Rev. Proc. 78-9

Section 1. Purpose

The purpose of this Revenue Procedure is to encourage more effective utilization of administrative appeals procedures by taxpayers, and to achieve earlier development and disposition of docketed cases.

Section 2. Procedure

Rev. Proc. 60-18, 1960-2 C.B. 988, is modified and United States Tax Court cases will be processed under the following procedures:

.01 Chief Counsel's delegate (hereinafter Counsel) will have exclusive jurisdiction over any case docketed in the Tax Court if the notice of deficiency, liability or other determination was issued by the Appellate Division; if the notice of deficiency, liability or other determination was issued after an appellate consideration by the Employee Plans/Exempt Organizations function (hereinafter EP/EO); or if the case was docketed under Code sections 6110 or 7477. Jurisdiction will vest with Counsel at the time the case is docketed with the Court. For cases docketed under Code sections 6110 or 7477, settlement jurisdiction is provided by section 2.13.

.02 Appellate Division ¹ will have exclusive settlement jurisdiction for a period of four months over any case docketed in the Tax Court (other than a case docketed under Code sections 6110 or 7477) in which the notice of deficiency or liability was issued by a District Director, the Director of International Operations, or the Director of a Service Center, or in which the notice of deficiency, liability or other determination was not the subject of an appellate consideration by EP/EO. The four-month period will commence at the time Appellate receives the case from Counsel. Appellate will arrange settlement conferences in such cases within 45 days of receipt of the case. In the event of a settlement, Appellate will prepare the necessary computations and forward them to Counsel, who will prepare the settlement documents for execution by the parties and filing with the Tax Court. Appellate will also have authority to settle less than all the issues in the case and to refer the unsettled issues to Counsel for disposition. In the event of a partial settlement, Appellate will furnish Counsel with the agreement of the petitioner(s) and Appellate concerning the agreed issues. Counsel will prepare documents reflecting settlement of the agreed issues for execution by the parties and filing with the Tax Court at the appropriate time.

.03 At the end of such four month period, or before that time if Appellate determines the case is not susceptible of settlement, the case will be returned to Counsel. Thereafter, Counsel will have exclusive authority to dispose of the case. If at the end of the four month period there is substantial likelihood that a settlement of the entire case can be effected in a reasonable period of time, Counsel may extend Appellate's settlement jurisdiction for a period not to exceed 60 days, but in no event beyond the date of the receipt of a trial status order or trial calendar upon which the case appears.

.04 Extensions beyond the period specified in section 2.03 will be granted only with the personal approval of the Regional Counsel. Such extensions will be made only in those cases in which the probability of settlement of the case in its entirety by Appellate clearly outweighs the need to commence trial preparation.

.05 When Counsel acquires sole jurisdiction of a case, it will fully develop all of the legal positions and facts relevant to issues in the case. Conferences will be arranged within 45 days of receipt of jurisdiction to request informally any additional evidence or facts. If the requested information is not forthcoming within a reasonable period of time, the Court's discovery procedures will be utilized, as appropriate. When the case is fully developed legally and factually and when Counsel is in a position to evaluate the Service's litigating posture, Counsel will determine whether a settlement offer or settlement negotiations will be entertained. Settlement offers and counteroffers made between Appellate and the taxpayer will not be binding on Counsel.

.06 During the period of Appellate's jurisdiction, Appellate will make available such files and information as may be necessary for Counsel to take any action required by the Court (e.g., responding to a motion filed by petitioner) or which is in the best interests of the Government.

.07 At the time a case is referred by Counsel to Appellate, Counsel may indicate areas of needed factual development or areas of possible technical uncertainties. In referring a case to Counsel, Appellate will furnish its summary of the facts and the pertinent legal authorities.

.08 The Chief Counsel may, by appropriate order, require review by the Regional Counsel, or the Chief Counsel, of Counsel settlements of certain categories of cases. The decision of the Regional Counsel or the Chief Counsel in such cases is final.

.09 Before an offer in settlement of all or part of the issues in a case is accepted by Counsel, Counsel will solicit the views of Appellate in cases designated by Appellate. The solicitation will be in the form of a proposed Regional Counsel's decision. If Appellate disagrees with the offer, it will, within 15 work days, express its views of the offer. If Appellate disagrees with the proposed settlement, and the settlement is not required to be reviewed by the Regional Counsel or the Chief Counsel pursuant to section 2.08, Appellate may protest the settlement and require the settlement to be reviewed by the Regional Counsel. If Appellate protests, the protest will be supported by a memorandum of its position and its view of the acceptable basis for settlement. The decision of the Regional Counsel in such protest cases is final. The 15-day period may be extended by Counsel upon request by Appellate.

.10 If an offer is received at or about the time of trial, in a case designated by Appellate for settlement consultation, Counsel will endeavor to have the case placed on a motions calendar to permit consultation with and review by Appellate in accordance with the foregoing procedures. If that is not possible, or if an offer meriting consideration is made at any time which does not permit the written procedures to be followed, Counsel will orally inform Appellate and consult with them, reducing to memorandum the results of that consultation. To the extent possible, Appellate will be afforded the same "protest" procedure in such a case as set forth above.

.11 In all cases in which a settlement has been concluded by Counsel, Appellate will prepare the appropriate computations including the audit statement and statement of account.

.12 For issues in docketed and nondocketed cases pending with Appellate which are related to issues in docketed cases over which Counsel has jurisdiction, no settlement offer will be accepted by either Appellate or Counsel unless both agree that the offer is acceptable. The protest procedure will be available to Appellate and the Regional Counsel will have authority to resolve the issue with respect to both the Appellate and Counsel cases. If settlement of the docketed case requires approval by the Regional Counsel or the Chief Counsel pursuant to section 2.08, the final decision with respect to the issues under the jurisdiction of both Appellate and Counsel will be made by the Regional Counsel or the Chief Counsel.

.13 Assistant Commissioner (Technical) and Deputy Chief Counsel (Litigation) will have joint settlement jurisdiction over any case docketed in the Tax Court under Code sections 6110 or 7477 until the first day of the calendar on which the case is called for trial or, if earlier, the day on which the Court serves on Counsel an order setting brief due dates; thereafter the Chief Counsel's delegate will have settlement jurisdiction. Upon receipt, Counsel will promptly prepare the case for submission to the Court. If a settlement is recommended by Counsel during the joint jurisdiction period, it will be forwarded to the Deputy Chief Counsel (Litigation) with a supporting memorandum.

Section 3. Effective Date

(A) This procedure will be applicable to all cases docketed with the Tax Court after June 30, 1978.

(B) This procedure will also be applicable to cases pending in the Tax Court on June 30, 1978, in which the notice of deficiency was issued by a District Director, or the Director of International Operations, or the Director of a Service Center, and in which a settlement conference has not been held by Appellate prior to July 1, 1978.

(C) For other cases pending in the Tax Court on June 30, 1978, the procedures of Rev. Proc. 60-18 will continue to be applicable, except that sole authority to dispose of the case will vest in Counsel at the earlier of the following:

.01 The date of receipt of a trial calendar on which the case appears;

.02 The date when Appellate and Counsel conclude settlement negotiations without disposition of the case and Appellate transfers the case to Counsel; or

.03 July 1, 1979.

Section 4. Effect on Other Documents

Rev. Proc. 60-18 is modified.

¹ Until such time as Delegation Order 66 (Rev. 6), page 512 this Bulletin, is modified, the reference herein to "Appellate" will include "Assistant Regional Commissioner (EP/EO)" for matters within the delegated authority of Assistant Regional Commissioner (EP/EO).