Bulletin No. 2025–11

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2025–11

March 10, 2025

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

T.D. 10030, page 1066.

These regulations implement section 7803(e). 26 C.F.R.

301.7803-2 states that consideration of a Federal tax controversy by the Independent Office of Appeals is generally

available to all taxpayers, sets forth a list of exceptions to

Appeals consideration, and provides procedural and timing

requirements that must be met before Appeals will consider

an issue. 26 C.F.R. 301.7803-3 describes notice and protest rights for a taxpayer in receipt of a notice of deficiency

who requests consideration by Appeals and that request is

denied.

EXCISE TAX

Notice 2025-15, page 1089.

This notice provides guidance regarding the alternative manner of furnishing certain health insurance coverage statements to individuals pursuant to sections 6055(c)(3) and

6056(c)(3) of the Internal Revenue Code (Code), added by

section 2 of the Paperwork Burden Reduction Act (Pub. L.

118-167, 138 Stat. 2584, Dec. 23, 2024) (the Act).

Section 2 of the Act directs the Treasury Department and

the IRS to provide the time and manner in which a reporting

entity can provide clear, conspicuous, and accessible notice,

detailing an individual’s ability to request certain health insurance coverage statements in lieu of the reporting entity providing the statements to all individuals, to satisfy the alternative manner of furnishing certain health insurance coverage

Finding Lists begin on page ii.

statements to individuals pursuant to sections 6055(c)(3)

and 6056(c)(3) of the Code.

INCOME TAX

Rev. Proc. 2025-15, page 1090.

This revenue procedure provides discount factors for the

2024 accident year for use by insurance companies in computing discounted unpaid losses under § 846 of the Internal

Revenue Code and discounted estimated salvage recoverable under § 832.

Rev. Proc. 2025-16, page 1100.

This revenue procedure provides: (1) two tables of limitations on depreciation deductions for owners of passenger

automobiles placed in service by the taxpayer during calendar year 2025; and (2) a table of dollar amounts that

must be used to determine income inclusions by lessees

of passenger automobiles with a lease term beginning in

calendar year 2025. The tables detailing these depreciation

limitations and amounts used to determine lessee income

inclusions reflect the automobile price inflation adjustments

required by section 280F(d)(7). For purposes of this revenue procedure, the term “passenger automobiles” includes

trucks and vans.

Rev. Rul. 2025-6, page 1064.

Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes

of sections 382, 1274, 1288, 7872 and other sections of

the Code, tables set forth the rates for March 2025.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

March 10, 2025 

Bulletin No. 2025–11

Part I

Section 1274.—

Determination of Issue

Price in the Case of Certain

Debt Instruments Issued for

Property

(Also, Sections 42, 280G, 382, 467, 468, 482, 483,

1288, 7520, 7872.)

Rev. Rul. 2025-6

This revenue ruling provides various

prescribed rates for federal income tax

Annual

AFR

110% AFR

120% AFR

130% AFR

4.31%

4.74%

5.18%

5.62%

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

4.46%

4.91%

5.36%

5.81%

6.73%

7.87%

AFR

110% AFR

120% AFR

130% AFR

4.82%

5.31%

5.79%

6.29%

Short-term adjusted AFR

Mid-term adjusted AFR

Long-term adjusted AFR

March 10, 2025

purposes for March 2025 (the current

month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current

month for purposes of section 1274(d)

of the Internal Revenue Code. Table 2

contains the short-term, mid-term, and

long-term adjusted applicable federal

rates (adjusted AFR) for the current

month for purposes of section 1288(b).

Table 3 sets forth the adjusted federal long-term rate and the long-term

tax-exempt rate described in section

382(f). Table 4 contains the appropri-

ate percentages for determining the

low-income housing credit described in

section 42(b)(1) for buildings placed in

service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service

after July 30, 2008, shall not be less

than 9%. Finally, Table 5 contains the

federal rate for determining the present

value of an annuity, an interest for life

or for a term of years, or a remainder or

a reversionary interest for purposes of

section 7520.

REV. RUL. 2025-6 TABLE 1

Applicable Federal Rates (AFR) for March 2025

Period for Compounding

Semiannual

Quarterly

Short-term

4.26%

4.24%

4.69%

4.66%

5.11%

5.08%

5.54%

5.50%

Mid-term

4.41%

4.39%

4.85%

4.82%

5.29%

5.26%

5.73%

5.69%

6.62%

6.57%

7.72%

7.65%

Long-term

4.76%

4.73%

5.24%

5.21%

5.71%

5.67%

6.19%

6.14%

Annual

3.26%

3.38%

3.64%

REV. RUL. 2025-6 TABLE 2

Adjusted AFR for March 2025

Period for Compounding

Semiannual

3.23%

3.35%

3.61%

1064

Monthly

4.22%

4.64%

5.06%

5.48%

4.37%

4.80%

5.23%

5.66%

6.53%

7.60%

4.71%

5.18%

5.64%

6.11%

Quarterly

3.22%

3.34%

3.59%

Monthly

3.21%

3.33%

3.58%

Bulletin No. 2025–11

REV. RUL. 2025-6 TABLE 3

Rates Under Section 382 for March 2025

Adjusted federal long-term rate for the current month

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal

long-term rates for the current month and the prior two months.)

3.64%

3.67%

REV. RUL. 2025-6 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for March 2025

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after

July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit

8.08%

Appropriate percentage for the 30% present value low-income housing credit

3.46%

REV. RUL. 2025-6 TABLE 5

Rate Under Section 7520 for March 2025

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,

or a remainder or reversionary interest

Section 42.—Low-Income

Housing Credit

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2025. See Rev. Rul. 2025-6, page 1064.

Section 280G.—Golden

Parachute Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2025. See Rev. Rul. 2025-6, page 1064.

Section 382.—Limitation

on Net Operating Loss

Carryforwards and

Certain Built-In Losses

Following Ownership

Change

The adjusted applicable federal long-term rate

is set forth for the month of March 2025. See Rev.

Rul. 2025-6, page 1064.

Section 467.—Certain

Payments for the Use of

Property or Services

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2025. See Rev. Rul. 2025-6, page 1064.

Section 468.—Special

Rules for Mining and Solid

Waste Reclamation and

Closing Costs

The applicable federal short-term rates are set

forth for the month of March 2025. See Rev. Rul.

2025-6, page 1064.

Section 482.—Allocation

of Income and Deductions

Among Taxpayers

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2025. See Rev. Rul. 2025-6, page 1064.

5.4%

Section 483.—Interest on

Certain Deferred Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2025. See Rev. Rul. 2025-6, page 1064.

Section 1288.—Treatment

of Original Issue Discount

on Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

March 2025. See Rev. Rul. 2025-6, page 1064.

Section 7520.—Valuation

Tables

The applicable federal mid-term rates are set

forth for the month of March 2025. See Rev. Rul.

2025-6, page 1064.

Section 7872.—Treatment

of Loans With BelowMarket Interest Rates

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2025. See Rev. Rul. 2025-6, page 1064.

Bulletin No. 2025–11

1065

March 10, 2025

26 C.F.R. 301.7803-2; 26 C.F.R. 301.7803-3

T.D. 10030

DEPARTMENT OF THE

TREASURY

Internal Revenue Service

26 CFR Part 301

Resolution of Federal

Tax Controversies by the

Independent Office of

Appeals

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final regulation.

SUMMARY: This document contains

final regulations that provide guidance on

the resolution of Federal tax controversies

by the IRS Independent Office of Appeals

(Appeals) under the Taxpayer First Act of

2019 (TFA). The final regulations provide

that while the Appeals resolution process

is generally available to all taxpayers to

resolve Federal tax controversies, there

are certain exceptions to consideration by

Appeals. The final regulations also address

certain procedural and timing rules that

must be met before Appeals consideration

is available. The regulations affect taxpayers requesting Appeals consideration

of Federal tax controversies.

DATES: Effective date: These regulations

are effective on January 15, 2025.

Applicability date: The regulations in

§§301.7803-2 and 301.7803-3 apply to all

requests for consideration by Appeals that

are received on or after February 14, 2025.

FOR FURTHER INFORMATION

CONTACT: Joshua P. Hershman at (202)

317-4311 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Authority

This document contains amendments

to the Procedure and Administration

Regulations under 26 CFR part 301 to

March 10, 2025

implement section 7803(e) of the Internal

Revenue Code (Code), which Congress

enacted in the TFA (final regulations). The

final regulations are issued under section

7805(a) of the Code, which expressly delegates to the Secretary of the Treasury or

her delegate (Secretary) the authority to

“prescribe all needful rules and regulations for the enforcement of [the Code],

including all rules and regulations as may

be necessary by reason of any alteration of

law in relation to internal revenue.”

Background

Section 7803(e)(3) provides that it is

the function of Appeals to resolve Federal

tax controversies without litigation on a

basis that is fair and impartial to both the

Government and the taxpayer, promotes

a consistent application and interpretation of, and voluntary compliance with,

the Federal tax laws, and enhances public

confidence in the integrity and efficiency

of the IRS. Section 7803(e)(4) states that

the resolution process to resolve Federal

tax controversies described in section

7803(e)(3) “shall be generally available to

all taxpayers.”

On September 13, 2022, the Treasury

Department and the IRS published in the

Federal Register (87 FR 55934) a notice

of proposed rulemaking (REG-12569319) proposing amendments to implement

section 7803(e) (proposed regulations).

The proposed regulations proposed to

adopt the function of Appeals as stated in

section 7803(e)(3) and that the Appeals

resolution process is generally available to

all taxpayers to resolve Federal tax controversies as stated in section 7803(e)(4). The

proposed regulations defined what constitutes a Federal tax controversy involving

disputes over administrative determinations made by the IRS and, consistent

with the historical practice and functions

of Appeals, listed certain additional topics involving disputes over administrative

determinations by the IRS that are treated

as Federal tax controversies. Proposed

§301.7803-2(c)(1) through (24) also proposed an exclusive list of twenty-four

exceptions to consideration of a Federal

tax controversy by Appeals, almost all of

which existed before the enactment of the

TFA. This preamble refers to the exceptions in proposed §301.7803-2(c), such as

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proposed §301.7803-2(c)(1), (2), and (3),

for example, as “Exception 1,” “Exception 2,” and “Exception 3.”

Additionally, the proposed regulations

proposed certain procedural and timing

rules that must be met before Appeals consideration is available: the originating IRS

office must have completed its review; a

taxpayer must have submitted the request

for Appeals consideration in the prescribed time and manner; and Appeals

must have had sufficient time remaining

on the appropriate limitations period for it

to consider the matter. Further, if a Federal tax controversy is eligible for consideration by Appeals and the procedural

and timing requirements are followed, a

taxpayer would generally have only one

opportunity for Appeals consideration.

The proposed regulations also proposed

two special rules for docketed cases. First,

if Appeals issued a notice of deficiency,

notice of liability, or other determination, without having fully considered one

or more issues because of an impending

expiration of the statute of limitations on

assessment, Appeals may choose to have

the Office of Chief Counsel (Chief Counsel) return the case to Appeals for full consideration of the issue or issues once the

case is docketed in the United States Tax

Court (Tax Court). Second, Appeals and

Chief Counsel may determine how settlement authority is transferred between

the two offices. Similar prerequisites to

Appeals consideration as those described

in this paragraph existed before the enactment of the TFA.

Besides soliciting public comments

on the rules in the proposed regulations,

the Treasury Department and the IRS also

solicited public comments in the proposed

regulations on whether certain exclusions

from Appeals’ consideration currently

provided in the Internal Revenue Manual (IRM) relating to requests for relief

under §§301.9100-1 through 301.910022 (9100 relief) and requests for a change

in accounting method (CAM) should be

included in the list of exceptions in the

regulations.

Lastly, the proposed regulations proposed requirements to implement section

7803(e)(5). Enacted by the TFA, section

7803(e)(5) requires the IRS to follow the

special notification procedures set forth

in section 7803(e)(5) if a taxpayer who is

Bulletin No. 2025–11

in receipt of a notice of deficiency under

section 6212 of the Code requests to have

the Federal tax controversy referred to

Appeals and that request is denied.

The Summary of Comments and

Explanation of Revisions of these final

regulations summarizes the provisions

of the proposed regulations, which are

explained in greater detail in the preamble

to the proposed regulations. In response

to the proposed regulations, the Treasury

Department and the IRS received fourteen

comments. A public hearing was requested

and held on November 29, 2022.

After careful consideration of the comments and hearing testimony, the Treasury Department and the IRS adopt the

proposed regulations, as modified by this

Treasury decision, in response to such

comments as described in the Summary of

Comments and Explanation of Revisions.

The final regulations also include minor

typographical and editorial edits, including non-substantive clarifications, to the

proposed regulations.

Summary of Comments and

Explanation of Revisions

I. Proposed §301.7803-2

A. Intent of the TFA to Grant

Authority to Make Exceptions

Numerous

comments

addressed

the scope of the proposed exceptions

to Appeals consideration in proposed

§301.7803-2(c) or the authority of the

Treasury Department and the IRS to make

exceptions that exclude or limit access to

Appeals.

Several comments agreed that the TFA

generally authorizes the Treasury Department and the IRS to provide exceptions to

Appeals consideration. A comment agreed

that the statutory text and legislative history of the TFA confirm Congress did not

intend for Appeals access to be universally available. This comment supported

the proposed regulations’ identification

of particular situations in which Appeals

access should not be available. While disagreeing with Exception 19 (Challenges

Alleging That a Treasury Regulation Is

Invalid) and Exception 20 (Challenges

Alleging That a Notice or Revenue Procedure Is Invalid) and exceptions for 9100

Bulletin No. 2025–11

relief and CAMs, another comment generally agreed with the Treasury Department

and the IRS that not every case is appropriate for Appeals consideration. The

comment also stated that the TFA did not

require that the IRS grant all requests for

Appeals to consider any dispute because

the Secretary may provide exceptions to

Appeals consideration. Another comment

stated there was “ample reason, rooted in

logic and past practice, for the majority of

[the] proposed exceptions.” It opined that

some of the proposed exceptions, which

were not identified, were not necessary to

the proper administration of the Appeals

process or were not consistent with the

statute’s mandate that the Appeals process

be generally available. Another comment

stated that some of the historic exclusions in the proposed regulations should

be accepted and specifically mentioned

penalties and determinations under sections 6702 or 6682 of the Code. Other

comments stated that the proposed exceptions or exceptions framework laid out

in the proposed regulations generally ran

afoul of the intent of the TFA by limiting

access to Appeals, or that certain proposed

exceptions such as Exception 18 (Challenges Alleging That a Statute Is Unconstitutional), Exception 19, and Exception

20 did so. These comments gave several

reasons in support of their arguments,

as described in greater detail in section

I.D. of this Summary of Comments and

Explanation of Revisions. Two comments

claimed that providing exceptions to

review by Appeals would deny taxpayers a statutory right to Appeals, and two

comments claimed exceptions to review

by Appeals would inappropriately restrict

Appeals access and suggested the proposed regulations should instead expand

Appeals access.

As explained in more detail in section

I.C. of the proposed regulations’ Explanation of Provisions, Congress did not

provide for an absolute right to administrative consideration by Appeals, which

is reflected in the statute and the TFA’s

legislative history. Rather, Appeals review

is “generally available,” under section

7803(e)(4) and the Treasury Department

and the IRS may provide reasonable

exceptions in their discretion, whether

existing or new. In addition to this statutory language, TFA’s legislative history

1067

also reflects the intention of Congress

that the Treasury Department and the IRS

retain their historical discretion to determine whether the resolution of particular

types of disputes is appropriate for the

Appeals resolution process, and for the

IRS to retain the discretion to determine

whether a particular Federal tax controversy is appropriate for the Appeals resolution process:

Independent Appeals is intended to

perform functions similar to those

of the current Appeals. Independent

Appeals is to resolve tax controversies

and review administrative decisions of

the IRS in a fair and impartial manner,

for the purposes of enhancing public

confidence, promoting voluntary compliance, and ensuring consistent application and interpretation of Federal tax

laws. Resolution of tax controversies in

this manner is generally available to all

taxpayers, subject to reasonable exceptions that the Secretary may provide.

Thus, cases of a type that are referred

to Appeals under present law remain

eligible for referral to Independent

Appeals.

