Appeals employees must follow the work request procedures to request ATT assistance. Use of the ATT is mandatory for agreement package, closing package, and FPAA preparation. Follow the work request procedures in IRM 8.19.1.1.1, Appeals TEFRA Team (ATT). Also see detailed procedures for using the ATT on their ATT SharePoint site. A link to the site is found on the Appeals TEFRA website.

These procedures are written for partnership tax years ending after August 5, 1997. If you have a partnership whose tax year ends before August 6, 1997, please contact the TEFRA Technical Specialists or the TEFRA AO assigned to your case for guidance.

Unique issues arise in the context of the TEFRA provisions when applied to persons who file a joint return. Generally the signatures of both spouses, or an authorized representative for both, are needed. If the partnership penalty and affected item adjustments are settled, both signatures are needed in Parts I and II of the Form 870-LT(AD) to settle both spouses.

If only one spouse signs the agreement form, the other spouse may or may not remain a party to the TEFRA proceeding. Either an FPAA or a notice of deficiency will have to be mailed to the spouse that did not sign the agreement. See Treas. Reg. 301.6231(a)(2)-1(a) and Treas. Reg. 301.6231(a)(12)-1(a).

For consolidated return tax years beginning before June 28, 2002, where the common parent corporation was the partner, Treas. Reg. 1.1502-77A(a) provides that the common parent corporation in a consolidated group is the sole agent for the group and is the one authorized to sign settlements with respect to the tax liability for the consolidated return year. The signature block would appear as follows:

For consolidated return tax years beginning on or after June 28, 2002, where the common parent corporation was the partner, Treas. Reg. 1.1502-77(a)(6)(iii) provides that the Service will deal directly with any member in its capacity as a partner of a TEFRA partnership. The signature block would appear as follows:

For consolidated return tax years beginning before June 28, 2002, where a subsidiary corporation was the partner, Treas. Reg. 1.1502-77A(a) provides that the common parent corporation for the year to be settled must sign the agreement form with respect to the consolidated group. The signature block would appear as follows:

For consolidated return tax years beginning on or after June 28, 2002, where a subsidiary corporation was the partner, Treas. Reg. 1.1502-77(a)(6)(iii) provides that the subsidiary corporation partner must sign settlements with respect to the partnerships for which the subsidiary is a partner. The signature block would appear as follows:

If a subsidiary corporation in a consolidated group is the TMP and the agreement is for a consolidated return year beginning before June 28, 2002, Treas. Reg. 1.1502–77A(a) provides that the common parent corporation must sign the agreement form with respect to the consolidated group. The signature block would appear as follows:

If a subsidiary corporation in a consolidated group is the TMP and the agreement is for a consolidated return year beginning on or after June 28, 2002, a current officer of the subsidiary corporation should sign the agreement in the name of the subsidiary corporation. See Treas. Regs. 1.1502-77(a)(3)(v) and 1.1502-77(a)(6)(iii). The signature block would appear as follows:

For partnership tax years ending before August 6, 1997, indirect partners are bound by a Form 870-P(AD) signed by a pass-thru partner with respect to the determination of partnership items. No special language needs to be added to the agreement to bind the indirect partners. A pass-thru partner cannot bind an indirect partner with respect to affected items.

For partnership tax years ending after August 5, 1997, indirect partners are bound by a Form 870-PT(AD) signed by a pass-thru partner with respect to the determination of partnership items and penalties. No special language needs to be added to the agreement to bind the indirect partners. A pass-thru partner cannot bind an indirect partner with respect to affected items, including partner level defenses to penalties.

For partnership tax years ending before August 6, 1997, non-notice partners are bound by a Form 870-P(AD) signed by a tax matters partner (TMP) with respect to the determination of partnership items. See IRM 8.19.11.2 for the language needed on the agreement. A TMP cannot bind non-notice partners with respect to penalties or affected items. For this purpose, non-notice partners do not include indirect partners.

For partnership tax years ending after August 5, 1997, non-notice partners are bound by a Form 870-PT(AD) signed by a TMP with respect to the determination of partnership items and penalties. See IRM 8.19.11.2 for the language needed on the agreement. A TMP cannot bind non-notice partners with respect to affected items, including partner level defenses to penalties.

If the TMP does not agree to bind the non-notice partners, the agreement forms should be sent directly to each non-notice partner.

Consents to assess additional tax (Form 870, and others) of $250,000 or less can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent by fax. Consents to assess tax in excess of $250,000 should be secured with original signatures and delivered in person or by mail.

