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ABA Recommends Allowing Limited Representation Before the Tax Court

Last May, the US Tax Court (Tax Court) announced that approximately 70 percent of all taxpayers in Tax Court cases and approximately 90 percent of taxpayers in small tax cases are self-represented. The Tax Court encourages assistance by pro bono attorneys at its calendar calls, and strives to provide information to taxpayers about how they may be able to connect with those attorneys (more background on the Tax Court’s efforts can be found here). Although pro bono attorneys appear at Tax Court calendar calls to assist self-represented taxpayers, ethical rules may limit the ability of these attorneys to provide certain kinds of legal assistance. For example, once an attorney makes an appearance in a court case, typically the attorney cannot simply withdraw and stop representing the client. The attorney may have to get both the client’s and court’s consent to withdraw from the representation. The inability to provide legal advice for one or more occasions without potentially being stuck on a case is perceived to dissuade many practitioners from providing pro bono service.

In response to these concerns, the American Bar Association (ABA) Section of Taxation recently provided comments to the Tax Court regarding potential amendments to its rules relating to appearance and representation before the Tax Court. The ABA comments encourage the Tax Court to consider a limited appearance rule for pro bono attorneys appearing at the calendar call. This one-time appearance representation may encourage more attorneys to get involved in providing pro bono legal assistance to taxpayers. We will provide an update on any future action that the Tax Court may take in this regard.

Links to McDermott posts and articles about tax pro bono efforts by volunteer attorneys are listed below:

 




ABA Section of Taxation Seeks Nominations for Annual Pro Bono Award

As we have written about before, there is a substantial need for pro bono assistance to low-income taxpayers throughout the country. A sample of some of the tremendous results obtained by pro bono volunteers can be found here. As strong proponents of pro bono, both in tax law and other areas of the law, we have seen firsthand the difference that a few hours of your time can make in the life of an individual that cannot otherwise afford to pay for legal representation.

The American Bar Association (ABA) Section of Taxation annually selects one individual or law firm as the recipient of the Janet Spragens Pro Bono Award. The award was established in 2012 to recognize outstanding and sustained achievements in pro bono activities in tax law. The ABA is seeking nominations for the 2018 recipient, which must be submitted by December 8, 2017. More information about the criteria for selection and a list of prior recipients can be found here. If you know of an individual or a law firm that would be a worthy nominee, please do not hesitate to submit your nomination to the ABA Section of Taxation. We note that all nominations are maintained in strict confidence by the Pro Bono Award Committee.




Appeals Large Case Pilot Program Draws Criticism

In October 2016, the Internal Revenue Service (IRS) revised the Internal Revenue Manual (Manual) 8.6.1.4.4 to provide IRS Appeals Division (Appeals) with discretion to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel (Counsel) to the Appeals conference. Many tax practitioners opposed this change, believing that it undermines the independence of Appeals and may lead to a breakdown in the settlement process.

In May 2017, the American Bar Association (ABA) Section of Taxation submitted comments recommending the reinstatement of the long-standing Manual provision regarding the limited circumstances for attendance by representatives from Exam and Counsel at settlement conferences. Additionally, the Tax Section’s comments were critical of the practice whereby some Appeals Team Case Leaders (ATCLs) in traditional Appeals cases are “strongly encouraging” IRS Exam and the taxpayer to conduct settlement negotiations similar to Rapid Appeals or Fast Track Settlement, such that many taxpayers do not feel they can decline such overtures. The Tax Section comments suggested that the use of Rapid Appeals Process and Fast Track Settlement should be a voluntary decision of both the taxpayer and IRS Exam and the use of these processes should be the exception rather than the rule. (more…)




ABA Seeks Priority Guidance for Transfer Pricing Issues

The ABA recently issued comments to the IRS and Treasury regarding the new temporary regulations issued in TD 9738 concerning the aggregation of controlled transactions, under Section 482, which broaden (“clarify”) the scope of intangible value, to include “all the value provided” from a controlled transaction, and such other transactions that may occur before, during or after, that are so interrelated, as to require aggregate consideration. See attached. While the IRS does not explicitly mention goodwill or going concern—except by reference in one example—the regulations are intended to sweep in the consideration of any goodwill, including synergy, value that may relate to such transactions.

Given the inherent difficulty, and the persistent controversy, as exhibited in the past (i.e., the Veritas and Amazon cases) and as certainly more is yet to come (BEPS) in attempting to determine the value of intangibles generally, let alone goodwill, for the sake of good tax administration, the IRS would do well to provide more concrete/ explicit definitions, or at least boundaries, as to what or when this “extra” value may, or may not, be likely to apply.

This broader scope of consideration is now likely to make it easier for the IRS to recast transactions on economic substance or realistic alternatives grounds, leading to more controversy and disputes, not just with taxpayers, but with foreign governments as well.




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