See H.R. Rep. No. 39, Part 1, 116th Cong.,

1st Session (House TFA Report), 30-31

(2019) (emphasis added).

Contrary to one comment’s suggestion, the Committee reports for the IRS

Restructuring and Reform Act of 1998,

Public Law 105-206 (112 Stat. 685, 689

(July 22, 1998)), and any earlier version

of the TFA that Congress did not enact,

are not informative when interpreting the

TFA. The legislative history of the TFA

reflects Congressional intent that the Treasury Department and the IRS retain their

historical discretion to determine whether

the resolution of particular types of disputes is appropriate for Appeals, and the

discretion of the IRS to determine whether

a particular Federal tax controversy is

appropriate for the Appeals resolution

process. See House TFA Report, at 29.

Several comments expressed concern

that excluding a matter from Appeals consideration adversely affects the independence or impartiality of Appeals. Some

of the comments specifically asserted that

prohibiting Appeals from considering

validity challenges to a regulation, notice,

March 10, 2025

or revenue procedure as set forth in Exception 19 or Exception 20 undermines its

independence. The Treasury Department

and the IRS disagree with this comment.

Exceptions from review by Appeals do

not inhibit the independence or impartiality of Appeals for matters or issues under

consideration. If a matter is not reviewed

by Appeals, there is no independent analysis to be performed. Appeals still would be

free to settle a Federal tax controversy that

is referred to it using its own standards and

an exception to review by Appeals would

have no bearing on the cases or issues that

are referred to Appeals.

One comment opined that the proposed

exceptions in general are not reasonable

or narrowly construed. The Treasury

Department and the IRS disagree with this

comment. As reflected in the proposed

regulations’ Explanation of Provisions in

section I.C., the proposed exceptions are

narrowly tailored and are based on reasonable rationales. Additionally, the proposed

regulations and these final regulations

reinforce the statutory presumption that

Federal tax controversies may be considered by Appeals and require a regulatory

exception for consideration to be unavailable.

The same comment suggested there

would be no “whipsaw” if Appeals settles any of the cases or issues outlined in

the proposed exceptions because Appeals

settlements are not binding on any other

taxpayer or on Chief Counsel’s litigation

position. It is unclear what is intended by

this comment. The term whipsaw refers to

the situation produced when the Government is subjected to conflicting claims of

taxpayers. The issue of whipsaw has no

bearing on the Appeals exceptions listed

in the proposed regulations nor on the

rationales set forth in the proposed regulations that support these exceptions and

so the Treasury Department and the IRS

do not agree that revisions to the proposed

regulations are necessary.

A few comments focused on costs and

opined that Congress intended for Appeals

to resolve Federal tax controversies without expensive litigation. A comment

asserted the establishment of Appeals was

an attempt by Congress to make resolving controversies less cost-prohibitive

for lower income individuals. Another

comment stated the proposed regulations’

March 10, 2025

approach granting exceptions to Appeals

consideration would be a waste of

resources of the Government and taxpayers. The Treasury Department and the IRS

agree that part of Appeals’ mission is to

resolve Federal tax controversies without

litigation, but do not agree that exceptions

to review by Appeals will result in a waste

of resources. There is no reason to assume

that the cost to litigate a particular Federal

tax controversy will significantly increase

as a result of the proposed regulations, or

that litigation expenses will increase at all

in circumstances in which an exception

existed before the TFA. Appeals consideration will still be available for most cases,

which can be resolved without litigation

(or without further litigation if the taxpayer has petitioned the Tax Court). The

proposed regulations’ procedural requirements, timing requirements, and almost

all of the exceptions to consideration by

Appeals already exist in previously established guidance regarding Appeals. As

in the past, the proposed exceptions are

limited in number and scope. The vast

majority of taxpayers, including low-income taxpayers, will have the opportunity

to have Appeals consider their Federal tax

controversies.

Similarly, two comments asserted

that Exception 18, Exception 19, and/or

Exception 20 waste taxpayer and Government resources. As discussed in more

detail in sections I.D.11.a. and 12. of this

Summary of Comments and Explanation

of Revisions, in contrast to a single decision by Appeals that is applicable and

communicated only to one taxpayer, a

final decision from a Federal court is publicly available and applied consistently to

all taxpayers. As a result, these exceptions

promote efficiency rather than wasting

taxpayer and Government resources. Furthermore, even if Appeals were to review

the matter covered by these exceptions,

there is no guarantee that Appeals would

settle or resolve it.

One comment recommended that the

Treasury Department and the IRS should

take a conservative approach to Appeals

exceptions because recent Supreme Court

decisions such as CIC Services, LLC v.

Internal Revenue Service, 593 U.S. 209

(2021) and Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022) defined limits on the IRS’s contentions concerning

1068

its prerogatives under the Administrative

Procedure Act (APA), equitable tolling,

and Tax Court jurisdiction. The Treasury

Department and the IRS disagree with the

premise of this comment that a more conservative approach is needed or that the

referenced cases are relevant in construing

section 7803(e). The exceptions in these

regulations are reasonable and narrowly

tailored to achieve their purposes. None

of the cited cases addressed the meaning of section 7803(e) or the availability

of Appeals review. Instead, these cases

address different issues and have no bearing on these regulations.

Another comment noted that litigation

arguing that the TFA provides taxpayers with access to Appeals is pending in

the Hancock and Rocky Branch cases in

the United States Court of Appeals for

the Eleventh Circuit (Eleventh Circuit),

implying that the regulations should be

withheld due to the litigation. The Treasury Department and the IRS disagree that

these two cases serve to limit or prevent

the publication of regulations. Neither

case is pending any longer. In Hancock,

the U.S. District Court for the Northern

District of Georgia held that the taxpayer

had no absolute right to Appeals consideration under the circumstances. The

Eleventh Circuit upheld the decision on

Anti-Injunction Act grounds (see section

7421 of the Code), and the Supreme Court

denied certiorari. See Hancock County

Land Acquisitions LLC, et. al. v. United

States, 553 F. Supp. 3d 1284, 1294 fn.

9 (N.D. Ga. 2021), aff’d 130 AFTR 2d

2022-5529 (11th Cir. Aug. 17, 2022), cert.

denied 143 S.Ct. 577 (January 9, 2023).

Rocky Branch has facts similar to the

facts in Hancock, and as in Hancock the

Eleventh Circuit upheld the decision on

Anti-Injunction grounds, and the Supreme

Court denied certiorari. See Rocky Branch

Timberlands LLC, et. al. v. United States,

129 AFTR 2d 2022-2137 (N.D. Ga. 2022),

aff’d 132 AFTR 2d 2023-5788 (11th Cir.

Sept. 6, 2023), cert. denied 144 S.Ct. 812

(Feb. 20, 2024).

One comment asserted that some of

the exceptions in the proposed regulations, in particular, Exception 3 (Whistleblower Awards); Exception 4 (Administrative Determinations Made by Other

Agencies); Exception 7 (Denial of Access

Under the Privacy Act); and Exception

Bulletin No. 2025–11

14 (Authority Over the Matter Rests

With Another Office) leave a taxpayer

without any administrative recourse. The

comment suggested an interagency discussion over how and whether administrative appeals processes, whether residing in the IRS Independent Office of

Appeals or outside of the IRS, could be

developed for these types of cases. The

Treasury Department and the IRS agree

with the comment’s premise that the language of section 7803(e) does not cover

Exception 3, Exception 4, and Exception

7, or cover Exception 14 with respect to

referrals to the Department of Justice (Justice Department). See sections I.D.2., 3.,

4., and 8. of this Summary of Comments

and Explanation of Revisions. The disputes involved in Exception 3, Exception

4, and Exception 7 are not Federal tax

controversies, and Appeals lacks settlement authority after a referral of a case

to the Justice Department, as described in

Exception 14. The inclusion of Exception

3, Exception 4, Exception 7, and Exception 14 in the list of proposed exceptions

in proposed §301.7803-2(c) was to clarify

these points. These exceptions to Appeals

consideration all existed before the TFA.

Expanding the role of Appeals as suggested is not administratively feasible and

is outside the scope of these regulations

and section 7803. Furthermore, lack of

consideration by Appeals does not leave

the taxpayer without an administrative

option to resolve a controversy as issues

can always be resolved during an examination. Accordingly, these final regulations do not adopt this comment.

B. Definition of a Federal Tax

Controversy: Proposed §301.7803-2(b)

(2)

Section 7803(e)(3) provides that the

function of Appeals is “to resolve Federal

tax controversies without litigation,” without defining the term “Federal tax controversy.” Proposed §301.7803-2(b)(1),

consistent with the statutory text of section 7803(e)(4), provides that the Appeals

resolution process is generally available to

all taxpayers to resolve Federal tax controversies. Proposed §301.7803-2(b)(2)

defined a Federal tax controversy as a dispute over an administrative determination

with respect to a particular taxpayer made

Bulletin No. 2025–11

by the IRS in administering or enforcing

the internal revenue laws, related Federal

tax statutes, and tax conventions to which

the United States is a party (collectively

referred to as internal revenue laws) that

arises out of the examination, collection,

or execution of other activities concerning

the amount or legality of the taxpayer’s

income, employment, excise, or estate and

gift tax liability; a penalty; or an addition

to tax under the internal revenue laws.

As proposed in the proposed regulations and consistent with the statute, the

definition of a Federal tax controversy is

broad. Although the proposed definition

does not specifically refer to tax-exempt

organizations, it includes an IRS determination that an organization is not tax-exempt because the determination concerns

whether the organization has or will have

a tax liability in some amount. Similarly,

determinations of private foundation or

qualified employee plan status and tax-exempt or other tax-advantaged bond status

are included in the proposed regulations’

definition of a Federal tax controversy

because these determinations concern

whether there is or will be a tax liability

for the foundation; plan, or its participants; or bond issuers or holders. In these

final regulations, the Treasury Department

and the IRS have modified the definition

of a Federal tax controversy to clarify that

such determinations are included in the

definition.

Consistent with section 7803(e), the

definition of Federal tax controversy

means that determinations that Appeals

historically may not have considered may

now be considered by Appeals. These

determinations include the classification

or reclassification of a non-exempt charitable trust under section 4947(a)(1) of the

Code as described in section 509(a)(3) of

the Code; the classification or reclassification of the organization as an exempt operating foundation under section 4940(d)

(2) of the Code; relief from retroactive

revocation or modification of a determination letter under section 7805(b) of the

Code; denials of relief requested under

§301.9100-3 to permit the organization to

be recognized and treated as tax-exempt

effective as of a date earlier than the date

of application; and pursuant to section

7611 of the Code relating to restrictions

on church tax inquiries and examinations,

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revocation of the exempt or church status of an organization that is listed as, or

claims to be, a church.

C. Disputes Not Meeting the Definition

of a Federal Tax Controversy that are

Treated as Federal Tax Controversies:

Proposed §301.7803-2(b)(3)

Proposed §301.7803-2(b)(3) provided

that notwithstanding the definition of a

Federal tax controversy, disputes over

administrative determinations made by

the IRS with respect to a particular person

regarding certain topics listed in proposed

§301.7803-2(b)(3) are treated as Federal

tax controversies.

1. Additional Disputes Treated as

Federal Tax Controversies: Proposed

§301.7803-2(b)(3)(iv) through (vi)

As explained previously in section I.B.

of this Summary of Comments and Explanation of Revisions, the final regulations

clarify that the definition of Federal tax

controversy includes determinations concerning the status of tax-exempt organizations, private foundations, and qualified plans, and the status of tax-exempt

or other tax-advantaged bonds. Accordingly, the final regulations delete these

items from proposed §301.7803-2(b)(3)

(iv) through (vi), because inclusion would

be unnecessary and duplicative. The final

regulations retain the language in proposed §301.7803-2(b)(3)(vi) referring to

arbitrage claims, because such claims do

not involve a tax and therefore do not meet

the definition of a Federal tax controversy,

as defined in §301.7803-2(b)(2). That language is now included in the final regulations and redesignated as §301.7803-2(b)

(3)(iv).

2. FOIA Cases Treated as Federal Tax

Controversies: Proposed §301.78032(b)(3)(ii)

One comment was received on proposed §301.7803-2(b)(3)(ii) relating to a

request under the Freedom of Information

Act (5 U.S.C. 552) (FOIA). This comment recommended removing proposed

§301.7803-2(b)(3)(ii) because FOIA does

not affect the collection of taxes or the liability for taxes of the FOIA requester. The

March 10, 2025

Treasury Department and the IRS do not

adopt this recommendation. Appeals consideration of IRS administrative determinations listed in proposed §301.7803-2(b)

(3), including in proposed §301.7803-2(b)

(3)(ii), is consistent with the historical

practice and functions of Appeals as codified in section 7803(e)(3). See §301.78032(b)(3)(i) through (vi). As a matter of tax

policy and administration, it is important

that FOIA requesters have, consistent with

past practice, the opportunity for consideration by Appeals. The TFA does not

prohibit Appeals from reviewing determinations by the IRS that are not Federal

tax controversies, and retaining the ability

for review by Appeals is beneficial to the

public.

D. Exceptions to Appeals

Consideration: Exception 1 through

Exception 24

The Treasury Department and the IRS

received several comments concerning the

exceptions to Appeals consideration listed

in proposed §301.7803-2(c)(1) through

(24). The exceptions that were subject to

the greatest number of comments were

Exception 19 and Exception 20.

1. Frivolous Position and Penalties

Related to Frivolous Positions and

False Information: Exception 1 and

Exception 2

Two comments were received on

Exception 1 and Exception 2. Exception 1

provides that Appeals consideration is not

available for an administrative determination made by the IRS with respect to a particular taxpayer in which the IRS rejects a

frivolous position. Similarly, Exception 2

provides that Appeals consideration is not

available regarding a penalty assessed by

the IRS with respect to a particular taxpayer for asserting a frivolous position,

for making a frivolous submission, or for

providing false information.

One comment agreed with excepting

from Appeals consideration penalties and

determinations under section 6702 or section 6682 of the Code. A second comment

alleged the exceptions would curtail the

independence of Appeals by eliminating

its right to review determinations of frivolousness because such determinations

March 10, 2025

are not infallible. That comment recommended Appeals should have the option,

but not the obligation, to decide whether

positions have been wrongly labeled frivolous to strike a balance between its independence and the IRS’s need to weed out

frivolous arguments.

The Treasury Department and the IRS

do not adopt this recommendation to give

Appeals the option to consider whether

the IRS has mistakenly labeled a taxpayer’s position as frivolous or wrongly

imposed a frivolous filing penalty. Referring every frivolous argument to Appeals

upon the request of a taxpayer, for

Appeals to then determine whether or not

to grant consideration, would be unnecessarily resource intensive and inconsistent

with the historic, reasonable limitations

on access to Appeals. Section I.C.1. of

the proposed regulations’ Explanation

of Provisions identified similar existing restrictions precluding the consideration of frivolous positions by Appeals

that can be found in §601.106(b) of the

Statement of Procedural Rules (26 CFR

part 601) (regarding appeal procedures

not extending to cases involving solely

the failure or refusal to comply with tax

laws because of frivolous moral, religious,

political, constitutional, conscientious, or

similar grounds), IRM 5.14.3.3(1) (10-202020) (relating to installment agreement

requests made to delay collection action),

and IRM 8.22.5.5.3 (11-08-2013) (relating to frivolous issues). There are sound

policy reasons for these historic limitations. As explained in sections I.C.1. and

2. of the proposed regulations’ Explanation of Provisions, Appeals consideration

of frivolous positions would facilitate

abuse of the tax system by allocating IRS

and Appeals resources to reviewing positions that have already been designated as

frivolous. Penalties imposed under section

6702 or section 6682 are designed to deter

frivolous behavior or improper conduct by

a taxpayer. If Appeals does not consider

the merits of a taxpayer’s frivolous position, it follows that Appeals should not

consider the IRS’s assessment of a penalty

with respect to the taxpayer as well. The

exceptions are consistent with the restriction in section 7803(e)(5)(D) that the

notice and protest procedures under section 7803(e)(5) do not apply to a request if

the issue is frivolous within the meaning

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of section 6702(c). Also, as explained in

section I.A. of this Summary of Comments

and Explanation of Revisions, excluding a

matter from Appeals consideration has no

bearing on its independence.

2. Whistleblower Awards: Exception 3

Two comments were received on

Exception 3, which provides that Appeals

consideration is not available for any

administrative determination made by the

IRS under section 7623 of the Code relating to awards to whistleblowers.

