IRS RESPONSE TO RECOMMENDATION: The IRS does not agree to implement TAS recommendations (i) and (ii) but states recommendations (iii) and (iv) have been implemented in part.

Parts (i) and (ii) of this recommendation pertain to LB&I and SB/SE Examination as the suggested actions would take place while a case is in Compliance jurisdiction. Appeals is responsible for parts (iii) and (iv) of the recommendation as those suggested actions would occur while a case is in Appeals jurisdiction.

LB&I and SB/SE Examination do not agree with Parts (i) and (ii) of this recommendation. Existing published guidance already establishes timeliness expectations when a taxpayer requests an Appeals conference. Under IRM 4.10.8.12.9.3(3), when a formal written protest or small case request is received, the group must review the protest within seven days to determine whether it meets the requirements of Publication 5. As part of that review, the examiner evaluates any new facts, legal arguments, or issues to determine whether additional development is required, the report should be modified, or a rebuttal should be prepared. Cases requiring additional development are treated as priority work and receive expedited consideration.

Further, IRM 4.10.8.12.9.3.1 provides that, to meet general case-closing time frames, all required actions — including securing consent, rebutting protest, and conducting a group manager conference — should generally be completed within twenty days of receipt of the protest, unless additional development is necessary.

In addition to these timeframes, examination procedures emphasize consistent and transparent communication with taxpayers throughout the unagreed case process. Examiners are instructed to take timely action upon receipt of a protest, including preparation of a prompt and thorough rebuttal. Cases are updated to Status Code 13 upon issuance of a 30-day letter, which facilitates monitoring and promotes timely case actions. Case managers are also responsible for ensuring timely review and transfer of cases to Appeals following closure from Examination.

Examination cases vary significantly in scope, size, and complexity. While existing guidance provides structured timeframes, it also allows flexibility when a protest involves significant factual or legal complexity. Establishing rigid, uniform timelines for all cases—without regard to case-specific circumstances—could hinder effective case resolution and create inefficiencies rather than improve timeliness.

For these reasons, LB&I and SB/SE believe current IRM provisions appropriately balance enforceable timeliness standards with the flexibility necessary to address the varying complexity of examination cases. See: IRM 4.10.8.2.4.4, Time Frames for Closing Cases from the Group; IRM 4.10.8.12, Unagreed Case Procedures; IRM 4.10.8.12.7(6), Issuing 30-Day Letters; IRM 4.10.8.12.9.3, Request for Appeals Conference; IRM 4.10.8.12.9.3.1, Timely Actions – Request for Appeals Conference; and IRM 4.46.5.7.3, 30-Day Letter Follow-Up.

Where the second half of this recommendation is concerned (Parts (iii) and (iv)), Appeals appreciates TAS’s suggestions for improving the taxpayer experience and partially agrees to implement those over which we have control. In part, Appeals has already adopted the spirit of the recommendations in that we currently track and internally monitor the time it takes for cases to be received and assigned to an Appeals technical employee (ATE). Appeals must consider every case that is protested, and each protested case involves unique facts and circumstances that must be considered independently. As a result, ATEs require the flexibility necessary to give each taxpayer’s case the time and attention it deserves. In addition, Appeals is concerned that mandatory time limits in assigning cases to employees who will not be able to commence work on the case in a short period of time create an environment where potential reassignment and taxpayer confusion could occur as well as inefficiencies related to multiple ATE involvement. We will continue to search for ways to streamline our processes to improve tax administration and the taxpayer experience.

CORRECTIVE ACTION: We will continue to search for ways to streamline our processes to improve tax administration and the taxpayer experience.

TAS RESPONSE: The IRS correctly notes that parts of the protest-to-conference process occur in Compliance, that existing IRM provisions establish expectations for reviewing protests and taking follow-up actions, and that complex cases require flexibility. However, those existing provisions have not resolved the taxpayer-facing problem identified in this Most Serious Problem. Taxpayers continue to experience long, unexplained delays after timely invoking their right to independent Appeals review.

TAS is not recommending rigid deadlines that disregard case complexity. Rather, TAS recommends published, enforceable milestone standards with appropriate exceptions, follow-up communication when additional time is needed, management review, and annual reporting. Organizational responsibility for particular stages of the process does not eliminate the IRS’s obligation to provide taxpayers with a coherent end-to-end path from protest to initial Appeals contact.

