8.7.6. Appeals Bankruptcy Cases

(1) IRM 5.9, Bankruptcy and Other Insolvencies, contains the Service’s position, procedures, information, instructions, guidance, and references concerning bankruptcy cases, stockbroker insolvencies, receiverships, assignments for the benefit of creditors, corporate dissolutions, and bulk sales.

(1) The U.S. Constitution grants Congress authority to enact federal bankruptcy laws. The Bankruptcy Act of 1898 formed the basis of federal bankruptcy law. Appeals operates within the guidelines of the US Bankruptcy Code (11 USC) and the Federal Rules of Bankruptcy Procedure.

(1) The Director, Case and Operations Support (COS) is the executive responsible for designing, developing, delivering, and monitoring short and long range administration policies, programs, strategies, and objectives for the Appeals organization.

(2) The Director, Policy, Planning, Quality and Analysis oversees the Appeals Policy function and is responsible for providing technical and procedural guidance to Appeals employees, establishing and maintaining policies and standard procedures for Appeals work streams.

(3) The Policy Analyst shown on the Product Catalog page, as the originator, is the assigned author of this IRM.

(1) Policy, Planning, Quality, and Analysis (PPQA) provides trends and data analyses and detailed summary reports for Appeals.

(1) 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 accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about TBOR, see https://www.irs.gov/taxpayer-bill-of-rights.

(1) Prior to October 17, 2005, when a debtor filed a petition in bankruptcy court, in all instances the court entered an order for relief which immediately stopped ongoing and future (during the pendency of the bankruptcy) attempts by creditors to collect pre-petition debts owed by the debtor or otherwise exercise control over property of the estate or the debtor (11 USC 362). This essential feature of bankruptcy law created what is known as the automatic stay. For most debtors, the automatic stay will remain in effect during the pendency of the bankruptcy case. However, BAPCPA provided that for some individual debtors who file bankruptcy on or after October 17, 2005 and have had one or more bankruptcy cases dismissed within the preceding twelve month period, the automatic stay may either terminate within 30 days or not go into effect at all. See IRM 5.9.5.7, Serial Filers.

(2) 11 USC 362 also prohibits the commencement or continuation of a Tax Court Proceeding while the automatic stay is in effect. BAPCPA amended 11 USC 362(a)(8) to allow for a commencement or continuation of a Tax Court proceeding when all of the following conditions are met:

• The debtor is an individual taxpayer.

• The bankruptcy petition was filed on, or after October 17, 2005.

• The tax liability is for a tax period ending after the bankruptcy petition date (post-petition).

(3) For corporate debtors, BAPCPA prohibits the commencement or continuation of a Tax Court case for any taxable period for which the bankruptcy court may determine the liability. Generally, this will include all preconfirmation taxes.

(4) In most cases, the stay of assessment and suspension of the assessment statute expiration date (ASED) does not apply for agreed cases.

(5) The automatic stay does not prohibit the issuance of a statutory notice of deficiency for unagreed cases. For this reason, the SND must be issued prior to the expiration of the IRC 6501 assessment statute. However, the stay prohibits the commencement or continuation of certain proceeding before the U.S. Tax Court. The stay of Tax Court proceedings only applies in certain cases of individuals and corporations (11 USC § 362(a)(8)). For bankruptcy cases of individuals, the stay prohibits the commencement or continuation of Tax Court cases concerning tax liabilities for tax years ending before the bankruptcy petition date. For bankruptcy cases of corporations, the stay generally prohibits the commencement or continuation of Tax Court cases concerning tax liabilities for tax years that ended before the confirmation date of the Chapter 11 plan.

(6) Effect of the Automatic Stay, IRC 6213(f), provides the 90-day petition period is suspended while the taxpayer is prohibited from petitioning the Tax Court due to the bankruptcy proceedings, and for an additional 60 days. Thus, while the taxpayer is prohibited from petitioning the Tax Court due to the automatic stay, the assessment statute of limitations is suspended.

(1) The filing of a bankruptcy petition under any chapter creates a bankruptcy estate The estate is under the control of the court and generally consists of all of the debtor’s interests in any property at the time the case is filed, in addition to property acquired by the estate after the petition is filed.

(2) The stay against property of the estate continues until the property is no longer property of the estate. With the exception of serial individual filings discussed inIRM 5.9.5.7, Serial Filers, the stay of any other act continues until the earliest of the date the case is dismissed or closed by the court or until a discharge is granted or denied (11 USC § 362). The automatic stay never goes into effect at all (including the stay with respect to estate property) in certain multiple serial filer cases. If needed, Appeals can contact Insolvency to verify if the taxpayer is a serial filer.

(3) A proof of claim is a document a creditor files with the bankruptcy court to assert a right of payment from the bankruptcy estate for pre-petition debts. A claim can also be filed for post-petition debts in some instances (e.g., § 1305 claims in Chapter 13). Proofs of claim may be for taxes that have been assessed or for which an assessment is being proposed. The bar date is a date fixed by the court or by statute as the date by which a creditor must file a proof of claim. The Service is allowed a minimum of 180 days after the order for relief in which to file a proof of claim. The court may grant extensions for cause.

(4) The Insolvency Organization is the office responsible for timely filing proofs of claim with the court. However, to protect the government's interest, IRS employees outside of the Insolvency Organization who are proposing additional tax liabilities or who have secured tax returns with unpaid balances, are responsible for promptly advising Insolvency of any proposed or unassessed tax liabilities so they may be included as such in the proof of claim.

(5) Examination, Underreporter, Field Functions and Appeals may not have the final tax information by the bar date. In such cases, Insolvency will file an unassessed (estimated) proof of claim. An amended proof of claim will subsequently be filed as necessary to claim the correct tax liability owed the Service after the completion of an audit and appeal, if one is filed.

(1) There are two types of trustees in bankruptcy, United States Trustees and private trustees.

(2) U.S. Trustees are appointed by the U.S. Attorney General and employed by the Department of Justice under the Department’s United States Trustee Program. A U.S. Trustee oversees the administration of bankruptcy cases in an assigned region. This includes appointing and supervising private trustees assigned to administer Chapter 7, 12, and 13 bankruptcy estates. Although they do not appoint Chapter 11 trustees, U.S. Trustees may ask the bankruptcy court to appoint one.

(3) Chapter 7, 11, 12, and 13 trustees are private trustees. A private trustee serves in all Chapter 7, 12, and 13 cases, but not in all Chapter 11 cases. Generally, a Chapter 11 debtor manages the business/financial affairs of the bankruptcy estate as the debtor in possession, unless the court orders the appointment of a trustee.

(4) The role of the trustee varies depending on the type of case. Chapter 7 and 11 trustees are more involved in the daily operations of the debtor’s bankruptcy estate. Chapter 12 and 13 trustees have a more limited role, with the focus more on plan confirmation and collecting and disbursing plan payments. Generally, debtors in Chapter 12 and 13 cases continue to manage their own affairs after filing for bankruptcy. In Chapter 12 cases, however, the court is authorized to appoint a trustee to operate the debtor’s business where there is evidence of debtor fraud or incompetence.

(5) The extent to which the Service can disclose return information to a bankruptcy trustee depends on the type of case, the type of trustee and the reason for the disclosure. For a detailed discussion of the rules governing disclosure to a bankruptcy trustee, see IRM 11.3.2, Disclosure to Persons with a Material Interest, and the exhibit at IRM 5.9.19-1, Insolvency Disclosure and Telephone Procedures.

(1) The automatic stay results in a suspension of the period for making some assessments when a bankruptcy petition was filed before October 22, 1994. The law suspends the running of the statutory period for assessment for the time the Service is prohibited from making an assessment by reason of the bankruptcy plus 60 days. See IRC 6503 (h). This is a complex area; therefore, refer any questions on the statute of limitations for these cases to Area Counsel on a case by case basis. The Bankruptcy Reform Act of 1994 lifted the stay for assessment of pre-petition taxes when the bankruptcy petition was filed on or after October 22, 1994.

(2) Pre-petition taxes are taxes incurred, whether or not assessed, prior to the filing of the bankruptcy petition. An income tax is incurred on the last day of the tax year. Employment taxes and the trust fund recovery penalty are incurred when the wages are paid. However, employment taxes are treated as pre-petition when the wages were earned pre-petition.

1. Prior to October 22, 1994, 11 USC 362(a)(6) stayed any act to collect, assess, or recover a claim against the debtor that arose before the petition. In these cases, IRC 6503(h) suspends the statute of limitations for assessment for the length of the automatic stay and for 60 additional days. Because the stay prohibits assessment, the period for issuing a notice of deficiency is also suspended even though the automatic stay does not prohibit the Service from issuing the deficiency notice.

2. The Bankruptcy Reform Act of 1994 added an exception to the stay for the assessment of pre-petition taxes when a bankruptcy petition was filed on or after October 22, 1994 (11 USC 362(b)(9)(D). As a result, the stay does not prohibit the assessment of taxes. For these bankruptcy cases, the statute of limitation on assessment continues to run since the Service is no longer prohibited from making the assessment.

   Caution: In order to protect the assessment statute, the Service must make an assessment within the normal statutory period, send out a statutory notice of deficiency (SND), or obtain a waiver.

3. The Service can immediately assess taxes that are not subject to deficiency procedures. The trust fund recovery penalty and most excise taxes do not involve deficiency procedures and are immediately assessable. However, the trust fund recovery penalty may not be assessed unless the notice procedures under IRC 6672(b) have been satisfied. See IRM 8.7.6.5.

4. For taxes subject to the deficiency procedures (i.e., income, gift, and estate taxes), if an agreement is reached before the statutory notice is sent, the assessment must be processed as if the bankruptcy did not exist. If the case is unagreed, a statutory notice of deficiency must be timely sent. However, for bankruptcy petitions filed before October 17, 2005, 11 USC 362(a)(8) prohibits the taxpayer from petitioning the Tax Court until the automatic stay is lifted. This prohibition applies to both pre-petition and post-petition taxes. Under BAPCPA for individual taxpayers only, if the bankruptcy petition was filed on or after October 17, 2005, the taxpayer can file a petition in Tax Court only for tax years ending after the date of the filing of the bankruptcy petition. IRC 6213 prohibits the Service from making an assessment until the taxpayer’s right to petition the Tax Court expires or is waived. The statute is suspended under IRC 6213(f) for the period the taxpayer is prohibited from petitioning the Tax Court by reason of the bankruptcy case plus 60 days and for the period the Service is prohibited from making the assessment under IRC 6213 plus 60 days. See IRC 6503(h) and Rev. Rul. 2003-80, 2003-29 I.R.B. 83.

(3) Post-petition taxes are taxes incurred, whether or not assessed, after the filing of the bankruptcy petition, for tax periods ending after the petition date. An income tax is incurred on the last day of the tax year. Employment taxes and the trust fund recovery penalty are incurred when the wages are paid. The automatic stay does not prohibit the assessment of tax for a post-petition tax period when the debtor is an individual.

1. IRC 6503 does not suspend the running of the limitations period for assessment of post-petition tax liabilities.

2. The Service must take action to protect the statutory limitations periods for these taxes. It must issue a notice of deficiency if one is necessary to assess the disputed taxes or secure a waiver to protect the statute of limitations on assessment of deficiencies.

(4) The running of the collection statute expiration date (CSED) is suspended for the period collection is prohibited (e.g., while the automatic stay is in effect, and in the Chapter 11 context, postconfirmation, provided the Service's claim is allowed, the confirmed plan provides for payment of the tax debt, and the plan is not in default) plus six months. See IRC 6503(h)(2). Computation of a new CSED is similar to an assessment statute expiration date (ASED) computation. Six months are added to the unexpired time (number of days) remaining on the original statute as of the petition date and that total is added to the discharge or dismissal date (or the date the stay was lifted) to establish the new CSED.

(5) All Appeals employees should familiarize themselves with IRM 8.21, Appeals Statue Responsibility.

(1) As a general rule, 11 USC 505(a) permits the bankruptcy court to determine the amount or the legality of any tax, addition to tax, or tax penalty. This applies to tax liabilities of the debtor or of the estate whether or not the tax was previously assessed, paid, or contested. When a bankruptcy court determines a liability, the Service may immediately assess the tax. See 11 USC 505(c)

(2) The bankruptcy court may not re-examine a tax liability ruled on by a court of competent jurisdiction before the filing of the bankruptcy petition.

(3) The bankruptcy court can determine the right of the estate to a tax refund if the taxing authority does not rule on the trustee's refund claim within 120 calendar days. (See 11 USC 505(a)(2)(B).)

(4) While the automatic stay does not ban the issuance of a notice of deficiency to the debtor, it prohibits the commencement or continuation of any civil court proceeding, against the debtor, as well as any Tax Court proceeding. The bankruptcy court can lift the stay and allow the Tax Court to determine the tax liability. See 11 USC 362(a)(8),(b)(9), and (d).

