A team coordinator should have the following qualifications:

As noted in 4.46.5.2, one of the primary responsibilities of a team coordinator, during the examination, is to serve as a focal point for communications among team members, taxpayers and the team manager. It is essential that all communications flow in an open and orderly manner to minimize:

Other key duties of the TC are to:

Visits to the examination site by team managers are a key component to the success of the examination. On-site visits and meetings are important elements of the team manager’s involvement. Team managers should avoid delegating this responsibility to others. There are several types of visits, depending on the stage of the examination. These include:

Visits, whether on-site at the primary examination location or at the assistance or support location, should be planned with the following objectives in mind:

Specific areas which may be addressed during visits are as follows:

In visiting an examination site, the team manager should periodically meet with appropriate levels of company management to discuss the progress of the examination and to resolve any developing problems.

When the on-site visit includes a meeting with the taxpayer, the team manager should, prior to the meeting, provide the participants with an agenda which identifies the specific matters to be discussed. This will allow sufficient time to conduct any research, inquiry, or development of background material necessary to the discussions.

Visits to the examination site for the purpose of obtaining data for planning will be necessary.

Team manager visits for the purpose of monitoring the progress of the examination should be:

During the planning and execution stages of CIC and certain IC examinations, the team manager should maintain a case visitation log for overall control purposes. The log, at a minimum, should contain the following:

The visitation log should also indicate data to be developed or a description of action items to be performed by the next planned visit.

The visitation log should serve as a recap of the team manager's involvement. As appropriate, it should be supplemented with narrative comments about the following:

The visitation log should be maintained in the taxpayer's case binder (CIC). An example of the type of information for the CIC case binder that would be helpful to achieve effective case control is shown in Exhibit 4.46.5-1.

A system for recording time must be established for use by each team member. The team manager’s analysis of this information will materially assist in controlling and monitoring the examination in the following ways:

A prescribed format will be established for time to be tracked by specific segment or Standard Audit Index Number (SAIN) line item. Generally, the format developed for time tracking will naturally follow the content of the examination plan. The format used should record time by SAIN item or issue area using:

Where two or more team members are engaged in the development of an issue or are applying time to the same line item but for different entities, the team manager is responsible for maintaining a cumulative time record. This will provide the team manager with the information needed to compare actual time spent on each issue with planned time.

In establishing a system for recording time by audit segments, team managers must, by their own actions and reference to the records, only use it as a means to effectively manage the case. It is not intended nor should it ever be used for personnel evaluation purposes.

Time tracking is mandatory for all CIC examinations and is suggested for larger IC examinations.

Documentation will normally be incorporated into the case visitation log and related files in CIC examinations because significant case management activity modifies the approved examination plan. In addition, the team manager will specifically note in the examination plan major changes that involve:

Where significant changes are made, especially in time projections, approval by the Territory tanager should be documented. Taxpayers should be notified timely of changes affecting them and their staffs.

The Coordinated Examination Management Information System (CEMIS) provides all levels of management with summary information concerning the status of specific cases which, when further consolidated, provides information about the status of the CIC program. It is the responsibility of CIC team managers to make sure the information input into the CEMIS system is correct. [Note: The Issue Based Management Information System (IBMIS), the reporting portion of the Issue Management System (IMS), will replace CEMIS.]

Since it is difficult to define "unusual items" in terms of audit significance, the team manager's judgment must be relied upon to help identify the type of information to be reported. There are three broad categories of information that could be of importance and assistance to others: technical issues; examination techniques, and other items of interest.

Technical issues include:

Examination techniques generally concern recommended examination procedures and may involve:

Other items of interest may not specifically fall into the technical issue or examination technique categories but are worthwhile reporting. Examples include:

The use of ADR methods will be considered in all examinations and utilized in appropriate cases. The examination plan will contain instructions to team members to consider the benefits of using these techniques in resolving examination issues.

The following are ADR tools available to the team manager and examination team:

Discussion of ADR will be standard operating procedure by the examination team, team manager, and territory manager during risk analysis or team strategy meetings. Decisions will be documented in the minutes of the meetings regarding the use of these methods.

LMSB examiners and team managers should also be familiar with the Industry Issue Resolution (IIR) Program. This program resolves frequently disputed or burdensome tax issues that affect a significant number of business taxpayers through published guidance.

Appeals settlement guidelines must be redacted, as appropriate, when shared with taxpayers.

Delegation Order 4–224 Settlement Offers and Closing Agreement in CEP Cases Where Appeals has Effected a Settlement , is to assist in relieving taxpayer burden and reducing both Service and taxpayer costs when similar issues exist which are beyond LMSB’s resolution capabilities.

Delegation Order 4–24 gives team managers limited settlement authority with respect to certain issues. It does not restrict nor reduce the issue resolution capabilities otherwise vested with team managers.

Role of Area Counsel – Area Counsel should be included in all aspects of settlement discussions.

Delegation Order 4–24 settlement authority may be exercised only if all of the following factors are present.

The settlement authority guidelines are not meant to be all inclusive or to replace the judgment and discretion of the team manager. The team manager may use Examination Settlement Authority contained in Delegation Order 4–24. However, the benefits to be derived by both the Service and the taxpayer are so significant that this authority should be carefully considered before determining that the issue or case should be forwarded unagreed to Appeals. The team manager must weigh all the facts and circumstances and decide whether an issue will be resolved using this authority.

An individual, officially acting for the team manager, will usually be delegated all or most of the manager's authority including that covered by Delegation Order 4–24.

Under Delegation Order 4–24, LMSB may apply settlement authority where the same or related taxpayer is involved in a prior Appeals settlement. A related taxpayer includes both organizational and transactional relationships. Delegation Order 4–24 illustrates these relationships as follows:

Communication should be maintained with the Appeals Officer having jurisdiction over the earlier or later tax cycles. Regular Appeals/Team conferences should be scheduled before and after Appeals consideration of those tax cycles. Generally, this will be accomplished through the pre-and post-conference procedures. Any such communications may be subject to the ex parte communications limitation set forth in Internal Revenue Service Restructuring and Reform Act 1998 (RRA 98) Sec.1001(a)(4). (See Rev. Proc. 2000-43; IRM 8.1.1.3.1)

The taxpayer has no right to appeal the team manager’s decision if the team manager declines to exercise team manager settlement authority. However, as a courtesy, the taxpayer may request a conference with the team manager and/or territory manager to discuss the reasons this authority is not being exercised.

Prior to finalization, the appropriate territory manager within the industry function and coordinated with the appropriate field specialist manager must review and approve the proposed settlement, together with the related agreement documents when the agreement concerns a specialist issue. The settlement will be in writing and should be retained by the team manager and also included in the case file.

Delegation Order 4-24 authorizes the team manager authority to execute closing agreements and/or Forms 870-AD with respect to settlement authority issues. Form 870-AD and/or a closing agreement must be used in all instances where Examination Settlement Authority is exercised to ensure consistency, and to affect a more binding and permanent agreement with the taxpayer.

Only agreed settlement authority issues can be presented on the Form 870-AD. Form 870-AD cannot be used for other regularly agreed issues(s). When using a Form 870-AD and both agreed settlement authority issues and other non-settlement authority issues are present, two tax computations will be required

If the taxpayer agrees to the settlement, the Delegation Order permits the use of either a Form 870-AD or a closing agreement in finalizing the settlement. In most circumstances, the use of the Closing Agreement will be preferred for the following reasons:

When a Form 870-AD is used to secure agreement on a settlement authority issue that is a potential competent authority issue, it will not be treated as a binding agreement by the U.S. Competent Authority in subsequent negotiations with a treaty country. However, if a taxpayer executes a closing agreement with respect to a potential competent authority issue, the U.S. Competent Authority will endeavor to obtain a correlative adjustment from the treaty country and will not undertake any actions that would otherwise change the agreement. See Section 7.05 of Rev. Proc. 2002-52, 2002-2 C.B. 242.

Treasury Regulation Section 301.7121-1(a) provides that a closing agreement may be entered into in any case in which there appears to be an advantage in having the case permanently and conclusively closed, or if good and sufficient reasons are shown by the taxpayer for desiring a closing agreement and it is determined by the Commissioner that the United States will sustain no disadvantage through consummation of an agreement.

IRM 8.13.1, Closing Agreements, provides instructions and prescribes procedures for Service personnel handling closing agreements entered into under IRC section 7121.

IRM 8.13.1 contains a number of examples of closing agreements. The LMSB team should be able to effectively prepare a customized closing agreement based on the particular fact pattern unique to the issue(s) being settled after consulting this chapter and Area Counsel.

A closing agreement terminates an existing Form 872A (Special Consent to Extend the Time to Assess Tax) if language in the agreement could be construed to be the final determination of tax and final administrative Appeals consideration. It is important that a Specific Matters Closing Agreement, Form 906, be used to limit the agreement to only those issue(s) that are being settled. The closing agreement should specifically state that the agreement is not a final determination of tax and final administrative Appeals consideration of any remaining issues.

Deputy Director, International must provide concurrence on cases which U.S. competent authority assistance has been requested, or is intended to be requested, under Rev. Proc. 2002-52, closing agreements that provide relief under Rev. Proc. 65-17 (as amended) or Rev. Proc. 99-32 for issues involving allocations of income under IRC section 482.

