In September 2019, the IRS Office of Appeals released procedures and sample communications for the IRS Appeals pilot program. In May 2017, the IRS Office of Appeals began a pilot program as part of the Appeals Judicial Approach and Culture (“AJAC”) project, in which Appeals Team Case Leaders (“ATCLs”) invite the IRS examination team and counsel to participate in the Appeals conferences for the largest, most complex, cases in Appeals. Under the initiative, the IRS exam team, taxpayer and counsel for both parties are present at the conference while each presents its position regarding the issues in dispute.
According to the IRS, the IRS Appeals’ overall aim regarding the AJAC initiative is to conduct conferences in a manner that furthers the interest of good tax administration. The Appeals mission is to resolve tax controversies, without litigation, on a basis that is fair and impartial to both the government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service. The basis of AJAC is to provide insight that Appeals gains from an open discussion of positions in the largest and most complex cases to help facilitate case resolution. The initiative relies on compliance and the taxpayer and the taxpayer’s representative to participate in focused discussions so that Appeals can identify, narrow and resolve factual or legal differences. After the conference, settlement discussions are held between Appeals and the taxpayer and/or their representative, without the examination team and IRS counsel present. While intended to foster settlement, the AJAC initiative was never intended to change the traditional Appeals conference into a required mediation session. To foster an understanding of the initiative, the IRS posted an FAQ of questions and answers about the initiative.
IRS Appeals has decided to continue the initiative for another year, through May 1, 2020, and to conduct a formal survey of participants in cases worked and closed within the initiative.
“Under the initiative, the IRS exam team, taxpayer and counsel for both parties are present at the conference while each presents its position regarding the issues in dispute.”
Process and Procedures
The ATCL has overall responsibility for planning and controlling the progress of the case throughout this process. The ATCL is responsible for:
• Organizing an Appeals Team;
• Holding an Expectation’s Conference Call with all parties present, including the Appeals Team, Compliance and the Taxpayer and/or their Representative. The call should:
- Address administrative issues, including date, time, location and names of attendees at the conference;
- Discuss the role each participant will have at the conference.
– Effective open communication among the parties is essential in resolving the issues.
– ATCL has overall responsibility for planning and controlling the progress of the conference and setting appropriate ground rules as necessary.
– Appeals’ role will be the decision maker on the disputed issues and to assess the strengths and weaknesses of both sides to help resolve the issues.
– Compliance and the Taxpayer and/or their Representative have a role during the conference to explain their positions; this will assist Appeals in narrowing or resolving factual or legal differences.
– Compliance and the Taxpayer and/or their Representative present their positions on the issues.
– ATCL will focus conference participants on a goal to resolve any factual or legal discrepancies while both parties are present.
– Mediation may be used by the ATCL, but only if agreed to by both parties. After the conference, the Taxpayer and/or their Representative should be ready to discuss settlement of the issues with the ATCL.
• Discuss case file concerns involving TEFRA issues, statutes, Joint Committee review issues, etc., if applicable;
• Review the issues that will be addressed
– This will provide clarification of the specific issues to be conferenced.
– Schedule of adjustments discussed and confirmed.
– Are there any issues or arguments that are no longer being pursued?
• Confirm and address unagreed issues on the Schedule of Adjustments, and identify and address any barriers to settlement that were previously identified;
• Set forth expectations and ground rules for the conference. Such ground rules should include:
– Compliance or the Taxpayer and/or their Representative will lead off with their presentation.
– Each party should be prepared to present their issues and respond to any questions.
– Both parties will remain during the presentation of the issues.
– After the conference, Compliance will be excused and settlement discussions will be between the ATCL and the Taxpayer and/or their Representative.
• Follow-up by mail or, if appropriate, by e-mail with an Expectations Letter to the Taxpayer, which reiterates the points made during the call.
• Distributing any upfront questions to the parties with responses required at least 2 weeks prior to the conference (responses will be shared with the parties);
• Requiring both parties to provide any new arguments or information not in the administrative file no later than 45 days prior to the conference;
• In order to assist in narrowing the scope of the dispute, each participant should immediately notify Appeals whenever it has been determined that an issue will be dropped by the party and no longer pursued within Appeals. (This could occur, for example, if a recent court case has been decided.)
• Hosting a conference in which both parties are present while each presents its position regarding the issues in dispute;
• Focusing conference participants on discussions so that Appeals can narrow or resolve factual or legal differences; and
• Maintaining ongoing communications.
Issuance of these procedures is the result of comments, both external and internal, over the past two years regarding how Appeals conducted conferences under the initiative. The IRS plans to continue to survey participants in cases worked and closed within the initiative. The survey, which will be conducted by a thirdparty organization, is scheduled to begin this Fall for cases closed by that time, and will continue through May 2020.