25.6.23. Examination Process-Assessment Statute of Limitations Controls

(1) Purpose. This IRM provides guidance on establishing and maintaining assessment statute controls.

(2) Audience. These procedures apply to Appeals, Large Business and International (LB&I), Small Business and Self-Employed (SB/SE) and Wage and Investment (W&I) employees.

(3) Policy Owner. The Director Examination - Field and Campus Policy, who is under the Director, Headquarters Examination.

(4) Program Owner. Field Examination Special Processes (FESP), which is under the Director, Examination - Field and Campus Policy.

(5) Contact Information. To recommend changes or make any other suggestions related to this IRM section, see IRM 1.11.6.6, Providing Feedback About an IRM Section - Outside of Clearance.

(1) The essential tools for controlling statutes for examination cases in the area offices and campuses are as follows:

• Form 895, Notice of Statute Expiration,

• Electronic statute control records and listings such as Correspondence Examination Automation Support (CEAS), Tax Equity and Fiscal Responsibility Act (TEFRA) Database, Examination Return Control System (ERCS), Statistical Sampling Inventory Validation Listings (SSIVLs) and Partnership Control System (PCS),

• Pending Statute Report and 895 Log generated through ERCS.

Note: The ERCS Pending Statute Report does not list returns with expired or alpha coded statutes.

• AIMS Table 4.0 or Table 4.1, Returns with Statute Date Pending,

Note: References to AIMS Table 4.0 are used throughout this section even though the SSIVL program may be used in area offices and campuses to generate the Table 4.0 data as opposed to an AIMS report generator.

• 120 Day Numeric Statute Report (Centralized Case Processing (CCP)),

• ERCS 895 Report/LB&I SSIVL (CCP),

• Use of a red folder for tax returns with ASEDs that are due to expire within 180 days.

(1) Statute controls are required for the following:

• All tax returns controlled on AIMS or being examined (regardless of whether the return is controlled on AIMS) with ASEDs that may expire within 180 days considering the return due date or date filed, whichever is later. See IRM 25.6.23.5.1.1, Time for Initiating Controls.

  Exception: In case closing functions, such as CCP, statute controls are required on all returns upon which the ASED may expire within 120 days. See IRM 25.6.23.6.1.1, Time for Initiating Statute Controls in Case Closing Functions.

• All returns which have an alpha code in the ASED on AIMS.

  Note: This requirement does not apply to Alpha Code EE cases in Campus Correspondence Exam (Corr Exam). Please see IRM 25.6.23.5.1.4(5), Initiation of Controls by Examiner or Specialist - Area Offices and Campus Operations, for additional information on processes required for Alpha Code EE cases in Corr Exam.

• All returns with consents to extend the period of time for assessment.

• All returns with prompt assessment requests filed under IRC 6501(d), Request for Prompt Assessment. See Treas. Reg. 301.6501(d)-1, Request For Prompt Assessment (see 26 CFR 6501(d) -1) which specifies that the assessment is to be within 18 months after receipt of the written request for prompt assessment. A request for prompt assessment is not the same as a request for prompt determination filed in bankruptcy cases. The request for prompt determination does not result in a reduction of the period of time to make the assessment.

• Returns with open requests for reconsideration of rejected claims and the statutory period for filing suit for refund may expire within 180 days.

• Return preparer penalty cases with statutes that may expire within 180 days.

• IRC 5000A, Requirement to Maintain Minimum Essential Coverage, individual shared responsibility payment (SRP) cases with statutes that may expire within 180 days.

• Other return-related penalty cases with statutes that may expire within 180 days when the period of time for assessment of the penalty needs to be extended, and a consent to extend the period of time for assessment of tax is not required. For example, assertion of the IRC 6707A, Penalty for Failure to Include Reportable Transaction Information With Return, penalty on an S corporation return when the limited situations in which an S corporation may be subject to tax do not apply.

• Any other miscellaneous civil penalties with a statute of limitations period that may expire within 180 days. See IRM 20.1, Penalty Handbook.

(2) Examples of specific types of returns which require statute controls include the following:

• Returns requisitioned for information (Source Code 45).

• Tax Equity and Fiscal Responsibility Act (TEFRA) partnership returns.

• Cases with transferee liability under IRC 6901, Transferred Assets.

• Returns placed in suspense, including fraud and grand jury suspense.

(1) Managers have primary responsibility for initiating and maintaining statute controls.

(2) Managers are responsible for ensuring that all employees within their jurisdiction:

• Understand the law pertaining to statutes - commensurate with the employees' assigned responsibilities,

• Maintain required statute controls, and

• Make timely assessments of tax and penalties.

(3) Examiners are responsible for controlling statutes on their assigned cases.

(4) Clerks, secretaries, and other individuals may have assigned responsibilities in controlling statutes.

(5) Specific responsibilities are described throughout this section.

(1) The procedures in this subsection apply to work groups in area offices and campus operations which are involved with the examination of tax returns including Planning and Special Programs, Technical Services staff and Classification sections at campuses. They cover examinations and related activities conducted by:

• Revenue agents,

• Tax auditors/Tax compliance officers,

• Tax examiners,

• Estate and gift tax attorneys, legal assistants, and paralegal specialists,

• Employment tax specialists, and

• Excise tax specialists.

(1) The following instructions apply to the below case closing functions.

• Centralized Case Processing (CCP) units located at campuses and

• Batch Processing or any other function closing examined cases at campuses.

(1) Cases with imminent statute of limitations require special handling and it is imperative that examiners and managers allow adequate time for case closing procedures; including, for the necessary case review, case processing and closure.

(1)

This exhibit provides instruction for preparation of the manually prepared version of Form 895, Notice of Statute Expiration. Exhibit 25.6.23-2, ERCS Form 895 Instructions, provides instruction for preparation of the ERCS version of Form 895.

(1)

This exhibit provides instruction for the ERCS version of Form 895, Notice of Statute Expiration. Exhibit 25.6.23-1, Form 895 Instructions, provides instruction for preparation of the manually prepared version of Form 895.

Reminder: Electronic signatures are permitted on PDF file copies of Form 895. An electronic signature must reflect the full name of the person signing the document and date signed. An electronic signature may also be used instead of initials.

(1) (1) Form 5348, AIMS/ERCS Update (Examination Update), is used to update statute of limitation information on AIMS. Form 5348 is also used to request statute updates on Examination Returns Control System (ERCS). Statute updates on ERCS will automatically update the same data on AIMS. See IRM 4.4.34, Updating/Correcting AIMS Data Base, and IRM 4.7.3, Statute of Limitations.

(2) (2) An extended or corrected statute expiration date is entered in this format: MMDDYYYY. For example: 04152015.

(3) Once a statute update has been input on AIMS and the statute expiration date is more than 180 days from the date AIMS Table 4.0 or 4.1 is generated, the return will no longer appear on the table.

(4) (3) When an open-ended consent has been secured, for example, Form 872-A, Special Consent to Extend the Time to Assess Tax, enter "872-A" in the ASED field.

(5) This entry does not remove the return from AIMS Table 4.0 or 4.1. The "872-A" designation will appear on the table indicating an open-ended consent has been secured.

(6) (4) Where a restricted consent to extend the statute is accepted, ensure that all deficiencies other than those covered by the extension are assessed (partial assessment) before the statute is updated, on AIMS and on ERCS, to the extended expiration date. Statute consent code "R" must be input to AIMS if a restricted consent agreement is entered into with the taxpayer. For guidelines on restricted consents, see IRM 25.6.22.8, Restricted Consents.

(7) Updating ASED Upon Issuance by Area Office of a Statutory Notice of Deficiency or Notice of Final Partnership Administrative Adjustments (FPAA): When a statutory notice of deficiency is issued, the Technical Service’s issuing office will update the ASED on returns with a calendar date ASED to include the minimum number of days the period for assessment is suspended from running (90 or 150 days if the notice is addressed to a person outside the United States, plus 60 days for a total of 150 or 210 days). This is done in order to reflect the best information available with respect to the statute of limitations at the time the notice of deficiency is issued. Should the updated ASED change, for example, as a result of an agreement by the taxpayer to the deficiency, then the ASED would be updated again to reflect the new information. When an FPAA is issued, the Technical Service’s issuing office will update the ASED of the TEFRA entity to include the minimum number of days the tax matters partner (TMP) or other partners have to petition the Tax Court, District Court or Claims Court (90 days for TMP, plus 60 days for other partners after the initial 90 days, for a total of 150 days as per IRC 6226, Judicial Review of Final Partnership Administrative Adjustments), plus one year as per IRC 6229, Period of Limitations for Making Assessments, to reflect the best information available with respect to the statute of limitations at the time the FPAA is issued.

(8) Alpha Codes: A two-digit alphabetic code designating a special statute situation may be entered in the day (DD) position of the statute date on AIMS and ERCS. For example, if Alpha Code FF is entered for a reference return and the actual statute expiration date is 04/15/2014, the statute date will be entered on AIMS as 04/FF/2014. An alpha code on the AIMS statute database does not remove the return from AIMS Table 4.0 or 4.1. It creates a message indicating that special conditions exist which affect the statute expiration date. Also, it should be noted the ASED is updated on AIMS as the result of entering an alpha code, but the ASED is not updated at Master File.

(9)

(10) There can be more than one special statute condition for a given tax period. In such cases, the statute controls should reflect the normal statute expiration date until it is determined with certainty which special assessment statute condition be relied upon to alpha code the AIMS ASED.

(11) As a general rule, the alpha code should not be entered on AIMS and on statute control records prior to 180 days before expiration of the normal statutory period for assessment and the individual ASED alpha code descriptions below should be read in the context of this general rule.

(12) Most alpha codes apply only when specific requirements of the law are met. The alpha code should be used only when it is clear that all essential elements of the applicable law are present.

(13) For protection of the persons making and approving the ASED alpha code determination, in cases where the normal statutory period for assessment is still open, a statement in the "remarks" section of Form 895 or other statute control report or system as utilized by function is required. The signatures or initials of both the employee charged with the return and the manager next to the statement give added assurance that all aspects of the alpha code condition have been carefully considered. Electronic signatures are permitted on the statute control records if the form is in PDF. If signing electronically, the signature must reflect the full name of the person signing the document (not just the SEID or other identifier) and the date signed. An electronic signature may also be used instead of initials, providing the full name and date are reflected.

