§4961 — Abatement of second tier taxes where there is correction

Statute Text — 26 U.S.C. §4961

Treasury Regulations

• Treas. Reg. §53.4961-1Abatement of second tier taxes for correction within correction period Show full text ▾ Collapse ▴

  If any taxable event is corrected during the correction period for the event, then any second tier tax imposed with respect to the event shall not be assessed. If the tax has been assessed, it shall be abated. If the tax has been collected, it shall be credited or refunded as an overpayment. For purposes of this section, the tax imposed includes interest, additions to the tax and additional amounts. For definitions of the terms second tier tax, taxable event, correct, and correction period, see § 53.4963-1.

• Treas. Reg. §53.4961-2Court proceedings to determine liability for second tier tax Show full text ▾ Collapse ▴

  (a) Introduction. Under section 4961 (b) and (c), the period of limitations on collection may be suspended and assessment or collection of first or second tier tax may be prohibited during the pendency of administrative and judicial proceedings conducted to determine a taxpayer's liability for second tier tax. This section provides rules relating to the suspension of the limitations period and the prohibitions on assessment and collection. In addition, this section describes the administrative and judicial proceedings to which these rules apply.

  (b) Initial proceeding—(1) Defined. For purposes of subpart K, an initial proceeding means a proceeding described in subparagraph (2) or (3).

  (2) Tax Court proceeding before assessment. A proceeding is described in this subparagraph (2) if it is a proceeding with respect to the taxpayer's liability for second tier tax and is commenced in accordance with section 6213 (a).

  (3) Refund proceeding commenced before correction period ends. A proceeding is described in this subparagraph (3) if it is a proceeding commenced under section 7422, in accordance with the provisions of § 53.4963-1(e) (4) and (5) (relating to prerequisites to extension of the correction period during certain refund proceedings), and with respect to the taxpayer's liability for second tier tax.

  (c) Supplemental proceeding—(1) Jurisdiction. If a determination in an initial proceeding that a taxpayer is liable for a second tier tax has become final, the court in which the initial proceeding was commenced shall have jurisdiction to conduct any necessary supplemental proceeding to determine whether the taxable event was corrected during the correction period.

  (2) Time for beginning proceeding. The time for beginning a supplemental proceeding begins on the day after a determination in an initial proceeding becomes final and ends on the 90th day after the last day of the correction period.

  (d) Restriction on assessment during Tax Court proceeding. If a supplemental proceeding described in section 4961 (b) and § 53.4961-2(c) is commenced in the Tax Court, the provisions of the second and third sentences of section 6213(a) and the first and third sentences of § 301.6213-1(a)(2) apply with respect to a deficiency in second tier tax until the decision of the Tax Court in the supplemental proceeding is final.

  (e) Suspension of period of collection for second tier tax—(1) Scope. Except as provided in subparagraph (6), this paragraph (e) applies to the second tier tax assessed with respect to a taxable event if a claim described in subparagraph (2) is filed.

  (2) Claim for refund. A claim for refund is described in this subparagraph (2) if, no later than 90 days after the day on which the second tier tax is assessed with respect to a taxable event, the taxpayer—

  (i) Pays the full amount of first tier tax for the taxable period, and

  (ii) Files a claim for refund of the amount paid.

  (3) Collection prohibited. No levy or proceeding in court for the collection of the second tier tax shall be made, begun, or prosecuted until the end of the collection prohibition period described in subparagraph (5). Notwithstanding section 7421(a), the collection by levy or proceeding may be enjoined during the collection prohibition period by a proceeding in the proper court.

  (4) Suspension of running of period of limitations on collection. With respect to a second tier tax to which this paragraph (e) applies, the running of the period of limitations provided in section 6502 (relating to collection of tax by levy or by a proceeding in court) shall be suspended for the collection prohibition period described in subparagraph (5).

  (5) Collection prohibition period. The collection prohibition period begins on the day the second tier tax is assessed and ends on the latest of:

  (i) The day a decision in a refund proceeding commenced before the 91st day after denial of the claim described in subparagraph (2) of this paragraph (including any supplemental proceeding under § 53.4961-2(c)) becomes final;

  (ii) The 90th day after the claim referred to in subparagraph (2) is denied; or

  (iii) The 90th day after the second tier tax is assessed.

  (6) Jeopardy collection. If the Secretary makes a finding that the collection of the second tier tax is in jeopardy, nothing in this paragraph (e) shall prevent the immediate collection of such tax.

  (f) Finality—(1) Tax Court proceeding. For purposes of this subpart K, section 7481 applies in determining when a decision in a Tax Court proceeding becomes final.

  (2) Refund proceeding. For purposes of this subpart K, § 301.7422-1 applies in determining when a decision in a refund proceeding becomes final.

• Treas. Reg. §53.4961-2(a)Introduction. Show full text ▾ Collapse ▴

  Introduction. Under section 4961 (b) and (c), the period of limitations on collection may be suspended and assessment or collection of first or second tier tax may be prohibited during the pendency of administrative and judicial proceedings conducted to determine a taxpayer's liability for second tier tax. This section provides rules relating to the suspension of the limitations period and the prohibitions on assessment and collection. In addition, this section describes the administrative and judicial proceedings to which these rules apply.

• Treas. Reg. §53.4961-2(b)Initial proceeding—(1) Defined. Show full text ▾ Collapse ▴

  Initial proceeding—(1) Defined. For purposes of subpart K, an initial proceeding means a proceeding described in subparagraph (2) or (3).

  (2) Tax Court proceeding before assessment. A proceeding is described in this subparagraph (2) if it is a proceeding with respect to the taxpayer's liability for second tier tax and is commenced in accordance with section 6213 (a).

  (3) Refund proceeding commenced before correction period ends. A proceeding is described in this subparagraph (3) if it is a proceeding commenced under section 7422, in accordance with the provisions of § 53.4963-1(e) (4) and (5) (relating to prerequisites to extension of the correction period during certain refund proceedings), and with respect to the taxpayer's liability for second tier tax.

• Treas. Reg. §53.4961-2(c)Supplemental proceeding—(1) Jurisdiction. Show full text ▾ Collapse ▴

  Supplemental proceeding—(1) Jurisdiction. If a determination in an initial proceeding that a taxpayer is liable for a second tier tax has become final, the court in which the initial proceeding was commenced shall have jurisdiction to conduct any necessary supplemental proceeding to determine whether the taxable event was corrected during the correction period.

  (2) Time for beginning proceeding. The time for beginning a supplemental proceeding begins on the day after a determination in an initial proceeding becomes final and ends on the 90th day after the last day of the correction period.

• Treas. Reg. §53.4961-2(d)Restriction on assessment during Tax Court proceeding. Show full text ▾ Collapse ▴

  Restriction on assessment during Tax Court proceeding. If a supplemental proceeding described in section 4961 (b) and § 53.4961-2(c) is commenced in the Tax Court, the provisions of the second and third sentences of section 6213(a) and the first and third sentences of § 301.6213-1(a)(2) apply with respect to a deficiency in second tier tax until the decision of the Tax Court in the supplemental proceeding is final.

• Treas. Reg. §53.4961-2(e)Suspension of period of collection for second tier tax—(1) Scope. Show full text ▾ Collapse ▴

  Suspension of period of collection for second tier tax—(1) Scope. Except as provided in subparagraph (6), this paragraph (e) applies to the second tier tax assessed with respect to a taxable event if a claim described in subparagraph (2) is filed.

  (2) Claim for refund. A claim for refund is described in this subparagraph (2) if, no later than 90 days after the day on which the second tier tax is assessed with respect to a taxable event, the taxpayer—

• Treas. Reg. §53.4961-2(f)Finality—(1) Tax Court proceeding. Show full text ▾ Collapse ▴

  Finality—(1) Tax Court proceeding. For purposes of this subpart K, section 7481 applies in determining when a decision in a Tax Court proceeding becomes final.

  (2) Refund proceeding. For purposes of this subpart K, § 301.7422-1 applies in determining when a decision in a refund proceeding becomes final.

• Treas. Reg. §53.4961-2(i)The day a decision in a refund proceeding commenced before the 91st day after denial of the claim described in subparagraph (2) of this paragraph (including any supplemental proceeding under § 53. Show full text ▾ Collapse ▴

  The day a decision in a refund proceeding commenced before the 91st day after denial of the claim described in subparagraph (2) of this paragraph (including any supplemental proceeding under § 53.4961-2(c)) becomes final;

  (ii) The 90th day after the claim referred to in subparagraph (2) is denied; or

  (iii) The 90th day after the second tier tax is assessed.

  (6) Jeopardy collection. If the Secretary makes a finding that the collection of the second tier tax is in jeopardy, nothing in this paragraph (e) shall prevent the immediate collection of such tax.