The first comment suggested creating

an interagency administrative review process, and it is discussed in section I.A. of

this Summary of Comments and Explanation of Revisions.

The second comment asserted that the

authority relied upon for Exception 3 is

the proposed definition of Federal tax controversy in the proposed regulations and

alleged that the language of the TFA authorizes Appeals to review whistleblower matters. The Treasury Department and the IRS

do not adopt this comment. The exception

for whistleblower awards under section

7623 in Exception 3 is a historic exception

that has existed before the enactment of the

TFA. For example, section 7623 was one

of the exclusions listed in section 4 of Rev.

Proc. 2016-22, 2016-15 IRB 577 (April

11, 2016), which provides procedures for

Chief Counsel referrals of cases docketed

in the Tax Court to Appeals for settlement.

Its inclusion in the list of proposed exceptions was to clarify the point that section

7803(e) does not cover whistleblower

awards because they do not involve a Federal tax controversy. In a whistleblower

case, the IRS determination involves

whether the whistleblower is entitled to an

award. The whistleblower’s tax liability is

not at issue, and Appeals is not reviewing

a determination by the IRS in its examination, collection, or execution of other activities with respect to the whistleblower’s tax

liability. This award determination is separate and distinct from a determination of

tax liability.

3. Administrative Determinations

Made by Other Agencies: Exception 4

One comment concerned Exception

4, which provides that Appeals consider-

Bulletin No. 2025–11

ation is not available for an administrative

determination issued by an agency other

than the IRS. An example is a determination by the Alcohol and Tobacco Tax and

Trade Bureau (TTB) concerning an excise

tax administered by and within its jurisdiction. The comment suggested creating

an interagency administrative review process, and it is discussed in section I.A. of

this Summary of Comments and Explanation of Revisions.

4. Denials of Access Under the Privacy

Act: Exception 7

One comment was received on Exception 7, which provides that Appeals consideration is not available for any dispute

regarding a determination of the IRS

resulting in denial of access under the Privacy Act (5 U.S.C. 552a(d)(1)) (relating to

access to records) to a particular person.

The comment suggested creating an interagency administrative review process,

and it is discussed in section I.A. of this

Summary of Comments and Explanation

of Revisions.

5. IRS Erroneously Returns or Rejects

an Offer in Compromise: Exception 9

Exception 9 provides that Appeals

consideration is not available regarding

the application of section 7122(f) of the

Code when the IRS erroneously returns

or rejects a taxpayer’s offer in compromise (OIC) submitted under section 7122

as nonprocessable. As explained in section I.C.9. of the proposed regulations’

Explanation of Provisions, Exception 9

includes, for example, the claim that the

IRS’s mistaken rejection or return was

in bad faith. Because the IRS returned or

rejected the offer without making a determination regarding the OIC, there is no

administrative determination made by the

IRS for Appeals to review.

Two comments were received concerning OICs. The first comment recommended that Appeals should be authorized to review when the IRS erroneously

returns or rejects a taxpayer’s OIC as

nonprocessable or no longer processable.

The comment stated that such a return or

rejection is an administratively reviewable

determination, that not allowing Appeals

review is a significant loss of rights for the

Bulletin No. 2025–11

taxpayer including low-income taxpayers in particular, that excepting this issue

from Appeals review circumvents section

7122(f), and that Appeals review would

promote consistency.

The Treasury Department and the IRS

do not adopt this comment. Appeals has

not historically reviewed such returned

or rejected OICs. Exception 9 is narrow,

and it is consistent with the pre-existing

OIC regulations. Section 301.7122-1(f)

(5)(ii) states, in part, that if an OIC is

returned following a “determination”

that the offer was nonprocessable, that

return of the OIC “does not constitute

a rejection of the offer for purposes of

this provision and does not entitle the

taxpayer to appeal the matter to appeals

under the provisions of this paragraph

(f)(5)…” Also, the comment’s recommendation is not consistent with the

function of Appeals, which is to weigh

litigation hazards in applying the law

to specific facts. Reviewing the completeness of an OIC is not a weighing

of hazards. There would be no hazards

of litigation for Appeals to consider or

merits to weigh—either the OIC request

is complete or not complete. Further,

the recommendation, if adopted, would

conflict with the OIC regulations. The

return of an OIC as nonprocessable is

an example of a premature review in

§301.7803-2(d)(1) because the originating IRS office has not completed its

action. It has been a longstanding practice of the IRS to return incomplete or

otherwise nonprocessable OICs that taxpayers fail to perfect. See for example,

sec. 5 of Rev. Proc. 2003-71, 2003-36

I.R.B. 517 (September 8, 2003) (relating

to offers in compromise).

The second comment opined that

Exception 9 is too loosely defined and its

focus should be limited to those taxpayers who are abusing the process such as

by creating undue delay. This comment

is not adopted. Exception 9 is narrowly

limited to a case in which the IRS erroneously returns or rejects an OIC as nonprocessable or no longer processable and the

taxpayer requests Appeals consideration

to assert that the OIC should be deemed

to be accepted under section 7122(f). This

exception is narrowly defined to sufficiently meet the administrative goals of

the rule.

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6. Criminal Prosecution Is Pending

Against Taxpayer: Exception 10

One comment was submitted on Exception 10, which provides that Appeals consideration is not available for a Federal tax

controversy with respect to a taxpayer while

a criminal prosecution or a recommendation

for criminal prosecution is pending against

the taxpayer for a tax-related offense other

than with the concurrence of Chief Counsel

and the Justice Department, as applicable.

The comment recommended that the

final regulations should limit Exception 10

to only cases in which the pending criminal

matter pertains to the same subtitle of the

Code and that Exception 10 not be applied

to matters within a single subtitle that are

completely unrelated to each other and do

not involve common facts or tax transactions. The Treasury Department and the

IRS do not adopt this comment. Exception 10 allows for Appeals consideration

with the concurrence of Chief Counsel

and the Justice Department, as applicable.

Such concurrence is fact-based and case

specific and would accommodate the situations addressed in the comment because

if they were to arise, Chief Counsel and/

or the Justice Department could determine

whether concurrence would be appropriate under the facts and circumstances of

the particular case. Limiting the exception

as suggested in the comment could require

that Appeals consideration be afforded,

when such consideration could interfere

with a pending criminal matter. It would

also be contrary to regulations under 26

CFR part 601, which provide general procedural rules for Appeals functions and

limit Appeals’ authority to act in a case

in which criminal prosecution is recommended, except with the concurrence of

Chief Counsel. See §601.106(a)(2)(vi).

7. IRS’s Automated Process of

Certifying a Seriously Delinquent Tax

Debt: Exception 12

One comment was received on Exception 12, which provides that consideration

by Appeals is not available for the certification or issuance of a notice of certification

of a seriously delinquent Federal tax debt

of a particular taxpayer to the Department

of State (State Department) under section

7345 of the Code (relating to the revoca-

March 10, 2025

tion or denial of a taxpayer’s passport in

the case of serious tax delinquencies).

According to the comment, if Appeals consideration is not available for certification

or issuance of a notice of certification of a

seriously delinquent tax debt, the taxpayer

lacks an important check on the automated

system and does not have an opportunity to

contest whether the statutory requirements

for passport certification have been met

under section 7345(b).

The Treasury Department and the IRS

do not adopt this comment. In the event

of a mistake in the automated process, a

taxpayer has the opportunity to contact

the IRS personnel identified in the notice,

which provides a check on the automated

process. Specifically, the taxpayer receives

Notice CP508C, Notice of certification of

your seriously delinquent Federal tax debt

to the State Department, informing the

taxpayer to contact the IRS at the phone

number in that notice to request reversal

of the certification if the taxpayer contends the certification is erroneous. The

role of Appeals is to review administrative

determinations and to weigh the hazards

of litigation, not to provide a backstop

to an automated process. This exception

existed before the TFA. See Notice 20181, 2018-3 I.R.B. 299 (January 16, 2018).

The comment also alleged Exception

12 violates the Taxpayer Bill of Rights

(TBOR). See https://www.irs.gov/taxpayer-bill-of-rights. The Treasury Department

and the IRS do not adopt this comment;

this exception is consistent with the TBOR.

The TBOR does not grant new enforceable

rights but instead it obligates the IRS to

ensure that its employees are familiar with

and act in accord with rights established

in other Code provisions. See Facebook,

Inc. v. Internal Revenue Service, 2018 WL

2215743, at *13-14 (N.D. Cal. 2018). See

also Hancock County Land Acquisitions

LLC, et. al. v. United States, 553 F. Supp.

3d 1284, 1296 n. 11 (N.D. Ga. 2021). As

discussed in section I.A. of this Summary

of Comments and Explanation of Revisions, section 7803(e)(4) does not confer

an absolute right to Appeals consideration.

8. Authority Over the Matter Rests

With Another Office: Exception 14

One comment was received on Exception 14. Exception 14 provides that con-

March 10, 2025

sideration by Appeals is not available for

any case, determination, matter, decision,

request, or issue with respect to a particular

taxpayer that Appeals lacks the authority

to settle. Proposed §301.7803-2(c)(14)(i)

through (v) provides a non-exclusive list

of examples illustrating this rule, including the example in proposed §301.78032(c)(14)(i) that Appeals does not have

authority to resolve an issue with respect

to a particular taxpayer in a docketed case

after a referral has been made to the Justice Department. The comment suggested

creating an interagency administrative

review process, which is discussed in section I.A. of this Summary of Comments

and Explanation of Revisions. The settlement authority for any litigation under

the jurisdiction of the Justice Department

already vests with the Justice Department.

9. Certain Technical Advice

Memoranda and Technical Advice

From an Associate Office in a Docketed

Case: Exception 15 and Exception 16

One comment was submitted concerning Exception 15 and Exception

16. Exception 15 provides that Appeals

consideration is not available for certain adverse actions related to the initial

or continuing recognition of tax-exempt

status, an entity’s classification as a foundation, the initial or continuing determination of employee plan qualification, or

a determination involving an obligation

and the issuer of an obligation under section 103 of the Code, when the adverse

action is based upon a technical advice

memorandum (TAM) issued by an Associate Office of Chief Counsel (Associate

Office) before an appeal is requested.

Similarly, Exception 16 provides that

Appeals consideration is not available for

any case docketed in the Tax Court if the

notice of deficiency, notice of liability, or

final adverse determination letter is based

upon a TAM issued by an Associate Office

in that case involving an adverse action

described in Exception 15.

The comment asserted that granting

an exception for an appeal in cases of

tax-exempt status in which a TAM has

been issued would unnecessarily narrow

an already small area of appeal rights, and

suggested that it would be beneficial to all

parties to bring the matter to Congress’

1072

attention if this is more a matter in need of

statutory clarification.

The Treasury Department and the IRS

do not adopt this comment, which suggested a change but did not provide a rationale for a change, refute the rationale given

in the proposed regulations, or explain its

conclusion that the two proposed exceptions would unnecessarily narrow Appeals

review. As reflected in the proposed regulations’ Explanation of Provisions in sections I.C.15. and 16., these two exceptions

are supported by reasonable rationales

and are narrowly tailored to achieve their

purposes. If the legal issues and determinations in Exception 15 and Exception 16

are the subject of a TAM from an Associate Office, they are excepted from Appeals

consideration because traditionally Chief

Counsel has exclusive authority over the

dispute administratively or upon litigation. A TAM is advice furnished by an

Associate Office in a memorandum that

responds to any request for assistance on

any technical or procedural legal question

involving the interpretation and proper

application of any legal authority that is

submitted in accordance with an applicable revenue procedure. Chief Counsel’s

decision with respect to the issues related

to the initial or continuing recognition of

tax-exempt status, an entity’s classification as a foundation, the initial or continuing determination of employee plan qualification, or a determination involving an

obligation and the issuer of an obligation

under section 103 is the legal position of

the IRS with respect to the particular facts

and circumstances that are the subject of

the TAM. These exceptions are important

to preserving Chief Counsel’s authority

to resolve these sensitive legal issues. As

noted in section I.C.15. of the proposed

regulations’ Explanation of Provisions,

these exceptions are consistent with historical practice as found in §601.106(a)

(1)(v)(a) and IRM 8.1.1.2.1(1)(c.) (02-102012) (currently found in IRM 8.1.1.3.1

(01-09-2024)). Furthermore, a broad range

of tax-exempt status issues are reviewable

by Appeals under these final regulations.

10. Letter Rulings Issued by Associate

Office: Exception 17

Two comments were received on

Exception 17, which excepts from Appeals

Bulletin No. 2025–11

consideration a decision by an Associate

Office regarding whether to issue a letter ruling or the content of a letter ruling.

However, the subject of the letter ruling

may be considered by Appeals if all other

requirements in §301.7803-2 are met. For

example, if the taxpayer subsequently

files a return taking a position that is contrary to the letter ruling and that position

is examined by the IRS, Appeals could

consider that Federal tax controversy if

all other requirements in §301.7803-2 are

met.

The first comment stated that the provision in Exception 17 helpfully makes

clear that the subject of the letter ruling

may be considered by Appeals if all other

requirements in proposed §301.7803-2

are met, and recommended that this provision should be strengthened to offer an

affirmative safe harbor for appeals for taxpayers who in good faith attempt to fulfill

the terms of §301.7803-2. The Treasury

Department and the IRS do not adopt this

recommendation. The criteria for a “safe

harbor” would not be practical because

meeting some but not all of the requirements would not be sufficient. A taxpayer

must comply with all the requirements

in §301.7803-2 in order to have Appeals

consider the taxpayer’s Federal tax controversy. The second comment on Exception 17 relates to 9100 relief and CAMs

and is discussed in section I.H. of this

Summary of Comments and Explanation

of Revisions.

11. Challenges Alleging that a Statute is

Unconstitutional: Exception 18

Exception 18 provides that Appeals

consideration is not available for any issue

based on a taxpayer’s argument that a statute violates the United States Constitution

unless there is an unreviewable decision

from a Federal court holding that the cited

statute is unconstitutional. Exception 18

does not preclude Appeals from considering a Federal tax controversy based on

arguments other than the constitutionality

of a statute, such as whether the statute

applies to the taxpayer’s facts and circumstances.

Proposed §301.7803-2(c)(18) defined

the phrase unreviewable decision as a decision of a Federal court that can no longer

be appealed to any Federal court because

Bulletin No. 2025–11

all appeals in a case have been exhausted

or the time to appeal has expired and no

appeal was filed, and no further action can

be taken in the case by any Federal court

once there is an unreviewable decision.

An unreviewable decision means an unreviewable decision of any Federal court,

regardless of where the taxpayer resides.

The proposed language “and no further

action can be taken in the case by any

Federal court once there is an unreviewable decision” has been deleted in the final

regulations because it is inaccurate in certain circumstances. For example, even if

a district court grants a motion to dismiss

and the decision is appealed and a reversal of that motion becomes unreviewable,

the case would have further action such

as discovery, dispositive motions, or trial.

See §301.7803-2(c)(18).

The Treasury Department and the IRS

received several comments on Exception 18. One comment agreed with Exception 18 to not allow Appeals to consider

constitutional challenges to Federal tax

statutes unless there is an unreviewable

court decision. It recommended the final

regulations should strengthen the concept

of an “unreviewable decision.” See section

I.D.11.a. of this Summary of Comments

and Explanation of Revisions regarding

the phrase unreviewable decision.

Two comments objected to Exception

18 as inconsistent with the TFA and recommended Appeals should be allowed

to consider constitutional challenges to

Federal tax statutes in the absence of an

unreviewable decision. One objected that

denial of Appeals consideration in Exception 18 strips taxpayers of a statutory

right to Appeals. The other objected that

Exception 18 improperly restricts access

to Appeals and forces taxpayers to sacrifice legal arguments.

