26 U.S. Code § 7430 - Awarding of costs and certain fees
(a)
In general
In any administrative or court proceeding which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, the prevailing party may be awarded a judgment or a settlement for—
(b)
Limitations
(1)
Requirement that administrative remedies be exhausted
A judgment for reasonable litigation costs shall not be awarded under subsection (a) in any court proceeding unless the court determines that the prevailing party has exhausted the administrative remedies available to such party within the Internal Revenue Service. Any failure to agree to an extension of the time for the assessment of any tax shall not be taken into account for purposes of determining whether the prevailing party meets the requirements of the preceding sentence.
(2)
Only costs allocable to the United States
An award under subsection (a) shall be made only for reasonable litigation and administrative costs which are allocable to the United States and not to any other party.
(3)
Costs denied where party prevailing protracts proceedings
No award for reasonable litigation and administrative costs may be made under subsection (a) with respect to any portion of the administrative or court proceeding during which the prevailing party has unreasonably protracted such proceeding.
(4)
Period for applying to IRS for administrative costs
An award may be made under subsection (a) by the Internal Revenue Service for reasonable administrative costs only if the prevailing party files an application with the Internal Revenue Service for such costs before the 91st day after the date on which the final decision of the Internal Revenue Service as to the determination of the tax, interest, or penalty is mailed to such party.
(c)
Definitions
For purposes of this section—
(1)
Reasonable litigation costs
The term “reasonable litigation costs” includes—
(B)
based upon prevailing market rates for the kind or quality of services furnished—
(i)
the reasonable expenses of expert witnesses in connection with a court proceeding, except that no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the United States,
(ii)
the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party’s case, and
(iii)
reasonable fees paid or incurred for the services of attorneys in connection with the court proceeding, except that such fees shall not be in excess of $125 per hour unless the court determines that a special factor, such as the limited availability of qualified attorneys for such proceeding, the difficulty of the issues presented in the case, or the local availability of tax expertise, justifies a higher rate.
In the case of any calendar year beginning after 1996, the dollar amount referred to in clause (iii) shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section
1
(f)(3) for such calendar year, by substituting “calendar year 1995” for “calendar year 1992” in subparagraph (B) thereof. If any dollar amount after being increased under the preceding sentence is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10.
(2)
Reasonable administrative costs
The term “reasonable administrative costs” means—
(B)
expenses, costs, and fees described in paragraph (1)(B), except that any determination made by the court under clause (ii) or (iii) thereof shall be made by the Internal Revenue Service in cases where the determination under paragraph (4)(C) of the awarding of reasonable administrative costs is made by the Internal Revenue Service.
Such term shall only include costs incurred on or after whichever of the following is the earliest: (i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of Appeals; (ii) the date of the notice of deficiency; or (iii) the date on which the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the Internal Revenue Service Office of Appeals is sent.
(3)
Attorneys’ fees
(A)
In general
For purposes of paragraphs (1) and (2), fees for the services of an individual (whether or not an attorney) who is authorized to practice before the Tax Court or before the Internal Revenue Service shall be treated as fees for the services of an attorney.
(B)
Pro bono services
The court may award reasonable attorneys’ fees under subsection (a) in excess of the attorneys’ fees paid or incurred if such fees are less than the 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. This subparagraph shall apply only if such award is paid to such individual or such individual’s employer.
(4)
Prevailing party
(A)
In general
The term “prevailing party” means any party in any proceeding to which subsection (a) applies (other than the United States or any creditor of the taxpayer involved)—
(ii)
which meets the requirements of the 1st sentence of section
2412
(d)(1)(B) of title
28, United States Code (as in effect on October 22, 1986) except to the extent differing procedures are established by rule of court and meets the requirements of section 2412(d)(2)(B) of such title 28 (as so in effect).
(B)
Exception if United States establishes that its position was substantially justified
(i)
General rule
A party shall not be treated as the prevailing party in a proceeding to which subsection (a) applies if the United States establishes that the position of the United States in the proceeding was substantially justified.
(ii)
Presumption of no justification if Internal Revenue Service did not follow certain published guidance
For purposes of clause (i), the position of the United States shall be presumed not to be substantially justified if the Internal Revenue Service did not follow its applicable published guidance in the administrative proceeding. Such presumption may be rebutted.
