Waters 1Jf~~ 1Jf~~

DEPARTMENTDEPARTMENT

OFTHEOFTHE

TREASURYTREASURY

INTERNALINTERNAL

REVENUEREVENUE SERVICESERVICE

(I(I

((

(,(,

WASHINGTON,WASHINGTON, D.C.D.C. 2022420224

OFFICEOFFICE

OF OF

CHIEFCHIEF

COUNSEL COUNSEL

NOVNOV

rr22

19991999

MEMORANDUMMEMORANDUM FORFOR NATIONALNATIONAL TAXPAYERTAXPAYER ADVOCATEADVOCATE

Attn:Attn: VickiVicki O'HaraO'Hara

FROM:FROM:

MaryMary

AnnAnn

WatersWaters

1Jf...~~1Jf...~~

AttorneyAttorney

OfficeOffice ofof CounselCounsel toto thethe NationalNational TaxpayerTaxpayer AdvocateAdvocate

SUBJECT:SUBJECT:

AbatementAbatement ofof InterestInterest

ThereThere areare severalseveral differentdifferent reasonsreasons thethe ServiceService cancan abateabate interest.interest.

However,However,'based'based

onon

thethe discussiondiscussion II hadhad withwith youyou thisthis moming,moming, itit isis mymy

understandingunderstanding thatthat thethe taxpayertaxpayer youyou areare dealingdealing withwith

isis

claimingclaiming thatthat thethe interestinterest

shouldshould bebe abatedabated becausebecause thethe interestinterest isis attributableattributable toto

anan

unreasonableunreasonable errorerror oror

delaydelay ofof anan officerofficer oror employeeemployee ofof thethe ServiceService

inin

performingperforming aa ministerialministerial oror

managerialmanagerial act.act. Accordingly,Accordingly, II willwill confineconfine thisthis memorandummemorandum toto aa discussiondiscussion ofof

abatementabatement ofof interestinterest provisionprovision dealingdealing withwith interestinterest attributableattributable toto unreasonableunreasonable

errorserrors oror delaysdelays ofof officersofficers oror employeesemployees ofof thethe ServiceService inin performingperforming ministerialministerial oror

managerialmanagerial acts.acts.

UnderUnder I.R.C.I.R.C.

§§ 6404(e)(1),6404(e)(1), thethe ServiceService hashas discretionarydiscretionary authorityauthority toto abateabate

thethe assessmentassessment ofof allall oror anyany partpart ofof thethe interestinterest

onon

anyany deficiencydeficiency oror paymentpayment

attributableattributable inin wholewhole oror

inin

partpart toto anyany unreasonableunreasonable errorerror oror delaydelay byby ServiceService

employeesemployees inin performingperforming aa ministerialministerial oror managerialmanagerial act.act. ForFor

taxtax

yearsyears

beginningbeginning

beforebefore

JulyJuly

31,31, 1996,1996,

onlyonly

errorserrors

oror

delaysdelays

attributableattributable

toto

ministerialministerial

actsacts

maymay

bebe

abated.abated.

Specifically,Specifically, thethe ServiceService hashas discretionarydiscretionary authorityauthority toto abateabate thethe assessmentassessment

ofof allall oror anyany partpart ofof interest:interest: (1)(1)

onon

anyany deficiencydeficiency relatingrelating toto income,income, estate,estate, gift,gift,

generation-skipping,generation-skipping, andand certaincertain exciseexcise taxestaxes attributableattributable

inin

wholewhole oror

inin

partpart toto anyany

unreasonableunreasonable errorerror oror delaydelay byby

anan

officerofficer oror employeeemployee ofof thethe ServiceService actingacting

inin

hishis

officialofficial capacitycapacity

inin

performingperforming aa ministerialministerial oror managerialmanagerial act;act; andand

(2)(2)

onon

anyany

paymentpayment ofof anyany taxtax relatingrelating toto income,income, estate,estate, gift,gift, generation-skipping,generation-skipping, andand certaincertain

exciseexcise taxestaxes toto thethe extentextent thatthat anyany unreasonableunreasonable delaydelay

inin

thethe paymentpayment

isis

attributableattributable toto anan officerofficer oror employeeemployee beingbeing erroneouserroneous oror dilatorydilatory

inin

performingperforming aa

ministerialministerial oror managerialmanagerial act.act.

AnAn errorerror oror delaydelay

inin

performingperforming aa ministerialministerial oror managerialmanagerial actact willwill onlyonly bebe

takentaken intointo accountaccount ifif

nono

significantsignificant

aspectaspect

ofof

thethe

errorerror

oror

delaydelay

cancan bebe

PMTA:00292 PMTA:00292

((

"" JJ

attributedattributed

toto

thethe

taxpayertaxpayer

InvolvedInvolved

oror

toto

aa personperson relatedrelated toto thethe taxpayer.taxpayer.

Additionally.Additionally. anan errorerror

oror

delaydelay inin performingperforming aa ministerialministerial

oror

managerialmanagerial actact willwill bebe

takentaken intointo accountaccount onlyonly ifif itit occursoccurs

afterafter

thethe ServiceService hashas contactedcontacted thethe taxpayertaxpayer inin

writingwriting withwith respectrespect toto aa deficiencydeficiency

oror

payment.payment. Therefore.Therefore. thethe ServiceService isis

notnot

permittedpermitted

toto

abateabate interestinterest

forfor

thethe periodperiod

ofof

timetime betweenbetween thethe datedate thethe taxpayertaxpayer filesfiles

aa returnreturn andand thethe datedate thethe ServiceService contactscontacts thethe taxpayertaxpayer aboutabout anan audit.audit.

Similarly,Similarly,

ifif

taxpayertaxpayer

fliesflies

returnreturn

butbut

doesdoes

notnot

paypay

thethe

taxestaxes

due,due,

thethe

ServiceService

IsIs

notnot

permittedpermitted

toto

abateabate

thethe

InterestInterest

regardlessregardless

ofof

howhow

longlong

itit

takestakes

toto

contactcontact

thethe

taxpayertaxpayer

andand

requestrequest

payment.payment.

AA "ministerial"ministerial act"act" meansmeans aa proceduralprocedural

oror

mechanicalmechanical actact thatthat doesdoes not not

InvolveInvolve thethe exerciseexercise ofof judgmentjudgment

oror

discretion,discretion, andand thatthat occursoccurs duringduring the the

processingprocessing

ofof

aa taxpayer'staxpayer's casecase afterafter allall prerequisitesprerequisites ofof thethe act,act, suchsuch as as

conferencesconferences andand reviewsreviews

byby

supervisors,supervisors, havehave takentaken place.place. However,However, aa decision decision

concerningconcerning thethe properproper applicationapplication

ofof

federalfederal taxtax lawlaw

oror

otherother federalfederal

oror

statestate

lawlaw

is is

notnot aa ministerialministerial act. act.

TheThe Service'sService's authorityauthority toto abateabate interestinterest hashas beenbeen expandedexpanded toto include include

situationssituations inin whichwhich ServiceService "managerial"managerial acts"acts" resultresult inin unreasonableunreasonable errorerror

oror

delay. delay.

ManagerialManagerial actsacts thatthat fallfall underunder thisthis provisionprovision includeinclude delaysdelays resultingresulting fromfrom thethe loss loss

ofof

recordsrecords

byby

thethe

Service,Service, transferstransfers ofof ServiceService personnel,personnel, extendedextended illness, illness,

extendedextended personnelpersonnel training,training,

oror

extendedextended leave. leave.

AA requestrequest

forfor

abatementabatement ofof interestinterest shouldshould bebe mademade onon FormForm 843843 (attached).(attached).

ClaimClaim

forfor

RefundRefund andand RequestRequest

forfor

Abatement.Abatement. TheThe taxpayertaxpayer shouldshould filefile thethe claimclaim

withwith thethe InternalInternal RevenueRevenue ServiceService -- ServiceService CenterCenter wherewhere thethe taxpayertaxpayer filedfiled

thethe

taxtax

returnreturn thatthat waswas affectedaffected

byby

thethe errorerror

oror

delay.delay.

IfIf

thethe taxpayertaxpayer doesdoes notnot rememberremember

thethe ServiceService

CenterCenter

wherewhere he/shehe/she filedfiled thatthat taxtax return,return, thethe taxpayertaxpayer shouldshould sendsend

his/herhis/her claimclaim

toto

thethe ServiceService CenterCenter wherewhere thethe taxpayertaxpayer filedfiled his/herhis/her lastlast

taxtax

return.return.

IfIf

thethe

taxpayertaxpayer hashas alreadyalready paidpaid thethe interestinterest andand wouldwould likelike aa creditcredit

oror

refundrefund ofof

interestinterest paid,paid, thethe taxpayertaxpayer mustmust filefile FormForm 843843 withinwithin 33 yearsyears fromfrom thethe datedate he/shehe/she

filedfiled thethe taxpayer'staxpayer's originaloriginal returnreturn

oror

22 yearsyears fromfrom thethe datedate thatthat thethe taxpayertaxpayer paidpaid

thethe interest,interest, whicheverwhichever isis later.later. IfIf thethe taxpayertaxpayer hashas

notnot

paidpaid anyany ofof thethe interest,interest,

thesethese timetime limitationslimitations

forfor

filingfiling FormForm 843843

dodo

notnot apply.apply.

Generally,Generally,

thethe

taxpayertaxpayer shouldshould filefile aa separateseparate FormForm 843843

forfor

eacheach

taxtax

periodperiod

andand eacheach typetype

ofof

tax.tax. However.However. theythey shouldshould completecomplete onlyonly oneone formform 843843 ifif thethe

interestinterest isis fromfrom aa singlesingle InternalInternal RevenueRevenue ServiceService errorerror

oror

delaydelay thatthat affectsaffects thethe

taxpayer'staxpayer's

taxtax

forfor

moremore thanthan oneone taxtax periodperiod

oror

forfor

moremore thanthan oneone typetype ofof

taxtax

(for(for

example,example, whenwhen thethe delaydelay occurredoccurred duringduring thethe examinationexamination

ofof

twotwo

oror

moremore

taxtax

years).years).

TheThe

taxpayertaxpayer doesdoes notnot havehave toto figurefigure thethe dollardollar amountsamounts ofof interestinterest thatthat thethe

taxpayertaxpayer wantswants lowered.lowered. IfIf thethe taxpayer'staxpayer's requestrequest

forfor

abatementabatement

ofof

interestinterest isis

denied,denied, thethe taxpayertaxpayer cancan appealappeal thethe decisiondecision toto thethe InternalInternal RevenueRevenue ServiceService

AppealsAppeals OfficeOffice (See(See attachedattached PublicationPublication 556).556).

( (

((

Also,Also, thethe TaxTax CourtCourt cancan reviewreview thethe InternalInternal RevenueRevenue Service'sService's refusalrefusal toto

abateabate interestinterest whenwhen allall ofof thethe followingfollowing requirementsrequirements areare met:met:

1.)1.) TheThe taxpayertaxpayer hashas filedfiled aa requestrequest forfor abatementabatement ofof interestinterest (Form(Form 843)843)

withwith thethe InternalInternal RevenueRevenue Service.Service.

2.)2.) TheThe IntemalIntemal RevenueRevenue ServiceService hashas notnot denieddenied thethe taxpayer'staxpayer's requestrequest

forfor abatementabatement beforebefore JulyJuly 31,31, 1996.1996.

3.)3.) TheThe InternalInternal RevenueRevenue ServiceService hashas mailedmailed thethe taxpayertaxpayer aa noticenotice ofof finalfinal

determinationdetermination oror aa noticenotice ofof disallowance.disallowance.

4.) 4.) TheThe taxpayertaxpayer hashas filedfiled aa petitionpetition forfor reviewreview ofof thethe failurefailure toto abateabate

interestinterest withwith thethe TaxTax CourtCourt withinwithin 180180 daysdays ofof thethe mailingmailing ofof thethe noticenotice

ofof finalfinal determinationdetermination oror thethe noticenotice ofof disallowance.disallowance.

TheThe taxpayertaxpayer mustmust

alsoalso meetmeet thethe followingfollowing requirementsrequirements

inin

orderorder forfor thethe TaxTax

CourtCourt toto reviewreview thethe decision:decision:

1.) 1.) ForFor individualindividual andand estateestate taxpayerstaxpayers -- thethe taxpayer'staxpayer's netnet worthworth mustmust notnot

exceedexceed $2$2 millionmillion asas ofof thethe filingfiling datedate ofof thethe taxpayer'staxpayer's petitionpetition forfor

review.review.

2.) 2.) ForFor charitiescharities andand certaincertain cooperativecooperative -- thethe taxpayertaxpayer mustmust notnot havehave

moremore thanthan 500500 employeesemployees

asas

ofof thethe filingfiling datedate ofof thethe taxpayer'staxpayer's

petitionpetition forfor review.review.

3.) 3.) ForFor allall otherother taxpayerstaxpayers -- thethe taxpayer'staxpayer's netnet worthworth mustmust notnot exceedexceed $7$7

million,million, andand thethe taxpayertaxpayer mustmust notnot havehave moremore thanthan 500500 employeesemployees asas

ofof thethe filingfiling datedate ofof thethe taxpayer'staxpayer's petitionpetition forfor review.review.

((

II hopehope thisthis informationinformation assistsassists you.you. PleasePlease letlet meme knowknow ifif youyou needneed moremore

information.information.

Enclosures:Enclosures:

I.R.C.I.R.C. §§ 64046404

556�PublicationPublication 556

843�FormForm 843