The Treasury Department and the IRS

do not adopt these two comments; Exception 18 is consistent with the TFA. As

discussed previously, the TFA does not

provide an absolute statutory right to an

administrative appeal. Rather, the Treasury Department and the IRS have the

statutory authority to provide exceptions

to Appeals consideration. Exception 18 is

one such exception, and it is narrowly tailored and supported with reasonable rationales. As proposed, Exception 18 does not

exclude the constitutionality issue from

1073

Appeals consideration totally but merely

provides that Appeals will not be the first

forum to hear such a challenge because

it is not the appropriate forum without a

final decision from a Federal court. The

Treasury Department and the IRS still

agree with the rationales in section I.C.18.

of the proposed regulations’ Explanation of Provisions, namely that questions

within the IRS regarding the constitutionality of a statute, and positions taken

by the IRS in light of such questions, are

determinations of general applicability

resolved at the highest levels of the Treasury Department and the IRS, in consultation with the Office of Legal Counsel of

the Justice Department, and subject to the

ultimate resolution by a court of relevant

jurisdiction. Moreover, a constitutional

determination should be communicated

and applied consistently to all taxpayers.

It would be inappropriate for Appeals to

consider the constitutionality of a statute

for a particular taxpayer in the absence of

an unreviewable court decision, which is

accessible to all taxpayers and the IRS.

A comment asserted Appeals has historically analyzed legal arguments concerning tax statutes, regulations, and IRS

procedures and so Appeals is capable of

considering these arguments. This comment insinuated that Exception 18, Exception 19, and Exception 20 are premised on

Appeals’ training, skills, or competency to

review legal arguments related to statutes,

regulations, or IRS procedures. The rationales for Exception 18, Exception 19, and

Exception 20 provided in sections I.C.18.,

19., and 20. of the proposed regulations’

Explanation of Provisions do not relate to

Appeals’ training, skills, or competency.

Appeals will continue to review taxpayer

arguments about whether the relevant statutes, regulations, or IRS procedures apply

to the taxpayer’s factual circumstances

just as Appeals has historically done.

A comment construed the definition of

an unreviewable decision to mean an unreviewable decision only from a Federal

court within the circuit in which the taxpayer resides. Neither the proposed regulations, nor these final regulations, require

the unreviewable decision to be in the

taxpayer’s own circuit. Another comment

recommended eliminating Exception 19

and Exception 20 but, in the alternative, it

recommended clarifying the phrase unre-

March 10, 2025

viewable decision. The comment interpreted the phrase as the proposed regulations intended, that is, as an unreviewable

decision of any Federal court, regardless

of where the taxpayer resides, but stated

it was unclear and should be clarified. In

response to these comments, the language

in the proposed regulations, “a decision

of a Federal court,” is clarified in the final

regulations to “a decision of any Federal

court regardless of where the taxpayer

resides.” See §301.7803-2(c)(18).

A comment recommended the final regulations modify the definition of unreviewable decision to provide the decision must

be one that would govern the taxpayer’s

case. In other words, the final regulations

should ensure, according to the comment,

that Appeals access is available only if

there is a relevant decision that would bind

the taxpayer and the Government if the dispute proceeded to litigation. The Treasury

Department and the IRS do not adopt this

comment because it is too limiting. If the

only unreviewable decision that Appeals

should consider is one that is binding on the

IRS and the taxpayer, then it would not be

a matter of Appeals weighing the hazards

of litigation because that decision would

be controlling on the taxpayer. Also, such a

rule would prevent Appeals from weighing

the hazards of litigation by evaluating how

a court in another circuit ruled on the issue.

Like the proposed regulations would have

done, the final regulations allow Appeals to

consider that final decision in considering

the hazards of litigation.

A comment stated that the Treasury

Department and the IRS have no basis

to hold Appeals to a different, and higher

standard than that of the Justice Department or the Solicitor General. The comment’s reference to the Justice Department and Solicitor General appeared to be

a reference to those offices resolving cases

in a manner that Appeals could not under

Exception 19 and Exception 20. The comment appeared to suggest that Appeals

should be able to do the same in fulfilling

its function of considering hazards of litigation.

The Treasury Department and the

IRS do not adopt this comment because

the authority of employees of the Justice

Department and the Solicitor General to

take certain actions in fulfilling their distinct functions and roles does not mean

March 10, 2025

employees of Appeals, like Appeals Officers (AO), can take the same actions. As

explained in section I.D.12. of this Summary of Comments and Explanation of

Revisions, questions regarding the validity

of a regulation, or the procedural validity

of a notice or revenue procedure, involve

determinations of general applicability

resolved at the highest levels of the Treasury Department and the IRS and must be

followed by all IRS employees, including

AOs. Such validity decisions should be

communicated and applied consistently

to all taxpayers. It would be inappropriate

for Appeals to act in contravention with

those decisions in a specific case involving one taxpayer and consider validity

issues in the absence of an unreviewable

court decision.

Three

comments

recommended

Appeals be allowed to consider the hazards of litigation on a validity issue for

a notice or regulation based on a similar

or analogous court decision on a different notice or regulation. The comments

mentioned Green Valley Investors v. Commissioner, 159 T.C. 5 (2022) (Tax Court

setting aside Notice 2017-10, 2017-4 IRB

544 for failure to comply with the Administrative Procedure Act’s (APA’s) notice

and comment requirements) as an example and suggested that if a court decision

invalidated a notice for the same APA reason that a taxpayer is raising to challenge

the validity of other guidance, Appeals

should consider the hazards of litigation

in the taxpayer’s analogous case.

The Treasury Department and the IRS

do not adopt these comments because

it would defeat the purposes of Exception 18, Exception 19, and Exception 20.

Appeals consideration is limited to unreviewable decisions involving the validity of the particular regulation, notice, or

revenue procedure being challenged. As

described previously, in this Summary of

Comments and Explanation of Revisions

and sections I.C.18., 19., and 20. of the

proposed regulations’ Explanation of Provisions, the promulgation of a regulation,

notice, or revenue procedure consists of

multiple levels of review at the highest

levels within the Treasury Department and

the IRS, and taxpayers are not well-served

by confidential decisions by Appeals on a

validity matter that is applicable to only

a single taxpayer. Appeals does not have

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the authority to unilaterally contradict the

decisions made through the regulatory or

subregulatory process. In addition, there

may be other defenses to APA challenges

that the IRS might assert, and therefore

the Tax Court having ruled on an unrelated notice or regulation is not a reason to

provide the carve-out suggested here.

A comment recommended eliminating

the unreviewable decision requirement

and allowing Appeals to consider a judicial decision in weighing the hazards of

a case. Similarly, another comment recommended allowing Appeals to consider

hazards pending the appeal of a decision.

The Treasury Department and the IRS do

not adopt these recommendations because

they would defeat the purpose of the unreviewable decision rule in Exception 18,

Exception 19, and Exception 20. Until

the pending decision becomes unreviewable by a Federal court, as described in

proposed §301.7803-2(c)(18), it would

not be sufficiently final. The finality of

the judicial decision is important because

the judicial branch is charged with independently interpreting Federal statutes

and a Federal court’s decision on the merits may reject the determinations made

by the Treasury Department or the IRS.

There must be a final decision, however,

before Appeals can weigh the hazards of

litigation with respect to these specific

challenges because a lower court decision

that is not final might be overturned on

appeal and the challenges under Exception

18, Exception 19, and Exception 20 relate

to determinations of general applicability resolved at the highest levels of the

Treasury Department and the IRS. Until

a judicial decision is unreviewable and

final, Appeals must respect the decision

of the Secretary and the Commissioner of

Internal Revenue (Commissioner). In that

regard, the final regulations clarify that

the definition of unreviewable decision

includes decision of any Federal court

regardless of where the taxpayer resides.

12. Challenges Alleging that a Treasury

Regulation is Invalid and Challenges

Alleging That a Notice or Revenue

Procedure is Invalid: Exception 19 and

Exception 20

Exception 19 provides that Appeals

consideration is not available for any issue

Bulletin No. 2025–11

based on a taxpayer’s argument that a

Treasury regulation is invalid unless there

is an unreviewable decision from a Federal court invalidating the regulation as a

whole or the provision in the regulation

that the taxpayer is challenging. Exception

20 provides that Appeals consideration is

not available for any issue based on a taxpayer’s argument that a notice or revenue

procedure published in the Internal Revenue Bulletin is procedurally invalid unless

there is an unreviewable decision from a

Federal court holding it to be invalid. As

proposed, Exception 19 and Exception 20

do not preclude Appeals from considering

a Federal tax controversy based on arguments other than the validity of a regulation, or procedural validity of a notice or

revenue procedure, such as whether the

regulation, notice, or revenue procedure

applies to the taxpayer’s facts and circumstances.

The Treasury Department and the IRS

received several comments on Exception 19 and Exception 20. In response to

these comments, the Treasury Department

and the IRS have modified the language in

proposed §301.7803-2(c)(19) and (20), as

explained below.

A comment agreed with the rationales

described in the proposed regulations

for Exception 19 and Exception 20 that

Appeals should not consider these types

of challenges. Another comment made

the same objection it made to Exception

18 that denial of Appeals consideration

in Exception 19 and Exception 20 strips

taxpayers of a statutory right to Appeals.

Another comment made the same objection it made to Exception 18 that Exception 19 and Exception 20 improperly

restrict access to Appeals and forces taxpayers to sacrifice legal arguments.

Like Exception 18, Exception 19 and

Exception 20 are consistent with the TFA,

which does not provide an absolute statutory right to an administrative appeal,

and permits the Treasury Department and

the IRS to provide exceptions. The rationales for Exception 19 and Exception 20

are similar to the rationales for Exception

18, as discussed previously. See sections

I.C.18., 19., and 20. of the proposed regulations’ Explanation of Provisions. Questions regarding the validity of a regulation, or the procedural validity of a notice

or revenue procedure, involve determina-

Bulletin No. 2025–11

tions of general applicability resolved at

the highest levels of the Treasury Department and the IRS and must be followed

by IRS employees, including AOs. Such

validity decisions also should be communicated and applied consistently to all

taxpayers. It therefore would be inappropriate for Appeals to act in contravention

with those institutional decisions in a specific case involving one taxpayer and consider the validity issues in the absence of

an unreviewable court decision.

A comment stated Exception 19 and

Exception 20 are not narrowly tailored

because they encompass any challenge to

almost any level of published guidance.

The Treasury Department and the IRS

do not adopt this comment. Exception 19

and Exception 20 are narrowly tailored

and expressly allow Appeals to consider

arguments other than the validity of a regulation, or procedural validity of a notice

or revenue procedure, such as whether

the regulation, notice, or revenue procedure applies to the taxpayer’s facts and

circumstances. They do not exclude the

validity challenges from Appeals consideration totally but merely provide Appeals

will not be the first forum to hear these

challenges because it is not the appropriate forum for such challenges without an

unreviewable decision of a court. Further,

Exception 20 is even narrower in scope,

applying only to a taxpayer’s argument

that a notice or revenue procedure published in the Internal Revenue Bulletin is

procedurally invalid.

A comment asserted that Exception 19

and Exception 20 did not exist prior to the

TFA and taxpayers historically could at

least raise validity challenges to published

IRS guidance and have those challenges

be considered by Appeals; therefore

Exception 19 and Exception 20 appear

contrary to the TFA’s intent to expand

taxpayer access to Appeals. As explained

previously, Exception 19 and Exception

20 are consistent with the intent of the

TFA to grant the Treasury Department and

the IRS the authority to make exceptions,

which includes the authority to provide

new exceptions that did not exist before

the enactment of the TFA.

A comment asserted that Exception 19

and Exception 20 are contrary to Appeals’

mission or function because they will

force the parties into litigation instead of

1075

providing an opportunity for Appeals to

resolve the case. Another comment similarly stated that Exception 20 tries to cast

the validity determination as a high-level

policy decision, while Appeals’ function is

to hear and settle cases and in doing so it is

not making policy.

The Treasury Department and the IRS

do not adopt these comments. Unlike most

Appeals analyses that weigh litigation hazards in applying the law to specific facts,

Appeals’ potential consideration of the

validity of a regulation or the procedural

validity of a notice or revenue procedure

does not necessarily involve taxpayer-specific facts. As explained in section I.C.20.

of the proposed regulations’ Explanation

of Provisions, the issue of whether an

IRS notice or revenue procedure is procedurally valid involves a determination

regarding whether specific IRS subregulatory guidance complied with administrative law requirements, such as notice and

comment under 5 U.S.C. 553. Whether a

notice or revenue procedure was properly

issued involves facts solely related to the

Treasury Department and the IRS and is

unlike the application of the tax law to a

taxpayer’s specific facts. Furthermore, the

procedurally validity of a notice or revenue procedure is a determination of general applicability resolved at the highest

levels of the Treasury Department and the

IRS and such a determination would not

be appropriate for Appeals to consider in a

specific case involving one taxpayer.

The latter comment regarding Exception 20 did not address the other rationale

in support of Exception 20, namely, that

the issue of whether a notice or revenue

procedure failed to comply with administrative law requirements should be communicated and applied consistently. As

explained in the proposed regulations, an

unreviewable decision of a Federal court

is the appropriate means of accomplishing

this objective because a settlement before

Appeals is specific to a taxpayer and cannot be made available to other taxpayers.

An unreviewable decision makes information accessible to all taxpayers and the

IRS regarding whether a notice or revenue

procedure was prescribed in accordance

with applicable Federal law. A determination by the judicial branch on the merits of the validity challenge may reject

the determinations made by the Treasury

March 10, 2025

Department or the IRS with regard to the

validity of a regulation or the procedural

validity of a notice or revenue procedure,

thereby providing a basis for Appeals to

consider those issues. If no unreviewable

decision has been issued on the validity

challenge, Appeals would not be weighing hazards with respect to that particular

guidance of general applicability because

it has not been successfully challenged in

court yet. Instead, absent an unreviewable

decision, Appeals would be contravening

the decision made at the highest levels of

the Treasury Department and the IRS.

Four comments related to Appeals’

competency to consider validity challenges to a regulation, notice, or revenue procedure. A comment alleged

Appeals has historically analyzed legal

arguments concerning statutes, tax regulations, and IRS procedures. A similar

comment asserted that under Exception

19 and Exception 20 Appeals is unable

to assess the hazards of litigation in a

way that a Chief Counsel trial attorney is

not restricted and that specialists within

Appeals are competent to consider these

arguments when evaluating other hazards

of litigation in the case. A comment stated

that AOs have the training and qualifications to consider all hazards of litigation,

including challenges to the validity of regulations, notices, or revenue procedures,

or if they lack such training and qualifications, the IRS should provide them instead

of preventing Appeals from considering

these issues. Another comment asserted

Appeals is familiar with considering all

arguments made by a taxpayer regarding

the applicability of regulations, notices,

and revenue procedures, and it should be

able to consider in docketed cases credible

arguments about hazards involving validity challenges to a regulation, notice, or

revenue procedure because the APA and

ordinary judicial methods for review of

legislative rules apply to tax cases.

The Treasury Department and the IRS

do not adopt these comments. None of

these exceptions relate to Appeals’ training, skills, or competency. Appeals’ competency does not pertain to the rationales

of Exception 19 and Exception 20 to prevent a decision for one taxpayer regarding

guidance of general applicability, which

has been approved at the highest levels within the Treasury Department and

March 10, 2025

the IRS. Also, like Appeals employees,

Chief Counsel attorneys handling docketed cases in Tax Court must follow regulations, notices, and revenue procedures.

See Chief Counsel Directives Manual

(CCDM) or IRM 32.1.1.2.5(1) (08-022018) (relating to Treasury decisions);

CCDM/IRM 32.2.2.10 (08-11-2004)

(relating to force and effect of specified

publications). Further, Appeals applying

the APA and ordinary judicial methods

to invalidate guidance would lack consistency because Appeals’ action, unlike an

unreviewable decision, is not public and is

applicable to only that taxpayer challenging the guidance. A final court decision is

applicable to, and accessible by, all taxpayers and the IRS, which promotes consistency. Furthermore, a final, unreviewable court decision ensures that Appeals

does not act in contravention of a decision

made at the highest levels of the Treasury

Department and the IRS. In the absence of

an unreviewable decision, Appeals would

not have a court decision with respect to a

particular document to weigh or evaluate

any hazards.

Two comments recommended that if

the Justice Department has conceded that

an unrelated notice was invalid on the

same basis as in the holding by the United

States Court of Appeals for the Sixth Circuit (Sixth Circuit) in Mann Construction Inc. v. United States, 27 F.4th 1138

(6th Cir. 2022) (holding a different notice

invalid because it was required to follow

APA notice and comment procedures and

failed to do so), Appeals should consider

the hazards of litigation on a notice validity issue in a taxpayer’s case involving a

different notice. Similarly, another comment recommended allowing Appeals

to consider the hazards of litigation on a

regulation validity issue in a taxpayer’s

case if the Justice Department has settled

or conceded that an unrelated regulation

was invalid.