For purposes of estimating tax for flow-through adjustments, the tax is figured by multiplying the partner’s share of the adjustment by the highest tax bracket percentage. The estimated tax figure will be used for figuring the $250,000 tolerance for acceptance of the faxed agreements.

Form 4605-A is used to show the adjustments to the TEFRA partnership. The TCS should work from the return and take into account any Administrative Adjustment Request (AAR) filed on Form 8082 or Form 1065X, if applicable. The only issues that should be shown on the Form 4605-A are the ones that result in an adjustment to the amount shown on the return. If there are no changes to the RAR, the file copy of the Form 4605–A may be used.

The following should be clearly marked on top or in the remarks on the Form 4605–A:

Include an IRC 6404(g) key case comment on the Form 4605–A in the remarks section. See IRM 8.19.1.7 and IRM 8.17.6.9. For example, if the earliest notice that was issued was a 60-day letter that was dated March 15, 2006, enter "60-day letter" and "March 15, 2006." There may be more than one notice for the same return and more than one IRC 6404(g) notice date. See IRM 8.17.6.9.4.

See Exhibit 8.19.11-1 for a sample Form 4605–A.

Form 4605–A is not needed for a no-change case. See IRM 8.19.10.4.9 and IRM 8.19.11.13 for more information on no-change cases.

A separate Form 886-Z should be prepared for each tax year to show the partners' corrected partnership items and penalty or affected item adjustments.

If there are non-notice partners, they should be listed together on a Form 886–Z separate from the Form 886–Z that lists notice partners.

The Form 886–Z should only show the issues that changed from the Schedules K-1. It is unnecessary to show no-change issues. The CTFs will treat all issues not shown on the Form 886–Z as correctly shown on the Schedule K-1.

The following should be clearly marked on the top or in the center of Form 886–Z:

The partner information on the Form 886–Z should be listed either alphabetically or in TIN order.

Reconcile any notice and non-notice Forms 886-Z to make certain that the total for column (3) equals 100%. The amounts shown on these forms, along with the items shown on the Schedule K-1 that have not changed, will be used by the CTFs to make the partners' recalculations.

Where penalties or affected items are at issue, columns (8) through (12) should be used to list the separate penalties and affected items.

Form 886–Z is not needed for a no-change case. See IRM 8.19.10.4.9 and IRM 8.19.11.13 for more information on no-change cases.

Additional information for Form 886-Z is found in IRM 8.19.10.4.3.1.

The Schedule of Adjustments page is the part of the agreement form that shows the partnership adjustments.

Although the TEFRA agreement forms have columns for multiple year computations, there could be disclosure problems if more than one year is shown on a form. The only situation that allows listing multiple years on the Schedule of Adjustments page is when Appeals will be mailing the agreement forms and all partners are exactly the same in each year. If the CTF will be mailing the agreement forms to the partners, the TCS will include only one year on each Schedule of Adjustments page.

The allocation of all partners must be shown on the Schedule of Adjustments page if the correct allocation of partnership items or partner's ownership is an issue. See IRM 8.19.10.4.8.4. See Exhibit 8.19.11-3 (allocation of partnership items) and Exhibit 8.19.11-4 (allocation of partners' ownership).

Sample Schedule of Adjustments pages for each of the Appeals agreement forms may be found as follows:

For a no-change case, the Schedule of Adjustments page of the agreement form will show no adjustments. See Exhibit 8.19.11-5 for a sample Schedule of Adjustments page for a no-change agreement form. See IRM 8.19.10.4.9 and IRM 8.19.11.13 for more information on no-change cases.

The AO will retain the administrative file and monitor the progress being made by the key case CTF in securing agreement forms from the partners. If it is determined that even one direct partner does not agree to the settlement, an FPAA will have to be prepared. Follow the procedures in IRM 8.19.12.

The partnership statute must continue to be protected and extended as needed.

While waiting for the CTF to mail the agreement forms to the partners, the AO should update the ACDS status code to “E/TEF” (Inactive, waiting for TEFRA action outside office).

The key case CTF will batch the agreement forms as they are received and associate them with the CTF key case file.

The key case CTF will complete the following actions:

All TEFRA key cases must be closed through Laguna Niguel APS. The AO should follow these closing procedures only if the AO did not use the ATT and TEFRA AO team member in working the case. If the AO used the ATT and TEFRA AO team member, then follow the procedures posted to the ATT sharepoint site. A link to the sharepoint site is found on the Appeals TEFRA website.

After the key case CTF has received signed agreement forms from all direct partners and has input a one-year statute date on PCS for all direct partners, the AO will close the case through the ATM to local APS. Copies of the agreement forms that were received from the key case CTF will be retained in the file. The AO inputs AC-TF on ACDS.

The ATM signs the Letter 913 and Form 5402 and forwards the administrative file to local APS. The AC-FR and ACAP codes are not input at this time.

After the key case CTF has received signed agreement forms from all direct partners, has input a one-year statute date on PCS for all direct partners, and the CTF has released the AIMS “H” freeze, local APS:

Local APS enters the following in the ACDS fields:

Laguna Niguel APS, upon receipt of the administrative file, enters the following in the ACDS fields:

The ATT performs a procedural review. The ATT ATM will notify the field when it is time to enter AC-FR and ACAP. When it is verified those codes have been entered, the ATT will forward the administrative file to Laguna Niguel APS.

Laguna Niguel APS closes the case from ACDS as follows.

Laguna Niguel APS may close the case from AIMS unless it has a PICF Code of 4 or 5. The case should not be sent to the key case CTF unless it has a PICF Code of 4 or 5.

If the case has a PICF Code of 4 or 5, it is a partner in another TEFRA partnership and has to be sent to the key case CTF. Verify there are no other open TEFRA linkages. Instructions for identifying the key case CTF may be found on the Appeals TEFRA website. Instructions for sending the case to the key case CTF are as follows:

Laguna Niguel APS ensures that copies of the following documents are in the administrative file before it is closed:

The AO will retain the administrative file and monitor the return of the agreement forms by the partners. If it is determined that even one direct partner does not agree to the settlement, an FPAA will have to be prepared. Follow the procedures in IRM 8.19.12.

The partnership statute must continue to be protected and extended as needed.

The AO will receive the signed agreement forms if the Appeals Office mailed them, or if they were mailed by the CTF and the AO instructed the key case CTF to have the agreement forms returned to Appeals because the case was docketed or contained an allocation issue.

When the agreement forms are received in the Appeals Office they will be receipt date stamped (on the reverse side) and forwarded to the AO. The receipt date stamp will generally differ from the date of execution by the Service. The date of execution by the Service starts the running of the one-year statute date under IRC 6229(f). (See IRM 8.19.1.6.6.6).

If a partner signed and returned only one copy of the agreement form, a copy should be made after it is date stamped.

The AO will collect the agreement forms and prepare them for processing. They should generally be batched every 30 days and submitted to the ATM for signing and mailing to the CTF.

The AO will review the agreement forms to ensure that the Schedule of Adjustments page shows the proper amounts, that the appropriate signatures are included, and that the closing package is complete and correct. The AO is ultimately responsible for the accuracy and completeness of the closing package, including the Form 3210.

The AO will identify the partners that signed agreement forms on the Form 886-Z that was previously prepared by the TCS.

The AO should ensure that any special instructions for the key case CTF are included on the Form 3210.

After entering the information on the Form 886–Z, the AO will give the case (including the partner agreement forms and the closing package) to the ATM. The AO will ensure that all documents listed on the Form 3210 are included with the closing package.

The ATM will sign the agreement forms within 5 workdays after receiving the case from the AO. The ATM (or the AO if delegated by the ATM) will enter the one-year statute date on the Form 3210. In computing the one-year statute date, one day should be subtracted from the date that is one year from when the ATM signed the agreement form.

After the agreement forms are signed and the one-year statute date is entered on the Form 3210, the ATM (or AO, if delegated) will forward the closing package to local APS. If agreement forms from all direct partners have been signed on behalf of the Commissioner, the key case file will also be forwarded to local APS. If all agreement forms have not yet been received, then the file will be returned to the AO in order to monitor receipt of additional agreement forms.

Local APS will ensure that the documents listed on the Form 3210 are included in the closing package. Local APS will mail the closing package to the key case CTF within 5 workdays after the forms are signed for the Commissioner, using the Form 3210 prepared by the TCS or AO. Instructions for monitoring the return of the Form 3210 by local APS may be found in IRM 8.19.11.7.

The key case CTF will complete the following actions:

The AO will collect any additional agreement forms received during the following 30 days and follow the procedures as indicated above.

If even one direct partner does not agree to the settlement, an FPAA will have to be prepared. Follow the procedures in IRM 8.19.12.

All TEFRA key cases must be closed through Laguna Niguel APS. The AO should follow these closing procedures only if the AO did not use the ATT and TEFRA AO team member in working the case. If the AO used the ATT and TEFRA AO team member, then follow the procedures posted to the ATT sharepoint site. A link to the sharepoint site is found on the Appeals TEFRA website.

