Regulations Under IRC Section 7430 Relating to Awards of Administrative Costs and Attorneys' Fees, 10479-10490 [2016-04401]
Download as PDF
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
is committed to meaningful consultation
with Tribes on substantive matters that
have a substantial direct effect on
Tribes, in accordance with E.O. 13175
and the Department of the Interior
Policy on Consultation with Indian
Tribes.
I. Paperwork Reduction Act
This information collection for trust
land applications is authorized by OMB
Control Number 1076–0100, with an
expiration of 08/31/16. The elimination
of the requirement to comply with DOJ
standards is not expected to have a
quantifiable effect on the hour burden
estimate for the information collection,
but BIA will review whether its current
estimates are affected by this change at
the next renewal.
J. National Environmental Policy Act
This interim final rule does not
constitute a major Federal action
significantly affecting the quality of the
human environment.
K. Information Quality Act
In developing this interim final rule
we did not conduct or use a study,
experiment, or survey requiring peer
review under the Information Quality
Act (Pub. L. 106–554).
asabaliauskas on DSK5VPTVN1PROD with RULES
L. Effects on the Energy Supply (E.O.
13211)
This interim final rule is not a
significant energy action under the
definition in Executive Order 13211. A
Statement of Energy Effects is not
required.
M. Clarity of This Regulation
We are required by Executive Orders
12866 and 12988 and by the
Presidential Memorandum of June 1,
1998, to write all rules in plain
language. This means that each rule we
publish must:
(a) Be logically organized;
(b) Use the active voice to address
readers directly;
(c) Use clear language rather than
jargon;
(d) Be divided into short sections and
sentences; and
(e) Use lists and tables wherever
possible.
If you feel that we have not met these
requirements, send us comments by one
of the methods listed in the
‘‘COMMENTS’’ section. To better help
us revise the rule, your comments
should be as specific as possible. For
example, you should tell us the
numbers of the sections or paragraphs
that are unclearly written, which
sections or sentences are too long, the
sections where you believe lists or
tables would be useful, etc.
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
N. Public Availability of Comments
Before including your address, phone
number, email address, or other
personal identifying information in your
comment, you should be aware that
your entire comment—including your
personal identifying information—may
be made publicly available at any time.
While you can ask us in your comment
to withhold your personal identifying
information from public review, we
cannot guarantee that we will be able to
do so.
O. Required Determinations Under the
Administrative Procedure Act
We are publishing this interim final
rule with a request for comment without
prior notice and comment, as allowed
under 5 U.S.C. 553(b)(B). Under section
553(b)(B), we find that prior notice and
comment are unnecessary because this
is a minor, technical action that
eliminates an unnecessary requirement.
This rule removes the unnecessary
requirement that the title evidence the
applicant submits must comply with
DOJ standards for title evidence. Delay
in publishing this rule would
unnecessarily continue imposing the
unnecessary requirement on applicants
and would therefore be contrary to the
public interest.
We have requested comments on this
interim final rule. We will review any
comments received and if we receive
significant adverse comments, we will
by a future publication in the Federal
Register, initiate a proposed rulemaking
or revise or withdraw this rule.
List of Subjects in 25 CFR Part 151
§ 151.13
10479
Title review.
(a) If the Secretary determines that she
will approve a request for the
acquisition of land from unrestricted fee
status to trust status, she shall require
the applicant to furnish title evidence as
follows:
(1) Written evidence of the applicant’s
title or that title will be transferred to
the United States on behalf of the
applicant to complete the acquisition in
trust; and
(2) Written evidence of how title was
acquired by the applicant or current
owner; and
(3) Either:
(i) A current title insurance
commitment; or
(ii) The policy of title insurance
issued at the time of the applicant’s or
current owner’s acquisition of the land
and an abstract of title dating from the
time the land was acquired by the
applicant or current owner.
(b) After reviewing submitted title
evidence, the Secretary shall notify the
applicant of any liens, encumbrances, or
infirmities that the Secretary identified
and may seek additional information
from the applicant needed to address
such issues. The Secretary may require
the elimination of any such liens,
encumbrances, or infirmities prior to
taking final approval action on the
acquisition, and she shall require
elimination prior to such approval if she
determines that the liens, encumbrances
or infirmities make title to the land
unmarketable.
Dated: February 23, 2016.
Lawrence S. Roberts,
Acting Assistant Secretary—Indian Affairs.
Indians—lands, Reporting and
recordkeeping requirements.
For the reasons given in the preamble,
the Department of the Interior amends
25 CFR part 151 as follows:
[FR Doc. 2016–04332 Filed 2–29–16; 8:45 am]
PART 151—LAND ACQUISITIONS
Internal Revenue Service
1. The authority citation for part 151
continues to read as follows:
26 CFR Part 301
■
Authority: R.S. 161: 5 U.S.C. 301. Interpret
or apply 46 Stat. 1106, as amended; 46
Stat.1471, as amended; 48 Stat. 985, as
amended; 49 Stat. 1967, as amended, 53 Stat.
1129; 63 Stat. 605; 69 Stat. 392, as amended;
70 Stat. 290, as amended; 70 Stat. 626; 75
Stat. 505; 77 Stat. 349; 78 Stat. 389; 78 Stat.
747; 82 Stat. 174, as amended, 82 Stat. 884;
84 Stat. 120; 84 Stat. 1874; 86 Stat. 216; 86
Stat. 530; 86 Stat. 744; 88 Stat. 78; 88 Stat.
81; 88 Stat. 1716; 88 Stat. 2203; 88 Stat. 2207;
25 U.S.C. 2, 9, 409a, 450h, 451, 464, 465, 487,
488, 489, 501, 502, 573, 574, 576, 608, 608a,
610, 610a, 622, 624, 640d–10, 1466, 1495,
and other authorizing acts.
■
2. Revise § 151.13 to read as follows:
PO 00000
Frm 00047
Fmt 4700
Sfmt 4700
BILLING CODE 4337–15–P
DEPARTMENT OF THE TREASURY
[TD 9756]
RIN 1545–AX46
Regulations Under IRC Section 7430
Relating to Awards of Administrative
Costs and Attorneys’ Fees
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
This document contains final
regulations relating to awards of
administrative costs and attorneys’ fees.
The final regulations conform the
regulations to the amendments made in
SUMMARY:
E:\FR\FM\01MRR1.SGM
01MRR1
10480
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
the Taxpayer Relief Act of 1997 and the
IRS Restructuring and Reform Act of
1998. The regulations affect taxpayers
seeking attorneys’ fees and costs.
DATES:
Effective date: The final regulations
are effective on March 1, 2016.
Applicability date: For date of
applicability, see § 301.7430–6.
FOR FURTHER INFORMATION CONTACT:
˜
Shannon K. Castaneda at (202) 317–
5437 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
asabaliauskas on DSK5VPTVN1PROD with RULES
I. In General
This document contains final
amendments to Treasury Regulations
under section 7430 of the Internal
Revenue Code (Code) relating to awards
of administrative and attorneys’ fees.
Section 7430 generally permits a
prevailing party in an administrative or
court proceeding to seek an award for
reasonable administrative and litigation
costs incurred in connection with such
proceedings. The amendments
incorporate the 1997 and 1998
amendments to section 7430, which
were enacted as part of the Taxpayer
Relief Act of 1997 (TRA), Public Law
105–34, 111 Stat. 788 (Aug. 5, 1997),
and the IRS Restructuring and Reform
Act of 1998 (RRA ’98), Public Law 105–
206, 112 Stat. 685 (Jul. 22, 1998).
The Treasury Department and the
Internal Revenue Service published a
notice of proposed rulemaking (REG–
111833–99) in the Federal Register, 74
FR 61589, on November 25, 2009 (the
NPRM), proposing amendments to the
regulations under section 7430. A
public hearing was scheduled for March
10, 2010. The Internal Revenue Service
did not receive any requests to testify at
the public hearing, and the public
hearing was cancelled. Two written
comments responding to the NPRM
were received and are available for
public inspection at https://
www.regulations.gov or upon request.
After consideration of the comments,
the proposed regulations are adopted as
revised by this Treasury Decision.
II. Statutory Provisions
Section 7430 generally authorizes a
court to award administrative and
litigation costs, including attorneys’
fees, to a prevailing party in an
administrative or court proceeding
brought by or against the United States
in connection with the determination,
collection, or refund of any tax, interest,
or penalty. To qualify as a ‘‘prevailing
party’’ a taxpayer must substantially
prevail as to the amount in controversy
or the most significant issue or set of
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
issues in the proceeding, exhaust the
administrative remedies, meet net worth
and size limitations, and pay or incur
the costs. The taxpayer generally cannot
qualify for an award of such costs,
however, if the government establishes
that its position in the proceeding was
substantially justified.
The TRA contained several
amendments to section 7430 that are
incorporated in the amendments to the
regulations. First, the TRA provided that
a taxpayer has ninety days after the date
the Internal Revenue Service mails to
the taxpayer a final decision
determining tax, interest, or a penalty,
to file an application with the Internal
Revenue Service to recover
administrative costs. Section 7430 had
previously been silent as to the timing
for seeking administrative costs.
Second, the TRA provided that a
taxpayer has ninety days after the date
the Internal Revenue Service mails to
the taxpayer, by certified or registered
mail, a final adverse decision regarding
an award of administrative costs, to file
a petition with the Tax Court. Section
7430 had previously been silent as to
the timing for seeking review in the Tax
Court. Third, the TRA clarified the
application of the net worth and size
limitations imposed by section
7430(c)(4) by providing that individuals
filing joint returns should be treated as
separate taxpayers for purposes of
determining net worth. The TRA added
trusts to the list of taxpayers subject to
the net worth and size limitations and
also specified the date on which the net
worth and size determination should be
made. Before the TRA’s clarification of
the net worth and size limitations,
section 7430 had stated only that a
prevailing party must meet the
requirement of the first sentence of
section 2412(d)(1)(B) of Title 28. Section
2412(d)(2)(B) establishes the net worth
and size limitations of the Equal Access
to Justice Act. See 28 U.S.C. 2412
(EAJA). The TRA also added section
7436 to the Code, which gives the Tax
Court jurisdiction in certain
employment tax cases. Section
7436(d)(2) provides that section 7430
applies to proceedings brought under
section 7436.
RRA ’98 also contained several
amendments affecting section 7430.
First, RRA ’98 increased the hourly rate
limitation for attorneys’ fees in section
7430(c)(1) from $110 per hour to $125
per hour. Second, two special factors
were added that may be considered to
allow an increase in an attorney’s
hourly rate: (1) Difficulty of the issues
presented and (2) local availability of
tax expertise. Prior to the enactment of
RRA ’98, the only special factor
PO 00000
Frm 00048
Fmt 4700
Sfmt 4700
included in section 7430(c)(1) was the
limited availability of qualified
attorneys. Third, RRA ’98 added a
provision that requires a court to
consider whether the Internal Revenue
Service has lost cases with substantially
similar issues in other circuit courts of
appeal in deciding whether the Internal
Revenue Service’s position was
substantially justified. Fourth, RRA ’98
created an exception to the requirement
that to recover attorneys’ fees, the
taxpayer must have paid or incurred the
fees. The exception provides that if an
individual who is authorized to practice
before the Tax Court or the Internal
Revenue Service is representing the
taxpayer on a pro bono basis, then the
taxpayer may petition for an award of
reasonable attorneys’ fees in excess of
the amounts that the taxpayer paid or
incurred, as long as the fee award is
ultimately paid to the individual who
represented the taxpayer or such
individual’s employer. The Treasury
Department and the Internal Revenue
Service are releasing, simultaneously
with these final regulations, a revenue
procedure detailing the procedures for
the recovery of attorneys’ fees in the pro
bono context. Fifth, RRA ’98 extended
the period for recovery of reasonable
administrative costs to include costs
incurred after the date on which the first
letter of proposed deficiency, commonly
known as a 30-day letter, is mailed to
the taxpayer. Previously, administrative
costs only included costs incurred on or
after the date of the receipt by the
taxpayer of the notice of the decision of
the Internal Revenue Service Office of
Appeals, or the date of the notice of
deficiency.
Summary of Regulations
The final regulations reflect the
changes made by the TRA as originated
in the proposed regulations. Clarifying
changes included in the proposed
regulations and adopted here address
the calculation of net worth. Section
7430 imposes net worth and size
limitations on who can recover costs.
First, the proposed and final regulations
specify which limitations with respect
to net worth and size apply when a
taxpayer is an owner of an
unincorporated business. Second, the
proposed and final regulations clarify
the net worth and size limitations in
cases involving partnerships subject to
the unified audit and litigation
procedures of sections 6221 through
6234 of the Code (the TEFRA
partnership procedures).
The final regulations reflect a further
clarification that was not included in
the proposed regulations. The proposed
regulations merely noted that the net
E:\FR\FM\01MRR1.SGM
01MRR1
asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
worth of taxpayers who filed joint
returns should be calculated separately.
The final regulations further explain
how the separate calculation will be
conducted in various situations. When
taxpayers who file joint returns jointly
petition the court and incur joint costs,
each taxpayer qualifies for a separate net
worth limitation of $2 million, but the
limitation will be evaluated jointly. As
such, taxpayers will meet the net worth
limitation so long as their combined
assets are equal to or less than $4
million, regardless of how the assets are
distributed. This prevents high net
worth taxpayers from avoiding the net
worth limitation by seeking costs on
behalf of a spouse with a lower net
worth. When taxpayers file a joint
return, but petition the court separately
and incur separate costs, the limitation
will be evaluated separately. As such,
each taxpayer will have his/her assets
applied toward a separate $2 million
cap for each spouse. This analysis
protects the ability of spouses with
fewer assets to seek representation when
the spouse with higher-value assets is
unwilling or unable to incur those costs.
The final regulations do not adopt the
proposed rule in §§ 301.7430–5(g)(1)
and (2) that the net worth limitation is
computed based on the fair market
value of the taxpayer’s assets. The
existing section 7430 regulations do not
address this issue and no comments
from the public were received on this
issue. The existing case law, however,
generally recognizes that the net worth
calculation is made based on the
acquisition costs of the taxpayer’s
assets. Because the case law is clear and
provides an existing standard for
determining net worth, the final
regulations follow the case law and do
not adopt the proposed rule in
§ 301.7430–5(g)(1) and (2) relating to the
determination of the value of the
taxpayer’s assets. Accordingly, the final
regulations add a new paragraph (6) to
§ 301.7430–5(g) to clarify that for
purposes of determining net worth,
assets are valued based on the cost of
their acquisition.
Consistent with the changes made by
RRA ’98, the final regulations clarify
that a taxpayer may be eligible to
recover reasonable administrative costs
from the date of the 30-day letter only
if at least one issue (other than recovery
of administrative costs) remains in
dispute as of the date that the Internal
Revenue Service takes a position in the
administrative proceeding. This
requirement follows RRA ’98’s
prevailing party definition. Under the
changes made by RRA ’98, the position
of the United States is established in the
administrative proceeding on the earlier
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
of the date the taxpayer receives the
notice of the decision of the Internal
Revenue Service Office of Appeals or
the date of the notice of deficiency.
Where the Internal Revenue Service
concedes an issue in the Office of
Appeals prior to issuing a notice of
deficiency or notice of the decision of
the Office of Appeals, the United States
does not take a position, so an award of
administrative costs is not available.
Where the Internal Revenue Service
concedes an issue in the notice of
decision, the position of the United
States is necessarily substantially
justified. See, for example, Fla. Country
Clubs, Inc. v. Commissioner, 122 T.C.
73, 78–86 (2004), aff’d, 404 F.3d 1291
(11th Cir. 2005) (Where the Office of
Appeals determined that taxpayer did
not owe any additional tax after issuing
a 30-day letter, but without ever issuing
a notice of deficiency or notice of
determination, the Internal Revenue
Service did not take a position),
Purciello v. Commissioner, T.C. Memo.
2014–50 (Where the Internal Revenue
Service conceded the matter at issue in
full in the notice of decision, the
Internal Revenue Service was
substantially justified).
Summary of Comments and
Explanation of Revisions
The Treasury Department and the
Internal Revenue Service received two
written comments in response to the
NPRM, both of which related to the
provisions in the proposed regulations
providing for the award of reasonable
attorneys’ fees when an individual is
representing a party on a pro bono basis.
This section addresses those comments.
This section also describes the
significant differences between the rules
proposed in the NPRM and those
adopted in the final regulations.
As discussed in this preamble, prior
to RRA ’98, only those costs incurred by
the taxpayer were eligible for payment
under section 7430. RRA ’98 provided
that the court could award costs in
excess of the costs actually incurred by
the taxpayer if those costs were less
than the reasonable attorneys’ fees
because an individual is representing
the taxpayer on a pro bono basis. The
statute defined pro bono as
representation provided for no fee or for
a fee which (taking into account all the
facts and circumstances) is no more
than a nominal fee. Finally, the statute
directed that awards for pro bono
representation must be paid to the
representative or that representative’s
employer, as opposed to section 7430’s
general requirement that awards are
paid to the taxpayer.
PO 00000
Frm 00049
Fmt 4700
Sfmt 4700
10481
1. Persons on Whose Behalf Pro Bono
Representation Must Be Provided
Section 7430 establishes net worth
and size limitations that a taxpayer must
meet in order to recover administrative
or litigation costs. The proposed
regulations included an additional
requirement related to a taxpayer’s net
worth: They stated that, for reasonable
administrative costs to be awarded for
legal services provided on a pro bono
basis, the services must be provided to
or on behalf of either (A) persons of
limited financial means who meet the
eligibility requirements for programs
funded by the Legal Services
Corporation, or (B) organizations
operating primarily to address the needs
of persons with limited means if
payment of a standard legal fee would
significantly deplete the organization’s
financial resources. Both of the
commentators recommended revising
the regulations to provide that
organizations to whom or on whose
behalf representation may be provided
include low income taxpayer clinics,
clinics participating in the Internal
Revenue Service student tax clinic
program, and clinics operating as
approved clinics in the United States
Tax Court. Both commentators also
proposed changes in the proposed
regulations’ income limitation for
persons on whose behalf pro bono legal
representation must be provided. The
proposed regulations provided an
income limitation based on the
eligibility requirements for programs
funded by the Legal Services
Corporation (see 42 U.S.C.
2996e(a)(1)(A)), which is 125 percent of
the current Federal Poverty Guidelines
published by the United States
Department of Health and Human
Services. One commentator
recommended that the limitation be
expanded to include individuals and
households whose incomes do not
exceed 250 percent of the poverty level
as determined in accordance with
criteria established by the Director of
the Office of Management and Budget.
The other commentator recommended
that the regulations should not contain
an income threshold for persons on
whose behalf pro bono representation is
provided, and recommended that the
only limitation should be that pro bono
representation must be provided to
persons with limited means if payment
of a standard legal fee would
significantly deplete the person’s
financial resources.
The Treasury Department and the
Internal Revenue Service have carefully
considered both comments and have
considered the difficulty of establishing
E:\FR\FM\01MRR1.SGM
01MRR1
10482
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
asabaliauskas on DSK5VPTVN1PROD with RULES
fair and easily applied limitations on
eligibility for attorneys’ fees for pro
bono representation based upon the
income and financial resources of the
taxpayer. The Treasury Department and
the Internal Revenue Service have
determined that eligibility should not be
limited based on the income or financial
resources of the recipient of the
representation beyond the limit
provided by section 7430(c)(4)(A)(ii). As
a result, the rule contained in the
proposed regulations is not being
finalized. This change makes it
unnecessary to revise the eligibility
requirements as proposed by the
commentators.
2. Rate of Reimbursement for Attorneys
Who Do Not Have a Customary Hourly
Rate
An example in the proposed
regulations stated that an award for
representation by attorneys employed
by a low income taxpayer clinic who do
not have a customary hourly rate would
be limited to the rate prescribed under
section 7430(c)(1)(B). Section
7430(c)(1)(B)(iii) provides for attorneys’
fees based on prevailing market rates for
the kind or quality of services furnished,
except that the fee is limited to a
statutory rate of $125 an hour plus cost
of living adjustments, unless a special
factor justifies a higher rate. One
commentator stated that because of the
difficulty of determining the prevailing
market rates for the kind or quality of
services furnished in the case of
attorneys representing low income
taxpayers, and because of the
unlikelihood that a low income taxpayer
clinic or student taxpayer clinic
program would become involved in a
case that would justify a rate in excess
of the statutory rate, the rate for pro
bono attorneys who do not have a
customary hourly rate should be set at
the statutory rate.
After publishing the proposed
regulations, the Treasury Department
and the Internal Revenue Service
determined that details such as the rate
of compensation for pro bono attorneys
who do not have a customary hourly
rate would more logically be contained
in a revenue procedure. The Treasury
Department and the Internal Revenue
Service are releasing simultaneously
Rev. Proc. 2016–17, which provides that
pro bono attorneys who do not charge
an hourly rate receive the statutory rate
for their services unless they establish
that a special factor, as described in
section 7430(c)(1)(B)(iii), applies to
justify a higher hourly rate. The final
regulations, therefore, do not contain
the example in the proposed regulations
on the rate applicable to pro bono
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
attorneys who do not have a customary
hourly rate. Instead, these
recommendations are taken into account
in Rev. Proc. 2016–17.
3. Enhanced Rate Based on Limited
Availability of Pro Bono Representatives
With Tax Expertise
One commentator recommended a
change to the section of the proposed
regulations that provided that the
limited local availability of tax expertise
is a special factor that would justify an
award at a rate higher than the statutory
rate. The proposed regulations provided
that limited local availability of tax
expertise is established by
demonstrating that a representative
possessing tax expertise is not available
in the taxpayer’s geographical area. The
commentator stated that she did not
think this special factor produces a fair
result in the case of pro bono
representatives because, even if
attorneys possessing tax expertise
practice within a taxpayer’s geographic
area, those attorneys may not be willing
or able to take on pro bono cases. The
commentator suggested that the
regulation be revised so that, in pro
bono cases, the special factor based on
the limited local availability of tax
expertise would apply if there is no
representative possessing tax expertise
practicing within the taxpayer’s
geographic area who is willing or able
to represent the taxpayer on a pro bono
basis.
The Treasury Department and the
Internal Revenue Service disagree that
the proposed rule does not produce a
fair result in the case of pro bono
representatives. The rule permits the
award of an enhanced rate based on the
limited local availability of tax expertise
because such a circumstance reasonably
could have an unfair impact on a
taxpayer who pays or incurs liability for
attorneys’ fees. For example, the
taxpayer who must go outside his
geographic area to retain a
representative with tax expertise might
be required to pay more for the
representation than the generally
prevailing market rate for
representatives in the taxpayer’s
geographic area. Taxpayers who are
represented on a pro bono basis are
entitled to the enhanced rate in the
same manner as taxpayers who incur
fees. Therefore, the final regulations
adopt the rule in the proposed
regulations without change.
4. Payments for Work Performed by
Students and Hourly Rates for Students
The proposed regulations did not
discuss issues relating to the award of
attorneys’ fees based on the work of
PO 00000
Frm 00050
Fmt 4700
Sfmt 4700
volunteer law students. Both
commentators recommended clarifying
the proposed regulations to state that
payment for work performed by law
students should be made to the
attorneys under whom the students
work or to such an attorney’s employer
rather than to the law students.
One commentator expressed concern
that fees may be awarded based on the
work of law students who volunteer in
low income taxpayer clinics and clinics
participating in the Internal Revenue
Service student taxpayer clinic program,
but that such students do not have
customary hourly rates. The
commentator proposed setting an hourly
rate for law students at 40 percent of the
statutory hourly rate for attorneys. The
commentator also requested
clarification that the work of law
students can be compensated as
attorneys’ fees or costs regardless of
whether the students have special
orders authorizing them to practice
before the Internal Revenue Service.
The Treasury Department and the
Internal Revenue Service agree that
awarding fees based on the work of
volunteer students may be appropriate
and are addressing this issue in a
revenue procedure being released
contemporaneously with these final
regulations. In Rev. Proc. 2016–17, the
Treasury Department and the Internal
Revenue Service clarify that work
performed by students authorized to
practice before the Internal Revenue
Service or the Tax Court may be
compensable at 35 percent of the
statutory hourly rate for attorneys,
unless the student can demonstrate that
a rate in excess of that 35 percent is
appropriate, with the award payable to
the clinic or organization with which
the student is affiliated. Rev. Proc.
2016–17 further clarifies that with
respect to students who are not
authorized to practice before the
Internal Revenue Service or the Tax
Court, the requester will have the
burden of proving that an award of costs
is appropriate and what rate of
compensation is reasonable.
5. Effective/Applicability Date
The proposed regulations provided
that the changes in §§ 301.7430–2,
301.7430–3, 301.7430–4, and 301.7430–
5 would apply to costs incurred and
services performed as of the date of
publication of the final regulations,
without regard to when a petition was
filed. That meant that these changes
could have applied in cases where a
petition was filed before publication of
the final regulations in the Federal
Register. To ensure that these changes
are not mandatory for cases in which a
E:\FR\FM\01MRR1.SGM
01MRR1
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
petition was filed before publication of
the final regulations in the Federal
Register, the effective/applicability date
in § 301.7430–6 of the final regulations
has been revised to provide that the
changes in §§ 301.7430–2, 301.7430–3,
301.7430–4, and 301.7430–5 apply to
costs incurred and services performed
in cases in which the petition was filed
on or after the date of publication of the
final regulations in the Federal Register.
However, taxpayers may rely on the
changes contained in §§ 301.7430–2,
301.7430–3, 301.7430–4, and 301.7430–
5 of the final regulations for costs
incurred and services performed in
which a petition was filed prior to
March 1, 2016.
In addition, no effective/applicability
date was proposed with respect to the
rules for qualified offers under
§ 301.7430–7, but one has been added to
the final regulations. Accordingly,
under § 301.7430–7(f) of the final
regulations, section 301.7430–7 applies
to qualified offers made in
administrative court proceedings
described in section 7430 after
December 24, 2003, except that section
301.7430–7(c)(8) is effective as of the
date these final regulations are
published in the Federal Register.
asabaliauskas on DSK5VPTVN1PROD with RULES
Statement of Availability for IRS
Document
For copies of recently issued Revenue
Procedures, Revenue Ruling, notices
and other guidance published in the
Internal Revenue Bulletin, visit the IRS
Web site at https://www.irs.gov.
Special Analyses
Certain IRS regulations, including this
one, are exempt from the requirements
of Executive Order 12866, as
supplemented and reaffirmed by
Executive Order 13563. Therefore, a
regulatory impact assessment is not
required. It also has been determined
that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations and,
because these regulations do not impose
on small entities a collection of
information requirement, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply. Therefore, a Regulatory
Flexibility Analysis is not required.
Pursuant to section 7805(f) of the
Internal Revenue Code, the Notice of
Proposed Rulemaking was submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for
comment on its impact on small
business. No comments were received.
Drafting Information
The principal author of these
˜
regulations is Shannon K. Castaneda,
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
Office of Associate Chief Counsel
(Procedure and Administration).
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes,
Excise taxes, Gift taxes, Income taxes,
Penalties, Reporting and recordkeeping
requirements.
Adoptions of Amendments to the
Regulations
Accordingly, 26 CFR part 301 is
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 301.7430–0 is
amended by:
■ 1. Adding an entry for § 301.7430–
3(c)(4).
■ 2. Adding entries to § 301.7430–4,
paragraphs (b)(3)(iii)(A) through (F) and
(d).
■ 3. Revising the entries for § 301.7430–
5.
■ 4. Revising the section heading for
§ 301.7430–6.
■ 5. Adding entries for §§ 301.7430–7
and 301.7430–8.
The additions and revisions read as
follows:
■
§ 301.7430–0
*
*
*
Table of contents.
*
*
§ 301.7430–3 Administrative proceeding
and administrative proceeding date.
*
*
*
*
*
(c) * * *
(4) First letter of proposed deficiency
that allows the taxpayer an opportunity
for administrative review in the Office
of Appeals.
*
*
*
*
*
§ 301.7430–4
costs.
Reasonable administrative
*
*
*
*
*
(b) * * *
(3) * * *
(iii) * * *
(A) In general.
(B) Special factor.
(C) Limited availability.
(D) Local availability of tax expertise.
(E) Difficulty of the issues.
(F) Example.
*
*
*
*
*
(d) Pro bono representation.
(1) In general.
(2) Requirements.
(3) Nominal fee.
(4) Payment when representation
provided for a nominal fee.
PO 00000
Frm 00051
Fmt 4700
Sfmt 4700
10483
(5) Requirements.
(6) Hourly rate.
(7) Examples.
§ 301.7430–5
Prevailing party.
(a) In general.
(b) Position of the Internal Revenue
Service.
(c) Examples.
(d) Substantially justified.
(1) In general.
(2) Position in courts of appeal.
(3) Examples.
(4) Included costs.
(5) Examples.
(6) Exception.
(7) Presumption.
(e) Amount in controversy.
(f) Most significant issue or set of
issues presented.
(1) In general.
(2) Example.
(g) Net worth and size limitations.
(1) Individuals.
(2) Estates and trusts.
(3) Others.
(4) Special rule for charitable
organizations and certain cooperatives.
(5) Special rule for TEFRA
partnerships.
(6) Determining net worth.
(h) Determination of prevailing party.
(i) Examples.
§ 301.7430–6
Effective/applicability dates.
§ 301.7430–7
Qualified offers.
(a) In general.
(b) Requirements for treatment as a
prevailing party based upon having
made a qualified offer.
(1) In general.
(2) Liability under the last qualified
offer.
(3) Liability pursuant to the judgment.
(c) Qualified offer.
(1) In general.
(2) To the United States.
(3) Specifies the offered amount.
(4) Designated at the time it is made
as a qualified offer.
(5) Remains open.
(6) Last qualified offer.
(7) Qualified offer period.
(8) Interest as a contested issue.
(d) [Reserved].
(e) Examples.
(f) Effective date.
§ 301.7430–8 Administrative costs
incurred in damage actions for violations of
section 362 or 524 of the Bankruptcy Code.
(a) In general.
(b) Prevailing party.
(c) Administrative proceeding.
(d) Costs incurred after filing of
bankruptcy petition.
(e) Time for filing claim for
administrative costs.
(f) Effective date.
E:\FR\FM\01MRR1.SGM
01MRR1
10484
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
■ Par. 3. Section 301.7430–1 is
amended by revising paragraphs
(b)(1)(ii)(A), (d)(1)(i) and (ii) and (d)(2)
introductory text to read as follows:
§ 301.7430–1
remedies.
Exhaustion of administrative
*
*
*
*
(b) * * *
(1) * * *
(ii) * * *
(A) Requests an Appeals office
conference in accordance with
§§ 601.105 and 601.106 of this chapter
or any successor published guidance;
and
*
*
*
*
*
(d) * * *
(1) * * *
(i) The party follows all applicable
Internal Revenue Service procedures for
contesting the matter (including filing a
written protest or claim, requesting an
administrative appeal, and participating
in an administrative hearing or
conference); or
(ii) If there are no applicable Internal
Revenue Service procedures, the party
submits to the Area Director of the area
having jurisdiction over the dispute a
written claim for relief reciting facts and
circumstances sufficient to show the
nature of the relief requested and that
the party is entitled to the requested
relief, and the Area Director denies the
claim for relief in writing or fails to act
on the claim within a reasonable period
after the claim is received by the Area
Director.
(2) For purposes of paragraph (d)(1)(ii)
of this section, a reasonable period is—
*
*
*
*
*
■ Par. 4. Section 301.7430–2 is
amended by:
■ 1. Revising paragraph (a).
■ 2. Removing the semicolon at the end
of paragraph (c)(3)(i)(B) and adding a
period in its place, and adding a
sentence at the end of the paragraph.
■ 3. Adding a sentence at the end of
paragraph (c)(3)(i)(E).
■ 4. Revising paragraph (c)(3)(ii)(C),
adding paragraph (c)(3)(iii)(C)., and
revising paragraph (c)(5).
■ 5. Adding a sentence at the end of
paragraph (c)(7).
■ 6. Revising paragraph (e).
The additions and revisions read as
follows:
asabaliauskas on DSK5VPTVN1PROD with RULES
*
§ 301.7430–2 Requirements and
procedures for recovery of reasonable
administrative costs.
(a) Introduction. Section 7430(a)(1)
provides for the recovery, under certain
circumstances, of reasonable
administrative costs incurred in
connection with an administrative
proceeding before the Internal Revenue
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
Service. Paragraph (b) of this section
lists the requirements that a taxpayer
must meet to be entitled to an award of
reasonable administrative costs from the
Internal Revenue Service. Paragraph (c)
of this section describes the procedures
that a taxpayer must follow to recover
reasonable administrative costs.
Paragraphs (b) and (c) apply to requests
for administrative costs regarding all
administrative proceedings within the
Internal Revenue Service.
*
*
*
*
*
(c) * * *
(3) * * *
(i) * * *
(B) * * * For costs incurred after
January 18, 1999, if the taxpayer alleges
that the United States has lost in courts
of appeal for other circuits on
substantially similar issues, the taxpayer
must provide, for each such case, the
full name of the case, volume and pages
of the reporter in which the opinion
appears, the circuit in which the case
was decided, and the year of the
opinion;
*
*
*
*
*
(E) * * * This statement must
identify whether the representation is
on a pro bono basis as defined in
§ 301.7430–4(d) and, if so, to whom
payment should be made. Specifically,
the statement must direct whether
payment should be made to the
taxpayer’s representative or to the
representative’s employer.
(ii) * * *
(C) For costs incurred after January
18, 1999, if more than $125 per hour (as
adjusted for an increase in the cost of
living pursuant to § 301.7430–4(b)(3)) is
claimed for the fees of a representative
in connection with the administrative
proceeding, an affidavit is necessary
stating that a special factor described in
§ 301.7430–4(b)(3) is applicable, such as
the difficulty of the issues presented in
the case or the lack of local availability
of tax expertise. If a special factor is
claimed based on specialized skills and
distinctive knowledge as described in
§ 301.7430–4(b)(2)(ii), the affidavit
should state—
(1) Why the specialized skills and
distinctive knowledge were necessary in
the representation;
(2) That there is a limited availability
of representatives possessing these
specialized skills and distinctive
knowledge; and
(3) How the representative’s
education and experience qualifies the
representative as someone with the
necessary specialized skills and
distinctive knowledge.
(iii) * * *
(C) In cases of pro bono
representation, time records similar to
PO 00000
Frm 00052
Fmt 4700
Sfmt 4700
billing records, detailing the time spent
and work completed, must be submitted
for the requested fees.
*
*
*
*
*
(5) Period for requesting costs from
the Internal Revenue Service. To recover
reasonable administrative costs
pursuant to section 7430 and this
section, the taxpayer must file a written
request for costs within 90 days after the
date the final adverse decision of the
Internal Revenue Service with respect to
all tax, additions to tax, interest, and
penalties at issue in the administrative
proceeding is mailed or otherwise
furnished to the taxpayer. For purposes
of this section, interest means the
interest that is specifically at issue in
the administrative proceeding
independent of the taxpayer’s objections
to the underlying tax, additions to tax,
and penalties imposed. The final
decision of the Internal Revenue Service
for purposes of this section is the
document that resolves the taxpayer’s
liability with regard to all tax, additions
to tax, interest, and penalties at issue in
the administrative proceeding (such as a
Form 870 or closing agreement), or a
notice of assessment for that liability
(such as the notice and demand under
section 6303), whichever is earlier
mailed or otherwise furnished to the
taxpayer. For purposes of this section, if
the 90th day falls on a Saturday,
Sunday, or a legal holiday, the 90-day
period shall end on the next succeeding
day that is not a Saturday, Sunday, or
a legal holiday as defined by section
7503.
*
*
*
*
*
(7) * * * Once a notice of decision
denying (in whole or in part) an award
for reasonable administrative costs is
mailed by the Internal Revenue Service
via certified mail or registered mail as
required by paragraph (c)(6) of this
section, a taxpayer may obtain judicial
review of that decision by filing a
petition for review with the Tax Court
prior to the 91st day after the mailing of
the notice of decision.
*
*
*
*
*
(e) The following examples primarily
illustrate paragraph (a) of this section:
Example 1. Taxpayer A receives a notice
of proposed deficiency (30-day letter). A
requests and is granted Appeals office
consideration. The administrative file
contains certain documents provided by A as
substantiation for the tax matters at issue.
Appeals determines that the information
submitted is insufficient. Appeals then issues
a notice of deficiency. After receiving the
notice of deficiency but before the 90-day
period for filing a petition with the Tax Court
has expired, and before filing a petition with
the Tax Court, A convinces Appeals that the
information previously submitted and
E:\FR\FM\01MRR1.SGM
01MRR1
asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
reviewed by Appeals is sufficient and,
therefore, the notice of deficiency is incorrect
and A owes no additional tax. Pursuant to
section 6212(d), the notice of deficiency is
rescinded. Appeals then closes the case
showing a zero deficiency and mails A a
notice to this effect. Assuming that Appeals
did not rely on any new information
provided by A in rescinding the notice of
deficiency and that all of the other
requirements of section 7430 are satisfied, A
may recover reasonable administrative costs
incurred after the date of the 30-day letter
(the administrative proceeding date as
defined in Treas. Reg. § 301.7430–3(c)). To
recover these costs, A must file a request for
administrative costs with the Appeals office
personnel who settled A’s tax matter, or if
that person is unknown to A, with the Area
Director of the area that considered the
underlying matter, within 90 days after the
date of mailing of the Office of Appeals’ final
decision that A owes no additional tax.
Example 2. Taxpayer B files a request for
an abatement of interest pursuant to section
6404 and the regulations thereunder. The
Area Director issues a notice of proposed
disallowance of the abatement request (akin
to a 30-day letter). B requests and is granted
Appeals office consideration. No agreement
is reached with Appeals and the Office of
Appeals issues a notice of disallowance of
the abatement request. B does not file suit in
the Tax Court, but instead contacts the
Appeals office within 180 days after the
mailing date of the notice of disallowance of
the abatement request to attempt to reverse
the decision. B convinces the Appeals office
that the notice of disallowance is in error.
The Appeals office agrees to abate the
interest and mails the taxpayer a notification
of this decision. The mailing date of the
notification from Appeals of the decision to
abate interest commences the 90-day period
from which the taxpayer may request
administrative costs. Assuming that Appeals
did not rely on any new information
provided by B in reversing its notice of
disallowance, and that all of the other
requirements of section 7430 are satisfied, B
may recover reasonable administrative costs
incurred after the date the Area Director
issued the notice of proposed disallowance of
the abatement request (the administrative
proceeding date as defined in Treas. Reg.
§ 301.7430–3(c)). To recover these costs, B
must file a request for costs with the Appeals
office personnel who settled B’s tax matter,
or if that person is unknown to B, with the
Area Director of the area that considered the
underlying matter within 90 days after the
date of mailing of the Office of Appeals’ final
decision that B is entitled to abatement of
interest.
Example 3. Taxpayer C receives a notice
of proposed adjustment and employment tax
30-day letter. C requests and is granted
Appeals office consideration. The
administrative file contains certain
documents provided by C to support C’s
position in the tax matters at issue. Appeals
determines that the documents submitted are
insufficient. Appeals then issues a notice of
determination of worker classification. After
receiving the notice of determination of
worker classification but before the 90-day
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
period for filing a petition with the Tax Court
has expired, C convinces Appeals that the
documents previously submitted and
reviewed by Appeals adequately support its
position and, therefore, C owes no additional
employment tax. Appeals then closes the
case showing a zero tax adjustment and mails
C a no-change letter. Assuming that Appeals
did not rely on any new information
provided by C in reversing its notice of
determination of worker classification, and
that all of the other requirements of section
7430 are satisfied, C may recover reasonable
administrative costs incurred after the date of
the notice of proposed adjustment and 30day letter (the administrative proceeding date
as defined in Treas. Reg. § 301.7430–3(c)). To
recover these costs, C must file a request for
administrative costs with the Appeals office
personnel who settled C’s tax matter, or if
that person is unknown to C, with the Area
Director of the area that considered the
underlying matter, within 90 days after the
date of mailing of the Office of Appeals’ final
decision that C owes no additional tax.
Par. 5. Section 301.7430–3 is
amended by:
■ 1. Revising paragraphs (b), (c)(1), and
(3).
■ 2. Adding paragraph (c)(4).
■ 3. Revising paragraph (d).
The addition and revisions read as
follows:
■
§ 301.7430–3 Administrative proceeding
and administrative proceeding dates.
*
*
*
*
*
(b) Collection action. A collection
action generally includes any action
taken by the Internal Revenue Service to
collect a tax (or any interest, additional
amount, addition to tax, or penalty,
together with any costs in addition to
the tax) or any action taken by a
taxpayer in response to the Internal
Revenue Service’s act or failure to act in
connection with the collection of a tax
(including any interest, additional
amount, addition to tax, or penalty,
together with any costs in addition to
the tax). A collection action for
purposes of section 7430 and this
section includes any action taken by the
Internal Revenue Service under Chapter
64 of Subtitle F to collect a tax.
Collection actions also include
collection due process hearings under
sections 6320 and 6330 (unless the
underlying tax liability is properly at
issue), and those actions taken by a
taxpayer to remedy the Internal Revenue
Service’s failure to release a lien under
section 6325 or to remedy any
unauthorized collection action as
described by section 7433, except those
collection actions described by section
7433(e). An action or procedure directly
relating to a claim for refund after
payment of an assessed tax is not a
collection action.
(c) Administrative proceeding date—
(1) General rule. For purposes of section
PO 00000
Frm 00053
Fmt 4700
Sfmt 4700
10485
7430 and the regulations thereunder, the
term administrative proceeding date
means the earlier of—
(i) The date of the receipt by the
taxpayer of the notice of the decision of
the Internal Revenue Service Office of
Appeals;
(ii) The date of the notice of
deficiency; or
(iii) The date on which the first letter
of proposed deficiency that allows the
taxpayer an opportunity for
administrative review in the Internal
Revenue Service Office of Appeals is
sent.
*
*
*
*
*
(3) Notice of deficiency. A notice of
deficiency is a notice described in
section 6212(a), including a notice
rescinded pursuant to section 6212(d).
For purposes of determining reasonable
administrative costs under section 7430
and the regulations thereunder, the
following will be treated as a notice of
deficiency:
(i) A notice of final partnership
administrative adjustment described in
section 6223(a)(2).
(ii) A notice of determination of
worker classification issued pursuant to
section 7436.
(iii) A final notice of determination
denying innocent spouse relief issued
pursuant to section 6015.
(4) First letter of proposed deficiency
that allows the taxpayer an opportunity
for administrative review in the Office of
Appeals. Generally, the first letter of
proposed deficiency that allows the
taxpayer an opportunity for
administrative review in the Office of
Appeals is the first letter issued to the
taxpayer that describes the proposed
adjustments and advises the taxpayer of
the opportunity to contact the Office of
Appeals. It also may be a claim
disallowance or the first letter of
determination that allows the taxpayer
an opportunity for administrative
review in the Office of Appeals.
(d) Examples. The provisions of this
section are illustrated by the following
examples:
Example 1. Taxpayer A receives a notice
of proposed deficiency (30-day letter). A files
a request for and is granted an Appeals office
conference. At the Appeals conference no
agreement is reached on the tax matters at
issue. The Office of Appeals then issues a
notice of deficiency. Upon receiving the
notice of deficiency, A does not file a petition
with the Tax Court. Instead, A pays the
deficiency and files a claim for refund. The
claim for refund is considered by the Internal
Revenue Service and the Area Director issues
a notice of proposed claim disallowance. A
requests and is granted Appeals office
consideration. A convinces Appeals that A’s
claim is correct and Appeals allows A’s
claim. A may recover reasonable
E:\FR\FM\01MRR1.SGM
01MRR1
10486
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
administrative costs incurred on or after the
date of the notice of proposed deficiency (30day letter), but only if the other requirements
of section 7430 and the regulations
thereunder are satisfied. A cannot recover
costs incurred prior to the date of the 30-day
letter because these costs were incurred
before the administrative proceeding date.
Example 2. Taxpayer B files an individual
income tax return showing a balance due. No
payment is made with the return and the
Internal Revenue Service assesses the amount
shown on the return. The Internal Revenue
Service issues a Notice Of Intent to Levy And
Notice Of Your Right To A Hearing pursuant
to sections 6330(a) and 6331(d). B timely
requests and is granted a Collection Due
Process (CDP) hearing. In connection with
the CDP hearing, B enters into an installment
agreement as a collection alternative. The
costs that B incurred in connection with the
CDP hearing were not incurred in an
administrative proceeding, but rather in a
collection action. Accordingly, B may not
recover those costs as reasonable
administrative costs under section 7430 and
the regulations thereunder.
Par. 6. Section 301.7430–4 is
amended by:
■ 1. Removing the language ‘‘such’’ the
second time it appears in the second
sentence and in the fifth sentence of
paragraph (b)(2)(ii) and adding the
language ‘‘that’’ in its place.
■ 2. Revising paragraphs (b)(3)(i) and
(b)(3)(iii)(B).
■ 3. Revising the first sentence in
paragraph (b)(3)(iii)(C) and adding a
new second sentence following the first
sentence.
■ 4. Redesignating paragraph
(b)(3)(iii)(D) as paragraph (b)(3)(iii)(F),
adding new paragraphs (b)(3)(iii)(D) and
(b)(3)(iii)(E), and revising newly
redesignated paragraph (b)(3)(iii)(F).
■ 5. Revising paragraph (c)(4).
■ 6. Adding paragraph (d).
The additions and revisions read as
follows:
■
§ 301.7430–4
costs.
Reasonable administrative
asabaliauskas on DSK5VPTVN1PROD with RULES
*
*
*
*
*
(b) * * *
(3) Limitation on fees for a
representative—(i) In general. Except as
otherwise provided in this section, fees
incurred after January 18, 1999, and
described in paragraph (b)(1)(iv) of this
section that are recoverable under
section 7430 and the regulations
thereunder as reasonable administrative
costs may not exceed $125 per hour (as
adjusted for an increase in the cost of
living and, if appropriate, a special
factor adjustment).
*
*
*
*
*
(iii) * * *
(B) Special factor. A special factor is
a factor, other than an increase in the
cost of living, that justifies an increase
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
in the $125 per hour limitation of
section 7430(c)(1)(B)(iii). The
undesirability of the case, the work and
the ability of counsel, the results
obtained, and customary fees and
awards in other cases, are factors
applicable to a broad spectrum of
litigation and do not constitute special
factors for the purpose of increasing the
$125 per hour limitation. By contrast,
the limited availability of a specially
qualified representative for the
proceeding, the limited local availability
of tax expertise, and the difficulty of the
issues are special factors justifying an
increase in the $125 per hour limitation.
(C) Limited availability. Limited
availability of a specially qualified
representative is established by
demonstrating that a specially qualified
representative for the proceeding is not
available at the $125 per hour rate (as
adjusted for an increase in the cost of
living). The representative’s special
qualification must be based on nontax
expertise. * * *
(D) Limited local availability of tax
expertise. Limited local availability of
tax expertise is established by
demonstrating that a representative
possessing tax expertise is not available
in the taxpayer’s geographical area.
Initially, this showing may be made by
submission of an affidavit signed by the
taxpayer, or by the taxpayer’s counsel,
that no representative possessing tax
expertise practices within a reasonable
distance from the taxpayer’s principal
residence or principal office. The hourly
rate charged by representatives in the
geographical area is not relevant in
determining whether tax expertise is
locally available. If the Internal Revenue
Service challenges this initial showing,
the taxpayer may submit additional
evidence to establish the limited local
availability of a representative
possessing tax expertise.
(E) Difficulty of the issues. In
determining whether the difficulty of
the issues justifies an increase in the
$125 per hour limitation on the
applicable hourly rate, the Internal
Revenue Service will consider the
following factors:
(1) The number of different provisions
of law involved in each issue.
(2) The complexity of the particular
provision or provisions of law involved
in each issue.
(3) The number of factual issues
present in the proceeding.
(4) The complexity of the factual
issues present in the proceeding.
(F) Example. The provisions of this
section are illustrated by the following
example:
Example. Taxpayer A is represented by B,
a CPA and attorney with a LL.M. Degree in
PO 00000
Frm 00054
Fmt 4700
Sfmt 4700
Taxation with Highest Honors who regularly
handles cases dealing with TEFRA
partnership issues. B represents A in an
administrative proceeding involving TEFRA
partnership issues that is subject to the
provisions of this section. Assuming A
qualifies for an award of reasonable
administrative costs by meeting the
requirements of section 7430, the amount of
the award attributable to the fees of B may
not exceed the $125 per hour limitation (as
adjusted for an increase in the cost of living),
absent a special factor. B is not a specially
qualified representative because
extraordinary knowledge of the tax laws does
not constitute distinctive knowledge or a
unique and specialized skill constituting a
special factor. A higher rate may be justified
by another special factor, that is, the limited
local availability of tax expertise or the
difficulty of the issues.
*
*
*
*
*
(c) * * *
(4) Examples. The provisions of this
section are illustrated by the following
examples:
Example 1. After incurring fees for
representation during the Internal Revenue
Service’s examination of A’s income tax
return, A receives a notice of proposed
deficiency (30-day letter). A files a request for
and is granted an Appeals office conference.
At the conference no agreement is reached on
the tax matters at issue. The Internal Revenue
Service then issues a notice of deficiency.
Upon receiving the notice of deficiency, A
discontinues A’s administrative efforts and
files a petition with the Tax Court. A’s costs
incurred before the date of the mailing of the
30-day letter are not reasonable
administrative costs because they were
incurred before the administrative
proceeding date. Similarly, A’s costs incurred
in connection with the preparation and filing
of a petition with the Tax Court are litigation
costs and not reasonable administrative costs.
Example 2. Assume the same facts as in
Example 1 except that after A receives the
notice of deficiency, in addition to
petitioning the Tax Court, A recontacts
Appeals and A convinces Appeals that the
information previously submitted during the
review by Appeals is sufficient and,
therefore, the notice of deficiency is incorrect
and A owes no additional tax. The Internal
Revenue Service and A agree to a stipulated
decision in the Tax Court case to reflect
Appeals’ decision. The Tax Court enters the
decision. If A seeks administrative costs, A
may recover costs incurred after the date of
the mailing of the 30-day letter, costs
incurred in recontacting Appeals after the
issuance of the notice of deficiency, and costs
incurred up to the time the Tax Court
petition was filed, as reasonable
administrative costs, but only if the other
requirements of section 7430 and the
regulations thereunder are satisfied. The
costs incurred before the date of the mailing
of the 30-day letter are not reasonable
administrative costs because they were
incurred before the administrative
proceeding date, as set forth in § 301.7430–
3(c)(1)(iii). A’s costs incurred in connection
with the filing of a petition with the Tax
E:\FR\FM\01MRR1.SGM
01MRR1
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
asabaliauskas on DSK5VPTVN1PROD with RULES
Court are not reasonable administrative costs
because those costs are litigation costs.
Similarly, A’s costs incurred after the filing
of the petition are not reasonable
administrative costs, as they are litigation
costs.
(d) Pro bono representation—(1) In
general. Fees recoverable under section
7430 and the regulations thereunder as
reasonable administrative costs may
exceed the attorneys’ fees paid or
incurred by the prevailing party if such
fees are less than the reasonable
attorneys’ fees because an individual is
representing the prevailing party on a
pro bono basis. In addition to attorneys’
fees, reasonable costs incurred or paid
by the individual providing the pro
bono representation that are normally
billed separately also may be recovered
under this section. The Treasury
Department and the Internal Revenue
Service may, in revenue rulings, notices,
or other guidance published in the
Internal Revenue Bulletin, provide for
additional rules that apply for awards of
costs for pro bono representation for
purposes of this paragraph (d).
(2) Requirements. Pro bono
representation is established by
demonstrating—
(i) Representation was provided for no
fee or for a fee that (taking into account
all the facts and circumstances)
constitutes a nominal fee;
(ii) The representative intended to
provide representation for no fee or for
a nominal fee from the commencement
of the representation. Intent to provide
representation for no fee or for a
nominal fee may be demonstrated
through documentation such as a
retainer agreement. An individual will
not be considered to have represented a
client on a pro bono basis if the facts
demonstrate that the individual
anticipated a fee greater than a nominal
fee or provided representation on a
contingency fee basis. The fact that the
representative intended to seek recovery
of fees under section 7430 will not
prevent the representative from
satisfying this requirement.
(3) Nominal fee. A nominal fee is
defined as a fee that is insignificantly
small or minimal. A nominal fee is a
trivial payment, bearing no relation to
the value of the representation
provided, taking into account all the
facts and circumstances.
(4) Payment when representation
provided at no charge or for a nominal
fee. A prevailing party who receives
representation at no charge or for a
nominal fee and who satisfies the
requirements under this section is
eligible to receive reasonable fees in
excess of the fees actually paid or
incurred. Payment will be made to the
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
representative or the representative’s
employer.
(5) Recordkeeping. Contemporaneous
records must be maintained,
demonstrating the work performed and
the time allocated to each task. These
records should contain similar
information to billing records.
(6) Examples. The provisions of this
section are illustrated by the following
example:
Example 1. Taxpayer A, an attorney, files
a petition with the Tax Court and pays a $60
filing fee. A appears pro se in the court
proceeding. If A prevails, he will not be
entitled to an award of reasonable litigation
costs for his services. A is rendering services
on his own behalf, not providing pro bono
representation. His lost opportunity costs are
not compensable under section 7430. A may
recover the filing fee as a litigation cost, but
only if the other requirements of section 7430
and the regulations thereunder are satisfied.
Par. 7. Section 301.7430–5 is revised
to read as follows:
■
§ 301.7430–5
Prevailing party.
(a) In general. For purposes of an
award of reasonable administrative costs
under section 7430 in the case of
administrative proceedings commenced
after July 30, 1996, a taxpayer is a
prevailing party (other than by reason of
section 7430(c)(4)(E)) only if—
(1) At least one issue (other than
recovery of administrative costs)
remains in dispute as of the date that
the Internal Revenue Service takes a
position in the administrative
proceeding, as described in paragraph
(b) of this section;
(2) The position of the Internal
Revenue Service was not substantially
justified;
(3) The taxpayer substantially prevails
as to the amount in controversy or with
respect to the most significant issue or
set of issues presented; and
(4) The taxpayer satisfies the net
worth and size limitations referenced in
paragraph (f) of this section.
(b) Position of the Internal Revenue
Service. The position of the Internal
Revenue Service in an administrative
proceeding is the position taken by the
Internal Revenue Service as of the
earlier of—
(1) The date of the receipt by the
taxpayer of the notice of the decision of
the Internal Revenue Service Office of
Appeals; or
(2) The date of the notice of
deficiency or any date thereafter.
(c) Examples. The provisions of this
section may be illustrated by the
following examples:
Example 1. Taxpayer A receives a notice of
proposed deficiency (30-day letter). A pays
the amount of the proposed deficiency and
PO 00000
Frm 00055
Fmt 4700
Sfmt 4700
10487
files a claim for refund. A’s claim is
considered and a notice of proposed claim
disallowance is issued by the Area Director.
A does not request an Appeals office
conference and the Area Director issues a
notice of claim disallowance. A then files
suit in a United States District Court. A
cannot recover reasonable administrative
costs because the notice of claim
disallowance is not a notice of the decision
of the Internal Revenue Service Office of
Appeals or a notice of deficiency.
Accordingly, the Internal Revenue Service
has not taken a position in the administrative
proceeding pursuant to section 7430(c)(7)(B).
Example 2. Taxpayer B receives a notice of
proposed deficiency (30-day letter). B
disputes the proposed adjustments and
requests an Appeals office conference. The
Appeals office determines that B has no
additional tax liability. B requests
administrative costs from the date of the 30day letter. B is not the prevailing party and
may not recover administrative costs because
all of the proposed adjustments in the case
were resolved as of the date that the Internal
Revenue Service took a position in the
administrative proceeding.
(d) Substantially justified—(1) In
general. The position of the Internal
Revenue Service is substantially
justified if it has a reasonable basis in
both fact and law. A significant factor in
determining whether the position of the
Internal Revenue Service is
substantially justified as of a given date
is whether, on or before that date, the
taxpayer has presented all relevant
information under the taxpayer’s control
and relevant legal arguments supporting
the taxpayer’s position to the
appropriate Internal Revenue Service
personnel. The appropriate Internal
Revenue Service personnel are
personnel responsible for reviewing the
information or arguments, or personnel
who would transfer the information or
arguments in the normal course of
procedure and administration to the
personnel who are responsible.
(2) Position in courts of appeal.
Whether the United States has won or
lost an issue substantially similar to the
one in the taxpayer’s case in courts of
appeal for circuits other than the one to
which the taxpayer’s case would be
appealable should be taken into
consideration in determining whether
the Internal Revenue Service’s position
was substantially justified.
(3) Example. The provisions of this
section (d) are illustrated by the
following example:
Example. The Internal Revenue Service, in
the conduct of a correspondence examination
of taxpayer A’s individual income tax return,
requests substantiation from A of claimed
medical expenses. A does not respond to the
request and the Internal Revenue Service
issues a notice of deficiency. After receiving
the notice of deficiency, A presents sufficient
E:\FR\FM\01MRR1.SGM
01MRR1
10488
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
disallowance is in error. The Appeals officer
then abates the assessment. E may recover
reasonable administrative costs if the
position taken in the notice of claim
disallowance issued by the Office of Appeals
was not substantially justified and the other
requirements of section 7430 and the
regulations thereunder are satisfied. If so, E
may recover administrative costs incurred
from the mailing date of the 30-day letter
because the requirements of paragraph (c)(2)
of this section are met. E cannot recover the
costs incurred prior to the mailing of the 30day letter because they were incurred before
the administrative proceeding date.
(4) Included costs. (i) An award of
reasonable administrative costs shall
only include costs incurred on or after
the administrative proceeding date as
defined in section 301.7430–3(c) of this
chapter.
(ii) If the Internal Revenue Service
takes a position in an administrative
proceeding, as defined in paragraph (b)
of this section, and the position is not
substantially justified, the taxpayer may
be permitted to recover costs incurred
before the position was taken, but not
before the dates set forth in this
paragraph (d)(4).
(5) Examples. The provisions of this
section may be illustrated by the
following examples:
asabaliauskas on DSK5VPTVN1PROD with RULES
information and arguments to convince a tax
compliance officer that the notice of
deficiency is incorrect and that A owes no
tax. The revenue agent then closes the case
showing no deficiency. Although A incurred
costs after the issuance of the notice of
deficiency, A is unable to recover these costs
because, as of the date these costs were
incurred, A had not presented relevant
information under A’s control and relevant
legal arguments supporting A’s position to
the appropriate Internal Revenue Service
personnel. Accordingly, the position of the
Internal Revenue Service was substantially
justified at the time the costs were incurred.
(6) Exception. If the position of the
Internal Revenue Service was
substantially justified with respect to
some issues in the proceeding and not
substantially justified with respect to
the remaining issues, any award of
reasonable administrative costs to the
taxpayer may be limited to only
reasonable administrative costs
attributable to those issues with respect
to which the position of the Internal
Revenue Service was not substantially
justified. If the position of the Internal
Revenue Service was substantially
justified for only a portion of the period
of the proceeding and not substantially
justified for the remaining portion of the
proceeding, any award of reasonable
administrative costs to the taxpayer may
be limited to only reasonable
administrative costs attributable to that
portion during which the position of the
Internal Revenue Service was not
substantially justified. Where an award
of reasonable administrative costs is
limited to that portion of the
administrative proceeding during which
the position of the Internal Revenue
Service was not substantially justified,
whether the position of the Internal
Revenue Service was substantially
justified is determined as of the date any
cost is incurred.
(7) Presumption. If the Internal
Revenue Service did not follow any
applicable published guidance in an
administrative proceeding commenced
after July 30, 1996, the position of the
Internal Revenue Service, on those
issues to which the guidance applies
and for all periods during which the
guidance was not followed, will be
presumed not to be substantially
justified. This presumption may be
rebutted. For purposes of this paragraph
(d)(7), the term applicable published
guidance means final or temporary
regulations, revenue rulings, revenue
procedures, information releases,
notices, and announcements published
in the Internal Revenue Bulletin and, if
issued to or with respect to the taxpayer,
private letter rulings, technical advice
memoranda, and determination letters
(§ 601.601(d)(2) of this chapter). Also,
Example 1. Pursuant to section 6672,
taxpayer D receives from the Area Director
Collection Operations (Collection) a
proposed assessment of trust fund taxes
(Trust Fund Recovery Penalty). D requests
and is granted Appeals office consideration.
Appeals considers the issues and decides to
uphold Collection’s recommended
assessment. Appeals notifies D of this
decision in writing. Collection then assesses
the tax and notice and demand is made. D
timely pays the minimum amount required to
commence a court proceeding, files a claim
for refund, and furnishes the required bond.
Collection disallows the claim, but Appeals,
on reconsideration, reverses its original
position, thus upholding D’s position. If
Appeals’ initial determination was not
substantially justified, D may recover
administrative costs incurred on or after the
mailing of the proposed assessment of trust
fund taxes, because the proposed assessment
is the first determination letter that allows
the taxpayer an opportunity for
administrative review in the Internal
Revenue Service Office of Appeals.
Example 2. Taxpayer E receives a notice
of proposed deficiency (30-day letter). E pays
the amount of the proposed deficiency and
files a claim for refund. E’s claim is
considered and a notice of proposed
disallowance is issued by the Area Director.
E requests and is granted Appeals office
consideration. No agreement is reached with
Appeals and the Office of Appeals issues a
notice of claim disallowance. E does not file
suit in a United States District Court but
instead contacts the Appeals office to attempt
to reverse the decision. E convinces the
Appeals officer that the notice of claim
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
PO 00000
Frm 00056
Fmt 4700
Sfmt 4700
for purposes of this paragraph (d)(7), the
term administrative proceeding includes
only those administrative proceedings
or portions of administrative
proceedings occurring on or after the
administrative proceeding date as
defined in § 301.7430–3(c).
(e) Amount in controversy. The
amount in controversy shall include the
amount in issue as of the administrative
proceeding date as increased by any
amounts subsequently placed in issue
by any party. The amount in
controversy is determined without
increasing or reducing the amount in
controversy for amounts of loss,
deduction, or credit carried over from
years not in issue.
(f) Most significant issue or set of
issues presented. (1) In general. Where
the taxpayer has not substantially
prevailed with respect to the amount in
controversy the taxpayer may
nonetheless be a prevailing party if the
taxpayer substantially prevails with
respect to the most significant issue or
set of issues presented. The issues
presented include those raised as of the
administrative proceeding date and
those raised subsequently. Only in a
multiple issue proceeding can a most
significant issue or set of issues
presented exist. However, not all
multiple issue proceedings contain a
most significant issue or set of issues
presented. An issue or set of issues
constitutes the most significant issue or
set of issues presented if, despite
involving a lesser dollar amount in the
proceeding than the other issue or
issues, it objectively represents the most
significant issue or set of issues for the
taxpayer or the Internal Revenue
Service. This may occur because of the
effect of the issue or set of issues on
other transactions or other taxable years
of the taxpayer or related parties.
(2) Example. The provisions of this
section may be illustrated by the
following example:
Example. In the purchase of an ongoing
business, Taxpayer F obtains from the
previous owner of the business a covenant
not to compete for a period of five years. On
audit of F’s individual income tax return for
the year in which the business was acquired,
the Internal Revenue Service challenges the
basis assigned to the covenant not to compete
and a deduction taken as a business expense
for a seminar attended by F. Both parties
agree that the covenant not to compete is
amortizable over a period of five years;
however, the Internal Revenue Service
asserts that the proper basis of the covenant
is $25,000, while F asserts the basis is
$50,000 and claims a deduction of $10,000 in
the year in which the business was acquired.
F deducted $12,000 for the seminar. The
Internal Revenue Service determines that the
deduction for the seminar should be
E:\FR\FM\01MRR1.SGM
01MRR1
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
asabaliauskas on DSK5VPTVN1PROD with RULES
disallowed entirely. In the notice of
deficiency, the Internal Revenue Service
adjusts the amortization deduction to reflect
the change to the basis of the covenant not
to compete, and disallows the seminar
expense. Thus, of the two adjustments
determined for the year under audit, the
adjustment attributable to the disallowance
of the seminar is larger than that attributable
to the covenant not to compete. Due to the
impact on the next succeeding four years,
however, the covenant not to compete
adjustment is the most significant issue to
both F and the Internal Revenue Service.
(g) Net worth and size limitations—(1)
Individuals. A taxpayer who is a natural
person meets the net worth and size
limitations of this paragraph if the
taxpayer’s net worth does not exceed
two million dollars. For purposes of
determining net worth, individuals
filing a joint return, and jointly
incurring administrative or litigation
costs shall have their net worth
determined jointly, with all assets and
liabilities treated as joint for purposes of
the net worth evaluation, and applying
a joint cap of four million dollars.
Individuals who file a joint return, but
incur separate administrative or
litigation costs, by retaining separate
representation, and/or seeking
individual administrative review or
petitioning the court individually, such
as under section 6015, shall have their
net worth determined separately, with
only those assets and liabilities
reasonably attributable to each spouse
considered against separate caps of two
million dollars per spouse.
(2) Estates and trusts. An estate or a
trust meets the net worth and size
limitations of this paragraph if the estate
or trust’s net worth does not exceed two
million dollars. The net worth of an
estate shall be determined as of the date
of the decedent’s death provided the
date of death is prior to the date the
court proceeding is commenced. The
net worth of a trust shall be determined
as of the last day of the last taxable year
involved in the proceeding.
(3) Others. (i) A taxpayer that is a
partnership, corporation, association,
unit of local government, or
organization (other than an organization
described in paragraph (g)(4) of this
section) meets the net worth and size
limitations of this paragraph if, as of the
administrative proceeding date:
(A) The taxpayer’s net worth does not
exceed seven million dollars; and
(B) The taxpayer does not have more
than 500 employees.
(ii) A taxpayer who is a natural person
and owns an unincorporated business is
subject to the net worth and size
limitations contained in paragraph
(g)(3)(i) of this section if the tax at issue
(or any interest, additional amount,
VerDate Sep<11>2014
18:20 Feb 29, 2016
Jkt 238001
addition to tax, or penalty, together with
any costs in addition to the tax) relates
directly to the business activities of the
unincorporated business.
(4) Special rule for charitable
organizations and certain cooperatives.
An organization described in section
501(c)(3) exempt from taxation under
section 501(a), or a cooperative
association as defined in section 15(a) of
the Agricultural Marketing Act, 12
U.S.C. 1141j(a) (as in effect on October
22, 1986), meets the net worth and size
limitations of this paragraph if, as of the
administrative proceeding date, the
organization or cooperative association
does not have more than 500 employees.
(5) Special rule for TEFRA
partnership proceedings. (i) In cases
involving partnerships subject to the
unified audit and litigation procedures
of subchapter C of chapter 63 of the
Internal Revenue Code (TEFRA
partnership cases), the TEFRA
partnership meets the net worth and
size limitations requirements of this
paragraph (g) if, on the administrative
proceeding date—
(A) The partnership’s net worth does
not exceed seven million dollars; and
(B) The partnership does not have
more than 500 employees.
(ii) In addition, each partner
requesting fees pursuant to section 7430
must meet the appropriate net worth
and size limitations set forth in
paragraph (g)(1), (g)(2), or (g)(3) of this
section. For example, if a partner is an
individual, his or her net worth must
not exceed two million dollars as of the
administrative proceeding date. If the
partner is a corporation, its net worth
must not exceed seven million dollars
and it must not have more than 500
employees.
(6) Determining net worth. For
purposes of determining net worth
under this paragraph (g), assets are
valued based on the cost of their
acquisition.
(h) Determination of prevailing party.
If the final decision with respect to the
tax, interest, or penalty is made at the
administrative level, the determination
of whether a taxpayer is a prevailing
party shall be made by agreement of the
parties, or absent an agreement, by the
Internal Revenue Service. See
§ 301.7430–2(c)(7) regarding the right to
appeal the decision of the Internal
Revenue Service denying (in whole or
in part) a request for reasonable
administrative costs to the Tax Court.
■ Par. 8. Section 301.7430–6 is revised
to read as follows:
§ 301.7430–6
Effective/applicability dates.
Sections 301.7430–2 through
301.7430–6, other than §§ 301.7430–
PO 00000
Frm 00057
Fmt 4700
Sfmt 4700
10489
2(b)(2), (c)(3)(i)(B), (c)(3)(i)(E),
(c)(3)(ii)(C), (c)(3)(iii)(C), (c)(5), (c)(7),
and (e); §§ 301.7430–3(c)(1), (c)(3),
(c)(4), and (d); §§ 301.7430–4(b)(3)(i),
(b)(3)(ii), (b)(3)(iii)(B), (b)(3)(iii)(C),
(b)(3)(iii)(D), (b)(3)(iii)(E), (b)(3)(iii)(F),
(c)(2)(ii), (c)(4), and (d); and
§§ 301.7430–5(a), (b), (c)(3), (d)(2),
(d)(3), (d)(4), (d)(5), (d)(7), (f)(2), (g)(1),
(g)(2), (g)(3), (g)(5), and (g)(6) apply to
claims for reasonable administrative
costs filed with the Internal Revenue
Service after December 23, 1992, with
respect to costs incurred in
administrative proceedings commenced
after November 10, 1988. Section
301.7430–2(c)(5) is applicable to costs
incurred and services performed in
cases in which the petition was filed on
or after March 1, 2016, except for the
last two sentences, which are applicable
March 23, 1993. Sections 301.7430–
2(b)(2), and (c)(3)(i)(B) (except the last
sentence); 301.7430–4(b)(3)(ii),
(b)(3)(iii)(C) (except the first two
sentences), and (c)(2)(ii) (except for
references to the statutory cap as $125);
and 301.7430–5(a) (except the
parenthetical of 5(a) and all of 5(a)(1)),
and the first and last sentence of (d)(7)
are applicable for administrative
proceedings commenced after July 30,
1996. Sections 301.7430–1(e), 301.7430–
2(c)(2), 7430–3(a)(4) and (b) are
applicable with respect to actions taken
by the Internal Revenue Service after
July 22, 1998. The last sentence of
§ 301.7430–2(c)(3)(i)(B), the first two
sentences of § 301.7430–2(b)(3)(iii)(C),
§§ 301.7430–2(c)(3)(i)(E), (c)(3)(ii)(C),
(c)(3)(iii)(C), (c)(7), (e); 301.7430–3(c)(1),
(c)(3), (c)(4), (d); 301.7430–4(b)(3)(i),
(b)(3)(iii)(B), (b)(3)(iii)(E), (b)(3)(iii)(F),
(c)(2)(ii) (to the extent it references the
statutory cap as $125), (c)(4), (d); the
parenthetical of § 301.7430–5(a) and
§§ 301.7430–5(a)(1), (b), (d)(2), (d)(3),
(d)(4), (d)(5), (d)(7), except the first and
last sentences, (f)(2), (g)(1), (g)(2), (g)(3),
(g)(5), and (g)(6) apply to costs incurred
and services performed in cases in
which the petition was filed on or after
March 1, 2016.
■ Par. 9. Section 301.7430–7 is
amended by:
■ 1. Adding paragraph (c)(8).
■ 2. Amending paragraph (e) by adding
Examples 16 and 17.
■ 3. Revising paragraph (f).
The additions and revisions read as
follows:
§ 301.7430–7
*
Qualified offers.
*
*
*
*
(c) * * *
(8) Interest as a contested issue. To
constitute a qualified offer, an offer
must specify the offered amount of the
taxpayer’s liability (determined without
E:\FR\FM\01MRR1.SGM
01MRR1
10490
Federal Register / Vol. 81, No. 40 / Tuesday, March 1, 2016 / Rules and Regulations
regard to interest, unless interest is a
contested issue in the proceeding), as
provided in paragraphs (c)(1)(ii) and
(c)(3) of this section. Therefore, a
qualified offer generally may only
include an offer to compromise tax,
penalties, additions to the tax, and
additional amounts. Interest may only
be included in a qualified offer if
interest is a contested issue in the
proceeding. For purposes of this section,
interest is a contested issue in the
proceeding only if the court in which
the proceeding could be brought would
have jurisdiction to determine the
amount of interest due on the
underlying tax, penalties, additions to
the tax, and additional amounts.
Examples of proceedings in which
interest might be a contested issue
include proceedings in which the
increased interest rate for large
corporate underpayments under section
6621(c) is imposed by the Internal
Revenue Service and interest abatement
proceedings brought under section
6404. Interest is not a contested issue in
the proceeding if the court that would
have jurisdiction over the proceeding
would not have jurisdiction to
determine the amount or rate of interest,
regardless of whether the taxpayer
attempts to raise interest as an issue in
the proceeding. Consequently, interest
will not be a contested issue in the vast
majority of tax cases because they
merely involve the straightforward
application of statutory interest under
section 6601. Accordingly, in those
cases, interest may not be included in
the offer.
*
*
*
*
*
(e) * * *
Example 16. Qualified offer may not
compromise interest unless it is a contested
issue. Taxpayer J receives a notice of
deficiency making an adjustment resulting in
a deficiency in tax of $6,500 plus a penalty
of $500. Interest is not a contested issue in
the proceeding. Within the qualified offer
period, J submits a written offer to settle the
case for a deficiency of $1,000, including all
taxes, penalties, and interest. The offer states
that it is a qualified offer for purposes of
section 7430(g) and that it will remain open
for acceptance by the Internal Revenue
Service for a period of 90 days. Section
7430(g)(2)(B) and paragraph (c)(3) of this
section state that the amount of a qualified
offer must be without regard to interest
unless interest is at issue in the proceeding.
Since J’s offer attempts to compromise
interest, which is not a contested issue in the
proceeding, it is not a qualified offer.
Example 17. Qualified offer based on new
defense or legal theory. Taxpayers K and L
received a statutory notice of deficiency for
tax year 2005, a tax year when they were
married and filed a joint income tax return.
Taxpayer K files a separate petition claiming
innocent spouse relief and simultaneously
submits an offer purporting to be a qualified
offer. The offer states that K is entitled to
innocent spouse relief and offers to settle the
2005 deficiency as to K. K’s innocent spouse
claim was not raised during K and L’s audit,
nor was it raised during their appeals
conference. Additionally, at no time prior to
or contemporaneously with submitting the
offer did K file with the Internal Revenue
Service a Form 8857, Request for Innocent
Spouse Relief, or otherwise provide the
information specified in § 1.6015–5(a) of this
chapter. K’s offer is not a qualified offer
because K did not file a Form 8857 or
otherwise provide substantiation or legal and
factual arguments necessary to allow for
informed consideration of the merits of the
innocent spouse claim as required by
paragraph (c)(4) of this section,
contemporaneously with the offer or prior to
making the offer.
(f) Effective/applicability date. This
section is applicable with respect to
qualified offers made in administrative
or court proceedings described in
section 7430 after December 24, 2003,
except that paragraph (c)(8) is effective
as of March 1, 2016.
§§ 301.7430–1, 301.7430–2, 301.7430–4, and
301.7430–5 [Amended]
Par. 10. For each section listed in the
table, remove the language in the
‘‘Remove’’ column and add in its place
the language in the ‘‘Add’’ column as set
forth below:
■
Section
Remove
§ 301.7430–1(f)(2)(i) ................................................................
§ 301.7430–1(f)(3)(ii) ...............................................................
§ 301.7430–1(f)(3)(iii) ..............................................................
§ 301.7430–1(f)(4)(i) ................................................................
§ 301.7430–1(g) Example 6 third and fourth sentences .........
§ 301.7430–1(g) Example 7 third and fourth sentences .........
§ 301.7430–1(g) Example 8 second and fourth sentences ....
§ 301.7430–1(g) Example 9 second sentence .......................
§ 301.7430–2(b)(2) fourth and fifth sentences ........................
§ 301.7430–2(c)(4) first sentence ...........................................
§ 301.7430–2(c)(6) second sentence ......................................
§ 301.7430–4(b)(3)(ii) first and second sentences .................
§ 301.7430–4(c)(2)(i) third sentence .......................................
§ 301.7430–4(c)(2)(i) fourth sentence .....................................
§ 301.7430–4(c)(2)(ii) second and third sentences ................
§ 301.7430–5(h) first sentence ................................................
district director .......................................
district director .......................................
district director .......................................
district director .......................................
district director .......................................
district director .......................................
district director .......................................
such .......................................................
such .......................................................
which ......................................................
such .......................................................
$110 .......................................................
Such .......................................................
which ......................................................
$110 .......................................................
such .......................................................
DEPARTMENT OF LABOR
asabaliauskas on DSK5VPTVN1PROD with RULES
John Dalrymple,
Deputy Commissioner for Services and
Enforcement.
Occupational Safety and Health
Administration
Approved: January 19, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax
Policy).
29 CFR Part 1910
[FR Doc. 2016–04401 Filed 2–29–16; 8:45 am]
CFR Correction
Occupational Safety and Health
Standards
In Title 29 of the Code of Federal
Regulations, Parts 1900 to § 1910.999,
revised as of July 1, 2015, on page 243,
18:20 Feb 29, 2016
Jkt 238001
PO 00000
Frm 00058
Fmt 4700
Internal
Internal
Internal
Internal
Internal
Internal
Internal
these
these
that
the
$125
These
that
$125
an
Sfmt 4700
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Revenue
Service
Service
Service
Service
Service
Service
Service
office
office
office
office
office
office
office
in § 1910.106, paragraph (a)(14)
introductory text is reinstated to read as
follows:
§ 1910.106
Flammable liquids.
*
BILLING CODE 4830–01–P
VerDate Sep<11>2014
Add
*
*
*
*
(14) Flashpoint means the minimum
temperature at which a liquid gives off
vapor within a test vessel in sufficient
concentration to form an ignitable
mixture with air near the surface of the
E:\FR\FM\01MRR1.SGM
01MRR1
Agencies
[Federal Register Volume 81, Number 40 (Tuesday, March 1, 2016)]
[Rules and Regulations]
[Pages 10479-10490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04401]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9756]
RIN 1545-AX46
Regulations Under IRC Section 7430 Relating to Awards of
Administrative Costs and Attorneys' Fees
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to awards of
administrative costs and attorneys' fees. The final regulations conform
the regulations to the amendments made in
[[Page 10480]]
the Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform
Act of 1998. The regulations affect taxpayers seeking attorneys' fees
and costs.
DATES:
Effective date: The final regulations are effective on March 1,
2016.
Applicability date: For date of applicability, see Sec. 301.7430-
6.
FOR FURTHER INFORMATION CONTACT: Shannon K. Casta[ntilde]eda at (202)
317-5437 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
I. In General
This document contains final amendments to Treasury Regulations
under section 7430 of the Internal Revenue Code (Code) relating to
awards of administrative and attorneys' fees. Section 7430 generally
permits a prevailing party in an administrative or court proceeding to
seek an award for reasonable administrative and litigation costs
incurred in connection with such proceedings. The amendments
incorporate the 1997 and 1998 amendments to section 7430, which were
enacted as part of the Taxpayer Relief Act of 1997 (TRA), Public Law
105-34, 111 Stat. 788 (Aug. 5, 1997), and the IRS Restructuring and
Reform Act of 1998 (RRA '98), Public Law 105-206, 112 Stat. 685 (Jul.
22, 1998).
The Treasury Department and the Internal Revenue Service published
a notice of proposed rulemaking (REG-111833-99) in the Federal
Register, 74 FR 61589, on November 25, 2009 (the NPRM), proposing
amendments to the regulations under section 7430. A public hearing was
scheduled for March 10, 2010. The Internal Revenue Service did not
receive any requests to testify at the public hearing, and the public
hearing was cancelled. Two written comments responding to the NPRM were
received and are available for public inspection at https://www.regulations.gov or upon request. After consideration of the
comments, the proposed regulations are adopted as revised by this
Treasury Decision.
II. Statutory Provisions
Section 7430 generally authorizes a court to award administrative
and litigation costs, including attorneys' fees, to a prevailing party
in an administrative or court proceeding brought by or against the
United States in connection with the determination, collection, or
refund of any tax, interest, or penalty. To qualify as a ``prevailing
party'' a taxpayer must substantially prevail as to the amount in
controversy or the most significant issue or set of issues in the
proceeding, exhaust the administrative remedies, meet net worth and
size limitations, and pay or incur the costs. The taxpayer generally
cannot qualify for an award of such costs, however, if the government
establishes that its position in the proceeding was substantially
justified.
The TRA contained several amendments to section 7430 that are
incorporated in the amendments to the regulations. First, the TRA
provided that a taxpayer has ninety days after the date the Internal
Revenue Service mails to the taxpayer a final decision determining tax,
interest, or a penalty, to file an application with the Internal
Revenue Service to recover administrative costs. Section 7430 had
previously been silent as to the timing for seeking administrative
costs. Second, the TRA provided that a taxpayer has ninety days after
the date the Internal Revenue Service mails to the taxpayer, by
certified or registered mail, a final adverse decision regarding an
award of administrative costs, to file a petition with the Tax Court.
Section 7430 had previously been silent as to the timing for seeking
review in the Tax Court. Third, the TRA clarified the application of
the net worth and size limitations imposed by section 7430(c)(4) by
providing that individuals filing joint returns should be treated as
separate taxpayers for purposes of determining net worth. The TRA added
trusts to the list of taxpayers subject to the net worth and size
limitations and also specified the date on which the net worth and size
determination should be made. Before the TRA's clarification of the net
worth and size limitations, section 7430 had stated only that a
prevailing party must meet the requirement of the first sentence of
section 2412(d)(1)(B) of Title 28. Section 2412(d)(2)(B) establishes
the net worth and size limitations of the Equal Access to Justice Act.
See 28 U.S.C. 2412 (EAJA). The TRA also added section 7436 to the Code,
which gives the Tax Court jurisdiction in certain employment tax cases.
Section 7436(d)(2) provides that section 7430 applies to proceedings
brought under section 7436.
RRA '98 also contained several amendments affecting section 7430.
First, RRA '98 increased the hourly rate limitation for attorneys' fees
in section 7430(c)(1) from $110 per hour to $125 per hour. Second, two
special factors were added that may be considered to allow an increase
in an attorney's hourly rate: (1) Difficulty of the issues presented
and (2) local availability of tax expertise. Prior to the enactment of
RRA '98, the only special factor included in section 7430(c)(1) was the
limited availability of qualified attorneys. Third, RRA '98 added a
provision that requires a court to consider whether the Internal
Revenue Service has lost cases with substantially similar issues in
other circuit courts of appeal in deciding whether the Internal Revenue
Service's position was substantially justified. Fourth, RRA '98 created
an exception to the requirement that to recover attorneys' fees, the
taxpayer must have paid or incurred the fees. The exception provides
that if an individual who is authorized to practice before the Tax
Court or the Internal Revenue Service is representing the taxpayer on a
pro bono basis, then the taxpayer may petition for an award of
reasonable attorneys' fees in excess of the amounts that the taxpayer
paid or incurred, as long as the fee award is ultimately paid to the
individual who represented the taxpayer or such individual's employer.
The Treasury Department and the Internal Revenue Service are releasing,
simultaneously with these final regulations, a revenue procedure
detailing the procedures for the recovery of attorneys' fees in the pro
bono context. Fifth, RRA '98 extended the period for recovery of
reasonable administrative costs to include costs incurred after the
date on which the first letter of proposed deficiency, commonly known
as a 30-day letter, is mailed to the taxpayer. Previously,
administrative costs only included costs incurred on or after the date
of the receipt by the taxpayer of the notice of the decision of the
Internal Revenue Service Office of Appeals, or the date of the notice
of deficiency.
Summary of Regulations
The final regulations reflect the changes made by the TRA as
originated in the proposed regulations. Clarifying changes included in
the proposed regulations and adopted here address the calculation of
net worth. Section 7430 imposes net worth and size limitations on who
can recover costs. First, the proposed and final regulations specify
which limitations with respect to net worth and size apply when a
taxpayer is an owner of an unincorporated business. Second, the
proposed and final regulations clarify the net worth and size
limitations in cases involving partnerships subject to the unified
audit and litigation procedures of sections 6221 through 6234 of the
Code (the TEFRA partnership procedures).
The final regulations reflect a further clarification that was not
included in the proposed regulations. The proposed regulations merely
noted that the net
[[Page 10481]]
worth of taxpayers who filed joint returns should be calculated
separately. The final regulations further explain how the separate
calculation will be conducted in various situations. When taxpayers who
file joint returns jointly petition the court and incur joint costs,
each taxpayer qualifies for a separate net worth limitation of $2
million, but the limitation will be evaluated jointly. As such,
taxpayers will meet the net worth limitation so long as their combined
assets are equal to or less than $4 million, regardless of how the
assets are distributed. This prevents high net worth taxpayers from
avoiding the net worth limitation by seeking costs on behalf of a
spouse with a lower net worth. When taxpayers file a joint return, but
petition the court separately and incur separate costs, the limitation
will be evaluated separately. As such, each taxpayer will have his/her
assets applied toward a separate $2 million cap for each spouse. This
analysis protects the ability of spouses with fewer assets to seek
representation when the spouse with higher-value assets is unwilling or
unable to incur those costs.
The final regulations do not adopt the proposed rule in Sec. Sec.
301.7430-5(g)(1) and (2) that the net worth limitation is computed
based on the fair market value of the taxpayer's assets. The existing
section 7430 regulations do not address this issue and no comments from
the public were received on this issue. The existing case law, however,
generally recognizes that the net worth calculation is made based on
the acquisition costs of the taxpayer's assets. Because the case law is
clear and provides an existing standard for determining net worth, the
final regulations follow the case law and do not adopt the proposed
rule in Sec. 301.7430-5(g)(1) and (2) relating to the determination of
the value of the taxpayer's assets. Accordingly, the final regulations
add a new paragraph (6) to Sec. 301.7430-5(g) to clarify that for
purposes of determining net worth, assets are valued based on the cost
of their acquisition.
Consistent with the changes made by RRA '98, the final regulations
clarify that a taxpayer may be eligible to recover reasonable
administrative costs from the date of the 30-day letter only if at
least one issue (other than recovery of administrative costs) remains
in dispute as of the date that the Internal Revenue Service takes a
position in the administrative proceeding. This requirement follows RRA
'98's prevailing party definition. Under the changes made by RRA '98,
the position of the United States is established in the administrative
proceeding on the earlier of the date the taxpayer receives the notice
of the decision of the Internal Revenue Service Office of Appeals or
the date of the notice of deficiency. Where the Internal Revenue
Service concedes an issue in the Office of Appeals prior to issuing a
notice of deficiency or notice of the decision of the Office of
Appeals, the United States does not take a position, so an award of
administrative costs is not available. Where the Internal Revenue
Service concedes an issue in the notice of decision, the position of
the United States is necessarily substantially justified. See, for
example, Fla. Country Clubs, Inc. v. Commissioner, 122 T.C. 73, 78-86
(2004), aff'd, 404 F.3d 1291 (11th Cir. 2005) (Where the Office of
Appeals determined that taxpayer did not owe any additional tax after
issuing a 30-day letter, but without ever issuing a notice of
deficiency or notice of determination, the Internal Revenue Service did
not take a position), Purciello v. Commissioner, T.C. Memo. 2014-50
(Where the Internal Revenue Service conceded the matter at issue in
full in the notice of decision, the Internal Revenue Service was
substantially justified).
Summary of Comments and Explanation of Revisions
The Treasury Department and the Internal Revenue Service received
two written comments in response to the NPRM, both of which related to
the provisions in the proposed regulations providing for the award of
reasonable attorneys' fees when an individual is representing a party
on a pro bono basis. This section addresses those comments. This
section also describes the significant differences between the rules
proposed in the NPRM and those adopted in the final regulations.
As discussed in this preamble, prior to RRA '98, only those costs
incurred by the taxpayer were eligible for payment under section 7430.
RRA '98 provided that the court could award costs in excess of the
costs actually incurred by the taxpayer if those costs were less than
the reasonable attorneys' fees because an individual is representing
the taxpayer on a pro bono basis. The statute defined pro bono as
representation provided for no fee or for a fee which (taking into
account all the facts and circumstances) is no more than a nominal fee.
Finally, the statute directed that awards for pro bono representation
must be paid to the representative or that representative's employer,
as opposed to section 7430's general requirement that awards are paid
to the taxpayer.
1. Persons on Whose Behalf Pro Bono Representation Must Be Provided
Section 7430 establishes net worth and size limitations that a
taxpayer must meet in order to recover administrative or litigation
costs. The proposed regulations included an additional requirement
related to a taxpayer's net worth: They stated that, for reasonable
administrative costs to be awarded for legal services provided on a pro
bono basis, the services must be provided to or on behalf of either (A)
persons of limited financial means who meet the eligibility
requirements for programs funded by the Legal Services Corporation, or
(B) organizations operating primarily to address the needs of persons
with limited means if payment of a standard legal fee would
significantly deplete the organization's financial resources. Both of
the commentators recommended revising the regulations to provide that
organizations to whom or on whose behalf representation may be provided
include low income taxpayer clinics, clinics participating in the
Internal Revenue Service student tax clinic program, and clinics
operating as approved clinics in the United States Tax Court. Both
commentators also proposed changes in the proposed regulations' income
limitation for persons on whose behalf pro bono legal representation
must be provided. The proposed regulations provided an income
limitation based on the eligibility requirements for programs funded by
the Legal Services Corporation (see 42 U.S.C. 2996e(a)(1)(A)), which is
125 percent of the current Federal Poverty Guidelines published by the
United States Department of Health and Human Services. One commentator
recommended that the limitation be expanded to include individuals and
households whose incomes do not exceed 250 percent of the poverty level
as determined in accordance with criteria established by the Director
of the Office of Management and Budget. The other commentator
recommended that the regulations should not contain an income threshold
for persons on whose behalf pro bono representation is provided, and
recommended that the only limitation should be that pro bono
representation must be provided to persons with limited means if
payment of a standard legal fee would significantly deplete the
person's financial resources.
The Treasury Department and the Internal Revenue Service have
carefully considered both comments and have considered the difficulty
of establishing
[[Page 10482]]
fair and easily applied limitations on eligibility for attorneys' fees
for pro bono representation based upon the income and financial
resources of the taxpayer. The Treasury Department and the Internal
Revenue Service have determined that eligibility should not be limited
based on the income or financial resources of the recipient of the
representation beyond the limit provided by section 7430(c)(4)(A)(ii).
As a result, the rule contained in the proposed regulations is not
being finalized. This change makes it unnecessary to revise the
eligibility requirements as proposed by the commentators.
2. Rate of Reimbursement for Attorneys Who Do Not Have a Customary
Hourly Rate
An example in the proposed regulations stated that an award for
representation by attorneys employed by a low income taxpayer clinic
who do not have a customary hourly rate would be limited to the rate
prescribed under section 7430(c)(1)(B). Section 7430(c)(1)(B)(iii)
provides for attorneys' fees based on prevailing market rates for the
kind or quality of services furnished, except that the fee is limited
to a statutory rate of $125 an hour plus cost of living adjustments,
unless a special factor justifies a higher rate. One commentator stated
that because of the difficulty of determining the prevailing market
rates for the kind or quality of services furnished in the case of
attorneys representing low income taxpayers, and because of the
unlikelihood that a low income taxpayer clinic or student taxpayer
clinic program would become involved in a case that would justify a
rate in excess of the statutory rate, the rate for pro bono attorneys
who do not have a customary hourly rate should be set at the statutory
rate.
After publishing the proposed regulations, the Treasury Department
and the Internal Revenue Service determined that details such as the
rate of compensation for pro bono attorneys who do not have a customary
hourly rate would more logically be contained in a revenue procedure.
The Treasury Department and the Internal Revenue Service are releasing
simultaneously Rev. Proc. 2016-17, which provides that pro bono
attorneys who do not charge an hourly rate receive the statutory rate
for their services unless they establish that a special factor, as
described in section 7430(c)(1)(B)(iii), applies to justify a higher
hourly rate. The final regulations, therefore, do not contain the
example in the proposed regulations on the rate applicable to pro bono
attorneys who do not have a customary hourly rate. Instead, these
recommendations are taken into account in Rev. Proc. 2016-17.
3. Enhanced Rate Based on Limited Availability of Pro Bono
Representatives With Tax Expertise
One commentator recommended a change to the section of the proposed
regulations that provided that the limited local availability of tax
expertise is a special factor that would justify an award at a rate
higher than the statutory rate. The proposed regulations provided that
limited local availability of tax expertise is established by
demonstrating that a representative possessing tax expertise is not
available in the taxpayer's geographical area. The commentator stated
that she did not think this special factor produces a fair result in
the case of pro bono representatives because, even if attorneys
possessing tax expertise practice within a taxpayer's geographic area,
those attorneys may not be willing or able to take on pro bono cases.
The commentator suggested that the regulation be revised so that, in
pro bono cases, the special factor based on the limited local
availability of tax expertise would apply if there is no representative
possessing tax expertise practicing within the taxpayer's geographic
area who is willing or able to represent the taxpayer on a pro bono
basis.
The Treasury Department and the Internal Revenue Service disagree
that the proposed rule does not produce a fair result in the case of
pro bono representatives. The rule permits the award of an enhanced
rate based on the limited local availability of tax expertise because
such a circumstance reasonably could have an unfair impact on a
taxpayer who pays or incurs liability for attorneys' fees. For example,
the taxpayer who must go outside his geographic area to retain a
representative with tax expertise might be required to pay more for the
representation than the generally prevailing market rate for
representatives in the taxpayer's geographic area. Taxpayers who are
represented on a pro bono basis are entitled to the enhanced rate in
the same manner as taxpayers who incur fees. Therefore, the final
regulations adopt the rule in the proposed regulations without change.
4. Payments for Work Performed by Students and Hourly Rates for
Students
The proposed regulations did not discuss issues relating to the
award of attorneys' fees based on the work of volunteer law students.
Both commentators recommended clarifying the proposed regulations to
state that payment for work performed by law students should be made to
the attorneys under whom the students work or to such an attorney's
employer rather than to the law students.
One commentator expressed concern that fees may be awarded based on
the work of law students who volunteer in low income taxpayer clinics
and clinics participating in the Internal Revenue Service student
taxpayer clinic program, but that such students do not have customary
hourly rates. The commentator proposed setting an hourly rate for law
students at 40 percent of the statutory hourly rate for attorneys. The
commentator also requested clarification that the work of law students
can be compensated as attorneys' fees or costs regardless of whether
the students have special orders authorizing them to practice before
the Internal Revenue Service.
The Treasury Department and the Internal Revenue Service agree that
awarding fees based on the work of volunteer students may be
appropriate and are addressing this issue in a revenue procedure being
released contemporaneously with these final regulations. In Rev. Proc.
2016-17, the Treasury Department and the Internal Revenue Service
clarify that work performed by students authorized to practice before
the Internal Revenue Service or the Tax Court may be compensable at 35
percent of the statutory hourly rate for attorneys, unless the student
can demonstrate that a rate in excess of that 35 percent is
appropriate, with the award payable to the clinic or organization with
which the student is affiliated. Rev. Proc. 2016-17 further clarifies
that with respect to students who are not authorized to practice before
the Internal Revenue Service or the Tax Court, the requester will have
the burden of proving that an award of costs is appropriate and what
rate of compensation is reasonable.
5. Effective/Applicability Date
The proposed regulations provided that the changes in Sec. Sec.
301.7430-2, 301.7430-3, 301.7430-4, and 301.7430-5 would apply to costs
incurred and services performed as of the date of publication of the
final regulations, without regard to when a petition was filed. That
meant that these changes could have applied in cases where a petition
was filed before publication of the final regulations in the Federal
Register. To ensure that these changes are not mandatory for cases in
which a
[[Page 10483]]
petition was filed before publication of the final regulations in the
Federal Register, the effective/applicability date in Sec. 301.7430-6
of the final regulations has been revised to provide that the changes
in Sec. Sec. 301.7430-2, 301.7430-3, 301.7430-4, and 301.7430-5 apply
to costs incurred and services performed in cases in which the petition
was filed on or after the date of publication of the final regulations
in the Federal Register. However, taxpayers may rely on the changes
contained in Sec. Sec. 301.7430-2, 301.7430-3, 301.7430-4, and
301.7430-5 of the final regulations for costs incurred and services
performed in which a petition was filed prior to March 1, 2016.
In addition, no effective/applicability date was proposed with
respect to the rules for qualified offers under Sec. 301.7430-7, but
one has been added to the final regulations. Accordingly, under Sec.
301.7430-7(f) of the final regulations, section 301.7430-7 applies to
qualified offers made in administrative court proceedings described in
section 7430 after December 24, 2003, except that section 301.7430-
7(c)(8) is effective as of the date these final regulations are
published in the Federal Register.
Statement of Availability for IRS Document
For copies of recently issued Revenue Procedures, Revenue Ruling,
notices and other guidance published in the Internal Revenue Bulletin,
visit the IRS Web site at https://www.irs.gov.
Special Analyses
Certain IRS regulations, including this one, are exempt from the
requirements of Executive Order 12866, as supplemented and reaffirmed
by Executive Order 13563. Therefore, a regulatory impact assessment is
not required. It also has been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to
these regulations and, because these regulations do not impose on small
entities a collection of information requirement, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Therefore, a
Regulatory Flexibility Analysis is not required. Pursuant to section
7805(f) of the Internal Revenue Code, the Notice of Proposed Rulemaking
was submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business. No comments
were received.
Drafting Information
The principal author of these regulations is Shannon K.
Casta[ntilde]eda, Office of Associate Chief Counsel (Procedure and
Administration).
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Adoptions of Amendments to the Regulations
Accordingly, 26 CFR part 301 is amended as follows:
PART 301--PROCEDURE AND ADMINISTRATION
0
Paragraph 1. The authority citation for part 301 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 301.7430-0 is amended by:
0
1. Adding an entry for Sec. 301.7430-3(c)(4).
0
2. Adding entries to Sec. 301.7430-4, paragraphs (b)(3)(iii)(A)
through (F) and (d).
0
3. Revising the entries for Sec. 301.7430-5.
0
4. Revising the section heading for Sec. 301.7430-6.
0
5. Adding entries for Sec. Sec. 301.7430-7 and 301.7430-8.
The additions and revisions read as follows:
Sec. 301.7430-0 Table of contents.
* * * * *
Sec. 301.7430-3 Administrative proceeding and administrative
proceeding date.
* * * * *
(c) * * *
(4) First letter of proposed deficiency that allows the taxpayer an
opportunity for administrative review in the Office of Appeals.
* * * * *
Sec. 301.7430-4 Reasonable administrative costs.
* * * * *
(b) * * *
(3) * * *
(iii) * * *
(A) In general.
(B) Special factor.
(C) Limited availability.
(D) Local availability of tax expertise.
(E) Difficulty of the issues.
(F) Example.
* * * * *
(d) Pro bono representation.
(1) In general.
(2) Requirements.
(3) Nominal fee.
(4) Payment when representation provided for a nominal fee.
(5) Requirements.
(6) Hourly rate.
(7) Examples.
Sec. 301.7430-5 Prevailing party.
(a) In general.
(b) Position of the Internal Revenue Service.
(c) Examples.
(d) Substantially justified.
(1) In general.
(2) Position in courts of appeal.
(3) Examples.
(4) Included costs.
(5) Examples.
(6) Exception.
(7) Presumption.
(e) Amount in controversy.
(f) Most significant issue or set of issues presented.
(1) In general.
(2) Example.
(g) Net worth and size limitations.
(1) Individuals.
(2) Estates and trusts.
(3) Others.
(4) Special rule for charitable organizations and certain
cooperatives.
(5) Special rule for TEFRA partnerships.
(6) Determining net worth.
(h) Determination of prevailing party.
(i) Examples.
Sec. 301.7430-6 Effective/applicability dates.
Sec. 301.7430-7 Qualified offers.
(a) In general.
(b) Requirements for treatment as a prevailing party based upon
having made a qualified offer.
(1) In general.
(2) Liability under the last qualified offer.
(3) Liability pursuant to the judgment.
(c) Qualified offer.
(1) In general.
(2) To the United States.
(3) Specifies the offered amount.
(4) Designated at the time it is made as a qualified offer.
(5) Remains open.
(6) Last qualified offer.
(7) Qualified offer period.
(8) Interest as a contested issue.
(d) [Reserved].
(e) Examples.
(f) Effective date.
Sec. 301.7430-8 Administrative costs incurred in damage actions for
violations of section 362 or 524 of the Bankruptcy Code.
(a) In general.
(b) Prevailing party.
(c) Administrative proceeding.
(d) Costs incurred after filing of bankruptcy petition.
(e) Time for filing claim for administrative costs.
(f) Effective date.
[[Page 10484]]
0
Par. 3. Section 301.7430-1 is amended by revising paragraphs
(b)(1)(ii)(A), (d)(1)(i) and (ii) and (d)(2) introductory text to read
as follows:
Sec. 301.7430-1 Exhaustion of administrative remedies.
* * * * *
(b) * * *
(1) * * *
(ii) * * *
(A) Requests an Appeals office conference in accordance with
Sec. Sec. 601.105 and 601.106 of this chapter or any successor
published guidance; and
* * * * *
(d) * * *
(1) * * *
(i) The party follows all applicable Internal Revenue Service
procedures for contesting the matter (including filing a written
protest or claim, requesting an administrative appeal, and
participating in an administrative hearing or conference); or
(ii) If there are no applicable Internal Revenue Service
procedures, the party submits to the Area Director of the area having
jurisdiction over the dispute a written claim for relief reciting facts
and circumstances sufficient to show the nature of the relief requested
and that the party is entitled to the requested relief, and the Area
Director denies the claim for relief in writing or fails to act on the
claim within a reasonable period after the claim is received by the
Area Director.
(2) For purposes of paragraph (d)(1)(ii) of this section, a
reasonable period is--
* * * * *
0
Par. 4. Section 301.7430-2 is amended by:
0
1. Revising paragraph (a).
0
2. Removing the semicolon at the end of paragraph (c)(3)(i)(B) and
adding a period in its place, and adding a sentence at the end of the
paragraph.
0
3. Adding a sentence at the end of paragraph (c)(3)(i)(E).
0
4. Revising paragraph (c)(3)(ii)(C), adding paragraph (c)(3)(iii)(C).,
and revising paragraph (c)(5).
0
5. Adding a sentence at the end of paragraph (c)(7).
0
6. Revising paragraph (e).
The additions and revisions read as follows:
Sec. 301.7430-2 Requirements and procedures for recovery of
reasonable administrative costs.
(a) Introduction. Section 7430(a)(1) provides for the recovery,
under certain circumstances, of reasonable administrative costs
incurred in connection with an administrative proceeding before the
Internal Revenue Service. Paragraph (b) of this section lists the
requirements that a taxpayer must meet to be entitled to an award of
reasonable administrative costs from the Internal Revenue Service.
Paragraph (c) of this section describes the procedures that a taxpayer
must follow to recover reasonable administrative costs. Paragraphs (b)
and (c) apply to requests for administrative costs regarding all
administrative proceedings within the Internal Revenue Service.
* * * * *
(c) * * *
(3) * * *
(i) * * *
(B) * * * For costs incurred after January 18, 1999, if the
taxpayer alleges that the United States has lost in courts of appeal
for other circuits on substantially similar issues, the taxpayer must
provide, for each such case, the full name of the case, volume and
pages of the reporter in which the opinion appears, the circuit in
which the case was decided, and the year of the opinion;
* * * * *
(E) * * * This statement must identify whether the representation
is on a pro bono basis as defined in Sec. 301.7430-4(d) and, if so, to
whom payment should be made. Specifically, the statement must direct
whether payment should be made to the taxpayer's representative or to
the representative's employer.
(ii) * * *
(C) For costs incurred after January 18, 1999, if more than $125
per hour (as adjusted for an increase in the cost of living pursuant to
Sec. 301.7430-4(b)(3)) is claimed for the fees of a representative in
connection with the administrative proceeding, an affidavit is
necessary stating that a special factor described in Sec. 301.7430-
4(b)(3) is applicable, such as the difficulty of the issues presented
in the case or the lack of local availability of tax expertise. If a
special factor is claimed based on specialized skills and distinctive
knowledge as described in Sec. 301.7430-4(b)(2)(ii), the affidavit
should state--
(1) Why the specialized skills and distinctive knowledge were
necessary in the representation;
(2) That there is a limited availability of representatives
possessing these specialized skills and distinctive knowledge; and
(3) How the representative's education and experience qualifies the
representative as someone with the necessary specialized skills and
distinctive knowledge.
(iii) * * *
(C) In cases of pro bono representation, time records similar to
billing records, detailing the time spent and work completed, must be
submitted for the requested fees.
* * * * *
(5) Period for requesting costs from the Internal Revenue Service.
To recover reasonable administrative costs pursuant to section 7430 and
this section, the taxpayer must file a written request for costs within
90 days after the date the final adverse decision of the Internal
Revenue Service with respect to all tax, additions to tax, interest,
and penalties at issue in the administrative proceeding is mailed or
otherwise furnished to the taxpayer. For purposes of this section,
interest means the interest that is specifically at issue in the
administrative proceeding independent of the taxpayer's objections to
the underlying tax, additions to tax, and penalties imposed. The final
decision of the Internal Revenue Service for purposes of this section
is the document that resolves the taxpayer's liability with regard to
all tax, additions to tax, interest, and penalties at issue in the
administrative proceeding (such as a Form 870 or closing agreement), or
a notice of assessment for that liability (such as the notice and
demand under section 6303), whichever is earlier mailed or otherwise
furnished to the taxpayer. For purposes of this section, if the 90th
day falls on a Saturday, Sunday, or a legal holiday, the 90-day period
shall end on the next succeeding day that is not a Saturday, Sunday, or
a legal holiday as defined by section 7503.
* * * * *
(7) * * * Once a notice of decision denying (in whole or in part)
an award for reasonable administrative costs is mailed by the Internal
Revenue Service via certified mail or registered mail as required by
paragraph (c)(6) of this section, a taxpayer may obtain judicial review
of that decision by filing a petition for review with the Tax Court
prior to the 91st day after the mailing of the notice of decision.
* * * * *
(e) The following examples primarily illustrate paragraph (a) of
this section:
Example 1. Taxpayer A receives a notice of proposed deficiency
(30-day letter). A requests and is granted Appeals office
consideration. The administrative file contains certain documents
provided by A as substantiation for the tax matters at issue.
Appeals determines that the information submitted is insufficient.
Appeals then issues a notice of deficiency. After receiving the
notice of deficiency but before the 90-day period for filing a
petition with the Tax Court has expired, and before filing a
petition with the Tax Court, A convinces Appeals that the
information previously submitted and
[[Page 10485]]
reviewed by Appeals is sufficient and, therefore, the notice of
deficiency is incorrect and A owes no additional tax. Pursuant to
section 6212(d), the notice of deficiency is rescinded. Appeals then
closes the case showing a zero deficiency and mails A a notice to
this effect. Assuming that Appeals did not rely on any new
information provided by A in rescinding the notice of deficiency and
that all of the other requirements of section 7430 are satisfied, A
may recover reasonable administrative costs incurred after the date
of the 30-day letter (the administrative proceeding date as defined
in Treas. Reg. Sec. 301.7430-3(c)). To recover these costs, A must
file a request for administrative costs with the Appeals office
personnel who settled A's tax matter, or if that person is unknown
to A, with the Area Director of the area that considered the
underlying matter, within 90 days after the date of mailing of the
Office of Appeals' final decision that A owes no additional tax.
Example 2. Taxpayer B files a request for an abatement of
interest pursuant to section 6404 and the regulations thereunder.
The Area Director issues a notice of proposed disallowance of the
abatement request (akin to a 30-day letter). B requests and is
granted Appeals office consideration. No agreement is reached with
Appeals and the Office of Appeals issues a notice of disallowance of
the abatement request. B does not file suit in the Tax Court, but
instead contacts the Appeals office within 180 days after the
mailing date of the notice of disallowance of the abatement request
to attempt to reverse the decision. B convinces the Appeals office
that the notice of disallowance is in error. The Appeals office
agrees to abate the interest and mails the taxpayer a notification
of this decision. The mailing date of the notification from Appeals
of the decision to abate interest commences the 90-day period from
which the taxpayer may request administrative costs. Assuming that
Appeals did not rely on any new information provided by B in
reversing its notice of disallowance, and that all of the other
requirements of section 7430 are satisfied, B may recover reasonable
administrative costs incurred after the date the Area Director
issued the notice of proposed disallowance of the abatement request
(the administrative proceeding date as defined in Treas. Reg. Sec.
301.7430-3(c)). To recover these costs, B must file a request for
costs with the Appeals office personnel who settled B's tax matter,
or if that person is unknown to B, with the Area Director of the
area that considered the underlying matter within 90 days after the
date of mailing of the Office of Appeals' final decision that B is
entitled to abatement of interest.
Example 3. Taxpayer C receives a notice of proposed adjustment
and employment tax 30-day letter. C requests and is granted Appeals
office consideration. The administrative file contains certain
documents provided by C to support C's position in the tax matters
at issue. Appeals determines that the documents submitted are
insufficient. Appeals then issues a notice of determination of
worker classification. After receiving the notice of determination
of worker classification but before the 90-day period for filing a
petition with the Tax Court has expired, C convinces Appeals that
the documents previously submitted and reviewed by Appeals
adequately support its position and, therefore, C owes no additional
employment tax. Appeals then closes the case showing a zero tax
adjustment and mails C a no-change letter. Assuming that Appeals did
not rely on any new information provided by C in reversing its
notice of determination of worker classification, and that all of
the other requirements of section 7430 are satisfied, C may recover
reasonable administrative costs incurred after the date of the
notice of proposed adjustment and 30-day letter (the administrative
proceeding date as defined in Treas. Reg. Sec. 301.7430-3(c)). To
recover these costs, C must file a request for administrative costs
with the Appeals office personnel who settled C's tax matter, or if
that person is unknown to C, with the Area Director of the area that
considered the underlying matter, within 90 days after the date of
mailing of the Office of Appeals' final decision that C owes no
additional tax.
0
Par. 5. Section 301.7430-3 is amended by:
0
1. Revising paragraphs (b), (c)(1), and (3).
0
2. Adding paragraph (c)(4).
0
3. Revising paragraph (d).
The addition and revisions read as follows:
Sec. 301.7430-3 Administrative proceeding and administrative
proceeding dates.
* * * * *
(b) Collection action. A collection action generally includes any
action taken by the Internal Revenue Service to collect a tax (or any
interest, additional amount, addition to tax, or penalty, together with
any costs in addition to the tax) or any action taken by a taxpayer in
response to the Internal Revenue Service's act or failure to act in
connection with the collection of a tax (including any interest,
additional amount, addition to tax, or penalty, together with any costs
in addition to the tax). A collection action for purposes of section
7430 and this section includes any action taken by the Internal Revenue
Service under Chapter 64 of Subtitle F to collect a tax. Collection
actions also include collection due process hearings under sections
6320 and 6330 (unless the underlying tax liability is properly at
issue), and those actions taken by a taxpayer to remedy the Internal
Revenue Service's failure to release a lien under section 6325 or to
remedy any unauthorized collection action as described by section 7433,
except those collection actions described by section 7433(e). An action
or procedure directly relating to a claim for refund after payment of
an assessed tax is not a collection action.
(c) Administrative proceeding date--(1) General rule. For purposes
of section 7430 and the regulations thereunder, the term administrative
proceeding date means the earlier of--
(i) The date of the receipt by the taxpayer of the notice of the
decision of the Internal Revenue Service Office of Appeals;
(ii) The date of the notice of deficiency; or
(iii) The date on which the first letter of proposed deficiency
that allows the taxpayer an opportunity for administrative review in
the Internal Revenue Service Office of Appeals is sent.
* * * * *
(3) Notice of deficiency. A notice of deficiency is a notice
described in section 6212(a), including a notice rescinded pursuant to
section 6212(d). For purposes of determining reasonable administrative
costs under section 7430 and the regulations thereunder, the following
will be treated as a notice of deficiency:
(i) A notice of final partnership administrative adjustment
described in section 6223(a)(2).
(ii) A notice of determination of worker classification issued
pursuant to section 7436.
(iii) A final notice of determination denying innocent spouse
relief issued pursuant to section 6015.
(4) First letter of proposed deficiency that allows the taxpayer an
opportunity for administrative review in the Office of Appeals.
Generally, the first letter of proposed deficiency that allows the
taxpayer an opportunity for administrative review in the Office of
Appeals is the first letter issued to the taxpayer that describes the
proposed adjustments and advises the taxpayer of the opportunity to
contact the Office of Appeals. It also may be a claim disallowance or
the first letter of determination that allows the taxpayer an
opportunity for administrative review in the Office of Appeals.
(d) Examples. The provisions of this section are illustrated by the
following examples:
Example 1. Taxpayer A receives a notice of proposed deficiency
(30-day letter). A files a request for and is granted an Appeals
office conference. At the Appeals conference no agreement is reached
on the tax matters at issue. The Office of Appeals then issues a
notice of deficiency. Upon receiving the notice of deficiency, A
does not file a petition with the Tax Court. Instead, A pays the
deficiency and files a claim for refund. The claim for refund is
considered by the Internal Revenue Service and the Area Director
issues a notice of proposed claim disallowance. A requests and is
granted Appeals office consideration. A convinces Appeals that A's
claim is correct and Appeals allows A's claim. A may recover
reasonable
[[Page 10486]]
administrative costs incurred on or after the date of the notice of
proposed deficiency (30-day letter), but only if the other
requirements of section 7430 and the regulations thereunder are
satisfied. A cannot recover costs incurred prior to the date of the
30-day letter because these costs were incurred before the
administrative proceeding date.
Example 2. Taxpayer B files an individual income tax return
showing a balance due. No payment is made with the return and the
Internal Revenue Service assesses the amount shown on the return.
The Internal Revenue Service issues a Notice Of Intent to Levy And
Notice Of Your Right To A Hearing pursuant to sections 6330(a) and
6331(d). B timely requests and is granted a Collection Due Process
(CDP) hearing. In connection with the CDP hearing, B enters into an
installment agreement as a collection alternative. The costs that B
incurred in connection with the CDP hearing were not incurred in an
administrative proceeding, but rather in a collection action.
Accordingly, B may not recover those costs as reasonable
administrative costs under section 7430 and the regulations
thereunder.
0
Par. 6. Section 301.7430-4 is amended by:
0
1. Removing the language ``such'' the second time it appears in the
second sentence and in the fifth sentence of paragraph (b)(2)(ii) and
adding the language ``that'' in its place.
0
2. Revising paragraphs (b)(3)(i) and (b)(3)(iii)(B).
0
3. Revising the first sentence in paragraph (b)(3)(iii)(C) and adding a
new second sentence following the first sentence.
0
4. Redesignating paragraph (b)(3)(iii)(D) as paragraph (b)(3)(iii)(F),
adding new paragraphs (b)(3)(iii)(D) and (b)(3)(iii)(E), and revising
newly redesignated paragraph (b)(3)(iii)(F).
0
5. Revising paragraph (c)(4).
0
6. Adding paragraph (d).
The additions and revisions read as follows:
Sec. 301.7430-4 Reasonable administrative costs.
* * * * *
(b) * * *
(3) Limitation on fees for a representative--(i) In general. Except
as otherwise provided in this section, fees incurred after January 18,
1999, and described in paragraph (b)(1)(iv) of this section that are
recoverable under section 7430 and the regulations thereunder as
reasonable administrative costs may not exceed $125 per hour (as
adjusted for an increase in the cost of living and, if appropriate, a
special factor adjustment).
* * * * *
(iii) * * *
(B) Special factor. A special factor is a factor, other than an
increase in the cost of living, that justifies an increase in the $125
per hour limitation of section 7430(c)(1)(B)(iii). The undesirability
of the case, the work and the ability of counsel, the results obtained,
and customary fees and awards in other cases, are factors applicable to
a broad spectrum of litigation and do not constitute special factors
for the purpose of increasing the $125 per hour limitation. By
contrast, the limited availability of a specially qualified
representative for the proceeding, the limited local availability of
tax expertise, and the difficulty of the issues are special factors
justifying an increase in the $125 per hour limitation.
(C) Limited availability. Limited availability of a specially
qualified representative is established by demonstrating that a
specially qualified representative for the proceeding is not available
at the $125 per hour rate (as adjusted for an increase in the cost of
living). The representative's special qualification must be based on
nontax expertise. * * *
(D) Limited local availability of tax expertise. Limited local
availability of tax expertise is established by demonstrating that a
representative possessing tax expertise is not available in the
taxpayer's geographical area. Initially, this showing may be made by
submission of an affidavit signed by the taxpayer, or by the taxpayer's
counsel, that no representative possessing tax expertise practices
within a reasonable distance from the taxpayer's principal residence or
principal office. The hourly rate charged by representatives in the
geographical area is not relevant in determining whether tax expertise
is locally available. If the Internal Revenue Service challenges this
initial showing, the taxpayer may submit additional evidence to
establish the limited local availability of a representative possessing
tax expertise.
(E) Difficulty of the issues. In determining whether the difficulty
of the issues justifies an increase in the $125 per hour limitation on
the applicable hourly rate, the Internal Revenue Service will consider
the following factors:
(1) The number of different provisions of law involved in each
issue.
(2) The complexity of the particular provision or provisions of law
involved in each issue.
(3) The number of factual issues present in the proceeding.
(4) The complexity of the factual issues present in the proceeding.
(F) Example. The provisions of this section are illustrated by the
following example:
Example. Taxpayer A is represented by B, a CPA and attorney with
a LL.M. Degree in Taxation with Highest Honors who regularly handles
cases dealing with TEFRA partnership issues. B represents A in an
administrative proceeding involving TEFRA partnership issues that is
subject to the provisions of this section. Assuming A qualifies for
an award of reasonable administrative costs by meeting the
requirements of section 7430, the amount of the award attributable
to the fees of B may not exceed the $125 per hour limitation (as
adjusted for an increase in the cost of living), absent a special
factor. B is not a specially qualified representative because
extraordinary knowledge of the tax laws does not constitute
distinctive knowledge or a unique and specialized skill constituting
a special factor. A higher rate may be justified by another special
factor, that is, the limited local availability of tax expertise or
the difficulty of the issues.
* * * * *
(c) * * *
(4) Examples. The provisions of this section are illustrated by the
following examples:
Example 1. After incurring fees for representation during the
Internal Revenue Service's examination of A's income tax return, A
receives a notice of proposed deficiency (30-day letter). A files a
request for and is granted an Appeals office conference. At the
conference no agreement is reached on the tax matters at issue. The
Internal Revenue Service then issues a notice of deficiency. Upon
receiving the notice of deficiency, A discontinues A's
administrative efforts and files a petition with the Tax Court. A's
costs incurred before the date of the mailing of the 30-day letter
are not reasonable administrative costs because they were incurred
before the administrative proceeding date. Similarly, A's costs
incurred in connection with the preparation and filing of a petition
with the Tax Court are litigation costs and not reasonable
administrative costs.
Example 2. Assume the same facts as in Example 1 except that
after A receives the notice of deficiency, in addition to
petitioning the Tax Court, A recontacts Appeals and A convinces
Appeals that the information previously submitted during the review
by Appeals is sufficient and, therefore, the notice of deficiency is
incorrect and A owes no additional tax. The Internal Revenue Service
and A agree to a stipulated decision in the Tax Court case to
reflect Appeals' decision. The Tax Court enters the decision. If A
seeks administrative costs, A may recover costs incurred after the
date of the mailing of the 30-day letter, costs incurred in
recontacting Appeals after the issuance of the notice of deficiency,
and costs incurred up to the time the Tax Court petition was filed,
as reasonable administrative costs, but only if the other
requirements of section 7430 and the regulations thereunder are
satisfied. The costs incurred before the date of the mailing of the
30-day letter are not reasonable administrative costs because they
were incurred before the administrative proceeding date, as set
forth in Sec. 301.7430-3(c)(1)(iii). A's costs incurred in
connection with the filing of a petition with the Tax
[[Page 10487]]
Court are not reasonable administrative costs because those costs
are litigation costs. Similarly, A's costs incurred after the filing
of the petition are not reasonable administrative costs, as they are
litigation costs.
(d) Pro bono representation--(1) In general. Fees recoverable under
section 7430 and the regulations thereunder as reasonable
administrative costs may exceed the attorneys' fees paid or incurred by
the prevailing party if such fees are less than the reasonable
attorneys' fees because an individual is representing the prevailing
party on a pro bono basis. In addition to attorneys' fees, reasonable
costs incurred or paid by the individual providing the pro bono
representation that are normally billed separately also may be
recovered under this section. The Treasury Department and the Internal
Revenue Service may, in revenue rulings, notices, or other guidance
published in the Internal Revenue Bulletin, provide for additional
rules that apply for awards of costs for pro bono representation for
purposes of this paragraph (d).
(2) Requirements. Pro bono representation is established by
demonstrating--
(i) Representation was provided for no fee or for a fee that
(taking into account all the facts and circumstances) constitutes a
nominal fee;
(ii) The representative intended to provide representation for no
fee or for a nominal fee from the commencement of the representation.
Intent to provide representation for no fee or for a nominal fee may be
demonstrated through documentation such as a retainer agreement. An
individual will not be considered to have represented a client on a pro
bono basis if the facts demonstrate that the individual anticipated a
fee greater than a nominal fee or provided representation on a
contingency fee basis. The fact that the representative intended to
seek recovery of fees under section 7430 will not prevent the
representative from satisfying this requirement.
(3) Nominal fee. A nominal fee is defined as a fee that is
insignificantly small or minimal. A nominal fee is a trivial payment,
bearing no relation to the value of the representation provided, taking
into account all the facts and circumstances.
(4) Payment when representation provided at no charge or for a
nominal fee. A prevailing party who receives representation at no
charge or for a nominal fee and who satisfies the requirements under
this section is eligible to receive reasonable fees in excess of the
fees actually paid or incurred. Payment will be made to the
representative or the representative's employer.
(5) Recordkeeping. Contemporaneous records must be maintained,
demonstrating the work performed and the time allocated to each task.
These records should contain similar information to billing records.
(6) Examples. The provisions of this section are illustrated by the
following example:
Example 1. Taxpayer A, an attorney, files a petition with the
Tax Court and pays a $60 filing fee. A appears pro se in the court
proceeding. If A prevails, he will not be entitled to an award of
reasonable litigation costs for his services. A is rendering
services on his own behalf, not providing pro bono representation.
His lost opportunity costs are not compensable under section 7430. A
may recover the filing fee as a litigation cost, but only if the
other requirements of section 7430 and the regulations thereunder
are satisfied.
0
Par. 7. Section 301.7430-5 is revised to read as follows:
Sec. 301.7430-5 Prevailing party.
(a) In general. For purposes of an award of reasonable
administrative costs under section 7430 in the case of administrative
proceedings commenced after July 30, 1996, a taxpayer is a prevailing
party (other than by reason of section 7430(c)(4)(E)) only if--
(1) At least one issue (other than recovery of administrative
costs) remains in dispute as of the date that the Internal Revenue
Service takes a position in the administrative proceeding, as described
in paragraph (b) of this section;
(2) The position of the Internal Revenue Service was not
substantially justified;
(3) The taxpayer substantially prevails as to the amount in
controversy or with respect to the most significant issue or set of
issues presented; and
(4) The taxpayer satisfies the net worth and size limitations
referenced in paragraph (f) of this section.
(b) Position of the Internal Revenue Service. The position of the
Internal Revenue Service in an administrative proceeding is the
position taken by the Internal Revenue Service as of the earlier of--
(1) The date of the receipt by the taxpayer of the notice of the
decision of the Internal Revenue Service Office of Appeals; or
(2) The date of the notice of deficiency or any date thereafter.
(c) Examples. The provisions of this section may be illustrated by
the following examples:
Example 1. Taxpayer A receives a notice of proposed deficiency
(30-day letter). A pays the amount of the proposed deficiency and
files a claim for refund. A's claim is considered and a notice of
proposed claim disallowance is issued by the Area Director. A does
not request an Appeals office conference and the Area Director
issues a notice of claim disallowance. A then files suit in a United
States District Court. A cannot recover reasonable administrative
costs because the notice of claim disallowance is not a notice of
the decision of the Internal Revenue Service Office of Appeals or a
notice of deficiency. Accordingly, the Internal Revenue Service has
not taken a position in the administrative proceeding pursuant to
section 7430(c)(7)(B).
Example 2. Taxpayer B receives a notice of proposed deficiency
(30-day letter). B disputes the proposed adjustments and requests an
Appeals office conference. The Appeals office determines that B has
no additional tax liability. B requests administrative costs from
the date of the 30-day letter. B is not the prevailing party and may
not recover administrative costs because all of the proposed
adjustments in the case were resolved as of the date that the
Internal Revenue Service took a position in the administrative
proceeding.
(d) Substantially justified--(1) In general. The position of the
Internal Revenue Service is substantially justified if it has a
reasonable basis in both fact and law. A significant factor in
determining whether the position of the Internal Revenue Service is
substantially justified as of a given date is whether, on or before
that date, the taxpayer has presented all relevant information under
the taxpayer's control and relevant legal arguments supporting the
taxpayer's position to the appropriate Internal Revenue Service
personnel. The appropriate Internal Revenue Service personnel are
personnel responsible for reviewing the information or arguments, or
personnel who would transfer the information or arguments in the normal
course of procedure and administration to the personnel who are
responsible.
(2) Position in courts of appeal. Whether the United States has won
or lost an issue substantially similar to the one in the taxpayer's
case in courts of appeal for circuits other than the one to which the
taxpayer's case would be appealable should be taken into consideration
in determining whether the Internal Revenue Service's position was
substantially justified.
(3) Example. The provisions of this section (d) are illustrated by
the following example:
Example. The Internal Revenue Service, in the conduct of a
correspondence examination of taxpayer A's individual income tax
return, requests substantiation from A of claimed medical expenses.
A does not respond to the request and the Internal Revenue Service
issues a notice of deficiency. After receiving the notice of
deficiency, A presents sufficient
[[Page 10488]]
information and arguments to convince a tax compliance officer that
the notice of deficiency is incorrect and that A owes no tax. The
revenue agent then closes the case showing no deficiency. Although A
incurred costs after the issuance of the notice of deficiency, A is
unable to recover these costs because, as of the date these costs
were incurred, A had not presented relevant information under A's
control and relevant legal arguments supporting A's position to the
appropriate Internal Revenue Service personnel. Accordingly, the
position of the Internal Revenue Service was substantially justified
at the time the costs were incurred.
(4) Included costs. (i) An award of reasonable administrative costs
shall only include costs incurred on or after the administrative
proceeding date as defined in section 301.7430-3(c) of this chapter.
(ii) If the Internal Revenue Service takes a position in an
administrative proceeding, as defined in paragraph (b) of this section,
and the position is not substantially justified, the taxpayer may be
permitted to recover costs incurred before the position was taken, but
not before the dates set forth in this paragraph (d)(4).
(5) Examples. The provisions of this section may be illustrated by
the following examples:
Example 1. Pursuant to section 6672, taxpayer D receives from
the Area Director Collection Operations (Collection) a proposed
assessment of trust fund taxes (Trust Fund Recovery Penalty). D
requests and is granted Appeals office consideration. Appeals
considers the issues and decides to uphold Collection's recommended
assessment. Appeals notifies D of this decision in writing.
Collection then assesses the tax and notice and demand is made. D
timely pays the minimum amount required to commence a court
proceeding, files a claim for refund, and furnishes the required
bond. Collection disallows the claim, but Appeals, on
reconsideration, reverses its original position, thus upholding D's
position. If Appeals' initial determination was not substantially
justified, D may recover administrative costs incurred on or after
the mailing of the proposed assessment of trust fund taxes, because
the proposed assessment is the first determination letter that
allows the taxpayer an opportunity for administrative review in the
Internal Revenue Service Office of Appeals.
Example 2. Taxpayer E receives a notice of proposed deficiency
(30-day letter). E pays the amount of the proposed deficiency and
files a claim for refund. E's claim is considered and a notice of
proposed disallowance is issued by the Area Director. E requests and
is granted Appeals office consideration. No agreement is reached
with Appeals and the Office of Appeals issues a notice of claim
disallowance. E does not file suit in a United States District Court
but instead contacts the Appeals office to attempt to reverse the
decision. E convinces the Appeals officer that the notice of claim
disallowance is in error. The Appeals officer then abates the
assessment. E may recover reasonable administrative costs if the
position taken in the notice of claim disallowance issued by the
Office of Appeals was not substantially justified and the other
requirements of section 7430 and the regulations thereunder are
satisfied. If so, E may recover administrative costs incurred from
the mailing date of the 30-day letter because the requirements of
paragraph (c)(2) of this section are met. E cannot recover the costs
incurred prior to the mailing of the 30-day letter because they were
incurred before the administrative proceeding date.
(6) Exception. If the position of the Internal Revenue Service was
substantially justified with respect to some issues in the proceeding
and not substantially justified with respect to the remaining issues,
any award of reasonable administrative costs to the taxpayer may be
limited to only reasonable administrative costs attributable to those
issues with respect to which the position of the Internal Revenue
Service was not substantially justified. If the position of the
Internal Revenue Service was substantially justified for only a portion
of the period of the proceeding and not substantially justified for the
remaining portion of the proceeding, any award of reasonable
administrative costs to the taxpayer may be limited to only reasonable
administrative costs attributable to that portion during which the
position of the Internal Revenue Service was not substantially
justified. Where an award of reasonable administrative costs is limited
to that portion of the administrative proceeding during which the
position of the Internal Revenue Service was not substantially
justified, whether the position of the Internal Revenue Service was
substantially justified is determined as of the date any cost is
incurred.
(7) Presumption. If the Internal Revenue Service did not follow any
applicable published guidance in an administrative proceeding commenced
after July 30, 1996, the position of the Internal Revenue Service, on
those issues to which the guidance applies and for all periods during
which the guidance was not followed, will be presumed not to be
substantially justified. This presumption may be rebutted. For purposes
of this paragraph (d)(7), the term applicable published guidance means
final or temporary regulations, revenue rulings, revenue procedures,
information releases, notices, and announcements published in the
Internal Revenue Bulletin and, if issued to or with respect to the
taxpayer, private letter rulings, technical advice memoranda, and
determination letters (Sec. 601.601(d)(2) of this chapter). Also, for
purposes of this paragraph (d)(7), the term administrative proceeding
includes only those administrative proceedings or portions of
administrative proceedings occurring on or after the administrative
proceeding date as defined in Sec. 301.7430-3(c).
(e) Amount in controversy. The amount in controversy shall include
the amount in issue as of the administrative proceeding date as
increased by any amounts subsequently placed in issue by any party. The
amount in controversy is determined without increasing or reducing the
amount in controversy for amounts of loss, deduction, or credit carried
over from years not in issue.
(f) Most significant issue or set of issues presented. (1) In
general. Where the taxpayer has not substantially prevailed with
respect to the amount in controversy the taxpayer may nonetheless be a
prevailing party if the taxpayer substantially prevails with respect to
the most significant issue or set of issues presented. The issues
presented include those raised as of the administrative proceeding date
and those raised subsequently. Only in a multiple issue proceeding can
a most significant issue or set of issues presented exist. However, not
all multiple issue proceedings contain a most significant issue or set
of issues presented. An issue or set of issues constitutes the most
significant issue or set of issues presented if, despite involving a
lesser dollar amount in the proceeding than the other issue or issues,
it objectively represents the most significant issue or set of issues
for the taxpayer or the Internal Revenue Service. This may occur
because of the effect of the issue or set of issues on other
transactions or other taxable years of the taxpayer or related parties.
(2) Example. The provisions of this section may be illustrated by
the following example:
Example. In the purchase of an ongoing business, Taxpayer F
obtains from the previous owner of the business a covenant not to
compete for a period of five years. On audit of F's individual
income tax return for the year in which the business was acquired,
the Internal Revenue Service challenges the basis assigned to the
covenant not to compete and a deduction taken as a business expense
for a seminar attended by F. Both parties agree that the covenant
not to compete is amortizable over a period of five years; however,
the Internal Revenue Service asserts that the proper basis of the
covenant is $25,000, while F asserts the basis is $50,000 and claims
a deduction of $10,000 in the year in which the business was
acquired. F deducted $12,000 for the seminar. The Internal Revenue
Service determines that the deduction for the seminar should be
[[Page 10489]]
disallowed entirely. In the notice of deficiency, the Internal
Revenue Service adjusts the amortization deduction to reflect the
change to the basis of the covenant not to compete, and disallows
the seminar expense. Thus, of the two adjustments determined for the
year under audit, the adjustment attributable to the disallowance of
the seminar is larger than that attributable to the covenant not to
compete. Due to the impact on the next succeeding four years,
however, the covenant not to compete adjustment is the most
significant issue to both F and the Internal Revenue Service.
(g) Net worth and size limitations--(1) Individuals. A taxpayer who
is a natural person meets the net worth and size limitations of this
paragraph if the taxpayer's net worth does not exceed two million
dollars. For purposes of determining net worth, individuals filing a
joint return, and jointly incurring administrative or litigation costs
shall have their net worth determined jointly, with all assets and
liabilities treated as joint for purposes of the net worth evaluation,
and applying a joint cap of four million dollars. Individuals who file
a joint return, but incur separate administrative or litigation costs,
by retaining separate representation, and/or seeking individual
administrative review or petitioning the court individually, such as
under section 6015, shall have their net worth determined separately,
with only those assets and liabilities reasonably attributable to each
spouse considered against separate caps of two million dollars per
spouse.
(2) Estates and trusts. An estate or a trust meets the net worth
and size limitations of this paragraph if the estate or trust's net
worth does not exceed two million dollars. The net worth of an estate
shall be determined as of the date of the decedent's death provided the
date of death is prior to the date the court proceeding is commenced.
The net worth of a trust shall be determined as of the last day of the
last taxable year involved in the proceeding.
(3) Others. (i) A taxpayer that is a partnership, corporation,
association, unit of local government, or organization (other than an
organization described in paragraph (g)(4) of this section) meets the
net worth and size limitations of this paragraph if, as of the
administrative proceeding date:
(A) The taxpayer's net worth does not exceed seven million dollars;
and
(B) The taxpayer does not have more than 500 employees.
(ii) A taxpayer who is a natural person and owns an unincorporated
business is subject to the net worth and size limitations contained in
paragraph (g)(3)(i) of this section if the tax at issue (or any
interest, additional amount, addition to tax, or penalty, together with
any costs in addition to the tax) relates directly to the business
activities of the unincorporated business.
(4) Special rule for charitable organizations and certain
cooperatives. An organization described in section 501(c)(3) exempt
from taxation under section 501(a), or a cooperative association as
defined in section 15(a) of the Agricultural Marketing Act, 12 U.S.C.
1141j(a) (as in effect on October 22, 1986), meets the net worth and
size limitations of this paragraph if, as of the administrative
proceeding date, the organization or cooperative association does not
have more than 500 employees.
(5) Special rule for TEFRA partnership proceedings. (i) In cases
involving partnerships subject to the unified audit and litigation
procedures of subchapter C of chapter 63 of the Internal Revenue Code
(TEFRA partnership cases), the TEFRA partnership meets the net worth
and size limitations requirements of this paragraph (g) if, on the
administrative proceeding date--
(A) The partnership's net worth does not exceed seven million
dollars; and
(B) The partnership does not have more than 500 employees.
(ii) In addition, each partner requesting fees pursuant to section
7430 must meet the appropriate net worth and size limitations set forth
in paragraph (g)(1), (g)(2), or (g)(3) of this section. For example, if
a partner is an individual, his or her net worth must not exceed two
million dollars as of the administrative proceeding date. If the
partner is a corporation, its net worth must not exceed seven million
dollars and it must not have more than 500 employees.
(6) Determining net worth. For purposes of determining net worth
under this paragraph (g), assets are valued based on the cost of their
acquisition.
(h) Determination of prevailing party. If the final decision with
respect to the tax, interest, or penalty is made at the administrative
level, the determination of whether a taxpayer is a prevailing party
shall be made by agreement of the parties, or absent an agreement, by
the Internal Revenue Service. See Sec. 301.7430-2(c)(7) regarding the
right to appeal the decision of the Internal Revenue Service denying
(in whole or in part) a request for reasonable administrative costs to
the Tax Court.
0
Par. 8. Section 301.7430-6 is revised to read as follows:
Sec. 301.7430-6 Effective/applicability dates.
Sections 301.7430-2 through 301.7430-6, other than Sec. Sec.
301.7430-2(b)(2), (c)(3)(i)(B), (c)(3)(i)(E), (c)(3)(ii)(C),
(c)(3)(iii)(C), (c)(5), (c)(7), and (e); Sec. Sec. 301.7430-3(c)(1),
(c)(3), (c)(4), and (d); Sec. Sec. 301.7430-4(b)(3)(i), (b)(3)(ii),
(b)(3)(iii)(B), (b)(3)(iii)(C), (b)(3)(iii)(D), (b)(3)(iii)(E),
(b)(3)(iii)(F), (c)(2)(ii), (c)(4), and (d); and Sec. Sec. 301.7430-
5(a), (b), (c)(3), (d)(2), (d)(3), (d)(4), (d)(5), (d)(7), (f)(2),
(g)(1), (g)(2), (g)(3), (g)(5), and (g)(6) apply to claims for
reasonable administrative costs filed with the Internal Revenue Service
after December 23, 1992, with respect to costs incurred in
administrative proceedings commenced after November 10, 1988. Section
301.7430-2(c)(5) is applicable to costs incurred and services performed
in cases in which the petition was filed on or after March 1, 2016,
except for the last two sentences, which are applicable March 23, 1993.
Sections 301.7430-2(b)(2), and (c)(3)(i)(B) (except the last sentence);
301.7430-4(b)(3)(ii), (b)(3)(iii)(C) (except the first two sentences),
and (c)(2)(ii) (except for references to the statutory cap as $125);
and 301.7430-5(a) (except the parenthetical of 5(a) and all of
5(a)(1)), and the first and last sentence of (d)(7) are applicable for
administrative proceedings commenced after July 30, 1996. Sections
301.7430-1(e), 301.7430-2(c)(2), 7430-3(a)(4) and (b) are applicable
with respect to actions taken by the Internal Revenue Service after
July 22, 1998. The last sentence of Sec. 301.7430-2(c)(3)(i)(B), the
first two sentences of Sec. 301.7430-2(b)(3)(iii)(C), Sec. Sec.
301.7430-2(c)(3)(i)(E), (c)(3)(ii)(C), (c)(3)(iii)(C), (c)(7), (e);
301.7430-3(c)(1), (c)(3), (c)(4), (d); 301.7430-4(b)(3)(i),
(b)(3)(iii)(B), (b)(3)(iii)(E), (b)(3)(iii)(F), (c)(2)(ii) (to the
extent it references the statutory cap as $125), (c)(4), (d); the
parenthetical of Sec. 301.7430-5(a) and Sec. Sec. 301.7430-5(a)(1),
(b), (d)(2), (d)(3), (d)(4), (d)(5), (d)(7), except the first and last
sentences, (f)(2), (g)(1), (g)(2), (g)(3), (g)(5), and (g)(6) apply to
costs incurred and services performed in cases in which the petition
was filed on or after March 1, 2016.
0
Par. 9. Section 301.7430-7 is amended by:
0
1. Adding paragraph (c)(8).
0
2. Amending paragraph (e) by adding Examples 16 and 17.
0
3. Revising paragraph (f).
The additions and revisions read as follows:
Sec. 301.7430-7 Qualified offers.
* * * * *
(c) * * *
(8) Interest as a contested issue. To constitute a qualified offer,
an offer must specify the offered amount of the taxpayer's liability
(determined without
[[Page 10490]]
regard to interest, unless interest is a contested issue in the
proceeding), as provided in paragraphs (c)(1)(ii) and (c)(3) of this
section. Therefore, a qualified offer generally may only include an
offer to compromise tax, penalties, additions to the tax, and
additional amounts. Interest may only be included in a qualified offer
if interest is a contested issue in the proceeding. For purposes of
this section, interest is a contested issue in the proceeding only if
the court in which the proceeding could be brought would have
jurisdiction to determine the amount of interest due on the underlying
tax, penalties, additions to the tax, and additional amounts. Examples
of proceedings in which interest might be a contested issue include
proceedings in which the increased interest rate for large corporate
underpayments under section 6621(c) is imposed by the Internal Revenue
Service and interest abatement proceedings brought under section 6404.
Interest is not a contested issue in the proceeding if the court that
would have jurisdiction over the proceeding would not have jurisdiction
to determine the amount or rate of interest, regardless of whether the
taxpayer attempts to raise interest as an issue in the proceeding.
Consequently, interest will not be a contested issue in the vast
majority of tax cases because they merely involve the straightforward
application of statutory interest under section 6601. Accordingly, in
those cases, interest may not be included in the offer.
* * * * *
(e) * * *
Example 16. Qualified offer may not compromise interest unless
it is a contested issue. Taxpayer J receives a notice of deficiency
making an adjustment resulting in a deficiency in tax of $6,500 plus
a penalty of $500. Interest is not a contested issue in the
proceeding. Within the qualified offer period, J submits a written
offer to settle the case for a deficiency of $1,000, including all
taxes, penalties, and interest. The offer states that it is a
qualified offer for purposes of section 7430(g) and that it will
remain open for acceptance by the Internal Revenue Service for a
period of 90 days. Section 7430(g)(2)(B) and paragraph (c)(3) of
this section state that the amount of a qualified offer must be
without regard to interest unless interest is at issue in the
proceeding. Since J's offer attempts to compromise interest, which
is not a contested issue in the proceeding, it is not a qualified
offer.
Example 17. Qualified offer based on new defense or legal
theory. Taxpayers K and L received a statutory notice of deficiency
for tax year 2005, a tax year when they were married and filed a
joint income tax return. Taxpayer K files a separate petition
claiming innocent spouse relief and simultaneously submits an offer
purporting to be a qualified offer. The offer states that K is
entitled to innocent spouse relief and offers to settle the 2005
deficiency as to K. K's innocent spouse claim was not raised during
K and L's audit, nor was it raised during their appeals conference.
Additionally, at no time prior to or contemporaneously with
submitting the offer did K file with the Internal Revenue Service a
Form 8857, Request for Innocent Spouse Relief, or otherwise provide
the information specified in Sec. 1.6015-5(a) of this chapter. K's
offer is not a qualified offer because K did not file a Form 8857 or
otherwise provide substantiation or legal and factual arguments
necessary to allow for informed consideration of the merits of the
innocent spouse claim as required by paragraph (c)(4) of this
section, contemporaneously with the offer or prior to making the
offer.
(f) Effective/applicability date. This section is applicable with
respect to qualified offers made in administrative or court proceedings
described in section 7430 after December 24, 2003, except that
paragraph (c)(8) is effective as of March 1, 2016.
Sec. Sec. 301.7430-1, 301.7430-2, 301.7430-4, and 301.7430-5
[Amended]
0
Par. 10. For each section listed in the table, remove the language in
the ``Remove'' column and add in its place the language in the ``Add''
column as set forth below:
------------------------------------------------------------------------
Section Remove Add
------------------------------------------------------------------------
Sec. 301.7430-1(f)(2)(i)...... district director. Internal Revenue
Service office
Sec. 301.7430-1(f)(3)(ii)..... district director. Internal Revenue
Service office
Sec. 301.7430-1(f)(3)(iii).... district director. Internal Revenue
Service office
Sec. 301.7430-1(f)(4)(i)...... district director. Internal Revenue
Service office
Sec. 301.7430-1(g) Example 6 district director. Internal Revenue
third and fourth sentences. Service office
Sec. 301.7430-1(g) Example 7 district director. Internal Revenue
third and fourth sentences. Service office
Sec. 301.7430-1(g) Example 8 district director. Internal Revenue
second and fourth sentences. Service office
Sec. 301.7430-1(g) Example 9 such.............. these
second sentence.
Sec. 301.7430-2(b)(2) fourth such.............. these
and fifth sentences.
Sec. 301.7430-2(c)(4) first which............. that
sentence.
Sec. 301.7430-2(c)(6) second such.............. the
sentence.
Sec. 301.7430-4(b)(3)(ii) $110.............. $125
first and second sentences.
Sec. 301.7430-4(c)(2)(i) third Such.............. These
sentence.
Sec. 301.7430-4(c)(2)(i) which............. that
fourth sentence.
Sec. 301.7430-4(c)(2)(ii) $110.............. $125
second and third sentences.
Sec. 301.7430-5(h) first such.............. an
sentence.
------------------------------------------------------------------------
John Dalrymple,
Deputy Commissioner for Services and Enforcement.
Approved: January 19, 2016.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2016-04401 Filed 2-29-16; 8:45 am]
BILLING CODE 4830-01-P