4.24.6. Technical Guidance and Information Processing for Excise Tax Examination Issues

(1) For compliance purposes, it is essential that managers, senior management officials, excise examiners and personnel at CEAC understand and follow correctly the technical guidance and information processing steps and methods explained in this section to ensure accurate reports are prepared and submitted.

(2) Examinations are conducted primarily by excise examiners located in field offices. CEAC personnel conduct correspondence examinations and assess excise tax penalties.

(1) The most significant statutes affecting excise taxes are listed in the table below and dedicated to the associated trust funds or general revenue authorized by the applicable Internal Revenue Code (IRC) Sections.

(1) Director, Examination - Specialty Policy is responsible for Excise Tax Examination policy and procedures.

(2) Director, Examination - Specialty Examination is responsible for operational examination compliance activities.

(3) Chief, Estate & Gift/Excise Tax is responsible for ensuring the policies and procedures specific to Excise Tax Examination are communicated to and performed by excise examiners.

(1) Program Goals - The program goals provided in this section are designed to increase compliance with excise tax laws by applying the tax laws with integrity and fairness and to provide SB/SE taxpayers top quality post-filing services for excise taxes administered by SB/SE.

(2) Program Reports - Information reporting of program objectives are included on Program Manager Monthly Briefings provided to the Director, Examination - Specialty Policy.

(3) Program Effectiveness - Program effectiveness is measured by the Exam Quality Review Staff, located in FSEQ. FSEQ supports the SB/SE Quality Improvement Program utilizing National Quality Review System (NQRS) to conduct independent case reviews from statistically valid samples of examination case work. National, area and territory trend analysis on the quality attributes is used to establish baselines to assess program performance, identify opportunities to improve work processes, analyze causes for failure, assess the feasibility of possible solutions and measure the success of quality improvement efforts.

(4) Annual Review - Program Manager - Excise Tax Policy is responsible for reviewing annually the information in this section to ensure accuracy and promote consistent tax administration.

(1) The following chart contains terms and their definitions used throughout this section.

(2) Refer to Exhibit 4.24.6-2 for Acronyms and the associated words or phrase that define them as used throughout this section.

(1) Refer to IRM 4.24.6.1.2 for a list of the most significant statutes affecting excise taxes that are dedicated to general revenue or the associated trust funds authorized by the applicable IRC Sections.

(2) Procedures, law and regulations on a wide variety of excise-related examination issues are addressed on the Excise Tax Knowledge Base Homepage.

(3) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. Refer to IRC 7803(a)(3), Commissioner of Internal Revenue; other officials, execution of duties in accord with taxpayer rights. For additional information about the TBOR, refer to Taxpayer Bill of Rights.

(1) Excise examiners are responsible for conducting excise examinations of international taxpayers. Generally, the areas addressed are air transportation, foreign insurance, Ozone Depleting Chemicals (ODCs) and fuel.

(1) In general, federal agencies are not exempt from excise taxes.

(2) The Tax Exempt/Government Entities (TE/GE) Federal, State, Local/Employment Tax (FSL/ET) is responsible for ensuring federal tax compliance by federal, quasi-governmental, state agencies, city, county and other units of local government, American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands. FSL/ET coordinates activities with other IRS offices, such as Customer Account Services, Counsel, Government Liaison & Disclosure, Employee Plans and Excise Tax Examination.

(3) At the beginning of an examination of a federal agency, the excise examiner will review the IDRS CC AMDIS to determine whether FSL/ET has an open AIMS control on the taxpayer. If so, the excise examiner should contact FSL/ET by sending a secure email to the Manager EO Classification mail box at "EOclass@irs.gov." The excise examiner should advise FSL/ET that he or she plans to start an examination on the taxpayer. FSL/ET will respond to the excise examiner, if coordination is necessary. The excise examiner does not need to delay opening an examination while awaiting FSL/ET’s response.

(4) If there is not an open AIMS control on the taxpayer, then the excise examiner should contact FSL/ET through TE/GE using the Specialist Referral System (SRS). For more information about SRS, refer to IRM 4.24.6.9.

(5) Refer to IRM 4.75, Exempt Organizations Examination Procedures, for further guidance.

(1) The potential collectibility of the proposed excise tax liability must be reviewed and evaluated for excise examinations with wagering issues. For detailed guidance, refer to IRM 4.20.1.2.1, Examination Collectibility, Examination Collectibility Procedures, Collectibility Considerations.

(2) All excise examiners need to be aware that TE/GE, not SB/SE, examines wagering issues for Indian Tribal Governments. Refer to IRM 4.88.1.8, Indian Tribal Governments Examination Issues and Procedures, Examination Issues Pertaining to ITG Cases, Indian Gaming, for further guidance.

(1) For examination procedures including an air carrier for imposition of tax under IRC 4261, refer to IRM 4.24.6.2.5.

