for the Director, Employee Plans.

Case File Assembly

  1. Assemble case file for closing and send it to your group manager:

    1. Cover Sheet or Routing Slip to group manager.

    2. Outgoing Correspondence to Member of Congress.

    3. Copy of signed and dated outgoing correspondence for the case file.

    4. TRAC Control Sheet with hours listed separately for the initiator and the reviewer.

    5. Technical Case History Sheet.

    6. Email approvals by the technical advisor and, if applicable, the senior technical advisor.

    7. Incoming Request.

    8. Miscellaneous Items, if any.

  2. Group manager review.

    1. Sign the TRAC control sheet and send the case file to the administrative staff for closing.

    2. Direct initiator to email a copy of the response to the e-trak coordinator who closes the case on e-trak and TRAC.

  3. Initiator makes copies of the signed and dated outgoing correspondence for the initiator, the reviewer and the group reading file (which also includes a copy of the completed TRAC control sheet).

  4. Mail the outgoing correspondence to the Member of Congress.

General Information Inquiries

  1. Administrative staff: When you receive a general information request, add the case to the TRAC database and forwards it to a group manager for assignment.

  2. An information letter is a "letter that…calls attention to a well established interpretation or principle of tax law (including a tax treaty) without applying it to a specific set of facts" . No user fee is required to request an information letter.

  3. While EP Technical no longer has a formal program for general information requests (see Rev. Proc. 2018-4), it will respond by phone or in writing to certain requests for information that fall within its subject matter jurisdiction and involve clear principles of law or are procedural in nature. Examples include requests for information regarding the requirements for obtaining nonbank trustee approval or a waiver of the 60-day rollover requirement.

    Example:

    Examples include requests for information on requirements to obtain nonbank trustee approval or a waiver of the 60-day rollover requirement.

  4. Thirty-Day due date. Information letters are due 30 calendar days after IRS receives them. Refer to the due date noted on the control sheet for this information.

  5. Concise response. Complete a conference report if you respond by phone. For both written and oral responses, be concise and clearly address the taxpayer’s question. At the same time, do not draw any conclusions when explaining the law that relates to the taxpayer’s facts, as a written response could constitute a ruling without the taxpayer having satisfied the procedural requirements of Rev. Proc. 2018-4.

    1. The purpose of a letter ruling is to provide a conclusion based on the taxpayer’s specific facts.

    2. The purpose of an information letter is to offer general information to help the taxpayer.

  6. Include in all general information letters the caveat that the information provided cannot be relied on by the taxpayer or used or cited as precedent.

Nonbank Trustee Program

  1. Approval. A business entity that is not a bank must receive IRS approval to be a trustee or custodian of certain fiduciary accounts. To receive IRS approval, the entity files an application under Rev. Proc. 2018-4. The application must demonstrate by clear and convincing proof that it meets the requirements of 26 CFR 1.408-2(e). An approved nonbank trustee may handle these fiduciary accounts:

    1. Archer Medical Savings Accounts

    2. Health Savings Accounts

    3. Qualified Retirement Plan Custodial Accounts

    4. 403(b)(7) Custodial Accounts

    5. Traditional IRA Accounts

    6. SEPs and SIMPLEs

    7. Roth IRAs

    8. Deferred Compensation Plan of State and Local Governments

    9. Coverdell Education Savings Accounts

  2. Continued regulatory compliance. An approved nonbank trustee must continually comply with the requirements of 26 CFR 1.408-2(e).

  3. A nonbank trustee must notify the IRS in writing of any change that affects the continuing accuracy of any representations made in the nonbank trustee application ( 26 CFR 1.408-2(e)(6)(iv)).

  4. EP Technical reviews this information and:

    1. Updates the List of Approved Nonbank Trustees and Custodians and its electronic files.

    2. Issues an acknowledgment letter in response to a notification of change.

      Note:

      The letter states that it does not constitute a determination that the entity satisfies or continues to satisfy the requirements of the regulations.

    3. May ask that the entity submit a new application, or it may pursue revocation if the change clearly and necessarily will cause the entity to fail nonbank trustee requirements (for example, an approved nonbank trustee merges into an entity that is not a bank or an approved nonbank trustee).