(1) Jurisdiction over bankruptcy litigation involving the government rests with the Department of Justice. Department of Justice attorneys in the Tax Division and local U.S. Attorney offices represent the Service’s interests in bankruptcy cases once the case is referred to the Department of Justice by Area Counsel. Insolvency has been delegated limited authority to directly refer certain cases to the Department of Justice (through the Assistant U.S. Attorney) involving matters that require virtually no legal determinations or where the law is clear. See Delegation Order 25-9, IRM 1.2.2.14.9. Servicewide Delegations of Authority. In general, however, when the Service becomes the subject of bankruptcy litigation or decides to file an action in the bankruptcy case, Insolvency refers the case to Area Counsel and Area Counsel refers the matter, if appropriate, to the Tax Division or to the local U.S. Attorney’s office.

(2) Assistants U.S. Attorney - Local U.S. Attorney's Offices often handle routine bankruptcy matters for the Department of Justice. IRM 5.9.1.3.1, The Bankruptcy Court, and IRM 5.9.1.3.3, United States Attorney, provide additional information on Counsel's role in bankruptcy cases.

(3) To process tax cases of debtors efficiently, the Assistant Attorney General, Tax Division, Department of Justice and the Chief Counsel have agreed to a bankruptcy referral procedure. The agreement parallels the docketed case Appeals—Counsel jurisdictional provisions in Rev. Proc. 2016-22. Area Counsel guidelines are found in Chief Counsel Directives Manual (CCDM) 34.3.1.1.7, Procedures in Bankruptcy Cases, see Exhibit 8.7.6-1.

(4) Each Area Counsel office will designate at least one trial attorney to act as a coordinator of bankruptcy cases. That attorney will provide assistance to Appeals and other Service functions in handling bankruptcy cases.

(1) The ultimate goal for the debtor in a bankruptcy filing is to obtain a discharge order from the bankruptcy court. A discharge bars creditors from collecting discharged debts from the debtor personally or the property acquired by the debtor after bankruptcy.

(2) Discharge determinations of federal taxes are the sole responsibility of the IRS Insolvency function.

(3) Although the ultimate determination of what federal taxes are dischargeable is determined by Insolvency, Appeals Technical Employees (ATE) should be familiar with applicable Bankruptcy Code sections and how they can relate to resolving tax controversies. The applicable sections include:

1. Chapter 7 - 11 USC 727

2. Chapter 11 - 11 USC 1141

3. Chapter 12 - 11 USC 1228

4. Chapter 13 - 11 USC 1328

(1) An ex parte communication is an oral or written communication that takes place between an Appeals employee (e.g., Appeals Officers, Settlement Officers, Appeals Team Case Leaders, Appeals Tax Computation Specialists) and employees of other IRS functions without the taxpayer or their representative being given an opportunity to participate in the communication. Written communications include those that are manually or electronically generated.Rev. Proc. 2012-18, Rev. Proc. 2012-10 IRB 1 and IRM 8.1.10, Appeals Function, Ex Parte Communications, contain guidance concerning ex parte communications. Appeals employees must understand the guiding principles governing communications between Appeals and other IRS employees.

(2) When bankruptcy issues arise in Appeals cases, there may be a necessity to obtain information regarding the bankruptcy filing and status. Not all communications between Appeals and other IRS employees are prohibited. Information pertaining to the bankruptcy filing and status is considered to be ministerial, administrative or procedural in nature and therefore not prohibited ex parte communication. Permitted communications concerning the status of the case should be limited to a direct, narrow exchange of information without any surrounding discussion. These communications are not intended to provide the Insolvency function a chance to discuss the strengths, weaknesses or position in the case, the credibility of the taxpayer, advocate for a particular result, object to potential resolution or otherwise attempt to influence Appeals' decision in any way.

(3) The following table is a list of typical questions that Appeals may ask to the Insolvency organization. These types of questions are not considered prohibited ex parte communications. The Insolvency organization and its employees are not typically considered an originating function, but there are occasions where Insolvency files a Notice of Federal Tax Lien or issues a levy. If the Insolvency function issued the levy or proposed levy or requested the filing of a Notice of Federal Tax Lien, certain questions below may pose a greater risk that the discussion may transition into topics that might violate the ex parte communication rules. To minimize that possibility, it is best to remind the Insolvency employee of the ex parte communication rules at the beginning of the conversation or give the taxpayer/representative an opportunity to participate in the discussion. If the taxpayer/representative was not part of the discussion and a prohibited ex parte communication occurs, the ATE should share the substance of the discussion with the taxpayer/representative and give the taxpayer/representative an opportunity to respond. Counsel may be contacted in these instances if clarification is needed.

(4) The ATE must be aware that although certain questions are not considered prohibited ex parte communications, they could develop into prohibited ex parte communications if the Insolvency employee makes statements about the legitimacy of the petition or claim, etc. It is best to remind the Insolvency employee of the ex parte communication rules at the beginning of the conversation.

(5) ATEs may also be contacted by bankruptcy trustees. There is no ex parte communication concerns because the trustee is not an employee of the IRS. However, there may be restrictions on disclosure under IRC 6103. See IRM 11.3.2.4.12, Bankruptcies, and the exhibit at IRM 5.9.19-1, Insolvency Disclosure and Telephone Procedures.

(1) Upon notification that a taxpayer has filed bankruptcy, the ATE must promptly verify the following facts of the bankruptcy filing and annotate in the Case Activity Record:

• The entity and TIN(s) that filed the bankruptcy.

• The date the bankruptcy petition was filed.

• The case number.

• The location of the bankruptcy court (e.g. "Southern District of New York").

• The bankruptcy Chapter.

(2) The documentation confirming the bankruptcy filing can be obtained from the taxpayer, the taxpayer’s representative, PACER (Public Access to Court Electronic Records) at http://pacer.psc.uscourts.gov/ or the local Insolvency Unit, a part of the Collection Function for the SB/SE Operating Division. The Insolvency National Field/Centralized Site Directory may be accessed through http://serp.enterprise.irs.gov/databases/who-where.dr/inslvncy-bnkrptcy/national_insolvency_field.htm. This National Directory provides local contact telephone numbers for Insolvency Field Offices and Centralized Insolvency Operation based on inventory assignment.

(3) If the taxpayer provides the information, a copy of the petition showing the Court’s received date stamp and case number should be included. Otherwise, verify the filing through PACER or Insolvency. Transaction Code TC 520 with the bankruptcy closing codes (cc’s 60 through 67, 81 and 83 through 89) will also appear on TXMODA. In some cases this may be the first indication of a bankruptcy filing. If so, the employee should obtain the facts about the filing through the sources listed above.

(4) All of the facts of filing, as well as how the Appeals employee verified the bankruptcy filing, must be annotated in the Case Activity Record.

(5) The Appeals employee may also be contacted by the taxpayer’s bankruptcy attorney. The required bankruptcy documentation can be requested from the bankruptcy counsel.

(6) In all CDP and EH cases, advise the taxpayer that Appeals is suspending any further proceedings in the case until the automatic stay is lifted or the amount and collection of the tax liabilities raised in the hearing are resolved by the bankruptcy. The Appeals employee should request that the taxpayer contact them when the automatic stay has lifted or a plan has been confirmed. However, this does not substitute for the employee’s responsibility to monitor the bankruptcy proceeding. See IRM 8.7.6.3.3

(7) Refer the taxpayer and/or representative to Insolvency for any substantive discussions regarding the bankruptcy case.

(8) Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), for petitions filed on or after October 17, 2005, certain Chapter 7, 11, or 13 cases filed by individuals may have no automatic stay imposed or the stay may be terminated 30 days after the petition date. This applies solely to individual serial bankruptcy filers. See IRM 5.9.5.7, Serial Filers, or consult with Area Counsel for additional guidance.

(1) If the ATE determines that the CDP Levy notice was issued after a bankruptcy filing and in violation of the automatic stay, the employee assigned the case will inform the originating function that the levy notice is invalid. Instruct the originating function to input a TC 972 AC 069 so that the invalid CDP levy notice is reflected on IDRS. The originating function will send the taxpayer a letter stating that the notice was invalid and a substitute CDP levy notice may be issued when the automatic stay is no longer in effect. The CDP/EH case will not be suspended but rather closed as a premature referral. See IRM 8.22.5.2.4, Premature Referrals, for closing cases as premature referrals. If the ATE determines that the Notice of Federal Tax Lien was filed after the bankruptcy filing and in violation of the automatic stay, it is mandatory that the lien be withdrawn by the Insolvency organization. The CDP/EH case will then be suspended. See IRM 8.22.5.4.2.4.2, CDP Non-Statute Verification and Documentation. Advise the taxpayer that the Notice of Federal Tax Lien is being withdrawn or the levy is being released and that copies of the lien withdrawal or levy release will be mailed to them.

(2) The ATE should check IDRS for the TC 520 bankruptcy codes on TXMODA prior to issuing a Notice of Determination or a Decision Letter. A bankruptcy filing may have occurred after the CDP/EH hearing, but prior to the case being closed. A Notice of Determination or Decision Letter should not be issued while a bankruptcy case is pending and the automatic stay is in effect. The taxpayer may voluntarily withdraw the CDP/EH, but the ATE should not coerce the taxpayer into doing so. If the taxpayer does not withdraw the CDP/EH, place the case in E/BNK suspense for monitoring. If a Notice of Determination is issued, it cannot be rescinded. Contact Counsel if a Notice of Determination or a Decision Letter is issued when the automatic stay is in effect.

(3) The automatic stay may not be in effect for a CDP hearing only involving a post-petition liability and as a result, the hearing could be conducted and a Notice of Determination or Decision Letter could be issued. However, in bankruptcy cases filed before October 17, 2005 and in cases filed by corporate debtors on or after October 17, 2005, the automatic stay may prevent a taxpayer from seeking Tax Court review of a Notice of Determination or Decision Letter for post-petition liabilities. In these instances, Notices of Determination or Decision Letters should not be issued and the case placed into suspense.

(4) Reassign cases that warrant suspension to the AARS for input of the appropriate bankruptcy suspension codes and monitoring of the bankruptcy case. In Appeals offices that do not have an AARS, the ATE will retain the case in inventory and will be responsible for input of the suspension codes as well as monitoring the bankruptcy using the procedures set forth in IRM 8.7.6.3.3.

(5) To place a case in E/BNK suspension, input the CARATS Action Code BI and enter the date the bankruptcy petition was filed. The system will only allow an input of a BI date that is three years from the current fiscal year. The Bankruptcy field will automatically populate with a Y. Input of the BI Action Code will launch a system generated response of SU-PI and automatically place the case in E/BNK status. Feature Code "BK" is now obsolete.

(6) If a taxpayer submits a processable offer in compromise in a CDP/EH proceeding and subsequently files bankruptcy, return the offer to the taxpayer and close the OIC Work Unit Number. See IRM 8.22.7.10.9, Offer in Compromise, for procedures on returning an offer in compromise filed under a CDP. The CDP/EH has to remain in open suspense until the bankruptcy is resolved.

(1) Appeals employees that are assigned cases in E/BNK suspense for all bankruptcy chapters except Chapter 7 no asset filings, will monitor the case every 90 days to determine the status of the bankruptcy. Chapter 7 no asset cases should be monitored monthly due to the generally swift issuance of a discharge order. A CARATS entry must be made documenting the action taken and the status of the proceeding.

(2) PACER is the preferable method of monitoring the proceeding. This system maintains records and provides court notifications as well as the current status of a majority of bankruptcy cases. AARS, SO’s or AO’s assigned suspended cases should obtain authorization for use of this database via an OL5081 request. PACER may be accessed at http://pacer.psc.uscourts.gov/.

(3) The CDP/EH proceeding may resume once the automatic stay is lifted. For non-individual Chapter 11 debtors and individual debtors whose Chapter 11 cases were filed before October 17, 2005, the stay lifts upon confirmation of the plan.

(4) To remove a case in E/BNK suspension, input the CARATS Action Code BO and enter the date the stay was lifted. Input of the BO Action Code will launch a system generated response of SU-TO and automatically change the status from E/BNK to the most recent CARATS action code. In cases where a plan in an individual Chapter 11 filed on or after October 17, 2005 or a Chapter 12 or 13 plan has been confirmed (regardless of the date the bankruptcy was filed), the case will remain in E/BNK status and reassigned to an SO or AO to determine if the confirmation of the plan resolves the amount and collection of the tax liabilities raised in the CDP/EH hearing. If the plan resolves all of the CDP/EH issues and the taxpayer withdraws the request for a hearing, then the SO or AO will input the bankruptcy action codes using the date the plan was confirmed.

(1) The following is general guidance on determining when the automatic stay has been lifted and the CDP/EH proceeding may resume. Due to the complexities and unique set of laws governing each of the bankruptcy chapters, seek guidance from Counsel when necessary. The individual Debtor in a Chapter 11, 12, and 13 case may receive a hardship discharge or a discharge upon completion of the plan.

