Alternative Dispute Resolution

Andy Roberson, Kevin Spencer and Emily Mussio recently authored an article for Law360 entitled, “A Look At Tax Code Section 199’s Last Stand.” The article discusses the IRS’s contentious history in handling Code Section 199 and the taxpayers’ continued battle to claim the benefit – even after its recent repeal.

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Originally

On August 27, 2018, the Internal Revenue Service (IRS) announced that the Compliance Assurance Process (CAP) program will continue, with some modifications.  As we previously discussed, the IRS began an assessment of the CAP program in August 2016 to determine if any recalibration was needed.

CAP is an IRS program that seeks to identify and resolve tax issues through open, cooperative, and transparent interaction between the IRS and Large Business and International (LB&I) taxpayers prior to the filing of a return.  The goal of CAP is greater certainty of the treatment of tax positions sooner and with less administrative burden than conventional post-file audits.  The program began in 2005, and became permanent in 2011.  Several notable taxpayers publically disclose their involvement in the CAP program.
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On March 13, 2018, the Internal Revenue Service (IRS) announced that it will begin ramping down the current Offshore Voluntary Disclosure Program (OVDP) and urged taxpayers with undisclosed foreign assets to apply for the program prior to its close on September 28, 2018. We have previously reported on developments in the OVDP.

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The Internal Revenue Service Office of Appeals (IRS Appeals) recently announced that it will offer a new virtual “face-to-face” option in the form of web-based communication to taxpayers and representatives to resolve tax disputes. IRS Office of Appeals Pilots Virtual Service, IRS (July 24, 2017. This announcement comes on the heels of other changes

Today, the Internal Revenue Service (IRS) released Revenue Procedure 2017-25 extending the Fast Track Settlement (FTS) program to Small Business / Self Employed (SB/SE) taxpayers.  The IRS’s SB/SE group serves individuals filing Form 1040 (US Individual Income Tax Return), Schedules C, E, F or Form 2106 (Employee Business Expenses), and businesses with assets under $10

In its annual report to the US Congress, the Taxpayer Advocate Service (TAS) had a lot to say about IRS Appeals and the (lack of) use of other alternative dispute resolution (ADR) techniques. In this post, we will highlight what the TAS had to say in this area.

IRS Appeals

Undoubtedly, one of the Internal

On June 9, 2016, the US Tax Court released its opinion in Medtronic, Inc. and Consolidated Subsidiaries v. Commissioner. The Internal Revenue Service had taken issue with the transfer pricing of transactions between Medtronic, Inc. and its Puerto Rican manufacturing arm under §482 of the Internal Revenue Code. Finding the IRS’s application of the

In a letter dated November 4, 2016, IRS Chief of Appeals Kirsten Wielobob provided some clarification regarding the authority of the Appeals Team Case Leaders (ATCLs) to settle cases, revisions to IRM section 8.6.1.4.4 permitting other IRS employees to attend conferences, clarifications to conference practices, and revisions to how Appeals handles section 9100 relief determinations.

Knowing your options for a US Federal tax controversy is helpful in creating a sound and efficient strategy. The attached chart depicts the typical options involved in a US Federal tax controversy, from the IRS’s examination of the return, through administrative appeals, litigation in Tax Court, Circuit Court appeal, and to ultimate assessment of tax.

Due to the enormous amount of electronic data stored by companies in the modern era, discovery requests can involve millions of documents which need to be reviewed prior to being turned over to the opposing party.  In conducting their analysis of this overwhelming quantity of information, litigants must, amongst other things, detect and exclude any privileged material.  Should a party inadvertently fail to do so before such records reach the hands of the opposing counsel, he/she will be deemed to waive privilege in many jurisdictions.  Given the massive quantity of data, however, such mistakes are practically unavoidable.

Federal Rule of Evidence (FRE) 502 was enacted in 2008 in an attempt to combat the issue of inevitable human error and the costs associated with parties’ efforts to avoid it.  FRE 502(d) allows parties to request the court to grant an order stipulating that a disclosure of privileged material does not waive any claims of privilege with respect to those documents.  If the court agrees to enter the order, it is controlling on third parties and in any other federal or state proceeding.

FRE 502(d) has led to the possibility of “quick peek” agreements where the parties give over all or a portion of their documents to opposing counsel without any privilege review whatsoever so that the recipient can identify which material he would like to retain.  The recipient, in turn, agrees not to assert a waiver claim on any document that the producing party intends to withhold from the requested documents as privileged.  These arrangements can dramatically ease the temporal and financial burdens of conducting a privilege review because they allow the producing party to focus only on those documents desired by the recipient while at the same time preserving their right to claim privilege on such documents.
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