(2) For general procedural guidelines in the case of uncollected taxes, refer to Treas. Reg. 49.4291-1, Persons receiving payment must collect tax.

(3) Determine whether the collector (the entity that files the Form 720, Quarterly Federal Excise Tax Return, and deposits taxes collected from actual taxpayers) provided an "uncollected tax report" described in Treas. Reg. 49.4291-1. If the collector has not provided the report and an examination reveals the collector failed to collect taxes due on past transactions, the excise examiner should request the collector:

1. Attempt to collect the back taxes from the actual taxpayers.

2. Report the taxes on Form 720X, Amended Quarterly Federal Excise Tax Return, for the period during which the taxes should have been collected.

3. Provide a list of back taxes collected showing each person's name and address, the amount of tax collected, the date the tax was incurred and the date the tax was collected.

4. Provide a list of uncollected back taxes, showing each person's name and address, the amount of tax due and the date the tax was incurred.

(4) If the collector agrees to follow the preceding procedures, the examination will be held open for a reasonable amount of time to allow the collector to collect the back taxes.

(5) The excise examiner should also follow the procedures below:

1. If the collector filed Form 720, the prior periods covered by the examination should be established on AIMS using regular MF procedures.

2. The substitute for return (SFR) procedures will be followed if the collector did not file Form 720. Refer to IRM 4.24.6.6 for detailed guidance.

3. Copies of current Form 720 filed by the collector to report tax collected on past transactions will be secured and made part of the examination work papers. The work papers will also include the lists described in (3)(c) and (d) above.

4. Where the collector is unable to collect back taxes and the failure to collect was not willful, as defined for purposes of IRC 6672, Failure to collect and pay over tax, or attempt to evade or defeat tax, Non-Master File (NMF) assessments will be made directly against the actual taxpayers using correspondence examination procedures. For example, the failure is not willful if the collector timely provided the "uncollected tax report." Refer to IRM 4.24.2.6 for detailed procedures.

5. In such cases, the examination of the collector should be closed as a "no change" case. An assessment of additional tax should not be proposed for the prior periods.

(6) If the collector refuses to collect the taxes that it failed to collect on past transactions, the following procedures apply:

1. Establish on AIMS all prior periods covered by the examination.

2. Consider the Trust Fund Recovery Penalty (TFRP) under IRC 6672, if the collector's failure to collect and remit the tax was willful. Refer to IRM 5.7.3.3.2, Collecting Process, Trust Fund Compliance, Establishing Responsibility and Willfulness for Trust Fund Recovery Penalty TFRP), Establishing Willfulness, for a discussion of willfulness. Refer to IRM 20.1.11.4, Penalty and Interest, Penalty Handbook, Excise Tax and Estate and Gift Tax Penalties, IRC 6672 Failure to Collect and Pay Over Tax or Attempt to Evade or Defeat Tax, for more detailed guidance about asserting the TFRP.

3. If the IRC 6672 penalty is not applicable, assess directly the back taxes against the actual taxpayers using correspondence examination procedures in IRM 4.24.6.2.6.

4. In such cases, close the examination of the collector as a "no change" case. The work papers will reflect the back taxes, which were not collected by the collector.

(7) If the collector volunteers to pay an amount equal to the back taxes from its own funds, the procedures in IRS Policy Statement 4-104 allow for acceptance of the payment by the collector in lieu of asserting tax against the actual taxpayer or asserting the IRC 6672 penalty. As a condition to the acceptance of such payments, the collector is required to execute a waiver of its rights to claim any refund on the grounds of failure to collect the tax. For an example of a waiver template, refer to the Excise Tax Knowledge Base Home, Excise Examination shelf, Other Examination Work and Referrals book, Waiver of Collector to File Claims page, located at Related Forms and Documents.

(8) The excise examiner should make the assessments directly on the collector’s Form 720 using standard report writing procedures. Refer to IRM 4.24.20, Excise Tax Report Writing Guide, for guidance.

(9) Rev. Rul. 58-300, 1958–1 C.B. 454 provides guidelines on the assessment of interest in collected tax cases. Interest assessments are made against the actual taxpayers when warranted.

(10) There is no basis for assertion of a delinquent filing penalty against the actual taxpayers.

(1) If an examination of a collector, who is also an air carrier, for taxes imposed under IRC 4261 reveals the collector or air carrier failed to collect one or more of the taxes due under IRC 4261, the excise examiner will:

1. Determine if the air carrier under examination provided the initial segment of taxable transportation. IRC 4263(c), Special rules; payment of tax, provides that where any tax imposed by IRC 4261 is not paid at the time payment for transportation is made, then such tax shall be paid by the air carrier providing the initial segment of such transportation, which begins or ends in the U.S. If the air carrier under examination is the air carrier who provided the initial segment of transportation beginning or ending in the U.S., then prior and subsequent tax periods where there is potential liability should be established on AIMS using MF procedures.

