This section provides guidelines for managers and resources for TEFRA cases.

The Appeals TEFRA Team (ATT) and TEFRA Technical Specialists serve as the resource persons for managers and all other Appeals employees. They should know and understand the responsibilities for all TEFRA duties within the Appeals office, including the procedures in this section relating only to the manager.

The guidelines in this Handbook are specifically for pass-thru entity cases and especially for TEFRA cases. They supplement the general information in other parts of the Appeals IRM.

The list of TEFRA resource persons is found on the Appeals TEFRA website.

All guidance in this section concerning the Campus TEFRA Functions (CTFs) is for cases controlled on the Partnership Control System (PCS). The CTFs only work with key cases and partners controlled on the PCS.

TEFRA cases are worked at the key case level. The Appeals office has jurisdiction over settlement of the partnership issues and the penalties and affected items.

The partner returns which are not Coordinated Industry Case (CIC) corporations, Joint Committee or corporate specialty cases will remain in the Campus TEFRA Function (CTF). The CTF is responsible for statute control, processing settlements and notices, and making assessments for the PCS-linked partner cases which are not Coordinated Industry Case (CIC) corporations, Joint Committee or corporate specialty cases. The CTF will generally handle questions about computations for PCS linked partner cases which are not Coordinated Industry Case (CIC) corporations, Joint Committee or corporate specialty cases.

CIC corporation partner cases will be suspended and controlled in the area/territory where the returns were examined unless Appeals has jurisdiction of the return.

Joint Committee cases and other corporate specialty partner cases will be handled in the same manner as the CIC corporation partner cases. Other corporate specialty cases are the following:

Penalties and affected item issues should generally be considered with the key case. Under the key case concept, the focus at the key Appeals office should be the partnership issues and related penalties and affected items.

Affected items may be considered after the partnership adjustments conclude. The TEFRA program cannot be effectively administered unless affected items are considered when the key case is evaluated. In addition, partners should be given an opportunity to settle affected item issues as early as possible. The appeals officer (AO) must evaluate affected item issues at the partnership level and attempt to resolve them at that time.

If affected item issues are unagreed when the partnership administrative proceeding concludes, and a partner protests or petitions the affected item issues, Appeals will consider each partner case separately. This eliminates the benefits of a unified proceeding. While some partners will require a separate determination at the partner level, the key AO should always evaluate the overall merits of the affected item issues at the partnership level. Also see IRM 8.19.2.10.3, Settlement of Penalty and Affected Item Issues.

For partnership tax years ending after August 5, 1997, if the penalty is unagreed when the partnership administrative proceeding concludes, Appeals will issue a Notice of Final Partnership Administrative Adjustment (FPAA) to address the penalty at the partnership level. Also see IRM 8.19.2.10.3, Settlement of Penalty and Affected Item Issues.

When an AO evaluating penalty issues on a key case (e.g., overvaluation) becomes aware that a related IRC 6700 penalty for promoting an abusive tax shelter was asserted, the AO should contact the examiner to advise of the proposed key case penalty settlement, particularly if the proposal is a full concession by the Government.

The duties of the ATM and ATT will overlap at times and may require some coordination.

Review work units prior to assignment to ensure the case is assigned to the appropriate AO. Because of the procedural difficulties and length of time required to close a TEFRA case, exercise care when assigning TEFRA cases.

Although TEFRA cases have adjustments, not deficiencies, these cases make up a large part of the Appeals inventory and typically involve large dollar amounts.

Since the partner cases are not available to the Appeals office, the formula shown in IRM Exhibit 8.19.10–1 is used to compute the estimated TEFRA "deficiency." The formula is also used to compute the estimated revised dollars at closing. However, at closing use line 2, Form 4605-A, prepared by Appeals for line 1 of the formula. Use the highest individual tax rate for joint filers as shown in IRM Exhibit 8.19.10–1 for both proposed and revised dollars regardless of who the specific investors may be.

When the case is initially assigned to the ATT, the TEFRA AO will compute the estimated proposed deficiency and validate it on ACDS. If the case is not initially assigned to the ATT (it went to local APS without going through Laguna Niguel APS) then the field AO assigned to the case must compute the estimated deficiency and validate ACDS.

When the case is closed, the field AO should compute the revised deficiency and enter it on Form 5402. The TEFRA AO will verify it and instruct APS to update it, if needed. Revised dollars are entered on ACDS only when the TEFRA key case is closed.

The ATM will need to determine the correct grade of each case using the case grading guidelines in IRM 1.4.28.8 and IRM Exhibit 1.4.28-1, IRM 1.4.28-2, and IRM 1.4.28-3 . Generally, grade the cases based upon the complexity of the issues.

Since the key case will include the estimated proposed tax deficiency for all investors, ACDS will automatically record the case at a grade 13 or 14. The ATM must then determine the correct grade and promptly advise APS.

The statute of limitations must be protected for both key cases and partner cases.

For a complete discussion on the statutory period of limitation, see IRM 8.19.1.6.6 and IRM 8.21.6.

Review all cases to identify systemic or procedural problems that need to be considered for corrective action. Make corrections timely at the local level if possible.

Timely apprise the area office and/or Appeals Technical Specialist(s) for TEFRA of the facts and circumstances when the situation requires their involvement.

Due to the unique statutory requirements of TEFRA, consider certain problem areas when settling partnership cases.

