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billed, the rate at which those hours were billed, and the
miscellaneous costs are reasonable as claimed by petitioner.
A. Attorney's Fees
Petitioner submitted an itemized statement from its
attorney, Mr. John P. McDonnell (McDonnell), for the hours that
were spent, reflecting costs incurred from September 26, 1995,
through August 29, 1997. McDonnell billed his time at an hourly
rate of either $195 or $220.
Section 7430(c)(1) defines reasonable litigation costs in
part as reasonable fees paid or incurred for the services of
attorneys in connection with the court proceeding. Section
7430(c)(1)(B)(iii) limits the hourly rate for attorney's fees to
$75, with allowances for increase in the cost of living and other
special factors. An issue exists as to whether the cost of
living adjustment (COLA), which applies to an award of attorney's
fees under section 7430, should be computed from October 1, 1981,
or from January 1, 1986.
Our position on this issue was stated in Bayer v.
Commissioner, 98 T.C. 19, 23 (1992), where we concluded that
Congress, in providing for cost of living adjustments in section
7430, intended the computation to start on the same date the
COLA's were started under the Equal Access to Justice Act, 5
U.S.C. sec. 504 (1982). Citing Lawrence v. Commissioner, 27 T.C.
713 (1957), revd. on other grounds 258 F.2d 562 (9th Cir. 1958),
we stated that we would continue to use 1981 as the base year for
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