Appeals’ internal tracking of receipt and assignment times is useful, but internal monitoring does not substitute for taxpayer-facing standards or accountability. Without clear timeframes for Exam rebuttal, transfer to Appeals, Appeals assignment, and initial contact, taxpayers cannot know whether their cases are moving, delayed for a valid reason, or stalled in the handoff between functions. TAS therefore continues to recommend enforceable timeliness standards for the full path from protest to conference.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: Appeals has in place a range of guidance directing ATEs to objectively negotiate and resolve cases based on their evaluation of the facts, law, and applicable hazards of litigation. In most cases, both the ATE and the Appeals Team Manager (ATM) sign resolution documents, and they collaborate with each other and other functions within Appeals to ensure that Appeals, as an institution, is providing taxpayers with high-quality service that is internally consistent and independent from other organizations within the IRS.

Appeals has the right to seek Counsel advice under IRC 7803(e)(6)(B), but this occasional consultation is in no way inconsistent with Appeals standard practice of arriving at our own determination regarding the applicable hazards of litigation and the appropriate resolution of a case. This approach and our independence was reaffirmed and refined in recently published IGM AP-08-0326-0006. Further, Appeals communicates in training and otherwise internally the independent role its mission requires and how that objectivity is reflected in Appeals’ hazards of litigation determinations.

Separately, Appeals domestic and international specialists are Appeals employees that work closely with ATEs to assess the factual and legal hazards of a case. With the large variety of issues heard in Appeals, ATEs may not be experts in all issues involved in a taxpayer’s case. Appeals’ specialists are an important resource for ATEs in resolving cases with similar facts and circumstances in a consistent and fair manner. Appeals continually seeks opportunities to reiterate and reinforce the importance of each ATE evaluating the facts, applying the law to the facts, and weighing factual and legal litigating hazards for possible case resolution. The role of the Appeals specialist is to provide technical support and advice. Further, for the limited number of issues involving Review and Concurrence, ATEs work collaboratively with the Appeals specialist, and if there is ever disagreement, the issue should be elevated for resolution through both leadership chains.

CORRECTIVE ACTION: Appeals continually seeks opportunities to reiterate and reinforce the importance of each ATE evaluating the facts, applying the law to the facts, and weighing factual and legal litigating hazards for possible case resolution. The role of the Appeals specialist is to provide technical support and advice. Further, for the limited number of issues involving Review and Concurrence, ATEs work collaboratively with the Appeals specialist, and if there is ever disagreement, the issue should be elevated for resolution through both leadership chains.

TAS RESPONSE: TAS agrees that Appeals may seek Counsel advice under IRC § 7803(e)(6)(B), that Appeals specialists can provide important technical assistance, and that ATM or Appeals Team Case Leader (ATCL) approval may be appropriate to promote quality and consistency. TAS does not object to advisory input, technical consultation, or supervisory approval. The concern is whether that input becomes, or is perceived as becoming, outcome determinative. Practitioners continue to report that AOs may feel constrained by informal expectations, generalized hazards ranges, technical guidance, or Counsel views rather than conducting a case-specific evaluation of the taxpayer’s facts, applicable law, evidentiary strengths and weaknesses, and hazards of litigation.

Existing guidance, training, and elevation procedures are helpful but do not fully implement the recommendation. TAS continues to recommend that Appeals revise the IRM to state expressly that (1) AOs independently develop settlement proposals; (2) Counsel, Technical Guidance Coordinators (TGC), and specialist input is advisory; and (3) supervisory review document concurrence or disagreement with the AO’s hazards analysis when outside input materially affects the recommended resolution.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: In most Appeals cases, including when Counsel or Treasury General Counsel (TGC) input is sought and received, the outcome and reasoning are shared with taxpayers and the full results are documented in the administrative record. ATEs and taxpayers also discuss the legal and factual considerations of a case through the conferencing process. Disclosing Counsel advice is also inconsistent with IRC 7803(e)(6)(B), which provides Appeals with the authority to seek legal assistance and advice from the Office of the Chief Counsel, because such disclosure could have a chilling effect on the nature and depth of this advice, which is privileged.

ATEs prepare ACMs to document the recommended resolution of a case for approval or concurrence by their manager. ACMs function as an internal management tool intended to ensure that case resolutions are properly supported and memorialized. They are shared with Compliance as Compliance is not present for the full Appeals conference. We are presently evaluating potential ACM policies and receiving input from a number of stakeholders regarding our treatment of ACMs going forward.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS does not recommend disclosure of privileged legal advice or materials protected by law. The recommendation can be implemented without violating privilege by documenting when AOs sought Counsel, TGCs, or other non-ATE input; identifying the consulted issue; and including a brief non-privileged summary of the input or its effect on the case, as appropriate.

