SECTION 7. PROCEDURES — Internal Revenue Bulletin 1999-24

REQUESTING, PROCESSING, AND IMPLEMENTING A SETTLEMENT

.01 Procedures for requesting the set- tlement.

(1) Initiating the request.

(a) In general. A taxpayer that wants to request a settlement under this revenue procedure must submit its request for the settlement in writing to Sharon Russell (Vacation Pay Issue Specialist) on or before the later of October 1, 1999, or the due date of its return (determined with regard to extensions of time) for its first taxable year ending after July 22, 1998. The request must be addressed to the Internal Revenue Service, 5990 West Creek Road, Independence, Ohio 44131, Attention: Sharon Russell (Vacation Pay Issue Specialist), Exam Branch 2.

(b) Taxpayer under examination. A taxpayer that is under examination on June 14, 1999, that wants to request a settlement under this revenue procedure must submit its request to the case manager or group manager having jurisdiction of the case on or before October 1, 1999.

(c) Service-initiated request. A case manager or group manager may make a settlement offer under this revenue procedure in a case under their jurisdiction at any time during the examination.

June 14, 1999 40 1999–24 I.R.B.

(2) Statement of facts, law, and arguments. The request for settlement must include the following information:

(a) the taxpayer’s name, address, telephone number, and taxpayer identification number;

(b) the type of settlement proposed by the taxpayer (alternative-timing or time-value-of-money);

(d) a statement of the material facts, including the amount of the accelerated deductions and excess accelerated deductions for each taxable year covered by the proposed settlement;

(e) an analysis of whether the amounts shown as accelerated deductions for each taxable year covered by the proposed settlement were incurred under § 461 in that taxable year;

(f) if the taxpayer is proposing an alternative-timing settlement under this revenue procedure, a statement that the taxpayer agrees to file amended returns to reflect the settlement for any affected taxable years covered by the settlement (not under examination);

(g) if the taxpayer is proposing a time-value-of-money settlement under this revenue procedure, a computation of the specified amount, including the supporting computations of the time-valueof-money benefit (detriment) with respect to each taxable year covered by the settlement;

(h) a statement that the taxpayer agrees that the Service is not changing the taxpayer’s method of accounting for the taxable years covered by the settlement;

(i) a statement that the taxpayer has changed or agrees to change its method of accounting for its first taxable year ending after July 22, 1998, to comply with § 404(a)(11);

(j) the amount of the § 481(a) adjustment required as a result of the change to comply with § 404(a)(11) and, if the taxpayer is proposing an alternative-timing settlement, the reduction of the § 481(a) adjustment required as a result of the settlement;

(k) a statement that the Service is not precluded from challenging the amount of the accelerated deduction for any taxable year covered by the settlement on a basis unrelated to the securitization arrangement (e.g., that all or a por

tion of the amount is not incurred during that year under § 461); and

(l) a statement that the taxpayer accepts the settlement and agrees to the terms of this revenue procedure.

(3) Perjury statement. The request for settlement must be accompanied by the following declaration: “Under penalties of perjury, I declare that I have examined this information, in- cluding accompanying documents, and, to the best of my knowledge and belief, the information contains all the rele- vant facts relating to the request for the information, and such facts are true, correct, and complete.” This declaration must be signed by, or on behalf of, the taxpayer by an individual with the authority to bind the taxpayer in such matters. The declaration may not be signed by the taxpayer’s representative.

.02 Procedures for processing the re- quest.

(1) Receipt of request acknowledged. The Vacation Pay Issue Specialist, case manager, or group manager (whichever is applicable) will acknowledge receipt of the taxpayer’s request for settlement in writing within 15 days of receipt.

(2) Factual development. The Vacation Pay Issue Specialist, case manager, or group manager (whichever is applicable) will contact the taxpayer to discuss any questions that the Service may have, or ask for additional information believed to be necessary in order to execute the settlement.

(3) Notification of acceptance. The Vacation Pay Issue Specialist, case manager, or group manager (whichever is applicable) will notify the taxpayer in writing when the Service agrees to the settlement requested by the taxpayer. The notification of acceptance will set forth the material terms and conditions of the settlement.

(4) Withdrawal of request for settle- ment. The taxpayer may withdraw its request for the settlement any time prior to execution of the closing agreement required in section 7.03(1) of this revenue procedure or payment of the specified amount as required in section 7.03(2) of this revenue procedure. The withdrawal must be communicated in writing to the Vacation Pay Issue Specialist, case manager, or group manager (whichever is appropriate).

.03 Procedures for implementing the settlement.

(a) Closing agreement required. A taxpayer implementing an alternativetiming settlement under this revenue procedure is required to execute a closing agreement under § 7121. The taxpayer must pay the government any taxes and interest due as a result of the settlement.

(b) Contents of closing agreement. A closing agreement finalizing an alternative-timing settlement under this revenue procedure must comply with the requirements of Rev. Proc. 68–16, 1968–1 C.B. 770, and must state: (i) the name, address, telephone number, and taxpayer identification number of any taxpayer included in the agreement;

(ii) that the issue covered by the settlement is the timing of deductions for accrued vacation pay and other benefits unpaid during a taxable year for which the taxpayer purchased a letter of credit, bond, or other similar financial instrument to secure the benefits during the first 2 ¹ ⁄2 months of the following taxable year; (iii) the facts and representations upon which the taxpayer and the Service relied in reaching the agreement;

(iv) the definitions of accelerated deduction and excess accelerated deduction set forth in section 3 of this revenue procedure;

(v) the taxable years covered by the settlement;

(vi) that the Service is disallowing 50 percent of the excess accelerated deduction for each of the taxable years covered by the settlement;

(vii) that the Service is not changing the taxpayer’s method of accounting for the taxable years covered by the settlement;

(viii) that the taxpayer is required to change its method of accounting for its first taxable year ending after July 22, 1998, to comply with § 404(a)(11); (ix) the amount of the § 481(a) adjustment required as a result of the change to comply with § 404(a)(11);

(x) that the § 481(a) adjustment resulting from the change to comply with § 404(a)(11) will be reduced by 50 percent of the aggregate of the excess accelerated deductions for the taxable years covered by the settlement;

(1) Alternative-timing settlement.

1999–24 I.R.B. 41 June 14, 1999

(xi) that the taxpayer has filed or will file amended returns to reflect the settlement for any affected taxable years covered by the settlement;

(xii) that the Service is not precluded from challenging the amount of the accelerated deduction for any taxable year covered by the settlement on a basis unrelated to the securitization arrangement (e.g., that all or a portion of the amount is not incurred during that year under § 461); and

(xiii) that the taxpayer accepts the alternative-timing settlement and agrees to the terms of this revenue procedure.

(c) Review and execution of clos- ing agreement. The Vacation Pay Issue Specialist, case manager, or group manager (whichever is applicable) will prepare the closing agreement and submit the closing agreement to the taxpayer for execution. The closing agreement will be executed by the Service after it has been executed by the taxpayer and will be executed on behalf of the Service by the Vacation Pay Issue Specialist or, in the case of a taxpayer under examination, by the case manager or group manager having jurisdiction of the case. A case manager or group manager must submit a closing agreement to the Vacation Pay Issue Specialist for review prior to submitting the closing agreement to the taxpayer for execution.

(iii) Time and manner. The Service may require the taxpayer to file the amended returns prior to executing the closing agreement, and in no event will the amended returns be filed later than 60 days after the date the Service executes the closing agreement. The taxpayer must provide a copy of the amended returns to the Vacation Pay Issue Specialist, case manager, or group manager (whichever is applicable) at the time it files the amended returns.

(e) Compliance with § 404(a)(11). A taxpayer implementing an alternativetiming settlement under this revenue procedure must change its method of accounting and file its returns for taxable years ending after July 22, 1998, in compliance with § 404(a)(11).

(2) Time-value-of-money settlement.

authority to bind the taxpayer in such matters. The declaration may not be signed by the taxpayer’s representative.

(d) Label. The following language must be either typed or legibly printed at the top of the first page of the information: PAYMENT OF SPECIFIED AMOUNT UNDER REV. PROC. 99–26”.

(e) Compliance with § 404(a)(11). A taxpayer implementing a time-value-ofmoney settlement under this revenue procedure must change its method of accounting and file its returns for taxable years ending after July 22, 1998, in compliance with § 404(a)(11).

.04 Authority to make and accept set- tlement offers.

Examination case managers and group managers will have delegated authority to accept or make the settlement offers described in this revenue procedure and to execute required closing agreements for cases under their jurisdiction. The Vacation Pay Issue Specialist will have the same delegated authority to accept settlement offers and to execute closing agreements.