rp-99-35.pdf

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Part IV
ADMINISTRATIVE APPEAL OF PROPOSED ADVERSE DETERMINATION OF
TAX-EXEMPT STATUS OF BOND ISSUE
REVENUE PROCEDURE 99-35
TABLE OF CONTENTS
SECTION 1. PURPOSE
SECTION 2. BACKGROUND
SECTION 3. SCOPE
.01 In general
.02 Issuers as taxpayers
.03 Conduit Borrowers
.04 Early referral
SECTION 4. ADMINISTRATIVE APPEAL PROCESS
.01 In general
.02 Consultations with District Counsel
.03 The District requests technical advice
.04 The Issuer requests technical advice
.05 Technical advice not requested
.06 Closing agreement with the District
SECTION 5. HOW TO REQUEST AN APPEAL
.01 In general
.02 The Issuer’s appeal request and response to the District’s notice
.03 Failure to make appeal request
SECTION 6. THE DISTRICT FORWARDS CASE FILE TO APPEALS
SECTION 7. PROCESSING AN APPEAL REQUEST
SECTION 8. RESOLVING AN APPEAL ISSUE(S)
.01 In general

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.02 Other participants in the Appeals process
.03 New information provided
.04 If agreement is reached
.05 If agreement is not reached

SECTION 9. NO USER FEE
SECTION 10. EFFECTIVE DATE

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SECTION 1. PURPOSE
As required by ' 3105 of the Internal Revenue Service Restructuring and Reform Act of
1998, P.L. 105-206, 112 Stat. 685 (RRA 98), this revenue procedure provides procedures for
Issuers (as defined in Rev. Proc. 96-16, 1996-1 C.B. 630) to request an administrative appeal to
the Office of Appeals (Appeals) of a proposed adverse determination by an Employee
Plans/Exempt Organizations Key District (the District) that the interest on their debt obligations
(the Bond Issue) is not excludable from gross income under ' 103 of the Internal Revenue Code.
SECTION 2. BACKGROUND
Prior to RRA 98, procedures did not exist for Issuers to appeal a proposed adverse
determination by the District that the interest on a Bond Issue is not excludable from gross
income of the bondholders. Section 3105 of RRA 98 directs the Service to modify its
administrative procedures to allow Issuers to appeal a proposed adverse determination by the
District to Appeals with respect to a Bond Issue. As a result, an Issuer may appeal a proposed
adverse determination to Appeals before the District proceeds to tax bondholders. This revenue
procedure sets forth procedures for Issuers to appeal proposed adverse determinations by the
District, and makes other modifications to the examination process made appropriate by RRA 98.
As a result of the changes made by section 3105 of RRA 98, examination procedures have
been modified to eliminate the requirement that the District receive a technical advice
memorandum from Assistant Chief Counsel (Financial Institutions & Products) that is unfavorable
to the Issuer before the District proceeds to tax bondholders.
SECTION 3. SCOPE
.01 In general. An appeal of a proposed adverse determination by the District is optional
and is initiated by the Issuer as described below. Any issue raised by the District during an
examination of a Bond Issue that would cause the interest on the Bond Issue not to be excludable
from gross income under ' 103 or claims for refund or rebates raised by the Issuers are
appropriate for consideration by Appeals.
.02 Issuers as taxpayers. For purposes of examining Bond Issues, Issuers are treated as
taxpayers. See Section 8.02 of this revenue procedure regarding other persons that may
participate in an Appeals proceeding.
.03 Conduit borrowers. In appropriate circumstances, Appeals may consider issues that
relate to the tax liability of the beneficiary of bond proceeds in a conduit financing (Conduit

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Borrower) at the same time as the Issuer=s appeal. Appeals will only consider an issue relating to
the tax liability of a Conduit Borrower if the Conduit Borrower is under examination with respect
to the issue, the resolution of the issue is affected by the determination of whether the interest on
the Bond Issue is excludable from gross income under ' 103, and the Conduit Borrower agrees to
resolving the issue at the same time as the Issuer’s appeal under this revenue procedure. See
section 8.01 of this revenue procedure for Appeals procedures governing the Conduit Borrower.
.04 Early referral. Section 3465 of RRA 98 provides that the Service shall prescribe
procedures by which a taxpayer may request early referral of one or more unresolved issues to
Appeals. Under Revenue Procedure 99-28, 1999-29 I.R.B. 109, an Issuer may make a separate
request to the District for the early referral to Appeals of one or more issues regarding a Bond
Issue. See section 2.02 of Rev. Proc. 99-28 for issues that are appropriate for early referral.
Early referral may also be appropriate for issues that are not determinative of whether the interest
on the Bond Issue is excludable from gross income under ' 103, including such issues for which
the National Office has issued a technical advice memorandum to the District.
SECTION 4. ADMINISTRATIVE APPEAL PROCESS
.01 In general. Sections 4.03, 4.04, and 4.05 of this revenue procedure describe the
circumstances in which an Issuer may appeal a proposed adverse determination by the District
that the interest on a Bond Issue is not excludable from gross income under ' 103. To the extent
provided in sections 4.03(2), 4.04(2), or 4.05(2), the Issuer may request an appeal in accordance
with section 5.
.02 Consultations with District Counsel. Prior to issuing a proposed adverse
determination to the Issuer regarding a Bond Issue, the District will consult with District Counsel
regarding whether the District should request technical advice. Technical advice should be
requested, for example, when there is a lack of uniformity regarding the disposition of an issue or
when an issue is unusual or complex enough to warrant consideration by the National Office.
.03 The District requests technical advice. (1) If, after consultation with District Counsel,
the District determines that technical advice is warranted, the District will follow the procedures
for requesting technical advice set forth in Rev. Proc. 99-2, 1999-1 I.R.B. 73, or subsequent
revenue procedure. If the National Office issues a technical advice memorandum to the District,
the District will notify the Issuer, in writing, of the National Office=s determination.
(2) The written notice will identify the Bond Issue under examination and will include a
copy of the technical advice memorandum. If the District has made a proposed adverse
determination that the interest on the Bond Issue under examination is not excludable from gross
income under ' 103, the written notice will state the District=s reasons for the proposed adverse

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determination, and will inform the Issuer of the availability of an administrative appeal of such
proposed adverse determination.
.04 The Issuer requests technical advice. (1) If, after consultation with District Counsel,
the District determines that technical advice is not necessary, the District will notify the Issuer, in
writing, of its preliminary adverse determination that the interest on the Bond Issue is not
excludable from gross income under ' 103, and provide the Issuer with an opportunity to have
closing agreement discussions. The notice will also inform the Issuer that it may request that an
issue be referred to the National Office for technical advice in accordance with Rev. Proc. 99-2,
1999-1 I.R.B. 73, or subsequent revenue procedure. If the Issuer requests that an issue be
referred to the National Office for technical advice, such referral will be made, and considered, in
accordance with the procedures set forth in Rev. Proc. 99-2, or subsequent revenue procedure. If
the National Office issues a technical advice memorandum to the District, the District will notify
the Issuer, in writing, of the National Office=s determination.
(2) The written notice will identify the Bond Issue under examination and will include a
copy of the technical advice memorandum. If the District has made a proposed adverse
determination that the interest on the Bond Issue under examination is not excludable from gross
income under ' 103, the written notice will state the District=s reasons for the proposed adverse
determination, and will inform the Issuer of the availability of an administrative appeal of such
proposed adverse determination.
.05 Technical advice not requested. (1) If, after receiving notice of the District’s
preliminary adverse determination described in section 4.04(1) of this revenue procedure, the
Issuer does not request technical advice or if the Issuer’s request is denied, the District will
provide the Issuer with an opportunity to have closing agreement discussions. If closing
agreement discussions between the Issuer and the District are unsuccessful, the District will send
the Issuer a written notice to the effect that the District has made a proposed adverse
determination that the interest on the Bond Issue under examination is not excludable from gross
income under ' 103.
(2) The written notice will identify the Bond Issue under examination, state the District’s
reasons for its proposed adverse determination and inform the Issuer of the availability of an
administrative appeal of the District’s proposed adverse determination.
.06 Closing agreement with the District. The District will retain jurisdiction over the Bond
Issue until the Issuer has made a request to appeal the District’s proposed adverse determination
that interest on the Bond Issue is not excludable from gross income under ' 103 and the agent’s
file has been sent to Appeals in accordance with section 6 of this revenue procedure. Prior to
requesting an appeal, the Issuer may enter into closing agreement discussions with the District and

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execute a closing agreement with respect to the Bond Issue. The District will generally prepare a
closing agreement using the model closing agreement provided in Internal Revenue Manual
exhibit 7.6.2.5-3.
SECTION 5. HOW TO REQUEST AN APPEAL
.01 In general. Established Appeals procedures, including those governing submissions
and taxpayer conferences, apply to requesting an appeal of a proposed adverse determination that
interest on a Bond Issue is not excludable from gross income under ' 103.
See
' 601.106 et seq. of the Statement of Procedural Rules.
.02 The Issuer’s appeal request and response to the District’s notice. The Issuer’s appeal
request must be in writing. The appeal request must include a detailed written response to the
District’s notice of the District’s proposed adverse determination, and include any further
explanation of the Issuer’s position regarding the issue(s) in dispute. The Issuer’s written appeal
request must be submitted to the District within 30 days of the date of the notice from the District
regarding its proposed adverse determination. The District may extend this 30-day requirement
following a written request by the Issuer justifying such extension. The Issuer or the Issuer’s
authorized representative must sign an appeal request. It is preferred that Form 2848, Power of
Attorney and Declaration of Representative, be used to designate an authorized representative
when making an appeal request under this revenue procedure.
.03 Failure to make appeal request. If the Issuer does not submit a written appeal request
within the time period set forth in section 5.02 of this revenue procedure, the District=s proposed
adverse determination shall become final and the District may begin the process of taxing
bondholders without further notice to the Issuer.
SECTION 6. THE DISTRICT FORWARDS CASE FILE TO APPEALS
The District will forward the case file to Appeals. The file should include copies of the
following:
1.the technical advice memorandum, if any;
2.all information received by the District from the Issuer regarding the Bond Issue;
3.all work papers of the District examining the Bond Issue;
4.the District’s notice;
5.the Issuer’s written appeal request, and
6.the District’s response to the Issuer’s position, if any.
After the case file is sent to Appeals, Appeals will have jurisdiction over the Bond Issue.

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SECTION 7. PROCESSING AN APPEAL REQUEST
An appeal by an Issuer of a proposed adverse determination will be assigned to a senior
Appeals officer, who will make every effort to resolve the case as expeditiously as possible.
SECTION 8. RESOLVING AN APPEAL ISSUE(S)
.01 In general. Established Appeals procedures, including those governing submissions
and taxpayer conferences, apply to appeals regarding Bond Issues. See
' 601.106 et seq. of the
Statement of Procedural Rules. See also Treasury Department Circular 230, 31 C.F.R., Part 10.
The procedures in sections 8.04 and 8.05 of this revenue procedure, specifically apply to Bond
Issues.
.02 Other participants in the Appeals process. The Issuer may authorize any person (e.g.,
Conduit Borrower) to inspect or receive confidential information during the Appeals process by
submitting a duly executed Taxpayer Information Authorization (Form 8821) to the Appeals
officer. In addition, the Issuer may authorize certain persons to represent the Issuer before
Appeals by submitting a duly executed Power of Attorney and Declaration of Representative
(Form 2848) to the Appeals Officer.
.03 New information provided. If the Issuer provides additional information not
previously given to the District, Appeals will forward the information to the District for its
comments.

.04 If agreement is reached. If Appeals and the Issuer agree that no action is necessary
with respect to the Bond Issue, Appeals will notify the District and close the case. If Appeals and
the Issuer reach an agreement with respect to the Bond Issue, Appeals will generally prepare a
closing agreement using the model closing agreement provided in Internal Revenue Manual
exhibit 7.6.2.5-3.
.05 If agreement is not reached. (1) If Appeals and the Issuer fail to reach an agreement
with respect to an appeal, Appeals will close the appeal file, return jurisdiction over the Bond
Issue to the District, and send a copy of the Appeals Case Memorandum with respect to the Bond
Issue to the District. In such case, the District=s proposed adverse determination shall become
final and the District may begin the process of taxing the bondholders without further notice to
the Issuer.
(2) Appeals will not reconsider an unagreed appeal unless there has been a substantial
change in the circumstances regarding the appeal issue.

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SECTION 9. NO USER FEE
There is no user fee for an appeal request.
SECTION 10. EFFECTIVE DATE
These procedures are generally effective on September 22, 1999, the date this revenue
procedure is released to the public, with respect to proposed adverse determinations made by the
District for Bond Issues for which a closing agreement has not been executed.
DRAFTING INFORMATION
The principal authors of this revenue procedure are Theodore J. Cichaski, Senior Program
Analyst and Thomas Carter Louthan, Director, Office of Alternative Dispute Resolution &
Customer Service Programs, National Office Appeals; Bruce M. Serchuk, Senior Technician
Reviewer, Office of Associate Chief Counsel (Financial Institutions and Products); and Joseph
Grabowski, Senior Analyst, Exempt Organizations Division. For further information regarding
this revenue procedure, please contact Mr. Louthan at (202) 694-1842, Mr. Serchuk at
(202) 622-3980, or Mr. Grabowski at (202) 622-7761 (not toll-free numbers).