part34-21
- 34.12.1.1
Supplementary Material - Exhibit 34.12.1-1
Notice of Acceptance or Rejection of Plan of Reorganization - Exhibit 34.12.1-2
Supplemental Provisions - Exhibit 34.12.1-3
Large Case Bankruptcy Letter - Exhibit 34.12.1-4
Immediate Assessment Under Section 6871 Letter - Exhibit 34.12.1-5
Basic Checklist for Analyzing Revenue Officer Report-Federal Tax - Exhibit 34.12.1-6
Basic Checklist, Things to Know Re: Security Interest Date - Exhibit 34.12.1-7
Basic Checklist, Things to Know Re Security Interest — Realty - Exhibit 34.12.1-8
Preparation of Suit Letters — Checklist - Exhibit 34.12.1-9
Memorandum from Chief Counsel to General Counsel, Treasury Department, Re: Appointing Agent (where tax lien is not senior
lien) - Exhibit 34.12.1-10
Document Executed by General Counsel Appointing the Agent (where tax lien is not senior lien) - Exhibit 34.12.1-11
Memorandum from Chief Counsel to Commissioner of the Internal Revenue – Re: Appointing Agent (where tax lien is senior lien) - Exhibit 34.12.1-12
Document Executed by Commissioner of the Internal Revenue Appointing Agent (where tax lien is senior lien) - Exhibit 34.12.1-13
Letter to Agent Advising of Appointment - Exhibit 34.12.1-14
Letter to Tax Division of Department of Justice Advising It of Appointment of Agent - Exhibit 34.12.1-15
Motion for Writ of Ne Exeat - Exhibit 34.12.1-16
Affidavit with Motion in the United States District Court - Exhibit 34.12.1-17
Writ of Ne Exeat - Exhibit 34.12.1-18
Order for Writ of Ne Exeat - Exhibit 34.12.1-19
Bond With Writ - Exhibit 34.12.1-20
Certificate for Appointment of Receiver - Exhibit 34.12.1-21
Petition - Exhibit 34.12.1-22
Declaration - Exhibit 34.12.1-23
Order - Exhibit 34.12.1-24
Approval of Settlements by Associate Chief Counsel and Division Commissioner When Required — Closing Agreement - Exhibit 34.12.1-25
Settlement Letter for Branch Chief’s Signature or Associate Area Counsel Signature - Exhibit 34.12.1-26
Letter to Joint Committee - Exhibit 34.12.1-27
Adjudication by Another Court Having Concurrent Jurisdiction With Tax Court - Exhibit 34.12.1-28
Dismissal of Related Refund Suit - Exhibit 34.12.1-29
Compromise by the Attorney General - Exhibit 34.12.1-30
Stipulation for Entry of Judgment in a U.S. District Court - Exhibit 34.12.1-31
Stipulation for Entry of Judgment in the Court of Federal Claims - Exhibit 34.12.1-32
Sample Testimony Authorization - Exhibit 34.12.1-33
Addresses of Service Centers to Be Used for Payment Memoranda Only - Exhibit 34.12.1-34
Questions and Answers Regarding Prohibition Against Requesting Taxpayers to Waive Right to Bring Civil Actions Against the
United States
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This section provides sample documents and other material used in Counsel’s litigation practice as described in CCDM 34.1
through CCDM 34.11. These exhibits have been consolidated into a single chapter for ease of use.
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PURPOSE. This exhibit suggests provisions for which Field attorneys may wish to negotiate with respect to supplemental provisions
that can be used in proposed plans of reorganization under chapter 11 of the Bankruptcy Code.
PROVISIONS. The following provisions may be used:
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The amount of the Internal Revenue Service’s claim for unpaid taxes, as set forth in its proof of claim and as approved by
the bankruptcy court, together with interest at a rate of ___ per cent per annum or such higher rate as may be hereafter established
under the Internal Revenue Code, plus statutory interest on the unpaid tax liability which will have accrued between the date
of the petition and the date of confirmation, plus prepetition and post-petition penalties, will be paid in monthly installments
of $ ___per month. Interest will be computed from the date of confirmation to the date of each monthly payment; the first
such installment shall be due on the ___day of the first month following confirmation of the plan of arrangement and on the
___day of each month thereafter until such time as the amount of said claim plus interest has been fully paid. No other unsecured
claims, except administration claims in this proceeding, will be paid until the claim of the Internal Revenue Service, together
with interest, has been paid in full. -
Any unpaid federal tax liabilities of the debtor arising between the filing of the petition in this case, and confirmation
of the plan of reorganization will be paid in full upon confirmation. -
To the extent that any federal tax lien attached to any property owned by the debtor as of the date of the filing of the petition
in this case, such property shall remain subject to such federal tax lien until such time as the amount of such lien has been
fully satisfied. -
All installment payments made pursuant to this agreement shall be made to the Internal Revenue Service, for the attention
of the Chief, Insolvency Group. The Insolvency Group may apply each installment payment to the claim for unpaid taxes, penalties,
or interest as they, in their sole discretion, may determine. During the pendency of this agreement, the debtor agrees to
timely file all required federal tax returns. -
The debtor, after confirmation, shall segregate and hold separate and apart from all other funds all moneys withheld from
employees or collected from others for taxes under any internal revenue laws of the United States and shall deposit the moneys
so withheld and collected in a separate bank account in trust for the United States not later than within the calendar week
next after such collecting or withholding. At the time of making such deposit in such separate bank account, the debtor will
notify the Chief, Insolvency Group, or his/her delegate, of the date and place of deposit and the amount of money deposited
with respect to each such item of federal tax. The debtor will pay from said bank account to the Insolvency Manager or his/her
delegate the proper amounts at the time and in the manner prescribed by applicable internal revenue laws. -
Default.
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If the debtor fails to make any installment payment required under this agreement within 21 days after the due date of such
installments; or if the debtor fails to make any deposit of any currently accruing employment tax liability to the separate
bank account as provided above or fails to make any payment of any tax to the Internal Revenue Service within 10 days of the
due date of such deposit or payment; or if the debtor fails to file any required federal tax return by the due date of such
return, or if the debtor violates any other provisions of this agreement, the Insolvency Manager or his/her delegate, may,
in his/her sole discretion, declare the debtor is in default of this agreement. Failure to declare that the debtor is in default
does not constitute a waiver by the Insolvency Manager or his/her delegate of the right to declare that the debtor is in default. -
If the Insolvency Manager declares the debtor to be in default of its obligations under this agreement, the entire unpaid
liability under the installment agreement, together with any unpaid current liabilities, shall upon demand in writing become
immediately due and payable upon any officer or director of the debtor. -
If full payment is not made within 21 days of such demand, the Internal Revenue Service may collect any unpaid liabilities
through the administrative collection provisions of the Internal Revenue Code or by any other procedure authorized by law. -
So long as any part of the Internal Revenue Service’s claim which is subject to this agreement remains unpaid or so long as
any tax liabilities accruing during the pendency of this proceeding or while this agreement is in effect, remain unpaid:-
No lien, mortgage, or other security interest shall be created to provide a priority as to payment equal to or superior to
that of the United States under the plan; -
No increase in management fees or compensation (except with the express consent of the Insolvency Group) shall be made in
favor of any administrative or executive officer or official of the debtor (including any director of the debtor) or any other
business organized or made use of in effectuating this plan; and -
No dividends shall be paid or allowed to stockholders of the debtor or of any concern organized or made use of in effectuating
this plan.
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All statutes of limitation on the collection of any federal taxes due from the debtor or involved in this plan are suspended
during the pendency of this plan and for such further time as any part of the aforementioned taxes remain unpaid, and for
one year thereafter. -
Any refunds or other credits to which the debtor may become entitled for any reason before completion of the payment of the
federal taxes under this plan may be credited to apply to the last payment or payments required to be made under this plan. -
In the event that additional outstanding federal taxes not covered by proofs of claim are determined to be due from the debtor,
such additional items shall be paid by continuing the installment payments so long as necessary but in no event shall the
period of any installment payments exceed six years; in the event that the allowance of claims for such additional liabilities
shall cause the period for installment payments, including interest, to extend beyond six years, the amount of each monthly
installment payment shall be increased in a sufficient amount so that the period for full payment shall not exceed six years. -
If by the carryover of any net operating loss or any credit including but not limited to investment tax credit, the debtor
becomes entitled to a reduction in taxes it would otherwise be required to pay, an amount equivalent to the tax savings will
be paid and applied to the unpaid portion of the claim of the Internal Revenue Service or to any tax liabilities accruing
during the pendency of this proceeding.
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| [Letterhead] | ||||||
| Date: | Person to Contact: Contact Telephone Number: |
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| The deficiency in tax is being assessed against you under the provisions of section 6871 of the Internal Revenue Code. Accordingly, no petition for the redetermination of the deficiency may be filed with the United States Tax Court as prescribed by that section. If, after a conference, you are still not in agreement with the findings, the deficiency and such interest, additional amounts, and additions to the tax may be presented for adjudication in accordance with law to the court before which the bankruptcy or receivership proceeding is pending. |
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| Attention is called to the rights and priorities of the United States under applicable provisions of the Bankruptcy Act or Bankruptcy Reform Act of 1978 and under 31 U.S.C. § 3713(a). Except with respect to a trustee acting in accordance with the provisions of the Bankruptcy Reform Act of 1978, 31 U.S.C. § 3713(b) imposes personal liability upon every executor, administrator, assignee, or other person who, in paying debts of the person or estate for whom or for which he or she acts, fails to observe the priority in payment prescribed by law in favor of the United States. |
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| The Area Director is authorized to file proof of claim for any tax liability in proceedings under the Bankruptcy Reform Act and in receivership cases. The filing of proof of claim will not prejudice an application to this office for reconsideration of the above-mentioned tax. If the bankruptcy was filed under the Bankruptcy Act and you do not agree with the findings shown in the attached statement, you may file a written protest within 30 days from the date of this letter and send it to our address shown on this letter. The protest should be declared true under penalties of perjury which may be done by adding the following declaration: |
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| “Under penalties of perjury, I declare that I have examined this protest and any accompanying schedules and statements, and, to the best of my knowledge and, to the best of my knowledge and belief, it is true, correct, and complete.” |
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| We will transfer your protest and case to the Appeals office nearest you. They will contact you to arrange a conference. | ||||||
| If, after a conference, you are still not in agreement with the findings, the deficiency and such interest, additional amounts, and additions to the tax may be presented for adjudication in accordance with law to the court before which the bankruptcy or receivership proceeding is pending. |
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| If the bankruptcy was filed under the Bankruptcy Reform Act of 1978 and you do not agree with the findings shown in the attached statement, you are not entitled to an Appeals conference. Instead, you should ask the bankruptcy court to determine the amount of any unpaid liability. |
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| If you have any questions, please contact the person whose name and telephone number are shown in the heading of this letter. | ||||||
| [Signature block] | ||||||
| Enclosure: | ||||||
| Statement | ||||||
| 1. Name and type of taxpayer (corporation, individual, joint). | |
| 2. Type of tax (e.g., income, employment tax, excise tax). | |
| 3. Assessment: | |
| a. Date of assessment, by type and period of tax. | |
| b. Was assessment timely made? | |
| c. Balance due as of recent date. | |
| 4. Notice of federal tax lien: | |
| a. Date(s) of filing. | |
| b. Place(s) of filing. | |
| (The use of a table is recommended for all cases which include the above items) | |
| 5. Seizure: | |
| a. Date of notice before levy – section 6331(d) | |
| b. Any letters, publications sent to the taxpayer required under sections 6320 and 6330 (Collection Due Process) and notices sent and any hearing conducted in connection with the above. |
|
| c. Date of notice of seizure. | |
| d. Date of sale if any. | |
| 6. Suspension of statute of limitations: | |
| a. Dates and terms of consensual waivers. | |
| b. Copies of installment agreements and offers-in-compromise. | |
| c. Dates and term of pendency of court proceedings (special rule for bankruptcy cases). | |
| SECURITY INTEREST — PERSONALTY | |
|---|---|
| 1. Security agreement: | |
| a. Date of execution. | |
| b. Description of collateral. | |
| c. Amount and description of loan. | |
| 2. Financing statement: | |
| a. Information in 1 (above) for Financing Statement. | |
| b. Date executed and filed. | |
| c. Place(s) of filing. | |
| 3. Amount of loan(s) described in note and whether to be disbursed in installments. | |
| 4. Date(s) loaned money disbursed to debtor. | |
| 5. Balance due on note: | |
| a. Time of filing of notice of federal tax lien. | |
| b. 45 days after N.F.T.L. filing. | |
| c. At time of actual knowledge of creditor of taxes. | |
| 6. Date creditor received actual knowledge or notice of federal taxes. | |
| 7. Was collateral in existence at date of filing of notice of federal tax lien (or 45 days thereafter), or at date of levy? | |
| 8. Possession of collateral—who had it and when (constructive possession?). | |
| SECURITY INTEREST — REALTY | |
|---|---|
| 1. Type of interest conveyed (e.g., fee simple, lease, executory real estate contract). | |
| 2. Date of recording of instrument conveying property to taxpayer. | |
| 3. Date of execution and recording of mortgage, deed of trust, or other notice of lien. | |
| 4. Place(s) of recording of mortgage, deed of trust, or other notice of lien. | |
| 5. Who took possession and when (constructive possession?). | |
| 6. Property description: | |
| a. If by metes and bounds, does description make an enclosed area? | |
| b. County and state of location. | |
| 7. Minerals—realty versus personalty. | |
| 8. Mechanic lien rights accrued but not yet perfected by recording? | |
| ( Note : This checklist is to be used as a supplement to, not a substitute for, official directives.) |
|
