Part 4. Examining Process

Chapter 2. General Examining Procedures

Section 3. Technical Advice to Taxpayers and Examination Personnel

4.2.3 Technical Advice to Taxpayers and Examination Personnel

4.2.3.1 (10-01-2003)

Furnishing Advice to Taxpayers

  1. Oral advice given to taxpayers should correctly reflect the position of the Service.

4.2.3.1.1 (10-01-2003)

Guidelines for Furnishing Advice

  1. Employees who give advice and assistance to taxpayers will observe the following guidelines:

    1. Ensure that there is a clear understanding of the facts involved in the transaction under discussion and that the applicable principles of law are identified and explained so the taxpayer understands the facts and law as discussed.

    2. Advice should not be given until there is a clear understanding of the facts and applicable law. If the facts are not clear, clarify areas of doubt and request additional information as needed. If the applicable law is not clear, follow through with necessary research to ascertain the correct answer before replying fully to the request.

4.2.3.1.2 (10-01-2003)

Furnishing Advice on Filing Claims for Refund and Appeal Rights Questions

  1. In furnishing advice to taxpayers on the filing of claims for refund and answering questions on the appeal rights of taxpayers, the employee should explain the Service's position and recite the law and regulations regarding the filing of a timely claim or an individual's appeal rights. No attempt should be made to dissuade the taxpayer from making a claim. This will avoid subsequent assertions that, if the Service had not "refused to accept" the claim, the taxpayer's interest would have been protected and other similar assertions.

4.2.3.2 (10-01-2003)

Taxpayer's Request for Determination Letters

  1. Determination letters will be issued by each director's office in response to taxpayer requests. Specific guidance related to the issuance/submission of determination letters is found in the first revenue procedure issued each year. This revenue procedure is updated annually, but may be modified or amplified during the year.

  2. Definitions:

    1. Determination Letter: A "determination letter" is a written statement issued by a director that applies the principles and precedents previously announced by Headquarters to a specific set of facts. It is issued only when a determination can be made based on clearly established rules in the statute, a tax treaty, the regulations, or based on a conclusion in a revenue ruling, opinion, or court decision published in the Internal Revenue Bulletin that specifically answers the questions presented.

    2. Director: any reference to director or field office refers to the Director, Field Operations, LMSB; the Area Director, Field Compliance, SB/SE; or the Director, Compliance, W&I and their respective offices.

4.2.3.2.1 (10-01-2003)

Determination Letters Issued

  1. Directors issue determination letters in response to taxpayers' written requests on completed transactions that affect returns over which they have examination jurisdiction.

  2. A director may issue a determination letter on the replacement, even though not yet made, of involuntarily converted property under IRC § 1033, if the taxpayer has filed an income tax return for the year in which the property was involuntarily converted.

4.2.3.2.2 (10-01-2003)

Determination Letters Not Issued

  1. Directors normally do not issue determination letters on the tax consequences of proposed transactions.

  2. A Director will not issue a determination letter in response to any request if --

    1. It appears that the taxpayer has directed a similar inquiry to Headquarters;

    2. The same issue involving the same taxpayer or a related taxpayer is pending in a case in litigation or before an area office;

    3. The determination letter is requested by an industry, trade association, or similar group; or

    4. The request involves an industry-wide problem.

  3. Under no circumstances will a director issue a determination letter unless it is clearly shown that the request concerns a return that has been filed or is required to be filed and over which the director has, or will have, examination jurisdiction.

4.2.3.2.3 (10-01-2003)

Guidelines to Request a Determination Letter

  1. The first revenue procedure issued each year (i.e., Rev. Proc. 2003-1) contains specific information on requesting a determination letter. This section will provide an overview of the information needed to request a determination letter.

