SECTION 6. RESOLVING THE EARLY

REFERRAL ISSUE

.01 In general. The taxpayer’s written response to the Form 5701 generally serves the same purpose as an Appeals protest. Established Appeals procedures, including those governing submissions and taxpayer conferences, apply to early referral issues. See § 601.106 et seq of the Statement of Procedural Rules.

.02 Agreement reached. (1) If an agreement is reached with respect to an early referral issue, a specific matters closing agreement (Form 906) will be prepared. See § 7121 and also Rev. Proc. 68–16, 1968–1 C.B. 770, which describes the preparation of closing agreements. The closing agreement will be used to compute the corrected tax as a partial agreement prior to or concurrently with the resolution of any other issues in the case.

(2) If an early referral issue results in a refund or credit requiring a report described in § 6405 that must be submitted to the Joint Committee on Taxation, the report must include a copy of the proposed closing agreement signed by or for the taxpayer, but not signed by or on behalf of the Commissioner. The Service will not sign the proposed agreement until after review by the Joint Committee.

.03 Agreement not reached. If an agreement is not reached with respect to an early referral issue:

(1) Appeals will close the early referral file and return jurisdiction over the issue to Examination. Appeals will send a copy of the Appeals Case Memorandum for the issue to the CEP case manager.

(2) Appeals will not reconsider an unagreed early referral issue if the entire case is later protested to Appeals, unless there has been a substantial change in the circumstances regarding the early referral issue.