| 1. General and Specific Requirements for Suits | |
| (a) Tax Data. Is it set forth completely? Is the Form 4340 complete and current? Each item of tax and penalty specifically identified? |
|
| (b) Periods of Limitation on Assessment and Collection. Was tax assessed over three years from the date return was due? Has the normal ten-year period for collection after assessment expired? Explain extensions of and exceptions to these periods. Are deadline dates set forth clearly for DJ? Are there special periods applicable to estate and gift taxes? Waivers? Is proof submitted? |
|
| (c) Penalties. What evidence can DJ present to the court to show why and how each penalty was incurred? Are I.R.C. sections cited? |
|
| (d) Administrative Remedies. Specifically, what efforts were made by the Area Director to effect collection? Were they exhausted? | |
| (e) Field Counsel Collection Efforts. Are they described in the letter to DJ? | |
| (f) Refiling of Notice of Lien. If applicable, set forth in the DJ letter. | |
| (g) Recommendation to DJ. Is the letter specific as to the action we want DJ to take? | |
| (h) Taxpayer TIN. Is the taxpayer’s TIN (prefixed by SSN: or EIN: as appropriate) in the caption following the taxpayer’s name? |
|
| (i) Collection Due Process. If there have been any prior proceedings under sections 6320 or 6330, include an issue preclusion analysis. |
|
| 2. Foreclosure of the Tax Lien | |
| (a) Administrative efforts? | |
| (b) Will assets be dissipated or concealed? | |
| (c) Property description. Is it adequate? | |
| (d) Competing lienors. Is there a discussion of the merits of their claims and are addresses included? | |
| (e) Reducing the Tax Claim to Judgment in the same action. DJ wants a recommendation, pro or con, in every foreclosure letter. | |
| (f) Receiver. Is one needed? The certificate for a receiver is not sent by the DJ letter. It is supplied by letter transmittal but is sent with a proposed letter to Assistant Chief Counsel (CBS). |
|
| (g) Principal Residence. If the property at issue is a principal residence, has the approval of the Area Director been obtained? | |
| 3. Section 6334(e)(1) Proceeding | |
| (a) Property Description. If the property at issue is the principal residence of the taxpayer’s spouse, former spouse, or minor child, include the name of that person or persons. |
|
| (b) Status Investigation. Has an investigation been made pursuant to section 6331(j)? | |
| (c) Collection Due Process. If there have been any prior proceedings under sections 6320 or 6330, include an issue preclusion analysis. |
|
| (d) Approval. The written approval of the Area Director should be included with the suit letter. | |
| 4. Reducing the Tax Claim to Judgment. | |
| (a) Does the letter describe collection efforts since assessment and how we can reasonably expect DJ to collect after the judgment is obtained? |
|
| (b) What assets do we expect to be available later? | |
| (c) Is section 7401 cited? | |
| 5. Transferee Liability and Fraudulent Conveyance. There are three methods by which to proceed. | |
| (a) Is state law adequately discussed? | |
| 6. Enforcing the Levy. Has foreclosure of the tax lien been considered and discussed? | |
| 7. Intervention | |
| (a) Jurisdiction. Are the facts and applicable law set forth? | |
| (b) State Courts. Will the Government’s right be protected? Would an alternative action, such as removal, be more effective? | |
| (c) Timeliness | |
| 8. Construction Contracts | |
| (a) Amount Subject to Lien. Does it represent progress payments or retained fund? | |
| (b) Progress payment. Did we serve a levy? | |
| (c) Competing lienors. Are they and the priority of their claims described? | |
| (d) Laborers and materialmen. Does the tax lien arise from labor paid under the contract? Does it encumber payments due to unpaid laborers and materialmen under the same contract? |
|
| (e) Priority. Did any of the federal tax liens arise prior to the contract? | |
| (f) State Law. Does it provide a statutory trust fund designating the Government as a beneficiary? | |
| (g) Government Contracts. Can we effect a setoff? | |
| (h) Miller Act. Performance Surety Bond, 40 U.S.C. § 270a. Can we collect under this statute? | |
| (i) Third party liability. Did third parties pay wages or supply funds so as to be liable for withheld taxes under section 3505? |
|
| 9. Trust Fund Recovery Penalty Cases (section 6672). Does the file show financial status of primary obligor and the possibility of collecting from other officers, partners or employees? Are “responsibility” and “willfulness” set forth in the file? |
|
| 10. Miscellaneous | |
| (a) Signature of Chief Counsel. Letter should be signed by Field Counsel. | |
| (b) Sensitive Cases. Could this case cause notoriety? | |
| (c) Coordination. Should we contact other divisions of the Office of Chief Counsel or National Office of the Service? | |
| (d) Fraud. Can the Government carry the burden of proof? | |
| (e) Constitutional questions, tainted evidence and illegal evidence. Discussion adequate? | |
| (f) SOP Procedures. Have SOP procedures been complied with? | |
| Office of Chief Counsel Internal Revenue Service m e m o r a n d u m |
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| date: | ||||
| to: | THE GENERAL COUNSEL TREASURY DEPARTMENT |
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| from: | Chief Counsel Internal Revenue Service |
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| subject: | Request for Appointment of Agent in United States v. [Name] Civil No. [case no. and citation] |
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| ACTION FORCING EVENT: The Department of Justice, Tax Division, has requested appointment of an agent to purchase [#] properties at a judicial foreclosure sale in the event no purchasers offer the required minimum bid. [#] of the properties are encumbered only by federal tax liens. The purchase of these properties [and/or] appointment of the agent may be authorized by the Deputy Commissioner, Internal Revenue Service. [However, on the third property, the federal tax liens are junior to a mortgage. In such cases the General Counsel (through delegation from the Secretary) has the authority to authorize the purchase of the property and appointment of the agent. Thus, we are simultaneously requesting that the General Counsel authorize our agent to purchase this third property] |
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| RECOMMENDATION: I recommend that you sign the attached appointment document authorizing agent [name] to purchase the subject property. |
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| BACKGROUND AND ANALYSIS: This action was commenced by the United States to reduce to judgment assessments of outstanding income tax, penalties, and interest against [name(s)] (taxpayers) and to foreclose federal tax liens against [#] properties equitably owned by the taxpayers, [but held by [name] as nominee]. The properties are: [property addresses]. [Describe properties, e.g., the properties are rental apartment residences; are vacant, the tenants having been evicted by the United States Marshals Service; are subject to a mortgage, which has priority over the filed federal tax liens]. |
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| On [date], the District Court found the taxpayers liable for numerous assessments and that the Government was entitled to foreclose upon the [#] subject properties, because the taxpayers’ transfer of the [#] properties to [name] was a fraudulent conveyance under [State] law. On appeal, the [#] Circuit upheld the foreclosure, but reversed the District Court’s finding that the taxpayers were liable for civil penalties under I.R.C. § 6702 for certain tax years. The District Court amended final judgment, dated [date], indicates that [name] is liable for penalties and taxes totaling $ [amount] and [name 2] is liable for taxes totaling $ [amount] (copy attached). The amended judgment decrees that the tax liens of the United States are foreclosed and the property sold with the proceeds of the sale to be paid over to the United States, after the loan amount secured by a mortgage on the [property] is paid in full. As of [date], the loan balance owed is $ [amount]. |
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| A judicial sale of the [properties] was conducted by the Marshals Service on [date]. At that sale, [describe particular incidents of the sale, and also why the United States should purchase the property (e.g., disruptive taxpayers, refusal of court to grant other relief, lack of other collection alternatives)]. |
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| 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 Internal Revenue Code grants similar authority, limited to purchase of property upon which the United States has a first lien. You have been delegated authority under 31 U.S.C. § 3715. Treasury Order 101-05 (January 7, 1999), paragraph 9 (delegating authority to General Counsel to perform any function the Secretary of the Treasury is authorized to perform). Similarly, the Commissioner has been delegated authority under I.R.C. § 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 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 Service officer or employee to purchase property at a judicial foreclosure sale pursuant to I.R.C. § 7403(c) or 31 U.S.C. § 3715. |
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| Because the Secretary’s delegation to the Commissioner is limited to the authority found in I.R.C. § 7403(c), to purchase property on which the United States has a first lien, appointment of an agent by you under 31 U.S.C. § 3715 is necessary to purchase the [property], on which the United States is the junior lienor. A request for appointment of an agent to purchase the [#] other properties on which the United States has a first lien is being submitted to the Deputy Commissioner. |
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| Agent [name], Internal Revenue Service Property Appraisal and Liquidation Specialist (PALS), who is familiar with the properties and with the proceedings, has agreed to act as agent on behalf of the United States. [PALS name] estimates the fair market value and the minimum bid for the [property] to be $ [amount] and $[amount], respectively. We recommend that, pursuant to the provisions of 31 U.S.C. § 3715, you appoint [PALS name], IRS PALS to act as agent of the United States with authority to bid on the interests of the taxpayers in the [property], but not to bid higher than the minimum bid amount. If the United States purchases the property, the Marshals Service will be required by the judgment to pay approximately $[amount] to [mortgagor]. The remainder of the purchase price will be credited to reduce the judgment amount and the taxpayers’ liabilities. [PALS name] will then sell the property in a private sale, at which he expects to receive at least $[amount], the forced sale value. This should result in net revenue of at least $[amount]. |
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| If you agree with my recommendation, please sign the attached appointment of agent. We will inform [PALS name] of his appointment and advise the Department of Justice. |
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| Attachments (2) | ||||
| cc: Assistant Chief Counsel (CBS) | ||||
| [Memorandum] | ||||
|---|---|---|---|---|
| date: | ||||
| to: | [Appointed Agent] | |||
| from: | General Counsel U.S. Department of Treasury |
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| subject: | United States v. [name] Civil No. [case no. and court] |
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| Pursuant to my authority to act for the Secretary of the Treasury, as granted under Treasury Order 101-05, and pursuant to 31 U.S.C. § 3715, I appoint you, [PALS name], Property Appraisal and Liquidation Specialist, to act as agent for the Secretary of the Treasury at the forthcoming sale of the interest of [taxpayers] in the [improved] real property located at [address], upon the judgment rendered in favor of the United States against [name], in the case of [name of case], Civil No. [case no.] in the United States District Court for the [location]. |
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| As agent of the Secretary of the Treasury, you shall exercise the authority vested in you in accordance with 31 U.S.C. § 3715 but not to bid higher than the minimum bid (approximately $[amount]) for the [improved] real property located at [address]. |
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| Office of Chief Counsel Internal Revenue Service m e m o r a n d u m |
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| date: | ||||
| to: | COMMISSIONER OF THE INTERNAL REVENUE | |||
| from: | Chief Counsel Internal Revenue Service |
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| subject: | Request for Appointment of Agent in United States v. [Name] Civil No. [case no. and citation] |
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| ACTION FORCING EVENT: The Department of Justice, Tax Division, has requested appointment of an agent to purchase [#] properties at a judicial foreclosure sale in the event no purchasers offer the required minimum bid. [#] of the properties are encumbered only by federal tax liens. You may authorize the purchase of these properties or the appointment of the agent where the United States has a first lien. [However, on the third property, the federal tax liens are junior to a mortgage. In such cases the General Counsel (through delegation from the Secretary) has the authority to authorize the purchase of the property and appointment of the agent. Thus, we are simultaneously requesting that the General Counsel authorize our agent to purchase this third property] |
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| RECOMMENDATION: I recommend that you appoint an agent to purchase the subject property. | ||||
| BACKGROUND AND ANALYSIS: This action was commenced by the United States to reduce to judgment assessments of outstanding income tax, penalties, and interest against [name(s)] (taxpayers) and to foreclose federal tax liens against [#] properties equitably owned by the taxpayers, [but held by [name] as nominee]. The properties are: [property addresses]. [Describe properties, e.g., the properties are rental apartment residences; are vacant, the tenants having been evicted by the United States Marshals Service; is subject to a mortgage, which has priority over the filed federal tax liens]. |
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| On [date], the District Court found the taxpayers liable for numerous assessments and that the Government was entitled to foreclose upon the [#] subject properties, because the taxpayers’ transfer of the [#] properties to [name] was a fraudulent conveyance under [State] law. On appeal, the [#] Circuit upheld the foreclosure, but reversed the District Court’s finding that the taxpayers were liable for civil penalties under I.R.C. § 6702 for certain tax years. The District Court amended final judgment, dated [date], indicates that [name] is liable for penalties and taxes totaling $ [amount] and [name 2] is liable for taxes totaling $ [amount] (copy attached). The amended judgment decrees that the tax liens of the United States are foreclosed and the property sold with the proceeds of the sale to be paid over to the United States, after the loan amount secured by a mortgage on the [property] is paid in full. As of [date], the loan balance owed is $ [amount]. |