  2. Certain information is required in all requests for a determination letter:

    1. Names, addresses, telephone numbers, and taxpayer identification numbers of all interested parties;

    2. The annual accounting period, and the overall method of accounting for maintaining the accounting books and the filing of federal income tax returns, of all interested parties;

    3. A description of the business reasons for the transaction; and

    4. A detailed description of the transaction.

    5. Copies of all contracts, wills, deeds, agreements, instruments, other documents, and foreign laws.

  3. All material facts and documents must be included in the taxpayer's initial request or in supplemental letters. These facts must be accompanied by an analysis of their bearing on the issue or issues, specifying the provisions that apply.

  4. The request must state whether, to the best of knowledge of both the taxpayer's and the taxpayer's representative, the same issue is in an earlier return of the taxpayer.

  5. The request must state whether the same or similar issue was previously ruled on or requested, or is currently pending.

  6. The request must state whether it involves an interpretation of a substantive provision of an income or estate tax treaty.

  7. The request must state if the taxpayer advocates a particular conclusion, an explanation of the grounds for that conclusion and the relevant authorities to support it must be included.

  8. The request should inform the Service about, and discuss the implications of, any authority believed to be contrary to the position advanced by the taxpayer.

  9. The request should identify any pending legislation that may affect the proposed transaction.

  10. The request must be signed and dated by the taxpayer or the taxpayer's authorized representative. A stamped signature is not permitted.

  11. The request and any subsequent change submitted must be accompanied by the following declaration: "Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete." The declaration must be signed and dated by the taxpayer, not the taxpayer's representative. A stamped signature is not permitted.

  12. A request for a determination letter must be accompanied by a statement indicating the deletions desired. Because the text of the determination letter is open to public inspection under IRC § 6110, the Service makes deletions required by IRC § 6110(c) from the text before it is available for inspection. If the deletions statement is not submitted with the request, the request will be closed within 21 days.

  13. A request generally requires only copy to be submitted.

  14. SB/SE and W&I taxpayers should send their determination letter requests to their local SB/SE office. Appendix D of the first revenue procedure issued each year contains the addresses for the appropriates SB/SE offices.

  15. LMSB taxpayers should send their request for a determination letter to the following address:

    Internal Revenue Service

    Attn: Manager, Office of Pre-Filing Services

    Large and Mid-Size Business Division

    C:LM:PFT:PF

    Mint Building, 3rd Floor

    801 9th Street N.W.

    Washington, D.C. 20002-4503

  16. Fees are required to be paid with determination letter requests. See Appendix A of the first revenue procedure issued each year for the required fee amount. Also see IRM 4.8.8.6, Involuntarily Converted Property.

4.2.3.2.4 (10-01-2003)

Employee Responsibilities

  1. Compliance employees who handle the determination letter requests need to ensure that a careful distinction is made between requests for determination letters and general information requests. If it appears to be a request for general information, treat it as such and do not apply these provisions. A general information response should clearly state that it is providing general information only.

4.2.3.3 (10-01-2003)

Securing Advice for Compliance Personnel

  1. Examination compliance personnel have various types of assistance that can be requested to assist them in performing their job duties.

4.2.3.3.1 (10-01-2003)

Assistance Available from Area Counsel

  1. Area Counsel is the legal advisor to the Area Director. Generally, examiners are entitled to advice or guidance for any technical or procedural matter related to the tax liability of any taxpayer. Area Counsel may provide for advice through consultation or by memorandum. Written advice is generally first requested through Technical Services (Exam).

4.2.3.3.1.1 (10-01-2003)
Examples of Area Counsel Assistance

  1. Examples of types of assistance that may be requested from Area Counsel through Technical Services (TS) include but are not limited to the following:

    1. Meaning, enforceability, and effect of legal terms in a contract;

    2. Application of State laws to the elements of a contract;

    3. Information regarding applicable State statutes, which relate to corporate existence and the status of transferee assets;

    4. Review of a case to ascertain favorable points, factual weaknesses, and/or adverse circumstances to the government's case in order to determine whether the Service's position on the issue would be fairly presented in court;

    5. Evaluation of primary or secondary evidence in a case, which would be useful in litigation;

    6. Documentation of evidence;

    7. Review of proposed statutory notices of deficiency under the provisions of IRM 4.14; and

    8. Advice related to the issuance and enforcement of summons per IRM 25.5.10.4.3.

4.2.3.3.1.2 (10-01-2003)
Informal Advice

  1. When a quick response is required, Technical Services (TS) will contact Area Counsel informally for assistance. The subject matter must be limited to relatively routine and simple concepts. This informal procedure should not be used as a substitute for more formal advice, where such advice is appropriate.