The Treasury Department and the

IRS do not adopt these comments for the

same reasons they disagree with the similar comments regarding analogous court

decisions. See section I.D.11.a. of this

Summary of Comments and Explanation

of Revisions. If adopted, these recommendations would defeat the purposes of

Exception 19 and Exception 20. Moreover, there are numerous factors that go

1076

into determining whether a case should

be settled, and a recommendation for a

settlement in one case may not dictate the

same result in another case. There may be

other defenses to APA challenges that the

IRS might assert and therefore the Justice

Department having settled an issue based

on hazards of litigation involving an unrelated notice or regulation is not a reason to

provide the suggested carve-out. Regarding the transaction in the case cited by the

comment, for cases within the Sixth Circuit, the Treasury Department and the IRS

have represented in court that APA matters

conceded by the Government in the Mann

case would not be subject to examination

by the IRS in other listed transaction cases

and therefore such cases would not come

up for Appeals review.

A comment agreed with the policy

expressed in Exception 19, but with a

caveat that “invalidity” should be further

defined. Specifically, the comment asked

whether a change in the law would make

regulations invalid or would fit within the

provision in proposed §301.7803-2(c)(19)

that states Exception 19 would not prevent

a taxpayer from arguing that a regulation

does not apply to their position. Generally,

a regulation would still be valid for prior

tax years before any repeal of or amendment to the statute upon which the regulation is based, and a change in the statute

would have precedent over the regulation

for tax years after the change. These regulations do not prohibit a taxpayer from

arguing whether the statute applies to the

taxpayer’s own facts and circumstances.

In that case, Appeals is considering the

applicability of the statute to the taxpayer

for the relevant period. In response to

this comment, the Treasury Department

and the IRS have revised the language in

Exception 19 and Exception 20 by adding

a reference to the statute to clarify that

Appeals may consider arguments based on

whether a statute applies to the taxpayer’s

facts and circumstances. See §301.78032(c)(19) and (20). Also, for the sake of

clarity, Exception 19 is revised to define

the term invalid. See §301.7803-2(c)(19).

The same comment asked that if regulations overlap in a factual situation

whether reconciliation of such a situation

would involve a determination that a regulation is invalid. As proposed, Exception

19 would still allow Appeals to consider

Bulletin No. 2025–11

whether the regulations apply to a taxpayer’s facts and circumstances, but to the

extent the taxpayer argues that the regulations are invalid, Exception 19 would

preclude Appeals from considering that

validity issue in the absence of an unreviewable decision. The concern raised in

this comment appeared to relate to ensuring consistency. Appeals is not the only

administrative function within the IRS;

there are other offices and other ways

within the IRS to ensure such consistency

short of consideration by Appeals or litigating the issue.

A comment on Exception 20 expressed

some confusion as to the meaning of

the term procedurally invalid and stated

the comment had little concern regarding Exception 20 if its intent is only that

Appeals would not be allowed to consider whether a notice or revenue procedure was properly adopted or promulgated. As explained in section I.C.20. of

the proposed regulations’ Explanation of

Provisions, the term procedurally invalid

in proposed §301.7803-2(c)(20) was

intended to mean challenges to procedural

determinations regarding notices and revenue procedures, including determinations regarding compliance with administrative law requirements. This comment

recommended defining the term procedurally invalid for the sake of clarity. The

Treasury Department and the IRS adopt

this recommendation and have defined the

term to mean “any determination regarding whether a notice or revenue procedure

failed to comply with administrative law

requirements, such as notice and comment

under 5 U.S.C. 553.” See §301.7803-2(c)

(20).

The same comment noted that the

rationale behind Exception 19 is generally

sound but opined that that rationale does

not support Exception 20 because a notice

or revenue procedure does not undergo the

public notice and comment process under

the APA, lacks the same approval process,

and does not carry the same weight or level

of authority of a regulation. The Treasury

Department and the IRS do not adopt this

comment. The same rationale for Exception 19 applies to Exception 20 because

whether a notice or revenue procedure is

procedurally valid is a determination of

general applicability resolved at the highest levels of the Treasury Department and

Bulletin No. 2025–11

the IRS. As discussed previously, such a

determination would not be appropriate

for Appeals to consider in a specific case

involving one taxpayer.

A comment asserted that Appeals has

historically heard arguments about the

application of Treasury regulations and

that the meaning of a regulation, notice,

or revenue procedure is not exclusively

determined by senior officials at the Treasury Department and the IRS. This comment appears to misperceive the scope of

Exception 19 and Exception 20. These

exceptions do not preclude Appeals from

considering a Federal tax controversy

based on arguments other than the validity of a Treasury regulation or procedural

validity of a notice or revenue procedure.

As stated in the text of Exception 19 and

Exception 20, such arguments include

whether the Treasury regulation, notice,

or revenue procedure applies to the taxpayer’s facts and circumstances. Appeals

may resolve the Federal tax controversy

by weighing the likelihood a court would

agree with the position of the taxpayer or

the Government. As for the comment’s

suggestion that guidance is not exclusively determined by senior officials at

the Treasury Department and the IRS, the

final regulations do not adopt this comment. While employees of all levels of the

Treasury Department and the IRS have a

role in promulgating a regulation, notice,

or revenue procedure, such guidance is

reviewed and approved by senior officials in the Treasury Department and the

IRS, including the Assistant Secretary of

the Treasury (Tax Policy) and the Deputy

Commissioner of the IRS as appropriate.

See generally IRM 32.1.1 (November 13,

2019).

Two comments related to consistency

by Appeals. A comment alleged the proposed regulations did not explain why

consistency cannot be accomplished if

Appeals reviews the validity issues. The

same comment argued Exception 19 and

Exception 20 will result in bad policy

because they will make the Appeals process more inconsistent, random, and less

responsive to legal developments, causing additional costs and delay for taxpayers who otherwise could access Appeals

while invalidity arguments work through

the court system. Another comment stated

that Appeals can reach a coordinated posi-

1077

tion on validity challenges and forcing

taxpayers to litigate will decrease uniformity of tax administration because the

IRS can settle or concede issues to avoid

adverse opinions and because years may

pass before there is an unreviewable judicial decision deciding the validity challenge.

Sections I.C.18., 19., and 20. of the

proposed regulations’ Explanation of Provisions, provides the Treasury Department

and the IRS’ position on consistency. Any

determinations with respect to constitutional challenges to a statute, the validity

of a regulation, or procedural validity of

a revenue procedure or notice should be

communicated and applied consistently to

all taxpayers. An unreviewable decision

of a Federal court is the appropriate means

of making information accessible to taxpayers, and the Treasury Department and

the IRS do not agree that Exception 19

and Exception 20 will result in bad policy. A court’s unreviewable decision on

the validity of a regulation, or procedural

validity of a revenue procedure or notice

ensures the judicial branch decides questions of law. The Treasury Department

and the IRS recognize the deliberateness

of the judicial process, but absent that process, Appeals lacks the authority to take

actions contrary to the reasoned decisions

of the Secretary and the Commissioner.

An unreviewable decision is publicly

available, and generally applicable, to

all taxpayers and the IRS, which promotes consistency and uniformity. Having

Appeals weigh hazards of litigation based

on an unreviewable decision that is publicly available and generally applicable

to all taxpayers is sounder policy than a

confidential decision by Appeals on a matter that is applicable to only a single taxpayer. The question of whether Appeals

can reach a coordinated position on validity challenges is irrelevant because under

these exceptions the issues would not be

considered by Appeals in the first place in

the absence of an unreviewable decision.

A comment opined that Appeals should

have the right to determine all hazards of

litigation, including challenges to all levels of IRS published guidance on an unlimited basis and including rationale from all

court opinions because this approach is

consistent with the Treasury Department’s

2019 Policy Statement on the Tax Regu-

March 10, 2025

latory Process (Policy Statement). Policy

Statement on the Tax Regulatory Process

(March 5, 2019), https://home.treasury.

gov/policy-issues/tax-policy/tax-regulatory-process. The Treasury Department

and the IRS do not adopt this comment.

An unreviewable decision is necessary

because it is publicly available to the IRS

and taxpayers and generally applicable,

which promotes consistency and uniformity. The Policy Statement is unrelated to

Exception 19 and Exception 20 because

it concerns the tax regulatory process and

does not address Appeals or its function.

The Policy Statement also explicitly states

it does not create any right or benefit,

either substantive or procedural.

A comment alleged that Exception 19

and Exception 20 undercut the key focus

area for Appeals in fiscal year 2023 to

improve taxpayer experience. To the contrary, Exception 19 and Exception 20 are

consistent with the TFA as it relates to

taxpayer experience. Section 1101 of the

TFA requires the IRS to develop a comprehensive strategy for customer service

and submit the plan to Congress. The

strategy will include best practices of customer service provided in the private sector, including, online services, telephone

call back, and training of employees, and

the strategy must incorporate best practices of businesses to meet reasonable

customer expectations. The strategic plan,

updated guidance, and training materials

must also be available to the public. The

taxpayer experience requirement does

not address whether a taxpayer can have

the taxpayer’s case or issue considered

by Appeals. The strategic plan addresses

topics like communications with the IRS

and taxpayer information services, such as

expanded digital services, guides to taxpayer resources and IRS communication

channels, and outreach and education.

See Publication 5426, Taxpayer First Act

Report to Congress (January 2021).

A comment alleged that Appeals’

consideration of all of a taxpayer’s arguments, including validity challenges, does

not harm the Government but instead

provides the taxpayer and the Government the opportunity to resolve the issue

without litigation. Appeals’ consideration

of validity challenges would harm the

Government because in the absence of an

unreviewable decision, such consideration

March 10, 2025

would undermine the decisions based on

the regulatory and subregulatory guidance

process as described in sections I.C.19.

and I.C.20. of the proposed regulations’

Explanation of Provisions, and result in a

decision by Appeals for one taxpayer on

an issue that is not related to the taxpayer’s specific facts and that would not be

publicly available to other taxpayers and

the IRS.

Another comment recommended that

Appeals should consider APA challenges

as part of its weighing of hazards of litigation. The comment argued that Treasury regulations are not necessarily in

compliance with the APA because they

go through an extensive review process

involving numerous offices within the

Treasury Department and the IRS. The

comment alleged that challenges to a

regulation’s validity is taxpayer specific

because any controversy before Appeals

will involve the IRS enforcing an agency

rule against a taxpayer based on that taxpayer’s facts. Finally, the comment also

suggested that the exceptions would prove

unworkable because final, unreviewable

decisions may be limited to one district

court or circuit.

The Treasury Department and the IRS

do not adopt this comment. As explained

previously in this section and section

I.D.12. of this Summary of Comments

and Explanation of Revisions, the promulgation of a regulation, or publication

of a notice or revenue procedure goes

through multiple levels of review within

the Treasury Department and the IRS. An

individual AO does not have the authority to unilaterally contradict the decisions

made through the regulatory or subregulatory process. Furthermore, as explained

above and in section I.C.20. of the proposed regulations’ Explanation of Provisions, the validity of a regulation or the

procedural validity of a notice of revenue

procedure does not involve taxpayer-specific facts. The validity of a regulation or

the procedurally validity of a notice or

revenue procedure is a determination of

general applicability and does not involve

the application of tax law to a specific

set of facts and circumstances. Lastly, as

explained in section I.D.11. of this Summary of Comments and Explanation of

Revisions, the Treasury Department and

the IRS have clarified the final regulations

1078

to specify that an unreviewable decision

means “a decision of any Federal court

regardless of where the taxpayer resides.”

See §301.7803-2(c)(18).

13. Cases or Issues Designated for

Litigation or Withheld from Appeals:

Exception 21

Four comments were received on

Exception 21, which provides that

Appeals consideration is not available for

any case or issue designated for litigation,

or withheld from Appeals consideration in

a Tax Court case, in accordance with guidance regarding designating or withholding

a case or issue. As proposed, designation

for litigation means that the Federal tax

controversy, comprising an issue or issues

in a case, will not be resolved without a

full concession by the taxpayer or by decision of the court.

A comment proposed that Chief Counsel attorneys should have the flexibility

to refer all docketed cases to Appeals for

resolution. This comment is not adopted.

To the extent this comment invites a Chief

Counsel attorney to disregard the Office

of Chief Counsel’s decision to designate

or withhold a case, trial attorneys do not

operate independently of managerial

direction. In addition, such flexibility

would defeat the exception’s purpose. As

explained in section I.C.21. of the proposed regulations’ Explanation of Provisions, cases are designated for litigation

or withheld in the interest of sound tax

administration to establish judicial precedent, promote consistency, conserve

resources, or reduce litigation costs for the

taxpayers and the IRS. Moreover, section

3.01 of Rev. Proc. 2016-22 provides that

docketed cases are not referred to Appeals

if Appeals issued the notice of deficiency

or made the determination that is the basis

of the Tax Court’s jurisdiction. This exclusion also is set forth in Exception 22, see

§301.7803-2(c)(22), and prevents duplicative review by Appeals.

Two comments stated that Exception

21 provides too much deference to Chief

Counsel and recommended that the exception delete the reference to withheld cases.

The Treasury Department and the IRS

do not adopt these comments. The withholding of cases or issues from Appeals

has been, and will continue to be, limited

Bulletin No. 2025–11

and rare.1 The determination to withhold

a case or issue from Appeals requires a

high-level review, with the decision ultimately resting with the Division Counsel

or a higher-level Chief Counsel official.

See section 3.03 of Rev. Proc. 2016-22.

When Congress enacted the TFA, it was

aware of the historic exceptions to Appeals

consideration, including Chief Counsel’s

authority to designate a case for litigation

or withhold a case from Appeals consideration on the basis of a referral not being

in the interest of sound tax administration

under Rev. Proc. 2016-22. Congress recognized that the Treasury Department and

the IRS retain their historical discretion to

determine whether the resolution of particular types of disputes is appropriate for

Appeals, and the discretion of the IRS to

determine whether a particular Federal tax

controversy is appropriate for the Appeals

resolution process. As proposed, Exception 21 is narrowly tailored, and it does

not encroach on Appeals’ independence

for the reasons discussed previously in

section I.A. of this Summary of Comments

and Explanation of Revisions.

Two comments that objected to Exception 19 and Exception 20, in the alternative, recommended the regulations

provide notice and protest rules for any

taxpayer with a case or issue withheld or

designated for litigation. One of the comments recommended at least requiring

meetings with Chief Counsel executives

to explain the decision. Similarly, another

comment recommended that low-income

taxpayers should receive a written explanation and given an opportunity to object.

The Treasury Department and the

IRS do not adopt these comments. If

Chief Counsel determines that a docketed case or issue will be withheld from

Appeals, Chief Counsel will notify the

taxpayer that the case will not be referred

to Appeals. See section 3.03 of Rev. Proc.

2016-22. Taxpayer cases that are withheld

from Appeals consideration under Exception 21 and meet the requirements of proposed §301.7803-3 already would receive

a written notice detailing the facts of the

case, the reason for the denial, and the

opportunity to protest the denial pursuant

to section 7803(e)(5). As discussed in section 2 of this Summary of Comments and

Explanation of Revisions, section 7803(e)

(5) only requires notice and denial protest

rights be given to a taxpayer in receipt of

a notice of deficiency. Consistent with

the statute, these final regulations do not

extend notice and denial protest rights to

taxpayers who did not receive a notice

of deficiency. With respect to situations

involving low-income taxpayers, as

described by the comment, such taxpayers would similarly receive an explanation

and opportunity to protest under proposed

§301.7803-3 after they receive a notice of

deficiency.

Another comment alleged that the designation of cases or issues for litigation is

not rare and prevents sound tax administration in thousands of cases because Appeals

could arrive at the correct amount of tax or

a deduction and the IRS’s approach of settling a designated case only if taxpayers

concede all issues, including all penalties,

has created a backlog in the IRS and the

court. The comment is factually incorrect

because designation of a case or issue is

rare. The IRS has designated fewer than

10 cases since 2013.

