8.4.1. Procedures for Processing and Settling Docketed Cases

(1) Purpose: This IRM describes the processes used by the IRS Independent Office of Appeals (Appeals) to work docketed cases. Specifically, IRM 8.4.1:

1. gives general information aimed at assisting Appeals Technical Employees (ATEs) who work docketed cases;

2. provides procedures for new receipts and closures of docketed cases by ATEs; and

3. recommends resources and authorities, including decision tools and other IRM sections, for considering docketed cases in Appeals.

(2) Audience: The primary users of this IRM section are ATEs.

(3) Policy Owner: Policy, Planning, Quality and Analysis is under the Director of Case and Operations Support.

(4) Program Owner: Appeals Policy is the program office responsible for providing technical and procedural guidance to the Appeals organization, and is under the Director of Policy, Planning, Quality and Analysis.

(5) Contact Information: Appeals employees should follow established procedures on How to Contact an Analyst. Other employees should contact the Product Content Owner shown on the Product Catalog Information page for this IRM.

(1) As indicated, Rev. Proc. 2016-22 describes the general procedures for handling docketed cases.

(2) Appeals strives to resolve as many docketed cases as possible prior to trial.

(3) This section covers the processing and settlement of docketed cases from the time the ATE receives the case until the time the case is closed to the ATM.

(4) This section covers general procedures for docketed cases. More specific information may be found in IRM sections by type of docketed case.

(5) There are some unique procedures that apply solely to campus docketed cases that are covered in IRM 8.4.2, Campus Appeals Docketed Cases.

(6) References to Examination include the examiners in Wage and Investment (W&I), Small Business/Self-Employed (SB/SE), Large Business and International (LB&I), and Tax Exempt & Government Entities (TE/GE) groups.

(7) Refer to IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria, for criteria to determine when it is necessary to refer a case to the Taxpayer Advocate Service (TAS), and guidelines for processing TAS cases from assignment to completion.

(1) A docketed case is a tax case assigned a docket number in the U.S. Tax Court. These cases include, but are not limited to, petitions filed in response to:

1. Notices of Deficiency;

2. Final Adverse Determination Letters;

3. Notices of Final Partnership Adjustment (FPA), or Notices of Final Partnership Administrative Adjustment (FPAA);

4. Notices of Determination Concerning Relief From Joint and Several Liability Under Section 6015, as well as cases in which the IRS failed to send any Notice of Determination with respect to a request for spousal relief submitted to the IRS at least six months ago;

5. Notices of Determination of Worker Classification;

6. Notices of Certification of Seriously Delinquent Federal Tax Debt to the Department of State (a.k.a. "Passport cases"); and

7. Notices of Determination Concerning Collection Action.

(2) A regular case is any docketed case that has not been identified as an "S" case.

(3) In eligible cases, taxpayers may elect to have their case conducted under the Court's simplified small tax case or "S" case procedures. Trials in "S" cases are conducted more informally, generally following less stringent procedural and evidentiary rules. An "S" case proceeding may result in a speedier disposition. However, a decision entered in an "S" case is not subject to review in any other court and cannot be treated as precedent for any other case. See IRC 7463 for details.

(4) In a deficiency case, taxpayers may elect "S" case procedures when the total amount of the deficiency and any additions to tax or penalties (not including interest) in dispute is not more than $50,000 for:

1. Any one taxable year (income tax cases).

2. The tax imposed (estate tax cases).

3. Any one calendar year (gift tax cases).

4. Any one taxable period (or, if there is no taxable period, taxable event) (excise tax cases).

Note: The amount of deficiency in dispute includes additions to the tax, additional amounts and assessable penalties as outlined in IRC Chapter 68, to the extent the Tax Court has jurisdiction.

(5) Cases that do not deal with deficiencies in dispute, but which may be conducted under "S" case procedures include:

1. Innocent spouse cases in which the "amount of spousal relief sought" does not exceed $50,000 for all years combined. The Tax Court holds that the "amount of spousal relief sought" includes accrued but unassessed penalties and interest.

2. Collection Due Process cases in which the total unpaid tax (including interest and penalties) does not exceed $50,000 for all years combined.

3. Worker classification cases in which the amount of employment taxes in dispute does not exceed $50,000 for any calendar quarter.

(1) The U.S. Tax Court is a federal court of record established by Congress under Article I of the Constitution of the United States. Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the Commissioner of Internal Revenue prior to payment of the disputed amounts.

(2) The jurisdiction of the Tax Court includes the authority to hear a variety of tax disputes. The Tax Court has jurisdiction to redetermine whether deficiencies determined by the Commissioner in notices of deficiency are correct. The Tax Court also has jurisdiction over other proceedings where Congress has given specific grants of jurisdiction. In all cases, the jurisdiction of the Court also depends on the timely filing of a petition by the taxpayer.

(3) The following list describes various types of docketed cases over which the Tax Court has jurisdiction:

(1) When Counsel refers a docketed case to Appeals for consideration, Appeals has exclusive authority to settle the case. This authority remains with Appeals unless procedures require the case be returned to Counsel.

(2) Counsel may choose not to refer certain cases or issues to Appeals. See Rev. Proc. 2016-22, § 3.03. If Counsel determines that a referral to Appeals will not be made on a case or issue, Counsel will notify the petitioner that a referral to Appeals will not be made. In such a situation, Appeals foregoes settlement authority on the case or issue not referred by Counsel.

(1) Some Tax Court terms and definitions are provided in CCDM 35.1.2, Tax Court Terms and Definitions. In addition, common definitions for docketed cases include:

(1) After filing an answer with the Tax Court, Counsel sends the administrative file (or dummy file) for consideration directly to the Appeals office and ATM identified in the Orange Cover Sheet previously placed on top of the administrative file by APS. Counsel generally puts a copy of the Designation of Place of Trial and answer in the administrative file for the ATE to use. But Counsel no longer places a copy of the petition in the administrative file. Instead, the petition will generally be uploaded into ACDS on the relevant Case Activity Records page as a case file attachment.

(2) Upon receipt of the file from Counsel after answer, the case will be assigned to an ATE on ACDS.

(3) When the ATM and/or ATE receives the administrative file, they must identify any processing instructions or issues raised by Counsel, as well as conduct their own independent review, for actions needed on issues including: non-petitioning spouses, non-petitioned years, and premature assessments. If any of these issues are identified, the ATM or ATE must alert APS immediately of any corrections needed.

(1) When an ATE receives a newly assigned docketed case, he/she completes the intake procedures fully described in IRM 8.2.1.4, Receipt of New Assignment by an Appeals Technical Employee (ATE), generally within 45 days of receiving the case. To summarize IRM 8.2.1.4(1), the ATE’s intake actions must include:

1. Completing the statute verification (including verifying the timeliness of the petition),

2. Validating all critical data fields in ACDS,

3. Determining whether the case is ready for Appeals’ consideration, and

4. Making initial contact with the taxpayer or representative.

(2) All returns, Compliance documents, and Counsel documents (including a copy of the petition, answer, and designation of place of trial) should be available to the ATE, either in the administrative file or as case-file attachments in ACDS, and properly arranged.

(3) When the ATE receives a dummy file for consideration, the paper file and the ACDS Case Activity Record should collectively contain all available return and Compliance information, as well as the petition, answer, and designation of place of trial from Counsel.

(4) If the ATE determines that critical data fields in ACDS are incorrect, he/she must either: (i) input and promptly submit any necessary updates or corrections using the validation tracking system (VTS) in ACDS, or (ii) prepare and promptly submit an “ACDS Update Request Form” to APS if the data field that needs correction is not available for update via the VTS. If an ACDS Update Request Form is needed for an update or correction, the campus and field offices will use the following procedures to request assistance from APS:

1. Prepare the ACDS Update Request Form, completing the required fields as appropriate. This form can be found on either APGolf or APGolf 2.0 under the “ACDS Updates” category.

   Note: APS will return requests that can be completed by the ATEs. If an ACDS Update Request must be used, then ATEs should use the most recent ACDS Update Form from APGolf or APGolf 2.0.

2. Find the correct email address on Outlook and email the update request form via encrypted email to: *AP-COS-APS-(your Area, East or West)-(abbreviation for your APS servicing office) ACDS Update Request.

   Caution: Do not email the ACDS Update Request Form directly to an APS employee, such as the Processing Team Manager.

3. APS will process the ACDS Update Request Form within three business days of receipt. APS will email the requesting employee if clarification is needed to process the request.

4. APS will return any requests for updates or corrections that are not submitted via the electronic form/mailbox. The electronic mailboxes allow APS management to monitor timeliness and accuracy of the updates.

(1) Follow procedures found in IRM 8.6.1, Conference and Issue Resolution, IRM 8.6.2, Appeals Case Memo Procedures, and IRM 8.6.3, Appeals Rulings, for information to help in preparing for and holding the conference with the taxpayer.

(1) The "Last Chance" Letter is designed to encourage unresponsive petitioners to initiate settlement with Appeals as early as possible.

(2) When requested by Appeals, the assigned Field Counsel attorney or paralegal in SB/SE Field Counsel or TEGE Division Counsel (TEGEDC) will issue a "Last Chance" Letter strongly encouraging petitioners to participate in the resolution of their docketed cases or prepare to go to trial.

(3) When to use:

• Ask Counsel to send the "Last Chance" Letter to petitioners who have not meaningfully responded to contacts to initiate settlement negotiations.

• Include "no-response" situations.

• Ask Counsel to send the letter any time it may help to get the petitioner to cooperate with Appeals.

(4) The steps to request that Counsel issue a "Last Chance" Letter are:

1. Ask Counsel to prepare and issue the letter by sending an encrypted email to the assigned Field Counsel attorney/paralegal, as well as a carbon copy to the assigned Field Counsel employee’s supervisor.

   Note: The ATE can generally determine the assigned Field Counsel paralegal/attorney by checking the “Attorney” field on the Case Summary Card, or by performing a Docket Search on the Tax Court’s website (i.e., clicking on the Printable Docket Record button and reviewing the people listed as “Respondent Counsel”). The ATE can then use Outlook to determine the Field Counsel attorney’s supervisor.

2. Include the name of the petitioner and the docket number in your request.

3. Counsel prepares and issues the "Last Chance" Letter to the petitioner within 2 business days of receiving the ATE's request. The letter instructs the petitioner to respond to the ATE by a certain date or within a certain number of days from the date of the letter.

Note: There is no standard "Last Chance" Letter format, so each Field Counsel attorney/paralegal will prepare the letter in accordance with local procedures.

4. Once issued, Counsel attaches a copy of the dated letter to an encrypted email and sends it to the requesting ATE.

5. Note the email request and Counsel response in the ACDS CARATS for the case and hold the case for the period indicated.

(5)

(1) The settlement approach and elements of evaluating issues are not affected by whether a case is non-docketed or docketed. An unacceptable settlement in non-docketed status does not become acceptable solely because it is reconsidered in docketed status; nor does an unacceptable settlement become more acceptable when a case is calendared for trial than prior to being calendared for trial.

(2) This approach, of course, does not preclude recognition of changes in judicial interpretation of the law and changes in Service position. It is also recognized that in reconsideration of a case or in trial preparation, additional facts may arise which can affect evaluation of the case. See IRM 8.6.4, Reaching Settlement and Securing an Appeals Agreement Form, for additional guidance on settling cases.

(1) Appeals is responsible for preparing the necessary computations for docketed cases settled either by Appeals or by Counsel. These computations are to be prepared by a TCS.

(2) When the ATE reaches settlement with a petitioner or counsel of record and determines that settlement computations are needed, he/she will use the APGolf subsystem in ACDS to electronically prepare and submit Form 3608, Request for TCS Service, to request assignment to a TCS.

(3) When the docketed case is settled as an agreed case, the TCS will follow the normal procedures for preparing settlement computations found in IRM 8.17.2, General Settlement and Rule 155 Computations.

(1) IRC 6512 governs overpayments allowable by the Tax Court. For tax years ending before 8/6/97, IRC 6512(b)(3)(B) and IRC 6511 entitle a taxpayer who does not file a return to receive a refund of taxes paid within two years prior to the date of the mailing of the notice of deficiency.

(2) For tax years ending before 8/6/1997, if a statutory notice is issued to a non-filing taxpayer more than two but less than three years after the due date of the return and the taxpayer petitions the Tax Court, any payments made more than two years prior to the date of the issuance of the notice of deficiency (such as withholding) are barred from being refunded.

(3) If the taxpayer files a return after the statutory notice is issued in the situation described in (2) above, the refund is still barred even if the return is filed within three years of the due date. See Commissioner v. Lundy, 516 U.S. 235 (1996).

(4) To correct possible inequities, Congress modified IRC 6512(b)(3) in the Taxpayer Relief Act of 1997, PL 105–34, August 5, 1997:

1. For tax years ending after 8/5/97, if a statutory notice is issued to a non-filing taxpayer more than two years but less than three years after the due date, and the taxpayer petitions the Tax Court, IRC 6512(b)(3)(B) now allows a refund of tax paid within the three-year period prior to the deficiency notice.

(5) Carefully analyze the case file in all docketed cases involving overpayments where the taxpayer did not file a return, since it is possible the refund could be barred.

(1) An award of litigation costs, attorney’s fees or court costs may be appropriate for docketed cases settled, whether by Appeals or Counsel, or decided by the Tax Court.

(2) These cases require approval by Counsel and are forwarded to them for action.

(3) These cases are not input on CASES.

(4) See IRM 8.7.15, Administrative Cost and Qualified Offer Cases.

(1) An interim assessment is an assessment (other than a jeopardy assessment) of tax and penalty made after the issuance of the statutory notice.

(2) Examples of interim assessments include:

1. Amounts paid by the taxpayer on the deficiency determined by the Service.

2. A taxpayer has not filed a return before the statutory notice of deficiency was issued, later files a return after the issuance of the notice of deficiency and the Campus assesses the tax shown in the delinquent return.

3. A taxpayer files an amended return that is assessed and then petitions Tax Court.

(1) Unless an agreement has been reached between Appeals and Counsel on a particular case, ATEs working docketed cases must follow the deadlines contained in section 3.07 of Rev. Proc. 2016-22 for returning cases to Counsel:

• For regular cases where the amount at issue for each year is $50,000 or less, as well as for all S cases, Counsel may recall the case after six months. If Counsel does not recall the case, Appeals must return the case so that it is received by Counsel no later than 30 calendar days before the date of the calendar call.

• For all other docketed cases, Appeals must return the case to Counsel at the first to occur of: (i) the date Appeals concludes that the case is not susceptible to settlement, or (ii) within ten calendar days after the case appears on a trial calendar.

(2) If Appeals cannot reach agreement with a petitioner or counsel of record to resolve a docketed case, the ATE prepares the following documents, uploads them in ACDS, and forwards the case to the ATM so it can be routed to APS and Counsel for trial preparation:

• Form 5402, Appeals Transmittal and Case Memo

• Schedule of Adjustments

• Appeals Case Memorandum

• Letter 971, Letter Advising No Settlement Reached - Docketed Case

• Letter 937, Transmittal for Power of Attorney (if the petitioner is pro se but has an authorized power of attorney)

(3) If Appeals reaches an agreement on a docketed case with a petitioner or counsel of record, the ATE determines if he or she can draft the necessary decision document or if Counsel’s assistance will be needed. (Note that a final decision on whether Counsel’s assistance is required in the preparation of a decision document may depend on the results of the settlement computations.) See IRM 8.4.1.11.2, Stipulation/Decision Preparation, for guidance on making this decision.

(4) If the ATE can draft the decision document without Counsel’s assistance, he or she prepares the decision document and follows the procedures outlined in IRM 8.4.1.16.1, Docketed EZ Close Procedures.

(5) If the ATE needs Counsel’s assistance to prepare the decision document, he or she contacts Counsel for assistance and provides the assigned Counsel employee with any information necessary to prepare the decision document. After the decision document is prepared, the assigned Counsel employee will provide it to the ATE. The ATE will then follow the procedures outlined in IRM 8.4.1.16.1, Docketed EZ Close Procedures.

(1) See IRM 8.13.1, Processing Closing Agreements in Appeals, for procedures to secure and process closing agreements in docketed cases.

(2) A closing agreement may be entered into at any time before the tax period comes within the jurisdiction of an appropriate court, and may thereafter be entered into in appropriate circumstances when authorized by the court (e.g., certain bankruptcy situations). A closing agreement must not determine the amount of tax liability (or deficiency or overpayment) for any taxable period under the jurisdiction of the United States Tax Court.

(1) When Appeals concludes docketed case consideration without settlement, forward the case to Counsel. Ordinarily a settlement computation is not required in an unagreed docketed case; however, if the ATE raises a new issue or concedes an issue, one might be necessary.

(2) The case will then appear on the ATE’s inventory listing in Part 3 with suspense status “E/T”.

(1) The Tax Court regularly issues calendars for trial sessions. The calendars list petitioners’ names, case docket numbers, trial session date and location (city and state). A trial session’s calendar also lists cases in which motions are calendared for hearing at a trial session.

(2) The Tax Court posts all session schedules to its website, http://www.ustaxcourt.gov.

(3) Tax Court judges sometimes issue orders requesting specific actions by the IRS that may impact Counsel/Appeals calendar time frames or document submissions. Appeals employees should pay particular attention to the requirements of any orders of this nature issued by a Tax Court judge.

(1) Counsel and Appeals may agree jurisdiction will be returned to Appeals for settlement in a docketed case with strong likelihood of settlement for all or part of the case.

(2) The reasons for returning the case to Appeals must be well defined, preferably in writing, before Appeals accepts the work unit from Counsel.

(3) If a Campus Appeals office forwards a case to Field Counsel for "trial preparation" and, subsequently, the petitioner or counsel of record wishes to discuss "settlement", presents new information or decides to settle based upon Appeals' settlement offer, Field Counsel may return case jurisdiction to Campus Appeals when all agree there is a strong possibility of settlement and the case is not on a Tax Court calendar.

(4) If the case is on a Tax Court calendar, Field Counsel may return the case to Field Appeals for reconsideration.

(5) If Counsel returns the case to Appeals for reconsideration, Appeals will accept jurisdiction of the case and the following administrative actions should be taken:

1. APS will update the case from Part 3 to Part 2 on ACDS with input of Closing Code 42. This action will be initiated by the ATM or ATE immediately either: routing the case to APS with appropriate instructions, or preparing and electronically submitting an ACDS Update Request Form. See IRM 8.20.6.13(4), Docketed Reconsideration Cases (Closing Code 42) - Jurisdiction Returned to Appeals by Counsel, for more information.

2. If an AC/FR was previously input on the Case Activity Record (CAR), the ATM will input **RR to reflect the case is being returned to the assigned technical employee. This will change the prior AC/FR to MS. Or, if the case needs to be reassigned to a different technical employee, the ATM will reassign and input **RR on the CAR.

3. After reconsideration, the ATE will input AC/FR and submit the case to the ATM.

4. The ATM will input a revised ACAPDATE and submit to APS for closing.

(6) In all cases Appeals:

1. is responsible for any "reconsideration" activities, and

2. conducts the settlement negotiations.

(7) When the case is in Counsel's jurisdiction, it is in Part 3 on ACDS. When the case is returned to Appeals for reconsideration, APS inputs Closing Code 42 and a date closed equal to the date the case is received for reconsideration. This changes the "Part" on the open ACDS record from 3 to 2. The closed ACDS record retains Part 3 and the closing information.

(1) A distinction must be made between cases dismissed for lack of jurisdiction and cases dismissed for lack of prosecution.

(2) A dismissal for lack of jurisdiction is not a determination on the merits, and the Order of Dismissal does not reflect a deficiency amount.

(3) A dismissal for lack of prosecution is considered to be a final determination on the merits, and the Order of Dismissal includes a deficiency amount.

(1) The following subsections briefly cover docketed cases that contain a unique feature. Some refer to other IRM sections, which cover the type of case in more detail.

(1) For detailed information concerning the various types of refund suits and the different types of settlements by the Department of Justice, see IRM 8.7.1, Guidelines for Cases with Special Issues.

(1) Discovery refers to the pre-trial exchange of information by parties in litigation.

(2) The Federal Rules of Civil Procedure (FRCP), as amended in December 2006 and again in 2015, clarify and establish uniform discovery processes and procedures to be used for electronically stored information (ESI).

(3) The FRCP place an obligation on the IRS to preserve ESI when litigation in federal courts is initiated or can be reasonably anticipated. Failure to preserve and provide timely discovery material can seriously jeopardize the Government’s case and potentially lead to sanctions.

(4) The Tax Court adopted ESI procedures effective January 1, 2010. Counsel will follow the procedures outlined in Chief Counsel Notice CC-2016-005, which supersedes Chief Counsel Notice CC-2012-017, for all cases in the federal courts, including the Tax Court (with the exception of "S" cases). For more information regarding ESI, see CCDM 34.7.1.1.4, Discovery Obligations to Preserve Evidence, Including Electronically Stored Information.

(5) Litigants are required to:

1. Identify relevant ESI that relates to a filed case.

2. Preserve ESI (including metadata).

3. Provide electronically stored data in its native format.

4. Respond to requests within mandated time frames.

(6) E-Discovery requests may involve cases worked by a variety of business units, including Appeals.

(7) Requests come from Counsel to a single Appeals PPQA point of contact (POC) that will provide guidance to affected Appeals employees. The POC will work with employees, Area Directors and Managers to ensure appropriate coordination with Information Technology and Counsel.

(8) ESI includes but is not limited to:

• All email & attachments

• Word processing documents, spreadsheets, graphics & presentation documents

• Images, text files, text messages

• Other information stored on hard drives or removable media (e.g., desktops and portable thumb drives)

• Metadata, databases

• Instant messages, transaction logs, computer logs, audio and video files

• Voicemail

• Web pages

• Backup and archived material