On Aug. 24, 2016, the IRS issued revised procedures relating to Appeals "Conference and Issue Resolution" under Internal Revenue Manual (IRM) Section 8.6.1. Appeals has indicated that the revised procedures are driven by a desire to clarify its procedures for taxpayers, to better allocate IRS resources, and to get the right work to the right Appeals employee. Appeals also has stated that face-to-face meetings with taxpayers are not practical to resolve all cases and that 87% of cases are handled over the phone. The changes went into effect Oct. 1, 2016.
The IRM revisions eliminate prior procedures related to transfers of cases for the convenience of the taxpayer and transfers of cases within Appeals. The revisions reflect the fact that most Appeals conferences are conducted by telephone and specify that a telephonic, rather than an in-person, conference will be first offered to taxpayers (IRM §184.108.40.206.1, ¶(2)). If a taxpayer declines the invitation for a telephonic conference and requests an in-person conference, a virtual conference should be offered as the next best alternative (IRM §220.127.116.11.1, ¶(3)). If a taxpayer declines the virtual conference alternative, the Appeals team manager has the sole discretion to determine whether to allow an in-person conference.
In deciding when an in-person conference is appropriate, the team manager is instructed to consider the following facts and circumstances (IRM §18.104.22.168.1, ¶(4)):
1. Whether there are substantial books and records to review that cannot be easily referenced with page numbers or indexes;
2. Whether an in-person conference is necessary to judge the credibility of the taxpayer's oral testimony;
3. Whether the taxpayer has special needs that can only be accommodated with an in-person conference;
4. Whether there is a risk of an unauthorized disclosure or breach of confidentiality due to numerous conference participants;
5. Whether an alternative conference procedure (e.g., Post Appeals Mediation or Rapid Appeals Process) involving separate caucuses will be used; and
6. Whether another IRM section calls for an in-person conference.
Revised IRM Section 22.214.171.124.2 states that an assigned Appeals technical employee will refer a taxpayer directly to the team manager to discuss any concern the taxpayer raises about the technical employee, including questions about perceived (lack of) impartiality, as well as any request to have the case reassigned. The team manager will evaluate the request and/or concerns and will directly communicate the decision to the taxpayer/representative whether to transfer the case to another technical employee.
The revisions also include guidance for requesting case assistance (IRM §126.96.36.199.1.1). The revised procedures state that the assigned technical employee will request case assistance from an assisting technical employee who will participate in the in-person conference when the assigned technical employee's post of duty (1) does not accommodate in-person conferences, (2) is not reasonably convenient for the taxpayer or representative, or (3) does not conduct circuit riding.
In addition, new language in IRM Section 188.8.131.52.4 states that Appeals has the discretion to invite Counsel and/or Compliance officials to the conference but must not violate the ex parte communication provisions (Rev. Proc. 2012-18).
The revised Appeals procedures could adversely affect how taxpayers' Appeals hearings are conducted. Specifically, it will likely be more difficult to have a case transferred to a local Appeals office and to obtain an in-person or face-to-face hearing with an Appeals officer under the new procedures. In addition, it has been publicly reported that Appeals is considering the potential removal of settlement authority from Appeals team case leaders, which could dramatically impact the Appeals process, although a Nov. 4 letter from Kirsten Wielobob, Chief, Appeals, IRS, indicates that the IRS will not act on that proposal. It is also unclear how having another technical employee and/or Counsel/Compliance official participating in the Appeals conference will affect a taxpayer's case. Furthermore, taxpayers should be mindful of the ex parte communication provisions to ensure they are properly notified of any discussions of their case among IRS personnel. Taxpayers should strategically consider these changes and potential changes to the Appeals process when developing their tax controversy strategy for issues that may not be resolved with the IRS's Compliance (Examination) function.
Michael Dell is a partner at Ernst & Young LLP in Washington.
For additional information about these items, contact Mr. Dell at 202- 327-8788 or firstname.lastname@example.org.
Unless otherwise noted, contributors are members of or associated with Ernst & Young LLP.