A comment recommended the IRS

make public a list of all designated cases

docketed in Tax Court and all designated

issues and publish the total number of taxpayers affected by cases or issues being

designated for litigation. The Treasury

Department and the IRS do not adopt this

comment. The comment raises potential

disclosure concerns under section 6103 of

the Code relating to the prohibition of the

disclosure of return information. Even if

such disclosure was not prohibited by law,

it is beyond the scope of these regulations.

14. Appeals Consideration is a

Prerequisite to Jurisdiction of the Tax

Court: Exception 23

One comment was received on Exception 23. Exception 23 provides that

Appeals consideration is not available

for a case in which timely consideration

by Appeals must be requested before a

petition is filed in the Tax Court because

exhaustion of administrative review,

including Appeals consideration, is a prerequisite for the Tax Court’s jurisdiction,

and the taxpayer failed to timely request

Appeals consideration.

The comment opined the heading for

this exception in the proposed regulations’

preamble (that is, Appeals Consideration

is a Prerequisite to the Jurisdiction of

Tax Court) did not mention whether there

could be exceptions to the requirement

to exhaust administrative remedies. The

comment recommended adding language

to the regulation’s text to explicitly indicate that Exception 23 does not apply

when there is an exception to the requirement to exhaust administrative remedies

as provided in a statute or other guidance.

The Treasury Department and the IRS do

not adopt this recommendation. The text

of the regulation adequately covers the

comment’s point, as the text makes clear

that this exception applies only when

timely Appeals consideration itself is a

prerequisite to the Tax Court’s jurisdiction.

E. Procedural and Timing

Requirements are Followed: Proposed

§301.7803-2(e)

One comment was received on proposed §301.7803-2(e), which provides

the procedural and timing requirements

that a taxpayer must meet before Appeals

may consider the taxpayer’s Federal

tax controversy. Specifically, proposed

§301.7803-2(e) provides that a request

for Appeals consideration must be submitted in the time and manner prescribed

in applicable forms, instructions, or other

administrative guidance and that all procedural requirements must be complied

with for Appeals to consider a Federal tax

controversy.

The comment recommended that the

final regulations explicitly direct the IRS

to list specific requirements that the IRS

must meet for accessibility, to explain the

processes in a way that is easy to under-

Since the TFA was enacted on July 1, 2019, the IRS has denied three requests for referral to Appeals, as described in section 7803(e)(5)(A), on the basis of sound tax administration. Because

section 7803(e)(5)(A) is limited to denials of a request for referral to Appeals by those taxpayers in receipt of a notice of deficiency authorized under section 6212, fewer than 130 cases not

subject to section 7803(e)(5)(A) were otherwise withheld from Appeals review during that period by Division Counsel under section 3.03 of Rev. Proc. 2016-22. For example, these cases

include cases involving partnerships in which a final partnership administrative adjustment was issued instead of a notice of deficiency.

1

Bulletin No. 2025–11

1079

March 10, 2025

stand for the unrepresented taxpayer

and feasible for all taxpayers, including

low-income taxpayers who may face

financial and other barriers to following

traditional mailing processes. The comment suggested including notices with

appeal rights delivered by mail and to a

taxpayer’s online IRS account if they have

one; deadlines to file an appeal should be

clearly and accurately stated in plain language on the first page of a notice that has

an appeal right; the IRS should have an

easy-to-understand fill-in form that contains all required elements to request an

appeal, and the form should be available

for every level of appeal; each notice from

the IRS that carries an appeal right should

enclose a copy of the simple form along

with an envelope and instructions for certified mailing to prove the mailing date;

and each notice from the IRS that carries

an appeal right should also include both a

simple URL link and QR code link to the

online simplified form, the form should be

easily fillable on a computer or a smartphone and be available in multiple languages, and the taxpayer should be able to

submit this form online to meet the deadline for the Appeals request.

The Treasury Department and the

IRS do not adopt this comment’s recommendations because they are outside

the scope of these final regulations. The

comment is better suited to be addressed

in the specific correspondence sent from

the IRS to taxpayers. Promoting taxpayer

communication, understanding, and efficiency, including in accessing Appeals,

are important topics that the IRS will continue to look at as it improves and develops its systems and procedures. In that

regard, the IRS will carefully consider the

suggestions in this comment as part of that

process.

F. One Opportunity for Consideration

by Appeals: Proposed §301.7803-2(f)

One comment was received with a

suggestion relating to the general rule of

one opportunity for Appeals consideration

in proposed §301.7803-2(f)(1). Another

comment was received on the exceptions

to that general rule. Those comments are

addressed in this section I.F. of the Summary of Comments and Explanation of

Revisions.

March 10, 2025

1. In general. Proposed §301.7803-2(f)

(1)

Proposed §301.7803-2(f)(1) provides

that if a Federal tax controversy is eligible for consideration by Appeals and the

procedural and timing requirements are

followed, a taxpayer generally has one

opportunity for Appeals to consider such

matter or issue in the same case for the

same period or in any type of future case

for the same period. The comment on proposed §301.7803-2(f)(1) recommended

that the final regulations should explicitly

include the situation in which the taxpayer and the Government have run out

of time for Appeals consideration prior to

the expiration of the statute of limitations

and a notice of deficiency being issued,

thereby confirming that a taxpayer’s case

can be heard by Appeals either before

or after a case is docketed (although not

both).

The Treasury Department and the

IRS agree that if there is insufficient

time remaining on the limitations period

for Appeals consideration, a taxpayer in

receipt of a notice of deficiency would

have the opportunity to have Appeals consider the taxpayer’s case after the taxpayer

has filed a petition with the Tax Court and

the case is docketed, assuming the issue

being considered by Appeals is not subject to an exception described in the final

regulations. An example has been added

to §301.7803-2(e) to illustrate this point,

which is a more appropriate place in the

regulations for this addition.

2. Exceptions. Proposed §301.7803-2(f)

(1) and (2)

There are several exceptions to the

general rule in proposed §301.7803-2(f)

(1). Proposed §301.7803-2(f)(1) provides

an exception to the proposed general rule

in a case in which the Tax Court remands

a collection due process (CDP) case for

reconsideration. Proposed §301.78032(f)(2) provides an exception for a taxpayer that participated in an Appeals

early consideration program but did not

reach an agreement with Appeals. Proposed §301.7803-2(f)(2) also provides an

exception to the general rule in proposed

§301.7803-2(f)(1) for taxpayers who provide new information to the IRS and who

1080

meet the conditions and requirements for

audit reconsideration or for reconsideration of liability issues previously considered by Appeals. Appeals may consider

the new information.

A comment recommended clarifying

in proposed §301.7803-2(f)(2) that a new

development in the law is “new information” that would allow Appeals reconsideration of the same matter. The Treasury

Department and the IRS recognize that

the original phrasing in the paragraph

was unclear. For purposes of these final

regulations, new information is intended

to mean additional facts that the taxpayer

did not provide during the original examination. It is not intended to mean a new

development in the law. Additional language has been added to §301.7803-2(f)

(2) in the final regulations to clarify the

intended meaning.

G. Special Rules. Proposed §301.78032(g)

A comment suggested that Chief Counsel delaying Appeals review of a case was

tantamount to a denial of Appeals review.

The Treasury Department and the IRS

disagree. As explained in section I.H.2.

of the proposed regulations’ Explanation

of Provisions regarding the special rule in

proposed §301.7803-2(g), Chief Counsel

may delay forwarding a docketed case

to Appeals when Chief Counsel anticipates filing a dispositive motion such as

a motion for summary or partial summary

judgment, or a motion to dismiss for lack

of jurisdiction, in which case Chief Counsel will retain jurisdiction over the case

until the Tax Court rules on the motion.

This flexibility to respond to the needs

of specific Federal tax controversies promotes the efficient disposition of a taxpayer’s case, including developing or narrowing the issues in dispute. The taxpayer will

continue to be eligible for consideration

by Appeals if the litigation continues and

all other requirements in §301.7803-2 are

met. Accordingly, these final regulations

do not adopt this comment.

H. Section 9100 Relief and Change of

Accounting Method

The list of exclusions in proposed

§301.7803-2(c) does not include certain

Bulletin No. 2025–11

exclusions from Appeals consideration

currently provided in the IRM relating

to requests for 9100 relief and CAMs.

In the proposed regulations, the Treasury

Department and the IRS requested comments on whether these items should be

included in the list of exclusions. Specifically, comments were requested on

whether the binary nature of decisions by

an Associate Office regarding 9100 relief

or CAM requests makes these decisions

unsuitable for Appeals review; whether

a different review standard should apply

if Appeals considers the decisions; and

what impact would Appeals review of the

decisions have on later years that are not

before Appeals.

In response, the Treasury Department

and the IRS received four comments.

One comment in support of adopting an

Appeals exception recommended that

Exception 17 relating to letter rulings

issued by an Associate Office be finalized as proposed so that the regulations

ensure, consistent with the historical IRS

position, that Appeals not be permitted

to consider an Associate Office decision

concerning whether to issue 9100 relief or

CAM letter rulings. See section I.D.10. of

this Summary of Comments and Explanation of Revisions regarding Exception 17.

According to this comment, letter ruling

decisions regarding 9100 relief and CAMs

should not be considered by Appeals for

the reasons described in the proposed regulations that apply to other types of letter

rulings. In particular, a letter ruling interprets internal revenue laws and applies

them to the taxpayer’s specific set of facts.

A voluntary request for a letter ruling is

not an administrative determination that is

a part of the IRS’s compliance function.

A taxpayer receiving a letter ruling is not

obligated to file a return consistent with

that letter ruling. Generally, the program

is designed instead to provide taxpayers

with information regarding whether the

IRS will accept a position to be taken on

the taxpayer’s return. For letter rulings

responding to a taxpayer’s request for a

CAM, the letter ruling grants or denies

consent under section 446(e) of the Code.

The Treasury Department and the IRS

adopt this recommendation for those reasons and added language to clarify this

point that Exception 17 includes Associate

Office decisions on 9100 relief requests

Bulletin No. 2025–11

and CAM requests. See §301.7803-2(c)

(17). While Appeals cannot consider an

Associate Office’s decision on whether

to issue a letter ruling or the content of a

letter ruling, Exception 17 recognizes that

Appeals may consider the subject of the

letter ruling if all other requirements in

§301.7803-2 are met. For example, if an

Associate Office issues an adverse letter

ruling to a taxpayer, the taxpayer cannot

immediately appeal the issuance of the

adverse letter ruling. If the taxpayer later

files a return taking a position that is contrary to the letter ruling and that position

is examined by the IRS, Appeals can consider that Federal tax controversy if all

other requirements in §301.7803-2 are

met.

The comment also recommended a

separate exclusion for Appeals consideration of decisions by an Associate Office

regarding 9100 relief or CAM requests.

The Treasury Department and the IRS do

not adopt this recommendation. As previously described, if a taxpayer files a tax

return contrary to the Associate Office’s

decision and a Federal tax controversy

arises that involves the subject of the

adverse decision, Appeals could consider

the subject of that Associate Office’s decision in the dispute if all other requirements

in §301.7803-2 are met.

Another comment suggested the final

regulations should empower Appeals to

consider an Associate Office’s decisions

regarding 9100 relief or CAM requests

because Appeals consideration would protect taxpayer rights. Two comments suggested the final regulations should allow

Appeals to consider such cases because

judicial review is costly and time consuming and Appeals consideration would

reduce litigation. The Treasury Department and the IRS agree Appeals review

as described in the preceding paragraph is

consistent with the function of Appeals to

resolve Federal tax controversies without

litigation and is consistent with the provision that such resolution be generally

available to all taxpayers. A comment

suggested the final regulations should

empower Appeals to consider such cases

because Appeals consideration would

promote impartial resolution. The Treasury Department and the IRS disagree

with this reasoning because, as explained

previously in this Summary of Comments

1081

and Explanation of Revisions, impartiality presupposes that the matter is being

considered by Appeals in the first place.

Once a Federal tax controversy is referred

to Appeals, Appeals will consider the hazards of litigation while impartially considering the positions of the taxpayer and of

the IRS.

A comment asserted accounting

method issues do not have to be viewed as

binary and noted Appeals already reviews

adjustments initiated by the IRS through

an examination. According to this comment, Appeals should review accounting

method issues consistently regardless

of whether the originating function was

through an IRS examination or an Associate Office. Similarly, another comment

asserted that Appeals consideration of a

CAM letter ruling denial that was issued

on the basis that the requested change

would not clearly reflect income or would

otherwise not be in the interest of sound

tax administration would allow Appeals

review of the substantive positions in

these cases, similar to Appeals review of

the substantive issue in cases arising in

examination or a docketed case, and that

foreclosing Appeals consideration would

create inconsistencies and be counterproductive to tax administration. The Treasury Department and the IRS agree that

Appeals should have the ability to review

accounting method issues arising in an

examination, even when the accounting method issue relates to an Associate

Office’s denial of a CAM letter ruling

request.

Another comment suggested Appeals

consideration of an Associate Office’s

decisions regarding 9100 relief or CAM

requests would promote consistent application of laws and public confidence in the

IRS. Appeals consideration of an Associate Office’s decisions regarding 9100

relief or CAM requests would promote

public confidence in the IRS and is consistent with the purpose of the TFA.

A comment asserted the ultimate decision may be binary, in that an Associate

Office either does or does not permit 9100

relief or a CAM. According to this comment, the binary nature of decisions on

these matters should not automatically

exclude them from Appeals review. To

the extent an Associate Office’s decision

regarding a 9100 relief or CAM request

March 10, 2025

is viewed as a binary decision, the Treasury Department and the IRS agree with

the comment’s general premise that the

binary nature of such decisions would not

automatically exclude them from Appeals

review. If a taxpayer files a tax return

contrary to the Associate Office’s decision and a Federal tax controversy arises

that involves the subject of the adverse

decision, Appeals may consider the subject of that Associate Office’s decision

in the dispute if all other requirements in

§301.7803-2 are met.

The IRM currently provides that

Appeals will not partially or fully concede an issue in a case in which an

Associate Office’s decision would be

reviewed by a court using an abuse of

discretion standard. One comment urged

that if Appeals is permitted to consider

a decision by an Associate Office that

denied a 9100 relief or a CAM request,

then the final regulations should apply

a different standard of review than the

abuse of discretion standard used for

other administrative determinations. The

comment recommended that Appeals

should only be permitted to make concessions if it determines there is a significant risk that, if litigated, a court would

find that the IRS abused its discretion in

issuing an adverse letter ruling. Another

comment observed that a CAM request

may be denied by an Associate Office

for many different reasons, including,

for example, on the basis of substantive issues or due to procedural issues

when the Associate Office determines

that the taxpayer has not complied with

all the procedural terms and conditions,

such as filing requirements and deadlines. The comment urged the Treasury

Department and the IRS to look through

the superficial similarities of these denials to the underlying legal issues when

determining whether Appeals review is

warranted. The Treasury Department and

the IRS agree that an Associate Office

may issue a denial letter on a 9100 relief

request or CAM request for a variety of

different reasons, which are generally

expressed in the applicable statute, regulations, or other guidance published in

the Internal Revenue Bulletin. A decision

to deny such a request, whether on a procedural or a substantive basis, is based

on all the facts and circumstances. The

March 10, 2025

final regulations do not provide a standard of review because it is outside the

scope of these regulations, and the Treasury Department and the IRS expect the

existing review standard would be used

by Appeals for such cases.

A comment stated Appeals may need

to enter into closing agreements with taxpayers to ensure that future taxable years

are consistent with the request that was

denied by the Associate Office, but that

closing agreements would be more difficult for the taxpayer and the Government

to reverse in future years compared to a

letter ruling issued by an Associate Office.

These regulations do not alter the authority delegated to the Associate Offices

over 9100 relief or CAM requests or to

restrict Appeals’ ability to use its existing

settlement authority to review or settle

such cases. See, e.g., Rev. Proc. 2002-18,

2002-1 C.B. 678 (regarding procedures

relating to the settling of method change

issues). Likewise, these regulations do not

alter the IRS’s authority to review these

issues during an examination of a taxpayer’s Federal income tax return.

I. Miscellaneous Recommendations

Regarding Proposed §301.7803-2

A comment expressed concern that

the proposed regulations could make the

Appeals review process more confusing and stressful for taxpayers, including

low-income taxpayers, but did not specify

how or why this could happen. The Treasury Department and the IRS disagree with

this comment. The procedural requirements, timing requirements, and almost

all of the exceptions to consideration by

Appeals already exist in previously established guidance regarding Appeals. As in

the past, the proposed exceptions are limited in number and the vast majority of

taxpayers, including low-income taxpayers, would have the opportunity to have

Appeals consider their Federal tax controversies.