1. Chapter 7 - Liquidation: For Individuals: The earliest of the date the court grants or denies an order of discharge, enters an order of dismissal or enters an order closing the case. For Non-Individuals (Corporations, Partnerships and certain LLC's): The date the court enters an order closing the case or an order dismissing the case, whichever comes first.

   Note: Entities, other than individuals, do not receive a discharge in a Chapter 7 proceeding.

2. Chapter 9 - Adjustment of a Municipal Debt: The earlier of the date the plan for adjustment of debts is confirmed and the required deposit and court determination are made, an order of dismissal or an order closing the case is entered. However, due to the small number of filings under Chapter 9 and unique circumstances of each case, consult with Area Counsel.

3. Chapter 11 - Reorganization: For Individuals: The stay lifts upon the earliest of the completion of all payments due and provided for under the plan and the entry of a discharge order, an entry of an order of dismissal or the entry of an order closing the case. In some jurisdictions courts close individual Chapter 11 cases before the plan is completed and a discharge order is entered. The closing of the case for administrative purposes only, generally will not lift the automatic stay. If this occurs, contact Counsel for guidance.

   Note: For post-BAPCPA individual case, the discharge no longer occurs at confirmation. The stay remains in place until completion of plan payments and entry of a discharge order by the court, unless the court has lifted the stay at an earlier date.

Note: In cases where the petition was filed before October 17, 2005, the stay lifts the earliest of the date the plan of reorganization is confirmed, an order closing the case is entered or an order dismissing the case is entered.

For Non-Individuals (Corporations, Partnerships and certain LLC’s): the stay lifts upon the earliest of the date the plan or reorganization is confirmed, an order of dismissal or an order closing the case is entered.

4. Chapter 11 - Liquidation: For Non-Individuals (Corporations, Partnerships and certain LLC’s): Liquidating non-individual Chapter 11 cases in which the debtor will not engage in business after completion of the plan, the stay is lifted the earliest of the date the court confirms the plan of liquidation, an order of dismissal is entered or the date an order closing the case is entered.

5. Chapter 12 - Family Farmers and Fisherman: The earliest of the completion of all payments due and provided for under the plan and the entry of a discharge order, entry of a hardship discharge, the entry of an order of dismissal or the closing of the case.

6. Chapter 13 - Voluntary Reorganization for individual debtors (wage earners and sole proprietors): The earliest of the completion of all payments due and provided for under the plan and the entry of a discharge order, entry of a hardship discharge, the entry of an order of dismissal or an order closing the case.

(1) Once it has been verified that the automatic stay has been lifted, remove the case from E/BNK status. This will systemically revert the case to its pre-suspension status. The ATE can then contact the taxpayer and continue the CDP/EH process.

(2) After the automatic stay has lifted, all tax issues with respect to the tax liabilities raised in the CDP/EH hearing may not have been resolved by the bankruptcy. The taxpayer may raise issues such as the collection of nondischargeable taxes, the dischargeability of taxes or the extent to which discharged taxes may be collected from property exempted, abandoned or excluded from the estate. Under these circumstances, continue the CDP/EH hearing in order to resolve these issues. The ATE should refer to IRM 5.9, Bankruptcy and Other Insolvencies,or consult with Counsel or Insolvency as needed on the dischargeability of taxes or the collection of dischargeable taxes. See IRM 8.7.6.2.7 for basic dischargeability guidelines.

(3) The automatic stay is terminated in a Chapter 7 case involving a non-individual entity at the earliest of the time of dismissal or closure. In a Chapter 11 case involving a non-individual entity in which all assets are liquidated and the entity will cease doing business after completion of the plan, the automatic stay terminates upon confirmation of the liquidating plan. Because these entities will cease to exist and there will be no assets from which the IRS can collect after the bankruptcy, there is no purpose in resuming the CDP/EH hearing. The ATE will contact the taxpayer after the lifting of the automatic stay (BMF Chapter 7 at closing or dismissal; BMF liquidating Chapter 11 at confirmation, closing or dismissal) and ask for a withdrawal of the CDP/EH hearing request. If the taxpayer will not withdraw the hearing request, issue the (Letter 3193, Notice of Determination or Letter 3210, Decision Letter). The Notice of Determination or Decision letter should state that the automatic stay has lifted and levy action is not sustained or the NFTL will be released after the collection statute has expired because all of the assets of the taxpayer have been liquidated and distributed in accordance with the bankruptcy court’s order of final distribution or confirmed plan and the taxpayer will cease to exist. As a result, there is no property from which to collect by levy or to which the tax lien could attach.

(4) In an individual Chapter 7 case with no assets to be liquidated (Ch7N, no asset), resume the CDP/EH hearing after the discharge order is entered or the case is dismissed. In an individual Chapter 7 case with assets to be liquidated, the hearing may be resumed after the discharge order is entered but there may be instances where the hearing process cannot be completed until the amount of taxes remaining unpaid after final distribution is known. It might be necessary to contact the Insolvency function to determine the priority of the Service's tax claim and the amount and type of assets to be liquidated. No collection action should be allowed to proceed that could potentially interfere with the trustee's liquidation of the taxpayer's assets that are part of the bankruptcy estate. ATEs need to use sound judgment and proceed with caution. Seek Counsel's guidance if legal issues arise.

(5) In an individual Chapter 11 filed on or after October 17, 2005, a Chapter 12 or a Chapter 13 regardless of the date the bankruptcy was filed, resume the CDP/EH hearing after a discharge order is entered (usually after all of the plan payments have been made) or the case is dismissed

(6) In a Chapter 11 reorganization case involving a non-individual entity or an individual who filed the case prior to October 17, 2005, resume the CDP/EH hearing after confirmation of the plan. As stated in (4) above, ATEs should proceed cautiously as to not disturb the confirmed plan.

(7) If a discharge order has been entered in an individual Chapter 7, a Chapter 12 or a Chapter 13 case, or an individual Chapter 11 filed on or after October 17, 2005, a Form 12256, Withdrawal or 12257, Waiver, may be used.

(1) The following is general guidance on how to approach CDP and EH hearings for taxpayers residing in community property states whose spouses have filed for Chapter 11 or 13 bankruptcies.

(2) Holding CDP and EH hearings of a limited scope for a non-debtor individual (the non bankrupt taxpayer) whose spouse has filed for a Chapter 11 or 13 bankruptcy, although not a direct violation of the automatic stay, is complicated by the fact that some or all of the taxpayer’s property may be considered property of the bankruptcy estate and therefore protected by the automatic stay.

(3) The bankruptcy automatic stay generally prohibits any action against the debtor to collect a pre-petition debt, the commencement or continuation of an administrative or judicial action and any collection action against property of the estate. It is clear that trying to resolve a CDP/EH case under these conditions can be extremely hazardous.

(4) Consistent with Appeals procedures for Chapter 11 and 13 individual taxpayers in bankruptcy, ATEs will likewise suspend CDP/EH hearings for a non-debtor taxpayer until the spouse’s bankruptcy plan has been confirmed. Upon confirmation, the ATE can then determine what portion of the taxpayer’s assets was included in the postconfirmation bankruptcy estate and to what extent the plan resolves all of the tax issues.

(5) If the confirmation of the plan does not resolve all of the CDP/EH issues, then the case will remain in E/BNK suspense until the earliest of the completion of all payments and conditions due and provided for under the plan and the entry of the discharge order or the entry of an order of dismissal. Consult with Counsel if complex issues arise due to specific facts of each individual case.

(1) The following are examples of how to proceed with the CDP process when certain spouses request a CDP hearing and a bankruptcy has been filed by one or both spouses. ATEs should proceed with caution in these circumstances and consult with Counsel if legal issues arise. The following examples are a general guide and a determination must be made based on the facts and circumstances of each case. For individual Chapter 7 filings, the hearing should generally be suspended until the automatic stay terminates. For individual Chapter 11 or 13 filings, see below.

(1) Debtors with confirmed plans should not incur additional liabilities. If debtors incur additional liabilities, their cases can be dismissed. In certain locations, post-petition liabilities are allowed to enter the collection stream. When an event occurs that offers a taxpayer CDP rights, ATEs must proceed with caution. No event should occur that could be construed by the bankruptcy court as violating the automatic stay. Levies or intent to levy notices are sometimes issued by the Insolvency function when a specific asset is identified. Likewise, the Insolvency function may file an NFTL for a specific purpose when permitted. . In these instances, ATEs should confer with Counsel if collection alternatives are raised by the taxpayer.

(2) Collection actions by IRS functions other than Insolvency, must not disturb the property of the bankruptcy estate. Most districts consider wages and salary above what is needed to fund the plan as individual property and not property of the estate, but the plan may provide that all such property remains property of the estate. The law in some districts is that all property remains in the estate after confirmation. Appeals employees should contact Insolvency through the Centralized Insolvency Operation (CIO) before taking any action to a post-petition period, Insolvency enters a TC 520 cc 84 on the post-petition periods(s). CIO telephone and fax numbers for internal use can be found on SERP.

(3) To this end, taxpayers seeking collection alternatives must be handled adeptly by ATEs. No action should occur that could impede the debtor's ability to make plan payments.

(4) Unless a post-petition liability qualifies for a guaranteed installment agreement (IA), and the automatic stay on property of the estate is no longer in effect (e.g., the bankruptcy court has lifted any stay on property that remains property of the estate, see IRM 5.9.10, Processing Chapter 13 Bankruptcy Cases, a request for a post-petition IA is not processible when a taxpayer is in bankruptcy.

(5) Guidance from Counsel should be sought when ATEs are considering taxpayer's proposals for collection alternatives on post-petition liabilities.

(1) When a taxpayer has filed for bankruptcy protection, the IRS's policy is not to consider administrative offers in compromise from a taxpayer in bankruptcy. Refer to IRM 5.8.10, Special Case Processing, The Bankruptcy Code provides procedures to resolve the Service's claim depending on the type of bankruptcy case filed. These are addressed in IRM 5.9, Bankruptcy and Other Insolvencies.

(2) Taxpayers will occasionally file bankruptcy after they appeal Collection's rejection of an offer. Doubt as to Collectibility and Effective Tax Administration offers from taxpayers in bankruptcy will be sustained rejections. Doubt as to Liability Offers will be returned.

1. The closing letter should state, that as a matter of policy, IRS does not consider Form 656 offers in compromise from taxpayers while they are in bankruptcy. The Bankruptcy Code provides procedures to resolve the Service’s claim, therefore, the offer in compromise rejected by Collection is sustained.

2. A brief Appeals Case Memorandum explaining the circumstances should be sufficient.

(3) An offer will not be considered under the administrative or CDP offer in compromise procedures until the bankruptcy is concluded or terminated.

• In Chapter 7 cases, an administrative compromise with the taxpayer can be considered after the taxpayer has received a discharge, or the case is dismissed or the case is closed, whichever occurs first.

  Note: In Chapter 7 asset cases where the Service has filed a proof of claim, the taxpayer may have received a discharge but the bankruptcy case has not been closed while the parties are awaiting distribution of funds from the trustee. The Reasonable Collection Potential must include an amount that the Service can reasonably expect to recover from the bankruptcy proceeding, in addition to what can be collected from the taxpayer.

• In Chapter 11, 12, and 13 cases, an administrative compromise will not be considered until the taxpayer completes payments under the plan and there are remaining balances due not provided for in the plan, the debtor is granted a hardship discharge, or the bankruptcy is dismissed by the court.

(4) If a taxpayer files an offer in compromise in a CDP or EH hearing and subsequently files bankruptcy, return the offer to the taxpayer. However, the CDP is to remain open until the bankruptcy is resolved. See IRM 8.7.6.3.2.

(5) See IRM 8.23.3.3.2.3, Bankruptcy Consideration, for information on how to proceed if the taxpayer states an intent to file a bankruptcy petition.

(1) The Compliance function (Examination) will make a timely determination if any returns of a taxpayer in bankruptcy are under examination and, if not, whether an examination will be made because of this notification.

(2) If an examination is open on a pre-petition period, an employee with Examination Technical Services will:

1. Contact the responsible Field Insolvency caseworker or CIO liaison.

2. Continue with established examination bankruptcy procedures.

3. Advise Insolvency of any proposed Examination initiated deficiencies or adjustments that might result in a refund or a credit to the taxpayer. This should be done at the earliest possible time before the bar date by sending Insolvency a memorandum, or a locally developed form, along with a copy of the transmittal letter with the Examination report or a copy of the Revenue Agent Report (RAR).

Note: Insolvency will not perform a periodic follow-up with Compliance. Responsibility to notify Insolvency rests entirely with the Compliance function.

(3) In cases where Technical Services is aware of the bankruptcy and an appeal is filed, the Appeals Officer will contact the bankruptcy coordinator with Technical Services and advise of the determination on the case. The bankruptcy coordinator will then contact the Insolvency Organization with the correct amounts of the liabilities.

(4) If the bankruptcy was filed during the appeal process, then the Appeals employee must immediately take the following actions:

1. Verify the bankruptcy filing using the procedures for CDP cases outlined in IRM 8.7.6.3.1 The bankruptcy filing can also be identified by a "-V" freeze (or a "-W" freeze for CCs 81 and 84) on a transcript and "Bankruptcy" printed on the 1st page of AMDISA.

2. Promptly complete the determination on the case and advise the bankruptcy coordinator and, if applicable, the Counsel or Department of Justice attorney assigned the bankruptcy case of the results.

3. If the case cannot be closed in 30 days, advise Technical Services and if applicable, the attorney assigned the case, of the proposed tax deficiency so an unassessed/estimated proof of claim can be filed.

4. After the correct tax liability has been established, advise Technical Services so that they can instruct Insolvency to file an amended proof of claim if warranted.

(5) On campus sourced cases, it might be necessary to contact the Insolvency function directly. Contact the Centralized Insolvency Organization for the name of the Insolvency employee. To contact the Centralized Insolvency Organization by phone, go to the Who/Where tab on SERP and click on the Insolvency (Bankruptcy) Tools. Then go to Insolvency (Bankruptcy) National Field/Centralized Site Directory where the telephone number for the CIO will be listed http://serp.enterprise.irs.gov/databases/who-where.dr/inslvncy-bnkrptcy/national_insolvency_field.htm. Be aware of prohibited ex parte communications. See IRM 8.7.6.2.8 for additional information regarding ex parte communications.

(6) In agreed cases, the assessment must be processed as if the bankruptcy did not exist if the bankruptcy petition was filed after October 22, 1994 or if it is for a post-petition tax liability.

(7) Debtors may challenge the merits of the tax liability in the bankruptcy court. They may do so by filing an action to have the bankruptcy court determine their tax liability under 11 USC 505 or by objecting to the Government’s proof of claim. Upon the filing of such an objection or a section 505 action, the Tax Division of the Department of Justice obtains exclusive settlement authority. Therefore, when Appeals receives notification that the debtor has filed an action to determine tax liability or an objection to the Government’s proof of claim, Appeals will:

1. Cease work on the case.

2. Issue a notice of deficiency if the Service has not issued one and it is appropriate.

3. Immediately close the case to the Tax Division and send a copy of the closing to Insolvency and the attorney assigned the bankruptcy case, if the attorney is not in the Tax Division. See IRM 8.7.6.2.6.1.

(8) IRC § 6213 prohibits assessment of an unagreed Examination or AUR deficiency during the time the automatic stay prohibits the taxpayer from filing a Tax Court petition and for 60 days thereafter.

(1) If technical advice is necessary, send the request for technical advice to Chief Counsel’s office through the designated Area Counsel trial attorney under expedited procedures. Chief Counsel procedures state that:

1. If the Service has an established litigating position, Chief Counsel’s office must respond to Area Counsel's inquiry within 10 work days of the request.

2. If no such position exists, Chief Counsel’s office must provide Area Counsel with technical advice within 30 days.

3. To ensure expedited technical advice from Chief Counsel’s office, send copies of all technical advice requests to the appropriate Division Counsel and to the Associate Chief Counsel (Procedure and Administration) for coordination.

4. The technical advice request should notify the Chief Counsel’s office responsible for the technical advice of the bankruptcy filing and that Area Counsel authorized the request under the expedited procedures.

(2) The ATE should check with the designated Area Counsel trial attorney that all copies of the technical advice requests have been sent to Chief Counsel’s office. If no response is received within 45 days, the ATE should ask the designated attorney to check on the status of the request.

(1) If a settlement computation is needed in a case where an assessment has been made under a bankruptcy proceedings, the ATE should inform the Tax Computation Specialist (TCS) to follow the format of jeopardy assessment cases located in IRM 8.17.5.21.

(1) A notice of deficiency, also called a "statutory notice of deficiency", "statutory notice" or "90 Day Letter", is a legal notice in which the Commissioner determines the taxpayer's tax deficiency. The statutory notice of deficiency (SNOD) is a legal determination that is presumptively correct and consists of:

1. A letter explaining the purpose of the notice, the tax period(s) involved, the amount of the deficiency and the taxpayer’s options,

2. An agreement form (waiver) to allow the taxpayer to agree to the additional tax liability,

3. A statement showing the computation of the deficiency and

4. An explanation of the adjustments.

(2) The Appeals Technical Employee (ATE) will select the appropriate SNOD Letter to issue when a taxpayer has an open bankruptcy and for an unagreed Pre 90-day cases. See IRM 8.7.6.6.5.1 below for Pre 90-Day Income Tax Cases. The ATE needs to issue the appropriate SNOD for the taxpayers status as listed below:

• Letter 531-E, Notice of Deficiency, relates to Form 5330 or Form 990-T assessments,

• Letter 894, Notice of Deficiency, is used for individuals,

• Letter 901, Statutory Notice, has selectable paragraphs for liabilities involving or not involving affiliated companies, and

• Letter 3523-A, Notice of Employment Tax Determination is used for IRC Section 7436.

(3) The Bankruptcy Code prohibits debtors from filing petitions with the Tax Court if they are under the protection of the automatic stay with the exception of certain cases filed under BAPCPA. Under BAPCPA, an individual's post-petition tax liabilities may be heard by the Tax Court. See IRM 8.7.6.6 and IRM 8.7.6.2.6.1.

(4) IRC 6503(a) suspends the statute of limitations on assessment from the date that the Service issues a SNOD until the end of the period under IRC 6213(a) within which the taxpayer may file a petition to the Tax Court and if the taxpayer files a petition, until the Tax Court decision is final and for 60 days more.

(5) Unless an exception applies under BAPCPA, the filing of a bankruptcy petition suspends the time the debtor has to petition the Tax Court. This is true no matter which comes first, the bankruptcy petition or the statutory notice of deficiency. The filing of a bankruptcy petition does not suspend the time if the time to petition the Tax Court has passed before the bankruptcy petition was filed. The debtor’s opportunity to petition the Tax Court continues when the automatic stay is lifted or terminated. In these cases IRC 6213(f) gives the taxpayer 60 additional days, plus whatever remains of the 90-day period under IRC 6213(a) to petition the Tax Court following the lifting of the automatic stay. Consult with Area Counsel on a case by case basis.