  5. Investigations and revocation. TE/GE Examinations investigates approved nonbank trustees per IRM 4.72.18. If TE/GE Examinations recommends revocation of nonbank trustee status because the entity can’t or won’t comply with the regulations, it forwards the case to EP Technical for review. If EP Technical agrees, it pursues revocation of the nonbank trustee approval according to the requirements of 26 CFR 1.408-2(e)(6).

Application for Nonbank Trustee Approval

  1. An entity may request IRS approval to become a nonbank trustee by filing an application and paying a user fee under Rev. Proc. 2018-4. To process the request, EP Technical generally follows the procedures for letter rulings in IRM 7.1.6.2 (Three-Week Meetings, Thirty-Day Letters, Conferences, etc.).

  2. Reviewing Nonbank Trustee applications. The initiator and reviewer review the nonbank trustee application as follows:

    1. Rev. Proc. 2018-4 Requirements. Confirm that the application complies with the procedural requirements in Rev. Proc. 2018-4, Section 26.

    2. Substantive Requirements. Review the application for compliance with the requirements under 26 CFR 1.408-2(e). Use IRM 4.72.18.3, and the Nonbank Trustee Guidelines which contains a checklist for nonbank trustee approvals.

    3. Thirty-Day Letter. If the application does not contain clear and convincing proof that the nonbank trustee requirements are satisfied as required by Rev. Proc. 2018-4, Section 3.04, send a Thirty-Day Letter noting the deficiencies and asking the applicant to submit appropriate information or documentation within 30 days. If the applicant doesn’t send the required information or documentation, schedule a Conference of Right per Rev. Proc. 2018-4 and IRM 7.1.6.2.6.

  3. Approval letter. Once EP Technical is satisfied that the applicant has demonstrated compliance with the requirements of the nonbank trustee regulations, the initiator drafts a Notice of Approval.

  4. Assemble case file for signature and closing. When the case is ready for signature and closing, the initiator assembles the case file and forwards it through the reviewer to the group manager for signature and closing. The package should include:

    1. Cover Sheet or Routing Sheet to group manager.

    2. Outgoing Correspondence for Signature: Original Approval Letter with Original Cover Letter for the Authorized Representative (if any).

    3. Administrative Documents: TRAC Control Sheet with hours listed separately for the initiator and the reviewer, User Fee Case Input Sheet, User Fee Refund Form (if any).

    4. Case History Documents, Technical Case History Sheet, Conference Reports, Routing Slips, and drafts notice of approval.

    5. Incoming applications.

    6. Other Correspondence.

    7. Miscellaneous Items.

  5. Group manager signature. The group manager signs and dates the TRAC Control Sheet, the User Fee Refund Form (if any), and all outgoing correspondence. The group manager may delegate signature authority to the reviewer

    1. Notify Employee Plans Examinations and Communications and Liaison of the new approval so that they can add the newly approved Nonbank Trustee to the list of Nonbank Trustees on the TE/GE website.

    2. Forward the Case File to the administrative staff for closing.

  6. Initiator. After your manager has signed and dated the Notice of Approval and case file documents:

    1. Notify EP Examinations of the new approval

    2. Send a copy to the agent or tax law specialist who is responsible for updating the List of Approved Nonbank Trustees. (He or she will then forward the updated list to Communications and Liaison to post on the TE/GE web page).

    3. Mail the original Notice of Approval to the approved nonbank trustee. If applicable, mail the original cover letter to the authorized representative and enclose a copy of the Notice of Approval.

    4. Update the electronic nonbank trustee files.

    5. Prepare copies for the initiator, the group reading file (which also includes a copy of the TRAC Control Sheet), and the case file. Return the case file to the manager who sends it to the administrative staff for closing.

Notification of Change in Information

  1. A nonbank trustee must notify the IRS in writing of any change that affects the continuing accuracy of any representation made in the application, whether the change occurs before or after the applicant receives a Notice of Approval (26 CFR 1.408-2(e)(6)(iv)). The change could be either a:

    1. Cosmetic change that does not adversely affect the entity’s status as a nonbank trustee

    2. Substantive change, such as a merger or acquisition, which may adversely affect the entity’s nonbank trustee status.

  2. Notification. The nonbank trustee’s notification or notice of change should describe the change, state the reason for the change (cosmetic or substantive), and state that no other representation made in its original application has materially changed.