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| A judicial sale of the [properties] was conducted by the Marshals Service on [date]. At that sale, [describe particular incidents of the sale, and also why the United States should purchase the property (e.g., disruptive taxpayers, refusal of court to grant other relief, lack of other collection alternatives)]. |
||||
| 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 Internal Revenue Code grants similar authority, limited to purchase of property upon which the United States has a first lien. You have been delegated authority under 31 U.S.C. § 3715. Treasury Order 101-05 (January 7, 1999), paragraph 9 (delegating authority to General Counsel to perform any function the Secretary of the Treasury is authorized to perform). Similarly, the Commissioner has been delegated authority under I.R.C. § 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 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 Service officer or employee to purchase property at a judicial foreclosure sale pursuant to I.R.C. § 7403(c) or 31 U.S.C. § 3715. |
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| Because the Secretary’s delegation to the Commissioner is limited to the authority found in I.R.C. § 7403(c), to purchase property on which the United States has a first lien, appointment of an agent by the General Counsel under 31 U.S.C. § 3715 is necessary to purchase the [property], on which the United States is a junior lienor. A request for appointment of an agent to purchase the [property] is being submitted to the General Counsel. Since the United States has first liens on the [properties], you are authorized to appoint an agent under section 7403(c) to purchase these properties, pursuant to the Commissioner’s delegation of authority to you under Delegation Order 193 (Rev. 6). |
||||
| Agent [name], Property Appraisal and Liquidation Specialist (PALS), who is familiar with the properties and with the proceedings, has agreed to act as agent on behalf of the United States. [PALS name] estimates the fair market values and the minimum bids for the [properties] as follows: |
||||
| [property]: fair market value $ [amount]; minimum bid $ [amount]. [property]: fair market value $[amount]; minimum bid $ [amount]. |
||||
| In view of the request of the Department of Justice, it is recommended that, pursuant to I.R.C. § 7403(c), you appoint Agent [name], IRS PALS to act as agent of the United States with authority to bid on the interests of the taxpayers in the [properties], but not to bid higher than the minimum bid amounts. |
||||
| If you agree with my recommendation, please sign the attached appointment of agent. We will inform [PALS name] of [his/her] appointment and advise DJ. |
||||
| Attachments (2) | ||||
| cc: Assistant Chief Counsel (CBS) | ||||
| [Memorandum] | ||||
|---|---|---|---|---|
| date: | ||||
| to: | [Appointed Agent] | |||
| from: | General Counsel U.S. Department of Treasury |
|||
| subject: | United States v. [name] Civil No. [case no. and court] |
|||
| Pursuant to my authority to act for the Secretary of the Treasury, as granted under Treasury Order 150-10, and Delegation Order 193 (Rev. 6), and pursuant to I.R.C. § 7403(c), I appoint you, [PALS name], Property Appraisal and Liquidation Specialist, to act as agent for the Secretary of the Treasury at the forthcoming sale of the interest of [taxpayers] in the [improved] real property located at [address], upon the judgment rendered in favor of the United States against [name], in the case of [name of case], Civil No. [case no.] in the United States District Court for the [location]. |
||||
| As agent of the Secretary of the Treasury, you shall exercise the authority vested in you in accordance with I.R.C. § 7403(c) but not to bid higher than the minimum bid (approximately $ [amount]) for the [improved] real property located at [address]. |
||||
| [Letterhead] | ||||
|---|---|---|---|---|
| Agent [name] Property Appraisal and Liquidation Specialist Internal Revenue Service [address] |
||||
| United States v. [name] Civil No. [case no. and court] |
||||
| Taxpayer: [name(s)] | ||||
| Dear [PALS name]: | ||||
| You are hereby advised that pursuant to the provisions of section 3715 of Title 31 of the United States Code, you have been appointed by the General Counsel, Treasury Department, as agent of the United States with authority to act for the United States in the purchase of property of [name] at any forthcoming sale thereof in the above-described proceeding in satisfaction or partial satisfaction of the item of Federal tax claimed and allowed therein. However, in no case shall you bid in behalf of the United States a greater amount than $ [amount]. Enclosed herewith are the appointment, together with a copy thereof, which has been executed by the General Counsel and a copy of our memorandum to the General Counsel. |
||||
| Sincerely yours, | ||||
| [name] Chief Counsel |
||||
| Enclosures | ||||
| [ Note : distribution as follows:] |
||||
| 2 cc: Assistant Chief Counsel (CBS) 1 cc: Area Counsel (office where case is located) 1 cc: Department of Justice, Tax Division, Civil Trial Section, [Region]. |
||||
| [Letterhead] | ||||
|---|---|---|---|---|
| Honorable [name] Assistant Attorney General Tax Division Department of Justice Washington, D.C. 20530 |
||||
| Attn: Chief, Civil Trial Section, [Region] | ||||
| In re: | United States v. [name] Civil No. [case no. and court] |
|||
| Taxpayer: [name] | ||||
| Dear [Assistant Attorney General]: | ||||
| This is in reply to your letter to this office dated [date], relative to the appointment of an agent with authority to act for the United States at the forthcoming sale of certain property of the above-named taxpayer. |
||||
| Please be advised that Agent [name], Property Appraisal and Liquidation Specialist, IRS, [location], has been appointed in accordance with section 3715 of Title 31 of the United States Code, as agent of the United States with authority to act for the United States in the purchase of the property. A copy of the appointment is enclosed. Title should be executed by the Marshall in the name of the United States, if [PALS name] is the successful bidder. Sale or other appropriate disposition will then be made pursuant to section 7506 of the Internal Revenue Code. |
||||
| Sincerely yours, | ||||
| [name] Chief Counsel |
||||
| Enclosures | ||||
| [ Note : cc distribution as follows:] |
||||
| 2 cc: Assistant Chief Counsel (CBS) 1 cc: Area Counsel (office where case is located) |
||||
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| [TREASURY DEPARTMENT] | |
|---|---|
| IN THE MATTER OF: | |
| Pursuant to the provisions of I.R.C. § 7403 and Treas. Reg. § 301.7403-1(a), I certify that it is in the public interest that a receiver, with all the powers of a receiver in equity, be appointed in the above-entitled suit. This authority has been delegated to me by the Chief Counsel in the Chief Counsel Directives Manual. |
|
| Signed and dated at Washington, DC, this [day] of [month and year]. | |
| [NAME] Chief Counsel for the Internal Revenue Service |
|
| By: | |
| [NAME ] Assistant Chief Counsel (Collection, Bankruptcy & Summonses) |
|
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| Department of Justice Tax Division |
||
|---|---|---|
| Memorandum No. 81-51 July 28, 1981 |
||
| Compromise Procedures | ||
| The following procedures have been agreed to by the Internal Revenue Service and the Tax Division: | ||
| (1) A proposed settlement including a taxpayer or period not in the pending litigation requires the recommendation of the Assistant Commissioner (Compliance), except in the following situations: |
||
| (a) A decision by the court could resolve the issue as to the taxpayer or period not in suit; | ||
| (b) The taxpayer not in suit is conceding the issue, or the taxpayer in litigation is conceding the issue for the subsequent period; or |
||
| (c) The District Director’s office or the Appeals Division has under consideration the matter as to the taxpayer or period not in suit, and the recommendation of the District Director’s office or the Appeals Division is obtained. |
||
| (2) Where a proposed settlement provides for the execution of a closing agreement as part of the settlement, the closing agreement must be reviewed on behalf of the Assistant Commissioner (Compliance) or by the Appeals Division prior to the Government’s acceptance of the offer. |
||
| [signed] JOHN F. MURRAY Acting Assistant Attorney General Tax Division |
||
Note to Exhibit 34.12.1-24 : In consequence of the reorganization of the Service on March 21, 1982, and again in the year 2000, the title of Assistant Commissioner (Compliance) was abolished. Reference to that title should be construed as though it read Chief Counsel or Associate Chief Counsel in paragraph 1 and Division Commissioner in paragraph 2. However, even when the period or taxpayer not in suit is not being considered by Examination or the local Appeals office, it is not normally necessary to refer the case to an Associate office and have the recommendation approved by the Chief Counsel or the appropriate Associate Chief Counsel. Reference to the Appeals Division in the agreement should be construed as though it read local Appeals office (where a Field case) except that a closing agreement in an Associate office case must only be reviewed on behalf of the appropriate Division Commissioner. |
| [Letterhead] | ||||||
| [Name] Assistant Attorney General Tax Division Department of Justice Washington, D.C. 20530 |
||||||
| Subject: | [Name] v. United States [citation] Your ref: [DJ reference no.] |
|||||
| Dear [name]: | ||||||
| By letter of [date], you forwarded three copies of an offer in compromise of the subject case which had been submitted by counsel on behalf of the plaintiff under date of [date]. This proposal is supplemented by a letter from counsel of [date]. |
||||||
| The suit was instituted on [date], in the United States District Court for the [District] for the recovery of $ [amount], allegedly representing the total overpayment in income taxes and assessed interest for the calendar years [years], together with interest and costs. The plaintiff claims refunds of taxes in the respective amounts of $ [amount] and $ [amount], and of assessed interest in the respective amounts of $ [amount]; and $ [amount]. |
||||||
| ISSUES | ||||||
| (1) Were certain expenses properly attributable in each of the taxable years to the mineral property in computing taxable income from the property for purposes of the limitation on the percentage depletion deduction? 0613.03-01; 0613.03-04; 0613.03-05. |
||||||
| (2) Did the taxpayer sustain an abandonment loss in [year] resulting from the abandonment of a mine. 0165.10-01; 0165.23-00? | ||||||
| (3) Did the taxpayer sustain net operating losses in [years] which resulted in an allowable net operating loss carryover deduction in [year]? 0172.02-01; 0172.04-00. |
||||||
| (4) Were expenditures of $ [amounts] in [year] capital expenditures or rental expenses? 0162.09-07; 0163.13-00. | ||||||
| (5) Is the taxpayer entitled to an additional carryover of unused investment credit to [year]? 0046.02-00. | ||||||
| (6) Were expenditures in [years] in connection with the ABCD Power and Light Company contract capital expenditures to acquire the contract or development expenses currently deductible? 0263.13-06; 0616.00-00. |
||||||
| OFFER | ||||||
| Counsel proposes that the case be settled on the following basis: | ||||||
| (1) This issue would be conceded by the taxpayer except: | ||||||
| a. The expenses charged or allocated to other companies in [years] which are treated as reductions from direct mining expenses in the exhibits to the 90-day letter will be treated instead as reductions from indirect expenses; and |
||||||
| b. The allocation of the indirect expenses to mining and nonmining activities will be based on the ratio of direct mining costs to total direct costs. |
||||||
| (2) This issue would be conceded by the Government except the amount of the abandonment loss allowable in [years] would be limited to $ [amount]. |
||||||
| (3) This issue would be automatically adjusted. | ||||||
| (4) This issue would be conceded by the taxpayer. | ||||||
| (5) This issue would be automatically adjusted. | ||||||
| (6) This issue would be conceded by the taxpayer. | ||||||
| RECOMPUTATION | ||||||
| We have had computations prepared pursuant to the terms of the proposal to ascertain the overpayment which would result for the years [years] if the proposal were to be accepted. They disclose overpayment of tax in the respective amounts of $ [amounts] and overpayments of assessed interest in the respective amounts of $ [amounts 2]. The total overpayment of tax would be $ [total amount], and of assessed interest would be $ [interest amount], a grand total of $ [grand total amount]. |
||||||
| DISCUSSION | ||||||
| Issue 1. Depletion | ||||||
| An examination of the computations shows that with respect to the depletion issue there would be under the proposal a reduction in depletion for [year] in the amount of $ [amount]; an increase in depletion for [year] in the amount of $ [amount]; a reduction in depletion for [year] in the amount of $ [amount]; an increase in depletion for [year] in the amount of $ [amount]; an increase in depletion for [year] in the amount of $ [amount]; and, a decrease in depletion for [year] in the amount of $ [amount]. Thus, under the settlement proposal there would be a net decrease in the depletion deductions in the amount of $ [amount]. |
||||||
| The depletion issue is thoroughly discussed in a Valuation Report submitted by Internal Revenue Service geologist [name] under date of [date]. The content of this report is incorporated herein by reference and need not be repeated. The proposed settlement of this issue follows the recommendations and computations of [name]. |
||||||
| Issue 2. Abandonment Loss | ||||||
| Essentially, the only concession the Government would be making under the proposal is with respect to the abandonment loss claimed in issue two. |
||||||
| Facts | ||||||
| The following facts support plaintiff’s contention that its [name of mine] was not actually abandoned until [year] even though regular operations ceased in [year]. |
||||||
| [Balance of discussion of facts omitted.] | ||||||
| Legal Analysis | ||||||
| Section 165(a) of the Internal Revenue Code of 1954 provides . . . . | ||||||
| [Balance of legal analysis omitted.] | ||||||
| RECOMMENDATION | ||||||
| Inasmuch as the geologist has determined the loss which results in the overpayments under the offer in settlement was sustained by the taxpayer in the year [year] and our auditor has verified the amount thereof, we recommend that the proposal be accepted. |
||||||
| Three copies of the recomputations dated [date], and the original and one copy of the valuation report dated [date 2], are enclosed in the administrative files. |
||||||
| Sincerely yours, | ||||||
| [NAME] Chief Counsel |
||||||
| By: | ______________ [NAME] [Title] |
|||||
| Enclosures | ||||||
| Administrative files (2) | ||||||
| U.S. DEPARTMENT OF JUSTICE TAX DIVISION |
|
|---|---|
| [date] |
| The Honorable [name] Chairman Joint Committee on Taxation Room 1015 Longworth House Office Bldg. Washington, D.C. 20515 |
||||
|---|---|---|---|---|
| Re: [name] v. United States Civil Action No. [citation] |
||||
| Dear Mr. Chairman: | ||||