(14) The procedures immediately below are to be followed in those instances when the examiner and manager have made a decision to allow the normal assessment statute to expire in reliance on the extended assessment statute provisions of IRC 6501(c)(1), False Return; IRC 6501(c)(8), Failure to Notify Secretary of Certain Foreign Transfers; IRC 6501(c)(9), Gift Tax on Certain Gifts not Shown on Return; IRC 6501(c)(10), Listed Transactions; IRC 6501(e), Substantial Omission of Items; IRC 7609(e), Suspension of Statute of Limitations. Also, see Alpha Codes AC, OO and YY, below for the requirement to document the case file and secure Territory Manager (for Alpha Code YY and in some circumstances OO), or Area Director (AD)/Director, Field Operations (DFO) (for Alpha Code AC) concurrence if any of these alpha codes are entered on AIMS/ERCS.

(15)

1. Timely and properly make a request to the taxpayer to extend the normal assessment statute of limitations and document the file accordingly with the request and the taxpayer’s response (or lack of response).

2. Prior to expiration of the normal assessment statute, document the manager’s decision to allow the normal assessment statute to expire in reliance on an extended assessment statute specified above. Documentation is accomplished by the manager preparing a memorandum to file that has been concurred with, in writing, by the Territory Manager that fully sets forth the rationale and calculations to support the conclusion to allow the normal assessment statute to expire. The requirement to seek concurrence from the Territory Manager applies only to the special assessment statute conditions associated with the IRC subsections specified above or the Alpha Code "YY" and occasionally Alpha Code "OO".

   Note: If using Alpha Code AC, written approval from the AD/DFO is required prior to updating the statute or proceeding with the examination.

3. Prior to the expiration of the normal assessment statute, update the AIMS database by means of the appropriate code:

   • Alpha Code "AC" for TEFRA-entity statute protected at the partner level,

   • Alpha Code "LL" for third-party summons suspension,

   • Alpha Code "NN" for substantial omission of items,

   • Alpha Code "OO" for false/fraudulent return,

   • Alpha Code "UU" for failure to notify of foreign transfers,

   • Alpha Code "VV" for inadequately disclosed gifts,

   • Alpha Code "WW" for failure to disclose "listed transactions, "and

   • Alpha Code "YY" for participation in abusive offshore arrangements.

(16) AA - Claim for Refund/Credit/Abatement Issue

(17) Alpha Code AA can be used to designate a claim for refund/credit/abatement that was timely filed by the taxpayer if all of the following conditions are met:

• A decision has been made that there are no other issues on the return which warrant an assessment,

• 180 days or less remain in the statute of limitations for assessment, and

• The claimed refund/abatement has not been made.

  Note: If the claimed refund/abatement has been made, refer to alpha codes BB or DD for potential application.

(18) If unpaid, the refund statute is held open for refund or credit up to the amount of the claim subject to the limitation on the amount provided by the lookback rules of IRC 6511(b), Limitations on Credit or Refund.

(19) If the statute for assessment is open when a claim is received for examination, the actual statute expiration date, not the AA, should be entered initially on the statute control records. The statute controls should be updated to AA only after the examiner is certain there is no likelihood of a tax or penalty assessment, and only after the examiner ascertains that the refund or abatement amount has not already been made. An appropriate statement on the statute control record would be: "The return was inspected and there are no material issues other than those on the claim and the claimed refund (or abatement) has not been made."

(20) Alpha Code AA may be used for formal claims, informal claims, and for taxpayer requests for abatement of unpaid tax (AIMS source code 73 – Taxpayer Request, also known as audit reconsiderations) when the taxpayer has filed a return. Alpha Code AA may be used for Offer in Compromise - Doubt as to Liability (OIC-DATL) cases for which the assessment statute has expired prior to the taxpayer’s filing of the Form 656-L, Offer in Compromise (Doubt as to Liability), and the Tax Increase Prevention and Reconciliation Act (TIPRA) statute is no longer applicable. See IRM 25.6.23.5.7.2.1, for more guidance on the TIPRA statute procedures.

(21) If the taxpayer has not filed a return and requests abatement of an assessment made by means of a substitute for return under IRC 6020(b), Returns Prepared For or Executed by Secretary, the ASED, if alpha coded, should be Alpha Code EE. Also, see Alpha Code SS – Financial Disability, for claims filed after the normal statute of limitations which are based on a claim of financial disability, as defined in IRC 6511(h)(2), Financially Disabled.

(22) Alpha Code AA may also be used for preparer penalty cases under IRC 6694(a), Understatement of Taxpayer’s Liability by Tax Return Preparer, or IRC 6695, Other Assessable Penalties with Respect to the Preparation of Tax Returns for Other Persons, where:

• The normal three-year ASED has expired,

• The preparer has paid the penalty, and

• A claim for refund of the penalty has been filed.

(23) AB - Assessment Statute of Limitations Waived by Properly Executed Closing Agreement

(24) Alpha Code AB designates that the statutory limitation pertaining to the period of time for assessment of tax for the taxable period has been waived by a closing agreement that has been properly executed by both the taxpayer and a delegated IRS official. The month (MM) and year (YYYY) entries accompanying the Alpha Code AB are the month and year the statute expired, absent the properly executed closing agreement waiving the assessment statute of limitations.

(25) AC - TEFRA-Entity Statute Protected at the Partner Level

(26) Generally, the TEFRA IRC 6229, Period of Limitations for Making Assessments, statute is secured at the partnership level with a Form 872-P, Consent to Extend the Time to Assess Tax Attributable to Partnership Items, (preferred method) or Form 872-O, Special Consent to Extend the Time to Assess Tax Attributable to Partnership Items. However, there are some occasions where it is not possible to secure an extension at the partnership (key case) level. When this happens, it is necessary to protect the IRC 6501, Limitations on Assessment and Collection, statute at the partner level before the TEFRA partnership IRC 6229 statute expires.

(27) TEFRA proceedings should be finalized prior to the expiration of the key case statute whenever possible. It is recommended that a Final Partnership Administrative Adjustment (FPAA) be issued, if necessary, to avoid the need to control partner level IRC 6501 statutes. It may be necessary to quickly issue a Notice of Beginning of Administrative Proceeding (NBAP), FPAA, and untimely notice letter in some cases.

(28) If a determination is reached that the issuance of an FPAA or a statute extension at the TEFRA partnership level is not an option, the period of limitations must be protected by securing a Form 872, Consent to Extend the Time to Assess Tax, from each partner with an open IRC 6501 statute being controlled and adjusted. The Form 872 does not extend the IRC 6229 minimum period, it only extends the partner’s 6501 period. See IRM 25.6.22, Extension of Assessment Statute of Limitations by Consent.

(29) When a determination has been made not to protect the IRC 6229 statute or the IRC 6229 statute has expired and one or more of the direct/indirect partners’ IRC 6501 statute is open, the key case statute, upon approval, will be updated to Alpha Code AC. See IRM 4.31.2, TEFRA Examinations - Field Office Procedures.

(30) If an Alpha Code AC is used at the key case level, the pass-through tier statute should be updated to Alpha Code AC when the regular statute date is within 180 days of expiration or has expired, unless the tier itself is under examination. All direct or indirect partners being adjusted with open IRC 6501 statutes should have a calendar date statute.

(31) Following approval, the key case IRC 6229 statute for the month (MM) and year (YYYY) segments will retain the normal three-year, or extended, statute date. Only the day (DD) segment of the statute date will be updated to Alpha Code AC. For example, if the regular three-year expiration date is 03/15/2014 the updated statute would show as 03/AC/2014.

(32) If a determination is made to continue or initiate an examination with a short or expired key case statute the IRS will need to rely on the direct/indirect IRC 6501 partner statute. For example, to address a partner’s net operating loss carryforward created by the key case partnership, the partnership and partner’s expired tax years will need to be controlled on AIMS to make the affected item carryover adjustment. In this situation, the Alpha Code AC would be used for the key case, any intervening tiers and the partner’s expired statutes. There must be an open IRC 6501 statute on the partner carryforward year being adjusted.

(33) For the partner’s expired statute, the Alpha Code AC is entered in the day (DD) position. The month (MM) and year (YYYY) positions designate the statute date of the open year (carryforward) where the adjustments will be made.

(34) If the partner’s statute of the open year (carryforward) is extended prior to issuance of a FPAA to the partnership or the IRS does not have a countersigned partner agreement, the Alpha Code AC statute month (MM) and year (YYYY) must be updated to reflect the date of the extended statute. Once the FPAA has been issued or the IRS has a countersigned agreement from the partner the alpha statute can be updated to Alpha Code HH.

(35) If 100 percent of the partner statutes are not protected with respect to adjustments passing from the TEFRA entity, an explanation as to why certain partners’ statutes were allowed to expire must be included on the Alpha Code AC Approval Memo. This memo must be attached to the key case partnership Form 895, Notice of Statute Expiration. For example, the memo would explain why the statute for Partner A referenced above was not protected.

(36) AD - Employment Tax Return Examination Limited to IRC 3121(q)

(37) Alpha Code AD indicates that the examination is limited to IRC 3121(q), Tips Included for Both Employee and Employer Taxes. Employment taxes for tip income not reported to the employer is the only issue. See IRM 4.23.7.8, Statute of Limitations for Tip Examinations, for additional information.

(38) AE - IRC 6235(a), Period Of Limitations On Making Adjustments [Effective for returns filed for partnership taxable years beginning after December 31, 2017]

(39) The IRC 6235(a)(1) date is the IRS’ deadline for issuing a Notice of Proposed Partnership Adjustment (PPA/NOPPA). The IRC 6235(a)(1) date is generally extended by the Field exam group to allow timely issuance of the PPA/NOPPA by Technical Services or Appeals. Technical Services or Appeals may also solicit an extension under IRC 6235(b),or solicit an extension of the IRC 6235(a)(1) date. Issuance of the PPA/NOPPA triggers other dates under IRC 6235(a) that must be considered when determining the deadline for issuing a Notice of Final Partnership Adjustment (FPA). If one of these other dates is later than the IRC 6235(a)(1) date, the IRS may rely on the latest date, and make a managerial decision to allow IRC 6235(a)(1) to expire and update the statute date field to “AE”. Generally, this will happen after the case is no longer in the Field Exam group. See Interim Guidance Memorandums LB&I-04-1019-010 (expiring 10/31/2021) and LB&I-04-0320-0005 (expiring 04/01/2022) and Form 15271, Bipartisan Budget Act (BBA) Partnership Adjustment Statute Extension Check Sheet, for more information. After the expiration dates of the interim guidance memorandums, consult IRM 4.31.9, Centralized Partnership Audit Regime (BBA) Field Examination Procedures, and Form 15271, Bipartisan Budget Act (BBA) Partnership Adjustment Statute Extension Check Sheet, for more information.

