TEB - Setting Aside or Clarification of Closing Agreements

The Commissioner may set aside an agreement entered into under IRC 7121 if there’s a showing of fraud or malfeasance, or misrepresentation of a material fact. The Commissioner’s signature is required to set aside an agreement. Even if there is a basis to set aside the agreement, it is not mandatory. The Commissioner may refrain from doing so if it is in the best interests of the United States not to set aside the agreement.

An agreement entered into under IRC 7121 may be clarified if any of its provisions are unclear and reasonably subject to more than one reasonable interpretation or if surrounding facts and circumstances result in more than one reasonable interpretation of a provision in the agreement.

TEB generally clarifies its understanding of a closing agreement by issuing a letter to the issuer interpreting the unclear provision and its application to the surrounding facts and circumstances.

TEB may refuse to clarify a disputed closing agreement term if it determines that the challenging party’s proposed interpretation is unreasonable and unlikely to prevail if it is litigated.

For exam closing agreements, the Director decides whether it is necessary to clarify the agreement.