On September 11, the IRS expanded the number of cases that are eligible to go through mediation in Appeals and updated the mediation procedures (Rev. Proc. 2009-44).
The IRS Appeals function is designed to resolve tax controversies without litigation. The mediation program (which was authorized in 1998 and established in 2002) is an extension of the Appeals function and is intended to help increase voluntary taxpayer compliance.
Mediation may be used to resolve issues in qualifying cases while they are under consideration by Appeals. It may be used only after Appeals settlement discussions are unsuccessful and generally when all other issues are resolved except the issue(s) for which mediation is being requested. The mediation process is voluntary.
Under Rev. Proc. 2009-44, mediation is available for:
- Legal issues;
- Factual issues;
- Compliance or Appeals coordinated issues (unless the taxpayer has declined the opportunity to discuss such issues during the regular Appeals process);
- Certain early referral issues when an agreement is not reached;
- Issues for which a request for competent authority assistance has not yet been filed;
- Unsuccessful attempts to enter into a closing agreement; and
- Certain offer in compromise and trust fund recovery penalty cases.
The revenue procedure provides that, for offer in compromise cases with liabilities of $50,000 or more, the IRS Chief Counsel’s office must review any settlement or agreement reached.
The guidance spells out the application process, what the agreement to mediate must contain, how mediators will be selected, and particulars of the mediation sessions.
The IRS’s previous Appeals mediation guidelines, contained in Rev. Proc. 2002- 44, are superseded by the new revenue procedure, which is effective October 5, 2009.