IRS Examination Division

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. Continue Reading Appeals Large Case Pilot Program Draws Criticism

On June 24, 2016, the Internal Revenue Service (IRS) issued a memorandum (AP-08-0616-0003, available here) to the IRS Appeals Division (Appeals) providing new, uniform procedures for requesting assistance from the Examination Division (Exam) in docketed Tax Court cases. The guidance implements standard procedures that would treat petitioners similarly. Currently, when petitioners provide new information to Appeals that was not previously considered by Exam, Appeals requests Exam’s assistance based on local procedures, which sometimes result in disparate treatment of petitioners. The guidance is effective on August 29, 2016.

Under the new procedures, Appeals will send a request for Exam’s assistance if Appeals determines that the new information merits additional analysis or investigation. If Exam approves the request, an Exam Agent may recommend changes to the proposed adjustment, including an increase in tax, based upon the new information. Appeals, however, is not required to adhere to Exam’s recommendations. Where acceptance of the Exam Agent’s recommended changes results in a new issue or an increased deficiency, the IRS generally must bear the burden of proof on such changes from the notice of deficiency pursuant to Tax Court Rule 142. If Exam denies the request, Appeals will consider settlement offers based on all information in the case file, and the probative value of the new information.