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IRS updates its procedures for administrative appeals of docketed cases

Rev Proc 2016-22, 2016-15 IRB

IRS has issued a Revenue Procedure to update its description of the administrative appeals process in cases docketed in the Tax Court.

Background. Rev Proc 87-24, 1987-1 CB 720 describes IRS’s administrative appeals process in cases docketed in the Tax Court.

The Office of Chief Counsel (Counsel) is charged with the responsibility of representing IRS in cases docketed in the Tax Court. (Code Sec. 7452, Code Sec. 7803(b)(2)(D))

The Internal Revenue Service Restructuring and Reform Act of ’98 (P.L. 105-206) requires IRS to “ensure an independent appeals function” within IRS.

Under Rev Proc 2012-18, 2012-1 CB 455, Counsel and the IRS Office of Appeals (Appeals) share a responsibility to interact — in all circumstances — in a manner that preserves and promotes Appeals’ independence.

Earlier guidance. In October 2015, IRS published Notice 2015-72, 2015-44 IRB 613, which contained a proposed Revenue Procedure that would update Rev Proc 87-24. (See Weekly Alert ¶ 32 10/22/2015.) IRS received several comments regarding the proposed guidance and adopted several of the suggestions by making clarifying modifications.

New Revenue Procedure. Rev Proc 2016-22, which supersedes Rev Proc 87-24, updates IRS’s description of the practices for the administrative appeals process in cases docketed in the Tax Court as follows:

  • Except as provided below, Counsel will refer docketed cases to Appeals for settlement consideration.
  • If Appeals issues a notice of deficiency or makes a determination without having fully considered one or more issues because of an impending expiration of the statute of limitations on assessment, Appeals may include a request in the administrative case file for Counsel to return the case to Appeals for full consideration of the issue or issues once the case is docketed in the Tax Court. If Appeals includes such a request in the administrative case file, the case will be treated as if Appeals did not issue the notice of deficiency or make the determination.
  • Except as provided below, Counsel will refer a docketed case to Appeals within 30 days of the case becoming “at issue in the Tax Court” (as defined by Tax Court Rule 38). Counsel may, with manager approval, delay forwarding a docketed case to Appeals if Counsel identifies a need for additional time. A delay of more than 90 days (120 days from when the case is at issue) requires approval of a Counsel executive. If a delay of more than 90 days is approved, Counsel will discuss with Appeals the need for the delay and when Counsel expects to forward the case to Appeals for settlement consideration. If a delay of more than 90 days is approved by a Counsel executive, Counsel will promptly notify the taxpayer that referral of the case to Appeals will be delayed.
  • When a docketed case is forwarded to Appeals for consideration, Appeals has the sole authority to resolve the case through settlement until the case is returned to Counsel.
  • To the extent feasible, Counsel will alert Appeals about limits on the amount of time that Appeals may have the case for settlement consideration. In such cases, Counsel and Appeals shall then agree upon the time when the case will be returned to Counsel.
  • A docketed case proceeding as a small tax case under the provisions of Code Sec. 7463, or as a regular case in which the amount at issue for each year is $50,000 or less, that has been forwarded to Appeals for consideration, may be recalled by Counsel after six months. If not recalled, Appeals will return the case so that it is received by Counsel no later than 30 days prior to the date of the calendar call. In all other docketed cases, Appeals will return the case to Counsel when Appeals concludes that the case is not susceptible to settlement or within 10 days after the case appears on a trial calendar, whichever is sooner. In all cases, Counsel and Appeals may agree to extend the time for Appeals to consider a case if settlement appears reasonably likely.
  • If Counsel determines that the case is needed for trial preparation, Counsel may request that Appeals return the case (including settlement authority) to Counsel before Appeals has completed its consideration of the case.
  • Notwithstanding any other provision in Rev Proc 2016-22, any docketed case may be transferred from Counsel to Appeals or from Appeals to Counsel by agreement between Appeals and Counsel. This authority will be used when such transfer may promote a more efficient disposition of the case.
  • Upon request, Appeals will make the administrative case file, or a copy, readily available to Counsel when needed for trial preparation. A request for the administrative case file by Counsel will not transfer settlement authority back to Counsel. Counsel will promptly return the administrative file to Appeals on request, or when it is no longer needed by Counsel for trial preparation.
  • When transferring a docketed case to Appeals, Counsel may request to be included in a settlement conference with the taxpayer. Appeals may, with manager approval, decline to include Counsel in the settlement conference if, after considering the views of both Counsel and the taxpayer, Appeals determines that Counsel’s participation in the settlement conference will not further settlement of the case. Whether or not Counsel participates in the settlement conference, Counsel will continue with trial preparation.
  • Appeals will provide Counsel with access to any documents received by Appeals in a settlement conference with respect to the docketed case.
  • If a taxpayer or the taxpayer’s representative raises an issue for the first time while the docketed case is with Appeals for settlement consideration, Appeals will advise Counsel as soon as the new issue is identified. Appeals or Counsel will coordinate with the examination function as appropriate to obtain IRS’s views on the new issue, and in docketed cases containing an issue that was not previously examined, Appeals or Counsel will coordinate with the examination function of the relevant operating division, as needed, to develop the material facts relating to the new issue prior to Appeals’ consideration of the issue.
  • In evaluating the merits of a docketed case that has been referred to Appeals for settlement consideration, Appeals may obtain advice from Counsel and consider it in conjunction with other factors to reach a basis for settlement.
  • If Appeals reaches a settlement with the taxpayer in the docketed case, a stipulated decision document reflecting the proposed resolution will be prepared and forwarded to the taxpayer. When Appeals prepares the decision document, Counsel may assist with drafting, as needed. By signing the proposed stipulated decision document and returning the document to IRS, the taxpayer makes an offer to settle the case. Counsel will review the decision document for accuracy and completeness, sign the decision document on behalf of the Commissioner, and file the document with the Tax Court. (Rev Proc 2016-22, Sec. 3)

Circumstances under which Counsel will not refer docketed cases to Appeals. If any of the following apply, Counsel will not refer a docketed case (or, in some cases, an issue in a docketed case) to Appeals for settlement consideration:

  1. Appeals issued the notice of deficiency or made the determination that is the basis of the Tax Court’s jurisdiction; (Rev Proc 2016-22, Sec. 3.01)
  2. The taxpayer forgoes settlement consideration by Appeals; (Rev Proc 2016-22, Sec. 3.01)
  3. The case or issue has been designated for litigation by Counsel; (Rev Proc 2016-22, Sec. 3.03)
  4. In limited circumstances, if Division Counsel or a higher level Counsel official determines that referral is not in the interest of sound tax administration; (Rev Proc 2016-22, Sec. 3.03)
  5. Cases docketed under Code Sec. 6015(e)(1)(A)(i)(II) (certain Tax Court innocent spouse cases), Code Sec. 6110 (public inspection of IRS determinations), Code Sec. 6320 and Code Sec. 6330 (hearings with respect to liens and levies), Code Sec. 6404 (abatements), Code Sec. 7428 (declaratory judgments regarding exempt organizations), Code Sec. 7476 (declaratory judgments regarding retirement plans), Code Sec. 7477 (declaratory judgments regarding the value of certain gifts), Code Sec. 7478 (declaratory judgments regarding certain governmental obligations), Code Sec. 7479 (declaratory judgments regarding eligibility to defer estate tax payments), or Code Sec. 7623 (whistleblower awards) (Rev Proc 2016-22, Sec. 4); or
  6. Cases docketed under Code Sec. 6213(a) (Tax Court petition), with respect to Code Sec. 6015 (innocent spouse) relief raised for the first time in the petition. (Rev Proc 2016-22, Sec. 4)

With respect to items (3) and (4) above, if Counsel determines that a docketed case or issue will not be referred to Appeals, Counsel will notify the taxpayer that the case will not be referred to Appeals.

Effective date. Rev Proc 2016-22 applies to all docketed Tax Court cases that are pending on or after Mar. 23, 2016.

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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