  3. IRS Review. The initiator and reviewer review the notice of change. Changes might include:

    1. Name change.

    2. Address change.

    3. Acceptance of non-passive accounts.

    4. Acceptance of accounts that were not described in the IRS Notice of Approval.

    5. An acquisition, merger, consolidation, or other type of reorganization.

  4. IRS Response

    1. EP Technical generally acknowledges in writing receipt of the notice of change and informs the entity that the IRS is updating its files.

    2. The acknowledgment letter states that it does not constitute a determination that the entity satisfies or continues to satisfy the requirements of section 1.408-2(e). Thus, if the entity’s notification of change also includes a request that the IRS determine that the change does not adversely affect its nonbank trustee status, EP Technical informs the entity that it must file a nonbank trustee application per Rev. Proc. 2018-4 to receive a determination. If it’s clear that the change adversely affects the entity’s nonbank trustee status, EP Technical may pursue revocation.

  5. Assemble File for Signature and Closing

    1. Initiator: When the case is ready for signature and closing, assemble the case file and forward it through the reviewer to your manager for signature and closing.

    2. Group manager: Sign the TRAC Control Sheet and outgoing correspondence, and notify Examinations and the agent or tax law specialist who prepares the List of Approved Nonbank Trustees.

    3. Initiator: Mail the outgoing correspondence, prepare copies, update the electronic file, and send the case file back to the group manager who sends it to the administrative staff for closing and archiving.

Investigations

  1. EP Examinations performs investigations of approved nonbank trustees to ensure that they are operating in compliance with the requirements of 26 CFR 1.408-2(e). EP Technical reviews a number of these investigations. EP Examinations may address and resolve deficiencies they find during the investigation process. If EP Examinations believes the issues are serious or can’t be resolved, it should send the case to EP Technical recommending revocation. See IRM 4.72.18, Employee Plans Technical Guidance, Nonbank Trustee Investigation Procedures for nonbank trustee investigations information.

Revocation of Nonbank Trustee Approval

  1. Based on an investigation and recommendation by EP Examinations, EP Technical may need to revoke a nonbank trustee’s Notice of Approval as a result of facts discovered in an investigation or for other reasons.

    1. 26 CFR 1.408-2(e)(7)(iv) describes the grounds for revocation.

    2. 26 CFR 1.408-2(e)(7)(v) provides the procedures to be followed for revoking a nonbank trustee’s approval letter.

    3. Revocation could result in the nonbank trustee fiduciary accounts losing their qualified status.

  2. Preliminary Review. Initiator: Review the facts of the case to determine whether the nonbank trustee complies with the requirements of the nonbank trustee regulations. Discuss the case with the reviewer. If you both decide to recommend revocation of the nonbank trustee’s Notice of Approval, discuss the case with the group manager. If the group manager concurs, draft a “60-Day Letter” which proposes to revoke the nonbank trustee’s Notice of Approval. (If you decide to pursue compliance rather than revocation, send a closing letter with deficiencies to the nonbank trustee or custodian and prepare a memorandum to EP Classification. The Area Manager in EP Examinations will be provided copies of the memo and the closing letter).

  3. Proposed Revocation Letter. Prepare a “60-Day Letter” for your manager’s signature. For the letter:

    1. Explain the case’s key facts and circumstances and identify and explain how the entity failed to satisfy the requirements of the nonbank trustee regulations.

    2. Notify the nonbank trustee that they may protest the proposed revocation per 26 CFR 1.408-2(e)(7)(v)(B) and that they may request a conference with Employee Plans Technical.

    3. Notify the nonbank trustee that the IRS must receive any protest within 60 calendar days of the date of the 60 day letter.