  2. Area Counsel will limit their assistance to advice and recommendation. This assistance will not give orders or directions. It may not be cited as authority to effect a closing.

4.2.3.3.1.3 (10-01-2003)
Procedures for Requesting Area Counsel Assistance

  1. The examiner should research the issue in question before seeking legal advice. The case should then be discussed with the group manager. The group manager should ensure that all the facts are fully developed and documented. Either the examiner or the group manager should discuss the issue with Area Technical Coordinator or directly with Area Counsel per procedures established in the Area.

  2. Once the decision is made to request legal advice, the examiner should prepare a formal memorandum requesting advice. The memorandum should fully detail the facts and circumstances of the issue. Additionally, pertinent documents should be included as attachments to the memorandum. The examiner must include his/her contact number in the event Area Counsel needs additional information.

  3. The memorandum should be directed to the Area Counsel for the appropriate operating division (i.e., SB/SE, LMSB, etc.) through the group manager and the Area Technical Coordinator in Technical Services (TS). The Area Technical Coordinator is responsible for screening oral and written requests to ensure that they are properly directed.

4.2.3.4 (10-01-2003)

Technical Advice Memorandum

  1. A Technical Advice Memorandum (TAM) is requested according to formal procedures contained in the second revenue procedure (i.e., Rev. Proc. 2003-2) issued each year. This revenue procedure is updated annually, but may be modified or amplified during the year.

  2. A Technical Advice Memorandum is intended to establish the proper interpretation and application of the Internal Revenue laws to the facts of a specific case. A Technical Advice Memorandum is a final determination of the Service's position for a specific case. The examiner must follow the Technical Advice Memorandum in preparing the report and closing the case.

  3. The Director determines whether to request technical advice on any issue being considered. Once an issue is identified, all requests for technical advice should be made as early as possible. The Director's decision to request technical advice should not be affected when the issue is raised late. Responses to technical advice frequently result in publication of revenue rulings and revenue procedures which promote uniformity in the treatment of tax issues.

  4. The taxpayer may request technical advice on the grounds that a lack of uniformity exists regarding an issue, or that the issue is so unusual or complex that is warrants consideration by Headquarters. (See Policy Statement P-4-82 in IRM 1.2.1.4.23)

  5. Each request for a Technical Advice Memorandum is forwarded through the Area Technical Coordinator in Technical Services (Exam). The Technical Coordinator reviews and processes the requests for technical advice. (See IRM 4.8.8.14)

4.2.3.4.1 (10-01-2003)

Definition of Technical Advice

  1. Technical advice means advice or guidance in the form of a memorandum furnished by Headquarters in response to any technical or procedural question that develops during any proceeding on the interpretation and proper application of tax law, tax treaties, regulations, revenue ruling, notices, or other precedents published by the national office to a specific set of facts. Such proceedings include:

    1. The examination of a taxpayer's return;

    2. The consideration of a taxpayer's claim for refund or credit;

    3. Any matter under examination pertaining to tax-exempt bonds or mortgage credit certificates; and

    4. Any other matter involving a specific taxpayer under the jurisdiction of the territory manager.

4.2.3.4.2 (10-01-2003)

When to Request a Technical Advice Memorandum

  1. The examiner needs to consider whether the circumstances warrant a request for technical advice or do not warrant a request.

