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Discussion
Section 7430 has been amended several times since it was
enacted in 1982.5 Which provisions (and therefore which
amendments) apply in a given case depends on when the proceeding
was commenced and the period within which the claimed costs were
incurred. Because this proceeding was commenced on May 29, 2002,
and the costs were incurred after January 18, 1999, the
amendments to section 7430(c)(2) made by the Internal Revenue
Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L.
105-206, sec. 3101(b), 112 Stat. 727 apply. In addition, we are
asked to interpret the amendment in 1996 to section 7430(c)(4)
made by the Taxpayer Bill of Rights 2 (TBOR 2), Pub. L. 104-168,
secs. 701-704, 110 Stat. 1463-1464.
We begin by discussing the general, operative provisions of
section 7430, then discuss the amendments made in TBOR 2 and RRA
1998. We then analyze the arguments each party made, and we
conclude that petitioners cannot recover administrative costs.
5 Sec. 7430 was enacted in 1982 to allow certain prevailing
parties to recover reasonable litigation costs (but not
administrative costs) in cases brought by or against the United
States to determine, collect, or refund any tax, interest, or
penalty. The Tax Equity and Fiscal Responsibility Act of 1982,
Pub. L. 97-248, sec. 292(a), 96 Stat. 572. Sec. 7430 was
expanded in 1988 to allow for the recovery of reasonable
administrative costs. The Technical and Miscellaneous Revenue
Act of 1988 (TAMRA), Pub. L. 100-647, sec. 6239(a), 102 Stat.
3743-3746.
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