(iii)
Effect of losing on substantially similar issues
In determining for purposes of clause (i) whether the position of the United States was substantially justified, the court shall take into account whether the United States has lost in courts of appeal for other circuits on substantially similar issues.
(C)
Determination as to prevailing party
Any determination under this paragraph as to whether a party is a prevailing party shall be made by agreement of the parties or—
(D)
Special rules for applying net worth requirement
In applying the requirements of section
2412
(d)(2)(B) of title
28, United States Code, for purposes of subparagraph (A)(ii) of this paragraph—
(E)
Special rules where judgment less than taxpayer’s offer
(i)
In general
A party to a court proceeding meeting the requirements of subparagraph (A)(ii) shall be treated as the prevailing party if the liability of the taxpayer pursuant to the judgment in the proceeding (determined without regard to interest) is equal to or less than the liability of the taxpayer which would have been so determined if the United States had accepted a qualified offer of the party under subsection (g).
(5)
Administrative proceedings
The term “administrative proceeding” means any procedure or other action before the Internal Revenue Service.
(6)
Court proceedings
The term “court proceeding” means any civil action brought in a court of the United States (including the Tax Court and the United States Court of Federal Claims).
(e)
Multiple actions
For purposes of this section, in the case of—
(2)
a case or cases involving a return or returns of the same taxpayer (including joint returns of married individuals) which could have been joined in a single court proceeding in the same court,
such actions or cases shall be treated as 1 court proceeding regardless of whether such joinder or consolidation actually occurs, unless the court in which such action is brought determines, in its discretion, that it would be inappropriate to treat such actions or cases as joined or consolidated.
(f)
Right of appeal
(1)
Court proceedings
An order granting or denying (in whole or in part) an award for reasonable litigation or administrative costs under subsection (a) in a court proceeding, may be incorporated as a part of the decision or judgment in the court proceeding and shall be subject to appeal in the same manner as the decision or judgment.
(2)
Administrative proceedings
A decision granting or denying (in whole or in part) an award for reasonable administrative costs under subsection (a) by the Internal Revenue Service shall be subject to the filing of a petition for review with the Tax Court under rules similar to the rules under section
7463 (without regard to the amount in dispute). If the Secretary sends by certified or registered mail a notice of such decision to the petitioner, no proceeding in the Tax Court may be initiated under this paragraph unless such petition is filed before the 91st day after the date of such mailing.
(g)
Qualified offer
For purposes of subsection (c)(4)—
(1)
In general
The term “qualified offer” means a written offer which—
(2)
Qualified offer period
For purposes of this subsection, the term “qualified offer period” means the period—
Source
(Added Pub. L. 97–248, title II, § 292(a),Sept. 3, 1982, 96 Stat. 572; amended Pub. L. 98–369, div. A, title VII, § 714(c),July 18, 1984, 98 Stat. 961; Pub. L. 99–514, title XV, § 1551(a)–(g), Oct. 22, 1986, 100 Stat. 2752, 2753; Pub. L. 100–647, title I, § 1015(i), title VI, § 6239(a),Nov. 10, 1988, 102 Stat. 3571, 3743; Pub. L. 102–572, title IX, § 902(b)(1),Oct. 29, 1992, 106 Stat. 4516; Pub. L. 104–168, title VII, §§ 701(a)–(c)(2), 702(a), 703(a), 704(a), July 30, 1996, 110 Stat. 1463, 1464; Pub. L. 105–34, title XII, § 1285(a)–(c), title XIV, § 1453(a),Aug. 5, 1997, 111 Stat. 1038, 1055; Pub. L. 105–206, title III, § 3101(a)–(e), title VI, §§ 6012(h),
6014
(e),July 22, 1998, 112 Stat. 727, 728, 819, 820; Pub. L. 106–554, § 1(a)(7) [title III, § 319(25)], Dec. 21, 2000, 114 Stat. 2763, 2763A–647.)
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title.
Prior Provisions
Amendments
2000—Subsec. (c)(3). Pub. L. 106–554, § 1(a)(7) [title III, § 319(25)(A)], substituted “Attorneys’ ” for “Attorneys” in heading.
