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The mission of Appeals is to resolve federal tax controversies without litigation on a basis which is fair and impartial to both the Government and the taxpayer, promotes a consistent application and interpretation of, and voluntary compliance with, the federal tax laws, and enhances public confidence in the integrity and efficiency of the IRS. Appeals accomplishes this mission by considering protested and Tax Court cases and negotiating settlements in a manner which ensures Appeals employees act in accordance with the Taxpayer Bill of Rights (TBOR) in every interaction with taxpayers. See IRM 8.1.1.2, Accomplishing the Appeals Mission.

IRC 7803(e), Independent Office of Appeals

26 CFR 601.106, Appeals Functions

IRM 1.2.1.9, Policy Statement for the Appeals Process

IRM 1.2.2.9, Delegations of Authority for the Appeals Process

The following are authorities and IRM resources for some of the topics covered in this IRM section. See each IRM subsection for more information.

The Director, Operations Support, is the executive responsible for Appeals¡¯ policy and procedural guidance.

The Director, Policy, Planning, Quality and Analysis (PPQA) is responsible for program oversight.

PPQA provides trend and data analyses and detailed summary reports for Appeals.

The following table lists commonly used acronyms and their definitions:

See Exhibit 8.1.1-1, Common Terms Used by Appeals.

See IRM 8.7.1.1.2, Authority, for related IRM guidance on topics covered in this IRM section.

Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. Refer to the TBOR website, for additional information.

In accordance with IRM 25.30.2.3, Statement of Commitment, Appeals and the Taxpayer Advocate Service (TAS) will work collaboratively to enhance the taxpayer experience. See IRM 25.30.2, Service Level Agreement between the IRS Independent Office of Appeals and the Taxpayer Advocate Service.

For the purposes of IRC 547, the term "determination" means:

Use Form 2198, Determination of Liability for Personal Holding Company Tax, as an informal agreement for liability of PHC tax under IRC 547(c)(3). For authority to enter into such agreements, see Delegation Order No. 4-1 [formerly Delegation Order 8 (Rev. 11)] in IRM 1.2.2.5.1, Delegation Order 4-1 (formerly DO-8, Rev. 11), Agreements as to Liability for Personal Holding Company Tax.

Do not accept Form 2198 unless sufficient time remains to make an assessment, taking into consideration the taxpayer is allowed 120 days. See IRM 25.6.22.7.1.9, Personal Holding Company Tax.

Do not accept this agreement form on behalf of the IRS unless the taxpayer executes an appropriate agreement/waiver form, such as Form 870 or Form 870-AD, covering the proposed adjustments to both income tax and PHC tax for the years involved. Form 870 must contain conditional paragraphs as shown in IRM 4.10.8.11, Personal Holding Company (PHC) - Deficiency Dividends. Ordinarily it is not necessary to insert conditional paragraphs on Form 870-AD since the acceptance of Form 870-AD and Form 2198 are concurrent. See also Rev. Proc. 63-1, 1963-1 C.B. 471.

When using closing agreements as determinations under IRC 547(c)(2), see IRM 8.13.1, Closing Agreements, and Rev. Proc. 68-16, 1968-1 C.B. 770.

If Form 2198 is accepted, solicit taxpayer's claim (Form 976) and secure necessary substantiating evidence.

Claim filing deadlines include the following, as set forth in 26 CFR 1.547-2, Requirements for Deficiency Dividends:

If no unusual circumstances are involved and verification of payment of dividends can easily be made, verify the claim. Prepare Form 3189, Deficiency Dividend Deduction Case Transmittal, and Form 5402, Appeals Transmittal and Case Memo, and close the case.

If unable to easily verify the claim, send the substantiating evidence and administrative file to Compliance to verify the claim and prepare the report. Clearly state on the transmittal that the entire case file must be returned to Appeals, including the Revenue Agent Report (RAR) reflecting the recommendation to allow or disallow the claim. See IRM 4.10.8.11, Personal Holding Company (PHC) - Deficiency Dividends, that covers Compliance¡¯s considerations of Form 976 claims involving Appeals acceptance of Form 2198.

