SERVICE PROVIDES INSTRUCTIONS FOR ENTERING AGREEMENT TO RESCIND NOTICES OF DEFICIENCY.

Rev. Proc. 88-17

SECTION 1. PURPOSE

This revenue Procedure provides taxpayers with instructions for entering into an agreement under section 6212(d) of the Internal Revenue Code to rescind a notice of deficiency. Section 8212(d) of the Code provides that the Secretary may, with the consent of the taxpayer, rescind any notice of deficiency mailed to the taxpayer. Section 6212(d) was added to the Code by the Tax Reform Act of 1986, section 1562(a), 1986-3 (Vol. 1) C.B. 678.

SEC. 2. BACKGROUND

01 Section 6212(a) of the Code provides that if the Secretary determines that there is a deficiency in respect of any tax imposed by subtitle A of title 26 (relating to income taxes), subtitle B (relating to estate, gift, and generation-skipping taxes), or chapters 41, 42, 43, 44, or 45 (relating to certain excise taxes), the Secretary is authorized to send notice of such deficiency to the taxpayer by certified mail or registered mail.

02 Section 6212(c)(1) of the Code provides, in general, that if the Secretary has mailed to the taxpayer a notice of deficiency as provided in section 6212(a), and the taxpayer files a petition with the Tax Court within the time prescribed in section 6213(a), the Secretary shall have no right to determine any additional deficiency, except in the case of fraud, and except as provided in section 6214(a) (relating to assertion of greater deficiencies before the Tax Court), in section 8213(b)(1) (relating to mathematical or clerical errors), in section 6851 (relating to termination assessments), or in section 6861(c) (relating to the making of jeopardy assessments).

03 Section 6213(a) of the Code states that within 90 days, or 150 days if the notice is addressed to a person outside the United States, after the notice of deficiency authorized in section 6212 is mailed, the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as provided in section 6851 or 6861, no assessment of a deficiency and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day restriction period, as the case may be, nor, if a petition has been filed with the Tax Court, until the decision of the Tax Court has become final.

04 Section 6212(d) of the Code provides that the Secretary may, with the consent of the taxpayer, rescind any notice of deficiency mailed to the taxpayer. Any notice so rescinded shall not be treated as a notice of deficiency for purposes of section 6212(c)(1) (relating to further deficiency letters restricted), section 6213(a) (relating to restrictions applicable to deficiencies and petition to Tax Court), and section 6512(a) (relating to limitations in case of petition to Tax Court), and the taxpayer shall have no right to file a petition with the Tax Court based on such notice.

SEC. 3. SCOPE AND OBJECTIVE

01 This revenue procedure applies to agreements to rescind a notice of deficiency mailed to a taxpayer pursuant to section 6212(a) of the Code. This procedure does not apply to a Notice of Final Partnership Administrative Adjustment (PPAA) or to a Notice of Final S Corporation Administrative Adjustment (FSAA).

02 Whether a notice of deficiency will be rescinded is discretionary on the part of the Secretary. A notice of deficiency may only be rescinded with the consent of the taxpayer.

03 If a notice of deficiency is rescinded, it is treated as if it never existed. Limitations regarding credits, refunds, and assessments relating to the rescinded notice are void and the rights and obligations of the parties that existed prior to the issuance of the notice of deficiency are reinstated. The Commissioner or his or her delegate may issue a later notice of deficiency in an amount that exceeds, is the same as, or is less than the amount in the rescinded notice of deficiency. The taxpayer may exercise all administrative and statutory appeal rights from a reissued notice of deficiency, but cannot petition the Tax Court from a rescinded notice of deficiency.

04 A notice of deficiency may be rescinded for the following reasons:

(1) If the notice was issued as a result of an administrative error; for example, the notice was issued (i) to the wrong taxpayer, (ii) for the wrong tax period, or (iii) without considering a properly executed Form 872, Consent to Extend the Time to Assess Tax.

(2) If the taxpayer submits information establishing the actual tax due to be less than the amount shown in the notice.

(3) If a taxpayer specifically requests a conference with the Appeals Division for the purpose of entering into settlement negotiations. However, the notice may be rescinded only if the Appeals Division first decides that the case is susceptible to agreement.

05 Notwithstanding section 3.04, the Internal Revenue Service will not rescind a notice of deficiency if:

(1) On the date of the rescission, 90 days or less would remain before the expiration date of the period of limitation on assessment (determined, for this purpose, without regard to the issuance of the notice of deficiency). A notice of deficiency may be rescinded in these circumstances, however, if before that expiration date the taxpayer and the Service execute a consent to extend the limitation period on Form 872. In no case will the Service rescind a notice if, on the date of the rescission, the period of limitation on assessment would have expired but for the issuance of the notice of deficiency;

(2) The 90-day or 150-day restriction period under section 6213(a) of the Code has expired without the taxpayer filing a petition with the Tax Court;

(3) The taxpayer has filed a petition with (or mailed a petition to) the Tax Court; or

(4) The taxpayer and the Service, prior to the issuance of the notice of deficiency, have executed a Form 872-A, Special Consent to Extend the Time to Assess Tax, covering any of the tax years in the notice of deficiency.

SEC. 4. PROCEDURE

01 In all events taxpayers who wish to have a notice of deficiency rescinded should contact the person/office listed on the notice and request Form 8626, Agreement to Rescind Notice of Deficiency. Taxpayers who wish an Appeals conference (see section 3.04(3) above) should contact the person/office listed on the notice in order to find out how to contact the appropriate Appeals Office.

02 A request to rescind a notice of deficiency should be made by the taxpayer as soon as possible after receipt of the notice because a notice will not be rescinded after the 90-day or 150-day restriction period under section 6213(a) of the Code has expired.

03 If the Service agrees with the taxpayer that the notice of deficiency should be rescinded, Form 8626 will be sent to the taxpayer requesting the taxpayer's written consent to rescind. If appropriate, Form 872 will also be sent for the taxpayer's signature. If the taxpayer agrees to the rescission of the notice of deficiency, the signed Form 8626 (and Form 872 if appropriate) must be returned to the office that sent the Form 8626 as soon as possible prior to the expiration of the 90-day or 150-day restriction period as described in section 2.03 of this revenue procedure. After the Form 8626 is returned by the taxpayer and signed on behalf of the Commissioner, a copy will be furnished to the taxpayer (and/or his or her authorized representative(s)) by mail or in person. The effective date of the rescission agreement is the date on which the Commissioner's delegate signs Form 8626.

04 If the notice of deficiency was issued to a husband and wife jointly, Form 8626 and, if included, Form 872, must be signed by both the husband and wife, or their authorized representative(s). If Form 8626 and/or Form 872 is signed by a representative, and a power of attorney has not previously been filed, the power of attorney must be included with Form 8626.

05 If the Service does not agree that the notice of deficiency should be rescinded, the taxpayer will be notified in writing and the notice of deficiency will remain in effect.

06 Form 8626 must cover the same tax period(s) as the notice of deficiency to which it relates and must reflect the same tax deficiency and penalties as the notice of deficiency.

SEC. 5. EFFECTIVE DATE

This revenue procedure is effective with respect to notices of deficiency issued on or after January 1, 1986.

DRAFTING INFORMATION

The principal author of this revenue procedure is John McGreevy of the Individual Tax Division. For further information regarding this revenue procedure contact Mr. McGreevy on (202) 566-4942 (not a toll-free call).