The same comment suggested considering the impact of the regulations on

closed cases in Appeals. To the extent this

comment is suggesting these regulations

should cover procedures for reopening

a closed case, that topic is beyond the

scope of these regulations. Procedures for

reopening closed Appeals cases already

1082

exist in other guidance. See IRM 8.6.1.7

(09-25-2019).

A comment suggested that the proposed regulations overlap with §601.106.

To the extent that the Treasury Department

and the IRS are not repealing or revising

§601.106, the comment recommended

Treasury explicitly harmonize areas of

overlap and consolidate all Appeals regulations into adjacent sections of the regulations to prevent ambiguity and controversy. In the alternative, even if no actual

or perceived conflict exists, the comment

recommended adding cross-references in

§301.7803-2 to avoid creating a trap for

the unwary.

The Treasury Department and the IRS

do not agree with this comment and do not

adopt these recommendations. The Statement of Procedural Rules, 26 CFR part

601, are procedural rules governing internal IRS affairs. Those rules do not concern

the substantive resolution of Federal tax

controversies by Appeals.

Two comments recommended additional funding, including funding for

Appeals in order to more effectively and

fairly serve taxpayers, and limit the need

for the exceptions in these regulations.

The recommendation addresses operational matters of Appeals and is beyond

the scope of these regulations because it

does not address the proposed regulations

or recommend any changes.

One comment addressed the Interim

Guidance (IG) Memorandum (Control

Number AP-08-0922-0011) that Appeals

issued on September 14, 2022, relating

to validity challenges to regulations and

relating to procedural validity challenges

to notices or revenue procedures. This

comment alleged that the IRS has already

begun to make the substance of Exception 19 and Exception 20 effective even

though, as proposed in the proposed regulations, they would not take effect until

30 days after the publication of a final

regulation. The comment recommended

that Appeals pause using these exceptions

before the regulations are finalized.

The Treasury Department and the IRS

decline to adopt the comment’s recommendation because it is outside the scope

of these regulations. The IG Memorandum

provides interim guidance by Appeals to

AOs and does not have bearing on these

final regulations.

Bulletin No. 2025–11

II. Notice and Protest of Denial

Procedures Following Issuance of

a Notice of Deficiency: Proposed

§301.7803-3

Two comments were received on proposed §301.7803-3, which implements the

notice and protest procedures of section

7803(e)(5). As proposed, these procedures

apply if any taxpayer requests Appeals

consideration of a matter or issue, the

request is denied, and the taxpayer meets

the requirements of proposed §301.78033(a)(1) through (5). Proposed §301.78033(a)(1) adopts the statutory language

in section 7803(e)(5)(A), which refers

to any taxpayer in receipt of a notice of

deficiency authorized under section 6212

(relating to notice of deficiency).

The comments recommended that the

notice and protest procedures should not

be limited to taxpayers in receipt of a

notice of deficiency. The Treasury Department and the IRS do not adopt this recommendation because it is contrary to the

TFA. Section 7803(e)(5) does not grant

the right to notice and protest a denial

to all taxpayers. That statute requires the

provision of such rights when the taxpayer

is in receipt of a notice of deficiency, the

taxpayer requests referral to Appeals, and

that request is denied. Thus, a taxpayer

would not be entitled to notice and protest

procedures under section 7803(e)(5) and

proposed §301.7803-3 in the absence of a

notice of deficiency.

A comment described the notice

and protest procedures in proposed

§301.7803-3 as not applying when a

taxpayer is ineligible for Appeals consideration because one of the exceptions

listed in proposed §301.7803-2(c) applies

to the taxpayer. This description is incorrect. As written and intended, proposed

§301.7803-3 does not except such cases

or issues from the notice and protest procedures. Thus, that one of the exceptions

listed in proposed §301.7803-2(c) applies

to a taxpayer does not prevent these procedures from applying if the taxpayer otherwise meets the requirements of proposed

§301.7803-3(a)(1) through (5), although it

may be a reason why the request for referral to Appeals was denied. In response to

the comments, the final regulations make

clarifying edits to the text of §301.78033(a).

Bulletin No. 2025–11

III. Comments on Topics that Are

Outside the Scope of these Regulations

Although the Explanation of Provisions

of the proposed regulations discussed other

new sections of the TFA, such as section

7803(e)(6) relating to Appeals’ authority

to obtain legal assistance and advice from

Chief Counsel attorneys with regard to

cases pending at Appeals, the proposed

regulations stated that sections 7803(e)

(4) and 7803(e)(5) were the primary focus

of the guidance provided in the proposed

regulations. Some comments received in

response to the proposed regulations concerned topics and issues that are outside

the scope of these final regulations.

One such comment recommended that

these final regulations include the assurances currently provided in subregulatory

guidance regarding the ex parte rules; limitations on the IRS examination function

or Appeals raising new issues; conference rights; or the longstanding policies

regarding the reopening of mutual concession cases. A comment was offered on

access to administrative files under new

section 7803(e)(7). Another comment

recommended that the Treasury Department should adopt the National Taxpayer

Advocate’s proposal that a taxpayer has

the right to a conference with Appeals that

does not include personnel from Chief

Counsel or the IRS examination function

unless the taxpayer specifically consents

to the participation of those parties in the

conference, and another comment recommended that neither Appeals nor any IRS

personnel involved in the Appeals conference should offer “nuisance” settlement

offers of zero or small numbers.

The Treasury Department and the IRS

do not adopt these comments because

their topics are outside the scope of sections 7803(e)(4) and 7803(e)(5), which

were the primary focus of the proposed

regulations. Section 7803(e)(4) provides

for the general availability of Appeals

consideration for taxpayers and section

7803(e)(5) provides for the limitation on

designation of cases as not eligible for

referral to Appeals. These comments do

not address those areas and are already

contained in other existing guidance. The

IRS will consider and evaluate the comments for inclusion in the IRM or other

guidance, as appropriate.

1083

Special Analyses

I. Regulatory Planning and Review

Pursuant to the Memorandum of

Agreement, Review of Treasury Regulations under Executive Order 12866 (June

9, 2023), tax regulatory actions issued by

the IRS are not subject to the requirements

of section 6 of Executive Order 12866, as

amended. Therefore, a regulatory impact

assessment is not required.

II. Regulatory Flexibility Act

In accordance with the Regulatory

Flexibility Act (5 U.S.C. 601 et seq.) it is

hereby certified that these regulations will

not have a significant economic impact on

a substantial number of small entities.

These regulations affect any person

who would like to have a Federal tax controversy considered by Appeals, including

any small entity. Because any small entity

could potentially request consideration by

Appeals, these regulations are expected to

affect a substantial number of small entities. However, the IRS has determined

that the economic impact on small entities

affected by these regulations would not be

significant.

The regulations provide procedural and

timing requirements for consideration by

Appeals. The regulations also establish

the general availability of consideration by

Appeals and exceptions to that consideration. The procedural requirements, timing

requirements, and the vast majority of the

exceptions to eligibility for consideration

by Appeals already exist in previously

established guidance regarding Appeals.

The regulations also provide rules regarding certain circumstances in which a written explanation will be provided regarding why Appeals consideration was not

provided. None of the regulations affect

entities’ substantive tax liability nor do

they affect the process that Appeals follows when it considers an eligible Federal

tax controversy. Any significant economic

impact on small entities will result from

the application of the substantive tax provisions and will not be a result of these final

regulations. Accordingly, the Secretary

hereby certifies that these regulations will

not have a significant economic impact on

a substantial number of small entities.

March 10, 2025

Pursuant to section 7805(f) of the

Code, the notice of proposed rulemaking

was submitted to the Chief Counsel for the

Office of Advocacy of the Small Business

Administration for comment on its impact

on small business, and no comments were

received.

in this document are published in the

Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the

Superintendent of Documents, U.S. Government Publishing Office, Washington,

DC 20402, or by visiting the IRS website

at https://www.irs.gov.

III. Unfunded Mandates Reform Act

Drafting Information

Section 202 of the Unfunded Mandates

Reform Act of 1995 (UMRA) requires

that agencies assess anticipated costs and

benefits and take certain other actions

before issuing a final rule that includes

any Federal mandate that may result in

expenditures in any one year by a State,

local, or Indian tribal government, in the

aggregate, or by the private sector, of $100

million (updated annually for inflation).

These final regulations do not include any

Federal mandate that may result in expenditures by State, local, or Indian tribal

governments, or by the private sector in

excess of that threshold.

The principal author of these regulations is Joshua Hershman of the Office of

the Associate Chief Counsel (Procedure

and Administration). Other personnel

from the Treasury Department and the

IRS participated in their development.

IV. Executive Order 13132: Federalism

Executive Order 13132 (Federalism)

prohibits an agency from publishing any

rule that has federalism implications if

the rule either imposes substantial, direct

compliance costs on State and local governments, and is not required by statute,

or preempts State law, unless the agency

meets the consultation and funding

requirements of section 6 of the Executive

order. These final regulations do not have

federalism implications and do not impose

substantial direct compliance costs on

State and local governments or preempt

State law within the meaning of the Executive order.

V. Congressional Review Act

Pursuant to the Congressional Review

Act (5 U.S.C. 801 et seq.), the Office of

Information and Regulatory Affairs designated this rule as not a major rule as

defined by 5 U.S.C. 804(2).

Statement of Availability of IRS

Documents

IRS Revenue Procedures, Revenue

Rulings notices, and other guidance cited

March 10, 2025

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes,

Excise taxes, Gift taxes, Income taxes,

Penalties, Reporting and recordkeeping

requirements.

Adoption of Amendments to the

Regulations

Accordingly, the Treasury Department

and the IRS amend 26 CFR part 301 as

follows:

PART 301—PROCEDURE AND

ADMINISTRATION

Paragraph 1. The authority citation

for part 301 is amended by adding entries

in numerical order for §§301.7803-2 and

301.7803-3 to read, in part, as follows:

Authority: 26 U.S.C. 7805.

*****

Section 301.7803-2 is also issued under

26 U.S.C. 7803(e).

Section 301.7803-3 is also issued under

26 U.S.C. 7803(e).

*****

Par. 2. Sections 301.7803-2 and

301.7803-3 are added to read as follows:

§301.7803-2 Internal Revenue Service

Independent Office of Appeals

resolution of Federal tax controversies

without litigation.

(a) Function of the Internal Revenue

Service Independent Office of Appeals.

The Internal Revenue Service Independent

Office of Appeals (Appeals) resolves Fed-

1084

eral tax controversies without litigation on

a basis that is fair and impartial to both the

Government and the taxpayer, promotes

a consistent application and interpretation of, and voluntary compliance with,

the Federal tax laws, and enhances public

confidence in the integrity and efficiency

of the Internal Revenue Service (IRS).

(b) Consideration of a Federal tax controversy by Appeals—(1) In general. The

Appeals resolution process is generally

available to all taxpayers to resolve Federal tax controversies.

(2) Definition of Federal tax controversy. For purposes of this section, a Federal tax controversy is defined as a dispute

over an administrative determination with

respect to a particular taxpayer made by

the IRS in administering or enforcing the

internal revenue laws, related Federal tax

statutes, and tax conventions to which

the United States is a party (collectively

referred to as internal revenue laws) that

arises out of the examination, collection,

or execution of other activities concerning

the amount or legality of the taxpayer’s

income, employment, excise, or estate

and gift tax liability; a penalty; or an addition to tax under the internal revenue laws.

For purposes of this section, a Federal tax

controversy includes, for example, a dispute over an administrative determination

made by the IRS concerning a taxpayer’s

proposed deficiency, a taxpayer’s claim

for credit or refund, the tax-exempt nature

of a particular organization, private foundation, or qualified employee plan under

the internal revenue laws, or the status of a

tax-exempt or other tax-advantaged bond.

(3) Other administrative determinations treated as Federal tax controversies.

Notwithstanding the definition of a Federal tax controversy in paragraph (b)(2)

of this section, disputes over administrative determinations made by the IRS with

respect to a particular person regarding the

following topics are treated as Federal tax

controversies for purposes of this section:

(i) Liabilities and penalties administered by the IRS that are outside the Internal Revenue Code (Code), such as a liability or penalty pursuant to 31 U.S.C. 5321

(relating to Report of Foreign Bank and

Financial Accounts or Bank Secrecy Act

civil penalties);

(ii) A request under the Freedom of

Information Act (5 U.S.C. 552);

Bulletin No. 2025–11

(iii) Application to become, or the

sanction of, an Electronic Return Originator or Authorized IRS e-file Provider;

(iv) An IRS-proposed determination

to a bond issuer that denies a claim for

recovery of an asserted overpayment of

arbitrage rebate, yield reduction payment,

or penalty in lieu of rebate under section

148 of the Code (relating to arbitrage)

with respect to tax-exempt bonds or under

section 148 as modified by relevant provisions of the Code with respect to other

tax-advantaged bonds;

(v) Administrative costs under section

7430 of the Code (relating to awarding of

costs and certain fees); or

(vi) Any other topic that the IRS has

determined may be considered by Appeals.

(c) Exceptions to consideration by

Appeals. The following are Federal tax

controversies that are excepted from consideration by Appeals or matters or issues

that are otherwise ineligible for consideration by Appeals because they are neither

a Federal tax controversy nor treated as a

Federal tax controversy under paragraph

(b)(3) of this section. If a matter or issue

not eligible for consideration by Appeals

is present in a case that otherwise is eligible for consideration by Appeals, the ineligible matter or issue will not be considered by Appeals during resolution of the

case. The exceptions are:

(1) Any administrative determination

made by the IRS rejecting a position of

a taxpayer that the IRS has identified as

frivolous for purposes of section 6702(c)

of the Code (regarding listing of frivolous

positions) and any case solely involving

the taxpayer’s failure or refusal to comply

with the internal revenue laws because

of frivolous moral, religious, political,

constitutional, conscientious, or similar

grounds.

(2) Penalties assessed by the IRS

under section 6702 (relating to frivolous

tax submissions) or section 6682 of the

Code (relating to false information with

respect to withholding) or any other penalty imposed for a frivolous position or

false information. Appeals, however, may

obtain verification that the assessment of

the penalties complied with sections 6203

(relating to method of assessment) and

6751(b) (relating to supervisory approval

of assessment) of the Code in a collection

due process (CDP) hearing under sections

Bulletin No. 2025–11

6320 (relating to a hearing upon filing of

a notice of lien) and 6330 (relating to a

hearing before levy) of the Code. Appeals

also may consider a non-frivolous substantive challenge to a section 6702 or

section 6682 penalty in a CDP hearing.

(3) Any administrative determination

made by the IRS under section 7623 of the

Code (relating to awards to whistleblowers).

(4) Any administrative determination

issued by an agency other than the IRS,

such as a determination by the Alcohol

and Tobacco Tax and Trade Bureau (TTB)

concerning an excise tax administered by

and within the jurisdiction of TTB.

(5) Any decision made by the IRS

not to issue a Taxpayer Assistance Order

(TAO) under section 7811 of the Code

(relating to TAOs).

(6) Any decision made by the IRS concerning material to be deleted from the

text of a written determination pursuant to

section 6110 of the Code (relating to public inspection of written determinations)

unless the written determination is otherwise being considered by Appeals.

(7) Any denial of access under the Privacy Act (5 U.S.C. 552a(d)(1)).

(8) Any issue resolved in an agreement

described in section 7121 of the Code

(regarding closing agreements) that the

taxpayer entered into with the IRS, and

any decision made by the IRS to enter into

or not enter into such agreement. Appeals

may consider the question of whether an

item or items are covered, and how the

item or items are covered, in a closing

agreement.

(9) Any case in which the IRS erroneously returns or rejects an offer in compromise (OIC) submitted under section 7122

of the Code (relating to compromises) as

nonprocessable or no longer processable

and the taxpayer requests Appeals consideration to assert that the OIC should

be deemed to be accepted under section

7122(f).

(10) Any case in which a criminal prosecution, or a recommendation for criminal prosecution, is pending against the

taxpayer for a tax-related offense, except

with the concurrence of the Office of

Chief Counsel or the Department of Justice, as applicable.

