SEC. 7. COORDINATION WITH

OTHER ADMINISTRATIVE OR JUDICIAL PROCEEDINGS

.01 Suspension of Administrative Ac- tion with Respect to U.S. Adjustments .

When a request for competent authority assistance is accepted with respect to a U.S. initiated adjustment, the Service will postpone further administrative action with respect to the issues under competent authority consideration, except (a) in situations in which the Service may be requested otherwise by the U.S. competent authority, or (b) in situations involving cases pending in court and in other instances in which action must be taken to avoid prejudicing the U.S. Government’s interest. The normal administrative procedures continue to apply, however, to all other issues not under U.S. competent authority consideration. For example, if there are other issues raised during the examination and the taxpayer is not in agreement with these issues, the usual procedures for completing the examination with respect to these issues apply. If the taxpayer is issued a thirty day letter with respect to these issues and prepares a protest of the unagreed issues, the taxpayer need not include any unagreed issue under consideration by the competent authority. Following the receipt of a taxpayer’s protest, normal Appeals procedures shall be initiated with respect to those issues not subject to competent authority consideration.

.02 Coordination with Appeals . Taxpayers that disagree with a proposed U.S. adjustment may either pursue their right of administrative review with Appeals before requesting competent authority assistance or may request competent authority assistance immediately. See, however, section 8 of this revenue procedure for Simultaneous Appeals procedures. Appeals’ consideration of potential competent authority matters will be made without regard to other issues or considerations that do not involve potential competent authority matters.

.03 Coordination with Litigation . The U.S. competent authority will not, without the consent of the Chief Counsel, accept (or continue to consider) a taxpayer’s request for assistance if the request involves a taxable period pending in a U.S. court or involves a matter pending in a U.S. court or designated for litigation for any taxable period. If the case is pending in the United States Tax Court, the taxpayer may, in appropriate cases, be asked to join the Service in a motion to sever issues or delay trial pending completion of the competent authority proceedings. If the case is

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pending in any other court, the Chief Counsel will consult with the Department of Justice about appropriate action, and the taxpayer may, in appropriate cases, be asked to join the U.S. Government in a motion to sever issues or delay trial pending completion of the competent authority proceedings. Final decision on severing issues or delaying trial rests with the court. The filing of a competent authority request does not, however, relieve the taxpayer from taking any action that may be necessary or required with respect to litigation.

.04 Coordination with the APA Pro- cedure. Rev. Proc. 91–22, 1991–1 C.B. 526, informs taxpayers how to request an APA from the office of the Associate Chief Counsel (International). If an APA request involves a treaty country, taxpayers are encouraged to seek a competent authority agreement with respect to the matters that are the subject of the APA. The purpose of a competent authority agreement in this case is to avoid double taxation that otherwise may occur. Further, where the taxpayer requests that, as part of the APA process, consideration be given to resolving an issue raised by the Service for earlier taxable periods, the taxpayer is encouraged to seek competent authority consideration of the issue for these periods.

.05 Effect of Agreements or Judicial Determinations on Competent Authority Proceedings . If a taxpayer either executes a closing agreement with the District (whether or not contingent upon competent authority relief) with respect to a potential competent authority issue or reaches a settlement on the issue with Appeals or Counsel pursuant to a closing agreement or other written agreement, the U.S. competent authority will endeavor only to obtain a correlative adjustment from the treaty country and will not undertake any actions that would otherwise change such agreements. However, the U.S. competent authority will, in appropriate cases, consider actions necessary for the purpose of providing relief pursuant to Rev. Proc. 65–17. Once a taxpayer’s tax liability for the taxable periods in issue has been determined by a U.S. court (including settlement of the proceedings before or during trial), the U.S. competent authority similarly will endeavor only to obtain correlative relief from the treaty country and will not undertake any action that would otherwise reduce the taxpayer’s federal

tax liability for the taxable periods in issue as determined by a U.S. court. Taxpayers therefore should be aware that in these situations, as well as in situations where a treaty country takes a similar position with respect to issues resolved under its domestic laws, relief from double taxation may be jeopardized.

.06 Accelerated Competent Authority Procedure . A taxpayer requesting competent authority assistance with respect to an issue raised by the Service also may request that the competent authorities attempt to resolve the issue for subsequent taxable periods ending prior to the date of the request for assistance if the same issue continues in those periods. See also Rev. Proc. 94–67, 1994–2 C.B. 800, concerning the Accelerated Issue Resolution (‘‘AIR’’) process. The U.S. competent authority will consider the request and will contact the appropriate District to consult on whether the issue should be resolved for subsequent taxable periods. If the District consents to this procedure, the U.S. competent authority will present to the foreign competent authority the request to consider such taxable periods. For purposes of resolving the issue, the taxpayer must furnish all relevant information and statements that may be requested by the U.S. competent authority pursuant to this revenue procedure. In addition, if the case involves a Coordinated Examination Program (‘‘CEP’’) taxpayer, the taxpayer must furnish all relevant information and statements requested by the District Director, as described in Rev. Proc. 94–67, 1994–2 C.B. 800. If the case involves a non-CEP taxpayer, the taxpayer must furnish all relevant information and statements that may be requested by the District Director. A request for the accelerated competent authority procedure may be made at the time of filing a request for competent authority assistance or at any time thereafter, but generally before conclusion of the mutual agreement in the case; however, taxpayers are encouraged to request the procedure as early as practicable. The application of the accelerated procedure may require the prior consent of the Chief Counsel. See section 7.03 of this revenue procedure. A request for the accelerated competent authority procedure must contain a statement that the taxpayer agrees that: (1) the inspection of books of account or records under the accelerated competent authority procedure will

not preclude or impede (under § 7605(b) or any administrative provision adopted by the Service) a later examination of a return or inspection of books of account or records for any taxable period covered in the accelerated competent authority assistance request and (2) the Service need not comply with any applicable procedural restrictions (for example, providing notice under § 7605(b)) before beginning such examination or inspection. For competent authority assistance with respect to prospective periods, see Rev. Proc. 91–22, 1991–1 C.B. 526. The accelerated competent authority procedure is not subject to the AIR process limitations.