The ATE is responsible for providing the Tax Computation Specialist with PHC tax case information needed for preparing computations and agreement forms, including Form 2198. See IRM 8.7.1.2.2, Tax Computation Specialists.

Depending on local procedures, either APS or the ATE controls the 120 days. APS must notify the ATE of the date Form 2198 is mailed. See related IRM guidance in IRM 8.7.1.2, Personal Holding Company Tax Alleviated by Deficiency Dividend.

Because the amount of the PHC tax is embedded in the body of the settlement computation and hard to see, the Tax Computation Specialist (TCS) or other employee preparing the settlement computations must provide the amount in "reference number 321 field" of the Form 5403 Worksheet. This requirement is valid for MFT 02 returns.

The ATE or TCS, whomever prepares the settlement computations, is responsible for preparing a computation of the PHC tax.

Interest is restricted for PHC tax underpayments under IRC 547(f)(2) and on overpayments under IRC 547(b)(2). This information is annotated in the settlement computation (on Form 3610, 5278, etc.) when applicable.

The Tax Reform Act of 1986 added the research credit to the general business credit (GBC) for years beginning after 1985. Prior to that it was a stand-alone credit. As part of GBC, it is subject to the carryback and carryforward provisions of IRC 39(a).

Special rules apply where both the credit and a deduction is claimed for the same research expenditures.

The Tax Relief Extension Act of 1999 provides for two suspension periods for the research credit. As a result, credit arising from these suspension periods cannot be taken into account on original returns.

No credit involving the two suspension periods may be claimed on a timely filed or late filed original income tax return, even if that original return is filed after the expiration of such suspension period. The amount can only be claimed on a Form 1040X/ Form 1120X or a Form 1045/ Form 1139.

Further, any claim for refund of an overpayment of tax attributable to a research credit suspension period cannot be filed before the expiration of the applicable suspension period or before the date the original return for the applicable taxable year is filed.

See Notice 2001-2; 2001-2 IRB 1 (December 6, 2000) and IRM 21.7.4, Income Taxes/Information Returns, for additional information on research credit suspension periods.

To determine the amount of the credit that is suspended, the taxpayer must first calculate the research credit for the taxable year.

The amount of the total credit that is suspended is based solely on the number of months in the fiscal year before the suspension date (October 1, 2000 or October 1, 2001) and the number of months after the suspension date, not on the dollar amounts incurred for qualified research activity during the suspension periods. Any adjustment to the credit amount is to be allocated to the different periods before and after the suspension date. See the examples below:

Any research credit not allowed in the taxable year that is attributable to a research credit suspension period may not be claimed as a carryback or carryforward until the day after the end of the applicable research credit suspension period. After the end of the applicable research credit suspension period, however, research credits attributable to a research credit suspension period not used currently as a credit against tax may be carried to other taxable years under the rules of IRC 39.

During these suspension periods, the research credit is not used to determine any amount required to be paid for any purpose under the Internal Revenue Code. This restriction extends to the determination of underpayments for the computation of penalties and additions to tax.

In general, additions to tax for failure to pay estimated tax are made under IRC 6654 or IRC 6655 for any underpayment of income tax imposed by the Code even if the underpayment is created or increased because of the suspension of the research credit. No additions to tax for failure to pay estimated tax, however, are made for any period before July 1, 1999, for any underpayment of income tax imposed by the Internal Revenue Code to the extent the underpayment is created or increased by reason of the suspension of the research credit. See Notice 2001-2.

In determining estimated tax payments, a credit created by a claim for research credit can only be applied to an estimated tax payment that is due after the suspension period expires. An example of this is a credit attributable to the second suspension period cannot be used to reduce any estimated tax payment due before October 1, 2001.

Since the taxpayer can apply a credit from a suspension period to an estimated tax payment, pay special attention to the preparation of Sequa worksheets for interest computations. See IRM 8.17.6., Interest Issues in Settlement Computations, for information on preparing the Sequa worksheets when the taxpayer claimed research credits which are subject to the suspension periods.

