4.36.3. Examination Team Responsibilities

(1) See IRM 4.36.1.1.1, Background.

(1) See IRM 4.36.1.1.2, Authority.

(1) See IRM 4.36.1.1.3, Roles and Responsibilities.

(1) See IRM 4.36.1.1.4, Program Management and Review

(1) See IRM 4.36.1.1.5, Program Controls.

(1) See IRM 4.36.1.1.6, Terms/Definitions/Acronyms.

(1) See IRM 4.36.1.1.7, Related Resources.

(1) The examination team is responsible for identifying all JC cases in their inventory, based on either the return information submitted by the taxpayer or when the case meets the JC criteria. The examination team must ensure that all returns (both source and carryback years) in the case file have Project Code 0077 on ERCS/AIMS. If during an examination the team determines a case no longer meets the JC criteria, the manager of the examination team must remove the project code. Project Code 0077 takes precedence over all other project codes that may be applicable to the case. See IRM 4.36.2.4, Determining Joint Committee Jurisdictional Amount and Years.

(1) If a taxpayer files a claim for refund or application for tentative refund during an open examination that is in excess of the jurisdictional threshold, the examination must be expanded to include such source year. Certain cases can be closed and reported to the JCT prior to the resolution of all issues. See IRM 4.36.3.7.2, Tentative Allowance from Unexamined Source Years — Report Required, for procedures and criteria for tentative allowances from unexamined source years and IRM 4.36.3.7.3, Request for Refund — Claims from Unexamined Source or Refund Years — Modified Expedite Refund Report, for the procedures and criteria for claims from unexamined source or refund years.

(1) If an examination team discovers that an overpayment in excess of the jurisdictional threshold has been refunded, but not reported to the JCT, the examination team must notify their manager and the *LB&I Joint Committee Assistance mailbox.

(2) The JCR program manager coordinates with Office of Chief Counsel and the examination team to determine the appropriate steps to take on a case-by-case basis.

(3) If determined that the case is reportable to the JCT, the examination team that closed the examination of the case is responsible for securing the required files and submitting the case to the JCR program in accordance with IRM 4.36, even though the examination has been completed and closed.

(1) All pertinent years (both refund and source years) must be covered in a current examination or survey-after-assignment action, even if one or more of the refund years has been previously surveyed after assignment or examined. All prior examination or survey-after-assignment reports pertaining to such years must be included in the case file.

(2) If the refund or credit is for a year that was previously examined, that year is not reexamined unless such action is necessary under reopening criteria, also known as "case return" criteria.

(1) Upon completion of the examination, the examination team will inform the taxpayer that a JC report is required, answer any taxpayer questions about JC procedures, and advise the taxpayer to expect written notification from the examination team when a JC report has been sent. Letter 1573 is used for this purpose. See IRM 4.36.4.3.1 , Taxpayer Notification Letters.

(1) JC cases are considered "Excepted Agreed Cases" and as such the reopening procedures do not apply. See IRM 4.10.8.5, Excepted Agreed Cases.

(2) The Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, or Form 890, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment - Estate, Gift, and Generation - Skipping Transfer Tax, must not contain any restricted language.

(3) A qualified Form 870 or Form 890 will not be accepted for JC cases.

(1) Adjustments due to carrybacks will result in restricted interest. Even if there is no tax change to a carryback year, there may be a net interest assessment or abatement. See IRM 4.11.11.10.4, Restricted Interest.

(2) The tax computation specialist (TCS) is responsible for the preparation of Section I of Form 2285, Concurrent Determinations of Deficiencies (Increase in Tax) and Overassessments (Decrease in Tax) in Cases Involving Restricted Interest Provisions of the Internal Revenue Code, if applicable. The examination team must review these computations with the TCS.

(3) For estate tax, use Form 1366, Tax Analysis Worksheet of Overassessment of Estate Tax Involving Restricted Interest.

(1) Due to the time required to process a JC case, the examination team does not solicit Form 2297, Waiver of Statutory Notification of Claim Disallowance, in an agreed claim case if a refund or credit is disallowed in full or in part. Such action is a disadvantage to the taxpayer because it prematurely starts the running of the two-year period for filing suit.

(2) When the examination team receives notification from the JCS that the release letter has been received from the JCT, the examination team solicits and obtains the taxpayer’s signature on Form 2297 and follows normal case closing procedures.

(3) If the taxpayer declines to sign Form 2297, the examination team indicates that a statutory notice of claim disallowance (Letters 905 and 906) is issued to the taxpayer. This is shown on page 1 of Form 3198, Special Handling Notice for Examination Case Processing, under the section, "Forward to Technical Services." The case is then forwarded to the examination team’s servicing Technical Services Group.

