8.7.7. Claim and Overassessment Cases

(1) Purpose - This section covers processes and procedures for handling appeals of Compliance’s decision to disallow a taxpayer’s claim for refund of an overpayment related to a liability imposed under the Internal Revenue Code (U.S. Code Title 26), requests for audit reconsideration, and requests for abatement of interest due to the Service’s unreasonable delay in performing a ministerial or managerial act. This is a supplement to general guidance contained in IRM 25.6.1.10, Claims, Abatements and Refunds.

(2) Audience - Appeals Technical Employees (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) The following table reflects Appeals' policy on accepting claim and overassessment cases that involve expiring statutes of limitations:

(2) Verify the case is correctly carded-in on ACDS following procedures in IRM 8.20.5, Carding New Receipts, and validate all critical data fields on ACDS. Make necessary changes following procedures in IRM 8.20.3, Appeals Centralized Database System (ACDS). In addition, verify the amount in the following ACDS field:

• DDAMTCL (Amount disallowed by Compliance) - See IRM 8.20.3.3.62.12.1, DDAMTCL.

(3) Follow the procedures in IRM 8.2.1.4, Receipt of New Assignment by an Appeals Technical Employee (ATE), requiring statute verification within 45 days, mailing of the appropriate initial contact letter, guidance on returning a case to Examination, and closing actions for a premature referral. Determine whether the time for making a refund is still open.

(4) Check for a related IRC 6676 penalty case. In accordance with IRC Section 6676, Erroneous Claim for Refund or Credit, if a claim for refund or credit with respect to income tax is made for an excessive amount, unless it is shown that the claim for such excessive amount is due to a reasonable cause, the person making such claim shall be liable for a penalty amount equal to 20 percent of the excessive amount. Verify the case meets the acceptance criteria and that this IRC 6676 work unit is correctly carded in on ACDS. See IRM 8.11.1.3.7, IRC 6676, for more information.

(5) If no statute protection is needed, determine the need to complete Form 10495, Memorandum Re: Statute Paragraph. For most refund claim cases, Appeals employees use CLAIM as the ACDS statute code where an assessment was not proposed. See Exhibit 8.21.2-1, ACDS Statute Codes.

(6) Determine whether the case was previously closed with finality and not subject to reopening. See IRM 8.7.7.2.2, Liability Issues Previously Closed With Finality.

(7) Review the administrative file contents and determine if the case is ready for Appeals' consideration. See IRM 8.2.1.5, Returning a Case to Examination - ATE. If not previously closed with finality, Appeals’ reconsideration will be limited to new issues and/or new information but only after Compliance has considered it.

(8) Conduct the conference as described in IRM 8.1, Appeals Function, and IRM 8.6, Conference and Settlement Practices.

(1) For relevant code and regulation sections on limitations for allowing refunds or credits of overpayments, see the following:

(2) A claim for refund or credit of an overpayment must be filed within three years after the filing of the original return or within two years after payment, whichever is later. If the overpayment is shown on a delinquent original return, the refund claim is timely filed but the amount is limited to the amount paid within the three year period prior to the filing of the return (plus the period of any extension of time to file).

Limitation on Allowance of Credits and Refund - A timely filed claim could result in no refund or overpayment allowable, if the payments fall outside the "look-back period" described under IRC Section 6511(b)(2). Look-back periods limit how far into the past payments can be available for refund. Consideration is given to the filing extension period for determining the look-back period. See IRC Section 6511(d) for other filing time limits that might apply. Also, refer to the following:

1. IRM 25.6.1.10.2.7, Claims for Credit or Refund - General Time Period for Submitting a Claim

2. IRM 25.6.1.10.2.7.2.1, Three-year Rule

3. IRM 25.6.1.10.2.7.2.2, Two-year Rule

4. IRM 25.6.1.10.2.8, Claims for Credit or Refund - Special Items of Income, Deduction, Loss or Credit

(3) IRC Section 7502 (the "timely mailing" equals "timely filing" rule) applies to a refund claim postmarked within the three-year period after the original return's filing date. See IRM 25.6.1.10.2.7.1.4 , Examples for the Three-Year Period. A claim filed on a delinquent original income tax return that is postmarked on the last day of the three year period is deemed to be filed on the postmark date. See AOD 2000–09, Weisbart v. U. S. Dep't of Treasury, 222 F.3d 93 (2d Cir. 2000), action on dec., 2000-09 (November 13, 2000). See also Treasury Regulation Section 301.7502-1(f).