Subsec. (c)(3)(B). Pub. L. 106–554, § 1(a)(7) [title III, § 319(25)(B)], substituted “attorneys’ fees” for “attorneys fees” wherever appearing.
1998—Subsec. (b)(4), (5). Pub. L. 105–206, § 6012(h), redesignated par. (5) as (4).
Subsec. (c)(1)(B)(iii). Pub. L. 105–206, § 3101(a), substituted “$125” for “$110” and inserted “the difficulty of the issues presented in the case, or the local availability of tax expertise,” before “justifies a higher rate”.
Subsec. (c)(2). Pub. L. 105–206, § 3101(b), added concluding provisions and struck out former concluding provisions which read as follows: “Such term shall only include costs incurred on or after the earlier of (i) the date of the receipt by the taxpayer of the notice of the decision of the Internal Revenue Service Office of Appeals, or (ii) the date of the notice of deficiency.”
Subsec. (c)(3). Pub. L. 105–206, § 3101(c), substituted “attorneys” for “attorney’s” in heading and amended text of par. (3) generally. Prior to amendment, text read as follows: “For purposes of paragraphs (1) and (2), fees for the services of an individual (whether or not an attorney) who is authorized to practice before the Tax Court or before the Internal Revenue Service shall be treated as fees for the services of an attorney.”
Subsec. (c)(4)(B)(iii), (iv). Pub. L. 105–206, § 3101(d), added cl. (iii) and redesignated former cl. (iii) as (iv).
Subsec. (c)(4)(D). Pub. L. 105–206, § 6014(e), substituted “subparagraph (A)(ii)” for “subparagraph (A)(iii)” in introductory provisions.
Subsec. (c)(4)(E). Pub. L. 105–206, § 3101(e)(1), added subpar. (E).
Subsec. (g). Pub. L. 105–206, § 3101(e)(2), added subsec. (g).
1997—Subsec. (b)(5). Pub. L. 105–34, § 1285(b), added par. (5).
Subsec. (c)(4)(D). Pub. L. 105–34, § 1453(a), added subpar. (D).
Subsec. (f)(2). Pub. L. 105–34, § 1285(c), substituted “the filing of a petition for review with” for “appeal to” and inserted at end “If the Secretary sends by certified or registered mail a notice of such decision to the petitioner, no proceeding in the Tax Court may be initiated under this paragraph unless such petition is filed before the 91st day after the date of such mailing.”
Subsec. (f)(3). Pub. L. 105–34, § 1285(a), added par. (3).
1996—Subsec. (b)(1). Pub. L. 104–168, § 703(a), inserted at end “Any failure to agree to an extension of the time for the assessment of any tax shall not be taken into account for purposes of determining whether the prevailing party meets the requirements of the preceding sentence.”
Subsec. (b)(3), (4). Pub. L. 104–168, § 704(a), redesignated par. (4) as (3) and struck out former par. (3) which read as follows:
“(3) Exclusion of declaratory judgment proceedings.—
“(A) In general.—No award for reasonable litigation costs may be made under subsection (a) with respect to any declaratory judgment proceeding.
“(B) Exception for section
501(c)(3) determination revocation proceedings.—Subparagraph (A) shall not apply to any proceeding which involves the revocation of a determination that the organization is described in section
501
(c)(3).”
Subsec. (c)(1). Pub. L. 104–168, § 702(a)(3), inserted closing provisions “In the case of any calendar year beginning after 1996, the dollar amount referred to in clause (iii) shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section
1
(f)(3) for such calendar year, by substituting ‘calendar year 1995’ for ‘calendar year 1992’ in subparagraph (B) thereof. If any dollar amount after being increased under the preceding sentence is not a multiple of $10, such dollar amount shall be rounded to the nearest multiple of $10.”
Subsec. (c)(1)(B)(iii). Pub. L. 104–168, § 702(a)(1), (2), substituted “$110” for “$75” and struck out “an increase in the cost of living or” before “a special factor,”.
Subsec. (c)(2)(B). Pub. L. 104–168, § 701(c)(1), substituted “paragraph (4)(C)” for “paragraph (4)(B)”.
Subsec. (c)(4)(A). Pub. L. 104–168, § 701(a), redesignated cls. (ii) and (iii) as (i) and (ii), respectively, and struck out former cl. (i) which read as follows: “which establishes that the position of the United States in the proceeding was not substantially justified,”.
