§ 301.6404-2 Abatement of interest.
(a) In general.
(1) Section 6404(e)(1) provides that the Commissioner may (in the Commissioner's discretion) abate the assessment of all or any part of interest on any—
(i) Deficiency (as defined in section 6211(a), relating to income, estate, gift, generation-skipping, and certain excise taxes) attributable in whole or in part to any unreasonable error or delay by an officer or employee of the Internal Revenue Service (IRS) (acting in an official capacity) in performing a ministerial or managerial act; or
(ii) Payment of any tax described in section 6212(a) (relating to income, estate, gift, generation-skipping, and certain excise taxes) to the extent that any unreasonable error or delay in payment is attributable to an officer or employee of the IRS (acting in an official capacity) being erroneous or dilatory in performing a ministerial or managerial act.
(2) An error or delay in performing a ministerial or managerial act will be taken into account only if no significant aspect of the error or delay is attributable to the taxpayer involved or to a person related to the taxpayer within the meaning of section 267(b) or section 707(b)(1). Moreover, an error or delay in performing a ministerial or managerial act will be taken into account only if it occurs after the IRS has contacted the taxpayer in writing with respect to the deficiency or payment. For purposes of this paragraph (a)(2), no significant aspect of the error or delay is attributable to the taxpayer merely because the taxpayer consents to extend the period of limitations.
(b) Definitions—(1) Managerial act means an administrative act that occurs during the processing of a taxpayer's case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act. Further, a general administrative decision, such as the IRS's decision on how to organize the processing of tax returns or its delay in implementing an improved computer system, is not a managerial act for which interest can be abated under paragraph (a) of this section.
(2) Ministerial act means a procedural or mechanical act that does not involve the exercise of judgment or discretion, and that occurs during the processing of a taxpayer's case after all prerequisites to the act, such as conferences and review by supervisors, have taken place. A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act.
(c) Examples. The following examples illustrate the provisions of paragraphs (b) (1) and (2) of this section. Unless otherwise stated, for purposes of the examples, no significant aspect of any error or delay is attributable to the taxpayer, and the IRS has contacted the taxpayer in writing with respect to the deficiency or payment. The examples are as follows:
Example 1.
A
taxpayer moves from one state to another before the
IRS selects the
taxpayer's income tax return for examination. A letter explaining that the return has been selected for examination is sent to the
taxpayer's old address and then forwarded to the new address. The
taxpayer timely responds, asking that the audit be transferred to the
IRS's district office that is nearest the new address. The group manager timely approves the
request. After the
request for transfer has been approved, the transfer of the case is a
ministerial act. The Commissioner may (in the Commissioner's discretion) abate
interest attributable to any unreasonable delay in transferring the case.
Example 2.
An examination of a
taxpayer's income tax return reveals a deficiency with respect to which a notice of deficiency will be issued. The
taxpayer and the
IRS identify all agreed and unagreed issues, the notice is prepared and reviewed (including review by District Counsel, if necessary), and any other relevant prerequisites are completed. The
issuance of the notice of deficiency is a
ministerial act. The Commissioner may (in the Commissioner's discretion) abate
interest attributable to any unreasonable delay in issuing the notice.
Example 3.
A revenue agent is sent to a training course for an extended period of time, and the agent's supervisor decides not to reassign the agent's cases. During the training course, no work is done on the cases assigned to the agent. The decision to send the revenue agent to the training course and the decision not to reassign the agent's cases are not ministerial acts; however, both decisions are managerial acts. The Commissioner may (in the Commissioner's discretion) abate interest attributable to any unreasonable delay resulting from these decisions.
Example 4.
A
taxpayer appears for an office audit and submits all necessary
documentation and information. The auditor tells the
taxpayer that the
taxpayer will receive a copy of the audit report. However, before the report is prepared, the auditor is permanently reassigned to another group. An extended period of time passes before the auditor's cases are reassigned. The decision to reassign the auditor and the decision not to reassign the auditor's cases are not
ministerial acts; however, they are managerial acts. The Commissioner may (in the Commissioner's discretion) abate
interest attributable to any unreasonable delay resulting from these decisions.
Example 5.
A taxpayer is notified that the IRS intends to audit the taxpayer's income tax return. The agent assigned to the case is granted sick leave for an extended period of time, and the taxpayer's case is not reassigned. The decision to grant sick leave and the decision not to reassign the taxpayer's case to another agent are not ministerial acts; however, they are managerial acts. The Commissioner may (in the Commissioner's discretion) abate interest attributable to any unreasonable delay caused by these decisions.
Example 6.
A revenue agent has completed an examination of the income tax return of a taxpayer. There are issues that are not agreed upon between the taxpayer and the IRS. Before the notice of deficiency is prepared and reviewed, a clerical employee misplaces the taxpayer's case file. The act of misplacing the case file is a managerial act. The Commissioner may (in the Commissioner's discretion) abate interest attributable to any unreasonable delay resulting from the file being misplaced.
Example 7.
A
taxpayer invests in a tax shelter and reports a loss from the tax shelter on the
taxpayer's income tax return.
IRS personnel conduct an extensive examination of the tax shelter, and the processing of the
taxpayer's case is delayed because of that examination. The decision to delay the processing of the
taxpayer's case until the completion of the examination of the tax shelter is a decision on how to organize the processing of
tax returns. This is a general administrative decision. Consequently,
interest attributable to a delay caused by this decision cannot be abated under
paragraph (a) of this section.
Example 8.
A
taxpayer claims a loss on the
taxpayer's income tax return and is notified that the
IRS intends to examine the return. However, a decision is made not to commence the examination of the
taxpayer's return until the processing of another return, for which the statute of
limitations is about to expire, is completed. The decision on how to prioritize the processing of returns based on the expiration of the statute of
limitations is a general administrative decision. Consequently,
interest attributable to a delay caused by this decision cannot be abated under
paragraph (a) of this section.
Example 9.
During the examination of an income tax return, there is disagreement between the
taxpayer and the revenue agent regarding certain itemized deductions claimed by the
taxpayer on the return. To resolve the issue, advice is requested in a timely manner from the Office of Chief Counsel on a substantive issue of federal
tax law. The decision to
request advice is a decision concerning the proper application of federal
tax law; it is neither a ministerial nor a managerial act. Consequently,
interest attributable to a delay resulting from the decision to
request advice cannot be abated under
paragraph (a) of this section.
Example 10.
The
facts are the same as in
Example 9 except the attorney who is assigned to respond to the
request for advice is granted leave for an extended period of time. The case is not reassigned during the attorney's absence. The decision to grant leave and the decision not to reassign the
taxpayer's case to another attorney are not
ministerial acts; however, they are managerial acts. The Commissioner may (in the Commissioner's discretion) abate
interest attributable to any unreasonable delay caused by these decisions.
Example 11.
A
taxpayer contacts an
IRS employee and
requests information with respect to the amount due to satisfy the
taxpayer's income tax liability for a particular
taxable year. Because the employee fails to access the most recent data, the employee gives the
taxpayer an incorrect amount due. As a
result, the
taxpayer pays less than the amount required to satisfy the
tax liability. Accessing the most recent data is a
ministerial act. The Commissioner may (in the Commissioner's discretion) abate
interest attributable to any unreasonable error or delay arising from giving the
taxpayer an incorrect amount due to satisfy the
taxpayer's income tax liability.
Example 12.
A
taxpayer contacts an
IRS employee and
requests information with respect to the amount due to satisfy the
taxpayer's income tax liability for a particular
taxable year. To determine the current amount due, the employee must interpret complex provisions of federal
tax law involving net operating loss carrybacks and foreign tax credits. Because the employee incorrectly interprets these provisions, the employee gives the
taxpayer an incorrect amount due. As a
result, the
taxpayer pays less than the amount required to satisfy the
tax liability. Interpreting complex provisions of federal
tax law is neither a ministerial nor a managerial act. Consequently,
interest attributable to an error or delay arising from giving the
taxpayer an incorrect amount due to satisfy the
taxpayer's income tax liability in this situation cannot be abated under
paragraph (a) of this section.
Example 13.
A
taxpayer moves from one state to another after the
IRS has undertaken an examination of the
taxpayer's income tax return. The
taxpayer asks that the audit be transferred to the
IRS's district office that is nearest the new address. The group manager approves the
request, and the case is transferred. Thereafter, the
taxpayer moves to yet another
state, and once again asks that the audit be transferred to the
IRS's district office that is nearest that new address. The group manager approves the
request, and the case is again transferred. The agent then assigned to the case is granted sick leave for an extended period of time, and the
taxpayer's case is not reassigned. The
taxpayer's repeated moves
result in a delay in the completion of the examination. Under
paragraph (a)(2) of this section,
interest attributable to this delay cannot be abated because a significant aspect of this delay is attributable to the
taxpayer. However, as in
Example 5, the Commissioner may (in the Commissioner's discretion) abate
interest attributable to any unreasonable delay caused by the managerial decisions to grant sick leave and not to reassign the
taxpayer's case to another agent.
(d) Effective dates—(1) In general. Except as provided in paragraph (d)(2) of this section, the provisions of this section apply to interest accruing with respect to deficiencies or payments of any tax described in section 6212(a) for taxable years beginning after July 30, 1996.
(2) Special rules—(i) Estate tax. The provisions of this section apply to interest accruing with respect to deficiencies or payments of—
(A) Estate tax imposed under section 2001 on estates of decedents dying after July 30, 1996;
(B) The additional estate tax imposed under sections 2032A(c) and 2056A(b)(1)(B) in the case of taxable events occurring after July 30, 1996; and
(C) The additional estate tax imposed under section 2056A(b)(1)(A) in the case of taxable events occurring after December 31, 1996.
(ii) Gift tax. The provisions of this section apply to interest accruing with respect to deficiencies or payments of gift tax imposed under chapter 12 on gifts made after December 31, 1996.
(iii) Generation-skipping transfer tax. The provisions of this section apply to interest accruing with respect to deficiencies or payments of generation-skipping transfer tax imposed under chapter 13—
(A) On direct skips occurring at death, if the transferor dies after July 30, 1996; and
(B) On inter vivos direct skips, and all taxable terminations and taxable distributions occurring after December 31, 1996.