    4. Ask your manager to sign and date the letter.

    5. Fax and mail it with appropriate tracking to the nonbank trustee and to its authorized representative.

  4. Nonbank Trustee Agrees to Revocation. If the nonbank trustee consents to the proposed revocation:

    1. Initiator: Prepare a letter for the manager’s signature. The letter informs the nonbank trustee that it may no longer accept new fiduciary accounts as of the date that it receives the letter. The letter state that the nonbank trustee must:

      1. Transfer its fiduciary accounts, within a specified time frame (usually 60 days), to a bank or an approved nonbank trustee.

      2. Inform the IRS of the name of the transferee.

      3. Inform the IRS of the date the transfer will be complete.

      4. Provide written evidence that the transferee has agreed to accept its accounts.

      5. Notify the IRS in writing when the transfer is complete.

    2. Group manager: sign and date the letter.

    3. Initiator: Call the nonbank trustee or authorized representative about of the letter’s contents. Fax and mail the letter with appropriate tracking to the nonbank trustee and to the authorized representative.

  5. Protest:

    1. The initiator and reviewer consider any protest received from the nonbank trustee and hold a conference as appropriate.

    2. After considering all the information, including any information provided at the conference and the post-conference submission, the initiator and reviewer discuss the case with the group manager.

    3. If you, the reviewer and your manager decided that revocation is appropriate, prepare a letter for the group manager’s signature (see IRM 7.1.6.9.4 (4) above).

  6. Revocation Letter. When the nonbank trustee notifies you in writing that it has transferred fiduciary accounts, prepare a revocation letter for the signature of the Director, Employee Plans, and send it through your manager for the Director’s signature.

    1. The revocation letter must reference the nonbank trustee’s approval letter, state that the entity no longer meets the regulations’ nonbank trustee requirements and notify the entity that the approval letter is revoked.

    2. When the Director, Employee Plans signs the letter, make copies of the signed and dated letter. Fax and mail the letter with appropriate tracking to the nonbank trustee and authorized representative.

  7. Prepare a memorandum to CP&C that refers to the investigation, the Notice of Approval, and any notices of change. Summarize the deficiencies and provide the rationale for revocation. Ask your manager to sign and date it. Send it to CP&C.

  8. Case Assembly and Closing

    1. Initiator: Assemble the file for closing, include copies of outgoing correspondence, and send the file to your group manager. Assemble copies for the Group Reading File, the initiator, and the reviewer.

    2. Group manager: Sign the TRAC control sheet.

    3. Initiator: Send copies of the revocation letter and memo to CP&C, to the EP Examinations area manager and the agent who investigated the nonbank trustee. Notify the agent or tax law specialist who prepares the List of Approved Nonbank Trustees, update the electronic file, and return the closed file to the group manager who sends the case file to the Administrative Staff for closing.

IRA, SEP, SIMPLE Opinion Letter Program

  1. EP Technical issues Opinion Letters on whether a Traditional and Roth Individual Retirement Account (IRA), Simplified Employee Pension (SEP), or Savings Incentive Match Plan for Employees (SIMPLE) satisfies the requirements of the Internal Revenue Code.

Assignment and Final Review

  1. The group manager assigns the case to the initiator and a reviewer.

  2. Initiator: After reviewing IRA, SEP or SIMPLE, send the file and an updated Technical Case History Sheet to the reviewer.

  3. Reviewer: Review the file for legal accuracy and make sure all numerical identifications of annuity contracts and endorsements are accurate.

  4. Initiator: When the reviewer returns the file with recommendations, incorporate his/her changes and if necessary, obtain any additional language. Keep the earlier version of the IRA, SEP or SIMPLE in the file when you resubmit it to the reviewer for signature.

  5. Initiator: Send the file to the reviewer for final approval of additional changes.

  6. Initiator:

    1. Submit the file to generate the opinion letter and cover letter to the taxpayer and copy to authorized representative.

    2. Indicate on the cover letter reference line that this is for an opinion letter request for [name of the taxpayer].

    3. State on the letter "The enclosed documents are being provided to you under the provisions of a power of attorney currently on file with the Internal Revenue Service."

