UPDATED PROCEDURES ARE PROVIDED FOR APPEALS OF 100-PERCENT PENALTY ASSESSMENTS UNDER SEC. 6672

Rev. Proc. 84-78

SECTION 1. PURPOSE

The purpose of this revenue procedure is to set forth updated procedures for appeals of 100-percent penalty assessments arising under section 6672 of the Internal Revenue Code in light of the single level of appeals established by the Internal Revenue Service.

SEC. 2. BACKGROUND

01 Section 6672(a) of the Code imposes a penalty (100-percent penalty) against any person required to collect, truthfully account for, and pay over any tax imposed by the Code who willfully fails to collect the tax, or truthfully account for and pay over the tax, or who willfully attempts in any manner to evade or defeat the tax or the payment of it.

02 Under section 6671(b) of the Code, the term "person" includes (but is not limited to) an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member, is under a duty to perform the act with respect to which the violation occurs.

03 Rev. Proc. 61-27, 1961-2 C.B. 563, sets forth procedures for appeals of proposed 100-percent penalties. Under those procedures, taxpayers were generally allowed two conferences with the Service, one with representatives of the District Collection Division and another with the Appeals Division (formerly Appellate Division). Rev. Proc. 61-27 amplified Rev. Proc. 57-26, 1957-2 C.B. 1093, which provided administrative appeal procedures relating to excise and employment taxes.

04 Rev. Proc. 69-26, 1969-2 C.B. 308, modified Rev. Proc. 61-27 to provide that no administrative appeals would be allowed in a case in which a 100-percent penalty assessment was asserted at the request of the office of Chief Counsel in order to support a third party action in a pending refund suit.

SEC. 3 SCOPE

The procedures in this revenue procedure apply to all unagreed 100-percent penalty cases arising in District Collection Divisions that relate to employment and excise taxes imposed under chapters 21, 22, 24, 33, and 45 of the Code, except where collection is in jeopardy. Sections 4 and 5 below apply to all cases except those cases in which assessments are made with respect to a pending refund suit. Section 6 below applies only to those third party refund party suit cases.

For procedures for a stay of collection if a bond is furnished, see section 6672(b) of the Code.

SEC. 4. PROCEDURE IN DISTRICT COLLECTION DIVISIONS

01 When, at the conclusion of an investigation to determine whether liability for the 100-percent penalty has been incurred, assessment of the penalty is proposed, the taxpayer will be so informed by notice from the District Collection Division and will be given an opportunity to execute an agreement form. In the same notice, the taxpayer will be informed of the right to appeal the determination by filing a formal protest within 30 days and requesting an Appeals conference.

02 If a signed agreement form is received from the taxpayer, either before, on or after issuance of the 30-day notice referred to in Section 4.01 above, or if the taxpayer does not file a protest within the specified 30-day period, the penalty will be assessed. If the taxpayer submits a timely protest in response to the 30-day notice and requests that the case be referred to Appeals, the case will be reviewed in the district director's office to determine whether further action or development is required before referring the case to Appeals.

SEC. 5 PROCEDURE IN DISTRICT DIRECTOR'S OFFICE FOR DISPOSING OF CLAIMS

If the 100-percent penalty has been assessed either by reason of the failure of the taxpayer to respond to a 30-day notice within the 30-day period or on the basis of the decision of Appeals, the taxpayer will be required to pay and file a claim for refund before any further consideration of the case on its merits by the district director of Appeals. After assessment of the penalty under either of the conditions specified above, the Service will not consider any claim for abatement that may be filed, unless the taxpayer establishes to the district director's satisfaction that unusual circumstances merit consideration of such a claim. If the district director concludes that no consideration is to be given to an abatement claim that has been filed, the taxpayer will be notified to that effect.

SEC. 6 THIRD PARTY REFUND SUIT PROCEDURES

01 In developing the defense of a refund suit brought by a responsible person against whom assessment is made under section 6672 of the Code, it may become necessary to determine whether another person, against whom an assessment has not been made, may have been a responsible person for purposes of section 6672. In such circumstances, action may be instituted against such a person.

02 In order to maintain a third-part action in such a case, the district director may be requested to make an assessment if no assessment had previously been made against such a person. This action is necessary to bring all potentially responsible persons before the court and let the court decide which person or persons are responsible under section 6672 of the Code.

03 If the 100-percent penalty has not been assessed against all the potentially responsible persons and a request for an assessment is made by the Chief Counsel in order to support a third-party action in a pending refund suit, the Collection Division of the appropriate district director's office will immediately request an assessment of the 100-percent penalty against such potentially responsible persons. The administrative appeal procedures described in section 4 above will not apply in such a case. The administrative review procedures will, however, be normally available in a case in which the potentially responsible person is outside the jurisdiction of the court in which the refund suit is pending.

04 The elimination of the administrative appeal does not deprive the person of the right of review. The forum for the hearing becomes the court that will decide which person or persons are responsible under section 6672 of the Code.

SEC. 7 EFFECT ON OTHER DOCUMENTS

Rev. Proc. 61-27 and Rev. Proc. 69-26 are superseded.

Rev. Proc. 57-26 is obsolete because procedures for appeal of excise and employment tax cases have been incorporated in the Statement of Procedural Rules.