(11) Any issues relating to allocation

among different fee payers of the branded

1085

prescription drug and health insurance

providers fees in section 9008 of the

Patient Protection and Affordable Care

Act (PPACA), Public Law 111-148 (124

Stat. 119 (2010)), as amended by section

1404 of the Health Care and Education

Reconciliation Act of 2010 (HCERA),

Public Law 111-152 (124 Stat. 1029

(2010)), and section 9010 of PPACA, as

amended by section 10905 of PPACA,

and as further amended by section 1406

of HCERA.

(12) Any certification or issuance of a

notice of certification of a seriously delinquent Federal tax debt to the Department

of State under section 7345 of the Code

(relating to the revocation or denial of a

passport in the case of serious tax delinquencies).

(13) Any issue barred from consideration under section 6320 or section 6330,

§§301.6320-1 and 301.6330-1, or any

other administrative guidance related to

CDP hearings or equivalent hearings.

(14) Any case, determination, matter,

decision, request, or issue that Appeals

lacks the authority to settle. The following

is a non-exclusive list of examples:

(i) Any case or issue in a case that has

been referred to the Department of Justice.

(ii) Any competent authority case

(including a competent authority resolution previously accepted by the taxpayer)

under a United States tax treaty that is

within the exclusive authority of the

United States Competent Authority.

(iii) Any decision of the Commissioner

of Internal Revenue or the Commissioner’s delegate to not rescind a penalty under

section 6707A of the Code for a non-listed

reportable transaction.

(iv) Any request for relief under section

6015 of the Code (relating to relief from

joint and several liability on a joint return)

when the nonrequesting spouse is a party

to a docketed case in the United States Tax

Court (Tax Court) and does not agree to

granting full or partial relief under section

6015 to the requesting spouse.

(v) Any criminal restitution-based

assessment under section 6201(a)(4) of

the Code (relating to certain orders of

criminal restitution and restriction on

challenge of assessment).

(15) Any adverse action related to the

initial or continuing recognition of tax-exempt status, an entity’s classification as a

March 10, 2025

foundation, the initial or continuing determination of employee plan qualification,

or a determination involving an obligation and the issuer of an obligation under

section 103 of the Code. The exception in

this paragraph (c)(15) applies only if the

tax-exempt recognition, classification,

determination of employee plan qualification, or determination involving an

obligation and the issuer of an obligation

under section 103 is based upon a technical advice memorandum issued by an

Office of Associate Chief Counsel before

an appeal is requested.

(16) Any case docketed in the Tax

Court if the notice of deficiency, notice of

liability, or final adverse determination letter is based upon a technical advice memorandum issued by an Office of Associate

Chief Counsel in that case involving an

adverse action described in paragraph (c)

(15) of this section.

(17) Any decision by an Office of Associate Chief Counsel regarding whether to

issue a letter ruling or the content of a letter ruling. This includes decisions regarding requests for relief under §§301.9100-1

through 301.9100-22 and requests for

a change in method of accounting. The

subject of the letter ruling may be considered by Appeals if all other requirements

in this section are met. For example, if an

Office of Associate Chief Counsel issues

an adverse letter ruling to a taxpayer, the

taxpayer cannot immediately appeal the

issuance of the adverse letter ruling. If the

taxpayer subsequently files a return taking a position that is contrary to the letter

ruling and that position is audited by the

IRS, Appeals may consider that Federal

tax controversy if all other requirements

in this section are met.

(18) Any issue based on a taxpayer’s argument that a statute violates the

United States Constitution unless there

is an unreviewable decision from a Federal court holding that the cited statute

is unconstitutional. For purposes of this

paragraph (c)(18), an argument that a

statute violates the United States Constitution includes any argument that a

statute is unconstitutional on its face or

as applied to a particular person. The

exception in this paragraph (c)(18) does

not preclude Appeals from considering a

Federal tax controversy based on arguments other than the constitutionality

March 10, 2025

of a statute, such as whether the statute

applies to the taxpayer’s facts and circumstances. For purposes of this section,

the phrase unreviewable decision is a

decision of any Federal court regardless

of where the taxpayer resides that can

no longer be appealed to any Federal

court because all appeals in a case have

been exhausted or the time to appeal has

expired and no appeal was filed.

(19) Any issue based on a taxpayer’s

argument that a Treasury regulation is

invalid unless there is an unreviewable

decision from a Federal court invalidating

the regulation as a whole or the provision

in the regulation that the taxpayer is challenging. The exception in this paragraph

(c)(19) does not preclude Appeals from

considering a Federal tax controversy

based on arguments other than the validity

of a Treasury regulation, such as whether

the Treasury regulation applies to the taxpayer’s facts and circumstances. For purposes of this paragraph (c)(19), the term

invalid means any challenge to validity,

whether substantively invalid or procedurally invalid in scope. See paragraph

(c)(20) of this section for definition of the

term procedurally invalid.

(20) Any issue based on a taxpayer’s

argument that a notice or revenue procedure published in the Internal Revenue

Bulletin is procedurally invalid unless

there is an unreviewable decision from a

Federal court holding it to be invalid. This

exception does not preclude Appeals from

considering a Federal tax controversy

based on arguments other than the procedural validity of a notice or revenue procedure, such as whether the notice or revenue procedure applies to the taxpayer’s

facts and circumstances. For purposes of

this section, the term procedurally invalid

is defined as any determination regarding

whether a notice or revenue procedure

failed to comply with administrative law

requirements, such as notice and comment

under 5 U.S.C. 553.

(21) Any case or issue designated for

litigation, or withheld from Appeals consideration in a Tax Court case, in accordance with guidance regarding designating or withholding a case or issue. For

purposes of this section, designated for

litigation means that the Federal tax controversy, comprising an issue or issues in

a case, will not be resolved without a full

1086

concession by the taxpayer or by decision

of the court.

(22) Any case docketed in the Tax

Court if the notice of deficiency, notice

of liability, or other determination was

issued by Appeals unless the exception in

paragraph (f)(1) of this section (regarding

when the Tax Court remands a CDP case

for reconsideration) applies.

(23) Any case in which timely Appeals

consideration must be requested before a

petition is filed in the Tax Court because

exhaustion of administrative review,

including consideration by Appeals, is

a prerequisite for the Tax Court to have

jurisdiction, and the taxpayer failed to

timely request Appeals consideration. For

example, Appeals consideration must be

requested before a petition is filed in the

Tax Court regarding a declaratory judgment request under section 7428 (relating

to declaratory judgment on the classification of specified organizations), section

7476 (relating to declaratory judgment on

qualification of certain retirement plans),

or section 7477 (relating to declaratory

judgment on the value of certain gifts) of

the Code.

(24) Any administrative determination

made by the IRS to deny or revoke a Certified Professional Employer Organization

certification.

(d) Originating office has completed

its review—(1) In general. Appeals consideration of a matter or issue is appropriate only after the originating IRS office

has completed its action on the Federal

tax controversy and issued an administrative determination or a proposed administrative determination accompanied by

an offer for consideration by Appeals. If

the originating office has not completed

its action regarding the Federal tax controversy, the request for Appeals consideration is premature. Appeals may consider

the Federal tax controversy if the taxpayer

requests consideration after the originating office’s action is complete and if all

requirements in this section are met.

(2) Exception for early consideration

programs. If administrative guidance

permits the originating office to engage

Appeals prior to completing its action

regarding the Federal tax controversy,

Appeals may consider the Federal tax controversy under the terms of that administrative guidance, such as mediation under

Bulletin No. 2025–11

a fast track settlement program or early

consideration of some issues under an

early referral program.

(e) Procedural and timing requirements are followed—(1) In general. A

request for Appeals consideration of a

Federal tax controversy must be submitted in the time and manner prescribed in

applicable forms, instructions, or other

administrative guidance. All procedural

requirements must be complied with

before Appeals will consider a Federal tax controversy. In addition, there

must be sufficient time remaining on

the appropriate limitations period for

Appeals to consider the Federal tax controversy, as provided in administrative

guidance. In a case docketed in the Tax

Court, if the Office of Chief Counsel has

recalled the case from Appeals or, if not

recalled, Appeals has returned the case to

the Office of Chief Counsel so that it is

received by the Office of Chief Counsel

prior to the date of the calendar call for

the trial session, further consideration by

Appeals will not be available if there is

insufficient time for such consideration.

(2) Example. The following example

illustrates the application of the rule of

insufficient time remaining on the limitations periods for Appeals consideration:

The IRS examines Taxpayer X’s Form

1040, U.S. Individual Income Tax Return,

and determines a deficiency in income

tax due to the IRS disallowing some of

the deductions reported on the return.

Because the expiration date of the assessment period of limitations with respect to

the proposed deficiency is imminent, there

is insufficient time for Appeals to receive

the case and determine whether the case

is susceptible to settlement. Consequently,

the IRS issues a notice of deficiency under

section 6212 of the Code to Taxpayer X.

Under section 6213(a) of the Code, the

issuance of this notice suspends the running of the assessment period while a taxpayer seeks judicial review of the notice.

Taxpayer X timely files a petition with the

Tax Court. After the case is docketed in the

Tax Court, Taxpayer X generally would

have the opportunity to have Appeals consider the case.

(f) One opportunity for consideration

by Appeals—(1) In general. If a Federal

tax controversy is eligible for consideration by Appeals and the procedural and

Bulletin No. 2025–11

timing requirements are followed, a taxpayer generally has one opportunity for

Appeals to consider such matter or issue

in the same case for the same period or

in any type of future case for the same

period, unless the Tax Court remands for

reconsideration in a CDP case. Appeals

has considered a Federal tax controversy

if the Federal tax controversy was before

Appeals for consideration and Appeals

issued a determination or made a settlement offer, Appeals decided the Federal

tax controversy was not susceptible to

settlement, or the person who requested

consideration was issued and failed to

respond to Appeals’ communications

and as a result of that failure Appeals

issued or made a determination. Appeals

also has considered a Federal tax controversy if the taxpayer notified the Office

of Chief Counsel or the IRS that the taxpayer wanted to discontinue settlement

consideration by Appeals or requested

to transfer from Appeals to the Office of

Chief Counsel settlement consideration

of a Federal tax controversy that is currently before the Tax Court.

(2) Exceptions. Notwithstanding

paragraph (f)(1) of this section, taxpayers retain the opportunity for a

traditional appeal after participating

in an early consideration program as

described in paragraph (d)(2) of this

section if no agreement was reached

between the taxpayer and the IRS originating office. Taxpayers may be able to

request post-Appeals mediation under

the terms of administrative guidance

after a traditional appeal if no agreement

was reached between the taxpayer and

Appeals. Notwithstanding paragraph (f)

(1), taxpayers who provide new factual

information to the IRS and who meet the

conditions and requirements for audit

reconsideration or for reconsideration of

issues previously considered by Appeals

may have an opportunity for Appeals

consideration, as provided in administrative guidance.

(g) Special rules. The following special

rules apply to this section:

(1) Appeals reconsideration. Notwithstanding the exception in paragraph (c)

(22) of this section, if Appeals issued a

notice of deficiency, notice of liability, or

other determination without having fully

considered one or more issues because of

1087

an impending expiration of the statute of

limitations on assessment, Appeals may

choose to have the Office of Chief Counsel return the case to Appeals for full consideration of the issue or issues once the

case is docketed in the Tax Court.

(2) Coordination between Office of

Chief Counsel and Appeals. Appeals and

the Office of Chief Counsel may determine

how settlement authority in a Federal tax

controversy that is before the Tax Court is

transferred between the two offices.

(h) Applicability date. This section is

applicable to requests for consideration

by Appeals made on or after February 14,

2025.

§301.7803-3 Requests for referral

to the Internal Revenue Service

Independent Office of Appeals

following the issuance of a notice of

deficiency.

(a) Notice and protest. If any taxpayer

requests consideration by the Internal

Revenue Service Independent Office of

Appeals (Appeals) of any matter or issue

under section 7803(e)(5) of the Internal

Revenue Code (Code) (relating to limitation on designation of cases as not

eligible for referral to Appeals) and the

request is denied, the Commissioner of

Internal Revenue (Commissioner) or the

Commissioner’s delegate must provide

the taxpayer a written notice that provides a detailed description of the facts

involved, the basis for the decision to

deny the request, a detailed explanation

of how the basis for the decision applies

to such facts, and the procedures for protesting the decision to deny the request,

but only if the requirements of paragraphs (a)(1) through (5) of this section

are met:

(1) Notice of deficiency. The taxpayer

received a notice of deficiency authorized

under section 6212 of the Code (relating

to notice of deficiency) before the taxpayer requested consideration by Appeals.

(2) Frivolous positions. The issue

involved is not a frivolous position within

the meaning of section 6702(c) of the

Code (regarding listing of frivolous positions).

(3) Multiple requests for referral to

Appeals. The taxpayer has not previously

requested consideration by Appeals, pur-

March 10, 2025

suant to section 7803(e)(5), of the same

matter or issue in a taxable year or period.

(4) Previous Appeals consideration.

Appeals has not previously considered

the matter or issue in a taxable year or

period that is the subject of the request

and determined that the matter or issue

could not be settled or a settlement offer

was rejected, except as provided in

§301.7803-2(f)(2) with respect to a taxpayer participating in an early consideration program.

March 10, 2025

(5) Notice of deficiency with more than

one matter or issue. If the notice of deficiency for which the taxpayer requests

Appeals consideration includes more than

one matter or issue in a taxable year or

period, the taxpayer must request referral

for Appeals consideration and submit all

such matters or issues at the same time.

(b) Applicability date. This section is

applicable to relevant requests for consideration by Appeals made on or after February 14, 2025.

1088

Douglas W. O’Donnell,

Deputy Commissioner.

Approved: January 3, 2025.

Aviva R. Aron-Dine,

Deputy Assistant Secretary of the

Treasury (Tax Policy).

(Filed by the Office of the Federal Register January

14, 2025, 8:45 a.m., and published in the issue of the

Federal Register for January 15, 2025, 90 FR 3645)

Bulletin No. 2025–11

Part III

Guidance Related to

Health Coverage Reporting

Required by Sections 6055

and 6056

Notice 2025-15

PURPOSE

This notice provides guidance regarding the alternative manner of furnishing

certain health insurance coverage statements to individuals pursuant to sections 6055(c)(3) and 6056(c)(3) of the

Internal Revenue Code (Code), added by

section 2 of the Paperwork Burden Reduction Act (Pub. L. 118-167, 138 Stat. 2584,

Dec. 23, 2024) (the Act).1 Sections 6055(c)

(3) and 6056(c)(3) of the Code are effective for statements with respect to returns

required by sections 6055 and 6056 for

calendar years after 2023.

BACKGROUND

Section 6055 of the Code requires all

persons providing minimum essential

coverage to an individual during a calendar year to file annual information returns

with the Internal Revenue Service (IRS)

reporting certain information, including

information that identifies each covered

individual and the individual’s months of

coverage.2 Section 6055 also requires persons providing minimum essential coverage to an individual during a calendar

year to furnish each responsible individual

(generally, the person named on an application who enrolls one or more individuals in minimum essential coverage) with a

statement containing the same information

that is included on the annual information

return required to be filed with the IRS.

See Treas. Reg. § 1.6055–1(b)(11). Pursuant to section 6055(c)(2), the statement

must be furnished on or before January 31

of the year following the calendar year for

which the return was required to be made.

Treasury Regulation § 1.6055-1(g)(4) provides an automatic 30-day extension of

time in which to furnish these statements.

Treasury Regulation § 1.6055-1(g)(4)

(ii)(B) provides an alternative manner of

furnishing the statements required under

section 6055(c) of the Code if the individual shared responsibility payment amount

under section 5000A(c) for the calendar

year in which minimum essential coverage is provided is zero. Pursuant to Treas.

Reg. § 1.6055-1(g)(4)(ii)(B), the requirement to furnish the statement generally is

satisfied if the reporting entity provides

clear and conspicuous notice, in a location

on its website that is reasonably accessible to all responsible individuals, stating

that responsible individuals may receive a

copy of their statement upon request. The

notice must be timely posted and retained

on the website through October 15 of the

year following the calendar year to which

the statement relates. The regulations

further provide that the reporting entity

must furnish the statement to a requesting

responsible individual within 30 days of

the date the request is received.

Section 6056 requires applicable large

employers (ALEs) (generally those with

50 or more full-time employees, including full-time eq

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