SECTION 4. ADMINISTRATIVE

APPEAL PROCESS

.01 In general .02 Consultations with District Counsel .03 The District requests technical advice

.04 The issuer requests technical advice referral

1998–49 I.R.B. 13 December 7, 1998

provide that an agent may, in consultation with District Counsel, arrive at a preliminary adverse determination that interest on a Bond Issue is not excludable from gross income under § 103 of the Code. If the District determines that a closing agreement is appropriate, the agent generally will inform the issuer, orally or in writing, of the agent’s preliminary adverse determination and give the issuer an opportunity to enter into a closing agreement. If the issuer and the District fail to reach an agreement, Internal Revenue Manual section 7(10)7(11) and the examination procedures require that prior to declaring that the interest on a Bond Issue is not excludable from gross income under § 103 of the Code, the District must receive a technical advice memorandum from Assistant Chief Counsel (Financial Institutions & Products) that is unfavorable to the issuer. If the technical advice memorandum concludes that interest on the Bond Issue is not excludable from gross income under § 103 of the Code, the District may proceed with its determination that interest on the Bond Issue is not excludable from gross income when received or accrued by bondholders. Under existing procedures, the issuer may not request an appeal of the District’s adverse determination.

Section 3105 of the Act directs the Service to modify its administrative procedures to allow issuers to appeal an adverse determination. An issuer, having received an adverse determination following an examination of its Bond Issue, may protest the determination to Appeals before the interest on the Bond Issue is declared not excludable from gross income under § 103 of the Code.