[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

[[Page 18061]]

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

[[Page 18062]]

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]
BILLING CODE 4830-01-P