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MSP #18: APPEALS

The IRS’s Decision to Expand the Participation of Counsel and Compliance Personnel in Appeals Conferences Alters the Nature of Those Conferences and Will Likely Reduce the Number of Agreed Case Resolutions

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #18-1

Preserve its actual and perceived independence by adopting IRM procedures that separate Counsel and Compliance from Appeals conferences unless their inclusion is mutually agreeable to the taxpayer and Hearing Officer involved.

IRS RESPONSE TO RECOMMENDATION: The ATCL Conferencing Initiative is a limited pilot focused on a very small population of large, complex cases involving well-represented taxpayers. For these cases, we are testing to see whether allowing Appeals to hear both parties discuss the underlying facts and law (followed by taxpayer-only settlement negotiations) aids case resolution and supports Appeals’ impartiality without undermining our independence. We will further evaluate the pilot upon its completion.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Resource constraints and considerations of efficiency cannot be allowed to override the right to quality service. ATEs are most needed not in Campuses and regional offices, but in the communities that are impacted by their decisions.

An essential aspect of quality case resolution is a rapport between a taxpayer and an ATE. Intangible but incalculably powerful benefits arise from a common understanding of the social and economic challenges facing the community in which a taxpayer lives. This shared knowledge of circumstances can most effectively be achieved when ATEs live in relatively close proximity to the taxpayers with whom they are interacting.

Concentrating ATEs in Campuses and larger cities from which they communicate with taxpayers by telephone, by videoconferencing, or by occasionally traveling to distant locations to conduct circuit-riding conferences detaches ATEs from the taxpayers they serve. This trend toward consolidation and separation is precisely the opposite of what should be occurring. Instead, Appeals should expand its geographic footprint and reengage with taxpayers, which will help taxpayers gain confidence that their cases will be brought before ATEs who are accessible, committed to case resolution, and conversant with their circumstances.

Workload and resource concerns are simply not insurmountable obstacles to this approach. As TAS has amply demonstrated through its own geographic footprint, it is possible to round out smaller locale inventories with assignments of cases that are resolvable independent of location. Moreover, Appeals can staff offices in those states currently without a geographic presence by allocating the new hiring made possible through campus retirements and other attrition to field offices, thereby allowing resource expenditures to be held constant.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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2.

TAS RECOMMENDATION #18-2

Continue to involve Counsel and Compliance in pre-conference hearings and if, after the Appeals conference itself is complete, additional information from Counsel and Compliance proves necessary, explain the need to taxpayers and convene a post-conference call or meeting in conformity with ex parte rules.

IRS RESPONSE TO RECOMMENDATION: ​​This recommendation presumes adoption of TAS Recommendation #18-1, which we do not adopt at this time. For ATCL Conferencing Initiative cases, Appeals will continue to follow all applicable pre-conference and conference procedures; for all other cases, Appeals will continue to follow its existing procedures. Appeals will continue to strictly adhere to the ex parte rules for all cases.

CORRECTIVE ACTION: N/A

TAS RESPONSE: This recommendation is what the National Taxpayer Advocate would have provided, had she been consulted prior to implementation of the pilot. Taxpayers and tax practitioners are comfortable with the involvement of Compliance and Counsel in the pre-conference stage of an appeal. The challenge to the integrity and the effectiveness of an appeals proceeding arises when these personnel participate after the pre-conference. As a result, a general no-participation rule should be maintained. Thereafter, if additional information proves absolutely necessary, mechanisms for its acquisition can be established in conformity with the existing ex parte rules.

The strong concerns expressed by the tax practitioner community with respect to this initiative were primarily attributable to its mandatory nature and the lack of consultation with which it was imposed. These are not attributes calculated to inspire confidence in, and openness to, any type of pilot program. To the extent Appeals believes that ATEs are lacking necessary information, other ways of addressing this issue exist that would do less violence to the integrity of Appeals proceedings. Allowing for this post-conference meeting is just one of these possible alternatives. Another is for the IRS to insist that Compliance provide Appeals, in the first instance, with the information needed to adequately fulfill Appeals’ mission of undertaking independent and unbiased administrative dispute resolution.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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3.

TAS RECOMMENDATION #18-3

Track and analyze data relating to cycle times, outcomes, and subsequent litigation activity regarding conferences in which Counsel and Compliance participate so as to provide quantitative insight into the impact of such participation on Appeals proceedings.

IRS RESPONSE TO RECOMMENDATION: ​​Appeals regularly communicates with and solicits feedback from internal and external stakeholders about experiences with the ATCL Conferencing Initiative. This qualitative insight will inform future decisions made regarding Compliance attendance at ATCL conferences. In addition, Appeals collects data it deems appropriate that may also assist in informing future decision making.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Qualitative insights regarding the ATCL Conferencing Initiative are worthwhile and the National Taxpayer Advocate commends Appeals for gathering this anecdotal evidence on an ongoing basis. A meaningful evaluation of the pilot, however, also requires the collection and analysis of in-depth quantitative data such as that enumerated in this recommendation. Without such rigorous and objective analytical tools, the pilot program likely will represent little more than a self-fulfilling prophecy in which the ultimate results mirror the expectations and desires with which the initiative commenced.

The National Taxpayer Advocate urges Appeals to collect a broad range of quantitative data relating to this initiative and make that data broadly available. Thereafter, Appeals should work with the National Taxpayer Advocate, tax practitioner groups, and other stakeholders to analyze the quantitative and qualitative results it has compiled and to arrive at meaningful collective conclusions regarding the outcome of the pilot.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

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4.

TAS RECOMMENDATION #18-4

Seek and carefully consider comments from tax practitioners and other stakeholders regarding when, and to what extent, the participation of additional IRS personnel in Appeals proceedings would contribute to case resolution.

IRS RESPONSE TO RECOMMENDATION: Since October 2016, Appeals has conducted regular, external outreach about Appeals’ conference procedures and the ATCL Conferencing Initiative. We will continue to communicate with and engage external stakeholders on these and other issues of importance to Appeals and to the taxpayer community.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Communicating with and engaging external stakeholders is an important aspect in moving forward with the ATCL Conferencing Initiative. The National Taxpayer Advocate believes that listening to stakeholders is implicit in the communication and engagement surrounding the ATCL Conferencing Initiative. Nevertheless, the commitment to listen should be made explicit as well. To this point, the initiative has been unilaterally imposed by Appeals on a largely unwilling community of tax practitioners who have expressed substantial concerns about the initiative’s operation and impact. Appeals should pay careful attention to the comments of these practitioner groups, as well as other stakeholders throughout the implementation and evaluation of the pilot. Appeals should move away from the fiat-based approach that, to this point, has characterized the ATCL Conferencing Initiative, toward a more collaborative method of tax administration. This type of transparency and partnership among taxpayers, tax practitioners, and Appeals is particularly well suited to the Appeals environment, in which cooperation will only lead to more effective administrative case resolution.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

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

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