The IRS’s statement that taxpayers receive the outcome and reasoning through the conference process does not fully address the transparency concern. Oral discussion is not a durable written rationale, and taxpayers may not be able to reconstruct whether outside input influenced the resolution. A limited non-privileged written explanation would improve procedural fairness without chilling privileged legal advice.

The ACM issue presents a separate fairness concern. As the NTA has stated repeatedly over the years, if the ACM is an internal management tool, it should remain internal and not be shared with Compliance. If Appeals shares the ACM with Compliance, then a redacted version should be provided to the taxpayer at closure on equal terms. Evaluating future ACM policies is a positive step, but it does not implement the recommendation or resolve the current asymmetry.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: Appeals conferences can be divided into three segments:

• The first phase – the pre-conference – provides Compliance with the opportunity to appear before Appeals to discuss the issues, the taxpayer’s protest, and Compliance’s written rebuttal. Pursuant to ex parte requirements, the taxpayer is offered an opportunity to participate in the pre-conference;
• The middle phase, in which the taxpayer traditionally presents its position to the Appeals team. Compliance/Counsel are generally absent from this phase, but can attend at the invitation of the ATE; and
• The final phase, which is limited exclusively to the taxpayer and the Appeals team, and where the ultimate settlement negotiations take place.

Although Appeals has the authority to do so, we do not routinely invite Compliance or Counsel to attend Appeals proceedings beyond the pre-conference. The discretion to request Compliance/Counsel participation in the middle phase can be a valuable tool that allows ATEs to hear from both sides in real time to clarify factual disagreements and the parties’ legal positions. Nevertheless, we already generally limit this participation to the most complex and contentious cases. Even then, Compliance/Counsel are excluded from the settlement negotiations which occur during the third and final phase of the Appeals conference.

To underscore Appeals restraint in this area, and to memorialize the parameters under which we operate, we published targeted Interim Guidance in December 2025. See AP-08-1225-0051. This guidance implements a number of TAS’s recommendations and, among other things:

• Requires managerial approval for Compliance/Counsel participation in all but the largest cases, which typically fall within the ATCL category;
• Sets forth a non-exclusive list of factors for ATMs and ATCLs to consider when determining whether to allow Compliance/Counsel participation such as the existence of factual/legal complexity or nationwide importance/precedential uncertainty; and
• Mandates that when Compliance/Counsel will be participating in an Appeals conference, all parties hold an Expectations Meeting, unless waived by the taxpayer. Among other things, this provides advance notice to the taxpayer regarding the attendance of Compliance/Counsel.

CORRECTIVE ACTION: To underscore Appeals restraint in this area, and to memorialize the parameters under which we operate, we published targeted Interim Guidance in December 2025. See AP-08-1225-0051. This guidance implements a number of TAS’s recommendations and, among other things:

• Requires managerial approval for Compliance/Counsel participation in all but the largest cases, which typically fall within the Appeals Team Case Leader (ATCL) category;
• Sets forth a non-exclusive list of factors for ATMs and ATCLs to consider when determining whether to allow Compliance/Counsel participation such as the existence of factual/legal complexity or nationwide importance/precedential uncertainty; and
• Mandates that, when Compliance/Counsel will be participating in an Appeals conference, all parties hold an Expectations Meeting, unless waived by the taxpayer. Among other things, this provides advance notice to the taxpayer regarding the attendance of Compliance/Counsel.

TAS RESPONSE: The interim guidance described by Appeals is a constructive step. Managerial approval, factors limiting when Counsel or Compliance may participate, advance notice, and an Expectations Meeting can help reduce unnecessary participation and clarify roles. Those safeguards, however, do not fully address the recommendation. Advance notice and an Expectations Meeting are not affirmative taxpayer consent. Nor does exclusion from final settlement negotiations eliminate the concern that the presence of Counsel or Compliance during the taxpayer-facing presentation phase may make the conference appear adversarial rather than independent.

TAS recognizes that Appeals may benefit from outside consultation and that some complex cases may require real-time clarification of factual or legal issues. But participation by non-Appeals personnel in the taxpayer-facing portion of the conference should occur only with the taxpayer’s affirmative consent or at the taxpayer’s request. At a minimum, Appeals should publish annual data on Counsel and Compliance attendance, taxpayer objections or waivers, case categories, and outcomes so the IRS and stakeholders can evaluate whether the new guidance protects Appeals’ independence in practice.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

IRS RESPONSE TO RECOMMENDATION: The IRS plans to develop transcript and online account indicators for certain Collection cases once a complete appeal is received and transferred to Appeals, subject to prioritization and system constraints (target implementation: September 30, 2027). IRS does not support an indicator with our current exam systems because of administrative requirements and possible increase in systemic errors during case closing procedures that can cause delays.

CORRECTIVE ACTION: The IRS plans to develop transcript and online account indicators for certain Collection cases once a complete appeal is received and transferred to Appeals, subject to prioritization and system constraints (target implementation: September 30, 2027). IRS does not support an indicator with our current exam systems because of administrative requirements and possible increase in systemic errors during case closing procedures that can cause delays.

TAS RESPONSE: The IRS’s plan to develop transcript and online account indicators for certain Collection cases is a positive step, and TAS recognizes that system limitations may require phased implementation. But the planned action is too narrow and too delayed to address the full problem. Limiting the indicator to certain Collection cases after a complete appeal has been transferred to Appeals leaves Examination cases and the pre-transfer “black hole” largely unaddressed. That is the stage where many taxpayers most need confirmation that their protest was received and is moving through the process.

TAS recognizes the IRS’s concern that current Exam systems may create administrative burdens or systemic-error risks. Those concerns support pilots, controls, phased implementation, or limited status indicators. They do not justify excluding Exam cases altogether. TAS continues to recommend transcript and online account indicators showing (1) receipt of an Appeals request, (2) transfer to Appeals, (3) assignment, and (4) key status changes for both Collection and Exam cases.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 09/30/2027

IRS RESPONSE TO RECOMMENDATION: ​Currently, Appeals has several systems that facilitate direct and secure communication between individual and business taxpayers and the IRS. This includes, for example, a secure messaging digital communication portal as well as a secure document upload tool. Appeals also maintains a customer service line to help taxpayers determine whether their cases have reached Appeals.

While Appeals does not currently have a unified digital portal, Appeals and Information Technology (IT) agree that such a portal would be beneficial for individual and business taxpayers and would significantly enhance the taxpayer experience. Development of a portal will be evaluated as part of broader IRS technology initiatives and implemented when feasible based on available resources and system priorities.

CORRECTIVE ACTION: While Appeals does not currently have a unified digital portal, Appeals and Information Technology (IT) agree that such a portal would be beneficial for individual and business taxpayers and would significantly enhance the taxpayer experience.

Development of a portal will be evaluated as part of broader IRS technology initiatives and implemented when feasible based on available resources and system priorities.

Appeals is currently studying the feasability of a March 31, 2027 implementation date.

TAS RESPONSE: The IRS correctly notes that Appeals has secure messaging, document upload tools, and a customer service line, and TAS agrees these tools are useful. The IRS also appropriately acknowledges that a unified portal would significantly improve the taxpayer experience. However, the existing tools remain fragmented and do not provide a single authoritative record, real-time status tracking, unified file access, or seamless data exchange between Appeals and the originating functions. A customer service line is not an adequate substitute for secure digital status information that taxpayers and representatives can access directly.

Further, a commitment to evaluate a unified portal when feasible is not sufficient without milestones, ownership, and defined requirements. TAS continues to recommend that the IRS establish a modernization plan for a unified Appeals portal that includes secure messaging, document upload, digital file access, real-time status tracking from protest to closure, and data exchange with originating functions so all parties rely on one authoritative record.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 03/31/2027

IRS RESPONSE TO RECOMMENDATION: ​Appeals already provides significant hazards of litigation (HoL) training to ATEs during their mandatory new hire training classes. To further augment this training, we are exploring a recurring Continuing Professional Education (CPE) requirement on HoL. As currently envisioned, we would make this CPE dynamic and meaningful by incorporating real world case studies, that include HoL analysis and evidentiary concepts, simulations, and scenario-based exercises to strengthen practical application of HoL, including the application of a judicial and impartial approach to dispute resolution, negotiations, and taxpayer rights. The feasibility and frequency of this training are currently under consideration.

Because we already view these topics as crucial aspects of our ATEs core responsibilities, we already offer such training in a variety of forms. We agree with TAS that additional training of the kind described above is always helpful and we plan to make it available wherever possible. Moreover, we already support Tax Court observation and the attendance of Tax Court proceedings by our ATEs.

CORRECTIVE ACTION: Appeals already provides significant hazards of litigation (HoL) training to ATEs during their mandatory new hire training classes. To further augment this training, we are exploring a recurring Continuing Professional Education (CPE) requirement on HoL. As currently envisioned, we would make this CPE dynamic and meaningful by incorporating real world case studies, that include HoL analysis and evidentiary concepts, simulations, and scenario-based exercises to strengthen practical application of HoL, including the application of a judicial and impartial approach to dispute resolution, negotiations, and taxpayer rights. The feasibility and frequency of this training are currently under consideration.

