Form 872–B, Consent to Extend the Time to Assess Miscellaneous Excise Tax, is used to extend the statutory period of limitation on assessment of the excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, Form 2290, Heavy Highway Vehicle Use Tax Return, Form 730, Monthly Tax Return for Wagers, and Form 11–C, Occupational Tax and Registration Return for Wagering.

A consent should not be solicited unless one of the following conditions applies:

Separate consents are needed for each type of excise tax return (e.g. Form 2290 and Form 720) for which the limitations period will be extended.

For the kind of tax, name the specific excise tax being extended. The pertinent code section should be stated in the space provided in the consent.

If an extension is desired for more than one type of tax reported on the same Form 720, each type of tax and its corresponding code section should be listed separately on the consent form.

The periods ("due for the period" ) should be shown inclusive, beginning with the first day of the earliest period and ending with the last day of the most recent period.

Transferee liability—Consent Form 4016, Consent Fixing Period of Limitation Upon Assessment of Employment or Miscellaneous Excise Taxes Against a Transferee, is used for extending the statutory period of limitations for assessment of excise taxes against a transferee, arising on liquidation or dissolution of a corporation or partnership, or on a reorganization within the means of IRC § 368(a). See IRM 25.6.22.6.16.1 below.

Limited Liability Companies–

Form 872 or 872–A is used to extend the statute for assessment of taxes under Chapters 41 (Public charities) and 42 (Private Foundations and Certain Other Tax-Exempt Organizations) of the Code.

When consent agreements are entered into extending the statutory period of limitations for assessment of income and Chapter 41 or 42 taxes, the same consent form can be used. The kind of tax will be shown as " income and excise" .

For the Form 990–T, Exempt Organization Business Income Tax Return, the consent should be signed by an officer or fiduciary.

The statutory period for assessment of Chapter 41 or 42 taxes imposed upon a disqualified person, foundation manager, organization manager, public charity, a private foundation, or a black lung benefit trust may be extended when necessary by securing an executed Form 872 or 872–A for each year in which acts (or failures to act) occur which give rise to the Chapter 41 or 42 taxes.

The consent form must also cover all other years in the taxable period because these excise taxes are imposed for each year in the taxable period and not merely the year in which the act occurred.

The consent must always be obtained from the person upon whom the tax is imposed even though the period of limitations is determined by the due date of the annual return (Form 990, Return of Organization Exempt From Income Tax, Form 990–PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation, Form 990–BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts & Certain Related Person, or Form 5227, Split-Interest Trust Information Return) or the date the return is filed, whichever is later.

Form 872 or 872–A is used to extend the statute for assessment of taxes under Chapter 43 (Qualified Pension, Etc., Plans) of the Code.

The statutory period for assessment of the IRC § 4975(a) excise tax on a disqualified person may be extended when necessary by securing an executed fForm 872 or 872–A for each year in which transactions occur that give rise to the excise tax. The consent must always be obtained from the person upon whom the tax is imposed, even though the period of limitations is determined by the due date of the annual return (Form 5500 series) or the date the return is filed, whichever is later.

When consent agreements are entered into extending the statutory period of limitations for assessment of Chapter 43 taxes, the kind of tax will be shown as "excise."

Form 5500 is filed by the employer maintaining the plan or the plan administrator and the consent must be signed by the employer or plan administrator. If Schedule P (Annual Return of Fiduciary of Employer Benefit Trust) is filed with the Form 5500, the Schedule P is a jurat signed by a plan trustee and filed by the employer or the plan administrator that allows the trustee under penalties of perjury to treat the information in the Form 5500 as the trustee's return information. The consent for the trust must be signed by the trustee.

Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, should be signed by the person (employer, entity, individual) against whom the tax will be assessed and any consent pertaining to the Form 5330 should be signed by the same person or another person authorized to sign the consent.

A Form 872 or 872–A is used to extend the period of limitations for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. See IRM 4.23.14.8(2), Form 872, Consent to Extend the Time to Assess Tax, for guidance regarding preparation of the consent.

Separate consent forms should be used to extend the periods of limitation for Form 1120 and Form 1042.

The statute for the preparer penalties under IRC §§ 6694(a) and 6695 can be extended by agreement. See Rev. Rul. 78–245, 1978-1 C.B. 435.

The statute must be extended using Form 872–D, Consent to Extend the Time on Assessment of Tax Return Preparer Penalty.

Special conditions affect the statute of limitations. This section deals with the effect of these conditions on consents to extend the period of time for assessment of tax.

Form 872–A, Special Consent to Extend the Time to Assess Tax, is an open-ended consent form. This is used instead of the Form 872, the fixed-date consent form.

Form 872–A extends the period of limitations as follows:

Some assessments do not reflect a final determination and appeals consideration and therefore will not terminate the agreement before the expiration date. Examples of assessments that do not constitute final determination and appeals consideration are:

Unassessed payments, such as amounts treated by the Service as cash bonds and advance payments not assessed by the Service, will not terminate the consent agreement.

The agreement entered into on Form 872–A, will end on the date determined in paragraph (2) above, regardless of any assessment for any period includable in a report to the Joint Committee on Taxation (JCT) submitted under § 6405 of the IRC. See IRM 4.36.3.5, Statute of Limitations, for procedures to be followed in cases reportable to the JCT under IRC § 6405.

Form 872–A should be used by Examination personnel in situations where its use would be advantageous to both the Service and the taxpayer.

The Form 872–A is processed in the same manner as the Form 872:

The Form 872–A is signed by the same persons authorized to sign the Form 872.

The Form 872–O, Special Consent to Extend the Time to Assess Tax Attributable to Partnership Items, is an open-ended consent form for TEFRA partnership returns. This form may be used instead of the fixed–date consent Form 872–P. See IRM 25.6.22.6.5.1 above for discussion of Form 872–P.

See IRM 25.6.22.7.1 above for discussion of the procedures for open-ended consents and IRM 4.31.2.6.2, Extension of Statute at the Partnership, for further information on statute extensions for TEFRA returns.

Form 872–N, Notice of Termination of Special Consent to Extend the Time to Assess Tax Attributable to Partnership Items, is the written notification to the Service (or to the taxpayer) that terminates the open-ended consent (Form 872–O) 90 days after issuance by the Service or 90 days after the date on which the Form 872–N is received by the office designated by the Commissioner of Internal Revenue.

To determine the person empowered to sign the consent for the partnership, see the IRM 4.31.

The Form 872–O is handled in a similar fashion as the Form 872–P:

If the partner has signed a Form 872 or 872–A with respect to issues unrelated to the terminated Form 872–O (i.e., non-TEFRA partnership adjustments), that Form 872 or 872–A remains in full force and effect for the non-TEFRA partnership adjustments.

The Form 872–R, Special Consent to Extend the Time to Assess Tax Attributable to Items of an S Corporation, is an open-ended consent form for TEFRA S corporation returns. This form may be used instead of the fixed-date consent Form 872–S. See IRM 25.6.22.6.5.1 above for discussion of Form 872–S.

See IRM 25.6.22.7.1 above for discussion of the procedures for open-ended consents and IRM 4.31 for further information on statute extensions for TEFRA returns. When the term "partnership" is used in IRM 4.31, you should substitute the term "S" corporation to determine the procedures for TEFRA S corporations.

Form 872–Q, Notice of Termination of Special Consent to Extend the Time to Assess Tax Attributable to Items of an S Corporation, is the written notification to the Service (or to the taxpayer) that terminates the open-ended consent (Form 872–R) 90 days after issuance by the Service or 90 days after the date on which the Form 872–Q is received by the office designated by the Commissioner of Internal Revenue..

To determine the person empowered to sign the consent for the S corporation, see the IRM 4.31.