    4. Include your contact information.

    5. Get the letter stamped with the Director, EP Rulings and Agreement’s signature.

Preparing Case for Closing

  1. Initiator: After the reviewer approves an IRA, prepare the file for closing. Print the letters, which are automatically signed and dated. Submit the following package to the reviewer for closing:

    1. MAPICS Control record indicating the closing code and the hours worked.

    2. Control Card, filled out to indicate hours worked on the case by the initiator and the reviewer. initiators should not fill in the closing date or enter closing signatures.

    3. Technical Case History Sheet.

    4. Conference Report(s), if any.

    5. Originals and any needed copies of Individual Retirement Account letter and Cover letters.

    6. Taxpayer Documents:

      1. Application Form 5306

      2. Plan

      3. Associated Documents

      4. Incoming taxpayer correspondence

      5. Power of Attorney Form 2848

    7. Official file copies of each original letter in the package.

    8. EP User Fee Case Input Sheet.

    9. Correspondence.

    10. Discard all duplicate or unnecessary materials. If unsure whether a document is necessary, consult with the reviewer.

Closing a Case

  1. Reviewer: When you receive a closing package from the initiator, check the original opinion letter and any accompanying cover letter. Sign and date the control card. Send the case to the administrative staff for closing.

Closing Agreements

  1. IRM 7.2.1 covers detailed procedures that apply to closing agreements that EP Technical handles. This IRM section 7.1.6.11 highlights some of the key procedures outlined in IRM 7.2.1. IRS uses closing agreements when there is an advantage in having a case permanently and conclusively closed. In the EP rulings area, a taxpayer generally requests a closing agreement as a way to resolve a case that can’t be resolved by a favorable PLR, but the taxpayer can show it’s appropriate to provide relief from adverse tax consequences. In some cases, a taxpayer considers a closing agreement to resolve the tax liability. See IRM 7.2.1.4 for obtaining approval to pursue a closing agreement.

Processing a Request for a Closing Agreement

  1. A taxpayer requesting a closing agreement generally submits a draft agreement that the initiator evaluates. If the IRS suggests a closing agreement, the initiator prepares the initial draft.

Format for a Draft Closing Agreement

  1. Prepare a closing agreement electronically, following the pattern language from Exhibit 7.2.1-1. The closing agreement contains a heading, an opening paragraph, a series of "Whereas" clauses listing the agreement facts and circumstances and the terms. See IRM 7.2.1.5.1, Preparing the Closing Agreement Document.

Preparing the Approval Memorandum for the Director

  1. After the initiator and the reviewer have prepared a draft closing agreement, they route it to the director, EP Rulings and Agreements, or the Director, Employee Plans for approval. Prepare a memo:

    1. State in the introductory paragraph that we are seeking the Director’s concurrence in recommending the closing agreement.

    2. Present the facts, a summary of the closing agreement, and explain why EP Technical is recommending entering into the closing agreement.

    3. Leave the signature blocks for the group manager, the Manager, EP Technical, the Director, EP Rulings and Agreements and the Director, Employee Plans blank.

    4. Place the memo and the draft closing agreement in a yellow signature folder with an action routing slip on the outside.

    5. Write the reviewer, the group manager, and the same names that are in signature block of the memo on the action routing slip.

Obtaining the Taxpayer’s Signature

  1. Initiator: After the Director of EP signs the approval memo and returns it, prepare three execution copies of the closing agreement. Send three copies with a cover letter to the taxpayer or the taxpayer’s authorized representative. Explain that the taxpayer needs to sign all copies of the agreements and return them to the IRS along with any sanction due. Keep a copy of the cover letter for the case file. See IRM 7.2.16.1 for instructions to the taxpayer, and IRM 7.2.1.7 for the procedures to execute closing agreements.

Obtaining the Director’s signature

  1. Initiator: When you receive the signed copies of the closing agreement from the taxpayer, give any check that comes with them promptly to the user fee unit for processing. Prepare another signature package in a yellow folder with an action routing sheet on top, and the three copies of the closing agreement on the right hand side. It is good practice to place the previously signed approval memo on the left hand side as background. Indicate on the action routing slip that the package contains closing agreements for signature. Route the signature package per IRM 7.1.6.11.3 (1).