(4) Per IRC Section 6513 , Time Return Deemed Filed and Tax Considered Paid, advance payments are deemed to be paid on the last day prescribed for paying the tax. Estimated income tax payments are deemed paid on the last day prescribed for filing the return. These deemed payment dates are determined without considering a filing extension. See IRM 25.6.1.7.2 , Time When Payments and Credits are Considered to be Made.

(1) A claim must be timely filed and must set forth in detail each ground upon which a refund or credit of an overpayment is claimed. See 26 CFR 301.6402-2 and IRM 25.6.1.10.2.6.1, Background on the Acceptability of Claims Failing to Comply with Prescribed Requirements for the Content and Form.

(2) IRM 8.6.1.7.4, Taxpayer Raises New Issue, contains guidance for Appeals' consideration of new issues raised by the taxpayer for a case under Appeals jurisdiction. Don't consider a new issue raised in Appeals for a refund claim case if the time for filing a refund claim has expired.

(3) If the taxpayer requests Appeals consideration of an issue not included in the refund claim or not raised during Compliance's consideration, consider the following:

(4) An "informal claim" must have a written component apprising the Service that a refund is sought and describe the legal and factual basis for the refund so that the Service may investigate the claim. See IRM 25.6.1.10.2.6.3, Informal Claims.

(5) See IRM 25.6.1.10.2.6.4, Supplemental Claims, for information on supplementing a pending claim, submitting a new claim, and perfecting an informal claim.

(6) If Appeals returns the case to Compliance to consider the new claim issue, follow the guidance in IRM 8.6.1.7.7, Jurisdiction Released. Include on Form 5402, Appeals Transmittal and Case Memo, information about the refund statute for the new issue. See the following sample language:

• On MM/DD/YYYY, the taxpayer timely submitted another amended return to include a new issue before the time for filing a refund expires on MM/DD/YYYY; or

• On MM/DD/YYYY, the taxpayer timely submitted an informal claim to include a new issue before the time for filing a refund claim expires on MM/DD/YYYY.

(1) This section provides information on documents needed for closing refund claim cases. An Appeals Case Memo (ACM) and Form 5402, Appeals Transmittal Case Memo, are required for each work unit. APGOLF will generate a specific customized Form 5402 based on the ACDS Type (e.g. Type "I" for Income Tax, Type "ES" for Estate & Gift, Type "EMPL" for Employment Tax, Type "EX" for Excise Tax, etc.) For key and related cases, prepare consolidated ACMs to avoid duplication of information. The ACM must adequately explain and support the basis of the settlement. See IRM 8.6.2, Appeals Case Memo Procedures, and IRM 8.6.4, Reaching Settlement and Securing an Appeals Agreement Form. Sometimes all ACM comments and rationale about the case could fit in the "Remarks" section of the Form 5402. In these instances, the Form 5402 serves as the entire ACM. See IRM 8.6.2.3.2,Using Form 5402 as the Appeals Case Memo (ACM).

(2) If Appeals determination is to fully or partially sustain Compliance’s decision to disallow the claim, determine whether the Service previously mailed the taxpayer a Notice of Claim Disallowance or received Form 2297, Waiver of Statutory Notice of Claim Disallowance, to start the running of the 2-year period for filing a refund suit. After the period of limitation expires for filing a refund suit, a refund or credit of an overpayment is not allowable for the issues covered in the Notice of Disallowance. See IRM 8.7.7.3, Periods of Limitation in Claim and Overpayment Cases.

(3) For frequently-issued Notices of Claims Disallowance, see Exhibit 8.7.7-1, IRS Claim Disallowance Letters that Begin the 2-Year Period for Filing a Refund Suit. Campus-sourced letters (e.g. Letter 105-C or Letter 106-C) can usually be identified on IDRS, using the following IDRS commands:

• ENMODA (IRM 2.3.15)

• IMFOLE for IMF (IRM 2.3.51)

• BMFOLE for BMF (IRM 2.3.59)

• TXMODA for specific period (IRM 2.3.11)

(4) If the taxpayer filed a second amended return (timely filed under IRC Section 6511) for the same issues included in the first claim, after the Service has issued a claim disallowance letter or received Form 2297 that started the 2-year period for filing a refund suit, do not issue a second claim disallowance letter for these duplicate issues or secure Form 2297. See IRM 8.7.7.7, Form 2297, Waiver of Statutory Notification of Claim Disallowance. Issue another claim disallowance letter or secure Form 2297 only for the disallowed portion of the claim in respect to issues not included in the first claim disallowance.

(5) AIMS Control - For each claim period controlled on AIMS, prepare Form 5403 Instructions. The assigned APS Tax Examiner will use these instructions to prepare Form 5403, Appeals Closing Record, for processing account adjustments and closing the AIMS module. See IRM 4.4.1.2, Description of AIMS. Use IDRS command code AMDIS to determine if the account module is on AIMS. See IRM 2.8.3, AIMS Command Code AMDIS. Campus-sourced claims are generally not controlled on AIMS.

(6) No AIMS Control - For each claim period not controlled on AIMS, prepare Form 3870, Request for Adjustment, for processing a partial allowance or full allowance. For a no-change / non-AIMS module, Form 3870 is acceptable, but not needed. In this instance, the ATE can include instructions to APS (on Form 5402) similar to the following: "Input TC 290 $0.00 for all periods" (e.g. where the claim disallowance was fully sustained for all claim periods).

(7) For an Appeals Notice of Claim Disallowance that starts the 2-year period for filing a refund suit, the ATM is the lowest signature level for signing these letters that include the following:

• Letter 1363, Appeals Partial Disallowance of Refund Claim - Certified Letter

• Letter 1364, Appeals Full Disallowance of Refund Claim - Certified Letter

(8) For an Appeals closing letter sustaining the Service’s earlier Notice of Claim Disallowance (i.e. the 2-year period for filing suit has already begun), the ATE can sign the closing letter (to be sent by regular mail). They include the following:

• Letter 2681, Appeals Full Disallowance After Previous Claim Disallowance

• Letter 2683, Appeals Partial Disallowance After Previous Claim Disallowance

(9) To notify the taxpayer of the full claim allowance, not involving an additional tax, use closing Letter 2682, Appeals Full Claim Allowance. The ATE can sign this closing letter (to be sent by regular mail).

(10) For specific closing instructions, see the following and its related subsections:

1. IRM 8.7.7.5.1, Reaching Agreement for Liability Issues

2. IRM 8.7.7.5.2, Unagreed Refund Claim (No Additional Tax)

3. IRM 8.7.7.5.3, Closing Deficiency Cases Involving Claims

4. IRM 8.7.7.6, Settlement Computations for Claims and Overassessments Cases

5. IRM 8.7.7.8, Closing of Overassessment Case to be Withheld Until Related Taxpayer Deficiency is Established

6. IRM 8.7.7.9, Partial Overassessments May Be Allowed in Certain Contested Cases

7. IRM 8.7.7.10, Processing Partial Allowances of Refunds or Credits

8. IRM 8.7.7.11, Securing an Agreement Form for an Overassessment (No Refund Claim Filed)

9. IRM 8.7.7.12, Applying an Overassessment to a Deficiency in a Related Case

10. IRM 8.7.7.13, Refund Suit for an Open Appeals Liability Case

11. IRM 8.7.7.14, Expedite Closing of Large Dollar Examination-Sourced Overpayment Cases

(1) This section provides guidance on the preparation of settlement computations on cases involving claims and overassessment cases. It is intended for Appeals employees who prepare settlement computations.

(2) A current transcript of account is required for all cases. Analyze the transcript of account if there is a question about the timeliness of a claim for refund or payments, etc. Statements of accounts are required in docketed cases involving overpayments. See IRM 8.17.3.2, Explanation of the Statement of Account.

(1) In cases where a claim for refund is disallowed in whole or in part, you may request that the taxpayer execute Form 2297, Waiver of Statutory Notification of Claim Disallowance, especially when mailing an agreement form for the taxpayer’s approval. See IRM 4.10.8.10.4.1, Instructions for Completing Form 2297.

(2) Follow these procedures when securing a Form 2297:

1. Prepare three copies, including a copy for the taxpayer. If appropriate, send a copy to the authorized representative;

2. Attach an original to the claim; and

3. Retain a copy in the administrative file.

(3) If the taxpayer chooses not to sign Form 2297, issue a notice of claim disallowance using Letter 1363 or Letter 1364, even if an agreement form (Form 870 type, etc.) is submitted.

(4) When a claim issue is allowed - but offsetting adjustments reduce or eliminate the overpayment, secure a Form 2297 or issue a notice of claim disallowance (Letter 1363 or 1364).

(5) There are many exceptions to the use of this form, most of which are listed in the following subsections.

(1) When adjustments are made which increase the tax liability of one taxpayer and the position taken in support of the adjustments requires as a matter of consistency a reduction in the tax liability of another taxpayer, the case closing will be withheld of the taxpayer whose tax liability will be reduced until the taxpayer whose liability has been increased agrees to the adjustments proposed and consents to the closing of the case on that basis, or until action by the United States Tax Court or other court establishes the correctness of the adjustments. See IRM 1.2.1.5.13, Policy Statement 4-34.

(1) The Service's policy on partial allowance of refunds or credits of overassessments in certain contested cases is found in IRM 1.2.1.5.17, Policy Statement P–4–41, and Rev. Rul. 54-378, 1954–2 C.B. 246. Generally, partial allowances will be made only in cases falling within the following categories:

1. Cases for a specific year involving two or more tax-reducing issues;

2. Cases for a specific year involving several issues, both tax-reducing and tax-increasing, where the overall result after giving effect to the tax-increasing issues is a net overassessment; and

3. Cases involving more than 1 year where the net result is an overassessment.

Note: See Revenue Ruling 54-378 for more information, including examples illustrating these categories. Care should be exercised to identify the existence of any pending or proposed liabilities concerning the taxpayer.

(2) Refunds of partial overassessments are only recommended in those cases where there is agreement on the issue or issues resulting in the partial overassessment. See IRM 8.6.4, for guidance on "Modification of Agreement for Partial Agreement".

(3) Rev. Rul. 2007-51 2007-2 C.B. 573,clarifies that Rev. Rul. 54-378 does not limit the Service to crediting overpayments only against assessed tax liabilities. It holds that the Service may credit an overpayment against unassessed internal revenue tax liabilities that have been determined in a statutory notice of deficiency sent to the taxpayer. The Service may also set off a liability identified in a proof of claim filed in a bankruptcy case even though the liability has not been assessed or included in a notice of deficiency. See Rev. Rul. 2007-52.

(4) Partial overassessments are not recommended in potential Joint Committee cases, except as provided in IRM 8.7.9, Joint Committee (JC) Cases.

(1) When the taxpayer agrees to the allowance of a partial overassessment, secure an appropriate agreement form before the "time for filing a refund claim" has expired (if no refund claim has been filed). See IRM 8.7.7.11, Securing an Agreement Form for an Overassessment (No Refund Claim Filed).

(2) If the case is on AIMS, include instructions for Form 5403, Appeals Closing Record, showing the agreed overassessment. See IRM 8.2.1.10, Closing the Case to APS, (and its related subsections) and IRM 8.2.1.11, Preparing the Case to Close to APS. Also, see IRM 8.20.3.3.62.1, AIMS, to assist in determining whether a case is on AIMS.

(3) If the case is not on AIMS, prepare Form 3870, Request for Adjustment.

(4) Prepare Form 5402, Appeals Transmittal and Case Memo, which discusses the agreed issues as part of the final closing package.

(1) If an agreement is reached on an overassessment ("without a claim filed"), secure an agreement form using the standards for agreement in a pre-90 day case (i.e. Form 870 or Form 870-AD ). If Form 870 or Form 870-AD is not appropriate, consider the case type to identify the appropriate form for securing an agreement.

(2) Under Rev. Rul. 68-65, 1968–1 C.B. 555, a signed agreement Form 870 or Form 890 series is a claim for refund to the extent that any Service determined overassessment shown is an overpayment, provided the form is executed and filed within the period of limitations for filing a claim for credit or refund.

(3) The "date of the claim for refund" is the date of receipt of the signed agreement form, or the date it is postmarked, if mailed before the due date and received after that due date.

(1) Overassessments may be applied against deficiencies determined in an interrelated case. Add to the agreement form language for the taxpayer to consent to application of the overpayment to the interrelated deficiency. See IRM 8.6.4, Reaching Settlement and Securing an Appeals Agreement Form, for a suggested paragraph when modification of agreement is needed to apply an overpayment against an interrelated deficiency.

(1) IRC Section 6532, Suits by Taxpayers for Refund, prohibits a refund suit before the expiration of 6 months from the date of filing the refund claim, unless the Service makes a determination within that time. If notified that a suit has been filed for an open Appeals case or related case, follow procedures in IRM 8.7.1, Guidelines for Cases With Special Issues, as applicable:

1. IRM 8.7.1.7, Civil Cases Involving Department of Justice

2. IRM 8.7.1.8.1, Refund Suits with No Deficiency in Appeals Cases

3. IRM 8.7.1.8.2, Refund Suits with Disposition of Pending Claims

4. IRM 8.7.1.8.3, Refund Suits with Statutory Notice of Deficiency Issued

5. IRM 8.7.1.8.4, Refund Suits with Deficiency in Appeals Cases

6. IRM 8.7.1.8.5, Refund Suits When Petition is Filed with US Tax Court

7. IRM 8.7.1.8.6, Refund Suits Affecting Related Appeals Cases

8. IRM 8.7.1.8.7, Settlements by Department of Justice (DOJ)

(1) The tax law provides for interest on overpayments in respect to any internal revenue tax, in accordance with IRC Section 6611. For an examination-sourced case, Appeals will expedite the closing of an overpayment case that meets the “large dollar criteria” - described in IRM 4.4.18, AIMS Procedures and Processing Instructions, Large Dollar Cases, and as shown on Exam’s Form 3198, Special Handling Notice for Examination Case Processing. An overpayment case meets the "large dollar criteria" if the total amount of a period’s tax overpayment plus penalties exceeds $100,000.

1. Appeals Officer (AO)

2. Appeals Team Case Leader (ATCL)

3. Appeals Team Manager (ATM)

4. Account and Processing Support (APS)

(2) Appeals Officer (AO) - The AO will "flag" the "large dollar" overpayment case - by attaching any EXPEDITE "sticker", "note", or "tag" to the case file and - by including a notation similar to the following: $100,000 overpayment. The AO will include a similar notation in the remarks section of Form 5402, Appeals Transmittal and Case Memo and close the case within five (5) calendar days of receipt of the agreement form. The AO will document the reason for the delay (if any) in the Case Activity Record and Timesheet (CARAT).

(3) Appeals Team Case Leader (ATCL) - The ATCL will "flag" the "large dollar" overpayment case - by attaching any EXPEDITE "sticker", "note", or "tag" to the case file and - by including a notation similar to the following: $100,000 overpayment. The ATCL will include a similar notation in the remarks section of Form 5402, Appeals Transmittal and Case Memo and close the case within ten (10) calendar days of receipt of the agreement form. The ATCL will document the reason for the delay (if any) in the CARAT.

(4) Appeals Team Manager (ATM) - The ATM will properly "flag" the case, if not properly "flagged" by the AO (as described above). The ATM will close the case within ten (10) calendar days of the AO’s receipt of the agreement form. The ATM will document the reason for the delay (if any) in the CARAT.

(5) Account and Processing Support (APS) - APS will expedite the closing of a "large dollar" overpayment case, as" flagged" by the Appeals employee. APS will assign the case on Appeals’ Processing Employee Automated System (PEAS) and identify the case as a high priority - requiring expedite processing. APS will make every effort to process a large dollar overpayment within 30 days of Appeals’ receipt of a waiver form and/or closing agreement.

(1) IRM 21.5.3, General Claims Procedures, contains guidance for identifying and processing claims. Once the claim is determined to be complete and processible, a determination is made whether the statute is open. See IRM 21.5.3.4, General Claim Procedures. If the claim is determined to be untimely, IRM 21.5.3.4.6, No Consideration and Disallowance of Claims and Amended Returns, require IRS campuses to disallow the claim following procedures in IRM 21.5.3.4.6.1, Disallowance and Partial Disallowance Procedures.

(2) If the taxpayer appeals the decision to disallow the claim for untimeliness, as required by IRM 21.5.3.4.6.1 to disallow the claim with no consideration, and if Appeals concludes that the claim was timely filed, Appeals will also determine the following:

1. If the issue was previously “closed with finality”, as described in IRM 8.7.7.2.2, Liability Issues Previously Closed With Finality

2. Whether Compliance considered the merits of the claim

(3) If Appeals determines the claim was timely filed and the merits were previously considered and accepted by Compliance, allow the claim with no further consideration if the issue(s) was not previously "closed with finality."

(4) If Appeals determines the claim was timely filed and Compliance did not previously consider the merits, return the case to Compliance to consider the merits if the issue(s) was not previously "closed with finality."

(5) To return a claim for consideration of the merits, prepare Letter 5209, Appeals Referral to Examination, advising the taxpayer that Appeals determined the claim was timely filed and will return it to the originating function for consideration of the merits of the claim. Prepare Form 5402 to return the case. The Form 5402 must include the following:

• "Claim submitted timely. Jurisdiction released for consideration of underlying issue. Return to originator."

• Closing Code 20

• Feature Code "TC"

• Indicate where the case is being sent.

• Include in remarks section: "Time remaining for filing suit MM/DD/YYYY"

(6) Refer to the Case Routing tab on the Appeals Home Page at http://appeals.web.irs.gov/APS/caserouting.htm for "RETURNING CASES TO ORIGINATING FUNCTION (JURISDICTION RELEASED)."

(7) For an exception to the requirement for returning claims disallowed by Compliance based solely on timeliness, see IRM 8.7.7.15.1, Refund Disallowed as Time Barred During Original Return Processing.

(8) If Appeals determines the claim was previously closed with finality, follow the closing procedures in IRM 8.7.7.5, Closing refund Claim Cases (No Additional Tax) to sustain the disallowance.

(1) The service will not reopen liability issues previously closed with finality, as discussed in the following guidance:

1. IRM 8.7.7.2.2, Liability Issues Previously Closed With Finality

2. IRM 4.13.1.8, Non-Acceptance of Request

3. IRM 4.13.3.1.3, Cases Closed in Appeals

(2) If the liability issues were not "previously closed with finality" and new information is provided requiring Compliance’s consideration, return the case to Compliance to consider the new information. See IRM 8.6.1.7.5, Taxpayer Provides New Information and IRM 8.6.1.7.7, Jurisdiction Released, for instructions on returning a case. Notify Compliance when the two-year period for filing a refund suit will expire. The taxpayer can appeal the unresolved issue. An unresolved issue is not appealable if the allowance of the claim would be time-barred. See IRM 8.7.7.3, Periods of Limitation in Claim and Overpayment Cases.

(3) Also, see IRM 1.2.1.5.21, Policy Statement 4-75, Usual Principles Applicable in the Examination of Claims on Their Merits, that provides that a conclusion previously reached by an Appeals official on a specific issue in a case will not be modified by Compliance as a result of the reconsideration of a claim, without concurrence of the Regional Director of Appeals (currently known as Appeals Operations Directors, as described in IRM 1.4.28.1.3, Appeals Managers Procedures, Responsibilities.)

(1) An "audit reconsideration" case is the reevaluation of the results of a prior audit when a taxpayer disagrees with the original determination. However, the Service will not reconsider issues previously "closed with finality." See the following:

1. IRM 8.7.7.2.2, Liability Issues Previously Closed With Finality

2. IRM 4.13.1.4, Criteria for Reconsideration

3. IRM 4.13.1.7, Acceptance of Request

4. IRM 4.13.1.8, Non-Acceptance Request

5. Exhibit 4.13.7-13, Audit Reconsideration of Assessments Made by Appeals Processing Unit

6. Pub 3598, What you Should Know About the Audit Reconsideration Process

(2) The taxpayer should provide information "not previously considered during the original examination." Also, "audit reconsideration" is the process the IRS uses when the taxpayer contests an Automated Substitute for Return (ASFR) or Substitute for Return (SFR) determination by filing an original delinquent return, and the assessment remains unpaid - or, as a result of the assessment, the tax credit is reversed.

(3) For audit reconsiderations on cases closed by Appeals as "dismissed for lack of jurisdiction", Compliance will route these cases in accordance with IRM 4.13.2.2, Function Responsible & Routing Instructions. The taxpayer can appeal the result of the audit reconsideration.

(4) When the taxpayer requests Appeals' consideration, the full administrative file should accompany the taxpayer's request. See IRM 4.13.3.16, Request for Appeal. Compliance will follow the guidance in IRM 4.13.3.1.3, Cases Closed in Appeals, and Exhibit 4.13.7-13 , Audit Reconsideration of Assessments Made by Appeals Processing Unit, to determine whether to route the case directly to Appeals without further action.

(5) Follow procedures in IRM 8.2.1.4, Receipt of New Assignment by an Appeals Technical Employee (ATE), requiring statute verification with 45 days, mailing of the appropriate initial contact letter, guidance on returning a case to Examination, and closing actions for a premature referral. Verify the case is correctly carded in on ACDS following procedures in IRM 8.20.5.9, Audit Reconsideration Case Carding.

(6) If the disputed issue was not previously "closed with finality" and the case was sent directly to Appeals without consideration of the new information (or the taxpayer provides Appeals with new information, requiring Compliance’s consideration), return the case to Compliance for consideration, with appeal rights. See IRM 8.6.1.7.5 , Taxpayer Provides New Information.

(7) If IRS previously closed the disputed issue with finality or the information provided was previously considered, follow the procedures in IRM 8.7.7.17.1, Audit Reconsideration Case Closing Procedures, to close the case with no change to the taxpayer’s account.

(1) IRC Section 6404(e)(1) was added by the Tax Reform Act of 1986 to provide for abatement of interest on deficiencies or payments attributable to errors or delays in the performance of ministerial acts by the Service. On July 30, 1996, the Taxpayer Bill of Rights 2 (TBOR 2) revised IRC Section 6404(e)(1) to allow the Service to abate interest attributable to unreasonable errors or delays by the Service in the performance of ministerial or managerial acts. This TBOR 2 amendment applies to interest accruing with respect to deficiencies or payments for taxable years beginning after 7/30/1996.

(2) Delegation Order 20-1 (formerly DO 228, Rev. 3), Delegation of Authorities for Penalty and Interest Activities, identifies the individuals authorized to abate interest under IRC Section 6404(e)(1). See IRM 1.2.2.13.1.

(3) An error or delay in performing a ministerial or managerial act will be taken into account only if it occurs after the IRS has contacted the taxpayer in writing with respect to the deficiency or payment. If the conditions of IRC Section 6404(e)(1) are met, IRS is authorized to abate interest assessed on a deficiency of income tax, estate tax, gift tax and/or certain excise taxes. See IRC Section 6211, Definition of a Deficiency.

(4) Ministerial act means a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer's case after all prerequisites to the act, such as conferences and review by supervisors, have taken place. A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act.

(5) Managerial act means an administrative act that occurs during the processing of a taxpayer's case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act.

(6) The Service has the authority to abate only the amount of interest that accrued during the period attributable to an error or delay in performing the ministerial or managerial act. IRC Section 6404(e)(1) applies only to an error or delay that occurs after the date the Service contacts the taxpayer in writing with respect to the deficiency or payment. For additional information, see IRM 20.2.7.5, IRC 6404(e)(1), Unreasonable Error or Delay in Performing a Ministerial or Managerial Act.

(7) Interest abatement claims (Form 843, Claim for Refund and Request for Abatement) are generally filed with the Campus where the taxpayer would be required to file a current tax return for which the claim or request relates. Compliance will consider the claim after the tax and/or penalty issues have been resolved. After Compliance considers the claim, the taxpayer will have full appeal rights.

(8) TBOR2 granted the Tax Court jurisdiction to determine whether the Service's failure to abate interest was an abuse of discretion and to order an abatement. To bring an action under IRC Section 6404(h), the taxpayer must file a petition for review with the Tax Court within 180 days after the date of the mailing of the Service's final determination not to abate. See IRM 8.7.7.18.5 (10) to determine the appropriate document for Appeals to close a non-docketed abatement of interest case.

(9) The "abatement of interest" provision is applicable in the context of a TEFRA partnership audit.

(10) Interest on employment, excise, and other taxes that are not subject to deficiency procedures don't qualify for abatement of interest under IRC Section 6404(e). However, the IRS has authority to abate interest under IRC Section 6404(a) if the interest is:

• excessive in amount;

• assessed after the expiration of the applicable period of limitations; or

• erroneously or illegally assessed.

(11) IRC Section 6404(e)(2) imposes a requirement for the Secretary to abate interest assessed on an erroneous refund under IRC Section 6602, accrued to the date that demand for repayment is made. For Appeals authority to abate interest under IRC Section 6404(e)(2), see IRM 8.7.7.18.3, Appeals Level of Authority for Abating Interest Under IRC Section 6404(e). Interest must be abated on an erroneous refund under IRC Section 6602, unless --

• The taxpayer or related party caused the erroneous refund; or

• The erroneous refund exceeds $50,000.

(1) The Internal Revenue Code (Title 26) does not provide a period of limitations for the allowance and payment of interest on an overpayment of tax. However, 28 U.S.C. Section 2401, Time for Commencing Action Against the United States, and 28 U.S.C. Section 2501, Time for Filing Suit, provide a six-year period within which a suit must be filed for the allowance of additional interest on an overpayment. An administrative claim may be allowed and paid upon request at any time before the six-year period for filing suit expires. No allowance of interest on a refund or credit of an overpayment of tax may be made after the expiration of six years from the date of allowance of the refund or credit unless the taxpayer has filed a civil action against the United States within such period. See Rev. Rul. 56-506, 1956-2 C.B. 959, and Rev. Rul. 57-242, 1957-1 C.B. 452.

(2) The date of the allowance of the tax overpayment (that begins the six year period for filing suit for additional overpayment interest) is the date the Commissioner or his delegate signs the "schedule" on which the tax overpayment is listed as provided under IRC Section 6407, Date of Allowance of Refund or Credit. The allowance of interest under IRC Section 6611, Interest on Overpayments, is usually made at the time the overpayment is scheduled. See IRM 20.2.4.7.1, Refund Schedule Dates. The "schedule date" of the overpayment is the "starting event for the six-year period" for filing suit. Per IRM 20.2.14.6.2, Applicable Periods of Limitation for Post-Enactment Periods, the "schedule date" is shown on Form 2188, Voucher and Schedule of Overpayment and Overassessments. If a Form 2188 is not available, for administrative purposes, the "23C date of the refund or cycle date of the offset" will be considered the "schedule date of the overpayment." See IRM 4.4.25.11.1.1, 23C Date.

(3) In cases where interest on refunds or credits was insufficient and is legally allowable, an informal claim or claim filed on Form 843, Claim for Refund and Request for Abatement, is sufficient notice to consider and allow additional overpayment interest. Overpayment interest accrues from the date of overpayment of the tax to a date not more than 30 days prior to the date of the refund under IRC Section 6611, Interest on Overpayments.

(4) See IRM 8.7.7.5, Closing Refund Claim Cases (No Additional Tax). The refund claim disallowance letters include information on the 6 year time period for filing suit for overpayment interest. The language in these letters regarding a two year period for filing a refund suit does not apply to the overpayment interest.

(5) See IRM 20.2.4, Overpayment Interest, for information on IDRS Transaction Code 770 (Credit Interest due Taxpayer) and Transaction Code 776 (Generated Interest Due on Overpayment) to assist in identifying overpayment interest on account transcripts.

(6) For information on net rate netting procedures, see IRM 8.7.19, Net Rate Netting Procedures for Appeals.