The Form 872–R is handled in a similar fashion as the Form 872–S:

If the shareholder has signed a Form 872 or 872–A with respect to issues unrelated to the terminated Form 872–R (i.e., non–TEFRA S Corporation adjustments), that Form 872 or 872–A remains in full force and effect for the non-TEFRA S corporation adjustments.

The taxpayer has the right to request a restricted consent.

The Internal Revenue Service Restructuring and Reform Act of 1998 requires the Service to notify taxpayers of their right to limit the extension to particular issues (effective for requests to extend the period of limitations made after 12/31/99). See IRM 25.6.22.3 above regarding notification.

It is the position of the Service that the taxpayer's right to a restricted consent is the right to request a restricted consent. The Service is not compelled in all circumstances to agree to a restricted consent. A consent constitutes a mutual agreement, with both parties, the taxpayer and the Service, having the right to determine what they will agree to in the consent.

See IRM 25.6.22.8.2 below for circumstances where the Service will enter into a restricted consent requested by taxpayers.

As a general rule, as reflected in Publication 1035, the Service will enter into a restricted consent requested by the taxpayer if all of the following conditions are met:

Restricted consents should be avoided, if possible, until the examination has been completed to the extent that all potential issues have been identified.

Generally, restricted consents should not be accepted for returns included in a Joint Committee case. See IRM 4.36.3.5.1, Restricted Consents.

Since a restricted consent is used to allow the statute to expire with regard to all items on the return except those included in the restrictive statement, the examiner should include a statement on the Form 895, Notice of Statute Expiration, to the effect that all conditions noted above have been met.

Generally, the Service will not solicit restricted consents.

The Service may request a consent restricted to one or more issues where, in the light of reasonable tax administration, resolution of such issue or issues requires establishment of a Service position through court decision, regulation, ruling or other Headquarters action, or where other equally meritorious circumstances exist. See Rev. Proc. 68–31, 1968-2 C.B. 917 (modified by Rev. Proc. 77–6, 1977-1 C.B. 539, for other matters).

If there are issues other than those subject to the restricted consent, a partial agreement on Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, must be obtained and the assessment made within the regular period for assessment and extensions thereof.

The report transmittal for the partial agreement report should be clearly marked, "partial agreement report." The basic report form should clearly set forth that it is a partial agreement report and that a final report will be prepared when the examination has been completed. Process Form 5344, Examination Closing Record, in accordance with the instructions contained in IRM 4.4.12, Examined Closings, Surveyed Claims, and Partial Assessments, or Form 5599, TE/GE Examined Closing Record, and its instructions in IRM 4.5.2, TE/GE Examined and Non-Examined Closures.

When appropriate, a partial overassessment may be made. See Policy Statement P-4-41 at IRM 1.2.1.4.15.

A restricted consent may be signed on behalf of the Service by any person who is authorized to sign consents as specified in Delegation Order 42, Revision 28, Authority to Execute Consents Fixing the Period of Limitations on Assessment or Collection Under Provisions of the 1939, 1954, and 1986 Internal Revenue Codes or Servicewide Delegation Order 4–19 (formerly Delegation Order 209, Revision 5) for TEFRA partnership or TEFRA subchapter S corporation matters. See IRM 1.2.52.8, Delegations of Authority for Special Topic Activities, and IRM 1.2.43.5, Delegation of Authorities for the Examining Process, for the above-referenced delegation orders, respectively.

The area office is responsible for preparing the restrictive wording and must obtain the approval of Area Counsel as to its legal sufficiency, prior to providing any consent containing restrictive wording to the taxpayer.

Any questions regarding the use of restricted consents or restrictive wording should be discussed with Area Counsel.

When other areas or divisions are involved, only the area/division having jurisdiction of the controlling entity (hereinafter the "coordinating " office) will prepare the restrictive statement and obtain approval from Counsel. The "coordinating" area/division will then distribute the approved restrictive statements to the impacted offices. When such a restricted consent is prepared, the restrictive wording will not be modified to cover an additional unresolved issue of any particular taxpayer without first obtaining approval of the "coordinating" office.

In those cases where the coordinating area/division and its Area/Division Counsel determine that it is not appropriate for the impacted office to secure a modified restricted consent, the "coordinating" area/division will notify the other impacted areas/divisions of this decision by memorandum. The reasons why a restricted consent would not be appropriate will be set forth in the memorandum.

The area/division preparing the consent should anticipate the possibility of issues being present in the tax period for which the consent is being sought based on the continuing effects of a prior year adjustment. The preparing area/division can cover such possible situations by including the following statement as the first provision of the description of the issues to which the consent is restricted: "(1) items affected by continuing tax effects caused by adjustments to any prior tax return;" . Such an opening provision is followed by provisions describing the major areas of consideration. The addition of the restrictive statement addressing the continuing tax effects of adjustments to prior tax periods does not require approval by the coordinating office.

When requesting a restricted consent which has been prepared by the "coordinating" area/division, the examiner should explain to the taxpayer that, for consistency purposes, the restricted consent cannot be changed and that all similarly situated taxpayers are being requested to sign either a general consent or this restricted consent. If the restrictive wording contains a provision for the continuing tax effects of prior year adjustments, the examiner should explain that the provision was included to cover possible situations of numerous taxpayers and, if there are no continuing tax effects from adjustments or proposed adjustments in a prior year, the provision has no effect.

When approval of Area/Division Counsel is required for the restrictive wording, such approval must be sought no later than 90 days prior to the earliest statute expiration date of any related taxpayer's return. Concurrently, the "coordinating" area/division also will seek Area/Division Counsel approval of wording for adjustments to be used in statutory notices in the event such notices become necessary when consents cannot be secured from the related taxpayers.

If the request for approval cannot be made within the time limit prescribed in (5) above, the request to Counsel must be made in writing signed by the Territory Manager in LMSB, SB/SE and W&I, or the Area Manager in TE/GE of the coordinating office.

When the only unresolved issues appearing on a taxpayer's return are those resulting from the non-TEFRA flow-through items, the division office having jurisdiction over the shareholder's or partner's (hereinafter referred to as "distributee" ) tax return will prepare the restricted consent using the wording contained in IRM 25.6.22.8.15(5), (6), or (7) below), except in unusual circumstances. When the wording specified in IRM 25.6.22.8.15 (5), (6) or (7) is used without modification, approval of Area Counsel is not required. For this purpose, the addition of a statement regarding the continuing tax effects of prior year's adjustments as an area of consideration is not considered to be a modification requiring the approval of Area Counsel.

Prior to soliciting a restricted consent from a distributee, the division office having jurisdiction over the distributee's return will determine if other flow-through entities are being examined by researching AIMS and PCS. The Partnership Control System (PCS) places a Partnership Investor Control File (PICF) code of "6" on the AIMS record for the investor. The code alerts IRS personnel to the existence of an ongoing examination of the key case return and prevents its premature closure. For example, an examiner in Peoria may be auditing Investor A's individual income tax return when an examiner in Boston begins the examination of a non-TEFRA partnership in which Investor A is a partner. If Investor A asks for a restricted consent, the Peoria examiner must check the PICF Code and determine whether the restricted consent should include any flow-through entities. Investor A's examination cannot be closed without addressing the PCS linkage.

Although the restricted consent procedures apply to the returns of TEFRA entities, a consent containing wording restricting adjustments to one or more items of a partnership or S corporation may not be solicited without the prior written approval of Area Counsel. Because of the potential impact on distributees and the interrelationship of partnership or S corporation items, managers and technical personnel must consider the difficulties in clearly and accurately describing the scope of a restricted consent covering items of a TEFRA partnership or S corporation. Suggested wording for restricted consents for TEFRA partnerships and TEFRA S corporations is provided in IRM 25.6.22.8.15; however, review by Area Counsel of the restrictive wording is still required.

Restricted issues must be identical for each tax period, in order to have one consent form to cover multiple tax periods. See IRM 25.6.22.5.5.1 above for more information on multiple tax period consents.

Extreme care should be exercised when drafting restrictive wording for use in a consent.

The basic restrictive statement is:
"The amount of any deficiency assessment is to be limited to that resulting from any adjustment to (description of the area(s) of consideration), any penalties and additions to tax attributable thereto, and any consequential changes to other items based on such adjustment."

The following wording should also be included on Forms 872 and 872-A when the consent is being restricted:
"The provisions of Section 6511(c) of the Internal Revenue Code are limited to any refund or credit resulting from an adjustment for which the period for assessment is extended under this agreement."

The restrictive statements should be typed on the consent in the space provided, depending upon the particular consent form being used.

On some consent forms there is very little space for typing a restrictive statement. If the restrictive statement will not fit on the consent form, a reference can be made on the consent form to an attachment. A key consideration is that the attention of both the taxpayer and the Service is clearly directed to the restriction. Also, see IRM 4.31.2.6.2, Extension of Statute at the Partnership or Partner Level.

The expiration date of the consent should generally be sufficient to provide time for disposition of the case without a foreseeable need for obtaining a renewal consent. This is particularly important when the outcome of the case is dependent upon a court decision in another case.

If it becomes necessary to extend the statutory period beyond the date originally agreed upon, renewal consents may be secured before the expiration date of the original consent. Renewal consents may be obtained by using an open-ended consent agreement even if the preceding consent was a fixed-date consent.

If a restricted consent was secured originally, the restrictive statement on the renewal consent must be worded exactly as the original restricted consent. If a general consent had been obtained originally, the renewal consent may be restricted to certain areas of consideration using the principles described in this IRM section.

The following examples illustrate the principles to be used in drafting the restrictive statement.

In general—Assume the taxpayer and the Service are awaiting a court decision involving the deduction for dependency exemptions for the taxpayer's parents in a particular factual setting. The only unresolved issue on a subsequent return of the taxpayer involves the same issue with the same facts. The basic restrictive statement with the description of the area of consideration is as follows (also see NOTE pertaining to IRC section 6511(c) restriction at IRM 25.6.22.8.15(1):

Shareholder receiving distribution—Assume the taxpayer in a particular taxable year received distributions as shareholder from Corporation A. The corporation advised shareholders that the distribution was only 50 percent taxable but the taxable status of the distribution has not yet been made by the Service. The only unresolved issue on the return of the taxpayer/shareholder involves the amount of the distribution subject to tax. The basic restrictive statement with the description of the area of consideration is as follows (also see NOTE pertaining to IRC section 6511(c) restriction at IRM 25.6.22.8.15(1):

Shareholder receiving distribution in exchange for stock—In any examination, an adjustment to the tax treatment of a particular item in one year can have continuing effects on items in a subsequent year. For example, assume a situation where the shareholders of Corporation X received common stock of Corporation Y in exchange for their shares of Corporation X common in a merger. The shareholders treated the transaction as a tax-free exchange but the Service is questioning that treatment. For the year of the exchange, the basic restrictive statement with the description of the area of consideration is as follows (also see NOTE pertaining to IRC section 6511(c) restriction at IRM 25.6.22.8.15(1):

S Corporation Shareholder/Partner Consent (non-TEFRA) Covering Only Specific Entities on Return—In examinations of S corporations or partnerships (hereinafter referred to as " flow-through entity" ), the adjustments may be at the flow-through entity level with changes in profit, loss, etc., flowing to the shareholders' or partners' returns based on the flow-through entity adjustments. However, adjustments also may be reflected at the shareholder or partner level due to changes in the shareholder's or partner's basis in the flow-through entity. For example, in partnership leveraged tax shelter situations utilizing nonrecourse financing, a possible Service position is that the loans lack economic substance and create artificial losses because taxpayers never intend to honor the loans. Disallowance of the losses on such grounds is a partnership level adjustment. If the fair market value of the property underlying the nonrecourse loans is not at least equal to the loans, an alternative Service position would be the disallowance of a portion of the losses at the partner level on the grounds that the losses exceed the partner's basis in the partnership. A partner's basis includes nonrecourse liabilities only to the extent of the fair market value of the property underlying such liabilities. In certain partnership situations, it is also possible to argue that the partnership is an association taxable as a corporation. In such situations, the "distributive shares" of income, gain, loss, deduction, or credit of the " partnership" are not recognized to the "partners" but are taxable to the association. However actual distributions to the "partners" from the association, as opposed to distributive shares from the "partnership" , could be taxable as dividends.
In preparing restricted consents to be obtained from shareholders or partners in any flow-through non-TEFRA entity situation, the restrictive statement should cover all of the possible issues. Additionally, the restricted consent will exclude all flow-through non-TEFRA entities which are not under examination. The following restrictive wording may be used to include specific flow-through entities on the consent. The wording in IRM 25.6.22.8.15(6) and (7) below may be used to include all flow-through entities appearing on the return or all flow-through entities except specifically named flow-through entities, respectively. Except in unusual circumstances, the appropriate restrictive wording provided in this paragraph, or in IRM 25.6.22.8.15(6) or (7) below, will be used on Form 872 or 872–A. The restrictive statement with the description of the areas of consideration is as follows (also see NOTE pertaining to IRC section 6511(c) restriction at IRM 25.6.22.8.15(1):

S Corporation Shareholder/Partner Consent (non-TEFRA) Covering All Entities on Return—The following restricted consent wording may be used if all (one or more) flow-through entities in which the taxpayer is a shareholder or partner are under examination or if the examiner is unable to determine if one or more of the flow-through entities are under examination. If the taxpayer is involved in numerous flow-through entities, not all of which are under examination, the wording in IRM 25.6.22.8.15(7) below may be used to exclude specifically named flow-through entities or, alternatively, the wording in 25.6.22.8.15(5) above (naming specific flow-through entities to be covered) may be used. The restrictive statement with the description of the areas of consideration is as follows (also see NOTE pertaining to IRC section 6511(c) restriction at IRM 25.6.22.8.15(1):

S Corporation Shareholder/Partner Consent (non-TEFRA) Covering All Entities on Return Except Those Specified—The following restricted consent wording effectively modifies the "any small business corporation and any partnership" clause in 25.6.22.8.15(6) above to exclude specifically named flow-through entities. The " exclusion" applies to all flow-through entities which are not under examination. Alternatively, the wording in 25.6.22.8.15(5) above (naming specific flow-through entities to be covered) may be used. The restrictive statement with the description of the areas of consideration is as follows (also see NOTE pertaining to IRC section 6511(c) restriction at IRM 25.6.22.8.15(1):

Tiered S Corporations/Partnerships (Non-TEFRA Tiers)— Problems can be encountered when a partner of a partnership is another partnership (a tier partnership) or an S corporation. Care must be taken to assure that consents are secured from the right parties and that the restricted consent properly identifies the entity from which an adjustment will flow. If this situation arises, consult Area Counsel for restrictive wording. Assume an examination of the TEFRA XYZ Partnership is in process and it becomes necessary to extend the statutory period for assessment. Eighteen partners are individuals, one partner is the AB Partnership (a non-TEFRA partnership), and one partner is the CD Corporation, an S corporation. It has been determined that it is appropriate to secure restricted consents from each affected taxpayer except the XYZ and AB partnerships. If consents from the partnerships are necessary, general consents should be secured (see below).

Partner/Shareholder Consent (investor in TEFRA Partnership or TEFRA S Corporation)—Consents at the partner or shareholder level to extend the time to assess tax attributable to items of a TEFRA partnership or TEFRA S corporation should contain specific wording.