25.3.1. General Guidelines

(1) Litigation actions by the government are identified on taxpayer accounts using the Transaction Code (TC) 520 and associated closing codes specified in the following references:

• Document 6209 searching under, 520 Closing Code Chart.

• IRM 25.3.8, TC 520 - W Freeze Servicewide Guide.

• IRM 25.3.6, Open Litigation Control, Monitoring and Closing Actions.

• IRM 25.3.7, Reconciling Non-Insolvency LAMS Reports. This IRM also contains additional information on the individual closing codes.

(2) Whether an action is initiated by the IRS, a taxpayer, or a third-party preservation of electronically stored information (ESI) is required. This topic is covered in IRM 25.3.1.7, Preserving Electronically Stored Information In Litigation Cases. See also the following references:

• IRM 25.3.1.7.1 Background

• IRM 25.3.1.7.21 References

(3) There are a number of judicial actions the IRS initiates against taxpayers or third parties and a number of actions brought by taxpayers or third parties against the IRS.References for the Principal Types of Actions the IRS Initiates

(4) Advisory is responsible for internal control of and actions pertaining to most litigation by and against the United States.Actions Where Advisory Does Not Generally Maintain a Case Control

(1) The United States Code, Title 26, Subtitle F, Chapter 76, Subchapter A, Civil Actions by the United States, Sections 7401 through 7410 control civil actions that may be filed by the United States (US) in US District Courts.Civil Actions by the US

(2) The United States Code, Title 26, Subtitle F, Chapter 76, Subchapter B, Proceedings by Taxpayers and Third Parties, Sections 7421 through 7437 control civil actions filed in US District Court against the US (i.e., in which the United States will be the defendant).Civil Actions Against the US

(1) IRM 5.17.1, Legal Reference Guide for Revenue Officers, General Information, provides a list of the parties with an explanation of their role with suits.

(1) Program Reports: There are no specific reports associated with this IRM, however, they are identified as appropriate in the other sections within the IRM 25.3 series. Litigation holds are controlled by Counsel (see IRM 34.7.1.1.4.3, Litigation Hold Procedures, and IRM 34.12.1-39, Litigation Hold Checklist.

(2) Program Effectiveness: Whenever litigation involving collection matters is pending or the institution of affirmative legal action to effect collection is under consideration, revenue officers will, in the main, be investigators of facts. Advisors will advise, review, and coordinate. IRS management will consult and support. Counsel will provide or decline authorizations to move into the judicial arena, and the DOJ will represent the IRS in the judicial arena. Each stakeholder relies on the other stakeholders to communicate effectively in order to achieve the appropriate outcome for any one case.

(1) Collection Advisory maintains a copy of any suit documentation until the suit is closed. After case closure - see Document 12990, Records and Information Management Records Control Schedules, under section Internal Revenue Service Records Control Schedule (RCS) 28, Tax Administration Collection, in:

• PART III - Administrative Records - All Collection Functions, item number 38, Litigation Files.

• PART IV - Delinquent Accounts, Delinquent Returns, And Office Services Records, item 45, Suits to Foreclose Federal Tax Liens, item 53, Civil Suit Recommendation, Form 4477, and in item 54 (a), Special Procedures Function Case Files.

(2) Preserving electronically stored information is covered in:

• IRM 25.3.1.7, Preserving Electronically Stored Information In Litigation Cases

• IRM 25.3.1.7.21, References

• Chief Counsel Notice CC-2016-005, (https://www.irs.gov/pub/irs-ccdm/cc%202016%20005.pdf), Discovery Obligations to Preserve Evidence, Including Electronically Stored Information

• IRM 34.7.1.1.4, Discovery Obligations to Preserve Evidence, Including Electronically Stored Information

(1) The table lists commonly used acronyms and their definitions:

(1) For procedural guidelines on recommending, working, and responding to suits and claims for damages both for and against the United States, see:Resources

(2) 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 the TBOR, see Taxpayer Bill of Rights, (https://www.irs.gov/taxpayer-bill-of-rights).

(1) This section does NOT pertain to Tax Court Subpoena Service in IRM 5.1.12.22. Occasionally, DOJ, or the US Attorney through IRS Chief Counsel, requests that a revenue officer serve legal process documents associated with civil litigation before a United States District Court. The documents for service most frequently involve an Order to Show Cause or a court Summons and Complaint. DOJ or the U.S. Attorney may include special instructions regarding the manner of service. Some service must be handed to the person to be served and other times it may be appropriate to leave the documents with another adult at the person’s residence or affix them to a door if no one is present.

(1) While electronically stored information (ESI) has always been subject to discovery in litigation, the Federal Rules of Civil Procedure (FRCP) were amended in 2006 to specifically include references to and requirements for the discovery of ESI. In January 2010, the Tax Court Rules were amended to include essentially similar provisions with regard to ESI. The Office of Chief Counsel has issued guidelines to IRS attorneys for complying with the amended rules regarding electronic discovery. See Chief Counsel Notice CC-2016-005, (https://www.irs.gov/pub/irs-ccdm/cc%202016%20005.pdf), Discovery Obligations to Preserve Evidence, Including Electronically Stored Information. In order to fulfill its obligations to comply with electronic discovery requests, the IRS must preserve ESI whenever litigation is initiated or can be reasonably anticipated. This section provides guidance for Collection employees regarding their responsibilities for preserving ESI.

(1) ESI is electronically stored information or information created, stored, or used with digital technology. It includes, but is not limited to, e-mail and other electronic communications, word processing documents, spreadsheets, electronic calendars, telephone logs, Internet usage files, metadata, voice-mail, text messages, and network access information. In the context of a collection case, ESI would also include, but not be limited to, Integrated Collection System (ICS) histories, results of electronic research, and any other information regarding the case that is either obtained, recorded, or sent electronically.

(2) ESI may be contained on hard drives, optical discs, removable discs or tapes, a device that reads data or pulls data onto a removable disc or tape, and damaged data devices.

(1) All ESI is subject to discovery if it is potentially relevant to the case. For purposes of determining potential relevancy, the nature of the litigation or anticipated litigation, including the time periods involved, the allegations made by the parties, and the subject matter of the litigation, must be considered. While all potentially relevant ESI must be preserved, this does not mean that the information must be or will be produced in litigation. The ESI may not be responsive to the discovery request of the opposing party. Or, the Government may claim that relevant ESI is privileged information protected from discovery requests the same way it claims paper documents are protected. For example, the Government may claim that an e-mail message sent by a collection advisor to an area counsel attorney regarding the merits of a taxpayer’s position in litigation is protected by the attorney-client privilege. It is the attorney assigned to the case who determines whether a privilege applies, not the IRS employee(s) who prepared, obtained, or preserved the ESI. Accordingly, even if you believe that certain ESI is covered by a privilege, the information must nevertheless be preserved and isolated for possible production in litigation.

(1) All ESI relating to a particular taxpayer’s case must be preserved when litigation is initiated or can be reasonably anticipated (see IRM 25.3.1.7.5 below). This eliminates the possibility of losing ESI that is later determined to be responsive to a discovery request. Whether ESI is potentially relevant to the case is a determination to be made by the attorney assigned to the case.

(1) The duty to preserve ESI arises in suits filed against the Government when the lawsuit is filed or when litigation can be reasonably anticipated. When such litigation can be reasonably anticipated depends upon the facts of the case. In suits brought by the Government, the duty to preserve ESI begins no later than when a decision is made by Chief Counsel to refer a suit to the DOJ.

(1) IRS counsel is responsible for issuing a litigation hold when litigation is initiated or reasonably anticipated. The litigation hold informs all IRS and Chief Counsel employees involved in a case to preserve all of their paper and electronic files.

(2) Depending upon the type of litigation, “IRS counsel” may refer to Area Counsel Attorneys, National Office Attorneys, Assistant U.S. Attorneys, or Tax Division Attorneys. Generally, if the IRS counsel is an Assistant U.S. Attorney or a Tax Division Attorney, an Area Counsel field attorney will issue the litigation hold on behalf of the Assistant U.S. Attorney or Tax Division attorney to IRS and Chief Counsel employees.

(3) When a litigation hold needs to be established, Area Counsel will send an e-mail notification to the IRS point of contact.

(1) The IRS point of contact will be the person identified by Counsel as the IRS employee who is most familiar and involved in the case and who would have knowledge about other IRS or Counsel employees who may possess relevant ESI. In suits brought by the United States, the IRS point of contact will generally be the Collection Advisor responsible for the litigation case.

(2) There may be a need for more than one point of contact as there could be different organizations and program offices involved in a particular case each of which may involve an extensive number of employees. It is also possible that points of contact may need to include those within contractor or Treasury organizations.

(1) The IRS point of contact will assist the attorney assigned to the case by identifying and contacting all IRS employees who may possess potentially relevant ESI that may be subject to the litigation hold. All IRS employees who possess potentially relevant ESI are required to preserve this information.

(1) First, confirm receipt of the litigation hold notification. If you determine after a search of your records that you were not involved in any way in the case, provide an e-mail response informing the sender that you were not involved in the case or the subject matter involved in the suit.

(2) If you were involved in the case, in accordance with the instructions in the e-mail message, provide an e-mail response informing the sender of your involvement and providing the information requested.

(3) Also, if you are appropriately identified as the IRS point of contact, forward the litigation hold notification to all IRS employees that you believe may have ESI relating to the case. In accordance with the instructions in the e-mail message, provide contact information for these employees to the sender of the litigation hold notification. If you have questions about serving as the IRS point of contact, send an e-mail message to the sender.

(1) In general, the IRS must take the following steps to comply with a litigation hold:

1. Identify the types of ESI that have been created while working the case.

2. Search the types of ESI to which you have access for all information that is potentially relevant to the case.

3. Preserve the ESI.

4. Isolate the ESI.

(2) Collection employees will only perform the first three steps. Instructions for completing these steps will be provided by Counsel in the litigation hold notification e-mail message that is sent to the IRS point of contact. The message must be forwarded by the IRS point of contact to all IRS employees who have been identified as possessing ESI.

(3) The litigation hold notification e-mail message also serves to identify the types of ESI that may have been created, and to determine whether the ESI is readily accessible. If any IRS employees who are identified as possessing ESI are unable to follow the instructions contained in the litigation hold notification e-mail message, they should contact the Counsel attorney who issued the litigation hold notification.

(1) In order to identify and search for ESI, IRS employees must be familiar with the types of electronic records kept in cases that may end up in litigation. The litigation hold e-mail message requests that you specify the types of ESI that were created while you were working on the case. Some of the more common types of ESI that may be created while working on a collection case include the following:

• E-mail and attachments

• Word processing documents, such as suit narratives or other exhibits prepared for a suit recommendation

• Spreadsheets (e.g. showing CSED calculations)

• ICS case histories

• Images (e.g. digital pictures of property involved in the litigation)

• Hard drives (desktops and portable thumb drives)

• Internet data

• Backup and archived material

(2) This list is not all-inclusive. In your response to Counsel’s litigation hold notification, you must identify all of the types of ESI that you created while working on the case.

(1) Once you have identified the types of ESI that you created while working the case, you should conduct a preliminary search to identify any ESI to which you have access, including on external media such as CDs or flash drives. For example, you should search your Microsoft Office files (Word, Excel, etc.) or Outlook folders to find all ESI that relates to the litigation. The employee should inform the IRS point of contact of the results of the search, including the time frame during which the ESI was created and the employee’s post of duty at the time the ESI was created. If there are types of ESI to which you do not have access, inform the IRS point of contact. The IRS point of contact will inform Counsel so that they can notify Information Technology (IT) of the existence of this ESI.

(1) Once located, ESI must be preserved and isolated. Preservation of ESI means that it should not be altered or destroyed and must be maintained in its native format throughout the duration of the litigation. Accordingly, all applicable record retention schedules are suspended until such time as the ESI is isolated. ESI is isolated when a mirror image of the ESI in its native format (i.e., electronic format as opposed to paper format) is created and moved to a separate server for storage for the duration of the litigation. Collection employees need not isolate the ESI. The isolation and creation of a mirror image of the ESI in its native format is done by IT personnel.

(1) Counsel will coordinate with IT personnel to isolate and preserve the ESI you identified. Do not alter or destroy the ESI until you have confirmed that the ESI has been isolated and preserved by IT and that it is no longer necessary for you to isolate and preserve the ESI.

(1) The decision whether to isolate the ESI in each case will be made by IRS Counsel. The isolation will be done by IT personnel. Once a Collection employee receives a litigation hold, however, the employee must preserve all ESI relevant to the litigation until notified otherwise.

(1) The general rules for retaining e-mail messages as records are found in IRM 1.15.6. The general rule is that the basic requirements applicable to all records apply to e-mail records as well. If they are not in an approved electronic record keeping system, e-mail messages identified as records must be printed out and placed in the appropriate paper record system.

(2) Accordingly, when a litigation hold is not in place or litigation is not reasonably anticipated, e-mail messages that are records should be printed, including attachments and transmission information, and placed in the case file or other appropriate official filing system; or, email messages should be forwarded or copied to the appropriate electronic record-keeping system. After the e-mail message is filed in an established paper or electronic record-keeping system, it should be deleted unless it is needed for reference purposes. Saving an e-mail message in an Outlook folder does not eliminate the requirements to print a hardcopy and file it because an e-mail folder is not considered to be part of an official filing system. See IRM 1.15.6-1, Common Questions about E-Mail.

(3) To the extent that e-mail messages potentially relevant to the case have not been filed and deleted in accordance with applicable retention schedules, they must be preserved once litigation is initiated or is reasonably anticipated. This means that the e-mail messages may not be deleted. Once a litigation hold is in place, IT personnel will isolate the messages and preserve them in their original format. However, before any e-mail messages would be produced in litigation, a determination would be made as to whether they are in fact relevant to the case and whether they contain any privileged information. Remember, it is up to Counsel, and/or the court, to make this determination.

(1) The same procedures, as set forth above, should be followed. If the litigation hold requests that you take any actions that are inconsistent with these procedures, contact your local Area Counsel office and request assistance.

(1) As a practical matter, the litigation hold is in effect until you are notified in writing by Counsel that the litigation hold has been lifted. The obligation to preserve ESI remains in effect for as long as the IRS can reasonably anticipate litigation in a case and for the duration of the litigation and any subsequent appeals. IRS counsel will periodically send an e-mail to remind employees of their continuing obligation to preserve the ESI. The IRS point of contact should forward the reminder notification to all identified IRS employees. Employees should respond to the reminder notification within five business days, and provide a brief statement as to whether the ESI remains preserved and unaltered and where the information is stored.

(1) Failure to preserve documents and ESI could result in unfavorable discovery orders, sanctions against the Government, disadvantage to the Government’s position in litigation, or preclusion of any and all evidence in favor of the Government’s position.

(1) There is no consequence if any ESI is destroyed prior to the issuance of the litigation hold and before litigation was reasonably anticipated. If an employee cannot locate ESI, the employee should describe the missing ESI in sufficient detail. IT personnel then will conduct a search for the missing ESI. Reasonable steps must be taken to ensure ESI is not destroyed after a litigation hold notification is received. Even inadvertent destruction after receipt of a hold notice could have negative consequences for the Government, although inadvertence may weigh against the court imposing sanctions.

(1) IRM 1.10.3, Standards for Using E-Mail.

(2) IRM 1.15.6, Managing Electronic Records.

(3) IRM 1.15.6.9, Security of Electronic Records.

(4) IRM 1.15.6.10, Disposition of Electronic Records.

(5) IRM 1.15.7, Files Management.

(6) Document 12990, Records Control Schedules.

(7) Chief Counsel Notice, CC-2016-005, (https://www.irs.gov/pub/irs-ccdm/cc%202016%20005.pdf), Discovery Obligations to Preserve Evidence, Including Electronically Stored Information, and IRM 34.7.1.1.4, Discovery Obligations to Preserve Evidence, Including Electronically Stored Information, supersede the notices listed below.

1. CC-2009-024,

2. CC-2010-008, and

3. CC-2012-017.