Subsec. (c)(4)(B). Pub. L. 104–168, § 701(b), added subpar. (B). Former subpar. (B) redesignated (C).
Subsec. (c)(4)(C). Pub. L. 104–168, § 701(c)(2), substituted “Any determination under this paragraph” for “Any determination under subparagraph (A)”.
Pub. L. 104–168, § 701(b), redesignated subpar. (B) as (C).
1992—Subsec. (c)(6). Pub. L. 102–572substituted “United States Court of Federal Claims” for “United States Claims Court”.
1988—Pub. L. 100–647, § 6239(a), substituted “costs” for “court costs” in section catchline and amended text generally, revising and restating provisions so as to include costs and fees in administrative proceedings.
Subsec. (c)(2)(A)(iii). Pub. L. 100–647, § 1015(i), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “meets the requirements of section
504
(b)(1)(B) of title
5, United States Code (as in effect on the date of the enactment of the Tax Reform Act of 1986 and applied by taking into account the commencement of the proceeding described in subsection (a) in lieu of the initiation of the adjudication referred to in such section).”
1986—Subsec. (a). Pub. L. 99–514, § 1551(f), inserted “(payable in the case of the Tax Court in the same manner as such an award by a district court)” in concluding provisions.
Subsec. (b). Pub. L. 99–514, § 1551(a), (b), redesignated pars. (2) to (4) as (1) to (3), respectively, added par. (4), and struck out former par. (1), maximum dollar amount, which read as follows: “The amount of reasonable litigation costs which may be awarded under subsection (a) with respect to any prevailing party in any civil proceeding shall not exceed $25,000.”
Subsec. (c)(1)(A). Pub. L. 99–514, § 1551(c), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “The term ‘reasonable litigation costs’ includes—
“(i) reasonable court costs,
“(ii) the reasonable expenses of expert witnesses in connection with the civil proceeding,
“(iii) the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party’s case, and
“(iv) reasonable fees paid or incurred for the services of attorneys in connection with the civil proceeding.”
Subsec. (c)(2)(A). Pub. L. 99–514, § 1551(d), substituted “was not substantially justified” for “was unreasonable” in cl. (i), and added cl. (iii).
Subsec. (c)(4). Pub. L. 99–514, § 1551(e), added par. (4).
Subsec. (f). Pub. L. 99–514, § 1551(g), struck out subsec. (f), termination, which read as follows: “This section shall not apply to any proceeding commenced after December 31, 1985.”
1984—Subsec. (a)(2). Pub. L. 98–369inserted reference to United States Claims Court.
Effective Date of 1998 Amendment
Pub. L. 105–206, title III, § 3101(g),July 22, 1998, 112 Stat. 729, provided that: “The amendments made by this section [amending this section and section
7431 of this title] shall apply to costs incurred (and, in the case of the amendment made by subsection (c) [amending this section], services performed) more than 180 days after the date of the enactment of this Act [July 22, 1998].”
Amendment by sections 6012(h) and 6014(e) ofPub. L. 105–206effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 ofPub. L. 105–206, set out as a note under section
1 of this title.
Effective Date of 1997 Amendment
Pub. L. 105–34, title XII, § 1285(d),Aug. 5, 1997, 111 Stat. 1039, provided that: “The amendments made by this section [amending this section] shall apply to civil actions or proceedings commenced after the date of the enactment of this Act [Aug. 5, 1997].”
Pub. L. 105–34, title XIV, § 1453(b),Aug. 5, 1997, 111 Stat. 1055, provided that: “The amendment made by this section [amending this section] shall apply to proceedings commenced after the date of the enactment of this Act [Aug. 5, 1997].”
Effective Date of 1996 Amendment
Amendment by section
701
(a)–(c)(2) of Pub. L. 104–168applicable in case of proceedings commenced after July 30, 1996, see section 701(d) ofPub. L. 104–168, set out as a note under section
6404 of this title.
Pub. L. 104–168, title VII, § 702(b),July 30, 1996, 110 Stat. 1464, provided that: “The amendment made by this section [amending this section] shall apply in the case of proceedings commenced after the date of the enactment of this Act [July 30, 1996].”
Pub. L. 104–168, title VII, § 703(b),July 30, 1996, 110 Stat. 1464, provided that: “The amendment made by this section [amending this section] shall apply in the case of proceedings commenced after the date of the enactment of this Act [July 30, 1996].”
Pub. L. 104–168, title VII, § 704(b),July 30, 1996, 110 Stat. 1464, provided that: “The amendment made by this section [amending this section] shall apply in the case of proceedings commenced after the date of the enactment of this Act [July 30, 1996].”
Effective Date of 1992 Amendment
Amendment by Pub. L. 102–572effective Oct. 29, 1992, see section 911 ofPub. L. 102–572, set out as a note under section
171 of Title
28, Judiciary and Judicial Procedure.
Effective Date of 1988 Amendment
Amendment by section 1015(i) ofPub. L. 100–647effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) ofPub. L. 100–647, set out as a note under section
1 of this title.
Pub. L. 100–647, title VI, § 6239(d),Nov. 10, 1988, 102 Stat. 3746, provided that: “The amendments made by this section [amending this section and section
504 of Title
5, Government Organization and Employees] shall apply to proceedings commencing after the date of the enactment of this Act [Nov. 10, 1988].”
Effective Date of 1986 Amendment
Pub. L. 99–514, title XV, § 1551(h),Oct. 22, 1986, 100 Stat. 2753, provided that:
“(1) General rule.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to amounts paid after September 30, 1986, in civil actions or proceedings, commenced after December 31, 1985.
“(2) Subsection (f).—The amendment made by subsection (f) [amending this section] shall take effect as if included in the amendments made by section 292 of the Tax Equity and Fiscal Responsibility Act of 1982 [see Effective Date note below].
“(3) Applicability of amendments to certain prior cases.—The amendments made by this section shall apply to any case commenced after December 31, 1985, and finally disposed of before the date of the enactment of this Act [Oct. 22, 1986], except that in any such case, the 30-day period referred to in section
2412
(d)(1)(B) of title
28, United States Code, or Rule 231 of the Tax Court, as the case may be, shall be deemed to commence on the date of the enactment of this Act [Oct. 22, 1986].”
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–369effective as if included in the provision of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. 97–248, to which such amendment relates, see section 715 ofPub. L. 98–369, set out as a note under section
31 of this title.
Effective Date
Pub. L. 97–248, title II, § 292(e),Sept. 3, 1982, 96 Stat. 574, as amended by Pub. L. 98–369, div. A, title I, § 160,July 18, 1984, 98 Stat. 696, provided that:
“(1) In general.—The amendments made by this section [enacting this section and amending section
6673 of this title and section
2412 of Title
28, Judiciary and Judicial Procedure] shall apply to civil actions or proceedings commenced after February 28, 1983.
“(2) Penalty.—The amendments made by subsections (b) and (d)(2) [amending section
6673 of this title] shall apply to any action or proceeding in the United States Tax Court which—
“(A) is commenced after December 31, 1982, or
“(B) is pending in the United States Tax Court on the day which is 120 days after the date of the enactment of the Tax Reform Act of 1984 [July 18, 1984].”
Written determinations for this section
These documents, sometimes referred to as "Private Letter Rulings", are taken from the IRS Written Determinations page; the IRS also publishes a fuller explanation of what they are and what they mean. The collection is updated (at our end) daily. It appears that the IRS updates their listing every Friday.
Note that the IRS often titles documents in a very plain-vanilla, duplicative way. Do not assume that identically-titled documents are the same, or that a later document supersedes another with the same title. That is unlikely to be the case.
Release dates appear exactly as we get them from the IRS. Some are clearly wrong, but we have made no attempt to correct them, as we have no way guess correctly in all cases, and do not wish to add to the confusion.
We truncate results at 20000 items. After that, you're on your own.
- Awarding of Court Costs and Certain Fees : 2010-06-18
- Requirement Administrative Remedies Exhausted : 2009-05-08
- Determination as to Prevailing Party : 2009-05-08
- Prevailing Party : 2009-02-20
- Attorney's Fees : 2009-02-20
- Determination as to Prevailing Party : 2009-02-20
- Position of United States : 2000-08-04
- Definitions : 1999-05-28
LII has no control over and does not endorse any external Internet site that contains links to or references LII.