The IRS Independent Office of Appeals (IRS Appeals, Appeals) has seen many changes over the past several years. One of the more controversial and publicized change related to the 2017 pilot program to test whether inviting Large Business & International (LB&I) exam teams and Chief Counsel attorneys to engage with taxpayers and their representatives at the IRS Appeals conference would improve Appeals’ ability to work large, complex cases. The pilot program technically applied only to IRS Appeals’ largest and most complex cases, however, the IRS also revised the Internal Revenue Manual to provide IRS Appeals with discretion to invite exam teams and Chief Counsel attorneys to any conference. The pilot program ended on May 1, 2020, and the IRS has been gathering feedback and data from multiple sources (both within and outside the IRS) to determine the effectiveness of the program.

The results are in, as reflected in the recently released Appeals Team Case Leader Conferencing Initiative: Summary of Findings and Next Steps (IRS Appeals Summary). Generally, IRS Appeals Officers found that the exam team’s participation improved their understanding of the dispute and helped them identify, narrow and resolve factual and legal differences between the parties before engaging in settlement negotiations with taxpayers. On the other hand, some taxpayers expressed concerns over the presence of exam teams and Chief Counsel attorneys because they found it hindered the ability to resolve cases without litigation and required more concrete ground rules before the start of the conference.

The IRS Appeals Summary concluded that the process was generally helpful and that IRS Appeals would be given discretion to invite exam teams and Chief Counsel attorneys to attend the IRS Appeals conference in the future. In exercising such discretion, the Appeals Officer must consider several factors and solicit and consider both the taxpayers’ and the exam team’s views as to whether joint participation would be helpful.

Practice Point: Our experiences with the exam team and Chief Counsel attorneys attending the IRS Appeals conference has been mixed. Similar to concerns raised by other taxpayers, we have seen certain IRS personnel repeatedly interrupt the taxpayer during the presentation of their case and offer the exam team’s views of an acceptable settlement. However, we have also seen situations where the IRS Appeals Officer has been able to hold IRS personnel accountable by questioning factual and legal positions. In any event, exam team participation is here to stay and LB&I taxpayers and their representatives need to be aware of the new ground rules in this area.