(6) When the Service issues a statutory notice of deficiency, the debtor may ask the bankruptcy court to determine the tax liability under 11 USC 505 (a) or the debtor may ask the bankruptcy court to lift the automatic stay so that the debtor can petition the Tax Court. For cases filed before October 17, 2005, the debtor cannot file a petition with the Tax Court and an existing Tax Court case cannot proceed without the bankruptcy court lifting the automatic stay. It makes no difference whether the SNOD is for pre-petition tax or post-petition tax periods. For cases filed on or after October 17, 2005, an individual debtor is prohibited from commencing or continuing a case in Tax Court concerning a pre-petition tax liability and a corporate debtor is prohibited from commencing or continuing a case in Tax Court concerning a tax liability for a taxable period the bankruptcy court is authorized to determine.

(1) This section discusses the impact a bankruptcy filing has on an open Appeals Examination sourced case and the reports that must be generated by Appeals when closing a case for a taxpayer who is in bankruptcy.

(2) On all cases, prepare a complete report on Form 5402, Appeals Transmittal and Case Memo. Send a copy of the report to the bankruptcy coordinator with Examination Technical Services, who will advise the Insolvency Organization of Appeals' determination. See IRM 8.7.6.6.1. See Knowledge Management Bankruptcy Web page for locations of the local Examination Technical Services Group. For campus sourced cases, send a copy of the report to the Insolvency employee assigned to the case. Contact the Centralized Insolvency Organization for the name of the Insolvency employee. The CIO telephone number can be obtained from SERP at http://serp.enterprise.irs.gov/databases/who-where.dr/inslvncy-bnkrptcy/national_insolvency_field.htm.

(3) The following is meant to be a general guide of how to proceed when a bankruptcy filing impacts an open Appeals Examination sourced case.

(1) Debtors may challenge the merits of the tax liability in the bankruptcy court. They may do so by filing an action to have the bankruptcy court determine their tax liability or by objecting to the Government’s proof of claim. Upon the filing of such an objection or action, the Tax Division, U.S. Department of Justice obtains exclusive settlement authority. Therefore, when Appeals receives notification that the debtor has filed an action to determine tax liability or an objection to the Government’s proof of claim, Appeals will:

1. Cease work on the case.

2. Issue a notice of deficiency, if the Service has not issued one and it is appropriate, and

3. Immediately close the case to the attorney assigned the case (i.e., the Tax Division attorney or the Assistant U.S. Attorney, as applicable).

(1) Petitions to Tax Court - When one spouse is in bankruptcy during an examination of a joint pre-petition tax year and the IRS issues a statutory notice of deficiency, the time for filing the bankrupt spouse's Tax Court petition is suspended and the assessment statute is suspended until the bankrupt spouse is granted or denied a discharge or dismissed from bankruptcy. However, the time to file a Tax Court petition and the assessment statute for the deficiency is not extended on the spouse who did not file bankruptcy. If the non-debtor spouse (the spouse that did not file for bankruptcy) does not timely file a Tax Court petition, the deficiency against the non-debtor spouse must be assessed within the normal ASED.

(2) Mirroring - When Appeals must make an assessment on a non-debtor spouse while a bankruptcy is pending, the modules should be mirrored to create MFT 31 accounts.

(3) Appeals Requests for Mirroring - If Appeals determines the deficiency assessment must be made on the non bankrupt spouse because of the assessment statute, Appeals will contact Centralized Insolvency Operation (CIO) to request MFT 31 Mirroring of a joint tax period. The request should be sent via secure e-mail to *CIO Issues. If the ASED is expiring in less than 12 weeks, it must be noted in the request. The request for mirroring of the account must be documented in the AIS history.

(4) Required Actions by Appeals - Appeals will:

1. Contact Insolvency with its determination that the non-bankrupt spouse must be assessed the deficiency.

2. The ATE will request that APS input a TC 421 to reverse the MFT 30 –L freeze so mirroring of the MFT 30 module can be done;

3. The ATE will monitor IDRS for the TC 421 to post on the MFT 30 module and then contact Insolvency.

4. The ATE will monitor IDRS for the creation of the MFT 31 mirrored modules and re-input the TC 420 on the MFT 30 module.

(5) Required Actions by Insolvency - Insolvency will:

1. Maintain the bankruptcy freeze (-V or –W for closing code 81). The mirroring can be accomplished without the reversal of the bankruptcy freeze and will remain unreversed to ensure the automatic stay is not violated.

2. Input the required transaction codes to mirror the module according toIRM 5.9.4.4.2, MFT 31 Mirroring Requested by Appeals and Other Organizations, and IRM 5.9.17.22.1, MFT 31 Mirror Modules.

(1) ATEs must properly identify large bankruptcy work units. They must take immediate action to begin the internal processing of the case. They should quickly prepare the case for its referral to Area Counsel.

(2) The ATE must notify Area Counsel as soon as Appeals becomes aware of a large bankruptcy case. Chief Counsel Directives Manual 34.3.1.3 discusses the procedural guidelines to be followed in large bankruptcy cases.

(3) If Appeals proposes a notice of deficiency, the designated Area Counsel attorney should be advised and given an opportunity to review the notice of deficiency before the appropriate official authorizes the mailing.

(1) 11 USC 362 prohibits the commencement or continuation of a Tax Court proceeding while the automatic stay is in effect, except for certain cases filed on or after October 17, 2005 (BAPCPA cases) 11 U.S.C. § 362(a)(8). For bankruptcy cases filed on or after October 17, 2005, the automatic stay does not prohibit the commencement or continuation of a Tax Court proceeding filed by an individual concerning a tax liability for a tax period ending after the bankruptcy petition date (post-petition liabilities). A corporate debtor that files a bankruptcy petition on or after October 17, 2005, is not prohibited from commencing or continuing a Tax Court case concerning a tax period the bankruptcy court has no authority to determine.

(2) The Service is permitted to issue a Notice of Employment Tax Determination Under IRC 7436 while the automatic stay is in effect and should do so to prevent expiration of the statute of limitations on assessment, which continues to run during the bankruptcy proceeding.

(3) Unless BAPCPA applies, the taxpayer may not file a petition contesting the Service's "Notice of Employment Tax Determination Under IRC 7436" without first obtaining relief from the automatic stay in bankruptcy court. Pub 3953 Q&A's About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436 contains language advising the taxpayer of this fact.

(1) There are instances when partners subject to unified audit and litigation procedures under TEFRA may file bankruptcy.

(2) Due to the complexities of the TEFRA statues and procedures, this IRM will not go into detail on the bankruptcy aspects of a TEFRA case. See IRM 8.19.6 Partner Cases, for guidance when either the TEFRA key case or an investor in a TEFRA key case files for bankruptcy.