Anything signed or approved by or in the name of the Chief Counsel should be the position of the entire office and not merely the position of a particular division or part of the office. See coordination principles at CCDM 31.1.4.2 Coordination within the Office of Chief Counsel.

The basic authority of the Attorney General to settle tax cases within the jurisdiction of the Department of Justice is contained in section 7122(a) and Executive Order No. 6166, dated June 10, 1933. See C.B. X111–2, 449. Section 5 of that Order provides, in part, as follows:

Cases docketed in the Tax Court that have not been referred to the Department of Justice are within the jurisdiction of the Chief Counsel, who is the Commissioner’s exclusive representative in the Tax Court pursuant to section 7452.

In order to ensure that the Attorney General’s settlement authority is properly exercised with the fullest knowledge of all pertinent matters concerning cases within their jurisdiction, it is essential that proposed settlements of Tax Court cases that are related to cases pending in DJ are carefully coordinated with the DJ attorney. Following coordination with DJ, settlements of related Tax Court cases will be finalized by the Chief Counsel.

Coordination between the Chief Counsel and the Attorney General occurs whenever there is a pending refund or collection suit with DJ, and the taxpayer’s offer of settlement to DJ includes not only disposition of the refund or collection suit but also disposition of a related Tax Court case or a related nondocketed case. In this instance, only after coordination with DJ has been completed will a final determination on the acceptance or rejection of the offer be made. Coordination with the Attorney General must also occur in instances in which an offer of settlement is made to the Service to dispose of not only the Tax Court and/or nondocketed cases but also a pending refund or collection suit.

All letters to DJ regarding settlement may be mailed directly by Field Counsel, except that the following must be submitted to the appropriate Associate office for review:

Notwithstanding the above, Field Counsel in their discretion may send any letter to the appropriate Associate office for review. Two information copies of any directly mailed letter should be sent by Field Counsel to the appropriate Associate office. See Exhibit 35.11.1–1, Issues Requiring Associate Office Review.

A settlement or concession in a Tax Court case may not be made in any instance in which there is also a refund suit in a related case pending in a district court, the Court of Federal Claims, a court of appeals, or the Supreme Court without prior coordination of the proposed settlement or concession through the appropriate Associate office and with DJ. Likewise, a proposed settlement or concession in a refund suit will be coordinated with the related Tax Court case prior to the Office of Chief Counsel’s recommendation to DJ on such proposal. The requirements set forth in this section are applicable both to situations in which the Attorney General must be consulted with respect to the settlement of the Tax Court case, and in situations in which the settlement of the Tax Court case is to be effectuated without a corresponding settlement of the refund suit.

Approval of the issuance of the statutory notice by the office then charged with the criminal matter recognizes that the civil case may be forced to a conclusion before the criminal case. In any such case, whether the statutory notice was issued by Appeals or an Area Director (SB/SE), the files related to the Tax Court matter should be retained by Counsel pending completion of the criminal aspects of the case or until the supervisor determines that forwarding the case to Appeals is appropriate. Generally, any settlement of the case must be in accord with the basis of the recommendation for prosecution to DJ. See CCDM 38.3.1.8, which discusses the balancing of criminal and civil considerations.

It is the policy of the Service not to hold settlement conferences in Tax Court cases that have open criminal aspects, except at the request of or with the concurrence of DJ. (Note that the concurrence with DJ is necessary only if the criminal case has been referred; otherwise, concurrence is with the Criminal Investigation Division.) The factors to be given consideration may be different, depending upon whether the related criminal case is pending in Criminal Investigation, Counsel, or DJ offices. Also, the factors may be different when the related criminal case is open and when it is closed, as well as whether the taxpayer, or related taxpayer, was in fact indicted, convicted based upon a plea agreement, convicted after a trial, or was acquitted.

In this section, the term "related Tax Court and criminal cases" usually means that the criminal case involves the same taxpayer for the same or some of the same years that are pending in the Tax Court case. The term also includes a related taxpayer or different years of the same taxpayer if the facts, theory, or circumstances in the two cases are so intertwined that an action taken in one may materially affect the other. This is particularly applicable in net worth cases because of the effect of one year’s ending net worth on the next year’s beginning net worth.

The basic principle involved is that when a criminal tax case is under investigation or has been referred to DJ for prosecution, the Chief Counsel, or his delegate, should not, without a basic change in the facts or law, recommend criminal prosecution on the one hand while on the other hand admit or concede there is no civil fraud or fraud delinquency penalty. Nor should Field Counsel allow evidence to be prematurely discovered in a civil proceeding that would not be as readily available in a criminal case. In theory, there is a difference between the quantum of proof necessary to sustain the civil fraud or fraud delinquency penalty and to prove the criminal tax violation. As a practical matter, if there is sufficient evidence to recommend criminal prosecution, or DJ determines that there is sufficient evidence to warrant an indictment, there should be sufficient evidence to support the government’s burden on the civil fraud or fraud delinquency penalty. This latter factor should be borne in mind by the attorneys and supervisors in the consideration of any proposed concession of the fraud or fraud delinquency penalty in a Tax Court case for a year or years covered by the prosecution recommendation.

After a prosecution referral has been made to DJ in a criminal case, settlement negotiations in a related civil case will not ordinarily be conducted while the criminal aspects of the case remain open, except perhaps in fugitive situations or in response to a request by the attorney for the government as part of the sentencing process. In fugitive situations, however, negotiations should not be pursued without the advance concurrence of DJ. Any proposed settlement should be coordinated in advance with DJ. Any proposal for settlement should fully set forth all of the material facts.

When the criminal case has been closed by DJ following a conviction either by trial or plea, the following guidelines are applicable.

When the criminal aspects of a Tax Court case are pending investigation with Criminal Investigation or pending consideration with the delegated officials of Criminal Investigation, the following guidelines are applicable.

For civil cases which are set for trial before the disposition of the criminal case, the taxpayer may in a stipulation of facts or trial preparation conference make a settlement proposal, which the Field attorney deems acceptable and not detrimental to the criminal case. While, in this instance, the attorney or the reviewer must not make any commitment with respect to such offer or negotiate settlement, Field Counsel may clarify the taxpayer’s offer and obtain all of the facts or bases upon which it is made for later consideration and coordination with the Area Counsel (CT).

Problems often develop in the civil case when the taxpayer is under indictment and has left the country. It is the general policy of DJ not to deal with fugitives from justice. This policy specifically applies to the settlement of the civil liability and, normally, if the taxpayer is a fugitive from justice, settlement proposals will not be entertained or considered. In appropriate instances, DJ may give clearance for settlement negotiations. This general policy of not dealing with fugitives from justice does not apply to the stipulation of facts or other trial preparation when the Tax Court has set the civil case for trial prior to the disposition of the criminal case. If it appears that a case in this category will be set for trial by the Tax Court and that an agreed motion for continuance cannot be obtained, the Field Counsel responsible for the Tax Court case, the Area Counsel (CT), and APJP, Branch 3 should be promptly notified.

A settlement or concession in a Tax Court case may not be made in any instance where there is a related general litigation case (including bankruptcy cases) pending in any court without prior coordination of the proposed settlement or concession in the appropriate Division or Associate office and with DJ. Likewise, a proposed settlement or concession in a related general litigation docketed case will not be made or recommended to DJ without prior coordination concerning the Tax Court case.

Field Counsel will coordinate, or cause to be coordinated, within their areas the tax litigation and general litigation activities of related cases. Action will not be taken or recommended in one case without prior coordination.