2. Follow the SFR procedures, if the air carrier who provided the initial domestic segment of air transportation did not file Form 720.

3. If the excise examiner does not have the air carrier that provided the initial segment that begins or ends in the U.S. under examination, the excise examiner should prepare and submit Form 5346. Refer to new IRM 4.24.25.5.8.1, Issue Management System (IMS), Notebook and Workpapers, Form 5346, Examination Information Report, for more detailed guidance. Once the air carrier that provided the initial segment is assigned for examination by WSD, the excise examiner should initiate an examination of that air carrier.

4. The excise examiner should prepare detailed work papers to support taxes assessed under IRC 4263(c).

5. Ensure all components of taxes imposed under IRC 4261 are properly included in the proposed assessment. Work papers will include computations of the tax and a review of all flights.

6. Prepare an assessment of the uncollected tax against the air carrier utilizing forms used in an agreed or unagreed case, whichever applies. Refer to IRM 4.24.20 for guidance.

7. If SOL extensions are necessary, extend all applicable statutes. Refer to IRM 4.24.6.3.1, for more detailed guidance.

(2) These procedures are limited to air carriers who failed to collect taxes imposed under IRC 4261 and may not be utilized for taxes due under IRC 4271. Refer to IRM 4.24.6.2.4 for more detailed guidance.

(1) Under IRC 4251, IRC 4261 and IRC 4271, the taxes imposed are "collected taxes." Therefore, the person making a payment for the taxable air transportation service is considered the taxpayer and liable for the tax; however, the collector of the payment is the entity required to file Form 720 and remit the collected tax to the government. Tax attaches at the time payment is made for the taxable air transportation service. Form 720 filed by the collector should include all amounts collected for the period for which the Form 720 is filed. The taxpayer (i.e., the person paying for the taxable air transportation service) does not have a filing requirement for these taxes. Treas. Reg. 40.6011(a)-1(a)(3), Returns, provides the person required to collect a collected tax, and not the person incurring liability for the tax, must file Form 720. Generally, for examinations where air transportation taxes are due, the assessment is made against the collector.

(2) In instances where a tax assessment must be made against the taxpayer (the person paying for the taxable air transportation service), direct assessment procedures are followed. Direct assessments are controlled on MF. To establish controls on a taxpayer for whom direct assessment applies, the excise examiner must submit Form 5346. Refer to new IRM 4.24.25.5.8.1 for more detailed guidance. The excise examiner should note in the comments section this is a direct assessment and identify the collector where the issue was originally identified. WSD will establish the MF controls after receipt of Form 5346.

(3) If the taxpayer has no MF controls established, WSD should establish the case on Examination Return Control System (ERCS) using NMF 45 controls. The case can then be established and worked in IMS. Time can then be charged to ERCS through the IMS time synchronization mechanism.

(4) If the taxpayer is currently controlled on Master File, the excise examiner will work the case outside IMS. Time should be charged to Activity Code 521.

(5) The excise examiner should ensure each tax period is controlled where a collector or collectors failed to collect tax on transactions arising in different quarters.

(6) The excise examiner must ensure the SOL date established by WSD is correct. If there is an error, the excise examiner assigned the case must correct the error using Form 5354, Examination Request Non-Master File.

(7) Letter 898, 15 - 30 Day Letter - Statement of Proposed Adjustments, is used when making direct assessment of a "collected" tax against an actual taxpayer where the collector failed to collect taxes due on past transactions. Items to consider when preparing Letter 898 are:

• The period covered by the examination should be shown on Letter 898 as an inclusive period from the date of the first transaction for which tax was not collected to the date of the last transaction for which tax was not collected.

• Completing the last page of Letter 898 eliminates the need for an accompanying report. If a separate report is necessary as in the case of claim adjustments, Letter 898 will be the mechanism for transmitting the report and should be notated "See Attached Report" on the last page.

• Form 886-A, Explanation of Items, should be attached to explain the proposed assessment.

(8) Letter 898 offers the recipient taxpayer three options. The taxpayer may:

1. Sign and return the Statement of Proposed Adjustments on Letter 898.

2. Request an appointment to discuss the case with the excise manager.

3. Within 30 days, request consideration of the case by Appeals.

(9) If the taxpayer agrees to the proposed assessment, Letter 898 becomes the "return" for processing. Form 5344, Examination Closing Record, and Form 5734, Non-Master File Assessment Voucher, must also be completed before the case is forwarded to the excise manager for closure. When preparing Form 5734, the excise examiner must exercise care to utilize:

1. NMF 46, even though the case is controlled on NMF 45.

2. Tax Class 6.

(10) If the taxpayer has not responded to the Letter 898 after 30 days, the case is processed as agreed and the procedures in the preceding paragraph are followed. The initialed copy of Letter 898 along with Form 5344 and Form 5734 suffice for assessment of the tax.

