SECTION 7. COORDINATION WITH

OTHER ADMINISTRATIVE OR JUDICIAL PROCEEDINGS

.01 Suspension of Administrative Action 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 (such as assessment or collection procedures), 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 either may pursue their right of administrative review with Appeals before requesting competent authority assistance or may request competent authority assistance immediately. Appeals’ consideration, if any, of potential competent authority matters will be made without regard to other issues or considerations that do not involve potential competent authority matters. Taxpayers who are pursuing their rights with Appeals may contact the competent authority if they believe they have a potential competent authority issue. If a taxpayer decides to make a competent authority request, it may choose to make a request pursuant to the Simultaneous Appeals procedures in section 8 of this revenue procedure or otherwise. If a taxpayer makes a competent authority request, the taxpayer is deemed to consent to the U.S. competent authority contacting Appeals. See Rev. Proc. 2000–43, 2000–2 C.B. 404. .03 Coordination with Litigation . The U.S. competent authority will not, without the consent of the Associate Chief Counsel (International), 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

2002–31 I.R.B. 247 August 5, 2002

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 pending in any other court, the Associate Chief Counsel (International) 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 Other Alterna- tive Dispute Resolution and Pre-Filing Procedures . Competent authority assistance is available to taxpayers in conjunction with other alternative dispute resolution and pre-filing procedures in order to ensure taxation in accordance with tax treaty provisions. Other revenue procedures and IRS publications should be consulted as necessary with regard to specific matters. See, e.g., Rev. Proc. 96–53, 1996–2 C.B. 375 (concerning APAs); or Rev. Proc. 98–21, 1998–1 C.B. 585 (concerning Article XIII(8) of the U.S.Canada treaty). Taxpayers that have applications under any other dispute resolution procedures should seek competent authority assistance as early as possible if they believe they have potential competent authority issues.

.05 Effect of Agreements or Judicial Determinations on Competent Authority Proceedings . If a taxpayer either executes a closing agreement with the Service (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 with Chief 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 neces

sary for the purpose of providing treatment similar to that provided in Rev. Proc. 99–32. 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 IRS field office to consult on whether the issue should be resolved for subsequent taxable periods. If the IRS field office consents to this procedure, the U.S. competent authority will address with the foreign competent authority the request for 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 Industry Case (“CIC”) taxpayer, the taxpayer must furnish all relevant information and statements requested by the Service, as described in Rev. Proc. 94–67, 1994–2 C.B. 800. If the case involves a non-CIC taxpayer, the taxpayer must furnish all relevant information and statements that may be requested by the IRS field office. 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 there

after, 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 Associate Chief Counsel (International). 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 section 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 section 7605(b)) before beginning such examination or inspection. The accelerated competent authority procedure is not subject to the AIR process limitations.