The unified partnership proceedings involve logistics problems in securing and processing settlement agreements for every partner. Even in those situations where the TMP may bind non-notice partners or where a pass-thru partner may bind indirect partners, every partner's return must be controlled by the Campus TEFRA Function in order to make the computational adjustments so that assessments or refunds can be made. This is a cumbersome and time-consuming procedure, particularly where the key case has partnerships as investors.

While the only criteria on which a settlement may be based are the facts, law, and hazards of litigation, the settlement should be structured to simplify its application to the partners' returns to the extent possible.

Settlements that require follow-up action in future years may inadvertently prejudice an examination of the subsequent years. To avoid this situation, the AO should determine whether the later affected years are currently under examination. If so, the AO should discuss the settlement of the current years with the examiner.

If the later years are not under examination, the AO should secure copies of the returns for the affected years and ascertain that the settlement will not prejudice an examination of subsequent years. The AO should also notify Compliance of any follow-up action required as a result of the settlement by using Form 5402.

For tax years ending after July 22, 1998, interest is suspended for a timely filed individual return if the Service fails to provide notice of the liability and the reason for the liability within a 36-month period (18 months effective for tax years where the 18-month period ended on or before November 25, 2007) beginning with the due date of the return (without extensions) or the filing date of the return, whichever is later. See IRC 6404(g). The interest suspension period ends 21 days after notice of the liability is given. For TEFRA partnerships, notice is deemed given to all partners when notice is given to the TMP. The earliest of the following provide IRC 6404(g) notice if the reason for the liability is given:

For partnership tax years beginning after August 5, 1997, in the case of a partner's settlement under IRC 6224(c), interest is suspended under IRC 6601(c) starting 30 days after the settlement agreement is executed by the Commissioner's delegate and ending with notice and demand. In the case of a CIC corporation, Joint Committee or other corporate specialty case, when the taxpayer enters into a TEFRA settlement, the AO assigned the partner return will secure a computation and assessment of the deficiency as quickly as possible in order to minimize the loss of interest. If the appeals team case leader or ATM deems it necessary to extend the one-year statute date to avoid the expense of time consuming computations while the investor case is in Appeals for non-TEFRA consideration, the AO will encourage an advance payment of tax. See IRM 8.19.6.11.

Appeals developed agreement forms to use for the settlement of TEFRA partnership cases. In addition, Compliance uses separate agreement forms that do not use the term "settlement." Refer to IRM 8.19.1.6.10 for a listing of forms to be used by Appeals, LB&I and SB/SE.

Settlement letters have also been developed.

Forward the agreement forms to the notice partners using one of two methods:

See IRM 8.19.11.8 and IRM 8.19.11.4 for a discussion on the recommended option depending upon the circumstances. If using method (3)b), above, be aware that the mailing addresses shown in the case file may not be current. Therefore, the AO should verify them with the TMP before an Appeals office directly mails the agreements.

Delegation Order No. 4-19 authorizes appropriate officials to sign notices such as FPAAs and settlement agreements. This authority for executing settlement agreements has been extended to AOs in the CTFs but not as to their respective cases. Appeals settlement agreements may be executed by Revenue Agents GS-12 and above in the CTFs.

The full authority within Appeals to sign FPAAs and settlement agreements as well as to designate a TMP has been delegated to ATMs, and to appeals team case leaders as to their respective cases.

Refer to Delegation Order Number 4-19, IRM 1.2.43.17, for settlement authority for your case.

The CTFs have the ability to mail computer generated NBAPs, 60-day letters, and FPAAs to the notice partners using the PCS. They also can generate settlement letters for mailing to all partners who have not already settled.

In large project cases, advise the CTFs as early as possible of the support required to process the settlement. Coordination between the CTFs may also be necessary in order to establish specific procedures for a particular project. In order to minimize procedural problems, Appeals offices should always avoid complex settlements that may be difficult to administer.

When accepted for the Commissioner, the agreement forms discussed in IRM 8.19.1.6.10 represent final settlements; therefore, exercise extreme care when executing the agreement forms.

Compare the schedule of adjustments with the office copy to ensure that the amounts are correct.

If the settlement is contingent upon all partners accepting it, do not execute any agreements until they are all received.

If the TMP agrees to bind all non-notice partners, the statement found in IRM 8.19.11.2 must be shown on the agreement form.

A pass-thru partner’s agreement binds all indirect partners unless the indirect partner is identified as provided in IRC 6223(c)(3). See IRC 6224(c)(1). No additional statement is needed on the agreement form for the pass-thru partner to bind the indirect partners.

Treas. Reg. 301.6223(c)-1(e) sets out specific requirements for a power of attorney from a TEFRA partnership partner. Section 2 of Form 2848 (The Power of Attorney and Declaration of Representative) must state the name and address of the authorized representative to handle partnership items and Form 1065. The following is the authorization language that can be used under section 3 of Form 2848:

If the "TEFRA partnership items" and "1065" are not included on the power of attorney, the representative may not be authorized to discuss partnership items, penalties, and affected item issues. See IRM 8.19.1.6.5.2, IRM 8.19.10.4.3.4, and IRM 8.19.6.7 for more information on powers of attorney.

Effective May 1, 2012, APS will no longer create and maintain office files.

After a case has been closed in Appeals and if information is needed from the administrative file, the AO must request the file by completing the ACDS Update Request Form in APGolf. The completed form should be sent to the following mailbox for processing: *AP-TS-APS Closed Case Doc Request.