EO - Statute Protection - Dual Responsibility With Appeals

Both the primary return (e.g., Form 990) and the converted tax return (e.g., Form 1120) for the same tax year will share the same statute date based on the filing of the same Form 990. However, the two MFT case files will be separated once Mandatory Review ships the primary return case to Appeals assuming the organization protests the proposed adverse status change. This results in separating case assignments, and therefore dual responsibility for monitoring statutes.

At the onset, you are primarily responsible for monitoring and protecting the statute on all returns you establish on AIMS, including converted tax returns.

However, if an organization protests an adverse status change (e.g., Form 990 returns) for specific tax years, Appeals will assume primary responsibility for protecting the statute of limitations for those tax years once accepted in their inventory.

You will continue to monitor statutes for all converted return tax years you establish on AIMS, but because Appeals assumed primary responsibility for protecting the statute for the protested years, you continue to assume primary responsibility for protecting the statute of limitations for the non-protested years, if any.

While the primary returns (e.g., Form 990) are in Appeals for resolution of the exemption issue, Mandatory review will hold the converted tax return case file in Status 38 suspense:

Mandatory Review will only hold the converted tax return case file in Status 38 suspense until the sooner of:

1. A converted tax return in the case file becomes a "short statute return," requiring "statute controls" or

2. Appeals has decided the adverse status change issue.

If a converted tax return becomes a short statute return, the reviewer will send the converted tax return case file back to you to monitor statutes for all converted return tax years, and to protect and solicit a statute extension for the non-protested tax years, if any.

If the organization will not consent to extend the statute date for any short statute returns, you and your manager may take steps to initiate deficiency procedures in order to protect the tax, even if the adverse status change is not yet resolved in Appeals.

Consult with TEGEDC regarding your issuance of a statutory notice of deficiency for a converted tax return if the ASED is imminent.

Don’t suspend the converted tax return case file using AIMS Status Code 39. See IRM 4.70.12.3.7.5, Extending the Statute of Limitations, for statute extension procedures.

You are allowed to contact Appeals if needed to coordinate communications with the organization and soliciting statute extensions. This communication will not violate Rev. Proc. 2012-18, 2012-10 IRB 455, regarding ex parte communications because it meets the ministerial, administrative or procedural matters exception in Section 2.03(2)(a) of the Rev. Proc, so long as the issues are not discussed.

The instructions in the previous paragraphs are illustrated by the following examples: