Rev. Proc. 61-27

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to set forth procedures for protests and conferences before a Regional Appellate Division in unagreed cases arising in District Collection Divisions involving section 6672 of the Internal Revenue Code of 1954 or corresponding provisions of the Internal Revenue Code of 1939.

SEC. 2. BACKGROUND.

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

.02 The terms "person" and "taxpayer," as used herein, include 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 in respect of which the violation occurs.

.03 Revenue Procedure 57-26, C.B. 1957-2, 1093, extended jurisdiction of the Appellate Division, prior to assessment, to all unagreed cases arising in District Audit Divisions which involve excise taxes imposed under Chapters 31, 32, 33, 34, 36, 37, Subchapter F of Chapter 38, and Subchapters B, C, D, E, and F of Chapter 39, and employment taxes under Chapters 21, 22, 23, and 24 of the Internal Revenue Code of 1954 and corresponding provisions of the Internal Revenue Code of 1939, except where collection of the amount involved is in jeopardy. This Procedure explains the right of taxpayers to Appellate Division consideration, prior to assessment, in unagreed and protested 100 percent penalty cases arising in District Collection Divisions.

SEC. 3. SCOPE.

The procedures set forth herein are applicable to all unagreed 100-percent penalty cases arising in District Collection Divisions which relate to employment and excise taxes imposed under Chapters 21, 22, 24, and 33 of the 1954 Code and corresponding provisions of the 1939 Code, except where collection is in jeopardy.

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 letter from the District Collection Division and will be afforded an opportunity to execute an agreement form. If the taxpayer does not agree to the proposed assessment, he will be afforded an opportunity to present objections thereto at an informal conference. If the taxpayer does not request an informal conference or if an agreement is not reached at an informal conference, a formal notice of the proposed assessment will be issued to the taxpayer granting him 30 days in which to file a protest and request a conference before the Regional Appellate Division. A copy of the revenue officer's report of investigation or report of the conference will accompany the 30-day notice.

.02 If a signed agreement form is received from the taxpayer, whether prior or subsequent to issuance of the 30-day notice referred to in paragraph .01 of this section, 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 his case be referred to the Regional Appellate Division, the case will be reviewed in the District Director's office to determine whether new facts are presented in the taxpayer's formal protest which require verification or which may constitute a basis for possible revision of the position previously taken by the District Director's office. If additional facts are presented which require verification or which indicate that it may be possible to reach agreement on the liability issue, necessary action will be taken to accomplish such verification and, if appropriate, an informal conference with the taxpayer will be arranged. If no additional facts are presented in the taxpayer's protest or if consideration of such additional facts as may be presented does not produce a basis for closing the case in the District Collection Division, the case will be forwarded to the Regional Appellate Division for necessary action.

SEC. 5. PROCEDURE IN DISTRICT DIRECTORS' OFFICES IN DISPOSING OF CLAIMS.

If the 100-percent penalty has been assessed (1) by reason of the failure of the taxpayer to respond to a 30-day notice within the 30-day period or (2) on the basis of the decision of the Regional Appellate Division, the taxpayer ordinarily will be required to pay the assessment and file a claim for refund prior to any further consideration of the case on its merits by the District Director or the Regional Appellate Division. After assessment of the penalty under either of the conditions specified above, the Internal Revenue Service will not recognize any claim for abatement which may be filed, unless the taxpayer establishes a meritorious reason warranting consideration of such a claim, such as failure to receive a 30-day notice. 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. A claim for refund, or a claim for abatement of an assessment made under conditions other than conditions (1) and (2) described above, will be considered on its merits and will be referred to the Regional Appellate Division if the taxpayer protests the District Director's conclusions and requests Appellate Division consideration.

SEC. 6. PROCEDURE IN REGIONAL APPELLATE DIVISIONS.

The procedure before a Regional Appellate Division in unagreed 100-percent penalty cases is similar to the procedure for the handling of cases prescribed in section 601.106(b) of the Statement of Procedural Rules, as amended, C.B. 1955-2, 921; C.B. 1958-1, 664; and C.B. 1959-1, 770.

SEC. 7. EFFECT ON OTHER DOCUMENTS.

Revenue Procedure 57-26, C.B. 1959-2, 1093, is hereby amplified to include the provisions stated herein.