The examination team, with Area Counsel’s assistance, is responsible for preparing the closing agreement. However, closing agreements involving any Joint Committee jurisdictional years should not be signed by or on behalf of the Service until the team manager is notified by the Joint Committee Specialist Group that the Joint Committee’s views have been received and considered. IRM 4.36.3.6.2 provides guidance for requesting Joint Committee review of closing agreements. These procedures should also be referred to where issues are resolved early in the examination process, such as through Fast Track Settlement or Early Referral to Appeals.

Closing agreements on joint committee cases, including those based on Competent Authority determinations, must not be executed on behalf of the Government until reviewed and approved by the Joint Committee on Taxation. See IRM 4.36.4.10.

If a settlement is reached on an issue near the completion of the LMSB examination, the closing agreement should be submitted with the Revenue Agent’s Report to the local Joint Committee Coordinator for preparation of the Joint Committee Report.

If a settlement is reached on an issue near the beginning of the LMSB examination, there could be substantial delay in executing the closing agreement if the closing agreement is not reviewed by the Joint Committee until the examination is completed. In this situation:

Due to the complexities in attempting to settle TEFRA partnership issues and the technical administrative procedural requirements involved in processing, it is recommended that TEFRA partnership issues be excluded from LMSB Settlement Authority.

Settlement authority covers coordinated issues with Appeals Settlement Guidelines. Settlement authority is available for these types of issues, regardless of the amount of the adjustment. The Delegation Order also grants the authority to execute closing agreements, or the Form 870-AD, necessary to effect any settlement reached.

Prior to finalizing the agreement with the taxpayer, the proposed settlement (whether on the facts or litigating hazards) and any resulting closing agreement must be reviewed and approved by the appropriate Technical Advisor (TA) and Appeals Issue Specialization Program (ISP) coordinator.

The team manager should contact the LMSB TA and the Appeals ISP coordinator as soon as a coordinated issue is identified. The team manager should also contact Area Counsel so that the appropriate Industry Counsel can be contacted. These specialists will know which coordinated issues have settlement guidelines and will provide a copy of the appropriate settlement guidelines to the team manager.

The current coordinated issues with the names and telephone numbers of the assigned TAs are available on the intranet by accessing the LMSB Pre-Filing & Technical Guidance home page. The names and telephone numbers of the Appeals TA coordinators can be obtained from the LMSB TA.

A team manager must ensure that the issue is fully developed before discussing settlement with the taxpayer.

Team manager provides the taxpayer Form 5701 that reflects the full adjustment during the process. A statement should be included on Form 5701 indicating that there is a settlement guideline on the issue. Within 30 days, the taxpayer will be expected to respond in writing either agreeing to the adjustment or presenting its arguments.

The team manager is responsible for formulating the settlement position with assistance and participation from the TA and the Appeals ISP coordinator.

The Service will pursue settlement attempts through appropriate discussions with the taxpayer and consultation with the TA and the Appeals ISP coordinator.

The settlement position will be reflected on a Form 5701-S (Notice of Proposed Adjustment) as amended to indicate the settlement offer. The S should be typed on a regular Form 5701.

Prior to finalizing the settlement offer with the taxpayer, the Form 5701-S together with related documentation must be reviewed and approved by the Technical Advisor and the Appeals coordinator.

If the taxpayer agrees to the settlement, the Delegation Order permits the use of either a Form 870-AD or a closing agreement in finalizing the settlement. In most circumstances, the use of a closing agreement will be preferred. Refer to IRM 4.46.5.10.5 above for further information regarding closing agreements.

Every attempt should be made by the TA, the Appeals ISP coordinator and the team manager to reach agreement on a settlement position. If the disagreement involves a specialist issue, the specialist manager will be involved in the discussions. If an agreement cannot be reached, the matter may be elevated to the next level of management at the discretion of the team manager.

If agreement still cannot be reached among those parties, negotiations should cease and the adjustment should be proposed in full and closed unagreed. Disagreements will not be elevated to the Industry Directors

If the taxpayer does not agree with the proposed settlement, the full adjustment (unsettled position) will be treated as an unagreed issue and closed to Appeals. Both the Forms 5701 and 5701-S should be included in the case file being transferred to Appeals.

Unless the taxpayer presents new information or the facts and circumstances change, Appeals will not offer a new settlement on this issue to the taxpayer.

The Appeals Settlement Guideline will not be given to the taxpayer under any circumstance.

Availability of the Appeals Settlement Guideline will be limited to the applicable LMSB and Counsel personnel involved with developing and approving the settlement position.

At the conclusion of the examination, the Appeals Settlement Guideline should be removed from the case file and destroyed

The team manager should prepare a separate settlement memorandum explaining in detail the basis for the settlement and the factors that were taken into consideration in arriving at the settlement. A settlement memorandum should be prepared whether the issue is finally agreed or unagreed. The Form 5701-S, however, should not itself be the settlement document.

