Suspension of Running of Period of Limitations During a Proceeding to Enforce or Quash a Designated or Related Summons, 22879-22883 [E8-9147]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 73, Number 82 (Monday, April 28, 2008)]
[Proposed Rules]
[Pages 22879-22883]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-9147]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[REG-208199-91]
RIN 1545-BC55


Suspension of Running of Period of Limitations During a 
Proceeding to Enforce or Quash a Designated or Related Summons

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and withdrawal of notice of 
proposed rulemaking.

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SUMMARY: This document contains proposed regulations regarding the use 
of designated summonses and related summonses and the effect on the 
period of limitations on assessment when a case is brought with respect 
to a designated or related summons. This document also withdraws the 
previous proposed regulations published in the Federal Register on July 
31, 2003 (68 FR 44905). These proposed regulations reflect changes to 
section 6503 of the Internal Revenue Code of 1986 made by the Omnibus 
Budget Reconciliation Act of 1990 and the Small Business Job Protection 
Act of 1996. These regulations affect corporate taxpayers that are 
examined under the coordinated issue case (CIC) program and are served 
with designated or related summonses. These regulations also affect 
third parties that are served with designated or related summonses for 
information pertaining to the corporate examination.

DATES: Written or electronic comments and requests for a public hearing 
must be received by July 28, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-208199-91), room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Alternatively, submissions may be hand delivered 
between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-208199-
91), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC. Comments may also be submitted 
electronically to the Federal eRulemaking Portal at https://
www.regulations.gov (IRS REG-208199-91).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Elizabeth Rawlins, (202) 622-3630; concerning submissions of comments, 
Richard Hurst, (202) 622-7180 or Richard.A.Hurst@IRSCounsel.Treas.Gov 
(not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed regulations amending the Procedure 
and Administration regulations (26 CFR part 301) under section 6503. 
Section 11311 of the Omnibus Budget Reconciliation Act of 1990 (Pub. L. 
101-508, 104 Stat. 1388) amended section 6503(k) to suspend the period 
of limitations on assessment when a case is brought with respect to a 
designated or related summons. Section 6503(k) was

[[Page 22880]]

redesignated as section 6503(j) by section 1702(h)(17)(A) of the Small 
Business Job Protection Act of 1996 (Pub. L. 104-188, 110 Stat. 1874).
    Proposed regulations under section 6503(j) were previously 
published in the Federal Register on July 31, 2003 (68 FR 44905) (the 
2003 proposed regulations). The 2003 proposed regulations contained a 
procedure for determining the date of compliance with a designated or 
related summons issued with respect to a taxpayer whose statute of 
limitations on assessment was suspended under section 6503(j) because a 
court proceeding was brought. No comments were received with respect to 
this procedure or any other aspect of the 2003 proposed regulations, 
and no hearing was requested or held. The IRS and the Treasury 
Department have determined that, in the interest of effective tax 
administration, the procedure in the 2003 proposed regulations is not 
warranted. Instead, the IRS intends to create procedures by which 
taxpayers can inquire about the suspension of their periods of 
limitations under section 6503(j), including the date of compliance 
with the summons, and to publish these procedures in the Internal 
Revenue Manual. In addition, the IRS has established administrative 
procedures in the Internal Revenue Manual that ensure substantial IRS 
executive involvement and oversight of any designated and related 
summons issued. Additionally, Sec.  301.6503(j)-1(c)(1)(i) of these 
proposed regulations requires that any designated summons be reviewed 
by the IRS Division Commissioner and Division Counsel of the Office of 
Chief Counsel before it is issued. Accordingly, the 2003 proposed 
regulations are withdrawn.

Explanation of Provisions

    These proposed regulations generally provide that the period of 
limitations on assessment provided for in section 6501 is suspended 
with respect to any return of tax by a corporation that is the subject 
of a designated or related summons if a court proceeding to enforce or 
quash is instituted with respect to that summons.

Designated Summonses and Related Summonses

    A designated summons is a summons issued to determine the amount of 
any internal revenue tax of a corporation for which a return was filed 
if certain additional requirements are satisfied. A designated summons 
may only be issued to a corporation (or any other person to whom the 
corporation has transferred records) if the corporation is being 
examined under the IRS's coordinated examination program or ``any 
successor program.'' The existing successor program to the coordinated 
examination program is the coordinated issue case (CIC) program.
    Section 6503(j)(2)(A)(i) requires that the issuance of the summons 
be preceded by a review by the regional counsel of the Office of Chief 
Counsel for the region in which the examination of the corporation is 
being conducted. The office of regional counsel was eliminated by the 
IRS reorganization implemented pursuant to the IRS Reform and 
Restructuring Act of 1998. Because the office of regional counsel no 
longer exists, these proposed regulations provide that the review must 
by completed by the Division Commissioner and the Division Counsel of 
the Office of Chief Counsel (or their successors) for the organizations 
that have jurisdiction over the corporation whose liability is the 
subject of the summons. The summons also must be issued at least 60 
days before the day on which the statute of limitations on assessment 
under section 6501 would otherwise expire. Finally, the summons must 
clearly state that it is a designated summons for purposes of section 
6503(j).
    A related summons is any other summons that is issued with respect 
to the same tax return of the corporation as a designated summons and 
is issued during the 30-day period that begins on the date the 
designated summons is issued.

Suspension of Period of Limitations on Assessment

    Section 6503(j)(1) suspends the period of limitations on assessment 
under section 6501 for the applicable tax period when a court 
proceeding is brought with respect to a designated or related summons. 
For purposes of these proposed regulations, a court proceeding is a 
proceeding brought in a United States district court either to quash a 
designated or related summons under section 7609(b)(2) or to enforce a 
designated or related summons under section 7604. The court proceeding 
must be brought within the otherwise applicable period of limitations 
in order to suspend that period under section 6503(j).
    The proposed regulations provide that the suspension begins on the 
day that a court proceeding is brought and continues until there is a 
final resolution as to the summoned party's response to the summons 
(discussed in the next section), plus an additional 120 days if a court 
requires any compliance with the summons at issue. If a court does not 
require any compliance, then the period of limitations on assessment 
resumes running on the day following the date of the final resolution 
and in no event shall expire before the 60th day following the date of 
final resolution.

Final Resolution of a Summoned Party's Response to a Summons

    Under section 6503(j)(3)(B), the length of the suspension under 
section 6503(j) depends on when ``final resolution'' of a summoned 
party's response to the designated or related summons occurs. The term 
``final resolution'' is not defined in the statute. The legislative 
history states that the term ``final resolution'' has the same meaning 
it has under section 7609(e)(2)(B), relating to third-party summonses. 
H.R. Conf. Rep. No. 101-964 (1990). Specifically, the conference report 
states that final resolution means that no court proceeding remains 
pending and that the summoned party has complied with the summons to 
the extent required by a court.
    Accordingly, the proposed regulations provide that final resolution 
occurs when no court proceeding remains pending and the summoned party 
complies with the summons to the extent required by the court. If the 
summoned party has complied with the summons to the extent required by 
the court but there still remains time to appeal that order, final 
resolution occurs when all appeals have been either disposed of or the 
period in which an appeal may be taken or a request for further review 
may be made has expired. If all appeal periods have expired but the 
summoned party has not complied with the summons to the extent required 
by the court, the proposed regulations provide that final resolution 
does not occur until the summoned party has complied with the summons 
to the extent required by the court. Whether a party has complied with 
the terms of the summons as enforced by a court cannot be determined 
until the completeness of the materials produced and the testimony 
given has been evaluated. The IRS intends to create administrative 
procedures by which the taxpayer can inquire about the suspension of 
its period of limitations under section 6503(j) and to publish these 
procedures in the Internal Revenue Manual.
    In cases in which a court wholly denies enforcement or orders that 
the summons in its entirety be quashed, the date of compliance with the 
court's order is treated as occurring on the date when all appeals are 
disposed of or when all appeal periods expire. In cases in which a 
court orders the summons enforced, in whole or in part, the

[[Page 22881]]

determination of whether there has been full compliance will be made 
within a reasonable time after the later of the giving of all testimony 
or the production of all records required by the order. What 
constitutes a reasonable time will depend on the volume and complexity 
of the records produced.
    If, following an enforcement order, collateral proceedings are 
brought challenging whether the production made by the summoned party 
fully satisfied the court order and whether sanctions should be imposed 
against the summoned party for a failing to do so, the suspension of 
the periods of limitations shall continue until the order enforcing any 
part of the summons is fully complied with and the decision in the 
collateral proceeding becomes final. A decision in a collateral 
proceeding becomes final when all appeals are disposed of or when the 
period for appeal or further review has expired.

Other Rules

    These proposed regulations provide additional rules regarding the 
number of designated and related summonses that may be issued with 
respect to a return for any taxable period, the time within which a 
court proceeding must be brought to enforce or quash a designated or 
related summons, the computation of the suspension period in cases of 
multiple court proceedings, and the computation of the 60-day period 
for assessment when the last day falls on a weekend or holiday.
    The proposed regulations also address the relationship of the 
suspension period provided for in section 6503(j) with other suspension 
provisions in the Code. The proposed regulations provide that if a 
designated or related summons also could be subject to the suspension 
rules governing third-party summonses under section 7609(e), then the 
suspension rules in section 6503(j) govern. In addition, the proposed 
regulations provide that the section 6503(j) suspension period is 
independent of, and may run concurrently with, any other period of 
suspension, such as the suspension period for third-party summonses 
under section 7609(e) if a separate third-party summons also was issued 
in a case. Examples of these rules are contained in the proposed 
regulations.

Proposed Effective Date

    These regulations are proposed to be applicable on the date final 
regulations are published in the Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to this regulation, and because the 
regulation does not impose a collection of information requirement on 
small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) 
does not apply. Pursuant to section 7805(f), this regulation has been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and the Treasury Department request comments on the 
clarity of the proposed rules and how they can be made easier to 
understand. All comments will be available for public inspection and 
copying. A public hearing may be scheduled if requested in writing by a 
person who timely submits written comments. If a public hearing is 
scheduled, notice of the date, time, and place for the hearing will be 
published in the Federal Register.

Drafting Information

    The principal author of these regulations is Elizabeth Rawlins of 
the Office of the Associate Chief Counsel, Procedure and 
Administration.

Lists of Subjects in 26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Withdrawal of Proposed Regulations

    Accordingly, under the authority of 26 U.S.C. 7805, the notice of 
proposed rulemaking (REG-208199-91) that was published in the Federal 
Register on Thursday, July 31, 2003 (68 FR 44905) is withdrawn.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

    Paragraph 1. The authority citation for part 301 continues to read 
in part as follows:


    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 301.6503(j)-1 is added to read as follows:


Sec.  301.6503(j)-1  Suspension of running of period of limitations; 
extension in case of designated and related summonses.

    (a) General rule. The running of the applicable period of 
limitations on assessment provided for in section 6501 is suspended 
with respect to any return of tax by a corporation that is the subject 
of a designated or related summons if a court proceeding is instituted 
with respect to that summons.
    (b) Period of suspension. The period of suspension is the time 
during which the running of the applicable period of limitations on 
assessment provided for in section 6501 is suspended under section 
6503(j). If a court requires any compliance with a designated or 
related summons by ordering that any record, document, paper, object, 
or items be produced, or the testimony of any person be given, the 
period of suspension consists of the judicial enforcement period plus 
120 days. If a court does not require any compliance with a designated 
or related summons, the period of suspension consists of the judicial 
enforcement period, and the period of limitations on assessment 
provided in section 6501 shall not expire before the 60th day after the 
close of the judicial enforcement period.
    (c) Definitions--(1) A designated summons is a summons issued to a 
corporation (or to any other person to whom the corporation has 
transferred records) with respect to any return of tax by such 
corporation for a taxable period for which such corporation is being 
examined under the coordinated industry case program or any other 
successor to the coordinated examination program if--
    (i) The Division Commissioner and the Division Counsel of the 
Office of Chief Counsel (or their successors) for the organizations 
that have jurisdiction over the corporation whose tax liability is the 
subject of the summons have reviewed the summons before it is issued;
    (ii) The IRS issues the summons at least 60 days before the day the 
period prescribed in section 6501 for the assessment of tax expires 
(determined with regard to extensions); and
    (iii) The summons states that it is a designated summons for 
purposes of section 6503(j).

[[Page 22882]]

    (2) A related summons is any summons issued that--
    (i) Relates to the same return of the corporation under examination 
as the designated summons; and
    (ii) Is issued to any person, including the person to whom the 
designated summons was issued, during the 30-day period that begins on 
the day the designated summons is issued.
    (3) The judicial enforcement period is the period that begins on 
the day on which a court proceeding is instituted with respect to a 
designated or related summons and ends on the day on which there is a 
final resolution as to the summoned person's response to that summons.
    (4) Court proceeding--(i) In general. For purposes of this section, 
a court proceeding is a proceeding filed in a United States district 
court either to quash a designated or related summons under section 
7609(b)(2) or to enforce a designated or related summons under section 
7604. A court proceeding includes any collateral proceeding, such as a 
civil contempt proceeding.
    (ii) Date when proceeding is no longer pending. A proceeding to 
quash or to enforce a designated or related summons is no longer 
pending when all appeals (including review by the Supreme Court) are 
disposed of or after the expiration of the period in which an appeal 
may be taken or a request for further review (including review by the 
Supreme Court) may be made. If, however, following an enforcement 
order, a collateral proceeding is brought challenging whether the 
testimony given or production made by the summoned party fully 
satisfied the court order and whether sanctions should be imposed 
against the summoned party for a failure to so testify or produce, the 
proceeding to quash or to enforce the summons shall include the time 
from which the proceeding to quash or to enforce the summons was 
brought until the decision in the collateral proceeding becomes final. 
The decision becomes final on the date when all appeals (including 
review by the Supreme Court) are disposed of or when all appeal periods 
or all periods for further review (including review by the Supreme 
Court) expire. A decision in a collateral proceeding becomes final when 
all appeals (including review by the Supreme Court) are disposed of or 
when all appeal periods or all periods for further review (including 
review by the Supreme Court) expire.
    (5) Compliance--(i) In general. Compliance is the giving of 
testimony or the performance of an act or acts of production, or both, 
in response to a court order concerning the designated or related 
summons and the determination that the terms of the court order have 
been satisfied.
    (ii) Date compliance occurs. Compliance with a court order that 
wholly denies enforcement of a designated or related summons is deemed 
to occur on the date when all appeals (including review by the Supreme 
Court) are disposed of or when the period in which an appeal may be 
taken or a request for further review (including review by the Supreme 
Court) may be made expires. Compliance with a court order that grants 
enforcement, in whole or in part, of a designated or related summons, 
occurs on the date it is determined that the testimony given, or the 
books, papers, records, or other data produced, or both, by the 
summoned party fully satisfy the court order concerning the summons. 
The determination of whether there has been full compliance will be 
made within a reasonable time, given the volume and complexity of the 
records produced, after the later of the giving of all testimony or the 
production of all records requested by the summons or required by any 
order enforcing any part of the summons. If, following an enforcement 
order, collateral proceedings are brought challenging whether the 
production made by the summoned party fully satisfied the court order 
and whether sanctions should be imposed against the summoned party for 
a failing to do so, the suspension of the periods of limitations shall 
continue until the order enforcing any part of the summons is fully 
complied with and the decision in the collateral proceeding becomes 
final. A decision in a collateral proceeding becomes final when all 
appeals are disposed of, the period in which an appeal may be taken has 
expired or the period in which a request for further review may be made 
has expired.
    (6) Final resolution occurs when the designated or related summons 
or any order enforcing any part of the designated or related summons is 
fully complied with and all appeals or requests for further review are 
disposed of, the period in which an appeal may be taken has expired or 
the period in which a request for further review may be made has 
expired.
    (d) Special rules--(1) Number of summonses that may be issued--(i) 
Designated summons. Only one designated summons may be issued in 
connection with the examination of a specific taxable year or other 
period of a corporation. A designated summons may cover more than one 
year or other period of a corporation. The designated summons may 
require production of information that was previously sought in a 
summons (other than a designated summons) issued in the course of the 
examination of that particular corporation if that information was not 
previously produced.
    (ii) Related summonses. There is no restriction on the number of 
related summonses that may be issued in connection with the examination 
of a corporation. As provided in paragraph (c)(2) of this section, 
however, a related summons must be issued within the 30-day period that 
begins on the date on which the designated summons to which it relates 
is issued and must relate to the same return as the designated summons. 
A related summons may request the same information as the designated 
summons.
    (2) Time within which court proceedings must be brought. In order 
for the period of limitations on assessment to be suspended under 
section 6503(j), a court proceeding to enforce or to quash a designated 
or related summons must be instituted within the period of limitations 
on assessment provided in section 6501 that is otherwise applicable to 
the tax return.
    (3) Computation of suspension period if multiple court proceedings 
are instituted. If multiple court proceedings are instituted to enforce 
or to quash a designated or one or more related summonses concerning 
the same tax return, the period of limitations on assessment is 
suspended beginning on the date the first court proceeding is brought. 
The suspension shall end on the date that is the latest date on which 
the judicial enforcement period, plus the 120-day or 60-day period 
(depending on whether the court requires any compliance) as provided in 
paragraph (b) of this section, expires with respect to each summons.
    (4) Effect on other suspension periods--(i) In general. Suspensions 
of the period of limitations under section 6501 provided for under 
subsections 7609(e)(1) and (e)(2) do not apply to any summons that is 
issued pursuant to section 6503(j). The suspension under section 
6503(j) of the running of the period of limitations on assessment under 
section 6501 is independent of, and may run concurrent with, any other 
suspension of the period of limitations on assessment that applies to 
the tax return to which the designated or related summons relates.
    (ii) Examples. The rules of paragraph (d)(4)(i) of this section are 
illustrated by the following examples:


[[Page 22883]]


    Example 1. The period of limitations on assessment against 
Corporation P, a calendar year taxpayer, for its 2007 return is 
scheduled to end on March 17, 2011. (Ordinarily, Corporation P's 
returns are filed on March 15th of the following year, but March 15, 
2008 was a Saturday, and Corporation P timely filed its return on 
the subsequent Monday, March 17, 2008, making March 17, 2011 the 
last day of the period of limitations on assessment for Corporation 
P's 2007 tax year.) On January 4, 2011, a designated summons is 
issued to Corporation P concerning its 2007 return. On March 3, 2011 
(14 days before the period of limitations on assessment would 
otherwise expire with respect to Corporation P's 2007 return), a 
court proceeding is brought to enforce the designated summons issued 
to Corporation P. On June 6, 2011, the court orders Corporation P to 
comply with the designated summons. Corporation P does not appeal 
the court's order. On September 6, 2011, agents for Corporation P 
deliver material that they state are the records requested by the 
designated summons. On October 13, 2011, a final resolution to 
Corporation P's response to the designated summons occurs when it is 
determined that Corporation P has fully complied with the court's 
order. The suspension period applicable with respect to the 
designated summons issued to Corporation P consists of the judicial 
enforcement period (March 3, 2011 through October 13, 2011) and an 
additional 120-day period under section 6503(j)(1)(B), because the 
court required Corporation P to comply with the designated summons. 
Thus, the suspension period applicable with respect to the 
designated summons issued to Corporation P begins on March 3, 2011, 
and ends on February 10, 2012. Under the facts of this Example 1, 
the period of limitations on assessment against Corporation P 
further extends to February 24, 2012, to account for the additional 
14 days that remained on the period of limitations on assessment 
under section 6501 when the suspension period under section 6503(j) 
began.
    Example 2. Assume the same facts set forth in Example 1, except 
that in addition to the issuance of the designated summons and 
related enforcement proceedings, on April 5, 2011, a summons 
concerning Corporation P's 2007 return is issued and served on 
individual A, a third party. This summons is not a related summons 
because it was not issued during the 30-day period that began on the 
date the designated summons was issued. The third-party summons 
served on individual A is subject to the notice requirements of 
section 7609(a). Final resolution of individual A's response to this 
summons does not occur until February 15, 2012. Because there is no 
final resolution of individual A's response to this summons by 
October 5, 2011, which is six months from the date of service of the 
summons, the period of limitations on assessment against Corporation 
P is suspended under section 7609(e)(2) to the date on which there 
is a final resolution to that response for the purposes of section 
7609(e)(2). Moreover, because final resolution to the summons served 
on individual A does not occur until after February 10, 2012, the 
end of the suspension period for the designated summons, the period 
of limitations on assessment against Corporation P expires 14 days 
after the date that the final resolution as provided for in section 
7609(e)(2) occurs with respect to the summons served on individual 
A.

    (5) Computation of 60-day period when last day of assessment period 
falls on a weekend or holiday. For purposes of paragraph (c)(1)(ii) of 
this section, in determining whether a designated summons has been 
issued at least 60 days before the date on which the period of 
limitations on assessment prescribed in section 6501 expires, the 
provisions of section 7503 apply when the last day of the assessment 
period falls on a Saturday, Sunday, or legal holiday.
    (e) Effective/applicability date. This section is applicable on the 
date the final regulations are published in the Federal Register.

 Kevin M. Brown,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E8-9147 Filed 4-25-08; 8:45 am]
BILLING CODE 4830-01-P