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Part 4. Examining Process

Chapter 32. Abusive Tax Avoidance Transactions (ATAT)

Section 3. Coordination and Roles of Cross Functional Units (Cont. 1)

4.32.3  Coordination and Roles of Cross Functional Units (Cont. 1)

4.32.3.4 
Counsel

4.32.3.4.2 
LMSB Division Counsel

4.32.3.4.2.1 
LMSB Oversight

4.32.3.4.2.1.2  (03-30-2006)
Office of Tax Shelter Analysis (OTSA)

  1. Within LMSB Division Counsel, the Senior Legal Counsel (Tax Shelters) serves as counsel to OTSA, which plans and coordinates LMSB’s tax shelter operations. For more information on OTSA, see IRM 4.32.2.3.3, Office of Tax Shelter Analysis (OTSA) and LMSB 6700 Committee.

  2. The LMSB Senior Legal Counsel (Tax Shelters) works with OTSA and the LMSB Emerging Issue Process Group to identify, coordinate, and gather information on emerging tax shelter issues. The issues are referred to the Senior Counsel to the Chief Counsel, who forms task forces, including LMSB and LMSB Division Counsel personnel to determine the Service’s response to the issues.

4.32.3.4.2.1.3  (03-30-2006)
Executive Issue Champions

  1. Within LMSB Division Counsel, attorneys are assigned to serve as counsel to the Executive Issue Champions by the LMSB Tax Shelter Committee when a particular issue becomes significant enough to warrant executive oversight and direction. See IRM 4.32.1.4, SB/SE Issue Management Teams , for more information on IMTs. Contact OTSA for more information on Issue Champions.

4.32.3.4.2.1.4  (03-30-2006)
Assistance to Audit Teams and Coordination

  1. LMSB Counsel attorneys are available to provide legal support and guidance to audit teams throughout each step of promoter investigations and participant examinations. They may also coordinate with LMSB technical advisors, Issue Champions, OTSA, and other Counsel divisions and Associate offices, as appropriate.

4.32.3.4.2.2  (03-30-2006)
Coordination with the Department of Justice (DOJ)

  1. LMSB Division Counsel confers with the DOJ on a regular basis to coordinate the litigation of ATAT cases and provide cohesive processes in promoter cases.

  2. Counsel attorneys also serve on DOJ trial teams for selected ATAT cases.

  3. Counsel also coordinates with DOJ on a continuing basis regarding the issuance and enforcement of promoter summonses.

4.32.3.4.2.3  (03-30-2006)
Promoter Investigations

  1. This section provides information on LMSB Counsel's role in LMSB promoter investigations.

4.32.3.4.2.3.1  (03-30-2006)
LMSB 6700 Committee

  1. Area Counsel for Financial Services and Senior Legal Counsel (Tax Shelters) are members of the LMSB 6700 Committee, which serves under the LMSB Tax Shelter Committee and is authorized to approve all LMSB tax shelter promoter contacts and investigations. Area Counsel for Financial Services and the Financial Services Industry Director co-chair the LMSB 6700 Committee.

4.32.3.4.2.3.2  (03-30-2006)
Initiation of Approved Promoter Investigations

  1. Once the LMSB 6700 Committee has approved a promoter investigation, LMSB Area Counsel assigns an attorney to provide legal assistance to the examiner conducting the investigation.

4.32.3.4.2.3.3  (03-30-2006)
Promoter Meeting

  1. Information Document Request (IDR) Assistance - Attorneys work with examiners to obtain any necessary documentation from promoters, including assisting in the drafting of language for IDRs.

  2. Assigned attorneys assist examiners in conducting interviews of promoters, investors and third parties. Interviews may or may not be conducted pursuant to summons. Servicewide Delegation Order 4, Summons, Oaths, Certifications and Related Functions, authorizes Counsel attorneys to take testimony from a summoned witness.

  3. During promoter investigations, the assigned attorney, team manager and examiner may meet with the promoter to discuss the status of the investigation and give the promoter an opportunity to provide documents requested or present arguments about why a penalty or other actions should not be imposed.

4.32.3.4.2.3.4  (03-30-2006)
Summonses

  1. Area Counsel assists examiners in preparing and issuing administrative summonses, including dual purpose, third-party, and "John Doe " summonses to promoters.

  2. All summonses in promoter cases must be pre-reviewed by local Counsel and the Area Counsel for Financial Services or Division Counsel.

  3. To ensure prompt enforcement of any summonses, promoter teams should follow the best practice of also obtaining pre-service review of summonses by the Procedure and Administration Division of Chief Counsel’s Office and DOJ.

  4. See IRM 25.5, Summons Handbook, for additional information on summonses.

4.32.3.4.2.3.5  (03-30-2006)
Penalty/Injunction Determination

  1. Assigned attorneys assist examiners in determining if penalties or injunctive relief are applicable to a promoter. LMSB Counsel should follow the DOJ injunction referral process found in IRM 4.32.3.4.1.3.6, Injunction Referrals to DOJ.

