in his exclusive authority to settle (i) all cases docketed in the Tax Court of the United States and designated for trial at any place within the territory comprising the region and (ii) all docketed cases originating in the office of any district director situated within the region or in which jurisdiction has been transferred to the region, which are designated for trial at Washington, D.C., unless the petitioner resides in and his books and records are located (or can be made available) in the region which includes Washington, D.C.

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(iii) Eliminate the ad valorem fraud penalty in any income, profits, estate or gift tax case in which the penalty has been determined by the district office in connection with a tax year or period, or which is related to or affects such year or period, for which criminal prosecution against the taxpayer (or a related taxpayer involving the same transaction) has been recommended to the Department of Justice for willful attempt to evade or defeat tax, or for willful failure to file a return, except upon the recommendation or concurrence of the Regional Counsel;

(c) Nature of proceedings before the Appellate Division.-Proceedings before he Appellate Division are informal. Testimony under oath is not taken, although natters alleged as facts may be required to be submitted in the form of affidavits, or declared to be true under the penalties of perjury. Taxpayers may represent hemselves or designate a qualified representative to act for them. See Subpart E for conference and practice requirements. At any conference granted by the Appellate Division on a nondocketed case, the district director will be repreented if he and the Appellate Division official having settlement authority deem t advisable. At any such conference on a case involving the ad valorem fraud enalty for which criminal prosecution against the taxpayer (or a related taxayer involving the same transaction) has been recommended to the Department f Justice for willful attempt to evade or defeat tax, or for willful failure to le a return, the Regional Counsel will be represented if he so desires.

(f) Conference and practice requirements.

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(3) Rule III.-Where the Appellate Division conferee recommends acceptance f the taxpayer's proposal of settlement, or, in the absence of a proposal, recomends action favorable to the taxpayer, and said recommendation is disapproved whole or in part by a reviewing officer in the Appellate Division, the taxpayer all be so advised and upon written request shall be accorded a conference with ich reviewing officer. The Appellate Division may disregard this rule where the terest of the Government would be injured by delay, as for example, in a case volving the imminent expiration of the period of limitations or the dissipation assets.

(g) Limitations on the jurisdiction and functions of the Appellate Division.) Overpayments of more than $100,000.—If the Appellate Division of a region termines in any case that there is an overpayment of income, war profits, cess profits, estate or gift tax, including penalties and interest, in excess of 00,000, such determination will be considered by the Joint Committee on ternal Revenue Taxation. See § 601.108.

PAR. 4. Section 601.109 is amended by revising paragraph (c) (2) to ad as follows:

§ 601.109 BANKRUPTCY AND RECEIVERSHIP CASES.

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(c) Procedures before the Appellate Division restricted. (2) If a petition for redetermination of the deficiency has been filed in the x Court prior to the adjudication of bankruptcy or the filing or (where proval is required by the Bankruptcy Act) the approval of a petition of, or approval of a petition against, the taxpayer in any other bankruptcy proceed, or the appointment of a receiver, the proceeding may be prosecuted in the x Court. All such docketed cases will be referred to the Appellate Division omptly after issuance of the Form 7900 letter. If a case not docketed in the 289-712°-68-42

Tax Court is under Appellate Division consideration at the time that circumstances require the issuance of a Form 7900 letter, that Division may request return of the file in order to continue its consideration and arrive at a determination.

PAR. 5. Section 601.201 is amended by revising paragraphs (a)(6), (b)(1), (b)(3), (b)(4), (c) (1), (c) (4), (c) (7), (e) (2), (e)(5), (1) (1), (1) (7), (1) (8), (m), (n), (o)(1)(i), (o)(2) (i), (o) (2) (iii) (c), (o)(2)(iv) (e) (1), (o) (2) (vi), (o)(2)(vii) (d), (o)(3)(iii), (0) (4) (vi), and by adding two new paragraphs, (o) (2) (ii) (ƒ) and (0) (3) (ix). The revised and added provisions read as follows:

§ 601.201 RULINGS AND DETERMINATION LETTERS.

(a) General practice and definitions.-* * *

(6) A "closing agreement," as the term is used herein, is an agreement be tween the Commissioner of Internal Revenue or his delegate and a taxpayer with respect to a specific issue or issues entered into pursuant to the authority contained in section 7121 of the Internal Revenue Code. Such a closing agreement is based on a ruling which has been signed by the Commissioner or his delegate and in which it is indicated that a closing agreement will be entered into on the basis of the holding of the ruling letter. Closing agreements are final and conclusive except upon a showing of fraud, malfeasance, or misrepresentation of material fact. They may be entered into where it is advantageous to have the matter permanently and conclusively closed, or where a taxpayer can show good and sufficient reasons for an agreement and the Government will sustain no disadvantage by its consummation. See § 601.202 for closing agreements of the type not covered in this section.

(b) Rulings issued by the National Office.—(1) In income and gift tax matters, the National Office issues rulings on prospective transactions and on completed transactions before the return is filed. However, rulings will not ordinarily be issued if the identical issue is also involved in a return of the taxpayer already filed for a taxable period with respect to which the statutory period of limitations on assessment or refund of tax has not expired. The National Office issues rulings involving qualifications of plans under section 401 of the Code or the exempt status of organizations under section 501 or 521 of the Code, only to the extent provided in paragraphs (o) and (n), respectively, of this section. The National Office will not issue rulings with respect to the replacement of involuntarily converted property, even though replacement has not been made, if the taxpayer has filed a return for the taxable year in which the property wasS converted. However, see paragraph (c) (6) of this section as to the authority of district directors to issue determination letters in this connection.

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(3) In employment and excise tax matters, the National Office issues rulings with respect to prospective transactions and to completed transactions either before or after the return is filed. However, the National Office will not ordnarily rule with respect to an issue, whether related to a prospective or a completed transaction, if it knows or has reason to believe that the same or an identical issue is before any field office (or any branch office of the Appells” Division) in connection with an examination or audit of the liability of the same taxpayer for the same or a prior period.

(4) Ordinarily, the Service will not issue rulings to business, trade, or inda trial associations or to other similar groups relating to the application of the tax laws to members of the group. However, rulings may be issued to sur groups or associations relating to their own tax status or liability provided sta tax status or liability is not an issue before any field office (or any bran office of the Appellate Division) in connection with an examination or ani: of the liability of the same taxpayer for the same or a prior period.

(c) Determination letters issued by district directors.-(1) In income and gift tax matters, district directors issue determination letters in response ti taxpayers' requests submitted to their offices involving completed transactions which affect returns required to be filed in their districts, but only if the quest = presented is covered specifically by statute, Treasury decision or regulati or specifically by a ruling, opinion, or court decision published in the Inter Revenue Bulletin. A determination letter will not usually be issued with respe

to a question which involves a return to be filed by the taxpayer if the identical question is involved in a return or returns already filed by the taxpayer. District directors may not issue determination letters as to the tax consequence of prospective or proposed transactions, except as provided in subparagraphs (5) and (6) of this paragraph.

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(4) Notwithstanding the provisions of subparagraphs (1), (2), (3), (5), and (6) of this paragraph, a district director may not issue a determination letter in response to an inquiry, although the inquiry presents a question covered specifically by statute, regulations, rulings, etc., published in the Internal Revenue Bulletin, where (i) it appears that the taxpayer has directed a similar inquiry to the National Office, (ii) the identical issue involving the same taxpayer is pending in a case before the Appellate Division, (iii) the determination letter is requested by an industry, trade association, or similar group, or (iv) the request involves an industry-wide problem. Under no circumstances will a district director issue a determination letter unless it is clearly indicated that the inquiry is with regard to a taxpayer or taxpayers who have filed or are required to file returns in the district under his supervision. Notwithstanding the provisions of subparagraph (3) of this paragraph, a district director may not issue a determination letter on an employment tax question when the specific question involved has been or is being considered by the national office of the Social Security Administration. Nor may district directors issue determination letters on excise tax questions if a request is for a determination of a constructive sales price under sections 4216(b) and 4218.of the Code. However, the National Office will issue rulings in this area. See paragraph (d)(3) of this section.

(7) A request received by a district director with respect to a question involved in an income, estate, or gift tax return already filed will, in general, be considered in connection with the examination of the return. If response is made to such inquiry prior to an examination or audit, it will be considered a tentative finding in any subsequent examination or audit of the return.

(2) Each request for a determination letter or a ruling must contain a complete statement of facts relating to the transaction. This includes, but is not necessarily limited to, the names, addresses, and taxpayer identifying numbers of all interested parties; the district office where each files or will file its return or report; a full and precise statement of the business reasons for the transaction; and true copies of all contracts, wills, deeds, agreements, or other documents involved in the transaction. (The term "all interested parties" is not to be construed as requiring a list of all shareholders of a widely held corporation requesting a ruling relating to a reorganization, or a list of employees where a large number may be involved in a plan.) The request must contain a statement whether, to the best of the knowledge of the taxpayer or his representative, the identical issue is being considered by any field office of the Service in connection with an examination or audit of a tax return of the taxpayer already filed. Where the request pertains to only one step of a larger integrated transaction, the facts, circumstances, etc., must be submitted with respect to the entire transaction. As documents and exhibits become a part of the Internal Revenue Service file and cannot be returned, the original documents should not be submitted. When documents and exhibits are submitted, they must be accompanied by an analysis of their bearing on the issue or issues, specifying the pertinent provisions. If the request is with respect to a corporate distribution, reorganization, or other similar or related transaction, the corporate balance sheet nearest the date of the transaction should be submitted. (If the request relates to a prospective transaction, the most recent balance sheet should be submitted.)

(5) A request by or for a taxpayer must be signed by the taxpayer or his authorized representative. If the request is signed by a representative of the taxpayer, or if the representative is to appear before the Internal Revenue Service in connection with the request, he must either be:

(i) An attorney who is a member in good standing of the bar of the highest court of any State, possession, territory, Commonwealth, or the

District of Columbia, and who files with the Service a written declaration that he is currently qualified as an attorney and he is authorized to represent the principal,

(ii) A certified public accountant who is duly qualified to practice in any State, possession, territory, Commonwealth, or the District of Columbia, and who files with the Service a written declaration that he is currently qualified as a certified public accountant and he is authorized to represent the principal, or

(iii) A person, other than an attorney or certified public accountant, enrolled to practice before the Service. (See Treasury Department Circular No. 230, as amended, C.B. 1966–2, 1171.)

The above requirements do not apply to an individual representing his full-time employer, or to a bona fide officer, administrator, trustee, etc., representing a corporation, trust, estate, association, or organized group. An unenrolled preparer of a return (other than an attorney or certified public accountant referred to in subdivisions (i) and (ii)) who is not a full-time officer, administrator, trustee, etc., may not represent a taxpayer with respect to a ruling or a determination letter. Any authorized representative, whether or not he is enrolled to practice, must also comply with the conference and practice requirements of subpart E.

(1) Effect of rulings.—(1) A ruling, except to the extent incorporated in a closing agreement, may be revoked or modified at any time in the wise administration of the taxing statutes. See paragraph (a) (6) of this section for the effect of a closing agreement. If a ruling is revoked or modified, the revocation or modification applies to all open years under the statutes, unless the Commissioner or his delegate exercises the discretionary power under section 7805(b) of the Code to limit the retroactive effect of the ruling. The manner in which the Commissioner or his delegate generally will exercise this power is set forth in this paragraph. With reference to rulings relating to the sale or lease of articles subject to the manufacturers excise tax, see specifically subparagraph (8) of this paragraph.

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(7) If a ruling is issued covering a continuing action or a series of actions and it is determined that the ruling was in error or no longer in accord with the position of the Service, the Assistant Commissioner (Technical) ordinarily will limit the retroactivity of the revocation or modification to a date not earlier than that on which the original ruling was modified or revoked. To illustrate, if a taxpayer rendered service or provided a facility which is subject to the excise tax on services or facilities, and in reliance on a ruling issued to the same taxpayer did not pass the tax on to the user of the service or the facility, the Assistant Commissioner (Technical) ordinarily will restrict the retroactive ap plication of the revocation or modification of the ruling.

(8) A ruling holding that the sale or lease of a particular article is subject to the manufacturers excise tax or the retailers excise tax may not revoke or modify retroactively a prior ruling holding that the sale or lease of such article was not taxable, if the taxpayer to whom the ruling was issued, in reliance upon such prior ruling, parted with possession or ownership of the article without passing the tax on to his customer. Section 1108 (b), Revenue Act of 1926.

(m) Effect of determination letters.-A determination letter issued by a di trict director, in accordance with this section, shall be given the same effect upon examination of the return of the taxpaper to whom the determination letter was issued as is described in paragraph (1) of this section, in the case of a ruling issued to a taxpayer, except that reference to the National Office is not necessary where, upon examination of the return, it is the opinion of the district director that a conclusion contrary to that expressed in the determination letter is indicated. A district director may not limit the modification or revocative of a determination letter but may refer the matter to the National Office for exercise by the Commissioner or his delegate of the authority to limit the modfication or revocation.

(n) Organization claiming exemption under section 501 or 521 of the Code.— (1) Filing applications for exemption.-(i) An organization seeking a ruling * determination letter of exemption under section 501 or section 521 of the Code

required to file an application (in duplicate, if under section 501) with the district director of internal revenue for the district where it would otherwise be required to file a tax return. Any application received by the National Office or by a district director other than as provided above will be forwarded, without any action thereon, to the appropriate district director.

(ii) An exemption ruling or determination letter will be issued to an organization, provided its application and supporting documents establish that it meets the particular requirements of the section under which exemption is claimed. Exempt status will be recognized in advance of operations if proposed operations can be described in sufficient detail to permit a conclusion that the organization clearly will be exempt. A mere restatement of purpose or a statement that proposed activities will be in furtherance of such purposes will not satisfy the requirements for an advance ruling. Where the Service considers it warranted, a record of actual operations may be required before a ruling or determination letter will be issued.

(iii) Requests for rulings or determination letters other than in the form of applications for exemption are governed by the procedures outlined in paragraphs (a) through (m) of this section.

(2) Processing applications.-(i) Under the general procedures outlined in paragraphs (a) through (m) of this section, district directors are authorized to issue determination letters involving applications for exemption under sections 501 and 521 of the Code.

(ii) A district director will refer applications which present questions not covered by established precedents to the National Office for ruling. The National Office will consider each such application, issue a ruling directly to the organization, and send a copy of the ruling to the district director. In the event of a conclusion unfavorable to the applicant, it will be informed of the basis for the conclusion and of its rights to file a protest and to a conference in the National Office. If a conference is requested, the conference procedures outlined in subdivision (vi) of paragraph (b) (5) of § 601.105 will be followed. After reconsideration of the application in the light of the protest and any information developed in conference, the National Office will affirm, modify, or reverse the original conclusion, issue a ruling to the organization, and send a copy of the ruling to the district director.

(iii) An exemption application which does not contain the required information will be classified as an "incomplete application case." The applicant will be advised in writing why a determination will not be made.

(3) Effect of exemption rulings or determination letters.-(i) An exemption ruling or determination letter is usually effective as of the date of formation of an organization if its purposes and activities during the period prior to the date of the ruling or determination letter were consistent with the requirements for exemption. If the organization is required to alter its activities or to make substantive amendments to its enabling instruments in order to qualify for exemption, the exemption ruling or determination letter will be effective only for the period specified therein.

(ii) An exemption ruling or determination letter may not be relied upon if here is a material change inconsistent with exemption in the character, the purpose, or the method of operation of the organization.

(4) National Office review of determination letters.-The National Office will review determination letters to assure uniformity in the application of the stablished principles and precedents of the Service. Where the National Office akes exception to a determination letter, the district director will be advised. f the organization protests the exception taken, the file and protest will be eturned to the National Office. The referral will be treated as a request for echnical advice and the procedures of paragraph (b) (5) of § 601.105 will be ollowed.

(5) Protest of adverse determination letters.-(i) Upon the issuance of a letermination letter adverse to the applicant the district director will advise he organization of its right to protest the determination by submitting a statenent of the facts, law, and arguments in support of its application for exemption, nd of its right to a district office conference.

(ii) The organization may waive its right to a district office conference and equest referral of the matter directly to the National Office. The district director vill advise the organization in writing that the matter will be referred to the Naional Office in accordance with its request only after a statement is filed seting forth the facts, law, and arguments in support of its application for ex