rp-16-17.pdf

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[26 C.F.R. § 301.7430-2]: [Requirements and procedures for recovery of reasonable
administrative costs]
(Also: Section 7430)

Rev. Proc. 2016-17

SECTION 1. PURPOSE
This revenue procedure provides guidance on the recovery of administrative and
litigation costs in connection with the determination, collection, or refund of any tax,
interest, or penalty by individuals who provide pro bono representation to taxpayers.
SECTION 2. BACKGROUND
.01 Section 7430 provides for awards of reasonable administrative and litigation
costs incurred by taxpayers who substantially prevail in administrative or court
proceedings brought by or against the United States in connection with the
determination, collection, or refund of any tax, interest, or penalty under title 26.
.02 Section 7430(c)(3)(B), as amended by the Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 685 (Jul. 22,
1998) (RRA ’98), provides that a court may award reasonable attorneys’ fees under
section 7430(a) in excess of fees paid or incurred if those fees are less than the

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reasonable attorneys’ fees because an individual is representing the prevailing party for
no fee or for a fee which, taking into account all the facts and circumstances, is no more
than a nominal fee (i.e., pro bono).
.03 Section 7430(c)(3)(A) provides that the fees for the services of an individual
(whether or not an attorney) who is authorized to practice before the United States Tax
Court or before the Internal Revenue Service (the Service) shall be treated as fees for
the services of an attorney.
.04 Section 7430(c)(3)(B) further provides that an award of fees for representation
on a pro bono basis may only be paid to the individual providing the pro bono
representation or such individual’s employer.
.05 On November 25, 2009, the Treasury Department and the Service published
proposed amendments to the Treasury regulations relating to awards of administrative
costs and attorneys’ fees under section 7430 (74 FR 61589) to conform the regulations
to the amendments that were made to section 7430 in RRA ’98, including the
amendment allowing for an award of reasonable attorneys’ fees when a taxpayer is
represented on a pro bono basis. Final regulations are being issued
contemporaneously with this revenue procedure (Treasury Decision 9756).
.06 In response to public comments received on the proposed regulations, this
revenue procedure supplements the final regulations by providing more detailed
information and processes specific to pro bono representation. A summary of the
comments can be found in the preamble to the final section 7430 regulations.

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SECTION 3. SCOPE
.01 This revenue procedure applies to representatives providing pro bono
representation.
.02 Pro Bono Representation. Pro bono representation is established by
demonstrating that (1) representation was provided for no fee or for a fee that, taking
into account all the facts and circumstances, constitutes a nominal fee, and (2) the
representative intended to provide representation for no fee or a nominal fee from the
commencement of the representation. See Treas. Reg. § 301.7430-4(d)(2).
(A) A nominal fee is defined as a fee that is insignificantly small or minimal. A
nominal fee is a trivial payment, bearing no relation to the value of the representation
provided, taking into account all the facts and circumstances. See Treas. Reg. Sec.
301.7430-4(d)(3).
(B) Intent to provide representation for no fee or a nominal fee may be
demonstrated through documentation such as a retainer agreement or a pro bono
representation agreement. A representative will not be considered to have provided pro
bono representation if the facts demonstrate that the representative anticipated a fee
greater than a nominal fee or provided representation on a contingency fee basis.
However, the fact that the representative intended to seek recovery of fees under
section 7430 will not prevent the representative from satisfying this requirement. See
Treas. Reg. § 301.7430-4(d)(2)(ii).
.03 Pro bono representatives include, but are not limited to, individuals providing
pro bono representation directly or individuals employed by or acting in conjunction with

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organizations providing legal representation. Thus, a pro bono representative may be a
sole practitioner, a partner or employee in a law firm or accounting firm, an employee of
an organization, or a volunteer affiliated with an organization. Examples of
organizations that provide pro bono representation, in whole or in part, include, but are
not limited to, legal aid organizations, low income taxpayer clinics receiving funding
under section 7526, clinics participating in the Service’s Student Tax Clinic Program,
and clinics participating in the United States Tax Court’s clinical program, whether the
representation is provided by the employees, the legal aid organization or clinic, or by
other individuals and/or service providers affiliated with the legal aid organization or
clinic.
SECTION 4. PROCEDURE
.01 To recover fees under section 7430, a pro bono representative generally should
follow the procedures set forth in section 7430, Treas. Reg. § 301.7430-2, and Tax
Court Rules 230-233. The additional procedures set forth below apply only to pro bono
representatives.
.02 Recordkeeping Requirements. To recover fees, a pro bono representative must
maintain contemporaneous activity records of all time spent on a case for which fees
are being claimed. The records should be similar to billing records maintained by for-
profit law firms for non-pro bono representation, and must show the work performed and
the time allocated to each task. The representation must be described in sufficient
detail to enable the Service to evaluate the reasonableness of the amount of time
expended in relation to the service performed and to identify duplicated efforts, if any.

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The records must include time spent by all those who provide representation to the
taxpayer that is recoverable under this revenue procedure. For each representative for
whom fees are claimed, the records must identify the individual’s name and position,
such as supervisory attorney, student, or paralegal, and the associated incremental
periods of time spent by that individual for which a fee is claimed. For each increment
of time for which fees are claimed, the records must identify the date on which the
representation was provided and must describe the nature of the representation in
detail. The use of classifications to describe the representation is strongly encouraged.
Suggested classifications include, but are not limited to, initial client interview, research
(identifying the issue), preparing pleadings or other court documents, preparing letters
(identifying the recipient and subject matter), investigation of underlying facts (briefly
describing the subject matter and information), analysis of taxpayer or third-party
records (identifying the records), consultation with tax return preparer (identifying the
preparer), consultation or interview of third party (identifying the person), and telephone
conversations (identifying with whom the conversation was held and the subject matter).
What constitutes sufficient detail will be initially determined by the Service based on the
facts and circumstances of each case.
.03 Review of Denial. The Service’s denial of an award of fees, in whole or in part,
may be challenged in the Tax Court pursuant to section 7430(f).
.04 Rate for Pro Bono Representatives Who Charge an Hourly Rate. The hourly
rate used to calculate an attorney fee award for pro bono representatives who charge
hourly rates in their ordinary course of business will generally be limited to the lesser of

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the statutory hourly rate set forth in section 7430(c)(1)(B)(iii) or their hourly billing rate,
unless they can establish that a special factor, as described in section 7430(c)(1)(B)(iii),
applies.
.05 Fixed Rate for Pro Bono Representatives Who Do Not Charge an Hourly Rate.
Some pro bono representatives do not charge hourly rates for representation in the
ordinary course of their business. Examples of these pro bono representatives include,
but are not limited to, employees of a clinic or organization that provides pro bono
representation, and other individuals who perform pro bono representation outside of
their professional employment, such as retired representatives or in-house counsel.
Since it is often difficult to determine an appropriate hourly rate with respect to these pro
bono representatives on a case-by-case basis, and attempting to do so may require the
expenditure of significant resources by the parties to the proceeding and possibly a
court, this revenue procedure provides a fixed rate for individuals who provide pro bono
representation but do not charge an hourly rate for representing taxpayers equal to the
statutory hourly rate under section 7430(c)(1)(B)(iii). If an award based on a higher
hourly rate is sought, the burden will be on the requester to establish that a higher
hourly rate is appropriate.
.06 Fixed Rate for Students and Paralegals. Reasonable fees may be recovered for
work performed by students who have been authorized to practice before the Service
pursuant to 31 C.F.R. Part 10 (Treasury Department Circular No. 230) or to practice
before the United States Tax Court under the supervision of a practitioner through the
United States Tax Court’s Clinical, Student Practice and Calendar Call Program, and by

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paralegals or other persons qualified to perform paralegal work who are assisting pro
bono representatives. For reasons similar to those described in section 4.05 of this
revenue procedure, this revenue procedure provides a fixed rate for students authorized
as described in this section 4.06, and for paralegals or other persons qualified to
perform paralegal work regardless of whether they charge an hourly rate, equal to thirty-
five percent of the statutory hourly rate provided for representatives under section
7430(c)(1)(B)(iii). If an award based on a higher hourly rate is sought, the burden will
be on the requester to establish that a higher hourly rate is appropriate. Fees are not
recoverable for work that is secretarial in nature. See Treas. Reg. § 301.7430-4(c)(2).
.07 Other Volunteers at a Pro Bono Clinic or Organization. Fees for time claimed for
other volunteers (e.g., students or professionals who have not been authorized to
practice before the Service or the Tax Court or paralegal students) working at a pro
bono clinic or organization may be recoverable on a case-by-case basis. The burden
will be on the requester to establish an appropriate hourly rate.
.08 Application of Requirements of Section 7430. To be eligible for an award of
attorneys’ fees, taxpayers represented by a pro bono representative must meet all
applicable requirements of section 7430.
.09 Award of Fees. A fee awarded under section 7430(c)(3)(B) generally will be
paid to the pro bono representative, unless the Service is specifically instructed by the
representative, in writing, to pay the fee to the representative’s employer, such as a law
firm. Fees awarded for services provided by an employee of a pro bono clinic or
organization, or a student affiliated with a pro bono clinic or organization, will be paid to

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the clinic or organization. If, however, an individual representative who is not an
employee of a pro bono clinic or organization volunteers to provide services in affiliation
with a pro bono clinic or organization, fee awards in that context will be paid to the clinic
or organization. Solely for the purpose of determining to whom an award of fees under
section 7430 should be paid, the clinic or organization will be considered the employer
of the individual who volunteers to provide services for the pro bono clinic or
organization. If the Service is specifically informed in writing by the pro bono clinic or
organization that, pursuant to an agreement between the clinic or organization and the
representative, some or all of the award should be paid to the representative or to the
representative’s employer, that agreement will be honored. For purposes of this section
4.09, a for-profit law firm is not considered to be an organization.
SECTION 5. EXAMPLES
Example 1. This example primarily illustrates the application of sections 4.04 and
4.05 of this Revenue Procedure. Attorney W, an employee of a low income taxpayer
clinic, represents D in a Tax Court proceeding. Counsel, an attorney employed by a for-
profit law firm, also represents D in that Tax Court action on a pro bono basis. D
prevails and a motion for fees is filed on D’s behalf. Counsel’s hourly billing rate at the
law firm exceeds the statutory hourly rate under section 7430(c)(1)(B)(iii). The claim for
fees includes time charged at the statutory hourly rate for Attorney W and time charged
at Counsel’s hourly billing rate. Counsel cannot demonstrate that any special factor
warrants an hourly rate in excess of the statutory hourly rate. Similarly, Attorney W
cannot demonstrate that a rate in excess of the fixed rate is appropriate. Assuming D

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meets the remaining requirements of section 7430, Attorney W and Counsel are entitled
to an award of fees for a reasonable number of hours. The award is limited to the
statutory hourly rate for Attorney W’s and Counsel’s time.
Example 2. This example primarily illustrates the application of sections 4.05 and
4.06 of this Revenue Procedure. Attorney X, an employee of a low income taxpayer
clinic, represents A on a pro bono basis in a controversy with the Service. Student S
and Paralegal P assist Attorney X with the representation of A. Student S has been
authorized to practice before the Service. A prevails and Attorney X files a claim for
fees on A’s behalf. Attorney X does not charge an hourly billing rate, and cannot
demonstrate that a rate in excess of the statutory hourly rate is appropriate. Similarly,
Student S and Paralegal P do not charge an hourly billing rate, and cannot demonstrate
that a rate in excess of the fixed rate set forth in section 4.06 of this revenue procedure
is appropriate. Assuming A meets the remaining requirements of section 7430, fees will
be awarded for Attorney X’s reasonable time at a fixed rate equal to the statutory hourly
rate under section 7430(c)(1)(B)(iii). Fees for reasonable time spent by Student S and
Paralegal P in assisting Attorney X will be awarded at a fixed rate of thirty-five percent
of the statutory hourly rate provided for representatives under section 7430(c)(1)(B)(iii).
Example 3. This example primarily illustrates the application of section 4.09 of this
Revenue Procedure. Attorney Y, who is employed by a nonprofit organization,
represents B on a pro bono basis. B prevails with respect to the amount in controversy.
In addition to Attorney Y, B is represented by Lawyer, an attorney employed by a for-
profit law firm, who worked on the case on a pro bono basis at the request of the

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nonprofit organization. B prevails and Attorney Y files a claim for administrative and
litigation costs on B’s behalf. Therefore, assuming B is otherwise entitled to recover
costs, and the nonprofit organization does not specifically inform the Service that the
portion of the fees attributable to Lawyer’s work on the case should be paid to Lawyer or
Lawyer’s firm, all fees will be paid to the nonprofit organization.
Example 4. This example primarily illustrates the application of section 4.02 of this
Revenue Procedure. Attorney Z, an employee of a low income taxpayer clinic, provides
C with pro bono representation in a controversy with the Service that was ongoing for
several years. C prevails and Attorney Z files a claim for fees on C’s behalf. The
activity records submitted with the claim for fees were created shortly before the claim
was submitted. The Service may challenge C’s entitlement to fees based on the fact
that the activity records were not contemporaneously maintained and may be unreliable.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective for all motions for costs under section 7430 filed
on or after February 29, 2016. Taxpayers may elect to follow this revenue procedure for
motions for costs under section 7430 filed prior to February 29, 2016, and pending
before the court on February 29, 2016.
SECTION 7. DRAFTING INFORMATION
The principal author of this revenue procedure is Shannon K. Castañeda of the
Office of Associate Chief Counsel (Procedure and Administration). For further
information regarding this revenue procedure, contact Shannon K. Castañeda at (202)
317-5437 (not a toll-free call).