[Federal Register Volume 76, Number 63 (Friday, April 1, 2011)]
[Rules and Regulations]
[Pages 18059-18062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-7770]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 301
[TD 9519]
RIN 1545-BF33
Taxpayer Assistance Orders
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to taxpayer
[[Page 18060]]
assistance orders. These regulations reflect changes to the law made by
the Taxpayer Bill of Rights II, the Internal Revenue Service
Restructuring and Reform Act of 1998, the Community Renewal Tax Relief
Act of 2000, and the American Jobs Creation Act of 2004. The final
regulations affect taxpayers in cases where a taxpayer assistance order
is being considered or issued.
DATES: Effective date: These regulations are effective on April 1,
2011.
Applicability date: For dates of applicability, see Sec. 301.7811-
1(f).
FOR FURTHER INFORMATION CONTACT: Janice R. Feldman, (202) 622-8488 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
These final regulations contain rules related to taxpayer
assistance orders under sections 7811 of the Internal Revenue Code
(Code). These regulations are necessary to 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. On July 27, 2009, a notice of proposed rulemaking (REG-152166-05)
relating to taxpayer assistance orders was published in the Federal
Register (74 FR 36973). No comments were received from the public in
response to the notice of proposed rulemaking. No public hearing was
requested or held. The proposed regulations are adopted without
substantive change by this Treasury decision with one exception.
Example 3 in Sec. 301.7811-1(a)(4)(iv) of the regulations illustrating
significant costs was revised slightly.
Furthermore, Sec. 301.7811-1(g) of the final regulations (TD 8403)
published on March 23, 1992, in the Federal Register (57 FR 9975)
defined the term ``Ombudsman.'' After these final regulations were
published, section 101 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.'' Section 1102 of RRA 98, Public Law 105-
206, 112 Stat. 685 (1998), further amended section 7811, by replacing
``Taxpayer Advocate'' with ``National Taxpayer Advocate.'' Thus, Sec.
301.7811-1(g), which defined the obsolete term ``ombudsman'' is being
removed by these final regulations as it is obsolete. Section 301.7811-
1(e) of the existing final regulations (TD 8403), which contains the
term ``ombudsman'' and concerns the suspension of the statute of
limitations, was not revised by these final regulations as changes to
that section may involve changes to IRS computer processing systems.
Thus, all references to the term ``ombudsman'' in Sec. 301.7811-1(e)
should, consistent with the current version of the statute, be
construed as referring to the ``National Taxpayer Advocate.'' Possible
revisions to Sec. 301.7811-1(e) will be considered at a later date.
Special Analyses
It has been determined that this Treasury decision 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
this Treasury decision 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
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, the notice of
proposed rulemaking preceding these regulations was submitted to the
Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.
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.
Adoption of the 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 301.7811-1 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
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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. a notice
requesting payment of the outstanding employment taxes and penalties
owed by XYZ, Inc. The notice indicates that XYZ, Inc. has 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 quarter
correctly, there would be no balance due. The IRS requests
additional records and documentation. Because there are 12 quarters
involved, to comply with this request XYZ, Inc. asserts that it 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
how to apply the deposits and payments. 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 section
6325(d), or discharge the property subject to the lien, as permitted
by 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, the Commissioner, or the Deputy Commissioner. If
a TAO is modified or rescinded by the Commissioner or the 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 the Taxpayer
Advocate Service (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 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)(1)(D) and 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 the NTA's 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 the NTA's 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
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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 April 1, 2011, except that paragraph (e) of
this section is applicable beginning March 20, 1992.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: March 25, 2011.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2011-7770 Filed 3-31-11; 8:45 am]
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