The suspension periods also affect the availability dates (e.g. interest computation date) of credits/abatements against the taxpayer¡¯s tax liability, and must therefore be taken into consideration when preparing Form 2285, Concurrent Determination of Deficiencies, for restricted interest computations.

The ATE consults with AAS on any case claiming a value for a single work of art in excess of $50,000. Telephone discussions with this office are encouraged in order to take advantage of expert advice and to facilitate the handling of all referrals for valuation assistance. To determine information and items necessary to obtain valuation assistance on works of art, see IRM 8.18.1, Valuation Assistance Procedures, for detailed instructions and procedures. Also, see IRM 4.48.2, Valuation Assistance for Cases Involving Works of Art.

Requests for AAS¡¯s assistance must be submitted through the online Specialist Referral System (SRS).

Requesters are encouraged to contact the AAS Director or Lead Appraiser by telephone and/or email to informally discuss a valuation to determine the type of assistance required and whether a formal referral is needed. For detailed instructions and procedures, see IRM 8.18.1, Valuation Assistance Procedures.

The Code provides an expedited assessment procedure when tax collection is endangered if regular assessment and collection procedures are followed. IRC 6867, Presumptions Where Owner Of Large Amount Of Cash Is Not Identified, allows the IRS to presume that tax collection will be jeopardized in certain circumstances where an individual is in physical possession of an unidentified large amount of cash. The following code sections allow for jeopardy assessment:

For IRS policies on jeopardy assessments, see the following:

The Compliance Area Director has five days after a jeopardy assessment to furnish the taxpayer with a written statement of the information the IRS relied on in making the assessment, as required by IRC 7429(a)(1)(B), Information to Taxpayer. Compliance will mail the appropriate letter (jeopardy or termination assessment) that notifies the taxpayer of the 30-day deadline for filing a written request for review of the jeopardy or termination assessment action. IRM 4.15.1.9.3.1 , Jeopardy/Termination Letters, identifies these letters as follows:

Approval by Chief Counsel or his/her delegate is required prior to all jeopardy and termination assessments and all jeopardy levies. See IRC 7429(a)(1)(A), Prior Approval Required, and Policy Statement 4-88, Jeopardy assessments used sparingly and assessments to be reasonable in amount.

Jeopardy assessments initiated by Collection personnel are limited to proposed:

A jeopardy assessment is requested when:

Examination occasionally investigates the need for a jeopardy assessment for cases pending in Appeals for consideration of the merits of the liability. Examination¡¯s jeopardy investigation is limited to whether collection of any proposed deficiency is endangered by any circumstance that might adversely affect the taxpayer's ability to pay or the Government's ability to collect. Appeals is responsible for making the final determination of the tax liability in controversy.

If Examination determines that a jeopardy assessment is not warranted, the Compliance Area Director returns the tax liability case to Appeals with a notice to that effect.

When Examination determines that a jeopardy assessment is warranted, it is made by the Compliance Area Director. The tax liability case and jeopardy assessment file are immediately returned to the Examination function that referred the jeopardy assessment case. In income, estate and gift tax cases, Appeals issues any notice of deficiency required by IRC 6861(b), Deficiency Letters. Send a copy of the notice of deficiency to the appropriate Examination function.

When a tax liability case and jeopardy assessment file are returned to Appeals, only consider the issues in the underlying tax liability case. The taxpayer must follow procedures under IRC 7429(a)(2), Request for Review, for requesting an administrative review of the jeopardy determination and appropriateness of the amount assessed before Appeals can consider the jeopardy case.

IRC 7429(b) permits a taxpayer to seek judicial review of a jeopardy determination of the appropriateness of the amount of the jeopardy assessment. The period for seeking judicial review is the earlier of the 16th day after requesting Appeals review of the jeopardy assessment or the date Appeals notifies the taxpayer of its determination. Therefore, Appeals should complete its review of the jeopardy determination and the appropriateness of the assessed amount, and should issue a written determination to the taxpayer, within 15 days after the taxpayer makes his request for Appeals review under IRC 7429(a)(2).

Some jeopardy assessments lend themselves to complete resolution of both the merits of the liability and the reasonableness of the jeopardy determination. Therefore, both aspects can be resolved by agreement if the action is taken within 15 days after the taxpayer's request for administrative review is filed or the taxpayer decides not to request judicial review of the assessment in District Court.

The Compliance Area Director makes a termination assessment under the conditions found in Policy Statement P-4-89 and the procedures in IRM Part 4. See IRM 8.7.1.6.2, Compliance¡¯s Jeopardy/Termination Assessment Cases. Time limitations for holding Appeals conferences, rendering a prompt decision, and statutory provisions for filing suit in the appropriate court are the same as for jeopardy assessment.

Because of time limitations involved, if the taxpayer provides new information or documentation to the ATE, the Compliance Area Director may need to promptly comment on the new evidence. Appeals retains jurisdiction over the case in instances where the Compliance Area Director comments on the new evidence.

Inform the taxpayer of the right to judicial review under IRC 7429(b) when a taxpayer does not agree with the Appeals decision. Follow case closing procedures identified in IRM 8.7.1.6, Review of Jeopardy/Termination Assessment Cases.

At the end of the full tax year, the taxpayer is required to file a full year return. Generally, Examination is responsible for issuing the notice of deficiency required under IRC 6851(b) for the taxpayer's taxable year. Compliance Area office and Campus controls are established to determine whether or not the taxpayer files a full year return.

Examination either examines the taxpayer's return or prepares a substitute for the return. The taxpayer may protest the notice of deficiency and come to Appeals. In some cases, it is possible for Appeals to receive the case prior to issuance of the notice of deficiency. In these cases, Appeals issues the notice of deficiency. If Appeals issues the notice of deficiency, a copy of the notice is sent to the appropriate Examination function.

For IRS policies on jeopardy assessments, see the following:

Appeals is notified when the case jurisdiction exclusively changes to Department of Justice (DOJ).

After the ATE prepares the case for release to DOJ, APS will close the case off AIMS and ACDS, recharge the administrative file and send it to Counsel.

After notice that a suit has been filed in an Appeals case involving no deficiency, issue the notice of claim disallowance (when required), prepare Form 5402, Appeals Transmittal and Case Memo, and identify the case as a court case.

Forward the case file for processing to APS, who will complete the appropriate actions and promptly send the administrative file to Counsel.

However, if the Campus maintains a follow-up control on the refund litigation file, APS will forward the administrative file to the Campus, referring in the transmittal to the Campus's Refund Litigation control number.

If a claim has not previously been disallowed or Form 2297, Waiver of Statutory Notification of Claim Disallowance, was not signed by the taxpayer, issue a statutory notice of claim disallowance. See IRM 8.7.7.5, Closing Refund Claim Cases (No Additional Tax).

If the case involves an application for reconsideration of a claim previously acted upon, prepare Form 5402, Appeals Transmittal and Case Memo, to transmit the case file to APS and enter the date the notice of claim disallowance was issued or the date Form 2297 was filed. Finally, advise the taxpayer that, because of filing suit, the case is under jurisdiction of the DOJ and Appeals will give no further consideration to the case.

Before issuing a notice of deficiency on the suit years, consult with the DOJ through Counsel, for advice and concurrence. If the DOJ concludes a notice of deficiency should be issued, they notify Counsel, who notifies the appropriate Appeals office.

If the notice of deficiency raises an issue under a specific Internal Revenue Code section or Tax Court Rule 142 that places the burden of proof on the Government with respect to the issue, consider sending the proposed notice to Counsel for consideration. There is no need to consider sending the proposed notice to Counsel if the burden of proof issue involves only IRC 7491, Burden of Proof.

Notify Counsel if the ATE has information that the taxpayer intends to petition the Tax Court after receiving a notice of deficiency.

If there are proposed deficiencies before Appeals for years involved in the suit, Form 5402, Appeals Transmittal and Case Memo, and accompanying ACM, must include the following:

If the Tax Court acquires jurisdiction, process the case the same as other docketed cases. Chief Counsel notifies the DOJ that a petition was filed. See IRM 8.4.1, Procedures for Processing and Settling Docketed Cases.

Appeals may have pending cases related to issues in suit involving either the same or different taxpayers. Use Form 5402, Appeals Transmittal and Case Memo, to transmit the years in suit, indicating the related cases are pending before Appeals, the issue involved, and the relationship with the years in suit. Also request prompt advice on disposition of the years in suit.

If further consideration of related cases appears warranted, ask Counsel to determine whether the DOJ has any objection to adjusting the nonsuit year(s). Before taking final action on any related case covering the nonsuit year(s), ask Counsel to determine if the DOJ has any objection to the proposed disposition. If the Appeals case covering the nonsuit year(s) is docketed in the Tax Court, Counsel (rather than Appeals) coordinates action with the DOJ.

For Department of Justice cases (or related issues or cases) involving closing agreements, see IRM 8.13.1, Processing Closing Agreements in Appeals.

This section covers the different settlements handled by the DOJ; specifically, those where the settlement affects cases pending in Appeals.

If the DOJ receives a proposal of settlement in a case previously considered by Appeals that affects only years in suit, Counsel does not refer the proposal to Appeals for comment unless circumstances warrant coordination.

The notice of criminal investigation referred to above releases Appeals from the restriction to act on criminal cases. See IRM 1.2.2.9.8, Delegation Order 8-8 (Rev. 1) (formerly DO-66, rev. 15), Authority of Appeals in Protested and Tax Court Cases. However, the notice received from Criminal Investigation in pending criminal cases may have limitations or qualifications. Appeals authority is subject to any of these restrictions.

Appeals may consider the civil liability of a taxpayer convicted of violating the internal revenue laws and placed on probation for a specified period of time conditioned upon satisfactory settlement and/or payment of civil liability for taxes and penalties.

Promptly inform the Special Agent in Charge, Criminal Investigation, for the originating field office of any lack of cooperation, or any other act of the taxpayer, that appears intended to delay or to interfere with an orderly determination of liability. Also, give a status report on the case to the Special Agent in Charge, Criminal Investigation, no later than 60 days before the expiration of the probationary period or upon completion of the case, whichever occurs first.

After disposition of criminal aspects of a case, Compliance forwards to Appeals the administrative file for consideration of any unsettled civil liabilities following regular protested/petitioned procedures for sending liability cases to Appeals.

Compliance¡¯s liability case sent to Appeals reveals any additional facts or evidence obtained by Criminal Investigation or developed in any pretrial investigation by a special agent. It also reveals whether or not the case was tried. If tried, or if additional evidence was developed, there is a special agent's summary report, prepared in accordance with instructions in IRM Part 9, Criminal Investigation. If the file does not contain the required report, request it from the area Criminal Investigation function, consistent with the limitations set forth in Federal Rule of Criminal Procedure 6(e) relating to grand jury investigations.

Include a concise statement in the ACM about the joint investigation by a special agent and revenue agent, the results, and the disposition of any recommendations for criminal prosecution.

Refer to IRM 8.11.1.6 , Processing Fraud Penalty Cases, regarding the requirement to secure Area Counsel concurrence if Appeals proposes to remove fraud penalties under IRC 6663(a) or IRC 6651(f) when reaching a settlement on a case which was successfully prosecuted under Title 26. Also, see IRM 1.2.2.9.8 ,Delegation Order 8-8 (Rev. 1) (formerly DO-66, Rev.15), Authority of Appeals in Protested and Tax Court Cases.

The amount of restitution ordered payable to the IRS creates two separate debts for the same liability. These two separate debts provide two different means for collection, but the same liability cannot be collected twice. See IRM 21.6.8, Split Spousal Assessments, for more information on splitting accounts and applying payments.

The defendant ordered to pay restitution may be one or more of, but is not limited to, the following:

Because restitution debts stem from the same underlying tax liability, the full amount can only be collected once. Any payments that wholly or partially satisfy the restitution-based assessment (as a result of the criminal case) will also be applied against the underlying tax liability (if assessed) provided that the restitution-based assessment is attributable to the underlying civil liability. If the liability is not the same as the amount ordered by restitution, they will not be mirrored.