(40) AF - BBA Partners Subject to Chapter 2/2A Adjustments Protected by IRC 6501 (c)(12), Certain Taxes Attributable to Partnership Adjustments

(41) Used on partners in a BBA partnership that are subject to Chapter 2/2A adjustments and their statute is protected by IRC 6501(c)(12). Alpha Code AF will be used primarily with Partnership Control System (PCS) linked partner returns controlled in the Pass-Through Entities (PTE). See Interim Guidance Memorandums LB&I-04-1019-010 (expiring 10/31/2021) and LB&I-04-0320-0005 (expiring 04/01/2022) and Form 15271, Bipartisan Budget Act (BBA) Partnership Adjustment Statute Extension Check Sheet, for more information. After the expiration dates of the interim guidance memorandums, consult IRM 4.31.9, Centralized Partnership Audit Regime (BBA) Field Examination Procedures, and Form 15271, Bipartisan Budget Act (BBA) Partnership Adjustment Statute Extension Check Sheet, for more information.

(42) BB - NOL or Capital Loss Carryback

(43) Under IRC 6501(h), Net Operating Loss or Capital Loss Carrybacks, or IRC 6501(k), Tentative Carryback Adjustment Assessment Period, the period for assessing a deficiency on a carryback year return can be determined by the statute date of the loss (source) year return. Alpha Code BB can be used to designate a return reflecting a net operating loss (NOL) or capital loss carryback for which a claim for refund or tentative allowance has been paid to the taxpayer, thus disqualifying use of the Alpha Code AA.

(44) When using Alpha Code BB, the assessment statute of the loss (source) year return must be protected to assess a deficiency on a carryback year due to any changes to the loss carryback.

(45) Alpha Code BB may be used when a taxpayer has filed, because of a carryback loss, an application for tentative allowance (Form 1045, Application for Tentative Refund, or Form 1139, Corporation Application for Tentative Refund) or a claim for refund (with Form 1040-X, Amended U.S. Individual Income Tax Return, or Form 1120-X, Amended U.S. Corporation Income Tax Return), in which the refund claim has been paid to the taxpayer AND the following conditions have also been met regarding any open statute on a carryback year at the time of determination:

1. There are no general adjustments (as defined in IRM 25.6.23.1.5, Terms) to the carryback year return when a claim for refund has been paid and/or

2. There are no general adjustments to the carryback year return that would result in a tax assessment greater than any tentative allowance amount (reduced by tax which may be assessed because of adjustments to the loss carryback) for the carryback year.

(46) Alpha Code BB should NOT be used if the assessment statute on the carryback year(s) is still open and there may be general adjustments affecting tax for the carryback year that could exceed the tentative allowance or claim amount. Any general adjustments generating more tax than the claim or tentative allowance amount would require assessment based on the ASED of the carryback year without regard to the provisions of IRC 6501(h), Net Operating Loss Or Capital Loss Carrybacks or IRC 6501(k), Tentative Carryback Adjustment Assessment Period, relating to the ASED on the loss (source) year.

(47) When Alpha Code BB is used, some examples of appropriate statements in the "Remarks" section of Form 895 or other statute control record would be:

1. If the ASED on the carryback return has not expired and the taxpayer has filed an Application for Tentative Allowance: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the loss carryback) and a deficiency can be assessed for the carryback year as a result of either or both a decrease in the carryback loss and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount."

2. If the ASED on the carryback return has not expired and the taxpayer has filed a claim for refund as a result of the loss carryback and the claim has been paid: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency for the carryback year and a deficiency can be assessed for the carryback year as a result of a decrease in the carryback loss."

3. If the ASED on the carryback return has otherwise expired and the taxpayer has filed an Application for Tentative Allowance: "The normal ASED for the carryback year has expired and under IRC 6501(h) and IRC 6501(k), a deficiency can be assessed for the carryback year as a result of either or both a decrease in the carryback loss and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount."

4. If the ASED on the carryback return has otherwise expired and the taxpayer has filed a claim for refund as a result of the loss carryback and the claim has been paid: "The normal ASED for the carryback year has expired and under IRC 6501(h), a deficiency can be assessed for the carryback year as a result of a decrease in the carryback loss."

(48) Alpha Code BB is entered in the day (DD) position of the statute date field. The month (MM) and year (YYYY) positions designate the statute date of the loss year.

(49) If the ASED of the loss (source) year return is extended, the Alpha Code BB statute of the carryback years will require updating to reflect the new MM and YYYY ASED for the loss (source) year. If an open-ended consent is secured with Form 872-A, Special Consent to Extend the Time to Assess Tax, for the loss (source) year return, the ASED of the carryback year would be 872-ABB.

(50) CC - Joint Investigation

(51) Alpha Code CC is used for tax periods covered by a Form 10498–B, Joint Investigations Intent to Solicit Consent to Extend Statute, or memorandum signed by the Territory Manager and Special Agent in Charge (SAC), Criminal Investigation (CI) or the Area Director (AD), stating that no consent to extend the statute should be secured. See IRM 25.1.4.3.8, Statute Protection. An appropriate statement in the Remarks section of Form 895 or other control record would be: "Concurrence memorandum approved on [date signed by the Territory Manager or the Area Director]."

(52) Alpha Code CC may also be used with a tax return under joint investigation which has a statutory period for assessment that expired before the return was established on AIMS.

(53) If Criminal Investigation withdraws from the joint investigation prior to the expiration of the statute, the statute controls should be updated to reflect the normal statute expiration date, or other applicable ASED alpha code, for example NN or OO, if some other exception to the normal three-year assessment statute applies.

(54) If it is ultimately determined that there is no exception to the normal ASED, then replace the Alpha Code CC ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment cannot be made, refer to IRM 25.6.1.13.2.8, Statute Expiration Reporting Responsibilities and Procedures for SB/SE Area Office and Campus Organizational Components Involved Directly With or Providing Support for Tax Return Examinations, or other procedures required by your particular organizational component, for the procedures for preparing and submitting a Form 3999, Statute Expiration Report.

(55) DD - Credit Carryback

(56) Under IRC 6501(j), Certain Credit Carrybacks, or IRC 6501(k), Tentative Carryback Adjustment Assessment Period, both of which adopt the definition of credit carryback provided in IRC 6511(d)(4)(C), Credit Carryback Defined, the period for assessing a deficiency on a carryback year return can be determined by the statute date of the return from which the credit was carried. Under IRC 6501(i), Foreign Tax Carrybacks, the period for assessing a deficiency on a carryback year return can be determined by the statute date of the return giving rise to the excess tax credit plus one year.

(57) Credits which may be carried back include:

• General business credits as defined in IRC 39, Carryback and Carryforward of Unused Credits,

• Foreign tax credits as defined in IRC 904(c), Limitation on Credit, and

• Disallowed oil and gas extraction taxes as defined in IRC 907(f), Special Rules in Case of Foreign Oil and Gas Income.

Caution: See discussion of limitations to the carryback of foreign tax credits and disallowed oil and gas extraction taxes below.

(58) For general business credits, Alpha Code DD can be used to designate a return reflecting a general business credit carryback for which a claim for refund or tentative allowance has been paid to the taxpayer, thus disqualifying use of the Alpha Code AA.

(59) Alpha Code DD may be used when a taxpayer has filed, because of a general business credit carryback loss, an application for tentative allowance (Form 1045, Application for Tentative Refund, or Form 1139, Corporation Application for Tentative Refund), or a claim for refund (with Form 1040-X, Amended U.S. Individual Income Tax Return, or Form 1120-X, Amended U.S. Corporation Income Tax Return), in which the claim for refund has been paid to the taxpayer AND the following conditions have also been met regarding any open statute on a carryback year at the time of determination:

1. There are no general adjustments (as defined in IRM 25.6.23.1.5, Terms) to the carryback year return when a claim for refund has been paid, and/or

2. There are no general adjustments to the carryback year return that would result in a tax assessment greater than any tentative allowance amount (reduced by tax which may be assessed because of adjustments to the general business credit carryback) for the carryback year.

(60)

(61) Foreign tax credits and disallowed oil and gas extraction taxes: The Form 1045, Application for Tentative Refund, and Form 1139, Corporation Application for Tentative Refund, cannot be used to carryback unused foreign tax credits or disallowed oil and gas extraction taxes. However, if the tax credit was carried back on an amended return and the claimed refund amount resulting therefrom had been refunded to the taxpayer, then IRC 6501(i) would allow assessment of a deficiency resulting from the tax credit carryback so long as the assessment statute is open on the tax period giving rise to the excess tax credit plus one year.

(62) Alpha Code DD may be used in these circumstances to code the AIMS ASED for the carryback tax period to designate the applicability of the IRC 6501(i) statute.

(63) Credits can be released as a result of loss carrybacks from a subsequent year and made available for carryback or carryover to some other year. In these situations, the ASED for assessing a deficiency for the refunded amount or the tentative allowance amount of the "released" credit that is attributable to the loss carryback is also determined under IRC 6501(j) or IRC 6501(k).

(64) When Alpha Code DD is used, some examples of appropriate statements in the Remarks section of Form 895 or other statute control record would be:

1. If the ASED on the carryback return has not expired and the taxpayer has filed an Application for Tentative Allowance: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the credit carryback), and a deficiency can be assessed for the carryback year as a result of either or both a decrease in the credit carryback and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount."

2. If the ASED on the carryback return has not expired and the taxpayer has filed a claim for refund as a result of the credit carryback and the claim has been paid: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency for the carryback year and a deficiency can be assessed for the carryback year as a result of a decrease in the credit carryback."

3. If the ASED on the carryback return has otherwise expired and the taxpayer has filed an Application for Tentative Allowance: "The normal ASED for the carryback year has expired and under IRC 6501(j) and IRC 6501(k), a deficiency can be assessed for the carryback year as a result of either, or both, a decrease in the credit carryback and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount."

4. If the ASED on the carryback return has otherwise expired and the taxpayer has filed a claim for refund as a result of the loss carryback and the claim has been paid: "The normal ASED for the carryback year has expired and under IRC 6501(j), a deficiency can be assessed for the carryback year as a result of a decrease in the credit carryback."

(65) Alpha Code DD is entered in the day (DD) position of the statute date field. The month (MM) and year (YYYY) positions designate the statute date of the tax year generating the credit.