After Appeals has received signed agreement forms from all direct partners, APS has received an acknowledged Form 3210 from the CTF, and the CTF has input a one-year statute date on PCS for all direct partners, the AO will close the case through the ATM to local APS. The AO inputs AC-TF on ACDS.

The ATM signs Letter 913 and Form 5402 and forwards the administrative file to local APS. The AC-FR and ACAP codes are not input at this time.

After Appeals has received signed agreement forms from all direct partners, the CTF has input a one-year statute date on PCS for all direct partners, and the CTF has released the AIMS “H” freeze, the procedures for closing the case in IRM 8.19.11.8.3 steps (4) through (11) should be followed.

Form 870-LT(AD) will allow a partner to agree to both the partnership items and penalties and affected item adjustments, or only to the partnership items and partnership level determination as to penalties. The partner must sign Part I to agree to the partnership items and the partnership level determinations as to penalties and Part II to agree to the affected items (including partner level determinations as to penalties). Form 870–LT(AD) covers all affected items.

Partners who wish to contest penalties using partner level defenses must do so by filing a refund claim after the penalties are assessed and paid. The refund claim must be filed within six months after the notice of computational adjustment is mailed. The refund consideration will be limited to the partner level defenses against the penalties or a challenge to the amount of the computational adjustment. See IRC 6230(c)(4).

Affected items other than penalties are either agreed on a Form 870–LT(AD) or are covered by deficiency procedures.

When a penalty is asserted, unless all partners remaining in the proceeding sign an agreement form for the partnership items and the penalty, an FPAA must be issued. If the only unagreed issue is a determination of the applicability of the penalty at the partnership level, an FPAA must be issued for the applicability of the penalty at the partnership level.

See IRM 8.19.11.4.3 for information on when a pass-thru partner may bind an indirect partner to penalties or affected items.

See IRM 8.19.11.4.4 for information on when the TMP may bind non-notice partners to penalties or affected items.

The AO prepares the Letter 2621 for the TMP at the key case address. If the address of the TMP is different from the key case address, also prepare a Letter 2621 for the TMP at the TMP’s last known address. If there is no TMP, send the letter to “Tax Matters Partner” (generic TMP) at the key case address.

The TMP will have the responsibility of notifying the other partners of the outcome of the proceeding.

If the statute was extended with a Form 872–O, prepare Form 872–N, Notice of Termination of Special Consent to Extend the Time to Assess Tax Attributable to Partnership Items, and mail it with the No Adjustments Letter.

The Letter 2621 and Form 872-N (if applicable) should be signed by the ATM.

The AO prepares a package to send to the key case CTF to close the partner linkages. Exhibit 8.19.11-13 is an example of a Form 3210 used for No Adjustment Letters.

The AO prepares a Form 5402 and submits the case and the closing package to the ATM for approval before the closing package is mailed to the CTF.

The AO will ensure that all documents listed on the Form 3210 are included with the closing package. The AO is ultimately responsible for the accuracy and completeness of the Form 3210.

All TEFRA key cases must be closed through Laguna Niguel APS. The AO should follow these closing procedures only if the AO did not use the ATT and TEFRA AO team member in working the case. If the AO used the ATT and TEFRA AO team member, then follow the procedures posted to the ATT sharepoint site. A link to the sharepoint site is found on the Appeals TEFRA website.

The AO prepares the case for closure and submits it to the ATM for approval and signature of Letter 2621, Form 872-N (if applicable), and Form 5402. The AO inputs AC-TF on ACDS.

The ATM (or AO if delegated by the ATM) will sign the letters and forms. After approval, the administrative file and closing package are forwarded to local APS. The AC-FR and ACAP codes are not input at this time.

Local APS mails the Letter 2621 and Form 872-N (if applicable) to the TMP by certified mail and POA, if any, places dated copies of the letters in the administrative file, then mails the closing package to the CTF.

Local APS will enter the one-year statute date on Form 3210 using the date that is the shorter of the statute date of the key case or one year from the date the Letter 2621 is mailed.

CTF inputs the one-year statute date for all direct partners and releases the “H” freeze.

Local APS monitors the key case AIMS record for the “H” freeze to be removed and the input of the one-year statute date for the direct partners on TSUMY.

After the CTF has input a one-year statute date on PCS for all direct partners and has released the “H” freeze, local APS:

Laguna Niguel APS will follow the procedures for closing the case in IRM 8.19.11.8.3 steps (6) through (11).