(11) If the taxpayer does not agree and responds to Letter 898 requesting an Appeals hearing, standard procedures for unagreed cases are followed. Refer to IRM 4.24.10.7, Appeals Referral Process, Case Routing Procedures for Unagreed Excise Tax Examination Cases to Appeals, for more detailed guidance.

(12) No penalties apply in direct assessments as the taxpayer was not required to file a return or to make deposits. Refer to Rev. Rul. 58-300, 1958-1 CB 454. Additionally, because the tax attaches at the time the taxpayer or customer pays the seller or collector for the taxable services, interest is due from the time the taxable services were paid until the time the tax is paid, either to the collector or the government. Refer to Rev. Rul. 58-300, Rev. Rul. 59-306, 1959-2 CB 422 and IRM 20.2.10.4, Interest, Interest on Estate, Excise, Employment Taxes and Foreign Taxes, Excise Taxes, for more detailed guidance. For Centralized Case Processing (CCP) to calculate the interest, the excise examiner must include a list of the transaction dates and amounts of tax due for each transaction in the case file at closing.

(13) Once the NMF direct assessment case established on AIMS is ready to close, it is updated to Status Code 51, by the local AIMS/ERCS Analyst. The case should be closed to CCP using Form 3210, Document Transmittal, and indicate that, "This case is NMF and is controlled on AIMS only and must be closed accordingly. As such no time has been applied." The AIMS/ERCS Analyst puts the case into Status Code 51 prior to it closing to CCP.

(1) Form 8876, Excise Tax on Structured Settlement Factoring Transactions, can be filed multiple times during the year and does not have a due date tied to a specific tax period. Any taxpayer filings of this form are posted for assessment to NMF using Abstract Code 234.

(2) Leads for Excise Tax Examination on structured settlement factoring transactions are sent to the field from WSD and controlled on AIMS and ERCS on NMF as non-filer leads using MFT 27, Abstract Code 034.

(3) If during the course of the excise examination it is determined the taxpayer is liable for filing a prior or subsequent Form 8876, the excise examiner will submit Form 5345-D, Examination Request - ERCS (Examination Returns Control System) Users, and request NMF controls.

(4) If the excise examiner reviews records for multiple months, Form 5345-D is completed for each month/period reviewed.

(5) The statute is the alpha statute EE.

(6) If the case is agreed, the excise examiner updates the statute to three years from the date the signed Form 5384, Excise Tax Examination Changes and Consent to Assessment and Collection, is received. The excise examiner need not submit a SFR for processing.

(1) Form 1363, Export Exemption Certificate (Tax on Amount Paid for Transportation of Property by Air), is used to support exemption under IRC 4272(b)(2), Definition of taxable transportation, etc.; exceptions, from the excise tax on the transportation of property by air, where property is transported by two or more methods of transportation in the course of exportation. For general guidelines refer to Treas. Reg. 49.4271-1(d), Tax on transportation of property by air.

(2) Form 1363 may be prepared by the shipper for each payment or, if the shipper expects to make payments for numerous export shipments over a definite or an indefinite period of time, it may be used as a blanket exemption with the permission if approved by an IRS manager with responsibility for excise tax matters.

(3) Written requests for permission to execute a blanket exemption certificate are reviewed by the Air Transportation Analyst and, if necessary, will be assigned to an excise group. Requests are reviewed for completeness and, when necessary, additional information will be secured from the shipper to make a determination. The determination, if made by the excise group, will be forwarded to the Air Transportation Analyst who will make the final determination of granting the permission.

(4) Permission will be granted where the shipper can demonstrate that it is impractical to execute a separate Form 1363, Export Exemption Certificate (Tax on Amount Paid for Transportation of Property by Air), for each payment.

(5) Written notice of permission to issue a certificate is prepared by the Air Transportation Analyst and signed by excise managers with responsibility for excise tax matters. Written notice to the shipper it is not entitled to execute a blanket exemption certificate will be prepared by the Air Transportation Analyst for signature by excise managers with responsibility for excise tax matters. There is no standard form to be used for the shipper's request or for blanket exemption permission.

(6) If the permission is for an indefinite time or an extended period time, the status of shippers who receive permission to execute blanket exemption certificates should be reviewed within six months after permission is granted and every two years thereafter, to determine if the shipper still qualifies to execute the certificates.

(7) If denial of permission to execute a blanket exemption certificate is recommended and agreement with the shipper cannot be reached at the excise manager level, the shipper can appeal to the next level of excise tax management.

(8) For indefinite or extended periods of time for the blanket exemption, a copy of the written requests and all notices of permission and denial are sent to the affected excise group and are maintained by that excise group. Permission to execute a blanket certificate shall remain in force until withdrawn or until the expiration date noted in the permission.

(1) Under IRC 6901(a)(2), Transferred assets; other taxes, an assessment may be made of the liability of a transferee for excise taxes incurred, if the transferee liability arises from the liquidation of a partnership or a corporation or a reorganization within the meaning of IRC 368(a), Definitions relating to corporate reorganizations; Reorganizations.

(2) In such cases, if the transferee agrees to pay the excise tax due, the excise examiner will prepare a supplemental return for the taxpayer or collecting agency involved. The transferee will evidence his or her agreement by signing the return as transferee under IRC 6901(a)(2).

(3) Refer to IRM 4.4.17, AIMS Procedures and Processing Instructions, Jeopardy-Assessments/Termination Assessments/Transferor-Transferee Assessments.

(1) On December 20, 2006, Congress created a provision establishing a Whistleblower Office (WO) within the IRS. The WO oversees administration of the informant award program under IRC 7623(a), Expenses of detection of underpayments and fraud, etc.; in general, and IRC 7623(b), Awards to whistleblowers. The provision authorizes awards based on a percentage of proceeds collected by the Government and arising from information provided by the informant.

(2) Treas. Reg. 301.7623–1, General rules, submitting information on underpayment of tax or violation of the internal revenue laws, and filing claims for award, provides that whistleblowers may claim an award on Form 211, Application for Award for Original Information. All claims received require coordination with the WO.

(3) Most excise tax cases involving an award claim originate with the WO. The proper designation (IRC 7623(a) or IRC 7623(b) claim) is determined by the WO and special instructions are included in the assigned case. However, if an examiner receives a Form 211 directly from a taxpayer, immediate coordination with the WO is required to ensure the proper claim procedures are followed.

(4) IRM 25.2.1, Information and Whistleblower Awards, General Operating Division Guidance for Working Whistleblower Claims, and IRM 25.2.2, Whistleblower Awards, provides Service-wide procedures and guidance to ensure consistent and proper handling of these cases, including the use of proper safeguards in protecting the claimant’s identity.

(1) IRC 7611, Restrictions on church tax inquiries and examinations, procedures apply to all excise tax inquiries.

(2) IRC 7611 provides guidelines and a procedural framework for certain examinations of churches, conventions or association of churches. Refer to Treas. Reg. 301.7611-1, Questions and answers relating to church tax inquiries and examinations, for guidance.

(3) Excise examiners should not initiate an examination on a church. If an excise tax examiner encounters an excise tax issue that involves a church, the excise examiner should refer to IRM 4.75.39, Exempt Organizations Examination Procedures, Church Tax Inquiries and Examination under IRC 7611, for detailed guidance.

(1) Fuel samples are used to support excise tax examinations, ExSTARS examinations, registration reviews and penalty assertion.

(2) Abnormal fuel samples are identified by the Excise Forensics Lab (EFL) when adulterants are found in a taxable fuel sample. The presence of adulterants means that untaxed product may have been blended with taxed fuel and tax may be due on the volume of adulterant. The person responsible for blending such adulterant with the taxable fuel is generally liable for tax on the amount of the adulterant blended. Adulterants are an indication that the taxpayer is a blender of taxable fuels and if so, must be registered under Form 637 "M" activity. Refer to IRM 4.24.2, Form 637 Excise Tax Registrations, and IRM 4.24.9, Excise Tax Penalties Guidance, for additional information on registration requirements and failure to register penalties.

(3) Abnormal fuel referrals will be assigned to excise examiners to conduct a follow-up examination or Form 637 Registration review.

(4) The excise examiner is required to contact the owner of the abnormal fuel sample to determine all of the following:

1. The source of the fuel.

2. If the owner of the fuel should be registered as a blender.

3. If a follow-up fuel sample should be taken.

4. If any potential fuel tax liability exists.

(5) Third party contacts may be necessary to verify purchases and sales. Refer to IRM 4.11.57, Third Party Contacts, for more information.

(6) If the excise examiner determines there are records to substantiate the non-taxed blending, additional case controls may need to be established.

(7) Abnormal fuel examination cases will follow the examination procedures found in this section, and the report writing, and case processing procedures found in IRM 4.24.20, Excise Tax Report Writing Guide, and IRM 4.24.21, Case Closings.

(1) Investigative sample leads are closely related to the Abnormal Fuel Referrals, as discussed in IRM 4.24.6.2.12, Procedural Guidance for Abnormal Fuel Referrals. The potential technical issues and overall approach to working these leads are similar. Refer to IRM 4.24.15.14, Investigative Samples, for more information.

(2) The group will assign and ensure these leads are worked as expeditiously as possible to determine the extent of any fuel non-compliance.

(3) The excise examiner should attempt to obtain a chemical analysis description of the questionable product. Questionable products may require that samples be obtained and a chemical analysis be performed. Excise examiners must discuss questionable product sampling with their group manager. The group manager will forward the request to sample and analyze the questionable product to the Excise Tax Policy Program Manager before proceeding to collect any samples.

(1) With collected taxes, special care is needed to ensure all aspects of the SOL for filed returns are protected. On May 23, 2001, IRS Chief Counsel issued Field Advice 200101032 followed by supplemental guidance later that same year, which provided language required for extending statutes for collected taxes. The forms and wording to accomplish this task depend on the type of entity under examination. Special language must be used on the Form 872-B and depends on the function the taxpayer plays (i.e., collector, taxpayer, or air carrier).

(2) In situations where the collector failed to charge and collect tax from the customer, an IRC 6672 penalty can be asserted against the collector to recoup non-collected taxes. Form 2750, Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty, extends the period of limitations for this penalty. Refer to IRM 20.1.11.4 for more detailed guidance.

(3) For collectors, the following forms should be secured by the excise examiner:

• Form 2750 for each tax period under examination. The form can be prepared for the entity or for each responsible official depending on the facts and circumstances of the case. This form protects the IRC 6672 penalty SOL.

• Form 872-B to protect the collectibility for the collected taxes under IRC 7501, Liability for taxes withheld or collected.

(4) When using Form 2750 and Form 872-B under the facts and circumstances described above, the wording depends on the type of tax protected. The language below are the entries that must be entered on the form:

• For taxable transportation of persons by air tax, the following bolded language must be entered on the form: The amount of liability for collecting/remitting IRC 4261 Taxable Transportation by Air tax, imposed on the taxpayer(s) by section 7501 and 4291 of the Internal Revenue Code.

• For the taxable transportation of property by air tax, the following bolded language must be entered on the form: The amount of liability for collecting/remitting IRC 4271 Taxable Transportation by Air tax, imposed on the taxpayer(s) by section 7501 and 4291 of the Internal Revenue Code.

(5) For taxpayers, Form 872-B should be secured by the excise examiner to protect the collectibility for the taxes imposed under IRC 4261 and IRC 4271. The wording depends on the type of tax protected. The language below are the entries that must be entered on the form:

• For the taxable transportation of persons by air tax, the following bolded language must be entered on the form: The amount of liability for Taxable Transportation of Persons by Air tax, imposed on the taxpayer(s) by section 4261 of the Internal Revenue Code.

• For the taxable transportation of property by air tax, the following bolded language must be entered on the form: The amount of liability for Taxable Transportation of Property by Air tax, imposed on the taxpayer(s) by section 4271 of the Internal Revenue Code.

(6) For air carriers, Form 872-B should be secured by the excise examiner to protect the collectibility for the tax imposed on the air carrier under IRC 4263, Special rules. The following bolded language must be entered on the form: The amount of liability for IRC 4261 taxes not paid or collected under any other provision tax, imposed on the taxpayer(s) by section 4263 of the Internal Revenue Code.

(7) While the surcharge on fuel used in an aircraft, which is part of a fractional ownership program, is not a collected tax, specific language is required to protect this statute. Form 872-B should be secured by the excise examiner to protect the liability for the tax imposed on the fractional program manager of a fractional program aircraft under IRC 4043, Surtax on fuel used in an aircraft part of a fractional ownership program. The following bolded language must be entered on the form: The amount of liability for Fractional Aircraft Ownership Programs Fuel Surtax tax, imposed on the taxpayer(s) by section 4043, of the Internal Revenue Code.

(1) Special language on Form 872-B is needed to assess communications taxes and depends on the function the taxpayer plays (i.e. collector or communication provider, or taxpayer).

(2) Where the collector failed to charge and collect tax from customers, an IRC 6672penalty can be asserted against the collector to recoup non-collected taxes. Form 2750 extends the period of limitations for this penalty.

(3) Extension information for a collector:

1. Form 2750 is secured for IRC 4251 taxes.

2. Form 872-B should be secured by the excise examiner to protect the collectibility for the tax imposed under IRC 4251. The following bolded language must be entered on the form: The amount of liability for collecting/remitting IRC 4251 Communication Service tax, imposed on the taxpayer(s) by section 7501 and 4291 of the Internal Revenue Code.

(4) Extension information for a taxpayer: Form 872-B should be secured by the excise examiner to protect the collectibilty for tax imposed under IRC 4251. The following bolded language must be entered on the form: The amount of liability for Taxable Communication Service tax imposed on the taxpayer(s) by section 4251 of the Internal Revenue Code.

(1) If an excise return omits an amount of properly includible tax exceeding 25 percent of the amount of tax reported on that return, IRS has additional time (up to six years) to assess the additional tax from the date the return was filed. The excise examiner must secure written advice from local Counsel that the six year statute applies and include that documentation in the case file.

(2) For example, when a Form 720 is filed including the word, "None" or "0" in the abstract’s tax column, a return has been filed in accordance with IRC 6501(b)(4), Limitations on assessments and collections; return of excise taxes, and any omission of tax from that return triggers the six-year period for assessment provided by IRC 6501(e)(3), Limitations on assessments and collections; excise taxes, because the omission is in excess of 25 percent of the tax reported on that return.

(3) Since IDRS CC BRTVU and BMFOLR do not always reflect what is recorded on the actual tax return, the original return should be solicited to confirm the amount of tax reported.

(4) Update the SOL on Form 895 as required.

(1) A project code is a four-digit number indicating that a case belongs to a special program. A project code should be used for large broad based excise exam actions that cannot be monitored via activity codes alone.

(2) A tracking code is a four-digit code used to identify specific categories of excise projects, or specific excise exam issues or strategies.

(3) WSD coordinates assignment of project and tracking codes to case work to gauge whether the work sent for examination is productive. Most case work sent to the field for examination includes a project and/or tracking code. WSD is also responsible for all requests for new project and tracking codes or for discontinuance of a code.

(4) Excise managers and excise examiners must review case inventory to verify that the correct project/tracking codes are reflected on ERCS/AIMS and confirm the codes are recorded on Form 5345-D for any examination pick-ups.

(5) The accurate use of these codes allows for meaningful data analysis regarding the productivity of each project and provides excise management critical information regarding resource allocation.

(6) All Affordable Care Act case work requires an assigned project code. The excise examiner must verify accuracy of the project code for these cases.

(1) Cases will be assigned to Excise Tax Examination when the following criteria are present:

• Taxpayer’s BOD code is SB/SE or LB&I.

• Tax period involves an examination made previously by Area 214 Excise Tax (TC300 or TC308).

• Tax period involves an assessment from an original filed excise return (Form 720, Form 730, Form 11-C, Form 2290, etc.) that has not had an examination assessment made from another area.

(1) OIC-DATL offers are filed with the Brookhaven Centralized OIC Operation on Form 656-L. The DATL unit is responsible for the initial screening for processability. For further guidance, refer to IRM 5.19.24.6, Liability Collection, Doubt as to Liability Offer in Compromise, Processability.

(1) WSD conducts an initial screening of the case within 10 days of receipt to determine if the case is appropriate for assignment to an Excise Tax Examination field group.

(2) If the offer is deemed appropriate for an Excise Tax Examination field group, WSD will:

1. Request case controls on all quarters involved (those with TCs 480) using Project Code 0264, Source Code 73 and Tracking Code None. Source Code 73 cannot be used if the return remains on AIMS in status code 90 or below. In that case, the return retains its original Source Code and Aging Reason Code 53 should be added.

2. Request the original case file workpapers.

3. Verify TIPRA statute.

4. Notify the excise manager via secure e-mail that an OIC-DATL case has been assigned to his or her group and forward the case file via Form 3210 to the excise manager.

(3) If the offer is not appropriate for field assignment, WSD will:

1. Return the offer to the centralized DATL processing unit and update the AOIC assignment number to 1901165901.

2. Enter information in the AOIC remarks section regarding why the case was returned.

(4) Once the DATL case is assigned to an examination group and the case file forwarded to the group via Form 3210 to the excise manager, WSD will update the AOIC remarks section to reflect the appropriate Employee Group Code (EGC) and a contact point.

(1) Upon receipt of the case from WSD, the excise manager assigns control to an excise examiner.

(2) The excise examiner should refer to IRM 4.18.1, Exam Offer-in-Compromise, Offers-in-Compromise Received in Exam, for guidance about working the OIC-DATL case.

(1) An acceptance is very rare because in most cases the reasonably correct liability can be determined. If acceptance is being considered, the excise examiner should refer to IRC 4.18.1.4.3.2, Acceptance, for guidance in accepting an OIC-DATL offer.

(2) The completed case is routed via Form 3198 to the attention of WSD, who reviews the case, secures approval to issue the acceptance letter and prepares and processes abatement on Form 3870, Request for Adjustment.

(1) IRC 7122(e), Compromises; administrative review, requires IRS to provide for independent administrative review of all proposed OIC rejections prior to the rejection being communicated to the taxpayer. For Excise Tax Examination cases, the case is forwarded to WSD for review by an Excise Tax Policy Subject Matter Expert (SME). The SME cannot be anyone who worked on the case or is a party to the initial rejection or acceptance decision. The SME will review the proposed rejection of OIC prior to any indication or notification of such action being given to the taxpayer. The purpose of the review is to evaluate the case and determine if rejection is the correct decision.

(2) WSD forwards the case via Form 3210 to the SME for review.

(1) Upon receipt of a case from the SME for rejected offers or from the excise examiner for withdrawal offers, WSD will:

1. Generate and issue the appropriate AOIC disposition letter.

2. For rejected offers, suspend the case for 45 days to allow taxpayer time to request Appeals consideration.

3. Complete the IAR/Tech Checklist and fax or scan the sheet to the Brookhaven Centralized OIC-DATL site.

4. Return the IAR/Tech Checklist to the OIC-DATL processing unit within 180 days of receipt. It must include the date the case was forwarded to Appeals, if appropriate.

5. Complete the AOIC offer closing actions based on information on the IAR/Tech Checklist.

6. Close the case to CCP for final closure, if agreed or if no Appeals request is received.

(1) The purpose of Coordinated Excise Issues (CEI) is to provide excise examiners with guidance on significant national issues that are identified as potentially not resolved consistently. CEI may be proposed by the Program Manager, Excise Tax Policy, Program Manager or SME to ensure key excise issues are raised within a particular abstract and are developed and resolved consistently.

(2) The CEI process for excise tax issues establishes uniform positions within the excise tax abstract or issue area. Excise examiners must not deviate from such positions without the concurrence of the Program Manager, Excise Tax Policy.

(1) The following are the duties and responsibilities of excise management with regard to ensuring technical advice and guidance are observed:

1. Follow the policies and the procedures instituted by Excise Tax Policy for uniform and consistent excise tax administration.

2. Consider CEI during the examination process.

3. Excise examiners will consult with the SME, as warranted, whenever the excise examination involves an abstract/issue within the SME’s area of expertise.

4. Excise examiners are responsible for preparing requests for excise tax technical advice. Requests should be made as early as possible in the examination process. A copy of each request should be sent to the appropriate SME in accordance with the yearly Technical Advice Request Revenue Procedure. The SME should be involved in every step in the process leading to the release of the Technical Advice Memorandum (TAM), including Chief Counsel requests for additional information, conferences, discussions of tentative conclusions, etc.

5. The SME’s involvement on all excise issues selected for the LB&I Pre-Filing Program or Industry Issue Resolution Program.

(1) A technical advice memorandum (TAM) is requested according to formal procedures contained in the second revenue procedure issued each year. This revenue procedure is updated annually, but may also be modified or amplified during the course of the year.

(2) Because technical advice is issued to assist field offices, it is the field office that determines whether to request it. In determining whether to request technical advice, the field office should consider whether other forms of guidance, e.g., published guidance, generic advice, or some other form of advice, would be more appropriate. Before requesting technical advice, however, the field office must request assistance and a recommendation from Counsel.

(3) Written requests for Area Counsel’s advice are routed through the Appeals/Counsel liaison in Technical Services. Refer to IRM 4.8.8.12.1.2, Technical Services, Miscellaneous Responsibilities, Advice from Area Counsel, for further guidance.

(4) New streamlined procedures have been implemented in the processing of TAM requests. The field examiner and the assigned Area Counsel attorney will determine if a TAM is warranted. The field examiner will prepare the Form 4463, Request for Technical Advice or Technical Expedited Advice, and all required attachments and forward to the assigned Area Counsel attorney. The Area Counsel attorney will forward the request via electronic means directly to the Office of Associate Chief Counsel.

(5) Technical Service’s role in the TAM process is limited to processing the original written request for Area Counsel advice. In some instances, Area Counsel may request additional assistance if necessary.

(6) For complete TAM procedures, please refer to the second revenue procedure of the year (i.e., Rev. Proc. 2021-2, 2021-1, I.R.B. 116, 2021 WL 54191) and IRM 4.2.3, Technical Advice to Taxpayers and Examination Personnel.

(7) Other technical requests, such as CEIs and issues resulting from the Compliance Assurance Process program (CAP) (refer to IRM 4.51.8, LB&I Case Management, Compliance Assurance Process (CAP) Examinations) require the following:

1. Forward the request immediately upon receipt to the Program Manager, Excise Tax Policy.

2. Notify the LB&I Program Analyst, Excise Tax, if the request originates from a CEI case.

3. Engage the SME for the excise issue abstract, if needed.

(8) Technical excise tax issues should be coordinated with other divisions:

1. Including involvement by the Chief, Estate & Gift/Excise Tax and the Program Manager, Excise Tax Policy.

2. The Program Manager, Excise Tax Policy collaborates with the LB&I Technical Advisor to provide SME support to the excise field group in resolving case issues.

(1) An analyst on the Excise Tax Policy Manager’s staff shall be assigned responsibilities for the Excise Tax Embedded Quality Program.

(2) At the direction of the Excise Tax Policy Manager, such analyst’s responsibilities include:

1. Establishing and providing guidance to meet program objectives.

2. Ensuring consistent application of the quality attributes.

3. Recommending updates to the quality attributes and process measures.

4. Maintaining instructional guides, forms and letters, as needed.

5. Hosting an embedded quality summit to discuss quality trends with affected stakeholders, as needed.

(1) Territory Manager responsibilities include:

1. Conducting analysis of the territory’s NQRS and EQRS results and identifying opportunities for improvement.

2. Conducting quality improvement initiatives to impact NQRS and EQRS results.

(2) Excise Tax Examination group manager responsibilities include:

1. Conducting quality reviews on case work and inputting the results into the EQRS system.

2. Assisting Territory Managers in conducting analysis of the territory’s NQRS and EQRS results and identifying opportunities for improvement.

3. Conducting quality improvement initiatives to impact NQRS and EQRS results.