4.32.3.4.2.3.6  (03-30-2006)
Referral to Criminal Investigation/Office of Professional Responsibility

  1. Assigned attorneys assist examiners in determining whether a referral to CI and/or the OPR is warranted.

4.32.3.4.2.3.7  (03-30-2006)
Final Memorandum

  1. Area Counsel assists examiners in preparing a final memorandum to the LMSB Director of Field Operations recommending action to be taken against the promoter.

4.32.3.4.3  (03-30-2006)
TE/GE Division Counsel/Associate Chief Counsel

  1. TE/GE Division Counsel/Associate Chief Counsel (TE/GE Counsel) provides legal support and guidance throughout each step of promoter investigations and participant examination cases.

4.32.3.4.3.1  (03-30-2006)
Servicewide Support

  1. TE/GE Counsel is an integral partner in the Service's effort to combat ATATs. TE/GE Counsel coordinates with the Department of Justice (DOJ) and all Operating Divisions, Counsel Divisions and Associate Counsel offices. TE/GE Counsel provides coordination and guidance on the early identification of technical shelters, including formulation of policy and legal positions, and continues its support throughout the ATAT process.

4.32.3.4.3.1.1  (03-30-2006)
TE/GE ATAT Executive Committee

  1. TE/GE Counsel serves as a member of the TE/GE ATAT Executive Steering Committee (ESC), which provides leadership and executive oversight in implementing TE/GE's ATAT program.

4.32.3.4.3.1.2  (03-30-2006)
Servicewide Abusive Transaction Executive Steering Committee (SAT ESC)

  1. TE/GE Counsel serves as a member of the SAT ESC which provides leadership, Servicewide coordination and policy regarding the Service's methods of addressing ATATs.

4.32.3.4.3.1.3  (03-30-2006)
Emerging Issues Group

  1. TE/GE Counsel receives information on emerging ATATs and refers it to the Senior Counsel to the Chief Counsel and provides early leadership and guidance regarding appropriate methods to address ATAT issues.

4.32.3.4.3.1.4  (03-30-2006)
Issue Management Teams (IMT)

  1. TE/GE Counsel attorneys serve as supporting members and legal advisors on all IMTs that involve either TE/GE Operating Division taxpayers or issues within the topical jurisdiction of TE/GE Counsel as an Associate Chief Counsel.

4.32.3.4.3.2  (03-30-2006)
Promoter/Preparer Investigations

  1. TE/GE Counsel attorneys provide legal support and guidance to the Service's promoter investigations, regardless of which Operating Division is conducting the investigation, whenever the investigation involves either TE/GE Operating Division taxpayer or issue within the topical jurisdiction of TE/GE Counsel as an Associate Chief Counsel. TE/GE Counsel assists the Service as necessary in every aspect of its ATAT investigations. Examiners, revenue officers, and other support functions should not hesitate to call TE/GE Counsel for advice.

4.32.3.4.3.3  (03-30-2006)
Penalties

  1. TE/GE Counsel provides advice regarding promoter and participant penalty assessments

4.32.3.4.3.4  (03-30-2006)
Examination of ATAT Participants

  1. TE/GE Counsel is available to provide support with ATAT participant examinations, such as:

    • Summons language and enforcement.

    • Taxpayer meetings.

    • Statutory Notice of Deficiency language.

    • Designating cases for litigation.

4.32.3.4.3.5  (03-30-2006)
Litigation

  1. TE/GE Counsel defends the Service's positions and facilitates its goals through litigation and alternatives to litigation.

4.32.3.5  (03-30-2006)
Criminal Investigations (CI)

  1. This section describes roles that the CI Operating Division plays in the ATAT process.

4.32.3.5.1  (03-30-2006)
Notification to CI by the Civil Operating Divisions

  1. The SB/SE LDC and OTSA forward recommendation memorandum summarizing their findings to the CI LDC stating their desire to open an investigation under IRC §6700, IRC §6701, IRC §6707 and/or IRC §6708.

  2. See IRM 4.32.2.3, Lead Identification and Investigation Authorization, for further information.

4.32.3.5.2  (03-30-2006)
Role of the Designated CI LDC

  1. The CI LDC is responsible for coordination with SB/SE and LMSB.

  2. When the CI LDC receives a memorandum from the SB/SE LDC or OTSA, Criminal Investigation Management Information System (CIMIS) research is conducted. The preliminary deconfliction process simply involves a search by name and taxpayer identification number, associate identity or DBA for any numbered CI investigation. The CI LDC maintains a database of all IRC §6700, IRC §6701, IRC §6707 and IRC §6708 requests received from the civil Operating Divisions. If the CIMIS check fails to disclose any open investigations or associate identities, the CI LDC sends a memorandum to SB/SE LDC/OTSA advising that there is no conflict in proceeding with a civil promoter investigation under IRC §6700, IRC §6701, IRC §6707 or IRC §6708.

  3. The CI LDC simultaneously assigns the basic information to the Field Office that services the Area in which the subject resides.

  4. For packages deemed to have criminal potential, the CI Field Office assigns a Primary Investigation number. Contact names and telephone numbers in the civil Operating Division are provided to the Field Office to assist with the evaluation process.

  5. If the CI LDC CIMIS check discloses an open investigation or associate identity, a memorandum is forwarded to the Special Agent in Charge (SAC) of the respective Field Office requesting a determination whether there is a "conflict" or "no conflict" between the proposed civil action and the criminal investigation. A conflict determination means a civil investigation would greatly harm the ongoing criminal investigation. A no conflict determination means pursuing a civil investigation (Parallel Investigation) would not harm the criminal investigation.

  6. See the following IRM sections for further information on CI’s involvement in the ATAT process:

    1. IRM 4.32.2.3.5, Coordination with CI.

    2. IRM 4.32.2.6.3, Six-Way Conference.

    3. IRM 4.32.2.6, Parallel Investigations.

4.32.3.5.3  (03-30-2006)
CI Field Office Actions

  1. The SAC makes a conflict/no conflict determination within 10 days of receiving the CI LDC memorandum and faxes the determination to the SB/SE LDC or OTSA. See IRM 4.32.2.3.5, Coordination with CI, for further information on CIs involvement in determining if a parallel investigation can be initiated.

  2. When a Field Office receives a Primary Investigation (PI) from the CI LDC relating to an abusive tax promotion or promoter, the PI is considered a lead from the SB/SE LDC or OTSA after the no conflict determination. The evaluation of the PI should be completed within 30 days, with a provision for a 30-day extension. Within 10 days of receiving the PI, the assigned special agent schedules and conducts a six-way conference. This conference assists CI in evaluating criminal potential and provides an opportunity to discuss conducting parallel civil and criminal investigations. The source code for these investigations is 31, IRS-Other, not a fraud referral.

  3. If a fraud referral has been developed with the assistance of a Fraud Technical Advisor (FTA) or by the referring Division, CI handles it as a regular fraud referrals.

  4. See IRM 4.32.2.6.3, Six-Way Conference.

4.32.3.6  (03-30-2006)
Referrals to the Department of Justice (DOJ)

  1. IRC §7401, Authorization, authorizes the Secretary to make referrals to the Attorney General to bring civil suit.

  2. All promoter and preparer injunction cases are referred to the Civil Trial Section, Central Region.

  3. Attorneys in the Tax Division of the DOJ bring injunctive actions in Federal District Court under:

    • IRC §7402, Jurisdiction of District Courts

    • IRC §7407, Action to Enjoin Income Tax Return Preparers , or

    • IRC §7408, Actions to Enjoin Specified Conduct Related to Tax Shelters and Reportable Transactions

  4. A DOJ trial attorney from the Civil Trial Section generally makes all the appearances and prepares the pleadings, motions, etc. In some cases the local US Attorney's Office, a branch of the DOJ, makes court appearances on behalf of the DOJ.

4.32.3.6.1  (03-30-2006)
Steps in an Injunctive Case

  1. The steps in an injunctive case involve several actions that the DOJ trial attorney deems appropriate and necessary. These actions are determined by the DOJ trial attorney based on evidence examiners have accumulated.

    1. The DOJ attorney may request that the examiner perform additional case development.

    2. The initial action taken by the DOJ is the filing of a complaint in the appropriate federal district court. The complaint contains a written narrative describing the conduct of the promoter and the attributes of the promotion or transaction they are promoting.

    3. If the conduct of the promoter is so egregious and the harm to the Government is significant, damaging and ongoing, the DOJ may ask for an immediate halt to the promoter's activities through a request for a Temporary Restraining Order (TRO). TRO’s are only in effect for a short time, usually no more than thirty days.

    4. If the DOJ does not believe a TRO is warranted or it is not granted by the Court, a motion for a preliminary injunction is usually filed with the Court. The filing of this motion could be simultaneous, or could occur days or weeks after the complaint was filed. The filing of a motion for a preliminary injunction begins a series of events that could culminate in terminating the actions of the promoter.

    5. The court order for a preliminary injunction orders the promoter to immediately terminate the promotion activities in order to prevent continuing harm to the Government. However, as the name implies, it is only preliminary. The DOJ generally files a motion for summary judgment, asking the Court for a permanent injunction without a trial.

  2. If, after the promoter has been enjoined by the Court, the IRS learns that a promoter has violated the terms of the injunction order, contempt proceedings may be instituted in court. Promoters are subject to either civil or criminal contempt charges with the decision based on the judgment of the DOJ attorneys. Penalties for violating court orders can be fines, imprisonment or both.

4.32.3.6.2  (03-30-2006)
Requests by DOJ Trial Attorneys

  1. The DOJ trial attorney assigned to the injunctive case may continue to request that the IRS provide evidence, documents, testimony and requests for other assistance. These requests may include:

    1. Requests for IRS assistance in preparing declarations filed with the court. A declaration is a summary of the examiner’s portion of the case and contains relevant information vital to obtaining an injunction on the promoter. The declaration is generally drafted by the DOJ attorney assigned to the case.

    2. Requests related to depositions. Examiners may be deposed under oath by promoters or their representatives once DOJ has filed the complaint. This happens in the discovery phase of the injunction process and may occur on more than one occasion. Examiners should never appear at a deposition without the presence and counsel of a DOJ trial attorney.

    3. Requests related to hearings. DOJ attorneys may request that examiners testify in court during any court hearings. Usually this takes place at hearings for requests for preliminary injunctions. Examiners prepare to testify with the assistance of attorneys from the DOJ and Office of Chief Counsel.

4.32.3.7  (03-30-2006)
Taxpayer Education and Communications (TEC)

  1. (Reserved)

4.32.3.8  (03-30-2006)
Tax Exempt and Government Entities (TE/GE)

  1. The TE/GE ATAT ESC is responsible for formulating a uniform and consistent approach to ATATs involving TE/GE entities. It is a resource for, and coordinates among, the various TE/GE functions. The following are members of the TE/GE ATAT ESC:

    • Division Commissioner.

    • Deputy Division Commissioner.

    • Senior Technical Advisor to the Division Commissioner.

    • TE/GE Division Counsel/ Associate Chief Counsel.

    • Director – Exempt Organizations.

    • Director – Employee Plans.

    • Director – Government Entities.

    • Representatives from the various TE/GE ATAT committees.

  2. The TE/GE ATAT ESC also addresses issues raised by the SAT ESC.

  3. The TE/GE Senior Technical Advisor to the Division Commissioner coordinates the dissemination of reports and other activities between the TE/GE functions and the SB/SE LDC and OTSA.

  4. The following committees address ATATs and emerging issues involving TE/GE entities:

    • Tax-Exempt Organizations (EO) – EO ATAT Committee.

    • Employee Plans (EP) – Tax Shelter Coordinator.

    • Tax-Exempt Bonds (TEB) – TEB IRC §6700 Committee.

    • Indian Tribal Governments (ITG) – Abusive Detection and Prevention Team (ADAPT).

    • Federal, State & Local Governments (FSLG) – FSLG Outreach, Planning & Review.

4.32.3.9  (03-30-2006)
Technical Services (TS)

  1. TS supports the ATAT program by serving as supporting members on Issue Management Teams (IMT) and by conducting in-process case reviews and examination end processes where the authority for such processes is delegated to TS managers and employees. The Alternative Resolution Implementation Program (ARI) within Technical Services participates with the ATAT IMTs in the development of alternative resolution implementation strategies and the development of resolution implementation procedures. Specific items for which TS is responsible include:

    • In-process case reviews where agreed to by the TS Director and the Examination Compliance Director or upon a specific request and agreement by the Examination Area Director to the TS Territory Manager (TSTM). (Refer to IRM 4.8.7.2.4, In Process Case Reviews, and IRM 4.8.2.2, Cases Requiring Action By Technical Services.)

    • Closed Case Reviews. (Refer to IRM 4.8.1.4.1, Case Review , IRM 4.8.2.7, General Case Review Procedures, and IRM 4.8.5, Post Examination Case Processing Requirements .)

    • Notice of Deficiency preparation and issuance (IRM 4.14.1, Statutory Notices of Deficiency Issued by Area Offices) using ATAT pre-approved language.

    • Closing Agreement review and signature (IRM 4.8.8.3, Closing Agreements, and IRM 8.13.1, Purposes and Authorities ) using ATAT pre-approved language.

    • Suspense of promoter or investor cases in Bankruptcy, IRC §1254, Fraud or Grand Jury Suspense statuses where agreement to suspense cases has been reached between the TSTM and the Area Territory Manager (TM) assigned ATAT program oversight. (Refer to IRM 4.8.2.10, Suspense Cases , and IRM 4.8.5, Post Examination Case Processing Requirements .) However, parallel investigation cases are suspensed at the group level.

    • Other technical coordination or assistance at a local level upon specific request where agreed to by the TSTM and the Area TM assigned ATAT program oversight. (Refer to IRM 4.8.7.2.3, Technical and Procedural Inquiries, and IRM 4.8.8.13, Transferee Liability Cases .)


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