Distribution of Executed Copies

  1. Initiator: After the Director has executed the three copies of the closing agreement on behalf of the IRS, prepare a cover letter and mail one copy back to the taxpayer. EP Technical keeps a second copy and includes a copy in the case file to be imaged. If the taxpayer is a plan sponsor, send the third copy to the area office that has jurisdiction over the taxpayer’s plan. If the taxpayer is an individual, generally EP Technical keeps that copy as well. The taxpayer’s authorized representative may request an executed copy. If they do, prepare and send four copies for signature instead of three. Keep a copy of the cover letter for the case file.

Assemble Case for Closing

  1. Initiator: After sending the executed copies assemble the case file and transmit to your group manager for closing.

    1. Routing Slip you sent to your manager/administrative assistant or other person who closes cases. List the case name and that you are submitting for closing, including hours worked by the initiator and reviewer.

    2. Control Card.

    3. Technical Case History Sheet.

    4. Official File Copies.

    5. Group Reading File Copies.

    6. Case file, including the Action Routing Sheets that indicate approval of the agreement and signature.

  2. Group manager or reviewer signature. The group manager or reviewer signs the TRAC Control Sheet and sends the case file to the administrative staff for closing.

Administrative Staff Case Closing Procedures

  1. Confirm case ready to close. When the group manager sends a case to the administrative staff for closing, the administrative staff checks the following:

    1. Signatures. Outgoing correspondence must be signed and dated.

    2. TRAC Control Sheet. The TRAC Control Sheet must list the hours for both the Initiator and reviewer and be signed by the group manager or reviewer.

    3. Technical Case History Sheet. Technical Case History Sheets should generally be included for all cases. However, case files for Letter Rulings and Technical Advice must contain Technical Case History Sheets before the case is closed.

    4. Send the User Fee Refund form, if any, to the EP/EO Adjustments Unit in Covington, KY.

    5. Scans and archives the case file.

Closing Letter Ruling Cases

  1. Date stamp each outgoing letter and memo.

  2. Print Closing Date on TRAC Control Sheet

  3. Close Case on TRAC. Enter the following data on TRAC:

    • Case Closing Date

    • The initiator's hours

    • The reviewer's hours

    • Change status to "C1, etc."

  4. Prepare Form 3210 to send Refund Form (if any) to the EP/EO Adjustments Unit. If there is a User Fee Refund Form, make a copy for the file and send the original to the EP/EO Adjustments Unit.

  5. Prepare Notice of Intention to Disclose Form 437 for Letter Rulings.

  6. For letter ruling, prepare copies as follows:

    1. TRAC Control Sheet - one copy

    2. Letter Ruling - five copies

    3. Deleted Letter Ruling - four copies

    4. POA Letter - two copies

    5. Notice 437 - four copies

    6. User Fee Refund Form (if applicable) - one copy

  7. Mail to taxpayer using a window envelope or large envelope to mail the outgoing correspondence.

    1. Original Letter Ruling

    2. Original Deleted Letter Ruling

    3. Form 437, Notice of Intention to Disclose

  8. Mail to authorized representative (if any):

    1. The Cover Letter addressed to the authorized representative

    2. A copy of the Original

    3. Deleted Letter Ruling

    4. Notice 437, Notice of Intention to Disclose

  9. Mail disclosure package to the Disclosure Unit.

    1. Prepare the Disclosure package:

      1. A copy of the Original Letter Ruling

      2. The original and a copy of the Deleted Letter Ruling

      3. A copy of the TRAC Control Sheet

      4. Notice 437, Notice of Intention to Disclose

    2. Prepare a Routing Slip that lists the items in the Disclosure package and indicates the taxpayer's name, the taxpayer’s SSN, the initiator's name, the date, and the group symbols.

    3. Place the Routing Slip and Disclosure package into an Interoffice envelope addressed to:

      Chief, Disclosure and Litigation Support Branch CC:PA:LPD:DLS
      1111 Constitution Ave., NW, Room 5201
      Washington, DC 20224.

  10. Send the User Fee Refund Form (if any) to the EP/EO Adjustment Unit.

  11. Return the closed case file and the group reading file copies to your group manager for final closing review.