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Administrative proceedingsis defined in IRC 7430(c)(5) and explained in Treas. Reg. 301.7430-3(a). Generally it means any procedure or other action before the Internal Revenue Service that is commenced after November 10, 1988. However, an administrative proceeding does not include matters of general application, including hearings on regulations, comments on forms, or proceedings involving revenue rulings or revenue procedures; proceedings involving requests for private letter rulings or similar determinations; proceedings involving most technical advice memoranda, and proceedings in connection with collection actions excluding claim for refunds after payment of the assessed tax and proceedings described in Treas. Reg. 301.7430-8(c) and Treas. Reg. 301.7433-2.

Administrative proceeding date is defined in IRC 7430(c)(7) and Treas. Reg. 301.7430-3(c). . The term administrative proceeding date means the earlier of--

Attorney Fees is defined in IRC 7430(c)(3). For the purposes of reasonable litigation costs and administrative costs these are fees for services of an individual who is authorized to practice before the Tax Court or before the IRS. Pro bono services are covered if the fees are paid to the individual or his employer. The costs must be incurred after receipt of the NODA, SND, or the first letter of proposed deficiency that allows the taxpayer for an administrative review in the IRS, whichever is the earliest received.

Court Proceedings is defined in IRC 7430(c)(6). It means any civil action brought in a court of the United States including the Tax Court and the United States Claims Court.

Most significant issue or set of issues is defined in Treas. Reg. 7430-5(e). Where the taxpayer has not substantially prevailed with respect to the amount in controversy the taxpayer may nonetheless be a prevailing party if the taxpayer substantially prevails with respect to the most significant issue or set of issues presented. The issues presented include those raised as of the administrative proceeding date and those raised subsequently. Only in a multiple issue proceeding can a most significant issue or set of issues presented exist. However, not all multiple issue proceedings contain a most significant issue or set of issues presented. An issue or set of issues constitutes the most significant issue or set of issues presented if, despite involving a lesser dollar amount in the proceeding than the other issue or issues, it objectively represents the most significant issue or set of issues for the taxpayer or the Internal Revenue Service. This may occur because of the effect of the issue or set of issues on other transactions or other taxable years of the taxpayer or related parties.

Net worth and size limitations is defined in IRC 7430(c)(4)(D) and explained in Treas. Reg. 7430-5(f). The determination is made on the administrative proceeding date.

Notice of the decision of the Internal Revenue Service Office of Appeals (NODA) is defined in Treas. Reg. 7430-3(c)(2). A notice of the decision of Appeals is the final written document, mailed or delivered to the taxpayer, that is signed by an individual in the Office of Appeals who has been delegated the authority to settle the dispute on behalf of the Commissioner, and states or indicates that the notice is the final determination of the entire case. A notice of claim disallowance issued by the Office of Appeals is a NODA.

Notice of deficiency is defined in Treas. Reg. 301.7430-3(c)(3). A notice of deficiency is a notice described in IRC 6212(a), including a notice rescinded pursuant to IRC 6212(d). For purposes of determining reasonable administrative costs, a notice of final partnership administrative adjustment and a notice of final S corporation administrative adjustment will be treated as a SND.

Prevailing party is defined in IRC 7430(c)(4) and explained in Treas. Reg. 301.7430-5. For purposes of an award of reasonable administrative costs in the case of administrative proceedings commenced after July 30, 1996, a taxpayer is a prevailing party if the taxpayer substantially prevails as to the amount in controversy or with respect to the most significant issue or set of issues presented; and the taxpayer satisfies the net worth and size limitations. An exception to this is that a party shall not be treated the prevailing party regardless of whether he substantially prevailed If the taxpayer files a 7430(g) qualified offer, the prevailing party rules of IRC 7430(c)(4)(E) will apply instead. A taxpayer is a prevailing party by reason of making a qualified offer if the taxpayer's liability under the last qualified offer would equal or exceed the amount of the taxpayer's liability under the judgment entered by the court.

Prevailing Party under IRC 7430(g) is explained in IRC 7430(c)(4)(E). Additional limitations apply to IRC 7430(g) qualified offer cases. These additional limitations are:

Position of the United Statesis defined in IRC 7430(c)(7) and explained in Treas. Reg. 301.7430-5(b). It is the position of the United States in an administrative proceeding as of the administrative proceeding date, and it is the position taken by the United States in a judicial proceeding.

Presumption is explained in Treas. Reg. 301.7430-5(c)(3). If the Internal Revenue Service did not follow any applicable published guidance in an administrative proceeding commenced after July 30, 1996, the position of the Internal Revenue Service, on those issues to which the guidance applies and for all periods, during which the guidance was not followed, will be presumed not to be substantially justified. This presumption may be rebutted. The term applicable published guidance means final or temporary regulations, revenue rulings, revenue procedures, information releases, notices, announcements, and, if issued to the taxpayer, private letter rulings, technical advice memoranda, and determination letters.

Qualified offer is defined in IRC 7430(g)(1) and explained in Treas. Reg. 7430-7. A qualified offer means a written offer made by the taxpayer to the United States during the qualified offer period, specifies the offer amount, is designated at the time it is made as a qualified offer and remains open during the period beginning on the date it is made and ending on the earliest of the date the offer is rejected, the date the trial begins, or the 90th day after the date the offer is made.

Qualified offer period is defined in IRC 7430(g)(2) as the period beginning on the date the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in Appeals is sent and ending on the date which is 30 days before the date the case is first set for trial.

Reasonable Cost:

Substantially justified is defined in IRC 7430(c)(4)(B) and explained in Treas. Reg. 301.7430-5(c). The position of the Internal Revenue Service is substantially justified if it has a reasonable basis in both fact and law. A significant factor in determining whether the position of the Internal Revenue Service is substantially justified as of a given date is whether, on or before that date, the taxpayer has presented all relevant information under the taxpayer's control and relevant legal arguments supporting the taxpayer's position to the appropriate Internal Revenue Service personnel.