The Joint Committee of Taxation is required to approve the refunds identified in IRC section 6405. These large refund cases (in excess of $2 million) generally come from complex returns involving carrybacks of losses or credits, claims for refund, or taxpayer-favorable audit adjustments. Joint Committee Review is a mandatory Performance, Quality and Innovation (PQI) function. PQI is a staff function in the Large & Mid-Size Business division of the Internal Revenue Service.
Reviewer teams headquartered in Manhattan and Chicago are charged with the task of writing reports to the Committee Refund Staff on most of the large refund cases (in some cases, the reports are written by Appeals Officers). Reviewers consider both the technical and procedural aspects of a case. Reviewers are devoted to providing top-quality support to field agents working Joint Committee cases. This is accomplished by answering questions from field agents, providing training for Continuing Professional Education (CPE) and team meetings, and on-site visits to audit sites. The following pertain to questions frequently asked:
Types of Tax Subject to Review
In a Joint Committee case, the refund has to be from either income tax, war profits tax, estate tax, gift tax, or any tax imposed by IRC Chapters 41, 42, 43 or 44 on private foundations, public charities, pension plans, operators' trust funds or real estate investment trusts. IRM 4.36 furnishes additional information.
Excluded Refunds
Taxpayers can get back some funds that do not count toward the $2 million Joint Committee total. These include:
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Estimated or withheld income tax made without an examination,
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An un-assessed advance payment or deposit made before a final determination of liability, and
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A refund or credit of $2 million or less that resulted from a previously closed Joint Committee case.
Offsets and Abatements
Another situation that does not affect the $2 million Joint Committee total occurs when an over assessment is applied as an offset or abatement of the unpaid portion of an assessment for the same taxable period and the same type tax liability.
Related Taxpayers
Sometimes cases are closed where two or more related taxpayers receive refunds. For example, when a husband and wife file separate returns, they are two related taxpayers, not just one. The same is true for a corporation and its subsidiary. The refund that goes to one is not added to the refund that goes to the other. Only the amount that is paid to each separate taxpayer is counted toward the $2 million Joint Committee total.
Types of Refund
There are three types of Joint Committee refund. These three types are added up separately to determine if there is a $2 million Joint Committee refund. The first type is defined in IRC section 6405(a). Section 6405(a) refunds are amounts that have yet to be paid. They usually come from taxpayer claims or favorable examination adjustments.
The second type is defined in IRC section 6405(b). Section 6405(b) refunds come from tentative carrybacks of Net Operating Losses, Capital Losses or various credits on Forms 1045 or 1139.
The third type is defined in IRC section 6405(c). Section 6405 (c) refunds come from IRC section 165(i) losses. These are losses attributable to a disaster declared by the President under the Disaster Relief and Emergency Assistance Act.
Deficiencies
The rules on applying deficiencies to refund years are complicated. Deficiencies are netted against the refunds. The IRM contains a detailed explanation of this netting process in IRM 4.36.2.4.4. A spreadsheet may help to apply the rules.
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