SECTION 17. WHAT IS THE

EFFECT OF TECHNICAL ADVICE?

Applies only to the taxpayer .01 A taxpayer may not rely on a technical advice memorandum issued by the Service for whom technical advice for another taxpayer. See § 6110(k)(3). was requested

Usually applies retroactively .02 Except in rare or unusual circumstances, a holding in a technical advice memorandum that is favorable to the taxpayer is applied retroactively.

Moreover, because technical advice, as described in section 2 of this revenue procedure, is issued only on closed transactions, a holding that is adverse to the taxpayer is also applied retroactively, unless the Associate Chief Counsel (Domestic), the Associate Chief Counsel (Employee Benefits and Exempt Organizations), the Associate Chief Counsel (Enforcement Litigation), or the Associate Chief Counsel (International), as appropriate, exercises the discretionary authority under § 7805(b) to limit the retroactive effect of the holding.

Generally applied retroactively .03 A holding that modifies or revokes a holding in a prior technical advice memoranto modify or revoke prior dum is applied retroactively, with one exception. If the new holding is less favorable to technical advice the taxpayer than the earlier one, it generally is not applied to the period when the taxpayer relied on the prior holding in situations involving continuing transactions.

A pplies to continuing action or .04 If a technical advice memorandum relates to a continuing action or a series of series of actions until specifically actions, ordinarily it is applied until specifically withdrawn or until the conclusion is

Sec. 17.04 2000–1 I.R.B. 97 January 3, 2000

withdrawn, modified, or revoked modified or revoked by the enactment of legislation, the ratification of a tax treaty, a decision of the United States Supreme Court, or the issuance of regulations (temporary or final), a revenue ruling, or other statement published in the Internal Revenue Bulletin. Publication of a notice of proposed rulemaking does not affect the application of a technical advice memorandum.

Applies to continuing action .05 A taxpayer is not protected against retroactive modification or revocation of a or series of actions until technical advice memorandum involving a continuing action or a series of actions material facts change occurring after the material facts on which the technical advice memorandum is based have changed.

Does not apply retroactively .06 Generally, a technical advice memorandum that modifies or revokes a letter ruling or under certain conditions another technical advice memorandum is not applied retroactively either to the taxpayer to whom or for whom the letter ruling or technical advice memorandum was originally issued, or to a taxpayer whose tax liability was directly involved in such letter ruling or technical advice memorandum if—

(1) there has been no misstatement or omission of material facts;

(2) the facts at the time of the transaction are not materially different from the facts on which the letter ruling or technical advice memorandum was based;

(3) there has been no change in the applicable law;

(4) in the case of a letter ruling, it was originally issued on a prospective or proposed transaction; and

(5) the taxpayer directly involved in the letter ruling or technical advice memorandum acted in good faith in relying on the letter ruling or technical advice memorandum, and the retroactive modification or revocation would be to the taxpayer’s detriment. For example, the tax liability of each shareholder is directly involved in a letter ruling or technical advice memorandum on the reorganization of a corporation. However, the tax liability of a member of an industry is not directly involved in a letter ruling or technical advice memorandum issued to another member and, therefore, the holding in a modification or revocation of a letter ruling or technical advice memorandum to one member of an industry may be retroactively applied to other members of the industry. By the same reasoning, a tax practitioner may not obtain the nonretroactive application to one client of a modification or revocation of a letter ruling or technical advice memorandum previously issued to another client.

When a letter ruling to a taxpayer or a technical advice memorandum involving a taxpayer is modified or revoked with retroactive effect, the notice to the taxpayer, except in fraud cases, sets forth the grounds on which the modification or revocation is being made and the reason why the modification or revocation is being applied retroactively. SECTION 18. HOW MAY RETROACTIVE EFFECT BE LIMITED?

Taxpayer may request that .01 Under § 7805(b), the Associate Chief Counsel (Domestic), the Associate Chief retroactivity be limited Counsel (Employee Benefits and Exempt Organizations), the Associate Chief Counsel (Enforcement Litigation), or the Associate Chief Counsel (International), as the Commissioner’s delegate, may prescribe the extent, if any, to which a technical advice memorandum will be applied without retroactive effect.

A taxpayer for whom a technical advice memorandum was issued or for whom a technical advice request is pending may request that the Associate Chief Counsel (Domestic), the Associate Chief Counsel (Employee Benefits and Exempt Organizations), the Associate Chief Counsel (Enforcement Litigation), or the Associate Chief Counsel (International), as appropriate, limit the retroactive effect of any holding in the technical advice

Sec. 17.05 January 3, 2000 98 2000–1 I.R.B.

memorandum or of any subsequent modification or revocation of the technical advice memorandum.

When germane to a pending technical advice request, a taxpayer should request to limit the retroactive effect of the holding of the technical advice memorandum early during the consideration of the technical advice request by the national office. This § 7805(b) request should be made initially as part of that pending technical advice request. The national office, however, will consider a § 7805(b) request to limit the retroactive effect of the holding if the request is made at a later time.

Form of request to limit .02 When a technical advice memorandum that concerns a continuing transaction is retroactivity—continuing modified or revoked by, for example, issuance of a subsequent revenue ruling, or tempotransaction before examination rary or final regulation, a request to limit the retroactive effect of the modification or revoof return cation of the technical advice memorandum must be made in the form of a request for a letter ruling if the request is submitted before an examination of the return pertaining to the transaction that is the subject of the request for the letter ruling. The requirements for a letter ruling request are given in sections 8 and 12.11 of Rev. Proc. 2000–1.

Form of request to limit .03 In all other cases during the course of an examination of a taxpayer’s return by the retroactivity—in all district director or during consideration of the taxpayer’s return by the chief, appeals other cases office (including when the taxpayer is informed that the district director or the chief, appeals office, will recommend that a technical advice memorandum, letter ruling, or determination letter previously issued to, or with regard to, the taxpayer be modified or revoked), a taxpayer’s request to limit retroactivity must be made in the form of a request for technical advice.

The request must meet the general requirements of a technical advice request, which are given in sections 6, 7, and 9 of this revenue procedure. The request must also—

(1) state that it is being made under § 7805(b);

(2) state the relief sought;

(3) explain the reasons and arguments in support of the relief sought (including a discussion of the five items listed in section 17.06 of this revenue procedure and any other factors as they relate to the taxpayer’s particular situation); and

(4) include any documents bearing on the request.

The taxpayer’s request, including the statement that the request is being made under § 7805(b), must be submitted to the district director or the chief, appeals office, who must then forward the request to the national office for consideration.

Taxpayer’s right .04 When a request for technical advice concerns only the application of § 7805(b), the to a conference taxpayer has the right to a conference in the national office in accordance with the provisions of section 13 of this revenue procedure. In accordance with section 13.02 of this revenue procedure, the examining officer or appeals officer will be offered the opportunity to attend the conference on the § 7805(b) issue. Section 13.02 of this revenue procedure also provides that other Service representatives are allowed to participate in the conference.

If the request for application of § 7805(b) is included in the request for technical advice on the substantive issues or is made before the conference of right on the substantive issues, the § 7805(b) issues will be discussed at the taxpayer’s one conference of right.

If the request for the application of § 7805(b) is made as part of a pending technical advice request after a conference has been held on the substantive issues and the Service determines that there is justification for having delayed the request, then the taxpayer will have the right to one conference of right concerning the application of § 7805(b), with the conference limited to discussion of this issue only.

Sec. 19.01 2000–1 I.R.B. 99 January 3, 2000

SECTION 19. WHAT .01 The titles in this revenue procedure are based on the current organization of the SIGNIFICANT CHANGES Service. Accordingly, the Assistant Commissioner (Employee Plans and Exempt HAVE BEEN MADE TO Organizations) has been replaced by the Commissioner, Tax Exempt and Government REV. PROC. 99–2? Entities Division .

.02 Section 9.01(2) is amended in two respects if the taxpayer chooses to submit the written statement and information of facts and arguments when the Service initiates the request for technical advice. First, the taxpayer and the district or appeals office should determine a mutually agreed date for the submission of the taxpayer’s statement and information so that it will be forwarded to the national office with the request for technical advice. Second, a 21-day time period is provided for submitting the taxpayer’s statement and information to the national office when the request for technical advice is forwarded to the national office without such statement and information. If the national office does not receive the taxpayer’s statement and information within the 21-day period, plus any extensions granted, the national office, at its discretion, may base its advice on the facts provided by the district or appeals office.

.03 Section 9.03 is amended to provide the new address for appeals offices to send a request for technical advice.

.04 Section 9.05 is amended to conform to Notice N(39)1(10)3–1, dated October 22, 1999, which allows the submission of an original, a copy, or a fax of the power of attorney.

.05 Section 15.05 is amended to provide that the district or appeals office should promptly notify the taxpayer of a decision to return the case for further factual development or other reasons.

.06 Sections 15.11(1) through 15.11(3) of Rev. Proc. 99–2 have been redesignated as sections 15.11(2) through 15.11(4) in this revenue procedure. New section 15.11(1) is added to provide the procedures for receiving a request for additional information by fax.