(1) The examination team’s case must have sufficient documentation to justify that an examination is not warranted. If the reason, economic or otherwise, for the overassessment is not readily determinable from the return or file, the examination team may use the options below:

1. Obtain the necessary information from public sources (e.g., annual report, Security Exchange Commission’s filings, Moody’s, Standard and Poor’s, etc.) The examination team’s request for copies of the taxpayer’s tax returns, prior RARs or information otherwise available from public sources is within the confines of a survey-after-assignment action.

2. If the examination team needs to contact the taxpayer, use Letters 6461– 6464.

(2) However, if the examination team inspects any portion of the taxpayer's books and records (except as provided in this section) or discusses any potential issues with the taxpayer, the return cannot be surveyed under this procedure.

(3) Cases containing computational errors unfavorable to the taxpayer (more tax due or less refund), may be surveyed after assignment. For these types of cases, see SB/SE Division Delegation Order 1-23-15, Error Tolerance Levels (IRM 1.2.65.3.4), or LB&I Division Delegation Order 1-23-17, Error Tolerance Levels for LB&I Cases (IRM 1.2.63.2.16). Include the following in the "Explanation" section of Form 1900:

1. Statement that there was a computational error,

2. The error amount and the tax years,

3. Statement that there were no other potential issues identified, and

4. Proper approval was received. "Approved by" section must be completed and signed by the individual with delegated authority under the delegation order.

(1) All survey-after-assignment returns use Form 1900, Income Tax Survey. Each year must be shown separately on Form 1900.

(1) All pertinent years (refund years and source years) must be included in the survey-after-assignment action, even if one or more of the refund years has been previously closed. Include all prior examination reports pertaining to such years in the case file.

(2) For survey-after-assignment cases, ensure that the tax shown on the tax return agrees with current transcripts, and are not more than 30-days old when the case is referred to the JCR Program.

(3) The documentation requirements for survey-after-assignment cases are listed below.

1. Form 4665, Report Transmittal. See IRM 4.36.3.6.2 for required information.

2. Form 5321, Joint Committee Case Checklist, prepared and signed by the examiner and examination team manager.

3. A computational RAR (including Form 4549-A, Form 4549-B, BNA worksheets or RGS calculation output worksheets) prepared by a TCS to verify the accuracy of all tax computations. The examiner’s signature is not required. SB/SE specialty examiners (excise, estate & gift) and TE/GE examiners will do their own tax computations on JC cases.

4. For examination teams in SB/SE and LB&I, the TCS prepares the JC spreadsheet.

(1) All contacts with the JCT must go through the JCR program. See IRM 4.36.4.4, Inquiries from Joint Committee on Taxation.

(2) The JCR Program and the JCT will discuss informal inquiries on a survey-after-assignment case that cannot be resolved without contacting the taxpayer.

(3) If the IRS agrees that the requested information is critical to the JCT’s review, the taxpayer's returns will be examined in order to respond to the inquiry. This contact removes the case from the survey-after-assignment procedures and an RAR is required. See IRM 4.36.3.6.1, Revenue Agent’s Report (RAR) Requirements.

(4) All inquiries from the JCT are congressional Inquiries subject to disclosure rules. Congressional records cannot be released to the taxpayer without written permission of the JCT. See IRM 4.36.4.5, Disclosure of Correspondence with the JCT.

(5) Absent formal notice to the contrary, a request by the JCT for additional documentation in a specific case will not set a precedent for similar documentation in other cases involving the same issue.

(1) Restricted consents will not be used in JC cases because it would restrict the rights of the JCT to perform its oversight function.

(1) Update the statute date of the carryback years on AIMS/ERCS and/or RCCMS with the correct alpha code when the regular statute has expired or is about to expire. See IRM Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS.

(2) For unpaid claims, replace the day field with AA. The month and year fields do not change.

(3) If the claim or tentative allowance was paid, “BB (NOL)” and “DD (credits)” replace the day field. The month and year fields must be changed to the earliest source year statute.

(1) For all JC cases, the examination team is responsible for maintaining the required statute controls per IRM 25.6, Statute of Limitations, retaining the case file and closing the case.

(1) An RAR must be prepared by a TCS for all examined JC cases within LB&I and SB/SE. SB/SE specialty examiners (excise, estate & gift) and TE/GE examiners prepare their own RARs. The RAR includes the following:

1. Form 4549-A (signed and dated by the examiner), Form 4549-B (LB&I only), and a BNA or RGS output worksheet. See IRM 4.10.8.1.5, Terms, IRM 4.10.8.5, Excepted Agreed Cases.

2. A written explanation of all adjustments on Form 886-A, Form 5701, or leadsheets. See IRM 4.10.9.6.2.2, Issue Lead Sheet Content, and IRM 4.10.8.12.4, Explanation of Items. For LB&I cases, see IRM 4.46.6.4, Examination Reports, paragraph(7). For exempt organization cases, see IRM 4.75.15.7, Change Cases - Proposing Adjustments, and IRM 4.75.37, Exempt Organization Examination Procedures - Claims, Requests for Abatement and Examination Reconsiderations. For employee plans, see IRM 4.71.8, Employee Plans Examination of Returns - EP Claims, and IRM 4.10.8.12.4, Explanation of Items.

3. Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment. See IRM 4.36.3.2.6, Form 870, and IRM Exhibit 4.10.8-2, Preparation of Form 870. For estate and gift tax cases, see Form 890, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment - Estate, Gift, and Generation-Skipping Transfer Tax, or Form 890-T, Waiver of Restrictions on Assessment and Collection of Transferee or Fiduciary Liability for Estate, Gift, and Generation-Skipping Transfer Tax. Also see IRM 4.25.10.7.3.1, 30 Day Letter Procedures — Examiner, paragraph 8.

(1) Form 4665, Report Transmittal, lists the returns included in the JC case referral, corresponding statute of limitations and explains the causes of the overassessments (reasons for the refund). If the overassessments result from a net operating loss, the economic reason for such loss must be explained. Include a statement of the taxpayer’s principal business activity, principal products, and any major changes in the tax years.

(2) For corporations, the following additional information will be furnished in every case (as applicable):

1. Date and place of incorporation.

2. If stock is closely held, who controls the corporation.

3. Names of subsidiaries or affiliates.

4. Any changes in capital structure such as mergers, acquisitions, dispositions, etc., during the years under examination or survey. Include adequate information for each major event such as asset acquisition, stock acquisition, reverse triangular merger, IRC 368(h), corporate equity reduction transactions (CERT), etc.

5. Whether the stock is publicly held and on which exchange.

6. IRC 172(f) (specified liability) loss fully explained, including an analysis of the rulings and court cases.

7. If there is a capital loss carryback, comment on the applicability of the loss disallowance rules of Treasury Regulation 1.337(d)-2.

(3) If an issue arises as to the proper carryback period of losses or credits of a newly acquired member of a consolidated group, state whether the newly acquired corporation was organized by or for a preexisting member of the consolidated group (i.e., SRLY).

(4) If the adjustments are related to losses or credits from a pass-through entity, the examination team will add a statement to include the following:

1. Whether the return was inspected or examined,

2. The reason for the economic loss or adjustment,

3. Principal business activity,

4. Taxpayer ownership interest, and

5. Whether the taxpayer had basis, was at-risk and materially participated in the pass-through loss entity. See IRM 4.36.3.2, Examination Procedures, paragraph (2).

(5) Contact information for the examiner and examination team manager, including address and telephone numbers must be entered on Form 4665.

(6) The name and title of the taxpayer’s corporate officer and/or power of attorney/authorized representative who is to receive correspondence must be included.

(7) Short taxable periods have numerous possible tax consequences. To fully understand the tax implications of the tax years reported, the examination team must disclose the existence and cause of any short taxable period on Form 4665.

(8) Explain any large, unusual or questionable items even if not adjusted.

(9) Form 4665 must be signed and dated by both the examiner and examination team manager.

(1) The tax computation specialist (TCS) is responsible for the preparation of the JC spreadsheet. The JC spreadsheet is a required document (except for SB/SE estate and gift and TE/GE) included with the electronic Joint Committee referral. Use the Specialist Referral System (SRS) to request a TCS.

(1) The following items may apply to certain JC cases. If so, they should be documented in the case file as described below.

1. Closing agreements, see IRM 4.36.3.6.4.1

2. Competent Authority

3. Advance Pricing Agreements

4. Compliance Assurance Process

5. Change of Accounting Method

(1) Upon completion of the examination, if the taxpayer is entitled to an IRC 6405(a) refund, and there are unagreed issues, the case may be a minimum refund case.

(2) A minimum refund is the amount the taxpayer is due to receive after offsetting any potential unagreed deficiency. The taxpayer would receive the net minimum refund amount regardless of the outcome of the unagreed issues.

(3) A minimum refund may be processed before the case is sent to Appeals if:

1. The unagreed issues require a substantial period of time to resolve (one year or more for Large Corporate Compliance (LCC) cases, six months or more for all other cases), and the delay would deprive the taxpayer of a timely refund to which it is clearly entitled, in spite of the resolution of the unagreed issues, and

2. The taxpayer signs Form 870 indicating agreement with the minimum refund. See examples below for determining the minimum refund due the taxpayer.

(4) If the minimum refund exceeds the jurisdictional threshold , and the taxpayer has indicated agreement with the examination team’s findings by signing Form 870, the JCR program must report the refund to the JCT before releasing the unagreed issues to Appeals. The supplemental report will be made by the office that makes the final determination of the taxpayer’s liability (that includes agreed or unagreed issues) for the year(s) previously reported to the JCT.

(5) Once the JCT release letter is received for the minimum refund report, the examination team must process the minimum refund and ensure the overassessment posts to the master file before the unagreed issues can be forwarded to Appeals. Verification that the minimum refund was issued to the taxpayer must be documented in the case file.

(6) A minimum refund may also apply when there are open pass-through entity examinations. See IRM 4.36.4.10, TEFRA and Investor Level Statute Control (ILSC) Procedures, for pass-through suspense procedures.

(1) A case can be submitted to the JCR program with tentative allowances from unexamined source years, if:

1. It is a JC case without regard to the carryback from the unexamined source years, and

2. The examination of the source years will take over six months (or one year for LCC taxpayers) to complete.

(2) When an NOL, capital loss, or credit carryback is allowed subject to future examination of the subsequent year, the examination report, (Form 4549-A) should contain the following statement:
"The net operating loss (or capital loss or credit) carryback from the year ending MM/DD/YYYY, reflected herein, is subject to correction upon examination of the tax return from which it originated."

(3) If, as a result of the examination, the tentative allowances are reduced below the jurisdictional threshold, the examination team notifies the JCR program in writing. Otherwise, the examination team submits a referral for the source and carryback years at the completion of the examination.

(4) If the current examination would not be a JC case but for those carrybacks, the case is not to be submitted to the JCR program for review until the examination is completed on the subsequent source years.

(1) These procedures are an accommodation to taxpayers and are not statutorily required. The IRS can issue a conditional refund when the refund is in excess of the jurisdictional threshold prior to the completion of the examination if all of the following apply:

1. The taxpayer has requested the refund and filed a formal claim.

2. The examination team, in their discretion, is satisfied that the claim issues resulting in the refund will reasonably lead to allowance of all or a substantial part of the claimed refund.

3. No disadvantage to the government will occur.

4. The taxpayer posts a bond or other similar type of security. See IRM 4.36.3.7.4, Posting of Security — Modified Expedite Refund Report, and Exhibit 4.36.3-1, Sample Security Agreement.

5. The examination will not be completed within six months from the date the taxpayer requests the refund.

6. There is sufficient time on the statute of limitations to complete the examination. All reportable years must have open live statutes, original statute date or by extension. If there are years included in the case which are open only by reason of a carryback, the entire case is not reported under the modified expedite refund procedures.

(2) This procedure is also applicable if the taxpayer files a claim after the due date to correct errors on its original return. An amended return filed before the due date does not require a report be submitted to the JCT.

(3) The JCS prepares the modified expedite refund report and submits it to the JCT. The following documents are required from the examination team to complete the modified expedited refund report:

1. Tax returns for all source and carryback years, including any amended returns and tentative refund applications.

2. Transcripts of accounts for all tax years. The examination team must check the transcript against information in the case file to ensure that all deficiencies, overassessments, claims paid, and refunds or credits, including tentative allowances and abatements, are properly reflected in the tax computation for the RAR and JC spreadsheets.

3. Form 4665, Report Transmittal, signed by the examiner and examination team manager. See IRM 4.36.3.6.2.

(4) The examination team is responsible for obtaining all necessary letter of credit extensions and statute extensions until the case is closed.

(5) A supplemental report may be required at the completion of the examination. The statutes must be protected for all years, including the source year(s), until the supplemental report has been released by the JCT.

(1) To submit a modified expedite refund report, the taxpayer is required to post a bond or similar security for the refund amount. Refer to IRC 7101 , the regulations thereunder and IRM 5.6.1, Collateral Agreements and Security Type Collateral, for further guidance. An additional amount of bond or similar security may be required with respect to interest on the refund in the event all or part of the refund must be repaid. This amount is measured by the reasonably anticipated time to complete the examination and the interest rate currently in effect under IRC 6621. Coordination with local counsel in the development of the bond or similar security is required. The posting of the bond or similar security must be accomplished prior to the submission of the referral to the JCR program.

(2) Any bond or similar security needs to specify that in fully agreed cases the agreement will not terminate until the JCT issues a release letter. See Exhibit 4.36.3-1 for a sample security agreement.

(3) A copy of the bond or similar security agreement signed by the taxpayer must accompany the modified expedite refund report. At the time of the JCR referral, the bond or similar security agreement may not be signed by the approving IRS official. If there are no inquiries from the JCT, the approving IRS official may sign the security after the expiration of the 30-day period from when the JC report was submitted to the JCT.

(4) The refunds must not be released until the JCR program notifies the examination team that the appropriate documents may now be executed.

(1) The JC review is conducted electronically via documents obtained through a case inventory system i.e., Issue Management System (IMS), email or other electronic submission. The JCS contacts the examination team to secure additional documents as needed. The JCS inputs their time on the case into IMS, if applicable.

(2) If the review cannot be completed due to technical, computational, or procedural errors, a Notice of Suspended Referral (NSR) Form is emailed by the JCS after discussing the issue with the examination team.  See IRM 4.36.4.2, Notice of Suspended Referral. The examination team must update ERCS or RCCMS to remove ARC 027 if an NSR is issued.  When the errors have been corrected, the examination team must:

1. Update ERCS or RCCMS to reflect ARC 027,

2. Sign the NSR, and

3. Resubmit the electronic referral (do not create a new referral).

(3) Letter 1573 notifies the taxpayer the JC report has been sent to the JCT. When the JC report is submitted to the JCT, the JCS prepares Letter 1573 (and Letter 937, if applicable) for the examiner’s signature. The examiner signs and transmits Letter 1573 (and Letter 937, if applicable).

(4)  When the release letter or final staff review memorandum (SRM) is received from the JCT, the JCS notifies the examination team. The JCS uploads the JCR program documents to IMS SAIN 022, if applicable, and provides the following documents to the examination team for case closure:

1. Letter 1574 notifies the taxpayer that the JCT has completed consideration of the JC report. The JCS prepares Letter 1574 (and Letter 937, if applicable) for the examiner’s signature. The examiner signs and transmits the letters.

2. Release letter or final SRM - (subject to disclosure procedures). See IRM 4.36.4.5, Disclosure of Correspondence with Joint Committee on Taxation.

3. JC report – (subject to disclosure procedures). See 4.36.4.5, Disclosure of Correspondence with Joint Committee on Taxation.

4. Letter 1573.

5. JC spreadsheet or other case documents updated by the JCS, if applicable.

(5) The examination team will remove ARC 027 and then close the case to CCP or follow local case closing procedures.

(1) There are two types of inquiries from the JCR program: informal and formal. An informal inquiry is made by telephone or email. A formal inquiry can be in the form of a Notice of Suspended Referral (NSR) or a Staff Review Memorandum (SRM). See IRM 4.36.4.2, Notice of Suspended Referrals (NSR) and IRM 4.36.3.9.3, Formal Inquiries — SRM.

(1) Every effort should be made to respond to the JCR inquiry in a timely manner.

(2) A status report should be submitted to the JCS every 30 days from receipt of the inquiry. The status report should contain the case name, tax years, earliest statute of limitations date, status explanation/reason for delay, and expected completion date.

(1) SRMs are formal inquiries issued by the JCT to the IRS Commissioner. The JCT shares the SRM via email with JCR executives, JCR program manager, JCR managers and the JCR senior analyst. There are two types of SRMs issued:

1. SRM – Response Required. See IRM 4.36.3.9.3.1, SRM Procedures and Tracking – Response Required.

2. SRM – No Response Required. See IRM 4.36.3.9.3.2, SRM Procedures and Tracking – No Response Required.

(2) Responses to SRMs whereby no change will be made because the IRS does not agree with JCT’s recommendations, need to be approved by the applicable operating division deputy commissioner. See Delegation Order 4-18 (Rev. 1), Reports of Refunds and Credits to the Joint Committee on Taxation.

(3) A response to all other SRMs can be approved by the director as to their respective cases. See Delegation Order 4-18 (Rev. 1) at IRM 1.2.2.5.15.

(4) Within 5 days of receiving an SRM, the JCR program manager shares the SRM with the examiner, examination team manager, territory manager, DFO/area executive and senior director.

(5) The JCR program manager shares the SRM with the practice network specialty area for awareness of the issue, if applicable.