Updated Rules Would Govern Tax Court and Appeals Office Procedures

By Sally P. Schreiber, J.D.

The IRS is proposing to update its administrative appeals process for cases docketed in the Tax Court, the service announced Thursday in a proposed revenue procedure (Notice 2015-72). The new procedures are designed to facilitate consideration by the IRS Appeals office, while maintaining the independence of the appeals process as required under the law. The prohibition on ex parte communications between the Chief Counsel’s office and Appeals does not apply to cases docketed in Tax Court.  

Under the proposed process, except in rare circumstances, the Chief Counsel’s office, which is charged with representing the IRS in Tax Court, will refer cases to the Appeals office for settlement consideration. Chief Counsel will refer cases unless Appeals issued the notice of deficiency or made the determination that is the basis for the Tax Court’s jurisdiction or the taxpayer forgoes Appeals settlement consideration. In addition, if the Chief Counsel’s office has designated a docketed case or issue for litigation, that case will not be referred to Appeals if it is in the best interest of sound tax administration.     

If Appeals issues a notice of deficiency or a determination because the statute of limitation is about to expire without having fully considered all of the issues, it can request that the Chief Counsel’s office return the case to it once the case is docketed in the Tax Court. If Appeals makes that request, the case will be treated as if Appeals did not issue the notice of deficiency or make the determination.

Chief Counsel will not refer to Appeals any docketed case or issue that it has designated for litigation. In limited circumstances, a docketed case or issue will not be referred to Appeals if Division Counsel or a higher level Chief Counsel official determines that referral is not in the interest of sound tax administration.

For all other cases, the Chief Counsel’s office must refer a docketed case to Appeals within 30 days of the case becoming “at issue in the Tax Court” (as defined by Tax Ct. R. 38), unless, with manager approval, the Chief Counsel’s office identifies a need for additional time. (Longer delays require higher approval.) Examples of when the Chief Counsel’s office may delay forwarding a docketed case to Appeals include, but are not limited to, cases in which the Chief Counsel’s office must retain the file for early trial preparation or when the pleadings raise new facts, issues, or items.

When Appeals has a case, it has sole authority to settle the case until it is returned to the Chief Counsel’s office. If possible, the Chief Counsel’s office and Appeals should agree on how long Appeals will keep the case and when the case will be returned. In Sec. 7463 small tax cases, Appeals must return the case within six months or, if it is docketed for trial, three weeks before that date. Other cases must be returned by the earlier of the date Appeals determines the case is not susceptible to settlement or 10 days after the case appears on a trial calendar. These deadlines do not apply if the Chief Counsel’s office and Appeals agree that settlement is likely.

The notice contains a number of other administrative procedures designed to permit the Appeals office to continue to pursue settlement of cases while cooperating with the Chief Counsel’s office to aid trial preparation.

The procedure will not apply to innocent spouse Tax Court petitions under Sec. 6015(e)(1)(A)(i)(II), cases involving levies or liens, and various declaratory judgment proceedings, among other exclusions.

When issued, the new procedure will obsolete Rev. Proc. 87-24 and will apply to all docketed Tax Court cases pending on or after the date the finalized procedure is released to the public.

Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.

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