| In accordance with the provisions of section 6405 of the Internal Revenue Code of 1986, and the letter dated [date], from [name], Chief Counsel, Internal Revenue Service, there is transmitted herewith a copy of our letter of this date to Chief Counsel, Internal Revenue Service, and a copy of a Memorandum dated [date], in support of the proposed settlement, under the authority vested in the Attorney General under section 7122 of the Code and Executive Order 6166, in full settlement of all issues involved in the case of [name] v. United States, now pending in the United States District Court for the [District], Civil Action No. [case no.]. The proposed settlement would result in the refund of approximately $ [amount over $ 2 million] in tax plus assessed interest paid, and statutory interest, for the years [years]. |
||||
| The period of 30 days during which the overassessment will be withheld from final settlement expires on [date]. | ||||
| Sincerely yours, | ||||
| [Name] Assistant Attorney General Tax Division |
||||
| By: [Name] Chief, Office of Review |
||||
| Enclosures | ||||
| 1 cc letter to Chief Counsel of even date 1 cc Supporting Memorandum dated [date] |
||||
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| DECISION | |
|---|---|
| Pursuant to agreement of the parties in this case, it is | |
| ORDERED and DECIDED: That the deficiencies in income taxes due from the petitioner for the taxable years [years] have been discharged by the acceptance by the Attorney General of the United States of a sum offered in settlement thereof, and |
|
| That by reason of the aforesaid settlement there are now no deficiencies in income taxes due from the petitioner for the taxable years [years]. |
|
| Judge. | |
| Entered. | |
| * * * * * | |
| It is stipulated that the court may enter the foregoing decision. | |
| [Case Caption] | ||||
|---|---|---|---|---|
| Stipulation for Entry of Judgment | ||||
| It is hereby stipulated and agreed that judgment may be entered in favor of the plaintiff(s), [name(s)], and against the defendant, the United States of America, in the amount of $ [amount] in tax, [and $ [amount] in interest paid,] plus interest thereon according to law. Execution of this stipulation does not preclude the plaintiff(s) from claiming costs, fees, or other expenses under 28 U.S.C., section 2412. |
||||
| [Name of plaintiff(s) or counsel] [Address] |
[Name of Assistant Attorney General] [Acting] Assistant Attorney General Tax Division Washington, D.C. 20530 |
|||
| [Name] [Counsel for] Plaintiff(s) |
[Name] Counsel for Defendant, United States of America |
|||
| ORDER | ||||
| IT IS SO ORDERED, this [date]. | ||||
| United States District Judge | ||||
Note to Exhibit 34.12.1–30: If required by local civil rule, the attorneys bar identification number of each signer must be shown. |
||||
| [Case Caption]1,2 | ||||
|---|---|---|---|---|
| STIPULATION FOR ENTRY OF JUDGMENT | ||||
| It is hereby stipulated and agreed that judgment should be entered in favor of the plaintiff(s) and against the defendant, the United States, in the amount of $ [amount] in tax, [and $ [amount] in interest paid,] plus interest thereon according to law. Execution of this stipulation does not preclude the plaintiff(s) from claiming costs, fees, or other expenses under 28 U.S.C. section 2412. |
||||
| [Name of plaintiff(s) or counsel] [Address] |
[Name of Assistant Attorney General] [Acting] Assistant Attorney General Tax Division Washington, D.C. 20530 |
|||
| [Name]2 [Counsel for] Plaintiff(s) |
[Name]2 Counsel for Defendant, United States of America |
|||
| 1/ If the docket number has a T use it here; if it does not, do not add one. | ||||
| 2/ The case name and names under the signature lines should be typed in all capital letters. The Court of Federal Claims does not require the attorneys bar identification number to be shown on pleadings, motions and papers filed. |
||||
| [date] | ||
| MEMORANDUM FOR: [employee called upon to testify] | ||
| FROM: | Area Counsel | |
| SUBJECT: | Testimony Authorization in re: [case caption] | |
| The Government has been served, in connection with the above-captioned matter, with a notice for your deposition testimony. You are to be deposed in your official capacity as an employee of the Internal Revenue Service. The deposition is scheduled to take place at the offices of [name and address of law firm], on [date], at [time]. (Copy attached.) |
||
| Pursuant to Delegation Order No. 156, 26 C.F.R. § 301.9000-1, and the notice of deposition, you are authorized to appear and give deposition testimony, under the guidance of counsel for the Government, and subject to the following limitations. |
||
| You may : |
Testify as to facts of which you have personal knowledge in your official capacity concerning [describe]. | |
| You may not : |
Testify as to matters of which you have no personal knowledge. | |
| Testify in response to hypothetical questions. | ||
| Testify in response to general questions concerning the positions, policies, procedures, or records of the Internal Revenue Service, except those that are relevant to the proceeding or are reasonably calculated to lead to the discovery of admissible evidence. |
||
| Testify as to matters of official business not relevant to the proceeding or reasonably calculated to lead to the discovery of admissible evidence. |
||
| Disclose any information that is protected by the attorney-client, attorney work product, or deliberative process privileges, except and only to the extent waived by this authorization. |
||
| Disclose returns or return information of any third party taxpayer, i.e., a taxpayer not a party to this proceeding except as may be authorized by I.R.C. § 6103(h)(4). | ||
| Disclose information that may tend to identify a confidential informant, if any. | ||
| Disclose information subject to I.R.C. § 6105, if any. | ||
| Disclose information that is secret pursuant to FED. R. CRIM. P. 6(e), if any. | ||
| This matter is a “tax administration” proceeding; therefore, post-testimonial feedback to a disclosure office pursuant to IRM 11.3.35.14(3) is not required. |
||
| If the deposition is rescheduled to a date different from that which appears on the notice of deposition, this authorization remains valid, provided that there is no material change as to the nature of your deposition testimony. |
||
| Inquiries concerning this matter may be directed to [name and telephone number of DOJ trial attorney] or to [name and telephone number of the Chief Counsel docket attorney]. |
||
| Attachment (1) [Copy of notice of deposition testimony] | ||
| cc: [employee’s immediate supervisor] | ||
| (Telephone inquiries regarding Payment Memoranda may be directed to the organization and number listed under each Service Center.) | ||||
|---|---|---|---|---|
| Director, Andover Service Center P.O. Box 4053 Woburn, MA 01888 |
Director, Fresno Service Center P.O. Box 12606 Fresno, CA 93778 |
|||
| Attn: | Technical Unit, Stop 661 |
Attn: | Technical Unit, Stop 5348 |
|
| (508) 474-9875 | (209) 454-6332 | |||
| Director, Atlanta Service Center P.O. Box 47601 Doraville, GA 30362-1549 |
Director, Kansas City Service Center P.O. Box 24551 Kansas City, MO 64131–0551 |
|||
| Attn: | Technical Unit, Stop 35 |
Attn: | Technical Unit, Stop 6800 |
|
| (770) 455-2730 | (816) 926-5661 | |||
| Director, Austin Service Center P.O. Box 934 Austin, Texas 78767 |
Director, Memphis Service Center P.O. Box 30309 Memphis, TN 38130 |
|||
| Attn: | Technical Unit, Stop 6813 AUSC |
Attn: | Adjustment Correspondence Branch, Stop 48 |
|
| (512) 460-2795 | (901) 546-4409 | |||
| Director, Brookhaven Service Center P.O. Box 777 Holtsville, NY 11742 |
Director, Ogden Service Center P.O. Box 9941 Ogden, Utah 84409 |
|||
| Attn: | Technical Section, Stop 531 |
Attn: | Technical Unit, Stop 6731 |
|
| (516) 654-6068 | (801) 620-7267 | |||
| Director, Cincinnati Service Center P.O. Box 12267 Covington, KY 41012-0267 |
Director, Philadelphia Service Center P.O. Box 6073 Philadelphia, PA 19114 |
|||
| Attn: | Technical Unit, Stop 537 |
Attn: | Technical Unit, DP 537A |
|
| (606) 292-5769 | (215) 516-2170 | |||
Q1. May a Counsel employee request a taxpayer to waive any rights under the Code?
A1. In many circumstances, yes. The restrictions of section 3468 only pertain to requesting a taxpayer to waive “a right to
bring a civil action . . . for any action taken in connection with the internal revenue laws.”
Consequently, the restrictions of the law pertain to waivers of right to bring suit. Waivers of other rights or privileges
are not addressed by the statute.
Q2. Should Counsel employees ever propose that an unrepresented taxpayer waive their rights to bring a civil action for any action
taken in connection with the internal revenue laws?
A2. No. The prohibition against requesting a taxpayer to waive the taxpayer’s right to bring a civil action applies unless the
taxpayer waives the right “knowingly and voluntarily,”
or unless the taxpayer is represented by an attorney or other federally authorized tax practitioner and the request is
made in the presence of the practitioner or is made to the practitioner in writing. The first exception would presumptively
be met if an unrepresented taxpayer initiated the discussion regarding the waiver of rights and the Government employee could
assess that the taxpayer made the waiver knowingly and voluntarily. If the unrepresented taxpayer did not initiate the discussion,
a Government employee would risk a violation of the section by raising the subject in any way reasonably construed as a request
for waiver. The propriety of the Government employees conduct does not hinge on whether the taxpayer actually waives any
right to bring suit. Even if an unrepresented taxpayer decides against a waiver suggested by a Counsel employee, the employee
could be found to have violated the provision, since the prohibition applies to making a request (not a successful request).
Because of these difficulties, Counsels policy is that it will not propose to an unrepresented taxpayer a waiver of the taxpayer’s
right to bring a civil action as covered by section 3468.
Q3. If an unrepresented taxpayer undertakes to make such a waiver on the taxpayer’s own initiative, can a Counsel employee assume
the waiver is made “knowingly and voluntarily”
and accept it?
A3. Yes, in the absence of conduct or statements by the taxpayer that would imply to a reasonable person that the waiver is
being made under misapprehended facts or law or under circumstances of duress. For example, a Counsel employee should question
the unsolicited proffer of any waiver made by an unrepresented taxpayer that appears mentally incompetent or emotionally strained.
Similarly, a Counsel employee should question the proffer of any waiver made by an unrepresented taxpayer if it appears that
the taxpayer is making the offer to placate what the taxpayer incorrectly perceives as a request from Counsel for a waiver.
Finally, a Counsel employee should question the proffer of any waiver made by an unrepresented taxpayer who demonstrates an
obviously incorrect view of the law or facts.
Q4. May a Department of Justice (DOJ) attorney request an unrepresented taxpayer to waive the taxpayer’s right to bring a civil
action against IRS for an action taken in connection with the internal revenue laws?
A4. A Department of Justice employee, being an “officer or employee of the United States,”
is covered by the restrictions of section 3468. Prohibited conduct covers not only requests to waive the right to bring
a civil action against the Service or Counsel or its employees – but against the United States or any officer or employee
of the United States – including the Department of Justice and other organs, officers, and employees of the United States
for any action taken in connection with the internal revenue laws.
Q5. How will section 3468 impact settlement of tax liabilities or settlement of claims for attorneys fees or other costs?
A5. The RRA Conference Report explains that the prohibition against requesting waivers of civil actions is not meant to apply
to “[t]he waiver of claims for attorneys fees or costs or to the waiver of one or more claims brought in the same administrative
or judicial proceeding with other claims that are being settled.”
H.R. Conf. Rep. No. 599, 105th Cong., 2d Sess. 293 (1998). Nevertheless, it is generally Chief Counsel policy that the
tax liability of a taxpayer will be litigated, settled, or conceded solely on the merits of that tax liability, i.e., the
correct tax liability should be determined. This is customarily done without regard to whether the resolution of the tax liability
would indicate that the taxpayer “substantially prevailed”
in the proceeding which would potentially qualify the taxpayer for administrative or litigation costs. The issue of administrative
or litigation costs would then be litigated, settled, or stipulated on its own merits.
Q6. The Chief Counsel Notice on section 3468 encourages Counsel employees to remind AUSAs (or other DOJ attorneys) of the requirements,
when necessary and appropriate. What is the reasoning behind this statement and what are we to do?
A6. It is expected that Counsel employees will sometimes have a greater familiarity with RRA provisions than certain DOJ employees.
If a Counsel employee learns that a DOJ employee appears disposed towards taking action that would risk violating the provision,
the attorney should remind the DOJ employee of the requirements. The Counsel employee should also notify the Counsel employee’s
supervisor of any situation threatening a potential violation. Counsel management will escalate the issue as appropriate.
Q.7. May a Counsel employee request a taxpayer to waive rights to bring a civil action for actions taken by the agency under a
provision of law not contained in the Internal Revenue Code?
A.7. The restrictions of section 3468 pertain to requesting a taxpayer to waive “a right to bring a civil action . . . for any
action taken in connection with the internal revenue laws.”
Legislative history suggests that the provision was enacted to prevent the agency and its employees from taking advantage
of taxpayers by conditioning resolution of a disputed tax matter on a waiver of right to sue the agency over actions or injuries
argued to be sustained though improper assessment or enforcement action taken under the internal revenue laws. While the quoted
expression can be expected to include actions beyond those taken “under authority of the Internal Revenue Code,”
given the history of the provision, it is likely that the covered actions were only intended to include actions taken
on or with respect to a tax matter. It is unlikely that the prohibition would be applied to waivers of right to bring suit
over actions taken by the agency in connection with general governmental activities (e.g., internal labor matters, government
contract matters, FOIA disputes), unless those activities were somehow intertwined with a tax case or cases. These situations
must be assessed on a case by case basis.