(66) If the ASED of the return from which the credit was carried is extended, the DD statute of the carryback years will require updating to reflect the new MM and YYYY ASED for the return from which the credit was carried. If an open-ended consent is secured with Form 872-A, Special Consent to Extend the Time to Assess Tax, for the credit generating year return, the ASED of the carryback year would be 872-ADD.

(67) EE - No Return Filed

(68) Alpha Code EE designates a return has not been filed by the taxpayer. Therefore, there is no statute expiration date.

(69) Alpha Code EE is used in the AIMS ASED when a substitute for return is prepared by the IRS, either by inputting AM 424 with an appropriate push code to post a Substitute for Return (SFR) Transaction Code (TC) 150 to Master File or by the IRS filing an actual IRC 6020(b), Returns Prepared for, or Executed by Secretary, return to assess the types of taxes that can be assessed without the IRS first issuing a notice of deficiency.

(70) Alpha Code EE may also be used when information returns, or other non-income tax returns have not been filed, and controls are established to assess a civil penalty.

(71) Alpha Code EE is entered in the day (DD) position of the statute field. The month (MM) and year (YYYY) positions should reflect the "normal" ASED if the return had been timely filed without regard to extensions.

(72) When a late filed return is received from a taxpayer, the examiner or specialist will replace the Alpha Code EE statute designation with a true statute expiration date based on the date the return was received by the IRS. The examiner or specialist will obtain transcripts throughout the examination, at least once a year, to check for postings (such as TC 976 or 977) indicating a return may have been filed. Hard copies of these dated transcripts are to be retained in the case file. The date and action taken for checking transcripts, as well as the results of the check, will also be documented on the case activity record. See IRM 4.4.9, Delinquent and Substitute for Return Processing, for additional information.

(73) FF - Reference Return

(74) Alpha Code FF is used when a return is requisitioned for reference only (Source Code 45) and there is no expectation of making a tax assessment for the tax period. If the statute is still open when a reference return is secured, the true statute expiration date should be used, rather than Alpha Code FF, until a definite determination is made that there will be no tax change.

(75) If a reference return is examined, replace Source Code 45 with a source code appropriate for an open examination and replace the Alpha Code FF statute designation with the actual statute expiration date.

(76) GG - ILSC Pass-through

(77) Alpha Code GG is used for non-taxable, investor level statute control (ILSC) Form 1065, U.S. Return of Partnership Income, and Form 1120-S, U.S. Income Tax Return for an S Corporation returns. The statute for assessments passing from the non-taxable ILSC return is determined on the returns of the partners or shareholders.

(78) Alpha Code GG statutes should not be used if:

• There is a possibility of a tax or penalty assessment on the S corporation, or

• There is a possibility of a penalty assessment on the partnership, or

• A final determination has not been made that the partnership comes within the TEFRA or BBA provisions.

(79) Alpha Code GG should be used only if all the following four conditions are confirmed:

1. The entity is not liable for entity level tax or penalties. For S corporations this includes the Built-in Gains (BIG) Tax (IRC 1374, Tax Imposed on Certain Built-In Gains), Excess Net Passive Income Tax (IRC 1375, Tax Imposed When Passive Investment Income of Corporation Having Accumulated Earnings and Profits Exceeds 25 Percent of Gross Receipts), Last in First out (LIFO) Recapture Tax (IRC 1363(d), Effect of Election on Corporation), recapture of prior C corporation credits and/or tax paid on fuels. For S corporations and partnerships this includes penalties under IRC 6707A, Penalty for Failure to Include Reportable Transaction Information with Return, IRC 6698, Failure to File Partnership Return or IRC 6699, Failure to File S Corporation Return.

2. The S corporation election is valid and has not had a terminating event, including, but not limited to, an invalid shareholder, three years of excessive net passive investment income, or a revocation.

3. A final determination has been made that the partnership does not fall within the TEFRA or BBA provisions.

4. All investor statutes are controlled on AIMS and protected, or are properly linked via the Partnership Control System (PCS), unless they have a signed Form 15041, ILSC Pass-Through Entity Intent Not to Pursue Investor - Statute Protection, to allow the investor’s statute to expire as detailed in IRM 25.6.23.4.5.1, Inconsistent Applications for Investor Returns - Investor Level Statute Control.

(80) The month and year of the alpha coded ASED is three years after the ILSC return is filed or due, whichever is later.

(81) HH - TEFRA Partner

(82) Alpha Code HH is used for returns of partners in TEFRA partnerships with only TEFRA pass-through adjustments and the assessment statute is protected at the TEFRA entity level for all TEFRA entities from which an adjustment to the TEFRA partner’s return is to be made. Alpha Code HH must not be used if there are ILSC adjustments at the partner level.

(83) Alpha Code HH is used by campus TEFRA units where partner returns are held pending only the outcome of TEFRA partnership examinations.

(84) Area offices may use Alpha Code HH when the return of the partner only is subject to TEFRA pass-through adjustments. Area offices will not use the Alpha Code HH for open partner examinations when issues other than TEFRA pass-through adjustments exist.

(85) II - Form 1040, U.S. Individual Income Tax Return, Other Taxes

(86) Alpha Code "II" is used to indicate the Form 1040 return is examined for the non-filing or under-reporting of taxes reportable in the Other Taxes section of the Form 1040, and to indicate that a determination has been made that there are no income tax issues (Tax and Credits before consideration of Other Taxes) of material tax consequence on the Form 1040 return which require examination or the assessment statute has already expired with respect to the income taxes.

(87) Since the extended tax assessment statute resulting from the non-filing of Other Taxes only applies to the tax liability relating to the Other Tax and does not apply to the income tax ASED, a careful determination that no income tax issues are present on the return must be made before alpha coding the AIMS ASED with Alpha Code "II", if the income tax ASED has not otherwise expired at the time the alpha coding determination is being made. If there are income tax issues of tax consequence based on inspection of the Form 1040 and the period for assessment of the income taxes has not expired, do not code the AIMS ASED with Alpha Code "II". Action must be taken to protect the income tax assessment statute of limitations.

(88) Also, consideration needs to be given to protecting the assessment statutes for the Other Taxes, for which an examination is warranted, rather than relying on a non-filing determination to permit assessment of the Other Taxes at any time. Care must be exercised whenever a separate return or schedule required for an Other Tax is not filed with the Form 1040 return and the IRS will rely on a non-filing determination to permit assessment of the Other Tax at any time. In particular, before concluding that filing of Form 1040 has no effect on the period for assessment of an Other Tax, make sure it has been determined the Other Tax is separate and distinct from the income taxes imposed by subtitle A of the IRC. See Rev. Rul. 79-39, 1979-1 C.B. 435 (FICA taxes on tip income are separate and distinct) and Rev. Rul. 82-185, 1982-2 C.B. 395 (self-employment taxes are not separate and distinct from income taxes). There is no separate ASED reflected on Master File or AIMS for these Other Taxes as Master File only reflects the ASED of the Form 1040 so the ASED for Other Taxes needs to be determined separately in instances of non-filing of Other Taxes.

(89) Non-filing for the purposes of this AIMS alpha code means the taxpayer filed a Form 1040 return but did not attach the information specified by the form or form instructions. An example of Other Taxes required to be reported on the Form 1040 return are household employment taxes, which are required to be reported in the Other Tax section of the Form 1040, and are to be supported by the attachment to the Form 1040 of a Schedule H, Household Employment Taxes. A taxpayer’s entry of a "zero" on the Form 1040 line item prescribed for reporting household employment taxes without supplying the supporting Schedule H will not start the running of the statute of limitations for household employment taxes. For example, a taxpayer who mistakenly computes wages and, therefore, honestly believes they have no tax liability and follows the IRS guidance that the schedule does not have to be filed, has not started the period of limitations (the "first position"). The same treatment should apply if a number (greater than zero) is entered in the Other Tax section without the supporting schedule being supplied (the "second position"). Case law specifically addressing the Schedule H has yet to be established regarding these positions.

(90) If the taxpayer did report a tax liability for household employment taxes (in this example) on the Form 1040, the AIMS Alpha Code "II" can be used to designate the return is being examined for household employment taxes only. Form SS-10, Consent to Extend the Time to Assess Employment Taxes, should be used to extend the assessment statute for household employment taxes, if necessary, even if AIMS is coded with the Alpha Code "II". Again, there is presently no way to indicate the Other Tax ASED on AIMS. The month and year of the ASED on AIMS when using the Alpha Code "II" should be the month and year of the expiration of the Form 1040 ASED, whether or not there was a filing or nonfiling of the Other Tax.

(91) In addition to the household employment taxes discussed above, the Alpha Code "II" can be used to designate the period for assessment has not expired for such Other Taxes as the Social Security and Medicare tax on tip income not reported to the employer and the excise taxes on excess contributions or accumulations in qualified retirement or other plans. For a comprehensive list of Other Taxes reported on the Form 1040 depending upon the tax period under consideration, see the instructions for the Other Tax section of the Form 1040. Again, as stated above, care must be exercised to determine if the underlying tax being considered requires the filing of a" return" for taxes which are separate and distinct from the income taxes imposed by subtitle A of the IRC, and the Other Tax being considered has a period for assessment which has not already expired. For additional information, also see IRM 25.6.1.9.4.3, Forms Reporting More Than One Item of Tax. See Paschall v. Commissioner, 137 T.C. 8 (2011), in which the Tax Court held the failure to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, kept the assessment statute open on the excise taxes imposed on excess contributions to an individual retirement account under IRC 4973, Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities, and failure to file penalty under IRC 6651(a)(1), Failure to File Tax Return or to Pay Tax, although the Form 1040 returns, where the excise taxes should have been reflected after calculation on Form 5329, were timely filed.

(92) JJ - Non-taxable Fiduciary and Certain Deceased Spousal Unused Exclusion (DSUE) Returns

(93) Alpha Code JJ is used for Form 1041, U.S. Income Tax Return for Estates and Trusts, fiduciary returns for which it has been determined that the fiduciary entity is not a taxable entity for the tax periods in question but is a pass-through entity. The assessment statutes are determined on the returns of the beneficiaries receiving pass-through items from the Form 1041.

(94) Alpha Code JJ is also used during an examination of a Form 706, U.S. Estate Tax Return, or Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, when a related estate or gift tax return is being examined for purposes of determining the subject return's correct Deceased Spousal Unused Exclusion (DSUE) amount. Alpha Code JJ is only used for the related estate or gift tax return(s) when no otherwise viable alpha code is available.

(95) KK - Bankruptcy Suspense

(96) Alpha Code KK is used for returns of taxpayers who file petitions in Bankruptcy Court and the assessment statute is suspended pending resolution of the bankruptcy (unless the court lifts the stay earlier). Since, for bankruptcy petitions filed after October 22, 1994, the issuance of a statutory notice of deficiency is necessary in order for the bankruptcy stay to suspend the period of time for assessment, the Alpha Code KK should only be input by those employees managing the inventory of returns held in Bankruptcy Suspense status.

(97) Where a bankruptcy petition was filed before October 22, 1994, the statute is suspended during the period of time the bankruptcy stay is in effect, plus 60 days, as the IRS was prohibited from making an assessment. Where a bankruptcy petition is filed on, or after October 22, 1994, the statute is suspended during the period of time the bankruptcy stay is in effect if a valid statutory notice of deficiency has been issued and no waiver of restriction on assessment is received.

(98) Where a bankruptcy petition is filed on, or after October 17, 2005, in the case of an individual taxpayer, the assessment statute is suspended from running on the pre-petition tax periods once the notice of deficiency is issued and during the period of time the bankruptcy stay prescribed in 11 USC 362 is in effect. Post bankruptcy petition tax periods should not be placed in bankruptcy suspense and Alpha Coded KK as the assessment statute is not suspended from running by the bankruptcy stay.

(99) In the case of corporate taxpayers, the bankruptcy stay generally applies to liabilities that arise before the confirmation of the Chapter 11 plan. Therefore, the tax period for which a statutory notice was issued, and to which the stay is in effect should be Alpha Coded KK and placed in bankruptcy suspense.

(100) When the bankruptcy stay is lifted, a new statute expiration date must be determined. Then the Alpha Code KK statute will be replaced by the recomputed assessment statute expiration date.

(101) LL - Third-Party Summons

(102) Alpha Code LL is used when the statute of limitations on assessment (but not collection) under IRC 6501, Limitation on Assessment and Collection, or the statute of limitations on criminal prosecution under IRC 6531, Periods of Limitation on Criminal Prosecutions, is suspended by operation of IRC 7609(e)(1), Suspension of Statute of Limitations - Subsection (b) Action, or IRC 7609(e)(2), Suspension of Statute of Limitations - Suspension After 6 Months of Service of Summons. The suspension provisions operate as follows:

• IRC 7609(e)(1) suspends the statutes of limitations under circumstances where a third party is served with a summons that is subject to the notice requirement of IRC 7609(a), and the taxpayer (whose liability is being investigated by that summons) either intervenes in a suit to enforce the summons or files a petition to quash the summons. Under these circumstances, the taxpayer's statutes of limitations (for the tax periods which are the subject of the summons) are suspended for the period during which a proceeding, and appeals therein, are pending.

• IRC 7609(e)(2) suspends the statutes of limitations under circumstances where a recipient of a John Doe summons issued under IRC 7609(f), or where a recipient of a third-party summons that is subject to the notice requirement of IRC 7609(a), fails to comply with the summons for more than 6 months after the summons was served. Under these circumstances, the taxpayer's statutes of limitations (for the tax periods which are the subject of the summons) are suspended for the period beginning 6 months after the date the summons was served and ending on the date the summoned party finally resolves their response to the summons.

(103) IRC 7609(e)(1) and IRC 7609(e)(2) should generally be relied upon to extend the period for assessment only in those instances when the ASED has otherwise expired. The ASED may be Alpha Coded LL when it has been determined that IRC 7609(e)(1) or IRC 7609(e)(2) is applicable and the normal three-year assessment statute applicable to the return may be allowed to expire if:

1. A consent to extend the assessment statute for the return cannot be obtained after timely and proper solicitation,

2. The case file is documented with adequate justification for letting the assessment statute applicable to the return expire in reliance on IRC 7609(e)(1) or IRC 7609(e)(2), and

3. Written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

(104)

(105) MM - IRC Section 183(e)(4): Activities Not Engaged in for Profit

(106) Alpha Code MM is used when a taxpayer makes the election under IRC 183(e), Special Rule, by filing Form 5213, Election to Postpone Determination as to Whether the Presumption Applies That an Activity is Engaged in for Profit, to postpone a determination as to whether the profit motive presumption applies to an activity until the close of the fifth year (or seventh year in certain circumstances) in which the taxpayer engages in the activity. This election extends the statute of limitations on assessment for all years in this five-year or seven-year presumption period until two years after the due date (determined without extensions) for filing the return for the last taxable year in the presumption period.

(107) The month and year accompanying the Alpha Code MM will be the date determined under IRC 183(e)(4), Time for Assessing Deficiency Attributable to Activity. For example: if the due date for the final year involved in a IRC 183 determination is April 15, 2015, the alpha code designation for the tax years held open by the IRC 183(e) election would be 04/MM/2017.

(108) NN - IRC 6501(e): Substantial Omission of Items

(109) Alpha Code NN indicates the IRS is relying on a substantial omission of items meeting the requirements of either IRC 6501(e)(1), Income Taxes, IRC 6501(e)(2), Estate and Gift Taxes, or IRC 6501(e)(3), Excise Taxes, as the exception to the normal three-year period of time for assessment of tax. The tax may be assessed within 6 years after the date the original return was filed or due, whichever is later, if the taxpayer omits:

• More than 25 percent of the gross income reported on the original income tax return. See IRM 25.1.4.3.8.1, IRC 6501(e), Six-Year Statute, for items included in the computation of gross income.

• More than $5,000 in income attributable to foreign financial assets to include those tax periods upon which the period of time for assessment was open on March 18, 2010, the date of enactment of the Hiring Incentives to Restore Employment (HIRE) Act, or for returns filed after that date. See IRC 6038D, Information with Respect to Foreign Financial Assets; IRC 1471, Withholdable Payments to Foreign Financial Institutions, and IRC 1473, Definitions for definitions pertaining to foreign financial assets. See Exhibit 25.6.23-5, for examples.

• More than 25 percent of tax on original Form 720, Quarterly Federal Excise Tax Return.

• Includable items in excess of 25 percent of the gross estate reported on original Form 706, U.S. Estate Tax Return.

• Gifts in excess of 25 percent of the total gifts reported on original Form 709, United Statutes Gift (and Generation - Skipping Transfer) Tax Return.

(110)

(111) The burden of proving omission of items is on the government. The ultimate test is did the taxpayer adequately apprise the IRS of the nature and amount of the item by disclosing it in the return or in a statement attached to the return. Therefore, as a general rule, the IRS relies on IRC 6501(e) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

(112) The ASED may be coded Alpha Code NN when it has been decided that reliance on IRC 6501(e) is warranted and the normal three-year assessment statute applicable to the return may be allowed to expire if:

1. A consent to extend the assessment statute for the return cannot be obtained after timely and proper solicitation,

2. The case file is documented with adequate justification for allowing the assessment statute applicable to the return expire in reliance on IRC 6501(e), and

3. Written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

(113) The six-year statute, provided for in IRC 6501(e), may apply when a joint investigation case is returned to Examination for assessment of tax after the three-year statute has been allowed to expire.

(114) The six-year limitations period applies to assess deficiencies and additional taxes with respect to the taxpayer's entire return, Colestock v Commissioner, 102 TC 380 (1994).

(115) The assessment period will be extended even if the taxpayer files an amended return, after the return due date, which includes part of the income omitted from original return so that omission on the amended return was not over 25 percent, See Goldring v Commissioner, 20 TC 79 (1953), Houston v Commissioner, 38 TC 486 (1962) (applying the five-year statute extension that was in effect at the time).

(116)

(117)

(118)

(119) If it is ultimately determined the provisions of IRC 6501(e) are unsupported and there is no exception to the normal ASED, then replace the Alpha Code NN ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment cannot be made, refer to IRM 25.6.1.13, Barred Assessments/Barred Statute Cases, (or other procedures required by your organizational component) for the procedures for preparing and submitting a Form 3999, Statute Expiration Report, or other form prescribed by your organization.

(120) OO - IRC 6501(c)(1): False Return (taxpayer not under joint investigation)

(121) Alpha Code OO is used when the IRS is relying on the provisions of IRC 6501(c)(1), False Return, relating to the filing of a false or fraudulent return with the intent to evade tax, to keep the statute open. If fraud is proven, there is no limit on the period for assessment making the ASED opened indefinitely. Also, the taxpayer cannot alter their fraudulent intent relating to the original return by filing a non-fraudulent amended return, Badaracco v. Commissioner, 464 U.S. 386 (1984). So, if the original return is fraudulent, an increase in the tax liability can be assessed at any time. The IRS has the burden of proof with respect to fraud.

(122) As a general rule, the IRS relies on IRC 6501(c)(1) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

(123) The ASED may be coded Alpha Code OO and the normal three-year assessment statute allowed to expire when it has been determined IRC 6501(c)(1) is applicable, and:

1. A consent to extend the assessment statute for the return cannot be obtained after timely and proper solicitation,

2. The case file is documented with adequate justification for allowing the assessment statute applicable to the return to expire in reliance on IRC 6501(c)(1), and

3. Written Territory Manager (TM) approval is obtained in advance of the normal three-year assessment statute expiration date.

(124) Also, Alpha Code OO may be used to alpha code the AIMS ASED when the normal three-year ASED has expired before the start of an examination when it has been determined IRC 6501(c)(1) will be the reliance to make an assessment upon conclusion of the examination. Case file documentation must reflect adequate justification for examination of the return and written territory manager approval is required for use of the Alpha Code OO statute when case controls are established after the normal assessment statute has expired.

(125) Alpha Code OO can also be used when the IRS is relying on the fraudulent acts and intent to evade tax on the part of the return preparer to keep the assessment statute open on the returns of the preparer's clients. See Allen v. Commissioner, 128 T.C. 37 (2007).

(126) When a case is closed agreed from the group to CCP for assessment where IRC 6501(c)(1) has been relied upon to extend the assessment statute for a particular tax period, flag the case file with a Form 3198, Special Handling Notice for Examination Case Processing, and enter in the statute information section, proximate to the applicable tax period, the AIMS ASED as Month/OO/Year, (format: MM/OO/YYYY). In the Special Features, Other Instructions section enter: "IRC 6501(c)(1) assessment can be made at any time". If the case is closed as unagreed for issuance of a statutory notice of deficiency or for routing to Appeals, then the Alpha Code OO should be reflected in the DD of the ASED field.

(127) If ultimately determined the provisions of IRC 6501(c)(1) are unsupported and there is no exception to the normal ASED, then replace the Alpha Code OO ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment cannot be made, refer to IRM 25.6.1.13, Barred Assessments/Barred Statute Cases, (or other procedures required by your organizational component) for the procedures to prepare and submit a Form 3999, Statute Expiration Report, or other form prescribed by your organization.

(128) The month (MM) and year (YYYY) entries accompanying the Alpha Code OO are the month and year the statute would expire if the return was not false or fraudulent.

(129) Alpha Code OO can also be used when the taxpayer submits and is accepted into the Voluntary Disclosure Practice (VDP), evidenced by Project Codes 0997 or 1140. Project Code 0997 is for VDP cases received before September 28, 2018 and Project Code 1140 is for VDP cases received after September 28, 2018. In 2009, the IRS offered the first of several Offshore Voluntary Disclosure Programs (OVDP). OVDP was officially closed on September 28, 2018; however, the IRS maintains the traditional Voluntary Disclosure Practice (VDP). IRM 9.5.11.9, Voluntary Disclosure Practice, will continue to serve as the basis for determining taxpayer eligibility. Interim Guidance Memorandum LB&I-09-1118-014 is the current guidance for VDP until the IRM is updated.

(130) PP - Non-taxable TE/GE Return

(131) Alpha Code PP is used for non-taxable returns under examination in TE/GE. Tax returns in Employee Plans (EP) and Exempt Organizations (EO) are initially controlled using actual statute expiration dates. The Alpha Code PP may be used when it is determined with certainty the non-taxable return will not be converted to a taxable return.

(132) The month (MM) and year (YYYY) accompanying the Alpha Code PP will be the date of statute expiration as if it were a taxable return.

(133) QQ - Docketed Case

(134) Alpha Code QQ is used by Appeals and Counsel for cases docketed for trial in the United States Tax Court and by Technical Services for docketed cases which Appeals/Counsel has asked Technical Services to temporarily hold in inventory rather than transferring to Appeals.

(135) RR - IRCs that Override IRC 6501(a)

(136) Examples of IRCs overriding IRC 6501(a), Limitations on Assessment and Collection - General Rule, normal three-year period for assessment, under certain circumstances–not otherwise covered by a separately designated alpha code.

(137) Alpha Code RR is used when another code section overrides IRC 6501(a), Limitation on Assessment and Collection - General Rule, and the special statute condition is not otherwise designated by another alpha code. If Alpha Code RR is used, the Form 895 must reflect which particular IRC section applies and why.

(138) An example of an IRC section which overrides IRC 6501(a) is IRC 1033(a)(2)(C), Involuntary Conversions, under which a taxpayer whose property is involuntarily converted may elect to recognize only the gain that exceeds the cost of the replacement property acquired within a limited period of time. The Alpha Code RR indicates the statutory period for assessment is extended due to the IRC 1033 election. In this example, Alpha Code RR may be used as long as the taxpayer has not notified the IRS, in the manner prescribed in the relevant regulations, regarding replacement of the property. After the taxpayer notifies the IRS that the converted property has been replaced or will not be replaced, a new statute expiration date will be determined, taking into account the suspension of the statute under IRC 1033, and the Alpha Code RR code will be replaced with the calendar date ASED.

(139) In the above example, the statute for assessment is kept open only for tax attributable to gain on the involuntary conversion so a determination must be made that the involuntary conversion is the only issue of tax consequence before the extended assessment statute of IRC 1033 is relied upon to allow the ASED for the entire return to expire and Alpha Code RR is applied to the ASED. In this example, the month (MM) and year (YYYY) entries accompanying the Alpha Code RR are the month and year the statute would expire if there was no involuntary conversion to consider in determining the ASED.

(140) Alpha Code RR may be used for IRC 965(k), Extension of Limitation on Assessment, six-year statute for assessment that is limited to the net tax liability under IRC 965. Generally, IRC 965 applies to the 2017 and/or 2018 tax years. For returns classified for examination for the IRC 965 for Individuals Campaign, or the IRC 965 Campaign, PSP will update AIMS to reflect the Alpha Code RR statute if the returns have not been delivered to the Field at least 180 days prior to the expiration of the IRC 6501(a) statute of limitations. Examiners assigned to the IRC 965 Individuals Campaign, or the IRC 965 Campaign, or cases with IRC 965 issues can use Alpha Code RR when the assessment is limited to the net tax liability under IRC 965. Once it is determined that IRC 965(k) applies, the ASED should be updated to the applicable numeric six-year statute date. While the Alpha Code RR is used under the provisions of IRC 965, the year (YYYY) accompanying the Alpha Code RR will be the six-year expiration date.

(141) SS - Financial Disability

(142) Alpha Code SS is used when a claim is received after the normal statute of limitations, for filing a claim for credit or refund of tax has expired, and the person signing the claim for credit or refund indicates the taxpayer, an individual, is claiming financial disability. IRC 6511(h), Running of Periods of Limitation Suspended While Taxpayer is Unable to Manage Financial Affairs Due to Disability, which was added by the IRS Restructuring and Reform Act of 1998, suspends the statute of limitations period for filing a claim for credit or refund in certain situations. See Rev. Proc. 99–21, 1999-1 C.B. 960, for specifics on the proper application of this provision.

(143) For example, an individual taxpayer timely filed his or her 2012 tax return. For the entire year of 2015 the taxpayer experienced a financial disability, as defined in IRC 6511(h). In December of 2016 the taxpayer filed a claim for refund of taxes paid for 2012. The normal statute of limitations for credit or refund would have expired 04/15/2016. However, due to the taxpayer's financial disability, running of the statute of limitations period for filing a claim for credit or refund is suspended for the period when the taxpayer was financially disabled (in this example, one year)—provided the procedures in Rev. Proc. 99–21 are followed. The ASED would be entered as 04/SS/2016, the date the ASED expires, to denote the claim filed based on IRC 6511(h).

(144) TT - Mitigation

(145) Under IRC 1311, Correction of Error, the IRS is allowed to correct the effect of an erroneous treatment of an item in a taxable year which is closed by the statute of limitations under certain specific circumstances. These mitigation provisions apply only in seven specific circumstances (see description in IRC 1312, Circumstances of Adjustment, and Treas. Reg. 1.1312-1 (see 26 CFR 1312-1 ) through 1.1312-8 (see 26 CFR 1312-8 )). In general, the mitigation provisions are intended to offset the benefit a party might otherwise obtain by maintaining a position in an open tax year that is inconsistent with the treatment of the same item in a closed year (e.g., a taxpayer receives a double deduction.) Until a determination (as defined in IRC 1313, Definitions) is made, Alpha Code TT should be used to identify the otherwise statute-barred year as a year coming within the mitigation provisions of IRC 1311 - IRC 1314. The month (MM) and year (YYYY) entries accompanying the Alpha Code TT are the month and year of the normal three-year statute expiration date. Once the determination is made, the ASED must be updated to the new one-year statute expiration date, which is one year from the determination date – IRC 1314(b), Amount and Method of Adjustment.

(146) UU - Failure to Notify Secretary of Foreign Transfers

(147) Alpha Code UU is used to indicate that, under IRC 6501(c)(8), Failure to Notify Secretary of Certain Foreign Transfers, any information which is required to be reported under IRC 1295(b), Qualified Electing Fund; IRC 1298(f), Reporting Requirement; IRC 6038, Information Reporting with Respect to Certain Foreign Corporations and Partnerships; IRC 6038A, Information with Respect to Certain Foreign-Owned Corporations; IRC 6038B, Notice of Certain Transfers to Foreign Persons; IRC 6038D, Information with Respect to Foreign Financial Assets; IRC 6046, Returns as to Organization or Reorganization of Foreign Corporations and as to Acquisitions of Their Stock; IRC 6046A, Returns as to Interests in Foreign Partnerships or IRC 6048, Information with Respect to Certain Foreign Trusts, the period for assessment of any tax with respect to any tax return, event, or period to which the information relates will, not expire before a date which is three years after such information is furnished. However, if the failure to furnish the information is due to reasonable cause and not willful neglect, then the extension of the period for assessment applies only to the item or items related to such failure, rather than to any tax with respect to any tax return, event, or period. Other exceptions to the three-year period for assessment of tax under IRC 6501(a), General Rule, may also apply as described in IRC 6501(c), Exceptions.

(148) The information to be furnished relates to a transaction, event, or period, of the type required to be reported by the above code sections, and regulations thereunder, on the currently prescribed forms (listed below) or as encompassed in applicable future form revisions and form number re-designations and is generally applicable to information the reporting of which is due after August 5, 1997 and under the Hiring Incentives to Restore Employment (HIRE) Act enacted on March 18, 2010. Prior to amendment in 1997, the IRC 6501(c)(8) exception only applied to information required to be provided under IRC 6038B with respect to IRC 367, Foreign Corporations, exchanges and distributions.

(149) Reporting forms, listed by applicable IRC section, include:

• IRC 1295, Qualified Electing Fund -Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Co. or Qualified Electing Fund.

• IRC 1298(f), Reporting Requirement, as amended by the HIRE Act-Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Co. or Qualified Electing Fund.

• IRC 6038, Information Reporting with Respect to Certain Foreign Corporations and Partnerships-Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations; Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs) (if attached to a Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, or Form 8865, Return of U.S. Persons with Respect to Certain Foreign Partnerships) and Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.

• IRC 6038A, Information with Respect to Certain Foreign-Owned Corporations-Form 5472, Information Return of a Foreign Owned Corporation.

• IRC 6038B, Notice of Certain Transfers to Foreign Persons-Form 926, Return by a U. S. Transferor of Property to a Foreign Corporation; Form 8865-O, Transfer of Property to a Foreign Partnership; Form 8838, Consent to Extend the Time to Assess Tax Under 367 - Gain Recognition Agreement; Form 8838-P, Consent to Extend the Time to Assess Tax Under Section 721(c), Gain Deferred Method.

  Note: Unlike the other listed forms, Form 8838 and Form 8838-P are not returns; however, the forms require disclosure of the details of the transfer, and therefore, are forms that report information required by IRC 6038B. The failure to file initial documentation required under IRC 367, Foreign Corporations, for example, a gain recognition agreement, or failure to comply with the requirements of the IRC 367 regulations and the failure to file statements under, or failure to comply with the requirements of, the gain deferral method under the IRC 721(c) regulations may result in penalties under IRC 6038B.

• IRC 6038D, Information with Respect to Foreign Financial Assets, enacted on March 18, 2010 - Form 8938, Statement of Foreign Financial Assets (see Notice 2011-552011-2 C.B. 532011-29 I.R.B. 53, with respect to the delay in publishing the Form 8938 and how and when the taxpayer is to report the required information as a result of the delay).

• IRC 6046, Returns as to Organization or Reorganization of Foreign Corporations and as to Acquisitions of Their Stock-Form 5471.

• IRC 6046A, Returns as to Interests in Foreign Partnerships-Form 8865-P, Acquisitions, Dispositions and Changes of Interests in a Foreign Partnership.

• IRC 6048, Information with Respect to Certain Foreign Trusts, Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and Form 3520-A, Annual Return of Foreign Trust With a U.S. Owner (under section 6048(b)).

(150) Under IRC 6501(c)(8), as amended by the HIRE Act, the failure by the taxpayer to report the information required by new IRC 6038D will serve to extend the period of time for assessment to three years after the date the taxpayer provides the required information.

(151) The HIRE Act amended IRC 6501(c)(8) to clarify that this statutory exception to the period of time for assessment, if applicable, applies to the entire return, not just those tax liabilities associated with the information not reported. If, however, the failure to furnish information required to be reported is due to reasonable cause and not willful neglect, the IRC 6501(c)(8) extended time for assessment applies only to the item or items associated with such failure. The clarifying amendment is not limited to information required to be reported under new IRC 6038D as IRC 6501(c)(8) also applies to information required to be reported by IRC 1295(b), IRC 1298(f), IRC 6038, IRC 6038A, IRC 6038B, IRC 6046, IRC 6046A and IRC 6048. The clarification applies to all returns filed after March 18, 2010, and all returns filed on or before such date as long as the period of time (determined without regard to the IRC 6501(c)(8) amendments referenced above) for assessment of taxes had not expired as of March 18, 2010. See Exhibit 25.6.23-6, IRC 6501(c)(8), Failure to Notify Secretary of Certain Foreign Transfers, Example - Clarifying Amendment, for example.

(152) The ASED may be coded Alpha Code UU when it has been determined that IRC 6501(c)(8) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if:

1. A consent to extend the assessment statute for the entire return cannot be obtained after timely and proper solicitation,

2. The case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on IRC 6501(c)(8), and

3. Written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

(153) Once the required information is furnished so that the ASED can be determined and either the ASED on the entire return has otherwise expired or the Territory Manager has approved reliance on IRC 6501(c)(8) in advance of the expiration of the statute on the entire return in accordance with the above procedures, update the ASED to the date determined under IRC 6501(c)(8) and enter an "R" indicator, which indicates, in this instance, the restrictions applicable to the IRC 6501(c)(8) exception. The ASED determined under IRC 6501(c)(8) is three years after the date the required information is furnished.

(154) The ASED determined under IRC 6501(c)(8) can be extended by consent agreement but the examiner needs to bear in mind that consent agreements to extend the IRC 6501(c)(8) ASED only apply to the period for assessing the tax liability related to the transaction/event for which information was required to be furnished if failure to furnish the required information is due to reasonable cause.

(155) VV - Gifts Not Adequately Disclosed on Return

(156) Alpha Code VV is used to indicate the period for assessment of the tax imposed by Chapter 12 on gifts not adequately disclosed on the return (or in a statement attached to the return) may be assessed at any time. This exception to the normal three-year period for assessment is provided for in IRC 6501(c)(9), Gift Tax on Certain Gifts Not Shown on Return, which was originally added to the Code by P.L. 101-508, effective for gifts made after October 8, 1990.

(157) Generally, IRC 6501(c)(9) should only be relied upon to extend the assessment statute if the normal three-year assessment period has otherwise expired, since this exception to the normal three-year period for assessment only applies to the ASED for assessing tax with respect to the inadequately disclosed gifts and not the ASED for the entire return.

(158) IRC 6501(a) requires the IRS to assess a gift tax liability within three years after the filing date (or due date, if later) of the gift tax return. However, IRC 6501(c)(9) provides that if a gift is not shown on a gift tax return in a manner adequate to apprise the Secretary of the nature of the gift, then gift tax may be assessed at any time with respect to that gift. IRM 4.25.1, Estate and Gift Tax Examinations.

(159) A gift may be inadequately disclosed if it is:

1. Omitted completely from the return, or

2. Shown on the return, but the manner in which it is shown is not adequate to apprise the Secretary of the nature of the gift.

(160) If an examiner determines that a gift is inadequately disclosed on a gift tax return and the three year statute of limitations has not expired on the return on which the gift should be shown, the examiner must secure a consent to extend the statute of limitations on the entire return in order to protect the government’s interest.

(161) If the examiner is unable to secure a consent, the examiner may allow the three-year statute to expire on that gift tax return and rely on IRC 6501(c)(9) after the examiner takes the following actions:

(162)

1. In cases in which a gift is omitted from a gift tax return: Document the case file with adequate justification for permitting the assessment statute applicable to the entire return expire in reliance on IRC 6501(c)(9), and obtain written approval from the Manager in advance of the normal three-year assessment statute expiration date.

2. In cases in which a gift is disclosed on a gift tax return: Document the case file with adequate justification for allowing the assessment statute applicable to the entire return expire in reliance on IRC 6501(c)(9), and obtain written approval from the Territory Manager in advance of the normal three-year assessment statute expiration date.

(163) For gifts made after October 8, 1990, and before January 1, 1997, the following Code provision is applicable: IRC 6501(c)(9)-Gift tax on certain gifts not shown on return. If any gift of property the value of which is determined under IRC 2701, Special Valuation Rules in Case of Transfers of Certain Interests in Corporations or Partnerships, or IRC 2702, Special Valuation Rules in Case of Transfers of Interests in Trusts, (or any increase in taxable gifts required under IRC 2701(d), Transfer Tax Treatment of Cumulative But Unpaid Distributions) is required to be shown on a return of tax imposed by chapter 12 (without regard to IRC 2503(b), Exclusions from Gifts), and is not shown on such return, any tax imposed by chapter 12 on such gift may be assessed, or a proceeding in court for the collection of such tax may begin without assessment, at any time. The preceding sentence shall not apply to any item not shown as a gift on such return if such item is disclosed in such return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature of such item.

(164) For gifts made after December 31, 1996, the following code provision is applicable: IRC 6501(c)(9)-"Gift tax on certain gifts not shown on return. If any gift of property the value of which (or any increase in taxable gifts required under IRC 2701(d)) which is required to be shown on a return of tax imposed by chapter 12 (without regard to IRC 2503(b)), and is not shown on such return, any tax imposed by chapter 12 on such gift may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. The preceding sentence shall not apply to any item which is disclosed in such return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature of such item."

(165) In deciding whether or not a gift was adequately shown/disclosed on the return, see Treas. Reg. 301.6501(c)-1(e) (see 26 CFR 6501(c)-1(e)), Gifts Subject To Chapter 14 Of The Internal Revenue Code Not Adequately Disclosed On The Return, and Treas. Reg. 301.6501(c)-1(f) (see 26 CFR 6501(c)(1) (f)), Gifts Made After December 31, 1996, Not Adequately Disclosed On The Return--.

(166) WW - Failure to Provide Information with Respect to "Listed Transactions" (does not apply to taxable years with respect to which the period for assessing a deficiency expired before October 22, 2004, the date of enactment of American Jobs Creation Act (AJCA))

(167) Alpha Code WW is used to indicate that, per IRC 6501(c)(10), Listed Transactions, the period for assessment of tax with respect to a "listed transaction" that the taxpayer failed to disclose as required under IRC 6011, General Requirement of Return, Statement or List, will not expire before one year after the earlier of either the date the taxpayer discloses the transaction in accordance with prescribed procedures (see Rev. Proc. 2005-26, 2005-17 I.R.B. 965 (April 25, 2005), or subsequently published guidance) or the date a "material advisor" meets the requirements of IRC 6112, Material Advisors of Reportable Transactions Must Keep Lists Of Advisees, Etc., with respect to a request by the Secretary under IRC 6112 relating to the transaction.

(168) If neither the taxpayer nor the "material advisor" disclose the required information, the period of time for assessment of any tax with respect to the "listed transaction" is unlimited. Other exceptions to the normal statutory period for assessment of tax may also apply to the tax return in question and, of course, IRC 6501(c)(10) does not shorten any other applicable period for assessment, such as the general three-year period prescribed by IRC 6501(a).

(169) The American Jobs Creation Act of 2004 (AJCA), Public Law 108-357, amended IRC 6501(c) by adding a new exception, IRC 6501(c)(10) to the normal three-year period for tax assessment in those instances when the taxpayer does not provide information with respect to a "listed transaction" as required under IRC 6011. IRC 6707A(c)(2), Penalty for Failure to Include Reportable Transaction Information with Return, which was added by the AJCA, defines a "listed transaction" as a transaction that is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction. Treas. Reg. 1.6011-4(b)(2) (see 26 CFR 1.6011-4(b)(2) ) also defines "listed transactions."

(170) Unlike some of the other exceptions contained in IRC 6501(c), this exception only applies to the tax liability related to the "listed transaction" and not to the ASED for the entire return; therefore, IRC 6501(c)(10) should generally be relied upon to extend the period for assessment only in those instances when the ASED for the entire return has otherwise expired.

(171) The ASED may be coded Alpha Code WW when it has been determined that IRC 6501(c)(10) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if:

1. A consent to extend the assessment statute for the entire return cannot be obtained after timely and proper solicitation,

2. The case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on IRC 6501(c)(10), and

3. Written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

(172) In order to determine if the one-year period under IRC 6501(c)(10) has started to run, the examiner should consult Rev. Proc. 2005-26, or subsequently published guidance, to determine if the taxpayer or "material advisor" has complied with the requirements contained in the applicable published guidance.

(173) The IRC 6011 regulations and section 4 of the revenue procedure require disclosure also be provided by the taxpayer to the Office of Tax Shelter Analysis (OTSA), even when the taxpayer provided the required information with the return filing. The one year limitations period on assessment under IRC 6501(c)(10) will not begin until the original disclosure is received by the appropriate Service Center and a copy of the disclosure is received by OTSA. A process has been established to determine whether or not, and the date, this requirement to provide OTSA with the disclosure has been met. Contact OTSA by telephone at (866) 775-7474 or by fax at (844) 201-5535, or by email at: irs.tax.shelter.hotline@irs.gov to ascertain whether the taxpayer filed the required disclosure with OTSA.

(174) If the requirements of Rev. Proc. 2005-26 have not been satisfied by the taxpayer or the "material advisor," update the ASED for the tax period using Alpha Code WW in the DD position of the AIMS ASED field.

