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Comments on the Voluntary Fiduciary Correction Program

1. Years and Taxes Covered by a Qualified Offer. Treas. Reg. § 301.7430-7(b)(1) generally provides that to determine if a taxpayer is a prevailing party, "the liability for the type or types of tax and the taxable year or years at issue in the proceeding" is compared to the comparable liability under the judgment. The regulation also refers to Treas. Reg. §§ 301.7430-7(b)(2) and 301.7430-7(c) for further details. Neither of these regulations addresses situations involves more than one year or more than one tax in any more detail than Treas. Reg. § 301.7430-7(b)(1). None of the examples under Treas. Reg. § 301.7430-7(e) involve a more than one year or more than one tax. In a multi-year and/or multi-tax case, it is unclear whether a taxpayer may, or must, make a qualified offer on a single year/single tax basis, on an entire case basis encompassing all years and all taxes, or on any combination of some, but not all, years and/or taxes, at the taxpayer’s option.

   Under the principles of Commissioner v. Sunnen, 333 U.S. 591 (1948), and similar cases, each tax liability for each tax year generally stands on its own. We believe that these principles should apply equally in qualified offer situations, so that taxpayers may make a qualified offer for a single tax for a single year, even in a multi-year and/or multi-tax case. Alternatively, we believe that in order to promote settlement of multi-year and/or multi-tax situations, the taxpayer should be able to make a single offer specifying a single net tax liability that includes as many of the years and taxes as the taxpayer desires, in whatever combination the taxpayer desires. Such an offer could cover some, but not all, of the years and taxes in an entire case: if it covered less than all the years or taxes in an entire case, one or more additional qualified offers could be made which covered some or all of the remaining years or taxes. We believe that these principles should apply whether the multiple years and/or multiple taxes are combined into a single docket or whether they are in multiple proceedings (the latter is consistent with section 7430(e)). We would recommend that each of these principles be adopted and that the regulations be clarified to explicitly permit the taxpayer, in a multi-year and/or multi-tax case, at its option, to make one or more qualified offers to cover a single tax for a single year or multi-year and/or multi-tax qualified offers covering some or all the years, whether in one or more proceedings. We recommend that one or more examples be given to illustrate this.

   We understand that there is a concern that if a single issue affects more than one year or if a tax is dependent upon the resolution of another tax, then allowing the taxpayer to make an offer that covers some but not all the affected years or affected taxes would be inappropriate. If this is the case, we recommend that the regulation describe the circumstances where this concern arises and provide examples.

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