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IRS Sets Rules for Municipal Appeals.

The U.S. Internal Revenue Service (IRS) last week issued Notice 98-58. The new notice describes a proposed revenue procedure to set out a process for notification to cities and towns and appeal of adverse IRS determinations against such cities.

The procedure describes the appeal process cities and towns could use in order to prevent the IRS from declaring their tax-exempt municipal bonds as taxable.

The proposed revenue procedure details the NLC-supported provisions of the 1998 IRS Restructuring and Reform Act (P.L. 105-206).

The appeal provision plus the act's expansion of the IRS' alternative dispute resolution programs also means that cities will be able to use the IRS' early referral program, which enables certain municipal issuers to go to appeal while an audit is ongoing.

The proposed revenue procedure in Notice 98-58 would implement two major changes. The first allows cities to seek review of IRS adverse determinations.

The second change is that a city would be permitted to appeal prior to the field IRS agent obtaining a technical advice memorandum.

A city or town seeking to appeal an adverse IRS determination must request the review in writing within 30 days of the date of notice from the district.

The request, which should include any further explanation the issuer might wish to make of its position, must be signed and dated by the city and must include a declaration that the statements in the request are true.

The appeal right becomes effective on December 7, 1998, when it will 1 appear in Internal Revenue Bulletin 1998-49.

The IRS would welcome comment on the proposed revenue procedure provided in this notice and on the application of the early referral program to Bond Issue. Comments should be submitted by March 7, 1999, either to:

National Director of Appeals 901 D Street, N.W. Box 68 Washington, D.C. 20024 Attn:C:AP:ADR&CS, Rm. 236

or electronically via: ax--regs/comments.html (the Internal Revenue Service Internet site).
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Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Nov 30, 1998
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