General Information and Procedures. Field Counsel renders legal advice as to the most appropriate course of action and the probability of processing a case through to a successful conclusion.

Report from the Area Director. The Area Director’s office will generally send a report to the Field Counsel requesting that a suit be instituted. The general requirements for various types of suits are discussed in CCDM 34.6.1.3 and under the separate suit headings. The Technical Support Services Branch will obtain and forward all administrative files and other documents pertinent to the case.

Exhaustion of Administrative Remedies. Upon receipt of a suit request, Field Counsel must first determine whether the Area Director’s office has exhausted its administrative remedies.

Efforts by Field Counsel Prior to Litigation. Upon receipt of the case, Field Counsel should attempt a resolution of the matter without litigation. A letter from Field Counsel may achieve the desired result by indicating that the Service is embarking on the first step to enforce its rights.

Executive Order 12778 on Civil Justice Reform. Section 1(a) of Executive Order No. 12778 (57 F.R. 3640, January 30, 1992) requires that, in referring a civil action to DJ for the purpose of instituting a suit, either the Office of Chief Counsel or DJ make a reasonable effort to notify all disputants about the nature of the dispute and to attempt to achieve a settlement. By agreement with DJ, notification will normally be provided by Tax Division Attorneys. There may be instances, however, where counsel attorneys are requested to provide the required notification on behalf of DJ. A simple declarative statement in either the introductory or jurisdictional section of the suit letter affirming (1) that the notice of the Government’s intent to sue has been made, and (2) that the Service has attempted to resolve the dispute prior to referral, is sufficient. The notice and settlement provisions do not apply in any action in which the Service is not the plaintiff. The notice and settlement provisions are also inapplicable in the following circumstances:

Suit Not Recommended. Field Counsel is responsible for determining whether institution of suit should be requested. If Field Counsel determines that suit is not advisable, the Territory Manager’s office should be advised by a memorandum that sets forth the reasons therefor.

Referral to DJ. Section 7401 requires that any suit to collect or to recover taxes must be authorized or sanctioned by the Secretary or a delegate. The authority of the Chief Counsel has, in most cases, been redelegated to Field Counsel.

The emergency procedure can be utilized where there appears to be an imminent dissipation of assets, a need for immediate intervention, where the taxpayer should be restrained, or in any other situation demanding expeditious action. It should also be utilized where there is a short statute of limitations for collection.

If suit must be instituted immediately, the following procedure will be used.

A suit letter sanctioning the action must be forwarded as soon as possible.

If additional assessments are made after a suit has been referred, a supplemental letter to DJ should be prepared to include the additional taxes so that the judgment will cover all outstanding obligations of the taxpayer. DJ must be notified immediately of any payment made during the course of litigation.

The suit letter should mention when other sources of collection are available and whether the Service intends to pursue collection activity.

Amending a complaint to include new or omitted assessments is looked upon with disfavor by the courts. It is therefore suggested that collection be attempted from other sources rather than by suit, or if the amounts are de minimis, to ignore them for purposes of the suit. Any collection activities by the IRS during the pendency of the suit should be cleared in advance with Field Counsel and the Tax Division.

In rare instances, the General Counsel of the Treasury Department will appoint an agent with authority to act for the United States in bidding at certain execution sales of property where the United States is the plaintiff in the action. The statutes and delegations provide that, under 31 U.S.C. 3715, the Secretary is authorized to purchase real property upon which the United States has a lien at a judicial foreclosure sale. Section 7403(c) of the Code grants similar authority, limited to purchase of property upon which the United States has a first lien. The General Counsel of the Department of Treasury has been delegated authority under 31 U.S.C. 3715. Treasury Order 101-05 (December 17, 2015), paragraph 2 (delegating authority to General Counsel to perform any function the Secretary of the Treasury is authorized to perform). Similarly, the Commissioner of Internal Revenue has been delegated authority under section 7403(c). Treasury Order 150-10 (delegating to Commissioner the Secretary’s authority to enforce and administer the internal revenue laws). The Commissioner has further delegated that authority to the Deputy Commissioner. Delegation Order 1-23 (formerly Delegation Order 193 (Rev. 6)). Appointment of an agent is necessary because currently there is no delegation of authority from the General Counsel or the Deputy Commissioner to any IRS officer or employee to purchase property at a judicial foreclosure sale pursuant to section 7403(c) or 31 U.S.C. 3715.

The following documentation is required:

When it becomes necessary to secure the appointment under 31 U.S.C. 3715 of an agent to bid at an execution sale, documents modeled in Exhibits 34.12.1-9 through 34.12.1-14 will be effective.

The same documentation will be used in bidding in 28 U.S.C. 2410 cases. SeeCCDM 34.5.6.3.

A writ of ne exeat will be issued only where it can be shown that a defendant is about to leave the United States and that he or she has conveyed away his or her property, or has concealed cash or other property that has been arranged and concealed so that it may be taken out of the United States.

Since the nature of the writ is to protect the power of a court to give equitable relief to an injured party, it is necessary that a civil action requesting relief be commenced simultaneously with or soon after the application for a writ ne exeat. A writ of ne exeat may be issued before judgment, it may be provided for in a final decree, or it may even be issued after judgment is established. It is a temporary remedy, and is not intended to operate as a perpetual restriction upon a defendant’s freedom of movement. In personam jurisdiction is required.

The present provisions for writ of ne exeat are found in 28 U.S.C. 1651— also known as the all writs statute — and section 7402(a). In any court proceeding where there exists justification to use a writ of ne exeat, the following pleadings are usually necessary:

Actions to obtain writs of ne exeat republica shall be coordinated with the Office of the Associate Chief Counsel (International), Branch 1, where the taxpayer is an alien or nonresident citizen who has resided in a foreign jurisdiction for a period of time. If the taxpayer is a longtime U.S. citizen, coordination is with the Office of the Associate Chief Counsel (Procedure & Administration), Branch 3 or 4.

The United States as a plaintiff in an action has exactly the same rights and remedies available relative to restraining and injunctive relief as any other party to a proceeding. In U.S. v. Ernst & Whinney , 735 F.2d 1296 (11^th Cir. 1983), the Court held that section 7402(a) gives the district courts broad powers to grant injunctive and other equitable relief necessary to enforce the internal revenue laws. For Injunction actions brought by the United States under section 7402(a), review and approval by the Associate Chief Counsel (Procedure & Administration) is required. Suit letters should be forwarded to Branch 5, for review.

Civil injunctions under section 7402(a) to restrain pyramiding. Where a taxpayer is pyramiding trust fund taxes and the seizure of the business would not yield net proceeds, IRM 5.7.2 and IRM 5.17.4.17 set forth procedures that must be followed before seeking an injunction under section 7402(a). Where the Service determines that a judicial order is necessary, the usual writ of entry procedures should not be followed. In these cases, a suit letter should be prepared authorizing DJ to take appropriate action to enjoin further pyramiding. This letter should describe the extent of the taxpayer’s pyramiding and the Service’s previous efforts to bring the taxpayer into compliance. Generally, the Service will have given the taxpayer notice pursuant to section 7512. DJ will seek an injunction against further pyramiding and may, in appropriate cases, seek an entry order as a sanction for contempt.

Streamlined section 7402(a) procedure. There is also a streamlined section 7402(a) injunction procedure dealing with section 861 Employment Tax Stop Filer Cases. For such an injunction the Service needs to demonstrate:

Section 7407, Action to Enjoin Income Tax Preparers. Under this section the United States has specific authority to enjoin tax return preparers who engage in certain proscribed practices.

Section 7408, Actions to Enjoin Specified Conduct Related to Tax Shelters and Reportable Transactions. This provides specific authority for the United States to enjoin any person who takes action or fails to take action that is subject to a penalty under section 6700, 6701, 6707, or 6708 or is in violation of Circular 230.

The statutory 10-year estate tax lien is not based on an assessment but arises automatically on the date of death. The 10-year estate tax lien is of absolute duration. Therefore, a lien foreclosure must be completed before the expiration of 10 years. On the other hand, an administrative levy is completed once the notice of levy is served or, in the case of tangible property, when the notice of seizure is given. Thus, any suit outside the 10-year period to enforce a levy would not be barred. The estate tax lien may be available as a basis for action when the assessment lien or general lien is not applicable or is not entitled to priority under the circumstances. If the assessment lien arises after intervening rights come into play reliance must be placed upon the estate tax lien. There should be a thorough analysis of the circumstances giving rise to the estate tax lien and how it achieves priority over any intervening lien.

A remedy available but not often used is the suit to collect the estate tax lien from property listed in the gross estate on the federal estate tax return but not a part of the probate estate. See section 6324(a).

A remedy may be available based on the special lien provided for in section 6324A for estate tax deferred under section 6166 or 6166A (extension of time for payment of estate tax where estate includes closely held business). A remedy may also be available based on the special lien provided for in section 6324B for additional estate tax that may arise where specially valued property is disposed of or ceases to qualify for the special valuation under section 2032A (property used as a farm or used in a trade or business).

The statutory 10-year gift tax lien arises automatically upon the making of the gift. Therefore, it may achieve a priority over rights that have arisen prior to the actual date of assessment. In any suit letter based upon this gift tax lien, there should be an analysis of how the lien arose, what property it is applicable to, and how priority over intervening creditors has been achieved. The names and addresses of any other claimants to the property should be included in the letter.

Whenever Field Counsel believes that a limited action is preferable, this should be clearly stated in the letter to DJ, with the reasons for such recommendation.

The authorization paragraph of the letter should contain the usual broad and general authorization statement; it should not be limited to the specific action later requested in the letter.

Where appropriate, it is proper to recommend as many counts in the same action as may be appropriate or necessary to accomplish a desired result.

The primary responsibility for the collection of judgments rendered in favor of the United States rests with DJ. As a general rule, DJ looks to the local U.S. Attorney to collect judgments. The U.S. Attorney will generally request assistance from the Area Director. If Field Counsel is contacted regarding the judgment, it will also seek assistance from the Area Director’s office. SeeIRM 5.17.4.

Collection suits referred to and pending with DJ under most circumstances are under the settlement authority of the Attorney General. A suit letter to the Tax Division requesting and authorizing suit is ordinarily sufficient "reference" to give the Attorney General the authority to compromise under section 7122. A court proceeding need not be in existence. General guidelines for settlement procedures can be found at CCDM 34.8.

In all cases where the United States has obtained a judgment for the tax liabilities, compromise authority thereafter is only with the Attorney General. The Service cannot compromise under section 7122 taxes that have been reduced to judgment (except Tax Court judgments). In the past, when the Service has compromised taxes not realizing judgment has been entered, the facts have been forwarded to DJ and a request made that the compromise be affirmed.

Most suit recommendations referred to DJ will be subject to S.O.P. procedures, which means that DJ need not refer a settlement offer to the Office of Chief Counsel, unlike a case that is classified as STANDARD. Examples of cases that should be classified STANDARD are cases that require the review or approval by the Office of the Associate Chief Counsel (Procedure & Administration) or Division Counsel, cases where the taxpayer is in flagrant noncompliance, cases that are especially sensitive, or cases in which settlement may create difficulty in collecting from other taxpayers. SeeCCDM 34.5.1.1.1 Case Classification.

Regardless of whether a case has been classified S.O.P, DJ will refer any settlement offer based on collectibility to Field Counsel, who will refer it to the Area Director for verification.

Field Counsel has the responsibility of furnishing a settlement recommendation to the Tax Division on behalf of the Service. There is no specific requirement that the Area Director be contacted and asked for views; however, whenever possible, Field Counsel should obtain the views and recommendations of the Director’s office. Where the views of Field Counsel and the Territory Manager’s office regarding the offer are not in agreement, it is suggested that the case be referred to the Area level for resolution. If there is no resolution at the Area level then the case should go to Division for resolution.

The letter to the Tax Division should state the recommendation of the Office of Chief Counsel. A counteroffer can also be recommended.

There are no conferences by litigants and their representatives with the Associate Chief Counsel (Procedure & Administration) concerning offers in cases pending with Field Counsel.

Settlement recommendations to the Tax Division on offers in field cases are usually signed in the Field Counsel’s office.

Unassessed deficiencies for income, estate, and gift taxes are not recommended for suit.

The suit letter is prepared on Field Counsel stationery in the style prescribed by Office of Chief Counsel instructions concerning correspondence. It is signed on behalf of the Chief Counsel by the Field Counsel, with an appropriate by-line, subject to proper delegation to the Field Counsel.

The letter is personally addressed to the Assistant Attorney General, Tax Division, Department of Justice, for the attention of the Chief, Civil Trial Section of the appropriate Region.

The symbols of the originating office are indicated on the letter.

The caption of the letter should include the caption of the court action, where there is one, and DJ file symbols if known. The name and address of the taxpayer will be stated in the caption. The social security number or other taxpayer identification number should also be included. Special instructions concerning captions in cases where more than one function is involved will be found in the orders concerning coordination. Furthermore, the applicable statute of limitations date should be stated.

The originating attorney and reviewing supervisors should initial the letter on the designated initialed copy.

For cases where pre-review is required the suit letter will be emailed to Area Counsel and mailbox TSS Assignments where it will be forwarded to the appropriate Associate Chief Counsel office which will promptly contact the Field Counsel attorney assigned to the case.

Copies. The original is sent to the Tax Division. The copies should show the following distribution:

See Exhibit 34.12.1-8 for a checklist for use in preparing suit letters.

The first paragraph of a suit letter generally requests and authorizes suit or sanctions action pursuant to section 7401 or section 7403. Also, the first or second paragraph of the letter should state clearly what is being recommended, i.e., money judgment, foreclosure, enforcement of a levy, etc. If a personal judgment should not be secured, this fact should be stated, together with the reasons.

In addition to all the necessary data concerning the tax liability, information as to all efforts by the Area Director to enforce the tax lien administratively should be included. The collection history of the case is vital. State to what extent administrative remedies have been exhausted and the potential for future collection if the statute of limitations is extended.

Where appropriate, the suit letter should set forth a complete description of the property, the nature and amount of competing liens, and the identity of all lienors (and other affected parties) and their addresses so that they may be served as party defendants. The revenue officer’s report should not seek to determine the validity of the various claims.

The suit letter should analyze the relative priorities and indicate the fair market value of the property involved. Encumbrances that may have been satisfied or are otherwise unenforceable but have not been marked satisfied should be included in the letter.

All persons claiming any interest in the property to be foreclosed should be joined in the action and, preferably, at the beginning of the suit, because it is difficult to amend pleadings and amendments are frowned on by the courts.

Title searches should be complete, current, and accurate.

Where the Government has the burden of proving fraud, the suit letter should include Special Agents’ reports, Revenue Agents’ reports and any other data indicating fraud. Accurate information is necessary to back up all affirmative allegations.

Where cases involve trust fund recovery penalty assessments, the following should be included:

If insolvency is involved, it must be affirmatively alleged with as many facts supporting insolvency.

If an operating receivership is requested, the request should be well-documented since it is quite expensive and hard to control. There must be a clear need for a receiver shown, and if a potential person is known, his or her name should be included.

Where the United States seeks an injunction, evidence of equitable need must be presented to the Court before such relief will be granted.

All suit letters should include information pertaining to any notices issued and/or hearings conducted pursuant to sections 6320 and 6330 including court proceedings and their final disposition. A summary of all issues raised in these proceedings (where relevant) should be included.

Limitations on Assessments and Collection. Since DJ affirmatively alleges that the suit is timely the letter should explain why the collection periods are open where the suit is being commenced more than 10 years from the date of assessment. Copies of all available proof must be transmitted as enclosures to the suit letter. Furthermore, the letter should point out where the original documents are located. Keep in mind that the authority to extend the collection period under section 6502(a) has been severely curtailed and can only be done in very limited cases. See IRM 5.17.4.5.

At the institution of the suit, DJ should be informed as to what information will be made available and what is in existence. Attach what you have to the suit letter.

Additionally, the suit letter should contain:

Copies of all pertinent documents should be enclosed (many of which will be included administrative file in collection suits) with the letter including:

A suit is instituted by filing a complaint. It is a notice-type proceeding. Adequate and full information should be contained in the suit letter. Supplemental letters can be sent to DJ if additional information is subsequently obtained after the due date of the letter. There are three phases of a complaint: Jurisdiction and Venue, Statement of the Claim, and Prayer for Relief.

Jurisdiction. Usually jurisdiction is statutory in federal courts, and there are generally no problems. The following questions should nonetheless be considered:

Venue for an in-rem proceeding is where the res is located. Venue requirements for suit are where the return is filed, where the liability occurs, or where the taxpayer resides.

A Statement of the Claim is necessary to allege that an assessment has been made.

Prayer for Relief. This portion of the complaint follows from the theory of the case.

The Tax Division has indicated that, in addition to the items listed above, the following tax data should be included in all suit letters: