4.24.10. Appeals Referral Procedures

(1) General Overview - This section provides specific information for Excise Tax Examination to refer Excise Tax Program cases to the IRS Independent Office of Appeals (Appeals). A taxpayer has the right to appeal an IRS decision in an independent forum that allows for a fair and impartial administrative appeal.

(2) Purpose - This section explains the referral process for Excise Tax Program cases to Appeals.

(3) Audience - The audience for this section includes the Director, Examination - Specialty Tax, Chief, Estate & Gift/Excise Tax Exam, Excise Tax Examination territory managers, group managers (managers), revenue agents (RAs), and fuel compliance agents (FCAs) (RAs and FCAs are collectively and hereinafter referred to as examiners throughout this section), who refer cases to Appeals.

(4) Policy Owner - Director, Examination - Specialty Policy, is responsible for the administration, procedures and updates related to the referral of cases to Appeals.

(5) Program Owner - Director, Examination - Specialty Tax, owns Excise Tax Examination.

(6) Primary Stakeholders - Appeals, Counsel, Field and Specialty Exam Quality (FSEQ) and Excise Tax Examination are the primary stakeholders for this section.

(1) Prior to forwarding and closing an Excise Tax Examination or claim to Appeals, the examiner must confirm the completeness of the case file. There must be sufficient documentation to establish that:

• The procedures for an administrative appeal have been explained to the taxpayer or the taxpayer’s representative. Additionally, the option to pay any deficiency and file a claim for refund, if the taxpayer or the taxpayer’s representative is not familiar with these procedures, have also been explained.

• Managerial involvement occurred. The case file must demonstrate that the manager was informed when the examiner believed a case would have unagreed issues (except for no show or no response cases). The manager’s actions must be documented in the case file that include attempts to successfully resolve the dispute. Form 9984, Examining Officer’s Activity Record or the Case Level Activities at the IMS Team Web Site, may be used for this purpose. Refer to IRM 1.4.40.4.11.5, Unagreed Closing Procedures.

• The Excise Tax Examination report is accurate. For examinations, refer to IRM 4.24.20, Excise Tax Report Writing Guide. For claims, refer to IRM 4.24.8, Examination Guidance for Excise Claims for Refund or Abatement. For preparation of workpapers that support accurate examination reports, refer to IRM 4.24.6, Technical Guidance and Information Processing for Excise Tax Examination Issues, and IRM 4.24.25, Issue Management System (IMS), Notebook and Workpapers.

(2) Cases closing to Appeals for the first time require at least 365 days on the SOL when they are received in Appeals. In addition,

1. There must be at least 210 days remaining on the SOL when a case is received in Excise Tax Examination, if Appeals returns the case for consideration of new information or new issues raised by the taxpayer.

2. There must be at least 180 days remaining on the SOL when a case is received in Appeals, if Appeals previously released jurisdiction on the case and returned it to Excise Tax Examination for additional work.

   Note: The group must allow a minimum of 30 days for shipping and processing a case through Technical Services (Tech Services). Therefore, a case must have a minimum of 395 days (or 210 days if the case was returned) remaining on the SOL when the case is closed through Tech Services.

(3) For purposes of case processing, the examiner must be aware of the 365 day requirement and plan accordingly when issuing examination reports to the taxpayer where the taxpayer has not indicated probable agreement.

1. If the case has 445 days or more remaining on the SOL, then the examiner must use the appropriate letter, Letter 950-E, 30-Day Letter – Straight Deficiency or Over-Assessment for Excise Tax Examination Cases, or Letter 569-X, Claim Disallowance Letter, to transmit the examination reports. The examiner must follow the procedures in IRM 4.24.20.3.4, Unagreed Excise Reports, or IRM 4.24.8.12, Unpaid Claims - Unagreed and Excepted Agreed Cases.

2. If the case has less than 445 days remaining on the SOL, then the examiner must use Letter 5153-E, Examination Report Transmittal - Statute, to transmit the examination reports and notify the taxpayer additional time is needed on the SOL for Appeals to consider their case if it is unagreed. A statute extension must be secured for the taxpayer to engage in the Appeals process. The extension must allow sufficient time for preparing a rebuttal and 30 days for shipping and processing the case in Tech Services to ensure a minimum of 365 days remain on the SOL when the case is projected to be received in Appeals.

(4) If a valid Form 872-B, Consent to Extend the Time to Assess Miscellaneous Excise Taxes, is not received, then the case will be processed based on the proposed changes as an unagreed case not eligible for consideration by Appeals. Refer to IRM 4.24.21.5.4, Closing Procedures for Unagreed Excise Examinations Not to be Forwarded to Appeals.

(1) Situational facts and circumstances, such as sufficient time being available on the SOL to allow Appeals to review a case, determine the appropriate letter to issue with the Excise Tax Examination report.

(2) Refer to Exhibit 4.24.10-2, Excise Tax - Letter Table According to Situational Facts and Circumstances, to identify the appropriate letter(s) to issue to the taxpayer.

(3) Refer to Exhibit 4.24.10-3, Excise Tax - Letter Table with Letter Numbers and Descriptions, for a list of the letter number and description (catalog name) for those letters itemized under Exhibit 4.24.10-2.

(1) Generally, Appeals procedures for unagreed income tax cases are applicable to excise cases, except for the statutory notice provisions, which do not apply.

(2) Unless specifically excluded from Appeals consideration, all excise cases are eligible to be forwarded to Appeals on the condition that the taxpayer submits an "adequate" protest (when a formal written protest is required) or a small case request that includes the information required under Publication 5, Your Appeal Rights and How to Prepare a Protest if You Disagree.

(3) The following is a list of cases that are excluded from Appeals consideration:

• Fewer than 365 days remain on the SOL when the case is received in Appeals.

• Request/claim for abatement of unpaid tax that is not an audit reconsideration. Refer to IRM 4.10.8.8, Claims for Abatement, Audit Reconsiderations, and Supplemental Reports, (taxpayer has no judicial rights).

• Taxpayer disagrees solely on moral, religious, political, constitutional, conscientious or similar grounds. Refer to IRM 8.1.1.3.1, No Appeals Conference or Concession on Certain Arguments.

• Cases designated for litigation. Refer to Chief Counsel Directives Manual 33.3.6, Designating a Case for Litigation.

• Cases where Appeals discovered potential fraud, malfeasance or a misrepresentation of a material fact. Refer to IRM 8.2.1.5.

(4) The issuance of a notice of deficiency of a non-excise tax case does not preclude transfer on protested cases to Appeals for:

• Other taxable periods of the same taxpayer,

• Other types of tax for the same taxable periods for the same taxpayer, or

• An offer in compromise covering the same type of tax and the same taxable periods of the taxpayer.

(1) When the taxpayer requests an Appeals conference, examiners must follow the applicable procedures in Exhibit 4.24.10-4, Steps and Procedures When a Taxpayer Requests an Appeals Conference.

(2) Unless specifically excluded from Appeals consideration, all excise cases are eligible for an Appeals conference if the taxpayer submits an "adequate" written protest (when required) or a small case request.

(3) To qualify as "adequate" the taxpayer’s written protest must comply with requirements identified in Publication 5, Your Appeal Rights and How to Prepare a Protest if you Disagree.

(4) When a rebuttal is needed, the examiner will prepare a Form 886-A, Explanation of Items. The following areas must be addressed:

• Statements, facts and arguments that were not previously explained in the Excise Tax Examination report.

• New arguments or facts raised by the taxpayer.

• Factual differences between the Excise Tax Examination report and the protest.

  Note: A copy of the rebuttal must be provided to the taxpayer at the time the case is sent to Appeals. Examiners must use Letter 5072, Examiner’s Rebuttal, to transmit the rebuttal to the taxpayer. Letter 5072 with the attached rebuttal must be included with the taxpayer’s protest in the case file as provided in IRM 4.10.9.9.3(1)(e), Forms and Other Documents Inside the Case Folder.

(5) The protest should be returned to the taxpayer if it does not comply with the requirements as outlined under Publication 5 and additional time should be granted to perfect the protest. Use Letter 1025-E, Letter of Protest - Excise Tax, or Letter 1025-A, Letter of Protest (Claims), for this purpose.

(6) If a rebuttal is not prepared, when closing the case to Appeals, then the examiner must prepare Letter 2280-X, Transfer to Appeals, to notify the taxpayer the case is being closed to Appeals. The letter must be signed by the manager and mailed to the taxpayer.

(1) A taxpayer's protest generally will be reviewed at the group level as designated by management within seven calendar days of receipt to determine whether:

1. The protest is "adequate."

2. The case requires further development by the examiner.

3. The examiner’s report should be modified.

(2) To be considered "adequate," the taxpayer’s formal protest or small case request must contain all information required under Publication 5 (with the exceptions noted in the table under Exhibit 4.24.10-4, Steps and Procedures When a Taxpayer Requests an Appeals Conference.)

(3) A formal written protest is required for a proposed change to the total amount of tax and penalties for any tax period that is more than $25,000 for an increase or decrease in tax and penalties or claimed refund. To meet the Publication 5 "adequacy" requirement, the formal written protest must include:

1. A statement that the taxpayer wants to appeal the changes proposed by the IRS.

2. The taxpayer’s name, address and daytime telephone number.

3. List of all disputed issues, tax periods or years involved, proposed changes and reasons for the taxpayer’s disagreement with each issue.

4. Facts supporting the taxpayer’s position on each disputed issue.

5. Law or authority, if any, supporting the taxpayer’s position on each disputed issue.

6. A declaration of truth under penalties of perjury. This may be done by adding the following signed declaration to the protest document: "Under penalties of perjury, I declare to the best of my knowledge and belief, that the information contained in this protest and accompanying documents is true, correct and complete."

(4) If the taxpayer’s representative submits the written protest for the taxpayer, then the representative must substitute a declaration stating:

1. That the protest and accompanying documents were submitted by the representative.

2. That to the best of their personal knowledge and belief, the information is true, correct and complete or, if not, there is no personal knowledge concerning the information stated in the protest and accompanying documents.

3. The taxpayer or the representative must sign the document under the penalties of perjury statement.

(5) If the total amount of tax and penalties is $25,000 or less, then the taxpayer may submit a small case request. To meet the Publication 5 "adequacy" requirement, the small case request should include:

• A brief written statement listing the disputed issues and why the taxpayer disagrees with the proposal for additional tax and penalties, or

• A completed appeal request Form 13683, Statement of Disputed Issues, that was included with the letter the taxpayer received proposing the change, if applicable, or a completed Form 12203, Request for Appeals Review.

(6) "Adequacy" of a protest is generally not determined based on substantive content, such as whether the protest contains sufficient factual or legal support. If a taxpayer submits a formal written protest that includes all the information required by Publication 5 addressing the issues raised in the 30 Day letter, the reasons for disagreement and factual information to support their position on the issues, then the case must be forwarded for Appeals consideration. This is regardless of whether the examiner or manager disagrees with the taxpayer’s facts and/or does not consider the taxpayer’s position sufficiently supported.

(7) An incomplete protest, which is one that does not satisfy the requirements listed in Publication 5, must be returned to the taxpayer and additional time granted to perfect the document. If the protest contains information warranting further consideration, then the case should be returned to the examiner for further development. Cases returned for additional development should be considered priority work and given expedited consideration.

(8) If the examiner or manager determines there is something in the protest that does not change the determination but requires further comment or explanation and is not confidential in nature, then a rebuttal can be prepared and included in the case file before being sent to Appeals. This rebuttal will serve to supplement the information contained within the examiner's report and offer a constructive response to the taxpayer's arguments that were presented in the protest. If a rebuttal is prepared, then the taxpayer must be provided a copy. Examiners must use Letter 5072, Examiner’s Rebuttal, for this purpose.

(9) The manager is authorized to meet with the taxpayer to discuss any disputed issues in an attempt to resolve them, obtain taxpayer agreement and limit taxpayer burden.

(1) Appeals has specially trained Appeals Officers (AOs) who handle excise tax case referrals.

(2) All unagreed cases are routed to Appeals via Tech Services. Tech Services will forward cases to the Appeals Account and Processing Support (APS) Carding Team.

(3) Examiners must complete Form 3198, Special Handling Notice for Examination Case Processing, as follows:

1. In the "Forward to Technical Services" section, the boxes "Unagreed to Appeals" and "Other" must be checked.

2. In the space next to "Other," insert "Forward to APS Carding Team (non-collection cases). Unagreed Excise case please assign to Appeals Officer trained in Excise" and insert the proper address for case routing.

3. In an unnamed section below the "Other" section, check the box for "Forward to Tech Services - Update to Status 21." Enter the "Date Closed to Manager" and "Manager Name."

(4) After the physical case file is mailed to Tech Services, the examiner will close the case off IMS.

(1) If the taxpayer requests a transfer of jurisdiction for an appeal and the written protest is "adequate," then the case file will be routed to Appeals.

(2) A case can be transferred to Appeals with a copy of the taxpayer’s return, if:

1. A transcript of account is attached to the copy of the excise return.

2. The case does not involve fraud, jeopardy assessment or Joint Committee Review.

(3) Disposal Code 07 must be used for an unagreed case that is transferred to Appeals.

(4) Form 4665, Report Transmittal, must be prepared and contain the following information:

1. The statement: "Unagreed Excise case, please assign to Appeals Officer trained in Excise."

2. If the issues impact multiple taxpayers, then the statement, "This issue impacts multiple taxpayers and/or is an industry issue, as such consistency in treatment amongst taxpayers is needed. Cases should be coordinated through the Appeals Technical Guidance Coordinators – Excise Fuel or General Excise." For a list of current technical guidance coordinators, refer to the Excise Tax Knowledge Base Homepage, Excise Examination Shelf, Closing an Examination Book, and Type of Closure at the Unagreed Case Chapter.

3. If the case has live statutes, particularly those that cannot be extended, then the statement: "Caution - Case contains live statutes related to paid fuel claims which cannot be extended. The last day to make an assessment under IRC 6206 is MM-DD-YYYY."

4. Summary of the unagreed issues, if necessary.

5. If an Appeals preconference is requested, then the statement: "An Appeals preconference is requested due to a new or novel issue."

6. Indicate whether the taxpayer was offered the opportunity to discuss the unagreed issues with a manager.

(5) Letter 2280-X, Transfer to Appeals, must be prepared, signed and dated by the manager. Letter 2280-X notifies the taxpayer of the case transfer to Appeals for consideration.

(6) If a taxpayer is a non-filer and the failure to pay penalty is asserted, then Form 13496, IRC Section 6020(b) Certification, for each tax period must be included in case file forwarded to Appeals. For further guidance, refer to IRM 4.24.9.6, IRC Section 6020(b) Certification Procedures for Non-Filed Excise Tax Returns.

(7) Requests from Appeals for additional information for further verification of facts in a protested case will be completed expeditiously.

(8) Refer to IRM 4.10.8.15.6, Taxpayer’s Appeal Rights, for guidance concerning appeal rights for inadequate taxpayer records cases.

(9) Refer to IRM 8.7.10.3.1, Routing and Assignment of Cases from SB/SE to the Appeals Case Officer Cadre, for guidance on Appeals procedures for cases.

(10) If Appeals cannot resolve the case to the taxpayer’s satisfaction, then the taxpayer’s only recourse will be paying the additional tax when assessed and filing a claim for refund within the applicable SOL. Upon disallowance of the claim or six months from the date the claim was filed, the taxpayer may then file suit in the U.S. District Court or the U.S. Court of Federal Claims to recover the excise tax paid.

(1) After giving the taxpayer or the taxpayer’s representative an opportunity to participate, a preconference meeting may be held between the Appeals Officer (AO) and the examiner. This may be about a protested case addressing an unusual or complex issue. A determination regarding what is an unusual or complex issue will be left to the discretion of the AO and the examiner.

(2) The purpose of a preconference meeting is to discuss the issue, the protest and the written rebuttal in a case containing a complex or unusual issue. A frank discussion of the issue will help to identify additional information that may be needed. The need for resources, specialists or expert witnesses, etc., can be discussed at this preconference meeting. Excise Tax Examination is encouraged to share its views on disputed issues, including the assessment of the facts and the law to recommended adjustments on a particular issue. However, the preconference meeting is not for securing a commitment from Appeals to defend a particular issue or settlement position, or otherwise negotiate the settlement posture of Appeals on a case.

(3) A preconference meeting will take place prior to an Appeals/taxpayer conference.

(4) If a preconference meeting is requested by an examiner and/or manager, then the request should accompany the case file when sent to Appeals. Requests can be made for a pre-conference with Appeals using Form 4665, Report Transmittal. The request must be signed by the manager and must be associated with the case file.

(5) Review of taxpayer’s formal protest and preparation of the rebuttal in non-docketed cases:

1. Before forwarding the case to Appeals, the examiner must review any new information, new issue or new argument raised by the taxpayer or the taxpayer’s representative in the protest to determine Excise Tax Examination's position before preparing a written rebuttal. The rebuttal is not intended to restate positions taken in the Excise Tax Examination report, but to address any new information or new issues raised in the protest. A copy of the examiner’s rebuttal will be provided to the taxpayer and/or the taxpayer’s representative before sending the case to Appeals for consideration.

2. The protest rebuttal shall reference the request for a preconference meeting and refer to the separate request memorandum from the manager. This will alert the AO to look for the preconference meeting request memorandum.

3. Factual differences between the Excise Tax Examination report and the protest will be reconciled. Rebuttals will be secured from specialists, such as engineers, economists, appraisers, etc., who provided background data, assumptions, etc., used to formulate Excise Tax Examination's position. These reports will be included in the administrative file with the protest and provided to the taxpayer or representative before sending the case to Appeals for consideration.

4. Excise Tax Examination will seek technical advice on a novel or unique issue prior to Appeals’ consideration.

5. Changes in the examiner’s and the manager’s position made during the review process will be reflected clearly in any revised report and will include any tax re-computations.

Note: The examiner should not wait until the taxpayer disagrees to secure technical advice or reports from specialists to prepare for the preconference meeting. Doing so might delay the taxpayer’s appeal and limit the time the taxpayer has to respond. If the examiner has such information that addresses the taxpayer’s arguments, then the information must be provided to the taxpayer with the 30 Day Letter, to assist the taxpayer in the decision of whether to retain an expert or professional to prepare a protest.

(6) If a preconference meeting initiated by either party is accepted by the other party, then the acceptance need not be in writing, but the acceptance should be communicated expeditiously to the other party.

(7) A request by either party shall address the unusual or complex factual or legal issue warranting the preconference.

(8) Either the AO or examiner can decline the preconference meeting request. The declination must be in writing and signed and conveyed to the other party with copies to respective managers.

(9) Despite these preconference meeting procedures, the AO remains responsible for complying with the SOL procedures outlined in IRM 8.21, Appeals Statute Responsibility.

(10) Participation in a preconference meeting:

1. The AO will arrange the meeting.

2. Appeals and Excise Tax Examination will each identify its participants in the meeting.

3. The participants may include other specialists, as deemed necessary by Excise Tax Examination.

4. The parties will determine the location and method of the preconference on a case-by-case basis.

(1) Appeals will return cases to Excise Tax Examination in the following situations (not all-inclusive):

• Missing protest.

• Inadequate protest (does not meet the requirements described in Publication 5).

• Less than 365 days remaining on the SOL.

• Taxpayer provides new information or evidence.

• Taxpayer raises new issues not considered by Excise Tax Examination.

• Contrary to IRS practice, the case is a reopening of a previously closed case as set forth in Rev. Proc. 2005-32.

• The case involves claims for abatement of excise tax or trust fund recovery penalty which are not deemed meritorious by IRS.

• Appeals discovers potential fraud, malfeasance or misrepresentation of a material fact.

(1) IRM 8.13.1, Processing Closing Agreements in Appeals, contains guidance and instructions regarding closing agreements under IRC 7121, Closing agreements, for all types of taxes.

(2) The United States Tax Court has no jurisdiction over cases involving the excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, Form 2290, Heavy Highway Vehicle Use Tax Return, Form 730, Monthly Tax Return for Wagers, and Form 11-C, Occupational Tax and Registration Return for Wagering. After payment of at least a divisible portion of the excise tax, these cases may be litigated in either the United States District Court or the United States Court of Federal Claims by filing a suit for refund of the excise tax paid.

(1) IRM 8.7.10.4.2(3), Issue Management System (IMS), requires Appeals to work all Excise Tax Examination Field cases in IMS. If the case is not in IMS, then Appeals will ask the Appeals Team Manager to search the Account & Processing Support inventory in IMS for cases that are not currently in the Appeals IMS Case Inventory.

(2) The Subject Matter Experts (SMEs) in Excise Tax Policy may review the ACM. If there is a disagreement with how the case was resolved/disposed, then Excise Tax Policy should provide feedback to Appeals either informally or through the formal dissent procedures. Formal dissent procedures are found in IRM 8.6.4.2.10, Disagreements with Appeals Determinations. The formal dissent procedures are not intended to replace any informal procedures currently in use. It is expected that Excise Tax Examination, Excise Tax Policy and Appeals will continue to address and resolve disagreements over case resolutions at the lowest possible level. The formal dissent procedures are used when the informal process results in Excise Tax Examination or Excise Tax Policy continuing to have unresolved significant concerns about the Appeals disposition of an issue.

(3) Dissents will be prepared by Excise Tax Policy and forwarded to the appropriate Appeals area director, through the Program Manager, Excise Tax Policy, within 90 days (extensions may be mutually agreed upon) of receipt by Excise Tax Examination of an ACM. Refer to IRM 8.6.4.2.10 for detailed dissent routing guidance.

(1) The table below contains acronyms and their definitions used throughout this IRM.

(1) When the taxpayer requests an Appeals conference, examiners must follow the applicable procedures in the table below: