Awards of Attorney's Fees &
Other Costs Based Upon Qualified Offers

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 301 [REG-121928-98] RIN 1545-
AW99

TITLE: Awards of attorney's fees and other costs based upon
qualified offers

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to
temporary regulations and notice of public hearing.

SUMMARY: In the Rules and Regulations section of this issue of the
Federal Register, the IRS is issuing temporary regulations relating
to the circumstances in which a party, by reason of having made a
qualified offer, will be entitled to an award of court costs and
certain fees in a civil tax proceeding brought in a court of the
United States (including the Tax Court). The text of those temporary
regulations also serves as the text of these proposed regulations.
This document also provides notice of a public hearing on these
proposed regulations.

DATES: Written comments must be received by April 4, 2001. Outlines
of topics to be discussed at the public hearing scheduled for May
23, 2001, at 10 a.m., must be received by May 2, 2001. The IRS and
Treasury specifically request comments on the clarity of the
proposed rule and how it may be made easier to understand.

ADDRESSES: Send submissions to: CC:M&SP:RU (REG-121928-98 room 5226,
Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday
through Friday between the hours of 8 a.m. and 5 p.m. to: CC:M&SP:RU
(REG-121928-98), Courier's Desk, Internal Revenue Service, 1111
Constitution Avenue, NW., Washington, DC. Alternatively, taxpayers
may submit comments electronically via the Internet by selecting the
"Tax Regs" option on the IRS Home Page, or by submitting comments
directly to the IRS Internet site at
http://www.irs.gov/prod/tax_regs/regslist.html. The public hearing
will be held in room 4718, Internal Revenue Building, 1111
Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the hearing, submission
of written comments, and to be placed on the building access list to
attend the hearing, Treena V. Garrett, (202) 622-7180; concerning
the regulations, Thomas D. Moffitt (202) 622-7900 (not toll-free
numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules and Regulations section of this
issue of the Federal Register provide rules relating to the
circumstances in which a party, by reason of having made a qualified
offer, will be entitled to an award of court costs and certain fees
in a civil tax proceeding brought in a court of the United States
(including the Tax Court). The text of those regulations also serves
as the text of these proposed regulations. The preamble to the
temporary regulations explains. the temporary regulations.

Comments are specifically requested on the rule requiring the
provision of information and arguments regarding adjustments raised
by taxpayers after the issuance of the first letter of proposed
deficiency which provides the taxpayer with an opportunity for
administrative review in the Internal Revenue Service Office of
Appeals and still unresolved at the time the last qualified offer is
made. The changes to section 7430 made by Congress anticipate
qualified offers based upon the adjustments at issue when the first
letter of proposed deficiency is sent. Adjustments subsequently
raised by taxpayers would not be subject to the audit development
preceding the issuance of such first letter of proposed deficiency.
The proposed rule is intended to eliminate any such differences
between the adjustments subject to the last qualified offer.

Comments are also specifically requested on the rule establishing
the end of the qualified offer period, for courts using trial
calendars, at the point where the case remains listed on a trial
calendar thirty days before the scheduled date for the calendar call
for that trial session. The proposed rule is intended to keep the
qualified offer period open until shortly before trial while
ensuring that the last day of the qualified offer period can be
ascertained on that day.

Special Analyses

It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in. Executive Order
12866. Therefore, a regulatory assessment is not required. It also
has been determined that section 553(b) of the Administrative
Procedure Act (5 U.S.C. chapter 5) does not apply to these
regulations and, because these regulations do not impose on small
entities a collection of information requirement, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Therefore, a
Regulatory Flexibility Analysis is not required. Pursuant to section
7805(f) of the Internal Revenue Code, this notice of proposed
rulemaking will be submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (a signed
original and eight (8) copies) that are submitted timely to the IRS.
The IRS and Treasury Department request comments on the clarity of
the proposed rules and how they may be made easier to understand.
All comments will be available for public inspection and copying.

A public hearing has been scheduled for May 23, 2001, at 10 a.m., in
room 4718, Internal Revenue Building, 1111 Constitution Avenue NW.,
Washington, DC. Due to building security procedures, visitors must
enter at the 10th Street entrance, located between Constitution and
Pennsylvania Avenues, NW. In addition, all visitors must present
photo identification to enter the building. Because of access
restrictions, visitors will not be admitted. beyond the immediate
entrance area more than 15 minutes before the hearing starts. For
information about having a visitor's name placed on the building
access list to attend the hearing, see the FOR FURTHER INFORMATION
CONTACT caption.

An outline of the topics to be discussed and the time to be devoted
to each topic (a signed original and eight (8) copies) must be
submitted by any person that wishes to present oral comments at the
hearing. Outlines must be received by May 2, 2001.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. A period of
10 minutes will be allotted to each person for making comments.

An agenda showing the scheduling of the speakers will be prepared
after the deadline for receiving requests to speak has passed.
Copies of the agenda will be available free of charge at the
hearing.

Drafting Information

The principal author of these regulations is Thomas D. Moffitt,
Office of Assistant Chief Counsel (Field Service). However, other
personnel from the IRS and Treasury Department participated in their
development.

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read
in part as follows:

Authority: 26 U.S.C. 7805 * * *

§301.7430-0 [Removed]

Par. 2. Section 301.7430-0 is removed.

Par. 3. Section 301.7430-7 is added to read as follows:

§301.7430-7 Qualified offers.

[The text of this proposed section is the same as the text of
§301.7430-7T published elsewhere in this issue of the Federal
Register.]

Robert E. Wenzel
Deputy Commissioner of Internal Revenue

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