SECTION 5. RESOLVING THE

PENALTY

.01 In general . Case files transferred to Appeals should include the computation of the penalty; date, location, and type of violation; results of laboratory and field testing of fuel (if applicable); prior warnings and offenses; and statements made by the investigating official, the IRS supervisor, and the taxpayer.

.02 Collection activity . Since Appeals jurisdiction and consideration will be afforded to the taxpayer before the final determination of the penalty, collection activity will be suspended until Appeals has determined the penalty amount.

.03 Appeals determination . Each case will be reviewed under established Appeals procedures and decided on its own merits.

(1) The IRS should be given the opportunity to timely review and comment on any significant new information or evidence presented by the taxpayer. “Significant new information” is information of a non-routine nature that, in the judgement of the appeals officer, would have had an effect on the IRS’s findings or that changes the appeals officer’s evaluation of the litigating hazards. If it appears the significant new information or evidence was purposely withheld from the IRS, the entire case should be returned to the IRS and jurisdiction relinquished. See Internal Revenue Manual 8.2.1.2.2.

(2) If evidence submitted in Appeals conflicts with evidence originally submitted to the IRS or shifts responsibility to another taxpayer, and this new evidence was not purposely withheld from the IRS, consideration should be given to retaining jurisdiction but referring the new issues or information to the IRS for timely review and comment.

.05 If the Dyed Fuel Penalty is upheld . If the Dyed Fuel Penalty is upheld, Appeals will prepare an Appeals Case Memorandum and forward it along with the case file to the IRS office that proposed the Dyed Fuel Penalty so that the Dyed Fuel Penalty may be assessed and collected.

.04 New information submitted.

.06 If the Dyed Fuel Penalty is not up- held . If the Dyed Fuel Penalty is not upheld, Appeals will prepare an Appeals Case Memorandum and forward it along with the case file to the IRS office that proposed the penalty to close the Dyed Fuel Penalty case without assessing a penalty.

.07 If the Refusal Penalty is upheld . If the Refusal Penalty is upheld, Appeals will forward the case file to District Counsel for advice and direction on penalty enforcement.

.08 If the Refusal Penalty is not upheld. If the Refusal Penalty is not upheld, Appeals will prepare an Appeals Case Memorandum and forward it along with the case file to the IRS office that proposed the penalty to close the Refusal Penalty case.

.09 Subsequent events . If an excise tax assessment is made in conjunction with the Dyed Fuel Penalty, a copy of the Appeals Case Memorandum on the Dyed Fuel Penalty should be included in the case file. Any redeterminations of the excise tax issue and the Dyed Fuel Penalty will be based on the respective merits of each case.