TAS RESPONSE: Appeals’ existing new-hire hazards-of-litigation training, support for Tax Court observation, and exploration of recurring CPE are important accomplishments. TAS agrees that practical training using case studies, evidentiary concepts, simulations, negotiation exercises, and taxpayer-rights principles would strengthen AO decision-making. Still, the IRS’s response remains incomplete because it does not commit to annual training, establish a required curriculum, institutionalize Tax Court observation for all AOs, or tie training and courtroom exposure to Critical Job Elements. Training made available “wherever possible” may be displaced by inventory pressures, particularly when caseloads are high. TAS continues to recommend that Appeals embed litigation-focused training into AO performance expectations. Required annual training and structured Tax Court observation would strengthen independent hazards analysis, reduce overreliance on Counsel or technical advisors, and improve the quality and timeliness of Appeals resolutions.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Open

DUE DATE FOR ACTION (if left open): 12/31/2026

IRS RESPONSE TO RECOMMENDATION: ​ADR reinvigoration has been an active priority of the IRS and the Alternative Dispute Resolution Program Management Office (ADR PMO) since FY 2024. The ADR PMO, in collaboration with impacted BODs, is accountable for ADR performance, and ADR programs have seen considerable recent success. For example, during FY 2024 and FY 2025, ADR case receipts have increased by over 60%. Moreover, ADR programs have continued to operate within the targeted timeframes set forth in the IRM (120 days for LB&I cases, 60 days for SB/SE cases). To promote transparency, we circulate a wide range of ADR data within the IRS monthly and will be publishing much of that same data in the IRS Data Book. Appeals and Compliance have also put procedures in place that limit denials of ADR requests to only those relatively few cases ineligible or inappropriate for ADR. Collectively, we continue to provide ongoing training regarding Fast Track Settlement (FTS), Post Appeals Mediation (PAM), and the importance of facilitating the appropriate use of ADR throughout the examination and Appeals process.

Undue reliance on targets and deadlines can be counterproductive in an ADR environment which is compromise based and often dependent on the positions taken by taxpayers. For example, saying “no” is always quicker and easier than engaging in the type of good-faith negotiations needed to reach a mutually acceptable resolution between the parties. Also, care must be taken to avoid the type of outcome-based goals that could have the unintended consequence of encouraging people to work toward satisfaction of artificial metrics, rather than encouraging efforts to settle cases where appropriate and consistent with the applicable hazards of litigation.

CORRECTIVE ACTION: ADR reinvigoration has been an active priority of the IRS and the Alternative Dispute Resolution Program Management Office (ADR PMO) since FY 2024. ADR programs have continued to operate within the targeted timeframes set forth in the IRM (120 days for LB&I cases, 60 days for SB/SE cases). To promote transparency, we circulate a wide range of ADR data within the IRS monthly and will be publishing much of that same data in the IRS Data Book. Appeals and Compliance have also put procedures in place that limit denials of ADR requests to only those relatively few cases ineligible or inappropriate for ADR. Collectively, we continue to provide ongoing training regarding Fast Track Settlement (FTS), Post Appeals Mediation (PAM), and the importance of facilitating the appropriate use of ADR throughout the examination and Appeals process.

TAS RESPONSE: Appeals has taken meaningful steps to reinvigorate ADR, including establishing the ADR PMO, increasing ADR receipts, circulating internal ADR data, planning to publish data in the IRS Data Book, limiting denials of ADR requests, and continuing training on FTS and PAM. TAS also agrees that ADR metrics should not create settlement quotas or pressure employees to resolve cases contrary to the merits.

The recommendation, however, calls for program management metrics, not outcome-based settlement quotas. Measures such as ADR offers, taxpayer acceptance or declination, reasons for denial, resolution rates, time to resolution, and results by program and business operating division would help identify barriers and improve access without compromising neutral, hazards-based decision-making. Additionally, recent gains should be measured against the historically low use of ADR and continuing reports of inconsistent awareness, support, and consideration across Appeals and Compliance.

TAS continues to recommend measurable ADR goals, good-faith consideration in eligible cases, managerial accountability for appropriate ADR use, and ADR training as a Critical Job Element, where appropriate. Without accountability across both Appeals and Compliance, ADR is unlikely to become a reliable early-resolution path for taxpayers.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A