Duplicate assessments include the RBAs made on the appropriate MFT 31 account, and civil tax and/or penalties assessed on each respective party¡¯s underlying tax account.

Two responsible parties may owe different duplicate assessments amounts for the same period. The duplicate assessments may or may not be equal to the RBA amount and can be identified by a TC 971 AC 188 or TC 971 AC 189. Those accounts include, but are not limited to, the following:

See IRM 4.8.6, Criminal Restitution and Restitution-Based Assessments, and IRM 25.26.1.2, Restitution Debt, for more information.

Examination Technical Services (TS) has exclusive responsibility for completing, revising, and/or abating assessments. Whether a criminal restitution order can be assessed as a tax depends on the nature of the criminal offense for tax purposes. If the restitution ordered is traceable to a tax imposed on the defendant under Title 26 (e.g., cases stemming from an underreporting of income, an inflated credit or expense, or an alleged overpayment of tax that results in a false refund), then the restitution may be assessed as a tax.

Criminal Investigation (CI) in coordination with Criminal Tax (CT) Counsel will make a case-specific determination whether a restitution order relates to a tax imposed under Title 26. Restitution ordered for a criminal violation of the following statutes may meet the requirements necessary to be assessed as a tax: IRC sections 7201, 7202, 7203, 7205, 7206(1), 7206(2), 7206(4), 7206(5), 7207, and 18 USC sections 286, 287, and 371. This is not an all-inclusive list, but is representative of the most frequently encountered criminal statutes that may result in a restitution-based assessment.

A criminal restitution is also referred to as a restitution-based assessment (RBA). Examination Technical Services (TS) has exclusive responsibility for completing assessments on criminal restitution cases where IRC 6201(a)(4), Assessment Authority, is applicable.

The following provisions are helpful in interpreting IRC 6201(a)(4):

For more information, refer to IRS Chief Counsel Notice CC-2013-012, Deficiency and Litigation Issues Concerning Tax Periods For Which Criminal Restitution Has Been Ordered.

The criminal RBAs against an individual are posted on the individual defendant¡¯s MFT 31 module(s). The duplicate civil assessments (when applicable) are posted on the appropriate module for the type of civil tax on which the criminal restitution is based (MFT 30, MFT 02, MFT 01, etc.). Refer to IRM 4.8.6.2.2.2, Assessing Restitution, for more information on cases where the restitution may be ordered against an entity.

Also, the following are IDRS indicators of an RBA:

After the restitution assessment process has been completed, an Examination Technical Service employee will review the referral package from Criminal Investigation and determine whether civil examination actions are warranted. Field Examination is responsible for reviewing case files forwarded by Technical Service to complete the following actions:

A restitution case may also be a Condition of Probation (COP) case. Criminal Investigation and Compliance (Examination/Collection) share primary responsibility for monitoring tax-related COP for the IRS. See IRM 25.1.4.6, Special Conditions of Probation, IRM 8.7.1.9.2, Report to Criminal Investigation When Convicted Taxpayer on Probation, and IRM 4.8.2, Case Processing.

On unagreed protested cases and petitioned statutory notice of deficiency cases, Technical Service will send notification of an RBA and/or COP case sent to Appeals by sending an email to the Appeals "Condition of Probation Case Coordinator". The COP Case Coordinator is identified at the bottom of Appeals Condition of Probation / Restitution-Based Assessment intranet page. This email is forwarded to an Account and Processing Support (APS ) delegate who will search Appeals Centralized Database System (ACDS) for the Appeals¡¯ COP/RBA new receipt. After the case is added to ACDS, APS inputs the "PB" feature code on ACDS to allow for Appeals COP/RBA case tracking.

During the consideration of the civil tax liabilities, ATEs should refer to the following IRM sections (as appropriate):

Upon conclusion of Appeals¡¯ consideration (or Counsel¡¯s jurisdiction for a docketed case), an Appeals Policy analyst will send an email notification of the final results of the case to the following: