On April 10th, the U.S. District Court for the District of Columbia vacated an IRS notice (Notice 2006-50) that set out procedures for refunds of certain illegally-collected telephone service excise taxes. An IRS Notice normally provides public guidance on the position of the Service on specific questions. More substantive guidance is often contained in Revenue Procedures (Rev. Procs.), or formal Treasury Regulations interpreting sections of the internal revenue code. Regulations and Revenue Procedures are subject to a “notice and comment” requirement to be binding. The Court’s opinion states an IRS Notice that is meant to be binding upon taxpayers must be subject to notice and comment. Because the IRS failed to follow the APA’s notice and comment requirements, the Notice was vacated. This decision has significant implications for other IRS Notices, such as those governing deductions for energy-efficient buildings under IRC Section 179D.
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