4.2.3.4.2.1 (10-01-2003)
Circumstances That Warrant a Technical Advice Memorandum

  1. Given a specific set of facts, technical advice should be requested when:

    1. The law and regulations are not clear on the issue under consideration, and there is no published precedent for determining the proper treatment of the issue;

    2. There is a lack of uniformity regarding the disposition of an issue;

    3. A doubtful or contentious issue is involved in a number of cases;

    4. The issue is unusual or complex enough to warrant consideration by Headquarters; or

    5. The director believes that securing technical advice from national office would be in the best interest of the Service.

4.2.3.4.2.2 (10-01-2003)
Circumstances That Do Not Warrant a Technical Advice Memorandum

  1. The following are instances when a technical advice memorandum should not be requested:

    1. Frivolous issues should not be forwarded to Headquarters. A " frivolous issue" is one without basis in fact or law, or that espouses a position which has been held by the courts to be frivolous or groundless. See IRM 4.19.1.6, Frivolous Filers, or its successor.

    2. An identical issue of the same taxpayer that an area office is currently considering. A director also may not request technical advice on an issue if the same issue of the same taxpayer is in a docketed case for any taxable year.

4.2.3.4.3 (10-01-2003)

Guidelines to Request a Technical Advice Memorandum

  1. The second revenue procedure issued each year contains specific information on requesting a Technical Advice Memorandum. This section will provide an overview of the information needed to request a Technical Advice Memorandum.

  2. Certain information is required in all requests for technical advice:

    1. A completed Form 4463, Request for Technical Advice, to include the signature of the approving official.

    2. A clear and complete statement of the issue(s) in controversy to include a statement of the facts.

    3. The Area's statement of its position about the issue(s), an analysis of the applicable law, and the arguments in support of the position.

  3. If the taxpayer initiates the request for technical advice, the taxpayer must submit a written statement that includes the facts, the issues, an explanation of the taxpayer's position, a discussion of relevant statutory provisions and the reasons for requesting technical advice. The taxpayer must also submit a copy of relevant foreign laws and certified English translations of documents in a language other than English.

  4. If the Service initiates the request for technical advice, the taxpayer is notified that technical advice is being requested and is given a copy of the arguments being made to support the position of the Service. The taxpayer is given ten calendar days to indicate, in writing, any factual disagreement. Every effort should be made to reach agreement on the facts and specific points at issue. Taxpayers are encouraged to submit a written statement with an explanation of the taxpayer's position and a discussion of the statutory provisions that support the taxpayer's position.

  5. If applicable, Power of Attorney information must be included. The preferred form is Form 2848, Power of Attorney and Declaration of Representative.

  6. Because the text of the Technical Advice Memorandum is open to public inspection under IRC § 6110, the Service makes deletions from the text before it is available for inspection. To help the Service make the deletions required by IRC § 6110(c), the taxpayer must provide a statement indicating the deletions desired. Whether the request for technical advice is submitted by the director or the taxpayer, if the taxpayer does not submit the deletions statement, the national office will make the deletions that the Commissioner of the Internal Revenue Service determines are required by IRC § 6110(c).

  7. The area office must submit three copies of the request for technical advice with two copies designated for Headquarters. The area office must send one copy of the request for technical advice to: (1) the technical advisor if the request involves a designated issue or industry under the Office of Pre-Filing and Technical Guidance, LMSB; and (2) the operating division counsel that has jurisdiction of the taxpayer's tax return.

  8. Requests for technical advice are mailed to the following address:

    Internal Revenue Service

    Attn: CC:PA:T

    P. O. Box 7604

    Ben Franklin Station

    Washington, D. C.20044

  9. The technical advice request package must be assembled and organized by the examiner. If the package includes a number of attachments, the examiner should label/index the references. An original and at least three copies of Form 4463 with applicable attachments must be submitted to the Area Technical Coordinator. The Technical Coordinator will forward the appropriate copies to national office.

4.2.3.4.4 (10-01-2003)

Conferences

  1. Two types of conferences may be held with the taxpayer.

4.2.3.4.4.1 (10-01-2003)
Pre-Submission Conferences

  1. In an effort to promote expeditious processing of requests for technical advice, Headquarters will generally meet with the area office representative and the taxpayer prior to the time when the request for technical advice is submitted to Headquarters.

  2. In cases involving very complex issues, the area is encouraged to request pre-submission conferences. A request for pre-submission conferences should be made only after the area determines that it likely will request technical advice and the parties agree that a pre-submission conference should be requested.

  3. The purpose of the pre-submission conference is to facilitate agreement between the area office and the taxpayer as to the scope of the request for technical advice, the factual information to be included, any collateral issues that should or should not be considered and any other information that should be considered.

  4. Requests for pre-submission conferences must be submitted in writing by the area office. The conferences generally are held in person in Headquarters. The conference may be held via telephone if one or more of the parties are unable to travel.

4.2.3.4.4.2 (10-01-2003)
Conferences for Taxpayer Adverse Decisions

  1. When the examiner notifies the taxpayer that technical advice is being requested, the taxpayer will also be told about the right to a conference in Headquarters if an adverse decision is indicated. The taxpayer will be asked if a conference is desired.

  2. If it appears the technical advice adverse to the taxpayer will be given and a conference has been requested, the taxpayer will be notified of the time and place of the conference. The notification of the taxpayer is by telephone, if possible.

  3. The conference is held within 21 calendar days after the taxpayer is contacted. An extension of the 21 days is granted only if the taxpayer justifies it in writing and the associate or assistant chief counsel of the office assigned to the case approves the extension request. There is no right to appeal the denial of an extension request.

4.2.3.4.5 (10-01-2003)

Replies to Requests for Technical Advice

  1. Replies to requests for technical advice are addressed to the director and are drafted in two parts. Each part identifies the taxpayer by name, address, identification number, and year or years involved.

  2. The first part of the reply is a transmittal memorandum (Form M-6000). In unusual cases, it serves as the means to give the area office advice that need not be discussed with the taxpayer.

  3. The second part of the reply is the technical advice memorandum, which contains the following:

    1. A statement of issues;

    2. The conclusions of Headquarters;

    3. A statement of the facts that pertain to the issues;

    4. A statement of pertinent law, tax treaties, regulations, revenue rulings, and other precedents published in the Internal Revenue Bulletin, and court decisions; and

    5. A discussion of the rationale supporting the conclusions reached by Headquarters.

  4. The conclusions give direct answers, when possible, to the specific issues raised by the field office. Headquarters may reframe the issues to be answered in the technical advice. The discussion of the issues will be in enough detail so the field will understand the reasoning underlying the conclusion reached.

4.2.3.5 (10-01-2003)

Technical Expedited Advice Memorandum

  1. The Service has provided a program to streamline the issuance of Technical Advice Memoranda (TAM). The new advice will be known as a technical expedited advice memorandum (TEAM). The purpose of the TEAM is to expedite aspects of the TAM process and to eliminate requirements (taxpayer and field agreement on facts) that may delay or frustrate the process.

  2. A TEAM issued under Rev.Proc. 2003-2 will have the same force and legal effect as a TAM requested under Rev. Proc. 2003-2. The Service will attempt to issue TEAMs within 60 days of receipt and the field will have 30 days from the issuance of the TEAM to request reconsideration.

  3. In general, the same procedures should be used for preparing a TEAM request that are used for preparing a TAM request.

  4. All documents will be electronically transmitted by field counsel (followed by hard copy upon request of the Associate Chief Counsel). The field and the taxpayer are encouraged to provide electronic versions of a proposed TEAM containing the taxpayer's deletions and legends for the Associate Chief Counsel's use.

4.2.3.6 (10-01-2003)

Technical Coordination Reports

  1. Under the Technical Coordination Report Program, tax abuses, inequities, and administrative problems in the interpretation and application of tax laws and regulations are reported to Headquarters. It is essential that Headquarters be made aware of the scope of tax arrangements that may have the effect of legally circumventing the statute or regulations. Since examiners in the field are often in the best position to identify these situations, the initial steps toward the correction or elimination of the problems frequently originate in the field.

  2. The Technical Coordination Report Program was established as a vehicle for communicating these matters to Headquarters. The program is administered by the Area Technical Coordinator, who is responsible for establishing and maintaining an avenue of communication with Headquarterson problem areas encountered, through the use of Technical Coordination Reports (TCR).

4.2.3.6.1 (10-01-2003)

General Information

  1. Technical Coordination Reports need not be case related. They may result from news items, publications, or other matters encountered in day to day operations. The use of Technical Coordination Reports, both case and non-case related, allows Headquarters to utilize the knowledge and experience of field personnel in improving nationwide operating programs.

  2. Technical Coordination Reports can include one or more of the following subject areas:

    1. Problems or practices that indicate abuses, inequities, or difficulties in applying the administrative provisions of the Internal Revenue Code and that may be corrected by reexamination of rules for interpretation and application of tax law;

    2. Suggestions for policy statements or interpretative materials on broad subjects if the guidance would assist in eliminating controversy or in promoting national uniformity; or

    3. Suggestions for improvements in tax laws, regulations, tax forms and/or instructions for tax forms.

  3. Technical Coordination Reports are classified into two categories: Those containing significant items which merit the Commissioner's attention, and those which do not merit the Commissioner's attention.

4.2.3.6.2 (10-01-2003)

Technical Coordination Reports that Merit the Commissioner's Attention

  1. Generally, it should be assumed the Commissioner wants to review matters having one or more of the following characteristics:

    1. A large number of taxpayers are affected;

    2. A large amount of revenue or potential revenue is involved;

    3. The matter relates to a key policy of the president, the Secretary of the Treasury, or the Congress;

    4. The matter is causing or may cause a significant amount of adverse publicity or public controversy; or

    5. The matter is creating significant problems in the audit of returns, appeals, or litigation.

  2. While the primary focus is on substantive problems, administrative problems can be submitted under this category if they are of a significant nature. Problems which might be alleviated by amendment of regulations rather than legislative enactment may also be included.

4.2.3.6.3 (10-01-2003)

Technical Coordination Reports That Do Not Merit the Commissioner's Attention

  1. The following situations should be reported to Headquarters through Technical Coordination Reports:

    1. Tax Abuses: This area covers all cases in which an apparently lawful method or device has been used to escape all or a portion of the tax that would be due. Generally, tax avoidance devices resort to lawful management or manipulation of the form or timing of an income or loss producing transaction to take advantage of some relief provision of the law, or to avoid the tax consequences that would attach to the economic benefits realized.

    2. Inequities: This area involves situations where the application of some particular provision of the law to the particular facts and circumstances results in a substantial disadvantage with other taxpayers.

    3. Administrative Problems: this area covers situations where an administrative requirement of the law seems to impose an unnecessary burden on the Service.

4.2.3.6.4 (10-01-2003)

Procedures for Technical Coordination Reports

  1. Form 3558, Technical Coordination Report, is used for reporting both those items that either warrant or do not warrant the Commissioner's attention. Form 3558 is completed in triplicate.

  2. If the Technical Coordination Report merits the Commissioner's attention, Form 3558 should be clearly marked "COMMISSIONER'S ATTENTION " at the top of the form.

  3. Reports should be directed to the appropriate office (in Headquarters) as listed in Item 1 of Form 3558.

  4. The original and applicable copies of Form 3558 should be forwarded through channels to the Area Technical Coordinator (TS) for review. Technical coordinators are encouraged to add their comments or additional recommendations even if they concur with the originator. They must provide comments or an appropriate explanation if they do not concur with the recommendation. The package is then processed to Headquarters.

  5. If it is concluded that a Technical Coordination Report designated "Commissioner's Attention" does not merit the Commissioner's attention, it will be amended for forwarding to Headquarters office.