(175) Once the required information is furnished so that the ASED can be determined and either the ASED on the entire return has otherwise expired or the Territory Manager has approved reliance on IRC 6501(c)(10) in advance of the expiration of the statute on the entire return in accordance with the above procedures, update the ASED to the date determined under IRC 6501(c)(10) and enter an "R" indicator, which indicates, in this instance, the restrictions applicable to the IRC 6501(c)(10) exception. The ASED is one year after the earlier of the date the taxpayer discloses the transaction, as discussed in the above-referenced revenue procedure, or the date that a "material advisor" meets the requirements of IRC 6112 with respect to a request by the Secretary under IRC 6112 relating to the transaction.

(176) The ASED determined under IRC 6501(c)(10) can be extended by consent agreement but the examiner needs to bear in mind that consent agreements to extend the IRC 6501(c)(10) ASED only apply to the period for assessing the tax liability related to the "listed transaction." See Notice 2009-59 for identifying listed transactions.

(177) XX - Return Preparer, Promoter, Aiding/Abetting Penalties and Certain Penalties for Failure to Report Foreign Transaction/Ownership Information (Only Used For ERCS Controls, not an AIMS entry)

(178) Alpha Code XX is used on ERCS to designate that a return preparer penalty under IRC 6694(b), Understatement of Taxpayer’s Liability by Tax Return Preparer, may be assessed at any time. However, return preparer penalty controls for penalties under IRC 6694(a) and IRC 6695, Other Assessable Penalties with Respect to the Preparation of Tax Returns for Other Persons, are to reflect a date three years after either the due date of the return (without regard to an extension of time to file) or the date the return was filed, whichever is later. If the penalty case is open for the sole purpose of addressing a claim for refund of a penalty assessed under IRC 6694(a) or IRC 6695 that has already been paid, and the normal three year assessment date has expired, then Alpha Code AA should be used. Alpha Code XX can be used to designate that a return preparer penalty under IRC 6713, Disclosure or Use of Information by Preparers of Returns, for preparer's unauthorized disclosure or use of taxpayer information may be assessed at any time.

(179) Alpha Code XX can also be used to designate that penalties under IRC 6700, Promoting Abusive Tax Shelters, Etc., and IRC 6701, Penalties for Aiding and Abetting Understatement of Tax Liability, for promoting abusive tax shelters and aiding and abetting understatement of the tax liability, respectively, may be assessed against the tax return preparer at any time. See IRM 20.1.6, Penalty Handbook-Preparer, Promoter, Material Advisor Penalties.

(180) To designate that the penalties under IRC 6038(b), Information Reporting with Respect to Certain Foreign Corporations and Partnerships; IRC 6038A(d), Penalty for Failure to Furnish Information or Maintain Records; IRC 6038B(c), Penalty for Failure to Furnish Information; IRC 6038C(c), Information with Respect to Foreign Corporations Engaged in U.S. Business; IRC 6038D, Information with Respect to Foreign Financial Assets; IRC 6039E, Information Concerning Resident Status; IRC 6039F(c)(1)(B), Notice of Large Gifts Received from Foreign Persons and IRC 6039G, Information on Individuals Losing United States Citizenship, for failure to report certain foreign-related transaction/ownership information may be assessed at any time if the applicable information is not reported. See IRM 20.1.9, International Penalties.

(181) YY - Participation in Abusive Offshore Arrangements—Returns generally controlled under Project Codes 0971, Offshore Private Banking Initiative - CIP; 1222, Swiss Bank Project; 1194, 2014 Streamlined Compliance Filtered Work; Various OVDI Project Codes as well as returns controlled under any projects pertaining to abusive offshore arrangements subsequently approved by headquarters

(182) Alpha Code YY is used when the decision is made to allow the normal statute of limitations to expire on the offshore project returns involving participation in abusive offshore arrangements, (Offshore Credit Card Project (OCCP), Offshore Voluntary Compliance Initiative, Broker Initiative, or participants identified pursuant to a promoter investigation which involves tax avoidance/evasion tactics based on offshore arrangements) and the decision to allow the normal assessment statute to expire has been timely and properly documented, including approval by the Territory Manager. The documentation requirement to support the determination that special conditions exist will be satisfied by including a statement such as, "as a part of the OCCP (or Broker Initiative, or promoter investigation involving tax avoidance/evasion tactics based on offshore arrangements), it has been determined that there is a likelihood in this case that one or a combination of the following conditions exists: (1) the tax return is false/fraudulent; (2) a sufficiently large omission of gross income to rely on the six-year assessment statute; or, (3) failure to notify the Secretary of foreign transfers (IRC 6501(c)(8))."

(183) Generally, the Alpha Code YY ASED should only be used for tax returns filed by participants in abusive offshore arrangements where it has yet to be determined whether or not a specific statutory exception to the normal three-year period of time for assessment of tax applies.

(184) Alpha Code YY may also be used to alpha code the AIMS ASED when the normal three-year period of time for assessment of tax has already expired before commencement of the examination of a return for a tax period which involves abusive offshore arrangements and it has yet to be determined whether or not a specific statutory exception to the normal three-year period of time for assessment of tax applies.

(185) If it is determined some exception to the normal period for assessment applies, update the ASED to the applicable alpha code, for example, NN for IRC 6501(e), Substantial Omission of Items, or OO for IRC 6501(c)(1), False Return, or UU for the IRC 6501(c)(8), Failure to Notify Secretary of Certain Foreign Transfers, exception.

(186) The month (MM) and year (YYYY) entries accompanying the Alpha Code YY are the month and year the normal three-year statute expires.

(187) If it is ultimately determined there is no exception to the normal ASED, then replace the Alpha Code YY ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment cannot be made, refer to IRM 25.6.1.13, Barred Assessments/Barred Statute Cases, (or other procedures required by your particular organizational component) for the procedures for preparing and submitting a Form 3999, Statute Expiration Report, or other form prescribed by your organization.

(188) Examinations carrying project codes which qualify as abusive offshore arrangements should not be closed prior to the proper development of the case which can include multiple years. Examiners should prepare a risk analysis to document potential losses to the Government should the statute be allowed to expire during the completion of the examination to evaluate the risks accordingly.

(189) ZZ - Transfer of AIMS Database

(190) Alpha Code ZZ is used to update the AIMS ASED temporarily to allow the transfer of the AIMS data base. The terminal will not accept a transfer (Disposal Code 30) if the statute of limitations has expired or will expire within the times prescribed in IRM 4.4.33.2, Transfer Restrictions, unless certain other conditions specified in IRM 4.4.33.2, Transfer Restrictions, are met.

(191) Approval must be received from the receiving (gaining) unit before Alpha Code ZZ can be input. The receiving unit must change the AIMS ASED, which has been Alpha Coded ZZ, to the correct ASED upon receipt of the case file and AIMS data base. See IRM 4.4.33.2, Transfer Restrictions.

1. Data in AIMS Table 4.0 and AIMS Table 4.1:

Column Number	Description
Column (1):	Name of Taxpayer
Column (2):	Taxpayer Identification Number and Filing Status
Column (3):	Master File Tax Code
Column (4):	Tax Period
Column (5):	Name Control/Check Digit
Column (6):	Activity Code
Column (7):	Organization Code
Column (8):	Statute Expiration Date
Column (9):	Source Code/Project Code/Partnership Investor Control File (PICF) Code/Organization Code Change/Repeat Indicator
Column (10):	Status Code (Table 4.1) and Date
Column (11):	Comments

2. Data in Table SC 4.0:

Column Number	Description
Column (1):	Name of Taxpayer
Column (2):	Taxpayer Identification Number and Filing Status
Column (3):	Master File Tax Code
Column (4):	Tax Period
Column (5):	Name Control/Check Digit
Column (6):	Activity Code
Column (7):	Status Date
Column (8):	Statute Expiration Date
Column (9):	Source Code/Project Code/PICF Code/Repeat
Column (10):	Comments

(1) IRC 6501, Limitations on Assessment and Collection, was amended by the Hiring Incentives to Restore Employment Act, Public Law No. 111-147, on March 18, 2010, IRC 6501(c), and IRC 6501(e), and further amended by the Education Jobs and Medicaid Assistance Act, Public Law No. 111-226, on August 10, 2010, (IRC 6501(c)).

(2) In each example below, assume the taxpayer failed to report taxable interest income in the amount of $6,000, earned on a bank account, maintained at a foreign financial institution:

(3)

(1) The amendments to IRC 6501(c)(8) are not limited to information required to be reported under new IRC 6038D, Information with Respect to Foreign Financial Assets, because IRC 6501(c)(8) also applies to information required to be reported by IRC 1295(b), Qualified Electing Fund-Election; IRC 1298(f), Special Rules–Reporting Requirements; IRC 6038, Information Reporting with Respect to Certain Foreign Corporations and Partnerships; IRC 6038A, Information With Respect to Certain Foreign-Owned Corporations; IRC 6038B, Notice of Certain Transfers to Foreign Persons; IRC 6046, Returns as to Organization or Reorganization of Foreign Corporations and as to Acquisitions of Their Stock; IRC 6046A, Returns as to Interests in Foreign Partnerships and IRC 6048, Information With Respect to Certain Foreign Trusts.

(2) For failures to report under IRC 6038, IRC 6038A, IRC 6038B, IRC 6046, IRC 6046A or IRC 6048:

1. If the assessment period of limitations was open on March 10, 2010, then the limitations period is extended for three years from the date the missing information is provided. This extension applies to the whole return, unless the taxpayer has reasonable cause, in which case the extension applies only to items related to the unreported information or

2. If the period of limitations was closed on March 10, 2010, then the limitations period is extended for three years from the date the missing information is provided only for items related to the unreported information.

(3) For failures to report under IRC 1295(b):

1. If the period of limitations was open on March 10, 2010 other than with respect to the failure to report under IRC 1295(b), then the limitation period is extended for three years from the date the missing information is provided. This extension applies to the whole return, unless the taxpayer has reasonable cause, or

2. If the period of limitations was closed on March 10, 2010, then the three-year extension does not apply.

(4) For failures to report under IRC 6038D or IRC 1298(f):

1. If the failure to report is for a tax year beginning after March 18, 2010, then the limitation period is extended for three years from the date the missing information is provided. This extension applies to the whole return, unless the taxpayer has reasonable cause, or

2. If the failure to report is for a tax year beginning on or before March 18, 2010, then the three-year extension does not apply.

(5)

(1) The following table lists common acronyms and their definitions as used throughout this IRM.

(1) The following table contains related IRMs which cover additional processes and procedures that examiners may use and are referenced throughout this IRM.