In agreed cases, the settlement memorandum should be attached to the Form 5701-S and placed in the case file. In unagreed cases, the settlement memorandum, along with the Form 5701-S should be included with the T-letter and RAR, and forwarded to Appeals to inform them of the previously offered settlement of the issue. The settlement memorandum is the equivalent of the Appeals Case Memorandum and should not be given to the taxpayer

Accelerated Issue Resolution (AIR) is an examination process to apply the resolution of the same or similar issues arising for an examination of an LMSB taxpayer from one or more tax periods to other tax periods.

Examiners should refer to Rev. Proc. 94-67 and Rev. Proc. 68-16 when considering the utilization of AIR procedures.

Counsel assistance is mandatory when utilizing AIR.

The AIR process applies to both CICs and ICs. However, the AIR process should be limited in IC examinations where it is not practical to include subsequently filed tax return years as part of the current examination cycle.

Although the AIR process does not constitute a formal examination of the taxpayer’s books and records, examiners should follow normal procedures for the control of tax periods on the Audit Information Management System (AIMS).

AIR does not alter in any way the authority team managers have to resolve issues. Unlike Delegation Orders 4-24 and 4-25, AIR does not give managers added settlement authority.

AIR does not affect Policy Statement P-4-5 for subsequent years included in the AIR agreement but not examined. (See Policy Statement P 4-5)

During the AIR process, the team manager must ascertain the accuracy and applicability of the AIR issues. If the AIR issues were developed by specialists, the appropriate specialist managers should be consulted with respect to technical accuracy and consistent treatment of the issues. The team manager and examination team must adhere to the same auditing standards and substantiation requirements as in a normal examination.

In developing the AIR issue(s) and agreement, the team manager should try to ascertain from the taxpayer or other sources some or all of the following:

Extra caution should be exercised when the AIR issue involves a change of accounting method. The AIR resolution can have a future effect. To resolve any questions or for more information, the Change in Accounting Methods Technical Advisor should be contacted.

Care must be exercised if the taxpayer intends to seek relief from double taxation. The team manager is encouraged to consult with the U.S. Competent Authority with respect to these issues. Approval from the U.S. Competent Authority is required if the parties wish to conclude a closing agreement prior to applying for Competent Authority assistance.

In CIC examinations the team manager is responsible for ensuring that appropriate AIR information is properly recorded on the Coordinated Examination Management Information System (CEMIS).

Early referral is a process to resolve cases more expeditiously through LMSB and Appeals working simultaneously. This process is optional and may be requested by any taxpayer. A taxpayer may request early referral of one or more unagreed issues. Rev. Proc. 99-28, 1999-2 C.B. 109, sets forth the procedures to request early referral.

The Fast Track Settlement (FTS) Program allows LMSB personnel and taxpayers an opportunity to resolve issues through an expedited settlement process with an Appeals Official acting as a neutral party. Overall control of the case remains in LMSB during the FTS process and either party may withdraw at any time. Detailed information and procedures for the FTS program are set forth in Rev. Proc. 2003-40, 2003-1 C.B. 1044, and IRM 4.51.4.

Rev. Proc. 2001-22, 2001-1 C.B. 745, provides the basic information for taxpayers to participate in the Pre-Filing Agreement Program. Pre-Filing examinations can often resolve issues more effectively and efficiently than a post-filing examination because the taxpayer and the Service have more timely access to the records and personnel relevant to the issue. Pre-Filing Agreements allow a taxpayer to request examination of specific issues involving factual questions and well-settled principles of law before the return is filed. If the taxpayer and LMSB are able to resolve the selected issues prior to the filing of the return, Rev. Proc. 2001-22 authorizes the taxpayer and LMSB to finalize their resolution by executing an LMSB Pre-Filing Agreement (PFA).

This program is intended to reduce taxpayer burden that would normally be encountered during the actual examination process.

LMSB and SBSE will review and evaluate the issues submitted under the Industry Issue Resolution (IIR) Program. If appropriate, LMSB and SBSE may recommend that an issue be included on the Treasury Department’s and the Service’s Guidance Priority List for the upcoming year, or on quarterly updates to the Guidance Priority List. The Guidance Priority List sets forth the published guidance that Treasury and the Service expect to issue during the published guidance business plan year.

Taxpayers, industry associations, and other interested parties may submit issues at any time during the year. The LMSB and SBSE Divisions will review and evaluate the issues submitted under the IIR Program at least semi-annually, generally after March 31 and August 31 of each year.

Interested parties should submit issues by e-mail to IIR@irs.gov.

If an issue is selected as a published guidance project under Industry Issue Resolution (IIR), the Service will establish a team to analyze the issue. IIR team members may include appropriate personnel from the LMSB and SBSE Divisions, Appeals, the Office of Chief Counsel, and the Treasury Department.