[Federal Register Volume 74, Number 142 (Monday, July 27, 2009)]
[Proposed Rules]
[Pages 36973-36977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17747]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[REG-152166-05]
RIN 1545-BF33
Taxpayer Assistance Orders
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Withdrawal of notice of proposed rulemaking and notice of
proposed rulemaking.
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SUMMARY: This document withdraws the notice of proposed rulemaking
published on April 19, 1996, in the Federal Register and contains
proposed regulations relating to the issuance of Taxpayer Assistance
Orders (TAOs). The IRS is issuing these proposed regulations to provide
guidance relating to the issuance of a TAO. These proposed regulations
are necessary because the existing regulations do not reflect changes
to the law made by the Taxpayer Bill of Rights II (TBOR 2), the
Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98),
the Community Renewal Tax Relief Act of 2000, and the American Jobs
Creation Act of 2004 (AJCA). The action taken in these proposed
regulations will affect IRS employees in cases where a TAO is being
considered or issued.
DATES: Written or electronic comments and requests for a public hearing
must be received by October 26, 2009.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-152166-05), room
5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20224. Submissions may be hand delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
152166-05), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC 20044, or sent electronically via the
Federal eRulemaking Portal at http://www.regulations.gov/ (IRS REG-
152166-05).
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Janice R. Feldman, (202) 622-8488; concerning submissions of comments,
[email protected] (202) 622-7180 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
Section 7811 of the Internal Revenue Code (Code) authorizes the NTA
to issue a TAO when a taxpayer is suffering or is about to suffer a
significant hardship
[[Page 36974]]
as a result of the manner in which the internal revenue laws are being
administered by the IRS and the law and the facts support relief. A TAO
may be issued to direct that the operating division or function take a
specific action, cease a specific action, or refrain from taking a
specific action or to order the IRS to review at a higher level,
expedite consideration of, or reconsider a taxpayer's case. The IRS
will comply with a TAO unless it is appealed and then modified or
rescinded by the Commissioner, the Deputy Commissioner, or the NTA.
Appeal procedures are provided in the Internal Revenue Manual (IRM).
Proposed regulations were published on April 19, 1996, in the
Federal Register (61 FR 17265). The proposed regulations limited the
authority to modify or rescind TAOs to the Ombudsman, the Commissioner,
and the Deputy Commissioner, and, with the written authorization of one
of these officials, a district director, a service center director, a
compliance center director, a regional director of appeals (director),
or the superiors of a director. Following the publication of the
proposed regulations, Congress enacted TBOR 2, Public Law 104-168, 110
Stat. 1452 (1996), which, among other things, authorized only the
Taxpayer Advocate, the Commissioner, or the Deputy Commissioner to
modify or rescind a TAO. In light of the enactment of TBOR 2, this
document withdraws the proposed regulations published in the Federal
Register on April 19, 1996.
This document also contains proposed amendments to the Procedure
and Administration Regulations (26 CFR part 301) relating to TAOs under
section 7811. Temporary regulations (TD 8246) were published on March
22, 1989, in the Federal Register (54 FR 11699). Final regulations (TD
8403) were published on March 23, 1992, in the Federal Register (57 FR
9975). After the final regulations were published, sections 101 and 102
of TBOR 2, Public Law 104-168, 110 Stat. 1452 (1996), amended section
7811 by changing the name of the Ombudsman to the Taxpayer Advocate,
providing that TAOs may order the IRS to take certain affirmative
actions, and restricting who may modify or rescind a TAO. Section 1102
of RRA 98, Public Law 105-206, 112 Stat. 685 (1998), further amended
section 7811, by providing examples of significant hardship and
replacing ``Taxpayer Advocate'' with ``National Taxpayer Advocate.''
Section 881(c) of AJCA, Public Law 108-357, 118 Stat. 1418 (2004)
clarified that a TAO applies to personnel performing services under a
qualified tax collection contract to the same extent as it applies to
IRS personnel. Thus, this document contains a new notice of proposed
rulemaking implementing the amendments under section 7811 pursuant to
the enactment of TBOR 2, RRA 98, the Community Renewal Tax Relief Act
of 2000, and AJCA and also to provide guidance on issues that have
arisen in the administration of section 7811. Section 301.7811-1(e) of
the existing regulations, which concerns the suspension of statutes of
limitations, is not being revised as part of this proposed rulemaking
as changes to that section may involve changes to IRS computer
processing systems and will be dealt with at a later date.
Explanation of Provision
1. Significant Hardship
Under Section 301.7811-1(a)(4)(ii) of the existing regulations,
significant hardship means ``serious privation caused or about to be
caused to the taxpayer as the result of the particular manner in which
the internal revenue laws are being administered by the Internal
Revenue Service.'' RRA 98 clarified the meaning of the term significant
hardship by providing a nonexclusive list of types. Section 7811(a)(2)
provides that significant hardship includes: (1) An immediate threat of
adverse action; (2) a delay of more than 30 days in resolving taxpayer
account problems; (3) the incurring by the taxpayer of significant
costs (including fees for professional representation) if relief is not
granted; or (4) irreparable injury to, or a long-term adverse impact
on, the taxpayer if relief is not granted. Thus, the proposed
regulations list the statutory types and also provide guidance with
regard to what constitutes significant hardship under the delay
standard and other criteria. Significant hardship under the 30-day
delay standard is met when a taxpayer does not receive a response by
the date promised by the IRS, or when the IRS has established a normal
processing time for taking an action and the taxpayer experiences a
delay of more than 30 days beyond the normal processing time.
2. Distinction Between Significant Hardship and Issuance of TAO
The proposed regulations discuss the distinction between a finding
of ``significant hardship'' and ``the issuance of a TAO.'' The proposed
regulations are designed to clarify that a finding by the NTA that a
taxpayer is suffering or about to suffer a significant hardship as a
result of the manner in which the internal revenue laws are being
administered by the IRS will not automatically result in the issuance
of a TAO. After making a determination of significant hardship, the NTA
must determine whether the facts and the law support relief.
3. Compliance With the TAO
The proposed regulations explain that a TAO is an order by the NTA
to the IRS and that the IRS will comply with the terms of the TAO
unless it is appealed and then modified or rescinded by the
Commissioner, the Deputy Commissioner, or the NTA. If a TAO is modified
or rescinded by the Commissioner or Deputy Commissioner, a written
explanation of the reasons for the modification or rescission must be
provided to the NTA. Furthermore, the proposed regulations clarify that
a TAO is not intended to be a substitute for an established
administrative or judicial review procedure, but rather is intended to
supplement these procedures if a taxpayer is about to suffer or is
suffering a significant hardship. Thus, a taxpayer's right to
administrative or judicial review will not be diminished or expanded in
any way as a result of the taxpayer's seeking assistance from the
Taxpayer Advocate Service (TAS).
4. Form of Request
The proposed regulations provide that a request for a TAO shall be
made on a Form 911, ``Request for Taxpayer Advocate Service Assistance
(and Application for Taxpayer Assistance Order)'' (or other specified
form) or in a written statement that provides sufficient information
for TAS to determine the nature of the harm or the need for assistance.
5. Scope of the TAO
The proposed regulations provide that the NTA can issue a TAO
directing an action in the circumstances outlined in section 7811(b).
Section 7811(b) provides that the NTA may issue a TAO ordering the IRS
within a specified time to (i) release levied property, or (ii) cease
any action, take any action as permitted by law, or refrain from taking
any action with respect to a taxpayer under: (A) Chapter 64 (relating
to collection); (B) chapter 70, subchapter B (relating to bankruptcy
and receiverships); (C) chapter 78 (relating to discovery of liability
and enforcement of title); or (D) any other provision of law
specifically described by the NTA in the TAO. Consistent with the list
of specific subchapter and chapters of the Code in section 7811(b), the
proposed regulations provide that the phrase ``any provision of law''
refers to other provisions of the internal revenue laws
[[Page 36975]]
similar to the provisions enumerated in the statute.
The proposed regulations further provide that in circumstances
where the statute does not authorize the issuance of a TAO to order a
specific action, if the NTA determines that the taxpayer is suffering
or about to suffer a significant hardship and that the issuance of a
TAO is appropriate, the NTA may issue a TAO seeking to expedite,
review, or reconsider an action at a higher level. Although the statute
does not expressly state that a TAO may be issued to request that the
IRS expedite, review, or reconsider at a higher level an action, the
statute and the legislative history support this interpretation.
As initially enacted, section 7811(b) did not grant the Ombudsman
(the predecessor to the NTA) the authority to order affirmative
actions. At that time, section 7811(b) provided that a TAO could order
either the release of levy or could order the IRS to cease or refrain
from taking an action under the three enumerated chapters of the Code
listed in the statute. Thus, under the initial version of section
7811(b)(2), except for releasing levies, TAOs could not be issued to
take affirmative actions. For example, a TAO could order the IRS to
refrain from filing a Notice of Federal Tax Lien (NFTL), but it could
not require the IRS to release an NFTL. Delegation Order (DO) 239 (01-
31-92) remedied this problem by delegating to the Ombudsman the
authority to order affirmative acts. Congress also recognized the
deficiency in the law and amended section 7811(b) as part of TBOR 2 to
allow TAOs to be issued with respect to affirmative acts by inserting
the words ``take any action as permitted by law'' into the statute. The
Committee Report to TBOR 2, H. Rep. No. 104-506, 104th Cong., 2nd
Sess., at 1148 (1996), explains how the existing law was deficient in
that, for example, it did not allow a TAO to be issued to expedite a
refund or review the validity of a tax deficiency. The report explains
that the reason for amendment to section 7811(b) was to allow a TAO to
be issued ``for a review of the appropriateness of the proposed
action.'' Thus, consistent with the legislative history and the
statutory amendments, the proposed regulations provide that where the
statute does not authorize the issuance of a TAO to order a specific
action, if the NTA determines that a taxpayer is suffering or about to
suffer a significant hardship and that relief is appropriate, the NTA
may issue a TAO seeking to expedite, review, or reconsider an action at
a higher level.
6. Who Is Subject to a TAO?
The proposed regulations provide rules regarding who is subject to
a TAO. Generally, a TAO can be issued to any operating division or
function of the IRS. Due to the sensitivity and importance of criminal
investigations, the proposed regulations provide that a TAO may not be
issued if the action ordered in the TAO could reasonably be expected to
impede a criminal investigation. The IRS Criminal Investigation
division (CI) will determine whether the action ordered in the TAO
could reasonably be expected to impede an investigation. Procedures for
handling cases where the NTA questions CI's initial determination will
be added to the IRM.
The rule for issuing a TAO to the Office of Chief Counsel has been
updated to reflect the reorganization of the IRS as well as statutory
changes. The existing regulations provide that: ``[a] taxpayer
assistance order may generally not be issued * * * to enjoin an act of
the Office of Chief Counsel (with the exception of Appeals).'' Due to a
reorganization of the Office of Chief Counsel, effective October 1,
1995, Appeals is no longer a component of the Office of Chief Counsel.
Accordingly, the proposed regulations eliminate the parenthetical
reference to Appeals in Sec. 301.7811-1(c)(3). The NTA continues to
have the authority to issue TAOs to Appeals. Additionally, at the time
that the existing regulations were finalized, the Ombudsman could not
issue a TAO to order an affirmative act, other than a release of levy.
As discussed in this preamble, under the current version of the
statute, the NTA has much broader authority regarding the ability to
order an affirmative act. Thus, the term ``enjoin'' has also been
eliminated, and the rule under the proposed regulations is that:
``[g]enerally a TAO may not be issued to the Office of Chief Counsel.''
Special Analyses
This notice of proposed rulemaking is not a significant regulatory
action as defined in Executive Order 12866. Therefore, a regulatory
assessment is not required. It has also been determined that section
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations. Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby certified that these regulations
will not have a significant economic impact on a substantial number of
small entities. The information required under these proposed
regulations is already required by the current regulations and the Form
911, ``Request for Taxpayer Advocate Service Assistance (and
Application for Taxpayer Assistance order).'' In addition, the Form 911
takes minimal time and expense to prepare, and the filing of a Form 911
is optional. Therefore, preparing the Form 911 does not significantly
increase the burden on taxpayers. Based on these facts, the Treasury
Department and the IRS have determined that these proposed regulations
will not have a significant economic impact on a substantial number of
small entities. Furthermore, the substance of the regulations does not
concern the Form 911, but the procedures the Taxpayer Advocate Service
(TAS) or the Internal Revenue Service (IRS) must follow with respect to
taxpayer assistance orders. Therefore, any burden created by these
regulations is on the TAS or IRS, not taxpayers. Pursuant to section
7805(f) of the Code, this notice of proposed rulemaking has been
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Comments and Requests for a Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written or electronic comments that
are submitted timely to the IRS. All comments will be available for
public inspection and copying. A public hearing may be scheduled if
requested in writing by any person who timely submits written comments.
If a public hearing is scheduled, notice of the date, time, and place
for the public hearing will be published in the Federal Register.
Drafting Information
The principal author of these regulations is Janice R. Feldman,
Office of the Special Counsel (National Taxpayer Advocate Program)
(CC:NTA).
List of Subjects in 26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
Withdrawal of Proposed Regulations
Accordingly, under the authority of 26 U.S.C. 7805, the notice of
proposed rulemaking that was published in the Federal Register on April
19, 1996 (61 FR 17265) is withdrawn.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 301 is proposed to be amended as follows:
[[Page 36976]]
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 301.7811-1 is amended by revising paragraphs (a),
(b), (c) and (d), removing paragraphs (f), (g), (h) and redesignating
paragraph (h) as (f) and revising newly designated paragraph (f) to
read as follows:
Sec. 301.7811-1 Taxpayer Assistance Orders.
(a) Authority to issue--(1) In general. When an application for a
Taxpayer Assistance Order (TAO) is filed by the taxpayer or the
taxpayer's authorized representative in the form, manner and time
specified in paragraph (b) of this section, the National Taxpayer
Advocate (NTA) may issue a TAO if, in the determination of the NTA, the
taxpayer is suffering or is about to suffer a significant hardship as a
result of the manner in which the internal revenue laws are being
administered by the Internal Revenue Service (IRS), including action or
inaction on the part of the IRS.
(2) The National Taxpayer Advocate defined. The term National
Taxpayer Advocate includes any designee of the NTA, such as a Local
Taxpayer Advocate.
(3) Issuance without a written application. The NTA may issue a TAO
in the absence of a written application by the taxpayer under section
7811(a).
(4) Significant hardship--(i) Determination required. Before a TAO
may be issued, the NTA is required to make a determination regarding
significant hardship.
(ii) Term Defined. The term significant hardship means a serious
privation caused or about to be caused to the taxpayer as the result of
the particular manner in which the revenue laws are being administered
by the IRS. Significant hardship includes situations in which a system
or procedure fails to operate as intended or fails to resolve the
taxpayer's problem or dispute with the IRS. A significant hardship also
includes, but is not limited to:
(A) An immediate threat of adverse action;
(B) A delay of more than 30 days in resolving taxpayer account
problems;
(C) The incurring by the taxpayer of significant costs (including
fees for professional representation) if relief is not granted; or
(D) Irreparable injury to, or a long-term adverse impact on, the
taxpayer if relief is not granted.
(iii) A delay of more than 30 days in resolving taxpayer account
problems is further defined. A delay of more than 30 days in resolving
taxpayer account problems exists under the following conditions:
(A) When a taxpayer does not receive a response by the date
promised by the IRS; or
(B) When the IRS has established a normal processing time for
taking an action and the taxpayer experiences a delay of more than 30
days beyond the normal processing time.
(iv) Examples of significant hardship. The provisions of this
section are illustrated by the following examples:
Example 1. Immediate threat of adverse action. The IRS serves a
levy on A's bank account. A needs the bank funds to pay for a
medically necessary surgical procedure that is scheduled to take
place in one week. If the levy is not released, A will lack the
funds necessary to have the procedure. A is experiencing an
immediate threat of adverse action.
Example 2. Delay of more than 30 days. B files a Form 4506,
``Request for a Copy of Tax Return.'' B does not receive the
photocopy of the tax return after waiting more than 30 days beyond
the normal time for processing. B is experiencing a delay of more
than 30 days.
Example 3. Significant costs. The IRS sends XYZ, Inc. several
notices requesting payment of the outstanding employment taxes owed
by XYZ, Inc. and four of its subsidiaries. The IRS contends that
XYZ, Inc. and the four subsidiaries have small employment tax
balances with respect to 12 employment tax quarters totaling $10X.
XYZ, Inc. provides documentation to the IRS which it contends shows
that if all payments were applied to each entity correctly, there
would be no balance due. The IRS requests additional records and
documentation. Because there are 60 tax periods (12 quarters for
each of the five entities) involved, to comply with this request
XYZ, Inc. will need to hire an accountant, who estimates he will
charge at least $5X to organize all the records and provide a
detailed analysis of the how the payments should have been applied.
XYZ, Inc. is facing significant costs.
Example 4. Irreparable injury. D has arranged with a bank to
refinance his mortgage to lower his monthly payment. D is unable to
make the current monthly payment. Unless the monthly payment amount
is lowered, D will lose his residence to foreclosure. The IRS
refuses to subordinate the Federal tax lien, as permitted by IRC
section 6325(d), or discharge the property subject to the lien, as
permitted by IRC section 6325(b). As a result, the bank will not
allow D to refinance. D is facing an irreparable injury if relief is
not granted.
(5) Distinction Between Significant Hardship and the Issuance of a
TAO. A finding that a taxpayer is suffering or about to suffer a
significant hardship as a result of the manner in which the internal
revenue laws are being administered by the IRS will not automatically
result in the issuance of a TAO. After making a determination of
significant hardship, the NTA must determine whether the facts and the
law support relief for the taxpayer. In cases where any IRS employee is
not following applicable published administrative guidance (including
the Internal Revenue Manual), the NTA shall construe the factors taken
into account in determining whether to issue a TAO in the manner most
favorable to the taxpayer.
(b) Generally. A TAO is an order by the NTA to the IRS. The IRS
will comply with a TAO unless it is appealed and then modified or
rescinded by the NTA, Commissioner or the Deputy Commissioner. If a TAO
is modified or rescinded by the Commissioner or Deputy Commissioner, a
written explanation of the reasons for the modification or rescission
must be provided to the NTA. The NTA may not make a substantive
determination of any tax liability. A TAO is also not intended to be a
substitute for an established administrative or judicial review
procedure, but rather is intended to supplement existing procedures if
a taxpayer is about to suffer or is suffering a significant hardship. A
request for a TAO shall be made on a Form 911, ``Request for Taxpayer
Advocate Service Assistance (And Application for Taxpayer Assistance
Order)'' (or other specified form) or in a written statement that
provides sufficient information for TAS to determine the nature of the
harm or the need for assistance. A taxpayer's right to administrative
or judicial review will not be diminished or expanded in any way as a
result of the taxpayer's seeking assistance from TAS.
(c) Contents of Taxpayer Assistance Orders. After establishing that
the taxpayer is facing significant hardship and determining that the
facts and law support relief to the taxpayer, the NTA may issue a TAO
ordering the IRS within a specified time to--
(1) Release a Levy. Release levied property (to the extent that the
IRS may by law release such property); or
(2) Take Certain Other Actions. Cease any action, take any action
as permitted by law, or refrain from taking any action with respect to
a taxpayer pursuant to--
(i) Chapter 64 (relating to collection);
(ii) Chapter 70, subchapter B (relating to bankruptcy and
receiverships);
(iii) Chapter 78 (relating to discovery of liability and
enforcement of title); or
(iv) Any other provision of the internal revenue laws specifically
described by the NTA in the TAO.
(3) Expedite, Review or Reconsider an Action at a Higher Level.
Although the NTA may not make the substantive determination, a TAO may
be issued to
[[Page 36977]]
require the IRS to expedite, reconsider, or review at a higher level an
action taken with respect to a determination or collection of a tax
liability.
(4) Examples. The following examples assume the existence of
significant hardship:
Example 1. J contacts a local taxpayer advocate because a wage
levy is causing financial difficulties. The NTA determines that the
levy should be released as it is causing economic hardship (within
the meaning of section 6343(a) and Treas. Reg. Sec. 301.6343-
1(b)(4)). The NTA may issue a TAO ordering the IRS to release the
levy in whole or in part by a specified date.
Example 2. The IRS rejects K's offer in compromise. K files a
Form 911, ``Request for Taxpayer Advocate Service Assistance (and
Application for Taxpayer Assistance Order).'' The NTA discovers
facts that support acceptance of the offer in compromise. The NTA
may issue a TAO ordering the IRS to reconsider its rejection of the
offer or to review the rejection of the offer at a higher level. The
TAO may include NTA analysis of and recommendation for resolving the
case.
Example 3. L files a protest requesting Appeals consideration of
IRS's proposed denial of L's request for innocent spouse relief.
Appeals advises L that it is going to issue a Final Determination
denying the request for innocent spouse relief. L files a Form 911,
``Request for Taxpayer Advocate Service Assistance (and Application
for Taxpayer Assistance Order).'' The NTA reviews the administrative
record and concludes that the facts support granting innocent spouse
relief. The NTA may issue a TAO ordering Appeals to refrain from
issuing a Final Determination and reconsider or review at a higher
level its decision to deny innocent spouse relief. The TAO may
include TAS analysis of and recommendation for resolving the case.
(d) Issuance. A TAO may be issued to any office, operating
division, or function of the IRS. A TAO shall apply to persons
performing services under a qualified tax collection contract (as
defined in section 6306(b)) to the same extent and in the same manner
as the order applies to IRS employees. A TAO will not be issued to IRS
Criminal Investigation division (CI), or any successor IRS division
responsible for the criminal investigation function, if the action
ordered in the TAO could reasonably be expected to impede a criminal
investigation. CI will determine whether the action ordered in the TAO
could reasonably be expected to impede an investigation. Generally, a
TAO may not be issued to the Office of Chief Counsel.
* * * * *
(f) Effective applicability date. These regulations are applicable
for TAOs issued on or after the date of publication of the Treasury
decision adopting these rules as final regulations in the Federal
Register, except that paragraph (e) is applicable beginning March 20,
1992.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
[FR Doc. E9-17747 Filed 7-24-09; 8:45 am]
BILLING CODE 4830-01-P